Recent actions surrounding short-term rental licenses—or lack of them—in Pacific Grove will keep the city as busy as seaside cottage rentals over the Fourth of July weekend.
Attorneys for the city and code enforcement officers are working on multiple fronts defending the city’s short-term rental ordinance, as well as clamping down on those who flout it.
So far, the ordinance created by voters who passed Measure M by 58 percent last November is holding up to a recent legal challenge. However, a lottery the city held more than a year ago to sunset 51 short-term rental licenses by April of this year may still be in question.
The legal challenge to Measure M came in what started as a lawsuit brought by former short-term rental owners Bill and Sue Hobbs and other owners with legal help from the Arizona-based Goldwater Institute was already underway when Measure M won. That suit challenged the legality of a lottery city officials held in May 2018, in which the Hobbses’ license was chosen along with 50 others to sunset in April of this year.
The owners argued their license gave them vested rights to renew their permits once they expired and continue operating their properties as short-term rentals.
On June 25, Monterey County Superior Court Judge Lydia Villarreal ruled that the plaintiffs did not have vested rights. Measure M was, in essence, upheld, says the measure’s chief supporter, Luke Coletti.
“This is a clear victory for Measure M,” he writes by email, adding that supporters are celebrating.
However, that was Villarreal’s second ruling that day. The first was a win for the plaintiffs. She agreed with the owners that before the city held a lottery to retire licenses in the coastal zone—22 of the 51 were located in that zone—it should have sought a coastal development permit from the California Coastal Commission. That issue will move forward in court. A case management conference is scheduled for Aug. 27.
In the meantime, a separate lawsuit brought by the Short-Term Rental Owners Neighborhood Group of Pacific Grove, called STRONGpg for short, before the lottery in an attempt to stop it, also had a case management conference the same day as the Hobbs case. Villarreal scheduled a mandatory settlement conference for Sept. 20.
The week before the city was in court on short-term rental issues, the City Council voted unanimously under the consent calendar on June 19 to place liens on two homes that were operating without licenses.
Property owner Maya Kakis Pechak failed to pay more than $25,500 in penalties and fees—including nearly $3,000 in transient occupancy taxes, late fees and interest—after a city hearing officer determined in an administrative hearing on Jan. 7, that Pechak had violated three ordinances by operating without a license at 1029 Del Monte Blvd. The officer also ordered that Pechak pay $50 a day in penalties until she complied with the ruling.
As of June 19, Pechak still had not paid her penalties. Pacific Grove Senior Program Manager Terri Schaeffer requested the council approve placing the lien for a total of $30,361. That number could go way up, however. Penalties and fines are still accruing for as long as Pechak does not pay them.
The bright and cheery two-bedroom cottage just a couple of blocks from the shoreline has been on the market for over two months. It’s currently listed for $1.1 million, down $15,000 after a price reduction on May 14.
A detailed record of the case against Pechak indicates how the city tried to get her to comply since a listing for the home was first discovered in October 2016. Pechak kept denying she used the property as a short-term rental, contending she only used it for long-term rentals. However, Schaeffer was able to uncover evidence that ran counter to Pechak’s claims.
Schaeffer concluded that possibly as early as 2015, Pechak had been operating the Del Monte home as a short-term rental, hosting at least 55 visits. Pechak contended that a long-term tenant had been the one to rent the house out, but Schaeffer wrote in her report that based on the evidence, Pechak’s claim that it was happening without her knowledge “stretches credulity.”
The penalties and fines are focused on the period of time between June 2016 and August 2017, based on evidence gathered by Schaeffer.
Pechak was reached by email but declined to comment.
The second lien approved by the council was for a home owned by local photographer and designer Birgit Maddox, at 250 Lighthouse Ave., for a total of $8,000. In Maddox’s case, she admitted she had rented out the home for short stays illegally from June-December 2017.
Her case experienced some twists and turns after her home was discovered being advertised online in December 2017. Originally she was assessed $12,172 in TOT, late fees, penalties and interest. She made a plea to former Community and Economic Development director Mark Brodeur early last year, telling him she had financial difficulties and couldn’t pay.
Brodeur negotiated a reduction in TOT, interest and penalties to $8,000 and Maddox signed a settlement letter agreeing to a lien in that amount in April 2018. The letter was rejected by City Manager Ben Harvey, however, stating Brodeur had no authority to negotiate the lien.
(Earlier this year Harvey reorganized the department from Community and Economic Development to Community Development, eliminating Brodeur’s position and giving the former director several months notice. Anastazia Aziz was promoted to director of Community Development.)
At a subsequent hearing held earlier this year, the hearing officer determined that Maddox had negotiated in good faith.
“The City’s internal disorganization is not the responsibility of [Maddox], and should not adversely affect [her],” the report states. “Residents can reasonably expect the City will honor its agreements, regardless of which officer or employee enters into those agreements.”
The hearing officer ruled on Jan. 20, that “in the interest of justice,” Maddox could keep all of the revenue she earned in 2017, more than $19,000. All she had to pay at that point was $2,430 in TOT and interest and penalties by March 22. If she didn’t, the city would move forward with the lien she agreed to the year before, which it is now in the process of doing.
Maddox says by email she “takes responsibility for the fines that were imposed on me for short-term rentals without a license.”