By Roland Murphy for AZBEX – BEXCLUSIVE
Developers, particularly multifamily developers, have been wary of Fountain Hills for several years, as the town has earned a reputation for difficulty in securing zoning and entitlements for new projects.
With the Town Council’s June 6 denial of a rezoning as part of an 80-unit proposal for Senderos at Fountain Hills, the town has declared itself effectively closed for business and given the development community a loud and clear signal that even the best proposal stands little-to-no chance of bearing fruit.
Even though Senderos at Fountain Hills is a smaller development than we would normally pay much attention to, it turned out to be a proposal representative of multiple issues all at once: Thoughtful development planning, organized opposition willing to use mis- and disinformation to stop a project, backroom pressure, failures of leadership and, ultimately, an active choice to maintain stagnation through adherence to the status quo.
It also has a fair bit of comeuppance. Since we had an unusual degree of access and multiple sources to provide insight, we decided to give it the time and space it deserves as a microcosm of the overall collection of issues facing multifamily development. With all that said, let’s start the deep dive into this one.
The Plan
Senderos at Fountain Hills was to be an 80-unit community of high-end apartments on 6.3 acres at the SEC of East Palisades Blvd. and North Mountainside Drive. The property has split zoning, with the southern parcel zoned R-4 “Multifamily Residential Zoning District” and the northern zoned R1-10 “Single-Family Residential Zoning District – 10,000 Square Feet Per Dwelling Unit.”
Senderos owns the R-4 site, which is unusual since developers will usually enter into a purchase contract giving them the right to walk away if the necessary zoning and other approvals cannot be secured. The developer proposed downzoning the southern parcel to the less dense R-3 zoning type and changing the northern parcel’s zoning to match, combining both as R-3.
The property has been undeveloped since before the town’s incorporation in 1989. Its close proximity to the Town Center makes it a remarkably underutilized site, ideal for residential development.
According to the application accompanying the request, “The Project will include a total of 80 dwelling units (with a mix of one, two, and three bedroom units) throughout four (4) separate buildings. Each of the Project’s buildings will be three (3) stories (with a parking level and two residential floors on top) at a maximum building height of thirty (30) feet. The parking garage will be tucked under the units and built into the hillside based on the existing topography…”
Under the R-4 zoning for the south parcel, Senderos could have, by right, built a 70-unit, urban-style multifamily development. However, the hillside layout of the site presents design challenges, with a significant downward slope, an existing drainage easement and a detention basin and wash. The application says this would have required the units to be “squeezed” together on the property and created a project not in keeping with the surrounding properties. It also would have limited unit sizes to studios and one-bedrooms.
The northern parcel, which could fit 13 single-family homes under the existing zoning, had been owned by a local church. Ron Cuttler and Senderos saw the opportunity to build across both parcels, construct 80 apartments in total—rather than the 13 single-family and 70 apartments—and greatly improve the product the developer was offering.
In a June 8 telephone interview, Nick Wood, a partner at Snell & Wilmer—the law firm representing the project—explained to me that even though the revised proposal would only have 80 units, its benefits over the 70 allowed by right in the R-4 and 13 single-family homes in the R1-10 were numerous, both for Senderos and for the town. Doubling the size of the lot would allow the development of a suburban-style project with tuck-under parking, more than 60% open space, and the units could be moved further down the hillside, thereby not impeding any existing residents’ views, which is a top consideration in Fountain Hills.
The combined approach would also attract a different type of tenant, which would integrate better with the surrounding area. Regarding the difference between the two possible projects, Wood added, “If you look at the demographics, if you have studios and ones, you’re going to have college kids and people who work at these restaurants versus the 80, larger units where you’ve got people with disposable income—young professionals and older people who are empty nesters.”
In addition to moving the buildings down to prevent blocking existing residents’ views, the developer also offered to make improvements to the intersection of Mountainside and Palisades, which is a blind corner. Wood said, “We agreed to do a big modification of that intersection. It didn’t warrant a light, but instead we created a dedicated left turn lane. It’s really an expensive thing to do.”
After the development team made additional modifications and agreed to stipulations, the project was recommended by Town planning staff and recommended for approval in March by the Planning and Zoning Commission on a 5-2 vote.
The Status Quo of Fountain Hills
According to 2022 U.S. Census Bureau estimates, Fountain Hills is a town of 23,785 people, 37.3% of whom are older than 65, and 92.6% of whom are White. As of 2021, the median household income was slightly more than $90K. and World Population Review lists the median age as 58.6 years.
