Pacific Grove City Council
May 18, 2022

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 92 of the Complaint.

93. In answering Paragraph 93 of the Complaint, City Defendants admit that City Attorney Walsh sent a letter to Pacaso on February 10, 2021, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 93 of the Complaint.

94. In answering Paragraph 94 of the Complaint, City Defendants admit that City Attorney Walsh sent a letter to local real estate agents, dated March 16, 2021, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 94 of the Complaint.

95. In answering Paragraph 95 of the Complaint, City Defendants admit that City Attorney Walsh sent a letter to local real estate agents, dated March 16, 2021, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 95 of the Complaint.

96. In answering Paragraph 96 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 96 of the Complaint.

97. In answering Paragraph 97 of the Complaint, City Defendants deny each and every allegation in Paragraph 97 of the Complaint.

98. In answering Paragraph 98 of the Complaint, City Defendants deny each and every allegation in Paragraph 98 of the Complaint.

99. In answering Paragraph 99 of the Complaint, City Defendants admit that Pacaso responded to City Attorney Walsh on March 17, 2021 and that Mr. Walsh did not respond to Pacaso’s letter by April 1, 2021. City Defendants assert that the documents/meeting speak for themselves and that no response is otherwise required.

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 100. In answering Paragraph 100 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 100 of the Complaint. 101. In answering Paragraph 101 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 101 of the Complaint. 102. In answering Paragraph 102 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 102 of the Complaint. 103. In answering Paragraph 103 of the Complaint, City Defendants deny each and every allegation in Paragraph 103 of the Complaint.
104. In answering Paragraph 104 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 104 of the Complaint.
105. In answering Paragraph 105 of the Complaint, City Defendants deny each and every allegation in Paragraph 105 of the Complaint.
106. In answering Paragraph 106 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

Except as admitted, City Defendants deny each and every allegation in Paragraph 106 of the Complaint.
107. In answering Paragraph 107 of the Complaint, to the extent that Plaintiffs have accurately quoted what Ms. Ueda said during the July 14, 2020 meeting, City Defendants admit she said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 107 of the Complaint.
108. In answering Paragraph 108 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every Case 3:21-cv-02493-WHO Document 20 Filed 06/01/21 Page 15 of 30

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 allegation in Paragraph 108 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 109. In answering Paragraph 109 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

Except as admitted, City Defendants deny each and every allegation in Paragraph 109 of the Complaint.
110. In answering Paragraph 110 of the Complaint, City Defendants deny each and every allegation in Paragraph 110 of the Complaint.
111. In answering Paragraph 111 of the Complaint, City Defendants deny each and every allegation in Paragraph 111 of the Complaint.
112. In answering Paragraph 112 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 112 of the Complaint.
113. In answering Paragraph 113 of the Complaint, City Defendants deny each and every allegation in Paragraph 113 of the Complaint.
114. In answering Paragraph 114 of the Complaint, City Defendants assert that Government Code § 65850 speaks for itself, and that no response is otherwise required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 114 of the Complaint.
115. In answering Paragraph 115 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

Except as admitted, City Defendants deny each and every allegation in Paragraph 115 of the Complaint.
116. In answering Paragraph 116 of the Complaint, City Defendants deny each and every allegation in Paragraph 116 of the Complaint.
117. In answering Paragraph 117 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 Except as admitted, City Defendants deny each and every allegation in Paragraph 117 of the Complaint.
118. In answering Paragraph 118 of the Complaint, City Defendants deny each and every allegation in Paragraph 118 of the Complaint.
119. In answering Paragraph 119 of the Complaint, to the extent that Plaintiffs have accurately quoted what Ms. Ueda said during the July 14, 2020 meeting, City Defendants admit she said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 119 of the Complaint.
120. In answering Paragraph 120 of the Complaint, City Defendants deny each and every allegation in Paragraph 120 of the Complaint.
121. In answering Paragraph 121 of the Complaint, City Defendants deny each and every allegation in Paragraph 121 of the Complaint.
122. In answering Paragraph 122 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 122 of the Complaint.
123. In answering Paragraph 123 of the Complaint, to the extent that Plaintiffs have accurately quoted the May 22, 2020 letter and July 2020 Report, City Defendants admit that the letter and/or report read as alleged. Except as admitted, City Defendants deny each and every allegation in Paragraph 123 of the Complaint.
124. In answering Paragraph 124 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 124 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 125. In answering Paragraph 125 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every Case 3:21-cv-02493-WHO Document 20 Filed 06/01/21 Page 17 of 30

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 allegation in Paragraph 125 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 126. In answering Paragraph 126 of the Complaint, City Defendants deny each and every allegation in Paragraph 126 of the Complaint.
127. In answering Paragraph 127 of the Complaint, City Defendants deny each and every allegation in Paragraph 127 of the Complaint.
128. In answering Paragraph 128 of the Complaint, City Defendants deny the allegations asserted.
129. In answering Paragraph 129 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

Except as admitted, City Defendants deny each and every allegation in Paragraph 129 of the Complaint.
130. In answering Paragraph 130 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 130 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 131. In answering Paragraph 131 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 131 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 132. In answering Paragraph 132 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 132 of the Complaint. 133. In answering Paragraph 133 of the Complaint, City Defendants deny each and every allegation in Paragraph 133 of the Complaint.

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 134. In answering Paragraph 134 of the Complaint, City Defendants deny each and every allegation in Paragraph 134 of the Complaint.
135. In answering Paragraph 135 of the Complaint, City Defendants deny each and every allegation in Paragraph 135 of the Complaint.
136. In answering Paragraph 136 of the Complaint, City Defendants admit that the City adopted a General Plan, and assert that the document speaks for itself. To the extent a further response is required, City Defendants deny each and every allegation in Paragraph 136 of the Complaint.
137. In answering Paragraph 137 of the Complaint, City Defendants deny each and every allegation in Paragraph 137 of the Complaint.
138. In answering Paragraph 138 of the Complaint, City Defendants deny each and every allegation in Paragraph 138 of the Complaint.
139. In answering Paragraph 139 of the Complaint, City Defendants deny each and every allegation in Paragraph 139 of the Complaint.

CLAIM 1
DECLARATORY RELIEF: INAPPLICABILITY OF SECTION 17.112.130 (AGAINST THE CITY)
140. The City Defendants reasserts the answers to Paragraphs 1-139. 141. In answering Paragraph 141 of the Complaint, the City Defendants asserts that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 141 of the Complaint.
142. In answering Paragraph 142 of the Complaint, the City Defendants admit that Pacaso sent a letter dated March 17, 2021, requested a response by April 1, 2021, and that the City Defendants did not respond before April 1, 2021. Except as admitted, City Defendants deny each and every allegation in Paragraph 142 of the Complaint. 143. In answering Paragraph 143 of the Complaint, City Defendants deny each and every allegation in Paragraph 143 of the Complaint.

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 144. In answering Paragraph 144 of the Complaint, City Defendants deny each and every allegation in Paragraph 144 of the Complaint.
145. In answering Paragraph 145 of the Complaint, the City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 145 of the Complaint. 146. In answering Paragraph 146 of the Complaint, the City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 146 of the Complaint. 147. In answering Paragraph 147 of the Complaint, the City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 147 of the Complaint.

CLAIM 2
DUE PROCESS VIOLATION: DEFENDANTS’ APPLICATION OF SECTION 17.112.130

TO PACASO IS UNCONSTITUTIONALLY VAGUE AND AMBIGUOUS
(AGAINST ALL DEFENDANTS)
148. City Defendants reassert the answers to Paragraphs 1-147. 149. In answering Paragraph 149 of the Complaint, City Defendants deny each and every allegation in Paragraph 149 of the Complaint.
150. In answering Paragraph 150 of the Complaint, City Defendants deny each and every allegation in Paragraph 150 of the Complaint.
151. In answering Paragraph 151 of the Complaint, City Defendants deny each and every allegation in Paragraph 151 of the Complaint.
152. In answering Paragraph 152 of the Complaint, City Defendants deny each and every allegation in Paragraph 152 of the Complaint.
153. In answering Paragraph 153 of the Complaint, City Defendants deny each and every allegation in Paragraph 152 of the Complaint.
154. In answering Paragraph 154 of the Complaint, City Defendants deny each and every allegation in Paragraph 154 of the Complaint.

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 155. In answering Paragraph 155 of the Complaint, City Defendants deny each and every allegation in Paragraph 155 of the Complaint.
156. In answering Paragraph 156 of the Complaint, City Defendants deny each and every allegation in Paragraph 156 of the Complaint.
157. In answering Paragraph 157 of the Complaint, City Defendants deny each and every allegation in Paragraph 157 of the Complaint.
158. In answering Paragraph 158 of the Complaint, City Defendants deny each and every allegation in Paragraph 158 of the Complaint.
159. In answering Paragraph 159 of the Complaint, City Defendants deny each and every allegation in Paragraph 159 of the Complaint.
160. In answering Paragraph 160 of the Complaint, City Defendants deny each and every allegation in Paragraph 160 of the Complaint.
161. In answering Paragraph 161 of the Complaint, City Defendants deny each and every allegation in Paragraph 161 of the Complaint.
162. In answering Paragraph 162 of the Complaint, City Defendants deny each and every allegation in Paragraph 162 of the Complaint.

CLAIM 3

SELECTIVE AND DISCRIMINATORY ENFORCEMENT
(AGAINST ALL DEFENDANTS)
163. City Defendants reassert the answers to Paragraphs 1-162. 164. In answering Paragraph 164 of the Complaint, City Defendants deny each and every allegation in Paragraph 164 of the Complaint.
165. In answering Paragraph 165 of the Complaint, City Defendants deny each and every allegation in Paragraph 165 of the Complaint.
166. In answering Paragraph 166 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 166 of the Complaint.

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 167. In answering Paragraph 167 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 167 of the Complaint. 168. In answering Paragraph 168 of the Complaint, City Defendants deny each and every allegation in Paragraph 168 of the Complaint.
169. In answering Paragraph 169 of the Complaint, City Defendants deny each and every allegation in Paragraph 169 of the Complaint.
170. In answering Paragraph 170 of the Complaint, City Defendants deny each and every allegation in Paragraph 170 of the Complaint.
171. In answering Paragraph 171 of the Complaint, City Defendants deny each and every allegation in Paragraph 171 of the Complaint.
172. In answering Paragraph 172 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 172 of the Complaint. 173. In answering Paragraph 173 of the Complaint, City Defendants deny each and every allegation in Paragraph 173 of the Complaint.
174. In answering Paragraph 174 of the Complaint, City Defendants deny each and every allegation in Paragraph 174 of the Complaint.
175. In answering Paragraph 175 of the Complaint, City Defendants deny each and every allegation in Paragraph 175 of the Complaint.
176. In answering Paragraph 176 of the Complaint, City Defendants deny each and every allegation in Paragraph 176 of the Complaint.
177. In answering Paragraph 177 of the Complaint, City Defendants deny each and every allegation in Paragraph 177 of the Complaint.
178. In answering Paragraph 178 of the Complaint, City Defendants deny each and every allegation in Paragraph 178 of the Complaint.
179. In answering Paragraph 179 of the Complaint, City Defendants deny each and every allegation in Paragraph 179 of the Complaint.

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 180. In answering Paragraph 180 of the Complaint, City Defendants deny each and every allegation in Paragraph 180 of the Complaint.
181. In answering Paragraph 181 of the Complaint, City Defendants deny each and every allegation in Paragraph 181 of the Complaint.
182. In answering Paragraph 182 of the Complaint, City Defendants deny each and every allegation in Paragraph 182 of the Complaint.

CLAIM 4
DECLARATORY RELIEF: INVALID USE OF MUNICIPAL AUTHORITY
(AGAINST THE CITY)
183. The City reasserts the answers to Paragraphs 1-182. 184. In answering Paragraph 184 of the Complaint, City Defendants deny each and every allegation in Paragraph 184 of the Complaint.
185. In answering Paragraph 185 of the Complaint, City Defendants deny each and every allegation in Paragraph 185 of the Complaint.
186. In answering Paragraph 186 of the Complaint, City Defendants deny each and every allegation in Paragraph 186 of the Complaint.
187. In answering Paragraph 187 of the Complaint, City Defendants deny each and every allegation in Paragraph 187 of the Complaint.
188. In answering Paragraph 188 of the Complaint, City Defendants deny each and every allegation in Paragraph 188 of the Complaint.
189. In answering Paragraph 189 of the Complaint, City Defendants deny each and every allegation in Paragraph 189 of the Complaint.
190. In answering Paragraph 190 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 190 of the Complaint. 191. In answering Paragraph 191 of the Complaint, City Defendants deny each and every allegation in Paragraph 191 of the Complaint.

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INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE (AGAINST THE CITY AND CITY ATTORNEY ETHAN WALSH)
192. The City Defendants reassert the answers to Paragraphs 1-191. 193. In answering Paragraph 193 of the Complaint, City Defendants deny each and every allegation in Paragraph 193 of the Complaint.
194. In answering Paragraph 194 of the Complaint, the City and City Attorney admit that City Attorney Walsh sent a letter in March 2021 to real-estate offices in the City. Except as admitted, City Defendants deny each and every other allegation in Paragraph 194 of the Complaint.
195. In answering Paragraph 195 of the Complaint, City Defendants admit that Ms.

DeRosa sent a letter on May 15, 2020 notifying a homeowner that, if a house was used as a timeshare in violation of the Municipal Code, then that would be a violation of the Municipal Code.
196. In answering Paragraph 196 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 196 of the Complaint. 197. In answering Paragraph 197 of the Complaint, Defendants deny each and every allegation in Paragraph 197 of the Complaint.
198. In answering Paragraph 198 of the Complaint, City Defendants deny each and every allegation in Paragraph 198 of the Complaint.
199. In answering Paragraph 199 of the Complaint, City Defendants deny each and every allegation in Paragraph 199 of the Complaint.
200. In answering Paragraph 200 of the Complaint, City Defendants deny each and every allegation in Paragraph 200 of the Complaint.
201. In answering Paragraph 201 of the Complaint, City Defendants deny each and every allegation in Paragraph 201 of the Complaint.

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 202. In answering Paragraph 202 of the Complaint, City Defendants deny each and every allegation in Paragraph 202 of the Complaint.

AFFIRMATIVE DEFENSES
City Defendants assert the following affirmative defenses against each and every claim and cause of action alleged by Plaintiffs. By asserting the following defenses, City Defendants do not assume the burden of proof on any essential element of Plaintiffs’ claims.

FIRST AFFIRMATIVE DEFENSE
(Failure to State a Claim)
City Defendants incorporate by reference the answers and allegations stated above.

As a separate and distinct affirmative defense to all claims in the Complaint, City Defendants allege that the Complaint fails to allege facts sufficient to state a claim against the City Defendants.

Plaintiffs fail to state sufficient facts to state a claim for declaratory relief (Claim 1) because Section 17.122.130 of the St. Helena Municipal Code does apply to Pacaso. On information and belief, Pacaso markets properties in the City under the guise of “co-ownership” arrangements; in-fact, Pacaso is selling timeshares prohibited by Section 17.122.130 of the St.

Helena Municipal Code. Plaintiffs are not entitled to declaratory relief because they were violating the City’s municipal ordinance.

Plaintiffs fail to state sufficient facts to state a claim for due process violation (Claim 2) because Section 17.112.130 of the St. Helena Municipal Code is not unconstitutionally vague or ambiguous. On information and belief, Pacaso was provided fair notice of Section 17.112.130, its specific terms, and its application to partial or fractional ownership structures, such as those marketed by Pacaso in the City. On information and belief, Pacaso attempted to sell timeshares as fractional ownership/co-ownership properties in the City in violation of Section 17.122.130 of the St. Helena Municipal Code.

Plaintiffs fail to state a selective and discriminatory enforcement claim (Claim 3) because the City Defendants enforce all violations of Section 17.122.130 in the City in the same manner, and do not take a different approach with those related to Pacaso. The City Defendants allege Case 3:21-cv-02493-WHO Document 20 Filed 06/01/21 Page 25 of 30

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KRIEGER LLP ATTORNEYS AT LAW 18101 VON KARMAN AVENUE, SUITE 1000 IRVINE, CALIFORNIA 92612 that there was no selective enforcement of Section 17.112.130 of the St. Helena Municipal Code against Pacaso.

Plaintiffs fail to state a claim for Invalid Use of Municipal Authority (Claim 4) because Section 17.112.130 of the St. Helena Municipal Code does not exceed the City’s scope of a municipal zoning authority and police power under Cal. Government Code § 65850(a). Section

17.112.130 of the St. Helena Municipal Code is not arbitrary or unreasonable as it has a substantial relation to the public health, safety, morals, and general welfare of the residents of the City. The City’s enforcement of Section 17.112.130 against Pacaso is reasonable, warranted, and a valid land use ordinance under California Government Code § 65850(a).

Plaintiffs fail to state a claim for Intentional Interference with Prospective Economic Advantage (Claim 5) because Plaintiff’s fifth claim arises from protected speech and is a strategic lawsuit against public participation (“SLAAP”). Plaintiffs’ claim is based on privileged communications and are subject to a special motion to strike under California Code of Civil Procedure §425.16. A special motion to strike (anti-SLAAP motion) was filed by the City and City Attorney on May 17, 2021 [Doc. 18.]. City Defendants further allege, on information and belief, that Plaintiffs cannot demonstrate that they incurred an actual loss or disruption to a prospective economic advantage in which they had a sufficiently reasonable expectation of future business or income.

SECOND AFFIRMATIVE DEFENSE
(Governmental Immunity For Exercise of Discretion – California Government Code § 820.2)
City Defendants incorporate by reference the answers and allegations stated above.

As a separate and distinct affirmative defense to all claims in the Complaint, City Defendants allege that no relief may be obtained under the Complaint pursuant to California Government Code § 820.2. City Defendants allege that the decisions in the Complaint were an exercise of governmental discretion immune from challenge under California Government Code § 820.2, and as such, all of Plaintiffs’ claims are barred.

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THIRD AFFIRMATIVE DEFENSE
(Governmental Immunity for Administrative Proceeding Within Scope of Employment – California Government Code § 821.6)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and distinct affirmative defense to all claims in the Complaint, City Defendants allege that no relief may be obtained under the Complaint pursuant to California Government Code § 821.6. City Defendants allege that the enforcement actions alleged in the Complaint were part of an administrative proceeding within the scope of employment, immune from challenge under California Government Code § 821.6, and, as such, all of Plaintiffs’ claims are barred.

FOURTH AFFIRMATIVE DEFENSE
(Estoppel)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and distinct affirmative defense to all claims in the Complaint, City Defendants allege that no relief may be obtained under the Complaint by reason of the doctrine of estoppel. On information and belief, City Defendants allege Plaintiffs willfully violated Section 17.112.130 of the St. Helena Municipal Code by owning and/or marketing ownership of timeshares in the City.

FIFTH AFFIRMATIVE DEFENSE
(Unclean Hands)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense to all claims in the Complaint, City Defendants allege that no relief may be obtained under the Complaint by reason of the doctrine of unclean hands. On information and belief, City Defendants allege Plaintiffs willfully violated federal, state and/or local laws in connection with their sale of fractional interests in real property, including, but not limited to, federal and state securities laws, state laws governing the marketing and sale of time shares, and Section 17.112.130 of the St. Helena Municipal Code. ///
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SIXTH AFFIRMATIVE DEFENSE
(Privileged Communications)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense to all claims in the Complaint, City Defendants allege that no relief may be obtained under the Complaint because Plaintiffs’ claims are based on privileged communications. City Defendants allege that the enforcement actions alleged in the Complaint were part of City employees official duties, and were conducted as part of an official proceeding concerning a matter of common interest. City Defendants further allege that Plaintiffs claims are based on privileged communications under California Civil Code § 47.

SEVENTH AFFIRMATIVE DEFENSE
(Illegality)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense to all claims in the Complaint, City Defendants allege that no relief may be obtained under the Complaint by reason of the doctrine of illegality. On information and belief, City Defendants allege Plaintiffs willfully violated federal, state and/or local laws in connection with their sale of fractional interests in real property, including, but not limited to, federal and state securities laws, state laws governing the marketing and sale of time shares, and Section 17.112.130 of the St. Helena Municipal Code.

EIGHTH AFFIRMATIVE DEFENSE
(Failure to Exhaust Remedies)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense to all claims in the Complaint, City Defendants allege that no relief may be obtained under the Complaint because Plaintiffs failed to exhaust their administrative remedies before filing their Complaint. On information and belief, City Defendants allege that Plaintiffs did not participate in any administrative hearing prior to the filing of the Complaint.
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NINTH AFFIRMATIVE DEFENSE
(Failure to Comply With the California Tort Claims Act - California Government Code §§ 810, et seq.)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense to all claims in the Complaint, City Defendants allege that no relief may be obtained under the Complaint because Plaintiffs failed to comply with the California Tort Claims Act (California Government Code §§ 810, et seq.). On information and belief, the City never received a government claim from Plaintiffs prior to the filing of the Complaint.

TENTH AFFIRMATIVE DEFENSE
(Statute of Limitations - Government Code § 65009)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense to all claims in the Complaint, City Defendants allege that Plaintiffs’ action is barred, in whole or in part, by the statute of limitations set forth in California Government Code § 65009. On information and belief, City Defendants allege that Plaintiffs’ Complaint was not brought within ninety (90) days of the enactment of Sections 17.112.130 and

17.134.010-17.134.100 of the St. Helena Municipal Code.

PRAYER FOR RELIEF
WHEREFORE, Defendant prays that:

1. That the Complaint be dismissed with prejudice;

2. That Plaintiffs take nothing by this proceeding;

3. That City Defendants be awarded their costs of suit incurred in the defense of this action;
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4. That City Defendants be awarded their reasonable attorneys’ fees incurred in the defense of this action as permitted by law; and

5. For such other and further relief as the Court deems just and proper.

Dated: June 1, 2021 BEST BEST & KRIEGER LLP
By: /s/ Damian N. Northcutt
DAMIAN M. MOOS
DAMIAN A. NORTHCUTT
TYLER D. ANTHONY
Attorneys for Defendants
CITY OF ST. HELENA; PLANNING &

BUILDING DIRECTOR MAYA
DEROSA; MAYOR GEOFF
ELLSWORTH; and CITY ATTORNEY

ETHAN WALSH
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DAMIAN M. MOOS, Bar No. 240030
[email protected]
DAMIAN A. NORTHCUTT, Bar No. 258183
[email protected]
TYLER D. ANTHONY, Bar No. 305652
[email protected]

BEST BEST & KRIEGER LLP
18101 Von Karman Avenue
Suite 1000
Irvine, California 92612
Telephone: (949) 263-2600
Facsimile: (949) 260-0972
Attorneys for Defendants
CITY OF ST. HELENA; PLANNING & BUILDING
DIRECTOR MAYA DEROSA; MAYOR GEOFF
ELLSWORTH; and CITY ATTORNEY ETHAN
WALSH

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA
PACASO INC. and PAC 6 CA 2021 LLC,
Petitioner,
v.

THE CITY OF ST. HELENA; PLANNING &
BUILDING DIRECTOR MAYA DEROSA;
MAYOR GEOFF ELLSWORTH; CITY
ATTORNEY ETHAN WALSH; and DOES 1-
5,
Defendants.

Case No. 3:21-cv-02493-WHO
DEFENDANTS’ SECOND AMENDED

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Defendants, CITY OF ST. HELENA (“City”), PLANNING & BUILDING DIRECTOR MAYA DEROSA; MAYOR GEOFF ELLSWORTH; CITY ATTORNEY, and CITY ATTORNEY ETHAN WALSH (“City Attorney”) (collectively the “City Defendants”) hereby answer Plaintiff PACASO INC. and PAC 6 CA 2021 LLC (collectively “Plaintiffs”) Complaint for: (1) Declaratory Judgment; (2) Due Procession Violation; (3) Selective Enforcement; (4) Invalid Use of Municipal Authority; and (5) Intentional Interference with Prospective Economic Advantage (“Complaint”). City Defendants answers as follows: (hereafter “City” or “Defendant” hereby answers the allegations in the Complaint of PACASO INC. and PAC 6 CA 2021 LLC (“Plaintiffs”), as follows:

INTRODUCTION

1. In answering Paragraph 1 of the Complaint, City Defendants deny each and every allegation in Paragraph 1 of the Complaint.

2. In answering Paragraph 2 of the Complaint, City Defendants deny each and every allegation in Paragraph 2 of the Complaint.

3. In answering Paragraph 3 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 3 of the Complaint.

4. In answering Paragraph 4 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 4 of the Complaint.

5. In answering Paragraph 5 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 5 of the Complaint.

6. In answering Paragraph 6 of the Complaint, City Defendants deny each and every allegation in Paragraph 6 of the Complaint.

7. In answering Paragraph 7 of the Complaint, City Defendants deny each and every allegation in Paragraph 7 of the Complaint.

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8. In answering Paragraph 8 of the Complaint, City Defendants admit that a Report to the City Council was prepared on July 14, 2020 and that local residents expressed concerns about a residential property, which one of the Plaintiffs owns. City Defendants deny each and every other allegation in Paragraph 8 of the Complaint.

9. In answering Paragraph 9 of the Complaint, to the extent that Plaintiffs have accurately quoted portions of the July 2020 Report, City Defendants admit that the July 2020 Report reads as alleged. City Defendants deny each and every other allegation in Paragraph 9 of the Complaint, including, but not limited to, any conclusions, meaning or interpretation that Plaintiffs derive or seek to insert into the July 2020 Report.

