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HomeMy WebLinkAbout1988-07-08 RRC Minutes MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING FRIDAY, JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * I. CALL TO ORDER Chairman White convened the meeting at 3:00 p.m. II. PLEDGE OF ALLEGIANCE III. ROLL CALL Present: Excused Absence: Commissioner Joe Abbondondola Commissioner Mike Isbell Commissioner Wanda Tucker Commissioner Joyce Wade-Maltais Chairman Randall White Also Present: Sheila R. Gilligan, City Clerk/Public Information Officer Mary P. Frazier, Deputy City Clerk David J. Erwin, City Attorney Rick Erwood, Hearing Officer Jean M. Benson, Mayor IV. OLD BUSINESS A. CONSIDERATION OF HEARING OFFICER'S RECOMMENDATION RELATIVE TO PROPOSED RENTAL AGREEMENT FOR SILVER SPUR MOBILE MANOR. Key RE RICK ERWOOD, HEARING OFFICER RW RANDALL WHITE, RENT REVIEW COMMISSION CHAIRMAN WT WANDA TUCKER, RENT REVIEW COMMISSIONER JA JOE ABBONDONDOLA, RENT REVIEW COMMISSIONER DJE DAVID J. ERWIN, CITY ATTORNEY DP DOUG PHILLIPS, DEPUTY CITY ATTORNEY RT ROBERT TURNBULL, RESIDENT AR ANTHONY RODRIGUEZ, ATTORNEY FOR PARK OWNER JF JACK FRENCH, SILVER SPUR HOMEOWNERS ASSOCIATION PRESIDENT PC PAUL COLLINS, RESIDENT JMB JEAN M. BENSON., MAYOR W RUTH WALLIS, RESIDENT MPF MARY P. FRAZIER, DEPUTY CITY CLERK RW Now, the business that we have before us today is the consideration of the hearing officer's recommendation relative to the proposed rental agreement for Silver Spur Mobile Manor. Perhaps the best thing to do, there must be an echo in here, the best thing would be to have the hearing officer state his recommendation and give us an overview of his supplemental report. Mr. Erwood. t . MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RE Thank you, Chairman White. With respect to my report, the matter was referred back to me for further evidentiary hearing concerning the question of how many persons had been actually represented by Attorney Joan Baumgarten, and in the essence were involved in consenting to the agreement that I had initially recommended should be adopted by the Commission. That hearing was conducted on June 24th, 1988. Prior to that hearing a ballot was sent out to, one ballot per space, to all of the spaces in the park with respect to the issue of whether or not they were, the individuals were, opposed or in favor of the agreement which had been entered into by the attorney for the homeowners association and the president of the homeowners association with Silver Spur Reserve. Out of 215 ballots, were received 143 back. The procedure that was established, I believe by the City Clerk and the City Attorney, was that the ballots, since there was one ballot per space, the ballot had to be signed by the individual voting and returned by, I believe, June 21st, 1988. Three ballots were returned with no preference indicated, and one ballot was returned after the deadline of June 21st. Those four ballots were not included within this count. Of the ballots that we received, 90 people voted in favor of the agreement, 53 voted against the agreement. That represented approximately 67% of the eligible votes were actually voted during that election. 25% of the eligible votes were actually in opposition. Of the votes that were returned, that constituted 37% of those actually voting. Those in favor constituted 42% of the eligible votes, and 63% of those actually voting. During the hearing, I also received testimony from various individuals in opposition, which I've attempted to summarize in the report just briefly. There was some testimony also in favor of the agreement. Also submitted was the agreement between Attorney Joan Baumgarten and Harold Faunt, representative of the homeowners association, and the signatures, or copies of the signatures that were signed by members of the park who were consenting to be represented by counsel in this proceeding and that authorized the president of the homeowners association to act as their agents in their behalf. I received 178 signatures of people indicating that they were, in fact, represented by counsel and the president of the homeowners association. That constituted 83% of all the eligible persons in the park were asking to be represented by both counsel and the representative from the homeowners association. I did indicate some other items that were received in evidence. There was some testimony given. Also, you have reference to my prior report in which letters in opposition and petitions in opposition were also submitted. One item that was actually, besides the signatures, that was also a new item, was the letter from Attorney Anthony Rodriguez, and I believe that was a letter addressed to the City Attorney, Doug Phillips, outlining the position of those individuals who wish to be represented by counsel and the president of the homeowners association. I merely point that out because the issue was raised by Mr. Rodriguez regarding any action by the City which might constitute an interference with these individuals rights to contract with the representatives of the park ownership, or the park owner I should say. Any you will recall in my previous report I referenced Section 9.50.080; that is the provision which indicates that nothing in the rent control ordinance is to be construed as in any way limiting an individual's right or group of individuals to contract or enter into any type of an agreement with a park owner or to restrict in any way the ability to contract. And as Mr. Rodriguez's letter points out, any interferene with that right might have a constitutional implication of interfering with an individual's right to contract. 2 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * After considering all of the evidence that was submitted, I made basically the same recommendation that I had made before. And the reason for that recommendation is as follows: One, obviously 83% of the individuals at one time indicated that they should be represented by both counsel and the president of the homeowners assocation acting as their agents; therefore, under the basic contract and agency principles, it was my finding that those individuals are bound by the document they executed by signing their signatures. They are in fact bound by the agreement as entered into. With respect to the other individuals, the question is whether or not to apply this agreement to all the individuals in the park or to require the owner to go through the hardship petition further in order to establish the right to a hardship rent increase. I did point out in my report that there has been no evidence produced which shows that this 17% should be in any way treated differently than those who entered into the agreement. There has also been no evidence produced which indicates that this agreement is either unfair or the result of overreaching. You will recall when I made my report to you, it was previously, there was was some indication that certain individuals who signed the petition wanted their names removed at a later point in time and things of that nature. I think that's what created the ambiguity as to how many people were actually entering into this agreement; however, with those signatures being entered into evidence, which we had not had