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HomeMy WebLinkAbout10-06-2022 - Planning Commission NEWPORT BEACH PLANNING COMMISSION SPECIAL MEETING MINUTES CITY COUNCIL CHAMBERS – 100 CIVIC CENTER DRIVE THURSDAY, OCTOBER 6, 2022 REGULAR MEETING – 6:30 P.M. I. CALL TO ORDER - The meeting was called to order at 6:30 p.m. II. PLEDGE OF ALLEGIANCE – Commissioner Klaustermeier III. ROLL CALL PRESENT: Chair Lauren Kleiman, Secretary Mark Rosene, Commissioner Tristan Harris, Commissioner Sarah Klaustermeier, Commissioner Lee Lowrey, Commissioner Erik Weigand ABSENT: Vice Chair Curtis Ellmore Staff Present: Community Development Director Seimone Jurjis, Deputy Community Development Director Jim Campbell, City Attorney Aaron Harp, Principal Planner Jaime Murillo, Administrative Assistant Clarivel Rodriguez, Department Assistant Savannah Martinez IV. PUBLIC COMMENTS None V. REQUEST FOR CONTINUANCES None VI. CONSENT ITEMS ITEM NO. 1 MINUTES OF SEPTEMBER 8, 2022 Recommended Action: Approve and file Motion made by Commissioner Weigand and seconded by Secretary Rosene to approve the minutes of the September 8, 2022, meeting as amended. AYES: Harris, Kleiman, Lowrey, Rosene, and Weigand NOES: None ABSTAIN: Klaustermeier ABSENT: Ellmore VII. STUDY SESSION ITEM NO. 2 CODE UPDATE RELATED TO FRACTIONAL HOMEOWNERSHIP (PA2022-0202) Site Location: Citywide Summary: Staff will provide the Planning Commission with an update regarding the growing trend of fractional homeownership, how other jurisdictions are addressing the use, deficiencies in current codes, and the outcome of recent City Council discussions on this topic. DocuSign Envelope ID: 2E4CA2B6-698E-4A00-923B-95DC55343673 Planning Commission Special Meeting Agenda October 6, 2022 Page 2 of 7 Recommended Action: Receive Presentation on fractional homeownership and provide staff direction. Community Development Director Jurjis thanked the Planning Commission for attending the special meeting, reminded them that it is a study session with no formal action required, and requested input on policy recommendations on fractional ownership with the goal of gaining consensus from the Planning Commission for staff to use to draft an ordinance that can be recommended to the City Council. He encouraged questions before turning the presentation over to Principal Planner Murillo. Principal Planner Murillo utilized a presentation to provide the Planning Commission with an overview of the discussion, what is fractional homeownership, fractional ownership of real estate, companies selling fractional ownership, how it works, operations, complaints/concerns, claimed benefits, City regulations, municipal code review, “timeshare” and “development” definitions, and city timeshare requirements. Furthermore, he reviewed the City Council background and direction, research report findings, 12 known properties in the City, and case studies for St. Helena, CA, Palm Springs, CA, and Park City, UT. Principal Planner Murillo presented options and recommendations based on direction from the City Council – Option A definition and Option B definition, including review process options, parking requirements, noise restrictions, separation standards, trash management, management plan, prohibited subletting, the Good Neighbor policy, owner acknowledgements, and grandfathering provisions. In response to Secretary Rosene’s question, Principal Planner Murillo stated that Option B can be exercised either with a use permit or zoning clearance. Community Development Director Jurjis indicated that the City is looking at fractional ownership as a new land use category as opposed to a permit program like Short-term Lodging (STL). In response to Commissioner Lowrey’s inquiry, City Attorney Harp reviewed the set-up structure and state regulations for fractional ownership and how it differs from tenant in common. In response to Commissioner Weigand’s questions, Deputy Community Development Director Campbell verified that the City would need to go to the California Coastal Commission (CCC) for any amendment to the Local Coastal Program (LCP). City Attorney Harp indicated that fractional ownership properties generally want to be in the coastal zone, some City’s have banned it by zone. He expects push back from some City Council members who think that some coastal zone areas are overburdened, and restricted areas could be crafted if preferred by the Planning Commission. Deputy Community Development Director Campbell relayed that CCC staff does not consider fractional ownership an issue but looks at the use as a timeshare. Community Development Director Jurjis noted that the City only regulates land use and will use municipal codes to enforce violations. City Attorney Harp recognized enforcement challenges related to violations from property users who are not owners. Community Development Director Jurjis shared a Pacaso property complaint and the City’s response to a violation on the property and noted a reactive program for code violations, the Timeshare Act for fractional ownership, and Planning Commission discretion to lower the size of fractional portions. Commissioner Weigand suggested a negotiation between the industry, City, and a resident representative. Community Development Director Jurjis agreed with this approach and for staff to have conversations and collaborate with the three active companies in Newport Beach on acceptable regulatory standards. City Attorney Harp was in agreement that it would be wise for the City to get guidance from the St. Helena litigation and January