AGENDA - City of Calimesa
Transcription
AGENDA - City of Calimesa
City of Calimesa Regular Meeting of the City Council AGENDA Tuesday, July 5, 2016 6:00 p.m. Norton Younglove Multipurpose Senior Center 908 Park Avenue, Calimesa, CA 92320 Jeff Hewitt, Mayor Joyce McIntire, Mayor Pro Tem Bill Davis, Council Member Jim Hyatt, Council Member Ella Zanowic, Council Member Bonnie Johnson, City Manager Kevin Ennis, City Attorney In compliance with the Americans with Disabilities Act, if you need special assistance to participate in a City meeting or other services offered by this City, please contact the City Clerk’s Office, (909) 795-9801. Notification of at least 48 hours prior to the meeting or time when services are needed will assist the City staff in assuring that reasonable arrangements can be made to provide accessibility to the meeting or service. Any public writings distributed by the City to at least a majority of the Council Members regarding any item on this regular meeting agenda will be made available at the public counter at City Hall located at 908 Park Avenue, Calimesa, CA 92320 ANNOUNCEMENT REGARDING SPEAKER SLIPS Anyone wishing to address the City Council either during “Communications from the Public” or on any item on the agenda should fill out a blue speaker slip and give that slip to the City Clerk prior to the item being heard. Please write the number of the agenda item or the subject of your presentation on the slip. Please observe a time limit of three (3) minutes when giving your presentation. When called upon, please step forward to the microphone, state your name for the record, whom you represent and any statement you wish to make. Please be advised that you may not defer your three (3) minutes to another speaker. CALL TO ORDER ROLL CALL: MAYOR HEWITT, MAYOR PRO TEM MCINTIRE, COUNCIL MEMBER DAVIS, COUNCIL MEMBER HYATT, COUNCIL MEMBER ZANOWIC. STAFF: CITY MANAGER JOHNSON, CITY ATTORNEY ENNIS, CITY CLERK GERDES, PUBLIC WORKS DIRECTOR FRENCH, COMMUNITY DEVELOPMENT DIRECTOR GARDNER, CITY ENGINEER THORNTON, FIRE CHIEF SMITH AND POLICE CHIEF BURCH. PLEDGE OF ALLEGIANCE COMMUNICATIONS FROM THE PUBLIC Anyone wishing to address the Council on any item within the Council’s jurisdiction that is not on the agenda may do so at this time. This is not a time for City Council discussion of non-agenda items. After receiving public comments, Council Members or staff, after being recognized by the Mayor, may briefly respond to statements made by the public or questions posed by the public. In addition, Council Members may ask questions for clarification or make a referral to staff for factual information to be reported back to the Council at a later meeting. APPROVAL OF THE AGENDA RECOMMENDATION: Move to approve the agenda Motion__________________ Second__________________ Vote_________________ Regular Meeting of the Calimesa City Council July 5, 2016 Page 1 of 4 Page 1 of 194 CONSENT CALENDAR The following Consent Calendar items are expected to be routine and non-controversial. Council will act upon them at one time without discussion. Any Council Member or staff member may request removal of an item from the Consent Calendar for discussion. 1. APPROVAL OF CITY COUNCIL ACTION MINUTES. Page 5 a) June 20, 2016 Regular City Council Meeting Action Minutes. 2. RECEIVE AND FILE CITY COMMISSION & BOARD MINUTES. Page 12 a) There are no minutes ready for approval at this time. 3. APPROVAL OF WARRANT REGISTERS. Page 13 a) Check Register Report with a total of $595,310.39 (Check Nos. 30153 to 30219) b) June 30, 2016 Payroll of $27,513.68. 4. WAIVE FULL READING OF ANY PROPOSED ORDINANCES ON THE AGENDA. Page 19 This permits reading the title only in lieu of reciting the entire text of the Ordinances. This does not take policy action on the Ordinances or approve or disapprove any Ordinances on the agenda. 5. AWARD OF CONTRACT FOR ADMINISTRATION OF THE CITY’S COMMUNITY DEVELOPMENT BLOCK GRANT (CDBG) FUNDED HOUSING REHABILITATION PROGRAM Page 20 RECOMMENDATION: That the City Council: 1. Approval to enter into a professional services agreement with Michael Baker International to provide Owner-Occupied Housing Rehabilitation Program Administration for the City’s CDBG Program. 2. Approval of Resolution 2016-20, a resolution of the City of Calimesa California amending the 2016-17 Budget to include an appropriation and related revenue for the Community Development Block Grant Funded Housing Rehabilitation Program CHIEF OF POLICE COMMENTS & REPORTS FIRE CHIEF COMMENTS & REPORTS MAYOR & COUNCIL MEMBER REPORTING OF COUNTY & REGIONAL MEETINGS This is the time for comments, announcements and/or reports on meetings attended at public expense as required by AB 1234. Regular Meeting of the Calimesa City Council July 5, 2016 Page 2 of 4 Page 2 of 194 PUBLIC HEARINGS The recommended order of business for the Public Hearing is: 1. Open the Public Hearing 2. Introduction and Opening Comments a. b. c. d. e. f. 3. Staff Report on general issues (background, Ordinance and procedures) Appellant Presentation on general issues Park Resident Representatives’ Presentation on general issues Public Comment Appellant’s Reply on general issues City Council questions to all parties Arguments on Appeal (recommendation for numbers 3 - 6 to occur at a continued public hearing; date and time to be determined by City Council) a. Arguments in Favor and Against Appeal i. Appellant’s Argument in favor of Appeal ii. Park Resident Representatives’ Argument in response to Appeal iii. Public Comment (for those who did not speak on July 5, 2016) iv. Staff’s Argument in response to Appeal v. City Council questions to all parties regarding issues raised in Appeal and Responses to Appeal b. Rebuttal Arguments i. Rebuttal by Appellant ii. Rebuttal by Park Resident Representatives iii. Rebuttal by Staff c. Closing Arguments i. Staff Closing Argument ii. Park Resident Representatives Closing Argument iii. Appellant Closing Argument 4. Public hearing closed 5. City Council Discussion and Deliberation 6. City Council Motions and Votes Speakers are encouraged to be brief and remain within the established time limit of three (3) minutes per speaker. Once the public hearing has been closed, no further testimony will be taken. 