Agenda, regular meeting — Arvin City Council, June 27, 2023 (part 4 of 4)

Reso Authorizing a 5% Reduction in Development Impact Fees for Multi-Family Affordable Housing with at least 50% of Units Deemed as Affordable Housing.

RESOLUTION NO. __________

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARVIN
AUTHORIZING A FIVE PERCENT (5%) REDUCTION IN

DEVELOPMENT IMPACT FEES FOR MULTI-FAMILY AFFORDABLE
HOUSING PROJECTS WITH AT LEAST FIFTY PERCENT (50%) OF

UNITS DEEMED AS AFFORDABLE HOUSING
WHEREAS, the City of Arvin aims to promote affordable housing options and facilitate the development of multi-family residential projects; and WHEREAS, it is important to strike a balance between affordable housing needs and financial obligations associated with development impact fees; and WHEREAS, after careful consideration, the City Council recognizes the need to decrease development impact fees for multi-family affordable housing projects to support their viability and contribute to the city's growth; and
WHEREAS, the City Manager recommends that the City Council adopt the proposed reduction in development impact fees for multifamily affordable housing projects.

NOW, THEREFORE, BE IT RESOLVED THAT: The City Council of Arvin does hereby:

Section 1: Approve a 5% reduction in development impact fees that shall be implemented specifically for multi-family residential projects that allocate at least 50% of their units for affordable housing. This reduction will apply to all new multi-family residential developments that receive approvals from the city on or after the effective date of this resolution.

Section 2: The City of Arvin shall undertake the necessary steps to implement this resolution, including updating fee schedules and notifying relevant stakeholders, such as developers, builders, and the public, about the decreased development impact fees for multifamily affordable housing projects. //////
//////
//////
//////
//////
//////
//////

3.K.2
Attachment: Resolution Auth a Reduction of Development Impact Fees Multifamily Affordable Housing 6.27.23 (Decreasing Dev Impact Fees

Page 2 of 2 ends

Reso Authorizing a 5% Reduction in Development Impact Fees for Multi-Family Affordable Housing with at least 50% of Units Deemed as Affordable Housing.

I HEREBY CERTIFY that the foregoing resolution was passed and adopted by the City Council of the City of Arvin at a regular meeting thereof held on the 27th day of June 2023 by the following vote:

AYES:

NOES:

ABSTAIN:

ABSENT:

ATTEST
CECILIA VELA, City Clerk

CITY OF ARVIN
By:

OLIVIA TRUJILLO, Mayor
APPROVED AS TO FORM:

By:

NATHAN HODGES, City Attorney
Hodges Law Group
I, ______________________________, City Clerk of the City of Arvin, California, DO HEREBY CERTIFY that the foregoing is a true and accurate copy of the Resolution passed and adopted by the City Council of the City of Arvin on the date and by the vote indicated herein.

3.K.2
Attachment: Resolution Auth a Reduction of Development Impact Fees Multifamily Affordable Housing 6.27.23 (Decreasing Dev Impact Fees

Page 1 of 1 ends

Staff Report – Reso to modify Arvin Transit Fees 2023

CITY OF ARVIN
Staff Report
Meeting Date: June 27, 2023
TO: Arvin City Council
FROM: Hesham Elshazly, Transit Manager
Jeff Jones, City Manager / Finance Director
SUBJECT: Consideration and Approval of A Resolution of the City Council of the City of Arvin Modifying Fees for Transit Related Services.

BACKGROUND:

Cities are authorized to establish reasonable fees and charges for City services which reimburse the City for those associated services. The City of Arvin is proposing to modify the current fare structure for the provision of public transportation within and around the City of Arvin. A public hearing notice informing the public of this hearing was published in the local newspaper, Bakersfield Californian at least ten days prior to the hearing date of June 27, 2023.

The fare structure for Arvin Transit services and Dial-A-Ride were last increased in the year 2009. In order to keep up with the rate of inflation, the City is proposing fare modifications that will allow Arvin Transit to achieve State required fare box recovery ratios, and help to offset increasing operational costs, including, but not limited to, fuel, maintenance, and overhead costs.

The proposed fare modifications do not exceed the reasonable cost of providing the transitrelated services.

Proposed fees:

Staff recommends approval of the Resolution modifying fees for Transit related services.

FINANCIAL IMPACT:

This increase will allow Arvin Transit to achieve State required fare box recovery ratios, and help to offset increasing operational costs, including, but not limited to, fuel, maintenance, and overhead costs.

Free services will continue to be offered for free.

ATTACHMENTS:

Resolution

4.A.1
Attachment: Staff Report_Modify Transit Fees_062723 (Public Hearing: Modifying Fees for Transit Related Services)

Page 1 of 2 ends

Reso Modifying Transit Fees 2023
RESOLUTION NO. _____

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARVIN
MODIFYING FEES FOR TRANSIT RELATED SERVICES.

WHEREAS, Cities are authorized to establish reasonable fees and charges for City services which reimburse the City for those associated services; and WHEREAS, the City of Arvin is proposing to modify the current fare structure for the provision of public transportation within and around the City of Arvin; and WHEREAS, a public notice was published in the Bakersfield Californian newspaper at least 10 days prior to this public hearing stating the date, place, time and specific purpose of the hearing and inviting all persons interested in this topic who have questions, would like to provide feedback, or who have comments to attend the hearing; and WHEREAS, the City of Arvin is implementing modifications and improvements to the Arvin Transit system, including additional route stops which will allow for a more efficient and effective system within the City of Arvin; and
WHEREAS, the current fare structure for Arvin Transit services was increased in 2009, and the current fare structure for the Dial-A-Ride, Local Route and Arvin/Lamont Route need to be increased, in order to keep up with the rate of inflation; and to meet our fare box requirements.

WHEREAS, the proposed fare modifications will allow Arvin Transit to achieve State required fare box recovery ratios, and help to offset increasing operational costs, including, but not limited to, fuel, maintenance, and overhead costs; and WHEREAS, the proposed fare modifications do not exceed the reasonable cost of providing the transit related services; and
NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Arvin, California, does hereby approve the following fees for transit related services:

4.A.2
Attachment: Reso to Modify Transit Fees_062723 (Public Hearing: Modifying Fees for Transit Related Services)

Page 2 of 2 ends

Reso Modifying Transit Fees 2023
I HEREBY CERTIFY that the foregoing Resolution was passed and adopted by the City Council of the City of Arvin at its regular meeting thereof held on the 27th day of June 2023 by the following vote:

AYES:

NOES:

ABSTAIN:

ABSENT:

ATTEST
CECILIA VELA, City Clerk

CITY OF ARVIN
By:

OLIVIA TRUJILLO, Mayor
APPROVED AS TO FORM:

By:

NATHAN HODGES, City Attorney
Hodges Law Group
I, ____________________________, City Clerk of the City of Arvin, California, DO HEREBY CERTIFY that the foregoing is a true and accurate copy of the Resolution passed and adopted by the City Council of the City of Arvin on the date and by the vote indicated herein.

4.A.2
Attachment: Reso to Modify Transit Fees_062723 (Public Hearing: Modifying Fees for Transit Related Services)

NOTICE OF PUBLIC HEARING

CITY OF ARVIN
Fees for Transit Services
Notice is hereby given that the City Council of the City of Arvin, California, will conduct a public hearing, at which time the public may be present and be heard, to consider modifying fees related to transit services.

The following fees will be proposed:

Fixed-Route Dial-A-Ride Arvin-Lamont
General Public $1.50 N/A $2.00
Seniors $1.25 $1.50 $1.50
ADA $1.25 $1.50 $1.50
Between 12noon & 1pm N/A $0.75 N/A
Companion Free Free Free
Children (5 & younger) Free Free Free
In compliance with the Americans with Disabilities Act, if you need special assistance to participate in this meeting, please call (661) 854-3134. Notification 48 hours prior to the meeting will enable the city to make reasonable arrangements to ensure accessibility.

All persons interested in this topic who have questions, would like to provide feedback, or who have comments are invited to attend. If you challenge the approval or denial of these matters in court, you may be limited to raising only those issues you or someone else raised at the public hearing described in this notice, or in written correspondence delivered to the City Clerk, at or prior to, the public hearing. Address any communications or comments regarding this hearing to Cecilia Vela, City Clerk, at 200 Campus Drive, Arvin, CA 93203, (661) 854-3134, [email protected]. /s/
Cecilia Vela, City Clerk
Published: Bakersfield Californian, June 12, 2023
Arvin City Council Public Hearing Information
Date: June 27, 2023
Time: 6:00 PM
Place: City of Arvin Council Chambers, 200 Campus Drive, Arvin, CA 93203

4.A.3
Attachment: Public Hearing Modifying Transit Fees_062723 (Public Hearing: Modifying Fees for Transit Related Services)

CITY OF ARVIN
Staff Report
Meeting Date: June 27, 2023
TO: Arvin City Council
FROM: Jeff Jones, City Manager
SUBJECT: A Resolution of the City Council of the City of Arvin Adopting the Annual Operating and Capital Budgets for Fiscal Year 2023-2024 BACKGROUND:

Before you for your review and for public comment is the proposed Annual Operating Budget for FY 2023-2024. The proposed budget was presented for review and public comment at City Council meetings held on June 13, 2023, and June 27, 2023.

This budget provides spending authority of $44,182,231 for Fiscal Year 2023-2024.

