TO: Mayor and City Council
THROUGH: Keith Stahley, City Manager
FROM: Dan Atchison, City Attorney
SUBJECT:
title
Second Reading of Ordinance Bill No. 13-24 to amend SRC chapter 38 to modify the definition of “transient lodging” to exclude short term rentals and accessory short term rentals from the Tourism Promotion Area fee.
Ward(s): All Wards
Councilor(s): All Councilors
Neighborhood(s): All Neighborhoods
Result Area(s): Strong and Diverse Economy.
end
SUMMARY:
summary
The proposal would amend the definition of “transient lodging” to exclude short term rentals and accessory short term rentals from the Tourism Promotion Area fee.
end
ISSUE:
Shall City Council pass Ordinance Bill No. 13-24?
RECOMMENDATION:
recommendation
Pass Ordinance Bill No. 13-24.
body
FACTS AND FINDINGS:
The Tourism Promotion Area (TPA) was enacted by City Council in 2019 at the request of Travel Salem and Salem Area Lodging Association. The TPA imposes a 2% fee on stays of transient lodging within Salem. Approximately 95% of TPA funds are allocated by the City to Travel Salem, the City’s Destination Marketing Organization, to be used exclusively for programs that promote marketing efforts, overnight tourism and improve the lodging business environment in Salem. Up to 5% is retained by the City of Salem to offset administrative costs.
The TPA must be renewed every five years and a public hearing on the renewal is set for December 9, 2024. The TPA may be renewed unless more than 33% of the operators who will be subject to the TPA object to its renewal.
The TPA currently defines “transient lodging” to include not only hotels and motels, but short term and accessory short term (“short term”) rentals and intermediaries, such as Airbnb, Expedia, and other booking agents. Under the requirements for renewal, if more than 33% of transient lodging operators in the city object to renewal, the TPA must be dissolved.
Travel Salem has requested that the Code be amended so that operators of short term rentals be excluded from the TPA, meaning they will not be required to collect or remit the 2% fee, nor will they be eligible to object to renewal of the TPA.
While operators of short term rentals are currently subject to the TPA, the City has not collected the TPA fee from the operators and some intermediaries, such as Airbnb, have refused to collect it on their behalf unless the operators give them express permission to do so. Licensed operators of short term rentals are currently paying the Transient Occupancy Tax (TOT) and intermediaries are collecting it and remitting it to the City pursuant to an agreement with the City.
Currently there are 20 licensed short term rental operators in the city, however, staff believes there are more short term rentals operating without a license. Staff is working to implement a software tool that will allow the City to better identify short term rental operators in the City and ensure that those operators are licensed with the City and paying the applicable Transient Occupancy Tax. Once that software tool is implemented, the City may reevaluate whether to amend the Code to include short term rental operators in the TPA.
Travel Salem submitted testimony in support of the code amendment for first reading on October 14th. Travel Salem indicates that its was “not the original intent of the ordinance” to allow short term rental hosts (aka operators) the ability to vote on the creation or renewal of TPA. Further that it is inequitable to allow the owner of a single unit of transient lodging to have the same weight as a 100-room hotel when objecting to the renewal of the TPA. The language of the original ordinance, reflected in SRC chapter 38 is clear that objections from all “operators” as defined in the chapter are considered when creating or extending the TPA. Individuals who operate short term rentals, hotels and motels, and intermediaries like Expedia or Airbnb are all defined as operators under the current code. Therefore, the proposed amendment is necessary to exclude short-term rental operators and their intermediaries from the TPA.
Travel Salem also indicates the proposed amendment is a short term solution, and that Travel Salem will seek to work with the City make short term rental operators and their intermediaries, such as Airbnb subject to the TPA in the future. Staff will work with Travel Salem on a potential long term solution such as giving operators proportional weight based on the number of units when considering objections to the TPA. However, if code is amended to make operators or their intermediaries subject to the fee, where before they were not, it will be necessary to allow the people who will be subject to the fee to object in the same manner as the creation or renewal of the TPA.
BACKGROUND:
The TPA was passed by City Council in 2019 after a public hearing. Per State statute, the TPA operates as an Economic Improvement District (EID) and must be renewed every five years. A public hearing on the TPA renewal is set for December 9, 2024.
Dan Atchison
City Attorney
Attachments:
1. Ordinance Bill No. 13-24.
2. Exhibit A to Ordinance Bill No. 13-24