Grand Jury Report

RentStabilization Board FOR IMMEDIATE RELEASE Press Berkeley RentStabilization Board (510)575.2068 Contacts:Lisa Stephens, Chairperson, JayKelekian,Executive Director,Berkeley RentStabilization Board (510)981.7368 RentStabilization Stephen Barton,DeputyDirector,Berkeley Board(510)981.7368 RENT BOARD CHAIR LISA STEPHENS RESPONDS TO CIVIL GRAND JURY'S FINAL REPORT The Alameda County Civil Grand Jury hasjust completeda review of the Berkeley Rent Stabilization Board's budget,fees and personnelproceduresand issueda Final Report. From the outsetof its inquiry, we offered our full cooperationand provided extensivewritten documentationto support our oral testimony. Civil Grand Juriescan perform a vital role in our modem democracyby reviewing the activities of public agencies and acting as "watchdog" to ensurethat those agencies not abusingthe public's trust. are We would have welcomed a critical, fact-basedanalysisof the Rent Board's chargeunder the City Charter: the administration of the Rent Stabilization and Eviction for Good CauseOrdinance. Unfortunately, this Grand Jury missed such an opportunity. lnstead,it has issueda report that ignored significant evidencesubstantiatingthe effective enforcementand reasonableness the administrationof of Berkeley's rent and eviction laws, choosingto mask a disagreement about what type of rent control law Berkeley should have under the guise of criticism of administrativeissues. Even more troubling for a report from a public body is the reliance on inaccuracies, innuendo and "perceived" problems,to give a veneerof plausibility to its conclusions. In the normal courseof events,I would ask the Board to respondto inquiries about the Grand Jury report if and when they arose.The factual errors and insinuation of impropriety in this caseare so egregious that to not respondimmediately does a disservicenot only to the dedicatedpublic servantswho provide servicesto landlords and tenantsalike on a daily basis,but to the voters who have consistentlysupported fair and active enforcementof the Ordinance.The Board may issuea formal responsein the future. Civil Grand Jury testimony is confidential. Testimony and evidencerecountedhere is mine and that of the Executive Director, JayKelekian. Although we do not know the substance origin of the or 2125Milvia Street, Berkeley, California94704 r (981-RENT)o TDD: (s10)981-6903 FAX: (510)981-4940 TEL: (510)981-7368 ?. E-MAIL: rent@citvofberkeley.info INTERNET: www.cityofberkeley.info/rent/ complaintsthat triggered this investigation,the initial inquiries to which we respondedand much of the Final Report mirror the June 28,2011 letter sentto the City Auditor by Sid Lakireddy on behalf of the Berkeley Property Owners' Association (BPOA) (attached). The BPOA has been a consistentopponent of Berkeley'srent control laws sincethe late 1970's. It is important to point out that despitea nine-month investigation,the Grand Jury found nothing illegal or unethical, and that none of the Board's activities were outsidethe scopeof the Ordinance.Instead,the Grand Jury opined on what type of rent control Berkeleyshould have without any indication that they understoodthe distinctive nature of Berkeley's type of rent control and without any considerationof the strengths,weaknesses costs of different approaches. and The voters of Berkeley have consistently supportedBerkeley's form of rent control over the 32yearc it has been in effect. Our staffing levels and fees are in line with cities that have a similar form of rent control (SantaMonica, V/est Hollywood and EastPalo Alto). ln its report, the Grand Jury either ignored or misstatednumerouskey points, including: o The electedBoard is accountableto the voters, who have repeatedlymade clear that they support full enforcementof the Rent Stabilization& Eviction for Good CauseOrdinance. The purposeof the Ordinance is to createa reasonable balancebetweenthe interestsof landlords and tenantsin an unbalancedhousing market. The increases the initial annual registration fee h?ve beenpassedthrough to most tenantsand to are paid through the rent. The Board carries out extensivereview and oversight and does so transparentlyand in public. Board meetingsare televised (with transcription),broadcaston radio and web cast to maximize total transpa.rency accessibility. and The Board has six standing committeesthat meet regularly with staffto provide effective oversight. The staffat the Rent Board has decreased needshave changed. the height of rent control, as At the Rent Board had 36 FTE. Sincethe passage vacancydecontrol the staffrng level gone down of ftom27 to between19 - 2l FTE the past few years. Due to the foreclosurecrisis and the increasedincentive that vacancydecontrol createdto evict long-term tenants,the need for the Rent Program'sserviceshas increased. We receiveover 10,000client contactsayear. Overwhelmingly tenantsand most landlords (regardless their opinion about the law) believe of that the servicesthey receive from the Rent Board staffare fair and professional. o Berkeley'sregistration fee is within the rangeof the California cities with strong rent control policies: SantaMonica, EastPaloAlto and WestHollywood. enforcement Los Angeles, San Franciscoand Oakland chargelower fees,but studieshave shown that these cities have a far higher rate of non-compliancewith their ordinancesand they have much larger populationsand beneflrtfrom economiesof scale. All Rent Board employeesare hired through the City's civil service system,administeredby the Department,which ranksjob applicantsby their qualifications. Those hired at Human Resources by the Rent Board arejudged the most qualified candidates this process. The Executive Director's pay is similar to what other directors are paid in similar cities. in has The electedBoard's compensation not increased 25 years,since 1987. the Like most local and independentgovernmentalagencies, Board has a lobbyist to representits interestsin Sacramentoand has had one since 1984 which includes the period when the majority of the Board were people supportedby landlord organizations. The Board has detailed published regulationsthat govern the late paymentpenalty/waiver processand all waivers are reviewed by the Director to assurerules are applied correctly. We are fortunate that at a time when tax limitations and recessionare crippling local government fees and ensurethat the Rent services,the Berkeley Rent Board is able to chargeadequate Stabilizationand Eviction for Good CauseOrdinanceis properly enforced. to Finally, perhapswhat is most disturbing are the numerousunfounded and undocumentedreferences "potential areasof misuse" or "perceptions of impropriety" made by opponentsof the Program. Anyone can make unfounded accusationsand createa'operception"problem - we live in a time when many people claim the Presidentof the United Statesis not really an American. The Civil Grand Jury's inaccurateand inconclusive review of theseissuesin and of itself contributesto these"perceptionsof impropriety". The attacheddocumentdoes not discuss"potential" problems or "perceptions" but rather the facts that to, were presented but often not included in, the Grand Jury's analysisor Final Report. Chairperson Lisa Stephens, BerkeleyRent StabilizationBoard June25,2012 TO DETAILED RESPONSE CIVIL GRAND ruRY of Berkeleyhaschoseneffectiveenforcement its ordinance Jlur:re25,2012 Berkeley's voters have consistently supporteda strong,fair systemof rent regulation and the to measures necessary enforce it. The Civil Grand Jury report makesno effort to evaluatewhat is actually required in order to effectively implement Berkeley's Rent Stabilization and Eviction for Good CauseOrdinanceand it ignores the evaluationstudiesdone by the City of Berkeley, as The Civil Grand Jury well as thoseby the City of Los Angeles and by academicresearchers. proclaims that the Rent Board "must reducethe high rental registration fees" and follow the exampleof the larger cities of Los Angeles, SanFranciscoand Oakland, all of which charge much lower fees ?p. 65-66). Proper enforcementrequiresrent registration and verification and unlike Berkeley, SantaMonica and some other cities, theselarger cities don't do that. Instead they rely on tenant complaints about rent violations to enforcetheir ordinances. A recent study commissionedby the City of Los Angeles reportedthat more than one quarter of all rent stabilizedtenantsin Los Angeles - well over 100,000tenant households- had been subjectto that Los Angeles considerrequiring rent over the legal limit and recommended rent increases registrationas Berkeley does.l In contrast,Berkeley's recent study found that at most five paying an amount over the registeredrent ceiling.t The Civil Grand percentof all tenants\ryere Jury choosesas its model a systemthat allows tens of thousandsof tenantsto be overchargedand usesthis as the basis for arguing that Berkeley's administrativecosts are excessive.A system that promotesongoing education,rent registrationand verification addsto the cost of our program, but it coststenantsfar more when they are overchargedas in other cities. Berkeley has reduced staff sincevacancy decontrol while responding to new problems and increasedrequest for services In1986187,the Rent Stabilization Programhad 36 full-time equivalent staff (FTE). Prior to the passage vacancy decontrol in 1995,the Rent Board had27 FTE. In the current fiscal year, we of have had between 18-21 FTE, despitethe Civil Grand Jury report's claim that we have not that vacancy reducedour activities ?. 