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HomeMy WebLinkAbout2008-09-22 Rent Review HearingRENT REVIEW COMMISSION OF THE CITY OF PALM DESERT POSTED AGENDA HEARING RE: CONSIDERATION OF INDIAN SPRINGS MOBILE HOME PARK'S APPLICATION FOR CAPITAL IMPROVEMENT RENT INCREASE CIVIC CENTER COUNCIL CHAMBER 73-510 Fred Waring Drive Palm Desert, California MONDAY, SEPTEMBER 22, 2008 2:02 p.m. to 6:19 p.m. Reported by: Brenda S. Kroger, C.S.R. No 10212 CERTIFIED COPY DEPOSITION SUITES: Palm Springs, Palm Desert/Indian Wells Village Two 74-900 Highway 111, Suite 216 Indian Wells, California 92210 760-340-2181, FAX 760-346-7541 E-Mail: PSCSR@AOL.COM 1111111111 1111111111 1111 c)tte& ord Computerized Court Reporting Service INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 pipes have to be buried at a depth of eight feet, okay, 2 nine feet in some cases. When you bury pipe at that 3 depth, OSHA steps in, and OSHA requires that the 4 trenches be shorn up for the protection of the men who 5 are inside the trenches installing the pipes. So all of 6 those costs really drive the price up into that 7 category. Okay. 8 It was right after the petition was 9 denied -- and that was approved by the Board -- that I 10 got involved in it and started talking with 11 Justin McCarthy of the City. We had discussions with 12 the city council to see if there's some way of resolving 13 this matter, and the city council appointed Justin 14 McCarthy as my man to talk to to see if we could work 15 this out. 16 And we started from the point we left off, 17 which was this public sewer system assessment district 18 issue or a way to proceed. And we investigated that and 19 realized that the best we could ever hope for with 20 subsidies and whatnot was an rent increase in the 21 neighborhood of $200 per space. And we both concluded 22 that that would have been a very difficult proposition 23 for everybody. 24 So I explained to the City, and we kind of 25 shifted gears at that point, and I said, Look, I'm Page 10 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING in the fees. It's up to the residents to see if there's going to be any more or greater subsidies of this system than that. Now, you had a question about the NOI. We gave you a spreadsheet on the NOI We can give you more. We can give you the general ledgers. We can give you the checks, to da da. If you look at the NOI -- and we're NOI. guess my point was very simple. If you attorneys' fees and all the engineering the sake of argument, that NOI is right be. It's exactly where it should be. So i had Michael St. John go through in more detail with respect to what Sunny raised as issues on the NOI. And he did that NOI, taking out everything in dispute and leaving in everything that wouldn't be disputed, such as -- well, I'll let him explain it. But that's about in the neighborhood of a $39 rent increase. not filing -- that was not an application for an It was just informational for you. We have -- I take out all the costs, just for where it should We do not want to file an NOI to prove the capital improvement. If we're forced to, we're forced to. If you force us to do that, we're in that position, we're forced to do that. But I think that the most economical way to go forward, after all these Page 16 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 discussions with the City and all of these discussions 2 with Justin McCarthy and through the city council, 3 getting this thing in front of a hearing officer to find 4 out what's an appropriate rent increase level, and then 5 bringing it back to you for a final decision on that is 6 the most efficient way of handling this capital 7 improvement issue. If we turn this into an NOI, we're 8 going to be at it for a year with all the disputes over 9 all the issues and on and on and on. This is just a 10 simple question of, Is this the best bid for the sewer, 11 the streets, the engineering, and the hookups, and is 12 the City going to donate the hookups? 13 So I hope that's answered a lot of your 14 questions directed to the park owner. I am sorry I 15 wasn't here that day. I had another hearing that day. 16 And I'm not blaming Frankie in any way. We thought it 17 was just an administerial matter, that this was going to 18 be assigned out to a hearing officer and I would get to 19 tell him this story. This is where we are in this 20 hearing process about this oddball sewer situation 21 that's occurred in this particular park. 22 You know, I was going to give him the 23 factual predicate that I've just given you, and let's 24 just move forward, let's come up with a number, let's 25 see if the City is going to donate or assign those fees Page 17 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 that they've already paid, and let's see what the end 2 result is, and then bring it to you and see if you guys 3 thumbs up or thumbs down on it. 4 Now, with respect to filing an NOI, I have 5 Michael St. John here if you'd like to have him address 6 that issue. But my purpose in showing you the NOI was 7 twofold. Number one, to show that there isn't any huge 8 fact in the NOI to support a sewer, and Number two, in 9 this CPI claim that the residents are making, to show 10 you that there isn't any overcharge taking place. You 11 know, take out all those disputed numbers, and we're 12 still entitled to a rent increase. So how could there 13 be an overcharge? 14 Michael, if you'll talk about your and 15 I think you may have a revised NOI thing. 16 MR. ST. JOHN: Good afternoon. My name is 17 Michael St. John. I'm an economist, and I've been 18 working with the park owner to try to sort out these 19 different questions for approximately a year. 20 So right now -- Dave, what do you want me 21 to focus on? Because there are a lot of different 22 things I could talk about. 23 MR. SPANGENBERG: Well, I really would like you 24 just to talk about -- you read Sunny's objection to the 25 NOI numbers, and I believe you did an analysis taking Page 18 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 out everything that she was objecting to, and you came 2 up with a number, a revised number on the NOI. 3 MR. ST. JOHN: Yes. Yes. I can talk about that. 4 MR. SPANGENBERG: And you made a number of copies 5 of that. 6 MR. ST. JOHN: I did. 7 MR. SPANGENBERG: Okay. So let me hand those out 8 while you address that. 9 MR. ST. JOHN: Okay. What I did was -- was a 10 standard maintenance of net operating income analysis, 11 that we've done before and do in many different 12 jurisdictions, and sent that to the residents and, I 13 believe, to the City. 14 And Sunny, as David just said, made some 15 objections that some of the legal fees and some of the 16 engineering fees might be disallowed within a rent 17 control analysis. And Sunny was right about that. So I 18 reduced the legal fees completely. And I should caution 19 everybody here that I am not an attorney. I'm just an 20 economist. So I simply took out all legal fees that had 21 anything to do with applications or with the subdivision 22 or anything of the kind and left in a token figure of 23 $4,295 which had to do with legal fees having to do with 24 the residents. 25 And then under the professional fees, Page 19 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 APPEARANCES: 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CITY COUNCIL: William Adams, Chairman Arne Werchick, Acting Chairman Brian Torsney, Member Joyce Wade-Maltais, member For the Applicant, Indian Springs Mobile Home Park: THE LAW OFFICES OF DAVID SPANGENBERG BY: DAVID C. SPANGENBERG, ESQ. 420 Hudson Street Suite A Healdsburg, California 95448 For the Respondent, Indian Springs Mobile Home Park Homeowners Association: ALESHIRE & WYNDER, LLP BY: SANAZ (SUNNY) K. SOLTANI, ESQ. 18881 Von Kaman Avenue Suite 400 Irvine, California 92612 For the City of Palm Desert: BEST, BEST & KRIEGER BY: DAVID J. ERWIN, ESQ. -and- ROBERT W. 74760 Highway Suite 200 Indian Wells, HARGREAVES, ESQ. 111 California 92210 Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 2 760-340-2181 _ INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 there were professional fees that were for the sewer 2 engineering. Now, it could be argued that the sewer 3 engineering fees should be left in. These were -- as I 4 understand it, these fees were the design of the sewage 5 project, the advanced design engineering fees for the 6 design of the sewer project. And they might have been 7 left in, but arguably, they should be left out. So 8 trying to be conservative, I took them out. 9 And with those two changes and one more -- 10 there was an income item. You have it in the notes -- 11 in the notes on page 3, by they way. You have all these 12 explanations. There was an income item called "Lien 13 Sale Proceeds" that I eliminated from the income because 14 it's not a recurring item, and it doesn't have anything 15 to do with the normal operation of the park. So it's a 16 small item, but it didn't seem appropriate to keep it in 17 there. 18 So making those three adjustments, the net 19 operating income analysis done in the standard way 20 results in a rent increase of $38.86 per space, per 21 month. In other words, based on these assumptions, if 22 we were filing today a net operating income analysis, we 23 would be asking for something like $38.86. We're not. 24 But this shows that the park is not making too much. If 25 the park income at the present time, or in 2007, was too Page 20 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 high in a fair return sense, then this wouldn't have 2 come out this way. There wouldn't have been any rent 3 increase from this analysis. It would have showed that 4 the park was making more than enough for a fair return. 5 But it didn't show that. It showed that the park is 6 making less than enough for a fair return. And if we're 7 to allow a fair return, the park deserves at least a 8 rent increase of $38.86 per month going forward. 9 That shows that the capital improvements 10 have to be paid for separately; in other words, there's 11 no room in the budget for this -- whatever it is, $1.2 12 million cost for the sewer. It has to be paid for 13 separately. 14 How did I do? 15 MR. SPANGENBERG: That's what I wanted you to 16 explain. 17 So we've addressed the NOI, what the 18 park's making, what the park's income is and expenses. 19 We think the most efficient way to go forward is just to 20 send the petition to a hearing officer and begin the 21 process, continue to work with the City as far as what 22 they're going to do to subsidize the residents so this 23 rent increase is lower than it is. We do not want to be 24 forced into the position of filing an NOI petition and, 25 you know, that rather long process that may be even Page 21 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 worse than the $59 we're talking about here, assuming 2 that the City just assigns over those connection fees 3 that it paid in anticipation of doing that anyway. 4 So I think with all the work that's been 5 done on this project, we've come back to you with a 6 project that's one -forth or one -fifth of what the old 7 project was. We've worked with the City, we've worked 8 with redevelopment, and everybody to get this down. 9 It's up to you. The ball is in your court whether you 10 want to proceed on this basis or whether you want to 11 proceed some other way. 12 ACTING CHAIRMAN WERCHICK: Mr. Spangenberg, are 13 you suggesting that we refer everything to a hearing 14 officer? That would be the capital? 15 MR. SPANGENBERG: Just the capital. 16 ACTING CHAIRMAN WERCHICK: What about the rent 17 increase? 18 MR. SPANGENBERG: That's a factual determination 19 too. I mean, the rent increase issue is incredibly 20 fact -driven. And I mean, I would not want to be in your 21 position. You've got leases circling around, you've got 22 all these rent increases, you've got -- I mean, the city 23 attorney has given us direction in terms of the 24 interpretation of the ordinance. But as far 25 as -- I mean, I opened up their spreadsheet year, after Page 22 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 year, after year, after year, after year, and it's like 2 four and a half million dollars in overcharges according 3 to -- 4 ACTING CHAIRMAN WERCHICK: I take it your answer 5 is yes? 6 MR. SPANGENBERG: Yeah, my answer is yes. I 7 think that we need to get this in front of a hearing 8 officer both -- to look at both items. 9 ACTING CHAIRMAN WERCHICK: Both the -- 10 MR. SPANGENBERG: Yeah, because -- 11 ACTING CHAIRMAN WERCHICK: Both the capital item 12 and the complexity of the rent increase? 13 MR. SPANGENBERG: It's the only -- to try this 14 case involving hundreds of spaces over 25 years in front 15 of four people, I don't think it's ever been done. 16 Maybe the Nuremberg trials or something like that, but I 17 don't know that this, you know, gets up to that level 18 yet. 19 ACTING CHAIRMAN WERCHICK: I'm sure it's been 20 done, but I don't know that this group of volunteers 21 the Nuremberg judges were paid. 22 MR. SPANGENBERG: Okay. Well, anyway 23 ACTING CHAIRMAN WERCHICK: Do you guys have any 24 questions for Mr. Spangenberg before we move along with 25 the discussion? I have one other actually. Page 23 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 MR. SPANGENBERG: Sure. 2 ACTING CHAIRMAN WERCHICK: You're under way with 3 the construction for the -- 4 MR. SPANGENBERG: We are -- yes. I think we're 5 46 percent. 6 MR. NADER: It's 65 percent now. 7 MR. SPANGENBERG: We're 65 percent completed. 8 ACTING CHAIRMAN WERCHICK: Okay. And we're 9 estimating what kind of completion date if all goes as 10 anticipated? 11 MR. NADER: End of October it sounds like. 12 MR. SPANGENBERG: End of October is what the 13 engineer is telling me. 14 Again -- I'll tell you this story because 15 I think it's kind of interesting. It's interesting to 16 me. When I got involved in this case and looked at 17 everything, I told -- I called up the owner 18 Jim Goldstein, and I said "Jim, you got to put the sewer 19 in." 20 And he said, "You're the first person 21 that's told me that." 22 And I said, "What have you been told?" 23 "That I don't have to put it in." 24 I said, "No, you got to put the sewer in." 25 Okay. "I mean, you've got an order from HCD, you've got Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 24 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 an order from the City to put the sewer in. Let's get 2 the sewer in.' 3 That's when everything changed, and we 4 started doing this. And we have a sewer. We're going 5 to have a sewer in October. We're hooked up. And the 6 sewage is going to Coachella Valley for those spaces 7 that are hooked up. It's flowing. Right? 8 MR. NADER: Forty-eight of those spaces. 9 MR. SPANGENBERG: Twenty-eight of those spaces. 10 MS. JAMES: Forty-eight. 11 MR. SPANGENBERG: Forty-eight of the spaces. 12 So as you go along, they abandon the 13 septic, close those down, but 48 of the spaces it's 14 going into the sewer system now. So we're going to be 15 done. I think we've worked with the City, with Justin 16 McCarthy, with the city attorney's office, with the 17 staff to come up with a solution here that's not a $269 18 or $263 solution, a solution that's really the best 19 solution we could get. And I think it needs to go to a 20 hearing to see if it could have been better or if it's 21 going to be as much. Because we do have 20 percent 22 contingencies in there. It may not be as much as we 23 think it is. So that would be my suggestion. 24 ACTING CHAIRMAN WERCHICK: Ms. Soltani, I assume 25 that -- Page 25 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 MS. SOLTANI: Oh, yeah. 2 ACTING CHAIRMAN WERCHICK: -- the residents -- 3 I'm sorry. Do you have any questions? 4 CHAIRMAN ADAMS: Mr. Spangenberg, I did have one 5 other question. 6 MR. SPANGENBERG: Sure. 7 CHAIRMAN ADAMS: You mentioned two methods of 8 construction of the sewer, one with a deep burial and 9 one with not quite as deep that you use in mobile home 10 parks. 11 MR. SPANGENBERG: Yeah. 12 CHAIRMAN ADAMS: Are you building this to the 13 mobile home park? 14 MR. SPANGENBERG: Yeah. Yeah, it's -- sorry. 15 CHAIRMAN ADAMS: If it is then condominiumized 16 and sold as separate lots, does it qualify having that 17 lesser depth of burial? 18 MR. SPANGENBERG: Yeah. Yes. Good question. 19 Mobile home parks, whether they are 20 subdivided or whether they're full -on mobile home parks 21 continue under the jurisdiction of HCD. HCD has -- its 22 regulations for construction of the park are found in 23 the California Administrative Codes, Title 25. Title 25 24 refers you to the Uniform Plumbing Code for sewer 25 systems. Page 26 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 So I'm not sure about this, but I'm pretty 2 sure when you have a condominium project, I mean, a 3 stick -built condominium project where you have private 4 sewers over there for the condominiums coming out to the 5 city street, I think that's a Uniform Public Code sewer 6 system in a condo project. It's not a public sewer 7 system. See, the public -- when you dedicate a sewer 8 system to the public, they want something that's going 9 to live on for eternity without any maintenance, you 10 know, 50, 60, 70 years with nothing being done, hundreds 11 of years. I mean, in New York City the sewers are 12 hundreds of years old, you know. 13 So the flaw, if there was a flaw, was 14 somebody started out thinking -- and I think it was 15 through discussions with the City -- that, Oh, my God, 16 we're going to have to do this kind of assessment 17 district because it's such a big number. And then they 18 went to Coachella Valley to get the design standards for 19 a public sewer system that you would find in a city 20 street, and they applied that to private roads. 21 And even in talking to Coachella Valley, they're saying, 22 We've never done this. We've never -- we don't put our 23 systems in private streets. They're all in public 24 streets. So you're going to have to start dedicating 25 these streets. And this was just turning into this Page 27 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 gigantic hairball from the assumption that it had to be 2 built as a Coachella Valley public sewer system because 3 there was going to be some assessment district. 4 When that got turned around and I said, 5 Hey, look, no park in the state that I've ever worked in 6 in 25 years has ever done this, we got a hold of HCD, we 7 got ahold of Sal Poidomani (phonetic), who's the 8 Southern California rep who I've worked with, a head of 9 Southern California for HCD. We met out at the park, 10 and he said, Fine, get me a letter from the health 11 department and get me this from county, and we're good 12 to go. And in two days we had the letters. 13 CHAIRMAN ADAMS: You've answered my question. 14 Thank you. 15 MR. SPANGENBERG: Good. 16 ACTING CHAIRMAN WERCHICK: Ms. Soltani, you might 17 address to the Commission the question of whether your 18 client feels that it's appropriate to send either the 19 capital rent increase issue or the requested periodic -- 20 or is it a hardship? -- whichever, periodic rent 21 increase issue to a hearing -- or both, to a hearing 22 officer at this time, or whether you feel the Commission 23 should first make some other rulings or decisions before 24 doing that or instead of doing that. 25 MS. SOLTANI: I will do that. Good afternoon. Page 28 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 And thank you again for your time. I do want to address 2 that actually. I do believe that the Commission is in a 3 position to make a determination at least on the capital 4 improvement application today. And I will go over why 5 this is such a simple matter that does not need to get 6 this complicated. And I also believe that it is almost 7 impossible to address the rent overcharge issue without 8 this Commission making certain determinations today. 9 And I have tried my best to provide you 10 with briefs beforehand to educate the Commission on the 11 issues. Because at this point these residents are just 12 suffering the consequences of the delays that have been 13 going on. And these issues need to come to an end, and 14 they need to come to an end quickly. 15 I want to thank Mr. Spangenberg for his 16 efforts. It's been a pleasure working with him. But 17 what he informed you about today outlines precisely the 18 issue that the residents have had with this application 19 all along. We have consistently said, "This application 20 is untimely." 21 Like Mr. Spangenberg, I've been involved 22 doing mobile home park issues, I have represented 23 homeowners' associations, and I've represented cities. 24 Our law firm represents cities. We are city attorneys. 25 And I work for the City of Carson, and I sit at the rent Page 29 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Statement Statement Statement Statement Statement Statement Statement Statement Statement Statement by Mr. by Mr. by Mr. by Ms. INDEX Spangenberg St. John Spangenberg Soltani by Elaine Henshel by Margo Iverson by Carol Byron by Mari Schmidt by Jono Hildner by Ed Difani Discussion Vote Discussion Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 7 18 21 28 50 53 58 63 70 72 73 106 108 Page 3 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 review board hearings almost -- I don't know, 2 Ken Freschauf is here, but I litigate those capital 3 improvement applications, I litigate the fair return 4 applications for that city, and I can tell you, this is 5 a very unique application. I've never seen an 6 application for a capital improvement filed before the 7 work is rendered. And the reason it doesn't get filed 8 before the work is rendered is because of the problems 9 we're facing today. 10 Can you imagine if you had granted the 11 initial application for $260 per month, per space 12 forever for these senior citizen residents on fixed 13 income? Can you imagine the consequences of that? We 14 have gone from $260 -- $263 per month to $85, to $59.08. 15 And because you did your job last time, and you 16 requested a fair return analysis, now potentially we're 17 looking at $38. This is why -- Mr. Spangenberg 18 highlighted why this application should be denied today 19 right here. When the work is completed -- why are we 20 guessing? Why are we speculating? When the work is 21 completed, when it's rendered, we'll come back before 22 you. File your application again. Let's have numbers. 23 20 percent contingency? At the last set 24 of hearings, when we were before Mr. Patterson, I asked 25 the -- and I forget his name now, the person who was in Page 30 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 charge of putting the sewers in. I said, What happens 2 if the 20 percent contingency is inaccurate? Let's say 3 that you finish the work, and you come under the number 4 that you estimated. What happens with the 20 percent? 5 He said, "Well, you know, we talked with 6 the park owner, and we'll probably split that money 7 amongst us." The money that the residents paid, these 8 senior citizens on fixed income? Is that conscionable? 9 This is simple. Again, I'm grateful for 10 Mr. Spangenberg getting involved and taking this 11 ridiculous application from a $263 number to now 12 potentially $38. But $38 may be chop change for 13 Mr. Goldstein, but it's not chop change for these 14 residents. They will have to cut their medication. 15 They will have to sometimes maybe forgo the extra movie 16 they wanted to go see that month. 17 So it's still unconscionable for this to 18 be granted when the work hasn't been rendered. When 19 Mr. Spangenberg himself said, "Well, by the time we get 20 to a hearing officer, maybe the 20 percent contingency 21 may go away." Why not then just file it when the work 22 is completed? So that's the first point I wanted to 23 talk about. 24 The second point is that -- well, what 25 Mr. Spangenberg refers to as to the NOI application. Page 31 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 When we were here before you last time, you were very 2 clear -- I remember Commissioner Werchick actually had 3 read the Morgan vs. City of Chino case, and he read it 4 on the record. And that case holds, Due process in the 5 City's rent control ordinance merely requires a city to 6 take the capital improvement into account when 7 determining whether the park is earning a fair return. 8 Your guidelines are very clear. Your 9 guidelines only say that you may permit a capital 10 improvement, capital rent increase. And that's simple 11 because you have a CPI pass -through ordinance. So if 12 you may do that and all you have to guarantee is a 13 constitutional fair return, which is the law -- and 14 Commissioner Werchick, you were right on. You asked the 15 park owner to submit that. This is what you asked for. 16 You asked for the fair rate of return. It's not an NOI. 17 I want to clarify this. A fair return application is 18 different than an NOI application. You asked for a rate 19 of return data, you asked for competitive bids, 20 circumstances and results, you asked for status of 21 requests the City of Palm Desert for contribution. 