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HomeMy WebLinkAbout04-11-1985 MHRRB Minutes.o city of sari 1UIS OBISPO HUMAN RELATIONS COMMISSION • 979 PALM STREET Post Office Box 321 • San Luis Obispo, CA 93406-0321 • 805/549-7150 M I N U T E S MOBILEHOME RENT REVIEW BOARD April 11, 1985 MOBILEHOME RENT REVIEW BOARD MEMBERS PRESENT: Tom Swem, Patricia Barlow, Gaye Benson, Denny Wheeler and Naoma Wright. STAFF PRESENT: Steve Henderson and Roger Picquet CALL TO ORDER: The meeting was called to order by Chairperson Tom Swem at 3:15 p.m. Chairperson Swem explained that the meeting is a specific meeting pursuant to an application for a rent increase from Chumash Village Investments, Inc. At this point, due to a conflict of interest, Chairperson Swem relinquished the Chair to Co -chairperson Gaye Benson. STAFF REPORT: Steve Henderson discussed the Staff Report including: I. Mobilehome Park Rent Review Stabilization Ordinance (San Luis Obispo Municipal Code Chapter 5.44 - April, 1982). 2. Chumash Village Investments application to the Board for a hardship increase heard and denied in June, 1983. 3• The owner appealed the Board's decision which was rejected by the Council in August, 1983. 4. The owner then filed suit against the City of San Luis Obispo in Supreme Court. 5. Judge Woolpert made specific decisions regarding Rate of Return and referred the matter back to the City Council. 6. The City Council referred the case back to the Rent Review Board for further hearing and consideration. Page 2 Mebilehome Rent Review Board Minutes - April 11, 1985 JUST AND REASONABLE RETURN: 1. Requirements of the Court were mentioned. 2. Decisions of the Board regarding methodology used for the application were reviewed. 3. Staff provided the most common methods used to determine Just and Reasonable Return. 4. Chairperson Swem provided supplemental information. 5. Jim Buttery and Gerald Taylor presented an alternate method. Mr. Henderson mentioned Mr. Buttery's letter of March 27, 1985 as well as further Staff Recommendations concerning Rate of Return and questions to be considered by the Board as they deliberate this case. Staff requests direction and guidance on which type of findings are indicated by the Board so that supporting findings can be researched and reported in the form of a "Deci- sion and Order" report. REAPPOINTMENT OF BOARD MEMBERS: At this time, City Attorney Roger Picquet explained that due to an Ordinance change, two Board Members were not officially reappointed at the expiration of their terms on March 31, 1985. The Board took this technicality into consideration and with no object- ions from the audience, allowed Mr. Swem and Mr. Wheeler to participate. APPROVAL OF MINUTES: The Minutes of the April 4, 1985 meeting were approved as submitted. PURPOSE OF MEETING: Acting Chairperson Benson explained the purpose and procedure of today's hearing. SWFARINn IN. Clerk Secretary, Sharon Turner conducted a "Swearing-in" at 3:33 p.m. of those giving testimony in today's hearing. STATEMENT OF REPRESENTATIVE OF APPLICANT: Jim Buttery, Attorney for Chumash Village Investments, commented on the Staff Report of April 11, 1985, specifically on the issue of whether or not the owner of Chumash Vil- lage is entitled to receive a $20 per month per space increase as applied for in April, 1983. Mr. Buttery quoted from the purposes and intent of the Rent Stabilization Ordinance regarding rent increases as well as owner's right to a suitable profit on the property. Page 3 Mobilehome Rent Review Board Meeting - April 11, 1985 Mr. Buttery reviewed the Court's decision regarding information concerning justi- fication of hardship, CPI Increases, specific mandates to Board on Rate of return and irrelevant items identified for purposes of Board's decision on methodology to be used. Mr. Buttery objected to Staff recommendations made on Page 4 of Staff Report as placing Staff in the role of an advocate rather than as a