Spa City cuts off its rental licenses

HOT SPRINGS — No business licenses for vacation rentals in areas zoned for residential use in Hot Springs will be available next year, the city said.

The city had issued 454 licenses in residential areas for the current year at the Nov. 1 application deadline. The number exceeded the cap of 400 that takes effect in January. Current licensees are eligible to renew next year, including the more than 50 that applied for 2022 licenses after the cap was reached.

The ordinance the Hot Springs Board of Directors adopted in August lowering the cap from 500 to 400 allows 2022 applicants who applied before the deadline to renew their license next year, even if the number of applications exceeded the cap.

There’s no cap on short-term rental licenses in areas zoned for commercial use.

An ordinance the board adopted in March 2021 prohibits short-term rentals from operating in the city without a business license. Enforcement power proceeding from the subsequent regulatory ordinance authorizes the city to levy fines and disconnect water meters at unlicensed short-term rentals.

May 1 is the renewal deadline for 2023 business licenses. Deputy City Manager Lance Spicer said short-term rental licenses in residential areas will be ineligible for renewal after May 1.

“They will have effectively abandoned their license and will not be eligible for a new/initial license due to the 400 license limit and based upon current data,” he said.

Some short-term rental projects in residential zones weren’t able to get licensed prior to the Nov. 1 deadline, leading the owners to request commercial zoning for their developments.

The board approved a zone change for more than 15 acres off of Lakeshore Drive at its Nov. 1 business meeting. The parcel was zoned medium/high density residential, or R-4, when the planning commission approved the site plan for The Cabins at Rocky Ridge earlier this year.

The residential cap was at 500 when the 30-cabin plan was approved, prompting the planning commission to recommend a zone change to commercial transitional, or C-TR, zoning to the city board.

“It’s very unusual for a use that is OK in a zone to suddenly become not OK not through a land use action but by another action,” Planning and Development Director Kathy Sellman told the planning commission last month. “In this case the capping of residential licenses at a lower number than when he came into the game.”

The engineer who applied for the zone change on behalf of Rocky Ridge Investments told the planning commission lenders wouldn’t finance the project without the zone change.

“The financing component is driving this,” John Rogers of Crafton Tull said. “The bank wants assurance that we can have these units available for our guests. With that cap, the bank is not comfortable with that. This rezone would remove that single obstacle, which would allow us to go forward.”

City Manager Bill Burrough told the board last month that short-term license and permit fees had collected more than $225,000, money the city plans to use to upgrade its short-term rental compliance software. Burrough said the city will switch to GovOs for management and tracking of short-term rentals. The city will pay a $70,000 setup fee and an annual maintenance fee.