6. PUBLIC HEARING: APPEAL OF THE DECISION OF THE CALIMESA MOBILE HOME RENT STABILIZATION BOARD AS ADOPTED BY MHRSB RESOLUTION NO. 2016-01 DENYING THE SPECIAL RENT INCREASE PETITION AND TEMPORARY RENT INCREASE PETITION FILED BY AVMGH THREE-GOLDEN PALMS LIMITED PARTNERSHIP PURSUANT TO THE CITY OF CALIMESA MOBILE HOME RENT STABILIZATION ORDINANCE, CHAPTER 9.05, SECTIONS 9.05.100(D) AND (F) AND SECTION 9.05.140 OF THE CALIMESA MUNICIPAL CODE. Page 37 RECOMMENDATION: That the City Council open the public hearing, have the Introduction and Opening comments including presentation of general issues by Staff, Appellant AVMGH Three-Golden Palms Limited Partnership, and the Park Resident Representatives; and then continue the public hearing to a date and time certain for presentation of the arguments in favor and against the Appeal; City Council discussion and deliberations; and action. Regular Meeting of the Calimesa City Council July 5, 2016 Page 3 of 4 Page 3 of 194 CONVENE JOINT CITY COUNCIL AND SUCCESSOR AGENCY TO THE CALIMESA REDEVELOPMENT AGENCY MEETING JOINT CC-CSA CONSENT ITEMS 1. FOURTH AMENDMENT TO AGREEMENT FOR LEGAL SERVICES Page 190 RECOMMENDATION: That the City Council and the Agency Board of Directors approve the Fourth Amendment to Agreement for Legal Services with Richards, Watson & Gershon. ADJOURN THE SUCCESSOR AGENCY TO THE CALIMESA REDEVELOPMENT AGENCY AND RECONVENE CITY COUNCIL COUNCIL MEMBERS’ COMMENTS & REPORTS This is the time for additional general comments, announcements, reports on meetings attended at public expense as required by AB 1234, requests of staff, and other issues of concern to Council Members may be presented briefly at this time. The Council may not legally take action on any item presented at this time other than to direct staff to investigate a complaint or place an item on a future agenda unless (1) by a majority vote, the Council determines that an emergency situation exists, as defined by Government Code § 54956.5 or (2) by a four-fifths vote, the Council determines that there is a need for immediate action and the need for action arose subsequent to the agenda being posted as required by Government Code § 54954.2(b). CITY MANAGER COMMENTS & REPORTS CLOSED SESSION A. CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION Pursuant to Paragraph (1) of Subdivision (d) of Government Code Section 54956.9 Name of Case: AVMGH Three-Golden Palms Limited Partnership V. City of Calimesa – Superior Court Case No. RIC1600278 ADJOURNMENT Adjourn to the Regular Meeting of the City Council on Monday, July 18, 2016 at 6:00 p.m. Regular Meeting of the Calimesa City Council July 5, 2016 Page 4 of 4 Page 4 of 194 Page 5 of 194 Page 6 of 194 Page 7 of 194 Page 8 of 194 Page 9 of 194 Page 10 of 194 Page 11 of 194 Page 12 of 194 Page 13 of 194 Page 14 of 194 Page 15 of 194 Page 16 of 194 Page 17 of 194 Page 18 of 194 Page 19 of 194 Page 20 of 194 Page 21 of 194 Page 22 of 194 Page 23 of 194 Page 24 of 194 Page 25 of 194 Page 26 of 194 Page 27 of 194 Page 28 of 194 Page 29 of 194 Page 30 of 194 Page 31 of 194 Page 32 of 194 Page 33 of 194 Page 34 of 194 Page 35 of 194 Page 36 of 194 Agenda Item No. 6 STAFF REPORT CITY OF CALIMESA CITY COUNCIL MEETING SUBJECT: PUBLIC HEARING: Appeal of the decision of the Calimesa Mobile Home Rent Stabilization Board as adopted by MHRSB Resolution No. 2016-01, denying the Special Rent Increase Petition and Temporary Rent Increase Petition filed by AVMGH Three-Golden Palms Limited Partnership pursuant to the City of Calimesa Mobile Home Rent Stabilization Ordinance, Chapter 9.05, Sections 9.05.100(D) and (F) and Section 9.05.140 of the Calimesa Municipal Code. APPELLANT: AVMGH Three-Golden Palms Limited Partnership LOCATION: Rancho Calimesa Mobile Home Ranch, 10320 Calimesa Boulevard, Calimesa, California 92320 MEETING DATE: July 5, 2016 PREPARED BY: Darlene Gerdes, City Clerk/Rent Administrator Amy Greyson, Assistant City Attorney RECOMMENDATION: That the City Council conduct a Public Hearing on the appeal filed by AVMGH Three-Golden Palms Limited Partnership (“AVMGH”) from the decision of the Calimesa Mobile Home Rent Stabilization Board denying AVMGH’s Petition for a Special Rent Increase and Petition for a Temporary Rent Increase. (Attachment 1) Staff recommends that the public hearing on the Appeal be conducted in accordance with the following procedures: 1. Open the Public Hearing 2. Introduction and Opening Comments a. Staff Report on general issues (background, Ordinance and procedures); b. Appellant Presentation on general issues c. Park Resident Representatives’ Presentation on general issues d. Public Comment e. Appellant’s Reply on general issues f. City Council questions to all parties 3. Arguments on Appeal (recommendation for Part #3-6 to occur at continued public hearing; date and time to be determined by City Council) a. Arguments in Favor and Against Appeal i. Appellant’s Argument in favor of Appeal ii. Park Resident Representatives’ Argument in response to Appeal iii. Public Comment (for those who did not speak on July 5, 2016) iv. Staff’s Argument in response to Appeal Page 37 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 2 v. City Council questions to all parties regarding issues raised in Appeal and Responses to Appeal b. Rebuttal Arguments i. Rebuttal by Appellant ii. Rebuttal by Park Resident Representatives iii. Rebuttal by Staff c. Closing Arguments i. Staff Closing Argument ii. Park Resident Representatives Closing Argument iii. Appellant Closing Argument 4. Public hearing closed 5. City Council Discussion and Deliberation 6. City Council Motions and votes: a. Alternative #1: i. Adopt a motion granting the appeal and approving a Special Rent Increase for Appellant pursuant to CMC § 9.05.100(D) (Maintenance of Net Operating Income Rent Increase); or CMC § 9.05.100(F) (Fair Return Rent Increase) based on stated findings of fact and conclusions, and ii. Adopt a motion granting the appeal and approving a Temporary Rent Increase to reimburse Appellant for the costs incurred in preparing and presenting the Petition and Appeal, pursuant to CMC § 9.05.140, based on stated findings of fact and conclusions or b. Alternative #2: i. Adopt a motion denying the appeal and upholding the decision of the Mobile Home Rent Stabilization Board denying the Special Rent Increase filed by AVMGH Three-Golden Palms Limited Partnership pursuant to CMC § 9.05.100(D) and (F), based on stated findings of fact and conclusions; and ii. Adopt a motion denying the appeal and upholding the decision of the Board denying the Temporary Rent Increase for reimbursement