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HomeMy WebLinkAbout75A - PH - PREP ORDINANCEREQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: SEPTEMBER 6, 2011 TITLE. PUBLIC HEARING - CONTINUATION OF THE PROACTIVE RENTAL ENFORCEMENT PROGRAM (PREP) CITY MANAGER RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: APPROVED ? As Recommended ? As Amended ? Ordinance on 151 Reading ? Ordinance on 2"d Reading ? Implementing Resolution ? Set Public Hearing For_ CONTINUED TO FILE NUMBER Approve an ordinance to extend Proactive Rental Enforcement Program (PREP) for four years and provide that beginning with the 2012 license renewal cycle that the per unit fee be adjusted annually, based on a percentage reflected by the change in the Consumers Price Index-Urban, All Services Component for the Los Angeles-Riverside-Orange County area. 2. Approve continuation of the Gold Seal Incentive Program and funding to recognize exemplary rental properties. DISCUSSION The Proactive Rental Enforcement Program (PREP) was initially approved by the City Council in 1992 in response to a study prepared by community leaders. The study, entitled the "Mayor's Task Force on Neighborhood Standards and Preservation", proposed establishing a systematic proactive rental inspection program to address poorly maintained rental properties that were negatively impacting the quality of life of tenants and surrounding residents. After an extensive series of negotiations between representatives from the City, the rental housing industry and the real estate association, a program and operational guidelines were agreed upon. The program was to be compliance driven versus punitive and would sunset in December of 1999. Upon completion of inspections in several designated neighborhoods and one round of city-wide inspections, the program was renewed for four years, first in 1999, again in 2003 and later in 2007. When the PREP program was initially approved, the rental housing industry requested a provision be included that would reward rental owners who have displayed exemplary maintenance and management practices, and who have not created service demands from Community Preservation or the Police Department. This provision was labeled the Gold Seal Incentive Program. 75A-1 Continuation of PREP September 6, 2011 Page 2 The primary benefit for rental owners who can successfully complete a three stage qualification process and receive Gold Seal recognition is an exemption from the annual which initially was $17.50 per unit fee for a period of four years. The annual PREP per unit fee of $17.50 was increased in 2010 to $19.50 due to increasing costs to administer the program. The increase in revenue also reduced the amount of expenditures not funded by the PREP fee were accounted for in the Planning and Building Agency's operating budget. The exemptions for rental owners currently participating in the Gold Seal program are scheduled to sunset along with the PREP program in December 2011. An early continuation of the program by the City Council will allow time for a Gold Seal application period to be conducted in 2011 and no break in rental fee exemptions for those that can re-qualify. The present funding for the Gold Seal program is $110,000, which provides for 5,640 units to receive exemptions from the $19.50 per unit annual fee. The primary concentration of the PREP inspections is on the exterior maintenance of rental properties, such as poor landscaping, unsightly paint, damaged fencing, illegal storage or inoperable vehicles. Should a condition be observed that leads to suspicion of a more serious issue being present on the property, or within the structure, a thorough inspection is conducted. The PREP team also responds to all complaints received by Community Preservation pertaining to rental properties. As awareness of the PREP program has grown, rental owners understand their properties will be routinely surveyed. This has led to an increasing number of owners regularly monitoring their properties and correcting unsightly conditions as they may occur. Unfortunately, another sizable number of rental owners still does not demonstrate diligence in their management and lets their properties to repeatedly regress into eyesores. These are the properties requiring continued regular proactive inspections by the PREP staff. Each year, PREP inspectors survey one-fourth of the City, using the Police reporting districts as a guide. All rental housing in the quadrant is surveyed and those with deficiencies are issued notices to correct the conditions. The on-going challenge for PREP is to maintain improvements made in the completed areas, while moving on to conduct inspections in the next quadrant. Properties that rapidly deteriorate generate most of the complaints received by the PREP staff. Due to the proactive nature of the program, inspectors have addressed conditions of the rental properties before adjacent impacted neighbors are compelled to file a complaint. The on-going challenge for PREP is to maintain improvements made in the completed areas, while moving on to conduct inspections in the next quadrant. Properties that rapidly deteriorate generate most of the complaints received by the PREP inspectors. 