HomeMy WebLinkAboutCC Minutes 2006-07-17SRCC Minutes (Regular) 07/17/2006 Page 1
IN THE COUNCIL CHAMBER OF THE CITY OF SAN RAFAEL, MONDAY, JULY 17, 2006 AT 8:00 P.M.
Regular Meeting:
San Rafael City Council
Also Present: Ken Nordhoff, Interim City Manager
Gary T. Ragghianti, City Attorney
Jeanne M. Leoncini, City Clerk
OPEN SESSION — COUNCIL CHAMBER — 6:30 PM
Mayor Boro announced Closed Session items.
Present: Albert J. Boro, Mayor
Gary O. Phillips, Vice -Mayor
Paul M. Cohen, Councilmember
Barbara Heller, Councilmember
Cyr N. Miller, Councilmember
Absent: None
CLOSED SESSION — CONFERENCE ROOM 201 - 6:30 PM — File 1-4-1a
a) Conference with Labor Negotiators — Government Code Section 54957.6
Negotiators: Ken Nordhoff, Nancy Mackle, Lydia Romero, Gus Guinan,
Donna Williamson, Richard Whitmore
Employee Organization(s): San Rafael Firefighters' Association
San Rafael Fire Chief Officers' Association
San Rafael Police Association
San Rafael Police Mid -Management Association
Association of Confidential Employees
Western Council of Engineers
SEIU Miscellaneous & Supervisory
b) Public Employment — Government Code section 54957(b)(1)
Title: City Manager
City Attorney Gary Ragghianti announced that no reportable action was taken on 1.a)
Indicating there was reportable action resulting from Closed Session 1.b), and with regard to
New Business Agenda Item #22 concerning the appointment of a new City Manager,
Mr. Ragghianti deferred to Mayor Boro and Councilmember Cohen to present the report.
For the record Mayor Boro reported that he and Councilmember Cohen were appointed by
the City Council to work with interim City Manager Ken Nordhoff over the past several
months.
NEW BUSINESS:
22. CONSIDERATION OF RESOLUTION APPOINTING KEN NORDHOFF CITY MANAGER
AND APPROVING AND AUTHORIZING THE MAYOR TO EXECUTE AN EMPLOYMENT
AGREEMENT WITH KEN NORDHOFF (CA) — FILE 9-3-11
City Attorney Gary Ragghianti indicated that copies of the proposed Employment Agreement
with Mr. Nordhoff were available to the press and public from the City Clerk.
For the benefit of the public Councilmember Cohen explained that at the City Council
meeting of December 19, 2005, the City Council took action to appoint Mr. Nordhoff as
Interim City Manager for a period of approximately six months. As an ad hoc sub -committee
of the City Council he and Mayor Boro met on an ongoing basis with Mr. Nordhoff over that
period for the purpose of determining progress towards some established City goals.
Councilmember Cohen stated that in his view, not only did Mr. Nordhoff perform admirably in
making progress towards achieving those goals, rather he did so in a much more turbulent
time in terms of transition within City Hall than anyone had contemplated when he agreed to
the arrangement. Therefore, his performance was to be commended.
In the process of moving forward, Councilmember Cohen explained they had reviewed a
number of local and statewide practices in City Manager employment agreements, and
based on a series of meetings with Mr. Nordhoff, the City Attorney was directed to draft a
proposed employment agreement between the City of San Rafael and Mr. Nordhoff in
consideration of his accepting the position permanently as City Manager. He reported that
Council met in closed session this evening, as was appropriate under the law, to discuss the
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terms of that agreement on everything but the issue of compensation. He indicated that that
document would be available as soon as Council acted on the item.
Regarding the proposed Employment Agreement for Mr. Nordhoff as City Manager,
Councilmember Cohen stated it was an at -will contract. He explained that should this or a
future City Council come to the conclusion that it was in the interest of the City for Mr.
Nordhoff and the City to part ways, Council reserved the right to do so. Despite this
however, the Agreement was intentionally drafted as a five-year agreement and his
(Councilmember Cohen's) intent in proposing that this language be included, despite the fact
that it was an at -will appointment, the interim period of Mr. Nordhoff's employment as City
Manager was intended to end effective with this agreement, and Council wanted to make
clear the intention that this be a long-term, stable relationship and looked forward to having
the excellent services of Mr. Nordhoff for quite a few years to come. He reiterated that
although it was an at -will agreement the City Council was specifying that it be at least five
years.
With regard to the issue of compensation, Councilmember Cohen stated that in addition to
looking at practices in other communities, the sub -committee looked at compensation in
other communities. As stated in the contract with Mr. Gould (former City Manager), and as
a practice in terms of employment agreements, Council believes that the challenges and
tasks that face the employees of the City of San Rafael, the City Manager included, are the
most challenging and complex within Marin County. Therefore, it was appropriate that the
San Rafael City Manager be the most highly compensated of all City Managers within Marin
County. In addition, as is done with employee contracts, Councilmember Cohen stated the
City should also be aware of compensation levels in surrounding jurisdictions of a
comparable size and complexity.
Councilmember Cohen stated that based on that review and with those goals in mind, he
had a couple of proposals to offer to the City Council. A benefit was that Mr. Nordhoff
already resides in San Rafael, thereby dispensing with the need for competitive
compensation and housing assistance, and the City was also fortunate that Mr. Nordhoff
already worked with the City thus avoiding a costly search for an excellent candidate.
Councilmember Cohen proposed amending the Employment Agreement to include
compensation in two areas, by motion:
1) An annual salary of $175,000
2) Additional Deferred Compensation (457 plan) of $5,000.
Councilmember Phillips seconded the motion.
AYES: COUNCILMEMBERS: Cohen, Heller, Miller, Phillips and Mayor Boro
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
Councilmember Phillips expressed thanks to Mayor Boro and Councilmember Cohen for
bringing the proposal to Council and more importantly, to Mr. Nordhoff for accepting.
Indicating he was delighted, Councilmember Phillips stated Mr. Nordhoff was an outstanding
person and someone the City Council could work with and trust. He noted Mr. Nordhoff's
integrity was beyond reproach and he welcomed Mr. Nordhoff as City Manager.
Councilmember Heller stated she had enjoyed Mr. Nordhoff's company and personality for
the past nine years and in the last few months getting to know him more as Interim City
Manager. She commented that having this evening inquired of Mr. Nordhoff as to at what
point in the six months he made the decision to accept the position of City Manager, Mr.
Nordhoff's response was April 1. Indicating she was very happy with the appointment,
Councilmember Heller welcomed Mr. Nordhoff.
Congratulating Mr. Nordhoff, Councilmember Miller stated he concurred with all of the above.
Mayor Boro stated that when he first spoke with Mr. Nordhoff concerning taking this
assignment on an interim basis, he was very candid in stating that there was a big difference
in being #2 and #1 and he wished to ensure it would feel good and be right for him. Mayor
Boro stated he appreciated his being up front and honest. Noting Mr. Nordhoff had a
baptism of fire, Mayor Boro stated that having left town for a few days a lot of issues arose
simultaneously causing him to greatly exceed his cellphone minutes. He noted that Mr.
Nordhoff had faced a lot of challenges throughout the entire time of his being Interim City
Manager and he had always analyzed the situation, stepped up to the bat, sought and
effected a solution. Wishing Mr. Nordhoff the best of luck, Mayor Boro believed he would
have a great tenure with the City. He was aware City employees were very pleased and
would be happy Mr. Nordhoff was to be the permanent City Manager.
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Confirming that the Employment Agreement with Mr. Nordhoff was intended to be effective
from July 1, 2006, Councilmember Cohen commented it was fairly rare that members of the
public would approach him about personnel issues; however, this was the exception. He
indicated that to a person, those with whom he had spoken in recent months about this
decision would be delighted with tonight's action.
Councilmember Cohen moved and Councilmember Miller seconded, to adopt the
Resolution.
RESOLUTION NO. 11993 — RESOLUTION APPOINTING KEN NORDHOFF CITY
MANAGER AND APPROVING AND AUTHORIZING THE
MAYOR TO EXECUTE AN EMPLOYMENT AGREEMENT
WITH KEN NORDHOFF (Effective July 1, 2006) (as
amended)
AYES: COUNCILMEMBERS: Cohen, Heller, Miller, Phillips and Mayor Boro
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
Indicating that his wife, Shana, son Noah and daughter Elizabeth were in attendance, Mr.
Nordhoff thanked the City Council for their support and encouragement over the past few
months and he looked forward to the challenges ahead. Commenting that he did not believe
all the challenges in the world were accomplished in the last six months, Mr. Nordhoff stated
he was both humbled and excited by this opportunity and looked forward to serving the
community for many years to come.
ORAL COMMUNICATIONS OF AN URGENCY NATURE:
Undeclared Wars: - File 9-1
8:15 PM
Rachel Bell, Esmerelda Domingos, Patrick Smith and John Jenkel read excerpts from a document urging
U.S. Representative Lynn Woolsey to "stand and ask other cities to help Sebastopol stop mass murder."
CONSENT CALENDAR:
Councilmember Miller moved and Councilmember Phillips seconded, to approve the Consent Calendar, as
follows:
ITEM
2. Approval of Minutes of Special and Regular
Meetings of Monday, June 19, 2006 and Minutes
of Special Meeting (Closed Session) of
Wednesday, July 12, 2006 (CC)
3. Resolution of Appreciation to Bruce Scott for his
10 Years of Service as a Commissioner on the
San Rafael Planning Commission (CD) —
File 102 x 9-2-6
RECOMMENDED ACTION
Minutes approved as submitted.
RESOLUTION NO. 11994 —
RESOLUTION OF APPRECIATION TO
BRUCE SCOTT, SAN RAFAEL
PLANNING COMMISSIONER, RETIRING
AFTER TEN YEARS OF SERVICE
4. Summary of Legislation Affecting San Rafael Accepted report.
(CM) — File 116 x 9-1
5. Resolution Authorizing Renewal of Agreement Item removed from Agenda at
with Marin Operational Area to Provide request of staff.
Emergency Management Services, Training and
Exercises, from 07/01/06 through 06/30/07 (CM)
- File 4-13-99 x 13-11 x 9-3-31
7. Resolution Approving a Contract (CPRE -6197)
with the Department of Education to Provide
State Preschool Services in the Amount of
$161,920.00 and Authorizing the Interim City
Manager to Sign Contract Documents (CS) —
File 4-10-238 x 9-3-65
RESOLUTION NO. 11995 —
RESOLUTION AUTHORIZING
ENTERING INTO A CONTRACT
(CPRE -6197) WITH THE
DEPARTMENT OF EDUCATION FOR
STATE PRESCHOOL SERVICES AND
AUTHORIZING THE CITY MANAGER
TO SIGN CONTRACT DOCUMENTS
IN THE AMOUNT OF $161,920.00
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SRCC Minutes (Regular) 07/17/2006 Page 4
8.
Resolution Approving a Contract (CLTK-6049)
RESOLUTION NO. 11996 —
with the Department of Education to Provide
RESOLUTION AUTHORIZING
Extended Day Child Care Services in the Amount
ENTERING INTO A CONTRACT
of $107,850.00 and Authorizing the Interim City
(CLTK-6049) WITH THE
Manager to Sign Contract Documents (CS) —
DEPARTMENT OF EDUCATION FOR
File 4-10-238 x 9-3-65
EXTENDED DAY CHILD CARE
SERVICES (LATCHKEY) AND
AUTHORIZING THE CITY MANAGER
TO SIGN CONTRACT DOCUMENTS
IN THE AMOUNT OF $107,850.00
9.
Resolution Approving a Contract (CPKR-5331)
RESOLUTION NO. 11997 —
Amendment 01 with the Department of Education
RESOLUTION AUTHORIZING
which Extends the Current Contract from July 1,
ENTERING INTO A CONTRACT
2006 through June 30, 2007 and Authorizing the
(CPKR-5331, Amendment 01) WITH
Interim City Manager to Sign Contract
THE DEPARTMENT OF EDUCATION
Documents (CS) — File 4-10-238 x 9-3-65
FOR THE PRE -KINDERGARTEN
CHILD CARE RESOURCE PROGRAM
AND AUTHORIZING THE CITY
MANAGER TO SIGN CONTRACT
DOCUMENTS IN THE AMOUNT OF
$2,425.00
10.
Resolution Approving Acceptance and Use of
RESOLUTION NO. 11998 —
Marin Community Foundation Grant in the
RESOLUTION AUTHORIZING THE
Amount of $50,000 for Support of Falkirk Cultural
ACCEPTANCE AND USE OF A
Center's Arts Education Program Learning to
MARIN COMMUNITY FOUNDATION
Look (CS) — File 9-3-84 x 226
GRANT IN THE AMOUNT OF $50,000
FOR THE SUPPORT OF FALKIRK
CULTURAL CENTER ARTS
EDUCATION PROGRAM
(Grant Period: 12 months July 1, 2006
to June 30, 2007)
11.
Monthly Investment Report for Month Ending
Accepted Monthly Investment Report
June, 2006 (MS) — File 8-18 x 8-9
for month ending June, 2006, as
presented.
12.
