DISCUSSION/ANALYSIS:
As part of the effort to establish new regulations for STRs, staff recommends that the City Council consider revisions to the TOT Regulations to impose TOT on STRs and make other clarifying administrative edits. Additional revisions to the TOT Regulations are necessary to modernize the application of TOT regulations consistent with current practices. A ballot measure would seek approval from the qualified voters of Del Mar to amend the TOT Ordinance by expanding the tax to apply to guests staying in STRs and in lodging uses with less than three units. The proposed revisions to the TOT Ordinance are included as Attachment A. Since this potential measure would propose a tax, the Del Mar electorate must approve the measure before the tax can be implemented.
TOT is considered a general fund tax and is one of the City’s major revenue sources, which allows for maintaining a variety of public services provided to residents and businesses. Since the establishment of the City’s TOT, a significant portion of the City’s General Fund revenue (approximately 17%) comes from TOT. The current estimated TOT revenue is $3.8 million annually for Fiscal Years 2023-24 and 2024-25. The benefit of TOT, as opposed to other forms of taxes, is that the burden is on the visitors and tourists staying at Del Mar lodging units. The City’s current TOT rate is 13%, which would remain the same. The proposed measure does not contemplate amending the tax rate, it proposes to impose TOT on STRs at the same 13% rate currently charged to hotels.
DTA, the City’s data consultant, prepared an analysis identifying the number and characteristics of active STRs within the City. The study completed by DTA included 125 STR’s in Del Mar that were listed on Airbnb and/or VRBO websites. Based on the information provided by DTA, the overall annual STR revenue for 2023 was approximately $5.8 million and ranged from $550 to close to $400,000 per STR. Considering that the citywide STR cap is anticipated to be 129 and based on the information provided by DTA and STR registration data, staff used the current median annual income of $30,000 for each additional STR over the 125 identified by DTA. Taking all of this into consideration, staff estimates that additional TOT revenue related to STR operations will generate approximately $775,000 annually.
If the Council directs staff to move forward with the proposed amendments to the TOT regulations and related ballot measure, it is recommended that the language specify that the entire rental amount charged to guests is subject to TOT (inclusive of cleaning and booking fees, etc.); and that hosting platforms (e.g., Expedia, VRBO, Airbnb, etc.) be included within the definition of “operator” to allow hosting platforms to collect TOT on behalf of guests. If directed to proceed, staff would prepare the necessary documents to place a measure on the November 5, 2024, ballot (such as a Resolution calling for the placement of a tax measure on the general election ballot and an Ordinance outlining the proposed amendments to the TOT Regulations) and return to the City Council for approval at the next regular City Council meeting.
The City Council intends to adopt STR regulations in late November or early December 2024, following the results of the November 5, 2024, General Municipal Election. Should the ballot measure fail, the STR regulations would go back to the City Council for further consideration and to determine next steps.
2 May 20, 2024 Item 12
City Council Agenda Report
TOT 2024 General Election Ballot Measure
May 20, 2024
FISCAL IMPACT:
Estimated revenues to the City from STR related TOT generation is approximately $775,000 annually. The estimated cost to include the TOT related measure on the November 2024 ballot is $15,000, funds for which are included in the proposed FY 2024-25 budget update for Council consideration in June 2024. The City will receive an invoice from the County Registrar of Voters for actual election costs after the November 2024 election.
HOUSING IMPACT:
STRs involve commercial use of a dwelling unit that can displace long term housing. The City’s Housing Element commits the City to implement measures to reduce current vacancy rates (off-site owners with units reported as unoccupied/no housing tenant) with the intent to maintain dwelling units in residential zones for long term housing. To reduce the vacancy rate, the draft STR regulations in process would provide for a citywide limit on the number of allowable STRs and includes other provisions to maintain dwelling units as primary residences where occupants live more than six months per year. As proposed, through a ballot measure, the TOT (general tax) that visitors and tourists pay for most lodging within the City of Del Mar would be extended to also apply to STRs and lodging with less than three units.
ENVIRONMENTAL IMPACT:
The requested Council action to discuss and consider placing a general tax measure on the November 5, 2024, General Municipal Election ballot for submission to the qualified voters of a proposed Ordinance amending the City’s existing TOT regulations under DMMC Chapter 3.12, and authorizing the collection of TOT from STRs operating in the City is exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15061(b)(3) (General Rule) because CEQA only applies to projects with the potential for causing a significant effect on the environment and it can be determined with certainty authorizing a ballot measure related to TOT collection for STRs will not cause a significant effect on the environment. However, since this action is related to proposed STR regulations that could be implemented Citywide, the City has completed an Initial Study evaluation for the STR regulations project and concluded that no environmental factors could be potentially affected by the STR regulations.
Therefore, the result of the ballot measure being contemplated would not cause a significant effect on the environment regardless of the outcome of the ballot measure.
