RENT STABILIZATION BOARD

Transcription

1 Item 7.a.(1) Rent Stabilization Board RENT STABILIZATION BOARD DATE: June 20, 2016 TO: FROM: Honorable Members of the Rent Stabilization Board Honorable Members ofthe Budget and Personnel Committee and ~7 Jay Kelekian, Executive Director SUBJECT: Adoption offy Line-Item Budget, Staffing Model & Expenditure Level Recommendation: That the Board adopt the attached resolution approving the FY line-item budget and staffing model of23.35 FTE career employees and authorizing an overall spending level of $4,862,500, which includes a set-aside for up to $50,000 in one-time capital related expenditures. Background and Need for Rent Board Action Legally, the Board has through the end of June to adopt a staffing model and budget with a maximum expenditure authorization for FY The process for adopting the annual budget has been guided by the Budget and Personnel Committee. Beginning in December and January, the Committee met with the Executive Director to discuss a timeline and process for adopting the FY 2016/17 budget; a dozen additional meetings followed between January and June loth. The Committee recommended that the Board utilize a multi-step process similar to the process followed the past several years: Step One- The Committee and Board began by understanding the Program's Fund balance at the end of last fiscal year (FY ) and started receiving reports on the status of the current fiscal year (FY 2015/16). In January, the Committee received final reports for FY from the Executive Director and the Outside Auditor. The first reports for FY were provided to both the Committee and the Board in March and have been updated several times thereafter. Those initial reports brought good financial news; we ended last year/began this year with a larger reserve balance than anticipated. After accounting for unbilled commitments from FY , the Rent Stabilization Fund had an available balance nearly $70,000 greater than anticipated last June. Unfortunately, unlike most years, we were not on pace to realize any significant salary savings and staff anticipates that year-end expenditures will reach the maximum spending levels approved by the Board when it adopted this year's budget last June. Step Two -Throughout March and April, the Budget and Personnel Committee continued to monitor the Program's current year financial status but also began discussing future needs and possible revisions in next year's budget. A call went out to Board members, Committees and staff for proposals for future projects that may have a financial impact. The Committee agreed that very little needed to change in the day-to-day programmatic operations. However staff and the Committee felt strongly that, given the dramatic increase in demand for services the past

2 FY Staffing Model and Budget Report Page 2 several years that we plan to increase staff. In March and April, the Committee began reviewing expenditure projections for FY It became apparent that even with no significant change in staffing or new programmatic initiatives requiring additional funding, operational costs would increase by as much as $160,000. When combined with the structural deficit of $240,000 already built into the FY 2015/16 budget, we were faced with a potential $400,000 structural shortfall in FY The Committee began discussing several approaches (please see Attachment 7 ~ to maintaining the long-term solvency of the Fund. The Committee also recommended that the Board schedule a special meeting and hold a public hearing on May 2nd to discuss the budget and a possible fee increase. Step Three - In addition to hearing from the public, Board members wanted to understand the baseline work that the Program regularly engaged in. The Board scheduled a budget workshop and requested that staff prepare a report discussing, division-by-division, a summary ofthe services provided to both the community and the Board. At the May 2nd Budget Workshop, eleven staff members explained to the Board and public both the recurring baseline work each Division undertook as well as some recent or special projects from the previous months. Staff also discussed plans underway to continue and expand upon the operational improvements accomplished this year. A copy of both the Power Point presentations from that workshop as well as a report providing some historical context of the Program's operations are included for your reference as Attachments 8 and 9. Step Four- On May 11th, after considering testimony from the public and a report from the Budget and Personnel Committee and the Executive Director, the Board voted to increase the fee by $21 per unit/per year so as to maintain a Fund reserve balance of roughly 8% of expenditures when comparing recurring revenues to recurring expenditures. The Board resolution also directed the Executive Director to produce a final budget document showing the revenues and expenditure levels broken down in line-item detail as well as a staffing model for the Board's consideration and adoption at the June 20th meeting. Step Five- In an effort to carry out the Board's May 11th directive, the Committee met with the Executive Director three times between May 12th and June 10 1 h to develop and refine the details of the budget presented in your agenda packet this evening. Much of the discussion at the Committee focused on minor line-item-by-line-item minor adjustments to the budget. However, there were some requests for new or additional funding as will be noted below. The joint recommendation presented in the following pages is from the Budget and Personnel Committee and Executive Director and was unanimously approved by the Committee on June 10, Programmatic Accomplishments Over the Past Months The Board and Program have much to be proud of over the past months. Together, once again, we have experienced an extraordinarily productive period, both administratively and in promoting sound public policy, despite shortages and the sad loss of key staff. As was discussed, at length on May 2nd, the overwhelming majority of staffs time, energy and resources go to performing our core services. As documented in Attachment 8 and 9 our core services focus on providing the following essential services: 1. Regularly communicating with Berkeley' s 50,000+ tenants and 2,800 landlords to ensure they are aware of the protections, requirements and services under the Rent Stabilization and Good Cause for Eviction Ordinance.

3 FY Staffing Model and Budget Report Page 3 2. Providing counseling and other direct services to over 1,000 clients per month who call, come through our doors or write seeking our advice and assistance. The majority of these contacts are with Berkeley property owners. 3. Issuing administrative hearing decisions on over 150 petitions and roughly 100 voluntary mediations each year. 4. Maintaining accurate records on the rents and services of over 20,000 rental units in the City of Berkeley and processing payments, changes in tenancy and exempt status and requests for penalty waivers for all units covered by the Ordinance. 5. Guiding policy, transparency and governance: Historically 1-2 FTE are dedicated to providing policy, administrative, legal and logistical support directly for the Board and its committees. The overwhelming majority of our resources is dedicated to the multitude of tasks involved in carrying out the five essential "core" areas of work listed above. Providing this great public service is the primary way in which we carry out the purpose and mission of the Ordinance under Section 120 of the City Charter: "The purpose of this article is to provide for proper administration of programs to regulate residential rents; to protect tenants from unwarranted rent increases and arbitrary, discriminatory or retaliatory eviction; to help maintain the diversity of the Berkeley community; and to ensure compliance with legal obligations relating to the rental of housing. " In addition to our "core" areas of work, the past months has produced impressive results in fulfilling the Board's charge under the City Charter through the following efforts and accomplishments: Received the UC Berkeley Chancellor's Award for public service for public service for campus community partnership. Prevailed in Mak v Berkeley Rent Stabilization Board case - Published California Court of Appeal decision upholding the Board's ability to prohibit sham "voluntary" vacancies. Successfully converted over to a Paperless Agenda process for Board and the public - dramatically reducing the number of printed agenda packages. Increased both the number of workshops and seminars for owners and tenants offered as well as significantly increasing the average attendance at these events. Began offering owners the ability to pay registration fees online as of June Expanded early notification of important events like the AGA and the annual billing materials. Most owners preferred receiving their October ALRC notices via , but those that did not had them mailed via USPS. Began using Constant Contact to regularly notify the public about events, workshops, agendas, services, AGA's and bills. By doing so we increased awareness and attendance while reducing postage and printing costs. Launched "My Rent Ceiling" online- allowing owners and tenants the ability to receive expanded information concerning their unit online 24/7. Provided important counseling on the Relocation Ordinance to owners and tenants (several low-income tenants) displaced by fires, including "real-time/on scene" assistance and information. Board approved proposed changes to language in both the Relocation Ordinance as well the new Tenant Buyout Ordinance were adopted by Council.

4 FY Staffing Model and Budget Report Page 4 Made important progress in the Exemption Verification process and "Amnesty" by beginning the review of up to 14,000 units and registering an additional units. Continued development and expansion ofnew RTS database. Staffs comments were accepted and incorporated into the updated Housing Element. Many of Board and staff's recommendations related to the revised Demolition Ordinance and the new Short-Term Rental Ordinance were adopted by the City Council. Completed initial (Phase I) improvements to the web page. Assisted Berkeley Housing Authority in their petition to HUD to increase the Section 8 payment standards for units in Berkeley. Worked with 4x4 Committee as well as Planning staff to review and recommend possible improvements to the Rental Housing Safety Program and other options to improve habitability and safety in Berkeley rental units. Began utilizing an internal paperless petition process accessible for all staff. Expansion of Regulation 1017 to include refugees and those temporarily displaced because oflocal emergencies (such as fire). Continued monitoring and providing rent control rental history for several proposed demolitions or cases that would result in the loss of rent-controlled units. Began in-house review and administration of requests for reimbursement to low-income tenants ofthe pass-through of increases in the registration fee. Successfully completed negotiations of labor agreements/contracts, through 2018, with all represented and unrepresented employees. In 2014/15 staff identified as a priority responding to the growing trend the very disturbing pattern, particularly among some larger property management companies and Berkeley's larger property owners, of blatantly ignoring portions of the Rent Control and/or Relocation Ordinance in an effort to get sitting tenants to vacate their unit or otherwise violate the terms oftheir existing lease. Staff remains vigilant in monitoring and intervening in such cases and will continue making efforts to affirmatively prevent them and direct resources to meet this problem. Efforts include cease and desist letters, direct intervention with parties when abusive lease addenda are imposed and, in cases of long-term noncompliance, Board-initiated hearings. Sent postcards to tenants in buildings on the City's soft story list that have not had seismic work completed. Worked with Housing Inspectors to identify 280 "problem properties" (buildings with 10 or more outstanding code violations) and mailed residents an informational post card. Successfully urged City Council to adopt the Property Assessed Clean Energy (PACE) seismic financing proposal. Updated the agency's Emergency Action Plan. Goals and New Initiatives in FY 2017 While over the past months an increasing portion of our efforts have gone into guarding the basic protections of the Rent Stabilization Ordinance, we have still been able to respond to the increased demand for our services. Fortunately, we are allowed to spend the majority of our time and energy pursuing initiatives that improve the overall excellent service our clients deserve and have come to expect. Staff, working with the Budget and Personnel Committee, has identified 18 projects that we hope to initiate or implement during the upcoming fiscal year:

5 FY Staffing Model and Budget Report Page 5 1) Presentation to and adoption by the voters of proposed amendments to the Rent Stabilization Ordinance. 2) Continued development and refinement ofrts and implementation of online access for key registration activities including expanded ability for owners to pay registration fees and penalties online. 3) Continue work to improve the Demolition Ordinance to reach the appropriate balance of allowing new construction but protecting sitting tenants and mitigating the overall loss of housing affordability. 4) Continue work to revise or reverse the impacts of the Palmer decision which greatly impedes local government from requiring inclusionary housing in new developments. 5) Completion of Exemption Verification Project for the majority of units registered as exempt in our database and begin regularized exemption status review. 6) Increased use of for outreach and distribution of property-specific information (expanded utilization of Constant Contact and postcards rather than USPS letters) 7) Development and distribution of an Annual Report, similar to that distributed by the City, Library and School District in the fall of ) Continued improvements to and redesign of the Rent Board's web page (Phase II in July and Phase III by January). 9) Development of a tool in RTS to facilitate improvements to the Case Management efforts utilized by the housing counselors. 10) Work with the City Council to update and revise the Ellis Relocation Ordinance levels. 11) Completion of initial report reviewing how other cities approach solutions to the hording problem with the goal of defining an appropriate role for the Board in acting as a catalyst in mitigating the problem. 12) Expanded staff and Board training. 13) Begin administration of implementation ofthe Tenant Buyout Ordinance 14) Increase proactive media outreach and explore the expanded use of social media as well as the possible production of online workshops and seminars. 15) Begin studying and memorializing the impacts of Costa-Hawkins on Berkeley and other cities in the state. 16) Work with the BPD and other appropriate agencies to address the problem of fraudulent rental listings posted on-line. 17) Maintain and expand our response to illegal and/or constructive evictions. 18) Facilitate even better coordination or services between BFD, the Housing Department and the Rent Program when assisting victims displaced from their homes by fire. Highlights of the FY 2016/17 Budget Proposal: Historically, the Board has attempted to maintain at least a two month uncommitted reserve balance in the Rent Stabilization Fund. The attached historical summary of the Rent Stabilization Fund balances (Attachment 4) shows the year-end balances between FY 2009 and the Proposed FY 2017 budget (as well as estimates through FY 20 18). When it was believed to be necessary (most recently FY2015) the Board adopted budgets ending a fiscal year with an uncommitted reserve balance below the comfort level of a full two-month (8%) reserve.

6 FY 2016/17 Staffing Model and Budget Report Page 6 Traditionally, our actual reserve balance is higher than budgeted, but this is not guaranteed. These considerations drove much of the discussion at the Committee. As noted below, other than mandatory COLAs and step increases, the item with the largest potential budget impact was providing additional staff to meet the increased demand caused by the housing affordability crisis. Also related to responding to that crisis were proposals to increase funding for eviction prevention, by up to $100,000. Improvements to the RTS database, the possible need to pay for some or all of a Deputy Director recruitment, and the recent Board motion to study the effects on 20 years of vacancy decontrol on Berkeley and other cities were also discussed and budgeted. The primary issue addressed was how to achieve the greatest portion of what we felt needed to be accomplished while staying at or near the 8% Fund reserve. We agreed that while the request was meritorious, the Fund was not in a position to fully fund the increased eviction defense services; the increase recommended was a more modest $22,000 with an understanding that we would continue to monitor the situation. That increase was assumed to be on a recurring basis. This adjustment still left the Board with an 8% reserve when comparing recurring expenditures and recurring revenue. It was agreed that the additional staffing (of 1.75 FTE) would be allowed because they were believed to be of a shorter-term (two years or less) nature and therefore not part of the recurring budget. This type of expenditure is exactly what a reserve is to be used for- to respond to one-time or short-term need. Thus, while the actual amount budgeted may create a balance that dips below 8% in FY 2017, we have avoided recreating the structural deficits we have worked so hard to eliminate the past several years. The following lists proposed changes from the staffing model approved by the Board last June: 1) Make the 6-month, temporary Legal Secretary position permanent 2) Add 1.0 FTE Community Service Specialist I position 3) Reduce 1.0 FTE Office Specialist II in the Registration Unit to.80 FTE 4) Convert an Office Specialist II position to Office Specialist III 5) Increase the Associate Management Analyst in Registration from.60 FTE to.75 FTE 6) Convert a Senior Hearing Examiner position to Hearing Examiner 7) Reduce a Community Services Specialist II from 1.0 FTE to.80 FTE 8) Offset reduction of Housing Intern with increase in Temporary Office Specialist II 9) Reallocate 0.30 FTE Assistant Management Analyst from the Hearings Unit to the Administrative Unit and backfill with 0.50 FTE Legal Secretary. Move.25 FTE Senior Legal Secretary from the Hearings Unit to the Legal Unit. Reduce the time Community Service Specialist II spends in Legal Unit and reassign to PIU Combined, these changes result in a net increase in career City of Berkeley staff of FTE when compared to the staffing model approved by the Board last June. If approved, total career FTE would be The attached Rent Board Position Detail (Attachment 2) shows the