65). The Grand Jury report claims, without substantiation, decontrol has so greatly reducedthe staffing needsof the Rent StabilizationProgram that further reductionsshould be made. In the real world, to take only one example,vacancy decontrol changedthe nature of the problems faced by tenantsin Berkeley by providing a major incentive for landlordsto push out long-term rent stabilizedtenantsso that they can be replacedwith new tenantswho would then pay current market rents,insteadof the former tenants' much lower stabilizedrent. In addition, the foreclosurecrisis has increasedthe number of tenantsbeing told that they must vacateforeclosed propehies,even though foreclosureis not a good causefor I Economic Housing (RSO) and theLosAngeles Ordinance Economic Studyof theRentStqbilization Roundtable, 127. Market,2009,p. 2Berkeley RentalUnits, of of Board,Reporton fheApril - May 2009Survey Tenants Registered RentStabilization March15,2010,pp.2l-22. Page1 of t2 eviction. This has greatly increasedthe need for Rent Board action to ensuretenantsare awareof and capableof exercisingtheir rights to eviction for good cause.Vacancy decontrol has diminished the needfor extensive hearingson issuessuch as rent increasesfor capital improvements,but it has increasedthe need for outreachand educationon good causefor eviction. The Grand Jury fails to acknowledgethe actual changesin staffing levels that resultedfrom decontrol, despitehaving this evidencepresented them. For example,the Grand Jury was to informed that prior to decontrol, the Board had as many as 6.85 FTE Hearing Examiners on staff. In 1995 (the earliestyear we were able to get an accuratecount of the number of hearingsheld), the Board had 4.6 FTE Hearing Examiners and conducted485 hearings. In 2011, the number of Hearing Examiners was reducedto 1.85 FTE and 215 hearingsand/or mediations were conducted.Similarly, it was pointed out to the Grand Jury that ?n2002, the Board had three attorneys: a Chief Counsel and two individuals at the Staff Attorney III level. The combined 2011 cost for thesethreepositionswould be roughly $475,000in salary. ln20lI and2012,the Board has had three attorneys: one Staff Attorney III and two individuals at the Staff Attorney I level. The combined 2011 salary cost for thesenew individuals serving in adjustedclassifications is roughly $325,000.That is a savingsof $150,000per year. The most common complaint about the Program in late 2002 was that the counselingwas since 2004, one entry-level attomey has been "biased, inconsistentand unreliable." In response, assigned the Public Information Unit to serveas an "attorney of the day." This is to provide to initial and ongoing training to counselors,respondto diffrcult and more complex casesand provide immediate quality control assurances. Complaints about the quality of counselingare now rare and customersatisfaction surveysof owners and tenantsindicate that now citizens are pleasedwith the servicethey receive in our Public Information Unit. The Civil Grand Jury report summarily dismissesthesestaffing changesas the Rent Board "reinventing itself' and rather than appreciatingthat the Rent Board is responsiveto changing conditions and the needto improve services,treatsthis as evidencethat it is a "self-sustaining" bureaucracy. The Board provides effective oversight The very reasonthe voters altered the City Charterto createan electedRent Board was to they believed the intent of the increasetransparencyand accountabil? to the voters because Ordinancewas not being ca:ried out suffrciently by staff and the appointedBoard; it was not solely for "stricter enforcementof the registrationfee", as the Grand Jury report states.The Rent Board takes its mission seriously and has an active committee structurethat provides regular and ongoing oversight of st?ff efforts. Board committeesinclude Budget & Personnel;Eviction, Safe & Sustainable Foreclosure& Section 8,IRA/AcAAEIabitability, Outreach,Vy'aivers, Housing. Rent Board memberstypically Housing and an Ad Hoc Committee on Smoke-Free Page of t2 2 attend25 - 40 publicly noticed meetings ayear. The Board placesan emphasison transparency and accessibility to the public. Regular meetingsof the full Board are televised with closed captioning,broadcaston radio and live webcast(webcastsare also archived for convenienthome viewing). all The Budget and PersonnelCommittee reviews and discusses changesto the staffing model before forwarding them on to the full Board for final approval. When appropriateunder the law, the Board meets in closed sessionto discusspersonnelmatters.The Chair and other Board membersprovide informal feedbackand direction to the Executive Director on a regular basis and the Board conducts a detailed formal evaluationof the Director every two to three years. The Grand Jury report did not mention that, similar to other departmentsin the City, the Rent Board financial practices are reviewed annually by an independentoutside auditor, selectedby the City. The report and findings of the outside auditor are forwarded to the Board as part of their oversight function. The most recent audit report was provided to the Grand Jury. In addition, the Board has periodically commissionedstudiesof the effectivenessof the Program, who it is serving and how well it is meeting its objectives.Thesestudieshave resulted in new initiatives to improve progrrim implementation,but were ignored in the report. A recent survey by of tenants analyzedthenature of the tenant population assisted rent regulation and how well they are servedby the Program. This study found that new residentsof Berkeley were often unawateof their rights and led the Board to work with staff through the Board's Outreach Committee to develop better ways of informing new residents.A recent economic study determinedthat the rental property owners who own buildings where there has beenno turnover sincevacancydecontrol (only 400 units out of 19,000)might not be receiving a fair return on the their investment.ln response, Board's Individual Rent Adjustment Committee worked with staff to develop a new regulation that will allow them an additional rent increase. Theseare examplesof real program evaluation and real accountability.Both the tenant survey and the economic study were provided to the Grand Jury. Berkeleyts fees are at the appropriate level to implement the Ordinance and are passed through to tenants The Berkeley Rent Stabilization Board has made a policy decision to chargefees sufficient to enableit to fully enforce the Rent Stabilization and Eviction for Good CauseOrdinance.The Grand Jury wants the Rent Board to adopt a different policy that would reduce the fees,and therebyreducethe quality of regulatory oversight,making it easierfor some property ownersto violate the law. This is not just a simple concem with administrativeefficiency, but a substantive policy change. The recommendationby the Grand Jury to reducethe fees seemsto be basedon a fundamental of misunderstanding who actually pays the annualregistrationfee. Although property owners to physically write the check, the increases the initial registrationfee are paid by the tenants Page of 12 3 through their rents. Representatives from the Berkeley Property Owners Association have repeatedlymade this point when arguing for lower fees. From 1980through2004, the Board did an annual analysisof all costsincurred by property owners as the basis for determining the Annual GeneralAdjustment (AGA.) All increases the in RegistrationFee were included in this calculation.ln2004, the voters approved a measurethat changedthe way the AGA was calculated,setting it by law at 65%o CPI rather than through an of annual cost study (this changetook effect with the AGA approvedin October 2005, affecting 2006 rents). Since 2005, the Board has increasedfees from $154 to $194 per unit. The Grand Jury acknowledges that the Board allows $48 ($4 per month) to be passedthrough to tenants under full rent control. This amount includes the $40 increaseplus a portion of the City's fees for housing code enforcement.The Grand Jury fails to understandor acknowledgethat the balance of