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HomeMy WebLinkAboutLegislative Review - SB1404 (Soto) - Multi-Family Imprvmnt DistCITY OF PALM DESERT COMMUNITY SERVICES DEPARTMENT STAFF REPORT REQUEST: REQUEST FOR CONSIDERATION OF LEGISLATIVE REVIEW COMMITTEE ACTION ON SB1404 (SOTO) AT ITS MEETING OF APRIL 27, 2004. DATE: May 13, 2004 CONTENTS: SB1404 LANGUAGE Recommendation: By Minute Motion, concur with the action taken by the Legislative Review Committee at its meeting of April 27, 2004, and direct staff to prepare a letter of opposition for the Mayor's signature with regard to SB1404 (Soto) relative to Multi -family Improvement Districts. Executive Summary: Passage of SB1404 would provide for a program for the establishment of Multi -family Improvement Districts subject to the approval of the Director of Housing and Community Development. Background: Current law establishes the Property and Business Improvement District Law of 1994 to levy assessments within a city's business improvement district. This bill would provide for a program for the establishment of Multi -family Improvement Districts to levy assessments on residential rental properties within the district to finance improvements and promote activities beneficial to those properties subject to the approval of the Director of Housing and Community Development. SB1404 Multi -Family Improvement Districts May 13, 2004 Page 2 The City of Palm Desert has established such programs as appropriate for developments within the City and does not believe that mandating such a program, particularly subject to the approval of the Director of Housing and Community Development, is conducive to the manner in which it conducts its day-to-day business. Therefore, the Legislative Review Committee recommends that the City Council oppose SB1404 and direct staff to prepare a letter stating that position to the appropriate Legislators for the Mayor's signature. PATRICIA SCULLY SENIOR ► NAGEMENT ANAL SHEILA R. ILL N ASSISTANT CI ANAGER PAUL GIBSON DIRECTOR OF FINANCE/ CITY TREASURER CARLOS L. ORTEGA CITY MANAGER SB 1404 Senate Bill - AMENDED Page 1 of 3 BILL NUMBER: SB 1404 AMENDED BILL TEXT AMENDED IN SENATE APRIL 12, 2004 INTRODUCED BY Senator Soto FEBRUARY 18, 2004 An act to add Part 2 (commencing with Section 35000) to Division 2 of Title 4 of the Government Code, relating to multifamily improvement districts. LEGISLATIVE COUNSEL'S DIGEST SB 1404, as amended, Soto. Multifamily improvement districts. Existing law establishes the Property and Business Improvement District Law of 1994 to levy assessments within a business improvement area within a city. This bill would stablish a pil t provide for a program for the establishment of multifamily improvement districts to levy assessments on residential rental properties within the district to finance improvements and promote activities beneficial to those properties, subject to approval of the Director of Housing and Community Development. Vote: majority. Appropriation: no. Fiscal committee: yes. State -mandated local program: no. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. Part 2 (commencing with Section 35000) is added to Division 2 of Title 4 of the Government Code, to read: PART 2. MULTIFAMILY IMPROVEMENT DISTRICT PILOT PROJECTS Article 1. General Provisions 35000. This part shall be known and may be cited as the MultiFamily Multifamily Improvement District Pil t Pr j ct Law. 35001. The Legislature finds and declares that the formation of assessment districts to benefit residential rental properties is a concept that may improve the quality of residential neighborhoods in a manner similar to business improvement districts ..and sh uld b t ct d in up t thr multifamily n ighb rh ds in r uth rn Cali fo a a€ 3r apprrvz t�_ }• +_hr� Dir ct r f H ucing and C mmun y bevel pm nt. . 35002. For the purposes of this part, the following words have the following meanings: (a) "Assessment" means a levy for the purpose of acquiring, constructing, installing, or maintaining improvements and promoting activities that will benefit the residential rental properties located within a multifamily improvement district. (b) "District" means a multifamily improvement district established pursuant to this part. (c) "Multifamily district management plan" or "plan" means the http://info. sen.ca.gov/pub/bill/sen/sb_1401-1450/sb_1404 bill_20040412_amended sen.ht... 4/13/2004 SB 1404 Senate Bill - AMENDED Page 2 of 3 plan defined in Section 35113. (d) "Property" means residential rental real property located within a district. (e) "Property owner" means any person shown as the owner of land on the last equalized assessment roll or otherwise known to be the owner of the land by the city council. Article 2. District Formation 35100. Upon the submission of a written petition, signed by the property owners in the proposed district who will pay more than 50 percent of the assessments proposed to be levied, the city council may initiate proceedings to form a district by the adoption of a resolution expressing its intention to form a district. The amount of assessment attributable to property owned by the same property owner that is in excess of 40 percent of the amount of all assessments proposed to be levied, shall may not be included in determining whether the petition is signed by property owners who will pay more than 50 percent of the total amount of assessments proposed to be levied. 