COMMENTARY

MILT THOMAS

Tuesday’s BCC meeting was, in Chairman Bob Solari’s words on a radio call-in show, a “knockdown,” with regard to approval of a short term rental ordinance covering unincorporated Indian River County. However, it may have been more of a sucker punch given his previous attitude toward regulating short term rental businesses in residential neighborhoods.

Back in February Chairman Solari appeared on that same radio show insisting short term rentals were not a problem, merely a “blip” that was 85-90 percent solved thanks to the recently passed event and parking ordinances. That was before the Short Term Vacation Rental Advisory Committee (STVRAC) he and the Commission created to recommend regulations had completed its deliberations. Maybe he felt the rental business-oriented STVRAC would minimize the impact of its recommendations. A more balanced committee might have determined the problem of short term rentals was much larger than the “blip” Chairman Solari indicated.

Apparently with the election just a few months away and many District Five constituents unhappy over his position regarding short term rentals, Solari gave a knockdown performance in favor of residential homeowners and left his own STVRAC hanging in the warm ocean breeze.

Regardless of how the process evolved, the BCC vote on Tuesday was a win for homeowners and an even bigger win for the county, just about ensuring that the number of licensed short term rental operators will increase from the current 31 to the more accurate estimate of 350-500. It is also a win for vacationers, who will now realize protections they did not have before (safer accommodations, law abiding landlords, less confrontation with neighbors, etc.). At least that is the theory.

Several important issues remain though, first among them has to do with tangible personal property taxes (TPPT if you enjoy acronyms). Every business is required to file TPP tax returns. According to State Statute, “Anyone who owns TPP on January 1 and who has a proprietorship, partnership, or corporation, or is a self-employed agent or a contractor, must file a tangible personal property return to the property appraiser by April 1 each year (See 193.062, F.S.). Property owners who lease, lend or rent property must also file.” (Emphasis ours)

With so many vacation rental operators unlicensed and non-compliant on state or local taxes, it should come as no surprise that they also fail to file TPP tax returns. In fact a number of licensed operators do not file as well. STVRAC chairman Glenn Powell was apparently surprised to learn of the TPPT filing requirement on his 19 rental properties (Community Development Director Stan Boling forwarded information about this requirement from the Property Appraiser early in committee proceedings). Nevertheless, it was not discussed in his STVRAC proceedings. It did not come up during Planning & Zoning deliberations on short term rentals earlier this month. And it was not considered by the BCC on Tuesday – until Dr. Miles Conway brought it up under public input. The subject was promptly dismissed by Chairman Solari.

This was not the first time the South Beach Property Owners Association (SBPOA) addressed the TPPT issue. It was included in the mostly ignored SBPOA recommendations as a requirement to obtain a rental license. So after Tuesday’s BCC meeting, Dr. Miles Conway submitted the SBPOA recommendations regarding TPPT in a memo to County Clerk Jeffrey Smith and Property Appraiser David Nolte. Here are some highlights from that memo. “TBB” refers to Transient Boarding Business:

“We see no reason why they should not also be required to pay their fair share of IRC taxes just as every business does and compliance with this should be a required TPP document production to obtain the TBB license. In fact when the inspection for the TBB license is performed there is no reason why a Property Appraiser cannot be part of the physical inspection to tally all the TPP to ensure the $25,000 exemption is not gamed like every other facet of this genre of business.”

“Under the proposed IRC 911.15(9)(b)(2) Rental Ordinance TBBs are required to produce a State License, a local business tax receipt and a local tourist tax account.”

“The genesis of compliance with this item was Mr. Boling noticing a member of the styled STVRAC on November 6, 2015 in anticipation of a November 12 meeting.”

“The noticing contained the July 13, 2012 TPP opinion of Mr. Nolte’s office. This was the very day after TBBs were “clarified” into residential communities in 2012. In short these businesses were supposed to be paying TPP tax from as far back as 2012.”

“The individual on the committee who collaborated with Messrs. Boling and DeBraal on the agenda for the forthcoming meeting indicated on November 6, 2015 he clearly understood the ramifications of compliance with FLA Statute 192.001.”

“Mr. Boling’s documentation on the subject of TPP was included in his staff report and and distributed to the committee on November 12, 2015.”

“The subject of TPP tax was “Monroed” (never saw the light of day) at the meeting and is quite understandable as a requirement to pay taxes comes out of the pocket of the committee members who both directly and indirectly benefited from the business of renting bedrooms, kitchens and toilets to transients for 24, 48 hours or even months at a time while sitting on this committee.”

“The “Monroeing” of this important State tax could have been prevented with the application of tax expertise from a tax professional. One of the committee members, a Mr. Glenn Heran is a CPA, the former President of the Taxpayers Association of Indian River County and the District 5 (Solari) appointee to the committee.”

“Unfortunately, Mr. Heran was absent for the second meeting in a row without excuse and his expertise in tax matters was not considered nor applied.”

“NOTE: “Monroeing” refers to the Monroe County short term rental ordinance, probably the strictest in Florida, that was provided as a starting point to all STVRAC members, but then ignored by them.”

“The 47 minute November meeting ended with a 5-0 vote to follow staff recommendations but the paying of TPP tax by the committee renters both long and short term never made it to the PZC/BCC recommended ordinance.”

“The SBPOA hereby exercises its duty of care, civic responsibility and sense of tax equity to make sure you collect the taxes from these committee members and others who profit at the social and tax expense of bona fide residential property owners.”

“To assist you in this tax collection task, the SBPOA liaised with Mr. Nolte and his staff to produce the latest (2016) TPP tax roll shown on page 32. A total of 745 rental dwelling businesses filed a return with 19 renters exceeding the exemption threshold declaring a market value of $1.7m and an ad valorem taxable level of $1.4m.”

“Of the 31 TBBs holding state licenses only 8 have ever filed a return according to the PA’s office.”

“In closing Mr. Smith and Mr. Nolte these TBBs based on the information provided to the SBPOA do not appear to be paying their fair share of taxes other compliant renters are paying. This results again in other taxpayers paying more than they should.”

“We hope our recommendation to make production of a TPP return receipt be a requirement of obtaining a license and your staff performs a value audit of these businesses to ensure the $25,00 exemption is not abused.
Sincerely,
Miles Conway, Ph.D.
President and Director
SOUTH BEACH PROPERTY OWNERS ASSOCIATION INCORPORATED
c/c SBPOA Board of Directors”

Although the new short term rental ordinance is a great leap forward on behalf of unincorporated county residents and is designed to hold short term rental business operators accountable as well as protect the rights of homeowners in residential neighborhoods, it is still not complete.  For instance, a short term rental business must be covered by commercial insurance, not the standard homeowner policy. Just because these businesses are located in residential neighborhoods doesn’t exempt them from laws to which every other business must comply.