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HomeMy WebLinkAbout1988-06-20 RRC Minutes MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING MONDAY, JUNE 20, 1988 4:00 P.M. - CIVIC CENTER COUNCIL CHAMBER * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * I. CALL TO ORDER Chairman White convened the meeting at 4:00 p.m. II. PLEDGE OF ALLEGIANCE III. ROLL CALL Present: Commissioner Joe Abbondondola Commissioner Mike Isbell Commissioner Wanda Tucker Commissioner Joyce Wade-Maltais Commissioner Randall White Also Present: Sheila R. Gilligan, City Clerk/Public Information Officer Mary P. Frazier, Deputy City Clerk Doug Phillips, Deputy City Attorney Rick Erwood, Hearing Officer IV. INTRODUCTION OF NEW RENT REVIEW COMMISSIONER JOE ABBONDONDOLA AND ADMINISTERING OF THE OATH OF OFFICE Chairman White introduced the new Rent Review Commissioner Mr. Joe Abbondondola, Deputy City Clerk Mary Frazier administered the oath of office. V. NEW BUSINESS A. DETERMINATION OF TERMS OF OFFICE FOR RENT REVIEW COMMISSIONERS. Chairman White reviewed the staff report, noting that the recommendation was that the terms of Joyce Wade-Maltais and Wanda Tucker would expire in January, 1990; the term of Joe Abbondondola, who was filling a vacancy created by the resignation of Sabby Jonathan, would expire in January, 1989, as would the term of Michael Isbell; and the term of Randall White would expire in January, 1991. Commissioner Tucker moved to, by Minute Motion, approve the recommendation as outlined by Chairman White. Motion was seconded by Commissioner Isbell and carried by unanimous vote. MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * B. APPEAL OF HEARING OFFICER'S RECOMMENDATION RELATIVE TO PETITION FOR INTERPRETATION FILED BY THE OWNER OF PORTOLA PALMS MOBILE HOME PARK REQUESTING $47.80 PER MONTH PER SPACE INCREASE. KEY RE RICK ERWOOD, HEARING OFFICER RW RANDALL WHITE, RENT REVIEW COMMISSION CHAIRMAN MI MIKE ISBELL, RENT REVIEW COMMISSIONER JA JOE ABBONDONDOLA, RENT REVIEW COMMISSIONER WT WANDA TUCKER, RENT REVIEW COMMISSIONER JWM JOYCE WADE-MALTAIS, RENT REVIEW COMMISSIONER DP DOUG PHILLIPS, DEPUTY CITY ATTORNEY MPF MARY P. FRAZIER, SECRETARY TO THE RENT REVIEW COMMISSION SRG SHEILA R. GILLIGAN, CITY CLERK LH LARRY HORWITZ, ATTORNEY FOR THE PARK OWNER WM WILLIAM MESSICK, RESIDENT R MR. ROCKWELL, RESIDENT JL JANET LANE, RESIDENT RW Our second order of business has to do with the appeal of the hearing officer's recommendation relative to the petition for interpretation which was filed by the owner of Portola Palms Mobilehome Park in which it was requested that a $47.80 per month per space increase be granted. The recommendation of the hearing officer is contained in his report. Perhaps it would be best at this point to hear from the hearing officer as to the contents of that recommendation. Mr. Erwood. RE Mr. Chairman and members of the Commission. Basically, the reason we're here is that the representative of the park owner filed a petition for interpretation of the Palm Desert Rent Review Ordinance, specifically referring to the issue of a proposed addition of sewers to the park and the rent that might be increased based upon that construction. There is in your packet I believe, besides my report, copies of correspondence between the City Attorney Mr. Phillips and Mr. Horwitz with respect to allowing the letter to serve as notice so a public hearing could be scheduled with respect to those items. The public hearing was held of February 29, 1988, in which testimony was taken. Initially the applicant presented one bid to myself with respect to the cost of construction. There was also evidence that there was a loan commitment of $500,000 for five years at 12% which they wanted to include and use to set the term over which the capital expenditure would be recouped by the park owner. Mr. Horwitz proposed increasing rents either in two or three phases, first to occur within six months of the groundbreaking, second to occur upon completion of the project or one year from the previous increase. After hearing some testimony from the homeowners, it became apparent that not all the evidence that was necessary had been presented. And by that, I mean apparently there is a cost savings that will occur if the sewer construction is completed. The septic tanks that are used in this park have over the years been more and more expensive to operate, and I believe the last year, 1987, the maintenance of those septic tanks was around $20,000. There was an issue of whether or not how much that offset should be. Obviously, the homeowners felt 2 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * that any savings that the park owner received by this construction they should be given some credit for. There was also an issue with respect to whether or not I was bound to accept the only bid that was submitted by the applicant. The applicant submitted one bid, and when I questioned that he indicated to me that he felt that the hearing officer did not have really any business inquiring into who was going to do the construction. I then requested that counsel provide me with five, I believe it was five, bids because I felt based upon my interpretation of the ordinance, which requires me to make a determination as to whether or not the expenses are reasonable, that the only way I can make that determination is if the applicant submits more than one bid. And that was done later. I also requested records for five years with respect to the septic tank upkeep costs in order somehow to make a determination from that with respect to the cost savings that would appear to be reasonable based upon what had happened in the past once the septic tanks were eliminated. Initially, as I pointed out in my report, the applicant was requesting $81.36, and then it went to, on March 14, it was a request for $38.30 per space per month, and on March 23rd it was raised to $47.80 per space per month based upon the fact that apparently there is a Coachella Valley Water District monthly fee that had not been included. After conclusion of the hearing, I asked counsel and representatives of the homeowners to submit the evidence they wished further with respect to the bid. I received those from the representative of the park owner, and I also received one bid from a representative of the homeowners. After examining this case, I determined that there were a certain number of issues that were presented by this application. One of the things that, after looking at all the bids, began to trouble me was whether or not a park owner can pass the cost of construction of a capital improvement directly through to the homeowners without using the Net Operating Income theory, which is basically the foundation for our rent control ordinance. So that was the first issue that I indicated I felt was presented by the application. I also addressed in my determination whether or not the park owner could use a method other than the Net Operating Income method to calculate any increase in rents. The third issue was what period of amortization should be used for an improvement of this type. The fourth issue was in what situation should a park owner be required to file a petition for hardship rent increase. The fifth issue - what effect does the financing have on the period of amortization. Sixth - if the cost is passed on to the homeowners, how should the rents be increased and should it be done in phases, is that permitted by the ordinance? Seventh was what method should be used to calculate the savings by the elimination of the septic tanks and how that should be reflected in the calculation of any rent increase. And issue eight was what bids should be used in calculating the costs of the sewers. Initially, I pointed out that there was really only one method in our ordinance for calculating any rent increase, and that's by using the Net Operating Income method. There is a provision in the ordinance which allows an individual to file a petition for interpretation. In reading the statute as a whole, that would appear to apply only ,to those general issues as to whether or not a certain course of conduct is permissible, not how much should be charged to the homeowners and how much of the cost should be borne by the park owner. 