City Council Meeting - FINAL

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Meeting Date: 11/03/2020  
Co-Submitter: Anja Wendel From: Jack Fitchett, Management Analyst

Consideration and Adoption of Ordinance No. 2020-27:  An ordinance of the City Council of the City of Flagstaff, amending the Flagstaff City Code, Title 3 Business Regulations, by adopting a new chapter 3-12 Short-Term Rentals; providing for penalties, repeal of conflicting ordinances, severability, and establishing an effective date
1) Read Ordinance No. 2020-27 by title only for the final time.
2) City Clerk reads Ordinance No. 2020-27 by title only (if approved above)
3) Adopt Ordinance No. 2020-27
Executive Summary:
A short-term rental (STR) is a single-family residence, unit within a condominium, cooperative or timeshare, or owner-occupied residential home that is rented for lodging accommodations of 30 days or less ("transient lodging"). It will also include a unit in a multiple-family dwelling unit offered for transient lodging.

The Short-Term Rental Ordinance will bring the City in line with current State law regarding short-term rental rules and regulations and provide clear and consistent messaging to our residents. This ordinance outlines the expectations, rules and regulations that come with operating a short-term rental (STR).

The key takeaways of this ordinance’s requirements are:
  1. STRs shall acquire a Transaction Privilege Tax (TPT) license.
  2. STRs shall post all required information on site,as specified in this ordinance and in accordance with State law. 
  3. STRs shall register with all required information on the City site, as specified in this ordinance, i.e. owner’s emergency contact information, etc. 
  4. No STR shall advertise their property in a way that would violate the City Code. 
Additionally, this ordinance defines key terms and outlines civil penalties for owners of STRs that are in violation of any section of this ordinance.
Financial Impact:
By ensuring all short-term rentals are obtaining a Transaction Privilege Tax (TPT) license from the Arizona Department of Revenue, the City expects that its local tax revenues from STRs will rise.  STRs are required to pay the same local TPT rate as hotels (4.281%) of gross revenue from taxable activity.  

Although the ordinance will not be effective until January 1, 2021, STRs should already have TPT licenses and be remitting taxes to the Arizona Department of Revenue per existing state law.
Policy Impact:
This ordinance will help ensure that hotels and STRs are subject to the same tax treatment, as they are engaging in similar taxable business activity.  This ordinance will also help us to better understand the number of STRs operating in the community, the effects of STRs on housing supply and the hotel industry in general, which may affect future policy decisions.  The ordinance will also help STRs be operated in conformance with our land use codes that protect public health and welfare. 
Connection to PBB Key Community Priorities/Objectives & Regional Plan:
Priority Based Budget Key Community Priorities and Objectives

Safe & Healthy Community: Ensure the built environment is safe through the use of consistent standards, rules and regulations, and land use practices. 

Livable Community: Achieve a well maintained community through comprehensive and equitable code compliance. 
Has There Been Previous Council Decision on This:
In 2016 the Arizona Legislature preempted municipalities from taking action that would prohibit STRs (SB 1350).

In 2019 the Arizona Legislature passed HB 2762 allowing municipalities to require specific information as it relates to STRs, and gave some additional flexibility in how municipalities could regulate these properties.

On September 15, 2020, Council approved a contract with LodgingRev for software that would assist the City track, monitor, and enforce STRs. This software also allows STR owners the ability to register with the City free of charge. This software will also greatly assist our Code Compliance staff with enforcement related to this ordinance. 

It was estimated in September 2020 that there are between 1300 - 1700 unique short-term rental properties operating within the City of Flagstaff municipal boundary.
Ord. 2020-27


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