Santa Rosa is sharply increasing the rent on a house a city employee has occupied below market rate for 17 years.
Denise Cadman, a natural resource specialist with the city's utilities department, learned earlier this month that her rent would increase from $500 a month to $1,525 beginning Jan. 1.
The steep rent hike is the city's latest response to revelations that several homes it owns were mismanaged, including sweetheart deals for city employees and families living in homes rent-free for years.
The move follows a recent market analysis performed for the one-acre property on Occidental Road where Cadman has lived since 1996.
David Guhin, the director of the utilities department, said the original rental deal was "appropriate at the time" but the city failed to update the lease over the years. The increase is the first step in resolving that oversight, he said.
"It's our responsibility, not hers. She's a tenant," Guhin said. "We needed to address it by figuring out what the current going rate was, get it corrected and move on."
The rent increase of $1,025 per month amounts to $12,300 annually. It is unclear how much rental income the city missed out on over the 17 years. Rental rates have changed over time and are currently at historic highs, Guhin said.
The rent appears to have been below market rate from the start and became more so over time, said Keith Becker, president of DeDe's Rentals.
Rents in Sonoma County have nearly doubled since 1995. They rose by 50 percent from 1995 to 2000, remained moderate from 2000 to 2010, and have increased substantially since then, Becker said.
He estimated the rental loss to the city at a least $100,000.
"It is absolutely true that there was a lot of money lost," Becker said.
Cadman said she and her husband, Stuart Schroeder, plan to pay the higher rent in the short term but will have to consider whether the higher rent works for them long-term.
"For the time, it is what it is," Cadman said.
In previous interviews, Cadman said that she and her family have fixed up the one-bedroom home over time and treated the property well in recognition of the cheap rent. She has and will continue to receive a $75 per month credit for keeping an eye on neighboring city properties.
She said there are "extenuating circumstances" that would help explain the arrangement, but she declined to discuss them, citing privacy concerns.
Once the rent is raised, Guhin said the next step is for the department to review whether the city needs to own the property at all. The home was acquired as part of its 1984 purchase of the 112-acre Stone Farm, parts of which the city irrigates with treated wastewater.
"Anything the utilities department owns should have a beneficial use to our operations," Guhin said.
A four-acre portion of the farm containing the original farmhouse and several barns is leased at no cost to the Laguna Foundation, which uses it for offices and educational programs.
In addition to the Occidental Road home, four other residential properties were identified earlier this year as having below-market rents.
The city has since issued eviction notices to two families who lived rent free for six years in homes on Walker Avenue that the city purchased to create a buffer around the wastewater treatment plant. Those homes are now slated for demolition.