trial outcome. City Attorney Harp explained that his office provides legal advice to the City and will reach out to expert counsel for guidance as needed. Community Development Director Jurjis explained that Pacaso purchases and prepares the property for the fractional sale to the one eighth ownership and collects a fee for property management and indicated that an DocuSign Envelope ID: 2E4CA2B6-698E-4A00-923B-95DC55343673 Planning Commission Special Meeting Agenda October 6, 2022 Page 3 of 7 operating agreement and management company are included in the regulations. In closing, Commissioner Weigand sought protection for properties passed down within a family. In response to Commissioner Harris’ questions, Community Development Director Jurjis confirmed that it is possible for fractional owners to modify the agreement but once the property is designated as a fractional ownership the owners must comply with the rules or be subject to enforcement. City Attorney Harp noted different approaches by other cities and strategies by fractional ownership companies. Principal Planner Murillo reviewed the Carmel by the Sea report notes but was unaware of the details. In response to Commissioner Klaustermeier’s questions, City Attorney Harp relayed that the City could consider an amortization program for fractional ownership homes established before regulations are in place, but typically they will have a good defense of nonconforming use and an amortization program would then be used to regulate them. In response to Secretary Rosene’s comment, City Attorney Harp recommended using a fractional ownership model and narrower approach to the definition that is defensible, addressing the issues, building regulations similar to STL, and using a zoning clearance as opposed to a use permit. Furthermore, he liked the idea of working with the industry to find out what they think is acceptable to avoid litigation. Gabe Dima-Smith, Public Affairs Manager for Pacaso, utilized a presentation to demystify areas of the Pacaso business model and review co-ownership as an age-old practice, Pacaso buyer ratio to one home, Pacaso business model, co-ownership not timeshare, who are Pacaso owners, neighbors not short-term renters, fully-managed experience, Pacaso versus timeshare, nightly rental, traditional second homes, and Airbnb, facts versus fiction, and neighbors@pacaso.com to address questions or concerns. In response to Commissioner Weigand’s question, Mr. Dima-Smith explained Pacaso’s code enforcement procedures in their Neighbor Playbook that address regulation adherence, violations, enforcement, monetary fines, and suspended stays. Furthermore, he indicated that Pacaso is not a publicly traded company. In response to Commissioner Weigand’s question, City Attorney Harp stated that the City cannot specify a fractional ownership company in the City, but with one set of rules can remove bad actors through enforcement and revoked permits and property uses. Furthermore, he noted that the City can take action against an independent operator but learned from Pacaso that only the company could get owners removed by a provision in the agreement. In response to Commissioner Weigand’s comment, Mr. Dima-Smith recognized the fear of a change to the community culture with a large number of fractional ownerships in an area, expressed the unlikelihood of a 40- 50 home expansion of the business, and relayed a pathway towards regulation that can prevent potential variables by working together. Commissioner Weigand recognized the infancy stage of fractional ownership, the past scramble to save the character of the neighborhood during the infancy of Vrbo and Airbnb, and the opportunity to try to figure it all out now, inquired about Pacaso’s interest in working together with the City, a third-party attorney, and resident input, noted the public concerns, expressed an interest in not rushing through the process, and noted pressure in the community to act quickly, personal concern for the families passing down homes, how it works with real estate agents, and protection for residential areas. In response to Commissioner Harris’ inquiry, Mr. Dima-Smith provided the history and an update on the fractional ownership cease and desist letter in Carmel by the Sea. In response to Secretary Rosene’s question, Mr. Dima-Smith suggested options to reach a reconciliation of regulations and recognized that identifying an exact proposal during the meeting would be challenging. In response to Commissioner Harris’ question, Mr. Dima-Smith indicated that every property has a home manager that is local in the community and accessible 24 hours a day. DocuSign Envelope ID: 2E4CA2B6-698E-4A00-923B-95DC55343673 Planning Commission Special Meeting Agenda October 6, 2022 Page 4 of 7 In response to Commissioner Klaustermeier’s question, Mr. Dima-Smith indicated that Pacaso has no ownership once the shares are sold to the ownership group nor a right to sell the home and that all the owners need to agree to sell it to one buyer. In response to Chair Kleiman’s inquiries, Mr. Dima-Smith noted an 80 percent financing option with Pacaso, loans backed by Pacaso, a process to protect the interest of the owners, Best Neighbor Practices rules as part of the ownership agreement, a kitchen counter posting of unique City codes (enforcement issues, quiet hours, trash requirements, noise, and parking), and property taxes obligations for all owners that does not include Transient Occupancy Tax (TOT) tax. Carmen Rawson questioned where the “development” definition