Cave Creek tables short-term rental ordinance, orders nuisance code review
CAVE CREEK, ARIZONA — May 2, 2023

Cave Creek tables short-term rental ordinance, orders nuisance code review

Cave Creek Town Council tabled a contentious short-term rental ordinance to address definition and enforcement concerns while dealing with party house complaints, approved routine infrastructure and governance matters, and discussed community partnership initiatives.

Cave Creek Delays Short-Term Rental Crackdown as Party House Complaints Collide with Ordinance Ambiguities

On May 2, 2023, the Cave Creek Town Council voted unanimously to table the second reading of a draft short-term rental ordinance, halting its momentum just weeks before final passage. The 6-0 decision to postpone until the first June meeting marked a dramatic reversal triggered by a firestorm of resident testimony, legal concerns raised by counsel, and the council's own misgivings about definitions, enforcement mechanisms, and penalty structures that remain unresolved.

The delay was framed by Mayor Robert Morris as a pathway to refinement rather than defeat. Yet the move exposed the limitations of regulating a market sector newly authorized under Arizona state law, and underscored the town's struggle to balance the interests of residential neighbors plagued by party houses against the rights of property owners—both small-scale operators and large management firms—to conduct legal short-term rental business.

Key Speeches

"I'm not against short-term rentals. I don't think any of my neighbors here are. I use short-term rentals. But there has to be a way to protect neighbors from the bad apples in this industry." — Janine Maxwell, Rancho Manana resident

"We don't want to be 24/7 party time… Short-term renters would stay here for a weekend or a week to party. They should not spend their money in restaurants but read the party in their rental units 24/7." — Eric Jensen, Cave Creek business advocate

"Every time we look at this something else seems to pop up that seemed daily… I was surprised that the sheriff, when they're called to a problematic house and we do have problematic houses in town, was unable to do anything, and reference that our laws, our code did not allow that. I found that our nuisance code is really lacking." — Mayor Robert Morris

"I took out the sex offender background checks that you all had concerns about… It's required, it's allowed by the statute. Some jurisdictions do it. Your sister jurisdiction next door does it." — Mr. Sims, Town Attorney

"I moved to table the short-term rental ordinance until the first meeting in June. Instruct staff to simultaneously improve the nuisance code and to address the issue of adding additional definitions either administratively or in code as appropriate." — Councilmember McGuire (motion maker)

Timeline

Applicant/Proponent presentation: Town Attorney Sims delivered a comprehensive overview of the draft ordinance, highlighting that it was modeled on League of Arizona Cities and Towns recommendations and affirmed by the Arizona Attorney General. He emphasized that the state legislature authorized towns to regulate short-term rentals for the first time in 2022, opening the door to licensing requirements, sales tax collection, background check provisions, and penalties up to $1,000 per violation plus suspension of rental privileges. Sims noted that the previous draft had been criticized as overly burdensome, and this second version attempted to streamline by removing neighborhood notification language from the code and placing it in the application instead. He acknowledged several unresolved issues: insurance requirements (removed at council request but allowed by statute), penalties for failure to respond to a complaint within one hour (currently set at $300), and the definition of "short-term rental" (available in state statute but not yet in town code).

Staff recommendation: Town Manager Luke Sarsfield provided a parallel recommendation to review and update the town's nuisance code in tandem with the short-term rental ordinance. He noted that recent complaints revealed the nuisance code lacks sufficient "teeth" to address noise, disturbance, and property maintenance violations that drive short-term rental disputes. He stated that coordinating both efforts would ensure the nuisance code applies town-wide (not just to short-term rentals) and provides consistent standards of conduct. Sarsfield also described a vendor-management approach: the town would contract with a third-party firm to maintain a public database of licensed short-term rental properties, operate a 24/7 complaint hotline, and track compliance—offsetting administrative burden on town staff using application fees and fines.

