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2016-03-01 Continued 02-16 CC MinutesContinued February 16, 2016 Meeting Alameda City Council March 1, 2016 1 MINUTES OF THE CONTINUED FEBRUARY 16, 2016 REGULAR CITY COUNCIL MEETING TUESDAY- -MARCH 1, 2016- -7:00 P.M. Mayor Spencer reconvened the continued meeting at 5:39 p.m. ROLL CALL - Present: Councilmembers Daysog, Ezzy Ashcraft, Matarrese, Oddie and Mayor Spencer – 5. Absent: None. CONTINUED REGULAR AGENDA ITEM (16-072 Continued) Summary title: Related to the Rent Review, Rent Stabilization and Limitations on Evictions Ordinance Consider: 1) A Resolution Adopting Policy Concerning Capital Improvement Plans (CIP), and 3) An Appropriation of Funds. (16-072A Continued) Adoption of Resolution Adopting Policy Concerning Capital Improvement Plans (CIP). Not adopted; and (16-072B Continued) Appropriation of $300,000 from the General Fund to Fund a Rent Program Fee Study and to Cover the Cost to Administer the Rent-Related Programs through June 30, 2016. Mayor Spencer proposed re-opening the public comment from the February 16th meeting for students to speak and be able to leave the meeting early. Councilmember Ezzy Ashcraft inquired how much time did the students request to speak, to which Mayor Spencer responded six minutes. Councilmember Oddie stated the first reading has already been passed ; comments would not be germane; Council is deciding about the appropriations and CIP tonight; the public hearing portion of the item has been closed and a vote has been taken. Mayor Spencer stated the issue is broadly connected to rent; Councilmembers can weigh-in. Councilmember Ezzy Ashcraft stated tonight’s agenda informs the public that there will be no additional public comment because the item was continued from February 16 and the public comment was closed; Council should not carve out an exception; she is concerned that there could be members of the public watching who would have come to speak as well, had they known Council was going to make an exception and re -open the public speaking. Mayor Spencer stated the public is welcome to come at 7:00 p.m. to speak on the rent issue on the regular agenda; inquired whether a motion is required on the issue. Regular Meeting Alameda City Council February 16, 2016 2 The Assistant City Attorney responded only a consensus of the Council is required, but that a motion may be the best way since it seems the Council is divided on the issue. Vice Mayor Matarrese moved approval of re-opening the public comment and allowing the youth to speak. Councilmember Daysog seconded the motion which carried by the following voice vote: Ayes: Councilmembers Daysog, Matarrese, and Mayor Spencer – 3. Noes: Councilmember Ezzy Ashcraft – 1. Abstention: Councilmember Oddie – 1. Expressed support for the Alameda community during the rent and housing crisis : Jay Feria, San Leandro. The Community Development Director gave a brief presentation. Mayor Spencer suggested discussing the CIP first. In response to Councilmember Ezzy Ashcraft’s inquiry, the Community Development Director stated that she did not have the revised language until Friday, thus hardcopy was not provided to the Council. In response to Mayor Spencer’s inquiry, the Community Development Director stated the language now reads: “a capital improvement, for purposes of the capital improvement plan policy.” Mayor Spencer inquired whether the eight words are the only change, to which the Community Development Director responded in the affirmative. Councilmember Oddie inquired who would determine whether improvements are mandatory, to which the Community Development Director responded the Program Administrator. Councilmember Oddie inquired if the Council would be providing guidance to the Program Administrator, to which the Community Development Director responded in the affirmative. Councilmember Oddie inquired whether any provisions allow the tenant to move back in when the repair is done. The Community Development Director responded the affirmative; stated the tenant can be temporarily relocated if there is a vacant unit on site ; if there are no vacant units, tenants will be permanently relocated and receive the relocation benefits; the tenant could return to the improved unit if desired. Continued February 16, 2016 Meeting Alameda City Council March 1, 2016 3 Councilmember Oddie that stated he is concerned that the provision of returning to the improved unit is not spelled out in the plan; there are no time limits on improvements; inquired how will a reasonable improvement and time frame be determined. The Community Development Director responded the Program Administrator would render judgments on the CIP, including the decisions regarding appropriate rent increase, whether or not a temporary or permanent relocation is required, and the length of time reasonable to make the improvements. Councilmember Oddie stated that he is concerned there are no standards; a temporary relocation could turn into a huge loophole for mass evictions if the improvements take an excessive amount of time; he would like to see a provision allowing a tenant to move back in to the improved unit without an excessive amount of time. In response to Councilmember Ezzy Ashcraft’s inquiry, the Community Development Director stated that she finished the CIP portion of the presentation. Mayor Spencer stated Council agreed to bifurcate the CIP and appropriation issues since they are two separate votes. Vice Mayor Matarrese stated the termination of tenancy