After years of discussion and debate, on August 26, 2024, the Saugatuck City Council voted in favor of the adoption of a 20% cap on short-term rental licenses in the six neighborhoods of its R1 Residential District.
Saugatuck Neighbors v. City of Saugatuck
Complaint and Jury Demand
Plaintiff, Saugatuck Neighbors, by and through its attorney, VARNUM LLP, states for its Complaint against Defendant, City of Saugatuck (the "City"), as follows:
Introduction
1. The City of Saugatuck is attempting to pass new ordinances to regulate short-term rental properties in certain sections of the City. However, the City has failed to follow its own City Charter in this process. Specifically, the City ignored the Charter’s provisions for resolving potential conflicts of interest among public officials voting on these new ordinances. This is particularly concerning because a few elected officials, who stand to benefit financially from the new ordinances, voted in favor of them despite the majority of the community opposing these changes.
2. Over the past decade, the number of short-term rentals (STRs) in the City has significantly increased, partly due to platforms like Airbnb. This rise prompted City leaders to consider new regulations. In 2023, the City formed an STR Task Force to gather data and community feedback on STRs. The Task Force found that most community members did not support limiting the number of STRs, fearing it would harm the tourism that is vital to the City’s economy. Despite this, the City Council enacted new ordinances capping the number of STRs in certain areas, raising significant financial implications for property values and income opportunities.
3. Despite the Task Force’s findings, the City Council enacted new ordinances capping the number of STRs in certain sections of the City. The financial implications of such new ordinances are enormous, as the value of properties and income opportunities for properties is significantly impacted by whether a property can be used as an STR. Considering the implications, the question of whether a conflict of interest existed for several City Council members was raised throughout the legislative process.
4. The City Charter does not allow a Council member to “vote on any issue or matter in which he or a member of his family shall have a proprietary or financial interest or as the result of which he may receive or gain a financial benefit.” Section 4.9(e).
5. The City Charter also sets forth the process for determining whether a conflict exists when the question is raised about any Council member, which requires a vote of the non-questioned members: “If a question is raised” as to whether a conflict exists, “such specific question shall be resolved before the main question shall be voted on, but the council, board or commission member concerning whom the question was raised shall not vote on such determination.” Id.
6. During several City Council meetings, the City did not follow Section 4.9(e) of the City Charter. Even though the question of whether several Council members had a conflict was raised numerous times, not once did the Council vote to determine whether a conflict existed. Rather, the City’s attorney merely stood up and asserted whether, in his personal opinion, a conflict existed; at which time the City accepted the attorney’s opinion without voting on it as required by the Charter.
7. In addition to the invalid process followed, the City also incorrectly determined that Council member (and Mayor) Stanton did not have a conflict. Mayor Stanton undoubtedly “may” receive a “gain or financial benefit” as a result of the new ordinance because the Mayor voted to exclude her residence from the new ordinance, which has the effect of financially benefiting her property value. Because the Mayor “may” receive a “gain or financial benefit,” the Mayor should not have been allowed to vote.
8. Because the City did not follow its City Charter when adopting its new STR ordinances, the City Council’s actions were ultra vires and the new ordinances are ineffective as a matter of law. The new ordinances must be declared invalid and the City must follow its Charter when adopting any new ordinance...
Frequently Asked Questions
Could this ordinance impact my property value?
Potential buyers might perceive properties in areas with strict short-term rental regulations as less desirable, fearing future regulatory changes or enforcement issues. This perception can lower demand and, consequently, property values.
Moreover, if the ordinance leads to fewer tourists staying in the area, local businesses might suffer, which can negatively impact the overall attractiveness and economic vitality of the community. A less vibrant local economy can contribute to lower property values. Property and business owners who can no longer generate income might have less incentive or financial ability to maintain and improve their properties, leading to a decline in property conditions and neighborhood appeal.
How does the non-transferability of licenses affect me if I want to sell my property?
The non-transferability means that the new owner must apply for a new license, which could complicate the sale process and potentially reduce the property’s attractiveness to buyers interested in short-term rentals.
How does the ordinance affect my ability to pass my rental business to my family?
Since licenses are non-transferable, your family members would need to apply for a new license if they inherit or purchase the property, which could disrupt the continuity of the business.
What happens if my short-term rental license expires or is revoked while a cap is in effect?
You will not be able to re-apply for a new license until the number of active short-term rental licenses in your zoning district falls below the maximum limit. At that point, you will need to go through the city’s lottery selection process for issuing available licenses, which could delay your ability to rent out your property.
What are the current limits on licenses in each zoning district?
Community Residential R-1: No more than 76 licenses.
Peninsula West R-1: No more than 10 licenses.
Maple Street R-1: No more than 7 licenses.
Peninsula South R-1: No more than 11 licenses.
Peninsula North (Duneside) R-1: No more than 3 licenses.
Peninsula North (Riverside) R-1: No more than 2 licenses.
How does this affect accessory dwelling units?
Accessory dwelling units are not subject to the maximum number of licenses and may be licensed as short-term rentals even if the current number of short-term rental licenses exceeds the maximum limit. Moreover, accessory dwelling units are not counted towards the total number of dwelling units in a district for the purposes of calculating the maximum limit on short term rental licenses.
What impact does this ordinance have on my stay as a visitor in Saugatuck?
There may be fewer short-term rental options available, making it harder to find accommodations, especially during peak seasons. With fewer rentals available, prices for remaining short-term rentals might increase due to higher demand.
How might this ordinance impact my local business?
By limiting the number of short-term rentals, the ordinance may decrease the number of tourists staying in the area. This reduction in visitors can lead to fewer customers for local businesses, particularly those that rely heavily on tourist spending, such as restaurants, shops, and entertainment venues. This economic downturn can affect the viability of small businesses, potentially leading to closures or reduced services.
Businesses that provide services to short-term rental properties, such as cleaning companies, maintenance services, and property management firms, may see a decline in demand. This can lead to reduced income and potential job losses in these sectors.
The perception that the area is less welcoming to tourists due to stricter regulations can deter potential visitors, further impacting local businesses. A reputation for being less tourist-friendly can have long-term negative effects on the local economy.
With fewer tourists, businesses may need to compete more aggressively for local customers. This increased competition can lead to lower profit margins and financial strain for businesses.
What can I do to challenge this ordinance and the representatives pushing this policy?
Join our mission for positive change. By becoming a member, you can stay informed, participate in our activities, and help shape our strategies. Your contributions will help cover legal fees, court costs, and other expenses associated with challenging the ordinance and representatives in power.
Spreading the word is also crucial; use social media, local media, and word of mouth to inform others about the negative impacts of the ordinance and encourage them to join our cause. Engage with local government by writing letters or emails to city council members and speaking during public comment periods at city council meetings. Express your opposition not only to the ordinance but also to the representatives who support such policies.
City of Saugatuck: 102 Butler St, PO Box 86, Saugatuck, MI 49453, (269) 857-2603
City Manager: Ryan Cummins, rcummins@saugatuckcity.com
City Clerk: Jamie Wolters, jwolters@saugatuckcity.com