at the prior hearing, all we had was the typewritten list of people that Joan Baumgarten indicated were represented by her, I think that really precludes any consideration as to whether or not any of those people should be excused from the obligations of the agreement. Though 17% of a park of this size is not an insignificant number, without any evidence showing that they would in any way be able to show that there's anything wrong with this agreement or why they should be treated any differently, I would suggest that the agreement, not quite as submitted, but the agreement be adopted and applied to all members of the park. The agreement, as I previously indicated, has one provision which appears t be inconsistent with the ordinance. That's Paragraph 18 on page 6 which talks about an optioning out procedure and certain notice requirements and things of that nature. This, I believe, is in apparent conflict with Section 9.50.070 of the Palm Desert Municipal Code and, therefore, just to avoid any ambiguity, that paragraph should be removed from the agreement if and when it is adopted. And that concludes my report. RW Thank you, Mr. Erwood. Does the Commission have any questions of Mr. Erwood? WT I have a question on a figure, Mr. Erwood. You said 143 back out of the 215? RE That is correct. WT Any four were bad? RE Three were not signed, and one was returned late, yes. WT So that's 139. 3 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RE No, I was giving you the valid votes. WT Oh, okay. RE I probably didn't state that. . . WT Then your figures are correct because I couldn't figure how you got 90 and 53 with four gone. That's my only question, Mr. Chairman. RW I have a question. Correct me if I'm wrong, but does the statute with which we are dealing provide for any burden, either of proof or burden of going forward with the evidence, on the part of the tenants in this type of proceeding? RE No. The burden of proof is on the owner to produce evidence of sufficient quantity that it is more likely than not, that's called a preponderane of the evidence, that the fact he's attempting to establish in fact occurred. So it's basically a 51% type of burden of proof. RW And what you are suggesting to us is that through the contract procedure, the owner has met that burden under the code? RE Due to the fact that 83% have in effect adopted this agreement while they were represented by counsel and by the president of the homeowners association and due to the fact that the hearings in this matter were continued many times so that Robert Stewart, who is an accountant out of Palm Springs, could examine the records of the park before making his recommendation. I feel that by a preponderane of the evidence, they have established that it is in fact a fair agreement between the parties. RW And when you say "between the parties" you are including these 17% of the people who were not clients of the attorney Joan Baumgarten. RE Yes. There has been different opportunities for those who oppose the agreement to produce any type of evidence which shows in any way that the owner, by having this agreement, would be getting more than a fair rate of return or would be even getting an excess or a substantial excess of what the net operating theory would provide. Besides the hearings that I have presided over, there were meetings, and you should have some documentation with respect to certain items of correspondence that were introduced indicating that notices were sent out to individuals in the park and meetings were held. I referenced in my report a meeting which occurred on January 26, 1988, in which he agreement was discussed and voted upon by those present. There were only 61 people at that meeting who actually cast votes at that meeting, and Mr. Faunt testified to that, 54 in favor and 7 against. At the time he gave that testimony he also indicated that he had his vote, which he had not cast, and he had 17 proxies, which he was authorized to vote in his best judgment. If he had voted those, that would have increased the majority to 72 in favor and 7 against. So, I should also emphasize that were was initially when this came before me for a hearing on the agreement, there was no testimony that anyone was opposed to the agreement, and it came out later after I made my initial recommendation that we began to hear some further opposition and see some petitions and things of that nature. 4 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RW And at this point, then, what you're saying is that there has not been opposition demonstrated which would have any impact on the NOI formula. RE That is correct. The park owner submitted documentation indicating the costs of the improvements, different documentation of what in fact they were doing and how much it was going to cost to put in the sewer system, repave the roads, and things of that nature. And it's a substantial outlay, which of course would justify an increase. And I believe initially that one of the letters of correspondence initially we were talking about increasing the rent approximately $27.50 per month with some added charges. You will recall, initially this park owner was asking for $58.54. This agreement that you have before you is obviously substantially less than that. I think since October of 1987, there was a stipulated rent increase that a high majority of the individuals are paying, I don't know the exact, I can't recall the exact figures, but most of the people have been paying an extra $20 since October. This agreement indicates from I think it's October to April 1st of this year it's to be a $30 increase with credit for the $20 that was actually paid. So in effect it's a $10 for that period of time, and there's an arrangement in the agreement where the $60 that is due on April 1st to make up the deficiency of the $30 can be carried over a period of time for approximately $5 per month. And there's a formula with respect to the April 1st, 1988, which I believe talks about the Consumer Price Index, and a percentage of that. And you will recall when we used the NOI theory, besides the Consumer Price Index calculation that each year a park owner is involved with, he can ask for a hardship rent increase in which we take 50% of the Consumer Price Index with respect to cost increase. So I felt that in essence this agreement is reflective of what is occurring at the park and might, in fact, be somewhat of an understatement as to what the owner may be able to establish with respect to the improvements that he's putting in. RW Thank you, Mr. Erwood. Does anyone have any other questions? WT Yes, I'd like to ask Mr. Erwood, has there ever been such an agreement in Palm Desert, have we had an agreement like this before, or is this a precedent setting thing? RE Well, I haven't been involved in any, so. . . WT We'll defer to the City Attorney on that, then. DJE I don't have any recollection of them before. Certainly our ordinance anticipates this possibility, but I don't believe that it has been before this commission before. WT And if I read this correctly, we are being asked to do five and a half years from the period October 1, 1987, to April 1, 1993? RE I believe that's correct. It's basically a five-year agreement. One