The City Advertising and Promotion Commission met August 14: to discuss the position for Finance Director and to hold a workshop about the Vacation Rentals by Owner platform, commonly referred to as Vrbo®.
Chair Steve Holifield admitted the CAPC was in a difficult position and needed to fill the part time Finance Director post quickly. Commissioners had discussed the possibility of out-sourcing financial responsibilities to an agency or hiring someone to fill the position. They had only received a couple of applications, one from an individual who both City Finance Director Michael Akins and CAPC Director Mike Maloney said was unqualified, and another, Mr. Ty Reed.
Holifield, Akins, and Maloney met with Reed, and Holifield urged members to consider him as a candidate. Commissioner Kolin Paulk called for an executive session to look over options and talk with Reed.
That session lasted 40 minutes, and when commissioners returned Paulk made a motion to have Holifield reach out to financial agencies to see what hiring an agency would cost in comparison to hiring a person, without ruling out any current applicants. Commissioners agreed.
Maloney explaining that over the past two or three years, booking services where people are directed to short-term rentals, dominate. Airbnb and Expedia have been losing prominence to the Vrbo platform, which works with property owners who run such businesses.
Vrbo uses a service known as Home Away that remits taxes from businesses to municipalities. These municipalities must sign a contract with Vrbo to access these properties and see information on revenues and taxes of business using the platform.
Eureka Springs doesn’t have a contract, so cannot see these businesses or have taxes automatically remitted by Home Away. Maloney added that the state of Arkansas, Bella Vista, Rogers, and more have signed contracts with Vrbo. Sandy Martin, who worked with Bella Vista to set up their contract with Vrbo, talked commissioners through the process.
Martin explained that the difference between Vrbo and Airbnb is that Vrbo primarily is for renting out a whole house, which is seen as more desirable than a room or part of a property. This usually draws wealthier renters, which means more revenue and taxes. She said that since Bella Vista signed the contract in October 2022, they initially collected $1400 for that year, then $38,000 for 2023, and were on track to make between $40,000 to $45,000 for the city.
In Bella Vista, there has only been a slight downturn in people using Airbnb, as most people appear to search both sites, but having the Vrbo contract has added reassurance to tracking and collecting from short-term rental properties. Martin said the process was fairly simple, involving a two-page contract. She said that Bella Vista has the same legal counsel as Eureka Springs, Bill Watkins, who helped modify the contracts for Little Rock and Bella Vista, and added a section about Home Away providing information that could be required for FOIA requests.
Under this agreement, Home Away collects the taxes and VRBO sends the checks to the city. Paulk interjected that he liked the idea of VRBO skipping the homeowner being responsible for the taxes and having VRBO pay the taxes directly to the CAPC. He wondered if they could look into having something similar with Airbnb to simplify the process for both the business owners and the CAPC.
Commissioner Robert Schmidt said that Vrbo, part of Expedia, was set up so that some business owners could hide the revenue they were collecting from a city in order to avoid paying taxes, and that Vrbo refused to give out information of these businesses unless they had a contract signed with them. He also brought up a case he knew of in Eureka Springs where a hotel had stopped listing itself as a hotel but was renting out on Vrbo to avoid paying taxes.
Martin admitted that Home Away was “sneaky” in that, if there is not a contract, they don’t push to businesses that they’re obligated to pay taxes. Bella Vista modified A&P gross receipts that are to be turned in every month and have business owners put gross revenue receipts from Airbnb, Vrbo, and Evolve, so as to track how much is coming in from each platform.
Schmidt interjected that as a business, owners have to apply for a license and have tax papers for the city, and apply for the CAPC to grant approval that the business owner is a tax collector. He argued that just because people are on Vrbo, which currently the CAPC doesn’t have a contract with, doesn’t make it right for them to avoid paying their taxes.
Paulk replied that Schmidt is assuming people are doing the legal thing and applying for a business license before renting out their properties. Schmidt said it was a legal issue and that if the CAPC did sign the contract with Vrbo, they should use it to go back and track who has been renting out properties with the site and not paying taxes.
Schmidt said he wants the city to make a rule about Vrbo, as they have for Airbnb and hotels, that if you do business on Vrbo you “can’t circumvent tax responsibilities.” Paulk said Schmidt was misunderstanding what was going on with people using Vrbo to post their properties, and that it is illegal to withhold taxes no matter what platform you use – that having a contract with Vrbo will make it easier to track who uses the platform and who is paying taxes.
Commissioner Sherry Faust said the contract will provide better numbers and information because Vrbo will now be remitting the taxes, not the business owners. There was further discussion on how Vrbo could be used to hold business owners accountable for paying taxes and the best means for the CAPC to track business.
Maloney said he would contact Bill Watkins for his opinion on how a contract might be set up. Commissioner Heather Wilson pointed out that that a contract with Vrbo is only for 30 days, so it wouldn’t hurt to consider it or try it when if it doesn’t meet city and CAPC needs it could easily be gotten out of.
Holifield said he wanted to clarify to the public, because several citizens had been worried the Vrbo issue was tied to creating a contract with a reservation company like Jack Rabbit, and Vrbo contract wasn’t about reservations. Martin said that the VRBO contract was a financial agreement between the CAPC and the booking platform to be more transparent about who was using the platform and who owed tax money.