CITY HALL — The City Council voted Tuesday to ask the owner of an embattled trailer park to sell his property, a potentially expensive proposition that would kill off planned city projects and that the trailer park ownership team has not considered in the past.

The request comes at the end of over six years of negotiations between City Hall and co-owner Marc Luzzatto to keep residents in their homes until details could be hammered out on a mixed-use condominium project proposed for the site.

That included a tenant relocation plan that would move residents into deed-restricted low-income apartments included in his project, or into the-city owned Mountain View Mobile Home Park.

In the meantime, the company has spent a lot of money maintaining the park, Luzzatto told council members.

“No good deed goes unpunished,” he said Tuesday.

It’s the first time aggressive action like purchase or eminent domain has come up with the council, but Luzzatto couldn’t say he was surprised.

“Nothing in this process has surprised me, nor will surprise me,” he said.

Luzzatto would not comment on whether or not he and his partners would consider the offer to sell for city staff’s estimated $22 to $30 million, or at all.

The direction came as a result of Councilmember Kevin McKeown’s urging that the council do something to preserve Village Trailer Park and allow its 51 elderly and disabled residents to live out their lives in place.

A request to sell fell far short of McKeown’s hope that city staff would explore “all options to protect the Village Trailer Park and its residents, including acquisition,” phrasing that would open the door to seizure through an eminent domain process.

Eminent domain is the seizure of private property by a government entity at or above market rate. It was characterized by City Manager Rod Gould as “the most extreme use of a city’s police powers.”

Using eminent domain to acquire the property could result in a sale price that exceeds the market rate by 50 to 100 percent of the cost, which would restrict City Hall’s ability to provide services or complete other approved projects by cutting into the General Fund.

The total impact of such a sale was hotly debated by local attorney Rosario Perry, who argued that the property could not be worth more than $8 million, and required an “honest appraisal.”

The $22 to $30 million figure given by staff was evaluated by looking at what 167,664 square feet of property would cost, per square foot, in other locations on the northeast side of the city, including airport property and property on Exposition and Olympic boulevards.

There’s a lot of information missing, Perry said.

“There’s no explanation of where these are, how big they are or what use is allowed on these properties,” he said.

Use, in particular, is important to any valuation because commercial is worth more than residential, and density also factors into the equation.

If the Village Trailer Park was valued like the properties around it, which are all low-density residential, it would only be worth $8 million, Perry estimated.

The question of zoning is an important one in what City Attorney Marsha Moutrie called “an unusual situation.”

The Planning Department is negotiating a development agreement with owners of the park to guide the potential condominium project they wish to build. That would change the zoning, and therefore the value, of the land on which the mobile home park sits.

“Whether the park would be valued as presently zoned, or valued at what the value might be with a development agreement, I can’t tell you I know that answer,” Moutrie said.

The council remained divided between what should be done to help the elderly residents and what kind of precedent City Hall should set in terms of considering the seizure of private property.

The council has seen many properties removed from the rental market and residents displaced, said Councilmember Pam O’Connor.

“If we want to go down the path to protect all renters, let’s take this up as a policy,” O’Connor said.

A flurry of three motions followed, including McKeown’s original — which was voted down — and one to simply study the question of the appraisal value as raised by Perry.

McKeown was disappointed by the outcome.

“The intent tonight was to look at how we might purchase the property,” McKeown said as he voted against the motion. “This and other substitutes that were made tonight looked for reasons not to.”

Residents of a 130-unit mobile home park have for the first time made a formal offer of $41 million to buy the property when and if it’s sold.

The potential sale of Laguna Terrace Mobile Home Park at 30802 South Coast Highway has percolated for years, delayed by litigation and contested decisions.

Sean Schlueter, a 10-year resident spearheading the purchase offer, sent park neighbors a copy of the letter of intent, which was agreed upon and signed by Boyce Belt, the park association president.  Seventy-three residents supported submitting the letter to the park’s owner, Stephen Esslinger; 18 opposed.

“This is a letter of intent to see if we have a willing seller,” said Schlueter.  “The interest rates are as low now as they’re ever going to be.  We’ll never know unless we ask.  At least our hat’s in the ring.”

The offer is good until Oct. 6, Schlueter said, who added that he and the nearly 400 park residents expect a written response.

Schlueter owns his mobile home on the hill across Coast Highway from Treasure Island beach park and would like to buy the lot beneath its wheels. So do 54 percent of the park’s other residents.  Schlueter was a founding member of the park’s association, which he said was established to purchase the mobile home park and convert it to a nonprofit, resident-owned property. Park residents agreed to the idea four years ago.  This is the first time a formal offer has been made to Esslinger because earlier ownership was in contention among family members.

