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HomeAway most likely company affected by May 17 vote approved by the City Council.

FILE PHOTO - Commissioner Nick FishThe City Council is asking Portland voters for specific authority to tax short-term rentals, like those advertised on websites operated by HomeAway and Airbnb.

A proposed city charter amendment on the May 17 special election ballot would allow the council to more clearly impose transient lodging taxes on a wide range of rentals, from traditional brick-and-mortar hotels to rooms in private homes advertised by short-term rental companies.

The measure was sponsored by Commissioner Nick Fish and unanimously referred to the ballot by the council on Feb. 15. The measure is the latest move in a long-running series of regulatory battles between Portland and so-called sharing economy companies. It is in response to a federal court ruling that the charter does not clearly give the city the authority to collect its existing 6 percent transient lodging tax from short-term rental companies.

"HomeAway is an arrogant out-of-state company that doesn't believe the rules applies to it," says Fish, noting that Airbnb is collecting and paying the tax on rentals advertised on its site.

HomeAway declined to respond directly to the dispute. But Philip Minardi, policy communications director for HomeAway and its parent company Expedia said, "HomeAway welcomes an open dialogue with the city to help craft a solution that recognizes the important role vacation rentals have played locally."

The tax is collected by the Office of Management and Finance, which is overseen by Mayor Ted Wheeler. Fish says he sponsored the measure because of longstanding concerns with so-called sharing economy companies, including Uber, the ride sharing service.

The wording of the ballot title has been challenged in Multnomah County Circuit Court. As prepared by the City Attorney's Office, it says the change would authorize the council to "interpret" transient lodging taxes. But the lawyer representing an elector argues the title should say the change authorizes the council to expand the tax.

A Multnomah County Circuit Court judge will hear the challenge on March 14. Fish says he does not plan to launch a campaign in support of the measure unless HomeAway or someone else campaigns against it.

Six days later, in a separate federal lawsuit, the same judge will consider a request from HomeAway to temporarily prevent the city from enforcing any short-term regulations against it. HomeAway is seeking a temporary restraining order (TRO) against the city until a federal suit the company filed challenging all city authority over it is resolved.

Regulating the disruptors

Like other cities around the world, Portland has struggled to regulate companies that intentionally seek to disrupt traditional business models. For example, HomeAway and Airbnb claim they are not hotel or motel operators, but online services for private homeowners who want to rent out rooms. Likewise, Uber and Lyft claim they are not taxi companies, but online services for private automobile owners who want to give people rides.

As Fish sees it, such claims are ruses to avoid complying with regulations intended to ensure the safety of those who use their services. Among other things, the council has adopted policies requiring the housing rented through companies like HomeAway and Airbnb to be inspected and licensed for a small fee. Likewise, companies like Uber and Lyft are required to conduct background checks on the drivers who use them. The drivers are also required to carry a certain level of insurance.

The companies have resisted many of the regulations. For example, studies consistently find that relatively few of the homeowners who use HomeAway and Airbnb are licensed. The companies refer to homeowners as "hosts."

"I understand it's all about keeping costs down and increasing profits as much as possible. But if people understood how little concern such companies have for their customers or the communities where they do business, they would take their business elsewhere," Fish says.

But no company has fought Portland's regulations harder than HomeAway. Unlike Airbnb, it has refused to pay the city's transient lodging tax, claiming it is not a rental "operator," the term used in the charter. The city imposed a $326,500 fine on it for failing to pay lodging taxes and sued it for an additional $2.5 million for not following its regulations in 2015.

After the city filed the federal suit, U.S. District Court Judge Michael Mosman ruled that HomeAway was not covered by the charter's tax collection wording on June 7, 2016. The lawsuit was dismissed, but an amended complaint is pending.

In January 2017, the council amended the city code to clarity that short-term rental companies are "operators." The ballot measure is intended to reinforce that interpretation. In the meantime, HomeAway has filed two lawsuits against the city.

One in Multnomah County Circuit Court argues Portland does not have the authority to collect transient lodging taxes. The other, filed in federal court, argues the city's requirement to provide the names, addresses and contact information of their local hosts is preempted by federal law, The Stored Communications Act.

The federal suit also claims that the city's requirement that it prominently display a listing's short-term rental permit number provided by the Bureau of Development Services violates Section 230 of the Communications Decency Act and the First Amendment of the Constitution.

Among other things, the TRO motion to be heard on March 20 claims the city regulations will cause irreparable harm to HomeAway's operations. It claims the public interest will be served by protecting the company "from civil liability and lost consumer goodwill resulting from unlawful regulation."

After HomeAway filed the motion, the Revenue Division agreed to suspend seeking a $1.6 million fine against Airbnb for not providing the names and addresses of its hosts to city until it is resolved.

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