Assembly Committees Hold Hearing on Hotel Taxes and Home-Sharing

This week, Assembly Members Ting and Maienschein, chairmen of the Assembly Revenue and Taxation and Assembly Local Government Committees, respectively, convened an informational hearing on the application and collection of Transient Occupancy Taxes (TOT) and the impact of the emerging home-sharing phenomenon. As part of what’s often called the “sharing economy,” web-based vacation rental businesses like Airbnb and HomeAway (which owns VRBO (Vacation Rental By Owner)) connect tourists with home- and apartment-owners who are willing to rent out all or a part of their property. As widely reported by the press, the proliferation of rentals in certain communities in California has led to local efforts to regulate and tax these businesses no differently than hotels.

Representatives from Airbnb and HomeAway shared with the committee their interest in working with local agencies to educate their users as to applicable local regulations. In San Francisco and San Jose, Airbnb has entered into a “voluntary collection agreement” where hosts are notified of the city’s requirements and Airbnb acts as a collector of transient occupancy taxes. HomeAway, on the other hand, asserts that it is merely an advertising platform for hosts and renters and is not appropriately situated to collect applicable taxes. It does, however, provide its hosts with information about local regulations.

The committees also heard from the cities of Auburn, San Francisco, and West Hollywood, each of which has embarked upon a regulatory process to address issues raised by growing use of home-sharing. San Francisco perhaps has the most robust regulatory framework, requiring that hosts register with the city, demonstrate that they are permanent residents of the city, and maintain adequate insurance.

Members of the committee were clearly concerned about the rising use of home-sharing in California and its impacts on local communities, including land use, housing, and revenue impacts. Expect a vigorous legislative debate in the coming months on this issue.

For additional information, see the research papers for the hearing by committee staff and the Legislative Analyst’s Office.

Disincorporation

AB 851 (Mayes) – Support in Concept

Assembly Member Chad Mayes has introduced AB 851, which seeks to update the statutes associated with municipal disincorporation. These statutes have not been updated since before the passage of Proposition 13, when it was anticipated that the county would have the ability to raise the local tax rate to cover any costs associated with the transition from city to county control, including paying off the city’s debts. Since local agencies no longer have the ability to raise the property tax rate to cover these costs, AB 851 seeks to update the statutes associated with the LAFCO process of developing the terms and conditions of a disincorporation.

The California Association of Local Agency Formation Commissions (CALAFCO) is sponsoring AB 851 and has convened a group of stakeholders including CSAC, RCRC, UCC, the League of California Cities, the California Special Districts Association, and others to discuss the proposed bill. This dialogue has resulted in some potential amendments, including an alternative approach to addressing land use issues in the disincorporated territory.

While it is likely that the bill will continue to be vetted and amended during the legislative process, CSAC agrees that it is important to update the codes to reflect current constitutional constraints, particularly in light of the potential for disincorporations in the future. Counties must have relevant information prior to making decisions about how to continue to provide and finance critical public services in disincorporated communities.

Counties are encouraged to review AB 851 and share comments and concerns with CSAC. AB 851 is awaiting a scheduled hearing in the Assembly Local Government Committee.