Esslinger, whose grandfather developed the park, has proposed subdividing the property for individual purchase, but that plan has been stymied by the California Coastal Commission due to a question over lot lines and natural waterways.

The purchase price is based on a 2007 appraisal of the property, according to documents. Schlueter said all leases will be protected and lot purchase is not required to continue renting at the mobile home park.

Belt said he expects a response from Esslinger or his attorney, Boyd Hill, within the next two weeks.  Esslinger and Hill did not return phone calls seeking comment nor did the park’s general manager, James Lawson.

As the debate wages over vacancy decontrol in Oceanside’s mobile home parks, we need to set the record straight and take a look at how we wound up here.

Most park owners are also seniors and veterans (like my grandfather) who built these parks in the 1960s to provide affordable housing and try to run a fair, sustainable business with the hopes of passing it on to their children.

Owners took a risk in buying a vacant property, getting it zoned for a mobile home park, then building a beautiful park with lots of amenities and maintaining all the streets and utilities. The parks eventually filled with happy residents paying a market rent to enjoy the many benefits of mobile home park living.

Then the nightmare began.

In 1984, the Oceanside City Council decided the votes of a few residents were more important than private property rights. The council determined that providing affordable housing should be on the backs of the park owners, without a government subsidy or any financial means test for residents. Fair? Not a chance.

Fast forward 27 years. The parks are getting older and require more maintenance. Park owners are not allowed to increase rent more than 75 percent of the Consumer Price Index. What choice does that leave park owners? They are tired of the government telling them what to do with their property. They have to consider closing the parks and converting them to a more sustainable use.

Meanwhile, park residents don’t want to pay a dime more for rent, even though they never took a financial means test to qualify for this affordable housing, and many of them use these beachfront properties as vacation homes or buy up multiple mobile homes and rent them to turn a substantial profit of their own. Who wouldn’t want a deal this great?

However, Oceanside taxpayers have spent more than $3 million to defend rent control for these residents.

This $3 million could have been much better spent on fire, police or anything else.

Three council members have recognized that rent control is unsustainable and stepped up to offer a compromise. They don’t want the parks to close and to see seniors on the streets, so they suggested vacancy decontrol. This compromise protects all current park residents, as the ordinance will never allow their rent to increase more than 75 percent of the CPI. The space rent can only go to a market rate upon sale of their mobile home.

Despite popular scare tactics, vacancy decontrol does not lower the value of a mobile home. All homes sell for their market value, not the inflated value on someone else’s property. The market determines home prices, not rent control.

This debate comes down to fairness. Will either party be happy? No, but the council is attempting to do the right thing to form a compromise which will keep parks open and preserve affordable mobile home park living while protecting all current residents that bought their mobile home under the rent control ordinance.

The owners of Capistrano Terrace Mobile Home Park in San Juan Capistrano have filed bankruptcy, the latest twist in the saga of the 60-year-old park where residents already faced the prospect of losing their homes.

In a news release issued Friday, owners of the park, Capistrano Terraces Ltd., said they were forced into bankruptcy protection by the city’s rent control ordinance, lawsuits by residents and other issues.

They had already notified the city they intended to close the park, triggering public hearings and in-depth study of the homes there.

An Orange County Superior Court Jury awarded more than 100 plaintiffs $1 million in a 2007 lawsuit by residents alleging park owners had not maintained Capistrano Terrace. The previous owner paid more than $1.5 million in a similar suit before Capistrano Terraces purchased the Valle Road park.

“Adding to the mounting burdens, the City of San Juan Capistrano’s rent control ordinance makes it extremely difficult to even raise the rents to allow replacement of major park systems, such as new sewer lines or upgraded electrical systems,” the release says. “The inability of the owners to raise rents ($51 per month per the city’s rent control ordinance) to cover these additional expenses as well as the rising costs of insurance, property taxes and improvements have created an untenable situation resulting in the need to file for bankruptcy protection.”

Park owners had already started the process of shutting down the 17.5-acre park on Valle Road park, home to 143 occupied units.

The park began as a trailer campground in the 1950s, evolving to a permanent mobile-home park over the years. It is terraced into a hillside above the San Diego Freeway, and some units have ocean views.

The aging park has struggled for years, as the hillside has slipped. Sewage at times ran though the streets, and the power to the entire park has failed for days at a time.

Over the last dozen years, the city has tried to facilitate residents’ purchase of the park at least three times.

In the late 1990s, LINC Housing Corporation of Long Beach worked with park residents and city staff for a year to create a resident-owned park, but failed to get support from a majority of the residents in the park.

Several years later, Resident Owned Parks Inc. of Sacramento took another run at converting the park to resident ownership, but again failed to get resident support, according to a city report.