The proposed budget includes the following: FY 23 Adopted FY 24 Proposed REVENUES:

General Fund Revenue $7,864,430 $8,046,279
General Fund Revenue – Use of Reserve ($17,964) $166,644 Enterprise Fund Revenue $3,870,299 $3,935,073
Use of Enterprise Fund Balance - $297,504
Enterprise Fund Revenue – Assign to Reserve ($268,768) - Special Revenue Fund Revenue $4,155,318 $4,912,960
Use of Special Revenue Fund Balance $40,000 $35,174
Successor Agency Revenue $552,602 $681,344
Use of Successor Agency Fund Balance $143,229
Capital Fund Revenue $18,847,093 $26,107,253
TOTAL REVENUE $35,186,239 $44,182,231
EXPENSES:

General Fund Expenditure $7,846,466 $8,212,923
Enterprise Fund Expenditure $3,601,531 $4,232,577
Special Revenue Fund Expenditure $4,195,318 $4,948,134
Successor Agency Expense $695,831 $681,344
Capital Fund Expenditure $18,847,093 $26,107,253
TOTAL EXPENSE $35,186,239 $44,182,231

4.B.1
Attachment: FY 24 budget staff report FINAL (Public Hearing: Adopt FY 2023-2024 Budget) City of Arvin Financial Position
City Status as of June 30, 2022
At the close of Fiscal Year (FY) 2021-2022, the City has $1,650,002 in uncommitted general fund reserves. This is an increase of $345,200 from the prior year. The City also has $1,046,026 of general fund (an increase of $118,950 from prior year) committed to legal contingencies.

The sanitation enterprise fund continues to operate on budget and has a positive fund balance of approximately $ 2 million as of June 30, 2022. Those funds are targeted to be used for capital equipment purchases over the next several years.

Fiscal Year 2021-2022 in review
Like most cities, at the end of Fiscal Year 2021-22 the city emerged in an improved position at the end of the fiscal year compared to the end of the prior fiscal year. Overall general fund revenue for the year ended at $1,300,000 above budget. Strong growth in sales tax and VLF in lieu payments were major reasons for this increase.

Sales taxes increased by about $225,000 from the prior year. The budget projected a decrease of $100,000. Cannabis tax revenue increased by $219,000 to a total of $388,000 for the year. This increase while notable was not enough as cannabis tax revenue did not achieve the budgeted target of $550,000. Building permit fee revenue continues to be depressed mainly due to several developer agreements the city negotiated back in 2006-2008 at rates which were well below market at that time. Expenses for the year were about $800,000 above budget with most of the increase accruing to the police department.

Fiscal Year 2022-2023 outlook
Sales tax revenue for the year is expected to be above budget. As of April 30, 2023, sales tax revenues were at 105% of budget for the entire FY. The city’s two unions both signed a fouryear labor contract which among other things limits cost of living increases to three percent for each year of the contract. Police department overtime expenses are projected to be $150,000 above budget. Other labor cost items are at or slightly above budget. Cannabis revenues increased slightly over FY 21-22 but are expected to be significantly below budget as several promising cannabis operations have not yet started operations in the city. Building permit revenue is expected to close above budget.

The United States Department of Treasury released new guidelines on use of American Rescue Act funds which allows the city to spend funds based on ‘revenue replacement’ theory. As a result of this change, the city in August of 2021 budgeted the $5.227 million of ARPA funds as follows: Kern County Fire Contract $622,000, Streets and Roads $1,500,000, Park improvements and repairs $1,100,000, Police department refurbishment $200,000, Employee related $800,000, Wastewater treatment plant maintenance $505,000, and Economic development $500,000. As of June 30, 2023, the city has spent approximately $1,600,000 of this funding with the remainder allocated to FY 23-24 and FY 24-25. Building and planning department revenues remain depressed. The city is expected to close out Fiscal Year 2023-2024 with a surplus of approximately $180,000 for the year.

4.B.1
Attachment: FY 24 budget staff report FINAL (Public Hearing: Adopt FY 2023-2024 Budget) Fiscal Year 2023-2024 General Fund budget summary
Revenue: $8,046,279 which is an increase of $181,849 (2.3%) from FY 22/23 budget.

Expense: $8,212,293 which is an increase of $366,487 (4.6%) from FY 22/23 budget.

Net result (Revenue less Expense) = -$166,644 for the FY.

Fiscal Year 2023-2024 General Fund Revenue changes over prior year budget Cannabis – DECREASE of $200,000 which results in $500,000 total revenue from this source.

Sales Tax – increase of $157,500 (5%) – which results in $3,300,750 total revenue from this source.

Motor Vehicle In-Lieu (VLF) – increase of $117,202 (5%) which results in $2,473,252 from this source.

Building department – increase of $20,000 (5%). Projected revenue $420,000.

Fiscal Year 23/24 Expense increases projected over prior year budget.

The majority of budget line items are frozen at FY 22/23 levels. This means that overall purchasing power will be reduced as there is no budget room for inflation.

Liability insurance continues to skyrocket. Liability insurance costs increased by over $175,000 or 55% between 2020 and 2023. It should be noted that the city has had no claims during this period, the cost increase is just reflective of ‘hard market’ insurance coverage costs nationwide.

Salaries and benefits increase by approximately $150,00 – which is fully related to negotiated union increases. No additional positions are proposed in this budget.

A Challenging Future Ahead
Arvin has achieved a balanced budget in each of the past five years. But it has come at a cost.

Until 2021, employees had not received a cost-of-living increase in over four years. The city’s streets and roads need repair and, in some cases, require full reconstruction. The police department is staffed at a minimal safety level. While the city does not have a deficit general fund balance, it has not quite achieved the City Council mandated reserve target of 25% of one year’s general fund expense. As of June 20, 2023 the reserve target is projected to be at 21% Arvin’s ratio of city generated revenue (sales tax, property tax, business permits, etc.) to city population ranks #418 out of California’s 421 incorporated cities.

Positive Factors:

Continued post-pandemic sales tax activity – economy is experiencing a modest recovery from the pandemic.

Bakersfield Community College – Arvin campus will open its doors within the next two years.

4.B.1
Attachment: FY 24 budget staff report FINAL (Public Hearing: Adopt FY 2023-2024 Budget) New businesses entering the city – Starbucks (August 2023), and another national fast-food outlet (Spring 2024). The Arvin Town Center is under design with construction scheduled to start in late 2024.

City owns prime real estate available for retail and commercial development and is actively marketing those properties. The city recently expanded the sphere of influence by over 40% so the future looks good for long term development opportunities.

Areas of Concern:

The current fire service protection contract with Kern County Fire expires on June 30th, 2022.

The new seven-year contract includes an increase of 100% from today’s costs, phased in over the term of the contract. This will require an additional $800,000 per year in general fund revenue by fiscal year 28-29. Increased pressure from labor unions to re-negotiate terms of labor contracts.

Continued depressed new housing development.

In 2016, the city obtained a $5 million loan for infrastructure related to the Jewett Square/Walnut Street extension. The debt for this loan was to be serviced by revenue obtained via new development in the area. As of June 2023, no new development has taken place and the City will need to fund the $300,000 annual debt service on this loan from the general fund, starting as soon as FY 24-25.

The City has approximately $3 million in net pension liability which will need to be financed and/or paid down over the next twenty years. The net pension liability payment for Fiscal Year 2023-2024 is estimated at $280,000 and is included as a general fund expense in this budget.

FISCAL IMPACT:

The proposed FY 23-24 Budget, if adopted, would provide spending authority of $44,182,231 of which $8,212,923 is budgeted general fund expense. The general fund budget projects a deficit of $166,644 which will be funded from the general fund reserve of approximately $1,800,000.

ATTACHMENTS:

Fiscal Year 2023-2024 proposed budget

4.B.1
Attachment: FY 24 budget staff report FINAL (Public Hearing: Adopt FY 2023-2024 Budget)

Page 1 of 6 ends

Reso Adopting the Operating and Capital Budgets for Fiscal Year 2023-2024 RESOLUTION NO. ___________

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ARVIN

ADOPTING THE ANNUAL OPERATING AND CAPITAL BUDGETS
FOR FISCAL YEAR 2023-2024
WHEREAS, pursuant to Arvin Municipal Code, section 23.06.150, the City Manager has the duty to prepare and submit a proposed annual budget and the proposed annual salary plan to the city council for its approval; and,
WHEREAS, consistent with his responsibility, on June 13, 2023, and June 27, 2023, at duly noticed regular meetings of the Arvin City Council, the City Manager presented to the City Council a proposed budget for the 2023-24 Fiscal Year as part of agendized budget workshops; and,
WHEREAS, on June 27, 2023, at a duly noticed regular meeting of the City Council, the City Council conducted a public hearing regarding adoption of the Annual Budget for the 2023- 24 Fiscal Year during which is received comments and testimony from members of the public and staff regarding the contents of the budget; and,
WHEREAS, the City Council desires to establish policies for implementation of the Annual Budget to ensure the budget is implemented efficiently and consistent with the City Council’s policy direction; and,
WHEREAS, after reviewing the proposed budget and considering the testimony received from City staff and members of the public, the City Council believes the proposed Annual Budget serves the interests of the City of Arvin and its citizens and is consistent with the goals it has established in its adopted Strategic Plan for the City of Arvin.

NOW THEREFORE BE IT RESOLVED, by the City Council of Arvin as follows:

SECTION 1. ADOPTION OF BUDGET FOR 2023-24 FISCAL YEAR
The FY 2023-2024 Annual Operating Budget is hereby adopted, and as summarized on page1 of the Approved Budget, includes a total appropriation for the City’s Operating budget of $44,182,231 which includes Capital budgets of $26,107,253.

SECTION 2. SCOPE
This resolution defines the authority and responsibilities of the City Manager in implementing the Approved Budget of the City of Arvin.

SECTION 3. DEFINITIONS

3.1 “Approved Budget” means the budget adopted by the City Council on June 27, 2023 for the 2023-2024 fiscal year, per the attached exhibits, including subsequent transfers from Contingency Reserves if required to departments to implement labor agreements and transfers to account for employee service changes due to promotions, vacancies, merit

4.B.2
Attachment: FY 24 budget reso (Public Hearing: Adopt FY 2023-2024 Budget)

Page 2 of 6 ends

Reso Adopting the Operating and Capital Budgets for Fiscal Year 2023-2024 increases and reallocations.

