Petition for Writ of Certiorari — Colony Cove Properties, LLC, Petitioner v. City of Carson, California, et al.

1a

APPENDIX A

UNITED STATES COURT OF APPEALS FOR

THE NINTH CIRCUIT

COLONY COVE PROPERTIES,

LLC, a Delaware limited liability company,

Plaintiff-Appellee,

v.

No. 16-56255

D.C. No. 2:14-cv03242-PSG-PJW

CITY OF CARSON, a municipal

corporation; CITY OF CARSON

MOBILEHOME PARK RENTAL

REVIEW BOARD, a public administrative body,

Defendants-Appellants.

OPINION

Appeal from the United States District Court

for the Central District of California

Philip S. Gutierrez, District Judge, Presiding

Argued and Submitted February 9, 2018

Pasadena, California

Filed April 23, 2018

Before: Susan P. Graber and Andrew D. Hurwitz,

Circuit Judges, and Edward R. Korman,* District

Judge.

Opinion by Judge Hurwitz

* The Honorable Edward R. Korman, United States District

Judge for the Eastern District of New York, sitting by designation.

2a

SUMMARY**

Civil Rights

The panel reversed the district court’s judgment

and remanded with instructions to enter judgment

in favor of defendant in an action brought by the

owner of a mobile home park who alleged that defendant, the City of Carson, engaged in an unconstitutional taking in violation of the Fifth Amendment

when it approved a lower rent increase than plaintiff had requested.

Applying the factors set forth in Penn Central

Transportation Co. v. City of New York, 438 U.S. 104

(1978) the panel first held that plaintiff did not present sufficient evidence to create a triable question

of fact as to the economic impact caused by the

City’s denial of larger rent increases. The panel

then held that plaintiff failed to present sufficient

evidence supporting its investment-backed expectations claim. Finally, the panel held that the character of the City’s action could not be characterized

as a physical invasion by the government. The

panel concluded that based on the evidence, no reasonable finder of fact could conclude that the denials of plaintiffs requested rent increases were the

functional equivalent of a direct appropriation of

the property. Accordingly, the panel held that the

district court should have granted the City’s motion

for judgment as a matter of law.

** This summary constitutes no part of the opinion of the

court. It has been prepared by court staff for the convenience of

the reader.

3a

COUNSEL

Matthew Dwight Zinn (argued) and Andrew W.

Schwartz, Shute Mihaly & Weinberger LLP, San

Francisco, California; Jeff M. Malawy, Stephen R.

Onstot, June S. Ailin, William W. Wynder, and

Sunny K. Soltani, Aleshire & Synder LLP, Irvine,

California; for Defendants-Appellants.

Anton Matlitsky (argued), O’Melveny & Myers

LLP, New York, New York; Adam P. Wiley, Thomas

W. Casparian, and Richard H. Close, Gilchrist &

Ruiter PC, Santa Monica, California; Daniel J.

Tully, Dimitri Portnoi, and Matthew W. Close,

O’Melveny & Myers LLP, Los Angeles, California;

for Plaintiff-Appellee.

Christine Van Aken, Chief of Appellate Litigation; Dennis J. Herrera, City Attorney; City Attorney’s Office, San Francisco, California; for Amici

Curiae League of California Cities and California

Chapter of the American Planning Association.

Navneet Grewal and Sue Himmelrich, Western

Center on Law and Poverty, Los Angeles, California; Shirley Gibson, Legal Aid Society of San Mateo

County, Redwood City, California; for Amici Curiae

California Rural Legal Assistance Inc., California

Coalition for Rural Housing, Community Legal Services of East Palo Alto, The Golden State Manufactured-Home Owners League Inc., Housing California, Legal Aid Foundation of Los Angeles, Legal Aid

Society of San Mateo County, National Housing

Law Project, Public Advocates, Public Counsel Law

Center, The Public Interest Law Project, Tenants

Together, Western Center on Law and Poverty, and

Theresa L. Forsythe.

4a

OPINION

HURWITZ, Circuit Judge:

The Takings Clause of the Fifth Amendment,

made applicable to the States by the Due Process

Clause of the Fourteenth Amendment, provides that

“private property” may not “be taken for public use,

without just compensation.” The issue in this case

is whether a California city engaged in an unconstitutional taking when it approved a lower rent increase for a mobile home park than the park had

requested.

After a jury trial, the district court entered a

judgment finding an unconstitutional taking and

awarding the park more than $3 million in damages. We reverse and instruct that the district court

enter judgment in favor of the City.

I. Background

A. The Rent Control Ordinance

In 1979, the City of Carson adopted a “Mobile

Home Space Rent Control Ordinance,” establishing

a seven-member Rent Review Board to “hear and

determine applications of property owners for rent

adjustments.” The ordinance directs the Board to

grant property owners a “fair, just and reasonable”

rent increase, one that both “protects Homeowners

from excessive rent increases and allows a fair return on investment to the Park Owner.”

To balance these competing concerns, the ordinance lists several factors to be considered when

evaluating a proposed rent increase, including

changes in the Consumer Price Index (“CPI”), rent

5a

at comparable parks, capital improvements conducted since the last increase, and changes in operating and maintenance expenses. The listed factors,

however, are neither exclusive nor dispositive.

To assist the Board, the City Council adopted

Implementation Guidelines in 1998. The original

Guidelines permitted, but did not require, the Board

to conduct a “Gross Profits Maintenance Analysis”

(“GPM Analysis”) in evaluating a rent increase application. A GPM Analysis “compares the gross

profit level expected from the last rent increase

granted to the park prior to the current application

. . . to the gross profit shown by the current application.” The Analysis “provide[s] an estimate of

whether a park is earning the profit estimated to

provide a fair return, as established by the immediately prior rent increase, with some adjustment to

reflect any increase in the CPI.” Acquisition debt

service can be a relevant expense under the GPM

Analysis “if the purchase price paid was reasonable

in light of the rents allowed under the Ordinance

and involved prudent and customary financing

practices.” But the Guidelines expressly state that

a GPM Analysis “is not intended to create any entitlement to any particular rent increase.”

In October 2006, the City amended the Implementation Guidelines to permit the Board also to

conduct a “Maintenance of Net Operating Income

Analysis” (“MNOI Analysis”) when considering applications for rent increases. The MNOI Analysis

“compares the net operating income (NOI) level expected from the last rent increase granted to a park

owner and prior to any pending rent increase application . . . to the NOI demonstrated in any pending

6a

rent increase application.” “[C]hanges in debt service expenses are not to be considered in the” MNOI

Analysis.

B. Colony’s Purchase of the Mobile Home Park

and Requested Rent Increases

On April 4, 2006, Colony Cove Properties, LLC

(“Colony”) purchased Colony Cove Mobile Estates

(“the Property”), a mobile home park in Carson, for

$23,050,000; $18,000,000 of the purchase price was

obtained through a loan. The annual debt service

on that loan—$1,224,681—far exceeded the prior

owner’s annual profit of $718,240.

At the time of purchase, the Implementation

Guidelines provided only for the GPM Analysis.

Colony first filed an application for a rent increase

in 2007, after the Guidelines were revised to also

allow an MNOI Analysis. That application sought

a rent increase of $618.05 per space; it was later

amended to seek only $200 per space. The Board’s

GPM Analysis suggested a rent increase of $200.93

per space, driven largely by the post-acquisition

debt service. The Board’s MNOI Analysis, which

did not account for the debt service, suggested a

rent increase of only $36.74. The Board adopted the

MNOI Analysis and approved the $36.74 increase.

In 2008, Colony requested a $342.46 rent increase.

The Board again conducted both a GPM and an

MNOI Analysis, adopted the latter, and granted an

increase of $25.02.

C. Colony’s Previous Litigation

In 2008, Colony sued the City, asserting facial

and as-applied takings and due process claims with

respect to the Board’s 2007 decision. See Colony

7a

Cove Props., LLC v. City of Carson, 640 F.3d 948,

953-54 (9th Cir. 2011). The district court dismissed

the facial attack as time-barred and the as-applied

takings claim as unripe; we affirmed. Id. at 956-57,

959.