ATTACHMENT:
Attachment A – Proposed Revisions to DMMC Chapter 3.12 (Transient Occupancy Tax) 3 May 20, 2024 Item 12
TITLE 3 - TAXES
Chapter 3.12 TRANSIENT OCCUPANCY TAX
Del Mar, California, Municipal Code Created: 2024-04-03 15:46:17 [EST] (Supp. No. 8)
Chapter 3.12 TRANSIENT OCCUPANCY TAX
3.12.010 Taxable Event.
A. For the privilege of occupancy in any hotel, each transient shall pay a tax in an amount up to 13 percent of the rent charged by the operator. The exact rate shall be as set by resolution of the City Council. The transient satisfies this tax obligation by paying the tax to the operator.
B. The tax is payable at the time that rent is paid. If the rent is paid in installments, a proportionate share of the tax shall be paid with each installment. The balance of the tax shall be due upon the transient's ceasing occupancy in the hotel.
C. If sufficient funds are not paid to the operator by the transient to pay the tax in full, the Tax Administrator may commence an action against the transient to recover the amount of the tax.
3.12.020 Exemptions.
No tax under this Chapter shall be imposed upon:
A. Any person as to whom, or any occupancy as to which, it is beyond the power of the City to impose the tax herein provided.
B. Any federal or State of California officer or employee when on official business.
C. Any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty.
No exemption shall be granted except upon a claim therefor made at the time rent is collected and under penalty of perjury upon a form prescribed by the tax administrator.
3.12.030 Definitions.
For the purposes of this Chapter, the following words and phrases shall have the meanings respectively ascribed to them by this Section:
Hotel. Any structure or any portion of any structure which has three or more unit(s)room(s) occupied or intended or designed for occupancy by transients for dwelling, lodging or sleeping purposes, including any hotel, inn, tourist home or house, motel, studio hotel, bachelor hotel, short-term rental, lodging house, rooming house, apartment house, dormitory, public or private club, mobile home or house trailer at a fixed location or other similar structure or portion thereof.
Occupancy The use or possession or the right to the use or possession of any room or portion thereof in any hotel for dwelling, lodging or sleeping purposes.
Operator. The person who is proprietor of the hotel, whether in the capacity of owner, lessee, sublessee, mortgagee in possession, licensee or any other capacity. Where the 4 May 20, 2024 Item 12
Created: 2024-04-03 15:46:17 [EST]
(Supp. No. 8)
operator performs his functions through a managing agent or any type or character other than an employee, the managing agent shall also be deemed an operator for the purposes of this Chapter and shall have the same duties and liabilities as his principal. Compliance with the provisions of this Chapter by either the principal or the managing agent shall, however, be considered to be compliance by both.
Rent. The consideration charged, whether or not received, for the occupancy of space in a hotel valued in money, whether to be received in money, goods, labor or otherwise, including all receipts, cash, credits, and property and services of any kind or nature, without any deduction therefrom whatsoever. This amount shall include any cleaning fees, resort fees, and other fees as part of the total “rent” charged.
Transient. Any person who exercises occupancy or is entitled to occupancy by reason of concession, permit, right of access, license or other agreement for a period of 30 consecutive calendar days or less, counting portions of calendar days as full days.
Any such person so occupying space in a hotel shall be deemed to be a transient until the period of 30 days has expired unless there is an agreement in writing between the operator and the occupant providing for a longer period of occupancy; provided, that any person who actually occupies the same premises for a period of 31 or more consecutive days shall be deemed exempt from the tax imposed by this Chapter on that specific occupancy. In determining whether a person is a transient, uninterrupted periods of time extending both prior and subsequent to the effective date of this Chapter may be considered.
3.12.040 The Collection of Tax.
A. It shall be unlawful for an operator to fail to collect from the transient the tax imposed by this Chapter at the same time as the rent is collected from the transient.
B. The operator shall deliver to the transient a receipt for payment which states the amount of the tax separately from the amount of the rent charged.
C. No operator shall advertise or state in any manner, whether directly or indirectly, that the tax or any part thereof will be assumed or absorbed by the operator, or that the tax will not be added to the rent, or that, if added, any part will be refunded except in a manner provided in this Chapter.
D. For purposes of this Section, if the operator uses a web- or application-based hosting platform or third-party booking vendor that facilitates rentals and payments for hotel rentals, the hosting platform or third party booking vendor shall be considered an agent of the operator for purposes of collecting and remitting TOT to the City.
3.12.050 Registration.
Within 30 days after commencing business, each operator of any hotel renting occupancy to transients shall register such hotel with the Director of Finance and obtain from the Director a "Transient Occupancy Registration Certificate" which certificate shall be at all times posted in a conspicuous place on the premises. Such certificate shall, among other things, state the following:
5 May 20, 2024 Item 12
Created: 2024-04-03 15:46:17 [EST]
(Supp. No. 8)
4889-0045-4588, v. 2
A. The name of the operator.
B. The address of the hotel.
C. The date upon which the certificate is issued.
D. "This Transient Occupancy Registration Certificate signifies that the person named on the face hereof has fulfilled the requirements of the Transient Occupancy Tax Ordinance by registering with the Tax Administrator for the purpose of collecting from transients the Transient Occupancy Tax and remitting said tax to the Director of Finance. This certificate does not authorize any person to conduct any unlawful business or to conduct any lawful business in any unlawful manner, nor to operate a hotel without strictly complying with all local applicable laws, including but not limited to those requiring a permit from any board, commission, department or office of this City. This certificate does not constitute a permit."
