6)% wi/j ~ tm EYV'at«ntoi ~ tntuhua, ~/me,,

Transcription

1 6)% wi/j ~ tm EYV'at«ntoi ~ tntuhua, ~/me,, Staff Report for the City Council Meeting of July 17, 2018 UNFINISHED BUSINESS (a) TO: FROM: Honorable Mayor and City Council Debbie Mcintyre, Director of Finance Hilary Roverud, Deputy Director Development Services DATE: July 17, 2018 RE: Report Ordered by the City Council of the City of South Lake Tahoe at the June 19, 2018 City Council Meeting Pursuant to Election Code Section 9212 of an Initiative Petition Entitled "A Citizen's Initiative Measure to Eliminate Most Vacation Home Rentals ("VHRs") in Residential Zones within the City of South Lake Tahoe;" and Options for the City Council Required Pursuant to California Elections Code Section 9215 RECOMMENDATION: Hear Staff Report; Hear the Report Presented by City Staff; Take Action on One (1) of the following: (a) (b) Adopt Ordinance within 10 Days; or Submit the Ordinance, without Alteration, to the Voters at the November 6, 2018 Election via Adoption of Resolution BACKGROUND: On April 30, 2018 the City Clerk received from proponents an initiative petition entitled "A Citizen's Initiative Measure to Eliminate Most Vacation Home Rentals ("VHRs") in Residential Zones within the City of South Lake Tahoe". On June 19, 2018 South Lake Tahoe City Clerk presented her certification to the City Council that a sufficient number of valid voter signatures had been collected in order to place the initiative measure on the ballot. At that time, the City Council had three options: 1. Adopt the ordinance, without alteration, at the regular meeting at which the certification of the petition was presented, or within 10 days after it was presented 2. Pursuant to EC Section 1405(b), submit the ordinance, without alteration, to the voters at the General Municipal Election to be held November 6, Pursuant to Elections Code (EC) Section 9212, order a report analyzing the impact of the ordinance on municipal operations. Staff must present the report no later than 30 days after it is ordered by the City Council. When the report is submitted to the City Council, the City Council shall either adopt the ordinance within 10 days or order an election.

2 Report Re: "An Initiative Petition "A Citizen's Initiative Measure to Eliminate Most Vacation Home Rentals ("VHRs") in Residential Zones within the City of South Lake Tahoe" City Council Meeting of July 17, 2018 On June 19, 2018, the City Council selected Option 3, and referred the initiative to staff for preparation of a "30-day report" as outlined in Elections Code Section 9212 for an analysis on the impacts and effects of the initiative ordinance. This 30-day report was prepared by City staff and discusses the impacts and effects of the initiative pursuant to Elections Code Section The 30-day report is being presented to City Council on July 17, 2018 within the 30-day time frame. ISSUE & DISCUSSION: The initiative amends Vacation Home Rental Ordinance Article V through All references to specific code sections of the City of SL T are specifically referencing the Vacation Home Rental (VHR) Ordinance. The initiative would ban VHR rentals in residential zones following a two year amortization period, with exception of qualified VHR rentals totaling less than 30 days per calendar year. This initiative has no effect on vacation rentals in commercial zones and the tourist core area. FINANCIAL IMPLICATIONS: All impacts including financial are included in the attached 30-day report prepared by City of South Lake Ta hoe staff. By: By: ~111~~ Debbie Mcintyre Director of Finance Hilary Rove Deputy D. ctor of Development Services Reviewed and Approved by: ~nage r, Attachment 1 :Report Ordered by the City Council of the City of South Lake Tahoe at the June 19, 2018 City Council Meeting Pursuant to Election Code Section 9212 of an Initiative Petition Entitled "A Citizen's Initiative Measure to Eliminate Most Vacation Home Rentals ("VHRs") in Residential Zones within the City of South Lake Tahoe;" Attachment 2: Resolution Submitting the Measure to the Voters at the November 16, 2018 Municipal Election

3 Attachment 1 California Elections Code 9212 Report A Citizen's Initiative Measure to Eliminate Most Vacation Home Rentals ("VHRs") in Residential Zones within the City of South Lake Tahoe July 17, 2018