included in the presentation come from, read the definition from Chapter 21:70 of the Newport Beach Municipal Code, and asked for clarification, thought Pacaso is a timeshare operation because owners are limited to the number of days at the property, noted differences in enforcement action for STL violations and STL oversaturation in the Balboa Peninsula, and asked the Planning Commission to follow Option A and apply the regulation in the R1 and R2 zones. Mr. Jim Mosher expressed how he was surprised to see staff’s Option B presentation, shared the comments by the City Council at the September 27, 2022, City Council meeting prohibiting timeshares anywhere in Newport Beach except in certain commercial areas, staff told the Council that fractional ownership does not fit the definition of timeshare, and for the Planning Commission to prepare a definition that would fit the model and exclude the homes passed down within a family. Mr. Mosher noted that he does not think the revision is necessary because the definition for “development” is found in Title 20/Zoning Code that has regulated land use since 1982 and prohibits timeshares of residential units. Max, a local Pacaso employee, read a statement in support of fractional homeownership on behalf of Pacaso owners Cindy and Randy. Russ Dahl lives next to the Peninsula Point Pacaso home and believed no one likes the fractional ownership model and assimilated it to a timeshare and noted property behaviors, disruptions to the community, changes to the fabric of the community, property pricing, and a proliferation of properties and companies that were not intended. Lauren, a local Pacaso employee, read a statement in support of fractional homeownership on behalf of Pacaso owner Steve Hayes. Nancy Scarbrough noted two previous meetings with approximately 75 people in attendance who opposed fractional ownership, the fractional ownership sales process, and the creation of an asset class that messes with the neighborhood home values, inquired about how many of the 11 fractional homes in Newport Beach have eight owners, relayed five active listings for fractional ownership homes on the market, and thought fractional ownership properties operate like STLs and are multifamily homes in a single family zoning. She asked the Planning Commission to consider how they might feel living next to a fractional ownership property. Jeff, local Pacaso employee, read a statement in support of fractional homeownership on behalf of local Pacaso owner Anthony Cumar. An unidentified local Pacaso employee read a statement in support of fractional homeownership on behalf of local business owner Jessica Roy. Tim, a local Pacaso employee, read a statement in support of fractional homeownership on behalf of a local Pacaso owner. Ken Rawson acknowledged the community members who filled the chambers at the City Council meeting with concern for fractional ownership growth, noted an exchange option in the Elite Homes model that allows owners to stay at other properties within their system and resembles a timeshare, and asked the Planning Commission to limit fractional ownership development. DocuSign Envelope ID: 2E4CA2B6-698E-4A00-923B-95DC55343673 Planning Commission Special Meeting Agenda October 6, 2022 Page 5 of 7 At the request of Chair Kleiman, Community Development Director Jurjis clarified that with a majority vote the City Council directed staff to come back to the Planning Commission, look at the adopted St. Helena ordinance, and find a way to regulate fractional ownership with guidance and recommendations from the Planning Commission that can be supported and brought back to the City Council. In response to Commissioner Weigand’s question, Community Development Director Jurjis relayed that the City cannot restrict Pacaso-like companies to only purchase and operate the existing 1500 STL designated properties because the City regulates the land use by looking at the zoning and not the STL status, staff is looking for the Planning Commission to provide direction and language for a framework that would regulate the use of the land, and staff’s recommendation of R1 zone with a 500 foot separation and City Attorney Harp concurred. Commissioner Weigand proposed using a hybrid of Options A & B towards the creation of an ordinance that protects the City while monitoring the St. Helena case and expressed his lack of preparation to go all the way with option A without knowing the outcome of St. Helena. Community Development Director Jurjis turned to Chair Kleiman to develop a consensus among Commissioners for the direction to staff. Commissioner Lowrey acknowledged all parties involved, a complicated issue with strong opinions on both sides, and not prepared to vote or recommend specific direction. He recommended forming a subcommittee for further study. In response to Commissioner Harris’ question, City Attorney Harp clarified that the City Council elected to not move forward with a moratorium. Commissioner Harris noted that neither option was satisfactory, Option A potentially exposes the City to a lawsuit and Option B does not address all the impacts, expressed an interest in identifying and addressing the issues now, and supported a working group consisting of members of the public, neighbors, and industry. Commissioner Klaustermeier concurred with Commissioner Harris, thought the fractional ownership model is like a STL, recalled capping STL in the community, suggested reworking Option B and regulate it with separation standards that will satisfy the public, indicated