The Sedona City Council voted unanimously to approve the purchase of the Sedona Cultural Park and to issue $10.2 million worth of excise tax bonds to pay for part of the purchase at its meeting on Nov. 22.

Discussion of the purchase, which had been scheduled for one hour, lasted for two. Around 40 people attended the meeting.

Financing

The city has received six bids from financial institutions interested in taking up the bond issue. Mark Reader, managing director at Stifel and the city’s bond advisor, said that the “most responsible bid for the city” was offering an interest rate of 4.21% for a term of 15 years, which would result in an annual payment around $910,000.

To secure this lower interest rate, the city will issue tax-exempt interest bonds, which in turn will require that at least 50% of the Cultural Park development be public use.

Reader added that the bonds will incorporate a flexible prepayment feature.

“We want to make sure that we have complete flexibility as it relates to the planning of this acreage,” he said. “And if we got into a situation where we went over the 50% … if the city leased some land, or sold some land, or we want to refinance the bonds, or we want to pay down the debt … that will allow the city to prepay any of the bonds with 30 days’ notice at no penalty.”

City Finance Director Cherie White explained, and City Manager Karen Osburn confirmed, that the city “had budgeted for half of the amount to be debt financed” from the beginning of the process in order to keep cash on hand “because of the projections of increases in construction costs.”

White also suggested that in a couple years’ time, the city might be “flush enough with cash again that if we said we wanted to pay this off early, just because we wanted to, we’d likely be in that situation.”

“It’s really as if we were doing it all in cash,” Councilman Jon Thompson said. “We’re just doing it a little slower and paying a little interest in the meantime.”

“The impetus for the financing, and the close date of Dec. 8, had to do with interest rates,” Osburn said. “If we waited for the next time council met, even, we run the risk that — we’re expecting another adjustment in December to those rates — and on a $10 million issuance, that’s material money.”

According to Sedona’s fiscal year 2023 budget, the city “has approximately $38 million in outstanding bonds — all of which are excise tax revenue bonds.” The annual payments on the existing bonds are $6.8 million, and by the time they are paid off in 2042, they will have cost the city over $57 million.

The new bond issue will increase the city’s debt by 26.8%. Based on the expected annual payment, the total cost of the bond issue will be in the range of $13.6 million.

Purchase Process

Although council first discussed a possible purchase of the Cultural Park in an executive session on Oct. 26, 2021, and again at their retreat in January 2022, developer True Craft Residential held an option on the property at that time.

In January 2021, True Craft submitted a proposed plan for the site, later withdrawn, that would have included 610 housing units and a 195-room six-story hotel.

When True Craft’s due diligence period ended this fall, Osburn said, the city began negotiating with South Dakota property owner Michael Tennyson, as well as commissioning an environmental assessment and an appraisal.

After the property was appraised at between $20 million and $22.3 million, the city negotiated a purchase price at the lower end of that range.

No Master Plan

“We do not have a specific master plan for this site at this time,” Osburn confirmed. She added that the planning process would need to involve “dialogue with community about what the future land use plan should be.”

“We can’t plan it until we own it,” Councilwoman Kathy Kinsella said.

“You buy a piece of property, then you plan it,” Councilwoman Jessica Williamson said.

Hotel Location

Members of the council repeatedly said that without city involvement, the Cultural Park site will likely become a hotel.

“The proposals to develop the site almost always included a luxury hotel resort convention center as well as lots and lots of housing that, in this day and age, would most likely be short-term rental housing,” Williamson said. “Just so people are clear about the realities of what’s going to be developed on that site … if it’s privately owned.”

“Every single proposal that has come in, that city staff has reviewed, has required, in order for it to be profitable for a developer, either a major hotel or major development beyond what we’re comfortable with in terms of density,” Kinsella said. “We’re trying to prevent urbanization.”

“This will not be a hotel if we own it,” Vice Mayor Scott Jablow said.

Legislative Interference

Councilwoman Holli Ploog reminded the council and public that the Arizona State Legislature’s housing study committee visited Sedona earlier this year.

“It was not a friendly meeting,” Ploog said. “The crisis statewide for housing has reached a level where the state legislature is considering removing local government’s ability to zone its land … Where 40 acres could be thousands of housing units if the state legislature has their way.”

Threat of legislative action, she argued, is “why we want to have control of the last major piece of land that exists in our community.”

