Sedona council sees smaller FY2026 budget as staff warn reverting to state expenditure limit would gut services

Sedona's City Council spent its work session scrutinizing the proposed Fiscal Year 2026 budget and the risks of losing Home Rule, with city finance staff warning that the state's expenditure limit would force deep cuts to essential services if the city did not preserve a local control option.

"The budget before you is actually smaller than this year's budget," City Manager Annette Spicker said as she opened the session, thanking staff for months of preparation. Director of Financial Services Barbara Whitehorn told councilors the administration built the FY2026 proposal on a conservative revenue forecast because Sedona depends heavily on sales and bed taxes, which together account for roughly 61% of total city revenue and about 80% of the general fund.

Whitehorn outlined a technical calculation required by the state of Arizona that sets an automatic expenditure limit for municipalities. "Our calculated limit is about $15.4 million," she said, contrasting that with the city's base budget of roughly $91.6 million. She added that small exclusions to the limit (grants, donations and a few other narrow items) leave little room for local governments that rely on visitor-driven revenue.

Councilors pressed staff about the practical consequences of reverting to the state limit, and whether debt or capital spending would be excluded. "If we were at the limit, we could fund our debt service and perhaps 87% of police operations at their current level," Whitehorn said, adding that required services would still exceed the limit by more than twice.

Vice Mayor Plue and others noted recent state legislation under consideration — cited in the meeting as HB 2221 — that could limit municipalities'ability to shift funds between public-safety and other uses. "If a bill passes that prevents reductions to police funding, and we are forced to cut the rest of the budget under the limit, we'd be left with impossible choices," one councilor said. City attorney Kurt (last name on transcript) told council that constitutional requirements for municipal government likely would be litigated if state statutes conflicted with the state constitutional framework on Home Rule.

Whitehorn recommended council weigh either holding another Home Rule election or pursuing a permanent base adjustment so Sedona would not automatically revert to the low statutory limit in future years. "This is a one-size-fits-all calculation that treats tourist-driven cities differently," she said. Several councilors asked staff to model scenarios with lower revenue assumptions and to show the program-level cuts that would be required under the state limit.

Councilors and staff also discussed one-time decision packages and department requests, including additional equipment and maintenance items for parks, public works and wastewater, plus a limited number of new or converted positions. "I've tried to make tough choices so that the base budget is smaller," Spicker said, while noting that council may add or amend recommendations during deliberations.

The council did not take formal action at the work session; staff said the discussion and scenario modeling will continue and that council deliberations will resume on the next scheduled budget day.

Notes: Whitehorn's presentation used the state calculation and cited a $15.4 million limit number the state publishes. Councilors repeatedly emphasized they want program-level scenarios showing what would be cut under the statutory limit and asked staff to present alternatives at the next meeting.