22 Commissioner Torsney asked -- and this is 23 what he said. "I do also believe that it's up to the 24 parties to provide all the relevant information that 25 they need to support their own claims. Their failure to Page 32 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 do so is a failure of the parties. And I do not believe 2 it's the duty of the Commission to coax information out 3 of the parties." 4 Well, guess what? This was May 14th. 5 This hearing was set awhile back. We were going back 6 and forth with Ms. Riddle trying to get a date. The 7 park owner had not submitted a shred of evidence that 8 you had required over four months, another delaying 9 tactic I say. But Ms. Riddle was kind enough to follow 10 up with him constantly a few times until we got the 11 two -page document, self-serving document with no backup 12 documents. I don't believe you've received what you 13 asked for. You may have just had this in mind. 14 How do I know? I couldn't have my expert 15 verify any of the information because I don't have any 16 of the data. And you know, I point out to one simple 17 thing. I look at that sheet, and I go, whoa, $600,000 18 in attorneys' fees? What was that? I've reviewed his 19 capital application. I've reviewed fair return 20 applications. $600,000 in attorneys' fees in one year 21 is just an outstanding amount of money, especially for a 22 city that has a CPI pass -through application -- form of 23 an ordinance. Sorry. 24 I point that out. It comes out again. So 25 now we've gone from $600,000 attorneys' fees to $4,000? Page 33 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 So what's to say that if you continue this another 2 hearing this doesn't go down another $10? What if these 3 residents had not had the bake sales that they did? 4 What if they had not had the poker nights they did to 5 raise some funding to hire my law firm to represent 6 them? What would have happened to them? They would be 7 paying $260 per month right now for something that would 8 have cost the park owner a lot less, and he would have 9 split the difference between him and his contractor. 10 I simply want to remind you that the 11 purpose of a rent control ordinance is to protect the 12 residents of mobile home parks in this city from 13 unconscionable rents while allowing the park owner to 14 earn a fair return. You've given him four months to 15 submit data, information, documents to support that he 16 will be denied a fair return. What have you received? 17 Nothing. 18 So my solution is you deny this today. 19 You said last time, Commissioner Werchick, that if I 20 don't get these documents, we might have to deny it, and 21 we might be able to act on it. I ask you deny it. And 22 if the park owner wants to go file a fair return 23 application for $38 a month, let him do that. And I'll 24 deal with that too. Because I bet you anything, he's 25 making more than a fair return on this park. Just Page 34 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 recently he took out a few million dollars out of this 2 park to purchase another park in another city. 3 So I don't see why we would set this and 4 send it to a hearing officer when we know everything we 5 need to know. What has changed? Has the work been 6 completed? You heard the engineer say that it's, what, 7 almost 60 percent completed? I have a chart that I've 8 asked Ms. Riddle to pass out to you. It appears that 9 maybe, at best, 140 spaces are not -- well, 140 spaces 10 are not connected. So it appears that, at best, maybe 11 one -fifth or one -sixth of the work is done. 12 ACTING CHAIRMAN WERCHICK: Well, isn't it 13 possible then that that's the fastest part of the 14 process to complete, though, taking into account that 15 they had to do other preparation work and then just 16 hooking up the actual laterals, maybe they will still 17 finish by the end of October? 18 MS. SOLTANI: I understand. 19 ACTING CHAIRMAN WERCHICK: I'm going to suggest 20 that we don't have to decide when they're going to 21 finish. We don't have to decide if they're building it 22 right. Fortunately, that's one of the few issues we 23 don't have to decide. So let's move on to something 24 that's more productive. All right. 25 MS. SOLTANI: And I agree. And I think that the Page 35 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 main issue is that before you is an $89 a month 2 application for work that's not completed. The 3 documents you asked for to support that the park will be 4 denied a fair return have not been submitted. But even 5 assuming that the two -page document or chart that was 6 put together for you is accurate -- and I have no reason 7 not to think it's accurate, but even assuming everything 8 in that is accurate, you're still only at $39 -- $38 a 9 month, and not $89. 10 So that's why I think this should be 11 denied. If the park owner wants to file a fair return 12 application, he can do so. If the park owner wants to 13 file an application after the work is rendered and 14 completed, he can still do so. 15 Another issue that I would like to bring 16 to the Commission's attention and talk about -- I hope 17 this is news to you, but recently it came to our 18 office's attention that the City may have reached a 19 potential settlement with the park owner on another 20 lawsuit, the conversion lawsuit. So I ordered the 21 transcripts of that hearing. And on it, one of the 22 conditions was that the Rent Review Board approves the 23 capital improvement application. 24 That gravely concerned me. I objected to 25 it immediately in writing. I have been told -- I have Page 36 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 been assured by the City staff that that's not it, that 2 that the condition is not that the Board has to act a 3 certain way -- of course, that's illegal -- and the 4 settlement is just contingent on the Board acting that 5 way. It doesn't mean that they have to act that way. 6 But I want -- as an employee that 7 represents cities, I'm in the public service too. I 8 believe our jobs have to be carried through not being 9 concerned about litigation, not being concerned about 10 who has the bigger book that can sue the city harder and 11 slap the City around faster and harder. It should be 12 based on what is the public interest. And our duty is 13 to protect the public interest. 14 And I think this Commission has done a 15 fantastic job doing that, as demonstrated by the record. 16 We've gone from a $263 rent application to potentially a 17 $38 rent application. And I just ask you today that you 18 continue doing what you've done, and you continue -- 19 continue making the park owner and the residents do 20 their job like the way that they're supposed to to put 21 the rental information before you. 22 UNIDENTIFIED SPEAKER: What is NOI? 23 MS. SOLTANI: Do you have any questions for me? 24 ACTING CHAIRMAN WERCHICK: Does anybody have any 25 questions for Ms. Soltani? I have one or two. Page 37 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 COMMISSIONER WADE-MALTAIS: You have some? Go 2 ahead. 3 ACTING CHAIRMAN WERCHICK: First, just for my own 4 thought processes, as I recall a year ago, over a year 5 ago -- I think it was July over a year ago that we 6 first -- this group of commissioners first addressed the 7 issue. You are arguing fairly ostensibly against any 8 capital pass -through to the tenants on account of the 9 sewers because they still have the consideration and 10 various other things, as I recall generally. 11 Are we to assume that you're incorporating 12 those arguments into your present thinking and still 13 want us to discuss that, or are you falling back on a 14 more practical position? Where does that stand now? 15 MS. SOLTANI: Oh, absolutely, I'm assuming that 16 you're incorporating those arguments. This capital 17 improvement application -- 18 ACTING CHAIRMAN WERCHICK: We appreciate you not 19 taking the time to tell us every one of those. 20 MS. SOLTANI: But now that you've brought it up, 21 I have to touch up on it briefly. I'll be very brief. 22 This should not be a capital improvement 23 application. This is a failure to maintain issue. This 24 park owner has failed to maintain his septic system 25 properly for over 25 years. There are letters from HCD Page 38 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 as early as 1986 to him saying, "You need to do 2 something about your failing septic system." 3 What did he do? And there's testimony 4 from the previous rent review -- or the hearing officer. 5 What did he do? He went, and he made -- he altered the 6 system. He made repairs without obtaining the proper 7 permits from HCD. 8 And that is precisely why HCD has ordered 9 him to connect to the sewer system now. He tries to 10 paint the picture that, well, up and down Coachella 11 Valley HCD is ordering everybody to connect to the sewer 12 system. But we have in the letter, the letter ordering 13 him to connect to the sewer system by HCD that says, "We 14 are ordering you because you have made alterations to 15 the system without acquiring the proper permits." 16 ACTING CHAIRMAN WERCHICK: Another question for 17 you. And I'm going to ask Mr. Spangenberg to answer 18 this as well when he speaks next. 19 I was under the impression from what he 20 said that the $38 figure was a different number, a 21 different kind of animal than the $59 number. The $59 22 is if they were going to ask us to impose the capital 23 costs on the tenants, that that's the number for the 24 pass -through of just the capital improvement; and 25 whereas, as I understand it, they're claiming that the Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 39 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 MONDAY, SEPTEMBER 22, 2008, PALM DESERT, CALIFORNIA 2 2:02 P.M. 3 4 ACTING CHAIRMAN WERCHICK: We're going to call 5 the meeting to order. I'd like to start on time as 6 possible. 7 CITY CLERK RIDDLE: Hang on. 8 ACTING CHAIRMAN WERCHICK: Because I think we may 9 be here for a while. 10 So the first item on the agenda, without 11 looking, will be the call to order and the Pledge of 12 Allegiance. Brian, you're closest to the flag. Will 13 you lead us, please. 14 (The Pledge of Allegiance was held.) 15 ACTING CHAIRMAN WERCHICK: Will the clerk call 16 the roll, please. 17 CITY CLERK RIDDLE: Commissioner Werchick? 18 ACTING CHAIRMAN WERCHICK: Present. 19 CITY CLERK RIDDLE: Commissioner Torsney? 20 COMMISSIONER TORSNEY: Present. 21 CITY CLERK RIDDLE: Commissioner Wade-Maltais? 22 COMMISSIONER WADE-MALTAIS: Present. 23 CITY CLERK RIDDLE: Commissioner Bill Adams is on 24 his way. 25 ACTING CHAIRMAN WERCHICK: All right. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 4 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 $38 number is a current shortfall, that somehow under 2 current rents and current expenses, excluding the sewer, 3 they're claiming the owner is not getting a return at 4 all. He's got a negative rate of return. 5 Which I'm sure if you were given the 6 opportunity to argue the issue, you would take a 7 contrary position. Is that your understanding also? So 8 they're not -- today they're asking us for $59 for 9 capital, but in the second half of our gathering, I'm 10 assuming, when they're asking for the August rent 11 increase, they're going to be arguing that $38 number as 12 to why they should be getting more base rent. 13 Is that your understanding as well? Or do you see the 14 $38 as a substitute for the $59 somehow? 15 MS. SOLTANI: I think I see a combination of what 16 you said. I don't think they ever intended -- and 17 Mr. Spangenberg can speak to that. I don't think they 18 ever intended to use that number to argue that in the 19 second half the number should be lower, the base rent 20 should not be set at where we're requesting it. I think 21 they were trying to comply with what the Commission 22 requested last time, which was fair return documents to 23 show that if this rent increase is not granted, they 24 will be denied a fair return. 25 And I'm confused as to whether the $38 Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 40 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 number is actually instead of the $59 or in addition to 2 the $59. That's a good question. But in any event, you 3 know how I feel about it. 4 ACTING CHAIRMAN WERCHICK: Mr. Spangenberg, did I 5 interpret it correctly? The $38 is a separate animal 6 from the $59? It may have informational value on the 7 $59, but it is also of importance on the second item? 8 MR. SPANGENBERG: Yes. The $38 is just without 9 sewer. Okay? And if I can just read from your 10 guidelines. 11 ACTING CHAIRMAN WERCHICK: Well, let me ask 12 Ms. Soltani, Are you concluded with your remarks for the 13 moment? I'm sure you'll be back. Are you done for now? 14 MS. SOLTANI: Yes, I am. 15 ACTING CHAIRMAN WERCHICK: All right. I'll let 16 Mr. Spangenberg take another minute, and then I'm going 17 to call for additional comments from other people that 18 are here. 19 MR. SPANGENBERG: Okay. Let me -- I think I got 20 a list of all her issues, and let me see if I can answer 21 it. 22 First of all, she said, Why should we make 23 this based on an estimate? There was going to be fraud 24 and all that other stuff. 25 Here's the fine -- Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 41 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: She said there was a 2 contingent fund. 3 MR. SPANGENBERG: There's a contingent fund and, 4 you know, we shouldn't base it on an estimate. 5 Here's the findings from Mr. Patterson, 6 the hearing officer. Let me read to you. 7 Finding Number 5, "It is not a problem 8 that the application is based on an estimate, 9 particularly in light of the City's ability to supervise 10 the bidding and lending process if it becomes 11 necessary." 12 So basing it on an estimate, 13 Mr. Patterson found that that's really not a problem. 14 The City is watching us because they're going to be 15 giving up money here. So I don't think that the 16 estimate is a problem. 17 Let me address the fair rate of return. 18 What we were doing when we gave you the original 19 documents is that's unedited. That's everything. 20 That's all of our expenses. Okay. We didn't make a 21 decision of attorneys' fees should be taken out so we're 22 not going to put them in there. We're going to give you 23 the raw data. Okay. Then I had Mr. St. John come back 24 and come up with the $38 number when we left in things 25 that were not disputed. That $38 is without the sewer. Page 42 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Okay. 2 But let me read to you from your 3 guidelines. Because if you file the application, are we 4 limited to $38? No. We can also put in proposed 5 capital improvements, which will drive that up another, 6 if we do the same application, $86.05. So instead of 7 being a $38 -- and it's not going to be a $38 8 application. We're going to start back at the $200. 9 Because why would we give up anything? We would be 10 crazy to do that. 11 Hopefully, we could resolve a number of 12 those issues. But I'm just trying to give you a picture 13 of where we are in an undisputed context. Maybe we'll 14 end up at $38 just in a shortfall. 15 But the guidelines say this for an NOI 16 formula: "Where a capital expenditure is proposed for 17 the prospective year and is to be paid for through 18 financing, the amortization of such expenditures may 19 reflect the terms of such financing." 20 So the guidelines speak in terms of a 21 proposed capital improvement to be inserted in the NOI 22 application. 23 We didn't insert $86.05 in the application 24 to get to be 30-some dollars. 30-some dollars is 25 without the 86. We have been working hard for these Page 43 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 residents. You may not believe it, but I'm the guy that 2 got it down to $59. It wasn't the residents. They 3 didn't go out and get bids. It was me and Justin 4 McCarthy and the city attorney and staff working these 5 numbers down. 6 I wasn't involved in the last application, 7 and it ended up with a lot of frustration. But when I 8 stepped in, I stepped in with a goal of making this 9 work. Okay. 10 So the residents at any time could have 11 had some expert come in here and say, I'll do that for a 12 million bucks. They didn't. The park owner did that. 13 It's unfortunate -- 14 ACTING CHAIRMAN WERCHICK: I'm not sure that 15 you're suggesting that the residents should have built 16 the sewer. 17 MR. SPANGENBERG: No. No. I'm just saying, hey, 18 wait, why don't you build an HCD -- no, I'm saying they 19 could have come in and say, look, why don't you build an 20 HCD system? It would have been a lot cheaper. I 21 mean -- 22 ACTING CHAIRMAN WERCHICK: I'm going to suggest 23 you move on to your next argument. 24 MR. SPANGENBERG: Okay. Let me ask Ann if there 25 has been loans on the property. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 44 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 MS. JAMES: No. 2 MR. SPANGENBERG: Just come on up here and tell 3 us if there have been loans on the property, either one 4 of you? Noelle? 5 MS. JAMES: I'll let Noelle. 6 MR. SPANGENBERG: Okay. Has the property been 7 refinanced in the recent past? I don't know how far 8 back you want to go. 9 MS. STEPHENS: We just -- 10 MR. SPANGENBERG: I'm talking Indian Springs up 11 here. Has it been refinanced? 12 MS. STEPHENS: Yes. 13 MR. SPANGENBERG: When was it refinanced? 14 MS. STEPHENS: It was refinanced just recently. 15 However, there was not -- it was in anticipation of -- 16 MS. RIDDLE: Could you step up to the microphone, 17 please. 18 ACTING CHAIRMAN WERCHICK: Yeah, we ask that you 19 identify yourself. Would you identify yourself? 20 MS. STEPHENS: My name is Noelle Stephens. I'm 21 the accountant for James & Associates. 22 Paperwork for a refinance has recently 23 been done and approved. No cash has been taken out. it 24 was in anticipation of making construction draws for the 25 existing project, the sewer project. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 45 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 MR. SPANGENBERG: Okay. So there was no loans to 2 buy other property. We have here two -some million 3 dollars worth of project. This is not a petty cash item 4 that we pick out of the drawer at the main office. 5 Status of the installation, that we have 6 somehow misled you into thinking -- well, I think you 7 finally terminated that one, so I won't address that. 8 ACTING CHAIRMAN WERCHICK: I think we're okay 9 with that. 10 MR. SPANGENBERG: Okay. Failure to maintain 11 litigation. Let me go back to the hearing officer's 12 decision about this. 13 They're saying, Oh, the park owner has not 14 maintained this thing. You know, I mean, the minute one 15 of these red herrings come up, I have to deal with it, 16 and then I get another one. But that's what it feels 17 like to me. I'm sorry. But let me read to you -- 18 ACTING CHAIRMAN WERCHICK: Well, Mr. Spangenberg, 19 you weren't the attorney at the time of the 2007 20 meeting, but there was lengthy discussion on the issue 21 of whether a capital improvement pass -through should be 22 allowed at all. 23 MR. SPANGENBERG: I think there's a finding here 24 that's relevant from Mr. Patterson, who I believe would 25 be impartial on these matters. It's Finding Number 4. Page 46 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 And it really is the hub of this whole thing. 2 "The sewage system at Indian Springs 3 Mobile Home Park is substantially in excess of 25 years 4 old. It needs repairs and installation of new leach 5 line and holding tanks. If permits were available, the 6 system could be maintained almost indefinitely. The 7 problem is, is there is a law that says that if you were 8 within a hundred feet of a sewer system, the county will 9 not issue you a permit to put in a septic system. 10 So if you've been out to the park, you've 11 seen these huge greenbelt areas that were designed for 12 serial relocation of septic leach fields. That's what 13 that was designed for. And along comes this ordinance 14 that says you're within a hundred feet of a sewer line, 15 you have to hook up, we will not issue a permit. Okay. 16 And that's exactly what the hearing officer found to be 17 the case. Not that you haven't maintained it. This 18 thing could go on indefinitely if we could get the 19 permits to put in the leach fields. The problem is the 20 county won't issue permits to put in leach fields. And 21 HCD requires that you get a county permit to put in a 22 leach field. 23 So there is no failure to maintain. 24 There's a failure, of anything, of the ability to get a 25 permit to put in a leach field that will run this system Page 47 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 as a septic system indefinitely. 2 So anybody can stand up here and make any 3 allegation they want. It's only when you get in front 4 of a hearing officer that you're put to your proof. And 5 I urge you to send this to a hearing officer and put 6 this to its proof. Because we've been through it, I 7 understand it, I can explain it, and I think the park 8 owner has done absolutely nothing wrong. 9 MS. SOLTANI: If I may address this? 10 ACTING CHAIRMAN WERCHICK: Sure. 11 MS. SOLTANI: On the refinance issue, we 12 submitted documents to the hearing officer last set of 13 hearings that the park owner took out, and I may be off 14 a little bit here, but $5.7 million in 2002. That's 15 what I was talking about. 16 ACTING CHAIRMAN WERCHICK: When's that? 17 MS. SOLTANI: 2002. So that was that. 18 And on the issue of failure to maintain, 19 the hearing officer finally concluded that he doesn't 20 have to consider that, that he's not going to address 21 that point. He did not, however, rule that there was no 22 issue with failure to maintain. He didn't address the 23 documents that we submitted letter after letter after 24 letter from HCD. These are not allegations. They were 25 letters that we submitted into the record where HCD Page 48 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 says, "Hello, Mr. Goldstein, your septic system is 2 failing. Do something about it." 3 No response. 4 Why no response? Because he would alter 5 it without getting the proper permits. Their own -- 6 their own expert -- not expert, but their own contractor 7 even said that he had not gone to obtain a permit this 8 time around because he was told, "Don't worry about 9 that. We'll get that." 10 But no permit had been obtained. So it 11 wasn't until he was forced to go obtain the proper 12 permits that he did. And again, I thank the City, and I 13 thank you for doing your job and making him follow the 14 process properly. 15 ACTING CHAIRMAN WERCHICK: All right. Now would 16 be an appropriate time to hear from anybody else who 17 wishes to speak. Many of you have spoken to us at past 18 hearings. I certainly invite you to add anything new to 19 what you've previously told us. We do have, of course, 20 in the record your comments from before. And I think 21 most of us have them in mind. 22 So I'm going to call on people who have 23 requested the opportunity to speak. And as I say, if 24 you have spoken to us before, I'm going to ask you to 25 take that into account and be brief. Page 49 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Commissioner Adams had asked me to chair the meeting 2 today as the vice chairman of the committee, and I 3 reluctantly agreed to do so, but not that I don't love 4 chairing meetings. 5 The next item of business is a standard 6 matter on the public commission hearings is called oral 7 communications. And it means that, because we are open 8 to the public, if there are members of the public who 9 have come here today to speak to the Rent Control 10 Commission about things that don't involve -- do not 11 involve Indian Springs Mobile Home Association and its 12 rents and other issues; in other words, you can't talk 13 now about Indian Springs. Are there any members of the 14 public who wish to discuss something else? And then you 15 may have three minutes to do so. And I'm hoping not, 16 that there's not too many. 17 All right. Not seeing hands out there and 18 not having any cards from anybody, I'm assuming that 19 nobody is here to talk to us about something not on the 20 agenda. 21 First item on the calendar then is the 22 consideration to the minutes. The last meeting we 23 received a transcript. I don't -- did we receive 24 minutes? I can't remember in my packet -- I'm running a 25 little bit of feedback here, if somebody wants to turn Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 5 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Let's hear from Elaine Henshel, please. 2 Ms. Henshel. 