“This was a very disturbing meeting,” Jablow said. “Not only do they want to impose more density, as much as a developer wants, not what we wanted, height as well, regardless of the views.”

“That housing meeting was a scary moment,” Kinsella said. “It was a very scary moment to know that local control would have absolutely no impact … You have to take some things into your own hands if you want to protect and preserve them.”

Public Support

“This property is going to be sold to someone and I would prefer the city to be the person in charge of the development as opposed to another hotel operator,” said Tracy Randall, of West Sedona.

“We are purchasing this land for under the price of 20 homes,” commented Linda Martinez, of Sedona, referencing a recent rise in the median Sedona home price to $1,087,000. “Why is the outrage on a city doing its job to address the common good in terms of housing and uses for the community?”

“What you are doing is what you are called to do as our leaders,” Martinez told the council.

Public Opposition

“This city council finds pure delight in spending money on credit,” former Vice Mayor Sheri Graham told the council in a letter read by Ron Volkman that drew audience applause, which was suppressed by Mayor Sandy Moriarty.

“The consideration of this agenda item is outrageous. Everyone that I’ve spoken with thinks this is a waste of city funds,” former Vice Mayor John Martinez stated.

“My generation’s going to have to cover those budget deficits, and it appears that this is happening without any mandate from my generation,” said Pasquale Neri, a Lake Montezuma resident.

“Why is it so necessary in the guidelines of the purchase that you all are able to change the plans after the purchase?” asked Emily Taylor, of Sedona. “That’s very alarming to me and I think our community … if we can quickly sell it.”

“This is a fait accompli,” Sylvia Sepielli of Sedona declared, calling the council’s warnings of what might happen to the property in private hands “disingenuous.”

“I don’t believe it’s your job to be the ‘shareholders’ or ‘shepherds’ of this property,” former mayoral candidate Samaire Armstrong told council.

“I’ve never seen anything in all my years quite like this, with the speed and non-transparency that’s being proposed tonight,” Volkman said, speaking for himself. “How is this justified?” Also, Volkman pointed out, “if there is a referendum or initiative by the citizens to overturn your decision, your contract does not leave you with an escape clause.”

Armstrong and John Martinez reminded council that the city owns several hundred acres of land at the Dells, a few miles west of the Sedona city limits, that would be suitable for housing development without incurring purchase costs for land.

Public Duty

Members of the council made it clear that they saw the Cultural Park purchase as fulfilling a longexpressed wish for many Sedonans.

“This piece of land is something that has been on the minds of Sedonans for years,” Kinsella said. “It is large enough to address a number of different pressures and requests.”

“There’s been plenty of public review and discourse on this,” she added.

“People have said for 20 years now, ‘Why don’t you get the Cultural Park?’” Williamson said.

“It’s been something that’s been on our radar for a long, long time,” Thompson said.

“There’s a lot of [people] we never hear from, and I think it’s our obligation to think of those people when we make our decisions,” Moriarty said.

“I do agree that it needs to be purchased now; it’s only going to get more expensive,” she added.

“A quarter-acre piece of land for $121,000 — that seems like a pretty good price to me,” Councilman Tom Lamkin said.

“You trust us to do what’s best for all of Sedona,” Lamkin told the audience. He stated that the parking garage and Jordan Lofts projects had originated in public demand before being killed by 30 or 40 people, and called for greater unanimity of public opinion. “We need you to get together … Do I trust that all of you are in agreement? … You will be the ones who will be able to come forward and kill it or not.”

New Council

Lamkin, Thompson and Moriarty leave council next week. Lamkin did not run for reelection; Thompson and Moriarty were defeated in August. Brian Fultz, Pete Furman and Melissa Dunn will take their seats.

“The new council’s been engaged,” Kinsella claimed, responding to the argument that the city’s decision should have been delayed until the newly-elected council members are seated.

“They’ve been in the loop on all of this. Some of them are here tonight and they can speak to that themselves … They’re on board for this, in terms of this moving forward tonight.”

Fultz, Furman and Dunn, if they were present, did not speak publicly about Kinsella’s claim of their support.

Environmental Concerns

Public works manager Andy Dickey confirmed that multiple environmental studies had been done on the Cultural Park property without detecting any contamination from the landfill and transfer station that formerly occupied part of the site