DEL MAR — Hoping to add $175,000 or more annually to city coffers, council members voted unanimously at the Jan. 25 meeting to expeditiously move forward with an ordinance that will expand the transient occupancy tax to include short-term vacation rentals.
The tax currently applies to stays less than 30 days in hotel rooms and time shares, but not in single-family residences or duplexes, a practice that violates zoning laws in most areas of the city.
According to initial research by staff and the Finance Committee, there are 75 to 125 units in Del Mar that are rented approximately nine weeks a year for a conservatively low estimate of $2,500 per week.
City Planner Adam Birnbaum said the original revenue estimate of $175,000, based on 75 units, is likely on the low side because it was calculated using the city’s previous TOT, which was recently increased by 1 percent to 11.5 percent.
“I’m very fond of this proposal and I’d like to keep it moving forward,” Councilman Don Mosier said, adding that he felt the estimates presented were extremely low. He said he recently conducted a search and found about 100 short-term units in the city with weekly rents that ranged from $995 to $18,000.
“All those numbers suggest that this plan is quite conservative,” he said.
Del Mar is currently the only North County coastal city that does not have an ordinance regulating and collecting TOT for short-term rentals. D’Marie Simon, a Finance Committee member, said cities that have implemented such ordinances report no problems, however, they feel they aren’t doing the best job they can to collect the tax from individual property owners.
While Mayor Richard Earnest agreed it may be difficult for most cities to monitor and enforce the regulations, he said Del Mar has an advantage as a small city. “It’s much easier to count noses,” he said.
No one spoke during the public comment period, but four residents sent e-mails — two supported the plan and two opposed it.
Because it is a tax, voter approval is required. A draft ordinance is expected to be introduced at the Feb. 8 meeting. A ballot initiative, which will cost the city about $7,000, must be ready by mid-March to be included in the June election. Staff members said they didn’t anticipate any legal or timing issues that would prevent them from meeting those deadlines.
The law, which would go into effect 60 days after it passes, will require homeowners to obtain a permit and register their properties as short-term rentals. A business license will also be required. Fees collected will help defer administrative costs. The new law will also specify where in the city short-term rentals will be allowed.
Mosier wanted to ensure there was minimal negative impact on residents who depend on short-term rental income. Because the TOT doesn’t apply to stays longer than 30 days, properties rented for the entire Del Mar race season will be exempt.
The Finance Committee originally sought to capture additional race track rentals but learned that was not an option as it is governed at the state level.
The tax, which will be collected with the rental fee by the agency or owner, is paid by the renter, not the property owner.
In addition to raising additional money to pay for city services, Councilman Mark Filanc said implementing the tax is also a matter of fairness.
“Our hotels are subject to the transient occupancy tax and they’re in direct competition with these rentals,” Filanc said. “When you start talking about the costs … it’s driving people into those rentals and that’s really kind of unfair to the hotels because they are paying the tax.
“I think it’s appropriate that we keep all of our businesses in town on a level playing field. I think it’d be unfair to just ignore this, bury our head in the sand and let it continue happening.”