Pete Furman

City authorizes up to $18M in garage bonds – Sedona Red Rock News

The Sedona City Council voted unanimously on Tuesday, June 11, to approve a proposed issue of up to $18 million in excise revenue bonds as part of the financing arrangements for the Forest Road Extension and Uptown parking garage.

City Manager Anette Spickard explained to the council that the resolution was proposed as an emergency measure both “to take advantage of the bond market to the city’s benefit” and to prevent a referendum on the bond issue that could delay the start of work on the garage.

Bonds and More Bonds

City financial advisor Jack Leeper, of Stifel Public Finance, presented council with the proposed financing plan for the Uptown garage. Under the arrangement tentatively approved by council on May 14, when the garage contract was authorized, the $18.6 million remaining balance of the $25 million raised in 2022 by a bond issue to fund Sedona in Motion projects, potentially including the garage, will be reallocated from the Forest Road Extension to the garage project. The proceeds of the 2024 bonds, which may be up to $18 million but are currently estimated to be $16.345 million, will be allocated to completion of both Forest Road and the garage.

Spickard stated that allocating the bond proceeds in this manner would result in a savings of over $5 million to the general fund.

Emergency

The resolution approving the bond issue was proposed as an emergency measure, meaning that it would take effect immediately instead of in 30 days and would be exempt from repeal by a referendum. Such an ordinance must be approved by at least 75% of council, or six of the seven members.

“There’s been at least 24 … bond issuances and refundings,” City Attorney Kurt Christianson said about the emergency clause in reply to a question from Councilwoman Jessica Williamson. “Of the 24, 23 were approved with an emergency declaration. The one exception was a 1992 refunding.”

“They are commonly used by cities, towns, counties across the state,” bond counsel Paul Gales said.

Gales said that using the emergency clause in the resolution “allows the city to access the market in a timely manner,” while

Leeper said that it “allows you to take advantage of market conditions” and “lock in those rates,” resulting in taxpayer savings.

Leeper said that the Federal Reserve will likely not cut interest rates in the near future. “There are some whispers of rates actually being increased,” he said.

“Is there actually any placement risk here?” Councilman Pete Furman asked. “Verde Valley bonds are pretty safe.”

Leaper said it was uncommon but could happen.

“Everything I see suggests we’re in a relatively stable interest rate environment,” Councilman Brian Fultz said. “Is there really any interest rate risk to the city over a two-week delay?”

The bond pricing is currently scheduled for between July 2 and 8, while Leeper said the soonest the bonds could be priced without the emergency clause would be July 16.

“It’s unlikely,” Gales said. “But, as we’ve seen in the world the past couple of years, anything’s possible.”

“We do have sufficient liquid cash in order to cover that,” interim Finance Director Jean McGann said, regarding the city’ ability to continue work on Forest Road if the bond issue was deferred for a two-week period.

“We were already planning to carry the project for a couple of weeks,” Spickard added.

No Referendum

“If the emergency clause is not used, and if we have folks who, I have heard, pulled or are about to pull packets to create a referendum on this decision, that introduces massive uncertainty into the completion of this project because we don’t know if the voters will vote it down,” Spickard said in response to a question from Vice Mayor Holli Ploog about potential delays. “It could be more than a year delay … You’ve recently been faced with a similar situation, and you had to choose, would you implement a project in the face of a referendum looming, and you chose not to. I would bring the same question to you if a referendum were filed on this, asking you, ‘Do you want the city to cancel $12 million worth of other projects to see this one through to completion with no guarantee that you’re going to get the bond?’ … You won’t get away from this decision by leaving out the emergency clause. We will be back to you to find out how we’re going to get to finish Forest Road with other money because there’s no guarantee the bond will come … The emergency clause is providing certainty for the financing of the project.”

“If that’s your intention, to have people vote on major projects, probably do that before you start a project instead of in the middle of it,” Spickard added.

If the bond issue and the garage were turned down, Deputy City Manager Andy Dickey said, “what contractor in their right mind would bid our contracts?”

Public Comment

Three residents spoke on the proposed bond issue. Allison Nichols said she was concerned about the emergency clause, while Mike Wise urged the council to approve the bonds and move forward with the project.