Resolution Waiving the Competitive Bidding
RESOLUTION NO. 11999 —
Requirement of Chapter 11.50 of the San Rafael
RESOLUTION WAIVING THE
Municipal Code and Approving and Authorizing
COMPETITIVE BIDDING
the Director of Public Works to Execute a Sole
REQUIREMENT OF CHAPTER 11.50
Source Contract with Lamperti Contracting and
OF THE SAN RAFAEL MUNICIPAL
Design for Remodel of the Pickleweed
CODE AND APPROVING AND
Community Center Kitchen (PW) —
AUTHORIZING THE DIRECTOR OF
File 4-1-582 x 4-1-572
PUBLIC WORKS TO EXECUTE A
SOLE SOURCE CONTRACT WITH
LAMPERTI CONTRACTING AND
DESIGN FOR REMODEL OF THE
PICKLEWEED COMMUNITY CENTER
KITCHEN
14. Report on Bid Opening and Resolution Awarding RESOLUTION NO. 12000 —
Contract for Glenaire Drive No. 16-20 Storm RESOLUTION AWARDING
Drain Improvements, Project No. 11067, to E.E. CONTRACT FOR GLENAIRE DRIVE
Gilbert Construction, Inc. in the Amount of NO. 16-20 DRAINAGE
$256,085 (Bid Opening Held on Tuesday, June IMPROVEMENTS TO E.E. GILBERT
27, 2006) (PW) — File 4-1-583 x 4-4-6b CONSTRUCTION, INC. IN THE
AMOUNT OF $256,085 (Lowest
responsible bidder)
15. Report on Bid Opening of July 11, 2006 for 2005- RESOLUTION NO. 12001 —
2006 ADA Curb Ramp, Project No. 15006, and RESOLUTION REJECTING ALL BIDS
Resolution Rejecting all Bids and Authorizing FOR THE 2005-2006 ADA CURB
Staff to Rebid the Project (PW) — RAMP, PROJECT NO. 15006, AND
File 13-1-1 x 4-3-439 AUTHORIZING STAFF TO REBID
THE PROJECT IN THE FALL OF
2006
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SRCC Minutes (Regular) 07/17/2006 Page 5
16. Resolution Approving a One Hundred Thousand
RESOLUTION NO. 12002 —
Dollar Loan by the Redevelopment Agency of the
RESOLUTION APPROVING A ONE
City of San Rafael to Mercy Housing California
HUNDRED THOUSAND DOLLAR
and Making Findings and Approvals Pursuant to
LOAN BY THE REDEVELOPMENT
the California Redevelopment Law in Connection
AGENCY OF THE CITY OF SAN
with the Utilization of Agency Low and Moderate
RAFAEL TO MERCY HOUSING
Income Housing Funds Outside the Central San
CALIFORNIA AND MAKING
Rafael Redevelopment Project Area (Martinelli
FINDINGS AND APPROVALS
House, 1327 Lincoln Avenue) (RA) —
PURSUANT TO THE CALIFORNIA
File 13-16 x 229
REDEVELOPMENT LAW IN
CONNECTION WITH THE
UTILIZATION OF AGENCY LOW AND
MODERATE INCOME HOUSING
FUNDS OUTSIDE THE CENTRAL SAN
RAFAEL REDEVELOPMENT
PROJECT AREA (Martinelli House,
1327 Lincoln Avenue)
AYES: COUNCILMEMBERS: Cohen,
Heller, Miller, Phillips and Mayor Boro
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
ABSTAINING: COUNCILMEMBERS: Phillips
(from #2 - Minutes of June 19 only, due to
absence from meeting); and
Cohen
(from item #12 only)
The following item was removed from the Consent Calendar for discussion, at the request of
Councilmember Miller:
6. RESOLUTION TO ESTABLISH THE PICKLEWEED ADVISORY BOARD UNDER THE
PICKLEWEED ADVISORY BOARD GUIDELINES AND POLICY (CS) —
FILE 270 x 254 x 267 x 9-3-65
Councilmember Miller explained that the Pickleweed Advisory Board Guidelines and Policy
document emanated from the community. It was discussed in the context of the definition of
community based governance as outlined in General Plan 2020. Consultations took place with
the City Manager's office in terms of how every commission and committee operates and exists.
He indicated, therefore, that a lot of thought went into generating a very simple, straightforward
structure to accomplish something he believed to be outstanding.
Councilmember Miller explained the three basic principles in the Pickleweed Advisory Board
Guidelines and Policy document:
• Mission of the Pickleweed Park Community Center — all community centers are part of a
system and as such, Pickleweed opens up to embrace everyone from the City, County,
etc. He indicated that Pickleweed was unique in that its mission is to build the capacity
of the community in order for that community to identify how they wished to move
forward and better themselves, with the City providing the resources.
Operation of Pickleweed Park Community Center — operation of the center is dependent
upon partnerships with all the various agencies, people and groups that come together,
each with its own mission, which are taken and directed to the Pickleweed Park
Community Center. Councilmember Miller noted it was a remarkable situation in that
the City has the venue and the community brings on the programs; however, the City
takes over in the absence of partners.
The Pickleweed Advisory Committee - basic task is to look over and provide
performance contracts for all these people to ascertain how they fit into the overall
development of the community, etc., and to monitor how programs were working.
Councilmember Miller noted that the Pickleweed Advisory Committee was an
extraordinarily important element; they had developed leadership in the past which
would continue because of funding from the Canal Community Alliance.
Councilmember Miller stated he had approached the City Manager with the idea that
Pickleweed be a specific cost center with a written operation plan to take care of revenues,
outputs and operation, together with a sinking fund for extraordinary maintenance, etc.
Because of insufficient availability of time by staff members, Councilmember Miller suggested
using contract services.
Councilmember Miller moved and Councilmember Heller seconded, to adopt the Resolution.
SRCC Minutes (Regular) 07/17/2006 Page 5
SRCC Minutes (Regular) 07/17/2006 Page 6
Mayor Boro commented that Councilmember Miller had generated a twelve -point plan of action
which he shared with the City Manager and copied to him (Mayor Boro), and he believed they
would accomplish all the points.
RESOLUTION NO. 12003— RESOLUTION ESTABLISHING THE PICKLEWEED ADVISORY
BOARD UNDER THE PICKLEWEED ADVISORY BOARD
GUIDELINES AND POLICY
AYES: COUNCILMEMBERS: Cohen, Heller, Miller, Phillips and Mayor Boro
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
The following item was removed from the Consent Calendar for discussion, at the request of
Councilmember Heller:
13. REPORT ON BID OPENING AND RESOLUTION AWARDING CONTRACT FOR CITY HALL
ROOF REPAIR AND HVAC REPLACEMENT - 2006, PROJECT NO. 11084, TO BEST
INCORPORATED IN THE AMOUNT OF $399,000 (BID OPENING HELD ON TUESDAY,
JUNE 27, 2006) (PW) — FILE 4-1-584 x 9-3-40
Indicating she was delighted with this first phase and the fact that there might be a clean air-
condition system in the Council Chambers, Councilmember Heller noted from the staff report
that the rest of City Hall would have to be brought up to standard at a later point and inquired
whether there was a plan for that.
Senior Civil Engineer Scott Schneider reported that Public Works staff had received a report
from a consultant regarding the air-condition system in the entire City Hall, and this was being
reviewed. At first glance it appears to be a very expensive fix; however, staff would explore
staging and continuously make small improvements to eventually have the entire system up
and running.
Indicating this was very important, Councilmember Heller stated this should be kept front and
center of problem areas needing funds.
Councilmember Heller moved and Councilmember Phillips seconded, to adopt the Resolution.
RESOLUTION NO. 12004 — RESOLUTION AWARDING THE CONTRACT FOR CITY
HALL ROOF REPAIR AND HVAC REPLACEMENT — 2006,
PROJECT NO. 11084, TO BEST INCORPORATED IN THE
AMOUNT OF $399,000.00 (Lowest responsible bidder)
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: COUNCILMEMBERS:
SPECIAL PRESENTATION:
Cohen, Heller, Miller, Phillips and Mayor Boro
None
None
17. PRESENTATION OF RESOLUTION OF APPRECIATION TO BRUCE SCOTT FOR HIS 10
YEARS OF SERVICE AS A COMMISSIONER ON THE SAN RAFAEL PLANNING
COMMISSION (CD) — FILE 102 x 9-2-6
Reporting that for the past ten years Bruce Scott had served on the San Rafael Planning
Commission, Mayor Boro stated the Resolution of Appreciation spoke to all the great things he
had done, noting Mr. Scott's wife, Sue, preceded him and also served on the Planning
Commission for ten years. Therefore, between them Mr. and Mrs. Scott had left a wonderful
legacy to the City in working towards the betterment of San Rafael. Mayor Boro noted Mr. Scott
attended over 250 meetings in the past ten years and commending him for his endurance,
stated he was always very attentive and a consensus builder on the Planning Commission.
Mayor Boro stated that the resolution addressed the many projects that came under Mr. Scott's
watch, including General Plan 2020, Rafael Town Center, Dominican University Masterplan,
Recreation Center and Science Building and the Loch Lomond Marina Village, together with
countless variances, exceptions and use permits. However, he believed the one line in the
Resolution that stated it all was, "Bruce's participation on the Planning Commission was
characterized by his steady, cool demeanor, his thorough research of the issues and well
reasoned decision-making." On behalf of the City Council and people of San Rafael, Mayor
Boro thanked and congratulated Bruce Scott for the great job he did.
Bruce Scott stated that having spent ten years in the Council Chambers "babbling into those
SRCC Minutes (Regular) 07/17/2006 Page 6
SRCC Minutes (Regular) 07/17/2006 Page 7
microphones" he did not believe he had anything left to say.
PUBLIC HEARINGS:
18. Public Hearing:
CONSIDERATION OF ORDINANCE ESTABLISHING A TAX RATE FOR FISCAL YEAR
2006-2007 FOR PARAMEDIC SERVICES FOR BOTH RESIDENTIAL AND NON-
RESIDENTIAL PROPERTIES IN THE CITY OF SAN RAFAEL, CSA 19, CSA 13, AND
MARINWOOD CSD, AS PROVIDED FOR IN THE VOTER APPROVED PARAMEDIC
SERVICES SPECIAL TAX (MS) — FILE 9-12-1 x 9-3-31
Mayor Boro declared the public hearing opened
Finance Manager Cindy Mosser stated that adoption of this ordinance would establish the
Paramedic Tax Rate for the fiscal year 2006-2007 for the City of San Rafael, County Service
Area #19, County Service Area #13 and Marinwood Community Services District.
Reporting that in 1979, City voters approved the paramedic tax program allowing the City
Council to approve tax rates based upon the cost of operating the paramedic program, Ms.
Mosser stated that changes in tax law and voter authority had modified how this process had
worked over the past few years. She indicated that in November 2002, the citizens of San
Rafael passed Measure `P', which established a $61 ceiling on the residential tax rate and $.08
cents per square -foot for commercial, non-residential units. She noted that this measure is
valid from July 2003 through June 2007 and the other three jurisdictions adopted similar tax
ceilings and time periods.
Ms. Mosser stated that for this fiscal year 2006-2007, the cost of running the paramedic
program is approximately $4.6 million and this sum was approved in the overall City budget
adopted on June 19, 2006. She indicated that there were no significant changes in the
operations of the paramedic program for fiscal year 2006-2007 from the prior year.
Indicating that staff proposed the residential rate remain at the cap of $61 in the City as well as
the other three jurisdictions, Ms. Mosser stated that the residential sector made up
approximately 63% of the total Paramedic Tax resources. Staff also proposed that the non-
residential units remain at the cap of $.08 cents per square foot; commercial and industrial
customers comprise approximately 37% of total tax revenue. Ms. Mosser stated that these
recommended rates were not sufficient to cover the operating expenses of the paramedic
program for this year and a General Fund subsidy in the amount of $448,500 was required to
sustain the program at the current level.
Ms. Mosser stated that she, City Manager Ken Nordhoff and Fire Chief John Montenero met
with the County, Marinwood CSA #19 and CSA #13 representatives in April 2006 to discuss
these rates.
Councilmember Miller confirmed with Ms. Mosser that every four years the rates are amended
to cover the actual costs of the operation. Ms. Mosser explained that the City goes to the voters
every four years to try to cover the projected cost for the ensuing four years.
There being no comment from the audience, Mayor Boro closed the public hearing.
