When the residents of Kenai’s Vintage Pointe Manor senior housing pay their rents for the month of July, it will cost them up to $35 more than rents in June. It will be the third time in three years that rates have gone up. These increasing rents have been a contentious issue between Vintage Pointe residents and the city of Kenai, as well as within Kenai’s city government.

Vintage Pointe is owned and managed by the city of Kenai, which in 2013 adopted a plan of yearly rent increases to ensure that Vintage Pointe rates are comparable to other privately-owned rental properties in the area.

Previously, monthly rents at Vintage Pointe had been adjusted sporadically since the community was founded in 1992.

When the systematic yearly increases began in 2013, it was the first time residents had seen their rents increase since 2008.

 

The 2013 plan calls for the market value of the apartments to be assessed every five years through a study by licensed appraisers. The market rates determined by the study become the price of new Vintage Pointe leases.

Leases existing before the June 2013 initiation of the plan — “grandfathered” leases — are also increased yearly by a fixed increment to bring them gradually closer to market value. Non-grandfathered rents are also adjusted yearly according to the Anchorage Consumer Price Index, a measure of average cost of goods and services set by the federal Bureau of Labor Statistics.

The first market study was done in 2013 by appraisers Derry and Associates. It set the price of new leases and prompted a one-time increase of $50 for grandfathered leases, followed by subsequent yearly increases of $35. The plan called for market rents to be re-evaluated every five years, in years ending in “0” or “5.”

Vintage Pointe resident Jim Schneider, who holds a grandfathered lease and will face a $35 increase to the $835 monthly rent that he and his wife Happy pay for a 826 square foot apartment, said that the increase is significant because he and many other Vintage Pointe seniors have fixed incomes.

While the rents are adjusted for economic change, his federal pension is not, he said.

“Everything has an impact on you if your wages don’t follow,” Schneider said. “And I know they’re always a little behind, because I worked for 35 years. But if I freeze them, which is what’s been done to me — I’m a retired federal employee. I don’t get raises… I tell you, living on a fixed income that is 20 years old or 25 years old — when I worked I made excellent money.”

This year’s rent raise follows a second Derry and Associates market study completed in April.

The study compared Vintage Pointe rent to 13 senior and non-senior facilities in Kenai, Nikiski, Homer, Sterling, Cooper Landing, and Soldotna. Adjustments were made to the comparable prices for tax burden, building age and condition, views, and the existence of carports and garages at the facilities considered.

According to the study, 14 of Vintage Pointe’s 40 apartments are currently at market value, and others are between 4 and 6 percent lower than market value.

After some debate, the Kenai city council voted to include a rate increase in the city fee schedule during its May 20 meeting. During that debate, Kenai Mayor Pat Porter, supporting the increase, said “When the residents of Kenai come to me and tell me they don’t mind subsidizing the rents at Vintage Pointe, then I can make a different decision.”

Kenai finance director Terry Eubank said that Vintage Pointe has always been supported completely by rents from residents, and that Kenai taxpayers have never contributed to the cost of running the facility. However, Kenai city manager Rick Koch said that the rising cost of an aging building — the costs of its depreciation — will make funding beyond the current rents necessary.

“(The building) has been extremely well-maintained, but it’s past that honeymoon period of a building’s life,” Koch said. “For the first 15 years of any building, absent some sort of unforeseen circumstance, the major operating systems of a building don’t require a lot of attention… Then they start to wear out, just like people get old. Buildings get old, too, and they take a lot of attention as they age.”

Eubank said the reserve to fund depreciation does not currently exist.

“We are not funding depreciation,” Eubank said. “My concern with not funding even a portion of depreciation is that long-term we will not have the funds available to maintain the building at its current condition for future residents.”

The fiscal year 2016 budget lists a reserve of $338,772 in the fund dedicated to Vintage Pointe.

But that money could be quickly spent on projects like boiler replacement, which both Koch and Eubank said may need to be done soon. Koch said that a boiler replacement “could easily be a half million dollars.”

“That’s well over a year’s amount of rent that goes into there,” Koch said. “So it’s important to build up operating reserves.”

Eubank said that, to a lesser degree, increased cost of utilities and staffing were also driving the expenses of Vintage Pointe. However, he said the systematic rent increase was based more fundamentally in the city’s goal for Vintage Pointe.

“One of the driving forces behind the rent increase is that the management philosophy of the facility is that it will not unfairly compete with private industry out there trying to provide rental units,” Eubank said. “So the commitment was given to the community, when it was built, that the rent rates would be comparable to the open market out there.”

