Final totals for the city of Sedona’s fiscal year 2024 sales and bed tax collections, including the period from July 2023 through June 2024, have been released and were discussed by the Sedona City Council on Oct. 8.

Total sales tax collections for FY24 were $33,441,918, an increase of $1.67 million, or 5%, over FY23, while total bed tax collections were $9,340,377, an increase of $752,388, or 9%, over FY23 collections, for total city 2024 tax collections of $42,782,295.

According to the U.S. Department of Labor, the inflation rate for the 12 months ending in September 2024 was 2.4%.

“It’s pretty flat but it’s higher,” Vice Mayor Holli Ploog said of bed tax levels.

The construction sector posted the largest increases in tax revenue, which were up 12% year over year, followed by leasing and hotels and motels, each of which made a contribution to city revenues that had increased by 9%. Restaurants and bars paid 6% more, while amusements were up 4% and retail up 1%.

March and April were the most profitable months for the city in terms of sales tax, returning sales tax revenues of $3,710,005 and $3,297,969, respectively, while bed tax payments were highest in March and October, at $1,198,616 and $963,131, with May coming in third at $944,627. August was the slowest month for both sales and bed tax, at $2,088,510 and $492,948 each.

Hotel sales tax collections accounted for 28.6% of sales tax collections, with retail being responsible for another 32.5% and restaurants and bars for 19%. Non-tourism economic sectors were responsible for less than 20% of city sales tax collections. Including bed tax receipts, tourism-related activities provided at least 84.6% of city tax collections.

“Without tourism, we don’t have the taxes,” Councilwoman Melissa Dunn said.

“I’m very concerned about our lack of economic diversity,” Ploog said. “We are totally reliant on one industry.”

Economic diversity is broadly measured by comparing the respective proportions of an economic unit’s agricultural, or primary, industrial, or secondary, and service, or tertiary, sectors. In terms of land use, Sedona’s zoning code does not permit agricultural uses, and industrial-zoned properties account for 56 of the city’s roughly 7,000 parcels.

While construction receipts were up for the year, at a total of $2,113,554, the result indicates that the total value of construction activity in Sedona in FY24 was $60.39 million.

The city of Sedona was responsible for more than $24 million of this activity, issuing construction contracts worth $186,444 in October 2023 and $478,300 in November 2023 for work on Ranger Station Park; $4,468,058 in November 2023 for the Uptown median; $17.5 million for the Uptown garage in May 2024; and $1.598 million for pickleball courts in May 2024.

Councilman Brian Fultz asked if there was any evidence that average daily room rates, which so far in calendar year 2024 have fluctuated between $250 and $425, have become high enough to be diverting visitor spending from other sectors such as restaurants or entertainment.

“Yes, that is theoretically possible and I would definitely want to investigate that,” said Andrew Grossmann, the city’s new tourism manager.

“Do you think building more hotels decreases short-term rentals?” Ploog asked.

“Depends on the hotels,” Grossmann said before stating that STR bookings were in decline nationally but “I’m not seeing that trend here … we’re not seeing decreases in occupancy in the short-term rental data that we have access to.”

“I don’t have a verified smoking gun through the data yet,” Grossmann had said earlier during a break on whether the presence of STRs in Sedona could be linked to loss of housing stock.

“I think there is no limit on the number of hotels that want to come here,” outgoing Councilwoman Jessica Williamson said.

“I say the answer’s ‘no,’ that it’s not driving people out of town,” Fultz said. “To lose four points while in that time the number of short-term rentals skyrocketed in town really speaks well to the resilience of the average hotel product.”

“I do look forward to the STR data being part of this going forward,” Fultz added. The city’s previous finance director, Cherie White, refused to disclose the share of city revenue paid by STRs when directed to do so by council and did not provide council with a justification for her refusal. A number of other Arizona municipalities already release this information publicly or internally.