Resolution Number 16-10-17-01RESOLUTION NO. 16-10-17-01
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN JUAN
CAPISTRANO, CALIFORNIA, DENYING A REQUESTED $403 PER
MONTH RENT INCREASE AND APPROVING AN INCREASE WITHIN EL
NIDO MOBILE ESTATES OF NOT TO EXCEED 0.9% APPLIED TO EACH
UNIT (RANGING FROM $5.09 TO $10.14 PER MONTH) INACCORDANCE
WITH SECTION 2-2.902(D)(2) OR $9.50 PER MONTH FOR EACH UNIT,
WHICHEVER IS GREATER, SUBJECT TO THE REMOVAL OF A
REIMBURSEMENT AMOUNT OF $4.75 PER MONTH FOR LEGAL &
ACCOUNTING EXPENSES AFTER FIVE YEARS, LOCATED IN EL NIDO
MOBILE ESTATES AT 27703 ORTEGA HIGHWAY IN ACCORDANCE WITH
SECTION 2-2.902(D)(2) (ASSESSOR PARCEL NUMBER: 650-621-01) (EL
NIDO MOBILE ESTATES)
Whereas, EI Nido Estates, LLC ("Park Owner") is the owner of real property
located at 27703 Ortega Highway (APN: 650-621-01) (the "Park"); and,
Whereas, on or about May 24, 2016, the Park Owner notified the residents of
the Park of a proposed rent increase in the amount of $403 per month, applicable to all
spaces within the Park, with a proposed effective date of September 1, 2016; and,
Whereas, on June 8, 2016, Thomas Perrin, EI Nido Estates Steering
Committee Chairperson, 27703 Ortega Highway, Space 151, San Juan Capistrano, CA
92675, submitted to Laura Stokes, Secretary to the Housing Advisory Committee, a valid
petition and a $500 deposit, opposing the proposed $403 rent increase, in accordance with
the San Juan Capistrano Municipal Code Section 2-2.903; and,
Whereas, upon being notified of the complete petition and deposit received
by the City and the requirements of the San Juan Capistrano Municipal Code Section 2-
2.903 having been met, Richard Worley of EI Nido Estates, L.L.C. provided a $500 deposit
on June 16, 2016, from Coldren Law Offices; and,
Whereas, the City Council appointed Hearing Officer, Michael Roush, to
conduct a rent review hearing for a recommendation to the Housing Advisory Committee
and City Council as to the propriety of the proposed rent increase in light of the non-
exclusive criteria set forth in Municipal Code Section 2-2.903(g); and,
Whereas, the proposed rent increase has been processed pursuant to
Municipal Code Sections 2-2.901 through 2-2.904, including a duly -noticed hearing before
the Hearing Officer on August 2, 2016, and August 25, 2016, at which time all affected
parties wishing to be heard were afforded an opportunity to present evidence and
arguments; and,
Whereas, on September 10, 2016, the Hearing Officer has rendered a 31
page determination concluding that the proposed rent increase exceeds the "maximum
allowable increase" permitted by Municipal Code Section 2-2.902(d) and is not required in
order for the Park Owner to receive a fair, just, and reasonable return on the property; and,
Page 1
10-17-2016
Whereas, on September 29, 2016, the Housing Advisory Committee
conducted a duly noticed hearing, at which time all affected parties wishing to be heard
were afforded an opportunity to be heard and present oral or written arguments; and,
Whereas, the Housing Advisory Committee, having duly considered the
Hearing Officer's findings and conclusions as well as the administrative record before them
(but, did not receive or consider any additional evidence), voted unanimously to
recommend to the City Council that the Hearing Officer's conclusions, findings, and
recommendations be recommended to the City Council for approval; and,
Whereas, the Housing Advisory Committee's review was limited to the written
record, consisting of the evidence received by the Hearing Officer, written arguments of the
parties, the findings of the Hearing Officer, other relevant matters as compiled by the
secretary of the Committee, and additional oral or written arguments the parties made, but
the Committee did not receive or consider any additional evidence; and,
Whereas, on October 17, 2016, the City Council conducted a duly -noticed
public hearing, to review the findings of the Hearing Officer and the recommendations of
the Housing Advisory Committee, including the administrative record, at which time the
affected parties were afforded an opportunity to address the City Council; and,
Whereas, the City Council has not reopened the hearing for purpose of
receiving any new evidence.
NOW, THEREFORE, BE IT FURTHER RESOLVED, as follows:
SECTION 1. The City Council, after due consideration of the evidence
provided by the parties concerning the Hearing Officer's findings, conclusions and
recommendations, and the Housing Advisory Committee's recommendation, and the
administrative record on October 17, 2016, hereby accepts and adopts the findings and
conclusions of the Hearing Officer, as set fourth in Exhibit A, attached hereto and
incorporated fully by reference herein. The City Council finds that the proposed $403 per
month rent increase is not necessary in order for the Owner to receive a fair, just, and
reasonable rate of return on the property, as determined by the Hearing Officer, and shown
on pages 12-18 of the Hearing Officer's recommendation. The City Council adopts and
incorporates herein by reference all of the analyses, findings, and conclusions contained
within the Hearing Officer's findings, conclusions and recommendations, in support of the
City Council's conclusion to deny the proposed rent increase of $403 per month for each
unit in the EI Nido Mobile Estates at 27703 Ortega Highway. This resolution, including the
findings adopted and incorporated by reference herein, shall constitute the City Council's
written findings, as required by Municipal Code section 2-2.903(e).
SECTION 2. The City Council, after due consideration of the Mobile Home
Rent Control process conducted in accordance with Municipal Code Section 2-2.903 and
the fee reimbursement in accordance with Municipal Code Section 2-2.904, determines
that the Owner shall be responsible for full $1,000 administrative fee, and the $500 deposit
received from EI Nido Estates Steering Committee shall be reimbursed. In accordance
Page 2 10-17-2016
with Municipal Code section 2-2.904(c), the Owner shall remit to the City the amount of
$500, within thirty (30) days following the effective date of this resolution.
SECTION 3. The City Council, after due consideration of the findings,
conclusions and recommendation of the Hearing Officer, as adopted and recommended by
the Housing Advisory Committee regarding the "maximum allowable increase" in
accordance with Municipal Code Section 2-2.902(d) and the "fair, just and reasonable
return" in accordance with 2-2.903(g), and approves of a rent increase within EI Nido
mobile Estates at 27703 Ortega Highway of not to exceed 0.9% applied to each unit's rent
(ranges from $5.09 to $10.14 per month) in accordance with Section 2-2.902(d)(2) or $9.50
per month for each unit, whichever is greater, as determined by the Hearing Officer, and
shown on pages 10-18 of the recommendation, effective as of September 1, 2016;
provided however, that effective as of September 1, 2021 said greater amount shall be
reduced b 4.75 per month for each unit representing the amortized cost of legal and
accounting expenses.
SECTION 4. The City Council, after due consideration of the Municipal Code
Section 2-2.903(f), determines that any and all rent increases collected by the Owner from
any resident (past or present) pursuant to the proposed rent increase notices subject to this
rent review process, in excess of the above-mentioned increase within EI Nido Mobile
Estates at 27703 Ortega Highway of not to exceed 0.9% applied to each unit's rent (ranges
from $5.09 to $10.14 per month) in accordance with Section 2-2.902(d)(2) or $9.50 per
month for each unit, whichever is greater, shall be returned by the Owner to said residents.
Said payment shall be made by Owner to the residents within thirty (30) days following the
effective date of this resolution.
SECTION 5. Staff has evaluated the proposed rent increase with respect to
applicability of the California Environmental Quality Act ("CEQA") (Pub. Res. Code,§ 21000
et seq.: "CEQA") and the State CEQA Guidelines (Cal. Code Regs., tit. 14, § 15000 et
seq.) and determined that the City's approval of an increase within EI Nido Mobile Estates
at 27703 Ortega Highway of not to exceed 0.9% applied to each unit's rent (ranges from
$5.09 to $10.14 per month) in accordance with Section 2-2.902(d)(2) or $9.50 per month
for each unit, whichever is greater, and denial of the requested $403 per month rent
increase does not constitute a "project" for purposes of CEQA and is exempt from further
CEQA review on multiple grounds, each of which individually and wholly applies to the
City's action.
First, the proposed rent increase does not constitute a "project" and is exempt from further
CEQA review under State CEQA Guidelines section 15378(b)(4), which exempts
government fiscal activities which do not involve any commitment to any specific project
which may result in a potentially significant physical impact on the environment. Here, the
City's approval of an increase within EI Nido Mobile Estates at 27703 Ortega Highway of
not to exceed 0.9% applied to each unit's rent (ranges from $5.09 to $10.14 per month) in
accordance with Section 2-2.902(d)(2) or $9.50 per month for each unit, whichever is
greater, and denial of the requested $403 per month rent increase, constitutes a fiscal
1 Added by City Council motion, September 17, 2016, based on the Hearing Officer's Conclusion #8 (on page 18)
and Findings in support thereof contained in the Hearing Officer's Findings, Conclusions and Recommendations.
Page 3 10-17-2016
activity on the part of the City, but does not approve a particular project, and has no
potential to result in a physical impact on the environment.
Second, the proposed rent increase does not constitute a "project" and is also exempt from
further CEQA review under State CEQA Guidelines section 15378(b)(5), which exempts
organizational or administrative activities of governments that will not result in direct or
indirect physical changes in the environment. Because the proposed rent increase within
EI Nido Mobile Estates at 27703 Ortega Highway of not to exceed 0.9% applied to each
unit's rent (ranges from $5.09 to $10.14 per month) in accordance with Section 2-
2.902(d)(2) or $9.50 per month for each unit, whichever is greater, and the denial of the a
rent increase of $403 per month, is an administrative action of the City, and because there
is no potential for a rent increase to result in physical changes to the environment, the
City's action does not require further environmental review under CEQA.
SECTION 6. This resolution shall be effective immediately upon its adoption,
and shall constitute the City's final administrative determination for these administrative
proceedings, subject only to judicial review as set forth in California Code of Civil
Procedure and all applicable law.
PASSED, APPROVED, AND ADOPTED this 17th day of October 2016.
ATTEST:
(A (-�- -AP ,-
ARIA MOR I CITY CLERK
Page 4 10-17-2016
STATE OF CALIFORNIA )
COUNTY OF ORANGE ) ss.
CITY OF SAN JUAN CAPISTRANO )
I, MARIA MORRIS, appointed City Clerk of the City of San Juan Capistrano, do hereby
certify that the foregoing Resolution No. 16-10-17-01 was duly adopted by the
City Council of the City of San Juan Capistrano at an Adjourned Regular meeting thereof,
held the 17t" day of October 2016, by the following vote:
AYES: COUNCIL MEMBERS: Reeve, Perry, Allevato, and Mayor pro tem Ferguson
NOES: COUNCIL MEMBERS: None
ABSENT: COUNCIL MEMBERS: Mayor Patterson
\ fa
RI City Clerk
Page 5 10-17-2016
Exhibit A
Hearing Officer's Findings, Conclusions and Recommendation
Page 6 10-17-2016
Michael H. Roush
Attorney at Law
5571 Corte Sierra
Pleasanton, CA 94566
925-876-7525
mhrjgRat@comcast.net
September 10, 2016
Jeffrey Ballinger
City Attorney
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Re: In Re EI Nido Mobile Home Estates
Dear Mr. Ballinger,
As provided under Section 2-2.903 (c) of the San Juan Capistrano Municipal Code, please find attached
the Hearing Officer's Findings, Conclusions and Recommendations as to the propriety of the rent
increase in the above entitled matter. As you indicated, I am also sending a copy of the document to the
attorneys who represented the parties in this matter. If you need an original of the attached, please
advise and I will mail it to you. Thank you for your attention to this matter.
T
Michael H. Roush
Hearing Officer
Bruce Stanton, w/attachment
Robert Coldren, w/attachment
Daniel Rudderow, w/attachment
CITY OF SAN JUAN CAPISTRANO
ADMINISTRATIVE HEARING UNDER ARTICLE 9 OF THE SAN JUAN CAPISTRANO MUNICIPAL CODE
IN RE EL NIDO MOBILE HOME ESTATES )
)
Residents of EI Nido Mobile Home Estates,
Petitioners, )
)
and )
)
EI Nido Estates, LLC, )
)
Remadent. )
Introduction
HEARING OFFICER'S FINDINGS,
CONCLUSIONS AND RECOMMENDATIONS
Following the Hearing Officer's threshold determination that a $403 per month rent increase at the EI
Nido Mobile Home Estates would exceed the maximum allowable increase under the rent control
ordinance of the City of San Juan Capistrano, the hearing on the above entitled matter was conducted
on August 25, 2016. Bruce Stanton of the Law Offices of Bruce Stanton represented Petitioners, the
residents of EI Nido Mobile Home Estates ("the Residents"). Robert S. Coldren of the Coldren Law
Offices and Daniel Rudderow of the Rudderow Law Group represented Respondent EI Nido Estates, LLC,
the park owner ("the Park Owner"). Jeffrey Ballinger, City Attorney of the City of San Juan Capistrano,
represented the City of San Juan Capistrano ("the City"). Michael H. Roush, Attorney at Law, was the
Hearing Officer, appointed by the City Council of the City,
As will be discussed in more detail below, the Park Owner voiced timely objections concerning this
proceeding including (a) the Hearing Officer should be disqualified because of unacceptable bias, (b) the
proceeding was premature, (c) there were procedural irregularities with the City's petition process and
(d) the Hearing Officer failed to follow the City Ordinance in calculating the maximum allowable
increase. The Hearing Officer noted those and all objections for the record and all such objections have
been preserved. Several witnesses, including three expert witnesses, testified at the hearing and the
parties introduced numerous exhibits. Over various objections as to many of the exhibits by the
Residents and the Park Owner (which objections have also been preserved), the Hearing Officer
admitted all the exhibits into evidence. In addition, the parties stipulated that the record of proceedings
from 2015 that also involved a proposed rent increase at the Park would be part of this proceeding as
well ("the 2015 Proceedings"). At the conclusion of the hearing on August 25, the Hearing Officer closed
the evidentiary portion of the proceeding. The parties submitted closing briefs on September 1, 2016.
Backgrgund
The City has adopted a Mobile Home Rent Control Ordinance ("the Ordinance"), codified in Article 9 of
City of San Juan Capistrano Municipal Code ("SJCMC"). The San Juan Capistrano City Council first
1
adopted the Ordinance in 1980 and Councils, over time, have amended the Ordinance in various ways
and for various reasons. See, for example, Gregory v. City of San Juan Capistrano (1983)142 Cal. App. 3d
72, 77 (overruled in Fisher v. City of Berkeley (1984) 37 Cal.3d 644, 716. The current Ordinance sets
forth findings that provide there is a shortage of locations for mobile home spaces within the City and
the surrounding areas, resulting in a low vacancy rate and rising space rents; mobile home owners have
invested substantial sums In their mobile homes; alternative sites to relocate a mobile home are difficult
to find and moving and reinstalling a mobile home are expensive; and, accordingly, it is necessary to
protect the residents of mobile homes from unreasonable space rent increases while recognizing the
need for park owners to receive a fair, just and reasonable return. Section 2-2.901, SJCMC.
The Ordinance also provides for a petition and hearing process regarding rent increases. Section 2-
2.903, SJCMC. Under that process either the park owner or the residents who reside in the park and
represent more than fifty percent of the inhabited spaces within the park may file with the secretary a
written petition concerning a proposed or actual increase in rent. Upon a timely filing of such petition, a
Hearing Officer (chosen by the City Council) Is to conduct a hearing. Section 2-2.903 (a), SJCMC.