The same day it appealed the first district court

order, Colony also “filed a petition for writ of administrative mandate seeking review of the Board’s

2008 determination of its September 2007 rent increase applications” in state court; Colony later filed

a similar second petition concerning the 2008 application. See Colony Cove Props., LLC v. City of Carson, 163 Cal. Rptr. 3d 499, 515 (Ct. App. 2013). The

state trial court denied Colony’s petitions, and the

California Court of Appeal affirmed, holding that

state law allowed use of MNOI Analysis and that

the Board’s failure to take debt service into account

did not deprive Colony of a fair rate of return. Id.

at 521-24, 530. The California Supreme Court denied review.1

D. The Current Litigation

Having exhausted its state-law claims,2 Colony

returned to federal court, alleging that the 2007 and

1 The state trial court struck Colony’s England reservation

of its federal takings claims, but the Court of Appeal reinstated

the reservation. Colony Cove Props., 163 Cal. Rptr. 3d at 52930; see England v. La. State Bd. Of Exam’rs, 375 U.S. 411, 421

(1964).

2 A “writ of administrative mandate” is a judicial avenue for

relief from rent control decisions created by the California Supreme Court. See Kavanau v. Santa Monica Rent Control Bd.,

941 P.2d 851 (Cal. 1997). If the writ is granted, the property

owner may seek a future rent adjustment “that takes into consideration past confiscatory rents.” Id. at 866. “[T]he Kavanau

adjustment process” satisfies the exhaustion requirements of

8a

2008 Board decisions were an unconstitutional taking and violated Colony’s substantive due process

rights. The district court dismissed all of Colony’s

claims except for an as-applied regulatory takings

claim premised on Penn Central Transportation Co.

v. City of New York, 438 U.S. 104 (1978).

Over the City’s objection, the district court allowed a jury trial. At trial, Colony presented expert

testimony that the Board’s use of the MNOI Analysis and the consequent failure to take debt service

into account in setting the 2007 and 2008 rents

would cause Colony to lose rental income of approximately $5.7 million. Colony’s owner, James Goldstein, also testified that, when he bought the Property, he expected the Board to consider debt service

in future rent increase determinations, and he

would not have paid $23 million for the park absent

that expectation.

The City moved for judgment as a matter of law

after both the close of Colony’s case and the close of

evidence. After the district court denied the motions, the jury found that the Board’s 2007 and 2008

decisions were regulatory takings and awarded Colony $3,336,056 in damages. The City then filed a

renewed Federal Rule of Civil Procedure 50(b) motion for judgment. The court denied the motion and

awarded Colony prejudgment interest, attorneys’

Williamson County Regional Planning Commission v. Hamilton

Bank of Johnson City, 473 U.S. 172, 195 (1985). See Equity Lifestyle Props., Inc. v. Cty. of San Luis Obispo, 548 F.3d 1184, 1192

(9th Cir. 2008).

9a

fees, and costs, entering a final judgment of

$7,464,718.41.3

The City timely appealed. We have jurisdiction

under 28 U.S.C. § 1291, and we review de novo the

district court’s denial of a motion for judgment as a

matter of law. United States ex rel. Hopper v. Anton,

91 F.3d 1261, 1268 (9th Cir. 1996). In doing so,

“[w]e must view the evidence in the light most favorable to the nonmoving party . . . and draw all

reasonable inferences in that party’s favor.” Ostad

v. Or. Health Scis. Univ., 327 F.3d 876, 881 (9th Cir.

2003). “Judgment as a matter of law is proper when

the evidence permits only one reasonable conclusion

and the conclusion is contrary to that reached by the

jury.” Id.

II. Discussion

“The Takings Clause of the Fifth Amendment

provides that private property shall not ‘be taken

for public use, without just compensation.’” Murr v.

Wisconsin, 137 S. Ct. 1933, 1942 (2017). Although

the paradigm of an unconstitutional taking is the

direct appropriation of property, the Supreme Court

has long acknowledged that “if regulation goes too

far it will be recognized as a taking.” Penn. Coal Co.

v. Mahon, 260 U.S. 393, 415 (1922).

“[T]he Court for the most part has refrained from

elaborating . . . definitive rules” about when regulation goes so far as to become a taking. Murr, 137

3 In the final judgment, the district court noted its agreement

with the jury’s verdict: “Having independently weighed and considered the evidence, the Court agrees with the jury’s finding

that a taking occurred, as well as the amount of damages that

the jury awarded . . . .”

10a

S. Ct. at 1942. Judicial decisions considering regulatory takings claims are typically “characterized by

essentially ad hoc, factual inquiries, designed to allow careful examination and weighing of all the relevant circumstances.” Tahoe-Sierra Pres. Council,

Inc. v. Tahoe Reg’l Planning Agency, 535 U.S. 302,

322 (2002) (internal quotation marks and citations

omitted). The goal is to determine whether regulatory actions “are functionally equivalent to the classic taking in which government directly appropriates private property.” MHC Fin. Ltd. P’ship v. City

of San Rafael, 714 sF.3d 1118, 1127 (9th Cir. 2013)

(quoting Lingle v. Chevron U.S.A. Inc., 544 U.S. 528,

539 (2005)).

The Penn Central factors ground our regulatory

takings analysis. Penn Central instructs us to consider “[1] the regulation’s economic impact on the

claimant, [2] the extent to which the regulation interferes with distinct investment-backed expectations, and [3] the character of the government action.” MHC Fin., 714 F.3d at 1127. The question is

whether Colony presented sufficient evidence on

these factors to allow a reasonable finder of fact to

conclude that the Board’s denials of Colony’s requested rate increases were the functional equivalent of the direct appropriation of the Property. We

address each factor in turn.

A. Economic Impact

In considering the economic impact of an alleged

taking, we “compare the value that has been taken

from the property with the value that remains in the

property.”

Keystone Bituminous Coal Ass’n v.

DeBenedictis, 480 U.S. 470, 497 (1987). Penn Cen-

11a

tral stresses that, “[i]n deciding whether a particular governmental action has effected a taking, this

Court focuses rather both on the character of the action and on the nature and extent of the interference

with rights in the parcel as a whole.” 438 U.S. at

130-31. If “an owner possesses a full ‘bundle’ of

property rights, the destruction of one ‘strand’ of the

bundle is not a taking, because the aggregate must

be viewed in its entirety.” Andrus v. Allard, 444

U.S. 51, 65-66 (1979).

The jury concluded that Colony would have received approximately $3.3 million in additional income over an 8-year period if the Board had adopted

the alternative GPM Analysis and factored debt service into the 2007 and 2008 rent increases. But the

mere loss of some income because of regulation does

not itself establish a taking. Rather, economic impact is determined by comparing the total value of

the affected property before and after the government action. See MHC Fin., 714 F.3d at 1127. Projected income streams can contribute to a method

for determining the post-deprivation value of property, but the severity of the loss can be determined

only by comparing the post-deprivation value to predeprivation value. Id.

Not every diminution in property value caused

by a government regulation rises to the level of an

unconstitutional taking. “Government hardly could

go on if to some extent values incident to property

could not be diminished without paying for every

such change in the general law.” Penn. Coal Co.,

260 U.S. at 413. Although no litmus test determines

whether a taking occurred, we start from the premise that the Penn Central factors seek “to identify

regulatory actions that are functionally equivalent

12a

to the classic taking in which government directly

appropriates private property or ousts the owner

from his domain.” See Lingle, 544 U.S. at 539.

Thus, we have observed that diminution in property

value because of governmental regulation ranging

from 75% to 92.5% does not constitute a taking.

MHC Fin., 714 F.3d at 1127-28. The Federal Circuit

has noted that it is “aware of no case in which a

court has found a taking where diminution in value

was less than 50 percent.” CCA Assocs. v. United

States, 667 F.3d 1239, 1246 (Fed. Cir. 2011). Nor

are we.

There was no evidence before the district court

allowing a comparison of the pre-deprivation and

post-deprivation values of the Property. Colony

purchased the Property for approximately $23 million, and we assume that this number establishes

the pre-deprivation value. But Colony presented no

evidence, expert or otherwise, about the Property’s

post-deprivation value. Rather, the only evidence

concerned the amount of rent claimed to be lost over

an 8-year period because of the Board’s refusals to

approve higher increases. Even assuming that the

lost rental income asserted by Colony—$5.7 million—equates to diminution in property value, that

reduction would only be 24.8% of the assumed $23

million pre-deprivation value of the Property, far

too small to establish a regulatory taking.4

Colony argues that post-deprivation “sale value

is not the only permissible basis to consider economic loss.” We agree—for example, the discounted

4 The jury, whose award Colony does not challenge on ap-

peal, found that the lost rental income was only $3 3 million,

which would equate to a 14.3% reduction in the Property’s value.