3.12.060 Obligation of Operator.
A. If the operator receives any consideration for allowing the transient to occupy the hotel, the value of such consideration shall be first applied by the operator to satisfy the tax owed. It shall be unlawful for the operator to fail to hold the tax collected by the operator in trust for the benefit of the City. It shall be unlawful for the operator to fail to remit the collected tax to the City in accordance with the provisions of this Chapter.
B. On or before the last day of each month, the operator shall file a return with the Tax Administrator on a form approved by the City, setting forth for the previous month:
1. The total rents charged;
2. The total rents received;
3. The amount of tax funds held by the operator;
4. An explanation if the amount of Item 3 is less than ten percent of the amount of Item 1.
C. The tax funds collected for the previous month shall be remitted together with the return for that month.
D. The operator shall comply with shorter reporting and payment periods if imposed by the Tax Administrator in order to facilitate the collection of this tax.
E. If the operator ceases business, it shall be unlawful for the operator to fail to file immediately with the City the return and tax funds for the previous month and the return and tax funds for the period of the current month in which the operator ceased business.
6 May 20, 2024 Item 12
Created: 2024-04-03 15:46:17 [EST]
(Supp. No. 8)
4889-0045-4588, v. 2
3.12.070 Penalties and Interest.
A. Original Delinquency. Any operator who fails to remit any tax imposed by this Chapter within the time required shall pay a penalty of ten percent of the amount of tax, in addition to the amount of the tax.
B. Continued Delinquency. Any operator who fails to remit any delinquent remittance on or before a period of 30 days following the date on which the remittance first became delinquent shall pay a second delinquency penalty of ten percent of the amount of the tax in addition to the amount of the tax and the ten percent first imposed.
C. Fraud. If the Director of Finance determines that the nonpayment of any remittance due under this Chapter is due to fraud, a penalty of 25 percent of the amount of the tax shall be added thereto, in addition to the penalties stated in Subsections A. and B. of this Section.
D. Interest. In addition to the penalties imposed, any operator who fails to remit any tax imposed by this Chapter shall pay interest at the rate of one-half of one percent per month or fraction thereof on the amount of the tax, exclusive of penalties, from the date on which the remittance first became delinquent until paid.
E. Penalties Merged with Tax. Every penalty imposed and such interest as accrues under the provisions of this Section shall become a part of the tax herein required to be paid.
3.12.080 Records and Inspection.
It shall be the duty of every operator liable for the collection and payment to the City of any tax imposed by this Chapter to keep and preserve, for a period of three years, all records as may be necessary to determine the amount of such tax as he may have been liable for the collection of and payment to the City, which records the Director of Finance shall have the right to inspect at all reasonable times.
3.12.090 Refunds.
A. Whenever the amount of any tax, interest or penalty has been overpaid or paid more than once or has been erroneously or illegally collected or received by the City under this Chapter, it may be refunded as provided in Subsections B. and C. of this Section; provided, that a claim in writing therefor, stating under penalty of perjury the specific grounds upon which the claim is founded, shall be filed as a claim against the City as set forth in Chapter 1.18 of this Code.
B. An operator may claim a refund or take as credit against taxes collected and remitted the amount overpaid, paid more than once or erroneously or illegally collected or received when it is established in a manner prescribed by the Director of Finance that the person from whom the tax has been collected was not a transient; provided, that neither a refund nor a credit shall be allowed unless the amount of the tax so 7 May 20, 2024 Item 12
Created: 2024-04-03 15:46:17 [EST]
(Supp. No. 8)
collected has either been refunded to the transient or credited to rent subsequently payable by the transient to the operator.
C. A transient may obtain a refund of taxes overpaid or paid more than once or erroneously or illegally collected or received by the City by filing a claim in the manner provided in Subsection A of this Section, but only when the tax was paid by the transient directly to the tax administrator, or when the transient having paid the tax to the operator, establishes to the satisfaction of the Director of Finance that the transient has been unable to obtain a refund from the operator who collected the tax.
D. No refund shall be paid under the provisions of this Section unless the claimant establishes his right thereto by written records showing entitlement thereto. 8 May 20, 2024 Item 12
City of Del Mar
Agenda Report
________________________________________________________________________________________________________ City Council Action:
TO: Honorable Mayor and City Council Members
FROM: Deputy Mayor Terry Gaasterland and Councilmember Tracy Martinez, City Council Housing Subcommittee
Via Ashley Jones, City Manager
DATE: May 20, 2024
SUBJECT: Concerns Related to State Economic Development Department (EDD) Jobs Data and Del Mar 6th Cycle Regional Housing Needs Assessment (RHNA) Allocation
REQUESTED ACTION/RECOMMENDATION:
The City Council Housing Subcommittee, Deputy Mayor Gaasterland and Councilmember Martinez, recommend that the City Council receive information and discuss concerns related to the EDD jobs data for Del Mar and the City’s 6th Cycle RHNA allocation.
