REPORT TO THE MOBILEHOME PARK RENT REVIEW AND STABILIZATION COMMISSION January 9, 2024 FROM: ANDREW JANZ, City Attorney Office of the City Attorney BY: SARAH PAPAZIAN, Senior Deputy City Attorney Office of the City Attorney SUBJECT ..Title Actions pertaining to Fresno Estates LP's (Owner) rent increase application (Application) for Fresno Mobile Home & RV Park (the Park): 1. HEARING on the Application. 2. Take one of the following actions: i. APPROVE the full $75,900.00 rent increase requested by Owner; OR ii. APPROVE the 6.6% rent increase permitted automatically pursuant to Fresno Municipal Code (FMC) Section 12-2014, plus any increased properly substantiated government costs in excess of 5% of the previous 12 months' costs pursuant to FMC Section 12-2013, plus any additional amount determined to be just, fair, and reasonable pursuant to FMC Section 12-2012; OR iii. APPROVE only the 6.6% rent increase permitted automatically pursuant to FMC Section 12-2014, plus any properly substantiated increased government costs in excess of 5% of the previous 12 months' costs pursuant to FMC Section 12-2013. ...Body RECOMMENDATION Staff recommends that, after holding the public hearing, the Mobilehome Park Rent Review and Stabilization Commission (Commission) approve the 6.6% rent increase permitted automatically pursuant to Fresno Municipal Code (FMC) Section 12-2014, plus any properly substantiated increased annual government costs in excess of 5% of the previous 12 months' costs pursuant to FMC Section 12-2013, plus any additional amount determined to be just, fair, and reasonable pursuant to FMC Section 12-2012. EXECUTIVE SUMMARY On or about September 26, 2023, Fresno Estates LP (Owner), through General Partner Alan Heck, served the City of Fresno (City) with a copy of the 2023 rent increase application (Application) for Fresno Mobile Home & RV Park (the Park). On or about November 9, 2023, the Fresno Mobile Home & RV Park Residents' Committee (Residents), through Chair Jackie Atkins, served the City with a copy of the residents' voting results on the Application. On or about November 20, 2023, Owner served the City with a Request for Commission Proceedings pursuant to FMC section 12-2010(b)(2). In Form MRR 1-2 of the Application, Owner notated that the average rent of affected spaces was $632 and requested a total rent increase of $75,900. Of note, this form is required to be calculated based on the increase per space, so taking Owner's Application at face value indicates the $75,900 increase is being sought on a per space basis. Such an interpretation is implausible, but as Owner failed to properly calculate the sought rent increase on a per space basis, Staff is significantly hampered in evaluating the calculations and providing assessments to the Commission. Owner attributed the requested increase to three different sources: (1) 39.5% from the automatic rent increase tied into the Consumer Price Index for the previous year as authorized under FMC 12-2014; (2) 50% from the automatic rent increase tied to the automatic pass-through of annual government costs as authorized under FMC 12-2013; and (3) 10.5% from "comparable mobilehome spaces in comparable parks." On December 19, 2023, Residents served the City with a copy of their packet in opposition of the Application (Residents' Committee Packet), pursuant to FMC section 12-2011(d) and Commission Bylaws Article 4, Section 14. This report included a cover letter contextualizing the rest of the packet and concisely outlining each of the Residents' objections to the Application as detailed further below. Ultimately, following review of the Application and completion of the hearing, the Commission must determine (1) if the automatic increase amounts sought under FMC 12-2013 and 12-2014 were properly calculated and supported; and (2) what amount is a just, fair, and reasonable rent increase. At a minimum, that amount should include the 6.6% automatic increase and any substantiated increased annual government costs in excess of 5% of the previous 12 months' costs. BACKGROUND The City of Fresno Mobilehome Park Rent Review and Stabilization Ordinance (Ordinance) established the Commission to act as arbitrators when mobilehome park owners and residents could not come to an accord on a fair and reasonable rent increase. The Commission's purpose is twofold - both to protect mobilehome park residents from excessive rent increases, and at the same time provide mobilehome park owners a level of rent sufficient to