the fee increases had already been included in the rent through prior AGA increases. For tenantswhose rents have ever been decontrolled,this amount is paid out of the rent increase abovewhat they would be paying under full rent control. The very logic of vacancy decontrol is that owners will account for all increasesin fees,taxes and other operating costs when they set the new market rentBerkeley's fees fall within the normal range for the other California cities that have strong policies:East Palo Alto, SantaMonica and'WestHollywood. Los Angeles, enforcement Oakland and San Franciscohave very different complaint-based systemsas well as economiesof scaledue to their larger size, so they are not a fair basisfor comparison. Table: Units Reeisteredand Per Unit Feesin Cities with Strong EnforcementPolicies City Berkelev EastPaloAlto SantaMonica Reeistered Units 19,000 Per Unit Fees $194 1.900 28,000 15,000 s234 $ls6 $120* WestHollvwood * 'West Hollywoodalsoreceives General Fundsupport operate to their Program The Civil GrandJuryreportincorrectly usesthe initial 1980registration of $12per unit to fee assert RentBoardfees,currently$194per unit, haveincreased that exorbitantly. the As Directorexplained the GrandJury,theinitial feewassetfar too low to meetthe Executive to requirements the agency. of Santa Monica,whichprovidedsignificantly betteradministration of its ordinance the earlyyears, in raisedits feeto $72per unit in 1981,while Berkeley'sfeewas finally setat a morerealistic$60per unit by the first elected Boardbackin 1984. Page4 of 12 We note that rents in Berkeley have more than tripled since 1980, so the Rent Board's real operatingcostshave not increasedany fasterthan the rents. The averageowner ofrental property in Berkeley savesfar more in reducedproperty taxes due to valuations that have not kept up with market values than they pay in fees to the Rent Board. In addition, as a result of vacancy decontrol,landlords in Berkeley receive an averageof an additional $5,000 per unit annually from tenants,more than25 times the amount of the annualregistration fee. Berkeley hires and promotes the most qualified staff The Grand Jury report is simply wrong when it claims that the City of Berkeley hiring lists are not ranked by applicant qualifications and that this could make it easyfor the Executive Director to hire minimally-qualified "friends". It is standardpractice for the City of Berkeley's Human Resources Departmentto rank applicantson hiring lists, placing them in three groups: "qualified", "well qualif,red"and'omostqualified". Almost every personhired or promoted by the Executive Director has been ranked in the "most qualified" group. There have been two or three exceptionsover more than a decadeand eachhas a specificjustification basedon the requirementsof the position. The Grand Jury was informed of thesefacts, and could easily have Department.The Executive Director verified this by contacting the City's Human Resources offered to open up his files for every position hired over the previous five years so the Grand Jury's staff could determinethat the most qualified personwas selected.Regrettably,this offer was declined. Such a review would have revealedthat the staff hired in recent years have extraordinarycredentials,ffiffiy with advanceddegreesfrom prestigiousuniversities. Instead,the Grand Jury falls back on possible "perceptionsof impropriety" and the incorrect claim that there are no rankings to imply that the Executive Director may not have hired the most qualified people.This amountsto use of innuendo to denigratethe reputation of the highly-qualified Rent Board staff, as well as that of the Executive Director and the Board. The Grand Jury report singles out for criticism the creation of the Deputy Director position and the accompanyinghiring process.Again, the Grand Jury statesthe facts incorrectly. The need for the position of Deputy Director was first identified by the Board in2006, in responseto the heavy demandon the Executive Director and lack of administrativesupport. At the time, the budget could not support the new additional position. After retirement of severalsenior staff in 2009,the Board beganthe processof creatinga new position. Any new classification in the City's Civil Service Systemmust be approvedby the City's PersonnelBoard and the City Council. The City Council approvedthe position and requestedan open recruitment and Departmentconductedan extensiverecruitment selectionprocess.The City's Human Resources and evaluatedall candidates,recommendingthe list of individuals to be interviewed by an outsidepanel. The panel included a City Attorney familiar with rent control laws and administration,the Chair of the Berkeley Housing Authority appointedby the Mayor, and a member of the Berkeley City Council who is often critical of rent control. Dr. StephenBarton, the first person hired as Deputy Director, was selectedas the most qualified candidateby this Page5 of 12 panel. Prior to being interviewed by the panel of outsideexperts,Dr. Barton was ranked "most qualified" by the Human Resources Departmentstaff. Dr. Barton is a widely published, award-winning expert on housing policy and previously served the City with distinction, receiving a City of Berkeley proclamation of thanks from Mayor Bates in July 2007 when he steppeddown after nine yearsas Housing Director. He retired after 15 months in the Deputy Director position but has remainedin this position on an hourly basisin retirement and is expectedto do so until his current projects are completed and the Board can make a smooth transition to a new Deputy. The report incorrectly claims that after his retirement as Deputy Director he was "rehired as a part-time seniorplanner". The Grand Jury report plaerning and implies that that the Deputy position had the sole purposeof succession suggests Dr. Barton's retirement indicatesthat his hiring was problematic. Dr. Barton was hired because his depth of knowledge of housing policy and City housing programs could facilitate the Rent Board's efforts to better coordinateits work with other City departments.This project was expectedto take approximately two years and he hasbeenDeputy Director on a full-time or hourly basisfor nearly two years now. Claims that the Rent Board does not follow City procedures are not correct and unsupported by evidence The Grand Jury recognizesthat all hiring (exceptthe Executive Director) is carried out through the Human ResourcesDepartment (p.64) following standardCity procedures(p.68) but proceeds to claim that the HR Department doesnot provide enoughoversight of the Rent Board's personnelprocedures(p.71) without providing a single example of such lack of oversight. In fact, the Human ResourcesDepartmentmust review and approve any changesin classifications used by a Department. New classificationssuch as the Deputy Director and Administrative Staff Assistant are also reviewed by the PersonnelBoard and the City Council. The Grand Jury states that "the BRSB and director should heedthe advice from the city departmentshandling personnel,payroll, and finances" (p.69) but again fails to provide a single example of an occasionwhen the Board or the Executive Director did not heed such advice. The Director used and were the minimum standards testified that the City of Berkeley purchasingstandards that the Rent Board will receive more bids from vendorsthan required under standardCity practices. In addition, the report saysthat "Berkeley staff appearsto be too deferentialto the BRSB when problems are identified" (p.69) but doesnot speciff any of the problems supposedly identified by staff from other departments. Attorneys play a vital role in advising landlords, tenants and other staff It is ironic that, having spent so much time inconclusively discussingunfounded"perceptions" that lessthan fully-qualif,redpeople are hired at the Rent Board, the Civil Grand Jury then goes on to criticizetheRent Board for hiring people they regard as over-qualified. According to the report, the Rent Board has too many attorneys,and their number should be reducedbecause Page6 of 12 attorneysare only necessary engagein lawsuits and are not neededto advise staff or talk to to owners or tenantsto explain complex regulatory issues.Again, the Civil Grand Jury provides no basis for this view and ignores the fact that good quality legal advice helps prevent lawsuits. The Rent Board public information and counselingstaff handle over 10,000 inquiries from the public annually. In light of the complexity of landlord-tenantlaws and regulations, it is essentialthat counselingstaff be provided with ongoing training, quality review and assistance responding in to difficult questionsand situations. Theseare vital functions that are best provided by people with legal training. It is worth noting that the salary