We have excellent news in our battle against the City of Santa Barbara!

As you know, in November 2016, Theo Kracke of Paradise Retreats World Class Vacation Rentals personally sued the City of Santa Barbara, alleging that its prohibition of Short Term Rentals violated the California Coastal Act…and we finally won!

After 2 ½ years of tough litigation where the City filed 3 motions to dismiss our case, we finally had our day in court. After trial, we achieved our goal of preventing the City of Santa Barbara from enforcing its ban against short-term vacation rentals in the Coastal Zone of Santa Barbara City.  The victory has been highly publicized in legal circles and will influence STR policy and judicial decisions throughout California. I would like to take this opportunity to acknowledge the excellent legal analysis & litigation skills of our attorneys: Travis Logue & Jason Wansor of Rogers, Sheffield, and Campbell.  This was a monumental effort; the cost of which exceeded $300,000.  It has all paid-off in the satisfaction that justice prevails when facts & evidence are presented to a rational decision-maker. A special Thank You to the Honorable Judge Mark Borrell.

The first ruling (filed on March 8, 2019) finds that the City violated the CA Coastal Act by illegally banning STRs in the Coastal Zone.  This ruling states that a writ shall issue ordering the City to once again allow STRs in the Coastal Zone of Santa Barbara as it did prior to June 2015 until such time as the City obtains approval by the CA Coastal Commission for a plan to regulate STRs. The second ruling (filed on May 16, 2019) concluded that the City did not “knowingly and intentionally” violate the Coastal Act so as to be liable for fines payable to the CA Coastal Commission.

We are thrilled that the court embraced our arguments that the City acted improperly when it eliminated an entire class of lower-cost visitor serving accommodations on the coast.  This is a victory for many, including traveling families who could not otherwise enjoy the Santa Barbara coastline.

The bottom line is that short term rentals in residential neighborhoods in the Coastal Zone of the City of SB will be allowed for the foreseeable future.  The City is working with the Coastal Commission to update their Local Coastal Program and how to reasonably regulate STVRs without banning them entirely.  Presently, the City is not issuing new business licenses to STR operators, nor allowing them to collect Transient Occupancy Tax for their rentals.  However, the City has expressly stated it will not be enforcing zoning violations against STRs in the Coastal Zone of SB City (the City Attorney even put this on record in our most recent court hearing).

Going forward, it is unlikely that the City will be able to obtain approval from the Coastal Commission for any unreasonably restrictive STR regulations in the Coastal Zone of SB.  Further, we have heard our victory may influence the City’s STR policy in areas outside the Coastal Zone. One goal is to catapult our win to spark a renewed conversation on citywide STR policy.

There is a good possibility that the City could appeal these rulings.  However, we will be working hard to prevent this.  We are lobbying the SB City Council against appealing the judgment, and to instead focus its time and resources on drafting fair STR regulations that comply with the CA Coastal Act.  Countless communities in California have done the same thing, and Santa Barbara can create its own regulations of STRs based on any one of these successful models.

By Alys Martinez, KEYT

See the full original article at KEYT.com

SANTA BARBARA, Calif. – The battle over short-term rentals is far from over in Santa Barbara.

Most rentals were banned by the city council, but residents living in an areas where it is permitted are running into difficulty when trying to get city permits.

Betsy Kehoe purchased her home near downtown Santa Barbara two years ago as part of her retirement plan. She lives there full-time and rents out a room in the back. “Initially, it was a wonderful experience,” she said. “We got the permit and the city allowed us to do it.”

But, her pleasant experience changed soon after the city council outlawed short-term vacation rentals in 2015–except in the R-4 zone, which is where Kehoe lives.

Originally, Kehoe operated her short-term rental under a city issued business license and paid a Transient Occupancy Tax (TOT) to rent out the room.

But, once that license expired, Kehoe said she has been unable to get a new permit from the city. “We have to pay a huge fee to go through the permit process, to even sit down with a planner in the planning department to discuss it,” Kehoe said. “Then, it’s wait, wait, wait.”