“Perhaps it’s because I’ve only been here for [two and a half years] that I’m still capable of being surprised by things that the city does,” Bill Noonan said. “Sedona city ordinances are very clear that emergencies and emergency ordinances that take effect immediately are limited to those situations that are required for the immediate preservation of the peace, health or safety. The only justification the city has given for declaring this an emergency is the financial convenience of the city … I’ve listened to some of the justifications for doing this. One of them is that the city has ignored the law many times in the past and should continue to do so in the present. Although that’s a creative defense, I don’t think that it’s very convincing.”

Council Discussion

“This whole emergency clause thing is confounding to me,” Fultz said. “Why isn’t there a more discreet ARS statute that speaks to giving this authority to basically fast-track without using language that, again, has been pointed out as questionable?”

“The emergency clause means that, when applied, whatever is happening is exempt from referendum,” Councilwoman Melissa Dunn said. “That is the crux of the emergency clause. That is what people in our community are most concerned about. If we issue this with the emergency clause, they cannot try to do a referendum to stop the bond.”

“I’m not against referendums, that’s fine,” Dunn said. “However, there is a health, safety and welfare risk to the community … I think that these [projects] are in the best interest of the health, safety and welfare of the community.”

“Hear, hear. I’m in support of the resolution as it’s currently written,” Williamson said.

“We would like you to be happy,” Williamson added, addressing the audience. “But I think we realize that 1., we’re not going to make you happy on this issue, and 2., the garage is in the best interests of the city.”

“I prefer that the emergency clause be removed from this action,” Furman said. “Governments move slow for good and frustrating reasons … It also subverts the public process. We need to be very conscious of that. I don’t think that a two-week delay in interest rate risk has made the case for me that we should revert to an emergency clause … there’s a difference between can and should.”

“I’m supposed to act fiscally responsible up here on behalf of our community,” Kinsella said, noting that she was “not happy about the emergency language in there” but it would save $5 million. “That’s fiscally responsible.”

“How are we going to govern these large decisions going forward?” Kinsella asked. “Do they remain with council? … Or do we allow things to be delayed in a way that harms our city financially?”

Mayor Scott Jablow said he would support the resolution as written.

“Just because you’ve always done something is not a good reason to continue to do this,” Furman said, pointing out that he checked with Flagstaff and Cottonwood city staff and was told that neither municipality uses emergency clauses to issue its bonds.

The council then passed the resolution unanimously.

Council votes $150,000 for summer marketing – Sedona Red Rock News

On Tuesday, May 14, the Sedona City Council approved allocating $150,000 for a summer marketing campaign to attract visitors to Sedona, bringing the total that the city has spent on branding and marketing since the Sedona Chamber of Commerce declined to renew its tourism management contract with the city last April to $431,000.

While the contract was approved as a consent item without discussion, the council had previously heard details of the proposed summer campaign and the results of the 2023-24 winter ad campaign from tourism marketing manager Rob MacMullen and city consultants Mary Angelo and Christian Folk, of DVA Advertising, on March 27.

Future Direction

“The tourism program has the potential to create harmony in our community … because we are able to reach them all with our communication, one, and two, because we are under the city auspices,” MacMullen had told the council, outlining the city tourism department’s planned management approach. “I want to keep in our minds this idea of harmony as a possible outcome of the tourism program.”

MacMullen and DVA presented a draft for a brand platform and two proposed summer campaigns. The draft branding statement defined Sedona as both unique and “silent, fragile and vulnerable” and prospective residents and visitors as “stewards of this sanctuary” who must “share our ethos.”

Councilman Brian Fultz and Councilwomen Melissa Dunn and Kathy Kinsella questioned the draft brand’s reference to “ethos” as potentially unwelcoming and repetitive.

“I thought that’s a very Sedona word,” Councilman Pete Furman said. “I wasn’t offended by it in any way.”

“We want to attract the type of person who shares the values around stewardship,” then-City Manager Karen Osburn said. Osburn retired April 5.

Angelo noted that concepts such as “fun” and “quirky” had been omitted from the brand draft because the Tourism Advisory Board had not supported such an identity. “We wanted to have that stewardship, educational stuff going on.”

