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HomeMy WebLinkAbout10-088-1986 MHRRB MinutesMUM.- A 41M. U11111�_®r TAPE #1 aty sAn 990 Palm Street/Post Office Box 8100 • San Luis Obispo, CA 93403-8100 M I N U T E S MOBILEHOME RENT REVIEW BOARD OCTOBER 8. 1986 I WELCOME/INTRODUCTIONS --------------------- Acting Chairperson Denny Wheeler declared the regular meeting of the Mobileho■e Rent Review Board come to order at 1:35 p.m. with the following in attendance: BOARDMEMBERS: Barlow. Label. Wheeler. Wright STAFF: Henderson. Kemper II. APPROVAL -OF THE MINUTES -OF SEPTEMBER 25. 1986 ------------------------------------------- The minutes of the meeting of September 25. 1986 were postponed for approval to the next meeting to be held on October 16, 1986. III. REVIEW -OF-PACKET -------------- Mr. Henderson reviewed the packet presented to the Duard, which included: 1. an information item provided by Adele Raymond, re: "Uniprop Manufactured Housing...": 2. Minutes and Agenda. IV. CONTINUATION_ OF SILVER_ CITY -APPLICATION ------------ -- ------ --------------- Prior to moving to the summation portion of the hearing, the Board opened -up the hearing to public testimony. Respondents were instructed to keep their comments brief and non-repetative. The first to speak was Mr. Dick Clark, a Silver City resident. He spoke -out against the application, refuting the methodology of using comparable expenses of other parks as a justification for a rent increase. The only other respondent was Mr. Edgar Allen Poe, also a Silver City resident. He too spoke -out against the application, using a comparison involving Laguna Lakes Mobilehome Park. The Board then closed the hearing to any further public input. The Board then briefly questioned Mr. Waters, appraiser, in order to clarify their understanding concerning the income statement of Silver City. The Board spent some time labeling the various exhibits with the following numbers: la.-ld.: 2 - 17. MHRRB Minutes - October 8. 1986 Page 2 IV. CONTINUATION OF-SILVER-CITYAPPLICATION --------------- ------ ---- - -- (continued) Mr. Dennis Law, attorney for the owners. first rebutted Mr. Poe's presentation before beginning his final summation. TAPE #2 Mr. Law. in his summation, explains that the fundamental concept here pertains to the "fact" that Silver City's space rent was substantially below market as well as comparable local rent among sobilehome parks when rent stabilization was adopted in March of 1982. It was his reasoning that San Luis Obispo's Rent Stabili- zation Ordinance does nct account for this problem, and thereby allows tenants of the applicant's park to enjoy such a (fixed) low space rent. to the detriment of the owners. Mr. Law stated this situation led the owners to the Board with an application for an increase in space rent, based on the owners' right to a fair and reasonable return on their investment. TAPE #3 Mr. Law reviewed for the Board the three approaches presented in the application. all which he felt indicated that the present space rent at Silver City was disadvantageously low with respect to achieving a fair and reasonable return on investment. Mr. Law also commented on a court case. Hall v. Santa Barbara ,(1986). which he felt was directly relevant to this hearing. At this point. the Board requested that the City Attorney, Roger Picquet, present his interpretation of the decision handed down in that case. Mr. Law concluded his summation requesting the Board to confirm the Silver City application. He asked, though. in the event the increase outlined in the application be denied. that the Board approve at least a "bare minimum" increase (over the next three years) in the range of $185 - $209. In beginning his summation. Mr. Ed Olpin. attorney for the tenants, focused on the "subjective and inflated" nature of the appraisal valuation concerning Silver City which was presented as evidence in justification of a space rent increase. Mr. Olpin's basic line of reasoning held that the owners had in the past, and were presently, receiving a fair and reasonable return on their investment. Mr. Olpin systematically discounted the three approaches followed in the appraisal, which included the: 1. Cost Approach: 2. Market Approach; and 3. Income Approach. He seemed to find fault with each of these processes. both in methodology and substance. The Cost Approach was based on inflated values, the Market Approach MHRRB Minutes - 10-8-86 Page 3 IV CONTINUATION -OF -SILVER -CITY -APPLICATION (continued) represented the highest possible value of the property, not the present value, and the Income Approach undermines rent stabilization, he stated. TAPE #4 Mr. Olpin also emphasized that many of the conclusions reached in the subject appraisal report are based on the assumption of a non -rent control environment, which clearly contradicts the fact that the subject property/mobilehome park resides under the jurisdiction of a rent stabilization ordinance. He then suggested to the Board that the only "fair" formula to utilize in assessing whether the owners were receiving a fair and reasonable return on their investment was the "Maintenance of Net Operating Income." Concluding that the owners were currently receiving a fair market rent for their property, Mr. Olpin requested that the Board deny_ the Silver City application. The Board briefly questioned the applicant in order to clarify some uncertainties. Mr. Law requested time for rebuttal, as is standard procedure in judicial hearings of this type. The Board granted the request. Mr. Law agreed with Mr. Olpin's suggestion that the Board use. as a measuring device to determine the proper space rent. the method known as the "Maintenance of Net Operating Income." Mr. Law differed, though. in his analysis of how that formula should be applied. He noted several ways in which the basic formula may be applied, while underscoring two of its failings. Mr. Law argued that the M.N.O.I. formula fails to account for inflation, and also does not consider whether rent and expense levels were at the proper level at the time the formula was applied. (The M.N.O.I. formula would set rent levels based on changes in the expense environment. as related to overall income [of the park].) Mr. Law suggested a few methods as ways to apply the basic M.N.O.I. formula, which, in his view, would remedy the inherent faults of the formula and thus provide the owners with a fair and reasonable return on their property. These methods were: 1. apply the inflationary indexes to the park's N.O.I. in 1982: or. 2. maintain a profit level equal to that which was earned when rent stabilization was adopted (1982). Mr. Law concluded that the first method would suggest a space rent of approximately $176. while the second method suggests $200 per month. In his conclusion, Mr. Law emphasized that all proper applications of the M.N.O.I. formula point to a monthly space rent higher than is currently being collected. MHRRB Minutes - 10-8-86 Page 4 IV. CONTINUATION -OF -SILVER -CITY -APPLICATION ---------------- ------------------- (continued) The Board took a break from 4:00 to 4:10 p.m.. The Board elected to take no further testimony and to begin deliberations and findings on the subject's application. The Board numbered an additional three Exhibits presented to the Board for the first time: *18, 19, & 20. The Board apologized to Mr. and Mrs. Nicas and moved their presentation to the first item on the agenda of the October 16th. meeting. V. ADJOURN The meeting was adjourned at 4:20 p.m..