differential between a Community Service SpecialistII (the position used as a Housing Counselor)and a Staff Attomey I is only $500 $900 per month. V/e firmly believe that we have the appropriatenumber of attorneyson staff in the appropriateclassificationsto reasonablymeet our needs.Perhapsthe Grand Jury's concern arisesbecause they did not realize that twenty years ago the C? Attorney determinedthat the Rent Board neededto have its own attorneys,rather than relying on the City Attorney's Office, to avoid any potential conflict of interest. The Board is responsiveto landlord concerns Contrary to the picture provided by the Civil Grand Jury, the Rent Board pays close attentionto the quality of its work with owners and managersof rental property. The Board is representative of Berkeley's renter/owner population. Five membersof the Board are tenantsand four are property owners. The Board has two landlords among its nine members-22% of the Board which is a far greaterproportion than are in the generaladult population. They are both small landlords who owner-occupy one unit and rent out another,which makes them similar to the vast majority of Berkeley landlords who rent out one to four units, although the majority of the units and all of the larger buildings are owned by a small number of landlords who have 15 units or more. More than half of our client contactsare with property o\ryners. The Rent Board recently conducteda customer service survey of landlords and found that, regardlessof how they may feel about the existenceof rent stabilization in Berkeley, they mostly find the Rent Board staff to be responsive,professional and helpful.3 This is a tribute to the quality of the Rent Board staff who work with a large number of small landlords who do not hire professionalmanagement to help ensurethat they understandboth their rights and their obligations under the law and how to meet their legal requirements.The Grand Jury seemed be impressedwhen informed that the to Board conductedspecial workshops and developedclear materials designedfor new owners,and co-sponsored statewidelegislation to make it easierto evict problematic tenantsfor nuisancebut, again,failed to note theseefforts in their report. The Executive Director's salary is appropriate The Civil Grand Jury was provided a det?iledexplanationand supporting written documentation on the Board's processin negotiating the Executive Director's salary. The Civil Grand Jury is 'Jay Kelekian, Executive Director,"Customer Service Suweyof Berkeley RentalProperty Owners Managers", and Berkelev RentStabilization Board.June18.2012. PageT oft2 critical of the salary that the Board has negotiatedwith the Executive Director, stating that he is overpaid in comparisonto other departmentheadswithin the City and that it is not appropriateto comparehim to directors of other municipal rent control programs.Unfortunately, the comparisonthe report makes is to the cunent salariesof certain City of Berkeley department heads,rather than evaluating whether the comparisonsand considerationsthe Board used at the time the salary was negotiated in 2008 were appropriate. At that time, we looked at a combination of the Executive Director's length of serviceto the City and his currentjob, the previous director's salary, other Rent Board employees'pay, and the salariesof other City employeeswith comparableresponsibility. The Board startedwith the City's salary range for small departmentheads,and comparedthe salariesand experienceof the other roughly-equivalentdepartmentheads. In April 2008, this includedthe newly-hiredCity Clerk at$169,776,the Director of Human Resources $161,136, at and the Planning Director at $179,039.We also looked at the previous Rent Board Director, who would havebeenmaking $165,000-168,000 had shestayed. with only cost-of-livingadjustments V/e also conducteda salary study within the agency. Prior to renegotiatinghis contract in 2008, 'We severalother Rent Board staff were making more than the Executive Director. also Board is a unique position within the city, recognizedthat the Executive Director of the Rent answerableand serving at the pleasureof the nine electedcommissioners.The only other city jobs like this are the Superintendentof Schoolsand the City Manager. And while the Grand Jury doesnot believe that we should have looked at the salariesof directors of other rent control programs,we did: at the time, SantaMonica, which is most equivalentto Berkeley, was advertising for a new Administrator at a salary substantiallyhigher than the $148,000 our Executive Director was makins. \ With all of theseconsiderations /e setthe ExecutiveDirector's salaryat $160,500,the middle of the the range for small departmentheads,plus any cost-of-living adjustmentsor other increases to City of Berkeley provided other departmentheads.We also provided annual step increases allow the salaryto approachthe higher end of the salaryrange as the Director gained even more experiencein the position. The Executive Director's current salary reflects this. The $183,000 the Grand Jury report cites is also within the current range for small departmentheadsof This range is set by the City of Berkeley, not the Rent Board. The current 5137,772-5189,396. salary for the Administrator of the SantaMonica Rent Control Board is $189,624. Finally, we regulate an industry that wants to not only weakenbut entirely eliminate rent regulation, with the result that the Director must be capableof managing and providing leadershipin an environment that involves high controversy,high scrutiny, personalattack and frequent misrepresentation.Rent stabilizationis a specializedfield that requires expert administration basedon a combination of managementskills and deepknowledge of the regulatory systemand its history. The Board believesthat Executive Director Jay Kelekian has the demonstrated highest level of competenceand accomplishmentduring his tenure at the Page8 of 12 Berkeley Rent Board. V/e have set his salary at a level that helps ensurethat he staysin that position as long as possible,rather than finding it attractiveto seekanotherposition. The Rent Board's Legislative Advocate defendsBerkeley's Ordinance, regardlessof the political orientation of the Board The Grand Jury incorrectly assertsthat the hiring of a lobbyist is a "manifestation" of the political orientation of the Board, to advocatefor "pro-tenant" legislation. The chargeof any electedbody is to promote and defendthe policies of the city's or agency's electorateand to fight againstthe diminution of local control by the statelegislature.Most local and independentagenciesretain lobbyists, including suchunlikely entities as EBMUD and AC Transit. Since 1984,the Rent Board has retaineda legislative advocate(lobbyist) in Sacramento to monitor, support and opposelegislation in conformancewith the purposesof the Ordinance. This includes the period of time when the majority of the Board were people supportedby landlord organizations. The Ordinanceand its provisions are under constantattack and have beenfor 32 years. The legislation the Board supportsis more accurately characte?zed oopro-ordinance" as rather than'opro-tenant." While much of the work of the legislative advocateis preventing the erosion of tenant protections,the Board also supportslegislation that clarifies the landlord-tenant relationship and promotes the housing policies of the electorate.Examples of legislation of this type that the Board has supportedrecently include: SB 426 (Calderon) clariffing that certain problematic behavior by tenantscan be considereda nuisanceunder statelaw; AB 1679 (Bonilla) allowing landlords and tenantsto agreeto use email to resolve the amount of the security deposit refund and direct deposit of the security deposit after atenant vacates(sponsored by the California Apartment Association); SB 1229(Pavley) prohibiting landlords from requiring de-clawing or de-voicing of animals as a condition to rent or remain in a unit; and AB 818 (Blumenfield) making recycling mandatory in all multi-family housing. The Berkeley Property Owners' Association, California Apartment Association, Califomia Housing Council, East Bay Rental Housing Association,Northern California Rental Property Association; numerousBoards of Realtors,the Apartment Associationsof many different cities and counties; all have lobbyists working to alter Berkeley's laws protecting tenants. Page9 of 12 Preliminar.vResponses Specific Grand Jur.vRecommendations: to Recommendation 12-10: The Berkeley Rent Stabilization Board must reduce the high rental unit registrationfees. The primary obligation of the Board is to effectively and efficiently implement the Rent Stabilization and Eviction for Good CauseOrdinance.The Board rejectsthe Grand Jury's view that lower feestake priority over effective implementation.V/e believe that