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Home My WebLink About3.0_Fractional Ownership Code and LCP Amendments_PA2022-0202CITY OF NEWPORT BEACH PLANNING COMISSION STAFF REPORT April 20, 2023 Agenda Item No. 3 SUBJECT: Fractional Ownership Code and LCP Amendments (PA2022-0202) ▪Zoning Code Amendment ▪Local Coastal Plan Amendment SITE LOCATION: Citywide APPLICANT: City of Newport Beach PLANNER: Jaime Murillo, AICP 949-644-3209 or jmurillo@newportbeachca.gov PROJECT SUMMARY Amendments to Title 20 (Planning and Zoning) and Title 21 (Local Coastal Program Implementation Plan) of the Newport Beach Municipal Code (NBMC) modifying the definition of time share to clearly include fractional ownership units. As a time share use, fractional homeownership would be prohibited in all residential zoning districts and only allowed in certain commercial and mixed-use zoning districts subject to existing time share regulations. RECOMMENDATION 1)Conduct a public hearing; 2)Find this project exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15060(c)(2) of the CEQA Guidelines, because it would not result in a direct or reasonably foreseeable indirect physical change in the environment; 3)Adopt Resolution No. PC2023-017 recommending the City Council adoption of a Code Amendment thereby to Section 20.48.220 (Time Share Facilities) and Section 20.70.020 (Definitions of Specialized Terms and Phrases) of the Newport Beach Municipal Code related to time shares (PA2022-0202) (Attachment No. PC 1); and 4)Adopt Resolution No. PC2023-018 recommending the City Council authorize submittal of a Local Coastal Plan Amendment to the California Coastal Commission requesting to amend Sections 21.48.025 (Visitor Accommodations) and 21.70.020 (Definitions of Specialized Terms and Phrases) of the Newport Beach Municipal Code related to time shares (PA2022-0202) (Attachment No. PC 2). 1 INTENTIONALLY BLANK PAGE2 Fractional Ownership Code and LCP Amendments (PA2022-0202) Planning Commission, April 20, 2023 Page 2 INTRODUCTION Background A fractional homeownership use is where ownership of properties is equally shared among multiple owners (typically between four and 12 owners) through a formal arrangement. While this arrangement is typically facilitated by a private company, it can also be derived from a group of people establishing a formal arrangement to share a private property. The amount of time the owner may spend at the property correlates to the fraction of ownership (e.g., a 1/8 share owner would be allotted 45 days per year). This time allotment is not typically used consecutively, but rather one or two weeks at a time. In addition to the cost to purchase their share of the home, the owners are responsible for their share of the maintenance, property management fees, HOA fees, cleaning costs, utilities, taxes, insurance, and payment into a reserve fund to cover long- term repairs. Previous dialogues As a result of community concerns received regarding the commercialization of residential neighborhoods that fractional ownership uses create, including increases in traffic, parking, noise, and trash, the Planning Commission and City Council have held multiple study sessions to discuss the best approach to address potential impacts. A summary of the actions conducted to date is as follows: • On November 16, 2021, the City Council conducted a study session to discuss the emerging trend of fractional ownership use of dwelling units. After accepting public testimony on the issue, the Council directed staff to monitor the use and investigate how other jurisdictions were dealing with the establishment of fractional ownership uses (Meeting Minutes- Attachment No. PC 3). • Staff retained the services of Sagecrest Planning + Environmental (Sagecrest) to research the benefits and impacts of fractional ownership uses operating within the City, and to determine how other jurisdictions were handling the use. The study, which surveyed 22 jurisdictions, found that a majority of the jurisdictions classified fractional ownership uses as a time share and/or adopted a moratorium to study the matter further. Due to bulk, the report and appendices are available online at www.newportbeachca.gov/fractionalownership. • On September 13, 2022, the City Council conducted a second study session to discuss fractional ownership use. After accepting public testimony on the issue, the Council directed staff to return with an initiation of a code amendment to revise the NBMC to regulate the use (Meeting Minutes- Attachment No. PC 4). 3 Fractional Ownership Code and LCP Amendments (PA2022-0202) Planning Commission, April 20, 2023 Page 3 • On September 27, 2022, the City Council adopted Resolution 2022-61, initiating amendments to Title 20 and Title 21 of the NBMC and directed staff to work with the Planning Commission to develop regulations that would regulate fractional ownership uses in the best manner that would protect the character of residential neighborhoods (Meeting Minutes- Attachment No. PC 5). • On October 6, 2022, the Planning Commission conducted a study session to discuss fractional ownership uses and accept public testimony. At the conclusion of study session, the Planning Commission expressed the desire to form an ad hoc committee and work closely with staff to formulate appropriate regulations (Meeting Minutes- Attachment No. PC 6). • On October 20, 2022, the Planning Commission formed an Ad Hoc Committee consisting of Commissioners Lee Lowery, Mark Rosene, and former Commissioner Erik Weigand. Over the four-month period, the Ad Hoc Committee met seven times to discuss potential options. The Ad Hoc Committee consulted with Community Development staff, the City Attorney’s Office, representatives from Pacaso, and a group of concerned citizens (Meeting Minutes- Attachment No. PC 7). • On February 23, 2023, the Ad Hoc Committee presented their findings to the Planning Commission. The Planning Commission approved forwarding two recommendations to the City Council: 1) the preferred recommendation to broaden the definition of time shares to include fractional ownership uses thereby prohibiting them in residential zoning districts, and 2) the alternative recommendation to create a separate regulatory scheme to allow fractional ownership uses in all zones, except the Single-Unit Residential (R-1) Zoning Districts (Meeting Minutes- Attachment No. PC 8). • On March 14, 2023, the City Council discussed the Planning Commission’s recommendations. The City Council directed staff to move forward with a Code Amendment and LCP Amendment to implement the Planning Commission’s preferred option of broadening the definition of time share to include fractional ownership uses effectively prohibiting them in residential zoning districts (Meeting Minutes- Attachment No. PC 9). DISCUSSION Proposed Amendments The proposed amendments to Title 20 and Title 21 of the NBMC would modify time share related definitions (i.e., accommodation, time share project, time share estate, time share instrument, time share interval, time share plan, time share property, time share unit, and 4 Fractional Ownership Code and LCP Amendments (PA2022-0202) Planning Commission, April 20, 2023 Page 4 time share use) to clearly include fractional ownership arrangements. Specifically, the definition of time share plan would be added to mean “any arrangement, plan, scheme, or similar device” that limits the owner to the right for “exclusive use of real property, or any portion thereof” for “less than a full year during any given year, on a recurring basis for more than one year.” This means the use of any real property in which an owner has exclusive use of said property for less than the full year would be classified as a time share. The proposed code changes are attached to this report in redlined format (Attachment No. PC 10). It is important to note that this action would not restrict the fractional ownership of the property but rather it would apply to the use of the property, which is within the City’s zoning powers. While the proposed amendments include minor clean-up revisions to the existing time share regulations for consistency with the modified definitions, no changes to the manner in which time shares are approved or development standards are proposed. Time shares uses would continue to be prohibited in all residential zoning districts and permitted in certain commercial and mixed-use zoning districts, specifically the OA, OM, CG, CV, MU- V, MU-MM, MU-CV/15th St, MU-W1, MU-W2 zones, subject to the following: • Approval of a Conditional Use Permit is required; • Conversion of existing dwelling units is prohibited; • The minimum number of units is 100 units, unless the time share is part of a resort hotel complex that has 300 or more units; • A development agreement is required; and • Approval of a sales plan, operating plan, management plan, and contingency plan is required. General Plan Consistency The proposed amendments would serve to implement the following goals and policies of the General Plan: Land Use Element Policy LU 2.6, which reads, “Visitor Serving Uses Provide uses that serve visitors to Newport Beach’s ocean, harbor, open spaces, and other recreational assets, while integrating them to protect neighborhoods and residents.” The proposed amendment would continue to allow time share uses, which is a visitor serving use in some commercial zones, while clarifying that fractional ownership uses are not permitted in residential zones. This would prevent additional commercialization of the residential neighborhoods and protect them from impacts created by increased traffic and noise. Land Use Element Goal LU 4, which reads, “Management of growth and change to protect and enhance the livability of neighborhoods and achieve distinct and economically vital business and employment districts, which are correlated with supporting infrastructure and public services and sustain Newport Beach’s natural 5 Fractional Ownership Code and LCP Amendments (PA2022-0202) Planning Commission, April 20, 2023 Page 5 setting.” Classifying fractional ownership uses as time shares continues to allow the use within certain commercial zones while prohibiting the use in residential zoning districts. This clarification would also help preserve the long-term housing stock by eliminating the conversion of existing and new housing developments into time share uses, and further ensure that the commercial businesses would not encroach into residential areas and impact the livability of said neighborhoods. Housing Element Goal #4, which states, “Housing opportunities for as many renter- and owner-occupied households as possible in response to the market demand and RHNA obligations for housing in the City.” Conversion of residential dwelling units into time shares removes the dwelling units from the market, thus making them no longer available for occupancy of full-time residences. The proposed amendment would serve to prevent single-unit residences from being taken off the market, thus protecting these housing opportunities for renters and owner-occupied households alike. Housing Element Goal #5, which states, “Preservation of the City’s housing stock for extremely low-, very low-, low-, and moderate-income households.” Removing market- rate dwelling units from the City’s housing stock impacts the affordability of housing across all income levels. As fewer dwelling units become available for rent or sale, the price increases. These price increases reduce the opportunities to provide affordable housing to extremely low-, very low-, low-, and moderate-income households. The proposed amendment would prevent conversion of single-unit residences into a visitor serving accommodation, thus preserving the number of units in the City’s housing stock, which would help minimize increases to housing costs. Local Coastal Program Consistency The proposed Title 21 amendment serves to implement Coastal Land Use Plan (CLUP) Table 2.1.1-1 (Land Use Plan Categories) of the LCP, which establishes the type, density, and intensity of land uses within the coastal zone, including residential land use categories that are intended for residential dwellings. The amendment clarifies that fractional ownership uses are considered time shares, a type of visitor-serving commercial use that is prohibited in the residential neighborhoods in order to maintain the residential character of communities. The proposed amendment would continue to allow time shares in other areas where visitor serving uses are currently permitted. This includes the CM, CV, MU-H, and MU-W Coastal Land Use Designations, which are identified in CLUP Table 2.1.1-1 to provide visitor serving uses. While CLUP Policy 2.3.3-6 authorizes the short-term rental of dwelling units as a means of providing lower-cost overnight visitor accommodations, the maximum number of short- term rentals are capped at a maximum of 1,550 permits to prevent adverse impacts to residential areas and preserve housing stock within the coastal zone. Unlike short term rentals, fractional ownership of coastal properties is a high-cost option to visit the coast on a limited basis but have similar negative impacts to housing supply and neighborhood 6 Fractional Ownership Code and LCP Amendments (PA2022-0202) Planning Commission, April 20, 2023 Page 6 disturbances that short term rentals create. Therefore, it is appropriate to prohibit this type of visitor-serving commercial use in residential neighborhoods. Furthermore, this amendment will not impact the City’s ability to support the wide variety of visitor accommodations that are currently provided, including 4,086 hotel/motel rooms a cap of 1,550 short term lodging units, and approximately 471 campground and RV sites. Local Coastal Plan Amendment Process Any amendment to the LCP, including Title 21, must be reviewed and approved by the City Council, with a recommendation from the Planning Commission, prior to submitting the amendment request to the California Coastal Commission (Coastal Commission). The Coastal Commission is the final decision-making authority on amendments to the certified LCP; however, the City retains the ability to reject an LCP amendment in its entirety if the Coastal Commission includes suggested modifications. Upon approval of the proposed LCP Amendment by the Coastal Commission, staff will return to the City Council with an ordinance formally adopting the Title 21 amendment. Environmental Review This action is exempt from environmental review under the California Environmental Quality Act (“CEQA”) pursuant to Section 15060(c)(2) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, which states that a project is not further review under CEQA if “[t]he activity will not result in a direct or reasonably foreseeable indirect physical change in the environment”. Fractional ownership uses are not listed as a permitted use or defined under the Zoning Code. This is amendment would clarify that fractional ownership uses are classified as time shares, which are currently regulated by the NBMC. This amendment does not alter the manner in which time shares are regulated and therefore would not result in a physical change in the environment. Public Notice Pursuant to Section 13515 of the California Code of Regulations, a review draft of the LCP Amendment was made available, and a Notice of Availability was distributed on June 24, 2022, to all persons and agencies on the Notice of Availability mailing list. In addition, notice of this amendment was published in the Daily Pilot as an eighth-page advertisement, consistent with the provisions of the Municipal Code and State law. The item also appeared on the agenda for this meeting, which was posted at City Hall and on the City website. 7 Fractional Ownership Code and LCP Amendments (PA2022-0202) Planning Commission, April 20, 2023 Page 7 Prepared by: Submitted by: ATTACHMENTS PC 1 Draft Resolution for Zoning Code Amendment PC 2 Draft Resolution for Local Coastal Plan Amendment PC 3 November 16, 2021, City Council Study Session Minutes PC 4 September 13, 2022, City Council Study Session Minutes PC 5 September 27, 2022, City Council Meeting Minutes PC 6 October 6, 2022, Planning Commission Study Session Minutes PC 7 October 20, 2022, Planning Commission Meeting Minutes PC 8 February 23, 2023, Planning Commission Meeting Minutes PC 9 March 14, 2023, City Council Meeting Minutes PC 10 Proposed Code Text Changes (Redlined) 8 Attachment No. PC 1 Draft Resolution for Zoning Code Amendment 9 INTENTIONALLY BLANK PAGE10 RESOLUTION NO. PC2023-017 A RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF NEWPORT BEACH, CALIFORNIA RECOMMENDING CITY COUNCIL ADOPTION OF A CODE AMENDMENT TO SECTION 20.48.220 (TIME SHARE FACILITIES) AND SECTION 20.70.020 (DEFINITIONS OF SPECIALIZED TERMS AND PHRASES) OF THE NEWPORT BEACH MUNICIPAL CODE RELATED TO TIME SHARES (PA2022-0202) THE PLANNING COMMISSION OF THE CITY OF NEWPORT BEACH HEREBY FINDS AS FOLLOWS: SECTION 1. STATEMENT OF FACTS. 1. Article XI Section 7 of the California Constitution authorizes cities to make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws. 2. California Government Code Section 65850 et seq. authorizes a city to adopt ordinances that regulate land uses as a valid use of its police powers. 3. Section 200 of the City of Newport Beach (“City”) Charter vests the City Council with the authority to make and enforce all laws, rules, and regulations with respect to municipal affairs subject only to the restrictions and limitations contained in the Charter and the State Constitution, and the power to exercise, or act pursuant to any and all rights, powers and privileges, or procedures granted or prescribed by any law of the State of California. 4. In 1982, the City Council adopted Ordinance No. 82-14 prohibiting the development of time share projects within Newport Beach in order to protect against unique problems associated with transient occupancy. 5. In 1996, the City Council adopted Ordinance 96-7 which provided a narrow exception to allow time share projects in commercial districts subject to a conditional use permit but continuing to prohibit time shares of residential property. 6. Over the past three years, Newport Beach and cities that serve as tourist destinations, have experienced a wave of purchases of single-unit residences, which are then re-sold into fractional shares. For example, over the past 15 months, the number of fractional-owned residences has nearly tripled with at least 12 fractionally owned homes in Newport Beach. 7. Under this new model, the residence is owned in up to 1/8 shares with stays ranging from two to fourteen nights in duration resulting in frequent turnover of the properties’ occupants and its commercial management. 11 Planning Commission Resolution No. PC2023-017 Page 2 of 10 8. Fractionally owned homes create impacts on the City’s housing supply and character of residential neighborhoods. 9. With respect to the housing supply, Governor Gavin Newsom declared a housing crisis in the State of California and called for the development of 3.5 million new homes to be built by 2025, to meet the population’s housing needs. As a result, the State of California has adopted a number of housing bills such as Senate Bill Nos. 8, 9, 10, 35 and 330, and an aggressive Regional Housing Needs Assessment (“RHNA”) for the 6th Cycle Housing Element covering the 2021-2029 (“6th Cycle Housing Element”). 10. The City’s RHNA for the 6th Cycle Housing Element is 4,845 new housing units, which units are intended to meet the housing needs of existing and future residents within the jurisdictional boundaries of Newport Beach. 11. According to the 6th Cycle Housing Element, whereas the median home price in the State of California was $579,770 as of 2020, the median home value of single-unit homes and condominiums in Newport Beach was $2,407,454. The fractional ownership of single-unit residences as a second home further exacerbates the housing supply in Newport Beach to meet housing demand. 12. With respect to the impacts on the character of residential neighborhoods, the City is a popular tourist destination known for its beaches and temperate weather. In accordance with Ewing v. Carmel-by-the-Sea, (1991) 234 Cal. App. 3d 1579, which upheld the City of Carmel-by-the-Sea’s right to impose zoning restrictions on short-term rentals, the Newport Beach City Council adopted Ordinance No. 92-13 on May 11, 1992, establishing regulations for the operation of short-term lodging units in order to mitigate the impact of this use on the residents of the City. 13. On May 11, 2004, the City Council adopted Ordinance No. 2004-6 prohibiting the issuance of new short-term lodging permits after June 1, 2004, to any dwelling unit on a parcel zoned as a single-unit residence or designated for single-family residential use as part of a Planned Community Development Plan, Specific Area Plan or Planned Residential District. 14. In 2020 and 2021, the City Council adopted Ordinance Nos. 2020-15, 2020-26, and 2021-28, amending the City’s short-term lodging regulations based upon evidence and documentation attesting to the need to further regulate and control short-term lodging units in residential zones to ensure that, among other things, short-term lodging units are regulated in a way to maintain harmony with surrounding uses. 15. Due to the proliferation of short-term rentals and their impact on neighborhoods and long-term housing, Ordinance No. 2021-28 placed a cap of 1,550 on the number of short-term lodging permits allowed in the City. 12 Planning Commission Resolution No. PC2023-017 Page 3 of 10 16. Fractional homeownership properties operate much like short-term lodgings in that they limit occupancy by owners of a fractional interest in a property to less than 30 consecutive days. 17. On November 16, 2021, the City Council conducted a study session to address concerns raised by the public regarding impacts of fractional homeownership. 