Does the City of Malibu Budget Depend on Short-Term Rental Income?

Projections show how a partial or full ban on short-term rentals in the City of Malibu could potentially affect the city’s budget from fiscal year 2020 up to fiscal year 2030.

A ban on short-term rentals could end up costing the City of Malibu $27,527,527 over the next decade—money the city now depends on for its balanced budget.

That’s according to projections provided to the Malibu City Council Administration and Finance Subcommittee last Thursday, Oct. 3, factoring in predicted tax revenue of about $2.75 million each year from short-term rentals alone.

Comments made by some of the two dozen community members who packed the City Hall Multipurpose Room for the event fell along the familiar divide between those who want to lease out their homes and those who feel the neighborhood rentals are a nuisance—if not an all-out danger.

“We don’t have parties, we don’t have noise, we don’t have beer bottles,” one resident, who said she has a short- term rental property, stated. “You have to regulate it: Two complaints, out. No more.”

Others argued house parties, trash and public nudity were disturbing the peace of their neighborhoods.

But when it came to the financial wrangling, there were more concerns that the city is now reliant on income from the controversial industry.

“Are we operating a city that’s too expensive than the revenue we have?” one speaker asked.

Losing the money from the city’s budget could create financial issues down the road, according to City Manager Reva Feldman.

“Our concern is it’s going to take some time for FEMA to pay us back,” Feldman said, referring to the $8.4 million owed to Malibu by the federal agency (together with the California Office of Emergency Services) following the Woolsey Fire. “We have a lot of unknown costs ahead of us. If we have another several years of rain, which we’ve been told by experts to prepare for three to five years of rain, we’re going to potentially have millions of dollars of unreimbursed [storm damage].” 

Additional unreimbursed costs, Feldman added, included consultants to assist the community with rebuilding after the Woolsey Fire—with salaries estimated at $3 million. 

Council Member Skylar Peak said it was “a little bit frustrating how reliant the city’s become” on the short term rental tax. His frustration was “if this stopped, how much of an impact it would have on day-to-day operations.”

The projections, prepared by financial consultants Raftelis (at the cost of just under $50,000), also included projections for how much it would cost if the city were to enact restrictions to short term rentals, cutting them back about 50 percent from current numbers.

Though analysts suggested halving the number of operating Airbnbs and other short- term rentals could incur extra costs for the city—such as a need to employ more code enforcement officers—the cost projection for a partial ban came to $13,763,763—exactly half of what a full ban would cost the city.

Those numbers did not impress some community members, who complained that the report was too simplistic.

Comments included complaining “you can’t forecast 10 years. You can forecast one year, you can project five years, you can’t go any further than that.” 

One public speaker went so far as to say “the quality of this report, I thought, was community college accounting 101—not very deep. I think this was kind of wasted money.”

When it came to the idea the city now relies on income from transient occupancy taxes raised from short-term rentals, residents suggested the best thing to do would be to cut back on city services and programs—one went so far as to suggest removing the city manager’s office to start. (The City of Malibu is what’s known as a general law city; it operates under the council-manager form of government.)

The financial report is slated to go before the full city council later this year.