Illegal Short Term Vacation Rentals Are Being Coddled

Tuesday, June 20, 2017

Dear Councilman Chip Henderson, Mr. John Bridger, and Mr. Wade Hinton and Mayor Andy Berke, 

Each of you personally, as well as many city council members and many others behind the scenes, have spent countless hours working long, hard, and tirelessly on this issue of Short Term Vacation Rentals.  Justin Tirsun is one of those hard working people who has made himself knowledgeable and  an expert in understanding the dynamics of the market and what key measures in the ordinance might best serve all the interested parties. 

I appreciate all your time and effort on trying to resolve this issue for the betterment of the property owners, visitors to our city, and the financial benefit of the city as a whole.  I personally have assisted and given much input into the process for more than two years now.  

After the City Council meeting on Tuesday, June 13, I have had enough.  I want to express my personal frustration regarding this issue. 

I am a Tennessee state licensed VLS (vacation lodging service) as well as a Tennessee state licensed vacation lodging designated agent.  I run a business managing 20 short term vacation rental in and around the state of Tennessee, the city of Chattanooga, Hamilton County, Marion County, and Rhea County as well.  I also operate in the state of Georgia both in Dade County and Walker County.   All permits are appropriate, in place, and all taxes are paid on a monthly basis.  I pay state, county, and business (yearly) taxes, as well as county hotel and city hotel taxes.  With 14 employees on our payroll of more than $15,000 monthly, owners paid more than $250,000 last year, and having paid more than $50,000 in sales and use taxes in 2016, my company is a substantial stakeholder in this arena. 

I have owned vacation rentals since 2004 in Georgia; Georgia does not require a license and Tennessee does.  When we actually started the business of managing other owners’ property in 2014, we became licensed in Tennessee.   At that time there were 17 properties listed in Chattanooga on Airbnb, Vrbo, HomeAway, Flipkey and other listing websites. Today there are over 500. Just between December 2016 and May 2017 another 100 have been added.  I would venture to say that more than most of them are illegal, meaning they are not allowed in R1 and R2 zones.  Meanwhile, the city of Chattanooga is continuing to allow these illegal, short term vacation rentals to operate in direct competition with the few of us following the law. We are having a very difficult time understanding this and would like some clarification. 

An example:  What if I owned a restaurant downtown.  I have all my permits, health inspection, my employees are serve safe certified, certified to serve alcohol, paying my taxes etc… Then in a three-year time period there are 500 new restaurants downtown, and they do not have the proper permits or certifications and the city of Chattanooga decides to just let them run and continue to operate and the city of Chattanooga will get them in compliance eventually.  Meanwhile these restaurants' prices are way lower than ours because we actually have to pay to play by the rules and slowly our restaurant can not compete anymore and eventually goes out of business.  All while the city of Chattanooga is trying to get the other 500 restaurants in compliance.  The other 500 restaurants should never have been allowed to be open in the first place. My mind is boggled.  

The city of Chattanooga obviously knows that people are using their properties and operating a business out of their property and outside of the permitted uses, yet the city of Chattanooga continues to allow them to do it. That certainly has to be a violation of some kind(s) of law(s).   

If I took my house that is in R1 and opened up a full fledged barber shop with five chairs in it, I am sure if the city of Chattanooga found out about me doing this in a R1 zone, I am certain that they would not allow me to continue to run my business for years until I got all the proper zoning and permits. I am pretty sure the city would shut me down, immediately. 

A zone is a zone is a zone and a permitted use is a permitted use and these illegal vacation rentals should be held accountable. Their zoning simply does not allow it.  Pretty simple. They should not be allowed to be operating and they should be shut down.  

If these people wanted to be hosts and have short term vacation rentals then they should have purchased property in R3 and/or R4.  If they are in R1 or R2 and still want to be hosts, they should be required to go through the process to get it rezoned for that particular use.  If they want to manage other owners' properties then they need to get a state license to do that, which is a state requirement (mentioned, but totally glossed over in the ordinance proposal), as is the state requirement for paying taxes on their business activities, albeit, illegal business activities.  

The other day one of our neighbors got a citation for having furniture on his front porch.  This trivial stuff is being enforced yet the illegal short term vacation rentals are being coddled.  What is the difference?  Is it because the city and the city council are looking at the available tax revenue that they could possibly generate by permitting this process rather than holding the residents accountable to the permitted use of their property.    

While all these illegal short term vacation rentals are being coddled (and not paying taxes), instead of being enforced. Meanwhile a legitimate business in this area and the vacation lodging industry is struggling more and more each day because of a very unfair competitive advantage (illegal short term vacation rentals) that has been created and continues to be allowed by the city of Chattanooga.  

My business can not continue to compete, keep my license and pay my employees and all the appropriate taxes while several hundreds of others are doing the same thing as us, except they are doing it in zoned areas where it is not allowed, no business license, not paying the appropriate taxes, no VLS license, no VLS designated agent, probably no escrow account. By state law, the money is to be put into an escrow account and does become the host’s money until after the stay. 

I  have tried in every way possible to be a resource, to support the city in this, and to help solve a problem.  I as well as you have become frustrated and I think it is time for the city to reverse its direction on this issue.   

Christian M Thoreson

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