Yesterday's News: City Council Gives OK's Condo Conversion Project

KEYT/Despite objections from residents, a mobile home park in Goleta can go ahead with a condominium conversion project.

Owner of the Rancho Mobile Home Park, Dan Guggenheim has prevailed in two lawsuits over the City of Goleta and on Tuesday the city council voted 4-1 in favor of the project.

Park residents have the option to purchase the parcels of land that their mobile homes occupy.

However the majority of residents say they will not be able to afford them giving Guggenheim a majority vote in the prospective lot owner's association.

Councilman Michael T. Bennett cast the lone nay vote.

Residents will be forced out but some will see their rents rise.

Mobile Home Owners Pay Landlord’s Court Costs

SB Independent
By Martha Sadler
July 19, 2007

Battle was joined in the Goleta City Council chambers over who must pay the landlord’s court costs in a rent-controlled park. When the smoke cleared, residents of the Rancho Mobile Estates each received a bill for $803.72 to cover the $94,000 that landlord Daniel Guggenheim spent fighting a suit in which a tenant alleged pain and suffering from an eviction attempt. The residents, who own and maintain their mobile homes but not the land on which the homes sit, objected that they should not have to pay the costs because the lawsuit had nothing to do with them. Goleta’s mobile home rent control ordinance allows the landowner to raise rents only to reflect actual increases in the Consumer Price Index and operating costs, plus capital expenses.

In a unanimous vote, the council affirmed Superior Court Judge Thomas Anderle’s ruling that lawyers’ fees and other legal expenses were a normal operating cost of doing business as a mobile home park landlord. Residents may pay the $803.79 up front or pay $20.38 monthly for the next five years, for a total of $120,000 including 10 percent interest.

At the meeting, Guggenheim’s attorney, Mark Alpert, aggressively tried to convince the council that the rent increase due to court costs should be permanent and not sunsetted once the costs are paid. “We are happy to file a lawsuit in Santa Barbara Superior Court and tell Judge Anderle just what I’m telling you,” he warned. “I want to tell you about the consequences of the decision you are making tonight,” Alpert continued. “Every year you’re going to have a fight and every year you are going to have litigation.” (Alpert also petitioned the court to pass on to tenants the cost of Guggenheim’s unsuccessful federal lawsuit, which challenged the constitutionality of the city’s mobile home rent control ordinance. Anderle rejected that request.)

Clarke Fairbrother — a principal with Newport Pacific Capital Company, Inc., which manages Rancho — claimed rent control resulted in a collective $500,000 annual windfall for Guggenheim’s tenants last year and contended that money should have been Guggenheim’s. Average rent for a one-bedroom apartment in Goleta is $1,100, Fairbrother said, yet Guggenheim currently receives an average of only $365 from each tenant monthly, plus payments for capital improvements and utilities. Counting court costs as an operating expense “brings rents up to a level a little more fair to the property owner,” Fairbrother said.

Adding court costs to residents’ rent is only one strategy that Guggenheim and his representatives are pursuing in order to, as they see it, reclaim the equity that is rightfully his. In early June, Guggenheim applied to the city to subdivide the park into privately owned plots, with each current resident getting first dibs on buying the space they now rent. Fairbrother said Guggenheim will fight the city’s resolution to first determine via Environmental Impact Report the effect on the city’s affordable housing supply of subdividing mobile home parks. However, Guggenheim’s team has taken no such action yet.

Meanwhile, Newport Pacific has been trying to chip away at the solid wall of resistance to the subdivision plan they have encountered from the homeowners’ association. The management company has set up an “executive board” of six residents willing to explore with Newport Pacific the option of buying their own land, and Fairbrother claimed that 20 additional residents of the park’s 150 spaces have expressed interest. Although Newport Pacific has publicly predicted that virtually everybody in the park will qualify for some kind of financing enabling them to buy their lots, questions about specific numbers remain.

Mobile Home Mogul Muzzled - Goleta City Council Demands EIR

SB Independent
By Martha Sadler
June 7, 2007

The City of Goleta stood fast against an attempted end-run around its mobile home rent control ordinances — namely Daniel Guggenheim’s bid to subdivide his Rancho Mobile Home Park and sell its 150 parcels for about $250,000 each. It is a strategy that has been used successfully by park owners throughout California, led by activist Sam Zell. Several park residents said they were pleasantly surprised to see their City Council circle the wagons around a Goleta city staff report that could spell doom for the proposed condo conversion.

Those attending the June 4 hearing were not sure if the more business-oriented council majority elected last year would defend the parks as staunchly as did Goleta’s previous council, which successfully fought Guggenheim’s attempt to vanquish the city’s rent control ordinance in the courts. Two of those new councilmembers, Eric Onnen and Michael Bennett, received considerable campaign contributions from Guggenheim before the election.

Despite threats of another lawsuit, though, the council seconded planning staff’s insistence that Guggenheim’s subdivision tract map requires an Environmental Impact Report (EIR). Clarke Fairbrother (pictured above, center, with two other company employees)— president of Newport Pacific Capital Company, Inc., which manages the Rancho Mobile Homes property on behalf of Guggenheim — told the City Council that an EIR is uncalled for because Guggenheim is proposing no physical changes to the park and that the city’s approval is therefore a simple ministerial process. An attorney for Guggenheim, Thomas Casparian, threatened to sue for “millions of dollars” if the council directed staff to proceed with an EIR. None of the two dozen other municipalities where his firm’s clients have proposed such subdivisions has required an EIR, he said, and an EIR is no place for the city to vet “social and economic issues” such as the loss of affordable housing. He called the city staff’s position “extremely novel.”

State law calls for environmental review because the project might displace affordable housing, said Goleta Planning Director Steve Chase. That would necessitate the construction of replacement housing elsewhere, said Chase, and that is an environmental effect. In addition, he said, approval of Guggenheim’s tract map would likely set a precedent so that in addition to the 150 households at the Rancho Mobile Home Park, those at Goleta’s three other rent-controlled parks would be affected.

Fairbrother claimed that there would “be no displacement.” Park residents would be offered “binding lease contracts” to stay at their current rent-controlled rates plus annual cost-of-living increases. However, for those who are willing, he said, his client is prepared to offer his tenants a “once-in-a-lifetime opportunity” to buy the parcels under their mobile homes. Fairbrother enumerated the government subsidies that can be used to assist low-income buyers, including loans that require no payments until the land is sold.

In that case, asked Onnen, “Why avoid the EIR?” Responding to implications that the city was using the EIR simply to stall and obstruct, Onnen said, “I can assure you the [EIR] was never about derailing the process. I can assure that that was never part of the discussion in closed session.”

Bennett asked how Guggenheim could be trusted to allow people to stay in their homes at current rents, since Guggenheim will make the profits he seeks only if people purchase. “To say he’ll look after everybody seems a little disingenuous,” said Bennett. “We don’t know how many can be financed through government subsidies for low-income,” Fairbrother admitted, “but we can’t go forward without the tract map.”

Noting that there is “no hard evidence that tenants would not be displaced,” Goleta planner Patricia Miller said that the EIR would create a process for “mulling, examining, weighing, and coming up with replacement alternatives if needed.”

The City Council, with Roger Aceves absent, voted 4-1 to proceed with the EIR.