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Board of Directors Changes

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The Apartment Association, California Southern Cities has accomplished much in the last several years through the team efforts of Board and Staff.

Our Trade Show outgrew its former venue of the Queen Mary and now moves on to the Convention Center. We have redesigned our CAM program to reflect current property management techniques and trends in the new California Housing Professional Program. Our legislative advocacy has advanced to a place of prominence in Sacramento as our highly respected consultants and lobbyists debate issues, negotiate battles and protect our private property rights. Locally, our voice is well known among the elected officials in the Southland.

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Primary Results Suggest A More "Business-Friendly" Senate

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For apartment owners, the results of the statewide primary held the first week of June bring some good news. While most of the press attention focused on the races for Governor and the other high-profile statewide offices, results in the legislative primaries suggest that a more pro-business slant is coming to the State Senate next year.

Of the 20 State Senate races on the ballot this election cycle, 12 were "open seats" on account of term limits forcing the incumbent to leave office; the other 8 will in all likelihood return the incumbent to office. Of the 12 open seats, ten were held by Democrats in what are considered "safe seats" for the party, meaning that the voter registration numbers in those districts make it all but a certainty that the Democrat nominee will win the seat in the November election. Six of the 10 primaries for these open-Democrat seats pitted current or recent members of the Assembly against each other. Each of these six Democrat primary races offered a liberal versus moderate choice.

Moderate Democrats won half of the six contested elections described above. In the 30th Senate district Assemblyman Ron Calderon narrowly defeated Assemblyman Rudy Bermudez for the Democrat nomination to succeed Senator Martha Escutia. In the 32nd district, now held by Senator Nell Soto, Assemblywoman Gloria Negrette-McLeod won the Democrat primary over Assemblyman Joe Baca. And in the 34th district, current Orange County Supervisor and former Assemblyman Lou Correa defeated Assemblyman Tom Umberg in the battle to succeed Senator Joe Dunn. These were the moderate victories and the new Senators will bring a far more bro-business outlook to the Senate than their predecessors.

Liberal Democrats won the other three contested Democrat nominations. In 28th Senate District, Assemblywoman Jenny Oropeza beat former Assemblyman George Nakano in the race to succeed Senator Deborah Bowen. Los Angeles City Councilman Alex Padilla defeated Assemblywoman Cindy Montanez and will replace Senator Richard Alarcon in the 20th district. And former Assemblywoman Ellen Corbett beat current Assemblymen John Dutra and Johan Klehs in the 10th Senate District, which is now represented by Liz Figueroa. While these winners fit comfortably within the liberal camp their impact on the Senate should be less noticeable in that they will succeed members who were generally liberal as well.

Given the overall election trends, splitting those six races marks a good performance for the moderates. Voter malaise combined with the generally negative campaign between Phil Angelides and Steve Westly in the gubernatorial primary to produce a record-low primary turnout; only 34.3% of registered Democrats voted in this primary. Generally speaking, lower turnout skews the electorate in an ideological direction. Moderates and independents tend to be more likely to stay home while conservatives and liberals continue to vote. This year, that tendency produced a more liberal than usual Democrat voter base that fueled the Angelides win at the top of the ticket. In this environment, splitting the open Senate seats represented a positive result for moderate Democrat candidates.

Currently Democrats control 25 of the 40 seats in the State Senate. That partisan split will likely remain intact after the November elections. Nonetheless, placing three moderate Democrats into seats now held by relatively liberal members changes the psychology of the Senate. Moderate Democrats will have the numbers to join with Republicans on the Floor to block legislation deemed anti-business. In addition, committees will offer a more favorable audience to business arguments. Given the number of close votes in recent years on issues that apartment owners follow - the defeat of 60-day notice or the defeat of proposals to block condominium conversions, for example - these elections could make a big difference on critical issues during the coming years.

Legislative Update - Condominium Conversion Restrictions Defeated

Some good news came recently on the legislative front. On May 31st, the Assembly defeated AB 2562 (Saldana) on the Assembly Floor by a vote of 38-39. In practical effect the bill would have delayed and deterred condominium conversions by extending the notice requirements to tenants by a minimum of 180 days. This win came after a day-long floor fight.