“What will it take to actually cause a change in behavior?” MacMullen asked, reviewing questions that city staff plan to explore through the tourism program. “What’s the tolerance or the receptivity of our intended travelers? How much of an education and stewardship message can they receive before we start diminishing their desire to actually visit? The only way to explore those concepts is to test.”

“We must use tourism to make Sedona a better place, and therefore make the world a better place,” Furman said.

Angelo then outlined DVA’s two proposed campaigns: “Tell a Different Story” and “In the Moment,” both of which featured nature photography. The former was intended to focus on trying to divert tourists from popular sites, while the latter was designed to stress “softer” out-of-market messaging to attract visitors and more imperative in-market — within 25 miles — messaging to visitors. Angelo described the second option as offering “a little bit stronger of a call” and repeatedly used the words “respectful” and “considerate.”

“It was fairly strong but still, we felt, welcoming,” Angelo said.

Both proposals reiterated “Leave No Trace” concepts.

After discussion of the proposed wording of the campaigns, council reached consensus on proceeding with the second option, including the softer out-of-market messaging recommended by the Tourism Advisory Board, as “Embrace the Moment.”

“We like the more directive [approach],” Dunn said.

“We’re constantly being led by city staff,” Fultz said.

“Thank God,” Councilwoman Jessica Williamson said.

“The [social media] influencers I’ve just been emailing through the course of this meeting right now is every one of them gets a response that says, we don’t compensate you for coming, if you’d like to come, here’s the times we’d like you to come, if you have an audience that’s big enough, and by the way, here are the messages that we want you to share,” city consultant Heather Hermen said.

During comment from the public, resident Alexis Parker described the directive approach of the “In the Moment” campaign proposal as “dictatorship.”

City staff expected the campaign to begin May 15.

Phoenix Visitors

Council members split on the desirability of marketing to Phoenix and Los Angeles, which are currently Sedona’s primary markets. Forty percent of visitors who stay in Sedona lodging properties come from Phoenix and provide 42% of the city’s tourism spending; for Los Angeles, those figures are 8% and 18%. MacMullen pointed out that 60% of Phoenicians plan to visit Sedona in the next 12 months.

“That data’s telling us that that’s a good market … why don’t we take those people and share our message of how to behave here?” Mayor Scott Jablow asked.

“We think that Phoenix is really a key market … we do agree with the [Sedona] Lodging Council in that Phoenix is your best opportunity to grow overnights, so our feeling is that that stewardship message is probably most valuable in Phoenix,” Angelo said.

The chance that the Sedona Lodging Council or the chamber’s Business Improvement District, which is directed by the lodging council, might compete with the city of Sedona in type and quantity of Phoenix-directed advertising was a concern for council members.*

“I just don’t want to give our power away,” Vice Mayor Holli Ploog said. “We just took it and I just can’t even imagine that we would allow the BID to be the face of Sedona.”

Jablow, Ploog and Dunn all favored marketing Sedona’s stewardship message to Phoenix, while Fultz, Williamson and Kinsella opposed it. Furman was opposed to any out-of-area marketing. Williamson then changed her position to support Phoenix marketing to avoid a tie.

Tourists Past

Angelo and Folk outlined the results of the city’s winter marketing campaign, which ran from Nov. 15 to Feb. 1 and, according to the city’s figures, generated 1,043 trips, 1,744 visitor days and 701 room nights. The city’s ad spend was $50,000 and Angelo said it generated approximately $12,000 in city sales tax as a result of the campaign.

“The numbers speak extremely well for themselves,” Fultz said.

MacMullen also revealed that the latest visitor surveys indicated that 12% of respondents said that they would only stay in a vacation rental rather than a hotel.

“Sedona’s the worst resident sentiment [toward tourists] that we’ve seen in any market that we’ve looked at,” Angelo told the council. “That’s not just us saying that, that’s also the survey company that we utilized that does lots and lots of resident sentiment surveys.”

*Editor’s note: The print version of this story did not clarify that the Business Improvement District was set up by the chamber but is directed by the lodging council.