The Ordinance sets forth a two-step process concerning the hearing. First, the Hearing Officer is to
conduct an investigation to determine if the rent increase exceeds the "maximum allowable Increase" as
that term is defined in the Ordinance. If the Hearing Officer concludes the rent increase exceeds the
maximum allowable increase, the Hearing Officer is to continue to conduct the hearing by receiving all
relevant evidence for the purpose of rendering findings and conclusions as to the propriety of the rent
increase In accordance with non-exclusive criteria set forth in another section of the Ordinance. Section
2-2.903 (b), SJCMC.
The Hearing Officer's findings and conclusions (referred sometimes in the Ordinance as
"recommendations") shall not be binding and, as provided in the Ordinance, are to be reviewed first by
the City's Housing Advisory Committee ("the Committee"). Section 2-2.903 (c) and (d), SJCMC.
Following the Committee's review of the Hearing Officer's findings and Conclusions, the Committee
makes its own recommendation to the City Council as to the propriety of the rent increase. The City
Council then reviews the findings and conclusions of the Hearing Officer and the Committee's
recommendations and affirms, modifies or reverses the rent increase; in no case, however, may the
Council require a reduction lower than the maximum allowable increase. Section 2-2.903 (e), SJCMC.
The purpose of the review of the rent increase is to determine whether the increase is, or is not, fair and
reasonable and, in conducting such review, the Hearing Officer, the Committee and the City Council are
to consider all relevant factors including, but not limited to, a park's operating expenses, such as
Increased or decreased costs attributable to utility rates, properly taxes, insurance, advertising,
governmental assessments, cost of living increases, normal repairs and maintenance, certain capital
improvements, amenities for services, as well as a "fair rate of return on the property". Section 2-2.903
(g)(1)(2), SJCMC.
The Ordinance sets forth separately the criteria for determining a "fair rate of return on the property"
but the Ordinance admonishes that all the provisions of the Ordinance are to be applied with the overall
purpose of eliminating the imposition of excessive rents but at the same time providing park owners
with a just and reasonable return on property. Section 2-2.903 (g)(3)(i), SJCMC. In addition, the
reasonableness of a rent increase Is not to be determined solely by the application of a fixed or
mechanical accounting formula, such as return of investment. Section 2-2.903 (g)(3)(0), SJCMC.
Moreover, the fair rate of return on property is only one of the non-exclusive factors in determining the
2
fairness of the rent Increase; it is to be given weight but not to dominate other relevant criteria. Section
2-2.903 (g)(3)(iii), SJCMC.
The Hearing Officer, the Committee and the Council are to consider impartially all relevant evidence in
relation to the application of the non-exclusive criteria and the extent to which the criteria are
considered, i.e., the weight given to any one of the criteria is within the wisdom and judgment of the
Hearing Officer, the Committee and the Council. Section 2-2.903 (g)(3)(iv), SJCMC.
Finally, the Ordinance states that in conducting the review process, the Hearing Officer, the Committee
and the Council should be guided from leading California case law decisions that address rent control,
particularly those cases that deal with mobile home rent control issues. [The Ordinance then lists
several cases, largely dating from the mid 1980's, discussed later.] Section 2-2.903 (g)(3)(v). SJCMC.
EI Nido Mobile Homes Estates ("the Park") is a mobile home park located at 27703 Ortega Highway
within the City and therefore rent increases in the Park are subject to the Ordinance. The Park Owner
owns the Park; Richard Worley is the managing partner and, for all Intents and purposes, makes the
business decisions concerning the Park. The Park was purchased in 2009 for $13,500,000. Respondent's
Exhibits ( "Resp. Ex. or Us!') 1-9. The Park has 154 spaces but "rent" is paid on only 153 spaces. (Park
managers occupy one space and hence do not pay rent as such.) See Resp. Ex. 27. Monthly rents within
the Park vary and, as of May 2016, ranged from a low of $565.81 to a high of $1127.05. Resp. Ex. 27.
Procedural Histo
In May 2016, the Park Owner served on the Residents a notice of a rent increase. Resp. Ex. 23. The
notice provides that effective September 1, 2016, each Resident's monthly space rent would increase by
$403.
On June 8, 2016, the Residents filed with the City a protest petition concerning the $403 monthly
increase. Resp. Ex. 24. They also deposited with the City a $500 deposit as required by the Ordinance
(Section 2-2.904 (b), SJCMC). Resp. Ex. 24. They filed the petition with (and gave the deposit to) Laura
Stokes, an employee of the City. Resp. Ex. 24. Ms. Stokes determined the petition bore the names of
persons who resided in the Park and represented more than 50% of the inhabited spaces within the
Park, and therefore notified the Park Owner that the hearing procedure under the Ordinance would be
invoked. Section 2-2.904 (b), SJCMC. Resp. Ex. 25.
Thereafter, following the City's receipt of Requests for Proposals to provide as needed hearing officer
services for five years, the City Council awarded a five year Professional Services Agreement to Michael
Roush. Resp. Ex. 34. On July 13, 2016, Mr. Roush informed the parties that he had been selected as the
Hearing Officer concerning the petition. Resp. Ex. 12.
Following various e-mail exchanges between the Hearing Officer and the legal representatives of the
parties, the Hearing Officer conducted a conference call with the legal representatives on July 19. The
call focused on one of the formulae under the Ordinance to determine the maximum allowable increase,
which formula involves the Park's operating expenses for the previous year. There was agreement the
Park Owner would provide those expenses to the Residents' attorney. Because calculation of one of
the formulae for determining the maximum allowable increase was primarily driven by what were the
allowable expenses, if the parties could not agree on the expenses, it was also agreed the Hearing
Officer would conduct a hearing on August 2 to determine the maximum allowable increase. If the rent
Increase exceeded the maximum allowable increase, the hearing would be continued until August 24 for
further proceedings as set forth in the Ordinance unless Respondent elected to accept the Hearing
Officer's determination of the maximum allowable increase and Implement such increase come
September 1. Resp. Ex. 37.
The parties were unable to reach agreement on the expenses and the Hearing Officer conducted the
hearing as described above on August 2, 2016. Prior to that hearing, the parties had submitted letter
briefs concerning what the maximum allowable increase should be. At the hearing, the Hearing Officer
considered further arguments on this issue. Resp. Ex. 40. Respondent argued the maximum allowable
increase should be $57. The Residents argued the maximum allowable increase should be $4.75. The
Hearing Officer concluded the maximum allowable increase is $4.75. Resp. Ex. 40 at pages 79-81 of the
Transcript.
Respondent then renewed its objection to the Hearing Officer's continuing to hear this matter on
grounds that the Hearing Officer was biased against Respondent and requested the Hearing Officer
disqualify himself. The Hearing Officer asked the parties to submit letter briefs concerning this issue,
which they did. Resp. Exs. 41, 42 and 48. In a written opinion, the Hearing Officer denied Respondent's
motion to disqualify. Resp. Ex. 44.
The Hearing Officer conducted the hearing on August 25, 2016. Because neither the Ordinance nor any
Guidelines promulgated by the City set forth how the Hearing Officer is to conduct the hearing, the
Hearing Officer employed the usual procedures in administrative hearing matters. That is, the
proceeding was not governed by the technical rules of evidence and any relevant evidence was
admitted if it was the sort of evidence on which responsible persons are accustomed to rely in the
conduct of serious affairs. Hearsay evidence was admitted solely for the purpose of supplementing or
explaining other evidence. in terms of burden of proof, the Hearing Officer used the preponderance of
evidence test. Preponderance of evidence is evidence that when weighed with that opposed to it has
more convincing force. The Park Owner had the burden of proof concerning the need for a rent increase
above the maximum allowable increase. The evidentiary portion of the review process was closed on
August 25, 2016. By stipulation, the parties submitted closing briefs on September 1. 2016.
Issues
1. Should the Hearing Officer have disqualified himself from hearing this matter?
2. Must the protest petition be dismissed because it was filed prematurely?
3. Must the protest petition be dismissed due to a lack of compliance with other procedural
aspects of the Ordinance?
4. Did the Hearing Officer calculate the maximum allowable increase correctly?
5. Is the $403 rent increase (or some other amount in excess of the maximum allowable increase)
required in order for the Park Owner to receive a fair, just and reasonable return on property?
6. What percentage shall each party pay concerning the $1000 administrative fee?
Discussion
Due to the number of issues, at the end of each section there will be Findings and Conclusions as to
those issues. For clarity, the Findings, Conclusions and Recommendations will then be collected at the
end of the Decision.
Issue 1: Should the Hearing Officer have disqualified himself from hearing this matter.
In 2015, the Park Owner notified the Residents that their rents would be increased $641 as of
September 1, 2015. The Residents filed a protest petition and the City appointed Michael Roush as the
Hearing Officer. Mr. Roush, as Hearing Officer, conducted a hearing as provided under the Ordinance
and in September 2015 issued his recommendation concerning the rent increase. The Hearing Officer
concluded the Park Owner had not carried Its burden of proof as to any of the four formulae or
methodologies promulgated by the Park Owner in support of a rent increase above the maximum
allowable increase. The Hearing Officer also rejected the various procedural objections the Park Owner
made. The Hearing Officer found the maximum allowable Increase under the Ordinance to be $37. The
City Council, although not bound by the Hearing Officer's findings, approved a rent increase of
$37/month. Resp. Ex. 22.
In 2016, the Park Owner notified the Residents that their rents would be increased $403/month as of
September 1, 2016, Resp. Ex. 23. Residents filed their protest petition on June 8, 2016. Resp. Ex. 24,
The City issued a Request for Proposals for a five year Professional Services Agreement to which Mr.
Roush and others responded. On the recommendation of City staff, the City Council awarded the five
year Agreement to Mr. Roush. See Resp. Ex. X.
On July 13, 2016, Mr. Roush Informed the parties that he had been appointed by the City Council to
serve as the Hearing Officer. Resp. Ex. 12. Various emails between the Hearing Officer and the parties
followed, leading to a conference call on July 19, 2016 concerning the procedure to be followed on this
matter. The Park Owner raised then, and thereafter, an objection to Mr. Roush serving as the Hearing
Officer given his decision in 2015.
On August 2, 2016, following the Hearing Officer's determination that for 2016 the maximum allowable
Increase is $4.75, and in response to continued objections from the Park Owner that the Hearing Officer
should disqualify himself, the Hearing Officer requested the parties to submit letter briefs as to why the
Hearing Officer should be disqualified from hearing this matter. The parties did so. Resp. Exs. 41, 42
and 49.
One of the arguments the Park Owner made as to why the Hearing Officer should disqualify himself
stems from a California Supreme Court decision, Haas v. County of San Bernadino (2002) 27 Cal. 4`" 1017
("Haas"). In Haas, the Supreme Court found the practice of some counties selecting temporary
administrative hearing officers on an ad hoc basis and paying them based on the number and length of
the cases they heard gave rise to the hearing officer's having an Impermissible financial interest in the
outcome of the cases to which they were assigned. Such impermissible financial interest was created
due to this arrangement because of the perception that continued appointments depended solely on
the county's goodwill and the county could prefer to appoint hearing officers whose past decisions
favored the county. Haas, at pps. 1020-1021. To avoid creating that financial conflict of interest, the
Court held that hearing officers must be appointed in such a way that does not create risks that hearing
officers will receive future appointments based on favorable decisions. The Court recognized, however,
that local governments must nevertheless make such appointments and therefore must have flexibility
as to how such appointments are made. Haas, at p. 1037.
The Park Owner argued the City's five year Professional Services Agreement with the Hearing Officer
violated the Owner's due process rights because the Hearing Officer will be predisposed to issue
decisions favorable to the City in order to keep in the City's good graces. Resp. Exs. 41 and 49.
On August 21, 2016, the Hearing Officer Issued a decision concluding that he was not disqualified from
hearing this matter. Resp. Ex. 44. In relevant part, the Hearing Officer rejected the Park Owner's
argument that he had an impermissible financial interest due to the Professional Services Agreement
because, unlike the situation in Haas, not only is the Agreement for a long term—five years—but also
the Agreement provides that it may be terminated by the City only for cause and not because of the
outcome of one or more decisions.
The Hearing Officer heard the merits of the rent Increase on August 25, 2016. In its post -trial brief, the
Park Owner renewed its objection to the Hearing Officer's hearing this matter. The Park Owner
contends the Professional Services Agreement mandates the Hearing Officer have a commercial general
liability insurance policy that names the City (and Its officials, employees, etc.) as additional insureds as
evidenced by certain enumerated endorsements to the policy. Because there was no evidence of such
policy, endorsements or other certain coverages, the Park Owner argues the Hearing Officer is in breach
of the Agreement and therefore the Hearing Officer will be motivated to make pro -rent control rulings
in order to curry favor with the City, presumably so the City will not terminate the Agreement for cause.
Findings.
1. For the reasons set forth in the Hearing Officer's Decision Concerning Respondent's Motion
to Disquallfy the Hearing Officer, dated August 21. 2016, (Resp. Ex. 44), the Hearing Officer
was not disqualified from hearing this matter.
The argument made in the Park Owner's post trial brief as to why the Hearing Officer should
be disqualified fails for two reasons. First, the Professional Services Agreement between the
City and the Hearing Officer, a copy of which is attached as Attachment 1, does not require a
commercial general liability insurance policy. See Section 11 of the Agreement. Second, the
City has not informed the Hearing Officer that he is in breach of the Agreement in any
respect (and indeed the Hearing Officer is not in breach of the Agreement). The Agreement
is clear it cannot be terminated based on the outcome of one or more decisions the Hearing
Officer makes concerning rent control matters (see Section 16) and therefore the Hearing
Officer is not financially motivated to issue decisions that are pro -rent control in nature or
that otherwise would keep him in the City's good graces.
3. Although the Hearing Officer informed the parties on July 13, 2016 that he had been
appointed to hear this particular matter, the Park Owner was aware earlier the City had
awarded the Agreement, over the Park Owner's objections, for as needed Hearing Officer
services to Mr. Roush. Resp. Ex. 35. In light of that, if there were serious concerns about
the Hearing Officer's impermissible blas, the Park Owner had more than ample time to seek
appropriate relief in the Superior Court. The Park Owner, for whatever reason, chose not to
do that. Even after the Hearing Officer Issued his decision on August 21 denying the Park
Owner's motion to disqualify the Hearing Officer, the Park Owner had time to seek
appropriate relief in the Superior Court. By not pursuing that remedy and thereby allowing
this proceeding to continue at great expense not only to the Residents and City but also to
L
itself, the Park Owner's contentions concerning disqualification of the Hearing Officer are
foreclosed by principles of equitable estoppel.
Conclusions:
1. The Hearing Officer was not legally disqualified from hearing this matter.
Issue 2. Must the protest petition be dismissed because it was flied prematurely?
The Park Owner contends the protest petition must be dismissed because it was filed prematurely. In
support, the Park Owner cites to the Ordinance that provides, "The hearing shall be conducted only in
the event the petition is filed with the secretary thirty (30) calendar days following the effective date of
the rent increase which is the subject of the petition." Section 2-2.903 (a), SJCMC. The notice of the
rent increase provides the effective date of the rent increase will be September 1, 2016. Resp. Ex. 23.
The Residents filed their protest petition on June 8, 2016. Resp. Ex. 24.
The Residents argue that the Ordinance simply requires the petition be filed no later than 30 days after
the effective date of the rent increase because the Ordinance, read literally, would mean the petition
could only be filed precisely 30 calendar days following the effective date of the rent increase, an absurd
Interpretation.
The meaning of an ordinance, like the meaning of a statute, may not be determined from a single word
or sentence. Words of an ordinance must be construed In context and provisions relating to the same
subject matter must be harmonized and given effect to the extent possible. An ordinance should not be
construed literally if it Is contrary to legislative intent as reflected in the ordinance. People v. Shabbar
(2006) 38 Cal, 4"' 55, 67-68.