4 California Elections Code 9212 Report A Citizen's Initiative Measure to Eliminate Most Vacation Home Rentals ("VHRs'] in Residential Zones within the City of South Lake Tahoe Introduction Two South Lake Tahoe residents, Dr. Kenneth Weitzman and Mr. Daniel P. Browne (Proponents) have circulated a petition to have an initiative measure entitled, "A Citizen's Initiative Measure to Eliminate Most Vacation Home Rentals ("VHRs") in Residential Zones within the City of South Lake Tahoe" (Initiative) placed on the ballot in an upcoming election. On June 19, 2018, the South Lake Tahoe City Clerk presented a Certificate of Sufficiency to the City Council indicating that the petition has sufficient valid signatures to be submitted to the voters at the next regular municipal election to be held on November 6, When an initiative is circulated and qualifies for the ballot, Section 9111 of the California Elections Code authodzes the City Council to request a report regarding the potential impacts of the initiative prior to deciding whether to adopt the initiative in the form of an ordinance or to place the initiative on the ballot for the next statewide election for the purpose of enabling the people of South Lake Tahoe to vote on the initiative, as provided in Elections Code Section This report evaluates the potential impacts of the proposed initiative as requested by the City Council at its June 19, 2018 meeting. Scope and Assumptions Pursuant to direction from the City Council, this report addresses the Initiative's potential impacts on the following (as provided in the California Elections Code Section 9112): (1) Its fiscal impact (2) Its effect on the internal consistency of the City's general plan and specific plans, including the housing element, the consistency between planning and zoning, and the limitations on City actions under Section of the Government Code and Chapters 4.2 (commencing with Section 65913) and 4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government.Code. (3) Its effect on the use of land, the impact on the availability and location of housing, and the ability of the city to meet its regional housing needs. (4) Its impact on funding for infrastructure of all types, including, but not limited to, transportation, schools, parks, and open space. Potential to result in increased infrastructure costs or savings, including the costs of infrastructure maintenance, to current residents and businesses. Page 1of8

5 (5) Its impact on the community's ability to attract and retain business and employment. ( 6) Its impact on the uses of vacant parcels ofland. (7) Its impact on agricultural lands, open space, traffic congestion, existing business districts, and developed areas designated for revitalization. The analysis included in this report assumes that the Initiative is adopted by the voters and implemented as proposed. The Initiative, if adopted, would likely require an in-depth legal analysis to help determine if any constitutional limitations would constrain a portion or portions of the proposed Initiative. Additionally this report highlights many unanswered questions that would need to be further considered and analyzed during the implementation phase should the voters adopt the Initiative. Further the Initiative addresses only the proposed initiative language as submitted by the initiative proponents and has not been analyzed with or compared to any other ballot initiative currently under consideration. Description of Initiative The full text of the Initiative is included as Appendix A of this report. The Initiative is summarized as follows: Prohibition on issuance of new VHR permits to non-qualified properties upon effectiveness of the initiative. Expiration of all multi-family VHR permits in Expiration of all VHR permits in residential zones in 2021 except for "qualified" VHRs whose owner is a permanent resident residing in the dwelling for the majority of the year. Qualified VHRs may rent for a maximum of 30 days per year. Allows the continued operation and permit issuance for VHRs in commercial zones and the Tourist Core area. Calculates allowable occupancy of a VHR as two persons per bedroom with a maximum. occupancy of 12. One parking space per four occupants is required. Specifies the fine for operating a VHR without a permit after the expiration date (December 31, 2021) as $1,ooo per violation. Potential Impacts of the Initiative (1)Fiscal Impact There will be fiscal impacts to City revenue with the reduction of VHRs in residential zones. The revenues affected are: City Transient Occupancy Tax- General Fund revenues that support operations including Police, Fire, Snow Removal, Street Repair, Planning, Parks and Recreation, etc. Page 2of8

