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Mayor Craig Klausing February 26, 2009 Page 3 Month Total units at % at or below or below FMR FMR June 2008 40 21.1% July 2008 36 18.9% August 2008 24 12.6% September 2008 34 17.9% October 2008 41 21.6% November 2008 41 21.6% December 2008 67 35.6% We should note that for the above we used the conservative assumption that no vacant units met the FMR requirement, although the statute is not clear in this regard and an argument could certainly be made the other way. We also did not take into account any refund actions taken by the owner, although the owner issued refunds to residents and former residents occupying certain units during the period from June through November 2008. We feel the owner did the right thing by trying to correct what was in its power (as it said in October it would do). The refunds did serve the policy of affordability by putting money back in the tenant's pockets. The refunds in total were sma11, because the amounts overcharged were small {leading to the conclusion that the violation was small). We also see that the owner has corrected rent levels going forward (again as the owner said in October it would do) and the issue has been completely fixed for the future. Finally, various legal issues surrounding compliance under Minnesota Statute Sec. 474A.047 remain unclear and would �ave to be tested in the courts. Legal arguments could be made by the owner as to, for example (i) compliance by means of vacant units, (ii} compliance by means of refunds, and (iii) compliance by means of annual periods versus monthly periods. For the 2Q08, at least 33.6% of the units on average were actually rented at or below FMR. Fortunately, the owner's responsive behavior and the sma11 size of the problem indicates that a penalty is unwarranted anyway at this time. The owner thought it was always in compliance, and when the issue was brought to its attention, sincere corrective measures were begun immediately and successfully. The period of the problem was short and the dollar amounts involved were small. __ __ __ _ _