The title of the Ordinance was read:
"AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL SETTING THE
PARAMEDIC TAX RATE, COMMENCING WITH FISCAL YEAR 2006-2007, AT THE RATES
ALLOWED IN ORDINANCE NO. 1793, FOR RESIDENTIAL AND NON-RESIDENTIAL
PROPERTIES IN THE CITY OF SAN RAFAEL; AND FURTHER CONFIRMING THE
PARAMEDIC TAX RATES, COMMENCING WITH FISCAL YEAR 2006-2007, FOR
RESIDENTIAL AND NON-RESIDENTIAL PROPERTIES IN THE CITY OF SAN RAFAEL, THE
MARINWOOD COMMUNITY SERVICES DISTRICT, COUNTY SERVICE AREA NO. 13 AND
COUNTY SERVICE AREA NO. 19 ($61.00 FOR RESIDENTIAL AND $.08 PER SQUARE -
FOOT FOR NON-RESIDENTIAL PROPERTY)"
Councilmember Heller moved and Councilmember Phillips seconded, to dispense with the
reading of the ordinance in its entirety and refer to it by title only, and pass Charter Ordinance
No. 1842 to print by the following vote, to wit:
AYES: COUNCILMEMBERS: Cohen, Heller, Miller, Phillips and Mayor Boro
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
SRCC Minutes (Regular) 07/17/2006 Page 7
SRCC Minutes (Regular) 07/17/2006 Page 8
19. Public Hearing:
CONSIDERATION OF ADOPTION OF RESOLUTION AMENDING MASTER FEE
SCHEDULE TO ESTABLISH FEES FOR PROCESSING RIGHT-OF-WAY AGREEMENTS
AND RELATED ENCROACHMENT PERMITS UNDER SAN RAFAEL MUNICIPAL CODE
CHAPTER 11.06 (PW) — FILE 9-10-2 x 9-3-40
Mayor Boro declared the public hearing opened.
Senior Civil Engineer Scott Schneider reported that in 2002, the City Council adopted a Right -
of -Way ordinance to establish the requirement that utilities enter into a right-of-way agreement
with the City for use of the right-of-way. He indicated that the ordinance already provides that
the application for a right-of-way agreement shall be accompanied by an application fee;
however, the fee was never added to the Master Fee Schedule. This resolution amends the
Master Fee Schedule to include processing fees for the right-of-way agreements and
encroachment permits. He stated that the proposed resolution establishes the fully burdened
hourly rates for staff time and also provides that applicants for such agreements shall make
deposits with the Public Works Department.
Mr. Schneider stated staff recommended adoption of the resolution.
Regarding the forthcoming AT&T Internet Services project, Councilmember Heller inquired
whether in the event the City did not like the product presented, it had to allow a right-of-way
permit.
Rather than getting into the nature of an issue not before the City Council, Mayor Boro stated
the question was what discretion the City Council had on a product when it came forward.
City Manager Ken Nordhoff stated that a combination of the Community Development
Department, City Attorney's office and Public Works staff was working on those kinds of issues
and questions. He believed there was an obligation to put an agreement in place; however,
staff certainly wanted to look at mitigation measures, particularly Councilmember Heller's
concerns — the size of the cabinets. Staff was trying to work with AT&T to identify locations,
size and color to ascertain whether there were possible mitigation measures, which of those
could get handled at the staff level and which might incur more formal approvals up to and
potentially including design review. Mr. Nordhoff added that he did not believe staff would be
able to deny; however, could influence potentially where they went, what they looked like or to
some extent, how they were mitigated.
There being no comment from the audience, Mayor Boro closed the public hearing.
For the record, Mayor Boro stated that since he had stock in several communications
companies, having spoken with the City Manager and City Attorney today, he was assured he
had no conflict of interest with the item as no application was before the City Council, rather this
was establishing fees in the Master Fee Schedule. If and when an application was before
Council, he would gladly leave the Council Chambers.
Councilmember Phillips moved and Councilmember Miller seconded, to adopt the Resolution.
RESOLUTION NO. 12005 — RESOLUTION AMENDING MASTER FEE SCHEDULE TO
ESTABLISH FEES FOR PROCESSING RIGHT-OF-WAY
AGREEMENTS AND RELATED ENCROACHMENT
PERMITS UNDER SAN RAFAEL MUNICIPAL CODE
CHAPTER 11.06
AYES: COUNCILMEMBERS: Cohen, Heller, Miller, Phillips and Mayor Boro
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
SRCC Minutes (Regular) 07/17/2006 Page 8
SRCC Minutes (Regular) 07/17/2006 Page 9
APPEAL HEARING:
20. APPEAL OF ARBITRATOR'S DECISION OF APRIL 11, 2006 — PETITION FOR RENT
INCREASE, CONTEMPO MARIN MOBILE HOME PARK (CA) — FILE 13-7-1 x 9-3-16
Referring to page 3 of the staff report prepared by Attorney Lisa Goldfien, City Attorney Gary
Ragghianti stated he wished to point out and make clear that this was a rather unusual hearing
for any council to undertake, and far different from the land use hearings which take place on a
regular basis.
Mr. Ragghianti explained that the appeal hearing to be conducted this evening was not a public
hearing and yet the Brown Act permits any member of the public to comment on this agenda
item should they so wish. However, any comments made by the public in connection with this
item, other than by the attorneys appearing on behalf of the parties, could not be treated as
evidence in connection with the decision on this matter. Mr. Ragghianti suggested it may well
be that the City Council should ask questions of the attorneys if they had any doubt about any
of the positions being advanced and he encouraged them to do so. He noted that the City
Council sat much like an Appellate Court this evening in connection with the matter. There was
a large record, two attorneys, briefs that had been filed and Council had had the opportunity to
see all of them before the proceedings commenced this evening.
Mr. Ragghianti deferred to Lisa Goldfien who would explain the lay of the land procedurally, and
the standard of review to be utilized this evening.
Attorney Lisa Goldfien explained that the appellants, whom she would refer to collectively as
"MHC", own and operate the Contempo Marin Mobilehome Park. In October 2005, MHC
petitioned the City under the City's Mobilehome Rent Stabilization Ordinance, to be allowed to
increase space rents at the park and to pass-through to the tenants expenses they alleged they
incurred making Capital Improvements and replacements to the park's privately owned sewer
system, community clubhouse and children's playground. She indicated that MHC's request
was for a one-time rent increase of $629.24 for each of the 396 spaces in the park, totaling
$249,177.74.
Ms. Goldfien reported that per the City's Ordinance, MHC's request was set for a hearing before
an arbitrator and that hearing was held on March 13, 2006. At the hearing, the parties
introduced documentary evidence and witness testimony and submitted written briefs in support
of their positions. Subsequent to the conclusion of the hearing, the arbitrator issued his
statement of decision:
He granted MHC's request for the rent increase attributable to the expenses for the
community clubhouse and children's playground; however, as to the expenses for the sewer
system, he denied some of the expenses. In particular, of the $219, 371 requested for
expenditures on the sewer system, the arbitrator disallowed $45,178.33 worth of
expenditures which he considered were more properly characterized as ordinary
maintenance and repair and should not be passed through to the tenants.
• Of the remaining expenses for the sewer system, the arbitrator determined that they were
Capital Replacements under the terms of the ordinance; however, he allowed MHC
reimbursement for only one-half of those expenditures based on a finding that the sewer
system was in violation of City codes.
Summarizing, Ms. Goldfien stated that rather than the one-time rent increase of $629.24, MHC
was granted an increase of $295.21 per space. Additionally, the arbitrator determined that that
increase must be collected over a twelve-month period at a rate of $24.60 per month.
Indicating that MHC had appealed the decision, Ms. Goldfien reported that the Homeowners
Association had not.
Explaining the procedure as set forth in the staff report, Ms. Goldfien stated that tonight the City
Council was charged with reviewing the Administrative Record of proceedings before the
arbitrator to determine whether the arbitrator's decision was reasonable based on the evidence
before him. To determine this, the City Council should look at the record as a whole and
determine whether it contained substantial evidence supporting the arbitrator's decision. She
indicated that substantial evidence was defined as relevant evidence that a reasonable mind
might accept as adequate to support a conclusion.
Ms. Goldfien stated that since the City Council was determining whether the arbitrator's action
was proper under the evidence before him, as mentioned by City Attorney Ragghianti, the City
Council could not consider new evidence this evening with the sole exception that a party could
introduce evidence if they could establish that there was no opportunity or ability to introduce
that evidence before the arbitrator. Therefore, comments from the public tonight could not be
considered as evidence.
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Noting the City Council had been provided with documents that constituted the Administrative
Record (additional copies were available in the lobby for the public), Ms. Goldfien stated these
included a verbatim transcript, the exhibits introduced by the parties as evidence at the hearing,
briefs submitted to the arbitrator and the arbitration decision itself. She indicated that the
grounds of the appeal were set forth in the staff report as well as in attorney Neil Sorensen's
letter and she believed Mr. Sorensen would explain these in detail.
Having called on the parties to present their positions, Ms. Goldfien stated the City Council
should feel free to ask any questions about those positions and their particular issues.
Ms. Goldfien stated that subsequent to hearing from the parties and members of the public
wishing to speak, Mayor Boro should close the hearing and return the matter to the City Council
for discussion, deliberation and a decision either to affirm, modify or reverse the decision of the
arbitrator. She indicated that Council should make this decision by motion, setting forth its
findings in support of its decision and should direct staff to prepare a resolution memorializing
those findings and decision for presentation at a future council meeting.
Indicating that the Council's decision would be final, Ms. Goldfien stated, however, that either
party could appeal the decision to the Superior Court.
Ms. Goldfien pointed out the ordinance provides that should the Council's decision on this
appeal result in an award to MHC of an increase that is 80% or more of what they requested,
which would be approximately $199,342, then MHC is also permitted to pass through the cost
of the arbitration, which does not include attorney's fees, to the tenants to be spread over a
twelve-month period.
Before inviting the attorneys to address the City Council, Mayor Boro pointed out to both parties
that the Council received this data many weeks ago and received the briefs within the past
week or so. He assured them Council had read them all and would appreciate if comments
could be kept to ten to fifteen minutes. Rather than reading from the briefs, he requested the
attorneys point out what they believed to be the important facts of their case and the support for
it.
Neil Sorensen, Attorney for the appellant, Equity Lifestyle Properties and MHC Operating
Partnership, stated he was accompanied this evening by Ellen Kelleher, General
Counsel, MHC Operating Partnership.
As eloquently stated both in the staff report and this evening, Mr. Sorensen explained this was a
petition made in October 2005 by the owners and operators of the Contempo Marin
Mobilehome park to pass-through certain costs for Capital Improvements or Capital
Replacements they had made at Contempo Marin. The petition sought approximately $250,000
or $629 per space, and the expenses related to the sewer system, park's clubhouse and
playground.
Mr. Sorensen reported that in March 2006, the arbitrator denied the petition and in effect,
granted a much smaller amount, approximately $116,000 or $295 per space. He indicated his
clients believed the decision was wrong for a number of reasons. He indicated that possibly
three major points needed to be stressed:
1) Mr. Sorensen stated that the arbitrator in denying a substantial part of the sewer costs
denied reimbursement for approximately $45,000 in costs that he (the arbitrator) termed
were non-productive or maintenance issues. He indicated there was no substantial
evidence in the record to support this finding. The only evidence in the record submitted
by the petitioner was that all of these costs were either Capital Improvements or Capital
Replacements. Mr. Sorensen explained that the City's ordinance defines a Capital
Improvement very specifically and he paraphrased: "A Capital Improvement is an
improvement that directly and primarily benefits the existing mobilehome park
homeowners, adds value to the mobilehome park, appreciably prolongs the useful life
and which is required to be amortized over its useful life under the Internal Revenue
Code provisions." He indicated that the same ordinance defines a Capital Replacement
as "The replacement or reconstruction of a piece of equipment, a utility line, a street, a
sidewalk, something like that that is over $5,000 in cost and which also adds value to the
park."
Mr. Sorensen noted that $30,000 of the $45,000 disallowed was spent replacing a sewer
force main. He commented that those City Councilmembers who had sat on the San
Rafael Sanitation District Board were aware that a sewer force main was clearly a utility,
qualifies as a replacement and costs more than $5,000. Having sat on that agency
board, they would also be aware that sewer force mains break and need to be replaced.
They have a useful life and wear out over that useful life. This was what happened in
this case, it was replaced and should qualify as a Capital Replacement.
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Mr. Sorensen indicated that the remaining $15,000 of the $45,000 denied was to replace
or try to repair sewer pumps that are part of the private sewer system. He explained that
again, this was a piece of equipment that qualified under the City ordinance as a Capital
Replacement. He noted that the only evidence in the record was that these types of
costs were: 1) amortized or depreciated over the life of the cost, 2) that they involved
utilities or pieces of equipment or other items that qualified either as a Capital
Replacement or Capital Improvement. He indicated that essentially, the arbitrator had
no discretion with respect to these items.
2) Having denied the $45,000 in costs, Mr. Sorensen stated the arbitrator then arbitrarily
reduced the remaining sewer costs by 50% based on evidence never submitted at the
hearing. He indicated the arbitrator did this after the hearing was closed by admitting
documents into evidence that neither party ever requested to be admitted into evidence
and that neither party ever submitted at the hearing. He noted these documents had
been set forth:
• The First Amended Complaint in the lawsuit between the Las Gallinas Valley
Sanitary District and Contempo Marin;
• The December 12, 2005 violation notice; and
• The agreement for acquisition and construction of improvements at Contempo Marin
Mobilehome Park.
Having secretly admitted those documents, Mr. Sorensen stated the arbitrator used
them as the justification for cutting the sewer costs in half. He believed anyone would
agree this was a blatant disregard for the principles of due process and fair hearings and
that it provided the petitioner with absolutely no opportunity to explain or refute this
evidence they had no idea was going to be either submitted or admitted into evidence.
