Into the woods

by David Forbes May 21, 2015

The city manager tries to put the brake on living wage increases, Council wrestles with short-term rentals and a split vote on a new development as local government heads into a tense summer

Above: City manager Gary Jackson, file photo by Max Cooper

As summer comes on Asheville City Council is into the meat of the city’s annual political decision-making cycle. There’s the need to craft a budget, one of the biggest undertakings of the year. Then there’s the city’s housing crisis, something officials now repeatedly acknowledge is bad and getting worse, and debates over what a solution to that might look like, whether it’s bringing vacation rentals to heel or approving a controversial development.

On top of all that it’s an election year, and now it’s clear that with only one incumbent, Vice Mayor Marc Hunt, running for re-election, there’s the possibility that Council’s dynamics could shift considerably.

On May 12 Asheville’s elected representatives sat down for an afternoon and evening of meetings that saw all these issues collide, with some rare demonstrations of tension in a city government that usually likes to eschew any appearance of public division. By the end, the evening would see differences between city staff and the elected officials on two major issues, as well as a close, divided vote on Council itself.

Bring out the books

Council began things a little early, with a work session on the budget two hours before the start of its regular meeting. This was the second such session this year. At the first, two weeks before, Council mulled a possible tax increase to deal with declining state revenue.

This one focussed on the city’s capital projects — big investments in infrastructure or future projects — and an overhaul of the way it deals with employee pay.

That second item concerned the lion’s share of the city budget and it took the lion’s share of the session’s time. Employee pay and benefits was 64 percent of last year’s budget, an amount covering everything from $10.48 an hour for a seasonal parks and rec laborer to $35,019 a year for a beat cop to $168,000 a year for City manager Gary Jackson.

Segal Waters, a national consulting firm, had just completed a study of the way the city pays its employees, including an analysis of how its salaries were or weren’t competitive with other areas.

Linda Wishard, the firm’s senior consultant, laid out the recommendations. The months-long study saw the firm review the city’s jobs and compare them to similar ones in other cities. Overall, she said the city was competitive.

“You are competitive, you are at-market with your general positions,” she said, with fire positions somewhat below the market and some police positions slightly over.

But there were adjustments to be made, “from a market perspective,” as Wishard put it. While the city was competitive overall, some positions weren’t and needed a raise. Specifically, both police and fire positions needed an overhaul, especially to ensure that the minimum pay was attractive, that employees could advance and that they would receive regular raises. Rank-and-file Asheville Police Department officers have lagged behind their counterparts at the Buncombe County Sheriff’s Office due to limited opportunities to advance their pay.

Those steps included bringing employees below a market rate up to it, reintroducing increases for longer tenure. Total, these steps would cost $1.1 million. The budget city staff are drawing up includes that along with a one percent pay increase for all city employees. Wishard also recommended increasing pay based on performance.

Council member Cecil Bothwell asked if the city’s pay structure was “top-heavy.” Wishard instead attributed some workers being paid below market rate to the city freezing regular advances along pay “steps” in 2008 during the recession. Since that time, the city has mostly opted for across the board pay increases, raising all employees’ salaries by the same percentage.

Jackson said he wasn’t surprised by the study’s findings, noting that he’d left the matter to the consultants’ “professional insight,” except for the fact that the city’s overall pay had remained competitive despite the area’s sharply rising cost of living.

“All city employees are not receiving an adjustment at all with regards to this study, it depends on where they are in the pay range,” Wishard said and the one percent raise “ensures everyone gets something.”

Human Resources Director Kelley Dickens estimated that combined with the one percent raise the total amount of changes to personnel pay would tally $1.6 million.

Pennies from heaven

The other major pay matter raised was bringing all city employees up to a living wage. This amount is $12.50 an hour without health benefits or $11 with. This is the amount required to make ends meet without public or private assistance.

The move followed a report late last year by the Blade that showed 140 “temporary or seasonal” city employees paid at rates below a living wage, in some cases far below, while the city touted itself as a living wage employer. Despite the city’s use of the term “temporary or seasonal,” the city’s criteria puts any worker working 20 hours or less a week in that category, even if they’ve worked consistent hours over many years. The city has had a living wage ordinance since 2007, and most recently updated it in 2013, but “temporary and seasonal” workers were left out of the living wage guarantee.

