Airbnbs: Commissioners relax on ADUs, but defend fees

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The Winters Planning Commission worked to resolve the City Council’s complaints concerning an ordinance proposal that would regulate vacation rentals operating in Winters, doubling down on what council members called high fees but relaxing on Accessory Dwelling Units at their meeting Sept. 24.

Commissioners voted 4-1 to allow Accessory Dwelling Units (ADUs) to operate as Airbnb-style short-term rentals in Winters, resolving one of three major problems identified when the City Council kicked the proposal back to the Commission in August. Council members objected to ambiguous language regarding code requirements, as well as the costs associated with the permitting process, when they considered the ordinance to regulate Airbnbs by requiring conditional use permits and business licenses Aug. 6 and Aug. 20.

City staff resolved the ambiguous language to specify that Airbnb operators need only demonstrate compliance with fire and safety codes, not all building codes, but commissioners decided not to change the permit requirements and their associated fees.

City Contract Planner David Dowswell, who gave the tenth staff report on the controversial proposal, brought ideas to resolve council members’ objections over what they called the high cost of conditional use permits. Dowswell referred to other cities with more relaxed permitting processes, such as Grass Valley, which requires only minor use permits at a much lower cost of $439. Other cities require a still cheaper home occupation fee, or that hosted rentals simply register with the city.

The current ordinance differentiates between hosted and non-hosted rentals, and calls for more regulation for non-hosted Airbnbs, where guests rent an entire property and the host is not present, than hosted, wherein the host remains in residence while renting a portion of their property.

The proposal would require conditional use permits with public hearings for non-hosted Airbnbs but a cheaper, administrative process to permit hosted rentals. Hosts of non-hosted rentals would pay the full $1820 conditional use permit fee, while hosted rentals would pay a $430 administrative fee, not including one-time inspections and annual business license fees.

City staff maintained that the $1820 conditional use permit fee had been established by a fee study and was unchangeable barring completion of a new—and costly—study. No action was taken regarding the requirement that non-hosted Airbnbs obtain conditional use permits, with commissioners deferring to the current $1820, which was established by a July 2017 study completed by Matrix Consulting Group and determined as a function of staff hours.

Chairman Paul Myer and other supporters of the ordinance have repeatedly emphasized that ordinance is not about collecting fees, but to provide the city with an enforcement mechanism to ensure Airbnbs don’t disrupt residential neighborhoods, especially for non-hosted rentals.

“The main function of the proposed ordinance is to protect the residential nature of the neighborhoods,” Myer said. “It’s not to keep from having Airbnbs—it’s to insure they’re not being disruptive. There is a definite difference between a hosted and a non-hosted, as evidenced by Dave’s work where he polled other cities—a number of cities don’t even allow non-hosted because—for whatever reasons they came to those conclusions.”

Commissioner Gregory Contreras said he was interested in lowering fees, reiterating that the Commission was not after revenue, but policy.

“Nobody on the Commission that I know of is interested in the fee—they’re interested in the permit,”Contreras said.

Contreras said he would have been interested in a “grandfathering in” process to exempt Winters property owners who began operating Airbnbs before the ordinance, assuming it’s adopted. He encouraged Airbnb operators who have been involved in the process to continue exploring fee reduction when the proposal returns to the City Council.

A look at the numbers

There’s no question requiring permits and taxes from the burgeoning short-term rental sector will be a boon to the city planning division, which the study cites as the second least effective in terms of cost recovery.

The short-term market has increased in both number of vacation rentals and average daily rate. Couple the permit fees with the Transient Occupancy Tax (TOT)—a 12-percent tax cities collect from hotels and other arrangements where occupants stay less than 30 days—and the planning division stands to greatly increase its revenue.

According to information the Express obtained from Airbnb data aggregation service AirDNA, 14 Airbnbs currently operate in Winters, the highest number since data was collected, renting at a 55-percent occupancy rate for an average daily rate of $324. All things remaining equal, the City of Winters stands to collect just under $110,000 in Airbnb taxes this year alone. Neither Airbnb operators nor council members have protested collection of this tax, which Airbnb collects for cities in which it operates.

Of the 14 Winters Airbnbs, 11 are non-hosted and each one will require a $90 business license in addition to the permit. Assuming each current Airbnb operator obtains a permit, the city’s division with the second lowest cost recovery rate will collect an additional $22,570 in one-time revenue.

According to the study, planning has one of the lowest rates of cost recovery in Winters, recouping just 15 percent of expenditures through fees, second only to police, which recovers 1 percent. In the year of the study, the planning division had recovered $18,856 of its $123,819 budget, for a $104,954 deficit. For comparison, the recreation department’s deficit reached nearly $150,000 and the police ran a deficit of nearly $2.5 million. To further add context, the city’s total projected revenue for the 2019-2020 budget is  $10.83 million. However, planning was the only department to recover 100 percent of its fee-related costs.

Commissioners have relaxed on many of the specifications included an earlier drafted modeled heavily on a similar ordinance in Napa—originally slated for finalization in April in hopes the City Council would adopt it ahead of the this past summer season.

City staff originally introduced plans to regulate Winters Airbnbs last August over claims of noise complaints caused by guests renting non-hosted Airbnbs to throw loud parties. Evidence of noise complaints has been mostly anecdotal, without corroborating police data. Data released to the Express earlier this year showed four calls in the summer of 2018 to two non-hosted rentals referenced by commissioners, with no official noise violations filed. Although that number has been mischaracterized in reference to all Winters Airbnbs without mention of a specific time period, city officials have changed their reasoning for the ordinance several times.

Fear of disruptive guests, parking scarcity and the potential eradication of residential neighborhoods have been cited as reasons for the ordinance’s necessity, however, commissioners eventually settled on the justification that business uses of residential properties are under the purview of the city to regulate, and that Airbnbs should face the same permits and taxes required of other businesses.

Comparing Winters to other cities

City staff and officials have frequently referenced cities like Yountville, Nevada City and Grass Valley as cautionary tales of cities overrun by vacation rentals at the cost of community goals. Aside from their relatively small size (Yountville and Nevada City have populations around 3,000 and Grass Valley’s population is just under 13,000), the cities are unequal comparisons when considering the short-term rental markets.

All three are cities dependent on a tourist sector not present east of Berryessa or this side of the foothills. Nevada City and Grass Valley are in the Sierras near ski resorts and Lake Tahoe, while Yountville lies surrounded by wineries in the center of Napa Valley.

Each of these cities host a substantially greater number of vacation rentals, with 18 in Yountville (down from 40 following regulations), 186 in Grass Valley and 291 in Nevada City, according to AirDNA data compiled in July 2019. Compensating for population differences, Nevada City has 97 Airbnbs per 1000 residents; Winters has just two.

The version of this article featured in the October 2 Print Issue incorrectly included an additional $300 in calculation of total permit revenue to account for inspection fees, inflating the sum by $4200. Inquiries regarding fee totals went unanswered by the city prior to publication of the article, however, city staff have since out to the Express to clarify that the initial inspections fees would be included in the conditional use permit fee of $1820. Further inspections would be required at cost to Airbnb hosts only if the city received a complaint directly. We apologize for the inaccuracy.]]>

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