Planning commission recommends Title 9 amendment to regulate extended-stay hotels, including pilot payment-in-lieu of TOT

The Atascadero City Planning Commission on March 4 voted 7-0 to recommend the City Council adopt a text amendment to Title 9 establishing “extended stay” hotels and motels as a distinct commercial use, adding standards, administrative review and a pilot payment-in-lieu of transient occupancy tax.

The amendment, introduced by staff, would define extended-occupancy hotel uses (stays longer than 30 days), require administrative use permits (AUP) or conditional use permits (CUP) in some zones, tie allowances for full kitchens to extended-stay approvals, and enable the city to require a fee agreement as a payment in lieu of TOT for long-term occupants.

City staff said the amendment responds to an industry shift toward longer hotel stays — a trend that increased during the COVID-19 pandemic and includes traveling nurses, seasonal contractors and other long-term workers. Staff noted state law currently prohibits collection of transient occupancy tax for stays longer than 30 days, creating a revenue gap for the city when rooms are used as de facto long-term housing. In the presentation staff said the proposed pilot would allow limited extended stays while requiring a fee to compensate the city for lost TOT revenue.

Staff described the amendment as targeted and relatively short. It adds a definition to distinguish extended stays from transient hotel stays, sets standards for approval, allows the city to add conditions through an administrative use permit, and outlines penalties for violations. Staff said the AUP process would let the city assess site-specific conditions while aiming for consistent treatment across operators.

“Hotels and motels are designated commercial uses. They are not residential units. They are intended for short-term occupancy and tourism,” staff said in the presentation, adding that the city relies heavily on TOT revenue and does not want extended stays to become the dominant business model for hotels.

Commission questions focused on enforcement, how the city audits exemptions, counts of hotel rooms in Atascadero, and how kitchen-equipped rooms factor into long-term rentals. Staff explained hotels submit TOT reports quarterly and that periodic audits (staff called them “every couple of years” for deeper audits, with more routine annual calculations possible) triggered this policy work after audit findings showed exemptions tied to long stays. Staff also said the city had previously allowed full kitchens in a limited share of rooms under an earlier policy and that the new language ties kitchen allowances to extended-stay permissions.

Terry Banish, director of community services and promotions, spoke to the local inventory of lodging: “With the hotels that we have, we're looking at, basically 7 hotels. And as far as the total rooms go, it's about 900 rooms including short term rentals,” she said during the meeting. Staff also said an exact, verified hotel-room count was not available at the hearing but that staff would provide precise figures later.

During discussion commissioners raised tenancy-rights concerns for stays longer than 30 days, the distinction between apartment-style leases and hotel occupancy, and process questions about when an extended-stay proposal would require a CUP (which comes to the planning commission) versus an AUP (an administrative decision). Staff said the ordinance keeps extended-stay review at least as stringent as existing hotel reviews in the same zoning districts.

Commissioner Grama moved to adopt a draft resolution recommending City Council approve the Title 9 text amendment adding extended-stay hotel/motel as a use, modifying definitions and providing standards and a fee for such uses; the motion was seconded and passed 7-0. The motion as read into the record was: “I make a motion that the planning commission adopt draft resolution recommending the city council adopt a text amendment to title 9 adding extended stay hotel motel as a use modifying definitions and providing standards and a fee for such uses based on findings.”

Votes at the meeting recorded the seven commissioners voting yes and no recorded no votes; the commission announced “Motion passes 7 0.”

The proposal now proceeds as a recommendation to the City Council. Staff told commissioners they could return with modifications, request more information, or recommend denial; staff emphasized they had worked with local hoteliers and audits prompted the compromise language.

At the hearing staff flagged enforcement tools including routine reporting and periodic audits to verify exemptions and compliance with any payment-in-lieu agreements. The staff presentation said the pilot’s agreements would specify the fee and limit how much of a hotel's revenue could come from extended stays to ensure hotels remain primarily short-term, tourism-oriented operations.

Commissioners did not take additional formal actions beyond adopting the recommendation. The City Council will consider the amendment in a subsequent public hearing if it places the item on its agenda.