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ITEM 5.a. TOWN OF FOUNTAIN HILLS STAFF REPORT Meeting Date: 1/12/2026 Meeting Type: Planning and Zoning Commission Regular Meeting Submitting Department: Development Services Prepared by: John Wesley, Development Services Director Staff Contact Information: Phone: 480-816-5138 Email: jwesley@fountainhillsaz.gov Request to Town Council Regular Meeting (Agenda Language) PUBLIC HEARING, with CONSIDERATION AND POSSIBLE ACTION: Relating to Ordinance 26- 02 amending Zoning Ordinance Chapter 27, Downtown Overlay, Section 27.02 A. related to permitted density for residential development Staff Summary (background) During the first part of 2025, the Planning and Zoning Commission worked with staff reviewing and drafting a new downtown overlay district to replace the two existing overlays and address some needs that stemmed from the recently approved downtown development strategy. Following a recommendation for approval by the Commission, the Town Council held a public hearing and approved the new overlay district at their meeting on September 2, 2025. When the Council approved the ordinance, a few minor changes were made, one of which was to lower the by-right density in the Avenue and Business Districts from 50 units per acre to 35. The next step in the process was to process a rezoning case to remove the two existing overlays and apply the new overlay to the downtown area. The Commission held a public hearing on this application in November 2025 and recommended approval to the Town Council. The Town Council held a public hearing on adoption of the rezoning on December 18, 2025. At that hearing, three citizens expressed concern regarding the maximum density allowed by right in the new overlay. Based on those concerns, the Council postponed action on the rezoning and asked the Planning and Zoning Commission to reconsider the density allowances in the overlay district with the belief the density should be lowered. Over the last few years staff has had discussions with property owners and developers looking at property in the downtown area. One proposal reviewed by staff was for a three- story apartment building on the corner of Parkview and Verde River. No plan was ever submitted because the applicant could not get enough units on the property to make the numbers work. Another discussion was for a mixed-use project along the Avenue that proposed commercial on the first floor with residential above it. To make that project work required significantly more than the eight units per acre allowed by code and the developer did not want to run the risk of the Special Use Permit process to achieve the needed density, so the project was not pursued. The citizens who spoke at the Town Council were concerned that, at the density contained in the new ordinance, residential developers would come in and buy up significant portions of the downtown area and develop it with high density housing and remove the opportunity for commercial uses. The concern expressed at the Council meeting was that, with 35 units per acre allowed, the downtown will be overrun with residential development to the exclusion of the desired commercial and employment development. Three points were missed in that discussion: 1. In the Avenue District, residential uses are not allowed on the ground floor. This area will have to maintain active ground floor uses. 2. In the Business District a Special Use Permit is required for ground floor residential. Therefore, the Town maintains the ability to achieve a mixed-use area and not allow residential uses on the ground floor. 3. The Innovation District does not allow any residential by right, it requires Council approval of a Special Use Permit to allow any residential in this area. Another limiting factor to extensive residential development is the maximum building height of 40 feet. As seen with the recently approved Special Use Permit for the mixed use building on the Avenue, it is difficult to have more than a three-story building. For comparison purposes, if all the lots on the north side of the 16,700 block of Parkview were assembled for redevelopment with a multifamily building, the total lot area would be 48,000 sq. ft. At 8 units per acre, 8 units could be built in this area. At 35 units per acre, 38 units could be built. Using Park Place Building C (the building west of Verde River) as a comparison, taking the same units and building shape and applying it to this area, there would be approximately 24 units per floor. At three stories, this translates into a density of 65 units per acre. An ordinance allowing 35 units per acre will not result in a development the same as Park Place. It would either be a similar building mass with fewer, larger units, or a smaller building with similar sized units. Studies show that to have a vibrant, active downtown area there should be a population density equal to at least 12,000 people per square mile. Using Verde River and Avenue of the Fountains as a center point, the area of downtown Fountain Hills is approximately 100 acres or about 0.156 sq. miles in size. Using these numbers, the Town should be working toward a population of 1,500 to 1,800 people in this area. At an average of two people per dwelling, the Town should have 750 to 900 dwelling units in this area to have the vibrant downtown envisioned. There are currently around 350 dwelling units within the downtown area; an additional 400-550 should be added. Within Plat 208 (the area bounded by the Avenue, La Montana, Palisades, and Saguaro) the total existing lots (both vacant and built) add up to 923,568 sq. ft. or 21.2 acres of land. At 8 units per acre, 169 units could be built. At 16 units per acre, it doubles to 339 and at 32 it would be 678. Because assembling, tearing down, and rebuilding adds to the cost of development, this is not likely on a large scale. Within Plat 208 there are 11.5 acres of vacant land. At 8 units per acre, this could provide up to 92 units, 184 at 16 units per acre, or368 at 32 units per acre; well under the number needed. The Town Council recently approved the Special Use Permit for six dwelling units to be built on a 12,000 sq. ft. lot on the Avenue. This number of units translates into 21 units per acre. Options: • Recommend no changes be made to the approved Ordinance. • Recommend retaining the 35 units per acre in the Avenue District and lower the maximum by right in the Business District to 25 units per acre. • Recommend reducing the maximum allowed density by right in both the Avenue and Business Districts to 20 units per acre. • Recommend a different density by right as determined by Commission discussion and deliberation. Related Ordinance, Policy or Guiding Principle Risk Analysis N/A Recommendation(s) by Board(s) or Commission(s) N/A Staff Recommendation(s) The goal is to provide a vibrant downtown area that supports the existing and desired businesses. In many cases, commercial development alone is difficult to finance. Going through an entitlement process such as a Special Use Permit adds time and risk into the development process. To help desired development happen, it is important to reduce or remove risk. The current density limit of 8 units per acre inhibits the type of growth and development desired. Given the small lots available, 15 units per acre does not make a significant difference. Staff recommends a density of at least 20 units per acre and supports maintaining the ordinance as currently approved. Suggested Motion MOVE TO recommend approval of Ordinance 26-02 (with any modifications needed as determined by the P & Z Commission to be needed to achieve the goals of the downtown area). OR MOVE TO recommend denial of Ordinance 26-02. FISCAL IMPACT Fiscal Impact: Budget Reference: Funding Source: ATTACHMENTS 1. Draft Ordinance 26-02