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HomeMy WebLinkAboutInformation Only 032624AGENDA INFORMATION UPDATE March 26, 2024 5:00 PM, I.Information Update I.A STR Update I.B Work Session Follow-Up - Demolition Allotment I.C Work Session Follow-Up - Heat Tape Outdoor Heating Info Only Memo_STR Update.pdf Work Session Follow-up_Demolition Allotment.pdf Work Session Follow-up_Heat Tape_Outdoor Heating.pdf 1 1 Page 1 of 10 INFORMATION ONLY MEMO TO: Aspen City Council FROM: Emmy Oliver (Garrigus) Lodging & Commercial Core Program Manager THROUGH: Pete Strecker, Finance Director Ben Anderson, Community Development Director MEMO DATE: March 26, 2024 RE: Information Only: Short-Term Rental Program Update ______________________________________________________________________ REQUEST OF COUNCIL: This Information Only memo serves to update Council on the status of Aspen’s Short-Term Rental (STR) Program after one year of full implementation of the new set of regulations that became effective following the 2022 Moratorium and after several months of collection of the STR-specific sales tax (since May of 2023). This memo serves to provide information and there is no specific request of Council from staff. Should Council desire additional information, please discuss further with the City Manager. SUMMARY AND BACKGROUND: History of Business Licensing and Permitting STR Entities In June of 2022, after nearly six months of extensive analysis, policy development, and public engagement, Aspen City Council approved Ordinance No. 09, Series 2022. Ordinance 9 (2022) amended the regulations for the operation of STRs in Aspen, including the creation of the three STR permit types that we see today (Classic, Owner Occupied, and Lodging Exempt) and placed limits on the number of Classic permits allowable in certain residential zone districts. The ordinance also included a non- transferability clause, life safety and operational requirements, and a permit fee schedule to capture City operational costs for administration such as land use review, taxation, and legal. Ordinance 09 became effective July 2022. The permitting moratorium expired on September 30, 2022, and on October 1, 2022, the City resumed accepting applications for new STR permits. 2 Page 2 of 10 1,276 Vacation Rental Permits (VRP) were issued before the 2021 permit moratorium was enacted, and those VRP were subject to annual permit renewal at the end of 2022. Because Ordinance 9 (2022) introduced three new permit types that replaced the VRP altogether, staff built a “survey” into the renewal process for 2023 to determine which new STR permit type the VRP-holder desired for 2023. If a VRP-holder chose to renew for a “Classic” (STR-C) permit, the account was “grandfathered” into the permit pool and was not subject to limits if the property was in a capped zone. It should also be noted that with the addition of the non-transferability clause, many individuals who speculatively obtained a permit prior to the moratorium chose not to obtain a new permit under Ordinance 9 (2022). New STR permit applications received from October 1, 2022 forward were processed and issued in accordance with Ordinance 9, and STR-C applications for properties in capped zones were placed onto waiting lists if the permit limit in the property’s zone was reached. Business License and Permit Data For 2023, the number of unique business licenses and permits for STR establishments equated to: Type Business Licenses Permits Classic 740 740 Lodge Exempt 392 9 Owner-Occupied 76 76 Total 1,208 825 Table 1. 2023 Count of Business Licenses and STR Permits by Type For the current year (2024), these counts have subsided slightly – due to a variety of reasons that include property sales (permits are not transferable) and a shift by some properties into long-term rental operations – with the number of unique business licenses and permits for STR establishments equating to: 3 Page 3 of 10 Type Business Licenses Permits Classic 698 698 Lodge Exempt 385 8 Owner-Occupied 72 72 Total 1,155 778 Table 2. 2024 Count of Business Licenses and STR Permits by Type It is important to note that 2023 data in Table 1 was collected over all 12 months of 2023, and data in Table 2 was collected over 2.5 months of 2024. It is likely that 2024 permit and license counts will increase as new applications for STR permits may be submitted at any time during the calendar year. Additionally, while each STR unit at a Lodge property is required to hold a valid STR-LE business license, only one permit is required per lodge property, hence the discrepancy between Lodge Exempt business license and permit counts. Permit Type 2023 2024 STR-OO $ 29,944 $ 28,368 STR-LE $ 58,016 $ 56,980 STR-C $291,560 $268,708 Total $379,520 $354,056 Table 3. Administrative Fee Revenue by Permit Type, 2023-2024 Ordinance 9 (2022) established annual administrative fees per STR unit, which are remitted at the time of permit application. Administrative fees are reported for the effective year of the permit, as shown in Table 3, and the fee revenue is distributed across the Community Development, Finance and Legal Departments. Taxation on STR Operations Due to the unique business licensing history on short-term rental businesses