For this reason alone, Mr. Sorensen believed the City Council had a right to ignore the
arbitrator's findings and grant the appeal.
Mr. Sorensen stated that to make matters worse, also after the close of the hearing, the
arbitrator made a determination that the petitioner had violated City building and housing
codes. Again, he noted no substantial evidence existed in the record to make such a
finding, and in fact, there was no evidence in the record of such a violation. He indicated
that the only evidence again, was the lawsuit between the Las Gallinas Valley Sanitary
District and the mobilehome park owner; it was secretly admitted after the hearing. Mr.
Sorensen noted this was not evidence of a violation, rather a piece of ongoing litigation
where there had been absolutely no resolution. He indicated the arbitrator had no
jurisdiction to decide that issue; it was before the Marin Superior Court and would not be
decided until a future date. He commented that until it was decided, such a
determination could not be made.
Even if it were evidence, Mr. Sorensen stated that the Las Gallinas Valley Sanitary
District, evident to those who have sat on LAFCO, is a Special District and not a city and
could not adopt city building and housing codes. As there was no other evidence of a
code violation, there was no substantial evidence or evidence at all. Mr. Sorensen
stated this fact alone deprived the petitioner of a fair hearing and would also be grounds
for reversal.
3) Indicating that the final point related to the amount the arbitrator found was due and
payable and the fact that he decided to allow it to be paid over a twelve-month period,
Mr. Sorensen stated there was no statutory authority in the City ordinance to do this and
even if there were, once again, there was no evidence in the record to support such a
finding. He stated that the respondent presented no evidence that the residents in the
park could not afford a onetime payment. The petitioner, as it had done in the past, had
always worked with the residents who did have a hardship and who requested to pay the
rent increases over time. The petitioner worked with them on a case by case basis to do
this and in fact, with regard to the original rent increase letter submitted in October 2005
to the residents, each letter indicated that should they have trouble with the rent
increase they should contact the petitioner to work something out. Mr. Sorensen stated
it was not up to the arbitrator to decide that because there was no statutory authority and
no evidence in the record.
In conclusion, Mr. Sorensen requested that the City Council modify the decision of the arbitrator
and approve the full amount requested of approximately $249,000 or $629 per space.
With regard to the issue of Capital Replacement, Councilmember Cohen stated it almost
appeared in Mr. Sorensen's brief and comments that any expenditure on anything that could be
treated as capital was subject to pass-through. Speaking metaphorically, he stated it was a
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capital expense to purchase a car. Ongoing expenses such as purchasing gasoline was not
capital, rather a replaceable item. Changing the oil every three -thousand miles, replacing the
fan belt, etc., were items routinely expected to be replaced during the life of a car, which he did
not believe was replacing the capital investment. Beyond gasoline, he inquired where the line
was with regard to Capital Replacement.
Indicating they had experts to deal with such issues and noting they were "stuck" with the
ordinance adopted by the City Council some years ago that defined Capital Replacements and
Capital Improvements, Mr. Sorensen believed the line was drawn as to what the ordinance
stated. He stated they believed the ordinance to be pretty clear in that when replacing a piece
of equipment that had a certain cost, in the aggregate, it qualified. He did not believe they were
dealing with the replacement of a single belt in this type of situation and was not sure the
analogy worked. Mr. Sorensen stated it was his understanding that pumps were taken out and
refurbished completely and part of that refurbishment included replacing a fan belt as with the
pump out it was appropriate to replace the belt in case it broke later on. Should Council wish to
disallow that expense he believed his client would not object.
Councilmember Cohen stated that in the record there was some discussion that some of the
expenses that were disallowed pertained to things that really appeared to be at the fan belt level
of routine maintenance. He was familiar with force mains and force main replacement which
appeared more substantial; however, some of the items included in the $45,000 disallowed by
the arbitrator appeared to him to fall more towards the routine maintenance end of the
spectrum, which was his reason for a further opinion.
Councilmember Cohen noted Mr. Sorensen talked about no statutory authority in the arbitrator's
decision to call for payment of the pass-through over time, yet in 1996, there was a rent
increase on a similar item of capital pass-through that was paid over time.
Concurring, Mr. Sorensen stated he believed this was a very different situation and it was his
understanding (he was not Counsel for the petitioner at that time) that the petitioner proposed
that from the outset. A settlement went to some type of very odd arbitration proceeding that
sounded more like a mediation and there was an agreement from both sides that it would be
over time. Here, as he indicated in his brief, a decision was made up front that to keep the
costs lower, they would ask for the total amount in a one-time payment. Mr. Sorensen stated
the ordinance allows them to request costs of capital and if they had planned on this being paid
over time, the rent increase would have been larger to reflect the cost of capital for not getting
their payment up front.
Councilmember Cohen inquired whether they borrowed the money.
Mr. Sorensen stated they did not borrow this specific money; however, as with any corporation,
they had lines of credit, taking money from one source or another, which they had to pay for.
Councilmember Phillips invited Mr. Ragghianti to comment on Mr. Sorensen's point with regard
to the apparent receipt of information regarding Las Gallinas Valley Sanitary District after the
fact and whether it was a fair statement.
Concurring that it was a fair statement, Mr. Ragghianti stated that the statement of decision
described the way this happened as follows:
Line 20 — page 1 of arbitrator, Mr. Freed's decision - "Respondent did not complete the
admission into evidence of the following documents:" He was unsure whether someone
reading that comprehended the intended meaning in the same way as someone else; however,
he believed Mr. Sorensen's description of what happened was a fair representation.
Councilmember Phillips stated the record made reference to Generally Accepted Accounting
Principles (GAAP) and the Internal Revenue Code with regard to amortization and depreciation
of costs, and he inquired whether in his interpretation, Mr. Sorensen's understanding of the
City's regulation and definition of Capital Replacement and repairs was consistent with GAAP.
Mr. Sorensen stated he relied on the experts and explained they had the Chief Financial Officer
of the Corporation testify that these items were treated as capital expenditures and amortized
according to IRS regulations. Being a lawyer, he stated he looked at the statute adopted by the
City Council, which stated "if they are amortized according to IRS regulations, that was one
aspect of a Capital Replacement or Capital Improvement." He commented that he could not
answer the question not being an expert on GAAP.
From the testimony received, Councilmember Phillips stated Mr. Sorensen must have drawn
conclusions since the expert witness made reference to GAAP. Therefore, he inquired whether
Mr. Sorensen's client was consistent in the treatment of expenditures or Capital Improvement
consistent with GAAP.
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Mr. Sorensen stated he had no idea. He indicated the ordinance stated "are they amortized as
required by IRS regulations" and that was his testimony. He indicated the expert witness also
testified as to GAAP; however, Mr. Sorensen stated he did not draw a conclusion as frankly he
could not draw a conclusion as to what that answer would be.
With regard to the expenditure for the sewer, Councilmember Phillips stated that apparently,
there was some question as to whether or not it had a continuing value. If the improvements
were not adequate to improve the situation to Las Gallinas' satisfaction, they may or may not
have value in the ultimate determination as to what that resolution might be.
Mr. Sorensen stated he did not believe there was a question about that. He believed it was
answered by the testimony — they would be used no matter what.
Hypothetically, if they were not used in that final solution, Councilmember Phillips inquired
whether Mr. Sorensen's client would then write off the costs that did not have a continuing
value.
Mr. Sorensen stated it was difficult to answer this question because he did not believe, from the
testimony, that that hypothetical had much of a chance of happening. According to the
engineer, there were two aspects of the sewer system, drywells and pumps. The pump
problem was fixed and the Las Gallinas Valley Sanitary District wanted them to fix what they
claimed was a drywell problem. These were two separate problems, fixing the second one
would not cause a problem with the first one; therefore, he did not believe Councilmember
Phillips' hypothetical would ever occur.
Councilmember Phillips stated that the assumption Mr. Sorensen wished the City Council to
draw was that there was continuing value of the expenditures incurred.
Disagreeing, Mr. Sorensen stated his conclusion was that if and when the Las Gallinas Valley
District prevailed in their lawsuit, if they did, and got some type of judgment that indicated the
mobilehome park owner had to do additional work, that work, as he understood it, was the
drywell work, had nothing to do with the pumps; therefore, the money that had been spent
would not have been wasted. He commented that that was the testimony by Mr. Klaus Voss
Councilmember Phillips inquired how MHC decided on the repairs to make.
Mr. Sorensen stated there was a program developed by SI Utility that was presented to the Las
Gallinas Valley Sanitary District and which was approved by them, and they went ahead and
made those repairs. He clarified that his client hired an expert who indicated this was what
should be done.
Mayor Boro stated his comment related to getting to know the relationship between the park
owner and park residents. Owning property himself and what he does when there was a need
to make improvements, he understood there was not a lot of discretion on some of the work that
had to be done; it appeared it was required by the regulatory authority. As the corporation
became aware of the fact they had these issues to attend to and also aware of the fact they
would be seeking compensation from the homeowners for the cost of the expenses, he inquired
whether there was any discussion with the tenants that this was happening. He believed some
of the tenants in question were of limited income and whether or not the repairs were necessary
was not their choice, and he requested a little background on how the relationship works.
Mr. Sorensen explained that MHC and ELS did not go out to spend money. Mr. Voss testified
that the sewer solution was the cheapest they could come up with as to what they thought
would satisfy the regulatory agencies. There was evidence in the record that the adjacent
condominium complex spent $6,000 per unit on a solution the Las Gallinas Valley Sanitary
District wanted; however, MHC was looking to spend the least amount of money and get the job
done. They thought they had the job done and that now was the subject of a lawsuit which
would not be decided by the City Council this evening. He invited Ms. Kelleher to address
whether there was any advance work done.
Ellen Kelleher stated that obviously, their residents received notice back in October 2005 in
terms of what the rent increase would be. She was uncertain whether they were aware in 2004
that the park began to have these issues and indicated that in September 2005, a notice was
distributed to each home site.
Councilmember Heller inquired whether this notice was just for the regular rent increase and did
not refer to any capital or other rent increase.
Ms. Kelleher stated it referred to the capital amount also.
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Tom Davis, representing the residents of Contempo Marin, stated that some residents were
present this evening to oppose petitioner MHC's request to overturn the arbitrator's decision
and substitute a onetime payment of $629 with respect to certain expenditures made by MHC
during 2004 and 2005. He indicated they believed that the arbitrator, Mr. Freed, correctly
evaluated MHC's petition as a rent increase request and applied the standards set forth in the
ordinance, section 20.12.110, to determine whether the increase was reasonable in order to
ensure the owner a fair and reasonable return on his investment. They believed the arbitrator
was correct in rejecting MHC's contention that it was entitled to an automatic pass-through of
any expenditure which MHC determined to be capital in nature. And also, such a rule, if
adopted, would destroy the effectiveness of the ordinance and encourage MHC to adopt
management practices which shift costs, wherever possible, to capital costs instead of
concentrating on the most efficient method for managing the park.
Although they believed the arbitrator was correct on the major analytical points, Mr. Davis
stated they contended that he failed to do a complete and thorough investigation of City
records. He noted Councilmember Heller mentioned the cost of living increases, which was
one of the issues the arbitrator did not investigate properly. Nor, did he avail himself of the
consultant services which the ordinance provides for in section 20.12.030, which would have
provided him with more information about City records among other things, or to request
assistance in determining the history of rent increases at Contempo Marin. As a result, the
arbitrator's conclusions with respect to the park rental history and the presence of prior rent
increases were erroneous.
He referred to a chart on view in the Council Chambers which listed the increases since MHC
acquired the park:
1996
- an increase of $9.
1997
— an increase of $17.
1998
— an increase of $17.
1999
- an increase of $20.
2000
- an increase of $19.
2001
—an increase of $22.
2002
— an increase of $25.
2003
— an increase of $7.
2004
— an increase of $7.
2005
— an increase of $6.
Total increases since MHC acquired the park through cost of living have been $149 per space
per month - 396 spaces x 12 months equaled $708,048 more than when they acquired the park
in 1996.
Mr. Davis stated that when the arbitrator indicated there had been two rent increases in the past
ten years, he was mistaken, and his evaluation of the reasonableness rules was skewed by that
error.
Under the standards of review set forth for this appeal, Mr. Davis stated the arbitrator abused
his discretion, in their opinion, by failing to examine the City records to discover the history of
the rent increases. He also relied on the testimony of Mr. Michael Berman, MHC's Chief
Financial Officer, in order to conclude that market rents for spaces at Contempo Marin were
$1,400. As he would point out in some detail, Mr. Davis stated Mr. Berman showed no basis for
knowledge of conditions at Contempo Marin or at Los Robles Mobilehome Park or Marin Valley
Country Club, the two parks closest to Contempo Marin in terms of the location in Marin.
Mr. Davis stated that an examination of Mr. Berman's testimony would show that it really was
not entitled to be given much weight, and he believed the arbitrator abused his discretion by
relying on that testimony as the basis for determining that a portion of the rent increase was
reasonable. He noted they believed that no portion of the rent increase was reasonable under
the circumstances.