6 Measure P Transient Occupancy Tax - Measure P, approved by City voters in November, 2016, increased the TOT by 2% on all lodging properties including VHRs. The restricted funds are currently being held for the special purpose of constructing, operating ana maintaining recreational facilities. Tourism Improvement District Revenues -The South Lake Tahoe Tourism Improvement District; a special benefit assessment district that established a per-night fee November 1, The fee is currently $3.00 per night for hotels/motels and $4.50 per night for timeshares and agentmanaged VHRs. The Tourism Improvement District fees are collected by the City of South Lake Tahoe, but passed through to the District. The revenues collected are used to fund various marketing programs aimed at increasing tourism activity. VHR Permit Fees - VHR Permit fees offset the costs of City employee positions that currently process VHR permits, analyze and investigate delinquent permits and payments, inspect and ensure the safety of VHRs within the community, and monitor, patrol and respond to VHR events for service. Currently there are approximately sixteen employees for a total of eight full-time equivalent positions funded with VHR permit fees. City Property Tax - General Fund revenue that supports operations including Police, Fire, Snow Removal, Street Repair, Planning, Parks and Recreation, etc. Currently there are 1,764 active VHR permits within the City limits with 1,373 or 77.8% issued outside the Tourist Core and 391 or 22.2% inside the Tourist Core. The total City Transient Occupancy tax received for 2016/2017 was $16,553,867 and 18.9% or $3,126,458 was collected from VHRs. The grid below uses 2016/2017 fiscal year numbers and the percentages above to calculate the potential loss of revenue due to the reduction of VHRs in residential zones. Revenue Type % of TIO nights % of total City that are TOT collected allocated to %ofvhrs in from Vacation Agent managed Residential lost Revenue 2016/2017 Home Rentals VHR's Area per year City General Fund VHR Transient Occupancy Tax $ 3,126, % $ 2,432, Measure P Transient Occupancy Tax - Feb 17 to Jan 18 $ 3,101, % 77.80% $ 456,106 Tourism Improvement District $ 1,161,980 40% 77.80% $ 361,608 Vacation Home Rental Permit Revenue $ 1,006, % $ 783,422 City Property Tax Unable to calculate the impact of 77.8% of VHR's or potentially up to 1373 housing units entering the "for sa le" market and how this may affect the property values of the remaining housing units within the City of South Lake Tahoe ***The City of South Lake Tahoe receives Property Tax on the assessed value of each housing unit. If a large influx of housing units for sale causes housing values to drop there will be a loss of revenue to the City General Fund property tax. Page 3of8

7 (2)Effect on the internal consistency of the City's general plan and specific plans, including the housing element, the consistency between planning and zoning, and the limitations on City actions under Section of the Government Code and Chapters 4.2 (commencing with Section 65913) and 4.3 (commencing with Section 65915) of Division 1 of Title 7 of the Government Code Internal consistency of the City's General Plan requires that no policy conflicts exist between the components of the General Plan, including externally referenced documents. Internal consistency includes the equal status of all elements of the general plan, consistency between elements, consistency within elements, consistency with area or community plans, and consistency between text and diagrams. The City's General Plan does not contain goals or policies directly addressing VHRs; however, the General Plan does contain policies promoting complete and distinct neighborhoods (Policy LU-3.1), clean and quiet neighborhoods (Policy LU-3.5) as well as policies promoting business and job retention (Policy ED-1.1), an economically diverse year round community (Policy ED-i.7), and the creation of jobs that create a living wage (Policy ED i.11). Although the authors of the Initiative state that "vacation rentals are negatively affecting the character and livability of our neighborhoods" and "the expansion of vacation home rentals in the commercial zones and through Tourist Core area will continue to support our tourism economy" data is not currently available to analyze the extent of impact related to neighborhoods or the economy. However, the Initiative would not have an effect on the internal consistency of the General Plan or the City's ability to implement the General Plan through programs other than VHRs. Zoning is one of the primary means of implementing a general plan. In contrast to the long-term outlook of the general plan, zoning classifies the specific, allowable uses ofland. Zoning must be consistent with the general plan. The Initiative would not have an effect on the City's adopted zoning or implementation of the zoning ordinance. Section of the Government Code prohibits, among other things, local government, in the enactment or administration of zoning laws, from discriminating against a residential development because the development is intended for occupancy by low and moderate income persons. This section also prohibits local government from imposing different requirements on residential developments because of race, sex, color, religion, ethnicity, national origin, ancestry, lawful occupation or age of the intended occupants of the development, or because of the income level of the intended occupants of the development, unless the local government imposes those requirements on developments generally or the requirements promote the availability of the residential development for lower income persons. The Initiative will not affect the ability of the City to continue compliance with this law. Section of the Government Code requires cities and counties to assure that land is sufficiently zoned at densities high enough for the production of affordable housing, to expedite the housing development process, and to limit design and public improvement standards on housing projects that increase costs of housing development which would render the project infeasible. The Initiative would not affect the City's ability to continue compliance with his law. Page4 of8