7 FY Staffing Model and Budget Report Page 7 changes in the allocation of staff resources over the past few years. Personnel related costs (salary and fringe benefits) make up 85% ofthe Board's proposed FY 2017 budget. (please see Attachment 6) Explanation of the Line-item budget The majority of the budget proposal could best be characterized as "maintenance of effort" budget with very few line-items being changed significantly. Monthly Employees (11-01) will increase from the FY 2015/16 adopted budget by $150,000. This is primarily due to six reasons: 1) approximately $50,000 to cover the net additional costs for negotiated COLAs for employees. 2) $58,000 in additional charges to add a Community Services Specialist I. 3) $33,000 to cover the costs of adding the.80 FTE Office Specialist II (rather than eliminating the position with the addition of the Legal Secretary position). 4) Approximately $2,500 additional to cover the additional cost of keeping the Legal Secretary position rather than have it revert back to an Office Specialist II. Earlier last year, the Board voted to convert a Office Specialist II to a temporary Legal Secretary position, pending review by the Budget and Personnel Committee what permanent classification would best serve the Program's needs. 5) Approximately $2,500 to convert an Office Specialist II in the Registration Unit to Office Specialist III. 6) The balance ofthe increase comes from step increases of less senior employees as they gain seniority. Total request= $2,350,000 Hourly Employees (11-03) Through April 30th, the Program expended $25,189 for Hourly Employees. This was for one of the temporary Office Specialist II positions that we used to assist during the annual registration as well as the Housing Intern hired in April. By year's end it is projected that we will expend $37,000. The amount for FY 2017 has increased slightly to reflect COLAs and provide a little additional flexibility around supporting our annual registration process. Total request= $40,000 Overtime (13-01) Based upon actual expenditures over the last several years and projections for this year, we are decreasing this line-item from $1,500 to $1,000 per year. Total request= $1,5000 Fringe benefits (27-20) Will increase from the FY 2015/16 adopted budget by $125,000 This is due primarily to ongoing increases in medical/dental rates and increased CalPERS rate projections. No new benefits are being offered to employees (in fact some concessions were made) but costs continue to increase. As we have noted elsewhere, in the past decade, the benefit rate (as a percentage of salary) charged has more than doubled, while actual benefits received have not changed significantly. The current rate is over 66% of salary. If the rate had simply increased at the rate of inflation plus 1% per year over the past decade, the program would save over $500,000 per year in charges. Total request= $1,555,000 Stipends (30-12) There is no change in the amount budgeted. This line-item changes very little from year-to-year. Total request = $53,500 Mise Legal Expenses (30-23) While theoretically this could include costs related to depositions, court reporters, transcriptions of records, outside counsel or expert witness

8 FY Staffing Model and Budget Report Page 8 fees, for most of the past decade these costs have been limited to $3,000- $4,000 annually for the service of the small claims la~suits. However, in 2015 we contracted for the services of outside counsel to assist in the Mak appeal. The services were provided at the end offy 2015 but the invoice was received in FY2016, which is why the year-end projections reflect an overage. While there are often threats of litigation, I do not believe it is appropriate to budget this as a recurring expenditure. If we are sued and need to incur costs for specialized services, the reserve is sufficient to absorb the cost until the amount can be replenished in the future. For this reason, the requested amount for next year remains at the same $4,000 that is budgeted this year. Total request= $4,000 Temp Agency Employees (30-36) When possible, we use City of Berkeley hourly workers (see above) rather than personnel from temporary employment agencies to fill long-term vacancies. In FY 2015, we used temporary agency employees until the City was able to furnish an eligibility list to select a City hourly employee. Consequently, we will spend just under $11,000 in FY The City has eligibility lists in place and we have already made selections for assistance with annual registration. For this reason, this line item is reduced to a nominal amount. The costs for the services will be incurred in line item (11-03). Total request= $1,000 Misc. Professional Services (30-38) This line-item represents our contracts with community service agencies to provide eviction counseling and defense to low-income clients (totaling $252,025 in FY 15/16) as well as the contract with our legislative advocate ($46,000). Historically, a small amount is set aside for additional consulting services. The amount reflects the modest increased allocation recommended as part of the new contract with EBCLC ($140,000) and EDC ($132,000). There is no change in the contract with our legislative advocate Brian Augusta and Associates. $4,000 has also been set aside to cover the Rent Board's portion of the City's contract with the Outside Auditor. Total request= $322,000 Office Equip Mtc./Copy Machine (30-42) This is for the maintenance and servicing of our two copy machines. The decrease is based upon actual spending over the past few years. The amount allocated was also decreased due to some savings realized by the Board shifting to paperless agendas. Total request= $10,000 Bldg Structures Mtc Svc (30-43) This line-item is being adjusted downward by $100 based upon actual usage the over past several years. Through April, the total FY 2016 expenditure has been $278. Total request= $400 Bank Credit Card Fees (30-51) In each of the previous four years, the Board has incurred between $19,500 and $20,550 in service fees charged by banks so that owners may pay their registration fees with a credit card. Based upon actual charges through April, this item has increased to $25,000 for FY Fortunately, because ofthe new online payment option, the amount of charges should begin decreasing in FY Prior to FY 2015, this item was reflected as part ofthe costs tracked in line-item but has been moved to its own item to conform to City codes. Total request= $22,000 Professional Dues and Fees (40-10) Consistent with City practice, the Program pays for the dues/fees that we require incumbents of a position to hold. The most common are bar

9 FY 2016/17 Staffing Model and Budget Report Page 9 dues, but we also may pay for other required dues such as Notary Public Certification dues. This item also reflects charges for Cal in Local Government interns. The actual charges for FY 2016 are roughly $2,800. The amount budgeted is being increased because the cost for Cal interns is slated to increase to $1,500 per intern. Total request= $5,800 Telephones (40-31) Includes charges for mobile devices (cell phone, Blackberry) as well as phones housed in our offices. This also includes charges for wireless connectivity (a new cost effective in FY 2016). Expenditures in FY 2016 will be between $5,100- $5,500. Blackberry charges ceased during FY 2016, which should keep the charges in FY 2017 to $5,000. Total request= $5,000 Printing and Binding ( 40-50) Includes charges for the printing of all postcards, newsletters, annual report, large mailings (like the AGA and ALRC mailings to owners and tenants) and the Guides to Rent Control. FY 2016 costs were approximately $7,500 over budget because of delays in billing for services provided in FY We believe a modest increase over the amount budgeted in FY 2016 should be adequate in FY Total request= $42,000 Commercial Travel (40-61) In most years, Program staff must do some traveling to either Sacramento. or Southern California. In FY 2016, staff did not travel out of town. We expect to be back on our regular schedule in FY 2017 and the total amount budgeted for this travel remains unchanged at $1,000. Total request= $1,000 Meals and Lodging (40-62) This line-item is for the cost of food an/or lodging when on Rent Board business out of town. Generally it covers the cost of meals when in Sacramento or Southern California. Nothing has been expended in either of the past several fiscal years. The amount set aside is set at a nominal $200 in case we incur these costs this year. Total request= $200 Registration Fees (40-63) Covers MCLE (ongoing legal training) and fees for professional conferences or trainings attended by staff. Based upon actual and projected expenditures this year, we are recommending a small increase in the allocation in FY Total request= $2,500 Transportation ( 40-64) The $500 set aside is to reimburse staff for costs incurred while either taking private or public transit to perform Agency-related duties. The most common occurrence is to cover the cost for parking or Bart when going to court to represent the Board or car rental when at a conference out of town. The amount spent in FY 2016, through April is $429. We are recommending this allocation remain unchanged in FY Total request= $500 Advertising/Public Access ( 40-70) The total amount budgeted for these services in FY 2016 is $50,000. There is no change recommended for FY The majority of these costs are associated with making the activities and proceedings of the Board accessible and transparent to the public. Major expenditures include cable coverage on BCM ($22,000), radio coverage on KPF A ($2, 1 00), closed captioning of our meetings ($7,000), and webcasting of our meetings ($6,000). Other costs in this category include

10 FY 2016/17 Staffing Model and Budget Report Page 10 PTA directory advertisements ($5,000), Rent Board magnets ($2,600), design of newsletters and postcards and publishing oflegal notices. Total request= $50,000 Books and Publications (40-80) These charges are almost exclusively for legal books or subscriptions for online legal research. This line item also pays for our RealQuest property records subscription. The amount budgeted in FY 2016 was $12,200 and we are recommending that it be increased by $800. Total request= $13,000 Rental of Land/Buildings (50-10) This charge is to cover costs for renting our office space on Center Street as well as any costs to keep the building open additional "after" hours once a week. In FY 2013 the total charge was roughly $241,000. Because of a renegotiation of our lease, the total charge for FY 2014 was $203,000. This increased to $225,000 in FY 2015 and approximately $230,000 in FY We will receive an additional incremental increase in FY As noted previously, the rent paid in FY 2017 will be nearly equal to the rent paid for the same space in FY Total request= $237,000 Postage (51-10) $55,000 was budgeted for FY 2016 and for a variety of reasons we will realize substantial savings. This line item covers the costs for all day-to-day operational mailing needs (Hearings and Admin unit, VR mailings, exemption verification), all seasonal mailings (registration, two ALRC notices), and also the costs for mailing postcards and newsletters to owners and tenants. Because of greater reliance on notification of events and one of our ALRC notices, combined with a carryover reserve in our postal account from FY 2015, we were able to experience substantial savings in FY We recommend that this line item be reduced for FY Total request= $45,000 Messenger/Delivery (51-20) The majority of this $1,200 line-item reflects charges related to the delivery of agenda packages. Because of the switch to paperless agendas we were able to save about half of the allocation. We recommend reducing the allocation further in FY Total request= $400 Office Supplies (55-11) This line-item speaks for itself. We experienced some savings in FY 2016 because of the Board's move to a paperless agenda. We expect this will continue and we recommend reducing the allocation in FY 2017 by $3,000. Total request= $17,000 Food and Water (55-50) In FY 2016 the Board set aside $1,500 for food and water but we exceeded the allocation. Generally, when the Board has early or contiguous meetings (closed session leading directly into a Board meeting) some food is provided. However, historically, the largest portion of this expenditure is for drinking water for staff and the public (per a long-standing Board resolution). Food for meetings hosted by the Board or staff are also reflected in this line-item. We recommend a $700 increase in this line-item. Total request= $2,200 Office Equipment and Furniture (70-41) Over the past few years, we have created and then moved a work station for Board members, built a new office and established three new work stations to house interns and new staff. Consequently, we doubled the $5,000

11 FY Staffing Model and Budget Report Page 11 allocated in the FY 2016 budget. With the continued changes in staffing levels, we are recommending that we increase the allocation for furniture and small office equipment in FY 2017 by $4,500. Total request= $9,500 Computers, Printer, Software (70-44) This line item is used for any additional computer or printer purchased, which is not part of the PC Replacement (75-25) below. Based upon expenditure levels the past few years, we recommend reducing the allocation by $1,000. Total request= $3,000 PC Replacement Contribution (75-25) All of our computers have an assumed life-span and they are rotated out at the end of that assumed cycle. We pay a fixed cost into a recurring fund based upon the number of computers we have and the estimated replacement cost. The charge for FY 2017 remains unchanged. Total request= $9,500 Mail Services (76-35) This is a charge from the City, assessed to all departments, to cover the cost of the employee who sorts and delivers the mail. The charge remains unchanged from FY 2015 and Total request= $3,500 Capital Expenditures - The Budget and Personnel Committee is recommending that the Board set-aside $50,000 for one-time capital expenditures. The initial allocation for this set aside amount would be $31,000 for additional RTS enhancements, $9,000 for research and/or training for staff and the Board and $10,000 for costs associated with either a search for new Deputy Director and/or costs associated with coordinating research and/or an event on the effects of the Costa Hawkins vacancy decontrol law on Berkeley and other communities. Total request = $50,000 Attachments: 1. Resolution authorizing FY 2017 Expenditure Authorization and staffing model 2. Proposed FY 2017 Position Detail grouped by unit, classification and job duty 3. Rent Stabilization Program proposed FY 2017 Organization Chart sorted by supervision 4. Rent Stabilization Board Proposed Fund 440 Balance overview in roll-up and detail 5. Proposed FY 2017 Line-Item Budget with historical data for FY 2015 & FY Pie Chart Comparison offy 2016 Adopted and FY 2017 Proposed Budgets 7. May 2, 2016 staff report for the budget workshop and public hearing on the FY 2017 Budget 8. Rent Stabilization Program in Review - power point presentation (online only) 9. Rent Stabilization & Good Cause for Eviction in the 2P 1 Century (online only) 10. May 11, 2016 staff report establishing the annual registration fee.

12 RESOLUTION Attachment 1 ADOPTING THE FISCAL YEAR BUDGET, STAFFING MODEL POSITION DETAIL AND THE EXPENDITURE LEVEL FOR FISCAL YEAR BE IT RESOLVED by the Rent Stabilization Board ofthe City of Berkeley as follows: WHEREAS, the Rent Stabilization Board operates on the basis of a fiscal year and each year adopts an operational budget after public review and input; and WHEREAS, Section 123 of Article XVII of the Charter of the City of Berkeley provides that the Rent Stabilization Board shall finance its reasonable expenses by charging landlords annual registration fees in amounts deemed reasonable by the Board; and WHEREAS, on May 2, 2016, the Rent Board held a budget workshop which included a detailed discussion of the ongoing and special responsibilities performed by the staff in each division of the Program; and, WHEREAS, on May 11, 2016, after reviewing the overall budget priorities of the Program, the Board determined that an annual registration fee of$234 per unit would be necessary to meet the Program's operating needs; and, WHEREAS, since January, the Budget and Personnel Committee has met a dozen times to discuss and evaluate the work and challenges facing the Program as well as the resources available to carry out the high-quality public service our clients deserve and have come to expect; and, WHEREAS, on June 10, 2016, the Budget and Personnel Committee and the Executive Director met and developed a line-item operating budget and staffing model for FY 2017 for the Board's review and consideration; and, WHEREAS, the proposed operating budget for FY 2017 authorizes expenditures totaling $4,812,500; and ' WHEREAS, the Budget and Personnel Committee and Executive Director recommend that the Board also authorize the set-aside of up to $50,000 additional for one-time capital improvement projects or contracts designed to enhance the new Rent Tracking data base, possibly conduct research, training or other services deemed necessary by the Board; and

13 RESOLUTION ADOPTING THE FISCAL YEAR BUDGET, STAFFING MODEL POSITION DETAIL, AND EXPENDITURE LEVEL FOR FISCAL YEAR (Page 2) WHEREAS, after reviewing the current workload and filled positions along with the goals and objectives for FY 2016/2017 articulated by the Board, the Executive Director and the Budget and Personnel Committee, the Board believes that a staffing level of at least Full-Time Equivalents (FTE's) at the Rent Board and 1.0 FTE's housed in other departments for a total of23.35 FTE's is required; and, NOW, THEREFORE, BE IT RESOLVED that an overall spending level totaling $4,862,500 ($4,812,500 operational and $50,000 for capital) and a staffing level of FTE's is hereby adopted for the Fiscal Year Dated: June 20, Adopted by the Rent Stabilization Board of the City of Berkeley by the following vote: Yes: No: Abstain: Absent: Jesse Townley, Chairperson Rent Stabilization Board Attest: Jay Kelekian Executive Director