3 MS. HENSHEL: My name is Elaine Henshel, and I 4 live in Space 44 at Indian Springs Mobile Home Park. 5 My experience is probably not unique, but 6 I think it's important and it's typical of what has 7 happened to many of our residents. 8 A few years ago I had to make a decision 9 about my retirement. I was sitting in my one -bedroom 10 condo in Orange County, Laguna Hills. I realized I was 11 sitting on equity, and I had no income except for Social 12 Security of less than a thousand dollars a month. So I 13 determined that I needed to find an inexpensive place to 14 live and then use any of my savings to supplement my 15 monthly income in order to survive without working at 16 73, I think I was. 17 So I sold my condo, and I found the mobile 18 home in Indian Springs on Lot 44. And it was a mess. 19 But I determined that I would use a certain amount of my 20 money to fix it up and make a home for myself. I was 21 very pleased with the park, the people I met, 22 everything. 23 There were no disclosures during the 24 process of purchasing from management. The only thing I 25 was told was that we may have the opportunity to buy our Page 50 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 lots in the future, which was fine, but I was assured 2 that I would also be able to continue renting if I could 3 not afford or decided not to buy. 4 I was so pleased with my situation there 5 that I commented to my sister that she might like to 6 move. She was living in Northern California, and I 7 thought she might enjoy relocating to the same park, 8 which she did. 9 And she closed escrow in June of whatever 10 year. Two days later, under a stone at her door, was a 11 notice in writing from management that her rent was 12 going to be raised $333 a month. I've heard a lot of 13 different numbers being drifting around, but we have 14 evidence of this letter. I have had a lot of real 15 estate experience and ownership. It never occurred to 16 me that I could be in such a humiliating lack of control 17 of my life and my future, and then adding my sister's 18 situation to it. There was no way we could afford to 19 pay $333 more a month, nor were we ever given any 20 indication that this would be happening. All we knew 21 was possible conversion. 22 So I have been ashamed, angry, afraid, all 23 the different emotions that one goes through ever since 24 I purchased there because it's been one thing after 25 another. I particularly purchased and convinced my Page 51 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 sister to purchase because it was under rent control. 2 As a real estate broker, I knew nothing about mobile 3 home parks, but I thought surely it would be a safe 4 place, an inexpensive living situation where I could 5 feel comfortable for the rest of my life. 6 Wrong. I'm depending, and so are all of 7 us in this room, upon a decision of a few people that we 8 don't even know to decide what's going to happen to us. 9 We can't sell. We can't rent. We're just there. And 10 then we come to meetings and come to meetings, and we 11 hear things from the attorneys, and it just goes on and 12 on. And it just isn't fair. It really isn't fair to 13 screw with people's lives emotionally and financially. 14 I appreciate your listening. 15 ACTING CHAIRMAN WERCHICK: Thank you, 16 Ms. Henshel. 17 Mr. Pruss, George Pruss? Is Mr. Pruss 18 here? I'll pass him for now. 19 Lois Power? 20 MS. POWER: I'm Lois Power. I do not live in the 21 park, but I'd like to donate my time to Mari Schmidt. 22 ACTING CHAIRMAN WERCHICK: Ms. Schmidt is already 23 on the speaker list. Thank you, Ms. Power. 24 MS. POWER: You're welcome. 25 ACTING CHAIRMAN WERCHICK: Mr. Pruss is still not Page 52 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 here. 2 Don Fair? 3 MR. FAIR: I'll pass on this issue. I'll pass 4 on this issue. 5 ACTING CHAIRMAN WERCHICK: Thank you, Mr. Fair. 6 Margo Iverson. Ms. Iverson? 7 MS. IVERSON: My name is Margo Iverson. I live 8 in Indian Springs. And a man I just passed said, "Be 9 nice, be nice." I've appeared before the City Council 10 and also the Rent Review Commission, and I've been told 11 that I'm either angry or passionate. And I think it's 12 kind of a combination of both. 13 One, I have something prepared, but I have 14 to say something after listening to Mr. Spangenberg. 15 Nowhere in that -- in anything he said did he mention 16 that the owner would pay for anything. Nowhere in that. 17 The other thing is when they talk about he 18 was not aware or Mr. Goldstein was not aware that there 19 was a sewer issue, in 1983 through '87, all the way up 20 to there, there was a lawsuit between Indian Springs and 21 the City of Palm Desert. At that time it was talked 22 about the condition of the sewer. In the Appeals Court 23 in 1987 -- and I sent you a packet. And I think that I 24 included that in there, that they were aware and the 25 City was aware at that point that there was problems in Page 53 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Indian Springs with the sewer system or the septic 2 system. 3 This is now 25 years later. And anyway, 4 I'm going back to where I -- there is no way-- there is 5 no other way to describe how tired, desperate, and 6 exhausted we are. This has been going on for four and a 7 half years. I cannot see myself personally giving up, 8 but I do believe some other people have. We have had 9 seven residents pass away within the last two months. 10 One were a couple that passed away three days apart. 11 We have had residents personally go into 12 assisted living nursing homes or with their families 13 just to get out of this situation. Not all of us have 14 had those options. This is truly becoming a 15 life -and -death situation. The uncertainty of the 16 situation is unbearable. To be 60, 70, 80, 90 years 17 old, and almost 100 years of age, and we have to go 18 through this kind of pressure? Some of our residents 19 have just given up. 20 And what are we supposed to do? We just 21 can't pick up our home and leave the park. Some of us 22 can't even pick up our belongings, let alone our home. 23 Our community is under siege with no end in sight. The 24 owner of the park knows this. He has completely taken 25 advantage and control of us and our lives. As Page 54 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 - INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 residents, we never dreamed we would be here pleading 2 for our lives. I'm sorry. 3 If his plans go through, we, our 4 relatives, spouses, daughters, sons, siblings, and 5 anyone involved in our lives are going to have to pick 6 up these pieces. This is a ripple -down effect. 7 Your elder life should not be like this. We cannot sell 8 our homes at a great loss. I have a mortgage on my 9 home, plus my rent, and plus what they are suggesting we 10 pay. I live on $1450 a month. I don't know what I'm 11 going to do. 12 We have residents who have gone into 13 nursing homes or assisted living. They are paying 14 monthly costs at the nursing home for assistance as well 15 as their space in the park. That is what we live with 16 24/7. 17 Indian Springs has worked on the sewers. 18 It's dirty, noisy. Your home shakes every time the huge 19 trucks go up and down the street. It's hard for some 20 residents to get around. But I must say, in fairness, 21 the men that are doing the work are wonderful, and 22 they're considerate, and we have no problems with them 23 at all. If you need to get out, and you need to do 24 something, they're very good. 25 But just to keep the records straight, the Page 55 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 sewer installation was ordered by HCD, not us. There 2 was a comment last time about, "We can't please you. 3 You know, you're the guys that wanted the sewers." 4 No, HCD ordered the sewers. 5 The owner puts up our rent as collateral 6 for his loans. We are sitting ducks. They mentioned 7 one loan back in 2003. They failed to mention that in 8 2005 that was re -- they redid an agreement. Basically 9 it started all over from that date. There was a rider 10 on there that the insurance -- excuse me, the mortgage 11 company would not be liable for any hazardous waste, 12 which is our septic system. And our rents were put up 13 as collateral. 14 And that's what they want to do now is get 15 this loan -- or got this loan. They can't take any 16 money out of it until you okay an increase. I really 17 don't think that's fair to us. 18 It appears we have no say in any 19 discussions made regarding our property. We are 20 depressed, scared, helpless, confused, confined, and, 21 more than anything, trapped. We are absolutely trapped 22 in the situation with nowhere to go at the will of an 23 owner of a mobile home park. 24 I really cannot believe that we are caught 25 in the middle of such a mess. I would never do this to Page 56 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 another human being. Personally, I would never do that. 2 And I doubt that anybody in this room would besides this 3 crew that is sitting here. 4 How can one person destroy so many lives 5 of really good residents? The owner has more than ample 6 income. Try to picture yourself in a situation, 7 desperate, having no control over anything. The park 8 and the City tell you you may have to pay for the sewer 9 installation and a rent increase, and you don't have the 10 money to pay this. What do we do? Our Social Security 11 goes up with cost of living. Isn't that the principle 12 of rent control? 13 I am one of the people in the park that 14 lives on a fixed income. I bought my home because there 15 was rent control. I moved 2,000 miles with the 16 assurance of rent control If the chronic problems of 17 the septic system were disclosed to me before I 18 purchased, I would have rethought my decision. 19 By the way, there is a mandatory 20 disclosure. Nothing was disclosed about the condition 21 of the septic systems at all. 22 ACTING CHAIRMAN WERCHICK: Ms. Iverson, I'll ask 23 that you kind of move on to your main points 24 MS. IVERSON: Okay. I'm almost done. 25 ACTING CHAIRMAN WERCHICK: -- if you would, Page 57 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 please, because a lot of other people want to speak as 2 well. 3 MS. IVERSON: Basically we're relying on you to 4 make a fair decision, and we're pleading for that fair 5 decision to be in the favor of the residents of the 6 mobile home -- Indian Springs Mobile Home Park. Thank 7 you. 8 ACTING CHAIRMAN WERCHICK: Thank you, 9 Ms. Iverson. 10 Carol Byron, please. Carol Byron. 11 Ms. Byron, I have your prepared remarks 12 now. Perhaps you could summarize them or touch on the 13 high points for us and help us save a bit of time? 14 MS. BYRON: How about if I talk fast? 15 ACTING CHAIRMAN WERCHICK: Well, we do have a -- 16 no, that's not an acceptable solution because this poor 17 young person sitting here is going to have to take down 18 everything you say. And the faster you talk, the harder 19 it is. 20 MS. BYRON: I'm aware of that. Thank you, 21 Mr. Werchick. 22 My name is Carol Byron. I live in 104 in 23 Indian Springs Mobile Home Park. I'm on the Board 24 there. 25 My hope is to alert you to some of the Page 58 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 conditions that the residents have been forced to 2 contend with, which I feel should definitely comprise a 3 part of your considerations regarding the capital 4 improvement request you are reviewing in the amount of 5 $89-plus to cover approximately $2.6 million of sewer 6 installation costs. 7 This is a staggering amount to put on the 8 residents of the park who are captive and unable to sell 9 their home due to the flux in which they find 10 themselves. Potential buyers flee when they learn about 11 what's going on. Coach prices have dropped by, 12 conservatively, 40 percent. Not only can they not sell, 13 they can't move, can't finance, or even rent out their 14 coaches. 15 It is important for you to remember that 16 the value of the 191 personal property/coaches, even in 17 today's downward spiraling market, approximates $12 18 million. In 2004 and 2005, when the conversion was 19 first under way, their aggregate value was over $18 20 million. 21 It can be argued that the land value of 22 the 32-plus acres would be appreciably higher if it were 23 zoned HR, hillside residential; however, the costs to 24 clear that land for purchase in any, quote, "change of 25 use," end quote, endeavor would be prohibitive, as all Page 59 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 me down a little. 2 Then I'll entertain a motion for either 3 approving or correcting the minutes. 4 COMMISSIONER TORSNEY: I move to approve the 5 minutes. 6 ACTING CHAIRMAN WERCHICK: Second? 7 COMMISSIONER WADE-MALTAIS: Second. 8 ACTING CHAIRMAN WERCHICK: Any opposition? 9 Minutes are approved. 10 The continued business, getting right to 11 the matter of the calendar -- and one thing I'm going to 12 ask, and this going to be -- it's going to pose a little 13 bit of an intellectual challenge to you people, as well 14 as to us. The issue is divided into chunks today. It 15 all bears upon the rent be paid or not paid by 16 Indian Springs Mobile Homeowner residents, but it's 17 broken down by topic for a variety of reasons, some 18 legal and some procedural. 19 For example, the first item is the 20 consideration of the application of the park owner for a 21 capital improvement rent increase. This is the item 22 that is carried over from prior calendars. I'm going to 23 ask people to think about this when they ask to speak on 24 these various subjects and try to focus on the 25 particular -- for our help, to try to focus on the Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 6 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 coaches would have to be either purchased by the park owner at fair market value or relocated within five miles of their present location. Well, there is no park within five miles of Indian Springs and, even if there were, any coach older than 1976 would not be accepted. Most of the coaches in Indian Springs are of the 1971-1972 vintage. Another interesting fact to ponder is that since 1981, the present park owner has employed his ability to leverage the land, borrowing large sums against it, which is certainly his prerogative to do and very smart if done directly. However, in doing so, one must not abuse the tenancy in executing the large cash withdrawals based on the increasing value of the land under the coaches. An investment in 1981-82 of $2.7 million blossomed over the years to nearly $20 million in 206 -- 2006, the date of an appraisal done for the City at that time, and that appraisal did not include a perceived added value to the land of approximately $20,000 per space or over $3.8 million once the sewers were installed. None of those borrowed equity amounts were used to improve the park as improvements or reserves for the sewer hookup, although as far back as 1983-4-5, before the then Rent Review Commission, there was a talk Page 60 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 of creating a $600,000 reserve account for the eminent 2 sewer installation which was needed even in those early 3 years. There is no evidence to support that a sewer 4 reserve requirement was ever imposed; however, it is no 5 secret that the septics were faulty at that time, and 6 there was talk of installing sewers even back then. 7 Aren't these equity withdrawals considered 8 in calculating fair return standards? Just what is 9 included in establishing a fair return on investment? 10 Is increased land value equity considered in figuring 11 return calculations? 12 Another issue to consider relates to the 13 conversion. If it would appear -- I'm sorry. It would 14 appear, locally anyhow, that after a conversion has 15 transpired and as the land appreciates, if a coach owner 16 does not exercise their option to purchase the space 17 early on, their coach depreciates, and in the interim, 18 if one has to sell, the bulk of the selling price goes 19 to the lot price, while the coach owner only gets the 20 remainder of the sale proceeds. We're still not sure 21 who exactly pays the real estate commissions. There is 22 no reason to believe this won't occur at Indian Springs 23 as well, unless the spaces/lots are appraised and fairly 24 priced. 25 To my knowledge, there is no regulation or Page 61 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 requirement regarding appraisals of the lots in the 2 conversion process. This seems wrong and places yet 3 another burden on, and loss of, the equity value of the 4 resident coach owner's property. 5 As you can see, we are all deeply 6 concerned and truly captive. If you approve this $89 7 rent increase and for some reason the August 1, 2008, 8 increases stand, the residents will suffer over a $100 a 9 month rent raise, which they cannot afford. This 10 equates to an added annual park owner income of over 11 $225,000. 12 We really are backed into a corner. Our 13 futures are in your hands. We have tried and tried to 14 work through the administrative processes, which are 15 exhausted after your final decisions. 16 Thank you. 17 ACTING CHAIRMAN WERCHICK: Thank you, Ms. Bryon. 18 I think we've been sitting here, and, 19 I hope, listening attentively. Let's try for a 20 five-minute break, and then we'll resume. 21 (A brief recess was taken.) 22 ACTING CHAIRMAN WERCHICK: Can we come to order, 23 please. 24 All Right. We're going to resume the 25 public hearing part of the presentation on this issue. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 62 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Melinda Lerg has asked to speak to us. 2 Ms. Lerg? 3 MS. LERG: I gave Mari a short note. My husband 4 is the treasurer. Just to save time, she can read it 5 when she gives her thing. 6 ACTING CHAIRMAN WERCHICK: Thank you. 7 Bette Heinze. Ms. Heinze? 8 MS. HEINZE: Yes. I'd like to speak later on. 9 Let you go ahead with your proceedings, if that's okay. 10 ACTING CHAIRMAN WERCHICK: I'm sorry, on this 11 issue? 12 MS. HEINZE: Yes, later on. 13 ACTING CHAIRMAN WERCHICK: Well, we only have 14 three more people, and Ms. Schmidt is going to conclude, 15 and Mr. Pruss may or may not be here. 16 MS. HEINZE: On the next issue I'd like to speak. 17 ACTING CHAIRMAN WERCHICK: On the next issue? 18 MS. HEINZE: Yeah. 19 ACTING CHAIRMAN WERCHICK: Fine. All right. 20 The next person on this issue requesting 21 to speak was Mr. Pruss, George Pruss. Is he present? 22 MR. PRUSS: Pass. 23 ACTING CHAIRMAN WERCHICK: Pass. Thank you. 24 And finally, Ms. Schmidt, Mari Schmidt. 25 MS. SCHMIDT: Good afternoon. My name is Page 63 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Mari Schmidt, and I am a legislative representative for 2 the homeowners' association and a resident of 3 Indian Springs. 4 And I have a prepared statement, but I 5 have to ask a couple questions. 6 When we appear before you, we're very 7 cognizant of time, and we hurry. And we're very polite, 8 and we're very mindful of how difficult it is for you to 9 sit there and listen ad infinitum to us, but I would 10 remind you that you're it. I mean, we have no others to 11 speak to basically. 12 And I respect David Spangenberg because 13 before him we had a team of really difficult people to 14 deal with, communicate with, and I will say that David 15 has tried. I also remember who signs David's check. 16 So when we come to you to speak -- and I 17 know sometimes we drag on -- it's a frustration that has 18 nowhere else to vent. There is much information that we 19 could include in this. Whether it's proper or not, I 20 don't know. But I do know that the people behind me are 21 at the end of a rope. We have never been included in 22 the discussions between the City staff, meaning 23 Mr. McCarthy -- I assume Justin McCarthy being 24 assigned He is the city staff person -- and the 25 ownership. We had, at the suggestion of the city Page 64 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 attorney, Robert -- one of the City attorneys, 2 Robert Hargreaves, a series of meetings with Mr. 3 Spangenberg to try to arrive at a global settlement, 4 which makes it very difficult to speak to one issue and 5 not the other and keep it all segmented because they're 6 inextricably intertwined. 7 And when we talk -- I am so completely 8 confused at this point in time. First of all, the first 9 application was $329 and change, I think $.57, for the 10 sewers. Then Dr. St. John did some number work and came 11 down to the 260 number, I believe. Today we started out 12 at $89, and I got lost when $59 and $39. Is what they 13 are requesting, $39? 14 UNIDENTIFIED SPEAKER: 38. 15 MS. SCHMIDT: Or whatever, 38 or 59? And I think 16 that it's a kind of good of boy chat that we're having 17 with you that doesn't work and the reasons that the 18 sewer project request for 200 or 300, however you want 19 to purse it, was denied was after long hearings. I 20 mean, we sat seven months before Jeff Patterson who 21 listened intently, and he took notes, shorthand I 22 understand, and came to the conclusion that it wasn't 23 warranted and requested that you turn it down, which you 24 did. 25 What I don't understand is what's changed? Page 65 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 It's the same sewer, the same ground. It's just a year 2 later. And I'll repeat, we do not feel that we should 3 pay one penny toward the costs of installing a sewer at 4 Indian Springs. I don't know what else I could really 5 say that would impress that on you, but I would like to 6 read Ron Lerg's letter. It's very short. 7 I'll make this very short. Most of our 8 residents are on -- residences are on fixed incomes, 9 with many relying only on their Social Security. Our 10 yearly association fee, meaning the homeowners' 11 association fee, is only $100 for the year. And that 12 even -- even that small amount is difficult for so many 13 to make. Some pay $10 a month. That's all they can 14 afford. 15 We've paid our attorneys by volunteer 16 payments to our legal fund, along with fund-raising 17 breakfasts, garage sale, and all those things. 18 Mr. Goldstein has attorneys on retainer, and it is a 19 business expense for him, and he can write that off. We 20 cannot. 21 Mr. Goldstein may think by dragging this 22 out he will run us out of money, and we will give up. 23 He doesn't realize that we are fighting for our homes 24 and our future. We will hold more breakfasts, lunches, 25 or whatever it take to raise the funds to protect the Page 66 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 retirement we've worked so hard for. Thank you. 2 I do not know if it's appropriate, and I 3 don't want you to be angry with me, but what I have 4 prepared is relatively short, and it really is 5 impossible to separate the issues. Would you bear with 6 me, or do you want me to wait? 7 ACTING CHAIRMAN WERCHICK: No, go ahead. 8 MS. SCHMIDT: Okay. This is to you all. General 9 comments. 10 It is not surprising that the three items 11 on the Commission's agenda today are all inextricably 12 intertwined and related. The entire audience, as you 13 can see, is riveted to your considerations and 14 decisions. It is also quite true that the items pertain 15 totally to one land owner. This is really all about 16 Indian Springs. Everyone here is anxiously awaiting the 17 outcome of your decisions on all these critical matters 18 that affect nearly everyone in this room, as well as the 19 remainder of the 250 residents living in Indian Springs. 20 There are overlapping criteria in each of 21 the three decisions before you, and I hope to lay them 22 out for you and ask that you consider the merit of the 23 information in each decision you make. 24 They are demographics. The majority of 25 the coach owners in Indian Springs are either nearing Page 67 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 and/or well over 70 years old. The vast majority of the 2 residents' income levels are low -low, low, low -moderate, 3 and, a very small percentage, moderate income. I do 4 have copies for you all. 5 The general consensus among the residents 6 is that we do not wish, nor have ever wanted, to contest 7 the conversion of the park to condominium status. 8 However, that does not mean that we are in favor of it 9 or espouse its merits. We, the residents, are wary and 10 watchful, cautious because this is an extraordinary 11 change to what we signed up for. 12 The majority of residents most probably 13 cannot afford to purchase the spaces, attend to their 14 coaches without substantial assistance from the park 15 owner and/or the City. The State Improv Loan Assistance 16 Program, which is presently unfunded, private mortgages 17 for the most part are nearing usury standards of 18 interest and are less and less available depending on 19 the age of the coach and the coach ownership. 