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HomeMy WebLinkAboutCC Resolution 12014 (Contempo Marin Appeal)RESOLUTION NO. 12014 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL GRANTING IN PART AND DENYING IN PART THE APPEAL OF MHC OPERATING LIMITED PARTNERSHIP AND EQUITY LIFESTYLE PROPERTIES, INC. FROM THE ARBITRATION AWARD ON APPELLANTS' PETITION FOR INCREASE OF RENTS AT CONTEMPO MARIN MOBILEHOME PARK, AND MODIFYING THE AWARD OF THE ARBITRATOR WHEREAS, Appellants MHC Operating Limited Partnership and Equity LifeStyle Properties, Inc. ("Appellants") are the owners and operators of the Contempo Marin Mobilehome Park ("Park") in San Rafael; and WHEREAS, San Rafael Municipal Code Title 20, known as the Mobilehome Rent Stabilization Ordinance, regulates the rents charged to tenants at the Park; and WHEREAS, on October 7, 2005, Appellants filed a petition pursuant to San Rafael Municipal Code section 20.12.050, requesting approval of a one-time rent increase of $629.24 per space at the Park, which they alleged was a pass-through to the Park tenants of $249,177.74 in capital expenditures made by Appellants for the Park's privately -owned sewer system, community clubhouse, and children's playground; and WHEREAS, pursuant to the Mobilehome Rent Stabilization Ordinance, an arbitration hearing was conducted on March 13, 2006 before a City -appointed arbitrator, at which representatives for Appellants and the Park tenants appeared to present evidence and arguments concerning the requested rent increase; and WHEREAS, following the arbitration hearing, the arbitrator awarded Appellants a rent increase of $116,902.95, equal to an increase of $295.21 per space, and ordered the increase to be assessed at the rate of $24.60 per space over 12 months; and WHEREAS, the arbitrator's award was based on the following findings: (a) All work done by Appellants to the children's playground, in the total sum of $6,208.63, qualifies as Capital Replacements within the meaning of the Mobilehome Rent Stabilization Ordinance, and should be passed through to the Park tenants. (b) All work done by Appellants to the community clubhouse, in the total sum of $23,597.88, qualifies as Capital Replacements within the meaning of the Mobilehome Rent Stabilization Ordinance, and should be passed through to the Park tenants. (c) Work in the total sum of $45,178.33 performed on the Park's sewer system prior to the hiring of SI Utility Group to perform a comprehensive upgrade of the system, was work in the nature of ordinary maintenance and repair to the system, and should not be passed through to the Park tenants. (d) Work in the total sum of $174,192.90 performed on the Park's sewer system after the hiring of SI Utility Group is properly classified as Capital Replacement work within the meaning of the Mobilehome Rent Stabilization Ordinance. (e) Applying the standards of reasonableness applicable to rent increases under the Mobilehome Rent Stabilization Ordinance, Appellants should only be permitted to pass through to the Park tenants one-half (1/2) of the $174,192.90 in Capital Replacements to the sewer system, or $87,096.46, on the basis that the Las Gallinas Valley Sanitary District contends in a pending lawsuit against Appellants that the sewer system as it is functioning is a public nuisance, which if true would constitute a violation of San Rafael's Planning Code and Housing Code. WHEREAS, Appellants filed a timely appeal from the arbitrator's award on April 25, 2006; and WHEREAS, the City Council conducted a hearing on Appellants' appeal on July 17, 2006; and WHEREAS, the City Council has reviewed the record of proceedings before the arbitrator, and has received and considered written and oral arguments from the parties to the appeal; and WHEREAS, the City Council makes the following findings based upon the evidence set forth in the record of proceedings herein: A. The arbitrator abused his discretion in finding that expenditures totaling $45,178.33, for work performed on the Park's sewer system prior to the hiring of SI Utility Group, were for ordinary maintenance and repair work, as that finding is not supported by substantial evidence in the record. Specifically: 1. The record shows that the payment of $22,171.40 made on April 13, 2004 to Linscott Engineering was for work described on the receipt as "sewer force main repair." Park Manager Bill Reames testified that this expenditure arose from a break in the sewer force main at the Park which had resulted in the deposit of raw sewage on the ground. The work included construction of a temporary line to bypass the broken main, and engineering and construction of a repair to the sewer main. The Council finds that because of the amount of this invoice, and because this work was essential to maintaining an operating sewer system, and therefore benefited the Park and its tenants, it meets the definition of "Capital Replacement" work in the Mobilehome Rent Stabilization Ordinance. The record shows it was treated as such by Appellants, and there is no evidence in the record to support the arbitrator's finding that this work was for ordinary maintenance and repair. 