AgdaPkt 2015-10-26 Study and Joint SA PFA

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8.A. - Page 1 REPORT To the Honorable Mayor and City Council From the City Manager October 26, 2015 SUBJECT Negotiate agreement with AirBNB to collect and remit Transit Occupancy Tax RECOMMENDATION By motion direct staff to negotiate an agreement with AirBNB to collect and remit Transit Occupancy Tax and dedicate the funds received to the affordable housing. BACKGROUND The City of Redwood City collects a Transit Occupancy Tax for transient related residential uses. Historically, the term "transient resident" was synonymous with "hotel guest". However, the short-term rental market has changed in recent years with the rise of the "sharing economy" and the terms no longer perfectly align. The key phrases within the Municipal Code are as follows: • Transient: Any individual who exercises occupancy or is, entitled to occupancy of a specific room by reason of concession, permit, right of access, license or other agreement for a period of thirty (30) consecutive calendar days or less, counting portions of calendar days as full days. • For the privilege of occupancy in any hotel, each transient is subject to and shall pay a tax in the amount of twelve percent (12%) of the rent charged by the operator. The language found within the Redwood City Municipal Code is similar to other codes throughout the State of California. The language has worked well for decades, as the hotel market remained unchanged for decades. However, as noted above, the short term rental market has recently undergone a substantial change with the rising popularity of several short-term rental companies. The companies have created platforms (apps, websites, etc.) that allow property owners to rent rooms, or entire homes, on a daily, weekly or monthly basis. The most well-known short-term rental platform is AirBNB. Although it has traditionally been the property or business owners who have collected and remitted TOT to cities, AirBNB has recently started entering into agreements with cities to collect and remit TOT on behalf of property owners. This allows cities to interact with one organization, rather than collecting funds from hundreds of individual property owners.