HomeMy WebLinkAbout2017-04-25; City Council; ; Resolution to accept a status report on Short-Term Vacation Rentals, and approve $100,000 in funding for a one year pilot program to enhance the city's code enforcement and related compliance effortsCA Review ftt
CITY COUNC I L
Staff Report
Meeting Date:
To:
From:
Staff Contact:
Subject:
April 25, 2017
Mayor and City Council
Kevin Crawford, City Manager
Debbie Fountain, Housing & Neighborhood Services Director
debbie.fountain@carlsbadca.gov or 760-434-2935
Resolution to accept a status report on Short-Term Vacation Rentals, and
approve $100,000 in funding for professional services for a one year pilot
program to enhance the city's code enforcement and related compliance
efforts.
Recommended Action
Adopt a Resolution to accept a status report on Short-Term Vacation Rentals, and approve
$100,000 in funding from the City Council Contingency fund to obtain professional services for
a one year pilot program to enhance city's code enforcement and related compliance efforts.
Executive Summary
In March 2016, the City Council requested a report on implementation of the Short-Term
Vacation Rental Ordinance in one year. Staff is returning with the requested status report on
operations and enforcement of the ordinance, and is providing some recommendations related
to continued code enforcement efforts and modifications to Chapter 5.60 of the Carlsbad
Municipal Code to allow for additional operational requirements and some clarifications of
applicability. Staff is also requesting funding for a one year contract for professional services to
enhance efforts to identify, monitor and ensure compliance with Short-Term Vacation Rentals
regulations, including payment of Transient Occupancy Tax (TOT). If the funding is approved,
staff will proceed with efforts to obtain the professional services with the intent of contracting
for the compliance/enforcement assistance prior to the summer 2017 season.
Discussion
On May 5, 2015, the Carlsbad City Council adopted Ordinance No. CS-272 which amended the
Carlsbad Municipal Code by adding Chapter 5.60 establishing regulations to govern short-term
vacation rentals (STVRs). Ordinance No. CS-272 became effective on June 4, 2015. At that time,
short-term vacation rentals were only permitted in the Coastal Zone. Based on a request from
owners of the La Costa Chateaus, City Council expanded the boundaries within which STVRs are
permitted by adopting Ordinance No. CS-291 on February 23, 2016. The expanded area includes
residential homes located outside the Coastal Zone in the La Costa Condominium Owners
Association, most commonly referred to as the Cortez and Balboa Buildings located at 2003 and
2005 Costa Del Mar in Carlsbad, also known as the La Costa Chateaus. Ordinance No. CS-291
became effective on March 22, 2016.
Item #11 April 25, 2017 Page 1 of 9
The City Council requested a report one year after adoption of the amended STVR ordinance to
determine if the operating conditions were working as intended, and to consider any necessary
revisions to the municipal code and/or related enforcement efforts. Attached is a table (Exhibit
2} on the current statistics related to the STVRs with some comparisons for prior fiscal years. The
report confirms that there has been success in gaining compliance with applicable regulations,
but enforcement has been slow and challenging for many reasons and considerable ongoing
enforcement efforts are required.
Based on advertisements in vacation rental host sites, it appears that there are about 2,145 STVRs
currently located within Carlsbad, and most of those rentals appear to be located in the
permitted areas although few of them have obtained the required license/permitto operate. At
this time, staff does not know how many of those rentals would qualify as long term rentals (30
days or more}. It is very evident that the desirability for homeowners to use their homes for
short-term vacation rentals has grown since the City Council initially adopted the STVR ordinance.
When the ordinance was adopted in 2015, staff estimated that there were approximately 400
STVRs in the coastal zone.
Only about 340 STVRs (units} have obtained the required license/permit to operate within the
permitted areas of the city, and about 100 have discontinued operations outside the permitted
areas based on code enforcement efforts. Staff is not recommending any changes to the
boundaries where the STVRs are permitted; staff is continuing to recommend that STVRs be
permitted in the coastal zone and in the La Costa Association neighborhood only as permitted by
Chapter 5.60 of the Carlsbad Municipal Code.
Although staff is not recommending any changes to the boundaries where STVRs are permitted,
staff will be recommending revisions to Chapter 5.60 for STVRs in the upcoming months that
would enhance our effectiveness in the city's enforcement efforts. The proposed recommended
revisions will include the following:
• No short-term vacation rental may be used for special events and/or other similar
commercial purposes such as weddings, receptions, large parties, corporate events,
fundraisers, etc.; the short-term vacation rental may be used for sleeping and eating
accommodations only for the permitted household size (2 persons per bedroom plus one,
which is a housing industry standard to prevent overcrowding and better ensure
adequate parking}.
