Agenda, closed session, second session — Hillsborough City Council, March 9, 2026 (part 1 of 2)

TOWN OF HILLSBOROUGH
San Mateo County
Sophie Cole, Mayor Town Hall
Leslie Marden Ragsdale, Vice Mayor 1600 Floribunda Avenue Laurie Davies Adams, Councilmember Hillsborough, CA 94010 Marie Chuang, Councilmember www.hillsborough.net
Christine Krolik, Councilmember 650-375-7400

A G E N D A
MONDAY, MARCH 9, 2026
5:00 PM CLOSED SESSION
6:00 PM CITY COUNCIL MEETING
Council Chambers
Meetings of the City Council are held in-person in Council Chambers. As a courtesy and technology permitting, the meeting will also be held virtually via Zoom Video Conference. However, the Town cannot guarantee that the public’s access to the Zoom virtual platform will be uninterrupted, and technical difficulties may occur from time to time. In those instances, so long as the public may still attend the meeting in person, the meeting will continue.

In the event a Councilmember is participating remotely under the alternative teleconferencing provisions in the Brown Act (Government Code Section 54953.8), the Town will stop the meeting if there is any technology disruption consistent with the Brown Act’s requirements.

To attend the meeting in person: 1600 Floribunda Avenue, Hillsborough, CA 94010 To provide Public Comment in person: Members of the public wishing to speak on the agenda item are requested to complete a yellow speaker card and submit it to the City Clerk. Speakers may speak for up to three minutes.

To participate in the meeting via Zoom Video Conference:
• Log in to the meeting at https://us06web.zoom.us/j/89573697578?pwd=blYDlIeBkvQDN8U3ufLUmyPA6DLi5Q.1 • Dial-in via phone:
+1 669 444 9171 US
Meeting ID: 895 7369 7578
Passcode: 317669
To provide Public Comment via Zoom Video Conference: Live verbal public comments may be made by requesting to speak using the “raise hand” feature in Zoom or, if calling in by phone, by pressing *9 on the telephone keypad prior to the close of the public comment period for the item. In response, the Town will unmute the speaker and allow them to speak for up to three minutes.

CLOSED SESSION (5:00 p.m.)

CALL TO ORDER

ROLL CALL

ANNOUNCEMENT OF CONFLICT OF INTEREST ON CLOSED SESSION ITEM(S) This portion of the agenda is for Councilmembers to disclose any conflict of interest related to the item(s) on the Closed Session agenda. Any Councilmember who has confirmed a conflict of interest or has reason to believe they have a conflict of interest should disclose the conflict for the record and abide by the disqualification requirements contained in FPPC regulations.

Agenda – Hillsborough City Council
Monday, March 9, 2026

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PUBLIC ANNOUNCEMENT OF CLOSED SESSION ITEM(S)
A. CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION
Pursuant to Government Code Section 54956.9(d)(1)
Town of Hillsborough v. All Persons Interested in the Matter of the Proceedings for Resolution No. 22-83 Adopting Maximum Rates for Water Service Charges San Mateo Superior Court Case No. 23CIV01028

PUBLIC COMMENT ON CLOSED SESSION ITEM(S)
Members of the public may provide public comments on the item(s) on the Closed Session agenda. Members of the public participating in person are requested to complete a yellow speaker card and submit it to the City Clerk before addressing the City Council. Members of the public participating via the Zoom platform may use the “raise hand” feature or, if calling in by phone, press *9 on the telephone keypad. Speakers are limited to one comment per Closed Session item.

ADJOURN CLOSED SESSION
REGULAR CITY COUNCIL MEETING (6:00 p.m.)
I. CALL TO ORDER
II. ROLL CALL
III. PLEDGE OF ALLEGIANCE
IV. REPORT FROM CLOSED SESSION
V. PRESENTATION
• Update from the Hillsborough Youth Commission
VI. TOWN UPDATE
VII. PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA
This portion of the meeting is reserved for persons wishing to address the City Council on any matter not on the agenda.

Members of the public participating in person are requested to complete a yellow speaker card and submit it to the City Clerk before addressing the City Council. Members of the public may provide comments via the Zoom platform by using the “raise hand” feature or, if calling in by phone, by pressing *9 on the telephone keypad. In response, the Town will unmute the speaker and allow them to speak on any topic for up to three minutes. If there appears to be a large number of speakers, speaking time may be reduced to no less than 2 minutes, at the discretion of the Mayor. Members of the public are limited to one comment at this time. State law prohibits the Council from discussing or acting on non-agenda items, and generally limits the ability of the Council to respond to any public comments made regarding non-agenda items.

VIII. ANNOUNCEMENT OF CONFLICT OF INTEREST
This portion of the agenda is for Councilmembers to disclose any conflict of interest related to any item on the agenda. Any Councilmember who has confirmed a conflict of interest or has reason to believe they have a conflict of interest should disclose the conflict for the record and abide by the disqualification requirements contained in FPPC regulations.

IX. CONSENT CALENDAR
The Consent Calendar includes routine items which generally do not require discussion. A Councilmember may remove an item for discussion, and any member of the public may request a Councilmember to remove an item for discussion. The items are approved in one motion.

Agenda – Hillsborough City Council
Monday, March 9, 2026

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1. Monthly Claims: February 1 through February 28, 2026

2. Resolution Approving and Authorizing the City Manager to Execute a Three-Year Fee Agreement with Eide Bailly LLP for Audit Services, in an Amount Not to Exceed $279,426.00 Excluding Single Audit Fees

3. Resolution Approving and Authorizing the City Manager to Execute a Revised Memorandum of Understanding Between the Town of Hillsborough and the Hillsborough Beautification Foundation

4. Receive February 2026 Legislative Update

5. Approval of Fundraising Event Permit Application 26-01 for the Hillsborough Schools Foundation 2026 Fun Run Under CEQA Guidelines 15378 and 15301

6. Approval of Fundraising Event Permit Application 26-02 for the SolMateo Signature Kitchen Tour Event Under CEQA Guidelines 15378 and 15301

7. Approval of Fundraising Event Permit Application 26-03 for the Hillsborough Beautification Foundation Celebrate May! Event Under CEQA Guidelines 15378 and 15301

8. Resolution Accepting as Complete the Contract with APB General Engineering for the Chateau Drive Sanitary Sewer Rehabilitation & Replacement Project in the Amount of $664,296.00 Under CEQA Guideline 15301

9. Resolution Accepting as Complete the Contract with Gateway Pacific Contractors, Inc. for the Darrell Water Tank Replacement Project in the Amount of $7,187,653.69 Pursuant to a Previously Adopted Mitigated Negative Declaration

10. Resolution Awarding to and Authorizing the City Manager to Execute a Contract with SoCal Pacific Construction Corporation for the Skyfarm 3 Tank No. 2 Interior Recoating Project in the Amount of $350,000.00, with a 20% Contingency in the Amount of $70,000.00, for a Total Cost of $420,000.00, Under CEQA Guideline 15301 X. OLD BUSINESS

11. Accept Sewer Rate Study and Authorize Implementation of the Recommendation

12. Introduction of an Ordinance Amending Chapter 17.52 of the Hillsborough Municipal Code Relating to Accessory Dwelling Units and Junior Accessory Dwelling Units and Finding the Action to be Statutorily Exempt from CEQA Under Public Resources Code Section 21080.17
XI. NEW BUSINESS

13. Acceptance of the 2025 General Plan Annual Progress Report (APR) Agenda – Hillsborough City Council
Monday, March 9, 2026

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XII. DISCUSSION

14. Preliminary Discussion Regarding Crystal Springs Uplands School Proposed Enrollment Increase

15. Discussion of Proposed Changes to Home-Based Business Regulations XIII. CITY COUNCIL ITEMS
This section of the agenda provides the City Council an opportunity to report their participation in activities related to any intergovernmental committee assignments.

XIV. ADJOURNMENT
SPECIAL ACCOMMODATIONS:

If you need a disability-related modification or accommodation, including auxiliary aids or services, to participate in the City Council meeting, or if you need an agenda in an alternate form, please contact the City Clerk’s Office at 375-7412 at least 24 hours before the scheduled City Council meeting.

ADDRESSING THE CITY COUNCIL:

Members of the public may provide written comments to the City Council regarding any item on the agenda up to two hours before the meeting to [email protected] or by mail/in person at 1600 Floribunda Avenue, Hillsborough, CA 94010. Any writings or documents provided to a majority of the City Council regarding any item on this agenda prior to the deadline, except as exempt from public disclosure under applicable law, will be available for public inspection on the Town website, and in the City Clerk’s Office at 1600 Floribunda Avenue, Hillsborough, CA 94010, during regular business hours. All oral comments made at public meetings, including a speaker’s name, are recorded and included as part of the public record in the meeting minutes. Meeting minutes are publicly accessible via the Town website and via various internet search engines. Written comments, including a commenter’s name, are a public record and subject to disclosure on the Town website and/or upon request under the California Public Records Act (with personal contact information including personal email addresses and personal phone numbers redacted).

AUDIO / VISUAL ADVISORY:

Those persons who wish to use PowerPoint or other mediums when presenting to the City Council will be required to submit media items to the City Clerk by 12:00 p.m. on the day of the meeting. Media items can be emailed to [email protected].

AUDIO OR VIDEO RECORDINGS:

Please be advised that under the Brown Act, any person has the right to record the City Council meeting, including the audience in attendance, using an audio or video recording device subject to certain exceptions. Please be aware that by attending a City Council meeting, you may be audio or video recorded.

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
1 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Monthly Claims: February 1 through February 28, 2026 SUMMARY: The monthly claims for the month of February 2026 in the amount of $6,040,521.63 are submitted for approval.

FISCAL IMPACT: Claims have been expended pursuant to the approved budget.

ENVIRONMENTAL ISSUES: The proposed action is exempt from environmental review pursuant to the California Environmental Quality Act (CEQA) Guidelines sections 15378(b)(2) and 15378(b)(5) as ongoing administrative or organizational activities that will not result in direct or indirect physical changes in the environment.

ATTACHMENT(S): Monthly Claims Listing
PREPARED BY: Rich Santiago, Assistant Finance Director
RECOMMENDATION: Approve the monthly claims for February 2026 as submitted. -1-
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
2 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Resolution Approving and Authorizing the City Manager to Execute a Three-Year Fee Agreement with Eide Bailly LLP for Audit Services, in an Amount Not to Exceed $279,426.00 Excluding Single Audit Fees
SUMMARY: The Town is required to have an independent audit of its financial statements and internal controls on an annual basis. The annual audit results are reviewed by the Financial Advisory Committee and are included for review by the City Council at a public meeting each December. Under Section 12410.6 (b) of the California Government Code, the Town must either change audit firms every six years or continue utilizing the services of a qualified audit firm, provided that a new lead partner with primary responsibility for the audit be appointed. The first rotation occurred with the existing audit firm, Eide Bailly, for June 30, 2023 financial statements, and thus, rotation is not required for an additional six years. Town staff requested a three-year fee letter for the June 30, 2026 through June 30, 2028 audit and the amount requires City Council approval based on the Town’s Purchasing Policy. Under the Town’s Purchasing Policy, services in an amount over $75,000.00 are required to be procured through a Request for Proposals (RFP) process. In lieu of the RFP process, staff recommends that this work be awarded to the current audit firm as it allows for greater efficiency, and continuing with the audit firm is allowable under the Government Code cited above. It has been held that competitive bidding is not applicable when competitive proposals work an incongruity and are unavailing as affecting the final result, or where competitive proposals do not produce any advantage. (See Graydon v. Pasadena Redevelopment Agency (1980) 104 Cal.App.3d 631.) On this basis, staff recommends contracting with the audit firm of Eide Bailly for the June 30, 2026 through June 30, 2028 audit. Eide Bailly’s combination of local government focus and prior experience with the Town will continue to serve it well in its annual audit and will ensure cost is kept to a minimum based on the consultant’s prior knowledge and experience working with the Town.

FISCAL IMPACT: The estimated fee for the work for FY 2025-26 is $90,520.00; for FY 2026-27 is $93,116.00 and for FY 2027-28 is $95,790.00. These fees exclude Federal Single Audit. The General Fund FY 2026-27 budget will include the initial year fee estimate in the proposed budget for adoption. The following two fiscal years of the agreement show an annual increase of 3%.

ATTACHMENT(S):

1. Resolution

2. Statement of Work
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Agenda Staff Report – Hillsborough City Council
March 9, 2026

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PREPARED BY: Rich Santiago, Assistant Finance Director
RECOMMENDATION: Adopt a resolution approving and authorizing the City Manager to execute a three-year fee agreement with Eide Bailly LLP for audit services, in an amount not to exceed $279,426.00 excluding single audit fees.
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RESOLUTION NO. 26-

RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF HILLSBOROUGH APPROVING AND AUTHORIZING THE CITY MANAGER TO EXECUTE A THREEYEAR FEE AGREEMENT WITH EIDE BAILLY LLP FOR AUDIT SERVICES, IN AN AMOUNT NOT TO EXCEED $279,426.00 EXCLUDING SINGLE AUDIT FEES WHEREAS, the Town of Hillsborough (“Town”) has a financial audit conducted by an external independent audit firm each year; and
WHEREAS, under the Town’s Purchasing Policy, services in an amount over $75,000.00 are required to be procured through a Request for Proposals or RFP process; and
WHEREAS, in lieu of the RFP process, the staff recommends that this work be awarded to the current audit firm as it allows for greater cost efficiency; and
WHEREAS, it has been held that competitive bidding is not applicable when competitive proposals work an incongruity and are unavailing as affecting the final result, or where competitive proposals do not produce any advantage. See, Graydon v. Pasadena Redevelopment Agency (1980) 104 Cal.App.3d 631; and
WHEREAS, on this basis, staff recommends contracting with the audit firm of Eide Bailly for the June 30, 2026 through June 30, 2028 audits as Eide Bailly’s combination of local government focus and prior experience with the Town will continue to serve it well in its annual audit and will ensure cost is kept to a minimum based on the consultant’s prior knowledge and experience working with the Town.

NOW THEREFORE, BE IT RESOLVED that the City Council of the Town of Hillsborough hereby approves and authorizes the City Manager to execute a fee agreement with Eide Bailly LLP for audit services in an amount not to exceed $279,426.00, excluding single audit fees.
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Mayor of the Town of Hillsborough
Attest: City Clerk
This resolution was adopted by the City Council of the Town of Hillsborough at its regular meeting held on the 9th day of March 2026, by the following vote of the members thereof:
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ATTACHMENT 1
Resolution No. 26-
March 9, 2026
2 AYES: Councilmembers
NOES: Councilmembers
ABSENT: Councilmembers
ABSTAIN: Councilmembers
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Statement of Work – Audit Government General – No Single Audit (February 2026)
February 24, 2026 Client#205780
Jan Cooke
Town of Hillsborough
1600 Floribunda Ave
Hillsborough, CA 94010
This document constitutes a statement of work ("SOW") under the most recently executed Master Services Agreement ("MSA"), made by and between Eide Bailly LLP ("Eide Bailly”, "we," "us," and "our") and Town of Hillsborough (“Town”, “Client,” "you," "your," or "the entity"). We are pleased to confirm our understanding of the terms and objectives of our engagement and the nature and limitations of the services Eide Bailly will provide for the entity as of and for the year ended June 30, 2026.

Ahmad Gharaibeh is the engagement partner for the audit services specified in this letter. The engagement partner’s responsibilities include supervising services performed as part of this engagement and signing or authorizing another qualified firm representative to sign the audit report.

Scope of Audit Services
We will audit the financial statements of governmental activities, business-type activities, each major fund, and the aggregate remaining fund information, and the related notes to the financial statements, which collectively comprise the entity’s basic financial statements.

The Governmental Accounting Standards Board (GASB) provides for certain required supplementary information (RSI) to accompany the entity's basic financial statements. The RSI will be subjected to certain limited procedures, but will not be audited.

If presented, we will also evaluate and report on the presentation of supplementary information other than RSI accompanying the financial statements in relation to the financial statements as a whole.

Also, the document we submit to you will include the following other additional information that will not be subjected to the auditing procedures applied in our audit of the basic financial statements:
• Introductory section
• Statistical section
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ATTACHMENT 2
Audit Objectives
The objectives of our audit are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors' report that includes our opinion about whether your financial statements are fairly presented, in all material respects, in conformity with accounting principles generally accepted in the United States of America (U.S.

GAAP). Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with auditing standards generally accepted in the United States of America (GAAS) and in accordance with Government Auditing Standards, and/or state or regulatory audit requirements, will always detect a material misstatement when it exists. Misstatements, including omissions, can arise from fraud or error and are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that certain information be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board (GASB), who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. As part of our engagement, we will apply certain limited procedures to the required supplementary information (RSI) in accordance with auditing standards generally accepted in the United States of America. We will not express an opinion or provide any form of assurance on the RSI.

Supplementary Information other than RSI
Supplementary information other than RSI will accompany Town’s basic financial statements. We will subject the following supplementary information to the auditing procedures applied in our audit of the basic financial statements and certain additional procedures, including comparing and reconciling the supplementary information to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and additional procedures in accordance with auditing standards generally accepted in the United States of America. We intend to provide an opinion on the following supplementary information in relation to the basic financial statements as a whole:
• Combining Statements and Individual Fund Schedules
• Budgetary Comparison Schedules for Non-Major Funds and capital project funds • Capital Assets Used in the Operation of Governmental Funds Auditor Responsibilities, Procedures, and Limitations
We will conduct our audit in accordance with GAAS and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America and/or any state or regulatory audit requirements. Those standards require that we exercise professional judgment and maintain professional skepticism throughout the planning and performance of the audit. As part of our audit, we will:
• Identify and assessthe risks of material misstatement of the financialstatements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
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• Obtain an understanding of the system of internal control in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. However, we will communicate to you in writing concerning any significant deficiencies or material weaknesses in internal control relevant to the audit of the financial statements that we have identified during the audit.
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements, including the amounts and disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. • Conclude, based on the audit evidence obtained, whetherthere are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time.

There is an unavoidable risk, because of the inherent limitations of an audit, together with the inherent limitations of internal control, that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with U.S. GAAS and, if applicable, Government Auditing Standards of the Comptroller General of the United States of America, and/or in accordance with any state or regulatory audit requirements. Because we will not perform a detailed examination of all transactions, material misstatements, whether from (1) errors, (2) fraudulent financial reporting, (3) misappropriation of assets, or (4) violations of laws or governmental regulations that are attributable to the entity or to acts by management or employees acting on behalf of the entity, may not be detected.

In addition, an audit is not designed to detect immaterial misstatements or violations of laws or governmental regulations that do not have a direct and material effect on the financial statements. However, we will inform the appropriate level of management and those charged with governance of any material errors, fraudulent financial reporting, or misappropriation of assets that come to our attention. We will also inform the appropriate level of management and those charged with governance of any violations of laws or governmental regulations that come to our attention, unless clearly inconsequential.

Ourresponsibility as auditors is limited to the period covered by our audit and does not extend to any later periods for which we are not engaged as auditors.

Compliance with Laws and Regulations
As previously discussed, as part of obtaining reasonable assurance about whether the basic financial statements are free of material misstatement, we will perform tests of your compliance with the provisions of applicable laws, regulations, contracts, and agreements. However, the objective of our audit will not be to provide an opinion on overall compliance and we will not express such an opinion.

Management Responsibilities
Our audit will be conducted on the basis that management and, when appropriate, those charged with governance, acknowledge and understand that they have responsibility:
a. For the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; b. For the design, implementation, and maintenance of the system of internal control relevant to the preparation and fair presentation of basic financial statements that are free from material -14-
misstatement, whether due to error fraudulent financial reporting, misappropriation of assets, or violations of laws, governmental regulations, grant agreements, or contractual agreements; c. To provide us with:
i. Access to all information of which management is aware that is relevant to the preparation and fair presentation of the financial statements, including the disclosures, such as records, documentation, and other matters;
ii. Additional information that we may request from management for the purpose of the audit; iii. Unrestricted access to persons within the entity and others from whom we determine it necessary to obtain audit evidence;
d. For identifying and ensuring that the entity complies with the laws and regulations applicable to its activities;
e. For adjusting the basic financial statements to correct material misstatements and confirming to us in the management representation letter that the effects of any uncorrected misstatements aggregated by us during the current engagement and pertaining to the current period under audit are immaterial, both individually and in the aggregate, to the financial statements as a whole; f. For acceptance of nonattest services, including identifying the proper party to oversee nonattest work; g. For maintaining adequate records, selecting and applying accounting principles, and safeguarding assets. h. For informing us of any known or suspected fraud affecting the entity involving management, employees with significant role in the system of internal control and others where fraud could have a material effect on the financials; and
i. For the accuracy and completeness of all information provided. j. If applicable, for including the auditor’s report in any document containing financial statements that indicates that such financial statements have been audited by us, including:
i. A written acknowledgement of all the documents that management expects to issue that will be included in the annual report and the planned timing and method of issuance of that annual report; and
ii. A final version of the annual report (including all the documents that, together, comprise the annual report) in a timely manner prior to the date of the auditor’s report.

With regard to the supplementary information referred to above, you acknowledge and understand your responsibility: (a) for the preparation of the supplementary information in accordance with the applicable criteria; (b) to provide us with the appropriate written representations regarding supplementary information; (c) to include our report on the supplementary information in any document that contains the supplementary information and that indicates that we have reported on such supplementary information; and (d) to present the supplementary information with the audited basic financial statements, or if the supplementary information will not be presented with the audited basic financial statements, to make the audited basic financial statements readily available to the intended users of the supplementary information no later than the date of issuance by you of the supplementary information and our report thereon.

Management agrees they are responsible for the distribution of reports issued in conjunction with this engagement to those charged with governance, entity officials, oversight bodies, or other organizations requiring audits, as applicable.

As part of our audit process, we will request from management and, when appropriate, those charged with governance, written confirmation concerning representations made to us in connection with the audit.

