Item 5.1 - Workshop on Home Occupation Permit RegulationsG`�•{ OF PO�y
TyF Y 9 -k City of Poway
O�rY^!N THE COV
COUNCIL AGENDA REPORT
DATE: September 2, 2014
APPROVED O
APPROVED AS AMENDED O
(SEE MINUTES)
DENIED O
REMOVED O
CONTINUED
RESOLUTION NO.
RECEIVED REPORT
TO: Honorable Mayor and Members of the City Council
FROM: Daniel Singer, City Manager Q-A .
INITIATED BY: Robert J. Manis, Director of Development Services
Rich Whipple, City Planne
SUBJECT: Workshop on Home Occupation Permit Regulations
Summary:
At the March 4, 2014, City Council meeting, Councilmember Steve Vaus raised the
issue of Home Occupation Permits (HOP) and proposed to amend the Poway Municipal
Code (PMC) to eliminate HOP's and associated fees as a method to encourage home
based businesses in Poway (Attachment A). The City Council concurred with the
request to evaluate the requirements for an HOP and directed staff, to return with a
workshop regarding the City's HOP program and associated fees.
Recommended Action:
It is recommended that the City Council provide direction pertaining to Home
Occupation Permit Regulations and Fees.
Background:
As defined in PMC Section 17.04.392, a "Home Occupation means any occupation or
profession conducted or carried on entirely within a dwelling by the occupants thereof
which is clearly incidental and secondary to the use of the structure for dwelling
purposes and which does not change the character thereof and does not adversely
affect other uses in the zone of which it is a part. Home occupations shall be evaluated
in accordance with the provisions and criteria in Chapter 17.28 PMC."
The intent of the HOP is to ensure compatibility of the proposed business use with
permitted residential uses and the residential character of the neighborhood, and to
ensure that the home occupation is clearly a secondary and incidental use to the single -
family home. Any person proposing to operate a home based business in the City of
Poway is required to obtain an HOP and to conduct business in compliance with the
conditions of HOP approval. Currently, the City's Master Fee Schedule requires an
initial fee for an HOP of $116, with a renewal fee of $21 due every two years.
The City of Poway's HOP criteria were originally derived from the San Diego County
Code and incorporated into the City's first Zoning Development Code in 1983. Since
then, there have been three minor revisions to the criteria. The first was in 2008, to
clarify the definition of home occupation and adjust some of the criteria, the second was
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in 2012, to require renewal every two years after the initial registration and the third was
in 2013, to waive the permit fee for active duty military families and veterans. Under the
current HOP criteria (PMC Chapter 17.28), a prospective home business owner must
complete the HOP application and initial each of the conditions, noted below, to ensure
that the operational requirements have been read and understood. These regulations
help ensure that a proposed home business is truly an ancillary use to the main
residence and that such use is not disruptive to the residential character of the
neighborhood.
As described in PMC Section 17.28.010, current conditions of approval for a Home
Occupation Permit are:
A. There shall be no stock in trade or exterior storage of materials in the conduct of
a home occupation.
8. A home occupation shall be conducted entirely within a dwelling; if in an attached
or a detached garage, shall not impede the use of said garage for vehicle
storage.
C. Electrical or mechanical equipment which creates visible or audible interference
in radio or television receivers or causes fluctuations in line voltage outside the
dwelling unit shall be prohibited.
D. Only the residents of the dwelling unit may be engaged in the home occupation.
E. There shall be no sale of goods on the premises.
F. The establishment and conduct of a home occupation shall not change the
principal character or use of the dwelling unit involved.
G. There shall be no signs other than those permitted by this chapter.
H. The required residential off - street parking shall be maintained and any need for
parking generated by the conduct of such home occupation shall be met off the
street.
1. A home occupation shall not create vehicular or pedestrian traffic in excess of
that which is normal for the zone in which it is located.
J. Passenger vehicles only shall be permitted in connection with the conduct of the
home occupation. Passenger vehicles include motorcycles, automobiles, pickup
trucks and vans.