Findings
4. Requiring residents to file a protest petition by no later than 30 days of the effective date of
a rent increase is much more reasonable reading of the Ordinance in that It harmonizes and
gives effect to all provisions of the Ordinance that relate to the same subject matter. While
true that one section of the Ordinance says the petition must only be filed "following the
effective date of the rent increase" (Section 2-2.903 (a), SJCMC), another section of the
Ordinance requires park residents to post a $500 deposit at the time the residents file a
protest petition of a "proposed [rent] increase". Section 2-209 (b), SJCMC). If residents
could not file their protest petition until after the effective date of the rent increase, the
reference to a proposed rent increase would be superfluous.
5. Requiring residents to file a protest petition by no later than 30 days of the effective date of
a rent increase is also consistent with the legislative intent as reflected in the Ordinance,
part of which is to protect the residents from unreasonable rent increases. The review
process is lengthy: 60 days (or longer) from the time the protest petition is filed for the
hearing itself to be conducted; 30 days following the hearing for the Hearing Officer's
decision; and at least two public hearings, one by the Committee and one by the City
Council, both of which require at least 10 days' notice. Indeed, here the protest petition
was flied on lune 8, 2016 but the hearing itself was not able to be scheduled and conducted
until late August, with the Hearing Officer's decision in early September. It is likely to take
7
at least another 30 days or so after that for a final Council decision. Accordingly, if the
Residents here were required to wait until September 1 just to file their protest petition, the
Residents would face the prospect of paying a substantial rent increase, even if not
warranted, for months, contrary to the purpose of the Ordinance. The Hearing Officer
acknowledges that in addition to protecting residents from unreasonable rent increases, the
Ordinance recognizes the need of a park owner to receive a fair, just and reasonable return
on investment. Interpreting the Ordinance such that a protest petition is timely so long as it
is filed by no later than 30 days following the effective date of the rent increase does not
deprive the park owner of imposing and collecting the rent increase on the effective date of
the rent increase. To the extent it is determined that the collected rent increase is required
in order to provide the park owner with a fair, just and reasonable return on Investment, the
Park Owner would have received the rent and the intent of the Ordinance as to a park
owner would be satisfied.
6. Requiring residents to file a protest petition by no later than 30 days of the effective date of
a rent increase also avoids an absurd reading of the Ordinance because the words of Section
2-2.903 (a), SJCMC, taken literally, would require residents to file their protest only on the
30" calendar day following the effective date of the rent increase.
7. Moreover, for the reasons set forth in Finding 3, equitable estoppel precludes this
argument. The Park Owner made this same argument last year and the Hearing Officer
determined the petition was not filed prematurely. Here, many weeks before the hearing
was conducted, it was clear the Hearing Officer intended to hold the hearing prior to the
effective date of the rent increase. As with the disqualification of the Hearing Officer,
nothing prevented the Park Owner from seeking injunctive or other relief in court on
grounds that the petition was premature and that the hearing should not proceed
accordingly. The Park Owner, however, chose not to do that.
Conclusions:
2. The petition was not filed prematurely.
Issue 3. Must the protest petition be dismissed due to a lack of compliance with other
procedural aspects of the Ordinance?
The Park Owner also contends the protest petition must be dismissed due to other procedural
irregularities, namely, that at the time the protest petition was filed there was no secretary of the
Committee and the signatures on the petition were not sufficiently authenticated such that the
Residents (and/or the City) did not prove that more than 50% of the Residents had signed the protest
petition.
Although the Ordinance does not define "secretary", it does refer to "secretary" in Sections
2-2.903 (a), 2-2.903 (h)(2)(11) and 2-2.904 (b), SJCMC. The reference is explained in section 2-2.903 (d)
as "the secretary of the Committee" and In section 2-2.904(b) as "the secretary to the Housing Advisory
Committee". In 2015, City representatives advised the Residents to file their protest petition with Laura
Stokes, a City employee, and the Residents filed it with her. See Ex. 151 of the 2015 Proceedings. Ms.
Stokes became the City's Housing/Redevelopment Coordinator in 2008 and the essential responsibilities
and duties of that classification included "Attend and administer the Housing Advisory Committee
8
meetings....". See Exs. 162 and 167 of the 2015 Proceedings. Although Ms. Stokes was reclassified in
2013 as a Housing Coordinator/Assistant Planner due, in part, to the dissolution of redevelopment
agencies, that classification continued to provide the person appointed to the position would "attend
and administer the Housing Advisory Committee meetings". See Exs. 162 and 169 of the 2015
Proceedings.
Until the very end of the 2016 hearing, the Park Owner had not raised as a procedural issue that the City
did not have a secretary to the Housing Advisory Committee and therefore the petition must be
dismissed because filing a petition with the secretary is a procedural requirement to conducting a
hearing. After the Park Owner raised this procedural issue, City Attorney Ballinger provided a
Memorandum dated May 31, 2016 from Ben Siegel, City Manager, to Laura Stokes, Housing
Coordinator/Assistant Planner. Petitioners' Exhibit ("Pet. Ex.") D. That memorandum provides that
under the City's Municipal Code, the City Manager Is to designate a Secretary of each Committee. The
memorandum reflects the City Manager's belief that based on past practice Ms. Stokes has served as
the Housing Advisory Committee's Secretary but to resolve any doubt about the matter, the City
Manager in the memorandum designated Ms. Stokes as the Secretary of the Housing Advisory
Committee. Ms. Stokes acknowledged the designation by signing the Memorandum. Pet. Ex. D.
The Park Owner, in its closing brief, takes issue with Pet. Ex. D because it fails to mention what specific
duties the Secretary is to perform and there was no evidence to support the City Manager's statement
that past practice demonstrates Ms. Stokes had been providing Secretary services to the Committee.
The Park Owner also objected to the timing and production of Pet. Ex. D, arguing its disclosure
demonstrates the City is an advocate for the Residents In this proceeding and that its tardy disclosure
prevented cross examination concerning its generation.
The Park Owner also contends there was not ample time between June 8 (when Ms. Stokes received the
petition) and June 9 (when she sent notice to the Park Owner that a sufficient petition had been filed)
for Ms. Stokes to have verified the petition complied with Section 2-2.903 (a), SJCMC.
Findings
8. Recognizing that Ms. Stokes had for all practical purposes been serving as the Secretary to
the Housing Advisory Committee for some time, the City Manager, as is his authority,
designated Ms. Stokes as the Committee's Secretary on May 31, 2016, which designation
she accepted. Pet. Ex. D. The duties of the Committee's Secretary are set forth generally
and specifically in the Ordinance and it was not required for the City Manager to be specific
In his designation memo as to what those duties are.
9. This Park Owner did not raise this particular procedural issue until the very end of the
hearing on August 25. In response, the City Attorney produced Pet. Ex. D to demonstrate
that Ms. Stokes had been designated the Committee Secretary. The production of Pet. Ex. D
was not advocacy on the part of the City; it was simply responding to a perceived procedural
issue. The Park Owner did not request the City Attorney to produce the City Manager or any
other person so that the Park Owner could cross examine such witnesses about the
memorandum.
10. Ms. Stokes had ample time to determine that on its face the petition had the required
number of signatures before advising the Park Owner that a petition had been filed. There is
N
nothing in the Ordinance that required Ms. Stokes to verify Independently that each of the
persons who had signed the petition in fact resided in the Park or had signed the petition.
She was entitled to rely on the good faith representation of Mr. Perrin who submitted the
petition along with the $500 deposit that the residents who signed the petition resided in
the Park. Resp. Ex. 24.
11. Moreover, the Residents had no control whether the City at the time they filed their petition
had officially designated Ms. Stokes as the secretary to the Committee. The Residents in
good faith relied on the representations of City personnel in the past as to whom the
petition should be filed and they followed that direction. To dismiss the Residents' petition
on those grounds would be unnecessarily punitive to the Residents.
12. In the 2015 Proceeding, Thomas Perrin, a Park resident and one of the members of the
Steering Group/Legal Defense Group, explained in detail how the signatures had been
collected on the petition and that no one had asked him to remove his/her name from the
petition. And while each of the Residents who had signed the petition did not testify at that
hearing to authenticate his or her signature, there was also no indication that any of the
signatures had been forged or were the result of fraud or duress. Last year, there was
ample proof that more than 50% of the Residents residing in the Park had signed the protest
petition. The Park Owner was provided with a copy of this year's petition that had the
names of the residents. Resp. Ex. 24. Certainly the Park Owner had time to review the
names on the petition to determine if anyone whose name was on the petition did not
reside in the Park or the petition was otherwise not genuine. If such were the case, the Park
Owner could have put on evidence to that effect. No such evidence was introduced.
13. In that these issues were raised last year but not decided in the Park Owner's favor, for the
reasons expressed in Finding 3 above, the Park Owner is equitably estopped from relying on
these procedural issues as grounds to dismiss the petition.
Conclusions:
3. Laura Stokes was the Secretary of the Housing Advisory Committee at the time the
Residents filed their protest petition with her.
4. More than 50% of the Residents then residing in the Park signed the protest petition.
S. The petition must not be dismissed due to a lack of compliance with any other procedural
aspects of the Ordinance.
Issue 4. Did the Hearing Officer calculate the maximum allowable increase correctly?
As stated earlier, the Hearing Officer made a threshold determination that the $4.03/month rent
increase exceeded the maximum allowable increase. The Park Owner contends that under one of the
two formulae to determine the maximum allowable increase under the Ordinance, the Hearing Office
has misinterpreted the Ordinance and therefore miscalculated the maximum allowable increase.
Because the Ordinance provides that in making its final decision as to a rent increase the City Council
shall in no case require a reduction lower than the maximum allowable increase (section 2-2.903 (e),
10
SJCMC), set forth below are the Hearing Officer's recommendations as to what is the maximum
allowable increase.
Under the Ordinance, maximum allowable increase means the maximum allowable increase in mobile
home space rent that an owner may charge unless a higher increase is approved by the City Council
after a petition and hearing as provided under the Ordinance. Section 2.2-902 (d) SJCMC. The
maximum allowable increase shall be determined by either of the following formulae an owner may
choose to apply:
1. Take the operating expenses for the twelve months immediately preceding the date upon
which notification of any rent increase is to be made, multiply that sum by the percentage of
Increase in the CPI -U appearing in the latest published Consumer Price Index to arrive at the
maximum allowable increase in rent for the entire park, and divide the number of units in
the park to compute the maximum allowable annual increase (in dollars) for each space; or
2. Secure the percentage of annual increase in the CPI -U for the calendar year immediately
preceding the one in which the rental adjustment is being made; multiply that figure by the
rent to be adjusted to arrive at the maximum allowable rent increase percentage per year;
and apply that product to each space rent.
Section 2-2.902 (d)(1) and (2), SJCMC.
CPI -U means the Consumer Price Index for all urban consumers published for the Los Angeles -Long
Beach-Anahelm area. Section 2-2.902 (c), SJCMC.
Findings
14. As to the formula under Section 2-2.902 (d)(2), the percentage increase in the CPI -U for the
calendar year immediately preceding the one in which the rental adjustment is being made,
i.e., the percentage increase in the CPI -U between 2014 and 2015, was 0.9%. Because there
is a range of rents in the Park, ranging from a low of $565.81 to a high of $1127.05 (Resp. Ex.
27), the maximum allowable increase ranges from $5.09 to $10.14, well below the $403 rent
increase.
15. Applying the formula under Section 2-2.902 (d)(1) requires some interpretation of the
Ordinance. First, the term "operating expenses" is not defined in the Ordinance. Second,
the Ordinance Is not clear what the relevant period is for determining the percentage
increase in the CPI -U. Third, this formula computes only the "maximum allowable annual
Increase" for each space but the rent increase ($403) is on a monthly basis.
16. The Park Owner provided a Profit and Loss Statement showing a list of expenses
representing the operating expenses between May 2015 and April 2016. Taking into
account that the Park Owner amortized some of the expenses listed on the Statement, the
Park Owner claimed at the August 2 hearing the operating expenses for purposes of
applying the formula under section 2-2.902 (d)(1) were $837,930. Based on the amount of
those expenses, the Park Owner stated the maximum allowable Increase was $57.
11
17: The Residents objected to the $57 figure on several grounds. First, they argued that some
of the claimed expenses were significantly overstated and/or should have been amortized.
More importantly, they argued that even assuming that the claimed expenses that gave rise
under the formula to $57 were valid, the $57 represents just the annual maximum allowable
Increase and therefore, $57 must be divided by 12 to yield a maximum allowable increase of
$4.75/month. Resp. Exs. 38 and 40, at pps. 62-63.
18. In response, the Park Owner pointed out that in the 2015 Proceeding, the Hearing Officer, in
reaching his decision and recommendation as to the maximum allowable increase did not
make that final division. Moreover, in the 2015 Proceeding the Residents did not argue to
the Housing Advisory Committee nor to the City Council that the maximum allowable
increase of $37 as calculated by the Hearing Officer should be divided by 12. As a result of
last year's proceeding, the City Council imposed a rent increase of $37. Resp. Ex. 40, at pps.
38-42.
19. Notwithstanding that the Hearing Officer in the 2015 Proceedings did not divide by 12 the
$37 which he determined to be the maximum allowable increase, the Hearing Officer failed
to take into account that the $37 there, like the $57 here, was the maximum annual
allowable increase and, in hindsight, he should have divided the $37 by 12. (Emphasis
added.) Resp. Ex. 40, at pps. 79=82.
Conclusions:
6. Accepting the Park Owner's operating expenses between May 2015 and April 2016 at face
value, the Hearing Officer correctly calculated the maximum allowable increase under
section 2-2.902 (d)(1) SJCMC as $4.75/month and the $403/month rent increase exceeds
the maximum allowable increase.
7. The maximum allowable increase under Section 2-2.902 (d)(2) SJCMC ranges between $5.09
and $10.14 and the $403 rent increase exceeds the maximum allowable increase.
Issue S. Is the $403/month rent increase (or some other amount in excess of the maximum
allowable increase) required In order to provide the Park Owner with a fair, just and
reasonable return on property?
Legal Framework for Determining If the $4031rnonth Rent Increase (Or Some Other Amounts Is Required
to Provide A Fair Return.
As noted previously, the Ordinance lists various factors that are to be considered in determining what
rent Increases are permitted but the Ordinance does not mandate any particular formula, methodology
or type of standard. The factors the Ordinance does list include park operating expenses and fair return
and the Ordinance directs that all relevant factors be considered, keeping in mind that the overall
purpose of the Ordinance is to protect the residents from unreasonable rent increases but still provide a
park owner with a just and reasonable return. See Sections 2-2.903 (g) and 2-2.901, SJCMC. The
Ordinance also cites to a number of California case law decisions, most from the mid 1980's, dealing
with rent control in mobile home parks and states, in conducting the entire process concerning the rent
Increase, the Hearing Officer, the Committee and the Council are to take guidance from these decisions.
Section 2-2.903 (g)(v), SJCMC.
12
Most of those cases cited in the Ordinance were facial challenges'to the rent control ordinances in
question. For example, Birkenfe/d v. City of Berkeley (1976)17 Cal. 3d 129 is the seminal California
Supreme Court decision concerning the constitutional authority of local jurisdictions to enact rent
control. In that case, a facial challenge to rent control imposed by an amendment to the City's Charter,
the court held rent control Is a proper exercise of a local government's police powers under the
California Constitution if it is reasonably calculated to eliminate excessive rents and at the same time
provide property owners with a just and reasonable return on their property. Birkenfeld, at 165. The
case, however, did not discuss what the appropriate standards for determining what constitutes a just
and reasonable return.
Another case cited in the Ordinance— Cotatl Alliance for Better Housing v. City of Cotatf (1983)148 Cal.
