By Jason Islas
Staff Writer

June 26, 2012 - - The Santa Monica Rent Control Board on Thursday will likely recommend that the City Council place a charter amendment on the November ballot that would dramatically change the way rent increases are calculated.

The Santa Monica Rent Control charter has only been amended by ballot three times since it was first adopted in 1979, the latest change coming in 2002.

The amendment would change the current, more complicated, General Adjustment (GA) formula to one directly tied to the regional increase of the Consumer Price Index (CPI) in order to create a more predictable process, rent board officials said.

“Our concern is that any changes take into account actual operating costs and that the approach is fair and balanced,” said Joseph Fitzsimons, vice president of Sulivan-Duturi Realtors, which manages more than 1,000 units across the city.

At its last meeting June 15, the Rent Control Board asked staff to write up a proposed formula to allow landlords an annual GA that would be 75 per cent of CPI.

This year's GA increase of 1.54 per cent was 77 percent of CPI.

“Just about every other municipality that has a rent control system uses a percentage of CPI for their general adjustments,” said Rent Control Board member Todd Flora.

Flora worked on the subcommittee that crafted the proposed change with fellow Board member Bill Winslow.

Together, they talked to various landlords, to representatives of Santa Monicans for Renters’ Rights (SMMR), and other stakeholders to determine what would be considered a fair percentage of CPI, Flora said.

But not everyone is completely satisfied with the proposed 75 percent.

“One hundred percent would be ideal,” said Rent Control Board member Robert Kronovet.

Kronovet is the only landlord on the board. Because he owns a six-unit property in Santa Monica, Kronovet has been barred by the California Fair Political Practices Commission from voting on and discussing matters related to the General Adjustment.

Though he would like to see a higher percentage used, Kronovet is glad to see the old formula go, adding that pinning the GA to CPI would make the process more predictable.

“I’m in favor of a predictable rent increase tied to CPI,” he said. “My goal on the board has been to see the normalization of the Rent Control bureaucracy.”

He called the current formula -- which divides each dollar a landlord spends into a certain percentage based on expenses -- “politically motivated” and “junk science.”

If the City uses 75 per cent of the CPI as the basis for its new formula, does the other 25 per cent come out of the landlords’ profit margin?

“Where else could it come from?” Kronovet asked rhetorically.

But Flora counters that “our mission is to grant (landlords) no more than a fair return,” citing the fact that Santa Monica’s rent control law guarantees landlords a “fair” return on their properties.

The word “fair” has led to much debate between rent board officials and landlords.

“Their definition of fair is usually astronomically higher than our or the public’s definition,” said Flora.

Although 75 per cent is on “the low end,” it’s “reasonable,” Kronovet said.

If the Board approves the proposed changes Thursday, the amendment would have to go before the council for final approval before it can be placed on the ballot.

“We’ve been working very carefully on the language,” said Tracy Condon, the Rent Control Board Administrator.

“The public will have the opportunity to comment” on the amendment on Thursday and once again at the Council discussion, Condon said.

If the council places the amendment on the ballot, Santa Monica voters will have the final say on November 6.