3.2 “Current Budget” means the 2022-2023 Approved Budget, incorporating any subsequent appropriation increases, decreases or transfers.

3.3 “Expenditures” means Employee Services, Other Services and Supplies, Equipment, Debt Service, Labor Offset, Transfers, and Capital Improvements.

3.4 “Department” or “Agency” means Mayor/Council, City Manager, Finance, Community Development, and Law Enforcement.

3.5 “Division” means a sub-unit of a Department or an entity not having department-level status such as Public Works, City Clerk or Human Resources.

3.6 “Activity” means a sub-unit of a division.

3.7 “Organization” means a Department, Division, or Activity.

3.8 “City Manager,” is responsible for managing and directing the affairs of the City within the established goals, objectives, and general policies approved by the City Council, and directing the activities of those agencies representing the interests of the City, as established by the City Council and the Arvin Municipal Code. The City Manager is solely responsible to the City Council for the effectiveness, efficiency and success in fulfilling the City’s goals, objectives, and policy priorities. The City Manager receives general policy direction from the City Council within the general policy guidelines and exercises direct supervision and general administrative direction over each department head and other city employees.

3.9 “Full Time Equivalent” means the decimal equivalent of a position; i.e., one full time position is 1.00 FTE and one quarter-time position is .25 FTE.

3.10 “Base Budget” means the current year budget modified per labor agreements, one-time expenditures and citywide charges, as approved by the City Council.

SECTION 4. AUTHORIZED STAFFING AND APPROPRIATIONS

4.1 The City Manager is authorized to make any expenditure and resource adjustment to the Proposed Budget based on final City Council action to adopt the Budget within the parameters of his authority established in the Arvin Municipal Code.

4.2 The City Council authorizes the City Manager to enter into contracts for and incur expenditures so long as such actions are consistent with the adopted Budget and the authority granted to the City Manager in the Arvin Municipal Code.

4.3 The appropriations and Full Time Equivalent staffing included in the budget document are hereby approved.

4.4 During budget hearings and following budget approval, the City Manager is authorized to make adjustments for updated labor, vehicle, energy, contingencies and risk management

4.B.2
Attachment: FY 24 budget reso (Public Hearing: Adopt FY 2023-2024 Budget)

Page 3 of 6 ends

Reso Adopting the Operating and Capital Budgets for Fiscal Year 2023-2024 changes such as retirement rates, payroll taxes, health benefit, fleet costs and risk management costs from designated funds or reserves.

4.5 Following budget approval, the City Manager is authorized to revise indirect cost rates to be applied to hourly salary rates in order to achieve full cost-recovery of services.

SECTION 5. APPROPRIATION INCREASES/DECREASES

5.1 All net increases in excess of $30,000 to operating and capital appropriations shall be approved by the City Council.

5.2 The City Manager is authorized upon completion of the audited financial statements for 2022-2023 to adjust FY 2023-2024 fund appropriations by the amount of net savings/overruns as determined by the City Council. These carryover amounts will be included and addressed in the Midyear Financial Report.

SECTION 6. STAFFING INCREASES

6.1 Any increases, by department by fund, in Full Time Equivalent (FTE) staffing levels as authorized in the Approved or Amended Budget for a department must be approved by the City Council.

6.2 Any existing positions which were approved on the basis of the City receiving a grant or other reimbursements must have continued funding verified prior to filling the position.

The City Manager is authorized to adjust staffing levels for renewals or expansions of fully offset grants. Grant funded positions shall be terminated upon completion or cancellation of the grant unless specifically continued by City Council resolution including a source of replacement funding.

6.3 All staffing position adjustments made subject to the approval of the City Manager and subject to the City’s policy must have funding verified by the Director of Finance prior to implementation.

6.4 Any reassignment of authorized FTE and employee services funding associated with these FTE within a department and within the same fund may be made with the approval of the City Manager as long as there is no net change to authorized FTE and funding levels.

6.5 All new positions or job reclassifications are requests subject to classification review and approval by the City Council. Funding adjustment will be consistent with appropriate classification and approval by the Finance Director.

6.6 In the case of a leave of absence due to sick leave, injury, vacation, or other reason, the City Manager is authorized to hire temporary workers so long as the temporary worker is released from employment when the fulltime employee returns to work.

4.B.2
Attachment: FY 24 budget reso (Public Hearing: Adopt FY 2023-2024 Budget)

Page 4 of 6 ends

Reso Adopting the Operating and Capital Budgets for Fiscal Year 2023-2024 SECTION 7. APPROPRIATION TRANSFERS FROM CONTINGENCY/
RESERVE FUNDS.

7.1 Appropriation transfers from General Fund Reserves up to and including $15,000 in total for the 2023-24 Fiscal Year may be approved by the City Manager. Transfers in excess of the $15,000 annual limit shall be approved by the City Council.

7.2 No Reserve transfer shall be made from any fund which would create a negative undesignated fund balance in the fund.

SECTION 8. OTHER APPROPRIATION TRANSFERS

8.1 Any operating appropriation transfers within the same Department must have prior approval of the City Manager.

8.2 Appropriation transfers between two or more Departments must be approved by the City Council.

SECTION 9. UNSPENT APPROPRIATIONS AND ENCUMBRANCES

9.1 All purchase order commitments outstanding on June 30, 2023 are hereby continued.

9.2 All appropriations in the operating budget which remain unencumbered or unexpended on June 30, 2023, shall revert to the fund balance of their respective funds. Amounts in excess of 100% of the Sanitation Fund ending fund balance at June 30, 2023 will be placed in a separate fund for capital replacement.

SECTION 10. CAPITAL IMPROVEMENTS

10.1 All multi-year capital improvement projects in existence on June 30, 2023, shall be continued in the 2023-2024 fiscal year, which may include items provided on page 15 of the Approved Budget. The FY 2023-2024 Capital Improvement Plan Budget is hereby adopted as summarized in the FY 2023-2024 Budget.

10.2 Each fiscal year, at June 30, the balance of each capital improvement projects must be zero or have a positive balance by fund. Projects that exceed in excess of the budget by $5,000 or less shall be corrected with other eligible project revenues that are within the Capital Improvement funds and are not restricted by law.

10.3 All capital improvement projects shall be approved by the City Council. The cancellation or modification in excess of the sum of $30,000 of a capital project must also be approved by the City Council.

10.4 Upon completion and closure of a capital project, the designated fund manager is authorized to transfer any remaining project balance to the fund balance contingency.

10.5 Capital appropriations shall be used solely for the originally approved project or projects except as provided in this section. Annually, completed or inactive projects will be closed except due to payment disputes. An inactive project is defined as one where

4.B.2
Attachment: FY 24 budget reso (Public Hearing: Adopt FY 2023-2024 Budget)

Page 5 of 6 ends

Reso Adopting the Operating and Capital Budgets for Fiscal Year 2023-2024 transaction activity is less than $1,000 over the prior two years. Closures are the responsibility of the designated project manager.

10.6 Unencumbered appropriations for all projects will expire on June 30th following third full year of the last appropriation to the project. Subject projects requiring continuing appropriations will require Council action through programming within the Capital Improvement Program or through amendment to the Program.

SECTION 11. OPERATING GRANTS

11.1 All operating grants shall be approved by the City Council.

11.2 Operating grant funds appropriated in the Approved or Amended Budget do not require additional City Council approval to be expended upon receipt of such grant or grants.

11.3 All multi-year operating grant budgets in existence on June 30, 2023, shall be continued in the 2023-2024 fiscal year.

SECTION 12. MISCELLANEOUS CONTROLS

12.1 No expenditures at the department level shall exceed the Approved or Amended Budget by fund.

12.2 Projected deficiencies in any department by fund must be corrected by:
(1) Reducing expenditures in said department (e.g. freezing vacant positions, restricting purchase orders, etc.) or
(2) An intra-fund transfer within that same department; or (3) An inter-departmental appropriation transfer.

12.3 The City Manager is hereby authorized to:
(1) adjust budgets in the Special Revenue funds for appropriations required based on the action/direction of the Council relative to capital projects, transfer requirements and the availability of funds;
(2) Adjust budgets in the Capital Project funds for the current year based on the previous action of Council for projects on a multi-year basis.
(3) Expend unbudgeted fund and reserves in response to public emergencies or disasters.

Such expenditures shall subsequently be ratified by the City Council.

SECTION 13. MID-YEAR FINANCIAL REPORT

13.1 City Council shall be provided a Midyear Financial Report including a re-estimate of the financial condition of all funds, including prior year actual fund balances, re-estimated revenues and expenditures, projected ending fund balances or deficits, and recommendations for eliminating any projected fund deficits.

13.2 The City Council shall act on any projected fund deficits prior to the close of the Fiscal Year.

4.B.2
Attachment: FY 24 budget reso (Public Hearing: Adopt FY 2023-2024 Budget)

Page 6 of 6 ends

Reso Adopting the Operating and Capital Budgets for Fiscal Year 2023-2024 SECTION 14. COST ALLOCATION PLANS
A Full Cost Allocation Plan and OMB Circular A-87 Cost Allocation Plan are prepared annually and presented for acceptance by the City Council. These plans provide a rational nexus for reimbursing the General Fund costs from other funds benefiting from such cost. All Transfers between Enterprise Funds and the General Fund are supported by the Cost Allocation Plans and are approved by the City Council through this action.