14 Attachment 2 RENT BOARD POSITION DETAIL (Sorted by Unit, Calssification and Job Assignment) Budget Code Monthly Employees Hourly Employees FY 2016 Adopted FY 2017 Proposed Administration / Policy Unit Administration / Policy Unit Executive Director 1.00 Executive Director 1.00 Administrative Staff Assistant 1.00 Administrative Staff Assistant 1.00 Deputy Director 1.00 Deputy Director 1.00 Community Services Specialist I 0.00 Community Services Specialist I 1.00 Assistant Management Analyst 0.70 Assistant Management Analyst 1.00 Associate Management Analyst 0.70 Associate Management Analyst 0.70 Senior Legal Secretary 0.25 Senior Legal Secretary 0.25 Subtotal for FTE 4.65 Subtotal for FTE 5.95 Salary/Benefit Total = $ Legal Unit Legal Unit Staff Attorney III 1.00 Staff Attorney III 1.00 Staff Attorney I 1.00 Staff Attorney I 1.00 Community Services Specialist II 0.25 Community Services Specialist II 0.20 Senior Legal Secretary 0.50 Senior Legal Secretary 0.75 Subtotal for FTE 2.75 Subtotal for FTE 2.95 Salary/Benefit Total = $ Hearings Unit Hearings Unit Senior Hearing Examiner 1.00 Hearing Examiner 1.00 Hearing Examiner 1.00 Hearing Examiner 1.00 Assistant Management Analyst 0.30 Assistant Management Analyst 0.00 Senior Legal Secretary 0.25 Senior Legal Secretary 0.00 Legal Secretary 0.00 Legal Secretary 0.50 Subtotal for FTE 2.55 Subtotal for FTE 2.50 Salary/Benefit Total = $ Registration & PIU Unit Registration & PIU Unit Community Services Specialist III 1.00 Community Services Specialist III 1.00 Staff Attorney I 1.00 Staff Attorney I 1.00 Associate Management Analyst 0.30 Associate Management Analyst 0.30 Associate Management Analyst 0.60 Associate Management Analyst 0.75 Community Services Specialist II 1.00 Community Services Specialist II 1.00 Community Services Specialist II 1.00 Community Services Specialist II 1.00 Community Services Specialist II 1.00 Community Services Specialist II 0.80 Community Services Specialist II 0.75 Community Services Specialist II 0.80 Office Specialist III 1.00 Office Specialist III 1.00 Office Specialist II 1.00 Office Specialist III 1.00 Office Specialist II 1.00 Office Specialist II 1.00 Office Specialist II 1.00 Office Specialist II 0.80 Legal Secretary 0.00 Legal Secretary 0.50 Subtotal for FTE Subtotal for FTE Salary/Benefit Total = $ Total RSB Staff Total RSB Staff Employees in Other Departments Information Systems Specialist 1.00 Information Systems Specialist 1.00 Located in the IT Dept Salary/Benefit Total = $160,000 Grand Total (City) Grand Total (City) Temporary Office Specialist II 0.25 Temporary Office Specialist II 0.35 Housing Intern 0.25 Housing Intern 0.15 Salary/Benefit Total = $60000 GRAND TOTAL (All Sources) GRAND TOTAL (All Sources) Proposed Changes from FY 2016 to FY 2017 include the following ** Make the 6-month temporary Legal Secretary position permanent ** Reduce an Office Specialist II position to.80fte ** Convert an Office Specialist II position to Office Specialist III ** Convert Senior Hearing Examiner position to Hearing Examiner ** Reduce a Community Services Specialist II from 1.0 FTE to.80fte ** Increase Asociate Management Analyst from.60fte to.75fte ** Add 1.0 FTE Community Services Specialist ** Offset reduction of Housing Intern with Temporary Office Specialist II ** Minor reallocation of staff duties with no change in classification

15 Berkeley Rent Stabilization Program Organization Chart Career Positions for FY 2016/17 Sorted by Supervision Attachment 3 BERKELEY VOTERS ELECTED RENT STABILIZATION BOARD EXECUTIVE DIRECTOR Jay Kelekian (1.0 FTE) ADMINISTRATIVE UNIT Jay Kelekian, Executive Director LEGAL UNIT Matt Brown, Staff Attorney III (1.0 FTE) HEARINGS UNIT Debra Hutton, Deputy Director REGISTRATION AND PUBLIC INFORMATION UNITS Nick Traylor, CSS III (1.0 FTE) Acting Deputy Director (1.0 FTE) Assoc. Mgmt. Analyst (1.0 FTE) Admin. Staff Assistant (1.0 FTE) Asst. Mgmt. Analyst (1.0 FTE) Community Services Specialist I(1.0 FTE) Staff Attorney I (2.0 FTE) Sr. Legal Secretary (1.0 FTE) Hearing Examiner (2.0 FTE) Legal Secretary (0.50 FTE) PIU Comm. Svc. Specialist II (3.80 FTE) Office Spec. II (1.0 FTE) REGISTRATION Allison Pretto, Assoc. Mgmt. Analyst (0.75 FTE) Office Spec. III (2.0 FTE) Programming Analyst (1.0 FTE) Housed by IT Dept. Legal Secretary (0.50 FTE) Office Spec. II (0.80 FTE) Total Career Staff: FTE

16 Attachment 4 Rent Stabilization Board Fund Cash Basis -- Rolled Up Updated Fund Projections Based upon FY /6 Year Report (April 2016) FY 2009 Actual FY 2010 Actual FY 2011 Actual FY 2012 Actual FY 2013 Actual FY 2014 Actual FY 2015 Actual FY 2016 Projected FY 2017 Proposed FY 2018 Estimated Beginning Balance 587, , ,549 1,032,354 1,059, , , , , ,696 Revenues 3,416,960 3,808,926 3,909,345 3,886,600 3,911,005 3,899,835 3,930,623 4,300,000 4,738,000 4,860,000 Expenditures 3,546,249 3,496,144 3,647,540 3,859,214 4,173,648 3,904,463 3,961,731 4,537,338 4,862,500 4,992,000 Prior Year Carryover/Encumbrance 50,000 30,830 Ending Balance 457, ,549 1,032,354 1,059, , , , , , ,696 Minus Encumbrances 20,754 30,830 Accrual Basis Balance 721, ,534 Rent Stabilization Board Fund Cash Basis -- Detailed FY 2009 Actual FY 2010 Actual FY 2011 Actual FY 2012 Actual FY 2013 Actual FY 2014 Actual FY 2015 Actual FY 2016 Projected FY 2017 Proposed FY 2018 Estimated Beginning Balance 587, , ,549 1,032,354 1,059, , , , , ,696 Revenues 3,416,960 3,808,926 3,909,345 3,886,603 3,911,005 3,899,835 3,930,623 4,300,000 4,738,000 4,860,000 Registration Charges 3,244,952 3,679,142 3,698,628 3,727,983 3,713,586 3,736,085 3,786,931 4,160,000 4,568,000 4,690,000 Legal Fees Recovery , , Review Fees and Miscellaneous 21,475 5,811 6,464 1,024 1,904 21,374 4,998 7,000 10,000 10,000 Fines & Penalties 149, , , , , , , , , ,000 Expenditures 3,546,249 3,496,144 3,647,540 3,859,214 4,173,648 3,954,463 3,961,731 4,568,168 4,862,500 4,992,000 Personnel 2,697,575 2,732,754 2,962,903 2,984,169 3,201,928 3,142,753 3,245,930 3,721,900 4,134,500 4,250,000 Non-Personnel 823, , , , , , , , , ,000 Capital (RTS, etc.) 25, , ,400 97,000 20,000 39,000 50,000 50,000 Displacement Reimbursement Offset** -6,450 2,238 Carryover (Services Received) 0 Annual Surplus/Shortfall -129, , ,805 27, ,643-54,628-31, , , ,000 Ending Balance 457, ,549 1,032,354 1,059, , , , , , ,696

17 Attachment 5 Rent Stabilization Program FUND 440 FY /6 Year Budget Update & FY Proposed Budget Actual FY 2015 Adopted FY /12-Year YTD (April) Year-End Projected Proposed FY 2017 Code Description Monthly Employees 1,915,299 2,200,000 1,739,537 2,165,000 2,350, Hourly Employees 14,768 10,000 25,189 37,000 40, Overtime 588 1, , Benefits 1,261,422 1,430,000 1,177,657 1,455,000 1,555, Stipends 52,135 53,500 44,350 53,500 53, Misc. Legal Expenses 3,348 4,000 15,344 15,500 4, Temp. Agency Employees 1,718 20,000 10,872 10,900 1, Misc. Professional Services 257, , , , , Office Equip. Mtc. Svcs. / Furniture 10,519 13,000 7,425 8,500 10, Bldg. & Structures Mtc. Svc Bank Credit Card Charges 20,080 20,000 24,891 25,000 22, Professional Dues & Fees 1,544 2,500 2,735 2,800 5, Telephones 5,431 3,400 5,106 5,500 5, Printing and Binding 20,643 40,000 45,056 47,500 42, Commercial Travel 1,720 1, , Meals & Lodging Registration Fees 1,795 2,000 2,190 2,200 2, Transportation 1, Advertising/public access 44,826 50,000 41,494 47,000 50, Books & Publications 14,048 12,200 9,554 12,200 13, Rental of Land / Buildings 223, , , , , Postage 44,045 55,000 28,633 35,000 45, Messenger / Delivery 855 1, Office Supplies 16,685 20,000 10,604 14,000 17, Food and Water 1,457 1,500 2,076 2,400 2, Office Equipment and Furniture 7,829 5,000 10,194 10,200 9, Computers, Printers, Software 2,533 4,000 1,824 2,000 3, PC Replacement Contribution 9,492 9,500 7,910 9,500 9, Mail Services 3,528 3,500 2,940 3,500 3, City Vehicle / Fuel & Maint. 1,974 3,000 1,845 1,900 1,500 Displacement Reimbursement Offset 1,224 1,000 2,060 2,238 5,000 Expenditure Subtotal 3,941,731 4,500,000 3,667,229 4,498,338 4,812,500 CIP (RTS Upgrade, paperless agenda, training) 20,000 50,000 39,849 39,000 50,000 Total Fund Expenditures 3,961,731 4,550,000 3,707,078 4,537,338 4,862,500 Total Fund Revenue 3,930,623 4,300,000 4,173,955 4,300,000 4,738,000 Annual Surplus/Shortfall (31,108) (250,000) (237,338) (124,500) FUND BALANCE (cash basis) 711, ,364 1,178, , ,696 Carryover for FY15 encumberances (included above) 30,830 30,830 30,830 FUND BALANCE (accrual basis) 680, , , ,696

18 Attachment 6 Comparison of FY 2016 Adopted and FY 2017 Proposed Budgets FY 2016 Adopted Budget = $4,550,000 Capital Expenditures, $50,000 (1%) Rent, $232,000 (5%) Community Service Contract, $300,000 (7%) Public Access/ Outreach, $145,000 (3%) All Other Operational, $107,600 (2%) Salary and Benefits, $3,715,400 (82%) FY 2017 Proposed Budget = $4,862,500 Capital Expenditures, $50,000 (1%) Community Service Contract, $322,000 (7%) Public Access/ Outreach, $137,000 (3%) All Other Operational, $116,000 (2%) Rent, $237,000 (5%) Salary and Benefits, $4,000,500 (82%)

19 Attachment 7 Rent Stabilization Board DATE: May 2, 2016 RENT STABILIZATION BOARD TO: FROM: SUBJECT: Honorable Members of the Rent Stabilization Board Members of the Budget and Personnel Committee, and Jay Kelekian, Executive Director Background Material for Budget Workshop and Public Hearing on the FY 2017 Budget and Possible Increase in the Annual Registration Fee Overview of Purpose of Tonight s Workshop and Public Hearing The Budget and Personnel Committee continues to meet and review both the current Fiscal Year (FY) 2015/2016 budget as well as options for maintaining consistent quality services and a sound Fund reserve balance in FY 2016/2017 and beyond. I will continue to meet with the Committee in order to present the Board on May 11 th with recommendations on the annual registration fee, a summer rental fee for fraternities and sororities, a pass-through of the registration fee for all pre-1999 tenancies, and a process for reimbursing low-income tenants who are unable to afford the monthly pass-through of the fees. While the Board is scheduled to set the annual registration fee on May 11 th, the Board has through the end of June to adopt the remainder of the FY 2016/2017 line-item budget and staffing model. While the Budget and Personnel Committee spends a substantial amount of time understanding the nuances of staff assignments and the work that staff performs in each unit, historically my presentations to the full Board focus more on numbers (what last year I labeled the inputs ). This is because getting the ensuring that the numbers in the budget are accurate and balanced is the core of any budget. Several years ago, those Board members not on the Budget and Personnel Committee and members of the public asked that staff present background information leading to a greater understanding of what I called the outputs : the work product and community benefits that result from those dollars spent. This type of understanding is essential for Board members so that they may better evaluate what services to cut, modify, maintain or expand. This exercise is always of value but particularly so at a time when the Program is simultaneously facing a shortfall even as demand for our services increases dramatically Milvia Street, Berkeley, California TEL: (510) (981-RENT) TDD: (510) FAX: (510) rent@cityofberkeley.info INTERNET:

20 As in the past, the first portion of our meeting will focus on more fully understanding the work performed and core services our staff provides to landlords and tenants in Berkeley. To further the Board and the public s understanding of how the Program operates (and has changed over the years), I have attached two reference documents: An updated version of Rent Stabilization and Good Cause for Eviction in the 21 st Century (Attachment 1) An updated copy of the PowerPoint slides presented by staff during the workshop last year describing, unit by unit, the ongoing work of the Program (Attachment 2) However, rather than re-present material on our extraordinary baseline services that the Board and public has seen several times in recent years, the focus of staff s presentations this year will be on trends and changes over the past months and possible areas of continuing service improvement planned over the next year or two. Naturally, staff will be happy to answer any questions related to the current or historical services described in Attachment 1 and 2. After the staff presentation there will be a Public Hearing to receive comments on the FY 2016/17 Rent Board budget and a probable increase in the annual registration fee, due July 1, The maximum amount of fee increase under consideration by the Board is $27 (to $240). The Board may elect to increase the fee in a smaller amount or to not increase the fee at all. If the fee is increased, it would be only the second registration fee increasehas been raised since The current annual registration fee is $213 per unit for all units other than qualifying fraternities and sororities renting exclusively to non-members over the summer. Summary of Budget Process and Update on FY 2015/16 For the past several months, the Budget and Personnel Committee has been meeting every few weeks to begin the process for setting next year s fee and crafting next year s budget. We began in December and January by successfully reconciling our year-end balances from FY 2014/15 with the results of the Outside Audit. The Board ended last year with a slightly larger fund reserve than was anticipated when the budget was adopted last spring. As the first column of Attachment 3 shows, the Fund began this year with an uncommitted reserve of roughly $680,000. When the Board adopted its budget last June, we assumed the uncommitted reserve balance would be roughly $605,000. The Committee then began examining how we were faring with the current FY 2015/16 budget. A mid-year budget report was first presented to and considered by the Committee and subsequently discussed at the full Board meeting onmarch 21 st. The Budget and Personnel Committee continued monitoring FY 2015/16 revenue and expenditures through the end of February. The 2/3 Fiscal Year Update (Attachment 3) was discussed at the Board s April 18 th meeting. Based upon actual expenditure information through the end of February, I am projecting that we will end this fiscal year with an uncommitted balance in the range of $435,000 - $440,000. When the Board adopted the FY 2015/16 Budget last June, we anticipated the yearend fund balance would be in the neighborhood of $355,000, so we are in a slightly better position than expected ten months ago. 2