of the costs incurred by Appellant in preparing and presenting the Special Rent Increase Petition to the Board and City Council based on stated findings of fact and conclusions. c. Adopt a Motion authorizing special counsel to the City Council to prepare a written Resolution memorializing the City Council’s findings and decisions on the Appeal. Page 38 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 3 Pursuant to Rule 9.3 of the Administrative Rules, no new written or oral evidence may be submitted to the City Council during the Appeal. The Appeal is limited to the record of proceedings before the Board, including the written staff reports, exhibits, reports, and protests which were admitted into evidence and considered by the Board during the public hearing on the petition, the resolution of the Board, the Board minutes, and the verbatim transcripts of the proceedings before the Board. The Board’s record of proceedings has been provided to the City Council and parties, and made available to the public. Due to the complexity of the Special Rent Increase Petition and Temporary Rent Increase Petition, and the size of the Board record, Staff recommends that the City Council break the public hearing up into at least two sessions. This process would allow the City Council and all participants’ sufficient time to prepare and respond to the arguments in favor of and against the Appeal, including submittal of any additional briefs and/or written responses to the parties’ contentions on appeal. Staff proposes that the first two parts – opening the public hearing and introduction of the general issues -- take place on July 5, 2016. Staff recommends that the City Council then continue the public hearing to another date and time certain for Parts #3 through #6, the presentation of the parties’ written and oral arguments in support of and in opposition to the Appeal, rebuttal and closing arguments; and City Council discussion, deliberation and action. Staff also recommends that the City Council specify deadlines for submittal of written responses to the Appeal by Staff, the Park Resident Representatives and any other residents, and submittal of written rebuttal by Appellant. Staff also recommends that the City Council set time limits on the parties’ presentations on each of the matters during the public hearing on the Appeal. Depending on the time required for the arguments in favor of and against the Appeal, the City Council may also wish to consider conducting its deliberations and decision at the conclusion of the arguments, or alternatively continue the matter to another date and time certain to complete the proceedings on the Appeal. Pursuant to CMC § 9.05.120(G), the City Council shall issue its decision in writing, including findings of fact, within 45 days of the commencement of the public hearing, or no later than Monday, August 15, 2016, unless the City Council extends the time limits for reasonable cause. BACKGROUND: This Appeal has been filed by Bruce A. Hohn, as authorized representative of AVMGH Three-Golden Palms Limited Partnership (“AVMGH” or “Park Owner”) with respect to the decision of the Mobile Home Rent Stabilization Board (“Board”) denying AVMGH’s Petition for Special Rent Increase (“Special Rent Increase Petition” or “Petition”), for Rancho Calimesa Mobile Home Ranch (“the Park” or “Rancho Calimesa”). AVMGH filed the Petition pursuant to the City’s Mobile Home Rent Stabilization Ordinance (Chapter 9.05, Sections 9.05.010 through 9.05.190 of the Calimesa Municipal Code) (the “Ordinance”), and the Administrative Rules for Implementation of the Mobile Home Rent Stabilization Ordinance (“Rules”). In its Petition, AVMGH contends that a Special Rent Increase is required under CMC § 9.05.100(D) or (F) to provide a fair return. In the original Petition, AVMGH proposed three alternative rent increases: A Fair Return Rent Increase of $218.95, pursuant to Section 9.04.100(F) of the Ordinance on the basis that this Special Rent increase is required in order to provide the Park Owner with a fair return on its investment. Page 39 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 4 A Maintenance of Net Operating Income (“MNOI”) Rent Increase for 204 spaces, of $99.52, calculated under Section 9.05.100(D) of the Ordinance, using 80% of the increase in the CPI since the Base Year (July 1, 1991 through June 30, 1992). An MNOI Rent Increase for 204 spaces of $119.40, calculated using 100% of the increase in CPI since the Base Year. During the public hearing, AVMGH presented several modified approaches to determining a Fair Return Rent Increase for the Park. Before the end of the public hearing, during their rebuttal, AVMGH modified its Petition to request that the Board grant a Fair Return Rent Increase of $100.80, using a capitalization rate of 7.25% on its inflation-adjusted purchase price of $8,894.379. In support of its Special Rent Increase Petition, AVMGH provided reports prepared by three experts, Edward Gogin, CPA, appraiser John P. Neet, MAI and Michael St. John. AVMGH also filed a Temporary Rent Increase for reimbursement of its petition and public hearing costs before the Board and its Appeal to the City Council, pursuant to CMC § 9.05.190. The City retained two experts, Dr. Kenneth Baar, Ph.D, J.D., and James Brabant, MAI, of Anderson & Brabant, Inc. to assist Staff in evaluating the Petition. According to a report prepared by Dr. Baar, AVMGH is already earning a fair return under the MNOI methodology as provided in Section 9.05.100(D) of the Ordinance, and that there is no basis to grant any other Special Rent Increase. Mr. Brabant raised questions about the analysis provided by AVMGH’s experts, Mr. Gogin and Mr. Neet, in support of AVMGH’s proposed Special Rent Increase. The public hearing on the Special Rent Increase Petition and Temporary Rent Increase Petition was held over seven days, on March 15, 16, 17, and 23, 2016, and May 10, 18, and 31, 2016. At the public hearing, the City was represented by Darlene Gerdes, City Clerk/Rent Administrator, and Amy Greyson, Assistant City Attorney, and the City presented three witnesses, Dr. Baar, Mr. Brabant, and Ms. Gerdes. The Board was represented by Donald Lincoln, Esq. The Park Owner was represented by Bruce A. Hohn, on behalf of AVMGH ThreeGolden Palms Limited Partnership, and Boyd L. Hill, Esq., of Hart, King, A Professional Corporation. AVMGH called three