I HEREBY CERTIFY that the foregoing resolution was passed and adopted by the City Council of the City of Arvin at a regular meeting thereof held on the 27th day of June 2023 by the following vote:

AYES:

NOES:

ABSTAIN:

ABSENT:

ATTEST
CECILIA VELA, City Clerk

CITY OF ARVIN
By:

OLIVIA TRUJILLO, Mayor
APPROVED AS TO FORM:

By:

4.B.2
Attachment: FY 24 budget reso (Public Hearing: Adopt FY 2023-2024 Budget)

4.B.3
Attachment: Arvin 2023-2024 budget book (Public Hearing: Adopt FY 2023-2024 Budget)

Page 1 of 3 ends

Staff Report – Apothio / Quantum First Amendment to Ag Lease Agreement.

CITY OF ARVIN
Staff Report
Meeting Date: June 27, 2023
TO: Arvin City Council
FROM: Jeff Jones, City Manager / Finance Director
SUBJECT: Consideration and Approval of the First Amendment to the Agricultural Lease Agreement between the City of Arvin and the Successor Agency to Arvin Community Redevelopment Agency and Apothio, LLC and Quantum Farms, LLC and Authorize the City Manager to Execute the Amendment.

Purpose:

The adoption of the attached amendment to the agricultural lease agreement will modify and approve the original 20 year Agricultural Lease Agreement between the City of Arvin and Apothio, LLC, extending it to a 25 year period, while changing the corporate name to Quantum Farms, LLC (“Quantum”). The corporate leadership remains the same. The purpose of the LLC change ensures that this company is focused on the City of Arvin, and not connected to any other operations. The Quantum Team has completed a substantial amount of work in support of the City of Arvin, the Arvin Wastewater Treatment Plant (WWTP), the successful irrigation of secondary water and draining Earthen Tank #3, as well as delivering key engineering groups completing WWTP grant application and administration.

This contract authorizes Quantum to farm the property, as defined below, with animal feeds or fiber (alfalfa, corn, wheat, etc.). Industrial hemp is also permitted as a fiber crop but will only be grown with additional permitting via County and State. This contract ensures that Quantum manages, accepts and utilizes all of the effluent generated by the City’s Wastewater Treatment Plant (“WWTP”) on the property.

Background:

Apothio was awarded the City’s Request for Proposals (“RFP”) for Tenant Farming on April 1st, 2021 to solicit proposals from qualified farming operators, with knowledge and experience complying with and working within the requirements of a waste discharge or similar permit, desiring to farm approximately 247 acres owned by the City of Arvin (“City”) in the vicinity of North Rancho Drive, Millux Road, and Burkett Blvd, Arvin, CA (“Property”). In the fall of 2021, while Apothio was repairing and working to improve this farm, the WWTP’s Earthen Tank #3 began to leak and the California Regional Water Board declared an Emergency. If Earthen Tank #3 would have failed, the California Regional Water Board (CRWB) may have threatened the City with disenfranchisement. The Apothio/Quantum Team worked for over 20 months repairing a completely fractured, decayed irrigation system that allowed Arvin to increase its water discharge acres from 213 acres to over 400 discharge acres. These improvements were essential to the WWTP and irrigation improvements demanded by the CRWB.

Introduction:

Before the Apothio contract, the property only grew alfalfa. The property is subject to Waste

5.A.1
Attachment: Staff Report First Amend to Ag Lease Agmt with Quantum Farms, LLC_Apothio, LLC_062723 (Apothio, LLC & Quantum, LLC -

Page 2 of 3 ends

Staff Report – Apothio / Quantum First Amendment to Ag Lease Agreement.

Discharge Requirement order 5-00-093 (“the Permit”) issued by the California Regional Water Quality Control Board (“RWQCB”). The Permit, which was issued in 2000, outlines the requirements for the proper use and application of the undisinfected secondary effluent produced by the treatment train from the WWTP. The estimate of effluent treated water is approximately

1.3 million gallons per day or 475 million gallons per year (1,456 acre feet) and is used to irrigate the crops.

Since April 1, 2021, Apothio has added over 183 available acres for farming and distribution of effluent. The Apothio/Quantum Team has modified the “alfalfa only” crop to include different crops to ensure winter-time crops as well as nitrogen consuming crops; respectively 3-way grass for the winter and corn during the regular growing season. This improves the WWTP effluent capacity for both gallons per day and nitrogen loading via the effluent. This superior effluent and crop management will continue throughout Quantum’s contract.

Quantum continues to assist the City of Arvin in the direct management and repairs of the WWTP via the Engineers (Carollo) and the CRWB. Quantum has already emptied this tank so there is no risk of tank failure. Quantum will keep this tank empty so repairs can be made.

Carollo is also preparing the WWTP grant application and Title 22 updates, while Quantum is providing the water effluent discharge rates, crop production plans and actual production yields.

This data was not available before the Apothio/Quantum Team became engaged. During a recent meeting with the City, the CRWB indicated that they acknowledged progress made by the City Manager, Carollo Engineering, and the Apothio/Quantum Team.

This Agreement is for a term of 25 years.

Analysis:

Staff reviewed Apothio’s/Quantum proposal on the basis of:

1. Responsiveness to the Request for Proposals and understanding of the scope of work. Dr.

Jones and Team went well beyond expectations in the response to the WWTP Earthen Tank Emergency.

2. Qualification and experience of the firm and individual staff members. This Team consistently delivered support engineering teams, while successfully making the improvements needed.

3. References.

4. Lease structure and payments proposed.

After reviewing this proposal, staff believes that the Apothio/Quantum Team has proven to the City of Arvin that they are qualified and capable to undertake the obligations set forth in this Agreement such that recommends that the City Council award this contract to Quantum.

CEQA:

If it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment, the activity is not subject to CEQA. The consideration of this Agreement is not subject to the California Environmental Quality Act (CEQA) pursuant to the CEQA Guidelines, California Code of Regulations, Title 14, Chapter 3, sections: 15060(c)(2) (the activity will not result in a direct or reasonably foreseeable indirect physical change in the environment); 15060(c)(3) (the activity is not a project as defined in Section 15378); and 15061(b)(3) (the activity is covered by the common sense exemption that CEQA applies only to

5.A.1
Attachment: Staff Report First Amend to Ag Lease Agmt with Quantum Farms, LLC_Apothio, LLC_062723 (Apothio, LLC & Quantum, LLC -

Page 3 of 3 ends

Staff Report – Apothio / Quantum First Amendment to Ag Lease Agreement. projects which have the potential for causing a significant effect on the environment) because the Agreement essentially maintains the status quo such that there is no possibility that Agreement may have a significant adverse effect on the environment; as a result, the approval of this Agreement is exempt from CEQA. Further, none of the exceptions to Categorical Exemptions set forth in CEQA Guidelines 15300.2 apply to this project.

Fiscal Impact:

In addition to Apothio using all of the City’s undisinfected secondary effluent that the City would otherwise have to dispose elsewhere at a net expense to the City approaching at least $100,000 per year, Apothio will pay the City a $24,700 annual ground lease payment. The City will also receive 25% of the net income derived from the grow, processing, manufacturing and sale of industrial hemp and all of its byproducts from the property, which could be in the range of $50,000 each year. Additionally, each year Apothio will donate to the Noah’s Arc Foundation, a 501(c)(3) non-profit (www.noahsarcfoundation.com) (“NAF”) an additional 25% of the net income derived from the growth, processing, manufacturing, and sale of industrial hemp and all its byproducts from the property. This donation will be earmarked for programs for the benefit of economic and workforce development programs, including training programs and facilities, to benefit residents of the City and/or for use in the Kern Community College District Promise Scholarship Programs or similar educational programs available to benefit residents of the City.

Staff Recommendation:

Staff recommends approval of the First Amendment to the Agricultural Lease Agreement between the City of Arvin and the Successor Agency to Arvin Community Redevelopment Agency and Apothio, LLC and Quantum Farms, LLC.and authorize the City Manager to execute the amendment.

5.A.1
Attachment: Staff Report First Amend to Ag Lease Agmt with Quantum Farms, LLC_Apothio, LLC_062723 (Apothio, LLC & Quantum, LLC -

Page 1 of 21 ends

AGREEMENT NO. ________

CITY OF ARVIN/SUCCESSOR AGENCY

FIRST AMENDMENT TO AGRICULTURAL LEASE AGREEMENT
This Agricultural Lease Agreement (“Lease” or “Agreement”) is made and entered into effective _______________, 2023 (“Effective Date”), by and between the City of Arvin, a municipal corporation and the Successor Agency to Arvin Community Redevelopment Agency (hereinafter collectively referred to as “City”), and Apothio, LLC, an Indiana limited liability company, and Quantum Farms, LLC, a California limited liability corporation (hereinafter collectively referred to as “Tenant”), with reference to the following facts:

RECITALS
WHEREAS, City and Apothio entered into that certain Lease Agreement dated April 1, 2021 (the “Apothio Lease Agreement”). A true and correct copy of the Apothio Lease Agreement is attached hereto and incorporated herein as Attachment “A.” All terms and conditions of the Apothio Lease shall remain in full force and effect, except for those terms and conditions which are expressly modified in this Agreement;
WHEREAS, pursuant to the Apothio Lease Agreement, City Property was leased to Apothio, LLC. Both the City of Arvin and Apothio have mutually agreed to amend the Tenant from Apothio, LLC to Quantum Farms, LLC, which is a California based Limited Liability Company. As with Apothio, LLC, all leadership and key contacts remain that same for Quantum Farms, LLC;
WHEREAS, pursuant to the Apothio Lease Agreement, the City Property was leased to Tenant for the planting, growing, harvesting, and processing of annual legally marketable crops, specifically industrial hemp, and soil preparation as needed, consistent with the Permit (the “Permitted Use”). Both City and Tenant agree that the Tenant has exclusive rights to the management and application of all Secondary Wastewater for the next 25 years following the date of this Amendment;
WHEREAS, pursuant to the Apothio Lease Agreement, the Parties acknowledged that the City Property receives treated water from the City's Wastewater Treatment Plant (“Treated Water”) and Tenant acknowledged and was aware that material aspects of the Lease Agreement were (1) acceptance and usage of 100% of the Treated Water for the Permitted Use; WHEREAS, City and Tenant wish to enter into this Amendment to add additional 75 acres of property owned by the Successor Agency to the Arvin Community Redevelopment Agency (“Additional Property”) to the Lease Agreement under the same 25 year terms and provisions related to such additional real property;
WHEREAS, in addition to the Additional Property, Tenant has also added another 75 acres of tillable land via the “Garcia MOU” and has the option to add more land as needed. These non5.A.2 Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 2 of 21 ends

City owned lands provide additional land for disbursement of the Secondary Water Effluent.

