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Contractor to enforce Petaluma short-term rental rules

After nearly two years of struggling to rein in residents who flout Petaluma’s short-term rental regulations, and missing out on tens of thousands of dollars in taxes, the city has hired an outside firm to identify and crack down on those non-complaint hosts.

Rules intended to bring vacation rental operators out of the shadows to obtain business and short-term rental permits and turn over 10 percent of their revenues to the city for transient occupancy taxes went into effect Jan. 1, 2016. Though they have largely been ignored, city officials are hopeful that hiring San Francisco-based Host Compliance will help turn things around.

There are 220 active listings in the city on the Airbnb, according to a spokeswoman, but the city only has 23 active short-term rental permits on file, according to Development Services Coordinator Ellen McDowell. The number of Airbnb listings may have been inflated by residents who participated in a temporary program to open their homes for free to shelter victims from October’s fire storm in Sonoma County, spokeswoman Molly Weedn said. But, the city still requires those hosts to obtain permits and pay taxes, McDowell said.

The planning department has issued a total of 30 permits since the program’s inception and in December 2016, city estimates indicated that 80 percent of the city’s hosts weren’t complying. Since the program kicked off, the city has collected $67,340 in bed taxes, according to Principal Financial Analyst Corey Garberolio. In contrast, city calculations showed that 100 hosts renting for an average of 90 days at $150 a night would net the city around $162,000 annually.

The city, otherwise bleeding financially, has collected a total of $10,265 for short-term rental permit fees. Those $348.80 permits must be renewed annually, and if 100 hosts complied with the rules, the city would collect $34,880 each year.

Enforcement has been handled by Joe Garcia, the city’s single code enforcement officer, on a compliant-driven basis. There have been five such complaints since May 2016, Garcia said.

Economic Development Manager Ingrid Alverde said Host Compliance will provide new tools to help resolve the issue.

“I think really what’s happened is there’s been sort of new technologies and approaches built for cities since the programs were implemented,” she said. “Cities have great programs, but not a lot of tools for enforcement.”

The recently-inked year-long $6,885 contract with the company includes web-based services to compile addresses of all rentals in the city listed on more than 25 websites. Reports will be delivered to the city weekly and the company will send two notices outlining compliance requirements to each operator. After notices are distributed by Host Compliance, it will be up to the city to enforce those rules should residents continue to shirk the mandates.

The company’s founder and CEO, Ulrik Binzer, estimates a 75 to 85 percent success rate for the program in the city. His company operates in about 85 municipalities, including major cities like Denver, Los Angeles and Oakland.

Binzer, a North Bay resident, was involved with shaping short-term rental policies in the Marin County town of Tiburon. He said short-term rental compliance has turned into a world-wide issue.

“It’s just a typical thing whenever there’s a new industry, at the end of the day, things change and everyone has to adapt,” he said. “Cities maybe haven’t been as quick at adapting and they have catch up a little bit.”

Petaluma could also have the option of seeking back taxes from those hosts, though that discussion hasn’t yet unfolded, City Attorney Eric Danly said.

Meanwhile, it’s been a year since the city attorney’s office issued a legislative subpoena to vacation rental websites Airbnb and VRBO seeking information to identify and contact Petaluma hosts. The subpoena sought addresses and contact information for hosts and renters, as well as the dates a property was rented and the rates charged for each transaction since Oct. 1, 2015. Though the city asked for that information by January, the requests have yet to be fulfilled, Danly said.

“We want to go in parallel tracks and not abandon the subpoena efforts,” he said. “We’ll see how it goes with the (Host Compliance) service and hopefully it addresses issues and will be a good way with limited staff to get much more compliance.”

The city will also explore an option to strike a deal with Airbnb to collect transient occupancy tax on behalf of the city. Sonoma County established a similar agreement last year.

The short-term rental program is set to expire in December 2018 unless the council takes up the issue first, a discussion that Mayor David Glass said is likely to happen. He said enacting regulations was not intended to be a source of revenue for the city, but rather a way to preserve the quality of life in the city’s residential neighborhoods.

“I anticipate some changes when it comes back. I can’t imagine that we did everything just perfectly,” he said. “I don’t know what those are, but I’m sure there will be a good, comprehensive staff report … and we’ll see where we go.”