75A-2 Continuation of PREP September 6, 2011 Page 3 The most notable achievement of the PREP program since inception is the substantial financial reinvestment to upgrade Santa Ana's rental housing. In terms of reinvestment, from the inception of the program through June 2011, PREP inspections have been responsible for in excess of $5 million dollars directly being reinvested back into the improvement and maintenance of the City's rental housing stock. The PREP program has proven beneficial to Santa Ana by maintaining the City's rental housing at an acceptable standard. The program receives positive reviews from residents for the improved appearance of their neighborhoods and from the rental housing industry for abiding by the approved guidelines and not generating complaints to their respective associations. As both apartment associations will attest, there have been very few complaints regarding PREP since inspections began in 1993. Almost all the complaints received were from property owners who were denied Gold Seal benefits. The owners had an opportunity to appeal their denial to the Rental Housing Task Force, which could either uphold or overturn the denial. With proven success in reducing complaints received for rental properties, noticeably improving the appearance of many rental properties and maintaining continued support of the rental housing industry, the Planning and Building Agency is requesting the extension of the PREP program for another four year term to allow continued inspection of all rental housing in the City. In addition it is requesting the authorization of the required funding for the Gold Seal Incentive Program. For the purposes of cost administration it is also requesting approval to annually adjust the per unit fee based on a percentage reflected by the change in the Consumers Price Index- Urban, All Services Component for the Los Angeles-Riverside-Orange County area. The Rental Housing Task Force has unanimously endorsed extending the PREP program for another four years contingent upon no changes to program guidelines, policies, or funding, and continuation of the Gold Seal Incentive Program (Exhibit 1). Environmental Impact The PREP program is exempt from CEQA pursuant to Section 15061(b)(3) of CEQA Guidelines in that it can be seen with certainty that extension of the existing rental inspection program will have no possible significant effect on the environment. Additionally, extension of the PREP program is further exempted pursuant to the Class 21 Categorical Exemption, Section 15321 of the CEQA Guidelines, which exempts enforcement actions of regulatory agencies. Categorical Exemption No. ER-2011-54 has been adopted for this program. 75A-3 Continuation of PREP September 6, 2011 Page 4 FISCAL IMPACT Funding for the Proactive Rental Enforcement Program is derived from a $19.50 per unit per year fee for all rental units in Santa Ana. Annual revenue is expected to be $505,606 with program expenditures anticipated to be $614,400 (Exhibit 2). The expenditures not funded by the PREP fee will be accounted for in the Planning and Building Agency's operating budget. APPROVED AS TO FUNDS AND ACCOUNTS: W ay M. Trevino Executive Director Planning & Building Agency FF:rb WreportsTREP Cont 9.06.11 Francisco Gutierrez Executive Director Finance & Management Services Agency Exhibit: 1. Rental Housing Task Force Letter 2. Fee Study 75A-4 RENTAL HOUSING TASK FORCE PROACTIVE RENTAL ENFORCEMENT PROGRAM August 18, 2011 Mr. Jay Trevino, Executive Director Planning & Building Agency City of Santa Ana 20 Civic Center Plaza, M-20 P.O. Box 1988 Santa Ana, CA 92702-1922 Subject: PREP Extension and Inspection Fee Adjustment Dear Mr. Trevino: This letter is written to advise you that as the Chairman of the Rental Housing Task Force, I am hereby notifying you of the unanimous decision by the Rental Housing Task Force Members to endorse the request by the Planning and Building Agency for the continuation of the Proactive Rental Enforcement Program (PREP) for the calendar years of 2012 - 2015. Our endorsement is conditional with the understanding that there will be no changes to the current operational guidelines or to the availability of the Gold Seal Incentive Program. We also support the request to adjust the annual PREP per rental unit inspection fee annually, effective with the 2012 license renewal billing cycle, based on Consumer Price Index for the Los Angeles-Riverside-Orange County area, I represent the Apartment Association of Orange County and have been a member of the Rental Housing Task Force since the inception of PREP in 1992. 