The URL can be used to link to this page

Home My WebLink About2023-09-13 - Agendas - Final_CITY OF FAYETTEVILLE ARKANSAS MEETING AGENDA Ordinance Review Committee Meeting September 13, 2023; 5:00 PM Committee Chair: Councilmember Hertzberg Committee Members: Councilmember Berna, Councilmember Jones, Councilmember Moore Staff: Britin Bostick, Jonathan Curth, City Attorney Kit Williams, Senior Assistant City Attorney Blake Pennington, Assistant City Attorney Hannah Hungate Welcome and Introductions- 5:00 PM Approval of Minutes from September 6, 2023 Tentative Discussion Items 1. Agenda Additions 2. STR ordinance change suggestions a) Detailed due process procedure undertaken to shut off a short-term rental's water b) Estimate of costs incurred by the City in forcing unlicensed rentals into compliance c) Estimate of costs incurred by the City in licensing short-term rentals initially d) Depiction of the density of short-term rentals based on zoning (i.e., residential areas compared to hotel/motel zoning) e) Description of other jurisdictions' practices with regard to short-term rental moratoriums Announcements 1. Next Meeting Adiourn - 7:00 PM VIMCOF FAYETTEVILLE ARKANSAS Ordinance Review Meeting Minutes (Sept. 6, 2023) Councilmember Hertzberg called the meeting to session at 5:00 p.m. Also present were Councilmember Burna, Councilmember Moore, Councilmember Turke, Jonathan Curth, Britin Bostick, Kit Williams, and Hannah Hungate The discussion centered around short-term rentals. Issue #1: Requiring Back Payment for Sales/HMR Tax 1. Question: can we require back payment of sales taxes, and would we have to tie it to HMR or use a flat rate penalty? a. Kit — courts generally disfavor penalties, particularly flat rates because two entities are paying the same penalty regardless of the length of time each failed to pay their taxes. i. Recovering back taxes may prove extremely difficult in these cases because pursuing criminal or civil remedies at court could take months. 1. Shutting off the water may prove a more effective penalty. 2. Some platforms, particularly those with which the City has an agreement, regularly remit the taxes to the City. a. Teresa — City may need agreements with other short-term rental platforms to ensure taxes are remitted. 3. Nashville has regulations with a checklist of items that need to be satisfied before licenses are issued to short-term rentals. a. Teresa — applicant could, for example, be required to provide proof of payment of taxes at the time they submit their permit application. b. Kit — Expressed hesitation to use municipal licensing/permitting to enforce standards or requirements of other agencies. Issue #2: Enforcing Regulations/Correcting Noncompliance 1. Question: can and should we shut off the water for noncompliant short-term rentals? a. The City regularly shuts off water for people who fail to pay their water bill, so the same should apply for the worst case scenario of short-term rental. i. Sarah — would like additional options beyond the "extreme" measure of shutting off water. 2. Question: what would the procedure look like to shut off someone's water? a. The business is entitled to a due process hearing prior to revocation of their license, which would happen before the water is turned off. i. Due process requires the violator be informed of the charges/violations against them and given an opportunity to present their side of the case to a somewhat -impartial person. ii. The due process required in this situation would be nearly identical to the steps followed by the City when revoking a business license. Ordinance Review Meeting Notes September 6, 2023 b. Process: i. If the business has a license: 1. City receives a complaint > Staff confirms there is a violation > Staff sends a violation letter giving them 30 days to stop or correct the behavior > Issue isn't fixed > City sends issue letter announcing public hearing between 5-10 days (businessowner has opportunity to come in) > There is the public hearing > The decision -making body can revoke/suspend license or refuse to do anything. ii. If the business has no license: 1. This is a clearer case for the prosecutor, and concurrently, Development Services can shut off the water. c. Sarah — who would be responsible for taking these steps? i. Kit — it's an administrative issue, and the Mayor would likely determine the responsible agency for taking these steps. 3. Question: does the cap on the number of short-term rentals impact the City's decisions in enforcing compliance? a. Jonathan — according to the numbers currently available, there are 395 Type II short-term rentals that have been approved by the City. i. There are 34 short-term rental CUPs pending. 1. This year alone, there were 49 short-term rental CUPs approved and 16 denied. ii. The City has a cap of 475 type II short-term rentals. b. The Council is concerned that the cap will be met before businesses get in compliance (i.e., obtain their licenses), and then there will be no license for them to obtain. i. In essence, the City will simply be shutting down the short-term rental because compliance is no longer an option. 1. Kit — even if the cap is reached, preventing the noncompliant short- term rental from obtaining a CUP does not deprive them of the value of their property. a. The owner can still live on the property or operate a long- term rental. b. They can also get on the waiting list to obtain a short-term rental CUP. ii. The owner/operator of the short-term rental knew that a cap existed, knew that they were not in compliance with City Code, and still chose not to obtain a CUP in the required timeframe. 