Responsibilities and Limitations Related to Nonattest Services For all nonattest services we may provide to you, management agrees to assume all management responsibilities for (a) making all management decisions and performing all management functions; (b) assigning a competent individual to oversee the services; (c) evaluating the adequacy of the services performed; -15-
(d) evaluating and accepting responsibility for the results of the services performed; and (e) designing, implementing, and maintaining the system of internal control, including the process used to monitor the system of internal control.

We will provide the following nonattest services:
• Prepare or assist with the preparation of your financial statements and the related notes • Propose journal entries to be reviewed and approved by management (i.e. Government-Wide conversion entries)
• Preparation of the California State Controller’s Financial Transactions Report • Assist in calculating the proportionate share of the net pension liabilities, if requested • Assist in the calculations of subscription-based information technology arrangement or lease amounts reported on the financial statements, if requested
• Assist in calculating bond accretion liability, if requested Our responsibilities and limitations of the nonattest services are as follows:
• We will perform the services in accordance with applicable professional standards. • The nonattest services are limited to the services previously outlined above. Our firm, in its sole professional judgment, reserves the right to refuse to do any procedure or take any action that could be construed as making management decisions or assuming management responsibilities.

You are also responsible for ensuring that your data and records are complete and that you have received sufficient information to oversee the services.

Reporting
We will issue a written report upon completion of our audit of your financial statements. Circumstances may arise in which our report may differ from its expected form and content based on the results of our audit.

Depending on the nature of these circumstances, it may be necessary for us to modify our opinion, add an emphasis-of-matter or other-matter paragraph to our auditors' report, or if necessary, withdraw from the engagement. If our opinion is otherthan unmodified, we will discussthe reasons with you in advance. If circumstances occurrelated to the condition of yourrecords, the availability ofsufficient, appropriate audit evidence, or the existence of a significant risk of material misstatement of the financial statements caused by error, fraudulent financial reporting, or misappropriation of assets, which in our professional judgment prevent us from completing the audit or forming an opinion on the financial statements, we retain the right to take any course of action permitted by professional standards, including declining to express an opinion or issue a report, or withdrawing from the engagement.

In accordance with the requirements of Government Auditing Standards, we will also issue a written report describing the scope of our testing over internal control over financial reporting and over compliance with laws, regulations, and provisions of grants and contracts, including the results of that testing. However, providing an opinion on internal control and compliance over financial reporting will not be an objective of the audit and, therefore, no such opinion will be expressed.

Engagement Administration and Other Matters
We understand that your employees will prepare all confirmations, account analyses, and audit schedules we request and will locate any documents or invoices selected by us for testing. Details of information we expect to need for our audit and the dates required will be provided separately.

You agree to share all facts that may affect your financial statements, even if you first become aware of those facts after the date of the auditor’s report but before the date your financial statements are issued. -16-
Government Auditing Standards require that we provide, upon request, a copy of our most recent external peer review report and any subsequent review reports to the party contracting for the audit. Accordingly, we will provide a copy of our most recent peer review report at your request.

Eide Bailly LLP has owners that are not licensed as certified public accountants as permitted under Section 5079 of the California Business Code. The nature of the services to be provided in conjunction with this engagement are such that non-licensee owners may be involved in performing our services.

Engagement Fees
Our fees are based on the amount of time required at various levels of responsibility. We estimate that our fee for the audit will be as noted below, plus actual out-of-pocket expenses and administrative charges. All bills are payable upon receipt. A service charge of 1% per month, which is an annual rate of 12%, will be added to all accounts unpaid 30 days after billing date
The ability to perform and complete our engagement consistent with the estimated fee included above depends upon the quality of your underlying accounting records and the timeliness of your personnel in providing information and responding to our requests. To assist with this process, we will provide you with an itemized request list that identifies the information you will need to prepare and provide in preparation for our engagement, as well as the requested delivery date for those items. A lack of preparation, including not providing this information in an accurate and timely manner, unanticipated audit adjustments, and/or untimely assistance by your personnel may result in an increase in our fees and/or a delay in the completion of our engagement.

We will advise you if unexpected circumstances require significant additional procedures resulting in a substantial increase in the fee estimate.

Changes in Professional Standards
Standard setters and regulators continue to evaluate and modify standards. Such changes may result in new or revised financial reporting and disclosure requirements or expand the nature, timing, and scope of the activities we are required to perform. To the extent that the amount of time required to provide the services described in the Statement of Work increases due to such changes, our fee may need to be adjusted. We will discuss such circumstances with you prior to performing the additional work.

Use of Financial Statements
Should you decide to include or incorporate by reference these financial statements and our auditors' report thereon in a future private placement or other offering of equity or debt securities, you agree that we are under no obligation to reissue our report or provide consent for the use of our report in such a registration or offering document. We will determine, at our sole discretion, whether we will reissue our report or provide consent forthe use of our report only after we have performed the procedures we consider -17-
necessary in the circumstances. If we decide to reissue our report or consent to the use of our report, we will be required to perform certain procedures including, but not limited to, (a) reading other information incorporated by reference in the registration statement or other offering document, and (b) subsequent event procedures. These procedures will be considered an engagementseparate and distinct from our audit engagement, and we will bill you separately. If we decide to reissue our report or consent to the use of our report, you agree that we will be included on each distribution of draft offering materials, and we will receive a complete set of final documents.

If we decide not to reissue our report or decide to withhold our consent to the use of our report, you may be required to engage another firm to audit periods covered by our audit reports, and that firm will likely bill you for its services. While the successor auditor may request access to our workpapersfor those periods, we are under no obligation to permitsuch access.

Termination
The engagement contemplated by this SOW shall terminate upon the earlier of completion of the services described herein or as described in the MSA.

Agreement
We appreciate the opportunity to provide the services described in this SOW under the MSA. This SOW and the MSA constitute the entire agreement regarding these services and supersedes all prior agreements (whether oral or written), understandings, negotiations, and discussions between you and Eide Bailly related to audit services. Please sign, date, and return this SOW to us to indicate your acknowledgment and understanding of, and agreement with, the arrangements for our audit of your financial statements including the terms of our engagement and the parties' respective responsibilities. By signing this Statement of Work, you represent and warrant that you are authorized to sign on behalf of and bind each client and any affiliate identified herein.

Sincerely,
Eide Bailly LLP
AGREED TO AND ACCEPTED:

Name: _______________________________________________________________ Title: ________________________________________________________________ Date: ________________________________________________________________ -18-

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
3 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Resolution Approving and Authorizing the City Manager to Execute a Revised Memorandum of Understanding Between the Town of Hillsborough and the Hillsborough Beautification Foundation
SUMMARY: On April 13, 2015, the City Council adopted a resolution approving a Memorandum of Understanding between the Town of Hillsborough (“Town”) and the Hillsborough Beautification Foundation (HBF), with the purpose of delineating the roles and responsibilities for HBF-funded projects on Town-owned property. The proposed revisions are a combination of updates from both the Town and HBF to modernize the agreement based on current practices and conditions. All changes have been reviewed by the Town and HBF and both parties are in agreement with the revised draft being considered.

FISCAL IMPACT: There is no direct fiscal impact to adopting the MOU; however, the Town receives benefits from HBF funding for projects throughout Town-owned properties.

ATTACHMENT(S):

1. Resolution and Exhibit A Revised Memorandum of Understanding (Clean)

2. Memorandum of Understanding (Redline)
PREPARED BY: Mandy Brown, Assistant City Manager
RECOMMENDATION: Adopt the resolution approving the revised Memorandum of Understanding between the Town of Hillsborough and the Hillsborough Beautification Foundation and authorize the City Manager to execute the revised Memorandum of Understanding on behalf of the Town. -19-
RESOLUTION NO. 26-

RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF HILLSBOROUGH

APPROVING AND AUTHORIZING THE CITY MANAGER TO EXECUTE A REVISED

MEMORANDUM OF UNDERSTANDING BETWEEN THE TOWN OF

HILLSBOROUGH AND THE HILLSBOROUGH BEAUTIFICATION FOUNDATION WHEREAS, the Hillsborough Beautification Foundation (“HBF”) is a California nonprofit public benefit corporation that contributes to landscape beautification projects as a gift to the Town of Hillsborough (“Town”); and WHEREAS, the Town and HBF have an existing Memorandum of Understanding (MOU) that formally delineates the roles and responsibilities for HBFfunded projects on Town-owned property or within Town-owned right-ofway areas; and WHEREAS, the Town and HBF wish to make updates to the existing MOU in accordance with current practices; and
WHEREAS, the Town and HBF have drafted a revised MOU (“Exhibit A”), which has been reviewed and approved by the HBF Board.

NOW, THEREFORE, BE IT RESOLVED that the City Council of the Town of Hillsborough hereby approves a revised Memorandum of Understanding between the Town of Hillsborough and the Hillsborough Beautification Foundation, and authorizes the City Manager to execute the MOU on behalf of the Town.

Mayor of the Town of Hillsborough
Attest: City Clerk
This resolution was adopted by the City Council of the Town of Hillsborough at its regular meeting held on the 9th day of March 2026, by the following vote of the members thereof:

AYES: Councilmembers
NOES: Councilmembers
ABSENT: Councilmembers
ABSTAIN: Councilmembers
-20-
ATTACHMENT 1
- 1 -

MEMORANDUM OF UNDERSTANDING
Town of Hillsborough
and
Hillsborough Beautification Foundation
This Memorandum of Understanding (“MOU”) is entered into this ___ day of ____, 2026 by and between the Town of Hillsborough (“Town”), and the Hillsborough Beautification Foundation (“HBF”), a California non-profit public benefit corporation. The purpose of this MOU is to delineate the roles and responsibilities of the parties regarding landscape maintenance, and landscape projects on Town property or within Town-owned right of way areas.

Recitals
A. The Town owns various parcels of real property as well as various rights of way throughout the Town (collectively, “Town Property”).

B. HBF desires to provide the funding and certain other services, as provided herein, for Landscape Maintenance or Landscape Projects (all as defined herein) over certain Town Property.

C. It is understood by all parties that the funding for the services provided by HBF pursuant to this MOU is being provided as a gift to the Town.

Definitions
A. “Landscape Maintenance” means and includes keeping certain Town Property landscaped areas healthy, clean, safe and attractive. The scope of work includes using tools, supplies, and physical skills to perform annual plantings, periodic weeding, fertilizing, litter removal, basic gardening, path maintenance, shrub pruning, fencing, runoff drainage, irrigation, mulching and other tasks.

B. “Landscape Projects” means and includes activities that modify the visible features or use of Town Property, including construction, grading more than 50 yards, or installation of new irrigation systems, electrical, plumbing, retaining walls, pathways or curbs.

C. Landscape Maintenance and Landscape Projects are sometimes collectively referred to herein as the “Projects,” and individually as a “Project.”
D. “Contractor’s List” means a list to be compiled by HBF of the names and contact information of at least three contractors, qualified and licensed to perform the desired Landscape Maintenance or Landscape Projects.

E. “HBF Activities” means the following when undertaken by HBF volunteers:

1. Visit Town Property in response to requests from residents and town personnel to assess for need for beautification.

2. Bring potential experts (who may be landscape architects, lay persons knowledgeable in landscaping or traditional landscaping installation or maintenance venders, aka ‘contractor and/or subcontractor’) to these locations to consider the area for a potential project. -21-

EXHIBIT A
- 2 -

3. Visit Town Property to review a project in process of beautification. Contractors may or may not be present during these visits.

4. Visit Town Property which has already been improved by a gift from HBF to verify that ongoing maintenance is adequate and appropriate.

5. Visit Town Property which has already been improved by a gift from HBF to consider additional work that may be required.

6. Visit Town Property which has already been improved by a gift from HBF to undertake actual physical work such as weeding, planting, pruning, watering, harvesting and oversight of HBF Volunteers. (Harvest Garden in particular but may apply to other locations from time to time.)
NOW THEREFORE, the parties hereto agree as follows:

I. Term. This MOU shall become effective upon approval by the City Council and full execution of the parties and shall continue until terminated by either party upon thirty (30) days prior written notice to the other party.

II. Collaboration. HBF will engage in HBF Activities on Town Property, and from time to time, HBF will propose funding Projects for which it shall supply Town with the proposed scope of work. Town, through its Public Works Department, shall review the scope of work and discuss any modifications it deems necessary with HBF. If HBF and Public Works Department, in consultation with the City Manager, reach agreement on the scope of work, the Project shall then be governed by the bid procedures required by the Hillsborough Municipal Code, Chapter 3.10, if applicable. Provided that the Town can legally do so, bids shall only be solicited from the contractors on the applicable Contractor’s List.

III. Revocation. If HBF does not approve the final scope of work for a Project, the final contract or the selected contractor, HBF shall be entitled to revoke its offer to fund the Project.

IV. Roles and Responsibilities.

A. Landscape Maintenance

1. HBF
a. Shall provide funding for Landscape Maintenance.
b. Shall provide the following services to Town:
i. Contractor's List for Landscape Maintenance.
ii. Develop the scope of work for Landscape Maintenance. iii. Select the contractor from the Contractor’s list, negotiate the terms of, and enter into the contract.
iv. Monitor progress of the work to ensure the work meets the requirements of the contract and is in compliance with all applicable laws, ordinances, rules and regulations.
-22-
- 3 -

2. TOWN
a. Shall provide assistance to HBF, upon request, in overseeing the services of any contractor and/or subcontractor, and compliance with all other applicable laws, ordinances, rules and regulations.

B. Landscape Projects

1. HBF
a. Shall provide funding for the Landscape Project.
b. Shall provide the following services to Town:
i. Contractor’s List to perform the Landscape Project;
ii. Consult and cooperate with Town in the development of the scope of work for the Project.

2. TOWN
a. Shall develop the scope of work for the Landscape Project in consultation and cooperation with HBF. No material change shall be made to the scope of work without prior written approval of HBF.
b. Shall put the Landscape Project out for bid to those on the applicable Contractor’s List if legally able to do so, otherwise in accordance with the bid procedures required by Hillsborough Municipal Code Section 3.10. c. Shall select the contractor, negotiate the terms of, and enter into the contract. d. Shall monitor progress of the work in coordination with the HBF designated site representative to ensure the work meets the requirements of the contract and is in compliance with all other applicable laws, ordinances, rules and regulations.

V. Indemnification.

A. Town agrees to defend, indemnify and hold harmless HBF, its officers, directors, employees, volunteers, and agents (“HBF Indemnitees”), from any claim, loss, damage, cost or expense (including reasonable attorneys’ fees) that any of the HBF Indemnitees may incur with respect to a Project resulting in physical damage to person or property, including, to the extent covered by Town’s liability insurance, those arising out of such HBF Indemnitees’ sole, partial, or concurrent negligence. provided that this indemnity shall not apply to any claim, loss, damage, cost or expense (including reasonable attorneys’ fees) asserted by any third party arising from or related to a Project resulting in physical damage to a person or property, to the extent caused by or arising out of the gross negligence or willful misconduct of HBF, its officers, directors, agents, volunteers or employees.. Notwithstanding anything to the contrary herein, Town agrees to exercise its reasonable best efforts to cause its insurer to make HBF a primary insured (i.e. a covered party) under Town’s liability insurance policy and to include a waiver of subrogation in favor of HBF’s insurer under Town’s -23-
- 4 -
liability insurance policy. Town further agrees to pay any deductible (not to exceed $50,000 per claim) owed in connection with any claim involving HBF paid by the Town’s insurer and not to seek reimbursement from HBF or HBF’s insurer of any such amounts paid. The foregoing indemnity shall only apply to an activity undertaken by an HBF Indemnitee which is within the roles and responsibilities of HBF as set forth in Section IV above and which involves HBF Activities.

VI. Notices.

Any notices relating to this MOU shall be given in writing and shall be deemed sufficiently given and served for all purposes when delivered personally or by generally recognized overnight courier service, or five (5) days after deposit in the United States mail, certified or registered, return receipt requested, with postage prepaid, addressed as follows:

To HBF: Hillsborough Beautification Foundation
1600 Floribunda Avenue
Hillsborough, CA 94010
Attn: President
To the Town: Town of Hillsborough
1600 Floribunda Ave.

Hillsborough, CA 94010
Attn: City Manager
VII. Miscellaneous.

B. Paragraph Headings. Paragraph headings as used herein are for convenience only and shall not be deemed to be a part of such paragraphs and shall not be construed to change the meaning hereof.

C. Governing Law. This MOU shall be construed and governed in accordance with the laws of the State of California. Venue shall be the County of San Mateo.

D. Counterparts. This MOU may be executed in any number of counterparts which together shall constitute the contract of the parties.

E. Severability. If any term, provision, covenant or condition of this MOU, other than Section III, Revocation, is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the provisions shall remain in full force and effect.

If Section III, Revocation, is held to be invalid, this MOU shall terminate.

F. No Agency Relationship. Neither HBF nor any of its officers, directors, volunteers, agents, or employees are or shall be considered to be agents of the Town in connection with this MOU.
-24-
- 5 -
G. Attorneys’ Fees. In the event of litigation between Town and HBF in connection with this MOU, the reasonable attorneys’ fees and court costs incurred by the party prevailing in such litigation, including appeals, shall be borne by the non-prevailing party.

IN WITNESS WHEREOF, the parties hereto have executed this MOU the day and year first hereinabove written.

TOWN OF HILLSBOROUGH HILLSBOROUGH BEAUTIFICATION

FOUNDATION
By: _____________________________ By: _________________________________ Printed Name:_____________________ Printed Name:_________________________ -25-
- 1 -

MEMORANDUM OF UNDERSTANDING
Town of Hillsborough
and
Hillsborough Beautification Foundation
This Memorandum of Understanding (“MOU”) is entered into this ___ day of ____, 2014 20265 by and between the Town of Hillsborough (“Town”), and the Hillsborough Beautification Foundation (“HBF”), a California non-profit public benefit corporation. The purpose of this MOU is to delineate the roles and responsibilities of the parties regarding landscape maintenance, rehabilitation work, and landscape projects on Town property or within Town-owned right of way areas.

Recitals
A. The Town owns various parcels of real property as well as various rights of way throughout the Town (collectively, “Town Property”).

B. HBF desires to provide the funding and certain other services, as provided herein, for Landscape Maintenance , Rehabilitation Work, or Landscape Projects (all as defined herein) over certain Town Property.

C. It is understood by all parties that the funding for the services provided by HBF pursuant to this MOU is being provided as a gift to the Town.

D. Design work and the hiring of professional services for development of plans for proposed Projects, is not addressed in this MOU, and will be outlined in writing for each proposed Project as defined herein.

B. “Rehabilitation Work” means and includes adjustments to Town Property landscaped areas that require $30,000 or less of funding per Project to preserve the use, dimensions and features of said Town Property-owned landscaped areas.

CB. “Landscape Projects” means and includes activities that modify the visible features or use of Town Property, including construction, grading more than 50 yards, or installation of new irrigation systems, electrical, plumbing, retaining walls, pathways or curbs.

DC. Landscape Maintenance, Rehabilitation Work and Landscape Projects aresometimesare sometimes collectively referred to herein as the “Projects,” and individually as a “Project.” ED. “Contractor’s List” means a list to be compiled by HBF of the names and contact information of at least three contractors, qualified and licensed to perform the desired Landscape Maintenance, Rehabilitation Work or Landscape Projects.

ATTACHMENT 2
- 2 -
FE. “HBF Activities” means the following when undertaken by HBF volunteers:

1. Visit public property locations throughout the townTown Property in response to requests from residentsfrom residents and town personnel to assess for need for beautification.

3. Visit public property locations throughout the townTown Property to review a project in process of beautification. Contractors may or may not be present during these visits.

4. Visit public propertyTown Property which has already been improved by a gift from HBF to verify that ongoing maintenance is adequate and appropriate.

5. Visit public propertyTown Property which has already been improved by a gift from HBF to consider additional work that may be required.

6. Visit public propertyTown Property which has already been improved by a gift from HBF to undertake actual physical work such as weeding, planting, pruning, watering, harvesting and oversight of HBF Volunteers. (Harvest Garden in particular but may apply to other locations from time to time.)
NOW THEREFORE, the parties hereto agree as follows:

II. Collaboration. HBF will engage in HBF Activities on Town Property, and From from time to time, HBF will propose funding Projects for which it shall supply Town with the proposed scope of work. Town, through its Public Works Department, shall review the scope of work and discuss any modifications it deems necessary with HBF. If HBF and Public Works Department, in consultation with the City Manager, reach agreement on the scope of work, the Project shall then be governed by heby the bid procedures required by the Hillsborough Municipal Code, Chapter 3.10, if applicable. Provided that the Town can legally do so, bids shall only be solicited from the contractors on the applicable Contractor’s List.

III. Revocation. If HBF does not approve the final scope of work for a Project, the final contract or the selected contractor, HBF shall be entitled to revoke its offer to fund the Project.

IV. Roles and Responsibilities.

A. Landscape Maintenance

1. HBF
a. Shall provide funding for Landscape Maintenance.
b. Shall provide the following services to Town:
- 3 -
i. Contractor's List for Landscape Maintenance.
ii. Develop the scope of work for Landscape Maintenance. iii. Put Landscape Maintenance out for bid to those on the Contractor’s List for the Landscape Maintenance. if legally able to do so, otherwise in accordance with the bid procedures required by Hillsborough Municipal Code Section 3.10.
iiiIv. Select the contractor from the Contractor’s list, negotiate the terms of, and enter into the contract.
iv. Monitor progress of the work to ensure the work meets the requirements of the contract and is in compliance with all applicable laws, ordinances, rules and regulations.
ii. Assistance in overseeing services provided by any contractor and/or subcontractor.