BACKGROUND:
Consistent with the provisions of California Government Code Section 65584, the San Diego Association of Governments (SANDAG) undertook a State mandated process for the 6th Cycle Housing Element (2021-2029) to identify and approve the methodology for and allocation of 171,685 housing units identified by the State Department of Housing and Community Development (HCD) as part of the 6th Cycle Regional Housing Needs Assessment (RHNA) process for the San Diego region. This multi-year process started in 2017, followed by adoption of the RHNA methodology by the SANDAG Board in 2019, and Board adoption of the final RHNA allocation in 2020.
The RHNA allocation methodology is required to comply with state housing laws, and primarily focused on three key criteria: proximity to transit; jobs/housing relationship; and equity. The way that SANDAG counted the number of jobs from the EDD jobs data (which does not differentiate between full-time and part-time/seasonal jobs) is consistent with how other councils and associations of governments have counted jobs, including the Southern California Association of Governments (SCAG) and Association of Bay Area Governments (ABAG), the basis for which is more fully described in the legal memo included as part of the legal analysis discussed later in this report.
Cities were required to submit their City Council approved 6th Cycle Housing Element reflecting future actions to implement their RHNA allocation and comply with housing laws to HCD by April 15, 2021 for State certification review.
1 May 20, 2024 Item 13
City Council Agenda Report
Del Mar RHNA Allocation/EDD Data Concerns
May 20, 2024
More information about SANDAG RHNA process can be found at:https://www.sandag.org/- /media/SANDAG/Documents/PDF/projects-and-programs/regional-initiatives/housing-landuse/6th-cycle-regional-housing-needs-assessment-plan-2020-07-10.pdf.
As part of the RHNA process, SANDAG identified 4,484 jobs for the City of Del Mar, which included full-time and part-time/seasonal employment. At that time, much concern was expressed by the Del Mar City Council, staff, and community about the number of jobs that had been identified for Del Mar, as it seemed very high for such a small City with mostly retail/visitor serving jobs and no large-scale employers other than the Del Mar Fairgrounds.
As will be discussed in greater detail below, the City later learned that the jobs data for the region, and resulting 163 housing unit RHNA allocation for Del Mar, was primarily based on information provided by the State Economic Development Department (EDD).
Jurisdictions were provided the opportunity to appeal the unit allocation for their area as part of the RHNA process; however, Del Mar was unable to take advantage of the appeal process because at that time the City did not have the documentation needed to challenge the methodology/data used by SANDAG to determine the RHNA allocation for Del Mar.
Therefore, the City’s concerns were unable to be addressed and the City was required to plan for the 163 housing units identified for Del Mar as part of the 6th Cycle RHNA process. The City’s total allocation also increased to 175 housing units based on a carry-over of 12 unmet low-income units assigned in the 5th cycle. This is a lot to achieve for an almost built out City will high land costs and very little land available for development.
DISCUSSION/ANALYSIS:
On February 7, 2022, the City Council authorized then Councilmembers Terry Gaasterland and Tracy Martinez to work with City staff to request the jobs data and related information used by SANDAG to calculate the City of Del Mar’s jobs count and subsequent RHNA allocation. Requests for information were made to SANDAG in March and December 2022, to which SANDAG responded by explaining that the EDD data was obtained through a required confidentiality agreement and could not be shared with the City directly. However, in February and March 2023, SANDAG data staff met with the City and provided an overview of the process and methodology for evaluating the jobs data without providing any EDD confidential data specifics. While they acknowledged that it isn’t perfect, the EDD data used is considered the “gold standard” for jobs data.
Following the February 2023 meeting with SANDAG data staff, the City obtained a copy of the SANDAG/EDD agreement, which specifies the timeframes and data sets that were used by SANDAG as part of the RHNA process. The City requested the same data from EDD and entered into the required EDD confidentiality agreement, which enabled staff to obtain the necessary EDD jobs data for Del Mar in April 2023.
EDD Data Review & Observations/Findings
As was used by SANDAG, the City obtained EDD Census of Employment and Wages data files for years 2017–2022. A review of the confidential EDD data provided the following important insights:
2 May 20, 2024 Item 13
City Council Agenda Report
Del Mar RHNA Allocation/EDD Data Concerns
May 20, 2024
➢ The EDD identifies job location by jurisdictional boundary, not postal code. ➢ EDD jobs are not differentiated between full-time and part-time/seasonal. This allowed for part-time and seasonal employment at the Fairgrounds related to one-time (music/entertainment events, etc.) and short-term events (County Fair, horse racing season, etc.) to be counted the same as full-time, year-round jobs. Counting jobs this way is also consistent with the methodology used by SANDAG and other California councils/associations of government as part of the RHNA process. ➢ SANDAG only looked at 3rd Quarter data for each year, which made it nearly impossible for SANDAG to identify jobs for one-time or short-term events occurring at the Del Mar Fairgrounds.
➢ Seasonal jobs can be easily identified as varying from nearly 0 in one month to a much larger number in another month for a given business.
➢ The EDD data indicated that there was an average of 4,911 jobs identified for Del Mar per quarter during the identified time frame. Of those, SANDAG counted 4,484 jobs for Del Mar after quality controlling the data.
