UPDATE 4/26/12 @ 11 p.m.

IRONTON, Ohio (WSAZ) --It’s back to the drawing board for city leaders in Ironton.

An ordinance requiring vendors to pay a fee before setting up shop at public events has been ruled unenforceable. The ordinance was put into effect last year, but with no consequences in place for violators it has not held up in court.

Thursday night, City Council discussed working up a new ordinance that would contain the proper language they would need to enforce it.

The issue is expected to be brought back up in a couple of weeks.

A big festival is set for the weekend, but an enforcement problem with a new law may cost the city thousands of dollars.

It’s what some are calling "vendorgate"

Organizers expect up to 50,000 people at this year's Rally by the River biker fest.

A new law says food and souvenir vendors outside the festival gates must pay a fee like the ones inside.

But it's a law with no teeth, and that omission has many chomping at the bit.

Rally on the River organizers, all with the Friends of Ironton civic group, say they're spending upward of $200,000 this year on national music acts and the international bikini team.

They say any profits go to city improvements like the new kids splash park.

“It's a hindrance on our growth and progress if we are financially strapped to make things happen," organizer Dave Smith said.

Smith said for years he's worked to get vendors outside the rally to pay the same $4,700 vendor fees that insiders pay -- fees that could total upward of $50,000.

So, the Ironton City Council recently passed an ordinance requiring every vendor in the city limits set up during a special event to pay the vendors fee.

But Mayor Rich Blankenship says with Tuesday’s city attorney ruling that the ordinance has no enforcement penalty, he will not have police enforce a toothless law.

“We can't enforce a law that has no penalties," Blankenship said. "This has to go back to City Council for amendment.”

Smith responded, “I'd expect them to back the ordinance and make people pay fees. And, if not, have consequences.”

Blankenship fired back, “I like the Friends of Ironton. They do good things for the city, but I'm not going to just hand them the keys and let them loose.”

Outside street vendor Rock McDavid knows there's no enforcement. He said his $180 annual Ironton vendor fee should be sufficient.

“I feel I'm in the right, not paying the $700," McDavid said.

But inside rally vendors paying the $700 fee say they're being cheated.

Vendor Emad Abirafeh said, “I'm a paying customer, making money for me and the city. And if some are not paying, that's not right.”

Blankenship said the new law superseded a law that called for fines and jail time if vendor fees were not paid.

The Friends of Ironton say for next year, they will rethink their support for the Rally on the River.

Some local vendors tell us other communities have taken years to resolve similar vendor fee problems.

Local business owners are afraid that a proposed fee imposed on vendors will break their profits during summer events.

But the Public Utilities Committee says this makes things fair for organizations hosting these events.

A specific event in mind is the rally on the river hosted by the "Friends of Huntington."

"It will protect them, and their investment since they're putting that on in regards to outside people cooking in and vending without sharing anything with the Friends of Ironton," Committee Chairman Mike Lutz said.

The Rally on the River brought more than 30,000 people into Ironton, and organizers are expecting more than 45,000 to attend this year.