The Park Rapids City Council on Tuesday referred a proposed short-term rental ordinance back to the city’s planning commission on its third reading.

On April 30, the city council sent back a previous draft of the ordinance for further review after local realtors spoke up against it on its second reading.

Following further discussion at four monthly meetings and two additional public hearings, the commission approved an updated ordinance on Aug. 24. This draft removed language requiring a 500-foot buffer between vacation rental by owner (VRBO) permits and changed the standard from an administrative permit handled by city staff to an interim use permit (IUP), requiring a public hearing before the planning commission and city council approval.

City Planner Andrew Mack said this change increases the fee structure for a VRBO permit from $100 per year for an administrative permit, plus $55 every three years for a rental license inspection, to a one-time application fee of $175 plus $750 in escrow, plus the $55 every three years.

Liability concern

Council member Erika Randall voiced concern about every permit application coming before the planning commission and the city council, as this exposes the city to liability.

“You run the risk of granting one to one person, and then the next person coming along not getting it. That creates a potential for appeals to the council,” she said.

In her experience, Randall said, such decisions must rest on a clear legal basis, or the city risks being sued. She said she has seen commissioners ask the wrong questions and make invalid comparisons, leading cities into trouble.

Randall also warned that having public hearings for each permit request could lead to commissioners being pressured into emotion-based decisions, for example, when a neighbor “rallies the troops” against a developer, while no one shows up to object to a similar request.

Her concern, she said, was that their decision may or may not have a reasonable basis, and this could lead to inequities.

Mack said the finding of fact in the IUP process does give the planning commission some discretion, such as asking how a proposed use will affect the neighborhood’s character.

However, Randall said, criteria for denying a request, such as limiting the density of VRBOs in an area, must be explicit in the ordinance or a ruling against a request could appear arbitrary.

“There’s room for a lot of interpretation and a lot of different outcomes on what people perceive to be the same kind of project,” she said.

Mack said the commission debated various buffers ranging from zero to 500 feet, but could not come to a consensus, and so they decided to delete the buffering standard and felt the IUP process gave them back some control.

Randall voiced frustration at this approach, saying, “We’re trying to regulate this; we want to regulate it; but I’m worried about this regulation of it.”

Regarding other lake communities’ approaches to handling short-term rentals, Mack said his research showed that no two cities do the same thing, but the commission’s first draft of the ordinance was modeled on that of Two Harbors.

He added that Bemidji had short-term rental permits for a while, but so many problems arose that they repealed it, leaving only grandfathered permits.

Initial motion

Council member Tom Conway moved to refer the ordinance back to the planning commission with instructions to include either a buffer or an administrative permit process, so that each case does not have to be reviewed by the council.

Mack asked for a specific direction he could bring to the commission regarding their preferred buffer standard.

Randall replied that it doesn’t matter, provided the council doesn’t have to deal with each case. If the commission continues to back an IUP process, she said, it would help to see the criteria they will follow.

She also questioned whether residents received enough notice to attend the commission’s Aug. 24 public hearing, which no one attended.

Mack said the absence of a realtor who had advised the planning commission during its revision of the ordinance suggested that he was OK with the changes.

The fact that a hearing was held, Randall said, does not mean the public has spoken.

“We have a fiduciary responsibility to the city to not cause a liability,” warned Conway. “The nature of what we’re trying to regulate, and the reason we’re trying to regulate it, makes it an item that could cause more dissent (than a hair salon). … Hair salons generally aren’t blasting stereos next door to my lakefront home at 2 a.m.”

City Administrator Ryan Mathisrud asked Mack whether the commission would support an administrative permit without a buffer standard. Mack said he felt the commission could split again, because they feel there needs to be some control on the density of short-term rentals.

Conway amended his motion to refer the issue back to the planning commission, instructing them to specify their criteria for density control. Randall added a friendly amendment, urging them to explore returning to an administrative permit instead of an IUP.

The motion passed without dissent.