witnesses, Mr. Hohn, Mr. Gogin, and Mr. Neet. The residents were represented by Robin Minnear, Pete Gallant and Tim Sheahan, National Manufactured Home Owners Association President. Numerous residents of the Park also testified during the public hearing. The Board admitted documentation into evidence at the request of the parties, which is provided to the City Council as the Board record of proceedings. The admitted exhibits and other matters included in this Board record of proceedings (“Board record”) include the following: Petitioner (Park Owner) Exhibits A through N1 Petitioner (Park Owner) Attachments 1, 2 and 3 Staff (City) Exhibits 1 through 46 Staff (City) Attachments 1 through 9 1 The Park Owner originally offered an additional exhibit, Exhibit O, into evidence. The Board did not admit Exhibit O into evidence and it is not part of the record of proceedings or the evidence that may be considered by the City Council on the Appeal. Page 40 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 5 Park Resident Representative Exhibits I through VI Park Resident Representative Attachments 1 and 2 Transcript of Board Hearing (seven transcripts and disks) All exhibits, and the complete transcript of the Board hearing, has been provided to the City Council and all parties as the Board’s record of proceedings. The entire Board record has also been made available to the public. At the May 18, 2016 session of the public hearing, public testimony was completed and closing comments were presented by City staff, AVMGH and the Park Resident Representatives. The Board then closed the public hearing and commenced deliberations, and thereafter voted to deny the Special Rent Increase Petition. The Board found that AVMGH failed to demonstrate that AVMGH is entitled to any Special Rent Increase under Sections 9.05.100(D) or (F) of the Ordinance. Because the Board denied the Special Rent Increase Petition, the Board also denied the Park Owner’s Temporary Rent Increase Petition under Section 9.05.140 of the Ordinance, because AVMGH was not the prevailing party on its request for a Special Rent Increase. The Board then directed City staff to prepare a resolution memorializing the Board’s tentative decision and to bring the proposed resolution back for Board approval. Staff prepared a proposed resolution, and circulated it to all parties as well as Board legal counsel Don Lincoln. Thereafter, on May 31, 2016 the Board adopted MHRSB Resolution No. 2016-01, denying the Special Rent Increase Petition and Temporary Rent Increase Petition filed by AVMGH pursuant to Sections 9.05.100(D) and (F) and Section 9.05.140 of the Ordinance. Pursuant to Calimesa Municipal Code Section 9.05.120, either party may, and prior to commencing any action in a court of competent jurisdiction shall, appeal any final decision or order of the board to the City Council by filing written notice of the appeal with the City Manager not later than 15 days after the date of deposit in the mail of the decision of the Board to the petitioner and affected residents. Appeals shall be filed, processed and heard in accordance with Section 9.05.120 and the administrative rules implementing the Ordinance. On June 15, 2016, the City received an “Appeal of the Calimesa Mobile Home Rent Stabilization Board Decision to the City Council” from Petitioner AVMGH Three-Golden Palms Limited Partnership. AVMGH contends that the Board’s decision must be reversed, and that it is entitled to a Fair Return Rent Increase of $100.80 per space per month, and a Temporary Rent Increase of $17.50 per month for five years to reimburse AVMGH for its costs incurred in preparing and presenting the Special Rent Increase Petition to the Board and City Council. Under the Ordinance, the public hearing on the Appeal must commence at a regular meeting of the Calimesa City Council held within 30 days after the Appeal is filed. AVMGH’s Appeal has been scheduled to be held on Tuesday, July 5, 2016 at 6:00 p.m. in the Norton Younglove Multipurpose Center, 908 Park Avenue Calimesa, California. Any person may submit written comments prior to the public hearing or may appear in person before the City Council to be heard. As noted, no new evidence may be submitted to the City Council on the Appeal. As of the date of the completion of the agenda packet, there were no written comments submitted to the City Clerk for consideration. Page 41 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 6 DISCUSSION: A. OVERVIEW OF CALIMESA MOBILE HOME RENT STABILIZATION PROGRAM The City’s Mobile Home Rent Stabilization Ordinance (“Ordinance”) is contained in Chapter 9.05 of the Municipal Code (“CMC”). To assist in administering the implementing the Ordinance, the City Council previously adopted implementing rules, which are contained in the Administrative Rules for the Implementation of the Mobile Home Rent Stabilization Ordinance (last amended by Resolution No. 2011-38) (“Rules”). In accordance with the Ordinance and Rules, the City has also adopted fee resolutions governing requirements for fees and deposits for Special Rent Increase Petitions. (Ordinance, Section 9.05.110(A) and 9.05.120(C); Rules 7.2, 8.2, 9.2 and 9.4; and Resolution No. 96-28) Copies of the Ordinance, the Rules, and Resolution No. 96-28 are enclosed with this staff report. (Attachments 2, 3 and 4) The following is a general overview of the Ordinance and its implementing rules. 1. To Whom Does the Ordinance Apply? The Ordinance applies to all month-to-month spaces in a mobile home park in the City. Certain types of spaces are exempt from the Ordinance, including spaces subject to long-term leases in excess of 12 months' duration, pursuant to the California Mobilehome Residency Law. (Cal. Civil Code § 798.17) However, upon expiration of an exempt long-term lease, rent control will thereafter control the rent on the subject space. The last rent in effect under the lease or rental agreement becomes the base rent for purposes of the City’s Ordinance. (Cal. Civil Code § 798.17(a).) Under the Mobilehome Residency Law, spaces or parks constructed after January 1, 1990, which constitute “new construction”, are also exempt from the Ordinance. (Cal. Civil Code §§ 798.7 and 798.45) 2. What does the Ordinance do? The Ordinance limits both the method by which rents may be increased in a park, and the amount of such increases. Upon adoption of the Ordinance, park owners were required to register their parks, and provide a description of space status, and space rent records. Park owners must also submit annual registration forms, which contain changes in space status and rents. If rent increases are imposed, park owners must also file updated schedules of space rents in their parks. 