Staff recommends the City Council adopt the attached resolution amending the Master Fee Schedule to establish the Rent Ordinances Subcategory and related fees under the Economic and Community Development Category for administration of the Residential Landlord and Tenant Relations Ordinance and the Rent Review Ordinance.  

In May 2016 the City Council held a study session to review rental market trends and consider potential tenant protection measures. In September 2016, the City Council formed a Rent and Tenant Taskforce (“Taskforce”) to assist with the consideration of possible tenant protection measures.  The Taskforce held multiple public meetings between October 2016 and January 2017. Staff returned to the City Council with the Taskforce’s recommendations on January 31, 2017.  After considering the Taskforce’s recommendations, the City Council directed staff to prepare an Eviction and Harassment Protection Ordinance and a Rent Review Ordinance. 

On April 11, 2017, the City Council adopted Ordinance 839-17, which adds Chapter 5.50 “Residential Landlord and Tenant Relations Ordinance” to the City’s municipal code (“Eviction Protection Ordinance”). The Eviction Protection Ordinance stipulates that landlords may only terminate a tenancy for a specific cause, such as non-payment of rent, and prohibits landlords from engaging in specific harassment activity. The Eviction Protection Ordinance went into effect on May 10, 2017.

On June 27, 2017, the City Council adopted Ordinance 841-17, which adds Chapter 5.55 “Rent Review” to the City’s municipal code (“Rent Review Ordinance”). The Rent Review Ordinance provides a mediation process for tenants to address rent increases with their landlords. More specifically, the ordinance consists of a two phase process: 1) conciliation and 2) in-person mediation with a professional mediator. Landlord participation in the process is mandatory but the mediator’s recommendations are non-binding. The Rent Review Ordinance will go into effect on October 2, 2017. 

Both ordinances allow the City to charge landlords an annual, per unit fee in order for the City to recoup its costs to administer and implement the ordinances. Therefore, staff has conducted a fee study to determine the annual cost estimates to administer the two ordinances and the per unit fee rate for each ordinance. The fee study for the Eviction Protection Ordinance is included as Exhibit A and the fee study for the Rent Review Ordinance is included as Exhibit B.

The fees were calculated by taking the total estimated cost for each ordinance and dividing it by 6,000 rental units. It is estimated there are approximately 6,500 to 6,700 rental properties in Union City however staff is only using 6,000 rental units when calculating the fee to account for units that may be exempt from the ordinances and property owners who fail to report their units to the City. Each year, the fees will be adjusted based on the prior year’s expenditures and the estimated number of rental properties in Union City. This annual fee adjustment will be incorporated into the annual Master Fee Schedule adoption process.

The fees will be collected as part of the City’s existing business license application/renewal process. Since the City’s business licenses are renewed on a rolling basis, the fees will be due at the time the landlord’s business license expires. The fees for the Eviction Protection and Rent Review Ordinances will go into effect on November 1, 2017. Although the Rent Review Ordinance goes into effect on October 2^nd, the City is delaying the fee effective date in order to give enough advance notice to landlords since business license renewals are typically sent four to six weeks in advance of the license’s expiration date.

Eviction Protection Ordinance

Staff estimates that the annual cost to administer the Eviction Protection Ordinance will be approximately $62,000 and that the Eviction Protection Ordinance Fee will be $10 per unit. The following is a breakdown of the cost estimates associated with administering the ordinance. See Exhibit A for additional information. 

• Staff Costs ($34,544) – This includes Economic & Community Development (ECD), Marketing and Communications (MARCOM), City Manager, Finance, and City Attorney staff time. More specifically, staff time will be spent fielding inquiries, developing forms, handouts, mailers, etc., managing the Program Administrator’s contract, reporting to City Council, and collecting the Eviction Protection Ordinance Fee.

• Consultant ($14,813) – As discussed in a previous staff report, the City is seeking to contract with Eden Council for Hope and Opportunity (ECHO) to serve as the Program Administrator for both ordinances. The Consultant costs, covers the ECHO’s time spent consulting with landlords and tenants, providing in-person office hours (by appointment), conducting outreach, and reporting out to the City. ECHO estimates an average of two (2) consultation hours per eviction case and staff is estimating an average of one (1) eviction case per week. It is also estimated that ECHO will provide one (1) office hour per week for eviction cases. In total it is estimated the ECHO will spend just under 200 hours per year administering this ordinance.