consultant. Evidence was presented consistant with Rates of Return 3, 4 and 5 as mentioned in Staff Report, and reasons were given for not addressing Items 1, 2 and 6. Reference was made to a Supreme Court case on the issue or rent control which was the Fisher vs. The City of Berkeley case. CLINT LEFLER'S TESTIMONY: At this time, Mr. Buttery called for testimony Mr. Clint Lefler, General Partner of Chumash Village Investments, Inc., owners of Chumash Village Mobilehome Park with offices located at 115 South La Cumbre Lane, Santa Barbara, California. Mr. Lefler discussed the formation of the partnership of Chumash Village Investments, purchase price and fees as well as reasons for purchase. SEE EXHIBIT 1, 2 and 3, (Summary of Clint Lefler's Presentation to Rent Review Board, City of San Luis Obispo, Chumash Vil- lage Investments Statement of Income and Expenses, 1/1/81 thru 12/31/81, Chumash Village Investments Statement of Income and Expenses l/l/82 thru 12/31/82, respectively.) Mr. Lefler explained Operating Reserves as well as Capitol Replacement reserves in relationship to Chumash Village. A question and answer period followed Mr. Lefler's statement regarding insurance, rent comparisons, property taxes, reserves, historical analysis and actual number of park spaces. Mr. Wheeler requested that Mr. Lefler furnish the Board with information concerning local and state rent comparisons at the time of purchase. Mr. Ed Olpin, Attorney for the Chumash Village Mobilehome Owners distributed EXHIBIT 4, (Tax Status Report) and EXHIBIT 5, (Sales Price, etc.). Mr. Olpin also established Mr. Lefler's position as a General Partner of Chumash Village Investments as well as President of LaCumbre Management as of June 1983. Mr. Lefler also explained additional expenses to the purchase price citing commis- sions, loan fees, organization expenses and syndicating expenses. Other Chumash Village incomel concerning laundry commissions, utility commissions, additional parking, etc. were discussed as well as on-site personnel expenses and other items mentioned in Exhibit 2 and 3. Mr. Buttery objected to the discussion of Exhibit 5 stating that there is no basis for determining how or for what period it was prepared. Mr. Olpin explained that the document (Exhibit 5) was prepared by the prior owner. Mr. Picquet interjected that Mr. Olpin is not a witness and that Mr. Buttery's comment is well taken. He further recom- mended that Exhibit 5 be accepted at this time contingent on it later being identified and discussed by Mr. Buttery's witness. Mr. Olpin stated he will ask no further questions regarding Exhibit 5. A question and answer period followed in which Board members requested clarification regarding Mr. Lefler's past involvement in real estate, the current partnership, Group Life Insurance, Management fees and available documentation of expense statement figures. RECESS: At this time (5:33 p.m.), Acting Chairperson Benson recessed the meeting to reconvene at 7:00 p.m. Page 4 Mobilehome Rent Review Board Meeting - April 11, 1985 RECONVENTION: The meeting was reconvened at 7:00 p.m. GERALD TAYLOR'S TESTIMONY: Mr. Buttery called as his witness, Mr. Gerald Taylor, Real Estate Appraiser of the firm of Schenberger, Taylor, McCormick & Jecker, Inc., 1306 Higuera Street, San Luis Obispo. Mr. Taylor described his background in relationship to the appraisal of mobile homes and mobile home parks. Mr. Taylor explained the basis for his calculations citing the N01 (Net Operating Income) percentage approach in Kenneth Barr's dissertation, "Guidelines for Rent Control", Page 803, Item 4, of "Rutger's Law Review. Mr. Taylor distributed and reviewed EXHIBIT 6, (Gerald Taylor Testimony Recap). He also cited the Real Estate Investor's Deskbook, Page 2-5 with specific reference to Table 2. Mr. Taylor commented that in his opinion, his estimated rent of $249 per month is conservative and should be from $289 to $304 per month. Mr. Taylor