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CC - (1) Receipt and Filing of an Update on Transient Occupancy Tax Revenues as Related to Short-Term Rentals; (2) If Desired, Consideration of a Recommendation from Finance Advisory Committee to Refer the Matter to the Planning Commission for Zoning Code Recommendations; and (3) If Desired, Provide the City Manager with Other Direction as Deemed Appropriate.
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Contact Person/Dept: Jeff Muir / Finance
Phone Number: (310) 253-5865
Fiscal Impact: Yes [] No [X] General Fund: Yes [] No [X]
Public Hearing: [] Action Item: [X] Attachments: Yes [] No [X]
Commission Action Required: Yes [X] No [] Date: 05/13/15
Commission Name: Finance Advisory Committee
Public Notification: (E-Mail) Meetings and Agendas - City Council (09/10/15); Finance Advisory Committee (09/10/15); Planning Commission (09/10/15)
Department Approval: Jeff Muir, Chief Financial Officer (08/27/15)
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RECOMMENDATION
Staff recommends the City Council: (1) receive and file an update regarding Transient Occupancy Tax (TOT) revenues relating to short-term rentals; (2) if desired, consider a recommendation from the Finance Advisory Committee (FAC) to refer the matter to the Planning Commission for Zoning Code recommendations; and (3) if desired, provide the City Manager with other direction as deemed appropriate.
BACKGROUND/DISCUSSION
Finance Department staff, in consultation with the City Attorney’s Office and Community Development Department, reviewed the issue of whether the City can apply its TOT to short-term rentals (residents who rent out their homes through online services such as Airbnb or Vacation Rentals by Owner). This report outlines some of the issues to be considered when determining whether to apply the City’s TOT to short-term rentals.
Applicability of City’s TOT to Short-Term Rentals
Several cities have been successfully applying their TOT to short-terms rentals (usually defined as rentals for durations of less than 30 days). Culver City’s current TOT is written broadly enough that it could apply to owners who rent their homes, apartments, or rooms (collectively “Units”) using the services of Airbnb, Vacation Rentals by Owner or other similar services (collectively “Intermediaries”). The City’s current TOT ordinance (Culver City Municipal Code (CCMC) Section 11.02.100, et seq.) applies to transient occupancy of a hotel for a rental period of 30 days or less. “Hotel” is defined broadly as:
“Any structure, or any portion of any structure, which is occupied or intended or designed for occupancy by transients for dwelling, lodging or sleeping purposes, and includes any hotel, inn, tourist home or house, motel, studio hotel, bachelor hotel, lodging house, rooming house, apartment house, dormitory, public or private club, mobilehome or house trailer at a fixed location, or other similar structure or portion thereof.” (emphasis added)
Also, the definition of “operator” in the City’s TOT ordinance does not distinguish between property owners who rent their Units directly to short-term tenants and those owners who rent their Units via Intermediaries, and includes a proprietor serving in the capacity of owner, lessee, sublessee, mortgagee in possession, licensee or “any other capacity.” Therefore, the City’s TOT should be equally applicable to property owners and Intermediaries.
Third Parties’ Collection of TOT on the City’s Behalf
Instances where cities impose the obligation to collect and remit TOT on entities such as Airbnb and Vacation Rentals by Owner is less common than cities’ direct imposition of TOT on the owners of the properties being rented on a short-term basis. Staff is aware of only two instances, San Francisco and Malibu, where Airbnb is already collecting TOT on short-term rentals.
San Francisco recently enacted an ordinance specifically imposing its TOT on short-term rentals. That new ordinance imposed its TOT not only on the owners of the short-term rentals but also, specifically, on any website, online travel agency, or online booking agent that offers, lists, advertises, or accepts reservations for a short-term rental in San Francisco. Culver City’s TOT ordinance is not as specific as San Francisco’s in this regard. The CCMC imposes the obligation to charge TOT on the proprietor of the structure and on his/her “managing agent.” The CCMC could be interpreted to require Airbnb, acting as an owner’s managing agent when it books a Culver City Unit, to collect the TOT in exchange for booking that Unit.
In Malibu, Airbnb has entered into an agreement to collect TOT on short-term Airbnb rentals of Malibu properties. This agreement was reached after the Malibu City Council began preparations to issue a legislative subpoena seeking information regarding Airbnb’s short-term rentals in Malibu.
Zoning Issues
Preliminary review of the City’s Zoning Code indicates that short-term rentals are not currently permitted in Culver City. Therefore, if the City Council determines that it wishes to apply the City’s TOT to short-term rentals, a Zoning Code amendment to specifically permit short-term rentals would probably be needed.
Other cities that either regulate or ban short-term rentals include:
1. Dana Point, which until recently prohibited short-term rentals, has enacted an ordinance allowing the use but requiring a city permit.
2. Tiburon, Auburn and St. Helena allow short-term rentals but require a city permit.
3. Laguna Beach has allowed, since 1999, short-term rentals with a city permit. However, earlier this year, the Laguna Beach City Council adopted a temporary moratorium on the issuance of any new permits, which moratorium was recently extended to October 1, 2016. During this moratorium period, Laguna Beach is considering whether to prohibit any further issuance of city permits and, if so, how to amortize the existing permits.
4. Mammoth Lakes permits short-term rentals of condominiums but limits short-term rentals of single family homes to only certain zones.
5. Carmel prohibits short-term rentals.
6. Santa Monica does not allow short-term rentals but does allow home sharing (which requires one resident to live on-site during the duration of the visitor’s stay), subject to a city permit. The Santa Monica ordinance also requires hosts to collect a 14 percent hotel tax and to obtain a business license. Violations are subject to a fine of up to $500.
7. Los Angeles is also currently discussing regulations similar to those of Santa Monica, requiring a resident to live on-site during the duration of the visitor’s stay.
Next Steps
At its May 13, 2015 meeting, the FAC considered this matter in order to make a recommendation to the City Council. Based on the issues with the current Zoning Code, the FAC adopted a motion recommending that the City Council direct the Planning Commission to review the City's Zoning Code as it relates to short-term rentals in residential areas prior to any further consideration of the application of TOT to such rentals.
Staff recommends the City Council discuss this matter and, either (1) direct the Planning Commission to review the City’s Zoning Code as it relates to short-term rentals in residential areas, or (2) provide other direction to the City Manager as deemed appropriate. If the first option is selected, staff from the Community Development Department, Finance Department and the City Attorney’s Office would coordinate efforts to prepare any necessary ordinances for presentation to the Planning Commission for recommendation to the City Council.
FISCAL ANALYSIS
There is no direct fiscal impact associated with discussing this item. Ultimately, if TOT is collected on short-term rentals, it would mean some additional revenue to the General Fund. The amount of any such revenue is difficult to estimate and will depend on the City Council’s future policy direction on this subject.
ATTACHMENTS
None.
RECOMMENDED MOTIONS
That the City Council:
1. Receive and file an update regarding TOT revenues relating to short-term rentals; and,
2A. If desired, direct the Planning Commission to review the City’s Zoning Code as it relates to short-term rentals in residential areas and provide recommendations to the City Council;
OR
2B. If desired, provide other direction to the City Manager as deemed appropriate.