of the provisions in the agreement is that, although I probably shouldn't try to interpret the agreement, but it refers to the protections of the rent control ordinance to still be applicable during the time period that this is in effect. And what I take that to mean is that although the rate of the rent increases has been established, if there is anything such as a decrease in services, further action that either the park owner or some of the homeowners want to take whereby they could avail themselves of the ordinance to come in and ask for or file a petition for 5 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * interpretation or anything like that, they would still be allowed to do so and they would still have the protections of that agreement. In other words, they haven't removed themselves from the agreement whereby the park owner could somehow breach the agreement and then try to raise the rents again and say wait a second, you know, you're out for five years, you're out of the realm of rent control because it's not in fact the way the agreement is set up. JA The homeowners who are not a party to this, they are bound by it? RE Well, they're not bound by it unless you adopt it and say to them to be bound. I think, and the park owner can probably address this better than I, I think the determination that you have to make is whether or not the 17% of the people that aren't bound, whether or not that opposition should trigger another evidentiary hearing in which the park owner would have to then establish the NOI formula and then on top of that I think you have to consider the ramifications of doing that as to whether or not what's going to happen one way or the other if you find that 17% are going to be subjected to a higher rental rate or a lower rental rate. I don't know if that would have any affect on your decision, but that's one of the things you might consider. I think we have to be realistic and understand that any time you have a number of people that are involved in any type of an agreement sort of process, you're always going to have some people that maybe aren't or don't want to be involved. But I think that, instead of looking at this maybe as adopting an agreement, you could say that, you could basically adopt the foundation or use the agreement as a foundation for making your recommendation or making your finding as to what the rents should in fact be, whether or not you want to do that or not. But it is my opinion as far as those 178 people that signed on, I think those people are going to be bound by it regardless. RW Just so we're clear on one point. The 215 that you have mentioned is 215 spaces in the park, not all of which may be occupied? RE I don't know how many are occupied. RT One vacant. RW One vacant, okay. Mr. Erwin, do you have any comment on this? DJE I think the hearing officer's report basically gives you several things to consider. One, his report I think is very clear that pursuant to the terms of our ordinance, 178 of the units are subject to an agreement which takes it out of, if you will, this body's determination. With regard to the balance of the units, I think there are potentially several alternatives. The board could adopt the recommendation of the hearing officer, obviously, which is that they be treated in effect in the same manner with regard to the rents as those who are bound by the agreement. You can, if you wish, disagree with that, send it back for further hearing and determination by the hearing officer with regard to those additional units. RW Thank you. WT Mr. Erwin, do you agree with Mr. Erwood's recommendation on eliminating the tenant opt out procedure from the agreement? 6 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * DJE Yes. RW One other concern that I had was whether the burden of proof or the burden of going forward has been shifted in some manner to the tenants, at least those 17%. do you have any opinion about that? DJE I think. . .my own judgment of what I have read of the report would indicate to me that certainly the fact of the agreement as well as the other documentary evidence would tend to lead me to believe that the evidence is there which you could use to base your decision on that the rents on the additional units other than the 178 should be at the same level. I think there is sufficient evidence there. It may not have necessarily been intended for that purpose when presented, but it is there. There is nothing in opposition to that. RW Thank you, sir. If it would be appropriate, at this time I would like to open this to floor questions or communications. Mr. Rodriguez, would you like to step to the podium and announce yourself? We have adopted a rule which is sometimes considered more in a breach than in favor that questions and comments are limited to five minutes. So if you could make this concise, please. AR Sure, I just have two points that I'd like to make. The first is that the actual June 30th, 1987, rent increase application provides all the evidence in support of a rent increase far in excess of that which is included in the actual settlement agreement between the parties. I don't see that June 30th, 1987, application in this brown folder that I was handed before the hearing, but I'm sure that it's part of the administrative record. The second point, and in that same light, there has been no evidence to rebut the evidence submitted with the June 30th, 1987, original application. The second point is, in terms of shifting of the burden of proof to the tenants, the California Supreme Court, in the case of Burkenfeld vs. the City of Berkeley, has clearly stated that the burden of proof should shift to a minority position if a vast majority of tenants are found to be bound by some sort of rent increase, then the burden shifts to the other side, to the minority position to show why they are different from those who are bound. And the quote from Burkenfeld is at page 2 of my letter to Douglas Phillips that's part of the brown folder that you have right now, it's at the bottom of page 2, and it's underlined where the court says "subject to the right of any member to make a showing of sufficient deviation from the norm to warrant special treatment". I don't believe that there. . .are you all able to find it? I don't believe that there's been any showing whatsoever that certain tenants at the park haven't been benefited by the capital improvements or that the affect of inflation only affects certain groups and not other groups, and that's primarily what the settlement agreement was based on, was the capital improvements and the inflation that occurred over the last eight years or so. Those are the only comments I have unless you have any questions. RW I have a question. Do other Commissioners have questions? Would you say, sir, that the capital improvements affect each of the tenants in the same manner? AR I believe that they do. I think that the sewer system that was installed clearly benefits everybody in the park. Each and every person, I believe, is now hooked up to the sewer system. The asphalt paving that was done throughout the park clearly benefits everybody in the park, and like I said, there has been no 7 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * evidence