MINUTES OF THE
SENATE COMMITTEE ON JUDICIARY
Sixty-seventh Session
June 19, 1993
The Senate Committee on Judiciary was called to order by Chairman Mark A. James, at 1:30 p.m., on Saturday, June 19, 1993, in Room 224 of the Legislative Building, Carson City, Nevada. Exhibit A is the Meeting Agenda. Exhibit B is the Attendance Roster.
COMMITTEE MEMBERS PRESENT:
Senator Mark A. James, Chairman
Senator R. Hal Smith, Vice Chairman
Senator Lawrence E. Jacobsen
Senator Dina Titus
Senator Ernest E. Adler
COMMITTEE MEMBERS ABSENT:
Senator Mike McGinness (Excused)
Senator Raymond C. Shaffer (Excused)
GUEST LEGISLATORS PRESENT:
Assemblyman William A. Petrak, Clark County Assembly District No. 18
STAFF MEMBERS PRESENT:
Dennis Neilander, Senior Research Analyst
Sherry Nesbitt, Committee Secretary
OTHERS PRESENT:
Joe Guild, Representative, Nevada Mobilehome Park Owners
Association
Mark Brown, Lobbyist, Nevada Apartment Association
William Richards, Member of the Public
Chris Harris, President, Nevada Association of Realtors
May Thorpe, Owner, Hillside Mobile Home Village
Fabio Reginado, Owner, Oasis Mobile Estates
John Allen, Owner, Comstock Mobile Village
Bill Allen, Sr., Owner, Comstock Mobile Village
Former Senator Peter Etcheverria
Frank Cujak, Realtor, Reno, Nevada
Paul Havas, Mobile Home Park Co-Owner, Reno, Nevada
Joan Clements, Administrator, State of Nevada, Department of Commerce, Manufactured Housing Division
Senator James advised this hearing was a continuation of the hearing which began on Friday, June 18, 1993.
The hearing was reopened on Assembly Bill (A.B.) 187.
ASSEMBLY BILL 187: Limits increase in rent for mobile home lots in certain counties. (BDR 10-6)
Joe Guild, Representative, Nevada Mobilehome Park Owners Association (NMPOA) presented testimony in opposition to A.B. 187. He recalled Assemblyman Petrak stating this bill will correct injustices imposed upon seniors and young families with fixed incomes. He stated that he would show that the bill would do the opposite, because the bill will ultimately result in a cost to mobile home park dwellers which does not currently exist. He stated A.B. 187 is rent control, pure and simple, because in the bill the amount of rent which can be charged in a mobile home park is fixed statutorily. He said this is a government control of rent. Mr. Guild referred to Clark County Commissioner Schlesinger's remarks, stating Mr. Schlesinger's statistics were the same given to the Clark County Commission 1 year ago. Mr. Schlesinger stated he would accept Mr. Guild's statement that the Consumer Price Index (CPI) has been roughly 3 percent for the past couple of years. Therefore, he stated Mr. Schlesinger is saying that 63.8 percent of mobile home spaces in Clark County had a rent increase in excess of 3 percent. Mr. Guild stated it is very possible under Mr. Schlesinger's own statement that a rent could have been increased by .1 percent or 1 point over the CPI. He stated Mr. Schlesinger did not mention that in the three counties affected by A.B. 187, the average rent increase for the 4 years between 1989 and 1992 for all spaces was 4 percent. Mr. Guild used the same printout used by Mr. Schlesinger to point out that by Mr. Guild's calculations, 25 percent of the affected spaces that would come under A.B. 187 either had no rent increase in the years 1989 through 1992, or had one rent increase of $15.00 or less. Mr. Guild stated of 261 parks affected by A.B. 187, 62 parks fall in that category. He stated if the rent is $300 per month, and the CPI percentage is taken against that, the increase would have been less than that allowed under A.B. 187. The Cost Of Living Adjustment (COLA) formula has been roughly 3 percent over the last 5 years. He advised this means that people in 25 percent of the mobile home parks affected by the bill will get a greater rent increase, or one they have not received in the past 4 years, if this bill is passed.
Mr. Guild referred to Mr. McQuen's testimony, and agreed that in years of hyper-inflation, mobile home park dwellers could get a rent increase of 15 percent in a given year. Also, the park owner may not, in some years, be able to get any increase.
Mr. Guild referred to accounting testimony received. He referred to the statement that the Cal Nev Ari mobile home park received a 233 percent increase. Mr. Guild agreed this is correct, but that the park started in 1989 with a $90 per month rent. This increased in 1992 to $300 per month. He suggested this is not an unreasonable rent. Mr. Guild gave other examples of justified rent increases in mobile home parks.
Mr. Guild referred to Mr. Schlesinger's testimony that Mr. Guild had threatened the Clark County Commission with a lawsuit. Mr. Guild stated this never happened. He made part of the record at the Clark County Commission meeting, a part of a brief which he wrote. The brief concluded that the attorney general's opinion, giving the authority to the Clark County Commission to enter into this arena of rent control, was inaccurate. Mr. Guild stated he later published a law review article in the Nevada Bar Journal on that point. Mr. Guild referred to Mr. Schlesinger's statement that the legislature is the proper forum for this issue. Therefore, Mr. Guild assumes Mr. Schlesinger agrees with the conclusion in the article that the Clark County Commission does not have the authority, and therefore, Mr. Schlesinger will never again introduce an ordinance before the commission, if A.B. 187 fails.