App. 3d 280—was also a facial challenge to that city's rent control ordinance. It recognizes that there
are a number of different methodologies that may be employed In the just and reasonable
determination but one of its principal holdings is, in arriving at that determination when employing the
maintenance of net operating income formula, the net operating income may not be frozen.
Palos Verdes Shores Mobile Estates, Ltd. v. City of Los Angeles (1983) 142 Cal. App 3d 362 (cited
erroneously in the Ordinance as Palisades Shores v. City of Los Angeles 143 Cal. App. 3d 369) was
another facial challenge to a rent control ordinance and the administrative guidelines promulgated
thereunder. The ordinance and the guidelines provided for automatic adjustments and provided for
other formulae for further adjustments under a "maintenance of profit approach", a "historic return
approach" and a "fair operating income approach" all of which, at least on their face, avoided
confiscatory results.
In Carson Mobilehome Park Owners Assn v. City of Carson (1983) 35 Cal. 3d 184, there was a facial
challenge to a mobile home rent control ordinance on grounds that the ordinance lacked sufficient
standards to govern its administration and for adjusting maximum rents. The Supreme Court found that
the ordinance was not unconstitutional because it did not articulate a precise formula for determining
what constitutes a just and reasonable return. Rather, so long as the result achieved is constitutionally
acceptable, the method of determining what Is a fair and just return is immaterial.
The Court in Oceanside Mobilehome Park Owners Assn. v. City of Oceanside (1984)157 Cal. App. 3d 887
did not disparage other methodologies but extolled the advantages of using the maintenance of net
operating income method in that it avoids having to calculate equity and/or fair market value but,
instead, permits property owners to obtain a fair return under general marketing conditions in any given
year. The case also warned that a fair return must not be so high so as to defeat the purpose of the
ordinance.
The one remaining case cited in the Ordinance—Gregory v. City of San Juan Capistrano (1983)142 Cal.
App. 3d 42—has been overruled by the California Supreme Court to the extent that it held that a rent
control ordinance needs to provide for a fair return on the value of property in order to survive a facial
challenge. Fisher v. City of Berkeley (1984) 37 Cal. 3d 644, at 716.
From the cases cited in the Ordinance and their progeny, the Hearing Officer gleans the following
guidance: Courts have upheld various formulae or methods for granting rent increases when they are
reasonably related to a proper legislative purpose and do not preclude a just and reasonable return or
necessitate unconstitutional results. See Kovanau v. Santa Monica Rent Control Bd. (1997)16 Cal 4th
13
761, 768, 777; Fisher v. City of Berkeley, supra., 37 Cal. 3d at 682; Carson Mobilehome Park Owners
Ass'n. v. City of Carson, supra., 35 Cal. 3d at 188-191.
Although no case has defined specifically the term "just and reasonable return", the term has been
described as one high enough to encourage good management, reward efficiency, discourage the flight
of capital, is commensurate with returns on comparable investments but not so high as to defeat the
purpose of preventing excessive rents. Accordingly, there is a range of rents that can be characterized
as providing a just and reasonable return and a range of methodologies that can provide such return.
Kavanau, supra., 16 Cal, 4`" at 778; City of Oceanside, supra., 157 Cal. App. 3d at 898. To the extent that
the Ordinance continues to cite to the Gregory case for guidance, that case's requirement that an
ordinance needs to provide for a fair return on the value of property in order to survive a facial
challenge has been overruled. Accordingly, the fair return on the value of property methodology is not a
valid methodology and the Park Owner has not relied on that methodology in seeking a rent increase.
The Park Owner has noticed a $403/month rent increase (Resp. Ex. 23) which amount the Park Owner
contends Is necessary in order for it to receive a fair, Just and reasonable return on property. In support
of that contention, the Park Owner's expert, Kerrie Merrifield, a certified public accountant, employed
four different formulae to derive various rent increases but she opined that any amount less than a
$403/month increase would not yield a fair return to the Park Owner.
The four formulae that Ms. Merrifield utilized were (1) maintenance of net operating income, (2) return
on investment, (3) a mobile home sales comparison, i.e. comparing sales of mobile homes in the Park
with what she understood as comparable sales of mobile homes outside the Park and then, based on
that sales price difference, calculating a "premium", how much the monthly rent for each space within
the Park would need to Increase in order to equalize the difference between the sale prices and (4) a
comparison of rents in EI Nido with rents at another park in the City. Resp. Ex. 49.
In rebuttal to Ms. Merrifield's opinion, the Residents offered the opinion testimony and supporting
documentation from two experts, Kenneth Baar and James Brabant. Dr. Baar is an attorney with a Ph.D
in Urban Planning who has considerable experience in analyzing fair return issues and advising local
jurisdictions concerning these issues. Dr. Baar has published extensively concerning rent stabilization
issues and has been cited favorably In many appellate court cases concerning rent control issues. See
Pet. Ex B. Mr. Brabant is an appraiser who has extensive experience in appraising mobile home parks
for the purposes of rent control hearings, park closures, park conversions, etc. See Ex. F (last two pages)
from the 2015 Proceedings. These experts concluded that, at best, only a $9/month increase would be
necessary in order for the Park Owner to receive a fair, just and reasonable return on property. Pet. Ex.
C.
A. Maintenance of Net Operating income Formula
In California the maintenance of net operating income ("MNOI") formula or standard is the most often
used for determining a fair return. Courts have praised the MNO1 standard for its fairness and ease of
administration and because it preserves for a park owner the net operating income prior to the
adoption of rent control. Colony Cove Properties, LLC v. City of Carson (2013) 220 Cal. App. 4a' 840 and
cases cited at 869. The Park Owner and the Residents introduced evidence concerning that standard.
Under that standard the Park Owner contends a rent increase of $144.66 would be warranted (although
that amount would be less than the $403 that the Park Owner contends is necessary in order to have a
14
fair return). Employing that standard, as properly applied, the Residents contend that a rent increase of
only $9/month is warranted.
Ms. Merrifield used a four step process to determine the $144.66 rent increase. Resp. Ex. 49, Tab A. In
step one, she determined the base year as 2014 as 2015 was the year of the last increase. Resp. Ex. 49
Tab A, p.1. In step 2, she calculated the base year net operating income for 2014 as adjusted for
inflation through June 2016 to be $1,103,654. Resp. Ex. 49, Tab A, page 1.
In step three, Ms. Merrifield "normalized" the current year (2015) net operating income and determined
It to be $836,317. Resp. Ex. 49, Tab A, page 3. In step four, Ms. Merrifield took the difference between
the base year net operating income, as adjusted for inflation, ($1,103,654) and the current year net
operating income ($836,317) to yield $267,337. Resp. Ex. 49, Tab A, page 3. She then divided $267,337
first by the number of spaces (154) and then by twelve (months) to yield $144.66. Resp. Ex. 49, Tab A,
page 3.
Part of the step three calculation involved Ms. Merrifield's determination as to what were the Park's
revenues for 2015. In the Revenue column for "Rent -Spaces" (Resp. Ex. 49, Tab A, page 1), for the
calendar year ending 2012, the figure was $1,390,568; for 2013, $1,437,935, for 2014, $1,434,792; and
for 2015, $1,299,681, a drop of over $135,000 even though in the last four months of 2015, all space
rents had increased by $37/month. When asked to explain this difference in space rent revenue, Ms.
Merrifield stated that she had normalized only the 2015 revenue number by using a one page
Management Report (Resp. Ex. 49, third page of Tab E) in order to calculate only the space rent income
for 2015. As to the Rent -Spaces Revenue, she felt a mistake had been made in prior years and that it
should be corrected for 2015. She did not, however, make a similar correction for 2014.
Also part of the step three calculation involved Ms. Merrifield's determination as to what were the
Park's operating expenses for 2015 and whether any of those expenses should be amortized. In making
that determination, she reviewed the Park's general ledger (Resp. Ex. 28) and, in relevant part, a number
of invoices for legal and accounting expenses (Resp. Ex. 30). In her step three analysis, for the expense
line item "accounting", Ms. Merrifield showed $21,839; for the "legal and professional" line item, she
showed $60,928. Resp. Ex. 49, Tab A, p. 2. She indicated these expenses stemmed from the Park
Owner's efforts In 2015 to obtain a rent increase, she did not see anything "unorthodox" about the
expenses and, in arriving at those line item amounts, she had amortized the overall expenses for these
two categories over a five year period at an interest rate of 10%.
Dr. Baar disagreed with Ms. Merrifield's determination of the Park's net operating income for 2015 in
several significant ways. First, Dr. Baar observed she changed or normalized the method of determining
the net revenue in 2015 but did not do the same for 2014. Second, the inflation factor she used to
calculate the 2014 operating income was too high. Third, she included legal and accounting expenses in
2015 that should not have been included or, if included, their amounts substantially reduced.
Dr. Baar testified that if the maintenance of net operating Income method is to be used to determine
fair return, then the methodology used to determine revenue/income must be the same for both years,
which Ms. Merrifield did not do. By changing the methodology in 2015 but not in 2014, it skewed the
maintenance of net operating income calculation such that the revenue for 2015 was substantially lower
in 2015 than 2014, leading to the need for a substantial rent increase in 2015 In order to maintain net
operating income for the Park Owner. Similarly, Dr. Baar opined the inflation factor Ms. Merrifield
applied to the 2014 net operating income was incorrect in that she showed an adjustment through June
15
2016, a 3% increase, but the correct adjustment should have been the percentage increase between
2014 and 2015, a roughly one percent increase. By using a higher inflation factor for the 2014 net
operating income, Dr. Baar felt that too skewed the maintenance of net operating income calculation,
leading to a need for a substantial rent increase.
Dr. Baar also opined that the legal and accounting fees for 2015 were astronomical and out of line for
the results obtained. Pet. Ex. B. That is, in the 2015 Proceedings in which the Park Owner sought a
$641/month rent increase, the Park Owner was not successful in persuading the Hearing Officer and
eventually the City Council concerning the theories or applications of the methodologies the Park Owner
had offered to justify such a rent increase. In addition there was legal work that Dr. Baar thought not
relevant to the 2015 proceeding, such as drafting park rules, or was for work, such as drafting a petition
for a writ of mandate that was never filed. Based on the amount of fees requested and received in
other rent control cases in which he has been involved (see Pet. Ex. B), Dr. Baar believed that
accounting fees of $20,000 and legal fees of $25,000, amortized over five years, were more reasonable
given the results obtained by the Park Owner.
Findings:
20. In order to use a maintenance of net operating income methodology to determine fair
return, the methodology used to determine revenues for the base year must be the same,
or at least comparable, as the current year. Ms. Merrifield did not use the same
methodology for both years and did not provide an adequate explanation as to why she did
not adjust the 2014 rent space revenue as she did for the 2015 space rent revenue, or why
she did not use the same methodology for 2015 as used for 2014.
21. The inflation adjustment used by Ms. Merriweather for the base year operating income was
incorrect. She compared the CPI -U as of June 2016 to the CPI -U for December 2014. The
comparison should have been between December 2014 and December 2015.
22. A Park Owner is entitled to recover reasonable expenses, including legal and accounting
fees, that are incurred in obtaining a fair return. Galland v. City of Clovis (2001) 24 Cal. 4'h
1002. There are neither clear guidelines nor judicial precedent to establish the amount of
legal and expert expenses that would be reasonable in mobliehome park fair return cases.
In other contexts, however, such as where a contract provides that the prevailing party in a
legal dispute has the right to recover attorney's fees or where a party is entitled to recover
these costs by statute (e.g., a civil rights claim), the burden is on the party seeking such fees
to show the reasonableness of the fees.
23. Courts in reviewing legal expense claims consider the reasonableness of the number of
hours, the reasonableness of the hourly rate, the success or failure of the party seeking to
recover these expenses and the proportion of the legal work associated with the successful
claims and the novelty or difficulty of the issues involved. Melnyk v. Robledo (1976) 64 Cal.
App. 3d 618, 623-624.
24. Applying these principles, the expenses for the legal and accounting fees for 2015 must be
reduced because (a) some of the expenses do not have supporting documentation, (b) some
of the claimed expenses, such as for drafting park rules, do not have a reasonable nexus to
16
the 2015 fair return proceeding, (c) some of the expenses were incurred for the purpose of
pursuing a legal challenge in court in the face of an adverse administrative decision yet not
pursued and (d) the Park Owner was not successful on any of the theories upon which the
Park Owner sought a rent increase in 2015.
25. There are expenses in the amount of $62,082.71($47,225.57 for accounting and $14,857.24
for legal) for which there is no back up documentation. The general ledger on which Ms.
Merrifield relied to calculate the legal and accounting expenses is on the seventh page of
Tab F of Resp. Ex. 49 (also on page 7 of Resp. Ex. 28). There are 25 entries and the
accounting expenses are noted with a handwritten capital "A". The invoices that she
reviewed are set forth in Resp. Ex. 30. On page 7, the first seven entries dated between
January 28, 2015 and April 21, 2015, four of which are for legal and three of which are for
accounting, have no supporting invoices or other documentation. These total $37,472.64
($25,103 for accounting; $12,369.74 for legal). Also absent Is the backup for an accounting
entry on October 16, 2016, to Capata & Co. in the amount of $20,684.62. (On August 19,
2016, Mr. Stanton sent an email to the Park Owner's counsel indicating that he did not see
the supporting documentation for this expense and requested the Itemized invoice to be
provided. Resp. Ex. 43. One of the Park Owner's exhibits is a copy of an invoice from Capata
& Co. dated September 1, 2016 in the amount of $26,633.50. Resp. Ex. 46. It is not clear
whether that invoice was intended to be In response to Mr. Stanton's inquiry but In any
event it lacks detail as to what work was performed. Moreover, not only does the amount
on that invoice not match the October 16 entry but the brief description of the work seems
off in -that it reflects Ms. Merrifield's billing $25,846 for work in August 2016 and Mr. Capata
billing only $787.50. Mr. Capata, however, testified at length in August during the 2015
Proceedings.) There is also an entry for $4187.50 for legal expenses but there is no
supporting documentation for $2487.50. Finally, there is an entry for $2069.95, $632 of
which was for legal and $1437.95 was for accounting. There is, however, no supporting
documentation for the accounting piece.
26. Following the Hearing Officer's Decision in September 2015, the Invoices from the law firms
representing the Park Owner reflect legal work concerning preparation of a petition for a
writ of mandate and related matters, such as a stay, presumably to challenge the decision of
the City Council concerning the amount of the rent increase for 2015. The total of these
entries Is $31,676. Although a Park Owner may choose to spend its money for legal services
however it chooses, the Residents should not be saddled with these expenses in light of the
overwhelming lack of favorable results in the administrative hearing and in light that
ultimately the Park Owner did not pursue a legal challenge to the City Council's decision.
Accordingly, these expenses must be excluded.
27. The invoices also reflect legal work unrelated to the fair return proceedings such as drafting
park rules and regulations ($7075), an investigation of a park resident ($434) and unrelated
legal work ($450).
28. Excluding these amounts from the legal expenses shown on the ledger leaves $177,379;
from the accounting expenses leaves $35,012.05.
29. In the 2015 Proceedings, the Park Owner sought a $641/month rent increase but also put
on evidence, employing various methodologies, to support a rent increase ranging from
17
$81/month to $742/month. Although the City Council did approve a monthly rent Increase
of $37 per space, it did not rely on or employ any of the methodologies urged by the Park
Owner. Given that lack of success, the Park Owner should not recover through a rent
Increase anywhere near the amount of legal and accounting expenses incurred in the 2015
Proceedings.
30. For the legal and accounting fees incurred in pursuing a fair return increase in 2015, the Park
Owner is entitled to recover reasonable legal expenses in the amount of $44,350 and
reasonable accounting fees in the amount of $8750. Amortized over five years at an
interest rate of seven percent, the expenses for 2015 are $10,537 for legal and professional
and $2079 for accounting.