These same acres will not be subject to any sort of rent payment or revenue sharing to the City.

WHEREAS, the Tenant has added over 300 acres of “Winter Crops” to the Farming Operation; thereby, increasing the farm’s ability to use and percolation the secondary effluent.

WHEREAS, if necessary to dispose of the Secondary Water Effluent, the City and Tenant will continue to acquire additional land by standard lease, complete acquisition, or when legally justified, eminent domain.

WHEREAS, City and Tenant wish to enter into this Amendment to modify certain payment terms contained in the Lease Agreement. These Terms will be negotiated by the City Manager and Tenant;
WHEREAS, City and Tenant wish to enter into this Amendment to modify the future existing Wastewater Treatment systems. The Tenant has worked diligently and has borne significant extraneous financial costs in the repair of wastewater emergencies related to historical wastewater infrastructure and wastewater management practices that existed before the Tenant became active. The Arvin City Manager and CEO of Quantum Farms, LLC will complete an updated, mutually agreed upon, payment/repayment schedule between the City and Tenant, applying a portion of the Tenant’s emergency expenses toward all past or any current rent or other fees due to the City of Arvin through 2026.

WHEREAS, the Tenant and City acknowledges that each party has worked together in good faith, diligence and regulatory compliance throughout the emergency created by the Wastewater Storage Earthen Tank #3, beginning in September 2021 through current date. It is the intent of the Parties to work together to negotiate mutually agreeable additional agreements, which may be drafted and executed as separate document(s) not included in this Agreement. Such negotiations will aim at creating potential additional agreements that seek to ensure that the City and Tenant, based upon objective performances, create a very long term Public-Private Partnership” agreement, which if agreed to by the parties will be known as the “International Sustainability Incubator Site” for the research, development and commercialization of sustainable clean water, clean air, the bioremediation and recycling of clean water, BioPharma production of organic, FDA level whole plant extracted, natural plant medicines and sustainable green energy production. Under any such potential agreement, the Tenant would share its unique abilities via a significant amount of plant genetics, intellectual property, patents, access to capital and grant monies in order to actualize the “Arvin International Sustainability Incubator Site” (AISIS).

WHEREAS, City and Tenant agree that any potential Public Private Partnership would include broad, far reaching mutual considerations. For example, the City and Tenant both acknowledge that the AISIS would be designed to create clean water and energy for the City of Arvin, while also providing new, unique and international workforce development, education, scholarship, and employment opportunities for the Citizens of Arvin for many decades to come.

Successful inclusion of AISIS would likely reward the City and/or its Designees and the Tenant and/or its Designees with an AISIS contract for no less than 30 years after the completion of said project. Notwithstanding the foregoing, nothing in this Agreement shall create a binding

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 3 of 21 ends

obligation on either party to enter into any agreement establishing a Public-Private Partnership between the City and Tenant or any designees or agents thereof.

AGREEMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, City and Tenant agree as follows:

1. Recitals. The Recitals above are true and correct and incorporated herein by this reference.

2. Name Change. The Tenant in the Apothio Lease Agreement shall be changed from Apothio, LLC, an Indiana limited liability company to Quantum Farms, LLC, a California limited liability company.

3. Lease of Premises. City hereby leases to Tenant, and Tenant leases from City, on the terms and conditions set forth in this Lease, the Additional Property, as described above and as generally depicted on the diagram attached as Attachment “B”. The parties acknowledge the Lease of the Additional Property shall not include that area currently being used for petroleum extraction operations located to the west of the Sycamore Sump area.

Additionally, the Parties acknowledge that this Lease, because it involves Successor Agency Land, shall not become effective related to that portion of the Property, until approved by the County of Kern Oversight Board, if necessary.

4. Term and Effective Date. The term of the Lease begins on the Effective Date of this Amendment, and terminates twenty-five (25) years later, on _____________, 2048, unless terminated sooner pursuant to Section 24 of this Agreement (the “Lease Term”). The Lease Term may be extended by up two (2) additional five-year periods, upon mutual written assent of the parties.

5. Use of Property; Updating the Permit; Indemnification. a. The Property is leased to Tenant for the planting, growing, harvesting, and processing of annual legally marketable crops, and soil preparation as needed consistent with the Permit (the “Permitted Use”). As the Permit currently only authorizes the use of the Treated Water on animal and fiber crops 3-way grass, corn and alfalfa, Tenant shall only cultivate industrial hemp, 3-way grass, corn and alfalfa until the Permit is amended or otherwise updated to allow the cultivation of industrial hemp. Once the Hemp Permit authorizes the cultivation of industrial hemp, and Tenant demonstrates that such a crop is capable of accepting and using all of the effluent generated by the WWTP and can be farmed in compliance with the applicable Water Discharge Requirement Permit (“Permit”), Tenant may plant up to 35,000 Tenant-derived hemp dioecious (male and female) seeds per acre. At all times during the term of this Agreement, and any extension terms, Tenant must obtain all necessary permits and comply with all current regulations as defined by CDFA. Tenant shall not use, or permit to be used, any part of the Property for any purpose other than the Permitted Use. All operations directly or indirectly related to the Permitted Use shall be performed in accordance with all then-applicable laws including the Permit and the best course of farming practiced in the vicinity. If

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 4 of 21 ends

Tenant fails to so perform or uses the Property for a use other than the Permitted Use, City may provide Tenant with a 10-days’ written notice of such failure. If Tenant does not take satisfactory remedial measures within that 10-day-period, then City may take necessary remedial measures, at the expense of Tenant, for which Tenant agrees to reimburse City on demand.
b. Tenant acknowledges and agrees that the Permit, which was issued in 2000, outlines the requirements for the proper use and application of the undisinfected secondary effluent produced by the treatment train from the WWTP. Because of the onset of the 2022 3
rd Earthen Tank Emergency, the Permit will need to be
updated or renewed through equal cooperation between the Tenant and City. The Tenant and City will work together in good faith, while bearing their own costs to complete the task before the California Regional Water Quality Board (“RWQCB”) in the most efficient manner possible. Tenant further acknowledges and agrees that, before Tenant can commence farming industrial hemp on the Property, Tenant must update or renew the Permit, as required by RWQCB, to state that the Property will accept all of the effluent generated by the WWTP, which is estimated to be approximately 1.3 million gallons per day or 475 million gallons per year (1,456 acre feet).
c. Tenant has engaged Waterworks Technology, Inc. (“Waterworks”) as a subcontractor to assist Tenant with the management of the Treated Water from the WWTP. Tenant shall be solely responsible for managing Waterworks, and making sure that Waterworks complies with all requirements of this Lease and the Permit, as may be amended, including providing proof to the City that Waterworks carries the same types and amounts of required insurance as Tenant is required to carry. d. Tenant will not permit any noxious weeds to go to seed on the Property, and all seed planted thereon shall be free from morning glory and other noxious weed seeds. City reserves the right to go onto the Property, at any time, for the purpose of inspecting same and treating any morning glory or other noxious weeds which may be growing thereon. Whenever Tenant removes crops from the Property, or the Additional Premises, Tenant agrees to plow, disk, or otherwise cultivate the land where such crops have been removed so that no weeds grow thereon. e. Tenant shall, at Tenant’s sole cost and expense, properly comply with any and all laws, ordinances, rules, regulations, requirements, and orders including the Permit, present or future, of the federal, State of California, County of Kern, or City’s government which may in any way apply to the Permitted Use, maintenance of, occupation of, or operations on the Property, the production of crops thereon, or the sale or other disposition of such crops.
f. Tenant shall not release, discharge, dispose of, or spill any toxic or hazardous substance, waste, or materials on the Property, except that Tenant may apply pesticides, herbicides, and fungicides as usually used in farming operations in accordance with industry standards and any and all regulations pertaining to the use

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 5 of 21 ends

thereof; provided, however, that Tenant agrees not to use pesticides, herbicides, or fungicides that will have residual effect beyond the Lease Term, without the prior written consent of City.
g. Tenant acknowledges that it shall have the right and duty as provided herein to take up to two (2) mgd of effluent from the WWTP for and during the term of this Lease.

Tenant shall obtain the written consent from Landlord to dispose of effluent in a manner other than as herein provided. City agrees that Tenant may have, and Tenant agrees and covenants to take, for and during the Term all effluent from the WWTP at all times of the year and Tenant agrees to use the same in such a way as to be in compliance with all applicable laws, rules or regulations. h. Tenant shall be responsible for repair of all irrigation facilities, including but not limited to pipelines, valves, standpipes, and tail water reservoir and fences on the Property solely caused by Tenant's acts or negligence. City shall be responsible for any repairs due to age, deterioration, flood damage, vandalism, etc. City agrees to cooperate with Tenant in such matters that will arise so far as it is practicable. City shall be solely responsible for all the maintenance of the pipelines, valves, standpipes and pumps not located on the Property, but used to convey effluent to the Property. Tenant agrees to cooperate with City in such matters that will arise so far as it is practicable. City shall offset those amounts due to City from Tenant for all costs and expenses related to repair of irrigation facilities due to age, deterioration, flood damage, vandalism, etc., after receipt and approval of an invoice describing the cost and expense.
i. City shall be responsible for the cost of the electrical power necessary to operate the irrigation pump(s) and tail water pump located on the Property. j. City shall maintain and keep in good repair a water well on the Property for use by Tenant.

