Study Session Meeting – Council Chambers, Ely City Hall May 31, 2022 at 6:30pm

CALL TO ORDER Mayor Skraba called the study session to order at 6:30pm in the Council Chambers.

PRESENT: Council Members A.Forsman, Kess, Debeltz, Omerza, Callen, Campbell and Mayor Skraba. ABSENT: None Also Present: Building Official Whitney, Planning and Zoning Administrator Huberty, Planning and Zoning members Hernesmaa, and Caruso, Clerk/Treasurer Langowski, and Attorney Klun

NEW BUSINESS: Short Term and Long Term Rentals – Updated Ordinance and Inspection Checklist

Langowski indicated that over the last couple of months Planning and Zoning and the Building Official and a couple council members have met to discuss the Short Term Rental(STR) Ordinance. Attorney Klun put together some proposed changes to our existing ordinance; a big part is including C1 and C2 into the license requirement, and changing it from a permit to a license. This would require all Short Term Rentals which is a rental for less than 30days to have a license from the City of Ely. The inspection checklist will be approved per resolution, so it can be changed more easily over time if it needs to be. The only thing that is exempt from a Short Term Rental is a bunkhouse and hotel/motel.

Whitney indicated that a few bunkhouses have a long term rental license, since they use them all year long.

Attorney Klun stated that this ordinance is just regarding Short Term Rentals, eventually we would like to combine the long term and short term rental ordinance, but at this time with summer coming up we are just working on revising the short term license. We see in town that a lot of places go Short Term in the summer and go Long Term in the winter, so we would like to see the license combined into one. The biggest item is the inspections, we have not required this in the past, and we were relying on the MN Department of Health to do the inspections. We thought the Department of Health was doing an expansive inspection, but we learned that they only have three or four issues they look at.

Mayor Skraba stated that the intent of the license is to ensure that the City of Ely is making sure that the people that want to do business in this type of business is adequate and safe. Constituents that have spoken to Skraba about this are asking why this is being done next door to me, the whole premise as to why a commercial business is being run next door to my house.

Attorney Klun indicated that we have a resolution on the number of Short Term Rentals that are allowed in certain zoning in the City of Ely. Now that we are adding C-1 and C-2 to the Ordinance, could define Residential at a certain number and commercial has a certain number of Short term rentals allowed.

Langowski indicated that the original intent of the Short Term Rental License was the amount of these turning up in neighborhoods, which is why they are limited to 35 in residential areas. In the commercial district we were not that worried about them since the neighbors probably would not have an issue with them. We learned that some of the same issues in residential areas were happening in commercial, for example with proper parking. Currently we have 23 Short Term Rentals in Residential and 11 Short Term Rentals in Commercial. We are adjusting it from how do we limit the amount in residential areas, how do we decrease the conflicts with the neighborhood, making them have off street parking and making them have a local contact/property manager nearby.

Kess asked in Section 17.10 Penalty if the $700 penalty is per occurrence. Attorney Klun indicated that was the intent, but we can add per occurrence. Whitney asked if that fee can be assessed to the property. Klun stated she can add the assessment language.

Mayor Skraba asked what if people do not get a license, what penalty they will get. Whitney indicated that he could post it as an illegal rental license. Attorney Klun indicated that this issue could be if your license is revoked, there may not be another license available once you get the issues fixed.

Kess stated that we know there are rentals out there renting without a license, another reason we want them to get a license is we want to make sure they are collecting lodging taxes.

A.Forsman stated that this is going to help us to maintain affordable housing, if we limit the number of rental units that are allowed to be Short Term Rentals; it is going to help maintain our housing stock for long term rentals. It is hurting our businesses that there are not long term rentals out there. Forsman stated that the way the ordinance is written right now he likes it and is happy with the revisions. Forsman feels that Commercial districts are commercial districts and if they want to rent them out as Short Term Rentals he does not have a problem with that, he doesn’t think that commercial districts should be limited or affect the numbers that we are allowing in residential areas.

Omerza asked how many addresses have a combined Short Term and Long Term Rentals. Huberty stated approximately half have combined licensing.

A.Forsman asked if it is allowed to rent out your house for a day or a weekend for a big event in town. Skraba indicated that there is the Augusta Rule through the IRS that allows homeowners to rent out their homes for up to 14days per year without needing to report the income.

Langowski stated that once the numbers of Short Term Rentals that are allowed are extinguished two things will happen, they will become a long term rental, or they will have to appeal it to the city council to request more short term rentals.

Whitney stated on the inspection checklist the lower score the better.