The owners, managed by the same group that owns the Distrito La Novia/San Juan Meadows, bought the property in 2003.

About two years ago, a councilman tried to broker a resident purchase, again coming up short.

In November 2006, the owners notified the city they intended to close the park. A city official again tried to broker the deal, but residents thought the landowners wanted too much money. When that effort failed in 2008, the park owners restarted the effort to close Capistrano Terrace.

The city requires park owners who want to close a park pay for a study that looks at how much each coach is worth, where it can be relocated, if at all, and develop a plan to compensate residents.

The study valued the coaches from $20,000 to $154,000.

The city’s Housing Advisory Committee held an exploratory meeting on the closure last month, drawing more than 30 residents who want the park to remain.

It is unclear what impact, if any, the bankruptcy will have on the closure plan.

Here is the park owners’ news release:

Capistrano Terrace Ltd., a California limited partnership and owner of the Capistrano Terrace Mobile Home Park announced today that it has filed for Chapter 11 bankruptcy protection. The mobile home park, purchased in 2003 has seen mounting liabilities caused by geological issues, deteriorating infrastructure, lawsuits by tenants over park issues, and failure of insurers to handle resolution of those claims.

The Capistrano Terrace Mobile Home Park was built as a temporary travel trailer park in the 1950s. It was never intended to be a full-time mobile home park, but over the years, has become just that.

Since its purchase by Capistrano Terrace Ltd. in December 2003, several improvements have been made, such as employing a professional management company, hiring full time maintenance staff, annual tree trimming, refurbishing the clubhouse and pool, buying new furniture, and scheduling regular sewer line cleaning.

Park tenants had indicated an interest in purchasing the park, which the owners had agreed to on two occasions (once under the old owner and most recently under Capistrano Terrace Ltd.), but the tenants failed to place the minimum of $100 per coach in a good faith deposit to open Escrow.

Adding to the mounting burdens, the City of San Juan Capistrano’s rent control ordinance makes it extremely difficult to even raise the rents to allow replacement of major park systems, such as new sewer lines or upgraded electrical systems. The inability of the owners to raise rents ($51 per month per the city’s rent control ordinance) to cover these additional expenses as well as the rising costs of insurance, property taxes and improvements have created an untenable situation resulting in the need to file for bankruptcy protection.

Geological studies and notices from the city required after the illegal dumping of dirt by residents resulted in slides and red tagging of homes, warned of potential danger to residents due to slope slippage.

The park pool has been closed for the past three years as a result of geological issues. With the heavy rains of December 2010, the park spent over a hundred fifty thousand dollars trying to repair damage to the park including electrical, plumbing, and cleaning up mud and debris. During one storm, the fire department recommended evacuation of several residences due to the situation.

The recent Failure-To-Maintain lawsuit resulted in a verdict for the residents (that we anticipate will be appealed). The costs and obligations required by the City’s park closure ordinance also contributed to the unfortunate need to file for bankruptcy protection. Capistrano Terrace, Ltd. will continue to work with the residents to help with relocation efforts.

Chapter 11 bankruptcy provides the opportunity to stay the claims of creditors while a plan of reorganization can be presented to the bankruptcy court over the next few months. Bankruptcy protection is intended to assure fair and pro-rata treatment of all the tenants in the relocation and claims process.

With a 6-1 vote, the council upheld Monday a Planning Commission recommendation to stop the park from subdividing the land. Councilman Devin Dwyer dissented.

The commission denied Pacific Mobile Home Park’s request to subdivide the park once before because the conversion would encroach on public property. City administrators recommended denial in both hearings.

At Thursday’s meeting, the Capitola City Council approved the sale of Castle Mobile Estates to Millenium Housing for $8.25 million from owner Abraham Keh.

Millenium is a nonprofit organization that offers affordable housing to people throughout California by purchasing and rejuvenating mobile home parks and apartment buildings. It owns 17 parks in the state.

“This gives an opportunity to restore homeowners’ dignity and pride where they live,” Castle resident Ken Cook said. “Millenium respects their tenants. The bottom line is that [under the current owner], we couldn’t sell or get a loan to buy new homes.”

The agreement ensures the park will be a haven of affordable housing for 55 years.

The terms of the plan, known as a Tax Equity and Fiscal Responsibility Act, were more than 570 pages long, prompting some on the council to admit they had not been able to go over every page. Mayor Dennis Norton, though, gained assurances from city staff more familiar with the resolution, that the city and residents were getting a fair deal.

In exchange for certain rent control exemptions, Millenium has agreed to a fixed rate of $650 per month for middle- and low-income residents, with those classified as “extremely low-income” paying $325 per month, with the help of rental assistance provided by the city. This will cost the city more than $100,000 each year.

