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
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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 -
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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
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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
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JEkNTNE M. LEONC , City Clerk