noted above, there has been some dramatic changes to tax collections on these operations. Prior to 2020, with the limited number of business licenses issued (50), it is all but certain that the City’s tax receipts were not reflective of the 2% lodging tax (and 2.4% sales tax) due on nightly stays at these sites. As individual business licensing was required beginning in 2020 with the adoption of Ordinance #13 and as compliance with this change resulted in the initial identification of 995 unique STR properties, which increased to 1,276 by the time the moratorium went into place, the City gained substantial insight on compliance with tax remittance efforts for these operators. And while the COVID pandemic significantly diminishes any ability to analyze how the additional compliance by STRs boosted lodging tax revenues in 2020-2021, there is certainty that accommodation taxes would have been far worse without the regulatory changes of unique licensing requirements for each site. 4 Page 4 of 10 With voter approval provided in the November 2022 election, the City adopted a new excise tax to be levied on all nightly stays on or after May 1, 2023. The tax was tiered based on the type of short-term rental permit obtained for the property: Type Excise Tax Rate Classic 10% Lodge Exempt 5% Owner-Occupied 5% Table 4. Voter-Approved Excise Tax Rate by STR Permit Type With a partial year of tax collections in 2023, there are a few metrics that we can provide at this time. Looking at a comparison of taxable sales between May 2022 and December 2022 (benchmark year) to May 2023 and December 2023 (first year with new tax), we can see that the short-term rental market experienced a 23% decline in sales. This decline likely includes a number of influences, including: • Declining state of the economy – strong US Dollar is impacting international tourism and dampening the overall economy, including the lodging sector. This is supported by the fact that even the non-STR lodging market (the traditional hotel sector) experienced a decline of 4% in taxable sales over this same period. That said, some international tourism has picked up, but it is still lagging. • Accommodation preferences – there was a definite shift into the STR market during the pandemic as travelers were looking for solitude and traditional lodging options were limited. As COVID restrictions subsided, there has been a greater acceptance in returning to traditional lodging options. • Shift to long-term rentals – reviewing filing data, we have seen an 18% increase in long-term rental deductions on tax filings over this period ($21.6M in 2022 to $25.4M in 2023). While not definitive, as filers continue to be educated around correct filing practices, some of this can be attributed to lower tax receipts. • Reduced number of STRs – as noted in the above business licensing figures, there has been a 4.4% decline in the total number of STRs. • Taxation increase – with the addition of an additional 5% or 10% tax on nightly stays, depending on the price sensitivity of the visitor seeking accommodations, the new tax could be influencing whether or not these units are rented. That said, it should be considered that the nightly price point for certain seasons / event weeks at some establishments are substantial and do not support a highly price-conscious patron base. But, for more economically priced units, some patrons for those establishments may be adversely influenced. 5 Page 5 of 10 2022 Taxable Sales 2023 Taxable Sales Percentage Change Traditional Lodge $142,570,269 $136,309,218 (4%) Short-Term Rentals $59,692,205 $46,068,150 (23%) Real Estate $2,799,173 $2,809,534 0% Table 5. Taxable Sales for Lodging Sector, 2022-2023 2023 STR Excise Taxes (May – Dec) 2024 STR Excise Taxes (Jan Only) STR-C $2,479,018 $745,897 STR-LE $995,520 $313,937 STR-OO $64,969 $16,882 Total STRs $3,539,507 $1,076,716 Table 6. STR Excise Tax Revenue, May 2023-January 2024. *January 2024 totals are preliminary and not yet finalized Waitlists for STR-C Permits Waitlists for STR-C permits in capped zone districts have changed significantly from 2023 to 2024. In February 2023, waitlists existed for nine (9) of the fourteen (14) capped zone districts, and sixty-five (65) total applications were on those waiting lists. In February 2024, only four (4) capped zone districts have waiting lists, and the total number of applications across those waiting lists is forty-eight (48). The R/MF zone district has the longest waiting list for STR-C permit applications (see Table 7). Zone District Waitlisted Applications in February 2023 Waitlisted Applications in February 2024 Difference in Totals from 2023 to 2024 R-6 12 3 -9 R-15 12 6 -6 R-15A 1 0 -1 R-15B 2 0 -2 R-30 2 2 n/a R/MF 29 37 8 R/MFA 1 0 -1 AH 1 0 -1 MU 5 0 -5 Table 7. February 2023 vs. February 2024 STR-C Waitlist Application Counts Each of the STR-C permit waiting lists has reduced in size from 2023 except for the R/MF waitlist, which has increased by 8 applications from 2023 to 2024. The R/MF zone district has the highest cap of all the zone districts limited for STR-C permits, at 190 permits, however due to the number of pre-moratorium permits that were grandfathered into the totals, the number of issued permits in