Sec. 16B-13. Operating expenses (OE).

(a) For purposes of this chapter, the operating expenses (OE) of a manufactured home park shall include the following:
(1) Real property taxes and assessments.
(2) Management expenses, including the compensation of administrative personnel (may include the value of any manufactured home space offered as part of compensation for such services), reasonable and necessary advertising to ensure occupancy only, legal and accounting services as permitted herein, and other managerial expenses. Management expenses are presumed to be not more than five percent of gross income, unless established otherwise.
(3) Normal repair and maintenance expenses for the grounds and common facilities, including but not limited to landscaping, cleaning, repair of equipment and facilities.
(4) Owner-performed labor in operating and/or maintaining the park. In addition to the management expenses listed above where the owner performs managerial or maintenance services which are uncompensated, the owner may include the reasonable value of such services. There shall be a maximum allowance of five percent of gross income unless such a limitation would be substantially unfair in a given case. It shall be presumed that a park owner must devote substantially all of his or her time, i.e., at least forty hours per week, to performing such managerial or maintenance services in order to warrant the maximum five percent allowance. No allowance for such services shall be authorized unless a park owner documents the hours utilized in performing such services and the nature of the services provided.
(5) Operating supplies such as janitorial supplies, gardening supplies, stationery and so forth.
(6) Insurance premiums prorated over the life of the policy.
(7) Other taxes, fees and permits.
(8) Reserve for replacement of necessary capital improvements. This amount shall not exceed five percent of gross income. The reserve shall be documented. The reserve may be included as an operating expense in a particular annual adjustment only to the extent that additional money is added to any previously approved reserve, up to a maximum of five percent of current gross income.
(9) Necessary capital improvement costs exceeding reserves for replacement. A park owner may include the cost of necessary capital improvement expenditures which exceeded reserves for replacement for which the park owner has been given credit under subsection (8) of this section in the current adjustment or in any previously approved adjustment. A necessary capital improvement shall be an improvement required to maintain the common facilities and areas of the park in a decent, safe and sanitary condition or to maintain the existing level of park amenities and services.
Expenditures for capital improvements to upgrade existing facilities or increase amenities or services shall be an allowable operating expense only if documented and only if the park owner has:
a. Consulted with the park residents prior to initiating construction of the improvements regarding the nature and purpose of the improvements and the estimated cost of the improvements.
b. Obtained the prior written consent of at least one adult resident from a majority of the manufactured home rental spaces to include the cost of the improvement as an operating expense. Evidence of such consent must be presented at the time of filing the application seeking to include such capital improvement expenditure as an operating expense.
Any capital improvement expense shall be amortized over the reasonable life of the improvement or such other period as may be deemed reasonable by the commission under the circumstances.
In the event that the capital improvement expenditure is necessitated as a result of an accident, disaster or other event for which the park owner receives insurance benefits, only those capital improvement costs otherwise allowable exceeding the insurance benefits may be calculated as operating expenses.
(10) Involuntary refinancing of mortgage or debt principal. A park owner may, under the provisions of this subsection, be able to include certain debt service costs as an operating expense. Such costs are limited to increases in interest payments from those interest payments made during the base year which result from one of the following situations or the equivalent thereof: (1) Refinancing of the outstanding principal owed for the acquisition of a park where such refinancing is mandated by the terms of a financing transaction entered into on or before the space rent ceiling, e.g., termination of a loan with a balloon payment; or (2) increased interest costs incurred as a result of a variable interest rate loan used to finance the acquisition of the park and entered into on or before the space rent ceiling.
In refinancing, increased interest shall be permitted to be considered as an operating expense only where the park owner can show that the terms of the refinancing were reasonable and consistent with prudent business practices under the circumstances.
(11) Increases in rental payments made on leases of land entered into on or before the space rent ceiling. A park owner may, on such terms and conditions as the commission deems reasonable, include as expenses that portion of the increase in rental payments made by the park owner on a lease of the land occupied by all or a portion of park where such lease was entered into on or before the space rent ceiling, as follows: The park owner may include as expenses an amount not to exceed the increase in such land; lease rental payments occurring since the previous commission-approved rental adjustment for the park when said increase in land lease rental payments is the result of inflation or the increase in the space rental income.
Such increased land lease rental obligations shall be permitted to be considered as an operating expense only where the park owner can show that the terms of the lease are reasonable and consistent with prudent business practices under the circumstances.
(B) Operating expenses shall not include the following:
(1) All debt service expenses and rental payments made on leases of land, except as provided above;
(2) Depreciation;
(3) Any expense for which the park owner is reimbursed;
(4) Attorney’s fees and costs incurred in proceedings before the commission, or in connection with legal proceedings against the commission or challenging this chapter; and
(5) Any late charges incurred by the park owner for failure to pay any registration fee to the city authorized by this chapter.
(C) All operating expenses must be reasonable.
Whenever a particular expense exceeds the normal industry or other comparable standard, the park owner shall bear the burden of proving the reasonableness of the expense. To the extent that the commission finds any such expense to be unreasonable, the commission shall adjust the expense to reflect the normal industry or other comparable standard. (Ord. No. 1362, § 1 (part).)