PROPERTY TAX PASS-THROUGH FEES
AND THE SPIRIT OF JOHN JURENKA

During the first ten years of rent control, when monetary inflation was high, there was no vacancy decontrol and the annual general adjustment was the only way most property owners would receive any rent increases, many owners would speak to the Board attempting to get a more generous rent adjustment. Every year, former ACTION President, John Jurenka, would quote the following section of Rent Control Law Section 1805 (b) (1) which states:

(b) Annual General Adjustment. Each year the Board shall generally adjust rents as follows:
(1) Adjust rents upward by granting landlords a utility and tax increase adjustment for actual increases in the City of Santa Monica for taxes and utilities. [Emphasis added.]

John Jurenka was objecting to the Board using a formula based upon percentages as applied to a hypothetical building to determine the amount of the general rent adjustment. He argued that he should be able to pass-through the entire cost of his tax and utility bills to the tenants. But his arguments were not well taken because the Rent Board was not required to pass-through the entire amount of the entire bills to tenants; it was only required to pass through the increased cost since 1978. However, John Jurenka’s arguments did make sense when applied to the “fees” that were added to the property tax bills since 1978. Most of those fees and surcharges were added to the property tax bills after April 1978, when Proposition 13 passed. Therefore, the entire amounts of the fees should be passed through.

Every year the Rent Control Board mails instructions to owners which specify which of the five fees stated on a property tax bill may be passed through to tenants. But there are also seven fees stated on the bill which may not be passed through; (1) “City of Santa Monica,” (2) “Metro Water Dist,” (3) “Health Lic Fees,” (4) “Flood Control,” (5) “County Park Dist,” (6) “Trauma/Emerg Srv,” and (7) “LA West Mosq Ab[atement]).” These “fees” are not related to the business of operating residential rental property, so it cannot be claimed that they only cover the reasonable cost or providing a service which benefits property owners.

A few years ago I realized that John Jurenka’s argument was correct when it was applied to the “Voted Indebtedness” and “Direct Assessments” stated on the property tax bills, and I have told the Rent Board so at the general rent adjustment hearings for the past two years, but the Rent Board (except for Commissioner Kronovet) ignored my arguments as they had ignored John Jurenka’s arguments in the past. I could not do anything about that, because I do not pay property taxes in Santa Monica, so I was not qualified to be a plaintiff in any lawsuit to make the Rent Board comply with the Rent Control Law.

But last year, the Rent Board made a mistake and picked on the wrong person. They treated a rental property owner named Elaine Golden Gealer unfairly in an excess rent hearing. As I reported Rent Board Story Part 142, two of Elaine’s tenants (and one former tenant who once lived in the same unit) filed an excess rent complaint against her. The allegations made in the complaint established that two of the tenants had no case, but the Hearing Examiner created the appearance of a violation of the law by assuming that no copy of the property tax bill had been attached to any of the rent increase notices that Elaine served on the tenants for the past three years. This issue was never alleged in the Complaint and the subject was never discussed at the hearing.

In most civilized countries, persons are presumed innocent of wrongdoing unless proven otherwise. And in California, (which barely qualifies as a civilized country), there is a provision of the California Evidence Code, which states, “The party claiming that a person is guilty of crime or wrongdoing has the burden of proof on that issue.” (See Evidence Code § 410). But unfortunately, Santa Monica is not a civilized country, and the Rent Board has little respect for California law, so it found that Elaine had violated a Rent Control Law provision that she had never been accused of violating. That made Elaine upset, and she said, “Since they yanked my chain, I want to yank their chain. How can I do that?”

So I explained that every year Elaine gives a general rent adjustment, there are seven fees on her property tax bill that are worth approximately ninety dollars ($90) per unit per year which she is not allowed to pass-through. Therefore, if she would be a plaintiff in a lawsuit against the Rent Board, it would be worth $90 per unit times 26,000 units in Santa Monica for a total of two million, three hundred and forty thousand dollars ($2,340,000) per year. Although this type of case is something Wes Wellman might call a “shin-kicker” case, it should be the mother of all shin-kicker cases and definitely worth-while to pursue.

Therefore, if you want to support ACTION in a lawsuit against the Rent Board that might be worth $90 per unit per year to for as long as the Santa Monica Rent Control exists, support the new ACTION lawsuit, which carries on the spirit of John Jurenka.