City council member Bob Molloy, who in the May 20 council meeting moved to eliminate increases to grandfathered rates but apply market rates to new leases, didn’t agree.

“It’s difficult to compare (Vintage Pointe) to apartments in the private market because they’re really different,” Molloy said. “I think that any owner has to put money into their property and can’t rely solely on rents for everything. At times they may find they have to put money into their property to repair or maintain it, that’s above whatever they’re getting for rent, because those are the circumstances. They can’t have their rent be so high that their occupancy falls out.”

At Vintage Pointe, some residents said this year’s increase has taken them by surprise. Two Vintage Pointe residents said they were unaware of the coming July 1 increase until it appeared on the agenda of the Kenai city council’s May 20 meeting. Resident Steve Hillyer said he had believed the council had eliminated increases for grandfathered leases during previous debates over the subject.

“A year or so ago, we’d been over at the council, having a little war on this thing back and forth,” Hillyer said. “And they had a resolution at that point to raise the rent $50. They already had the resolution made, and we were attending the meeting where they needed to vote it in. There was quite a group of us. They (council) determined to rewrite the resolution they had before them. The city attorney was present and they instructed him to rewrite it and eliminate that arbitrary raising the rent. As I left there, I thought that by golly they had agreed to this. Well, they simply denied that at this (May 20) meeting. So it was: you said, I said. On and on.”

There are also different understandings of who was originally meant to live in Vintage Pointe. Resident Wesley Meeks, whose parents Roger and Francis Meeks were on the mayor’s Council on Aging that created Vintage Pointe, said that maintaining low rents was not one of their intentions.

“My parents spent 5 years helping to put this place together,” Meeks said. “The whole idea to them was for middle- and upper-class — or not class, but income — people to have a nice place to stay where they could stay forever and be around their friends and all. I grew up here, and I could go someplace else to live that may be a little cheaper, I don’t know. But I know everyone here.”

Meeks said that he had been aware of the July increase and wasn’t alarmed by it.

“I know a lot of them won’t agree with me, but I think our rent is really very reasonable here,” Meeks said.

Mayor Porter, who had been the director of the Kenai Senior Center when Vintage Pointe was built, echoed Meeks’ statement of the original purpose of Vintage Pointe, and said that resident income is not a consideration in the building’s rent.

“It was never supposed to be low-income,” Porter said. “It was never supposed to be needs-based… It was intended to be — well, everybody could live there. No matter what your income, or what your assets. As long as you can afford to pay the rent. For those people that it’s totally out of their price range, there’s other places available for them.”

She said that market-value rents and independence from Kenai taxpayers were also part of the original design of Vintage Pointe.

“It stood alone, and it was not subsidized by the tax-payers of the community,” Porter said. “In the beginning, we actually had a lot of opposition (from) landlords who thought it was going to compete with their apartments and that kind of stuff. It was always supposed to be fair-market value.”

A least one current Vintage Pointe resident has a different understanding.

“(City Manager Koch) said when they built the facility, their purpose was to get it up to fair market value for middle and higher income people,” Vintage Pointe resident Pat Bravo said. “Well, that’s not what I understood at all. I thought it was for seniors who needed a good nice place to stay.”

Bravo, an opponent of the increase, said that she was not against raising rents on principal.

“The rent increase, I think, is probably logical,” she said. “But I don’t agree with it… I think it’s out of proportion to what it should be.”

When asked if below-market rents amounted to a taxpayer subsidy of Vintage Pointe, Bravo said “I don’t know what that means. I don’t know what the correlation is.”

Hillyer, who before his retirement was the manager of the building, said that he understood the need to raise new rents to market values, but opposed yearly increases on grandfathered leases.

“I want to recognize that it’s a justifiable thing, as the economy goes up and down, but our contention is that whatever you rented this apartment at, it should be grandfathered in as long you’re the tenant,” Hillyer said. “That’s why you committed yourself to this expense. And then make the adjustment after the next tenant, so that they’re renting it at a known price then.”

One sure result of the rent increase has been the speculation it has prompted among Vintage Pointe residents.

“This is just my sidewalk prediction, but we’re anticipating another oil pipeline boom coming up here,” Hillyer said. “What is this going to do to the local rental economy? It’s not unconceivable that rents will double… Are they then going to insist on that same thing (at Vintage Pointe)? You could talk about having a 100, 200, 300 dollar a month rental raise staring you in the face. Or move out. Because there would be people to move in.”

 

Reach Ben Boettger at ben.boettger@peninsulaclarion.com