HomeMy WebLinkAboutCA Contempo MarinCITY OF��t
Department: City Attorney
Agenda Item No:
Meeting Date: September 6, 2011
Prepared by: Robert Epstein, City Attorney city Manager Approval:
Lisa A. Goldfien, Deputy City Attorney 11 ancy Mackie
SUBJECT: HEARING ON CROSS APPEALS OF ARBITRATORS' DECISIONS ON FIVE
PETITIONS DATED VARIOUSLY 2006-2010 FILED BY EQUITY LIFESTYLE
PROPERTIES, INC. TO PASS THROUGH CAPITAL EXPENDITURES AT
CONTEMPO MARIN MOBILEHOME PARK
RECOMMENDATION:
Hold a hearing on the appeals of Equity LifeStyle Properties, Inc. ("ELS") and the Contempo
Marin Homeowners' Association challenging the decisions of the arbitrators on ELS's petitions
filed in 2006 through 2010 for rent increases at Contempo Marin Mobilehome Park, and
determine whether to affirm, modify, or reverse the decision of the arbitrators.
BACKGROUND:
Under the City's Mobilehome Rent Stabilization Ordinance ("the Ordinance"), contained in Title
20 of the San Rafael Municipal Code (see Attachment "11"), a mobilehome park owner is
permitted an annual automatic rent increase for rent -controlled spaces in an amount equal to
75% of the annual CPI. If the park owner desires a greater increase in the rents, the owner
must file a petition with the City requesting the additional rent, and the request is subject to
arbitration by a neutral hearing officer appointed by the City.
The owner of the Contempo Marin Mobilehome Park (the "Park"), Equity LifeStyle Properties,
Inc. ("ELS"), has sued the City to invalidate the Ordinance, and the Federal District Court has
determined that the Ordinance is unconstitutional. The City has appealed the decision to the
United States Court of Appeal for the Ninth Circuit, and the case is awaiting oral argument.
In 2005, ELS, then known as "MHC", filed with the City a rent -increase petition under the terms
of the Ordinance, requesting approval of a one-time rent increase of $629.24 per space at the
FOR CITY CLERK ONLY
File No. :—(
Council Meeting: _ q ,,
Disposition: I'
k5-70CAJ OAJ 91/1q/.m I
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2
Park, as reimbursement for $249.177.74iOactual costs ELS alleged ithad incurred iDadding
"C8pita| i[np[OvS08OtS" and/or "capital [8pl8C80eOL3" to the Park during 2004 and 2005. An
arbitration hearing was held OD the petition, and the Ad}it[8k}r granted ELS an iDCn38Se of
$110.902.05, or $295.21 per Sp@C8. which was |8SS than 50q6 Of the request. In reaching this
decision, the Arbitrator found that certain Of the claimed expenditures, most Of which were
expenditures OO the Park's sewer system, qualified as "C8pii8| iDlp[Ov808DiS" and/or "capital
n3p|8C8[n8OtS" as those terms are defined in the {}[dinaODB. and that the PernGiOiDg
8XpeDditU[SS were more properly considered to be for ordinary nOGiDteO8OCe and repair.
HOvveV8[. the Arbitrator determined that under Section 20.12.110(B) Of the ()ndin8DCe
/''St8ndGndS Of F88S0O8b|eO8SS to be applied to rent iOCr88SeS''\, the qualifying C8pii8|
expenditures ShOU|d not all be passed through to the Park t8D8Dt3. but rather that the tOi8|
8vv@rd ShOU|d be reduced by 5096. based UpDO the existence 0f8 pending |3vvSUit by the Las
G8||iO8S Valley S8Dit@U0O District claiming that the vvO[k done OO the Park's S8VV8[ system was
not Up to code or adequate to resolve the pn}b|eDlS in the SyS[8rn.
ELS appealed the Arbitrator's d8CSk]O. and that appeal was heard by the City Council on July
17. 2000. On 3pp88[ the COUOCi| d8t80niD8d that the evidence before the Arbitrator showed
that ELS had Dl8d8 @ total Of $335,615.33 in qualifying capital in0prOv8On8DtS and/or C8pi1G|
[9p|8Ce[n8Ot8 to the Park, and that there was insufficient evidence in the n3COrd to support the
Arbitrator's decision to avV3nd only 50% of this 8OnOUDt. The City Council determined that under
the C}rdiD8OC8. ELS 3hOU|d be 8||OVYed to pass through the eD[iP8 @nlOuDt Of pnDVeD capital
SXpCOditU[eS as @ one-time F8Ot iDC[8aS8, but ordered that it be 8SSeSSed against the Park
tenants over aperiod of24months, @tthe rate of$24.7Qper month. (see Attachment "2".)