6. Regulatory Agency Requirements. Tenant shall obtain any required written approval from the Kem County Health Department and California Regional Water Quality Control Board of cropping plans for any and all portions of the Property irrigated with treated effluent. City shall be responsible for ensuring that the effluent delivered to the Property meets any and all regulatory requirements and the disposal of effluent on the Property is compliant with all Waste Discharge Requirements and other regulatory strictures. Tenant shall be responsible for lawfully utilizing and disposing of all treated effluent received, within the boundaries of the Property and, in its discretion, on nearby property leased by Tenant and in compliance with any and all Waste Discharge Requirements. Tenant shall comply with all applicable requirements of the California Regional Water Quality Control Board for wastewater reclamation in the operations on the Property. Tenant shall provide a setback as specified in the Waste Discharge Requirements from any traffic lane of a dedicated public road or highway for any effluent storage reservoirs which are constructed within the Property.

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 6 of 21 ends

Tenant agrees to defend, indemnify and hold harmless City, and each of its officers, directors, employees, agents and attorneys (collectively, the “Indemnitees”) from and against any and all obligations (including removal and remedial actions), losses, claims (including third party claims), suits, judgments, liabilities, penalties, damages (including consequential and punitive damages), costs and expenses (including attorneys’ fees and expenses) of whatever kind or nature whatsoever that may at any time be incurred by, imposed on, or asserted against the Indemnitees directly or indirectly based on, or arising or resulting from (i) the actual or alleged presence of Hazardous Substances or Materials at, on or beneath the Property, or (ii) any environmental claim relating in any way to the alleged presence of Hazardous Substances or Materials at, on or beneath the Property; provided, that this indemnification shall only apply to Hazardous Substances or Materials resulting from Tenant’s actions or omissions. For the purpose of this Agreement, “Hazardous Materials” or “Hazardous Substances” shall include, but not be limited to, substances defined as “extremely hazardous substances,” “hazardous substances,” “hazardous materials,” “hazardous waste,” or “toxic substances” in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C.

Sections 11001-11050; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq.; the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901 et seq.; and those substances defined as “hazardous waste” in Section 25117 of the California Health and Safety Code, as “infectious waste” in Section 25117.5 of the California Health and Safety Code, or as “hazardous substances” in Section 25316 of the California Health and Safety Code or “hazardous materials” as defined in Section 353 of the California Vehicle Code; and in the regulations adopted and publications promulgated pursuant to said laws.

The parties acknowledge that portions of the Property receives treated water from the City’s WWTP (“Treated Water”). Tenant acknowledges and is aware that a material aspect of this Agreement is the usage of 100% of this Treated Water for the growth of crops, and shall accept and use for the irrigation of the Property 100% of the Treated Water. Tenants understands that, because of the use of the Treated Water, those crops that receive Treated Water may not be grown for human consumption. Tenant shall at all times comply with Permit, as it may be amended to authorize Tenant’s use of the Treated Water. Tenant’s failure to: modify the Permit as required by RWQCB for the Permitted Use to occur, to grow crops on the Property, to contain the Treated Water on the Property, and the Additional Premises, utilize 100% of the Treated Water, or to comply with the Permit, or any combination thereof, will constitute a material breach of this Agreement.

City shall provide Tenant with 100% of all Treated Water for the Permitted Use as such Treated Water is available.

7. Taxes. Tenant acknowledges that although the City is a municipal entity exempt from real property taxes, Tenant’s possessory interest under this Lease may be subject to real property taxation. Tenant shall be solely liable for the payment ofsuch taxes, if any. Tenant shall pay, when due, real property and any other taxes and general and special assessments of every description which, during the term of this Lease, may be levied upon or assessed against the Property and all interest therein (possessory or otherwise). Tenant shall also

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 7 of 21 ends

pay all licenses or permit fees necessary or required by law for the conduct of Tenant's operation.

8. Rent.
a. Base Rent. Tenant agrees to pay a base rent flat fee of $100 per acre for a total of Twenty-Four Thousand Seven Hundred Dollars ($24,700.00), per year to City as rent for the use and occupancy of the Property originally leased by Apothio. Tenant also agrees to pay a base flat fee of $100 per acre for a total of Seven Thousand Five Hundred Dollars ($7,500.00), per year to the City as rent for the use and occupancy of the Additional Premises. The RWQCB requires a Permit or amended Permit to be issued for the Additional Property to accept or have Treated Water applied to it. Both City and Tenant therefore acknowledge and agree that, although the Additional Property is currently being used for farming purposes, the State Water Board must approve the use of this real estate for application of secondary effluent and growing of said animal and/or fiber crops for Tenant’s continued use of the Additional Property for the Permitted Use. Both the City and Tenant acknowledge that the State is aware that Tenant is currently, or will be in the near future, planting, growing, harvesting, or processing of annual legally marketable crops on the Additional Property as such facts were part of the City of Arvin’s overall sustainable wastewater treatment, bioremediation of water and energy production plan submitted to the State of California Waterboard in April 2023. b. Income Sharing. In addition to base rent, at or shortly after each calendar yearend, Tenant will also make an income sharing payment to the City in an amount equal to 25% of the net income derived from the growth processing, manufacturing and sale of all crops farmed on the Property and the Additional Premises, including, but not limited to, alfalfa, three way grass, or industrial hemp, as applicable, and all of its byproducts from the Property in the preceding year. c. Charitable Contribution. At the end of each calendar year, Tenant shall also donate to the Noah’s Arch Foundation, a 501(c)(3) non-profit (www.noahsarchfountaion.com) (“NAF”) an additional 25% of the net income derived from the growth, processing, manufacturing, and sale of all crops farmed on the Property and the Additional Premises, including, but not limited to, alfalfa, three way grass, or industrial hemp, as applicable, and all of its byproducts from the Property in the preceding year. This donation shall be earmarked for programs for the benefit of economic and workforce development programs, including training programs and facilities, to benefit residents of the City and/or for use in the Kern Community College District Promise Scholarship Programs or similar educational programs available to benefit residents of the City. d. Carbon Credits. Any payments or credits which pay farmers for carbon sequestration or otherwise related to the use of the Property for the Permitted Use will be treated as income to Tenant, such that the payments or credits shall be deemed income to Tenant from the Permitted Use, accruing to the benefit of the

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 8 of 21 ends

City and beneficiaries of the NAF through the income-sharing and charitable contribution commitments noted above.
e. Total Rent. The Base Rent, Income, Income Sharing, Charitable Contribution, and Carbon Credits are all collectively referred to herein as “Total Rent”. Rent shall be paid each year, post-harvest, but no later than January 15th each year and shall be provided to the City at 200 Campus Drive, Arvin, CA 93203 while this Lease is in effect. If the Rent is not paid when due, and City elects not to terminate the Lease, Tenant agrees to pay interest on the amount of unpaid rent at the rate of 7% per annum from the due date until paid.

If Tenant continues to occupy the Property after the effective date of the notice of termination described in Section 24 of this Agreement, then Rent shall immediately be equal to two hundred percent (200%) of the otherwise normally applicable Rent.

Nothing in this Paragraph shall preclude the City from any of its remedies including ejecting Tenant for holding over or terminating the Lease for failure by the Tenant to timely Rent.

9. Entry by City. Tenant shall allow City, and City’s agents and assigns, at all reasonable times, to enter the Property for the purposes of inspection, ascertaining compliance with the terms of this Lease, exercise of City’s rights under this Lease, to survey and complete studies associated with City’s future use of the Property, and for all other lawful purposes.

City shall use reasonable caution in entering the Property for such purposes in order to avoid causing damage to Tenant’s crops.

10. Condition of Property. By execution of this Lease, Tenant accepts the Property in its asis present condition, and agrees, on the last day of the term or on sooner termination of this Lease, to surrender the Property to City in the same condition as when received, reasonable use and wear caused beyond the Tenants control excepted, and to promptly remove all of Tenant's personal property from the Property except for additional improvements or alterations which have been approved by City and installed by Tenant or that are attached to the Property. If the City wants to reserve the right to require Tenant to remove any such additional improvements upon the expiration or earlier termination of this Lease, the City must reserve such right in its notice of approval of the improvements. If Tenant is required to remove any improvements from the Property upon termination of this Lease, Tenant shall do so at Tenant’s sole cost and expense, and Tenant will repair any damage to the Property caused by such removal. Tenant shall at all times, and at Tenant’s sole cost and expense, keep, maintain and repair the Property (including the irrigation system) in good order, condition, and repair.

11. Disclaimer of Warranty - Soil Suitability and Treated Water. City makes no warranty of the soil’s suitability for growing the crops Tenant is authorized to grow under this Lease.

Tenant represents Tenant has made an independent inspection of the Property and is not relying upon any representation or warranty from City as to such condition. . City makes no representation as to water quality and quantity of the Treated Water. Tenant acknowledges there may be sales restrictions, regulations, or other requirements governing crops grown with Treated Water, and agrees Tenant is solely responsible for determining

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 9 of 21 ends

what regulations apply and what crops may be appropriate for irrigation with Treated Water. Tenant waives all claims against City regarding the use, quality and quantity of Treated Water and acknowledges and agrees that the crop grown on the Property cannot be used for human consumption.

12. Operating Costs. All costs incurred by Tenant directly or indirectly connected to the Permitted Use, including, but not limited to, costs of tools, labor, materials, water, electricity, and other utilities shall be the sole responsibility and borne and paid by Tenant.

