CITY HALL — The Rent Control Board is sure that it wants to raise registration fees on rent-controlled apartments to close its yawning budget gap, but how much and who should shoulder the burden is still up in the air.
The five member board went 20 rounds on the subject Thursday night, running through a wide range of ways to divide the $2 to $3 increase in the annual $13 fee between landlords and their tenants that covers the vast majority of the Rent Control Agency’s projected $4.6 million budget.
It would be the first time in 30 years that landlords would have to take on any portion of that cost, and some board members believe that any share should be phased in over the course of either three or five years to lessen the impact and give landlords time to adjust.
Boardmember Todd Flora pushed strongly for a five-year phase-in that would end with the landlords paying between 25 and 50 percent of the total fee. He argued that property owners would need time to plan for the new cost.
“To pass something that does not have good diplomacy and give them the ability to financially plan for this change is questionable at best,” Flora said.
Boardmember Ilse Rosenstein disagreed, calling the new tack on the registration fee a “business expense” for landlords who would need to “economize.”
Rent Control Agency officials warned against a phase-in that exceeded two years, saying that it would not only put a burden on employees who would need to change how they charge registration fees every year, but might impede the board if it needs to raise those fees again.
That might need to happen within three years, according to a report.
Officials believe that the fee must be increased to close a half-million dollar gap in its budget and proposed shifting some of the burden onto landlords.
Santa Monica is the only California city with rent control in which tenants pay the full cost of the registration fees.
Landlords object, pointing to the fact that most of the red in the Rent Control Agency’s budget comes from an excessively high 15 percent reserve and employees and their benefits. They also hold that the amount of work done by Rent Control officials has gone down faster than the number of positions at the agency.
In a comparison of the agency’s work load between 1995 and 2013 compiled by landlord representatives, the number of board meetings has dropped by two-thirds, and the amount of phone calls and e-mails has decreased by almost 58 percent.
The number of petitions and complaints by tenants and landlords went down by 70 percent, and hearings for a wide variety of matters — rent decreases and increases, excess rent complaints, rent control exemption applications and more — dropped by almost 70 percent.
The work of the agency has changed since the passage of the Costa-Hawkins Act in 1995, which allowed rents to rise to market rate every time a tenant moved out of a rent-controlled apartment, said Tracy Condon, rent control administrator in Santa Monica.
“It’s true we don’t have nearly the number of increase petitions we used to hear,” she said. “That’s a direct reflection that the market rate rents owners are collecting are providing them with at least a fair return and therefore they don’t need to avail themselves of the individual increase petition process.”
That change was accompanied by a significant drop in the number of employees working at the Rent Control Board — staffing levels are down by more than 50 percent since 1995, Condon said.
Still, the cost of the employees that remain are rising, a situation experienced by most public agencies in California.
City Hall is also struggling with multi-million dollar increases in its payments for retirement benefits as the California Public Employees Retirement System (CalPERS) drops its expected return on its investment portfolio.
At the Rent Control Agency, health costs are projected to increase by 16 percent as of January 2014, and the retirement contribution for employee salaries in the 2012-13 fiscal year has increased to 19.2 percent for 2013-14.
To combat the problem, employees now contribute 9 percent of their compensation toward their retirement accounts, according to a report by the Rent Control Agency.
The final decision on fees will not come until the board officially votes on their budget at the June 13 meeting.