18. On September 13, 2022, the City Council conducted a second study session to discuss the fractional ownership uses within the City. Written and oral testimony provided included a report on how other jurisdictions were addressing fractional ownership uses. Fifteen of the 22 jurisdictions surveys classified fractional ownership uses as a time share. Additional public testimony included concerns about increases in traffic, noise, and trash, as well as fractional ownership uses having an adverse impact on the character of the existing residential neighborhoods. 19. On September 27, 2022, the City Council adopted Resolution 2022-61, initiating a Code Amendment to Title 20 (Planning and Zoning) and a Local Coastal Program Amendment to Title 21 (Local Coastal Program Implementation Plan) of the Newport Beach Municipal Code (NBMC). The City Council directed staff to work with the Planning Commission to develop regulations that would regulate fractional ownership uses in the best manner that would protect the character of residential neighborhoods. 20. On October 6, 2022, the Planning Commission conducted a study session to discuss fractional ownership uses and accept public testimony. At the conclusion of study session, the Planning Commission expressed the desire to form an Ad-Hoc Committee to work closely with staff to formulate appropriate regulations. 21. On October 20, 2022, the Planning Commission formally formed an Ad-Hoc Committee to evaluate potential amendments to Title 20 and Title 21 related to fractional ownership uses within the City. The Ad-Hoc Committee met a total of seven times, during which the Committee discussed potential regulatory schemes with staff from Community Development Department and City Attorney’s Office. During these meetings, the Ad- Hoc Committee also met with representatives from one firm that facilitates fractional ownership uses (Pacaso, Inc.) and several concerned citizens to ensure the Committee members had a full understanding of the issue. 22. On February 24, 2023, the Ad-Hoc Committee presented their findings to the full Planning Commission. After accepting public testimony and discussing the matter at length, the Planning Commission approved forwarding two recommendations to the City Council. The preferred recommendation was to broaden the definition of time shares to include fractional ownership uses. As an alternative recommendation, the Planning Commission stated the City Council could consider creating a separate regulatory scheme to allow fractional ownership uses in all zones, except the Single-Unit Residential (R-1) Zoning Districts. 23. On March 14, 2023, the City Council discussed the Planning Commission’s recommendations. After accepting further public testimony on fractional ownership uses 13 Planning Commission Resolution No. PC2023-017 Page 4 of 10 within the City and discussing the issue, the City Council directed staff to move forward with the Planning Commission’s preferred option of broadening the definition of timeshare. 24. A public hearing was held on April 20, 2023, in the Council Chambers located at 100 Civic Center Drive, Newport Beach, California. A notice of time, place and purpose of the public hearing was given in accordance with the California Government Code Section 54950 et seq. (“Ralph M. Brown Act”) and Chapter 20.62 (Public Hearings) of the NBMC. Evidence, both written and oral, was presented to, and considered by, the Planning Commission at this public hearing. 25. The City desires to update Section 20.48.220 (Time Share Facilities) and related definitions set forth in Section 20.70.020 of the NBMC. SECTION 2. CALIFORNIA ENVIRONMENTAL QUALITY ACT DETERMINATION. 1. The Zoning Code Amendment (PA2022-0202) is exempt from environmental review under the California Environmental Quality Act (“CEQA”) pursuant to Section 15060(c)(2) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, which states that a project is not further review under CEQA if “[t]he activity will not result in a direct or reasonably foreseeable indirect physical change in the environment.” Fractional ownership uses are not listed as a permitted use or defined under the Zoning Code. This is amendment would clarify that fractional ownership uses are classified as time shares, which are currently regulated by the NBMC. This amendment does not alter the manner in which time shares are regulated and therefore would not result in a physical change in the environment. SECTION 3. FINDINGS. 1. The Code Amendment (PA2022-0202) is consistent with the City’s General Plan. It would serve to implement the following goals and policies of the General Plan: Land Use Element Policy LU 2.6, which states, “Visitor Serving Uses Provide uses that serve visitors to Newport Beach’s ocean, harbor, open spaces, and other recreational assets, while integrating them to protect neighborhoods and residents.” The proposed amendment would continue to allow time share uses, which is a visitor serving use in some commercial zones, while clarifying that fractional ownership uses are not permitted in residential zones areas. This would prevent additional commercialization of the residential neighborhoods and protect them from impacts created by increased traffic and noise. Land Use Element Goal LU 4, which states, “Management of growth and change to protect and enhance the livability of neighborhoods and achieve distinct and economically vital business and employment districts, which are correlated with supporting infrastructure and public services and sustain Newport Beach’s natural setting.” Classifying fractional ownership uses as time shares continues to allow the business within certain commercial zones. This clarification would also help preserve the long-term housing stock by eliminating the conversion of existing and new housing developments into time share uses, and further 14 Planning Commission Resolution No. PC2023-017 Page 5 of 10 ensure that the commercial businesses would not encroach into residential areas and impact the livability of said neighborhoods. Housing Element Goal #4, which states, “Housing opportunities for as many renter- and owner-occupied households as possible in response to the market demand and RHNA obligations for housing in the City.” Conversion of residential dwelling units into time shares removes the dwelling units from the market, thus making them no longer available for occupancy of full-time residences. The proposed amendment would serve to prevent single- unit residences from being taken off the market, thus protecting these housing opportunities for renters and owner-occupied households alike. Housing Element Goal #5, which states, “Preservation of the City’s housing stock for extremely low-, very low-, low-, and moderate-income households.” Removing market-rate dwelling units from the City’s housing stock impacts the affordability of housing across all income levels. As fewer dwelling units become available for rent or sale, the price increases. These price increases reduce the opportunities to provide affordable housing to extremely low-, very low-, low-, and moderate-income households. The proposed amendment would prevent conversion of single-unit residences into a visitor serving accommodation, thus preserving the number of units in the City’s housing stock, which would help minimize increases to housing costs. 2. A Local Coastal Program Amendment is also underway to ensure the regulations within the Coastal Zone are consistent with this amendment. 3. The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. SECTION 4. DECISION. NOW, THEREFORE, BE IT RESOLVED: 1. The Planning Commission of the City of Newport Beach hereby finds Zoning Code Amendment (PA2022-0202) is exempt from environmental review under the California Environmental Quality Act (“CEQA”) pursuant to Section 15060(c)(2) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, which states that a project is not further review under CEQA if “[t]he activity will not result in a direct or reasonably foreseeable indirect physical change in the environment”. Fractional ownership uses are not listed as a permitted use or defined under the Zoning Code. This is amendment would clarify that fractional ownership uses are classified as time shares, which are currently regulated by the NBMC. This amendment does not alter the manner in which time shares are regulated and therefore would not result in a physical change in the environment. 2. The Planning Commission hereby recommends to the City Council review the Code Amendment (PA2022-0202) as set forth in Exhibit “A,” which is attached hereto and incorporated herein by reference. 15 Planning Commission Resolution No. PC2023-017 Page 6 of 10 PASSED, APPROVED, AND ADOPTED THIS 20TH DAY OF APRIL 2023. AYES: NOES: ABSTAIN: ABSENT: BY:___________________________ Curtis Ellmore, Chair BY:____________________________ Sarah Klaustermeier, Secretary 16 Planning Commission Resolution No. PC2023-017 Page 7 of 10 EXHIBIT “A” ZONING CODE AMENDMENT NO. PA2022-0202 Section 1: Section 20.48.220 of the Newport Beach Municipal Code is amended in its entirety to read as follows: SECTION 20.48.220 TIME SHARE USE This section provides regulations for time share uses. A. Development Standards. 1. Property Development Standards. A time share use shall comply with the standards for the zoning district in which it is located. 2. Conversion of Existing Dwelling Units Prohibited. The conversion of existing residential dwelling units into a time share use shall be prohibited. 3. Minimum Number of Units. Each time share property shall have a minimum of one hundred (100) time share units. Time share properties consisting of less than one hundred (100) units, but developed or converted in conjunction with a resort hotel complex of three hundred (300) or more units, shall be considered to be in compliance with this requirement. B. Required Amenities. Time share uses shall be developed with substantial recreational amenities (e.g., golf courses, tennis courts, swimming pools, etc.). C. Permit and Review Requirements. 1. Plan Submittals. In addition to the application requirements in Section 20.52.020 (Conditional Use Permits and Minor Use Permits), an application for a time share use shall include the following documents: a. A sales plan shall address the times, areas and methods that will be used to sell the time share property. Factors to be defined in the plan shall include the location, length, and marketing methods that will be used, distinguishing on-site and off-site marketing and signage; and an estimate of the potential numbers of individuals and automobiles expected during various stages of the sales effort. The plan also shall describe measures that will be implemented to reduce traffic during peak hours. b. An operating plan shall address the terms of the time share plan, the types of private unit and common amenities, and the general financing, maintenance, and management arrangements of the resort that benefit the unit owners. 17 Planning Commission Resolution No. PC2023-017 Page 8 of 10 c. 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 a time share property . d. A contingency plan shall address the actions to be taken by the applicant if the time share project is an economic failure or fails to sell fifty (50) percent of the time share intervals within two years of receiving a permit to occupy the first unit. 2. Development Agreement. The City and the time share use operator shall enter into a development agreement in compliance with Chapter 15.45 (Development Agreements). 3. Modification or Waiver. The review authority may modify or waive any of the standards contained in this section if strict compliance with the standards is determined to be unnecessary to achieve the purpose and intent of this section. Section 2: The definition of “Accommodation” is added to Section 20.70.020 of the Newport Beach Municipal Code to read as follows: “Accommodation” means any dwelling unit, apartment, condominium or cooperative unit, hotel or motel room, or other or structure constructed for residential use and occupancy, including, but not limited to, a single-unit dwelling, two-unit dwelling, multi-unit dwelling. Section 3: The definition of “Time Share Facility (Land Use)” within Section 20.70.020 of the Newport Beach Municipal Code is amended to read as follows: Time Share (Land Use). See “Visitor accommodations.” Section 4: The definition of “Visitor Serving Accommodations (Land Use)” within Section 20.70.020 of the Newport Beach Municipal Code is amended to read as follows: Visitor Accommodations (Land Use) 1. “Bed and breakfast inn” means a dwelling unit that offers guest rooms or suites for a fee for less than thirty (30) days, with incidental eating and drinking service provided from a single kitchen for guests only. 2. “Hotel” means an establishment that provides guest rooms or suites for a fee to transient guests for sleeping purposes. Access to units is primarily from interior lobbies, courts, or halls. Related accessory uses may include conference and meeting rooms, restaurants, bars, and recreational facilities. Guest rooms may or may not contain kitchen facilities for food preparation (i.e., refrigerators, sinks, stoves, and ovens). Hotels with kitchen facilities are commonly known as extended stay hotels. A hotel operates subject to taxation under Revenue and Taxation Code Section 7280. 3. “Motel” means an establishment that provides guest rooms for a fee to transient guests for sleeping purposes. Guest rooms do not contain kitchen facilities. A motel is distinguished from a hotel primarily by direct independent access to, and adjoining parking 18 Planning Commission Resolution No. PC2023-017 Page 9 of 10 for, each guest room. A motel operates subject to taxation under Revenue and Taxation Code Section 7280. 4. “Recreational vehicle (RV) park” means a lot upon which two or more recreational vehicle sites are located, established, or maintained for occupancy for a rental fee by recreational vehicles of the general public as temporary living quarters for recreation or vacation purposes. 5. “Short-term lodging” means a dwelling unit that is rented or leased as a single housekeeping unit (see “Single housekeeping unit”) for a period of less than thirty (30) days, subject to the requirements of Chapter 5.95 (Short Term Lodging Permits) and any additional standards required by the City Manager. 6. “Single room occupancy, residential hotels (SRO)” means buildings with six or more guest rooms without kitchen facilities in individual rooms, or kitchen facilities for the exclusive use of guests, and which are also the primary residences of the hotel guests. 7. “Time share instrument” means one or more documents, by whatever name denominated, creating a time share plan or governing the operation of a time share plan, and includes the declaration dedicating accommodations to the time share plan. 8. “Time share interval” means the period or periods of time when the purchaser in a time share plan is afforded the opportunity to use the accommodations of a time share plan. 9. “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 real property, or any portion thereof, 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, on a recurring basis for more than one year, but not necessarily for consecutive years. A time share plan shall be deemed to exist whenever such recurring rights of exclusive use to the real property, or portion thereof, are created, regardless of whether such exclusive rights of use are a result of a grant of ownership rights, possessory rights, membership rights, rights pursuant to contract, or ownership of a fractional interest or share in the real property, or portion thereof, and regardless of whether they are coupled with ownership of a real property interest such as freehold interest or an estate for years in the property subject to the time share plan. 10. “Time share property” means one or more accommodations subject to the same time share instrument, together with any other property or rights to property appurtenant to those accommodations. 11. “Time share unit” means the time share property or portion of a time share property in which a time share interval exists and that is designated for separate use. 19 Planning Commission Resolution No. PC2023-017 Page 10 of 10 12. “Time share use” means the use of one or more accommodations or any part thereof, as a time share property. 20 Attachment No. PC 2 Draft Resolution for LCP Amendment 21 INTENTIONALLY BLANK PAGE22 RESOLUTION NO. PC2023-018 A RESOLUTION OF THE PLANNING COMMISSION OF THE CITY OF NEWPORT BEACH, CALIFORNIA RECOMMENDING CITY COUNCIL AUTHORIZE SUBMITTAL OF A LOCAL COASTAL PLAN AMENDMENT TO THE CALIFORNIA COASTAL COMMISSION REQUESTING TO AMEND SECTION 21.48.025 (TIME SHARE FACILITIES) AND SECTION 21.70.020 (DEFINITIONS OF SPECIALIZED TERMS AND PHRASES) OF THE NEWPORT BEACH MUNICIPAL CODE RELATED TO TIME SHARES (PA2022-0202) THE PLANNING COMMISSION OF THE CITY OF NEWPORT BEACH HEREBY FINDS AS FOLLOWS: SECTION 1. STATEMENT OF FACTS. 1. Article XI Section 7 of the California Constitution authorizes cities to make and enforce within its limits all local, police, sanitary, and other ordinances and regulations not in conflict with general laws. 2. California Government Code Section 65850 et seq. authorizes a city to adopt ordinances that regulate land uses as a valid use of its police powers. 3. Section 200 of the City of Newport Beach (“City”) Charter vests the City Council with the authority to make and enforce all laws, rules, and regulations with respect to municipal affairs subject only to the restrictions and limitations contained in the Charter and the State Constitution, and the power to exercise, or act pursuant to any and all rights, powers and privileges, or procedures granted or prescribed by any law of the State of California. 4. In 1982, the City Council adopted Ordinance No. 82-14 prohibiting the development of time share projects within Newport Beach in order to protect against unique problems associated with transient occupancy. 5. In 1996, the City Council adopted Ordinance 96-7 which provided a narrow exception to allow time share projects in commercial districts subject to a conditional use permit but continuing to prohibit time shares of residential property. 6. Over the past three years, Newport Beach and cities that serve as tourist destinations, have experienced a wave of purchases of single-unit residences, which are then re-sold into fractional shares. For example, over the past 15 months, the number of fractional-owned residences has nearly tripled with at least 12 fractionally owned homes in Newport Beach. 7. Under this new model, the residence is owned in up to 1/8 shares with stays ranging from two to fourteen nights in duration resulting in frequent turnover of the properties’ occupants and its commercial management. 23 Planning Commission Resolution No. PC2023-018 Page 2 of 11 8. Fractionally owned homes create impacts on the City’s housing supply and character of residential neighborhoods. 9. With respect to the housing supply, Governor Gavin Newsom declared a housing crisis in the State of California and called for the development of 3.5 million new homes to be built by 2025, to meet the population’s housing needs. As a result, the State of California has adopted a number of housing bills such as Senate Bill Nos. 8, 9, 10, 35 and 330, and an aggressive Regional Housing Needs Assessment (“RHNA”) for the 6th Cycle Housing Element covering the 2021-2029 (“6th Cycle Housing Element”). 10. The City’s RHNA for the 6th Cycle Housing Element is 4,845 new housing units, which units are intended to meet the housing needs of existing and future residents within the jurisdictional boundaries of Newport Beach. 11. According to the 6th Cycle Housing Element, whereas the median home price in the State of California was $579,770 as of 2020, the median home value of single-unit homes and condominiums in Newport Beach was $2,407,454. The fractional ownership of single-unit residences as a second home further exacerbates the housing supply in Newport Beach to meet housing demand. 12. With respect to the impacts on the character of residential neighborhoods, the City is a popular tourist destination known for its beaches and temperate weather. In accordance with Ewing v. Carmel-by-the-Sea, (1991) 234 Cal. App. 3d 1579, which upheld the City of Carmel-by-the-Sea’s right to impose zoning restrictions on short-term rentals, the Newport Beach City Council adopted Ordinance No. 92-13 on May 11, 1992, establishing regulations for the operation of short-term lodging units in order to mitigate the impact of this use on the residents of the City. 13. On May 11, 2004, the City Council adopted Ordinance No. 2004-6 prohibiting the issuance of new short-term lodging permits after June 1, 2004, to any dwelling unit on a parcel zoned as a single-unit residence or designated for single-family residential use as part of a Planned Community Development Plan, Specific Area Plan or Planned Residential District. 14. In 2020 and 2021, the City Council adopted Ordinance Nos. 2020-15, 2020-26, and 2021-28, amending the City’s short-term lodging regulations, based upon evidence and documentation attesting to the need to further regulate and control short-term lodging units in residential zones, to ensure that, among other things, short-term lodging units are regulated in a way to maintain harmony with surrounding uses. 15. Due to the proliferation of short-term rentals and their impact on neighborhoods and long-term housing, Ordinance No. 2021-28 placed a cap of 1,550 on the number of short-term lodging permits allowed in the City. 24 Planning Commission Resolution No. PC2023-018 Page 3 of 11 16. Fractional homeownership properties operate much like short-term lodgings in that they limit occupancy by owners of a fractional interest in a property to less than 30 consecutive days. 17. Section 30500 of the California Public Resources Code requires each county and city to prepare a Local Coastal Program (“LCP”) for that portion of the coastal zone within its jurisdiction. 