3 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * As I go on, I just want to emphasize one thing. The Net Operating Income method that is used by the City of Palm Desert is used to assure two things: one, that increased costs are not directly and totally passed on to the homeowners; and two, to give the park owner a fair rate of return on his investment. So, bearing that in mind, I went through and looked at this case. The applicant wished to write this improvement off over a period of twelve years; that is, be fully amortized over twelve years. The ordinance basically says that where capital expenditures proposed for the perspective year that is to be paid through financing, the amortization of such expenditure may reflect the terms of such financing. Since the word "may" is used rather than "shall", I felt that that was merely directory language and, therefore, it gave me the power to, or the discretion, to either have the terms of the financing reflected in the amortization schedule or not, and as you can see, the bottom line of my report was that it should not. With the ordinance are some guidelines that the City of Palm Desert has enacted, and with those guidelines are certain amortization periods. And it was my feeling that those periods should be used. The applicant lumped together the cost of the sewer construction and the cost of repairing the roads and things of that nature. Roads and streets have a different useful life than sewer systems, they have a different amortization schedule according to the guidelines. So I indicated in my report that thei guidelines should be followed in this instance, with some allowance with respect to the total cost when you add in the interest and things of that nature. After looking at the issues presented, I determined the following facts: one, that all the bids that the park owner has submitted appear to be reasonable bids for that type of work, that there's nothing in the ordinance to prohibit rent increases in phases, tied in with the period of construction. I also determined that the park owner should be allowed to increase rent charged for a capital improvement provided that it is necessary to provide him with a fair rate of return on his investment. And that goes back, of course, to the Net Operating Income theory and really requires that that be used. I think that is pretty much a summary of what my determination was. My last comment was that I felt a hardship petition should be filed in this matter. There is probably one other way to approach it. Regardless of what you call it, I think the evidence before you, if you take that in light of the way our ordinance reads, you will see that the evidence is insufficient for the park owner to carry his burden of proof in establishing how much of the cost of this improvement should be passed on to the homeowners. By that I mean, the ordinance requires that the applicant establish by a preponderance of the evidence that he is entitled to have his rent increased. All that has been submitted to me, and I believe all that will be submitted to you, is the cost of one capital improvement. There is nothing to show you whether or not the Net Operating Income that the owner is receiving from this park has actually increased since the base year established. There were no figures for the Consumer Price Index submitted to give some guidelines as to how much of the cost should be passed on to the homeowners. I think it bears emphasis that when you do a hardship rent increase, you take a 50% figure of the CPI basically, the difference in the CPI and then take 50% of that to get your calculation. And that, of course, is not done in this case. The representative of the applicant has written a letter with respect to my recommendation. And I am referring to the letter of May 13, 1988. There is a 4 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING DUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * misquote with respect to the first page of that, subparagraph 4, where the applicant has indicated I established what the appropriate period should be for amortization of the streets. When I was talking with, I believe it was Mr. Coldren, and Mr. Horwitz might have been on a speaker phone or I might have been talking to Mr. Horwitz, I can't remember, the question of what period should be used for these two items was brought up. I indicated that I thought sewers was a 25 year period but that I didn't have a specific recollection with respect to what the period of useful life the roads and the paving would be. And I didn't have the ordinance in front of me so I could not make that determination, but I indicated the guidelines should be followed. In his letter, he has indicated that I had said the ten year period should be used, and that simply is not the case. He also indicated that the City should, because of representations I believe of myself and Mr. Phillips, that the City should be estopped from doing anything further with this application other than to suggest you pass on to the homeowners the cost of the capital improvement. I think regardless, and I'll speak for myself, regardless of what representations that I made to the applicant, the purpose of the ordinance, of course, is to control rents in mobilehome parks because of the nature of that type of land ownership. The ordinance was not passed for either the City's benefit or the hearing officer's benefit, but it was passed for the homeowners' benefit. So with respect to the estoppel issue that he has now raised, I would just like to point out that I don't think it's appropriate since the hearing officer does not represent any side in this matter. And the people who own property in the park have a right to not be estopped from asserting the benefits under the ordinance by what one City official might have done. And that concludes my report. RW Thank you, Mr. Erwood. It appears that I neglected to have the Clerk call the roll. Perhaps we could do that at this time. MPF Commissioner Isbell. MI Present. MPF Commissioner Abbondondola. JA Present. MPF Commissioner Tucker. WT Present. MPF Vice Chairman Wade-Maltais. JWM Present. MPF Chairman White. RW Present. Okay, now, do the Commissioners have any questions or comments for Mr. Erwood before we move on? MI One quick one, Mr. Erwood. Did you find out the actual life of the sewer system itself? 5 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RE I believe it's, well, the guidelines indicate 25 years. I believe the streets are 10. MI Okay. DP Mr. Chairman, (unclear) to add to Mr. Erwood's report. RW Certainly. DP Is now a proper time to do that? RW Let me ask a couple more questions of Mr. Erwood, and then we'll get back to Mr. Phillips. I wanted to ask a question. With respect to the statement that you made, Mr. Erwood, in your conclusion, number five on the seventh page of your report, you say that the park owner shall be allowed to add to his cost of the capital improvement the interest he could have earned investing his money elsewhere for the period after the loan is paid but before the improvement has been fully depreciated. My question to you is, does that provide an additional benefit to the owner of the park which is something not contained within our guidelines? RE It has been done in the past, not necessarily with sewer expense specifically, but with items that are probably more, maybe more discretionary with the park owner. It has been done to encourage a capital expenditure rather than have the park owner put his money in some other area rather than attempting to improve the park. So it's basically to encourage the investment of any monies that they have into the park rather than letting the park run down and just investing in some other thing to get a return on the money. And that's, historically park owners have brought up the issue and indicated sometimes a reluctance to invest further on those discretionary improvements without that. RW Okay. Are there other questions, comments? Let me ask one more thing. I understand that the costs which have been presented to you are merely estimates by the persons who have provided those figures, is that correct or am I merely assuming that? RE I believe they're just estimates. I think the applicant probably has more information as to how binding those bids are. There is one point I neglected to bring out, and I should. The park owner proposed that, on the one bid that was initially submitted at the public hearing, that they would use that figure and that if there was a cost overrun, that the homeowners would not have to pay the excess in rent. RW But the figure that was being proposed was a figure which would be selected by the park owner? RE Well, I think the park owner has the right to pick the individual he wishes to do the work. However, since we're talking about. . .my duty as a hearing officer requires me to determine whether or not the costs are reasonable. I have to look at more than one bid and see if he is exercising what appears to be good judgment and making a reasonable expense because one of the things the ordinance is designed