and relocation should be a mediated process; every case is different; a City Program Administrator be a daunting task; temporary relocation depends on the case and the relationships between the landlord and tenant; that he strongly believes in a mediated, instead of mandated, approach; there is some protection of limiting activity by presenting a real plan. The Community Development Director stated a staff person approving a CIP is more appropriate because there are technical aspects to the review and approval of a CIP ; a Program Administrator has the expertise that the RRAC does not; each proposed CIP would be evaluated on its merits alone so the process would be done on a case -by- case basis. Councilmember Ezzy Ashcraft stated that she understands Vice Mayor Matarrese’s proposal, but that she would be reluctant to have items decided by the RRAC; suggested a mediator instead. The Community Development Director stated a staff person who would have the technical expertise has been proposed, but if Council decides a mediator could contribute to the analysis of the technical documents, staff could contract for the service. Councilmember Daysog inquired whether only the portion within the prime interest rate is subject to be recovered by rent. Regular Meeting Alameda City Council February 16, 2016 4 The Community Development Director responded in the affirmative; stated the prime rate plus 1% is a formula based on the standard business interest rate for renovation loans. In response to Councilmember Daysog’s inquiry, the Community Development Director stated the owner of 470 Central Avenue stated his interest rate for his balloon l oan is 10%; the proposed formula prevents rewarding business decisions that do not make sense to the tenants; a bank that offers commercial construction loans as a routine part of doing business would have a good interest rate; she does not want to encoura ge high interest rates that would drive up rent. Councilmember Daysog inquired whether staff sensed that a landlord seeking renovations in the millions of dollars will go after a higher interest rate. The Community Development Director responded in the negative; stated that it could happen, which was the case for 470 Central Avenue; the owner had a proposal to evict all tenants to do substantial rehab ilitation which included a doubling of rents due to the financing he had arranged; the financing structure the owner obtained to undertake substantial rehabilitation was not appropriate; staff was looking for standard business procedures. Councilmember Daysog stated the language should be re-written to capture various possibilities. Councilmember Oddie stated there are one-off circumstances; there should be some mediation if the tenant would like to return; issues should not be resolved at a public hearing or by the RRAC; having a trial or pilot program is a good opportunity, especially if a tenant wants to return; there are a lot of combinations to deal with in the interim period. The Community Development Director inquired whether Councilmember Oddie is proposing a mediator who could handle the CIP and mediate temporary relocation, to which Councilmember Oddie responded in the affirmative; stated having a mediator would give Council the opportunity to mediate evictions on a trial basis. Mayor Spencer stated the use of the word "landlord" instead of “housing provider” should be consistent. In response to Mayor Spencer’s inquiry, the Community Development Director stated staff reviewed City of Berkeley and City of Los Angeles as a model for the CIP program. Mayor Spencer inquired whether other cities have a staff person, to which the Community Development Director responded in the affirmative; stated most cities with rent control have a staff hearing officer; Alameda proposes a contract hearing officer. Continued February 16, 2016 Meeting Alameda City Council March 1, 2016 5 Mayor Spencer stated the position would require expertise; inquired whether it would go through the Planning Department. The Community Development Director responded it would go through the Program Administrator; stated staff is hoping the Housing Authority would administer the program; the Housing Authority would hire staff with the expertise. In response to Mayor Spencer’s inquiry, the Community Development Director stated there would be coordination with the Planning Department as permits would be the basis to understand the CIP valuation and project time length. Mayor Spencer inquired what expertise is needed for a hearing officer versus a mediator, to which the Community Development Director responded the hearing officer and mediator could have the same skill set; stated the person would have to be familiar with the construction and bidding process and have an understanding on how to calculate the interest rate for the allowable rent increase. Mayor Spencer stated determining the financing is a separate issue from determining the length of time for a project; the Planning Department is familiar with how long it takes to complete the jobs. The Community Development Director stated the Planning Department does not typically weigh-in or opine about the length of time of a project. Mayor Spencer stated the interest rate should be based on the real n umber that is being financed. The Community Development Director stated interest rates change all the time; the idea is to set a formula. Mayor Spencer stated the landlord should find the best interest rate possible; the rate information plugged into the formula