• Supplies and Services ($9,155) – This includes the printing and postage to send one citywide mailer notifying residents and landlords of the ordinance, translating one document into Spanish and Chinese, and printing handouts. Additionally, the City has to pay a one-time expense to add special reporting elements to the City’s business license software in order to accurately track fee payments.

• Initial Implementation Costs ($3,960) – This includes staff time, printing, postage and translation services to implement the Eviction Protection Ordinance. More specifically, the initial implementation has included the development of informational handouts, outreach/marketing materials, and forms that landlords can use to satisfy the noticing requirements of the ordinance. Staff has also spent time fielding inquiries, hosting public workshops on the Eviction Protection Ordinance, and selecting a program administrator. These initial implementation expenses are one-time costs, and will be recouped over a five year period. The amount of these expenses recouped in the first year of the five year period is $3,960.

Rent Review Ordinance

Staff estimates that the annual cost to administer the Rent Review Ordinance will be approximately $130,000 and that the Rent Review Ordinance Fee will be $21.50 per unit. The following is a breakdown of the cost estimates associated with administering the ordinance. See Exhibit B for additional information.

• Staff Costs ($42,043) – This includes Economic & Community Development (ECD), Marketing and Communications (MARCOM), City Manager, Finance, and City Attorney staff time. More specifically, staff time will be spent fielding inquiries, developing forms, handouts, mailers, etc., managing the consultant contracts, reporting to City Council, and collecting the Rent Review Ordinance Fee.

• Consultants ($76,613)
  ECHO Housing ($45,413) - As mentioned above, the City is seeking to contract with ECHO to serve as the Program Administrator for this ordinance. The Consultant cost estimate covers ECHO’s time spent fielding inquiries from landlords and tenants, providing in-person office hours (by appointment), conducting outreach, and reporting out to the City. ECHO estimates an average of eight (8) hours per rent review case, which includes providing consultation and conciliation services, making referrals to the Rental Housing Association’s landlord to landlord counseling program, and coordinating/scheduling the mediation meeting. Staff is estimating an average of one (1) rent review case per week. It is also estimated that ECHO will provide two (2) office hours per week for rent review cases. In total it is estimated that ECHO will spend over 450 hours per year administering this ordinance.
  
  On-Call Mediators ($31,200) - In addition, the City is in the process of hiring on-call professional mediators that will conduct and facilitate the mediation meetings. This cost includes the on-call mediator’s time to review case files, conduct the mediation, and report out the results. Staff estimates that mediation cases will take between three (3) and five (5) hours per case and is estimating there will be two (2) mediation cases per month. The goal is to have most cases resolved at the conciliation phase and that only more difficult/challenging cases will reach the mediation stage.

• Supplies and Services ($10,630) – This includes the printing and postage to send one citywide mailer notifying residents and landlords of the ordinance, translating one document into Spanish and Chinese, and printing handouts. Additionally, the City has to pay a one-time expense to add special reporting elements to the City’s business license software in order to accurately track fee payments.

• Initial Implementation Costs ($1,538) – This includes staff time, printing, postage and translation services to implement the Rent Review Ordinance. More specifically, the initial implementation has included the development of informational handouts, outreach/marketing materials, and forms that landlords can use to satisfy the noticing requirements of the Ordinances. Staff has also spent time fielding inquiries and selecting a program administrator and on-call mediators. These initial implementation expenses are one-time costs and will be recouped over a five year period. The amount of these expenses recouped in the first year of the five year period is $1,538.

This amendment would increase the City’s revenues by approximately $190,000 annually, assuming that both fees are paid for 6,000 rental units. However, this revenue can only be used to pay for the City’s costs to implement and administer the two ordinances.

If the City Council decides not to adopt these fees, the City will still be required to implement and administer the two ordinances. This would result in an approximate $190,000 annual impact to the General Fund. 

Staff recommends the City Council adopt the attached resolution amending the Master Fee Schedule to establish the Rent Ordinances Subcategory and related fees under the Economic and Community Development Category for administration of the Residential Landlord and Tenant Relations Ordinance and the Rent Review Ordinance.