2. 2. Town TOWN
a. Shall develop the scope of work for the Landscape Maintenance in consultation and cooperation with HBF. No material change shall be made to the scope of work without prior written approval of HBF.
b. Shall put the Landscape Maintenance out for bid only to those on the corresponding Contractor’s List.
c. Shall select the contractor, negotiate the terms of, and enter into the contract. da. Shall provide assistance to HBF, upon request, in overseeing the services of any contractor and/or subcontractor, and monitor progress of the work in coordination with the HBF designated site representative to ensure the work meets the requirements of the contract and is in compliance with all other applicable laws, ordinances, rules and regulations.

B. Rehabilitation Work.

1. HBF
a. Shall provide funding for the Rehabilitation Work.
b. Shall provide the following services to Town:
i. Contractor’s List to perform the Rehabilitation Work; ii. Assistance in overseeing services provided by any contractor and/or subcontractor.

2. Town
- 4 -
a. Shall develop the scope of work for the Rehabilitation Work in consultation and cooperation with HBF. No material change shall be made to the scope of work without prior written approval of HBF.
b. Shall put the Rehabilitation Work out for bid only to those on the corresponding Contractor’s List.
c. Shall select the contractor, negotiate the terms of, and enter into the contract. d. Shall monitor progress of the work in coordination with the HBF designated site representative to ensure the work meets the requirements of the contract and is in compliance with all other applicable laws, ordinances, rules and regulations.

CB. Landscape Projects

2. Town TOWN
a. Shall develop the scope of work for the Landscape Project in consultation and cooperation with HBF. No material change shall be made to the scope of of work k without prior r written approval of HBF. b. Shall put the Landscape Project out for bid and only to those on the applicable Contractor’s List if legally able to do so,
otherwise in accordance with the bid procedures required by Hillsborough Municipal Code Section 3.10.to the extent permitted by Hillsborough Municipal Code Section 3.10.
c. Shall select the contractor, negotiate the terms of, and enter into the contract. d. Shall monitor progress of the work in coordination with the HBF designated site representative to ensure the work meets the requirements of the contract and is in compliance with all other applicable laws, ordinances, rules and regulations.

V. Indemnification.

A. HBF agrees to defend, indemnify and hold harmless the Town, its officers, employees, and - 5 -
agents (“Town Indemnitees”) from any claim, loss, damage, cost or expense (including reasonable attorneys’ fees) asserted by any third party and arising from or related to a Project resulting in physical damage to person or property, to the extent caused by or arising out of the gross negligence or willful misconduct of HBF, its officers, directors, agents, volunteers or employees.

BA. Town agrees to defend, indemnify and hold harmless HBF, its officers, directors, employees, volunteers, and agents (“HBF Indemnitees”), from any claim, loss, damage, cost or expense (including reasonable attorneys’ fees) that any of the HBF Indemnitees may incur with respect to a Project resulting in physical damage to person or property, including, to the extent covered by Town’s liability insurance, those arising out of such HBF Indemnitees’ sole, partial, or concurrent negligence. provided that this indemnity shall not apply to claims to any claim, loss, damage, cost or expense (including reasonable attorneys’ fees) asserted by any third party arising from or related to a Project resulting in physical damage to a person or property, to the extent caused by or arising out of the gross negligence or willful misconduct of HBF, its officers, directors, agents, volunteers or employees. the extent covered under Section VA above. Notwithstanding anything to the contrary herein, Town agrees to exercise its reasonable best efforts to cause its insurer to make HBF a primary insured (i.e. a covered party) under Town’s liability insurance policy and to include a waiver of subrogation in favor of HBF’s insurer under Town’s liability insurance policy.

Town further agrees to pay any deductible (not to exceed $50,000 per claim) owed in connection with any claim involving HBF paid by the Town’s insurer and not to seek reimbursement from HBF or HBF’s insurer of any such amounts paid. The foregoing indemnity shall only apply to an activity undertaken by an HBF Indemnitee which is within the roles and responsibilities of HBF as set forth in Section IV above and which involves HBF Activities.

VI. Notices.

To HBF: Hillsborough Beautification Foundation
1600 Floribunda Avenue
Hillsborough, CA 94010
Attn: President
To the Town: Town of Hillsborough
1600 Floribunda Ave.

Hillsborough, CA 94010
Attn: City Manager
VII. Miscellaneous.

A. Entire MOU, Amendments. This MOU contains the entire understanding and agreement of the parties. This MOU may be altered, amended or modified only by an instrument in writing, executed by the Parties to this MOU.
- 6 -
B. Paragraph Headings. Paragraph headings as used herein are for convenience only and shall not be deemed to be a part of such paragraphs and shall not be construed to change the meaning hereof.

C. Governing Law. This MOU shall be construed and governed in accordance with the laws of the State of California. Venue shall be the County of San Mateo.

D. Counterparts. This MOU may be executed in any number of counterparts which together shall constitute the contract of the parties.

If Section III, Revocation, is held to be invalid, this MOU shall terminate.

F. No Agency Relationship. Neither HBF nor any of its officers, directors, volunteers, agents, or employees are or shall be considered to be agents of the Town in connection with this MOU.

G. Attorneys’ Fees. In the event of litigation between Town and HBF in connection with this MOU, the reasonable attorneys’ fees and court costs incurred by the party prevailing in such litigation, including appeals, shall be borne by the non-prevailing party.

IN WITNESS WHEREOF, the parties hereto have executed this MOU the day and year first hereinabove written.

TOWN OF HILLSBOROUGH HILLSBOROUGH H BEAUTIFICATION

FOUNDATION
By: By:

Printed Name:__________________________ Printed Name:_________________________

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
4 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Receive February 2026 Legislative Update
SUMMARY: The Town’s legislative consultant, California Public Policy Group (CPPG), has provided a Legislative Summary for February 2026 (Attachment 1).

Attachment 2 includes advocacy letters submitted by the Town since the February 9, 2026 City Council meeting.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item.

ATTACHMENT(S):

1. February 2026 CPPG Legislative Summary

2. Advocacy Letters Submitted Since February 9, 2026 City Council Meeting PREPARED BY: Lisa Natusch, City Clerk
RECOMMENDATION: Receive the February 2026 Legislative Update. -31-
1127 11TH STREET, SUITE 300, SACRAMENTO, CA 95814 • 916.974.9270 • PUBLICPOLICYGROUP.COM PAGE 1 Date: March 3, 2026
To: Doug Davis, City Manager
Town of Hillsborough
From: Dane Hutchings
Founder + CEO
California Public Policy Group
Re: CPPG Legislative Summary: February 2026

LEGISLATIVE UPDATE
Bill Introductions
February 21 was the deadline to introduce bills in the second year of the 2025-26 Legislative Session, with a total of 1,918 measures introduced to date. This reflects a 23% decrease from 2025 and marks the lowest number of bill introductions in the past 20 years. Of the 1,918 measures, 1,789 are policy bills, as opposed to resolutions, intended to change existing law—an average of just under 15 per legislator.

Approximately one-third of the measures are “spot bills,” meaning they do not yet contain substantive language and their full intent is still unknown. As a result, hundreds of proposals are currently in placeholder form. The deadlines to add substantive language to spot bills are March 16 in the Assembly and March 25 in the Senate. After those dates, we will have a much clearer understanding of what the 2026 legislative landscape will look like. Spot bills typically amend the relevant code section once substantive language is added.

It is also important to keep in mind the 30-day “in print” rule, which requires bills to remain unchanged for 30 days after introduction. Most bills introduced this year will therefore be eligible for action beginning in early April. At that point, the legislative process will begin to accelerate and move quickly. Policy committee hearings are already underway and will continue to ramp up throughout March.

BILLS OF INTEREST
E-Bikes
• AB 1942 (Bauer-Kahan) Electric bicycles: registration and special license plates. o This bill would require class 2 and class 3 electric bicycles to be registered with the Department of Motor Vehicles and to display a special license plate issued by the Department. The bill would make a person operating a class 2 or class 3 electric bicycle in violation of these requirements guilty of an infraction punishable by a fine. • AB 2284 (Dixon) Vehicles: electric bicycles.
o This bill would require, on or before June 1, 2027, the California Highway Patrol, in partnership with biking nonprofit groups, to compile a list of electric bicycles and electric bicycle products that do not comply with statutory and regulatory requirements for the labeling or advertising of electric bicycles or electric bicycle products. The bill would require the California Highway Patrol to make the list ATTACHMENT 1
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• AB 2346 (Wilson) Vehicles: electric bicycles and speed limits. o This bill would require all class 1 and class 2 electric bicycles manufactured, sold, or offered for sale on or after January 1, 2029, to be equipped with a speedometer. The bill would also require all electric bicycles manufactured, sold, or offered for sale on or after January 1, 2029, to be equipped with an integrated front lamp and a rear lamp. • AB 2595 (Papan) Vehicles: electric bicycles.
o This bill would, until January 1, 2031, establish a pilot program in the County of San Mateo authorizing a city within the County—or the County in unincorporated areas— to adopt an ordinance or resolution prohibiting a person under 12 years of age from operating a Class 1 or Class 2 electric bicycle.
• SB 1167 (Blakespear) Vehicles: electric bicycles.
o This bill would prohibit motor-driven cycles and mopeds from being advertised, sold, or labeled as electric bicycles. The bill would also redefine “motor-driven cycle” to include motorcycles with an internal combustion engine under 150cc or an electric motor under 3,750 watts producing 5 brake horsepower or less.

Housing
• AB 2433 (Alvarez) Housing development: affordable homes bonus. o This bill would require a city or county to grant an affordable homes bonus, along with related incentives, concessions, and waivers or reductions in development standards, to eligible housing developments that meet specified criteria, including providing a required percentage of units for very low-income, lower-income, or senior housing. The bill would also revise base density calculations to allow applicants to use a site’s full residential floor area ratio to determine base density, include any resulting increase in floor area ratio within the definition of a density bonus, and rename the “Density Bonus Law” as the “Affordable Homes Bonus Program.” • SB 908 (Wiener) Housing development: transit-oriented development. o This bill is currently a spot bill, meaning it contains no substantive language.

However, this will be the SB 79 (Wiener, 2025) expansion bill. We are expecting substantive language to be added within the next few weeks. • SB 1036 (Grayson) Mitigation Fee Act.
o This bill would any fee established, increased, or imposed under the Mitigation Fee Act to be based on the net impact on the need for the public facility being funded by the fee, and would be done by accounting for whether the development project is removing or replacing an existing use or a previous use that existed at the time the fee was established, where the removed or replaced use also caused the need for the public facility that will be funded by the fee. The bill would require a local agency to provide a fee credit or otherwise reduce the fee in an amount proportionate to the impact caused by the use that is being removed or replaced. • SB 1117 (Cervantes) Accessory dwelling units and junior accessory dwelling units. o This bill would require an impact fee for an Accessory Dwelling Unit (ADU) to be based only on the area in excess of 750 square feet of interior livable space. -33-
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• AB 2179 (Patel) Workplace violence: restraining orders. o This bill would, beginning on July 1, 2027, allow any party or witness to a petition for a restraining order to appear remotely at a hearing and would prohibit any fee for appearing remotely. The bill would require the court of each county to develop rules and instructions for such remote appearances and post them on its website. The bill would also, commencing on July 1, 2027, require courts to allow filings related to such protective orders to be submitted electronically.
• SB 1159 (Cabaldon) Artificial intelligence: transparency and governance. o This bill would specify that, for purposes of the California Public Records Act, the Bagley-Keene Open Meeting Act, the Ralph M. Brown Act, the Political Reform Act of 1974, the Administrative Procedure Act, and CEQA, “person,” “interested person,” “participant,” “member of the public,” and any other similar terms under each act referring to those who may engage with governmental agencies, do not include artificial intelligence systems, autonomous agents, robots, or other nonhuman entities, whether physical or digital.
• SB 1187 (Durazo) Open meetings: majority.
o This bill is currently a spot bill, meaning it contains no substantive language.

However, this is the vehicle that will be used for the SB 707 (Durazo, 2025) follow up legislation that the author had promised last year.
• AB 2033 (Papan) Local Agency Public Construction Act: job order contracting. o This bill authorize a city council to award individual annual job order contracts, not to exceed $500,000 for routine maintenance.

Miscellaneous
• AB 1421 (Wilson) Vehicles: Road Usage Charge Technical Advisory Committee. o This bill would require the California Transportation Commission to consolidate and prepare research and recommendations related to a road user charge or a mileagebased fee system. • AB 2267 (Garcia) State bridges and overpasses: suicide prevention. o This bill would require Caltrans to develop and maintain a set of preapproved suicide prevention safety-barrier designs that local governments may use to install suicide prevention barriers.

ADMINISTRATION ACTIONS UPDATE
On February 18, Governor Gavin Newsom announced the appointment of a new California Public Utilities Commission president, John Reynolds. Governor Newsom stated his agenda was to “lower utility bills, ensure wildfire safety spending delivers real value, and hold utilities accountable for safe, reliable, and affordable service.”
Additionally, the Governor signed AB 117 (Committee on Budget) into law on February 19. This bill requires the California Transportation Agency to loan to the Metropolitan Transportation Commission up to $590,000,000 of funding for projects within the San Francisco Bay area, including for the San Francisco Bay Area Rapid Transit District, the San Francisco Municipal Transportation Agency, the Peninsula Corridor Joint Powers Board, and the Alameda-Contra Costa Transit District. -34-
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ACTIVE POSITIONED BILLS
• AB 1557 (Papan) Vehicles: electric bicycles.
o Location: Assembly Transportation
o Position: Support
• AB 1569 (Davies) Pupil safety: electric bicycle parking: safety program. o Location: Assembly Education
o Position: Support
• AB 1614 (Dixon) Vehicles: bicycles.
o Location: Assembly Transportation
o Position: Support

LOOKING FORWARD
• March 25: Spring Recess begins upon adjournment
• April 6: Legislature reconvenes from Spring Recess
• Mid-May: Governor releases the May revision of the state budget • May 29: Last day for the Legislature to pass bills out of their house of origin • June 15: Legislature must pass the primary budget bill • June 30: Governor must sign the primary budget bill
• July 2: Summer Recess begins upon adjournment
• August 3: Legislature reconvenes from Summer Recess
• August 31: Last day for the Legislature to pass bills; end of the session • September 30: Last day for the Governor to sign or veto bills -35-

TOWN OF HILLSBOROUGH
California
Town Hall
Phone: 650-375-7400 | Fax: 650-375-7475 | 1600 Floribunda Avenue, Hillsborough, CA 94010 | www.hillsborough.net February 10, 2026
The Honorable Diane Papan
California State Assembly
1021 O Street, Room 4220
Sacramento, CA 95814
Re: Assembly Bill 1557 – Vehicles: electric bicycles – SUPPORT (As introduced, January 8, 2026) Dear Assemblymember Papan:

On behalf of the Town of Hillsborough, I am writing in support of Assembly Bill 1557. The town is experiencing a noticeable increase in electric bicycles being operated on local streets at dangerous speeds, creating serious safety concerns for pedestrians, motorists, and riders themselves – particularly in areas where families, children, and older adults walk and travel.

California law currently limits electric bicycle motor output to 750 watts, a restriction intended to help keep ebikes within a safer performance range. However, as your bill recognizes, existing law does not clearly specify whether the 750-watt limit applies to a motor’s continuous output or its maximum peak output. This ambiguity has been exploited by some online-only sellers who advertise “750W” e-bikes that can, in fact, produce far more power. These products are often sold with hardware and software limits that are easily modified, allowing riders to unlock higher peak output with little effort. The result is a growing presence of overly powerful devices operating in the public right-of-way in ways the Legislature did not intend when establishing California’s e-bike classification framework.

AB 1557 provides a straightforward and important fix by clarifying that the existing 750-watt restriction applies to a motor’s maximum peak power output. By closing this loophole, AB 1557 would help prevent the manufacture and distribution of e-bikes that function more like high-powered motorized vehicles while still being marketed and used as “e-bikes.” This clarity will support safer streets, improve consistency in manufacturing and sales, and provide clearer standards for education and enforcement.

In addition, we hope that additional work will be done in the area of e-bikes. The Town would support legislation that limits the ability for users to alter e-bikes, enhances requirements for e-bike rider safety training and licensing, and prohibits manufacturers and sellers from encouraging or aiding e-bike speed ability/alterations, and adds age limits for certain classes of e-bikes.

For these reasons, we are pleased to support AB 1557 and thank you for your leadership in advancing practical safety measures that reflect the realities communities are facing with the rapid growth of high-powered e-bikes.

Should you have any questions, please contact our legislative advocate Dane Hutchings with California Public Policy Group at (916) 230-6935.

February 10, 2026
ATTACHMENT 2
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Town of Hillsborough – Support for AB 1557

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Sincerely,
Dr. Sophie Cole
Mayor
CC: Members and Staff of the Assembly Transportation Committee The Honorable Josh Becker, Senate District 13
The Honorable Diane Papan, Assembly District 2
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TOWN OF HILLSBOROUGH
California
Town Hall
Phone: 650-375-7400 | Fax: 650-375-7475 | 1600 Floribunda Avenue, Hillsborough, CA 94010 | www.hillsborough.net February 10, 2026
The Honorable Assemblymember Davies
California State Assembly
1021 O Street, Room 4720
Sacramento, CA 95814
Re: Assembly Bill 1569 – Pupil safety: electric bicycle parking: safety program – SUPPORT (As introduced, January 12, 2026)
Dear Assemblymember Davies:

On behalf of the Town of Hillsborough, we write to express our strong support for AB 1569. Hillsborough, like many communities throughout California, is experiencing an increase in electric bicycle use, including among school-aged riders. While e-bikes can provide a valuable transportation option, the Town is increasingly concerned about unsafe operation – particularly high speeds and risky riding behaviors that put students, pedestrians, and other roadway users in danger.

AB 1569 advances a practical, education-focused approach to improving safety for young riders, who represent the fastest-growing demographic of e-bike riders in Hillsborough. As introduced, the bill would require a school that allows pupils in kindergarten or grades 1 to 12 to park a Class 1, Class 2, or Class 3 electric bicycle on campus during regular school hours to condition that privilege on the pupil completing the electric bicycle safety and training program developed by the Department of the California Highway Patrol, or a related safety course if available and prescribed by the local law enforcement authority within the jurisdiction. The bill further requires the pupil to submit proof of completion to the school before parking an e-bike on campus.

The Town of Hillsborough encourages safe riding habits before preventable collisions and injuries occur. By promoting consistent, age-appropriate training tied to a clear on-campus standard, the bill helps establish shared expectations for students and families while complementing local safety and enforcement efforts. AB 1569 does not prohibit e-bikes; instead, it promotes responsible use by ensuring that students who bring these devices onto school campuses have received safety instruction and understand the rules of the road and path.

For these reasons, we are pleased to support AB 1569 and thank you for your leadership on this most important issue. Should you have any questions, please contact our legislative advocate Dane Hutchings with California Public Policy Group at (916) 230-6935.
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February 10, 2026
Town of Hillsborough – Support for AB 1569

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Sincerely,
Dr. Sophie Cole
Mayor

CC: Members and Staff of the Assembly Education Committee The Honorable Josh Becker, Senate District 13
The Honorable Diane Papan, Assembly District 21
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TOWN OF HILLSBOROUGH
California
Town Hall
Phone: 650-375-7400 | Fax: 650-375-7475 | 1600 Floribunda Avenue, Hillsborough, CA 94010 | www.hillsborough.net February 10, 2026
The Honorable Diane Dixon
California State Assembly
1021 O Street, Room 5330
Sacramento, CA 95814
Re: Assembly Bill 1614 – Vehicles: bicycles – SUPPORT (As introduced January 21, 2026) Dear Assemblymember Dixon:

On behalf of the Town of Hillsborough, we write to express our strong support for AB 1614. As electric bicycles become more common and are operated at higher speeds, our community is increasingly concerned about unsafe riding behaviors that elevate the risk of serious injury for riders and others using the public rightof-way.

AB 1614 addresses a specific and growing hazard, “piggybacking” - when more than one person rides on a bicycle or e-bike without an appropriate separate seat. Existing California law already restricts unsafe riding configurations on highways by prohibiting operation when a person is riding other than upon or astride a permanent and regular seat, and by prohibiting carrying a passenger unless there is a separate seat attached.

However, this prohibition is currently limited to highways and does not apply on Class I bikeways, creating an enforcement and safety gap on paths intended to promote bicycle travel and to separate bicyclists from motor vehicle traffic.

This gap matters because the increased speed and accessibility of e-bikes have contributed to higher rates of injury, and injuries associated with piggybacking can be particularly severe. With multiple riders, the operator can be more easily distracted or lose control, creating an elevated risk of serious harm such as fractures and head injuries for both riders and those nearby. Data cited by the U.S. Consumer Product Safety Commission reflects continued increases in e-bike injuries, including a significant year-over-year rise in 2022 and a disproportionate impact on children. These trends underscore the need for clear, consistent rules in the places where e-bikes and bicycles are heavily used, including shared-use paths.

AB 1614 provides a practical and targeted solution by extending the existing prohibition to Class I bikeways, as defined in Streets and Highways Code Section 890.4, improving consistency in the law, and strengthening safety for riders, pedestrians, and drivers alike.

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For these reasons, we are pleased to support AB 1614 and thank you for your leadership on this most important issue. Should you have any questions, please contact our legislative advocate Dane Hutchings with California Public Policy Group at (916) 230-6935.

Sincerely,
Dr. Sophie Cole
Mayor

CC: Members and Staff of the Assembly Education Committee The Honorable Josh Becker, Senate District 13
The Honorable Diane Papan, Assembly District 21
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
5 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Approval of the Fundraising Event Permit Application 26-01 for the Hillsborough Schools Foundation 2026 Fun Run Under CEQA Guidelines 15378 and 15301 SUMMARY: The Hillsborough Schools Foundation (HSF) submitted an application to conduct its 2026 Fun Run. The 2K or 5K run/walk is proposed to take place on Sunday, May 3, 2026 beginning at 7:00 a.m. and ending at approximately 11:00 a.m. The total number of participants expected during the event is 650.

