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HomeMy WebLinkAbout12/15/1986 - MINUTES 4.97 CITY OF PALM SPRINGS CITY COUNCIL MINUTES DECEMBER 15, 1986 An Adjourned Regular Meeting of the City Council of the City of Palm Springs, California, was called to order by Mayor Bogert, in the Auditorium of the Palm Springs High School , 2248 E. Ramon Road, Palm Springs, California, on Monday, December 15, 1986, at 7:30 p.m. ROLL CALL: Present: Councilmembers Apfelbaum, Birer, Foster, Smith and Mayor Bogert Absent: None The meeting was opened with the salute to the Flag and a moment of silence. Mayor stated that the purpose of the meeting was limited to the single public hearing. PUBLIC HEARING: 1. GUIDELINES FOR HARDSHIP RENT INCREASES Recommendation: Rent Review Commission recommends that the Council repeal Guideline 101(c)(xii ) of Guidelines for Hardship Rent Increases as adopted by City Council Resolution 14799. City Attorney stated that the guideline proposed for repeal permits consideration by the Rent Review Commission of increases in purchase dollar's interest as an expense in determining hardship rent increases. Mayor inquired if anyone wished to be heard. ' Peter Shapiro, El Dorado Mobile Homeowners Association, restated comments he had made at previous meetings; and stated that any pass-through is unacceptable because of (85) the rent control initiative, which he believes violates the right given under Section 10 of the Initiative. He also relayed the homeowners attempt to purchase the El Dorado Park, his previous comments about the level of poverty in the park, and cyclical nature of the pass-through, i .e. , purchase the property, raise the rents to cover debt service, sell the park, etc; and stated that there is legal precedence to prohibit the pass-through of this expense. He urged that the guideline be repealed. Odie Lee, resident of Sahara Park, President of the Desert Political Action Association, stated that the guideline would dilute the law, and not protect the tenants from rapid rises in rents; and urged that the Council respect the court decision regarding Palacio de Anza. He asked that various park and apartment tenants stand and be recog- nized. Percy Aucoin, 131 Calle de Collado, Palm Springs View Estates, stated that the Council is fully aware of this issue, and urged elimination of the pass-through. Council Minutes ti F? 12-15-86, Page 2 1. GUIDELINES (Continued) Roger Oscar, 2286 Junipero, #21, President of the Coachella Valley Apartment Association (owners) , stated that his units are not subject to rent control , but there are units across the street from him which are rented for $250 per month, and attract an undesirable element to the neighbor- hood; that he has tried to sell his property, at less than what it cost him to build; that more stringent rent control guidelines will make the situation more difficult for those who are trapped in apartment ownership; that as rents are artificially held down, the more affluent will move down valley, as the less affluent move into the neighborhood; that the City has not had its share of building or influx in other areas as experienced by down valley communities; that there must be some way to accommodate the needs of the present tenants, and those of the residents in the future; and that the Commission recommended allowing for vacancy decontrol of rents, which ultimately would resolve the problem. Franz Fischer, Real Estate Appraiser for mobilehome parks, stated that owners have had to take new mortgages, for various reasons, some because of short term financing, or refinancing; that loans are not assumable, and because of low interest rates currently available, it can be to the tenant's advantage; that there may be a negative effect on anyone who relied on the guidelines in making a decision to purchase property; that the cost of capital debts is passed through, therefore, it would make sense to have the concept acceptable on a general basis, i .e. . . , pass- through of the mortgage interest; that many of the properties are of good quality, and as the value of the park increases, so does the value of the mobilehome, and he did not consider it "poverty" if the coach is valued at $60,000-$80,000. Lucille Vale] , Past President of the Coachella Valley Apartment Association, stated that for tax purposes, opera- ting expense includes interest, and it should be a deduction on any other accounting procedure; that the market place will determine if rents are too high; and that she did not think the real concern was that if a property is sold, the rents will automatically increase. Allen Perrier, Attorney representing George Oakes, stated that the court decision was that the guidelines were not hard and fast rules, and the Commission did not have to follow them; that he believes a formula approach to rent control is acceptable; that Mr. Oakes was shown the guide- lines by the Assistant City Attorney, prior to purchasing the Palacio de Anza, which provided that the purchase dollar interest was an expense for determining entitlements to hardship rent increases, and on the understanding that he could apply for such an increase, he purchased the property, invested $1.9 million, lost $107,000 in the first year, and applied for the increase; that the Council should recognize those who purchased property, with good faith reliance on the guidelines; that the Commission's minority report should be considered, and analyzed, which is an attempt at comparability; and that it should be recognized that rent control does not apply to all units in the City, i .e. , not to Indian Lands or units which rented for $450 or more on the specific date in 1979. Council Minutes 12-15-86, Page 3 1. GUIDELINES (Continued) Jim Goldstein, owner E1 Dorado Park, stated that he purchased the property under the premise that the rules in affect would govern the rent that would take place in the park, and considers it unfair to apply other rules after he purchased it; that if the CPI were applied to the rents at El Dorado, since 1977, the rents would be brought to l;he level he is asking for at this time; that he was sympathetic to those who cannot afford the rent increase, and would be agreeable to implement an assistance program, administered by an outside, independent source, so he would not be in a position of determining who would qualify; that there is precedence for this at De Anza Park; that inference has been made to something "fishy" about his purchase, and he fell: the facts were somewhat distorted; that at the time he made his offer to purchase the property, it was the highest offer acceptable to the seller; that the debt service is a cost of doing business for income properties, and it is extremely critical that it be considered in regard to future rent increases. Paul Selzer, Attorney, Best, Best & Krieger, representing Mr. Goldstein, stated that the Court has rules that the guidelines can or cannot be followed, posing a dangerous situation for everyone, because the philosophy of individual Commissions will determine what will be acceptable one time, and what will be acceptable another, time; that such seesawing will lead to constant litigation and expense to everyone; that the original initiative was litigated, and the court rules that because it did not. include hardship or a commission, it would be invalid; that the Council , corrected those two areas; that owner's are saying it is not fair to change the rules after the fact; that the Commission suggested looking at a maximum amount to pass-through, also vacancy decontrol ; that the ordinance creates two different classes of owners, and if the pass-through is not allowed, other improvements will not go in; and suggested that an independent "Price Waterhouse" type firm be retained to advise the Council . Mr. Shapiro stated that nothing said was meant to be con- strued as suggesting that there was something under the table about Mr. Goldstein ' s purchase; that rent control does not apply to anything built after 1980; and that Mr. Goldstein confirmed that he purchased the property because of the pass-through provision. Mr. Perrier stated that Mr. Oakes did rely on the guidelines in making his decision, which he considered that anyone who was going to make such a purchase, would assess the facts, and seek answers to any questions before making such an investment. Councilman Smith stated that the voters approved rent control ; that it provides that the Council cannot approve anything that reduces protection of the tenant; that the Commission concluded that the guideline does reduce that protection; and that he agreed with the Commission and believed it should be repealed. Councilwoman Apfelbaum stated the pass-through in the guidelines is not fair to the tenants; that it also is not fair to the landlord to have relied on the rules, only to have them pulled out from under, them; and that the guidelines need to be fair to both sides. Council Minutes 12-15-86, Page 4 1. GUIDELINES (Continued) Councilman Birer stated that the Ordinance was originally badly written, and would haunt the future; that he does not believe in rent control ; that the market settles most problems; that the voters approved rent control , which included prohibition from diminishing the right to this type of protection; that there should be some kind of relief for those who bought property in reliance on what I has turned out to be an unsatisfactory condition, and J some compromise must be found, recognizing that not everyone will be satisfied; that if decent housing is going to be available, there must be motivation for the owner to make improvements; that he agreed with the "seesaw" con- cerns about the guidelines, and favored having the City Attorney pursue the idea of some form of assistance to a person who buys in good faith, a level of return on investment to insure maintenance of the property in a manner that everyone wants it kept; that he would like the matter of how the entire problem is handled to be reconsidered in some manner; that he does not believe that anyone should buy a property, and then come to the Commission with a set of figures to justify rent increases as in the case of Palacio de Anza, but there must be some- thing that allows both the landlord and tenants to live well ; and perhaps the solution is in maximum comparable, or something along those lines. Mayor stated that he believes the type of increase proposed by Palacio de Anza violates the intent of rent control , and he would favor eliminating the guideline. -- Councilman Foster agreed with Mr. Birer, and stated that there must be some compromise, and landlords should not be allowed to take advantage of the situation; that he would like the Council to review the matter with the Rent Review Commission, and find a resolution that will be as fair as possible, recognizing that not everyone will be happy. Resolution 16072, repealing Guideline 101(c)(xii ) was presented; after which, it was moved by Smith, seconded by Bogert, and unanimously carried, that Resolution 16072 be adopted. City Attorney to pursue approach to address Council concerns above noted. ADJOURNMENT There being no further business at 8:45 p.m. , Mayor declared the meeting adjourned. G' r JUDITH SUMICH City Clerk