18. In 2005, the City adopted the City of Newport Beach Local Coastal Program Coastal Land Use Plan as amended from time to time. 19. The California Coastal Commission effectively certified the City’s Local Coastal Program Implementation Plan on January 13, 2017, and the City added Title 21 (Local Coastal Program Implementation Plan) (“Title 21”) to the City of Newport Beach Municipal Code (“NBMC”) whereby the City assumed coastal development permit-issuing authority on January 30, 2017. 20. On November 16, 2021, the City Council conducted a study session to discuss fractional ownership uses within dwelling units. 21. On September 13, 2022, the City Council conducted a second study session to discuss the fractional ownership uses within the City. Written and oral testimony provided included a report on how other jurisdictions were addressing fractional ownership uses. Fifteen of the 22 jurisdictions surveys classified fractional ownership uses as a time share. Additional public testimony included concerns about increases in traffic, noise, and trash, as well as fractional ownership uses having an adverse impact on the character of the existing residential neighborhoods. 22. On September 27, 2022, the City Council adopted Resolution 2022-61, initiating a Code Amendment to Title 20 (“Planning and Zoning”) and a Local Coastal Program Amendment to Title 21 of the NBMC. The City Council directed staff to work with the Planning Commission to develop regulations that would regulate fractional ownership uses in the best manner that would protect the character of residential neighborhoods. 23. On October 6, 2022, the Planning Commission conducted a study session to discuss fractional ownership uses and accept public testimony. At the conclusion of study session, the Planning Commission expressed the desire to form an Ad-Hoc Committee and work closely with staff to formulate appropriate regulations. 24. On October 20, 2022, the Planning Commission formally formed an Ad-Hoc Committee to evaluate potential amendments to Title 20 and Title 21 related to fractional ownership uses within the City. The Ad-Hoc Committee met a total of seven times, during which the Committee discussed potential regulatory schemes with staff from Community Development Department and City Attorney’s Office. During these meetings, the Ad- Hoc Committee also met with representatives from one firm that facilitates fractional ownership uses (Pacaso, Inc.) and several concerned citizens to ensure the Committee members had a full understanding of the issue. 25 Planning Commission Resolution No. PC2023-018 Page 4 of 11 25. On February 24, 2023, the Ad-Hoc Committee presented their findings to the full Planning Commission. After accepting public testimony and discussing the matter at length, the Planning Commission approved forwarding two recommendations to the City Council. The preferred recommendation was to broaden the definition of time shares to include fractional ownership uses. As an alternative recommendation, the Planning Commission stated the City Council could consider creating a separate regulatory scheme to allow fractional ownership uses in all zones, except the Single-Unit Residential (R-1) Zoning Districts. 26. On March 14, 2023, the City Council discussed the Planning Commission’s recommendations. After accepting further public testimony on fractional ownership uses within the City and discussing the issue, the City Council directed staff to move forward with the Planning Commission’s preferred option of broadening the definition of timeshare to capture. 27. Pursuant to Section 13515 (Public Participation and Agency Coordination Procedures) of the California Code of Regulations Title 14, Division 5.5, Chapter 8, Subchapter 2, Article 5 (Public Participation) (“Section 13515”), drafts of LCP Amendment (PA2022-0202) were made available and a Notice of Availability was distributed at least six weeks prior to the anticipated final action date. 28. A public hearing was held on April 20, 2023, in the Council Chambers located at 100 Civic Center Drive, Newport Beach, California. A notice of time, place and purpose of the public hearing was given in accordance with the California Government Code Section 54950 et seq. (“Ralph M. Brown Act”) and Chapter 21.62 (Public Hearings) of the NBMC. Evidence, both written and oral, was presented to, and considered by, the Planning Commission at this public hearing. 29. The City desires to update Section 21.48.025 (Time Share Facilities) and related definitions set forth in Section 21.70.020 of the NBMC. This code amendment does not impact the City’s ability to support coastal access in that 4,086 hotel/motel rooms hotels and motels, 1,550 short-term lodging units, and approximately 471 campground and RV sites are available to provide coastal access to the public. SECTION 2. CALIFORNIA ENVIRONMENTAL QUALITY ACT DETERMINATION. 1. The LCP Amendment (PA2022-0202) is exempt from environmental review under the California Environmental Quality Act (“CEQA”) pursuant to Section 15060(c)(2) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, which states that a project is not further review under CEQA if “[t]he activity will not result in a direct or reasonably foreseeable indirect physical change in the environment”. Fractional ownership uses are not listed as a permitted use or defined under the Municipal Code. This is amendment would clarify that fractional ownership uses are classified as time shares, which are currently regulated by the NBMC. This amendment does not alter the manner in which time shares are regulated and therefore would not result in a physical change in the environment. 26 Planning Commission Resolution No. PC2023-018 Page 5 of 11 SECTION 3. FINDINGS. 1. The LCP Amendment (PA2022-0202) is consistent with the City’s General Plan. It would serve to implement the following goals and policies of the General Plan: Land Use Element Policy LU 2.6, which states, “Visitor Serving Uses Provide uses that serve visitors to Newport Beach’s ocean, harbor, open spaces, and other recreational assets, while integrating them to protect neighborhoods and residents.” The proposed amendment would continue to allow time share uses, which is a visitor serving use in some commercial zones, while clarifying that fractional ownership uses are not permitted in residential zones areas. This would prevent additional commercialization of the residential neighborhoods and protect them from impacts created by increased traffic and noise. Land Use Element Goal LU 4, which states, “Management of growth and change to protect and enhance the livability of neighborhoods and achieve distinct and economically vital business and employment districts, which are correlated with supporting infrastructure and public services and sustain Newport Beach’s natural setting.” Classifying fractional ownership uses as time shares continues to allow the business within certain commercial zones. This clarification would also help preserve the long-term housing stock by eliminating the conversion of existing and new housing developments into time share uses, and further ensure that the commercial businesses would not encroach into residential areas and impact the livability of said neighborhoods. Housing Element Goal #4, which states, “Housing opportunities for as many renter- and owner-occupied households as possible in response to the market demand and RHNA obligations for housing in the City.” Conversion of residential dwelling units into time shares removes the dwelling units from the market, thus making them no longer available for occupancy of full-time residences. The proposed amendment would serve to prevent single- unit residences from being taken off the market, thus protecting these housing opportunities for renters and owner-occupied households alike. Housing Element Goal #5, which states, “Preservation of the City’s housing stock for extremely low-, very low-, low-, and moderate-income households.” Removing market-rate dwelling units from the City’s housing stock impacts the affordability of housing across all income levels. As fewer dwelling units become available for rent or sale, the price increases. These price increases reduce the opportunities to provide affordable housing to extremely low-, very low-, low-, and moderate-income households. The proposed amendment would prevent conversion of single-unit residences into a visitor serving accommodation, thus preserving the number of units in the City’s housing stock, which would help minimize increases to housing costs. 2. The proposed Title 21 amendment serves to implement Coastal Land Use Plan (CLUP) Table 2.1.1-1 (Land Use Plan Categories) of the LCP, which establishes the type, density, and intensity of land uses within the coastal zone, including residential land use categories that are intended for residential dwellings. The amendment clarifies that fractional ownership uses are considered time shares, a type of visitor-serving commercial use that is prohibited in residential neighborhoods in order to maintain the residential character of 27 Planning Commission Resolution No. PC2023-018 Page 6 of 11 communities. The proposed amendment would continue to allow time shares in other areas where visitor serving uses are currently permitted. This includes the CM, CV, MU-H, and MU-W Coastal Land Use Designations, which are identified in CLUP Table 2.1.1-1 to provide visitor serving uses. 3. While CLUP Policy 2.3.3-6 authorizes the short-term rental of dwelling units as a means of providing lower-cost overnight visitor accommodations, the maximum number of short-term rentals are capped at a maximum of 1,550 permits to prevent adverse impacts to residential areas and preserve housing stock within the coastal zone. Unlike short term rentals, fractional ownership of coastal properties is a high-cost option to visit the coast on a limited basis, but have similar negative impacts to housing supply and neighborhood disturbances that short term rentals create. Therefore, it is appropriate to prohibit this type of visitor- serving commercial use in residential neighborhoods. Furthermore, this amendment will not impact the City’s ability to support the wide variety of visitor accommodations that are currently provided, including 4,086 hotel/motel rooms hotels and motels, a cap of 1,550 short term lodging units, and approximately 471 campground and RV sites. 4. The LCP Amendment (PA2022-0202) shall not become effective until approval by the California Coastal Commission and adoption, including any modifications suggested by the California Coastal Commission, by resolution and/or ordinance of the City Council of the City of Newport Beach. 5. The LCP, including the LCP Amendment (PA2022-0202), will be carried out fully in conformity with the California Coastal Act. 6. The recitals provided in this resolution are true and correct and are incorporated into the operative part of this resolution. SECTION 4. DECISION. NOW, THEREFORE, BE IT RESOLVED: 1. The Planning Commission of the City of Newport Beach hereby finds Local Costal Program Amendment (PA2022-0202) is exempt from environmental review under the California Environmental Quality Act (“CEQA”) pursuant to Section 15060(c)(2) of the CEQA Guidelines, California Code of Regulations, Title 14, Division 6, Chapter 3, which states that a project is not further review under CEQA if “[t]he activity will not result in a direct or reasonably foreseeable indirect physical change in the environment”. Fractional ownership uses are not listed as a permitted use or defined under the Zoning Code. This is amendment would clarify that fractional ownership uses are classified as time shares, which are currently regulated by the NBMC. This amendment does not alter the manner in which time shares are regulated and therefore would not result in a physical change in the environment. 2. The Planning Commission hereby recommends the City Council authorize staff to submit the Local Coastal Program Amendment (PA2022-0202), as set forth in Exhibit “A,” which is attached hereto and incorporated herein by reference, to the California Coastal Commission. 28 Planning Commission Resolution No. PC2023-018 Page 7 of 11 PASSED, APPROVED, AND ADOPTED THIS 20TH DAY OF APRIL 2023. AYES: NOES: ABSTAIN: ABSENT: BY:___________________________ Curtis Ellmore, Chair BY:____________________________ Sarah Klaustermeier, Secretary 29 Planning Commission Resolution No. PC2023-018 Page 8 of 11 EXHIBIT “A” LOCAL COSTAL PLAN AMENDMENT NO. PA2022-0202 Section 1: Section 21.48.025(A) of the Newport Beach Municipal Code is amended to read as follows: A. Applicability. The provisions of this section shall apply to applications involving the development or creation of new visitor accommodations or the expansion, reduction, redevelopment, demolition, conversion, closure, or cessation of existing visitor accommodations. Converting an accommodation that was not used as a visitor accommodation into one that is used as a visitor accommodation, shall constitute the development or creation of a new visitor accommodation. Section 2: Section 21.48.025(C)(5) of the Newport Beach Municipal Code is amended to read as follows: 5. Mitigation. If the review authority determines that the development will impact existing lower cost visitor-serving accommodations, or provide only high or moderate cost visitor accommodations or limited use overnight visitor accommodations such as time share uses and condominium-hotels, then mitigation commensurate with the impact shall be provided by one of more of the following: a. Replacement of low cost rooms lost shall be provided at a one-to-one ratio either on site or a suitable off-site location within the City; b. Payment of an in-lieu fee commensurate with the impact shall be required; c. Programmatic components that provide low cost overnight accommodations; or d. Other form of mitigation addressing cost of stay. The review authority may authorize deviations from development standards that provide economic incentives to the development to maintain affordability. Section 3: Section 21.48.025(E) of the Newport Beach Municipal Code is amended to read as follows: E. Conversion of Existing Dwelling Units Prohibited. The conversion of existing residential dwelling units into a time share use shall be prohibited. Section 4: Section 21.48.025(F) of the Newport Beach Municipal Code is added to read as follows: F. Tsunami Information and Evacuation Plans. Visitor-serving accommodations in areas identified as susceptible to tsunami inundation shall be required to provide guests with information on tsunami information and evacuation plans. 30 Planning Commission Resolution No. PC2023-018 Page 9 of 11 Section 5: The definition of “Accommodation” is added to Section 21.70.020 of the Newport Beach Municipal Code is to read as follows: “Accommodation” means any dwelling unit, apartment, condominium or cooperative unit, hotel or motel room, or other or structure constructed for residential use and occupancy, including, but not limited to, a single-unit dwelling, two-unit dwelling, multi-unit dwelling. Section 6: The definition of “Limited use overnight visitor accommodations (LUOVA)” within Section 21.70.020 of the Newport Beach Municipal Code is amended to read as follows: Limited use overnight visitor accommodations (LUOVA). See “Time share use.” Section 7: The definition of “LUOVA” within Section 21.70.020 of the Newport Beach Municipal Code is deleted. Section 8: The definition of “Time Share Facility (Land Use)” within Section 21.70.020 of the Newport Beach Municipal Code is amended to read as follows: Time Share (Land Use). See “Visitor accommodations.” Section 9: The definition of “Visitor Accommodations (Land Use)” within Section 21.70.020 of the Newport Beach Municipal Code is amended to read as follows: Visitor Accommodations (Land Use) 1. “Bed and breakfast inn” means a dwelling unit that offers guest rooms or suites for a fee for less than thirty (30) days, with incidental eating and drinking service provided from a single kitchen for guests only. 2. “Campground” means a lot upon which one or more sites are located, established, or maintained for rent as an overnight tenting or camping area for recreation or vacation purposes. 3. “Hostel” means establishments offering supervised overnight sleeping accommodations, primarily for travelers who use nonmotorized transportation or commercial or public transportation. Such sleeping accommodations are designed, intended to be used and are used, rented or hired out as temporary or overnight accommodations for guests in which daily services of linen change, towel change, soap change and general cleanup are provided by the management. If kitchen or eating facilities are provided, they are communal in nature. 4. “Hotel” means an establishment that provides guest rooms or suites for a fee to transient guests for sleeping purposes. Access to units is primarily from interior lobbies, courts, or halls. Related accessory uses may include conference and meeting rooms, restaurants, bars, and recreational facilities. Guest rooms may or may not contain kitchen facilities for food preparation (i.e., refrigerators, sinks, stoves, and ovens). Hotels with kitchen facilities are commonly known as extended stay hotels. A hotel operates subject to taxation under Revenue and Taxation Code Section 7280. 31 Planning Commission Resolution No. PC2023-018 Page 10 of 11 5. “Motel” means an establishment that provides guest rooms for a fee to transient guests for sleeping purposes. Guest rooms do not contain kitchen facilities. A motel is distinguished from a hotel primarily by direct independent access to, and adjoining parking for, each guest room. A motel operates subject to taxation under Revenue and Taxation Code Section 7280. 6. “Recreational vehicle (RV) park” means a lot upon which two or more recreational vehicle sites are located, established, or maintained for occupancy for a rental fee by recreational vehicles of the general public as temporary living quarters for recreation or vacation purposes. 7. “Short-term lodging” means a dwelling unit that is rented or leased as a single housekeeping unit (see “Single housekeeping unit”) for a period of less than thirty (30) days. 8. “Single room occupancy, residential hotels (SRO)” means buildings with six or more guest rooms without kitchen facilities in individual rooms, or kitchen facilities for the exclusive use of guests, and which are also the primary residences of the hotel guests. 9. “Time share instrument” means one or more documents, by whatever name denominated, creating a time share plan or governing the operation of a time share plan, and includes the declaration dedicating accommodations to the time share plan. 10. “Time share interval” means the period or periods of time when the purchaser in a time share plan is afforded the opportunity to use the accommodations of a time share plan. 11. “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 real property, or any portion thereof, 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, on a recurring basis for more than one year, but not necessarily for consecutive years. A time share plan shall be deemed to exist whenever such recurring rights of exclusive use to the real property, or portion thereof, are created, regardless of whether such exclusive rights of use are a result of a grant of ownership rights, possessory rights, membership rights, rights pursuant to contract, or ownership of a fractional interest or share in the real property, or portion thereof, and regardless of whether they are coupled with ownership of a real property interest such as freehold interest or an estate for years in the property subject to the time share plan. 12. “Time share property” means one or more accommodations subject to the same time share instrument, together with any other property or rights to property appurtenant to those accommodations. 13.“Time share unit” means the time share property or portion of a time share property in which a time share interval exists and that is designated for separate use. 32 Planning Commission Resolution No. PC2023-018 Page 11 of 11 14.“Time share use” means the use of one or more accommodations or any part thereof, as a time share property. 