13a

future cash flows produced by an income-producing

property can provide an appropriate valuation

methodology. See, e.g., Cienega Gardens v. United

States, 503 F.3d 1266, 1282 (Fed. Cir. 2007) (determining economic impact by “compar[ing] the lost

net income due to the restriction (discounted to present value at the date the restriction was imposed)

with the total net income without the restriction

over the entire useful life of the property (again discounted to present value)”). But Colony presented

no evidence, by virtue of analyzing diminished income streams or otherwise, of the post-deprivation

value of the Property.

Colony also asserts that the Board took its property because it suffered annual operating losses in

2007 and 2008. But those losses resulted directly

from Colony’s decision to incur a large debt when

purchasing the property and cannot alone establish

a taking. Even if Colony’s decision to borrow was

commercially reasonable, it serves only to establish

that the purchase price of $23 million is the pre-deprivation value. The post-deprivation value of the

Property cannot be dictated by debt service; otherwise, two identical mobile home properties would

have different values, depending on how their owners chose to finance the acquisitions. See Colony

Cove Props., 163 Cal. Rptr. 3d at 521 (praising the

MNOI Analysis “for its fairness and ease of administration” in contrast to the GPM Analysis, which

can be “problematic to administer, because an

owner’s equity can be greatly affected by individual

differences in methods and costs of financing” (internal quotation marks omitted)).

Thus, on the first Penn Central prong, Colony did

not present sufficient evidence to create a triable

14a

question of fact as to the economic impact caused by

the City’s denial of larger rent increases. We therefore turn to the second prong.

B. Distinct Investment-Backed Expectations

Colony argues that, when it acquired the Property, it had a distinct investment-backed expectation that the Board would use the GPM Analysis

and account for debt service in determining future

rent increases. It is this expectation, Colony argues,

with which the City interfered, and the jury therefore properly awarded Colony the rent increases it

expected. Even accepting Colony’s argument that

we should focus only on the lost rental income, rather than the post-deprivation value of the Property

as a whole,5 the argument fails.

To form the basis for a taking claim, a purported

distinct investment-backed expectation must be objectively reasonable. See CCA Assocs., 667 F.3d at

1247; see also Lucas v. S.C. Coastal Council, 505

U.S. 1003, 1035 (1992) (Kennedy, J., concurring in

the judgment) (noting that investment-backed “expectations protected by the Constitution are based

on objective rules and customs that can be understood as reasonable by all parties involved”); Chancellor Manor v. United States, 331 F.3d 891, 907

(Fed. Cir. 2003) (holding that courts must use “an

objective analysis to determine the reasonable investment-backed expectations of the Owners”). Colony claims that, when it purchased the Property, it

5 Cf. Penn Cent., 438 U.S. at 130 n.27 (stating that in deter-

mining whether a regulatory taking occurred, the government’s

action is measured against “the parcel as a whole”).

15a

reasonably expected that debt service would be recognized in future rent increases because (1) the existing Implementation Guidelines then provided

only for a GPM Analysis; (2) the Board had always

recognized debt service as a factor when granting

rent increases on another mobile home park owned

by Goldstein; and (3) two California Court of Appeal

opinions—Palacio de Anza v. Palm Springs Rent Review Commission, 257 Cal. Rptr. 121 (Ct. App.

1989), and Carson Gardens, L.L.C. v. City of Carson

Mobilehome Park Rental Review Board, 37 Cal.

Rptr. 3d 768 (Ct. App. 2006)—required consideration of debt service. We address each argument in

turn.

1. The Implementation Guidelines—even before

the 2006 Amendment allowing MNOI Analysis—

clearly could not have formed the basis for an objectively reasonable expectation that the Board would

always account for debt service in considering future rent increases. The Guidelines plainly stated

that “[n]o one factor in the Ordinance is determinative and the facts must be considered together and

balanced in light of the purposes of the Ordinance

and all the relevant evidence.” More importantly,

the Guidelines stressed that the GPM Analysis “is

not intended to create any entitlement to any particular rent increase.” Indeed, Colony concedes that

“Carson does not permit an automatic rent increase

based on a set formula.”

2. Goldstein’s experience as an owner of another

mobile home park in Carson in the two decades before his purchase of the Property did not establish a

reasonable expectation that the Board would consider debt service in all rent increase applications.

As a general matter, an investor must account for

16a

“the burden of rent control” in its expectations about

future increased rental income. Guggenheim v. City

of Goleta, 638 F.3d 1111, 1120-21 (9th Cir. 2010) (en

banc).

And, the Implementation Guidelines,

adopted in 1998—long before the purchase of the

Property—made plain that use of a GPM Analysis

created no expectation to a particular rent increase.

Moreover, the Board did not consider acquisition interest expenses in Goldstein’s first application for a

rent increase at his other park. Goldstein initially

applied for a $57.85 rent increase for that park,

$41.38 of which related to increased debt service.

The Board, however, granted only a $12 rent increase, which did not account for the debt service.

Thus, an objectively reasonable person could not

have expected that all future rent increase applications seeking increases because of debt service

would be granted.6

3. Colony’s contention that the two California

Court of Appeal decisions require “the City to take

debt service into account in considering rent-increase applications, and . . . preclude[d] the City

from . . . using MNOI,” misreads both opinions. Neither mandates that a rent control board account for

debt service in determining rent increases. Rather,

both merely hold that a Board must conduct the

analyses it represented it would conduct, without

6 Colony’s purported expectation of a $200 increase in 2007

would have resulted in a 49.5% per-space rent increase for Colony Gardens. Such an increase would have been twice as large

as the largest increase ever previously granted by the Board and

significantly larger than the largest increase Goldstein’s other

properties ever received—$58.70.

17a

requiring the adoption of a particular method of

analysis.

Palacio de Anza simply required a rent control

board to apply its guidelines when considering a

rent increase application. 257 Cal. Rptr. at 124.

There is no contest that the Board did so here. And,

in Carson Gardens, the Court of Appeal expressly

held:

[N]othing in the [City of Carson’s] ordinance

requires the Board to apply any particular formula or methodology without deviation. Indeed, the city’s Guidelines specifically state

that the [GPM] analysis ‘is an aid to assist the

Board in applying the factors in the Ordinance and is to be considered together with

the factors in [the ordinance], other relevant

evidence presented and the purposes of the

Ordinance,’ and is not intended to create any

entitlement to any particular rent increase.

37 Cal. Rptr. 3d at 777 (fourth alteration in original). At most, Carson Gardens compels the Board

only to consider a GPM Analysis, see id. at 776-77,

and in affirming the trial court’s dismissal of Colony’s petition, the Court of Appeal here expressly

acknowledged that the Board did precisely that in

evaluating both the 2007 and 2008 Colony applications, see Colony Cove Props., 163 Cal. Rptr. 3d at

504-11.7

In Carson Gardens the plaintiff sued the Board,

claiming in part that the Board did not conduct a

7 The Court of Appeal also noted that “the MNOI approach

has been upheld by every court to have considered it.” Colony

Cove Props., 163 Cal. Rptr. 3d at 522.

18a

GPM Analysis. 37 Cal. Rptr. 3d at 770-76. A trial

court ordered the Board to conduct the analysis and

remanded the case, but the Board failed to conduct

the GPM Analysis on remand. Id. at 772-73. On

the second challenge, the trial court granted the

plaintiffs proposed rent increase based on its GPM

Analysis, but the Court of Appeal reversed. Id. at

774-75, 777. Although the initial trial court’s order

required consideration of debt service costs, the

Court of Appeal remanded the case “so that the

Board c[ould] exercise its discretion on the question

of whether passing through the entire amount of

debt service costs was necessary to provide a fair return.” Id. at 776.

No objectively reasonable person confronted

with this evidence in 2006 could have expected that

the Board would always account for debt service

when determining rent increases.8 Colony failed to

present sufficient evidence supporting its investment-backed expectations claim under Penn Central’s second prong.

8 Colony also claims that its expectations were reasonable

because a former City employee testified that the Implementation Guidelines were “more important, at least for day-to-day operation[s]” than the ordinance. But the Guidelines, even before

their amendment, made clear that a property owner had no right

to a rent increase based on the GPM Analysis. And Colony does

not contend that it relied on this statement, which was made in

a deposition in this litigation, in determining whether to purchase the Property.

19a

C. Character of the Government Action

Penn Central instructs that “[a] ‘taking’ may

more readily be found when the interference with

property can be characterized as a physical invasion

by government than when interference arises from

some public program adjusting the benefits and burdens of economic life to promote the common good.”

438 U.S. at 124 (citation omitted).9 The City’s rent

control ordinance is precisely such a program, striving to “protect[ ] Homeowners from excessive rent

increases and allow[ ] a fair return on investment to

the Park Owner.” This central purpose of rent control programs “counsels against finding a Penn Central taking.” MHC Fin., 714 F.3d at 1128.