3. What types of rent increases does the Ordinance allow? The Ordinance limits rent increases to Permitted Annual Rent Increase (Section 9.05.080); Capital Improvement Rent Increase (Section 9.05.090); and Rent Increase to Provide a Reasonable Return (Section 9.05.100). 4. What is a Permitted Annual Rent Increase? Under Section 9.05.0808 of the Ordinance, a park owner may increase rents not more than once every 12 months by 80% of the increase in the Consumer Price Index (“CPI”) over the prior 12 months. Permitted annual increases are permitted by right, and no prior approval from the City is required. However, concurrently with service of 90-day notice of rent increase to the affected residents, park management must file a rent schedule with the City Manager which Page 42 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 7 contains a list of all spaces subject to the Permitted Annual Increase, the space rent in effect for each subject space as of the date of notice of the rent increase, the amount of the rent Increase and the method by which it was determined, and the proposed new space rent.2 Dissatisfied residents may file a protest with the City Manager, who then reviews management’s actions to make sure the increase complies with the 80% CPI limit and other provisions of the Ordinance. The City Manager’s decision is final. 5. What types of rent increases require Board approval? Other types of rent increases require submittal of a petition, a noticed public hearing before the Board, and issuance of a written decision from the Board. These types of rent increases include the following: A Rent Increase to Provide a Reasonable Return (or “Special Rent Increase”), pursuant to Section 9.05.100 of the Ordinance. Capital Improvement Rent Increase, pursuant to Section 9.05.090. A Temporary Rent Increase, pursuant to Section 9.05.140, to reimburse the park owner for costs incurred for professional services in preparing a Special Rent Increase Petition and participating in a Board hearing or appeal hearing (only if the Board grants approval of a Special Rent Increase). The Ordinance and Rules specify the requirements for a petition under each of these provisions, including the supporting documentation that must be submitted; and also provide that the petition be considered by the Board at a noticed public hearing. The affected Park residents have the right to provide a written opposition or response, and all interested persons have the right to appear and testify at a public hearing. The Board must issue a written decision. The Board’s decision is subject to appeal to the City Council. (Ordinance, Sections 9.05.100, 9.05.110, 9.05.120, 9.05.140; Rules, Chapters 7, 8, 9, 10, and 11.) Following approval of any rent increase under the City’s Ordinance, the park management must provide a 90-day notice of rent increase to the affected residents. (Cal. Civil Code § 798.30) 6. What is a Capital Improvement Rent Increase? A Capital Improvement Rent Increase is a temporary rent increase based on the cost of a completed capital improvement paid over an amortization period. Once the amortization period ends, park management must stop charging for the Capital Improvement Rent Increase. The Capital Improvement Rent Increase must be separately listed on each monthly rental statement, and cannot be included in the space’s base rent for purposes of subsequent Permitted Annual Rent Increases or Rent Increases to Provide a Reasonable Return. The Ordinance defines a “capital improvement” to mean “the installation of new improvements and facilities and/or the replacement or reconstruction of existing improvements and facilities which consist of more than ordinary maintenance or repairs, and have a useful life of at least five years. Capital improvements include, but are not limited to, improvements which would 2 Under state law, park management must provide a resident with 90-days notice of rent increase. (Cal. Civil Code § 798.30). Page 43 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 8 qualify as capital improvements, rather than ordinary repairs and maintenance, pursuant to applicable regulations of the Internal Revenue Service or California State Franchise Tax Board.” (Ordinance, Section 9.05.030) Examples of capital improvements and an amortization schedule for particular capital improvements and capital expenses are also listed in the Rules. (Rules, Chapter 9 and 10 and Appendix A) In order to petition for approval of a Capital Improvement Rent Increase, the park owner must first obtain approval from at least 51% of the occupied spaces in the park, unless the capital improvement is necessary to protect the public health and safety of the park, its residents, or neighbors. (Ordinance, Section 9.05.090(A) and (C)) 7. What is a Rent Increase to Provide a Reasonable Return? In addition to Permitted Annual Increases, the Ordinance also allows park owners to petition the Board in extraordinary situations where the park owner contends that the Permitted Annual Increase does not provide a reasonable return. (Ordinance, Section 9.05.100) There is no precise definition of a fair return. Court decisions have established that a “fair return” is a legal constitutional term: “It refers to a constitutional minimum within a broad zone of reasonableness. . . [W]ithin this broad zone, the rate regulator is balancing the interests of investors, i.e., landlords, with the interests of consumers, i.e., mobilehome owners, in order to achieve a rent level that will on the one hand maintain the affordability of the mobilehome park and on the other hand allow the landlord to continue to operate successfully.” Galland v. City of Clovis (2001) 24 Cal.4th 1003, 1026 (emphasis added); Carson Harbor Village v. City of Carson Mobilehome Park Rental Review Board (1990) 70 Cal.App.4th 281, 288-289. Other court decisions have described a fair return in the following manner: “A fair return is a return which is high enough to encourage good management, reward efficiency and discourage the flight of capital and is commensurate with returns on comparable investments, but not so high as to defeat the