35101. The petition of property owners required under Section 35100 shall include a summary of the management district plan. That summary shall include the following: (a) A map showing the boundaries of the district. (b) Information specifying where the complete management district plan can be obtained. (c) Information specifying that the complete management district plan shall be furnished upon request. 35112. The resolution of intention described in Section 35110 shall contain all of the following: (a) A brief description of the proposed activities and improvements, the amount of the proposed assessment, and a description of the exterior boundaries of the proposed district. The descriptions do not need to be detailed and shall be sufficient if they enable an owner to generally identify the nature and extent of the improvements and activities and the location and extent of the improvements and activities and the location and extent of the proposed district. (b) A time and place for a public hearing on the establishment of the property and multifamily improvement district and the levy of assessments, which shall not be held more than 90 days after the adoption of the resolution of intention. 35113. The multifamily management district plan shall contain all of the following: (a) A map of the district in sufficient detail to locate each parcel of property within the district. (b) The name of the proposed district. (c) A description of the boundaries of the district, including the boundaries of any benefit zones, proposed for establishment or extension in a manner sufficient to identify the lands included. Under no circumstances shall the boundaries of a proposed district overlap with the boundaries of another existing district created pursuant to this part. Nothing in this part prohibits the boundaries of a district created pursuant to this part to overlap with other assessment districts established pursuant to other provisions of law, including, but not limited to, the multifamily improvement district. (d) The improvements and activities proposed for each year of operation of the district and the maximum cost thereof. (e) The total annual amount proposed to be expended for http://info.sen.ca.gov/pub/bill/sen/sb_1401-1450/sb_1404 bill 20040412_amended sen.ht... 4/13/2004 SB 1404 Senate Bill - AMENDED Page 3 of 3 improvements, maintenance, and operations in each year of operation of the district. (f) The proposed source or sources of financing including the proposed method and basis of levying the assessment in sufficient detail to allow each property owner to calculate the amount of the assessment to be levied against his or her property. (g) The time and manner of collecting the assessments. (h) The specific number of years, to a maximum of five, in which assessments will be levied. The management district plan may set forth specific increases in assessments for each year of operation of the district. (i) The proposed time for implementation and completion of the management district plan. (j) Any proposed rules and regulations to be applicable to the district. (k) A list of the properties to be assessed, including the assessor's parcel numbers, and a statement of the method or methods by which the expenses of a district will be imposed upon benefited real property, in proportion to the benefit received by the property, to defray the cost thereof, including operation and maintenance. The plan may provide that all or any class or category of real property which is exempt by law from real property taxation may nevertheless be included within the boundaries of the district but shall not be subject to the assessment. (1) Any other item or matter required to be incorporated therein by the city council. 35114. The city may request reimbursement from the district for any costs associated with planning and administration of the district. http://info.sen.ca.gov/pub/bill/sen/sb_1401-1450/sb_1404 bill_20040412_amended_sen.ht... 4/13/2004 Engineers/Planners/Surveyors April 1, 2004 Carlos A. Ortega City Manager/Executive Director Palm Desert Redevelopment Agency 73510 Fred Waring Drive Palm Desert, CA 92260-2524 RE: YOUR SUPPORT Dear Carlos: APR 0 0 2004 CITY OF PALM ,' DESERT CITY MANAGER I am writing to you to voice my support for SB 1404, Multi -Family Improvement Districts, and to encourage you to show your support and contact Senator Torlakson, Chair of the Local Government Committee, prior to April 12th. This Bill will be presented and heard by the committee on April 21 st. I have attached a sample letter of support and the addresses of all the committee members. SB 1404 will allow for the creation of Multi -Family Improvement Districts; which are very similar to property and Business Improvement District legislation used