Citing Lingle, 544 U.S. at 539, and David Hill

Development, LLC v. City of Forest Grove, No. 3:08CV-266-AC, 2012 WL 5381555 (D. Or. Oct. 30,

2012), Colony argues that the 2006 amendment to

the Guidelines should be characterized as a taking

because it targeted Colony’s acquisition of the Property and the consequent large debt service. But

these cases are inapposite. Lingle simply held that

a plaintiff could not claim that a regulation constituted a taking merely because it did not substantially advance a legitimate state interest. 544 U.S.

at 547-48. And David Hill dealt with an express ex-

9 The Supreme Court also stressed that the first two Penn

Central factors are the most important. See Lingle, 544 U.S. at

538-39 (“Primary among those factors are the economic impact

of the regulation on the claimant and, particularly, the extent to

which the regulation has interfered with distinct investmentbacked expectations.” (internal quotation marks and brackets

omitted)).

20a

action. 2012 WL 5381555, at *9-12. More importantly, government action is legitimately

prompted by changes in regulated areas. Even assuming that the 2006 Amendment to the Guidelines

was prompted by the large amount of debt service

involved in Colony’s acquisition and the City’s realization that a more sophisticated analysis than the

GPM might be needed to address requests for rent

increases, the character of the government regulation remains the same. The third Penn Central

prong therefore is not satisfied.

III. Conclusion

On the evidence in this case, no reasonable

finder of fact could conclude that the Board’s denials

of Colony’s requested rent increases were the functional equivalent of a direct appropriation of the

Property. Accordingly, the district court should

have granted the City’s motion for judgment as a

matter of law. We therefore REVERSE the judgment of the district court and REMAND with instructions to enter judgment in favor of the City.10

10 We therefore need not consider the City’s alternative ar-

gument that a district court, not a jury, is the appropriate finder

of fact in regulatory takings cases.

21a

APPENDIX B

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

COLONY COVE PROPERTIES,

LLC, a Delaware limited liability company,

Plaintiff-Appellee,

v.

CITY OF CARSON, a municipal

corporation; CITY OF CARSON

MOBILEHOME PARK RENTAL

REVIEW BOARD, a public administrative body,

Defendants-Appellants.

No. 16-56255

D.C. No. 2:14-cv03242-PSG-PJW

Central District

of California, Los

Angeles

ORDER

Before: GRABER and HURWITZ, Circuit

Judges, and KORMAN,* District Judge.

The panel has voted to deny the petition for

panel rehearing. Judges Graber and Hurwitz have

voted to deny the petition for rehearing en banc, and

Judge Korman so recommends. The full court has

been advised of the petition for rehearing en banc

and no judge has requested a vote on whether to rehear the matter en banc. Fed. R. App. P. 35.

The petition for panel rehearing and rehearing

en banc, Dkt. 78, is DENIED.

The Honorable Edward R. Korman, United States District Judge for the Eastern District of New York, sitting by designation.

*

22a

APPENDIX C

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

Case No. CV 14-3242

PSG (PJWx)

Date August 8, 2016

Title: Colony Cove Properties, LLC v. City of Carson, et al.

Present: The Honorable Philip S. Gutierrez,

United States District Judge

Wendy Hernandez

Not Reported

Deputy Clerk

Court Reporter

Attorneys Present for

Plaintiff(s):

Attorneys Present for

Defendant(s):

Not Present

Not Present

Proceedings (In Chambers): Order DENYING

Motion

Before the Court is Defendants’ “Renewed Motion for Judgment as a Matter of Law.” Dkt. #205.

The Court finds the matter appropriate for decision

without oral argument. See Fed. R. Civ. P. 78(b);

L.R. 7-15. After having read and considered the

moving, opposing, and reply papers, the Court DENIES Defendants’ motion.

In its opposition, Plaintiff requests that the

Court “make a direct finding in support of the jury’s

factual and legal conclusions.” Opp. 25 n.17. After

considering Plaintiff’s request and Defendants’ response, see Reply 11–12, the Court finds that Plain-

23a

tiff’s request is well taken. The Court will thus ensure that the judgment states at the end: “Having

independently weighed and considered the evidence, the Court agrees with the jury’s finding that

a taking occurred, as well as the amount of damages

that the jury awarded.”

IT IS SO ORDERED.

24a

APPENDIX D

MATTHEW W. CLOSE (Bar No. 188570)

mclose@omm.com

DIMITRI D. PORTNOI (Bar No. 282871)

dportnoi@omm.com

O’MELVENY & MYERS LLP

400 South Hope Street

Los Angeles, California 90071-2899

Telephone: (213) 430-6000

Facsimile: (213) 430-6407

RICHARD H. CLOSE (Bar No. 50298)

rclose@gilchristrutter.com

THOMAS W. CASPARIAN (Bar No. 169763)

tcasparian@gilchristrutter.com

GILCHRIST & RUTTER

Professional Corporation

1299 Ocean Avenue, Suite 900

Santa Monica, California 90401-1000

Telephone: (310) 393-4000

Facsimile: (310) 394-4700

Attorneys for Plaintiff Colony Cove Properties,

LLC

UNITED STATES DISTRICT COURT

CENTRAL DISTRICT OF CALIFORNIA

COLONY COVE PROPERTIES, LLC, a Delaware limited liability

company,

Plaintiff,

v.

Case No. CV 14-03242

PSG (PJWx)

[PROPOSED]

AMENDED JUDGMENT NUNC PRO

TUNC

Courtroom 880

25a

CITY OF CARSON, a

Judge: Hon. Philip S.

municipal corporation;

Gutierrez

CITY OF CARSON MOBILEHOME PARK

RENTAL REVIEW

BOARD, a public administrative body; and

DOES 1 to 10, inclusive,

Defendant.

On April 28, 2014, Plaintiff Colony Cove Properties, LLC commenced this action against Defendants City of Carson and City of Carson Mobilehome

Park Rental Review Board seeking damages and declaratory relief under 42 U.S.C. § 1983 for a regulatory taking without just compensation in violation

of the Fifth Amendment to the United States Constitution. Beginning on April 28, 2016, Plaintiff’s

claim for relief was tried to a jury. On May 5, 2016,

the jury duly rendered a unanimous verdict in

Plaintiff’s favor. (Dkt. No. 194.)

On May 16, 2016, the Court entered judgment in

Plaintiff’s favor on the jury’s verdict. (Dkt. No. 200.)

On June 10, 2016, Plaintiff filed a motion to alter or

amend the Judgment pursuant to Rule 59(e) of the

Federal Rules of Civil Procedure to increase the

amount of damages awarded by the jury and award

prejudgment interest. (Dkt. No. 206.) The same

day, Defendants filed a renewed motion for judgment as a matter of law under Rule 50(b) and a motion for relief from the Judgment under Rule 60(a).

(Dkt. Nos. 203, 205.) On August 8, 2016, the Court

denied Defendants’ renewed motion for judgment as

a matter of law and amended the Judgment to add

the language set forth in paragraph 6, below. (Dkt.

26a

No. 221.) On August 10, 2016, the Court granted

Plaintiff’s motion to alter or amend the Judgment to

include an award of prejudgment interest. (Dkt. No.

222.) It denied Plaintiff’s motion to the extent it

sought an increase in the jury’s damages award and

also denied Defendants’ motion for relief from the

Judgment. (Id.) On August 15, 2016, the Court

granted in part and denied in part Plaintiff’s motion

seeking attorneys’ fees and costs incurred through

the completion of trial. (Dkt. No. 225.) Accordingly,

IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED:

1. That Defendants City of Carson’s and City of

Carson Mobilehome Park Rental Review

Board’s (collectively, “Defendants”) decisions

with respect to Plaintiff Colony Cove Properties, LLC’s (“Plaintiff”) rent-increase application submitted in September 2007 constituted

a regulatory taking without just compensation

in violation of the Fifth Amendment to the

United States Constitution;

2. That Defendants’ decisions with respect to

Plaintiff’s rent-increase application submitted

in September 2008 constituted a regulatory

taking without just compensation in violation

of the Fifth Amendment to the United States

Constitution;

3. That Plaintiff recover $3,336,056 in damages,

jointly and severally, from Defendants;

4. That Plaintiff recover prejudgment interest at

a rate of 4.5% annually for the delay in payment of just compensation between December

1, 2008, and May 16, 2016—representing

27a

$1,119,543.83 in prejudgment interest—

jointly and severally, from Defendants;

5. That Plaintiff recover $2,910,299.62 in attorneys’ fees and $98,818.96 in costs incurred

through trial, jointly and severally, from Defendants; and

6. Having independently weighed and considered

the evidence, the Court agrees with the jury’s

finding that a taking occurred, as well as the

amount of damages that the jury awarded subject to the Court’s post-trial motion awarding

prejudgment interest.