31. Using the corrected inflation adjustment for the 2014 base year net operating income, using
the same space revenue as in 2014 but adding increased space revenue of $37/month for
150 spaces for four months, using the reasonable, amortized legal and accounting expenses
as set forth in Finding 30 and employing the methodology set forth in Resp. Ex. 49, Tab A
yields a rent increase of $9.50/month using the Maintenance of Net Operating income
methodology. [Calculations are on Attachment 2.]
Conclusions:
8. Using the Maintenance of Net Operating Income methodology, the Park Owner did not carry
its burden of proof that a $403/month rent increase nor any other rent increase in excess of
a $9.50/month (which would be more than the maximum allowable increase under the
Ordinance) is required in order to receive a fair, just and reasonable return on property. If a
rent increase is granted using this methodology, after five years, the $10.537 for legal and
professional expenses and the $2079 for accounting expenses must be removed from the
operating expenses.
B. Return on Investment Formula
Ms. Merrifield employed an 8% "return on investment" formula to conclude that the Park Owner should
receive a rent increase of $132/month. Resp. Ex. 49, Tab B. Initially she stated that a return on
investment is not the same as a capitalization rate which is the relationship between the purchase price,
say of a mobile home park, and the park's net operating income. In arriving at a return on investment of
8%, Ms. Merrifield said she relied on national data from investor surveys conducted by realtyrates.com
which reflects, among other sales, mobile home park sales.
The Residents' expert, James Brabant, disagreed strongly with Ms. Merrifield's opinion of an 8% return
on Investment. Pet. Ex. A. Mr. Brabant opined the appropriate standard is an overall capitalization rate
to determine a fair rate of return on Investment and that the appropriate overall capitalization rate for
the Park was 6%. He based the 6% capitalization rate on several factors. First, his office had conducted
an appraisal of a mobile home park in May 2015. In conducting that appraisal, his office researched and
confirmed seven sales of mobile home parks in San Diego County that occurred between May 2012 and
June 2014. The capitalization rates from those seven sales ranged from 5.2% to 6.5%, with the average
being 5.9%. Pet. Ex. A. Second, Mr. Brabant's office had commissioned a survey by the CoStar Group of
the overall capitalization rates from sales of mobile home parks throughout California between 2010
and the first few months of 2015. There were 59 such sales that reported capitalization rates, with the
18
average being 6.4%. Third, he had updated that survey and the overall average capitalization rate for
mobile home park sales throughout California was 6.8%, although the survey did not report the sales of
any mobile home parks in Orange County in 2015 or 2016. Notwithstanding that the average
capitalization rate from sales of mobile home parks throughout California neared 7%, Mr. Brabant
attributed percentage to the fact that, as a whole, the statewide data are considered inferior in location
to that of EI Nido, resulting in a higher capitalization rate. Pet. Ex. A.
Dr, Baar also implicitly disagreed that 8% was a fair return. In the 2015 proceeding, Dr. Baar relied on
data from California appraisers and real estate data services that Indicate the prevailing rate of return
associated with the purchase of mobile home parks is in the range of 5% to 7%. See Ex. E, at pages 20-
28, from the 2015 Proceedings. In this proceeding, Dr. Baar did not indicate he had changed his mind.
Findings:
32. The Residents' expert witnesses' analyses and opinions are more persuasive that the
capitalization rate is the proper standard for determining return on investment and that rate
should be 6%. First, although Ms. Merrifield stated that she was not using a capitalization
rate, the data on which she relied—realtyrates.com-- employs capitalization rates. (In the
2015 Proceedings, the Park Owner's expert also had relied on the capitalization rates from
realtyrates.com in arriving at his opinion about return on investment. See Ex. 4 from the
2015 Proceedings.) Second, the primary data on which Mr. Brabant based his opinion were
fairly recent sales of mobile home parks in neighboring San Diego County in which the
capitalization rate was confirmed. Those capitalization rates averaged 5.9%. While true
that the 2015 data is over a year old, and the more recent survey of mobile home park sales
throughout California indicate a capitalization rate that is approaching 7%, there were no
recent sales of mobile home parks in Orange County. While also true that not all of those
parks in Mr. Brabant's 2015 San Diego County survey would be an apples to apples
comparisons to EI Nido, the proximity of those parks to EI Nido in Orange County, coupled
with the reported low vacancy rates in those sold parks, confirms that the capitalization
rates for mobile home parks in southern California do not approach 8%. Third, other data
on which Mr. Brabant relied --such as the CoStar survey that analyzed mobile home sales in
California—were also more persuasive than the nationwide sales relied upon by Ms.
Merrifield in 2016.
33. Employing 8% as a fair return on investment, Ms. Merrifield opined that the Owner needed
a $131.86/month rent increase. If, however, a 6% cap rate is employed, the Owner would
not need any rent increase as the net operating income (as shown on Attachment 1) is
$1,063,529 which is more than $891,000 [$13,500,000 x 110% (inflation factor since 2009) _
$1,485,000 x 6% = $891,0001.
Conclusions:
9. The Park Owner did not carry its burden of proof that an 8% return on investment is a fair,
just and reasonable return on the property and/or that a $403/month rent increase, or a
$131.86/month rent increase, is required in order to receive a fair, just and reasonable
return on property.
19
C. The Mobile Home Sales Comparison Formula
A resident in a mobile home park owns his or her own mobile home and may sell that home to a third
party. The sales price of that'home depends on a number of factors such as the size of the mobile
home, i.e., single, double or triple wide, the age and condition of the home and a park's amenities. The
amount of the rent the prospective purchaser will pay undoubtedly will be a factor as well.
Under the Ordinance, the Park Owner is not permitted to Increase the rent upon a transfer of
ownership. Accordingly, the purchaser of a mobile home in the Park will pay the same rent as the
current mobile home owner. Presumably, the lower the monthly rent the purchaser will be obligated to
pay influences in a positive way for the current owner of the mobile home the sales price the purchaser
will be willing to pay for the mobile home. Moreover, if a comparable mobile home were in a
jurisdiction that did not have rent control (or had vacancy decontrol), the mobile home owner would not
receive this higher price when he/she sold his/her home. If that is true, this price differential is
sometimes referred to as a "premium" the mobile home owner receives because of the rent control
jurisdiction in which the owner lives.
Based on this premium concept, Ms. Merrifield testified the Park Owner was entitled to a rent increase
of $403 in order to receive a fair return on Investment. Resp. Ex. 49, Tab C. In support of her opinion,
Ms. Merrifield relied on the sales price of three mobile homes that had sold within the Park in the past
two years and compared those prices to the sales price of three mobile homes not in the Park that had
sold in the same time frame. According to Ms. Merrifield, an appraiser, Alan Sims, who did not testify at
the hearing, made the determination that the sales, taking into account such things as type, age and
square footage of the unit, and the location of the parks, were comparable. See Resp. Ex. 49, Tabs C and
K. Ms. Merrifield then took the difference in those sales prices and applied a 10% factor to the
differences in the sales prices to arrive at a "rental increase per month," These ranged from
$283/month to $493/month; the average was $403/month, representing what she called a "premium"
that residents in the Park were receiving when they sold their homes due to the benefit under the
Ordinance that the purchaser would receive by continuing to pay the existing rent. Ms. Merrifield was
of the opinion that this premium difference, $403/month, should be returned to the Park Owner in the
form of a rent increase to the Residents.
In this proceeding as well as in the 2015 Proceedings, Dr. Baar disagreed with the use of this formula for
determining a fair return. First, Dr. Baar pointed out that park owners have been litigating this issue
against cities and counties who have mobile home rent control ordinances on grounds that such
ordinances constitute a "taking" of the owner's property without just compensation, in contravention of
the Fifth Amendment of the United States Constitution but, to date, the owners have not been
successful in making such claims. Dr. Baar was also not aware that this formula for determining fair
return by use of a "premium" rent differential had ever been utilized by a city or county in determining
fair return nor that any court, unlike other formulae, had cited to such formula as an appropriate
method to determine fair return.
Findings:
34. To allow a Park Owner to use a Mobile Home Sales Comparison formula to recover a
premium differential through a rent Increase to the Residents would allow a park owner to
attain through the back door what the courts have said cannot be attained through the
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front door. No court has held that mobile home residents in a jurisdiction that has rent
control receiving a higher sales price for their homes than if there were no rent control
constitutes a taking for which the jurisdiction must compensate the park owner. Indeed, the
court decisions strongly suggest otherwise. See Lingle v. Chevron USA (2005) 544 U.S. 528;
Guggenheim v. City of Goleta (9"' Cir. 2010) 638 F. 3d 1111; Stardust Mobile Estates v. City of
San Buenaventura (2007147 Cal. App. 4'h 1.170, 1185-1188. If a park owner were now
permitted to recover this differential by increasing the rents for current residents, this
simply shifts the responsibility to compensate the park owner for an alleged takings claim
from the local jurisdiction to the residents. There is no support in the law to do that and,
indeed, it would be extremely unjust to shift a takings claim which falls on all taxpayers
within a jurisdiction to just the few taxpayers within a mobile home park.
35. In addition, a sample size of only three sales seems too small to reach any meaningful
conclusion whether rent control played any role in the price difference. Moreover, there
was no evidence whether the rents for the mobile homes sold outside the Park were also
rent controlled. If so, then the "premium" theory has no traction.
Conclusion:
10. The Park Owner has not carried its burden of proof that the Mobile Home Sales Comparison
Is a valid methodology for determining a fair, just and reasonable return on property nor
that a $403/month rent increase is required for the Park Owner to receive a fair, just and
reasonable return on property.
D. Rent Comparison With Another Park in the City Formula
In 2006, at the request of the residents of San Juan Capistrano Mobile Estates ("San Juan Mobile"),
another mobile home park in the City of San Juan Capistrano, and the Millenium Housing Corporation, a
non-profit organization that assists in providing affordable housing, the City joined a state wide joint
powers agency, the Independent Cities Lease Finance Authority (now called the Independent Cities
Financing Authority) in order to finance through the sale of tax exempt revenue bonds sufficient funding
for Millenium to purchase San Juan Mobile from the private owner. The joint powers agency, not the
City, issued the bonds for which the City and its general fund would have no financial responsibility. The
bonds would be paid from the rents at the park and part of the bond proceeds would fund a housing
assistance program for the residents who could not afford the higher rent. Resp. Ex. 19 and from the
2015 Proceedings see Exs.176 and 179 and in particular the June 16, 2015 agenda report re:
Consideration of Resolutions Related to the Refunding Bonds to be issued by the Independent Cities
Financing Authority for the San Juan Mobile Estate Project (Millenium Housing).
In order to market the bonds successfully in 2006, as well as marketing the refinancing of the bonds
successfully in 2015, the joint powers agency, as the issuer of the bonds, needed to provide assurances
to prospective purchasers of the bonds that the revenue stream from the rents would be sufficient so
that the bond payments could be made. As explained by a Mr. Dittmar, a resident of San Juan Mobile
since 2000 who was on the residents' board in 2006 when the negotiations for the sale of the park
between the then park owner, Millenium, the City and the residents was occurring, the City agreed that
the rents for all spaces in the park would be adjusted to $805, notwithstanding that most of the rents at
the park at the time were substantially below that amount. The residents paying rent less than
$805/month would continue to pay the same rent as prior to the rent increase and the difference would
21
be made up through a housing assistance or subsidy fund created as part of the bond
financing/refinancing. Rents currently at San Juan Mobile are $889.74/month (the same as in 2015)
and, at least in 2015, many residents receive financial assistance through the subsidy program ranging
from about $10 to over $350, with most being in the $250 range. Resp. Ex. 17.
Using $805 as a base rent in 2006, Ms. Merrifield, using a CPI adjustment, calculated the rents at San
Juan Mobile in 2014 as $948.37 and compared that to the average monthly rents at EI Nido in 2014
($727.66), a difference of $220.71. She also considered a letter from appraiser Sims that the two parks
are comparable because both are subject to rent control, have approximately the same space rent, have
homes that are similar in size and age, and are located within four miles of the beach. Resp. Ex. 47.
Based on Mr. Sims' letter and on an assumption the City determined in 2006 that $805 for space rent at
San Juan Mobile would provide a fair, just and reasonable return, which rents, as adjusted by the CPI,
had increased to $948.37 in 2014, she opined the Park Owner is entitled to a rent increase of $220.71
($948.37 - $727.66 = $220.71). Resp. Ex. 49, tab D.
The Residents' expert, Mr. Brabant, disagreed with Ms. Merrifield's opinion on several grounds. Pet. Ex.
A, pps. 2-3.. First, he felt that comparing rents in EI Nido to only one other park In the City disregarded
data from other parks in the City that was readily available. His office conducted a survey of 2016 rents
in the other parks in the City and determined that the average monthly rents of comparable parks
ranged from $600 to $800; EI Nido, at an average of $726/month, was within that range and Is higher
than three of the parks. He also pointed out, as had Mr. Dittmar, that the stated rent of $889.74 at San
Juan Mobile does not reflect what in fact most residents pay and ignores the history of why the rents
were increased in 2006 from an average of $570 to $805, i.e., in order to facilitate the purchase of the
park by Millenium, with all the accompanying benefits to the residents flowing from such sale, such as
having a non-profit own and managing the park. Mr. Brabant concluded the average rents at EI Nido are
consistent with rents at other comparable parks in the City and no rent increase is needed to bring
about equality.
f=indings:
36. The rents at San Juan Mobile were not set at $805/month based on the City's finding that
such rents were required in order to provide a fair return on investment. The rents were set
at that amount in order to facilitate the sale of San Juan Mobile to a non-profit company
through the sale of bonds and to assure the bondholders there would be a revenue stream
to make the bond payments. The bond sale also generated sufficient funds to establish a
rent subsidy program by which most of the residents in the park would continue to pay less
than the $805/month in 2006 and less than the $889.74/month currently in effect. Because
the $805/month established in 2006 for San Juan Mobile was unrelated to a fair return on
Investment, using an adjusted rent (whether $948.37 or $889.74) to compare it to the EI
Nido average rents is not supported by the evidence.
37. The average rents at EI Nido ($726/month) are comparable to the average range of rents in
other mobile home parks in the City and are higher than three other parks.
Conclusions:
22
11. Employing a Rent Comparison With Another Park in the City formula, the Park Owner did
not carry Its burden of proof that a $403/month rent increase, or a $220.71/month rent
increase, is required to receive a fair, just and reasonable return on property.
Issue S. What percentage should each party pay of the $1000 administrative fee?
The Ordinance required the Residents to post a $500 fee with the City when they filed their protest
petition. Once the City determined the petition to be in order and the fee deposited, the City notified
the Park Owner that it must deposit with the City an additional $500 fee. The fee is required for costs
incurred in invoking the Hearing Officer procedure. Section 2-2.904 (a)(b), SJCMC. The Residents and
the Park Owner deposited the required fees.
The Ordinance provides that at the conclusion of the administrative hearing, the Hearing Officer shall
recommend as to the percentage that each party is to pay in satisfying the $1000 administrative fee.
The City Council, however, makes the final determination. Section 2-2.904 (c), SJCMC. The Ordinance
does not provide any guidance to the Hearing Officer as to what factors to consider in making this
recommendation other than the general provisions that the overall purpose of the Ordinance is to
eliminate the imposition of excessive rents but still provide a park owner with a just and reasonable
return on property.
Here, the Park Owner noticed a rent increase of $403/month. The Park Owner's expert has opined that
a rent Increase of anything less than $403/month would not provide the Owner with a fair, just and
reasonable return on investment,
For the reasons stated in the Findings and Conclusions, the Park Owner has not carried its burden of
proof to demonstrate that any rent increase, other than a $10/month increase, Is required for a just and
reasonable return on property, an amount generally consistent with the rent increase the Park Owner
would have received had the Park Owner selected the formula under Section 2-2.902 (d)(2), SJCMC.