Public comment: Approximately 20 speakers addressed the council, with the overwhelming majority urging passage of the ordinance. The most compelling and emotionally charged testimony came from residents of Rancho Manana and adjacent neighborhoods:

Several speakers opposed the ordinance or raised concerns:

Two online commenters supported the ordinance: Simon Wilson and Carl Zimmel.

Council discussion: The council's debate revealed three key fault lines:

  1. Definitions and clarity: Councilmember Bill Bunch criticized the ordinance for lacking clear, published definitions of "short-term rental" vs. "long-term rental." He showed the Fountain Hills website as a model, noting it clearly defines the term on the first page and provides links to tax and application information. Mr. Sims responded that definitions are in state statute and that best practices among peer jurisdictions refer to the statute rather than replicating language in the town code (avoiding the need to amend the ordinance each time state law changes). Bunch countered that the town should at minimum reference and acknowledge the statutory definition in the code.

  2. Nuisance code integration: Robert Morris stated that the sheriff has been unable to enforce against party houses because the town's nuisance code is "really lacking." He argued that the short-term rental ordinance should reference and be enforced via the town's nuisance code, ensuring consistent standards apply across all rental types. Mr. Sims confirmed that section 112.14 of the draft ordinance does cross-reference the nuisance code, but the nuisance code itself needs updating to address noise, disturbances, and property maintenance. The council agreed to pursue a parallel nuisance code review concurrently with short-term rental ordinance refinement, rather than sequentially.

  3. Insurance, penalties, and enforcement: Mr. Sims flagged three unresolved policy questions for council guidance: (a) whether to require liability insurance (allowed by statute, common in other jurisdictions, but not required for other residential zoning approvals); (b) whether the penalty for failure to respond to a complaint within one hour should remain at $300 or increase to $500 (Sims had originally drafted $500 but reduced it at a prior council suggestion); and (c) how to handle background check documentation—whether applicants self-certify via a checkbox on the application that they have verified no sex offenders are renting, or whether the town maintains a separate database of checked names (the latter creating potential public-record privacy issues).

Councilmember Paul Storer asked whether the town website could host a searchable map and list of licensed short-term rental properties, similar to Scottsdale's model. Mr. Sims and Town Manager Sarsfield confirmed that a vendor could provide this service (likely funded via application fees and fines).

Motion and vote: Councilmember McGuire moved to table the ordinance until the first June council meeting. The motion included directives that staff (1) simultaneously improve the nuisance code to address noise and disturbance standards; (2) address definitions either administratively in the application or in the code; and (3) schedule an executive session before the June meeting for line-by-line review of the revised ordinance with counsel. The motion passed 6-0 with no debate.

Opposition

Number of speakers against: Approximately 6–8 speakers raised concerns; approximately 3–4 were primarily opposed.

Main concerns:

  1. Lack of definitions and clarity: Repeated complaints that "short-term rental" is not defined in the ordinance itself, forcing applicants and residents to cross-reference state statute. Betsy Worley and Janet Moore both emphasized that ambiguity will lead to non-compliance and gaming of the rules.

  2. One-hour emergency response requirement: Ted Nyquist and Jessica Ryder flagged the logistics and safety concerns of requiring an owner or designee to respond to a complaint at any hour. Ryder noted she lives 10 minutes away and has no desire to go to a rental at 1 a.m. without police present. Nyquist asked who calls whom and how "verified" is defined.

  3. Insurance requirements: Jessica Ryder and Frank Kepner questioned why liability insurance should be imposed on short-term rentals when it is not required for other residential rental approvals.

  4. Guest privacy and record-keeping: Advanced Stay and Frank Kepner objected to maintaining 12-month records of guest information, citing privacy concerns and noting that Airbnb and VRBO already conduct background checks and screening.

  5. HOA and CC&R conflicts: Richard Wilson and multiple commenters raised concerns that the ordinance could override recorded homeowner association rules. Though Mr. Sims clarified that the ordinance applies only to municipal law and does not preempt HOA authority, the written comments reflect ongoing confusion.