provide a just, fair, and reasonable return on their investment and to cover increased costs of repairs, maintenance, rehabilitation, capital improvements, services, amenities, upkeep, and insurance. (FMC � 12-2002(b).) To perform this duty, the Commission must review the Owner's Application and any other documentary evidence submitted, then hold a hearing where both the Owner and the Residents have an opportunity to provide evidence of what amount would be a fair and reasonable increase in rent. The Commission may take up to ten days after the closing of the hearing to make a decision on the application. Commissioners may elect to schedule a special meeting within ten days to make the final decision. FMC section 12-2012 establishes the main relevant factors a "fair, just, and reasonable" rent increase can stem from. When applying for a non-automatic rent increase, Owners are required to assert which factors of section 12-2012 are relevant to their specific situation, and provide supporting documentation for each. FMC section 12-2014 establishes that mobilehome park owners are permitted to automatically raise their rent by 75% of the previous year's annual Consumer Price Index (CPI) once a year. This amount is not subject to vote by the park's Residents' Committee or adjudication by the Commission. For 2023, the automatic CPI increase was 75% of 8.8%, or 6.6%. FMC section 12-2013 establishes that mobilehome park owners are permitted to automatically raise their rent by certain government costs incurred in excess of 5% of the previous 12 months' costs once a year. The applicable government costs are municipal utilities, general property taxes, governmental fees (such as regulatory fees, processing fees, licenses and permits), special property assessments, and any charges levied under articles XIIIC and XIIID of the California Constitution. When calculating this amount, each cost must be addressed separately to determine if there has been a 5% or greater increase, and Owner must submit all supporting documentation as part of their annual Application. Usually, an Owner's pass-through of annual government costs under FMC section 12-2013 is not subject to review by the Commission. However, the Residents may object and trigger review by the Commission if (1) the increase is not from a government cost as defined in the Ordinance; (2) the Owner has not provided documentation supporting the rent increase; or (3) the amounts of the increase was not properly calculated. Summary of Application. Page 3 of the Application displays Form MRR 1-2: a summary of the relevant factors, including current average park rent, requested automatic increase amounts, and reasonings for non-automatic rent increase. Pages 4 through 10 display Form MRR 1-3: a breakdown of the monthly rent for each space and the desired rent increase, ranging anywhere from $25 to $500 per space. Page 11 is titled "Exhibit to Rent Increase Application" and features a list of six other mobilehome parks by name, address, and monthly rent, to substantiate the "fair, just, and reasonable" rent increase factor identified by the Owner as relevant: "[r]ent lawfully charged for comparable mobilehome spaces in comparable mobilehome parks." (FMC � 12-2012(c).) The eleven-page Application is accompanied by twenty-eight pages of additional supporting documents, illustrating the dialogue between Owner and Residents after the Application was submitted. An email chain from late September to early October shows that Residents contacted Owner for additional information, as required under the FMC (Application pages 13-15). In response, Owner provided a new list of eleven parks showing name, address, and monthly rent (Application page 16); an instructional page for Form MRR 1-3 issued by the City (Application page 17); the two letters sent by Residents requesting supporting documentation (Application pages 18-19); a copy of the 7/1/2022-6/30/2023 property tax bill (Application page 20); and a copy of the Application with a new column added into Form MRR 1-3 (Application pages 21-31). A second email chain from mid-October was submitted (Application pages 32-36), along with a copy of a Grant Deed for the Park's land (Application pages 37-39). As previously stated, it appears Owner inaccurately completed Form MRR 1-2, and did not write the requested increases under FMC sections 12-2012 (non-automatic "fair, just and reasonable") or 12-2013 (automatic "pass-through of government costs") on a per space basis. This failure