1 have been please with the City of Santa Ana's commitment to operating the program in complete compliance with the originally approved policies and procedures. The other members and I look forward to this cooperative working relationship continuing. The Rental Housing Task force is requesting the Santa Ana City Council to approve the PREP inspection fee adjustment with the understandings stated above. Sincerely, r,. Ray Ma gi, Chairman / Rental Housing Task Force c: Miguel Pulido, Mayor Paul Walters, Interim City Manager Exhibit 1 75A-5 75A-6 Fee Study Proactive Rental Enforcement Program Program Account 11-510 Projected Expenditures and Revenue EXPEDITURES PREP Inspector Salaries & Wages - Regular $ 422,250.00 PREP Operating Overhead Expenditures $ 192,150.00 Total PREP Operating Expenditures $ 614,400.00 Total Paid Rental Units Licensed For Inspection 26,637 Average Cost Per Unit $ 23.07 REVENUE Total Rental Units Licensed For Inspection 32,277 Gold Seal Exempt Units 5,640 Gold Seal Exemption Funding $ 110,000.00 Total Paid Rental Units Licensed For Inspection 26,637 Annual Surcharge Per Unit $ 19.50 Total Rental Business License Revenue $ 519,422.00 PROJECTION TOTALS Expenditures $ 614,400.00 Revenue $ 519,422.00 Variance $ 94,978.00) EXHIBIT 2 75A-7 75A-8 ROH 09/06/11 ORDINANCE NO. 2011- AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA ANA AMENDING SECTION 21-120r.1(a) OF THE SANTA ANA MUNICIPAL CODE TO ADJUST AND EXTEND THE FEE CHARGED TO FINANCE THE CITY'S PROACTIVE RENTAL ENFORCEMENT PROGRAM. THE CITY COUNCIL OF THE CITY OF SANTA ANA HEREBY ORDAINS AS FOLLOWS: Section 1. The City Council hereby finds, determines and declares as follows: A. The City Council of the City of Santa Ana adopted the Proactive Rental Enforcement Program (PREP), to provide periodic and systematic inspections of all residential rental properties in the City of Santa Ana, and B. The PREP is intended to uncover unsanitary conditions and life safety hazards for occupants of residential rental properties, to ensure that rental properties have operable and safe water, sewage disposal, heating and electric systems, and to encourage owners or managers of residential rental properties to make repairs and conduct preventative building maintenance before deteriorated conditions upon rental property become life safety issues; and C. In 1992, City Council adopted a residential rental surcharge imposed on property owners who choose to enter into the residential property rental business to pay the enforcement costs of the Proactive Rental Enforcement Program, including inspection and administration costs; and D. In an effort to continue monitoring the results of the program, PREP will continue for another four-year period, commencing on January 1, 2012, and will sunset on December 31, 2015, to allow for review of the program; and E. All fees assessed for the PREP bear a direct correlation between the amount of the fee and the actual cost of the services provided, including administration, enforcement and implementation services specifically related to the PREP. Further, the proposed increase will not result in revenue which exceeds the City's estimated reasonable costs to provide the PREP; and Ordinance No. NS- Page 1 of 5 75A-9 F. In order to correlate the amount of the fee with the actual cost of the services provided, the fee shall be adjusted annually in accordance with the consumer price index as published by the United States Department of Labor for the Los Angeles-Riverside-Orange County (formerly Los Angeles-Long Beach-Anaheim) metropolitan area, as detailed in section 21-121 of the Municipal Code. G. A 2011 fee study reported the total projected expenditures for the PREP would amount to an estimated $614,400.00, which includes an estimated $422,250.00 for required staff and an estimated $192,150.00 in operational costs. H. On June 20, 1994, the City Council adopted Resolution No. 94-026 which approved and adopted the "Gold Seal Incentive Program" whereby particular residential properties or residential apartments may be certified as having met standards of excellence in property maintenance and as certified, would be exempted from payment of the residential rental surcharge fee for a three-year period; and The funding for the Gold Seal Incentive Program is $110,000.00, which currently provides for 5,640 units to receive exemptions from the existing $19.50 per unit annual fee. The number of units that can be approved to participate in the Gold Seal Incentive Program will fluctuate with the adjustment of the annual fee in line with the consumer price index. J. According to the 2011 fee study, records indicate an inventory of 32,277 rental units licensed for inspection. Subtracting out the 5,640 units qualified for the Gold Seal Incentive Program, 26,637 units were accountable for the $19.50 per unit fee, thus generating annual revenue of $519,422.00. K. Thus, it is anticipated that the deficit for the PREP will be $94,978.00 for the last year of the PREP term based on the estimated $614,400.00 in expenditures and $519,422.00 in revenues. L. Continuation of the Proactive Rental Enforcement Program is essential to the neighborhoods in Santa Ana to provide assurances that the rental housing will not be allowed to revert to the condition which led to the initial concerns for the implementation of an inspection program in 1992. Section 2. In accordance with the California Environmental Quality Act, the recommended action is categorically exempt from further review per section 15321, Class 21, as the project involves an enforcement action by a regulatory agency for an inspection program. A Categorical Exemption for Environmental