20 All of the residents want to ensure that 21 the rents stay fair and affordable; that if and when the 22 conversion occurs, the rents at that time, which will 23 become a state -monitored issue, will continue to remain 24 affordable. The moderate income residents who did not 25 wish to or cannot purchase their spaces want the rents Page 68 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 _ INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 to remain fair. Hopefully, these comments will assist 2 your deliberations and conclusions. 3 The only other thing that I would add is 4 that we presently have spent somewhere in the vicinity 5 of $100,000, this group of homeowners. To put this 6 before a hearing officer again, we have no guarantee 7 that it will not take another seven months to 8 deliberate. And it doesn't seem that it's necessary. 9 You know, when we go back into hearing officer's 10 decisions, they have always said, and even you, 11 Mr. Werchick, said, you know, the sewers -- "Are the 12 sewers in? Are they even started?" the last time we 13 were here. 14 I would say this issue just simply is not 15 something to be decided until the sewers are in and 16 approved. And we took the time to make that map to show 17 you that, yes, certain coaches are hooked up. I'm not 18 at all certain that the septic tanks that were attended 19 to those that are hooked up have been abandoned, which 20 is important in a lawful matter. 21 And it seems very premature, particularly 22 with the record that we know, which I'm not at liberty 23 to disclose here today. 24 Thank you. And if you have any questions 25 at all, I'd be happy to answer. Page 69 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 particular thing that we have under consideration. I 2 realize some of your comments will be generally 3 applicable to all of the issues, that's fine, but I want 4 to try and move us along as well as we can. So let's 5 focus. 6 And the first thing that we're going to 7 talk about today is the application for capital 8 improvement rent increase. I'll call upon any 9 representative of the park owner who is seeking the rent 10 increase to open the discussion. Do we have somebody 11 here on behalf of the park owner? 12 MR. SPANGENBERG: Good afternoon, Chairman. 13 David Spangenberg. I'm an attorney representing 14 Indian Springs Mobile Home Park. I've specialized in 15 mobile home rent control litigation issues -- or not 16 litigation, but applications and appeared before cities 17 since about 1985 or 1986. 18 I've prepared the application, and I could 19 see from the transcript there were a number of questions 20 about the application. So I've prepared an exhibit that 21 might be helpful, along with my explanation. Let me 22 give it to you. 23 MR. ERWIN: Mr. Chairman, not to interrupt, 24 I think Mr. Adams is just now arriving. 25 ACTING CHAIRMAN WERCHICK: All right. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 7 760-340-2181 - INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: Thank you, 2 Ms. Schmidt. 3 Are there any other members in the 4 audience -- or any other people in the audience who, 5 even though they did not complete a speaker card, wish 6 to speak at this time? 7 Sir, please give us a name. 8 MR. HILDNER: Chair, members of the Commission, 9 my name is Jono Hildner. I'm a resident of 10 Indian Springs Mobile Home Park and a member of the 11 legislative committee. 12 Let me see if I can quickly summarize 13 where I think we have come. As you -- all four of you 14 know, you have the authority today to -- that you may 15 grant or you may deny the application. We, obviously, 16 are asking you today to deny it and allow the owner to 17 come back when the sewers are done and we know what the 18 costs are and we know that they're operating. 19 I am very bothered by the fact that you 20 requested back in May evidence from the owner as to the 21 discussions they had had with the City and what 22 commitments the City had made -- has made regarding 23 offsetting some of these costs. We heard some 24 discussion, but I looked at the record, and I don't see 25 any evidence that was submitted responding to your Page 70 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 request. 2 We have seen nothing that says how long 3 this monthly charge is going to continue, whether it's 4 $80-some, $59, $39. And yet, we want to go -- they want 5 us to put it to a hearing officer. You commented back 6 in May that they needed to come back and talk about a 7 fair return. And I recognize that the ordinance talks 8 about an NOI. I had several people back behind me who 9 said, "What is NOI?" Well, it's net operating income. 10 But that isn't all the picture of a fair return on 11 investment. The dollars the owner is able to take out 12 of the property to use for other purposes, whether those 13 are lifestyle purposes or anything else, are part of 14 that owner's return, just as we have often been able to 15 take equity out of our homes. 16 And that needs to be part of that fair 17 return analysis. And you've heard arguments as to 18 whether or not that asset has been pledged or not. But 19 there seems to be pretty good evidence that the owner 20 has taken dollars against it. 21 I'm asking you, we're asking you this 22 afternoon, please don't appoint a hearings officer. You 23 have enough information, and you've seen how the 24 applicant has responded to your requests that were very 25 clear. Frankly, appointing a hearings officer is an Page 71 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 attempt to break us. And we're easily broken. Please 2 deny this request this afternoon. Thank you. 3 ACTING CHAIRMAN WERCHICK: Thank you. 4 Any other public comment? Hang on a 5 second, Mr. Spangenberg. We've got one more, at least. 6 MR. DIFANI: I'm Ed Difani in Space 132. And I 7 came here in '95. And since I came in '95, there's been 8 a continuous deal, rent control and all these things. 9 What my question is to somebody here, if they can answer 10 me, they said the sewer is going to cost 450,000 -- I 11 mean, 4,500,000 to start with. He only got one bid. 12 That's what that amounted to. I don't know whether it's 13 required to get three bids or what. 14 Secondly, it's already been reiterated 15 that from $330 they come up with other figures besides 16 that. Don't even mention the 330. Who's getting the 17 payoff on this? I don't know. You know, a hardship has 18 been mentioned. Has anybody ever seen the bottom line 19 of this man? I don't know whether he's got a hardship 20 or not. I don't think so. 21 Anyway, most of this stuff today has been 22 said. And I wanted to get up and give my peace because 23 I am tired of coming down here. I'm tired of it. And 24 he keeps bringing up all these things. And he came down 25 as low as $29 from $330. Where is this all coming from? Page 72 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 I don't know. And thank you for letting me share. 2 ACTING CHAIRMAN WERCHICK: Thank you, sir. 3 MR. DIFANI: D-i-f-a-n-i. 4 ACTING CHAIRMAN WERCHICK: Any other public 5 comment before we let Mr. -- 6 MR. SPANGENBERG: Let me confirm the 7 representative of -- 8 ACTING CHAIRMAN WERCHICK: Okay. All right. I'm 9 going to let counsel then have the next word. 10 MR. SPANGENBERG: Okay. I'm addressing two 11 gentlemen, and I'm sorry, I forgot your name, Mr. -- 12 MR. HILDNER: Hildner. 13 MR. SPANGENBERG: Huh? 14 MR. HILDNER: Hildner. 15 MR. SPANGENBERG: Hildner. I'm sorry. Okay. 16 Mr. Hildner's comments, two of them. 17 The capital improvement is scheduled to 18 amortize out in 30 years. So it's a 30-year 19 amortization. It's not an indefinite amount. 20 And let me talk about not providing you 21 with more information on the settlement. There are a 22 lot of moving parts. There are matching funds. There's 23 multimillion dollar matching funds for purchases. 24 There's a lot of stuff in the settlement. But they're 25 all moving parts, and you guys are one part of it. Page 73 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Okay. And it's not for public disclosure because those 2 moving parts are changing. And the City hasn't 3 committed to any of those moving parts; tentatively 4 committed to some of them. 5 UNIDENTIFIED SPEAKER: Talk up. We can't hear 6 you. 7 MR. SPANGENBERG: So I can't tell you what 8 this -- 9 UNIDENTIFIED SPEAKER: Why don't you speak into 10 that microphone, please. 11 MR. SPANGENBERG: Okay. I can't tell you what 12 that settlement agreement is. I don't think the city 13 attorney can tell you what the settlement agreement is. 14 I know this much. They pledged the hookup fees. And I 15 know this much. It's up to the residents to go to the 16 City and ask for more if they want more. But we've 17 gotten as much to lower this down out of the City that 18 the City is willing to talk about. But there are 19 matching funds for purchases, there's low income funds, 20 there's moderate income funds, there's all kinds of 21 things. All I ask you to do is let's get this aspect of 22 the job over with so that this thing can be resolved. 23 Because it's just been spiraling around for just a 24 little bit too long here. And it's upsetting too 25 everybody. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 74 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: Ms. Soltani. 2 MS. SOLTANI: Just one quick clarification. As 3 we sit here today, we don't even know if the City has 4 forgiven the hookup fees that they put up. No one has 5 ever committed to anything to the residents. I want to 6 be clear that the residents were the moving parties in 7 starting settlement discussions. We twice submitted, at 8 the request of the park owner, at the request of your 9 city attorney, a letter disclosing what we believe would 10 be a fair, just, and equitable settlement of all these 11 matters. Good faith efforts. Moving parts, yes. Our 12 letters were moving. No one to date has responded to 13 any of our letters meaningfully. 14 We still don't know if even the $500,000 15 is on the table because the application is for $89, not 16 $59. So to try to say somehow or insinuate that the 17 residents are holding up the settlement discussion is 18 very disingenuous, and I just needed to clarify that 19 point. 20 MR. SPANGENBERG: I didn't say that. Excuse me 21 if I -- 22 ACTING CHAIRMAN WERCHICK: I was about to ask a 23 question of you, Mr. Spangenberg. 24 MR. SPANGENBERG: Yeah. No, I didn't say that. 25 The residents aren't responsible for this. I don't mean Page 75 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 to say it. That was not my intention. 2 ACTING CHAIRMAN WERCHICK: That's not what I was 3 going to ask you. 4 MR. SPANGENBERG: Okay. 5 ACTING CHAIRMAN WERCHICK: But finish your 6 thought. 7 MR. SPANGENBERG: With my meetings with 8 Justin McCarthy, there have been two things on the 9 table. There's been two things on the table about this 10 sewer thing, and I'm really only at liberty to tell you 11 this one; that they've agreed to pay the sewer hookup 12 fees. I can't tell you the other one because it 13 benefits certain people in the park and not others. 14 Okay? So if I tell you that one -- I mean, I'm not 15 trying to play hide the ball. Go talk to the city 16 attorney if you want to find out what the settlement is. 17 I'm just saying that there's a bunch of 18 moving parts. It's not over with. There are 19 commitments. But the City has said we'll do this or 20 we'll do that. Okay. And the "this" is we'll pay the 21 hookup fees. 22 ACTING CHAIRMAN WERCHICK: Mr. Spangenberg, I 23 understood you at the outset -- and correct me if I'm 24 wrong -- to suggest the possible consideration of two 25 different things. One was to send the matter to a Page 76 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 - INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 hearing officer once again, including the determination 2 of the rate of capital rent pass -through, and the other 3 thing I understood you to say was that if we were going 4 to vote on a sum today, to use the $59.08 sum on the 5 assumption that the City -- if we approve the rent 6 increase, the City was going to pick up the -- or waive 7 the hookup fees. Am I correct in both of those, that 8 those were your thoughts at the beginning? And if not, 9 do you want to take one or both of them off that 10 table -- 11 MR. SPANGENBERG: No. 12 ACTING CHAIRMAN WERCHICK: -- before we get to 13 making motions up here? 14 MR. SPANGENBERG: Until you have an approved rent 15 increase, the City is not going to commit to what 16 they're going to do. 17 ACTING CHAIRMAN WERCHICK: I understand that. 18 MR. SPANGENBERG: Okay. 19 ACTING CHAIRMAN WERCHICK: But are you asking us, 20 if we were going to go that route, to get a commitment 21 from the City for you, are you asking us to vote on 22 $59.08, or are you asking us to vote on $86.05, or 23 $79 -- 24 MR. SPANGENBERG: Are you asking me -- 25 ACTING CHAIRMAN WERCHICK: -- or nothing? What Page 77 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 are you asking? 2 MR. SPANGENBERG: Well, okay. If you're at -- if 3 you're saying to me that the Board is willing to vote 4 today on $59 whatever it is, you know, as a 5 pass -through, contingent upon the City paying the 6 whatever -- 7 ACTING CHAIRMAN WERCHICK: That's not what I'm 8 asking you. 9 MR. SPANGENBERG: Okay. If you're -- okay. I 10 want to clarify. 11 ACTING CHAIRMAN WERCHICK: I'm asking if you were 12 to persuade us that today was decision day, and many 13 people, of course, would like it to be decision day, do 14 you want it to be -- are you submitting to us for 15 decision $59.08? Or alternatively, I know you'll also 16 feel that you've accomplished something for your client 17 if we refer it back to a hearing officer to get more 18 information to confer with the City to see what the 19 settlement agreement spells out, and so forth. 20 I understand I'm not -- I'm not telling 21 you you have to take that off the table either. 22 MR. SPANGENBERG: And I'm not -- 23 ACTING CHAIRMAN WERCHICK: I just want to know 24 what we should be debating today. 25 MR. SPANGENBERG: Okay. And I'm not trying to Page 78 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 play hide the ball. I'm trying to understand your 2 question. Okay. 3 If the Board was to approve today $59 4 whatever -- 5 ACTING CHAIRMAN WERCHICK: Let me interrupt you. 6 If we were to have a motion today -- 7 MR. SPANGENBERG: Yeah. 8 ACTING CHAIRMAN WERCHICK: -- to debate and vote 9 up or down, yea or nay, do you want us to -- would that 10 motion be a motion to accept $59.08 or a different 11 number? 12 I can tell you right now I don't feel 13 there's going to be sentiment -- I may be wrong -- for a 14 contingent motion saying we'll vote to approve $2 if 15 tomorrow it rains, but $4 if it's sunny tomorrow, and $6 16 if we get six days of weather under a hundred degrees. 17 That's not going to happen. I just don't see us 18 formulating that kind of motion. 19 Now, somebody may move to say I vote that 20 we approve a certain amount. Should they be saying 21 $59.08 or not? 22 MR. SPANGENBERG: Okay. This is going to be 23 complicated. 24 ACTING CHAIRMAN WERCHICK: You can say no. 25 MR. SPANGENBERG: I'd love for you to approve Page 79 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Mr. Spangenberg, pass this out and then stand at ease. 2 Provide one extra copy, please, for Mr. Adams. And 3 we'll await Mr. Adams taking a seat. 4 And let our record show Mr. Adams is 5 present for the meeting. We'll let Mr. Adams just say 6 the Pledge of Allegiance quietly to himself, and then he 7 will have caught up with everything that we've done so 8 far other than approve the minutes. 9 Mr. Spangenberg, thank you for your 10 indulgence. Go ahead. 11 MR. SPANGENBERG: Thank you. I'd like to welcome 12 Mr. Adams. It's been a very, very long time. I'm glad 13 to see that you're still in good health, sir. If you 14 remember me? Maybe you don't. 15 CHAIRMAN ADAMS: Oh, I do. 16 MR. SPANGENBERG: Okay. 17 CHAIRMAN ADAMS: In fact, I wanted to apologize 18 for being late. In case it hadn't been brought out, I 19 have -- due to some physical problems that have 20 occurred, I've asked Mr. Werchick -- 21 ACTING CHAIRMAN WERCHICK: I mentioned that. 22 CHAIRMAN ADAMS: -- to take over here. 23 ACTING CHAIRMAN WERCHICK: Well, I didn't give 24 the reason. I just said I -- 25 CHAIRMAN ADAMS: I didn't give you the reason. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 8 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 $59.08. 2 ACTING CHAIRMAN WERCHICK: But you understand 3 that if we do that, you're not going to, probably, come 4 back and get any more? 5 MR. SPANGENBERG: I understand that. Except I 6 have to make one -- and I can't tell you why. 7 UNIDENTIFIED SPEAKER: Hide the ball. 8 MR. SPANGENBERG: But the city attorney 9 understands why. It has to be $62, not to exceed $62. 10 Okay. 11 ACTING CHAIRMAN WERCHICK: Now, let me say one 12 thing for the audience. In defense of Mr. Spangenberg, 13 who has taken, and may continue to take, a beating, I 14 don't know, because -- 15 MR. SPANGENBERG: At least people think I'm okay. 16 ACTING CHAIRMAN WERCHICK: -- he stands as an 17 advocate in front of a large audience where everybody 18 has a different point of view. I understand what 19 Mr. Spangenberg is saying as an attorney. And maybe you 20 people without the experience of this will understand a 21 little better if I tell you that it's not unusual when 22 there is either litigation pending or a prospect of 23 litigation for those parties to go with mediators behind 24 closed doors and discuss all sorts of alternatives and 25 possibilities. Page 80 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 And they also swear each other to secrecy. 2 Because, as you can imagine, if you're trying to hammer 3 out a private budget, you don't want to do it on the 4 front page of the Desert Sun because then all of a 5 sudden everybody else starts piling in, and it 6 interferes with the discussion of that group of people, 7 and there may be a more appropriate time and place for 8 other people to be heard. 9 So please don't be mad at -- you can be 10 mad at Mr. Spangenberg for anything else you like, but 11 please don't be mad at him because he cannot disclose 12 confidential discussions that are taking place in an 13 effort to see if a settlement can or cannot be worked 14 out. There's other reasons why you can pile on him at 15 other times, but that's really not a fair one of them. 16 So don't get upset with him when he says, "I can't tell 17 you what we're discussing" because I'm sure people have 18 sworn him to secrecy. If he were to blurt out today 19 exactly what they're talking about, if I were a lawyer 20 on the other side, I would say I don't trust you 21 anymore, and I'm not going to talk to you anymore. So 22 understand that in his defense on that one small point. 23 But anyway, go ahead, Mr. Spangenberg. 24 MR. SPANGENBERG: Thank you. 25 So let me explain how I think this should Page 81 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 be. It's $62 is the number we have to use. However, I 2 think the project can be brought in at 50 -- whatever 3 the number is. That's what I think it can be brought in 4 at. If we don't exercise those contingencies, I think 5 the number can be brought in lower. But I have to tell 6 you 62 because that's the number that's being discussed. 7 It's only just because of doing the math again that we 8 realize these are the numbers that we think it's going 9 to be. 10 ACTING CHAIRMAN WERCHICK: Is it fair for me to 11 characterize this from our perspective as you're saying 12 you're really not prepared today to give us a final 13 number? 14 MR. SPANGENBERG: I'm prepared to give you a 15 number of not to exceed $62 subject of proof of cost. 16 So in other words, if the cost is 58, it's 58. I think 17 the cost will be less. If I -- if you make the motion 18 at 58, you're going to cost somebody money, and that 19 person you're going to cost money starts with a capital 20 Okay? And I'm not doing this to protect my 21 client. I'm doing it to protect you. Okay? 22 You don't have to believe me. You don't 23 have to believe me. But people have come up here and 24 said I've tried. 25 MS. SOLTANI: If I may respond to that? Page 82 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: Ms. Soltani. 2 MS. SOLTANI: Well, Mr. Spangenberg may not be 3 able to tell you why it has to be $62, but I can tell 4 you. 5 I have the reporting from Honorable Wells, 6 judge in Department 2-J of Indio court where the 7 settlement discussions actually took place. This is a 8 public record, and everybody can get a copy of this from 9 the court. 10 The reason it has to be $61 or more is 11 because the Court says this matter is settled, correct, 12 and Mr. Casparian, who represents the park owner in that 13 case, says, Your Honor, if I could read the key terms 14 that the parties have agreed to on the record. 15 The responsibilities of the plaintiff and 16 the petitioner would be to immediately dismiss all 17 litigation with prejudice, offer the residents of the 18 mobile home park 5 percent discount off the face value 19 of their spaces. These are dealing with the conversion 20 case. 21 Let me get to the key parts that are 22 related to these proceedings. 4, complete installation 23 of the sewer installation, and, 5, reduce the current 24 capital improvement rent increase request from $89.78 25 down to $61.26. Mr. Casparian -- somebody says Page 83 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 something, then Mr. Casparian says, that's correct. 2 2, the City to approve the capital 3 improvement rent increase of $61.26 or to provide the 4 monetary equivalent to the plaintiff. 3, the city 5 attorney will issue a letter that all prior rent charges 6 by plaintiff of petitioner have complied with the City's 7 rent control ordinance. 8 These are illegal conditions. 9 Mr. Werchick, you're an attorney. You know you can't 10 bound a commission before the commission hears the 11 evidence. That's precisely what this settlement 12 proposal is trying to do, and that's what Mr. 13 Spangenberg is asking you to do today, to approve this 14 settlement agreement that was reached without 15 participation from the residents, which was actually 16 hidden from the residents. 17 It was because we were snooping around 18 that we found this document. I represent -- our office 19 represents City of Carson. We have a rent review board. 20 We have similar issues that you're facing in this city. 21 Our residents are involved in every single discussion we 22 have with this very same park owner. Because the 23 residents are impacted, not Mr. Goldstein, not the city, 24 not this board. These residents are going to be 25 impacted. They need to be protected. Our job is to Page 84 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 protect them, not to just verify a settlement that was 2 reached in closed doors that dictates. Mr. Casparian is 3 dictating that this Board approve the $61.26. 4 So the park owner's attorney is dictating 5 that you approve this at $61.26. That's why 6 Mr. Spangenberg is saying, "For reasons I can't tell 7 you, it needs to be at least $62." 8 ACTING CHAIRMAN WERCHICK: Just so my 9 understanding is clear, I'm not understanding that I'm 10 being told how I must vote? 11 MR. SPANGENBERG: No. no. 12 ACTING CHAIRMAN WERCHICK: I am hearing you argue 13 that the settlement agreement may come unglued if there 14 is not ultimate approval of that amount. 15 MR. SPANGENBERG: There is a 61 -- and I stand 16 corrected. It's not 62. Because I'm not involved in 17 the settlement over there. I'm aware of the moving 18 parts. Okay. There is a $61.26 approved -- I mean, 19 there's a condition precedent to settlement. That's 20 what this is. Okay. And the attorney for the city and 21 the attorney for the park owner have sat down and said, 22 okay, what's a legitimate cost for this sewer system if 23 we put in the connections fees, da, da, da, da. They 24 came up with $61.26. I come up with 59-something. 25 Okay. And that's building in the contingencies. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 85 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 You know, so there's three ways we can 2 proceed. And it's up to you. You exercise your 3 discretion. We can approve a number for subject to 4 verification that, in fact, that's what was spent, 5 subject to auditing. We could do that. We could deny 6 this, which would force us to file for an NOI. We don't 7 want to do that. That unglues everything. Not only 8 does it unglue everything, it puts us in a position 9 where we don't -- we're not -- we're not asking for 10 $61.26, we're asking for a lot more. And I don't want 11 to be in that position. I don't want to have that kind 12 of bait out there for everybody to look at. I just want 13 to get this done as cheaply as possible. And you know, 14 that's been my goal. 15 So you do whatever you want. I'm not 16 telling you that you have any obligation to do anything. 