After that report came out, a majority of Council said that the rates should go up to put all city workers at a living wage or higher.

Right now, “temporary and seasonal” workers make closer to the minimum wage than the living wage. Dickens used workers at the U.S. Cellular Center, many of whom are put in this category, as an example, with concessionaires starting at $7.25 an hour, concession stand manager at $9.56 an hour and concession supervisor at $10.11. If the new budget brought them all up to a living wage, concessionaires would start $12.50 and all the other positions would get a bump up to a higher rate of pay accordingly. Such changes would take about $250,000, Dickens said, with the number of workers falling in this category ranging from 150 to 350 depending on the time of year.

“Staff is continuing to do its due diligence to review this and the implications of implementing something like a living wage,” she added.

Council member Jan Davis asked if Just Economics, which calculates the living wage, did so on a “scientific” basis. Bothwell replied that whether or not Council members personally agreed with the numbers, Just Economics’ rate was what its living wage rule was based on. As it’s something the city has touted in the past, he said, the organization should be angry if the city did so when “in fact, we are not paying a living wage to everyone we employ.”

Wishard, the consultant, came up to warn Council against a living wage for all city workers, declaring that it would put Asheville pay at a higher rate for some jobs than the “marketplace” and might lead to other city employees at the lower end of the salary scale to want a raise too.

“It could be an employee morale issue if they see a concessionaire making $12.50 an hour and they’re making $11 an hour,” she said. “If you went to move your entire structure up because of this I think it would falsely inflate your position in the marketplace. You would be leading the market quite substantially.”

Mayor Esther Manheimer asked how other cities had successfully incorporated a living wage into salaries for their workers, and Wishard replied that no city had and, for the issues she cited, she was against cities paying all their workers a living wage.

“When they see the numbers they get frightened and don’t do it,” she said.

“We are presenting, outside of the temporary workers, that we are a living wage employer,” Bothwell said. “So there shouldn’t be any quibbling that they’re not getting a living wage when someone else does because our base pay has to be a living wage or we’re lying.”

Wishard replied that part of the issue was the “emotional impact if an employee is going to compare their pay, even with a benefits package, to a temporary worker. What I have been used to seeing is severe employee morale issues because they’re not making what they think they should be making.”

“Yeah, you’re kind of swapping one problem for another there, because these people’s morale matters too,” Council member Gordon Smith said.

Hunt noted, after some brief back-and-forth with staff, that the total of benefits would put someone who made $11 closer to $15 an hour, but noted there could be a “psychological impact.”

Jackson said city staff were preparing to put raising temporary and seasonal employees into the budget at a living wage rate. But in this case the city manager was particularly hesitant about this particular aspect of the budget and pushed back.

“We’re here today to tell you that we know what the cost range is, we’ve been advised by the professionals in the field that you have an inconsistency in philosophy there,” Jackson said after Wishard’s remarks.

While he still planned to bring Council a budget that included the raise for “temporary and seasonal” employees, he wanted more time for analysis to see if “concessionaires, lifeguards, everything that’s included in this category really should be considered as a permanent part-time position.” He wanted to see if the city could “distinguish within this pool” to see if some employees could be kept at a lower rate. Staff, he noted, would “sharpen our pencils” to see what divisions could be made within the pool of “temporary and seasonal” employees.

“There’s some distinction that might need to be made,” he said, and while he claimed the city is moving forward with Council’s goal that all employees make a living wage, he also noted Wishard’s expertise, and all the work that had gone into the study.

After all that pencil sharpening, staff will present the budget to Council on May 26, with a public hearing to follow on June 9 and Council due to pass a budget before July 1.

Houses and industry

As Council moved into its formal meeting, it ran into one of the city’s other major hurdles: the housing shortage and the skyrocketing rents it brings with it.

Following a report, released earlier this year, that found a dire shortage, Council members have dubbed the issue a crisis and some have repeatedly invoked it when approving new developments, even controversial ones.