4. Question: can increased fines combat this problem? a. Jonathan — fines need to be significant because short-term rentals are operating with higher margins than normal businesses. i. Holly/Teresa — we can continue to stack fines against them, but if they won't pay taxes or license fees, they are not likely to pay fines or change their practices as a result of them. 1. It's more useful to have a hammer, like a utility shutoff. 5. Question: would the City absorb the cost of getting rentals into compliance, or should the City charge a separate fee? Page 2 of 4 Ordinance Review Meeting Notes September 6, 2023 a. Teresa — there should be a recovery fee paid by unlicensed rentals to recoup the City's costs in forcing them into compliance. i. Kit — any fee must be carefully crafted because the City cannot recover more than its enforcement costs or else the fee becomes an illegal tax. 1. Such a tax would require voter approval. b. Jonathan — Development Services is currently evaluating their practices to determine what their cost is for regulating short-term rentals. Issue #3: Transfer of \ Business License and CUP to New Owners upon Sale of Prober 1. Question: can we require subsequent purchases of a short-term rental to obtain new business licenses and conditional use permits in order to operate? a. Jonathan — currently, the new owner must obtain a new business license upon purchase but is not required to apply for a new CUP. i. The CUP will remain with the new property owner perpetually, provided they do not violate regulations or cease operation for an extended period. 2. Council disagrees whether subsequent purchasers of short-term rentals should be "grandfathered" into the prior conditional use permit. a. The CUP is a commodity for the short-term rental owner that will be especially valuable once the cap is reached. b. There is discomfort in forcing the new owner to restart the CUP process, particularly if they are not allowed to obtain a CUP because of the cap. c. This issue remains unresolved. Other Issues Addressed 1. Density a. Staff has been using a quarter -mile standard for short-term rental density. i. This standard is just the practice; it is not written in the Code. b. Holly — might want to know what the density would look like in residential areas. c. Kit — what is the justification for allowing increased density for short-term rentals compared to long-term rentals? 2. Would the City be in favor of having an additional annual license fee? a. Holly — would be in favor of adding re -inspection of the premises to the renewal process for short-term rentals b. Kit —we need to have a reason to present a judge why the fee would be so different for short-term rentals as opposed to long-term rentals? i. We must avoid arbitrary distinctions. 3. Should the City require a timed moratorium? a. Timeframe could be 3-5 years. b. Do other jurisdictions do this? Public Comment No comment. Next Meeting The next meeting will be on September 13, 2023, from 5:30 p.m. — 7:30 p.m. in City Hall Room 326 (or over Zoom if needed). Page 3 of 4 Ordinance Review Meeting Notes September 6, 2023 Information for Attendants to Gather: ➢ Detailed due process procedure undertaken to shut off a short-term rental's water ➢ Estimate of costs incurred by the City in forcing unlicensed rentals into compliance ➢ Estimate of costs incurred by the City in licensing short-term rentals initially ➢ Depiction of the density of short-term rentals based on zoning (i.e., residential areas compared to hotel/motel zoning) ➢ Description of other jurisdictions' practices with regard to short-term rental moratoriums Adiourned The meeting was adjourned by Councilmember Hertzberg at 6:33 p.m. Page 4 of 4 OFFICE OF THE CITY ATTORNEY TO DEPARTMENTAL CORRESPONDENCE Ordinance Review Committee Jonathan Curth, Development Services Director Kit Williams City Attorney Blake Pennington Assistant City Attorney CC: Susan Norton, Chief of Staff Jodi Batker Paralegal F 5 FROM: Kit Williams, City Attorney DATE: September 8, 2023 RE: Business License Revocation Procedure Reviewing Chapter 118: Business Registry and Licenses, I find that the City Council has already established the proper procedures and potential penalties for any revocation of a Type-2 Short Term Rental's business license. "(17) Suspension and Revocation. If the Development Services Director has reason to believe that any of the grounds specified in §118.03(A) of the Fayetteville Code exist, or that any rental unit was rented for less than one (1) full night, or to more than one (1) party of guests for the same period of time, or otherwise failed to comply with all terms and conditions of this section, the Development Services Director may suspend or revoke the short-term rental's business license pursuant to the procedures detailed in §118.03 of the Fayetteville Code." § 118.01(E)(17) Then as you look at §118.03 you find the very adequate procedural due process set forth for anyone whose business license might be revoked or suspended. (A) Grounds That Could Support Suspension or Revocation of Business License. (1) Valid complaints that the business license holder is operating the business in a dangerously unsanitary or unhealthy manner, or in such manner as to unreasonable and adversely affect the peace, health or safety of neighbors or other Fayetteville citizens. (2) The determination that the premises are a fire hazard or otherwise unsafe for occupancy because of violations of building, property