Because the recommended rent increase of $10/month is substantially less than the lowest rent
increase under any of the formulae set forth by the Park Owner, the Park Owner should pay 100% of the
administrative fee.
OVERALL FINDINGS
1. For the reasons set forth in the Hearing Officer's Decision Concerning Respondent's Motion to
Disqualify the Hearing Officer, dated August 21. 2016, (Resp. Ex. 44), the Hearing Officer was not
disqualified from hearing this matter.
2. The argument madip in the Park Owner's post trial brief as to why the Hearing Officer should be
disqualified fails for two reasons. First, the Professional Services Agreement between the City
and the Hearing Officer, a copy of which is attached as Attachment 1, does not require a
commercial general liability insurance policy. See Section 11 of the Agreement. Second, the
City has not informed the Hearing Officer that he is in breach of the Agreement in any respect
(and indeed the Hearing Officer is not in breach of the Agreement). The Agreement is clear it
cannot be terminated based on the outcome of one or more decisions the Hearing Officer
makes concerning rent control matters (see Section 16) and therefore the Hearing Officer is not
financially motivated to issue decisions that are pro -rent control in nature or that otherwise
would keep him in the City's good graces.
23
3. The Hearing Officer informed the parties on July 13, 2016 that he had been appointed to hear
this particular matter, the Park Owner was aware earlier that the City had awarded the
Agreement, over the Park Owner's objections, for as needed Hearing Officer services to Mr.
Roush. Resp. Ex. 35. In light of that, if there were serious concerns about the Hearing Officer's
Impermissible bias, the Park Owner had more than ample time to seek appropriate relief In the
Superior Court. The Park Owner, for whatever reason, chose not to do that. Even after the
Hearing Officer issued his decision on August 21 denying the Park Owner's motion to disqualify
the Hearing Officer, the Park Owner had time to seek appropriate relief in the Superior Court.
By not pursuing that remedy and thereby allowing this proceeding to continue at great expense
not only to the Residents and City but also to itself, the Park Owner's contentions concerning
disqualification of the Hearing Officer are foreclosed by principles of equitable estoppel.
4. Requiring residents to file a protest petition by no later than 30 days of the effective date of a
rent increase is much more reasonable reading of the Ordinance In that it harmonizes and gives
effect to all provisions of the Ordinance that relate to the same subject matter. While true that
one section of the Ordinance says the petition must only be filed "following the effective date of
the rent increase" (Section 2-2.903 (a), SJCMC), another section of the Ordinance requires park
residents to post a $500 deposit at the time the residents file a protest petition of a "proposed
[rent] increase". Section 2-209 (b), SJCMC). If residents could not file their protest petition
until after the effective date of the rent increase, the reference to a proposed rent increase
would be superfluous.
S. Requiring residents to file a protest petition by no later than 30 days of the effective date of a
rent increase is also consistent with the legislative intent as reflected in the Ordinance, part of
which is to protect the residents from unreasonable rent increases. The review process Is
lengthy: 60 days (or longer) from the time the protest petition is filed for the hearing itself to be
conducted; 30 days following the hearing for the Hearing Officer's decision; and at least two
public hearings, one by the Committee and one by the City Council, both of which require at
least 10 days' notice. Indeed, here the protest petition was filed on June 8, 2016 but the
hearing itself was not able to be scheduled and conducted until late August, with the Hearing
Officer's decision in early September. It is likely to take at least another 30 days or so after that
for a final Council decision. Accordingly, if the Residents here were required to wait until
September 1 just to file their protest petition, the Residents would face the prospect of paying a
substantial rent increase, even if not warranted, for months, contrary to the purpose of the
Ordinance. The Hearing Officer acknowledges that in addition to protecting residents from
unreasonable rent increases, the Ordinance recognizes the need of a park owner to receive a
fair, just and reasonable return on investment. Interpreting the Ordinance such that a protest
petition is timely so long as it is filed by no later than 30 days following the effective date of the
rent increase does not deprive the park owner of imposing and collecting the rent increase on
the effective date of the rent increase. To the extent it is determined that the collected rent
increase Is required In order to provide the park owner with a fair, just and reasonable return on
Investment, the Park Owner would have received the rent and the intent of the Ordinance as to
a park owner would be satisfied.
24
6. Requiring residents to file a protest petition by no later than 30 days of the effective date of a
rent increase also avoids an absurd reading of the Ordinance because the words of Section 2-
2.903 (a), SJCMC, taken literally, would require residents to file their protest only on the 30a'
calendar day following the effective date of the rent increase.
7. Moreover, for the reasons set forth in Finding 3, equitable estoppel precludes this argument.
The Park Owner made this same argument last year and the Hearing Officer determined the
petition was not filed prematurely. Here, many weeks before the hearing was conducted, It was
clear the Hearing Officer intended to hold the hearing prior to the effective date of the rent
Increase. As with the disqualification of the Hearing Officer, nothing prevented the Park Owner
from seeking Injunctive or other relief in court on grounds that the petition was premature and
that the hearing should not proceed accordingly. The Park Owner, however, chose not to do
that.
8. Recognizing that Ms. Stokes had for all practical purposes been serving as the Secretary to the
Housing Advisory Committee for some time, the City Manager, as is his authority, designated
Ms. Stokes as the Committee's Secretary on May 31, 2016, which designation she accepted.
Pet. Ex. D. The duties of the Committee's Secretary are set forth generally and specifically in the
Ordinance and it was not required for the City Manager to be specific in his designation memo
as to what those duties are.
9. This Park Owner did not raise this particular procedural issue until the very end of the hearing
on August 25. In response, the City Attorney produced Pet. Ex. D to demonstrate that Ms.
Stokes had been designated the Committee Secretary. The production of Pet. Ex. D was not
advocacy on the part of the City; it was simply responding to a perceived procedural issue. The
Park Owner did not request the City Attorney to produce the City Manager or any other person
so that the Park Owner could cross examine such witnesses about the memorandum.
10. Ms. Stokes had ample time to deterrhine that on its face the petition had the required number
of signatures before advising the Park Owner that a petition had been filed. There is nothing in
the Ordinance that required Ms. Stokes to verify independently that each of the persons who
had signed the petition in fact resided in the Park or had signed the petition. She was entitled to
rely on the good faith representation of Mr. Perrin who submitted the petition along with the
$500 deposit that the residents who signed the petition resided In the Park. Resp. Ex. 24.
11. Moreover, the Residents had no control whether the City at the time they filed their petition
had officially designated Ms. Stokes as the secretary to the Committee. The Residents in good
faith relied on the representations of City personnel in the past as to whom the petition should
be filed and they followed that direction. To dismiss the Residents' petition on those grounds
would be unnecessarily punitive to the Residents.
12. In the 2015 Proceeding, Thomas Perrin, a Park resident and one of the members of the Steering
Group/Legal Defense Group, explained in detail how the signatures had been collected on the
petition and that no one had asked him to remove his/her name from the petition. And while
each of the Residents who had signed the petition did not testify at that hearing to authenticate
his or her signature, there was also no indication that any of the signatures had been forged or
25
were the result of fraud or duress. Last year, there was ample proof that more than 50% of the
Residents residing in the Park had signed the protest petition. The Park Owner was provided
with a copy of this year's petition that had the names of the residents. Resp. Ex, 24. Certainly
the Park Owner had time to review the names on the petition to determine if anyone whose
name was on the petition did not reside in the Park or the petition was otherwise not genuine.
If such were the case, the Park Owner could have put on evidence to that effect. No such
evidence was introduced.
13. In that these issues were raised last year but not decided in the Park Owner's favor, for the
reasons expressed in Finding 3 above, the Park Owner is equitably estopped from relying on
these procedural issues as grounds to dismiss the petition.
14. As to the formula under Section 2-2.902 (d)(2), the percentage increase in the CPI -U for the
calendar year immediately preceding the one in which the rental adjustment is being made, i.e.,
the percentage increase in the CPI -U between 2014 and 2015, was 0.9%. Because there is a
range of rents In the Park, ranging from a low of $565.81 to a high of $1127,05 (Resp. Ex. 27),
the maximum allowable increase ranges from $5.09 to $10.14, well below the $403 rent
increase.
15. Applying the formula under Section 2-2.902 (d)(1) requires some interpretation of the
Ordinance. First, the term "operating expenses" is not defined in the Ordinance. Second, the
Ordinance is not clear what the relevant period is for determining the percentage increase in the
CPI -U. Third, this formula computes only the "maximum allowable annual increase" for each
space but the rent increase ($403) is on a monthly basis.
16. The Park Owner provided a Profit and Loss Statement showing a list of expenses representing
the operating expenses between May 2015 and April 2016. Taking into account that the Park
Owner amortized some of the expenses listed on the Statement, the Park Owner claimed at the
August 2 hearing the operating expenses for purposes of applying the formula under section 2-
2.902 (d)(1) were $837,930. Based on the amount of those expenses, the Park Owner stated the
maximum allowable increase was $57.
17. The Residents objected to the $57 figure on several grounds. First, they argued that some of the
claimed expenses were significantly overstated and/or should have been amortized. More
importantly, they argued that even assuming that the claimed expenses that gave rise under the
formula to $57, the $57 represents just the annual maximum allowable Increase and therefore,
$57 must be divided by 12 to yield a maximum allowable increase of $4.75/month. Resp. Exs.
38 and 40, at pps. 62-63.
18. In response, the Park Owner pointed out that in the 2015 Proceeding, the Hearing Officer, in
reaching his decision and recommendation as to the maximum allowable Increase did not make
that final division. Moreover, in the 2015 Proceeding the Residents did not argue to the Housing
Advisory Committee nor to the City Council that the maximum allowable increase of $37 as
calculated by the Hearing Officer should be divided by 12. As a result of last year's proceeding,
the City Council imposed a rent increase of $37. Resp. Ex. 40, at pps. 38-42.
26
19. Notwithstanding that the Hearing Officer In the 2015 Proceedings did not divide by 12 the $37
which he determined to be the maximum allowable increase, the Hearing Officer failed to take
into account that the $37 there, like the $57 here, was the maximum annual allowable increase
and, in hindsight, he should have divided the $37 by 12. (Emphasis added.) Resp. Ex. 40, at pps.
79=82.
20. In order to use a maintenance of net operating income methodology to determine fair return,
the methodology used to determine revenues for the base year must be the same, or at least
comparable, as the current year. Ms. Merrifield did not use the same methodology for both
years and did not provide an adequate explanation as to why she did not adjust the 2014 rent
space revenue as she did for the 2015 space rent revenue, or why she did not use the same
methodology for 2015 as used for 2014.
21. The inflation adjustment used by Ms. Merriweather for the base year operating income was
incorrect. She compared the CPI -U as of June 2016 to the CPI -U for December 2014. The
comparison should have been between December 2014 and December 2015.
22. A Park Owner is entitled to recover reasonable expenses, including legal and accounting fees,
that are incurred in obtaining a fair return. Galland v. City of Clovis (2001) 24 Cal. 4a' 1002.
There are neither clear guidelines nor judicial precedent to establish the amount of legal and
expert expenses that would be reasonable in mobliehome park fair return cases. In other
contexts, however, such as where a contract provides that the prevailing party in a legal dispute
has the right to recover attorney's fees or where a party is entitled to recover these costs by
statute (e.g., a civil rights claim), the burden is on the party seeking such fees to show the
reasonableness of the fees.
23. Courts In reviewing legal expense claims consider the reasonableness of the number of hours,
the reasonableness of the hourly rate, the success or failure of the party seeking to recover
these expenses and the proportion of the legal work associated with the successful claims and
the novelty or difficulty of the issues involved. Melnyk v. Robledo (1976) 64 Cal. App. 3d 618,
623-624.
24. Applying these principles, the expenses for the legal and accounting fees for 2015 must be
reduced because (a) some of the expenses do not have supporting documentation, (b) some of
the claimed expenses, such as for drafting park rules, do not have a reasonable nexus to the
2015 fair return proceeding, (c) some of the expenses were incurred for the purpose of pursuing
a legal challenge In court in the face of an adverse administrative decision yet not pursued and
(d) the Park Owner was not successful on any of the theories upon which the Park Owner sought
a rent increase in 2015.
25. There are expenses in the amount of $62,082.71($47,225.57 for accounting and $14,857.24 for
legal) for which there is no back up documentation. The general ledger on which Ms. Merrifield
relied to calculate the legal and accounting expenses is on the seventh page of Tab F of Resp. Ex.
49 (also on page 7 of Resp. Ex. 28). There are 25 entries and the accounting expenses are noted
with a handwritten capital "A". The invoices that she reviewed are set forth in Resp. Ex. 30. On
27
page 7, the first seven entries dated between January 28, 2015 and April 21, 2015, four of which
are for legal and three of which are for accounting, have no supporting invoices or other
documentation. These total $37,472.64 ($25,103 for accounting; $12,369.74 for legal). Also
absent is the backup for an accounting entry on October 16, 2016, to Capata & Co. In the
amount of $20,684.62. (On August 19, 2016, Mr. Stanton sent an email to the Park Owner's
counsel indicating that he did not see the supporting documentation for this expense and
requested the itemized invoice to be provided. Resp. Ex. 43. One of the Park Owner's exhibits is
a copy of an invoice from Capata & Co. dated September 1, 2016 in the amount of $26,633.50.
Resp. Ex. 46. It is not clear whether that invoice was intended to be in response to Mr. Stanton's
Inquiry but in any event it lacks detail as to what work was performed. Moreover, not only does
the amount on that invoice not match the October 16 entry but the brief description of the work
seems off in that It reflects Ms. Merrifield's billing $25,846 for work In August 2016 and Mr.
Capata billing only $787.50. Mr. Capata, however, testified at length in August during the 2015
Proceedings.) There is also an entry for $4187.50 for legal expenses but there is no supporting
documentation for $2487.50. Finally, there is an entry for $2069.95, $632 of which was for legal
and $1437.95 was for accounting. There is, however, no supporting documentation for the
accounting piece.
26. Following the Hearing Officer's Decision in September 2015, the invoices from the law firms
representing the Park Owner reflect legal work concerning preparation of a petition for a writ of
mandate and related matters, such as a stay, presumably to challenge the decision of the City
Council concerning the amount of the rent increase for 2015. The total of these entries is
$31,676. Although a Park Owner may choose to spend its money for legal services however it
chooses, the Residents should not be saddled with these expenses in light of the overwhelming
lack of favorable results in the administrative hearing and in light that ultimately the Park Owner
did not pursue a legal challenge to the City Council's decision. Accordingly, these expenses must
be excluded.
27. The invoices also reflect legal work unrelated to the fair return proceedings such as drafting park
rules and regulations ($7075), an investigation of a park resident ($434) and unrelated legal
work ($450).
28. Excluding these amounts from the legal expenses shown on the ledger leaves $177,379; from
the accounting expenses leaves $35,012.05.
29. In the 2015 Proceedings, the Park Owner sought a $641/month rent increase but also put on
evidence, employing various methodologies to support a rent increase ranging from $81 to
$742. Although the City Council did approve a monthly rent Increase of $37 per space, it did
not rely on or employ any of the methodologies urged by the Park Owner. Given that lack of
success, the Park Owner should not recover through a rent increase anywhere near the amount
of legal and accounting expenses incurred in the 2015 Proceedings.
30. For the legal and accounting fees incurred in pursuing a fair return increase In 2015, the Park
Owner is entitled to recover reasonable legal expenses in the amount of $44,350 and
reasonable accounting fees in the amount of $8750. Amortized over five years at an interest
rate of seven percent, the expenses for 2015 are $10,357 for legal and professional and $2079
for accounting.