21 As I explained on April 18 th, most years I am able to capture salary or other savings to further improve our overall year-end balance. However increased demand for services over the past eighteen months has just not allowed us to realize the type of salary savings as in prior years. Consequently, we expect to spend almost the full amount that the Board has authorized. Background & Considerations for Adopting a Registration Fee and Budget for FY 2016/17 As mentioned at the April 18 th Board meeting, consistent with our long-standing practice, the Budget and Personnel Committee has been using a Status Quo budget model to guide the discussions and analysis of the Board s projected financial status at the end of both FY 2016/17 and FY 2017/18. The Status Quo model builds in only known, or reasonably anticipated, changes to the existing budget and assumes that all other items will either be frozen or, if increased, offset by an expenditure reduction elsewhere in the budget. The underlying assumptions in the Status Quo model used, reflect salary increasing by 2% per year and the fringe benefit rate increasing by 4% per year over amounts budgeted for this fiscal year. Costs for hourly and temporary employees will be frozen while other non-salary costs will increase by 2% per year. This type of model provides the clearest understanding of the overall financial well-being of the Program if we simply maintain our current operations. The Board, when it adopts the final budget in June, may make additions or deletions that offset each other or make choices (such as cutting staff or raising the fee) that increase or decrease the overall Fund balance. As both Attachment 3 and Attachment 4 reflect, if no changes are made to the Status Quo model, we project that there will be $125,000 in recurring expenditure liabilities added to the current $250,000 structural shortfall that exists in the FY 2015/16 budget. This deficit spending of $375,000 would significantly deplete the Rent Board Fund reserve balance by the end of FY 2016/17, leaving an estimated uncommitted fund balance of only $64,000 (less than a 1.5% reserve). As Attachment 4 shows, if the Board does not continue to take steps to address the annual structural deficit, by the end of FY 2018, the Fund will have amassed a total overall negative balance in excess of $400,000. For over a decade, the Board s strategy was to only increase fees when absolutely necessary. We fulfilled this strategy by not raising fees, despite continued increases in costs (primarily due to increases in the cost of health care and retirement benefits charged by PERS), and thereby drawing down the Rent Board s Fund reserve balance. In the past decade the lowest year-end Fund reserve balance was in $458,000, in June When we began last year s budget process we acknowledged that this approach was successful in limiting the cost of the fee over the years, but allowed a structural deficit (a gap between recurring expenses and revenues) of $550,000 to emerge. The Board agreed that allowing the situation to continue unchecked was not sustainable and must be remedied. After several meetings and a public hearing the Board last year, decided that it was not feasible to eliminate the deficit created over six years in one bite. Ultimately, the Board decided that a combination of raising fee revenues by $400,000 and absorbing one additional $250,000 reduction in reserves, in the current budget, was the most balanced approach. This approach proved quite wise; most 3

22 owners appreciated the Board s efforts to limit fee increases for as long as possible. Feedback from the few owners who did comment was that the Board should consider a pay as you go * approach and, to the extent possible, adopt more predictable increases in the future. This was the focus of much of the discussion at the Budget and Personnel Committee over the past several months. Because last year the Board narrowed but did not eliminate the structural deficit, we began this budget process with an annual shortfall of $250,000. To understand the scope of the new potential shortfall, any additional costs, due to known commitments (employee contracts, rent, etc.) to be incurred in FY 2016/17, would be added to the $250,000. Using the approach embraced by the Board when adopting last year s budget, the Committee held eight meetings since January to strategize ways to bridge the potential annual gap between expenditures and revenues of $375,000. The Committee began by looking both at operational cuts as well as ways to realize long-term efficiencies. Over several meetings, the Committee reviewed more than 30 different Fund projection models ranging from no fee increase to a fee of $250 per unit, effective July 1 st. The Fund projection models also looked at options that included a one-time fee increase and future fee increases that tracked future cost increases ( pay as you go ). Models were reviewed which reflected the addition of one additional staff person and two additional staff to meet the increased demand. The models assumed that any staff additions would be temporary, lasting for a maximum of two years. The Committee analyzed the revenue and expenditure patterns in our current year s adopted budget. Over 96% of revenue comes from the registration fee, with the balance coming from penalties and fees for services to other departments in the City of Berkeley. Expenditures are apportioned as follows: * Pay as you go assumes that annual revenues will be set at a level sufficient to cover recurring costs. Thus, if we believe our recurring costs will increase by $60,000 next year, then additional new revenue of $60,000 should be identified. Prior year s savings and/or a drawing down of the reserves would only be used for one-time or short-term, rather than recurring, expenses. This approach allows for more frequent but smaller future fee increases. 4

23 Strategies for Resolving the Structural Deficit in FY 2016/2017 The Committee considered and discussed numerous options and approaches including: 1. Reducing expenditures by up to $240,000, including reducing staff by up to 1.5 FTE In addition to the possible elimination or reduction to part-time of one Office Specialist II and reducing Hearing Examiner staffing by.50 FTE, the Committee reviewed a series of cuts that would reduce outreach expenditures by nearly $30,000 (20%), reduce CIP spending by $10,000 (20%), and eliminate annual bank charges for credit card payments made by property owners ($25,000-$27,000). 2. Keep the authorized spending at a level roughly equal to the Status Quo budget and not adjust fees. As noted above and in the Attachment 4, this option would nearly deplete the reserve by the end of FY 2016/17 and, if continued through FY 2017/18 or beyond, result in a significant negative Fund balance. 3. Increase fees by $12 per unit (registration fee of $225) to eliminate the $250,000 structural deficit in the FY 2015/16 budget. A $12 fee increase would raise approximately $250,000, covering only the amount of the current year s structural gap. In order to simply maintain the existing level of services ( Status Quo ) next year, it is anticipated that expenditures will increase by $125,000. In essence, this approach will help in reducing, but not eliminate, the recurring gap and require dipping further into the reserves. 4. Keep the authorized spending at a level roughly equal to the Status Quo budget and increase fees by $18 per unit (registration fee of $231). This would raise approximately $375,000, covering the amount of the current year s structural shortfall and the anticipated increased costs for FY 2016/17 if a Status Quo budget is adopted. This approach would leave approximately $438,000 (apx. 9.4%) in Fund reserves. The City of Berkeley and the City Council have adopted a policy of maintaining at least an 8% (one month) reserve balance. 5. Keep the authorized spending at a level roughly equal to the Status Quo budget and increase fees by an amount greater than $18 per unit. This would allow the Board to have a Fund reserve larger than the minimum 8% norm established by the City. Each additional dollar, above $18 per unit, that the fee is raised will increase the reserve by approximately $20,000, assuming that there are no additional expenditures above the Status Quo level authorized. 6. Raise the fee by $18 per unit (registration fee of $231) but authorize short-term adjustments to the staffing model and otherwise reflect a Status Quo budget. This option maintains the Status Quo as the assumed norm but allows for the limited (over two fiscal years) addition of either one (23.25 FTE) or two (24 FTE) additional staff positions. If the authorized staffing level were increased by one position, the estimated reserve balance at the end of FY 2016/17 would be roughly $350,000 (7.5%). If the authorized 5

24 staffing level were increased by two positions, the estimated reserve balance at the end of FY 2016/17 would be approximately $300,000 (6.4%). Specific decisions about staffing will not be made until June s meeting, but this option would better assure funding is available if the Board agreed to add staff. 7. Keep authorized spending at a level roughly equal to the Status Quo budget and increase the fee by $21 per unit (registration fee of $234). This option would raise an additional $430,000 and increase the Fund s year-end balance by $60,000 to just under $500,000 (10.6%). 8. Raise the fee by $21 per unit (registration fee of $234) but authorize short-term adjustments to the staffing model and otherwise reflect a Status Quo budget. This option maintains the Status Quo as the assumed norm but allows for the limited (over two fiscal years) addition of either one (23.25 FTE) or two (24 FTE) additional staff positions. If the authorized staffing level were increased by one position, the estimated reserve balance at the end of FY 2016/17 would be roughly $407,000 (8.7%). If the authorized staffing level were increased by two positions, the estimated reserve balance at the end of FY 2016/17 would be approximately $357,000 (7.6%). Specific decisions about staffing will not be made until June s meeting but this option would better assure funding is available if the Board agreed to add staff. 9. Raise the fee by an amount greater than $21 per unit and consider the three expenditure/staffing scenarios noted in 4-8 above. As noted above, the Committee reviewed fee options up to $250 (a $37 increase over the current year). Each dollar the fee is increased will generate about $20,000 in annual revenue. If there are no changes and the Board adopts an expenditure level consistent with a Status Quo approach, a fee of $231 should fully bridge the structural gap. However, only if the Board continues to increase fees at a rate sufficient to cover recurring increases in expenditures will this approach avoid a recurrence of the original problem. One-time increases can be absorbed either by prior year s savings, by modestly drawing down the reserve balance or by adopting a higher fee. The Committee has also considered options that will allow the Board to respond to increased demand by adding staffing or continuing to develop technologies that improve services and contained operational costs. After considering all the options above (and numerous others) the Committee seemed resolved to the following concepts: While it was helpful to explore ways of saving money through efficiencies in nonpersonnel that allow resources to be redirected to emerging priorities, there should be no cuts in staffing levels while demand for services was increases at a record pace due to the region-wide housing crisis. There will be an ongoing discussion about how best to continue realizing and expanding upon efficiencies. While this is work that the Committee and staff will pursue up to and even after the adoption of a final expenditure budget in June, it is best used as a tool to maintain essential services while muting 6

25 increases to expenditures for essential services. While demand for services has continued to significantly increase, we must do our best to meet that demand through prudent, measured, short-term changes in staffing. We cannot retrench when our services are needed most, but neither should we assume that the staff being added are permanent additions. We must do our best to eliminate the structural deficit this year. It is not sustainable to reduce reserves further to pay for recurring expenditures. To the extent that we consider any additional depletion of the reserves, it would be to cover one-time or short-time rather than recurring expenditures. While the Committee understood that this Board cannot commit the actions of future Boards, staff was directed to prepare projection models based on the principle of pay as you go for anticipated increases in future fiscal years. While the Committee reviewed options that included a one-time only increase, they agreed that the material presented to the Board should only include options that assumed increased revenue from fees would roughly match increased recurring costs. Staff suggested that if the Board wished to continue narrowing or eliminate the ongoing structural deficit for existing recurring expenditures that it would be necessary to raise the fee to somewhere between $225- $231. The Committee wanted to hear the Budget Workshop presentation from staff and testimony at the public hearing before making a final recommendation but was inclined to raise the fee to $234 (please see Attachment 5). The Committee requested that staff publish $240 as the maximum fee under consideration to not unnecessarily limit the Board s reasonable options. The Committee Chair asked staff to provide the Board with some analysis of the impact of fee increases of $12, $18, $21and $24 per year when compared to increasing rents and changes in the Consumer Price Index (CPI) since May 2009 was selected as a comparison because last year when the Board increased fees, it was the first time the registration fee had been adjusted since That $19 increase reflected a 9.8% rise in the rate but was still significantly less than CPI and substantially less than the average rent increase since the last fee increase in May The following is staff s initial analysis of the cumulative comparative impacts of additional increases in the fee: Since May 2009, the Bay Area Consumer Price Index has increased by roughly 18%. Since May 2009, the average rent for all controlled units has increased by 27.46% Since May 2009, the average rent for all rent controlled units has increased by $346 per month or $4152 annually. An increase in the annual fee of $12 would result in a net 15.98% increase since May An increase in the annual fee of $18 would result in a net 19.07% increase since May An increase in the annual fee of $21 would result in a net 20.61% increase since May An increase in the annual fee of $24 would result in a net 22.16% increase since May

26 The table below, shows the registration fee as a percentage of rent, which is probably the most relevant measure of the impact of any fee. The shaded area reflects a pre-vacancy decontrol program while 1998 was a transition year from full rent control to decontrol. Fees as a percentage of rent Year Fee Mean Monthly Rent % Annual Rent 1984 $60 $ % 1987 $80 $ % 1989 $100 $ % 1991 $136 $ % 1998 $112 $ % 2000 $124 $ % 2005 $154 $1, % 2010 $194 $1, % 2014 $194 $1, % 2015 $213 $1, % 2016 $213-$225 $1, % 2016 $231-$237 $1, % The following documents are attached as background for the Board s reference in considering the FY 2015/16 Budget and potential increase in the annual registration fee: Attachment 1 Rent Stabilization and Good Cause for Eviction in the 21 st Century Attachment 2 Updated PowerPoint slides describing the ongoing work of each of the operational units at the Rent Stabilization Program. Attachment 3 Rent Stabilization Program FY 2015/16 line item 2/3-year update and FY 2016/17 Status Quo budget. Attachment 4 Table showing Fund balances if the Board continues to adopt Status Quo budgets and does not adjust the fees. Attachment 5 Rent Board Fund balance projections through FY 2018 based upon the annual fee level being set at either $225, $231, $234, $237. 8

27 Attachment 8 The Rent Stabilization Program MAY 2, 2016

28 Hearings & Legal unit Matt Brown, Staff Attorney II Chanée Franklin, Staff Attorney I Omar Calimbas, Hearing Examiner

29 Stabilization Is Our Middle Name 2700 Stabilized Rents vs. Market Rents Over Time Median 2BR Rents

30 Stabilization Is Our Middle Name Stabilized Rents vs. Market Rents Over Time Even After Costa-Hawkins, Rent Control Offers Stability } 41% in three years Median 2BR Rents *These data are Market Medians for new tenancies, published annually by the Rent Board.

31 Fairness: Our Promise To The Public Support for the Public Information Unit Increased number of OMI and Ellis evictions increased need for nuanced advice and information Case management support Rent Board University Enhance accuracy and effective dissemination of information Expanding partnership with Legal/PIU and other City Agencies to secure a safety net for Berkeley s most vulnerable populations Mediation program Despite increased incentive for conflict landlords and tenants continually seek to resolve issues without litigation

32 Invoking The Law Landlords and Tenants Alike Total 145 Petitions filed Total Total Tenant IRA Tenant Rent Withholding Landlord IRA Right to Set Initial Rent Appeal of Certificate Determine Occupancy Status Exempt Status

33 Invoking The Law Landlords and Tenants Alike Who filed petitions? 61% 63% 55% 45% 39% 37% Tenant Landlord

34 Ensuring A Level Playing Field Proactively neutral: a tilted field distorts the law A full & fair opportunity to be heard Due process without an attorney Encourage settlements in a safe space

35 Innovating To Improve responsiveness Paperless petition management Less time tracking paper, more time with people New Rent Tracking System Integrated petition workflow = more efficient, versatile staff

36 Projecting Rents Through 2017 $3,100 $2,600 Assumes 10.1% increases based on past five years Media n 2BR Rents 2013 $2, $1, *These data are Market Medians for new tenancies, published annually by the Rent Board.