IT IS SO ADJUDGED

DATED the 25th day of August, 2016.

/s Philip S. Gutierrez

The Honorable Philip S. Gutierrez

United States District Judge

28a

APPENDIX E

RELEVANT CONSTITUTIONAL PROVISIONS

The Fifth Amendment Provides:

***

[N]or shall private property be taken for public use,

without just compensation.

The Seventh Amendment Provides:

In Suits at common law, where the value in controversy shall exceed twenty dollars, the right of trial by

jury shall be preserved, and no fact tried by a jury,

shall be otherwise re-examined in any Court of the

United States, than according to the rules of the common law.

The Fourteenth Amendment Provides:

***

[N]or shall any State deprive any person of life, liberty, or property, without due process of law . . .

29a

APPENDIX F

*

*

*

GUIDELINES FOR IMPLEMENTATION OF

THE MOBILEHOME SPACE RENT CONTROL

ORDINANCE

These Guidelines are intended to assist the

Board in implementing the Ordinance. However,

the purpose of the Ordinance and the provisions of

the Ordinance are controlling.

I.

Purpose and General Principles

A. The purpose of the Ordinance is to protect the

homeowners who rent spaces in mobilehome parks

in the City from excessive rents and to allow Park

Owners to earn a “just and reasonable” or “fair” return on investment. Mobilehome owners (“homeowners”) are a uniquely vulnerable group of tenants

due to the investment made in purchasing and

maintaining their homes and the high cost and difficulty involved in attempting to move a home. Additionally, many of the homeowners in the City are

seniors on fixed incomes and many have low or moderate incomes. Unlike apartment tenants, homeowners cannot just pack their personal belongings

and move if rents increase to a level they cannot afford. In order not to lose the considerable investment made in purchasing and maintaining their

homes, they must either sell their home in place in

the park or move their home if they cannot afford

the rent. However, it is very costly to move a home

and even when vacant spaces are available in the

surrounding area, the parks having those vacant

spaces often restrict them to rental by new mobilehomes and will not accept homes being relocated

30a

from another park. Thus, moving the mobilehome

is not generally a feasible alternative. A homeowner who can no longer afford the rent must sell

the home quickly to avoid being evicted or defaulting on the mortgage on the home. However, excessive rents make a home difficult to sell and often

require the homeowner to sell the home at a price

which is insufficient to allow recovery of the investment made in the home.

B. Prior approval of the Board is required before

any rent increase may be charged unless a specific

exception is provided in the California Mobilehome

Residency Law, Civil Code § 798, et seq. That Law

exempts spaces subject to long term leases meeting

its requirements from local regulation. It also exempts increases in utility charges under certain circumstances and exempts newly constructed spaces,

as defined by the Mobilehome Residency Law.

C. The Ordinance assumes that the profit

earned by park owners when the Ordinance was

adopted provided a fair return because it was based

on rents chosen by the owners prior to regulation.

(see §I(F) re rebutting this assumption) The Ordinance, therefore, uses the factors in § 4704(g) to focus on changes in a park’s income, expenses and circumstances, including changes in the general economy, to determine whether a rent increase is appropriate to allow the owner to keep earning a fair return; and when a rent increase is appropriate to determine the amount of that increase. The factors

also require the Board to consider any changes in

the maintenance, services and amenities provided

and rents for spaces in comparable mobilehome

parks in the City and any change in the Consumer

31a

Price Index (“CPI”) since the last hearing on an application by a park. A decrease in, or elimination of,

services, maintenance or amenities may constitute

a de facto rent increase in violation of the Ordinance

and increases in the CPI may, in certain circumstances, indicate the need for a rent increase to offset the erosion of profit by inflation.

D. No one factor in the Ordinance is determinative and the factors must be considered together and

balanced in light of the purposes of the Ordinance

and all the relevant evidence. The Ordinance does

not mandate the use of any formula or guarantee

increases equal to the increase in the CPI, or any

percentage of the CPI.

E. Each park owner had the right to rebut the

assumption that the rents set before the Ordinance

was adopted provided a fair return when the park

owner applied for the park’s first rent increase, but

cannot challenge the decisions of the Board except

by legal challenge as provided in Ordinance

§4798(c). When the Board grants a rent increase it

is making a determination that the rent approved is

“fair, just and reasonable.” In other words, the

Board determined that the rent approved was not

excessive and allowed the park owner a fair return.

The Board cannot reconsider its decisions on a rent

adjustment application after they have been embodied in a formal written resolution setting forth the

findings of the Board. Therefore, each rent increase

application after the first application is evaluated

only on the basis of changes in income, expenses,

profit, the CPI, maintenance, amenities and services that have occurred since the date of the last

increase approved by the Board. A park owner or

homeowner who wishes to challenge the decision

32a

may do so by seeking review in the courts, as set

forth in §4708(c) of the Ordinance.

F. Notwithstanding Section D above, each park

owner has the right to apply for an increase on the

ground that existing rents do not allow the park

owner to earn a fair return, as set forth in §IV below, in addition to an increase based on the factors

in § 4704(g).

II.

Income, Operating Expenses And Profit

A. An applicant must provide the most current

data which is reasonably available concerning its

income, expenses and profit. In general, an application should include expenses, income and profit

documentation for all years subsequent to those for

which data was supplied with the last application

through at. least six months prior to the date of the

application. An application that does not provide

income, expense and profit data for the period between the date of the data submitted for the last increase application through six months prior to the

date of the current application will be deemed incomplete unless satisfactory reason is shown why

such data cannot be supplied. (For example, records

destroyed by fire, flood, etc., new owner cannot obtain files going back to date of last application.) The

necessary data may be provided by calendar year,

fiscal year or any other 12 month period selected by

the applicant provided that the same 12 month period is used for all data supplied and the applicant

utilizes the same 12 month period (e.g., July 1, 1993

through June 30, 1994, January 1, 1993 through December 31, 1993, April 1, 1993 through March 31,

1994) each time it applies for a rent increase. If an

applicant changes the 12 month reporting period

33a

used, the applicant will have to supply calendar

year data for the years since the last increase as

well as data presented according to the newly selected 12 month reporting period.

1.

Income includes rents, fees for services

not included in the rent such as RV parking, cable TV,

security, etc., and any other income derived from the

Park. Income from utilities is not income within the

meaning of the Ordinance. No fee may be charged in

addition to the rent for a service that was included in

the rent charged when the Ordinance was adopted,

except as otherwise provided in the Mobilehome Residency Law.

2.

Examples of operating expenses are

taxes, utility costs paid to a public utility if not billed

separately, maintenance (except maintenance of utilities which is to be paid for from utility income pursuant to PUC ruling), repairs, management and accounting services. All expenses may be reviewed for

reasonableness.

a. Owner performed labor is generally an

allowable operating expense so long as the amount

and type of labor performed is documented and is not

duplicated by expenses paid to others.

b. Fees paid to management companies not

in excess of 5% of gross rents are generally allowable;

higher fees are not generally allowed unless justified

by the applicant. Costs incurred for resident managers are allowable in addition to off-site management

expenses so long as there is no evidence of duplication

of services.