33 INTENTIONALLY BLANK PAGE34 Attachment No. PC 3 November 16, 2021, City Council Study Session Minutes 35 INTENTIONALLY BLANK PAGE36 City of Newport Beach City Council Meeting November 16, 2021 In response to Council Member Brenner's question, Deputy Community Development Director Campbell assured Council that any additional comments resulting from the Housing Element Update Advisory Committee meeting can be added to the revised housing plan before submitting to HCD. Mayor Avery acknowledged staff for their knowledge, time, and energy to revise the housing plan. SS3. Fractional Home Ownership Community Development Director Jurjis utilized a presentation to discuss fractional ownership of real estate, companies selling fractional ownership, how it works, operations, community concerns, City regulations, and the Newport Beach Municipal Code (NBMC) table of allowed uses, definitions. In response to Council Member Dixon's question, Community Development Director Juris noted the definition of conversion and its subjective interpretation and application. Council Member Blom highlighted the percentage of LLCs and trust ownerships in Newport Beach and discussed the reality of future home ownership and impact to the City with the elimination of fractional ownership. In response to Council Member Brenner's questions, Community Development Director Jurjis confirmed the zones in which fractional ownership and Short -Term Lodging (STL) are allowed and not allowed, explained how time share use is subject to the definition, zoning rules when properties convert to condominiums, and the cap on STL applications. Pacaso's Director of Government and Community Relations Ellen Haberle utilized a presentation to discuss co -ownership history, Pacaso's role, owner agreements, and enforced policies. In response to Council questions, Ms. Haberle provided the definition of a luxury home, stated who holds the title and how the co-owners are listed, and related Pacaso's enforcement procedures for respecting local ordinances; confirmed that Pacaso is employed by the LLC to serve as property and program manager; noted that the company uses an LLC operating agreement; stated that ownership interests are sold in one-eighth increments with a 50% cap, and an average owner group consisting of 6- 7 members; stated that while neighbor and owner conflict is a reality, local ordinances can preserve the peace, quiet, safety and comfort of the residents; and explained Pacaso's equitable scheduling calendar tool, the rules for member guests, and occupancy cycles. Community Development Director Jurjis agreed to seek collaboration with fractional home ownership companies, like Pacaso, to establish a mutual understanding of City regulations and company enforcement procedures. Ms. Haberle agreed to collaborate with City staff to identify cities with preventative ordinances. Council Member O'Neill expressed concern about regulation standards for commercial enterprise..Community Development Director Jurjis shared that a threshold provision exists for fractionally owned properties with 11 or more members, which requires filing with the Department of Real Estate and public records. Nancy Scarbrough believed that the rotation frequency of member stays is subjective and questioned how fractional ownership will affect property taxes. Volume 65 - Page 184 37 City of Newport Beach City Council Meeting November 16, 2021 Russell Dahl expressed concern for Pacaso's minimal data and history, unpredictable member behavior and guest visits, long-term unknown ramifications, and avoidance of the City's short- term occupancy and rental rules. Susan Stoneburner asked Council to consider classifying fractional ownership homes as STLs, described her experience with a Pacaso property, and expressed the opinion that the home is being used as a short-term rental without a short-term rental agreement, business license, or proper City taxation. Cathy Brown shared her dismay about having a Pacaso property in a single-family residential zone. Mike O'Neill shared and praised his relationship and experience as a fractional owner with Pacaso. Richard Manga noted his support and relationship as a fractional owner with Pacaso. Mike Desantis shared his displeasure and experience as a Pacaso property neighbor, expressed concern that his experiences conflicted with Ms. Haberle's presentation, and noted how the property has impacted the neighborhood. Connie Adnoff requested Council investigate legal options for when fractional owner members disturb the local community. Chuck Fancherbelieved that the City should focus on nuisance issues and not regulate good behavior, predict behavior, or profile guests. David Tanner requested that staff explore using fractional ownerships as a vehicle for affordable housing units. Council Member Blom correlated bad behavior sightings at fractionally owned properties with problems exhibited at individually owned dwellings, expressed concern with limiting opportunities and creating more regulations for property purchases and uses, and encouraged communication amongst neighbors. Mayor Pro Tem Muldoon expressed the opinion that fractional ownership cannot be eliminated and that it does not violate timeshare ordinances. In response to Mayor Pro Tem Muldoon's questions, City Attorney Harp shared conduct and public nuisance regulations and possibly creating a voluntary centralized complaint hotline as a communication tool with Pacaso and other fractional ownership businesses. Community Development Director Jurjis reviewed the Department of Real Estate time share laws and procedures for fractional ownership with 11 or more members, confirmed that Newport Beach regulations would need amending to include a time share cap, and concurred that the current City definition of time share does not fit the Pacaso application. In response to Council Member Dixon's questions; Ms. Haberle compared second homeowner travel habits to short-term renters, discussed policy guidelines for complaints, and agreed to share complaint reports with the City. City Attorney Harp clarified the difference between fractional ownership and short-term rentals. In response to Council Member Duffield's question, Community Development Director Jurjis explained that home sale prices are based on supply and demand and the possibility does exist for a private homeowner to overprice an individual home sale with the hope of a fractional owner sale at a higher cost. SS4. Water Conservation Ordinance Update Mayor Avery continued the item to the next City Council meeting. Volume 65 - Page 185 38 City of Newport Beach City Council Meeting November 16, 2021 III. PUBLIC COMMENTS ON AGENDA AND NON -AGENDA ITEMS Jim Mosher clarified that correspondence regarding offshore oil drilling and spent fuel at the San Onofre Nuclear Generating Station are both matters for which Council Members have been asked to be included on a future agenda and suggested handouts posted in the Council Chambers be amended to reflect this. City Attorney Harp announced that the City Council would adjourn to Closed Session to discuss the items listed in the Closed Session agenda and read the titles; and reported that City Manager Leung will be recusing herself on Closed Session Item IV.B due to potential financial interest conflicts. IV. CLOSED SESSION - Council Chambers Conference Room A. CONFERENCE WITH LABOR NEGOTIATORS Government Code § 54957.6): 1 matter Agency Designated Representatives: Grace K. Leung, City Manager, and Barbara Salvini, Human Resources Director, Negotiators. Employee Organization: Newport Beach Employees League (NBEL) B. CONFERENCE WITH LABOR NEGOTIATORS Government Code § 54957.6): 1 matter Agency Designated Representatives: Brad Avery, Mayor; and Kevin Muldoon, Mayor Pro Tem Unrepresented Employee: Grace K. Leung, City Manager V. RECESSED - 6:09 p.m. VI. RECONVENED AT 6:41 P.M. FOR REGULAR MEETING VII. ROLL CALL Present: Mayor Brad Avery, Mayor Pro Tem Kevin Muldoon, Council Member Noah Blom, Council Member Joy Brenner, Council Member Diane Dixon, Council Member Duffy Duffield, Council Member Will O'Neill VIII. CLOSED SESSION REPORT City Attorney Harp announced that no reportable actions, were taken. IX. INVOCATION - Pastor Rick Mixon, Fairview Community Church, Costa Mesa X. NATIONAL ANTHEM AND PLEDGE OF ALLEGIANCE - World War II Veteran Frank Puccilli and Council Member O'Neill, respectively XI. NOTICE TO THE PUBLIC XII. CITY COUNCIL ANNOUNCEMENTS AND ORAL REPORTS FROM CITY COUNCIL ON COMMITTEE ACTIVITIES Council Member Brenner: Attended the Newport Beach Foundation reception, spoke to the Newport Beach Chamber of Commerce, Wake Up Newport, and the Commodores and noted the websites stopsb9oc.com, ourcommunityvoices.com, and livablecalifornia.org Volume 65 - Page 186 39 INTENTIONALLY BLANK PAGE40 Attachment No. PC 4 September 13, 2022, City Council Study Session Minutes 41 INTENTIONALLY BLANK PAGE42 CITY OF NEWPORT BEACH City Council Meeting Minutes Study Session and Regular Meeting September 13, 2022 I. ROLL CALL - 4:05 p.m. Present: Mayor Kevin Muldoon, Mayor Pro Tem Noah Blom, Council Member Brad Avery, Council Member Joy Brenner, Council Member Diane Dixon, Council Member Duffy Duffield, Council Member Will O'Neill II. CURRENT BUSINESS SS1. Clarification of Items on the Consent Calendar - None SS2. Fractional Home Ownership Update Community Development Director Jurjis and Consultant David Blumenthal utilized a presentation to discuss the findings of the 22 cities surveyed, map of the 11 known fractional home ownership locations in the City, and case studies from St. Helena, Palm Springs, and Park City, Utah. Carmen Rawson sought information regarding timeshares in the City, cited chapters in the Newport Beach Municipal Code (NBMC) relative to timeshares, areas where timeshares are permitted, listed three fractional ownership companies breaking the NBMC, and defined timeshares and types of timeshares. In response to Council Member O'Neill's question, Ms. Rawson referenced NBMC Chapters 21. 18 and 21. 70. Nancy Scarbrough noted sentiment shared among residents regarding fractional ownership during recent community events, asked that Council consider the residents' dissatisfaction, and direct City staff to further explore options to regulate or restrict fractional home ownership. Bridget O'Connor opposed the fractional home ownership model. Gary Cruz asked Council to curb shared ownership in the City. Denise Macias opposed fractional ownership. Gabe Dima-Smith, Pacaso representative, clarified Pacaso's business model and indicated that the owners are interested in enjoying second -home ownership for single-family residential use, and that short-term rental is prohibited under the business model. Lisa Mathias opposed the use of single-family dwellings in the R1 zone for shared property development. An unidentified speaker expressed opposition to fractional home ownership. Denys Oberman expressed the opinion that entities acting as consolidators are using a short- term lodging model, asked Council for clarity on characterizing fractional home ownership as short-term lodging, and not allow them in residential zones and dense family -oriented residential neighborhoods. Roberta Schmidt referenced a Pacaso statement in the Orange County Register, noting a typical rental time of one week, and shared her concerns for keeping a community feel, knowing your neighbors, nearby fractional owners coming and going, community growth and stability. Volume 65 - Page 381 43 City of Newport Beach City Council Meeting September 13, 2022 Mark Markos expressed opposition to fractional home ownership. In response to Mayor Muldoon's request, Mr. Markos indicated that a fractional home ownership sublease can be found online and agreed to forward a copy to staff. Angela Caliger expressed opposition to fractional home ownership. Brita Leffler advocated for preserving historical construction and banning fractional home ownership development. Bob Yant relayed a non -supportive community opinion and suggested utilizing a cease and desist order or regulation enforcement to stop fractional home ownership in the City. Ann Archie described late night noise and noted concern for the quality of life for residents living around fractional home ownership properties. Jack Brown described people coming and going in the fractional home ownership near his home. Russ Dahl expressed the seriousness of this issue and how it changes the complexity of the neighborhood. Roberta Schmidt noted benefits to Pacaso in a fractional home ownership real estate transaction. Philip Mark expressed concern relative to how the fractional home ownership count has grown from two to twelve, questioned why the NBMC is not being enforced, asked for quick action, and for the City Attorney to review the NBMC to determine applicability. Beverly Johnson, Compass Realty agent, stated that Compass Realty does not have any fractional home ownership listings and is seeking reasonable comparisons. Philomena Mark urged Council to take action regarding fractional home ownership developments, noted quality of life disruptions from a nearby fractional home ownership property, and asked Council to ban further development. Mayor Muldoon recessed the meeting at 4.42 p.m. and reconvened the meeting at 4.53 p.m. with all members of the City Council in attendance. In response to Council Member O'Neill's questions, City Attorney Harp confirmed that Newport Beach defines code sections differently than other cities and that, while a NBMC section references fractional home ownership for timeshare projects, the code refers to a development, pointed out that over 30% of homes in Newport Beach are held in a LLC configuration, noted issues with applicability of provisions, indicated that Sonoma and St. Helena regulate their ordinances by looking at the operational plan and uses to craft regulations, relayed due process and regulation validity issues in the St. Helena lawsuit, indicated that a concise definition is required with an update to the NBMC and Local Coastal Program (LCP), recommended regulating use without capturing others in it, and agreed to work on regulations for consideration by the City Council. Council Member O'Neill supported regulations that would be similar to defining fractional home ownerships as a timeshare plan and thought the current model does not match the General Plan or zoning code, and encouraged residents to call code enforcement on all code violations. City Attorney Harp suggested bringing the matter to the Planning Commission after initiating the amendment. Council Member Dixon agreed with Council Member O'Neill, thanked the residents for attending the meeting, noted impacts throughout the City, suggested staff look at what other jurisdictions have done and come back with recommendations, and suggested adopting a moratorium in the meantime. Volume 65 - Page 382 44 City of Newport Beach City Council Meeting September 13, 2022 Council Member Avery noted that, even before Pacaso, the City was starting to lose local control to the State, experienced more density and traffic, agreed with implementing a moratorium, cautioned the potential cost to the City, supported looking at what other cities have done and updating the NBMC to mitigate the impacts. In response to Council Member Brenner's questions, Community Development Director Jurjis indicated that the City has not studied the State of Washington to confirm if they have banned fractional home ownership. City Attorney Harp noted that a cease and desist order would be based on current NBMC provisions and confirmed that a moratorium places a hold on development and would be the path to immediate action. Council Member Brenner expressed concerns for neighborhoods affected by short-term lodging, the Regional Housing Needs Assessment (RHNA), residential care facilities, and homelessness, and relayed the importance of finding a solution as soon as possible. Council Member Duffield expressed the opinion that further study is needed to amend the NBMC and supported considering a moratorium. Mayor Muldoon summarized the direction to staff to explore a regulation timeshare plan with the Planning Commission, conduct more studies on Sonoma and other communities, enact a moratorium and prohibition in the R-1 zone, and to move with expediency. In response to Council Member O'Neill's question, City Attorney Harp detailed the standards for a moratorium. In response to Council Member Dixon's question, City Attorney Harp clarified that the City Council must initiate the code change first before going to the Planning Commission. Mayor Muldoon clarified that the moratorium would come to Council for a vote and the code amendment first needs to be initiated by Council before going to the Planning Commission. III. PUBLIC COMMENTS ON AGENDA AND NON -AGENDA ITEMS Steven Gerard distributed a flyer, invited the City to become a Personhood City and attend the Kirk Cameron movie titled Lifemark, asked that this be placed on a future agenda, and sang a song. Regarding Item 18 (Amending and Re -Adopting the 2021-2029 6th Cycle Housing Element), an unidentified speaker from the Southwest Region of Carpenters expressed concern relative to the environmental impacts of the Housing Element and an interest in having local and skilled workforce requirements added into projects moving forward since he believed it would benefit the climate, boost economic development, and mitigate transportation and greenhouse gases. City Attorney Harp announced that the City Council would adjourn to Closed Session to discuss the item listed on the Closed Session agenda and read the title. IV. CLOSED SESSION — After Study Session — Council Chambers Conference Room A. CONFERENCE WITH REAL PROPERTY NEGOTIATORS Government Code § 54956.8): 1 matter Property: 1201 Dove Street, Newport Beach, California 92660 (APN 427-221-06). City Negotiators: Seimone Jurjis, Community Development Director and Lauren Wooding Whitlinger, Real Property Administrator. Volume 65 - Page 383 45 INTENTIONALLY BLANK PAGE46 Attachment No. PC 5 September 27, 2022, City Council Meeting Minutes 47 INTENTIONALLY BLANK PAGE48 CITY OF NEWPORT BEACH City Council Meeting Minutes Special Meeting September 27, 2022 I. CALL THE MEETING TO ORDER H. ROLL CALL — 4:02 p.m. Present: Mayor Kevin Muldoon, Mayor Pro Tem Noah Blom, Council Member Brad Avery, Council Member Joy Brenner, Council Member Diane Dixon, Council Member Duffy Duffield, Council Member Will O'Neill III. CURRENT BUSINESS 1. Resolution No. 2022-61: Initiation of Zoning Code and Local Coastal Program Amendments Related to Fractional Homeownership (PA2022-0202) [100-2022] Community Development Director Jurjis reviewed the previous direction provided to staff by Council to initiate a Newport Beach Municipal Code (NBMC) change and moratorium, and requested further direction from Council. Council Member O'Neill supported moving forward with a code change initiation and the Planning Commission preparing the first draft. Mayor Muldoon concurred. Council Member Dixon suggested that Council give direction to the Planning Commission and recommended providing direction and a framework for staff. Council Member Brenner agreed that more direction is needed for the Planning Commission, noted the original municipal code excluded timeshares and fractional ownerships, and suggested the moratorium begin immediately and sunset when an ordinance is in place. Council Member O'Neill thought the last study session provided a general framework, referenced the approach and litigation in St. Helena, and suggested the Planning Commission use it as a starting point. Mayor Muldoon concurred that Council had given direction previously and the parameters of the St. Helena lawsuit makes the most sense to use. Council Member Dixon agreed but added that there are other factors to consider. She announced that she met with a Pacaso representative and discussed options, noted this is a new industry with few case studies, and stated it requires a more substantive study. Council Member Avery agreed with Council Member O'Neill, suggested moving deliberately, identifying options, and picking a solution that works for the City. Mayor Muldoon thought that a majority exists to regulate fractional ownerships in residential areas of the City. Gabe Dima-Smith, Pacaso Public Affairs Manager, appreciated the thoughtful approach by Council, stated that Pacaso is not a timeshare business model, co -ownership is common and has been present for decades, no regulatory framework exists, and expressed interest in meeting with staff to reach a mutually agreeable policy. Volume 65 - Page 391 49 City of Newport Beach City Council Meeting September 27, 2022 Gary Cruz shared his wife's five points that addressed timeshare characteristics, suggested creating a moratorium, and expressed concern for banning fractional ownerships in only R-1 zones since Newport Island is zoned R-2. Nancy Scarbrough suggested forming an ad hoc committee to help the Planning Commission work through the extensive study conducted by staff, agreed with adopting a moratorium and taking a slower approach, and indicated that there are currently five fractional ownership listings. Jim Shaheen shared his background and the benefits of co -ownership. Jim Mosher discussed Ordinance No. 82-14, which addresses timeshares, read the definition from the NBMC, and questioned enforcement. City Attorney Harp indicated that the purchase of a residential property by an LLC does not constitute a timeshare under the current provisions of the NBMC. Meagan Licata, Pacaso employee, on behalf of the Stein family, read their letter of support and highlighted their co -ownership experience. Denys Oberman thanked Council for bringing the item forward, agreed with City Attorney Harp, supported enacting a moratorium, expressed the opinion that fractional ownership intensifies a neighborhood, noted challenges with setbacks and consequences of establishing co -ownership properties, discussed fractional ownership and timeshare history, and indicated a need to manage the concentration. Mike O'Neill stated that the wrong definition of timeshare is being used and discussed the differences between fractional ownership and timeshare transactions, the ability to buy up to half the property for a 180-day use, Pacaso having an interest in property management without a financial interest in the property, and questioned the parameters of a moratorium. Carmen Rawson expressed the opinion that the Pacaso business model is a timeshare, defined two types of timeshares, reviewed the guidelines for co-owner stays, questioned why timesharing is allowed in residential areas, reviewed the limits and regulations, and indicated the short-term lodging ordinance does not apply to fractional ownership properties because the owners are not paying rent or Transient Occupancy Tax (TOT). Chrissy Bruchey, Pacaso employee, read a letter from Steve Hayes and his family that supports the Pacaso model. Cathy Brown noted that she lives in a residential neighborhood behind a Pacaso property and asked Council to address owners who stay for short amount of time, and cleaners, friends and family who come and go. Samantha Walsh, Pacaso employee, read a letter from property owner Anthony Kumar who shared his experience as a fractional owner. Roberta Smith provided a complaint regarding the Plaza del Sur property. Timothy Ellis, Pacaso Home Estate Manager, read a statement from property owner Sam Papoyan and provided his own background and best practices. Steve Rosansky, President and CEO of Newport Beach Chamber of Commerce, noted different viewpoints on the subject, encouraged Council to be deliberative and engage with Pacaso, and asked that if the Council adopts a moratorium that it be for a short duration. Volume 65 - Page 392 50 City of Newport Beach City Council Meeting September 27, 2022 An unidentified speaker noted the City's responsibility to support its investors and longtime residents, discussed diminution of property value, and a comparison to how Costa Mesa was able to establish care facility development limits when it was thought