R/MF is still above the limit for the zone district (see Table 8). Because there are more permits issued in R/MF than are allowed by permit 6 Page 6 of 10 caps, applicants on the R/MF permit waitlist will not be offered permits until or unless the number of issued permits falls below the permit cap in this zone. The same can be said for the R-30 zone district. Over time, natural attrition of permits in capped zones will function to bring the permit counts in line with (or below) the limit established for each zone. Zone District Permit Cap # Issued # Pending Total # Permits (Issued + Pending) # Available Permits # on Waitlist AH 9 6 0 6 3 0 MU 39 22 0 22 17 0 NC 1 1 0 1 0 0 R/MF 190 217 0 217 -27 37 R/MFA 12 4 0 4 8 0 R-15 47 41 6 47 0 6 R-15A 8 3 0 3 5 0 R-15B 12 11 0 11 1 0 R-3 1 1 0 1 0 0 R-30 1 6 0 6 -5 2 R-6 81 70 11 81 0 3 RR 2 2 0 2 0 0 SCI 2 7 0 7 -5 0 SKI 2 0 0 0 2 0 Table 8. February 2024 STR-C Permit Availability Summary DISCUSSION: Staff Observations • Limits on the Classic permit in R/MF Zone District The R/MF zone district is situated primarily to the east of the Commercial Core and Lodging zones. Many multi-family buildings with studio, 1- and 2-bedroom units are concentrated in this zone district, including some which were historically used as lodges but that no longer meet the definition due to condominiumization of the units. The R/MF zone has the longest waitlist of any zone district capped for STR- C permits. Staff often receive questions about whether the limits on the number of STR-C permits will be raised in the R/MF zone. Based on the limited amount of historical data on permit abandonment in this zone, and due to the number of pre- existing permits that were not subject to permit caps, staff estimates it may be at least 2 more years until the first applicant on the waitlist for STR-C permits in the R/MF zone will be offered a permit. • Public Notice As part of the City’s commitment to mitigating the impacts of STRs in neighborhoods, the requirement for a public notice was included in Ordinance 09 7 Page 7 of 10 Series 2022. Public notices are posted on STR properties and mailed to surrounding neighbors by property owners applying for new STR permits. The goal of the notice is to make neighbors aware of the new STR being applied for in their neighborhood, and to provide contact information for the local “Qualified Owner’s Representative” who is responsible for managing the STR property and for responding to concerns or complaints. Staff has received feedback from STR applicants and from residents who have received a notice that the mailing of notices generates an excessive amount of paper waste, and requests have been made that the notices be sent virtually, instead of through paper mail. Additional feedback has been received from property owners receiving public notices in the Lodging and Commercial Core zones, where STRs are not limited in number and STR activity is heavily concentrated, that notices are unnecessary because the land use is both assumed and widespread. • Non-transferability of Permits Language detailing the non-transferability of STR permits was approved in Ordinance 09 Series 2022. STR permits may only be issued to one “natural person” who owns at least 10% of the STR property. Permits may not be transferred to other owners of the same property, nor to a new property address. STR permits are terminated and revoked upon the sale of a property, and if a permit is desired by a new property owner, they must submit an entirely new permit application to be considered. Non-transferability language supports the movement of applications on waitlists and gives new property owners a chance to obtain a permit where they may otherwise be monopolized if transfers were allowed. Non-transferability of permits is a concern for many permittees engaged in estate- planning. City regulations do not currently allow for an STR permit to be transferred to a next of kin in the event of death, and City staff have fielded many requests to modify this portion of the non-transferability requirement from permit holders. • Tax Filing Requirement STRs are required to be occupied by a short-term renter a minimum of once per year, as evidenced by STR tax filings, to be eligible for permit renewal. While recognizing the importance of this requirement for the overall effectiveness of the program, staff did not enforce this requirement in 2023, citing over 100 accounts that would not have been compliant with the new and highly impactive regulations. Staff instead used 2023 as a "notification period," in line with the City’s progressive enforcement policy, to effectively communicate the tax filing requirement so that permittees are better prepared to comply in 2024 and beyond. Ongoing messaging about this requirement is scheduled to continue via notifications in the City’s online tax portal to active accounts. Because the City accepts applications for new STR permits on a year-round basis, and because permits expire at the end of each year, most new STR permits are 8 Page 8 of 10 valid for less than 12 months of the first calendar year following approval. Staff will provide an administrative grace period to the tax filing requirements for new permits obtained after June 