introduced to suggest that that isn't the case. All the other capital improvements that were done tend to. . .well, I think that all the capital improvements that were done are in common areas of the park. I don't believe that any capital improvements were made to any individual space that other tenants are now being required to pay for. It may be true that certain tenants drive over the road more than other tenants or something along those lines, but I don't really think that that's what they're talking about when they're talking about capital improvements that benefit all tenants equally. What they're really talking about is common area, and since all of the capital improvements were made to common area, I believe that all tenants benefit equally from those capital improvements. RW Okay. Is there anyone else who would like to speak in favor of the contract at this point? Yes, sir, if you would like to. . . JF Thank you. I'm Jack French. I'm the president of the homeowners association. I took over from Harold Faunt in January. He signed the agreement because he is the one that really had put it all together, and I think that that signature of his was completely right. I would like to correct one small thing as far as Tony Rodriguez is concerned. Not all of us are directly benefiting from the improvement. We people who happen to live on what the area that is called the "new section" or the "hill section" was built about '71, '72, '73, somewhere in there. And we were put on sewers at that time, so the sewers of course did not benefit us in any kind of a way. The roads also were built at that same time, and there were minor things that were done to improve the road up in our area, but by and large it was the area down in the lower end, the former, older sections. I'm not saying that that makes any difference as far as I'm concerned. I think that where some benefit, I think that everybody should pay their fair share of this thing. I only have one, two further statements. Number one, there is one member that signed the petition that no longer lives in the park. He should not have voted. His name was Joe Krum. He's been out of the park for two months. So out of the 53, his name should be deleted. There's one other amusing, very amusing thing. One of the other fellows that signed opposing it was actually the fellow that made the motion at the meeting accepting the settlement agreement, so I don't know where he's coming from at all. RW Thank you, sir. Now is there anyone who would like to speak in opposition to the proposal and if there is, would you please approach the podium and, sir, keep your comments limited to things that we have not already heard and also, please, to five minutes. PC Paul Collins, 16 Prickly Pear. I hardly know what to say in five minutes except that there is no way that this panel or this hearing can bind me to this agreement because I'm not represented by Joan or this homeowners association. We had hoped when they got a petition of 102 people to rescind this type of action that's brought about by this so-called agreement, and you can call it an agreement if you want to. We was hoping to put it back in the hands of the Rent Review Board. Now the attorney, that is for the homeowners, and the homeowners have successfully taken it out of the hands of the Rent Review Board. This attorney for the City I believe that's over here, he suggested and also the hearing officer, Attorney Erwood, suggested that you take that #18 of this whatever it is, agreement. Now, I want you to turn back to #16 just above it and look under "A" and it says "Authority to enter into agreement - each party warrants once to the 8 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * other that each party has full and complete authority to enter into this signed agreement and to bind those parties on behalf of whom the signature is made and perform all acts and incur all obligations created under this agreement without the consent or approval of other persons." That other persons would be you as far as I'm concerned, or anybody else. So if they can eliminate you from this as hearing officers, we're just wasting our time here as a Rent Review Board, we're just spinning our wheels. Now, put that one down to digest later because I only have five minutes, you told me that. The people that really benefit by this is Silver Spur homeowners, I mean Silver Spur park owner. He benefits by this because he has an improvement of sewers and streets that we're paying for, and this is very clear because I have a whole stack of paper here showing how what he wanted us to pay for, and I think that you folks have had time to review that. If you haven't, why then you have to before you can make a decision. There's a (unclear) that he receives a capital improvement, and we receive a (unclear) on our places because as the rent goes up the prices of our units go down. So he's gained in seven years really at the rate of increase he got up to right now, if he got the $30.00, that would be paid for in seven years, including his interest. And then he's going to take that like a tax, never take it out of the record at all, just keep paying from now on. Then he wasn't satisfied and wanted to bind us for five years, so we're going to pay again and again and again. Now, the Coachella Valley Water Department, they gain because they're getting about $24,000 a year from we the owners of the units in that park. And they gain that from now on, not just for five years or so, they gain it from now on, $9.50. Some of us didn't have a problem, this is true. Some of the folks up in (unclear) did have a problem. Again, the homeowners lose because a fair percentage of us are sitting on half, well 30% less space than most of us are sitting on. (unclear) and I'm not speaking for them, I'm just speaking in a sense of justice. I don't think they should have to pay the same amount of money as all the rest of us because those people are getting less for their money, and that was not entered into at all. They have a ten foot wide or twelve foot wide and a patio area, so they have a lot less space but they're going to be (unclear) the same amount of money that those with 24 foot wide or triple wide (unclear) . Then the City of Palm Desert lastly, and I could go on for about two hours if I had the opportunity because I've got the (unclear) that's why he would get this (unclear) that's the park owner. The City of Palm Springs, or Palm Desert, I'll get you back to your home, and the Rent Review Board, you put (unclear) for five years. The attorney don't think so, but if this is true and #16 here means what it says, you're dealt out of it. I bet even if you're not dealt out of it, they signed the contract that includes money and that, about all you could represent is so much money. They've (unclear) for five years, so for five years you don't have to do nothing, don't even have to listen to us, talk to us, or bother with us. We've just been put on hold. I think the whole thing needs to have some real overhauling, and I'm going on record again. There is no way. He said 17% to be roped into this. He don't have no contract with me. The only thing I ever signed there is to pay rent for the