➢ SANDAG quality controlled the data by filtering out duplicates; jobs outside the City’s jurisdictional boundary; out of state employers; and corporate headquarters. ➢ Over half the jobs that were counted for Del Mar were at the Fairgrounds, and 90% (approximately 1,810) of the Fairgrounds jobs were part-time/seasonal. ➢ Del Mar has NO jurisdiction/authority over the Fairgrounds and Del Mar's ordinances do not apply to the Fairgrounds, including noise and parking. ➢ Without jobs attributable to the Fairgrounds, Del Mar has about 2,000 jobs.
➢ More than 5% of Del Mar's registered businesses are registered at PO Boxes and contribute over 10% of the jobs.
➢ More than 25% of Del Mar's registered businesses are registered to homes and contribute over 10% of the overall jobs for Del Mar. These jobs were reported to the EDD using private residential addresses in zones that do not include commercial activities as an allowed use. Some of these companies reported over 20 employees at the private residential address.
➢ A known closed business that no longer has a location in the City was being misreported with nearly 100 jobs in Del Mar, which has now been corrected with EDD.
Following the City’s review of the EDD data, observations and concerns were shared with SANDAG data staff in June and August 2023. SANDAG staff were very receptive to the feedback provided by the City and, as a result, will no longer be using just one quarter of 3 May 20, 2024 Item 13
City Council Agenda Report
Del Mar RHNA Allocation/EDD Data Concerns
May 20, 2024
annual data for their analyses and will expand the data set to include all four quarters of the calendar year. After receiving the City’s insight, SANDAG expressed a new understanding that the general data assumptions and methodology used across the County had the unintended consequence of disproportionally impacting Del Mar in ways that larger cities would not be affected due to our small size. As such, SANDAG expressed a willingness to allow Del Mar and other cities to obtain and review the EDD data and raise issues and concerns prior to the job numbers being finalized as part of future RHNA cycles.
Potential Remedies Explored
In November 2023 and thereafter, City staff and Councilmembers reached out to the SANDAG Board and Executive Leadership (Attachment A) and State representatives Assemblymember Tasha Boerner and Senator Toni Atkins to discuss possible remedies to address the City’s concerns. Each expressed a strong interest and support for ensuring that the methodology is addressed so that Del Mar is not disproportionately affected again in future cycles. However, all equally cautioned that it would be nearly impossible to make any changes to the current 6
th Cycle RHNA. This is because the SANDAG 6th Cycle RHNA methodology and process have been approved and certified by the SANDAG Board and State HCD; units have already been allocated to all the cities in the San region; and housing elements reflecting the RHNA allocations for those jurisdictions have been adopted and certified. The majority of these actions occurred 3-4 years ago, with cities in the San Diego region now working hard to implement their certified housing elements. However, these discussions are still timely and important as planning for the 7th Cycle RHNA process is expected to begin in 2025 or 2026.
The City Council additionally explored whether there was any legal remedy that could be pursued by the City and sought guidance from the City Attorney’s office and special counsel Pam Lee, who is a partner with Aleshire & Wynder, LLP. A copy of the memo provided by Attorney Lee is included with this agenda item as Attachment B. As further detailed in the memo, it is not recommended that the City pursue legal action as a remedy to address 6th Cycle RHNA process concerns due to the low likelihood of success and the potential negative ramifications to the City should the City’s current 6
th Cycle Housing Element be decertified by
HCD as a result.
Next Steps
City staff and Council representatives will continue to work with SANDAG and the City’s State representatives to pursue changes to the RHNA methodology and process to ensure that the City of Del Mar is not disproportionately affected during the next RHNA cycle. As part of the next RHNA cycle, Del Mar will also obtain and review the EDD jobs data well in advance so concerns can be raised and addressed prior to the RHNA methodology being approved.
It should also be noted that on March 22, 2024, the SANDAG Board hosted a discussion regarding the RHNA process with HCD representatives, during which the City of Del Mar and other jurisdictions were able to share their concerns and frustrations about the RHNA process (https://youtu.be/arKeg7IFk7w?si=IDqfOp-kmoVQLMOF&t=2728). 4 May 20, 2024 Item 13
City Council Agenda Report
Del Mar RHNA Allocation/EDD Data Concerns
May 20, 2024
Following the SANDAG Board meeting, and in accordance with their statutory requirement to assess and recommend improvements to the RHNA process, HCD recently released a report that outlines the stakeholder engagement process and statutory/regulatory suggested reforms to improve RHNA before Cycle 7. The report, entitled California’s Housing Future 2040: The Next Regional Housing Needs Allocation (RHNA), outlines dozens of suggested reforms to improve the RHNA methodology, regional determination, and compliance process.
Notable suggested reforms include the following, many of which align with issues/concerns that Del Mar has raised:
1. Requiring that the RHNA determination and housing element compliance process incorporates the regional homeless needs. This will likely be implemented through the integration of new extremely low income (ELI) categories and associated benchmarks that regional and local governments would need to assess and meet.
2. Broadening the scope of eligible housing types that can be credited within the RHNA process. This focus is targeting the group quarter living situations that are common for individuals within the ELI categories and may be at risk of homelessness. Additional categories of housing that the report suggests be incorporated are suite-style college housing (not dorms that meet quarter definitions) and other group-style homes that serve seniors. (excludes emergency shelters)
3. Requiring COGs to share the datasets they plan to use within their methodology with relevant local jurisdictions.
4. Amending the appeals process to clarify that the change in circumstance appeals criteria is only applicable when the change in question disproportionately impacts the jurisdiction that is the subject of the appeal.
