It was a true dilemma for members of the city's Rental Housing Committee on Monday night. On one hand, they needed to devise a way to fund the $2.4 million annual budget for the city's rent control program. But they also faced fierce resistance from a seething crowd of property owners who complained that a proposed annual fee on apartments would be unfair.
So the committee landed on what appeared to be the only palatable solution -- have the city foot the bill.
In an odd decision that drew many confused stares, the committee voted 3-1 to formally request that the Mountain View city government fund at least $1.2 million, or half the cost, of administering the city's new rent control program for its first 14 months.
"We should ask the city to reimburse us for half the potential fee based on the fact this is part of the city charter," said committee member Tom Means, who proposed the idea. "This is benefiting some of your tenants and voting residents, so we think you should throw in half the budget."
To call this idea a long shot would be an understatement. Nearly all City Council members firmly opposed the rent control initiative, which won voter approval last November. Some council members have aggressively demanded that the rental committee immediately pay back a $430,000 start-up loan from the city.
Mayor Ken Rosenberg said there would be scant support for cutting the rental program another check.
"It seems unlikely that the city would provide funding to benefit landlords," he said in an email. "City Council has made clear that it expects to be paid back for the expenses it has fronted."
The Rental Housing Committee operates independently from the rest of Mountain View's city government, with its own staffing and budget. This was deliberate because the authors of the rent control law didn't want the city's political leaders to exert control over the program.
But that structure also forces the rental program to be financially self-sufficient. Last month, the Rental Housing Committee reluctantly approved a $2.4 million budget despite criticisms that the projected costs were excessive. To pay that sum, the committee's staff proposed a new $155 fee on all apartments.
At the Monday night meeting, the rental committee wanted to see if landlords could legally pass through some portion of that fee onto tenants -- raising their rent beyond normal limits, in other words. The committee's hired attorneys gave a clear answer: No.
"We don't believe the (rent control law) allows the pass-through of the rental housing fee to tenants," said Karen Tiedemann of the firm Goldfarb & Lipman. "The law limits rent increases and there's no provision for an additional rent increase due to a pass-through."
Landlords could factor in the fee as part of a petition process to raise rents higher, Tiedemann said. But that idea did little to alleviate the concerns of a crowd of frustrated landlords in the room, who dismissed the petition process as too complex. Many speakers said it made sense for tenants to pay at least half the fee; others demanded that renters bear all the costs since they were the program's beneficiaries.
"That we should have to bear the costs for having our pockets picked is a travesty of justice," said Curtis Conroy, an apartment owner.
Those speakers found sympathetic ears. A man who identified himself as representing East Coast investors walked up to the dais to promote his firm's services in helping landlords "exit" their position.
Committee members Matthew Grunewald and Vanessa Honey echoed the landlords' concerns, saying it was only fair to split the cost between tenants and landlords. Despite the attorneys' advice, they signaled support for putting half the cost on tenants, possibly using a loophole in the law suggested by landlords.
"I feel empowered by the other people who found holes in the (rent control law)," Grunewald said. "A 50-50 split is fair, it's symbolic ... and it's not an excessive rent increase."
On the other side, committee member Evan Ortiz warned his colleagues that they should have learned their lesson after previous episodes when they disregarded their own attorneys' advice, resulting in "significant legal fees." He was referring to the fight to establish when the rent control law took effect, which resulted in three separate lawsuits.
During this debate, Means pitched his idea of asking the city to foot the bill, which appeared to come as a surprise to everyone in the room. He acknowledged the idea was likely to be shot down, but he described it as better than moving forward with a plan that could invite more lawsuits. By asking for the city's support, he said, council members would have the opportunity to weigh for themselves the fairness of putting all the fees on landlords. He proposed having the committee's chair, Vanessa Honey, write a letter to formally make this request.
With the committee lacking consensus for any other option, Means' idea won the day. It was approved in a 3-1 vote with Ortiz opposed. Committee member Emily Ramos abstained.
The committee also kicked the can down the road on the related issue of allowing an additional rent increase to compensate landlords for the four-month period not covered by Consumer Price Index adjustments after rents were rolled back to October 2015 rates. The extra rent adjustment would only cover the period between October 2015 and February 2016 when rents were effectively frozen, before raises tied to the CPI kicked in.
But the committee couldn't reach a decision because members disagreed over the length of time that needed to be counted. Grunewald and Honey insisted this increase should span a 10-month period, giving landlords an extra 3 percent. Other committee members, as well as the group's attorneys, said this period should be only four months, equaling 0.6 percent.
The committee voted 3-2, with Ortiz and Ramos opposed, to table the discussion in order for staff to explore more options.