Santa Rosa's Interim City Manager Launched a War on Short-Term Rentals While Acting as Avenu Insights' Senior Advisor for Revenue Enhancement Solutions
Avenu Insights & Analytics was contracted with the City for revenue audit and consulting services while City Manager Jeff Kolin operated as a double agent
From May 29, 2021 to January 20, 2022, Mr. Jeff Kolin served as Interim City Manager for the City of Santa Rosa. He was previously employed as the City’s Manager from 2000-2009.
From June 2016 to August of 2023, Mr. Kolin served as a Senior Advisor for Avenu Insights & Analytics. However, he failed to report this source of income to the Fair Political Practices Commission while serving as Interim City Manager.
On November 14, 2023, Santa Rosa City Council was tasked with approving the following agenda item on the consent calendar:
It is recommended by the Finance Department that the Council, by resolution: 1) approve a First Amendment to Professional Services Agreement Number F002076A with MuniServices, LLC, now operating as Avenu Insights & Analytics, LLC, a Limited Liability Company, Centreville, Virginia to extend the term of the Agreement by two-years and to increase compensation by $853,020 for a total not to exceed amount under the contract of $1,453,020; and 2) authorize the City Manager to execute any agreement related to the vendor’s corporate name change. The purpose of this agreement is to provide revenue auditing and consulting services to the City.
The Executive Summary provided in the Staff Report stated:
The City of Santa Rosa (the City) entered into contract with MuniServices LLC on November 19, 2019, for Revenue Audit and Consulting Services. The contract for these services was for a five-year period through September 2024, with two (2) one-year renewal options. The City seeks to amend the agreement to add funds through the current term and extend for a two-year period in the amount of $853,020, for a not to exceed total of $1,453,020.
The Background segment stated:
The City established a contract with MuniServices LLC to provide Revenue Audit and Consulting Services in 2019. In 2021, MuniServices LLC changed its name to Avenu Insights & Analytics, LLC. The scope of service remained the same and included auditing local business to ensure proper remittance and compliance with sales tax, utility users (UUT) tax, and other local tax sources. In addition, Avenu/MuniServices LLC provides consulting services for property tax analysis and has assisted with cannabis tax ordinance analysis.
The Analysis segment stated:
MuniServices LLC, now Avenu/MuniServices LLC, charges fees contingent upon a percentage of revenue recovered from the audits, or by flat fee per audit, depending on the service. The additional revenue received as a result of these audits has been consistently more than the cost for the services. Over the term of the current contract, the City paid approximately $600,000 in fees, and reclaimed over $2.6 million in additional revenues.
Per their website, Avenu Insights & Analytics first partnered with Santa Rosa city leaders in 1991 with a successful run of compliance auditing, discovery, and recovery. When it came time to replace the city’s permitting and planning system in 2012, officials chose Avenu’s unique combination of customized technology and service-led solutions. By building off the needs of Santa Rosa’s citizens, city officials, and customer-first culture, Avenu continues to support the community, recovering millions of dollars in new revenue to date.
Within their portfolio, Avenu Insights specifically focuses on short-term rental monitoring, compliance and administration.
Per the City’s website:
On October 13, 2021, the City Council adopted Ordinance No. ORD 2021-011 to add Chapter 20-48, Short-Term Rentals to the Zoning Code to establish a regulatory framework for STRs.
On August 9, 2022, the City Council adopted Ordinance No. ORD-2022-008 to set a maximum number of 198 non-hosted STR Permits to be issued citywide and to clarify that enforcement penalties apply to permit holders and “operators in good standing”.
On June 20, 2023, the City Council adopted Ordinance No. ORD-2023-008 allowing a one-time 31-day grace period for Permit holders whose Permits were issued within the first year of the Ordinance and expired without a renewal application being timely submitted. The Ordinance also included language to clarify that in the event that any non-hosted Short-Term Rental Permit was issued for a property within 1,000 feet of an expired non-hosted Permit that is subsequently renewed, both STRs would be able to retain their Permits regardless of the distance between them.
