Cave Creek defers short-term rental ordinance, removes six regulatory sections for stakeholder input

Cave Creek Defers Short-Term Rental Ordinance After Council Fracture Over "Overbearing" Regulations and Property Rights

The Cave Creek town council approved first reading of a sweeping short-term rental ordinance 7-0 on March 7, 2023, but stripped six major regulatory sections and directed staff to solicit property owner input before reintroduction, signaling deep internal disagreement over whether the ordinance protected community welfare or trampled property rights. The 90-minute debate revealed a council torn between enforcing business licensing and sales tax compliance on one side and concerns that the proposed regulations—including mandatory pest control every two weeks, sex offender background checks, and one-hour emergency response requirements—constituted an overreach that could drive small Casita operators out of business.

Across eight public speakers and four council members, critics condemned the ordinance as a "New York solution to a Cave Creek problem" that conflated noise complaints with a wholesale attack on residential rental property owners, while the town attorney and a minority of speakers warned that without teeth, the regulations would be unenforceable and fail to address demonstrable party-house nuisances.

Key Speeches

"This short-term rental proposal is aggressively punitive and cast far too large an entrapment net. It punishes every short-term housing provider with new taxes and additional nuisance regulations. Party houses is not mentioned once in the body of the sweeping proposal—not once. Why is that?" — Mike Haddock, public commenter

"I don't feel the need to go on a witch hunt. We're not talking thousands of properties—we're talking tens of properties. This seems to be a New York solution to a Cave Creek problem, and if we're going to look at nuisance party houses, we need to do something tailored for Cave Creek and that specific problem." — Laura Gomez, public commenter

"This is a motion to amend that we find three people who are short-term property owners in Cave Creek to assist in tweaking this potential ordinance to make sure it's not punitive for the property owners." — Dusty Rhoades, failed amendment motion

"I'm very cautious about taking it too far, and so I think that there's a fine line that we need to balance how to fix a problem that doesn't seem to be that great in this community." — Councilmember Joe Freedman

"If neither side is happy, you've done a good job." — Councilmember Cynthia Driskell, on legislative compromise

"I would like to see paragraphs 112.17 through 112.22—the hygienic paragraphs—struck from the next version we see." — Mayor Robert Morris, directing staff to remove insurance, advertising, neighbor notification, pest control, sex offender checks, and additional notification requirements

Timeline

• Applicant presentation: Town attorney Bill Sims presented a 13-page ordinance modeled on Fountain Hills, which had survived AG challenge. Sims emphasized licensing (with $250 fee plus $1,000 fine for non-compliance), required business license, sales tax collection, emergency contact protocols, and escalating penalties for violations. Sims noted the regulations were "complaint-based" and warned that without proactive enforcement, the ordinance would be toothless.

• Staff recommendation: Development Services Director Luke provided administrative implementation timeline: 30-day notice period post-second reading, computer system setup, identification of existing STRs via VRBO/Airbnb geo-searches and notifications, with enforcement driven by complaints to the marshal rather than proactive sweeps. Luke noted staff would request a longer implementation window than standard 30 days.

• Public comment: Eight speakers over approximately 45 minutes. Four opposed (Gomez, Haddock, Ryder, Hurd) focused on overreach, undefined problem scope, and burden on small operators. Four supported or qualified support (Moore, Phelps, Hurd, implicit majority sentiment): Moore (experienced STR operator) favored licensing and sales tax but sought clarity on definitions; others raised concerns about enforcement equity, neighbor retaliation, and whether MCSO could handle noise calls effectively.

• Council discussion: Dusty Rhoades moved (failed 3-4) to include 3–5 property owners in revision process before second reading. Council members Joe Freedman, Dusty Rhoades, and Bunch expressed concern about onerous provisions (pest control, sex offender checks, insurance requirements, 1-hour response time). Councilmember McGuire noted conflation of revenue and conduct regulation. Robert Morris issued explicit direction to strike six regulatory sections (112.17–112.22) and coordinate stakeholder input. Councilmember Alkema raised B&B historical precedent and questioned why STR revenue was off-books.