Kehoe said city officials have not provided a path for her and other owners in R-4 to get re-permitted as short term vacation rentals. “They essentially want us to comply with some process they seem to make up as they go,” she said.

Kehoe was given recommendations by city officials to go through a ‘conversion’ process to comply with commercial hotel ordinances. “I don’t want to become a hotel,” she said. Kehoe was instructed to tear down a wall inside the room she rents, which Kehoe said would cost $70,000. She was also advised to make a parking covenant.

“I don’t think it’s their right to take my property and decide what I should do with it,” Kehoe said. “Now they are making us jump through hoops, and it seems like they are doing this to keep us running around in circles so they don’t have to deal with us and keep us spending our money, hoping we will fall away one by one out of exasperation and frustration.”

Widow Dorothy Wallstein is fighting a similar battle with the city. She relies on her short-term vacation rental to stay afloat. “I was reassured personally by the mayor, the city attorney and two city councilmembers during their changes to the residential areas that I had nothing to worry about because I lived in R-4 and I took them on their word,” Wallstein said.

But, when her license came up for renewal on Dec. 31, city staff told her she too had to go through the planning department.

“When you talk to the planning department on the phone, they won’t answer any questions,” Wallstein said. “They say you have to apply to convert your residence into a hotel and that, that costs hundreds of dollars to even talk to someone.”

Wallstein said she feels the city is demonizing citizens who are trying to abide by the law. “They are making us out to be criminals,” she said.

Wallstein said she may lose it all if something isn’t done soon, “I will not be able to stay in my home if this continues.”

Jarrett Gorin, of Vanguard Planning, is helping his clients with property in the R-4 zone navigate the city’s permit process, which he claims is “made up.”

“They’ve really made up a permit that doesn’t exist. They didn’t go through any of the proper legal procedures to do that. They haven’t proposed an ordinance and the public never had a chance for review and input on this,” Gorin said. “The public is deprived a chance to challenge it because there is nothing to challenge.”

Gorin, Wallstein and Kehoe all said they believe there is a serious disconnect between the city council and the planning department.

“It seems like the staff and the city attorney are keeping the city council in the dark,” said Gorin. “I wonder sometimes who is running the city. Is it our elected decision makers or is it the bureaucrats in the planning department?”

Deputy City Attorney John Doimas said the city previously issued business licenses and collected TOT, but those are tax and regulatory licenses, and not land use licenses which don’t grant a resident to use a property in a ‘specific way’.

Doimas said the city stopped extending business licenses as of Dec 31, 2016 and told the public in August, 2015 that short term rental businesses licenses would not be renewed for people in zones where it was not allowed. “There are areas in the city where it may be permissible, R-4 and C-M,” he said.

According to Doimas who referred to the municipal code, a person has to go through a conversion process to get a permit–on a case by case basis.

City Planner Renee Brooke forwarded the a Short-Term Rental Permitting Process memorandum to the NewsChannel 3 newsroom. To read it click  here.

Tiffany Haller is a real estate broker and property manager helping her clients navigate the permit process. She started a group called, “R-4 Property Rights”. So far there are about 36 members.

Haller said she went to the city in August, 2015 to find out how to get a permit. Haller said she could not get a straight answer. “We are really hoping the city council can step up and show some leadership and help property owners get through the process together,” she said.

Haller started a blog about short-term vacation rental enforcement, to read it click here.

See the full original article at KEYT.com

By Paul Gonzalez, News-Press Staff Writer

A lawsuit against Santa Barbara’s ban on short-term rentals can proceed, according to a ruling in Ventura County Superior Court.

At the same time, a motion by the city to strike the challenge by vacation-rental business owner Theo Kracke under a statute aimed at quashing malicious lawsuits was denied.

See the full article at Newspress.com or in the Tuesday, March 14, 2017 edition of the Santa Barbara News-Press.

Challenge to Santa Barbara's Short-term Rental Ban Survives


By Joshua Molina, Pacific Coast Business Times Staff Writer

Entrepreneur Theo Kracke is at the center of an emotional debate over short-term vacation rentals in Santa Barbara, one that could deliver a significant financial blow to his business.

