Memorandum

City of Lawrence

Planning & Development Services

TO:	David L. Corliss, City Manager Scott McCullough, Planning & Development Services Director
FROM:	Brian Jimenez, Code Enforcement Manager
CC:	Diane Stoddard, Assistant City Manager
Date:	December 3, 2008
RE:	Rental Expansion

Background

Expansion of the rental registration and inspection ordinance to include rental dwelling units located within all zoning districts has been discussed amongst citizens, neighborhood associations, City staff and the City Commission over the last several years. During the spring of 2007 in preparation for the 2008 budget process, staff submitted a memorandum to the City Commission regarding the proposed expansion of the program which would include all rental dwelling units.  The memorandum addressed costs associated with implementing the program which included additional staff, office equipment and vehicles. 

At that time, it was proposed that if all multi-family rental units (13,000+) were to be inspected on a 3 year rotation, it would be necessary to increase staff to include 4 new code enforcement officer positions and 2 administrative support III positions. On March 27, 2007, expansion of the rental registration and inspection program was discussed at the City Commission meeting which resulted in the topic being tabled for future discussion at an undetermined time.

On November 7, 2007, members of the Oread Neighborhood Association met with City staff and City Commissioners to re-examine the possibility of expanding the program to their neighborhood and possibly city wide.  On April 29, 2008, as a follow up to the Oread study session, the City Commission received the staff report (Jan 25, 07), which had been presented to the previous City Commission for discussion.  After discussing the resources needed to expand the program to all residential dwelling units within the City, the City Commission directed staff to explore options to implement a reduced program with less first-year costs to the City and determine if the program could be established in a cost-neutral fashion.  The commission also asked for a clear purpose statement for the implementation of such expansion.

Rental Registration – Single Family Zoned Properties

Purpose

The rental inspection program for rental units located in single family zoned districts was adopted in May 2001 and became effective on February 1, 2002.  The current rental ordinance can be viewed as having three main purposes:

• The licensing and inspection of single family dwelling units ensures that landlords are providing the minimum property maintenance code standards therefore creating safer dwelling units for their tenants.  Since the implementation of the ordinance, staff has cited over 7,000 code violations. 

• The ordinance regulates rental properties as businesses and reduces the potential for demolition by neglect by requiring periodic inspections on a three year rotation. 

• By regulating these properties, single family neighborhoods are more likely to maintain their livability and integrity which benefits all properties within these neighborhoods.

Expansion to Rental Dwelling Units 50 Years Old or Older

After discussion amongst City staff regarding the merits of expanding the program and the costs associated with expansion, it was decided that the focus of expanding the program should be directed to all rental structures throughout the City, regardless of zoning district, that are 50 years old or older. By expanding the program to include rental dwelling units that meet this age requirement, the City will be including neighborhoods throughout the City that are currently not regulated nor inspected unless staff receives a complaint regarding the conditions of a rental dwelling unit.

There will be additional rental dwelling units each year that will meet the criteria requiring them to be licensed and inspected. Expanding the program will provide the same safeguards to tenants of these structures as those currently provided to the tenants of single dwelling zoned rental units.  Another important benefit will be addressing the issue of demolition by neglect.  Past inspection history of rental dwelling units that are 50 years old or older has demonstrated that code violations are more frequent in number and in severity.   

Other issues that will be specifically addressed are the following:

• International Fire Code Compliance

After speaking with Lawrence Douglas County Fire & Medical (LDCFM) Division Chief Rich Barr, it was determined that rental dwelling units that are 50 years old or older present many challenges to their Department.  Identifying the current use of these structures can be problematic for LDCFM.  Expanding the licensing and inspection ordinance to encompass these properties will address International Fire Code (IFC) regulations that are not being complied with as well as provide LDCFM personnel an accurate footprint of the building use which will be beneficial to personnel responding to medical emergencies, structure fires and other calls for service. 

It is anticipated that the inspection of these dwellings units would be a partnership between our department and LDCFM when Fire Code violations are present.  It has been confirmed by Chief Mark Bradford that LDCFM fully supports the proposal to expand the rental licensing and inspection program to dwelling units 50 years old or older.

• Land Use Compliance

Past experience has demonstrated to staff that occupancy violations are common in older structures, as many houses are very large in size and have many bedrooms.  Additionally, the current uses of the properties are often not identified by City staff.   A property that is identified in our records as 3 dwelling units may have been converted back to one dwelling unit or vice versa. Expanding the rental program to include these structures would identify properties that are being used as “boarding houses” and those properties that have changed their use without going through the proper procedures for approval.  The inspection would provide all staff of Planning & Development Services valuable information regarding how the property has been used in the past, how it is currently being used, and what the legal use is.