As they would show, Mr. Davis stated the proper decision for the arbitrator would have been to
find that MHC had failed to meet its burden of proof under section 20.12.170 and that any
increase beyond the cost of living increases, which had already been granted for 2004 and
2005, was not needed in order to ensure MHC a return on its investment. They had not
established that it was needed and the ordinance indicated that the burden of proving that they
needed an increase greater than the cost of living in order to make a fair return was on MHC.
Mr. Davis stated that in the arbitration hearing they were quite adamant they were not going to
show that or need to show that and were entitled to a capital pass-through because it was
deemed to be capital on their books. He noted this was the position Mr. Sorensen took in the
hearing; Mr. Davis believed that position to be wrong and the arbitrator correctly took the right
position which was that any kind of rent increase, whether based on a capital expenditure,
increased operating costs, increased tax obligations, etc., was run through the procedures of
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whether it was reasonable or necessary to ensure a fair return on the investment as a whole
Mr. Davis reported that in his decision the arbitrator set forth - page 7 — lines 5 through 12 — his
analysis of the reasonableness standards. Mr. Freed stated there had been two requests for
rental increases in the past ten years, which was incorrect. He (arbitrator) indicated $500,000
had been spent on street repairs which was probably correct, and he also concluded that space
rents were less than half of the fair market value for the value of spaces without rent control,
although the test imposed by the ordinance was what the value of spaces was in equivalent
communities, not the market value.
Based on these three factors, the un passed -through street expenses, absence of prior rent
increases and the relationship to market, Mr. Davis stated the arbitrator felt it appropriate to
pass-through to the residents some amount of the money spent so far to upgrade the sewer.
He indicated the arbitrator based his decision on the testimony of Mr. Berman — pages 108 —
151 in the transcript. Mr. Davis explained that Mr. Berman joined MHC in 2003 and serves as
the CFO. Mr. Berman testified that the costs in question were capitalized and depreciated by
MHC — page 109 of the transcript; however, on cross-examination, when he was questioned on
how much depreciation was being claimed for Contempo Marin, his response was that he did
not know and did not have that level of detail. However, Mr. Berman declared that he would
and could provide the information on the depreciation of the assets they were claiming to pass-
through, albeit he never did this. Mr. Davis stated that again, the burden of proof was on the
petitioner and he did not meet that burden, having indicated he would. He did not fulfill the
commitment and left the arbitrator without important evidence as to the useful life of the assets
in question. He reiterated that the burden of proving that the requested rent increase was
needed was on MHC and it had failed to provide evidence of the cost of these assets over their
useful life, not an arbitrary period.
In his testimony, Mr. Davis stated that Mr. Berman showed no familiarity with the expenses in
question. On page 127 — line 2 he stated: "I don't have personal knowledge of any of the
individual invoices." He indicated the company's policies were to depreciate according to
GAAP, which Mr. Davis believed he does; however, Mr. Berman was not the person who had
ever looked at the expenses regarding Contempo Marin.
In discussing the difference between capital expenditures and ordinary income expenses, Mr.
Davis stated the person actually doing the work, Mr. Reames, the onsite manager, testified that
what he was attempting to do up until the time of entering into the contract to replace the
pumps, was to keep worn out pumps functioning.
Mr. Davis stated they believed the arbitrator was correct in categorizing the expenses
undertaken before the beginning of the contract as operational expenses, not capital expenses.
With regard to the costs of capital, Mr. Davis reported that the ordinance permits recovery of
debt service costs if any were incurred as a direct result of Capital Replacement. He indicated
that Mr. Berman testified as follows on this point:
"There was no specific borrowing per se that I can recall with respect to these
expenditures." — page 131 — lines 23 through 25.
Mr. Davis stated there was no direct borrowing cost, end of story. The only evidence on the
record, therefore, was that MHC had no cost of capital which would result from spreading any
award over time. At the hearing, he noted MHC had noticed that the respondents had asked
that the award be spread over time and it could have offered evidence of what it would cost to
spread the award over twelve months, or over the useful life of the asset; however, the only
testimony was Mr. Berman's declaration that the cost would be much greater.
Referring to page 112 - lines 13 through 20 of the transcript, Mr. Davis stated that Mr. Berman
stated "we estimate the market rents today to be approximately $1,400 and that the rents
charged at Contempo averaged about $650."
Mr. Davis stated that Mr. Berman's testimony was self-serving. He noted that one of the points
being made in litigation was what they estimated the market rents to be, and in fact, market
rents was not directly what the ordinance addresses, rather it spoke to rents at comparable
parks, which was different. He commented that rents at Marin Valley Country Club and Los
Robles were in fact approximately $100 per month lower than Contempo Marin. He reiterated
that Mr. Berman's testimony was self-serving, showed no familiarity with the neighboring
conditions and was not sufficient to meet MHC's burden of proving that the existing market
rents in comparable communities were what he indicated they were. Mr. Davis believed the
arbitrator abused his discretion in concluding that that element of reasonableness had been
met.
Indicating that the most curious part of the arbitrator's decision was to reduce the award related
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to the sewer expenses by 50%, Mr. Davis stated that this was reduced because of continuing
uncertainty that the work so far undertaken would contribute to an eventual solution to the toxic
discharge problem and thereby provide a benefit. He noted that in addition to being a
capitalizable expense it also needed to provide a benefit under the ordinance to qualify as a
Capital Replacement and something subject to consideration as a rent increase, subject to the
requirements of being reasonable and necessary to ensure a fair return.
In fairness, Mr. Davis stated that they as respondents must concede that MHC hired a
competent contractor to do the sewer replacement work, made a serious effort to correct the
toxic discharge problem and were sympathetic to the arbitrator's impulse to give MHC some
relief, especially since the arbitrator erroneously believed there had not been regular substantial
rent increases. They conceded that the evidence provided by Mr. Berman, if taken at face
value, provided some support for an increase of some type. Finally, they acknowledged that it
was uncertain how much of the expenditures on the sewer system would ultimately be of benefit
to the park.
Returning to the burden of proof, Mr. Davis stated that as things stood currently, the petitioner
had the burden of showing it was a benefit and until the litigation was settled or decided, they
had not met that burden. Noting Councilmember Phillips inquired whether the equipment would
be used, Mr. Davis stated "maybe" because it was not known what the final solution would be in
that they could order a different brand of pump or system. He believed that without proving this
they were not entitled to an increase at this point.
Explaining why they did not appeal, Mr. Davis stated this was because they believed there was
some evidence from which the arbitrator might conclude that some increase would be
necessary, and they did not wish to go to court. He felt sad anticipating that perhaps the issue
would eventually end up in court. They decided to take half a loaf, however, since there was an
appeal and the City Council had the authority to reverse, affirm or modify the decision, they
were requesting that it be modified, i.e., make a better decision based on better information and
indicate that MHC had not successfully shown there had not been increases and that they had
not been compensated for the ongoing costs of operating the park. The residents believed they
had been and had not shown otherwise, and should the ordinance be allowed to sink to the
place where they did not have to prove fair return, or go through the process of showing, this
would hurt the tenants. Mr. Davis stated MHC was entitled to a fair return; however, they had to
make a case they would do that, which they had not done. In his opinion, they had done a less
than thorough job of showing that this was a reasonable increase because their claim was that
should they have a capital expenditure, they did not have to. He believed this was an incorrect
interpretation of the ordinance.
With regard to the eight objections of the petitioner to the arbitrator's decision, Mr. Davis stated
that the evidence from LGVSD — Civil Complaint, Notice of Violation — were public records. All
of the paperwork was included with briefs submitted before the hearing, not afterward and the
idea that this was some type of secret was ridiculous. Referring to the first pages of the
transcript, Mr. Davis stated that the arbitrator, as he began the hearing, began a process of
admitting evidence from both sides. He reported Mr. Sorensen requested that the respondents'
evidence be delayed until after he had presented his case in chief; however, no one
remembered — neither the arbitrator, Mr. Davis nor Mr. Sorensen remembered whether he had
an objection to that evidence. Mr. Davis stated this was relevant, trustworthy evidence, filed
public complaints and the kind of thing an arbitrator could rely on as being trustworthy and the
ordinance specifically stated that the arbitration hearing need not be conducted according to
technical rules of evidence. Therefore, an objection that indicated there was a technical deficit,
which the arbitrator or the City Council could cure by taking judicial notice of those facts, was
not really necessary because it was not necessary to meet that technical threshold. Mr. Davis
stated it was good evidence and the core of what was going on between the residents and MHC
had they done something that worked. If they did not, they were not entitled to even a
consideration of a rent increase for it. Mr. Davis believed the objection to that evidence was not
well founded.
With regard to other items the arbitrator indicated were not in evidence, Mr. Davis stated all had
to do with the ongoing process of carrying out the original contract in response to the original
notice of violation. The current position was past that - whether there was an agreement to
inject chlorine, etc., after all that was over, the LGVSD tested the effluent and found it a toxic
discharge and still constituted a public nuisance, and indicated there was non-compliance. Mr.
Davis stated the fact that in the interim some of the evidence was not considered, the piece of
evidence that was important was after the job was over it was found, so far, not to be
satisfactory.
With regard to Objection #3, Mr. Davis believed it to be the same problem. The ultimate
question was whether currently, there was a system that did the job and the answer was "we
don't know yet."
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Objection #4 — there was no evidence that the work done constituted operational expenses, not
capital expenditure, Mr. Davis stated the people who did the work, Mr. Reames testifying,
indicated they were trying to keep the system operational. He believed these were emergency
maintenance expenses, not capital expenses.
Objection #5 — the arbitrator found uniform codes were violated — referring to page 7 — lines 11
through 15, Mr. Davis stated that the arbitrator's decision was that the award was being
reduced in view of the uncertainly that capital expenditures so far had completely solved the
problem and the award was being reduced for the additional reason that the completed project
still presented a public nuisance, which was within the arbitrator's discretion to determine,
based on the evidence he had before him.
Objection #6 — as long as the system was still regarded as a public nuisance, not conclusively
proved, rather as long as it was uncertain, Mr. Davis stated it had not been established that it
provided a benefit and they had not met their burden of proof.
Objection #7 — the arbitrator not having evidence — Mr. Davis stated the arbitrator spent seven
pages discussing the evidence. He looked at it thoroughly and had grounds for making the
decision he made.
Objection #8 — the arbitrator's decision to spread the award over one year - Mr. Davis stated
that if anything, he believed this to be generous to MHC. As was pointed out, there had been
previous capital pass-throughs proposed under the ordinance and they had been to spread the
payment out over the useful life of the asset.
With respect to any of these expenditures, if the burden of proving reasonable increase and fair
return had been met, Mr. Davis requested that the increase awarded be spread over the useful
life of the assets. He pointed out that the residents did not own these items. He commented
that MHC's indicating this was a capital expenditure and no longer their responsibility, rather
the responsibility of the residents, was a bad idea and policy, which would weaken the
ordinance and weaken the efficiency with which they managed the park, and he requested the
City Council not to do that.
At the very least Mr. Davis requested that the arbitrator's award be left intact and to do the best
thing, the City Council should find the petitioner had not met its burden of proving that:
a) A benefit was provided by the expenses they undertook, and
b) The increase was reasonable and necessary for them to make a fair return on their
investment.
Councilmember Cohen noted Mr. Davis had not filed an appeal from the arbitrator's decision on
behalf of the residents. Mr. Davis concurred.
Even though Mr. Davis believed what ought to be applied was the standard of a reasonable
return on investment, and there was no evidence submitted on that issue, Councilmember
Cohen noted Mr. Davis believed the arbitrator's arbitrary decision to give 50% of these costs
was what he described as half a loaf and therefore, not worth disputing.
Mr. Davis stated there was some, but inadequate evidence given. The arbitrator made a
finding, albeit erroneous, that there had been two increases, that the rents were less than half
of market, that there were previously uncompensated Capital Improvements. He believed this
was evidence, although there was better evidence on the other side; however, it could not be
stated there was no evidence from which the arbitrator could conclude what he did. Mr. Davis
stated they believed they ran the risk of having his decision sustained. He believed the
arbitrator was cutting the baby in half and giving something to everyone. Believing they might
well have received worse, Mr. Davis stated they decided to take it.
Councilmember Cohen stated he was not sure he was convinced that Mr. Davis'
characterization of the testimony "we're doing everything we could to keep these things
working" and questioned whether this was an investment in deferring having to replace. While
Mr. Davis did not agree the ordinance allowed for Capital Replacement as a pass-through;
however, should one agree, replacing a pump would clearly appear to be Capital Replacement.
To go to extraordinary efforts in the interests of deferring having to replace a pump, he
questioned whether this also would legitimately be considered Capital Replacement, i.e.,
extending the useful life of a capital asset. He agreed there were items in the record that
appeared to him that fell under the description of ordinary routine maintenance, and other items
that seemed above and beyond that, that appeared to be aimed at extending the useful life of a
capital asset
Responding, Mr. Davis stated he found that question less important than the question of
whether they made a fair return on their investment as a whole. Having said this, he questioned
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SRCC Minutes (Regular) 07/17/2006 Page 18
where the line was between ordinary maintenance and extending the useful life. He believed
(and solicited Councilmember Phillips' assistance) the rule was that if the work done extended
the life of the asset being worked on by more than a year, that was a capital expense.
