City of Sedona short-term rental specialist Teresah Arthur reported to the Sedona City Council on the success of Sedona’s STR permitting program during their Dec. 12 priority retreat, as well as outlining plans for more regulation of STRs in city limits.

“The growth of short-term rentals has been fairly flat since we launched the permit program,” Arthur summarized, while also outlining a wide range of ideas she would like to implement to create “stricter regulation around short-term rentals and citations,” beginning with the enforcement of a new permitper-unit requirement that went into effect on Dec. 1 for those rentals advertising multiple units on the same parcel.

“I had identified 97 properties that were doing that, which is lower than I thought. I was thinking it was going to be around 300,” Arthur said. “I do foresee maybe a twice-yearly audit to capture anybody who’s decided to open up a second unit.”

According to the council’s Dec. 10 packet, the number of STRs in Sedona was 1,203, representing a 5.7% increase from 1,138 in December 2018, although the Dec. 12 packet placed the number of STRs at 1,157, or a 1.7% increase in six years.

Arthur will also be auditing STRs for compliance during the first quarter of the new year.

“They have to produce their evidence of neighbor notifications and the sex offender screenings,” Arthur said. “For those people who don’t have paper listings, they have to have a consistent use of AirBNB. Anybody else is going to have to produce documents for me or they’ll be cited.”

City Attorney Kurt Christianson said that staff plan to direct the city’s lobbyist to continue to pursue a change in state law that would allow the city to cap the number of STRs allowed in smaller municipalities, such as Sedona.

“One of the things I hope to work with Kurt is to kind of have stronger language about how permits don’t transfer … from one owner to another,” Arthur said, and also proposed updating city code “to say that if you book a short-term rental with an expired permit, it’s a citation.”

Arthur explained that city practice so far has been to issue notices of violation to property owners before issuing a citation.

“If a property comes into compliance before the 30 days elapse before their court date, then the citation is dismissed,” Arthur said. “We’ve really only had less than a dozen people that have been cited because the rest of them come into compliance … I’ve had a couple people who were repeat offenders that received two fines, and when they received the third citation, they paid up the fines and became permitted. Which is, I guess, what we want … the goal is compliance, not necessarily citation.”

“We don’t have to do notices of violation. It can go straight to a violation at this point, which is what council’s said,” Christianson commented, which would mean the city could hand out automatic $500 fines. He added that the city can only revoke a permit if it records three violations without corrective action against a property owner.

“I know there’s some discussion about a possible fee charged for even having code enforcement write up a citation,” Arthur added.

Arthur noted that she had spoken with the municipal court about the possibility of moving to criminal rather than civil citations, “but the judge was saying that the penalty for a criminal citation is a $1,000 less than our highest civil citation, so there’s not a tremendous amount of incentive to move people to a criminal citation, cause the city will lose money.”

“Have we actually shut any down?” Vice Mayor Holli Ploog asked.

“No, we have not,” Arthur said. “It would really take a lot to be able to prove gross negligence by a specific owner to set the mechanism in motion to revoke a permit.”

“I struggle with that,” Councilman Brian Fultz said. “I’m just surprised we’ve not shut anybody down at this point. We’ve not gone and put a lock on the front door?”

“I don’t know that that’s legal,” Arthur said.

“You can only lock doors for like a nuisance, health or safety reason,” Christianson said. “We’re not able to just lock people out of their houses.”

Councilwoman Kathy Kinsella suggested posting the names and addresses of those who received citations on the city’s website.

“That may get us more backlash than it gets us benefit,” Arthur said.

“What, if any, legal room do we have in terms of inspections?” Councilman Derek Pfaff asked. “If we have room to regulate, let’s regulate … I’m just looking at it from the standpoint of there may be other ways to make it less desirable to own a short-term rental.”

“State law allows the city to regulate short term rentals in two ways, one for health and safety reasons,” Christianson said. “We’re not the fire department, so we haven’t really gone that way, we don’t really have a health department, we haven’t gone that way … Council wasn’t really interested in implementing that type model because of staff resources.

“The other way the city can regulate short-term rentals is through code regulations that apply to all houses equally,” Christianson said. “Those are the only two options currently available.”

“We don’t have an issue with the types of huge party houses, party short-term rentals that are taking place in Scottsdale,” Christianson added.

“At least half, if not two thirds, are probably individual people, couples or a family trust,” Arthur summarized the breakdown of Sedona STR ownership.

Status as Businesses

During a previous discussion of STRs on Dec. 10, Mayor Scott Jablow referred to STRs as businesses. Jablow later said that he was entitled to his own definition of the term and stated that short-term rentals were required to maintain business licenses.

“He’s referring to them colloquially rather than legally, probably,” Christianson said when asked for clarification.

The Arizona Court of Appeals found in Village of Oakcreek Association v. Bonham that STRs were not a business use, a decision affirmed by the Arizona Supreme Court.

Neither Sedona City Code chapter 5.25 nor Arizona Revised Statutes §42-5042 define STRs as a business or require STR operators to obtain business licenses; both statutes require that STRs obtain a transaction privilege tax license, which is not a business license.

Following the passage of SB1131 during the 2023 legislative session, long-term rentals for terms of more than 30 days will not be required to obtain TPT licenses beginning Jan. 1, 2025