Mr. Guild referred to the mention by Mr. Schlesinger and Ms. Demas of the Yee case, as being a United States Supreme Court case upholding rent control. Mr. Guild stated the Yee case did uphold the Escondido rent control ordinance on a very narrow legal question, leaving open the answer to the larger question. He advised the Yee court answered the question, "did the Escondido rent control ordinance amount to a physical invasion of the Escondido mobile home park owner's property." He stated the answer to this was no. He advised there is a whole line of supreme court cases in the area of physical invasion of property under the Fifth Amendment to the United States Constitution, under the Takings Clause, which the court relied upon to answer this question. He advised Justice Sandra Day O'Connor stated in her opinion, "we leave for another day, indeed we invite anybody to ask us this other question, 'does a rent control ordinance amount to a regulatory taking of private property in violation of the Fifth Amendment Takings Clause?'" Mr. Guild advised the Takings Clause states, ". . .nor shall private property be taken for public use without just compensation." Mr. Guild advised that, in a very narrow sense, the court upheld the rent control ordinance in Escondido, but left open the second question. He stated, therefore, to say the Supreme Court of the United States has authorized mobile home rent control in the Yee case is a bit disingenuous.
Mr. Guild referred to the Urban Law Institute article quoted by Mr. Schlesinger. He stated this institute is a very prestigious law institute, publishing a regular law review. He stated the institute did do an article recently in support of rent control. He advised, however, that other respected authorities have written on rent control, and have concluded that it is a bad idea. Mr. Guild stated rent control is and always has been a bad idea, and A.B. 187 is rent control.
Mr. Guild distributed to the committee a compilation of material presented by the Nevada Mobile Home Park Owners Association. A copy of this material is attached as Exhibit C. Mr. Guild made reference to, and discussed, the various articles in this presentation which state that rent control is a bad idea. Mr. Guild also referred to material included regarding costs of moving mobile homes. He pointed out, for example, that Morgan Driveaway, in March, 1993, would move a 24x60 mobile home for $2,850 to move within 50 miles of Las Vegas. Mr. Guild stated he is sure it could cost more, such as was previously testified, however, this example was given to show that it can be done for less.
Mr. Guild recalled that several people had testified previously regarding excess profits and profits taken out-of-state by owners of mobile home parks. He asked since when is making a profit in this country a bad thing. He stated this is why these mobile home parks are developed and this affordable housing opportunity is there. He gave the example that Hilton owns several hotels in the state of Nevada, and is not a Nevada corporation. Mr. Guild advised if mobile home parks did not exist, personal property taxes would not be collected. Also, the state would not be able to collect business taxes from the employment of the people working in the parks. Additionally, sales taxes are paid. He stated, therefore, it is an absolute falsity to say that no taxes are paid. He referred to previous testimony regarding a park owner who had realized a $440,000 profit from a mobile home park. He stated that person invested his hard earned money to build that mobile home park, and so what if it is making a profit. He advised the rent in that park is $271 per month for a single wide space, $290 for a double wide space. He stated the park had 4.1 percent in rent increases over the past 4 years. He stated this is not excessive, nor gouging. He disputed the fact that the owner made $440,000, however, if this is correct, it is the right of the park owner to do so. He stated that person is providing an affordable housing alternative for the people of Washoe County.
Mr. Guild wondered if the people supporting A.B. 187 realize that at least 62 mobile home park tenants are going to pay more for rent in 1993 if this bill passes. He stated that the tenants of the nineteen parks in the three affected counties who had zero rent increases in the past 4 years, will get a rent increase in 1993. Mr. Guild referred to section 6 of the bill. He stated that a landlord who wishes to make a capital improvement or recover the cost of a substantial repair, after submitting the application, will be assessed a fee of $750 plus $1, plus any extra money it will take to administer the capital improvement or substantial repair pass through request. He further advised that a cost of that improvement or repair is the application fee, and the cost of the independent contractor who would be hired to administer those provisions. These costs would also include the fees of the attorney retained, and the expert witnesses. Mr. Guild referred to page 3, line 45 through page 4 of the bill, and stated when the administrator approves the application, included in the notice of that is the amount of the cost of the capital improvement. He stated that he could make a credible argument that the cost of that capital improvement includes all of the things he just mentioned. Therefore, the tenants will pay for the park owner's capital improvement request. He stated his belief that this is a flaw in the bill which the tenants, if they fully understood, would want to kill the bill immediately.
Mr. Guild stated, in summation, he finds it remarkable that Governor Miller supports this bill, and that he does so after consultation with members of the legislature. Mr. Guild advised that no one in the housing industry was consulted by the Governor in deciding whether or not to take that position. He found this remarkable because rent control is such a major policy shift from the present status. Mr. Guild stated all the committee heard from the proponents of the bill was complaints. He stated what he has said is the truth. People are going to get hurt if A.B. 187 passes. He stated the legislature passed a bill in 1991 which truly attempts to solve the problem. This legislation gives assistance where it is needed, to the truly needy tenant. He stated his belief that the legislature needs to let that program work. If it is not broad enough, or the formula by which someone qualifies for rental assistance does not cover all the people it should, the legislature should broaden the program. He stated if A.B. 187 passes, people are going to be hurt, who do not deserve to be hurt, and people are going to receive a windfall who do not deserve to receive a windfall. He read a phone message received by the assembly majority leader, after the hearing on the rent control bill in March, 1993:
I just got a rent increase. When's the rent control bill going to pass? Don't call back, we're leaving on a cruise and won't be home.
Senator Titus referred Mr. Guild's statement regarding people being hurt by A.B. 187, because they are getting no rent increases currently, and will receive increases. She stated this seems to her to be painting a very dismal picture of park owners being greedy people who will do this whether they need it or not. She stated this confirms all of the suspicions of all the complaints which the committee has heard. She asked if this is the kind of people who are running mobile home parks, who will give an increase in the rent just because it is allowed.
