These are the contents of a memorandum by two consulting attorneys to the Pasadena Rent Control Board. Write a news story in Associated Press style based on the information: To
Pasadena Rental Housing Board
From
Karen M. Tiedemann, General Counsel to the PRHB
Nazanin Salehi, General Counsel to the PRHB
RE
Adoption of Security Deposit Interest for 2024 and Regulations related to Security
Deposits
RECOMMENDATION: It is recommended that the Pasadena Rental Housing Board
approve the followmg:
(1) Find that the proposed action is exempt from the California Enviromnental
Quality Act ("CEQA") pursuant to State CEQA Guidelines Section 15061(b)(3)
(coiTimon sense exemption);
(2) Resolution adopting the Interest Rate for Security Deposits for 2024 and
adopting Regulations Related to Security Deposits
BACKGROUND
On November 8, 2022, the voters of the City of Pasadena (the "City") voted to adopt
Measure H, which amended the City's Charter to impose rent control and just cause
eviction protections. The Pasadena City Council ("City Council") adopted a resolution
certifying the results of the November 8, 2022 election on December 12,2022, and the
charter amendment was thereafter filed with the California Secretary of State and took
effect on December 22, 2022.
On April 19, 2023, the City Council appointed members to serve on the Pasadena Rental
Housing Board ("Board") to administer City Charter Article XVIII, The Pasadena Fair
and Equitable Housing Charter Amendment ("Charter Amendment"). The Board is the
charter-created governmental body within the City that is generally responsible for the
enforcement and implementation of the Charter Amendment. (See, generally, City
Charter, art. XVIII, § 1811.) The Board held its first meeting on May 24, 2023.
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The Charter Amendment gives the Board authority to establish mles and regulations for
admmistration and enforcement of the Charter Amendment (City Charter, Art. XVIII,
§1811(e)(2)).
The Charter Amendment requires that landlords pay interest annually on security deposits
held for at least one year (City Charter, Art. XVIII, § 1806(f)). The interest rate to be paid
on security deposits is to be set by the Board every October and is applicable for the
following calendar year. In setting the interest rate, the Board is required to survey the
mterest rates paid on savings accounts by at least five banks with branches in Pasadena
that are insured by the Federal Deposit Insurance Corporation ("FDIC") as of the prior
October. The security deposit interest rate is to be the average of at least five FDIC
insured banks.
The Charter Amendment also requires that the security deposit interest be paid to tenants
annually. If a tenant moves out of the rental unit before the payment of the interest, any
accmed interest is to be paid when the security deposit is required to be returned to the
tenant under State law, which requires landlords to return security deposits along with an
itemized statement of any deductions within 21 days of the tenant vacating the rental unit.
ANALYSIS
Bhyv Consulting surveyed FDIC insured banks with branches in Pasadena to determine
the interest rate paid on savings accounts as of October 1, 2022. Below is the infonnation
received. Not all banks could provide their interest rates for October 2022.
Bank Name
Chase Bank
City National Bank
Comerica Bank
Pacific Premier Bank
U.S. Bank
Wells Fargo Bank
American Plus Bank
First Foundation Bank
BMO
East West Bank
First Citizens Bank
Pacific Western Bank
FDIC
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Savings Account
October 2, 2022
.01%
.01%
.01%
.01%
.01%
.15%
.3%1
2.75%
unavailable
unavailable
unavailable
unavailable
1 On savings accounts under $10,000
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The Regulations related to Security Deposits proposed for adoption would require that
the Board use the five highest interest rates obtained to set the interest rates on security
deposits. Based on that proposed regulation and the information above, the mterest rate
for security deposits for 2024 would be .64%.
The attached Regulations also establish timing for landlords to pay tenants the security
deposit interest. The Charter Amendment requires that the interest be paid annually and
sets an interest rate for a calendar year. The Regulations propose that landlords pay
tenants the accmed interest no later than January 31st of each year beginning January 31,
2025. The interest to be paid would be the amount accrued for the prior calendar year
based on the interest rate set by the Board. Landlords could pay the interest either by
check or as a rent credit. Landlords would be requu-ed to provide tenants with notice of
the interest payment including how the interest amount was calculated.
If a tenant moves out prior to the end of the calendar year, the landlord would be required
to pay the interest accmed on the Security Deposit within the State law requu-ed 21 days
for return of security deposits along with a notice of how the interest amount was
calculated.
FISCAL IMPACT:
The adoption of the security deposit interest is not expected to have a fiscal unpact.