34a

c. Land lease payments are generally an

allowable operating expense only when paid to a landowner other than the park owner. Lease payments

made by a park owner to an entity owned by the park

owner will generally be deemed profit rather than an

operating expense.

d. Debt service incurred prior to adoption

of the Ordinance to purchase or operate the park is

generally an allowable operating expense.

e. Debt Service necessarily incurred to operate the park after adoption of the Ordinance is generally an allowable operating expense if the financing

arrangements were prudent and consistent with customary business practice.

f. Debt service incurred after adoption of

the Ordinance to purchase a park may be an allowable operating expense if the purchase price paid was

reasonable in light of the rents allowed under the Ordinance and involved prudent and customary financing practices. An applicant shall have the burden of

establishing the reasonableness of the purchase price

and financing procedures. If the applicant relies on

an appraisal, the appraiser must be available for

questioning at the hearing. Any other person relied

upon must also be available at the hearing. When it

is determined that some increase in debt service was

reasonably necessary to acquire the park, but that the

amount incurred was not reasonable in light of the

Ordinance and customary and prudent financing

practices, then only the appropriate portion of the

debt service incurred may be allowed as an operating

expense. The reason for these general rules is that

passing on increased debt service due to purchases at

prices above those that can be justified by the income

35a

earned by the park under rent control or incurred by

unusual financing methods, such as 100% financing,

would defeat the purpose of rent control.

g. Debt service incurred in making capital

improvements to a park may be recovered pursuant

to the Capital Improvement Rent Increase provisions

set forth below and is not an allowable operating expense.

h. Principal payments on a mortgage are

not an allowable operating expense.

i. Reasonable attorneys’ fees directly incurred in operating a park are generally allowable operating expenses. Attorneys’ fees incurred in presenting applications to the Board, for enforcing court rules

or for eviction are examples of fees that are allowable

operating expenses. Examples of attorneys’ fees

which are not allowable are those incurred in connection with challenging the Ordinance or decisions of

the Board or in connection with litigation seeking to

recover damages or reimbursement from third parties

or the City.

j. Charitable and political contributions

are not allowable operating expenses.

k. If the operating expenses submitted for

a park show a significant increase in expenses which

is not due to the increased cost of regular operating

expenses, is for an item which is not normally recurring, or is due to accumulating significant expenses in

a single year instead of spreading them pursuant to a

regular maintenance schedule, or if the expenses for

a year are unusually low, the Board may consider the

average of the park’s last three years, of expenses.

36a

The Board may consider the pattern of a park’s income and expenses instead of focusing on the income

and expenses for a single year in order to avoid unreasonable results.

l. An operating expenditure which covers

expenses for more than one year may be pro-rated

over the years to which it is attributable even if the

cost thereof is paid all in one year in order to avoid

unreasonable results. An example of such an operating expense is an insurance premium which covers

two or three years. An operating expense which is financed shall also be pro-rated over the life of the loan

by which it was financed.

B. Gross Profits Maintenance Analysis. In evaluating a rent increase application, the Board may

consider, in addition to the factors specified in

§4704(g) of the Ordinance, a “gross profits maintenance analysis,” which compares the gross profit

level expected from the last rent increase granted to

the park prior to the current application (“target

profit”) to the gross profit shown by the current application. This analysis will be included in the staff

report to the Board in addition to analysis concerning the eleven factors when there is sufficient data

to permit such an analysis.

The analysis is intended to provide an estimate

of whether a park is earning the profit estimated to

provide a fair return, as established by the immediately prior rent increase, with some adjustment to

reflect any increase in the CPI. The analysis is an

aid to assist the Board in applying the factors in the

Ordinance and is to be considered together with the

factors in §4704(g), other relevant evidence presented and the purposes of the Ordinance. The

37a

analysis is not intended to create any entitlement to

any particular rent increase.

III. Comparable Parks and Changes in Services,

Maintenance and Amenities

A. Comparable Parks. The Ordinance directs

the Board to consider rents in comparable parks in

the City. Consideration of the rents for spaces in

comparable mobilehome parks can assist the Board

in determining the range of reasonable rents for-a

particular park. The reason the Ordinance specifies

parks in the City is that comparison to rents in

parks outside the City which are not subject to rent

control would promote the excessive upward pressure on rents that the Ordinance is designed to

avoid. Rents in unregulated markets are the result

of the unequal bargaining power which arises from

the shortage of spaces for relocating homes and the

cost and difficulties inherent in trying to relocate a

home. The Ordinance is designed to prevent the excessive rents that can occur in such a market absent

regulation. Even if evidence were submitted showing a park in a neighboring jurisdiction with rent

control to be comparable in quality, amenities, services and location, evidence would be required concerning the nature of the rent control regulations in

effect in that jurisdiction during the period from

1979 to the present before the Board could determine whether the park was comparable within the

meaning-of the Ordinance. Parks subject to the Los

Angeles County mobilehome rent regulation ordinance have not been subject to rent regulation at all

times since the adoption of the Carson Ordinance

and were not and are not now subject to similar rent

regulation. Therefore, rents in spaces in parks in

unincorporated areas of Los Angeles County are not

38a

comparable within the meaning of the Ordinance.

Newly constructed spaces, as defined by the Mobilehome Residency Law, are also not comparable

spaces within the meaning of the Ordinance even

when they are located in City because the rents for

those spaces are exempt from rent control and have

never been subject to rent regulation.

B. Changes in Park Amenities, Services and

Maintenance. There is a range of rents or zone of

reasonableness which will permit a fair return. Decreases in amenities, services and maintenance may

indicate that a lesser increase within the zone of

reasonableness is appropriate and increases in services, amenities and maintenance may indicate that

a greater increase within the zone of reasonableness

is appropriate. Further, the elimination of or decrease in maintenance, services and amenities may

constitute a de facto rent increase imposed without

the approval of the Board in violation of the Ordinance and may, in some circumstances require a decrease in the rent increase that might otherwise be

granted or the denial of a rent increase.

IV.

OTHER RELEVANT EVIDENCE AND FAIR

RETURN

A. The Ordinance is based on the assumption

that the rents in effect before the adoption of the

Ordinance provided a fair return and park owners

attempted to rebut that presumption when they

first applied for an increase. Most applications submitted to the Board have been based on the factors

in the Ordinance and Park Owners rarely offer evidence concerning their investment in a park, the return being earned on the park or the return being

earned by comparable mobilehome parks. However,

39a

an applicant may file an application based on the

claim that a rent increase is necessary because the

park cannot earn a fair return without an increase

greater than that permitted by application of thefactors in the Ordinance as well as on the grounds

provided by the factors in the Ordinance. Such an

application must be made at the same time as a regular rent increase application and must include the

following information, including supporting documentation and testimony, as well as the information

concerning income, expenses and profit which is ordinarily required:

1.

The date the applicant purchased the

park and the purchase price of the park. If the park

was purchased after the adoption of the Ordinance,

the applicant shall also provide the rents charged, the

net operating income of the park prior to the purchase

and an appraisal of the park at the time of purchase.

Net operating income means gross income minus allowable operating expenses (as set forth above) minus

debt service. The appraiser performing the appraisal

and preparing any appraisal report will be required

to attend the hearing on the rent increase application.

2.

Any down payment made upon purchase

of the park and the total amount of equity in the park

on the date of the application. Any refinancing of the

park since the date of purchase and whether the proceeds of the refinancing were used to improve the

park or for other purposes.

3.

Any capital improvements made to the

park, the cost thereof and whether that cost was recovered by a capital improvement rent increase.

4.

The Overall Rate of Return (ratio of net

operating income to purchase price) being earned by

40a

comparable mobilehome parks in jurisdictions with

and without rent control at the time of the application. The Overall Rate of Return being earned by the

applicant’s park (after making any adjustments to the

purchase price necessary as a result of purchase after

the adoption of rent control). Other measures of the

rate of return being earned on the applicant’s park

and comparable parks and other evidence considered

relevant by the applicant may also be submitted, but

the Board is concerned with return on investment. It

will not consider return based on the current fair market value of a park or the value of park property for

purposes other than use as a mobilehome park. Any

expert relied upon concerning the return being earned

by the applicant or comparable parks or investments

must be available for testimony and questioning at

the hearing. Since mobilehome parks are unique investments, it is unlikely that the return on other

types of investments would be found relevant by the

Board. Thus, the return on investments which do not

have the potential for appreciation in value are not

relevant. Similarly, comparison to the return being

earned by other residential rental property is not

likely to be relevant since the owners of such properties must maintain the actual housing units whereas

the owners of mobilehome parks do not have this responsibility or expense because mobilehome owners

are responsible for maintaining them and the spaces

which they rent. The owners of apartment complexes

incur expenses in re-renting vacant units which are

not incurred by mobilehome park owners and apartment owners experience a much higher vacancy rate.

In the case of mobilehome parks, the existence of a

vacant space is uncommon since homes are usually

sold in place and rent is generally paid on a space so

41a

the home can remain on the space until it is sold even

if the owner has moved out. Further, the residents of

mobilehome parks invest in improvements which enhance the applicant’s investment and this does not occur in other types of residential rental properties.

V.

MISCELLANEOUS

A. Evidence concerning the income of the park

owner from sources other than the mobilehome park

is not relevant and will not be considered. Evidence

of the income of homeowners will generally not be

considered because the need to protect low income

homeowners is one of the reasons for adopting the

Ordinance, which is designed to protect them and

all homeowners from excessive rents.

B. Evidence concerning expenses, income, profit

or changes in services, maintenance and amenities

that was considered at the last hearing on a rent

increase application by a park will not be reconsidered.