The Fun Run route will start in front of North Hillsborough School located at 545 Eucalyptus Avenue. HSF will send postcards to residents living along and within the route to notify them of the event and road closures.

Hillsborough Municipal Code Section 5.16.080 requires City Council approval for a fundraising event permit where more than 200 people will be in attendance during any one day at any one property. The Police, Fire, and Building & Planning Departments have reviewed the application and submitted comments and recommendations, which are included as an attachment. The Police Department will assist event volunteer staff at main intersections to alert motorists and provide traffic safety for participants.

HSF is proposing to post Fun Run banners at the following locations:

1. Golf Course Drive/Black Mountain Road (physical banner)

2. Walnut Avenue Parking Lot on Floribunda Avenue (digital sign) The digital artwork will also be displayed on the digital sign at the Fire Station on Chateau Avenue.

The artwork was previously approved by the City Council. The signs will be posted no sooner than two weeks before the event begins and will be removed immediately following the event.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item.

ENVIRONMENTAL ISSUES: The proposed action is exempt from environmental review under California Environmental Quality Act (CEQA) Guidelines sections 15378(b)(2) and 15378(b)(5) as ongoing administrative or organizational activities that will not result in direct or indirect physical changes in the environment. The proposed action is also exempt under CEQA Guideline 15301 as the permitting of an existing facility involving a temporary negligible expansion of use with no corresponding construction or expansion of existing structures.

ATTACHMENT(S): Fundraising Event Permit Application 26-01 and Police Department, Fire Department, and Building & Planning Department Comments and Recommendations -42-
Agenda Staff Report – Hillsborough City Council
March 9, 2026

Page 2 ends

PREPARED BY: Margaret Stratton, Deputy City Clerk
RECOMMENDATION: Approve the Fundraising Event Permit Application 26-01 for the Hillsborough Schools Foundation 2026 Fun Run subject to the conditions recommended by staff. -43-
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2K(yellow) 5K(green)
Start &
Finish
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DATE: February 2, 2026
TO: Margaret Stratton, Deputy City Clerk
FROM: Julie Parenti, Deputy Fire Marshal
(650) 558-7648
SUBJECT: HSF Annual Fun Run – fire department approval
The following list is a typical set of conditions the fire department utilizes to ensure a minimum standard of fire and life safety. Arrangements shall be made by the applicant for a tour of the event site to receive more detailed comments. This tour should be conducted at least 14 days prior to the event.

Final conditions of approval are subject to review of floor plans, proposed routes of travel for public viewing, and a field inspection prior to opening. Temporary conversion of this space for public attendance will be acceptable, provided the applicant addresses the following concerns.

1. Provide a floor plan with site dimensions, exits, and proposed foot traffic pattern for the public. Floor plan shall be emailed to Inspector Julie Parenti at [email protected]. A review of the floor plan and arrangement of contents will be used by the Fire Department to determine a maximum occupancy load. Maximum occupancy load shall not exceed this limit. In addition to the overall limit, secondary floor areas served by a single stairway will be further restricted based on a review of floor plans. Event volunteers are to be provided in sufficient numbers to ensure enforcement of the limits. Foot traffic flow pattern shall be designed to minimize overcrowding in any area. Traffic flow shall be continually monitored and regulated by the volunteers.

2. If applicable, a standby fire watch shall be on duty during the time the fair is open to the public. The primary responsibility is enforcement of fire and life safety provisions of the California Fire Code. Duties are limited to those activities, except for medical emergencies, or other unusual, or hazardous conditions that may arise. Standby costs are paid by the applicant and are negotiated with the awarded security company.
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3. Exterior exit pathways shall be a hard surface walkway free from tripping hazards.

Exterior exit pathways shall be illuminated at night at any time the event is open to the public. Exterior gates shall be kept unlocked at all times.

4. Portable fire extinguishers with a minimum UL rating of 2A10BC shall be provided so that travel distance to an extinguisher does not exceed 75’. A fire extinguisher shall be provided for each 3000 square feet of floor area and at least one fire extinguisher shall be provided for each level. Extinguishers shall be accessible and visible. Or their location clearly marked.

5. Building Department approval and permits shall be obtained, if necessary, for remodeling and electrical work. The applicant is responsible for ensuring compliance with all Town of Hillsborough requirements.

6. Light duty extension cords are prohibited. UL approved multi-outlet power taps may be acceptable provided they are connected directly to a permanent outlet. Power tap cords shall be protected from physical damage and must be located so as not to present a tripping hazard.

7. No smoking signs shall be posted throughout the event space.

8. Candles, open flame, and other sources of ignition are prohibited.

9. Flammable liquids, propane, or other highly flammable materials or decorations are prohibited.

10. The driveway shall be maintained clear for emergency vehicle access during the hours the event is open to the public. Parking related to the event shall not restrict emergency vehicle access.

11. If applicable, tent and canopy installations shall comply with Article 31 of the California Fire Code and Town of Hillsborough requirements. A tent permit shall be obtained from the Fire Department before inspection. An inspection is required for tent installations prior to the event.
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Building Division
Ph. 650-375-7411 |Fx. 650-375-7415 | 1600 Floribunda Ave., Hillsborough, CA 94010 | www.hillsborough.net

TOWN OF HILLSBOROUGH
Building Department
Conditions for a Fundraising/Charitable Event
Date: February 21, 2025
From: RAY YNIGUEZ

BUILDING OFFICIAL
Location of Event: 828 SEABURRY RD, HILLSBOROUGH, CA 94010 Organization:

Partners & Advocates for Remarkable Children & Adults (PARCA) Name of Event: Annual Luncheon and Fashion Show
Date of Event: Wednesday, May 14, 2025
General minimum requirements

1. Any Building being used for an event is required to keep all exits clear.

2. Itwill benecessary toprovide restroom facilitiesfor allguests attending the event.

3. If a tent isto be used forthe event, you are required to obtain a permit from the Fire Department

4. Inspections are limited to regular business hours (8 a.m. to 5 p.m. M-F) Ifyouhave anyfurtherquestions, please contact theBuildingDepartment at 650-375-7411 April 23, 2025
300 El Cerrito Ave., Hillsborough, CA
Hillsborough Schools Foundation
Annual Fun Run
Sunday, May 03, 2026
February 05, 2026
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
6 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Approval of Fundraising Event Permit Application 26-02 for the SolMateo Signature Kitchen Tour Event Under CEQA Guidelines 15378 and 15301 SUMMARY: SolMateo submitted an application to conduct its Signature Kitchen Tour event at two homes in Hillsborough: 110 De Sabla Road and 259 W. Santa Inez Avenue. The event is proposed to take place on Saturday, May 16, 2026 from 10:00 a.m. to 3:00 p.m. The total number of guests expected is approximately 600.

The Police, Fire, and Building & Planning Departments have reviewed the application and submitted comments and recommendations, which are included as an attachment.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item.

ATTACHMENT(S): Fundraising Event Permit Application 26-02 and Police Department, Fire Department, and Building & Planning Department Comments and Recommendations PREPARED BY: Margaret Stratton, Deputy City Clerk
RECOMMENDATION: Approve Fundraising Event Permit Application 26-02 for the SolMateo Signature Kitchen Tour event subject to the conditions recommended by staff. -56-
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DATE: February 9, 2026
TO: Margaret Stratton, Deputy City Clerk
FROM: Julie Parenti, Deputy Fire Marshal
(650) 558-7648
SUBJECT: SolMateo Annual Kitchen Tour – fire department approval The following list is a typical set of conditions the fire department utilizes to ensure a minimum standard of fire and life safety. Arrangements shall be made by the applicant for a tour of the event site to receive more detailed comments. This tour should be conducted at least 14 days prior to the event.

Page 2 of 2 ends

3. Exterior exit pathways shall be a hard surface walkway free from tripping hazards.

Exterior exit pathways shall be illuminated at night at any time the event is open to the public. Exterior gates shall be kept unlocked at all times.

7. No smoking signs shall be posted throughout the event space.

8. Candles, open flame, and other sources of ignition are prohibited.

9. Flammable liquids, propane, or other highly flammable materials or decorations are prohibited.

10. The driveway shall be maintained clear for emergency vehicle access during the hours the event is open to the public. Parking related to the event shall not restrict emergency vehicle access.

11. If applicable, tent and canopy installations shall comply with Article 31 of the California Fire Code and Town of Hillsborough requirements. A tent permit shall be obtained from the Fire Department before inspection. An inspection is required for tent installations prior to the event.
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Building Division
Ph. 650-375-7411 |Fx. 650-375-7415 | 1600 Floribunda Ave., Hillsborough, CA 94010 | www.hillsborough.net

TOWN OF HILLSBOROUGH
California

Conditions for a Fundraising/Charitable Event
Date: February 21, 2025
From: RAY YNIGUEZ

BUILDING OFFICIAL
Location of Event: 828 SEABURRY RD, HILLSBOROUGH, CA 94010 Organization:

Partners & Advocates for Remarkable Children & Adults (PARCA) Name of Event: Annual Luncheon and Fashion Show
General minimum requirements

1. Any Building being used for an event is required to keep all exits clear.

2. Itwill benecessary toprovide restroomfacilitiesfor allguests attending the event.

3. If a tent isto be used forthe event, you are required to obtain a permit from the Fire Department

4. Inspections are limited to regular business hours (8 a.m. to 5 p.m. M-F) Ifyouhave anyfurtherquestions, please contact theBuildingDepartment at 650-375-7411 April 23, 2025 April 23, 2025
110 De Sabla Rd., Hillsborough, CA
259 W. Santa Inez Ave., Hillsborough, CA
SolMateo
Annual Kitchen Tour
Date of Event: 5/16/2026
February 9, 2026
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
7 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Approval of Fundraising Event Permit Application 26-03 for the Hillsborough Beautification Foundation Celebrate May! Event Under CEQA Guidelines 15378 and 15301
SUMMARY: The Hillsborough Beautification Foundation submitted an application to conduct its Celebrate May! event at 50 Baywood Avenue in Hillsborough. This event is proposed to take place on Thursday, May 7, 2026 from 9:30 a.m. to 12:30 p.m. The total number of guests expected is approximately 250.

The Police, Fire, and Building & Planning Departments have reviewed the application and submitted comments and recommendations, which are included as an attachment.

FISCAL IMPACT: There is no fiscal impact associated with this agenda item.

ATTACHMENT(S): Fundraising Event Permit Application 26-03 and Police Department, Fire Department, and Building & Planning Department Comments and Recommendations PREPARED BY: Margaret Stratton, Deputy City Clerk
RECOMMENDATION: Approve Fundraising Event Permit Application 26-03 for the Hillsborough Beautification Foundation Celebrate May! event subject to the conditions recommended by staff. -70-
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DATE: February 24, 2026
TO: Margaret Stratton, Deputy City Clerk
FROM: Julie Parenti, Deputy Fire Marshal
(650) 558-7648
SUBJECT: Celebrate May, Hillsborough Beautification Foundation – Fire Dept. approval The following list is a typical set of conditions the fire department utilizes to ensure a minimum standard of fire and life safety. We recommend that arrangements be made by the applicant for a tour of the event site to receive more detailed comments. This tour should be conducted at least 14 days prior to the event.

2. If applicable, a standby fire watch shall be on duty during the time the event is open to the public. The primary responsibility is enforcement of fire and life safety provisions of the California Fire Code. Duties are limited to those activities, except for medical emergencies, or other unusual, or hazardous conditions that may arise.

Standby costs are paid by the applicant and are negotiated with the awarded security company.
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3. Exterior exit pathways shall be a hard surface walkway free from tripping hazards.

Exterior gates shall be kept unlocked at all times.

7. No smoking signs shall be posted throughout event space (if indoors).

8. Candles, open flame, and other sources of ignition are prohibited (if indoors).

9. Flammable liquids, propane, or other highly flammable materials or decorations are prohibited.

10. The driveway shall be maintained clear for emergency vehicle access during the hours the event is open to the public. Parking related to the event shall not restrict emergency vehicle access.

An inspection is required for tent installations prior to occupancy. -79-
Building Division
Ph. 650-375-7411 |Fx. 650-375-7415 | 1600 Floribunda Ave., Hillsborough, CA 94010 | www.hillsborough.net

TOWN OF HILLSBOROUGH
Building Department
Conditions for a Fundraising/Charitable Event
Date: February 21, 2025
From: RAY YNIGUEZ

BUILDING OFFICIAL
Location of Event: 828 SEABURRY RD, HILLSBOROUGH, CA 94010 Organization:

Partners & Advocates for Remarkable Children & Adults (PARCA) Name of Event: Annual Luncheon and Fashion Show
Date of Event: Wednesday, May 14, 2025
General minimum requirements

1. Any Building being used for an event is required to keep all exits clear.

2. Itwill benecessary toprovide restroom facilitiesfor allguests attending the event.

3. If a tent isto be used forthe event, you are required to obtain a permit from the Fire Department

4. Inspections are limited to regular business hours (8 a.m. to 5 p.m. M-F) Ifyouhave anyfurtherquestions, please contact theBuildingDepartment at 650-375-7411 April 23, 2025
50 Baywood Ave, Hillsborough, CA
Hillsborough Beautification Foundation
Celebrate May
Thursday, May 7, 2026
February 26, 2026
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
8 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Resolution Accepting as Complete the Contract with Gateway Pacific Contractors, Inc. for the Darrell Water Tank Replacement Project in the Amount of $7,187,653.69 Pursuant to a Previously Adopted Mitigated Negative Declaration SUMMARY: The contract for the construction of the Darrell Tank Replacement Project was awarded to Gateway Pacific Contractors, Inc. on September 26, 2022. The project involved replacing the decommissioned Darrell Tanks #1 and #2 with a new two million-gallon circular prestressed concrete tank (Tank #4), built to American Water Works Association (AWWA) D-110 standards, adjacent to the existing Tank #3.This new facility includes a comprehensive yard piping system, connecting inlet pipes from the Marlborough, Skyfarm and Crocker pump stations, along with tank outlet pipes, a control valve station, with electrical and control systems fully integrated into the Town’s existing water network. Gateway Pacific Contractors, Inc. successfully completed the project within budget, with an expanded scope that included recoating the exterior of Tank #3, installing a bioretention area with landscaping, and irrigation. The tank was put online in April 2024, but due to long lead times associated with the expanded scope, the final close-out was delayed.

FISCAL IMPACT: The contract was awarded in the amount of $7,180,000.00 with a 10% contingency in the amount of $718,000.00, for a total amount of $7,898,000.00. The project was completed in the amount of $7,187,653.69, which is below the authorized budget with contingency.

Funding was allocated from the Darrell Tank Improvement (Capital Improvement Plan #511).

ENVIRONMENTAL ISSUES: The City Council adopted a Mitigated Negative Declaration on June 14, 2021 that examined the environmental impacts and imposed mitigation on the project in full compliance with CEQA.

ATTACHMENT(S): Resolution
PREPARED BY: Natalie Gribben, Deputy Director of Public Works RECOMMENDATION: Adopt the resolution accepting as complete the contract with Gateway Pacific Contractors, Inc. for the Darrell Water Tank Replacement Project, the final amount of which is $7,187,653.69 and authorizing staff to file a Notice of Completion for the project and release withheld retention in accordance with state prompt payment laws. -81-
RESOLUTION NO. 26-

RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF HILLSBOROUGH

ACCEPTING AS COMPLETE THE CONTRACT WITH GATEWAY PACIFIC CONTRACTORS, INC. FOR THE DARRELL WATER TANK REPLACEMENT PROJECT IN THE AMOUNT OF $7,187,653.69 PURSUANT TO A PREVIOUSLY

ADOPTED MITIGATED NEGATIVE DECLARATION
WHEREAS, the Town of Hillsborough (“Town”) maintains the Town’s public water system; and
WHEREAS, the Town desired to replace the existing Darrell tanks No.1 and 2 with a larger two Million Gallons (2.0 MG) pre-stressed concrete tank as part of the Darrel Water Tank Replacement Project (the “Project”); and WHEREAS, the Project proposed new prestressed concrete tank constructed in accordance with American Water Works Association (AWWA) D-110. It includes new on-site yard piping comprising inlet pipes from the Marlborough, Skyfarm and Crocker pump stations, tank outlet pipes, along with tank outlet pipes, a control valve station, with electrical and control systems fully integrated into the Town’s existing water network; and WHEREAS, plans and specifications were developed for improvements to the deficient water tanks; and
WHEREAS, the Project was publicly bid and advertised according to the Public Contract Code and the Town received five bids for the Project; and WHEREAS, staff conducted an analysis of the bid and verified that Gateway Pacific Contractors, Inc. (“Gateway Pacific”) qualifications and experience levels are satisfactory; and
WHEREAS the construction contract for the Project was awarded to Gateway Pacific on September 26, 2022, in the amount of $7,180,000.00 with a 10% contingency in the amount of $718,000.00, for a total amount of $7,898,000.00; and
WHEREAS, Funding for the Project was allocated from the Darrell Tank Improvement (Capital Improvement Plan #511); and
WHEREAS, a Notice to Proceed was issued to Gateway Pacific and the Project progressed as anticipated until completed for a total contract amount of $7,187,653.69.

NOW, THEREFORE, BE IT RESOLVED that the City Council does hereby accept as complete the contract with Gateway Pacific for construction of the Darrell Water Tank Replacement Project, the final amount of which is $7,187,653.69, and authorizes staff to file a Notice of Completion for the project and release withheld retention in escrow in accordance with state prompt payment laws.
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Resolution No. 26-
March 9, 2026
2 Mayor of the Town of Hillsborough

Attest: City Clerk
This resolution was adopted by the City Council of the Town of Hillsborough at its regular meeting held on the 9th day of March 2026, by the following vote of the members thereof:

AYES: Councilmembers
NOES: Councilmembers
ABSENT: Councilmembers
ABSTAIN: Councilmembers
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
9 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Resolution Accepting as Complete the Contract with APB General Engineering for the Chateau Drive Sanitary Sewer Rehabilitation and Replacement Project in the Amount of $664,296.00 Under CEQA Guideline 15301 SUMMARY: This project involved replacing, realigning, and upsizing approximately 2,000 linear feet of 6-inch clay sanitary sewer pipes along Chateau Drive and adjacent streets. Due to the old age of the clay pipes, steep slopes, and ground settling, some pipe segments have settled, causing sewer flow restrictions and backups. As a result, the pipes require frequent maintenance to prevent potential sewer overflows into nearby storm drains and creeks. Completion of these upgrades will result in a reduction in after-hours and emergency sewer calls and maintenance costs.

FISCAL IMPACT: The project was awarded on February 10, 2025, the amount of $ 588,620.00, with 20% contingency in the amount of $117,724.00 for a total project budget of $706,344.00.00.

The project was successfully completed on schedule in the amount of $664,296.00, which is below the authorized budget.

ENVIRONMENTAL ISSUES: The proposed action is exempt from environmental review under California Environmental Quality Act (CEQA) Guidelines sections 15301.

ATTACHMENT(S): Resolution
PREPARED BY: Paul Willis, Director of Public Works
RECOMMENDATION: Adopt the resolution accepting as complete the contract with APB General Engineering for the Chateau Drive Sanitary Sewer Rehabilitation and Replacement Project, the final amount of which is $664,296.00 and authorizing staff to file a Notice of Completion for the project and release withheld retention in accordance with state prompt payment laws. -84-
RESOLUTION NO. 26-

RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF HILLSBOROUGH

ACCEPTING AS COMPLETE THE CONTRACT WITH APB GENERAL

ENGINEERING FOR THE CHATEAU DRIVE SANITARY SEWER REHABILITATION AND REPLACEMENT PROJECT IN THE AMOUNT OF $664,296.00 UNDER CEQA GUIDELINE 15301
WHEREAS, the Town of Hillsborough (“Town”) maintains the Town’s wastewater system; and
WHEREAS, plans and specifications were developed for the Chateau Drive Sanitary Sewer Rehabilitation and Replacement Project (“Project”) for rehabilitation and replacement of approximately 2,000 linear feet of damaged and/or deteriorated sanitary sewer mains in public and private utility easements on Chateau Drive, Laurant Road and Lupine Road; and
WHEREAS, the Project was publicly bid and advertised according to the Public Contract Code and the Town received eight bids for the Project; and \WHEREAS, staff reviewed the bids and determined APB General Engineering was the lowest responsible bidder submitting a responsive Base Bid in the amount of $ 588,620.00; and
\WHEREAS, the project was awarded to APB General Engineering on February 10, 2025 in the amount of $588,620.00; and
WHEREAS, the Town established a 20% contingency for a total Project budget of $706,344.00; and
WHEREAS, funding was allocated from FY 2024-25 Capital Improvement Fund CIP#717; and
WHEREAS, a notice to proceed was issued to the APB General Engineering and the project progressed until completed in the amount of $664,296.00.

NOW, THEREFORE, BE IT RESOLVED that the City Council does hereby accept as complete the contract with APB General Engineering for the Chateau Drive Sanitary Sewer Rehabilitation and Replacement Project, the final amount of which is $664,296.00 and authorizes staff to file a Notice of Completion for the project and directs staff to release withheld retention in accordance with state prompt payment laws.

Mayor of the Town of Hillsborough
-85-
Resolution No. 26-
March 9, 2026
2 Attest: City Clerk
This resolution was adopted by the City Council of the Town of Hillsborough at its regular meeting held on the 9th day of March 2026, by the following vote of the members thereof:

AYES: Councilmembers
NOES: Councilmembers
ABSENT: Councilmembers
ABSTAIN: Councilmembers
-86-

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
10 CONSENT CALENDAR

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Resolution Awarding to and Authorizing the City Manager to Execute a Contract with SoCal Pacific Construction Corporation DBA National Coating and Lining for the Skyfarm 3 Tank No. 2 Interior Recoating Project in the Amount of $350,000.00, with a 20% Contingency in the Amount of $70,000.00, for a Total Cost of $420,000.00, Under CEQA Guideline 15301
SUMMARY: This project involves complete removal and replacement of the existing interior coating of one of the two 700,000-gallon welded steel potable water tank located Skyfarm 3 tank site. An inspection was conducted in 2024 and determined coating is necessary to preserve the integrity of the tank and protect water quality.