significantly hampered Staff in evaluating the calculations and providing assessments to the Commission. Staff Analysis of Exhibit to Rent Increase Application Owner initially submitted a list of six other mobilehome parks. The list includes each parks' name and address, and asserts a monthly rent amount. No sources for any of the data is cited, and no corroborating documentation is included - the document merely concludes that it is "self-evident". Of note, three of the six parks listed are not within the City of Fresno: one is in Tollhouse, one is in Chowchilla, and one is allegedly in Yokuts (Squaw) Valley. Additionally, one of the Fresno parks, Blackstone North, does not have a Residents' Committee and is therefore not subject to the Ordinance. Below is a table as seen on pages 11 and 31 of the Application, as well as contextual information compiled by Staff. Park Address Monthly Rent Contextual Information Four Seasons Mobile Home Community 3138 W. Dakota Ave. Fresno, CA 93722 $765 Amenities include: Gated, Off-Street Parking, Playground, Clubhouse, Swimming Pool, Basketball Court, Billiards Room, Laundry Facilities, Fitness Center, Game Room, Library, Boat & RV Storage Fresno Mobile Estates 1898 E. Gettysburg Ave. Fresno, CA 93726 $765 Amenities include: Gated Swimming Pool, Laundry Facilities Blackstone RV Park 6494 N. Blackstone Ave. Fresno, CA 93710 $865 No Residents' Committee; not subject to Ordinance Amenities include: Laundry Facilities, Shower Facilities, RV Storage Squaw Valley Mobile Home 37575 Shadybrook Ln Yokuts Valley, CA 93675 $850 No mobilehome park could be found at this location. Tollhouse Market Mobile Home Tollhouse, CA 93667 $1,000 No mobilehome park by this name could be located. The Golfs RV & Golf Resort 5001 E Robertson Blvd. Chowchilla, CA 93610 $1,000 A mobilehome park named "The Lakes" was found at this location. Amenities at The Lakes include: Swimming Pool, Spa, Laundry Facilities, Shower Facilities Upon prompting by Residents, Owner subsequently provided a new list, featuring eleven other mobilehome parks (Owner's Exhibit). Below is a table including the data from Owner's Exhibit as seen on pages 12 and 16 of the Application, as well as contextual information compiled by Staff. Park Name Address Monthly Rent Contextual Information Alhambra II Mobile Home Park 7676 N. Fresno St Fresno, CA 93720 $800 * Amenities include: Off-Street Parking, Swimming Pool, Laundry Facilities. * Current Rent According to 2023 Rent Increase Application: $497.17. Ashwood Place (formerly Sunnyside) 5541 E Tulare Ave Fresno, CA 93727 $820 * Amenities include: Off-street Parking, Clubhouse, Swimming Pool, Laundry Facilities. * Both trash and water included in rent cost. * Current Rent According to 2023 Rent Increase Application: $481.18. Country Living Mobile Home Park 3550 N Duke Ave Fresno, CA 93727 $730 * Amenities include: Gated, Clubhouse, Swimming Pool, Spa, Billiards Room, Laundry Facilities, Library, Boat & RV Storage. * Both trash and water included in rent cost. * Current Rent According to 2023 Rent Increase Application: $656.28. Four Seasons Mobile Home Community 3138 W. Dakota Ave Fresno, CA , 93722 $765 * Amenities include: Gated, Off-Street Parking, Playground, Clubhouse, Swimming Pool, Basketball Court, Billiards Room, Laundry Facilities, Fitness Center, Game Room, Library, Boat & RV Storage. * Water included in rent cost. * Current Rent According to 2023 Rent Increase Application: $572.54. Fresno Mobile Estates 1898 E Gettysburg Ave Fresno, CA 93726 $765 * Amenities include: Gated Swimming Pool, Laundry Facilities. * Current Rent According to 2023 Rent Increase Application: $601.36. Sunset West Community 3187 N Parkway Dr Fresno, CA 93722 $760 * Amenities include: Clubhouse, Swimming Pool, Laundry Facilities, Showers, Restrooms, RV pull-through spaces . * Approximate Current Rent based on 2022 Rent Increase Application: $389.61. Blackstone RV Park 6494 N Blackstone Ave Fresno, CA 93710 $865 * No Residents' Committee; not subject to Ordinance. * Amenities include: Laundry Facilities, Shower Facilities, RV Storage. * Current Rent According to Management: $825.00. Green Acres Mobile Home Park 3051 N Mosswood Dr Fresno, CA 93722 $834 * No Residents' Committee; not subject to Ordinance. * Amenities include: Clubhouse, Swimming Pool. * Unable to reach Management to confirm Current Rent Stonegate Mobile Home Park 221 W Herndon Ave Pinedale, CA 93650 $777 * No Residents' Committee; not subject to Ordinance. * Amenities include: