New Imputed Interest Rates for 1999-2000 Announced - 1/27/99

The Rent Stabilization and Arbitration Board Commissioners passed amendments to the language in Section 7.14 of the Rules and Regulations which became effective as of January 19, 1999. These amendments change the source of rates and the calculation method used to determine imputed interest rates for capital improvements when the owner has used his/her own money. These amendments were passed because the indicators that form the basis for determining the imputed interest rates in the former legislation was not always specifically expressed for the designated period (February) each year. Because of the possibility that the use of another month as an indicator might have the same unfavorable results, a new, more reliable source for a Treasury instrument was sought that would offer similar results on a consistent basis.

This amendment now requires the use the rates as posted for Treasury Securities in the Federal Reserve Statistical Release, H.15, as found on the Federal Reserve Internet site. These rates appear to offer similar results to the current methodology being used, yet on a more reliable and consistent basis, unlike the former use of Treasury Notes. The rates will be determined by averaging the last 12 months of the most recently posted rates for seven and ten-year Securities. This eliminates the impact of an unusual spike or drop in the index were only one specific monthly rate to be utilized. Using the average of the last 12 months also appears to more accurately reflect the future trend in rates.

The rates will also be determined in December of each year for the prior 12 months as posted at the Federal Reserve site. This is a change from the use of rates in effect as of the last week in January. This change will allow the department to post for the following year the new imputed interest rates at the same time as the annual allowable increase amount and will give interested parties earlier notice of these rates.

This methodology is being used to determine the interest rates for the next 12 months beginning March 1, 1999. Those rates would be 5.3% for seven-year amortized costs and 5.3% for ten-year amortized costs. The current rates in effect through February 28, 1999 are 5.5% and 5.6%, respectively.

©1999 City & County of San Francisco 1/20/99