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City of City Council Report
Santa Monica
City Council Meeting: July 24, 2012
Agenda Item: c _r4
To: Mayor and City Council
From: Marsha Jones Moutrie, City Attorney
Subject: Proposed Ballot Measure to Amend Provisions of the City Charter Related
to Altering the Method of Making the Annual Rent Control Adjustment to
Rent Ceilings
Recommended Action
Staff recommends that the City Council adopt the attached two resolutions, Resolution
A and Resolution B. Each resolution is related to placing a measure on the November
6, 2012 ballot, which would amend Title XVIII of the City Charter (the Rent Control Law).
Resolution A proposes changing the method for establishing the amount of the annual
general adjustment to rent ceilings for controlled units. The proposed measure would:
• Require that the general adjustment be based on a formula consisting of
seventy -five percent of the annual percentage change in the March to March
Consumer Price Index but limited to a range consisting of a minimum adjustment
of 0% and a maximum of 6 %; and
• Give the Rent Control Board discretion, after holding a public hearing, to impose
a dollar limit, within that 0 -6% range, which would be calculated using the same
formula that is employed when imposing such a limit under the existing general
adjustment formula.
In addition, Resolution A provides for the City Council to designate members to sign
arguments in support of or in opposition to the proposal and directs the City Attorney to
prepare an impartial analysis of the proposal.
Resolution B requests the County of Los Angeles to consolidate the General Municipal
Election, including the proposed City Charter Amendment, with the Statewide General
Election scheduled to be held on November 6, 2012.
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Executive Summary
On July 17 2012 Council considered a request by the Rent Control Board that Council
place on the November 6, 2012 ballot a proposed amendment to the City Charter
relating to the City's Rent Control Law. At that Council meeting Council directed staff to
prepare the appropriate resolutions to place the proposed measure on the November 6,
2012 ballot. Staff has prepared the resolutions as directed and the resolutions
(Resolution "A" and "B ") are attached to this staff report. Staff recommends that Council
conduct a hearing, hear and consider public testimony, and adopt the two resolutions.
Background
As described in reports submitted to the Council from the Rent Control Board staff and
from the City Attorney's Office on July 17, 2012, the voters last amended City Charter
Section 1805 in 1984. Section 1805 governs the annual general adjustment to the
ceilings on allowable rents for controlled rental units. Section 1805 (a) allows the Rent
Control Board, after holding a public hearing, to adjust the rent ceiling up or down for all
controlled rental units or for particular categories of units and to postpone the effective
date of the change. Subsection (b) presently requires the Rent Control Board to
generally adjust rents upward by granting landlords upward adjustments for actual
increases in utility costs and taxes and for increases in City "maintenance expenses ".
Subsection (b) also allows the Rent Control Board to generally adjust rents downward
for actual decreases in taxes pursuant to a formula of general application. Subsection
(e) currently applies to both individual and general adjustments. It authorizes the Rent
Control Board to adopt any lawful fair return standard. Subsection (e) also requires the
Rent Control Board to consider all factors relevant to the formula it employs.
For nearly thirty years, the Rent Control Board has implemented Section 1805 by using
a complex methodology known as the "component ratio to gross rent" formula.
However, over the years both the Rent Control Board and its staff have observed that
actual changes in expenses may be determined for only a small portion of landlords'
expenses considered under the current methodology. Further, the survey process
required to determine those expense changes is both costly and time consuming. The
Rent Control Board and staff believe that the present formula is so complex that it
makes results unpredictable and difficult to understand.
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As directed by Council, the proposed City Charter amendment would require calculation
of the general rent adjustment based on 75% of the annual percentage change in the
Consumer Price Index. The proposal would limit the adjustment to a range of zero to
six percent, and grant the Rent Control Board authority to impose a dollar amount limit
within the zero to six percent range, with the limit being calculated using the present
formula for calculating the maximum increase or ceiling.
Discussion
The attached resolutions to this report fulfill Council's direction that a measure be
prepared for consideration by the voters at the November 6, 2012 General Municipal
Election. The attached resolutions would allow the proposed amendments to the City
Charter to be placed on the ballot. The voters would be asked:
Proposition" ": Shall the City Charter be amended to allow the annual rent control
general adjustment to be based on 75% of the annual percentage change in the
Consumer Price Index, but limited to an adjustment between 0% and 6 %; and to give
the Rent Control Board discretion, after a public hearing, to impose a dollar limit, within
the 0 -6% range, calculated using the same formula employed when imposing a limit
under the existing general adjustment formula?
If adopted, this measure would make less complicated the annual rent control general
adjustment process. It would also make the annual adjustment methodology easier to
understand
The attached Resolution "A" also authorizes the City Council to submit arguments and
rebuttals concerning the measures. (One to five members may be designated.) And
this resolution directs the City Clerk to transmit a copy of the measure to the City
Attorney. It further directs the City Attorney to prepare an impartial analysis of the
effects of the measure on existing law and of the operation of the measure.
Arguments and rebuttals must be submitted in accordance with State Elections Code
Sections 9280 -9287 and Santa Monica Municipal Code Section 11.04.125. The
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Elections Official will set the deadline for submitting arguments at 14 days from the date
the election is called on the measure, and the deadline for submitting rebuttals to
arguments as 10 days after the deadline for submitting arguments on the measure.
Resolution "B" requests that the County of Los Angeles consolidate all aspects of the
General Municipal Election with the Statewide General Election, which will also be
conducted on November 6, 2012.
Council may choose not to adopt any of the resolutions and thereby avoid placing a
measure on the ballot.
Financial Impacts & Budget Actions
The cost of placing a measure on the ballot will be covered by the FY2012 -13 election
budget with costs paid for and reimbursed by the Rent Control Board.
Prepared by: Marsha Jones Moutrie, City Attorney
Joseph Lawrence, Assistant City Attorney
Approved:
Marsha Jones Mo
City Attorney
Attachments:
Forwarded to Council:
Rod Gould
City Manager
Resolution A— Resolution Proposing Placing on the November 6, 2012 General
Election a Measure to Amend the City Charter Altering the Method
of Making the Annual Adjustment to Rent Ceilings
Exhibit 1 - Proposed City Charter Amendment
Resolution B - Resolution Requesting County of Los Angeles to Consolidate
General Municipal Election with Statewide General Election to be
Held on November 6, 2012
Reference Resolution Nos.
10699 (CCS) and
10700 (CCS)