The town’s claim to fame is its namesake fountain, built by Robert P. McCulloch and noted as the second tallest in the U.S. It is also a recognized International Dark Sky Community and serves as a pass-through for people traveling to and from We-Ko-Pa Casino Resort and metro Phoenix.
Between 1990-2000 it was the eighth fastest growing community in Arizona, but since then its population has remained stagnant, and even experienced minor decreases in some years over the last two decades.
Fountain Hills also has a reputation for being one of, perhaps the, most difficult Arizona municipalities to get approval for any type of development other than large-lot single-family. The numbers largely bear that reputation out.
Since the DATABEX project database was launched in 2016, 11 $5M+ private projects have been proposed in Fountain Hills, not including Senderos. Of those, only four have been approved and completed. Only one of those, a 147-unit Build-to-Rent, was multifamily. The others are a specialty medical clinic, an expansion to an existing resort and a self-storage facility.
Four projects have been canceled, consisting of a traditional hotel and, ironically for a town with such a rapidly aging population, three assisted living/senior housing developments.
Two co-related multifamily projects that are part of a larger mixed-use are on hold and were recently granted a second development agreement extension.
Only one project, a small observatory/planetarium/auditorium that has so far raised $18.5M of its estimated $25M construction cost, including $14M from various state budget allocations, is listed as being in pre-construction.
As the table on this page shows, the square footage of the canceled projects is nearly equal to the square footage of the other projects combined.
Fountain Hills has a low degree of housing diversity. The Census Bureau does not have housing unit data in its Fountain Hills overview, but it shows 82.1% of residents live in owner-occupied homes. Yardi Matrix, the default source for traditional apartment information, lists a total of 661 units in four communities. Two of those communities, totaling 239 units, were completed between 1997 and 1998. If those apartments are combined with the Build-to-Rent, that puts the entire multifamily population unit count at slightly more than 800 for a town of nearly 25,000 residents.
The Opposition: A Study in Stereotypes and Distortions
Nearly every multifamily application, particularly those planned for undeveloped sites next to existing residential, encounters opposition. It has become an expected part of the process in Arizona and around the country.
It is also expected that opponents’ arguments against projects will be rooted in sentimentality, not fact, and that long-discredited myths such as increased crime and lower property values will make an appearance in many opponents’ arguments.
Another trend in the increase in NIMBYism is that opponents have become far more organized than they once were. That was certainly the case with opponents to Senderos.
At the time the staff report to Council was compiled, planning staff received 16 individual emails opposing the proposal, several of which used the same language. There was also a petition submitted with more than 150 signatures.
The petition, entitled “Keep Lost Hills Residential,” is a study in misinformation. It alleges the development will impair the view of nearby residential lots and “degrade the residential character of (the) neighborhood,” when the project was specifically planned to avoid those impacts.
It also mischaracterizes zoning ordinances as promises to homeowners to protect the status quo and that they “should only be changed in extreme circumstances,” rather than as land use guidelines that are frequently adapted to reflect changing conditions. Perhaps the biggest falsehood is that Senderos would “probably build only three apartment buildings on the apartment-zoned lot and leave the residential for single-family usage, as was planned by the town.”
A separate petition on change.org garnered 60 signatures and was even more divorced from reality. Entitled, “Save our Neighborhood–Stop the Rezoning Project Behind Four Peaks,” the petition claimed the property serves an important role in area biodiversity.
While wild animals like javelina and coyotes are regularly seen on the property, it is not a wildlife sanctuary or nature preserve; it’s a privately owned, residentially zoned vacant parcel next to a condo development. It has not been “left to flourish by nature;” it merely has not been developed in accordance with either its existing or proposed zoning.
The petition also criticizes the traffic impact of a new development. After bemoaning the additional noise and “traffic that 80 new apartments will deposit ungraciously into this quiet, residential part of town,” it hyperbolically states, “More people, more cars, more traffic, and more noise will be the negative byproducts in our community if we allow every remaining parcel of desert to be razed for apartment buildings to be simply heaped upon each other.”
In reality, if the two parcels were developed according to their existing zoning with 70 apartments and 13 single-family homes, the traffic impact study shows an estimated daily trip count of 595, while the revised 80-unit multifamily zoning would generate 588.
The Peek Behind the Curtain
After talking with several people for this story, it appears the reality is that several of the town’s elites simply do not want larger-volume multifamily, no matter how well integrated, near their homes.