But when the 108-unit Greymont Village Apartments (or precisely, the zoning change necessary for the project to proceed) came up, the fact that Council remains divided on exactly how to address that crisis became abundantly clear. The current Council is generally characterized by unanimous votes, usually with only one or two dissenters, while this issue would prove a good deal more contentious.

Usually, by the time a development makes its way to Council, staff have given it their stamp of approval. Often, developers will request a delay or wait to bring a project forward

But in this case, the Greymont Village apartments, a project that straddles the city limits had failed to nab that endorsement. For one thing, the developer wanted to build on industrial land and in an attempt to deal with one of its other major problems — Asheville’s low wages — repeated Councils have set preserving potential industrial land as a major priority, in the hopes of attracting somewhat higher-paying jobs.

“Staff continues to not be in favorable support of this project,” planner Jessica Bernstein told Council. “We have a clear comprehensive policy that states that industrial-zoned land should be preserved for industrial uses.”

For another, the developer was only offering to make some of the units “workforce” housing for five years (here’s more about how the city defines “affordable” and “workforce” housing). The city generally wants a developer to provide units at the lower “affordable” level and wants them to stay at that level for a decade or more. Staff also concluded there isn’t enough residential infrastructure nearby to support a denser housing development.

And last of all, the Asheville Fire Department had concerns that the level of sprinkler system the developer wanted to put in wasn’t the level of protection it desired for a housing site with a single entrance and exit. If the whole project was in the city, it would be required to install a higher-level sprinkler system by the AFD.

“We just feel that this is not an appropriate location,” Bernstein added. If approved, staff wanted more commitment to affordable housing and improved fire safety from the developer.

But not so fast, attorney and former mayor Louis Bissette, speaking for the developer, said. In this case, the Industries for the Blind, which owns the land, had tried to find a buyer and had no takers for many years. He claimed the apartments would help provide housing for the industry’s workers, who would receive units at a five percent discount, in an area that was more residential than in previous years and “could really use some expansion of multi-family units.”

“This project has been going on for a long time,” he said. “The thought that this is going to be used industrially is a little hard to comprehend.”

“We currently have over 20 employees who would like to live in the location and more that might be interested in the future,” Randy Buckner, director of Industries for the Blind, noted. “We feel this will help fill some of the rental property need in Asheville.”

Council member Chris Pelly asked Buckner how much employees at the business made ($8 to $18 an hour, he answered) and then noted that at the apartment’s rates, that would mean half of their income would go to rent. The director acknowledged that “some could, some could not” meet the rates, but that many received disability checks in addition to their work at the industries.

Buckner added that currently many of IFB’s workers were already paying similar rates for rent elsewhere, but also incurring major transportation costs they wouldn’t have at these apartments.

Bissette also said that the sprinkler system the developer would install was perfectly safe, and the one the fire department had requested would make the project unaffordable.

During public comment on the issue Betty Ford, one of the workers at Industries for the Blind, asserted that the apartments would be a major boon due to decreased transportation costs. “With that savings, we could afford the rent difference” and her whole family could move to Asheville.

But Jenny Hassler, controller at the neighboring PolyLinks, a plastics manufacturing firm, said they had issues with traffic and problems with housing residents near an industrial neighbor.

“PolyLinks, as an industrial neighbor, is looking for complementary industrial neighbors,” she said. “Other production plants located nearby would enhance that exchange of technology and skills. A separation of residents from industrial is generally preferred by both parties.”

For Council, the split came down to how they viewed different ways of addressing the housing crisis. For Hunt, things are dire enough that the city isn’t in a position to turn down such a project, even though he had issues with some aspects of the project.

“The report we recently got that indicates a dire lack of housing in all levels of the community is really important,” Hunt said. “One thing I think we’ve learned from that is that adding to supply at workforce rates actually supports affordability across the whole spectrum. To the extent supply is not added, it will skew supply and demand in a way that will drive rents up.”

Given that this developer wasn’t going to include more affordable units, Hunt added, he felt that the need for more overall supply was still important, though “it’s not my favorite project I’ve ever voted for” but “if we continue to turn away projects because developers don’t meet the 10 percent [affordable unit] threshold, we ultimately harm affordability.”