Review No. ER-2011- 54 will be filed for this project. Ordinance No. NS- Page 2 of 5 75A-10 Section 3. Section 21-120r.1 of the Santa Ana Municipal Code is hereby amended to allow adjustment of the residential rental surcharge and extend the sunset date. Said Section 21-120r.1 shall read in full as follows: Sec. 21-120r.1. Residential Rental Surcharge. (a) Except as otherwise provided in subsection (b) of this section, the business license tax for residential property rental and residential apartment rental shall consist of the amount set forth in subsections (2) and (3) of section 21-120r plus an annual surcharge of nineteen dollars and fifty cents ($19.50) per each property rental unit or each apartment rental unit. The surcharge hereby established shall be due and payable and shall be paid at the same time and in the same manner that the amount due under section 21-120r is due and payable. No business license shall be issued unless the surcharge is paid. Penalties and interest shall be assessed upon the total amount due and unpaid at the rate specified in this chapter until such time as both the amount due under section 21-120r and the surcharge due under this section are paid in full. All provisions for the enforcement, collection and recovery of unpaid business license taxes shall likewise apply to the enforcement, collection and recovery of any unpaid surcharge. this GhapteF to the GORtraFy, the amount of the SUFGharge shall RGt Ghange eXGept by ameRdment of this . This section shall expire on, and be of no further force or effect after December 31, 2011- 2015. (b) The city council may, by resolution, establish a program whereby particular residential properties or residential apartments, licensed pursuant to this chapter, may be certified as having met standards of excellence in property maintenance. In such event, the executive director of the planning and building agency shall be responsible for the implementation of that program. Owners of property certified pursuant to that program shall be exempt from the payment of the surcharge specified in subsection (a) of this section for the three (3) tax years next succeeding the time of such certification. The executive director of the planning and building agency shall provide the executive director of the finance and management services agency with listings of licensed properties certified under this program, which shall be periodically updated to reflect changes. The city council may provide for such financial limitations on the exemptions to be granted from the surcharge as the city council deems appropriate. Ordinance No. NS- Page 3of5 75A-11 Section 4. Section 21-121 of the Municipal Code relating to annual consumer price index adjustments shall be applied to the aforementioned residential rental surcharge in the same manner as it is applied to all other business license fees and charges except that the residential rental surcharge imposed by this chapter shall be first adjusted effective November 1, 2011, upon a base year ending with the month ending October 31, 2010, and the base year residential rental surcharge rate subject to adjustment shall be $19.50. Thereafter, each annual adjustment of the residential rental surcharge made in accordance with section 21-121 shall assume the same base year and base rate. Section 5. If any section, subsection, sentence, clause, phrase or portion of this ordinance is for any reason held to be invalid or unconstitutional by the decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this ordinance. The City Council of the City of Santa Ana hereby declares that it would have adopted this ordinance and each section, subsection, sentence, clause, phrase or portion thereof irrespective of the fact that anyone or more sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. Section 6. Neither the adoption of this ordinance nor the repeal hereby of any ordinance shall in any manner affect the prosecution for violation of ordinances, which violations were committed prior to the effective date hereof, nor be construed as affecting any of the provisions of such ordinance relating to the collection of any such license or penalty or the penal provision applicable to any violation thereof, nor to affect the validity of any bond or cash deposit in lieu thereof, required to be posted, filed or deposited pursuant to any ordinance and all rights and obligations there under appertaining shall continue in full force and effect. ADOPTED this day of 2011. Miguel A. Pulido Mayor Ordinance No. NS- Page 4 of 5 75A-12 APPROVED AS TO FORM: Joseph A. Straka, Interim City Attorney By: Ryan O. Hodge Assistant City Attorney AYES: Councilmembers NOES: Councilmembers ABSTAIN: Councilmembers NOT PRESENT: Councilmembers CERTIFICATE OF ATTESTATION AND ORIGINALITY I, MARIA D. HUIZAR, Clerk of the Council, do hereby attest to and certify that the attached Ordinance No. NS-XXX to be the original ordinance adopted by the City Council of the City of Santa Ana on , and that said ordinance was published in accordance with the Charter of the City of Santa Ana. Date: Clerk of the Council City of Santa Ana Ordinance No. NS- Page 5 of 5 75A-13 75A-14