5. Aligning RHNA with Regional Transportation Plan (RTP) and Sustainable Communities Strategies Growth (SCS) growth projections.
6. Simplifying the RHNA determination and allocation process via statute clean-up language and process. This would include transparency and communication requirements between HCD and jurisdictions, more clearly defined data sources, and refining various determination factors.
Overall, HCD’s recommendations are likely to be considered and incorporated into legislative and budget proposals over the next few sessions prior to the onset of the RHNA 7 Cycle.
FISCAL IMPACT:
There is no fiscal impact or action to be taken by the Council related to this agenda item.
ATTACHMENTS:
Attachment A - Letter to SANDAG dated November 15, 2023 Attachment B – Legal Memo from Pam Lee, Aleshire & Wynder, LLP 5 May 20, 2024 Item 13
1050 Camino Del Mar, Del Mar, CA 92014 | 858.755.9313 | www.delmar.ca.us November 15, 2023
San Diego Association of Governments (SANDAG) SENT VIA EMAIL SANDAG Board & Executive Leadership
401 B Street, Suite 800
San Diego, CA 92101
Re: Observations and Findings Regarding City of Del Mar EDD Data/RHNA Allocation
Dear SANDAG Board & Executive Leadership,
For almost a year now, the City of Del Mar has been working with SANDAG data staff and the State of California Employment Development Department (EDD) to evaluate and better understand the jobs data that was used by SANDAG to calculate the City of Del Mar’s jobs data and related Regional Housing Needs Allocation (RHNA) for the City’s Sixth Cycle Housing Element.
After entering into an EDD required confidentiality agreement, the City obtained the necessary EDD Quarterly Census of Employment and Wages (QCEW) data files for Quarter 3 (Q3) of Years 2017 – 2022, of which data from Q3 2017 was used by SANDAG to calculate the City of Del Mar’s jobs data. The data contained many important elements including unique identifiers, ownership codes, NAICS codes, business names, business addresses, employment figures, and more, which allowed us to delve into the intricacies of Del Mar’s jobs data.
A thorough review of the data by Del Mar provided several important observations and findings, as further summarized below. Due to the confidential nature of the data provided by EDD, we are only able to provide summarized, high-level information. It is important to note that the EDD identifies job locations by jurisdictional boundary (not postal code), and jobs are not differentiated between full-time and part-time/seasonal.
High Level Overview of Del Mar Jobs
• In 2017, the EDD identified 405 businesses with addresses in the City of Del Mar. • The EDD data indicates that there was an average of 4,911 jobs identified for Del Mar during Quarter 3 of 2017.
• Of those, SANDAG counted 4,484 jobs for Del Mar as part of the RHNA allocation process.
• SANDAG quality controlled the data by filtering out duplicates; jobs outside the City’s jurisdictional boundary; out of state employers; and corporate headquarters.
Fairgrounds Jobs
• Over half the jobs identified for Del Mar were at the Fairgrounds, and 90% of the Fairgrounds jobs were part-time/seasonal.
6 May 20, 2024 Item 13
SANDAG EDD Data & RHNA Methodology
November 15, 2023
• Seasonal jobs can be easily identified as varying from nearly 0 jobs in one month to a much larger number in another month for a given business. • Del Mar has NO jurisdiction/authority over the Fairgrounds and Del Mar's ordinances do not apply to the Fairgrounds, including noise and parking. • Without jobs attributable to the Fairgrounds, Del Mar has about 2,000 jobs (less than half of the 4,484 jobs counted by SANDAG for the RHNA allocation).
The majority of the part-time/seasonal jobs at the Fairgrounds are related to special events, from small one-to-three-day events throughout the year to large events like the annual Fair or horseracing season. Many of the special event vendors and contractors live in other parts of San Diego or the State or they come from out of state to work the event. As an example, vendors/contractors who work the annual San Diego County Fair work a circuit of fair events in the State, and are likely be counted in each jurisdiction that they work in.
Post Office Boxes
More than 5% of Del Mar's businesses are registered to post office boxes and contribute over 10% of the jobs for Del Mar. Living in or owning a business in Del Mar is not required in order to have a post office box in Del Mar. A review of the data indicated that many of the Del Mar post office boxes were attributable to businesses that are not actually located in Del Mar, causing issues with the accuracy of the data and driving up the number of jobs for Del Mar.
Home Addresses for Registered Businesses
More than 25% of Del Mar's registered businesses are registered to homes and contribute over 10% of Del Mar’s jobs. Based on a review of the data, there were many home addresses in Del Mar that were being used as the mailing address for a business, but the actual business and its employees are not physically located in Del Mar. Again, this affected the data and drove up the jobs numbers for Del Mar.
Erroneous Data
A known closed business that has not been located in Del Mar since for over 10 years, has been consistently misreported with nearly 100 jobs in Del Mar (2% of Del Mar’s overall jobs). The City is taking steps to correct this data with the EDD.