C. The Board cannot grant an increase greater

than that specified in the application. Considering

a larger increase could deprive affected homeowners

of an opportunity to oppose the larger increase.

Residents are given notice of the specific increase

requested and decide whether to submit written opposition or appear to testify concerning the application based, in part, on the amount of the increase

noticed. Although a resident might not oppose the

noticed increase and not be present to testify at the

hearing for that reason, that resident might have

appeared to oppose a larger increase.

VI.

Capital Improvement Rent Increases

42a

A. Definition and Examples. Capital Improvement is defined by Section 4701(c) of the Mobilehome Space Rent Control Ordinance to mean

“improvements to a mobilehome park and major rehabilitation of a mobilehome park that involve more

than ordinary maintenance and repairs.”

1.

Normal routine maintenance and repair

of a park is not a capital improvement. For example,

patching of potholes and slurrying of asphalt streets

and roadways constitute ordinary repairs and are not

capital improvements within the meaning of the Ordinance.

2.

Replacement or major reconstruction of

an existing facility or improvement constitutes a capital improvement. For example, the replacement

and/or reconstruction of streets or roadways, constitute capital improvements. Repairs to common areas

where such work is part of a major rehabilitation, refurbishment, reconstruction, or remediation project,

are also examples of capital improvements.

3.

Addition of new facilities in a park, such

as a new office or utility room, a sauna, jacuzzi, pool

or an addition to a recreation room, are also examples

of capital improvements.

4.

The costs of major rehabilitation or refurbishment necessitated by acts of nature (earthquake, fire, flood, storm) or major remediation work

such as environmental clean-up are also examples of

capital improvements.

5.

Capital improvements which would otherwise form the basis for a capital improvement rent

increase cannot be the basis of such an increase if the

43a

park owner charges a fee for the use of the improvement. For example, additional washers and dryers

installed for the use of residents cannot be the basis

for a capital improvement rent increase if the tenants

must pay to use them.

6.

Portable items, such as pool furniture

and landscaping or gardening equipment, do not constitute capital improvements, unless they are part of

a major rehabilitation or refurbishment.

7.

Costs of any capital improvement that

have been recovered by the owner through any insurance claim, litigation, or other right of indemnity

shall be excluded for purposes of determining the

amount of any capital improvement.

B. Determination of Allowable Increases.

1.

Amortization Periods. In amortizing

capital improvements, the following schedule shall be

used to determine the amortization period of the capital improvement. For those items not listed, the

amortization period for an improvement which has

similar characteristics shall be used. The amortization period below may be increased or decreased depending upon the quality of the improvement, the

conditions placed upon it or any other relevant factors

affecting amortization. The Board may rely upon Department studies or reports it deems appropriate in

establishing a greater or lesser amortization period or

an amortization period for any item not listed below:

Expenditure

Appliances

Major Appliances, residential

Garage door openers

Garbage disposers, washing machines

Years

10-18

8-11

6-12

44a

Home electronics

Telephone systems

Vacuum-cleaning system

Exterior

Awnings and window screens

Canopies and patio covers

Exterior paint

sealers, silicone, etc.

Fireplaces, chimneys, masonry

metal

Shutters

Storefronts

entrance doors, automatic

Floor Covering

Access (Computer) floor

Carpet and pad

Carpet tiles

Ceramic, quarry, precast terrazzo

tile/pavers

Indoor-outdoor carpet

Linoleum

Rubber mats

Terrazzo, bonded or epoxy

Vinyl composition tile or sheet

Vinyl or rubber tile or sheet

Wood flooring

Hazardous Waste Removal/ Environmental Clean-up

Interior

Acoustical ceiling tiles or panels

Cabinets

Countertops, laminates

Doors, hollow core

solid

shower

5-12

9-12.

12-17

3-9

12-19

3-7

1-5

35-55

20-35

3-7

18-25

7-20

10-18

4-10

5-10

25-40

3-10

10-20

3-6

25-50

7-19

12-24

20-35

10-20

8-15

15-35

10-35

18-25

25-50

5-25

45a

Drapery

Lighting

Paint

Tile, glazed

Vertical blinds

Wallpaper

Heating, Ventilating and Air Conditioning

Solar-heating systems

Exhaust and ventilating fans

Air ducts, galvanized steel

aluminum

fiberglass

duct insulation

Fans and motors

Heating and cooling coils.

Plumbing

Plumbing fixtures

enameled steel

fiberglass

Faucets and valves

Water heaters, residential

commercial

Pumps, sump and well

Pipe, galvanized

copper

plastic

Sprinkler and fire protection systems

residential smoke detectors

smoke and heat detectors

fire hose and misc. equip

Miscellaneous pumps, motors, controls

Rehabilitation Expenses (Earthquake,

fire, flood, storm)

Architectural and Engineering Fees

6-12

15-35

3-10

20-45

5-16

7-18

5-15

6-18

17-30

15-32

14-28

12-24

14-20

10-17

17-30

5-14

10-20

8-16

3-12

8-20

8-15

12-30

20-35

15-33

20-30

10-17

13-20

7-13

3-10

3-5

46a

Emergency Services Clean-up

Fencing and Security

Management

Tenant Assistance

Structural Repair and Retrofitting

Foundation Repair

Foundation Replacement

Foundation Bolting

Iron or Steel Work

Masonry-Chimney Repair

Shear Wall Installation

Grading

Roofing

Built-up tar and gravel

Composition shingles

Elastomeric

Metal

Slate or copper

Tile, concrete or clay

Wood shakes

Wood shingles

Exposed insulation

Gutters and downspouts

Site Improvements

Bulkheads, concrete

steel

wood

Culverts, concrete

Curbing, concrete

Flagpole

Fencing, chain link

masonry walls

wood

wind screens

3-5

3-5

3-5

3-5

5-10

15-20

15-20

15-20

15-20

5-10

15-20

10-20

12-30

12-25

13-45

50-60

30-50

20-35

16-30

19-24

10-30

30-40

25-35

20-30

30-40

15-25

16-30

13-20

20-35

6-12

4-7

47a

Landscaping, decorative shrubs,

trees, etc.

Outdoor furniture

Outdoor lighting fixtures

Parking lot bumpers

guard rails

Paving, asphalt

concrete/brick

Railings

Signs

Sprinklers, galvanized pipe

plastic pipe

controllers and pumping systems

Stairway and decks, wood

cement composition

Structural Additions (utility room, offices, guardhouses)

Swimming pool, commercial, concrete

Mechanical equipment

Spas

Solar pool equipment

Synthetic sports surfaces

Tennis court

asphalt/colored concrete resurfacing

nets

Underground sewer and water lines

2.

7-20

3-10

10-20

3-7

7-13

5-17

10-20

5-10

8-14

10-25

15-28

8-13

7-15

12-25

10-20

15-30

10-20

3-12

7-20

3-8

18-25

3-7

1-3

22-32

Calculation

The monthly rent increase for each mobilehome

space based on a capital improvement shall be calculated according to the following formula: Cost of

the capital improvement, including interest, divided

by the amortization period; the result of that calculation divided by twelve (12) months; and the result

of that calculation by the number of all spaces.

48a

For example, the allowable capital improvement

rent increase for a street replacement, (paving) costing $10,000 (including interest) and having a useful/amortizable life of ten (10) years is calculated as

follows:

$

10,000.00

10 years

=

$1,000.00 annual amortization cost.

$

1,000.00

12 months

=

$83.33 monthly amortization cost.

$

83.33

30 spaces

=

$2.78 monthly rent increase per space for ten

years

3.

In general, a capital improvement

should not be amortized over a period which would

yield a monthly per space increase of over ten percent

(10%). In such a case, a longer amortization period

may be appropriate. The percent increase represented by a particular capital improvement rent increase shall be calculated by dividing the proposed

capital improvement rent increase by the amount of

the existing base rent. Thus, in the case of the above

street replacement example, the percent increase is

calculated as follows:

$2.78 (proposed capital

provement rent increase

$130 (existing base rent)

im- = 2.1% (rent increase)

In cases where a longer amortization period is

used to avoid a monthly per space increase of over

49a

ten percent (10%), interest at the legal rate of interest shall be allowed over the entire amortization period.

4.

Notwithstanding the subsections above,

based upon the circumstances of a particular case, the

Board shall have the discretion to determine capital

improvement costs or appropriate amortization in

any alternative manner necessary to protect the residents of the mobilehome park from excessive rents

while ensuring the park owner receives a fair return.