• Vote: First reading ordinance 2023-02 approved 7-0. Motion to amend and include property owner stakeholder input failed 3-4 (Dusty Rhoades, Bunch, Alkema in favor; Joe Freedman, McGuire, Tom Augherton, Robert Morris opposed). No second reading scheduled; staff directed to revise and return.

Opposition

• Number of speakers against: 4 (Laura Gomez, Mike Haddock, Jessica Ryder, Chantel Hurd), with qualifying concerns from 2 others.

• Main concerns:

  1. Ordinance lacks focus on actual problem—"party houses" or noise nuisance—and is instead punitive on all STR operators.
  2. Overreach comparable to Scottsdale/Fountain Hills models without Cave Creek's specific needs assessment; language vague and difficult to comply with.
  3. Disproportionate burden on small property owners (widows, mom-and-pop retirees, Casita operators) versus problem posed by commercial Airbnb/VRBO platforms, which already restrict bookings to 25+.
  4. Unreasonable requirements (pest control every 2 weeks, sex offender background checks, 1-hour emergency response, neighbor notification, insurance) go beyond statutory baseline.
  5. Enforcement will be inconsistent, subject to neighbor retaliation, and MCSO inadequate to handle concurrent enforcement burden.
  6. Lack of definitions and clarity makes compliance impossible; "13 pages of muddled mess."
  7. Sales tax already paid by Airbnb/VRBO platforms (deduct ~15% of gross); licensing is revenue-grab disguised as public safety.

• Most compelling arguments:

  • Laura Gomez: "We don't want to kill dreams." Ordinance conflates noise complaints with wholesale regulation of residential rentals; state statute allows local tailoring, not mandate.
  • Mike Haddock: "Party houses is not mentioned once" in body of ordinance. Attack on property rights, not targeted remedy. Casitas and motels should be exempt.
  • Jessica Ryder: "This isn't big company—we are individuals." Legislation affects small families, not egregious operators; 1-hour response time impossible for out-of-state/out-of-country owners.
  • Chantel Hurd: Waiving punitive measures for some and not others could expose town to discrimination liability; MCSO already inadequate.

• Organized groups: No formal opposition group; speakers appeared to be local property owners and neighbors.

Support

• Number of speakers in support: Implicit support from Robert Morris and Councilmember Bunch; qualified support from Janet Moore (experienced STR operator) and David Phelps (citizen).

• Main arguments:

  1. Licensing and sales tax collection are necessary and appropriate regulatory baseline; Casitas and short-term rentals have operated "off the books" for 15 years without oversight.
  2. Problem is real: historic B&Bs required licensing; short-term rentals in residential areas should too. Revenue needed to fund fire and emergency services.
  3. Complaint-based enforcement mitigates overbreadth risk; ordinance only punishes those who refuse to comply.
  4. State statute empowers local control; Cave Creek should follow Fountain Hills model, which AG blessed.
  5. Administrative procedures and reasonable implementation timeline reduce burden; waivers allowed for good-faith operators.

• Most compelling arguments:

  • Robert Morris: "Complaint-based" enforcement means only bad actors are "overbeared to." Balance licensing/tax enforcement with measured penalties; implement administrative procedures first, hygienic rules later.
  • Councilmember Alkema: Historical precedent—B&Bs and cottage industries accepted. "This is not rocket science." Licensing makes sense; sales tax on overnight stays parallels hotel tax.
  • Janet Moore: "I think it's sensible to have a license." Been in business since 2017; respects neighbors; sales tax collection necessary for town services. Offer to be "sounding board" for revision.