should be the actual number. In response to Mayor Spencer’s inquiry, the Community Development Director stated a tenant who notifies the landlord that they would like to remain in their unit after improvement have been made could be temporarily r elocated to an available vacant unit onsite; the tenant could move back into the renovated unit and pay the higher rent; if there is no vacant unit, the tenant would be permanently relocated. Mayor Spencer stated the tenant should be able to come back to the renovated unit whether or not the landlord has another vacant unit for a temporary relocation; the unit would eventually be available and the tenant should have first right of refusal. The Community Development Director stated one criteria when evaluating a CIP would be to hash out the temporary relocation. Regular Meeting Alameda City Council February 16, 2016 6 In response to the Interim City Manager’s inquiry, Mayor Spencer stated that she is referring to the tenant’s option to return to the renovated unit; relocation assistance is also included in the proposal. Councilmember Oddie stated there is a precedence that the tenant should be compensated for loss of use of their unit during a temporary relocation as in situations like mold remediation where the tenant is not at fault. The Community Development Director stated if no temporary relocation is available, permanent relocation is provided. Mayor Spencer stated that she prefers to have the ability for the tenant to return regardless of the relocation situation; the caveat being the repairs should be done in a timely manner. Councilmember Ezzy Ashcraft stated every situation is different; she favors the proposal in cases where the tenant may want to return; depending on the circumstance, a negotiation could be done with a mediator; cautioned about limiting the length of repairs, especially on older homes that need special supplies ; stated property owner’s hands should not be tied inordinately; rather than a set formula for the interest rate, the policy should not penalize building owners for improving old and decaying buildings, which might require a loan with an unfavorable interest rate; a set formula is too cookie-cutter. Vice Mayor Matarrese stated he would like two things: 1) termination of tenancy and evictions should be subject to mediation; 2 ) property owner must prove any renovation; he strongly supports mediation, which the ordinance does not contemplate; a CIP should be subject to proof; no landlord wants their building empty during renovations; the proposal seems impossible to administrate. Councilmember Oddie stated that he would like to treat all parties equally; the tenant would be penalized if the landlord has bad credit and can only get unfavorable financing rates; perhaps there is a middle ground; he does not like using the word “penalty.” In response to Mayor Spencer’s inquiry, Vice Mayor Matarrese stated that he thinks the interest rate should be the real rate; banks will not lend at a favorable rate if a building is dilapidated. Mayor Spencer stated Council would have to agree on principles and have the matter brought back; inquired whether there is consensus on imposing actual interest rate. Councilmember Daysog stated the interest rate formula by which all possible reimbursements would be done is hard and fast at prime rate plus 1; there are many different property types; the ultimate rate is subject to a variety of conditions and market factors such that instead of 7% plus 1, the real rate turns out to be 8.5%, which is not captured; the formula was created based on the situation related to the 470 Central Avenue property; he is looking for more flexibility regarding the interest rate. Continued February 16, 2016 Meeting Alameda City Council March 1, 2016 7 The Community Development Director stated that she understands the Council would like staff to return with a policy which reflects the actual interest rate. Mayor Spencer stated that is the consensus. In response to Councilmember Daysog’s inquiry, the Community Development Director stated without doubling the rents, the 470 Central Avenue project would be upside down. Mayor Spencer stated Council needs to assume everyone is acting in good faith. Councilmember Ezzy Ashcraft stated the issue falls along the same lines as documenting the actual construction work; these are the cases that are more appropriately handled in semi-private setting with mediation or arbitration, rather than at the RRAC. The Community Development Director stated the proposal is to have issues handled by a mediator or trained staff; the three key things should be accomplished by a CIP: 1) a mechanism for approving the work; 2) setting the allowable rent increase; and 3) resolving any relocation issues. In response to Mayor Spencer’s inquiry, the Community Development Director stated the proposal states CIP issues would be handled by staff, but does not specify who the staff is; the Program Administrator should determine who the best qualified staff would be to handle the situations, based on training and expertise, which could be a skill set to search for in a staff person. Vice Mayor Matarrese stated the CIP is a technical exercise; the relocation is a negotiation; the two issues could be understandable if separated and described better. In response to Councilmember Oddie’s inquiry, the Community Development Director stated that she understands the distinction being requested, but does not think there needs to be two separate people; she understands the