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HomeMy WebLinkAboutResolution No. 2012-47.. f4 �� the city o f // KENA3KA A Suggested by: Adminj A RESOLUTION OF THE COUNCIL OF THE CITY OF KENAI, ALAS V, AMENDING ITS COMPREHENSIVE SCHEDULE OF RATES, CHARGES, AND FEES/FOR CHANGES TO INCREASE RENTS AT THE VINTAGE POINTE SENIOR HOUSING FACILITY. WHEREAS, Vintage Pointe Senior Housing complex is a facility operated by the City; and, senior housing WHEREAS, current rental rates at the City's Vintage P me Senior Housing complex are insufficient to cover annual operating expenses to provide funds for ongoing facility repairs and upgrades; and, WHEREAS, the City hired a local appraiser toberform a rental rate study which compared rents at Vintage Pointe with that of of er similar facilities; and, WHEREAS, the results of the rental study uggested Vintage Pointe rents were less than rents of other like facilities by $74.00 o $153.00 per month dependent upon the size and location of the apartment; and, WHEREAS, it is in the best interest f the citizens of the City and the residents of Vintage Pointe for the City to mai a n rental rates at market value and at a level sufficient to fund operations and aintenance on the facility; and, NOW, THEREFORE, BE IT RE OLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, to amend the Cityy Comprehensive Schedule of Rates, Charges and Fees "Vintage Pointe Rents" seeti to: VINTAGE POINTE RENT' 1 -A apartment =/b86 Sq. Ft. Ocean Side [$714.00] $764.00 1 -A apartmenl86 Sq. Ft. Street Side [$677.28] $727.28 1 -B apartme t = 637 Sq. Ft. Ocean Side [$689.52] $739.52 1 -B apart nt = 636 Sq. Ft. Street Side [$689.52] $739.52 1 -B apar e ent = 637 Sq. Ft Ocean Side [$726.24] $ 7S 76.24 1 -C ap tment = 682 Sq. Ft. Ocean Side [$738.48] $788.48 I -C a rtment = 682 Sq. Ft. Street Side [$701.76] 751.76 1 -C partment = 682 Sq. Ft. Ocean Side [$726.24] $776.24 apartment = 826 Sq. Ft. Ocean Side [$787.44] $837.44 apartment = 826 Sq. Ft. Street Side [$750.72] $800.72 apartment = 876 Sq. Ft. Ocean Side [$799.68] 849.68 apartment = 876 Sq. /ote:All Ft. Street Side [$762.96] 812.96 apartment = 789 Sq. Ft. Ocean Side [$775.20] 825.20 thly Automatic ACH Payment Fee $0.00 Vintage Pointe Rent s are subject to a 2% discount for payment by means other than credit card. New Text Underlined; [DELETED TEXT BRACKETED] Resolution No. 2012 -47 Page 2 of 2 BE IT FURTHER RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this Resolution shall be effective on January 1, 2013. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this day of , 2012. PAT PORTER, MAYOR U-1162fA Sandra Modigh, City Clerk Approved by Finance: X11 New Text Underlined; [DELETED TEXT BRACKETED] u TO: City Council FROM: Rick Koch, City Manager DATE: January 26, 2012 SUBJECT: Resolution 2012 -47, Amending the Comprehensive Schedule of Rates, Charges and Fees for Changes to Increase Rents at the Vintage Pointe Senior Housing Facility The purpose of this correspondence is to recommend Council approval of the above referenced ordinance. Attached please find the following information for your information: 1. Memo from the Finance Director dated July 25, 2012 2. Summary Appraisal Report prepared by Derry & Associates establishing current fair - market rental rates 3. Spreadsheet comparing expenditures for Congregate Housing (Vintage Pointe) for FY2008and FY2012 There are different analyses that can be performed to determine if rents are at an appropriate level and provide a financial return sufficient to address increasing future maintenance costs associated with an aging facility. One manner of analysis is to have a market analysis performed to determine if rent levels are consistent with the market. Item number two above, provides that analysis and it shows that rents in Vintage Pointe are across the board below the market, in some cases substantially so. The other manner of analysis is to review the financial performance of the enterprise, in other words income and expense. The last rent increase for Vintage Point occurred in July 2008, or just over four years ago. Over that time period we have absorbed increased costs in almost every expenditure category. Below is a summary of that information: Expense /income Description FY2008 FY2012 j Difference %Diff. Salaries & Benefits $25,145 $37,675 $12,530 +49.83% Maintenance & Operations $192,222 $249,922 $57,700 +18.17% Depreciation $125,299 $125,299 $0 0% Capital Outlay & Transfers Expenditures $26,900 $31,300 $369,566 $444,196 $4,400 $74,630 +16.36% +20.19% __Total $24,675 _ $1,502 +6.48% Rents $316,039 $320,945 $4,906 +1.55% Insurance Proceeds /Grants $16,237 $52,666 $36,429 +224.36% Total Income $332,276 $373,611 $41,335 +12.44 Income less Expense (Excluding Depreciation; $88,009 $54,714 - $33,295 I Income less Expense (Including Depreciation) - $37,290 - $70,585 - $33,295 Over the past four years the following are specific annual increases /decreases to certain expenses: Expense Description FY2008 FY2012 Difference % Diff. GCI /Cable Television $6,980 $8,060 $1,080 +15.47% AK Waste /Solid waste_ $1,442 $2,342 $900 +62.41% HEA /Common Areas Elec. $25,770 $35,156 $9,386 +36.42% City of Kenai /Water & $6,204 Sewer $4,828 - $1,376 - 222.18% Enstar /Natural gas $23,173 $24,675 _ $1,502 +6.48% Totals _ $63,569 $75,061 $11,492 +18.08% The purpose of depreciation is to recognize future costs associated with repairs and /or replacement of an aging facility. While it may be acceptable to recover through depreciation an amount slightly less than the calculated depreciation when income falls far short of the calculated depreciation it is cause for concern, with a predictable outcome of eventually needing to secure a different source of revenue to subsidize the income shortfall to support maintenance and operation expenditures. In the case of Vintage Pointe, both methods of analyses result in a common result. Rent increases are justified by both a market analysis and an income /expense analysis. It is Administrations' recommendation that an across - the -board rent increase of $50 per month /per unit be approved and that a second, or check, market analysis is performed by a second appraisal firm to validate the initial findings. This will provide the basis to determine if additional rent increases are scheduled for subsequent years. A rent increase of $50 per month /per unit, assuming 100% occupancy, results in increased revenues of $23,400. This amount is significantly less than the increase in operating costs ($33,295 or 70.28 %) since the last rent increase. If you have any questions, please contact me at your convenience. attachments M To: Rick Koch, City Manager From: Terry Eubank, Finance Director Date: July 25, 2012 Re: Resolution 2012 -47 The purpose of this memo is to provide support for passage of Resolution 2012 -47 that will increase rents at the City's Vintage Pointe Senior Housing facility. Rents at Vintage Pointe were last increased in July of 2008. As an unsubsidized facility, rents must be sufficient to cover the annual cost of operations and to provide the necessary reserves for long -term facility maintenance. Long -term maintenance projects in recent years have include facility window replacement, $111,000, dry sprinkler piping replacement, $54,000, siding replacement, estimated to cost $260,000, and boiler replacement, estimated to cost $125,000. The adopted FYI Budget projects the fund to produce $14,037 for funding future long -term maintenance projects. Annual long -term maintenance funding of $14,037 is not sufficient for the City to maintain the facility at an acceptable level. Prior to recommending this rent increase, the administration commissioned an independent appraisal to evaluate Vintage Pointe rental rates as compared to similar facilities. The results of this study indicated current rental rates are $74.00 to $153.00 per month below market rates, depending upon the size and location of the unit within Vintage Pointe. A $50.00 per month rent increase represents a 7.38% rent increase on the least expensive unit at Vintage Pointe. Inflation since the Last rent increase has been approximately 10.5 %. City Of Kenai Fund: 009 - Congregate Housing Fund Department: 62 - Congregate Housing Account Expense FY2008 FY2012 Number Description Actual Actual Difference °A Increase Salaries and Benefits 0100 Salaries $ 16,546 $ 25,644 $ 9,098 54.99% 0200 Overtime - - - - 0250 Holiday Pay - - - - 0300 Leave (956) (2,244) (1,288) 134.73% 0400 Medicare 233 378 145 62.23% 0450 Social Security - - - - 0500 PERS 5,983 7,886 1,903 31.81% 0600 Unemployment Insurance - - - - 0700 Workers Compensation 106 99 (7) -6.60% 0800 Health & Life insurance 2,850 5,388 2,538 89.05% 0900 Supplemental Retirement 383 524 141 36.81% Total Salaries & Benefits $ 25,145 $ 37,675 $ 12,530 49.83% Maintenance and Operations 2021 Office Supplies 415 672 257 61.93% 2022 Operating& Repair Supplies 5,688 4,565 (1,123) - 19 -74% 2024 Small Tools /Minor Equipment 1,979 7,898 5,919 299.09% 2025 Snack Bar Supplies - - - - 2026 Computer Software - - - - 4531 Professional Services 22,950 36,300 13,350 58.17% 4532 Communications 1,492 2,678 1,186 79.49% 4533 Travel & Transportation - - - - 4534 Advertising 564 354 (210) - 37.23% 4535 Printing & Binding 200 348 148 74.00 4536 Insurance 12,800 10,596 (2,204) - 17.22% 4537 Utilities 63,606 75,061 11,455 18.01% 4538 Repair & Maintenance 82,358 111,410 29,052 35,28% 4539 Rentals - - - - 4540 Equip, Fund Pmts. - - - - 4541 Postage - - - - 4666 Books - - - - 4667 Dues & Publications - - - - 4999 Contingency - - - - 5041 Miscellaneous 170 40 (130) - 76.47% 5045 Depreciation 125,299 125,299 - - 5047 Grants to Agencies Total Maim. and Operations $ 317,521 $ 375,221 $ 57,700 18.17% Capital Outlay & Transfers 8061 Land - - - - 8062 Buildings - - - - 8063 Improvements - - - - 8064 Machinery & Equipment - - - - 9090 Transfers Out 26,900 31,300 4,400 16.36% Total Capital Outlav and Transfers $ 26,900 $ 31,300 $ 4,400 16.36% Department Total: $ 369,566 $ 444,196 $ 74,630 ;?Q"S M 210 Fidalgo Avenue, Kenai, Alaska 99611 -7794 Telephone: 907 - 283 -7535 / FAX: 907 - 283 -3014 Implementation of Changes to Vintage Pointe Rents Resolution No. 2012 -47 proposes to amend the City's comprehensive fee schedule to increase the rents charged at the Vintage Pointe senior housing facility. At the August 1, 2012 Council meeting, the Council discussed the resolution and postponed farther consideration of the proposal until the September 5 Council meeting. I told the Council that I would, in the meantime, provide you with additional information about the landlord- tenant laws so the Council could further consider the timelines to implement any changes, should the Council decide to amend the fee schedule. Changes to the City's comprehensive fee schedule typically take effect immediately. But, a change to the fee schedule does not amend each lease the City has with each tenant at Vintage Pointe. As a matter of State landlord- tenant law,1 the City must still amend each lease to implement a rent increase. Because the leases for Vintage Pointe are month -to -month leases, in order to change a term in the lease, the City as landlord roust give the tenants a full calendar month's notice of the changed rent The City cannot implement the new rent until after the notice period. For example, if a landlord wants a raise in rent to be effective on January 1, 2013, the landlord must give the tenant notice of this change no later than November 30, 2012. If the tenant does not like that change, the tenant would have that intervening month to reject the change by vacating the premises and leaving. Although the resolution process to change the comprehensive fee schedule is a public process, this public process is not sufficient to meet the notice requirements to tenants under the law. A change to the fee schedule does not automatically change the rent due under the lease. Notice of a change in a lease requirement must be delivered to tenants in Uniform Residential Landlord and Tenant Act, AS 34.03. Mayor Porter and City Councilors August 24, 2012 Page 2 of 2 writing, either in person or by mail. This notice should be delivered so that each tenant actually receives the notice a full calendar month in advance. And, of course, a landlord can always provide more notice than legally required. If, after notice of a rent increase, a tenant does not want to accept the change, the tenant can vacate the premises. Hopefully, the tenant would provide the City with advance notice that they intend to do so (the lease requests that they provide 20 days' notice after the City announces a change in the lease). If the tenant remains on the premises, the City can view this conduct as indicative of the tenant's agreement to accept the new rent. If, however, the tenant fails /refuses to pay the new rent but remains on the property, the City's remedy is to evict the tenant. I will not detail the entire process of eviction in this memo, but highlight a few important steps in the process. The first step is for the City to serve the tenant with a Notice to Quit. The Notice to Quit must state the tenant's breach of the lease -- failure to pay rent - -and inform the tenant that the lease will terminate upon a. date that is at least seven days after service of the Notice to Quit unless the tenant cures the breach. the tenant pays the rent, the matter ends. If the tenant does not tender payment, the second step is for the City to file a lawsuit known as a Forcible Entry and Detainer (FED) action to evict the tenant. Third, the court will schedule a hearing on the matter. FED actions have priority on the court calendar, so the hearing is usually within a few days of filing the suit. If the City prevails, the City will ask the court to issue a Writ of Assistance. That writ authorizes a law enforcement officer to remove the tenant from the premises if the tenant does not leave the apartment. Usually, after the hearing, a tenant has about three days to move. L:A Council \MemoAvntg.pt.rent.082212 2 AS 09.45.100 -.015; 34.03.220.