soo_successfully in many of our State's central business districts. Through a petition process, the owners who will pay more than 50% of the assessments to belevied may request that the City establish an assessment district over all the multi -family properties in a designated area. As you, may -know, I have been involved with , attempts to improve dysfunctional multi -family neighborhoods in Southem Californiafor nearly 20 years. I have found that it is generally quite easy to get 50% to 70% of the multi -family owners to support improvement efforts. In doing so, they agree to make physical improvements to their property and abide by common and strict tenant screening practices and professional management policies." Unfortunately, in most multi -family neighborhoods that areexperiencing blight, there is at least one "slum lord" who does not want to participate in the betterment of the area. This slum lord and his/her poor building conditions and management practices are an ever present threat to the long term health of the neighborhood and its residents. Blight and the deterioration of a neighborhood can begin with one building, but cannot be eliminated in the same way. Tenants and owners alike need assurance that a total neighborhood improvement will take place and not be overwhelmed by blighting "influences. Please join me and others in support of SB 1404, sponsored by the City of Montclair, have attached a brief Summary Report on SB 1404, mailing addresses for the Senate Local Government Committee, a model Resolution for your City and, if you like, there is also a model letter of support for your use. Thank you for your time and consideration. If you have any questions, please call. Cordial . 13tfC Vice President o Co unity Development RRF:cms Enclosures L.D. King, Inc. 2151 Convention Center Way, Suite 100, Ontario, CA 91764-4464 (909) 937-0200 Fax: (909) 937-0202 April 1, 2004 Senator Tom Torlakson Chair, Senate Local Government State Capital, Room 410 Sacramento, CA 95814 Subject: SB 1404 Multi -Family Improvement Districts Dear Senator Torlakson: I am writing you to voice my support for SB 1404 and to encourage you to give if full and urgent consideration. I believe passage of this Bill will give California a very valuable, new tool for improving blighted, crime infested multi -family neighborhoods. As a city employee/official, I have been involved with attempts to improve dysfunctional multi -family neighborhoods in Southern California for many years. One of the biggest challenges facing improvement programs in multi -family neighborhoods is obtaining 100% cooperation and support from property owners. I have found that it is generally quite easy to get 50% to 75% of the owners to support improvement efforts. Unfortunately, in most multi -family neighborhoods that are experiencing blight, there is at least one "slum lord" who does not want to participate in the betterment of the area. This slum lord and his/her poor building conditions and management practices are an ever-present threat to the long-term health of the neighborhood and its residents. I believe that SB 1404 will give our cities and our State's responsible multi -family property owners the new tool necessary to improve our multi -family neighborhoods without being hindered by a small number of uncooperative slum lords. Cordially, cc: Senator Nell Soto State Capitol, Room 4074 Sacramento, CA 95814 Senator Tom Torlakson Chair Local Government State Capitol, Room 5061 Sacramento, CA 95814 Senator Dennis Hollingsworth State Capital, Room 2048 Sacramento, CA 95814 Senator Nell Soto State Capitol, Room 4074 Sacramento, CA 95814 Senator Bob Margett Vice Chair Local Government State Capitol, Room 3082 Sacramento, CA 95814 Senator Michael Machado State Capital, Room 3086 Sacramento, CA 95814 Senator Dick Ackerman State Capitol, Room 4066 Sacramento, CA 95814 Senator Don Perata State Capitol, Room 313 Sacramento, CA 95814 RESOLUTION NO. A RESOLUTION OF THE COUNCIL OF THE CITY OF IN SUPPORT OF SENATE BILL 1404 CREATING MULTI -FAMILY IMPROVEMENT DISTRICTS WHEREAS, there is a need for the State of California to effectively provide quality neighborhoods while meeting housing demands, especially low- and moderate -income housing; and WHEREAS, there is a need to improve the quality of life within certain low- and moderate -income multi -family neighborhoods; and WHEREAS, not all multi -family property owners are willing to invest in their neighborhoods; and WHEREAS, current tax and land use policies and economic factors make it extremely difficult for low- and moderate -income multi -family neighborhoods to redevelop depressed areas and attract investment; and WHEREAS, Senate Bill 1404 would provide a method for a majority of multi -family property owners in a specified neighborhood to assess 100% of the properties for needed improvements and services; and WHEREAS, Senate Bill 1404 will help provide an improved quality of life for tenants in certain low- and moderate -income multi -family neighborhoods; and WHEREAS, Senate Bill 1404 will especially help areas that currently cannot improve