13. Release and Hold Harmless.
a. Tenant, as a material part of the consideration of this Lease, on its behalf and on behalf of Waterworks, hereby waives all claims against the Indemnitees for damages arising out of, in whole or in part, from Tenant and Waterworks’ operations upon, of and/or concerning the Property and the Permit. Tenant also agrees to indemnify, defend and hold harmless the Indemnitees from and against all claims, liability, loss, damage, costs or expenses (including reasonable attorney’s fees and court costs) (“Damages”) arising from or as a result of the death of any person or any accident, injury, loss or damage whatsoever caused to any person or to the property of any person which shall occur on or adjacent to the Property, or otherwise in connection with this Lease or the Permit; provided, that Tenant’s obligation to indemnify and hold harmless shall only be to the extent Tenant and/or Waterworks was, or is alleged to have been, a direct or indirect cause of the Damages. Tenant shall be responsible for any loss of or damage to pumps, fencing, access roads, storage ponds, irrigation head ditch, turnouts, tailwater ditch, tailwater pond, supplemental irrigation ditch and ground water monitoring wells and protective features.
b. Tenant agrees to keep City free from all liability and claim for damages arising from any injury from any cause to any person, including officers, employees, and agents of Tenant and/or Waterworks, or to property of any kind belonging to anyone, including Tenant and/or Waterworks, arising from Tenant and /or Waterworks’ operations while in, upon, or in any way connected with the Permit and the Property, including the flooding of public roads or neighboring lands because of improper or inadequate drainage or escaping irrigation waters, during the term or any occupancy under this Agreement.

14. Insurance.
a. Liability Insurance. Tenant shall maintain in good standing liability insurance at least as broad as Insurance Services Offices Commercial General Liability Coverage (occurrence form CG 0001), to protect against loss from liability imposed by law for damages on account of, but not limited to, (1) bodily injury, including death therefrom, suffered or alleged to be suffered by any person or persons whomsoever on or about the Property and the business of the Tenant on the Property, or in connection with the operations thereof, resulting directly or indirectly from any acts or activities of Tenant, or any person acting for Tenant, or

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 10 of 21 ends

under Tenant's control or direction, and also to protect against loss from liability imposed by law for (2) damagesto any property of any person occurring on or about the Property, or in connection with the operation thereof, caused directly or indirectly by or from acts or activities of Tenant, or any person acting for Tenant, or under Tenant's control or direction. Such property damage and bodily injury insurance shall also provide for and protect City against incurring any legal cost in defending claims for alleged loss. Such Commercial General Liability insurance shall be maintained in full force and effect during the term of this Lease in the following amount: Commercial General Liability insurance with limits not lessthan $1,000,000 for each occurrence, combined Single limit for bodily injury and property damage. If a general aggregate limit is used, either the general aggregate limit shall apply separately to this location or the general aggregate limit shall be twice the required occurrence limit. Any deductible or self-insured retention must be declared to and approved by the City, and the City shall be named as an additional insured. At City’s option, City may require Tenant to reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, elected and appointed officials, employees and volunteers, or City may require Tenant to provide a financial guaranty satisfactory to City, guaranteeing payment of losses and related investigations, claims administration, and defense expenses. b. Workers’ Compensation Insurance. Tenant shall maintain in good standing Workers' Compensation insurance issued by a responsible carrier authorized under the laws of the State of California to insure employers against liability for compensation under the workers' compensation laws now or hereafter in force in California or in lieu thereof. Such workers' compensation insurance shall cover all persons employed by Tenant in connection with the Property and shall cover liability within statutory limits for compensation under any such act aforesaid, based upon death or bodily injury claims made by, for or on behalf of any person incurring or suffering injury or death in connection with the Property or the operation thereof by Tenant. Notwithstanding the foregoing, Tenant may, in compliance with the laws of the State of California and in lieu of maintaining such insurance, self-insure for workers' compensation in which event Tenant shall deliver to City evidence that such self-insurance has been approved by the appropriate State authorities.
c. General Requirements. All of the above policies of insurance shall be primary insurance and shall name the City, its elected and appointed officers, employees and agents as additional insureds and any insurance maintained by City or its officers, employees or agents may apply more than, and not contribute with Tenant’s insurance. The insurer is deemed hereof to waive all rights of subrogation and contribution it may have against the City, its officials, officers, employees and agents and their respective insurers. Moreover, the insurance policy must specify that where the primary insured does not satisfy the self-insured retention, any additional insured may satisfy the self-insured retention.

All of said policies of insurance shall provide that said insurance may not be amended or cancelled by the insurer or any party hereto without providing at least thirty (30) days prior

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 11 of 21 ends

written notice to City, or at least ten (10) days prior written notice to City in the case of cancellation for nonpayment. In the event any of said policies of insurance are cancelled, the Tenant shall, prior to the cancellation date, submit new evidence of insurance in conformance with Section 14 to the City.

No occupation, work, or services under this Agreement shall commence until Tenant has provided the City with Certificates of Insurance, additional insured endorsement forms or appropriate insurance binders evidencing the above insurance coverages and said Certificates of Insurance or binders are approved by the City. City reserves the right to inspect complete, certified copies of and endorsements to all required insurance policies at any time. Any failure to comply with the reporting or other provisions of the policies including breaches or warranties shall not affect coverage provided to City.

Tenant agrees that the requirement to provide insurance shall not be construed as limiting in any way the extent to which the Tenant may be held responsible for the payment of damages to any persons or property resulting from the Tenant’s activities or the activities of any person or persons for which the Tenant is otherwise responsible nor shall it limit the Tenant’s indemnification liabilities or obligations as provided in this Agreement.

15. Lease Subject to Existing Rights of Others. This Lease is subject to all existing easements, servitudes, licenses, and rights of way for canals, ditches, levees, roads, highways, telephone, telegraph, and electric power lines, railroads, pipelines, and other purposes, whether or not of record.

16. Quiet Enjoyment. Subject to the City’s rights contained herein, including, but not limited to the inspection rights, the City hereby covenants and agrees that if Tenant pays Rent as herein provided and faithfully performs the terms and conditions on Tenant's part to be kept, observed, and performed, Tenant shall have the quiet enjoyment of the Property during the term hereof, without hindrance or interference from City.

17. Waste. Tenant shall not commit, or permit others to commit, any waste or nuisance upon the Property, or commit or allow any other act thereon that could disturb the quiet enjoyment of City, any other tenant of City, or other persons lawfully upon the Property or upon adjacent or nearby property. Unless otherwise agreed by the Parties, waste shall include removing or damaging otherwise viable long-term crops such as trees, vines and perennials upon expiration or termination of this Lease, damaging or rendering the irrigation system inoperable, etc.

18. Assignment or Subletting. Neither this Lease nor any interest therein shall be assigned, either voluntarily or involuntarily, by Tenant, or by operation of law or otherwise, nor shall the Property, or any part thereof, be subleased by Tenant without the prior written consent of City. Any assignment or subletting without such prior written consent of City shall be void.

19. Liens. Tenant shall nor permit or suffer any liens of any kind to be recorded or filed against the Property for any reason whatsoever and Tenant shall diligently take all steps necessary and proper to immediately remove and discharge any liens which are filed. Tenant shall

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 12 of 21 ends

promptly discharge or remove by bond or otherwise prior to foreclosure thereof any and all mechanics’, materialmen’s and other liens for work or labor done, services performed, materials, appliances, teams or power contributed, used or furnished to be used in or about the Property for or in connection with any operations of Tenant, any alterations, improvements, repairs or additions which Tenant may make or permit or cause to be made, or any work or construction by, for or permitted by Tenant on or about the Property, and to save and hold City and all of the Property and all buildings and improvements thereon tree and harmless of and from any and all such liens and claims of liens and suits or other proceedings pertaining thereto. Tenant covenants and agrees to give City written notice not less than twenty (20) days in advance of the commencement of any construction, alteration, addition, improvement or repair costing in excess of Twenty-Five Thousand Dollars ($25,000) in order that City may post appropriate notices of City’s nonresponsibility.

20. Time of Essence. Time is of the essence in this Lease and each and every provision thereof, and each such provision is hereby made and declared to be a material, necessary, and essential part of this Lease.

21. Governing Law and Venue. This Lease will be construed, interpreted, and enforced pursuant to California law. Venue regarding any matter arising out of this Lease between the parties shall be the County of Kern, Kern Superior Court.

22. Attorneys’ Fees; Limitations of Legal Acts. In any action or proceeding by either party to enforce this Lease or any provision of this Lease, the prevailing party shall be entitled to all costs incurred and to reasonable attorneys’ fees. Except as provided by the preceding sentence, in no event shall the City, or its officers, agents or employees, be liable in damages for any breach or violation of this Lease, it being expressly understood and agreed that Tenant’s sole legal remedy for breach or violation of this Lease by City shall be a legal action in mandamus, specific performance, or other injunctive or declaratory relief to enforce the provisions of this Lease.

23. Relocation Waiver and Compensation for Early Termination by City. Tenant hereby waives any and all compensation that may be due under Title 25, Division I, Chapter 6, Subchapter 1, of the California Code of Regulations relating to relocation assistance.