to protect against is a park owner making unreasonable expenses just to be entitled to an increase in rents which thereby inflates the value of his 6 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * property. And so that's why you have to look at more than one bid, at least I felt that way. RW That brings me to the second phase of this question. I said it was only one question, but this is "b". The decrease in the amount of maintenance expense that you mentioned in your report, is that a decrease which has been calculated on the basis of the last year of operation, that being 1987, and if so, is that a fair judgment in that you stated earlier that the expenses were increasing for the maintenance of the existing sewer system, or the existing septic tank system. RE I originally thought that perhaps I should take the average of the last five years, but then I noticed that the costs had increased to quite a bit. And as a matter of fact, I believe that the last year, 1987, it was approximately $20,000. It is the type of expense that I think is hard to predict how much more it will go up. I am sure that based upon the last I think four years of figures that I received, that it would increase again, I don't know how much. Rather than pick some arbitrary figure out of the air, I thought that the '87 costs should be used to calculate the savings that would occur by the elimination of the septic tanks. RW Anyone have any other questions or comments? Mr. Phillips. DP Mr. Chairman and Members of the Board, I just briefly wanted to cover with you one of the points on the appeal, which is an estoppel argument. That simply means that the City is not permitted to take a course of action different than what the City, through its officers or agents, took in the past. And here's how it relates, the argument, relates to this question. The applicant is arguing that the City is estopped to deny a rent increase because of certain statements either made person to person or in letters or in correspondence between the applicant's lawyer, Mr. Erwood, and myself. What the applicant is saying is that at some point, Mr. Erwood and myself agreed that the proper procedure to obtain a hardship rent increase could be the petition for interpretation, and as a result, the applicant is now appealing the decision of Mr. Erwood, which is that, no, the way to get a hardship rent increase in the City of Palm Desert under our ordinance and guidelines is to file just that, a petition for hardship rent increase. The applicant, in his letter which I just received today, dated June 14, states in part "Attached hereto as Exhibit "C" is my firm's correspondence dated December 22, 1987." I'm looking now at (unclear) page 3, so you can see where I'm at. Are you with me? Going on then with the paragraph, it states "In summary, this correspondence confirms the fact that both Mr. Erwood and Mr. Phillips had indicated prior to our filing our petition for interpretation that such a petition would be the appropriate procedural mechanism to obtain the proposed rent increase." And, if I look at the letter that he is referring to as Exhibit "C", that is a letter dated December 22, 1987, and it, in fact, and I believe correctly, summarizes the discussion or discussions that I participated in. And the first reference to these discussions is found on page 1 in the paragraph that begins with the following words: "On December 21, 1987, Larry Horwitz of this office contacted Rick Erwood and Doug Phillips of the City of Palm Desert." Now, here's the important part: "Both Mr. Erwood and Mr. Phillips indicated that if our firm submitted, on behalf of our client, a petition for interpretation (Mobilehome Park Rent Review Board) and a brief statement of facts giving rise to the petition, this would be sufficient to allow the hearing officer to schedule a hearing date to review the items contained in the petition." Then, looking on in the letter, at the 7 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * last page, at the top of the last page, it states, and this is now page 3 of the letter dated December 22, 1987, it states, in part: "As Mr. Phillips and Mr. Erwood have previously indicated, the above is sufficient to allow us to: 1) Send notices to the park tenants regarding the filing of this petition. Both Mr. Phillips and Naomi of the City Clerk's Office have indicated that our sending a copy of the petition with this letter will be sufficient to comply with the applicable ordinance and guidelines; and 2) obtain a hearing date before Mr. Erwood as hearing officer of the Rent Review Board. Mr. Erwood has indicated that this date is typically 30 days after the 20-day waiting period required by the ordinance, approximately 50 days from the date of this letter." Now, and then a copy of the letter of course went to me. And this letter correctly states, I believe, what I said. My review of this letter, though, is a far cry from my indicating as the appellant now states that a petition for interpretation is a proper mechanism for requesting and obtaining a hardship rent increase, when in fact what we indicated was that the letter was sufficient to cause the City to schedule a hearing on a petition for interpretation. And under the Code, Section 9.50.070(b), a petition for interpretation permitted the City to interpret the ordinance and determine whether a particular course of action, either proposed or actual, is legal, valid, and within the terms of the ordinance. And that is precisely what Mr. Erwood has done. There are other sections, of course, of our ordinance and guidelines which deal with a separate issue, that being the question of whether a hardship rent increase is permissible and under what amount. The reason why a petition for interpretation is different than a petition for hardship rent increase is, of course, that many other factors are considered by the hearing officer and this Commission in determining whether to grant a hardship rent increase than what you would consider in this case with respect to this proposed capital improvement. And that is precisely what Mr. Erwood has said, and that is "I need a lot more information to determine in context of all the other factors that would be applicable whether or not your petition for hardship increase is to be granted and, if so, in what amount. So, to summarize then. I believe Mr. Horwitz's letter of December 22, 1987, is clear by its own terms that neither Mr. Erwood nor I indicated that a petition for interpretation was sufficient as a procedure for the hearing officer of this Board to consider and then grant a hardship rent increase. Second, the ordinance itself makes a great distinction between a petition for hardship rent increase and the all procedures apply, on the one hand, as opposed to a mere petition for interpretation. All we have before us now is a recommendation from our hearing officer with respect to a petition for interpretation. That's all I have. RW I have one question concerning the estoppel issue. DP Yes. RW Does the hearing officer or the City Attorney's Office have any legal right to bind this Commission to any particular course of action? DP We don't believe so in terms of our discussions with applicants on the telephone. For example, if we are incorrect in our statements with respect to the City's position or contrary to our ordinances, contrary to law, and therefore contrary 8 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * to public policy, even if those statements were made, I don't believe that they bind this Commission. Does that answer your question? RW Yes, sir. Thank you. Any other questions of Mr. Phillips? I think it would perhaps be appropriate at this time, if there is no objection, to hear from the applicant, and I think we have agreed, have we not, that we are limiting comments from the floor to five minute statements? Haven't we agreed to that? WT Not just one five-minute statement, Mr. White. I'm sure there are more than one person out there who would like to be heard. RW Five minutes per person, right. LH I would like to question your limiting, I'm a little bit hoarse here, you're limiting the comments from the applicant to five minutes? RW If you could please state your name, sir. LH Sure, my name is Larry Horwitz. I'm with the law firm of Hart, King, and Coldren, and we represent Portola Palms Mobilehome Park, the applicant in the matter. And I guess you were saying that you're going to limit my comments to five minutes? RW What we have done in the past is limit comments from any particular individual to five minutes, so if you could make your comments succinct, that would be very helpful. LH Okay, I guess on behalf