The Sunset Lofts affordable housing project, which launched with fanfare and excitement on the part of city leaders in July 2021 and later featured in Mayor Scott Jablow’s 2022 election campaign, has faced numerous setbacks, but the Sedona Planning and Zoning Commission revived it yet again on Nov. 5.

After the MK Company of Scottsdale failed to begin work on the project by the first deadline of July 13, 2023, and the second deadline of April 1, 2024, focusing instead on a 60-unit townhome development on Navajo Drive in West Sedona, the city acquired title to the 2.2-acre property and the plans for the proposed 46-unit apartment complex.

“A building permit for the project was issued on Dec. 20, 2023, and was given an extension in June 2024, giving the building permit an expiration date of Dec. 20, 2024,” interim Housing Manager Jeanne Frieder stated in the city’s request for a development review extension on Sept. 19. “As the city now owns the project, city staff has [sic] been working to begin development of the proposal, which requires issuance of an [request for proposals] to secure a contractor. This RFP is anticipated to be issued in October 2024. Due to these timeframes, it is unlikely that the construction will begin before the building permit expires in December 2024. Without an extension to the development review approval, if the building permit expires in December, the permit would not be able to be extended again and the project would have to restart the development review/ public hearing process, further delaying the beginning of construction.”

Planning Manager Cari Meyer told the commission that city staff “are working to get this off the ground, but we just need a little more time with the short time between when the city took ownership and now.”

“We are finalizing that RFP today in fact and looking to get that RFP out this week,” Community Development Director Steve Mertes said. “Looking for a developer to both build and manage, that is one of the options.” He said that the arrangement the city is seeking with a prospective developer would be a land lease with “similar terms” to the proposed Villas on Shelby project, for “a minimum 30 years.”

“Is there any opportunity to go back to the original roof design?” Commissioner Will Hirst asked.

“The plans that we have are the flat roof,” Meyer said.

The fiscal year 2025 budget called for the city to loan a total of $7.2 million in financing to the project. As of March 28, the city had already paid out $1,982,123 of that amount in loans to the previous developer.

The commission unanimously approved extending the development review approval through Sept. 21, 2026, the maximum time allowed. If construction has not commenced by that date, the review will expire and the city will have to begin the approval process again. There were no public comments.

The RFP for the project was issued at 4 p.m. on Nov. 7, and will close at 2 p.m. on Dec. 5. The RFP’s included schedule estimates that the city will issue a contract to the successful bidder in February 2025.

Applicants are required to have completed at least three projects involving the development or management of “community housing” in the last 10 years. Proposing firms will be allowed to modify the mix of unit types but may not alter the existing building footprint, and will be expected to assign between three and five staff members to the project.

The successful developer will pay $12,000 per year for the land lease on the site, which will escalate by $5,000 every five years. Once the project is complete, the terms of the lease will require the developer to audit tenants annually to determine their income levels, family composition and employers, and to make that information available to the city. The lease also provides that the basis for rent determination will not be Yavapai County median income, but rather Prescott Valley median income.

The city will loan a yet-to-be-determined amount to the project at 4.08% interest; as of Nov. 8, the national average interest rate for a 30-year mortgage, according to financial services firm Bankrate, was 6.97%. At the time of the City Council’s budget work session in April, the planned amount of the subsidy was $7.75 million.