37 Enforcement: Targeting Abusive Practices Fake Owner Move-Ins Mak v. City of Berkeley Rent Stabilization Board Abusive lease addenda Cease and Desist letters Advocating against moving Evictions to Hayward Section 8 opt-outs Craigslist scammers Demolition

38 Efficiency: Refining Regulations and Laws To Save Time and Avoid Confusion Tenant Buyout Ordinance Relocation Ordinance Issues Demolition Ordinance Revisions Short-Term Rental Ordinance Proposed Ordinance Revisions

39 Public Information Unit & Registration Nick Traylor, Division Manager Allison Pretto, Associate Management Analyst

40 Registration Unit By the Numbers 19,300 units registered 5,000 new tenancies registered 23,000 ALRC notices sent 12,000 exempt units analyzed in ongoing verification

41 Compliance Decrease in Litigation Better outreach/compliance = fewer cases filed Small Claims Cases Filed 2013/ / /16 (Projected) Exemption Verification Multi-phased effort Amnesty offer 100+ units added Database correction/cleanup

42 Fairness / Efficiency Vacancy Registration filing Foundation for all counseling calls Confirmation of tenancy/rent ceiling data Outreach opportunity for landlords and tenants My Rent Ceiling Real-time updates of rent ceilings 24-7 access Reduces mailing costs

43 Looking Ahead Online Payments Online Registration Forms Increase access to accurate information Reduce costs & carbon footprint

44 Administration & Policy Unit Debra Hutton, Deputy Director Aimee Mueller, Administrative Staff Assistant Lief Bursell, Associate Management Analyst

45 Adaptive Solutions to Respond to Increased Demand for Rent Board Services Before Old Rent Tracking System (RTS) database limited functionality, old technology Paper Apparent Lawful Rent Ceiling (ALRC) mailings Multiple mailings for Rent Board Workshops & Seminars 60+ Paper copies of Board Agenda packets printed & mailed each month NOW: New RTS Database My Rent Ceiling online Constant Contact Paperless Agenda Packet Program

46 Launched November 2015 Maintains 7 different lists

47 Board and Committee Meeting s Berkeley Rent Stabilization Board UPCOMING COMMITTEE MEETINGS (~t.,'y <\-~ Jri"'JU:-fiVUM'I:,.,_.,_..u...- : ~~ _.,,.,.,.....,.,,..... _,, l". r..., ~,,. l,. lt.. I f: r':~~--~ :""--t-.:«==b:all) JL"'Ic::!ttt *' tt.: :x:mt(. M~I I- : I IM~..""'""''N\0_.,,...,1."",.._""'' April 19, Habitability Committee Meeting Date: Tuesda~ April 19, 2016 too~ I ~ J.'UJIU:t.\lli.)~ JU,J.\KL> H \MLJ p UUI) <.O>UJillU ~LI:.l.IL~C J.. l'*idll,,\frui. l tll. J:tl\l p.~ ~yu I t'u lu j 1 Le.. Lltmn """ ilu...1 Time: 5:00p.m. 1 l.l.i~ t,tu l.\r;f~t.lctft.tc~' Location: Rent Board Office 2001 Center Street, 2nd Floor, Law Library, Berkeley Committee Agenda Previous Agendas J h""'(--.:-~, ~ '...,..._,...,,......_...,."'*::t ~! l* 'llkt.-"ucm. IC"'f'CdC:~ 'I.'e.t: April 20, Eviction/ Section 8/ Foreclosure Committee Meeting Date: Wednesday, April 20, 2016 Time: Location: 4:00 p.m. Rent Board Office 2001 Center Street, 2nd Floor, Law Library, Berkeley

48 Workshops & Events May 6, Landlord in Berkeley 101 Seminar Required informiltion Person~} Information First Name: LastName: Address: ~ BeriCeley Confirm Address: Participant Informa ion You may add a maximum of 3 T ype 0 ~ Partici~t(s) Register By submitting this form, you're granting: Berkeley Rent Stabilization Program, Mihia Street, Berkeley, CA United States rent permission to you. You can m-oke permission to mail to }'Our address at any time using the Safe Unsubscribe'", found at the bottom of every . Constant Contact takes }'Our privacy seriously (to see for }'Ourself, please read the Constant Contact r ' Pr:r ':Y 1'2ikl:). s are servioed by Constant Contact.

49 Website Improvements III Phases Phase I: Basic improvements and requirements gathering (Complete) Phase II: Home page redesign (Late July 2016) Phase III: Revamp to organization and look of secondary pages (2017)

50 Improvements to the Rent Board s webpage

51 Website Redesign RE'NT STABILIZATI9N B?ARD Rent Stabilization Board Landlo rds Te nants For m s ~ --~ I Rent Board Laws& Regs Reports N EWS & IN FORMA TlON: CONTACT A HOUSING COUNSELOR - Rent Board Housing Counselors provide informaiion to tenants and landlords about the r rights and responsibilities. FIRE SAFETY - ConcErns or issues with the fire safety of a b j ilding or rental unit, please see the attached link to file a complaint or request a fire safety inspection_ RENT CONTROL 101 : W hat is rent control? Is your unit covered? And what does that mean for you? To access :he Guide, click here Upcoming Meetings & Events Apri l 2016 Sun Mon Tue Wed Thu Fri Sat D ~ March 10am B11dget & Personnel Committee April 3:30pm Eviction/Section 8/Foreclosure Committee [ April 5 15pm Landlord & Tenants secuntv Uepos1t semmar Homepage implementation in late July phase 3 to follow in 2017

52 What s Coming, What It Means and Why It Matters! By continually adapting to better meet the evolving needs of those we serve, we are leveraging technology and maximizing organizational efficiencies so that we can soon offer more tools for landlords and tenants: Redesigned, improved Website Workshops & Seminars online Online Payments & E-Checks Online Registration

53 The Rent Stabilization Program in Review May 2, 2016

54 Overview Context: A Bay Area affordability crisis Purpose, scope and effectiveness of the Rent Stabilization Program Program structure and relation to other City programs Administrative and budget history Recent challenges 2

55 Constant 2010 dollars Context: Affordability Crisis Income Remaining to Very Low-Income Bay Area Tenants After Paying Rent: 1960, 1980, 2010 (25th percentile income and rent for tenants in the San Francisco Bay Area) $30,000 $25,000 $20,000 $15,000 $10,000 $5,000 $ Annual Rent $5,723 $8,215 $10,992 Income after Rent $14,234 $17,721 $10,598 * * It has only gotten worse since

56 Average Rent for Post January 1, 1999 Tenancies (Q Q4 2014) Average Rent for post 1999 Tenancies $1, $1, $1, $1, $1, $1, $1, $1, $1, $ $

57 $ Housing market failure and increasing inequality of wealth and income creates extreme power imbalance 5

58 Purpose, Scope, & Effectiveness of the Rent Stabilization Program 6

59 Purpose The Text Section PURPOSE The purposes of this chapter are to regulate residential rent increases in the city of Berkeley and to protect tenants from unwarranted rent increases and arbitrary, discriminatory, or retaliatory evictions, in order to help maintain the diversity of the Berkeley community and to ensure compliance with legal obligations relating to the rental of housing. This legislation is designed to address the City of Berkeley's housing crisis, preserve the public peace, health and safety, and advance the housing policies of the city with regard to low and fixed income persons, minorities, students, handicapped, and the aged. (Ord NS 3, 1982: Ord NS 3, 1980.) 7

60 Purpose Jay s Summary: More equal rights for tenants in good standing to have stability in their home 8

61 Scope Rent regulation and good cause for eviction Good cause protects 26,000 tenant households Rent stability for roughly 20,000 tenant households Old rent control assists more low-income tenants than the Berkeley Housing Authority (over 2,000 households) 9

62 Effectiveness High Effectiveness Comparing Berkeley with Los Angeles High customer satisfaction from surveys of owners and tenants 30% 25% 20% 15% 10% 5% 0% Los Angeles 27% Berkeley 5% Overcharged 10

63 Structure of Berkeley s Rent Stabilization Program Staffing Configuration (Adopted FY 2016) Elected Board Executive Director Registration & Public Information Hearings Legal Administration & Policy IT Department Total RB staff FTE 2.55 FTE 2.75 FTE 4.65 FTE 1.00 FTE FTE 11

64 Budget and Staffing History Fiscal Year Staff Actual FTE Per Unit Fee Expenditures $100 $2.7M $125 $2.3M $124 $2.3M $154 $3.0M $194* $3.6M $194 $4.0M $213 $4.5M** Notes: Increased costs above inflation since 2002 due to citywide health care and pension costs. (*) The registration fee remained $194 from (**) Projected expenditures for FY 2016 are between $4,400,000 - $4,500,000 12

65 Administration within the City Government Structure Human Resources All staff except Director are City employees All hiring conducted using City process, protocols and job classifications Co-signatory to all union contracts Follow the same salary structure as all other city departments Finance and Auditor Banking and payroll Purchasing : RSB follows or exceeds City standards Use same outside auditor for annual audit 13

66 Recent Challenges / Areas of Focus Eviction for Good Cause Increased outreach & use of conflict resolution & mediation Interdepartmental coordination Increased capacity to serve property owners, tenants and the public 14

67 Eviction for Good Cause Increases in Evictions and Threats of Eviction Without Good Cause Vacancy decontrol increased incentives to evict Foreclosure crisis increased evictions Increased harassment of all tenants in a building (e.g., change in lease and must move letters ) Funds legal assistance for low-income tenants facing eviction 15

68 Increased Outreach & Use of Conflict Resolution & Mediation Rent Board has expanded outreach to make sure all parties are familiar with the laws Contacts all new owners and new tenants Active outreach to all owners and tenants regarding their rights and obligations Notifies residents of units in foreclosure Targeted outreach to UC students and BUSD families Maintaining an ongoing community presence The Rent Board has placed an emphasis on conflict resolution. 16

69 Focus on Conflict Resolution Hearings and Mediations Year Petitions Mediations Examiners * * One Hearing Examiner position was vacant for much of 2014

70 Interdepartmental Coordination Cooperation with Planning Earthquake preparedness: Soft-story buildings Demolition and removal of units Housing code enforcement Energy efficiency in rental properties Cooperation with Health, Housing & Community Services Ensure the smoking ordinance minimized evictions Relocation ordinance revision and counseling Cooperation with Other Departments Auditor & Finance: Increase City revenue collection Public Works: Recycling in rental properties BHA: To assist where our laws overlap & conducting BHA hearings 18

71 Increased Capacity to Serve New database software will Save staff time Make information more accessible and easier to analyze Allow on-line payment of fees and registration of new tenancies Enable improved communication through website, use of social media 19

72 Public Information & Registration Unit 20

73 Overview: Staffing Module Nick Traylor Division Manager Chanee Franklin Matthew Siegel Staff Attorneys Cynthia Martin Acting Legal Secretary PUBLIC INFORMATION UNIT Housing Counselors Moni Law Jacquelyn Morgan Palomar Sanchez Michele Byrnes REGISTRATION UNIT Allison Pretto Registration Supervisor Athena Addison Office Specialist III Drew Milan Office Specialist II Mary Matambanadzo Office Specialist II 21

74 The Basics of Berkeley s Rent Stabilization Berkeley s Form of Rent Stabilization HOW We Actively Enforce the Ordinance WHAT Active Enforcement Looks Like WHY An Active Enforcement Program? Proactive Education & Active Enforcement Extensive Outreach & Counseling / Rent Tracking & Registration Empowering Renters & Landlords Self-Help Mediation Hearings Informed Residents Make for a Strong & Enforceable Ordinance Tenants in a complaint based rent control city are 5 times more likely to be overcharged than in a city with active enforcement. Source: Rent Stabilization in the 21 st Century. Steve Barton,

75 Counseling In-office, offsite, phone & counseling Assistance with filing petitions Facilitate mediations 23

76 Counseling Common Issues Raised Rent overcharges Owner move-in evictions Reduction or increase in number of tenants allowed Habitability problems, security deposit disputes Interest on a security deposit Good cause for eviction (nonpayment of rent, continued violation of a lease agreement, etc) Capital improvements Decrease/increase in space or services Rent certification Ellis Act evictions Lease disputes Noise disputes Tenant/landlord rights during relocation for repairs Costa Hawkins analysis (when a landlord can go to market) Historically low rent Registration billing/waivers Breaking a lease Roommate and master tenant-subtenant disputes/rights Berkeley s eviction notice requirements Tenant/landlord rights during foreclosures Helping landlords properly register their tenancies and properties Mediation counseling Petition counseling Rent control protections for condos Benefits Key to more informed and educated tenants and landlords Avoiding, reducing, resolving conflicts Ensuring continued compliance with the Rent Ordinance 24 24

77 RENT REGISTRATION Bill & collect registration fees Process & track changes in rental status Collect penalties & process waivers Communicate changes to new tenants and owners 25

78 Rent Tracking & Rent Registration New RTS Property Finder Vacancy Registration/ Rent Validation Report Rent Ceiling Notice 26

79 From Outreach to Rent Registration Educational Materials Sent to Landlord (and Tenant) Bills & Registration Collection of Registration Fees Fees Paid by July 1? Yes Process Completed Notice of Rent Ceiling & Rent Validation Report Unit Status Correct? Yes No Landlord Updates/ Corrects Unit Status RB Adjusts Fees No Penalties Waivers Filed Litigation & Collections Process Completed Approval by RB Commissioners 27

80 OUTREACH Community outreach & counseling Core outreach: Rent Ceiling mailings, SD interest/ AGA mailing, targeted outreach, informational postcards/newsletters Staff and advise the Outreach Committee

81 Core Outreach CONTACT ALL NEW TENANTS: Rent Validation Report, Magnet and Guide to Rent Control Mass Mailings Registration Billing Outreach Website, Postcards, Newsletters CONTACT ALL NEW OWNERS: Welcome letter and landlord kit/packet VALUE ADDED Informed residents and public Improved accuracy in recordkeeping for everyone Providing helpful resources and timely information Reduce conflict 29

82 Core Targeted Outreach Informational Postcards Landlord/Tenant Workshops & Seminars New Landlord/ New Tenant Packet (includes magnet, guide and special file folder) Special Group Workshops Students leaving the Dorms, BPOA, Berkeley Realtors Assoc. Community Counseling Library, Senior Center & Cal Campus Counseling Tabling at Community/ Special Events Targeted Ads (e.g., PTA directory, student file folders, etc.) 30

83 Landlord and Tenant Packets 31

84 Seminars & Workshops 32

85 Informational Postcards & Newsletters 33

86 Outreach to College Students Collaboration with RLA Presentations at the Dorms Outreach at Berkeley City College Rent Board Interns 34

87 From Rent Registration/Outreach to Resolution Active Enforcement Rent Registration & Proactive Outreach & Education Counseling Informed Residents & Empowered Landlord or Tenant Resolution Self-Enforced (This represents the majority of our cases, which constitutes about 10,000 contacts); Mediation Agreement; OR Petitions/Hearing Decision

