Fountain Hills Approves Daybreak Development 5-2, Heads to Voter Referendum
FOUNTAIN HILLS, ARIZONA — November 20, 2019

Fountain Hills Approves Daybreak Development 5-2, Heads to Voter Referendum

Town council approved controversial Daybreak residential development agreement 5-2 amid significant community opposition over traffic and compatibility concerns, with project now subject to voter referendum after petition efforts.

Council Approves Contested Daybreak Development Agreement 5-2; Project Heads to Mandatory Voter Referendum

On November 20, 2019, the Fountain Hills Town Council voted 5-2 to approve a development agreement for the Daybreak project at the northeast corner of Palisades and Shea Boulevard—a 60-acre mixed-residence development that has become the most contentious land-use issue to face the council in years. The vote came after 37 members of the public submitted written comments opposing the project, primarily centered on traffic safety at the proposed southern exit on Palisades and concerns that the 17-unit-per-acre density is incompatible with the town's scenic character. The project now proceeds to a voter referendum, with town staff estimating a May 2020 special election if county signature verification confirms sufficient petition signatures.

What the council approved is not the project itself—zoning and general plan amendments were already approved on October 1st—but a development agreement that the council hopes will impose community protections and financial commitments on the developer. If voters reject the referendum, the entire project becomes void. If voters approve it, the agreement becomes binding.

Key Speeches

"The development agreement before you and as Mr. Wesley stated before you contains a number of provisions incorporating the provisions of the pad...the developer has negotiated with the town to put in money as a letter of credit towards those improvements that they feel is a pro rata share of their net impact." — Grady Miller, Town Manager

"Without [the development agreement] those benefits don't come to town...if we assume for the sake of discussion as the council turns down the development agreement can the developer still develop a property...the answer is yes...the project can move forward without the development agreement." — Aaron Armstrong, Town Attorney

"I am very sympathetic to the residents are surrounding this area...if I lived in that area I would have the same feelings as they do...at this point right now this is the democracy in the works and we need to allow this to move forward." — Councilman Brown, supporting passage

"I don't feel as confident as my other council members saying that this agreement protects the town so greatly. I consider it to be a condom with a hole in it. It's not that great of protection." — Councilman Spells, voting against

"The property was zoned for a resort in my opinion as a council member...this is a downgrade to me essentially...I looked at the financials of this and looked at the Fry's plaza and you look at all the vacancies in town...you look at all of the economic impact that a project like this can have." — Councilman Charnow, supporting passage

Timeline

October 1, 2019: Council approved the general plan amendment, pad zoning, and site plan framework, but deferred the development agreement for further negotiation.

October–November 2019: Town Attorney Aaron Armstrong and Development Services Director John Wesley negotiated refinements with the applicant, with council providing guidance in executive sessions.

November 14, 2019: Referendum petitions submitted to Maricopa County for signature verification; county has 15 business days to randomly sample and verify 5% of the approximately 830 signatures collected.

November 20, 2019 (this meeting): Development agreement presented to council after Thursday posting for public review; 37 speaker cards submitted in opposition; council debate and 5-2 vote.

December 2019–mid-2020: County verification process concludes; assuming sufficient signatures verified, town council sets election date. Current projections suggest May 2020 special election, though a December 21, 2019 deadline exists to notify county if council chooses a special election (135 days' notice required for consolidated election dates).

Opposition

Number of speakers against: 37 comment cards submitted in writing (no oral speakers took the podium during public comment, though council members read written cards and responded). Notable named opponents on the record include Steve Messel, Larry Herring, Robert Hong, Carol Kelso, and Jim Messmer.

Main concerns:

  1. Southern exit location on Palisades is dangerous and incompatible with the scenic intersection. Robert Hong presented a sketch showing the proposed southern exit is only 600 feet from Shea, compared to a hotel project (approved years prior) that placed its exit 2,000 feet north on Palisades. Hong argued that moving the exit north would eliminate the traffic problem entirely rather than attempting traffic controls post-occupancy.

  2. Density of 17 units per acre is excessive and out of scale. Multiple residents cited the scenic character of the northeast quadrant and argued that such density is incompatible with fountain Hills' brand as a low-density, scenic town. Comparison was made to the Keystone project, described as smaller, lower-density, and more visually appropriate.

  3. Traffic study timing is inadequate. Hong and others noted that the development agreement calls for a traffic study only after the final certificate of occupancy is issued—meaning buildings would already be occupied and the southern exit in active use before the town has real data on traffic impacts. Herring and others argued this puts the cart before the horse; a professional traffic study should precede or accompany site plan approval, not follow occupancy.