K. Renewal of Existing Permit. All home occupation permits which are renewed
shall be valid for a 24 -month term unless otherwise revoked. Permits shall be
required to be renewed before the expiration date shown on the permit. The City
shall notify all permit holders at least 30 calendar days prior to the date of the
renewal. (Ord. 753 § 4, 2013)
Application Process
In Poway, all HOP applications are processed through the Customer Services Division
of the Administrative Services Department. An HOP application can be submitted either
at the City's Customer Services Counter in City Hall or online through the City's website.
Each application is reviewed by Customer Services Division and Planning Division of
the Development Services Department for completeness and compatibility with other
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land use and residential zoning regulations. Prior to submitting the application, the
applicant must agree to all criteria to operate a Home Occupation and sign the
application certifying that they understand and will comply with all requirements. The
review process for an HOP application is tracked through the City's database program
and often involves follow -up conversations with applicants to validate correct address,
phone number and /or email address information. It is not uncommon for applicants to
submit incomplete or vague applications to describe their business. It is, therefore,
necessary to contact applicants and request that they clarify the description of their
business. Research on the property may also be conducted to determine if the property
has been the subject of previous code violations. A HOP will not be issued until the
violation has been cleared. Once the review has been completed by Customer
Services, and Development Services confirms the business use and zoning compliance,
staff will approve the application and send the applicant a certificate. The average time
to process an HOP is typically five to seven business days depending on the
information submitted by the applicant.
Types of HOP's that are in Poway include a variety of professions and trades such as
general contractors, internet consultants, attorneys, mobile vendors, landscape
contractors, cleaning services, music lesson services and cottage food industry
preparation.
Poway's HOP Fee History
Beginning in 1983, the HOP fee was $20. The fee was increased to $25 in 1991 and
remained until 2008, when it was raised to $100. As part of the Master Fee Schedule
update in 2009, the fee was increased to $116 to reflect the City's estimated cost to
process the application. HOP renewal fees are $21 and due every two years. As
mentioned above, the fees reflect the costs associated with the cumulative estimated
amount of staff time required to review the initial application, request follow -up
information, site visits (if needed), research, etc.
Table 1
Powav Home Occupation Fees
Year
Permit Fee
Renewal Fee
1983 -1991
$20
n/a
1991 -2008
$25
n/a
2008 -2009
$100
n/a
_2009-present
$116
$21
Professions, trades or businesses operated in commercial, industrial or other non-
residential zones are required to obtain a City of Poway Business Certificate. Fees for
Business Certificates are the same as HOP's, $116 for a new certificate and $21 for a
renewal due every two years. It is important to note that in Poway, businesses located
in residential zones, which are required to obtain an HOP, are exempt from obtaining a
Business Certificate.
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Code Enforcement
In the past three years, the City has issued an average of 110 new HOP's annually and
issues an average of 420 HOP renewals. Because HOP's are businesses in residential
areas, there is an increased possibility of neighbor complaints. In 2013, Code
Enforcement staff investigated 14 HOP - related complaints and there have been six
complaints to date in 2014. Types of complaints include:
• Employees coming to property (the most common);
• Work vehicles stored on the property;
• Excessive vehicular traffic coming to property;
• Exterior storage of goods;
• Fabrication - generated noise from machinery;
• Other noises generated by the business;
• Emanation of odors;
• Business is being conducted out of, or occupying the garage to the point where
the garage cannot accommodate vehicle parking as required.
Each complaint requires a Code Compliance staff investigation. In some cases, the
complaint is unfounded and a result of unrelated neighbor grievances or perceived
unfair business competition. Valid complaints can require days, weeks, or even months
of staff involvement to resolve. Sometimes resolution involves reminding the business
owner of the permit they signed when they agreed to comply with all of the HOP criteria
in the PMC.
Findings:
It is possible for a resident to start conducting a business from their home without the
City's knowledge. However, Customer Services staff indicates that most business
owners apply for an HOP because it is a common practice and may be required for the
validation of the business to the Internal Revenue Service and /or the operational
requirements of their business. Customer Services staff indicates that the $116 fee is
not an issue for a majority of the HOP applicants because it is seen as a cost of doing
business as well as being tax deductible. Equally, Poway business owners appreciate
that the HOP is valid for two years, and that the renewal fee is relatively low. Last year,
the City approved an HOP amendment to waive HOP fees for active duty military
families and veterans. In 2013, eleven veterans received new HOPs and five others
renewed.