24. Termination. Tenant may terminate this Lease by giving notice to City at least 180 days prior to January 1
st of the next year. City may terminate the Lease as follows:
a. Abandonment by Tenant. Should Tenant breach this Lease and abandon all or any part of the Property prior to the scheduled expiration of the term of this Lease, City may continue this Lease in effect by not terminating Tenant’s right to possession of the Property, in which event City shall be entitled to enforce all City’s rights and remedies under this Lease including the right to recover the Rent specified in this Lease as it becomes due under this Lease.
b. Termination for breach by Tenant. All covenants and agreements contained in this Lease, including Tenant’s obligation to modify the Permit as required by RWQCB

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 13 of 21 ends

for the Permitted Use to occur, are declared to be conditions to this Lease and to the term hereby demised to Tenant. Should Tenant fail to perform any covenant, condition, or agreement contained in this Lease, except for payment of any Rent or other monetary amount due, and such failure is not cured within 30 days after written notice thereof is served on Tenant, then City may terminate this Lease immediately, and in the event of such termination, Tenant shall have no further rights hereunder and Tenant shall thereupon forthwith remove its personal property from the Property and shall have no further right or claim thereto and City shall immediately thereupon have the right to re-enter and take possession of the Property, subject only to appropriate legal process.
c. Termination for failure to pay Rent. If any payment of Rent is not made as herein provided and such failure to pay is not cured within three (3) days after written notice thereof is served on the Tenant, then City shall have the option to immediately terminate this Lease; and in the event of such termination, Tenant shall have no further right or claim thereto and City shall immediately thereupon have the right to re-enter and take possession of the Property, subject only to appropriate legal process.

25. No Partnership. It is expressly understood and agreed that City does not, in any way or for any purpose by executing this Lease, become a partner of Tenant in the conduct of Tenant's business, or otherwise, or a joint venture or a member of a joint enterprise with Tenant.

26. Covenants Run With Land. The agreements, covenants and conditions in this Lease contained are and shall be deemed to be covenants running with the land and the reversion and shall be binding upon and shall inure to the benefit of City and Tenant and their respective successors and assigns and all subsequent landlords and Tenants respectively hereunder.

All references in this Lease to ''Tenant" or “City/Landlord” shall be deemed to refer to and include successors and assigns of Tenant or City, respectively, without specific mention of such successors or assigns.

27. Holding Over. This Lease shall terminate without further notice upon the expiration of the Term, and any holding over by Tenant after the expiration of the Term shall not constitute a renewal hereof or give Tenant any rights hereunder or in or to the Property, except as otherwise herein provided, it being understood and agreed that this Lease cannot be renewed, extended or in any manner modified except in writing signed by City and Tenant and approved by City's Council.

28. General. If any term or provision of this Lease or any application thereof shall be invalid or unenforceable, then the remainder of this Lease and any other application of such terms or provisions shall not be affected thereby. The captions of this Lease are for convenience of reference only and shall not define or limit any of its terms or provisions. All of the

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 14 of 21 ends

covenants of Tenant hereunder are deemed and construed to be "conditions" as well as "covenants" as though the words specifically expressing or imparting covenants and conditions were used in each separate instance. The relationship created by this lease is one of Landlord/Tenant. This Lease is not intended to create a joint venture relationship or any relationship other than that of Landlord/Tenant.

29. Notices. Any notices, requests, demands, documents, approvals or disapprovals given or sent under this Lease from one Party to another (collectively, “Notices”) may be personally delivered, transmitted by facsimile (“fax”) transmission, email, overnight courier, or deposit with the United States Postal Service for mailing, postage prepaid, to the address of the other Party as stated in this Paragraph. Notices shall be sent as follows:

If to City:

City of Arvin
Attn: City Manager
200 Campus Drive
Arvin, CA 93203
If to Tenant:

Quantum Farms, LLC
Attn: Dr. Trent Jones
_________________________
_________________________
And electronically to:

Dr. Trent Jones, CEO
Each such Notice shall be deemed delivered to the party to whom it is addressed (i) if personally served or delivered, upon delivery, (ii) if given by email, upon the sender's receipt of an appropriate answerback or other written acknowledgement (iii) if given by fax, upon the sender's receipt of an appropriate answerback or other written acknowledgement, (iv) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, (v) if given by overnight courier, with courier charges prepaid, 24 hours after delivery to said overnight courier, or (vi) if given by any other means, upon delivery at the address specified in this Paragraph.

30. Estoppel Certificate. Tenant shall, at any time and from time to time upon not less than twenty (20) days prior notice from the City, execute, acknowledge and deliver to the City a statement in writing certifying that this Lease is unmodified and is in full force and effect, and the dates to which the Rent has been paid, and stating whether or not to its best knowledge the City isin default under this Lease, and, if in default,specifying in reasonable detail each such default, and such other matters as the City may reasonably request, it being intended that any such statement delivered by Tenant may be relied upon by the City or

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 15 of 21 ends

any prospective purchaser of the fee or any prospective mortgagee or encumbrancer thereof. If the City desires to refinance or transfer the Property, Tenant agrees to deliver to the City or any lender or transferee designated by the City such financial information concerning Tenant as may be reasonably required by such lender or transferee and is reasonably available to Tenant. All such financial information shall be received by the City in confidence to the extent allowed by applicable laws.

31. Discrimination and Conflicts of Interest. With regard to the farming operations involving the Property, Tenant agrees it shall not discriminate against any employee or applicant for employment because of race, color, creed, religion, sex, marital status, ancestry or national origin. Tenant also warrants Tenant has not entered and will not enter into any arrangement to pay financial consideration to, and has not made and will not make any payment to, any City official, agent or employee that would create a legally cognizable conflict of interest as defined in the Political Reform Act (California Government Code Sections 87100 et seq.).

32. Recordation. Tenant shall cause a notice of this Lease agreement to be recorded with the Kern County Recorder within 30 days of approval by the parties, and Tenant shall provide all signatures or take any other actions necessary to allow the City to accomplish the same.

Upon termination or expiration of the Lease, Tenant shall promptly cooperate with City to effectuate removal of the notice of the Lease recorded with the Kern County Recorder.

33. Representation by Counsel/Understanding. The parties acknowledge that they have been, or had the opportunity, to be represented by counsel of their choice and have had the opportunity to receive independent legal advice from such counsel with respect to the negotiation and advisability of entering into this Lease. Each of the parties acknowledges that it has fully read and understood this Lease, and is executing this Lease freely, voluntarily, with full knowledge of its significance, and without duress, undue influence or coercion.

34. Non-Applicability of Rule of Construction/Enforceability. Prior to the execution of this Lease, each party reviewed this Lease, made any desired changes, and signed this Lease to indicate the agreement of the parties, and had the opportunity for legal counsel to approve this Lease as to form. The rule of construction that any ambiguities are to be construed against the drafting party shall not be employed in interpreting this Lease. To the extent any provision or term of this Lease is held unenforceable, the remaining terms and provisions shall remain in full force and effect, and enforceable.

35. Entire Agreement. This Lease (together with the exhibits and schedules, if any, referenced herein and appended hereto) constitutes the entire agreement between the City and Tenant with respect to the subject matter hereof and supersedes all prior offers and negotiations, oral or written. This Lease may not be amended or modified in any respect whatsoever except by an instrument in writing signed by the City and Tenant.

36. Counterparts. This Lease may be executed in several counterparts which, when taken together, shall constitute the entire Lease.

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 16 of 21 ends

37. No Third-Party Beneficiaries. The terms of this Lease are for the sole and exclusive protection and use of the Tenant and City. No third-party beneficiary is created by this Lease, and no provision of this Lease shall operate or inure to the use and benefit of any such third party.

38. Authority to Execute Agreement. Each party warrants and represents to each other that the person(s) whose signature appears below their respective name is duly authorized and has full authority to execute this Lease on behalf of the entity appearing above such signatures.
{Signatures on Following Page}

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 17 of 21 ends

IN WITNESS WHEREOF, City and Tenant have entered into this Lease on the day and year first above written.

CITY: City of Arvin and Successor
Agency to Arvin Community
Redevelopment Agency
By:

TENANT: Apothio, LLC, an Indiana limited
liability company, and Quantum Farms, LLC, a
California limited liability corporation
By:

Jeff Jones, City Manager
By: ___________________________________
ATTEST:

By:

APPROVED AS TO FORM
By:

Cecilia Vela, City Clerk Attorney for Tenant

APPROVED AS TO FORM
By:
*Provide notarial acknowledgement for signature
Nathan M. Hodges, City Attorney
Attachments:

Attachment “A” – City of Arvin Agricultural Lease
Attachment “B” – Map of Property

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 18 of 21 ends

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of California )
County of Orange )
On ____________________, before me, ____________________________, a Notary Public, personally appeared _______________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 19 of 21 ends

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

Page 20 of 21 ends

Attachment “A”
Agricultural Lease Agreement between City of Arvin and
Apothio, LLC dated April 1, 2021.

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

5.A.3
Attachment: Exhibit A 2021-08 Apothio Agricultural Lease Agreement_030921_Redacted (Apothio, LLC & Quantum, LLC - First Amend to Ag

5.A.3
Attachment: Exhibit A 2021-08 Apothio Agricultural Lease Agreement_030921_Redacted (Apothio, LLC & Quantum, LLC - First Amend to Ag ©©
22002200GGooooggllee

5.A.3
Attachment: Exhibit A 2021-08 Apothio Agricultural Lease Agreement_030921_Redacted (Apothio, LLC & 01248.0024/699198.2 TJI

Page 13 of 15 ends

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

5.A.3
Attachment: Exhibit A 2021-08 Apothio Agricultural Lease Agreement_030921_Redacted (Apothio, LLC & Quantum, LLC - First Amend to Ag 01248.0024/699198.2 TJI

Page 14 of 15 ends

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature

5.A.3
Attachment: Exhibit A 2021-08 Apothio Agricultural Lease Agreement_030921_Redacted (Apothio, LLC & Quantum, LLC - First Amend to Ag

Page 21 of 21 ends

Attachment “B”
Map of Property Leased

5.A.2
Attachment: Apothio, LLC_Quantum Farms, LLC - First Amendment to Ag Lease Agreement (Apothio, LLC & Quantum, LLC - First Amend to

5.A.4
Attachment: Exhibit B to First Amend to Ag Lease Agmt Apothio and Quantum_Map of Property Leased

Arvin City CouncilJune 27, 2023

Arvin City Council
June 27, 2023