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2009-3629 OrdinanceATTACHMENT 1 "CODIFICATION OF DIRECTOR'S INTERPRETATION" ORDINANCE NO. 2009-3629 AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING THE MIAMI BEACH CITY CODE, PART B "LAND DEVELOPMENT REGULATIONS", CHAPTER 142, "ZONING DISTRICTS AND REGULATIONS," BY AMENDING DIVISION 2, "RS-1, RS-2, RS-3 AND RS-4 SINGLE-FAMILY RESIDENTIAL DISTRICTS," BY AMENDING SECTION 142-905, "PERMITTED ACCESSORY USES IN SINGLE-FAMILY DISTRICTS," BY ADDING NEW SUBSECTION (b)(5) LIMITING LEASES OF SINGLE FAMILY HOMES TO A MINIMUM OF SIX MONTHS AND ONE DAY, AND BY CODIFYING THE PLANNING DIRECTOR'S INTERPRETATION OF THE CITY CODE; PROVIDING FOR REPEALER, SEVERABILITY, CODIFICATION AND AN EFFECTIVE DATE. WHEREAS, the Land Development Regulations restrict single-family residential properties to residential and compatible uses; and WHEREAS, the rental of single-family residential properties in districts zoned RS-1, RS-2, RS-3 and RS-4 ("Single Family Residential Homes") for periods of less than six months and one day ("Seasonal Rentals") is prohibited, based upon Administrative Interpretation 00-2 of the Planning Director of various sections of the City's Code and land development regulations; and WHEREAS, some persons have challenged the Interpretation that led to the above prohibition, and the City Commission desires to codify the prohibition in the City Code; and WHEREAS, for the reasons expressed in the Planning Director's Interpretation 00-2, and the staff report that provides review and background for this ordinance, the provision herein regarding leases of single family homes is hereby adopted. NOW, THEREFORE, BE IT ORDAINED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA: SECTION 1. That Section 142-905, ""Permitted Accessory Uses In Single- Family Districts," is hereby amended by adding a new subsection (b)(5) as follows: Sec. 142-905. Permitted Accessory Uses In Single-Family Districts. (b) Permitted accessory uses. The following are permitted accessory uses in single-family districts: Leases of single family homes to a family (as defined in section 114-1) for not less than six months and one day including extensions for lesser periods of leases permitted under this subsection to original leaseholders. SECTION 2. Repealer. All ordinances or parts of ordinances and all section and parts of sections in conflict herewith be and the same are hereby repealed. SECTION 3. Codification. It is the intention of the City Commission, and it is hereby ordained that the provisions of this ordinance shall become and be made part of the Code of the City of Miami Beach as amended; that the sections of this ordinance may be renumbered or relettered to accomplish such intention; and that the word "ordinance" may be changed to "section" or other appropriate word. SECTION 4. Severability. If any section, subsection, clause or provision of this Ordinance is held invalid, the remainder shall not be affected by such invalidity. SECTION 5. Effective Date. This Ordinance shall take effect ten days following adoption. PASSED and ADOPTED this 25th day of February , 2009. ATT~E T: MAYOR Matti Herrera Bower CITY CLERK Robert Parcher APPROVED AS TO First Reading: January 28, 2009 FORM AND LANGUAGE Second Reading: February 25, 009 & FOR EXECUTION Z1~'U4 Verified by: City Attorney Date rg omez, I ~~ Ian mg Director Underscore enotes new langu Italics denotes language added after first reading. T:WGENDA\2009\February 25\Regular\Codification of Director's Interpretation Ordinance revised.doc 2 Condensed Title: COMMISSION ITEM SUMMARY An Ordinance Amending The City Code "Zoning Districts And Regulations" Limiting Leases Of Single Family Homes To A Minimum Of Six Months And One Day, To Codify The Planning Director's Interpretation Of The City Code. Ke Intended Outcome Su orted: Increase satisfaction with neighborhood character; quality of life. Supporting Data (Surveys, Environmental Scan, etc Development construction was ranked No. 5 by residents as one of the changes that will make Miami Beach a better place; 77% of residents say availability of parking across Miami Beach is either too little or much too little. Issue: Should the Commission codify the existing Planning Directors interpretation of the City Code, limiting rentals of single family homes in sin to famil zonin districts to a minimum of six months and one da ? item summa irtecommenaatlon: SECOND READING PUBLIC HEARING The purpose of the subject ordinance is to codify the existing Planning Director's interpretation of the City Code, limiting rentals of single family homes in single family zoning districts to a minimum of six months and one day. After discussing various options fora "Seasonal/Short Term Rental of Single Family Homes" ordinance, the City Commission at its January 28, 2009 meeting voted 7-0 to approve the codification of the existing Planning Director's interpretation of the City Code, limiting rentals of single family homes in single family zoning districts to a minimum of six months and one day, rather than moving forward with any "Seasonal/Short Term Rental of Single Family Homes" ordinance. The Administration recommends that the City Commission adopt the ordinance "Codifying the Planning Director's Interpretation of Ci Code" Advisory Board Recommendation: At the August 26, 2008 meeting, the Planning Board recommended by a unanimous vote (6-0, one absent) that the City Commission approve a seasonal rental ordinance permitting seasonal rentals of no shorter than ninety (90) days, for no more than three (3) times. a year Financial Information: Source of Amount Account Funds: ~ 2 3 OBPI Total Financial Impact Summary: The proposed ordinance may have both positive and negative fiscal im acts u on the resources of the Ci . City Clerk's Office Legislative Tracking: ~ Jorge Gomez or Richard Lorber ~ ~ yepartmen~-rector ~ ~ Assyeltant City Manager ~ City Manager _ of Planning Directors Interpretation summary.doc +~ N A~1111 16 EAG H AGENDA ITEM -"~~~ ~ DATE 2'2>'"~g m MIAMIBEACH City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139, www.miamibeachfl.gov COMMISSION MEMORANDUM TO: Mayor Matti Herrera Bower and Members of the C' Commission FROM: Jorge M. Gonzalez, City Manager SECOND READING DATE: February 25, 2009 PUBLIC HEARING SUBJECT: CODIFYING THE PLANNING DIRECTOR'S INTERPRETATION OF CITY CODE REGARDING SHORT TERM RENTAL OF SINGLE-FAMILY HOMES AN ORDINANCE OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, AMENDING THE MIAMI BEACH CITY CODE, PART B LAND DEVELOPMENT REGULATIONS, CHAPTER 142, "ZONING DISTRICTS AND REGULATIONS," BY AMENDING DIVISION 2, "RS-1, RS-2, RS-3AND RS-4SINGLE-FAMILY RESIDENTIAL DISTRICTS," BY AMENDING SECTION 142-905, "PERMITTED ACCESSORY USES IN SINGLE-FAMILY DISTRICTS," BY ADDING NEW SUBSECTION QB)(5) LIMITING LEASES OF SINGLE FAMILY HOMES TO A MINIMUM OF SIX MONTHS AND ONE DAY, TO CODIFY THE PLANNING DIRECTOR'S INTERPRETATION OF THE CITY CODE; PROVIDING FOR REPEALER, SEVERABILITY, CODIFICATION AND AN EFFECTIVE DATE. ADMINISTRATION RECOMMENDATION The Administration recommends that the City Commission adopt upon second reading public hearing the proposed ordinance codifying the Planning Director's interpretation of the City Code, limiting leases of single family homes in single family zoning districts to a minimum of six months and one day. BACKGROUND During the discussions over the past year regarding the commercial use of single-family homes that culminated in the adoption of the "Party House" ordinance, the related issue of short term rentals of single family homes was also brought up. Over the past several years, it has come to the attention of the City that certain homeowners were renting their homes out to transient visitors. These rentals have been in various areas of the City, especially on the islands and waterfront areas, and have ranged from one-time incidents all the way to, in some cases, elaborate Internet commercial marketing operations. In cases where clear evidence is found, through complaints or advertising, the City has cited the homeowners for operating a use not permitted in a residential-only zoning district, and operating a business without a certificate of use or occupational license (n/k/a Business Tax Receipt). Recent direction from the City Commission has limited the issuance of violations to when complaints are made to the City. The violations for the commercial use of single family homes, and of short term rental of homes to transient visitors, are based upon the Land Development Regulations (LDR's). City Commission Memorandum Seasonal/Short Term Rental of Single-Family Homes February 25, 2009 Page 2 of 7 The LDR's specify that the only permitted main use within single family residential zoning districts are single family dwellings. No commercial activities are permitted as main uses, and only very limited accessory commercial activities, such as garage sales, and home- based business offices, are permitted as uses ancillary and customarily associated with the main use of the home as a single family residence. While regulations in the "Party House" ordinance addressed many commercial uses in single family homes, the Commission decided to separate the short term rental issue. Short term rental of single family homes is a commercial use of the home and not permitted under the City Code as presently codified. This ordinance clarifies existing policy. While the LDR's do not specifically prescribe the amount of time a single family home in a single family zoning district may be rented, the resort tax section of the City Code specifies that any rental for a time period of less than six (6) months constitutes a transient usage, and must pay resort tax. The Planning Department used the prohibition on commercial uses within residential districts, and the six month timeframe for resort tax, among other code provisions, to reach the official interpretation in Administrative Interpretation 00-2, issued February 29, 2000, that the Code does not permit in single family districts rentals of less than six (6) months, which constitute transient or hotel occupancy. Planning Department research confirms that this interpretation is common amongst many municipalities nationwide. Staff believes that the interpretation of the Code as explained above is a valid and legal interpretation, and has the force of law. A homeowner and an entity engaged in short term rentals have filed suit against the City challenging this interpretation. Pursuant to the subsequent mediation efforts of the parties in the subject litigation, at its April 16, 2008 meeting, the City Commission referred to the Planning Board consideration of an ordinance amendment to the LDR's that would permit the rental of single family homes for minimum periods of 3 - 6 months no more than 3 times per year, subject to such additional regulations as the Planning Board or Administration proposes. At the same meeting, the Commission also confirmed its agreement with the Planning Director's Administrative Interpretation 00-2 that the City's Land Development Regulations prohibit the rental of a single family home for less than six months. A separate proposed amending ordinance was therefore prepared by staff and processed together with the Short Term Rentals ordinance, which would codify the existing interpretation limiting rentals of single family homes to no less than six months. That ordinance amendment, codifying the Planning Director's interpretation, is attached. At its January 28, 2009 meeting, the City Commission also considered options for seasonal/short term rental ordinances which would have permitted rentals of less than six months. However, the Commission after extensive public comment chose not to liberalize the existing interpretation and permit short term rentals in single family districts, and instead, voted 7-0 to approve the codification of the existing Planning Director's interpretation. ANALYSIS In researching other jurisdictions' approaches to short term rentals of single family residences, a wide variety of policies are to be found. In certain resort areas, such as mountain ski areas that do not contain a large number of hotels, rentals of homes for vacationers serves an important community need. Other jurisdictions permit some limited City Commission Memorandum Seasonal/Short Term Rental of Single-Family Homes February 25, 2009 Page 3 of 7 rental of homes, to promote tourism or address the economics of homeownership and permit the cost of homes to be partially defrayed through rentals. However, many more communities appear to have adopted a more conservative approach to residential zoning, and continue to prohibit short term rentals, either explicitly or by interpretation. Many conflicts over short term rentals in residential districts have been reported in newspapers, and the issue appears especially prevalent in ocean resort states such as Florida and California. Other jurisdictions are confronting the same complaints Miami Beach has experienced about short term rentals, such as increased noise and traffic, diminishment of the private residential character of neighborhoods, with the uncertainty and instability associated with the transient turnover next door or down the street, and also the unfair competition these rentals present to licensed hotel uses elsewhere in the area (see Attachment 3, which contains a package of articles, reports and presentations from other jurisdictions). Proponents of vacation rentals point out that short term rental to families will not necessarily cause greater traffic, noise, parties or other issues than longer term or permanent residents. Overall, however, it is reasonable to predict that such results are more likely to occur with short term rentals. More important, perhaps, are other, less obvious adverse consequences to single family residential neighborhoods which may result from the turnover of short term renters. Neighborhoods zoned exclusively for single-family residential homes are enhanced in value by long-term permanent residents having a shared sense of community, an interest in maintaining a stable community, by neighbors knowing each other, and/or looking out for each other, and by having the same interest in maintaining their properties. Conversion of single family homes to short term rentals would potentially reduce these positive values, as they values are not likely to be shared by short-term residents of vacation rental homes, who are simply using the residential properties as a temporary residence. In examining possible policy responses to this problem, the safest and most conservative approach would be to codify the existing prohibition on short term rentals of less than six months. The Administration has expressed strong reservations about the liberalization of single family zoning regulations of the City of Miami Beach. Staff has been concerned about the appropriateness of this type of transient usage in the City's single family residential areas. There is a concern regarding availability of parking and transportation to serve these transient renters. Concern has also been raised by neighborhood associations and single family residents that permitting transient rentals within the City's single family zoning districts has affected and will continue to affect the character of their neighborhoods, and their quality of life, and they question whether it is appropriate to permit such rentals within the City's single family areas (see Attachment 2 -Letter from Alton Road Homeowner's Association President). FISCAL IMPACT The ordinance codifying the existing Planning Director's interpretation will not have a direct fiscal impact upon the City, as this would be simply formalizing the policy that has been in place within the City for several years. A fiscal impact study, performed in Hawaii for related legislation, (see Attachment 4), indicates that although the allowance of resort rentals can have a positive impact on the economy of a region in general, the gains can come at the expense of traditional "institutional" accommodations (i.e. hotels, condominiums, and timeshares). The study identifies this effect as a "redistribution". City Commission Memorandum Seasonal/Short Term Rental of Single-Family Homes February 25, 2009 Page 4 of 7 The study also indicates that the introduction of transient rentals into single-family residential areas has the potential for negative consequences such as increased traffic, noise, neighborhood disruption and changes in the character of these neighborhoods. The long- term economic impact of these potential negative side-effects of transient rentals is unlikely to be positive. Additionally, while transient rentals may increase economic activity in areas that are underserved by adequate hotel and hospitality uses, it is unlikely that this would be the case in areas, such as Miami Beach, that already contain significant numbers of hotel rooms and existing transient hospitality uses. The introduction of transient resort tourism in single family neighborhoods could reasonably be expected to divert. a portion of potential tourist expenditures from existing hotels. PLANNING BOARD ACTION At the August 26, 2008 meeting, the Planning Board recommended by a unanimous vote (6- 0, one absent) that the City Commission approve an ordinance permitting Seasonal Rentals of no less than ninety (90) days, for no more than three (3) times a year. LAND USE AND DEVELOPMENT COMMITTEE At the September 22, 2008 LUDC meeting, the Committee discussed the Planning Board's August 26 public hearing and recommendation for the Seasonal Rental of Single-Family Homes. The Committee took testimony from members of the audience, including members of the hospitality industry, owners of rental properties, City staff and others, and directed the Administration to prepare a third alternative version of the proposed ordinance for consideration, which would permit short-term rentals of no less than thirty (30) days, also for no more than three (3) times a year. CITY COMMISSION ACTION After discussing the Planning Board and Land Use Committee options fora "Seasonal/Short Term Rental of Single Family Homes" ordinance, and the third alternative of codifying the Planning Director's Interpretation, the City Commission at its January 28, 2009 meeting voted 7-0 to approve the codification of the existing Planning Director's interpretation of the City Code, limiting rentals of single family homes in single family zoning districts to a minimum of six months and one day, rather than moving forward with any "Seasonal/Short Term Rental of Single Family Homes" ordinance. That is the ordinance before the Commission today for second reading. The Ordinance on second reading includes the additional phrase "including extensions for lesser periods of leases permitted under this subsection to original leaseholders. " This phrase is added to reflect the Commission's intent not to prohibit the continuation of leases in compliance with this Ordinance where no new written lease is entered into, for periods allowed under applicable law such as month-to-month tenancies, when such continuation is by the original leaseholder. LEGAL ANALYSIS Constitutional challenges to zoning regulations are analyzed under the rational basis standard, which requires a zoning decision to have a rational relationship to any "legitimate general welfare concern." Restigouche, Inc. v. Town of Jupiter, 59 F.3d 1208, 1214 (11th City Commission Memorandum Seasonal/Short Term Rental of Single-Family Homes February 25, 2009 Page 5 of 7 Cir. 1995)). Under federal law, there is a two-step inquiry for determining whether a zoning decision survives such rational basis scrutiny. See Haves v. City of Miami, 52 F.3d 918, 921-24 (11th Cir: 1995). The first step is to identify any "legitimate government purpose .. . which the enacting government body could have been pursuing." The second step "asks whether a rational basis exists for the enacting government body to believe that the legislation would further the hypothesized purpose." The inquiry "is concerned with the existence of a conceivably rational basis, not whether that basis was actually considered by the legislative body." With regard to the first step, one need not look far to locate legitimate government purposes supporting zoning restrictions insingle-family neighborhoods. Section 142-101 of the City Code provides as follows: [S]ingle-family residential districts are designed to protect, and preserve the identity, image, environmental quality, privacy, attractive pedestrian streetscapes, and human scale and character of the single-family neighborhoods and to encourage and promote new construction that is compatible with the established neighborhood context. In orderto safeguard the purpose and goals of the single-family districts mandatory review criteria are hereby created to carry out the provisions of these land development regulations. The seminal Supreme Court zoning case, Village of Euclid v. Ambler Realty Co., 272 U.S. 365, 391 (1926), suggests others: ...promotion of the health and security from injury of children and others by separating dwelling houses from territory devoted to trade and industry; suppression and prevention of disorder; facilitating the extinguishment of fires, and the enforcement of street traffic regulations and other general welfare ordinances; aiding the health and safety of the community by excluding