  6. Fairness to compliant operators: Jessica Ryder (a responsible rental operator) and Frank Kepner objected to being treated as presumptive violators and to overly burdensome compliance procedures that do not apply to other business types.

  7. Cost and complexity: Betsy Worley and Frank Kepner noted that the ordinance is too long, too complex, and imposes fees and penalties that encourage non-compliance rather than compliance.

Most compelling argument: Janine Maxwell's and Chris Swainhart's testimony about the Rancho Manana party houses. Maxwell stated she has four years of video evidence of disturbances and that Airbnb and VRBO will suspend a property for 3–4 days then re-list it. Swainhart compared the scenario to living next to an unlicensed adult entertainment venue, noting that the management company has no local presence and no incentive to regulate guest behavior. Both emphasized that they are not anti-rental but demand enforcement mechanisms with teeth.

Organized groups: No formally organized opposition coalition was identified, though residents from Rancho Manana area appeared coordinated in their testimony and focus on enforcement. Advanced Stay (a property management company) submitted a formal comment letter opposing specific provisions.

Support

Number of speakers in favor: Approximately 12–14 speakers supported the ordinance or its core intent.

Main arguments:

  1. Resident safety and quality of life: Janine Maxwell, Chris Swainhart, Ted Nyquist, Pete Beveritz, and Sheila Wells all stated that short-term rental regulations are necessary to protect residential neighborhoods from party houses and their externalities (noise, traffic, trespassing, inappropriate behavior).

  2. Comparison with peer jurisdictions: Pete Beveritz and others noted that Carefree, Scottsdale, and other neighboring towns have already enacted short-term rental ordinances, and Cave Creek should not become a "magnet for bad actors" by lagging behind with weaker rules.

  3. Revenue and business benefits: Eric Jensen and Reg Monokino highlighted that short-term rental sales tax represents a revenue stream for the town and local businesses (restaurants, retail). Jensen noted that the property tax model forces Cave Creek to rely on variable revenue and that rental-generated sales tax helps stabilize the budget.

  4. Parallel nuisance code: Sheila Wells and others agreed that a robust nuisance code review should proceed alongside the ordinance, providing town-wide protections rather than rules applicable only to short-term rentals.

  5. Pragmatism over perfection: Sandy Catino urged the council not to let the pursuit of a perfect ordinance delay action indefinitely: "don't try to make all the details so perfect that we never get to the end zone." She noted that minor adjustments can be made over time.

  6. Vendor model: Eric Jensen and Pete Beveritz endorsed the use of a third-party vendor to manage the database, hotline, and enforcement legwork, noting that fees and fines fund this service rather than burdening town staff.

Project Details

Vote Breakdown

Outcome & Next Steps

The ordinance was tabled until the first meeting in June, with the following directives:

  1. Executive session: Before the June meeting, the town attorney will conduct an executive session with the council for line-by-line review of a revised draft ordinance, addressing outstanding policy questions on insurance, penalties, and background check procedures.

  2. Nuisance code parallel review: Staff directed to initiate a comprehensive review of the town's nuisance code (separate from short-term rental regulation) to ensure robust noise, disturbance, and property maintenance standards apply town-wide. This effort is to conclude before the 90-day implementation window begins (should the ordinance be adopted).

  3. Vendor evaluation: Town Manager Sarsfield and Town Clerk Teresa Riza to complete negotiations with contracted vendors (shortlist of four firms identified) to provide:

    • Searchable online database and map of licensed short-term rental properties
    • 24/7 complaint hotline
    • Guest information tracking and documentation
    • Initial enforcement/investigative support (identifying properties, confirming compliance)

  4. Application framework: Definitions, background check procedures, and fee structure to be finalized in the application rather than the ordinance code itself, permitting flexibility and reducing future amendment burden.

