Pete Furman

Divided council approves new lease for Villas on Shelby – Sedona Red Rock News

After a contentious discussion, the Sedona City Council approved a ground lease for the proposed Villas on Shelby 30-unit, three-story apartment complex project by a 5-2 vote during its April 28 meeting, with Vice Mayor Holli Ploog and Councilman Derek Pfaff opposed.

The approval had been scheduled for April 22 but was tabled until the following week due to council concern over available time to review lease changes that will significantly increase the city’s eventual cost to purchase the project.

City Attorney Kurt Christianson said the city had previously approved two similar leases for the city-owned parcel at 2250 Shelby Drive, the first in support of a 9% Low Income Housing Tax Credit application by the developer, and the second in support of a 4% LIHTC application, which would have required the units to remain affordable for 75 years, committed the city to a $2.25 million loan to the project and given the city the option to purchase the project for $100 after 30 years.

“It was on April 3, just two weeks ago, that the city found out that the option to purchase for $100 at year 30 was not going to be able to be in the lease and that the option to purchase would have to be fair market rent,” Christianson said. “It was on April 15 that the city found out that the affordability period could not be for 75 years, that it would have to be only for 30 years, and then it was just on Friday, on April 23, that the city found out that the lease term had to be 99 years instead of 75 years.”

The revised lease to meet LIHTC requirements will allow the city to purchase the complex at market value after 15 years, while retaining the $2.25 million city loan to the project, which will carry an interest rate of 5.83%.

Housing Manager Jeanne Blum said that “close to $20 million in outside funding sources are being contributed” to the project in partnership with investment funds.

The agenda bill for the resolution approving the lease stated the project’s additional financing would include a $5 million loan from the Arizona Department of Housing, $8 million in tax-exempt bond funding and a $7.525 million “construction loan” and $1.365 million “permanent loan” from unspecified investors for a total of $24,140,000.

The agenda bill also stated that staff had asked council to waive $18,924.26 in review and permitting fees and pay $312,245.41 in development impact fees for the project, a total of $331,169.71, in addition to the city loan. The fee waivers and payments would increase the city’s total contribution to $2,581,169.71 and the estimated total project cost to $24,471,169.71.

Developer Matt Shoemacher stated in January 2024 that the cost of the project was then “right at $14 million,” or $466,666 per unit; on the basis of the new project cost, that has now risen to $815,706 per unit.

“We plan on closing and breaking ground in two weeks,” Shoemacher said on April 28, adding that the closing date had been scheduled for May 9 and that bond funding would remain available for roughly 60 days.

Although he was presenting a proposal to build an apartment complex, Shoemacher also said that locals to whom he has spoken “want to be the next homeowners.”

“I don’t think I can support this,” Pfaff said. “We started with the benefit to the city was going to be this … and then in the last few months it’s sort of been whittled down to, now we’re getting this. That doesn’t sit right with me.”

“I have concerns that this project has just gotten a worse and worse deal for the city. I’m probably going to vote ‘no,’” Pfaff added.

“I think I’m begging for two more weeks to see if we can get some outside independent advice of looking at this deal,” Councilman Pete Furman said.

“The affordability was taken out of our control,” Shoemacher said. “It’s a 30-unit deal that has 4% credits with two pieces of subordinate debt. That’s the only way to make a project here work.”

“With this not giving the same terms to the city, there might be a future responsibility to the city … to be having an additional financial contribution, and I think we need to consider that,” Councilwoman Kathy Kinsella said. “I hate kicking the can down the road on this, but I think there is some research that could be done in those areas over the next two weeks.”

“There’s dozens of attorneys that are experts in this that we’ve had conversations with. They’re not going to say anything different,” Shoemacher said. “I don’t know if there is the time to go through another two weeks and then pick it up again,” adding that it would be complicated to reschedule the 75 people involved in negotiating the deal for a different date. “At a certain point the tax credit investor is going to say ‘we can’t change this and this, these are federal opinions, we have to be compliant with federal banking laws.’”

“I was under the impression there was a drop-dead date,” Kinsella said. “Would a date of like the [May] 12th be too late?”

“To be blunt, we haven’t had any of this information until the 11th hour and 59 minutes. We felt the rug pulled out from underneath us in the past month on this where things have changed due to the negotiation points,” Mayor Scott Jablow said. “To me it felt like somebody up there is negotiating in bad faith, because they weren’t giving us a lot of information 18 months ago. When we started, we had a totally different picture of what it was to dealt with LIHTC 18 months ago, and it’s certainly not what we’re getting now.”

“The terms are what the terms are. I don’t think there’s a lot of room left,” Christianson said.

“From a straight business perspective, having terms change this dynamically, and unfortunately negatively, right up to the last minute is really unpalatable,” Councilman Brian Fultz said. “That said, I think that we are wasting time and putting the project at risk to go and seek additional consultation.”

“If we kill this, we’re still going to wind up spending as much money one way or another to get something done,” Fultz added.

“I’m not in favor of the terms, but they are what they are,” Councilwoman Melissa Dunn said.