Councilmember Phillips believed this was not far from GAAP.
Mr. Davis stated that the sewer service was on the site every couple of weeks and they were
not carrying out work that had long term life extension aspects to them, rather they were doing
emergency, make it work by noon, work. He commented that the frequency of the visits tended
to suggest this.
Councilmember Cohen noted some discussion regarding the issue of the introduction into
evidence, or importance of the lawsuit involving LGVSD. He stated that Mr. Davis advanced an
argument, which he was not sure he was persuaded by; however, would pursue, regarding the
issue of the efficacy of the capital investment. Forgetting about the $45,000, Councilmember
Cohen explained that MHC relied on a professional engineer/contractor judgment and made an
investment in Capital Replacement which was very clearly important to the residents' ability to
enjoy ongoing benefit from the park. Should the private sewer system shut down and raw
sewage was spilling over the ground, residents could not continue to live there; therefore,
maintaining the system operational was an investment intended to ensure the benefit of
continuing the use of the park. Therefore, Councilmember Cohen inquired whether Mr. Davis
was arguing that despite their good faith reliance on professional advice, if that advice turned
out to be less than complete in terms of its effects, MHC was not entitled to pass-through those
capital costs where if it were complete they were entitled to pass through the costs.
Mr. Davis reiterated the question "should they be compensated for a good try that does not
work." He stated the City ordinance indicated the test was that it provides a benefit and
questioned whether a failed try provided a benefit. He believed there was the consolation of
knowing that work was done in good spirit on the residents' behalf; however, it did not fix the
sewer. He indicated that eventually, there would be a lot of costs, hopefully in the range of what
they had spent; however, sooner or later something would have to be done to fix the sewer and
then the discussion would take place, based on something that did work, of who was
responsible of paying for it.
Councilmember Cohen stated this was an excellent segue to his final question. He noted Mr.
Davis' argument that the arbitrator was correct in only allocating 50% and based on reliance on
the lawsuit, there was a question concerning whether or not the repairs were effective. In the
event the lawsuit settled in favor of MHC, he questioned whether the other 50% should be
granted.
Mr. Davis stated he believed this question went to the scope of the Council's authority in
whether as a Council they had the authority to basically put this decision on the table until the
unresolved issue of whether a benefit is provided was resolved, and he did not know the
answer to this.
Mr. Ragghianti stated he did not think so.
Mr. Davis stated the situation would then be that as things were currently, it was not established
that this system worked. The burden of showing that a benefit was provided to the park was on
the petitioner and he had not met it because of the outstanding dispute, and without litigating
the issue this evening, which was not possible, this hurdle could not be crossed. He noted that
it was not like the lawsuit was brought in bad faith — he assumed the LGVSD honestly believed
their measurements indicated there was a problem that would have to be resolved in the future
— however, at this point in time, in his opinion, the ordinance stated the petitioner had not
provided a benefit and was not entitled to a rent increase. Since they were entitled to a fair
return on their investment as a whole, should they show over the next five years they had done
$1 million on this false start and had to put another $5 million into what eventually worked, Mr.
Davis believed they would have a good claim to indicate they were entitled to a $6 million
increase in their investment and they were entitled to make a return on their investment as a
whole, including that additional $6 million. He believed that when they eventually made the
investment that provided the benefit, they were entitled to a return on that.
Councilmember Heller noted Mr. Davis' remarks that there had been many rent increases and
inquired whether he was mingling the two types — basic rent and any improvement, Capital
Replacement or Capital Improvements. She referred to a list on display, which she would not
read.
Responding negatively, Mr. Davis explained that the increases identified on the list were CPI
increases, i.e., the automatic increases the petitioner applied for every September and
received. He noted these were intended to compensate for changes in operating the park,
including the sewer system wearing out, and the increases they received were much larger than
the amounts in question.
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Councilmember Heller inquired whether the sanitary system was working
Responding affirmatively, Mr. Davis explained however, that it was in violation. He confirmed
for Councilmember Heller that in his home it was working and always had worked. He noted
that the cost of this had always been included in their rent and it was a novel idea to charge
separately.
Councilmember Phillips inquired whether it was a fair statement that something had to be done
to the sewer system and Mr. Davis agreed. They agreed it might also be concluded that MHC
was not stupid, and Councilmember Phillips explained that by that he meant they assessed the
situation, drew a conclusion, brought in consultants to assist in determining what could be done
to satisfy the requirement to improve the sewer system. Mr. Davis agreed it could be assumed
they wished to have a successful outcome. Since a conclusion had to be drawn this evening
based on reasonable input, Councilmember Phillips stated that faced with a similar problem he
would probably call a consultant to determine what needed to be done, perhaps at the minimum
cost, and have the work done, from which the tenants would benefit. Mr. Davis stated it was
still unclear as to what would have to be done to eventually make the system viable. Noting this
was an additional problem for MHC, Councilmember Phillips stated that at this point the
situation had been improved. In terms of operation, Mr. Davis stated that to his knowledge, the
sewer had not stopped working, rather those receiving the sewage indicated they were no
longer willing to accept because it was toxic. Councilmember Phillips noted that had it not been
working, Mr. Davis, rightly so, would have been one of the first to complain to MHC and request
they fix it.
Mr. Davis explained that Mr. Reames, the onsite manager, was pretty conscientious about
seeing that problems such as this were dealt with.
Councilmember Phillips stated therefore, there was a situation that required a change to the
existing, and it appeared to him there was an element of Capital Improvement, a onetime
expenditure that served the park for a period of time.
Mr. Davis stated he believed the SI contract clearly fit within that framework, whereas the work
done before this contract was entered into did not. Rather that was repeated emergency calls
and that was what the arbitrator found and Mr. Davis believed he was correct in his evaluation
of the evidence, finding it to be ongoing ordinary maintenance. Mr. Davis believed the division
line was before the SI contract was entered into; that was when they undertook to do a capital
fix and was clearly a program to make changes in the system, as opposed to keeping the
system running.
Councilmember Phillips inquired whether Mr. Davis was sufficiently knowledgeable of the sewer
system to conclude whether or not ongoing, routine maintenance over the previous years would
have precluded or not required this expenditure at this point in time.
Mr. Davis indicated he was not. He stated all that could be done would be to go through the
receipts to ascertain who was there.
Councilmember Phillips noted Mr. Davis made an issue of the CFO not knowing the amount of
depreciation.
Mr. Davis added "and not finding out from whomever on his staff who had that information and
returning with it."
Setting the amount aside, Councilmember Phillips inquired whether Mr. Davis had any
questions as to whether MHC depreciated the cost over some period of time.
Mr. Davis stated it would have been foolish not to.
With regard to the ordinance which speaks to depreciable items, Councilmember Phillips
inquired whether Mr. Davis would suggest this in fact, was treated as a depreciable item.
Concurring, Mr. Davis explained that in deciding how much a third -party had to pay, it would be
useful to know, not just internally, rather on the part of the third -party being requested to do the
paying, the time period over which he would service this.
Suggesting it was not important, Councilmember Phillips explained this was a measure of the
cost being absorbed over that period of time dictated by the IRS; however, it was not a measure
of the amount of capital, or cash, they paid for the service. He reiterated this was the amount,
not how it was spread. With regard to the check written in the amount of $249,000, he stated
this was a capital outlay, presumably approximately the date of the improvement, not over a
period of time. He noted Mr. Davis suggested it would be unfair for them to receive that
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SRCC Minutes (Regular) 07/17/2006 Page 20
reimbursement in the outlay period
Mr. Davis explained that the residents' contract was that they paid rent for the right to occupy a
space and get services. MHC had to provide those services and their cost of providing those
services, whether capital or operational, should go into whether they were making a profit, and
they were entitled under the ordinance to demonstrate that the revenues they received were not
sufficient to compensate for the expenses and leave them a reasonable profit. He believed they
had to make that showing and they had not done so. Mr. Davis did not believe the fact that they
had to add to their capital investment did not mean the residents had to purchase that capital
asset for them, rather their investment had gone up and they were entitled to a return on their
total investment.
Councilmember Phillips noted the ordinance did speak to being entitled to a reimbursement for
those capital expenditures; therefore, reimbursement of a capital expenditure was at the time of
the outlay of the cash. While MHC could be financing the purchase, in this case, the sewer
system, he suggested that the residents were benefiting over that time, having the use of the
asset over that period of time.
Concurring, Mr. Davis noted they did not have ownership of the asset over that period of time.
Councilmember Phillips stated the ownership was not relevant.
Mr. Davis stated that the residents were paying, they bought it for cash. If it cost $1 million,
they were paying, albeit not owning it. He noted MHC owned it, depreciated it and received tax
benefits for it, while residents got the use of it.
Using an example, if they received $249,000, Councilmember Phillips inquired as to how they
treated receipt of this figure. It was an offset against the purchase and therefore, they had not
depreciated any amount — they actually recorded receipt in the year in which they received it,
which was when it was taxable. He noted they were not depreciating that asset because they
had been reimbursed for it.
Councilmember Phillips clarified for Mr. Davis as follows: MHC laid out $249,000 for the sewer
system as an expenditure. They were reimbursed by the residents; therefore, their investment
in that asset was zero, they received no future benefit for this because they had no capital
invested.
Responding to Mr. Davis' question on whether they could depreciate that asset, Councilmember
Phillips stated they had no cost to depreciate.
Mr. Davis stated that Mr. Berman testified they already had set up a depreciation schedule. He
indicated MHC was treating this as their asset.
Councilmember Phillips explained that if they did not offset the cost they would have to reflect
receipt from the residents of the amount expended, which would either reduce the depreciation
or it would be taken into income in the year of receipt; therefore, they did not receive an
additional deduction for it over this period of time as they had no cost to depreciate or amortize.
Regarding the issue of rent increases, Councilmember Phillips inquired as to its relevancy.
Mr. Davis explained the ordinance provides that a rent increase must be reasonable and
necessary to ensure a fair rate of return and the standards for determining reasonableness
were in 20.12.110, of which there were nine. He indicated that the arbitrator examined some of
them. Mr. Davis noted some of the standards of reasonableness as follows:
• The rental history of the mobilehome park, including the presence or absence of
increases.
• The frequency of past rent increases and amounts.
• The owner and/or operator's response to any tax reduction measure.
• The occupancy rate of the mobilehome park in comparison to comparable units in the
same general area — everything is full up 100%.
Mr. Davis stated this was section 20.12.110 and was used in determining a reasonable rent
increase.
Councilmember Phillips inquired whether this was a rent increase or reimbursement for capital
expenditure.
Mr. Davis believed them all to be rent increases and the ordinance stated that a rent increase
could be obtained for a capital expenditure, for an increase in taxes to be paid and operational
expenses; however, the arbitrator stated the capital reimbursement request should be judged
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SRCC Minutes (Regular) 07/17/2006 Page 21
by the standards of reasonable return, which Mr. Davis believed to be correct. He explained
what should be realized was that there were two competing interests and the City Council would
be the reconciler of people of low to moderate income who were attempting to preserve their
housing costs as low as possible and a corporate investor who wanted to obtain a fair return for
its shareholders. These interests had to be balanced, and in his opinion, this should be done by
taking the investment as a whole and determining the fair return on that investment. He
believed the ordinance did this in 20.12.110 and the arbitrator overlooked some of these factors
in making his decision. There was some evidence he followed that. It was enough that his
decision could be sustained, it could be improved upon if the City Council went further and
indicated he did not do as stalwart an investigation as he should have. Mr. Davis stated there
was not a separate automatic pass-through for capital expenditures. There was a separate
automatic pass-through for cost of living increases, which was excluded from review; however,
there was not another exclusion for capital expenditures. He noted capital pass-through was
not mentioned in the ordinance; other ordinances did provide for separate capital pass-through
and he believed the City's ordinance was the better policy.
Regarding the issue of playground and clubhouse improvements, Councilmember Phillips noted
these associated costs were in fact, capital. Mr. Davis agreed that the arbitrator so found.
Councilmember Phillips noted this related to replacing sod and to him this appeared like an
expense. Paint related to the clubhouse, which he would normally expense, while interior
improvements could be an expense; however, it also addressed some siding. While not huge
amounts, he indicated these appeared like expense for repairs.
Agreeing, Mr. Davis stated it was di minimus — the action was in the sewer system. He believed
that if the sewer system was regarded as not being established as a Capital Replacement,
there would not be sufficient expenditure to even justify a rent increase from the other two.
Believing it to be an interesting question, Mr. Davis stated he believed paint to be an expense.
Mayor Boro paused the meeting at 10:20 p.m. for approximately five minutes.
Resuming, Mayor Boro stated Council had heard from and interacted with both attorneys and
he issued a reminder that the City Attorney had indicated at the outset, that unlike most Council
meetings, this was not a public hearing. Members of the public could make comment should
they so wish; however, the City Council was not permitted to use any of these comments in
making their decision. He invited anyone who wished to speak and in light of the lateness of
the hour, he requested that comments be confined to a couple of minutes.