So he’s putting up a fight against the City of Santa Barbara, which has banned short-term rentals in most residential areas of town. Kracke sued the city, alleging it was violating the California Coastal Act, and then the city fired back, calling for Kracke’s suit to be thrown out of court.

See the full article at PacBizTimes.com or in the March 3-9, 2017 edition of the Pacific Coast Business Times.

Fighting City Hall


By Scott Steepleton, News-Press City Editor

A judge is considering whether a lawsuit challenging Santa Barbara’s short-term vacation rental ban should be tossed out on the grounds that, according to the city attorney, it is a frivolous attempt to stifle free speech.

Attorneys for Theo Kracke, owner of the vacation rental service Paradise Retreats, argue in court papers before Ventura County Superior Court Judge Mark Borrell that the California Coastal Act of 1976 mandates that cities in the coastal zone take steps to ensure low- and moderate-priced visitor accomodations with access to beaches.

See the full article at Newspress.com or in the Friday, March 3, 2017 edition of the Santa Barbara News-Press.

City argues Short Term Rental lawsuit tramples free speech



On January 30, 2017, the City of Santa Barbara filed an anti-SLAPP Motion against Theo Kracke, who recently sued the City over its vacation rental ban. Kracke’s lawsuit argues the City should have amended its Local Coastal Program or sought a Coastal Development Permit because the vacation rental ban contravenes the policies set forth in the Coastal Act.

In its anti-SLAPP motion, the City cites to Code of Civil Procedure (CCP) § 425.16. SLAPP stands for Strategic Lawsuit Against Public Participation. Customarily, anti-SLAPP motions involve first amendment issues, like defamation. Ironically, the statute was enacted to protect the “little guy” from companies with vast resources who could file lawsuits against those who voiced opposition. Section 425.16(a) describes the Legislature’s intent for the law, “The Legislature finds and declares that there has been a disturbing increase in lawsuits brought primarily to chill the valid exercise of the constitutional rights of freedom of speech and petition for the redress of grievances. The Legislature finds and declares that it is in the public interest to encourage continued participation in matters of public significance, and that this participation should not be chilled through abuse of the judicial process.” While the statute’s purpose was to protect the expression of first amendment rights and curb litigation that would otherwise suppress people’s right to free speech, the statute is being abused by attorneys attempting to gain a tactical advantage in lawsuits. Attorneys have used anti-SLAPP motions in a variety of creative yet improper contexts, with the net result being increased attorneys’ fees, delays, and more litigation.

The City’s motion alleges Kracke’s suit is “frankly outrageous,” was “brought as a result of acts in furtherance of the City’s rights of petition or free speech” and “is an attempt to stifle free speech on an issue under consideration or review by the City Council and should be summarily dismissed.” If the City prevails, Kracke’s lawsuit will be thrown out and he could be held liable for the City’s attorneys’ fees. Even if Kracke prevails at the Anti-SLAPP hearing, the City will have the right to immediately appeal the decision which will automatically delay the litigation until the appeal is resolved, possibly as late as 2018.

According to Kracke, “The City’s heavy-handed tactics continue. It’s outrageous the City is alleging I’m stifling its right of free speech. There is no precedent for the City to file such a motion against a suit like ours. Now we have to consider whether to file a CCP § 128.7 motion for sanctions based on the motion’s frivolous nature. It’s obvious the City’s strategy is to delay and escalate my attorneys’ fees in the hopes that I drop the lawsuit. The Coastal Commission is on record that any action banning short-term rentals amounts to ‘development’ under the Coastal Act and therefore requires an amendment to the City’s Local Coastal Program or an application for a Coastal Development Permit. The City just refuses to acknowledge its wrongdoing and now resorts to underhanded legal tactics.”


Contact: Theo Kracke
Phone: 805-275-1851
Email: theo@paradiseretreats.com

To read, print and/or download the full text of the press release in PDF format, please click below. The following enclosures are included in the document:

California Coastal Commission letter Re: Short-Term/Vacation Rentals in the California Coastal Zone
City of Santa Barbara anti-SLAPP Motion

STR Press Release with Enclosures PDF | 1.5MB

On November 30, 2016, the California Coastal Commission provided comments to the County of Santa Barbara Board of Supervisors which are consistent with what would have been provided to the City of Santa Barbara had the Commission been duly provided the opportunity.  According to the Coastal Commission, the prohibition of short-term rentals violates various tenets of the Coastal Act.