Project Details

• Case number: Ordinance 2023-02

• Applicant / developer: N/A (town staff-initiated)

• Attorney: Bill Sims (town attorney)

• Location / address: Town of Cave Creek, all residential and desert rural zoning

• Current code: No short-term rental licensing or regulation; medical marijuana facilities regulated under Chapter 155

• Proposed ordinance: Chapter 112 (Short-Term Rental Public Health and Safety Protections)

• Key provisions (as presented; later modified by council direction):

  • License requirement + $250 annual fee; $1,000 fine for non-compliance, recurring every 30 days
  • Business license and transaction privilege tax (sales tax) required
  • Application must include floor plan, escape routes, emergency contact (24-hour response requirement)
  • Insurance requirement
  • Proof of sales tax license
  • Neighbor notification
  • Pest control every 2 weeks
  • Sex offender background checks for registered occupants
  • Prohibition on special events (weddings, receptions) without permit
  • 24-hour garbage retention (no trash left >12 hours)
  • Suspension for 3 verified violations within 12 months
  • Administrative appeal to hearing officer; judicial review to superior court
  • License posted on premises and town website

• Changes from initial draft (per mayor's directive): Sections 112.17–112.22 to be removed: insurance requirements (112.17); advertising/license display restrictions (112.18); neighbor notification (112.22); pest control (112.19.f); sex offender checks (112.20); additional neighbor notification (112.22). Emergency response requirement (1 hour) left blank; staff to solicit input and propose revision at second reading.

Vote Breakdown

• Final (first reading ordinance 2023-02): 7-0
• Yes: All council members present (Councilmembers Alkema, Bunch, Cynthia Driskell, Joe Freedman, McGuire, Dusty Rhoades, Robert Morris, Kathryn Royer)
• No: None
• Motion to amend (include 3–5 property owner stakeholders): Failed 3-4
  • Yes: Dusty Rhoades, Bunch, Alkema
  • No: Joe Freedman, McGuire, Tom Augherton, Robert Morris

Outcome & Next Steps

The council approved first reading of ordinance 2023-02 with explicit direction to:

1. Remove sections 112.17–112.22 (insurance, advertising, neighbor notification, pest control, sex offender checks, additional neighbor notification).
2. Leave emergency response time requirement (112.16) blank with staff recommendation for reasonable period.
3. Retain license requirement, posting, and town website publication; ensure emergency contact information accessible to enforcement.
4. Coordinate with known short-term rental operators (Janet Moore explicitly named) to solicit input on revised language.
5. Consult with neighbors who filed complaints re: party houses to ensure revised ordinance addresses documented problems.
6. Prepare administrative procedures (online licensing system, VRBO/Airbnb geo-search protocol, notification strategy) before second reading.
7. Implement 60–90 day effective date after second reading to allow notification of existing operators.

No second reading date set. Council expects revised ordinance at next eligible meeting (likely late March or early April 2023) for second reading and final adoption.

Controversies & Context

Conflation of Revenue and Regulation: The ordinance blurred two distinct goals: (1) revenue collection (business license and sales tax, required by state statute and generally accepted); (2) conduct regulation (noise, party houses, emergency response). Critics argued the council had conflated these and proposed remedying a vague "party house" problem with 13 pages of rules affecting all STR operators. Council members (Dusty Rhoades, Joe Freedman, Bunch) agreed the two should be decoupled: implement licensing and tax first, defer hygienic/conduct rules until problem-specific evidence gathered.

State Preemption and Legislative History: Bill Sims emphasized that Arizona legislature had previously preempted local STR regulation (RBO lobby successfully lobbied for prohibitive statute ~12 years ago). Recent legislation (2022) allowed narrow local control modeled on Fountain Hills, which survived AG challenge. However, Sims' emphasis on state blessing was double-edged: if Cave Creek model too restrictive, AG could threaten loss of state shared revenue (as happened to Sedona). This risk animated Council's caution.

Property Rights vs. Nuisance Control: Core ideological fault line emerged. Opponents (Gomez, Haddock) framed regulation as attack on property rights and small-business freedom; supporters (Robert Morris, Bunch) framed licensing as parallel to existing B&B and cottage-industry precedent and tax enforcement as necessary for town services. No clear data presented on scope of actual "party house" problem—Sims and Luke asserted it was complaint-driven, suggesting limited incidents, but council members who'd received complaints (implicit reference to unidentified parties) warned enforcement failure would be costly.