Rent increases will be limited by the cost of living index, which is based on annual inflation, but Millenium president George Turk said that in years of high inflation, rent would not likely jump at the maximum rate, because the money goes into a trust instead the pockets of any one person.

Rental assistance will not apply to tenants who move in after the Millenium purchase, because as Turk said, “it’s only to transition people already in the park now.”

Cook said Keh, who has been suing the city for several months to get around rent controls, would not let people move new homes into the park, also often raising rent for spaces when new tenants moved in. These and other practices plaguing residents are not allowed under the agreement between the city and Millenium.

Just before the vote, Norton asked residents in the audience if they were in favor of the agreement, receiving several replies of “yes,” and the final approval decision was showered in applause.

COLONY COVE PROPERTIES, LLC v CITY OF CARSON

Sonoma County government’s latest stance on disputed condo-style conversions of mobile home parks is expected to come today in a Planning Commission vote.

For the second time, commissioners will take up a plan to subdivide the 191-unit Sequoia Gardens Mobile Home Park off Fulton Road, a county-controlled area within the city of Santa Rosa.

Under the change, tenants would have the option of buying the land beneath their homes or continuing to rent.

But park residents, who packed a Feb. 17 Planning Commission hearing, are opposed to the conversion, saying high purchase prices and rent increases will push them out of their homes.

“If I am forced to move out of the park by these rent increases then I will lose everything,” 17-year Sequoia resident Mary Lynne Nicholas, 72, told commissioners.

The park owners, an out-of-the-area investment group, claim the conversion would not adversely impact residents. Low-income tenants would be covered by state rent control until they move while market-rate rents for all other tenants would be phased in over five years, according to a report submitted by the group, Sequoia Park Associates.

But because that report did not use actual rent figures or disclose possible purchase prices, the owners’ assurances aren’t credible, critics said.

“They’re just playing a game,” said William Constantine, the residents’ attorney.

Don Jurow, an owners’ representative, declined to provide rental and purchase figures in an interview, saying the report “spelled out all the facts.”

Similar disputes between mobile home residents and park owners have cropped up around the county and the state.

Critics say the conversions are an end run around local rent control rules that govern parks, which make up one of the state’s largest blocks of affordable housing, especially for seniors.

Separate county and Santa Rosa city ordinances that sought to limit owner-driven conversions were struck down in 2009 in a court challenge by Sequoia Park Associates.

Commissioners are set to deliberate and vote today. Public comments were taken until Feb. 17.

County planners have recommended denial on two grounds:

– A required survey showed residents overwhelmingly oppose the conversion, with 164 against it and two for it.

– The park’s well water has been off-limits to drinking since 2009 because of higher-than-allowed levels of arsenic. Owners have provided bottled-water vouchers. A bid to join the city’s water system remains in funding limbo.

Any decision will likely be appealed to the Board of Supervisors.

Assemblyman Bill Monning, D-Carmel, introduced a bill Wednesday that he hopes shifts the balance in frequent and often long-running disputes between mobile home park owners and communities seeking to protect residents from eviction and rent hikes.

The bill, AB 579, allows governments that prevail in court to recover attorney’s fees in mobile home cases, something they aren’t currently allowed to do. Monning said the bill should particularly help small cities that can’t afford to pursue pricey litigation.

“Our current legal system is tilted against a local government’s ability and willingness to defend their mobile home rent control ordinances and AB 579 will level the playing field,” Monning said.

Monning said the bill provides parity for local governments, which can be ordered to pay the costs associated with litigation should they lose a case. Many of the suits focus on government efforts to control rents on the land beneath owner-occupied mobile homes. Shelia Day, of the Sacramento-based Western Manufactured Housing Communities Association, said mobile home park owners have a First Amendment right to argue their cases in court and that one industry should not be singled out by lawmakers.

But advocates for mobile home residents praised the bill.

“One of the strategies the park owners use is to bludgeon smaller communities with the threat of litigation expenses,” said Terry Hancock of Santa Cruz Senior Citizens Legal Services. “To defend these lawsuits takes a lot of money.”

Santa Cruz County has seen its share of mobile home park battles over the years. In December, the city of Capitola estimated that it’s spent nearly $1 million defending its mobile home rent law.

And the city of Santa Cruz waged – and ultimately gave up on – long-running battles over its mobile home laws following a protracted battles with the owners of De Anza Mobile Estates, situated on a picturesque bluff on the city’s Westside.

There are 89 mobile home and recreation vehicle parks in Santa Cruz County, many of them located in unincorporated areas, according to the California Department of Housing and Community Development.