Norwood & Associates, representing the Apartment Association, California Southern Cities, joined with lobbyists from the California Association of Realtors, the Apartment Association of Greater Los Angeles, and the Apartment Association of Orange County in working the bill that day. Assemblywoman Saldana presented her measure shortly after session convened and at 10:45 AM the first roll call vote came - 33 AYE, 28 NO, with 19 members not voting. With 41 votes needed for passage the measure went on "call," meaning that the Assembly could return to update the vote at any time throughout the remainder of the session. Working this call meant both keeping as many as possible of the 19 members not recorded on the original roll call from adding on as an AYE and persuading one or two of the original AYE votes to change their votes. In aggregate, the lobbyists working the bill spoke to over 20 members during the course of the next 10 hours while the Assembly remained in session.

In parliamentary terms, it is "lifting the call" whenever the vote on a measure is reopened during an Assembly session. A legislator can lift a call as many times as needed - upon approval of the house - during the course of a legislative session. When Assemblywoman Saldana first lifted the call on her measure, shortly before 1 PM, the AYE vote jumped to 40, just one short of the number needed for passage. That news both surprised and disappointed the apartment lobbyists present in that our review of the roll call - and our conversations to that point with legislators - had suggested that we could keep the AYE vote in the high 30s. All hope was not lost, however, because after some quick consultations with members listed as AYE on the updated roll we realized that several of our votes had inadvertently cast an AYE vote. Recognize that on this day the Assembly was considering and voting on literally hundreds of proposals; bill numbers and issues sometimes run together and members occasionally confuse a vote.

We continued to work the bill and were rewarded when, at 7:33 PM, Assemblywoman Saldana next lifted the call and actually lost votes - this now third roll call came in at 38 AYE, 39 NO, with only 3 not voting. Our confidence soared because all 3 of the legislators listed as not voting had committed to us not to vote AYE. (Members who do not support a bill sometimes simply do not vote rather than formally vote NO. In legislating, not voting has the same effect as voting NO.) At this point our job came down to keeping the NO votes solid. Our confidence proved to be well founded because when Assemblywoman Saldana lifted her call for the final time, shortly before 10 PM as the Assembly began to shut down, the vote stayed at 38-39. With 41 votes required to pass a bill in the Assembly, the measure was defeated.

The process on AB 2562 was very similar to the floor fight last year on SB 51 (Kuehl), legislation that would have continued the requirement that tenants with more than one year on the premises receive a 60-day notice of termination. The same coalition of moderate Democrats and Republicans defeated both measures. We intend during the final months of the 2006 session to join that same group to defeat AB 1169 (Torrico), this year's attempt to require a 60-day notice, as well as SB 540 (Kehoe), which proposes to grant tenants an absolute right to display political signs on the premises. Killing a bill brings other rewards. An apartment coalition with a proven record of lobbying success gets a better reception when requesting amendments.

The Legislature is scheduled to take its summer recess from July 7th to August 7th. With a constitutionally required adjournment set for August 31st, that means the Legislature will conclude its 2006 business with a final rush of activity during those last 3 1/2 weeks of session. It will be then that the fates of the remaining legislation affecting apartment owners will be decided. Next month's report will summarize all outstanding legislative issues.

This article is copyrighted and cannot be republished without the consent of the author.

Congratulations to the 2007 Board

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At the June membership meeting the 2007 Board of Directors was elected. I congratulate the individuals who will be serving you - the members - effective January 1, 2007. These directors will serve until December 2008: Lucille Aresco-Crowley, Ed Arnold, Evelyn Arnold, Malcolm Bennett, Becky Blair, Nancy Comaford, Brian Coomans, Kirk Davey, Phil Dauk, Donald First, Elaine Hutchison, Geoff McIntosh, Isidro Menezes.

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Finally a Bond Deal

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After several fits and starts Governor Schwarzenegger and legislative leaders finally reached a deal to place a package of infrastructure bonds on the November, 2006 ballot. During floor sessions that began on May 4th but continued well past midnight, the State Assembly and Senate approved four bond proposals totaling $37.281 billion. Broken down by subject area, $19.925 billion will go to transportation projects, $10.416 to K-12 and college education, $4.09 to flood protection projects, with $2.85 to be spent on affordable housing. As part of this compromise the Legislature approved a separate appropriation for $500 million in levee repairs and changed the sales-tax allocation to guarantee that the entire sales tax on gasoline sales will go to transportation projects. Governor Schwarzenegger signed the four proposals at separate events held in the days immediately following the legislature's action, clearing the way for the proposals to go before the voters for approval.