• Add a definition of "bedroom" to Chapter 5.60 to ensure that the permitted household
size is easily calculated by staff (and the vacation rental owners}.
• Add a requirement for the property owner of the STVR to mail an Impact Response Plan
to all neighbors (occupants and property owners} within a 300-foot radius providing a
contact name and number should short-term renters impactthe neighborhood negatively
or with nuisance activities, such as loud after hours parties or noise, disruptive behavior,
illegal parking, excessive and/or overflowing trash, or any activity that disrupts the
neighborhood peace, the residents' quality of life, and is inconsistent with Chapter 5.60.
• Clarify that the STVR regulations do not apply to a "time-share project" as defined in
Section 21.04.357 of the Carlsbad Municipal Code, which states that a "time-share project
means a project in which a purchaser receives a right in perpetuity, for life, or for a term
Item #11 April 25, 2017 Page 2 of 9
of years to the recurrent exclusive use or occupancy of a lot, parcel, unit or segment of
real property annually or on some other periodic basis, for a period of time that has been,
or will be, allotted from the use or occupancy periods onto which the project has been
divided."
• Add an administrative fee for annual compliance review by the city for all permitted
STVRs.
• Clarify the requirements for both a short-term vacation rental permit (which shall be
posted) and a business license to legally operate within the city.
Staff will bring a proposed ordinance with the above noted municipal code revisions back to the
City Council for further consideration within the next two to three months; any additional
requirements directed by the City Council will be included in the municipal code revisions.
Funding Request
Staff is also requesting funding approval of $100,000 to contract with an STVR enforcement
company as a one year pilot program to enhance the city's code enforcement efforts. Although
short-term rental enforcement is a fairly new field, companies have been established to help
assist with short-term rental compliance monitoring and enforcement solutions. Some of the
contracted services may include, but may not be limited to:
• Assistance with implementing fair and effective short-term rental ordinances.
• Identifying privately-owned short-term residential properties on behalf of local
governments.
• Monitoring and enforcing registration, permitting and lodging tax compliance.
• Registering, processing and verifying permit applications (online and offline).
• Providing 24/7 telephone hotline services that makes it easy for neighbors and other
stakeholders to anonymously report and resolve issues with short-term renters without
involving law enforcement officials.
• Identifying tax under-reporting and other fraudulent practices.
By having better tools and collaborating with these new industry contractors, the city would be
able to:
1. Better ensure that short-term renters and landlords comply with local ordinances, and
2. Increase tax collections from short-term rental property owners, and
3. Free up valuable staff time to focus on other priorities.
The enforcement of the STVR regulations is time consuming and very difficult due to the ability
for property owners to operate in a more anonymous manner as a result of the variety of on line
advertising platforms, as well as challenges associated with pinpointing the exact location of the
short-term rental. For code enforcement efforts to be more successful in Carlsbad, it is critical
for the city to contract with a contractor or company that would be able to monitor the STVRs on
a consistent, and continual basis. The cost of the contracted services (not to exceed $100,000)
is comparable to a full-time, fully burdened code enforcement officer; and it is anticipated that
these contracted services will have much greater success due to new monitoring solutions and a
better understanding ofthe STVR market and day-to-day operations. At this time, we do not have
Item #11 April 25, 2017 Page 3 of 9
the expertise within the city to be fully successful at our code enforcement efforts without these
contracted services. The cost of the contracted services will be offset by the collection of
increased TOT from STVRs. Due to the increase in TOT revenue that is realized as a result of more
effective and proactive code enforcement efforts.
Fiscal Analysis
The cost of engaging the services of a private company to provide professional STVR compliance
services is estimated at a cost not to exceed $100,000. The cost is comparable to one fully
burdened, full-time code enforcement officer, and it is anticipated that a private company will
have the ability to monitor activities 24 hours a day, 7 days a week. It is a reasonable cost
considering the code enforcement benefit and the Transient Occupancy Tax revenue that will
increase with more proactive and effective enforcement. It is recommended that the City Council
Contingency Fund be used to fund the contract for a pilot program of one year to test the ability
and capacity of a private contractor to provide these services to the city; the Chief Operations
Officer is authorized to execute a professional services agreement which does not exceed
$100,000. By using the City Council Contingency fund, staff will be able to enter into a
professional services agreement by summer 2017. If the program is successful after one year, the
cost for the services will be incorporated into the operating budget for Housing and
Neighborhood Services in future years.