2. The record shows that the payment of $9,444.52 made on May 6, 2004 to Forster Pump & Engineering was for work described as "repairs to lift stations," and the 2 testimony of Bill Reames indicated that the work was for a pump breakdown, and included parts for a pump. The Council finds that because of the amount of this invoice, and because this work was essential to maintaining an operating sewer system, and therefore benefited the Park and its tenants, it meets the definition of "Capital Replacement" work in the Mobilehome Rent Stabilization Ordinance. The record shows that it was treated as such by Appellants, and there is no evidence in the record to support the arbitrator's finding that this work was for ordinary maintenance and repair. 3. The record does contain substantial evidence to support the arbitrator's conclusion that the remaining $13,562.41 expended for the sewer system was for work that should be considered as ordinary maintenance and repair. The invoices for this work, and the testimony of Bill Reames concerning the nature of the work performed, indicate that this work, which included replacing belts, cleaning pump stations, checking valves, and clearing obstructions in pumps and sewer lines, was of a type that would be a regular part of operating the sewer system. B. The arbitrator abused his discretion in finding that Appellants are maintaining a sewer system that is a public nuisance, that the public nuisance is a violation of San Rafael City codes, and that such public nuisance justifies disallowing a pass-through of one-half (1/2) of Appellants' capital expenditures on the sewer system, as those findings are not supported by substantial evidence in the record. Specifically: 1. The arbitrator concluded that evidence of the pending lawsuit between Appellants and the District supported a finding that it is uncertain that the capital expenditures for the sewer system had corrected the violation asserted by the District or benefited the Park tenants. The Appellants argue that this evidence was improperly admitted by the arbitrator after the arbitration hearing. However, the City Council finds that evidence concerning a pending lawsuit, whether or not properly admitted, cannot be deemed to be substantial evidence, since the allegations of the lawsuit, which are contested by Appellants, have not yet been adjudicated. There is no other evidence in the record indicating that the sewer system is creating a nuisance, or that the sewer system is otherwise in violation of any San Rafael City codes. The testimony of Mr. Voss indicates that his company SI Utility Group was hired to inspect and analyze the Park's sewer system and to design and implement changes to the sewer system that would respond to a compliance order issued by the District; that SI Utility Group did prepare a proposal; that the proposal was approved by the District; that the proposed work was completed; and that an additional remedy approved by the District, the installation of chlorine pumps, was also performed. The evidence in the record as a whole contains no substantial evidence that the repairs and replacements to the system have not been successful and beneficial to the Park. 2. There is no basis in the record for the arbitrator's finding that the pass- through of capital expenditures on the sewer system should be reduced by one-half (1/2). The Mobilehome Rent Stabilization Ordinance allows a park owner to pass through to park tenants the cost of expenditures which qualify as Capital Improvements or Capital Replacements. The arbitrator's finding that Appellants had made expenditures totaling $174,192.90 for Capital Replacements in the Park, but that the permitted pass-through should be reduced by one-half (1/2) to $87,096.46, was based solely on his finding that the sewer system is a public nuisance. Since there was no evidence in the record to support this finding, the Council