This project was advertised in accordance with the Public Contract Code. A total of six bids were received and opened on February 26, 2026. The bid results were announced in the Town Hall Council Chambers, in accordance with the Town’s policies and procedures. The bid summary is as follows:

Polytech Industrial, Inc. (non-responsive) $313,778.81
SoCal Pacific Construction Corporation DBA National Coating and Lining $350,000.00 Olympus and Associates, Inc. $385,000.00
Jeffco Painting & Coating, Inc. $388,900.00
Euro Style Management $477,000.00
Advanced Industrial Services, Inc. $550,000.00
Of the bids received for this project, SoCal Pacific Construction Corporation DBA National Coating and Lining (“SoCal Pacific”) was confirmed by staff to be the lowest responsible bidder submitting a responsive bid. Based on staff analysis of the low bid and reference checks, it was determined that SoCal Pacific’s qualifications and experience levels are satisfactory to perform all work associated with this project.

FISCAL IMPACT: It is recommended that funding be allocated from the approved budget for the Water Tank Improvement project (CIP #520) in the amount of $350,000.00, including a 20% contingency in the amount of $70,000.00 if needed, for a total project allocation of $420,000.00.

Sufficient funds are available within the approved budget to fully cover this project.

ENVIRONMENTAL ISSUES: The proposed action is exempt from environmental review under California Environmental Quality Act (CEQA) Guidelines section 15301.

ATTACHMENT(S): Resolution
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Agenda Staff Report – Hillsborough City Council
March 9, 2026

Page 2 ends

PREPARED BY: Natalie Gribben, Deputy Director of Public Works RECOMMENDATION: Adopt the resolution awarding to and authorizing the City Manager to execute a contract with SoCal Pacific Construction Corporation DBA National Coating and Lining for the Skyfarm 3 Tank No. 3 Interior Recoating Project in the amount of $350,000.00, with a 20% contingency of $70,000.00 if needed, for a total cost of $420,000.00 under CEQA Guideline 15301. -88-
RESOLUTION NO. 26-

RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF HILLSBOROUGH

AWARDING TO AND AUTHORIZING THE CITY MANAGER TO EXECUTE A

CONTRACT WITH SOCAL PACIFIC CONSTRUCTION CORPORATION DBA NATIONAL COATING AND LINING FOR THE SKYFARM 3 TANK NO. 2 INTERIOR RECOATING PROJECT IN THE AMOUNT OF $350,000.00, WITH A 20% CONTINGENCY IN THE AMOUNT OF $70,000, FOR A TOTAL COST OF $420,000.00, UNDER CEQA GUIDELINE 15301
WHEREAS, the Town of Hillsborough (“Town”) maintains the Town’s potable water distribution system; and
WHEREAS, the capital improvement budget and a previous inspection of the tank identified the need to recoat the interior of Tank No. 2 at the Skyfarm 3 tank site; and
WHEREAS, the Skyfarm 3 Tank No. 3 Interior Recoating Project (“Project”) consists of complete removal and replacement of the existing interior coating of a 700,000-gallon welded steel potable water tank; and
WHEREAS, specifications have been developed for the tank improvements; and WHEREAS, the Project was publicly bid and advertised in accordance with the Public Contract Code, and the Town received six bids for the Project; and WHEREAS, SoCal Pacific Construction Corporation DBA National Coating and Lining (“SoCal Pacific”) was the lowest responsible bidder submitting a responsive bid in the amount of $350,000.00; and
WHEREAS, staff conducted an analysis of the bid and verified that SoCal Pacific’s qualifications and experience levels are satisfactory; and WHEREAS, funding will be allocated from the approved budget for the Water Tank Improvement project (CIP #520).

NOW, THEREFORE, BE IT RESOLVED that the City Council of the Town of Hillsborough hereby awards and authorizes the City Manager to execute the contract with SoCal Pacific Construction Corporation DBA National Coating and Lining for the Skyfarm 3 Tank No. 3 Interior Recoating Project in the amount of $350,000.00 with a 20% contingency of $70,000.00 if needed, for a total cost of $420,000.00 under CEQA Guideline 15301, allocating funds from the approved budget for the Water Tank Improvement project (CIP #520).

Mayor of the Town of Hillsborough
-89-
Resolution No. 26-
March 9, 2026
2 Attest: City Clerk
This resolution was adopted by the City Council of the Town of Hillsborough at its regular meeting held on the 9th day of March 2026, by the following vote of the members thereof:

AYES: Councilmembers
NOES: Councilmembers
ABSENT: Councilmembers
ABSTAIN: Councilmembers
-90-

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
11 OLD BUSINESS

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Accept Sewer Rate Study and Authorize Implementation of the Recommendation
SUMMARY: The Town of Hillsborough (“Town”) has undertaken a sewer rate study to review and determine the rates necessary to fund the revenue requirement for the sewer fund for the next five years, beginning July 1, 2026. The preliminary draft Sewer Rate Cost of Service analysis and proposed rates were brought to City Council at a public study session on February 9, 2026.

The Town reviews the need for potential sewer increases annually or as needed to ensure that revenues are sufficient to cover the costs of the sewer fund. In 2021, the Town adopted a five-year schedule of increases to maximum authorized rates. To cover the cost of services of the sewer fund, a new five-year rate series is recommended and will require Proposition 218 proceedings to adopt the proposed rates. If adopted, the first year of the rate series would be effective July 2026.

The Town awarded a Request for Proposal (RFP) contract to HF&H Consultants (“HF&H”) for rate consulting services for the sewer rate study. They have prepared the Sewer Rate Study report that projects rates for a five-year planning period (2026-2030). The sewer five-year projection analyzed and established a rate plan that supports the projected revenue requirement over the five-year period. The Town’s sewer rate revenues are used to fund sewer operations, maintenance, capital improvements, and debt service for the Town’s sewer system.

Background
The Town’s sewer infrastructure consists of 98 miles of wastewater main lines, 2,477 manholes, 247 cleanouts and 4 sewer lift stations. The system serves a Hillsborough population of approximately 11,699 people and covers over 6.21 square miles.

Capital Plan
A key component in the development of the Town’s sewer revenue requirement was properly funding capital improvement needs. Master Plans were developed for the sewer system and the five-year capital improvement projects were prioritized by Public Works to determine the highest priority needs using a risk-based approach. The Town’s Sewer Five Year CIP plan outlines approximately $26.5 million in capital projects over the five-year period. The plan is dominated by projects that are being monitored and audited by other agencies (Regional Water Quality Control Board, EPA, State Water Boards, Baykeeper). The Priority Basin I&I Rehabilitation Program is the major CIP cost for the five-year period and focuses on replacing the sewer drainage basin main lines and manholes. The CIP projects are necessary to provide system reliability and reduce system-wide sanitary sewer overflows. Older clay pipes are prone to cracking and root intrusion and will be replaced with PVC and HDPE pipes which will improve durability and longevity. The CIP projects also address infiltration and inflow (I&I) which will reduce the amount of water entering -91-
Agenda Staff Report – Hillsborough City Council
March 9, 2026

Page 2 ends

the sewer pipes from groundwater and stormwater. By addressing I&I, the collection system and treatment costs are reduced as the amount of flow coming through the system is reduced.

Wastewater Treatment
The Town pays for treatment plant services in Burlingame and San Mateo under the disposal contracts, and the San Mateo treatment plant is undergoing major improvements with the Clean Water Program. The Town and the City of San Mateo finalized an amended agreement for the Town’s participation in the program, costing $47.6 million (excluding interest) over thirty years. The objectives of the Clean Water Program are: 1) Replace aging infrastructure and facilities, 2) Build wet weather sewer system capacity assurance to prevent overflows, 3) Meet current and future regulatory requirements, 4) Achieve sustainability goals.

Analysis
The proposed rates:
• Provide Adequate Capital Improvement Plan (CIP) Funding - Invest in the system to minimize risk of failure and material financial impact and to mitigate costly deferred maintenance. • Maintain Prudent Reserve Levels - Ensure adequate reserves for cash flow timing to fund operations, and to cover capital project timing and contingencies. • Meet Debt Service Coverage Ratios - Allow the Town to maintain a compliant debt service coverage ratio.
• Keep Revenues Aligned with Costs - Ensure adequate revenue aligns with costs of the system so that the enterprise operation remains financially independent and sustainable and does not rely on the General Fund.

The proposed rate adjustments and increases outlined in the HF&H Sewer Rate Study report are effective starting July 1, 2026. These adjustments and increases cover the revenue requirements for the next five years as outlined in the HF&H Sewer Rate Study report.

Cost of Service Study
HF&H performed a cost of service and rate study (the “Study”) for the Town of Hillsborough with projections for the cost of service and revenue requirements for the rate years effective July 2026 through 2030. The study indicates an overall revenue requirement increase of 3% per year over the five-year period. The prior five-year sewer rate series had annual increases of 4%.

The Study develops the cost and rate to collect and treat wastewater on a per Single Dwelling Equivalent. Residential indoor water use has declined, which shifts costs from residential to the commercial class. Based on recent data collected, the Single-Family Dwelling Equivalent (SFDE) is 78 hundred cubic feet (HCF) per year, whereas in the previous study, the amount was 144 HCF per year. Commercial uses this SFDE for the sewer calculation, and the calculated property wastewater discharge varies by commercial property. As such, commercial charges reflect each customer’s calculated discharge compared to the SFDE.

Process for Implementation
The Proposition 218 process requires the Town to hold a public hearing on the proposed rates for the charges and to mail notice of the public hearing to property owners who are directly liable for the payment of sewer charges not less than 45 days before the public hearing to adopt the rates -92-
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March 9, 2026

Page 3 ends

for the service fees or charges. They are subject to the protest proceeding wherein the adoption of any new or increase in any existing fees and charges cannot be adopted if the Town receives written protest to the proposed fees and charges from the record owners of a majority (50%+1) of the parcels upon which the charges are proposed for imposition who are directly liable for the payment of the proposed sewer charges.

Additionally, the Town intends to implement procedures described in Government Code section 53759.1. This procedure establishes an administrative remedy for members of the public to raise legal concerns regarding the proposed sewer rates prior to adoption, and to receive written responses from the Town regarding each such concern. This procedure accomplishes two important goals: first, it provides a meaningful opportunity to address legal concerns prior to rate adoption, and second, it ensures that any person that may wish to challenge the proposed rates in court first attempt to resolve the concern with the Town administratively.

It is recommended that the City Council adopt the recommendation for adjustments and increases to the sewer rates effective for July 2026 through 2030, as outlined in the HF&H Sewer Rate Study report. In addition, it is requested that City Council direct staff to mail the Notice of Public Hearing on proposed adjustment and increases to Town of Hillsborough 2026 through 2030 sewer rates and set the public hearing at no less than 45 days thereafter, in accordance with Proposition 218 and Government Code section 53759.1.

FISCAL IMPACT: Sewer service costs in Hillsborough are covered by the sewer rate paid by residential and commercial accounts. The costs of these services are not paid for by the Town’s General Fund budget.

ENVIRONMENTAL ISSUES: In accordance with the California Environmental Quality Act (CEQA) and the CEQA Guidelines, the increases in the solid waste service charges are exempt from CEQA under Section 15378 and Section 15273 of the CEQA Guidelines and Public Resources Code Section 21080(b)(8) because (1) the increases in charges are for the purpose of meeting operational and maintenance expenses of the aforementioned services and (2) the charges constitute the creation of a funding mechanism/other governmental fiscal activity which does not involve any commitment to any specific project that may result in potential significant physical impact on the environment.

ATTACHMENT(S):

1. HF&H Sewer Rate Study Report

2. Notice of Public Hearing on Proposed Adjustments and Increases to Town of Hillsborough 2026-2030 Sewer Rates

3. Proposition 218 Protest Procedures
PREPARED BY: Rich Santiago, Assistant Finance Director
RECOMMENDATION:

1. Accept the recommendations for sewer increases and changes as outlined in the HF&H Sewer Rate Study Report; and
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March 9, 2026

Page 4 ends

2. Direct staff to mail the Notice of Public Hearing on Proposed Adjustment and increase to Town of Hillsborough 2026-2030 Sewer Rates; and

3. Set the public hearing at no less than 45 days after the notice is mailed, incorporating procedures as set forth in Government Code section 53759.1. -94-

THE TOWN OF

HILLSBOROUGH
Sewer Rate Study
March 3, 2026
ATTACHMENT 1
-95-
HF&H Consultants
590 Ygnacio Valley Rd. Suite 105
Walnut Creek, CA 94596
Phone: (925) 977-6950
Web: hfh-consultants.com
March 3, 2026
Jan Cooke
Finance Manager
The Town of Hillsborough
1600 Floribunda Avenue
Hillsborough, CA 94010
Sent via email: [email protected]
Subject: Sewer Rate Study
Dear Jan Cooke,
HF&H Consultants (HF&H) is pleased to submit this draft report for updating the Town of Hillsborough’s (Town’s) sewer rates for Fiscal Years (FYs) 2026-27 through 2030-31.

Beginning FY 2026-27, we recommend five annual 3.0% revenue increases, effective July 1 each year, from 2026 through 2030. The increase in revenue will allow the Town to:
 Fund inflationary increases in existing staff and sewer collection system operating and maintenance costs;
 Fund $5.1 million in annual collection system capital projects to continue the trend of reducing sewer overflows, assisting residents with private lateral repairs, sewer lift station improvements, and preventing excess stormwater from entering the sewer system which leads to unnecessary treatment costs of rainwater;  By FY 2030-31, reach the targeted levels of the Town’s operating, capital, and debt service reserve balances.

A copy of the rate model is included in the appendix.

Sincerely,
Rick Simonson
Senior Vice President
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Sewer Rate Study
Table of Contents
The Town of Hillsborough | March 3, 2026 | Page i
Table of Contents
I. EXECUTIVE SUMMARY ................................................... 1 Findings and Recommendations ............................................ 1 II. INTRODUCTION........................................................... 3 Background ........................................................................ 3 Rate Study Purpose ............................................................. 3 Rate study Process .............................................................. 3 Five-Year Financial Plan ........................................................ 4 Sewer Customer Classes and Current Annual Rates ................. 4 III. REVENUE REQUIREMENT PROJECTIONS .................... 6 O&M Expenses – Collection ................................................... 7 Capital Improvements – Collection ........................................ 8 Current Treatment Costs ...................................................... 8 Existing Debt Service ........................................................... 9 Sewer Fund Reserves.......................................................... 10 Fund Balance Without Revenue Increases .............................. 11 IV. PROPOSED SEWER SERVICE CHARGES ..................... 13 Revenue Increases ............................................................. 13 Fund Balance with Revenue Increases ................................... 13 Proposed Rates .................................................................. 14 -97-
Sewer Rate Study
Figures
The Town of Hillsborough | March 3, 2026 | Page ii
Figures
Figure 1-1. Current and Proposed Annual Sewer Rates ($/EDU) ................... 2 Figure 1-2. Projected Year-End Sewer Enterprise Fund Balance .................... 2 Figure 2-1. Current Annual Sewer Rate ..................................................... 5 Figure 3-1. Budgeted Projection Assumptions by Fiscal Year ........................ 6 Figure 3-2. Total Projected Revenue Requirements ..................................... 7 Figure 3-3. Net Revenue Requirement Needed from Rates ........................... 7 Figure 3-4. Projected O&M Expenses ........................................................ 8 Figure 3-5. Capital Improvement Projects by Fiscal Year ............................. 8 Figure 3-6. Projected Treatment Costs ...................................................... 9 Figure 3-7. Projected Year-End Sewer Enterprise Fund Balance .................. 11 Figure 3-8. Projected Year-End Sewer Enterprise Fund Balance Targets ....... 12 Figure 4-1. Annual Revenue Increases .................................................... 13 Figure 4-2. Projected Year-End Sewer Enterprise Fund Balance .................. 14 Figure 4-3. Change in Commercial EDUs ................................................. 15 Figure 4-4. Proposed Annual Sewer Rates ($/EDU) ................................... 15 Appendices
A. Sewer Rate Model
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Sewer Rate Study
Glossary
The Town of Hillsborough | March 3, 2026 | Page iii
Glossary
BOD – Biological Oxygen Demand; a component of wastewater strength CIP – Capital Improvement Program
COSA – Cost of Service Analysis
EDU – Equivalent Dwelling Unit; A standard unit measure of wastewater utility service, based on the volume and strength of wastewater flow.

FY – Fiscal year
HCF – Hundred cubic feet of metered water or 784.052 gallons I&I – Inflow & infiltration
NPDES – National Pollutant Discharge Elimination System O&M – Operation and Maintenance
PAYGo – Pay-As-You-Go, in reference to funding capital improvements with cash rather than from borrowed sources such as loans or bonds
SRF – State Revolving Fund, a type of loan issued by the State to public Agencies SS or TSS – Suspended Solids or Total Suspended Solids; a component of wastewater strength
Town – Town of Hillsborough
WEF – Water Environment Federation
WWTP – Wastewater Treatment Plant
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Sewer Rate Study
Acknowledgements
The Town of Hillsborough | March 3, 2026 | Page iv
Acknowledgements
City Council
Sophie Cole, Mayor
Leslie Marden Ragsdale, Vice Mayor
Laurie Davies Adams, Councilmember
Marie Chuang, Councilmember
Christine Krolik, Councilmember
Town Staff
Jan Cooke, Finance Director
Richard Santiago, Assistant Finance Director
Paul Willis, Director of Public Works / City Engineer
Doug Davis, City Manager
Mandy Brown, Assistant City Manager
Best Best & Krieger LLP
Lutfi Kharuf
HF&H Consultants, LLC
Rick Simonson, Senior Vice President
Gabe Sasser, PE, Project Manager
Alex Santos, Senior Associate
La Velda Peterson, Assistant Analyst
Limitations
This document was prepared solely for the Town of Hillsborough in accordance with the contract between the Town and HF&H and is not intended for use by any other party for any other purpose.

In preparing this study, we relied on information from the Town, which we consider accurate and reliable. Our analysis is based on the best available information at the time of the study.

Rounding differences caused by stored values in electronic models may exist.

This document represents our understanding of relevant laws, regulations, and court decisions but should not be relied upon as legal advice. Questions concerning the interpretation of legal authorities referenced in this document should be referred to a qualified attorney. -100-
Sewer Rate Study
I. Executive Summary
The Town of Hillsborough | March 3, 2026 | Page 1
I. Executive Summary

FINDINGS AND RECOMMENDATIONS
This section summarizes our findings and recommendations related to the rate increases for the sewer fund.

The Town of Hillsborough (Town’s) sewer enterprise serves all commercial and residential developments within its Town limits, approximately 3,900 connections. The Town owns and operates its sewer collection system facilities; however, wastewater collected through the Town’s sewer system is treated at wastewater treatment plants through contractual relationships with San Mateo and Burlingame, the cost for which is billed to the Town and included in the Town’s sewer service charges. The Town shares the costs of any capital improvements to the treatment plants borne by the cities of San Mateo and Burlingame. Like the other benefactors of the treatment system, the Town reimburses the cities based on the Town’s proportionate share of sewer flows conveyed. The collection and treatment costs are proposed to be billed to the Town customers on the tax roll as one combined charge under the authority of Health and Safety Code section 5471 et seq.

Sewer rates have been proposed to meet the following objectives:

1. Operating Expenses. Rates must generate sufficient revenue to fund the collection system’s operation and maintenance expenses, and the Town’s portion of wastewater treatment expense at the San Mateo and Burlingame treatment plants.

2. Capital Expenses. Capital funding over the next five years is primarily related to replacement projects that will continue the trend of reducing sewer overflows, assisting residents with private lateral repairs, and preventing excess stormwater from entering the sewer system which leads to unnecessary treatment costs of rainwater. The Town plans to fund $5.1 million per year of future sewer capital projects on a pay-as-yougo basis.

3. Reserves. Maintain adequate operating, capital, and debt service reserves for shortterm working capital, for monthly operating expenses and large capital projects, to compensate for a nine-month lag in receipt of revenues from the tax rolls. By FY 2030- 31, proposed rates reach the targeted levels of the Town’s operating, capital, and debt service reserve balances.

4. Proposed Rates. The Town’s sewer customers are billed an annual charge for sewer services (which is proposed to be billed on the tax roll for residential customers and on the water bill for commercial customers). All residential customers are equal to one Equivalent Dwelling Unit (EDU); Commercial customers are charged based on their respective indoor water use, whereas 1 EDU is equal to 78 hundred cubic feet (HCF), which is equivalent to the average indoor water use of a single-family residence.

Historically, Figure 1-1 summarizes the proposed sewer rates that are needed to cover the projected operating and capital expenses, and to maintain a reasonable reserve.
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I. Executive Summary
The Town of Hillsborough | March 3, 2026 | Page 2
Figure 1-1. Current and Proposed Annual Sewer Rates ($/EDU) After increasing rates for FY 2026-27, effective July 1, 2026, the Town should monitor the fund balance before adopting subsequent rate increases. The proposed rates are the maximum amount that rates can be set.

1. Reserve Fund Balance. The Town’s Sewer Enterprise reserve fund balance is projected to end the year (June 30, 2026) at approximately $13,000,000, above the target balance. Figure 1-2 shows the projected year-end fund balances with and without the proposed rate increases. With the proposed increases and the drawing down of reserves in FY 2026-27 and FY 2027-28, the fund balance will achieve the target reserves of operating, capital, and debt service expenses (blue line).