8 Section of the government Code requires a city or county to grant a density bonus to a developer proposing a project that meets specified standards for housing affordability. The Initiative would not have an effect on the City's ability to continue compliance with this law. (3)Effect on the use of land, the impact on the availability and location of housing, and the ability of the city to meet its regional housing needs. The Initiative will cause a reduction in the number ofvhrs in residentially zones areas. However, qualified VHRs would remain in residential areas and maintain the ability to rent for up to 30 days per year. The occupancy and ownership of these units is not likely to change. The number ofvhrs that would be considered qualified VHRs, as defined in the Initiative, is unknown therefore an analysis of the number of housing units that would no longer be renting as VHRs, and their potential future use, is not available. VHRs in residential zones that are not qualifying VHRs would expire in These units may then become second homes for seasonal or occasional use, long term rental units, vacant properties, or sold for permanent residential use. However, owner characteristics and supporting data that would allow for a projection of the potential future use of VHRs is not currently available. State housing element law (Government Code Section 65580) mandates that local governments must adequately plan to meet the existing and projected housing needs of all economic segments of the community. The City's General Plan Housing Element provides information on household characteristics, housing needs, housing supply, land inventory for new development, housing programs, constraints, and incentives for new housing development. The purpose of the housing element is to identify the community's housing needs, to state the community's goals and objectives with regard to housing production, rehabilitation, and conservation to meet those needs, and to define the policies and programs that the community will implement to achieve the stated goals and objectives. State law requires cities and counties to address the needs of all income groups in their housing elements. The City's Housing Element was last updated and adopted by the City Council in May Required by state law, the Regional Housing Needs Allocation Plan (RHNP) is part of a statewide statutory mandate to address housing issues that are related to future growth through Housing Elements. The RHNP allocates to cities and counties each jurisdiction's "fair share" of the region's projected housing needs by household income group over the upcoming housing element planning period. The regional housing needs allocation (RHNA) numbers for South Lake Tahoe are provided in the SACOG plan and the RHNA projection period is January 1, 2013 through October 31, The allocations are intended to be used by jurisdictions when updating their housing elements as the basis for ensuring that adequate sites and zoning are available to accommodate at least the number of units allocated. The RHNP allocated 336 new housing units to South Lake Tahoe for the planning period. Of 336 housing units, 155 units are to be affordable to moderate-income households and below, including 27 extremely low-income units, 27 very low-income units, 38 low income units, and 63 moderate-income units (p. 4-61). These allocations are specific to future housing unit development and existing :units, unless deed restricted as affordable, do not count towards meeting the RHNA allocation. In order to demonstrate that adequate sites are available to meet the RHNA allocation for new development, Housing Element law requires an inventory of land suitable for residential development (Government Code, Section 65583(a)(3)), including vacant sites and sites having the potential for redevelopment, and an analysis of the relationship of zoning and public facilities and services to these sites. The inventory ofland suitable for residential development shall be used to identify sites that can be Page 5of8