30 in any given year, and those accounts will be required to comply with the minimum rental requirement beginning in the following full year of operation. • MUNIRevs Software MUNIRevs is the City’s Permitting, Licensing, and Compliance software platform whereby the public manages permits, business licenses, and sales tax reporting for STR properties. Prior to 2022, STR operators were required to obtain a business license and vacation rental permit from MUNIRevs. Both permit and license were required to be renewed annually, but because there were no limits on the number of permits that could be issued, the consequences of non-renewal were minimal. In addition to the requirement for annual permit renewal, the introduction of caps on permit numbers means that stakes are higher for STR-C permittees as the failure to renew a permit can result in the permit being offered to a waitlist applicant. Despite having regularly scheduled notification emails, up-to-date website information, and a dedicated staff member for support, staff has identified the need to create more resources detailing how MUNIRevs customers can interact with the software to receive timely notifications about their accounts. In advance of the 2024 permit renewal period, staff will be developing those resources for permittees and account managers to support the effective use of the software. • Program Compliance STR compliance is primarily monitored through public complaints submitted via Aspen 311 Connect. To date, Community Development has responded to 4 complaints alleging that properties are operating as STRs without the requisite permits. In most cases, the activity that triggered the complaint was verified to be guests of the property owner staying at the property for free of charge, but in one case, an online advertisement was found that corroborated the complaint of STR activity. A Notice of Violation (NOV) was mailed to the property, and the owners responded by coming into compliance with program regulations. In complaint- based situations where a property is assumed to be an STR operating without a permit, it is challenging for staff to prove STR activity is occurring unless an advertisement for the activity can be found. Another tool for monitoring STR compliance is MUNIRevs’ sister platform, LODGINGRevs. LODGINGRevs performs frequent “scrapes” of the internet to identify STR advertisements, and then determines if the advertisements are connected to permitted properties in Aspen’s system. LODGINGRevs is highly effective at identifying STR advertisements listed on prominent rental sites such as Airbnb and VRBO, however most online advertisements do not contain property addresses. Without exact address information, it's difficult to pinpoint whether an advertised property has an associated permit, or who the property owner may be 9 Page 9 of 10 in the event they need to be contacted. Staff are continuously working in LODGINGRevs to maintain updated compliance records and utilizing all available tools to identify unpermitted properties in online advertisements. By participating in the STR Program, permittees are responsible for ensuring their guests adhere to high standards of behavior and act as “good neighbors” to those around them. Permittees must communicate expectations for parking, trash, wildlife, and noise compliance to their renters, and permittees must respond in a timely manner if complaints about renters are submitted to the City. STR staff have fielded approximately 5 complaints from the public about concerning behavior from renters. As City policy dictates, staff first contact the permittee and/or property owner's representative to inform them of the issue. All permittees have, thus far, been responsive and have resolved the complaints. Staff also coordinates with APD to contact STR permittees when APD identifies issues at STRs. Looking Ahead As with any new program, there are always opportunities to improve. Staff is continually working to identify those opportunities in pursuit of providing elevated customer service to program participants and the public. Throughout 2024, more resources will be developed for the following focus areas: • MUNIrevs user information to include the importance of user roles and maintaining updated contact information, automated notifications and how to sign up for them, how to grant access to an STR account, and tax reporting information for filers on an account. • Compilation of “Need to Know” compliance information for permittees, including tax filing and in-unit messaging requirements, responsibilities for owners’ representatives, details about non-transferability and the annual permit renewal process, and best practices for formatting online advertisements. • Updates to the ArcGIS STR Map, including the addition of a deed-restricted layer for more complete property information. • Updates to STR Program Guidelines, including expansion and clarification of existing information and the addition of many of the above topics; anticipated date of completion is summer 2024 (to be amended by Council Resolution). Staff also intend to build on their existing partnership with the Pitkin County Assessor’s office to develop a system of regular information sharing about property sales. This system will help to facilitate more frequently updated permit counts and real time waitlist movement rather than waiting to be contacted by permit holders who have sold properties. 