she would not like a fractional ownership property next to her residence, and encouraged finding a way to proactively work together with the agencies to identify an agreeable way to regulate fractional ownership. Secretary Rosene relayed not wanting to expose the City to litigation using Option A, fractional ownership homes appear to be in the R2 zone, and R1 zone being an inappropriate placement. He wondered if the next step might be for staff to prepare a written ordinance that the Planning Commission could evaluate and get specific. City Attorney Harp advised the Planning Commission to move forward with a recommendation to the City Council of what is best without regard for potential litigation. Secretary Rosene noted that this seems like a policy decision and the Commission may be struggling because that is not their scope, and it is easy to prepare an ordinance when the City Council is clear about what is wanted. Chair Kleiman relayed that the policy decision was already made by the Council and provided to the Planning Commission, this is a study session and a first exposure, there is no need to craft language from the dais or approve anything tonight, and the Planning Commission needs to provide further direction to staff. She summarized the consensus for crafting a fractional ownership definition and an ordinance framework. The Planning Commission and staff discussed the possibility of forming an ad hoc committee with members of the Planning Commission, public, and industry to address the land use. DocuSign Envelope ID: 2E4CA2B6-698E-4A00-923B-95DC55343673 Planning Commission Special Meeting Agenda October 6, 2022 Page 6 of 7 In response to Commissioner Weigand’s question, Community Development Director Jurjis relayed that the Council delegated this task to the Planning Commission to access the land use, noted staff support, reminded the Commission of the Brown Act requirement for an ad hoc committee beyond three Planning Commission members. Commission Weigand questioned the Planning Commission’s authority and time commitment to review proposals and the process for granting fractional ownership purchases and appeals. In response, Community Development Directory Jurjis thought that this is a discussion to have with the Commissioners and noted how staff works well in collaboration with ad hoc and steering committees and the Planning Commission. Commissioner Weigand thought making decisions from the dais without having the presentation prior to the meeting is poor public policy, encouraged being mindful of a process for future applications, and planned for more discussion. In response to Commissioner Weigand’s question, Community Development Director Jurjis indicated that the 500-foot separation standard as opposed to 1000 feet was determined by mapping current properties to strike a balance and expressed an interest in getting guidance from the Commission regarding this standard. Commissioner Weigand noted grandfathered properties, consideration for a 1000-foot separation standard, and future discussion. In response to Chair Kleiman’s assessment, Community Development Director Jurjis clarified the Brown Act rules for an ad hoc committee greater than three Planning Commission members. Commissioner Lowrey proposed a motion to form an ad hoc committee to review fractional ownership consisting of three Commissioners who would report back to the Planning Commission within 90 days with findings. He volunteered to be on the committee. In response to Chair Kleiman’s inquiry, Community Development Director Jurjis advised the Commission to move the ad hoc committee review as quickly as possible with a maximum of 90 days and noted next steps to agendize the item. City Attorney Harp indicated that a general direction to staff is all that is needed now, and staff will bring it back to the next meeting. With a show of hands, the Planning Commission was in majority agreement. In response to Commissioner Weigand’s concern for timing, Community Development Directory Jurjis confirmed that a 90-day period is possible for staff and 60-days is workable as well. In response to Chair Kleiman’s inquiry, Commissioners Lowrey, Harris, and Rosene volunteered to be on the ad hoc committee and will be subject to a vote. VIII. STAFF AND COMMISSIONER ITEMS ITEM NO. 3 MOTION FOR RECONSIDERATION None ITEM NO. 4 REPORT BY THE COMMUNITY DEVELOPMENT DIRECTOR OR REQUEST FOR MATTERS WHICH A PLANNING COMMISSION MEMBER WOULD LIKE PLACED ON A FUTURE AGENDA Deputy Community Development Director Campbell reported to the Planning Commission a letter received from the State Department of Housing and Community Development stating that the Housing Element is certified. The City is the ninth jurisdiction in Orange County. He announced the next Planning Commission meeting on October 20, 2022, with five agenda items. ITEM NO. 5 REQUESTS FOR EXCUSED ABSENCES None IX. ADJOURNMENT - The meeting adjourned at 8:47 P.M DocuSign Envelope ID: 2E4CA2B6-698E-4A00-923B-95DC55343673 Planning Commission Special Meeting Agenda October 6, 2022 Page 7 of 7 The agenda for the October 6, 2022, Planning Commission meeting was posted on Friday, September 30, 2022, at 12:45 p.m. in the Chambers binder, on the digital display board located inside the vestibule of the Council Chambers at 100 Civic Center Drive, and on the City’s website on Friday, September 30, 2022, at 12:30 p.m. _______________________________ Lauren Kleiman, Chair _______________________________ Mark Rosene, Secretary DocuSign Envelope ID: 2E4CA2B6-698E-4A00-923B-95DC55343673