9 developed for housing within the planning period. The City Housing Element policies and programs for new construction are focused on facilitating and incentivizing opportunities, removing constraints to the development of new housing units, and encouraging development of housing in Town Centers and sites that reuse infrastructure and existing land coverage and other development commodities. The Initiative would not have an effect on the City's ability to implement these policies. The Housing Element also must include programs to conserve and improve the existing housing stock. Improvement includes physical activities that upgrade the housing stock, such as rehabilitation. Conservation includes both maintenance activity (such as code enforcement on deteriorating buildings), improvements to the housing stock (such as weatherization programs that reduce housing costs), and other actions, policies, and programs that conserve the affordability of housing (such as a mobile home park preservation ordinance). The City's Housing Element provides data supporting the conclusion that "a large percentage of the city's existing housing stock is in need of some form of rehabilitation" (Housing Element, p. HE-13). The Housing Element policies and programs for the rehabilitation and conservation of housing units focus on encouraging private investment in neighborhoods and housing maintenance. Policies also direct the City to continue the Housing Issues Hotline and Multi-family Inspection Program and to implement an inspection program for long term rentals in hotels (Single-Room Occupancy Program). The Initiative would not have an effect on the City's ability to implement these policies. The Housing Element also contains polices to direct the preservation of neighborhoods. These policies are related to the design and appearance of new housing developments and maintaining the character and environmental quality of surrounding areas. The Initiative would not have an effect on the design or nature of future housing development. The Housing Element Background Report did discuss and recognize that VHR activities are related to housing availability in the City. In 2014, only approximately 9 percent of the City's housing stock was used as VHRs; therefore, in 2014 VHRs were not considered an "actual constraint" to providing housing for all income levels in South Lake Tahoe. While the use of housing for short-term rentals reduces the number of housing units that, in some cases, would be available as long-term rental units, the 2014 level of use was not considered by the City Council to be a constraint to providing, maintaining, and improving housing for people of all income levels in South Lake Tahoe. (Housing Element, p ). Currently, there are 1,764 permitted VHRs in the City, which isl0-4% of the total number of housing units estimated by the American Fact Finder in 2016 (17,015 total housing units). The US Census maintains counts of housing units in the community. A housing unit is vacant if no one is living in it at the time of the interview, unless its occupants are only temporarily absent. In addition, a vacant unit may be one which is entirely occupied by persons who have a usual residence elsewhere. A housing unit is occupied if a person or group of persons is living in it at the time of the interview or if the occupants are only temporarily absent, as for example, on vacation. The persons living in the unit must consider it their usual place of residence or have no usual place of residence elsewhere. Therefore vacation rental units would be counted as vacant, as would seasonal use and second homes. The 2010 Census counted 6,362 vacant units (4i.4% of total) in South Lake Tahoe and counted 9,008 (58.6% of total) occupied housing units. The US Census American Fact Finder provides housing units estimates annually since In 2016 American Fact Finder estimates that 50.6% of the total housing units are vacant and 49-4% are occupied (US Census American Fact Finder, factfinder.census.gov, July 2, 2018). Therefore, the estimates indicate that the percentage of housing units in the city that meet the definition of vacant (including VHRs, second homes, and seasonal use homes) has increased since Page 6of8

10 Where vacancy rates are high, housing prices and rents tend to be lower. A vacancy rate of 5 percent or lower indicates a "tight housing market," meaning that it is harder to find available units in any particular area or price range. The 2010 Census reported the South Lake Tahoe homeowner vacancy rate to be 4.5 percent, with a rental vacancy rate of 14.6 percent (Housing Element, P-4-22). The American Fact Finder estimates that the homeowner vacancy rate was 2.9% and rental vacancy rate as 1i.2%in 2016 (US Census American Fact Finder, factfinder.census.gov, July 2, 2018). This data indicates that the vacancy rate in the City has decreased which may be one factor in rising housing prices and rents, however data to identify the specific causes of decreased vacancy rates, and the influence ofvhrs, is not currently available. (4)1mpact on funding for infrastructure of all types, including, but not limited to, transportation, schools, parks, and open space. Potential to result in increased infrastructure costs or savings, including the costs of infrastructure maintenance, to current residents and businesses. See the discussion under item 1 above for impacts to Measure P Transient Occupancy Tax and potential impacts on constructing, operating and maintaining recreational facilities. Discussion under item 1 above also provides an analysis of potential impacts on General Fund revenue associated with Transient Occupancy Tax and Property tax. The City does not have a designated source of revenue for the construction and maintenance of streets or other City owned infrastructure. Accordingly, General Fund excess revenues (excess of 25% reserve requirement) have historically been used for the construction and maintenance of streets and other City owned infrastructure. General Fund revenues have also historically been used to fund and implement parks and open space infrastructure projects. General Fund revenues in the past have been used for all types of necessary infrastructure construction and/ or maintenance as determined by the City Council based on budgeting constraints, opportunities, priorities and pending projects. (5)1mpact on the community's ability to attract and retain business and employment. The Socioeconomic Impact analysis that was conducted by Michal Baker International, Inc. in 2017 acknowledged that the option of staying in a VHR may attract visitors that would not have come to the area if staying in a VHR was not an option, thus creating greater economic activity (including employment opportunities and income for locals. (Socioeconomic Impacts of Vacation Home Rentals in South Lake Tahoe, June 2017, p. 3-22). Therefore, a reduction in the number ofvhrs may have an effect on the City's tourism based economy, however, data is not currently available to conducfa detailed analysis on the extent of that impact or its relationship to business retention and employment. (6)1mpact on the uses of vacant parcels of land. The Initiative would have no impact on the uses of vacant parcels ofland. The Initiative does not affect existing zoning and development regulations or other influences on the uses of vacant land. Page 7of8