too not be possible. Furthermore, he suggested consulting with attorneys who have handled similar cases with success on an appeal, and questioned if the NBMC is sufficient. Purvi Doshi, Pacaso employee, read a statement on behalf of owner Cathy Coste. Dave Archie, neighbor to a Pacaso property, encouraged an accelerated solution, noted three -to - seven -day guest rotations over the last year, discussed their behavior, and offered to share additional experiences. Charles Klobe noted the number of sold shares in Newport Beach and urged Council to conduct a study and do what is best for the residents of the City. Max Johnson stated his opposition to fractional home ownership. Michael Jacobs discussed the Plaza del Sur property, supported a moratorium to conduct a study, and opposed businesses in residential areas. Mayor Muldoon noted that sold shares are grandfathered in, supported regulations in R-1 and R-2 zones, looked forward to what is brought back to Council, expressed support for Council Member O'Neill's analysis, expressed concern regarding enacting a moratorium, and supported the emergency passage of regulation of R-1 and R-2 zones. Motion by Mayor Muldoon, seconded by Council Member O'Neill, to a) determine this action exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15262 Feasibility and Planning Studies) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3; and b) adopt Resolution No. 2022-61, AResolution of the City Council of the City of Newport Beach, California, Initiating Amendments to Title 20 (Planning and Zoning) and Title 21 (Local Coastal Program Implementation Plan) of the City of Newport Beach Municipal Code Related to Fractional Homeownership (PA2022-0202). In response to Council Member Dixon's question, Council Member O'Neill clarified that the request includes moving quickly, using existing models and language from St. Helena to encompass what the City wants, and the Planning Commission has enough information to craft the language to be sent back to Council. Council Member Dixon sought expediency, and in response to her question, Community Development Director Jurjis indicated that staff will have a study session with the Planning Commission to discuss the current NBMC, break down the St. Helena code, ask for feedback from the Planning Commission, draft NBMC amendments, and return to Council with a written document by the first part of the new year. Council Member Dixon clarified that the City Council will give the Planning Commission the parameters and framework within the context of the St. Helena ordinance, agreed to be supportive, and asked if support exists among her colleagues to have a 60 or 90-day moratorium to give the Planning Commission time to do the work or impose immediate code changes to control the density. Mayor Muldoon expressed concern for litigation if the City makes any missteps, suggested a special meeting of the Planning Commission to address it sooner, and noted a drastic move will weaken the City's position. In response to Council Member Brenner's question, Mayor Muldoon clarified his suggestion to move through more quickly instead of enacting a moratorium. Council Member Brenner noted that she would support passing this to the Planning Commission with a moratorium in place. Volume 65 - Page 393 51 City of Newport Beach City Council Meeting September 27, 2022 Council Member O'Neill stated the importance of reviewing Government Code Section 65858, which is the standard for a moratorium, and indicated it does not apply to this situation, the City's hands are tied by State law. At the request of Council Member Brenner, Council Member O'Neill read Government Code Section 65858. In response to Council Member Dixon's question, City Attorney Harp clarified that all moratoriums and urgency ordinances have the same basic standard and require an immediate threat to the public health, safety, and welfare. He also clarified that any non -urgency ordinance takes effect 30 days after the second reading. Community Development Director Jurjis indicated that a draft ordinance could return to Council by the first or second Council meeting in November and would take effect 30 days after the second meeting. In response to Council Member Avery's question regarding the City of Beverly Hill's moratorium, City Attorney Harp noted that Beverly Hills enacted a moratorium two years ago, they were the only city in the State to do so, and they were not challenged. In response to Council Member Brenner's question, Community Development Director Jurjis relayed that the Planning Commission could hold special meetings but staff will not return to Council until November at the earliest. Council Member Dixon questioned why the City cannot enact a moratorium, to which Mayor Muldoon stated that due process must be followed. Council Member Dixon concluded that Council agrees about expediting the process, following the due process rules, and moving forward in a manner that is supported by neighbors and respects property rights. Motion by Council Member Brenner to establish a moratorium and go forward with the rest of staffs recommendation. Council Member O'Neill questioned the findings included in Council Member Brenner's motion and City Attorney Harp stated that the City cannot establish a moratorium at this meeting but could direct staff to come back with a proposed moratorium. Alternate motion by Council Member Brenner, seconded by Council Member Dixon, to a) determine this action exempt from the California Environmental Quality Act (CEQA) pursuant to Section 15262 (Feasibility and Planning Studies) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3; b) adopt Resolution No. 2022-61, A Resolution of the City Council of the City of Newport Beach, California, Initiating Amendments to Title 20 (Planning and Zoning) and Title 21 (Local Coastal Program Implementation Plan) of the City of Newport Beach Municipal Code Related to Fractional Homeownership (PA2022-0202); and c) direct staff to bring back a moratorium discussion at the next City Council meeting. In response to Council Member Dixon's question, Community Development Director Jurjis confirmed that Beverly Hills is the only City to enact a moratorium and City Attorney Harp noted that any findings for a moratorium in Newport beach would need to be based upon facts specific to Newport Beach. Council Member O'Neill expressed the opinion that staffs time is better spent on the code initiation instead of trying to identify findings on a moratorium, and opposed the motion in an effort to be sure the City is moving forward speedily. In response to Council Member Dixon's inquiry, City Attorney Harp stated that he has not consulted with an outside attorney regarding enacting a moratorium and agreed with Council Member Dixon that this may be a prudent course of action if direction is given to go forward with the moratorium. Volume 65 - Page 394 52 City of Newport Beach City Council Meeting September 27, 2022 Council Member Brenner questioned whether lack of staff time is a problem. Mayor Muldoon indicated the City Attorney's Office's time is separate from Community Development at this time, but City Attorney Harp noted that his office works closely with the Community Development Department in regards to these matters. With Council Members Brenner and Dixon voting yes, the alternate motion failed 2- 5. The original motion carried unanimously 7- 0. IV. ADJOURNMENT - 5:37 p.m. The special meeting agenda was posted on the City's website and on the City Hall electronic bulletin board located in the entrance of the City Council Chambers at 100 Civic Center Drive on September 22, 2022, at 4:00 p.m. og4rQl Leilani I. Brown City Clerk F- Volume 65 - Page 395 53 INTENTIONALLY BLANK PAGE54 Attachment No. PC 6 October 6, 2022, Planning Commission Study Session Minutes 55 INTENTIONALLY BLANK PAGE56 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 57 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 58 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 59 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 60 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 61 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 62 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 63 INTENTIONALLY BLANK PAGE64 Attachment No. PC 7 October 20, 2022, Planning Commission Meeting Minutes 65 INTENTIONALLY BLANK PAGE66 Planning Commission Regular Meeting Agenda October 20, 2022 Page 5 of 7 Commissioner Weigand requested staff be watchful of part B in the first recommendation. Commissioner Harris concurred with Secretary Rosene that recommendation two, part B is more applicable to retail and suggested constraining it to retail. Mr. Mosher inquired about how small fractional numbers will be fairly treated for earned credits from recommendations one and two and how eating establishments in Newport Beach will be affected by recommendation four. Principal Planner Zdeba relayed that rounding up is used for parking in the code and staff would need to study it more before putting it in to an ordinance and Deputy Community Development Director Campbell noted that the updated parking requirements will help facilitate permanent COVID patios, a small, anticipated parking reduction for some larger restaurants, and the impossibility of assessing potential impact on every restaurant in town. NEW BUSINESS ITEM NO. 5 MUNICIPAL CODE AND CITY COUNCIL POLICY REVIEW (PA2022-0219) Site Location: Not Applicable Summary: Establish an ad hoc committee of Planning Commissioners to assist the City Council in reviewing the Municipal Code and City Council Policies. Recommended Action: 1. Find the recommended action not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3; and 2. Form an ad hoc committee and authorize the Chair to appoint up to three Planning Commissioners to assist City staff in reviewing the Municipal Code and City Council Policies related to planning and zoning activities. Assistant City Attorney Summerhill informed Chair Kleiman that it is her discretion to appoint the members of the ad hoc committee. Motion made by Chair Kleiman and seconded by Vice Chair Ellmore to appoint Commissioners Harris, Rosene, and Klaustermeier to the ad hoc committee. AYES: Ellmore, Harris, Klaustermeier, Kleiman, Lowrey, Rosene, and Weigand NOES: None ABSTAIN: None ABSENT: None ITEM NO. 6 CODE UPDATE RELATED TO FRACTIONAL HOMEOWNERSHIP (PA2022-0202) Site Location: Not Applicable Summary: Establish an ad hoc committee of Planning Commissioners to assist City staff and the City Council in reviewing the issue of fractional homeownership. Recommended Action: 1. Find the recommended action not subject to the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3; and DocuSign Envelope ID: 05E2424B-1C69-4A0F-91A9-DA29BA6476DC 67 Planning Commission Regular Meeting Agenda October 20, 2022 Page 6 of 7 2. Form an ad hoc committee consisting of Commissioners Lowrey, Harris, and Rosene to assist City Staff and the City Council in reviewing and potentially regulating fractional homeownership. Motion made by Chair Kleiman and seconded by Vice Chair Ellmore to appoint Commissioners Rosene, Weigand, and Lowrey to the ad hoc committee. AYES: Ellmore, Harris, Klaustermeier, Kleiman, Lowrey, Rosene, and Weigand NOES: None ABSTAIN: None ABSENT: None Mr. Mosher reminded Chair Kleiman of the Brown Act requirement to allow public comment on hearing and agenda items and reiterated that forming an ad hoc committee is not the direction of the City Council who directed the Planning Commission to study and correct the definition of time share project so it would include a fractional ownership sold to a group of strangers and exclude a home shared by family and friends. He thought forming an ad hoc committee and a 500-foot separation requirement were bad ideas and the Planning Commission should follow the direction provided by the City Council. Assistant City Attorney Summerhill declined commenting on Mr. Mosher’s comments to avoid going in depth because the item was to form an ad hoc committee and noted that issues will be revisited as they come forward. IX. STAFF AND COMMISSIONER ITEMS ITEM NO. 7 MOTION FOR RECONSIDERATION None ITEM NO. 8 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 announced the next Planning Commission meeting on November 3, 2022, to review two agenda items and the next City Council meeting to go forward with the Circulation Element Update and conduct public hearings on the Lido House Hotel expansion and reconsideration for The Tennis Club at Newport Beach project. He further informed the Planning Commission of the ongoing General Plan Update process and steering committee who will recommend people for a General Plan Advisory Committee (GPAC) and send it to the City Council in November 2022 for appointment. Lastly, he noted that the GPAC will begin working in January 2023 and will focus on the Land Use Element and zoning amendments to implement the Housing Element, provide advice to staff, and be a body for public outreach and discussion for the comprehensive update of all elements. ITEM NO. 9 REQUESTS FOR EXCUSED ABSENCES None X. ADJOURNMENT – The meeting was adjourned at 7:52 p.m. DocuSign Envelope ID: 05E2424B-1C69-4A0F-91A9-DA29BA6476DC 68 Attachment No. PC 8 February 23, 2023, Planning Commission Meeting Minutes 69 INTENTIONALLY BLANK PAGE70 Planning Commission Regular Meeting Agenda February 23, 2023 Page 6 of 10 1.Conduct a public hearing; 2.Find this project exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) and statutorily exempt under Sections 15262 and 15265of the CEQA Guidelines, because it has not potential to have a significant effect on theenvironment; and 3.Adopt Resolution PC2023-011 approving the Coastal Development Permit filed as PA2017-046. Principal Planner Zdeba used a presentation to review the Balboa Village Parking Management District Plan background, purpose, implementing components, coastal consistency, and recommendation. Commissioners Rosene and Klaustermeier reported no ex parte communications and Commissioner Harris and Lowrey reported having spoken with area property owners. Chair Ellmore opened the public hearing. Jim Pertrulli asked if the parking on Adams Street will change and if his duplex spaces are included in the 161 spaces that will be more public. Jim Mosher noted a spillover parking analysis not included for consideration of an anticipated problem, typo on handwritten page 31 referring to the California Coastal Commission (CCC) approval when it is the Planning Commission’s approval, missing implementation specifics, Municipal Code, and incomplete pieces. Principal Planner Zdeba stated that no changes are planned for parking on Adams Street and residential parking garages are not included in the off-street parking pool that represents private commercial parking. Furthermore, he relayed that Mr. Mosher was referencing a residential parking permit program, which was not supported by the residents nor the CCC and thus not carried forward. He added that spillover parking impacts could happen if the Village is successful and that they can be reviewed in the required two-year review period. Chair Ellmore closed the public hearing. In response to Commissioner Harris’ questions, Principal Planner Zdeba indicated that the code does not speak to potential private parking being utilized to offset residential parking and would not be consistent with the program intent. He noted that the plan has flexibility built-in to make changes and the Employee Parking Permit program is intended to help divert the spillover. Motion made by Commissioner Harris and seconded by Vice Chair Rosene to approve the item as recommended. AYES: Ellmore, Harris, Klaustermeier, Lowrey, and Rosene NOES: None ABSTAIN: None ABSENT: None VIII.DISCUSSION ITEMS ITEM NO. 6 FRACTIONAL HOMEOWNERSHIP (PA2022-0202) Summary: A discussion of potential regulation of fractional homeownership. Recommended Action: 71 Planning Commission Regular Meeting Agenda February 23, 2023 Page 7 of 10 Receive a presentation of the Planning Commission ad-hoc committee on fractional homeownership and provide a recommendation to the City Council. Community Development Director Jurjis explained that the City Council has passed this item to the Planning Commission to work on, an Ad-Hoc Committee with Commissioner Lowrey and Vice Chair Rosene was formed, the staff has spent an enormous amount of time on the item, the recommendation is the Ad-Hoc Committee’s idea of how to address fractional ownership, and the subject is difficult and not perfect. He asked that the Planning Commission provide feedback which will be provided to the City Council on March 14 for further review. Principal Planner Murillo used a presentation to review what is fractional ownership, how it works, operations, complaints/concerns, background of past City Council direction, the Planning Commission study session with staff and Ad-Hoc Committee formation, and Ad Hoc Committee considerations. He shared the recommendations of the Ad-Hoc Committee which included a regulatory process, location restrictions and maximum caps, parking requirements, noise restrictions, management plan, prohibition of subletting and guest use, Good Neighbor Policy, owner acknowledgments, and grandfathering provisions. Principal Planner Murillo stated the recommendation requested and displayed a summary of the recommendations of the Ad-Hoc Committee for discussion purposes. Chair Ellmore provided an opportunity for public comment. Carmen Rawson thought that timeshares cannot be regulated like Short-Term Lodging (STL), questioned how regulations will be enforceable, asked for an update on what other cities are doing, noted the impacts, thought the City’s goal should be to have more residents, questioned removal of separation requirements, and noted the challenge of regulating subletting. Jim Mosher noted the difference in stay times between fractional ownership homes and co-owned homes, concern for regulating ownership, the applicability of the timeshare definition to fractional ownership, and differences in ordinances enacted in Park City, UT that prohibit fractional ownership in most residential areas except for where timeshares are allowed and Carmel where timeshares are banned in all residential areas, and sale advertisements will be prohibited. Maureen Cotton, President of Central Newport Beach Community Association, referenced Mr. Mosher’s letter to the Planning Commission dated yesterday as having clarified all the City needs to know, noted ordinances already placed by the City, asked for timeshares and fractional ownership to be called the same, described stay lengths, programming, and STL permit rules, asked the Planning Commission to review the letter from Mr. Mosher and her, thought the fractional ownerships are acting like timeshares and should be limited to where they are allowed in the City, and relayed the burden to City services. Denys Oberman asked for the presentation to be made available to the public and a reasonable opportunity to provide input, provided background information on fractional ownership companies and thought the corporate setup is not comparable to families forming a LLC for trust reasons, strongly opposed permitting commercial entities engaged in the business of fractional ownership and timeshare activity in residential neighborhoods, questioned if fractional ownership falls in the purview of timeshare ordinances and legal framework, believed that fractional ownership structures are not STL, noted impacts to the community, and suggested fractional ownership is a fundamental change in land use plans. Max H. Johnson requested the clarification and specification of the agenda item be available before the meeting, seconded that fractional ownership is a timeshare and not allowed in the City of Newport, noted the urgency to ban or enaction of a moratorium on fractional ownership in other cities with no legal repercussions, urged the Planning Commission to consider placing a moratorium or ban and using a buffer/pause until a decision is made, and relayed the quality of life in the Peninsula Point. Nancy Scarbrough noted her frustration for not having information in advance of the meeting, supported comments by Jim Mosher and Carmen Rawson, noted a 30 percent Pacaso staff reduction in the fourth quarter and 100 employees fired recently, stated that fractional ownership homes are permanently out of the residential housing stock and overvalued, and thought the focus of the discussion should be on what is best for the residents, 72 Planning Commission Regular Meeting Agenda February 23, 2023 Page 8 of 10 stepping back, enacting a moratorium, conducting a thorough study of other cities, and seeking a second legal opinion. Ken Rawson inquired about why the Ad-Hoc Committee is recommending regulating fractional ownership and expressed concern for regulation details and limits to the number of fractional ownership homes. Purvi Doshi, Senior Public Affairs Manager for Pacaso, thanked the staff and Planning Commission subcommittee, expressed gratitude for working collaboratively, and expressed hope to move forward with policies that address the City’s concerns and enrich lives, noted a regulations draft prepared by Pacaso that addresses concerns, supported the recommendations presented, recommended a cap of about 500 fractional ownership homes City-wide, relayed the differences of a Pacaso home versus a timeshare, and described the characteristics of a fractional owner. Gina Cruz supported the other speakers and expressed her astonishment at the proposed 500 fractional ownership cap. Chair Ellmore ended the opportunity for public comment. Chair Ellmore recapped what is being requested of the Planning Commission. Assistant City Attorney Summerhill suggested a permit suspension penalty to address enforcement issues and using the co-owner permit and acknowledgements to verify who is on the property and address subletting issues. In response to Chair Ellmore’s inquires, Principal Planner Murillo indicated that there is no data on police department complaints at Pacaso properties, Community