of my client and my firm, I have participated in a number of hardship hearings here in Palm Desert and other areas in the desert, and I've never heard of anything like a five-minute limit, and I'd just like to kind of issue a formal protest and surprise. WT You might point out to Mr. Horwitz, Mr. Chairman, that that action was taken by the Commission at the last hearing, it was not on this particular one, and you were not in attendance at that time. LH Thank you, ma'am. Let me kind of divide my remarks into those that I feel are not subject to the appeal today and those that are subject to the appeal. It is my understanding that the tenants, myself, and the hearing officer are all in agreement as to the following issues: one, the numbers of dollars contained in each of our estimates are reasonable and that any of those estimates are satisfactory for purposes of calculating the proposed rent increase; secondly, the notion that it really should be at the owner's discretion to select the contractor. It is also my understanding that the tenants, the park owner, and the hearing officer are in agreement there. It is also my understanding that it is acceptable to the three of us the notion that all interest, either actual or imputed, and that was I think the discussion between the Commission and the hearing officer, should also be included in the calculation. We just again ask that the Commission adopt each of those recommendations of the hearing officer and it would at least appear to me that there's no dispute as to those issues. 9 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * Now, as to those issues that are subject to the appeal, number one and obviously of most importance to us is the issue of whether the petition for interpretation is the appropriate procedural mechanism. As you can appreciate, my firm represents a client who is now extended thousands of dollars to cause us to obtain bids, to ;draft correspondence, to attend two hearings, and now if this is what we're being told is, well, guys, it's time to start over again. We kind of, you went down the wrong path the first time, now we're going to attempt to show you the right way to do it. It's our position that, and I think it's very clear in my correspondence that, one, at a very early juncture I communicated to Mr. Erwood and Mr. Phillips the procedural mechanism that we would use, number one, and number two, the calculation that I would eventually use in the form of kind of an algorithm in coming up with the eventual rent increase. At no time was it suggested that either a petition for interpretation was inappropriate or that that calculation as opposed to a full blown hardship rent increase petition was the appropriate information that would be required. And that includes prior to the hearing, at the hearing, and subsequent to the hearing. The first time I heard that a petition for interpretation might not be the appropriate mechanism was in Mr. Erwood's decision, and I guess now what I'm being asked to do is to appeal an issue that I was never allowed to address before some lower tribunal or hearing officer. I'd also like everybody to think a little bit about the purpose of a petition for interpretation because it would seem to me rather than address the issue of whether that's the appropriate procedural mechanism or not, please instead communicate with us and inform us what other information will be required for us to eventually obtain whatever rent increase we're all going to agree upon or be ordered to implement. If there is additional information that is required, it seems to me we can call it a hardship rent increase or we can call it a petition for interpretation. The purpose of the petition for interpretation, from our standpoint, and it seemed to me it made sense for the tenants and for the owner of the park, was to, prior to even breaking ground, have a complete understanding between the City, the tenants, and the owner as to what the amount of the rent increase would be and what the (unclear) would be. Now, as we're all aware, when we're talking about a hardship rent increase petition, we're talking about essentially a historical type analysis of the financial operations of the park. Well, that doesn't really make a lot of financial sense to my client for this reason; he's going to expend approximately half a million dollars, and there's going to be a lot of uncertainty there as to what the eventual rent increase will be. It would seem to me it would make more sense to get the issue resolved, prior to breaking ground, to everyone's satisfaction, and then we move forward. It makes more financial sense for my client, and it would seem to me it would make more sense in terms of certainty and comfort level for the tenants. End of discussion there. As to the amortization issue, there is. . .let me summarize a little bit the various positions. The position of Mr. Erwood in his decision is that the, I think it's an exhibit to the ordinance control, and that exhibit contains two (unclear) numbers; one, an appropriate amortization period for a sewer is 25 years. Second, the appropriate amortization period for some sort of paving is 10 years. There is also the provision that we were talking about earlier that essentially said in the case of the capital improvement, the relevant financing may control. As I've indicated in correspondence and other documentation, I basically indicated that financing 10 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * will be essentially a five-year period of time. The bottom line issue always in any amortization analysis, hardship rent increase analysis, etc. is fair and reasonable return to the property owner. If we're talking about a 25-year amortization period in terms of a rent increase but a five-year amortization period in terms of the expense side of the equation, it's very clear that the expenses are going to be bunched into a five-year period of time, the revenue is going to be spread out essentially over a 12-year and a 25-year period of time, and the eventual result will be something other than a fair and reasonable return. Lastly, as to the septic tanks, I think the record of our February 29 hearing will clearly show that there was an understanding between myself, Mr. Erwood, and the tenants that the average of that five-year period would control. And that was the number that I used in my correspondence and I believe I also indicated that in the correspondence that that was our agreement. It would again appear to be in Mr. Erwood's decision, I guess you could argue that it's arbitrary, he's chosen the '87 number because that's the highest number. We don't know if the number is going to be higher or lower. I'm ready to entertain any questions from the Board. RW Questions from the Commission? WT Wouldn't you agree, Mr. Horwitz that the cost of the septic tank maintenance is apt to go up rather than down next year? LH I don't know the answer to that. But I think historically that's the case. WT Yes, historically, it certainly is. RW Is there someone here from the respondent, am I using the right term? WM I'm the spokesman for the park and many of the tenants here may have something to say, but I have been selected as their spokesman. RW Okay, would you like to approach the lectern, sir? WM My name is William Messick, and I live in Space 22 of Portola Palms Mobilehome Park, and in the previous hearing we had on the 29th of February, the park at an association meeting asked me to be their spokesman. RW Mr. Messick, if you would please, you may certainly assume that we have all read the correspondence between you and the applicant and all the relevant documents here. WM Alright, I shall make my comments as brief as I can. Mr. Horwitz, standing up here just a couple of minutes ago, said that it was his understanding that the tenants of the park and the hearing officer, Mr. Erwood, and he, himself, had no questions concerning the passing on of the interest and the cost of the project and the financing. Mr. Horwitz, with all due respect, I don't think we ever did reach any final agreement on that and I say that really respectfully. I do think there's time when we can get together, we can meet, and I think this thing can be resolved, but I did want to clear that up with regards to what your statement was. These people here would shoot me if they thought I had lied to them and that we 11 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * had come to an agreement, and we have not. But I think the time comes when we shall. I do want to mention one more thing concerning the pass on of the savings of not having to use the septic tanks once the sewer system is put