11 (?)Impact on agricultural lands, open space, traffic congestion, existing business districts, and developed areas designated for revitalization. The Initiative will have no impact on agricultural lands and open space. With the limitation of VHRs in residential zones to Qualified VHRs, it is unknown whether the demand for VHRs will shift to commercial zones and the Tourist Core Area, resulting in increased supply in those areas. The Initiative text states that it "has no effect on VHRs in commercial zones and the Tourist Core area" however, it also states that "the expansion of vacation home rentals in the commercial zones and Tourist Core area will continue to support our tourism economy," implying that the reduction of VHRs in residential zones will result in an increase in VHRs in commercial zones and the Tourist Core area. The Initiative prohibits VHRs on multi-family property after There are currently 119 single-family residential units in commercial zones and 371 condominiums and 37 single-family residential units in the Tourist Core area, a total of 527 units, which would have the ability to become VHRs if permitting requirements are met. There is not currently data available that would support the potential for all eligible residential units in commercial zones or the Tourist Core area to become VHRs or the impact on existing business districts. Similarly, an analysis of the potential for impacts on traffic congestion is not feasible at this time. An economic analysis on the potential for a shift in demand for VHRs to commercial zones and the Tourist Core area along with a traffic analysis forecasting the potential changes in traffic volumes and movements would be necessary. Page 8of8

12 CITY OF SOUTH LAKE TAHOE RESOLUTION NO Attachment 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SOUTH LAKE TAHOE, CALIFORNIA, REQUESTING THE BOARD OF SUPERVISORS OF THE COUNTY OF EL DORADO, CALIFORNIA, TO CONSOLIDATE A GENERAL MUNICIPAL ELECTION, WITH THE STATEWIDE GENERAL ELECTION TO BE HELD ON NOVEMBER 6, 2018 AND TO INCLUDE AN INITIATIVE MEASURE ON THE BALLOT ENTITLED "A CITIZEN'S INITIATIVE MEASURE TO ELIMINATE MOST VACATION HOME RENTALS ("VHRs") IN RESIDENTIAL ZONES WITHIN THE CITY OF SOUTH LAKE TAHOE" WHEREAS, the City Council of the City of South Lake Tahoe has scheduled a General Municipal Election to be held on November 6, 2018; and WHEREAS, it is being requested that the General Municipal Election be consolidated with the statewide General Election to be held on November 6, 2018; and NOW, THEREFORE, the City Council of the City of South Lake Tahoe does hereby resolve, declare, determine, and order as follows: Section 1. Pursuant to the laws of the State of California relating to General Law Cities, there is called and ordered to be held in the City of South Lake Tahoe, County of El Dorado, a General Municipal Election on November 6, 2018 to be consolidated with the statewide General Election to be held on Tuesday, November 6, 2018 and the City opf South Lake Tahoe requests that the following Initiative Measure be included on the Election Ballot: "A Citizen's Initiative Measure to Eliminate Most Vacation Home Rentals ("VHRs") in Residential Zones within the City of South Lake Tahoe" Section 2. The Board of Supervisors of the County of El Dorado is hereby requested to approve consolidation of said election General Municipal Election with the statewide General Election to be held on November 6, Section 3. The City Clerk is hereby directed to file a certified copy of this Resolution with the El Dorado County Board of Supervisors and the El Dorado County Recorder Clerk Elections Division. This Resolution was duly PASSED AND ADOPTED by the City Council of the City of South Lake Tahoe at a regular meeting of the City Council on the 17th day of July, 2018 by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ~ ABSENT: ABSTAIN: COUNCILMEMBERS: ~ COUNCILMEMBERS: ~ ATTEST: Wendy David, Mayor Susan Alessi, City Clerk