from residential areas the confusion and danger of fire, contagion, and disorder that in a greater or less degree attach to the location of stores, shops and factories. Another ground is that the construction and repair of streets may be rendered easier and less expensive by confining the greater part of the heavy traffic to the streets where business is carried on. See also Village of Belle Terre v. Boraas, 416 U.S. 1, 9 (1974) ("A quiet place where the yards are wide, people few, and motor vehicles restricted are legitimate guidelines in aland- useproject addressed to family needs.... The police power is not confined to elimination of filth, stench, and unhealthy places. It is amply to lay out zones where family values, youth values, and the blessings of quiet seclusion and clean air make the area a sanctuary for people."); Com v. City ofLauderda/e Lakes, 997 F.2d 1369, 1375 (11th Cir. 1993) (holding that legitimate zoning interests include, but are not limited to protection from urbanization, exclusion of industry from residential areas, regulation of traffic, preservation of surrounding property values, regulation of city services and protection of a neighborhood's aesthetic value). The exclusion of hotel businesses and other commercial enterprises from single-family neighborhoods furthers several of these legitimate purposes for single-family zoning restrictions, including the expectation of living in privacy from strangers within a community of fellow residents sharing a common interest in its long term well-being. See, e.g., Euclid, 272 U.S. at 391 ("the exclusion of buildings devoted to business, trade, etc., from residential districts bears a rational relation to the health and safety of the community."); see also Restigouche, supra; Haves, supra. Because there is a conceivable rational basis for the City Commission Memorandum Seasonal/Short Term Rental of Single-Family Homes February 25, 2009 Page 6 of 7 zoning restriction at issue, it is likely the ordinance will be found valid through rational basis analysis. With regard to takings, as the Supreme Court has explained in Lingle v. Chevron, 544 U.S. 528, 538 (2005): Our precedents stake out two categories of regulatory action that generally will be deemed per se takings for Fifth Amendment purposes. First, where government requires an owner to suffer a permanent physical invasion of her property -however minor - it must provide just compensation. A second categorical rule applies to regulations that completely deprive an owner of "all economically beneficial us[e]" of her property. Lucas, 505 U.S., at 1019... . We held in Lucas that the government must pay just compensation for such "total regulatory takings," except to the extent that "background principles of nuisance and property law" independently restrict the owner's intended use of the property. The courts have held that zoning regulation of transient occupancy does not constitute a taking because it involves no physical invasion of the property and leaves available alternative economically viable uses of an owners' land. See, e.g., Cope v. City of Cannon Beach, 855 P.2d 1083 (Or. 1993); Ewing v. City of Carmel by the Sea, 234 Cal. App. 3d 1579 (Cal. Ct. App. 1991). Cope involved review of a land-use appeals board's decision upholding a municipality's prohibition on transient occupancy (defined as less than 14 days) in single-family neighborhoods. In that case, the court held that such a prohibition does not deprive the landowners of all economically-viable use of their property because it permits long term rentals and allows owners to reside in the homes. In Ewing, the court upheld the city of Carmel's ordinance confining accommodations for short-term visitors (less than 30 days) to areas outside the R-1 single-family zoning districts holding that "[a] zoning ordinance does not constitute a taking simply because it narrows a property owner's options." 234 Cal. App. 3d at 1591-92. Similarly, the codification of the Planning Director's interpretation as a zoning restriction does not involve a physical invasion of anyone's property and it obviously leaves alternative economically viable uses for the subject property. For example, the owner may sell the property, rent it for periods of longer than six months, or simply reside there himself. To determine whether an "as applied" taking has occurred, courts look to anon-exclusive set of factors set forth in Penn Central Transport Co. v. New York City, 438 U.S. 104 (1978). These factors include: "the regulation's economic effect on the landowner, the extent to which the regulation interferes with reasonable investment-backed expectations, and the character of the government's action," Palazzolo v. Rhode Island, 533 U.S. 606 (2001) (citing Penn Central, 438 U.S. at 124), such as whether it merely affects property interests through "some public program adjusting the benefits and burdens of economic life to promote the common good". Penn Central. We are confident that a court will not find that an "as applied" taking has occurred through adoption of this ordinance. CONCLUSION The Administration recommends that the City Commission adopt the ordinance "Codifying the Planning Director's Interpretation of City Code" upon second reading public hearing. City Commission Memorandum Seasonal/Short Term Rental of Single-Family Homes February 25, 2009 Page 7 of 7 Pursuant to Section 118-164(4) of the City Code, an affirmative vote offive-sevenths shall be necessary in order to enact any amendments to the LDR's. Attachments ~`L JMGlTH/,]'~/ H/RGL T:WGENDA\2009\February 25\Regular\Codification of Planning Directors Interpretation memo 2-25-09 final.doc Attachment 2 ~~~~~ ALT N R AD ~ !~E V~N~NS - October 13, 2008 Dear Commissioner Wolfson, The Alton Homeowners Association is concerned over the prospect of short-term leases within our residential neighborhoods. We are worried that these short-term leases would create an environment in which groups would opt to not rent hotel space in favor of one of our residential properties. Historically, these types of tenants tend to forget that we, the residents, work regular schedules, have children and cannot tolerate outdoor parties until four o'clock in the morning on a Tuesday. Events such as the boat show and Memorial Day weekend festivities come to mind first when thinking of these short term rental properties negatively impacting the beach population. It is already horrible to think of the additional funding needed for Memorial Day is in excess of one million dollars just for security. I understand that we have no choice in this matter but to potentially let this madness creep further up the beach in unappealing. At least for the moment, the chaos is contained, for the most part, in South Beach. Additionally, we have already had some issues with citizens renting out rooms in their homes on Alton Road. For example, one Alton resident has had as many as five tenants in his house. Beach enforcement was unable to do anything about this issue, though my understanding of the Housing Code is that only two surnames may reside in any single family home. We have also noted owners renting their houses out for parties and others using their driveways and used car lots. Again, none of these issues have been resolved by code enforcement. To open these houses to short term leasing is to open the floodgates to ten or more couples in one of our houses. These "tourists" each come with vehicles, motorcycles, and illegal drugs, compounded by disrespectful attitudes towards our homes and community as a whole. We are sympathetic to the current economic troubles. This economic crisis is touching everyone in the country at this time, but we don't wish to sacrifice what is left of our community in favor of "good deals." I believe that the condominium associations should be autonomous in this issue. I lived in Miami Beach Condos for years before purchasing my home. Some allowed short term rentals and some did not. This system seemed to work fine and I do not believe the local government should be involved with Condo Association Bylaws. In conclusion, short-term rentals may be better than having an abandoned, or run down property but we view short-term rentals as a minimum of six months. Also, we would expect the city to enforce all rules governing occupancy, parking, refuse disposal, noise, illegal activity and general upkeep with vehement force. At this point, the city has clearly demonstrated to us that they are unable to enforce code violations with any sort of consistency or force, leaving us quite weary of any policy change. Sincerely, Thomas Rockwell President Alton Road Homeowners Association Attachment 3 Package of Articles, .reports and presentations from other jurisdictions regarding short-term /seasonal rental ofsingle-family homes ORDINANCE NO. 46 -2007 AN ORDINANCE OF THE CITY OF TITUSVILLE, FLORIDA, AMENDING CHAPTER 59 OF THE LAND DEVELOPMENT REGULATIONS BY ENACTING A NEW SECTION 59-11 ENTITLED "SHORT-TERM RENTAL OF SINGLE FAMILY DWELLINGS", PROHIBITING RENTALS OF SINGLE FAMILY DWELLINGS IN RR, RE, R-lA, R-1B, R-1C, RMH-1, AND RHP ZONING CLASSIFICATIONS TO LESS THAN THREE MONTHS; PROVIDING FOR CERTAIN EXEMPTIONS; PROVIDING FOR SEVERABILITY; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City is granted the authority, under Section 2(b), Article VIII of the State Constitution, to exercise any power for municipal purposes, except when expressly prohibited by law; and WHEREAS, the maintenance of the character of residential neighborhoods is a proper purpose of zoning; and WHEREAS, limitations on the rental of single family detached dwellings serves a substantial governmental interest in preserving the character and integrity of residential neighborhoods; and WHEREAS, the City seeks to maintain residential districts that promote the permanent residency of families; and WHEREAS, the City's zoning district regulations are intended to permit only those uses that are expressly provided for under the list of permitted uses and conditional uses for each zoning category; and WHEREAS, all other uses not expressly provided for as a permitted or conditional use are intended to be prohibited; and WHEREAS, the City Council finds that the rental of dwellings or other structures for short-term use by visitors and transients is a commercial activity and is inconsistent with the use of zoning districts devoted to non-transient residential use; and WHEREAS, tourist commercial uses and transient commercial uses are not currently expressly listed as a permitted or conditional use within any zoning district; and WHEREAS, Florida Statutes 125.0104 subjects those property owners that rent or lease, for consideration, any living quarters or accommodations in any rooming house, (i.e. any house or other structure used or held out to the public to be a place where living quarters or sleeping accommodations are supplied for pay to transient or permanent Ordinance No. 4b - 2007 Page 1 of 5 guests or tenants), for a term of six months or less are exercising a privilege subject to tourist development taxation; and WHEREAS, Florida Statutes 212.03 subjects those property owners that rent or lease, for consideration, any living quarters or accommodations in any rooming house, (i.e, any house or other structure used or held out to the public to be a place where living quarters or sleeping accommodations are supplied for pay to transient or permanent guests or tenants), for a term of six months or less are exercising a privilege subject to transient rental taxation; and WHEREAS, it is the intent of the City Council to preserve single-family residential use from encroachment by commercial, transient rental activities by clarifying the existing intent of the City code with clear language defining what "short-term rental" is and affirmatively prohibiting it in certain zoning districts; and WHEREAS, the City Council finds that the commercial use of single-family, residential property for such purposes as vacation rentals which by their nature are transient and commercial in nature, creates unmitigatable, adverse impacts on surrounding residential uses including, but not limited to, increased levels of commercial and residential vehicle traffic, parking demand, light and glare, and noise detrimental to surrounding residential uses and the general welfare of the City; and WHEREAS, such commercial uses may increase the demand for public services, including, but not limited to, police, fire, and medical emergency services, and neighborhood watch programs, thereby necessitating a need for the City to increase spending and collection of ad valorem revenues to fund increased services, which is inconsistent with the State directives that the City cut spending, as embodied in two acts of the Florida Legislature, including HB 1-B (Spec. Sess. 2007) and SJR 4-B (Spec. Sess. 2007); and WHEREAS, the maintenance of the character of residential neighborhoods is a proper purpose of zoning, and the City Council adopts the determinations of the California Supreme Court in Miller v. Board of Public Works of Los Angeles, 234 P. 381, 386-87 (1925), which City Council finds applicable to its restrictions upon vacation rental uses: [W]e think it may be safely and sensibly said that justification for residential zoning may, in the last analysis be rested upon the protection of the civic and social values of the American home. The establishment of such districts is for the general welfare because it tends to promote and perpetuate the American home. It is axiomatic that the welfare, and indeed the very existence of a nation depend upon the character and caliber of its citizenry. The character and quality of manhood and womanhood are in a large measure the result of home environment. The home and its intrinsic influences aze the very foundation of good Ordinance No. 46 - 2007 Page 2 of 5 citizenship, and any factor contributing to the establishment of homes and the fostering of home life doubtless tends to the enhancement not only of community life but of the life of the nation as a whole; and WHEREAS, the City Council finds that that short-term tenants or transients have little interest in public agencies or in the welfare of the citizenry; that they do not participate in local government, coach little league, join the hospital guild, lead a scout troop, volunteer at the library, keep an eye on an elderly neighbor, or involve themselves in other aspects of the community and a residential neighborhood; and WHEREAS, the City Council finds that transient, short-term tenants are literally here today and gone tomorrow, without engaging in the sort of activities that mold and strengthen a community; and WHEREAS, the City Council finds that it is proper through the use of zoning to protect the integrity of residential neighborhoods by refusing to allow commercial activities to encroach upon residential areas and to do so promotes the ~eneral public welfare. Accord Brevard County v. Woodham, 223 So.2d 344 (Fla.4t DCA), cert. denied, 229 So.2d 572 (Fla. 1969); City of Miami v. Zorovich, 195 So.2d 31 (Fla.3d DCA), cert. denied, 201 So.2d 554 (F1a.1967); and WHEREAS, the City Council further finds that this Ordinance does not deprive the owners of properties in residential districts of the reasonable, investment-backed expected use of their properties and leaves the owners of properties in residential districts with many economically viable uses of their property; and WHEREAS, the City Council finds that long-term tenants may create a stable sense of community similar to permanent resident homeowners; and WHEREAS, the City Council has difficulty in determining what the bright line distinction between long-term tenancy and short-term tenancy is, and the City Council therefore, to the extent it may err, determines to err in favor of according residents as much freedom as reasonably possible to make use of their property by setting the bright line distinction between long-term tenancy and short-term tenancy as three (3) months; and WHEREAS, the City Council finds that vacation or short-term rental uses are inconsistent with the maintenance and perpetuation of the primarily low density residential character of the City in that vacation or short-term rental uses are not truly residential in character but are transient, commercial uses; and WHEREAS, the City Council finds that primarily residential uses with no transiency are found in the RR, RE, R-1 A, R-1 B, R-1 C, RMH-1 and RHP zoning districts; and Ordinance No. 46 - 2007 Page 3 of 5 WHEREAS, that the City, by this ordinance, is not regulating the length or term of rentals within multi-family uses including condominiums, apartments, townhouses, duplexes, quadraplexes, and rooming houses, etc.; and WHEREAS, the City Council finds that vacation or short-term rental use is commercial in character; and WHEREAS, the City Council fords that vacation or short-term rental uses are clearly prohibited in the RR, RE, R-lA, R-1B, R-1C and RMH-land RHP zoning districts; and WHEREAS, the City Council finds that it is necessary to prohibit rentals for periods of three months or less within certain single family zoning districts in order to preserve the character and integrity of residential neighborhoods; and WHEREAS, the City Council hereby finds this Ordinance to be in the best interests of the public health, safety, and welfare of the citizens of Titusville. NOW, THEREFORE, BE IT ENACTED by the City of Titusville, Florida as follows: Section 1. That the Code of Ordinances, of the City of Titusville is hereby amended by adding a new section to be numbered 59-11 and said section reads as follows: Section 59-11. Short-term Rental of Single Family Dwellings. It shall be unlawful for the owner of a single family detached dwelling to rent or lease the dwelling to another person(s) for periods of three months or less, or to lease or rent the subject dwelling more than four times in a twelve month period. The lease or rental of a single family detached dwelling more than four times within a twelve month period shall create a presumption that the owner is acting in violation of this section. These prohibitions shall only apply in the following zoning districts: RR, RE, R-1 A, R-1 B, R-1 C, RMH-l, and RHP. Any owner that claims a vested right to continue an existing short-term rental as prohibited above, shall be entitled to submit an application for vested rights pursuant to Section 47-350 to 47-352 to determine whether or not the owner has a vested right to continue ashort-term rental. Section 2. Severability. If any provision of this ordinance is for any reason held invalid or unconstitutional by any court of competent jurisdiction, such portion shall be deemed a separate, distinct and independent provision, and such holding shall not affect the validity of the remaining portions of this Ordinance. Ordinance No. 46 - 2007 Page 4 of 5 Section 3. Effec#ive Rate. This 4rdirxance shall -take .effect immediately ..upon adoption. A property owner shall be entitled to honor any written lease agreement or reservation in effect at the .time of adoption; however, ia~ no event shall. a nonconforming lease/rental agreement ar reservation be valid more than one year after-the .effective date of this ordinance. Section 4: Incorporation into Code. This ordinance shall be incorporated -into the, City of 'Titusville Land Development Regulations and. any section or .paragraph, number or letter, and any heading tray be changed or modified as necessary to effectuate the foregoing. Gratnmakical, typo~aphical, and like errors Tony be .corrected and additions, alterations, and nniissions, .not affecting-the construction, or meaning of this ordinance and'the Code may be made. PASSED AND ADOPTED this 25~' day of September, 20Q7. Ronald G. Swank; Mayor ,,~ R~ ATTEST: ~ , ~'~~ ordinance No. 4G - 2007 Page S of S Some Hawaii homeowners seek to thwart tourism By Sudhin Thanawala Associated Press March 23, 2008 HONOLULU-Hawaii's verdant volcanic peaks and crystalline waters have made tourism the state's biggest industry. But not all Hawaii residents are thrilled by the millions who flock to their shores. They complain that some of the visitors renting homes and rooms in their residential neighborhoods create noise, drive up home and rental prices and destroy the sense of community. "When you live in a place like Hawaii that is a resort 24-7, you need azeas where people can feel at home," said Katherine Bryant-Hunter, chairwoman of a neighborhood boazd on the island of Oahu. "Our neighbors change every day. They don't coach volleyball. They don't go to church with us. They are not part of the community fabric." Their concerns have led to a flurry of proposals by lawmakers on Oahu, Maui and Kauai. The legislators are trying to address what they say is a proliferation of short-term rentals that aze operating without required county approval. But owners of short-term rental units call them an asset to Hawaii's tourism industry. They say they set rules ensuring their guests aren't disruptive. "In my azea, I never had noise that I know of, and there were always house rules," said Angie Larson, who runs a bed and breakfast out of her home in an upscale Oahu neighborhood near the beach. She is part of a group fighting to lift a ban on new short-term rentals on Oahu. Larson and other short-term rental owners argue that their guests help them pay the mortgage and meet other expenses, not