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CC 2014-09-09_08.f. Resolution of Intent Vacation Rental_HomestaysMEMORANDUM TO: CITY COUNCIL FROM: STEVEN ADAMS, CITY MANAGER SUBJECT: CONSIDERATION OF RESOLUTION OF INTENTION TO AMEND CHAPTER 3.46 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO EXEMPTIONS AND VACATION RENTALS AND HOMESTAYS DATE: SEPTEMBER 9, 2014 RECOMMENDATION: It is recommended the City Council adopt a Resolution of Intention to amend Chapter 3.46 of the Arroyo Grande Municipal Code to provide that the same exemptions that apply to the Transient Occupancy Tax apply to Arroyo Grande Tourism Business Improvement District (AGTBID) assessments and amend the definition of "lodging" to include vacation rentals and homestays. FINANCIAL IMPACT: The AGTBID will experience a small increase in revenue from expansion to include vacation rentals and homestays. The only impact on staff time is the process of establishing the ordinance. BACKGROUND: In May 2013, the City Council adopted an Ordinance establishing the Arroyo Grande Tourism Business Improvement District. The District was formed under the Parking and Business Improvement Law of 1989, Sections 36500 et seq. of the Streets and Highways Code and incorporated into the Arroyo Grande Municipal Code in Title 3, Chapter 3.46. It was recently renewed for FY 2014-15. ANALYSIS OF ISSUES: The provisions in the Arroyo Grande Municipal Code relating to the AGTBID assessments do not include exemptions for governmental officials. Section 3.24.040 of the Arroyo Grande Municipal Code relating to the transient occupancy tax includes the following exemptions: any person as to whom, or any occupancy as to which, it is beyond the power of the City to impose the tax provided for in this chapter; any federal and state officer or employee when on official business; or any officer or employee of a foreign government who is exempt by reason of an express provision of federal law or international treaty. Item 8.f. - Page 1 CITY COUNCIL CONSIDERATION OF RESOLUTION OF INTENTION TO AMEND CHAPTER 3.46 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO EXEMPTIONS AND VACATION RENTALS AND HOMESTAYS SEPTEMBER 9, 2014 PAGE2 Since the assessment for the AGTBID is applied to occupied rooms for all transient occupancies, it would be appropriate to have the same exemptions that apply to the transient occupancy tax applied to the AGTBID assessments. The intent when the TBID was established was to maintain consistent regulations and procedures to minimize the effort of compliance by lodging businesses. However, this discrepancy was brought to the City's attention after it had taken effect. In addition, regulations for vacation rentals and homestays were recently established. Direction was provided to apply both transient occupancy tax and AGTBID assessments to permitted vacation rentals and homestays. Currently, the definition of "lodging" subject to the AGTBID assessment expressly excludes vacation rentals. This change has been recommended by the AGTBID Advisory Committee. Streets and Highways Code Section 36541 provides the procedure to modify the basis and method of levying the assessment. It requires the City Council hold a public meeting, adopt a Resolution of Intention, and then hold a public hearing that must be noticed 45 days in advance. Since the "public meeting" requirement only applies to a "new or increased assessment", it applies to the application of the assessment to vacation rentals and homestays, which would constitute a "new" assessment on such businesses. Introduction of the Ordinance is recommended to be considered by the City Council at the November 25, 2014 meeting. Adoption would then be considered at a public hearing at the December 9, 2014 meeting. ALTERNATIVES: The following alternatives are provided for the Council's consideration: 1. Approve staff's recommendations; 2. Do not propose expanding the AGTBID to include vacation rentals and homestays; 3. Do not adopt the Resolution of Intention; or 4. Provide staff other direction. ADVANTAGES: The recommendations will enable the City to expand the AGTBID, which provides a mechanism to generate funding to promote hotel stays and tourism in the City, which increases transient occupancy tax revenue and supports local businesses. It will also make compliance with the AGTBID requirements easier for lodging businesses by making the exemptions consistent with transient occupancy tax requirements. Item 8.f. - Page 2 CITY COUNCIL CONSIDERATION OF RESOLUTION OF INTENTION TO AMEND CHAPTER 3.46 OF THE ARROYO GRANDE MUNICIPAL CODE RELATING TO EXEMPTIONS AND VACATION RENTALS AND HOMESTAYS SEPTEMBER 9, 2014 PAGE3 DISADVANTAGES: No disadvantages with the recommended