FOUOVVOg diGpOShjOD of the @ppS8| OO the 2005 [8Ot-iDC[e8S8 petition, ELS filed SiDli|8[ DeUUODS
in 2000, 2007, 2008. 2009. and 2010, for rent iOC[e8S8S to recover the cost Of capital
expenditures. Each of those p8bd0Ds has been arbitrated as required by the (][diO8OC8. and
Unle|y appeals from those arbitration decisions were fi|ed, both by the Park OvvOe[, ELS, and by
the Park tenants, [Hp[eS8Oh3d by the CODt80pO W18[iO Homeowners' Association ("CyNH(]A").
However, the COUDCi| has not 8{tU@Uy considered those 8pp88|S yet, becaU3e, due to the
UOC8rt@iOtv about the legality Of the {}[diO8OC8 pending 8 decision by the District Court, the
parties 8gnB8d in 2007 to SUSp8Dd any further 8ppH3| proceedings UOd| the CODC(USiOO of the
[}iSt[iCi Court C8S8. The parties have now asked to resume the proceedings, and therefore
tonight's hearing is to consider the combined appeals from the Arbitrators' decisions OO the [8Ot
increase petitions filed byELS from 20O8through 2O1U.
A. The Scope of the City Council's Authority on Appeal.
San Rafael MUDi{jp@| Code S8(tiOO 20.12.090 gOYenOS the p[OCedUFeS OD appeal Of the
1 . The appeal is not a de novo hearing, but rather a review by the City Council of
the record of proceedings before the Arbitrator (the "Administrative Record"): The City Council
may not consider any new evidence not presented to the Arbitrators unless a party provides a
specific showing that such new evidence was unknown at the time of the particular arbitration
hearing and could not, with reasonable diligence, have been discovered before the hearing.
Thus, the Council most likely will not be allowing new testimony or documentary evidence to be
presented at the hearing.
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 3
2. The Administrative Record: The Council previously was provided with a binder
containing the following written briefs submitted by the parties for this appeal hearing, reference
to which will be made in this staff report:
• Contempo Marin Homeowners' Association's Brief on Appeal, filed 8/17/11
■ Equity LifeStyle's Opening Brief on Appeal, filed 8/16/11
• Contempo Marin Homeowners' Association Opposition to Equity LifeStyle's Opening
Brief, filed 8/24/11
■ Equity LifeStyle's Reply Brief on Appeal, filed 8/23/11
Because the parties have included with their briefs those portions of the Administrative
Record they believe to be relevant to the issues on appeal, the full Administrative Record has
not been provided individually to each Councilmember. However, the Council and any member
of the public may review the full Administrative Record and the parties' briefs in the City Clerk's
Office during regular business hours. The Administrative Record consists of the following for
each arbitration decision:
■ Letters of Appeal from the Arbitrators' Decisions
■ The Arbitrators' Statements of Decision
■ The arbitration briefs of the parties
■ The Reporter's Transcript of the arbitration hearings
■ Exhibits admitted into evidence at the hearings
■ Petitions for rent increase
3. This appeal hearing is not a public hearing. Of course, like any other matter on
the Council's agenda, the public may address the Council on this item, but such presentations
are not to be used as evidence in the Council's deliberations. Rather, the hearing is an
opportunity for both parties to present written and oral arguments as to why the Arbitrators'
decisions should or should not be upheld. The Council may ask questions of the parties and of
staff, but the evaluation of the evidence in the Administrative Record and the ultimate decision
rest with the City Council as the appellate tribunal.
4. The Council may affirm modify or reverse the decision of either or both the
Arbitrators using a "substantial evidence" standard: The Council must review the record of the
proceedings before the Arbitrators and determine whether the Arbitrators abused their
discretion in making their awards. An abuse of discretion has occurred if the Arbitrator has not
provided a fair hearing or has not proceeded as required by law, or if the Arbitrator's findings do
not support her decision, or those findings are not supported by "substantial evidence" in light of
the whole record, considering both the evidence supporting, and any evidence detracting from,
the arbitrator's decision. Accordingly, in considering the evidence, the Council's role is not to
determine whether it would have made the same decision as the arbitrator, but rather to uphold
that decision if there is substantial evidence in the record to support it (even if other conclusions
could be reached); to reverse the decision if there is not substantial evidence in the record to
support it; or to modify the decision if there is evidence in the record to support the modification.