10. In answering Paragraph 10 of the Complaint, to the extent that Plaintiffs have accurately quoted portions of the July 2020 Report, City Defendants admit that the July 2020 Report reads as alleged. City Defendants deny each and every other allegation in Paragraph 10 of the Complaint, including, but not limited to, any conclusions, meaning or interpretation that Plaintiffs derive or seek to insert into the July 2020 Report.

11. In answering Paragraph 11 of the Complaint, to the extent that Plaintiffs have accurately quoted what was said during the July 2014 Meeting, City Defendants admit that such statements were made. City Defendants deny each and every other allegation in Paragraph 11 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what was said during the July 2014 Meeting.

12. In answering Paragraph 12 of the Complaint, City Defendants deny each and every allegation in Paragraph 12 of the Complaint.

13. In answering Paragraph 13 of the Complaint, City Defendants deny each and every allegation in Paragraph 13 of the Complaint.

14. In answering Paragraph 14 of the Complaint, City Defendants deny each and every allegation in Paragraph 14 of the Complaint.
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THE PARTIES

15. In answering Paragraph 15 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 15 of the Complaint.

16. In answering Paragraph 16 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 16 of the Complaint.

17. In answering Paragraph 17 of the Complaint, City Defendants admit the allegations asserted.

18. In answering Paragraph 18 of the Complaint, City Defendants admit the allegations asserted.

19. In answering Paragraph 19 of the Complaint, City Defendants deny that the City Attorney acts under the Mayor’s direction. Except as denied, City Defendants admit the allegations asserted.

20. In answering Paragraph 20 of the Complaint, City Defendants admit the allegations asserted.

21. In answering Paragraph 21 of the Complaint, City Defendants admit that St. Helena City Council members include Vice Mayor Paul Dohring, Anna Chouteau, Lester Gardy, and Eric Hall. City Defendants admit that these members have collectively represented the City Council since November 2020. City Defendants deny that Vice Mayor Dohring has served on the City Council since 2018. City Defendants admit that Anna Chouteau has served on the City Council since 2018. City Defendants admit that the City Council is a legislative and policy-making body for the City of St. Helena. City Defendants admit that the City Council bears responsibility for setting City policy and for adopting ordinances, resolutions and other orders as necessary for governing the City. Except as admitted, City Defendants deny each and every other allegation in Paragraph 21 of the Complaint.
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JURISDICTION AND VENUE

22. In answering Paragraph 22 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 22 of the Complaint.

23. In answering Paragraph 23 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 23 of the Complaint.

GENERAL ALLEGATIONS

24. In answering Paragraph 24 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 24 of the Complaint.

25. In answering Paragraph 25 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 25 of the Complaint.

26. In answering Paragraph 26 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 26 of the Complaint.

27. In answering Paragraph 27 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 27 of the Complaint.

28. In answering Paragraph 28 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 28 of the Complaint.

29. In answering Paragraph 29 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 29 of the Complaint.

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30. In answering Paragraph 30 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 30 of the Complaint.

31. In answering Paragraph 31 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 31 of the Complaint.

32. In answering Paragraph 32 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 32 of the Complaint.

33. In answering Paragraph 33 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 33 of the Complaint.

34. In answering Paragraph 34 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 34 of the Complaint.

35. In answering Paragraph 35 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 35 of the Complaint.

36. In answering Paragraph 36 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 36 of the Complaint.

37. In answering Paragraph 37 of the Complaint, to the extent Plaintiffs have accurately quoted the ordinance, City Defendants admit that the ordinance reads as such. Except as admitted, City Defendants deny each and every other allegation in Paragraph 37 of the Complaint.

38. In answering Paragraph 38 of the Complaint, to the extent Plaintiffs have accurately quoted the ordinance, City Defendants admit that the ordinance reads as such. Except as Case 3:21-cv-02493-WHO Document 28 Filed 06/17/21 Page 6 of 27

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admitted, City Defendants deny each and every other allegation in Paragraph 38 of the Complaint.

39. In answering Paragraph 39 of the Complaint, to the extent Plaintiffs have accurately quoted the ordinance, City Defendants admit that the ordinance reads as such. Except as admitted, City Defendants deny each and every other allegation in Paragraph 39 of the Complaint.

40. In answering Paragraph 40 of the Complaint, to the extent Plaintiffs have accurately quoted the ordinance, City Defendants admit that the ordinance reads as such. Except as admitted, City Defendants deny each and every other allegation in Paragraph 40 of the Complaint.

41. In answering Paragraph 41 of the Complaint, City Defendants deny each and every allegation in Paragraph 41 of the Complaint.

42. In answering Paragraph 42 of the Complaint, to the extent Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the Report reads as quoted. Except as admitted, City Defendants deny each and every other allegation in Paragraph 42 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what is written in the July 2020 Report.

43. In answering Paragraph 43 of the Complaint, to the extent Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the Report reads as quoted. Except as admitted, City Defendants deny each and every other allegation in Paragraph 43 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what is written in the July 2020 Report.

44. In answering Paragraph 44 of the Complaint, to the extent Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the Report reads as quoted. Except as admitted, City Defendants deny each and every other allegation in Paragraph 44 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what is written in the July 2020 Report.

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45. In answering Paragraph 45 of the Complaint, to the extent Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the Report reads as quoted. Except as admitted, City Defendants deny each and every other allegation in Paragraph 45 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what is written in the July 2020 Report.

46. In answering Paragraph 46 of the Complaint, to the extent Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the Report reads as quoted. Except as admitted, City Defendants deny each and every other allegation in Paragraph 46 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what is written in the July 2020 Report.

47. In answering Paragraph 47 of the Complaint, to the extent Plaintiffs have accurately quoted who said what during the July 14, 2020 Meeting, City Defendants admit that the person said the accurately quoted material during the Meeting. Except as admitted, City Defendants deny each and every other allegation in Paragraph 47 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what was said during the July 14, 2020 Meeting.

48. In answering Paragraph 48 of the Complaint, to the extent Plaintiffs have accurately quoted who said what during the July 14, 2020 Meeting, City Defendants admit that the person said the accurately quoted material during the Meeting. Except as admitted, City Defendants deny each and every other allegation in Paragraph 48 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what was said during the July 14, 2020 Meeting.

49. In answering Paragraph 49 of the Complaint, to the extent Plaintiffs have accurately quoted who said what during the July 14, 2020 Meeting, City Defendants admit that the person said the accurately quoted material during the Meeting. Except as admitted, City Defendants deny each and every other allegation in Paragraph 49 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what was said during the July 14, 2020 Meeting.

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50. In answering Paragraph 50 of the Complaint, to the extent Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the Report reads as quoted. Except as admitted, City Defendants deny each and every other allegation in Paragraph 50 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what is written in the July 2020 Report.

51. In answering Paragraph 51 of the Complaint, to the extent Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the Report reads as quoted. Except as admitted, City Defendants deny each and every other allegation in Paragraph 51 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what is written in the July 2020 Report.

52. In answering Paragraph 52 of the Complaint, to the extent Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the Report reads as quoted. Except as admitted, City Defendants deny each and every other allegation in Paragraph 52 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what is written in the July 2020 Report.

53. In answering Paragraph 53 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 53 of the Complaint.

54. In answering Paragraph 54 of the Complaint, City Defendants deny each and every allegation in Paragraph 54 of the Complaint.

55. In answering Paragraph 55 of the Complaint, City Defendants deny each and every allegation in Paragraph 55 of the Complaint.

56. In answering Paragraph 56 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 56 of the Complaint.

57. In answering Paragraph 57 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 57 of the Complaint.

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58. In answering Paragraph 58 of the Complaint, to the extent Plaintiffs have accurately quoted who said what during the July 14, 2020 Meeting, City Defendants admit that the person said the accurately quoted material during the Meeting. Except as admitted, City Defendants deny each and every other allegation in Paragraph 58 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what was said during the July 14, 2020 Meeting.

59. In answering Paragraph 59 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 59 of the Complaint.

60. In answering Paragraph 60 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 60 of the Complaint.

61. In answering Paragraph 61 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 61 of the Complaint.

62. In answering Paragraph 62 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 62 of the Complaint.

63. In answering Paragraph 63 of the Complaint, City Defendants deny each and every allegation in Paragraph 63 of the Complaint.

64. In answering Paragraph 64 of the Complaint, to the extent Plaintiffs have accurately quoted the ordinance, City Defendants admit that the ordinance reads as alleged. Except as admitted, City Defendants deny each and every other allegation in Paragraph 64 of the Complaint.

65. In answering Paragraph 65 of the Complaint, City Defendants deny each and every allegation in Paragraph 65 of the Complaint.

66. In answering Paragraph 66 of the Complaint, City Defendants deny each and every allegation in Paragraph 66 of the Complaint.

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67. In answering Paragraph 67 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 67 of the Complaint.

68. In answering Paragraph 68 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 68 of the Complaint.

69. In answering Paragraph 69 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 69 of the Complaint.

70. In answering Paragraph 70 of the Complaint, City Defendants deny each and every allegation in Paragraph 70 of the Complaint.

71. In answering Paragraph 71 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 71 of the Complaint.

72. In answering Paragraph 72 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 72 of the Complaint.

73. In answering Paragraph 73 of the Complaint, to the extent Plaintiffs have accurately quoted who said what during the July 14, 2020 Meeting, City Defendants admit that the person said the accurately quoted material during the Meeting. Except as admitted, City Defendants deny each and every other allegation in Paragraph 73 of the Complaint, including, but not limited to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what was said during the July 14, 2020 Meeting.

74. In answering Paragraph 74 of the Complaint, to the extent Plaintiffs have accurately quoted who said what during the July 14, 2020 Meeting, City Defendants admit that the person said the accurately quoted material during the Meeting. Except as admitted, City Defendants deny each and every other allegation in Paragraph 74 of the Complaint, including, but not limited Case 3:21-cv-02493-WHO Document 28 Filed 06/17/21 Page 11 of 27

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to, any conclusions, meaning or (mis)interpretation that Plaintiffs derive or seek to insert into what was said during the July 14, 2020 Meeting.

75. In answering Paragraph 75 of the Complaint, City Defendants assert that the documents/meeting speak for themselves and that no response is otherwise required.

76. In answering Paragraph 76 of the Complaint, City Defendants deny each and every allegation in Paragraph 76 of the Complaint.

77. In answering Paragraph 77 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 77 of the Complaint.

78. In answering Paragraph 78 of the Complaint, City Defendants deny each and every allegation in Paragraph 78 of the Complaint.

79. In answering Paragraph 79 of the Complaint, City Defendants admit the allegations asserted.

80. In answering Paragraph 80 of the Complaint, City Defendants admit that a response, dated May 19, 2020 was sent, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 80 of the Complaint.

81. In answering Paragraph 81 of the Complaint, City Defendants admit that Ms.

DeRosa sent a written response, dated May 22, 2020, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 81 of the Complaint.

82. In answering Paragraph 82 of the Complaint, City Defendants deny each and every allegation in Paragraph 82 of the Complaint.

83. In answering Paragraph 83 of the Complaint, City Defendants admit that a response, dated May 26, 2020 was sent, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 83 of the Complaint.

84. In answering Paragraph 84 of the Complaint, City Defendants deny that the City represented that Pacaso’s operations were permitted. City Defendants are without sufficient Case 3:21-cv-02493-WHO Document 28 Filed 06/17/21 Page 12 of 27

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knowledge or information to form a belief as to the truth of the remaining allegations contained therein, and, on that basis, deny each and every other allegation in Paragraph 84 of the Complaint.

85. In answering Paragraph 85 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 85 of the Complaint.

86. In answering Paragraph 86 of the Complaint, City Defendants deny each and every allegation in Paragraph 86 of the Complaint.

87. In answering Paragraph 87 of the Complaint, City Defendants admit that Ms.

DeRosa sent a letter, dated January 25, 2021, and assert that the document speaks for itself.

Except as admitted, City Defendants deny each and every other allegation in Paragraph 87 of the Complaint.

88. In answering Paragraph 88 of the Complaint, City Defendants deny each and every allegation in Paragraph 88 of the Complaint.

89. In answering Paragraph 89 of the Complaint, City Defendants deny each and every other allegation in Paragraph 89 of the Complaint.

90. In answering Paragraph 90 of the Complaint, City Defendants admit that Pacaso contacted Maya DeRosa. City Defendants assert that the other allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every other allegation in Paragraph 90 of the Complaint.

91. In answering Paragraph 91 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the February 9, 2021 meeting, then City Defendants admit that such person(s) said what they are alleged to have said during the meeting. Except as admitted, City Defendants deny each and every allegation in Paragraph 91 of the Complaint.

92. In answering Paragraph 92 of the Complaint, City Defendants admit that City Attorney Walsh sent a letter to Pacaso on February 10, 2021, and assert that the document speaks Case 3:21-cv-02493-WHO Document 28 Filed 06/17/21 Page 13 of 27

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for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 92 of the Complaint.

93. In answering Paragraph 93 of the Complaint, City Defendants admit that City Attorney Walsh sent a letter to Pacaso on February 10, 2021, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 93 of the Complaint.

94. In answering Paragraph 94 of the Complaint, City Defendants admit that City Attorney Walsh sent a letter to local real estate agents, dated March 16, 2021, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 94 of the Complaint.

95. In answering Paragraph 95 of the Complaint, City Defendants admit that City Attorney Walsh sent a letter to local real estate agents, dated March 16, 2021, and assert that the document speaks for itself. Except as admitted, City Defendants deny each and every other allegation in Paragraph 95 of the Complaint.

96. In answering Paragraph 96 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 96 of the Complaint.

97. In answering Paragraph 97 of the Complaint, City Defendants deny each and every allegation in Paragraph 97 of the Complaint.

98. In answering Paragraph 98 of the Complaint, City Defendants deny each and every allegation in Paragraph 98 of the Complaint.

99. In answering Paragraph 99 of the Complaint, City Defendants admit that Pacaso responded to City Attorney Walsh on March 17, 2021 and that Mr. Walsh did not respond to Pacaso’s letter by April 1, 2021. City Defendants assert that the documents/meeting speak for themselves and that no response is otherwise required.

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100. In answering Paragraph 100 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 100 of the Complaint. 101. In answering Paragraph 101 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 101 of the Complaint. 102. In answering Paragraph 102 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 102 of the Complaint. 103. In answering Paragraph 103 of the Complaint, City Defendants deny each and every allegation in Paragraph 103 of the Complaint.
104. In answering Paragraph 104 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 104 of the Complaint.
105. In answering Paragraph 105 of the Complaint, City Defendants deny each and every allegation in Paragraph 105 of the Complaint.
106. In answering Paragraph 106 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

Except as admitted, City Defendants deny each and every allegation in Paragraph 106 of the Complaint.
107. In answering Paragraph 107 of the Complaint, to the extent that Plaintiffs have accurately quoted what Ms. Ueda said during the July 14, 2020 meeting, City Defendants admit she said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 107 of the Complaint.
108. In answering Paragraph 108 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every Case 3:21-cv-02493-WHO Document 28 Filed 06/17/21 Page 15 of 27

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allegation in Paragraph 108 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 109. In answering Paragraph 109 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

Except as admitted, City Defendants deny each and every allegation in Paragraph 109 of the Complaint.
110. In answering Paragraph 110 of the Complaint, City Defendants deny each and every allegation in Paragraph 110 of the Complaint.
111. In answering Paragraph 111 of the Complaint, City Defendants deny each and every allegation in Paragraph 111 of the Complaint.
112. In answering Paragraph 112 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 112 of the Complaint.
113. In answering Paragraph 113 of the Complaint, City Defendants deny each and every allegation in Paragraph 113 of the Complaint.
114. In answering Paragraph 114 of the Complaint, City Defendants assert that Government Code § 65850 speaks for itself, and that no response is otherwise required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 114 of the Complaint.
115. In answering Paragraph 115 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

Except as admitted, City Defendants deny each and every allegation in Paragraph 115 of the Complaint.
116. In answering Paragraph 116 of the Complaint, City Defendants deny each and every allegation in Paragraph 116 of the Complaint.
117. In answering Paragraph 117 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

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Except as admitted, City Defendants deny each and every allegation in Paragraph 117 of the Complaint.
118. In answering Paragraph 118 of the Complaint, City Defendants deny each and every allegation in Paragraph 118 of the Complaint.
119. In answering Paragraph 119 of the Complaint, to the extent that Plaintiffs have accurately quoted what Ms. Ueda said during the July 14, 2020 meeting, City Defendants admit she said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 119 of the Complaint.
120. In answering Paragraph 120 of the Complaint, City Defendants deny each and every allegation in Paragraph 120 of the Complaint.
121. In answering Paragraph 121 of the Complaint, City Defendants deny each and every allegation in Paragraph 121 of the Complaint.
122. In answering Paragraph 122 of the Complaint, City Defendants assert that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 122 of the Complaint.
123. In answering Paragraph 123 of the Complaint, to the extent that Plaintiffs have accurately quoted the May 22, 2020 letter and July 2020 Report, City Defendants admit that the letter and/or report read as alleged. Except as admitted, City Defendants deny each and every allegation in Paragraph 123 of the Complaint.
124. In answering Paragraph 124 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 124 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 125. In answering Paragraph 125 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every Case 3:21-cv-02493-WHO Document 28 Filed 06/17/21 Page 17 of 27

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allegation in Paragraph 125 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 126. In answering Paragraph 126 of the Complaint, City Defendants deny each and every allegation in Paragraph 126 of the Complaint.
127. In answering Paragraph 127 of the Complaint, City Defendants deny each and every allegation in Paragraph 127 of the Complaint.
128. In answering Paragraph 128 of the Complaint, City Defendants deny the allegations asserted.
129. In answering Paragraph 129 of the Complaint, to the extent that Plaintiffs have accurately quoted the July 2020 Report, City Defendants admit that the report reads as alleged.

Except as admitted, City Defendants deny each and every allegation in Paragraph 129 of the Complaint.
130. In answering Paragraph 130 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 130 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 131. In answering Paragraph 131 of the Complaint, to the extent that Plaintiffs have accurately quoted who said what during the July 14, 2020 meeting, City Defendants admit those persons said what Plaintiffs allege. Except as admitted, City Defendants deny each and every allegation in Paragraph 131 of the Complaint, including any attempts by Plaintiffs to interpret, distort, misconstrue or take out of context what was said during the July 14, 2020 meeting. 132. In answering Paragraph 132 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 132 of the Complaint. 133. In answering Paragraph 133 of the Complaint, City Defendants deny each and every allegation in Paragraph 133 of the Complaint.

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134. In answering Paragraph 134 of the Complaint, City Defendants deny each and every allegation in Paragraph 134 of the Complaint.
135. In answering Paragraph 135 of the Complaint, City Defendants deny each and every allegation in Paragraph 135 of the Complaint.
136. In answering Paragraph 136 of the Complaint, City Defendants admit that the City adopted a General Plan, and assert that the document speaks for itself. To the extent a further response is required, City Defendants deny each and every allegation in Paragraph 136 of the Complaint.
137. In answering Paragraph 137 of the Complaint, City Defendants deny each and every allegation in Paragraph 137 of the Complaint.
138. In answering Paragraph 138 of the Complaint, City Defendants deny each and every allegation in Paragraph 138 of the Complaint.
139. In answering Paragraph 139 of the Complaint, City Defendants deny each and every allegation in Paragraph 139 of the Complaint.

CLAIM 1
DECLARATORY RELIEF: INAPPLICABILITY OF SECTION 17.112.130 (AGAINST THE CITY)
140. The City Defendants reasserts the answers to Paragraphs 1-139. 141. In answering Paragraph 141 of the Complaint, the City Defendants asserts that the allegations contain Plaintiffs’ legal theories and/or legal conclusion to which no response is required. To the extent a response is required, City Defendants deny each and every allegation in Paragraph 141 of the Complaint.
142. In answering Paragraph 142 of the Complaint, the City Defendants admit that Pacaso sent a letter dated March 17, 2021, requested a response by April 1, 2021, and that the City Defendants did not respond before April 1, 2021. Except as admitted, City Defendants deny each and every allegation in Paragraph 142 of the Complaint. 143. In answering Paragraph 143 of the Complaint, City Defendants deny each and every allegation in Paragraph 143 of the Complaint.

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144. In answering Paragraph 144 of the Complaint, City Defendants deny each and every allegation in Paragraph 144 of the Complaint.
145. In answering Paragraph 145 of the Complaint, the City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 145 of the Complaint. 146. In answering Paragraph 146 of the Complaint, the City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 146 of the Complaint. 147. In answering Paragraph 147 of the Complaint, the City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 147 of the Complaint.

CLAIM 2
DUE PROCESS VIOLATION: DEFENDANTS’ APPLICATION OF SECTION 17.112.130

TO PACASO IS UNCONSTITUTIONALLY VAGUE AND AMBIGUOUS
(AGAINST ALL DEFENDANTS)
148. City Defendants reassert the answers to Paragraphs 1-147. 149. In answering Paragraph 149 of the Complaint, City Defendants deny each and every allegation in Paragraph 149 of the Complaint.
150. In answering Paragraph 150 of the Complaint, City Defendants deny each and every allegation in Paragraph 150 of the Complaint.
151. In answering Paragraph 151 of the Complaint, City Defendants deny each and every allegation in Paragraph 151 of the Complaint.
152. In answering Paragraph 152 of the Complaint, City Defendants deny each and every allegation in Paragraph 152 of the Complaint.
153. In answering Paragraph 153 of the Complaint, City Defendants deny each and every allegation in Paragraph 152 of the Complaint.
154. In answering Paragraph 154 of the Complaint, City Defendants deny each and every allegation in Paragraph 154 of the Complaint.

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155. In answering Paragraph 155 of the Complaint, City Defendants deny each and every allegation in Paragraph 155 of the Complaint.
156. In answering Paragraph 156 of the Complaint, City Defendants deny each and every allegation in Paragraph 156 of the Complaint.
157. In answering Paragraph 157 of the Complaint, City Defendants deny each and every allegation in Paragraph 157 of the Complaint.
158. In answering Paragraph 158 of the Complaint, City Defendants deny each and every allegation in Paragraph 158 of the Complaint.
159. In answering Paragraph 159 of the Complaint, City Defendants deny each and every allegation in Paragraph 159 of the Complaint.
160. In answering Paragraph 160 of the Complaint, City Defendants deny each and every allegation in Paragraph 160 of the Complaint.
161. In answering Paragraph 161 of the Complaint, City Defendants deny each and every allegation in Paragraph 161 of the Complaint.
162. In answering Paragraph 162 of the Complaint, City Defendants deny each and every allegation in Paragraph 162 of the Complaint.

CLAIM 3

SELECTIVE AND DISCRIMINATORY ENFORCEMENT
(AGAINST ALL DEFENDANTS)
163. City Defendants reassert the answers to Paragraphs 1-162. 164. In answering Paragraph 164 of the Complaint, City Defendants deny each and every allegation in Paragraph 164 of the Complaint.
165. In answering Paragraph 165 of the Complaint, City Defendants deny each and every allegation in Paragraph 165 of the Complaint.
166. In answering Paragraph 166 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 166 of the Complaint.

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167. In answering Paragraph 167 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 167 of the Complaint. 168. In answering Paragraph 168 of the Complaint, City Defendants deny each and every allegation in Paragraph 168 of the Complaint.
169. In answering Paragraph 169 of the Complaint, City Defendants deny each and every allegation in Paragraph 169 of the Complaint.
170. In answering Paragraph 170 of the Complaint, City Defendants deny each and every allegation in Paragraph 170 of the Complaint.
171. In answering Paragraph 171 of the Complaint, City Defendants deny each and every allegation in Paragraph 171 of the Complaint.
172. In answering Paragraph 172 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 172 of the Complaint. 173. In answering Paragraph 173 of the Complaint, City Defendants deny each and every allegation in Paragraph 173 of the Complaint.
174. In answering Paragraph 174 of the Complaint, City Defendants deny each and every allegation in Paragraph 174 of the Complaint.
175. In answering Paragraph 175 of the Complaint, City Defendants deny each and every allegation in Paragraph 175 of the Complaint.
176. In answering Paragraph 176 of the Complaint, City Defendants deny each and every allegation in Paragraph 176 of the Complaint.
177. In answering Paragraph 177 of the Complaint, City Defendants deny each and every allegation in Paragraph 177 of the Complaint.
178. In answering Paragraph 178 of the Complaint, City Defendants deny each and every allegation in Paragraph 178 of the Complaint.
179. In answering Paragraph 179 of the Complaint, City Defendants deny each and every allegation in Paragraph 179 of the Complaint.

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180. In answering Paragraph 180 of the Complaint, City Defendants deny each and every allegation in Paragraph 180 of the Complaint.
181. In answering Paragraph 181 of the Complaint, City Defendants deny each and every allegation in Paragraph 181 of the Complaint.
182. In answering Paragraph 182 of the Complaint, City Defendants deny each and every allegation in Paragraph 182 of the Complaint.

CLAIM 4
DECLARATORY RELIEF: INVALID USE OF MUNICIPAL AUTHORITY
(AGAINST THE CITY)
183. The City reasserts the answers to Paragraphs 1-182. 184. In answering Paragraph 184 of the Complaint, City Defendants deny each and every allegation in Paragraph 184 of the Complaint.
185. In answering Paragraph 185 of the Complaint, City Defendants deny each and every allegation in Paragraph 185 of the Complaint.
186. In answering Paragraph 186 of the Complaint, City Defendants deny each and every allegation in Paragraph 186 of the Complaint.
187. In answering Paragraph 187 of the Complaint, City Defendants deny each and every allegation in Paragraph 187 of the Complaint.
188. In answering Paragraph 188 of the Complaint, City Defendants deny each and every allegation in Paragraph 188 of the Complaint.
189. In answering Paragraph 189 of the Complaint, City Defendants deny each and every allegation in Paragraph 189 of the Complaint.
190. In answering Paragraph 190 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 190 of the Complaint. 191. In answering Paragraph 191 of the Complaint, City Defendants deny each and every allegation in Paragraph 191 of the Complaint.