action are identified. ENVIRONMENTAL REVIEW: No environmental review is required for this item. PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted in front of City Hall on Thursday, September 5, 2014 and on the City's website on Friday, September 6, 2014. No public comments were received. Item 8.f. - Page 3 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARROYO GRANDE DECLARING ITS INTENTION TO AMEND CHAPTER 3.46 OF THE ARROYO GRANDE MUNICIPAL CODE WITH MODIFICATIONS RELATING TO EXEMPTIONS FROM THE TOURISM BUSINESS IMPROVEMENT DISTRICT ASSESSMENT AND ADDING VACATION RENTALS AND HOMESTAYS TO THE DEFINITION OF "LODGING" BUSINESSES SUBJECT TO THE ASSESSMENT WHEREAS the Parking and Business Improvement Area Law of 1989, sections 36500 et seq. of the Streets and Highways Code, authorizes cities t9 establish business improvement districts for several purposes, one of which is promotion of tourism; and WHEREAS the Arroyo Grande Tourism Business Improvement District (AGTBID) was established in May, 2013 and incorporated into the Arroyo Grande Municipal Code under Chapter 3.46 which provides for the imposition of an assessment on lodging businesses; and WHEREAS, the City also imposes a Transient Occupancy Tax and that Tax includes exemptions that are contained in Section 3.24.040 of the Arroyo Grande Municipal Code which includes the following: any person as to whom, or any occupancy as to which, it is beyond the power of the city to impose the tax provided for in this chapter; any federal and state officer or employee when on official business; or any officer or employee of a foreign government who is exempt by reason of an express provision of federal law or international treaty; and WHEREAS, since the assessment for the AGTBID is applied to occupied rooms for all transient occupancies, the City Council finds that it would be appropriate to have the same exemptions that apply to the Transient Occupancy Tax applied to the AGTBID assessments; and WHEREAS, the City has developed regulations for vacation rentals and homestays, and currently the definition of "lodging" subject to the AGTBID assessment expressly excludes vacation rentals and it would be appropriate to impose the assessment on any vacation rentals or homestays that are permitted under the new regulations; and WHEREAS, Streets and Highways Code Section 36541 provides that in order to adopt modifications to the basis and method of levying the assessment the City Council is required to adopt a resolution of intention which states the proposed modification and then hold a public hearing; and Item 8.f. - Page 4 RESOLUTION NO. PAGE2 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Arroyo Grande as follow: Section 1. The City Council hereby declares its intention to amend Chapter 3.46 of the Arroyo Grande Municipal Code to provide for the following modifications: 1. Section 3.46.050 of the Arroyo Grande Municipal Code is hereby amended to read as follows: "3.46.050 Levy of assessment, reporting and exemptions. The AGTBID shall include all lodging businesses located within the AGTBID boundaries. The assessment to be levied on all lodging businesses within the AGTBID boundaries shall be based upon two percent of the rent charged by the operator per occupied room per night for all transient occupancies. The assessment shall be collected quarterly, based on two percent of the rent charged by the operator per occupied room per night in revenues for the previous quarter. New lodging businesses within the boundaries shall not be exempt from the levy of assessment authorized by Section 36531 of the law. Assessments pursuant to the AGTBID shall not be included in rent revenue for purpose of determining the amount of the assessment. The value of extended stays of more than thirty (30) consecutive calendar days shall be exempt from the levy of assessment. Stays by persons who are otherwise exempt from the imposition of a transient occupancy tax as defined in AGMC Section 3.24.040 shall be exempt from the assessment. Each operator shall, on or before the last day of the month following the close of each calendar quarter, or at the close of any shorter reporting period which may be established by the director of administrative services, make a return to the director of administrative services, on forms provided by him or her, of the total rents charged and received and the amount of assessment collected for transient occupancies. At the time the return is filed, the full amount of the assessment collected shall be remitted to the director of administrative services. The director of administrative services may establish shorter reporting periods for any operator if he or she deems it necessary in order to insure