Huberty discussed a couple notes he had on Short Term Rentals. One concern Huberty had was businesses in the Commercial District being converted in to Short Term Rentals and taking businesses away from us. Huberty suggested that for C1 or C2 Short Term License they would have to apply for a Conditional Use Permit, which would give us some leeway that if there is nothing else being done with this property we could allow it to be a Short Term Rental with conditions.

Skraba indicated that he doesn’t want to be too restrictive in the commercial zones, by making them get a Conditional Use Permit.

Kess indicated that this can be phase 1; we will be learning from this as we go through it, we can change this if needed in the future, if we discover some of these issues in the future.

A.Forsman stated that you can look at the first block of Sheridan St. most of the storefronts are vacant, as the market changes people are going to get creative at how to make money on their property.

Omerza indicated that this is an educational process; we need to explain to the real estate agents as to why this is happening since we get tourism money from the lodging taxes.

Langowski stated that Huberty has wanted to get this out to the public, especially since we are getting closer to the 35 allowed limit. Once the Ordinance and resolution are passed we need to put a notice to the public about the numbers.

Campbell asked Chief Houde if they have seen many security issues or had many calls on the Short Term Rentals in town. Houde indicated that they have not received many calls, maybe a few strange vehicle calls from neighbors, or garbage overflowing.

A.Forsman stated that we could get the resolution passed at the next council meeting to be able to get the word out on this.

Callen indicated that originally the number of short term Rentals was based on a percentage – 5% of the houses in Ely. Kess stated that it is better to have a hard number on the resolution rather than a percentage and adjust as the council sees fit.

Attorney Klun asked about transfers of the Short Term Rental licensing. Once someone has a Short Term Rental License does it transfer with the sale of the property? Currently the ordinance states it is to the property and the person.

Omerza indicated that in Winona they have that there can only be certain percentage of rental properties in certain areas. People know what properties are rentals in each area. So basically when someone dies everyone tries to buy that property and the prices to those homes are exorbitant. Omerza stated that is not something we want to do in Ely; once a property sells the license should be available, not transferable to the next property owner.

Skraba stated that it is important that the license stays with the property; it would be locked in with the land.

Kess stated that when you have a limited supply you are going to increase the value of the resale.

Campbell asked if you have a short term rental and it is a business and you sell it as a business, are we saying that the license would not transfer.

Whitney indicated that the new owner would have to apply for a license before the old license expired or the old owner sold if we are at the limit.

Attorney Klun indicated that it is not a problem until we have a waiting list for Short Term Rentals. Generally in real estate the concept is that things run with the land, the rights and uses of the land.

Skraba asked currently in the ordinance is the transfer allowed. Klun indicated it is not, and that is what we need clarification on. Right now if a person sells their property the license is tied to the person not the property.

A.Forsman stated that we do not want people to get a license now and hold on to it forever with the sale of a property. It’s not fair for the 36th person (with our current limit) who wants to apply to get a license, when a person would come in and purchase a property and get ahead of them on the list since the property was a Short Term Rental before.

Caruso gave some information that Planning & Zoning discussed when they were forming this ordinance. Caruso indicated that they did a hard number based on a percentage of homes in Ely. The license was meant to transfer with the property/land. Commercial zones were never intended to be restricted with a number allowed. If an owner of a property decides to give the license up that is up to them, then the next person on the list would get the license. The ordinance transfer language was never planning and zoning’s intent, you cannot penalize a business for selling their business.

Langowski indicated that a transfer has not happened yet, and that’s why we want to figure this out now, before the question comes up. In a commercial area it should be able to transfer, in a residential area there is some argument that it should just be to the person and not to the land.

Skraba stated that Conditional Use Permits and Variances are specific to the land use, and that is what this is, a land use issue, not an ownership issue.

Kess stated that he is willing to support us licensing the commercial Short term rentals and not having a limit on the Commercial ones, and he is good with the limit of 35 in the residential areas.

A.Forsman indicated that he would be willing to set the residential number to 30, the reason being we are already in a crisis with our housing stock and it is important that we are serious about these numbers.

Omerza indicated that she is fine with the 35 in residential areas since a lot of these are combined short term and long term rentals, they are not short term rentals all the time and that this number was based on a percentage of the housing stock in Ely.

Skraba asked if we are comfortable with the transfer issues of it being a land use issue and not the owner.

Langowski stated to lets work on this issue a little more; he can see it both ways.

ADJOURN Mayor Skraba adjourned the meeting at 7:46pm without objection.

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