Connecting the Dots Between Hotels and City Hall

This editorial originally appeared in the Santa Barbara Independent on November 23, 2016.

James Fenkner writes this opinion piece after his experiences owning a condo in Santa Barbara’s R-4 hotel zone. An investigative financial analyst who moved from Russia to Santa Barbara in 2009, Fenkner has also rented out his home during the summer occasionally, which has allowed him to travel with his wife and children. Both properties, which he owns with his wife, have been fully licensed and paid taxes. The majority of their renters have been families with children.

Starting January 1, 2017, all short-term vacation rentals in the City of Santa Barbara will be unlawful. The mom and pop or, as is often the case, grandma and grandpa owners who continue to rent out even one room for less than 30 days will face the city’s wrath. Miscreants will be heavily fined. For those who ask forgiveness, a magnanimous City Council has decided they may pay a lesser fine in exchange for waiving their First and Fourth Amendment rights and swearing to never rent less than 30 days again. Life will be harder for those who resist. If Grandma ignores warnings to cease and desist, the city may search her home and seize evidence of illicit conduct — which would presumably include misplaced family photos, packed suitcases, or a tourist map of State Street.

To fund this war on small-time hospitality, the city has summoned awesome resources. The city’s attorney has been apportioned an additional $150,000 to his budget and will get three new employees. Their mission: to scour the Internet in search of a public enemy so addicted to new friendships, ambassadorial pride, home beautification, and the thrill of making ends meet that they occasionally rent out their own homes for less than 30 days. Already the city attorney has sprung into action and subpoenaed 44 websites that advertised short-term rental sites.

There’s something un-American about the vociferous prosecution of residents for what they do in their homes. Rather than update a decades old municipal code to properly recognize and regulate vacation rentals, the city has chosen to criminalize what for years has been a licensed, tax-paying practice. Enforcement will have to compete with the city’s other core priorities — police, fire, parks, libraries, public works, homeless shelters, under-funded pensions, as well as the weeding out of city waste and corruption.

Why would the city want to do this? Proponents of the ban weave a deeply seductive tale based on Santa Barbara’s housing shortage. They’ll tell you that those loud, obnoxious tourists are parking on your street, sleeping in your bed, deflowering your fair city, and having a far better time doing it than you’ll ever have, all at your expense. Never mind that these urban myths have been thoroughly debunked. The truth lies elsewhere. To find it, follow the money.

Dug in at the money trailhead you’ll find the city’s hotels. By eliminating competition from the hundreds of short-term vacation rentals, Santa Barbara’s hotels snatched control of a valuable monopoly to lodge any and all guests staying less than 30 days. Beginning in 2017, well over $20 million a year in revenue, that was previously shared amongst short-term vacation rentals owners, will flow to the hotels. And this valuable, corporate handout comes just in the nick of time. The long derelict Californian Hotel is in the process of being redeveloped, renamed, and vastly expanded as the 123 room La Entrada de Santa Barbara, slated to open its doors in early 2017. Absent short-term rental competition, demand for all hotel rooms should easily absorb this increased supply, and then some. To understand how one business clique came to eliminate competition from short-term rentals and monopolize all lodging choices, follow the money.

Look no further than Santa Barbara City Councilmember Gregg Hart, the undisputed force behind the city’s ban of short-term rentals, and the money trail appears to run dry. Or does it? Like other City Council members, Hart is required by state law to file an annual ethics Form 700 disclosing his outside financial interests. What makes Hart’s disclosure forms so remarkable is what precious little he discloses. In fact, Hart disclosed less information than any other Santa Barbara councilperson on record, ever.

During Hart’s 2013 campaign, he boasted of running a “small family business”. Does he still own it, did he sell it, what ever happened to the money? All Hart’s personal investment disclosures are completely blank. As the City Council’s sole representative to both Downtown Santa Barbara and Visit Santa Barbara (a marketing group funded by the largest hotels), Hart regularly meets with the city’s well-heeled entertainment and hospitality interests. Could it be that over the past three years no one hosted the affable Hart at a single event, picked up his tab, or sent him a Christmas basket?

There is one other minor detail missing: Hart’s other full-time job. Nowhere on the city’s ethics forms does Hart make reference to his $100,000/year-plus-benefits public relations job at Santa Barbara County Association of Governments, a transportation bureaucracy partially funded by Measure A that has a hand in everything that moves along the central coast. Even if you have trouble comprehending why an intergovernmental bureaucracy needs such an expensive PR employee to primarily prepare “press releases and marketing material,” don’t give up now. Follow the money.

Hotel owners, managers, investors, and even hotel consultants have all openly contributed to Hart’s 2013 city council campaign. The only hotel-related group that did not is the one Hart pretends are his core constituents, the hotel workers. Depending on how it is sliced, hotel and development-related monies account for over $30,000 or one out of very four dollars of Hart’s record 2013 campaign funding. In all fairness, Frank Hotchkiss, to a lesser degree, and Bendy White also received money in 2013 from some of these same hotel/developer interests. What sets Hart apart is his lobbyist enthusiasm in presenting the hotel owners’ side of the vacation rental story, which is what I heard when I originally asked him about the ordinance. To find the genesis of this errant affair, follow the money.

The Hart and Hotel romance was consummated nearly two decades ago during Hart’s first two terms on City Council. Public campaign records from this era have been destroyed by the city clerk’s office, but, thankfully, private newspaper archives somehow survived. What happens next may be pure coincidence, but it smells fishy: Hart, who discloses no investments, claims to have made a $10,000 interest-free loan to his own 2013 campaign around the time that La Entrada de Santa Barbara was passing the city’s Historic Landmarks review but before millions of development dollars were put at risk. What is clear is that the $10,000 loan is the only recorded campaign loan outstanding among the entire City Council, and it has not yet been repaid. Future campaign contributions, perhaps from appreciative hoteliers, could enable that $10,000 to slide, like an anonymous hotel key, into Hart’s own back pocket. Stay tuned, and follow the money.

Only an independent investigation, with power of subpoena and enforcement, could clarify the full symbiotic financial relationship between Hart and the hotels. Gauge, if you will, the prevalence of self-dealing within the Santa Barbara City Council by the enthusiasm upon which they proceed. In the meantime, ponder the public good subverted and the public access denied by gifting a small clique of hotels a monopoly to underserve the full diversity of guests who visit our lovely, world-renowned city.

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