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HomeMy WebLinkAbout75A - PREP INSPECTION FEE ADJUSTMENT REQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: CLERK OF COUNCIL USE ONLY: NOVEMBER 15, 2010 TITLE: APPROVED ? As Recommended PUBLIC HEARING - PROACTIVE RENTAL El Amended ENFORCEMENT PROGRAM PREP ? Ordinance on 151 Reading ? Ordinance on 2nd Reading INSPECTION FEE ADJUSTMENT ? Implementing Resolution ? Set Public Hearing For CONTINUED TO FILE NUMBER CITY MANAGER RECOMMENDED ACTION Approve an ordinance to increase the existing $17.50 per unit annual rental inspection fee to $19.50 effective January 1, 2011. 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 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 in 1999, 2003 and 2007 for four year terms without any increases in fees. Since inception of the program, there have not been any increases in fees charged to the licensed rental property owners. 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. 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 $17.50 per unit fee for a period of four years. 75A-1 Continuation of PREP November 15, 2010 Page 2 The exemptions for rental owners currently participating in the Gold Seal program are scheduled to sunset along with the PREP program on December 31, 2011. The present funding for the Gold Seal program is $110,000, which provides for 6,285 units to receive exemptions from the existing $17.50 per unit annual fee. 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. Due to the proactive nature of the program, inspectors address conditions of the rental properties before adjacent impacted neighbors are compelled to file a complaint. Properties that rapidly deteriorate generate most of the complaints received by the PREP inspectors. One 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 2009 PREP inspections have been responsible for in excess of $4.3 million dollars being reinvested back into the improvement and maintenance of the City's rental housing stock. With proven success in improving the appearance of rental properties and maintaining continued support of the rental housing industry, the Planning and Building Agency is requesting to increase the existing $17.50 per unit annual rental inspection fee to $19.50 effective January 1, 2011 to continue the successful operation of the PREP program. The Rental Housing Task Force has unanimously endorsed to the proposal to increase the existing annual rental inspection fee to $19.50 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 an increase in fees to support the existing rental inspection program will have no possible significant effect on the environment. Categorical Exemption No. ER 2010-08 has been adopted for this program. 75A-2 Continuation of PREP November 15, 2010 Page 3 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 anticipated to be $498,927 with program costs anticipated to be $675,000 (Exhibit 2). The costs 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: a . Trevino Francisco Gutierrez Executive Director Executive Director Planning & Building Agency Finance & Management Services Agency FF:rb rb/reporWPREP Fee Increase Nov 2010 Exhibit: 1. Rental Housing Task Force Letter 2. Fee Study 75A-3 i 75A-4 RENTAL HOUSING TASK FORCE PROACTIVE RENTAL ENFORCEMENT PROGRAM October 21, 2010 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 Inspection Fee Adjustment Dear Mr. Trevino: This letter is to advise you that the Rental Housing Task Force Members endorse the City's proposal to adjust the annual PREP inspection fee from $17.50 per rental unit to $19.50 per rental unit, effective with the 2011 license renewal billing cycle. 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. I 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, O Ray Mag , Chairman Rental Housing Task Force c: Miguel Pulido, Mayor Dave Ream, City Manager Exhibit 1 75A-6 Fee Study Proactive Rental Enforcement Program Program Account 11-510 Projected Expenditures and Revenue EXPEDITURES PREP Inspector Salaries & Wages - Regular $ 386,856.00 PREP Operating Overhead Expenditures $ 288,144.00 Total PREP Operating Expenditures $ 675,000.00 Total Rental Units Licensed For Inspection 31,227 Average Cost Per Unit $ 21.62 REVENUE Total Rental Units Licensed For Inspection 31,227 Gold Seal Exempt Units 5,641 Gold Seal Exemption Funding $ 110,000.00 Total Paid Rental Business Licenses 25,586 Annual Surcharge Per Unit $ 19.50 Total Rental Business License Revenue $ 498,927.00 PROJECTION TOTALS Expenditures $ 675,000.00 Revenue $ 498,927.00 Variance $ (176,073.00) EXHIBIT 2 75A-7 75A-8 ROH 11/15/10 ORDINANCE NO. 2010- 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 INCREASE 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. The 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. The Santa Ana Rental Housing Task Force has endorsed a proposal to immediately increase the Residential Rental Surcharge by $2.00, from $17.50 to $19.50 per unit, to partially offset the costs of enforcement of the PREP; 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. A 2010 fee study reported the total projected expenditures for the PREP would amount to an estimated $675,000.00, which includes an estimated $386,856.00 for required staff and an estimated $288,144.00 in operational costs. G. 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 H. The funding for the Gold Seal Incentive Program is $110,000.00, which currently provides for 6,285 units to receive exemptions from the existing $17.50 per unit annual fee. Based on the proposed fee increase to $19.50 per unit, up to 5,641 units can be approved to participate in the Gold Seal Incentive Program. 1. According to the 2010 fee study, records indicate an inventory of 31,227 rental units licensed for inspection. Subtracting out the 5,641 units qualified for the Gold Seal Incentive Program, 25,586 units will be accountable for the $19.50 per unit fee, thus generating annual revenue of $498,927.00. J. Even with an increase of the annual fee from $17.50 to $19.50 per unit, it is anticipated that the deficit for the PREP will be $176,073.00 a year for the remainder of the PREP term based on the estimated $675,000 in expenditures and $498,927.00 in revenues. K. 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-2010- 128 will be filed for this project. Section 3. Section 21-120r.1 of the Santa Ana Municipal Code is hereby amended to increase the residential rental surcharge and extend the sunset date. Said Section 21-120r.1 shall read in full as follows: Ordinance No. NS- 75A-10 Page 2 of 5 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 seventeen dc!!aFG and fi#Y Gents ($1 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. Notwithstanding any provision of this chapter to the contrary, the amount of the surcharge shall not change except by amendment of this section. This section shall expire on, and be of no further force or effect after December 31, 2011. (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. Section 4. 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 Ordinance No. NS- 75A-1 1 Page 3 of 5 sections, subsections, sentences, clauses, phrases, or portions be declared invalid or unconstitutional. Section 5. 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 2010. Miguel A. Pulido Mayor APPROVED AS TO FORM: Joseph W. Fletcher, City Attorney By: Ryan O. Hodge Assistant City Attorney AYES: Councilmembers NOES: Councilmembers ABSTAIN: Councilmembers NOT PRESENT: Councilmembers Ordinance No. NS- 75A-1 2 Page 4 of 5 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