Council approves $17.5M contract for $26M garage – Sedona Red Rock News

The Sedona City Council voted unanimously on May 14 to approve the contract for the proposed Uptown parking garage to provide potential employee and customer parking for Uptown businesses at a contract price of $17.5 million, and a total cost of $26 million in public funds, after council members spent six hours discussing it and how much they disliked the price tag.

The current design of the garage as revised will feature 270 parking spaces, which will include six spots for electric vehicles and eight spots for motorcycles. Architect Jan Lorant described it as “a modest-size garage” that will “preserve the view of the mountainscapes” and utilize materials that “speak to the setting.”

The garage will also include 22 bike parking spaces, an information kiosk, a surveillance camera system, a solar array, a police substation, four restrooms, a server room for the city’s IT department and plaques discussing the history of the surrounding rock formations.

“It’s a wonderful amenity,” Lorant said.

“I think it’s a beautiful building,” Councilwoman Jessica Williamson said.

The current plan estimates that the garage will require another two to three months of excavation, involving both mechanical excavation and explosives, followed by nine months of construction with completion planned for August 2025. All components will be cast in place. Projected lifespan of the structure is 50 years.

Cost

Deputy City Manager Andy Dickey told council that the garage proposal was not put out to bid and that the proposed contractor, McCarthy Building Companies of Phoenix, was instead “selected early on through a qualification-based process” to work with city staff. Following the meeting, Dickey said that picking the contractor in advance was beneficial on complex projects by allowing them to give input on the design process and start getting bids from subcontractors.

The value of the construction manager at risk contract that the city awarded to McCarthy was $17,545,098. The city will incur another $5,133,133 in direct costs, mostly related to excavation and shoring, for a construction budget of $22,678,231. That equals $83,993 per space.

Costs already incurred by the city as part of the garage project include $1,089,053 for architecture and design work, $898,880 for land acquisition and related costs, $356,000 for utility removal and relocation, $65,000 for demolition and $61,000 for driveway relocation. The total estimated cost of the project as specified in the fiscal year 2025 budget is $25,999,668, of which $3,406,058 has already been spent, for a total cost of $96,295 per space. McCarthy’s construction fee will be 4.7%, or $824,620.

“We’re all shocked — stressed — about the price of the garage,” Councilman Pete Furman said, noting that in the San Francisco Bay Area, the typical price for a garage is around $40,000 per space, which includes seismic engineering costs. Furman cited a series of studies by WGI Engineering that found the average cost of a parking structure in Phoenix to be $26,274 in 2023.

Dickey and McCarthy representatives said the proposed cost of the Sedona garage was the result of travel costs for subcontractors, a competitive building environment in Phoenix, increased concrete use as a result of the garage’s flowthrough design, the garage’s small size, new information about needed utility relocations and the difference in cost between porcelain and stainless steel fixtures.

Dickey later said that “many of the general statewide cost estimates are already outdated, due to how fast construction costs are increasing.”

Assistant city engineer Bob Welch estimated that a less constrained site with fewer amenities developed through a comprehensive bidding process would reduce the cost of the garage by $8,152,800.

“A single wall-hung lavatory … is $3,781,” Councilman Brian Fultz said. “A urinal is $3,434 and a toilet is $5,184. That’s crazy. That’s just plain flatout crazy. I can go buy a Sloan vitreous china wallhung lavatory for $89 … This is called ‘sticking it to the man’ if I ever saw it.”

“That’s the cost that we have gotten from the market,” McCarthy estimator Ted Cholla said.

“I can’t justify this, either,” Mayor Scott Jablow said. “$2,300 for a mop sink?”

“We’re either going to support the staff or we’re not,” Vice Mayor Holli Ploog said.

As an alternative to building the garage, Dickey said the property could be completed as a surface lot with 70 to 80 spaces at a cost of $2.5 million.

Payment Plan

The city’s bond advisor, Mark Reader of Stifel, briefed council on two possible financing options for the garage.

Reader’s initial proposal was that the city pay the entire capital cost of the project by issuing $23.425 million in 2024 series bonds, which would result in debt payments of around $1.5 million per year. Alternatively, Reader suggested a second financing option in which the city would reallocate $18 million in outstanding series 2022 transportation bonds to pay for the garage, then issue $18 million in new 2024 bonds, $12 million of which would fund completion of the Forest Road extension and $6 million of which would be allocated to the garage. The advantage of the second alternative, Reader said, was that it would reduce debt service costs to the city’s general fund by roughly $340,000 per year.

