Atascadero council introduces ordinance to regulate extended-stay hotels, adopts 3% administrative fee

Atascadero City Council on a unanimous vote moved to introduce an ordinance to define and regulate extended-stay hotels and motels and adopted a companion resolution establishing a 3% administrative fee on those units.

City planning staff told the council that the change is meant to address an increase in hotel stays that exceed 30 days and the resulting loss of transient-occupancy tax (TOT) revenue. Community Development Director Phil Dunsmore said the proposed code changes would create a new land use category—an “extended occupancy hotel, motel”—and an administrative use-permit process with standards, limits and penalties recorded against the property.

Dunsmore summarized the policy rationale: “When these days do exceed that 30 days, essentially, what that is is an apartment building. It’s something that really is a different animal. It’s a different land use, and we have to acknowledge that.” He told the council the permit would include conditions such as limits on the share of long-term stays, caps on units with kitchens under the standard hotel rules, monitoring requirements and a small ongoing fee to offset regulatory costs.

Under the proposal discussed at the hearing, the city would keep existing rules for standard hotels and motels and add a regulated path for properties that need longer-term stays to remain economically viable. Dunsmore described three tiers in the draft language: a baseline allowance, higher allowances under a discretionary use permit, and a formal extended-occupancy designation that would be reviewed administratively and come with an agreement recorded against the property. He said the ordinance as drafted authorizes an operator agreement that “sets forth the conditions of extended occupancy that includes, but is not limited to, an extended occupancy fee payable by the operator… penalties for noncompliance, and maximum length of occupancy. The agreement will be recorded against the property.”

Council members pressed staff on how the limits would work in practice. Dunsmore clarified that the draft contains caps on kitchens for standard hotels (a 10% allowance without a use permit and up to 25% with a permit) and a separate cap on the overall number of long-term stays allowed through the use-permit process. He also said that if a property applies for the extended-occupancy designation under the new code, the kitchen cap would not be the same constraint as for standard hotels. On enforcement, staff said standard code-violation procedures would apply and that audits and voluntary compliance were the first-line approaches given the city’s prior findings of noncompliant long-term use.

The council adopted, on introduction, a draft ordinance amending Title IX to add the new land use and definitions and a draft resolution creating a 3% administrative fee on the extended-occupancy units. Staff and council repeatedly described the fee as far smaller than the TOT the city would have collected on a standard short-term stay: “That 3% fee is quite small; it doesn’t come anywhere near making up for what would be the transient occupancy tax,” Dunsmore said.

The ordinance was introduced for first reading and the accompanying resolution was adopted on unanimous roll call. The ordinance’s final numeric caps, operational thresholds and any recording requirements will be set in the adopted version after the process for second reading and final action.

Implementation and next steps noted at the hearing include recordation of an operator agreement if the use is approved, an administrative monitoring process, and a fee schedule amendment to be adopted by resolution.