  4. Fee waivers represent hidden subsidies to the developer. Steve Messel demanded clarification of the dollar value of fees being waived (final plat fee, grading permit review, and pad review stipulations). After council direction, Development Services Director Wesley estimated the total at approximately $30,000, though the grading permit fee was clarified as a percentage of grading costs, which remain unknown.

  5. Missing exhibits and development plan vagueness. Carol Kelso objected that the development agreement was not posted until Thursday (four days before the meeting), preventing meaningful public review, and that the agreement references exhibits not attached. She also noted inconsistency between versions circulated and questioned how a development plan can be "approved" when the site plan has not yet been voted on by planning and zoning.

  6. Process violations and transparency issues. Kelso and others criticized the deliberate executive session negotiations and the lack of a draft-review-refine-vote cycle standard in other municipalities. Herring alleged "hidden agendas," "corruption," and bias by council members, though he did not present specific evidence.

  7. Cumulative traffic impact with concurrent projects underestimated. Residents raised concerns that traffic analysis did not adequately account for concurrent development (Adero Canyon, Copper Wind), creating a multiplicative effect on Palisades and adjacent corridors. Concern that 80% of traffic entering/leaving Fountain Hills flows past this intersection.

Organized opposition: A referendum petition drive gathered sufficient signatures (submitted November 14th) to force a voter referendum. Michelle Webb was identified as one of the leaders of the petition effort. The two council members who voted no—Mayor Dickey and Councilman Spells—appear to sympathize with these concerns but did not explicitly endorse the referendum campaign.

Most compelling arguments from opposition speakers:

Support

Support speakers: Council members Brown, Charnow, Tolas, and Vice Mayor La Crone spoke in favor. No members of the public submitted speaker cards in favor of the project (all 37 written comments were in opposition).

Main arguments for passage:

  1. The project generates recurring revenue in a financially stressed town. Multiple council members cited the town's fiscal condition and the ongoing need for sales tax and property tax revenue. Councilman Brown stated: "We're told finally item five the development of the part of the property 541 retaining walls now...this project will bring continuous revenue to the town."

  2. Zoning already approved; development agreement imposes protections the developer otherwise wouldn't agree to. Town Attorney Armstrong and Manager Miller emphasized that the general plan amendment and pad zoning were already approved on October 1st, meaning the developer can build without the development agreement. The agreement, therefore, represents the council's best opportunity to extract concessions: a $150,000 traffic mitigation letter of credit, shuttle service for age-restricted units, and binding phasing language.

  3. Democratic process is working; voters will have the final say. Councilman Brown and others noted that the referendum petition succeeded, so the question will go to the voters in May 2020. The council's role is to approve the agreement on its merits; the voters' role is to decide whether the project should proceed at all.

  4. Negotiations were thorough and in good faith. Council members repeatedly emphasized the extensive executive session work, the back-and-forth with the developer, and the refinements made over two months (October–November). Councilman Charnow: "We did what we feel is our best effort to listen to the concerns that you had and try to address them in this development agreement...there's two people at the table."

  5. The property's highest and best use. Councilman Charnow characterized the pad as a downgrade from the prior lodging (resort hotel) designation, but argued that given market conditions and the need for revenue, residential use is the practical option. He cited examples of vacant commercial space (Fry's plaza) and the town's fiscal pressures.

Project Details

Vote Breakdown

Outcome & Next Steps

Immediate outcome: Resolution 2019-52 was approved 5-2 and is now in effect. The development agreement is binding on the town and the developer (unless the referendum voids it).

Referendum process:

Site plan review: The October 1st motion required the developer to submit a final site plan for council review before December 1, 2020. This is a separate and subsequent process. Section 8.2 of the development agreement includes an "impasse procedure" allowing for negotiation and mediation if disputes arise over the site plan.

Conditions attached to the development agreement:

Controversies & Context

Fiscal pressure vs. scenic preservation: Fountain Hills is marketed as a scenic retirement community with strict dark skies ordinances and emphasis on natural aesthetics. However, the town faces chronic fiscal stress, evidenced by vacant retail space (Fry's plaza was cited as an example) and the council's reliance on sales tax and property tax revenue. The Daybreak project represents a choice to prioritize near-term revenue over the scenic brand, a tradeoff that divides the council and the community.

Planning and zoning override: Jim Messmer objected that "you totally ignored the planning and zoning recommendation." The transcript does not clarify what planning and zoning recommended; however, the fact that the council approved zoning on October 1st suggests planning and zoning either opposed or had reservations the council overrode. This is a point of process tension that recurs in the public comments.