purpose of preventing excessive rents.” Kavanau v. Santa Monica Rent Control Board (1997) 16 Cal.4th 761, 771-772; San Marcos Mobilehome Park Owners Ass’n. v. City of San Marcos (1987) 192 Cal.App.3d 1492, 1502; Oceanside Mobilehome Park Owners’ Ass’n. v. City of Oceanside (1984) 157 Cal.App.3d 887, 907. A court must determine whether the regulations may be reasonably expected to maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks they have assumed, and yet provide appropriate protection for the heart of relevant public interest, both existing and foreseeable. Stardust Mobile Estates v. City of San Buenaventura (2007) 147 Cal.App.4th 1170, 1188; Galland, supra, 24 Cal.4th at 1021-1022; Kavanau; 16 Cal.4th at 771-772. This process maintains the constitutionality of a rent control ordinance by preventing confiscatory results. See Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 165. Determining prices that will provide a fair return “involves a balancing of the investor and the consumer interests.” Galland v. City of Clovis (2001) 24 Cal.4th 1003, 1021; Kavanau, supra, 16 Cal.4th at 771-772. As the Supreme Court has emphasized in Kavanau, “a ‘court must determine whether the [regulation] may reasonably be expected to maintain financial integrity, attract necessary capital, and fairly compensate investors for the risks they have assumed, and yet provide Page 44 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 9 appropriate protection for the heart of relevant public interests, both existing and foreseeable.’ “ (16 Cal.4th at 771-772.) “[R]ent regulation must not prevent an efficient enterprise from “ ‘ “operating successfully,“ ' ” but rent regulators are permitted to adjust prices “within a 'broad zone of reasonableness,' ” balancing the interests of landlords and tenants. (Kavanau at 778779.) Consistent with these constitutional principles, the Ordinance provides for additional types of increases, which are referred to as “Special Rent Increases”, and classifies them into three categories: A Maintenance of Net Operating Income (“MNOI”) Rent Increase. (Ordinance, Section 9.05.100(D).) An MNOI Rent Increase based on Readjusted Base Year Net Operating Income. (Ordinance, Section 9.05.100(E).) A Fair Return Rent Increase. (Ordinance, Section 9.05.100(F).) The park owner bears the burden of establishing entitlement to a Special Rent Increase. (Ordinance, Section 9.05.100; Rule 7.3 and 7.5.) 8. What is a Maintenance of Net Operating Income (MNOI) Rent Increase and how is it determined? The procedures and requirements for approval of a Maintenance of Net Operating Income (“MNOI”) Rent Increase are contained in Sections 9.05.100 and 9.05.110 of the Ordinance, and in Rule 7.3 and Rules, Chapter 8. Under these provisions, the park owner may petition the Board for a rent increase that will provide a current net operating income (“NOI”) that is equal to the net operating income from a specified “base year” as adjusted by 80% of the increase in the Consumer Price Index (or “CPI”) since the base year to the date of the petition. (Ordinance, Section 9.05.100(D).) The Ordinance generally defines the initial base year as fiscal year July 1, 1991 through June 30, 1992. A park’s net operating income (“NOI”) equals the park’s gross income (“GI”) minus the park’s operating expenses (“OE”) for the relevant year. (Ordinance, Section 9.05.100(B)(10).) The Ordinance contains a rebuttable presumption that the base year NOI provided a park owner with a fair return. (Ordinance, Section 9.05.100(A), (D) and (F).) The purpose of an MNOI Rent Increase is to enable the park owner’s income to increase by a percentage of the increase in inflation in order for the park owner to have sufficient income to cover the increased cost of operating a park plus while allowing the park owner to continue to earn a profit. The Ordinance limits the application of inflation to 80% of the increase in the CPI, and identifies the categories of income and operating expenses that may be considered in determining the park’s NOI for the base year or current year. (Ordinance, Section 9.05.100(D), Rule 7.3.) In reviewing the MNOI petition, and the evidence submitted in support of the requested rent increase, the Board must determine the Park’s base year gross income, operating expenses and NOI; the increase in CPI between the base year and the current year; and the Park’s Page 45 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 10 current year gross income, operating expenses and NOI. follows: Relevant terms are defined as “Base Year” or “BY”: Fiscal Year 7/1/91 – 6/30/92 “Current Year” or “CY”: The 12 months immediately preceding the date of submittal of a complete petition “Consumer Price Index” or “CPI”: Consumer Price Index for All Urban Consumers for the Bureau of Labor Statistics for the Los Angeles-RiversideOrange County areas (Dept. of Labor Bureau of Labor Statistics) “Base Year CPI”: CPI for 6/30/92 (146.2) “Current CPI”: CPI last reported as of the date the petition is deemed complete “MNOI Rent Increase”: Maintenance of Net Operating Income Rent Increase authorized by CMC Section 9.05.100(D) “Gross Income” or “GI”: The park’s gross space rents and other income allowed under the Ordinance and Rules “Net Operating Income” or “NOI”: Gross income – Operating Expenses “Operating Expenses” or “OE”: Park’s operating costs allowed under the Ordinance and Rules “Park Current Year Net Operating Income Entitlement” or “Park CY NOI Entitlement”: The amount representing the park’s Net Operating Income for the Base Year as adjusted by 80% of the increase in the CPI from the base year to the current year The Maintenance of Net Operating Income formula in Section 9.05.100(D) allows the net operating income in the base year (1991/92) to increase by 80% of the increase in the CPI since the base year. If the park owner’s NOI for the entire park has not increased by that amount, the Board will grant a rent increase sufficient to bring the current NOI for the park up to the amount equivalent to the 80% CPI increase (or “Current Year NOI Entitlement”). The total dollar amount of the Current Year NOI Entitlement is determined for the park as a whole; that sum is then compared with the current net operating income; and the difference is divided up among all spaces (regulated and unregulated) to arrive at a monthly space rent increase (or “Maintenance of Net Operating Income rent increase”) that