we have demonstrated that the Board's approachto implementationis far superior to the approachtaken by other cities that charge much lower fees and consequentlyprovide significantly less service. Nonetheless, Board is always concemedwith increasingthe efficiency of our operationsand the we believe that the new software systemscurrently being installed at the Rent Board will make it possibleto reducestaffing in certain areas.Given the increasingcost of salariesand benefits, much of it due to rapid increasesin health insurancecosts,it seemsunlikely that such increased efficiency will allow reductions in fees,but it will likely help avoid the need for further increases for someperiod of time. I2-I I : The Berkeley Rent Stabilization Board must allow landlords to pass Recommendation through a larger proportion of the registrationfee to tenants. All registrationfee increasesare passedthrough for long-term tenantsin units that have not received a vacancy increaseto market rent. Up until 2005, they were included in the annual cost study, so that rent ceilings were increasedby the amount of any fee increase.For units under full passrent control, all fee increasessince 2005 (totaling $48) have been allowed as a separate through to tenantsbecausethey are no longer allowed to be included in the Annual General Adjustment,as was the casefrom 1980-2005. Since the 2005 changein how the Annual GeneralAdjustment is determined,the Rent Board doesnot provide for pass-throughof registration feesfor new tenanciesbecauselandlords who newly rent a unit have the right to set the rent $16 a month higher in order to recoup the cost of the fee and they usually increasethe rent by far more than that. Furthe?nore, nothing preventsa landlord from using a leasethat setsa rent as a monthly rent plus a monthly payment of $16 for the registrationfee. Instead of leasing a unit for $1,250 monthly, the owner could leaseit for $1,250plus $16 for the registrationfee, for a total of Sl,266, or for 51,234plus $16 for the registrationfee. The Civil Grand Jury suggeststhat Berkeley follow the example of SantaMonica, whose ordinancerequiresa pass-throughof the registrationfee rather than including it in the baserent. Staff in SantaMonica inform us that many landlordsthere fail to inform tenantsof the rent after they have moved in. We do not registrationfee, and then add it to the agreed-upon think this is an activity that should be encouraged. Page10 of 12 Recommendation I2-12: The Berkeley Rent Stabilization Board must ask the city of Berkeley Human Resources Departmentfor a thoroughposition-control audit to evaluatethe number of stffi the cl assiJ?cati ons and wor kl oad. The Human Resources Departmentalreadyperforms a review any time a departmentchangesa classificationto determineif it is justified by the work assigned. This is true if a staff-personis promoted or if the departmentwishes to upgradea position, downgradea position or createa new position. All desiredchangesin the Rent Board staffrngmodel, under this Executive Director, have been done only after the independentreview of the Human Resources Department. A more extensivemethod for evaluationof the work and appropriateclassification is normally done through a processcalled a "desk audit" which is very labor-intensive,requiring the individual employeeto write up a detailed descriptionof everything they do, followed by verification and analysisby the Human Resourcesstaff. It is doubtful that the Human Resources Departmentdoesmore than half a dozenof thesein a year, let alone conduct an analysisof all 21 positions at the Rent Board. To do this for all Rent Board employeeswould be very timeconsuming and costly. Even if the Human Resources Departmentwere willing, we are not sure they are the most qualified to perform the audit requested. desk audit determinesthe A perform a set of assignedresponsibilities.To determinethe appropriateclassification to appropriatelevel of staffing is a different task and would require some expertisein what is neededto administer a rent control agency.Alternatively, the Rent Board could ask staff from anotherrent stabilizationprogr?rm do a peer review of our agency.This also would involve to somecost, to pay for their staff time, especiallysincethe peer agenciesare SantaMonica and West Hollywood in Southem California. We note that part of the lending of Berkeley Rent Board staff to other departmentsthat the Civil Grand Jury mentionshas included extensivepeer review and coaching assistance the City of East Palo Alto, all of which was reimbursedto the Rent to Board for the time spent assistingEast Palo Alto. Recommendation I2-13: The Berkeley Rent Stabilization Board must ask the city Human ResourcesDepartment to provide more comprehensive salary comparisonsregularly and use them in setting salar?es and benefits,including those of the ExecutiveDirector and the Board members. All Rent Board staff except the Executive Director are already in civil servicejob classifications establishedby the City Council, with salary rangesestablished the Council on the advice of by the Human Resources Department.When staff is hired initially their salariesare set within the allowable range with the advice of the HR staff and annualincreasesare determinedby the applicableunion contract or the City of Berkeley personnelrules for exempt staff. With regard to the compensationof $500 monthly plus health benefits provided to elected membersof the Rent Stabilization Board, the stipendamountwas set in the early 1980's before there was an electedBoard. In 1985,the first electedBoard continued the level of stipendat $500 and it has not been increasedsince.This meansthat it has lost more than half its value due to inflation over the years.Health benefits were addedin 1987,when other electedofficials receivedthem. In 1992 the Board majority, which had beenelectedwith the support of the Berkeley Property Owners Association, reaffirmed this policy and allowed Board membersto collect their full stipend as long as they attendedat leasttwo meetingsevery month. The current Page11 of 12 Board has establishedrules that deduct additional amountsfrom a Rent Board member's stipend when they have unexcusedabsences. The Rent Board is not like most other City commissions,which are appointed by the City Council and are entirely advisory. Board decisionscan only be appealedto the courts and not to the City Council as with other bodies such as the Planning Commission or Zoning Adjustments Board. In addition, the Board has an active committee structure,including Budget & Personnel; Eviction, Foreclosure& Section 8,IRA/AcA/Habitability, Outreach,Waivers, Safe & Sustainable Housing and an Ad Hoc Committee on Smoke-FreeHousing. Rent Board members typically attend25 - 40 meetingsa yeat. We believe the Board's monthly stipend level of $500 is appropriatewhen comparedwith other electedbodies like the School Board ($1500) and City Council ($2400). Recommendation I2-14: The BerkeleyRent Stabilization Board must conduct annual performance reviews of the executivedirector to provide more ffictive oversight. The Executive Director is an "At-Will" employeeserving at the pleasureof the Board so, in many regards,his performance is being evaluatedon an ongoing basis.A thorough formal performancereview processtakes severalmonths, as it typically includes surveysof staff, stakeholdergroups and the public. It is not realistic to expect such an extensive review to be conductedmore often than every two or three years.The Board will consider conducting a more frequent,limited review of the Executive Director. V/e will check with other electedbodiesto seewhat has beenthe practice in reviewing the City Manager and Superintendentof Schools. Paget2oft2 BERKELEY PNOPERTY OwNIens AssocIATIoN in? APVOCATE FOR BERKELET,S RENTAL HOUST?IA PROVIDERS 1 June28,201 Ann MarieHogan Auditor Cityof Berkeley Street 2180Milvia 94704 ey, Berkef California DearMs.Hogan, an requests auditof the BRSBby the owners Association Property The Berkeley and bothquantitatively The levelof spending, AuO?tor. Ottiae of the City by that envisioned the votersin passingr-ent. qualitatively, ?ar in excessof is evenfraudin abuseand possibly waste, an?'ha"ledto unconscionable control, of the activities the BRSB. some35 years ordinance passed rentcontrol a of Whenthe Citizens Berkeley unitat $12 ayear' The$12 ?"'e ago,theysetthe registration tor eachcontrolled that arguable the now $30. lt is therefore tor a?j?steO inflatio?would be about was one by envisioned the votersof Berkeley scaleof the rentcontrolprogram units) 19,000 ($30per unitfor approximately of witha budget lessthan$?00,000 of budget for annual per charge unitis now$196making today. Th? annual 000.00. 