The second day of the Sedona City Council’s budget work sessions on Thursday, April 18, revealed that city staff have reserved $18.9 million in public funds to subsidize new apartment buildings in Sedona and are planning building code-related permit changes for single-family homes that could result in longer delays.

Single-Family Homes

Community Development Director Steve Mertes estimated that the city would issue between 55 and 60 permits for single-family homes during fiscal year 2025. The number of single-family home permits issued in calendar year 2023 was 39, down from an average of 43 per year from 2005 to 2022 and an average of 97 per year from 2000 to 2004.

When Councilman Pete Furman asked about the time involved in reviewing permits, Mertes noted that his department is planning to introduce additional code changes that will require “a learning process in the community” and “a little bit longer lead time.”

Mertes had previously estimated that 40% to 50% of permit applications require resubmission after their initial submission due to failure to meet city requirements, and each round of resubmittals can take “three-plus weeks.”*

Mertes added that updates to the city’s Land Development Code, which council requested to simplify the building process, particularly for tiny homes and accessory dwelling units, will be deferred to fiscal year 2026.

According to the city’s draft budget, the community development department will receive $2,930,410 in FY25, with $378,260 earmarked for code enforcement.

Housing Coordinator Jeanne Frieder and Housing Manager Shannon Boone only provided details on one active housing ownership program — the city’s down payment assistance program, which provides a secured matching loan of up to $40,000 for qualifying local buyers. Boone stated that five people have used the program so far, who were loaned a total of $116,864. The draft budget has reserved $283,136 for down payment loans in the coming fiscal year.

Apartments

Boone explained to council that city staff plan to use $18.9 million in public funds to subsidize four apartment projects proposing to build a total of 272 units. The largest of these subsidies, $7.75 million, is reserved for the 46-unit Sunset Lofts project that was approved on Sept. 6, 2022. City Attorney Kurt Christianson confirmed that, as the developer had failed to break ground by April 1 — as required by the August 2023 renegotiation of the city’s subsidy — the property “is in the process of being deeded back to the city in the next week or two … the closing date is set for April 24.”

The current estimated development cost for Sunset Lofts has risen to $18,339,767, or $398,691 per unit, up from $14.6 million in July 2023. The city has loaned $1,982,123 of the total amount to the project so far, which Boone said has been used for “predevelopment, architectural design, those kind of things.”

“And the land,” Christianson added. “$1.622 million for the purchase of the property.”

Boone told the council that she expects to bring back a proposal for continued development of the property under the current arrangement at an increased cost in May.

“If not, we’ll move forward with taking the plans as well and trying to put the project out to bid,” Boone said. “Frankly, I don’t think anyone could build it cheaper.”

Staff have reserved another $6,368,296 for a subsidy for a proposed 96-unit apartment complex off Lem Drive; the proposers have not yet applied for building permits or a development review. Estimated cost of the project is $24,743,296, or $257,743 per unit.

While the city’s original request for proposals for housing on a portion of the Sedona Cultural Park specified that the city anticipated providing no subsidy apart from a below market-rate land lease, the housing department is now budgeting for a subsidy of $2.5 million to one of the developers that had previously submitted a proposal. The new project proposes 100 units at a cost of $25,749,163, or $257,492 per unit.

The department is continuing to plan for a $2.25 million subsidy to the 30-unit Villas on Shelby project, which currently has an estimated cost of $13,512,573, or $450,419 per unit.

The housing department will be receiving a total of $1,291,470 to administer these programs during FY25, with $244,960 budgeted for Boone and Frieder’s salaries and benefits, and $961,120 budgeted for supplies and services.

Local philanthropists Basil and Mimi Maher have been planning to construct a 54-unit apartment complex at 60 Goodrow Lane since February 2023, for which they have requested no city subsidy, only a zone change and height variance to accommodate a two-story building with parking underneath. Boone described the necessary variance as “like 20 feet over, something kind of ridiculous right now.”

‘Safe Place to Park’

Councilman Brian Fultz queried Boone about city staff’s proposed car camp for homeless local workers at the Sedona Cultural Park and the status of the $875,000 state grant the city has been awarded to fund the program.

“Is that geographically limited to that site, or just to the program?” Fultz asked about the grant.

“I believe if we found a different site they would be willing to redo anything in the contracts that refers to the site,” Boone said. “Nothing is zoned for it … also, I don’t think there’s any place better. The Cultural Park land is not visible from any road or private property.”

“What about the Sinagua property?” Fultz said. The city currently owns a vacant parcel at 50 Sinagua Drive adjacent to city hall.

“Happy to look into it,” Boone said.

“If we really want to try to do this, if we want to flush out anybody who’s hiding behind Sedona Cultural Park 2.0 as the reason for opposing ‘Safe Place to Park,’ then pursuing a rezoning or a CUP on another city-owned property would really show what the temperature of the community is at that point,” Fultz said. “Yeah, it’s a high-stakes gamble on the tension level and what not, but something to think about.”

*Editor’s note: The print version of this story incorrectly stated that Mertes had estimated that more than 50% of permit applications take more than three months to process.