STVRs generated $418,427 in Transient Occupancy Tax during the first 6 months of fiscal year
2016-17. In fiscal year 2015-16, permitted STVRS generated $506,940 and $371,606 in FY 14-15.
The revenue generated from the STVRs is increasing from year to year and well exceeds the cost
of an outside contractor for professional services to enhance the city's code enforcement and
related compliance activities.
Next Steps
With approval of the requested funding by City Council, staff will proceed with soliciting services
and drafting and executing a one year professional services contract for a pilot program to use
an outside contractor to enhance city staff's code enforcement efforts at an anticipated cost not
to exceed $100,000. Staff will also proceed with drafting ordinance revisions for the City Council
to consider at a later date, which will result in additional operational conditions, limit non-STVR
activities, and clarify applicability of the ordinance as discussed in this report.
Environmental Evaluation (CEQA)
Pursuant to Public resources Code Section 21065, this action does not constitute a "project"
within the meaning of CEQA in that it has no potential to cause either a direct physical change in
the environment, or a reasonably foreseeable indirect physical change in the environment and
therefore does not require environmental review.
Exhibits
1. City Council Resolution to accept a status report on Short-Term Vacation Rentals, and
approve $100,000 in funding from the City Council Contingency fund to obtain professional
services for a one year pilot program to enhance the city's code enforcement and related
compliance efforts
2. Short-Term Vacation Rentals Status Report with map
Item #11 April 25, 2017 Page 4 of 9
RESOLUTION NO. 2017-070
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, TO ACCEPT STATUS REPORT ON SHORT TERM VACATION
RENTALS, AND APPROVE $100,000 IN FUNDING TO OBTAIN PROFESSIONAL
SERVICES FOR A ONE YEAR PILOT PROGRAM TO ASSIST WITH COMPLIANCE
EFFORTS.
EXHIBIT 1
WHEREAS, the City Council of the City of Carlsbad, California requested and received for review
a status report on Short Term Vacation Rentals; and,
WHEREAS, the City Council of the City of Carlsbad, California has determined that based on its
review of the status report on Short Term Vacation Rentals that it is desirable to engage the services
of a private contractor to perform the proactive compliance efforts for short term vacation rentals
within the city and to approve funding for said contractor in the amount of $100,000 for a one year
pilot compliance assistance program; and
WHEREAS, the City Council of the City of Carlsbad, California has reviewed and accepted the
status report on Short Term Vacation Rentals, and finds it to be satisfactory for discussion of impacts
on the city; and
WHEREAS, the City Council of the City of Carlsbad, California supports the staff direction to
return to City Council at a later date with suggested modifications to conditions of operation and to
clarify applicability of the Short Term Vacation Rental regulations as set forth by staff during review of
the subject status report.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as
follows:
/Ill
/Ill
/Ill
/Ill
1. That the above recitations are true and correct.
2. That the City Council hereby accepts the status report on Short Term Vacation Rentals
within the City of Carlsbad.
Item #11 April 25, 2017 Page 5 of 9
3. That the City Council hereby approves funding in the amount of $100,000 and authorizes
the Administrative Services Director and/or Finance Director, or designee, to transfer
the monies from the City Council Contingency Fund to the Housing and Neighborhood
Services Department account(s), as appropriate, to allow for a professional services
contract for a one year, pilot compliance program to assist staff with ongoing monitoring
of Short Term Vacation Rentals within the city and to continue the proactive code
compliance effort associated with the Short Term Vacation Rentals.
PASSED, APPROVED AND ADOPTED at a Regular Meeting of the City Council of the City of
Carlsbad on the 25th day of April, 2017, by the following vote, to wit:
AYES: M. Hall, K. Blackburn, M. Schumacher, C. Schumacher, M. Packard.
NOES: None.
ABSENT: None.
(SEAL)
Item #11 April 25, 2017 Page 6 of 9
· Measures
Total# of STVRs
Educational
messages on STVR
regulations
(permitted & not
permitted)
Code Enforcement
Cases Opened on
STVRs
STVRs in coastal
zone that have
obtained city
permit/license
Compliance
inspection (by code
enforcement staff)
STVRs outside the
Coastal Zone that
have ceased
operation as a STVR
as a result of code
enforcement efforts
Transient
Occupancy Tax
Exhibit 2
CITY OF CARLSBAD
SHORT-TERM VACATION RENTALS (STVRs}
UPDATE ON ENFORCEMENT EFFORTS
(February, 2017}
FY 2014-15 FY 2015-2016 FY 2016-17 Comments
400-500+/-1000+/-2145+ Per advertisements, VRBO,
AirBnB, etc.