get rich. But disputes between owners and their neighbors have spazked angry confrontations and lawsuits. "There's a lot of ugly things occurring in neighborhoods," Bryant-Hunter said. "People aze really frustrated because they don't want to fight with their neighbors, and nobody wants to throw out the visitors." In one of the most contentious cases, Oahu resident Susan Cummvngs sued her neighbor Marlene Roth, accusing her of operating an illegal bed and breakfast. She has installed a video camera on the side of her beach cottage to catch renters going up and down the driveway she shazes with Roth. Cummings, who will be 75 this year, said a stream of guests coming in and out of Roth's house at all hours have ruined her dream of a quiet retirement. "This isn't the way I intended these years. of my life to be," she said. She won a lawsuit against Roth two years ago, but said she still has little relief. Roth is appealing the case and has accused Cummings in court papers of spying and harassment. Her attorney said she was unavailable for comment. Vacation rentals and bed and breakfasts aze a small part of Hawaii's tourism industry. Hotel rooms account for most of the roughly 73,000 units of visitor accommodations. Studies financed by real estate and vacation rental groups in 2005 found more than 4,000 short-term rental units on Oahu, Maui and Kauai-most of them illegal. The state Department of Business, Economic Development and Tourism counted more than 1,100 units on the state's remaining islands. Bed-and-breakfast rooms in Hawaii are available for as little as $80 a night, while the average hotel room is neazly $200, according to Hospitality Advisors LLC. Short-term vacation rentals tend to be more expensive, going for a few hundred dollars a night. , Maui is considering a proposal to eliminate special permits allowing short-term vacation rentals in residential azeas, said Jeff Hunt, Maui County planning director. The proposal would simplify the process of getting abed-and-breakfast permit and expand the areas where short-term vacation rentals can operate without a permit. "We're trying to find some middle ground," Hunt said. Vacation rental homes tend to incite the most outrage among neighbors, because unlike bed and breakfasts, they have no owner or manager on site, Hunt said. The county has about 1,100 illegal bed and breakfasts and vacation rentals, he estimated. On Kauai, the county council recently passed a law that prohibits single-family homes from serving as vacation rentals outside certain resort azeas. The previous law had mentioned only multifamily units, leading some people to azgue it didn't apply to single-family homes, according to Councilwoman JoAnn Yukimura, who proposed the new law. Oahu banned new bed and breakfasts aid short-term vacation rentals in the late 1980s. About 1,000 property owners-grandfathered in at the time of the ban-have city approval to rent rooms for less than 30 days. But hundreds of others operate illegally in Oceanside communities, critics say. City officials are considering a measure that would nearly quadruple the property tax on homes used as vacation rentals and bed and breakfasts. "If they are going to be making money out of residential districts operating as basically a hotel; I think it's only fair they pay something that is equivalent to a hotel rate," said Councilman Gary Okino, who introduced the proposal. Mayor: City must act on short-term rentals print By PHAEDRA HAYWOOD ~ The New Mezican September 21, 2007 There aze too many illegal short-term rentals in Santa Fe, and the practice must be curtailed or stopped. That was the message Mayor David Coss gave to city staff and councilors Friday at a special meeting on the long-running issue. "The number is growing while we don't do anything," Coss said of homes rented to vacationers, mostly in neighborhoods on Santa Fe's north and east sides. "It's time to put boundaries down and say `this is it.' " The study session, attended by all councilors except Rebecca Wurzburger and Matthew Ortiz, was called after the City Council failed to reach consensus after numerous meetings aimed at hammering out an ordinance acceptable both to neighborhood groups and to property owners and managers. Under existing city ordinances, it is illegal to rent guesthouses,. investment properties and second homes in most residential azeas for fewer than 30 days. City hall has turned a blind eye to the practice for years, but as such rentals increased, neighbors began to complain about a revolving door of inconsiderate short-timers. Among the complaints: renters who park in the wrong places, make noise and leave trash. Owners of such rentals -which range from guesthouses rented during Indian Market to multi- unit compounds managed by real-estate fums -have called for a change in the law to legalize short-term rentals. Supporters of short-term rentals say it is a valuable part of the city's tourism and real-estate industries. They azgue that the practice gives visitors a chance to mingle with locals. Councilor Karen Heldmeyer, who drafted an ordinance that never made it out of committee, agreed with the mayor that the council needs to do something. "We just keep letting it happen because people with wealth and power have said `we want to keep doing this,' "she said. "And that doesn't seem like a good reason to me." City staffer Jeanne Price presented nine possible options: Prohibit short-term rentals in all residential districts. Allow "very, very limited" short-term rentals by owner/occupants. Temporarily grandfather in existing short-term rentals, with a specific cutoi~ date. Permit guest houses to be rented for short times if the owner occupies the main residence. Permit some short-term rentals as a special exception in certain districts. Create overlay zoning that would permit short-term rentals in defined azeas. Permit outright short-term rentals in all or some residential zoning districts. Mayor: City must act on short-term rentals September 21, 2007 Page 2 of 2 Permit short-term rentals only for certain types of properties, such as condominiums with amenities, private parking and security. Determine the number of short-term rental permits the city is willing to allow and conduct a lottery to see who gets the permits. Coss said he favors grandfathering in existing uses with a clear end date. But other councilors think it might be tricky to decide which rentals get grandfathered. "Santa Fe, when I was younger, was known by its movidas, for lack of a better word," Councilor Carmichael Dominguez said, using a local term that can refer to sly schemes. "How would we deal with people who said they got permission from somebody on the council a long time ago and they don't have any proof?" Price also presented annual cost estimates for administering several of the scenarios: Enforce existing law: $188,594. Allow special exceptions: $367,240. Grandfather in existing rentals: $287,379. City Attorney Frank Katz told councilors he received a letter from an attorney threatening some sort of legal action. Katz suggested the council "evaluate the strength of that" in a closed-door session before making any decisions. Though it was not a public hearing, several members of the public spoke. Fred Rowe cautioned the councilors not to make a decision based on threats of mass unemployment or lawsuits. He suggested the city should "maybe get the facts about what the actual situation is." City Manager Galen Buller said after the meeting that the city has looked into legal implications surrounding the issue but doesn't have much hard data about the number of rentals or the amount of money at stake. The council will consider Katz's advice in a closed session at its next meeting and present some type of ordinance aimed at regulating the industry Nov. 28. "Or we can not pass anything and start to enforce the existing ordinance," Coss said. The Short-Term Rental Debate • Why restrict? • Increased noise & traffic. • Reduced housing stock available to those who live & work in a community. • Unfair competition with licensed establishments. • Impact of restrictions • Diminishes value of investment property. • Reduces the pool of buyers able to purchase in high-demand vacation areas. • infringes upon property rights. • .Benefits of short-term rentals • Promotes tourism. • Generates revenue for community. • Defrays costs of a vacation/second home • Possible Solutions • Create tourist zone where rentals are allowed. • Revision of rental policy only affects those who buy after change is in effect. • "Transient rental occupancy" license required, limit one per person. • Require a permit, post owner contact info for complaints, and impose stiff fines for landlords with nuisance tenants. Beach Beacon Tampa Bay Newspapers Page 1 of 1 AI'CI11VeS Article VIeW Published on TBNWeekly.com -Nov. 6, 2007 Redington Beach officials propose rules for rentals 8y BOB MACPHERSON Article published on Tuesday, Nov. 6, 2007 REDINGTON BEACH -Town commissioners are expected to discuss a proposed ordinance that would tighten regulations pertaining to short-term rentals. Short=term rentals are not allowed in single-family residential districts in Redington Beach but clear, prohibitive language in the town's ordinance is virtually nonexistent. Redington Beach resident Ruth Davies is fed up with what she described as a revolving door of short term renters in her single-family zoned residential neighborhood. Davies, who also attended the Town Commission's Oct. 30 meeting, restated her concerns and thanked the commission for its current efforts to put some prohibitive teeth in a new ordinance. Davies has said the noise starts at 4 p.m. and continues into the early morning. The owner is renting it week by week for people on vacation. Town code enforcement officer Mark Davis said previously that "four years ago I was told not to enforce anything. in previous years the feeling was that if nobody is hurt why push it." The issue came to a head when a former town clerk allegedly told an applicant who was seeking a construction permit to build asingle-family home in asingle-family residential district that it was the town's policy to allow short-term rentals. Subsequently, the applicant was made aware of the town's zoning ordinance that ostensibly prohibits short term use. At a Tune 21, 2005 commission meeting, Redington Beach attorney Dominick Amadio was asked to clarify the town's short-term rental policy. Amadio, in a 3une 30, 2005, letter explained that in asingle-family residential district, the town should cite anyone who rents for less than 181 days. In his letter Amadio explained that renting a property for less than 181 days requires properly owners to pay a 4 percent tourist development tax to the county and a 7 percent sales tax to the state. Accordingly, short-term rentals would constitute a tourist use, which is not allowed within single-family residential districts. In addition, if short-term rentals are receiving homestead exemption, Amadio said the town clerk should notify the Pinellas County Property Appraiser's Office of the alleged violation. Concluding that an amendment with teeth to the town's ordinance was needed in lieu of merely implementing a policy as outlined by Amadio. Town Attorney Andrew Salzman was instructed to draft an ordinance that would but some teeth into the existing ordinance. His first draft was given to the commission on Oct. 30 for their review. The draft specifically defines short term rentals as any rental of a dwelling unit or portion of a dwelling unit of less than a six month (181 day) period. The prohibition applies to Districts 2 and 3. Violation of the ordinance can bring a $200 fine under the current ordinance. The commission, however, elected to come up with a stiffer penalty with a second ordinance yet to be developed. A second draft will be hashed over by the commission at an upcoming meeting this month. Article published on Tuesday, Nov. 6, 2007 Copyright ©Tampa Bay Newspapers: All rights reserved. Printable Version Close Window E-mail article © Tampa Bay Newspapers: Ali rights reserved. httn~/lwww_thnweeklv.com/content articles/110607 bhb-02.txt?archiveview&print 11/05/2008 Reader's Forum Tampa Bay Newspapers Archives Article View Page 1 of 2 Published on TBNWeekiy.com -Nov. 28, 2007 Rules on rentals an overreaction Article published on Wednesday, Nov. 28, 2007 Editor: We do concur that weekly rentals are a problem (we own a home next door to one of the problems). Several months ago, we too were besieged every weekend with noisy, rowdy weekly or weekend renters next door with renters running amok all over our property. However, I think that requiring a minimum of six months plus is an over-reaction: the pendulum swung way too far in the opposite direction. Beach communities are always known to have a large number of home buyers, who are buying an additional (second) home (future snowbirds) so that they can be close to the beach at various times of the year. These are people who can afford to buy a house here without having to sell their house first. Real estate agents commonly tell these clients how they can furnish their house and get short term (two to six months renters) who will respect their house and belongings while helping to offset the owners` higher insurance (non primary residence) and non-homesteaded properly tax. These short-term renters are surely not those that we should be trying to get rid of; they are not the fun-in- the-sun, partying vacationers types; they are ideal neighbors and possible future home buyers. Real estate agents have told me that other neighboring communities allow one short-term rental, thereby eliminating the multiple, weekly rentals. The problem is that Redington Beach has a vast number of houses for sale, in some cases six or more houses on one block - a problem that could persist for the next five years. Last month, I drove around other towns along the beach from Clearwater Beach south and did not see anywhere near the high number of homes for sale as in our area. Aside from an incomparable problem for any one seller of any one house, all the houses for sale in this town sends out a red flag signal to prospective buyers - there's a problem here. Reai estate agents begin directing additional (second) home buyers to buy in other beach towns like Belleair Beach, North Clearwater Beach, Madeira Beach, Treasure Island, or Pass-A-Grille. And, with so many families having to sell their existing home first before they can buy another house, we are putting an additional huge burden on homeowners of Redington Beach by eliminating these potential buyers from the market. Home sellers need every tool possible to sell in this market, and we need not discourage future buyers. Solution Ideas: We'd like to see the law changed to a minimum of two or three months and a rental form filed with the town, by the property owner, stating that the house is rented and to whom, and for how long to add an element of control. Currently, with the town not requiring the names of tenants (all those living in the house), there is no way to ascertain if a sex offender or criminal may be renting next door. The rental form could carry a fine if not filed. Or, another idea might be leaving the six months and a day but also permit one short term rental (period not less than two months) per year and a rental form filed with the town stating that the house is rented and to whom, to add an element of control. In conclusion: the town has a problem with very short-term renters disturbing other residents' right to peace and enjoyment of their own home. We concur that weekly or even monthly tenants are not desirable in our residential neighborhoods. However, there needs to be another solution to this six-month and a day minimum rental period. I appreciate the town's willingness to address the problem, but feel that in the current real estate slump that hurting property owner's capacity to sell their home by making Redington Beach not competitive with neighboring cities is not the answer. We may all be sellers someday and the town's current solution to the weekly renters problem could virtually make our homes unsaleable. Tom Meinhardt http://www.tbnweekly.com/editoriaVreaders~olUcontent articles/112807~o1-Ol.txt?arc... 11/05/2008 Beach Beacon Tampa Bay Newspapers Page 1 of 1 Archives Article View Published on TBNWeekly.com -Tan. 16, 2008 Redington Beach officials address rentals, dock issues By BOB MACPHERSON Article published on Wednesday, Jan. 16, 2008 REDINGTON BEACH -Two lingering issues -short term rentals and reasonable boat dock regulations -are close to being resolved. The Redington Beach commission on Jan. 8 unanimously passed at first reading an ordinance that will prohibit short term rentals in residential zoned districts for less than a six month period. A draft ordinance establishing minimum specifications for boat dock location, number, and width was also discussed at length. The short term rental ordinance will have its second reading in February. The draft dock ordinance will undergo one last overhaul by the commission, planning and zoning board, and board of adjustment before it undergoes the formal adoption process. The dock issue is particularly thorny since waterfront properties in the city vary considerably. Some so-called "inverse" lots have little room to play with in locating a dock that would not infringe upon a neighbor's right to a clear view of the water. Town Attorney Andrew ]. Salzman said a major objective of the new dock rules is to remove any visual obstacles. "The rules should be uniform to some extent but have latitude for individual circumstances," he said. Salzman said there is legal precedent for the right of a property owner to not have the view from, his property obstructed. Although short term rentals are technically not allowed in single family residential districts in the town, language in the code has been found to be weak. Consequently, the code has not been enforced. The short-term rental issue came to a head when residents complained of a "revolving door" of short-term renters in single-family zoned residential neighborhoods. The importance of the issue was heightened when a former town clerk allegedly told a construction permit applicant that it was OK to rent short term when in fact the town's ordinance prohibited it. Former Redington Beach attorney Dominick Amadio in a June 30, 2005, letter to the commission explained that in a single-family residential district, the town should cite anyone who rents for less than 181 days. In his letter Amadio explained that renting a property for less than 181 days requires properly owners to pay a 4 percent tourist development tax to the county and a 7 percent sales tax to the state. Accordingly, short-term rentals would constitute a tourist use that is not allowed within single-family residential districts. In addition, if short-term rentals are receiving homestead exemption, Amadio said the town clerk should notify the Pinellas County Property Appraiser's Office of the alleged violation. Concluding that an amendment with teeth to the town's ordinance was needed in lieu of merely implementing a policy as outlined by Amadio. Town Attorney Andrew Salzman was instructed to draft an ordinance that would put substance into the existing ordinance. Violation under the current ordinance can bring a $200 fine. The commission, however, has elected to come up with a stiffer penalty with a second ordinance specifically dealing with violations. That ordinance has yet to be developed. Article published on Wednesday, Jan. 16, 2008 Copyright m Tampa Bay Newspapers: All rights reserved. Printable Version Close Window ~-mail article © Tampa Bay Newspapers: All rights reserved. httn~//www_thnweeklv.com/content articles/011608 bhb-04.txt?archiveview&print 11/05/2008 Short-term rentals fight ~ HeraldTribune.com ~ Southwest Florida's Information Leader Page 1 of 5 back to article H~rald9'ribu~e,com Printed on page Al WHAT PRICE TOURISM? Short-term rentals fight By Kim Hackett Published: Tuesday, February 12, 2008 at 2:01 a.m. From asix-bedroom, two-story Rialto Court house rented from entrepreneur Stephen Milo, retired Canadians Andre and Helene Dupont took morning walks to Caspersen Beach, cooed over their 8- month-old grandchild and lounged around the pool with Andre's two sisters. During their recent three-week Venice vacation, they did not seem like. a threat to the city's island community. But the presence of such short-term renters worries neighbors and the city of Venice. STAFF PHOTO / ED PFUELLER / Canadian visitors and sisters Jacqueline Dupont, left, and Yoland Dupont of Quebec relax Friday at a home in Venice rented from local entrepreneur Stephen Milo by their brother, Andre Dupont. Milo is suing the city of Venice for trying to limit the use of his rentals. "We can't get a handle on it," said Pat McDonald, an island resident who opposes short-term rentals. "You don't know who is renting half the time." Venice's desire to protect residential neighborhoods has sparked a lawsuit over private property rights, and the outcome could have implications for other Southwest Florida communities similarly trying to balance neighborhood tranquility with tourism. At issue is how destinations such as Venice that invite tourists and part-time residents regulate rental property. The focal point in Venice is Milo, who has rented out about a dozen houses on the island for as few as four days. One house on his vacationrentalpros.com site boasts 11 beds and enough room for 16. httn://www.heraldtribune.com/apps/pbcs.dlUarticle?AID=/20080212/NEWS/802120363... 