Summary of HOP regulations in other San Diego County cities
Staff conducted a survey of the other cities in San Diego County to determine how each
regulates HOPs and business licenses. Table 2 details the comparisons between each
city in San Diego County. The following is a brief summary of the findings:
• All cities require an applicant to complete and sign an HOP form that contains, or
references, the business operational conditions of approval.
• Home occupation regulations are contained within the Municipal Code of each
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city.
• Thirteen of eighteen cities require both an HOP and a business
license /certificate.
• The remaining five cities, including Poway, only require an HOP in residential
areas and do not require a business license.
• In 1998, the San Diego County Board of Supervisors eliminated the requirement
for any business certificates (licenses) and /or HOPs in the unincorporated
portions of the County of San Diego.
New applications
• Stand -alone HOP fees vary from $25 to $220.
• For cities that require both an HOP and a business license /certificate, the fees
vary between $25 and $50, plus a percentage of the business annual gross
receipts.
Renewal
• Thirteen of eighteen cities require an annual HOP renewal as part of the annual
renewal of their business license.
• Four of the eighteen cities do not require renewal of their HOPs.
• The City of Poway requires renewal of HOPs every two years.
• In most cities, the business license /HOP renewal fee is the same as the original
application fee.
Table 2 below, provides a summary of comparative HOP and Business License Permits
for cities within San Diego County. In the table, "GR" refers to Gross Receipts, "emp"
refers to employee and "sf' refers to square -feet.
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Table 2
Based on Councilmember Vaus's discussion on home occupations, the intent of
eliminating the HOP is to reduce cost and processing requirements, thereby
encouraging more home based businesses. Under the proposal, the HOP application
and fee would be eliminated, but the PMC criteria would remain, and would still be
applicable to any home occupation. Elimination of the HOP could result in activities that
could affect adjoining residences and the neighborhood. It could also result in a
resident unwittingly establishing a home occupation that is not permitted in a residential
zone, to find out later that they must comply and cease business operations. Code
Enforcement would be more difficult without a signed HOP where the applicant agreed
to comply with all PMC requirements.
6 of 12 September 2, 2014 Item # 5.1
Comparison of San Diego County Cities
Home Occu
ation Permits
x
E
y
z,
Carlsbad
Yes
No
Yes
No
Yes
$25 + % of GR
Same
Chula
Yes
$25
No
No
Yes
$25 + $6.5 /emp if >5
Same
Vista
Coronado
Yes
$31
No
No
Yes
% of GR starting @ $31
Same
Del Mar
Yes
No
Yes
No
Yes
% of GR starting @ $30
Same
El Cajon
Yes
No
Yes
No
Yes
$41 + $3/ employee
Same
Encinitas
Yes
No
Yes
No
Yes
$36 (registration) includes
$21
Bus and HOP
Escondido
Yes
No
Yes
No
Yes
% of GR starting @ $45
Same
Imperial
Yes
No
Yes
No
No
N/A
N/A
Beach
La Mesa
Yes
No
Yes
No
Yes
$36+ $3 /emp.
Same
Lemon
Yes
$46
Yes
$46
No
N/A
N/A
Grove
National
Yes
$220
No
No
Yes
$101
$50 min/
City
%of GR
Oceanside
Yes
$51
Yes
No
Yes
$76 min + % of GR
Same
Poway
Yes
$116
2 -YR
$21
No
N/A
N/A
$52 <12 emp. Or $125 +
San Diego
Yes
No
Yes
No
Yes
$5 emp. for 13> emp.
Same
San
Yes
No
Yes
No
Yes
$20min +$5 emp.
Same
Marcos
Santee
Yes
$40
Yes
$29
No
N/A
N/A
Solana
Yes
$110
Yes
$17
No
N/A
N/A
Beach
Vista
Yes
$45
No
No
Yes
$15 min + % of GR
Same
County
No
No
No
No
No
N/A
N/A
Based on Councilmember Vaus's discussion on home occupations, the intent of
eliminating the HOP is to reduce cost and processing requirements, thereby
encouraging more home based businesses. Under the proposal, the HOP application
and fee would be eliminated, but the PMC criteria would remain, and would still be
applicable to any home occupation. Elimination of the HOP could result in activities that
could affect adjoining residences and the neighborhood. It could also result in a
resident unwittingly establishing a home occupation that is not permitted in a residential
zone, to find out later that they must comply and cease business operations. Code
Enforcement would be more difficult without a signed HOP where the applicant agreed
to comply with all PMC requirements.
