Paradise Valley Airbnb ordinance violates Arizona law, AG says

The Arizona Attorney General has concluded that the most onerous parts of an ordinance passed earlier this year by the town of Paradise Valley aimed at reining in “party house” Airbnbs conflict with existing state law, putting $1.6 million of the town’s state shared revenue in limbo.

The office of Attorney General Mark Brnovich made the findings after conducting what is known as an SB1487 investigation, named after a 2016 law that allows state lawmakers to initiate a review of any action by a municipality or county if they believe it violates state law. If the AG finds a violation, the offending law must be repealed or the violator loses all of the money it receives from state income tax revenues. In Paradise Valley’s case, that means $1.6 million.

“The Office has determined that most of the ordinance does not violate state law,” the report by the AG says, while adding that the ordinance still runs afoul of provisions in a controversial 2016 law that prohibited municipalities from enacting certain regulations on short term rentals, also known as STRs.

Republican state Sen. Warren Petersen filed the complaint with the Attorney General’s Office earlier this month. He contends that the ordinance violates that law because it imposes different requirements on specific STRs, has new “significant” obligations for STRs and “​​increases regulatory burdens on businesses by subjecting platforms to new liability and disclosure requirements in violation of state and federal law.”

The town ordinance requires property owners to be on site for certain events, meet their guests within one hour of them arriving at the property, do a background check on every guest, provide the owner’s name and contact information to the town, install a landline telephone, prove that the guest has acknowledged the rules and regulations set by the town, clean the air filters every three months and more.

Petersen himself previously operated a million-dollar luxury STR on the platforms Airbnb and VRBO in his home town of Gilbert. He told the Arizona Mirror that he no longer offers it up as a short-term rental; attempts to find it on those platforms come up empty. He did not respond to a request for comment about the AG’s findings on the Paradise Valley ordinance.

The AG determined that it was within the town’s authority to create an ordinance that prohibits STRs from housing sex offenders, operating sober living homes, selling illegal drugs or liquor, having nude or topless dancing and having other adult-oriented businesses. He also determined that it was within the town’s authority to require an STR to provide contact information to city officials and provide evidence of registration with the Maricopa County Assessor’s Office along with a valid Transaction Privilege Tax license.

However, the town added additional registration requirements and booking information requirements that the AG said weren’t legal.

While Paradise Valley could still be allowed to make STRs install a landline and have liability insurance, local officials cannot make STR operators meet in person with guests prior to their stay and to describe all the local rules and regulations.

The AG also found that the additional fines created in the ordinance were allowed under the town’s authority — except for the one levied against an “online lodging marketplace” itself, which would have allowed the town to fine Airbnb and VRBO.

Paradise Valley’s ordinance also tried to regulate STRs by adding use restrictions, which the AG found violated state law by preventing “social gatherings” from occurring more than twice a year.

“[T]he city has not satisfied its burden to show that the primary purpose of restricting undefined ‘social gatherings’ from occurring more than twice a year is to protect public health and safety,” the AG concluded. Under the 2016 law, municipalities are allowed to do some regulation of STRs if the issues fall under the realm of public health and safety.

While the AG says that Paradise Valley can ask for state TPT license information and contact information from the owner of an STR, the town’s booking information disclosure requirements go beyond the scope of the 2016 law and are thus illegal.

“Had the legislature intended that a town or city require disclosure of such detailed information, it would have said as much,” the report says.

The AG’s office stated in its report that the town should “either repeal or amend” the ordinance so that it complies with state law “or the Attorney General will notify the State Treasurer, who shall withhold state shared monies,” the report said. Paradise Valley will have 30 days to “resolve the violation” or lose its state-shared revenue.

The town can also take the issue directly to the Arizona Supreme Court. Such was the case with Tucson which faced a similar challenge to an ordinance that allowed the city to destroy seized guns. The court ultimately ruled in favor of the state, stating that the ordinance was in conflict with state law, which requires guns to be sold not destroyed, upholding the 1487 conclusion. Tucson ultimately repealed the ordinance and the Tucson Police Department now auctions off its confiscated firearms per state law.

Paradise Valley Mayor Jerry Bien-Willner did not respond to a request for comment.