11 /05/2008 Short-term rentals fight ~ HeraldTribune.com ~ Southwest Florida's Information Leader Page 2 of 5 City officials say the way Milo rents the properties makes them "resort dwellings," which is not allowed in single-family neighborhoods. Other communities take different approaches to try to protect neighborhoods. Manatee County, for example, does not explicitly ban short-term rentals in its zoning code, but tells people who ask that they cannot rent for shorter than six months. Trying to correct that omission, as Brevard County recently did with a new zoning code, does not necessarily enable counties to stop short-term rentals. Property owners who rent their houses or condos for long weekends claim the restriction amounts to a "legal taking" of their property without compensation, something the Constitution prohibits. A national nonprofit property rights advocacy organization based in Sacramento, Calif., the Pacific Legal Foundation, is helping make that argument. The foundation, which looks for precedent-setting cases, recently jumped into the fray in Venice and has been fighting the Brevard County short-term rental case for several months. Mllo's fight with the city could be expensive for Venice, which has spent $36,000 in outside legal costs since October. "We'll support it all the way to the Supreme Court if necessary," foundation attorney Valerie Fernandez told the Venice City Council before it voted in December to start enforcing the short-term rental ban. The foundation has successfully argued ahalf-dozen property rights cases before the Supreme Court in recent years. The Florida lawsuits come as more property owners having trouble selling houses or condos turn to renting them for vacations to stay afloat. Milo's property. rentals have quadrupled in 2007, and new Venice rentals appear on his site regularly. But Venice and other local governments are feeling pressure from residents who fear shorter rentals bring noise, diminish property values and destroy their sense of community. "We will vigorously fight it," City Attorney Bob Anderson said. The state requires people who rent for less than a month more than three times a year to get a license. Property owners have to pay sales and other local taxes. Local officials decide .the duration and frequency of rentals. Sarasota County does not allow rentals in single-family neighborhoods for fewer than 30 days. Short-term rentals are allowed in other residential zoning districts on Siesta Key and the barrier islands for people who were renting them before 2003. hm,•/~wun,v heralc~trihnne rnm/arms/nbcs.dll/article?AID=/20080212/NEWS/802120363... 11/05/2008 Short-term rentals fight 1 HeraldTribune.com ~ Southwest Florida's Information Leader Page 3 of 5 Manatee and Charlotte counties make no mention of short-term rentals in their codes. "The code does not address that," said Nicole Dozier, Charlotte County's zoning ofhcer, adding that only the building is regulated. Florida has tong had short-term rentals with little scrutiny. Northerners who bought retirement homes planning to move i~n later typically advertised in newspapers or rented through a real estate agent or informally among friends and family to recoup some costs. But the Internet has changed vacation rentals as much as dating. People in Minnesota or Europe can search for beach vacation rentals, and if they type in "Venice Florida," Stephen Milo's venicerentalpros.com would be among the first sites to pop up. Venice residents who did the same thing were alarmed by what they saw. Beginning in 2005, they complained to the city about these short-term rentals. The city estimates that there are now about 30. Residents on Golden Beach, atight-knit community of condos and million-dollar houses with beach access, complained about noise and parking. "There have been problems, but it's usually the younger people," said Kay Leis, a Golden Beach resident who lives down the street from a Milo rental. "We have a draw because of our beach access." Milo said he became a target because his site lists addresses and is advertised heavily. "But we`ve never been cited by zoning for problems," Milo said. He maintains a property manager to take care of his Venice properties, Milo said. "We don`t rent to people under 25 and it is .not feasible to rent for less than a week." When City Manager Marty Black first asked zoning director Tom Slaughter to look into the issue in 2006, Slaughter concluded that he could find no code prohibiting short-term rentals. He recommended that the city craft an ordinance. It never did. Instead, it told Miio that because he held a public lodging state license he in essence was operating a commercial business and those were not allowed in single- family neighborhoods. t,trn• //www_heraldtrihune_com/anns/nbcs.dlUarticle?AID=/20080212/NEWS/802120363... 11 /05/2008 Short-term rentals fight ~ HeraldTribune.com ~ Southwest Florida's Information Leader Page 4 of 5 Milo cried foul and took his case to the Venice Planning Commission, which unanimously ruled in his favor in 2006. The city's staff reversed the volunteer Planning Commission's ruling last summer, and Milo appealed to the City Council. A few weeks after a new council took office late last year, it upheld the staff's position that short-term rentals were not allowed. "Nuclear power plants are not prohibited either," said Black. "But they are not allowed in single-family neighborhoods." The city planned to start fining short-term renters in January, but the lawsuit put those plans on hold. Milo continues to rent his houses and is adding new ones. He now manages more than 150 in Venice, Siesta Key and northern Florida -- quadrupling the number properties he had one year ago. The Pacific Legal Foundation's attorneys say they are seeing more rental rights issues, especially in Florida. "The trend in Brevard County and Venice is spreading," said Steven Gieseler, the foundation's attorn_ ey on the Brevard case. "It's significant. Contractors who are there for a month now can't rent." Milo wants to stay in business, and also seeks compensation for lost revenue and legal fees. "It's not that they can't regulate these things," Fernandez said. "But if they seek to take property, an owner has to be compensated under the 5th Amendment." The city has until Feb. 29 to respond to the suit. This story appeared in print on page Ai httn~//www.heraldtribune.com/anns/Abcs.dlUarticle?AID=/20080212/NEWS/802120363... 11 /05/2008 Transient Rentals: A Report for the City of Venice Prepared by: David W. Depew, PhD, AICP June 1 I, 2008 Transient Rentals: A Report for the City of Venice Executive Summary Initially it must be decided whether regulation of transient housing must be undertaken as a matter of public policy. If it is determined that the public health, safety, and welfare concerns warrant the use of the local government's police powers for the purpose of regulating transient rentals, then it must be decided the extent to which that regulation will be manifest. The most extreme form of regulation is the total prohibition of transient rentals in residential districts. This option may be difficult to sustain from a legal perspective, although there are communities that have undertaken this strategy. The next level of regulation involves the establishment of a permitting process, either quasi judicial or administrative, to control the location, number, and performance criteria under which such activities will be allowed to take place. The final level of regulation is one that simply establishes permission for such activities to take place, but requires notice to the local government, conformance to certain enumerated performance standards, and possibly an inspection program for building code issues. For any of the three levels of regulation, Comprehensive Plan amendments and Land Development Code regulations will be required. Introduction On March 14, 2008, Judge Bennett determined that the City of Venice' Land Development Code (LDC) did not prohibit short-term, transient rentals in single-family residential districts. In his decision, Judge Bennett reviewed the `Intent' clause of the single-family residential section of the LDC (Section 86-8 i (a)), and definitions of terms such as residence, residential, residential property, dwelling, principal and accessory uses, business, and home occupation. In Judge Bennett's decision, he clearly notes that the issue which he engages to decide is not whether the City may regulate short-term and resort rental uses in single-family residential neighborhoods, but rather whether the appropriate authorizing legislation establishing such a regulatory framework currently exists in the City's LDC. His grant to the petitioner notes that the LDC contains no such regulatory language, and as such the Planning Commission's decision was to be upheld. As a result of that decision, the City of Venice has determined that investigation into the options available to it as they relate to the regulation of short-term rentals in single-family neighborhoods must be investigated. To that end, the City Commission has directed that a workshop be conducted to examine policy options related to the issues associated with transient rental units located in single family residential neighborhoods. Considerable testimony was taken in the course of the prior case, both before the Planning Commission and the City Commission, and this report is not intended to re-state that material. The reader is referred to the prior record related to those matters; a recapitulation of those events is of limited concern to the policy options outlined in this analysis. 2~Page Transient Rentals 6/20/08 Instead, the purpose of this report is to provide some insights into the mechanisms used by other jurisdictions in their efforts to regulate the impacts of short term rentals in established neighborhoods. Plan and Code provisions from other jurisdictions are discussed in an effort to highlight the regulatory mechanisms available to the City. Finally, options are discussed with some suggestions for the level of effort necessary to implement each. Resort Rentals What exactly is a resort rental, and why should such a use be regulated with regard to location and performance criteria? According to Brevard County, "Resort dwelling means any single family dwelling or multifamily dwelling unit which is rented for periods of less than 90 days or three calendar months, whichever is less, or which is advertised or held out to the public as a place rented for periods of less than 90 days or three calendar months, whichever is less. For the purposes of this chapter, a resort dwelling is a commercial use. For the purposes of this definition, subleases for less than 90 days are to be considered separate rental periods. This definition does not include month-to-month hold-over leases from a previous lease longer than 90 days." For Madeira Beach, the term "short term rental" means any rental of a dwelling unit, or portion thereof, for lessthan asix-month period. In Solana Beach, California, "Short-term vacation" is defined as the rental of any structure or any portion of any structure for occupancy for dwelling, lodging or sleeping purposes for more than seven, but no more than 30, consecutive calendar days in duration in a residential zoning district, including detached single-family residences, condominiums, duplexes, twin-plexes, townhomes and multiple-family dwellings. Solana Beach further prohibits short=term vacation rentals for periods of less than seven (7) days in anything but a bona fide hotel or motel as defined by that City's code. The definitions vary from one jurisdiction to another, but the underlying concept is that resort rentals are units that are rented out for periods of time that serve needs generated by vacationers, temporary business or employment users, or other demand elements of the marketplace that do not intend to reside in a community. This may sound obvious, but the issues associated with resort rentals are dramatic enough that a clear defmition of the term is critical in any attempt to regulate the activity. Resort rentals can be demonstrated to create additional demands upon a community's infrastructure. For example, if we take a typical single-family residence with three (3) bedrooms, two (2) bathrooms, a kitchen, a washer and dryer, and the general amenities found in the average single-family dwelling, and compare that home to the exact same unit used as a three (3) bedroom transient rental unit, we can see some of the basic differences in demand upon public facilities. According to the Florida Administrative Code calculations (Section 64E-6.08, FAC) wastewater generation for a three (3) bedroom home is 300 gallons per day (GPD). That same unit, used as a three (3) room resort hotel (with laundry facilities) generates 1,350 GPD of demand for wastewater treatment. Calculating potable water demand, the single-family residence requires an estimated 360 GPD of potable water while the same home, used as a resort residential operation, will generate 1,620 GPD of potable water demand. Granted, these calculations assume 100% occupancy of the resort rental unit, but even if one considers a 33.3% 3~Page Transient Rentals 6/20/08 rental rate, the demand for the resort unit is greater than that of the same unit used for single- family activities. Further, there is no limitation upon the rental rate that would suggest the owner of the resort unit would limit rentals to only 33.3% of the yeaz. Traffic impacts aze similarly greater for resort uses than for single-family activities. Traffic generation for asingle-family home is an average of 10 trips per day. For a three (3) rental room resort facility that number is 26.76 average daily trips. The owner of the resort unit would only be able to rent out the facilities 37.4% of the time to have the same impact as that of asingle- family residence. Residents of neighborhoods in which short term rentals exist generally point to nuisance issues associated with noise, trash, parking, and maintenance as primary azeas of concern. Guests of resort residential units are deemed to have less of a stake in the overall neighborhood aesthetic, and are thus seen as contributors to a lack of commitment for neighborhood preservation. Absentee ownership is also pointed out as a potential difficulty in establishing a sense of community among permanent residents of a neighborhood in which such rentals aze occurring. Additionally, some instances have been identified in which single-family residences have been used not for resort or vacation guests, but rather as accommodations for short-term employment. Although empirical data are limited, it appears that some instances in which seasonal or project related, short term workforce members are housed in single-family neighborhoods have also occurred. Such a situation is reminiscent more of a dormitory situation that a resort rental and brings additional nuisance concerns. Demand for public services and facilities aze not the only elements associated with resort impacts. Short-term rentals also generate greater demand for restaurants, entertainment, car rentals, groceries, specialty retail outlets, and other related economic activities. Supporters of short term rental activities point to a 2005 study undertaken in Hawaii which suggests that for every $1.00 spent by vacationers in resort residential housing, an additional $0.79 of spending was generated elsewhere in the local economy for a total of $1.79 of economic impact. i The study estimates that 18.8 jobs were supported by each $1 million spent by resort residential guests. Proponents of short-term rentals also point out that such activities often generate additional demand for foil-time or seasonal residences as some percentage of vacationers eventually relocate to the area in which the short-term rentals had taken place. Although empirical data on this claim is scazce, the azgument may have some logic. The question remains, however, whether utilization of asingle-family residence rental would have a greater impact than a simple fiotel or motel room at a resort facility in a future resident's decision to relocate. Additional azguments for not regulating short term rentals include the difficulty in enforcing such resort rental regulations by a local government: The inability of a given local government to be aware of all activities for each residential unit in its jurisdiction at all times is cited as a 1 Transient Vacation Rentals on O'Ahu. The Kauaian Institute, 4973A Ohu Road, Kapa'a, HI. September 2005. 4~Page Transient Rentals 6/20/08 practical reason for allowing short-term rentals to occur without regulation, relying only upon nuisance ordinances to control off-site impacts. Brevard County addresses the enforcement issue by establishing prima facie guidelines for determining whether such activity is occurring in violation of its Code. Section 62-103 of Brevard's LDC states, "The following circumstances provide prima facie evidence that a property is being used as a resort dwelling: (1) On anon-homestead property, different occupants have been observed on at least two separate occasions within any 90-day period; (2) On anon-homesteaded property, different vehicles with different license plate tags have been observed parked on at least two separate occasions in any 90- day period; or (3) The property is advertised or held out to the public as a vacation rental, vacation resort, short-term rental, short-term resort, or resort rental." In Key West, under the provisions of Section 18-602 of that jurisdictions land development regulations, a resort residential rental condition is deemed to exist when any of the following occur: "(1) A lease between a property owner and a tenant that by its terms demonstrates a rental of a residential property of less than 30 days or one calendar month; (2) An advertisement in any medium, such advertisement that holds out the residential property for rental for a period of less than 30 days or one calendar month; or (3) Testimony is presented by any person who is a neighbor or by a representative of a condominium or homeowners association board that a pattern of activity- generally associated with unlicensed transient rental activity is occurring at the property." In both jurisdictions, reliance is upon neighborhood organizations and`individual residents to police the areas proximate to their homes. If short term rentals are taking place in violation of the applicable regulations it is anticipated that neighbors, rather than inspectors or other local officials, are better positioned to alert the appropriate authorities. Supporters of short term rentals have argued that in addition to violating basic property rights, such a program does more to destroy neighborhood consensus by pitting neighbor against neighbor. Opponents note that owners engaging in short term rentals are not neighbors, but rather absentee landlords that have little to do with the establishment of a neighborhood aesthetic. Regulation of Resort Rental Units in Residential Districts Prohibition There are local jurisdictions that have determined short term rentals to be a serious enough problem that a total prohibition has been established. The city of Atlantic Beach defines all short term rentals as commercial uses and restricts such activities to commercial districts. Section 24- 16 ofthe Atlantic Beach LDC states, "Short-term rentals shall mean any residential rental or lease the term of which is less than ninety (90) days. Short-term rentals shall be considered to be "commercial uses" as are hotel, motel, motor lodge, resort rental, bed and breakfast or tourist court uses." Section 24-82(1) goes on to state, "Short-term rentals prohibited. Private homes, including, but not limited to, single-family homes, townhomes, duplexes, condominiums, and the S~Page Transient Rentals 6/20/08 like, shall not be rented or leased for a term or period of less than ninety (90) days. No one shall offer or advertise a private home for rent or lease for a term or period of less than ninety (90) days:' Violators are cited under the City's code enforcement procedures and are liable for fines established as part of that process. Strict Regulation The City of Key West has determined that a license is required for any short term rentals of a residential property. Section 18-601 states, "(a) The short-term rental of a residential property is a business activity that requires the property owner to hold a business tax receipt issued by the city. A state or county license without an accompanying city license is insufficient. Notwithstanding the existence of any other regulation of the city regulating the transient use of property, the short-term rental of a residential property without a business tax receipt violates the law." Key West declares that it is unlawful for a property owner to lease a residential.property for a period of less than 30 days or one calendar month without having obtained a business tax receipt under the provisions of its LDC. Key West requires each owner of a residential unit to apply for an annual business license, pay applicable taxes, and provide evidence of compliance with certain minimum requirements for the rental unit. First, the street address and tax identification number of the rental unit must be supplied. Additionally, a disclosure of ownership, listing all owners must be provided. A report from the Fire Marshal, verifying an annual inspection of the facilities, is required to assure that basic Health/Safety Code provisions are being met on an ongoing basis. A structure and property sketch showing the size of the site, number of rooms, bedrooms, kitchens, and on-site parking facilities are required to determine the number of resort rental rooms available and whether the activity meets the minimum parking requirements. Tax information is also required, including a federal employer tax identification number or social security number, a Florida Department of Revenue sales tax number, and a valid license conforming to the provisions of Chapter 509, FS. Each transient rental unit is required to post the name, address, and 24-hour phone number, as well as providing such information in the annual permit renewal, of the person operatiog and responsible for the resort rental unit. The transient units must also provide, on-site, a notice alerting the public of the transient use. This notice is required to be of a uniform style, specified by the City of Key West, and to be clearly visible from the property boundary along the frontage of the public street. The name and telephone number of the 24-hour contact person must also be made available not only to the guests, but also to the adjoining and proximate residences in order for the owner/operator to be able to respond quickly to complaints. Resort residential units are required to conform to all ADA mandates, and occupancy limits are established in accordance with the limits found in the Florida Building Code as applied to each unit in question. The owner/operation is also required to keep a guest log with the name, address, and vehicle information (including make, year, and license tag number) of each guest. Parking requirements are enforced in accordance with the area of Key West in which the unit is located and the number of rental units in the structure. There is also a requirement for a written lease between a residential dwelling owner and a tenant, containing the tenant's agreement to applicable regulations. 