In past actions, the Coastal Commission has found that vacation or short-term rentals, including those in residential zones, can provide an important source of visitor accommodations in the Coastal Zone. In some instances, residential short-term rentals may provide a lower cost alternative to renting hotel or motel rooms, especially for large families or groups of individuals.

For the full text of the Coastal Commission’s letter to the Board of Supervisors, please see the PDF link below.

Coastal Commission Comments to SB County PDF | 209 kb

Rogers, Sheffield & Campbell, LLP


Theo KrackeOn November 30, 2016, Travis C. Logue and Jason W. Wansor, attorneys for the Santa Barbara law firm of Rogers, Sheffield & Campbell, LLP, filed a Petition for Writ of Mandate and Complaint for Civil Penalties for Violation of the California Coastal Act against the City of Santa Barbara (the “City”).

The suit stems from the City’s decision to ban short-term vacation rentals (STVRs). The prohibition will apply to all STVR properties beginning January 1, 2017.

The petition was filed on behalf of the firm’s client, Theo Kracke, a 35-year resident of Santa Barbara, and proprietor of Paradise Retreats World Class Vacation Rentals. Mr. Kracke has been engaged in operating, managing and servicing vacation rentals in and around the City since 2006, many of which are located within the City’s Coastal Zone, as defined under the Coastal Act.

The California Constitution and the Coastal Act require coastal access to be protected, provided, and maximized for all. STVRs serve as an alternate form of visitor-serving accommodations within the Coastal Zone, that provide a lower-cost alternative to renting hotel or motel rooms for families from diverse demographic sectors and range of incomes to enjoy unique local coastal resources. In recognizing these benefits, the Coastal Commission has urged local municipalities to regulate rather than outlaw STVRs. The suit alleges the City’s prohibition against STVRs contravenes both State and local law. The ban violates the City’s certified Local Coastal Plan (“LCP”) and Chapter 28.44 of the Santa Barbara Municipal Code, which was established for the purposes of implementing the Coastal Act and ensuring all public and private development in the City’s Coastal Zone is consistent thereto.

In 2014, the California Coastal Commission awarded a $123,000 grant to the City to update its LCP and address “the very old LCP policies and development standards.” Yet since that time, the City has neglected to take any action towards an update. In light of the ban, the City missed a key opportunity to act in a thoughtful manner and apply the grant award to hold public workshops, analyze the impact of STVRs from diverse perspectives, seek and obtain Commission input, and employ reasonable and balanced regulation designed to address the primary concerns of neighborhood compatibility and diminished affordable housing stock while allowing for regulated STVRs in residential and other zoning districts.

Mr. Kracke is seeking a writ of mandate requiring the City to either (i) submit and process a Coastal Development Permit; or (ii) amend its LCP and pursue certification by the Commission.


Contact: Theo Kracke
Phone: 805-275-1851
Email: theo@paradiseretreats.com

To read, print and/or download the full text of the complaint, please see the PDF link available at the Rogers, Sheffield & Campbell, LLP web site.

By Keith Hamm, Santa Barbara Independent

The City of Santa Barbara’s escalating crackdown on short-term vacation rentals has experienced plenty of expected backlash, the latest of which claims in court that the city’s position violates California’s formidable Coastal Act, a 40-year-old law designed to balance development pressures along the coast with conservation efforts and public access. The lawsuit — filed this week by Theo Kracke, owner of Paradise Retreats, which manages 27 short-term rentals within city limits — is buoyed by state law requiring relatively affordable overnight lodging along the coast. According to the suit, “[Short-term vacation rentals] serve as a lower cost alternative to renting hotel or motel rooms for families and small groups from diverse demographic sectors and incomes to enjoy coastal access.”

See the full article at Independent.com.

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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