88 Hearings Unit 36

89 Hearings Unit: Activities Conduct hearings and write decisions Conduct settlement conferences Consult with staff on legal issues Back-up resource on interpretation of Ordinance and Regulations Assist with public information documents Primary author of Guide to Rent Control booklet and the Petition Process (on website) Review other documents, such as newsletters and mailings Develop and revise petition forms 37

90 Hearings Unit: Activities (cont.) Conduct voluntary mediations Hearing examiners are available, along with staff attorneys and counselors, to do mediation Conduct Berkeley Housing Authority Hearings Special assignments as needed Examples: New RTS project; Collaboration with assistance to other jurisdictions, like East Palo Alto 38

91 Tenant Rent Withholding RWN Tenant IRA T Landlord IRA L Appeal of Certificate C Petition Types Determine Occupancy Status D Exempt Status E Right to Set Initial Rent IRD 39

92 Petition Descriptions Tenant ( T ) IRA Petitions: Illegally high rent (incl. return of security deposit) Decrease in housing services or living space Habitability or code violations Security deposit interest Landlord ( L ) IRA Petitions: Capital improvements Increase in number of tenants allowed Increase in services or space Historically Low Rent No Vacancy Increase since 12/31/1998 (Regulation 1282) Rent Withholding ( RWN ) Petitions: Tenant claims landlord not properly registered 40

93 Petitions Descriptions (cont.) Petitions Determining Occupancy/Initial Rent: D Whether tenant occupies as a primary residence (and no subtenants). IRD Whether landlord may set new initial rent for current tenant or subtenant because original occupant(s) no longer permanently resides in the unit. Petitions Appealing Certificate ( C ): Either party may challenge staff s administrative issuance of a Certificate of Permissible Rent Ceilings. Petition Appealing Non-Exempt Status ( E ): Landlord challenges staff s administrative determination that a unit is not exempt from the Ordinance. 41

94 Hearings Unit: Petition Statistics Petition Type Calendar Year 2011 Calendar Year 2012 Calendar Year 2013 Calendar Year 2014 Calendar Year 2015 Tenant IRA Landlord IRA Tenant Rent Withholding Determine Occupancy Status Right to Set Initial Rent Appeal of Certificate Exempt Status Totals IRA petition figures vary from those in Table 3 of Rent Stabilization in the 21 st Century due to a difference in the reporting period. Steve s Table 3 figures use, for , a reporting year of December 1 November

95 Legal Unit 43

96 Overview/Staffing Module Matt Brown Staff Attorney III Matthew Siegel Staff Attorney I Palomar Sanchez Community Service Specialist I (.25 FTE) Chanée Franklin Minor Staff Attorney I Maggie Cheng Senior Legal Secretary Brendan Darrow Acting Staff Attorney I 44

97 General Duties of Legal Department Represent Board in Litigation Advise Director, Staff and Elected Rent Board Decisions on Appeal Coordinate Response to Public Records Act Requests Staff and Advise Committees Contract Review Supervise Field Investigator/ Small Claims Court Lead Counseling Duties in PIU Special Projects 45

98 Represent Board in Litigation Writs Intervention Represent Board as Plaintiff 46

99 Advises Director and Board Draft Regulations, Resolutions, and Contracts Provide Legal Advice to Director on Matters Related to the Ordinance and Its Administration Brown Act / Parliamentary Rules Provide Counsel on HR / Personnel Matters Review and Analyze Local and Statewide Legislation 47

100 Decisions on Appeal Prepare Agency Opinion for Appeals to the Board Provide Counsel / Advice to Board When Hearing Appeals 48

101 Staff and Advise Four Board Committees Eviction / Section 8 / Foreclosure Committee Habitability Committee Ad Hoc Committee on Short-Term Rentals Committee IRA / AGA / Registration Committee 49

102 Contract Review and Preparation Eviction Defense Center / East Bay Community Law Center Non-Profits BFHP / Registration Fee Pass-Through Assorted Vendors for Day-to-Day Administration of Program Leases and Contracts 50

103 Provides Lead Counseling to PIU Trains & Supervises Counselors Legal Analysis Problem Cases 51

104 Small Claims Court Litigation Supervise and Oversee Annual Rent Board Small Claim Court Lawsuits for Non-Registration Provide Direct Supervision of Rent Board Small Claims Court Representative Fiscal Year Number of Cases 2010/ / / / /

105 Special Projects Fires and Other Mass Displacement/ Relocation Ordinance Coordination Fraternity/ Sorority Amnesty/ Registration Mediation Coordination Training / Workshops MCLE Workshop Public Workshops (Evictions, Tenants Rights, Realtors) 53

106 Administrative and Policy Unit 54

107 Administrative and Policy Unit BOARD AND COMMITTEE SUPPORT Coordination and assurance of compliance with Brown Act for all Rent Board and Committee meetings Coordination to ensure public access/transparency Coordination of agendas, minutes and documents for all Rent Board and Committee meetings (over 80 in 2015) Tracking and publication of Commissioner attendance for all Board and Committee meetings OFFICE ADMINISTRATION Payroll; Purchasing, Finance & Accounting Liaison for vendors and other City Departments Administrative workflow BUDGET/CONTRACTS Preparation, execution, monitoring & reporting COUNCIL/INTERDEPARTMENTAL POLICY FORMULATION Working with City Council & other departments to develop & implement a coordinated housing policy consistent with Ordinance 55

108 Administrative and Policy Unit RESEARCH Conduct surveys & studies to help guide administrative improvements and the formulation of sound public policy Research and inspect individual properties to assist in enforcement of the Ordinance LEGISLATION Monitoring & liaising with Legislative Advocate & other Rent Control jurisdictions OVERSEE/ ASSIST IN OUTSIDE REVIEW OF THE AGENCY Annual outside audit of Rent program fund Public Records Act & Non-Public Records Act requests for information PERSONNEL Oversight of all personnel-related issues (hiring, training, discipline in conformance with MOU s) Contract negotiation WEB Maintain and update Rent Board website and Facebook page 56

109 Ongoing improvements to building / office space RTS Redesign & Testing Improvements to / redesign of Rent Board website Special Projects Board & workspace Coordination of computer & other technology upgrades / initiatives Paperless Agenda 57

110 Attachment 9 Page 1 of 19 Rent Stabilization Board RENT STABILIZATION BOARD DATE: May 2, 2016 TO: FROM: SUBJECT: Honorable Members of the Rent Stabilization Board Jay Kelekian, Executive Director Rent Stabilization and Good Cause for Eviction in the 21 st Century During the FY 2012/2013 budget process, Board members indicated that while they had a good understanding of the Board s finances, they and the public would benefit from a greater understanding of the ongoing and ever evolving work performed by the Rent Stabilization Program staff. The Budget and Personnel Committee agreed and asked that staff put together a report with some historical context on the work of the agency. For the past several years we have updated the document and included it as background information for the Board and public when reviewing our budget and program. This report, which was originally prepared in 2012, describes how the Berkeley Rent Stabilization Board has adapted to the passage of vacancy decontrol and how it is working to ensure continued and effective enforcement of rent regulations and good cause for eviction in the 21 st century. It provides a historical perspective that illuminates the major administrative and staffing changes we have carried out over the years. While I have updated portions of the report, the core remains relatively unchanged. The citizens of Berkeley established our agency and its mission in 1980 and have reaffirmed it many times over the succeeding years. Although conditions have changed around us we can say with pride that we have adapted to those changes and continue to provide effective and efficient administration of the Ordinance. This report is an overview that is designed to work in tandem with a series of presentations from each of the Program s respective Units. We hope that this report in conjunction with the presentations from staff on Monday evening will provide the Board and public with a good understanding, not just of what we do now, but also how our work has evolved over the years and what we hope and expect to do in the near future.

111 Page 2 of 19 Rent Stabilization Board RENT STABILIZATION AND EVICTION FOR GOOD CAUSE IN THE 21 ST CENTURY Introduction May 2, 2016 This report explains how Berkeley Rent Stabilization Board has adapted to the passage of vacancy decontrol and is working to ensure continued and effective enforcement of rent regulations and good cause for eviction in the 21 st Century. Section One reviews the purposes of the Rent Board and the scope of the Board s mandate, which is to implement an ordinance designed to help level the playing field and ensure fair treatment for both landlords and tenants in a region where tenants, who are mostly low-income, have little market power. Section Two compares the strong, active enforcement approach utilized by Berkeley, West Hollywood and Santa Monica with the more passive, complaint-driven enforcement approach utilized by Los Angeles, Oakland and San Francisco and shows that Berkeley s active enforcement is both more effective and more costly than complaint-driven programs. Section Three describes the administrative structure of the Rent Stabilization Program and its relationship with other City departments. Section Four gives an historical overview of changes in the Program s budget, fees and staffing from its inception to the present day, showing how staffing gradually declined as a result of vacancy decontrol and then stabilized in response to increased demands resulting from changes in the program environment, most notably the current recession. Section Five describes the effort underway for the past several years to reorient Program activities to better meet the evolving needs of tenants and property owners under current conditions. These include a stronger emphasis on educating property owners and tenants about

112 Page 3 of 19 good cause for eviction, a greater emphasis on dispute resolution, strengthened interdepartmental coordination and improved administrative capacity and use of modern information technology. All of these efforts have received broad public support. All of these changes have been implemented at a time when demand for our services are at an all time high. I. Purposes and Scope of the Berkeley Rent Stabilization Program The Berkeley Rent Stabilization Program implements the Rent Stabilization and Eviction for Good Cause Ordinance passed by the voters in June 1980 and is governed under Article 17 of the Berkeley City Charter, Elected Rent Stabilization Board, passed by voter initiative in November The Ordinance (Berkeley Municipal Code Section 13.76) states: The purposes of this chapter are to regulate residential rent increases in the city of Berkeley and to protect tenants from unwarranted rent increases and arbitrary, discriminatory, or retaliatory evictions, in order to help maintain the diversity of the Berkeley community and to ensure compliance with legal obligations relating to the rental of housing. This legislation is designed to address the City of Berkeley's housing crisis, preserve the public peace, health and safety, and advance the housing policies of the city with regard to low and fixed income persons, minorities, students, handicapped, and the aged. The Rent Stabilization and Eviction for Good Cause Ordinance responds to a severe and longstanding housing market failure in Berkeley and in the surrounding Bay Area. In a genuinely competitive market with adequate supply that increases as demand increases, competition would hold rents down to the minimum necessary to cover the costs of operating and maintaining housing and providing a modest profit. Instead, for the past thirty years Bay Area rents have been based on scarcity in a market where supply has failed to increase with demand, making them among the highest rents in the United States. Under such circumstances, tenants are easily taken advantage of unless protected by strong and effective regulation. The Ordinance also falls within Berkeley s tradition of demanding equal rights for all, providing tenants in good standing with a level of security in their homes that is nearly equivalent to that available to homeowners with fixed-rate mortgages. Berkeley s voters have affirmed their continuing support for rent stabilization and eviction for good cause many times over the years, for example by strengthening the limits on owner move-in evictions in 2000 and adopting additional amendments proposed by the elected Rent Board in In response to changing needs, the Board has asked the City Council to place additional amendments before the voters in November Berkeley s current system of rent regulation can best be described as vacancy decontrol recontrol. In 1980 the voters established a strong form of rent regulation called vacancy control, which set base rents and allowed increases without regard for changes in tenancy. In 1995 the state legislature overrode the will of the voters of Berkeley and passed the Costa

113 Page 4 of 19 Hawkins Act, which allows the landlord to set the initial rent of a new tenancy, a system called vacancy decontrol. Once the unit is re-rented it is again controlled for the duration of the tenancy, with limits set on future increases in order to provide stability and security to the new tenant. Vacancy decontrol began on January 1, 1999 after a three-year phase-in period. The good cause for eviction provisions of the ordinance govern nearly the entirety of the approximately 27,000 rental units in Berkeley, while the rent stabilization provisions apply to approximately 21,000 units in multi-family properties built before About 19,000 of these units are required to register at any given time and the other 2,000 units are temporarily exempt. The most common reason for temporary exemption is that the unit is rented to a tenant who participates in either the Section 8 Portable Voucher or Shelter Plus Care programs. Permanently exempt units include those built after 1980 and most single-family and condominium units. The Berkeley Rent Board is now responsible for administering rent regulations for two parallel sets of tenancies: old rent control tenancies in units that have never received a vacancy increase and newer tenancies in units that have had a vacancy increase bringing the unit to market rent. At this point slightly more than 85% of stabilized units have turned over at least once since January 1, 1999 and have tenancies that began at market rent under the vacancy decontrol recontrol rules. Approximately 2,600 households have tenancies that began prior to January 1, 1999 and most of these have rents that are based on the original (usually 1980) base rent plus allowable annual and individual rent adjustments. There are also a small number of units within this group that received additional increases during the phase-in period. The rent ceilings for these long-term rent-controlled tenants are usually from 50% - 65% below the current market rent. According to the Rent Board s 2009 tenant survey, the great majority of the tenants who fall under old rent control are low-income and 37% of these households include a resident who is disabled, elderly or both. Even with rents substantially below the current market rate, 42% were paying over 30% of their income for rent and the majority would be hard put to afford other housing in Berkeley. (For more details, see Berkeley Rent Stabilization Board, Report on the April May 2009 Survey of Tenants of Registered Rental Units, March 15, 2010, available on the Rent Board web site under Research Reports.) By way of comparison with other housing programs, the Berkeley Housing Authority assists just over 1,900 tenants with Section 8 vouchers or certificates and the City s non-profit housing organizations have, over the past forty years, developed an inventory of about the same number of units of subsidized housing (with about 300 units that fall in both groups) for a total of about 3,500 assisted households. Meanwhile, taking both old and new tenancies, Berkeley has more than 8,000 low-income non-student tenants living in the private rental housing market who are provided with protection and stability by the Rent Stabilization and Eviction for Good Cause Ordinance. In addition, thousands of students and middle-income tenants also benefit from clear

114 Page 5 of 19 rules, a more level playing field between landlords and tenants, and a place to go for advice and to resolve disputes. The Rent Board has an important role in monitoring evictions as well as rents. Although evictions are carried out through the courts, the Rent Board is notified of all eviction actions and monitors them to ensure that they involve valid causes for eviction and to ensure that vacancy increases are not granted in cases that fall under the exceptions in the Costa Hawkins Act. The Board also administers the requirements of both the state Ellis Act, for owners evicting their tenants to go out of the rental business, and the corresponding local Ellis Ordinance, which provides a timeline and relocation payments to any tenants. Eviction monitoring is particularly important for units occupied by long-term tenants, since vacancy decontrol can create a major economic incentive to vacate such units and restart the rent at current market levels. The Rent Board s 2010 economic study demonstrated that, as a result of vacancy decontrol and the continued high demand for rental units in Berkeley, most landlords have received major increases in rents. Since 2010, market rents have increased by an additional 35%. On an annual basis 2010 rents in Berkeley were more than $100 million higher than they would have been if vacancy control had remained in place or if rents at the beginning of rent control had simply increased at no more than the rate of inflation, as they would have in a more competitive housing market. This amount has increased substantially since This additional $100 million in annual rental income, virtually all of which goes into net operating income, has increased the value of Berkeley s rental properties by over one billion dollars. It has not, however, increased Berkeley s tax revenues by very much, since most rental properties have not turned over since vacancy decontrol and they retain the much lower property tax rates mandated by Proposition 13. (For more details, see Berkeley Rent Stabilization Board, The Effects of Rent Stabilization and Vacancy Decontrol on Rents, Rental Property Values and Rent Burdens in Berkeley, California, April 19, 2010, available on the Rent Board web site under Research Reports.) II. The Value of a Strong Regulatory System Broadly speaking, there are two models of how to approach regulation of the landlord-tenant relationship; passive enforcement and active enforcement. The passive enforcement approach makes information available but does not collect systematic information regarding current rents and enforces regulations only in response to complaints, which usually find their way to the regulatory agency only in egregious cases or where tenants have contact with an advocacy organization. The active enforcement approach uses extensive outreach to inform tenants and owners about their rights and obligations under the law and regulations, maintains full and accurate records through reporting requirements for initial rents and eviction proceedings, ensures information provided by owners is also sent to current tenants for review, provides