6~Page Transient Rentals 6/20/08 Once a property has been licensed under the City of Key West's short term resort residential provisions, it is deemed to be a violation of the regulations to enter into along-term lease with the intention of subverting the regulatory goals of the LDC provisions. It is also a violation of the regulations for a property owner to lease space to "roommates" for periods less than 30 days or one calendar month when not licensed as a resort unit. According to the regulations, for the purpose of enforcement, the ordinance declares that a rebuttable presumption shall exist that roommates use a common entrance to a dwelling. Further, it is declared unlawful for any owner, tenant, broker, realtor, agent or other representative of the owners to hold out or advertise a residential dwelling for transient rental if the property is properly permitted. Brokers or realtors found in violation of the regulations are subject to having their business tax receipt revoked. The town of Marathon's regulations take a similar approach. The Marathon LDC indicates that the purpose is to protect residential neighborhoods from potential negative impacts of vacation rental uses, to limit the impacts of vacation rentals upon affordable housing stock, to direct transient rental properties to areas where such uses are compatible, to provide a reasonable period of time for the amortization of existing licensed vacation rental units made noncompliant by the adoption of regulations limiting such rental units, and to encourage the discontinuation of vacation rental uses deemed incompatible with the character of the neighborhoods in which they exist. To that end, Marathon has required that no owner of a vacation rental shall rent that unit for 28 consecutive calendar days or less without a valid vacation rental license. An owner may retain an agent, representative or local contact person to undertake the rental of the unit in question, but the license is issued only to the actual owner of the vacation rental. The owner, not the agent, is responsible for compliance with the provisions of the LDC; failure of an agent, representative, or local contact person to comply with the requirements is deemed to be a failure by the owner. Marathon's regulations were effective as of February 13, 2007. After that date, all vacation rental units were required to comply with the following: "1. All trash and debris on the vacation rental property must be kept in covered trash containers, unless the trash containers are kept indoors or are kept in an outdoor enclosure; however, when placing trash containers out for curbside pickup, the trash containers shall be covered. Each vacation rental unit must be equipped with at least four (4) covered trash containers for such purpose. 2. A local contact person must be available 24 hours per day, seven {7} days per week for the purpose of responding promptly to complaints regarding the conduct of the occupants of the vacation rental. The name and phone number of the contact person shall be registered with the sheriff department by the City of Marathon Code Compliance Department. 3. Each non-waterfront dwelling shall be a minimum of 1,800 square feet. Direct waterfront, those with indirect waterfront access or condominium dwelling units are exempt from this minimum size requirement. 4. Each licensed dwelling shall not contain more than one (1) kitchen. 5. The owner or vacation rental manager shall maintain a tenant and vehicle registration which shall include the name and address of each unit's tenant(s), and 7~Page Transient Rentals 6/20/08 the make, year and tag number of the tenant's(s) vehicle(s). This information shall be readily available upon request of any officer of the City responsible for the enforcement of this Ordinance. 6. The owner shall provide off-street parking on property owned or lawfully leased by the owner of the property or the occupants for all vehicles, water craft and trailers to be used by the tenants during any occupancy. The watercraft may be moored at either an existing on-site docking facility or stored on a trailer in ~an approved parking space. Vehicles, watercraft and trailers shall not be placed on the street, right-of--way or within the required setbacks. All permissible uses shall comply with the City of Marathon parking, driveway and loading standards. 7. The total length of docked vessels shall not exceed the width of the property at the waterline, without rafting of vessels nor create any hazard to navigation. No boat docked at a vacation rental property shall be chartered to a person other than registered guests of the vacation rental unit or used for live-aboards, sleeping or overnight accommodations. In addition, recreation vehicles shall not be used for sleeping or overnight accommodations at the vacation rental unit. 8. The occupancy of an individual dwelling shall conform to the occupancy limits of the Florida Fire Prevention Code and the Florida Building Code and total occupancy in all cases shall be subject to the following: (a) The maximum occupancy load of any vacation rental unit shall not exceed two (2) adults for each bedroom (children over 12 shall be considered adults for purposes of this section), plus two (2) persons. (b) If an owner or applicant can show a written lease or rental agreement where the owner is obligated to rent the property with more occupants or persons gathered than allowed in this subsection and can show sufficient proof that the lease or rental agreement was in existence at the time of ratification of this Ordinance, then this subsection shall be waived for the period of time the lease or rental agreement is in effect, but will not be waived for any period beyond (more than) 12 months after ratification of this Ordinance. 9. There shall be a written lease between a vacation rental dwelling owner and the tenant and it shall contain the tenant's agreements to the following: (a) The regulations contained in this section. (b) Acknowledging responsibility for all occupants during the rental term to comply with such restrictions as a condition of the agreement, signed by such tenant prior to occupancy. (c) Violations of the posted occupancy and use restrictions may result in immediate termination of the rental agreement, eviction from the vacation rental unit by the Owner or Property Manager and appropriate fines levied by the City. 10. Nothing in this section is intended to exclude the application of any other ordinance of the City of Marathon to the property or to the related parties. 8~Page Transient Rentals6/20/08 11. There shall be no overnight leases or any conversion from providing vacation rentals to operating an inn or motel. All leases, rentals or uses by a tenant must be for a minimum of seven (7) continuous nights. 12. Vacation rental units must be registered, licensed and meet all applicable state requirements contained in Fla. Stat. Ch. 212 (Florida Tax and Revenue Act), Fla. Stat. Ch. 509 (Public Lodging Establishments), Chapter 69A-43 F.A.C (Uniform Fire Safety Standards for Transient Public Lodging Establishments), and Chapter 69A-60 F.A.C (The Florida Fire Prevention Code), as may be amended. 13. The vacation rental unit must comply with all State of Florida Department of Health and FDEP standards for wastewater treatment and disposal 14. Complaints to the vacation rental manager concerning violations by occupants of vacation rental units to this section shall be responded to within one (1) hour. The neighbor who made the complaint shall be contacted by telephone or in person and informed as to the results of the actions taken by the manager. A record shall be kept of the complaint and the manager's response for a period of at least three (3) months after the incident, which shall be available for inspection by the City of Marathon Code Compliance Department during business hours." As was the case with Key West, Marathon established performance regulations and a complaint process to provide minimum standards for the use of single-family residences as short term rental units. The City of Marathon further prohibited overnight rentals in the single-family neighborhoods, deeming such uses to be an inn or motel activity and more properly located in a commercial district. This is similar to the process established by the City of Solana Beach, CA. For Marathon, as in the case of Key West, educational efforts for guests are also required. Each vacation rental is required to have a clearly visible and legible notice posted within the unit on or adjacent to the front door, containing the following information: "1. The name of the managing agency, agent, vacation rental manager, local contact or owner of the unit, and a telephone number at which that party may be reached on a 24-hour basis; 2. The maximum number of occupants permitted to stay in the unit; 3. The maximum number of vehicles allowed to be parked on the property; 4. The number and location of on-site parking spaces and the parking rules prohibiting on-street parking; 5. The trash pick-up day and notification that trash and refuse shall not be left or stored on the exterior of the property except from 6:00 p.m. of the day prior to trash pick-up to 6:00 p.m. on the day designated for trash pick-up; 6. Notification that an occupant may be cited, fined and/or immediately evicted by the Owner or Vacation Rental Manager, pursuant to State law, in addition to any other remedies available at law, for creating a disturbance or for violating other provisions of this Ordinance; 7. Notification that failure to conform to the parking and occupancy, requirements of the structure is a violation of this Ordinance; and 8. The VR [Vacation Rental] license." 9~Page Transient Rentals 6/20/08 Marathon's regulations are interesting for another reason: the LDC includes a specific right for private persons to seek compensation for damages that are incurred through the activity of an owner in renting out a transient unit. The LDC states, "Any person who has suffered, or alleges to have suffered, damage to person or property because of a violation of this chapter may bring an action for money damages and any other appropriate relief in a court of competent jurisdiction against the party alleged to have violated this chapter. The prevailing party in any such litigation shall be entitled to recover reasonable Litigation costs, including attorney's fees in an amount deemed reasonable by the court:' Solana Beach, California, also has recognized the desirability of regulating short term rentals. Prohibiting stays less than seven (7) days in single-family neighborhoods, and allowing unlimited stays of 30 days or longer in such areas, Solana Beach seeks only to regulate resort rentals in the 7-29 day duration. As in the case of Marathon and Key West, while agents are allowed to apply for and manage the operations of short term resort rentals, the owners of the units are ultimately held responsible for activities on the properties in question. Further, annual permitting requirements are enforced along with inspections. Owners are required to use their "best efforts" to insure that guests do not create disturbances, engage in disorderly conduct, do not overcrowd the unit, and do not abuse alcohol or drugs. Moderate Regulation While many of the jurisdictions reviewed had extensive regulations related to short term rentals or in some cases outright prohibitions for such uses, few jurisdictions had limited regulations related to such activities. In Hawaii the issues related to short term vacation rentals have been discussed for a number of years. Additionally, Santa Fe, New Mexico has also engaged in a policy dialogue involving short term vacation rentals. In both areas the local real estate professionals have encouraged an extended dialogue with public officials and property owners in an attempt to articulate compromise regulations that address the difficulties associated with short term rentals. While no jurisdiction appears to have a fully functional set of moderate regulations, there are some signposts for such mid-level regulatory activity. Even the most die-hard property rights advocates appear to recognize that there are abuses occurring in some instances of short term resort rentals. Spring break anecdotes abound related to single-family houses used by 40 students over the course of a 7-10 period. In general, it appears, however, that local jurisdictions can address such rare (relatively) instances by enabling code enforcement officials and local police officers to deal with immediate situations and providing for penalties for owners who rent to guests likely to engage in such behavior. Overall, moderate regulatory approaches require licensure for short term rentals, but the process is ministerial rather than quasi judicial. In other words, a permit is required, but not a conditional use approval or zoning amendment. To obtain the permit certain information is required ranging from basic elements such as the address, tax identification number, owners name and address, manager/operator's name and address (if applicable), maximum number of guests allowed, parking facilities provided, means by which solid waste will be collected, etc. Additionally, notice requirements are necessary for guests related to local noise ordinances, maximum occupancy limits, manager/operator's 24-hour contact number, trash pick-up days, 10~Page Transient Rentals 6/20/08 maximum vehicles allowed on-site, nearest emergency services facilities, hurricane evacuation procedures, and other similar elements related to preserving the health, safety, and welfare of the guests and neighbors. There is significant debate on whether notice to adjoining and proximate property owners should be required when asingle-family residence is converted to a short term resort rental. It is suggested, however, that notice of such a change in habitation activity should indeed be provided at least to adjoining property owners. Fees to administer the system are usually included in any permitting scheme. There is also a question of inspections to ascertain that minimum building and health codes are met in any rental and to insure that the necessary notice is being given to guests. Additionally, all tourist related levies and applicable business licenses would need to be addressed by the owner. Amortization Issues Some jurisdictions also recognize that existing units require elimination or compliance within a period of time after adoption of new regulations related to short term rentals. For example, Brevard County's LDC (Section 62-1191) stated that pre-existing resort dwellings must cease operating as resort dwellings within six months from the effective date of the ordinance amendments, and must thereafter be used in a manner consistent with the zoning classification applicable to the property where the resort dwelling was located. Pre-existing resort dwellings were defined as those resort dwellings with an active state permit or license for a resort dwelling from the Department of Business and Professional Regulation (DBPR), issued prior to the effective date, or which paid state sales taxes for a transient rental prior to the effective date. Uses that claimed to be pre-existing resort dwellings were required to provide a copy of their current DBPR permit or license or proof of paid state sales tax prior to issuance of a business tax receipt by the county. Marathon provided fora 12 month period during which existing resort rentals were allowed to continue operation. The catch was, however, that the owner was required to show a written lease or rental agreement where the owner was obligated to rent the property along with proof that the lease or rental agreement was in existence at the time of ratification of the ordinance amendments. After the 12 month period, all resort rentals were to be subject to the requirements of the ordinance. Interestingly enough, in both the Brevard County and Marathon situation, no additional zoning approvals were necessary for existing resort rentals. Compliance with the regulations was deemed to be the only requirement necessary to conform to the ordinance. For newly permitted properties, that is not always the case; many jurisdictions require a conditional use approval for short term rentals in single-family neighborhoods. Conclusions Basic decisions need to be made by policy makers to determine the nature and extent regulatory efforts are to be undertaken for short term resort rentals. The length of stay is the primary decision to be made as a starting point. Should overnight rentals be allowed? Should rentals less 11~Page ~ Transient Rentals 6/20/08 than 7 days be permitted only in hoteUmotel districts and commercial azeas? Should rentals longer than 30 days be regulated? These are a few of the basics that must be addressed. Additionally, the level of regulation must be determined. If an outright prohibition of all short term rentals in single-family neighborhoods is to be enacted, cazeful drafting of the Comprehensive Plan and LDC must be undertaken. Further, amortization efforts should also assume greater importance in order to avoid takings claims. If some degree of short term rentals are to be allowed, the degree to which they aze to be managed must be determined. A maximum effort will involve additional administrative expense and an increased inspection workload. While such activities should be fee supported, there is an upper limit for the fees that can be reasonably chazged. Most jurisdictio~ps have found that fees greater than $125, annually, bring significant opposition from owners. Should regulation be chosen, establishment of performance criteria will also involve amendments to the Comprehensive Plan and the LDC. In order to obtain the best possible consensus among the disparate interests, some jurisdictions have chosen to undertake resort rental management chazettes. These gatherings are intended to bring owners, operators, neighbors and guests into a forum where all points of view can be expressed and some level of consensus can be achieved. 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X ~ -F - ~ N ,~ .. .~ O N ` n U ~ -- ~ O o ~ ~ ~ ~ ~ Q ~ _ . 0 L ~ O V ~ ~_' ~ ~ ~ ~ ~ ~ ._ ~ N > L „~ Q ~ f+ • 0 _~ ~ '~ ~ ~ ~ 0 L ~ ~ ~ Q ~ ~ ~ ~ N ~ ~ ~L 0 ~ O Q ~ ~ ~ -iW-~ . W ~' ~ ~ ~ • L W W .~ ,~ N _~ ~ ~ L ~ ~ t V1 ~ p ~ ~ . C to ~ to O ~ ~ ~ ~ ~ a? ~ , ~., , O tU ~ ~ ~ N ~ -~ `~ ~- V) ~ (6 ~ -~ ~ ~ 0 ~ L '~ Q ~ +-+ O O ~ {~ ~ j O V .~ ~ Q U -~ N ~ ~ ~' Q ~-' ~ N I Z3 ~ ~ U .~ M I t~ ~tS a s° m .