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CLAIM 5

INTENTIONAL INTERFERENCE WITH PROSPECTIVE ECONOMIC ADVANTAGE (AGAINST THE CITY AND CITY ATTORNEY ETHAN WALSH)
192. The City Defendants reassert the answers to Paragraphs 1-191. 193. In answering Paragraph 193 of the Complaint, City Defendants deny each and every allegation in Paragraph 193 of the Complaint.
194. In answering Paragraph 194 of the Complaint, the City and City Attorney admit that City Attorney Walsh sent a letter in March 2021 to real-estate offices in the City. Except as admitted, City Defendants deny each and every other allegation in Paragraph 194 of the Complaint.
195. In answering Paragraph 195 of the Complaint, City Defendants admit that Ms.

DeRosa sent a letter on May 15, 2020 notifying a homeowner that, if a house was used as a timeshare in violation of the Municipal Code, then that would be a violation of the Municipal Code.
196. In answering Paragraph 196 of the Complaint, City Defendants are without sufficient knowledge or information to form a belief as to the truth of the allegations contained therein, and, on that basis, deny each and every allegation in Paragraph 196 of the Complaint. 197. In answering Paragraph 197 of the Complaint, Defendants deny each and every allegation in Paragraph 197 of the Complaint.
198. In answering Paragraph 198 of the Complaint, City Defendants deny each and every allegation in Paragraph 198 of the Complaint.
199. In answering Paragraph 199 of the Complaint, City Defendants deny each and every allegation in Paragraph 199 of the Complaint.
200. In answering Paragraph 200 of the Complaint, City Defendants deny each and every allegation in Paragraph 200 of the Complaint.
201. In answering Paragraph 201 of the Complaint, City Defendants deny each and every allegation in Paragraph 201 of the Complaint.

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202. In answering Paragraph 202 of the Complaint, City Defendants deny each and every allegation in Paragraph 202 of the Complaint.

AFFIRMATIVE DEFENSES
City Defendants assert the following affirmative defenses against each and every claim and cause of action alleged by Plaintiffs. By asserting the following defenses, City Defendants do not assume the burden of proof on any essential element of Plaintiffs’ claims.

FIRST AFFIRMATIVE DEFENSE
(Unclean Hands/In Pari Delicto)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense, City Defendants allege that no relief may be obtained under one or more Claims in the Complaint by reason of the doctrine of unclean hands/in pari delicto. On information and belief, City Defendants allege Plaintiffs willfully violated federal, state and/or local laws in connection with their sale of fractional interests in real property, including, but not limited to, federal and state securities laws (The Securities Act of 1933, the Securities Exchange Act of 1934, and the California Corporation Securities Law of 1968), and state laws governing the marketing and sale of time shares (The Vacation Ownership and Time-Share Act of 2004). In the process of violating the above-referenced laws, on information and belief, Plaintiffs have harmed and/or prejudiced the City as the City not been able to enforce its zoning ordinances prohibiting time shares and short-term rentals because Plaintiffs have avoided the “time share” label by violating federal and state laws that define their business as a time share and/or security.

Because of the illegal, fraudulent, and inequitable conduct of the Plaintiffs, on information and belief, Plaintiffs are in pari delicto, and cannot obtain relief on one or more of their claims.

SECOND AFFIRMATIVE DEFENSE
(Privileged Communications)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense, City Defendants allege that no relief may be obtained under one or more Claims in the Complaint because Plaintiffs’ claims are based on privileged communications. City Defendants allege that the enforcement actions alleged in the Complaint, Case 3:21-cv-02493-WHO Document 28 Filed 06/17/21 Page 25 of 27

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including, but not limited to, letters sent on May 15, 2020 (¶79 of the Complaint), May 22, 2020 (¶82 of the Complaint), January 25, 2021 (¶87 of the Complaint), February 10, 2021 (¶92 of the Complaint) , March 16, 2021 (¶94 of the Complaint), and others (¶195 of the Complaint), were acts in furtherance of City employees’ exercise of official duties, were conducted in connection with an official proceeding (including, but not limited to, a potential enforcement action), and/or concerned a matter of common interest. City Defendants allege that Plaintiffs claims are based on privileged communications under California Civil Code § 47.

THIRD AFFIRMATIVE DEFENSE
(Statute of Limitations - Government Code § 65009)
City Defendants incorporate by reference the answers and allegations stated above. As a separate and affirmative defense to one or more claims made in the Complaint, City Defendants allege that Plaintiffs’ action is barred, in whole or in part, by the statute of limitations set forth in California Government Code § 65009. On information and belief, City Defendants allege that Plaintiffs’ Complaint was not brought within ninety (90) days of the enactment of Sections

17.112.130 and 17.134.010-17.134.100 of the St. Helena Municipal Code.

PRAYER FOR RELIEF
WHEREFORE, Defendant prays that:

1. That the Complaint be dismissed with prejudice;

2. That Plaintiffs take nothing by this proceeding;

3. That City Defendants be awarded their costs of suit incurred in the defense of this action;
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83578.00112\34030494.1 26
3:21-CV-02493-WHO
DEFENDANTS’ SECOND AMENDED

ANSWER TO COMPLAINT
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BEST BEST
&

KRIEGER LLP

4. That City Defendants be awarded their reasonable attorneys’ fees incurred in the defense of this action as permitted by law; and

5. For such other and further relief as the Court deems just and proper.

Dated: June 17, 2021 BEST BEST & KRIEGER LLP
By: /s/ Damian N. Northcutt
DAMIAN M. MOOS
DAMIAN A. NORTHCUTT
TYLER D. ANTHONY
Attorneys for Defendants
CITY OF ST. HELENA; PLANNING &

BUILDING DIRECTOR MAYA
DEROSA; MAYOR GEOFF
ELLSWORTH; and CITY ATTORNEY

ETHAN WALSH
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United States District Court
Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA
PACASO INC., et al.,
Plaintiffs,
v.

CITY OF ST. HELENA, et al.,
Defendants.

Case No. 21-cv-02493-WHO

ORDER GRANTING ANTI-SLAPP

MOTION TO STRIKE FIFTH CAUSE

OF ACTION
Re: Dkt. No. 18
Plaintiffs Pacaso Inc. and PAC 6 CA 2021 LLC (collectively “Pacaso”), who claim that they have created a new and more accessible pathway for second home ownership by allowing coowners to buy partial interests in real property, are suing the City of St. Helena, City Attorney Ethan Walsh, Mayor Geoff Ellsworth, and Planning and Building Director Maya DeRosa (collectively “defendants”) for blocking it and its homeowners from enjoying home ownership in St. Helena and attempting to enforce a zoning ordinance that prohibits the creation of a timeshare project. Defendants move to strike Pacaso’s fifth cause of action for intentional interference with prospective economic advantage, which is based on a March 16, 2021 letter that City Attorney Walsh sent to all real estate agents in St. Helena concerning the City’s timeshare and short-term rental ordinances and the potential violation of those ordinances by persons selling fractional interests in residential properties.

Defendants have met their burden under step one of the analysis under California’s antiSLAPP statute, Cal. Code Civ. Proc. § 425.16, by showing that the statements in the letter were made in connection with an issue under consideration by a legislative body and are protected under section 425.16(e)(2) of the anti-SLAPP statute. Under step two, Pacaso cannot show a reasonable probability that it will prevail on its claim because defendants have demonstrated that Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 1 of 19

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Walsh sent the letter in the course of discharging his duties to evaluate and prevent violations of the City’s ordinances, an act that is privileged under California Civil Code section 47(a)’s official duty privilege. For these reasons, the motion to strike the fifth cause of action is GRANTED.

Pursuant to section 425.16(c) of the anti-SLAPP statute, defendants are entitled to attorney’s fees in the amount of $20,126.50.

BACKGROUND
Pacaso (formerly known as Niner Homes) launched in 2020, seeking to “open the second home market, which has traditionally only been accessible to affluent and predominately white buyers,” by simplifying and streamlining the co-ownership process that makes second home ownership possible at a more accessible price point. Complaint (“Compl.”) [Dkt. No. 1] ¶¶ 15, 24, 26, 30. Pacaso creates a property-specific LLC for each home, which owns deeded title to the real property and then “organizes and vets a maximum of eight co-owners, who hold co-ownership interests in the LLC and co-own the home in increments ranging from 12.5% to 50%.” Id. ¶ 27. “At closing, the co-owners enjoy 100% ownership in the property, and Pacaso’s only role remains to serve, at the discretion of the homeowners, as program manager overseeing the LLC and employing local businesses to care for the home.” Id. ¶ 28. Pacaso homeowners can “sell their interest at any point after the first year of ownership by listing the property on the Multiple Listing Service (‘MLS’) with a local real estate agent, and they are strictly prohibited from renting out the property at any point to anyone.” Id. ¶ 68.

Pacaso currently owns and/or manages five single-family homes in the City of St. Helena in Napa County. Id. ¶¶ 17. 25. It contends that Pacaso homeowners “are part and parcel of the underlying economic ecosystem of St. Helena” unlike “absentee second homeowners” because “Pacaso homeowners use and occupy their home year-round,” and “Pacaso itself employs between 8-10 local businesses per property, including real estate agents, property managers, landscapers, pool cleaners, home cleaners, laundry services, handymen, local artists, and more.” Id. ¶ 5.

The City first communicated with Pacaso in May 2020. Id. ¶ 79. On May 15, 2020, Maya DeRosa, the City’s Planning and Building Director, sent a “Notice of Potential Violation” to a Pacaso homeowner, Jay Jeffers, giving notice that if the home located at 1005 Valley View Street Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 2 of 19

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was “used as a timeshare or short term rental,” such use would be impermissible pursuant to the City Municipal Code. Id.; Declaration of Maya DeRosa in Support of Defendants’ Motion to Strike (“DeRosa Decl.”) [Dkt. No. 18-4], Ex. A (May 15, 2020 Letter). On May 19, 2020, Austin Allison (of then-named Niner Homes) responded on behalf of the homeowner to explain “why Pacaso’s operations do not violate such ordinances and that the homeowner’s use of his property was entirely consistent with such laws.” Compl. ¶ 80; DeRosa Decl., Ex. B (May 19, 2020 Response). Allison clarified that “Mr. Jeffers actually owns two homes in Saint Helena,” and that he is “selling a portion of his home on Valley View because he no longer desires to own 100% of the home[.]” May 19, 2020 Response at 1.

De Rosa replied on May 22, 2020, saying that she appreciated Allison’s statement “that your company, Niner Homes, only serves owner-occupants and that you ‘explicitly prohibit short term rentals and time-sharing uses’ that the City’s Municipal Code seeks to prevent.” DeRosa Decl. Ex. C (May 22, 2020 Letter); see Compl. ¶¶ 81–82. DeRosa explained, “The City’s concerns regarding both properties stem from apparent unpermitted short-term rentals of Mr.

Jeffers’ properties in the past, which is in part the reason for the City’s initial notice of potential violation.” May 22, 2020 Letter at 1. Because the May 22, 2020 letter “dropped any reference to a violation of the City’s time-share ordinance,” Pacaso alleges that it interpreted it as a “presumed green-light to move forward with its operations from this standpoint.” Compl. ¶ 82.

On July 14, 2020, reacting to “concerns” from neighbors about a listing for a Pacaso home, then-acting City Attorney Karen Ueda prepared a report to the City Council “regarding timeshare uses and fractional ownership of residence in the City.” Id. ¶ 8 and Ex. A (“July 2020 Report”).

The City of St. Helena has a timeshare ordinance, codified in Section 17.112.130, which states:
“The creation of a time-share project as a means of ownership of any single-family, two-family or multiple-family dwelling or any apartment house shall be prohibited within the city.” Id. ¶ 37; see Declaration of Ethan Walsh in Support of Defendants’ Motion to Strike (“Walsh Decl.”) [Dkt. No. 18-2], Ex. B (copies of the City’s local ordinances pertaining to timeshares and short-term rentals).

The July 2020 Report found that timeshares are “somewhat similar to short-term rentals and fractional ownership hotels but differ from both in important ways.” July 2020 Report at 324.

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It addressed the “challenges and limitations to regulating partial ownership in single-family residences,” finding that the “most fundamental challenge to amending the Zoning Code to regulate fractional or partial ownership in single-family residences is that by law zoning regulations must focus on the use of land,” and “may not target individuals.” Id. at 325. That is, “zoning based solely on ownership, as opposed to the use of land, is impermissible.” Id. at 326.

The July 2020 Report concluded with the following “recommended action”:

Receive this report, discuss, and provide direction to staff if desired.

City staff is seeking guidance and clarification from the City Council concerning the specific problem(s) a Zoning Code amendment could help resolve, but with the limitations noted above for regulating timeshares and partial ownership.

Id.

Ueda presented her July 2020 Report findings to the City Council, reiterating that “whether a residence is owned by a non-permanent city resident, for example, who may use that residence as a second home, isn’t an issue that can be regulated by the zoning code. And so, we can’t regulate based on the identity of the owner or of a tenant.” Compl. ¶ 10 (citing Recording of July 14, 2020 City Council Meeting (“July 2020 Meeting”) at 3:20:58 –3:21:13, available at https://sthelena.civicweb.net/document/42347?splitscreen=true&media=true&timestamp=11860).1 Pacaso quotes from the July 2020 Meeting, describing it as an “[e]xtensive discussion . . . about the limitations and impropriety of the City attempting to regulate partial ownership of singlefamily homes[.]” Id. ¶ 11. Despite those findings, Pacaso alleges, “[d]efendants decided to change course in early 2021, threatening that unless Pacaso immediately ceased its efforts to market a home in St. Helena to prospective home buyers, it would contact all real estate agents in the area to ‘educate’ them on the ‘illegality’ of Pacaso’s ownership model.” Id. ¶ 12. 1 Pacaso’s counsel submits a transcript of the July 2020 City Council meeting prepared by its legal staff and offers to submit a certified transcribed copy if required. See Declaration of Ashley Phillips in Support of Plaintiffs’ Opposition (“Phillips Decl.”) [Dkt. No. 22], Ex. 3. Defendants objects to the transcript for lack of relevance (FRE 401–403), lack of personal knowledge/foundation (FRE 602), impermissible hearsay (FRE 801–802), and under the best evidence rule (FRE 1002). See Evidentiary Objections to the Declaration of Ashley Phillips (“Evidentiary Objections”) [Dkt. No. 23-2] 3. Because Pacaso has submitted the URL link to the July 14, 2021 City Council meeting, I need not rely on the transcript that it prepared for purposes of resolving this motion.

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On January 25, 2021, a real estate agent for Pacaso received a letter from DeRosa regarding four Pacaso property listings. Id. ¶ 87. DeRosa’s letter stated: “The City is proactively sending this letter to communicate that there are local regulations in place pertaining to timeshares and short term rentals and we request that this letter be forwarded to both the buyer and the buyer’s agent to ensure that no zoning violations occur following these transactions.” DeRosa Decl., Ex. E (January 2021 Letter at 1). Pacaso responded on January 26, 2021 to confirm that “Pacaso is not a time-share, nor does the service allow time sharing use, and that Pacaso prohibits short-term rentals.” Compl. ¶ 90; see DeRosa Decl., Ex. G (January 2021 Response).

City Attorney Walsh, who replaced Ueda, raised the issue about the timeshare ordinance at the City Council’s February 9, 2021 meeting. Compl. ¶ 91. Pacaso alleges that Walsh’s update to the City Council “confirms that he and the City had not reached a different conclusion regarding the time-share ordinance since the conclusion reached in its July 2020 Report,” and that instead he “conceded that he and the City were still ‘looking at’ and ‘delving further into that issue’ (the applicability of the zoning ordinance), confirming that they had not yet determined what to do regarding co-ownership structures like Pacaso’s and whether such structures could be regulated under the time-share ordinance.” Id. In Pacaso’s view, Walsh’s statement that he and the City were “looking into both what we can do under our current regulations and potentially looking at some changes to the existing regulations” confirms the need to amend the City’s timeshare ordinance in order for it to apply to co-ownership structures like Pacaso.2 The next day, on February 10, 2021, Walsh sent a letter to Pacaso stating that the City “disagrees” that “Pacaso is not operating a timeshare in St. Helena.” Compl. ¶ 92. In that letter, Walsh stated: “Based on the evidence that the City has received of the nature of Pacaso’s and its buyers’ intended use of residential properties in St. Helena, Pacaso appears to be operating, 2 Pacaso’s counsel submits a transcript of the February 9, 2021 City Council meeting prepared by its legal staff and offers to submit a certified transcribed copy if required. See Phillips Decl., Ex. 4; February 9, 2021 City Council Meeting at 14:11–14:42 at https://www.youtube.com/watch?v=XUTsUdZ5wA8&t=759s&ab_channel=CityofSt.Helena.

Defendants object on the same grounds noted above. See Evidentiary Objections at 4. Because Pacaso has submitted the URL link to the February 9, 2021 City Council meeting, I need not rely on the transcript that it prepared for purposes of resolving this motion.

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facilitating, and selling timeshares under state law and the City’s code. (See St. Helena Municipal Code § 17.112.130.) Simply calling them co-ownership arrangements does not change that fact.” Walsh Decl., Ex. D (February 2021 Letter at 1). Pacaso contends that Walsh did not provide or describe the “evidence” and instead improperly placed the burden on Pacaso, inviting it to convince the City that it was not subject to the time-share ordinance: “If Pacaso convinces the City that Pacaso’s—and its buyers’—intended use of residential property in the City does not constitute a timeshare under state law and regulations or the City’s code, the City will not apply the timeshare-prohibition.” Compl. ¶ 93 (quoting February 2021 Letter at 1). Walsh gave Pacaso until February 19, 2021 to respond, stating: “Otherwise, the City will be forced to consider appropriate legal action to enforce its restrictions on timeshares, and also consider appropriate action to educate brokers and the public about the illegal nature of Pacaso’s timeshares.” February 2021 Letter at 2.

With no response from Pacaso3, on March 16, 2021, Walsh sent a letter to all listing agents and brokers in the City of St. Helena, stating:

The City is proactively sending this letter to all real-estate offices in the City to provide notice of local regulations pertaining to timeshares and short-term rentals that affect all residential properties in St.

Helena, including several properties that are currently listed for sale.

The City’s regulations encourage the long-term residential character of the City’s residential neighborhoods, which is vital to the welfare of the community.
. . .

The objective of this letter then is to ensure that no zoning violation occurs as a result of a transaction in which you or your clients might be involved.

Walsh Decl., Ex. E (March 2021 Letter at 1) (internal quotation marks omitted) (emphasis in original). The letter goes on to summarize the City’s timeshare and short-term rental regulations, adding that the timeshare ordinances applies “to a timeshare whether the use is called a 3 Pacaso contends that defendants incorrectly state that Pacaso failed to respond. Pacaso submits an email that their legal counsel sent to Walsh on February 17, 2021 stating that it would respond in due course. The email reads: “We are in receipt of your letter dated February 10, 202[1]. We have retained outside counsel who will response to the substance of the letter in two weeks.” Phillips Decl., Ex. 5 at 1. Pacaso responded to Walsh on March 17, 2021, after Walsh’s March 16, 2021 letter to the City’s real estate agents. See Walsh Decl., Ex. F (March 17, 2021 Pacaso Letter).

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‘timeshare,’ ‘fractional-ownership,’ ‘co-ownership’ ‘vacation club,’ or anything else.” Id. at 2.

Pacaso contends that this “threatening” letter “chill[ed], under threat of fines and other penalties, any desire of the agents’ part to be involved in a sale of ownership interests in Pacaso properties in St. Helena.” Compl. ¶ 94. Although the March 2021 Letter did not mention Pacaso, Pacaso contends that Walsh “plainly link[ed] his notice of purported zoning violations to listings for interests in Pacaso homes.” Id. ¶ 95. It describes the March 2021 Letter as “the manifestation of” Walsh’s threat “to educate brokers and the public about the illegal nature of Pacaso’s timeshare” from his February 2021 Letter to Pacaso. Id. ¶ 96.

Pacaso alleges that Walsh was not acting within the scope of his official discretion when he sent the February 2021 Letter or the March 2021 Letter and that Mayor Ellsworth had the power to prevent and should have prevented Walsh from sending the two letters “but failed to intervene in order to stop the impermissible application of the time-share ordinance against Pacaso.” Id. ¶¶ 97–98. Pacaso claims that the March 2021 letter to the real estate agents, brokers, and potential buyers in St. Helena “have caused [it] substantial harm” because defendants’ “misinformation campaign undermines Pacaso’s existing relationships with real estate agents working on its behalf, interferes with Pacaso’s business relationships and arrangements, tarnishes Pacaso’s reputation and goodwill in the community, and impairs Pacaso from future development (including future business partners and key stakeholders in the St. Helena community) by calling into question the legality of Pacaso’s operations.” Id. ¶ 100. “These threats have scared real estate agents and chilled their efforts to buy and sell ownership interests in Pacaso properties.

Likewise, Defendants’ threats have deterred prospective buyers from purchasing Pacaso properties.” Id. ¶ 101.

Pacaso asserts the fifth cause of action for intentional interference with prospective economic advantage against the City and Walsh based on the March 2021 Letter, alleging that “[t]he City’s and its employees’ efforts to discourage real estate agents, brokers and potential home buyers from working or transacting with Pacaso constitutes a clear, intentional interference with Pacaso’s business relationships with St. Helena residents, real estate agents and brokers in St.

Helena.” Compl. ¶ 193. Pacaso’s four other claims, asserted against either the City or all Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 7 of 19

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defendants, seek declaratory judgment that Section 17.112.130, the City’s timeshare ordinance, does not apply to Pacaso; that, as applied to Pacaso, is unconstitutionally vague and ambiguous and exceeds the City’s zoning authority and police power; and for violation of Pacaso’s due process rights based on selective and arbitrary enforcement. Id. ¶¶ 140–91.

LEGAL STANDARD
California Code of Civil Procedure 425.16 “was enacted to allow early dismissal of meritless first amendment cases aimed at chilling expression through costly, time-consuming litigation.” Metabolife Int’l, Inc. v. Wornick, 264 F.3d 832, 839 (9th Cir. 2001). These lawsuits are also known as “Strategic Lawsuits Against Public Participation,” or “SLAPPs.” Makaeff v.

Trump Univ., LLC, 715 F.3d 254, 261 (9th Cir. 2013). Under section 425.16 a party may file an “anti-SLAPP motion” to strike “a cause of action based on an act in furtherance of [the] right to petition or free speech.” Metabolife, 264 F.3d at 840 (internal quotations omitted).

In ruling on an anti-SLAPP motion, a court engages in a two-step process. Equilon Enterprises v. Consumer Cause, Inc., 29 Cal.4th 53, 67 (2002). Under step one, the court assesses whether the moving party has made “a prima facie showing that the lawsuit arises from an act in furtherance of its First Amendment right to free speech.” Nat’l Abortion Federation v. Center for Medical Progress, Case No. 15-cv-03522-WHO, 2015 WL 5071977, at *3 (N.D. Cal. Aug. 27, 2015).

At the first step, the moving defendant bears the burden of identifying all allegations of protected activity, and the claims for relief supported by them. When relief is sought based on allegations of both protected and unprotected activity, the unprotected activity is disregarded at this stage. If the court determines that relief is sought based on allegations arising from activity protected by the statute, the second step is reached.

Baral v. Schnitt, 1 Cal. 5th 376, 398 (2016).

If the moving party can establish step one, the burden shifts to the non-moving party which must then show a reasonable probability that it will prevail on its claim. Makaeff, 715 F.3d at 261. “For a plaintiff to establish a probability of prevailing on a claim, he must satisfy a standard comparable to that used on a motion for judgment as a matter of law.” Price v. Stossel, 620 F.3d 992, 1000 (9th Cir. 2010). This standard requires that a claim be dismissed if the plaintiff presents Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 8 of 19

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an insufficient legal basis, or if no reasonable jury would find in its favor. Metabolife, 264 F.3d at 840; see also Price, 620 F.3d at 1000 (an anti-SLAPP motion will be granted if the plaintiff “presents an insufficient legal basis for the claims or when no evidence of sufficient substantiality exists to support a judgment for the plaintiff”) (internal quotations omitted).

DISCUSSION
I. STEP ONE: PROTECTED ACTIVITY
A defendant satisfies the first step of the analysis by demonstrating that the “conduct by which plaintiff claims to have been injured falls within one of the four categories described in subdivision (e) [of section 425.16] . . . and that the plaintiff’s claims in fact arise from that conduct.” Rand Res., LLC v. City of Carson, 6 Cal.5th 610, 620 (2019) (internal quotation marks and citations omitted). The four categories in subdivision (e) describe conduct “in furtherance of a person’s right of petition or free speech under the United States or California Constitution in connection with a public issue.” Cal. Civ. Proc. Code § 425.16(e). Defendants contend that Pacaso’s fifth cause of action arises from two of those categories: communications “made in connection with an issue under consideration or review by a legislative body, executive, or judicial body, or any other official proceeding authorized by law” (Id. § 425.16(e)(2)) and “any other conduct in furtherance of the exercise of the constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.” (Id. § 425.16(e)(4)).