500, approximately $3, evena of for constraints all levels government, budget ln thesetimesfor severe proponent rentcontrolmustwonderwhy. of fromthe CityAuditor: attention are The following itemsthat deserve and hiring of of public allegations violations ethical 1) Therehavebeennumerous on attention this practices the BRSB. We brought to the Council's at oromotion on this gth, was sentregarding matter up letter a it?arcfr ?010. Additionally follow zgth,2o1o. November of structure the BRSB. ls it an we request auditbe doneof the employment and to be so top heavyin professional . in typicalbtuny department the City or needed structure management r?n"g"r"nt st?ttZ lf not, is sucha top heavy in be can c?stsand greaterefficiency achieved. ls the BRSBoverstaffed CA SUITE2O3' BERKELEY, 94704 2O4I BANCROFTW?Y, PHoNE:(5 t O) 525-3666 ' FAX: 51 G525-O2o3 BPoA@BPO^A.ORG WWW.BPOA.ORG general?lts principal duties unitregistration, determination the annual of general and ind?vidual adjustments haveall been rent adjustment processing fee reduced overthe yearsand yet the registration and the budget significantly goesup everyyearand the staffhas at bestbeenminimally trimmed. froman auditis the maintaining three of 2) Another itemthatdeserves attention the fulltimehearing examiners. onetimethe number hearings RentBoard At of with weremorethana hundred annually handled workload and the conducted (3)fulltime hearing Today RentBoardconducts than the three examiners. less justifies (20) actualhearings Typically BRSB the the annually. twenty examiners pointing the number by to maintenance three(3)fulltimehearing of of of madewithpeople seeking assistance the number annual or contacts the of any filed. However, vastmajority casesfiledneverrequires complaints to hearing.lf and caseworkby the hearing examiners do notproceed an actual thereshould moreefficient to be the aboveis indeed way lrue,thenwe believe needlessly wasting public's the resources. instance For without runthe program and attorneys be hearing to examiners onlypaysthemby usescontract Oakland hired needed.Andyetthe BRSBonlyrecently the hourwhentheyare actually Why? hearing examiner. another (EDC) for Defense Center and East funding the Eviction 3) The BRSBprovides per at Bay LegalCenter(EBLC) a costof morethan$200,000 year. We request to that are thatan auditbe doneof thesecontracts ensure the fundsdisbursed residents. source the fundsis The of usedto benefit Berkeley beingsolely owners and it is important that fees rentalproperty registration paidby Berkeley to that thesefundsbe usedto onlyfund services are prov?ded Berkeley residents. lobbyist a cost hireda Sacramento-based at the In addition, BRSBhas annually per to of approximately $100,000 year. We askthatan auditbe conducted in is expense, especially lightof if and determine thisactivity a justified needed for tenants sincebeingemployed. whatshehasaccomplished Berkeley of thereis a significant doubtas to the authority the 4) We furthermore believe tenants in of donefor the purposes defending BRSBto usefundsas is currently government Sacramento, Thereare 18 in State Courtor for lobbying mayhave to City enumerated duties assigned the BRSB.TheBerkeley Council it of free reignto pursueand fundany activity feelsis in the best interest the City, to but the BRSBdoes not. The BRSBis not empowered engagein any activity duties. To do so is a misuse by whichis not suppor-table one of thesespecified counsel a Sacramento and to outside of fundsby any measure.Relative funding might apply: of duties only lobbyist, thefollowing the enumerated to board shallhavethepower The rent and F. Powers duties. elected stabilization general individual through or andto setrentlevels,whether to determine, arbitrate rents under Berkeley any Ordinance, adjustments, any unitwhichhascontrolled of The and rents evictions' regulates program which any to and administer Berkeley powers duties: and the shatlhave foltowing board c . . of in iurisdiction' civil remedies courts appropriate Pursue 13. of a before court brought party as lnteruene an interested in anytit?ation 14. to rentalunits with jurisdiction a ?na?? or tenant respect ?y appropriate bYthischaPter. covered are whlch of to powersnecessary carryoutthe purposes thischapter 17.Other of with notinconsistent theterms thischapter' ? ? for allows the BRSBto payfor duties in specific theseenumerated Nothing whatis being thatis not the BRSBwhichis essentially a attornjys'in civilaction do duties theseenumerated the doneby tunOing EDCand EBLC. Specifically, party a who is already by to not allowthe g-RSg payfor representation someone to 'ln aOiliti?n; grantees'appeardo counseling unrelated to the in a legalaction; duties. by That activityis not covered enumerated litigati?n. to for or We see no justification authority the BRSBto funda lobbyist represent the is to administer lawas lts ?i?r" the Statelegis'lature. charge its interests rentlaw' the whichseeksto modify Berkeley legislat-ion not written, to influence services we lobbying. engaging It is morethan ? stretchtisay that # 17 perm?ts in dealwithlobbying duties it believe doesnot- and no ?therof the enumerated anyway at all. that we Forall thesereasons, believe the useof BRSBfundsfor bothlegal the casesandfor lobbying State tenant'driven t?r representat?on unspecified to and in legislature an abuseof authority subiect audit. overthe years viewof itscharge.lt hasfunded S)The BBSBhasan expansive as legalfunctions justified given..its limited be whichc?nnot m"ny activities whichclearly the whichesiablished Boardand ordinances in defined the several ago to permitted do. lt is nowmanyyears_ thatthe BRSB wtraiit is del?neate of as whichwasdistributed a publication safety on a funded Oro??ure earthquake to (thanks wereextended the Board by rhe Cityot eeik?f?ybutfund'ed the ?1Se the action; government was ihe publicatio? a legitimate in the brochure). poetryslamsand sponsored fundingny tne enSA was not. The Boardh.as at itselfon billboards bus stops. ltprotr?*r. The BRSBhastouted outreach agencies.BRSB to iis has allowed hearingexaminers serveothergovernment program. Board EastPaloAlto modifyits rentcontrol to staffwas allowed fr?lp and discussing deb_ating meeting Board at spendsubstantialtime members paidstaffservethe Board. not matters withinits purview.At thesemeetings, suchas housing in involvement otherCityactivities The Boardhas sought fees ptograr? and spentregistration in the process. Theseact?vities inspection to of thisis meant judgethe valueof these at" titetythe tip of the iceb'erg.None the involve therefore and clearlyextra-legal activities.They are, however, to an audit. be fun?s.Thistoo should subject of expendiiure public illegitimate SUITE2O3 'BERKELEY,CA947O4 2O41 BANCROFTWAY, (51 o) 525-3666 ' FAX: 5 f G525-o2o3 PHoNE: BPOA@BPOA.ORG WWW,BPOA,ORG the 6) At present BRSBkeepsa substantial reserve fundon hand. We request if an auditto determine sucha substantial reserve fund is in-linewith otherCity departments quasi-governmental of offices Berkeley.The BRSBis in empowered raisefundsto meetits obligations. to Doesthis extendto large purposes? reserves unspecified for We believe of theseitems all warrant auditandhopeonewill be undertaken. an Thankyoufor yourattention thisrequest. to SidLakireddy, President Property Berkeley Association Owners Enclosure: Copyof lettersentto Berkeley City Council29 November,2010 CC: Berkeley City Council 2otr-2olz Alameda CountyGrandJury FinalReport BERKELEY RENT STABILIZATION BOARD Introduction The zorr-rz Grand Jury investigatedthe operationsof the Berkeley Rent Stabilization Board(BRSB). This wasin response a varietyof complaints to that BRSB is biased in favor of tenants, chargesexcessive registration fees to landlords,usesimproper hiring procedures, discourages and open expression of concerns. During this investigation GrandJury foundthat the BRSBis a self-sustaining the bureaucracy that operatesr?'ithout effectiveoversightand accountability. The BRSB'sindependence from the city of Berkeleycontributesto excesses its in registration fees,in compensation the directorand members the board,and for of to perceptions impropriety personne? of in procedures. Background In 19Bo after Berkeley voters passeda rent stabilization law to regulate residentialrent increases, city initiated a rent stabilizationprogram. The the program was funded by annual registrationfeespaid by landlords of covered rentalproperty.Non-payment the registration by ownerswasa problem,so of fee tenant organizations workedto get the votersto passan ordinancecreatingan independentrent stabilizationagencyto provide stricter enforcementof the registration fee. In r98z the electoratevoted to make the BerkeleyRent StabilizationBoard. (BRSB)an independentagencynot responsible the city council. to The nine memberrent stabilization board,elected Berkeley by votersfor four yearterms, regulates rentsfor most apartments built before19Bo(covered units) and strives to