Sedona City Manager Karen Osburn said she can’t remember the last time she was so excited to make a point to Sedona City Council.

This same excitement was expressed by several board members at their meeting on Tuesday July 13th.

The item in front of them was something new to the city and, if it goes as planned, should help cope with the ever-growing housing crisis while opening the door to future developments similar to this one. .

By unanimous vote, council approved a resolution authorizing the city to enter into a development agreement with Sunset Lofts LLC for the development of a workforce multi-family apartment complex at 220 Sunset Drive. The City’s financial obligation will not exceed $ 4.2 million over two years.

Osburn said multiple locations around the city were considered for this project, but Sunset’s location turned out to be the best.

It is close to 89A as well as a grocery store and pharmacy as well as other office complexes.

“All around, every adjacent plot is either high density, multi-family or commercial,” she said. “We don’t have sites like this in Sedona that are so well suited to places where apartments are really a compatible use.”

The city is teaming up with developer Keith Holben on this project. He owns Piñon Lofts in West Sedona, developed a 100+ unit resort in the village of Oak Creek several years ago, and currently has other projects underway in Sedona and Cottonwood.

“Keith isn’t doing this project because it’s lucrative – the margins are very low,” Osburn said. “But I really believe he has a heart for this community and for our challenges with workforce housing. He really wanted to come and do a project that was going to meet those needs and be of real benefit to the community. “

A city report says the city’s 2020 Affordable Housing Action Plan recommended a five-year effort to address affordable housing, which included restricted housing,

In exchange for a contribution from the City not exceeding $ 4.2 million, the project will include a minimum of 46 housing units made up of 20 one-bedroom units of a minimum of 600 square feet and 26 units two bedrooms of a minimum of 900 square feet.

All are limited by deed to limit rents and utilities to 30% of gross income for employees representing 80%, 90% and 100% of median income in the region. Thus, the 46 units will be deemed affordable for the region’s workforce. In total, the project is expected to cost $ 13.3 million.

The term of the development agreement is 50 years and rent controls must be in place throughout this period, which is consistent with the useful life of the project. These income-eligible tenants must work at least 30 hours per week within city limits. And, the complex cannot be converted into condominiums, and their use as a short-term vacation rental will be prohibited.

The city’s contribution, of up to $ 4.2 million, will be paid in the form of a loan to the developer and will be guaranteed by a trust deed and a promissory note, which will be repaid over the term of the agreement. of development. The development impact and sewer capacity charges will be prepaid by the city as part of the loan and the developer will reimburse the city upon repayment of the loan.

Osburn said that, under the terms of the development agreement, the city will share the net revenues from the project with the affordability and local labor needs guaranteed by a 50% land use restriction agreement. years.

“The first 5% off will go to the owner for the management fee, then the city will receive 1% of the outstanding loan balance each year,” she said, adding that all that follows will be shared between the city and the developer. “We can take that revenue and start putting it back into the Affordable Housing Fund so that we can research additional units.”

Following the meeting, City Attorney Kurt Christianson was asked why a deal like this wouldn’t have to go through a competitive bidding process with other contractors.

“Public tendering is not necessary to enter into a development agreement like this, because the affordable workforce housing project is not a public improvement or on public property.” , did he declare. “In addition, according to the agreement, the developer is required to comply with all federal, state and local laws.”

Of that $ 4.2 million, approximately $ 2.3 million will be spent in the current fiscal year and the remaining $ 1.9 million next year. It is expected that it will take approximately 12 to 14 months to secure funding from the US Department of Housing and Urban Development for the project from the developer. Once HUD funding is secured and the development review is complete, construction will begin, likely in the fall of 2022. Construction is expected to take 14 months.

The property is already zoned for multi-family development.

The project will go through a normal development review process with staff, external review agencies and the Sedona Planning and Zoning Commission.

“It’s a unicorn – an ideal and 100% affordable project for 50 years,” said City Councilor Jessica Williamson. “There is a grant of $ 96,000 per unit that is required to do this. Creating affordable housing to serve our workforce is costly.