in. I had requested that the savings because the owner certainly wouldn't be using that money, the accelerated money, on septic tanks. Well, Mr. Erwood, who requested Mr. Horwitz to provide him with invoices showing the operational costs, the servicing costs, of those septic tanks over the past five years, well, it was a slight error on the part of the hearing officer. Mr. Natter, who is the owner of the park, that Mr. Horwitz represents, has not owned the mobilehome park five years as of this date. He purchased it in August of 1983; however, when the figure was used by Mr. Horwitz on what the average cost was for the annual savings on that septic tank when the savings was passed on was based on a five years, I guess that's 60 months, dividing 60 months into the invoice total and coming out with your average. Well, number one, the invoices only covered August of 1983 through November and not even December of 1987. I questioned this in the subsequent telephone call that I made to Mr. Horwitz. He then provided us with a second set of invoice figures, so we could come up with what the annual cost was to operate or service those tanks. He sent a second set which you will see in the material you have there, they're two thick items, one's the invoice the first time, the invoice the second time. When he came back the second time, he excluded the December month of 1987. The December month happened to be a very high month. Through the Health Department I learned and through the Health Department that in the first 14 days of December, there were 14 calls to the bell(sp) pumping services to come in the park and pump. There was another pumper service whose invoice was $1,200 for December; that is not in those figures. All I am asking is that since it is almost now five years, this is the end of June, it will soon be the beginning of August, that the actual service costs for those septic tanks, if you're going to use a five-year period average, get the invoices for five years, at least get them through the end of June, that will be four years and ten months, but get the actual ones. Please, I ask that and I had requested this before and we got it wrong. The idea of having to pay the interest on loan like in the last figures that Mr. Horwitz presented, he said that (unclear) financing period $24.00 of the $47.00 would be interest, $22.00 for the principal. I noticed that when the park owner goes for a hardship, he cannot include his loan principal or the interest he paid for that park to show as part of a hardship. So he has to bear the burden of that interest and he can't use what his purchase price was and his finance charges. However, in the financing of the sewer system, the attorney for the park owner is asking that the full interest be picked up by us tenants while we know at the same time that the park owner then can write that interest off as a business expense, pass on the interest to us. If he can't do it on a hardship with regards to when he financed the park to purchase it, we don't feel that the interest for the sewer system should be paid by us. We can't deduct it from our income tax and he could. I just threw these out for consideration because the people in the park have been quite concerned. First of all, we're being made to pay a capital improvement to enhance the value of the park by (unclear) because that's the price of the sewer system. The owner does not have to pay any of it; the ordinance says that the tenants have to pay for it. And then the attorney says that the park owner is entitled to a full return on his investment. Well, I would 12 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * ask the Commission (unclear) please take into consideration that capital improvements that we are being made to pay for is also a full return on the investment, a beautiful return on the investment of $500,000. To finally wrap it up, because I know we're all limited for time, the ordinance states that the hearing Commission can accept the recommendations of the hearing officer, it can amend the recommendations of the hearing officer, and this is in Ordinance 456, or it can refer it back to the hearing officer to review the situation again. These are the three responsibilities as I read it in the ordinance concerning the Commission. Our request as park tenants is that we have a full hearing on this. And I would say, surely, Mr. Horwitz, I think with the proper invoice figures and looking at an actual average of five years of figures and not four years and two months with (unclear) time, perhaps we can come to a reasonable agreement. Thank you very much to the Commission for allowing us to be heard. And there are other people in my park, whatever you want to do with them. Thank you. RW Thank you, Mr. Messick. Before you leave the podium, are there any questions for Mr. Messick? I do have a question. WM Yes. RW Do you believe, sir, that there is some common ground that you and the park owner may be able to reach a stipulated agreement between you as to what the rent increase should be? WM As long as the ordinance is interpreted that there is no question other than the fact that this entire cost has to be passed on to the park and legally that is in black and white and we can fight it, then I think it's up to us to make the price increase as low as it possibly can. You can look about you in the room here, and you can see the number of senior citizens, many of them on fixed incomes. The ordinance, in 456 in the City, the reasons you have rent control is to protect tenants from the previous abuses that had been made against them. That is so stated right in the ordinance. I really would not make any promise. I think if we sat down and came up with a figure, after we resolve this issue concerning the interest part of the situation and the total invoice costs and that, and we looked at the price, that was not astronomical. He first came to us with $82 which, you know, the morale in the park went really down to zero. And then the first hearing it came down to forty-some dollars and that. But if we had honest, accurate figures and taking into consideration such as what we are being made to pay on interest what we can't even say to the IRS as to how much interest we paid, if the Commission takes all of these things into account and the burden that is being placed on the tenants, I think the tenants all here realize that yes, sewers are in order. The reason the sewers are so bad is because of the improper maintenance that they've had over the years. But it has reached a point where we don't like the situation concerning sewers any more than they do. So we know at some point they have to be put in. So it's time that we all realize that something will have to be paid for them. The question is a reasonable thing that they can accept, all these senior citizens here. 13 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RW And you believe that in representing the tenants in the park, that there is a benefit, a substantial benefit, to the tenants in the park for a sewer system to be introduced to the park? WM Well, I've already read the findings of the Health Department, the County Health Department. I went down to the Indio Courthouse and saw it. So whether we did or we didn't, I (unclear) in the final result. And what happens if the sewers aren't installed, what would happen to the park owner with regard to fines. But other than that, yes. Is there anyone here that thinks the septic tank system is good? That's just what it is. It's a stinking septic tank system. So I think we all need it, I don't think there's any disagreement on that part. With regards to anything that if I sat down with the park owner's attorney or whatever, anything would have to then be taken to the association, to the members of the mobilehome park, the owners/tenants, and I could not promise anything. I could only advise of the benefits or the wrongs that are happening. This would certainly be very conscientiously done. RW Thank you, sir. MI I have a question of Mr. Messick. WM Yes. MI Can you give me a percentage of the mobilehome park tenants/residents that you represent with this point of view? WM We had a petition, we distributed a petition throughout the park to answer the petition of the park owner back in January or early February which (unclear) February 29 hearing. There are 140 coaches as I recall in the park. I remember the signatures which are on file with the City Clerk represented approximately 75% to 77% of the homeowners within the park, well over the 51% that was required. And the petitions were sent around, and we had a meeting in the park. They understood and knew me to be their spokesman. Prior