The latest amendments to the 12-page vacation rental ordinance the Hot Springs Board of Directors will consider tonight make several concessions short-term rental owners requested in October.
Changes on the agenda of tonight's business meeting include a reduction in the business license fee, lowering the annual fee from $100 per authorized occupant to $50. An STR can have a maximum overnight occupancy of two people per bedroom plus two, meaning a three-bedroom STR is authorized for eight overnight occupants and is assessed a $400 annual fee under one of three amendments the board will consider.
The fee was $50 per authorized occupant under the ordinance adopted in March that established the fee and prohibited STRs from operating in the city without a business license. An ordinance adopted in October doubled the fee, prompting STR owners to question why the fee wasn't more aligned with the $4 per bed hotels pay under the city code's business license and occupation tax schedule.
The group of STR owners who convened in October said the annual fee was considerably higher than what other cities in Arkansas charged and questioned how the fee will advance the regulatory scheme's stated goals of protecting public health, welfare and safety, minimizing adverse impacts on residential areas and preserving the availability of affordable housing stock.
Another change the board will consider tonight makes the city responsible for annual inspections required to obtain and renew an STR business license. The city was responsible under the regulatory ordinance adopted in May, but an amendment adopted in October required owners to hire a registered home inspector in good standing with the Arkansas Home Inspector Registration Board.
STR owners said the annual inspections for compliance with building and fire codes, coupled with the annual business tax, were cost-prohibitive for many STR providers. Several said their rental income only covers their overhead costs, which until a few months ago didn't include the annual business tax and inspection fees.
"They have been undergoing some additional training, so all of the inspectors in the planning and development office will be available to do those as well as the fire department," City Attorney Brian Albright said of the city reassuming responsibility for inspections. "We will activate the fire department to be able to assist in those inspections.
"We discovered the (home inspector) fees were turning out to be more than we were expecting. We took that away and also took away the requirement to get a zoning certification letter. That's an additional $90 fee. Since we're going to be doing the inspections ourselves, we can check the zoning ourselves. It's simpler, less expensive and more efficient."
Albright told the board last week that the city will charge a $50 inspection fee, the same fee charged for similar inspections conducted by the fire department or planning staff. The city recently made available a nine-page STR home inspection form on the city website.
Albright said inspections have been completed for about 100 of the more than 600 STR licenses the city issued prior to the moratorium that took effect at the end of May. Those properties won't require a subsequent inspection to renew their licenses for 2022 when the application window reopens Jan. 3.
All of the active licenses expire at the end of the year. With the annual cap on STR licenses in areas zoned for residential use set at 500, licenses in residential zones could be at a premium when the city resumes accepting applications next month. STRs in horizontal property regimes, or residential buildings with individual units that can be bought and sold separately, won't count against the annual cap in residential zones.
STRs issued a license to operate in a residential zone prior to the start of the seven-month moratorium are exempted from obtaining a special use permit from the planning and development department.
"They were lawfully issued a license, so therefore they have a preexisting, nonconforming use," Albright said of the exempted STR owners.
He said the exemption will expire if active license holders let their licenses lapse.
The regulatory ordinance the board adopted in May required STR applicants in residential zones to petition the planning commission for a conditional use permit, a dispensation allowing land uses, with conditions, that aren't permitted in a zoning district.
An amendment adopted in October replaced the conditional use requirement with the special use permitting process. The shift removed the city board from the appeals process, making the Board of Adjustment and Appeals/Board of Zoning Appeals the venue for appeals of STR licenses issued in residential areas.
Planning commission action on conditional-use applications can be appealed to the city board, which acts as a quasi-judicial body when it hears conditional use appeals. Acting in that capacity, the board is prohibited from soliciting or receiving information from constituents outside of the appeals hearing.
Having a conversation with a constituent about a conditional use appeal would force a director to recuse from the vote. The city has said the inability of directors to talk to the people they were elected to represent is problematic, a scenario that could become more common if STR licenses were subjected to the conditional use process.