City of Dana Point Office of the City Manager August 14, 2025 The Honorable Maria Hernandez, Presiding Judge of the*

Despite the increasing media coverage of Online Booking Agencies (OBAs), STRs are not a new phenomenon in Orange County. The City agrees with the finding. The City acknowledges that STRs (30 days or fewer) have been in existence for decades.

The steady growth of STR usage in the last decade raises concerns of potential public nuisance. The City agrees with the finding. The City has made several updates to its municipal code in order to build a robust compliance framework involving clear regulations, proactive monitoring, third-party support, technology advancements and coordination across the Community Development Department, Code Enforcement, and the Orange County Sheriff's Department (OCSD) to minimize potential nuisances.

Proactive home inspections of new and renewing STRs, which have been implemented in some Orange County cities, improve code enforcement and STR compliance with city ordinances. The City agrees with the finding. All permitted STRs within Dana Point undergo an inspection using a comprehensive checklist prior to permit issuance and renewal, covering health and safety, property maintenance, and good neighbor policies.

Direct remittance of taxes by Online Booking Agents does not capture all Transient Occupancy Tax (TOT) for an STR because of direct booking practices. The City agrees with the finding. The City of Dana Point's current municipal code does not permit or require OBAs to remit TOT on behalf of Short-Term Rental operators; this responsibility remains with the operators. The City has explored potential arrangements with OBAs; however, OBAs make it difficult, if not impossible, to obtain supporting documentation such as property addresses, number of nights booked, or room rates needed for the City to reconcile and confirm accurate remittance. The City has also consulted with other agencies that receive TOT collections directly from OBAs, and it was confirmed that no supporting documentation is provided to tie the payments to specific properties or transactions. In addition, OBAs do not capture all taxable transactions for short term rentals. Many operators accept direct bookings, repeat guest reservations, or alternative payment arrangements outside of OBA platforms, bypassing the OBA's collection process. For these reasons the City only accepts payment and required remittance information directly from operators.

Some cities in Orange County have outdated systems for tracking Short-Term Rental TOT making the process less effective and more difficult for staff. The City of Dana Point partially disagrees with the finding and does not have sufficient knowledge or information to reach a conclusion regarding other Orange County jurisdictions. The City uses GovOS' MuniRevs platform for Short-Term Rental TOT remittance and tracking. While the platform has limitations, it is functional - allowing operators to file and remit TOT online and enabling staff to review filings, monitor compliance, and generate reports. Certain reporting and integration features could be enhanced; however, the system currently meets the City's needs, reduces administrative burden, and equips staff with tools to identify and address noncompliance. As these programs and technology evolve, the City is exploring other collection platforms that may offer improved functionality and better meet its operational and reporting needs.

In some cases, STRs are improperly recharacterized as long-term rentals to circumvent the collection of TOT and any applicable penalties. The City agrees with the finding. The City has deployed software that targets STR operators who advertise rentals as 30+ day stays during the week but switch to short-term listings over the weekend. This platform tracks these advertisements in real time, logs changes, and captures associated reviews, providing staff with actionable evidence to justify enforcement actions. This has led to the City issuing 65 violations and 17 citations within the first several months of deployment.

Online Booking Agencies in foreign languages are outside the current capabilities of Code Enforcement to monitor and track unpermitted STRs. The City disagrees with this finding. The City is not currently aware of foreign-language booking platforms marketing unpermitted STRs in Dana Point but will continue to enhance its enforcement efforts to keep up with the ever-changing industry marketing tactics.

Cities that fail to routinely review their STR waiting lists potentially lose TOT revenue and contribute to a greater prevalence of unpermitted STRs. The City of Dana Point agrees with the finding. The City of Dana Point actively manages the waiting list for STRs and monitors properties on the list to ensure unpermitted STR activity is not occurring.

Locations that have hosted major events have reported an outsized increase in demand and pricing of STRs, a situation Orange County is likely to experience with the upcoming 2026 Los Angeles World Cup and 2028 Los Angeles Olympics. The City disagrees wholly or partially with the finding. The City lacks knowledge and information sufficient to reach this conclusion. The City does acknowledge the need for pro-active monitoring with evening and weekend code enforcement patrols during peak season and when significant community events, such as the Ohana Music Festival, are taking place.

City leaders have no regular communication with each other concerning STR issues, limiting opportunities to develop strategies and expertise to improve service. The City disagrees wholly with the finding. City staff regularly participate in regional roundtable forums where issues such as STRs are addressed, particularly in collaboration with the South Orange County Code Enforcement Divisions. Additionally, staff attend training sessions and seminars organized by professional organizations and engage with staff from similar jurisdictions to share insights. Over the past five years, the City Council has held 11 discussions on STRs during regular meetings. The Council also receives biannual updates from staff on the status of STRs, including the number of permit-holders, the waitlist, citations issued, violations, patrols, and additional monitoring data. Response to Recommendations