115 Page 6 of 19 mediation and dispute resolution services and actively enforces the law and program regulations when it finds violations. Berkeley is a city whose voters demand active enforcement. The Berkeley Rent Stabilization Program has career employees and an adopted budget for the 2015/2016 fiscal year of $4,550,000, (revenues of $4,300,000) mostly from annual registration fees of $213 per unit. Santa Monica, another high enforcement city, has an adopted 2015/2016 budget of $4,755,000, mostly from registration fees of $ per unit. Its 26 employees oversee 26,335 rent stabilized units. By way of contrast, the City of Los Angeles runs a rent stabilization program with lower-level enforcement. Its ordinance applies to approximately 450,000 units, which are overseen by a staff of approximately 80 employees. An annual registration fee of $24.51 per unit generates most of the program s $14,000,000 - $14,500,000 in annual revenue. Similarly, the Oakland Residential Rent Adjustment Program, which also takes a lower-level enforcement approach, has responsibility for regulating approximately 58,000 units with a recently expanded staff of 12.4 in-house employees and budgeted revenue of $2,632,000 from a per unit fee of $30. It is important to note that for both Los Angeles and Oakland, in-kind support from other departments (City Attorney, Codes, IT, etc) are not included in the staffing or cost figures above. We are trying to get more accurate and comprehensive figures and will update this report when we have them. The differences in information outreach, rent registration and enforcement generate measurable differences in results. The City of Los Angeles survey of tenants in and found that 27% of tenants reported current rents that were more than 105% of what they should have been based on the tenants initial rent and the increases allowed under the L.A. rent stabilization ordinance. (Economic Roundtable, Economic Study of the Rent Stabilization Ordinance (RSO) and the Los Angeles Housing Market, 2009, available at the L.A. Housing Department web site). By contrast, a 2009 survey of tenants in Berkeley found that 7% of pre-1999 tenants and 5% of tenants who moved in after 1998 reported a rent that was over 105% of the legal rent ceiling. (Berkeley Rent Stabilization Board, Report on the April May 2009 Survey of Tenants of Registered Rental Units, March 15, 2010, available on the Berkeley Rent Stabilization Program web site). The Berkeley survey overstates the overpayment rate because it did not try to take into account legal separate agreement payments, such as for parking or storage space, which tenants may have considered part of the rent. Even so, it is clear that rent violations are quite rare in Berkeley and fairly common in Los Angeles. This is certainly related to the fact that Berkeley requires landlords to report the initial rent for all new tenancies and mails out an annual statement to all tenants with their legal rent ceiling. In contrast, Los Angeles does not require rent reporting and their consultants recommended that they consider doing so. The Los Angeles study also found that 37% of tenants in stabilized units did not know that their rents were regulated. The Berkeley study found that 27% of tenants in stabilized units did not

116 Page 7 of 19 know, although only 3% of long-term Berkeley tenants did not report knowing that their rent was controlled. This reflects the particular challenge that Berkeley has in reaching the high-turnover student sector within its tenant population. After receiving the results of the survey, Berkeley has taken several measures to improve its outreach to college students. The Los Angeles ordinance has been the subject of major ongoing controversy and protests from tenants because its provisions allow landlords a minimum annual increase of 3% on sitting tenants, while over the past several years the rate of inflation has been much less than that. In contrast, Berkeley s ordinance does not allow a minimum annual increase if there is no inflation. It is not a coincidence that the high-enforcement cities in California were originally cities with strong vacancy-control rent regulations, while the low-enforcement cities always allowed decontrol on vacancy. Vacancy control systems had to track the legal rent for each unit, and could easily continue the practice after the state mandated vacancy decontrol. In addition, since Berkeley has a database with the addresses of all rent stabilized units, it is able to send regular mailings to all landlords and tenants informing them of their rights and obligations under the law. It is worth noting that to better respond to the housing crisis, Los Angeles, Oakland, and several other cities that have had a passive enforcement approach to implementing their ordinances are already in the process of converting to an active enforcement system and/or have proposals to do so pending before the city council or voters in the next few months. III. Structure of the Rent Stabilization Program The elected Rent Stabilization Board hires the Executive Director, who hires all other staff and manages the Program. The Rent Stabilization Program budget for the 2015/2016 fiscal year, adopted last June, budgeted for full-time equivalent staff (FTE) divided into four units: Registration and Public Information (10.65 FTE), Hearings (2.55 FTE), Legal (2.75 FTE) and Administration/Policy (4.65 FTE). The Board also funds 1.0 FTE in the City s Information Technology Department. (Minor changes are made throughout the year. The numbers used in this report always refer to the initial adopted budget unless otherwise specified.) The Registration unit handles the annual payment of registration fees for approximately 19,000 units, as well as requests for waiver of penalties for late payments, registration of approximately 4,500 new rents established after a change in tenancy each year, annual verification of approximately 2,000 units with temporary exemptions and verification of changes in exemption status. The unit staff calls landlords with past histories of late payment in advance of each year s due date to help them avoid penalties. We are not aware of any other agency (public or private) that goes to these lengths to avoid assessing a penalty. If a penalty is assessed, the Board processes several hundred requests a year to have the penalty reduced or forgiven entirely based upon good cause, with some relief being granted in over 90% of the cases.

117 Page 8 of 19 The Public Information unit (PIU) conducts extensive outreach to inform landlords and tenants of their rights and obligations through regular mailings, newsletters and other media. It holds monthly informational meetings at libraries and senior centers, weekly hours for counseling on the UC Berkeley campus, and does workshops for landlords and tenants. For example, in each of the past several years we held a workshop on eviction procedures for landlords to ensure that owners who needed to engage in this process knew how to do it correctly. PIU staff conducts regular workshops specifically for small property owners. Each of these workshops are generally attended by owners, expressing appreciation for the comprehensive presentations. PIU contacts new owners of Berkeley rental property and sends information packets to new tenants. It sends information on the eviction for good cause requirements to tenants who have received a three-day eviction notice. PIU now responds to over 12,000 inquiries/client contacts from the public annually, and when landlords or tenants bring in specific situations the staff follows through advising one or both parties until the situation is resolved. Although the Rent Program s current software does not provide detailed statistics, we know that volume of inquiries and counseling has increased substantially since Initially in response to the uncertainty caused by threats of eviction on foreclosed properties and more recently in response to dramatic rent increases and perceived harassment and/or threatened eviction. Over the past two years we estimate that demand has gone up an additional 20%. Staff is allocated as needed between the Registration and Public Information units, with a total of FTE budgeted. The Hearings unit, with 2.55 FTE (including 2.0 Hearing Examiners), deals with situations in which conflict has arisen between a landlord and a tenant. In 2015 its staff held hearings on 153 petitions for rent reductions or rent increases. In addition, the Hearings and Public Information units jointly conduct a mediation program and held 89 formal mediations in Hearings staff also carry out occasional special projects. The Legal unit, with 2.75 FTE, is responsible for advising the Board and Executive Director on all legal matters, similar to how the City Attorney advises the City Council and City Manager. The Legal Unit also handles collection of unpaid registration and penalty fees, reviews hearings unit decisions that are appealed to the Board and responds to writs and lawsuits filed against the Board. In 2010 the unit filed in small claims court against 140 properties and subsequently had to file liens with the County on 40 of these properties. When banks foreclose on a property and fail to pay fees, leaving them to an often unknowing new owner, the Legal unit will join with the new owner in pursuing payment from the bank. Since 2010 the economic situation for owners facing foreclosure has abated considerably and the number of cases requiring litigation has decreased (reduced to 61 cases in 2015) accordingly, the staff resources have been redirected to the outreach and counseling services The Administrative/Policy unit, with 4.65 FTE, includes the Executive Director and Deputy Director, who are responsible for providing leadership and managing the agency under the

118 Page 9 of 19 general direction of the elected Board, drafting and maintaining the annual budget, hiring and promotions, grievances and disciplinary actions, contract negotiations, and maintaining effective relations with other elected officials, heads of other City departments and the public. The unit is also responsible for payroll, office administration, staffing meetings of the Board and its nine committees, and conducting research and analysis and producing reports. Other City departments carry out several administrative support functions, although the City Charter does not require the Rent Board to use them. They include the City Auditor, Finance/Treasury, City Clerk, Human Resources, and an outside auditor selected by City. With the exception of the Executive Director, who is hired directly by the elected board with the assistance of an executive search firm, all personnel matters are conducted in consultation with the Human Resources Department in strict conformance with their procedures. The Executive Director hires and promotes staff through the City of Berkeley s civil service process. The City s Human Resources Department handles the outreach, determines eligibility for the list and ranks the candidates. All top candidates and others from within the City system are interviewed by a panel that provides recommendations to the Executive Director. The permanent staff, hired by the Rent Board, almost universally were ranked in the most highly qualified group by the HR Department and received the highest ranking by the professional review panel conducting the job interviews. All Rent Program positions except that of the Executive Director are defined within the City s job classification system. When the positions of Deputy Director, Administrative Staff Assistant, and Senior Hearing Examiner were created, it was reviewed not only by the Rent Board but also by the City s Personnel Commission and then approved by the City Council. The Rent Program Executive Director is co-signatory with the City Manager on all relevant union contracts and normally participates in contract negotiations as part of the management team. Employees at the Rent Program have seniority rights within the City system as a whole. The grievance and disciplinary procedures are defined by the union contracts and the Rent Program does what all other City departments do and follows the advice of the Human Resources Department and the Labor Relations Coordinating Committee. Rent Program staff, like all City staff, is paid through the City Auditor s payroll unit. The Finance Department handles the Rent Program s banking functions. Purchasing is conducted under the advice of the Finance Department, following standard City bidding and RFP procedures, with the exception that the Rent Program staff may, with approval of the Executive Director, take advantage of cost savings from, for example, obtaining more bids than the City normally requires or by using an immediate credit card payment to obtain a lower cost. The Rent Program originally hired its own Information Technology staff, but now contracts with the Information Technology Department for IT services. This arrangement both provides more comprehensive service and greater flexibility as needs change. Replacement of the Rent Program s obsolete software has been conducted under the advice of the IT Department to maximize compatibility between software used by the Rent Program and other City departments. This contract is budgeted at 1.0 FTE for the current fiscal year

119 Page 10 of 19 IV. Berkeley Rent Program Annual Budgets, An Overview of Changes from Table 1 below shows changes in the Rent Stabilization Program finances and staffing over time. After each several years of data there is an explanation of major issues and changes. Some of the information is not readily available for the early years, but later reports provided historical data on annual registration fees going back to the beginning of the agency in 1980 and on staffing FTEs (full-time equivalents) going back to The adopted budget is given starting in and actual expenditures since 1990/91, rounded to the nearest $1,000. When the agency began in 1980/81 the initial budget and staffing was completely unrealistic. The agency needed to determine which units were covered and which were exempt and register initial base rents for covered units while dealing with a deluge of lawsuits and concerted refusal to comply with the law. The owners of thousands of units tried to prevent the agency from carrying out its mission by refusing to pay fees or register base rents, forcing the City Council to lend money to support the program. In 1982 a voter initiative increased penalties for late payment and empowered the Board to place liens on properties whose owners failed to pay. Compliance increased substantially the following year. Santa Monica passed its ordinance in 1979 and began rent registration with an annual fee of $12.50 per unit, which may have provided the model for Berkeley s starting point of $12. Two years later, in 1981, the Santa Monica fee was set at a more realistic $72 per unit. Berkeley was several years slower in coming to this realization, with the fee reaching $60 in Table 1: Rent Board Budget History (see Appendix for full table without breaks for commentary) Fiscal Year FTE Fee Adopted Budget Actual Expenditures $ $ $ $ $ $60 In 1986 the legislature passed the Petris Act, requiring rent control agencies to certify rent ceilings by the end of the following year. Staffing reached its peak in FY as the Agency hired more staff in a final effort to clarify the base rents for as many units as possible before the deadline.

120 Page 11 of 19 Fiscal Year FTE Fee Adopted Budget Actual Expenditures $ $ $80 $1,861, $100 $2,220, $100 $2,180,000 $2,676, $136 $2,385,000 $2,147, $125 $2,510,000 NA $125 $2,400,000 $2,410, $115 $2,345,000 $2,290,000 In the November 1990 elections a new majority gained control of the Rent Board. They cut programs and staff and approved major rent increases in response to Searle v. City of Berkeley Rent Stabilization Board. The City Council filed suit against the elected Board arguing that the increases were larger than legally necessary. At that point the Rent Board attorneys and a legal secretary (3.5 FTE) were moved from the City Attorney s Office to the Rent Board to eliminate the resulting conflict of interest. The Rent Board majority changed again in the November 1994 elections, but in 1995 the state legislature passed legislation mandating vacancy decontrol. The Costa Hawkins Act created a three-year phase-in period from 1996 to 1998 in which landlords could receive a 15% vacancy increase and full vacancy decontrol began on January 1, As vacancy decontrol went into effect the number of rent increase petitions filed by landlords declined, as did the level of litigation. In FY 1996/97 Rent Program staff included a Chief Legal Counsel, two Staff Attorney positions and 4.6 Hearing Examiners. By FY 2002/03 the Chief Legal Counsel was eliminated and there were 2.3 Hearing Examiners. (See Table 3 for detailed information on changes in the hearings unit.) Fiscal Year FTE Fee Adopted Budget Actual Expenditures $125 $2,410,000 $2,266, $112 $2,308,000 $2,278, $112 $2,387,000 $2,405, $112 $2,417,000 $2,234, $124 $2,412,000 $2,299, $124 $2,457,000 $2,286, $124 $2,602,000 $2,464, $124 $2,769,000 $2,676, $136 $2,992,000 $2,751,000

121 Page 12 of 19 In November 2004 voters passed Measure O which was jointly sponsored by the Rent Board and the Berkeley Property Owners Association. It set the Annual General Adjustment in rent at 65% of the increase in the Consumer Price Index rather than according to an annual cost study conducted by an outside consultant. With the onset of the financial crisis and recession in 2008 and subsequent recovery, there was an upsurge in demand for counseling that has continued unabated to the present. Fiscal Year FTE Fee Adopted Budget Actual Expenditures $136 $3,155,000 $2,857, $154 $3,236,000 $2,967, $154 $3,290,000 $3,107, $170 $3,525,000 $3,313, $170 $3,517,000 $3,546, $194 $3,995,000 $3,496, $194 $3,950,000 $3,648, $194 $3,950,000 $3,859, * $194 $4,270,000 $4,174, $194 $4,120,000 $3,954, $194 $4,245,000 $3,961, $213 $4,550,000 NA * At no time was the actual staffing level above 21.0 FTE Fully 82% of the Rent Program budget is for staff salaries and benefits. Over the past dozen years staffing has remained largely level (or decreased slightly) but expenditures have increased substantially. This reflects the contracts negotiated by the City of Berkeley with its employee unions, especially the rapid increases in benefit costs resulting from the increased cost of health insurance and increased contributions to pension plans. For example, in FY 2002/2003 with a stock market boom under way and CalPERS reporting the pension plan fully funded as a result, employee benefits were budgeted at 25% of employee salaries. Today, with increased pension and health insurance costs, employee benefits are over 65% of salary. In other words, a minimum of $850,000 of the FY 2015/16 budget is the result of the increased benefits ratio since Without that change, the increase in the budget since 2002/2003 matches or is less than the rate of inflation in the Bay Area. It should be noted that the problem of increasing pension costs is the result of the investment strategy chosen by the California Public Employees Retirement System, not the pensions themselves. CalPERS did not set aside adequate reserves for an eventual market downturn, and undercharged the State and local governments during a decade of high stock-market returns.