“Nobody has given me the assurances I need,” Ploog said. “This is not a good deal for the city … We’re talking about a substantial amount of money that we’re going to put on hold every year for the next 15 years that we won’t have access to.”

“Dealing with LIHTC has left a bad taste in my mouth, and I tell you what, I’m going to be letting every city and town that I talk to in this state know that this is the way they negotiate,” Jablow said. “This is wrong.”

“I don’t think we’re urgent for a project,” Jablow added. “I’m going to support this and I’m probably going to kick myself one way or the other.”

The council then voted 5-2 to approve the lease and loan with Pfaff and Ploog opposed.

City Council blocks private sport courts – Sedona Red Rock News

The Sedona City Council voted unanimously to approve an ordinance amending the Land Development Code to impose restrictions on the construction of new private sport courts during its April 22 meeting.

Noise

Council had previously directed staff to draft such an ordinance on Oct. 9 after hearing a series of complaints from residents of one neighborhood that the noise from a private pickleball court being constructed in that neighbor hood would be hazardous to their and their dogs’ health.

Planning Manager Cari Meyer informed council at that time that the city had no record of any noise complaints associated with the city’s 13 existing private sport courts.

Resident Becky Hofer said during the Oct. 9 hearing that pickleball play produced sound levels of 110 dB “at the paddle.”

Due to physics, the sound from a 110-dB pickleball strike diminishes to 60 dB, the city’s noise limit for residential areas, at 26.35 feet away from the paddle and to 50 dB at a distance of 85 feet. At a distance of 200 feet, a 110-dB noise would diminish to 42.4 dB, quieter than a refrigerator.

Definition

The amendments to the LDC would define a sport court as “any flat, hardscape area of dimensions exceeding 20 feet by 30 feet, specifically designed for athletic purposes, including, but not limited to, basketball courts, tennis courts, handball courts, racquetball courts and pickleball courts, but excluding pools and driveways used exclusively for access to a garage.”

A sport court would become a conditional accessory use on a property and require that such a court be set back at least 200 feet from any property line unless it met at least two of five criteria, in which case the setback could be reduced to 25 feet: Incorporated sound mitigation to reduce the sound from the court at the property line to less than 50 decibels; was located on a common piece of property for use by multiple owners; other property owners within 200 feet agreed to the reduced setback; was separated from the property line by buildings; or was surrounded by city or U.S. Forest Service property not capable of development.

The minimum size of a property that could contain a 20-by 30-foot court surrounded by 200-foot setbacks would be 4.15 acres, while the minimum size of a property to which 25-foot setbacks could apply would be 5,600 square feet.

A sport court must also be surrounded by a fence or wall and would not be allowed to be rented separately from the property. The use of sport courts before 8 a.m. or after 8 a.m. would also be banned, unless modified by a conditional use permit, and any lighting of courts on single-family proper ties would be prohibited.

The Planning and Zoning Commission previously approved the proposed LDC amendments by a 6-1 vote on March 18, with Commissioner Kali Gajewski voting against the ordinance on the grounds that it felt anti-family.

Conditional Use Permit

“It kind of looks like we’re setting the table for a group of people in an HOA to put a sports court next to a private residential home that’s not — and allow them to have a setback,” Councilman Pete Furman said with regard to the CUP provision.

“If it’s a group of property owners coming together and saying we want to build this, we felt that was a way to allow the HOAs to do it,” Meyer said.

“In a wrong-headed enforcement machine, which I don’t think we have now, the words exclusively used for access to a garage could turn bad,” Furman said. “If someone has a driveway that they start to play basketball in … there could be an interpretation that that driveway is no longer exclusively used for a garage.”

“The intent of it was to not allow someone to pave an extensive area and say this was all my driveway,” Meyer said. “I don’t see that in that ability,” City Attorney Kurt Christianson said.

Councilwoman Kathy Kinsella asked if the word “exclusively” could be removed from the ordinance language.

“That was a definition we found from another city, and it seemed like a definition that would work, so we used it,” Meyer said. “The intent was that people couldn’t just pave every thing and kind of connect it all and call it their driveway and get around the regulations.”

“I think it’s describing the access, not necessarily the use,” Christianson said.

Mayor Scott Jablow asked if the new rule could be used to prohibit courts on the remaining vacant lots in a subdivision near his house.

Becky Hofer, Bob Pifke and Norris Peterson supported the ordinance during the public comment period.

Council Comments

“I’m just still a little bit fuzzy on whether the CUP is a necessity or not,” Councilman Brian Fultz said.

“This could be us worrying about something when there could only be two sports courts in the next 10 years,” Councilwoman Melissa Dunn said, adding that while it might be “overly burdensome” to have the CUP applications sent to P&Z rather the community development department, staff would tell them if there was a problem.

“I don’t understand the CUP either. I think it’s unnecessary,” Vice Mayor Holli Ploog said. “It seems cumbersome to conduct a public hearing.”

“I’m in favor of the CUP process,” Councilman Derek Pfaff said. “These things prob ably don’t belong in residential neighborhoods, so if there’s a little bit of an extra burden that people have to go through in order to construct one, I’m fine with that.”