Mr. Guild replied that if a person is running a business, and the only way to keep that business afloat is to raise the rent to the allowable limit every year, whether the person wants to or not, whether he or she wants to or not, that person will raise the rent. He reiterated that 62 owners have not raised the rent or have raised it less than $15 per month. He stated this proves to him that these people are not greedy. He again referred to the owner who was vilified for making a profit in his mobile home park, and who charges $290 per space for a double wide mobile home in a very nice part of Washoe County. He stated this is not rent gouging. He advised if the rent can only be raised to COLA, whether the owner wants to raise the rent or not, they will have to in order to survive.
Senator Titus stated she does not understand why would the owner have to do so, if he or she has not had to in the past. Mr. Guild stated he could only say that in order to survive as a business, if all a person is allowed to raise the rent is to COLA, an artificial market for rents is created. Therefore, the person is either playing in that artificial market, or not. He advised the 19 parks which did not raise the rent in the past 4 years are probably not at market price. If A.B. 187 passes, those owners would not have time for a 90-day notice for a rent increase. They would never be at whatever the market would bear for their properties, and therefore will have to raise the rent.
Senator Titus stated neither she nor Mr. Guild are economists, and therefore discussion regarding the market was not impressive. She stated the park owners have been in the market, competing with other parks and did not have to raise their rents. She asked why then, if A.B. 187 goes into effect, these owners will suddenly have to raise their rents to be competitive.
Mr. Guild replied the only way he could explain is the way he did previously. He suggested there is a mobile home park owner in the audience who could provide the exact answer to the question from an operator's point of view.
Senator Titus referred to the fund for low income mobile home tenants, and recalled the fund's history. She advised the fund was concocted as a scheme when the original commission bill for rent justification bill failed. She stated the mobile home park owners were opposed to supporting even the small concession of the fund.
Mr. Guild stated there were three bills proposed by the Mobile Home Park Owners Association, all of which he wrote. He advised one bill was a catch-all for amendments to NRS Chapter 118b, which the association believed would make this chapter more workable from a management standpoint. He stated the second bill was the trust fund, and the third was a manager education bill. He advised for years the biggest complaint he heard from tenants was that managers are not educated, and do not understand tenant problems. The association
agreed to make mandatory manager education. Mr. Guild advised he has taught two seminars under that program.
Senator Titus suggested these seminars would have been biased, with Mr. Guild as the teacher.
Mr. Guild replied he is certified by the State of Nevada Manufactured Housing Division to teach that course. He advised the industry came to the legislature with a pro-active program to help tenants address one of their complaints. He referred to the bill for the trust fund. He advised this was a separate bill, which was amended into the rent control bill. He stated he never backed away from his support of that bill. He advised he supports the trust fund because he wants to help the person who really needs the help. He stated this is the way to solve this problem; not to punish the good operators, nor to give a windfall to the tenants who do not need it, but to put it in the hands of the person who needs the assistance.
Senator Adler stated one problem is determining a reasonable rate of return on the investment of a mobile home park. He advised in certain instances, the CPI as an increase would be a substantial return on investment to some park owners. It may not be substantial for others because of the type of financing. Senator Adler said he does not know whether the bill could be adjusted for this eventuality.
Mr. Guild recalled that in 1991 the CPI was used as the adjuster. Now, the COLA under social security benefits is being considered. He stated the two are similar and sometimes track. He stated the COLA is a congressional authorization and the CPI is simply an econometric number which is always present.
Senator Adler referred to the 62 park owners who might raise the rents. He stated his belief that not all 62 would do this, because of their financing situation. If the park is owned free and clear, the owner would be unlikely to raise the rent. Mr. Guild disagreed. He stated anyone in a business, which is what a mobile home park ownership is, is going to have to raise the rent. Senator Adler indicated it would depend on the rate of return.
Senator Jacobsen referred to Mr. Guild's statement that the cost to move a mobile home is between $2,000 to $3,000. He asked what the cost would be for a triple wide which has to be taken apart.
Mr. Guild replied that there will be cases in which the moving would cost more. He referred to a study done by the University of California at Los Angeles which concluded that 98 percent of all mobile homes, which move into mobile home parks in California, never move. Therefore, he stated this is a red herring issue. The tenants say they are captive, but in effect they are not, because they can sell the home. Making a bad investment, living in a bad park, or letting the mobile home run down, is within the control of the tenant. Mr. Guild stated this is a very fluid population. He advised a tenant can sell their investment and realize some rate of return. However, they must realize this is a piece of personal property, and will deteriorate in value from the day it is purchased. He stated he is not saying there are not abuses in this industry. He reiterated that A.B. 187 will create more problems than it will solve. He again stated his belief that mechanisms are in place to solve the problems raised in this hearing.
Senator Jacobsen stated supply and demand usually create their own level. He asked if Mr. Guild would indicate if there would be more or less spaces available if A.B. 187 is passed. Mr. Guild answered he could almost guarantee that if this bill is passed, there will never another mobile home park built in Nevada. Senator Jacobsen asked how many spaces are available at this time, and Mr. Guild set forth his belief that the Clark County vacancy rate is around 9 percent. He attributed this to the fluidity of the tenant population.
Senator Jacobsen stated his concern regarding the representative from the American Association of Retired Persons (AARP) testifying that 165,000 members support A.B. 187. He wondered where those people draw their judgment. Mr. Guild said AARP has published a paper on rent control, and the association supports the concept. He stated, therefore, it is an association position. He stated his belief that he could sit in a room with a member of that organization and convince that person that A.B. 187 would harm rather than help their membership.