17 You can deny it, you can send it to a hearing officer, 18 you can vote to approve a number up to that amount 19 subject to verification. It's your call. And don't 20 feel like I'm telling you you got to do anything. 21 Because my job is just about done here. 22 ACTING CHAIRMAN WERCHICK: Have we exhausted 23 public comment? 24 MR. ERWIN: Mr. Chairman, if I might? 25 MR. FAIR: One question. Page 86 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 MR. ERWIN: Mr. Chairman? 2 MR. FAIR: One question. 3 ACTING CHAIRMAN WERCHICK: I'm going to call on 4 staff and counsel after public comment. 5 MR. FAIR: Just a question. How do we know that 6 if they get the -- 7 CITY CLERK RIDDLE: Excuse me, sir. You need to 8 come up to the podium and give your name. 9 ACTING CHAIRMAN WERCHICK: Please. We'd like to 10 know who you are, and we want to hear you clearly. 11 MR. FAIR: I thought it was a short question. 12 ACTING CHAIRMAN WERCHICK: It's all right. 13 MR. FAIR: Don Fair. I'm in 159 Indian Springs. 14 How do we know -- can we be assured that 15 if they get the 61 or 62 or 59 or 89 today that they 16 won't be back tomorrow for the 38 or 39 they're talking 17 about after this one is approved? 18 ACTING CHAIRMAN WERCHICK: I think that's what we 19 call a rhetorical question. Have we exhausted public 20 comment? Thank you. 21 I'm going to declare public comment closed 22 and ask for any comments from staff. 23 MR. ERWIN: Mr. Chairman, I'd like to clarify 24 for the record what Mr. Soltani was reading from that 25 the city's attorney at that hearing also said there are Page 87 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 a couple of reservations for the record as to the 2 approval of the rent increase. The item that was 3 mentioned, that is a determination to be made by the 4 Rent Review Board, which is an independent agency, and 5 therefore, there is not a commitment at this time that 6 it will go through. We understand that this is a 7 condition that must be fulfilled, but we cannot promise 8 it will happen because we do not control that entity. 9 ACTING CHAIRMAN WERCHICK: I appreciate that. 10 MR. ERWIN: I think that should be on the record. 11 ACTING CHAIRMAN WERCHICK: I think we assumed 12 that, but I'm glad that the City's representative put 13 that on the record at the time that they had no way of 14 knowing what we would independently -- in exercising our 15 authority, what we would determine. 16 Before we get to the actual making of 17 motions, let me take a shot at summarizing briefly what 18 I think we might do today on this particular issue, that 19 is, just the capital improvement rent increase. 20 I see that we have, in essence, five 21 choices that we're going to have to select from. We 22 could approve either $61.26 or such number as a member 23 of the commission chooses to move for adoption. We 24 could engage in considerable further subtexting and 25 approve a number, as counsel puts it, as Mr. Spangenberg Page 88 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 says, subject to and set out such conditions that might 2 raise or lower that number in the future without our 3 having to meet and discuss it again. Third, we could, 4 as some have suggested, defer any suggestion to 5 completion of the sewer and plan to meet in November, 6 say, to take up the entire issue based upon a 7 presentation by the actual accountants and contractors 8 as to what was spent, what contingencies were or were 9 not used, whether any further developments have 10 occurred, discussions with the City. We could refer the 11 matter to a hearing officer and ask that the entire 12 issue be revisited as it was a year ago, considering all 13 features, the interplay of the ordinance, the evidence 14 to be taken of these other matters. Or we could 15 disapprove. We could just say no capital rent increase, 16 and that's our final decision and hit the buzzer. 17 What's the pleasure of the Commission? 18 And certainly, before making a motion, if 19 anybody wants to add to the list of alternative possible 20 considerations or solutions, I, for one, would be happy 21 to hear them. 22 COMMISSIONER TORSNEY: I'm prepared to vote. 23 ACTING CHAIRMAN WERCHICK: Do you think we should 24 proceed to some sort of decision process on one of 25 these -- taking one of these approaches. Page 89 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 That's why. 2 MR. SPANGENBERG: Well, in his return, I remember 3 our discussion about these sewer issues, what, ten years 4 ago or something like that. 5 Anyway, so let me explain and, hopefully, 6 answer a lot of questions that you have about the 7 application. 8 There was -- the original application was 9 filed through Richard Close's office, and it sought a 10 pass -through of, I think it was, four and a half 11 million, or something like that, numbers in that range. 12 At that time the City and the park owner were in 13 discussions, and it was believed that the best way to 14 handle that capital improvement sewer was to treat it as 15 an assessment district type of project. Okay? 16 So the idea of the improvement was to 17 design it according to the Coachella Valley standards 18 for design. Those standards for design of a public 19 sewer system, because there was discussion about an 20 assessment district, dedication of right-of-ways, and 21 stuff like that. 22 With the Coachella Valley sewer system, 23 the pipes have to be a clay pipe. I don't know if 24 you've seen those stacked along the roads, but they use 25 a clay pipe. They use copper -rolled fittings. And the Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 9 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 COMMISSIONER TORSNEY: Yeah. 2 ACTING CHAIRMAN WERCHICK: Any other? Bill? 3 CHAIRMAN ADAMS: Well, if we were simply to deny 4 the application with the expectation that the sewer 5 project would then be completed, paid for, toted up, 6 accounted for, then brought back, what would -- what 7 celestial plan would be -- 8 ACTING CHAIRMAN WERCHICK: Well, I didn't 9 contemplate that when I said "denial." 10 COMMISSIONER TORSNEY: Oh. 11 ACTING CHAIRMAN WERCHICK: When I said "denial," 12 I had in mind more that we could discuss -- if was the 13 wish of -- somebody puts it in the form of a motion, 14 that we would deny the right of the loaner to secure a 15 capital rent increase for the sewer. In other words, if 16 we accepted arguments that were made a year ago, if we 17 accepted any other arguments that might be put out as to 18 why the owner should or should not get any capital rent 19 increases. Your position, I consider more to, in 20 essence, really, Number 3, deferring to completion. 21 That would be saying we're going to deny it today, but, 22 as we say in the law, without prejudice, meaning you can 23 make your motion again in two months, and you don't lose 24 anything by having brought the motion today. You bring 25 it back in two months, and we'll look at it then. Page 90 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 I think that your idea of you finish it, 2 and then we'll talk about it is only temporary denial. 3 What I had in mind is, if it's the wish of the 4 Commission, we could vote today on final denial based on 5 the purportedly hearing officer from last year and the 6 arguments of counsel. 7 And I am -- you know, I have my own 8 thoughts, but I am open to the will of the Commission in 9 terms of which of these five should be put on the table 10 to be argued amongst us and then voted up or down. And 11 then if it gets voted down, one of the other remaining 12 four could then -- I think we're going to be here for a 13 little while, in other words. But I think that's the 14 most logical way to proceed is to decide if one of us 15 feels strongly enough to make a motion to support one of 16 these procedures, these approaches. 17 And let's debate that and decides if 18 that's what the Commission wants to do or not. Does 19 that meet with everybody's approval to go about it that 20 way? 21 CHAIRMAN ADAMS: I do have some drawback in my 22 mind to granting of an increase, whether it -- no matter 23 how it's labeled, that's based on money that hasn't been 24 spent, and we don't know how much it's going to be. I'd 25 like to see it based on something that has happened and Page 91 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 that we know the cost. 2 ACTING CHAIRMAN WERCHICK: Should we -- 3 COMMISSIONER TORSNEY: Let me phrase where I'm 4 coming from. 5 ACTING CHAIRMAN WERCHICK: All right. Then I'm 6 going to make a suggestion. Go ahead, Brian. 7 COMMISSIONER TORSNEY: This request for a sewer 8 connection and sewer installation is based upon actions 9 that were taken several years ago. 10 UNIDENTIFIED SPEAKER: Can you speak into the 11 mike, please? 12 COMMISSIONER TORSNEY: Several years ago. 13 Apparently from all the evidence and all the testimony, 14 the owner of this property was ordered by the state and 15 by local health officials to make this installation 16 several years ago. Once again, according to the 17 materials that I've read, he made a business decision 18 not to do it at that time. 19 Well, I don't think the residents should 20 be forced to pay for the bad decision, the bad business 21 decision of the owner, and I don't think the residents 22 should be liable for the increased costs that bad 23 decision cost the owner; and, therefore, if I were to 24 vote right now, I would vote to deny the increase. 25 ACTING CHAIRMAN WERCHICK: Maybe if I could make Page 92 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 the suggestion, to go about this methodically, why don't 2 I simply ask if anybody is going to make a motion and 3 take these in the descending order of impact. 4 First, is any member of the commission 5 going to make a motion to approve $61.26 flat, outright, 6 no subject tos, just that number, and that's the end of 7 the issues? Is anyone going to make that motion? 8 COMMISSIONER WADE-MALTAIS: Not me. 9 COMMISSIONER TORSNEY: Not me. 10 CHAIRMAN ADAMS: Not I. 11 ACTING CHAIRMAN WERCHICK: All right. That's off 12 the table. 13 Is anybody going to make the motion 14 setting a number, such as $61.26 or some other number, 15 and add to it some conditions of subject to certain 16 future events that may cause the number to go up or 17 down, which frankly, I have to say as a subnote, we 18 would be here a long time formulating, I suspect, those 19 subject tos. 20 But is anybody going to make that motion 21 today based on what I just said? 22 COMMISSIONER WADE-MALTAIS: Not I. 23 COMMISSIONER TORSNEY: Not me. 24 CHAIRMAN ADAMS: No. 25 ACTING CHAIRMAN WERCHICK: Is anybody going to Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 93 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 move here that we defer this consideration until 2 completion of the sewer project and come back November 3 or some time thereafter and reconsider a capital rent 4 increase? 5 COMMISSIONER TORSNEY: Not I. 6 CHAIRMAN ADAMS: I'm considering doing that 7 COMMISSIONER WADE-MALTAIS: I'm considering that. 8 CHAIRMAN ADAMS: -- but I'd like sure like to 9 make sure I'm not -- I'd like to make sure I'm not 10 triggering some kind of unintended consequences that 11 seems to happen. 12 ACTING CHAIRMAN WERCHICK: Well -- 13 CHAIRMAN ADAMS: But I am giving serious 14 consideration that that -- you know, then there would be 15 a completed sewer project presumably approved by 16 somebody, presumably in use with a cost figure already 17 known and able to be, you know, worked with, and then we 18 could deal with it. 19 ACTING CHAIRMAN WERCHICK: Why don't you hold 20 that thought, and let me go to point four. Is anybody 21 going to move that we send this back to the hearing 22 officer? 23 COMMISSIONER WADE-MALTAIS: Not I. 24 COMMISSIONER TORSNEY: Not I. 25 CHAIRMAN ADAMS: I don't see a reason to. Page 94 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: All right. It seems 2 that we have two things on the table. Either one could 3 be put in the form of a motion, and then that motion 4 considered, with the other one being the alternative 5 basically. We've kind of narrowed our playing field 6 down here to two items, the two items being that we 7 defer to completion or that we make final disapproval of 8 any capital rent increase today. 9 And so the issue is, I guess, who gets to 10 the microphone first. Which of you would like to put it 11 in the form of a motion? Brian, will you make a motion, 12 please. 13 COMMISSIONER TORSNEY: I would vote to deny the 14 request for a capital improvement. 15 ACTING CHAIRMAN WERCHICK: Is that a motion? 16 COMMISSIONER TORSNEY: That's a motion. 17 ACTING CHAIRMAN WERCHICK: Is there a second to 18 that motion? 19 COMMISSIONER WADE-MALTAIS: I second the motion. 20 ACTING CHAIRMAN WERCHICK: Thank you. 21 I think for discussion purposes, I'll call 22 upon you, first of all, because you've articulated an 23 alternative, and now is the time for you to put your 24 thoughts together and decide if you want to argue for 25 that alternative. Page 95 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 CHAIRMAN ADAMS: Well, it would seem to me that 2 this -- unless I misunderstand, even denying this 3 application does not end the matter for all time. I 4 mean, it's still -- I presume that they can still -- 5 they're still going to have to -- somebody is going to 6 have to put the sewer in. 7 COMMISSIONER TORSNEY: I agree with that. The 8 sewer has to be put in. 9 CHAIRMAN ADAMS: It's all going to have to 10 happen. 11 COMMISSIONER WADE-MALTAIS: The sewer is 12 improvement. 13 CHAIRMAN ADAMS: So there isn't really that much 14 difference between the -- 15 COMMISSIONER WADE-MALTAIS: Two. 16 CHAIRMAN ADAMS: -- between the two. One of them 17 is saying, Hey, we're going to keep it alive and find 18 out what the costs are and then deal with it. The other 19 one says, We'll deny it. When you've got your act 20 together, come back and a put it in again. 21 ACTING CHAIRMAN WERCHICK: Well, I'm going to 22 indulge my right to speak as a member, as well as 23 temporary chair, and say I disagree with you. If we 24 deny the motion because we don't have the specific 25 number, yes, that would be sending a message that it Page 96 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 might be worth it again for the park owner to hire 2 counsel and all of these other skilled professionals to 3 come back to us at some future date and ask us to vote 4 again on the same point. 5 If, however, we deny it and make it clear 6 in our statement, in our discussion, as Brian had begun 7 to do, that the denial is based not on the lack of final 8 numbers, but, rather, on determination to deny it no 9 matter what those numbers are, yes, it's true, I don't 10 think legally we can say you can't come back and ask 11 again, but logic would say he'd be asking the same four 12 people, until we get new members of this commission, to 13 come back and vote on the same thing again in the face 14 of that statement. 15 Now, you know, in court the judge can say 16 don't ever come back and make that motion again, but the 17 Commission can't say that. And you can always go back 18 to a commission. You can always go back to the city 19 council. You can ask over and over again for the very 20 same thing. But the question is, Do you have any 21 expectation that you'll get it if it's been made clear 22 that you're not going to get it from those people who 23 are making the votes, unless situations have changed? 24 So I don't agree with you that it 25 automatically invites them to file a motion again in two Page 97 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 months, the application again. It depends on why. If 2 it were rejected, it would depend why it was rejected 3 and how clearly the point was made as to why. 4 All right. Any other -- do you want to 5 continue the discussion, please, on the subject of 6 whether the motion to deny it should be approved or 7 denied? 8 CHAIRMAN ADAMS: No. 9 MR. ERWIN: Mr. Chairman, if you wish to go 10 further with this motion, I think it's important that we 11 have reasons so that we can create the findings to 12 support that motion. 13 ACTING CHAIRMAN WERCHICK: I agree we should 14 clearly state what our thinking is. 15 MR. ERWIN: Yes. 16 ACTING CHAIRMAN WERCHICK: If for no other 17 reason, that it may help in future resolution whether 18 one side or the other decides to bring the motion back. 19 MR. ERWIN: I think potentially -- correct. 20 Potentially you're creating a res judicata argument too. 21 ACTING CHAIRMAN WERCHICK: Yes. Although can a 22 commission cite res judicata? A court can, but I don't 23 think a commission can. I think if they go to the 24 clerk's office and say, Please put something on the 25 agenda, the clerk can't say, I'm sorry, I can't do that. Page 98 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 MR. ERWIN: Correct. 2 ACTING CHAIRMAN WERCHICK: The clerk has to put 3 it on the agenda. 4 But I'm going to make a few comments. But 5 Brian, did you want to add anything before I do? 6 COMMISSIONER TORSNEY: No, go ahead. 7 COMMISSIONER WADE-MALTAIS: I would like to. 8 ACTING CHAIRMAN WERCHICK: Please, go ahead. 9 COMMISSIONER WADE-MALTAIS. (Inaudible.) 10 ACTING CHAIRMAN WERCHICK: You're going to have 11 to be sure the reporter gets it. You're on. You're on. 12 Go ahead. 13 UNIDENTIFIED SPEAKER: Just put it closer. 14 ACTING CHAIRMAN WERCHICK: A little closer to the 15 microphone or pull it closer to you. There you go. 16 Because she has to take down what you're saying. 17 COMMISSIONER WADE-MALTAIS: This is some of my 18 stream of consciousness, this discussion, and why I have 19 been reading through this tremendous lots of paper. 20 Even with 30 years' experience of college 21 teaching of English and with a Ph.D., it has been taking 22 me a little bit of a challenge to get to -- thank you. 23 Is this better for you? 24 UNIDENTIFIED SPEAKER: No. No, it's off. 25 ACTING CHAIRMAN WERCHICK: Even closer, I think. Page 99 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 UNIDENTIFIED SPEAKER: You've got to raise your 2 voice. 3 ACTING CHAIRMAN WERCHICK: Can we move these 4 papers out of the way? 5 COMMISSIONER WADE-MALTAIS: How about now? 6 ACTING CHAIRMAN WERCHICK: All right. 7 COMMISSIONER WADE-MALTAIS: As one of my 8 colleagues has said, this matter -- and this arose at 9 the last meeting before this gent here, advocate was 10 here, that this matter has stemmed from the sewer issue 11 of over 25 years, the stubbornness of -- as I see it, of 12 the owner to remedy the issue. And it has escalated to 13 the point where it seems as if the residents of the park 14 are penalized financially in a really very serious and 15 mind -boggling way. 16 It is the obligation of this Commission -- 17 it has two dual purposes. One, is to see that the owner 18 gets a fair return, but it's also important to protect 19 park residents from unconscionable prices. 20 Also, there is Senate Bill -- what is 21 it? -- 534 which requires full disclosure, which 22 apparently was not afforded the residents at some of the 23 meetings, for instance, with Mr. McCarthy and the park. 24 It's a matter of David and Goliath. And Goliath has a 25 lot of power and a lot of money, and David, that is the Page 100 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 residents, are senior citizens with dwindling funds. 2 The matter of the sewer, I think, the 3 deteriorating sewer and ignoring it over many years is 4 what has brought this to this pass. 5 But I would like to consider the serious 6 deferring, inviting the park owners to come back after 7 the sewer is remedied, after its complete. 8 That's it for now. 9 ACTING CHAIRMAN WERCHICK: Thank you. 10 UNIDENTIFIED SPEAKER: Could you summarize what 11 she said, please? Serious. 12 ACTING CHAIRMAN WERCHICK: Well -- 13 COMMISSIONER WADE-MALTAIS: It was a bit of 14 rambling. 15 ACTING CHAIRMAN WERCHICK: The public comment 16 time is closed. And one of the things that you learn, 17 it has been said that people don't -- shouldn't watch 18 sausages or laws being made because you don't 19 necessarily want to know what goes in them. 20 People who have legislative and commission 21 administrative responsibilities can express themselves 22 in a variety of ways, as long as it helps them organize 23 their own thinking to bring them to an honest vote. And 24 they don't have to explain themselves for what they say. 25 COMMISSIONER WADE-MALTAIS: I was hoping that I Page 101 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 was explaining myself. ACTING CHAIRMAN WERCHICK: I thought -- I understood, I think, what you were trying to say, and there were several ideas that were thought -provoking ideas. I have a somewhat different perspective, I think, perhaps than has been said so far. I actually alluded to it briefly a year ago, as I recall. I will say that those of you who read the transcript of our last hearing in May, I guess it was, know that I did say I was leaning towards denial of the capital rate increase unless a lot more information was forthcoming. I think Mr. Spangenberg has done an almost superhuman job trying to produce that information. I think some of it may just not exist, information adequate to answer some of my concerns that I expressed. I also expressed some time ago the view that I see a capital improvement and the concept of passing through capital improvements from a landlord to a tenant situation -- and I have some familiarity, personal experience, with San Francisco also, which is a rent control city. The whole city is rent controlled. And we have an ordinance in San Francisco. And so I've watched developments over the years in that and just pursuing it as a matter of news in other communities. Page 102 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 There are different kinds of capital 2 improvements. Some capital improvements are really more 3 like operating expenses, and once an owner has to do it, 4 it's gone. It's like painting the outside of a 5 building. You're going to have to do it again in five 6 years. You can't sell your building necessarily for any 7 more five years from now because you painted it. Yes, 8 it's a cash outlay for a sudden improvement kind of 9 thing, and some would call it a capital expense, but 10 that's something that gives an immediate pleasantness 11 benefit, but the owner really doesn't get anything out 12 of it in the long run. 13 There are other expenditures, such as 14 adding more land or property or building a bridge or 15 something like that that's a permanent change. There, a 16 tenant may not get much immediate benefit or any sense 17 of benefit from it, but the owner reaps a benefit over 18 the long term because not only will it possibly affect 19 that operating income, but there's the other component 20 of a fair return, and that is, does it increase the 21 value of your property. If it's going to let you sell 22 your property either sooner or for more money, I think 23 to me -- and I said it a year ago, and I was waiting to 24 hear whether anybody was going to debate it. To me, 25 that's part of a fair rate of return. You know, I may Page 103 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 have to lay out a million dollars or go to the bank to 2 get it this year, but if I can sell my property for 3 $5 million more, I've done a very smart thing, and I'm 4 getting more than a fair rate of return for my 5 investment. And I don't have to ask the tenants to pay 6 for it because I'm going to get my money somewhere else. 7 There are here, obviously, discussions 8 going on of other sources of revenue, including the City 9 to help the owner with the problems defraying the 10 capital cost of the sewer. I just don't think that a 11 fair and adequate showing has been made balancing the 12 undoubted -- you know, I didn't mean to rush you people 13 along when you were telling us about the problems that 14 you have as residents of the park. We know them. We 15 appreciate them. We've heard them for over a year now. 16 I didn't mean to rush you along, but we are sensitive to 17 them, as you can hear. And we have to balance those 18 concerns against the owner's rights as an American 19 business panel. I just don't think, to me, that an 20 adequate showing has been made under any circumstances 21 that at this point that I would vote to approve passing 22 through the sewer cost to the tenants. 23 And I don't -- and as a matter of a 24 finding, I don't anticipate anything in the final cost 25 of the project coming along saying, well, we did it for Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 104 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 20 percent less money, coming along and saying the City 2 did or did not approve a defraying of certain expenses. 