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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 OC_EAN 0----====1 Miles Q Document Path: J:\Requests201 OPlus\Library\5379132_ 14\CoastalZoneBndy_Bx11.mxd City of Carlsbad Coastal Zone Location Map C Cicyof Carl bad ... 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