BATYKO LAW LLC PAUL G. BATYKO III, ESQ. 7 Sharon Drive Moosic, PA 18507 (570) 510-2503 (phone) [email protected] (email) December 9, 2015 City Council, City of Scranton ATTN: Councilmen Evans, Gaughan, Rogan, Wechsler, and Perry Scranton City Hall Law Department 340 North Washington Avenue Scranton, PA 18503 Via facsimile – (570) 348-4207 Re:

Adam Guiffrida, et al. v. City of Scranton No. 3499 of 2015, In the Court of Common Pleas of Lackawanna County

Dear Councilmen: Please be advised that I represent Mr. Adam Guiffrida and his companies in a lawsuit filed against the City of Scranton, at Docket No. 3499 of 2015 in the Court of Common Pleas of Lackawanna County. Mr. Guiffrida and his named companies own 58 rental units within the City of Scranton. The lawsuit was filed as a class action, and the Honorable Judge Nealon has scheduled a hearing on class action certification for Monday, February 22, 2016. Among other things, the lawsuit seeks to declare the City’s Rental Registration Ordinance (File of Council No. 17, 2012), and corresponding Amendment (File of Council No. 7, 2014), unlawful. Together, the Ordinance and Amendment provide that any person who owns residential rental units in the City is required to have the property annually inspected and registered with the City’s Licensing, Inspections & Permits (“LIPS”) Department, and to pay annual fees in the amount of $150 per property plus an additional $50 per rental unit. Previously, the Honorable Judge Braxton issued an Order on June 8, 2015. The Order provides, specifically: 1.

The City of Scranton shall continue to deposit into a separate escrow account fifty percent (50%) of any and all rental registration fees it receives in, for, and/or after 2015, pending the outcome of the underlying lawsuit filed to No. 3499 of 2015. 1

2.

The City shall extend indefinitely the May 31, 2015 deadline for the payment of the 2015 rental registration fees, pending the outcome of the underlying lawsuit filed to No. 3499 of 2015.

3.

The City shall forego and hold in abeyance the collection of any and all rental registration fees beginning in 2016 and thereafter, under the current ordinances (File of the Council 17, 2012 and File of Council 7, of 2014), pending the outcome of the underlying lawsuit filed to No. 3499 of 2015.

A copy of Judge Braxton’s June 8, 2015 Order is enclosed herewith. My clients’ position is that the rental fees are unlawful and excessive because they produce a substantial amount of income for the City which is vastly out of proportion to the actual “direct costs” of administering the rental registration program, and as such the ordinances constitute illegal revenue-raising measures. To this point, the City has failed to provide sufficient, direct evidence to show the actual “direct costs” to administer the program. Moreover, the City has responded to right to know requests. Significantly, the City has acknowledged that it is unable to provide the total number of rental units in the City, or the number of rental units registered and inspected for the years 2012-2015. Notably, a real issue is the inconsistent and unequal enforcement of the inspections and registrations. The City is unable to come close to inspecting and registering most, let alone all, rental units. Allow me to explain our rationale. On a conservative estimate, there may be around 10,000 rental units in the City of Scranton. Unfortunately, that number may be impossible to establish definitively because of the City’s inability to provide the total number of rental units in the City, or the number of rental units registered and inspected for the years 20122015. On a conservative estimate, 10,000 units at $75 per unit would result in revenue to the City of $750,000 per year. As of the date of this letter, the City has not provided any identification, itemization, or breakdown of the “direct costs” to administer the rental registration program, however, we have reason to believe that the “direct costs” to administer the program are nowhere near $750,000 per year. In fact, the City collected $527,344.00 in rental fees in 2014. As a point of comparison, the total budget of the entire LIPS Department was $592,359.85 in 2014.

The applicable law in the Commonwealth of Pennsylvania is clear. The measure of the actual costs related to a municipality’s license fee program are only the municipality’s 2

“direct costs.” Martin Media v. Hempfield Tp. Zoning Hearing Bd., 671 A.2d 1211 (Pa. Commw. 1996). These costs include… “the salaries and benefits of … employees involved in the program, and the cost of supplies and equipment used to administer and enforce the program.” Kappe, et al. v. West Chester Borough, No. 00-07407 in the Court of Common Pleas of West Chester County, affirmed on appeal, 851 A.2d 264 (Pa. Commw. 2004). On the other hand, “indirect costs,” which are not to be considered in determining whether a municipality’s fees are lawful, “are those costs that are too removed from the program’s cost and administration…these are costs that the [municipality] would incur even if the [rental registration program] was terminated.” Id. In addition, upon information and belief, the City has not performed any studies or analyses to determine the proper allocation of “direct costs” that are attributable to the City’s rental registration program. Now, regarding the rental inspections, at this time Mr. Guiffrida and his companies will not allow any City officials access to inspect any of their properties or units unless the City first obtains an administrative warrant. Further, Mr. Guiffrida contends that any rental inspections are unlawful and unconstitutional. Recently, in October 2015, the Southern District of Ohio ruled that the City of Portsmouth’s rental property inspection and licensing fee program violated the Fourth Amendment to the United States Constitution. The Southern District of Ohio found that indiscriminate and warrantless government inspections of rental properties are unconstitutional, and that unlawfully-extracted rental inspection/registration fees are unlawful and must be returned to the property owners who paid them. Judge Susan Dlott, of the Western Division of the Southern District of Ohio, significantly proclaimed, in pertinent part: “[T]he Court finds that the Portsmouth [Rental Dwelling Code] violates the Fourth Amendment insofar as it authorizes warrantless administrative inspections. It is undisputed that the [Rental Dwelling Code] affords no warrant procedure or other mechanism for precompliance review . . . the owners and/or tenants of rental properties in Portsmouth are thus faced with the choice of consenting to the warrantless inspection or facing criminal charges, a result the Supreme Court has expressly disavowed under the Fourth Amendment.” “The inspections are also significantly intrusive. As the Supreme Court has noted, the ‘physical entry of the home is the chief evil against which the wording of the Fourth Amendment is directed.’” “Taking into account the above factors—the significant expectation of privacy, the substantial intrusion into the home, and the inefficacy of the warrantless inspections 3

on the proffered special need—the Court finds the warrantless inspections are unreasonable.” In conclusion, without evidence of the actual “direct costs” to administer the program, combined with the inability of the City to provide a total number of rental properties and units within the City, our position is that a lawful fee cannot be established. It is inherently unfair to make some landlords submit to warrantless inspections and to pay annual fees, while not taking any actions against other landlords. Please feel free to contact me with any questions or issues. Thank you. Sincerely, Batyko Law LLC

PAUL G. BATYKO III, ESQ. cc:

Adam Guiffrida Jason Shrive, Esq., Solicitor Joseph G. Price, Esq., Assistant Solicitor Scranton City Hall Law Department 340 North Washington Avenue Scranton, PA 18503 Via Email ([email protected]) ([email protected])

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