Arizona State Senator John Kavanagh and his wife Linda are among the town’s most prominent and recognizable residents. Linda previously served as mayor, and John served on the Town Council before going first to the Arizona House and then to the Senate. Their home is located nearby, “two blocks away,” according to Sen. Kavanagh.
The Kavanaghs and other prominent residents made their opposition known early. A January article in the Fountain Hills Times quoted Sen. Kavanagh’s opposition to what he referred to as the “historic upzoning,” planned for the site.
“Upzoning” is a mischaracterization. The R1-10 site would be upzoned to R-3, but the R-4 site would be downzoned, making the proposal, in reality, a compromise measure.
The article further quoted him as saying, “This is an aesthetic problem, a traffic problem and the community doesn’t want this.”
He also said he did not believe the south parcel R-4 zoning actually allowed for the 70 units discussed in the plan. During the hearing process, Fountain Hills Development Director John Wesley confirmed the site was eligible for the 70-unit volume.
Sources I spoke with for this story said there was a great deal of pressure exerted on Council to vote to deny the request and that many supporters were intimidated by both the degree of pressure and the prominence of leading opposition figures, including the Senator.
I emailed Senator Kavanagh on June 13, asking him, in part, “Would you care to make any comment as to the propriety of a highly ranked, long-serving Arizona legislator taking a prominent position on a local council-level matter? Some supporters have suggested your direct involvement constituted a significant degree of undue influence.”
I had expected a generic email response. Instead, I received a phone call a little more than an hour after sending the request. Kavanagh said, “I live about two blocks from the project, so I have just as much right as anyone else to comment on it, but even if I lived a mile away, there are times when I weigh in on local issues, just like very often federal congressmen weigh in on state issues. I’m a public figure. A lot of people respect my view. Others don’t, but I’m certainly free to give it. It’s not intimidating.”
While the first portions of that comment are certainly true at face value, I pressed the issue and explained that people had shared with me that the weight of his position in the community had intimidated people who would have expressed support into remaining silent.
The Senator responded, “First, there were virtually no people in support… There really was no support in the community for it. I don’t think that’s the issue. I think public officials have a responsibility, especially when they live in the community, to weigh in on issues. I think most people would properly put more weight in the opinion of a public official, especially someone like me who served six years on the Town Council. I think I had valued input into the process.”
Giving Kavanagh the benefit of the doubt that he may not have reviewed the staff report or project packet in full, there were actually 34 signed statements of support, all of them boilerplate but some with handwritten additions, submitted by the development team and included with the staff report.
Most law firms that regularly represent complex or controversial cases make public outreach a key component in their process, both to dispel the disinformation from opponents and to garner expressions of support for the project. In the presentation to Council, Snell & Wilmer Associate Michael Maerowitz, the attorney who did most of the work on this proposal, shared a map of contacts made in the area around the proposed site. The efforts procured 77 letters of support and 56 verbal expressions of support, along with 155 people saying they were neutral about the project and 63 opposed.
Notable in the statements of support was an email from one local couple that had previously opposed the development. After attending the March Planning Commission meeting, they were convinced that the 80-unit proposal was in the better interests of the neighborhood than the alternative, provided the agreed upon traffic mediation measures were included.
Wood said it was clear early on that the opposition was exerting pressure on Council. Three councilmembers and the mayor agreed to meet with the development team. Three councilmembers refused to meet with them. “I’ve been doing this for over 40 years,” Wood said, “sometimes there may be one councilmember who will refuse to meet with you, and that’s very rare. I’ve never had a situation where three refused to meet with us. Even in Scottsdale, they’ll meet with you. You may not get their vote, but they’ll meet with you.
Perhaps the most telling item on the support side was an unequivocal statement of support from the Chamber of Commerce. Going into the City Council meeting, the development team thought they had the votes, particularly when one of the members who had refused a meeting later expressed support following the Chamber’s letter of support.
The Chamber’s letter said, in part, “The Fountain Hills Chamber of Commerce believes that approving the rezoning application for Senderos at Fountain Hills would provide more housing and increase our community’s population, which has remained stagnant for more than two decades. Our town’s commercial vitality will not experience significant improvement without allowing our population to reach its full potential of 37,000-38,000, which is less than half the original zoning’s population target.
“We are pleased to extend a warm welcome to Senderos at Fountain Hills and fully support this projects (sic) development.”
Talking about the Chamber letter, Wood said, “All these locally owned businesses, they rely upon customers, and Fountain Hills hasn’t grown at all. They’re really very supportive of more people living there.”