Under California law, "substantial evidence" has been variously defined as "relevant
evidence that a reasonable mind might accept as adequate to support a conclusion," California
Youth Authority v. State Personnel Board (2002) 104 Cal.App.4th 575, and as "evidence of
ponderable legal significance ... reasonable in nature, credible, and of solid value." Young v.
Gannon (2002) 97 Cal.App.4th 209, 225. While substantial evidence does not mean just any
evidence, the courts have held that the testimony of a single witness may constitute substantial
evidence. Duncan v. Department of Personnel Administration (2000) 77 Cal.App.4`" 1166.
SAN RAFAEL CITY COUNCIL AGENDA REPORT I Page: 4
5. The COUOd\\s decision to affirm, modify or [8V8rSe the
decision Ofthe Arbitrator DluSi be supported by findings explaining the basis for the Council's
decision. The {}OUDCi[S d8CiSiUO is final. In the event that the final 8chUShSd 8d}itn8t|OD 8vV3[d is
in excess Of 00% of the rent iOC[R8Se requested, Section 20.12.100 of the [}ndin8DC8 provides
that Appellants may also pass-through the arbitration COStS to the P8[h tenants over 12 -month
period.
B. The Arbitration Awards for ELS Petitions Filed in 2006 through 2010
The appeals h8fO[H the COUD[jl COOC8Dl the 8dJit[@bODS of the rent iDC[88se petitions filed by
ELS in 2008 UlnDWgh 2010. Consistent with the COUD[j|'S decision OO the 2005 petition, the
[|ih/'S arbitrators allowed 8 100% pass-through for all expenditures they determined to be
qualifying C8pii8| i[DpnJY8[O8DtS or capital Fep|8C8D18OLS. Certain expenditures were not 8||OVVed
to be passed through, because the Arbitrators determined that ELS had not proved they were in
fact for capital iDlp[OVHnDSDiG or capital r8p|8CRDleO[S within the nl88OiOg Of the City's
OFdiD@DCH.
The following is 8 summary 0fthe [8rt increases requested by ELS, and the amounts allowed
by the Arbitrators on each petition on appeal:
Year of Claimed Requested Increase
Petition Expenditures per Space
2006 $ 90,047.33 $227.39 (one-time pmt)
2007 $ 35'000.00 $ 88.38/1-U[O8pmt)
3008 $ 89.440.65 $225.80(1-U0epmt)
2009 $ 89'314.82 $225.54 (1 -time pRlU
2010 $ 30'791.58 $ 77.70(1 -time pmt)
Awarded Increase
per Space
$174.15= $14.51 x 12 mos.
$140.81= $11.72 X 12 mos.
$ 07.35= $5.61 X 12 mos.
For the five y88[S CVV8[Hd by the petitions, the Arbitrators awarded ELS 8 total 0f$288.241 in
additional rent to be passed through to the Park tenants. The total per space rent increase is
$680.82, however the Arbitrators awarded the 8OOOUOtS payable over 12 DlODthS. SO the total
rent increase for the Park tenants will b8$58.74per month for 12months.
C The Legal and Evidentiary Issues on Appeal
The present appeals by the CMH()A raise anew a primary issue in ELS'S July 2006 GpDe8|,
namely, whether under the Ordinance, ELS may "p83S-thnDUgh"LOthe tenants any expenditures
it proves have been made for capital irnp[oveDl8OiS or capital [8p|8CerneOtS, within the meaning
of the Ordinance. AS more thoroughly Set forth in the "COnt8DlpO Marin HoOl8Ovvn8rS'
ASSQCi8dOD'8 Brief on /\pp8G|" and the ''COOt8[Op0 K4a[iD HO0eOvvne[S' Association C)ppOSiUOD
to Equity Lif8Sb/|S'S Opening Brief", the CMH{JA8rgUeG as to each of the 2006 through 2010
petitions, that under 8 proper iDt8[pFei8dQO of the C)rdiO@DC8, a rent iDCn8888 for qualifying
capital expenditures CaDDoi be granted Un|eSG the Park OvvDe[ proves that the requested
increase meets the "standards Of [8aSOD8bieDeS8^ S8i forth in Section 20.12.110 Of the
Ordinance. Therefore, they 8q]uO. the Arbitrators erred in g[8D[iDg any n8Dt iDCFS8Se OO the
2OOOthrough 201Opetitions.