Davis similarly noted that while he had some issues with the development not meeting a higher standard of fire protection, he felt that any industrial use for the site was unlikely at this point, and it was better to put housing there.

“I have a real issue with the industrial site being the stumbling block when you own the property, you are the industry that’s there, you have no real need for that property for expansion,” he said.

But Smith shot back, saying that for several times over the past few months, Bissette had come before Council representing developers that weren’t making any real, significant commitment to affordability.

“A five year commitment is not a meaningful commitment and I wouldn’t even consider it as an affordable housing condition,” he said.

He also volleyed back at Hunt, asserting that “we haven’t denied any of them lately,” that builders were bringing better proposals forward and that the Greymont project had multiple other issues.

“The fact we’re willing to lower the fire standards, just cause? I’m no ok with that,” Smith continued. “I think the message we send if we approve this tonight is that you don’t really have to do affordable units.”

Bothwell too, had major issues with the project, saying Council was granting far too many exemptions.

“We’re forgiving our fire chief’s recommendation, we’re introducing residential into an area surrounded by industrial uses, we have the nearest neighbor with reasonable objections to the project,” he said. “It seems to me that if it’s developable as a residential pad it’s also developable as an industrial site.”

After the debate, Greymont Village passed by a single vote, with Bothwell, Pelly and Smith dissenting.

The long and short

Discussion of the housing crisis didn’t let up as Council moved into its next issue: the controversy about short-term rentals. Due to Asheville’s desirability as a tourist destination, more apartments and houses than ever are being rented out on sites like AirBnB. In some cases, the people doing this are renting out a room to help make ends meet. In others, large landowners or companies are running multiple properties at considerable profits. Proponents want the rules relaxed, while opponents claim STRs worsen an already-dire housing crisis by taking units off the market, and harming neighborhoods to boot.

City government has wrestled with the issue over the past year-and-a-half as the industry has boomed due to AirBnB and Asheville’s nature as a tourist destination. Council held a forum earlier this year on the topic.

Short-term rentals are banned in Asheville’s residential neighborhoods, though they’re allowed in other areas like downtown. “Homestays,” where a person rents out a room of a house they live in, are allowed, but require at least a 2,500 square foot home, along with some other requirements.

In an analysis for the Blade, local researcher and writer Joy Chin compared Asheville’s experience to that of other cities. She concluded that the landowners or companies renting multiple properties often hid behind the more working class-homeowners renting out a room in pushing for relaxing rules on short-term rentals, which the analysis concludes do significant damage to the affordable housing supply.

Chin recommended banning short-term rentals outright throughout the city, including in the commercial areas where they’re currently allowed, while relaxing the restrictions on homestays so more modest income homeowners could help defray costs by temporarily renting out rooms in their own homes. She also suggested increased fines and active enforcement.

Over the months of debate, four rough positions had crystallized: allowing short-term rentals with minimal or nearly no regulation, allowing them in most areas of the city, but with more stringent regulation, only allowing homestays where the owner or tenant was on-site and, lastly, continuing the current ban with stepped up enforcement to stamp out short-term rentals.

While it wasn’t putting the issue to a formal vote or public comment, Council decided the time had come to hash some of their own thoughts on the issue. Over the course of an hour-long discussion, Council largely sided with the third of the above options with all members — to varying degrees — affirming that they wanted to keep the ban on short-term rentals in neighborhoods, while relaxing the rules on homestays (specifically by eliminating size, meal, parking and distance requirements) to allow small homeowners to do them as well. It also adopted elements of the fourth, advocating more active enforcement and increased fines.

“I am in favor of keeping the current regulations, which basically prohibits it except in some zoning areas,” Council member Gwen Wisler said. “I do think it tends to affect neighborhoods negatively and as we’ve talked about tonight and several times, we just need housing stock in the city of Asheville.”