Senator Jacobsen asked the number of available spaces in small and large parks. Mr. Guild stated it varied and said to his personal knowledge, the parks range from a very plush park in a very nice part of Las Vegas to a run-down park in not a very nice part of Washoe County. He advised the vacancy rates are different in both parks.
Senator Jacobsen discussed a contact from a constituent who is the owner of a mobile home park, and stated to him her belief that government should not be involved in this issue. He related other examples of conflicting ideas from other constituents. He also asked if Mr. Guild knew the amount of money which has gone into the assistance fund established for tenants.
Mr. Guild stated the administrator of the State of Nevada Manufactured Housing Division was present, and would probably have an up-to-date figure. He referred to previous testimony that people taking advantage of that program are worried that the fund will be depleted after 6 months. Mr. Guild advised by the statute passed, each park owner contributes $12 per space per year until the fund reaches $1 million. At that point, the $12 assessment stops. If the fund goes below $750,000, the assessment again goes into effect. He advised the point of the formula is to constantly keep enough money in the fund for assistance to be available.
Senator Jacobsen asked if the majority of the parks furnish utilities. Mr. Guild answered there are some master-metered parks, and others with individual meters for all utilities.
Mark Brown, Lobbyist, Nevada Apartment Association, presented testimony in opposition to A.B. 187. He stated he realizes that the apartment industry is not directly affected by this bill. He stated the association appreciates the assurances from the leadership in the assembly, the sponsor of the bill, Senator Titus, and Scott Craigie in the Governor's Office, that they have no intention of this spreading into the apartment industry. However, he stated legislators move on, leadership and governors change. Therefore, the industry is very concerned, as they have been since 1987, regarding the prospect of rent control. He stated although there is no direct impact, there is a severe indirect impact by the mere introduction of this legislation. He advised the apartment industry in southern Nevada is in a crisis situation. The multi-family housing industry comprises approximately 28 percent of the housing market. Currently, there is approximately 100,000 apartments. He advised that, during the last few years, a severe downturn in new construction starts has occurred. This is a direct result of a lack of new startup financing. He advised in 1988 approximately 18,000 new apartments were permitted. In 1991 that number was 3,900. He stated in 1992, 209 units were issued in the first quarter, no permits were issued in the second and third quarter, and eight permits were issued in the fourth quarter for duplex units. He stated the association study shows that permits for approximately 400 units have been issued in 1993. He advised a study was funded in Clark County regarding the reasons financiers were moving out of the market. The association polled approximately 30 financial institutions, private investors and limited partnerships. They stated the number one reason for the few new stars is that the market is saturated with apartment units. The association believes this is faulty, as the current occupancy rates are running at about 90 percent. Taking into account that there are three new properties expected in the very near future, the expectation is 98 or 99 percent occupancy. He advised the second reason given by the financial institutions was the prospects of a gross business tax. This tax did not materialize. However there is a business tax which the association does not feel is substantial enough to deter anyone from entering the marketplace. He advised the third reason was the prospect of such initiatives as rent control and impact fees. He referred to Mr. Guild's statement that there will be no new mobile home parks built if A.B. 187 passes. Mr. Brown advised he shares that opinion as it relates to apartments. If A.B. 187 goes into effect, the association feels that the small upturn which appears to be beginning, will come to a halt. He referred to AARP supporting this measure. He stated he doubted that every member of AARP has first-hand knowledge. He advised the Mobilehome Park Owners Association conducted a poll in 1992, prior to the Clark County Commission hearing. He stated that poll showed that 61 percent of Clark County residents oppose rent control. He stated his belief that this counters the AARP numbers. In conclusion, he stated that since 1989, when this proposal was first proposed, nothing has happened in terms of rent control. He offered to confer with the tenants, review the rental assistance program, and find out a way to make it work. He advised the park owners have been very active in supporting that program at considerable cost. He advised Mr. Guild made an offer to the Clark County Commission and the membership of the park owners association during late 1992. The offer was made to move the startup date for the program to January of 1993, if it was thought this would provide additional assistance. Mr. Brown stated to his knowledge no one ever contacted Mr. Guild to make that happen. Mr. Brown suggested the assistance program be reviewed and worked with to provide the help needed by tenants.
William Richards, Member of the Public, provided testimony in opposition to A.B. 187. Mr. Richards stated he is a mobile home park owner, and has owned parks with 28, 68 and 200 units. He stated he is a hands-on owner, because he understands the construction of mobile homes. He stated he also understands the people living in mobile homes, because for the most part, he comes from the same generation and has had the same problems in life. He stated he does not understand the animosity between mobile home park owners and tenants. Mr. Richards read from the California mobilehome residency law, California Civil Code, Chapter 2.5:
Mobilehome residency law, effective January 1, 1990. Section 798.7, New Construction. Any newly constructed spaces initially held out for rent after January 1, 1990.
Article 4.5, Rent Control. Section 798.45. Notwithstanding section 798.17, new construction as defined in section 798.7, shall be exempt from any ordinance, rule, regulation or initiative measure adopted by any city, county, which establishes a maximum amount that a landlord may charge a tenant for rent.
Mr. Lynam then read from Nevada Legislative Commission Bulletin No. 91.5:
Introduction. In recent years, there has been a growing concern about the diminishing availability of mobile home park spaces for reasonable rents. The 1979 study estimated that there were 550 mobile home parks in Nevada, almost 100 more than there are today. Thus, although the state's population has doubled the number of rental spaces has declined.