prevent unlawful evictions.while Berkeley's mayor, city council and city 63 20rr-2012 Alameda County Grand Jury FinalReport manager have no direct power over the BRSB,the agencyuses city departments for some functions: the city processes BRSB'semployeepayroll, the city conducts all hiring through the Human Resourcesdepartment, and the city's finance department processes BRSB'sbank depositsand provides purchasingsupport. In 1995,the California legislature passedthe Costa-HawkinsRental Housing Act that instituted "vacancydecontrol" which allows landlords to set a new rent when a unit becomest?acant.The landlord has the porverto determine the rent with no regulation by BRSB.This means that when a rental vacancyoccurs,the landlord can rent the unit at the prevailing market rate. Thereafter the rental increasesin covered units must comply with the Annual GeneralAdjustment (AGA) set by the BRSB. This limit is set on future increasesto provide rent stability for the new tenant. After a three-year phase-in period, "vacancy decontrol" began in rygg. Approximately 8o% of the covered rental units have tenanciesthat have turned over at least once since 1999. Berkeleyhas a high rate of turnover due to its large student population. The rest harre"old rent control" tenanciesthat never have had vacanciesso thev never receiveda vacancvincrease. The rent stabilization provisions apply to approximately 19,ooo rentals in multifamily units built before 1980. Orvnersof rental units covered by the law must register their units and pay an annual registrationfee. In 198o-Bl it was $rz a unit; in 2otr-2ot2 it is gr94 per unit with penaltiesfor non- payment. Every unit subject to rent control has a lawful rent increase ceiling. In recent years, the AGA in the rent cei?ing has been set aT 65% of the consumer price increasefor the year, which meansthat for 2or7- 2otz it is t.6%. BRSB'sweb site has a full guide to rent control, specifiiing exemptions, appeals procedures for landlord-tenant disputes, and addressing frequently asked questions (i,r'r,wv. rkele,v*. us/ rent) ci.be ca. 6+ 2oLr-2ot2 Alameda CountyGrand Jury FinalReport Investigation During this investigation the Grand Jury interviewed many witnessesincluding representativesfrom the board, management, staff, and citizens familiar with BRSB. Grand Jury members attended a board meeting, viewed videos of meetings on the web page, and reviewed materials provided b1' 1h. city of Berkeley and BRSB. The Grand Jury consideredtwo aspectsof BRSB: r) budget and fees; and z) personnelprocedures. Budget & Feae BRSB operates with 2o.9S full time employeesand an annual budget of nearly $4 million in zoro-zorr. The Grand Jury found that, even after CostaHawkins reducedthe amount of work for rent boards by allowing rents to rise uncontrolled rvhen vacanciesoccur, the BRSBdid not decrease total activities or budget,but its instead "re-invented itself," adjusting to the changesto sustain its operations. It appears to be a self-sustaining bureaucracy that operates without effective oversight and only minimal accountability. BRSB's budget and staff are large given the number of rental units in Berkeley r'vhen compared with the rent stabilization programs in other cities such as Oakland and San Francisco.(SeeChart, Comparable Rent RegistrationFees zott) BRSB explains this difference by stressing its active approach to rent control rvhich provides multiple servicesto tenants. It usesertensive outreach, including publications and seminars, to inform tenants and owners about their rights and obligations. It maintains full and accurate records through reporting requirements for initial rents.and eviction proceedings,and provides mediation and dispute resolution sessions.Not all of these services are provided in other cities that have a more passiveapproachto enforcing rent control. 6S zotL-zot2A-lameda CountyGrandJury FinalReport Cmpaeable Rent RegistratimFees- 2011 A?nual Rental Unit Reeistration Fees 66 2ou-2orzAlameda County Grand Jury Final Report This relatively large budget and staff are funded by the extraordinary increasein the annual registration fee from $rz per unit to $r94 per unit between rgBo and 2oL2. (SeeChart, Annual RentalUnit Reg?stration Fees).The Grand Jury was struck by the lack of controls over the increasein the registration fee. The landlords pay the fee for services primarily bene{iting tenants. This allows the BRSB to maintain its operations with minimal externalcontrols. The Grand Jury recognizesBerkeley voters have supported active rent control along with their commitment to neighborhoodpreservation and limited growth. The Grand Jury heard conflicting testimony about whether BRSB representsthe interest of landlords as well as the tenants.The Grand Jury finds that the current board is primarily composed of representativesfrom a pro-tenant slate. One manifestation of this is that the board hires a lobbyist who is paid $5o,ooo a year to advocate for state legislation that is pro-tenant. In addition, the BRSB contracts with local non-profits to provide legal advice and representation to tenants fighting evictions. Another manifestation is that landlords are only allowed to pass $+.oo a month of the registrationfee to tenants for a total of $+8 a year. In contrast, Santa Monica, like Berkeley,takes an active approach to rent control, yet it lets landlords pass $r3.oo a month to the tenants for a total of $rS6 a year thus covering Santa Monica's entire registration fee. The Grand Jury concludesthat a larger pass-throughof the registrationfee to tenants in Berkeley rn?ould a fairer way to finance rent control and one which creates a potential be check on excessiveincreasesin the registration fee becausethe tenants would sharemore of the burden. The Grand Jury also f?nds that the penaltiesfor non-payment of registration fees in Berkeleyare extremely high and substantialstaff and board time is devotedto pursuing payment and handling rvaiver requests.The penalty is roo% of the registration amount, imposed one day after the fee is delinquent. This is much higher than other city-imposed penalties. For example,the transient occupancy tax (hotel tax) penalty is to% of the amount due, and the parking spacerental tax is also ro%. The BRSB reported that several hundred requests are processed 6Z 2ott-2or2 Alameda County Grand Jury Final Report eachyear to havethe penaltyreduced waivedentirelyand that somerelief is or grantedin overgo% of the cases. GrandJury learned The that thesewaiversare discretionaryand most often reviewedby staff, leading the Grand Jury to question the potentialfor misuse and arbitraryapplication. 2o1othe BRSB In legalunit filed in smallclaimscourt against properties subsequentiy r4o and filed lienson 4o of those properties. The GrandJury found that the sizeof the staff hasnot decreased commensurate rvith the decrease the workload after vacancydecontrol.Furthermore,the in number of hearingshas gone down from 364 in ryg9 to rz8 in zorr. The emphasis now is on mediationbecause is more costeffective. it The number of hearingexaminers alsogonedorvn, enoughremainthat they are usedfor has yet otherjobs and "rentedout to the ciff" whichreimburses BRSB. Berkeley voterssupportthe missionof the BRSB whenthey electmembers the to board. However,even given that approachthere are excesses that make the GrandJury questionwhetherthe BRSBis managing resources its appropriately. Increases feeswithout justificationraisequestions the Berkeley in for electorate to consider.Other cities with significantly more units managerent control with lowerfees. Personnel Procedures The Grand Jury heardallegations aboutimproperpersonnel procedures: hiring does not follow standard procedures, appeals no processexists,positionsare createdand hires made basedon friendshipsrather than qualifications, and commitmentsare madeto new hiresbeforethe properprocedures followed. are The Grand Jury also heard contradictorytestimony that all hiring and disciplinaryprocedures follow standardprocedures, approvedby the BRSB, are and the most qualifiedpersonis hired. 