Figure 1-2. Projected Year-End Sewer Enterprise Fund Balance Current FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Rates eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 eff. 7/1/2029 eff. 7/1/2030 rate increases: 3.0% 3.0% 3.0% 3.0% 3.0%
All Customers ($/EDU) $4,311.00 $4,386.89 $4,518.49 $4,654.05 $4,793.67 $4,937.48 $ Increase $75.89 $131.60 $135.56 $139.62 $143.81
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Sewer Rate Study
II. Introduction
The Town of Hillsborough | March 3, 2026 | Page 3
II. Introduction

BACKGROUND
The Town’s sewer enterprise serves all commercial and residential developments within its Town limits, approximately 3,912 connections. The Town owns and operates its sewer collection system facilities. Wastewater from the Town’s sewer system is treated at treatment plants located in San Mateo and Burlingame. Like the other benefactors of each treatment plant, the Town reimburses the cities based on the Town’s proportionate share of sewer flows conveyed.

RATE STUDY PURPOSE
The Town conducted its most-recent sewer rate study in 2021. The study set annual rates through FY 2025-26. The purpose of this study is to reassess existing rates to ensure rate revenues generated meet the Town’s projected operating, capital, and debt service expenses for the next five-year planning period of FY 2026-27 through FY 2030-31.

RATE STUDY PROCESS
Proposition 218 requires that sewer rates and charges should be recovered from parcels in proportion to the cost of serving those customers. It also requires that the sewer rate-setting methodology must be sound and that there must be a nexus between the costs and the rates charged. We follow industry standard rate setting methodologies set forth by the Water Environment Federation (WEF) Manual of Practice No. 27, Financing and Charges for Wastewater Systems, fourth edition, 2018 to ensure this study meets Proposition 218 requirements.

To develop sewer rates that comply with Proposition 218 and industry standards while meeting other emerging goals and objectives of the Town, there are four major steps we followed:
1) Calculate Revenue Requirement
The rate-making process starts by deriving annual revenue requirements over the five-year planning period. The revenue requirements represent the costs that must be covered by revenue from annual sewer charges and other sources. The revenue requirement should sufficiently fund the Sewer Enterprise’s operations and maintenance (O&M), debt service, capital expenses, and reserve funding.
2) Cost of Service
Cost of service ratemaking proportionately apportions the cost of providing sewer service to each parcel based on their proportionate demand on the system. Previously, the Town established wastewater flow and strength characteristics to define a basic level of service each customer receives. An Equivalent Dwelling Unit (EDU) represents the basic level of sewer service. Given more than 99% of The Town’s accounts are single-family home parcels, the EDU reflects wastewater flow and strength characteristics of a typical single-family parcel.

Commercial customers are charged based on their respective annualized indoor water use, -103-
Sewer Rate Study
II. Introduction
The Town of Hillsborough | March 3, 2026 | Page 4
whereas 1 EDU is equal to 78 hundred cubic feet (HCF)1, which is equivalent to the average annual indoor water use of a single-family residence.
3) Rate Implementation
Rate implementation is the last step of the rate-making process to comply with Proposition 218. We have documented the rate study results in this report to serve as the Town’s administrative record and to help educate the public about the proposed changes, the rationale, and justifications behind the changes, and their anticipated financial impacts in lay terms. Our proposed rates will be documented in a notice to be mailed to each customer required under Proposition 218. The City Council may approve the proposed rates after holding a protest hearing no sooner than 45 days after mailing the notices.

FIVE-YEAR FINANCIAL PLAN
This report presents a financial plan for the Town’s sewer enterprise fund that incorporates capital improvements identified in the Town’s Master Plan, adopted by City Council, as well as the latest available operations and maintenance budgeted projections. The Town’s sewer enterprise five-year financial plan comprises:
 Projected sewer operating and capital expenses to maintain the collection system.  Projected operating and capital expenses of the Town’s proportionate share to operate and maintain the Burlingame and San Mateo wastewater treatment plants.  Projected debt service for outstanding bonds/SRF loans.  Projected reserve balances and targets; and,
 Projected revenues from the Town’s current and proposed sewer service charges.

The results of the financial plan indicate the annual increases in sewer service charges that are projected to fund the Town’s expenses and maintain adequate reserves. Detailed spreadsheets comprising the five-year financial plan are included in Appendix A.

SEWER CUSTOMER CLASSES AND CURRENT ANNUAL RATES
The Town provides sewer service to approximately 3,900 residential and 7 commercial customers. The Town is responsible for setting rates that cover the cost of providing collection and treatment services.

The Town’s sewer customers are billed an annual charge for sewer service (which is billed on the tax roll for residential customers and on the water bill for commercial customers).

Currently, all customers pay a fixed annual charge per EDU of $4,311. Each residential single1 As studied by California Data Collaborative (CaDC) which studied the water use patterns of single-family residences in Hillsborough from FY 2022-23 through FY 2024-25. -104-
Sewer Rate Study
II. Introduction
The Town of Hillsborough | March 3, 2026 | Page 5
family home is equivalent to one EDU. In accordance with the Town’s Municipal Code2 each commercial customer’s number of EDUs are calculated annually based on their actual average indoor water use over the previous three years, as follows: # of EDUs = average annual indoor water use divided by 144 HCF x (70% + 15% x BOD concentration in mg/l divided by 200 mg/l + 15% x SS concentration in mg/l divided by 200 mg/l). The flow and strength characteristics of an EDU are equivalent to an average single-family residence based on prior sewer rate studies conducted by the Town and the 1998 State Revenue Program Guidelines.

Figure 2-1. Current Annual Sewer Rate
2 Hillsborough Municipal Code Section 13.34.030 states: A Sewer Equivalent Dwelling Unit (EDU) represents the wastewater discharge from a typical customer and is defined as 144 hundred cubic feet (HCF) of annual wastewater flow with 200 mg/l concentration of Suspended Solids (SS) and 200 mg/l concentration of Biological Oxygen Demand (BOD).

FY 2025-26
All Customers ($/EDU) $4,311
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III. Revenue Requirement Projections
The Town of Hillsborough | March 3, 2026 | Page 6
III. Revenue Requirement Projections
A spreadsheet model was developed to derive revenue requirements for FY 2026-27 through FY 2030-31. The revenue requirements represent the costs that must be covered by revenue from rates and other sources. For this study, we have relied on the Town’s O&M and capital budgets, prepared by the Finance Department covering four years (FY 2026-27 through FY 2029-30) of the five-year planning period of this study. We worked with Town staff to project expenses for FY 2030-31. The escalation factors in Figure 3-1 summarize effective annual percentage increases in various cost categories. Factors driving these annual increases are discussed in more detail following Figure 3-3.

Figure 3-1. Budgeted Projection Assumptions by Fiscal Year The application of these assumptions to the O&M and capital expenses summarized graphically in Figure 3-2, listed in Figure 3-3, and are described in more detail below. -106-
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III. Revenue Requirement Projections
The Town of Hillsborough | March 3, 2026 | Page 7
Figure 3-2. Total Projected Revenue Requirements
Figure 3-3. Net Revenue Requirement Needed from Rates
O&M EXPENSES – COLLECTION
As shown in Figure 3-4, the Town’s Operation and Maintenance (O&M) expenses are projected to increase by an average of 3.8% per year from approximately $6.5 million to $7.7 million over the five-year planning period. Salaries and benefit costs are increasing by approximately 6.6% per year, with wages increasing an average of 4.4% and benefits increasing by an average of 5.9%, primarily due to a significant increase in workers compensation costs. No additional headcount is contemplated in the projections. The Town’s administrative and other overhead allocation costs (e.g., legal, human resources, finance, city manager’s office) are increasing at an average of 2.9% annually.

Fiscal Years FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 O&M Expenses - Collection $6,855,183 $7,060,908 $7,275,256 $7,494,094 $7,733,758 Treatment Costs $2,883,999 $3,027,199 $3,177,559 $3,335,437 $3,501,209 Debt Service $3,808,268 $3,832,606 $3,798,093 $3,820,231 $3,280,153 Transfer to/(from) Capital Reserves $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 Total Revenue Requirement $18,685,268 $19,058,531 $19,388,726 $19,787,579 $19,652,938 Transfer to/(from) Op Reserves ($1,134,420) ($981,157) ($769,031) ($609,293) $100,697 Net Revenue Requirement from Rates $17,550,848 $18,077,374 $18,619,695 $19,178,286 $19,753,634 -107-
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Figure 3-4. Projected O&M Expenses
CAPITAL IMPROVEMENTS – COLLECTION
The Town’s adopted Capital Improvement Program (CIP) expenses are summarized in Figure 3-5. Annual costs range from a low of $4.4 Million in FY 2028-29 to a high of $5.8 million in FY 2027-28 during the five-year financial planning period. On average, the Town expects to spend approximately $5.1 million annually on these projects.

Figure 3-5. Capital Improvement Projects by Fiscal Year The CIP is primarily related to projects that reduce inflow and infiltration and improve sewer lift stations. The Town plans to fund these capital improvements, as well as other projects that benefit the system, on a pay-as-you-go (PAYGo) basis. The Town’s rates do not directly fund each year’s capital improvements. Instead, the funding for the Town’s capital expenses takes the form of smooth annual contributions of rate revenue to the Capital Reserve equal to the average projected annual PAYGo expenditures. Capital projects are funded in varying amounts each year from the Capital Reserve. In this way, rates can be modulated smoothly using the Capital Reserve. The annual capital contribution to reserves, included in the annual revenue requirement, is $5,137,818 per year ($25,689,089 ÷ 5 years).

CURRENT TREATMENT COSTS
Current and projected treatment costs for operations and capital improvements previously listed in Figure 3-3 are separated according to each plant location in Figure 3-6.

Budgeted Projected
Fiscal Years FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Salaries & Benefits $1,297,020 $1,462,399 $1,526,383 $1,594,962 $1,663,890 $1,722,301 Materials & Services $1,812,189 $1,853,453 $1,898,539 $1,944,753 $1,992,121 $2,058,233 Administrative & Other Costs $3,445,492 $3,539,331 $3,635,986 $3,735,541 $3,838,082 $3,953,224 Total $6,554,700 $6,855,183 $7,060,908 $7,275,256 $7,494,094 $7,733,758 % Change 4.6% 3.0% 3.0% 3.0% 3.2%
Capital Improvement Projects FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 5-Year Total Smoke Testing & Video Inspections Priority Basins $185,000 $185,000 $185,000 $185,000 $0 $740,000 Priority Basins Inflow & Infiltration Rehabilitation Program$3,500,000 $3,500,000 $3,500,000 $3,500,000 $0 $14,000,000 Flow Metering/Modeling $180,000 $0 $180,000 $0 $0 $360,000 Miscellaneous Sewer System Repairs $170,000 $170,000 $170,000 $170,000 $0 $680,000 Sewer Lift Station Improvements $1,000,000 $1,300,000 $0 $0 $0 $2,300,000 CCTV Inspection/Root Removal $0 $285,000 $0 $285,000 $0 $570,000 Future Capital Projections $0 $0 $0 $0 $4,662,500 $4,662,500 Subtotal $5,035,000 $5,440,000 $4,035,000 $4,140,000 $4,662,500 $23,312,500 Construction Cost Index 1.033 1.068 1.104 1.141 1.179
Escalated Total CIP $5,203,655 $5,810,545 $4,454,208 $4,723,199 $5,497,481 $25,689,089 -108-
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Figure 3-6. Projected Treatment Costs
The Town operates an integrated wastewater system. While the Town does not have its own treatment plant for treatment of wastewater, the Town has entered into contracts with the cities of Burlingame and San Mateo for treatment. San Mateo treatment costs are projected to increase from the current sum of $1.2 Million to $1.5 Million by FY 2030-31. Burlingame treatment costs are projected to increase from the current sum of $1.6 Million to $2.0 Million by FY 2030-31. The increases are based on an average annual increase of 5% based on historical increases.

EXISTING DEBT SERVICE
The Town has an outstanding bond obligation totaling $17.1 million as June 30, 2025 of which a portion was used for sewer improvements. Of the annual debt service of approximately $2.6 million during the planning period, the Sewer Fund’s share is approximately $1.4 million (55%). The Town also has a State Revolving Fund loan for previous sewer improvements with a principal outstanding of $7.9 million on June 30, 2025. Annual debt service is $0.4 million.

Lastly, the Town is responsible for $1.9 million in annual payments to the City of San Mateo for their share of minor upgrades at the wastewater treatment facility owned and operated by the City of San Mateo, in accordance with the cost-share agreement to treat wastewater from the Town. The treatment plant was replaced and upgraded, to meet current and future regulatory requirements, and reduce incidents of sewer overflow. The Town’s residents benefit from the upgraded wastewater treatment plant which is designed to fully treat excess flows occurring during heavy rains thereby preventing sanitary sewer overflows that leak diluted raw sewage and pollutants into local creeks and the San Francisco Bay. The treatment plant enables the communities to meet current and future regulatory discharge permit requirements and address significant health concerns that ensure wastewater is treated in a way that does not negatively impact the community. The new treatment plant also ensures that the Town complies with the Regional Water Quality Board’s Cease and Desist Order (CDO) and the National Pollutant Discharge Elimination System (NPDES) permit requirements.

Failure to comply with these requirements could result in large fines that would be passed on to ratepayers and would result in continued public health and environmental concerns. The compliance at the treatment plants, coupled with the Town’s robust collection system capital improvements to address infiltration and inflow, will ensure that the Town’s sewer system is dependable thereby improving the ability to provide reliable sewer service to the Town’s residents on an ongoing basis.

The Town does not have any current plans to issue additional debt to fund sewer capital improvements during the five-year planning period. As discussed above, planned capital Fiscal Years FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 San Mateo O&M $1,157,909 $1,215,805 $1,276,595 $1,340,425 $1,407,446 $1,477,819 Burlingame O&M $1,569,709 $1,648,194 $1,730,604 $1,817,134 $1,907,991 $2,003,390 Subtotal Current Treatment Costs $2,727,618 $2,863,999 $3,007,199 $3,157,559 $3,315,437 $3,481,209 San Mateo Capital $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 Burlingame Capital $0 $0 $0 $0 $0 $0
Subtotal Treatment Plant Upgrades $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 Total Treatment Costs $2,747,618 $2,883,999 $3,027,199 $3,177,559 $3,335,437 $3,501,209 -109-
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improvements through FY 2030-31 will be funded on a PAYGo basis using the Town’s Capital Reserve to avoid rate spikes.

SEWER FUND RESERVES
In addition to covering annual expenses, sewer service charges need to generate revenue to maintain adequate operations and capital reserves. To determine what constitutes adequate reserve amounts, the Town’s sewer enterprise fund balance is divided into Operating, Capital, and Debt Service Reserves. Recommended target balances are set to fund each reserve.

Operating Reserve Target
Operating reserves serve multiple purposes ranging from monthly to annual cash flow management. On a monthly basis, the Operating Reserve provides working capital to cover the lag between when the Town incurs operating expenses and when it receives revenue from sewer service charges. Providing adequate funding for Operating Reserves is the highest priority.

The Town’s current policy is to maintain an Operating Reserve equal to 20% of its combined annual operating expenses and a debt reserve based on bond and loan covenants. Reserving 20% would be a reasonable target if the Town’s revenue stream from sewer service charges was relatively consistent throughout the year. However, because the Town intends to bill customers on the County tax roll, there is a nine-month lag between when sewer service charges are billed and payment is received from the County Tax Assessor. For rate-setting purposes, we recommend an Operating Reserve target equal to 50% of annual operating expenses. Meeting this target will provide six months of operating expenses in reserves during the nine months between payments from the County Tax Assessor. In turn, this will provide a greater financial buffer to the Sewer Enterprise Fund, decreasing the likelihood that temporary funding from the General Fund will be required to meet operating cash flow needs.

Over the five-year planning period, the Operating Reserve target ranges from $4.9 million to $5.6 million.

Debt Reserve Target
The debt reserve accounts for the debt service requirement the Town is obligated to meet in the bond covenants. The Town is required to hold $431,801 in reserve to meet the requirements of the existing loans. The Town has sufficient reserves to meet this target balance in FY 2026-27 and during the five-year financial planning period.

Capital Reserve Target
The Capital Reserve provides liquidity to fund construction for projects that are funded on a PAYGo basis (as opposed to those that are funded from debt). With adequate capital reserves, the Town is able to pay contractors without encroaching on the Operating Reserves. A target reserve balance of $5.1 million was used ($25,689,089 million in total CIP over the five-year planning period ÷ 5 years = $5.1 million per year).
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Maintaining the target balance for the Capital Reserve is recommended after meeting the minimum balance for the Debt Service and Operating Reserves.

FUND BALANCE WITHOUT REVENUE INCREASES
Figure 3-7 shows the projected annual fund balance without the revenue increases (dashed green line). The historic year-end fund balance for FY 2024-25 is shown as a reference and is well above the recommended fund balance target, which is the combination of the Debt Service Reserve target, Operating Reserve target, and Capital Reserve target (Target Reserve; blue line).

As indicated by the green-dashed line in Figure 3-7, based on the projected operating and capital expenses discussed above, without a revenue increase over the next five years, the Town’s Sewer Enterprise Fund Balance will drop below the minimum target (red line, which is equal to the Minimum Reserve target) sometime in FY 2029-30.

Section VI of this report provides our proposed rate increases to generate revenue that will be sufficient to avoid dropping below the minimum target and reach the target balance by FY 2030-31
Figure 3-7. Projected Year-End Sewer Enterprise Fund Balance Figure 3-8. summarizes the reserve target components for each fiscal year. -111-
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Figure 3-8. Projected Year-End Sewer Enterprise Fund Balance Targets FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Recommended Operating Reserve Target¹ $4,651,159 $4,651,159 $4,869,591 $5,044,053 $5,226,407 $5,414,765 $5,617,483 Debt Reserve Target² $431,801 $431,801 $431,801 $431,801 $431,801 $431,801 $431,801 Total Minimum Reserve $5,082,960 $5,082,960 $5,301,392 $5,475,854 $5,658,208 $5,846,566 $6,049,284 Capital Reserve Target³ $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 Total Target Reserve $9,472,960 $9,472,960 $10,439,210 $10,613,672 $10,796,026 $10,984,384 $11,187,102 ¹ 50% of Operating Expenses, excluding debt service and PAYGo ² The Town is required to hold $431,801 in reserve to meet the requirements of the existing debt service. ³ Average annual CIP over 5-year planning period (FY 2026-27 to FY 2030-31; $23.6 Million ÷ 5 years) -112-
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IV. Proposed Sewer Service Charges

REVENUE INCREASES
In order to meet the O&M expense, capital expense, debt payment, and reserve level obligations of the sewer, it is recommended that the Town increase sewer revenues by the following amounts:

Figure 4-1. Annual Revenue Increases
The proposed revenue increases will generate $510,000-$575,000 in additional revenue with each 3.0% increase, as shown in Table 3 of the attached model. Revenue increases were derived to fund the revenue requirements assuming the Town’s current customer base of 4,000.75 EDUs (3,904 residential EDUs from 3,904 residential parcels and 96.75 commercial EDUs from eight commercial customers). No growth in accounts has been assumed due to the built-out nature of the Town. If significant growth in accounts does occur, the additional revenue will increase the reserve balance, which may allow future increases to be less than projected.

Projected rates include allocating 2.65 EDUs to Town facilities for purposes of charging the Town for sewer service, based on the Town’s most recent three-year indoor water use data analyzed by the California Data Collaborative.

FUND BALANCE WITH REVENUE INCREASES
Figure 4-2 shows the projected year-end sewer fund balance with the rate revenue increases recommended in Figure 4-1 (solid green line) and without the rate increases (dashed green line).

Although the projections show straight lines between years, the fund balance will be drawn down substantially during each year. In other words, the reserves are actively drawn on at all times during the year but only periodically added to when payments are received from the County. The reserves are not simply accumulated without being used.

Fiscal Revenue
Year Increase
FY 2026-27 3.0%
FY 2027-28 3.0%
FY 2028-29 3.0%
FY 2029-30 3.0%
FY 2030-31 3.0%
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Figure 4-2. Projected Year-End Sewer Enterprise Fund Balance The recommended revenue increases will maintain a fund balance at or above the target during the five-year planning period.

PROPOSED RATES
The primary objective of a rate structure for each customer class is proportional allocation of the cost of wastewater service. To achieve proportionality with its commercial customers, whose flows and wastewater strengths vary widely, the Town bills these commercial customers based on their estimated wastewater discharge, which is a common industry practice.

Because the residential class is comparatively homogeneous in the strength of wastewater discharged, the Town bills its residential customers a uniform annual charge, regardless of flow, which is also a common industry practice. We recommend continuing this practice.

Commercial customers are currently charged based on their indoor water use as it compares to water use by a single-family customer, which is the basis for the per EDU rate. One rate per EDU is calculated for all customers. While single-family customers are charged 1 EDU per year, which represents 78 HCF of wastewater discharged, commercial customers are charged multiple EDUs in proportion to their respective wastewater discharge to the 78 HCF. For example, a commercial customer that is determined to have 93.6 HCF3 of indoor water use is charged 1.2 EDUs. Historically, single-family indoor water use was projected to be 144 HCF 3 Which is calculated annually by Town using the average indoor water use from the previous three-year period.
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per year. Based on updated information, including through working with the California Data Collaborative who was able to analyze water use data for all single-family customers over the past three-year period, it was determined that the current indoor water use for single-family customers is 78 HCF per year. This reflects changes in water consumption patterns resulting from periodic drought conditions over the past 20 years and changes in plumbing codes require more water efficient appliances (i.e., low-flow toilets, showerheads, etc.). As such, commercial EDUs used to determine the per EDU rate have increased from 50.48 to 96.75, as shown in Figure 4-3, which will result in higher charges to commercial customers beyond the 3% increase in the revenue requirement.

Figure 4-3. Change in Commercial EDUs
Figure 4-4 presents the proposed per EDU Sewer rates, using the revised commercial EDUs, for FY 2026-27 through FY 2030-31, that will generate the necessary revenue to meet the net revenue requirement (as summarized in Figure 3-1).