3 That's not what's going to change my vote. I would need 4 to know that this man is not going to be able to sell 5 his property even with a sewer or that there's no way 6 that he anticipates making a greater profit by finally 7 going ahead and putting in the sewer. And I don't think 8 that I can be shown that based on anything, or I would 9 have been shown that over the last year, I suspect, if 10 that kind of information existed. Why we shouldn't look 11 at this as whether it is enhancing the value of the 12 property or not, taking into account that is the case 13 that I referred to last time and the ordinance seem to 14 direct us to look at, and that is, weigh the owner's 15 right as a business person to make a fair amount of 16 money for having bought this park and owned it for a 17 period of time and operated it versus the needs of 18 people who have been afforded the constitutional 19 protection of a rent control ordinance. And I don't see 20 that the balance is even close on that issue in favor of 21 the owner. I see the balance strongly on that issue in 22 favor of the tenants. And so I will vote to support 23 Mr. Torsney's motion. 24 UNIDENTIFIED SPEAKER: So you do have a motion on 25 the floor? Page 105 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: Mr. Torsney has moved, 2 and it has been seconded -- 3 COMMISSIONER WADE-MALTAIS: I second it. 4 ACTING CHAIRMAN WERCHICK: -- that the rent -- 5 the capital improvement rent increase be denied 6 outright. And I'm going to call for a vote on that 7 issue. 8 Commissioner Adams? 9 CHAIRMAN ADAMS: I love unity. Aye. 10 ACTING CHAIRMAN WERCHICK: Thank you. 11 Commissioner Wade-Maltais? 12 COMMISSIONER WADE-MALTAIS: Aye. 13 ACTING CHAIRMAN WERCHICK: Mr. Torsney? 14 COMMISSIONER TORSNEY: Aye. 15 ACTING CHAIRMAN WERCHICK: And the Chair votes 16 aye. 17 All right, people, we're not through. 18 We're going to take a five-minute break 19 because we're going to go on to new business, 7(A), 20 consideration of the objection to the August 1st rent 21 increase. 22 (A brief recess was taken.) 23 ACTING CHAIRMAN WERCHICK: Ladies and gentlemen, 24 can I have your attention for just a minute, please? I 25 have to beg your indulgence. All right. Page 106 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Commissioner Wade-Maltais was unavailable 2 to stay any longer. We still would have a quorum to 3 continue the discussion, but Commissioner Adams is 4 running out of oxygen. So we've sent -- we've given him 5 a ride. We've sent him off. Commissioner Torsney is 6 going to drive him home, get another oxygen bottle, and 7 come back, but we can't have -- he's going to get very 8 sick otherwise. So we've decided what we need to do is 9 wait about 20 minutes or so to reconvene until they can 10 get back. We'll have a quorum again, and then we'll 11 decide where we're going from here. 12 I appreciate your patience, and it's been 13 a long day, and it may go on. 14 UNIDENTIFIED SPEAKER: Do you have any idea 15 (inaudible) -- 16 ACTING CHAIRMAN WERCHICK: We're going to 17 accept -- the suggestion has been made that we take up 18 Item 7(B) before we go to 7(A) because the report of the 19 city attorney is going to influence the discussion about 20 rent increases and how much and whether or not. So we 21 will take up the discussion of that first. How long 22 that will take, I don't know. I assume counsel are 23 going to want to make some brief remarks. They've 24 written us extensive -- extensively, both sides, on the 25 subject. But they're going to want to discuss it with Page 107 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 us. And there may be some public comment as well. And 2 then depending on what flows from that discussion, we 3 may or may not get to 7(A). 7(A) may be a matter that 4 the commission decides to send to a hearing officer, may 5 decide to vote on it. We can't tell until we hear more. 6 So I'm afraid I can't answer your 7 question. I know everybody wants to get home for 8 dinner. Me too. But I think it's best that we continue 9 straight on through and not plan to come back later in 10 the evening or anything of that sort. You all want to 11 hear a resolution as soon as we can get to it, I'm sure. 12 So we'll try and do the best we can for us. So bear 13 with us. Thank you. 14 (A brief recess was taken.) 15 ACTING CHAIRMAN WERCHICK: All right. The 16 chairman has the presence of a quorum, and we will 17 reconvene. 18 It has been proposed, and hearing no 19 objections, it will be the determination of the Chair 20 that we're going to take up item 7(B) before we take up 21 Item 7(A). 22 Item 7(B) is, Consideration of the city 23 attorney opinion in response to petitions for 24 interpretation of Chapter 9.50 of the Palm Desert 25 Municipal Code. Page 108 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 I think I'll first call on city attorney 2 to add or present any comments in addition to his very 3 brief, cogent, and, I think, well -written opinion for 4 our consideration, and then I will call on counsel, 5 briefly, to make such comments as they choose to make in 6 response. 7 I don't believe -- we're not making it a 8 ruling. City Attorney, is this a matter for public 9 comment as well? 10 MR. ERWIN: It can be Mr. Chairman, yes. 11 ACTING CHAIRMAN WERCHICK: I'm hoping that you're 12 all commented out for the most part, but if people have 13 a strong feeling and have read the actual documents and 14 want to comment on the specific question, I will 15 entertain public comment at that time. All right. 16 So let me first call upon the City 17 counsel, Mr. Erwin. 18 MR. ERWIN: Mr. Chairman, members of the 19 Commission, at the request of actually both parties 20 involved, we were requested to prepare an opinion 21 pursuant to our ordinance. And we did that after 22 several sessions of briefing from both sides with regard 23 to some of the questions that were raised. That's the 24 letter addressed to your body of July the 23rd, 2008. 25 The letter itself, I believe, in my opinion, addresses Page 109 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 involved in another -- a number of mobile home parks. 2 It's my specialty. I have never in my life ever seen a 3 mobile home park that had a public sewer system inside 4 of it. They're all HCD sewer systems, California 5 Department of Housing and Community Development approved 6 sewer systems. Those sewer systems are private sewer 7 systems, and they are built to the Uniform Plumbing 8 Code. Those systems only require a depth of three feet. 9 And so there's no shoring. They do not require clay 10 pipes. They do not require copper fittings. And I 11 said, Let's go bid that kind of project and see where we 12 are. Okay. 13 So Justin said, That's a good idea. And 14 we started looking at bids. We started with Meter Man. 15 And his bids with the project and the designs as not a 16 dedicated public sewer system, but as a private sewer 17 system like you'll find in every park in this city and 18 every park in this county and every park in Southern 19 California is this private type HCD built to the Uniform 20 Plumbing Code sewer system. 21 So Meter Man started out, I think, with a 22 bid of a million two or a million three just for the 23 sewer project. And then we started saying we don't want 24 the driveways destroyed, we don't want this. And then 25 that bid moved up to about a million six. And those Page 11 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 the issues that were raised or requested to be 2 interpreted. There -- I think after some discussion, 3 there may be some consideration. 4 And we did issue an additional letter of 5 September the 18th, which I hope that you have, which 6 does address at least one particular issue, and that is, 7 I think, a base date in either '87 or '88. I think both 8 parties will address that issue. I received today a 9 letter from Mr. Spangenberg with some additional 10 information. I believe you also have that with regard 11 to the base date as well. And I think it has been 12 pointed out in our ordinance that the ordinance in 13 effect in '87 and '88 does say that the decision will be 14 effective 30 days after filing of the petition in the 15 case. So that would potentially put the base date in 16 '87. 17 I'd be happy to answer any questions. I 18 think the documents are here, and hopefully everybody 19 has had a chance to read them and object to them. 20 ACTING CHAIRMAN WERCHICK: All right. I think 21 it's appropriate to hear from counsel. And I think, 22 Ms. Soltani, you're the most potentially aggrieved, I 23 guess, by the conclusions, so why don't you go first. 24 MS. SOLTANI: Sure. 25 First, I haven't received anything from Page 110 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Mr. Spangenberg, so this is news to me that he submitted 2 something today. 3 But we have prepared an outline, just a 4 talking point outline, for the Commission. It looks 5 like this (indicating). It says, "Indian Springs Mobile 6 Homeowners' Association petition for further legal 7 interpretation." We recognize that the issues are 8 complicated, and there's so many different components. 9 We just wanted to have something that we can follow. 10 The way we see it, there are three big 11 categories that we need to discuss today. The first 12 issue is how the current maximum allowable rents should 13 be calculated going forward. And the second big issue 14 is what the base month and year of base rents between 15 1983 to 1988 were. And the third big issue, the way we 16 see it, is we need to address the August 2008 and 17 September 2008 increases that have gone into effect. 18 Under Category 1, as to what the current 19 rents should be and how they need to be calculated going 20 forth, we believe that there are four components that 21 need to be addressed. And those are items A, B, C, and 22 D on the outline that we have provided you with and 23 basically what we had requested interpretation from the 24 city attorney on. 25 The first thing that needs to be clarified Page 111 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 _ INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 is what the month and year of the base represent is. 2 3 Well, actually, before I start getting 4 into outline -- this outline, I do want to give a quick 5 background. And last time we talked about this. It is 6 our contention that for over 25 years these residents 7 have been charged the wrong rents. Now, I know 8 Ann James & Associates. I work with them in other 9 cities. This is probably a complete overlook of things. 10 Ms. James is fantastic. She's a great person. She's a 11 great park manager. So this could have been an overlook 12 by Ann James, park owner, maybe even the City. Because 13 these residents have paid $10 a year to have the City 14 look at the rent registration forms, $10 per space, per 15 year, and no one has caught this issue. No one has 16 caught that the residents are being charged the wrong 17 rents in excess of what they should be charged. 18 One of the defenses that the park owner is 19 raising now, and sadly so I believe the city attorney is 20 leaning toward is, well, you know, this is how it's been 21 done, so let's just avoid it, and let's just say this is 22 how it's been done, so we're just going to go with 23 what's been done. There's a waiver argument, the 24 residents have never objected, which is wrong. And the 25 residents can speak as to when they objected. But only Page 112 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 because wrong was done doesn't mean that we have to 2 continue doing wrong. Only because for 25 years the 3 wrong base date has been used to calculate the rents 4 doesn't mean we need to continue using the wrong base 5 date to do this. And we need to correct it. Going 6 forward, we need to have the right base rents calculated 7 and the right formula to apply. 8 Now, the waiver arguments -- they can save 9 all of those waiver arguments for when we're in court 10 and we're seeking damages if we do that. Then they can 11 say, oh, look, it's really not fair for us to pay 12 damages because you've waived that argument. But to say 13 that this Commission should just say, well, whatever 14 you've been doing, just we'll ratify it and go forward 15 doing it wrong is just wrong. And no pun intended. 16 So that's the bigger issue I wanted to -- 17 and that's why I'm breaking it down to the two different 18 categories. And the first and the foremost important 19 issue is that we need to set what the base rents should 20 be at, or the current rents should be at right now, and 21 how we need to calculate it going forward. 22 Again, I thank Mr. Spangenberg for his 23 efforts. It has been a different experience since he's 24 gotten involved in this case. And I'm so glad he's been 25 involved. Even Mr. Spangenberg, you know, looked at the Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 113 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ordinance and said, Yeah, I can see, let's do some 2 briefing, let's get some opinions from the city attorney 3 before we run and go into court. 4 And I'm glad we did that. And the city 5 attorney looked at this carefully, and in his first 6 opinion he concluded that the month and the year of the 7 base rents needs to be October 1, 1988. And you've read 8 the briefs. He did this based on a settlement that was 9 reached between the residents and the City and the park 10 owner back in 1988 on a hardship rent increase, and he 11 said that that reset the base date for rents. And we 12 believe that was the correct decision. 13 Now he's going back and forth recently, 14 and I don't know why he's changing his position. I 15 haven't received anything from Mr. Spangenberg that 16 would support the city attorney's change in his opinion. 17 I read a letter from Mr. Spangenberg where he was 18 saying, Well, it's really confusing. Was it October 1, 19 1988? Was it September 1, 1988? You know, because it's 20 confusing, and we can't really assess when it was in 21 1988, let's just say it should be 1987. Well, that's 22 not a logical argument, and I don't agree to that. 23 What I have been handed right now by 24 Mr. Spangenberg -- and I believe Mr. Hargreaves gave me 25 this earlier, so this must be the same thing -- is a Page 114 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 - INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 provision in the 1986 rent control ordinance that says, 2 Any order of the Rent Review Board shall, unless 3 otherwise specified in its final decision, be effective 4 as of the date 30 days after the filing of the petition 5 for adjustment. 6 So I'm thinking he's probably arguing that 7 because the petition -- the hardship petition was filed 8 in 1987, and this provision is in effect, then it became 9 effective 30 days after that, and that's the argument he 10 wants to raise, that we should go back to 1987. 11 Well, the settlement agreement -- and I'm 12 sorry, I need to flip to it -- was very clear that the 13 City of Palm Desert with it filed a notice of findings 14 and recommendations. And in it they say that it's 15 signed by Sheila Gilligan, the city clerk. That notice 16 says, In accordance with the provisions of Section 17 9.50.070 of the rent control ordinance, the hearing 18 officer's proposed findings and recommended decisions 19 shall become the final findings and decision of the Rent 20 Review Board within 15 days after the filing of the same 21 with the city clerk without further action of the Board 22 unless the parties participating in the hearing file a 23 petition to review the hearing officer's proposed 24 findings. 25 And that's dated September 7, 1988. So Page 115 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 they agreed to another date. So we don't have to go 2 back to this ordinance, and we should not go back to 3 this Because the parties stipulated that the effective 4 date was going to be 1988, or September of 1988. And 5 when we take into consideration the notice requirement, 6 it becomes October 1, 1988. 7 So we're asking you to uphold your city 8 attorney's earlier ruling on this issue that the month 9 and year of the base rent should be October 1, 1988. 10 Now, it's interesting, because this park 11 owner has already sent out statements of rents for 12 August and September based on October 1, 1988, and now 13 they're trying to change that position. I don't know 14 why. Maybe it's a leveraging thing, maybe it is to 15 delay things further, but simply, it should not be 16 allowed to be done. 17 Another component under this is that we 18 need to decide what month and year for the base CPI-W 19 must be used, and what was available as of that time was 20 June of 1988. And this is just straight when the CPIs 21 are issued. 22 The next issue is what the next available 23 CPI rent increase should have been. And that was an 24 issue that we raised and we wanted further clarification 25 from the city attorney on. Because your ordinance -- or Page 116 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 the ordinance in effect back then said, No mobile home 2 park owner shall be entitled to a CPI increase within 12 3 months of the granting of a hardship rent increase. 4 And this park owner took a CPI rent 5 increase after the 1988 hardship rent increase three 6 months after that. So we think, to the extent that 7 impacts the rents, that needs to be backed out, and this 8 Commission must issue an opinion that -- or needs to 9 verify the city attorney's opinion actually that the 10 next CPI rent should have been taken out after 12 11 months; in other words, October 1, 1990, and not three 12 months later the way it was. 13 UNIDENTIFIED SPEAKER: '89. 14 MS. SOLTANI: Sorry, '89. Sorry. 15 And, again, it's one of those things. We 16 asked for further interpretation. The city attorney 17 sent us an e-mail saying I'm leaning towards concluding 18 that the next CPI should have been taken out 12 months 19 later, October 1, 1989, and then he started backing away 20 from that position. It seems like, I don't know -- to 21 be candid, I don't quite understand the last letter. 22 Because it seems to be saying, well, it could be this or 23 it could be that. I guess he's leaving it in your hands 24 to decide what it is. And I'm asking you to please 25 decide with his earlier clear ruling and just uphold his Page 117 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 _ INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 earlier rulings. 2 Now, the next issue, which is very, very 3 critical and very important, is whether the capital -- 4 what capital improvements must be removed from base 5 rents when calculating maximum current rents each year 6 going forward. And I say, What needs to be taken out? 7 Because your city attorney has already rendered the 8 opinion that capital improvements must come out because 9 they're temporary in nature. 10 You see, what has happened in the past, 11 the older version of your ordinance did not have a 12 capital improvement provision in it. So the park owner 13 every single time would come in and file a hardship rent 14 increase. But it wasn't a hardship, it was just a 15 capital improvement application. And it's ironic, 16 because if you look at the records, some of the 17 hardships, so-called hardship rent increase 18 applications, were to put in or make repairs to the 19 septic system, which is now failing. And so those rents 20 have stayed on. And as Commissioner Werchick said, 21 capital improvements are supposed to amortize over time. 22 They're supposed to fall off rents. And in this case, 23 they haven't. They've gone on forever in a form of 24 hardship rent increases. 25 And so we went back -- and we wanted to Page 118 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 have a good record before you to make your job easy, to make a determination. We found the six capital improvements that we could document. These are document capital improvement applications that were granted in the guise of a hardship rent increase. And you can see they're for seepage pits and air compressors and things like that. And they really need to come out of the base rents now. It's interesting to note that there's one Number 5, the $19.51 per month. At the time that they reached the 1988 settlement agreement as to what the hardship -- what the rents should be to guarantee a fair return, there was a Court of Appeals order that that $19.51 per month needed to be removed on 11/30/88. But it was never removed. I have a feeling Mr. Spangenberg is going to get up here, and he's going to try to argue, well, these shouldn't really come out because at the time that we decided -- or the park owner reached the settlement agreement as to what the hardship rent increase should be in 1988, he was assuming these capital improvements are going to stay on. That's not true. He had a Court of Appeal order that at least that $19.51 per month was going to be removed two months later. And also, we have hearing transcripts from April 13, 1988, where the park manager Page 119 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 bids are in your packet. 2 We looked at other people that do this 3 kind of work -- and it's a very specialized area. 4 There's not a lot of people that do this -- and our best 5 bid for the project came through Ted Burton Underground, 6 and it was $993,425. That's a long way from four and a 7 half million. Okay. So that's why we got that better 8 price. 9 Mr. Nader is the engineer on the project, 10 and he recommended that we build in a 20 percent 11 contingency on that. I talked to Mr. McCarthy of the 12 City, and he said, "I would definitely build in a 20 13 percent contingency" because of the projects he's 14 involved with as being in the redevelopment part of the 15 city. 16 So we have a contingency on the sewer 17 costs of almost $200,000. We have the overseeing of the 18 installation of the sewer system by the engineer. And 19 that entails the sewer system has to have a fall from 20 every location so that the sewage falls by gravity. So 21 Mr. Nader is involved in surveying and making sure that 22 these pipes are installed at levels that they flow 23 properly, they have sufficient flow, and things of that 24 nature, plus the other management to make sure that the 25 project is, in fact, built to his specifications in his Page 12 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Noelle Stephens actually comments on another capital 2 improvement item. 3 There's a question, "Is it your testimony 4 that all of the hardship rent increases should be rolled 5 back if they have not?" 6 "Answer: By the schedule I provided, they 7 have been because none of them had a longer life than 8 ten years." 9 "Question: And they have not been rolled 10 back, and they should be rolled back?" 11 "Answer: That would be my understanding." 12 Well, we're here to tell you that the 13 $19.51 one was never rolled back. And the other ones, 14 to the best of our abilities, we couldn't find anything 15 that showed they were rolled back. 16 Only Item Number 6, which was for $3.08 17 per month, there was documentation that $.97 of it 18 actually rolled off in February 1, '93, and $2.11 was 19 rolled off in February 1, 1998. But that sum needs to 20 come out of the base rents when we're calculating. I 21 mean, the rolling off might help them when -- the fact 22 that they rolled that little small amount off might help 23 them in our damages portion of the case, and they can 24 argue, well, that was taken out, but it needs to also be 25 removed from the base rent. Page 120 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 And if the Commission has questions, I 2 will -- we have our expert here that can explain why it 3 needs to be actually taken off of the base rents. 