28
31. Using the corrected inflation adjustment for the 2014 base year net operating income, using the
same space revenue as in 2014 but adding increased space revenue of $37/month for 150
spaces for four months, using the reasonable, amortized legal and accounting expenses as set
forth in Finding 30 and employing the methodology set forth in Resp. Ex. 49, Tab A yields a rent
increase of $9.50/month using the Maintenance of Net Operating income methodology.
[Calculations are on Attachment 2.]
32. The Residents' expert witnesses' analyses and opinions are more persuasive that the
capitalization rate is the proper standard for determining return on investment and that rate
should be 6%. First, although Ms. Merrifield stated that she was not using a capitalization rate,
the data an which she relied— realtyrates.com-- employs capitalization rates. (In the 2015
Proceedings, the Park Owner's expert also had relied on the capitalization rates from
realty.rates.com in arriving at his opinion about return on Investment. See Ex. 4 from the 2015
Proceedings.) Second, the primary data on which Mr. Brabant based his opinion were fairly
recent sales of mobile home parks in neighboring San Diego County In which the capitalization
rate was confirmed. Those capitalization rates averaged 5.9%. While true that the 2015 data is
over a year old, and the more recent survey of mobile home park sales throughout California
indicate a capitalization rate that is approaching 7%, there were no recent sales of mobile home
parks in Orange County. While also true that not all of those parks in Mr. Brabant's 2015 San
Diego County survey would be an apples to apples comparisons to EI Nido, the proximity of
those parks to EI Nido in Orange County, coupled with the reported low vacancy rates in those
sold parks, confirms that the capitalization rates for mobile home parks in southern California do
not approach 8%. Third, other data on which Mr. Brabant relied—such as the CoStar survey that
analyzed mobile home sales In California—were also more persuasive than the nationwide sales
relied upon by Ms. Merrfield in 2016.
33. Employing 8% as a fair return on investment, Ms. Merrifield opined that the Owner needed a
$131.86 rent increase. If, however, a 6% cap rate is employed, the Owner would not need any
rent increase as the net operating income (as shown on Attachment 1) Is $1,063,529 which is
more than $891,000 [$13,500,000 x 110% (inflation factor since 2009) _ $1,485,000 x 6% _
$891,000).
34. To allow a Park Owner to* use a Mobile Home Sales Comparison formula to recover a premium
differential through a rent increase to the Residents would allow a park owner to attain through
the back door what the courts have said cannot be attained through the front door. No court
has held that mobile home residents in a jurisdiction that has rent control receiving a higher
sales price for their homes than if there were no rent control constitutes a taking for which the
jurisdiction must compensate the park owner. Indeed, the court decisions strongly suggest
otherwise. See Lingle v. Chevron USA (2005) 544 U.S. 528; Guggenheim v. City of Goleta (9"' Cir.
2010) 638 F. 3d 1111; Stardust Mobile Estates v. City of San Buenaventura (2007)147 Cal. App.
4"'1170,1185-1188. If a park owner were now permitted to recover this differential by
increasing the rents for current residents, this simply shifts the responsibility to compensate the
park owner for an alleged takings claim from the local jurisdiction to the residents. There is no
support in the law to do that and, indeed, it would be extremely unjust to shift a takings claim
which falls on all taxpayers within a jurisdiction to just the few taxpayers within a mobile home
park.
29
35. In addition, a sample size of only three sales seems too small to reach any meaningful
conclusion whether rent control played any role in the price difference. Moreover, there was no
evidence whether the rents for the mobile homes sold outside the Park were also rent
controlled. If so, then the "premium" theory has no traction.
36. The rents at San Juan Mobile were not set at $805/month based on the City's finding that such
rents were required in order to provide a fair return on investment. The rents were set at that
amount in order to facilitate the sale of San Juan Mobile to a non-profit company through the
sale of bonds and to assure the bondholders there would be a revenue stream to make the
bond payments. The bond sale also generated sufficient funds to establish a rent subsidy
program by which most of the residents in the park would continue to pay less than the
$805/month in 2006 and less than the $889.74/month currently in effect. Because the
$805/month established in 2006 for San Juan Mobile was unrelated to a fair return on
Investment, using an adjusted rent (whether $948.37 or $889.74) to compare it to the EI Nido
average rents is not supported by the evidence.
37. The average rents at EI Nido ($726/month) are comparable to the average range of rents in
other mobile home parks in the City and are higher than three other parks.
OVERALL CONCLUSIONS
1. The Hearing Officer was not legally disqualified from hearing this matter.
2. The petition was not filed prematurely.
3. Laura Stokes was the Secretary of the Housing Advisory Committee at the time the Residents
filed their protest petition with her.
4. More than 50% of the Residents then residing in the Park signed the protest petition.
5. The petition must not be dismissed due to a lack of compliance with any other procedural
aspects of the Ordinance.
6. Accepting the Park Owner's operating expenses between May 2015 and April 2016 at face value,
the Hearing Officer correctly calculated the maximum allowable increase under section 2-
2.903(d)(1) SJCMC as $4.75/month and the $403/month rent increase exceeds the maximum
allowable increase.
7. The maximum allowable increase under Section 2-2.903(d)(2) SJCMC ranges between $5.09 and
$10.14, and the $403 rent increase exceeds the maximum allowable increase.
8. Using the Maintenance of Net Operating Income methodology, the Park Owner did not carry its
burden of proof that a $403/month rent increase nor any other rent increase in excess of
$9.50/month (which would be more than the maximum allowable increase under the
Ordinance) is required in order to receive a fair, just and reasonable return on property. If a
rent increase is granted using this methodology, after five years, the $10,537 for legal and
professional expenses and the $2079 for accounting expenses must be removed from the
operating expenses.
30
9. The Park Owner did not carry is burden of proof that an 8% return on investment is a fair, just
and reasonable return on the property and/or that a $403/month rent increase, or a
$131.86/month rent increase is required in order to receive a fair, just and reasonable return on
property.
10. The Park Owner has not carried its burden of proof that the Mobile Homes Sales Comparison is
a valid methodology for determining a fair, just and reasonable return on property or that a
$403/month rent increase is required for the Park Owner to receive a fair, just and reasonable
return on the property.
11. Employing a Rent Comparison With Another Park in the City formula, the Park Owner did not
carry its burden of proof that a $403/month rent increase, or a $220.71/month rent increase, is
required to receive a fair, just and reasonable return on property.
RECOMMENDATIONS
1. The Park Owner's rent increase of $403/month is not supported by the law or the evidence and
should not be granted.
2. Other monthly rent increases proposed by the Park Owner, ranging from $131.86 to $220.71,
are not supported by the evidence and should not be granted.
3. The evidence does support a rent increase of $9.50/month using a properly applied
Maintenance of Net Operating Income formula, with the caveat the amortized legal and
accounting expenses that factor in to this formula must be removed after five years.
4. Depending on what formula under the Ordinance is employed, the maximum allowable increase
is between $5/month (rounded) and, on average, $8/month (rounded).
5. The Park Owner should pay 100% of the administrative fee.
Dated: September 10, 2016 _ t ,mill A�-,e---
Michael
H. Roush
Hearing Officer
31
CITY OF SAN JUAN CAPISTRANO
PROFESSIONAL SERVICES AGREEMENT
This Agreement is made and entered into as of June 21, 2016 (the "Effective Date") by
and between the City of San Juan Capistrano, a municipal corporation organized and operating
under the laws of the State of California with its principal place of business at 32400 Paseo
Adelanto, San Juan Capistrano, CA 92675 ("City"), and MICHAEL. ROUSH, an ATTORNEY AT
LAW with its principal place of business at 5571 Corte Sierra, Pleasanton, CA 94566
(hereinafter referred to as °Consultant"). City and Consultant are sometimes individually referred
to as "Party" and collectively as "Parties" in this Agreement.
RECITALS
A. City is a public agency of the State of California and is in need of professional
services for the following project:
Mobile Home Rent Control Hearing Officer, in accordance with the City
Municipal Code Section 2-2.901 through 2-2.904 as needed for five (5)
years following the Effective Date (hereinafter referred to as "the
Project").
B. Consultant is duly licensed and has the necessary qualifications to provide such
services.
C. The Parties desire by this Agreement to establish the terms for City to retain
Consultant to provide the services described herein.
AGREEMENT
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Services.
Consultant shall provide the City with the services described in the Scope of Services
attached hereto as Exhibit "A"
2. Compensation.
a. Subject to paragraph 2(b) below, the City shall pay for such services in
accordance with the Schedule of Charges set forth in Exhibit "B."
b. In no event shall the total amount paid for services rendered by
Consultant under this Agreement exceed the sum of $225 er hour and reimbursement for
travel expenses. This amount is to cover all printing and related costs, and the City will not pay
any additional fees for printing expenses. Periodic payments shall be made within 30 days of
receipt of an invoice which includes a detailed description of the work performed. Payments to
Consultant for work performed will be made on a monthly billing basis.
61147,01401 \29019945.1
A-TThcAKCPT-
�-
3. Additional Work.
If changes in the work seem merited by Consultant or the City, and informal
consultations with the other party indicate that a change is warranted, it shall be processed in
the following manner: a letter outlining the changes shall be forwarded to the City by Consultant
with a statement of estimated changes in fee or time schedule. An amendment to this
Agreement shall be prepared by the City and executed by both Parties before performance of
such services, or the City will not be required to pay for the. changes in the scope of work. Such
amendment shall not render ineffective or invalidate unaffected portions of this Agreement.
4. Maintenance of Records.
Books, documents, papers, accounting records, and other evidence pertaining to costs
incurred shall be maintained by Consultant and made available at all reasonable times during
the contract period and for four (4) years from the date of final payment under the contract for
inspection by City.
5. Time of Performance.
Consultant shall perform its services in a prompt and timely manner and shall
commence performance upon receipt of written notice from the City to proceed ("Notice to
Proceed"). Consultant shall complete the services required hereunder as necessary for a five
(5) year period following the Effective Date. The Notice to Proceed shall set forth the date of
commencement of work.
6. delays in Performance.
a. Neither City nor Consultant shall be considered in default of this Agreement for
delays in performance caused by circumstances beyond the reasonable control of the non-
performing party. For purposes of this Agreement, such circumstances include but are not
limited to, abnormal weather conditions; floods; earthquakes; fire; epidemics; war; riots and
other civil disturbances; strikes, lockouts, work slowdowns, and other labor disturbances;
sabotage or judicial restraint.
b. Should such circumstances occur, the non-performing party shall, within a
reasonable time of being prevented from performing, give written notice to the other party
describing the circumstances preventing continued performance and the efforts being made to
resume performance of this Agreement.
7. Compliance with Law.
a. Consultant shall comply with all applicable laws, ordinances, codes and
regulations of the federal, state and local government, including Cal/OSHA requirements.
b. If required, Consultant shall assist the City, as requested, in obtaining and
maintaining all permits required of Consultant by federal, state and local regulatory agencies.
C. If applicable, Consultant is responsible for all costs of clean up and/ or removal of
hazardous and toxic substances spilled as a result of his or her services or operations
performed under this Agreement.
2
61147.01401129019945 I
8, Standard of Care
Consultant's services will be performed in accordance with generally accepted
professional practices and principles and in a manner consistent with the level of care and skill
ordinarily exercised by members of the profession currently practicing under similar conditions.
9. Assignment and Subconsultant
Consultant shall not assign, sublet, or transfer this Agreement or any rights under or
interest in this Agreement without the written consent of the City, which may be withheld for any
reason. Any attempt to so assign or so transfer without such consent shall be void and without
legal effect and shall constitute grounds for termination. Subcontracts, if any, shall contain a
provision making them subject to all provisions stipulated in this Agreement. Nothing contained
herein shall prevent Consultant from employing independent associates, and subconsultants as
Consultant may deem appropriate to assist in the performance of services hereunder.
10. Indepgndent ConsuRant
Consultant is retained as an independent contractor and is not an employee of City. No
employee or agent of Consultant shall become an employee of City. The work to be performed
shall be in accordance with the work described in this Agreement.
11. Insurance. Consultant shall not commence work for the City until it has provided
evidence satisfactory to the City it has secured all insurance required under this section. In
addition, Consultant shall not allow any subcontractor to commence work on any subcontract
until it has secured all insurance required under this section.
a. Reserved
b. Automobile Liability
(i) At all times during the performance of the work under this
Agreement, the Consultant shall maintain Automobile Liability Insurance for bodily injury and
property damage including coverage for owned, non -owned and hired vehicles, in a form and
with insurance companies acceptable to the City.
(ii) Coverage for automobile liability insurance shall be at least as
broad as Insurance Services Office Form Number CA 00 01 covering automobile liability
(Coverage Symbol 1, any auto).
(iii) The policy shall give City, its officials, officers, employees, agents
and City designated volunteers additional insured status.
(iv) Subject to written approval by the City, the automobile liability
program may utilize deductibles, provided that such deductibles shall not apply to the City as an
additional insured, but not a self-insured retention.
C. Workers' Com ensation/Em to er's Liability
(i) Consultant certifies that he/she is aware of the provisions of
Section 3700 of the California Labor Code which requires every employer to be insured against
61147.0140 1\29019945.1
liability for workers' compensation or to undertake self-insurance in accordance with the
provisions of that code, and he/she will comply with such provisions before commencing work
under this Agreement.
(ii) To the extent Consultant has employees at any time during the
term of this Agreement, at all times during the performance of the work under this Agreement,
the Consultant shall maintain full compensation insurance for all persons employed directly by
him/her to can out the work contemplated under this Agreement, all in accordance with the
"Workers' Compensation and Insurance Act, Division IV of the Labor Code of the State of
California and any acts amendatory thereof, and Employer's Liability Coverage in amounts
indicated herein. Consultant shall require all subconsultants to obtain and maintain, for the
period required by this Agreement, workers' compensation coverage of the same type and limits
as specified in this section.
d. Professional Liability(Errors and omissions
At all times during the performance of the work under this Agreement the Consultant
shall maintain professional liability or Errors and Omissions insurance appropriate to its
profession, in a form and with insurance companies acceptable to the City and in an amount
indicated herein. This insurance shall be endorsed to include contractual liability applicable to
this Agreement and shall be written on a policy form coverage specifically designed to protect
against acts, errors or omissions of the Consultant. "Covered Professional Services" as
designated in the policy must specifically include work performed under this Agreement. The
policy must "pay on behalf of the insured and must include a provision establishing the insurer's
duty to defend.
e. Minimum Policy Limits Required
(i) The following insurance limits are required for the Agreement:
Combined Single Limit
Automobile Liability $1,000,000 per occurrence for bodily injury and
property damage
Employer's Liability $1,000,000 per occurrence
Professional Liability $1,000,000 per claim and aggregate (errors and
omissions)
(ii) Defense costs shall be payable in addition to the limits.
(iii) Requirements of specific coverage or limits contained in this
section are not intended as a limitation on coverage, limits, or other requirement, or a waiver of
any coverage normally provided by any insurance. Any available coverage shall be provided to
the parties required to be named as Additional Insured pursuant to this Agreement.
f. Evidence Re aired
Prior to execution of the Agreement, the Consultant shall file with the City
evidence of insurance from an insurer or insurers certifying to the coverage of all insurance
4
61147.01401 \29019945.1
required herein. Such evidence shall include original copies of the ISO CG 00 01 (or insurer's
equivalent) signed by the insurer's representative and Certificate of Insurance (Acord Form 25-
S or equivalent), together with required endorsements. All evidence of insurance shall be
signed by a properly authorized officer, agent, or qualified representative of the insurer and
shall certify the names of the insured, any additional insureds, where appropriate, the type and
amount of the insurance, the location and operations to which the insurance applies, and the
expiration date of such insurance.
g, Policy Provisions Re uired
(i) Consultant shall provide the City at least thirty (30) days prior
written notice of cancellation of any policy required by this Agreement, except that the
Consultant shall provide at least ten (10) days prior written notice of cancellation of any such
policy due to non-payment of premium. If any of the required coverage is cancelled or expires
during the term of this Agreement, the Consultant shall deliver renewal certificate(s) including
the General Liability Additional Insured Endorsement to the City at least ten (10) days prior to
the effective date of cancellation or expiration.