  5. Public engagement: The revised ordinance will return for first and second readings (with intervening public hearings) before formal adoption. Timeline: tentatively June 2023 for adoption, with a 90-day implementation window to allow vendor setup, owner notification, and license applications.

  6. Strategic plan finalization: A separate action item to finalize the town's Strategic Plan (marked as "draft" in the budget document) before budget adoption, to be scheduled in a special session.

Controversies & Context

The Greenberg Property Arts Center Controversy

Early in the meeting, two residents—David Phelps and Anna Marcelo—raised concerns about permits issued to Steve and Lori Greenberg for their Harmony Hollow property (36 acres of combined parcels, including the former Stamp Mill property, adjacent to Spur Cross Branch Conservation Area). The residents alleged that the permits allow conversion of residential property to a "center for art education, desert awareness, and learning" without proper public notice and zoning interpretation, potentially violating the residential zoning (R-190).

Town Manager Sarsfield provided clarification: the permits allow only residential use and private renovation of existing structures. The Greenbergs intend to invite 4–5 artist friends to rotate through the property and create art in residence—a private use consistent with residential zoning and homeowner rights. No commercial activity, public facility use, or large gatherings are proposed. Sarsfield noted the Greenbergs have held four public meetings to gather stakeholder input and have been transparent. Phelps and Marcelo expressed skepticism, pointing to the "morphing" of residential use into soft commercial and educational uses over time, and to the historical 2005 council debate over a proposed 28-acre visitor center, museum, and amphitheater complex at Spur Cross (which was tabled and never revisited). Marcelo asserted the public should have been notified via formal channels, not social media.

Outcome: No formal action taken. The town manager clarified compliance and offered to have the Greenbergs address residents directly if questions persisted.

State Law Preemption and the Short-Term Rental Statutory Authority

Arizona HB 2009 (2022) preempted municipal regulation of short-term rentals prior to that date. The state legislature then authorized municipalities to regulate short-term rentals under specific parameters (Arizona Revised Statutes § 9-500.39). This authorization is recent and narrow, allowing towns to impose licensing, sales tax collection, background checks (if done carefully to avoid public record issues), and penalties. However, the statute does not allow towns to prohibit short-term rentals outright, nor does it allow towns to regulate HOAs' private CC&Rs.

Town Attorney Sims emphasized that the statute is heavily negotiated and pre-empts certain local restrictions while mandating others (e.g., background check eligibility, sex offender registry cross-reference). He noted that the statute evolved over multiple legislative sessions (particularly 2022), and that peer jurisdictions (Jerome, others) have had to litigate and refine ordinances in light of AG opinions and Goldwater Institute challenges. The draft ordinance before Cave Creek incorporates lessons from those battles and was vetted against AG guidance.

Fiscal Pressure and Revenue Expectations

Multiple speakers (Eric Jensen, Reg Monokino) noted that short-term rental sales tax represents a revenue stream for the town. Monokino cited a Maricopa Association of Governments report finding that Cave Creek has 4.3% of its housing stock in rentals (over 100 units), the second-highest percentage in Arizona. He suggested the town write to the Maricopa County Assessor to obtain a list of Class 4 properties (rentals) to identify unlicensed short-term rentals. Jensen and others noted that the town's business model (fixed expenses, variable revenue) makes short-term rental taxation a practical necessity and that surrounding towns have already begun collecting.

However, some commenters (Betsy Worley, Frank Kepner) objected that short-term renters already pay transaction privilege tax (3–5.5%) automatically through Airbnb and VRBO, and that imposing additional licensing fees and penalties on small operators amounts to double-taxation and discourages compliance.

Nuisance Code Gap and Enforcement Powerlessness

A critical undercurrent in the testimony was the town's apparent inability to enforce against party houses due to the lack of a noise ordinance and vague nuisance code standards. Multiple residents (Janine Maxwell, Chris Swainhart, Ted Nyquist) reported calling police and being told deputies could not cite violations because the town code did not support enforcement. Robert Morris confirmed this gap during his remarks, noting that the sheriff's lack of authority to respond to noise complaints on private short-term rental property is a "really lacking" aspect of the current nuisance code.