is added to each space’s current space rent. The resulting amount constitutes the new monthly rent for each space. In order to be entitled to an MNOI Rent increase, the park’s current year NOI must be less than the current year NOI Entitlement, which is determined by adjusted the base year NOI by 80% of the increase in inflation since the base year. Conceptually, the MNOI methodology is demonstrated in the following samples: Page 46 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 11 SAMPLE #1 – NO MAINTENANCE OF NET OPERATING INCOME (MNOI) RENT INCREASE WARRANTED Current Year NOI greater than Park Current Year NOI Entitlement – Current Year NOI Park Current Year NOI Entitlement Base Year NOI adjusted by 80% CPI Increase No MNOI Rent Increase warranted Base Year NOI SAMPLE #2 – MAINTENANCE OF NET OPERATING INCOME (MNOI) RENT INCREASE WARRANTED Park MNOI Rent Increase Base Year NOI adjusted by 80% CPI Increase Park Current Year NOI Entitlement Current Year NOI Current Year NOI less than Park Current Year NOI Entitlement – MNOI Rent Increase warranted Base Year NOI In order to obtain approval of an MNOI Rent Increase, the park owner bears the burden of proving entitlement to the proposed MNOI Rent Increase. (Rule 8.6(E).) The park owner must establish, by substantial evidence, that he/she is entitled to an MNOI Rent Increase, including the park’s base year and current year gross income, operating expenses and net operating income. Under the Rules, decisions of the Board “shall be supported by substantial evidence in light of the entire record of the proceedings.” (Rule 8.3(E).) Evidence is substantial when “it is relevant, credible and reliable and provides enough information, together with the reasonable Page 47 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 12 inferences from that information, to support a conclusion even though other conclusions might also be reached. No decision may be supported solely by hearsay evidence.” (Rule8.3(E).) 9. What is an MNOI Rent Increase based on Readjusted Base Year Net Operating Income and How is it Determined? A park owner may rebut the presumption that the base year net operating income provided a just and reasonable return, and instead use an adjusted base year net operating income in the MNOI formula. (Ordinance, Section 9.05.100(E).) When an ordinance provides for use of the MNOI rent increase methodology, including a specified base year, the courts have ruled that the ordinance must also allow a park owner to show the base year net operating income was not just and reasonable. This type of rent increase is known as a “Vega adjustment” after the appellate court decision of Vega v. City of West Hollywood (1990) 223 Cal.App.3d 1342. In Vega, the appellate court indicated that a rent control formula that establishes a base rent is premised on the concept that the base date rents can reasonably be expected to reflect general market conditions (see Vega, supra, 223 Cal.App.3d at 1351), and when a rent control law establishes a “base rent” by reference to rents on a specified date, the law should permit adjustments of that base rent for those rental units that had artificially low rents at that time, and that the law should permit individualized rent adjustments in appropriate cases even if base rent was not artificially low. See Kavanau, supra, 199716 Cal.4th 761, 772 (citing Birkenfeld v. City of Berkeley (1976) 17 Cal.3d 129, 168 and Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 689–690.) In the City’s Ordinance, a park owner may demonstrate that in calculating MNOI Rent Increase formula, the base year net operating income must be adjusted upwards based evidence relating to factors such as unusually high or low operating expenses in the base year; capital improvements were made in the base year but not reflected in rent increases collected in that year; unusual repairs due to uninsured events or vandalism; base year rents in the park that were lower than rents charged in comparable parks in the base year; and base year rents that were not sufficient to provide a just and reasonable return in the base year, by presenting evidence of the return on investment earned in comparable parks. (Ordinance, Section 9.05.100(E); Rule 7.4.) Under Section 9.05.100(E), the park owner also bears the burden of proof of demonstrating, by substantial evidence, that he/she is entitled to an MNOI Rent Adjustment based on a Readjusted Base Year NOI. The park owner must provide enough information and documentation to establish: the income and expenses received in the base year and current Year; and the factual basis for the request to readjust (increase) the base year NOI using the factors listed in Rule 7.4. 10. What is a Fair Return Rent Increase and How is it Determined? Under Section 9.05.100(F) of the Ordinance, a park owner may rebut the presumption that the rent increase calculations provided in Section 9.05.100(D) are sufficient to provide a just and reasonable return by presenting evidence that the rate of return being earned by the mobilehome park is not just and reasonable. (See also Rules 7.3, 7.4 and 7.5.) The purpose of this provision is to provide park owners with the opportunity to demonstrate that even with the other rent increase mechanisms in the Ordinance, the park owner is still not earning a just and reasonable return, consistent with court decisions. Page 48 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 13 Rule 7.5(B) provides as follows: “B. In determining whether a park owner is entitled to a Special Rent Increase under CMC 9.05.100(F) and this Rule 7.5, the Board shall consider all relevant evidence, including but not limited to: 1. The purchase price of the park; 2. The NOI of the park at the time of purchase; 3. Any capital improvements made in the park by the owner; 4. The park’s current income and expenses and income and expenses for the past 5 years; 5. The return earned by the park; 6. The return earned by comparable residential rental enterprises with commensurate risks and benefits; 7. The rents earned by comparable mobile home parks measured by the “capitalization rate” (or “cap rate”) of those parks determined by dividing a park’s net operating income by its purchase price; and 8. The mobile home park’s pattern of income and expenses over each of the past five years, including any unavoidable increases or decreases in maintenance, repairs, and other operating expenses (including but expressly not limited to deferred maintenance or substantial deterioration in the mobile home park other than as a result of normal wear and tear).” In evaluating a Fair Return Rent Increase Petition, the Board (and City Council on appeal) must consider the evidence presented by the park owner and the other parties on these listed issues and other relevant factors to determine if the park owner has established that it is entitled to a Fair Return Rent Increase. 