City Council Considers Doubling Development Fees to Boost Revenue

The Sedona City Council has approved a 3.6% increase in sewer fees as of August 13, signaling potential hikes in other city fees next year. Following this unanimous decision, the council conducted a public hearing to discuss proposed increases in development impact fees, which are fees charged to builders at the time of issuing building permits.

Ben Griffin, a consultant from Tischler Bise based in Washington, D.C., explained that these fees help offset costs incurred by the city due to increased demand on infrastructure from new developments. Unlike most Arizona cities, Sedona’s fees are determined by the square footage of residential units, promoting affordability for smaller homes.

The proposed increases are significant. For instance, charges for units under 700 square feet would rise from $3,273 to $7,381—an increase of 126%. Units measuring 1,500 square feet would see charges jump from $5,832 to $12,018, a 106% increase. Larger units also face hefty increases; 2,500 square foot units would rise from $7,419 to $17,228, marking a 132% hike. Lodging units would incur a charge increase from $3,702 to $8,863 per unit, a staggering 139% rise. This would translate to development fees of approximately $620,410 for the planned Oak Creek Heritage Lodge and $443,150 for the Ambiente Creekside resort.

In recent years, Sedona has averaged around 25 single-family and 33 multi-family units per year, with a total of just 23 multi-family building permits issued from 2000 to March 2023. A 2020 housing study indicated the need for an additional 1,480 to 1,515 housing units by 2025.

During the hearing, Vice Mayor Holli Ploog expressed her dismay at the proposed fees for smaller units, calling a charge of $7,100 for such units “outrageous.” Councilman Brian Fultz labeled the proposed increases as “breathtaking,” reflecting the wave of community concern voiced to council members. Councilwoman Kathy Kinsella suggested that these fees might actually deter the construction of smaller units.

Attempts to mitigate these costs have surfaced, such as proposals from Ploog and outgoing Councilwoman Jessica Williamson for pre-approved building plans to lower construction expenses. Yavapai County’s existing program, Home of My Own, has estimated the cost of a professionally built 607-square-foot home at approximately $65,000.

Furthermore, Councilman Pete Furman raised the possibility of imposing higher fees on homes intended for short-term rentals. However, Griffin clarified that the city lacks legal authority to charge lower fees for smaller residential units, even as this model incentivizes smaller developments.

City Manager Anette Spickard reported that Sedona collected $615,000 in development impact fees in the last fiscal year, a figure that was questioned by Ploog in terms of its effectiveness. With an inquiry about what this amount could fund in terms of shared-use paths, Deputy City Manager J. Andy Dickey noted it would cover only half a mile of concrete path.

Griffin also predicted an additional projected expenditure for the Sedona Police Department of about $2.1 million on facilities, as well as costs for vehicles and equipment over the next decade. Notably, comparison cities like Flagstaff and Kingman do collect impact fees but not as many categories as Sedona. When asked about nearby Cottonwood’s policies, it was revealed they typically negotiate fees project by project.

As the council prepares for further discussions, they are considering the practices of neighboring communities, including Yavapai County, which repealed its road impact fees in 2020 and Coconino County, which imposes no impact fees. Clarkdale promotes its lack of fees as a development incentive, while Cottonwood and Camp Verde appear to have very limited fee structures.

Christianson informed the council that they could not waive these development fees as a means to encourage housing but could opt to pay them on behalf of developers they wish to motivate. The city plans to implement new development fees starting March 31, adhering to the required legal processes.