Development Director Jurjis shared one complaint to code enforcement that was quickly resolved. Chair Ellmore stated that a party atmosphere does not seem to be apparent with 12 fractional ownership properties and one complaint. Vice Chair Rosene suggested to the public that the opportunity still exists to reach out to the new Council to recommend broadening the definition of timeshares and include fractional ownership under it. He stated this action is not in the purview of this body and supported the inclusion of a public hearing process by the Zoning Administrator (ZA) for complete transparency, adding a management permit, prohibiting fractional ownership in a R-1 zone, and meeting the guidelines of the City codes. Commissioner Lowrey thanked staff for their help, recapped what is being asked of the Planning Commission and the goal of creating regulations that a lot of people could agree on. He noted his issues of ownership and contract law, legal challenges in the State, and a fair recommendation to forward to the City Council as a starting point that could return to the Planning Commission for a full resolution. Community Development Director Jurjis indicated that the current recommendation of a regulatory framework would be included in the business license side so it will not come back to the Planning Commission, but will depend on how the Council looks at it. Assistant City Attorney Summerhill relayed that the St. Helena case is pending, and the trial date has been pushed out to January 2024. Vice Chair Rosene relayed that the recommendation is an attempt to come up with practical regulation and provide visibility to what ‘s happening in the neighborhoods and does not mean it is the only option. He noted the option to broaden the timeshare definition with the City Council. Secretary Klaustermeier thought fractional ownership sounds like a timeshare framed differently, is a business model that commercializes residential neighborhoods with a profit taken through sales and operates like STL which is capped in the City. She concurred with Vice Chair Rosene regarding the opportunity for the City Council to revise the way timeshare is defined and preferred not permitting this use and legally find a way to make that happen. In response to Commissioner Harris’ inquires, Assistant City Attorney Summerhill indicated that Carmel by the Sea tweaked and expanded their timeshare definition to capture fractional ownership, which is the equivalent to a ban, the ordinance is just now taking effect, she is not aware of a lawsuit on the case, and they prohibited the 73 Planning Commission Regular Meeting Agenda February 23, 2023 Page 9 of 10 advertisement by realtors of the units. Furthermore, she is aware of cease-and-desist instances, but does not know the enforcement efforts in the jurisdictions. Commissioner Harris was curious about the process with homeowners and companies and buffer zones, did not know how the City could enforce permit suspension restrictions and regulations, thought punitive or financial consequences made sense, and inquired about possible restricted areas and a cap number. Commissioner Lowrey explained that the Committee chose a cap method because it would be difficult to enforce spacing and a cap limit was more appropriate. He predicted a slowdown in sales with the rates changes over the last six to seven months. In response to Commissioner Harris’ question, Community Development Director Jurjis stated that the recommendation is a starting point of what enforcement could look like, consists of parts taken from the STL policy, and plans for enforcement like STL. Vice Chair Rosene restated his recommendations: 1- Consider the option to broaden the definition of timeshare. 2- Transparency for neighbors is needed with a regulatory process and permitted through the public ZA process for the property and co-owner permit. (A management company must be maintained) 3- Prohibit fractional ownership in the R-1 Zone. 4- Add practical regulations that create a good neighbor atmosphere. 5- Add language that suspends a permit after a certain number of complaints. 6- Explore an advertisement prohibition. Vice Chair Rosene thanked staff. Chair Ellmore proceeded with establishing a consensus of the Planning Commission for a recommendation. He confirmed the Planning Commission can recommend that the City Councill broaden the definition of timeshare. In response to Chair Ellmore, Vice Chair Rosene thought permit suspensions should be placed in the recommendation and discretion should be given to staff for review . In response to Commissioner Lowrey’s question, Assistant City Attorney Summerhill thought transparency can be created through a regulatory permit but is not sure if it would be through the ZA if the direction provided is to use a regulatory permit. The Commission agreed not using the ZA, but recommended some transparency be provided to the neighbors through the permit process. Chair Ellmore recommended the the Council further evaluate the idea of not allowing fractional ownership in the R-1 Zone. The Commission discussed a reasonable cap limit and agreed to forward it to the City Council to address. In response to Commissioner Lowrey’s question, Chair Ellmore clarified that the recommendation includes reviewing the timeshare definition to see if by broadening it, fractional ownership can be incorporated. ITEM NO. 7 APPEAL FEE DISCUSSION Summary: A discussion of planning application appeal fees and a recommendation to the Finance Committee and City Council. Recommended Action: 1. Find any recommendation to the City Council regarding planning application appeal fees is not subject to the California Environmental Quality Act (“CEQA”) pursuant to Sections 15060(c)(2) 74 Attachment No. PC 9 March 14, 2023, City Council Meeting Minutes 75 INTENTIONALLY BLANK PAGE76 City of Newport Beach City Council Meeting March 14, 2023 11. Acceptance of Proposition 69 Reimbursement [100-2024 a) Determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15060(c)(2) and 15060(c)(3) of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) Approve Budget Amendment No. 23-056 accepting Proposition 69 funds in the amount of 37,406.15 as reimbursement for the purchase of specified crime scene and evidence processing equipment and appropriating $37,406.15 in increased expenditures in Account No. 01035355- 841015. Motion by Mayor Pro Tern O'Neill, seconded by Council Member Kleiman, to approve the Consent Calendar; and noting the recusals by Council Member Stapleton to Items 6 and 7, the recusals by Council Member Weigand to Items 6 and 7, the recusal by Council Member Grant to item 7, and the amendment to Item 1. The motion carried unanimously. XVI. ITEMS REMOVED FROM THE CONSENT CALENDAR — None XVII. PUBLIC COMMENTS ON NON -AGENDA ITEMS Nancy Gardner inquired about Citywide evacuation plans and suggested more evacuation information be provided to residents. Jim Dastur read his letter that was submitted to Council and requested that City staff hold the Assessment District 124 meeting at the Balboa Island Fire Station prior to March 31, 2023 and not April 22, 2023, or move the date for the assessment payment from March 31, 2023 to the end of April. XVIII. CURRENT BUSINESS 12. Code Update Recommendations Related to Fractional Homeownership (PA2022-0202) 100-2023] Community Development Director Jurjis and Principal Planner Murillo utilized a presentation to discuss prior City Council, Planning Commission and Ad Hoc Committee discussion and direction, and Planning Commission recommendations to Council to expand the definition of timeshare and provided revised definitions. Principal Planner Murillo noted recommendations if Council determined to authorize fractional ownership as a use separate from timeshares and reviewed a regulatory process for a new use, and provided additional options for consideration. In response to Mayor Pro Tem O'Neill's question, Principal Planner Murillo relayed the process for Council to change the definition and City Attorney Harp confirmed [and later revised] that the draft language can come directly back to Council without going to the Planning Commission because the Planning Commission has done an extensive assessment and provided a recommendation. Community Development Director Jurjis confirmed that Newport Beach Municipal Code (NBMC) Titles 20 and 21 will be included in the vote for consistency. In response to Council Member Avery's question, Principal Planner Murillo relayed that Pacaso's operating requirements do not allow for subletting. Mayor Blom acknowledged the public in attendance, reminded them that Council will be providing direction today to staff for an ordinance to come back to the City Council and not voting on the ordinance tonight, and expressed an understanding about the public's frustration. Council Member Grant noted the evidence on this item, expressed gratitude to the public for attending tonight's meeting, and stated that she understands what the community is experiencing and their policy interests. Volume 65 - Page 511 77 City of Newport Beach City Council Meeting March 14, 2023 Mayor Pro Tem O'Neill expressed the opinion that the direction from Council tonight will be to bring back the proposed language that aligns with what the public is desiring, and suggested that Council take a straw vote. Council Member Weigand stated that he opposed fractional homeownership. Council Member Kleiman expressed the opinion that Pacaso is a market disrupter and noted allowable land uses, the City's purview, and discussed transient use. She expressed a lack of confidence that the law will be on the side of the City related to the interpretation of land use, but expressed that it was clear from the correspondence received that the community desires to disallow this use to the extent the City is able. She suggested adding language to the City's existing ordinance that addresses fractional ownership, thought that regulating through a permit process raises other questions about monitoring and enforcement and burdens the neighbors, and supported the recommendation and adding language to the existing ordinance. Council Member Stapleton concurred with his Council colleagues, emphasized he wants to protect property rights, expressed the opinion that the City needs to properly address fractional ownership and the current use is an improper use of land planning and creates a camouflage for timeshares, noted his interest in continuing a friendly family atmosphere in District 1, and opposed the commercialization of neighborhoods, adverse effects to quality of life, and reducing future housing stock. He expressed support for local investors that generate large revenue for the General Fund and an expansion of the timeshare definition. Mayor Blom echoed his colleagues' sentiments and expressed support for expanding the timeshare definition. Council Member Avery stated that he never thought residential areas (R1) would be threatened by changes from the State, noted the importance of building families, relationships, and community, relayed there are plenty of Short Term Lodging (STL) opportunities in the City, and expressed the opinion that the cycle of rehabilitation facilities and timeshares are too much for R1 neighborhoods. Nancy Gardner opposed using R2 zones for rehabilitation facilities and timeshares to avoid having them in R1 zones. Jim Mosher applauded Council's direction and suggested the ordinance include a mechanism for enforcing use and advertising the use. Patty Janssen stated that STLs act the same as vacation rental properties and proof of ownership is not required for subletting the rentals or fractional ownership properties. Kathy Kost provided her perspective about her family and the Pacaso model. Randy Kost relayed his experiences in Newport Beach as a fractional owner, and asked Council to consider the owners. Gary Cruz concurred with Nancy Gardner, noted code enforcement for STLs did not work, and cautioned Council to embrace membership vacation homes for rent coming into Newport Beach. Max Gardner asked Council to consider rules and regulations for how the management companies operate and how neighbors can communicate issues. Denys Oberman, on behalf of the Leadership Committee, noted a correspondence sent on March 13, 2023, the importance of the fractional ownership definition and enforcement, requested Council consider residential zones beyond R1, and asked for clarification about the minimum unit count indicated in the staff report. Volume 65 - Page 512 78 City of Newport Beach City Council Meeting March 14, 2023 Russ Doll noted a legal letter of position on November 10, 2021, expressed concern about the turnover at a neighboring Pacaso property, and stated the need for a mechanism to manage or remedy ongoing behavior. Maureen Cotton, President of the Central Newport Beach Community Association, thanked City staff and Council for the proposed language and supported the preferred recommendation, but suggested adding language that bans advertising the sale of fractional ownership properties. Andre Jones, Pacaso employee, read comments from Roy Mendrin of Silver Star Sound & Comm who shared his experiences as a local business owner working with Pacaso. John Panache shared why he became a fractional owner and how his family is part of the community. Jim Miller noted cities that are rewriting timeshare ordinances to prohibit hotel -like activity in residential areas and discussed timeshare and STL behavior. An unidentified speaker thanked Council for considering defining Pacaso as a timeshare and protecting local communities, encouraged Council to ensure that people who live in residential areas are accountable, possess an individual commitment to the greater good, and preserve what makes Newport Beach special, and suggested only allowing fractional ownerships in commercial zones. Lisa Sutton noted the City needs to clarify its direction on timeshares or the Pacaso model, and asked Council to be aware of loopholes that would allow fractional ownerships. Katie Sandvig, Pacaso employee, read comments on behalf of fractional homeowner Chris Looney, who thought that shared ownership is good for Newport Beach and encouraged Council to think favorably on co -ownership. Katie Durham, Pacaso employee, read comments from fractional homeowner Aaron Clark, who supported Pacaso. An unidentified speaker expressed the opinion that fractional ownership changes the fabric of the neighborhood by having temporary neighbors and offered a suggestion for the sale of grandfathered properties so they can return to single property ownership. Megan Licata, Pacaso employee, read comments from fractional homeowner Devon Atchison, who expressed hope that Council will allow more families a way into home ownership in Newport Beach and surrounding beach areas. Max, Pacaso employee, read comments from fractional homeowner Scott Hanson, who stated that he and his family support local businesses, promise to never rent out the home, take great care of the home, and thought it is a mistake to limit home ownership to 100 percent ownership. Karen Carlson thanked Council for taking a poll at the beginning of the meeting, supported the recommendation, and urged a moratorium on new fractional ownerships. Lee Pearl relayed being proud of how the community has come together on this issue and commended Council for a decision that he feels will be positive for the community. Steven Bass introduced his neighbors and asked that the neighborhood not be commercialized. Debbie Stevens, President of the Corona del Mar Residents Association, expressed the opinion that timeshares, STLs, and fractional ownerships act the same and that this is a quality of life issue, noted pressures from the State and the importance of having City control over fractional ownership, asked for a continued ban in residential areas and keeping fractional ownership in commercial areas, and stated she supports the recommendations. Volume 65 - Page 513 79 City of Newport Beach City Council Meeting March 14, 2023 Terry Janssen, President of Balboa Island Improvement Association, discussed the responses from a call -to -action email sent to their database regarding fractional ownership. Ben Roth noted no communication with neighboring fractional homeowners and that this is about the masses and not the few. An unidentified speaker stated that STLs are short term rentals and fractional ownerships are short term residents, but they are the same thing, noted voting privileges to being a resident, and cautioned Council on what the City is investing in. Thomas Palestrini, Pacaso employee, read comments from fractional homeowner Steve Hayes, who stated how he and his family use the property, noted his interest in high standards, a well -maintained property, and owners with a vested interest. in the property, and relayed he pays taxes. Gina Cruz suggested Council should consider the many standards of fractional ownership operators besides Pacaso, discussed issues with the current 12 fractional ownership properties in the City, and asked Council to take peace and tranquility for residents into consideration. Monika Krogmann questioned if Balboa Peninsula will be renamed the Balboa Peninsula Resort. Amber Snider, Newport Beach Fire Safe Council and Corona del Mar Alumni Association member, asked Council to save the neighborhoods and watch out for the children living nearby, especially with special needs. Carmen Rawson labeled fractional owners as transient, noted the impact in R2 zones, surveyed the audience by a show of hands to demonstrate who opposes any fractional ownership, disagreed with the assumption that fractional ownership is taking over empty homes, and asked Council to be prompt. An unidentified speaker asked Council to protect the residents' quality of life and put a stop to fractional ownership. Purvi Doshi, Pacaso employee, thanked staff and Council for their time and devotion to studying co -ownership, expressed the opinion that co -ownership is a.valuable and protected property right, noted meetings with staff to discuss potential solutions, desired to work with the City to develop common sense regulations, and urged the City to continue talks so regulations can be created that work for everybody. Max Johnson stated he started a petition, expressed the opinion that there will be missed tax collections for essential services due to fractional ownerships, and urged Council to support all the residents who are against fractional ownership. Jim Moloney, Balboa Island Preservation Association Chair, thought fractional ownership accelerates the rate of homes being torn down and rebuilt into large cubes to maximize the square footage, and noted there will be more sales revenue in the short term but emphasized the disruption in the long term. City Attorney Harp corrected his previous statement and reported that the item will need to go back to the Planning Commission for consideration and to hold a public hearing pursuant to the NBMC, and, in response to Mayor Pro Tem O'Neill's question, he relayed that there is a 6 week [correction from 60 days] legal requirement for public review before adoption and the clock begins as soon as it is made available to the public. Mayor Blom noted how complex the issue is and how much time was taken to ensure an appropriate recommendation. Volume 65 - Page 514 80 City of Newport Beach City Council Meeting March 14, 2023 In response to Council Member Weigand's questions, Community Development Director Jurjis stated that enforcement procedures are documented in the NBMC and the 12 existing Pacaso properties would be grandfathered based on the current direction of Council, no Transient Occupancy Tax (TOT) can be extracted, and these properties will not be viewed as STL. He indicated that he defers to the City Council for any additional regulations. However, he recommended moving forward with a focus on changing the timeshare definition for expediency instead of discussing additional regulations. Mayor Blom concurred with Community Development Director Jurjis and suggested moving forward with the staff recommendation. Motion by Council Member Grant, seconded by Mayor Blom, to a) determine this action is exempt from the California Environmental Quality Act (CEQA) pursuant to Sections 15262 of the CEQA Guidelines because this action will not result in a physical change to the environment, directly or indirectly; and b) provide direction to go with the Planning Commission's preferred option of broadening the definition of timeshare to capture fractional homeownership. The motion carried unanimously. XIX. MOTION FOR RECONSIDERATION — None XX. ADJOURNMENT — 7:33 p.m. The agenda was posted on the City's website and on the City Hall electronic bulletin board uity uierx Volume 65 - Page 515 81 INTENTIONALLY BLANK PAGE82 Attachment No. PC 10 Proposed Code Text Changes (Redlined) 83 INTENTIONALLY BLANK PAGE84 TITLE 20 - PLANNING AND ZONING SECTION 20.48.220 TIME SHARE FACILITIES USE This section provides regulations for time share developments uses. A. Development Standards. 1. Property Development Standards. A time share project use shall comply with the standards for the zoning district in which it is located. 2. Conversion of Existing Dwelling Units Prohibited. The conversion of existing residential dwelling units into a time share units use shall be prohibited. 3. Minimum Number of Units. Each time share project property shall have a minimum of one hundred (100) time share units. Time share projects properties consisting of less than one hundred (100) units, but developed or converted in conjunction with a resort hotel complex of three hundred (300) or more units, shall be considered to be in compliance with this requirement. B. Required Amenities. Time share projects uses shall be developed with substantial recreational amenities (e.g., golf courses, tennis courts, swimming pools, etc.). C. Permit and Review Requirements. 