Clubhouse, Swimming Pool, Laundry, Spa, RV Parking. * Current Rent According to Management: $776.07. * Both trash and water included in rent cost. Three Palms Mobile Home & RV Park 1941 N Golden State Blvd Fresno, CA 93705 $705 * No active Residents' Committee; not subject to Ordinance. * Amenities include: Off-Street Parking, Swimming Pool, Laundry Facilities, Showers, Restrooms. * Unable to reach Management to confirm Current Rent Woods Manufactured Home Comm 1001 Sylmar Ave Clovis, CA 93612 $810 * Located in Clovis; not subject to Ordinance. Inaccurate Data Owner's Exhibit does not cite any sources for any of the data, and does not include any corroborating documentation. Staff therefore independently verified the average rents of the parks listed as best as possible. For the six parks subject to the Ordinance, Staff reviewed their most recently submitted Rent Increase Application. For the four Fresno parks not subject to the Ordinance, Staff contacted management to verify average base rent. Additionally, Staff included data from Midstate Mobile Manor, another park both subject to the Ordinance and in geographic proximity to Fresno Mobile Home & RV Park. As shown in the table below, there appears to be a significant discrepancy between the numbers provided in Owner's Exhibit, and those that Staff received directly from the parks in question. Park Name Owner's Assessment; Fresno Parks Owner's Assessment; Subject to Ordinance City Records/Park Contact; Fresno Parks City Records; Subject to Ordinance Alhambra II $ 800.00 $ 800.00 $ 497.14 $ 497.14 Ashwood Place aka Sunnyside $ 820.00 $ 820.00 $ 481.18 $ 481.18 Country Living $ 730.00 $ 730.00 $ 656.28 $ 656.28 Four Seasons $ 765.00 $ 765.00 $ 572.54 $ 572.54 Fresno Mobile Estates $ 765.00 $ 765.00 $ 601.36 $ 601.36 Sunset West $ 760.00 $ 760.00 $ 389.61 $ 389.61 Blackstone North $ 865.00 -- $ 825.00 -- Green Acres $ 834.00 -- -- Stonegate $ 777.00 -- $ 776.07 -- Three Palms $ 705.00 -- -- Midstate Mobile Manor -- -- $ 367.62 $ 367.62 Average $ 782.10 $ 773.33 $ 574.09 $ 509.39 Median $ 771.00 $ 765.00 $ 572.54 $ 497.14 Of note, the inaccuracy of average rents in Owner's Exhibit was one of the objections noted in Residents' Report. (Report page 2.) This is further detailed below, in "Summary of Residents' Committee Packet". Defining Comparable Parks: Ordinance Applicability and Proximity To determine an appropriate rent increase based on the comparison of Fresno Mobile Home & RV Park to other parks, it is important to first consider what factors make a park "comparable" for such purposes. The two pertinent elements in the present matter would be (1) whether or not each park is subject to the Ordinance, and (2) proximity of each park to Fresno Mobile Home & RV Park. Of the eleven parks in Owner's Exhibit, four do not have active Residents' Committees, and are therefore not subject to the Ordinance: Blackstone RV Park, Green Acres, Stonegate, and Three Palms. Additionally, one of the parks, Woods Manufactured Home Community, is located outside of the City. As these five parks are not subject to the Ordinance, it would be difficult to say they are comparable. To factor in proximity - Fresno Mobile Home & RV Park is located approximately one block northwest of West Olive Avenue and California State Route (SR) 99. Of the six parks in Owner's Exhibit that are subject to the Ordinance, only two are also located on the west side of town: Four Seasons and Sunset West. Sunset West is closer, off of West Shields Avenue, whereas Four Seasons is off of West Dakota Avenue; both are adjacent to SR 99. Midstate Mobile Manor, one other proximal park subject to the Ordinance that was not included in Owner's Exhibit, is located off of West Shields Avenue, one block west of SR 99. It is Staff's opinion that these three parks are the most appropriate "comparable mobilehome spaces in comparable mobilehome parks" for the terms of the assessment. As shown in the table below, the data submitted by the owners of those parks in their own rent increase applications indicate the current average rent is $443.26. Park Name Owner's Assessment; Subject to Ordinance & Proximal City's Records; Subject to Ordinance & Proximal Four Seasons $ 765.00 $ 572.54 Sunset West $ 760.00 $ 389.61 Midstate Mobile Manor -- $ 367.62 Average $ 762.50 $ 443.26 Median $ 762.50 $ 389.61 Amenities The table below illustrates the amenities available at the Park and the three most comparable parks. While Four Seasons' monthly rent is significantly higher than