month. And, yeah, I'll take the minority position. I don't mean that. I'll take the minority position. A minority does have some rights, and you don't have the right to rope me in on somebody else's misappropriation of justice. Thank you. RW Thank you. Anyone else who would like to address the Commission at this time? AR Could I make one other comment? With respect to the 17% that aren't signators to the agreement, I would submit a third alternative that hasn't been discussed here. 9 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Personally, I would like to see the agreement approved as to everybody in the park as is, but if not, I believe that since the only evidence is to demonstrate the rent increase that was requested, and there's been no opposition, I would submit that we have met our burden of proof and should be entitled to the entire rent increase with respect to those 17% if the agreement is not approved as is. Thank you. RW Thank you. Mr. Erwood, I would like to ask one further question, which is something that Mr. Collins brought up. Is there a limitation on the length of time for this rent increase contained within the contract, or is this to be forevermore? RE No, it ends April 1st of 1893. RW 1993? RE 1993, right. So it automatically terminates on that date. That means that it is no longer in effect. RW And that would mean, then, that the rent at that time would automatically, under the contract, revert back to the former amounts that the tenants are paying. . . RE I'm going to have to look at this. I'm not sure that it says that. At that point in time, it expires, and then all it says is that the owner can basically go through a rent review hearing process if that ordinance is still in effect. If that ordinance is not, he would not be controlled by anything with respect to what he wants to do with the rents. RW I see. So what we are saying by ratifying the agreement is that essentially the rent is being increased not solely for the purpose of the capital improvements but in addition to that, it is being increased beyond 1993 if there is no further agreement. RE Not necessarily. The ordinance provides a petition for interpretation can be filed by either side. In other words, the homeowners could come in in April, 1993, and basically have the position that we had five years of increased rent, we feel that the capital expenses that justified this increase have been fully amortized, amortized over that period. If they can make a case for that. . . RW I see what you're saying. RE In other words, when we approve, generally when you approve, like, a capital improvement, where it's going to be amortized over 25 years, at the end of that 25 years the park owner cannot continue to use that expense to justify an increased rent. So I would think that the same logic would apply in this case. RW Do you agree with that, Mr. Rodriguez? AR Well, I can shed some light on it if you want me to come back up there. RW Would you, please. 10 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * AR In the record that was provided to us today, there is a stipulation that talks about the capital improvements. There's no marking of pages here so I really don't know how to identify it, but it's towards the middle and it's a three-page stipulation, and it's dated September 3rd and September 4th of 1987. Have you been able to find that yet? And what happened was. . .it's the one that's dated September 3rd and September 4th, and it was signed by myself and by Joan Baumgarten. And this talks about the amortization periods that were going to be used for various improvements. Did everybody find that? RW Okay, we have it. AR Is everybody ready? RW Yes. AR Okay. I believe the asphalt improvement was originally to be amortized over a ten-year period, and the sewer improvement was to be amortized over a 20-year period, and I believe that was in accordance with the amortization schedule that's part of the local rent control ordinance, although I could be mistaken, but I believe that's where the numbers can from, the ten- and 20-year numbers. This stipulation was entered into so that the owner could be assured that he would receive at least that amount before he began the sewer and asphalt repaving. It was a $400,000 expenditure, a $400,000 plus expenditure. So the parties agreed that at a very minimum, this amount would be allowed. And as the negotiations continued over a period of four or five, maybe six months, it was eventually agreed that rather than try and amortize all the different capital improvements that had been made and never recovered and a fair return had never been granted for over the years, that a flat rate rent increase would be granted, would be part of the agreement. That's where the $30.00 comes from. It includes that $20.00 for the sewer and the asphalt plus the other capital improvements that were made between 1979 and 1988, or '87, and also included the capital improvements to be made in the future under the agreement that are specified somewhere in the agreement. And the (unclear) of the parties in entering into the agreement was that at the end of the five-year period, the rent would be at whatever level it works out to under the agreement, and that would be the rent as we proceed after April 1st, 1993. The owner at that time could come in and apply for another increase if he could show that he was somehow entitled to it or the parties could enter into another agreement or a long-term lease would be entered into. The California Civil Code, when it talks about the expiration of long-term agreements, specifically states that the rent at the end of the period, unless a new agreement is entered into, shall be the rent during the last month of that agreement, and that was clearly and unquestionably the intent of the parties. RW Mr. Erwood, do you agree with that? RE Well, as I indicated, either party would have the right at the end to come back before this board requesting either that the rents be. . .that the rents were in excess of what the ordinance provides because of subsequent events or not. Either party has the right to file a petition for interpretation with respect to any activity that's going on. So once the agreement lapses, they would surely have that opportunity if they felt that because of, you know, one thing or another. . . 