Are we allowed to let people view our Halloween display in our yard?

It sounds like you should get a local lawyer in your city. From what you are saying, it sounds like the city does not want you to have the construction. It may be that removing the tarp will make it safer and possibly also make it so it is no longer a building, but simply a yard display. Cities regulate such things because they have at times been the scenes of horrific disasters, usually fires. The combination of flammable materials, the use of lighters to light the way, and people possible smoking can all lead to deadly disasters, especially when people are trapped in a space that may be built like a maze. I have seen people build elaborate yard displays and allow people to walk through, but they do not put up any roof.

Yes, the city wants you to shut the whole thing down. Talk with city officials about getting the proper permits and inspections prior to doing this next year.