~ 0 ~' v 0 0 N O N m Attachment 4 Economic Imuact of Transient Vacation Rentals (TVRs) on Maui County January 8, 2008 Dr. Thomas Loudat, President, TAL Associates, Honolulu, HI Dr. Prahlad Kasturi, Professor, Economics Department Radford University, VA Executive Summary Back rg ound This study was commissioned by the Realtors Association of Maui (RAM) to update a previous study conducted by the. Kauaian Institute addressing the economic contribution to Maui County of the Transient Vacation Rental industry (TVR). The intended purpose of our results is to not only inform policy makers of the TVR economic contribution to the County but also to scrutinize the industry itself in the context of the overall Maui lodging industry. The TVR industry is concerned about the apparent existence of an uninformed anti-TVR bias in Maui County government; about an ongoing enforcement of unreasonable rules; the potential enactment of legislation meant to marginalize this industry; and the potential economic consequences of such policies. This research effort is to inform the County policy makers of the level of these potential negative economic consequences. Informed policy-making can reduce both government and community concerns related to TVR operation while minimizing negative consequences of any new policy or enforcement of an existing policy. Our study uses the 2002 Input-Output Tables to study the economic impact of transient vacation rentals (TVRs) on Maui County. Data from the American Community Survey conducted by the US Census Bureau, the Hawaii Visitor Research Report published by the Department of Business Economic Development and Tourism (DBEDT) State of Hawaii and UHERO EIS portal have been used in the analysis. A review of relevant studies and other information sources investigating the impact of TVRs provides an information backdrop for our analysis results and conclusions, which may also prove useful to policy makers. Research Conclusion Our essential research conclusion is that the TVR accommodation industry generates significant, positive economic benefits to Maui County and the State of Hawaii. At the high end of our estimation range, our results indicate positive economic benefits approaching: $318.8 million in total output (i.e. sales), $100.6 million in labor income, 3,478 jobs, $19.7 million in Hawaii State taxes and $191.1 thousand for Maui County's share of the TAT (transient accommodations tax). These are significant economic values being generated by an industry utilizing only 1.7 percent of all housing units available in Maui County. Elimination of the TVR industry could result in the full loss of the TVR industry's economic value. The extent of the loss of the TVR industry due to government regulations depends to what extent TVR visitors substitute an alternative Maui County accommodation type to TVRs if they are unavailable or not sufficiently available to meet the current and expected future demand level for their accommodation type. In a global market place with alternatives to Maui destinations offering a literal potpourri of accommodation experiences, the modern, well-informed and sophisticated visitor can find the accommodations experience that best fits their tastes and preferences. Based on the increasing market share of TVRs on Maui from 2000 to 2006 relative to other accommodation types one can reasonably surmise that the modern visitor increasingly prefers a TVR or its equivalent experience. Thus, even though elimination of Maui TVRs may not result in the loss of all TVR visitors who may substitute an alternative Maui County accommodation type yet available, we would still expect a significantly negative economic impact in Maui County if TVRs are eliminated or significantly reduced. That the mere threat of elimination appears to be a significant cause of the reduction of TVR numbers from 2005 to 2006 (11.0 percent) supports this contention. Even with substitution of alternative accommodation types by the TVR visitor if TVRs are no longer available in Maui County there are economic impacts. These impacts are the redistribution of income from TVR property owners primarily to institutional accommodation (i.e. hotels, condos and timeshares) property owners. These are negative or positive depending on whether you lose or gain this income. Additionally, for the TVR visitor who yet comes to Maui utilizing an alternative accommodation type because of TVR unavailability, this visitor will have reduced satisfaction (i.e. utility) due to the fact that they have to choose asecond-best accommodation alternative. There exist policy means whereby the negative perceptions of TVRs leading to their current regulatory scrutiny can be addressed such that the negative economic consequences can be mitigated. For example, Maui could stand to gain tax revenues through increased property taxes if TVRs could operate as legitimate businesses and be required to pay their due share of taxes. Some of these additional funds can then be used to provide additional public goods and services such as water, sewer and parking in support of the visitor industry and for negative externality (i.e. unintended negative impacts on a local community from the operation of TVRs) mitigation. Negative externality mitigation may involve up-dating community zoning laws taking into account current realities, citations or loss of permits to operate for rowdy behavior and disturbing the peace in residential neighborhoods where TVRs .may be permitted, fines for illegal and inappropriate parking, higher property taxes on TVR establishments to compensate residents, increased responsibility for TVR operators for the safety and security of the guests and mandatory evacuation plans in case of emergencies. It is informative and appropriate to note aside from their economic contribution TVRs have positive externalities (i.e. unintended positive economic benefits on a local community). TVRs are generally associated with ADUs (accessory dwelling units). ADUs may be used for transient vacation rentals but they could also be used for housing local residents if need be. The character of Ohanas and local lifestyles need to be preserved as learning local customs and being exposed to native culture is one of the reasons why visitors choose to come to Hawaii. It is an irrefutable fact in resource economics that it is most efficient to let land gravitate to highest and best use, such as for TVRs. Finally, we feel it relevant and appropriate to state that before the TVR issue is subjected to short shrift and TVR closure, it might be prudent for county officials to work in concert with state officials and TVR operators to improve data gathering regarding TVR visitors. Additionally, an 2 extended cost-benefit analysis could also be undertaken exploring every option simultaneously addressing community concerns fairly and equitably. Corollar~Conclusion A corollary conclusion to our overall research conclusion that merits elaboration for policy makers relates to the operation of the Maui lodging industry market and government intervention into this market. Economic theory and empirical research suggest that any government market intervention requires a rationale other than anecdotal opinions oftentimes relied upon to justify regulation or perfect knowledge of the preference of future generations. Without such justification or perfect knowledge, government market intervention transfers the resource use decision from the property owner to the legal/political authority. It is akin to centrally planning a market. Simultaneously, government intervention distorts market mechanisms which require no government prodding to operate efficiently and effectively to supply products and services to meet consumer demand. Regulation of the TVR segment of the Maui lodging industry market will distort the naturally occurring economic activity of the TVR industry meeting the naturally occurring consumer demand for the lodging services it provides. Government intervention into a market in any form, however, is warranted when there is either: insufficient allocation for a public good (e.g. a beach,), there are significant negative externalities (i.e. undesirable impacts), or there is insufficient competition. Our analytical assessment indicates that there is no basis to conclude that the Maui lodging industry market and in particular the TVR segment of this market is operating other than optimally if the negative and positive externalities we elaborate on balance offset each other. It is beyond the scope of our research assignment to make this determination. We can state, however, that if the negative and positive externalities do offset one another, at least according to economic theory related to efficient markets, there is no basis for government market intervention into this market. A policymaker determination that negative externalities exceed both any positive externalities plus the positive economic impacts elaborated above then again, according to economic theory, government market intervention would be warranted. As a criterion to determine the nature and extent of regulation, the level warranted in the face of negative externalities would be that level required mitigating the negative externality without diminishing the positive benefits (i.e. economic + positive externalities) derived from the operation of the TVR lodging industry. This would be similar to what ahs occurred with the tobacco industry. Such a policy making outcome would preserve the economic and social benefits that accrue when the TVR market is allowed to operate freely without (or with a minimum) of government intervention with the simultaneous exercise of private property rights. When this occurs it is not possible to make some one better off without making some one else worse off by intervening with market forces. Detailed Summary of Research Findings A summary of our detailed research findings leading to the above conclusions follows. Our review of relevant TVR studies and information revealed the following. TVRs are part of a worldwide growing, home-based business trend serving the tourist industry. 3 • Home-based businesses afford greater sense of freedom and choice to visitors, provide earnings for proprietors and have become a significant source of employment generation in the country. • TVRs on Maui as well as elsewhere have been subject to government review to enforce existing regulations and to assess regulatory policy to mitigate perceived negative impacts (externalities) of TVRs on the communities where they operate. • Potential negative externalities of TVRs include: o increased tax burden on property owners o increase noise, traffic congestion and other (non-local) intrusions into local neighborhoods where TVRs operate o reduced housing and rental availability for residents o increase rent process for residents o devaluation of properties adjacent to TVRs o increased stresses on local infrastructure o the conversion of residential neighborhoods into resort neighborhoods o a decreased sense of "localness" o the urbanization of agricultural and rural areas o a profusion of illegal structures Potential positive impacts (externalities) of TVRs include: o economic growth and development o increased property value o improvements in the quality of life o employment, particularly in more remote areas o tax revenues o income and induced investments o provision of low cost, more affordable vacation lodging especially for families o provision of vacation lodging in areas without other lodging options o an income source for individual property owners o diversification of the visitor industry ownership, to include middle-class residents as owner-operators. o improvements in the visitor experience, allowing more direct interaction between visitors and the "real" Maui. Policy measures to mitigate negative TVR impacts o measures to manage the number of TVR occupants and vehicles o higher property and/or personal tax rates for TVRs o programs to improve the safety of residents and guests where TVRs operate o provide remedies for unruly and unlawful overnight uses o encourage currently unregistered rentals to become licensed o provide residents with notice of each proposed commercial use of a residence in their neighborhoods to solicit community feedback o fines to force regulation compliance. Data show the following for the TVR industry and the broader visitor industry within which it operates from which various inferences about the industry can be made. • In percentage terms, TVR units accounted for 1.71 percent of all housing units available in Maui County or 2.28 percent of all occupied Housing Units. 4 • Maui Lodging Demand by Visitors shows: o Total visitors to Maui County increased from 2,246,253 visitors to 2,477,316 visitors, a gain of 10.3 from 2000 to 2006. o The number of visitors staying in transient vacation rentals (TVRs) increased from 59,115 visitors in 2000 to 105,967 visitors, a gain of 79.3 percent over the period. • The size of the absolute increase in Maui visitors staying in TVRs and the increase in the visitor percentage of total Maui visitors staying in TVRs (i.e. lodging market share) suggest an increasing visitor preference of TVR accommodations on Maui with time when viewed in the context of a much smaller (10.3 percent) increase in total Maui visitors over this same period. • Lodging Supply o TVR lodging units declined from 2005 to 2006 with the Maui declines (11 percent) being less in percentage terms than statewide (17.3 percent). These TVR declines statewide as well as in Maui County can reasonably be considered the result of regulatory threats by governing authorities, as well as normal attrition due to fledgling businesses failing to perform. o Maui County TVRs accounted for 3.4 percent of total visitor lodgings which is slightly less than the statewide percentage of 3.6 percent o The institutionalized lodging supplier (i.e. hotels, condos and timeshares taken collectively) percentage statewide and for Maui County are the same. o TVRs are the largest non-institutionalized providers of lodging units in Maui County as well as statewide. • Efforts to aggressively regulate the TVR industry could restrict the supply of Maui (non- institutionalized) accommodations such that there is insufficient supply to service the increasing demand for this accommodation type with potential negative and other economic impacts. Our analysis of the economic impacts of the Maui TVR industry indicated the following. • Average daily TVR visitor spending totals $159.16 per day with the following distribution. 0 47 percent on lodging 0 19 percent on food and beverage 0 10 percent each on entertainment, transportation and shopping 0 4 percent on all other expenditures • The average TVR visitor stay values used for the analysis are the following: 0 6.85 days estimated from DBEDT data for Mixed and TVR accommodations 0 7.36 days estimated from DBEDT data for all types of accommodations 0 9.5 days estimated by RAM from anecdotal observations • Based on the total number of Maui TVR visitors, the visitor length of stay and TVR visitor daily expenditures, we estimate the direct TVR visitor expenditures for lodging and total expenditures range from: o $54.2 million to $75.2 million for lodging o $115.5 to $160.2 million for total TVR visitor expenditures. • Using the 2002 Input-Output multipliers we estimate the total (direct + indirect + induced) economic impact of the Maui TVR industry to range from: 0 output (i.e. sales) ^ $107.9 million to $160.2 million from lodging expenditures 5 ^ $229.9 million to $318.8 million from total expenditures o labor income (earnings) ^ $34.2 million to $47.4 million from lodging expenditures ^ $72.5 million to $100.6 million from total expenditure o Maui County jobs ^ 966 to 1,339 jobs from lodging expenditures ^ 2,508 to 3,478 jobs from total expenditure o Hawaii State taxes generated ^ $7.4 million to $10.3 million from lodging expenditures ^ $14.2 million to $19.7 million from total expenditure o Maui County share of the TAT (transient accommodations tax) ^ $72.0 thousand to $99.8 thousand from lodging expenditures ^ $137.8 thousand to $191.1 thousand from total expenditure o Maui County tax revenues could be increased from the operation of TVRs with an appropriate taxation policy which distinguishes TVRs from non-TVR residential properties. Elimination of Maui County TVRs with no substitution by TVR visitors to an alternative, available Maui County accommodation type would result in negative economic impacts equivalent to the full values of the TVR industry economic impact just presented. o Substitution by the TVR visitor to an alternative Maui County accommodation type due to the unavailability of TVRs would mitigate the negative economic impacts of elimination of the TVR industry the extent to which substitution occurs. o The economic impacts of substitution to an alternative to a TVR of lodging type in Maui County would result in income redistribution effects from TVR owners to non- TVR accommodation type owners, and the loss of utility (i.e. satisfaction) of the TVR visitor due to their inability to stay in their first preference accommodation type. 6 I. Introduction: Following a national trend, home-based businesses grew in Maui County during the 1990s. Some Maui County residents engaged in the vacation rentals business in order to serve the tourism industry. They did this by renting their homes or part of their homes as transient vacation rentals (TVRs). According to a former Mayor of Maui County, the discussions in the Maui County Council in the early nineties focused on growing the home-based vacation rental segment of tourism. This was seen as a part of an expanding worldwide trend. The public then clearly and enthusiastically supported incorporating the industry into the community as a growth industry. [1] However, under current rules, all home occupations have had to go through a lengthy, difficult permitting process to bring their TVR businesses in compliance with existing law. Only a very few of the TVRs operating in Maui County are currently registered and have the necessary special use permits. For various reasons, including past assurances from the Maui County Government to not enforce outdated regulations pending passage of a new vacation rental ordinance, many TVR businesses have not gone through the permitting process. The former Chairman of the Maui County's Land Use Committee produced a new bill proposing legitimatizing of TVRs in 2006. However, this bill was rejected by the County Council in February 2007. According to a news story, the current Maui Planning Department's draft bill for Bed & Breakfast rentals and TVRs being reviewed by various planning commissions on the islands of Maui, Molokai and Lanai, is more restrictive and if passed will likely eliminate many TVRs operating in Maui County. [2] This study on the economic impact of TVRs on Maui County commissioned by the Realtors Association of Maui (RAM) is aimed at informing the debate on the Planning Department's draft bill and underlining the economic consequences of the Department's announced intent to enforce existing law and shut down TVRs without permits by January 1 ~ 2008. Since TVRs are essentially small businesses, it is important to recognize the potential adverse effects and unintended consequences of regulation. Thus this study is also consistent with the enactment of Senate Bill 188 (Act 217) which was signed into law earlier this year by the Governor of the State of Hawaii. It may be noted that small businesses in Hawaii employ about 60 percent of the workforce. [3] There has been only one previous documented study regarding the Transient Vacation Rentals on Maui by The Kauaian Institute in 2005 [4]. That market segment assessment study provided a comparative analysis of the geographic and economic footprint of transient vacation rentals on Maui. The two significant findings from this study were a count of 1095 TVR units in Maui following an intensive search process (which shows an under count of TVRs in official figures reported by DBEDT) and an estimate of $38 million in lodging revenues received by TVRs in 2003. This study updates the earlier study by using officially reported data for 2006 and uses the Hawaii Input-Output Table also used by The Kauaian Institute to measure the impact of TVR lodging revenues on output, earnings and employment in Maui County. There has been no attempt to develop a new separate estimate of TVR lodgings in Maui County either through an intensive or extensive search process given the limitation on time in developing this research report. Section II provides a discussion of various externalities associated with vacation rentals in various parts of the US Mainland as well as in Maui County. In the third section the results of the present study are 7 examined and analyzed. The last section discusses the policy implications of our research investigation. II. Externality Impacts of Transient Vacation Rentals (TVRs) According to the Travel Industry Association of America, in 2003, the U.S. travel industry garnered approximately $554.5 billion from domestic and international travelers excluding international passenger fares. The estimated impact of these travel expenditures, resulted in 7.2 million jobs with over $158 billion in payroll income for Americans, as well as $94.7 billion tax revenue for federal, state and local governments [5] . It is not surprising, then, that given the vast potential of the tourism industry and its growth trend, many home-based businesses have turned their attention to serving travelers through either operating travel agencies or by offering lodgings as either bread & breakfast establishments or transient vacation rentals in their homes. Since the 1990s, the spread of the Internet, e-commerce, web-based advertising and growth in the number of firms providing specialized software for home- based businesses and facilitating monetary transactions on-line have all contributed to increasing this segment of home-based