Figure 4-4. Proposed Annual Sewer Rates ($/EDU)
All residential customers are equal to one Equivalent Dwelling Unit (EDU); Commercial customers are charged based on their respective winter water use, whereas 1 EDU is equal to 78 hundred cubic feet (HCF), which is equivalent to the average indoor water use of all single-family residences.

Customer Type Current FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Single-Family Residential 3,904.00 3,904.00 3,904.00 3,904.00 3,904.00 3,904.00 Commercial
Hillsborough Racquet Club 1.00 1.00 1.00 1.00 1.00 1.00 Cal Trans Rest Stop 5.90 9.80 9.80 9.80 9.80 9.80
Crystal Springs Upland School 4.20 7.60 7.60 7.60 7.60 7.60 Burlingame Country Club 16.80 31.80 31.80 31.80 31.80 31.80 Crystal Springs Golf Club 6.60 12.90 12.90 12.90 12.90 12.90 Hillsborough School District 10.90 20.60 20.60 20.60 20.60 20.60 Nueva School 3.20 10.40 10.40 10.40 10.40 10.40
Town of Hillsborough 1.88 2.65 2.65 2.65 2.65 2.65
Subtotal - Commercial 50.48 96.75 96.75 96.75 96.75 96.75 Total EDUS 3,954.48 4,000.75 4,000.75 4,000.75 4,000.75 4,000.75 Charge per EDU FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Net Revenue Requirement1$17,550,848 $18,077,374 $18,619,695 $19,178,286 $19,753,634 EDUs2 4,000.75 4,000.75 4,000.75 4,000.75 4,000.75
Charge per EDU $4,386.89 $4,518.49 $4,654.05 $4,793.67 $4,937.48 1 Figure 3-1
2 Figure 4-3
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APPENDIX A

SEWER RATE MODEL
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A B DE FGH I
Town of HillsboroughWastewater AnalysisTable 1A. Summary FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 eff. date 7/1/2026 7/1/2027 7/1/2028 7/1/2029 7/1/2030
Approved Projected Projected Projected Projected Projected Revenue Adjustments 4.0% 3.0% 3.0% 3.0% 3.0% 3.0%
Annual Increase ($) $76 $132 $136 $160 $144
Annual Charge per EDU $4,311.00 $4,386.89 $4,518.49 $4,654.05 $4,793.67 $4,937.48 $0.0$2.0$4.0$6.0$8.0
$10.0$12.0$14.0
FY 2024-25 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Revenue
Increase

3.0% 3.0% 3.0% 3.0% 3.0%
Debt
Coverage 2.18 2.12 2.14 2.21 2.24 2.66
Total Reserve Balance ($ Millions)
Balance w/o Rate Increases Debt Reserve + Operating TargetOperating + Capital + Debt Reserve Balance with Rate Increases HF&H Consultants, LLC3/3/2026 1:22 PM 1 of 10
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Table 1A. Summary
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A B CDE FGH I
Town of HillsboroughWastewater AnalysisTable 1B. General FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Assumptions
a General Inflation Budget Budget Budget Budget Budget 3.0% To Table 2 b Salaries Budget Budget Budget Budget Budget 3.0% To Table 2 c Medical Benefits Budget Budget Budget Budget Budget 5.0% To Table 2 d Retirement Costs (CalPERS) Budget Budget Budget Budget Budget 5.0% To Table 2 e O&M due to CWP Budget Budget Budget Budget Budget 5.0% To Table 2 f Burlingame WWTP O&M Inflation Budget 5.0% 5.0% 5.0% 5.0% 5.0% To Table 2 g Interest on Earnings 4.0% 2.0% 2.0% 2.0% 2.0% 2.0% To Table 4h Non-rate Revenues Budget 0.0% 0.0% 0.0% 0.0% 0.0% To Table 2 i % Change in Demand Budget 0.0% 0.0% 0.0% 0.0% 0.0% To Table 2, 3 j Construction Cost Inflation 0.0% 3.3% 3.3% 3.3% 3.3% 3.3% Town estimate; to Table 5 k San Mateo WWTP O&M Inflation Budget 5.0% 5.0% 5.0% 5.0% 5.0% Town estimate; To Table 2 l Growth EDUs 000000
Fund Balance Policies
Minimum balance
Purpose For O&M cash flow during the year Minimum balance Cannot go negativeTarget balance (Recommended) 50% of Annual Operationg Expenses (excludes debt service) Bond/SRF Reserve
Purpose Meet requirements of the existing Certificates of Participation and the SRF LoanMinimum balance $431,801Target balance $431,801 Capital Reserve
Purpose SRF Loan Covenant RequirementMinimum balance Cannot go negativeTarget balance (Current policy) NoneTarget balance (Recommended) Average annual PAYGo CIP over 5-year period.

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Table 1B. General
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A B CD E F G H I J
Town of HillsboroughWastewater AnalysisTable 2. Total Rev Req Budgeted Projections
Tbl 1B FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Salaries & Benefits
Salary b $746,195 $794,627 $835,367 $873,731 $899,943 $926,941 Overtime b $36,845 $37,950 $39,089 $40,262 $41,469 $42,713 Salary- Part Time b $27,500 $28,325 $29,175 $30,050 $30,951 $31,880 Leave at Retirement b $0$0$0$0$0$0
Vac/Sick Leave Payout b $3,900 $4,095 $4,299 $4,514 $4,740 $4,882 Vacation Cash out b $0 $0 $0 $0 $0 $0
Uniform Allowance b $5,472 $5,636 $5,805 $5,979 $6,159 $6,344 Medicare/FICA b $61,864 $63,720 $65,632 $67,600 $69,628 $71,717 PERS d $165,874 $173,603 $180,360 $193,488 $218,488 $229,413 Deferred Comp (ER) Expense b $7,200 $7,200 $7,200 $7,200 $7,200 $7,416 Health Benefits Insurance c $98,666 $103,599 $108,779 $114,218 $119,929 $125,926 Life Insurance c $894 $939 $986 $1,035 $1,087 $1,141
Dental/Vision c $9,598 $10,078 $10,582 $11,111 $11,667 $12,250 Long Term Disability c $1,094 $1,149 $1,206 $1,266 $1,330 $1,396 Retired Employee Benefit d $47,702 $48,766 $49,854 $50,965 $52,102 $54,707 Retirement Health Savings Plan d $18,398 $18,808 $19,227 $19,656 $20,094 $21,099 Safety/ Compliance Prog Assessment b $850 $876 $902 $929 $957 $985 Workers Comp Insurance b $64,968 $163,029 $167,920 $172,957 $178,146 $183,490 Salaries & Benefits subtotal $1,297,020 $1,462,399 $1,526,383 $1,594,962 $1,663,890 $1,722,301 Materials & Services
Office Supplies a $6,740 $6,909 $7,082 $7,259 $7,440 $7,663 Parts/Supplies a $126,500 $129,663 $132,904 $136,227 $139,632 $143,821 Tools/Equipment a $27,500 $28,188 $28,892 $29,614 $30,355 $31,266 Miscellaneous a $4,656 $4,772 $4,892 $5,014 $5,139 $5,293 Bank Fees a $4,043 $4,144 $4,247 $4,353 $4,462 $4,596
Signs/Barricades/Cones a $16,570 $16,984 $17,409 $17,844 $18,290 $18,839 Contractual - Project Management a $103,214 $105,794 $108,439 $111,150 $113,929 $117,347 Contractual - Professional Svcs a $73,863 $75,710 $77,602 $79,542 $81,531 $83,977 Contractual - General e $146,603 $150,268 $154,025 $157,875 $161,822 $169,913 Professional Services e $25,000 $25,625 $26,266 $26,922 $27,595 $28,975 Single Auditing Services a $0$0$0$0$0$0
Rental Expense a $35,535 $36,423 $37,334 $38,267 $39,224 $40,400 Pump Maintenance a $58,887 $30,000 $30,750 $31,519 $32,307 $33,276 Equipment Repair a $8,328 $8,536 $8,749 $8,968 $9,192 $9,468 Training a $18,196 $18,651 $19,117 $19,595 $20,085 $20,687 Personnel a $17,250 $14,500 $14,863 $15,234 $15,615 $16,083 Professional Development a $33,000 $33,825 $34,671 $35,537 $36,426 $37,519 Dues & Subscriptions a $0 $0 $0 $0 $0 $0
Allocated Costs a $783,323 $802,906 $822,979 $843,553 $864,642 $890,581 Utilities e $18,932 $19,405 $19,890 $20,387 $20,897 $21,942 Telephone/Pagers/Radios/GPS a $8,250 $8,456 $8,668 $8,884 $9,106 $9,380 Gas & Oil e $34,309 $35,167 $36,046 $36,947 $37,871 $39,764 Vehicle Repair & Maintenance a $123,050 $126,126 $129,279 $132,511 $135,824 $139,899 Printing a $4,718 $4,835 $4,956 $5,080 $5,207 $5,363
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Table 2. Total Rev Req
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A B CD E F G H I J
Town of HillsboroughWastewater AnalysisTable 2. Total Rev Req Budgeted Projections
Tbl 1B FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes 53545556575859606162636465666768697071727374757677787980818283848586878889909899 Postage a $4,718 $4,835 $4,956 $5,080 $5,207 $5,363
Corp Yard Maintenance e $62,700 $64,268 $65,874 $67,521 $69,209 $72,670 County Tax Collection Fee a $8,746 $8,965 $9,189 $9,419 $9,654 $9,944 Dam Inspection/State Svcsa $0$0$0$0$0$0 Generator Maintenance a $24,060 $24,662 $25,278 $25,910 $26,558 $27,354 Emergency Project a $13,500 $13,838 $14,183 $14,538 $14,901 $15,349 Claims Expense a $20,000 $50,000 $50,000 $50,000 $50,000 $51,500 Materials and Services subtotal $1,812,189 $1,853,453 $1,898,539 $1,944,753 $1,992,121 $2,058,233 Treatment Costs
Sewage Disposal - San Mateo k $1,157,909 $1,215,805 $1,276,595 $1,340,425 $1,407,446 $1,477,819 Current Town estimates Sewage Disposal CIP-San Mateo $20,000 $20,000 $20,000 $20,000 $20,000 $20,000 Current Town estimates Sewage Disposal - Burlingame f $1,569,709 $1,648,194 $1,730,604 $1,817,134 $1,907,991 $2,003,390 Current Town estimates Sewage Disposal CIP-Burlingame $0 $0 $0 $0 $0 $0 Current Town estimates San Mateo Clean Water k $0 $0 $0 $0 $0 $0 Current Town estimates Treatment subtotal $2,747,618 $2,883,999 $3,027,199 $3,177,559 $3,335,437 $3,501,209 Administrative & Other Costs
Computer a $7,500 $7,500 $7,500 $7,500 $7,500 $7,725
Vehicle a $300,000 $300,000 $300,000 $300,000 $300,000 $309,000 Furniture & Fixtures a $0$0$0$0$0$0 Equipment Replacement a $10,000 $10,000 $10,000 $10,000 $10,000 $10,300 Overhead Allocation a $3,127,992 $3,221,831 $3,318,486 $3,418,041 $3,520,582 $3,626,199 $3,445,492 $3,539,331 $3,635,986 $3,735,541 $3,838,082 $3,953,224 Subtotal, Operating Expenses $9,302,318 $9,739,182 $10,088,107 $10,452,815 $10,829,531 $11,234,967 Debt Service and Capital Expenditures
Existing Debt Service $3,785,856 $3,808,268 $3,832,606 $3,798,093 $3,820,231 $3,280,153 From Table 6 Macadamia Project Costs $0$0$0$0$0$0 Town analysis
Macadamia Bridge Loan $0 $0 $0 $0 $0 $0 From Table 6
To/From Capital Reserves (PAYGo Capital) $4,390,000 $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 From Table 4 Subtotal $8,175,856 $8,946,086 $8,970,424 $8,935,911 $8,958,049 $8,417,971 Transfer
Transfer to/(from) Operating Reserves ($438,515) ($1,134,420) ($981,157) ($769,031) ($609,293) $100,697 NET Revenue Requirement $17,039,659 $17,550,848 $18,077,374 $18,619,695 $19,178,286 $19,753,634 To Table 3 Annual Change 3.0% 3.0% 3.0% 3.0% 3.0%
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Table 2. Total Rev Req
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Town of HillsboroughWastewater AnalysisTable 3A. Rev Increase FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Rate Revenue @ Current Rates
Revenue from Current Rates $17,039,659 $17,039,659 $17,039,659 $17,039,659 $17,039,659 $17,039,659 Revenue Requirement $17,039,659 $17,550,848 $18,077,374 $18,619,695 $19,178,286 $19,753,634 Surplus/(Deficit) $0 ($511,190) ($1,037,715) ($1,580,036) ($2,138,627) ($2,713,976) Increase in Revenue from Rates 0.0% 3.0% 3.0% 3.0% 3.0% 3.0% Revenue from Current Rates $17,039,659 $17,039,659 $17,039,659 $17,039,659 $17,039,659 $17,039,659 Revenue from Rate Increases
FY 2026-27 (eff. July 1, 2026) 12 $511,190 $511,190 $511,190 $511,190 $511,190 FY 2027-28 (eff. July 1, 2027) 12 $526,525 $526,525 $526,525 $526,525 FY 2028-29 (eff. July 1, 2028) 12 $542,321 $542,321 $542,321FY 2029-30 (eff. July 1, 2029) 12 $558,591 $558,591FY 2030-31 (eff. July 1, 2030) 12 $575,349 Subtotal - Revenue from Rate Increases $0 $511,190 $1,037,715 $1,580,036 $2,138,627 $2,713,976 Total Rate Revenue $17,039,659 $17,550,848 $18,077,374 $18,619,695 $19,178,286 $19,753,634 Net Revenue Requirements ($17,039,659) ($17,550,848) ($18,077,374) ($18,619,695) ($19,178,286) ($19,753,634) Surplus/(Deficit) after Rate Increase $0 $0 $0 $0 $0 $0 HF&H Consultants, LLC3/3/2026 1:22 PM 5 of 10
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Table 3A. Rev Increase
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Town of HillsboroughWastewater AnalysisTable 3B. Current Rev FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Number of EDUs
Residential 3,904.00 3,904.00 3,904.00 3,904.00 3,904.00 3,904.00Hillsborough Racquet Club 1.00 1.00 1.00 1.00 1.00 1.00Cal Trans Rest Stop 5.90 5.90 5.90 5.90 5.90 5.90Crystal Springs Upland School 4.20 4.20 4.20 4.20 4.20 4.20Burlingame Country Club 16.80 16.80 16.80 16.80 16.80 16.80Crystal Springs Golf Club 6.60 6.60 6.60 6.60 6.60 6.60Hillsborough School District 10.90 10.90 10.90 10.90 10.90 10.90Nueva School 3.20 3.20 3.20 3.20 3.20 3.20 Subtotal 3,952.60 3,952.60 3,952.60 3,952.60 3,952.60 3,952.60 Growth EDUs 000000 From Table 1B
Total EDUS 3,952.60 3,952.60 3,952.60 3,952.60 3,952.60 3,952.60 Current Annual Rate $4,311.00 $4,311.00 $4,311.00 $4,311.00 $4,311.00 $4,311.00 Total Annual Rate Revenue $17,039,659 $17,039,659 $17,039,659 $17,039,659 $17,039,659 $17,039,659 HF&H Consultants, LLC3/3/2026 1:22 PM 6 of 10
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Table 3B. Current Rev
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Town of HillsboroughWastewater AnalysisTable 4. Reserves Estimated
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Operating FundWith Rate Increases
Increase in Rate Revenue: 3.0% 3.0% 3.0% 3.0% 3.0% From Table 1 Beginning Balance $8,378,646 $8,266,506 $7,286,073 $6,440,826 $5,792,921 $5,293,393 Transfer to/(from) Operating Fund $0 $0 $0 $0 $0 $0 From Table 3Transfers (to)/from:

Revenue Requirements ($438,515) ($1,134,420) ($981,157) ($769,031) ($609,293) $100,697 To Row 55 Bond/SRF Reserve $0 $0 $0 $0 $0 $0 To Rows 41 and 56 Capital Reserve $0 $0 $0 $0 $0 $0 To Rows 30 and 57 Fund Subtotal $7,940,131 $7,132,087 $6,304,916 $5,671,795 $5,183,628 $5,394,090 Estimated Interest Earnings $326,376 $153,986 $135,910 $121,126 $109,765 $106,875 Avg. Bal. * Table 1B assumption g.

Ending Balance with Rate Increase $8,378,646 $8,266,506 $7,286,073 $6,440,826 $5,792,921 $5,293,393 $5,500,965 Minimum Balance - HFH Method $4,651,159 $4,651,159 $4,869,591 $5,044,053 $5,226,407 $5,414,765 $5,617,483 6 mos. Operating Expenses; (Table 2a, Row 70) * 50% Minimum Balance - Town Method $2,617,635 $2,617,635 $2,709,490 $2,784,143 $2,850,182 $2,929,952 $2,903,024 (Total Expenditures - PAYGo Capital) * 20% Fund Balance Compared to Minimum 316% 269% 231% 203% 181% 189% Capital Replacement Reserve
Beginning Balance $4,300,000 $4,472,000 $4,494,945 $3,905,389 $4,673,943 $5,186,186 FY 2025-26 Beginning balance per TownCapital Projects Expenditures ($4,390,000) ($5,203,655) ($5,810,545) ($4,454,208) ($4,723,199) ($5,497,481) From Table 5 Transfers (to)/from:

Revenue Requirements $4,390,000 $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 To Table 2Operating Fund $0 $0 $0 $0 $0 $0 From above Fund Subtotal $4,300,000 $4,406,163 $3,822,217 $4,588,999 $5,088,561 $4,826,522 Estimated interest earnings $172,000 $88,782 $83,172 $84,944 $97,625 $100,127 Avg. Bal. * Table 1B assumption g.

Ending Balance $4,300,000 $4,472,000 $4,494,945 $3,905,389 $4,673,943 $5,186,186 $4,926,649 Target Balance $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 $5,137,818 From Table 5 - Avg annual cash-funded CIP Fund Balance Compared to Target 84% 87% 76% 91% 101% 96% Bond/SRF Reserve
Beginning Balance $431,801 $449,073 $458,055 $467,216 $476,560 $486,091 FY 2020-21 Beginning balance per Town Transfers (to)/from:

Revenue Requirements $0 $0 $0 $0 $0 $0Operating Fund $0 $0 $0 $0 $0 $0 From above Fund Subtotal $431,801 $449,073 $458,055 $467,216 $476,560 $486,091 Estimated interest earnings $17,272 $8,981 $9,161 $9,344 $9,531 $9,722 Avg. Bal. * Table 1B assumption g.