“The extent of stock used as short-term rentals right now takes a lot off the market,” Wisler continued. “I’ve heard some people say ‘well it’s only 650 units.’ If you follow our deliberations, ever, for us to get three units of affordable housing at all is incredibly painful. To add even a portion of those units that are short-term rentals on the market as long-term rentals is important to me.”

Smith agreed with Wisler and also brought up the possibility of banning short-term rentals in the commercial areas where they’re currently allowed, such as downtown.

“I’m currently leaning towards prohibiting the STRs in all zones, with the knowledge that later Councils can come back and loosen those restrictions if they’d like,” he said. “These commercially-zoned areas where this would be allowed are also our future residential areas, given the density we’re headed toward. What we don’t want to do is hollow out our central business district [downtown]. One of the reasons we’ve become such a popular tourist community is because we’ve built such a great city together that we all like.”

“I don’t think it’s incumbent upon us to create a place that tourists will like and cater to the tourists, I think what’s made us successful is being who we are,” Smith continued. “When thinking about the future of the CBD I don’t want that to just become a place for tourists and for Asheville to lose its own downtown.”

Currently, it’s a $100 fine if someone’s caught keeping a short-term rental in a district where they’re not allowed. Also, the city relies on locals complaining to enforce the rule. Wisler supported increasing the fine to $300 and Smith also wanted to see something “a lot more meaningful” so STR operators couldn’t just absorb the fine.

Bothwell was less harsh on STRs, saying they were part of a longer process of the core of cities becoming increasingly expensive.

“The market has bid the price of downtown accessibility way up,” he said. “I’m not convinced the short-term rental thing really hollows out affordability.”

Instead, he felt the impact of STRs was on bed-and-breakfasts and hotels. If STRs blunted the hotel industry, he asserted, it might slow down hotel growth and even help even out the rise in property prices, eventually making property more affordable “if you look at the macro.”

Bothwell sided with Wisler on keeping the current ban in residential areas.

Pelly, a realtor, said that “we can try and regulate it, and we should regulate that” but “I’m of the mind that this also allows people to stay in their homes and allows affordability to expand” so “I’m open to short-term rentals in a range of districts, but with some very strict regulations.”

He too sided with relaxing rules on homestays, though he added that “this whole notion of the sharing economy is real and our role on Council is to figure out a way to make it work for our community.”

Hunt wanted enforcement to become more proactive, with the funds for city staff to seek out and clamp down on short-term rentals in violation of the city’s law.

“There is a flurry of activity,” Hunt said. “Next year’s budget needs to provide for some rigorous enforcement.”

Hunt cautioned against banning short-term rentals in non-residential areas, saying the city needed to protect those who had invested in short-term rentals in downtown and other similar neighborhoods.

“There are lots of people who have acquired condo units with the anticipation that they will be able to rent them out, we’re talking multi-hundred thousand dollar investments,” “For us to change the rules on those people and say ‘we’re sorry, those units you’ve bought over the past 15 years and started renting out, we’re going to make that illegal now’ that’s a really tough call for me.”

But he said he was open to studying the possibility of such a ban further and that he believed relaxing the current ban further would “be a significant flood of rental property owners moving across, meaning a worsening rental housing crisis.”

Davis also noted “people who have already bought property, who have already invested in this industry who thought we were going to make it a legitimate, permitted use. I feel I have some concern with that. We should really look at the cost of enforcement. If we don’t legislate it, if we don’t make an ordinance that permits it, we’re going to have a lot of people doing it outside the law.”

But he said he heard the concerns of residential neighborhoods worried about the impact of STRs but that the city should support those who had invested in STRs in commercial areas like downtown.

Manheimer also supported the current ban and wanted more study on possibly banning STRs in commercial areas as well “because I don’t think that concept has been contemplated yet.” Smith interjected that he’d broached the idea as one that should be studied and implemented over the coming years. She added that “I do have concerns over affordable housing, I do have concerns about preserving our neighborhoods.”

“I don’t want to degrade that aspect of Asheville and I’m concerned short-term rentals have the potential to do that,” she added.

Based on this rough consensus on Council, staff will draw up future changes to the short-term rental rules, and might include increased money for enforcement of the current ban in this year’s budget, due for a vote in June.

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