Sunset West's and Midstate's, it also has a significantly greater offering of amenities. The Park's amenities are more in line with Sunset West and Midstate, yet it already charges an average monthly rent higher than Four Seasons'. Park Name Monthly Rent (City Records) Amenities Fresno Mobile Home & RV Park $632 BBQ, Swimming Pool, Laundry Facilities, Shower Facilities, Patio, Vending Machines. Four Seasons Mobilehome Park $572.54 Playground, Clubhouse, Swimming Pool, Basketball Court, Billiards Room, Laundry Facilities, Fitness Center, Game Room, Library, Boat & RV Storage, Off-Street Parking. Sunset West Community $389.61 Clubhouse, Swimming Pool, Laundry Facilities, Showers, Restrooms, RV pull-through spaces Midstate Mobile Manor $367.62 Clubhouse, Swimming Pool. (Laundry Facilities currently being refurbished) Staff Analysis of Owner's Automatic Pass-Through of Annual Government Costs Residents have objected to the pass-through of government costs, on grounds that supporting documentation was not provided either with the application as required by the Ordinance, or afterwards during subsequent communication. On Form MRR 1-2 (Application page 3), Owner asserts that the government cost of property taxes for the 12 months prior to the application were $13,751, and the same costs as of the date of the application were $51,694. No supporting documentation was included for either of those numbers in the Application. Several emails between the Residents and Owner discussed the matter, and the Owner did provide documentation supporting that the Previous tax bill sought $13,750.74 in early October (Application pages 13-15, 19-20; Resident's Packet pages 6-7, 28-32, 70-71, 89-90, 134-135). Owner asserted that the purchase price of the Park was $4,000,000 and stated that the new property tax bill would be issued in October of each year. To substantiate the purchase price, Owner referenced the documentary transfer tax of $4,400 as seen in the Grant Deed. That tax rate is $0.55 per $500.00 (see Revenue and Taxation Code � 11911), so a $4,440 tax would indicate a $4,000,000 purchase price. (Application pages 13 and 37). This is irrelevant, as the purchase price of the Park is not a cost permitted to be passed through under the Ordinance. Staff did not receive any evidence that Owner supplied Residents with the new tax bill once it was issued in October. Additionally, Staff independently looked up the 2023-2024 property tax bill, and found that it was issued for $13,932.86, and the first installment of $6,966.43 was paid on November 17, 2023. A copy of the property tax bill has been attached for Commission's review. That $181.86 increase would not be sufficient on its own to trigger a pass-through of the costs under the Ordinance. While the sale of the property will trigger a reassessment of the Park's property tax, that reassessment has evidently not yet occurred, and the cost has not yet increased. It appears Owner cannot provide the supporting documentation for the increased property taxes as such documentation does not yet exist. The requested increase is preemptive under the Ordinance. Summary of Residents' Committee's Packet Residents submitted a five-page letter outlining the objections to Owner's Application, along with 131 pages of additional supporting documents such as emails, letters, forms and calculations. The letter establishes that Residents object to the Application on grounds of (1) inability of park residents to afford the rent increase; (2) failure of Owner to respond to objections or provide requested documents; (3) improper calculation of the average rents in Owner's Exhibit; (4) various discrepancies with Owner's request for rent increase under FMC section 12-2013 (automatic "pass-through of government costs"); (5) inaccurate calculation of the average rent at the Park. Regarding the alleged improper calculations of average rents in Owner's Exhibit, Residents reached out to the Chairs the residents' committees at Sunset West, Country Living, Four Seasons, Westlake, and Fresno Mobile Estates for information on the average rent at each park. (Residents' Packet page 2.) Residents submitted signed testimonies from those Chairs to substantiate their allegations. (Residents' Packet pages 106-120.) Below is a table comparing the Residents' data to those of the Owner's Application and City's Records. Park Name Owner's Application City Records Residents' Assessment Country Living $ 730.00 $ 656.28 $ 656.45 Four Seasons $ 765.00 $ 572.54 $ 572.54 