On July 25, 2023, the City Council adopted Ordinance No. ORD-2023-011 to address technical changes and add new and revised definitions and policies, and to add the following amendments to the Chapter 20-48, Short-Term Rentals:
Allow Permit holders a 30-day grace period following the expiration of their Permit to submit a renewal application;
Prohibit outdoor burning at non-hosted STRs, with the exception of natural gas and propane appliances (such as BBQs, grills, heaters and fire pits);
Clarify that outdoor burning regulations do not apply to hosted STRs;
Allow a transfer of an STR Permits, under certain conditions, to a spouse or domestic partner;
Allow only one Non-Hosted STR Permit per property owner, but allow those with existing multiple STR Permits to retain and renew those Permits;
Require applicants for Hosted STR Permits to provide an affidavit verifying that the property is their principal residence;
Provide a tiered penalty schedule for violations, with one tier for minor violations and one for major violations, with a higher fine amount for major violations;
Require a fine for the first penalty for TOT/BIA violations and for operating an STR without a Permit – no warnings for these violations;
Clarify that after a third citation the Permit will be revoked and the property owner will be permanently ineligible for future consideration of a Short-Tern Rental Permit on the property that was the subject of the revocation; and
Clarify that the City will not be accepting any new Non-Hosted Short-Term Rental Permit applications, and reduce the Citywide cap on Non-Hosted Short-Term Rentals through attrition as permits are vacated or revoked.
Each of the established Ordinances went into effect while Mr. Kolin served as the Senior Advisor to Avenu Insights. Typically, advisors work with their clients over long periods of time, while consultants tend to work with their clients on a short-term basis. Because advisers usually work with companies for more extended periods of time, they often focus on a company's long-term goals and strategies as well as high-level issues.
Prior to the establishment of the initial ordinance effective October 13, 2021, the City held a public hearing regarding the short-term rentals urgency ordinance.
The background stated:
The City does not currently have formally adopted regulations addressing the rental of residential properties for a period of less than 30 calendar days (short-term rentals) as a land use separate and distinct from a residential land use. Unregulated short-term rentals have the potential to pose public safety hazards by impacting the ability of neighborhoods to safely evacuate during emergency events due to excessive parking on narrow streets. There is also a decreased ability to communicate with transient renters who may not be familiar with local warning and alert systems. Unregulated short-term rental activities have also led to increased frequency of complaints related to noise, occupancy, and large events requesting Police, Code Enforcement, and Planning staff response despite a lack of resources or a regulatory framework for enforcement.
The purpose of this ordinance is to provide a regulatory framework for short-term rentals in order to preserve the public peace, welfare, health, and safety by providing operating standards to address community compatibility, public safety threats due to wildfires and other potential emergencies requiring evacuation, limited housing stock, and the COVID-19 pandemic. The Santa Rosa City Charter authorizes the City Council to adopt an urgency ordinance if necessary to preserve the public peace, health, or safety if the ordinance contains the reasons for its urgency. An urgency ordinance requires a 5/7 Council vote and is effective immediately after adoption.
RECOMMENDATION: The Planning and Economic Development recommends that the Council adopt an urgency ordinance to amend Title 20 of the City Zoning Code to add Chapter 20-48, Short-Term Rentals, to regulate short-term rentals, defined generally as the rental of residential property for a period of less than 30 calendar days.
The Ordinance detailed the following registration requirements:
Pursuant to City Code Chapter 3-28, Transient Occupancy Tax each short-term rental shall be registered with the Tax Collector and obtain a Transient Occupancy Tax (TOT) account number. The owner must maintain records of paid Transient Occupancy Tax for three years and produce them upon request. B. Santa Rosa Tourism Business Improvement Area Assessment. Pursuant to City Code Chapter 6-56, Article IV, Santa Rosa Tourism Business Improvement Area, each short-term rental is responsible to pay Business Improvement Area assessments.
Transient Occupancy Tax (TOT), also known as a “hotel tax,” is authorized under State Revenue and Taxation Code Section 7280. The City of Santa Rosa has, by code, set the TOT for the City of Santa Rosa at 9 percent for the privilege of occupying a hotel, inn, motel, short-term (vacation) rental, bed & breakfast, or other lodging where accommodations are offered for a period of 30 days or less.
Under the Code, lodging operators in the City of Santa Rosa are required to charge this TOT of 9 percent of the rent to “transient” guests. The tax is paid by the occupant and collected by the lodging operator. The lodging operator then remits the tax to the City of Santa Rosa. Lodging operator payment for TOT must be remitted to the City on or before the last day of the month following the close of each calendar quarter.
A 3 percent City Tourism Business Improvement Area (BIA) assessment also applies to all lodging establishments, and a 2 percent Sonoma County Tourism BIA applies to most hotel/motels.
It is difficult to determine whether the ordinance was justified due to Mr. Kolin’s duality of serving two masters. As Mr. Kolin appeared to double dip into taxpayer monies, were these modifications to City regulations justified, ethical, or legal? Were these decisions fair for short-term rental owners and patrons?
“If we say we have no sin, we deceive ourselves, and the truth is not in us.” -John 1:8