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Tourism Commission wants agreement between city, short-term rental companies

Wednesday, August 14, 2019 by Chad Swiatecki

The Tourism Commission has asked City Council to change its long-held stance toward short-term rental platforms like Airbnb in favor of an agreement that would earn the city millions of dollars in new Hotel Occupancy Tax revenue each year.

At Monday’s meeting, the commission unanimously approved a recommendation to Council to reassess its negotiations with those companies, which have been in a virtual stalemate for years. At issue is the city’s demand that the platforms provide identifying information on individual short-term rental sites, so the city could enforce its licensing and tax remittance regulations on a consistent basis. The STR platform companies have resisted turning over that information and offered to hand over taxes incurred after any agreement is reached, which would in essence forgive years of eligible taxes on their part.

Recent analysis by commission members suggests the city would be due millions of dollars each year in additional hotel tax receipts levied on STR sites that currently operate without licenses. For the first quarter of 2019, which includes the robust 10-day stretch of South by Southwest, Airbnb bookings in the city are believed to have reached around $40 million, which would have produced nearly $3 million in hotel tax revenue for the city if there was an agreement in place between the two sides.

“We see the value in urging Council to negotiate and reach an agreement so we can start collecting those funds,” said Commissioner Vanessa Fuentes, who wrote the language for the recommendation.

“Every single day that goes by without an agreement, we are losing thousands of dollars from these short-term rentals that are operating within the city that are not remitting their hotel taxes. There’s a significant portion of STRs operating without a license and the amount of revenue going to the state of Texas indicates that the bulk of the business is from Austin … that was even more of an impetus to wanting to move toward action.”

Last month the city reported that 75 percent of the nearly 11,000 STR sites operating in Austin are unregistered. A memo that preceded the findings estimated it would cost the city nearly $3 million this year to consistently enforce current STR regulations, with some Council members suggesting licensing fees and fines may need to be increased to cover the enforcement expense.

Monday’s recommendation also suggested the city push the platforms to provide ZIP code-level data on providers, which would help enforce the moratorium on non-owner-occupied STRs operating in residential neighborhoods. It also suggested that licensed operators be required to post their city license number on their online listings, which would also help the city identify those sites operating without a license.

Testimony at the meeting from a licensed STR operator brought to light the fact that by complying with the city’s regulations and handing over hotel taxes, licensed sites are 11 percent less profitable than sites without a license.

Because of ongoing legal challenges by Airbnb to the city’s Type 2 STR moratorium, commission members said it could be difficult to have meaningful negotiations between the two sides.

Another factor in any talks is the prospect that cities such as Plano and Houston reaching agreements with one or more STR platforms could pave the way for the state Legislature to enact statewide laws in 2021 that could limit cities’ ability to regulate those businesses.

“The conversation needs to be ongoing. Everybody wants to see more transparency from the providers, but also perhaps not at the expense of taxpayers and those that are operating within the law,” Chair Catlin Whitington said.

“We understand (the platforms) are open to conversations on their terms, which puts everyone in a bad spot for negotiation. It should be a negotiation and a dialogue, and not an absolute, because any business that sees the value of Austin as a market for the success of their business model should understand that having that dialogue is important to maintaining some relations with the regulatory body.”

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