Defendants rely on City of Costa Mesa v. D’Alessio Invs., LLC, 214 Cal. App. 4th 358 (2013). and Maranatha Corr., LLC v. Dep't of Corr. & Rehab., 158 Cal. App. 4th 1075 (2008) for their subsection (e)(2) argument. An analysis of whether a cause of action arises from communication protected by subsection (e)(2) may “be broken down into three components: (a) was there an ‘issue under consideration or review by a legislative, executive, or judicial body’; (b) were the [defendants’] statements made ‘in connection with’ this issue; and (c) [does] the cause[] of action pleaded by [Pacaso] ‘aris[e] from’ the [defendants’] statements?” Costa Mesa, 214 Cal.

App. 4th at 372–73 (quoting Cal. Civ. Proc. Code § 425.16(e)(2)).

In Costa Mesa, a city brought claims against a commercial landlord to abate a public Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 9 of 19

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nuisance and refused to issue him any new business licenses until the landlord complied. Id. at 365. The landlord filed a cross-complaint alleging that city employees slandered him and interfered with his business by making negative statements about him to prospective tenants and contractors. Id. at 366. The court found that the landlord’s causes of action arose from “oral statements ‘made in connection with an issue under consideration or review by a[n] . . . executive . . . body’ under section 425.16, subdivision (e)(2)” and therefore was a protected activity. Id. at 372 (quoting Cal. Civ. Proc. Code § 425.16(e)(2)).

In Maranatha, a private firm sued the California Department of Corrections and Rehabilitation (“CDCR”), a state executive branch department, based on alleged defamatory statements made by the CDCR in a publicized letter (and subsequent oral comments made by an employee) explaining the reasons it was terminating its contract with the firm (i.e., the firm misappropriated funds). 158 Cal. App. 4th at 1080–82. Under the first step of the anti-SLAPP analysis, the court found that “Maranatha’s right to retain revenue from inmate telephone calls at the Victor Valley MCCF was undoubtedly an ‘issue under consideration’” by the CDCR. Id. at 1085. “Indeed, the CDCR and Maranatha argued over the issue for years and their disagreement was referenced in an amendment to the contract. The conflict finally came to a head when Woodford terminated the contract on the ground that Maranatha had failed to account for and wrongfully withheld the ITRF.” Id. The court rejected the private firm’s argument that a matter is “under consideration or review” only when formal or official proceedings have initiated. Id. Such an argument “disregards the plain language of section 425.16(e)(2), which protects ‘any written or oral statement or writing made in connection with an issue under consideration or review by a legislative, executive, or judicial body, or any other official proceeding authorized by law.’” Id. (quoting Cal. Civ. Proc. Code § 425.16(e)(2)) (emphasis added). The argument “would change the ‘or’ to an ‘and’ in derogation of settled principles of statutory construction and in disregard of the legislative mandate that section 425.16 be construed ‘broadly.’” Id.

Like Costa Mesa and Maranatha, the statements in the March 2021 Letter were made in connection with an issue under consideration by a legislative body—the scope of the City’s timeshare and short-term rental ordinances and potential violation of those ordinances by persons Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 10 of 19

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selling fractional interests in residential properties. Pacaso’s fifth cause of action arises from these statements; it alleges that the March 2021 Letter itself “intimidated and threatened real estate agents and brokers from engaging and transacting with Pacaso.” Compl. ¶ 194; see Costa Mesa, 214 Cal. App. 4th at 375 (“D’Alessio is suing for relief based on the oral statements, not challenging the underlying acts (the refusal of the City and its employees to issue licenses).”).

Pacaso’s attempt to distinguish Costa Mesa and Maranatha is unpersuasive. That the parties in Maranatha considered the issue “for years” does not mean that defendants’ consideration of the issue here for at least nine months makes it any less of a protected activity.

Maranatha, 158 Cal. App. 4th at 1085. Similarly, that Costa Mesa involved two entities, “both an executive body (the City government) and a judicial body (the trial court),” that were “considering and reviewing the issue of whether illegal activity was occurring,” does not make the one entity involved here any less deserving of protection from the anti-SLAPP statute. Costa Mesa, 214 Cal. App. 4th at 373.

The citations Pacaso offers in its opposition brief are distinguishable. In Diamond Resorts U.S. Collection Dev., LLC v. Pandora Mktg., LLC, 500 F. Supp. 3d 1104, 1108 (C.D. Cal. 2020), appeal dismissed sub nom., 2021 WL 2209114 (9th Cir. Mar. 15, 2021), a plaintiff timeshare company sued a defendant “timeshare exit” company, which advertised itself as helping timeshare owners cancel or terminate their timeshare contracts, for tortious interference. The defendant “timeshare exit” company argued that the pre-litigation demand letters they sent out, demanding the timeshare company to cease and desist from communicating with their timeshare owners, arose from activity protected under section (e)(2) of the anti-SLAPP statute. The court rejected that argument because defendants “sent hundreds of exit letters,” yet failed to state that “any letter resulted in subsequent litigation.” Id. at 1113. Instead, as the plaintiff alleged, defendants “never intended to represent [timeshare] owners in any actual litigation.” Id.

The court in A.F. Brown Elec. Contractor, Inc. v. Rhino Elec. Supply, Inc., 137 Cal. App. 4th 1118, 1129 (2006), an action arising in part from a contractor’s service of stop notices on a school district, found that there was “no ‘official proceeding’ in progress” at time of the stop notices, and that the stop notices required the district to withhold funds due to the general Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 11 of 19

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contractor but “did not request the district to commence any type of proceeding, or to make any type of administrative or adjudicatory decision.” A.F. Brown therefore concluded that the stop notices did not involve an “official proceeding” or serious consideration of litigation for clause (1) and (2) of section 425.16, subdivision (e) to apply. Id.

In City of Industry v. City of Fillmore, 198 Cal. App. 4th 191, 217 (2011), the court held that the fraud and conspiracy claims did not arise from administrative proceedings to determine the proper allocation of local sales tax revenues, a purported protected activity. Rather, it found that the claims were rooted in “a retailer’s submission of sales tax returns to the [State Board of Equalization (“SBE”)] in the ordinary course of business and the SBE’s transmission of local sales tax revenues to local jurisdictions based on the returns,” both of which “do[] not involve either a ‘proceeding’ or ‘an issue under consideration or review’ by an official body within the meaning of clauses (1) and (2) of section 425.16, subdivision (e).” Id.

Pacaso’s citations either involved the lack of potential consideration by judicial bodies (i.e., litigation was not contemplated) or claims that did not arise from the asserted protected activity. Neither issue is present here. Pacaso’s fifth cause of action for intentional interference directly arises from the disputed March 2021 Letter. Statements in the March 2021 Letter were made in connection with an issue under consideration by a legislative body. Defendants have met their burden under step one of establishing that the fifth cause of action arises from protected activity within the meaning of section 425.16(e)(2).
4 II. STEP TWO: PROBABILITY OF PREVAILING ON THE CLAIM
Once defendants demonstrate that the claims against them arise out of protected activity, the burden shifts to the plaintiff to demonstrate that each challenged claim based on protected activity is legally sufficient and factually substantiated. Baral, 1 Cal.5th at 384. The inquiry “is limited to whether the plaintiff has stated a legally sufficient claim and made a prima facie factual showing sufficient to sustain a favorable judgment.” Id. at 384–85. 4 Given that defendants’ argument under section 425.16(e)(2) succeeds, I need not address whether the alleged conduct is protected under section 425.16(e)(4).

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Defendants argue that Pacaso cannot make this showing because they are immune from suit for sending the March 2021 Letter. See Rohde v. Wolf, 154 Cal. App. 4th 28, 38 (2007) (finding that a statutory privilege is “relevant to the second step in the anti-SLAPP analysis in that it may present a substantive defense the plaintiff must overcome to demonstrate a probability of prevailing”). They contend that California Government Code section 820.2, the official duty privilege of California Civil Code section 47(a), the official proceeding privilege of Civil Code section 47(b), and the common interest privilege of Civil Code section 47(c) immunize them from liability for issuing the March 2021 Letter. Of the four statutory immunities raised by defendants, I find that the official duty privilege of section 47(a) is applicable to the March 2021 Letter and immunizes defendants from Pacaso’s fifth cause of action.5 A. Official Duty Privilege under Civil Code section 47(a) Section 47 (a) “confers privileged status upon any statement made by a public official in the course of discharging his [or her] official duties.” Royer v. Steinberg, 90 Cal. App. 3d 490, 500 (1979); Cal. Civ. Code § 47(a). The privilege “protects any statement by a public official, so long as it is made (a) while exercising policy-making functions, and (b) within the scope of his [or her] official duties.” Maranatha, 158 Cal. App. 4th at 1087 (citing Royer, 90 Cal. App. 3d at 501).

Defendants argue that the statements contained in the March 2021 Letter are privileged pursuant to section 47(a) because Walsh sent the letter in the course of discharging his duties as the city attorney to evaluate and prevent violations of the City’s zoning ordinances, which involved a policy-making aspect and the exercise of discretion. See Walsh Decl. ¶¶ 2, 8–11. 5 Immunity is not available under Government Code section 820.2 because Pacaso expressly pleads that it is seeking only “mandatory and prohibitory injunctions to cure Defendants’ tortious conduct and to prevent future, recurring harms” and that it “does not seek monetary or other damages based on their intentional interference with Pacaso’s economic interests.” Compl. ¶ 201 n.16; see La All. for Hum. Rts. v. City of Los Angeles, No. LACV2002291DOCKESX, 2021 WL 1890782, at *7 (C.D. Cal. May 11, 2021) (finding Government Code section 814, which governs claims for immunities under sections 815.2 and 820.2 “specifically denotes that ‘[n]othing in this part affects liability based on contract or the right to obtain relief other than money or damages against a public entity or public employee’”) (quoting Cal. Gov’t Code § 814). Because I find immunity applies under the official duty privilege of Civil Code section 47(a), I need not address the other privileges under sections 47(b) and 47(c).

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Pacaso contends that the privilege does not apply because the March 2021 Letter merely implements a policy decision that was previously made (that Pacaso was violating the City’s ordinances) and thus was “operational” and not an exercise of a policy-making function.

Statements made by city attorneys related to their policy-making function are protected under section 47(a). Tutor-Saliba Corp. v. Herrera, 136 Cal. App. 4th 604, 607 (2006) provides an illustrative example. There, a construction company (“Tutor”) sued San Francisco City Attorney Dennis J. Herrera for defamation for statements he made about the potential merits of fraud litigation he had initiated against the company on behalf of the city. The California Court of Appeal affirmed the trial court’s ruling striking the defamation action under the anti-SLAPP statute because the alleged defamatory statements fell under the official duty privilege of section 47(a). Id. at 617. It found:

Under these circumstances, Herrera, as city attorney, had the authority, if not the duty, to express his professional opinion about the justification for, and potential merits of, the protracted and expensive litigation he had initiated on behalf of the city,[footnote omitted] as well as to make a public statement that he disagreed with the mayor’s proposed unilateral action that would bring the case to a halt. While the language of his remarks was florid and certainly cast Tutor in an unfavorable light, the comments all concerned the claims being asserted in the federal action, and Herrera’s professional opinion, as the municipal attorney entrusted with plenary power over that litigation, that the matter was well worth pursuing.

Id. at 615. It concluded that “the alleged defamatory statements Herrera made concerning Tutor’s business practices related to the policy making he must necessarily perform as city attorney, and were within the scope of his duties.” Id.

Tutor-Saliba cited two other analogous cases involving state and county attorneys. Kilgore v. Younger, 30 Cal. 3d 770 (1982) involved former state Attorney General Evelle Younger, who had commissioned a study of organized crime in California. The report named 92 persons suspected of involvement in organized crime, including plaintiff Kilgore, who was identified as being engaged in an illegal bookmaking operation. Id. at 774–775. The report was made public by Younger at a press conference during which he distributed copies to the media and proclaimed that he “adopted” its findings. Id. at 775. Kilgore sued for defamation and related torts. The California Supreme Court found that the official duty privilege of section 47(a) is “absolute” and Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 14 of 19

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applied to public statements made by high-ranking governmental officers in the discharge of their official duties. Id. at 778.

In Ingram v. Flippo, 74 Cal. App. 4th 1280 (1999), Monterey County District Attorney Dean Flippo was sued for declaratory and injunctive relief by a local school member after issuing a press release charging the school board with minor violations of California’s Brown Act, Government Code. section 54950 et seq. Although Flippo denied any intention to prosecute for the minor violations described in the press release, the court nonetheless found that the privilege applied: “[T]he District Attorney issued a press release summarizing the results of an investigation of a complaint of alleged violations of the Brown Act. The District Attorney’s ultimate decision neither to prosecute nor to file a civil action at the time does not, in our view, affect the application of the privilege in these circumstances.” Id. at 1294.

Tutor-Saliba went on to distinguish these types of circumstances from the two cases Pacaso relies on here—McQuirk v. Donnelley, 189 F.3d 793 (9th Cir. 1999) and Neary v. Regents of the Univ. of Cal., 185 Cal. App. 3d 1136 (1986). In McQuirk, a former employee of the Glenn County Sheriff’s Office applied for a job with a police department in Washington and sued the Glenn County Sheriff for allegedly defamatory statements made about him to the police department. McQuirk, 189 F.3d at 795. It is “[n]ot surprising[]” that “the court concluded that answering requests for employment references,” statements made five years after the employee had retired from the Glenn County Sheriff’s Office, “is part of the ministerial, or operational, duties of any employer, and certainly did not relate to the policy-making, law enforcement functions of a county sheriff.” Tutor-Saliba, 136 Cal. App. 4th at 616 (citing McQuirk, 189 F.3d at 799–801). Similarly, Neary involved a vice chancellor at the University of California who released a veterinarian’s report investigating dead cattle at the plaintiff’s ranch, and the release of the report itself “was ministerial and divorced from any policy-making role the vice chancellor might have had.” Id.; see Neary, 185 Cal. App. 3d at 1142.

Here, Walsh’s statements were related to the policy-making he must necessarily perform as city attorney and were within the scope of his duties (like the city, county, and state attorneys involved in Tutor-Saliba, Kilgore, and Ingram). They were not merely ministerial or operational Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 15 of 19

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(in contrast to the county sheriff and vice chancellor involved in McQuirk and Neary). Walsh declares that his official duties include “the assessment and prevention of potential violations of the municipal code, including zoning ordinances, which is within the scope of the discretion that is vested in [him] as the City’s chief legal officer.” Walsh Decl. ¶ 2. Pursuant to these duties and “in consultation with the City Manager, and to prevent what [he] believed, in good faith and after deliberation, to be a potential zoning violation, [he] informed the Realtors of the City’s timeshare and short-term-rental regulations” through the March 2021 Letter. Id. ¶ 11. To repeat, Walsh sent the March 2021 Letter in the course of discharging his duties as the city attorney to evaluate and prevent violations of the City’s zoning ordinances, which involved a policy-making aspect and the exercise of discretion.

Pacaso argues that the act of sending the March 2021 Letter was ministerial because it could have been accomplished by someone other than Walsh, given his testimony that “the March 16, 2021 letter was initially drafted to be sent on behalf of the City Manager.” Walsh Decl. ¶ 11.

The argument is unpersuasive. Walsh attests that he prepared the letter “in consultation with the City Manager and Ms. DeRosa” and that the letter informing realtors of the City’s regulations and potential zoning violation was sent “[p]ursuant to [his] job duties,” which includes “assess[ing] and prevent[ing] zoning violations” “in consultation with the City Manager” who is “authorized to enforce the City’s Code.” Id. Walsh’s consultation with other city officials does not remove him from the cloak of the official duty privilege. Pacaso fails to cite any case that has held otherwise.

Pacaso cites the terms of Walsh’s contract with the City, which states that all of his responsibilities are “as directed” or “as requested” by the City but does not mention any “policy making” or “discretion.” See Phillips Decl., Exs. 1 and 2. Defendants object to Pacaso’s submission of Walsh’s contract with the City on lack of relevance and lack of foundation grounds.

That evidence does not undermine the conclusion above. The record demonstrates that Walsh was doing what the St. Helena City Council directed him and his predecessor Ueda to do—look into the City’s timeshare ordinance and investigate fractional uses in residential neighborhoods.6 6 Pacaso also contends that another partner at Walsh’s law firm, Best Best & Krieger, concluded that Pacaso was not subject to a time share ordinance in the City of Indian Wells. See Phillips Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 16 of 19

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Accordingly, Pacaso cannot prevail on the fifth cause of action because it is based on conduct and statements protected by the official duty privilege of section 47(a).

III. LIMITED DISCOVERY IS NOT WARRANTED
Pacaso contends that it should be permitted to take discovery to test the factual assertions made by defendants in support of their claimed immunities and privileges before I entertain a possible dismissal of the fifth cause of action. It argues that it is entitled to discovery on whether the decision to send the March 2021 Letter was “policymaking” within the section 47(a) privilege.

A similar request for discovery was rejected in Tutor-Saliba. When faced with the court’s skepticism concerning the need for any discovery, plaintiffs’ counsel contended it was “entitled to [discovery] which can help establish that these privileges do not apply” and that “if the court determined that Herrera was acting in his official capacity, [it] ‘should be able to explore’ this question further.” 136 Cal. App. 4th at 618. The Tutor-Saliba court found that “the trial court was well within its discretion in denying discovery” because “Tutor’s last minute attempt to argue that discovery was needed to ‘explore’ the factual basis for Herrera’s privilege claim was much too little, and came much too late.” Id. The request was “too late” because it was only raised at the hearing and “too little” because “no attempt was made by counsel to explain what specific discovery was needed, and why it was needed” other than “general comments that they should be able to explore and conduct discovery on what ‘exactly [Herrera’s] duties are and whether his decision to speak at [the public event] fell within those official duties.’” Id. at 619.

Although Pacaso’s request is not “too late” because it raised this issue in its briefing, it is “too little” to warrant discovery. The examples of necessary discovery that Pacaso provides in its opposition brief are overly board. When asked at the hearing what other facts it expected to uncover in discovery that would negate the privilege, Pacaso provided a similarly general response. In these circumstances, I find that discovery is not warranted.

Decl., Exs. 7–9 (copies of the City of Indian Wells’ municipal code and letters sent between Pacaso and the City of Indian Wells in April 2021). It argues that Walsh’s decision with respect to the City of St. Helena cannot be reconciled with the opposite conclusion reached on behalf of Indian Wells. It fails, however, to demonstrate how the circumstances involving another municipality and another lawyer is relevant to the matter at hand with Walsh and the City of St.

Helena. Pacaso’s counsel did not argue this point at the hearing.

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IV. FEES
Subject to limited exceptions that do not apply here, “a prevailing defendant on a special motion to strike shall be entitled to recover his or her attorney’s fees and costs.” Cal. Civ. Proc.

Code § 425.16(c)(1). “Because the award of attorney’s fees under this provision is mandatory, ‘the trial court must, upon defendant’s motion for a fee award, rule on the merits of the SLAPP motion’ even if the matter was dismissed before reaching said merits.” Elem Indian Colony of Pomo Indians of the Sulphur Bank Rancheria v. Ceiba Legal, LLP, 230 F. Supp. 3d 1146, 1152 (N.D. Cal. 2017) (quoting Pfeiffer Venice Props. v. Bernard, 101 Cal. App. 4th 211, 215 (2002)); see Ketchum v. Moses, 24 Cal.4th 1122, 1131 (2001) (holding “any SLAPP defendant who brings a successful motion to strike is entitled to mandatory attorney fees.”).

Defendants contend that they have incurred attorneys’ fees and costs in the amount of $20,126.50. In support of their request, they submit a declaration that provides the hours spent by counsel (a partner, two litigation associates, and a paralegal), along with their hourly rates (which have been reduced in connection with this matter). See Supplemental Declaration of Damian M.

Moos in Support of Motion to Strike [Dkt. No. 36].

Pacaso does not contest this amount or the reasonableness of defense counsel’s hourly rates.7 Instead, it argues that the request is premature and that attorneys’ fees cannot be awarded until it has a chance to amend the Complaint. See Verizon Delaware, Inc. v. Covad Communications Co., 377 F.3d 1081, 1091 (9th Cir. 2004) (holding that granting an anti-SLAPP motion without leave to amend “would directly collide with Fed. R. Civ. P. 15(a)’s policy favoring liberal amendment”). When asked at the hearing what facts it could allege in an amended complaint to save its fifth cause of action, Pacaso’s counsel came up short. While amendment is usually freely given, in light of my determination that the fifth cause of action is based on privileged protected activity, amendment would be futile.

Having reviewed defendants’ submission, I find that the amount of time spent researching 7 At the July 6, 2021 Case Management Conference, I ordered defendants to submit a supplemental declaration describing the fees actually incurred in litigating the motion. See Minute Entry [Dkt. No. 35]. I allowed Pacaso to respond to the declaration by July 10, 2021. No response was filed.

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and preparing the motion, briefs, and declaration is reasonable, as are the billing rates for defense counsel. Defendants’ request for fees is GRANTED.

CONCLUSION
Defendants have met their burden under step one of the anti-SLAPP analysis by showing that the fifth cause of action arises from protected activity. They have also demonstrated that Pacaso cannot prevail on the fifth cause of action because the claim is based on conduct and statements privileged under section 47(a)’s official duty privilege. For these reasons, the motion to strike the fifth cause of action is GRANTED. Pacaso is ORDERED to pay $20,126.50 to defendants for fees and costs incurred in connection with the anti-SLAPP motion.

IT IS SO ORDERED.

Dated: July 15, 2021
William H. Orrick
United States District Judge
Case 3:21-cv-02493-WHO Document 38 Filed 07/15/21 Page 19 of 19

2310 East Ponderosa Drive - Suite 25
Camarillo, California 93010-4747
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Los Angeles – Inland Empire – Marin County – Oakland – Orange County – Palm Desert – San Diego – San Francisco – Silicon Valley – Ventura County April 7, 2022

VIA E-MAIL TO
[email protected] and
[email protected]
Patrick Abell
Senior Legal Counsel
Pacaso, Inc.
2021 Fillmore St. Suite 183
San Francisco, CA 94115
Ellen Haberle, Director
Government & Industry Relations
Pacaso, Inc.
2021 Fillmore St. Suite 183
San Francisco, CA 94115
Re: Request to Immediately Cease and Desist Unlawful Operations Dear Mr. Abell and Ms. Haberle:

This law firm serves as City Attorney for the City of Carmel-by-the Sea, California (“City”). In that capacity, we are writing to advise Pacaso Inc. (“Pacaso”) that Pacaso’s current operations within the City are unlawful and must cease immediately. The City has been made aware of at least one property sold by Pacaso within the City at Dolores 7 SW 13th, Carmel by-the-Sea, CA 93921. The sale of this property constitutes the sale of a timeshare prohibited by the Carmel-by-the-Sea Municipal Code (“CMC”) Section

17.28.010.

City Prohibition on Timeshare Uses
CMC section 17.28.010 provides that “[t]imeshare projects, programs and occupancies are prohibited uses within all of the zoning districts within the City.” Timeshare projects, programs and occupancies are further defined in CMC Section 17.70.020:

Patrick Abell
Ellen Haberle
Pacaso, Inc.

April 7, 2022

 A “time-share program” is “[a]ny arrangement for a project whereby the use, occupancy, or possession of real property has been made subject to a timeshare estate, use, or occupancy, whereby such use, occupancy, or possession circulates among purchasers of the time-share intervals according to a fixed or floating time schedule on a periodic basis for a specific period of time during any given year, but not necessarily for consecutive years.”

 A “time share estate” is defined as “[a] right of occupancy in a time-share project that is coupled with an estate in the real property.
 A “time-share use” is “a license or contractual or membership right of occupancy in a time-share project which is not coupled with an estate in the real property.”  A “time-share project” is “[a] project in which a purchaser receives the right in perpetuity, for life, or for a term of years, to the recurrent, exclusive use or occupancy of a lot, parcel, unit, or segment of real property, annually or on some other periodic basis, for a period of time that has been or will be allotted for the use or occupancy periods into which the project has been divided.  A “project” specifically includes “[a]ny proposal for a new or changed use.” Pacaso’s Business Involves the Sale and Management of Prohibited Timeshare Uses
Pacaso’s website indicates that its business model involves sales of property held by an limited liability company in 1/8 ownership shares, with the associated right to exclusive use of the subject property by the owner of the share, with Pacaso managing among other things, the upkeep of the property and providing an app to arrange for periods of exclusive use by the share owners. Pacaso’s website further states that each owner of a 1/8 share is entitled to 6 “general stays,” booked at least 61 days in advance, which may range between 2 to 14 nights, and unlimited “short notice stays” booked less than 60 days in advance. However, maximum stay length is limited to 14 nights regardless of the method of booking. Owners of two shares have the option to book stays up to 28 nights.

Pacaso’s business model meets the City’s Ordinance’s definition of a prohibited “timeshare program,” because the ownership of the property through the LLC is an “arrangement for a project whereby the use, occupancy, or possession of real property

Patrick Abell
Ellen Haberle
Pacaso, Inc.

April 7, 2022

has been made subject to a time-share estate, use, or occupancy,” and rights to periods of exclusive use are circulated among the owners of the shares, in specific intervals up to 14 nights per 1/8 share, “according to a … floating schedule on a periodic basis for a specific period of time during any given year.” Additionally, division of the property into fractionalized ownership under Pacaso’s business model will create either a “time-share estate” or “time-share use” — either the owners of the shares of the LLC hold a “right of occupancy” and “an estate in the real property” which establishes a time-share estate, or if the LLC is deemed the sole holder of the “estate in the real property,” then such owners have a “time-share use” because they will hold a right to determine and establish their rights of occupancy pursuant to their right to operate and control the LLC under the terms of any membership or operating agreements.