Wood said, “Then, we get there and it turns out there’s all this pressure from the Kavanaghs and some other very well-heeled folks there. You’ve got some new councilmembers. We actually had the votes going in.” He added later, “A couple of the councilmembers lost their nerve. They do roll call voting. Once it turned out some of those who we’d thought were going to vote yes, when the votes were (counted) we lost 5-2.”
Councilmember Brenda Kalivianakis
Brenda Kalivianakis is a first-term councilmember who ran on a pro-business platform. She is also one of the councilmembers who pledged support for the project and then switched to vote in opposition at the June 6 meeting.
It is rare for an elected official to agree to an interview to discuss a controversial vote after the fact. Usually, the best a reporter can hope for is a campaign-style statement about dedication to core principles, like economic development and the will of the people, which is largely what Kalivianakis provided to the Fountain Hills Times for its story on the denial, although she added she believed the rezoning plan would have been better for the community than the R-4 by right development now planned.
Kalivianakis, however, agreed to a phone call, and we talked for nearly an hour on Friday, June 9, about the project, the state of economic development and growth in Fountain Hills, and the nature of NIMBYism.
In the interests of full disclosure, DATABEX researchers have projected the construction costs for Senderos at between $15M and $20M. Since that information was not available yet when Kalivianakis and I spoke, I used construction costs per square foot for some recently completed, similarly sized apartment complexes and increased them by 5% to allow for the site’s difficult topography to arrive at an estimate of around $25M for the purposes of our conversation.
Early in the discussion, I outlined the data points listed above about the lack of new construction in the town and the development community’s pragmatic aversion to try building anything other than traditional retail. When all the facts were laid out, Kalivianakis sounded aghast.
In explaining why she ultimately voted against the Senderos proposal, she said, “There is a pretty strong contingent of residents that just don’t want development in the town. I actually ran on being pro development and being business friendly, but then you get elected and all of a sudden the rubber has to hit the road and then you’re like, ‘Well, do I piss off a lot of people and do the right thing, or not?’ In this case, I thought it was a great project; I liked the project. When I did discuss it in Town Council, I discussed all the merits and I said to the people, ‘Be careful what you wish for, people, because the alternative is not good.’ I guess the politics seemed really bad for me, and I didn’t know if I wanted to die on this hill.”
While Kalivianakis conceded that there was support that could have provided some political cover for a “yes” vote, she ultimately decided the political calculus and standing of the opposition required her to vote “no.”
She added that she hadn’t realized the potential impacts the decision would likely have on future development opportunities until she had discussions with Wood and others after the fact, including myself. “I had no idea that this decision that we made last Tuesday was going to have such far-reaching implications.”
Continuing to talk about the potential impacts of the proposal’s defeat, Kalivianakis surprised me when she said, “I think, knowing the statewide ramifications of this—I had no idea it was going to carry this much weight and that people were going to be looking at it. So, I’m thinking that maybe it’s got to be fixed.”
When asked how the situation could “be fixed” after the fact, Kalivianakis explained that under the rules of procedure, a member who casts a “no” vote has the prerogative to introduce a motion to reconsider, place the issue back on the agenda and have a revote.
“’There’s always a way to get things done,” she said. “It’s just a matter of being creative and knowing what the goal is and knowing how to get it. Right now, I’m meeting with some folks tomorrow that want to get the project built. I’m going to talk to the mayor later today, and I’ve been doing an awful lot of work… Like I said, I think that there’s a pretty good chance that maybe we’ll have to fix this thing.”
I followed up with Kalivianakis via text message on June 13. Between then and our conversation on the 9th, her discussions led her to conclude a motion to reconsider would still fail. She said, “Upzoning is a very tough sell… I did like the project and appreciate all the work the Senderos crew put into it to fit into our lovely town. However, even with a motion to reconsider, the votes are just not there. I will continue to work hard to make Fountain Hills business and developer friendly. As Lou Holtz said, ‘If you ain’t growing, you’re dying.’”
In the interest of thoroughness, I asked Kalivianakis if anyone had pressured her to not file the motion between our conversation Friday and our text exchange Tuesday. She said, “There is always pressure on public officials to vote and act one way or another, there was nothing between Friday and yesterday (Monday) that crossed the line.”
What’s Next? An Undeniably Inferior Development
As noted earlier, Senderos owns the site and is allowed by right to build the more urban, less integrated 70-unit development of studio and one-bedroom units with only an approved building plan and no action by Planning and Zoning or City Council.
During the hearing process and as part of the application and submittals, Senderos and Snell & Wilmer repeatedly mentioned that the 70-unit option existed and that it was a drastically inferior project compared to the more integrated 80-unit suburban-style development. The team even went so far as to create and submit a conceptual site plan for the 70-unit option and renderings showing the difference between the two plans.
