Memorandum

City of Lawrence

City Manager’s Office

 

TO:

Lawrence City Commission

FROM:

Danielle Buschkoetter, Management Assistant

CC:

Scott McCullough, Director of Planning & Development Services

Randy Larkin, Senior Assistant City Attorney

Brian Jimenez, Code Enforcement Manager

Jeff Crick, Planner

DATE:

January 8, 2018

RE:

Short-Term Rental Work Session Follow-Up

 

 

Background

On November 14, 2017, the City Commission held a work session to discuss short-term rentals (STR). At that work session staff recommended the following framework:

1.    STR permitted in all zoning districts that allow residential uses.

a.    Staff is recommending that STRs be permitted in single and multi-dwelling districts.

b.    Additionally, staff is recommending that a distinction be made between owner occupied units and non-owner occupied units. All owner occupied units would follow the framework set forth in STR regulations while all non-owner occupied units would be required to follow the regulations set forth for traditional bed & breakfasts. Therefore, non-owner occupied STRs would be required to obtain a Special Use Permit (SUP).

2.    Collection of Transient Guest Tax and Sales Tax.

a.    STR hosts are responsible for ensuring that all applicable taxes are collected and remitted. Airbnb has signed an agreement with the State of Kansas to collect and remit all local and state taxes. However, the other platforms have not yet reached such an agreement and therefore that responsibility would fall to the operator of the STR. 

3.    Annual license and fee.

a.    The annual license and fee is proposed to be similar to the Rental Licensing and Inspection Program. The license fee is anticipated to be $25 per unit. The fees are set to recover the costs associated with processing the request. 

4.    Annual inspection and fee.

a.    The annual inspection and fee is proposed be similar to the Rental Licensing and Inspection Program. The inspection fee is anticipated to be $50 per unit. The fees are set to recover the costs associated with processing the request.

5.    Proof of insurance.

a.    Staff are recommending that STR operators be required to show proof of insurance in the event that an issue were to arise. It should be noted that Airbnb does provide some level of insurance for the STR operator, however that is not a universal practice among all STR platforms.

6.    Conform with current occupancy standards.

a.    Current occupancy standards would apply to STRs. That means in a single-dwelling, residential (RS) district a maximum of three (3) unrelated occupants are permitted. In a multi-dwelling, residential (RM) district a maximum of four (4) unrelated occupants are permitted. There are exceptions to this for congregate living, motel, hotel, bed & breakfast, dormitory, fraternity/sorority, and group homes. It should be noted that for a traditional bed & breakfast to be exempt from the occupancy standards they must apply for and be granted a special use permit.

7.    Local contact person.

a.    There must be a local contact person to receive notices and attend to issues as they arise. If the owner lives more than 40 miles outside of City limits, a resident agent is required that lives within 40 miles of City limits.

8.    Notice to neighbors.

a.    Staff are also recommending that a notification be sent out to owners of property within 400 feet of the STR as well as to registered neighborhood associations. The notice would be similar to Type B Home Occupation notices (e.g. tutoring, hair salon, accounting services). It would provide general information about STRs and how to file a complaint if an issue were to arise. Additionally, the notice would reflect that there is no right to appeal the STR use.

 

Summary of Direction

Based on the discussion that occurred during the Work Session, staff will pursue drafting the appropriate text amendments and ordinance to incorporate the recommended framework with the following changes from staff’s proposal incorporated:

1.    The licensing and inspection protocol will follow our current rental registration guidelines with the required inspection to occur on a three-year rotation instead of annually;

2.    remove the local contact person requirement because the owner of the property will serve as the contact person for owner-occupied STRs and all non-owner occupied properties will go through the existing special use permit process at which point that condition can be added;

3.    provide notice to neighbors for owner-occupied STRs that are within 200 feet of the STR instead of 400 feet (notice to neighbors will be provided in the normal course of the special use permit process for non-owner occupied STRs); and

4.    develop recommendations regarding properties that are currently receiving City incentives and include language about affordable units within incentivized projects.

 

Questions Raised During Work Session

During the City Commission discussion, a number of questions were raised. Staff have attempted to provide answers to those questions.

 

Taxation. There were a number of questions about the rate at which property taxes would be assessed as well as at which point sales taxes would cease to be collected. In regard to the property tax assessment for properties that operate a STR; the County Appraiser’s Office is responsible for the appraisal of all real estate, both commercial and residential. While the City does receive property tax dollars, the appraisal values are determined and administered through Douglas County.

 

Currently, it appears there are no STRs residences classified as commercial property. For this classification to occur the County Appraiser’s Office would have to determine that a property is being used strictly as a STR for a majority of the tax year. In addition to use, there are many variables looked at by the County Appraiser’s Office when making an assessment. The City is in communications with the County Appraiser’s Office and will try to provide more clarity on this issue as more details about the proposed regulations are known.

 

In regard to the sales tax collections, the State of Kansas collects and remits sales tax and transient guest tax to the City. While the City does receive sales tax and transient guest tax, both taxes are administered by the Department of Revenue. It appears as through sales taxes are collected based on gross receipts while transient guest taxes cease to be collected after accommodations are provide to the same individual or entity for 28 consecutive days.

 

Insurance. Staff is recommending that proof of general liability insurance be provided at time of licensing. Staff will set a minimum amount of insurance required to be maintained.  It will be incumbent upon the applicant to ensure that they have the proper insurance to cover STR operations.

 

Owner Occupied vs. Non-Owner Occupied. Staff’s recommendations included a distinction between owner occupied vs. non-owner occupied STR operations. Staff is proceeding with that distinction. Owner occupied STRs will follow the regulations set forth through the proposed text amendments and ordinance that staff will bring forward. Non-owner occupied STRs will have to additionally go through the special use permit (SUP) process, a discretionary approval process that would allow the use in residential zoning districts.

 

Next Steps

Staff is recommending that the City Commission initiate a text amendment to the City of Lawrence Land Development Code to incorporate short-term rental uses. Once initiated, staff will develop Land Development Code language and a proposed ordinance establishing licensing and inspection regulations for short-term rentals.

 

Both the text amendment and proposed ordinance will be brought forward to the Planning Commission and ultimately the City Commission for final approval.  Additionally, this will be a public process and public input will be gathered throughout the entire process.

 

Action Requested

Initiate a text amendment to the City of Lawrence Land Development Code to incorporate short-term rental uses and direct staff to develop an ordinance for the licensing, inspecting and regulating of short-term rental properties.