11. What is a Temporary Rent Increase and Under What Circumstances May It Be Awarded? Section 9.05.140 of the Ordinance authorizes the Board to award a park owner a Temporary Rent Increase to reimburse the park owner for costs incurred for professional services in preparing a Special Rent Increase Petition or Capital Improvement Rent Increase Petition and participating in a Board hearing or appeal hearing. A Temporary Rent Increase may only be awarded by the Board if a park owner obtains approval of a Special Rent Increase or Capital Improvement Rent Increase from the City. The concept of a Temporary Rent Increase is based on a California Supreme Court case, Galland v. City of Clovis (2001) 24 Cal.4th 1003, which held that a city should allow a park owner to apply for recovery of the costs incurred in obtaining a discretionary rent increase under a local rent control ordinance. Page 49 of 194 Appeal of the decision of the Mobile Home Rent Stabilization Board As adopted by MHRSB Resolution No. 2016-01 City Council Meeting of July 5, 2016 Page 14 The Ordinance provides that a Temporary Rent Increase is determined based on eligible costs for professional services actually incurred by the park owner, such as an attorney and fair return experts, incurred by a park owner in preparing the Special Rent Increase Petition and appearing before the Board and City Council on any appeal. If the park owner intends to seek recovery of a Temporary Rent Increase, the park owner must include a Petition for a Temporary Rent Increase as part of the Special Rent Increase Petition. Consideration of the Temporary Rent Increase is part of the public hearing before the Board. (Ordinance, Section 9.05.140(A) and (B).) If granted, a Temporary Rent Increase must be amortized over a five-year period, and may include seven percent interest. The rent increase must be listed separately on the rental statement; cannot be incorporated into the base rent for the space; and the park owner must cease charging the increase once the amortization period has ended. A resident must be given the option to pay the full amount so as to avoid any payment of interest. The decision on the Temporary Rent Increase must be addressed in the Board’s decision granting or denying the Special Rent Increase Petition. (Ordinance, Section 9.05.140(C).) B. RECOMMENDATIONS Based on the foregoing Report, Staff recommends that the City Council allow the Park Owner and Park Resident Representatives, and any other interested person, to address the City Council on the general issues pertaining to AGMGH’s Appeal from Board Resolution No. 201601. Staff recommends that the City Council then continue this appeal to a date and time certain, to allow all interested parties to present their arguments for and against the Appeal, and for the City Council to then carry out its discussion and deliberations and reach a decision on the Appeal. ATTACHMENTS: Attachment 1: Calimesa Mobile Home Rent Stabilization Board Resolution No. 2016-01 Attachment 2: Calimesa Municipal Code, Chapter 9.05, Sections 9.05.010 – 9.05.190 (codified format) Attachment 3: Administrative Rules for the Implementation of the Calimesa Mobile Home Rent Stabilization Ordinance Attachment 4: City Council Resolution No. 96-28 Attachment 5: Board Record of Proceedings (separately provided to Council members), including: Petitioner (Park Owner) Exhibits A through N Petitioner (Park Owner) Attachments 1, 2 and 3 Staff (City) Exhibits 1 through 46 Staff (City) Attachments 1 through 9 Park Resident Representative Exhibits I through VI Park Resident Representative Attachments 1 and 2 Transcript of Board Hearing (seven transcripts and disks) Page 50 of 194 Page 51 of 194 Page 52 of 194 Page 53 of 194 Page 54 of 194 Page 55 of 194 Page 56 of 194 Page 57 of 194 Page 58 of 194 Page 59 of 194 Page 60 of 194 Page 61 of 194 Page 62 of 194 Page 63 of 194 Page 64 of 194 Page 65 of 194 Page 66 of 194 Page 67 of 194 Page 68 of 194 Page 69 of 194 Page 70 of 194 Page 71 of 194 Page 72 of 194 Page 73 of 194 Page 74 of 194 Page 75 of 194 Page 76 of 194 Page 77 of 194 Page 78 of 194 Page 79 of 194 Page 80 of 194 Page 81 of 194 Page 82 of 194 Page 83 of 194 Page 84 of 194 Page 85 of 194 Page 86 of 194 Page 87 of 194 Page 88 of 194 Page 89 of 194 Page 90 of 194 Page 91 of 194 Page 92 of 194 Page 93 of 194 Page 94 of 194 Page 95 of 194 Page 96 of 194 Page 97 of 194 Page 98 of 194 Page 99 of 194 Page 100 of 194 Page 101 of 194 Page 102 of 194 Page 103 of 194 Page 104 of 194 Page 105 of 194 Page 106 of 194 Page 107 of 194 Page 108 of 194 Page 109 of 194 Page 110 of 194 Page 111 of 194 Page 112 of 194 Page 113 of 194 Page 114 of 194 Page 115 of 194 Page 116 of 194 Page 117 of 194 Page 118 of 194 Page 119 of 194 Page 120 of 194 Page 121 of 194 Page 122 of 194 Page 123 of 194 Page 124 of 194 Page 125 of 194 Page 126 of 194 Page 127 of 194 Page 128 of 194 Page 129 of 194 Page 130 of 194 Page 131 of 194 Page 132 of 194 Page 133 of 194 Page 134 of 194 Page 135 of 194 Page 136 of 194 Page 137 of 194 Page 138 of 194 Page 139 of 194 Page 140 of 194 Page 141 of 194 Page 142 of 194 Page 143 of 194 Page 144 of 194 Page 145 of 194 Page 146 of 194 Page 147 of 194 Page 148 of 194 Page 149 of 194 Page 150 of 194 Page 151 of 194 Page 152 of 194 Page 153 of 194 Page 154 of 194 Page 155 of 194 Page 156 of 194 Page 157 of 194 Page 158 of 194 Page 159 of 194 Page 160 of 194 Page 161 of 194 Page 162 of 194 Page 163 of 194 Page 164 of 194 Page 165 of 194 Page 166 of 194 Page 167 of 194 Page 168 of 194 Page 169 of 194 Page 170 of 194 Page 171 of 194 Page 172 of 194 Page 173 of 194 Page 174 of 194 Page 175 of 194 Page 176 of 194 Page 177 of 194 Page 178 of 194 Page 179 of 194 Page 180 of 194 Page 181 of 194 Page 182 of 194 Page 183 of 194 Page 184 of 194 Page 185 of 194 Page 186 of 194 Page 187 of 194 Page 188 of 194 Page 189 of 194 Page 190 of 194 Page 191 of 194 Page 192 of 194 Page 193 of 194 Page 194 of 194