finds that the pass - 3 through of all of Appellants' expenditures for Capital Improvements or Capital Replacements should have been allowed in full, and that the arbitrator abused his discretion in reducing the pass-through by one-half (1/2). C. The arbitrator's decision to deny Appellants' request to pass through the rent increase as a one-time increase, and to require the increase to be spread over 12 months at the rate of $24.60 per month per space, was within the reasonable discretion of the arbitrator. Citing evidence in the record that the current monthly rent in the Park is $650 per space, the arbitrator found that the one-time rent increase requested by Appellants would cause an unreasonable hardship on at least some of the Park tenants. Appellants' CFO Michael Berman testified that Appellants had not incurred specific costs to finance these Park improvements, and Appellants did not request or present evidence of any costs of capital incurred. The City Council finds that the arbitrator's decision was supported by substantial evidence in the record as a whole, including the Mobilehome Rent Stabilization Ordinance itself, which provides that the primary purpose of the Ordinance is to protect mobilehome park tenants from arbitrary, capricious or unreasonable rent increases while insuring that the park owner obtains a fair and reasonable return on its investment; and WHEREAS, pursuant to San Rafael Municipal Code section 20.12.100, if the final arbitration award is eighty percent (80%) or more of the increase requested by Appellants, not previously granted by the arbitrator, then, in addition to any rent increase allowed, Appellants shall be permitted to pass the costs of the arbitration, in the amount of $7,501.00, through to Park tenants spread over a one (1) year period. NOW THEREFORE, IT IS HEREBY RESOLVED by the Council of the City of San Rafael that Appellant's appeal of the amount of the rent increase to be allowed is granted in part and denied in part, and the arbitrator's award is modified as follows: 1. Appellants are hereby authorized to pass through to the Park tenants 100% of the costs of all expenditures found to be Capital Improvements or Capital Replacements, in a modified total amount of $235,615.33, detailed as follows: Amount awarded by arbitrator for playground: Amount awarded by arbitrator for clubhouse: Award for sewer, as adjusted to include expenditures of $22,171.40 to Linscott Engineering and $9,444.52 to Forster Pump & Engineering: $205,808.82 Total: $235,615.33 $ 6,208.63 $ 23,597.88 2. Appellants are not authorized to pass through to the Park tenants the cost of work attributable to ordinary maintenance and repair to the sewer system, in a modified total amount of $13,562.41, detailed as follows: ■ Amount excluded by arbitrator: $ 45,178.33 ➢ Less: Capital expenditures to Linscott Engineering -$ 22,171.40 ➢ Less: Capital expenditures to Forster Pump & Eng. -$ 9,444.52 Total: $ 13,562.41 4 BE IT FURTHER RESOLVED that the Appellants' appeal of the arbitrator's finding that increased rent should be paid over 12 months at the rate of $24.60 per space rather than as a lump sum is hereby denied, and consistent with that finding, the arbitrator's award is hereby modified to require the adjusted rent increase to be assessed over 24 months at the rate of $24.79 per month per space. BE IT FURTHER RESOLVED that because the adjusted arbitration award is in excess of 80% of the rent increase requested, Appellants shall also be permitted to pass through the costs of the arbitration herein, in the sum of $7,501.00, to the Park tenants over a 12 -month period, at the rate of $1.58 per month per space. BE IT FURTHER RESOLVED that, pursuant to section 20.08.010 of the Mobilehome Rent Stabilization Ordinance, this increase shall not be included in the base rent or in the calculation of annual CPI rent adjustments. BE IT FURTHER RESOLVED that this decision is final upon the Council's adoption of this Resolution and that the time within which to seek judicial review of this decision is governed by the provisions of California Code of Civil Procedure section 1094.6. I, JEANNE M. LEONCINI, Clerk of the City of San Rafael, hereby certify that the foregoing Resolution was duly and regularly introduced and adopted at a regular meeting of the Council of said City on August 7, 2006 by the following vote, to wit: AYES: COUNCILMEMBERS: Hel l er, Mi 11 er, Phi 11 i ps and Mayor Boro NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: Cohen 5 JEkNTNE M. LEONC , City Clerk