Keith Meloney, President, Contempo Marin Homeowners Association, referred to a statement
by Mr. Sorensen in his reply brief dated July 13, 2006, in which he stated there was no
evidence in the record that any hardship would result in making a demand for a onetime
payment from the residents of this magnitude. Mr. Meloney stated he believed the ordinance
served as its own evidence of the demographic that resides in Contempo, which included
elderly residents living on fixed incomes, residents who pay mortgages on their homes in
addition to their rent, low income residents, school teachers, County employees and many
suffering from medical problems leaving them with nothing to spare. He expressed the hope
that the City Council would consider the hardship factor regardless of any amount authorized for
passing -through to the residents. He stated they placed their trust in Council's judgment and in
their belief Council would do the right thing.
Gerry Frate, Contempo Marin, requested the City Council not to approve the requested fees
presented by the landlord. He indicated these types of submittals to the rent control ordinance
needed to be stopped. ELS was presenting repair and maintenance items as though they were
Capital Improvements. This was a slippery slope because should the City Council approve
painting a building and replacing playground swings as capital expenses, in five years grass
cuttings and leaf blowing would be submitted as necessary pass-throughs. Mr. Frate reported
that since moving into the park and prior to the federal case with ELS, things were done without
fee increases. No charges were levied for the following: street repaving for the entire park,
new street signage and exterior lighting, swimming pool heater and pipes, tennis court
resurfacing, patio equipment, repair of all sidewalks and clubhouse remodel, including interior
painting. He indicated he could list many more items that ELS had done in the past without
raising fees; however, now that the federal case appeared uncertain to them, they were seeking
creative ways to make more money. In other words, Mr. Frate stated that the normal cost of
maintaining a mobilehome park was lightly presented as Capital Improvements. He believed
the City Council would see though this disturbing ploy and decide to reject the maintenance and
repairs being called something different. He stated that once painting was deemed to be a
capital expense, he feared what would happen the next time around.
There being no further comment from the audience, Mayor Boro closed the appeal hearing and
returned the item to the City Council for discussion.
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Regarding what constituted maintenance and capital pass-through, Councilmember Miller
believed the arbitrator's decision had to be evaluated in terms of the 50% and whether it was
based on admitted evidence or litigation. The lump sum payment or spreading it out over
twelve months should also be evaluated.
Agreeing with Councilmember Miller's assessment, Councilmember Cohen stated that on the
issue of the right to pass through capital expenses, replacement or fair rate of return, he
believed the ordinance did allow for pass-through of capital expenditures and Capital
Replacement. Should pass-throughs not be allowed, he could not think of any reason why
those charges would not be added to the base rent. Instead, in the ordinance, although on this
issue there were grounds for argument, if those were not called out he might be more
persuaded the standard was a fair rate of return; however, capital expenditures were
specifically called out as not being added to the base rent. Councilmember Cohen stated the
law was pretty clear that landlords were entitled to recover capital expenses.
Regarding whether the evidence was properly submitted or not, Councilmember Cohen stated
even if it were introduced, he had two problems: 1) He did not find any basis, given his belief
that the ordinance allowed for capital pass-throughs, for the arbitrator's decision to reduce the
amount by 50%. He could not find any evidence to support why that was a reasonable cut to
make and there was the question of the issue of the efficacy of the repairs. He believed clearly
with respect to the money above and beyond the $45,000 prior to bringing in their consultant,
was spent in good faith in an effort to repair the system that was necessary for enjoyment of the
park and which the tenants would certainly expect to operate flawlessly and continuously.
Therefore, he did not believe it was up to the City Council to weigh in on the lawsuit. It did not
matter to him whether it was properly introduced or not as evidence, rather he believed the
arbitrator erred in how he attempted to apply it. Indicating this was not the standard,
Councilmember Cohen stated that at some point in the future if it could be demonstrated money
was spent that was of no benefit, perhaps this discussion could take place. However, he
believed there was no basis for determining at the outset to cut it off and he believed the
decision to do so was arbitrary and not supported by the evidence in the record.
Councilmember Cohen believed the nature of the expenditures of the $45,000 prior to engaging
a consultant was worthy of further discussion.
Regarding the issue of paint, etc., Councilmember Cohen stated Council did need to evaluate
the evidence and defer to some extent to the arbitrator's decision. Although there could be
debate on whether or not paint could be expensed, he did not believe there was a basis for
getting into the issue of the park and clubhouse. He believed testimony was provided; it had
not been appealed or addressed by either side and it appeared the standard to be used was to
allow it to stand as opposed to opening up those particular issues.
Attorney Lisa Goldfien concurred.
Councilmember Heller requested clarification on whether at this point the $174,192 qualified as
a Capital Improvement.
Councilmember Cohen stated he was inclined to uphold the appeal on that and state there was
no basis in the record for cutting that amount in half and he believed MHC's good faith reliance
on professional advice on efforts to repair the sewer system. He indicated this was where he
came down on reading through the record.
Regarding the $45,000 in expenses prior to engaging a consultant and carrying out that work,
Councilmember Cohen believed that to some extent, this involved deferring to the arbitrator's
examination of the evidence presented. He made that decision based on evidence in the record
and a certain amount of deference was owned to that.
Councilmember Cohen indicated there was one item he was pretty clear on and another he had
questions about in terms of whether or not there was evidence in the record that really
supported that decision. Regarding the $22,171.40 expenditure for sewer force main repair,
Councilmember Cohen noted that when these break, sewage spills on the ground, which was
not an acceptable condition and must be immediately repaired for continued enjoyment of the
use of the facilities, and he believed this to be a Capital Replacement. He noted that he did not
see any evidence in the record that supported the arbitrator's finding that even though at that
point they had not engaged a professional engineering contractor to support the notion that this
$22,000 was simply ordinary routine maintenance as opposed to Capital Replacement.
Therefore, at a minimum, the $22,171.40 should be added back in. The other amount referred
to an invoice from Forster Pump on the repairs to lift stations in the amount of $9,000 and
change. He believed there were a number of items within the $45,000 that did appear to fall
more on the other side of that line of ongoing maintenance that he did not believe appropriate to
deem Capital Replacement.
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SRCC Minutes (Regular) 07/17/2006 Page 23
In terms of Forster Pump, Councilmember Cohen referred to the definition of Capital
Replacement whereby a value of $5,000 or more is deemed Capital Replacement.
Councilmember Cohen referred to an issue raised in the testimony, and perhaps also in the
briefs, relating to the question of the meaning of the $5,000. Did it mean that any piece of work
had to be $5,000 or whether the value of the asset had to be at least $5,000. He indicated he
read it as the value of the asset had to be $5,000; therefore, it was not that it had to be a $5,000
bill for it even to be eligible to be considered. The pump repair in question appeared to be (the
invoice was not so clear) a rebuild of a pump, and using his metaphor of rebuilding the engine
of car, should that be what it was, it appeared to be Capital Replacement and not an expense.
Councilmember Phillips suspected it could go either way. He characterized it as capital
because of the amount. With regard to the $5,000, if the project resulted in several
expenditures equaling or exceeding $5,000, often times one would go through the process of
capitalizing and depreciating.
In reading the bill for the $22,000 for time and materials emergency work, while it was a lot of
money obviously, Mayor Boro stated that he and Councilmember Cohen sit on the Sanitary
Board and occasionally there are breaks necessitating emergency work with crews arriving in
the middle of the night to repair levies or whatever was necessary, and his experience was
there was a fund that paid for this as an expense. It was not necessarily capitalizing or buying a
new piece of equipment, rather repairing an existing piece. While he believed the remainder of
the items on the $45,000 list were primarily maintenance type items, he was wrestling with the
$22,000 item. He noted the materials amounted to approximately $4,068 with the contract work
amounting to approximately $18,000 and he invited Ms. Goldfien to expand on this.
Ms. Goldfien stated there was some testimony about the nature of the repair in the transcript
on pages 173 through 175, which she believed discussed it as perhaps starting out as an
emergency but becoming a replacement. She invited Councilmembers to read this for
clarification.
Councilmember Cohen stated his reading of the bill for $22,000 indicated approximately
$18,000 for the contract work and $4,000 time and materials for the emergency work. He noted
the testimony indicated there was a sewer line break. Raw sewage was on top of the ground
which very clearly described the system not functioning; a temporary line was placed on top of
the ground as a diversion for the force main and then the force main was replaced. Agreeing
there was a fund for emergencies, Councilmember Cohen stated he would characterize this as
being part and parcel of the replacement. He noted it was not possible to work on a force main
while in use; therefore, it had to be diverted. The line broke and a temporary line was inserted,
and from the testimony and reading of the receipt this appeared to be the emergency work.
Subsequently, the force main was replaced and the project was completed. Councilmember
Cohen stated that if engineering work, design and everything else was eligible to be folded into
capital expenditure, from other evidence and opinion given about that, he believed the
emergency diversion, which was a necessary part of a force main replacement, was eligible to
be considered as part of the cost of that Capital Replacement. Based on the evidence provided
and the testimony at hearing, he came to the conclusion that the entire $22,000 was legitimately
to be considered Capital Replacement. He commented that if engineering and planning was,
but temporary work to allow the repair was not, that was an illogical conclusion. He reiterated
that it was not possible to work on a force main when it was in operation.
Councilmember Cohen stated he believed the arbitrator erred in cutting the capital expenditure
portion by 50%. Of the $45,000, regarding the line item of $22,000, based on evidence in the
record, he believed the arbitrator erred in not considering this Capital Replacement. The force
main replacement bill for $22,000 was clearly Capital Replacement and there was a good
argument to be made that he erred on the $9,444 on the pump. He noted the evidence was not
as clear but the invoice appeared to be a list of parts sufficient to rebuild the pump. He noted
the transcript appeared to state that they rebuilt a pump which to him was Capital Replacement;
however, we was unsure on what basis the arbitrator ruled this should not be considered
capital. While it was less clear to him than the force main, the evidence he saw in the record
came down on the side of it being Capital Replacement as opposed to throwing it out, as the
arbitrator did. Councilmember Cohen believed the other items to be smaller and more routine
in nature and he would put back in the $22,000 and $9,444 as capital. He confirmed for
Councilmember Heller that he would take these out of the $45,000 and put them back into
Capital Replacement. He also confirmed he would defer to the arbitrator on the other items, the
description of which appeared to be more maintenance in nature, and was weighing
Councilmember Phillips' argument about the large scale of the work on both.
In calculating the figures, Councilmember Phillips stated in looking at the description it
appeared they were rebuilding the pump; therefore, the $9,444 was Capital Replacement and
he also agreed with Councilmember Cohen with regard to the $22,000.
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SRCC Minutes (Regular) 07/17/2006 Page 24
While some figures were not clear, Councilmember Heller agreed these two figures were clear
With regard to an earlier statement, since the City Council was reviewing the total record and
drawing a conclusion in connection with the total expenditures, Councilmember Phillips stated
he had a question relating to the playground and clubhouse. In reviewing pump improvements,
etc., regardless of the arbitrator's conclusion, in discussing capital, and simultaneously sod
replacing sand because of domestic and other animals using it, to him this was not a capital
item; therefore, he had difficulty with the conclusion and to make a decision with regard to its
nature, he still had a problem calling it capital. Similarly, with regard to the clubhouse, paint
was described by the appellant, which he would not capitalize, together with other items listed.
While he was willing to add the $9,444 and $22,000 as capital, based on the record, he
suggested that a conclusion had to be drawn to each of the components and he had difficulty in
stating these two were capital and would not include them as capital.
Attorney Lisa Goldfien stated she believed the City Council had discretion to consider this
although she did not think it incumbent on the Council to consider those issues not raised on
appeal; however, she believed Council could review the whole decision for substantial
evidence.
Councilmember Phillips suggested that the only substantial evidence available was the
characterization by both parties, which to him implied or clearly stated that these were not
capital, rather expenses.
In reading the definitions in the ordinance, Councilmember Heller stated Capital Replacement
meant substitution, replacement, construction, etc., and addressed landscaping and other
items, and that Capital Replacement costs meant all costs reasonably and necessarily related
to the planning, engineering and construction of Capital Replacement.
Councilmember Phillips stated this was taking out sand and replacing it with sod.
Councilmember Heller stated this was like landscaping.
Councilmember Phillips stated that if it were maintenance it would not qualify.
Councilmember Heller stated this was a full upgrade of a playground.
Councilmember Phillips indicated the reference to the playground was on page 2 of Mr.
Sorensen's Opening Brief.
Mayor Boro quoted: "Playground Improvements — This work involved replacing some of the
playground equipment, replacing the area around the playground with sod and other related
improvements. The costs totaled approximately $6,208.
Club House Improvements — The exterior of the clubhouse was extensively refurbished. The
work included replacing some siding, painting the exterior walls and painting the exterior metal
roof. Interior improvements included a new floor in the kitchen and office areas. The costs
totaled approximately $23,597."
Councilmember Phillips stated that the new floor could be argued; however, with regard to the
others, he suggested that to add to some of the rental units already there, he would probably
expense these. He noted some siding, painting exterior — painting was typically repairs and
maintenance — were not the types of things he would normally capitalize. The total of $29,805
he did not consider should be considered as a capital item, rather it was routine, ongoing
maintenance of the site.
