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sr-072412-8aID _dm 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. 1 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. 2 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 3 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)