In June and August 2023, we shared our findings, observations, and concerns with SANDAG data staff. We appreciate SANDAG staff’s willingness to engage constructively with us and take our feedback into consideration. We were pleased to learn that SANDAG has expanded its EDD data set to include all four quarters of the calendar year, rather than just the third quarter, and has recognized the need to adjust data assumptions and methodologies to account for the disproportionate impact of the data on smaller cities like Del Mar.
Moving forward, we recommend that SANDAG consider the following:
7 May 20, 2024 Item 13
SANDAG EDD Data & RHNA Methodology
November 15, 2023
1. Collaboration: We are encouraged by SANDAG's commitment to collaboration and transparency. We propose the establishment of a continuous dialogue between SANDAG and the City of Del Mar to address data-related issues promptly and effectively.
2. Regular Data Review: We recommend a systematic process for Del Mar and other cities to review EDD data and raise any issues or concerns before the jobs numbers are finalized in future RHNA cycles.
3. Improved Data Accuracy: In light of the data discrepancies we identified, we request that SANDAG take steps to ensure the accuracy of its data sources and methodologies to reflect the unique characteristics and challenges faced by smaller cities like Del Mar.
4. Policy Considerations: We encourage SANDAG to consider the potential policy implications of its data and methodologies, particularly concerning RHNA allocations for smaller jurisdictions.
This letter is intended to serve as a formal record of our concerns, findings, and recommendations. We believe that SANDAG, as a regional authority, can benefit from a RHNA approach that takes into consideration the diverse needs and circumstances of all the cities it serves. We look forward to a constructive and ongoing partnership to address the concerns we have raised and identify opportunities to ensure the accuracy of the data and jobs numbers for the current and future RHNA cycles.
We are requesting a formal meeting with SANDAG executive staff to discuss our findings and potential next steps. To schedule a time to meet, or for questions/additional information, please contact Del Mar City Manager Ashley Jones at [email protected] or (858) 704-3640.
Sincerely,
Tracy Martinez
Mayor
cc: Del Mar City Council
Ashley Jones, Del Mar City Manager
Clem Brown, Del Mar Assistant City Manager
Daniel Flyte, SANDAG Principal Analyst – Data Governance Manager Grace Chung, SANDAG Principal Researcher
8 May 20, 2024 Item 13
MEMORANDUM
01411.0002/983057.2
TO: HONORABLE MAYOR AND MEMBERS OF THE DEL MAR CITY COUNCIL
ASHLEY JONES, CITY MANAGER
LESLIE DEVANEY, CITY ATTORNEY
FROM: PAM K. LEE, SPECIAL LEGAL COUNSEL
DATE: MAY 14, 2024
RE: JOBS DATA AND THE CITY’S HOUSING ELEMENT
A. Background Information
For over 18 months now, the City of Del Mar has been working with the San Diego Association of Governments (SANDAG) to obtain and evaluate the jobs data that SANDAG used to calculate the Regional Housing Needs Allocation (RHNA) for each city within SANDAG’s jurisdiction, including the City of Del Mar.
When the City obtained the relevant job data in early 2023, it conducted a thorough review to determine whether the City’s RHNA was accurately calculated. The City learned that 4,484 jobs were attributed to the City of Del Mar, even after filtering out duplicate jobs, jobs outside the City’s jurisdictional boundary, out of state employers, and corporate headquarters. Of the 4,484 jobs, over half were derived from fairgrounds employment, and 90% of those jobs were either part-time or temporary in nature. Based on an independent analysis, if the part-time/temporary jobs were omitted from the calculation, the City’s RHNA could be reduced by almost half.
Because this data was not provided to the City when requested prior to the finalization of the RHNA process, the City could not and did not appeal its RHNA to SANDAG as part of the RHNA appeal process, per Government Code Section 65584.05(b). Accordingly, the City cannot appeal its RHNA now.
B. Should the City File A Lawsuit Against SANDAG or HCD for the City’s Overinflated RHNA?
Any lawsuit filed by the City against SANDAG for its erroneous job data in determining the City’s RHNA allocation would be pre-empted by and dismissed under City of Irvine v. Southern California Assn. of Governments, (2009) 175 Cal.App.4th 506, and City of Coronado, et al. v. San Diego Association of Governments, (2022) 80 Cal.App.5th 21. Both the City of Irvine and City of Coronado cases held that the court lacked jurisdiction to adjudicate a city’s claim against a council of governments/association of governments because (i) the city did not have an enforceable right against the council/association regarding the determination of RHNA allocations, (ii) the RHNA administrative appeals process under Government Code Section 65584.05 provides the remedy for a city to raise objections to an allocation, and (iii) the State legislature previously deleted a thenexisting statutory provision that authorized judicial review. 9 May 20, 2024 Item 13
JOBS DATA AND THE CITY’S HOUSING ELEMENT
MAY 14, 2024
01411.0002/983057.2
A lawsuit filed against California Department of Housing and Community Development (HCD) for the overinflated RHNA would likely meet the same fate. This is because HCD could successfully argue that (i) HCD had no part in determining the City’s RHNA based on any job data, and (ii) HCD reviewed the job data on a regional rather than individual municipal basis and did not independently assess (nor did it have the authority to independently assess) the accuracy of such data.