City Manager Anette Spickard said that staff estimated parking revenues from the garage will be $1.78 million per year on the basis of charging $2.50 an hour at a utilization level equal to 75% of that of the city’s current paid parking for nine hours a day. Assuming garages expenses of $120,000 a year, Reader predicted $1.66 million in parking revenue would be available to cover the required bond payments.

“Maybe it should be $4 an hour,” Jablow said, while Dickey proposed a timebased fee escalator to deter employees from parking in the garage.

“I think we’ve been very fiscally conservative,” Kinsella said.

“It’s not about $6 million. That’s peanuts. That’s money we have anyway. We always have $6 million,” Ploog said, explaining that her concern was sacrificing other priorities to the garage.

While a majority of council members were in favor of the second financing alternative, council is currently expected to make a formal decision on the bond financing for the garage on Tuesday, June 11.

Public Comment

Only two members of the public spoke in opposition to the garage, 10 spoke in favor and three suggested the city defer a decision pending a more comprehensive study.

“A garage will strain our coffers and lower our credit,” Sean Smith told the council.

With one exception, all individuals who spoke in favor of the garage were either Uptown business owners or managers or associated with the Sedona Chamber of Commerce.

“This is our best alternative at this point in time,” Ally Hansen said. “As an Uptown business owner, we want this, we need this and the sooner the better as far as we’re concerned.”

“For 20 years this parking garage has been a goal of the city’s,” Sedona Chamber of Commerce President and CEO Michelle Kostecki said, adding that the design showed “sensitivity to the environment” as well as how the city listens to the residents.

“With over 300 employees between our businesses, we desperately need this parking,” said Colm O’Brien, of L’Auberge Resort.

“This garage is especially needed at the southern end of Uptown,” Chamber Board of Directors Chairman Mike Wise said. “Forest Road is the best location for a garage.”

“I cannot believe the cost of this project, but it’s not going to get any cheaper, and we do need parking,” former Vice Mayor John Martinez said. “Let’s make the decision.”

“It’s time to really support the businesses in Uptown,” said Jesse Alexander, of Sinagua Plaza.

“Kicking the can down the road is not really an option,” Al Comello said.

“Would an employee be willing to pay $400 a month for parking in Uptown?” Uptown resident Mark TenBroek asked. “The city needs to gather much better data.”

“There has been extremely limited resident involvement,” said Uptown resident Joe Zanni, one of the two resident members of the parking advisory committee. “The only people who have been named as stakeholders have been businesses and city staff … I think it’s extraordinary the extent to which residents are ignored. There is a citizen engagement program which really does not engage residents … all that the city has done is had horse-and-pony shows for people to show them how wonderful a job you have done and how great the final product is going to be.”

Zanni said of city staff that “their sole purpose has been to move forward with a garage.”

Unanimous Approval

“The price of this thing makes me very uncomfortable … it will never be cheaper,” Furman said.

“It’s just going to cost more … by waiting,” Jablow said.

“It’s not my priority but it is a priority for the city,” Ploog said. “It doesn’t get cheaper … I trust our staff.”

“I also choke a bit at the number,” Councilwoman Melissa Dunn said. “What I don’t want it to be is another million dollars more because we decided to wait.”

While Dunn also expressed concern over the possible health effects of dust from the project and the 70 decibel noise of the concrete pump, “we cannot draw any correlation between any spikes in bad air quality and our projects,” Dickey said.

“People were hysterical about $13 million,” Williamson said. “I support it. It needs to be done.”

“I don’t like it but I can live with it,” Fultz said.

“I’m looking at the audience and I’m seeing pain on people’s faces,” Kinsella said, but added that the proposed price was less than the amount she had decided on as a deal-breaker and would consequently support it.

Council voted 7-0 to approve the garage.

During the meeting, Spickard announced the engagement of Jean McGann of St. Paul, Minn., as interim finance director until the recently-departed Cherie White can be replaced permanently.