Fresno Mobile Estates $ 765.00 $ 601.36 $ 564.13 Sunset West $ 760.00 $ 389.61 $ 388.59 Westlake -- -- $ 583.08 Novel Points Proffered in Residents' Committee's Packet Residents assert two types of inaccuracies in Application's Form MRR 1-3 on pages 4-10: that an incorrect CPI percentage was used, and that Owner included nonaffected spaces in the average space rent calculation. (Residents' Packet page 4.) Alleged Inaccurate CPI Factor Used Residents accurately assert that section 12-2014 of the Ordinance requires the use of the "previous year's Consumer Price Index for the period between November 1 and October 31", but inaccurately conclude that the applicable time period for the application at hand is therefore November 1, 2022, to October 31, 2023. All rent increase applications submitted within a calendar year utilize the same CPI calculation. Therefore, all rent increase applications submitted in the calendar year of 2023 would utilize the CPI calculation from November 1, 2021, to October 31, 2022, which was 6.6% (75% of the CPI's change of 8.8%). The City provided that 6.6% factor to all park committee chairs and park owners subject to the Ordinance in November 2022, along with a cover letter stating that it should be used for all applications starting January 1, 2023. Therefore, Owner used the correct CPI factor of 6.6% in the calculations. Alleged Inaccurate Space Rent Calculation Residents assert that 20 of the 62 spaces in the Park are either (1) occupied by recreational vehicles that have not been in place for at least nine months; or (2) used for transient travelers with daily or weekly rental rates, and therefore shouldn't have been included in the calculations. Under the Ordinance, a mobilehome space means "...a site within a mobilehome park intended or used for location or accommodation of a mobilehome or recreational vehicle, the latter for a period of nine months or more..." (FMC � 12-2003(k).) Staff agrees that, supposing Residents' assertion is true, such spaces would not fall under the terms of the Ordinance. Residents did not include a list of the specific 20 spaces in their letter. Based on the annotated Form MRR 1-3 submitted, Staff has inferred that the spaces Residents allege should not be included are 2, 5, 7, 8, 9, 10, 13, 14, 15A, 17, 18, 20A, 21, 35, 39, 40A, 40B, 47, 50, and 51, and that Residents confirmed the information in the Form with Park Manager "Joanne". (Residents Packet pages 47-53.) Assuming arguendo that Residents are correct, Staff calculated the accurate average space rent as $591, which would lead to a 6.6% automatic rent increase of $39.01, rather than $42.00. Conclusion. The Commission must determine (1) if the automatic increase amounts sought under FMC sections 12-2013 and 12-2014 were properly calculated and supported; and (2) what, if any, additional increase is just, fair, and reasonable to both park residents and park owner. Staff has provided a comparison chart below of the quantitative values put forth in the submitted documents and what staff has assessed. Before reaching any decision, however, staff recommends that the Commission hold the public hearing to allow Owner and Residents to confer or substantiate any relevant information, as discussed above. On Application Residents Assertion Staff Assessment FMC � 12-2014 Base Average Rent $ 632.00 $ 591.00 (Automatic CPI) Factor to Use 6.6% 2.4% 6.6% Automatic Increase $ 42.00 $ 39.01 FMC � 12-2013 Total $$ Increase $ 37,943.00 $ 0.00 $ 181.86 (Gov. Costs) Excess of 5% $ 37,255.45 $ 0.00 $0.00 # of Affected Spaces 62 40 Assuming Total Increase of $37,255.45: Increase Per Space $ 600.89 $ 931.39 Monthly Increase Per Space $ 50.07 $ 77.62 FMC � 12-2012 Average of "Comparables" $ 782.10 $ 388.59 $ 443.26 (Fair, Just, & Note: Residents did not identify best "comparables," but pointed to Sunset West in example Reasonable) ENVIRONMENTAL FINDINGS. Pursuant to California Environmental Quality Act (CEQA) Guidelines Section 15378, the Commission's consideration of the Application is not a CEQA "project". LOCAL PREFERENCE Not applicable. FISCAL IMPACT This matter does not impact the General Fund. Attachments: Findings Matrix for Hearing Decision 2024-01 Owner's Application & Packet Residents' Committee Document Packet Request for Commission Proceedings City Notice to Parties dated November 30, 2023 Memorandum in Opposition submitted by California Rural Legal Aid 2023-2024 Secured Property Tax Bill issued by County of Fresno Mobilehome Park Proximity Map SAP:th