11 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * AR I would also. . .excuse me. . . RE . . .that the rent was maybe in excess of what it should be because of changed circumstances. AR I would just point out in the stipulation, you'll see how we broke down the costs, and you can see that there's no possible way that after only five years, these capital improvements could be paid off. The sewer expense itself was a 20-year amortization under the ordinance, and it would simply be impossible to recover even half of that cost in the five-year period under the rent increase that we have now. Unless it extended into the future, the agreement really doesn't get us anywhere in terms of recovering the costs of those capital improvements. Do you follow me? RW I follow you. AR Okay. RW Does the Commission have any other questions? RE Chairman White, I do have an issue that I think, because of what Mr. Rodriguez has brought up, he'll have to bring before you. Paragraph 20 of the agreement that I was referring to indicates that this agreement, that is the agreement that I've been referring to, is the entire agreement between the parties. I only bring that up because I don't see any reference to the stipulation in that agreement. That stipulation did occur in the past, but since it's not referenced, it wasn't referenced in this agreement, I did not take that as being a part and parcel of this agreement. AR I can comment on that (unclear) the last page that says this stipulation will remain in effect basically until the final outcome, and it's intended to be temporary. RE That's still the way I interpreted it. We've had further proceedings, so I just didn't want that issue to somehow come up later on down the line without everybody being aware of that ambiguity. WT So if the agreement, then, should be adopted, that stipulation would not be in effect. Did I follow that correctly? RE That is correct. RW Okay, do we have any other questions, comments? WT I'm concerned about that 17% and what we do with them. Mr. City Attorney, you recommend that we include them, if we approve the whole agreement, that we bind them by the same terms? DJE Effectively, yes, as those terms basically apply to the rent schedules. JMB And what is their alternative, if they're not. Do they still. . . 12 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * DJE Their alternative, I think, if the Board or Commission does not do that and is not willing to accept the recommendation that is a fair rent and wishes further hearings with regard to the application for the rent increase, I think as to that 17% it should go back to the hearing officer for further proceedings to determine specifically what the rent should be. WT And after such hearings, we well might come back with a higher figure than the agreement provides. DJE I think that's a good possibility. JA I think that since they're not a party to the action, and if they don't want to be a party to it, then they would take that risk. And that would be the way it goes. DJE That's correct. JA And then Mr. Rodriguez would have to come in with a hardship, as he has done, petition for rent increase and provide some numbers as I see back here, and not get involved in the agreement between the people that have already signed the agreement, I want to call that a contract, and not have the 17% be bound by the agreement. ?? What do we do with the evidence submitted? JA The agreement is between the people who have signed, the mobilehome park owners, and the people who have agreed to be bound by it. That's the way I understand it. I don't see the 17% having had a voice, there's an opportunity, but if they're not bound by it, then they are protected by the ordinance. AR Right, and we have submitted our petition justifying an increase far in excess of that, so we would request a ruling on that application. JA That's fine. I would want to talk to the Commissioners about it again, and that would postpone that. DJE If I could interrupt, I think the hearing officer's recommendation is based upon everything that he has before him now. His recommendation is one you recognize the 178 subject to the agreement and take no action other than to ratify that. With regard to the other 17%, his recommendation, I believe, is to maintain equality as they should have the same rent schedule over the same periods of time. If the Commission does not agree with that and wishes further proceedings, I would suggest it go back to the hearing officer for further hearing as to the 17%because I think effectively that is his recommendation with regard to the other 17% based on what he has before him and obviously taking into consideration the existence of the agreement with 178 people trying to maintain some equality. PC I have a question. RW Mr. Collins. PC At the meeting prior to this one, not before the Board but before the hearing officer and attorneys and whoever was here, Attorney Erwood said that this could 13 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * not be amended. That was his statement, that this agreement could not be amended. Now you're attempting to amend it, and if it can be amended in one part, I am suggesting it could be amended in several parts. I'm not here to tear something up, but I'd like to see something put together that would give us some benefits. And so now, can you or can't you amend this? And if you can amend it, then it should be clear as to how long this is going to be, how long this money we're going to have to be paying out. He's supposed to amortize it over 20 years. Well, that's a hypothetical figure or a figure that he's (unclear) to show into it. You take it over 20 years and you'll find out that you can build sewers in three parks over that length of time and the roads too. Something's running off the track some way, I don't know what, but if you can amend part of it, tell my why you can't amend other parts. RW As I understand it, I think the reason that the recommendation was made to delete the opt out procedure was that that was inconsistent with the statute. Is that correct, Mr. Erwood? RE That is correct. RW And all of the other conditions within the agreement are consistent with the statute? RE That is correct. RW There is one hand back here. Yes, ma'am, if you would like to approach the podium and state you name, please. W Mr. Chairman and members of the Council, Mayor Benson, ladies and gentlemen. My name is Ruth Wallis, and I live at 27 Flying F Drive, Silver Spur Mobilehome. I'd like to go back just a few years. I can understand why it's difficult for new owners coming into the park to understand all the problems that we've faced over quite a few years. I've lived in Silver Spur for eight years. In 1981, through the (unclear) , we formed what we called an Area Three Council. When I say "we", we had representatives from all of the other parks. There are three other parks that pay rent on the land. I think you're familiar with them. It took us three years of meetings, stating all the facts, all the rents that had been paid for the last five years, to get to the City Council in the hopes that they would approve a rent control. And this happened in July of '83 for a three-year period as a trial basis. After the three years were up, it was extended into, we hoped, eternity. Anyway, I think the bottom line here, really and truly, is that we, the people in the park, the majority, who are familiar with the hardship cases, do not want to go through a lot of hardship cases, and we felt that we would have peace of mind for the next five years. We know that if a hardship case comes up, that we will be paying more. We're in a very desirable area, and we enjoy it. The people in the park really like the park, and we have wonderful people there and good thinkers. That's it. Okay? RW Thank you, ma'am. AR I don't know what you intend to do with the 17%, but I have a couple of last comments on that. One is, or even questions, do you recognize under Burkenfeld vs. City of Berkeley that the burden has in fact shifted to those in the minority 14 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * position? And if you do, there is absolutely no evidence