(ii) The Automobile Policy shall contain a provision stating that
Consultant's policy is primary insurance and that any insurance, self-insurance or other
coverage maintained by the City or any named insureds shall not be called upon to contribute
to any loss.
(iii) The retroactive date (if any) of each policy is to be no later than
the effective date of this Agreement. Consultant shall maintain such coverage continuously for
a period of at least three years after the completion of the work under 'this Agreement.
Consultant shall purchase a one (1) year extended reporting period A) if the retroactive date is
advanced past the effective date of this Agreement; B) ff the policy is cancelled or not renewed;
or C) if the policy is replaced by another claims -made policy with a retroactive date subsequent
to the effective date of this Agreement.
(iv) All required insurance coverages, except for the professional
liability coverage, shall contain or be endorsed to waiver of subrogation in favor of the City, its
officials, officers, employees, agents, and volunteers or shall specifically allow Consultant or
others providing insurance evidence in compliance with these specifications to waive their right
of recovery prior to a loss. Consultant hereby waives its own right of recovery against City, and
shall require similar written express waivers and insurance clauses from each of its
subconsultants.
(v) The limits set forth herein shall apply separately to each insured
against whom claims are made or suits are brought, except with respect to the limits of liability.
Further the limits set forth herein shall not be construed to relieve the Consultant from liability in
excess of such coverage, nor shall it limit the Consultant's indemnification obligations to the
City and shall not preclude the City from taking such other actions available to the City under
other provisions of the Agreement or law.
h. Qualifying Insurers
(i) All policies required shall be issued by acceptable insurance
companies, as determined by the City, which satisfy the following minimum requirements:
61147.01401129019945 1
(1) Each such policy shall be from a company or companies
with a current A.M. Best's rating of no less than A:VII and admitted to transact in the
business of insurance in the State of California, or otherwise allowed to place insurance
through surplus line brokers under applicable provisions of the Calfornia Insurance
Code or any federal law,
Additional Insurance Provisions
(i) The foregoing requirements as to the types and limits of insurance
coverage to be maintained by Consultant, and any approval of said insurance by the City, is
not intended to and shall not in any manner limit or qualify the liabilities and obligations
otherwise assumed by the Consultant pursuant to this Agreement, including but not limited to,
the provisions concerning indemnification.
(ii) If at any time during the life of the Agreement, any policy of
insurance required under this Agreement does not comply with these specifications or is
canceled and not replaced, City has the right but not the duty to obtain the insurance it deems
necessary and any premium paid by City will be promptly reimbursed by Consultant or City will
withhold amounts sufficient to pay premium from Consultant payments. In the alternative, City
may cancel this Agreement.
(iii) The City may require the Consultant to provide complete copies of
all insurance policies in effect for the duration of the Project.
(iv) Neither the City nor any of its officials, officers, employees, agents
or volunteers shall be personally responsible for any liability arising under or by virtue of this
Agreement.
j. Subconsultant insurance Requirements. Consultant shall not allow any
subcontractors or subconsultants to commence work on any subcontract until they have
provided evidence satisfactory to the City that they have secured all insurance required under
this section. Policies of commercial general liability insurance provided by such subcontractors
or subconsultants shall be endorsed to name the City as an additional insured using ISO form
CG 20 38 04 13 or an endorsement providing the exact same coverage. If requested by
Consultant, City may approve different scopes or minimum limits of insurance for particular
subcontractors or subconsultants.
12. Indemnification.
a. To the fullest extent permitted by law, Consultant shall defend (with
counsel reasonably approved by the City), indemnify and hold the City, its officials, officers,
employees, agents and volunteers free and harmless from any and all claims, demands, causes
of action, suits, actions, proceedings, costs, expenses, liability, judgments, awards, decrees,
settlements, loss, damage or injury of any kind, in law or equity, to property or persons,
including wrongful death, (collectively, "Claims') in any manner arising out of, pertaining to, or
incident to any alleged acts, errors or omissions, or willful misconduct of Consultant, its officials,
officers, employees, subcontractors, consultants or agents in connection with the performance
of the Consultant's services, the Project or this Agreement, including without limitation the
payment of all consequential damages, expert witness fees and attorneys' fees and other
related costs and expenses. Notwithstanding the foregoing, to the extent Consultant's services
are subject to Civil Code Section 2782.8, the above indemnity shall be limited, to the extent
6
6)147,01401\29019945 1
required by Civil Code Section 2782.8, to Claims that arise out of, pertain to, or relate to the
negligence, recklessness, or willful misconduct of the Consultant. Consultant's obligation to
indemnify shall not be restricted to insurance proceeds, if any, received by the City, its officials,
officers, employees, agents or volunteers .
b. Additional Indemnity Obligations, Consultant shall defend, with counsel
of City's choosing and at Consultant's own cost, expense and risk, any and all Claims covered
by this section that may be brought or instituted against the City, its officials, officers,
employees, agents or volunteers. Consultant shall pay and satisfy any judgment, award or
decree that may be rendered against the City, its officials, officers, employees, agents or
volunteers as part of any such claim, suit, action or other proceeding. Consultant shall also
reimburse City for the cost of any settlement paid by the City, its officials, officers, employees,
agents or volunteers as part of any such claim, suit, action or other proceeding. Such
reimbursement shall include payment for the City's attorney's fees and costs, including expert
witness fees. Consultant shall reimburse the City, its officials, officers, employees, agents and
volunteers, for any and all legal expenses and costs incurred by each of them in connection
therewith or in enforcing the indemnity Herein provided. Consultant's obligation to indemnify
shall not be restricted to insurance proceeds, if any, received by the City, its officials, officers,
employees, agents and volunteers.
13. California tabor Code Re uirements,
a. Consultant is aware of the requirements of California Labor Code
Sections 1720 et seq. and 1770 et seq., which require the payment of prevailing wage rates and
the performance of other requirements on certain "public works" and "maintenance" projects. If
the services are being performed as part of an applicable "public works" or "maintenance"
project, as defined by the Prevailing Wage Laws, and if the total compensation is $1,000 or
more, Consultant agrees to fully comply with such Prevailing Wage Laws, if applicable.
Consultant shall defend, indemnify and hold the City, its elected officials, officers, employees
and agents free and harmless from any claims, liabilities, costs, penalties or interest arising out
of any failure or alleged failure to comply with the Prevailing Wage Laws. It shall be mandatory
upon the Consultant and all subconsultants to comply with all California Labor Code provisions,
which include but are not limited to prevailing wages, employment of apprentices, hours of labor
and debarment of contractors and subcontractors,
b. if the Services are being performed as part of an applicable "public works"
or "maintenance" project, then pursuant to Labor Code Sections 1725.5 and 1771.1, the
Consultant and all subconsultants performing such Services must be registered with the
Department of Industrial Relations. Consultant shall maintain registration for the duration of the
Project and require the same of any subconsultants, as applicable. This Project may also be
subject to compliance monitoring and enforcement by the Department of Industrial Relations. it
shall be Consultant's sole responsibility to comply with all applicable registration and labor
compliance requirements.
14. Verification of Employment i^Iig�.
Sy executing this Agreement, Consultant verifies that it fully complies with all
requirements and restrictions of state and federal law respecting the employment of
undocumented aliens, including, but not limited to, the Immigration Reform and Control Act of
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61147.01401129019945.1
1986, as may be amended from time to time, and shall require all subconsultants and sub-
subconsultants to comply with the same.
15. laws and Benue.
This Agreement shall be interpreted in accordance with the laws of the State of
California. If any action is brought to interpret or enforce any term of this Agreemqnt, the action
shall be brought in a state or federal court situated in the County of Orange, State of California.
16. Termination or Abandonment
a, City has the right to terminate its obligations under this Agreement upon
thirty (30) calendar days' written notice to Consultant and only in the event of a substantial
failure of Consultant to perform in accordance with the terms of this Agreement through no fault
of City. In no event shall the outcome of one or more administrative hearing(s) be deemed
cause for City's termination of this Agreement, it being the intent of the parties to establish the
Consultant as a neutral hearing officer, whose engagement is not affected by the outcome of
any one or more administrative hearings rendered pursuant to this Agreement.
b. Consultant may terminate its obligation to provide further services under
this Agreement upon thirty (30) calendar days' written notice to •City in the event of substantial
failure by City to perform in accordance with the terms of this Agreement through no fault of
Consultant.
C. In the event of a termination of this Agreement, City shall be immediately
given title and possession to all original field notes, drawings and specifications, written reports
and other documents produced or developed for that portion of the work completed and/or being
abandoned. City shall pay Consultant the reasonable value of services rendered for any portion
of the work completed prior to termination, If said termination occurs prior to completion of any
task for the Project for which a payment request has not been received, the charge for services
performed during such task shall be the reasonable value of such services, based on an amount
mutually agreed to by City and Consultant of the portion of such task completed but not paid
prior to said termination. City shall not be liable for any costs other than the charges or portions
thereof which are specified herein. Consultant shall not be entitled to payment for unperformed
services, and shall not be entitled to damages or compensation for termination of work.
17. Documents. Except as otherwise provided in "Termination or Abandonment,"
above, all original field notes, written reports, Drawings and Specifications and other
documents, produced or developed for the Project shall, upon payment in full for the services
described in this Agreement, be furnished to and become the property of the City.
18, Organization
Consultant shall assign Michael Roush as Project Manager. The Project Manager shall
not be removed from the Project or reassigned without the prior written consent of the City.
19. Limitation of Agreement.
This Agreement is limited to and includes only the work included in the Project described
above.
D
61147 01401\29019945.1
20. Notice
Any notice or instrument required to be given or delivered by this Agreement may be
given or delivered by depositing the same in any United States Post Office, certified mail, return
receipt requested, postage prepaid, addressed to:
CITY:
City of San Juan Capistrano
32400 Paseo Adelanto
San Juan Capistrano, CA 92675
Attn: Housing Division
and shall be effective upon receipt thereof.
21. Third Party Rights
CONSULTANT:
Michael Roush, Attorney at Law
5571 Corte Sierra
Pleasanton, CA 94566
Nothing in this Agreement shall be construed to give any rights or benefits to anyone
other than the City and the Consultant.
22. Equal Opportunity Employment,
Consultant represents that it is an equal opportunity employer and that it shall not
discriminate against any employee or applicant for employment because of race, religion, color,
national origin, ancestry, sex, age or other interests protected by the State or Federal
Constitutions. Such non-discrimination shall include, but not be limited to, all activities related to
initial employment, upgrading, demotion, transfer, recruitment or recruitment advertising, layoff
or termination.
23. Entire Agreement
This Agreement, with its exhibits, represents the entire understanding of City and
Consultant as to those matters contained herein, and supersedes and cancels any prior or
contemporaneous oral or written understanding, promises or representations with respect to
those matters covered hereunder. Each party acknowledges that no representations,
inducements, promises or agreements have been made by any person which are not
incorporated herein, and that any other agreements shall be void. This Agreement may not be
modified or altered except in writing signed by both Parties hereto. This is an integrated
Agreement.
24. Severability
The unenforceability, invalidity or illegality of any provision(s) of this Agreement shall not
render the provisions unenforceable, invalid or illegal.
25. Successors and Assigns
This Agreement shall be binding upon and shall inure to the benefit of the successors in
interest, executors, administrators and assigns of each party to this Agreement. However,
9
61147.01401 \2901994 5.1
Consultant shall not assign or transfer by operation of law or otherwise any or all of its rights,
burdens, duties or obligations without the prior written consent of City. Any attempted
assignment without such consent shall be invalid and void.
26. Non -Waiver
None of the provisions of this Agreement shall be considered waived by either party,
unless such waiver is specifically specified in writing.
27. Time of Essence
Time is of the essence for each and every provision of this Agreement.
28. City's Fight to Eml2}oy Other Consultants
City may not employ other hearing officer consultants to perform the functions covered
by this Agreement while this Agreement is in effect.
29. Prohibited Interests
Consultant maintains and warrants that it has not employed nor retained any company
or person, other than a bona fide employee working solely for Consultant, to solicit or secure
this Agreement. Further, Consultant warrants that it has not paid nor has it agreed to pay any
company or person, other than a bona fide employee working solely for Consultant, any fee,
commission, percentage, brokerage fee, gift or other consideration contingent upon or resulting
from the award or making of this Agreement. For breach or violation of this warranty, City shall
have the right to rescind this Agreement without liability. For the term of this Agreement, no
director, official, officer or employee of City, during the term of his or her service with City, shall
have any direct interest in this Agreement, or obtain any present or anticipated material benefit
arising therefrom.
[SIGNATURES ON FOLLOWING PAGE]
10
61147.0140112901994 5.1
SIGNATURE PAGE FOR PROFESSIONAL. SERVICES AGREEMENT
BETWEEN THE CITY OF SAN JUAN CAPISTRANO
AND MICHAEL ROUSII
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first
written above.
CITY OF SAN JUAN CAPISTRANO MICHAEL ROUSH. ATTORNEY AT LAW
By:
e i Siegel
M a ger
ATTES
By.
APPROVED AS TO FORM:
By
<:: � Attorney
(0 14' 01401 29!)19943 1
Its: —f r, ru, , r
Printed Name
11
EXHIBIT A
Scope of Services
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61147.01401\29019945.1
CONSULTANT'$ RESPONSIBILITY:
The Hearing Officer shall perform the tasks as set forth in the San Juan Capistrano
Municipal Code Section 2-2.903. Including but not limited to the following:
• The Hearing Officer shall review all information submitted by the residents of a
mobile home park regarding a proposed rent increase, and information submitted by
a property owner of a mobile home park regarding a proposed rent increase, and
may require either party to a hearing on the petition to provide any books, records,
and papers deemed pertinent.
■ The Hearing Officer shall conduct a hearing within sixty (60) calendar days following
a petition being received by the City's Housing Advisory Committee Secretary.
• One or more pre -hearing meetings/conference calls with the parties may be
necessary to coordinate the hearing(s).
• Within thirty (30) days after concluding the hearing, the Hearing Officer shall render
written findings and conclusions as to the propriety of the rent increase to the City's
Housing Advisory Committee.
Maintenance of Records
The Hearing Officer/firm will maintain all books, documents, papers, employee time
sheets, accounting records/ledgers and other evidence pertaining to costs incurred and
shall make such materials available at their respective offices at all reasonable times
during the contract period and for three years from the date of final payment for
inspection by the City. The Hearing Officer shall furnish copies, if requested.
13
61147.01401129019945.1
Exhibit B
Fee Schedule
14
61147.01401 \29019945.1
FEE SCHEDULE:
Hourly rate for services is $225 per hour.
Reimbursements for reasonable costs of travel (air fare, car rental, hotel).
15
61147.01401129019945. 1
MAINTENANCE OF NET OPERATING INCOME
Base Year (2014) Net Operating Income 1,070,480
Inflation adjustment 101.00%
1,081,185 1,081,185
Total Revenue 1,341,133
Rent -Spaces (2015) (1,299,681
Rent -Spaces (2014) 1,434,792
Rent -Spaces (post 9/15) 22,200
1,498,444 1,498,444
Total Expenses
504,816
Accounting
( 21,839)
Legal
( 60,928)
Accounting
2079
Legal
10,537
434,665 (434,665)
Current year NOI 1,06 ,779 1,063,779
Difference 17,406
Divided by 154 spaces 113
Divided by 12 months $9.50
ATTACHMENT 2