Mr. Lynam stated the state of California concluded the reason for a decline in rental spaces was that no one would invest in a park as long as rent control was a possibility. He advised the Nevada Legislative Commission proposed 16 suggestions involving all facets of relationships between mobile home park owners and tenants. He stated the following two suggestions by the commission present the entire solution to the problem:
1. Adopt a resolution urging local governments to revise zoning restrictions and building codes to encourage the development of affordable mobile home parks for persons of low income.
2. Adopt a resolution urging the United States Congress to restore the commercial category for tax exempt, small issue, industrial development bonds to encourage the development of mobile home parks.
Mr. Richards recalled previous testimony stating that these ideas have been tried, and have failed. He read excepts from the book Not In My Backyard. He stated this book deals with removing barriers to affordable housing, and quoted:
Housing affordability as a state goal. All states should undertake an ongoing action plan at both the state and local levels directed at barrier removal. As part of such a strategy states should thoroughly review their existing zoning and land planning systems and remove all institutional barriers to affordability. These include limitations or prohibitions constraining the use of various housing affordability options such as accessory apartments, duplexes, manufactured housing, and so forth. The states should also continue their ongoing efforts directed at building code reform as well as consolidate and streamline their own regulatory responsibilities.
Foremost among state responsibilities is recognizing affordable housing as a state goal, public purpose for which the police power is delegated to localities. As such the state has the responsibility to ensure that all localities, as well as the state itself, have comprehensive programs of barrier removal and zoning reform.
Mr. Richards advised there are park owners who are guilty of rent gouging. However, it is unfair to penalize the reasonable park owners by having an across the board allowable rent increase based on COLA. This would give the owner charging more to begin with much more than the reasonable owner. He said he disagrees with using COLA as the basis for increasing park rent. He stated every other contract uses the CPI.
Mr. Richards referred to page 2, section 6, lines 40-48 of A.B. 187. He summarized this section as saying the park owner will pay 100 percent of all costs emanating from the review of park owners' applications.
Mr. Richards concluded by asking if every mobile park in Nevada had a 30 percent vacancy factor, would not every owner be attempting to steal every tenant he or she could from other parks. He stated the owners would never be able to raise the rents.
Senator James advised that Keith Lynam could not be present to testify in person, and requested that his written testimony be made a part of the record. Mr. Lynam's testimony is attached as Exhibit D.
Chris Harris, President, Nevada Association of Realtors, provided testimony in opposition to A.B. 187. Mr. Harris's verbatim testimony is attached as Exhibit E.
May Thorpe, Owner, Hillside Mobile Home Village, provided testimony in opposition to A.B. 187. A copy of Ms. Thorpe's verbatim testimony is attached as Exhibit F.
Senator Adler stated he understands the bill to state that the park owner would be entitled to separate the costs of utilities from the rent. He asked if he was reading this correctly. Ms. Thorpe stated the owner would probably be able to reduce the rent by the utility costs, and bill separately.
Senator Adler read from the bill:
The term [rent] does not include any amount paid for water, gas, electricity or any other utility service which is separately metered and billed to the tenant.
Ms. Thorpe stated her park has a master meter. Therefore, if A.B. 187 passes, she indicated, she would not be able to increase the amount of rent. Senator Adler asked if the water, gas and electricity are separately metered. Ms. Thorpe answered both water and sewer are master metered, and the gas and electricity are separate. She added that an increase in water service is expected, and a sanitation increase was recently incurred.
Senator Titus asked if an amendment was proposed in the assembly to provide for parks which are master metered. Ms. Thorpe replied she had not heard anything about this.
Senator Adler stated this is a problem, because if a utility has an increased energy cost, for example, and passes it on to the consumer,
the park owner has no control. Additionally, the owner would not be able to pass that cost to the tenant.
Senator Jacobsen asked what Ms. Thorpe's tax bill was in 1992, and was she taxed for the amount of property or the amount of spaces. Ms. Thorpe replied she is taxed on the property as a whole. She advised her tax bill in 1992 was approximately $3500.
Fabio Reginado, Owner, Oasis Mobile Estates, provided testimony in opposition to A.B. 187. Mr. Reginado advised that, even though rent control has not been imposed in the last 10 years, park owners have still paid a price. He stated each legislative session has produced new laws, restrictions, prohibited charges, penalties, and bureaucratic fees. He stated park owners must stop being penalized if a 3 percent growth rate is to be maintained. He advised if the threat of rent control continues every 2 years, developers and investors will cease activities. He stated the rent subsidy for low income families has just been implemented, and given a chance this should alleviate most mobile home rental problems. He suggested that, rather than devoting so much energy to attempts at rent control, the proponents of bills such as A.B. 187 should turn their energies toward projects such as he just mentioned. Mr. Reginado stated he does raise rent each year. He does this to avoid getting into a position where his costs go up 8 to 10 percent and he must institute that percentage of increase in 1 year to cover expenses. Therefore, if A.B. 187 passes, he will take the 3 percent increase. He advised over the 17 years he has owned his park, his rents have gone over the CPI. This is because of legislation and rising utilities. He advised he has recently installed a natural gas system, through Sierra Pacific Power Company.
Senator Adler asked if each tenant will be individually metered. Mr. Reginado replied this is the case. He stated years ago, he would buy the gas in bulk and charge the tenants, making a small profit. This was stopped 4 or 5 years ago, as it was prohibited by law, and leased the whole system to a private gas company. That company has continued to raise prices to a point that the tenants are being gouged in that way. Mr. Reginado, in order to protect the tenants, canceled that contract and turned the entire system over the Sierra Pacific Power Company.