businesses. As mentioned earlier, home-based businesses afford greater sense of freedom, provide earnings for proprietors and have become a significant source of employment generation in the country. However, in many resort areas of the country, short-term vacation rentals are also having externality impacts on the local community. In economic theory, an externality occurs if the benefits or costs of a good are passed on to or `spill over" to someone other than the buyer or seller of the good. The presence of externalities signifies market failure. This means that either the market produces "wrong" amounts of the goods or services in question or fails to allocate any resources to producing such goods or services even when fully justified economically through a consideration of benefits and costs. If costs of the good or service are inflicted on a third party without compensation it is referred to as a negative externality. Relative to market allocation of resources which is `efficient' (in the absence of externalities), there is over allocation of resources to the production of the good or service in the presence of a negative externality. Likewise, sometimes externalities associated with some goods or services are beneficial to other producers and consumers. These uncompensated spillovers accruing to third parties or the community at large are called positive externalities. Typically, the presence of beneficial externalities indicates under allocation of resources for goods and services that generate them. One of the earliest studies on the issue of vacation home development was regarding rural Vermont [6]. In Vermont, rural areas with natural amenities have a history of using the tourist industry as a means of importing economic development. Since the 1950s urbanites from southern New England and New York sought recreational facilities in Vermont. The tourist industry promoters focused on the beneficial impacts such as improvements in the quality of life, additional employment, tax revenues, income and induced investments in a state that had traditionally high levels of poverty. Furthermore, it was felt that the impact on the tax base would be positive so local land owners would face lower property taxes. The argument was also advanced that the physical quality of life would improve due to an increase in local public goods and services demanded by vacationers without an increase in the property tax paid by landowners. The study by Fritz (1982) investigated 8 the residential tax burden in about 240 Vermont towns. The study showed that problems may exist when attempting to rely on vacation home development as a method for inducing regional development. Under certain circumstances, increase in town land allocated for vacation homes was significantly associated with increasing tax burden on residential property. The incidence of occurrence was most apparent for smaller towns (less than 1000 population) although this result was significant for all 240 towns tested. It was also suggested by the author that positive effects such as increased property values may offset the disadvantage of increased tax burden. In the City of Encinitas, California a proposed Major Amendment No. 2-OS (Short Term Vacation Rentals) to the City's Local Coastal Program would have served to prohibit short-term vacation rentals in all residential zones throughout the city [7]. The amendment cited conflicts between residents and visitors involving late night disturbances, excessive noise, parking problems and trash especially in areas near the shoreline. In this case, the staff recommendation from the California Coastal Commission to the Commissioners (dated January 25, 2006) was to reject the amendment as this would have eliminated a significant source of overnight visitor-serving accommodations and therefore inconsistent with the Coastal Act.. The Coastal Act promotes and preserves a full range of public access opportunities along the coast, including provision of accessible and affordable visitor- serving commercial facilities which serves and support coastal visitors. The staff recommendations had noted that the City had performed an Internet search for vacation rentals and found at least 112 residences or condominiums that were advertised for short-term rentals. The majority of the identified residential units were located on the bluffs overlooking the ocean in the northern section of Encinitas in the community called Leucadia. The rental rates varied from $750-$3,750 per week in the low season (average $1564) to $850-$6000 per week in the high season (average$2414). However, the staff recommendations noted that despite the fact that the upper limits of these ranges could not be classified as low cost lodgings, short term rentals still offered a more affordable and desirable accommodation for many parties, especially families. Another major reason provided for the Staff's recommendation to reject the Amendment was its inconsistency with the California Environmental Quality Act (CEQA) as the amendment would have an adverse impact on visitor serving accommodations and low-cost recreational facilities. Provisions of CEQA also state that amendments will not be approved or adopted as proposed if there are feasible alternatives or feasible mitigation measures available which would substantially lessen any significant impact the activity may have on the environment. In other significant actions, the Staff recommendations pointed out that the Commission had approved a Local Coastal Program (LCP) amendment to allow short-term rentals in residential and mixed residential zones within the Shelter Cove community in Humboldt County affecting approximately 2,300 lots. This was accompanied by approval of suggested modifications to the Humboldt County LCP Amendment request that required specific regulations for vacation rentals in terms of managing the number of occupants, parking and other related impacts, so as to not unduly impact local residents. The Commission previously rejected an LCP amendment to ban vacation rentals in all residential zones in the City of Imperial Beach in 2002 noting that the proposal was excessively restrictive discouraging tourist related uses and visitor accommodations. Renting out a home as a vacation rental is not considered a commercial use in San Juan County in Washington and is allowed in residential areas. However, homeowners must obtain a conditional use permit. [8]. A concern over accessory dwelling units (ADUs) that may be attached or detached 9 was noted. Detached ADUs were more likely to be used for vacation rentals and provide housing for caregivers. Attached ADUs were more likely to be used for family and other personal guests. On the positive side, transient rentals earn income for the owners such that changing the rules could cause "economic harm." Conversely, on the negative side, transient rentals limited housing to residents, devalued surrounding properties and impacted water systems due to increased density. There was general consensus that ADUs historically had provided affordable housing [9]. In 2005, in order to mitigate the TVR problem, property owners with transient rental permits were assessed taxes 15 percent higher than similar buildings without a permit. In addition, all of the personal property in the transient rental properties is now subject to personal property tax. The transient rentals are also subject to sales and hoteUmotel taxes. [10] Property owners of transient vacation rentals must also provide a contact number that is available 24 hours a day and the number does not have to be local. [ 11 ] Big Bear nestled in the San Bernardino Mountains in California has a current 2008 Ballot Measure initiative which seeks to improve the quality of transient rentals by improving the safety and security of guests, provide remedies for unruly and unlawful overnight uses and encourage currently unregistered rentals to become licensed and provide residents with notice of each proposed commercial use of a residence in their neighborhoods [12]. The discussions over Transient Vacation Rentals in Hawaii to some degree mirror the various concerns expressed by various communities and towns on the US mainland. On Oahu, a significant concern over Transient Vacation Rentals is that it destroys the residential character of neighborhoods and turns them eventually into resort areas [13]. Other concerns include the fact that TVRs introduce a constant flow of strangers into the neighborhood and impacts rental housing availability, rent prices, property taxes and the property rights of neighbors [14]. In Maui, there is concern over the long run stock of housing for residents due to transient vacation rentals, Ohana units being converted to TVRs and their impact on local lifestyles. [15] There is also fear that TVRs would urbanize agricultural and rural areas [16]. A record of Maui county zoning complaints from January 1999 through August 2005 shows that noise, late parties, traffic congestion, illegal structures or illegal modeling, disturbances and parking on street are some of the negative externalities associated with TVRs on Maui. [17]. The most frequent complaint (10) was regarding disturbances from TVRs during the above period. According to testimony provided before the County's planning Committee on February 13, 2007, Planning Director Jeff Hunt stated on the record that the complaints against TVRs to his department were quite low. It amounted to 3 percent of all complaints on zoning matters. In sum this literature review clearly indicates that there could potentially be a number of externality related issues with respect to transient vacation rentals. Whereas the impacts on output, employment, earnings and tax revenues are generally positive, there are other costs associated with the operations of TVRs related to disturbances, parking, water and sewer services, pressures on the long run stock of housing, on the character of residential neighborhoods, and the urbanization of agricultural and rural lands. There is also concern over the safety and security of the guests as well as the residents. 10 An extended cost-benefit analysis, which incorporates valuation of both positive and negative externalities often used for social decision making, is beyond the scope of this report. However, it may be noted that there are a number of management tools in economic theory to manage externalities and make the social and economic outcome more efficient. As referenced above, these involve tools such as legislation, fines and specific taxes to deal with negative externalities and subsidies for consumers and producers and provision of public goods and services in the case of positive externalities; III. Economic Impacts of Transient Vacation Rentals (TVRs) on Maui County The only other documented research regarding the impact of TVRs on Maui was done by The Kauaian Institute in August 2005. Although some definitional and legal differences exist between Bed & Breakfast Rentals and other private homes available for short-term rentals, in this study, all such rentals are considered to be Transient Vacation Rentals (TVRs). Data Sources: 1. We used American Community Survey, for Maui County Hawaii done by the US Census Bureau for 2006. This provides a Population and Housing Narrative Profile and is an up-date over the US Census Bureau figures for 2000. 2. Information regarding total number of visitors, average length of stay, demand for lodging types, total visitor expenditures, visitor plant inventory by islands was all found through perusing DBEDTs Annual Visitor Research Reports from 2000-2007. We also used the input-output tables to make impact estimates using 2006 data consistent with The Kauaian Institute estimates that used data for 2003. This study, in essence, up-dates the impacts from the previous study for a year for which complete data exists. 3. Information on TVR visitor expenditures was derived by means of private communication with DBEDT officials. 4. The Kauaian Institute conducted searches over the Internet and in the print media to provide the best available estimate of TVRs in Maui County. We have reported the total counts of B&Bs and other TVRs from both sources, namely, DBEDT and The Kauaiian Institute as we did not investigate the numbers ourselves. There is no district-wise information regarding TVRs in Maui County in our report due to time constraints. Data Comparability DBEDT reported 653 transient vacation rentals (TVRs) in Maui County and 617 on Maui Island in the 2006 Annual Visitor Report. The study done by The Kauaian Institute estimated the number of TVRs on Maui Island alone to be 1095 units (295 Bread & Breakfast units and 800 Single-family units) by July 2005. The Kauaian Institute estimate of the number of TVRs on Maui Island thus exceeds that estimated by DBEDT by 478 or 77%. It is beyond the scope of this analysis to reconcile the difference between the DBEDT and Kauaian Institute estimates via primary research. It seems likely that the DBEDT numbers are from the 11 optional survey on the bank side of the Agricultural Declaration Form all inbound travelers fill out. Since the survey is optional, any TVR estimate based on this data could only accurately estimate the TVR number if there was 100% compliance. This is highly unlikely. Thus, the DBEDT TVR number is conservative, in all likelihood excessively so. In contrast, the Kauaian Institute Study's inventory lists were reviewed area by area by a small group of reliable, professional TVR booking agents specializing in those areas. The review: 1. eliminated duplicates (same property, different website, possibly different property name, etc.) 2. confirmed the number of rental units on the property 3. confirmed if it was B&B or TVR 4. provided additional (below the radar) units that were not initially found. In our opinion, the comprehensive nature of this primary data collection process performed by the Kauaian Institute would result in a more accurate count of the (2003) TVR number than the (optionally reported) DBEDT data. Thus, the Kauaian Institute's estimated Maui County TVR number is used for our analysis purposes. In estimating the market share for visitor lodgings by accommodation types in Maui County we had to drop the data for 2000 and 2001 as information on TVRs are not strictly comparable with information given for most recent years. Maui CountYHousin~ Characteristics The American Community Survey of Maui County done by the US Census Bureau in 2006 reported 64,000 housing units in the county. Of these, 48,000 were occupied dwellings.l The number of owner-occupied dwellings was 28,000 and the number ofrenter-occupied dwellings was 19,000.2 The Maui County Census survey data suggests that 25 percent (16,000) of the 64,000 housing units are unoccupied dwellings. It is not clear how many of those unoccupied homes are "seasonal" homes. Approximately, 64 percent of the housing units are single-unit structures and the other 36 percent multi-unit structures. This implies that in percentage terms, TVR units accounted for 1.71 percent of all housing units available in Maui County or 2.28 percent of all occupied Housing Units. Number of Maui Visitors Table 1 shows the Maui County Lodging Demand by Visitor Lodging Choice. Table 1 show that between 2000 and 2006, total visitors to Maui County increased from 2,246,253 visitors to 2,477,316 visitors, a gain of 10.3 percent. The figures for the total number of visitors were down for years 2001 through 2004 compared to a 2000 base yeah, but recovered in 2005 and posted a successive gain in 2006. Economic forecasts are for visitor numbers to remain relatively flat for the 2007-2008 period before resuming an upward trend in 2009. ' RAM estimates that 23,000 of the 64,000 are condos. 2 These are considered (by RAM) to generally be long-term, (non-vacation) rentals. 12 Table 1: Maui County Lodging Demand by Visitor Lodging Choice (Source: Hawaii Visitor ., _ _ _ _ ___L ., _~.,Ya,. ~nnn ~nn~ ili2L`ilTl 1\v~7vRl x.11 1_V Lod in T e 2000 ~, 2001 2002 2003 2004 2005 2006 Hotel* 1,273,679 1,102,568 1,099,959 1,097,701 1,088,990 1,077,167 1,040,891 Condo* 498,425 447,965 434,100 478,093 473,284 504,137 522,327 Timeshare* 65,471 87,474 108,050 111,191 127,455 147,042 178,568 Bed & Breakfast 65,471 27,746 28,737 29,082 27,469 28,924 30,599 Friends /Relatives 124,978 119,190 143,309 144,866 141,700 151,341 169,752 Mixed** 252,483 263,824 325,272 335,514 348,928 437,869 535,179 Total Visitors 2,246,253 2,048,768 2,139,427 2,196,447 2,207,826 2,346,480 2,477,316 * These accommodations only. *'~5taymg m multiple accommoaanons TVR Share of Maui Visitors Table 2 shows that the number of visitors staying in transient vacation rentals (TVRs) increased from 59,115 visitors in 2000 to 105,967 visitors in 2006, a gain of 79.3 percent over the period. The number of visitors staying in TVRs as a share of all visitors to Maui County (including those staying with families and friends) was 4.3 percent in 2006, up from a 2.8 percent level in 2000 (derived from Tables 1 & 2). This 2000 to 2006 increase in the percentage of total Maui visitors staying in TVRs equals 53.5 percent. The size of the absolute increase in Maui visitors staying in TVRs and the increase in the visitor percentage of total Maui visitors staying in TVRs suggests an increasing visitor preference of TVR accommodations on Maui with time when viewed in the context of a much smaller (10.3 percent) increase in total Maui visitors over this same time period. Table 2. Maui County TVR Demand by Visitor Number Year Rental Houses B&B TVR Total 2006 75,368 30,599 105,967 2005 65,195 28,924 94,119 2004 54,624 27,469 82,093 2003 49 232 29,082 78,314 2002 17,220 28,737 45,957 2001 23,061 28,780 51,841 2000 26,558 32,557 59,115 Visitor Demand and Market Share of Lodgings_by Accommodation Type for Maui County Table 3 combines Tables 1 and 2 data to more clearly reflect the TVR demand segment of the lodging market. Table 3 also eliminates the "Friends and Family" category as this category of visitor does not constitute demand for market lodgings. We characterize the lodging market serviced by hotels, condos and timeshare as the "institutional" market as these lodging providers are generally managed by third party institutions, not the lodging owner as is the case for a TVR. Table 3 clearly shows that these institutional lodging providers service the largest absolute number of visitors on Maui. However, Table 3 also shows that the market share of visitors they accommodate declined from 86.6 percent in 2000 to 75.5 percent in 2006. Figure 1 shows that of these 3 institutional accommodation types, only timeshare registered any market share gain from 2000 to 2006 (37.6 percent). Mixed accommodations also registered a market gain over this period (55.1 percent) but both gains are significantly less than the market share gain of TVRs, which showed a 13 91.6 percent market share increase from 2000 to 2006. This market share gain reinforces the observation just noted. That is, there appears to an increasing visitor preference for TVR-type accommodation services with time. T_L7_ 7_ • a___..a,..] Ail.. S !~'~. „s.. 7 ~arr~nrr nam7nr~ hV V1C1tAr T,nr~uinu ('.hnice 1 QVl{. /• Lod in T e 2000 2001 2002 2003 2004 2005 2006 Hotel* 1,273,679 1,102,568 1,099,959 1,097,701 1,088,990 1,077,167 1,040,891 Condo* 498,425 447,965 434,100 478,093 473,284 504,137 522,327 Timeshare* 65,471 87,474 108,050 111,191 127,455 147 042 178,568 TVR 59,115 51,841 45,957 78,314 82,093 94,119 105,967 Mixed** 177,733 197,452 271,916 286,282 330,440 414,952 506,663 Total 2,074,423 1,887,300 1,959,982 2,051,581 2,102,262 2,237,417 2,354,416 Market Share 86.6% 84.9% 82.3% 82.2% 81.8% 78.7% 75.5% Market share is the sum of that for noteis, conaos ana tunesnares. FiEUre 1: Market Share by Accommodation Type 5 Year Trend of Maui Market Share by Lodging Type 60% .ti, ~' F~H' ~<aa.~ ~~ y 7; ~~~ - y ~• ~ .~".~.%1; 50% L t 40% 4. S i~ r.+ 4 Y L 30% ~h~ ~ ~~,; ~,. e °" 10% : ~. .:, .