“I just don’t think it’s going to happen all that much,” Councilman Pete Furman said with regard to the CUP process, adding that he would trust staff’s interpretations of the language, but suggested that the city could have achieved “a much finer tuned solution” without an LDC change by modifying the noise and lighting ordinance. “We’re coming out a little bit unfriendly, perhaps, sounding to families and people that want to do things in their backyard.”

“I don’t think this would create an undue burden because we don’t expect that many of them,” Kinsella said.

“I trust the staff if it goes to staff instead of going to P&Z,” Jablow said.

The council then passed the ordinance unanimously. It will take effect on Thursday, May 22.

Council raises workforce rent cap by 13.6% – Sedona Red Rock News

The Sedona City Council voted for a 13.6% increase in the rental rate cap for the city’s Rent Local program on April 8. Council spent 41 minutes considering the change, which had originally been scheduled to take five minutes.

The program was created in August 2022 with the aim of inducing property owners to rent their properties for terms longer than 30 days by offering a one-time financial incentive. Participants must agree to refrain from renting their properties as short-term rentals for one year after signing up and cannot charge rents that are greater than the monthly rental cap set by the city.

“We simply want to raise the rental cap to $2,500 per month from the original $2,200 per month,” Housing Manager Jeanne Blum said. “We want to do this to better align with current market rates and encourage more home owners to participate.”

“Participation rates do remain low because the rental caps are kind of misaligned with our market rates,” Blum said. “Most potential participants have been discouraged because the rental cap is below what they can bear.”

According to the information provided to council by city staff about the current rental market in Sedona, which Blum said was derived from an “ad hoc study,” the average monthly rent is Sedona is $1,762 for a one-bedroom, $2,424 for a two-bedroom and $3,553 for a three-bedroom, compared to U.S. Department of Housing and Urban Development fair market rates for Yavapai County of $1,293, $1,606 and $2,048, respectively. Blum also estimated that a studio would run between $1,200 and $1,900 a month, while the rent for the few properties currently partici pating in the Rent Local program is $1,500 a month to $2,200 a month.

Councilwoman Kathy Kinsella asked why staff were not suggesting that the cap be raised to $2,700 per month.

“It’s not appropriate,” Blum said. “It’s a burden.”

Blum also argued that raising the rental cap, in combination with the one time incentive, would bring a landlord’s potential return up to an amount closer to the market rate for a three bedroom home, or $3,333 per month. The one-time incentives offered through the program are $6,000 for a studio, $7,000 for a one bedroom unit, $8,500 for a two-bedroom and $10,000 for a three-bedroom, while those renting individual rooms can receive $3,000 for a single room, $4,000 for two rooms and $5,000 for three rooms. The program paid out $8,500 in incentives out of a budget of $240,000 in fiscal year 2023, $31,250 against a budget of $100,000 in FY23 and $14,250 against a budget of $100,000 in FY25, with the budgeted amount for FY26 having been reduced to $50,000.

A total of seven properties have been enrolled in the program; the council’s packet for the April 8 meeting states that three of those renewed for a second year.

Blum said that renting properties long-term would reduce maintenance costs for property owners over short-term renting.

“The increase covers the first year, gets closer in the first year, and then goes away. Maybe that’s why only three households have renewed their leases in year two,” Vice Mayor Holli Ploog said.

“Of course, if the incentive were available for multiple years, there would be more traction in the program, more longevity,” Blum said.

“Perhaps there are modifications in addition to the increase in the cap that we should consider,” Ploog said.

“The number of registered STRs has continued to increase over the life of the program, and yet we still aren’t getting meaningful traction,” Councilman Brian Fultz said. City statistics show that the number of STRs increased by 6.4% between 2018 and 2024.

“At what point do we say that this is a strategic distraction?” Fultz asked.

“I don’t think it is a distraction,” Blum said. “If it helps one family, in my view that’s successful.”

“The housing that we need is two- to three-bedroom,” Lindsey Hammersmith said during the public comment period. “I agree with the amounts that were brought up today.”

“What we’re seeing on the sales market is that a lot of these short-term rentals now are going out to market, and if they were sold today, I know of a local one, a three-bedroom, two-bath, that if I were to purchase that, my mortgage would be about $4,000 a month,” Hammersmith added. “So you really kind of perpetuate this needing to do a short-term rental continuation.”

“I’m fine with giving this a try as requested, but I’m skeptical that it’s going to work,” Fultz said, saying that “the average short term rental is still grossing $3,200 a month.”

“I’m willing to try it,” Councilwoman Melissa Dunn said, but expressed concerns about the program merely “deferring homelessness.”

“Maybe we need to have an incentive that increases if you leave a property in the program,” Councilman Derek Pfaff suggested.

“We’re not trying to compete in the marketplace. We’re trying to find that trip level,” Councilman Pete Furman said.

“We can never compete with the market,” Kinsella said. “We were trying to find someone’s better side.”

Council voted unanimously for the increased cap.