due to uncooperative property owners. NOW THEREFORE, BE IT RESOLVED, by the City of as follows: 1. The City of expresses its support for Senate Bill 1404 and urges its passage by the State Legislature. I HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the Council of the City of at a regular meeting thereof held on CITY CLERK and Ex Officio Clerk of the Council of the City of APPROVED: By: Mayor APPROVED AS TO FORM: City Attorney By: Deputy City Attorney Multi -Family Improvement Districts Problem Statement and Solution SB 1404 April 1, 2004 Problem Statement: A common problem exists with certain multi -family neighborhoods throughout California. These problem neighborhoods typically consist of multiple four-plex or larger buildings, each with a different owner. They are also blighted and harbor significant criminal activity. This situation places the property owner, neighborhood residents and the city in jeopardy. Without coordinated professional assistance at many levels, regaining control of the neighborhood and reversing the blight and criminal activity is nearly impossible. Solution: The question is how can we best "switch" from the current public -oriented traditional, "big bucks" solution to a private oriented financially practical solution? One such change in the neighborhood improvement paradigm has permanently changed Helena Gardens, Cobblestone Village and other areas in the City of Montclair from true war zones into viable working class residential neighborhoods. This process has also proven successful in Santa Ana and Ontario. Given the programs' effectiveness and low cost (savings of 75% to 90% over typical redevelopment programs), increasing awareness of it in public policy circles would greatly benefit everyone. In the City of Montclair, Helena Gardens and Cobblestone Village have been in existence for nearly 15 years. Given their success, recognition, awards and publication in the appropriate public sector journals, the tools and principles should be more widely used. Key to the success of these programs was bringing all the owners together to function as "a single unit" in a business -like fashion. Although many other communities have attempted to duplicate the Montclair experience, few have been successful. The primary reason for these failures is not being able to get 100% participation from all property owners. Typically, 60% to 70% or more of the multi family owners are willing to coordinate and take charge, but they are stopped by the remaining few "slum lords". Multifamily Improvement Districts Problem Statement and Solution April 1, 2004 It is nearly impossible to improve a dysfunctional multi -family neighborhood unless substantially all owners are cooperating. One substantial building with tenants openly involved in illegal activity can make it impossible to obtain quality tenants for surrounding properties. A Multi -family Improvement District could, in most situations, could eliminate these obstacles. The passage of SB 1404 will allow responsible multi -family property owners to join together, tax themselves, work with their City officials and improve their businesses. Overview: The adoption of Multi -family Improvement District (MID) legislation in California will provide a tool and process for the improvement of dysfunctional multi -family neighborhoods through the coordination and cooperation of impacted property owners. This MID legislation is modeled after current California Legislation, which permits the creation of Business Improvement Districts (BID). BIDs have proven to assist commercial downtown business owners improve their businesses. These improvements, their maintenance and ongoing management are accomplished through assessments to property owners. More BIDs have been created in California than any other state in the Country. Such districts are not currently permitted in residential areas. Rental property is a business and those business owners should have the same tools available to them as their counter parts in the downtown. In today's economy, many of California's cities are struggling with budgets that only enable them to take care of the day-to-day needs of the City. There are no extra funds to invest in the renovation of troubled residential neighborhoods. In addition, many multi -family property owners are unwilling to invest funds in buildings located in substandard residential neighborhoods. They believe such investment is unwise unless all owners in the area are also making improvements. Some experts working in the field believe there is an opportunity for an innovative community based team to assist cities. The program could reduce cost of city services while at the same time, improve business profits for multi -family rental property owners and, more importantly, improve the quality of life for residents. -2- Multifamily Improvement Districts Problem Statement and Solution April 1, 2004 Proposed: Multi-familv Improvement Districts: The ability to create MIDs will greatly simplify and reduce delays in the elimination of substandard dysfunctional multi -family neighborhoods