~,~' 0% 2002 2003 2004 2005 2 006 -Hotel ~-Condo Timeshare ~-TVR ~-Mixed Supply of Lodging by Accommodation Type for the State of Hawaii and by Islands Table 4 provides information regarding the supply of visitor lodgings by accommodation type for Maui and Statewide. Statewide, the total number of hotel units declined by 0.8 percent and TVRs (i.e. B&Bs + individual vacation units) by 17.3 percent over 2005 levels. In contrast, for Maui County the total number of units declined by only 0.2 percent and the total number of TVRs declined by only 11.0 percent over 2005 levels. It seems reasonable to conclude that the TVR declines statewide as well as in Maui County are the result of regulatory threats by governing authorities. Table 4 also shows that TVRs accounted for 3.4 percent of all lodging types in Maui, 7.1 percent on Molokai and 1.1 percent on Lanai. In total for Maui County, TVRs accounted for 3.4 percent of 14 total visitor lodgings which is slightly less than the statewide percentage of 3.6%. Hotel lodgings were less on Maui (42 percent) than statewide (60 percent) but taken with the (institutionalized lodging) categories of condominium hotels and timeshares the percentages are the same (94 percent). These 3 categories would seem to interchange given the condominium and time share conversion of hotel lodging units, the category of which declined accordingly from 2005 to 2006. It is informative to note that TVRs are the largest non-institutionalized providers of lodging units in Maui County as well as statewide. If efforts to regulate the TVR industry are too restrictive the supply of Maui (non-institutionalized) accommodations may be insufficient to service the increasing demand for this accommodation type with potential negative economic impacts. Tnhln d• Cnnnly of T.n~Iainas by Tvne of ACCnmmUdatlOIIS. State of Hawaii, 2006 Island T e Available Units Pro ernes cnan a From 2005 Maui A artment/Hotel 37 5 -8 Bed & Breakfast 122 30 6 Condominium Hotel 7830 114 321 Hostel 37 3 0 Hotel 7595 27 -379 Individual Vacation Unit 495 71 -75 Timeshaze 1959 16 107 Other 366 15 0 Total 18441 281 -28 Molokai Bed & Breakfast 3 2 0 Condominium Hotel 259 6 0 Hotel 141 3 0 Individual Vacation Unit 29 22 -1 Timeshare 15 0 0 Other 4 1 0 Total 451 34 -1 Lanai A artment/Hotel 1 1 0 Bed & Breakfast 3 1 0 Hotel 362 3 0 Individual Vacation Unit 1 1 -2 Total 367 6 -2 Statewide A artment/Hotel 347 21 -14 Bed & Breakfast 598 179 -27 Condominium Hotel 17235 232 1988 Hostel 342 13 -5 Hotel 43637 141 -2424 Individual Vacation Unit 2014 531 -424 Timeshare 7271 45 344 Other 1072 54 -48 State Total Total 72516 1216 -610 15 Dailv Svending of TVR Visitor On average, a TVR visitor spent $159.16 per day in Maui County. Approximately, 47 percent of the amount expended was on lodgings which was equal to $74.70.3 Expenditures on lodgings were followed by expenditures on food and beverage ($30.72), transportation ($16.79), shopping ($15.38), entertainment ($15.28) and all other ($6.29) in order of importance. Thus the average TVR visitor spent $84.46 daily on other items besides lodging while visiting Maui County. We perform the estimation of the economic impacts on TVR lodging expenditures as well as total TVR visitor expenditures to highlight the fact that the full economic impact of the TVR industry exceeds the TVR visitor expenditure solely on lodging. Estimated TVR Lod~ina & Total Related Revenues from TVR Visitors in Maui County The formula for calculating revenues from TVR visitor stays on Maui is: Lodging (Total) Revenues for TVRs =Total Annual Number of TVR Visitors X TVR Visitor Length of Stay X TVR visitor daily lodging (total) expenditures. Where: Maui TVR visitor number (2006) = 105,967 (see Tables 3 or 4) Maui TVR visitor daily expenditure o Lodging = $74.70 (as noted above) o Total = $159.16 (as noted above) Average length of stay in Maui County per visitor range of estimates: 0 6.85 days estimated from DBEDT data for Mixed and TVR accommodations 0 7.36 days estimated from DBEDT data for all types of accommodations 0 9.5 days estimated by RAM from anecdotal observations.4 We calculate annual lodging expenditures and total (i.e. lodging + other expenditures) annual expenditures of Maui visitors staying in TVRs. The lodging expenditure indicates spending directly related to Maui property owners willingness to supply TVR services to accommodate this visitor market segment. Total expenditures more broadly measure the overall direct economic impact of serving the TVR market segment by TVR property owners. As such, total expenditures more accurately measure the overall economic impact of the TVR industry in Maui County. The economic impact of any reduction of TVR visitors to Maui due to any policy or regulation reducing the number of TVRs on Maui should use these impact estimates. s Information regarding daily expenditures of TVR visitors in Maui was gleaned from personal communication with Cy Feng, Economist, DBEDT October 30, 2007. a It is beyond the scope of our research efforts to substantiate the RAM visitor length of stay value for TVRs. It's ultimate credibility and any estimates we derive using this value rests with RAM. We can state, however, that a lower lodging rate per day does afford the average visitor a greater ability to stay longer (i.e. a greater length of stay) than higher priced accommodation types. The average TVR lodging rate ($74.4) is less than average rates for other accommodation types. For example, the average daily Maui lodging expenditure across all lodging types in 2006 was $93.4 and for hotels it was $130. Additionally, a 9.5 day TVR length of stay estimate implies a TVR occupancy rate of 80 percent with an average visitor number per stay of 3 persons using the 2006 TVR visitor number. This would seem within the realm of reasonableness in the context of a UHERO reported 2006 average Maui occupancy rate of 80%, a DEBDT reported average party size across all lodging types on Maui of 2.17 in 2006 and the fact that individual TVRs may have multiple accommodation units which would not be accounted for in the TVR count used for our analysis. 16 • Direct lodging expenditures o $54.2 million fora 6.85 average length of stay o $58.3 million fora 7.46 average length of stay, and o $75.2 million fora 9.5 average length of stay • Direct total expenditures o $115.5 million fora 6.85 average length of stay of o $125.8 million fora 7.46 average length of stay, and o $160.2 million fora 9.5 average length of stay Economywide Impacts of TVR Lodl;ing and Total Expenditures on Maui County We used multipliers (Type II) from the 2002 State of Hawaii Input-Output Tables to estimate the economic impacts of Maui TVR visitor lodging and total expenditures. These dollar impacts which include direct, indirect and induced effects for each economic variable are as follows. Total output o For lodging expenditures • $107.9 million from a 6.85 day length of stay • $124.1 million from a 7.36 day length of stay • $160.2 million from a 9.5 day length of stay o For total expenditures6 • $229.9 million from a 6.85 day length of stay • $247.0 million from a 7.36 day length of stay • $318.8 million from a 9.5 day length of stay Labor income (earnings) o For lodging expenditures • $34.2 million from a 6.85 day length of stay • $36.7 million from a 7.36 day length of stay • $47.4 million from a 9.5 day length of stay o For total expenditures • $72.5 million from a 6.85 day length of stay • $77.9 million from a 7.36 day length of stay s The Type II multiplier category used for determining the indirect and induced effects of direct TVR lodging is for "accommodation." 6 The total expenditure Type II multiplier categories used for determining the indirect and induced effects of direct TVR rnrat exnend;tnrec is the weiehted average tier the total expenditure distribution as shown 1n the following table. Expenditure Cate o Multiplier Cate o of total Ou ut Multipliers Earnin s State Tax Jobs Total Lodging Accommodation 46.9% 1.99 0.63 0.137 17.81 Total Food and Beverage Eating and drinking 19.3% 2.06 0.60 0.095 27.24 Total Entertainment Arts and entertainment 9.6% 1.97 0.77 0.09 34.97 Total Transportation Transportation 10.5% 2.03 0.57 0.078 15.35 Total Shopping Retail trade 9.7% 1.85 0.57 0.205 20.96 All Other Other services 4.0% 2.08 0.69 0.095 27.5 Wei hted Avera a 100.0% 2.00 0.63 0.12 21.71 17 • $100.6 million from a 9.5 day length of stay • Maui County jobs o For lodging expenditures • 966 jobs from a 6.85 day length of stay • 1,038 jobs from a 7.36 day length of stay • 1,339 jobs from a 9.5 day length of stay o For total expenditures • 2,508 jobs from a 6.85 day length of stay • 2,694 jobs from a 7.36 day length of stay • 3,478 jobs from a 9.5 day length of stay • Hawaii State taxes o For lodging expenditures • $7.4 million from a 6.85 day length of stay • $8.0 million from a 7.36 day length of stay • $10.3 million from a 9.5 day length of stay o For total expenditures • $14.2 million from a 6.85 day length of stay • $15.3 million from a 7.36 day length of stay • $19.7 million from a 9.5 day length of stay Fiscal Impacts of TVRs on Maui County According to Hawaii Statutes, 44.8 percent of TAT (Transient Accommodation Tax) revenues belong to counties [18]. Maui's share of the TAT revenues meant for the counties is 22.8 percent [19]. According to the Annual Report of the Hawaii State Department of Taxation, Total Transient Accommodations Tax (TAT) for fiscal year 2006 was $217,008,000 in the State of Hawaii which comprises 4.26% of total State tax revenues for 2006. Thus, the percentage of total state taxes generated by TVRs that would be paid to Maui for its share of the TAT equals 0.971%. Based on this percentage we estimate that Maui County's share of the additional revenues would be as follows. • Maui TAT from State o For lodging expenditures • $72.0 thousand fora 6.85 day length of stay • $77.3 thousand fora 7.36 day length of stay • $99.8 thousand fora 9.5 day length of stay o For total expenditures • $137.8 thousand fora 6.85 day length of stay • $148.0 thousand fora 7.36 day length of stay • $191.1 thousand fora 9.5 day length of stay There may be other Maui County-level tax consequences due to the current operation of TVRs. Based on the review of other studies presented above it is uncertain if these (property) tax consequences would be positive or negative. 18 A possible revenue opportunity for Maui County would be to increase property tax collections due to increased assessments of TVR building structures, improvements and associated land value in case TVRs are allowed to operate legitimately. It may be noted that Maui county government has already moved in this direction by imposing on the timeshare industry a much higher real property tax rate by creating a new tax category called timeshares in 2004. [20J The justification for a new property tax category is that the Transient Accommodations Tax or TAT is determined on the basis of the "fair market value." In the case of time share units it has been defined as "an amount equal to one-half the gross daily maintenance fees that are paid by the owner." An equivalent type of category could be created for TVRs. Visitor Reductions and Substitutions Due to TVR Regulation A reduction in TVRs could reduce the Maui visitor number if TVR visitors cannot or choose not to use an alternative lodging type if TVR lodgings are unavailable due to regulatory impacts. It is beyond the scope of this research report to address the issue of any TVR reduction on the Maui visitor number. However, one can reasonably surmise that in a competitive global market place with the capacity to provide a potpourri of lodging types, informed budget-conscious visitors would find alternative destinations to Maui if Maui lodging choices do not meet their specific lodging tastes and preferences, most specifically a TVR experience. It is safe to assume that this source of exogenous (out-of-state) expenditures would cease if TVR visitors make the choice to go to an alternate resort destination outside of the State of Hawaii. If some of the TVR visitors do retain Maui as their resort destination using alternate forms of lodgings such as hotels, condos or timeshares because TVRs are forced to cease Maui operations, the economic impact in Maui County from this segment of visitors will likely be reduced due to the netting out effect. However, there would yet be a redistribution of income from TVR owners to non-TVR accommodation owners and a loss of utility (satisfaction) to TVR visitors who must use a "second best" accommodation type during their stay in Maui County. It is again beyond the scope of this analysis to determine the extent of the substitution and income redistribution impacts of any policy eliminating or reducing TVRs. It is informative to note that it appears that the simple threat of TVR regulation has reduced their number from 2005 to 2006 as discussed above in Maui County by 11.0 percent. If this reduction resulted in a proportionate reduction in visitors to Maui and their total expenditures the economic impact would be a reduction ranging from: • $25.3 million to $35.1 million in output • $8.0 million to $11.1 million in labor income • 276 to 251 Maui jobs • $1.6 million to $2.2 million in Hawaii State taxes • $15.2 thousand to $21 thousand in TAT revenues to Maui County. Again as noted, it is beyond the scope of this research effort to determine whether visitors whose first preference is a TVR lodging experience substitute another Maui lodging type due to their unavailability, or choose an alternative resort destination. The extent to which the TVR visitor lacking his/her first lodging preference substitutes an alternative lodging type on Maui the 19 economic impact of a reduction in TVR numbers will be less than the numbers just reported. Similarly, if TVRs are eliminated altogether in Maui County and there is no substitution by the TVR visitor of an alternative lodging type, the economic impacts will be the full economic impact amount of the TVR industry estimated and presented above. IV. Policy Implications Opponents of TVRs have attempted, through the political process, to prohibit the operation of TVRs in Maui County, limit them to commercial or resort areas where permitted through the use of outdated zoning ordinances and/or deny them needed permits to operate legitimately. A current policy proposal being debated in Maui has the potential to deny needed permits to TVRs and cause approximately 90 percent of them to cease operations. No grandfathering of existing TVRs would be permitted. Our study has shown that there are significant positive economic impacts of TVR operations in Maui. There is prima facie evidence that the TVR sub-sector of the lodgings industry has grown into an industry of significant size over the last 15-16 years and that it is providing significant economic benefits to the populace of Maui County. These include contributions to economic output between $222.9 and $318.8 million, contributions to earnings between $72.5 million and $100.6 million with the generation of 2,508 to 3,478 jobs in the county. According to a Mayor of a previous Maui County administration, there were written assurances to concerned people that an appropriate bill legitimizing the activities of TVRs in Maui County would be brought forward and passed at which time the TVRs would be provided the necessary permits to operate legally. Some TVRs that were applicants for the permit withdrew their applications and were told they could continue to operate and the County would not enforce the existing law till revised. Others are still waiting for hearings on their applications made as long as six years previously. A possible alternative to a legal operation is an illegal one. As many TVRs are currently operating outside of the law, we estimate that some portion of the range of total state tax revenues generated by TVRs (i.e. $14.2 and $19.7 million) are being lost to the State of Hawaii with a consequent, though much lower, loss of TAT revenues to Maui County. Maui could stand to gain tax revenues through increased property taxes if TVRs could operate as legitimate businesses and be required to pay their due share of taxes. Some of these additional funds can then be used to provide additional public goods and services such as support of affordable housing, water, sewer and parking in support of the visitor industry and for negative externality mitigation. There are a number of negative externalities that have been associated with the transient vacation rental business. These need to be addressed to ameliorate citizen concerns. Fortunately, there are a number of policy instruments to mitigate the problems of negative externalities. These may involve up-dating community zoning laws taking into account current realities, citations for rowdy behavior and disturbing the peace in residential neighborhoods where TVRs may be permitted, fines for illegal and inappropriate parking, higher property taxes on TVR establishments to compensate residents, increased responsibility for TVR operators for the safety and security of the guests and mandatory evacuation plans in case of emergencies. The possible impact on long term availability of housing is not a major concern given the large number of unoccupied housing in Maui. It has been. shown that in other places outside of Hawaii, accessory dwelling units (ADUs) whether attached or detached have contributed to an increase in 20 affordable housing and also generated important family income. These ADUs may be used for transient vacation rentals but they could also be used for housing local residents if need be. The character of Ohanas and local lifestyles need to be preserved as learning local customs and being exposed to native culture is one of the reasons why visitors choose to come to Hawaii. It is an irrefutable fact in resource economics that it is most efficient to let land gravitate to highest and best use. Future trends in the tourism business in Hawaii will be determined by many factors not discussed in this study such as Hawaii's Tourism Strategic Plan, Small Business Policy, land use policy, availability of sufficient plant inventory, infrastructure policy and the recreational choices of baby boomers. However, based on our empirical investigations, we can state that there is a growing trend for transient vacation rentals (TVRs) in the Hawaii market as in other resort areas of the mainland and worldwide. Before the issue is subjected to short shrift and TVR closure, it might be prudent for county officials to work in concert with state officials and TVR operators to improve data gathering regarding TVR visitors and do an extended cost-benefit analysis and explore every option to address community concerns fairly and equitably. 21 References 1. Arakawa, Alan M., "Transient Vacation Rental History Detailed; Ban Reverses County Policy" in The Maui News Letters to the Editor Section. August 26, 2007 http•//www mauinews com letters/2007/8/26/Oltrans0826.html 2. Eagar, Harry, "Maui County Updates Vacation Rental and B&B Zoning" in Maui Health Guide, September 14, 2007. http•//www hawaiihealthguide com/healthtalk/displav.htm?id=601 3. Small Business Regulatory Review Board Announces Strengthening of Rights For Small Business. Hawaii Department of Business, Economic Development and Tourism Release News 07- 15, July 20, 2007. http•//www hawaii goy/dbedt/main news releases/2007/news-release-0715 4. The Kauaian Institute, Market Segment Assessment -Transient Vacation Rentals on Maui - A Comparative Analysis of the Geographic and Economic Footprint August 2005 http•//www mauiboard com/download files/TVRstudyAug2005.pdf 5. Travel Industry Association, "Economic Impact of Travel and Tourism" December 2004. http •//www.tia.org/Travelleconimpact.asp 6. Fritz, Richard G., "Tourism, Vacation Home Development and Residential Tax Burden: A Case Study of the Local Finances of 240 Vermont Towns" in American Journal of Economics and Sociology Vo1.41, No.4, October 1982. pp. 375-385. http•//www istor org/view/00029246/ap060168/06a00130/0 7. California Coastal Commission Staff Resort and Recommendations: City of Encinitas Maior Amendment LCPA No. 2-05. January 25, 2006. http•//documents coastal ca goy/reports/2006/2/Th15b-2-2006.pdf 8. Kivista, Sharon, "Transient Rental Permitting Headed to Court" San Juan Islander December 29, 2004. http•//www saniuanislander.com/county/gma/transient-rentals.shtml 9. San Juan County Growth Management, They Came, They Saw, They Heard in San Juan Islander July 21, 2004 http•//www saniuanislander com/county/gma/adus-legis-hearing.shtml 10. Higher Taxes for Homes With Transient Rental Permit in San Juan Islander March 9, 2005. http•//www saniuanislander.com/county/gma/transient-rentals.shtml 11. Transient Rental Rules Tweaked in San Juan Islander November 8, 2002. http•//www saniuanislander.com/county/gma/transient-rentals.shtml 12. Big Bear Initiative Measure To Be Submitted Directly To The Voters Regarding Transient Private Home Rentals. 2007 http•//www bigbearprivatehomes.comBallot/ 13. " 2 City Bills Aim To Curb Illegal Vacation Rentals" in The Honolulu Star Bulletin October 30, 2007. http •//starbulletin.com/2007/10/30/news/storyOS.htm1 14. "Vacation Rentals are Not Manageable" in The Honolulu Advertiser November 21, 2005. http • //thehonoluluadvertiser,com/article/2005/Nov/21 /op/op01 a.html 15. Eagar, Harry, Testimony, Tears Amid Packed Meeting on Vacation Rental Bills in The Maui News October 19, 2007 http •//www.mauinews.com/news/2007/10/10/04Test1010.htm1 22 16. Watanabe, Warren Viewpoint: Maui Farm Bureau. TVRs Appropriate in Rural. Zones Not on Ag-Zoned Land in The Maui News October 24, 2007. http•//www mvra net/index php~action=view article&id=88&module=articlemodule&src=% 40random46c6a6d286h42 17. Maui Vacation Rental Association. Supplemental TVR Report for The Maui Planning Commission. Exhibit I. p.34. June 24, 2006. http•//www mvra net/index php~action=view article&id=54&module=articlemodule&src=% 40random46096069d506e 18. State of Hawaii Department of Taxation, Annual Report 2005-06, Honolulu, Hawaii 2006. httn•//www hawaii.gov/tax/pubs/06annrnt.pdf 19. Title 14 Chapter §237D Transient Accommodation Tax, State of Hawaii P.6 1995. http•//www.hawaii.gov/tax/hrs/hrs 237d.pdf 20. Kalapa, Lowell L., "Sticking the Tax to Timeshare Owners" in Hawaii Reporter August 1 2005. http•//www hawaiireporter com/story asnx~d7457d26-4306-41ee-9flc-57a4446h09df 23 o-,i= 6ooz's~,iavnaaa~ `hdaNns ~ (~~1~213Ff twViwfi~ I saogy6iay/utoa'Ple~a}{iwe~~s - 81cJ>` m x °~ ~. E c- m_ v c~ ,~ ~ x m E c $: d o. ~ O d N m~ ~ C E V C F'- c o ~_' o ~ N •~ ~ cmi ~ ~ ' c o ~. c ~- m ~o ~c E ~U c~ ~ •; xx m ~~ ar CU. ~ d G N ?. Gj r m ~ v (p ;, N ~ ac cC u v E~ ~. y O 'O ~ ~ w. m ~T (C ~ E. m ~ ~_ oc c Oy oa ~ -O !# O d. 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