SAN RAFAEL CITY COUNCIL AGENDA REPORT i Page: 5
ELS argues that the Council properly interpreted the Ordinance in its July 2006 decision, as
more particularly set forth in "Equity LifeStyle's Opening Brief on Appeal" and "Equity LifeStyle's
Reply Brief on Appeal".
In addition, the CMHOA also disputes the Arbitrators' findings that six specific expenditures
claimed in the 2006, 2008, and 2009 petitions were for capital improvements or capital
replacements. ELS has dropped its appeals concerning specific evidentiary findings made by
the Arbitrators. The remaining issues on appeal, therefore, are raised only by the CMHOA, and
are summarized below.
1. 2006 Petition: In her Statement of Decision (see Attachment "3"), the City's
appointed Arbitrator, Lynda Millspaugh, found that ELS made expenditures for:
a) Construction of sidewalks and associated lighting in the Park ($13,295.44);
b) Replacement of kitchen cabinets, countertops, oven, microwave, and sliding
glass doors in the Clubhouse ($18,328.72);
c) The installation of a new pool heater and spa heater ($14,516.88);
d) The reconstruction of a lagoon pump ($7,138.27)
The Arbitrator determined that these improvements materially benefited and added
value to the Park and met the definition of capital replacements within the meaning of the
Ordinance, therefore she ordered that 100% of these costs could be "passed through" to the
tenants. The Arbitrator disallowed $21,081.15 of the $36,767.92 in costs ELS attributed to work
on the Park's sewer system, finding that ELS had failed to meet its burden of proof that these
expenses were reasonable capital expenditures.
CMHOA disputes the Arbitrator's findings that $13,295.44 for "sidewalk improvements"
(item "a" above) and $2,807.25 to "replace hot tub heater" (part of "c" above) are capital
improvements or capital replacements as defined in the Ordinance. The parties' detailed
arguments are set forth in their briefs on appeal:
See: CMHOA Brief on Appeal at page 14, line 19 to page 15, line 7, and Exhibits B, C,
and D.
See: ELS's Reply Brief on Appeal at page 4, line 21 to page 8, line 21, and Exhibit A,
for ELS's arguments in opposition to these claims.
2. 2008 Petition: The City's appointed Arbitrator, Betsy Strauss, conducted a
combined arbitration hearing on the 2007, 2008, and 2009 petitions on June 24-25, 2010. It
should be noted that Ms. Strauss stated in her Statement of Decision on these petitions that
she agreed with the argument presented by the CMHOA that the Ordinance should be
interpreted to require ELS to make a showing of reasonableness under the standards set forth
in Section 20.12.110 of the Ordinance, but that she nevertheless made her awards in a manner
consistent with the Council's action in 2006, allowing all qualifying capital expenditures to be
passed through to the Park tenants. (see Attachment "4")
In her Statement of Decision, the Arbitrator made separate findings of fact and
conclusions of law as to each of the three petitions. CMHOA does not dispute the evidentiary
findings on the 2007 petition. As to the 2008 petition, the Arbitrator found that ELS made
expenditures for:
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 6
a) New furniture for the clubhouse ($1,069.51);
b) Sewer system improvements consisting of the installation of new check
valves at the tennis court and two pump stations ($4,800), an upgrade to four
autodialers that operate the sewer system's emergency response functions
($5,480), and new lift station controls ($1,456.71);
c) Preparation of an operations and maintenance manual for the Park's sewage
pump stations and pH adjustment systems, as required in settlement of a
lawsuit between ELS and the Las Gallinas Valley Sanitary District ($5,750);
d) Operation and monitoring of the effectiveness of the pH adjustment systems
and sulfide control, as required in settlement of a lawsuit between ELS and
the Las Gallinas Valley Sanitary District ($13,435.41);
e) Replacement of pumps and a controller at the tennis courts ($21,000);
f) Pump repairs ($8,653.50);
g) Repair of a 6 -inch sewer line break ($2,648.51); and
h) Installation of a wrought iron fence and gate at the pool and surrounding
recreation areas ($25,147).
The Arbitrator found that the expenditures for the sewer system (item "b" above)
qualified as capital replacements which collectively cost more than $5,000 and materially
benefit and add value to the Park. She additionally found that the tennis court improvements
and wrought iron fence improvements (items "e" and "h" above) qualified as capital
improvements which materially benefit and add value to the Park. The Arbitrator allowed ELS
to pass through the costs of these improvements, and disallowed the remainder, finding that
ELS had failed to meet its burden to show that the remaining expenditures constituted capital
improvements or capital replacements. In total, the Arbitrator allowed $55,684.81 (including
interest on unsecured borrowing at the rate of 4.9%), or $140.61 per space, to be passed
through to the Park tenants, and ordered it payable over 12 months in the sum of $11.72 per
month per space.
