City May Consider Enforcing Law on Malibu’s Not-So-Secret Biz of Big Ticket Home Summer Rentals

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• Cash-Strapped Municipality Looks at All Options

BY BILL KOENEKER

One of Malibu’s cottage industries that has more to do with mansions than cottages—the widespread use of private residences as summer rentals for hefty price tags—could become one of the ways to help the City of Malibu come to grips with the reality that it has a longer wish list of things to do than it has revenue to do them.
The Malibu City Council’s Administrative and Finance Subcommittee was struggling this week to come up with its recommendations for the proposed budget for Fiscal Year 2009-2010 and providing recommendations for the full council to consider how to hand out grant money.
The subcommittee, which consists of Councilmembers Sharon Barovsky and John Sibert, met Monday morning and then again Tuesday afternoon after the Malibu Surfside News went to press.
The panel is expected to propose new ways to generate revenue by considering recommending the city collect Transient Occupancy Tax, or TOT, on short-term rent-out of private homes.
The major media have a field day reporting price tags on Malibu summer rentals of $125,000 or more a month, with the norm being more like numbers of $75,000 to $100,000 for the summer. Many of the renters are large corporations who often rent the same house on an annual basis to provide perks for their executives and their families.
Some property owners have indicated that they rent out their homes for one or two months with the income more than paying for their mortgages, taxes, annual utilities and other costs. Many say they use the rental duration as time to travel, also covering their travel costs with the revenue.
The city’s municipal code currently allows for such a tax, but Malibu has only been enforcing the TOT on hotels and motels, not on the short-term rent-out of private homes, according to a staff report prepared by the city’s Administrative Services Director Reva Feldman.
Preliminary estimates of the amount of revenue that could be generated by the collection of the tax are about $200,000, according to Feldman, but even a casual observation of the summer rental market indicates that the amount could be much higher than that.
If the council agrees to enforce the TOT on private homes when it approves the budget, property owners who use their properties for short-term rentals will be required to register with the city and obtain a transient occupancy residency certificate.
“Staff recommends adding a one-time registration fee of $25 per property to the city’s fee schedule to reflect the cost of providing this registration service,” Feldman added.
Since the tax is already on the books, it requires no new legal action. Its enforcement could prove to be lucrative given the number of summer rentals that are regularly advertised. Those ads and the numerous property columns and websites that these high-end summer rentals are often featured on could also prove to be a way to monitor homeowners who don’t seek permits if enforcement is begun.
The need to capture additional dollars for city coffers comes at a time when the municipality is experiencing a drop in revenue since last fiscal year and is projected to remain at least $1 million lower for the next fiscal year.
The subcommittee has also been charged with suggesting to the council how much money and to whom general fund grants should be given. The city received 25 grant applications totaling $605,040. The proposed budget includes just $75,000 for the general fund grant program. Last year, the city budgeted and spent $200,000 before it realized revenues would be down.
However, the A&F panel is recommending that funding for the grant fund program be increased if additional funds become available.