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Summary
Based on the City Council's direction to evaluate the HOP regulations, current fees, and
applicability, the following summary is provided for City Council consideration.
1. Retain the HOP application requirements, regulations and fee.
Advantages:
■ The application form would continue to allow the City to identify who, where,
and what type of home based businesses are being conducted in Poway.
■ An approved HOP would continue to provide the business owner the validity
of the business for tax,and operational requirements.
■ A signed application would assist the applicant in understanding the
conditions of the HOP approval.
■ Code Enforcement is aided with a signed application and HOP on file with the
City.
Disadvantages:
■ Applicants would be required to pay a fee for new applications and renewals.
■ Application processing time may be perceived to delay opening of business.
2. Eliminate the HOP, but retain regulations in PMC.
Advantages:
■ No delay in opening of business.
■ No application to fill out and process.
■ No fees to pay.
Disadvantages:
■ Without a HOP, a home based business owner may have a more difficult time
validating their business to the IRS and /or meeting the operational
requirements of their business. This could include not being able to prove an
owner has a legitimate business to potential customers, banks and other
institutions with whom the business would interact. It could affect the ability to
get a business loan, receive business discounts, and /or interact with other
business organizations.
■ Elimination of the HOP may result in a retreat from small leased commercial
office space within the City back to the home because they no longer would
require an HOP or business certificate to operate the business from the
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home. This may, in turn, result in increased commercial vacancy rates that
would affect other businesses and corresponding City revenues.
■ There would be an assumption that business owners would read the PMC
regulations or check with City staff before establishing a business in order to
understand and comply with PMC regulations for HOPs.
■ Without knowledge of HOP criteria, business owners may unknowingly create
conflicts with surrounding neighbors.
■ The Code Compliance Division could likely see a potentially significant
increase in neighborhood complaints, which would divert their time from other
cases.
3. Elimination of the HOP fee (retain HOP application and regulations in PMC).
■ The City would lose an estimated $21,200 annually in fee revenue generated
by the current HOP program. The continued cost to implement and monitor
the HOP program would have to be offset by the General Fund or other
funding source.
Fiscal Impact:
Based on an estimated 110 new HOPs and 420 renewal HOPs issued each year,
projected revenue from HOP fees is $21,200 annually. These fees are established to
offset, or partially offset, staff costs to process and monitor HOPs. If the fee is reduced
or eliminated, revenue losses will be absorbed by the General Fund.
Environmental Review:
The matter of this workshop discussion is not subject to the California Environmental
Quality Act (CEQA). Any subsequent action by the City Council to amend the PMC
would be subject to additional environmental review.
Public Notification:
None
Attachments:
A. Councilmember Steve Vaus Memorandum, Home Occupation Permit (dated
March 4, 2014), including additional material received for March 4, 2014 meeting.
K \planning \14 Reports \Workshop \HOP \rpt.docx
8 of 12 September 2, 2014 Item # 5.1
TO: Mayor and Members of the City Council
FROM: Steve Vaus, Councilmember
DATE: March 4, 2014
SUBJECT: Home Occupation Permit
Apple, Amazon, Google, Hewlett- Packard are all fabulously successful businesses with
an interesting commonality ... they started as home businesses.
Poway should do everything possible to encourage and incubate business - everything
possible to drive home the message that POWNAY MEANS BUSINESS. With that in
mind, I can think of no reason to require a Home Occupation Permit (and associated
fees) when a resident works out of their home to chase their entrepreneurial dreams.
With the concurrence of the Council I propose we eliminate the permits and fees
currently associated with Home Occupations. I suggest Poway Municipal Code Section
17.28.010 (General Requirements) be revised as follows:
17.28.010 General requirements
Home occupations may be are permitted only when in compliance with the conditions
listed in this chapter.
17.29.020, the fee shall be kn aGGeFdaRGe with these adopted by Qty GOURGil FeselutiqR.
The Permit shall be issued for a term of 24 Fnenth
�.+v.....a v�.c..n vv .vvuvv
A. There shall be no stock in trade or exterior storage of materials in the conduct of a
home occupation.