We are aware that Pacaso has asserted to other jurisdictions that the properties that they sell and manage are not timeshares, but rather “fractionalized ownerships.” According to Pacaso, a Pacaso home is no different from any other single family residence. However, this is simply not true. Regardless of what Pacaso wants to calls its business model, the impact is the same — this type of commercially managed short-term vacation use has the same impacts on surrounding residential areas as short-term vacation rentals, which are generally prohibited by the City’s municipal code. (See CMC Sections 17.08.040, 17.68.030; 17.28.040.) The frequent, rotating occupancy of the owners is functionally akin to short-term rentals, and the City’s existing regulations on timeshare uses are specifically intended to minimize the impacts created by this type of use and occupancy of land. Similar prohibitions on short-term rotating occupancies have already found lawful under Ewing v. City of Carmel-by-the-Sea (1991) 234 Cal.App.3d 1579, which found that the City could lawfully prohibit short-term rental of residential property for transient occupancy in residential neighborhoods as an incompatible “commercial” use.

Finally, several significant policy reasons justify the City’s prohibition against timeshares. The City’s prohibitions on timeshares were first adopted in 1988 in order to preserve housing stock. The Housing Element of the City’s General Plan includes Goal G3-2, which is to “[p]reserve existing residential units and encourage the development of new multifamily housing in the Commercial and R-4 Districts.” Furthermore, Goal G3-4 specifically requires that the City “[p]rotect the stability of residential neighborhoods by promoting year-round occupancy and neighborhood enhancement.” As part of this goal, the City has committed to “maintain and encourage the expansion of permanent residential housing stock,” because the Housing Element notes that “[a] substantial percentage of the City's housing stock lies vacant much of the

Patrick Abell
Ellen Haberle
Pacaso, Inc.

April 7, 2022

year as second homes occupied for weekends, vacations or on a seasonable basis” which “has the effect of reducing the number of permanent, year-round residents in the City.” To avoid depletion of residents and associated impacts on community, City services, Goal G3-4 of the City’s Housing Element specifically requires the enforcement of the prohibitions on short-term, transient rentals and timeshares in residential dwellings.

In sum, conversion of any existing housing stock into timeshares or “fractionalized ownerships” reduces the available supply of homes for occupation for full-time residency, and therefore reduces the affordability of housing in the City, based on basic laws of supply and demand.

Pacaso is Unlawfully Operating Without Required Business Licenses Pursuant to CMC section 5.04.020, it is unlawful for any person employed by Pacaso to commence or carry on any kind of business in the City without first procuring a business license and pay the applicable business license tax. (CMC section 5.04.020.) Pacaso does not possess a City business license, nor has it paid any business license tax to the City. As a result, Pacaso’s operations within the City also are in conflict with the City’s business license ordinance. However, we note that even if Pacaso obtains a business license, the business may not operate in the manner described above due to the prohibitions in the City’s Municipal Code regarding timeshares.

Request to Cease Unlawful Operation
In conclusion, Pacaso’s current operations within the City are unlawful and must cease immediately. The City requests that Pacaso cease all advertising and sale of fractional ownership of residential properties within the City. Failure to comply may result in enforcement. Any violation of City zoning prohibitions is subject to administrative citation and imposition of new fines for each day of unlawful operation pursuant to CMC Chapter 18.04. Furthermore, any violation of CMC section 17.28.010 prohibiting timeshare uses is a misdemeanor subject to criminal prosecution, punishable by a fine not exceeding $1,000 and imprisonment for a term not exceeding a period of six months. (CMC 1.16.010, 17.66.040.)
We are requesting your written response to this letter by April 21, 2022 which you may submit to me via email to [email protected]

Patrick Abell
Ellen Haberle
Pacaso, Inc.

April 7, 2022

Thank you for your cooperation.

Sincerely,
Brian A. Pierik
City Attorney
City of Carmel-by-the Sea
BAP:SAR/jc
CAM #4855-3499-0355 v1

April 19, 2022
Brian A. Pierik
Burke, Williams & Sorensen, LLP
2310 East Ponderosa Drive - Suite 25
Camarillo, California 93010-4747
Dear Mr. Pierik:

We are in receipt of your letter dated April 7, 2022 on behalf of your client, the City of Carmel-by-the-Sea (“City”).

As an initial matter, we were very disappointed to receive your letter. Pacaso has had numerous conversations with City officials. We thought these conversations were productive and that City officials understood our co-ownership model and that we wanted to be a good partner in the community. It is even more disappointing that you have demanded a draconian solution, i.e., that Pacaso cease its current operations in the City. This is especially egregious when one considers that Pacaso is only managing a single home in the City and, to our knowledge, there has not been a single complaint regarding the home.

Background
Pacaso is a real estate service company that supports buyers who wish to co-own residential property together through a property-specific LLC. Co-ownership, whereby a small group of family members or friends co-own a second home together, is a common practice throughout California, the Monterey Peninsula, and in Carmel. According to our analysis, about 60% of the housing units in the City are not occupied on a full-time basis by their owners and over 2,500 of these are owned in an LLC or trust, which enable co-ownership arrangements.

While your correspondence characterizes our business as "timeshare,” there are several key differences between the Pacaso co-ownership model and traditional timesharing plans. Pacaso sells ownership interests in residential real estate, unlike traditional timesharing plans, which often give purchasers a contractual right to use a resort property. Just like family members who own property together, Pacaso co-owners together own 100% of the property and employ Pacaso as a service provider to assist them with scheduling, property management and expense management. If Pacaso co-owners no longer desire Pacaso’s services, they have the option to terminate Pacaso as a service provider; traditional timeshare owners typically do not enjoy that option. Furthermore, the co-owners can sell the home, dissolve the LLC and distribute the sale proceeds of the real estate asset to each co-owner on a pro rata basis. That is, they have all of the rights and optionality of any other single-family residence owners.

Pacaso Homes Are Not Timeshares
Turning to the application of the City’s timeshare ordinance, it is clear that the City’s ordinance does not apply to a Pacaso home. Section 17.28.010 provides that: “[t]imeshare projects, programs and occupancies are prohibited uses within all of the zoning districts within the City.”

Times-hare project, program, and occupancy are defined in CMC Section 17.70.020 (emphasis added):

Time-Share Occupancy. An occupancy related to the situation wherein a purchaser receives the right or entitlement in perpetuity…for a period of time that has been or will be allotted from the use or occupancy periods into which the time-share project which is involved has been divided.”
Time-Share Project. A project in which a purchaser receives the right…to the recurrent, exclusive use or occupancy…for a period of time that has been or will be allotted for the use or occupancy periods into which the project has been divided.” Time-Share Program. Any arrangement for a project whereby the use, occupancy, or possession of real property has been made subject to a time-share estate, use, or occupancy, whereby such use, occupancy, or possession circulates among purchasers of the time-share intervals according to a fixed or floating time schedule on a periodic basis for a specific period of time during any given year, but not necessarily for consecutive years.

As you can see above, the definitions of timeshare occupancy, project, and program only apply when usage rights in a property have been divided into increments of time. A Pacaso home is not divided into increments of time. Rather, the home is owned in its entirety, in fee simple, by the LLC and the property has not been divided into increments by a timeshare plan or by a timeshare instrument. It is analogous to when friends or family members co-own a second home today and the friends or family members decide how to share ownership and use of the property. The negotiation and cooperation by co-owners regarding how they want to use their second home does not create a timeshare because the property is owned in its entirety and not divided into time increments. In short, Pacaso owners are not purchasing a use right for a specific period time, but rather are purchasing a co-ownership interest and agreeing to equitably use the home with their co-owners.

The co-owners of the Carmel home use their home for residential purposes, which is a permitted use of the property and is similar to the manner in which other second home owners own and use homes in the City. We presume it is not the intention of the City or the aim of the City’s zoning code to regulate who may or may not co-own a real estate together, or dictate the vehicle through which they elect to co-own real estate. As the City has acknowledged in its Housing Element of its General Plan, “Cities have limited ability to influence second home ownership and use.” The co-owners of the Carmel home have elected to co-own their home in a multi-member LLCs, which is an ordinary practice in real estate. The co-owners have agreed to engage Pacaso as a service provider to assist them with the management of the home. As such, the co-owners of the home in question are owning the home in a way that is permissible under the City code and is similar to the manner in which other owners of second homes own and use homes in the City.

In addition, any attempt by the City to enforce its current ordinance against the Carmel home would run counter to the Coastal Act, in that it purports to restrict access to the City’s coastal

zone in a way that has historically not been restricted for similarly situated co-owners of residential properties in the City.

Pacaso Homes Help the City Achieve Housing Goals
We also note that the Pacaso model will help the City achieve two goals set out in the City’ Housing Element - “Preserve the existing housing stock” (Goal G3-1) and “Protect the stability of residential neighborhoods by promoting year-round occupancy and neighborhood enhancement” (Goal G3-4).

The sale of Pacaso homes in Carmel will help “[p]reserve existing housing stock” by giving second home buyers a better option than a whole home. (Goal G3-1.) Just one co-owned Pacaso home can remove up to eight buyers from local housing competition by pooling them into a single luxury home, since Pacaso makes use of one property that would have otherwise been eight separate second-homes. As a result, the City’s embrace of the Pacaso model could actually help preserve existing housing stock. In short, by decreasing demand for second homes in Carmel, the Pacaso model will allow the City to preserve existing housing stock, based on the basic laws of supply and demand.

The sale of Pacaso homes will also help “...[p]rotect the stability of residential neighborhoods by promoting year-round occupancy and neighborhood enhancement.” (Goal G3-4.) Second home ownership can be inefficient, exclusionary and wasteful, as second homes owned by just one family typically sit vacant up to 80% of any given year. Pacaso homes are different - the homes offer a more sustainable way to own and enjoy a second home. In return, Carmel and its neighborhood could benefit from the year-round occupancy that Pacaso homes provide which create a more vibrant community filled with families with a long-term connection to the community, not empty homes with the blinds closed. In addition, local Carmel businesses would benefit from year-end occupancy as Pacaso co-owners will frequent Carmel’s shops, restaurants, and coffee shops more frequently than a second home-owner who is only in town sporadically.

We look forward to being a good partner with the City and look forward to continuing our productive conversations with the City’s elected officials.

Sincerely,
Kevin Heneghan

2310 East Ponderosa Drive - Suite 25
Camarillo, California 93010-4747
voice 805.987.3468 - fax 805.482.9834
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VIA FEDERAL EXPRESS
Kevin Heneghan, VP Legal
Pacaso, Inc.
2021 Fillmore St. Suite 183
San Francisco, CA 94115
Re: Pacaso Operations in City of Carmel-by-the-Sea
Dear Mr. Heneghan:

This letter is in response to your April 19, 2022 correspondence, acknowledging receipt and responding to my letter of April 7, 2022 on behalf of the City of Carmel-bythe-Sea (“City”) to immediately cease and desist unlawful operations in violation of Carmel-by-the-Sea Municipal Code (“CMC”) sections 17.28.010 and 17.70.020 prohibiting timeshare uses, and CMC section 5.04.020 requiring business licenses for commercial operations within the City of Carmel-by-the-Sea.

Our office has reviewed your assertions that Pacaso is not a time-share and disagree that Pacaso is not in the business of advertising, selling, and operating time shares in the manner defined by CMC section 17.70.020. Pacaso does not dispute that it creates multi-member LLCs to hold property. Nor does it contest that it sells shares of such LLCs to individual owners. It also does not dispute that the owners of such shares of the LLC gain fixed rights to the exclusive use and occupancy of a property pursuant to a floating time schedule, under such rules and operating agreements created by Pacaso, as a result of becoming owners and members of the LLC.

Rather, in your response letter, you assert that “[a] Pacaso home is not divided into increments of time. Rather, the home is owned in its entirety, in fee simple, by the LLC and the property has not been divided into increments by a timeshare plan or by a timeshare instrument.” You also assert that “Pacaso owners are not purchasing a use right for a specific period time, but rather are purchasing a co-ownership interest and agreeing to equitably use the home with their co-owners.” However, this is directly

Kevin Heneghan, VP Legal
Pacaso, Inc.

contradicted by statements on Pacaso’s own website,1 stating that owners are entitled to stay in a Pacaso property based on the number of shares in the property that they own, with each share giving the owner rights to entitling an owner to stay up to 44 nights per any given year, using either the six “general stays” that can last between 2 and 14 nights per year and be reserved 24 months in advance, to stay up to 44 nights per year, and rights to “short-notice stays” based on a floating schedule of availability.

Furthermore, the website states that each owner will be allotted a “general stay” that “falls on a special date (e.g. federal holidays or popular local events).” Pacaso’s response letter entirely fails to provide any substantive response that a floating schedule, as created by Pacaso, constitutes a prohibited time-share program, whereby the “use, occupancy, or possession circulates among purchasers of the time-share intervals according to a fixed or floating time schedule on a periodic basis for a specific period of time during any given year . . .” (See CMC section 17.28.020 [defining “timeshare program”].) Granting each owner the right to use the property for up to 44 nights per year based on a rules created by Pacaso and having use established under a floating time schedule creates a time-share use prohibited by the CMC, regardless of whether the ownership of the property is held via an LLC or some other manner. This is because the City prohibits both time-share estates (where a user is party to a time-share program and owns an interest in the estate in real property) as well as time-share uses (where a user is party to a time-share program and exercises a right of occupancy pursuant to a license, contractual or membership right without having an estate in the real property).

Thus, Pacaso’s argument that the properties it sells and manages are not timeshares because of ownership through a multi-member LLC is unavailing. Owners of Pacaso properties own an interest in the real estate through the LLC, and are using the property pursuant to a floating schedule, thereby using and occupying the property as a prohibited time-share estate. In the alternative, if such owners are deemed not to own an interest in the real estate, because the LLC is considered the sole legal owner, then they are owners of prohibited time-share uses. By buying shares and becoming party to operating agreements for the LLC, such owners gain contractual or membership rights to use the property based on the floating time scheduling system and rules created by Pacaso, constituting a prohibited time-share use.

1 https://www.pacaso.com/scheduling

Kevin Heneghan, VP Legal
Pacaso, Inc.

As a result, the City reiterates its requirement that Pacaso cease and desist from any advertising, operation, and/or sale of timeshare properties with the City. Any use or listing of property for unlawful time-share use in the City may result in enforcement, including issuance of citations, civil action for injunctive relief, or criminal prosecution.

We also wish to point out that any action by Pacaso to continue its operations in Carmel-by-the-Sea in the manner described above would expose its clients to potential jeopardy for violating the City’s codes prohibiting time shares.

Finally, in the meeting Councilmember Jeff Baron had with Steve Thomas and Gabe Dina-Smith on March 22, 2022, Councilmember Baron was told he would be provided with: (1) a copy of the basic Pacaso LLC template so that the City can review it and determine its adherence to the City’s Municipal Code regarding time shares and (2) investigating and reporting on how the parcel tax/property tax/accounting/reporting works in conjunction with the Monterey County Assessor’s and Tax Collector’s Office as shares of the LLC are created, then sold and resold, Councilmember Baron did not receive these documents and information and we renew that request at this time.

Sincerely,
Brian A. Pierik
BAP:dvdw
CAM #4888-4151-8110 v1

55575.18100\34590098.1

Indian Wells
(760) 568-2611
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Phone: (619) 525-1300 | Fax: (619) 233-6118 | www.bbklaw.com Riverside
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(202) 785-0600
Jeffrey S. Ballinger
(619) 525-1343
[email protected]
December 6, 2021
VIA E-MAIL [email protected]
Ellen Haberle
Director, Government & Industry Relations
Pacaso.com
2021 Fillmore St. Suite 183
San Francisco, CA 94115
Re: Pacaso’s Operations within the City of Palm Springs, California Dear Ms. Haberle:

As you know, this law firm serves as City Attorney for the City of Palm Springs, California.

In that capacity, we are writing to advise Pacaso.com that Pacaso’s current operations within the City are unlawful and must cease immediately.

While I appreciate your recent efforts to meet with City officials and present Pacaso’s position as to why the City’s timeshare ordinance does not apply to Pacaso, as set forth more fully below, such a position it not legally tenable.

Pacaso is a company that holds itself out as a new way to own a second home. According to Pacaso’s website (https://www.pacaso.com/learn), accessed earlier this year, Pacaso operates as follows:
“Co-ownership with Pacaso is the best way to buy and own a great second home.

From buying to closing here’s how Pacaso works. First, tell us a little about yourself and what you are looking for in a second home. Then, start shopping. If a listing currently on Pacaso is not a fit, find one you love on any real estate site and share it with us. If the home is a match for Pacaso, we will partner with you to purchase up to half of the property in a private and professionally managed LLC uniquely designed for co-ownership. This LLC is referred to as the Pacaso Home LLC. On behalf of Pacaso, we line up financing for the LLC and close quickly. In parallel Pacaso remarkets remaining ownerships shares in the home to interested buyers. Buyers can purchase their desired amount of ownership from one-eighth

55575.18100\34590098.1
VIA E-MAIL [email protected]
Ellen Haberle
December 6, 2021

to one-half of the whole home. We enable qualified buyers to access funds in the LLC and finance up to half of their purchase. The financing relationship is directly between the LLC and the buyer. Pacaso signs closing paperwork on behalf of the LLC. In parallel buyer signs the LLC owner operating agreement to complete their purchase. Ownership is recorded in the owner’s schedule section of the owner operating agreement. Following closing the collective owners own 100% ownership interest in the LLC. We transform the home with modern interior design and address any necessary repairs. Owners use the mobile app to book stays 2 days to 24 months in advance. Scheduling is easy and equitable based on the number of shares owned. From there we take care of everything, overseeing local property management, bill pay and platform technology, all from the mobile app. Owners simply show up, relax and enjoy their Pacaso.”
The maximum length of a stay is based on shares owned. Owners of one share can enjoy a stay anywhere from 2 to 14 nights. A stay with a duration of 2-7 nights counts as one general stay, while a stay with a duration of 8-14 nights counts as 2 general stays. Owners of two shares have the option to book stays up to 28 nights.

Pacaso asserts that the properties that they sell and manage are not timeshares. According to Pacaso, a Pacaso home is no different from any other single family residence. Pacaso further asserts that Pacaso co-owners agree to several restrictions to help ensure that their use promotes the public interest, safety and comfort. For example, Pacaso states that there is a maximum of eight co-owners for any home, with only one family using the property at a time; co-owners are prohibited from having large events or parties that exceed the maximum occupancy of the home; co-owners must adhere to a 9pm to 7am quiet hour policy; co-owners are prohibited from renting the home; and Pacaso encouraged homeowners to avoid parking on the street unless absolutely necessary. However, Pacaso does not provide any documentation or explanation of how these rules are enforced. The stays are reserved on an app, and while each co-owner is prohibited from renting the home as a short-term rental, they are permitted to allow other guests to stay there during their allotted days.

According to Pacaso, as of September, one single-family residence within Palm Springs has been fully sold, and Pacaso was marketing four others within the City.

City of Palm Springs Timeshare Ordinance
The City of Palm Springs regulates where timeshares can be located within the City and taxes occupancy of timeshares. Specifically, under the City’s zoning ordinance, a timeshare

55575.18100\34590098.1
VIA E-MAIL [email protected]
Ellen Haberle
December 6, 2021

project is allowed only in those zoning districts where a hotel use would be permitted (i.e., R-3, R-4, R-4VP, C-B-D, C-1, C-1AA and C-2 zones, and G-R-5 and R-2 zones when fronting on a major or secondary thoroughfare). (Palm Springs Zoning Code, § 93.23.11(B).) Indeed, such uses are not allowed by right, but instead require a conditional use permit. Notably, timeshares are not permitted in single-family zones.

The City’s Zoning Ordinance defines a “timeshare” as follows:
“…a “time-share project” is one in which time-share rights or entitlement to use or occupy any real property or portion thereof has been divided as defined in Section 3.24.020(7) of the Palm Springs Municipal Code into twelve (12) or more time periods of such rights or entitlement.” (PSZC, § 93.23.11(A).) Section 3.24.020(7) defines timeshares, for purposes of taxation. It defines a “timeshare” as
“occupancy related to the situation wherein a purchaser receives the right or entitlement in perpetuity, for life, or for a term of years or other extended term, to the recurrent, exclusive use or occupancy of a lot, parcel, unit, room(s), hotel or portion thereof, or segment of real property, annually or on some other seasonable or periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the time-share project which is involved has been divided. The said right or entitlement to occupancy may attach in advance to a specific lot, parcel, unit, room(s), or portion of a hotel, or segment of real property, or may involve designation or selection of the same at a future time or times.” Despite Pacaso’s assertions to the contrary, Pacaso’s business model meets the City’s Ordinance’s definition of a “timeshare”. The City’s definition, broken down into its constituent parts, applies to Pacaso.

Specifically, Pacaso’s business model fits the following definition: “wherein a purchaser receives the right in perpetuity… or other extended term, to the recurrent, exclusive use or occupancy of a lot … annually or on some other … periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the time-share project which is involved has been divided.”
Here, purchasers of a Pacaso LLC receive the right, in perpetuity or some other period defined in the LLC agreement, to the recurrent and exclusive use of the lot on which the residence

55575.18100\34590098.1
VIA E-MAIL [email protected]
Ellen Haberle
December 6, 2021

is located. The right to such use is on some periodic basis, for a period of time that is allotted under the LLC agreement.

Thus, by its terms, the City’s ordinance applies to a use such as Pacaso’s. As such, Pacaso’s operations are not permitted in single family-zones within the City of Palm Springs, California.

In addition to the City’s Zoning Ordinance, the City’s business license ordinance requires any party that is transacting any business within the City to first procure a business license and pay the applicable business license tax. (Palm Springs Municipal Code, § 3.48.010.) Pacaso does not possess a City business license, nor has it paid any business license tax to the City. As a result, Pacaso’s operations within the City also are in conflict with the City’s business license ordinance.

Finally, several significant policy reasons justify the City’s prohibition against timeshares in single-family zones. As the City’s Housing Element of the General Plan states, “Palm Springs considers housing affordability to be a critical issue. The inability to afford housing leads to a number of undesirable situations, including the doubling up of families in a single home, overextension of a household’s financial resources, premature deterioration of housing due to the high number of occupants, situations where children and seniors cannot afford to live near other family members because of the lack of affordable housing options, and in more extreme cases, homelessness.” (City of Palm Springs General Plan, Housing Element, p. 3-19, (2014-2019).)
For every house that Pacaso sells to one of its limited liability corporations, to be used as a second, vacation home, that house becomes unavailable to a buyer or renter who could live there full time. This necessarily reduces the amount of housing stock that is available for full time residents in the City. The reduction in housing stock, in turn, feeds the affordability crisis, making the remaining houses within the City more costly.

Pacaso may claim that it only purchases and sells “luxury” homes, and therefore does not impact the availability of affordable housing. However, basic laws of supply and demand dictate that every home that is made unavailable to a full time resident, whether “luxury” or not, necessarily reduces the supply of homes, and therefore reduces the affordability of housing in the City.

One of the policies of the City’s Housing Elements is to “protect established single-family residential neighborhoods from the transition, intensification, and encroachment of uses that

55575.18100\34590098.1
VIA E-MAIL [email protected]
Ellen Haberle
December 6, 2021

detract and/or change the character of the neighborhood.” (Housing Element, HS1.8, p. 3-63.) Pacaso portrays its business model as “the modern way to buy and own a second home”. However, Pacaso’s “modern way” involves up to eight (8) investors and their guests rotating occupancy throughout the year. Although the LLC investors are not technically “renters”, neighbors can expect the property to have many of the secondary impacts of vacation rentals, which are currently prohibited in many Coachella Valley cities and heavily regulated in Palm Springs. For example, house cleaners will have to come to the home in between each stay, and the home can turn over multiple times in a week. To a neighbor, that impact is very much the same as if the occupants were short-term vacation renters. In addition, the “co-owners” of the limited liability company really have no connection with one another, other than their investment in the company. All of this necessarily changes the character of a neighborhood, in contravention of the City’s stated policy of preserving the single-family residential character of its neighborhoods.

Another Housing Element policy is to “preserve the supply of affordable rental housing in the community, including mobile home parks, publicly subsidized rental housing, and special needs housing.” (Housing Element, HS2.9, p. 3-68.) As stated above, Pacaso’s business model removes single-family homes from the housing market for individuals or families who wish to reside in Palm Springs and therefore reduces the supply of affordable rental housing for those individuals or families.

Therefore, Pacaso’s current operations within the City are unlawful and must cease immediately.

Should you have any questions, please do not hesitate to contact me.

Sincerely,
Jeffrey S. Ballinger
of BEST BEST & KRIEGER LLP
City Attorney
City of Palm Springs

55575.18100\34590098.1
VIA E-MAIL [email protected]
Ellen Haberle
December 6, 2021

cc: Hon. Mayor and Councilmembers
Justin Clifton, City Manager
Teresa Gallavan, Asst. City Manager
Flinn Fagg, Development Services Director

California reaming: Pacaso taking punches in home
state
Second-home startup may be losing battle for hearts and minds San Francisco " March 22, 2022 08:00
AM
By T.P. Yeatts
Pacaso’s Spencer Rasco! and Austin Allison (LinkedIn, iStock) The proptech startup Pacaso has made a few enemies
(https://therealdeal.com/issues_articles/neighborhood-brawl/) in its

e!orts to help its customers realize their dream of second-home ownership.

Now comes the blowback, as legal and legislative actions in its home state of California spell trouble for the young company.

This month in Napa Valley, the planning commission for the city of St. Helena recommended expanding its rule banning timeshares to include Pacaso’s fractional ownership model. The proposal will soon go before the city council.

Down south, Palm Springs voted to extend its ban on timeshares to Pacaso’s business. It also issued a cease and desist letter to the company, which has sponsored four properties in the area.

