Title
Recommendation to Receive the Rent Program Regulatory Fee Study;
Adoption of Resolution Adopting a Program Fee to Implement and Administer the City’s Rent Review, Rent Stabilization and Limitations on Evictions Ordinance, as Amended, and Implementing Policies; and
Final Passage of Ordinance Amending the Alameda Municipal Code by Amending Various Sections of Article XV of Chapter VI Concerning (1) Review of Rent Increases Applicable to All Rental Units and Rent Stabilization Applicable to Certain Rental Units and (2) Limitations on Evictions and the Payment of Relocation Assistance Applicable to all Rental Units (eliminating “no cause” ground for eviction). (Rent Stabilization 265).
Body
To: Honorable Mayor and Members of the City Council
From: Jill Keimach, City Manager
Re: Recommendation to: 1) Receive the Rent Program Regulatory Fee Study; 2) Adoption of Resolution Adopting a Program Fee to implement and administer the City’s Rent Review, Rent Stabilization and Limitations on Evictions Ordinance, as amended, and Implementing Policies; and 3) Final Passage of Ordinance Amending the Alameda Municipal Code by Amending Various Sections of Article XV of Chapter VI Concerning (1) Review of Rent Increases Applicable to All Rental Units and Rent Stabilization Applicable to Certain Rental Units and (2) Limitations on Evictions and the Payment of Relocation Assistance Applicable to all Rental Units
BACKGROUND
Following the City Council’s adoption of the Rent Review, Rent Stabilization and Limitations on Evictions Ordinance (Ordinance) in March 2016, the City contracted with SCI Consulting Group (SCI) to determine the costs of administering the Ordinance and any related policies, such as the Capital Improvement Plan Policy, and to develop an appropriate fee that would cover the cost of the rent program. SCI is a public finance consulting firm with over 30 years of experience in helping public agencies in California with planning, justifying and establishing new revenues for public services and capital improvements.
SCI worked closely with the Alameda Housing Authority (Housing Authority), the Finance and the Community Development Departments and the City Attorney’s Office to understand all of the administrative and enforcement procedures necessary to implement the Ordinance. SCI prepared a Rent Program Regulatory Fee Study, which staff presented to the City Council on June 21, 2016, along with a recommendation to adopt a fee to fund the program made necessary by the Ordinance and implementing policies.
At that time, the Council chose to pay the Housing Authority to administer the Program for the first year with General Fund reserves. Council wanted to better understand the cost of the program before considering a fee and requested that the item be brought back after more data on the program and the cost to administer it were known.
At its April 7, 2017 meeting, the City Council authorized staff to prepare and present an updated fee study to the City Council at its June 6, 2017 meeting, with a recommendation that a fee be adopted effective July 1, 2017, to pay for the rent program beginning in the new fiscal year.
The requirement for a program fee is included in the amended Ordinance at Section 6-58-170. The Ordinance amending the Rent Stabilization, Rent Review and Limitations on Evictions was introduced on first reading at the May 16, 2017 City Council meeting. Final passage of the Ordinance is scheduled for the June 6 City Council meeting. A redlined version of the Ordinance is attached as Exhibit 1.
This staff report addresses both the adoption of a program fee as well as final passage of the ordinance amending the Rent Ordinance.
DISCUSSION
Tonight, under a separate agenda item, the City Council is being presented for its consideration a new, three-year Program Administration Services Agreement with the Housing Authority to administer the Rent Stabilization Program through June 30, 2020. This Service Agreement is the result of a competitive Request for Proposals (RFP) process. The Housing Authority’s preceding administration of the Program has allowed staff to refine policies and procedures and revise the hours needed for the program activities. By selecting the Housing Authority as the Program Administrator, Council would approve a budget that reflects the best cost estimate to oversee the City’s Rent Stabilization Program while providing a high degree of service and attention to individual cases.
In addition to the costs associated with the services to be provided by the Program Administrator, there have been significant associated costs for the City Attorney’s Office to provide the legal support for the program. The City Attorney recently added a new attorney to its office to assist with the legal workload related to the Ordinance. It is appropriate for these costs to be paid in part by the beneficiaries of the program.
SCI used the Housing Authority’s budget and the additional associated costs to administer the program to prepare a revised Rent Program Regulatory Fee Study (see Exhibit 2). These total annual costs (determined to be $1,799,712) were then applied to all of the rental units subject to the fee (14,788 units) to fix an annual cost/fee per rental unit of $122 per unit.
On May 16, 2017, the City Council introduced an ordinance amending the Rent Review, Rent Stabilization and Limitations on Evictions Ordinance. The Ordinance now contains a provision establishing a Program Fee to be paid by the landlord, one-half of which can be passed onto the tenant.
The program fee would be charged annually to rental property owners on a per residential unit basis. The program fee will be billed at the same time as the business license fee (for those owners required to pay such fee) and billed July 1 of each year for those rental property owners, for example owners of single family homes that are rented, who currently do not pay a business license fee.