Enforcement Capacity: Persistent tension over whether marshal and town staff had capacity to enforce 13-page ordinance. Bill Sims acknowledged Scottsdale's "significant" enforcement burden; Robert Morris and Luke aligned on "complaint-based" model to minimize proactive sweeps. However, concern was raised that MCSO (Maricopa County Sheriff's Office) would not respond to noise complaints outside business hours, leaving no enforcement mechanism Friday–Sunday. Proposed remedy: post license with contact info on property so neighbors or emergency responders could call. This detail remained unresolved at first reading.

Neighbor Retaliation and Due Process: Chantel Hurd raised concern that complaint-based system could enable neighbor retaliation and create discrimination liability if town waived requirements inconsistently. Bill Sims acknowledged public records disclosures of complaints would expose complainants post-closure, but active investigations kept confidential. Concern unresolved.

Scope of Regulation: Most compelling argument from public: why require pest control every 2 weeks, sex offender checks, insurance, and 1-hour response when actual problem is noise and parties? Laura Gomez and Mike Haddock both noted ordinance addressed dozens of non-party-house scenarios (small family rentals, Casitas, weddings) without defining or defending regulatory necessity. Council's decision to strip hygienic sections vindicated this critique.

Historical Precedent: Councilmember Alkema invoked B&B and cottage-industry history (early town resisted even kitchen facilities in Casitas out of fear they'd become rentals). Over decades, town moved toward allowing more flexible use. This suggested regulatory maturity, not overreach; licensing was routine municipal practice.

Fiscal Pressure: Robert Morris noted town had lost ~$1.5 million in projected fire/emergency services revenue due to state legislative action on food tax exemption (separate agenda item). This fiscal squeeze may have motivated aggressive STR revenue collection, though council members denied this was primary driver.

Duration

• Short-term rental ordinance (items 2–3, combined): ~90 minutes
• Total meeting: ~3.5 hours (estimated; transcript runs 40+ pages)

Other Notable Items

Recreational Marijuana Ordinance (Items 4–5): Council approved first reading of ordinance 2023-03 adding Chapter 157 for recreational marijuana facilities and amending Chapter 155 (medical) 7-0. Town attorney Bill Sims flagged potential conflict between "manufacturing" language in the ordinance and zoning code restrictions; directed staff to reconcile before second reading. No substantial public comment; vote perfunctory. Applicants will be permitted to cultivate and retail (not test) at licensed facilities and must pay transaction privilege tax.

Legislative Opposition Resolutions (Items 7–8): Council unanimously passed two resolutions: (1) R 2023-04 opposing Senate Bill 1117 (housing/infrastructure preemption eliminating citizen review and planning oversight) 7-0; (2) R 2023-05 opposing SB 1063 and HB 2061 (food tax exemption costing Cave Creek ~$1.5 million annually in fire/emergency services revenue) 7-0. Robert Morris and Kathryn Royer reported meeting with legislators on SB 1063/HB 2061 but received "no promises." David Phelps (public commenter) praised council's proactive stance against "striker" bills. No substantive council debate; strong bipartisan sentiment that state preemption and fiscal raids on local revenue were "unbelievable."

Equipment Purchase (Item 1): Council approved purchase of Case 580 SN backhoe from Sun's Ray Machinery for $130,314.38 (with 1993 model trade-in) 7-0. Shared between Public Works and Utilities. Staff reported three-bid process; backhoe most cost-effective. Minimal discussion.

Planning Commission Meeting Time (Item 6): Council approved first reading of ordinance 2023-04 moving Planning Commission meeting start time from 7 p.m. to 6 p.m. (to match Town Council timing) 7-0. Request pending since April 2021; staff noted delay. No public comment; perfunctory vote.

Wildfire Prevention Public Outreach: Town manager Kerry Direct announced March 11 brush drop-off day (free, 8 a.m.–noon, wastewater treatment facility) to help residents prepare defensible space. Staff and council discussed invasive species (globe chamomile with ~4,000 seeds per plant; fiddleneck reappearing after 3 years). Emphasis on voluntary community education rather than enforcement.