Senator Adler asked for and received confirmation that this installation will be natural gas, and that the power company will change all fixtures on stoves and so forth, free of charge. He then asked if the water and electricity is individually metered. Mr. Reginado replied that he has wells, and that is included in the rent. He replied that electricity is individually metered. Senator Adler asked a question regarding garbage pick-up. Mr. Reginado replied that this is included in the rent. He advised in 1992, his leach field failed, county ordinances had changed and he was prohibited from expanding the field. Therefore, he said, he had to hook up to the sewer, at a cost of $2500 per space, plus the construction and pumping the septic tanks. He advised the total cost was $250,000. He stated he would not have had time to go to a board for approval of that capital improvement, and he had no choice but to do it right away. Mr. Reginado indicated the project was completed in 21 days, and that year he passed a $24 per space rental increase.
Senator Adler stated this was a concern in the bill. Capital improvements are included, but there does not seem to be a distinction between basic utilities and energy cost pass-throughs. Mr. Reginado agreed, and stated all of his major expenses have been emergencies.
Senator Adler asked if Mr. Reginado took away his expenditures on utilities, what he would estimate his average rental increases to have been. Mr. Reginado replied that over the past 17 years it has probably been 4 to 5 percent.
Senator Jacobsen asked if Mr. Reginado performs any service work in the park. Mr. Reginado stated he does not do this in the homes. Everything outside of the homes is the park's responsibility.
Senator Jacobsen asked if the tenants have lawns or small gardens.
Mr. Reginado replied that they do, and this accounts for most of the water usage.
John Allen, Owner, Comstock Mobile Village in Carson City, provided testimony in opposition to A.B. 187. Mr. Allen advised he deals almost exclusively with senior citizens coming to Nevada for retirement. He advised that in 1978 he managed a rent controlled apartment complex in New York City, and is intimately familiar with the consequences of rent control, as a middle man between an owner and a resident. He stated Comstock Mobile Village is a 263 space, 31 acre mobile home park. He advised there is one water meter, from the city. The sewer and garbage removal is not metered. He stated a $30 million school bond measure recently passed in Carson City, and property taxes went up 50 percent. He stated there is nothing in A.B. 187 which addresses that type of expense increase. He advised that in the past 10 years he has often heard the argument that mobile home park residency is a partnership situation, and the tenants need some protection from their partner, the owner. He stated a more recent argument regarding lost resale values if rents get too high has also been made. He stated perhaps in rare cases, this could happen, but asked if A.B. 187 can provide the protection these people desire. He stated seniors leaving California and coming to Nevada buy mobile homes and do not have to worry about rent. They worry about taxes and recent water increases. He advised many people are trying their best to get out of California where rent controls have been instituted. He stated he has received reports of substantial decreases in resale values in those areas. Conditions are oppressive, and the parks are in financial trouble, and the tenants are having to absorb considerable losses in their retirement years just to get away to a more pleasant environment in Nevada. He stated the parks with rent control are going downhill, as are the values of the homes in those parks. He stated he views the makeup of mobile home owners at his park as typical in Nevada. He advised 90 percent of the homes are free and clear, and resales run between $30,000 and $70,000. He advised A.B. 187 will destroy the assets of these senior citizens, and the tenants may realize a few dollars in monthly rent savings, but will pay for it many times over when it becomes necessary to sell the home. He gave examples of the sales of mobile homes in his park. He advised that there are obvious advantages to mobile home park living and that rent increases are low on the list of considerations of tenants. He listed the advantages to the tenants. He stated the rent subsidy program which will become effective July 1, 1993, is an outstanding program. He gave examples of tenants in his park who will realize savings through this program. He stated unlike rent control, which spreads a small benefit across the total economic spectrum of senior citizens, the rent subsidy program provides benefits where needed. He questioned where the funding for A.B. 187 will be derived. He referred to the sections regarding fees for improvements and repairs, but questioned the administrative costs of controlling this program at the Manufactured Housing Division. He asked who will make up the shortfall.
Senator Jacobsen asked if all of the tenants share in the availability of the park's facilities. Mr. Allen replied all facilities are included in the rent, with no restrictions. Senator Jacobsen asked if Mr. Allen has homeowners' meetings for notification of increases in utilities. Mr. Allen stated this has occurred in the past, and the meetings were beneficial.
Senator Adler asked Mr. Allen to describe the types of increases that are unpredictable and Mr. Allen replied water, sewer, and garbage removal. He advised the park has gas and electric meters. Senator Adler then asked if insurance costs are predictable. Mr. Allen answered there have been huge insurance increases over the past few years, but they have recently come back down. Mr. Allen advised the other costs which are unpredictable are disasters such as water main breakage.
Bill Allen, Sr., Owner, Comstock Mobile Home Village, provided testimony in opposition to A.B. 187. He stated he is the sole owner and operator of the park he described as "the nicest mobile home park in northern Nevada, bar none." Mr. Allen said 99 percent of the residents of the park agree that rental of a single-wide space for $225, and $240 to $260 for a double-wide space "is reasonable and very affordable." He said the amenities include a large recreational hall, community kitchen, heated pool, hot tubs, sauna baths, shuffleboard courts, barbecue area, laundry room and recreational vehicle storage. Mr. Allen stated he "firmly resents" some implications made by a resident of the park that he is a "rent gouging, greedy operator." Mr. Allen reviewed his personal background and experience regarding ownership of mobile home parks.
Senator Jacobsen asked Mr. Allen how many children reside in the Comstock Mobile Home Village and Mr. Allen answered, "none," and added over 80 percent of the persons in the park are senior citizens. He said that fact qualifies the park as a "senior park." Mr. Allen stated he did not believe a mobile home park was a good place to raise children and said if there were children in the park, many of the senior citizens would leave.