to contradict the application that was submitted on June 30th, 1987, that requested rents of approxiamtely $290.00, and I believe that those 17% must be subject to that rent increase. There's absolutely no evidence to contradict anything that's there. My next question is -- why did we have the election? The election has been completely forgotten at this hearing today, and we've only talked about the contract. But we did have an election that was approved by two-thirds of the people who actually voted. That's all the more evidence that this agreement should be accepted with respect to everybody. The election is completely disregarded, it seems to be a futile gesture and just a complete waste of time. And finally, with respect to the 17%, I don't know and maybe you know, but isn't it possible that of those 17%, some of those people voted. Although they never signed the agreement, they may have voted in approval of the agreement, and I don't believe that that issue has ever been addressed either. And I would really appreciate some response on each of these issues because I think my client has a right to know where the board stands. RE Could I interrupt for just a second. The reason, I think it's obvious, why the election was required is because the typewritten list of clients that Attorney Joan Baumgarten had submitted was drawn into question when on that list of clients we saw name of people who had filed a petition in opposition saying they didn't want that agr ement. And we did not have the signatures. So, although Mr. Rodrigue has characterized it as a waste of time, that documentation was not put forth by Joan Baumgarten, and I believe it was requested through the City Clerk's fice to provide us with that information, and all we received was the typewritten list. So, it's basically, I think, at least as far as that one issue, there was nothing the City could have done to in any way rectify that situation, because that was just basically a failure of establishing who in fact had entered into the agreement by preponderance of the evidence. AR Well, I believe that at the last hearing before the full board, we volunteered to obtain those signatures and provide them, and that proposal was rejected in favor of the election as if the election would settle the issue. I don't see the correlation between the election and the signatures. If you want to know if the signatures are valid, you should try and get the signatures. If you want to have an election, have an election. We have both now. We have the signatures, and we have the results of the election. I don't see what the point is of going another round of proceedings. It's becoming very, very expensive for the parties involved to continue on like this, and I don't really know what it is that you're looking for. You know, we have uncontradicted evidence, we have the signatures, and we have the election. There's really not much more that we can do. You know, we have opposition, there's no question that we have opposition, and that's fine. But we can't let a couple of people make us keep coming down here (unclear) and going to a full blown proceeding, and the Supreme Court has specifically said that in Burkenfeld. RW Any other questions? Thank you. At this time, unless there's someone else who has not spoken, I'm going to close the meeting to further oral communications other than with the City staff, and I'd like to discuss the issue. Do you have any comments about what we've heard so far, Commissioners? WT I'm prepared to. . . 15 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ?? One comment please. . . RW Excuse me, sir. I have closed the meeting to open communication. Yes, ma'am. WT I'm prepared to make a motion, Mr. Chairman, but I would like to do it in two parts, two separate motions, because I'm not quite sure how we're going to go on the second part of this. And I believe we may be able to agree on the first part. I make a motion to approve the recommendation of the hearing officer and the City Attorney and ratify the agreement, with the exception of paragraph 18 pertaining the tenant opt out procedure. That's my motion. RW Okay, is there a second to that motion? JA I'll second. RW Alright. Now, perhaps we can discuss what that motion includes. Are you suggesting that that motion would include all of the tenants in the park, or are you suggesting that that would be simply the 83% who have agreed to the agreement? WT Those who have signed the agreement is the intent of my motion. That's why I reserve the right for a second motion on the 17%. RW Okay. Before I ask for a vote on that, I would like to ask what your thought was about the 17%. WT I have changed my thought three different times already, I think, at this meeting, depending on who spoke last, probably. I do believe, and my second motion would be this, although we can include it in this one if you wish, that it is to the benefit of everyone in the park to have the same terms. Those 17% who have not signed this agreement are going to find that they may wind up paying a heck of a lot more than they would if they are included under the same terms. And they would have the burden of proof of coming and requesting another hearing on it. I don't think they want to go through it. I doubt whether the rest of us want to go through it. We'll do it if you insist, but my opinion now is that the same rent schedule should apply to all the tenants over the same period of time. RW Do you have any comment about that? JA And at the end of the five years when the agreement expires there will be no reversion of rents to the previous level, they'll be at that level, and then they would come before us again with a petition for hardship rent increase? RW That is a possibility, or either party could come before us with a petition for interpretation of the statute or a proposed course of conduct. JA Okay. That would be fine if (unclear) the $200 plus was legitimate and you just might find that the other 17% not having signed it, there was a flip side of your comment to (unclear) , they may have voted, they may not have voted. I don't know, and if they want it, if you came before us with some figures and they're legitimate, and you were entitled to a hardship rent increase (unclear) CPI 16 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * formula has been worked out and net operating income, and ended up paying more money, that would be. . .I don't know why they're not here, basically. RW I'd like to ask one question, either of the City Attorney or of the hearing officer, and please jump in, gentlemen. Are you satisfied that the 17% of the tenants who did not sign the agreement would be better off in the long run if we were to ratify the agreement with respect to all of the homeowners, or would they be better off if we were not to ratify the agreement with respect to the 17%? DE Responding only for myself, I believe they would be better off if you were to ratify the agreement. RE As I indicated previously, initially the request was for $58.00 per month plus increase based upon the expenses. It has been my experience that when an increase like that is asked for and a petition is filed, which has the underlying basis to support that, that there is a