B. A home occupation shall be conducted entirely within a dwelling; if in an attached or
a detached garage, shall not impede the use of said garage for vehicle storage.
C. Electrical or mechanical equipment which creates visible or audible interference in
radio or television receivers or causes fluctuations in line voltage outside the dwelling
unit shall be prohibited.
D. Only the residents of the dwelling unit may be engaged in the home occupation.
E. There shall be no sale of goods on the premises.
9 of 12 ATTACHMENT A September 2, 2014 Item # 5.1
Home Occupation Permit
February 18, 2014
Page 2 of 2
F. The establishment and conduct of a home occupation shall not change the principal
character or use of the dwelling unit involved.
O. There shall be no signs other than those permitted by this chapter.
H. The required residential off - street parking shall be maintained and any need for
parking generated by the conduct of such home occupation shall be met off the street.
1. A home occupation shall not create vehicular or pedestrian traffic in excess of that
which is normal for the zone in which it is located.
J. Passenger vehicles only shall be permitted in connection with the conduct of the
home occupation. Passenger vehicles include motorcycles, automobiles, pickup trucks
and vans.
PMC Section 17.28.020, should be struck in its entirety.
LIM
10 of 12 September 2, 2014 Item # 5.1
From: Marcia Kipp [mailto:marcia.kipp sbcgiobal.net]
Sent: Tuesday, March 04, 2014 12:57 PM
To: Steve Vaus
Subject: Home Occupation Permits
Hello Mr. Vaus,
I think you are a good addition to the Poway City Council. I like that you bring forth fresh ideas.
Although I appreciate what you are trying to achieve by doing away with Home Occupation
Permits, I have some concerns.
The value of the permit it is that the applicant discloses the nature of the proposed business to the
city, and the applicant agrees in writing that they understand and agree to abide by the provisions
in the municipal code. By this process, the city staff can determine if the proposed business is
suitable for a residential area. This results in mutually agreed upon limits to the business. Should
the business grow, or the scope of the activities change to the point that the- business is no longer
suited for a residential zone, then the city has the power to revoke the permit. Without the permit,
there is little to encourage a businessperson to take on the additional overhead of relocating their
company to a properly zoned commercial or industrial area. Some will relocate on their own at
the appropriate stage because they know it will allow their business to grow, however some will
not.
If you lose the Home Occupation Permit, then you lose not only an enforcement tool, but a
means of communication between the home -based businessperson and the city. Without this
dialogue, I foresee a greater instance of neighbor - initiated complaints against home based
businesses that are operating outside the framework of the municipal code and without the city's
knowledge.
Another item that should be addressed is what would happen to people who currently hold a
permit that contains conditions? By this; I mean businesses that engage in activities that are not
allowed in a residential zone, but are being allowed to operate as long as they do "x,y, and z ". If
the permit was no longer required, would the conditions disappear? Would the business still be
able to operate out of a home, or would it then be required to move to an appropriately zoned
area?
Whatever the outcome, the section of the municipal code pertaining to Home Occupations
should be clarified. On the city webpage where the link to download the permit is, there is the
provision stating "... no mechanical equipment used, except that necessary for housekeeping purposes... ".
This statement is missing from both the checklist on the permit application and from the
municipal code. Including this provision in the text of the municipal code regarding home
occupations would provide clarification for enforcement purposes.
11 of 12 September 2, 2014 Item # 5.1
The section of the municipal code covering the intent of the residential zoning brings up issues
such as protection from noise, fumes, etc. Perhaps it would be helpful to reiterate these items in
the section pertaining to home occupations?
Neither of these items would be more restrictive, as the prohibition against manufacturing
already exists in the municipal code, but they would provide clarification, as the current list of
prohibitions in the section on home occupations, is vague. Additionally, a person wishing to
ascertain whether their proposed business was a compatible home occupation would not have to
hunt through the municipal code to see all of the conditions that must be met.
The overarching goal is to provide a welcoming environment for innovation, but still provide
protection for residents against those who are not proactive in minimizing the effect of their
business on their neighborhood. For this reason, the Home Occupation Permit is of value and
should remain.
Thank you for your service to the community.
Best regards,
Marcia M. Kipp
12 of 12 September 2, 2014 Item # 5.1