to this meeting today we had a meeting in the park on Thursday evening to discuss the hearing of today. The people know up to this point I have been their spokesman. You see the representation here today. I would say that by the petitions that were submitted to the City, approximately 77% (unclear) going back to February now we're still dealing the same issue. I have (unclear) and I say it to them sitting right here now. Anybody wants to do it, I'm ready to step down. Okay, really, truly, sir, about 77% are the names that have been submitted, and that doesn't include the vacant homes where no one could sign the petition. RW Any other questions, comments? Thank you, sir. WM Thank you. RW Is there anyone else who would like to address the Commission? Mr. Horwitz, would you like to make a statement in rebuttal? Do you have anything to add to what you've previously said? LH The first step we took in attempting to implement the rent increase was to sit down with the tenants to discuss a number or a rent increase that would be satisfactory 14 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * to the tenants. I'm uncomfortable in stating that those discussions were never close to reaching any mutually satisfactory agreement. It might be possible, with the direction of the Commission, obtaining closure on certain issues; for example, what number of dollars in construction is reasonable; does the owner have the right to select the contractor; can all interest, imputed and actual, be passed through in the calculation; etc. If we can get some guidance from the Commission as to the resolution of those issues, it might be possible for us to sit down again and discuss it. I can say there is now a lot of time pressure, which there wasn't six months ago, in getting the entire matter resolved. And that's part of why, I guess, we're all very surprised that I'm back here again talking about procedural issues rather than number of dollars in rent increase that will allow everybody to get the stinking septic tank system out of Portola Palms. One last comment. On the notion of, again, asking us to file a full-blown hardship rent increase petition, it's my firm's position that essentially we have done that, just as to this issue. And what that means is essentially you isolate the impact on residents, you isolate the impact on expenses resulting from the construction, and you adopt the algorithm that's in my December 22nd correspondence, which it's my opinion is consistent with the NOI theory. RW May I ask you a question about that? LH Sure. RW I think that, at least my concern, in not applying the net operating income formula is that you have excluded from consideration any impact on the formula of increased revenues from other areas of the park or decreased revenues or other types of income or expenditures which may have an impact on whether it is a true hardship or not a true hardship. And I think that is what the concern of the hearing officer is, at least from what I heard him saying earlier and from the report that he prepared. And I don't know that I can speak for the rest of the Commission, but at least I have that concern. Can you address that issue? LH That issue is addressed in my June 14 correspondence, but let me review it with you briefly. It's our position that there is no impact, increase or decrease, upon gross revenues resulting from installation of the sewer system. Okay? Secondly, the only expense items that are impacted are construction costs, resulting in a rent increase, and elimination of septic tank costs, resulting in a rent decrease. And we attempted to address each of those issues in the eventual calculation which came up with the forty, whatever it is, $40 number. RW Well, what I'm suggesting is that there may be some other, I have no idea, because we don't have the figures before us, there may be some other items which have increased the revenue of the park for the park owner substantially or some items which may have somehow decreased, and we need to know about those in order to make an intelligent decision. Do you have any comment about that? LH Yeah. Number one, that information should have been requested from us six months ago, and we would have been happy to provide as best we could whatever calculation was required. We are now six months down the road. I understand that the septic tanks are becoming a greater problem, and the time pressures involved may very well not allow us to, again, obtain experts to a full-blown calculation, obtain another hearing, another 60 days, and then we need to go 15 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * before this Commission again, another 30 days. We're talking about essentially a one-year process. It's the position of my law firm that that. . .essentially some mistakes were made early on, and we don't understand why. We've attempted to be as receptive and to provide whatever information has been requested as quickly as possible. Secondly, I guess, I am comfortable in my discussions with Mr. Natter and the park accountant, etc. , that a lot of, in fact all of the items that you just referenced, either material decreases in other expense items, other than those I addressed, or material increases in revenues because we're talking about a mobilehome park. The only material increase would be rent, and the tenants here know where we are in terms of rent and in terms of timing from the last hardship rent increase. So, again, it's our position that none of the items that you just referenced would impact upon an NOI calculation. RW Unless there were more people who are now tenants than there were under previous calculations, for example. LH And it's my understanding that that's not the case, that essentially the park has been full or very near so. RW Are there any other questions, comments? WT Mr. Horwitz, when was the last hardship rent increase? LH Bill, do you know the answer to that? WM Yes. The last hardship increase occurred about two years ago, and I would like to speak on that issue for one moment. A good portion of the justification for granting the rent increase to the park owner a couple of years ago was based upon his estimates of the accelerated costs for servicing of the deteriorating septic tank system. So, based upon that, a hardship increase was given to the owner. Now, in the event that the sewer system is tied into the City sewer system, and the septic tank system is no longer used, I think we should look at the hardship increase that was given to the park owner two years, largely based on the projected accelerated increase in servicing those tanks. He got a hardship increase based on that. Now we were coming up with tieing into the City sewer system, and I think that is another issue we might want to look at. Thank you. RW Does anyone have any other questions, comments? R My name is Rockwell, I'm in #97. RW Would you approach the lectern, sir? R My name is Rockwell, and I'm in #97, Portola Palms. I believe there also was an increase for cost of living that we received. RW Yes, I'm sure that's true. Thank you, sir. WM Could I just say one thing? The question you asked before, I think I could be heard loud enough. You asked, because Larry made some remark that if there is 16 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * any question concerning other revenues it should have been brought up at an earlier date. In a very quick thumb through of the Ordinance, I cannot find it now, but I did read it earlier today, that in considering a hardship, it is in here that anything concerning revenues from washrooms, revenues from any vending machines, revenues from the telephone, would be considered as additional income to the park in balancing it against operating costs. And I did read it in the Ordinance and I wish I had more time, I'd love to read it right now. But that is taken into consideration, other revenues besides rents that are received in mobilehome parks. RW Yes, thank you. Mr. Horwitz. LH Yes, one other comment on the issue of the septic tanks. SRG Would you go to the microphone because we're not picking you up on the tape. Thank you. LH Bill was briefly referencing, I guess, the prior hardship rent increase petition which included the septic tank costs. And obviously, in our calculations, we have attempted to eliminate those costs, resulting in a reduction of the proposed increase. RW Thank you. Are there any other. . . WT There's a hand in the back. RW Yes, ma'am. JL My name is Janet Lane, I'm in #83. On this rent increase, we got one retroactive. I believe it was, like, $33.00 or something a month. Wasn't it? $33.00 a month that just came out last year. And it was retroactive