122 Page 13 of 19 It is as if local governments had borrowed against their pension obligations during the stockmarket boom of the 2000s and now have to repay the money. If pension costs had been correctly estimated, then personnel costs would have been higher during that period and the Rent Board would have charged higher fees. In effect, landlords and tenants are now paying higher fees to make up for the unrealistically low fees charged in earlier years. V. Meeting the Challenges of the 21 st Century Our agency changes to meet the evolving needs of the community we serve. What is often not understood is that, while Costa-Hawkins largely eliminated the need for hundreds of administrative hearings to determine building-by-building fair return requirements, the Rent Board s other responsibilities have remained intact and in some cases have increased in scope and importance. Eviction for Good Cause With the passage of Costa-Hawkins the number of hearings has decreased but the financial incentive for an owner to evict a long-term tenant in good standing has increased dramatically. In the first few years of vacancy decontrol we witnessed hundreds of cases of owners attempting to evict tenants without good cause, so that they could increase the rent paid by a new tenant. This undermines the stated intent as well as the integrity of the Ordinance. The Board responded by increasing outreach and information and ensuring that low-income households had access to eviction defense services from local legal assistance organizations. All new owners and new tenants receive a package of information from the Program concerning our services and the protections offered under the law. Over the past nine years, all owners and tenants received an informative and easy to read newsletter several times a year. The format has changed to a more attention-getting large size postcard focused on one or two topics. In response to the foreclosure crisis we created a new outreach program to ensure that tenants in foreclosed buildings are aware of their rights. Representatives of lenders routinely demand that tenants in foreclosed buildings leave their homes and threaten them with eviction despite the fact that foreclosure is not a good cause for eviction under Berkeley s Rent Stabilization and Eviction for Good Cause Ordinance. The Rent Program staff obtains information monthly on properties that are declared to be in default or foreclosure and then mails information to all units on these properties informing occupants that if they are a tenant they have a right to remain in their unit. The mailing also provides the tenant with contact information for the Rent Board and legal assistance organizations. Staff at the East Bay Community Law Center and the Eviction Defense Center have informed us that Berkeley tenants are better informed of their rights than tenants in neighboring cities and more likely to contact them if their tenancy is threatened.

123 Page 14 of 19 Reallocation of staff to dispute resolution Although the Berkeley Property Owners Association threatens litigation against the Rent Board on a regular basis, the overall level of litigation in Superior Court involving the Rent Board is down and one of the two previous Staff Attorney III positions has been replaced by a Staff Attorney I. Current budgeted legal staffing is now one Staff Attorney III and two Staff Attorney I positions. One FTE of the Staff Attorney I position is assigned to the Public Information Unit as attorney of the day to provide quality control and assist in responding to particularly difficult questions. Table 2: Cases filed in Small Claims Court and Liens filed with Alameda County Year Small Claims Cases Liens Filed 2007/ / / / / / / / At one point in the mid-1980 s the Board filed over 1000 cases in a year for unpaid fees and penalties. Several hundred a year was the norm through the 1990 s. Since 2000, we have averaged between cases per year. As Table 2 (above) shows peak of the foreclosure crisis (2011 and 2012) was an exception, where between cases were filed. On average no more than one small claims case a year is denied by the commissioner hearing the case although a few are remanded to the Rent Board for review of newly made claims that the unit is exempt. The number of Hearing Examiners went from 6.85 in 1991/92 to 4.6 in 1996/97 to 2.3 in 2000/01 was further reduced to 2.0 in the 2015/16 fiscal year, (See Table 3). The Rent Program is now placing greater emphasis on providing mediation services to try to resolve landlord-tenant disputes. This reduces landlord-tenant litigation and formal complaints that require hearings and improves landlord-tenant relations generally. Mediation has been particularly effective in assisting owners who are locked into disputes with long-term tenants that might otherwise result in repeated hearings or eviction notices and going to court.

124 Page 15 of 19 Table 3: Rent Hearings and Mediations by Calendar Year Hearing Landlord Tenant Appeals Examiner Petitions Petitions Petitions to Board Mediations FTE 1992 NA NA NA NA NA NA NA NA NA NA NA NA NA NA * * Notes: Petition data from 2006 /2010 are based on December 1 st of the previous year through November 30 th. Hearings for Certification, Occupancy and Exempt Status are not categorized as landlord or tenant petitions. * The FY 2009/10 FTE of 2.45 was changed to 1.95 with the loan of 0.5 FTE to the City as a cost saving measure. Similarly, in FY 2014 we budgeted 1.85 FTE but due to staff turn-over only used 1.5FTE. No statistics on mediations were kept prior to 2006, although a few were done on an informal basis. FTE is for the fiscal year including January-June of the calendar year for which hearing data is given. One way the Rent Program has reduced costs while helping to maintain staffing in its Hearings Unit is by making Hearing Examiners available to the Berkeley Housing Authority, with their hourly costs reimbursed by the BHA. For nearly a decade Examiners have generally done hearings a year for the BHA. In FY , we began conducting Shelter Plus Care hearings for

125 Page 16 of 19 the Housing Department. Rent Program Hearing Examiners can also serve as back-up for the City Hearing Examiner when she is away or backlogged, with the hourly costs paid by the City Manager s Office. It is essential for the program to maintain its own staff of experienced Hearing Examiners. The issues are too specialized and specific to the Berkeley ordinance and its implementing regulations for contracting with outside hearing examiners to be successful. Berkeley and several other rent control jurisdictions that have experience with hiring outside hearing examiners have ultimately decided to hire in-house examiners given the complexity of the governing laws and regulations. The Rent Board has gradually decreased the number of staff and the proportion of higher salaried staff. Its goal has been to prevent or avert conflict through information and counseling rather than adjudication. When there is a dispute, staff tries to resolve it with the least conflict possible (voluntary mediation rather than a formal hearing) in order to preserve the relationship between the parties and contain costs. Interdepartmental Coordination In addition of conducting hearings for the city, the Rent Stabilization Program routinely provides assistance to other departments. Tenant petitions for rent reductions are one of the City s tools for ensuring that landlords correct housing code violations. The Planning Department review of applications for condominium conversion includes a Rent Program staff review of whether there have been evictions on the property of a nature that would disqualify it from conversion under the City s condominium conversion ordinance. The Rent Board is reimbursed for assisting the City with the condominium conversion ordinance. The Auditor s Office uses data on rent ceilings to help track down owners who fail to pay the required percentage of gross rent as business license tax. The Rent Board is working to improve cooperation with the Planning and Development Department, the Health, Housing and Community Services Department, the Auditor and the IT and Finance Departments. Important issues that involve both the Rent Stabilization Program and the Departments under the City Council in recent years have included: assistance in drafting and the ongoing tracking of the tenant buyout ordinance; increasing seismic safety in soft story buildings, where the ground floor may collapse in a major earthquake; improving energy efficiency in rental properties; setting conditions for demolition of existing rental housing to allow redevelopment of the site at higher densities, which could displace long-term tenants; developing appropriate procedures for dealing with owners of unpermitted units while minimizing harm to their tenants;

126 Page 17 of 19 housing code enforcement and improvements to citywide habitability; assisting in developing a smoking ordinance for multifamily properties to ensure that health and safety goals are met without causing improper evictions; assisting in extending recycling to multifamily rental buildings; assisting in extending disaster preparedness organizing to multifamily buildings; improving tax revenue collection through pooling information on rents. Implementation of the Ellis Eviction mitigation Ordinance. Posting of the rules and the rates for tenant screening fees under recent ordinance adopted by the City Council. serving, at the request of the City Manager, as the initial point of contact and counseling for tenants displaced in several major fires concerning their rights as well as possible resources to assist them in their relocation; assisting in the development of an appropriate policy on short-term rentals that will not disseminate the existing rental housing stock In addition, since protection of tenants from improper evictions is an essential part of the mission of the Rent Program, it is important to have procedures that provide an appropriate balance between enforcement of City zoning, housing and other code requirements and protection of tenants so that they can either return to their homes once violations are cleared or have a transition that prevents unnecessary disruption or even homelessness. Over the past decade a series of court decisions have changed the legal landscape in significant ways, with the result that some existing City procedures no longer provide the balance that was originally intended. Strengthening Internal Capacity The Rent Stabilization Program is most of the way through a several years long and much delayed process of improving internal procedures and upgrading Rent Program software for greater efficiency. The Rent Board s Rent Tracking System software, which was over 20 years old and obsolete, was replaced in Once fully developed, the new software is expected to make it possible to slightly reduce ongoing staffing in the registration unit as well as make Rent Board information more accessible and easier to analyze. When the new system is fully developed, the Rent Board will be able to dramatically increase its use of the web for business and communications. We have already begun seeing some of the benefits of these changes and will continue these improvements over the next several years. The Rent Board is a high-volume agency, with annual registration of over 19,000 units as well as annual notifications of legal rent ceilings, new rent registration of several thousand units every year, and around 12,000 additional client contacts every year with questions and concerns that often required detailed knowledge of the rent ordinance and related City and State laws to resolve. With the new Rent Tracking System the Board is about to launch a new web portal that

127 Page 18 of 19 will allow property owners to pay annual registration fees on line. In the near future, we hope to be able to register the initial rents for new tenancies on line and verify that information regarding their units is up to date. We have used the new system to expand communication via . Many owners received early notice of the AGA because they provided addresses. This is a feature we hope and expect to expand on over the next few years. will allow clients to receive information earlier and eventually reduce postage and printing costs. In addition, the Board will be able to use social media, such as Facebook, in order to provide information and updates to the public. Increased use of and social media will continue and extend the Board s tradition of openness and transparency, currently best exemplified by having its meetings carried by cable TV, radio, and webcast with closed captioning and making agendas and accompanying staff reports available on the web.

128 Page 19 of 19 Table 1. Berkeley Rent Program Annual Budgets Fiscal Year FTE Fee Adopted Budget Actual Expenditures $ $ $ $ NA $ $ $ $80 NA NA $80 $1,861,000 $1,642, $100 $2,220,000 $1,873, $100 $2,180,000 $2,676, $136 $2,385,000 $2,147, $125 $2,510,000 NA $125 $2,400,000 $2,410, $115 $2,345,000 $2,290, $125 $2,410,000 $2,266, $112 $2,308,000 $2,278, $112 $2,387,000 $2,405, $112 $2,417,000 $2,234, $124 $2,412,000 $2,299, $124 $2,457,000 $2,286, $124 $2,602,000 $2,464, $124 $2,769,000 $2,676, $136 $2,992,000 $2,751, $136 $3,155,000 $2,857, $154 $3,236,000 $2,967, $154 $3,290,000 $3,107, $170 $3,525,000 $3,313, $170 $3,517,000 $3,546, $194 $3,995,000 $3,496, $194 $3,950,000 $3,648, $194 $3,950,000 $3,859, * $194 $4,270,000 $4,174, $194 $4,120,000 $3,954, $194 $4,245,000 $3,961, $213 $4,550,000 NA Detailed information on Berkeley Rent Program annual budgets from the early years is not readily available, but later reports provided historical data on annual registration fees going back to the beginning of the agency in 1980 and on staffing FTEs (fulltime equivalents) going back to The contract with the IT Department is counted as an FTE. Temporary staffing prior to 2009 is not readily available and is excluded to maintain comparability. The adopted budget is given starting in 1989 and actual expenditures beginning in (except for ). * at no time was actual staffing ever above 21.0 FTE.

129 Attachment 10 Rent Stabilization Board RENT STABILIZATION BOARD DATE: May 11, 2016 TO: Honorable Members of the Rent Stabilization Board FROM: Budget and Personnel Committee, and Jay Kelekian, Executive Director SUBJECT: Recommendation to set the FY 2017 annual registration fee (due July 2016), and authorize the pass-through to certain tenants of a portion of the registration fee Recommendation That the Board adopt two resolutions concerning the Fiscal Year (FY) 2017 annual registration fee: Proposed Resolution increasing the FY 2017 annual registration fee, due July 1, 2016 to $234 per unit. Proposed Resolution authorizes, with proper notice, the pass-through of up to $8.00 per month to tenants where the tenancy began prior to January 1, The pass-through may be taken for 12 consecutive months and cannot begin prior to July 1, 2016, and must terminate no later than December 31, 2017, unless extended by future Board action. The increase shall not result in a passthrough of greater than $8.00 per month to any tenant. The Resolution also directs staff to continue a program/mechanism that allows low-income tenants with a household income of 40% or less of Annual Median Income (AMI), or otherwise demonstrating proof of qualification as low-income, to be reimbursed for the pass-through. Funds for the reimbursement would come from the AEPHI tenant overcharge settlement which, pursuant to Board Regulation 1271(B), must be used for the benefit of low-income tenants. Background and Need for Rent Stabilization Board Action Legally, the Board has through the end of June to adopt a line-item budget and expenditure authorization level for FY 2016/2017. However, in order to provide sufficient time to allow staff to print and mail the annual bill prior to the last week of May, the Board traditionally sets the fee no later than a meeting in early to mid-may. The Budget and Personnel Committee has been meeting regularly over the past several months monitoring the current year s budget as well as analyzing the required level of service and funding options for FY 2016/17 and into the future. Most recently, the Budget and Personnel Committee met on May 2 nd, and adopted the recommendations described above. The attached report (Attachment A), prepared for the May 2 nd Budget Workshop and Public Hearing on the FY 2016/17 Budget and Registration Fee, details the process followed and the nine primary options considered prior to the Committee ultimately recommending that per-unit registration fees due 2125 Milvia Street, Berkeley, California TEL: (510) 981-RENT TDD: (510) FAX: (510) rent@ci.berkeley.ca.us INTERNET: