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hotel occupancy tax

Senate passes AirBnB bill

As you know, I don’t care for this.

A Senate bill that would limit local government control of short-term home rentals in Texas passed out of the upper chamber Tuesday in a 21-9 vote.

Under Senate Bill 451 by state Sen. Kelly Hancock, R-North Richland Hills, Texas cities would be prevented from banning short-term rentals and their ability to write ordinances restricting the practice would be narrowed. Austin, San Antonio and Fort Worth are among the cities that have enacted such restrictions.

Critics of the bill said it would lower property values and allow Texans to rent houses to people who might host disruptive parties and increase traffic in their neighborhoods.

Proponents say SB 451 would protect homeowners from strict local laws that infringe on property rights while still allowing a limited amount of local regulation, such as prohibitions on short-term renters housing sex offenders or selling alcohol or illegal drugs to guests.

“The bottom line is you cannot ban short-term rentals,” Hancock said Tuesday.

Among local policies that would be limited in scope by Hancock’s bill: a Fort Worth regulation that requires property owners to obtain a bed-and-breakfast permit only available to homes built before 1993 and an ordinance in Austin that has capped the number of short-term rentals with no live-in owners.

During Tuesday’s debate, several legislators expressed concerns about the effects the measure would have on their communities. State Sen. José Menendez, D-San Antonio, even proposed a failed amendment to exempt his home district from the bill.

The lower chamber’s companion to Hancock’s legislation, House Bill 2551 by state Rep. Tan Parker, R-Flower Mound, was heard in the House Urban Affairs Committee on Tuesday afternoon. Testimony was divided over whether short-term rentals would be better regulated at the local or state level.

See here for the background. The reservations I expressed then remain with me now. At the very least, if the Legislature is going to insist on taking away cities’ autonomy on this matter, they could include a provision to require collection and remittance of state hotel taxes, so individual cities don’t have to negotiate their own deal with AirBnB as Houston just did. A little consistency would be nice, though apparently too much to ask. The House bill was left pending in committee, so this is may be as far as this effort goes this time. If so, you can be sure it will be back in 2019.

AirBnB tax collection deal

Seems reasonable.

[AirBnB] announced Wednesday it will begin collecting and remitting the 6 percent state hotel occupancy tax May 1. The decision followed more than a year of talks, said Laura Spanjian, Airbnb’s Texas public policy manager. Airbnb has similar tax-collection agreements with 25-plus states.

“These agreements are a meaningful revenue boost for communities, and we hope to reach similar agreements with cities around Texas soon,” Spanjian said by email.

Houston homeowners who rent out their properties are supposed to pay a total of 17 percent in occupancy taxes, 7 percent of which goes to Houston First, which oversees hotel tax collection for the city.

Yet of the 7,200 active hosts Airbnb says operate in the area, only 70 have registered with the city as taxpaying hosts, said Jonathan Newport, Houston First’s director of government affairs.

[…]

Under the new agreement, the state portion of the hotel-occupancy taxes will be guaranteed. Guests will be charged the correct amount on their bill for a stay of 29 nights or less, and Airbnb will then remit the collected taxes to the state.

“The sharing economy plays an important role in our state’s overall fiscal health,” Texas Comptroller Glenn Hegar said in a statement. “We applaud Airbnb for agreeing to collect state hotel occupancy taxes, as all lodging facilities in Texas are required to do.”

See here, here, and here for some background. This is a positive step, as it gets some revenue that otherwise would have been lost for the city while giving AirBnB some regulatory certainty. People want to use AirBnB, and as seems to be the case with everything these days there’s a bill in the Legislature to override local restrictions on it, so this is another level on which it makes sense for the city to reach a deal with them. Hope it works as intended for everyone.

Restricting restrictions on AirBnB

I have issues with this.

A legislative proposal that would limit local government control of short-term home rentals in Texas has reawakened a fight over regulations that has already played out in cities across the state.

Senate Bill 451 by state Sen. Kelly Hancock, R- North Richland Hills, would prevent Texas cities from banning or restricting short-term rentals. Austin, San Antonio and Fort Worth are among the cities that have enacted such restrictions.

Critics of the bill said it would lower property values and allow Texans to rent houses to people who might host disruptive parties and increase traffic in their neighborhoods.

One of those critics, David King, president of the Austin Neighborhoods Council, said houses with no live-in residents are sometimes rented to rowdy visitors. Neighborhood disapproval of these houses led cities like Austin to enact local ordinances that limit their presence.

However, bill proponents say SB 451 would protect homeowners from strict local laws that infringe on property rights while still allowing local regulations that limit or prohibit short-term rentals. Under the bill, local governments could still prohibit short-term renters from housing sex offenders or selling alcohol or illegal drugs to guests.

Through an aide, Hancock declined to comment on his bill. State Sen. Dawn Buckingham, R-Lakeway, the bill’s co-author, said it shields Texas property owners from governmental overreach.

“Private property rights in Texas are sacred,” she said.

Here’s SB451. I can understand the logic behind wanting to have a statewide framework for short-term rentals, in the same way I can understand it for transportation network companies. There’s a legitimate interest in providing something like a uniform regulatory environment for them. That said, hotels and traditional bed and breakfast places are generally subject to local zoning laws, land use requirements, and deed restrictions. Allowing the AirBnBs of the world to skirt those rules sounds more like an unfair advantage than a level playing field to me. In some cities, the proliferation of AirBnB properties has led to concerns about housing shortages in some neighborhoods. Neighborhood issues and quality of life are the province of local government, and as with many things this session I have concerns about the state stepping in to override their authority.

One more point, which I suppose was outside the scope of this story: Lots of cities levy hotel taxes, for a variety of purposes. AirBnB puts the responsibility for following local codes and collecting such taxes on the hosts. Here’s their advice for Houston hosts – you’re gonna have to do some reading to know what you’re supposed to do. The long and short of it is that the growth of AirBnB means that cities and states have been missing out on potential tax revenue, which in some cases is a substantial amount. To their credit, AirBnB is beginning to work with cities on this. The text of SB451 doesn’t address this at all. If the state wants to mandate a uniform regulatory code for short-term rentals, then the least the state can do is provide a uniform mechanism for collecting hotel occupancy taxes as well.

Another look at AirBnB

Interesting.

The hotel industry is starting to object. On Wednesday, a report funded by a national trade group claimed some Airbnb hosts function illegally and operate essentially as full-time hotels without the same health and safety oversight. It also says they can reduce the number of affordable options for full-time renters.

The home-rental site has stirred tensions in cities such as New York City, San Francisco, Paris and Barcelona. Austin has created new short-term rental regulations as a result.

In Houston, which does not have similar regulations, the city’s primary tourism agency is working with Airbnb and similar operators about taxes.

A city of Houston spokesman said Wednesday that the state is responsible for health and safety regulations that affect short-term rentals. But a spokesman for the Texas Department of State Health Services, which regulates hotels and bed-and-breakfast operators, said it does not have a role in Airbnb or short-term rentals.

Houston is the state’s second-largest Airbnb market, behind Austin, and officials are preparing for an increase in tourism around the 2017 Super Bowl. It was one of a dozen large U.S. cities included in the American Hotel & Lodging Association study released Wednesday by Pennsylvania State University’s School of Hospitality Management. Researchers tracked Airbnb data from a 13-month period.

“This study shows an explosion in activity among multi-unit hosts and the rise of full-time operators in each of the 12 markets we analyzed. Further, operators renting out three or more units represent a disproportionate share of revenue with only 7 percent driving more than $325 million in the period studied,” said John O’Neill, the Penn State professor who directed the research and is director of the school’s Center for Hospitality Real Estate Strategy.

The study found that nearly 30 percent of the revenue generated from hosts comes from people operating as full-time landlords, or 360 days a year. Individuals or entities renting out two or more residential properties on Airbnb account for 17 percent of hosts and drive nearly 40 percent of the revenue in those markets, according to the study.

The report found that in Houston there are 30 full-time operators who rent out their space for at least 360 days a year, generating $3 million in revenue during the 13-month period studied. In all, 956 hosts generated a total of $11 million in revenue, the report said.

It found 83 hosts operating three or more properties and 82 others with two units.

A copy of that report is here. AirBnB has disputed its findings and released its own report about its potential tax revenue for cities. I have no judgment about who is right or wrong in their facts and figures, I’m more interested in how cities are going to react to AirBnB, which I presume they’re going to have to do sooner or later. So far it has not been on the radar in Houston, but it has been in Austin and may be in San Antonio and elsewhere. I’ll be a little surprised if we see AirBnB regulation on the Council agenda in the near future, but if there’s any indication that it’s negatively affecting hotel tax revenue that could change.

BP settlement cash

Nice.

BagOfMoney

The city of Houston, Harris County and Metro netted $23 million in compensation from BP for revenue they could not collect in the wake of the company’s 2010 Gulf oil spill, officials announced Thursday.

Houston will pocket about $12.2 million from the costliest environmental lawsuit in U.S. history to cover hotel and sales tax shortfalls. The Metropolitan Transit Authority will receive more than $9.2 million for lost sales tax revenue, and Harris County will get $2.1 million for lost hotel occupancy tax revenues, officials announced in a joint statement.

However, expenses for the case and fees for two outside lawyers who represented the city, county and Metro will carve off nearly 40 percent of those totals.

Nearby communities and government entities, including the city of Galveston, Jefferson County, the city of Beaumont, and Orange Port Authority also are among the 511 entities that said the spill caused an economic shortfall.

The payouts are part of the $18.7 billion that BP agreed to pay earlier this month for damages and penalties resulting from the Deepwater Horizon spill – the worst environmental disaster in U.S. history.

[…]

Houston Mayor Annise Parker and Harris County Commissioners Steve Radack and Jack Morman said they were satisfied with the settlement. Commissioners Court has not yet determined how the county will split the money.

“Frankly, I wish we would have gotten more, but certainly it was a worthwhile lawsuit,” Radack said.

Several commissioners received a total of 1,700 identical emails from BP employees, via a server in United Arab Emirates, urging them not to pursue legal action against the company, according to Soard at the County Attorney’s office.

County Judge Ed Emmett, who voted in Commissioners Court against seeking damages, said, “I thought it was a stretch to say that we lost so much revenue because people didn’t rent hotel rooms here because of the BP spill.”

“Am I glad the county won? Sure. Would we have been part of the lawsuit if it had been just up to me? Probably not.”

He said he was disappointed the county would only to realize $1.3 million after the lawyers took their cut. Commissioner R. Jack Cagle had also voted against entering the lawsuit, in his case because he thought the county attorney could handle the case.

As to whether it was appropriate to seek damages, Janice Evans, spokeswoman for the mayor, said, “We raised the same exact issues as more than 500 other governmental entities and all parties have agreed to this, as has the court, so we would not characterize it as opportunist.”

Whether the amount that these three entities will receive is “enough” is not one I can answer, nor can I answer it for the 500 others involved in the litigation, not to mention BP itself. It’s something, and I’m quite sure it will be put to good use.

Mayoral candidate forum season is underway

They talk about the arts.

Not exactly

Houston’s mayoral candidates were full of praise for the city’s arts scene Wednesday, when they appeared at a forum together for the first time, though most said they would not support raising taxes or allocating new city funds to support arts and culture.

The forum hosted by four city arts groups – Houston Arts Alliance, Houston Museum District, Theater District Houston and Miller Outdoor Theatre – featured seven of the candidates vying to replace term-limited Mayor Annise Parker and kicks off a series of similar interest-specific events leading up to November’s election.

The relatively conflict free event at the Asia Society Texas Center drew a standing room only crowd. It opened with statements from each of the candidates, who then went on to answer three arts and culture-related questions.

The first addressed the city’s recently implemented cap on arts funding from hotel occupancy tax revenues, about 19 percent of which are set aside to fund city arts organizations. Two years ago, City Council passed an ordinance capping the city’s arts and culture spending through this revenue stream, prompting criticism from some of the grantees.

Four of the seven candidates – former congressman and City Council member Chris Bell, former mayor of Kemah Bill King, businessman Marty McVey and state Rep. Sylvester Turner – said they do not support the cap. The other three – City Council member Stephen Costello, former Harris County Sheriff Adrian Garcia and 2013 mayoral runner-up Ben Hall – did not come out directly in favor of the limit but said they would want to further review it once in office.

The second question addressed whether the candidates would support additional funding for arts education, with the final moderator-posed question touching on whether the candidates would see through Parker’s cultural plan. It is currently being created and is intended to guide Houston’s arts and cultural development in the coming decades.

CultureMap filled in the third question.

While much of the evening was taken up with policy wonk questions about a cap on the Houston Hotel Occupancy Tax (aka the HOT tax), which funds arts projects around the city, the best — and most humanizing question — came from an audience member, who asked, “Who is your favorite artist and why?” You could almost see the wheels turning in each candidate’s head as he scrambled to come up with an unscripted answer.

First up was former Kemah mayor Bill King, who lamely listed Van Gogh, whom he first learned about from his history teacher many years ago. Businessman Marty McVey picked the 13th century poet Rumi for the “great solace” his work provides, which drew applause of one audience member.

State Rep. Sylvester Turner was the first to turn the discussion to Houston artists — John Biggers and Michelle Barnes are among his favorites, and the other candidates quickly followed his lead, with Bell listing Lamar Briggs, Houston City Council member Stephen Costello mentioning Mark Foyle, muralist Ashley Winn and Justin Garcia, and former sheriff Adrian Garcia picking his daughter along with Project Row Houses founder Rick Lowe.

Attorney Ben Hall had the most unconventional answer — he’s mad about Surrealists M.C. Escher and Salvador Dali. “Read into that what you may,” he said cryptically.

I’d have gone with Beans Barton myself, though I have to admit that MC Escher is a fine answer if one doesn’t care about local pandering. Nancy Sims and Texas Leftist also reported on this forum.

Next, they talked about the budget.

Houston mayoral hopefuls swapped plans to shore up the city’s finances at a forum Thursday, pledging everything from pension reform to scrapping the city’s crime lab.

The event drew little in the way of political fireworks, with the rival candidates largely sticking to their own talking points at the University of Houston student center. More than 200 people were in attendance.

The forum was hosted by SPARC Growth Houston, a coalition of economic development groups that encircle the downtown core SPARC representatives asked six of the candidates jockeying to replace term-limited Annise Parker four questions, giving them 90 seconds to respond.

The seventh candidate, Ben Hall, the mayoral runner-up in 2013, was not present Thursday.

[…]

The questions from SPARC largely focused on how the candidates would spur economic development in neighborhoods to the north, east and south of downtown. The first question, however, broached how the candidates would curb the city’s looming budget deficit and drew more specific answers.

Looks like the candidate for people who thinks the revenue cap is stupid is Chris Bell, with Sylvester Turner the runnerup. There’s another forum this morning at Talento Bilingue in the East End to focus on labor and community issues, and there will be many many more after that. Find one that appeals to you and go hear what the candidates have to say for themselves. PDiddie has more.

AirBnB in Texas

The Rivard Report offers a useful overview of this growing service.

With success comes regulation and Airbnb, the wildly popular “sharing economy” website that allows users to rent out portions of their home to adventuresome travelers, has had more than its share of success. Recently valued at $13 billion, the company has more than 340 listings in San Antonio alone.

(Read more about local Airbnb operation in Part One of this series: The Rise of Airbnb in San Antonio.)

Airbnb’s success hasn’t escaped the notice of government officials, in Texas and elsewhere. Concerns about health, safety, and taxation have led some cities to begin efforts to regulate residential rentals.

Barcelona, New Orleans, San Francisco, and Malibu have conducted investigations into violations of zoning laws. Amsterdam now collects hotel tax on Airbnbs.

[…]

In 2014, Austin introduced an ordinance that requires short-term rental owners to obtain a license from the city. There is a $285 application fee, plus an annual renewal fee, and owners must submit proof of property insurance and payment of the city’s Hotel Occupancy Tax. They also must maintain a Certificate of Occupancy or proof of a certified inspection. The city intends to limit the number of homes that can be rented in a given building or neighborhood, and has placed a cap on licenses for properties not occupied by the owner.

The Airbnb website offers guidance on existing city regulations nationwide, including those in Austin.

Changes are coming to Texas beyond Austin. Cassandra Matej, executive director of the San Antonio Convention and Visitors Bureau, said that the Bureau is, of course, aware of Airbnb.

“We support anything that makes the San Antonio vacation experience safe and unforgettable,” she said, acknowledging that for some of the millions of visitors to the city each year, “that might mean researching alternative lodging, within legal boundaries.”

That final clause is a significant one. Legal boundaries may be changing in the near future. Scott Joslove, President and CEO of the Texas Hotel and Lodging Association, said his organization is not concerned with people who rent out rooms in their primary residence, but does oppose those who buy or rent properties specifically for the purpose of leasing them to overnight guests. Austin’s measures should serve as a model ordinance, he said, adding that the Association is working with other major cities to introduce registration, licensing, and occupancy tax to residential rentals.

In February, Councilmember Ron Nirenberg (D8) said “public safety” must be weighed against “letting the free market work,” but health and safety concerns seem little more than a front for the issue of taxation.

To date, Airbnb rentals have not been subject to San Antonio’s 6% Hotel Occupancy Tax. Proposed legislation could change that. House Bill 1792, authored by state Rep. Drew Springer (R-Muenster), seeks to legally define and regulate residential rentals. The bill expands the definition of “commercial lodging establishment,” which already includes hotels, motels, and inns, to encompass residential short-term rental units.

The proposed legislation would “characterize and treat a residential short-term rental unit in the same manner as a hotel for purposes of consumer protection, public health and human safety, taxation, licensing, and zoning.”

That means at least some Airbnb operators in Texas would have to adhere to same regulations as hotels, including requirements for the submission of water samples, regulation of appliances, and sanitation.

The bill’s wording is vague, and might exempt individuals who only rent our rooms of their primary residence, where the host is generally present for the duration of the stay. Individuals operating free-standing Airbnb venues, however, would not be exempt.

I blogged about AirBnB in Houston last August. According to the first story in this two-part series, there are about 900 AirBnB listings in Houston. Compared to the 75,000 or so hotel rooms in the Houston area, that’s pretty small. That said, I do expect the city to address this issue sooner or later – there’s too much hotel tax revenue at stake to leave it unaddressed. I’m actually surprised that AirBnB didn’t make like Uber and Lyft and lobby the Lege for a bill more favorable to them than Rep. Springer’s. (I’m assuming the characterization of his bill, and my understanding of it, are accurate.) I still think AirBnB is more likely to be a niche player in Houston, where business travel is what brings many of our visitors here, but you never know. Anyone out there have experience using AirBnB?

Houston’s hotel occupany tax lawsuit tossed

Back in 2006, the city of San Antonio filed a lawsuit against online hotel room bookers such as Expedia and Travelocity on the grounds that they were largely avoiding their hotel occupancy tax. The city of Houston did the same the next year. Last week, Houston’s suit was dismissed.

Harris County Civil District Judge Brent Gamble this week tossed the case out of court based on arguments from the online services that include that they aren’t hotels and their fees should not be subject to hotel taxes.

[…]

City Attorney Arturo Michel said he will recommend that the city ask for a new trial and appeal the decision if that fails. He said no precise amount of tax loss was calculated, but it was in the millions, possibly more than $10 million for several years.

“This is an issue about how our ordinance reads. It’s the actual cost paid for the room that matters,” said Michel.

Jim Karen, a Dallas-based lawyer for Expedia, Hotels.com and Hotwire, said the Houston case is one of many filed around the country. He said courts have decided the issues in different ways, sometimes based on the different wording in tax ordinances and sometimes based on how the judges viewed the facts.

The case number is 200713227 – 7 if you want to view the documents on the District Clerk webpage. I have not created an account there to view documents, so I have not read the decision. The story also notes that the class action lawsuit that stemmed from the original San Antonio action has been decided in part for the cities, so it’s possible that trying again could be successful. I still think that a legislative solution might be the simpler remedy.