10 Page 10 of 10 Possible State Legislation May Force Changes The State Legislature is considering a few bills this session that could have implications to the City’s program. Draft bills are seeking to standardize local lodging taxation, including adding uniform definitions for a short-term rental, allowances for mass tax reporting thereby shifting the burden of remittance to the administrator instead of the owner of the property, changing tax filing timeframes, increasing property tax on STR properties, and more. These bills are being watched by staff and the City is attempting to understand both their full intent and reach, to assess if there will be external mandates for the City’s program to comply with. CITY MANAGER COMMENTS: 11 FOLLOW-UP MEMORANDUM CITY COUNCIL WORK SESSION WORK SESSION MEETING DATE: February 26, 2024 FOLLOW-UP MEMO DATE: March 26, 2024 AGENDA TOPIC: GMQS – Demolition Allotment Program PRESENTED BY: Ben Anderson Community Development Director COUNCIL MEMBERS PRESENT: All present _______________________________________________________________________ WORK SESSION DISCUSSION SUMMARY: The 2/26/24 Work Session was a requested follow-up with Council to receive direction on several topics related to the Demolition Allotment Program. Council was presented with an update on the status of the program and several areas for potential changes to the program were discussed. Council was in consensus in the direction to staff to pursue a Policy Resolution – an action that if approved would open the Land Use Code for possible amendments. A majority of Council members agreed on several areas where there was interest to pursue specific changes to the program. NEXT STEPS: 1. As soon as is practicable, Staff will return to Council with a Policy Resolution to begin the code amendment process – likely in April 2024. 2. Based on majority Council direction at the 2/26 work session, staff will begin drafting potential code amendments to specific areas of the program. 3. If the Policy Resolution is passed, staff would continue in the code amendment process that would ultimately result in the presentation to Council of a proposed Ordinance. CITY MANAGER COMMENTS: 12 FOLLOW-UP MEMORANDUM CITY COUNCIL WORK SESSION WORK SESSION MEETING DATE: March 4, 2024 FOLLOW-UP MEMO DATE: March 26, 2024 AGENDA TOPIC: REMP – Heat Tape and Outdoor Heating PRESENTED BY: Bonnie Muhigirwa, Chief Building Official Justin Hahn, Deputy Chief Building Official Denis Murray, Plans Examination Manager Ben Anderson, ComDev Director COUNCIL MEMBERS PRESENT: All present (Council member Hauenstein was remote) _______________________________________________________________________ WORK SESSION DISCUSSION SUMMARY: The 3/4/24 Work Session was a requested follow-up with Council to receive direction on two specific topics within the Renewable Energy Mitigation Program (REMP) – Heat Tape and Outdoor Heating related to restaurant use. Staff provided background on the concerns related to the two topics. On heat tape, the primary issue is in the replacement of existing heat tape systems on commercial properties. The 2021 Building Code adoption (effective in Spring of 2023) includes heat tape within REMP calculations for the first time. Property owners have raised concerns during replacement scenarios about the mitigation costs and about the impact of these costs on their tenants. On outdoor heaters, staff requested direction from Council on whether there was desire to enforce, through a yet to be determined mechanism, the applicable code provisions, and mitigation requirements on portable, propane heaters – particularly those associated with restaurants. Relatedly, staff requested direction on whether Council desired staff to incentivize the installation of electric heaters as an alternative. On both topics, Council requested additional information. On the heat tape topic, a majority of Council was most supportive of increasing the exemption (currently at 1000 watts) for heat tape within the REMP calculator. There also was majority support to explore the exemption topic on residential applications. 13 On outdoor heaters, a majority of Council supported the encouragement of electric heaters. There was also a majority that were concerned about the use of propane heaters solely as an attractant feature or on patios when there are not seated patrons. On the more general topic of portable propane heaters, it was clear that Council needed more information and did not desire to provide direction for staff action at this time. NEXT STEPS: 1. Staff will continue to collect data and research both topics further. 2. Staff will return to Council in summer of 2024 with additional information and proposed language for potential code changes on both the heat tape and outdoor heating topics. 3. Depending on the nature of the eventual direction from Council, a Resolution would be needed to make technical changes in the REMP calculator tool, and an Ordinance would be necessary for any changes to the building code. CITY MANAGER COMMENTS: 14