without significant infusion of public dollars. Few Multi -Family Owners' Associations have been formed. Where formation has been successful, the results have proved to be rewarding over an extended period of time. Unfortunately, the process is difficult and time consuming to complete. The single, biggest constraint to the formation of associations is the need to have 100% participation by all owners for the association to be formed. One reluctant 'slum lord' can hold an entire neighborhood hostage. SB 1404 will allow the creation of Multi -Family Improvement Districts (MIDs) in a process similar to Business Improvement Districts (BIDs), that are successfully used in commercial areas. However, this option is not currently available to residential property owners. Existing California law specifically excludes residentially zoned property from being assessed in such BIDs. SB 1404 will permit the establishment of MIDs statewide. Such a program for Multi- family Improvement Districts will: be limited to multi -family rental properties; be created by a Petition process similar to BIDs; require a Management Plan and physical improvement plan and cost estimate; levy assessments for at least a ten-year period, with 20 years preferred; improvement and services will be provided to the neighborhood by way of assessments on the property; and assessments will be initiated by the property owner through a petition process. For more information, please contact: R. Richard Fleener, Vice President of Community Development L.D. King, Inc. 2151 Convention Center Way, Suite 100 Ontario, California 91764 Phone: (909) 937-0200 E-Mail: dfleener@Idking.com Multi -Family Improvement Districts What Will They Be Able to Do? SB 1404 April 1, 2004 Some activities may require cooperation of City and/or easements or permission from specific properties. 1. Collect assessments from a defined area, which will be used to benefit that area. 2. Funds can be used to: ✓ Pay a Security Guard. ✓ Maintain all landscape and irrigation. ✓ Clean yards, alleys and trash enclosures of debris. ✓ Common advertising. ✓ Onsite management. ✓ Construct physical improvements. Community Rooms Landscaping Entry Monuments Lighting Recreation Facilities Security Gates for Alleys Parking Lots Common Storage Other ✓ Supplemental Property Inspections / Code Enforcement ✓ Provide Management Services - Tenant Screening - Credit Checks - Eviction Assistance ✓ Pre -School and Day Care Services ✓ Concierge Services — Package Drop-off and Deliveries 3. Any improvements can be maintained. 4. MIDs can be a compliment to Owners Associations. - Cannot have CC&R's without 100% participation from Owners 5. MIDs might also be a pre -cursor to Owners Associations. 6. Offer assistance to Property Owners to improve property. 7. Do neighborhood wide activities not otherwise practical or possible. 8. Funds can be used to pay for additional, unusual City services. Such things as extra Police or Code Enforcement. Funds cannot be used to fund regular existing City services. 9. Brings owners together to work towards improved neighborhood and solve common problems. 10. Earn other income from services or grants from others such as City, non-profit foundations or churches. 11. Other. - 1- Multi -Family Improvement Districts Questions and Answers SB 1404 April 1, 2004 Q. What is a Multi -Family improvement District and why is it needed? A. Multi -Family Improvement Districts (MIDs) are assessment districts created by the owners of property within a defined area. The funds generated by the MID are used to fund physical improvements to the area or provide new services to the area. Q. Where did the idea of MiDs come from? A The need for MiDs originated from owners of multi -family properties who were frustrated with the lack of tools to bring neighboring owners together to improve the neighborhood. The MID concept is based on the highly successful Business Improvement Districts (BIDs) which can be found in nearly every State. California has more BIDs than any other state. BIDs do not allow residential land uses to participate. Q. What can a MID do? A. Actual activities of the MID will depend on the District's needs. Typical examples are: - Area wide landscape improvements and maintenance. - Additional neighborhood security guard. - Neighborhood trash pick-up. - Neighborhood wide tenant screening services to owners. - Parking facilities and services. Q. How is a MID created? A. The MID must be initiated by the affected property owners by petition to the City Council. Q. Who can sign the Petition? A. The Petition must be signed by Property Owners in the proposed district, who will pay more than 50-percent of the proposed assessments. No single Property Owner can be responsible for more than 40-percent of the total assessment. If they are, their signature cannot be included on the Petition. Example: $ 1, 000 in Total Assessments $ 501 Required in Petition Signatures $ 401 in Assessments by one Owner (Cannot be counted in calculation of 50-percent of petition.) Q. What should the Petition include? A. The petition must include a summary