The actions could trigger other roadblocks for Pacaso, which became something of a sensation last year when it achieved a $1 billion valuation (https://therealdeal.com/2021/09/14/less-than-oneyear-after-launch-pacaso-is-valued-at-1-5b/) less than 12 months after its launch — the fastest any proptech has reached “unicorn” status (https://therealdeal.com/2021/12/06/undeterred-by-criticspacaso-pursues-aggressive-expansion/) . The company operates in at least six other markets in California.

Read more
M&A will define proptech landscape in 2022: MetaProp survey

How to build a home in 30 days: Con-tech startup Diamond Age raises $50M
(https://therealdeal.com/2022/03/16/how-to-build-a-home-in-30-daysconstruction-startup-diamond-age-raises-50m/) Knock it o!: Homebuying startup ditches IPO plans
(https://therealdeal.com/2022/03/15/knock-it-o!-homebuying-startup-ditchesipo-plans/) San Francisco-based Pacaso, founded in 2020 by former Zillow executives Spencer Rasco! and Austin Allison, says it generated nearly $300 million in revenue in 2021 selling one-eighth shares of vacation properties across the U.S. to aspiring second-home owners — often over the protests of locals who saw its arrival as an invasion of their communities.

Demonstrations attended its recent debut in Maui, but the uproar has been particularly loud in its home state, where a loose association of anti-Pacaso civilian groups has coalesced to fight the company on the basis that it is a commercial enterprise operating in residential, or rural, areas.

The groups also assert Pacaso is hurting neighborhoods by removing already limited housing stock from tight markets — a claim the company disputes, citing its focus on a small group of luxury properties that are empty much of the year.

Pacaso preemptively sued St. Helena last April after the city of 6,000 signaled it would seek to freeze the company’s activity there.

Pacaso maintains that it is in the business not of timeshares but of co-ownership —– a new asset type as of last summer, after Pacaso pushed to have it recognized by the Real Estate Standards Organization.

This crucial distinction is what St. Helena and Palm Springs now seek to eliminate or render moot.

If St. Helena’s planning commission gets the city council to include fractional ownership in the city’s timeshare ordinance, it would be the first change to the law since 1982.

Colin Tooze, a spokesman for Pacaso, said that would represent selective application of the law. Nearly 10 percent of residential parcels in St. Helena are owned by limited liability companies, and more than 40 percent are owned in a trust, he said, citing Napa County Tax Assessor records. His argument is that those ownership models are similar to Pacaso’s, yet no one is moving to ban them.

Pacaso “attempted to settle our di!erences through genuine compromise and dialogue,” Tooze said in an email. “We certainly haven’t always seen eye-to-eye with local o"cials in St. Helena.” Tooze attributed the setback in Palm Springs to city sta!ers who

have a “regrettably one-sided and inaccurate view of Pacaso’s business.” The company has been trying to work things out with the Palm Springs City Council, he said.
“We’re confident that members of the council understand that it’s not the proper role of local government to decide who is allowed to own property,” he said.

The actions in St. Helena and Palm Springs could set a precedent for other locales that take issue with Pacaso. The company plans to launch in 30 new markets this year, nearly doubling its footprint.

Tooze said the company will continue to “invest in building relationships with partners at all levels of government.” “We are committed to dialogue and to working collaboratively with local leaders to make sure that we understand their priorities,” he said.

Contact T.P. Yeatts

Report to the City Council
Regular City Council - 22 Mar 2022
Agenda Section: PUBLIC HEARINGS
Subject: Ordinance Adding Chapter 17.138 "Time Share Uses" and Sections 17.138.060 to Title 17, Zoning of the St. Helena Municipal Code, amending sections 17.48.030 (Central
Business) and 17.52.030 (Service Commercial) and Deleting Section 17.112.130 of the St. Helena Municipal Code
CEQA
Determination:

Exempt
Prepared By: Ethan Walsh, City Attorney
Reviewed By: April Mitts, Administrative Services Director Approved By: James C. McCann, Interim City Manager

BACKGROUND
Over the past two years, there has been significant discussion in the community regarding Section 17.112.130 of the City’s Zoning Code, which prohibits the creation of a time-share project as a means of ownership of any single-family, two-family or multiple-family dwelling or any apartment house in the City (the “Time Share Ordinance”). The City Council discussed the Time Share Ordinance at its July 14, 2020 meeting in response to concerns raised regarding a real estate listing for a fractional or partial ownership interest in a residential home in the City. The prior City Attorney discussed this issue with the City, focusing on the question of the extent to which the City Council could regulate an ownership structure through the City’s zoning authority, and noted the challenges of doing so. At the conclusion of the Council’s discussion of this issue, Council directed the City Attorney and staff to continue to research its options to address the concerns raised by members of the community in response to the listing of the home at issue. In the months following the July 2020 Council meeting, the company that had been marketing that original home, now known as Pacaso, began marketing other homes in the City, and the City received additional complaints from members of the community. Based on new information that was available to the City, primarily through Pacaso’s marketing materials, the City Attorney’s office concluded that the properties being marketed by Pacaso were

not just fractional or partial ownership structures, but were also being marketed to be used as a time share project that would be prohibited under the City’s ordinance, and informed Pacaso of that conclusion. Pacaso disagreed with the City Attorney’s conclusion, and initiated a lawsuit in an effort to compel the City to retract its conclusion. That litigation is ongoing.

When reviewing the Time Share Ordinance in this context, the City Attorney’s office found that the substance of the Time Share Ordinance has not been updated since its adoption in 1982. The City Attorney’s office concluded that the Time Share Ordinance would benefit from an update to refine the definitions to more directly address the impacts of time-share uses, to clarify the means used by the City to enforce the restrictions on time share uses, and to clarify how time share uses are treated in non-residential districts. City staff initially delayed initiating any changes to the Time Share Ordinance while the litigation was ongoing. However, due to the continued marketing of time share uses within the City, staff has decided to move forward with recommending the proposed updates to the City’s ordinance.

On March 1, 2022, the Planning Commission voted unanimously to recommend the City Council approve the proposed ordinance.

DISCUSSION
The Discussion section of the Staff Report is organized as follows: First, the section provides a brief explanation for the City’s conclusion that the homes that have been marketed by Pacaso constitute time share projects. While the City’s conclusion does not directly affect the changes to the Zoning Code set forth in the proposed ordinance, it is helpful to understand that the Time Share Ordinance, both in its original form and as proposed to be amended, is intended to protect against the impacts that these homes and similar uses could have on the City’s housing supply and the character of the City’s residential districts. Second, this section discusses the legal basis for the City’s Time Share Ordinance, the reasons why the City prohibited time share uses in residential properties, and why those reasons continue to apply today. Third, this section outlines the changes made in the proposed ordinance and the reasons for the proposed changes.

A.Current Time Share Ordinance and Application to Pacaso Homes Section 17.112.130 of the Zoning Code prohibits the creation of a time-share project as a means of ownership of any single-family, two-family or multiple family dwelling or apartment house within the City. A time-share project is defined in that section as any real property that is subject to a time-share program. A time-share program is in turn defined in part as an arrangement whereby the use, occupancy or possession of the property circulates among purchasers according to a fixed or floating time schedule on a periodic basis for a specific period of time during any given year.

Pacaso provides a significant amount of information on its website regarding the manner in which its homes are used by the purchasers of a Pacaso home. According to Pacaso’s website, the single family residences marketed by Pacaso are held by a property-specific

limited liability company (“LLC”), and each co-owner purchases a 1/8 share in the LLC. (Pacaso.com/learn) Each 1/8 share entitles the co-owner to 44 stay nights within any 365 day window. Stays can be from 2 to 14 nights in duration for each 1/8 share. Back-toback stays are not permitted. (Pacaso.com/faq/scheduling) Stays are booked on an app, with specific rules governing the number of “special dates” that each co-owner can book, and the number of stays that each owner can book during “peak seasons.” (Id.) Each owner can book the residence to use themselves, or may allow guests to use the residence, whether or not the co-owner is present. (Id.) Between each stay, Pacaso conducts a thorough inspection and cleaning. (“5 reasons Pacaso is better than a timeshare.” Pacaso.com/blog/better-than-resort-timeshare)
The Pacaso model grants each 1/8 owner the right to use the property for a specific period of time (44 days in a year) in increments of 2-14 days. The use, occupancy and possession of the property circulates among the co-owners according to a floating time schedule that gives each co-owner exclusive rights to the property for a specific period of time each year. This use structure fits squarely in the City’s definition of a time-share program, and the properties operated by Pacaso in this manner would therefore be timeshare projects under the existing Time Share Ordinance.

B.Reasons for the Time Share Ordinance

1. The City’s General Plan
The City of St. Helena has long been defined by its rural, small town quality and agricultural character. In adopting the St. Helena General Plan Update 2040, the City noted that the defining, unifying goal of all the elements of the 1993 General Plan was:

To protect the rural, small town quality and agricultural character of St. Helena. It is the General Plan’s intent that the preservation of this small town character be the unifying philosophy that overlays all other stated goals and policies.(General Plan 2040, p. 1-2.) While the 2040 General Plan acknowledges that this is no longer the sole, overriding focus of the General Plan, retaining the small town character of St. Helena remains a primary focus of the City’s land use planning. (Id.)
A key component of retaining the City’s small town character is maintaining a balance between the economic benefits that arise from visitors who come to St. Helena for its wineries, restaurants and historic downtown, and maintaining its authentic small town quality of life for the City’s residents. This theme is consistent throughout the City’s General Plan, and maintaining this balance is key to the City’s long term viability. The General Plan notes in its Introduction that “[t]he community stands out in the Valley for its unique, historic character and its ability to attract visitors while also supporting the needs of its resident population.” (General Plan p. 1-8.) The City has set goals to maintain that balance, striving to achieve an economy that “will meet the basic needs of residents, while balancing the benefits and impacts of visitors and provide better economic opportunities. (General Plan 1-15.) The City further seeks to “promote sustainable tourism practices that allow the City to enjoy the economic benefits of visitors to the region while maintaining the authentic small-town quality of life.” (General Plan p. 3-9.)

St. Helena is a renowned tourist destination, bringing visitors from throughout the world to its wineries, restaurants and downtown, but it is also a functioning City and community, with residents who contribute to its social fabric. Like most communities throughout California, one of the key means that the City utilizes to maintain this balance is through its Zoning Ordinance. The City has commercial districts, like the Service Commercial district and the Central Business district, that provide for uses that serve both visitors and the local community, such as restaurants, retail shops and winery tasting rooms, among others, along with lodging where those visitors can stay. (St. Helena Municipal Code §§17.48.030, 17.52.030.) The City also has residential districts that provide housing for those who live in the community, at varying densities in order to provide a diversity of housing types.

2.Use of Zoning to Preserve Residential Areas
The use of zoning to preserve the character of the residential districts of a City has been common for over a century. In the seminal case of Euclid v. Ambler the United States Supreme Court upheld the validity of comprehensive zoning that would set aside residential districts “from which business and trade of every sort, including hotels and apartment houses, are excluded.” (Euclid v. Ambler Co. 272 U.S. 365, 390.) The U.S.

Supreme Court upheld the Village of Euclid’s zoning ordinance in that instance, noting that the inclusion of non-residential uses in residential districts may have an increasingly deleterious impact on the residential area “until, finally, the residential character of the neighborhood and its desirability as a place of detached residences are utterly destroyed.” (Id. at 394.)
The California Court of Appeals followed Euclid and subsequent cases in upholding the City of Carmel-by-the-Sea’s zoning restriction on short-term rentals. (Ewing v. City of Carmel-By-The-Sea (1991) 234 Cal.App.3d 1579.) In that case, the Court noted that the City’s chief purpose in adopting the short-term rental restriction was “to provide an appropriately zoned land area within the City for permanently single-family residential uses and structures and to enhance and maintain the residential character of the City.” (Id. at 1579.) In upholding Carmel’s short-term rental restriction, the Court found that short-term rentals “undoubtedly affect the essential character of a neighborhood and the stability of a community. Short-term tenants have little interest in public agencies or in the welfare of the citizenry. They do not participate in local government, coach little league, or join the hospital guild. They do not lead a scout troop, volunteer at the library, or keep an eye on an elderly neighbor. Literally, they are here today and gone tomorrow—without engaging in the sort of activities that weld and strengthen a community.” (Id. at 1591.)

3.Impacts of Time Share Uses on Residential Districts
Like Carmel, the City of St. Helena strives to maintain the character of its residential areas in the face of intense demand for accommodations to serve visitors to St. Helena. The

Time Share Ordinance is one of the means that the City has in place to ensure that it is able to maintain its existing and limited housing stock for use in long term residency, and to maintain the character of its residential zoning districts. When the City originally adopted the Time Share Ordinance in 1982, the City Council made specific findings based on the impact it foresaw if time share uses were to locate in the residential areas of the City. Those findings were as follows:

1. There is a critical shortage of affordable housing in the city for long-term occupancies (more than six months annually), and the availability of additional residential dwelling units is substantially restricted by the growth management system.

2. The conversion of residential dwelling units within the city to time-sharing projects eliminates residential dwelling units otherwise available for long-term occupancies (more than six months annually) in the city.

3. Time-sharing projects have the same character as commercial hotels, motels and other transient occupancy uses due to their transient nature and to the multiple shortterm (less than six months annually) occupancies by those participating in timesharing projects.

4. Such commercial or quasi-commercial like use is inappropriate in residential areas due to the increased traffic generation and multiple occupancies disturbing the peace
and quiet of residential neighborhoods.

5. The city council finds and determines that this section is necessary to protect the public health, safety and welfare of the citizens of the city.

As discussed in more detail below, these findings continue to hold true in St. Helena, and continue to support the City’s decision to restrict time-share uses in residential districts. i. Housing Shortages and Impacts of Time-Share Uses on Existing Housing Stock In adopting the current Time Share Ordinance, the City Council found that there was a critical shortage of affordable housing in the City for long-term occupancies. That continues to be the case, and is undoubtedly worse than was the case at the time the Time Share Ordinance was originally adopted. The most recent census data lists the median value of owner occupied homes in St. Helena at $1,112,100 for the period of 2015-2019, while the Zillow Home Value Index estimates medial home values in St.

Helena to be approximately $1,870,000 as of February 2022. www.census.gov/quickfacts/sthelenacitycalifornia; zillow.com/home-values/.) In contrast, the median household income in St. Helena from 2015-2019 was $90,031, and the median income for a four person household in Napa County for 2021 is approximately $109,200. (www.census.gov/quickfacts/sthelenacitycalifornia; www.hcd.ca.gov/grantfunding/income-limits/state-and-federal-incomelimits/docs/income-limits-2021.pdf.) At the time of adoption of the City’s Housing Element in 2015, the income necessary to purchase a median priced single family home was nearly $200,000 per year, and prices

have risen dramatically since then. (City of St. Helena Housing Element Update 2015¬23, p. 3.) The cost of homes currently in St. Helena are well in excess of what median income residents of St. Helena can afford, as well as median income residents of Napa County generally. Further, as Erika Sklar observed in the St. Helena Housing Update Report that she prepared for the City in April 2018, “St. Helena has more local jobs than people in the labor force, demanding large numbers of commuters to fill local jobs. Workers commute daily into St. Helena, many because there is no local housing that is affordable at the incomes that they make. 36% of St. Helena households cannot afford market rents while 70% of St. Helena households cannot afford to purchase a home. Paramedics and preschool teachers cannot afford St. Helena’s market rents. Teachers, registered nurses, winery and hospitality managers and non-profit directors cannot afford homeownership in St. Helena.” (St. Helena Housing Update Report, p. 7 (April 2018).) The City has made and continues to make efforts to address the need for affordable housing in the City, including providing assistance for the Brenkle Court, Turley Flats and 963 Pope Street projects. The City has also ensured that new non-residential development will assist the City in providing adequate affordable housing, as evidenced by the significant contributions to affordable housing made by the Farmstead Lodging project through its development agreement with the City. These efforts, however, have highlighted the challenges of providing housing at all income levels, with the most significant challenge being a limited supply of existing housing stock in the City, and a limited supply of available land for new housing. Given the housing shortage already in existence, losing additional housing stock will only make this problem worse.

The findings in the original Time Share Ordinance also note that the conversion of homes to time sharing projects would eliminate residential dwelling units that would otherwise be available for long term residential use. This continues to be true, as a home that is used for time share purposes will no longer be available for households to use as their long term residence. This threat to the City’s existing housing stock is not insignificant. The publicity regarding Pacaso’s rise as a company speaks to a pent up demand for homes that could be converted to time share use, reducing available housing stock for long term use. Pacaso’s co-founder has indicated that “[t]here are tens of millions of families that aspire to own second homes but are unable to, due to reasons of cost.” (Just Five Months Old, Zillow Co-founder’s Pacaso Claims It’s Already A Unicorn” Noah Kirsch, March 24, 2021 (www.forbes.com/sites/noahkirsch/2021/03/24/just-five-months-oldzillowcofounders-pacaso-claims-its-alread-a-unicorn/.)) In discussing Pacaso’s model, Dan Wenhold of the venture capital firm Fifth Wall said “[t]hey were taking a previously illiquid asset, which was a timeshare, and making it affordable for the masses, also making it attainable for folks who wanted to own a second home but previously weren’t able to.” (“Pacaso, the Proptech Startup Founds by Zillow Alums, Raises $125M Series C” Sophia Kunthara (September 14, 2021) (news.crunchbase.com/news/proptechstartup-pacasoraises-125m-series-c.)) Creating a new market for these prospective buyers who otherwise would not buy second homes unquestionably increases demand for these homes by creating an incentive for timeshare companies to buy up residences to meet this market demand. Creating more demand, and reducing supply, will further

ratchet up housing costs, exacerbating the already significant housing shortage in the City.
ii. Impacts to Character of the City’s Residential Districts The City Council additionally found as part of the adoption of the original Time Share Ordinance that time-sharing projects have the same character as commercial hotels, motels and other transient occupancy uses due to their transient nature and to the multiple short-term occupancies by those participating in time-sharing projects. The Council concluded that this commercial or quasi-commercial like use is inappropriate in residential areas due to the increased traffic generation and multiple occupancies disturbing the peace and quiet of residential neighborhoods. This continues to be the case, as the nature of time share uses of residential property is different than the typical long term residential uses for which the residential districts of the City are intended.

The complaints that have been made by some local residents regarding the Pacaso homes are illustrative of the distinctions between time share uses and long term residential uses. A sampling of the email complaints received by the City are included in Attachment No. 2 to this Staff Report. The complaints received center on concerns over more intense traffic and parking issues, outdoor parties and conversations going late into the evening, sometimes as late as 2 A.M. One neighbor complained of outdoor lighting shining into her daughter’s room at night. They complained of traffic and inadequate parking for the visitors to these homes. Further, neighbors have noted that with each turnover from one stay to another, cleaning and landscaping crews come to clean the unit and prepare it for the next user. While this level of maintenance is appropriate for a commercial vacation property, it impacts the residential character of the surrounding area by adding parking and noise burdens in the neighborhood. Living next door to a home where the residents turnover every 2-14 days, and professional cleaning and landscaping crews come to the property between each visit is much more akin to living by a commercial lodging project than a residential home. This is not at all surprising, given that these time share homes are used by people who are on vacation. While long term residents may have an occasional party at their home, the time share model means that these residences are constantly being used by people who are on vacation, hosting parties or celebrating special occasions. These activities by their nature are more intense than typical residential use of property.

The intensity of this use is a significant reason that these uses can change the character of a residential neighborhood. Long term residents, whether owners or renters, will occasionally have guests, and will occasionally have parties, but these time-share homes are used exclusively by people who are coming to the City on a short term basis for vacation or leisure. People will naturally stay out later, entertain more and gather in larger numbers while on vacation. That is the reason that these uses are more appropriate in non-residential areas that are intended to cater to the City’s visitors and tourists. Time share uses can change the character of a residential neighborhood by having it serve not only as a residential area but also a visitor lodging area, and subjecting it to the impacts that come with that more intense land use.

In their marketing materials, Pacaso cites this intensity of use as a benefit, indicating that having these units filled with visitors seven days a week will benefit the local economy, since these visitors will patronize local businesses. (pacaso.com/communities) However, as noted above, the City strives through its General Plan to achieve a balance between benefits to the local economy and maintaining the character of the City. The City seeks to achieve this balance by promoting “sustainable tourist practices that allow the City to enjoy the economic benefits of visitors to the region while maintaining the authentic smalltown quality of life, (General Plan p. 3-9) and striving to achieve a local economy that “will meet the basic needs of residents, while balancing the benefits and impacts of visitors.” (General Plan p. 1-15.) Bringing more visitors into residential neighborhoods to improve the local economy does not help to achieve that balance. It instead tips the scales in favor of the local economy, at the expense of the residential character of these neighborhoods.

The nature of the timeshare use itself can impact the residential character of the City’s residential districts because it will ensure that the time share users can only use their property for a limited amount of time each year. In the case of Pacaso owners, each stay is limited to 2-14 days. As discussed above, in the Ewing v. City of Carmel-by-the-Sea case, the California Court of Appeal found that short term rentals would affect the essential character of a neighborhood and the stability of a community. The Court noted that “[s]hort term rentals have little interest in public agencies or in the welfare of the citizenry. They do not participate in local government, coach little league, or join the hospital guild. They do not lead a Scout troop, volunteer at the library, or keep an eye on an elderly neighbor. Literally they are here today and gone tomorrow—without engaging in the sort of activities that weld and strengthen a community.” This same problem is present with time-share uses. Each co-owner is in the unit on a short-term basis, and without the time to participate in the types of activities or build the relationships that create the fabric of a community. At the April 28, 2021 council meeting several Pacaso co-owners spoke of their experiences in St. Helena. All of them spoke of their affection for the community and the traditions they had established, but these were centered on attending local events and visiting shops, restaurants and wineries. These types of transactional activities are all beneficial to the City’s local economy and are what the City hopes to see from visitors to the City, but it is not the type of community involvement described in the Ewing case that binds and strengthens a residential community. Given the City’s desire to strike a balance between the demands of the City’s visitor and tourist economy, and retaining its small town character and quality of life, the City has an interest in maintaining housing stock in its residential districts for long-term residents who will engage in the community in the manner described by the Court in Ewing, to the betterment of the entire community.

C.Proposed Amendments to the Time Share Ordinance
The proposed Ordinance would make certain changes to the City’s Existing Time Share Ordinance, as described below.

1.Findings and Establishment of New Chapter
The proposed Ordinance includes detailed recitals and findings describing the policy bases for the City’s regulation of time share uses. The findings are consistent with the findings made as part of the original Time Share Ordinance, but more detail has been added. The policy bases for the proposed Ordinance are discussed in the sections above, and further discussion is not necessary here.

The proposed Ordinance also relocates the restrictions on time share uses to its own chapter at Chapter 17.138. The Time Share Ordinance is currently located in Chapter

17.112, General Site Design and Development Standards. City staff believes that with the added level of detail in the Proposed Ordinance, these provisions merit being located in a separate chapter, and has changed the location of the Timeshare Ordinance accordingly.

2.Definitions
The Proposed Ordinance amends the definitions that are used to define time share uses, with the new definitions set forth in Section 17.138.020. The new definitions are modeled on the definitions utilized by the state to regulate time-shares in the Vacation Ownership and Time-Share Act of 2004 (Bus. & Prof. Code §§11210¬11288), but are modified somewhat to better apply in the land use regulation context.

The new ordinance includes a number of definitions that work in concert to define a timeshare use. The ordinance defines a “time-share use” as the use of one or more accommodations, or any part thereof, as part of a time-share property pursuant to a timeshare plan. An “accommodation” is defined in this Chapter to include a range of residential units that could potentially be used for time-share purposes. The types of residential units that can be accommodations are listed at the beginning of Section

17.138.020 in the proposed ordinance. A “time-share plan” is defined in the ordinance, and generally includes any arrangement, plan, scheme or similar device whereby a purchase receives the right to exclusive use of the accommodation, whether through the granting of ownership rights, possessory rights or otherwise, for a period of time less than a full year during any given year. A “time-share property”, in turn is defined as one or more accommodations that are subject to the same time-share plan together with any property rights that are appurtenant to the accommodations. A “time-share instrument”, is the document or documents that create or govern the operation of the time-share plan.

Therefore a time-share use is the use of a residential property that fits within the definition of an “accommodation” under the ordinance, pursuant to a ”time-share plan”, which grants each owner of the time-share property exclusive use of the property for a certain period of time each year, but not the full year.

It is important to note that not all properties with multiple owners or owned by business entities (such as LLCs) would constitute a time-share use under these definitions. The definitions focus on the manner in which the accommodation is used, not how it is owned.

A time-share plan allows each owner exclusive use of the property for a specific period of time. This manner of use prevents the property from being used for long term residency, and leads to the continual cycling of visitors through the property and the more intense, constant vacation oriented use that the ordinance seeks to limit in residential districts of the City.

A property that is owned by a group of friends or extended family members, whether through a separate business entity or otherwise, will not necessarily mandate that only one owner will be able to use the property at a time. The more formal arrangement found in time-share uses increases the intensity of use, in that each individual time-share owner cycles through the property, whereas families or friends are more likely to use the property together or in groups leading to less transition in the residential neighborhood. The more formal relationship, use of professional property managers and rights to exclusive use found in timeshare uses contributes to the commercial character of the property, with added traffic due to the more frequent turnover of visitors and more frequent cleaning and inspection between each user, which is common for a commercial vacation property, but not for a home owned by family or friends.