Both the Governor and Democrat leaders hailed the agreement as a triumph of bipartisanship. Interestingly, the two candidates for the Democrat nomination for Governor - Controller Steve Westly and Treasurer Phil Angelides - rushed to endorse the plan as well. Since the Governor first announced his bond proposal back in January during his State of the State Address, political commentators have assumed that Schwarzenegger viewed a bond deal as a means to reinvigorate his credentials as a bipartisan political reformer. The unwillingness of both Westly and Angelides to challenge Schwarzenegger on any of the bonds indicates their sense that the public supports the proposals. This development complicates whatever political critique the eventual nominee will mount against the Governor in the fall.

The November ballot promises to be one of the more competitive election cycles in recent years. In addition to what will likely be a relatively tight race for Governor, four other constitutional offices - Lieutenant Governor, Treasurer, Controller, and Attorney General - as well as Insurance Commissioner will be open. Besides Schwarzenegger, the only incumbents seeking statewide office will be Secretary of State Bruce McPherson and Supervisor of Public Instruction Jack O'Connell. Open seats generally produce tighter races. Beyond the candidates, several other provocative ballot measures appear likely to qualify. Sponsors of an initiative to restrict the application of eminent domain powers have submitted signatures sufficient to qualify. Signatures have also been filed for a measure to require parental notification when a minor seeks an abortion. Along with the bonds, this menu of initiatives and open offices will crowd, complicate and intensify the public debate.
Hot Summer, Cool Budget?

The so-called May revise - the annual adjustment to the Governor's January budget proposal to reflect any discrepancies between projected and actual tax receipts - brought good news for the Schwarzenegger Administration. California has collected $4 billion more in revenue this fiscal year than analysts had expected back in January. These forecasts also indicate that the state will collect an additional $2 billion over previous projections during the 2006-07 fiscal year. (California runs on a July-June budget cycle.) Together, this $6 billion bump in receipts smoothes the way for a relatively clean budget process this summer. (The California Constitution requires that the Legislature approve a budget by June 15th and that the Governor sign a budget by July 1st each year. In practice the Legislature typically runs into July in its budgeting process, with July 15th - the first date in the new fiscal year on which state bills come due - as the first deadline of practical significance.)

With this improved revenue position, the Governor's revised budget proposal looks to direct nearly $5 billion more to education. In a "Prop 98" deal that he reached with the California Teachers Association, Schwarzenegger now proposes to spend $55.1 billion on education during FY 2006-07 out of a total budget of $94.3 billion. That number comes in at $2.0 billion more than what the January budget had provided. His deal with the CTA commits Schwarzenegger to spending an additional $2.8 billion more on schools over the following seven years. The revised budget also would raise debt payments by $1.6 billion and add another $1.6 billion to the budget reserve during FY 06-07. (Prop 98 establishes the budget baseline for education funding.)

Schwarzenegger's budget choices indicate a belief on the part of the Administration that the newfound revenue represents a one-time windfall to the state rather that a lasting increase in receipts. His budget therefore avoids creating new and ongoing funding obligations. Instead, the educational increases described above have been cast as a correction of previous education spending shortfalls. Allocating $3.2 billion to one-time debt reduction and reserve payments likewise avoids increasing any budget baselines. This approach contrasts with how Governor Davis and the Legislature treated the dot-com windfall during the early years of this decade, when a flood of one-time capital gains receipts was dedicated to new spending programs that continue to obligate the state long after the market correction reduced these payments.

The CTA deal should ease the political path to a budget deal. While the legislative leadership will look to shift some spending to Democrat priorities the higher revenue means that tax increases and spending cuts can both be avoided. That suggests a relatively painless budget process.

This article is copyrighted and cannot be republished without the consent of the author.

New Tenant Screening Services

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I am pleased to announce the new tenant screening platform is up and running! We have been telling you that a change was coming and it is here.

Our new provider The Screening Pros' has developed a system whereby previous addresses of prospective tenants are pulled from credit lines and then checked for evictions. On the first day of trials we found several evictions based on this system, a more thorough search for you!

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Long Beach, CA 90802
(562) 426-8341

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