maintenance or fire codes. (3) The business is delinquent in submitting Hotel, Motel and Restaurant or city alcohol tax forms or in payment of the city's Hotel, Motel and Restaurant taxes or any other city or state taxes or required fees. (4) The business is being operated in violation of any federal or state law or city ordinance or has had a necessary state or city license suspended or revoked. (5) The business license was procured through fraud or misrepresentation. (B) Notice. If the Director of Development Services has reason to believe that grounds exist that could justify the suspension or revocation of a business license, the director shall mail a letter to the business mailing address shown on the application by first class mail notifying the business owner of the possible grounds to suspend or revoke the license and setting a due process hearing in not less than five (5) nor more than ten (10) business days. The director shall also telephone the business owner using the business phone number provided on the application (as well as the emergency phone number if the owner cannot be reached on the business phone number) and provide the same information as is within the letter. (C) Conduct of the Due Process Hearing. (1) The Chief of Staff shall provide a reasonable space for the due process hearing and shall receive evidence from city employees or others about the grounds to suspend or revoke the business license. (2) The business license holder shall then be granted an opportunity to explain or provide evidence to rebut any allegations and to show why the business license should not be suspended or revoked. (3) After the business license holder has had a reasonable opportunity to explain his side, the Chief of Staff can do one of the following depending upon the Chief of Staff's judgment of the seriousness of any proven ground: (i) Revoke the business license. (ii) Suspend the business license for not more than thirty (30) days. (iii) Place the business on probation status for not more than ninety (90) days on condition that the grounds causing z the problems will be remedied by the business license owner and not be allowed to reoccur. If the business license owner complies with the probation, the probation status shall be lifted, and no further action shall be taken. If the Chief of Staff determines that the business license owner has failed to correct the problems or new grounds or suspension or revocation have occurred, the Chief of Staff shall conduct a second due process hearing and consider all previous evidence whether or not the business license should be suspended or revoked. (iv) Refuse to revoke or suspend the license which shall remain valid. Any complaint about events leading to the hearing shall not be considered again. Even the appropriate range in penalties for operating without a license is stated in §118.05 which includes potential "(B) City Services Termination. If a business or entity continues to operate without a valid and current City of Fayetteville Business License for a period of one week after notification by the Director of Development Services, the Mayor may order the withholding of all city services including water, sewer, and solid waste for the business premises." I might suggest we place all of the current language of (B) in a subsection (1) and enact a second subsection for a person or entity that had not already received a procedural due process hearing because they never had a license to operate a Type 2 Short Term Rental as follows: "(2) A Type 2 Short Term Rental operator who does not have a valid and legal business license for the Type 2 Short Term Rental and who has not already been afforded an opportunity for a procedural due process hearing pursuant to §118.01 (E)(17) shall be ' sent a letter to the address of the suspected Type 2 Short Term Rental in which it is stated that the operator or owner may request a procedural due process hearing prior to withholding city services in not less than five (5) nor more than ten (10) business days. If such due process hearing is requested by the owner or operator prior to the expiration of ten (10) business days, such hearing shall be promptly scheduled. The Chief of Staff shall hear evidence from City staff and others that the subject Type 2 Short Term Rental does not have a valid current license and has been operating the Short Term Rental in violation of the City Code. The owner or operator may then explain and/or 3 provide evidence disputing the City's allegations or explaining why city services should not be withheld from the property. The Chief of Staff may then recommend to the Mayor whether or not city services should be withheld from the premises of the Type 2 Short Term Rental and what must be done by the owner/ operator of the premises to obtain city services at this location again. The Mayor may then order the withholding of all city services including water, sewer and solid waste from the premises and property." CONCLUSION If an owner/operator's business license is revoked after an opportunity for a procedural due process hearing, the Mayor already has the power to withhold some or all city services from the property or premises pursuant to §118.05 (B). If the owner/ operator of the Type 2 Short Term Rental never bothered to obtain the required business license, the proposed new subsection would provide a procedural due process hearing opportunity to the owner/operator prior to withholding city services from the premises and property of the unlicensed owner/ operator. 4