3.Enforcement
The new ordinance additionally adopts a new enforcement structure for the City timeshare restrictions, modeled on the City’s short-term rental ordinance. The ordinance prohibits both the use of accommodations for time-share use, and the advertisement of accommodations for time-share uses. This will better allow the City to prevent time-share uses in residential neighborhoods before they occur. The proposed Ordinance also outlines the process that will be used to enforce this new Chapter, again based on the City’s existing short-term rental regulations. This approach has proved to be effective in enforcing the City’s short-term rental regulations, and will help the City to take a more preventative approach to enforcing its time-share regulations as well.

4.Time Share Uses in Service Commercial and Central Business Districts Finally, while the City’s existing Time Share Ordinance did prohibit time-share projects within certain types of residential dwelling units within the City, it does not make distinctions based on the various zoning districts of the City. Given that the primary concerns and impacts of this use arise from the high intensity use of property that negatively impacts the residential character of residential districts within the City, this use may not have the same impacts in commercial districts where visitors can be closer to the amenities in the City that cater to visitors. The proposed new ordinance would allow time-share uses in the Service Commercial and Central Business Districts as conditional uses, provided that such time-share uses would be limited to accommodations in upper floors in conjunction with a mixed use project, would be required to provide at least one parking space for accommodations of two or fewer bedrooms, and at least two parking

spaces for accommodations of three or more bedrooms, and would be subject to such other conditions imposed by the City has part of the conditional use permit process. As part of the application for a time-share use, the applicant would have to provide specific information including a management plan and specific information on the accommodations and any ancillary uses. The City would then review the application process in accordance with its normal process for review of conditional uses. This would allow the City to address potential impacts associated with this use, similar to the approach that the City uses with hotels and other lodging accommodations in these districts.

Consistent with this change, the proposed ordinance updates the list of conditional uses in both the Service Commercial and Central Business Districts to include time share uses as regulated by the new Chapter 17.138.

The Planning Commission held a public hearing to consider the proposed ordinance at its regular meeting of March 1, 2022. Following the public hearing, the Planning Commission unanimously recommended that the City Council adopt the proposed ordinance. City staff has made minor, non-substantive edits to the proposed ordinance that went to the Planning Commission to correct typographical errors, and to add the sections amending the list of conditional uses in the Service Commercial and Central Business Districts.

FISCAL IMPACT
None

RECOMMENDED ACTION
Staff recommends that the City Council introduce by title only and waive further reading of an Ordinance Adding Chapter 17.138 "Time Share Uses" and Sections 17.138.010-

17.138.060 to Title 17, Zoning, of the St. Helena Municipal Code, amending sections

17.48 (Central Business) and 17.52 (Service Commercial) and Deleting Section

17.112.130 of the St. Helena Municipal Code.

ATTACHMENTS
Attachment 1-St. Helena Time Share Ordinance-Final
Attachment 2-Community email comments

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CITY OF ST. HELENA
ORDINANCE NO.

ADDING CHAPTER 17.138 “TIME SHARE USES” AND SECTIONS 17.138.010 –

17.138.060 TO TITLE 17, ZONING, OF THE ST. HELENA MUNICIPAL CODE, AMENDING SECTIONS 17.48.030 AND 17.52.030 AND DELETING SECTION

17.112.130 OF THE ST. HELENA MUNICIPAL CODE
WHEREAS, the City of St. Helena is a popular tourist destination, known for its scenic Napa Valley location, exceptional wineries and restaurants, historic Main Street and small town agricultural character; and
WHEREAS, preserving the rural, small town quality and agricultural character of the City of St. Helena has been a focal point of the City’s land use planning for decades, and remains a primary focus in the City’s 2040 General Plan; and WHEREAS, the City of St. Helena stands out in the Napa Valley for its ability to attract visitors while also supporting the needs of its resident population. Maintaining the balance between the quality of life for residents and those who work in the City and the visitors who help to sustain the City’s tourist economy is key to maintaining a sustainable community and a stable economy; and
WHEREAS, the City values and welcomes all visitors to the City and recognizes their contributions to the City’s economy, but finds that in order to maintain the City’s long term viability as a community where people not only come to visit, but also live, work and contribute to the long term betterment of the community through participation in the City’s schools, local community groups, civic government and local serving businesses, the City must maintain a balance between residential land uses and visitor serving uses; and
WHEREAS, the City’s existing housing stock is significantly impacted, with demand outweighing supply, resulting in extremely high housing prices as detailed in the accompanying staff report. A limited supply of suitable vacant land, exorbitantly high land costs, and limitations in the City’s existing infrastructure, among other factors, have limited the construction of additional housing in the City of St. Helena; and WHEREAS, according to the U.S. Census Bureau, the current median household income in the City of St. Helena is $90,031, while the estimated value of owneroccupied housing units from 2015-2019 was approximately $1,112,100, with current real estate listings suggesting that prices are increasing significantly, meaning that homes in the City are not affordable to the median household in the City; and WHEREAS, as noted in the St. Helena Housing Update Report prepared for the City in April 2018, “St. Helena has more local jobs than people in the labor force, demanding large numbers of commuters to fill local jobs. Workers commute daily into

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St. Helena, many because there is no local housing that is affordable at the incomes that they make. Thirty six percent (36%) of St. Helena households cannot afford market rents while seventy percent (70%) of St. Helena households cannot afford to purchase a home. Paramedics and preschool teachers cannot afford St. Helena’s market rents.

Teachers, registered nurses, winery and hospitality managers and nonprofit directors cannot afford homeownership in St. Helena”; and
WHEREAS, the City has made significant efforts to address the need for housing at lower income levels, of which recent examples include providing assistance to local nonprofit Our Town St. Helena for the Brenkle Court development, a mutual self-help housing development providing homeownership opportunities to eight low income working families, as well as the acquisition of a home located at 963 Pope Street using a charitable sale strategy. The property at 963 Pope Street is being developed with an additional four units to provide a total of five new affordable rental units in the City; and WHEREAS, further, in connection with the recently approved Farmstead lodging project, the City negotiated with the developer to contribute one million dollars toward the purchase of property to be used for the development of not less than twenty units of housing that will be affordable to low and very low income households, and an additional two million two hundred thousand dollars to be used more generally toward the development of affordable housing in the City; and
WHEREAS, the City additionally provided substantial financial assistance to the recently completed Turley Flats Affordable Housing development, which provides eight units of rental affordable housing in a three story building located at 1105 Pope Street; and
WHEREAS, these efforts have helped to address the City’s need for affordable housing, but have also highlighted the challenge of providing sufficient housing to meet demand, particularly at more affordable levels, due to the significant costs of acquiring housing or land for the development of housing in the City and the limited supply of such land; and
WHEREAS, the conversion of existing residential units to uses other than longterm residential use will further reduce the City’s existing long-term housing supply, causing further imbalance between the demand for housing in the City and the existing supply, not only altering the character of the City’s residential neighborhoods, but also presenting further challenges to the City’s efforts to provide affordable housing within the community; and
WHEREAS, the City additionally has, for many years, worked to preserve its existing housing stock for long term residential use, both to maintain the character of its residential neighborhoods and prevent residential districts from becoming visitor and tourist serving districts, and to ensure that it would not be converted to uses other than long-term residential uses; and

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WHEREAS, to this end, in 1982 the City adopted Ordinance No. 82-07, which prohibited the creation of time-share projects as a means of ownership of any singlefamily, two-family or multiple-family dwelling or any apartment house within the City.

This restriction was imposed because the conversion of residential dwelling units to time-sharing projects would eliminate residential dwelling units that would otherwise be available for long-term occupancies, and were inappropriate in residential areas because those uses have the same character as commercial hotels, motels and other transient occupancy uses, and would result in increased traffic generation and multiple occupancies disturbing the peace and quiet of residential neighborhoods; and WHEREAS, the City has historically not received complaints about time-sharing uses in residential neighborhoods. Commencing in 2020, however, the City began receiving complaints regarding single family homes in the City that were being sold and/or marketed as “fractional ownership” or “co-ownership” homes, wherein each buyer may acquire a one-eighth interest in a limited liability company that will own the home. Under the structure pursuant to which these dwelling units are marketed and sold, each owner gets a one-eighth share along with the right to use the home for oneeighth of each year indefinitely. During each owner’s usage period, that owner has exclusive use of the entire house. All rentals are prohibited; only owners and their guests are permitted to use the house. Each owner pays regular assessments to fund the operating costs of the home and maintenance reserves; and WHEREAS, this arrangement, which provides that each purchaser is entitled to exclusive use of the property for a fixed number of days each year, is a “time-share plan” as defined in Business and Professions Code section 11212, and a “time share program” as defined in Section 17.112.130 of the City’s Municipal Code; and WHEREAS, the City has received numerous complaints regarding these properties, including parking impacts from large numbers of people staying at these properties; excessive noise late into the evening due to frequent outdoor parties; traffic due to frequent visitor turnover; traffic, noise and parking concerns due to frequent visits from cleaning, landscape maintenance and pool cleaning services that come to the properties in between each stay to prepare the home for the next guest; and an inability to maintain lines of communication to set community expectations with the users of the unit, as visitors only frequent the homes for short term stays of 2 to 14 days; and WHEREAS, the complaints received by the City are reflective of the reasons that the City prohibited time-share projects within residential areas of the City. The timeshare uses provide a short-term, high impact vacation oriented use of the property, where those that buy into the time-share use the home for entertaining and short term stays while visiting restaurants, wineries and other tourist oriented locations in St.

Helena and the surrounding Napa Valley; and
WHEREAS, this high impact use, combined with the frequent turnover and commercial management of these properties is not consistent with the residential districts in which they are located. It is commercial in nature, in that these time-share

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uses are structured as a short-term, tourist oriented, visitor serving use of the subject properties. The use of these properties as time-shares adds excessive noise and traffic to residential districts by using these properties for high impact tourist oriented uses more appropriately located in commercial districts of the City; and WHEREAS, expanded use of residential properties for time-share uses will further reduce the availability of housing stock for long-term residential use, and create a new demand for time-share uses of residential properties; and WHEREAS, this encroachment of tourist oriented, visitor serving uses in residential neighborhoods will not only compromise the residential character of these areas, but will also further increase the costs for housing in the City, undermining the City’s efforts to provide a balance of housing for all income levels in the City; and WHEREAS, the City’s authority to enact zoning ordinances is based on the powers accorded cities and counties under the State constitution to make and enforce police regulations. This police power grants the City broad authority to regulate the development and use of real property within its jurisdiction to promote the public welfare; and
WHEREAS, pursuant to and in accordance with this authority, the City Council desires to reaffirm its restrictions on time-share uses in residential areas, and to update the language of the Zoning Code to provide consistency with the terminology used to define time-share uses in State law. Further, the City desires to provide greater clarity as to the zoning districts in which time-share uses are permitted as conditional uses, and the standards pursuant to which they will be reviewed in those zoning districts; and WHEREAS, the Planning Commission of the City of St. Helena held a duly noticed public hearing on March 1, 2022, as required by law to consider all the information presented by staff, and public testimony presented in writing and at the meeting; and
WHEREAS, on March 1 2022, the Planning Commission of the City of St. Helena recommended that the City Council adopt this Ordinance amending the Municipal Code as described herein by a 5-0 vote; and
WHEREAS, on March 22, 2022, the City Council held a duly noticed public hearing, accepting testimony from the public, and discussed the proposed amendments and staff’s recommended approval of this Ordinance; and WHEREAS, the proposed zoning amendments are consistent with the General Plan goals, policies and implementation programs as the Ordinance will continue to preserve the agricultural, small town character of the City of St. Helena; will preserve the City’s residential districts for residential uses; and will help to preserve the City’s existing housing stock for long term residential uses, to avoid further exacerbating the existing impacts on the City’s housing supply; and

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Now, therefore, the City Council of the City of St. Helena does hereby ordain as follows:

SECTION 1: The above recitals are hereby incorporated as though set forth in this section.

SECTION 2: Chapter 17.138 and sections 17.138.010 – 17.138.060 are hereby added to Title 17 of the St. Helena Municipal Code, to read as follows:
“Chapter 17.138

TIME-SHARE USES

17.138.010 Purpose and Findings

17.138.020 Definitions

17.138.030 Time-share Uses Restricted to Service Commercial (SC) and Central Business (CB) Districts

17.138.040 Application Process and Development Standards

17.138.050 Violations, Enforcement and Civil Penalties

17.138.010 Purpose and Findings
A. There is a critical shortage of permanent, long-term housing in the City of St.

Helena.

B. A limited supply of suitable vacant land, land values, and market demand for land for other uses, including but not limited to use of property for vineyards, have limited the construction of additional housing in the City of St. Helena.

C. St. Helena is a popular tourist destination known for its scenic Napa Valley location, exceptional wineries and restaurants, historic Main Street and small town agricultural character.

D. The City of St. Helena stands out in the Napa Valley for its ability to attract visitors while also supporting the needs of its resident population. Maintaining the balance between the quality of life for residents and those who work in the City and the visitors who help to sustain the City’s tourist economy is key to maintaining a sustainable community and a stable economy.

E. Time-share uses are not an appropriate land use in the City’s residential districts due to the multiple occupancy of time-share properties, the short-term, tourist oriented use of such property and commercial management of time-share facilities, all of which

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create increased traffic generation, excessive noise, disruption to residential communities through commercial-level maintenance of the time-share facilities, and therefore are appropriately confined to commercial zoning districts.

F. Conversion of permanent housing to time-share facilities removes existing housing units from the City’s existing stock and exacerbates an already severe housing shortage.

G. It is therefore in the public interest to prohibit conversions of existing housing units into time-share facilities, as to do so eliminates needed housing stock by diverting those units to a tourist-oriented, commercial use.

17.138.020 Definitions
For purposes of this Chapter, the following words and phrases shall have the meaning respectively ascribed to them by this Section:
“Accommodation” means any dwelling unit, apartment, condominium or cooperative unit, hotel or motel room, or other structure constructed for residential use and occupancy, including but not limited to a single family dwelling, or unit within a two family dwelling, three family dwelling, multiple family dwelling, or townhouse dwelling as defined in Section 17.04.160.
“Building” shall have the meaning ascribed to it by Section 17.04.160. “Dwelling unit” shall have the meaning ascribed to it by Section 17.04.160. “Managing entity” means the person who undertakes the duties, responsibilities and obligations of the management of a time-share plan.
“Person” means a natural person, corporation, limited liability company, partnership, joint venture, association, estate, trust, or other legal entity, or any combination thereof. “Time-share instrument” means one or more documents, by whatever name denominated, creating or governing the operation of a time-share plan and includes the declaration dedicating accommodations to the time-share plan. “Time-share interest” means the right to exclusively occupy a time-share property for a period of time on a recurring basis pursuant to a time-share plan, regardless of whether or not such right is coupled with a property interest in the time-share property or a specified portion thereof.
“Time-share plan” means any arrangement, plan, scheme, or similar device, whether by membership agreement, bylaws, shareholder agreement, partnership agreement, sale, lease, deed, license, right to use agreement, or by any other means, whereby a purchaser, in exchange for consideration, receives the right to exclusive use of an accommodation or accommodations, whether through the granting of ownership rights, possessory rights or otherwise, for a period of time less than a full year during any given

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year, on a recurring basis for more than one year, but not necessarily for consecutive years.
“Time-share property” means one or more accommodations subject to the same timeshare plan, together with any other property or rights to property appurtenant to those accommodations.
“Time-share use” means the use of one or more accommodations or any part thereof, as a time-share property pursuant to a time-share plan.

17.138.030 Time-share Uses Restricted to Service Commercial (SC) and Central Business (CB) Districts
Time-share uses are conditional uses within the City’s Service Commercial (SC) District and Central Business (CB) District, subject to approval of a conditional use permit applied for and approved in conformance with this Chapter. Time-share uses are not permitted in all other Zoning Districts in the City.

17.138.040 Application Process and Development Standards A. Application Process. Approval of a conditional use permit for time-share uses in the Service Commercial District or Central Business District shall be required in accordance with the requirements of Chapter 17.168. In addition to the application requirements contained in Chapter 17.168, an application for a time-share use shall be accompanied by the following documents which shall be subject to the approval of the planning director:

1. Management Plan. A management plan shall describe the methods employed by the applicant to guarantee the future adequacy, stability, and continuity of a satisfactory level of management and maintenance of the time share use.

2. Application Requirements. In addition to any application requirements established by this section and any other applicable requirements of this code, the following information shall be submitted as part of any application to develop or establish a time-share use:
a. Typical floor plans for each accommodation.
b. The phasing of the construction of the accommodations on the timeshare property, if applicable. c. A description of any ancillary uses which are proposed in conjunction with the time share use.
d. A description of the method of management of the time share use and indication of the management entity for the time-share property. e. Any restrictions on the use or occupancy of the accommodations.

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f. Any other information or documentation the applicant, city staff or commission deems reasonably necessary to the consideration of the time-share use, including any required environmental documents.

B. Development Standards and Operational Requirements. Notwithstanding any other provision of this chapter, the following conditions must be met by any time-share use in any conditionally permitted zone. Additional requirements may be attached to a conditional use permit or development agreement if found to be necessary to assure that the time-share use meets the intent of this chapter:

1. Time-share uses developed in the Service Commercial District or Central Business District shall be limited to accommodations in upper floors in conjunction with a mixed-use project.

2. No existing residential use in the Service Commercial or Central Business District shall be converted to a time-share use.

3. Development Standards. The time-share use shall comply with all development standards for the zone in which it is located.

4. Parking. Parking shall be provided as follows:
a. For accommodations of two or fewer bedrooms, one parking space shall be provided for each accommodation.
b. For accommodations of three or more bedrooms, two parking spaces shall be provided for each accommodation.

4. Modification or Waiver of Standards. The planning commission may modify or waive one or more of the regulations contained in this section if it determines that strict compliance is not necessary to achieve the purpose and intent of this section.

17.138.060 Violations, Enforcement and Civil Penalties
A. Any responsible person, including but not limited to an owner of a time-share interest, management entity, agent, or broker who uses, or allows the use of, or advertises or causes to be printed, published, advertised or disseminated in any way and through any medium, the availability for sale or use of an accommodation in violation of this chapter is guilty of a misdemeanor for each day in which such accommodation is used, allowed to be used, or advertised for sale or use in violation of this chapter. Such violation shall be punishable pursuant to Chapter 1.20.

B. Time-share use, and/or advertisement for time-share use, of an accommodation in violation of this chapter is a threat to public health, safety or welfare and is thus declared to be unlawful and a public nuisance. Any such nuisance may be abated and/or restored by the enforcement official and also may be abated pursuant to Chapter 1.12, except that the civil penalty for a violation shall be one thousand dollars ($1,000.00). Each day the violation occurs shall constitute a separate offense.

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C. Any responsible person who violates this chapter shall be liable and responsible for a civil penalty of one thousand dollars ($1,000.00) per violation per day such violation occurs. The city may recover such civil penalty by either civil action or administrative citation. Such penalty shall be in addition to all other costs incurred by the city, including without limitation the city’s staff time, investigation expenses and attorney’s fees.

1. Where the city proceeds by civil action, the court shall have discretion to reduce the civil penalty based upon evidence presented by the responsible person that such a reduction is warranted by mitigating factors including, without limitation, lack of culpability and/or inability to pay. Provided, however, that in exercising its discretion the court should consider the purpose of this chapter to prevent and deter violations and whether the reduction of civil penalties will frustrate that purpose by resulting in the responsible person’s enrichment or profit as a result of the violation of this chapter. In any such civil action the city also may abate and/or enjoin any violation of this chapter.

2. Where the city proceeds by administrative citation, the city shall provide the responsible person notice of the right to request an administrative hearing to challenge the citation and penalty, and the time for requesting that hearing. a. The responsible person shall have the right to request the administrative hearing within forty-five (45) days of the issuance of the administrative citation and imposition of the civil penalty. To request such a hearing, the responsible person shall notify the city clerk in writing within fortyfive (45) days of the issuance of the citation. The appeal notification shall include all specific facts, circumstances and arguments upon which the appeal is based. b. The city manager is hereby authorized to designate a hearing officer to hear such appeal. The city hearing officer shall conduct a hearing on the appeal within ninety (90) days of the request for the hearing unless one of the parties requests a continuance for good cause. The hearing officer shall only consider those facts, circumstances or arguments that the property owner or responsible person has presented in the appeal notification. c. The hearing officer shall render a decision in writing within thirty (30) days of the conclusion of the hearing. The hearing officer shall have discretion to reduce the civil penalty based upon evidence presented by the property owner or responsible person that such a reduction is warranted by mitigating factors including, without limitation, lack of culpability and/or inability to pay. Provided, however, that in exercising its discretion the hearing officer should consider the purpose of this chapter to prevent and deter violations and whether the reduction of civil penalties will frustrate that purpose by resulting in the property owner’s or responsible person’s enrichment or profit as a result of the violation of this chapter.
d. Any aggrieved party to the hearing officer’s decision on the administrative appeal may obtain review of the decision by filing a petition for writ

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of mandate with the Napa County superior court in accordance with the timelines and provisions set forth in Government Code Section 53069.4. e. If, following an administrative hearing, appeal, or other final determination, the owner of the property is determined to be the responsible person for the civil penalty imposed by this section, such penalty, if unpaid within forty-five (45) days of the notice of the final determination, shall become a lien to be recorded against the property on which the violation occurred pursuant to Chapter 1.12. Such costs shall be collected in the same manner as county taxes, and thereafter the property upon which they are a lien shall be sold in the same manner as property now is sold for delinquent taxes.

D. Any violation of this chapter may also be abated and/or restored by the enforcement official and also may be abated pursuant to Chapter 1.12, except that the civil penalty under Chapter 1.12 for a violation shall be one thousand dollars ($1,000.00).

E. Each day the violation of this chapter occurs shall constitute a separate offense.

F. The remedies under this chapter are cumulative and in addition to any and all other remedies available at law and equity.”
SECTION 3: Deletion of Section 17.112.130
Section 17.112.130 is hereby deleted in its entirety.

SECTION 4: Amendment of Section 17.48.030
Section 17.48.030 is hereby amended to add the following text as a separate line immediately following “Theaters, movie and legitimate;”, and immediately prior to “Tobacco/smoke shop, including the sale of tobacco, tobacco and/or nicotine products and equipment for smoking;”:
“Time share uses, pursuant to Sections 17.138.030 and 17.138.040;” SECTION 5: Amendment of Section 17.52.030
Section 17.52.030 is hereby amended to add the following text as a separate line immediately following “Theaters, movie and legitimate;”, and immediately prior to “Tobacco/smoke shop, including the sale of tobacco, tobacco and/or nicotine products and equipment for smoking;”:
“Time share uses, pursuant to Sections 17.138.030 and 17.138.040;” SECTION 6: CEQA

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This ordinance was assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines (the Guidelines), and the environmental regulations of the City. The City Council hereby finds that this ordinance is not subject to CEQA because the adoption of this ordinance is not a “project” pursuant to Sections 15060(c)(2) and 15060(c)(3) of Title 14 of the California Code of Regulations.

Moreover, under Section 15061(b)(3) of the State CEQA Guidelines, this ordinance is exempt from the requirements of CEQA because it can be seen with certainty that the provisions contained herein would not have the potential for causing a significant effect on the environment.

SECTION 6: Effective Date
This ordinance shall take effect 30 days after its final adoption, and a summary of this ordinance shall be published once with the names of the members of the Council voting for and against the ordinance in the St. Helena Star, a newspaper of general circulation published in the City of St. Helena.

THE FOREGOING ORDINANCE was introduced at a regular meeting of the St. Helena City Council on the day of , 2022, and was adopted at a regular meeting of the St. Helena City Council on the day of , 2022, by the following vote:

Mayor Ellsworth: _____
Vice Mayor Dohring: _____
Councilmember Chouteau: _____
Councilmember Hardy: _____
Councilmember Hall: _____
APPROVED:
___________________________________
Geoff Ellsworth, Mayor
ATTEST:

CITY OF ST. HELENA
___________________________________
Cindy Tzafopoulos, City Clerk

From: Mari Jansdotter <[email protected]>
To: Anna Chouteau
Sent: 6/8/2021 7:25:45 AM
Subject: Re: [External] 1242 Madrona pictures Re: Pacaso Thank you, Anna, for your kind reply.

I'm sorry you all have to go through this lawsuit by Pacaso and hope the judge find in your favor.

I have a follow—upquestion. Do you know who I should address it to? The Pacas house building on Kearney across the street from us has installed lights under the roo?ine that are on all night and installed in such a Way they shine straight into our house, especially my daughter's bedroom.

Are there any ordinances that I could refer to that help me ask them to please cover / redirect those lights or at least turn them off after 10 pm‘?
Thank you!
Best
Mari

Sent from Yahoo Mail on Android
On Tue, Jun 8, 2021 at 7:12 AM, Anna Chouteau
<[email protected]> wrote:

Hi Mari,
Thank you for your email. I forwarded your email to City staff about the speci?c permitting questions.

Our planning director is out of the of?ce this week.

We are defending ourselves in the lawsuit. Our City Attorney ?led an anti-SLAPP motion that is now public information and the hearing will be coming up this summer.

All my best,
Anna
Sent from my iPad
On Jun 7, 2021, at 6:01 PM, Mari Jansdotter <[email protected]> wrote:

To clarify, do they have permit allowing the new structure going up at l242 Madrona? The rendering from original sales listing shows a trellis (see attached) but a structure looking like a liVe—on unit close to (and taller than) the Oak neighbour‘ fence is being built. See pictures from today <202l0607_l75202jpg>
<202lO607_l752l9jpg>
Sent from Yahoo Mail on Android
On Mon, Jun 7, 2021 at 5:38 PM, Mari Jansdotter
<[email protected]> wrote:

Thank you for doing all you can to stop Pacasof
I am not o.k. with Pacaso’s Violation of city ordinance and I support the city‘slegal ?ght.