for, what, three years or something like that, two years? And it came just like $200.00 or $300.00 per unit, plus interest. We had to pay interest back, too, for the two years. So what was that for? I understand it was turned down here and they went to Riverside about it. WM That retroactive increase is the same hardship that the park was granted a couple of years ago we were talking about. It was appealed, and the tenants lost in the San Bernardino Courts. Larry, I think you were there. And then they ruled in favor of the owner and backed it up and it became retroactive, that's why you're paying for it. And that's the same one I'm saying that, let's say the sewers are put in tomorrow, but he still has that hardship based upon accelerated expenses of the septic tank system that's no longer in effect. It's something else to address. (unclear) what you're questioning is actually (unclear) maybe it's only been for a year but it goes back to the previous year because that's (unclear) . RW Understood. That isn't something that is before us now. I don't want to bring up past history. Is there something else? JL One other question I wanted. Would we be guaranteed that our lots would be put back in the order, because I've heard of same cases where they leave a big hole 17 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * in the ground and the trees all over. If it was done, would we have some guarantee or bond that it would be put back in order? RW Thank you very much. Anyone else have any questions, comments? Okay. I understand from the. . .at this point, I think I'm going to close the open portion of the meeting unless there's someone else who has a comment they wish to make, and I'd like to address a question to the City Attorney. DP Ready. RW I understand, Mr. Phillips, that the hearing officer has recommended that this matter be referred for further consideration, if there is a desire by the park owner to have a hardship increase that this should be taken up under the auspices of the net operating income formula. Is that correct? DP That's right. And the recommendation of the hearing officer would be that pursuant to the petition for interpretation, certain items as reflected in his findings have been established, and that for purposes of determining the amount of increase, that those findings be incorporated into any decision that would be made. That's the purpose for the petition for interpretation. WT Could we summarize the findings that you just referred to, item number such and such and let the people know what they are also. DP Yes. I think that we reviewed them at one point, but they are found on page 7 of the hearing officer's report. RW Are those the findings which Mr. Erwood stated at the beginning of the meeting. . . DP Yes, they are. RW . . .in his report, one through eight on pages 7 and 8 of his report, is that correct? DP Correct. Those are the same. . Those are what I was just referring to. RW Thank you. I'd like to ask one question, either of Mr. Erwood or you, Mr. Phillips, concerning that. Has there been a consideration in these findings as to the matter of a prospective increase and as to the length of time that this increase would take effect? RE I'm not sure I understood the question, but. . . RW Let me divide into two, because it's really two questions. The first question is: Is this increase that we have been discussing to be a prospective increase only so that the amounts paid would be for benefits to be gained in the future? RE Well, I believe I indicated it would be permissible to phase the increase. What has been done in the past is certain guidelines have been set for certain portions of the improvement to be constructed before the rent increase goes into effect so that the homeowners are assured they are going to be getting something for their money. And so, as a matter of fact, I've required in cases in the past a certificate 18 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * of completion filed with the City before the rent increase would go into effect, and that could be done here with different phases of the construction because those are filed under penalty of perjury. And that way both sides are protected, and they both know the ground rules as to when the increase is going to go into effect. DP And it would be, I believe, prospective only. In other words, if I understood your question right, you wouldn't be going back and increasing rents back, it would increased looking into the future only. And as Mr. Erwood has stated, that could be a phased increase that would be tied in with the NOI formula and with the benefits derived by the tenants as a result of the construction. RW Okay, now the second part of that question is: I know you've already talked about the amortization period and those guidelines that you have applied. What I would like to know is: Was there some sort of a cutoff date for the rent increase inasmuch as the cost of the sewers and the financing would be paid off after a period of time. Did you establish any cutoff date or was this to be from henceforth forevermore. RE I did not establish a cutoff date with respect to this case. However, in the past, that has been my recommendation with other parks where an improvement and once it gets built and its useful life is completed, that that cost increase or that rent increase then is no longer in effect. I didn't address that issue in my report. Either I didn't think of it or thought it was premature at this point because I had not figures as to how much the rent increase was going to be in the first place. But I believe that that would be appropriate also. RW Thank you. Any other questions? DP Could I just make one final comment before the Commission. And that is if I could ask our Clerk how long would it take us if the applicant requested or filed a petition for hardship, how quickly could we set that hearing? SRG It would probably be 30 days because of the requirement for us to notify all of the tenants. We have a 15-day requirement, mailing requirement. So we would have to set the date, mail the notices, I think we couldn't cut it much shorter than that. DP We could set it, though, in approximately a month? SRG Yes. DP I believe that there has been no mistake and no misleading done. It would appear to me that the applicant chose the petition for interpretation route and was told early on, I believe, that what he would get as a result of that petition and, in fact, the ordinance states what he would get if he filed such a petition. He now has available to him an adequate administrative remedy of a petition for hardship rent increase, which would be an expeditious avenue, administrative avenue, available to him where, for once and for all, an increase in rents based on hardship which would include the findings of the hearing officer established pursuant to the petition for interpretation and the hearing could be incorporated into any findings. 19 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RW Under the circumstances, could the hearing officer make a recommendation which the parties then stipulated to so that it would not be necessary for either of the parties to come before this board again. DP Yes, that is possible. In fact, the ordinance itself states, the section I don't have at my fingertips, but as I recall, it states that nothing in the ordinance prevents the parties from entering into agreements with respect to rent increases. So if there were a recommendation from the hearing officer that would be acceptable to both the tenants as well as the owner, and if they advise this board of that agreement or presented this board with a written agreement, I think that this board could certainly accept that if it desired to do so. RW Thank you very much. Now concerning the recommendation of the hearing officer, which has been, I believe, ratified by the City Attorney's Office, do I hear any motions? MI I would like to discuss this a little bit. RW You want to discuss? MI I'm not sure how this confusion and symbolism came about between a hardship rent increase petition and a petition for interpretation. However, I believe that what the hearing officer and counsel has done, again, has shown us where we stand in light of the ordinance, and we must follow the ordinance to the letter. If we don't, we're leaving ourselves open to quite a few procedural difficulties in later years. As has been shown, again, the only procedural method in which you can raise rent is a hardship increase, and also as was stated by the hearing officer, he needed more information. I believe that was stated as he was giving his recommendation. And I don't see any way out for the Commission