CMHOA disputes the Arbitrator's findings that the expenditures of $4,800 for check
valves at the tennis court and $1,456.71 for lift station controls (item "b" above), are capital
improvements or capital replacements as defined in the Ordinance. The parties' detailed
arguments are set forth in their briefs on appeal:
See: CMHOA Brief on Appeal, at page 15, line 8 to page 16, line 21, and Exhibits E,
F, G, and H.
See: ELS's Reply Brief on Appeal, at page 9, line 1 to page 11, line 4, for ELS's
arguments in opposition to these contentions.
3. 2009 Petition: As to the 2009 petition (see Attachment "4"), the Arbitrator
found that ELS made expenditures for:
a) Purchase of a tractor ($2,000);
b) Purchase of 32 plastic armchairs ($1,148.31);
c) Purchase of a radio receiver and antenna for the measurement of current
and effluent from the Park's wastewater system to the Las Gallinas Valley
Sanitary District system ($4,550);
d) Purchase of pool and spa covers to comply with regulations for installation of
anti -entrapment devices ($5,100);
e) Repair of sewer system pump stations and manholes to prevent infiltration of
bay water ($32,035);
SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 7
fl R8p|@CenleDt of three light fixtures and DO|eS ($/,714.71);
g) Repairs to S8VVS[ Sva[e[D pUDlpS and nlOtOrS and neDlOV8| Of debris from
sump ($24,721.80);
h) Replacement Uf8pool heater C$4.205\;and
i) |Ost8|katiDD of Dl3DhO|e rising to prevent water iDDKr8t0D ($7,750).
The Arbitrator found that all the CXpRDditV[eS except for the tractor, 80O chairs, and
radio receiver/antenna (items "a", ^b" and "C" above) qU8|UDed as capital replacements which
cost more than $5.O0Oand materially benefit and add value tnthe Park. The Arbitrator allowed
ELS to p8SS-[hFOUgh the COStS Of these iOlpP3veOleOLS, for 8 total the Arbitrator $81.120.84
(including iD(eP33t On unsecured b0[FOVYing at the [8t8 Of 1.4%). or $204.85 per space, to be
passed through to the Park ieD8DtS. and ordered it payable over 12 nlODthS in the sum Of
$17.07per month per space.
CK8HOAdisputes the Arbitrator's findings that the expenditures Of$24.721.8Ofor sewer
pump repair (item "Q" 8bOV8) and $4'295 for @ pool heater /it8Ol "h" @bOVe\ are capital
improvements or capital [8p|GC808DtS as defined in the C)ndiD8OQ3. The parties' detailed
arguments are set forth iDtheir briefs Onappeal:
See: CMH{}A Brief on AnpS8|, at page 10, line 22 to page 18, line 19, and Exhibits i
J.and K.
See: ELS'S Reply Brief on Appeal, at page Q, |iR8 1 to page 11` |iO8 4. for EUS'S
arguments in opposition to these contentions.
FISCAL IMPACT:
None.
OPTIONS:
The Council may 8ffirO, DlOdif«` Or [eVH[8e the dSdSiOOs of the /\[bit[8tDFS.
ACTION REQUIRED:
Open the appeal hearing, listen to argument from both parties, the CMHOA8Dd ELS, accept
any public comment, and consider the evidence iOthe record. Then deliberate, and hvmotion,
8Mirm, modify, or n9V8nSe the 8dbiL[8h3[S' respective decisions for 2006. 2007, 2008. 2009.
and/or 2010, based UpOD the COUOCi|'S interpretation of the {}[diO@nCe and the eVid8DC8 in the
record, and direct staff tO rOeDlO[i8|ize the {|OUOCi|'S findings in 8 neSO|UhOD for adoption on the
consent calendar 8tthe Council's next meeting.
1� Mobilehome Rent Stabilization Ordinance (San Rafael Municipal Code Title 20)
2. ReSQ|UdOn NO. 12014. adopted August 7` 2006
3. Statement QfDecision (2OO6rent increase petition)
4. Statement OfDecision (2OO7.2OO8.and 2O08rent increase petitions)
5. Statement OfDecision /2O1Orent increase petition)