In what some are calling a money grab, short-term-rental operators will face a 400 percent increase in city fees next year.
City officials, however, argue the increased fee is needed pay for new technology to collect taxes and better regulate a booming industry of almost 5,000 rental units that frequently draws resident complaints about traffic, parking, noise and litter.
The city council voted Oct. 27 to increase the annual registration fee for short-term rentals to $250 from $50 a year, a 400 percent hike.
The money will help pay for a software system to monitor rental operators for compliance in paying hotel occupancy taxes, to create a 24-hour call center to field complaints about rental units and to pay for enforcement of codes governing the industry, officials said.
The Rentalscape software by Deckard Technologies will cost about $1.3 million over five years, said Bryson Frazier, chief financial officer for the Park Board of Trustees, which regulates some aspects of island tourism and collects hotel taxes for the city.
The system will cost about $275,000 for the first year and $260,000 for years two through five, Frazier said.
Some operators argue the increase, which goes into effect Jan. 1, is squeezing the industry.
“We’re getting taxed out,” rental owner Ron Venable said.
“How much more money do they need? The owners of short-term rentals eventually get the short end of it while being charged these high fees. This is a money grab.”
Short-term-rental operators, like hotels and other lodging businesses, are required to collect from their guests a 15 percent tax applied to the room rates. Every dollar of room cost generates 15 cents of tax revenue, which operators must remit to the park board.
The park board collected $185,000 in short-term rental registration fees during the 2022 fiscal year, Frazier said.
City council members argued the fee was fair and some had advocated for an even sharper increase.
“I tried to get it to $350, but it didn’t fly, so I settled for $250,” District 6 Councilwoman Marie Robb said. “I thought it would be a number that was sufficient to cover the funds of the software.”
The increase in the registration fee wasn’t a money grab, Robb said.
District 4 Councilman Michael Bouvier also said the increase was justified.
“It’s something that is absolutely necessary for the city and I believe it’s not an inflated price for the registration fee,” Bouvier said.
Some short-term rental operators didn’t oppose the fee increase but wanted more detailed information about how the city would spend the new money.
“I have no problem with the fee,” Ana Draa, a board member of the Short Term Rental Owners Association of Galveston, said. “My concern is that the council did not show a breakdown on where the money was going to be allocated.
“It is absolutely imperative that city council should let the people know where exactly this money is going and where it will be ultimately allocated,” Draa said