but to defer action and call for a hardship rent increase petition from the applicant. And with all the information I believe it could be more fairly considered at that point. RW Anyone have any comments? WT I agree with Mr. Isbell's stance. My concern is perhaps about the individual findings of the hearing officer, but Mr. Isbell is not incorporating those. Are you willing to make a motion to just. . . MI Well, I just wanted to open this up for discussion to see how the Commission felt in general. WT The one that bothers me is the interest for capital improvements, and it bothered me the last time that we allowed this. The ordinance is not specific on that, and it is discretionary if I understand that correctly. It allows us to do it, but it doesn't say that we must, and there's just something about it that I don't like. I don't know whether anyone else feels the way that I do about it or not. RW Well, I have to say that that was the reason that I brought the question to the hearing officer, whether that was an additional benefit which was not warranted. However, his explanation that this was to encourage a capital expenditure in an area which might not otherwise have been expended I think is a fair conclusion and something that we should certain consider whether it is necessary or not. 20 • MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * WT I agree, but in this case it's obvious that this capital expenditure is necessary. RW Are there any other comments or questions? JWM It seems to me that we're maybe making a mountain of a molehill. The Section 9.50.070(b) that is quoted by the petitioner asks that the Board make an interpretation of the ordinance, and indeed, our interpretation is this should be presented in the form of a hardship rent increase. That is our recommendation, it seems to me, that a particular course of action should be for this request to come in the form of a hardship rent increase petition. RW Would you like to put that in the form of a motion? JWM Yes, indeed. WT I will second that motion, and I assume that we will go ahead with the discussion and perhaps a second motion on the findings of the hearing officer? RW Before we bring that up, let me just inquire as to the motion. The motion that you're making, then, is that we. . . JWM That our response to the petition is that the request come in the form of a hardship rent increase, that we acknowledge the petition, this petition for interpretation, and that our interpretation is that this request come in the form of a hardship rent increase. RW And that's the motion which you are seconding? 1WT That is correct. RW Thank you. Is there any further discussion concerning that issue? Yes, sir. MI One quick statement. If we do in effect pass that motion, there is no reason to go through the conclusions of the hearing officer because we'll have to do that after it's submitted as a hardship rent increase anyway. WT I think the idea was to narrow it to what we will actually hear at the hardship rent increase and not have to necessarily take up all of this again. RW I think that point is well taken. WT If there is a procedural way to do it. . . RW In any case, let's. . .any further discussion concerning that particular motion? DP Mr. White, so I'm clear too, I believe that is in fact one of the findings of the hearing officer. So the motion as I understand it before the Board is to specifically ratify and agree with that particular finding of the hearing officer, which of course. . . JWM Finding Two and Finding Eight. 21 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * DP Finding Two and Finding Eight, yes. RW Yes, Two and Eight, and we are incorporating in a motion that those findings be ratified. Is that correct? JWM Yes. RW Are there any other comments, questions? JWM And this is within the framework of acknowledging the petition for interpretation. RW Okay. Is there any further discussion? Do we need to do a roll call vote for this? SRG It's your choice, if you want to or if you just ask for a general yes and no vote. RW Let's have a yes or no vote. All in favor of the motion as it stands, say "aye". NOTE: All voted in favor. RW All opposed. . .Motion carries unanimously. Now, as to the other findings of the hearing officer, are there any other motions? WT I think Finding #1 probably is no problem with that because it follows along with what we have just done, provided that it is shown that it is necessary to provide him with a fair return on his investment, that's what the rent increase hearing will be about, the hardship rent increase. Does anyone have any objections to the phases? I don't object to that, I think that's a logical one, Finding #3. JWM Do we need to add on to this, perhaps, answers to the question that our Chairman asked in regard to a cutoff date? WT That's #4, I believe that goes with #4. RW Well, actually, my question was a little broader than that, but I think perhaps the hearing officer can consider that in making his determination. DP At the hardship rent increase hearing? RW Yes. Is there any feeling concerning four and five, six and seven of the findings? WT I agree with everything but five. I would make a motion for the others; I can't make a motion that includes five. RW Alright. Any other discussion concerning that? Would you like to make a motion? WT I'll make a motion that we approve Items #1, #3, #4, #6, and #7 in the hearing officer's findings. RW Is there a second to that motion? MI Second. 22 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * RW Any further discussion? DP May I ask a point please at this point before the vote? RW Yes. DP Just so I'm clear. Is it the intention of this board then as a result of the two motions, I believe, or three perhaps that had been made, that all of the findings of the hearing officer, with the exception of Finding #5, have been approved by this commission? RW I believe that is the intention. Is that correct? JWM I'm not sure of the objections to #5. WT Do you have a question on that, Mr. Phillips? DP No, I just wanted to clarify so that I understood, for the record, so I understood for the record exactly what the Commission was doing. RW Now, I have heard a second for the motion, is that correct? MI Correct. RW Alright, is there any further discussion concerning that second motion? All in favor of the second motion concerning the findings #1, #3, #4, #6, and #7, signify by saying "aye". NOTE: All voted in favor. RW All opposed. . .Motion carries. Is there any further discussion concerning other issues? Not hearing any, I would entertain a motion to adjourn. WT Before that, Mr. Chairman, may I suggest we read the findings back for the benefit of the audience because we voted on numbers, and they don't now what we voted on. RW Alright, I will do. WM Will you please speak into the microphone to be sure that they all can hear. RW The findings of the hearing officer which have been adopted are as follows: #1 - The park owner is entitled to increase the rent charged for the capital improvement provided it is shown that it is necessary to provide him with a fair return on his investment. #2 - In order to establish the right for the rent increase, the park owner must submit a petition for hardship rent increase and use the established net operating income calculation. 23 MINUTES PALM DESERT RENT REVIEW COMMISSION MEETING JUNE 20, 1988 * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * * #3 - The rent increase can be in phases prior to the construction being completed provided sufficient safeguards are established to protect the homeowners from paying increased rent without increased benefit. #4 - The amortization of the sewers shall be for the period provided in the Guidelines. Further, amortization of any road construction or ancillary capital improvements shall be amortized as provided in the Guidelines. #6 - The 1987 cost of maintaining and repairing the septic tanks shall be used to offset a portion of the rent increase. #7 - The park owner has discretion in the selection of the contractor to perform the construction of the sewer. j #8 - That a further public hearing be held in order to address the hardship petition that the park owner may wish to file. Is everyone clear on that? That being the case, I would entertain a motion to adjourn. JWM So moved. MI Second. RW All in favor. NOTE: All voted in favor. RW We're in adjournment. VI. ORAL COMMUNICATIONS None VII. ADJOURNMENT Upon motion by Commissioner Wade-Maltais, second by Commissioner Isbell, and unanimous vote of the Commission, Chairman White adjourned the meeting at 5:37 p.m. RESPECTFULLY SUBMITTED, ' NOL_ (c-- ()/Vg_2,zt L MARY P. lisk) ZIER, SECRE ARY 24