4 ACTING CHAIRMAN WERCHICK: I'm going to interrupt 5 you for a second because I think I have a very 6 fundamental question, and that is an inability to grasp 7 a lot of this and put it in my head at one time. 8 Would you address the question of why 9 whether or not we should refer the determination of 10 historically what increases have been allowed, what 11 should be determined if there's any disputes between the 12 parties as to this history, and then hear discussion by 13 both sides as to which belong in, which belong out, if 14 any. 15 Is there any reason that we shouldn't send 16 that to a hearing officer? Because otherwise, aren't we 17 going to end up spending an hour deciding whether you 18 get $.95 back from 1987? And I don't see that as the 19 function of the Rent Review Board as we sit here now. 20 Now, that said, I would also like you, at 21 the same time, and both counsel, to address the issue of 22 what parameters we should suggest to the hearing officer 23 if we're going to agree to do that to get people home 24 for dinner tonight or ever. For example, particular 25 aspects of Mr. Erwin's opinion, that we should tell the Page 121 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 hearing officer to report back to us assuming this is 2 what we're going to accept, and then report back to us 3 assuming that we may not accept this. 4 I do have, actually, a question that I 5 should have asked you before, but I'm going to ask you 6 to address before we make a decision. But do you 7 understand where I'm going? I want to see if I can 8 condense this down. First, tell me whether or not we 9 should go to a hearing officer. I want to hear from 10 both of you on these issues. And secondly, tell me if 11 there are any legal conclusions of interpretation by 12 city attorney that we should ask the hearing officer to 13 give us an approach of two different alternative ways. 14 MS. SOLTANI: Obviously, I don't like to go to a 15 hearing officer on this issue. But I see where you're 16 going with this, and I understand your concern. But 17 before we get there, and to have a productive and short 18 and meaningful hearing before a hearing officer, I think 19 you're on the right track. We do need to at least have 20 this Board set what the month and the year of the base 21 rent should be, what the month and the year of the base 22 CPI-W should be, and when the park owner was allowed to 23 take the next available CPI rent increase. Those issues 24 are issues that your city attorney has already rendered 25 an opinion on. We agree with his first set of opinions Page 122 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 on all of these issues. All we're asking you to do is 2 uphold those. And I think -- and also, sorry -- and the 3 capital improvements must come out. 4 ACTING CHAIRMAN WERCHICK: The first set of 5 improvements, you mean July 23rd letter? The first set 6 of your comments? 7 MS. SOLTANI: Well, it's -- 8 ACTING CHAIRMAN WERCHICK: That was the first 9 opinion in final form was July 23rd, 2008. 10 MS. SOLTANI: That -- yes. That one, combined 11 with an e-mail that he sent to us dated September 2nd, 12 2008. 13 ACTING CHAIRMAN WERCHICK: Dave, is that e-mail 14 part of your opinion, or is that -- 15 MR. ERWIN: It is not a part of the opinion. 16 ACTING CHAIRMAN WERCHICK: All right. Then we 17 should not -- I don't think that's -- I don't think 18 we're going to take that into account right now in 19 deciding what his opinion is. We're going to -- I'm 20 going to look to that, and then I have a letter dated 21 September 19th which he attempts to clarify. 22 But as you say, there are some 23 alternatives that he puts in there. So he doesn't have 24 to say flat out it's got to be this. 25 But I think, unless I'm missing something, Page 123 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 that's what we would consider the opinion of the city 2 attorney. 3 MS. SOLTANI: And I just want to make sure I 4 understand his opinion. That's why I'm trying -- that's 5 why I put together the outline, to make sure that -- 6 ACTING CHAIRMAN WERCHICK: That's grilling. 7 MS. SOLTANI: Yeah. I just want to understand 8 that what he's saying the month and the year of the base 9 rent is, what the month and the year of the base CPI-W 10 is, when the park owner was allowed to take the next 11 available CPI rent increase, and the last issue, I 12 wanted to confirm that all capital improvements must be 13 removed from base rents when calculating maximum current 14 rents each year going forward. 15 And I agree with you that when we get to 16 that, then if we have resolved all these issues, maybe 17 that's something that is more fact intensive and maybe 18 we can then hash it out before a hearing officer. 19 ACTING CHAIRMAN WERCHICK: Mr. Spangenberg, do 20 you want me to put some of those questions first to 21 Mr. Erwin before you comment, or would you like to make 22 your comments now? 23 MR. SPANGENBERG: Well, yeah, let me make my 24 comments. 25 ACTING CHAIRMAN WERCHICK: A11 right. Page 124 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 MR. SPANGENBERG: Because I think our position -- 2 and I -- at this point I think I've -- at this point I 3 pretty much agree with where the city attorney is on 4 this issue. 5 And this was the document I gave the city 6 attorney earlier today. Let me give you a copy of it. 7 ACTING CHAIRMAN WERCHICK: I don't know if we 8 have it or not. What's the date on it? 9 MR. SPANGENBERG: It's the 1986 ordinance is what 10 it is. Okay. 11 So if we're going to look at the '88 rent 12 increase, we ought to be looking at the '86 ordinance. 13 ACTING CHAIRMAN WERCHICK: Just to identify this, 14 we've been handed an amendment to the rent control 15 ordinance by Ordinance 474 dated October 9, 1986. 16 MR. SPANGENBERG: Okay. And if you turn to 17 page 11, I've highlighted for you something I'm going to 18 talk about in a minute. 19 ACTING CHAIRMAN WERCHICK: Okay. 20 MR. SPANGENBERG: This case is -- once you go 21 through all the reams of data, this case is very simple. 22 And I think the city attorney gets it. The last 23 hardship was filed in 1987, in September of 1987. Okay. 24 And that hardship was decided sometime around October of 25 '88. Page 125 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 So let me address the capital improvement 2 issues. And I don't know if any of you are math 3 wizards, but prior hardship rent increases included 4 capital improvements. The '87 hardship had none. There 5 were no capital improvements embedded in that 6 application. So the '87 hardship rent increase that 7 resulted in the '88 rent increase had no capital 8 improvements in it. And if you understand math, under 9 an NOI formula the rents are the base income, base year 10 net operating income, plus allowable expenses, equal 11 current rents. 12 So whether there was a capital improvement 13 embedded in last year in a prior year's hardship, it 14 just elevated the income. But if the subsequent 15 hardship rent increase did not have a capital 16 improvement embedded in it, then there's no capital 17 improvements embedded anymore. They've been wiped out 18 by a hardship rent increase that has no capital 19 improvements embedded in it. 20 ACTING CHAIRMAN WERCHICK: Can I ask a very 21 simple-minded question about that? 22 MR. SPANGENBERG: Sure. 23 ACTING CHAIRMAN WERCHICK: Are you saying that 24 because the subsequent Rent Review Commission -- let's 25 say the capital improvement had a hardship combined, Page 126 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 added a hundred dollars to the rents, and a year later 2 there was a hardship request saying -- 3 MR. SPANGENBERG: With no capital. 4 ACTING CHAIRMAN WERCHICK: -- with no capital 5 saying -- 6 MR. SPANGENBERG: Notwithstanding -- 7 ACTING CHAIRMAN WERCHICK: -- saying that the 8 hundred dollars isn't covering it, we need more 9 MR. SPANGENBERG: Yeah. 10 ACTING CHAIRMAN WERCHICK: -- we need more 11 because of operating expenses going up -- 12 MR. SPANGENBERG: Yeah. 13 ACTING CHAIRMAN WERCHICK: -- we're not asking 14 you to pass through any new capital -- 15 MR. SPANGENBERG: Right. 16 ACTING CHAIRMAN WERCHICK: -- but the number 17 we've been living with, even though it originally was a 18 combination of rent plus capital, is inadequate. 19 MR. SPANGENBERG: Is inadequate. 20 ACTING CHAIRMAN WERCHICK: And the Rent Review 21 Commission looked at it as a request purely for hardship 22 and said okay, we'll buy "X" dollars more and give you 23 another $25. You're saying that that erases any prior 24 consideration of capital improvement because even with 25 capital improvement it wasn't adequate for just basic Page 127 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 rent? 2 MR. SPANGENBERG: Yeah. It erases any prior 3 embedded capital improvement that might have been there. 4 ACTING CHAIRMAN WERCHICK: So even though the 5 bond got paid off, the end of the loan got paid, 6 whatever -- 7 MR. SPANGENBERG: It doesn't make a difference. 8 ACTING CHAIRMAN WERCHICK: -- that no longer is 9 what's driving the rent? 10 MR. SPANGENBERG: What's driving -- on the '87 11 petition, what's driving the rent is the allowable net 12 operating income in the base year, plus the allowable 13 expenses, equal, you know, the rents today. 14 ACTING CHAIRMAN WERCHICK: Irrespective of any 15 prior -- 16 MR. SPANGENBERG: Irrespective of any -- 17 ACTING CHAIRMAN WERCHICK: -- capital 18 improvements? 19 MR. SPANGENBERG: -- capital improvements. 20 ACTING CHAIRMAN WERCHICK: All right. Finally, I 21 think I understand it. 22 MR. SPANGENBERG: You got it? Okay. 23 To make matters even more uniform, the 24 rent increase for that application that had no capital 25 improvements in it was a stipulated rent increase by the Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 128 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 tenants. They said, okay, you've applied for 32, we'll 2 stipulate to 23. And they said, Okay, we'll stipulate 3 to 23. And that was the agreed -to rent increase. So 4 the agreed -to rent increase didn't have any capital 5 improvements in it and was less than what was applied 6 for. 7 And what the city attorney is saying is 8 that last hardship is your base rent. Okay. And that 9 was the sum and substance of his first decision. Okay. 10 And when I looked at the decision, I said, 11 well, that's interesting, you've established the base 12 rent of -- you know, in October of '88, but what's the 13 proper CPI to use for purposes of future calculations? 14 We know what the rent is, but we need to know, Are you 15 using, you know, a March CPI? A January CPI? What 16 would be the right CPI for purposes of today? We go 17 back to the base CPI and come forward. 18 So he looked at it, and his original 19 opinion was should be '88, the same time as the rent 20 increase started to -- you know, you guys agreed to the 21 decision. 22 I said, Wait a second. I think that's 23 wrong. '88 -- even though the decision was decided in 24 '88, I think that's wrong. Because if you look at the 25 application that was filed in '87, it brought the CPI up Page 129 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 _ INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 design. 2 The next is the sewer hookup fees to the 3 agency. And that's -- I forget the exact number, but 4 here is going to be the real issue about what this is 5 going to cost. Today, the sewer hookup fees are 6 763,000 and -- $763,000 and some change. The City knew 7 it was going to be involved in this project in some way 8 subsidizing. And that was one of the issues I read in 9 the transcripts, that you were interested, Is the City 10 going to subsidize any of this? 11 So in our discussions with Mr. McCarthy, 12 he said -- Justin McCarthy said that the City was 13 considering donating the sewer connection fees. 14 And so how did that all come about? Why 15 is the City interested in that? Well, it turns out, 16 from my discussion with Mr. McCarthy, that the City 17 early on bought the connection fees for the park back at 18 the time when the City imposed the requirement for the 19 sewer hookup. They purchased the connection fees for 20 the entire park, and they set those fees aside with the 21 agency, with Coachella Valley Water, saying, Look, we're 22 buying these for Indian Springs. We realize we're going 23 to be involved later on, you know, but we want to pay 24 for them. At the time they paid 571,000 for the fees. 25 Okay? So that's kind of where the City's involvement Page 13 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 to September of '87. So the application is bringing the 2 fair rate of return up to September of '87, and you have 3 this rent increase that occurs in October of '88. 4 And so in the e-mail that's being 5 discussed, this issue got discussed by the city 6 attorney. And Bob Hargreaves said, Well, I -- you know, 7 Hey, wait, if the Rent Board takes a year to decide 8 something, that shouldn't penalize the park owner as far 9 as the CPI. The longer they drag on the hearing, the 10 more it drags on the CPI, and that's unfair to the park 11 owner. If the City's process takes a year, it just 12 delays -- you know, maybe it should go back to 1987. 13 So at that point he was saying, Well, maybe it's 14 September of '87, which was the CPI used in that 15 application, or should it be the CPI in existence at the 16 time that the rent -- that the settlement was reached? 17 Okay. And that was the state of affairs until I gave 18 the city attorney the ordinance in effect at the time. 19 ACTING CHAIRMAN WERCHICK: Now, is that what's -- 20 that statement, before we get to the ordinance, is that 21 what is reflected in the next to last paragraph of the 22 September 19th letter? Is that what this discussion of 23 August 1st, 1988 -- 24 MR. SPANGENBERG: No. No. This is post -- this 25 is post his letter. His letter is kind of -- Page 130 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: Right, no. 2 MR. SPANGENBERG: It could be '88. 3 ACTING CHAIRMAN WERCHICK: You're saying -- 4 you're referring to an uncertainty. It could be '88? 5 MR. SPANGENBERG: Yeah. 6 ACTING CHAIRMAN WERCHICK: It could be '87? 7 MR. SPANGENBERG: Right. 8 ACTING CHAIRMAN WERCHICK: That's what's 9 discussed in that paragraph 10 MR. SPANGENBERG: Right. Are you with me so far? 11 ACTING CHAIRMAN WERCHICK: I hope so. 12 MR. SPANGENBERG: So now we look at the 13 ordinance, and the ordinance -- now, you have to 14 understand -- let's go back to the process. I mean, you 15 have to understand the process. I was doing this work 16 in '87 and '88, so I know what was happening. 17 You would file a petition, and along with 18 that petition -- and I don't know if you have the 19 petition and everything in your packet. But in that 20 petition there was a notice of rent increase. There was 21 the application, a notice of rent increase that was 22 effective in 60 days. Okay. So at that time a notice 23 of rent increase was effective in 60 days. 24 But the Commission or the Board could take 25 months to decide these things. And in the past, what Page 131 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 - INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 happened when it took months? Well, the ordinance 2 spelled out what happened in this Section R on page 11 3 of Ordinance 456, which says, "Any order of the Rent 4 Review Board shall, unless otherwise specified in its 5 final decision, be effective as of the date 30 days 6 after the filing of the petition for adjustment." 7 So the petition for adjustment is filed on 8 October 29th of '87, and the decision, be it rendered in 9 '88, is effective in November of '87. And so now the 10 city attorney is saying this pretty much establishes 11 that '87 is the CPI to use. Because at the time the law 12 required that if you make an agreement, you get a 13 decision, it's retroactive to 30 days after filing the 14 petition. And prior hardship rent increases included 15 surcharges and things of that nature, which I won't get 16 into. 17 So let's just look at what happened with 18 the city at that time and all of the things you have to 19 overcome and find that they were a bunch blooming idiots 20 at the time and did it all wrong. 21 First of all, the application was based on 22 the September '87 CPI. The petition was filed 23 October 29th of '87. When the decision was rendered, it 24 became effective November 29th of '87. Now, I won't get 25 into complexities about Group A tenants and Group B Page 132 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 tenants because some stipulated and some got a hearing 2 from the rent board, which further splits the effective 3 date of the rent increase into two different months. 4 But what was happening and the procedures 5 that were followed at that time is I file a petition, I 6 get a decision, my decision is effective 30 days from 7 the filing of the petition. That's November of '87. 8 So that's the effective date of my decision. I can 9 notice a rent increase, and even if I notice a rent 10 increase in '88, as was done here, my last rent increase 11 under the ordinance was effective as of November the 12 prior year. More than a year. More than a year. 13 Are you with me on that? Do you 14 understand what I'm saying? 15 ACTING CHAIRMAN WERCHICK: I hope so. 16 MR. SPANGENBERG: Okay. Now, so in two months 17 before January 1st of '89, a rent increase notice was 18 sent out, a CPI rent increase notice. And that 19 notice -- that was effective January 1st of '89, which 20 is what they're saying was done within three months of 21 the rent increase. It was done over 12 months from the 22 effective date of the decision under the ordinance. 23 That CPI notice of rent increase adjusted automatically 24 the CPI from September of '87, which was the last date 25 used in the hardship application, to September of '88, Page 133 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 effective January lst. If you're with me, you 2 understand that. 3 Now, the final coup de grace is the City 4 requires that you file -- not file, you register your 5 rents annually. And that's in your packet also. The 6 City -- the park owner registered these rents that had a 7 rent increase from September of '87 to September of '88, 8 and nobody at the City looked at this and said, Oh, this 9 is within three months of a rent increase. Because they 10 knew the ordinance related it back a year. Not only 11 that, the tenants were represented by a lawyer, 12 Mrs. Baumgarten. I mean, if they were pulling a fast 13 one, don't you think they'd be running off to 14 Mrs. Baumgarten and say, They've noticed a rent increase 15 within three months of my hardship rent increase? No, 16 they understood it. They understood that the way it 17 works was the decision, no matter where it happens, 18 relates back to 30 days after the filing of the 19 petition. 20 So the bottom line, the base rent should 21 be the post '87 filed hardship rent increase. That's 22 what the city attorney found. The CPI should be the 23 September '87 CPI. That's what the city attorney found. 24 And there are no embedded capital improvements because 25 there were none in the last application. Case over Page 134 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 with. 2 Now, we could make it a big deal or we 3 could make a little deal, but it's very simple once you 4 get it. 5 Any questions? 6 ACTING CHAIRMAN WERCHICK: Yes. Go ahead, Brian. 7 COMMISSIONER TORSNEY: No, go ahead. 8 Just for my clarification -- 9 MR. SPANGENBERG: Sure. 10 COMMISSIONER TORSNEY: -- for sake of argument, 11 $100 a month -- $100 a month capital improvement 12 represent increase was granted, and it was for something 13 that took five years to amortize? 14 MR. SPANGENBERG: Right. 15 COMMISSIONER TORSNEY: At the end of five years, 16 you're saying if there's a hardship increase for any 17 time within that period that $100 never comes off? 18 MR. SPANGENBERG: No, no. I'm not saying that at 19 all. 20 COMMISSIONER TORSNEY: Okay. 21 MR. SPANGENBERG: So I'm glad you clarified that. 22 This is a lot of obvious when known stuff, but you know, 23 it's hard to not -- anyway. There were -- there were 24 independent -- there were two types of capital 25 improvements basically. Okay? There were capital Page 135 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 improvements that were in a hardship application, okay, 2 that may have caused a $3 or $4 rent increase, okay, 3 that went on indefinitely. Okay. So those were in the 4 early applications. 5 And then the City adopted a standalone 6 capital improvement pass -through provision of sorts, or 7 something like that, and they had these little finite 8 capital improvements that would last for five years. 9 Those were outside of the NOI. Okay. Those were things 10 that rolled off regardless. Okay. 11 But what you're talking about -- and what 12 you're talking about with your $100 rent increase, 13 that's the one that's good -- that's like a -- there was 14 carpeting or something like that that was three years 15 and it was for $.26. Okay. That went on for three 16 years, rolled off. Okay. Those happened like that. 17 What they're talking about is, look, in the four prior 18 hardship rent increases, or three prior hardship rent 19 increases, there were embedded capital improvements. 20 Part of the rent increase that was granted was based on 21 an embedded capital improvement. 22 COMMISSIONER TORSNEY: I understand that. 23 MR. SPANGENBERG: I go fine, fine, that was 24 supposed to go on forever under the rules, and that's 25 what the Court of Appeal case was all about. The Court Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 136 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 of Appeal case said the first $100 in capital 2 improvements was to be treated like an expense, okay, 3 not as a capital improvement. 4 So yeah, originally there was $100 per 5 space embedded. But when the '88 rent increase came 6 along, the application came along, and which you have 7 it, and there is no capital improvement in that, then 8 the rent increase that's granted is not based on a 9 capital improvement; in other words, the old rent -- 10 let's say that the old rent was 230, but 235 with a 11 capital improvement. You know, it doesn't make any 12 difference if it was 230 or 235 because the application 13 shows that the rent should be 290 with no capital 14 improvements. So we don't care what happened in the 15 past. 16 So they all rolled off. They all rolled 17 off in the '88 year. And that's what the city attorney 18 understands and got it and said, Look, in the '88 year, 19 it's over with. That's the stipulated rent increase by 20 the tenants, no capital improvements, you're done. 21 That's the base rent. 22 Now, let's figure out what the base CPI 23 is. And the decision is effective 30 days after filing. 24 It should be the '87, September '87 CPI. This idea that 25 it should have been when the guys agreed to the rent Page 137 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 increase, you know, becoming effective, that's 2 superseded by the ordinance that says it's effective 30 3 days after filing. Are you with me? It's very 4 complicated. 5 ACTING CHAIRMAN WERCHICK: Can I make it more 6 complicated? 7 MR. SPANGENBERG: Sure, I'm happy. 8 ACTING CHAIRMAN WERCHICK: I was not instantly 9 comfortable with the city attorney's conclusion that 10 capital increases are to be treated as a reset during 11 the period of time that they're -- until amortized. 12 Because it seems to me that capital increases are more 13 analogous to a revenue bond, a separate category of 14 payment that wouldn't necessarily reset as a base rent 15 for CPI purposes. But that may be irrelevant to this 16 discussion unless there are some particular capital 17 improvements in dispute here, which were used to inflate 18 the base rent at some period of time and which we then 19 need to make a policy decision. And I was going to ask 20 if you have a comment a little more on that as to 21 whether we should. You know, what is the logic of 22 saying the capital improvements are -- you know, do we 23 set base rent? 24 MR. HARGREAVES: Okay. Well, Dave and I 25 collaborated on the decision, and rather than have the Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 138 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 parties argue about what we said, let's give us a chance 2 to try to elaborate. Because apparently it wasn't 3 entirely clear. 4 And I think a lot of the confusion comes 5 from the fact that, you know, there was a change in the 6 ordinance in '96 which basically changed the way rents 7 were calculated going forward that forces us to try to 8 interpret something that was done in 1988. 9 ACTING CHAIRMAN WERCHICK: Through the prism of 10 1996? 11 MR. HARGREAVES: Yeah. And it turns that the 12 decision made in '88 had different consequences based on 13 the '96 ordinance. And the parties at the time didn't 14 even know it was going to have these consequences. So 15 we can't even really opine what their intent was. 16 But there's two issues that have kind of 17 arisen, and that is the base rent month or CPI month and 18 then, also, the capital increases. And the way we 19 looked at it -- and you know, there again, trying to 20 interpret it through the prism of the '96 ordinance 21 was -- the way the ordinances work is basically there's 22 a base date where there's an agreement or a finding that 23 at that particular date the rents are fair. And then 24 going forward you do a 75 percent increase based on the 25 presumption there's a fair rate at that point. Page 139 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 has been in this sewer project is on the fees. And so 2 at the end of this I'll explain what this all means. 3 As a result of tearing up and all these 4 laterals and these mains going down the sides of the 5 streets and whatnot, the entire street system is going 6 to be destroyed, so we have to repave the street. 7 That's 408,000, and then a contingency, a 20 percent 8 contingency on that. Again, that may or may not happen, 9 but we built that in just in an err to be conservative, 10 and then also the street construction management by the 11 engineer. 