Senator James temporarily interrupted the hearing on A.B. 187 in order to address the matter of the suspension of Senate Standing Rule 92.
SENATOR TITUS MOVED TO SUSPEND SENATE STANDING RULE 92.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR SHAFFER AND SENATOR MCGINNESS WERE ABSENT FOR THE VOTE.)
* * * * *
The chairman returned to the hearing on A.B. 187.
The next to testify was former Senator Peter Etcheverria. Mr. Etcheverria stated he was also the Chief Bill Drafter for the Nevada State Assembly in 1949 and 1951. Former Senator Etcheverria said he was a senator from Washoe County "in the days when each county had one senator." He referred to section 3 of the bill, which refers to rent, and said it "had a loophole big enough to drive a mule through." Mr. Etcheverria quoted:
Rent means a consideration, including money, benefits, gratuities and deposits demanded or paid for the use of a mobile home lot. The term does not include any amount paid for the use of the mobile home.
Mr. Etcheverria referred to earlier discussions regarding people who want to sell their mobile home or move it, and the costs of such move become a problem. He stated:
In those situations I submit that each park owner can talk to the owner of the mobile home and say, 'It costs $8,000 to move this home...if you give me $6,000 deduction from the price of the mobile home I will buy it.' When he sets it up in the park and owns it, the application of this law is done. The law doesn't apply anymore because the term 'rent' does not include the use of the mobile home. He will be governed by the use of the lot by this law, but he won't be governed by the use of the mobile...and he is going to run rampant...."
Mr. Etcheverria also pointed out the law would only apply to counties with a population of more than 35,000, which involves only three counties in Nevada. He stated he believes the act to be "a Clark County problem." Mr. Etcheverria then referred to testimony by Clark County Commissioner Don Schlesinger, during the hearing on A.B. 187 on June 18, 1993, and stated:
When Commissioner Schlesinger was here...he didn't tell you that they had a big fight in Clark County. When Clark County tried to enact such an act it failed. They did not get their rent control bill through. Commissioner Schlesinger was here yesterday with an immense amount of material, all of which had been presented to the Clark County Commissioners...they voted down mobile home [rent control]....I submit this bill has already been tried before the people it most directly affects...Clark County ...and it has failed in its own bailiwick.
Mr. Etcheverria said A.B. 187 should not be passed by the legislature at this time. He stated, "Rent control is a bad philosophy and has never worked with any success anywhere it has ever been tried." Mr. Etcheverria said he and his wife have owned Lucky Lane Mobile Home Park in Reno, Nevada, for 25 years. He said the rent has only been increased in the park 4.1 percent over a 4-year period. Mr. Etcheverria said the increase was necessary because of an increase in expenses. He added none of the tenants have complained about the increase.
Mr. Etcheverria referred to the section of the bill dealing with a $750 application fee required to request a rental increase and stated:
$750 plus $1 for each lot in the mobile home park is not going to pay any part of any procedure...the law now is so complicated and diverse, that if someone files an application for increase in rent...that fee doesn't even begin to pay the expenses. When the administrator takes that money in and sends out the notices...and hires an independent investigator...how long do you think $750 is going to last?
Mr. Etcheverria stated if the landlord prevails and gets his rent increase, "that section is baloney because our law is clear that costs go to the prevailing party and are paid by the losing party." He said the legal costs surrounding the administrative process, including hearings, "can easily go to $25,000." Mr. Etcheverria indicated the State of Nevada would end up paying the costs because it has instituted the action and has instituted the law that makes it possible. He said the fiscal note attached to A.B. 187 does not tell the amount of exposure financially which the state will incur.
Mr. Etcheverria said in 1991 the legislature adopted a resolution which urged local governments to revise zoning restrictions and building codes to encourage the development of affordable mobile home parks for persons of low income. He said that was not done and should be and added, "You should do this now instead of fiddling around with this bill." He continued:
A.B. 187 is a bad bill...it is not an enforceable bill. It will create more problems than it solves. It does not represent to the people of the State of Nevada what you are doing because it eliminates the fiscal responsibility....
Mr. Etcheverria suggested the adoption of a resolution recommending there be a study on the availability of additional spaces, together with methods by which parks can be created, including zoning restrictions. He said rent control is a "socialistic doctrine, not a democratic doctrine." Mr. Etcheverria said the spirit of free enterprise and competition should be adopted.
Mr. Etcheverria referred to Scott Craigie's testimony on June 18th on behalf of Governor Bob Miller. Mr. Etcheverria said based on the fact there are 381 mobile home park owners and 40,000 tenants, the implication was clear:
40,000 votes against 381 votes. If you were a governor in trouble and coming up for election 2 years from now, where would you send your message? I suggest Scott Craigie's testimony yesterday afternoon was clear as a bell to me... it was strictly a political move.
Mr. Etcheverria thanked the committee for the time they have expended in hearing A.B. 187.
The next to testify was Frank Cujak (spelling unknown; testifier did not sign the attendance roster). Mr. Cujak identified himself as a realtor. He said he is opposed to rent control and said it did not work well in the real estate profession. Mr. Cujak indicated earlier testimony had portrayed landlords as "black-hearted, rent-gouging pirates." He said he did not believe that was a fair assessment of the "overall community of landlords." Mr. Cujak said rent control is not a democratic process, but is a "temporary patch for a small portion of the population." He said landlords have "chosen to pursue their American dream so they could realize in their retirement years the same things the tenants have...security." Mr. Cujak continued:
Mobile home parks are the only residential income properties that are being asked to subsidize a portion of the population, independently...as opposed to the government or the overall tax-paying population. Owners of parks should not be penalized or taxed for the benefit of another segment of the population by arbitrarily being deprived of rights of ownership paid for by their hard work and diligence.