Council’s desire is to have mediation. Councilmember Oddie requested a recap of the Council direction, to which the Community Development Director responded staff would modify the proposal to include the eight word definition of a capital improvement, language on the interest rate being the actual rate of the loan secured, more guidance on whether or not the proposed work triggers the need for relocation, a negotiation process for discussing options for temporary relocation beyond just a vacant unit on site, and consider a cap on temporary relocation and fees if improvements would take longer to complete. In response to Councilmember Ezzy Ahscraft’s inquiry, the Community Development Director stated staff would return to Council with a revised plan on April 5 th to avoid a Regular Meeting Alameda City Council February 16, 2016 8 gap in coverage of the moratorium and so there would not be any evictions before the CIP is in place. Appropriation and Fee Study: The Community Development Director continued the presentation. In response to Councilmember Ezzy Ashcraft’s inquiry, the Community Development Director responded the three full time staff being considered includes two attorneys and one paralegal. Councilmember Ezzy Ashcraft stated that she would like to see comparison done on what it would cost to outsource the work; benefits paid for a staff person need to be factored into cost. The Assistant City Attorney stated the cost estimate is very conservative; the cost is based on a dollar perspective, not a body perspective; the intent would be to hire outside counsel as needed in the initial stages of the program; a job allocation would be brought before Council at a later time if staff determines there is a need for full -time staff. In response to Councilmember Ezzy Ashcraft’s inquiry, the Assistant City Attorney stated the Full Time Estimate (FTE) positions would include an advice counsel to help educate landlords and tenants on the program, supported by a paralegal; and one litigator specializing in the area. Councilmember Oddie inquired whether Council has to approve the $300,000 appropriation before second reading of the ordinance, to which the Community Development Director responded in the affirmative. Vice Mayor Matarrese stated the appropriation has to be administered between now and June; if something changes, the amount could be unencumbered; the budget is conservative. Councilmember Oddie stated that he is hoping there are different options when the study is completed. Councilmember Daysog stated that he does not support a fee study; Council should find the money within the budget for the program; it is fundamentally unfair to impose fees on small mom and pop landlords. Mayor Spencer stated that she is concerned about who should bear the cost of the program; she would like to see arbitration beyond RRAC be shared between the parties at a minimum of 25% and would like the focus to be on meaningful participation at the RRAC level. Continued February 16, 2016 Meeting Alameda City Council March 1, 2016 9 The Interim City Manager stated the fee study is going to indicate how much the program will cost, not who will pay for the program; staff would decide who will pay. In response to Mayor Spencer’s inquiry, the Community Development Director stated the assumption for the number of arbitration cases is 20, which is $90,000; paying for the hearing officer process could be reviewed after the fee study analysis. Mayor Spencer stated the issue is not a simple landlord/tenant one; the issue is a community issue; some of the money should come from the General Fund. In response to Councilmember Ezzy Ashcraft’s inquiry, the Community Development Director stated staff will look at the whole range of options since there is not consensus of the Council on the program fees. Councilmember Daysog stated the fee structure is potentially split; recommended the tenant write a check to City Hall instead of rolling the fee into the rent ; stated the tenant would understand the program is City-run. Councilmember Oddie moved approval of the appropriation of $300,000 from the General Fund to fund a Rent Program Fee Study and to cover the cost to administer the rent-related programs through June 30, 2016. Councilmember Daysog suggested an alternative to bifurcate the motion. Mayor Spencer inquired whether Council would agree to two separate motions. Councilmember Ezzy Ashcraft responded that she would prefer to keep one motion. Vice Mayor Matarrese seconded the Councilmember Oddie’s motion. Mayor Spencer stated a Councilmember can request to bifurcate a motion in order to vote yes on one and no on the other. Vice Mayor Matarrese withdrew his second in favor of bifurcation. Council Member Daysog moved approval of the appropriation of $250,000 from the General Fund to cover the cost to administer the rent-related programs through June 30, 2016. Vice Mayor Matarrese seconded the motion which carried by unanimous voice vote – 5. Vice Mayor Matarrese moved approval of appropriating $50,000 from the General Fund to fund a Rent Program Fee Study. Councilmember Oddie seconded the motion which carried by the following voice vote: Ayes: Councilmembers Ezzy Ashcraft, Oddie, Matarrese, and Mayor Spencer – 4. Regular Meeting Alameda City Council February 16, 2016 10 Noes: Councilmember Daysog – 1. ADJOURNMENT Mayor Spencer adjourned the meeting at 6:55 p.m. Respectfully submitted, Lara Weisiger City Clerk The agenda for this meeting was posted in accordance with the Sunshine Ordinance.