Speaking with Maerowitz by telephone on June 13, he said, “We knew going into this that it was very important for us to design a development that addresses all the neighborhood’s concerns that we knew we were going to hear and that was the type of high-quality development that preserves views that you expect to see in Fountain Hills. We have no doubt that we were able to accomplish that in this case, but in spite of that the Council still decided not to approve the rezoning.”
Maerowitz said, “The message has been clearly sent. One of the things that we heard in this application that animated not only the comments from the neighbors, but also the decision from the majority of the Council was this notion that zoning for properties is a sacred promise and that it should never be changed except under extreme circumstances. By establishing that bar, which is inconsistent with every other jurisdiction’s evaluation of zoning and under state statute, you’ve taken away a very important tool that is in the zoning ordinances in every jurisdiction in every community in Arizona that the development community needs in order to develop well-designed projects or to develop in an area. “So, by taking that tool away, you’ve put up the sign (that development and growth are not welcome).”
In discussing next steps, I asked Maerowitz about developing the 70-unit option on the R-4 lot. He said, “This very much was a choice in front of the Council between two options. It was a choice between the status quo, which means leaving the existing zoning in place… or to approve the rezoning application. We’ve talked a lot about what approving the rezoning application would mean in terms of developing a project that is much more in line with the type of development that you expect to see in Fountain Hills. It’s much more respectful to neighbors because it can protect their views, it significantly increases the open space, and it just has much larger units that are a different product type.
“The Town Council ultimately decided that that is not the development that they would like our client to build, and they did that in denying the application and instead chose the status quo to leave the existing zoning in place. What that means is, our client already owns that property to the south that is zoned R-4 and, under the existing zoning, he is permitted as a matter of right to build it under its existing zoning, subject to meeting the development standards. I can’t speak for the developer, but I can tell you that is certainly his intent now to exercise his rights and to develop the by right development that he’s permitted to develop. That was, essentially, what the Council told him to build. He would have much preferred to build the better development project, but since they denied the rezoning application, his intent is to develop what he’s allowed to develop there as a matter of right.”
Talking about how, given the clear choice between the two projects, the opposition and Council could have forced the option of the more dense urban-style project, Maerowitz said, “What became clear from some of the statements from the neighbors is that a lot of them wanted to roll the dice and call what they believed was a bluff on the part of the developer. To dispel any notion that this was a bluff, we had a site plan prepared that showed exactly what the development would look like, that confirmed that, with 70 units spread out over three buildings on that property, you could meet all the required development standards under the R-4 zoning district. We had that site plan sent to planning staff and it was reviewed by planning staff and confirmed by planning staff that it meets the minimum development standards. It was our thought that that would show the neighbors that this was not a bluff and this really is a choice between two development options, one of which is significantly better than the other. In the end, I think there were some neighbors that decided they wanted to roll the dice.”
After the conversation with Maerowitz, I emailed Ron Cuttler for confirmation that the intent moving forward is to build the 70-unit R-4 development. He wrote, “Our plan is to build 70 units on our southern parcel, which we own. We have submitted only a conceptual plan to the town planning dept so far and they have confirmed that it meets the zoning requirements. We still have to have it vetted by our civil engineer, but our intent is to build as many units as we can up to the max of 70.”
Regarding the case in general and its outcome in particular, Cuttler wrote: “We are very disappointed with the Town Council’s decision to turn down a vastly superior development plan which was previously recommended for approval by both the planning department and planning commission and endorsed by the Fountain Hills Chamber of Commerce. We went through significant neighborhood outreach and expense planning a thoughtful development that took into consideration neighbor views and traffic concerns that would have been an asset to the community only to be opposed with illogical and unreasonable arguments.”
I had a follow-up conversation with Wood on the morning of June 13 to discuss the ramifications of the vote, the R-4 development project that will now almost certainly go ahead, and the message the opposition and the Town Council sent to the Arizona development community in rejecting a comprehensively structured, integrated development plan and all but daring Senderos to go ahead with the 70-unit option.
Uncharacteristically for an attorney, Wood pulled no punches in his response, saying, “The message is: ‘Developers, stay away. Don’t waste your time. Don’t waste your money, because if you have a multifamily project, or any project, we don’t want you here. We want to stay just as we are with no changes.’”
NOTE: This article has been updated to reflect the northern, R1-10 lot is zoned for 13 homes, not 17 as originally reported.