responded to a question from Mr. Buttery stating management fees should be 5°b,to 6% which is in addition to on-site management costs. He further stated that the re- placement cost of $4,540,000 was developed by using the base cost times 235 spaces adding the depreciated value and other pertinent factors. Mr. Taylor discussed in detail his basis for determining Rate of Return and N01 figures. Mr. Olpin requested Mr. Taylor repeat his clarification of the basis for replacement posts. Mr. Taylor cited information from the "Marshall & Swift Replacement Cost Guide" as sell as the previously mentioned "Rutger's Law Review", Pages 803 and 810. Mr. Olpin then referred to Mr. Taylor's statement in the 1983 Administrative Record presented to the Court in the litigation that resulted from the initial application. He specifically referred to Page 18 and 19 (Tab 3) regarding the OAR (Overall Rate of Return). Mr. Buttery lodged an objection to reading from the transcript. Mr. Picquet advised the Board that in this case it is proper to make reference to the Court record although the Board is not obligated to allow further pursuit of this question. Acting Chairperson Benson felt the Board should allow Mr. Olpin to continue on the grounds that it will clarify testimony for the Board. Mr. Taylor again reviewed his development of the OAR. Mr. Picquet reminded everyone that the application is being evaluated as of June, 1983. Mr. Olpin established that Mr. Taylor is retained by Mr. Buttery's client, Chumash Village Investments. Questions from the Board followed regarding Mr. Taylor's formula being applicable to apartments as well as mobile home parks and motels and the development of his approach to the replacement costs. RECESS: Acting Chairperson Benson called for a recess from 8:20 p.m. to 8:30 p.m. RECONVENTION: Upon reconvention, Mr. Buttery introduced EXHIBIT 7 (Consumer Price Index) explaining the source material for preparation of Exhibit 7 is the monthly circulars from the Depart- ment of Labor Standards. Mr. Buttery introduced EXHIBIT 8 (Cash Return on Value) and EXHIBIT 9 (Cash Return on Page 5 Mobilehome Rent Review Board �ieeting - April 11, 1985 Actual Equity Investment). At this time, testimony was heard from the audience. PAUL BEAUVIAS' TESTIMONY: Mr. Paul Beauvias of Creekside Mobile Home Park spoke on behalf of the Chumash Home- owners Association questioning Mr. Lefler regarding the purchase of Chumash Village, em- ployees' duties and ownership of LaCumbre Management. Mr. Beauvias directed a question to Mr. Buttery in reference to the reason for pur- chase of Chumash Village and asked Mr. Taylor if he had read the article from "The Calif- ornian" (EXHIBIT 10) entitled "Mobile Home Parks are Top Investment". Following Mr. Beauvias' statements, his questions were addressed by Mr. Lefler, Mr. Buttery and Mr. Taylor respectively. Mr. Buttery requested that comments off-the-record by the audience be strictly limited. DAVID BRYMER'S TESTIMONY: Mr. Olpin called David Brymer, Past President of Chumash Village Homeowners Associa- tion and eleven year resident of Chumash Village to make a presentation. EXHIBIT 11 (Dated April 11, 1985 -Research relating to history of rents in Chumash Village). A number of questions were asked of Mr. Brymer by Mr. Buttery as well as the Board re- garding Exhibit 5 and Exhibit 11. The discussion included the past survey and possible purchase of Chumash Village by the tenants before it was purchased by Chumash Village In- vestments, the utilities included in space rent, rent regulations and increases. Due to the late hour, testimony was closed at this time. NEXT MEETING: The next meeting will be on Thursday, May 23, 1985 at 3:00 p.m. with a dinner break at 5:30 and reconvention at 7:00 p.m. The meeting will be held in Council Chambers. AF)AM1RNMFNT- The meeting was adjourned at 9:40 p.m. Respectfully Submitted, v c_ Lois Barton, Recording Secretary Mobile Home Rent Review Board