General Press 500+ 150+ Ongoing; private messages direct
Releases, City Private messages Private to owners through VRBO, AirBnB
website posts, etc. direct to STVR messages to Flipkey & HomeAway
owners STVR owners
N/A 400 500 Both permitted & not permitted;
to date opening about 25 cases per week
during summer; address seldom
noted in advertisement;
investigation required to identify
address.
58 138 145 Fairly slow process to gain
compliance and get STVR owners
to obtain the required license &
comply with operational
conditions due to the amount of
research work required on each
N/A so 75 Inspections to verify compliance
with all licensing requirements; full
compliance rate with all
operational conditions is only
about 25% to date.
N/A 75 25 Most of those STVRs out of the
coastal zone (estimated at 90 to
100) have discontinued operations
once notified by city, per their
advertisements they have gone to
30+ day rentals.
$371,606 $506,940 $418,427
(to date)
General Enforcement Observations:
• Processes and procedures have been put in place to enforce the STVR regulations; tracking is now occurring to
the best of staffs ability based on resources, workload, and technology.
• STVR enforcement requires staff hours equal to one full time equivalent employee.
• The number of STVRs is continuing to grow from year to year; it is time consuming to successfully identify the
physical address for an STVR; staff is being successful by combining research through the STVR websites with SD
County Assessor information, GIS Maps, Google Maps and other similar investigative work.
Item #11 April 25, 2017 Page 7 of 9
21Page
• Compliance rate for illegal STVRs in the coastal zone is far less and takes longer to achieve than those outside the
coastal zone; staff is having difficulty in compliance with owners not obtaining the required permits and/or paying
TOT for those that are allowed; for those with licenses compliance with all operational conditions is having only
about a 25% success rate.
• Multiple compliance inspections have been, and will continue to be, required to ensure that permitted STVRs
remain in compliance with all operational conditions which include posting permit, paying TOT, etc.
• Compliance outside the coastal zone has generally been more successful with about an 80% compliance rate to
convert STVRs to monthly rentals (30 days or more).
• STVR listing/advertising websites generally do not allow STVR property owners to post city permit data, making it
more difficult to quickly identify unpermitted properties.
• Required TOT payments are currently fairly difficult to calculate for those property owners not self-reporting their
rental income to the city.
Next Steps:
• Staff will continue its efforts to physically locate the STVRs both inside and outside the coastal zone, and diligently
continue enforcement efforts as appropriate.
• Staff has completed research on potential contractors to assist with the city's enforcement effort, and will proceed
(if funding is approved by City Council) to engage the professional services of an appropriate contractor to assist
staff with its ongoing STVR compliance effort.
• Staff will proceed with efforts to prepare amendments to Chapter 5.60 of the Carlsbad Municipal Code to modify
conditions under which STVRs may operate within the city, and return its recommendations to the City Council
for consideration within the next 2 to 3 months.
Item #11 April 25, 2017 Page 8 of 9
PACIFIC
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Item #11 April 25, 2017 Page 9 of 9
Debbie Fountain
April 25, 2017
Short-Term Vacation Rentals
Background
•June 14, 2015 –effective date of ordinance
•STVRs permitted in Coastal Zone only
•March 22, 2016 –expanded boundaries
–La Costa Chateaus –permitted STVRs
•Status report requested after 1 year
Map of
Carlsbad
Coastal Zone
(highlighted)
Status Report
•Fairly slow process to gain compliance
•STVRs continuing to grow from year to year
•Only small percentage obtaining permits
•Compliance with operational conditions –25%
Recommendations
•No change in boundaries for permitted STVRs
•Revisions to ordinance (future date)
–STVRs may not be used for special events
–Add definition of bedroom
–Impact Response Plan
–Regulations do not apply to “time shares”
Recommendations
•Add administrative fee for annual compliance
review (if determined appropriate)
•Contract with a STVR enforcement company
–Identifying properties
–Monitoring
Recommended Action
•Adopt City Council Resolution to accept the
status report on Short-Term Vacation Rental
Ordinance, and approve $100,000 in funding
from the City Council Contingency fund to
obtain professional services for a one year
pilot program to enhance code enforcement
and related compliance efforts