In addition to signing the petition and putting a No Pacaso sign outside my home, what else can we on the community do to help, please?

I ?nally afforded my dream home after moving several times the last 10 years, only to a year later have 4! of these Pacaso ‘time share’ like vacation LLC/commercially owned houses popping up in my neighborhood.

I'm devastated - this is supposed to be a residential areal! I am very worried about my family's safe & peaceful living situation, now that I'll be impacted by 4 of these houses (one across the street) — each with 8 groups of owners and/or their guests circulating in and out all year round.

Many Pacaso have 4 bedroomsthat easily accommodate 8+ people, and pool in the backyards with outdoor areas for gatherings/parties.

It's a huge difference having your neighbor throwing an occasional party versus non—stop having a new group of people next door visiting for thier token time of vacation / partying.

Pacaso houses also come with increased parking problems as these properties tend not have garages or driveways (often transformed into addl bedroom).

Specifically would you mind looking into building code the one at 1242 Madrona / Oak? Looks like they're adding a guest house with vary narrow set back from the oak side neighbor. is that an approved building? Maybe they're getting around that by making it a partial garage? Add to that, the 4 Pacaso houses are all in close proximity of RLS with kids wa1king/ biking to and from school.

What are the safety concerns that this is imposing with new people circulating in and out all year round and increased car traffic? Worst case scenario there will be a liability situation that will put a stop to Pacaso.

Please, please stop Pacaso before we even get close to that.

Respectfully,
Mari Jansdotter
Sent from Yahoo Mail on Android

PACASO = PARTY HOUSES!
Debbie Polverino 5/11/2021
To the members of the City Council. In the recent Napa Register article, Austin Allison agrees that short term rentals are a problem, that commercial Timeshares are a problem- that’s not what Pacaso is he said. Yet, Pacaso listed the Valley View Street “Pool House” as a 1/8 Timeshare Ownership property. After the city was notified by several concerned citizens and myself regarding “timeshares” listed for sale in residential zoned areas, Pacaso changed its online marketing from “1/8 Timeshare Ownership to 1/8 Shared Ownership. Owners who purchase still share the property in available time slots just like a timeshare.

Living next door to a Pacaso home has been living next door to a full-time party house! The constant music with speakers blaring, loud conversations until 2 am and later, noise violations along with excessive vehicles parked on the street or in front of our homes. The additional noise of gardeners blowing dirt and leaves into our yard, Pool service, catering trucks, housekeeping scheduled more frequently. Open houses are held with statements made with, “this is a great place for pool parties and entertaining, it’s a perfect place to bring friends and extended family.” This home on Valley View Street was a weekend getaway home for the previous owners who had loud weekend parties. Itwas a constant nightmare and all the homes nearby complained. Now the property has been split up to 8 owners. The Saint Helena P.D. has already been to this home at least 3 times for noise violations after 10pm. There must be a way to stop these repeated violations and offenders.

Pacaso’s has written policies for its owners on their website that they must adhere to. No parking on the street, no parties, no noise after 9pm to 7am, no dogs over 80 pounds. Policies have been broken several times already from each group including the Pacaso’s owners.

According to Mr. Allison, Saint Helena is running a dishonest campaign against Pacaso. Pacaso claims discrimination of outside ownership which is not the case. As we all know we welcome all people the opportunity to live in our quiet small town. Pacaso selling an 1,100 square foot home which is smallest of any home on our street for $1.7M is dishonest in my opinion. This is what he says is affordable housing for second home buyers who are paying in full, plus maintenance fees? When commercial companies buy a dozen homes in Napa Valley and plans additional purchases to be split up to 8 shares it is not committed to the community or our quiet neighborhoods. Zoning is in place for a reason. Commercial companies operating in full time residential streets should adhere to the rules that are in place and only buy up in areas where other vacation homes are abundant and not a disruption.

What happens should we decide to sell our home? How will people feel about buying next door to a home owned by 8 owners who don’t know each other and all come at different time slots for as little as 2 days at a time? We will have to disclose this information. This put a negative mark on our property. This is something Iwant you to think about! Say NO to Pacaso! Thank you.

From: Amy Caldarola <amyca|@comcast.net>
To: Paul Dohring
CC: Anna Chouteau; Lester Hardy; Eric Hall
Sent: 5/23/2021 1:04:24 PM
Subject: [External] Picaso
Dear Council Members,
This is Amy Caldarola here. I am very concerned about Picaso buying property in our residential neighborhoods under the guise of democratizing home ownership. This is not affordable housing. Picaso properties are time-shares and short-term rentals which violate municipal code provisions. The presence of these properties in residential neighborhoods is inappropriate and will degrade the quality of life. It has already done so with Picaso’s property on Valley View; those neighbors are suffering with loud noise, music, and parties that go on to after midnight; even calling the police does not seem to stop them. I support the city in doing everything possible to defeat them. I also support a counter law suit against them if it makes legal sense. With that said, we are fighting for the soul of our community and this needs to be a number one priority.

Picaso is in Napa, Sonoma, Healdsburg, and probably will move into Calistoga and Yountville. This is a fight worth fighting. It might be helpful for the affected counties and municipalities to join their resources together to oppose them. Please outline for me what the city is doing and what the plan is.

Thank you. I really appreciate you taking the time to keep me informed on this very important and pressing issue. We must act now!
Sincerely,
Amy Caldarola

May 11, 2021
Good evening City Council members. My name is Clare Barr and l live in St. Helena. Tonight l would like to speak about the Pacaso Vacation Share homes.
l listened carefully to the public comments of Pacaso Share owners made at our last City Council meeting. They sounded sincere in their desire to be a part of the St. Helena community. The problem is they have bought into a business model that will make that nearly impossible.

To be a part of a real community means forming bonds with neighbors.

How can that come about with a home next door that has possibly dozens of strangers coming and going, with visits no longer than 14 days at a time, a few times a year? And with the likelihood of visits gifted by other share owners, and a cleaning crew who appears before each arrival, the number swells. With the result that a Pacaso share owner, is viewed by their neighbors as only one in a sea of unfamiliar faces.

And though the intentions of some of the share buyers might be good, can we say the same for all 7 of the remaining shareowners? One of whom might gift a weekend to his brother for a blowout bachelor party? Or as was the case in Napa, a single shareowner who conducted retreats in which close to a dozen visitors would come and go within one stay. That particular shareowner was charging her guests, which is a complication on an entirely different level.

Pacaso would have us believe that their sharebuyers are families who simply want a quiet, lovely getaway. But in actuality, a Pacaso home is built for partying. Their own website says of one offering ”This home takes entertaining to new heights”. And yet another listing says that a

particular home ”has been completely re—imagined to accommodate families, friends, and large groups”. Another listing offers "year round fun and adventure”.

Now, none of us resent the visitor who wants to have fun. Indeed, our beautiful valley is an ideal place for celebration. And we all do that on occasion. But when you realize that every single visitor owning a Pacaso share has been wooed with the promise of “fun and adventure” within a house ”built for entertaining”, then you have the possibility of major partying with each and every visitor, all crammed into stays that last from 2-14 days. This is transient occupancy in our residential neighborhoods that cannot possibly be regulated under the Pacaso system.

There is a reason why we have ordinances in place that designate where tourists and visitors can stay. it allows us to appreciate our visitors, giving them the space and accommodations in which to party and celebrate, while we ourselves can conduct our daily lives in the sanctuary of our residential neighborhoods. Which in turn, are places where we know our neighbors so well that we trust them with our keys, our pets, and even our children. With whom we share joy and sometimes sorrow, and whom are quick to lend a hand in times of crisis.

And if we have learned anything in the last few years, it is that the ability to know and rely on our neighbors is the very thing that sustains our community through thick and thin. A vacation home with a parade of visitors coming and going, does not belong in our residential neighborhoods. Please Say No to Pacaso.

Clare Barr
St. Helena

From: Beth Gray <[email protected]>
To: Geoff Ellsworth
Sent: 5/22/2021 3:01:13 PM
Subject: [External] Pacaso
Dear Mr. Mayor,
I am writing to express my strong opposition against the in?ltration of Pacaso and their timeshare strategy in the city of Saint Helena. As a full-time resident here in the city (and as your neighbor), I find it atrocious that the city has not been able to stop the in?ltration of this community destroying business model. This business will do nothing but destroy our community. As an example, I witnessed the dumping of water from the pool into the creekbed from a home purchased by Pacaso right on the corner of Sy1vaner/Reisling as they began to redevelop the home and expect to list it as fractional ownership. Illegal dumping of the pool water with disregard to any of the environmental consequences demonstratestheir utter lack of care about the community. Similarly, hearing from the neighbors who live next to a Pacaso home on Valley View, I can only shake my head and sympathize with the poor neighbors having to deal with multiple cars showing up and loud music being played at all hours.

One of the reasons I moved from San Francisco to Saint Helena was to enjoy the quiet sounds of nature, the beautiful outdoors — not to listen to vacationers who only want to party for the two weeks that they have their time in the home. Please protect our city from these timeshares.

I understand the city is being sued. I hope that we can collectively put the necessary resources behind this lawsuit to stop Pacaso from any more timeshares in St. Helena.

Respectfully,
Beth Gray

Report to the City Council
Regular City Council - 14 Jul 2020
Agenda Section: NEW BUSINESS
Subject: Discussion Regarding Timeshare Issues
CEQA
Determination:

Not a CEQA project
Prepared By: Kara Ueda, City Attorney
Reviewed By: April Mitts, Finance Director
Approved By: Maya DeRosa, Planning & Building Director/Acting City Manager

BACKGROUND
This agenda item is for informational purposes only to guide and facilitate a policy discussion amongst the City Council regarding timeshare uses and fractional ownership of residences in the City. The issue is being discussed following concerns raised by both City residents and Council members after some residents discovered a real estate listing for a fractional or partial ownership interest in a residential home in town.

The St. Helena Municipal Code currently prohibits creation of a timeshare project as a means of ownership of any single-family, two-family or multiple-family dwelling or any apartment house within the City. (SHMC § 17.112.130) The prohibition is based, in part, on findings made by the City Council that timeshare uses are commercial or quasicommercial uses that serve to reduce available residential housing and increase traffic and noise impacts. (See SHMC § 17.112.130(A).) As explained further below, though, a timeshare use differs from a fractional or partial ownership of a property.

DISCUSSION
What is a timeshare?
State law and the California Department of Real Estate regulate the advertising and sale of timeshares pursuant to “The Vacation Ownership and Time-Share Act of 2004.” (Bus. & Prof. Code, § 11210 et seq.). That law defines a “time-share plan” to mean “any arrangement, plan, scheme, or similar device, other than an exchange program,

whether by membership agreement, sale, lease, deed, license, right to use agreement, or by any other means, whereby a purchaser, in exchange for consideration, receives ownership rights in or the right to use accommodations for a period of time less than a full year during any given year, on a recurring basis for more than one year, but not necessarily for consecutive years.” (Bus. & Prof. Code, § 11212(z).) The law mandates certain registration and advertising requirements for timeshare plans and regulates the information and terms that must be included in a sale in order to protect consumers who may purchase time-share interests. However, the law does not regulate the location and use of timeshare plans, and it expressly does not invalidate or modify local “zoning, subdivision, or building code” ordinances. (Bus. & Prof. Code, § 11280.) The St. Helena Zoning Code prohibits the creation of a timeshare project as a means of ownership of any single-family, two-family, or multi-family dwelling or apartment house. (SHMC § 17.112.130). The Code has a fairly circuitous definition to determine if a project is a prohibited timeshare or not. A “time-share project” means any real property subject to a “time-share program.” A “time-share program” is defined as “any arrangement for time-share intervals in a time-sharing project whereby the use, occupancy or possession of real property has been made subject to either a time-share estate or time-share use whereby such use, occupancy or possession circulates among purchasers of the time-share intervals according to a fixed or floating time schedule on a periodic basis for a specific period of time during any given year, but not necessarily for consecutive years.” (SHMC § 17.112.130(A).) A “time-share estate” is defined in the Code to mean “an ownership or leasehold estate in property devoted to a time-share fee (tenants in common, time span ownership, interval ownership) or a time-share lease. (Id.) What emerges from these various definitions is that a timeshare, as defined in the City’s Zoning Code, is not identical to a fractional or partial ownership; but, rather, a timeshare involves an ownership arrangement where the owners have purchased an allotted amount of time to use the property (a timeshare interval). The Code also notes that timesharing projects have the same character as commercial hotels and other transient uses.

Timeshares, thus, are somewhat similar to short-term rentals and fractional ownership hotels but differ from both in important ways. The City defines short-term rentals as a use in which overnight accommodations are provided to guests for compensation for periods of less than thirty (30) days in a single-family dwelling and are only authorized with a short-term rental permit. (SHMC § 17.04.160.) Short-term rentals are generally rented by guests on a short-term basis. After the guest leaves, they have no further obligation or ownership of the property. A timeshare, on the other hand, means that the person has an ongoing ownership interest in the property for a limited duration of time.

The City defines fractional ownership hotels as hotels with a minimum of 40 rooms, in which 75% or more of the rooms may be made available to individuals as “time-share estates,” “which is defined as a time-share interest, which is the right to occupy a timeshare property, coupled with a freehold estate or an estate for years with a future interest in a time-share property or a specified portion thereof, pursuant to Section 11212(x)(1) of the California Business and Professions Code, and subject to obtaining

permission required to do so obtained from the California Department of Real Estate.” (SHMC § 17.112.150.) The Zoning Code provides that fractional ownership hotels are conditionally permitted in the Service Commercial district. Timeshares as discussed herein, by comparison, may be for any particular interval of time and are a type of fractional/partial ownership. But not all fractional/partial ownership interests are considered timeshare interests. For purposes of much of the discussion in this report, timeshares are discussed in the context of a single-family home rather than, for example, a large condominium project or converted hotel.

What are the challenges and limitations to regulating partial ownership in single-family residences?
City staff and the City Attorney’s office have reviewed a small sample of other jurisdictions’ ordinances regulating timeshares. What emerges as a theme from this limited review is that other jurisdictions appear to regulate timeshare uses as commercial uses, such as timeshare units in high-rise condominium buildings or something akin to fractional ownership hotels. The City’s code appears to try to similarly regulate timeshare uses as a commercial use.

The most fundamental challenge to amending the Zoning Code to regulate fractional or partial ownership in single-family residences is that by law zoning regulations must focus on the use of land. (See, e.g., O’Loane v. O’Rourke, 231 Cal.App.2d 774, 780 (1965) [zoning is “the regulation of buildings and structures, according to their construction, and the nature and extent of their use, and the nature and extent of the uses of land.”].) State law enumerates the specific types of permissible zoning regulations, which are likewise focused on “the use of buildings, structures, and land” and related physical requirements, such as the location and size of signs, buildings and structures. (Gov. Code, § 65850.) Thus, the City’s Zoning Code focuses on the types of uses, including, for example, different types of residential uses, winery uses, and commercial uses.

While there may be a concern that non-permanent City residents are purchasing property in St. Helena as a second home(s) either for themselves or their guests, zoning regulations may not target individuals. In other words, the City may not adopt a zoning regulation based on the identity of a tenant or where a particular resident permanently resides. See, e.g., Friends of Davis v. City of Davis, 83 Cal.App.4th 1004, 1013 (2000) [“a city does not have carte blanche to exclude a retail merchant that it, or some of its residents, do not like”].) City ordinances also may not regulate or define what constitutes a “family” for purposes of limiting the number of unrelated people who live together in a dwelling. (City of Santa Barbara v. Adamson, 27 Cal.3d 123 (1980).) There are also significant practical challenges to implementing and enforcing the existing timeshare regulations. Absent a proposed new development to specifically construct a timeshare project, the City does not know when a residence becomes a timeshare, since the ownership change is a private transaction between private parties.

The City does not have an easily available means to scrutinize such agreements or monitor the terms of particular ownership arrangements. Additionally, there may be a

number of joint ownership scenarios that do not necessarily trigger the same concerns as commercial transient uses or that do not qualify as a prohibited timeshare under the City’s ordinance. For example, multiple members of an extended family may all wish to purchase a residence together. The family members may not all necessarily live in the home together at the same time, but they also did not set up an arrangement where they each have a timeshare interval. While this residence may be owned by multiple people who each do not choose to live in the residence, the joint or partial ownership of the residence would not be considered a timeshare as each family member could have equal access to the residence (as opposed to purchasing a limited amount of time).

These challenges do not necessarily preclude regulating or prohibiting timeshare uses but should be considered in determining whether additional or amended regulations are desired.

What may the City regulate with respect to timeshares?
For the above reasons, zoning based solely on ownership, as opposed to the use of land, is impermissible. Timeshare regulations should, thus, focus on the type and use of the property and its related impacts, such as specific intervals of exclusive occupancy that render the use more akin to a transient commercial use.

If the City Council is concerned about the potential neighborhood impacts timeshare uses may create, the City has existing regulations in place to address such impacts. For example, if the concern is that part-time owners may infrequently visit the property and have large parties, the City’s noise ordinance addresses noise and authorizes abatement and issuance of an infraction. The City’s Municipal Code also addresses nuisances generally and has parking standards in place. However, these regulations all regulate the impacts of certain activities on the land, not the land uses themselves.

FISCAL IMPACT
None at this time. Additional staff time and research will be required if zoning amendments are proposed.

RECOMMENDED ACTION
Receive this report, discuss, and provide direction to staff if desired. City staff is seeking guidance and clarification from the City Council concerning the specific problem(s) a Zoning Code amendment could help resolve, but with the limitations noted above for regulating timeshares and partial ownership.

City of Sonoma
Agenda Item Summary
Meeting: City Council - 19 Jan 2022
Department
Planning and Community Services
Staff Contact
David A. Storer, AICP, Director, David J.

Ruderman, Assistant City Attorney
Agenda Item Title
Discuss, Consider, and Take Possible Action on Introduction and Adoption of an Urgency Ordinance Amending the Sonoma Municipal Code to Add Section 19.50.140 – Timeshares – and Finding the Ordinance exempt from the California Environmental Quality Act (CEQA) under the general rule pursuant to Guidelines Section 15061(b)(3) because CEQA only applies to projects that have the potential for causing a significant effect on the environment and the Ordinance does not involve a commitment to any specific project that may result in a potentially significant physical effect on the environment.

Summary
Currently, the Municipal Code does not contain any regulation governing the use of properties as time-shares, meaning that, as a non-enumerated use, time-shares currently are prohibited throughout the City. However, due to the rise in fractional home ownership, there may be ambiguity regarding whether fractional home ownership uses constitutes a prohibited timeshare or an allowed residential use. The urgency ordinance is intended to define time-shares broad enough to encompass fractional home ownership and ensure that their essentially commercial use is confined to those parts of the City that are planned for commercial uses.

This will avoid losing valuable land zoned for residential purposes from being usurped by fractional home ownership and time-share uses. The proposed urgency ordinance thus continues the prohibition on time-shares in all residential zones and as the residential component of a Commercial or Mixed Use development. The following findings can be made by the City Council to support the adoption of the Urgency Ordinance:

1. A severe housing crisis exists in the state with the demand for housing outpacing the supply;

2. The City of Sonoma is particularly experiencing a housing emergency due to its relative isolation, limited housing supply, and desirable location;

3. Time-share uses threaten to reduce the housing supply in the City by turning longterm housing in the City into vacation rentals and reducing the affordable housing stock in the City;

4. Time-shares increase traffic and noise impacts and have the same character as commercial hotels, motels, and other transient occupancy uses due to their transient nature making them inappropriate for residential zones;

5. California Government Code Sections 36934 and 36937 authorizes the City of Sonoma to adopt an urgency ordinance by a four-fifths vote (4/5ths) necessary to protect the public peace, health, or safety;

6. An urgency ordinance adopted pursuant to Government Code Sections 36934 and 36937 is warranted on an urgency basis to allow regulations to govern how time-share are regulated. Without such ordinance, the issues raised above pose a significant threat to the public peace, health and safety.

The attached Urgency Ordinance will add Section 19.50.140 – Timeshares into Title 19 and will be effective upon adoption. The attached Urgency Ordinance was presented to the

Planning Commission on January 13th, 2022, for comment and direction to staff, which will be reported to the City Council at the meeting.

It is anticipated that the Planning Commission will review a regular ordinance at its meeting on February 10th, 2022, that will be later introduced to the City Council on February 23rd, 2022, and adopted by the City Council on March 2, 2022 to supersede the Urgency Ordinance; however the Urgency Ordinance would be in effect until a regular ordinance becomes effective.

The attached Urgency Ordinance creates provisions for allowing timeshares with the approval of a Use Permit as part of the commercial component in a Commercial zoning district as defined in Section 19.10.020(B) or as a part of the commercial component in a Mixed Use zoning district as defined in Section 19.10.020(C).

Recommended Council Action
Introduce and adopt an Urgency Ordinance entitled “AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SONOMA ADDING TITLE 19, SECTION 19.50.140 (TIMESHARES) TO THE CITY OF SONOMA MUNICIPAL CODE.” Note: A 4/5 vote of the City Council is required to adopt an urgency ordinance and it takes effect immediately
Alternative Actions

1. Take no action

2. Direct staff to amend urgency ordinance to only allow time-shares in commercial zones, but not as part of the residential component (i.e., also prohibiting them as part of the commercial component in MX)

3. Direct staff to amend urgency ordinance to prohibit time-shares in all zones in the City.

Financial Impact
None, other than the time necessary for staff to prepare this report and the accompanying urgency ordinance.

Environmental Review Status
Environmental Impact Report
Negative Declaration
Exempt
Not Applicable
Approved/Certified
No Action Required
Action Requested
Attachments
Urgency Ordinance No. XX-2022
Alignment with Council Goals:

Not Applicable
Compliance with Climate Action 2020 Target Goals:

CC:
n/a

272104.2
City of Sonoma
DRAFT ORDINANCE #_____ -2022

AN URGENCY ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SONOMA ADDING TITLE 19, SECTION 19.50.140 (TIME-SHARES) TO THE CITY OF SONOMA MUNICIPAL CODE
WHEREAS, the City has recently become aware of time-share companies operating in the City; and
WHEREAS, this Ordinance is adopted as an urgency ordinance pursuant to Government Code Sections 36934 and 36937. The facts constituting the urgency are as follows:
a) A severe housing crisis exists in the state with the demand for housing outpacing the supply;
b) The City of Sonoma is particularly experiencing a housing emergency due to its relative isolation, limited housing supply, and desirable location; c) Time-share uses threaten to reduce the housing supply in the City by turning longterm housing in the City into vacation rentals and reducing the affordable housing stock in the City;
d) Time-shares increase traffic and noise impacts and have the same character as commercial hotels, motels, and other transient occupancy uses due to their transient nature making them inappropriate for residential zones; e) California Government Code Sections 36934 and 36937 authorizes the City of Sonoma to adopt an urgency ordinance by a four-fifths vote (4/5ths) vote where necessary to protect the public peace, health, or safety; f) An urgency ordinance adopted pursuant to Government Code Sections 36934 and 36937 is warranted on an urgency basis to allow regulations to govern how timeshare are regulated. Without such ordinance, the issues raised above pose a significant threat to the public peace, health and safety.

WHEREAS, the City Council find and determines that the immediate preservation of the public health, safety, and welfare requires that this Ordinance be enacted as an urgency ordinance pursuant to Government Code Section 36934 and 36937, and such that Ordinance take effect immediately upon adoption – therefore, this Ordinance is necessary for the immediate preservation of the public peace, health, safety and welfare and its urgency is hereby declared.

WHEREAS, the City Council desires to amend the City’s municipal code to address the impact that time-shares are having on the City’s housing supply.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SONOMA DOES ORDAIN AS FOLLOWS:

272104.2
SECTION 1. RECITALS.

The above set forth recitals and findings are true and correct and incorporated herein by reference, as if set forth herein in full.

SECTION 2. URGENCY ORDINANCE.

The urgency ordinance is necessary for the immediate preservation of the public peace, health, and safety because the operation of time-share companies in the City threatens to reduce the supply of affordable and market-rate housing in the City, increase site development conflicts and incompatibilities related to public safety, visual, privacy, and aesthetic impacts which would negatively impact the public welfare and the unique quality and character of the City of Sonoma.

SECTION 3. MUNICIPAL CODE AMENDMENTS.

Section 19.50.140 of the Sonoma Municipal Code is added to read as follows:

19.50.140 Time-Shares.

This section sets forth requirements for the establishment and operation of time-share uses.

A. Definitions.

1. “Accommodation” means any dwelling unit, multifamily dwelling, apartment, condominium or cooperative unit, cabin, lodge, hotel or motel room, or other private or commercial structure containing toilet facilities therein that is designed and available, pursuant to applicable law, for use and occupancy as a residence by one or more individuals.

2. “Owner” means owner of a time-share interest.

3. “Person” means a natural person, corporation, limited liability company, partnership, joint venture, association, estate, trust, or other legal entity, or any combination thereof.

4. “Time-share instrument” means one or more documents, by whatever name denominated, creating or governing the operation of a time-share plan and includes the declaration dedicating accommodations to the time-share plan.

5. “Time-share interest” means and includes either of the following:
a. The right to exclusively occupy a time-share property for a period of time on a recurring basis pursuant to a time-share plan, coupled with a freehold estate or an estate for years with a future interest in a time-share property or a specified portion thereof.
b. The right to exclusively occupy a time-share property for a period of time on a recurring basis pursuant to a time-share plan, which right is neither coupled with a freehold interest, nor coupled with an estate for years with a future interest, in a time-share property or a specified portion thereof.