substantial danger that when the time come for the owner to submit his proof, if any further proof is necessary, that he will be able to carry that burden of proof and the rent increase will be a higher one than the one that's proposed by this agreement. The one that's proposed by this agreement initially started off at approximately half of what this petition the park owner is claiming is justified. He has copies of documentation with respect to bills and estimates that have already been provided. Unless somebody can show that these are the product of some fraud or collusion or something like that, then the issue just boils down to what period do we amortize it over and that's basically it, especially on a capital expenditure of this size and of this nature. You know, I can see that it's going to be very difficult for anyone to attack the proof that the park owner's going to be able to muster in this instance. RW And you have already suggested to us that the evidence at this point, at least the prima facie evidence, is sufficient to support the increase. RE Yes, he's filed a verified petition and although this is slightly different than the ordinance for the City of Indio, it indicates that all he must do is have in the petition sufficient detail to establish those expenses, that you could basically just, if you desire, just render your decision based upon the documentation that he further submitted. And we have had. . .although the people that are opposing it now I don't think have been probably tuned in to the petition as much as they should have because they were more concerned about the specifics of the agreement. Still, it's going to be very hard for them to attack the documentation that he's already provided, and sure you can cause him to bring in the cancelled checks, but. . . DP Could I ask a question of the Hearing Officer. Is the request in the petition for one year for $58.00 increase, hardship, or numbers in that range? RE I believe that's correct. Let me just. . .not less than $58.54 per month, and there's a letter dated June 30, 1987 which breaks down the cost as to the different. . .how the different portions of the costs are allocated. And then, of course, there's. . .you probably have in your packet the petition itself and then there's the documentation in support of that petition which you've got cancelled checks, you've got documents from contractors as to the cost of the construction, when payment is due, what specifically they're going to do for that. And this was 17 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * all initially submitted prior to myself ever seeing any sort of an agreement between the parties. And I did review this prior to the parties getting together, and then when they got together I related back from the agreement to what was initially submitted, and that's the reason I recommended the agreement. DP Could they request, could the owner, if granted a hardship increase this year, come back next year and ask for another hardship rent increase? RE As far as the 17%? DP Yes, if they didn't go along with the agreement. RE If the. . .that's true. Each year, the park owner's entitled to bring a petition for a hardship rent increase. DP And under the agreement, how much is the increase in the first year? RE Well, it's. . .I forget how much, it goes from April 1st, I think there's a formula, three-quarters of the CPI or something of that nature, but actually $30.00 from October to this date, but. . . DP That includes the $20.00? RE Yes. DP That included the original $20.00, and then is there an increase then under the agreement during the subsequent years? RE Yes. Some years there is a CPI, it's based on CPI, with no minimum and no maximum, and in like the years 1989 and 1991 there's a minimum of a $15.00 increase and a not more than a $25.00 increase, regardless of what the Consumer Price Index does. So if you did have an abnormal year, the residents would be protected because they know that their rent, excuse me, they know that their rent can't increase above a certain figure. DP Based on that information, just to answer the question, I believe that the agreement sounds like it's a good idea. It would avoid the creation of two classes of tenants in the park, it would stabilize the rents for a period of five years, and it also appears to me that under the agreement, the possibility of a rental increase in excess of the amounts called for in the agreement would be avoided. RW Thank you. It seems to me also that. . .I would agree with what Mr. Phillips has said, and it seems to me that although this Commission should not be in the occupation of trying to put itself out of business, we should definitely support any kind of agreements that parties can come to between themselves and among themselves in order to avoid the type of conflicts that we have been seeing in some of these cases. For that reason, I think I would support the motion which has been made, and I would call for, unless there is some more discussion. WT Could I amend my original motion to include that to maintain equity, the same rent schedule should apply to all tenants over the same period of time. 18 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING DULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RW I believe you did that. WT Alright, I wasn't certain I did. Is that alright with the seconder? JA Absolutely. WT Fine. RW At this point I think it would be, unless there is more discussion. . . JA Just one quick question, if I could. Does that 17% have recourse, I mean once the decision is made within the next 30 days, is that how the procedure works, do they recourse to come back and. . . RE I think it's judicial recourse after that. JA Judicial. Okay. RE In other words, your decision as far as the administrative hearing is final. And then they would have the right to take it to, I believe, the Superior Court in this County. DP It would be a petition for a writ of mandate in the Superior Court. RW Thank you. Okay, unless there are other questions, I am going to call for the vote. And perhaps we could make this a roll call. MPF Commissioner Abondondola. JA Present. Oh, aye. MPF Commissioner Tucker. WT Aye. MPF Chairman White. RW Aye. MPF The motion carries by unanimous vote. RW Okay, are there. . . WT Mr. Chairman, could I make a comment? RW Yes. WT I'd like to join you in your comment on the agreement itself, the idea of the tenants and the homeowner, the property owner. . .the homeowners and the property owner, reaching an agreement like this is an excellent one, and I commend you all for your willingness to reach that point where we are able to say, gladly, we 19 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JULY 8, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ratify the agreement and we believe you have done a good job protecting your rights and your rights, and we're happy with it. RW Motion to adjourn. JA Second. RW All in favor. NOTE: All voted in favor. RW Let's go home. V. ORAL COMMUNICATIONS None VI. ADJOURNMENT Upon motion by Chairman White, second by Commissioner Abondondola, and unanimous vote of the Rent Review Commission, the meeting was adjourned at 4:35 p.m. RESPECTFULLY SUBMITTED, C MARY P. AZIER, SECR ARY 20