Staff also recommends, consistent with other rent stabilization programs that have a program fee, that property owners may pass up to fifty percent (50%) of the program fees to the tenant in equal installments over the course of twelve (12) months (or, if the fee is adopted, $5.08 per month), which amount would be excluded as rent when property owners are calculating the percentage rent increase.
Imposing the Program Fee and Annual Calculation
The SCI Fee Study found that the City Council adopted a robust rent stabilization and eviction protection program with a structure that is fair and well designed to limit the effects of rapid rent increases, and the associated risks of eviction, “without placing undue or onerous burden upon the City’s rental marketplace.”
To be successful, this program has to be fully funded and fully staffed. The Fee Study found that the proposed fee is reasonable and recovers the full costs associated with the administration and enforcement of the regulations for both rental property owners and residential tenants. Finally, the Fee Study found that the fee (with a portion paid by both the landlord and the tenant), is allocated in a fair or reasonable relationship to the payer’s burden on, or benefits received from, the City’s rent stabilization and eviction protection program.
If this Program Fee were not imposed on rental property owners and their tenants, the City’s General Fund would absorb the cost to administer the various programs, which would be an unfair burden on taxpayers of the community who neither own rental property nor are renters.
Therefore, staff recommends that the City impose an annual Program Fee of $122 per rental unit. Staff recommends that each year, the City should evaluate the actual costs versus estimates to determine whether or not the fee should be adjusted annually based on the change in the Consumer Price Index or if another comprehensive update is needed. The new fee would then be effective on July 1 of each year.
A rent program fee resolution has been prepared for City Council to adopt. This resolution will be effective immediately upon its adoption, but it will not be operative until July 1, 2017.
Final Passage of the Ordinance Amending Certain Provisions of the Rent Ordinance
In addition to adopting the program fee, staff is recommending final passage of the ordinance amending certain provisions of the Rent Ordinance. The ordinance was introduced on first reading at the City Council’s May 16 meeting. The ordinance makes a number of clarifying, housekeeping and other amendments to the Rent Ordinance, as well as the significant change of eliminating no cause terminations.
FINANCIAL IMPACT
In the event that a Program Fee is not adopted for the next fiscal year, there will be substantial cost to the General Fund. It is anticipated that the cost of implementing the program, as amended, will be approximately $1.6 million annually. This includes Program Administrator and City Attorney costs, but excludes the estimated $200,000 Department of Finance labor and services expenses that would have been necessary to oversee and implement the program fee.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
Adoption of this fee is consistent with the purposes and intent of the Ordinance, as amended, and implementing Policies.
ENVIRONMENTAL REVIEW
Under the California Environmental Quality Act (CEQA) Guidelines, a project does not include the creation of a government funding mechanism or other governmental fiscal activity that does not involve any commitment to any specific project that could result in a potentially significant physical impact on the environment. Therefore, the Council action to adopt this resolution to create a means to fund implementation of the Ordinance, as amended, is not a project under CEQA. Moreover, even if adoption of this resolution were a project as defined by CEQA (i.e., an activity that has the potential for causing a significant effect on the environment) where the activity shows with certainty that there is no possibility that the activity in question (the adoption of the resolution) will have any significant effect on the environment, the activity is not subject to CEQA, CEQA Guidelines, section 15061(b)(3). Here, there is no evidence that this resolution will have any effect on the environment.
Final passage of the ordinance amending the Rent Ordinance is not subject to environmental review because it is a continuing general policy and procedure making activity and therefore it is not a project under CEQA Guidelines, section 15378 (b)(2).
Additionally, final passage of the ordinance is exempt from further environmental review under the general rule in CEQA Guidelines Section 15061(b)(3) that CEQA only applies to projects that have the potential for causing a significant effect on the environment. As a series of text amendments and additions, it can be seen with certainty that there is no possibility that the ordinance will have a significant effect on the environment.
RECOMMENDATION
It is recommended that the City Council: 1) receive the Rent Program Regulatory Fee Study; 2) adopt a Resolution Adopting a Program Fee to implement and administer the City’s Rent Control, Rent Stabilization and Limitations on Evictions Ordinance, as amended, and implementing Policies; and 3) approve final passage of Ordinance Amending the Alameda Municipal Code by Amending Various Sections of Article XV of Chapter VI Concerning (1) Review of Rent Increases Applicable to All Rental Units and Rent Stabilization Applicable to Certain Rental Units and (2) Limitations on Evictions and the Payment of Relocation Assistance Applicable to all Rental Units.
Respectfully submitted,
Debbie Potter, Community Development Director
Financial Impact section reviewed,
Elena Adair, Finance Director
Exhibits:
1. Redlined version of Ordinance
2. City of Alameda, Rent Program Regulatory Fee Study, June 2017