This gap became a key reason for the council's decision to pursue parallel nuisance code review: regulating short-term rentals without adequate underlying nuisance standards was seen as an incomplete solution. The ordinance as drafted does reference compliance with town code, but if the town code is toothless, the reference is hollow.

Duration

Other Notable Items

Greenberg Property Arts Center Clarification: Town Manager Sarsfield provided a public statement clarifying that permits issued to Steve and Lori Greenberg for their Harmony Hollow property (36 acres adjacent to Spur Cross) allow only residential use with private artist guests invited by the owners, not a public commercial arts center or educational facility. No commercial activity, public uses, or large-scale gatherings are proposed. The Greenbergs have been transparent and held four public meetings. David Phelps and Anna Marcelo expressed skepticism about the zoning interpretation and desired more formal public notice, but no formal action was taken.

26th Street Paving Contract: The council voted 6-0 to award a contract to Gonzalez Asphalt Incorporated for $168,900 to pulverize and repave 26th Street north of Saddle Mountain Road. The road, originally paved circa 1986, is in poor condition. Funding from HERF (Highway Excise Revenue Fund) with general fund backup if costs exceed. Public comment from Bill Basor (resident) and another speaker thanked the council and joked about the lifespan of the repair.

Establishment of Audit Committee: The council voted 6-0 to establish an audit committee with a minimum of 3 members (maximum 7 possible). The committee will oversee the external financial audit, with the auditor reporting directly to the committee and council rather than to staff. Purpose: ensure alignment with audit best practices. The auditor will present at the next meeting for approval of the engagement agreement. Committee meetings will be public with agendas and minutes.

Intergovernmental Agreement with Maricopa County Emergency Management: The council voted 6-0 to approve a new 10-year intergovernmental agreement (Resolution R 2023-09) for Regional Emergency Operations management and disaster services with Maricopa County. Current annual cost: $1,716.43 (varies by year).

Foothills Food Bank Lease and Public Works Partnership: Town Manager Sarsfield reported that the town leased land adjacent to the wastewater treatment plant to Foothills Food Bank for expansion. In return, the Food Bank is constructing new public works and utilities office and lab facilities for the town—a mutually beneficial public-private partnership.

Spur Cross Ranch Land Acquisition: The town and partners (Maricopa County Parks and Land Trust) acquired 30 acres adjacent to Spur Cross Branch Conservation Area after four years of collaboration. Sarsfield noted this exemplifies long-term partnerships spanning 30+ years.

Land Lease Swap (Pending): A resolution and lease for a land swap with a commercial property owner will be presented at the May 16 meeting. The town would convey approximately 5 acres at Carefree Highway (next to wastewater treatment plant) in exchange for 1 acre of vacant commercial property in the town core. Sarsfield presented this as a public-private partnership example.

Annexation Agreement Presentation and Public Inquiry: Town Manager Sarsfield delivered an informational presentation on the 2008–2009 annexation agreements with the Arizona State Land Department (ASLD) for Rogers Wash, Willow Springs, and Apache Wash areas. The presentation clarified long-standing rumors and answered resident questions about zoning reversion, water supply obligations, and the town's authority. Key points: the 20-year first-right-of-refusal to purchase approximately 4,000 acres of open-space zoned land expires in 2028 (unless purchased earlier); the town is not obligated to provide water if it lacks supply (developer/state would bring their own); and the state can sell the land after 20 years unless the town purchases it. Town resident David Phelps and others expressed concern that the state could change zoning through legislative action or that ongoing state budget pressures might force auctioning. David Smith and Janet Moore questioned whether the town should increase preservation funding to ensure it can purchase the open space before state sale. Sarsfield emphasized ongoing dialogue with ASLD to ensure open space is bundled with development tracts (via transfer of development rights) rather than sold separately.