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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 SRCC Minutes (Regular) 07/17/2006 Page 1 SRCC Minutes (Regular) 07/17/2006 Page 2 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. SRCC Minutes (Regular) 07/17/2006 Page 2 SRCC Minutes (Regular) 07/17/2006 Page 3 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 SRCC Minutes (Regular) 07/17/2006 Page 3 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 SRCC Minutes (Regular) 07/17/2006 Page 4 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. SRCC Minutes (Regular) 07/17/2006 Page 9 SRCC Minutes (Regular) 07/17/2006 Page 10 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. SRCC Minutes (Regular) 07/17/2006 Page 10 SRCC Minutes (Regular) 07/17/2006 Page 11 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 SRCC Minutes (Regular) 07/17/2006 Page 11 SRCC Minutes (Regular) 07/17/2006 Page 12 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. SRCC Minutes (Regular) 07/17/2006 Page 12 SRCC Minutes (Regular) 07/17/2006 Page 13 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. SRCC Minutes (Regular) 07/17/2006 Page 13 SRCC Minutes (Regular) 07/17/2006 Page 14 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 SRCC Minutes (Regular) 07/17/2006 Page 14 SRCC Minutes (Regular) 07/17/2006 Page 15 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 SRCC Minutes (Regular) 07/17/2006 Page 15 SRCC Minutes (Regular) 07/17/2006 Page 16 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." SRCC Minutes (Regular) 07/17/2006 Page 16 SRCC Minutes (Regular) 07/17/2006 Page 17 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 SRCC Minutes (Regular) 07/17/2006 Page 17 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. SRCC Minutes (Regular) 07/17/2006 Page 18 SRCC Minutes (Regular) 07/17/2006 Page 19 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 SRCC Minutes (Regular) 07/17/2006 Page 19 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 SRCC Minutes (Regular) 07/17/2006 Page 20 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. SRCC Minutes (Regular) 07/17/2006 Page 21 SRCC Minutes (Regular) 07/17/2006 Page 22 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. SRCC Minutes (Regular) 07/17/2006 Page 22 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. SRCC Minutes (Regular) 07/17/2006 Page 23 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