12 So what does all this mean, all this 13 numbers stuff? Well, it means, very simply, this: We 14 have an application of $86.05. That's what it's going 15 to cost to go at it alone per space, per month, assuming 16 we hit all those 20 percent contingencies. The City has 17 bought those connections at 571. And if we were just to 18 purely buy those from the City -- they're already 19 assigned to Indian Springs -- the rent increase wouldn't 20 be $86.05, it would be $79.27. 21 But the City has said consistently that 22 they would donate or assign those fees so that the rent 23 increase for the residents was as minimal as they could 24 afford to get it. And that's the bottom number. The 25 bottom number is $59.08. Page 14 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Now, before '96 it was different. It was 2 an annual high. But after '96 it was you go back to the 3 base date at all points, measure the CPI from there 4 because that's when you're presumed to have a fair rent. 5 And this was an issue that when we wrote 6 the first opinion wasn't really focused on. We were 7 trying to figure out how to handle the hardship rent 8 increase. 9 So I think if you look at the opinion, it 10 says -- and it's Footnote Number 7. In terms of base 11 date, it says, Given the fact that as the resulting 1988 12 hardship rent increase was ultimately compromised, I 13 assume that the parties agree that the rents would be 14 fair and adequate as of their effective date. 15 So their -- the opinion kind of basically 16 said, Assuming that the parties agreed that the 17 effective date of that hardship rent increase was 18 actually a fair date, I mean, the rents were fair on 19 that date, that's the date we should use as the base 20 date. 21 Subsequently, the residents brought up the 22 issue of CPI increases and going forward and when should 23 they be measured from. 24 We went back and looked at it, and it 25 wasn't clear at all what the rent commission and/or the Page 140 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 parties considered the date of the fair rents. Because 2 it could either be, you know, the October date in '88 3 when it became effective, it could be the August date in 4 '88 when actually the stipulation -- if you look at the 5 stipulation the parties reached, they said that these 6 rents will be effective as of August lst. 7 So you could say that the parties actually 8 agreed that the rents were fair and adequate as of 9 August lst, '88, or you could go back and look at the 10 calculations that the park used in terms of determining 11 those rents. And their calculations appear to be based 12 on the '87 date. 13 So in order to make -- and you can't make 14 that determination. This city attorney can't make that 15 determination of a matter of law because you end up 16 having to go back and look at the record, try to figure 17 out what people were thinking, and try to figure out 18 what people at that time would have agreed is the month 19 and year when the rents were picked to be fair and 20 appropriate. 21 And then going forward from that date, 22 then you could, you know, figure back to that date what 23 the CPI is and move forward. And that's why I think if 24 you read the opinion, the second opinion, it doesn't 25 the city attorney doesn't define the base date or the Page 141 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 month of the CPI because there's that confusion. We 2 don't have the information. It's a factual decision as 3 to when, you know, the parties under the circumstances 4 should be considered to be fair. And there's a lot of 5 different things that can go into that. And that's why, 6 you know, we kind of recommended that you all consider 7 that. 8 ACTING CHAIRMAN WERCHICK: Well, thank you very 9 much. It's looks like you left us something to do. 10 Let me ask you this last question, if I 11 may, again to help me clarify this. It is the position 12 of the city attorney that there is not a legal answer to 13 this question. You can't refer us to statute, case, or 14 ordinance that answers this specific question of what is 15 the correct base date? Am I right? 16 MR. HARGREAVES: Exactly. 17 ACTING CHAIRMAN WERCHICK: Moreover, the city 18 attorney, in exploring the matter further, found that 19 there is insufficient legislative history existing to 20 allow you to express an opinion based on any legislative 21 history? 22 MR. HARGREAVES: Exactly. 23 MR. ERWIN: Correct. 24 ACTING CHAIRMAN WERCHICK: Right. And we have no 25 other sources of accessing the legislative history than Page 142 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 those that were available to you? Am I right? 2 MR. HARGREAVES: Well -- and I think if you look 3 at the second opinion, you say that this is something 4 the Board can determine after a full briefing by the 5 parties. Because, quite frankly, we never really -- 6 this is kind of a subsidiary point going forward, and it 7 kind of became a major point right at the end, and there 8 wasn't really a chance to develop it, so we haven't 9 given the parties a chance to really fully develop these 10 issues. 11 ACTING CHAIRMAN WERCHICK: We can ask the parties 12 to develop a legal position on how they believe that 13 relevant law, or analogous law, or other jurisdiction 14 law, or what have you, might guide a legal 15 interpretation. That's one thing we could do. Or we 16 could throw up our hands and acknowledge that you've 17 done the best job that can be done legally, try and come 18 up with a legal answer; that you've informed us that you 19 know of no other factual information lurking there, like 20 some very old person who sat through all the hearings 21 and will come testify as to everything that was said or 22 decided, and therefore, we have no factual information, 23 which leaves us essentially with a political judgment to 24 make. Because I think I'm understanding both the 25 parties and the city attorney to say, well, at some Page 143 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 point somebody is going to have to say, all right, 2 that's it. And it probably belongs at least first, if 3 not exclusively, with us and not a judge. Because a 4 judge supposedly is guided by legislative history and 5 law. And in the absence of either, that seems to leave 6 us with an, okay, guys, you are the governing body, in 7 essence, the administrative and governing body, you make 8 the call of what's the fairest, most intelligent way to 9 backtrack historically and set this right to make the 10 kind of findings that, perhaps, should have been made 20 11 years ago but weren't. 12 Is that -- do I basically define where we 13 are today -- 14 MR. HARGREAVES: Right. 15 ACTING CHAIRMAN WERCHICK: -- as far as the city 16 attorney is concerned? 17 MR. ERWIN: Yes. 18 ACTING CHAIRMAN WERCHICK: All right. We have 19 counsel standing side by side. Do I -- 20 MR. HARGREAVES: Mr. Chairman, there's two 21 issues. One was the date. The other was the capital 22 improvement. 23 ACTING CHAIRMAN WERCHICK: Yeah, I wanted to ask 24 more about that to the city attorney. 25 MR. HARGREAVES: All right. Page 144 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: All right. 2 MR. HARGREAVES: This opinion does not say that 3 they are moved forward or reset or anything else. What 4 it does say in the earlier opinion is that those are 5 temporary and they should be phased out. It does not 6 say, with respect to the '88 hardship rent increase, 7 whether or not there was any capital improvement 8 increase embedded in there that should or should not be 9 faded out. Because quite frankly, that's a factual 10 determination. We didn't have that kind of information 11 before us. 12 ACTING CHAIRMAN WERCHICK: And you know, I may 13 have overlooked the last sentence of Paragraph C there 14 that says, The capital improvement component of total 15 rents are not CPI indexed. 16 MR. HARGREAVES: Right. 17 ACTING CHAIRMAN WERCHICK: And that actually 18 answers my question. Because I was saying, Well, why 19 would you use the capital to add to the CPI adjustment 20 if capital improvement is more like a bond, revenue bond 21 than it is actual rent? And actually, you're in 22 agreement of my question there by saying, No, you 23 wouldn't use a CPI adjustment on the capital part of it, 24 you would only use the CPI adjustment on the hardship 25 and the base rent. Page 145 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Okay. So I'm satisfied. 2 So now, assuming that the city attorney 3 and I agree as far as capital, and that is that you 4 don't add CPI to capital, and assume that we are 5 thinking -- and I don't know if my colleagues agree, but 6 let's assume for a moment that they do -- that the 7 factual part of it is probably going to go to a hearing 8 officer to report back to us what capital was there and 9 did they erroneously add CPI to it or, you know, what 10 should the rent have been in a given month, and how many 11 dollars are involved, what is left is approaching this 12 question of how we should decide what the correct base 13 month and the applicable CPI is. 14 And I want you, first, to tell me if you 15 agree that (A), we have no law to guide us, because 16 maybe you think we do have law -- and I'll have that put 17 to you, and then you'll be asked to be brief -- and then 18 (B), whether we also lack specific legislative history 19 in answer to that. And if you feel we do have the 20 legislative history, point us to it. 21 MR. SPANGENBERG: I'm actually -- 22 MS. SOLTANI: Can I clarify? 23 MR. SPANGENBERG: I think I'm still on the 24 podium. 25 ACTING CHAIRMAN WERCHICK: Mr. Spangenberg. Page 146 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Okay. Ms. Soltani, we'll get to you in a minute. MR. SPANGENBERG: I think there's a critical element here that is as a matter of law, and that is the registration of the rents. In the ordinance is a provision that you register the rents pursuant to the terms of the ordinance. And they're registered with the City, and they are then presumed to be pursuant to the ordinance. To go back 25 years and say that the tenants didn't do their job, the City didn't do their job, the Rent Board didn't do their job, that these filings were incorrect is in violation of what the ordinance says about what the meaning of registering rents is. You can dance around that, but that's a legal issue that's in the ordinance; otherwise, there wouldn't have any registration. ACTING CHAIRMAN WERCHICK: Well, let me throw at you an analogy that pops into my mind legally, and that is, you can never correct defective property title because it got registered. MR. SPANGENBERG: No. No. ACTING CHAIRMAN WERCHICK: The decision of the judge is final, and you live with it for 20 years. The fact that you came along later and said, well, yeah, they said Aunt Tilly owned the land, but Aunt Tilly Page 147 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 never bought that land, it was Aunt Millie instead, that 2 you can't bring, say, a quiet title action, or you can't 3 challenge it 20 years after. You're saying registration 4 constitutes the last word, and I -- 5 MR. SPANGENBERG: If it's not challenged. If 6 it's not challenged. 7 ACTING CHAIRMAN WERCHICK: What's happening here 8 today is it's being challenged. 9 MR. SPANGENBERG: It's being challenged 25 years 10 later. 11 ACTING CHAIRMAN WERCHICK: I'm saying that may be 12 very unfair. That may lead to a conclusion on our part 13 as a political determination that we don't want to 14 entertain a 25-year-later challenge. I could see all of 15 that after discussion, after analysis going either way. 16 But I'm not sure that I agree or can agree 17 with you that that is legally dispositive. I -- you're 18 making an argument of latches basically. And latches is 19 an equitable document. 20 MR. SPANGENBERG: No. No. If you look at page 21 13 of the ordinance I handed you, which is Section 22 9.050.100, limitation of action to attack a final 23 decision, order of the Rent Review Board. Essentially, 24 it says, an action or proceeding to attack, review, set 25 aside, annul or void a final decision and order of the Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 148 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Rent Review Board, or reasonableness, legality, or 2 validity of any provision or condition attached thereto, 3 shall not be maintained by any person unless such action 4 or proceeding is commenced and service of the summons is 5 effective within 90 days of the filing with the city 6 clerk of the final determination and order and notice of 7 the same has been given to the city clerk. 8 She just read you the notice. It's been 9 more than 90 days. It's a final decision. It's been 10 implemented by the City through registration. It's over 11 with. And you can't now, 25 years later, say, oh, you 12 should have used the September '88 CPI because those 13 were registered. And then it becomes very clearly a 14 political decision and not so much a decision of what 15 happened, what the law is, and everything. She's trying 16 to attack reviews set aside that decision that happened 17 25 year ago. 18 MS. SOLTANI: Can I address the Board now? 19 ACTING CHAIRMAN WERCHICK: Yes, please do. 20 MS. SOLTANI: This is precisely the argument that 21 I anticipated Mr. Spangenberg was going to make. And 22 it's a red herring. It's trying to get you not to 23 correct something that must be corrected. 24 Let me read from you -- from your current 25 ordinance, Section 9.50.070 that says, Any resident of a Page 149 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Now, is the City over here jumping up and 2 saying, "We're going to do it"? No. They want this to 3 proceed through the capital improvement pass -through 4 process, and they want this to settle, and their 5 contribution to that settlement is the sewer fees, the 6 sewer connection fees. So what that means, in a simple 7 sense, is this is really -- if it all works out, and 8 everybody cooperates, and we get this thing done, and we 9 don't keep screwing around on it, it's going to be 10 $59.08. 11 Now, why didn't I file an NOI? That's 12 probably your next question. We've given you the 13 documents on an NOI. The original Patterson decision 14 was looking at a $263 or $269 rent increase. We have 15 got it down, we believe, to $59 in reality. Okay. 16 That's between one -forth and one -fifth of where we were 17 before. 18 And Mr. Patterson in his decision said, 19 "$263 is unconscionable." But I don't believe that $59 20 is unconscionable. In fact, I've been involved in a 21 number of rent control proceedings, and rent increases 22 up to $100 are pretty -- I wouldn't say typical, but not 23 unusual. So I think we've now moved it into a range 24 that is a range that's -- I think everybody can live 25 with. The City has indicated to us that they will put Page 15 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 mobile home park or a mobile home park owner, affected 2 by this chapter, upon payment of such filing fee as 3 shall be duly established, may petition the Board for an 4 interpretation of this chapter, for a determination of 5 whether a particular course of action, either proposed 6 or actual, is legal, valid, and within the terms of this 7 chapter. 8 The ordinance goes on in Section 9.50.090 9 to say, In the event of a violation by the management of 10 a mobile home park of any maximum rents -- exactly what 11 we have here -- an effective rent schedule, or a final 12 decision or order of the Rent Review Board, relief of 13 such violation shall be enforceable by an individual 14 tenant of the park in a court of appropriate 15 jurisdiction in which injuctive relief may be granted 16 and damages shall be allowed. 17 It doesn't specify a time limit. It 18 doesn't specify a time limit because it's the right 19 policy not to specify a time limit. 20 ACTING CHAIRMAN WERCHICK: Is there an equivalent 21 of 9.050.100 in the present statute? 22 MR. SPANGENBERG: It's the same thing. And it's 23 specific -- it's exactly the same. 24 MS. SOLTANI: Where is it in the current? 25 MR. SPANGENBERG: It's 9.50.100. Any action or Page 150 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 proceeding to attack, review, set aside, annul, or void 2 a final decision and order of the Rent Review Board, or 3 the reasonableness, legality, or validity of any 4 provision or condition attached thereto, shall not be 5 maintained by any person unless such action or 6 proceeding is commenced and service of the summons is 7 effected within 90 days of the filing. 8 It's the exact same language. It's 9 specific as to what it applies to. It's the decisions 10 of the Board. It's how they've been implemented. And 11 you cannot now attack, review, or set aside them. Not 12 withstanding a provision that you can get an 13 interpretation of something, you cannot -- if this were 14 applied to a final decision, if her argument were true, 15 which it is not, you could take the final decision of 16 this Board, and we could turn around and say, We want 17 your interpretation on passing through sewers. 18 You know, you've already made a final decision that 19 that's not allowed. 20 MS. SOLTANI: But -- but let me -- Commissioner 21 Werchick, there's something that I really would like to 22 address. And I think this is huge. 23 Mr. Spangenberg cited the Board to the old 24 ordinance, the Ordinance Number 456, and Provision R to 25 argue that the rents, the 1988 rents, became effective Page 151 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 30 days after the filing of the petition. But if you 2 read that carefully, it says, Any order of the Rent 3 Review Board shall, unless otherwise specified in its 4 final decision, be effective 30 days. 5 And when you look at the 1988 order or 6 notice of finding and recommendation, it says, In 7 accordance with the provisions of Section R of the rent 8 control ordinance, the hearing officer's proposed 9 finding and recommended decisions shall become final 10 findings and decisions of Rent Review Board within 15 11 days after the filing of the same with the City Clerk. 12 And this is dated September 7th, 1988. 13 That's why we have argued that even if we 14 accept the city attorney's argument -- and we're trying 15 to keep it simple. So we're saying, fine, we'll accept 16 the argument that the hardship is wiped out, that this 17 argument -- so you're nodding yes. I assume that you 18 understand what I'm arguing. That's why we're urging 19 you to uphold his earlier decision that it would have 20 been October of 1988 based on this finding that was 21 filed. So -- and if you do that, we're not challenging 22 this anymore. So we don't have to run into this issue 23 of waiver of the argument. Because we agree that it 24 should have become final in October of 1988, and we are 25 saying, Fine, we'll accept that. Page 152 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: Mr. Spangenberg, what 2 about the language suggesting that the effective date 3 was not the general ordinance language but, in fact, a 4 specific finding at the time? 5 MR. SPANGENBERG: Now, there's a decision -- the 6 decision -- the decision of the Board is effective 30 7 days after filing the petition. That is not the rent 8 increase date. The rent couldn't possibly be increased 9 within 30 days because the law requires a minimum 60-day 10 notice. 11 So what the decision says is the rent 12 increase is effective October of '88, but the 13 decision -- 14 ACTING CHAIRMAN WERCHICK: How could the rent 15 increase be effective 15 days after filing with the 16 clerk if it requires a 60-day notice? 17 MR. SPANGENBERG: Because the notice was -- the 18 notice of rent increase went out with the application in 19 October of '87. It's just a modification of the rent 20 increase. 21 ACTING CHAIRMAN WERCHICK: If they already met 22 the 60-day rule, why did they mention 15 days for 23 effective? It sounds like we have a political 24 interpretation. 25 MS. SOLTANI: No. It's a stipulation. It's been Page 153 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 stipulated to it. 2 MR. SPANGENBERG: Can'I finish? Can I -- 3 ACTING CHAIRMAN WERCHICK: Okay. 4 MR. SPANGENBERG: You really have to understand 5 two things going on here. 6 ACTING CHAIRMAN WERCHICK: It sounds like it was 7 poorly -- the stipulation may have been poorly drafted, 8 which is no fault of anybody in this room. 9 MR. SPANGENBERG: Let me explain something, which 10 I didn't want to get into before, about that particular 11 decision. If you've read the decision, you know that 12 there's stipulated tenants. There's 102 spaces that are 13 stipulated to a rent increase effective August 1st. 14 There are 77 tenants that went to the Board. and that 15 rent increase is effective in October. So you've got 16 two effective dates out of that decision. The decision 17 is final back in November. The effective dates are 18 different. 19 ACTING CHAIRMAN WERCHICK: Let's begin with the 20 fact there's a disagreement between the parties as to -- 21 numerous disagreements here. Is the city attorney 22 prepared to weigh in with anything additional at this 23 point? Because we're beating a horse here, and I'm not 24 sure that the three of us are able to resolve this right 25 now. And again, this may be a matter for a hearing Page 154 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 officer to help us. 2 MR. HARGREAVES: And here again, this all -- this 3 particular issue got focused on very late in the 4 process, and I don't believe either parties had an 5 opportunity to really brief it. We certainly haven't 6 had an opportunity to consider it. 7 ACTING CHAIRMAN WERCHICK: All right. We're 8 going -- we're going to lose Mr. Adams' attendance if we 9 don't make a pretty quick decision. I'm going to 10 grab -- I'm going to abbreviate the public hearing on 11 this, frankly. 12 COMMISSIONER TORSNEY: I'd like to make a 13 motion -- 14 ACTING CHAIRMAN WERCHICK: Yeah, let's get a 15 motion if we're going to do anything. 16 COMMISSIONER TORSNEY: -- to table this matter to 17 give both sides an opportunity to brief and allow the 18 city attorney to brief it. And -- 19 ACTING CHAIRMAN WERCHICK: All right. The motion 20 is to table. And I'm going to ask you to change the 21 word "table," please, to "continue." 22 COMMISSIONER TORSNEY: To continue. 23 ACTING CHAIRMAN WERCHICK: I was told that last 24 time if we put it on the table, then we need another 25 motion to take it off the table. That's a Robert's Page 155 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 Rules thing. 2 There's a motion to continue this 3 discussion to the next meeting of the Rent Review 4 Commission to permit the parties time to further brief 5 these issues and the city attorney to provide further 6 input to us. Is there a second? 7 CHAIRMAN ADAMS: Second. 8 ACTING CHAIRMAN WERCHICK: All in favor? 9 COMMISSIONER TORSNEY: Aye. 10 ACTING CHAIRMAN WERCHICK: Aye. 11 Is that three ayes? 12 CHAIRMAN ADAMS: Oh, yes. 13 ACTING CHAIRMAN WERCHICK: Three ayes. 14 MR. SPANGENBERG: Is there a scheduled date, 15 because I'm going on vacation? 16 ACTING CHAIRMAN WERCHICK: No. No, the date to 17 be determined with the clerk, soliciting input from all 18 parties. 19 MR. SPANGENBERG: Okay. 20 ACTING CHAIRMAN WERCHICK: Before you go, I was 21 asked to clarify for the clerk, did you vote "aye" on 22 the motion to deny the capital rent increase? 23 CHAIRMAN ADAMS: I did. 24 ACTING CHAIRMAN WERCHICK: So it was unanimous. 25 CHAIRMAN ADAMS: Aye. I did, yes. Aye. Ayotte & Shackelford, Inc. PSCSR@AOL.COM Page 156 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 ACTING CHAIRMAN WERCHICK: Also, I assume that 2 your motion -- and I think we all assumed the motion 3 governs both 7(A) and 7(B)? 4 COMMISSIONER TORSNEY: That is correct, Chairman. 5 ACTING CHAIRMAN WERCHICK: Thank you. I assumed 6 that. I should have said that explicitly. Both 7 continued. 8 Is there a motion to adjourn? 9 COMMISSIONER TORSNEY: Move to adjourn. 10 ACTING CHAIRMAN WERCHICK: Hearing no objection, 11 the meeting is adjourned. Thank you all. It's been a 12 long day. 13 14 (Whereupon the foregoing proceedings 15 were adjourned at 6:19 p.m.) 16 17 18 19 20 21 22 23 24 25 Page 157 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181 INDIAN SPRINGS HEARING 9/22/2008 INDIAN SPRINGS HEARING 1 CERTIFICATE 2 OF 3 COURT REPORTER 4 5 6 7 8 9 10 11 12 13 14 15 16 17 name this date: aA0 i1 17. 200.'6 18 19 20 21 22 23 24 25 I, Brenda S. Kroger, certified shorthand reporter of the State of California do hereby certify: That the foregoing transcript is a certified copy of the proceedings taken before me at the time and place therein set forth; That the testimony given at such time and place was recorded stenographically by me and was thereafter transcribed, said transcript being a true certified copy of my shorthand notes thereof and a true record of the testimony. In witness whereof, I have subscribed my JJtU1i\L4 Brenda S. Kroger, .S.R. Certificate No. 10212 Page 158 Ayotte & Shackelford, Inc. PSCSR@AOL.COM 760-340-2181