• Building Permit Application - Plan Review

Staff has encountered challenges when reviewing building permit applications for older properties.  A common issue is that the type of dwelling use listed on the building permit application is not always accurate.  Expanding the rental inspection program to older structures would provide our Department and LDCFM accurate information regarding the type of dwelling that is present when the permit and all related documents are reviewed prior to the issuance of the building permit.   There are uses of a property that require specific fire code regulations to be complied with that may be unknown to the owner. The staff assigned to plan review would be able to access rental inspection records to confirm the use of the property and compare to the use identified on the permit to determine if there are inconsistencies.  This process would greatly assist in reducing errors in the building permit process.

Estimated Number of Units to License and Inspect

With the assistance of Information Systems, it was determined that there is a minimum of 2,500 rental dwelling units that fit the criteria of being 50 years old or older and that would be licensed the first year of implementation.  We currently license approximately 2,000 units; therefore, during the first year of expanding the program there would be a minimum of 4,500 total dwelling units licensed annually.  To determine this number, a spread sheet was obtained from the Douglas County Appraiser’s Office that identified all of the parcels within the City and the built age of the structure on such parcel.  Information Systems then used Geographic Information System (GIS) parcel and zoning layers to incorporate the County data into the GIS system.  While this information will not be completely accurate, it does provide a baseline to establish a minimum number of rental dwelling units that would be included with the initial implementation.  As mentioned earlier, with each subsequent year there will be additional units that will be required to be licensed and inspected.  It is anticipated that staff will utilize the Douglas County Appraiser’s Office and building permit records to identify dwelling units that will be required to comply each year. 

Estimate of Inspections Performed Annually

If we estimate that there are between 4,500 to 5,000 rental dwelling units to be inspected based on the frequency schedule of once every three years then the following numbers can be used to estimate number of inspections per year per inspector:  inspect once every 3 years then 5,000 inspections/3 = 1,666 inspections per year = 555 initial inspections per year per inspector if we add 2 inspector positions.  This does not include re-inspections which would be required for the majority of all new rental units inspected for the first time.  Re-inspections will more than likely  require each inspector to complete 800 to 1,000 total inspections per year.  Additional work hours during a normal work day will include office time required for data entry, research and other miscellaneous assignments associated with the position.  As mentioned above, the number of dwelling units required to comply with the ordinance will increase each year therefore it is reasonable to conclude that each staff member will experience a work load increase each year.

Calculating the 2,080 work hours in a calendar year and then subtracting a minimum of 12 vacation days, 2 personal days, 3 sick days, 3 training days and 9 holidays we arrive at approximately 1,848 hours available for each inspector.  Each inspector would be required to perform 5 inspections per day initially with this total increasing yearly.  An initial inspection in older structures could easily take an hour or longer to complete. 

Addition of Administrative Support III position. 

A key element to the implementation of the expansion of the rental inspection program and to enhance our current rental inspection program is the addition of an Administrative Support III position (Licensing & Inspection Coordinator). With a minimum total of 5,000 rental dwelling units to license and inspect this position would be critical to the success of the expansion.  Inspection staff must be able to spend the majority of their time in the field. This position would be responsible for all of the daily clerical duties associated with the rental inspection program which would include data entry, scheduling, answering calls and emails, mailings, etc. 

Inspection Guidelines

The recommendation for the inspection protocol is to follow the same frequency as required for our current program which is an inspection once every three years for each dwelling unit.

Cost of Expansion

As previously mentioned, research indicates there are a minimum of 2,500 rental dwelling units located within the City that are 50 years old or older that are currently not required to be licensed and inspected.  A map (attached) identifying these units has been created to accurately demonstrate the geographic areas of the City where these rental dwelling units are located.  Based on the estimated number of rental dwelling units identified, it is our recommendation that a minimum of 2 Code Enforcement Officers and 1 Administrative Support III position be added for the program to be successfully implemented.

The table below identifies the costs associated with the implementation during the first year.

Position	1^st yr. Benefits  Salary, KPERS, SS, Health Care	Computer, office furniture, etc…	Vehicle Cost, Fuel & Maintenance	Total
Code Enforcement Officer (905)	$50,313	N/A – items are available due to vacant position	N/A -  already in existing budget	$50,313
Code  Enforcement Officer (905)	$50,313	N/A – items are available due to vacant position	N/A – already in  existing budget	$50,313
Admin Support III  (904)	$45,934	2,000	Not applicable	$44,934
			Total 1^st year	$146,560

• Health care benefits are calculated at the family plan rate resulting in the maximum amount for first year benefits.
• Salary is calculated at step 3 for all three positions.

Research indicates that annual license fees implemented by other city municipalities are quite varied regarding the amount of the license fee and the formula for how the annual fees are calculated.  Many cities have implemented an annual license fee while others have implemented an inspection fee.    Our annual fee of $25 is low compared to other cities contacted.

