Sedona council hears economic outlook; staff outlines home rule and permanent base adjustment options

City staff presented an economic update and a review of options to comply with Arizona’s constitutional expenditure limitation, emphasizing uncertainty in tourism-driven revenue and a need for public education before any ballot measure.

Deputy City Manager Barbara Whitehorn said consumer-confidence indicators and sales- and bed-tax trends showed retrenchment and month-to-month volatility, including a June dip and a July spike that staff attributed in part to reporting timing. “We’re still within budget tolerances,” Whitehorn said, but added that staff is watching for persistent downturns and recommended continued monitoring and reserve planning.

Staff explained three paths the council can take on the state expenditure limit: accept the state limit; continue home rule (which requires renewal via a local election; staff noted the next required action would be in 2026); or pursue a permanent base adjustment (PBA), which raises the 1980 base and must be voter-approved but does not require periodic renewal on a set schedule.

Whitehorn noted the tradeoffs: a PBA can produce a higher long-term cap and has been used successfully by some larger cities, but it requires an intensive public education effort so voters understand what the adjustment means. Councilors discussed outreach approaches, potential ballot timing and sequencing, and unintended incentives in the limit structure (for example, that debt-service exclusions can encourage financing rather than pay-as-you-go approaches).

Councilors asked staff to add this topic for deeper discussion at the upcoming council retreat and to prepare community education materials so residents can compare options and implications ahead of any election.