of the District Plan. It shall include - Map of District Boundaries - Information on where the complete plan can be found - Statement that the full plan will be furnished, if requested -1- SB 1404 April 1, 2004 Q. What is required in the Management Plan for the District? A. 1. Map showing boundaries. - Each Building / Property to be Assessed must be shown and listed 2. Name of proposed District 3. Description of boundaries, cannot overlap other MIDs 4. Description of Improvements and Maximum Cost for each Year Total Amount Per Year for Improvements Total Amount per Year for Maintenance Total Amount per Year for Operations Total Amount per Year for Debt Service 5. Proposed source of funds and methods of levying Assessments Must state if bonds will be Issued Time and Manner of Collecting Assessments Number of Years, Maximum Five (Maximum number for maturity of Bonds) Yearly increases can be set 6. Time for Implementation and Completion 7. Any proposed Rules and Regulations 8. List of properties to be assessed, including Parcel Numbers - Description of how assessment is calculated in proportion to benefit received - Owner should be able to calculate own assessment from information provided Q. What are the Benefits to the City? A. Additional, non-public funds are generated for identified needs/improvements. These additional funds should lead to: Improved Neighborhood Fewer Calls for City Services Improved Property Values (Increased Taxes Upon Sale) Reduced Tenant Problems Q. What is Expected of the City? A. 1. Fund all or part of the District Plan - Could be reimbursed out of assessments 2. Go through legislative process to form, including providing City Staff Overview and Technical Assistance and Guidance 3. Collect assessments and redistribute to Improvement District Board 4. Cooperation from al! City Departments 5. Some day-to-day "handholding" of the Board 6. Sell Bonds or arrange other financing to facilitate improvements -2- Multi -Family Improvement Districts Summary Benefits SB 1404 April 1, 2004 Saves money — fewer Improved quality of life, Increased property calls for Fire, Police better neighborhoods values. and Code Enforcement Improved security and stability for any existing loans in area. Enhances neighborhood and surrounding neighborhoods Better environment for raising children Increased cash flow through rent payments and higher occupancy rates Opportunity for marketing of new and refinancing existing mortgages Provides stable multi- family residential environment Increased sense of community — more loyalty to City and owner,, More money to invest in improving properties More secure and stable neighborhood will improve lenders interest in making new loans Increases (stimulates) additional level of investment of private capital Stabilizes neighborhood, longer term residents Longer term tenant occupancy Property values will increase, more equity Helps City council through recognition for fixing a dysfunctional multi -family neighborhood Reduced crime, safer Reduced vandalism Reduces crime More amenities and improved self image Tenant pride in property Increases property values and tax base More professional and responsive management Preserves the City's affordable housing stock Continued provision of safe, sanitary housing stock Multi -Family Improvement Districts Process SB 1404 April 1, 2004 MID can be initiated by City or Property Owner. City Initiates Concept for MID and Determines Preliminary Boundary Owners Initiate formation of MID by approaching City with Preliminary Boundary and show of Support City Holds Public Meeting with Owners and Discusses Concept, Preliminary Activities and Estimated Costs Owners/City Circulate Petition of Interest and/or Commitment (No fixed percent of owners required at this time. It is up to the City to determine what it would be like before proceeding to the next step.) If acceptable Percent Sign Petition in support, the City will initiate a Feasibility Study to determine Boundary, Project Activities and Cost Hire Consultant to prepare Plan or do with City Staff Plan Includes: Detailed Map of District by Parcel - Name of District Written Description of Boundary Proposed Improvements by Year - Proposed Activities by Year - Estimated Annual Expenses - Source of Income and Individual Assessments - Time and Manner of Collecting Assessment - Implementation Timeline Proposed Rules and Regulations for MID Organization - List of Properties to be Included - Other SB 1404 April 1, 2004 Public Meeting Held to Hear and Discuss Report Owners Meet to Discuss and Reach Consensus on what is wanted; Formal Petition is prepared for Council Consideration • Petition Presented to Council requesting Formation of MID. More than 50% of Property Owners Paying Assessment must Sign in Support City Council Adopts Resolution of Intent to Form District and Sets Date and Time for Public Hearing. Not more than 90 Days after adoption of Resolution. ♦ City adopts Resolution of Formation City Clerk Records Notice and Assessment Map 30 Days to Protest MID District Members Elects Board; Adopts By -Laws; Rules and Regulations