6B 2ott-2or2 Alameda County Grand Jury Final Report We heard that only people "on the list" developed the city of BerkeleSz's by Human Resources(HR) department's screening panel are hired. However, the Grand Jury heard testimony that being on the list is not a guaranteeof quality. Names on the list are not ranked and their presenceon the list may just indicate that they have met the minimum qualif?cations. Then, according to "the rule of the list," anyone r,vhomakes the list can be hiled. There are rules limiting hiling relatives but no rules limiting hiring friends. So it is possiblethat proper formal procedurescan be followed while there are also perceptionsof impropriety. The Grand Jury concludesthat perceptionsof impropriety must be addressedby the board and the director. We also concludethat the BRSB and director should heed the advice from the city departments handling personnel, payroll, and finances. In addition, Berkeley staff appearsto be too deferential to the BRSB r,vhen problems are identified. Another complaint about personnel procedures concerned the inappropriate creation of neiv positions and hiring of friends. For example, Berkeley HR and the city council liad to revier.r' BRSB's plan to create a new position of deputy director because it involved a change in the charter. HR supported the new position, which had been justified on the glounds that it would provide for an orderly succession. The city council questionedwhy the position was neededin a relatively small unit. In the end it was approved.The problematic nature of the appointment was underscored when tlie deputy director, hired ostensibly for planning, retired after a year. The deputy director was then rehired as succession a part time senior planner for the BRSB as an annuitant, a part-time position where a retired employee is paid r,r'hile receivingretirement benefits. The Grand Jury questions r,r'hether there l^/asa need to add a deputy director position in an agency this size. And again we think the board and the city need to be more diligent in questioning the director's recommendations increasestaffsize. to In investigating salaryof the BRSB's the executive director,the GrandJury found that it is well above the salariesof department directors in much larger 6g 2oLl-2or2Alameda County Grand Jurv Final Reoort deparbments Berkeley in and other cities.The directoris one of the most highly compensated staff members the city.The directormakesa salaryof gr83,ooo in (excludingbenefits)in an organization (FIE) with 2o.g5full time equivalents and a budgetof $3.95million. In comparison, Berkeley's directorof PublicWorks makes$r8r,ooo (excludingbenefits)in an organization with 326 FTEs and a budgetof $9o million. BERKELEY MANAGERS' SAI.ARIES Agency BRSB Director Police Chief Public Works Director Directorof Planning Director Library Services Salary Annual Budget of $r83,ooo $2o3,68o $ r B r , o o o $r83,44o $4 million fi17s,47s $rzB million LL7 $sB million 296 $90 million $r z million 65 Employees 27 326 As shown in the chart below, the salary of the BRSBdirector is an inordinately high percent of the agency's budget. Berkeley Manager Salary as %o of gudget 5.@% t I i ' o.oo* -i ? ? ?.sot,.i' ' 3.@% -i I i 2.90* j-.' 2.tro% :.' r.t0.? -!' Berk- Rent. Stab. Bd- Dir. Police Chief Public Works Oir. D?r. Planning Dir. Librarv Serv?ces 7O 2orr-2or2 Alameda CounWGrand Jury Final Report The GrandJury heardtestimonythat the BRSBaskedthe city HR to conducta comparative position.Suchstudiesshould compensation studyfor the director's not simply comparedirectors'salaries a handful of other actit'erent control at agencies, must alsocompare salaries otherBerkeley directors. but the of city Similarlywe questionthe compensation benefitsfor board members. and They are paid $Sooa month plusbenefitsincludinghealthbenefits, which is excessive comparedwith other rent boards and local governmentcommissionsand committees.We find that the Berkeley department HR doesnot provideenough oversight personnel proeedures. ofthe BRSB Anothercomplaintrvasthat the proportionof attorneys staff r??as largein on too relation to the total staff size thus keepingBRSB expenditures higher than appropriate. While most city of Berkeley departments utilize the city attorney's officefor their legalneeds, BRSB several the has aftorneys staff. Now that the on Iegal rvorkloadhas decreased a result of CostaHawkins,the proportion of as attorneys should be reduced.We found that someattorneys were beingusedto dojobs not requiringlegaltraining.In additionto havinga staff supervisor, there is an "attorneyof the day" assigned the BRSB. The GrandJury learnedthe to current workload does not justify the number of lar,ryers, exacerbated the by justification that the attorneyof the day'sjob is to adviseother staff to BRSR's not givelegaladvice. Additionally, numberof hearings declined the has overthe years, causing GrandJury to question thereis a betteruseof publicfundsin the if this staff?ng situaticin.The Grand Jury revieweddocumentsprovided by the BRSBand heardtestimonythat several the positionsin the BRSBspendtime of doingwork for other city departments ratherthan doingwork for the BRSB. BRSBhasnot askedthe city of Berkeley's department performan audit to HR to determineappropriatestaffingleve?s. Without a formal position control audit, there is no effective oversight the relationship of between work requiredand the the raisingof fees. It appears the GrandJury that the BRSB to seeks reapthe to 71 2ott-2ol2 A?amedaCounty Grand Jury Final Report benefits of being in the civil service system while not appllring the cit?z'sru?"t when they determine it benefitsthem. The Grand Jury also heard that there was not an appealsprocess for personne? matters. We found that there is an appealsprocess. The executivedirector hears appeals and then if it is denied, the appeal goes the city's glievance board and then to the city manager who delegatesthe job to the HR director. Unionized employees'procedures vary by union and contract. Another complaint is that BRSB'Sboard is not exercisingsufficient oversight of the executivedirector. The Grand Jury did not assess complaints regarding the executive directo?'s managementstyle or whether he has created an atmosphere that discouragesquestioning. The board evaluatesthe executive director e\/ery three years including doing a 36o-degree evaluation asking many of the stakeholders to assesshis work. The responsesshowed substantial support for the executive director but also some concerns that he disconrages open expression of views. Providing effective oversight of an executive is the responsibility of a board particularly when the agency operates independently from traditional administrative control. The Grand Jury determines that the board is too deferential to the executivedirector and urges the board to improve its oversight. Evaluations should be done annually and the board should give more feedback to the director, urging him to more appropriately address personnelissues. Conclusion BRSB is a governmental entity with its own sourceof revenue - registration fees. The board is elected by Berkeiey residents and is generally pro tenant \^'ith little accountability to the landlords who fund the operationsof the board. Thus, the board has little to no incentive to control costs. In an era where most governmental entities must control costs, BRSB has been exempt from these pressures because it has a dedicated source of funds and is a self-sustaining 72 20u-2o12 Alameda Countv Grand Jurv Final Renort bureaucracy. Berkeleyvoters are the only ones u'ho can changethe direction of the BRSBand so far thev have not shown anv inclination to do that. While the BRSB does provide rent control that voters appear to want, the board is not providing strong enough oversight, not holding the agencyaccountable not scrutinizingpersonnelhiring, not questioningcompensation, not balancing both landlord and tenant interests, not trylng to constrain increases in registration fees. For example,the executivedirector makes an exorbitant salary that comprises nearly 5% of the entire budget of the agency. The Grand Jury finds this unacceptableand concludesthe board needsto reprioritize servicesand to reduce costs not only in its administration but in sen'ices to the citizens of Berkeley. The Berkeley Rent Stabilization Board's independencefrom the city of Berkeley contributes to its excesses. Too often, it operates without traditional ' administrative controls that could be provided by the city of Berkeley. RECOMMENDATIONS Recommendation tz-lo: The Berkeley Rent Stabilization Board must reduce the high rental unit registration fees. Recommendation Iz-tt: The Berkeley Rent Stabilization Board must allow landlords to pass through a Iarger proportion of the registration fee to tenants. Recommendat?ontz-tz: The Berkeley Rent Stabilization Board must ask the city of Berkeley Human Resources Department for a thorough position-control audit to evaluate the number of staff, the classificationsand workload. 73 2olt-2or2 Alameda County Grand Jury Final Report Recommendation tz-t3: The Berkeley Rent Stabilization Board must ask the city Human Resources deparlment to provide more comprehensive salary comparisons regularly and use them in setting salariesand benefits,including those of the executivedirector and the board members. Recommendationlz-t4: The BerkeleyRent Stabilization Board must conduct annual performance reviews of the executivedirector to provide more effectiveoversight. R.EQUIR,ED R-ESPONSES Berkeley Board RentStabilization 12-10through12-14 Recommendations 74