In addition, the way SANDAG counted the number of jobs is consistent with how other councils of governments, such as the Southern California Association of Governments (SCAG) and Association of Bay Area Governments (ABAG), have also counted the total number of jobs for the region and for allocations for each municipality. The job data and how it intersects with housing needs was not further delineated by full-time, part-time, or seasonal/temporary categories in determining the RHNA methodology or allocations.
1 So if a lawsuit were to challenge the accuracy of job data in calculating the RHNA, the lawsuit would require HCD, all councils of government, and counties (that are not part of a council of government) to re-analyze the job data for all jurisdictions in California. A court will most likely find that such an undertaking requires a legislative fix, rather than a judicial fix on an ad hoc basis.
Even if a re-analysis were to occur, it would not guarantee that the methodology or the housing numbers would come out differently than before. This is because any lawsuit, even if successfully challenged, would require the court to give deference to SANDAG, City, or HCD in utilizing the job data and coming up with revised housing numbers – in other words, the court does not have the legal authority to dictate what the RHNA housing methodology or housing numbers would be. Moreover, any fix would most likely be on a prospective, rather than retrospective, basis.
C. Should the City on Its Own Revise and Self-Certify Its Housing Element? The City could revise its Housing Element using the updated job data (excluding the part-time or temporary jobs) and the same RHNA methodology implemented by SANDAG to come up with reduced RHNA for the City, in all relevant income categories. However, it should be noted that any draft amendment to the Housing Element must be submitted for review to HCD, who has legal authority monitor a City’s compliance with Housing Element law.2 1 See, e.g., Gov. Code § 65584.04(e)(1), which requires each jurisdiction to include the existing and projected jobs in total, including the number of low-wage jobs, regardless of the job type (part-time, full-time, temporary, etc.) and analyze the jobs’ relationship to housing. SCAG used California Employment Development Department’s (EDD) jobs report by industry, as well as 2010 Census information and American Community Survey data for all job types. (SCAG Final RHNA Methodology, Mar 3, 2020, p. 7.) SANDAG used job data from EDD and the 2010 Census’ Longitudinal EmployerHousehold Dynamics Origin-Destination Employment Statistics (LODES) data. SANDAG’s data consists of “all job types and includes jobs that are classified as a primary source of income, which can be part-time or full-time, year-round or seasonal,” in order to determine how much housing is needed. (SANDAG 6th Cycle RHNA Plan, Jul. 10, 2020, p. 20.)
2 Gov. Code § 65585(b).
10 May 20, 2024 Item 13
JOBS DATA AND THE CITY’S HOUSING ELEMENT
MAY 14, 2024
01411.0002/983057.2
HCD will vigorously oppose any reduction in the City’s RHNA allocation based on omission of parttime or temporary jobs from the job data. Recent case law regarding housing3 has been very deferential towards HCD in interpreting State housing laws liberally to promote housing and affordable housing development and restrictive against local laws that limit local governance in land use and zoning. HCD will most likely de-certify the City’s Housing Element if the City revised its Housing Element to include a reduced RHNA number.4 A de-certification of the City’s Housing Element, would mean that the City, according to HCD, no longer has a compliant Housing Element.
This would likely open the door to Builder’s Remedy project applications5, which would allow nonzoning compliant housing projects to be considered for approval for development during the time period the Housing Element is deemed non-compliant or de-certified. Furthermore, with a decertified Housing Element, the City would also be subject to a streamlined ministerial approval process for other housing development projects.
Moreover, because the City would be re-analyzing its Housing Element using different definitions of “jobs” than other jurisdictions in the State have used, the City would be inviting other jurisdictions as well as housing advocacy groups to potentially file lawsuits against the City for non-compliance with State housing element laws. As stated above, no other council of government or county has utilized the job data in a way being proposed by the City (i.e., to eliminate or discount part-time/temporary jobs in determining RHNA), so the RHNA methodology would be very different than what has historically been done. Based on the novel approach and how other jurisdictions utilized local job data, it is highly unlikely a court would agree with how the City would want to re-apply its job data to the current Housing Element.
As a result, the disadvantages greatly outweigh any potential benefits the City would receive in revising its RHNA and Housing Element based on the a new job data analysis. [END]
3 For example, the appellate courts in Anderson v. City of San Jose (2019) 42 Cal.App.5th 683 and Ruegg & Ellsworth v. City of Berkeley (2021) 63 Cal.App.5th 277 have held that the State’s interest in promoting access to housing and affordable housing are paramount, considering the State’s current housing and affordable housing crisis, resulting in very deferential treatment towards laws that promote such state interests, at the expense of local land use and zoning. 4 Notably, HCD is actively pursuing Housing Element de-certifications. In March 2024, HCD decertified the Town of Portola Valley’s Housing Element, less than two months after it had been certified by HCD. While nothing changed between HCD’s certification of Portola Valley’s Housing Element on January 31, 2024 and its de-certification on March 26, 2024, HCD cited that the town was not working fast enough to implement its housing programs as required under its Housing Element. 5 Gov. Code § 65589.5(d).
11 May 20, 2024 Item 13