Kansas City Council Business Session – December 1, 2022
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Kansas City Council Business Session – December 1, 2022
The Kansas City Council held a business session on December 1, 2022, at 8:15 PM. The agenda included approval of prior minutes, a presentation on short‑term rental taxation and fees by the City Auditor, and a presentation from the Ivanhoe Neighborhood Association regarding operational funding and governance issues. No formal votes were taken beyond the consent calendar.
Consent Calendar
- Approval of Minutes (November 3, 2022): A motion was made and seconded; all members voted aye. The motion passed unanimously.
Short‑Term Rental Presentation
- City Auditor Doug Jones presented findings from an audit of short‑term rental (STR) impacts on taxes and fees. He noted that Kansas City cannot collect its 7.5% convention and tourism (C&T) tax or the $1.50 per night hotel/motel occupancy fee from STRs because the city code defines a hotel as a building with more than eight rooms, mirroring state law. Other Missouri cities (St. Louis, St. Charles, Independence) do not have this restriction. The audit estimated that the city lost over $2.28 million in C&T taxes and nearly $354,000 in occupancy fees between July 2021 and August 2022. Recommendations included making changes to the C&T tax a state legislative priority and pursuing a separate occupancy fee for STRs (which would likely require a public vote due to Hancock Amendment restrictions). A companion audit on STR permit compliance is expected within two weeks.
- Councilmember Tim noted that the city’s legislative priorities already include the C&T tax recommendation.
- Councilmember Bunch questioned whether a public vote is needed for an occupancy fee, given it is a fee rather than a tax. The city attorney explained that the existing occupancy fee under Chapter 40‑11 was voter‑approved and is considered a tax‑like charge; a new fee for STRs could be created but may require a vote.
- Councilwoman Robinson asked about neighborhood disruption from STRs and a survey being conducted by the city manager’s office. The manager’s office stated the survey is collecting feedback until December 15 and can be accessed at kcmo.gov.
- Councilwoman Hall asked whether the legislative priority should wait until survey data is available. The auditor confirmed that the state law change would only grant enabling authority; local action would still be needed. Hall also noted that hotels must report occupancy; STRs should do the same.
- Councilmember Bunch asked for data on the number and location of STRs. The auditor stated that estimates were developed using the city’s vendor (Host Compliance) and aggregate data from platforms; detailed permit information will be in the companion audit.
Ivanhoe Neighborhood Association Presentation
- Mr. Fields and Mr. Young (Ivanhoe residents) and Councilman Ellington presented a request for $175,000 in city funds to provide one year of operational support for the Ivanhoe Neighborhood Council (the neighborhood association). They described the association’s history of community work—closing 700 drug houses, running minor home repair programs (bringing $23 million in improvements), after‑school programs, and achieving high Eagle Scout rates. The building is currently closed and locked; the association cannot conduct programming. Concerns were raised about the current board, which has not held elections since before COVID, allegedly mismanaged funds, and attempted a merger with Community Builders without member input. An election is scheduled for the coming Saturday to replace board members.
- Councilwoman Robinson emphasized the need to protect two existing city contracts: a CDBG minor home repair contract and a CCED housing development grant. She supported the one‑year funding to keep the building open and allow the Office of Citizen Engagement to operate from there.
- Councilmember Barnes asked whether the Ivanhoe Neighborhood Council is the same entity as the organization that does programming (e.g., minor home repair). Mr. Young confirmed they are one board and one organization.
- Councilmember Bunch asked about board composition and elections. Mr. Young explained that the membership votes for the board at annual meetings; no election has been held in years. The upcoming Saturday election is intended to replace the current board.
- The council expressed condolences to Mr. Young for the recent loss of his son to homicide.
Key Outcomes
- The minutes of November 3, 2022, were approved unanimously.
- No other votes were taken. The short‑term rental audit was presented for discussion; the council will consider legislative priorities at an upcoming legislative session. The Ivanhoe funding ordinance (providing $175,000) is scheduled for discussion in the Finance Committee, contingent on the outcome of the association’s board election.
Meeting Transcript
Welcome to business session. First item is approval of minutes from November 3rd. Is there a motion? Second. All in favor indicate by saying aye. Aye. Aye. All opposed. The motion passes. Short-term rental presentation. The city auditor. Good afternoon. We'll take a slight pause while we have a technical difficulty getting logged in. So while we wait, how about the question? Okay, we'll get started now. Mayor Lucas, Mayor's City Council, Doug Jones, City Auditor. I'm here to present our audit of short-term rural impacts on taxes and fees. I will discuss the objective for the audit, provide some background, and summarize our findings and recommendations. A companion audit we plan to release within the next week or two focuses on short-term rental permit compliance. Both audits were based in part on public audit suggestions. We originally planned to issue a single report addressing both issues. However, we decided to issue separate reports to ensure the mayor and city council receives information about the impact of short-term rentals on the city's convention and tourism tax as you consider the city's legislative priorities for the 2023 session of the Missouri General Assembly. The city has a 7.5% convention and tourism tax and a hotel motel occupancy fee of a dollar fifty per night that are typically paid by entities in the accommodation industry. However, the city is unable to collect either the CNT tax or the occupancy fee from short-term rentals in Kansas City. Had the fee and the tax applied to short-term rentals, we estimate the city would have collected over 2.28 million dollars in CNT taxes and nearly $354,000 in occupancy fees between July 2021 and August 2022. Short-term rentals are a significant part of the accommodation industry in Kansas City. It's a visit KC, the neighborhood tourist development fund, and capital expenses related to the city's convention center. The hotel motel occupancy fee supports the debt service and ongoing operation of the T Mobile Arena. The CNT tax definition and city code comes from the state law that enables the city to levy the CNT tax. The state statute defines a hotel in Kansas City as a building having greater than eight rooms. Other cities of Missouri with similar tourism related taxes do not have this eight room limitation. These cities collect CNT type taxes from their short-term rentals. The city's hotel motel occupancy fee has the same definition of a hotel as the CNT tax. However, there is no requirement for the city to define the fee that way. The state statute enabling the occupancy fee does not define a hotel at all. This means the city could change this definition locally. There are some issues the council should consider before doing this, such as the type of fee. This type of fee likely requires a citywide vote to change. The current fee underwrites the debt on the arena. And to not put arena funding source to a new vote, the council should create a new separate occupancy fee for short-term rentals. We make recommendations to the mayor and city council to continue, including changes to the convention tourism tax as a legislative priority and taking steps to assess a hotel motel occupancy fee on short-term rentals. We believe this will improve the city's ability to promote tourism and convention activities, optimize city revenues, and create tax parity between hotels, motels, and short-term rentals. In brief, short-term rentals are a significant part of the accommodation industry in the city and are not currently required to pay the same taxes and fees as similar businesses. Applying those taxes and fees would both level the playing field and provide the city with funding for convention and tourism related activities. I want to thank staff and management in the city planning and development and law departments for their cooperation on input throughout this audit. Normally, management would discuss their response to our recommendations, but in this instance, our recommendations are directed to the city council. The audit and recommendations are intended to provide the council information for discussions on how you want to work through the issues we identified in the audit. For the C and T tax, the council will be discussing and voting on the city's legislative priorities at today's legislative session that addresses one of our recommendations. The audit provides you with additional information and context for one of the major priorities. Addressing the occupancy tax for short-term rental will take additional discussion and direction by council.
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