1. Plan Submittals. In addition to the application requirements in Section 20.52.020 (Conditional Use Permits and Minor Use Permits), an application for a time share project use shall include the following documents: a. A sales plan shall address the times, areas and methods that will be used to sell the time share project property. Factors to be defined in the plan shall include the location, length, and marketing methods that will be used, distinguishing on-site and off-site marketing and signage; and an estimate of the potential numbers of individuals and automobiles expected during various stages of the sales effort. The plan also shall describe measures that will be implemented to reduce traffic during peak hours. b. An operating plan shall address the terms of the time share plan timeshare resort ownership interests, the types of private unit and common amenities, and the general financing, maintenance, and management arrangements of the resort that benefit the unit owners. c. 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 a time share project property . 85 d. A contingency plan shall address the actions to be taken by the applicant if the time share project is an economic failure or fails to sell fifty (50) percent of the time share estates or uses intervals within two years of receiving a permit to occupy the first unit. 2. Development Agreement. The City and the time share project use operator shall enter into a development agreement in compliance with Chapter 15.45 (Development Agreements). 3. Modification or Waiver. The review authority may modify or waive any of the standards contained in this section if strict compliance with the standards is determined to be unnecessary to achieve the purpose and intent of this section. SECTION 20.70.020 DEFINITIONS OF SPECIALIZED TERMS AND PHRASES A. “A” Definitions “Accommodation” means any dwelling unit, apartment, condominium or cooperative unit, hotel or motel room, or other or structure constructed for residential use and occupancy, including, but not limited to, a single-unit dwelling, two-unit dwelling, multi-unit dwelling. T. “T” Definitions. Time Share Facility (Land Use). See “Visitor accommodations.” V. “V” Definitions. Visitor Accommodations (Land Use) 1. “Bed and breakfast inn” means a dwelling unit that offers guest rooms or suites for a fee for less than thirty (30) days, with incidental eating and drinking service provided from a single kitchen for guests only. 2. “Hotel” means an establishment that provides guest rooms or suites for a fee to transient guests for sleeping purposes. Access to units is primarily from interior lobbies, courts, or halls. Related accessory uses may include conference and meeting rooms, restaurants, bars, and recreational facilities. Guest rooms may or may not contain kitchen facilities for food preparation (i.e., refrigerators, sinks, stoves, and ovens). Hotels with kitchen facilities are commonly known as extended stay hotels. A hotel operates subject to taxation under Revenue and Taxation Code Section 7280. 3. “Motel” means an establishment that provides guest rooms for a fee to transient guests for sleeping purposes. Guest rooms do not contain kitchen facilities. A motel is distinguished from a hotel primarily by direct independent access to, and adjoining parking for, each guest room. A motel operates subject to taxation under Revenue and Taxation Code Section 7280. 86 4. “Recreational vehicle (RV) park” means a lot upon which two or more recreational vehicle sites are located, established, or maintained for occupancy for a rental fee by recreational vehicles of the general public as temporary living quarters for recreation or vacation purposes. 5. “Short-term lodging” means a dwelling unit that is rented or leased as a single housekeeping unit (see “Single housekeeping unit”) for a period of less than thirty (30) days, subject to the requirements of Chapter 5.95 (Short Term Lodging Permits) and any additional standards required by the City Manager. 6. “Single room occupancy, residential hotels (SRO)” means buildings with six or more guest rooms without kitchen facilities in individual rooms, or kitchen facilities for the exclusive use of guests, and which are also the primary residences of the hotel guests. 7. “Time share project” means a development 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 an ownership interest in a lot, unit, room(s), or segment of real property, annually or on some other seasonal or periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the project has been divided and shall include, but not be limited to, time share estate, interval ownership, vacation license, vacation lease, club membership, time share use, hotel/condominium, or uses of a similar nature . 8. “Time share estate” means a right of occupancy in a time share project that is coupled with an estate in the real property 7. “Time share instrument” means one or more documents, by whatever name denominated, creating a time share plan or governing the operation of a time share plan, and includes the declaration dedicating accommodations to the time share plan. 98. “Time share interval” means the period or periods of time when the purchaser in a time share plan is afforded the opportunity to use the accommodations of a time share plan. length of time of occupancy in a time share unit. 9. “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 real property, or any portion thereof, 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, on a recurring basis for more than one year, but not necessarily for consecutive years. A time share plan shall be deemed to exist whenever such recurring rights of exclusive use to the real property, or portion thereof, are created, regardless of whether such exclusive rights of use are a result of a grant of ownership rights, possessory rights, membership rights, rights pursuant to contract, or ownership of a fractional interest or share in the real property, or portion thereof, and regardless of whether 87 they are coupled with ownership of a real property interest such as freehold interest or an estate for years in the property subject to the time share plan. 10. “Time share property” means one or more accommodations subject to the same time share instrument, together with any other property or rights to property appurtenant to those accommodations. 1011. “Time share unit” means the time share property or portion of a time share property in which a time share interval exists and that is designated for separate use. each portion of the real property or real property improvement in a project that is divided into time share intervals. 1112. “Time share use” means the use of one or more accommodations or any part thereof, as a time share property. a license or contractual or membership right of occupancy in a time share project that is not coupled with an estate in the real property. TITLE 21 - LOCAL COASTAL PROGRAM IMPLEMENTATION PLAN SECTION 21.48.025 VISITOR ACCOMMODATIONS. A. Applicability. The provisions of this section shall apply to applications involving the development or creation of new visitor accommodations or the expansion, reduction, redevelopment, demolition, conversion, closure, or cessation of existing visitor accommodations. Converting an accommodation that was not used as a visitor accommodation into one that is used as a visitor accommodation, shall constitute the development or creation of a new visitor accommodation. B. Considerations. The review authority shall consider: 1. The development’s ability to protect, encourage, or provide low cost visitor-serving and recreational facilities on the project site or in the immediately adjacent area; and 2. The development’s impact to, and ability to provide, public recreational opportunities; 3. The feasibility to rehabilitate existing low cost accommodations to meet a minimum acceptable level of comfort and hospitality while maintaining the ability to provide low cost visitor accommodations; and 4. The range of room types and room rates Citywide. C. Protection of Low Cost Visitor Accommodations. 88 1. Low, Moderate, and High Cost Visitor Accommodations Defined. For purposes of this subsection, visitor accommodations shall be defined as low, moderate, or high cost as follows: a. Low Cost. The average daily room rate of all economy hotels and motels in the City that have room rates that are below the Statewide average daily room rate or lower. Economy hotels and motels are AAA-rated one or two diamond hotels, or equivalent. b. Moderate Cost. The average daily room rate is between low cost and high cost. c. High Cost. The average daily room rate is one hundred twenty (120) percent of the Statewide average daily room rate or greater. For purposes of this section, room rate shall include the equivalent rental rate for campgrounds, recreational vehicle parks, hostels, and similar visitor accommodations. 2. Feasibility Analysis Required. An analysis of the feasibility of providing lower cost visitor accommodations shall be required for any application involving the expansion, reduction, redevelopment, demolition, conversion, closure, or cessation of any project involving visitor accommodations, with the exception of short-term lodging. If the proposed rates are not lower cost, the feasibility study shall explain why providing lower cost accommodations as part of the project is not feasible. This explanation shall address: the land value; development costs; a breakdown of the estimated annual revenues (including average daily rate and occupancy rates); a breakdown of the estimated operating costs; and any other information necessary to address the feasibility of providing lower cost accommodations on site. The feasibility analysis shall be prepared at the applicant’s expense. 3. Impact Analysis Required. An analysis of a development’s impact on the availability of lower cost visitor accommodations in the City shall be required for any application involving: a. The expansion, reduction, redevelopment, demolition, conversion, closure, or cessation of any project involving visitor accommodations, with the exception of short-term lodging; or b. New or limited use overnight visitor accommodations. The impact analysis shall be prepared at the applicant’s expense. 4. Impact Defined. The proposed development would result in the decrease in the available supply of existing lower cost visitor accommodations, or would fail to provide a range of affordability, including at least twenty-five (25) percent of the rooms as low cost 89 accommodations, or fail to use land suitable for lower cost accommodations for that purpose with the exception of short-term lodging. 5. Mitigation. If the review authority determines that the development will impact existing lower cost visitor-serving accommodations, or provide only high or moderate cost visitor accommodations or limited use overnight visitor accommodations such as time share uses timeshares, fractional ownership and condominium-hotels, then mitigation commensurate with the impact shall be provided by one of more of the following: a. Replacement of low cost rooms lost shall be provided at a one-to-one ratio either on site or a suitable off-site location within the City; b. Payment of an in-lieu fee commensurate with the impact shall be required; c. Programmatic components that provide low cost overnight accommodations; or d. Other form of mitigation addressing cost of stay. The review authority may authorize deviations from development standards that provide economic incentives to the development to maintain affordability. 6. In-Lieu Fee Program. Specific detailed information regarding calculation and use of any required in-lieu fees as part of a mitigation program shall be included as a condition of approval of the Coastal Development Permit for the visitor accommodations. 7. Rate Control and Income Eligibility Requirements Prohibited. In no event shall a development as mitigation be required: a. To provide overnight room rental be fixed at an amount certain; or b. To establish any method for the identification of low or moderate income persons for the purpose of determining eligibility for overnight room rentals in any such facilities. 8. Protection of Short-Term Lodging. Most short-term lodging units meet the low cost definition when maximum occupancy is taken into account. Short-term lodgings can accommodate more people than a typical hotel room. They also provide full-sized, equipped kitchens allowing families or larger groups to reduce the overall cost of a visit by allowing them to prepare meals as an alternative to dining out. The City shall continue to permit short-term lodgings as a means of providing lower cost overnight visitor accommodations while continuing to prevent conditions leading to increased demand for City services and adverse impacts in residential areas and coastal resources. D. Conversion to LUOVA Prohibited. The conversion of any hotel or motel unit or similar visitor accommodation for which a certificate of occupancy has been issued on or before July 90 14, 2009, to a limited use overnight visitor accommodations (LUOVA) shall be prohibited, except as provided in subsection (D)(1) of this subsection. 1. Exceptions to Conversion Prohibitions. A LUOVA project shall be permitted on the hotel resort property located at 1107 Jamboree Road, subject to a coastal development permit conditioned with the following requirements: a. LUOVA units shall be provided together with traditional overnight, hotel visitor accommodations; and b. A minimum of three hundred ninety-one (391) traditional hotel units shall remain available for transient overnight use by the general public year round and no more than eighty-eight (88) of the total four hundred seventy-nine (479) units planned may be LUOVA units; and c. Owner use of LUOVA units shall not exceed a maximum of ninety (90) days per calendar year with a maximum of twenty-nine (29) days of use during any sixty (60) day period; and d. LUOVA units shall be maintained by the management of the hotel facility and shall be remain available for transient overnight use by the general public when not occupied by the owner; and e. The hotel owner/operator shall retain control and ownership of all land, structures, recreational amenities, meeting space, restaurants, and other non-guest room/units; and f. The proposed LUOVA project shall comply with the provisions of subsection (C) of this section. E. Conversion of Existing Dwelling Units Prohibited. The conversion of existing residential dwelling units into a time share use shall be prohibited. EF. Tsunami Information and Evacuation Plans. Visitor-serving accommodations in areas identified as susceptible to tsunami inundation shall be required to provide guests with information on tsunami information and evacuation plans. SECTION 21.70.020 DEFINITIONS OF SPECIALIZED TERMS AND PHRASES A. “A” Definitions “Accommodation” means any dwelling unit, apartment, condominium or cooperative unit, hotel or motel room, or other or structure constructed for residential use and occupancy, including, but not limited to, a single-unit dwelling, two-unit dwelling, multi-unit dwelling. 91 L. “L” Definitions “Limited use overnight visitor accommodations (LUOVA)” See “Time share use” means a development 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 an ownership interest in a lot, unit, room(s), or segment of real property, annually or on some other seasonal or periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the project has been divided and shall include, but not be limited to, time share estate, interval ownership, fractional ownership, vacation license, vacation lease, club membership, time share use, hotel/condominium, or uses of a similar nature. LUOVA. See “Limited use overnight visitor accommodations (LUOVA).” T. “T” Definitions. Time Share Facility (Land Use). See “Visitor accommodations.” V. “V” Definitions. Visitor Accommodations (Land Use) 1. “Bed and breakfast inn” means a dwelling unit that offers guest rooms or suites for a fee for less than thirty (30) days, with incidental eating and drinking service provided from a single kitchen for guests only. 2. “Campground” means a lot upon which one or more sites are located, established, or maintained for rent as an overnight tenting or camping area for recreation or vacation purposes. 3. “Hostel” means establishments offering supervised overnight sleeping accommodations, primarily for travelers who use nonmotorized transportation or commercial or public transportation. Such sleeping accommodations are designed, intended to be used and are used, rented or hired out as temporary or overnight accommodations for guests in which daily services of linen change, towel change, soap change and general cleanup are provided by the management. If kitchen or eating facilities are provided, they are communal in nature. 4. “Hotel” means an establishment that provides guest rooms or suites for a fee to transient guests for sleeping purposes. Access to units is primarily from interior lobbies, courts, or halls. Related accessory uses may include conference and meeting rooms, restaurants, bars, and recreational facilities. Guest rooms may or may not contain kitchen facilities for food preparation (i.e., refrigerators, sinks, stoves, and ovens). Hotels with kitchen facilities are commonly known as extended stay hotels. A hotel operates subject to taxation under Revenue and Taxation Code Section 7280. 92 5. “Motel” means an establishment that provides guest rooms for a fee to transient guests for sleeping purposes. Guest rooms do not contain kitchen facilities. A motel is distinguished from a hotel primarily by direct independent access to, and adjoining parking for, each guest room. A motel operates subject to taxation under Revenue and Taxation Code Section 7280. 6. “Recreational vehicle (RV) park” means a lot upon which two or more recreational vehicle sites are located, established, or maintained for occupancy for a rental fee by recreational vehicles of the general public as temporary living quarters for recreation or vacation purposes. 7. “Short-term lodging” means a dwelling unit that is rented or leased as a single housekeeping unit (see “Single housekeeping unit”) for a period of less than thirty (30) days. 8. “Single room occupancy, residential hotels (SRO)” means buildings with six or more guest rooms without kitchen facilities in individual rooms, or kitchen facilities for the exclusive use of guests, and which are also the primary residences of the hotel guests. 9. “Time share project” means a development 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 an ownership interest in a lot, unit, room(s), or segment of real property, annually or on some other seasonal or periodic basis, for a period of time that has been or will be allotted from the use or occupancy periods into which the project has been divided and shall include, but not be limited to, time share estate, interval ownership, fractional ownership, vacation license, vacation lease, club membership, time share use, hotel/condominium, or uses of a similar nature See also “Limited use overnight visitor accommodations (LUOVA).. 10. “Time share estate” means a right of occupancy in a time share project that is coupled with an estate in the real property 9. “Time share instrument” means one or more documents, by whatever name denominated, creating a time share plan or governing the operation of a time share plan, and includes the declaration dedicating accommodations to the time share plan. 1110. “Time share interval” means the period or periods of time when the purchaser in a time share plan is afforded the opportunity to use the accommodations of a time share plan. length of time of occupancy in a time share unit. 11. “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 real property, or any portion thereof, 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, on a recurring basis for more than one year, but not necessarily for consecutive years. A time share plan shall be deemed to exist whenever such recurring rights of exclusive use to the real property, or portion thereof, are 93 created, regardless of whether such exclusive rights of use are a result of a grant of ownership rights, possessory rights, membership rights, rights pursuant to contract, or ownership of a fractional interest or share in the real property, or portion thereof, and regardless of whether they are coupled with ownership of a real property interest such as freehold interest or an estate for years in the property subject to the time share plan. 12. “Time share property” means one or more accommodations subject to the same time share instrument, together with any other property or rights to property appurtenant to those accommodations. 10.13.“Time share unit” means the time share property or portion of a time share property in which a time share interval exists and that is designated for separate use. each portion of the real property or real property improvement in a project that is divided into time share intervals. 11.14.“Time share use” means the use of one or more accommodations or any part thereof, as a time share property. a license or contractual or membership right of occupancy in a time share project that is not coupled with an estate in the real property. 94 Letter to Planning Commission re -Amendments to Ordinances regulatfng tfmeshare and Fractfonal ownership businesses and uses April 19,2023 PLEASE DISTRIBUTE AND ENTER INTO THE PUCLIB RECORD IN CONNECTION WITH PLANNING COMMISSION MEETING OF APRIL 20,2023 Chair Ellmore and Members of the Planning Commission: We would like to thank you and City staff for your work to draft Ordinances amending the City’s Timeshare ordinances, PA 2022-0202. The proposed amended Ordinances take a good step towards effectfve regulatfon of Timeshare Fractfonal ownership businesses and uses . We request your clarificatfon and confirmatfon to ensure that the Ordinances provide sufficient clarity to ensure that the Ordinances are practfcal to administer and defensible. Pursuant to Council directfon and public request, please confirm the following are reflected in the language of the Ordinances 1)Draft Ordinances provide that Fractfonal ownership is a form of Timeshare, and is regulated as such. 2)The Ordinances are directed at Timeshare and Fractfonal ownership Businesses commercially engaged in the marketfng and promotfon; sales and purchases of property and operatfonal management of propertfes and fractfonal ownership interests thereof. 