collection of the assessment, and he or she may require further information in the return. " Item 8.f. - Page 5 RESOLUTION NO. PAGE3 2. The definition of "Lodging" contained in Section 3.46.020 of the Arroyo Grande Municipal Code is hereby amended to read as follows: " 'Lodging' means any structure, or any portion of any structure, which is occupied or intended or designed for occupancy by transients for dwelling, lodging or sleeping purposes, and includes any hotel, motel, inn, 9f bed and breakfast, vacation rental or homestay that pays transient occupancy tax. For purposes of this chapter the definition of "lodging" shall not include RV parks and vacation rentals .. " Section 2. The City Council hereby sets November 25, 2014 as the date for a public meeting on the modifications and amendments to Chapter 3.46 and the AGTBID and December 9, 2014 as the date for a public hearing on the modifications and amendments. Both the pubic meeting and the public hearing will be held at 6:00 p.m., or as soon thereafter as practicable, in the City Council Chambers, located at 215 East Branch Street, Arroyo Grande. Section 3. At the public meeting and public hearing the testimony of all interested persons for or against the modifications and amendments to Chapter 3.46 and the AGTBID will be heard. A protest may be made orally or in writing by any interested person. However, only written protests will be considered in determining if there is a majority protest. Any protest pertaining to the regularity or sufficiency of the proceedings shall be in writing and clearly state the irregularity or defect to which objection is made. To count in the determination of a majority protest against the modifications and amendments to Chapter 3.46 and the AGTBID, a protest must be in writing. Written protests must be received by the City Clerk of the City of Arroyo Grande before the close of the public hearing scheduled herein and may be delivered or mailed to the City Clerk, City of Arroyo Grande, 300 East Branch Street, Arroyo Grande, CA 93420. A written protest may be withdrawn in writing at any time before the conclusion of the public hearing. Each written protest shall contain a written description of the business in which the person signing the protest is interested sufficient to identify the business. If the person signing the protest is not shown on the official records of the City of Arroyo Grande as the owner of the business, then the protest shall contain or be accompanied by written evidence that the person is the owner of the business. A written protest which does not comply with this section shall not be counted in determining a majority protest. Item 8.f. - Page 6 RESOLUTION NO. PAGE4 Section 4. If, at the conclusion of the public hearing, written protests are received from owners of businesses in the AGTBID which will pay fifty percent (50%) or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protest to less than fifty percent (50%) (i.e., there is a majority protest), no further proceedings relating to the modifications and amendments to Chapter 3.46 and the AGTBID, as contained in this Resolution of Intention, shall be taken for a period of one year from the date of the finding of a majority protest by the City Council. For purposes of determining the applicable majority protest figure for the initial formation of the district, the proposed assessment to be levied will be calculated based on the assessment rate multiplied by the most recent available data for the lodging operations' gross lodging rent as reported to the City during fiscal year 2013-2014. Section 5. Further information regarding the proposed AGTBID may be obtained from the City Clerk, City of Arroyo Grande, 300 East Branch Street, Arroyo Grande, CA 93420. Section 6. The City Clerk is instructed to provide notice of the public meeting and public hearing in accordance with the requirements of Streets and Highways Code Section 36523, including giving notice of the public hearing by causing this resolution of intention to be published once in a newspaper of general circulation in the City no less than seven days before the public hearing, and sending a copy of this resolution of intention by first-class mail within seven days of its adoption to the owner of each business in the AGTBID which will be subject to the assessment. On motion of Council Member , seconded by Council Member and by the following roll call vote, to wit: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted this _ day of 2014. Item 8.f. - Page 7 RESOLUTION NO. PAGES TONY FERRARA, MAYOR ATTEST: KELLY WETMORE, CITY CLERK APPROVED AS TO CONTENT: STEVEN ADAMS, CITY MANAGER APPROVED AS TO FORM: TIMOTHY J. CARMEL, CITY ATTORNEY Item 8.f. - Page 8