Process complaints: Carol Kelso raised systemic concerns about the timing and structure of development agreement review. In particular, she noted that the council did not post a draft for public comment, then receive feedback, refine it, and vote—instead, it posted the final agreement Thursday and voted Wednesday, four days later. She also questioned how the development plan can be deemed "approved" when the site plan (a key part of any development plan under the town's zoning code) has not been voted on by planning and zoning.

Accusations of bias and corruption: Larry Herring directly accused council members of having "hidden agendas" and of being "dishonest." He cited the council's override of planning and zoning as evidence. He also complained about the "vigilante" nature of the opposition, which he characterized as armed and organized to intimidate council. Councilman Brown responded by describing a fire-safety briefing in which he was warned of the potential for violence at the meeting, and he characterized the organized opposition as an unprecedented threat level in his 10 years on council. Councilman Spells deflected the corruption claim by inviting anyone with evidence to take it to the FBI, stating the accusation was "absolutely disgusting."

Traffic study timing: The most technically substantive objection concerns the development agreement's requirement for a traffic study only after occupancy. Town Attorney Armstrong argued that waiting for actual occupancy data is the correct approach—a traffic study done before occupancy would be speculative. However, Robert Hong's counter-argument—that the location of the southern exit should be studied and decided before construction, not after buildings are occupied—proved persuasive to many opponents and to Mayor Dickey and Councilman Spells, who cited traffic concerns as reasons to vote no.

Fee waiver ambiguity: Steve Messel's objection regarding fee waivers forced a clarification. The development agreement states the town waives "all fees pertain[ing] to the application and review approval of the pad, the final plot approval and grading permits." This language was initially unclear (Messel analogized it to buying a house without a termite inspection). Staff ultimately estimated the total value at approximately $30,000, with the largest component being the grading permit fee, which is calculated as a percentage of the actual grading costs (unknown until construction bids are finalized). Councilman Tolas underscored the $30,000 figure to contextualize it against a $95 million project cost (roughly 0.03%), arguing it was not a significant subsidy. However, Spells and Mayor Dickey expressed concern about any fee waivers when the town is financially stressed.

Referendum and special election logistics: Town Clerk Michelle Webb clarified that the earliest feasible election is May 2020 if the council votes for a special election by December 21st (to meet the 135-day notice requirement for consolidated election dates). A general election would be later. The referendum is mandatory once sufficient signatures are verified.

State preemption and prop 207: Town Attorney Armstrong noted that the prior October 1st motion included a Prop 207 waiver signed by the developer, indemnifying the town against claims of diminished property value due to the zoning change. Steve Messel's written comment raised this issue, citing the absence of such language in the development agreement. Armstrong clarified that the waiver was already obtained separately and is not repeated in the development agreement, addressing the concern.

Duration

Other Notable Items

Four Peaks Park Capital Improvements: Community Services Director Rachel Goodwin and Park Superintendent Kevin Snipes presented extensive renovation progress, including new playgrounds with compound and PlayCore equipment (nearly 40% funded by grants), basketball court grant ($85,000 from Arizona Sports and Tourism Authority), ballfield refurbishment, and a double zipline (pending component delivery). Grand opening scheduled December 21st pending final zipline installation. No vote required; item was informational.

Fountain of Light Sculpture Installation: The town council voted 6-1 to approve a 45-foot public art sculpture by artist Brian Shader at the western end of Avenue of the Fountains, commemorating the town's 50th anniversary. Total cost $150,000, fully privately funded. Dory Woodrick (FHCCA President / Public Art Committee) and dark skies experts confirmed the sculpture's lighting (12 glass layers with upward illumination from the base) meets dark skies ordinance requirements and does not interfere with the planned discovery center telescope. Testing confirmed light output well below town limits. Councilmember Magazine voted no, citing the 45-foot height as out of scale with Fountain Hills' character (though still 1 foot taller than town hall, it is 5 feet shorter than Park Place, another controversial sculpture). The sculpture will include recognition plaques for community members instrumental in the town's first 50 years.

Financial Audit Presentation: Heinfeld Meech & Co. (Jennifer Shields, partner; Josh Jumper, audit manager) presented the town's comprehensive annual financial report for fiscal year 2019, issued October 8th with an unmodified audit opinion. Key positives: interest earnings up $400,000, miscellaneous income up $190,000, retail sales up 4.4%, restaurant/bar sales up 7.7%. Repeat finding: building permit manual calculations continue to require secondary review to catch errors (one instance found in a sample of 19 permits this year). Recommendation: implement formal information technology disaster recovery plan (already underway). No material weaknesses or significant deficiencies noted. The audit indicates the town's overall financial health is sound despite prior fiscal stress.