3)Timeshares and fractfonal ownership businesses are Prohibited in ALL residentfal zones They may be permitted in certain commercial and hotel accommodatfon zones subject to use permits with public hearing. 4)That the provisions for revision of the City’s LCP are consistent with those proposed by the amended Ordinance, inclusive of confirmatory points above We would greatly appreciate response to the following questfons, previously proposed by the public: •What is a current count of fully established Timeshare/fractfonal own4ership business with instruments fully subscribed and operatfons ongoing? How many pending operatfons ( real estate transactfons; marketfng/sales in process;nstruments in process but not fully subscribed? •What is proposed to be the, Effectfve Date of the Ordinance-- the City Council on March 14, 2023 suggested that date. However, given the need to go to CCC, are there other consideratfons? Planning Commission - April 20, 2023 Item 3a - Additional Material Received (updated) Fractional Ownership Code and LCP Amendments (PA2022-0202) Thank you again for your consideratfon, thoughtiulness, and responses with clarificactfon/confirmatfon. Respectiully, Denys H. Oberman- Leadership Council Member, On behalf of Leadership Council including neighborhoods identffied below Cc: R.Yant, R. Doll- Balboa Penninsula Point; L. Pearl- Balboa Island; C. Rawson and F. Levine- Balboa Penninsula central; G. Cruz- W. Newport and Newport Island- Corona del Mar- D. Stevene; N. Scarbrough-Newport Heights SPON Board of Directors Planning Commission - April 20, 2023 Item 3a - Additional Material Received (updated) Fractional Ownership Code and LCP Amendments (PA2022-0202) 1 Rodriguez, Clarivel Subject:FW: Planning Commission Meeting, Thursday, April 20, 2023: Agenda Item VII.3 (Fractional Ownership Code and LCP Amendment (PA2022-0202) From: Paul Watkins <paul@lawfriend.com> Sent: April 19, 2023 10:40 AM To: Ellmore, Curtis <CEllmore@newportbeachca.gov>; Rosene, Mark <mrosene@newportbeachca.gov>; Klaustermeier, Sarah <sklaustermeier@newportbeachca.gov>; Barto, Bradford <BBarto@newportbeachca.gov>; Harris, Tristan <THarris@newportbeachca.gov>; Langford, Jonathan <JLangford@newportbeachca.gov>; Lowrey, Lee <llowrey@newportbeachca.gov> Cc: Campbell, Jim <JCampbell@newportbeachca.gov>; Summerhill, Yolanda <YSummerhill@newportbeachca.gov>; Murillo, Jaime <JMurillo@newportbeachca.gov> Subject: Planning Commission Meeting, Thursday, April 20, 2023: Agenda Item VII.3 (Fractional Ownership Code and LCP Amendment (PA2022‐0202) [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Dear Honorable Chair Ellmore, Vice Chair Rosene, and Commissioners Klaustermeier, Barto, Harris, Langford, and Lowrey: My name is Paul Watkins. I am a longtime resident of the City. With respect to the Fractional Ownership matter Public Hearing Item VII.3. (Fractional Ownership Code and LCP Amendment [PA2022‐0202]) scheduled to be heard tomorrow evening (Thursday, April 20, 2023), please adopt the Staff’s Recommended Action to adopt Resolution No. PC2023‐017 and Resolution PC2023‐018 tomorrow evening and recommend to the Council that it adopt the Code Amendment and Local Plan Amendment at the earliest practicable time. Such action by the Commission will reinforce the overwhelming sentiment expressed by our residents at the March 14, 2023 Council meeting to prohibit fractional ownership in ALL residential zoning districts in the City and preserve long‐ revered peace, tranquility, predictability, and quality of life in our community. Thank you for considering my point of view. Sincerely, Paul K. Watkins Paul K. Watkins for Paul K. Watkins, APC 6408 West Ocean Front Newport Beach, CA 92663-1929 and 485 East 17th Street, Suite 600 Costa Mesa, CA 92627-4705 Of Counsel: Self & Bhamre Cell: (714) 403-6408 Planning Commission - April 20, 2023 Item No. 3b - Additional Materials Received Fractional Ownership Code and LCP Amendments (PA2022-2020) April 20, 2023, Planning Commission Item 3 Comments These comments on a Newport Beach Planning Commission agenda item are submitted by: Jim Mosher ( jimmosher@yahoo.com ), 2210 Private Road, Newport Beach 92660 (949-548-6229). Item No. 3. FRACTIONAL OWNERSHIP CODE AND LCP AMENDMENT (PA2022-0202) Background – Our Existing Codes According to Part 2 of Title 20 of the Newport Beach Municipal Code:  “Time Shares” are allowed with approval of a Conditional Use Permit as a form of “non- residential visitor accommodation” in the OA and OM zoning districts. They are also allowed with approval of a Conditional Use Permit as a form of “visitor accommodation” (without the of “non-residential” qualification) in the MU-V, MU-MM, MU-CV/15th St., MU-W1 and MU-W2 zoning districts.  “Time Share Facilities” are allowed with approval of a Conditional Use Permit as a form of “visitor accommodation” (again without the of “non-residential” qualification) in the CG and CV zoning districts.1 According to Subsection 20.12.020.E of the Zoning Code’s Rules of Interpretation, the listing of “Time Shares” and “Time Share Facilities” as allowed uses in specified districts means they are not allowed in any other district. Title 20 also has a Section 20.48.220 (“Time Share Facilities”), which says it “provides regulations for time share developments.” Part 7 of Title 20 directs those seeking a definition of “Time Share Facility (Land Use)” to see “Visitor accommodations,” although that section defines neither “Time Share” nor “Time Share Facility” (although it does, under “Visitor accommodations” define “Time share project,” “Time share estate,” “Time share interval,” “Time share unit” and “Time share use” (terms which are used only in Section 20.48.220 or within the definitions themselves. Title 21 is similar, with “Time Share Facilities” being an allowed Visitor Accommodation in the CG, CV, MU-V, MU-MM, MU-CV/15th St., MU-W1 and MU-W2 coastal zoning districts. Title 21, like Title 20, directs those seeking a definition of “Time Share Facility (Land Use)” to see “Visitor accommodations,” where, as in Title 20, no definition is found, although one does find definitions of the Title 20 terms listed above, none of which are used, outside of the definitions themselves, in Title 21. Title 21 does, however, include provisions regarding the closely-related (if not identical) concept of “Limited use overnight visitor accommodations (LUOVA)” -- specifically Subsection 21.48.025.D, which, with some exceptions, prohibits “The conversion of any hotel or motel unit or similar visitor accommodation” available before July 15, 2009, into LUOVA. 1 It is unclear if Newport Beach has considered or intends these to include time share use of office or commercial properties, regarding the limited-term business users as “visitors” being “accommodated.” Planning Commission - April 20, 2023 Item No. 3b - Additional Materials Received Fractional Ownership Code and LCP Amendments (PA2022-2020) April 20, 2023, PC agenda Item 3 comments - Jim Mosher Page 2 of 4 Title 21 also differs from Title 20 in that its (unused) definition of “Time share project” and its definition and regulation of LUOVA already explicitly mention fractional ownership as an example of what is included. The Problem The 2010 comprehensive revision of the City’s Zoning Code, as well as some prior revisions, appear to have mushed together what were once freestanding regulations on various topics, consolidating all the definitions in one place, creating ambiguities as to what definitions were intended to go with what sections, especially their application to sections where a particular word or phrase may have originally been used with a different intent. It is very unfortunate that the Planning Commission subcommittee tasked with addressing fractional home ownership spent many months avoiding considering revising the definitions so that the current restriction of time shares to specific, limited districts (as described above) would clearly apply to fractional home ownership, even though that is what the Council had directed the Planning Commission to do. As a result, it looks like what the Commission has before it is a poorly thought out proposal that creates as many new ambiguities as it corrects (some of which are difficult to detect when one sees definitions without seeing the context in which they are used). In addition, the staff report does not explain how its proposal addresses the Council’s frequently repeated request for definitions that would apply to commercialized time sharing arrangements between strangers but not to home sharing arrangements between family (including heirs or divorced couples) or friends. And it does not explain how the City could prevent the sale or marketing of the prohibited land use model, even though it would presumably be much more effective and less complicated to prevent the prohibited use from ever being created than to remove it after a group of strangers have become co-owners of a property only to find they can’t use it as they had been promised. Nor does it explain if staff is recommending grandfathering existing time shared homes. Specific Comments Reviewing the redlines of Attachment No. PC 10, I have these comments: Handwritten page 86: The proposed new definition of “accommodation” seems both odd and unnecessary to me. At best, I think it blurs the distinction the existing code attempts to make between residential and visitor-serving districts and uses. According to my dictionary, “accommodations” is a synonym for “lodgings” and has a sense of short-term occupancy, whereas “residence” and “residential” has a longer-term, semi-permanent sense. Adding to the Code something saying a hotel room is “constructed for residential use and occupancy” is very confusing – as is newly defining all dwellings as accommodations. It is particularly confusing in light of the reference in the existing code (noted at the start, above) to ““non-residential visitor accommodations.” Planning Commission - April 20, 2023 Item No. 3b - Additional Materials Received Fractional Ownership Code and LCP Amendments (PA2022-2020) April 20, 2023, PC agenda Item 3 comments - Jim Mosher Page 3 of 4 But if hotel rooms are built for residential use, as this would say, why are they not listed as an allowed use in residential districts? Or is this trying to say a hotel room built for residential use is an accommodation while one built for visitor use is not? Either way, it makes little sense to me. Moreover, “accommodation” is used dozens of times in Title 20 in connection with the grant of a request for a “reasonable accommodation” and I don’t think this is the definition intended there. So why is a definition being introduced for a word whose meanings were previously thought to be understood? Handwritten pages 87-88: The proposed changes to the remaining definitions appear extremely convoluted and no better thought out. They delete a definition actually used in the code (“time share estate” appearing in Subsection 20.48.220.C.1.d) and introduce two new ones (“Time share instrument” and "Time share property") proposed to be used nowhere other than in the definitions themselves. Moreover, they fail to define either of the terms currently listed as allowed uses in Part 2 of Title 20 (“Time Shares” and “Time Share Facilities”). The need for definitions of “accommodation,” “time share instrument” and "time share property" could be eliminated by the following changes, which I believe would reduce wordiness without diminishing meaning: 1. Delete “7.” and “10.” entirely. 2. Revise “8.” to ““Time share interval” means the period or periods of time when the purchaser in a time share plan is afforded the opportunity to use any portion of the property subject to the plan.” 3. Revise “11.” to ““Time share unit” means the property or portion of property in which a time share interval exists and that is designated for separate use.” 4. Revise “12.” to ““Time share use” means the use of a property subject to a time share plan.” As to the remaining definition “9.”, it is extremely convoluted and could probably be reduced without loss of meaning to: ““Time share plan” means any arrangement whereby a purchaser receives the right to exclusive use of real property, or any portion thereof, 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.” Handwritten page 88: The proposed change to Title 21’s Subsection 21.48.025.A seems wholly unnecessary to me. The definition of “development” in Title 21 already includes any “change in the density or intensity of use of land” which arguably already includes the creation of new visitor accommodations or the conversion of existing uses into them. If it is for some reason needed, it could be more concisely stated as “The provisions of this section shall apply to applications involving the development of new visitor accommodations, the conversion of existing uses into visitor accommodations or the expansion, reduction, Planning Commission - April 20, 2023 Item No. 3b - Additional Materials Received Fractional Ownership Code and LCP Amendments (PA2022-2020) April 20, 2023, PC agenda Item 3 comments - Jim Mosher Page 4 of 4 redevelopment, demolition, conversion, closure, or cessation of existing visitor accommodations.” In any event, whether it is development requiring a Coastal Development Permit subject to the review described would have a bearing only on the areas where time shares are an allowed use. In that connection, it would appear from both the existing and proposed code that the conversion of residences into short term lodgings (or back to residences), even in the coastal zoning districts where they are allowed (R-2, R-BI, RM and certain Planned Communities), requires a CDP – or certainly would if conversion to time shares, where time shares are allowed, does. This impression is reinforced by the observation that in Subsection 21.48.025.C.2 short term lodgings are exempted from the requirement to prepare a Feasibility Analysis, but not exempted from any of the other provisions. Yet I do not recall ever hearing about an application for a CDP to open or abandon a short term lodging. Handwritten page 91: This is not a defect, but it might be noted that the proposed new Subsection 21.48.025.E, mirroring Title 20 Subsection 20.48.220.A.2 (see handwritten page 85) in prohibiting conversion of existing dwellings to time share use, would apply only in the coastal zoning districts where time share uses are otherwise allowed – not to the conversions in residential districts that prompted these revisions. Handwritten pages 91-94: Most of the proposed definition changes appear to be the same as those proposed to Title 20 (handwritten pages 86-88), so my comments about them are the same. The one exception is the proposed deletion of the existing definition of LUOVA at the top of handwritten page 92. I do not think that is well thought out, since the instruction to “See “Time share use”” is not particularly helpful. As best I can tell, readers looking there will find no mention of LUOVA, and will be unable to tell whether it is a synonym for “time share use” or a variant on it (and, if so, what kind of variant). Below that, the recommendation under “T” to have “Time Share (Land Use). See “Visitor accommodations” is similarly unhelpful unless there actually is a definition of “Time Share” in that section – something staff is not proposing. Was this intended to read “Time Share Use”? Planning Commission - April 20, 2023 Item No. 3b - Additional Materials Received Fractional Ownership Code and LCP Amendments (PA2022-2020) From:Gary Cruz To:Planning Commissioners Subject:Fractional Owned Homes Date:April 19, 2023 2:49:55 PM [EXTERNAL EMAIL] DO NOT CLICK links or attachments unless you recognize the sender and know the content is safe. Dear Planning Commissioners, I’ve been researching how city councils, planning departments and zoning administrators address fractional home ownership. I’ve passed my notes over to Jaime Murillo. The city of Sullivan Island, SC provided the most thorough discussion. Board of Zoning Appeals protection.outlook.com Thanks for all your efforts. Sincerely, Gary Cruz Newport Island Planning Commission - April 20, 2023 Item No. 3b - Additional Materials Received Fractional Ownership Code and LCP Amendments (PA2022-2020) Central Newport Beach Community Association PO Box 884 • Newport Beach, CA • 92661-0884 www.MyNewportBeach.Org April 19, 2023 City of Newport Beach, Planning Commission 100 Civic Center Drive Newport Beach, CA 92660 Subject: Item 3. Fractional Homeownership Code and LCP Amendment (PA2022-0202); Site Locations: Citywide Dear Chair Elmore, Vice Chair Rosene, and Members of the Planning Commission: Central Newport Beach Community Association (CNBCA) wants to thank the Planning Commission for its commitment to implementing the direction provided by the City Council on this topic. We want to encourage the Planning Commission to further its “Preferred Recommendation” presented at the March 14, 2023, City Council meeting, through the incorporation of the proposed code text changes (redline) for the:  Title 20 Planning and Zoning § 20.48.220 Time Share Use  Title 20 Planning and Zoning § 20.70.020 Definitions of Specialized Terms and Phrases  Title 21 Local Coastal Program (LCP) Implementation Plan § 21.48.025 Visitor Accommodations  Title 21 LCP Implementation Plan § 21.70.020 Definitions of Specialized Terms and Phrases CNBCA would also appreciate the City of Newport Beach implementing a ban on advertising the sale of fractional homes in Newport Beach similar to that being implemented by the cities of St. Helena, Sonoma, and Carmel-by-the-Sea. Preventing the sale for a use that will not be permitted seems easier on all parties than trying to unwind the sale after it has happened. Sincerely, CENTRAL NEWPORT BEACH COMMUNITY ASSOCIATION Maureen Cotton President Planning Commission - April 20, 2023 Item No. 3c - Additional Materials Received Fractional Ownership Code and LCP Amendments (PA2022-0202) Fractional Homeownership Code and LCP Amendments Related to Time Shares(2022-0202) Planning Commission April 20, 2023 Jaime Murillo, AICP, Principal Planner Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) Community Development Department 2 Background and Direction Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) Previous Dialogues •City Council –4 meetings •Planning Commission –3 meetings •Planning Commission Ad-Hoc Committee –7 meetings •Sagecrest Planning+Environmental Report (available to public) 3Community Development Department Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) City Council Direction March 14, 2023 Pursue Code and LCP Amendments to broaden definition of timeshare to include fractional ownership •Subject to existing time share regulations and standards •Prohibited in all residential zones Community Development Department 4 Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) 5Community Development Department Fractional Ownership Total of 12 Known Facilities Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) Community Development Department 6 Proposed Amendment Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) 1. Modifies All Time Share Related Definitions (Titles 20 and 21) •Broadly crafted to clearly include fractional ownerships and to capture other potential models •Various definitions work together •Close potential loopholes 7Community Development Department Fractional Ownership = Time Share Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) Current Definition “Time Share Project” Community Development Department 8 NBMC §21.70.020 Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) Proposed Definition Update Community Development Department 9 •a time share use is the use of an accommodation as a time share property •an accommodation means any dwelling unit, apartment, condominium or cooperative unit, hotel or motel room, or other or structure constructed for residential use and occupancy •a time share property is an accommodation subject to a time share instrument; •a time share instrument is a document (or documents) creating/governing a time share plan; and •a time share plan is any scheme/device/agreement whereby a purchaser, in exchange for consideration, obtains exclusive right to occupy a property (or portion thereof) for less than a year, and on a recurring basis for more than a year. Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) 2. Modifies Title 20 Time Share Regulations •Minor revisions for consistency with modified definitions •Prohibited in all residential zones •Allowed with CUP in certain commercial and mixed-use zones •Conversion of dwelling units prohibited •300 units minimum and substantial amenities required •Development Agreement required •Sales, operating, management, and contingency plan required 10Community Development Department Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) 3. Modifies Title 21 Visitor Accommodations Regulations •Minor revisions for consistency with modified definitions •Clarifies regulations to development and creation (includes conversion)of new visitor accommodations (including time shares) •Clarifies conversion of existing dwelling units into time shares is prohibited 11Community Development Department Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) Recommended Action •Conduct Public Hearing •Find Exempt from CEQA •Adopt Resolutions recommending City Council: •Adoption of Zoning Code Amendment •Adoption and Submittal of LCP Amendment to CA Coastal Commission 12Community Development Department Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202) 13 Questions and Discussion Jaime Murillo, AICP, Principal Planner jmurillo@newportbeachca.gov Planning Commission April 20, 2023 Planning Commission - April 20, 2023 Item No. 3d - Additional Materials Presented at the Meeting by Staff Fractional Ownership Code and LCP Amendments (PA2022-0202)