The following table provides examples of other cities’ license fees and their respective inspection frequency.

License Fee Comparison Table

City	Annual Fee	Inspection Frequency
Iowa City , Iowa	$60 for each structure $16 for each unit $6 for each bedroom Ex. 4 plex with 3 bedrooms each = $196	Every 2 years
Bloomington, Indiana	$50 for each structure $12 for each unit Ex. Single Family = $62       Duplex = $74       Triplex = $ 86	Every 3 to 5 years
Unified Government of Wyandotte County, Kansas	$18.50 for each structure $18.50 for each unit SF = $37, Duplex = $55.50 Triplex = $74	Single Family – 5 years Multi-Family – 3 years
Faribault, Minnesota	$67 for each structure 0-8 units = $24 per unit 9-14 units = $22 per unit 15+ units = $20 per unit	Every 2 years
Davison, Michigan	Initial registration:1-3 Units = $25 Over 4 units = $50 Initial inspection; SF= $75, 2 Units = $100 3-4 Units = $125, 5-8 Units = $175	Every 2 years
Des Moines, Iowa	SF Initial Inspection = $120  renewal Inspection = $85 Duplex initial Inspection = $142, renewal inspection = $108 Other structures = $108 plus $18.50 for each additional unit	SF and Duplex = 3 years Other Structures = 2 years

The table below provides the revenue generated from our current fee of $25 and the revenue potential if the fees were increased to $50 and $60 respectively.

Revenue Generated Comparison Table

Estimated Number of  dwelling units	$25 per dwelling (current)	$50 per dwelling	$60 per dwelling
1^st yr. – 2,500	$62,500	$125,000	$150,000
2^nd yr. – 2,750	$68,750	$137,500	$165,000
3^rd yr. – 3,000	$75,000	$150,000	$180,000
4^th yr. – 3,250	$81,250	$162,500	$195,000

• An annual licensee fee of $60 per dwelling unit would be necessary for the proposed expansion to be entirely cost-neutral during the 1^st year of implementation.

• The table below demonstrates what percentage of overall rental income associated with license fees of $25, $50 and $60 per dwelling unit would be paid for every dwelling unit that generates $500, $750 and $1,000 monthly rental income.   All scenarios result in the license fee representing less than 1% of the total revenue generated with the exception of a dwelling unit that rents for $500 per month and is required to pay a $60 annual license fee.

License Fee per dwelling unit	Rent per Month for each dwelling	License Fee = % of yearly revenue
$25	$500	0.0041%
	$750	0.0027%
	$1,000	0.0020%
$50	$500	0.0083%
	$750	0.0055%
	$1,000	0.0041%
$60	$500	0.01%
	$750	0.006%
	$1,000	0.005%

Ordinance

The proposed ordinance would regulate single dwelling zoned rental units and incorporates all rental dwelling units that are 50 years old or older located in all zoning districts.  The ordinance is attached for review. There are numerous changes to the ordinance which are summarized as the following:

• Provides revisions to code language including, but not limited to, the deletion of most definitions identified in the current ordinance but no longer applicable. 
• The amended ordinance would require all rental dwelling units located in single dwelling districts to be inspected (tri-plexes, nonconforming apartment buildings, etc.).  Currently the policy is to only inspect single family detached dwellings and duplexes. 
• Proposes an increase of the annual rental license from $25 to $60 per dwelling unit.
• Section 6-1302 (C) clearly identifies requirements of the owner regarding licensing their property and providing proper notification regarding mailing address, phone number, agent information and requires the current owner, prior to the sale of the property, to notify the buyer of all unabated violations as well as the requirements of the ordinance. 
• Section 6-1302 (D) requires owner to designate a local agent when the owner resides more than 40 miles from the City of Lawrence and holds the agent responsible for compliance with the ordinance which includes maintenance of the property and acceptance of all notices under the Article.
• Section 6-1304 creates additional language to specifically address inspection protocol including potential fees assessed for additional re-inspections and failure to appear for scheduled inspections.  Additionally, this section eliminates current code provision that allows for a private inspection as an alternative to the city inspection.  Since the implementation of the current ordinance there has not been one instance where this alternative has been utilized.  Research has not supported this alternative as being a common practice among other municipalities.

Conclusion

The program, as proposed, would provide benefit to the public’s health, safety, and welfare.  The current rental licensing program appears to be paying dividends in terms of maintaining rental units in a safe manner.  It also produces a level field of regulation that the entire rental community must abide by for the safety of tenants and the stability of neighborhoods.  The program is cost-neutral if the $60 fee is established, but is reasonable as a percentage of the revenue generated by each unit.  Staff recommends submitting this program to the public for review and comment prior to action by the Commission.