Councilmember Miller believed the clubhouse improvements not to be routine maintenance;
however, the playground was questionable.
Mayor Boro believed Councilmember Phillips' point was that the nature of the work done with
the clubhouse was more ongoing maintenance than Capital Improvement — a new clubhouse
was not built, rather the existing one was refurbished. Therefore, the question was whether
refurbishing in that light was a capital item or an expense item, regardless of what the arbitrator
ruled.
Ms. Goldfien recalled that there was some testimony by Mr. Berman in the record that some of
these expenses could be seen as one type of expense in certain situations and another type of
expense in others, which she believed went to Councilmember Heller's point that there may not
be one answer that applied all the time. She believed the arbitrator was looking at the totality of
the project in arriving at his conclusion, which was valid to do, given the testimony.
Councilmember Cohen stated portions of both of these appeared to him to be Capital
SRCC Minutes (Regular) 07/17/2006 Page 24
SRCC Minutes (Regular) 07/17/2006 Page 25
Replacement in the sense that rebuilding a portion of the clubhouse and repairing a hole in the
floor was not routine maintenance, rather replacing an asset. With regard to the playground, his
understanding from the record was that old playground equipment was removed and replaced
with new, which was a replacement. Whether the paint, as a portion of the refurbishing of the
clubhouse, and the sod as opposed to the playground equipment, were replacement or routine
expenses, could make a good argument. He believed the arbitrator apparently, given the
amounts perhaps, decided that to tear up the ground and replace equipment, new sod would
have to be placed, and in doing work to repair the clubhouse, paint would be necessary, as
opposed to stating the clubhouse was painted, which was capital.
Councilmember Phillips stated that clearly the motivation by MHC was to capitalize as much as
possible, assuming they were going to be reimbursed. Therefore, some of the characterization
needed to be evaluated carefully and draw independent judgments as to whether or not some
of these items were properly characterized or not. His conclusion, based on a few years in the
business, was that these would not be capitalized.
Mayor Boro stated that in reading this, he tended to agree with Councilmember Phillips. He
indicated it appeared to him that to refurbish and repaint a building was not a capital expense,
rather an operating expense. Rebuilding, adding a room, or doing something major to the
exterior or interior was a Capital Improvement. Reading words such as "refurbish" and
"replacing sod and other improvements" to him represented the cost of keeping the place going.
Indicating her disagreement, Councilmember Heller stated she read the definition in the
ordinance over and over.
Mayor Boro commented that what the arbitrator had done was done, albeit there were some
things the City Council did not agree with him. The can of worms had been opened up and
Council had to decide.
Councilmember Miller believed the arbitrator had ample reason to make this decision, while on
other issues he did not have ample reason.
Mayor Boro confirmed that three Councilmembers believed the clubhouse and playground
improvements should remain as part of the recovery.
Regarding the $45,000, Mayor Boro noted there was some sentiment that the $22,000 was
considered capital and some sentiment that the $9,444 was considered capital.
Councilmember Miller believed both were capital.
Councilmember Cohen believed both were capital.
Councilmember Heller believed both were capital.
Councilmember Phillips stated he had identified as best he could both expense and capital and
these were the only two capital items he could identify.
Mayor Boro believed both were capital.
Total: Approximately $31,615.00.
Regarding the $87,000 that was disallowed by the arbitrator, Mayor Boro stated the question
was whether or not this should be sustained or challenged and changed.
Councilmember Miller stated he wished to challenge and change it as he believed it was based
on non -admitted evidence. It was based not in terms of the ordinance definitions, rather it was
based on the lawsuit, and these were allegations. He believed the arbitrator erred and MHC
should receive 100%.
Councilmember Cohen stated he did not find that there was any substantial evidence in the
record to support the arbitrator's decision to disallow 50% of what were acknowledged to be
capital costs.
Concurring with Councilmembers Miller and Cohen, Councilmember Heller stated she believed
the arbitrator indicated that the $174,000 qualified as a Capital Improvement; however, he then
reduced it for other reasons. She did not believe that reduction was correct.
Councilmember Phillips indicated he could find no substantiated reason for the arbitrary
disallowance of 50%. He believed there probably was a strong argument for the action taken
by MHC to do what they had to do, presumably and hopefully to make their necessary repairs;
therefore, he would not disallow that 50%.
Concurring, Mayor Boro stated he did not believe there was anything to substantiate that and as
it was allegedly, potentially, wasted work, should further work need to be done and it was
shown that this work was truly wasted, then any further recovery of this would be a take back.
SRCC Minutes (Regular) 07/17/2006 Page 25
SRCC Minutes (Regular) 07/17/2006 Page 26
At this point, he believed it was to be assumed it was there and working, absent knowing
anything to the contrary with a lawsuit pending.
Mayor Boro noted the procedure would be for staff to calculate the figures and return to the City
Council at a future meeting with Council's findings and position, for adoption.
Mayor Boro noted the remaining issue was in connection with the timeline for payment.
Councilmember Cohen stated he had been looking at the arbitrator's decision concerning the
issue of applying this on a one-time basis and creation of an undue hardship. There was
evidence in the record, and reiterated this evening, that the appellant did not borrow the
money, nor did they seek cost of capital and there also was evidence in the record of precedent
for spreading Capital Replacement out over time. He believed the appellant was entitled to
request one-time; however, it was not unreasonable for the arbitrator to make a decision to
spread it out.
Noting Council had effectively doubled the amount of Capital Replacement being allowed,
based on the evidence, Councilmember Cohen stated he was persuaded by the arbitrator's
logic about the imposition of an undue hardship and by the comments he (Councilmember
Cohen) made about precedents for spreading this out over time. He inquired of the attorneys
whether, in light of the direction in which Council appeared to be headed, it was reasonable to
expand on the arbitrator's logic and, since the City Council was, effectively doubling the capital
pass-through, to double the repayment period from twelve (12) to twenty-four months (24).
Ms. Goldfien agreed this was within Council's discretion. She indicated that the ordinance did
not prescribe any particular procedure for assessing the increases; however, it did not prohibit
the City Council from using its discretion to determine something that was reasonable to
advance the purposes of the ordinance. Should that be the most effective way to advance the
purposes of the ordinance she indicated this would be within Council's discretion.
Councilmember Heller concurred.
As an aside, Councilmember Phillips suggested that for future reference perhaps MHC should
have some discussions with residents. Noting a letter was sent, he indicated that perhaps there
was not sufficient notification regarding this issue. He concurred, particularly in light of the fact
that the residents did not offer an appeal and while it could be a tough pill to swallow,
apparently it was one that was manageable; therefore, he agreed with the extended period.
Councilmember Miller agreed with the extended period. He indicated it did affect the ordinance,
explaining that the ordinance was put in place because of the low income; therefore, this would
be beneficial to the low-income people and cause much less hardship.
Having done some rough math, Mayor Boro believed the figure would be maintained at the level
discussed in the arbitrator's original decision, except that it would be for twenty-four months
instead of twelve.
Mayor Boro noted that Councilmember Phillips mentioned it and he (Mayor Boro) raised the
point earlier, that while he could not tell anyone how to conduct their business, it would appear
to him that in undertaking major Capital Improvements it would be worthwhile to talk, explain
and provide people with an explanation of what they could expect, rather than sending a bill. In
dealing with his tenants should there be work necessary in the building, he apprises them in
advance and what the impact may or may not be, if any, on them. He suggested that both
groups work together in the future.
Addressing Mr. Ragghianti, Mayor Boro stated his understanding was that staff would put this in
a resolution to be returned to City Council as a Consent Calendar item on the agenda for
adoption.
Mr. Ragghianti stated staff would memorialize the determination of the City Council.
Mayor Boro suggested the motion be that the twenty-four month payment period and dollar
amount be finalized in the resolution as the findings of the City Council with respect to the
testimony before them and the issues they had read in all the data presented.
Councilmember Cohen moved and Councilmember Phillips seconded, the City Council found
that as the arbitrator's decision was found not to be supported by substantial evidence in the
record, the appeal be upheld with respect to Capital Improvements to the sewer system, and
found the arbitrator's 50% reduction of the allowable pass-through to be unsupported by the
administrative record. With regard to the $45,000 which the arbitrator determined to be
maintenance and repair items made prior to the engagement of a professional contractor,
Council found that the force main repair for $22,171.40 and the pump repair to lift stations of
SRCC Minutes (Regular) 07/17/2006 Page 26
SRCC Minutes (Regular) 07/17/2006 Page 27
$9,444.52, were Capital Replacement and directed they be included in the capital pass-through;
To that extent the appeal was also upheld. The arbitrator's decision that expenditures for the
playground and clubhouse were capital expenditures was upheld, and his decision to deny the
onetime payment in favor of spreading it out over time was also upheld with that logic extended
to provide for a twenty-four month repayment period rather than twelve months.
AYES: COUNCILMEMBERS: Cohen, Heller, Miller, Phillips and Mayor Boro
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
City Attorney Gary Ragghianti stated staff would attempt to present this at the Council Meeting
of August 7, 2006. He complimented Mayor Boro and the City Council on the way the hearing
was conducted, noting it made him very proud.
COUNCIL CONSIDERATION:
NEW BUSINESS:
21. CONSIDERATION OF ADOPTION OF RESOLUTIONS IN RESPONSE TO GRAND JURY
REPORT - " AGENDIZING RESPONSES TO GRAND JURY REPORTS" (CM) —
FILE 269 x 9-3-16
City Manager Ken Nordhoff reported that the City received a request from the Marin County
Civil Grand Jury regarding the need to agendize reports. The report included three separate
findings the City was required to respond to and these were listed on page 1 of the staff report.
He stated that two resolutions were prepared that codify the changes suggested. He noted that
in essence, they requested Grand Jury reports be done in an open public process setting, that
they not be placed on the Consent Calendar, rather considered as a New Business item, and
the documentation before Council reflected that. Mr. Nordhoff stated that traditionally, this had
been City practice; however, one occasion was cited in the report where this did not occur.
With Council approval this evening, staff would submit the findings to the Civil Grand Jury and
consider the matter closed.
Councilmember Heller moved and Councilmember Miller seconded, to adopt the Resolution.
a) RESOLUTION NO. 12006 — RESOLUTION APPROVING AND AUTHORIZING THE
MAYOR TO EXECUTE THE CITY OF SAN RAFAEL
RESPONSE TO THE 2005-2006 MARIN COUNTY
GRAND JURY REPORT ENTITLED "AGENDIZING
RESPONSES TO GRAND JURY REPORTS"
AYES: COUNCILMEMBERS: Cohen, Heller, Miller, Phillips and Mayor Boro
NOES: COUNCILMEMBERS: None
ABSENT: COUNCILMEMBERS: None
Councilmember Cohen moved and Councilmember Phillips seconded, to adopt the Resolution.
b) RESOLUTION NO. 12007 —
AYES: COUNCILMEMBERS:
NOES: COUNCILMEMBERS:
ABSENT: COUNCILMEMBERS:
CITY MANAGER'S REPORT:
23. None.
COUNCILMEMBER REPORTS:
RESOLUTION ESTABLISHING A PROCEDURE
FOR CITY CONSIDERATION AND ADOPTION OF
RESPONSES TO GRAND JURY REPORTS
Cohen, Heller, Miller, Phillips and Mayor Boro
None
None
24. MTA:- File 4-13-101
Councilmember Miller distributed copies of the following material to the City Council:
City of Larkspur — Policy Issue/Collection of JPA Revenues and Distribution to Towns and
Cities, signed by Mayor Larry Chu, in terms of an amendment to the JPA that provides for
delivery of the gross revenues collected on behalf of its member agencies to each individual
agency, and then invoice the individual agency annually for its share of the approved
operational and/or program costs.
SRCC Minutes (Regular) 07/17/2006 Page 27
SRCC Minutes (Regular) 07/17/2006 Page 28
MTA Memorandum — Agenda Item I: Approval of Operating and Distributed Services Plans.
MTA Memorandum — Agenda Item J: Locally Administered Cable TV Low -Income Discount.
Councilmember Miler commented that he would need instruction from Council on this item.
MTA Memorandum — Agenda Item F: AT&T Video Services, including pictures identifying
Lightspeed boxes.
Following in the steps of Larkspur, Mayor Boro suggested that this issue be agendized for a
future City Council meeting. Indicating this was an ongoing discussion item with local City
Managers, Mr. Nordhoff concurred that it should be agendized and resolved.
SMART:- File 245
Mayor Boro invited all to attend a SMART, Sonoma/Marin Area Rail Transit, hearing to take
place in the Council Chambers at City Hall on Wednesday, July 19, 2006 at 1:00 p.m. regarding
certification of the Environmental Impact Report, approving a sales tax plan and putting the
measure on the ballot.
There being no further business, Mayor Boro adjourned the City Council meeting at 11:25 p.m.
JEANNE M. LEONCINI, City Clerk
APPROVED THIS DAY OF 12006
MAYOR OF THE CITY OF SAN RAFAEL
SRCC Minutes (Regular) 07/17/2006 Page 28