Olson Real Estate Group, doing business as R.D. Olson Development, and its subsidiary 115 Schnebly LLC, developers of the proposed Oak Creek Heritage Lodge, have filed a lawsuit against the city of Sedona and seven residents following the Sedona City Council’s June 25 reversal of the Planning and Zoning Commission’s approval of the Heritage Lodge.

The suit names the city of Sedona; Sedona Mayor Scott Jablow, Vice Mayor Holli Ploog, Councilmen Brian Fultz and Pete Furman and Councilwomen Melissa Dunn, Kathy Kinsella and Jessica Williamson, in their official capacities; and residents Carol Breen, Nancy Friedman, Ann Kelley, Sean Smith, Mark TenBroek, Lauren Thomas and Christine Wagner, as the 15 defendants. The latter seven are described as “indispensable parties to this action.”

Background of Suit

Following the Sedona Planning and Zoning Commission’s unanimous approval of the Heritage Lodge project on April 16, after more than three years of development work by the applicants, two groups of residents, one of which was composed of neighbors living adjacent to the proposed hotel — Thomas and Wagner — and one composed of Breen, Friedman, Kelley, Smith and TenBroek, appealed the commission’s decision to the City Council, claiming that it did not conform to the requirements of the Sedona Community Plan and the Schnebly Hill Community Focus Area plan.

The City Council granted the appeal and overturned the commission’s approval by a 4-3 vote in which Jablow, Ploog, Dunn and Fultz constituted the majority, citing the project’s lack of compliance with Land Development Code sections 8.3.E(5), paragraph C, lack of conformity with the community plan’s and focus area plan’s traffic, lodging and safety requirements; paragraph G, failure to minimize adverse environmental consequences; and paragraph J, failure to provide adequate road systems and traffic mitigation.

Charges and Specifications

The Olson lawsuit, filed on July 24 in Yavapai County Superior Court — due to the city of Sedona’s official address being in Yavapai County, although the hotel property is in Coconino County — argues that the council’s action was an “unlawful decision … effectuating [sic] a zoning decision in the context of an administrative appeal” and charges the council with three counts of unlawful actions:

• Citing Arizona Revised Statutes §9-461 and §9-462 and related cases, the complaint notes the separation of roles and powers between planning agencies and legislative bodies, that a planning commission when considering an application has “no independent discretion beyond determining whether the plan complies with the applicable regulations” and that a legislative body when reviewing such a decision “may exercise no greater authority than what the underlying commission or board possessed.” “As Sedona’s Land Development Code itself recognizes, the appeal process is administrative, not legislative in nature,” the complaint states. “By allowing the commission and the council to import legislative factors relevant only to zoning decisions into development review appeals, however, LDC 8.8.E.3.e.2 and LDC 8.8.E.3.e.4 impermissibly allow the commission and the council to enact zoning changes outside of the manner prescribed by Arizona statute … LDC 8.8.E.3.e.2 and LDC 8.8.E.3.e.4 do not comply with Arizona’s statutes regarding municipal planning and zoning.”
• The complaint alleges that the council abused its discretion by failing to limit itself to administrative review of the commission’s decision. “The council was required to ensure that the commission applied the approval criteria in LDC 8.3.E.5 but was not authorized to second-guess or re-weigh how the commission applied that criteria,” the complaint states. “However, the council did exactly that. Mayor Jablow, Vice Mayor Ploog, Councilmember Fultz and Councilmember Dunn [the ‘Majority Members’] second-guessed the commission’s factual findings and re-weighed the evidence based on their subjective belief … By exercising plenary review to overturn the commission’s decision based on its own review of the evidence and making unsupported factual findings … the council abused its discretion.” “Further, the council heard new evidence from the project opponents that was never presented to the commission when it made its decision approving plaintiffs’ application,” the complaint adds. “In this capacity, the council ‘does not have the authority to take additional evidence.’”
• The complaint alleges that the council engaged in “arbitrary and capricious conduct” by considering concerns related to traffic access, the environment, fire and medical services and design scale. “These concerns were not supported by the evidence,” the complaint states, citing testimony by city staff. “The council’s decision to sustain the appeal was against the weight of the evidence, unreasonable and erroneous. The council’s decision to sustain the appeal was arbitrary and capricious.”

Relief Sought

R.D. Olson is requesting that the court grant:

• An order “reversing the council’s decision and affirming the decision of the commission.”
• “A declaration pursuant to A.R.S. §12-1831 that LDC 8.8.E.3.e.2 and LDC 8.8.E.3.e.4 are void in their entirety as in conflict with state statute.”
• “A declaration pursuant to A.R.S. §12-1831 that the council, when exercising its appellate function, may not re-weigh the evidence or take new evidence that was not presented to the commission.”
• Attorney’s fees and nontaxable expenses incurred by the suit.

The complaint also notes that Olson has so far invested $10,080,000 in purchasing the land for the hotel and $2,361,788 in development costs.

The case has been assigned to Yavapai County Superior Court Presiding Judge John Napper. A trial date has not yet been set.