Mr. Cujak said he believes a bureaucratic agency is not qualified to "determine a fair return." He asked, "Is this a return on initial investment dollars...a return on appraised value...appraisals based on what?"
Mr. Cujak said if the "out-of-state owners are the culprits" law could be legislated regarding geographic ownership, but did not advocate that position. He referred to Assemblyman William Petrak's testimony on A.B. 187 during the hearing on June 18, 1993, at which time he stated, "This bill would be sending a message, if passed, to other mobile home park owners." Mr. Cujak declared, "I believe it would not only target other mobile home park owners...this bill would target the apartment owners...tenants, insurance companies, underwriters and lenders." He concluded:
Unfair taxation in the form of subsidy to tenants by a small group of private citizens, rather than a government entity, is an unfair way to tax a small group of people...I think the inflation of real property values should not be the spoils of those that did not participate in the work, the risk and the profits and losses...including loss of family time, loss of sleep and loss of money.
Mr. Cujak referred to an earlier question posed by Senator Titus involving the reasons landlords use an annual adjustment factor (AA). He said an AA under rent control would be necessitated because it creates an artificial cap on rent and prevents ways to bring cash flow to the market for purpose of sale, income or borrowing. He said the AA would not allow the owners to bring rents current to what would be considered market value.
Mr. Cujak stated:
When threatened with the enforcement of rent control, I immediately took note and started bringing my rents up to current market value...I wouldn't want to be faced with a lower than market rent value and have a rent cap imposed upon me at that time. At any time after that, I would be sure to raise my rents annually as the cap would allow.
Mr. Cujak concluded by saying he believes zoning is important to the development of mobile home parks, since there are "developers chomping at the bit to build mobile home parks, which would allow affordable housing to be built for seniors." He said it was the most viable way to build affordable housing without creating high density.
The last person to testify was Paul Havas, a co-owner of a mobile home park in Reno, Nevada. Mr. Havas said there are a lot of problems with rent control and posed the following question, "How do you assess and ascertain rate of return?" He said he believes there would be problems in the future in the realm of deferred maintenance. Mr. Havas added, "If law is going to be difficult to interpret...and if you cannot conduct your business in an appropriate hands-on manner, a few things may slip through the cracks." He said the rental assistance program which is going to be created should be successful and will take care of "the dysfunctional aspects of mobile home park living, but will preserve the integrity of the free enterprise system." Mr. Havas said counties are in a better position to ascertain zoning problems which exist in their area than the state. He concluded:
There has to be something in terms of public policy...which would permit the legislators to go on record with a resolution to have counties provide responsibility for something called rent control...or rent justification. The State of Nevada should not encourage legislation that will facilitate more problems, when the intention is for the elimination of problems.
Senator James indicated there would be no more hearings, nor would additional testimony be taken on A.B. 187. He then opened the hearing on Assembly Bill (A.B.) 161 and Assembly Bill 334.
ASSEMBLY BILL 161: Prohibits, under certain circumstances, disclosure of information obtained pursuant to investigation of complaint alleging violation of provisions governing mobile home parks.
ASSEMBLY BILL 334: Prohibits harassment of tenant of mobile home park by landlord.
The first to testify on A.B. 161 was Joan Clements, Administrator, State of Nevada, Department of Commerce, Manufactured Housing Division. Ms. Clements provided a written statement, which is set forth herein as Exhibit G.
The next to speak was Joe Guild, Nevada Mobile Home Park Owners Association. He expressed support for both A.B. 161 and A.B. 334.
Ms. Clements also provided a prepared statement regarding A.B . 334, attached hereto as Exhibit H.
Senator James closed the hearing on A.B. 161 and A.B. 334.
The chairman indicated the committee had to discuss whether to concur with the assembly amendment to Senate Bill (S.B.) 10.
SENATE BILL 10: Revises procedure for evaluation of certain persons convicted of driving under influence of alcohol or controlled substances to determine if such persons can be assigned to program for treatment.
Dennis Neilander, Senior Research Analyst, explained the bill, which involves the "Section 305 Program" and how persons convicted of driving under the influence (DUI) are evaluated to determine eligibility to participate in the rehabilitation program. He said
the original legislation would have provided that the Department of Prisons would do the evaluation, rather than the court. Mr. Neilander said the assembly chose to retain an amendment which would allow psychologists to conduct the evaluation, but replaced the language requiring the court to order such evaluation. He also said the amendment states the court would make the evaluation part of the presentence report.
Senator Adler said that "logistically does not work," because an inmate is evaluated by the psychologists after he arrives at the prison. He asked, "How does he get from the court to the prison before he has been sentenced to prison?" Mr. Neilander said the court is required to order the evaluation before sentencing, so it should be part of a presentence report. Following further discussion regarding the amendment and the logistics involved, the following motion was made:
SENATOR SMITH MOVED NOT TO CONCUR WITH THE ASSEMBLY AMENDMENT TO S.B. 10.
SENATOR JACOBSEN SECONDED THE MOTION.
THE MOTION CARRIED. (SENATOR SHAFFER, SENATOR TITUS AND SENATOR MCGINNESS WERE ABSENT FOR THE VOTE.)
* * * * *
There was no further business to come before the committee and the meeting was adjourned.
RESPECTFULLY SUBMITTED:
Sherry Nesbitt,
Committee Secretary
APPROVED BY:
Senator Mark A. James, Chairman
DATE:
??
Senate Committee on Judiciary
June 19, 1993
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