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HAC Minutes-2005-10-0532400 PASEO ADELANTO (949) 493- 1 17 1 (949) 493- 1053 FAX SAN JUAN CAPISTRANO. CA 92675 11 bVM' sanJliUt1Cupl~lYii17~) 0t.g MEMBERS OF THE CITY COUNCIL SAM ALLEVATO DIANE BATHGATE WYATT HART JOE SOT0 DAV'D M SWERDLIN OCTOBER 5,2005 MINUTES OF THE SPECIAL MEETING OF THE HOUSING ADVISORY COMMITTEE OF THE CITY OF SAN JUAN CAPISTRANO, CALIFORNIA The Meeting of the Housing Advisory Committee of the City of San Juan Capistrano, California, was called to order by Chairperson Ratcliffe at 7:02 p.m. in the Council Chambers. ROLL CALL PRESENT: Gene Ratcliffe, Chairperson Marie Buckner, Committee Member Joann deGuevara, Committee Member Joanne Marquez, Committee Member David Nahas, Committee Member ABSENT: None STAFF PRESENT Omar Sandoval, Deputy City Attorney, and Elizabeth White, Recording Secretary. ORAL COMMUNICATIONS - None ADMINISTRATIVE ITEMS 1. CAPISTRANO TERRACE MOBILE HOME PARK RENT INCREASE APPLICATION DATED JUNE 14,2005 DENIED. Omar Sandoval, Deputy City Attorney, summarized the staff report. The Residents of Capistrano Terrace Mobile Home Park on June 14, 2004 petitioned the City to review the Park Owners' notice of rent increase, which sought to increase rent by $51.74 per space commencing on September 1 , 2004. The Park Owners proposed to apply the increase incrementally upon the Residents, at the anniversary date of each Resident's lease, to pass through increased property tax and insurance costs. A majority of the Residents protested the increase in writing, therefore, the City was required to conduct a hearing to review the proposed increase. Son Jiran Capistr-ano: Preserving the Past to Enhame the F'zitirrc - Housing Advisory Committee Minutes October 5,2005 Page 2 The hearing procedure required that a Hearing Officer be appointed to make a recommendation on the matter. In addition to the Hearing Officer, a neutral CPNFinancial Expert was hired to review the financial information produced at the evidentiary hearings with respect to the “fair rate of return” analysis required by the Rent Control Ordinance. In 1. 2. 3. 4. 5. summary, the Hearing Officer determined in her report that: The City’s Rent Control Ordinance requires a fair rate of return analysis, and that such analysis is a matter of expert opinion. The neutral Financial Expert calculated the park’s rate of return at 6.271%, which in his opinion was a fair rate of return. Although the Park Owners documented increases in property taxes and insurance costs, the Hearing Officer and Financial Expert concluded that other booked expenses were discretionary expenses and not well documented. The Hearing Officer and Financial Expert further determined that such costs were not properly included in a “return on investment” analysis. Accordingly, the Hearing Officer did not accept the Park Owners’ contention that they had sustained a substantial negative cash flow, or that such a negative cash flow alone would support a rent increase under the Rent Control 0 rd ina nce. The park realized a fair rate of return. The proposed rent increase is unfair and unjust. Staff is recommending the Committee review the findings of the Hearing Officer and any additional arguments of the parties and forward a recommendation to City Council. Chair Ratcliffe opened the public hearing. Public Testimony: Ray Poulter, 22974 El Tor0 Road, Lake Forest represented the Park Owners. Mr. Poker felt that while the Hearing Officer was fair, the Rent Control Policy of the City is unjust. He reported that the Park Owners took care to improve management of the park and this involved higher costs. Had these costs been taken into consideration, the “fair rate of return” would be lower. Mr. Poulter felt that the Hearing Officer relied too heavily on the report of the Financial Expert. The park owners are not fighting the city’s rent control policies. They are just proceeding under the ordinance because they felt the rent increase was warranted. He also relayed to the Committee that the owners are prepared to repay the rent increase back to the residents if that is the final decision. Marilla Hamor, Capistrano Mobile Home Park resident, expressed her agreement with the City’s policies on rent control and the findings reported by the Hearing Officer. She felt that the owners knew what property taxes they would be responsible for when they bought the park and these costs should not be passed Housing Advisory Committee Minutes October 5,2005 Page 3 through to the residents. Ms. Hamor commented on the lack of management, violations by the park owners, and unresolved issues in the park. Vickie Talley, representing the Manufactured Housing Educational Trust, 25241 Paseo De Alicia Suite 120, Laguna Hills, disagreed with the findings of the Hearing Officer and the City’s rent control policies. Ms. Talley reported that the rate of return for the owners is not the norm for the industry. She feels that the City should not be able to regulate the amount a business charges for its services and that the City’s rent control policies are unjust. Bill Palmer, Capistrano Mobile Home Park resident, agreed with the findings of the Hearing Officer and the City’s policies on rent control. Mr. Palmer felt that the return the park has received since it was purchased was exactly what was expected. He also commented that the rent control policies were adopted by the City many years ago and they have worked since then. Stacy Hanson, Capistrano Mobile Home Park resident, agreed with the findings of the Hearing Officer but questioned the information reported. Ms. Hanson felt that many of the issues and relevant information she reported to the Hearing Officer were not included in the record. She feels the Park Owners do not meet the expectations of the residents. Sally Garibaldi, Capistrano Mobile Home Park resident, thanked staff for all their hard work and expressed her agreement with the findings of the Hearing Officer. Ms. Garibaldi felt that the residents made an investment in affordable housing and should be protected. Harry Mallard, Capistrano Mobile Home Park resident, feels that there is a lot less maintenance for the park owners than an apartment building and that the residents incur more of their own home upkeep costs. Mr. Mallard agrees with the rent control policies and supports the findings of the Hearing officer. Martina Gregory, Capistrano Mobile Home Park resident, thanked staff for their time and effort. Ms. Gregory loves the park and agrees with the rent control policies and the findings of the Hearing Officer. Chair Ratcliffe closed the public hearing. Committee Discussion The Committee members agreed that the fair rate of return reported by the financial expert was adequate and fair, that the ordinance clearly defined the instances in which rent increases are allowed, and the park owners should be required to pay the excess rent back to the residents in a lump sum within 30 days of the Council’s adoption of the Hearing Officer’s findings. Housing Advisory Committee Minutes October 5,2005 Page 4 Committee Action: Moved by Committee Member Marquez, seconded by Committee Member Buckner, and carried unanimously, 5-0, to forward to the City Council a recommendation to find that the Hearing Officers conclusions are correct and to direct the park owners to pay back the residents any excess rent collected in a lump sum within 30 days of approval. ADJOURNMENT There being no further business before the Commission, Chair Ratcliffe adjourned the meeting at 8:06 p.m. Respectfully submitted, Lyhette Adolphson, Secretary APPROVED: March 22,2006 _- I