C. Cost, of the Capital Improvement. The applicant shall provide documentary evidence of the actual cost incurred for the capital improvement. The

cost thereof shall include the interest expense incurred on money borrowed to pay for the capital improvement. In those cases where the park owner

finances the capital improvement or a part thereof

with his/her own funds, interest at the legal rate of

interest computed over a reasonable amount of time

shall be included as a part of the capital improvement cost. In determining the reasonable amount

of time over which interest shall be allowed, the

Board shall be guided by the current practices of

state and federally chartered banks and/or savings

& loan associations as to the length of time for repayment of improvement loans, provided, however,

that the time shall not exceed the amortization period used in calculating the allowable capital improvement rent increase. The staff report shall provide data to the Board concerning the reasonable

amount of time over which interest shall be allowed.

D. Application Procedures.

1.

An applicant may, but is not required to,

submit an application for a capital improvement rent

50a

increase at the same time as the application for a general rent increase. However, if an application for a

general rent increase and an application for a capital

improvement rent increase for the same park are submitted together they will be considered on the same

hearing date except in unusual circumstances.

2.

An application for a capital improvement rent increase is to be evaluated and heard separately from an application for a general rent increase.

A separate application form must be submitted for

each type of rent increase application. When a general rent increase application and a capital improvement rent increase application are filed together, the

capital improvement rent increase application shall

be heard first.

3.

A fee shall be charged for each rent increase application. However, if an application for a

capital improvement rent increase and an application

for a general rent increase for the same park are submitted together, only one fee will be charged.

4.

When the owner submits an application

for both a general rent increase and a capital improvement increase at the same time and they are set for

hearing on the same date, the notice to tenants prepared and sent by staff shall indicate that both increases are requested and will be heard on the same

hearing date but will be heard separately. On the

hearing date set to consider the applications the

Board shall hold a separate public hearing on each

application and the capital improvement rent increase application shall be heard first.

51a

APPENDIX G

RESOLUTION NO. 06-149

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF CARSON, CALIFORNIA,

AMENDING RESOLUTION NO. 98-010

ADOPTING REVISED GUIDELINES FOR

IMPLEMENTATION

OF

THE

MOBILEHOME SPACE RENT CONTROL ORDINANCE, CHAPTER 7, ARTICLE IV, OF THE

CARSON MUNICIPAL CODE

WHEREAS, the City Council hereby finds that it

is necessary to assure the supply of affordable housing within the City of Carson, and that one important source of such affordable housing are the

various mobilehome parks located throughout the

community; and

WHEREAS, the City Council hereby finds that is

appropriate to amend the current guidelines that

govern the administration of the City’s mobilehome

space rent control ordinance, and to do so as to better assure that residents of mobilehome parks are

protected from excessive rent increases that could

reduce the supply of affordable housing in the community; and

WHEREAS, the City Council hereby finds that

amendment of the current guidelines that govern

administration of the City’s mobilehome space rent

control ordinance will provide additional analytical

tools to evaluate pending applications for rent increase, and that such analytical tools will also help

to assure that the mobilehome park owners within

the City receive a constitutional fair return on their

investments.

52a

NOW, THEREFORE, the City Council of the

City of Carson, California, does hereby FIND, DETERMINE, and RESOLVE as follows:

1. The foregoing recitals are true and correct.

2. Resolution No. 98-010, entitled “A Resolution

of the City Council of the City of Carson Adopting

Revised Guidelines for Implementation of the Mobilehome Space Rent Control Ordinance, Chapter 7,

Article IV, of the Carson Municipal Code and Replacing the Policy Guidelines for Capital Improvement Rent Increase,” shall be, and the same hereby

is, amended to add a new Section II.C., to read, in

its entirety, as follows:

“C. Maintenance of Net Operating Income

(MNOI) Analysis. In addition to the analysis

set forth in Sub-Section II.B., above, the

Board may also consider, a “maintenance of

net operating income analysis,” which compares the net operating income (NOI) level expected from the last rent increase granted to

a park owner and prior to any pending rent

increase application (the so-called “target

NOI) to the NOI demonstrated in any pending

rent increase application.

1. Where relevant to any pending rent increase application, a MNOI analysis shall be

included in the staff report to the Board, along

with the analysis set forth in Sub-Section

II.B., above, and in addition to the analysis

considering and evaluating the eleven (11)

factors set forth in Municipal Code § 4704(g),

and where there is sufficient data submitted

by the applicant to permit such an analysis.

53a

2. An MNOI analysis is intended to provide

another method to estimate whether any applicant for a rent increase is earning a constitutional fair return, as established by the immediately prior rent increase, with appropriate adjustment(s) to reflect changes in the

CPI, and is a methodology approved by the

courts in which changes in debt service expenses are not to be considered in the analysis

(unlike a gross profits maintenance analysis,

where such changes may be considered). The

analysis is another aid to assist the Board in

applying the factors in the Ordinance, and is

to be considered in company with the factors

in Municipal Code § 4704(g), and all other relevant evidence presented and the statutory

purposes of the mobilehome space rent control

ordinance. An MNOI analysis is not intended

to create any entitlement to any particular

rent increase.”

3. Resolution No. 98-010, entitled “A Resolution

of the City Council of the City of Carson Adopting

Revised Guidelines for Implementation of the Mobilehome Space Rent Control Ordinance, Chapter 7,

Article IV, of the Carson Municipal Code and Replacing the Policy Guidelines for Capital Improvement Rent Increase,” shall be, and the same hereby

is, amended to add a new Section VII. to read, in its

entirety, as follows:

“VII.

Assuring a Constitutional Fair Return. Notwithstanding any other provision of

these guidelines, nothing shall preclude the

Board, either in the exercise of its sound discretion during review of any petition for a rent

54a

increase, including any fair return adjustments, or in response to a court order, from

granting an increase that is necessary in order to meet constitutional fair return requirements and to take into account factors that

must be considered in making a fair return

determination.”

4. Resolution No. 98-010, entitled “A Resolution

of the City Council of the City of Carson Adopting

Revised Guidelines for Implementation of the Mobilehome Space Rent Control Ordinance, Chapter 7,

Article IV, of the Carson Municipal Code and Replacing the Policy Guidelines for Capital Improvement Rent Increase,” shall be, and the same hereby

is, amended to revise the 4th full sentence in Section VI.B.3., to read, in its entirety, as follows:

“In cases where a longer amortization period

is used to avoid a monthly per space rent increase of over ten percent (10%), the allowable

interest rate shall equal to the average rate

for thirty year fixed rate for mortgages plus

one (1%) percent. The average rate shall be

the rate Freddie Mac last published in its

weekly Primary Mortgage Market Survey

(PMMS) as of the date of the initial submission of the rent increase application.”

5. Resolution No. 98-010, entitled “A Resolution of the City Council of the City of Carson

Adopting Revised Guidelines for Implementation

of the Mobilehome Space Rent Control Ordinance, Chapter 7, Article IV, of the Carson Municipal Code and Replacing the Policy Guidelines

for Capital Improvement Rent Increase,” shall

be, and the same hereby is, amended to revise the

55a

3rd full sentence in Section VI.C., to read, in its

entirety, as follows:

“The allowable interest rate for capital improvements shall equal the average rate for

thirty year fixed rate for mortgages plus one

(1%) percent. The average rate shall be the

rate Freddie Mac last published in its weekly

Primary Mortgage Market Survey (PMMS) as

of the date of the initial submission of the rent

increase application.”

PASSED, APPROVED, and ADOPTED this 31

day of October, 2006.

/s Jim Dear

Mayor Jim Dear

ATTESTED:

/s Helen S. Kawagoe

City Clerk Helen S. Kawagoe

APPROVED AS TO FORM:

ALESHIRE & WYNDER, LLP

/s

City Attorney

STATE OF CALIFORNIA

COUNTY OF LOS

ANGELES

CITY OF CARSON

)

) ss.

)

I, Helen S. Kawagoe, City Clerk of the City of

Carson, California, do hereby certify that the whole

number of members of the City Council is five; that

the foregoing resolution, being Resolution No. 06149 was duly and regularly adopted by said Council

at a special joint meeting duly held on the 31st day

56a

of October, 2006, and that the same was passed and

adopted by the following vote:

AYES:

COUNCIL

MEMBERS:

NOES:

COUNCIL

MEMBERS:

COUNCIL

MEMBERS:

COUNCIL

MEMBERS:

ABSTAIN:

ABSENT:

Mayor

Dear,

Ruiz-Raber, Santarina, Williams

and Gipson

None

None

None

s/ Helen S. Kawagoe

City Clerk Helen S. Kawagoe