Ending Balance $431,801 $449,073 $458,055 $467,216 $476,560 $486,091 $495,813 Target Balance $431,801 $431,801 $431,801 $431,801 $431,801 $431,801 $431,801 Fund Balance Compared to Target 104% 106% 108% 110% 113% 115% Projected
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Table 4. Reserves
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Town of HillsboroughWastewater AnalysisTable 5. Capital Projects Fiscal Year: FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes Project # Sewer Collection System Capital Expenditures Source: Sewer Enterprise Budget 702 Smoke Testing & Video Inspections Priority Basins $185,000 $185,000 $185,000 $185,000 $185,000701 Priority Basins Inflow & Infiltration Rehabilitation Program $3,500,000 $3,500,000 $3,500,000 $3,500,000 $3,500,000 704 Flow Metering/Modeling $180,000 $180,000707 Miscellaneous Sewer System Repairs $170,000 $170,000 $170,000 $170,000 $170,000708 Sewer Lift Station Improvements $250,000 $1,000,000 $1,300,000715 CCTV Inspection/Root Removal $285,000 $285,000 $285,000 Future Capital Projections $4,662,500
Total Project Costs $4,390,000 $5,035,000 $5,440,000 $4,035,000 $4,140,000 $4,662,500 Construction Cost Inflator 1.000 1.033 1.068 1.104 1.141 1.179 Source: Sewer Enterprise Budget Total Project Costs (with inflation) $4,390,000 $5,203,655 $5,810,545 $4,454,208 $4,723,199 $5,497,481 Average Annual PAYGo $5,137,818
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Table 5. Capital Projects
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Town of HillsboroughWastewater AnalysisTable 6. Debt Coverage Estimated Projected
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Notes

DEBT COVERAGE RATIO
SEWER
Gross Revenue
Sewer Service Charge $17,039,659 $17,550,848 $18,077,374 $18,619,695 $19,178,286 $19,753,634 From Table 3 Non-Operating Revenues $0 $0 $0 $0 $0 $0 From Table 2Interest $515,648 $251,749 $228,243 $215,414 $216,922 $216,724 From Table 4 Total Gross Revenue $17,555,306 $17,802,597 $18,305,616 $18,835,109 $19,395,208 $19,970,358 Operating Expenses
Salaries & Benefits $1,297,020 $1,462,399 $1,526,383 $1,594,962 $1,663,890 $1,722,301 From Table 2 Materials & Service $1,812,189 $1,853,453 $1,898,539 $1,944,753 $1,992,121 $2,058,233 From Table 2Treatment Costs $2,747,618 $2,883,999 $3,027,199 $3,177,559 $3,335,437 $3,501,209 From Table 2 Admin & Other Costs $3,445,492 $3,539,331 $3,635,986 $3,735,541 $3,838,082 $3,953,224 From Table 2 Total Operating Expenses $9,302,318 $9,739,182 $10,088,107 $10,452,815 $10,829,531 $11,234,967 Net Available Revenues $8,252,988 $8,063,415 $8,217,509 $8,382,295 $8,565,677 $8,735,391 Debt Service PaymentsRevenue Refunding Bonds, Series 2023 A Principal $1,785,000 $1,915,000 $2,055,000 $2,095,000 $2,240,000 $1,370,000 Interest $788,250 $699,000 $603,250 $500,500 $395,750 $283,790 Total $2,573,250 $2,614,000 $2,658,250 $2,595,500 $2,635,750 $1,653,790 55% 55% 55% 55% 55% 55% 55% attributed to
Total Portion attributable to Sewer $1,415,288 $1,437,700 $1,462,038 $1,427,525 $1,449,663 $909,585 the Sewer System State Revolving Fund Loan
Total $431,801 $431,801 $431,801 $431,801 $431,801 $431,801 San Mateo Clean Water $1,938,767 $1,938,767 $1,938,767 $1,938,767 $1,938,767 $1,938,767 Total
Bridge Loan Macadamia Project
Total $0$0$0$0$0$0
Total Debt Service $3,785,856 $3,808,268 $3,832,606 $3,798,093 $3,820,231 $3,280,153 To Table 2 Debt Coverage Ratio 2.18 2.12 2.14 2.21 2.24 2.66 To Table 1 HF&H Consultants, LLC3/3/2026 1:22 PM 9 of 10
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Table 6. Debt Coverage
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Town of HillsboroughWastewater AnalysisTable 7. COS
FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Total Rate Revenue $17,039,659 $17,550,848 $18,077,374 $18,619,695 $19,178,286 $19,753,634 from Table 3AEDUs 4,000.75 4,000.75 4,000.75 4,000.75 4,000.75 4,000.75 from below Charge per EDU $4,259.11 $4,386.89 $4,518.49 $4,654.05 $4,793.67 $4,937.48 Current COS COS
FY 2025-26 FY 2025-26 FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31 Number of EDUs
Single-Family Residential 3,904.00 3,904.00 3,904.00 3,904.00 3,904.00 3,904.00 3,904.00 From Supporting Detail Single Family Winter Water UseHillsborough Racquet Club 1.00 1.00 1.00 1.00 1.00 1.00 1.00 From Supporting Detail Commercial EDUs Cal Trans Rest Stop 5.90 9.80 9.80 9.80 9.80 9.80 9.80
Crystal Springs Upland School 4.20 7.60 7.60 7.60 7.60 7.60 7.60 Burlingame Country Club 16.80 31.80 31.80 31.80 31.80 31.80 31.80Crystal Springs Golf Club 6.60 12.90 12.90 12.90 12.90 12.90 12.90Hillsborough School District 10.90 20.60 20.60 20.60 20.60 20.60 20.60 Nueva School 3.20 10.40 10.40 10.40 10.40 10.40 10.40Town of Hillsborough 1.88 2.65 2.65 2.65 2.65 2.65 2.65 Subtotal - Commercial 3,954.48 4,000.75 4,000.75 4,000.75 4,000.75 4,000.75 4,000.75 Growth EDUs 000000 No growth assumed
Total EDUS 4,000.75 4,000.75 4,000.75 4,000.75 4,000.75 4,000.75 HF&H Consultants, LLC3/3/2026 1:22 PM Page 10 of 10
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Table 7. COS
1 NOTICE OF PUBLIC HEARING ON PROPOSED

ADJUSTMENTS AND INCREASES TO
TOWN OF HILLSBOROUGH SEWER SERVICE CHARGES BEGINNING JULY 1, 2026 The Town of Hillsborough invites the public to attend a public hearing to be held on Monday, May 11, 2026, at 6:00 p.m. to consider adoption of a five-year schedule of adjustments and increases to the Town’s sewer rates, to be effective July 1, 2026.

The purpose of the public hearing is to consider all oral testimony and written protests to, and the adoption of, the proposed rates. If adopted, the new rates will go into effect for services provided on and after July 1, 2026, and will be adjusted each July 1 thereafter through, and including, July 1, 2030.

RATE ADJUSTMENT PROCESS
The proposed rate adjustments and increases are based on an analysis by an independent rate consultant that demonstrated the proportional cost to the Town of providing sewer service to each property it serves. A copy of the rate study report is available online at https://www.hillsborough.net/DocumentCenter/View/6517/2026- Hillsborough-Sewer-Rate-StudyReport and is on file with the City Clerk.

ABOUT THE TOWN’S SEWER SYSTEM SERVICE
The Town of Hillsborough provides sewer service to approximately 11,000 Town residents and seven institutional and commercial customers. The Town’s sewer utility is a self-supporting enterprise that charges sewer service charges which must be adequate to fund the utility’s operating and maintenance costs, debt service obligations, and ongoing capital improvement needs.

The Town collects wastewater via a system of approximately 98 miles of sewer pipelines. The Town’s wastewater is conveyed to the Cities of Burlingame and San Mateo for treatment at their respective facilities.

WHY DO RATES NEED TO CHANGE?
The proposed rates are needed to keep revenues aligned with long-term funding needs, including:
• Funding $25.7 million in collection system capital improvement projects over the next five years to continue the trend of reducing sewer overflows, assisting residents with private lateral repairs, and preventing excess stormwater from entering the sewer system which leads to unnecessary treatment costs of rainwater. • Funding the Town’s proportionate share (approximately $48 million over a 30-year period) of an estimated $1 billion upgrade at the San Mateo treatment plant to replace aging infrastructure, meet current and future regulatory requirements, and reduce wet-weather overflows. The Town’s remaining balance to be funded by rates is approximately $38 million as of June 30, 2025. • Funding inflationary increases in staff and collection system operating and maintenance costs. No staffing increases necessary.
• Aligning the rates with the projected cost of service for each level of service provided.

PROPOSED SEWER RATES
The Town charges fixed annual sewer rates to its customers. All residential customers pay the same rate and the Town proposes to include sewer service charges on the annual property tax rolls. Commercial customers are billed annually based on the number of Equivalent Dwelling Units (EDUs) assigned to each customer. An EDU represents the estimated wastewater discharge from a typical residential customer, which is equal to 78 hundred cubic feet (HCF) per year. All residents are assumed to discharge 78 HCF annually, and are thus charged one EDU. EDUs are assigned to commercial customers based on calculated indoor water use from the prior three ATTACHMENT 2
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2 years. The following table shows the maximum sewer rates to be adopted for the next five fiscal years. The study demonstrates that the proposed maximum rates do not exceed the proportional cost of service on a parcel basis.

YOUR OPPORTUNITY TO GET INVOLVED
After reading the information in this letter, you may wish to provide input to the City Council. Below are three ways that you can get involved.

PUBLIC HEARING, OBJECTIONS, AND PROTESTS
Attend the Public Hearing:

Any interested member of the public may attend the public hearing, which will be held at:

Monday, May 11, 2026 at 6:00 p.m.
1600 Floribunda Avenue – Council Chambers
Hillsborough, CA 94010
At the public hearing, you will have an opportunity to provide oral or written testimony to the City Council, and may also submit a written protest as described below. Please note that submitting oral testimony at the City Council meeting will not count as a written protest unless accompanied by written protest that meets the requirements described below. The City Council will consider all oral and written testimony and timely written protests, and determine whether a majority protest exists prior to deliberating on the proposed rate adjustments.

Submit a Written Protest:

In addition to, or instead of, participating in the public hearing, any record owner of a parcel upon which the sewer service charges are proposed to be imposed and any tenant directly liable for the payment of sewer service charges (i.e., a customer of record who is not a property owner) may submit a written protest to the proposed rate adjustments and increases to the Town’s service charges; however, only one protest will be counted per identified parcel. To be valid, a written protest must: (1) state that the identified property owner or tenant is opposed to the proposed sewer rate adjustments; (2) provide the location of the identified parcel (by street address, assessor’s parcel number, or customer account number); and (3) include the name and signature of the property owner or tenant submitting the protest. Written protests may be submitted to the City Clerk by mail or in person at 1600 Floribunda Avenue, Hillsborough, CA 94010, or during the public hearing (date, time, and location noted above).

The City Clerk must receive written protests delivered by mail no later than 4:00 p.m. on the date of the Public Hearing. If submitted during the public hearing, the written protest must be received prior to the close of the public testimony portion of the public hearing. Any protest submitted via e-mail or other electronic means will not be accepted as a valid written protest. Please indicate on the outside of any envelope mailed to the Town Attn:

Sewer Rate Hearing.

Submit a Written Objection
Finally, and separate from the written protest procedure, parties that wish to preserve the right to legally challenge the proposed sewer rate adjustments must submit a written objection by 4:00 p.m. on May 5, 2026. This is an exhaustion of administrative remedies requirement and is a separate legal requirement from the written protest.

Proposed Maximum Annual Charger per EDU
FY 2026-27 FY 2027-28 FY 2028-29 FY 2029-30 FY 2030-31
Current Rates eff. 7/1/2026 eff. 7/1/2027 eff. 7/1/2028 eff. 7/1/2029 eff. 7/1/2030 All Customers ($/EDU) $4,311.00 $4,386.89 $4,518.49 $4,654.05 $4,793.67 $4,937.48 $ Increase $75.89 $131.60 $135.56 $139.62 $143.81
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3 In order to be valid, your written objection must:

1. Include a clear statement that it is an objection to the proposed sewer rates.

2. Provide the name of the record owner or customer of record;

3. Identify the affected parcel by assessor’s parcel number or service address;

4. Include an explanation of why you believe the rates are illegal. The explanation must be in sufficient detail to allow the Town to determine whether any changes to the proposed rates are necessary. A statement that the rates are too high is insufficient to constitute a valid legal objection.. Similarly, a statement that the rates are illegal because they violate Proposition 218, without additional information that allows the Town to understand whether any changes to the rates are necessary, is insufficient to constitute a valid legal objection.

5. Include the signature of the record owner or customer of record with respect to the identified parcel.

To be valid, all written objections must include the information listed above and be received by the City Clerk by 4:00 p.m. on May 5, 2026, by mail or in person at 1600 Floribunda Ave., Hillsborough, CA 94010.

Failure to submit a timely objection that meets the requirements described above will bar any right to challenge the sewer service charges through a legal proceeding.

Prior to the close of the public hearing, the City Council will consider and respond in writing to any timely, valid written objections. The Town’s responses will explain the substantive basis for retaining or altering the proposed sewer rates in response to the written objection, and, if applicable, the grounds for not making any amendments in response to the objection. The City Council will accept and consider all written protests and will hear and consider all oral comments to the proposed rate adjustments and increases at the public hearing. Oral comments at the public hearing will not qualify as formal protests unless accompanied by a written protest. Upon the conclusion of the public hearing, the City Council will consider adoption of the proposed rate adjustments and increases as described in this notice. If written protests against the proposed rates are not presented by a majority of the property owners or tenants of the identified parcels subject to the proposed rate increases and the City Council will be authorized to adopt the rate increases.

The documents supporting the rate adjustments and increases are available for review online at https://www.hillsborough.net/DocumentCenter/View/6517/2026-Hillsborough-Sewer-Rate-StudyReport and at the City Clerk’s office between 8:00 a.m. and 5:00 p.m., Monday through Thursday, and between 8:00 a.m. and 12:00 p.m. on Fridays.

The proposed sewer rates are subject to Government Code section 53759. You are hereby notified, pursuant to Government Code section 53759 that any judicial action or proceeding to attack, review, set aside, void, validate, or annul the City Council’s adoption of the proposed sewer rates must be commenced within 120 days of the effective date or of the date of the final passage, adoption, or approval of the ordinance or resolution adopting the sewer rates, whichever is later.
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Town of Hillsborough
Proposition 218 Noticing, Tabulation, and Protest Procedures The following procedures set forth the process for the completion, filing and tabulation of written protests for the Notice of Public Hearing on Proposed Adjustments and Increases to Town of Hillsborough Sewer Rates. These procedures are intended to assist the Town in complying with the process requirements set forth in Proposition 218 (The 218 Process).

The City Clerk’s office (City Clerk) will be responsible for the 218 Process for the Town and may be assisted by Town staff or outside professionals. These procedures will be kept on file in the office of the City Clerk.

A. Completion of Written Protest

1. Which properties are subject to the 218 Process?
Properties that are within the service area of the Town of Hillsborough are subject to the 218 Process.

These properties will be designated as the Town’s “Service Area” within these Procedures.

Protests received from properties within the Service Area will be tabulated in accordance with Proposition 218 and the procedures outlined herein.

2. Who may file Written Protest?
The owner of the assessor’s parcel subject to the rate increase may file a written protest. As used in these Procedures, the term “Owner” includes the owner’s authorized representative. If the owner of the parcel is a partnership, joint tenancy, or tenancy in common, a Protest may be filed by any of the general partners, joint tenants, or tenants in common.

3. Contents of the Written Protest
Only Protests submitted in accordance with the Town’s “Notice of Public Hearing on Proposed Adjustments and Increases to Town of Hillsborough Sewer Rates” will be tabulated. To be valid, the written protest must include the following information:
:(1) state that the identified property owner or tenant is opposed to the proposed sewer rate adjustments. (2) provide the location of the identified parcel (by street address, assessor’s parcel number, or customer account number); and
(3) include the name and signature of the property owner or tenant submitting the protest.

4. Valid Protest?
Only written protests with all required information stated above will be considered valid and included in the final tabulation. Protests by telephone, fax, or e-mail will not be accepted.

B. Return of the Protest

1. Where to file the Protest?
Written protests may be submitted to the City Clerk by mail at Town of Hillsborough, 1600 Floribunda Ave., Hillsborough, CA 94010.
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ATTACHMENT 3
Protests may be delivered in person to the City Clerk’s Office during the Town’s business hours. During the Public Hearing on the proposed rate increase, protests shall be provided to the City Clerk in the Council Chambers at Town Hall prior to the close of the Public Hearing.

2. When to return the Protest?
All protests must be received by the City Clerk by the close of the Public Hearing. The City Clerk must receive a written protest by mail no later than 4:00 p.m. on the date of the Public Hearing, or if provided to the city clerk in person, not later than the close of the public comment portion of the Public Hearing on the proposed rate increase.

3. Withdrawal of Protest
After filing a Protest to the Town, the person who signed the Protest may withdraw the Protest by submitting a written request in person to the City Clerk at 1600 Floribunda Ave., Hillsborough, CA 94010. The City Clerk will retain all withdrawn Protests and will clearly indicate on the face of such Protests that they have been withdrawn.

C. Tabulation of Protests

1. Which Protests will be tabulated?
Only Protests from within the Service Area and filed in accordance with these procedures will be tabulated.

Protests received after the close of the Public Hearing will not be counted.

Protests that do not have all the required information will not be counted.

Protests withdrawn in accordance with these procedures will not be counted.

If more than one Protest is filed by the same owner for the same parcel, only one protest will be counted.

If more than one owner or tenant directly liable for payment returns a Protest for the same parcel, only one protest will be counted.

2. When and where the Protests will be tabulated?
Protests will be tabulated periodically, throughout the noticing period, in the office of City Clerk, 1600 Floribunda Ave, Hillsborough, CA 94010.

The final tabulation of protests will be performed following the close of the Public Hearing. Following the last public speaker, and after the close of the public comment portion of the public hearing, the Mayor will announce that the City Clerk will tabulate the written protests.

The City Clerk reviews protest(s) received during the public hearing to confirm all required information is included to be counted as a valid protest.

3. How will the Protests be tabulated?
Each assessor’s parcel is allowed a single protest.

4. Confidentiality
Protests will be kept confidential until the public hearing. After the close of the public hearing, members of the public may inspect the protests.
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5. Results of the tabulation
The results of the tabulation will be announced following the completion of the tabulation and entered in the minutes of the City Council meeting.

D. Resolution of Disputes

1. Property Ownership
In the event of a dispute regarding whether the signer of a Protest is the owner of the parcel to which the Protest applies, the Town will make such determination from the last equalized assessment roll and any evidence of ownership submitted to the Town prior to the conclusion of the public hearing.

E. General Information
The names and addresses of the owners of real property within the Town’s Service Area were obtained from the equalized secured property tax assessment roll.

Notices will be mailed to all affected property owners, as they are shown on the equalized secured property tax assessment roll, at least 45 days prior to the Public Hearing. For the duration of the proceedings, the Town will retain any Notice packet that is returned to them as “undeliverable” by the U.S. Postal Service.

All Protests are public records. Actual written protests will be kept secured with the City Clerk until after the Public Hearing. After the Public Hearing, the written protests will be available for review by the public.

Proposed rates will not be adopted if more than 50% of affected property owners submit written requests. -132-

TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
12 OLD BUSINESS

CITY COUNCIL MEETING
MARCH 9, 2026

AGENDA STAFF REPORT
ITEM SUBJECT: Introduction of an Ordinance Amending Chapter 17.52 of the Hillsborough Municipal Code Relating to Accessory Dwelling Units and Junior Accessory Dwelling Units and Finding the Action to be Statutorily Exempt from CEQA Under Public Resources Code Section 21080.17
SUMMARY: On September 8, 2025, staff presented to the City Council an overview of required and discretionary amendments to Chapter 17.52 of the Town of Hillsborough Municipal Code governing Accessory Dwelling Units (ADUs) and received Council direction prior to preparation of a formal ordinance.

Based on direction received during that discussion, staff incorporated City Council feedback into the proposed amendments, and staff is presenting an ordinance for introduction to amend Chapter

17.52. The proposed amendments include:

1. Required amendments to bring the Town’s ADU regulations into compliance with State law, as identified by the California Department of Housing and Community Development (HCD); and

2. Discretionary amendments informed by implementation experience, administrative efficiency, and community feedback since adoption of the current ordinance.

The proposed amendments are intended to ensure continued compliance with State law, streamline ministerial ADU approvals, and remove locally imposed requirements that have proven confusing, administratively burdensome, or of limited practical benefit.

The revised ordinance also reorganizes Chapter 17.52 to more closely track the structure and terminology of current State ADU statutes. While the Town’s underlying development standards remain largely intact, the updated format improves clarity, reduces ambiguity, and strengthens defensibility by aligning the Town’s code more directly with Government Code Sections 66310 through 66342.

BACKGROUND: In December 2024, the City Council adopted an urgency ordinance amending Chapter 17.52 (Accessory Dwelling Units and Junior Accessory Dwelling Units) to ensure timely compliance with State laws that became effective on January 1, 2025. That urgency action addressed immediate statutory changes under AB 2533 (legalization of certain unpermitted ADUs and JADUs) and SB 1211 (replacement parking), along with minor administrative clean-up.

At the time, staff advised that additional amendments would be required to fully align the Town’s ordinance with subsequent 2025 legislation and to incorporate those revisions through the Town’s standard legislative process rather than through urgency procedures. -133-
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March 9, 2026

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Since the adoption of the urgency ordinance, the Legislature enacted additional changes to State ADU law, including SB 543 (Ministerial application completeness timelines and appeal procedures) AB 1154 (Junior ADU occupancy and rental provisions), and AB 462 (certificate of occupancy sequencing requirements). These measures impose new procedural requirements and clarifications that must be reflected in the Town’s municipal code.

The ordinance now before the Council incorporates those additional State-mandated revisions and consolidates the Town’s ADU regulations into a comprehensive, updated framework consistent with current Government Code provisions. In addition to required updates, the ordinance includes limited conforming and organizational refinements to improve clarity, administrative efficiency, and long-term defensibility. While many of these changes are procedural rather than substantive, they represent meaningful updates to the Town’s ADU processing framework.

DISCUSSION
Structural and Procedural Updates to Align with 2025 State Law  ADU & JADU Size - The revised ordinance incorporates new statutory requirements establishing that the allowable square footage of an ADU or JADU refer to square footage of “interior livable space.”
 Impact Fees - SB 543 clarifies that development impact fees (DIFs) may not be imposed on an ADU that has 750 or fewer square feet of interior livable space or on a JADU with 500 or fewer square feet of interior livable space. The bill also exempts an ADU or JADU with 500 or fewer square feet of interior livable space from school impact fees.  Quantity of ADUs - For some time, there has been uncertainty as to whether ADUs created under Government Code section 66323 could be combined. SB 543 codifies HCD’s most recent interpretation to specifically allow multiple by-right ADUs on a parcel, for example, an ADU converting existing space, a JADU, and a new detached ADU may all be permitted.  Application Completeness and Review Timelines - The revised ordinance incorporates new statutory requirements establishing:
 A 15-business-day deadline for determining whether an ADU or JADU application is complete;
 A requirement that any notice of incompleteness identify all missing items at one time;  A prohibition on introducing new completeness deficiencies after the initial notice; and  A provision that applications are deemed complete if the Town does not act within the required timeframe.

These provisions codify State-mandated timelines and provide additional procedural clarity for applicants and staff.
 Ministerial Appeal Procedures - State law now requires jurisdictions to provide a written appeal mechanism for determinations of application incompleteness and denials of ADU permits, even though ADU approvals remain ministerial and based solely on objective standards. The revised ordinance establishes a formal appeal process consistent with SB -134-
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March 9, 2026

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543. The appeal body is City Council and would be limited to reviewing objective compliance with applicable standards and does not exercise discretionary authority.  ADU & JADU Classes - The revised ordinance incorporates new statutory requirements establishing Classes. Class 1 ADUs and JADUs, formerly called “Building Permit Only” include conversions of existing space and Limited Detached ADUs. Class 2 ADUs, formerly called “ADU Planning Permit” include ADUs that meet all of the objective standards.
 Certificate of Occupancy Sequencing (AB 462) - The proposed ordinance adds new language clarifying that a certificate of occupancy for an ADU or JADU may not be issued before the certificate of occupancy for the primary dwelling, except in limited circumstances involving State-declared emergencies and detached ADUs.

This sequencing requirement is mandated by AB 462 and was not previously addressed in Chapter 17.52. In response to the practicalities of the Town's larger site development projects, staff recommend an additional more permissive provision which allows a Temporary Certificate of Occupancy to be issued for a detached ADU for period of 6 months if the ADU has passed all required inspections, but the primary dwelling has not.  Junior ADU Occupancy and Rental Clarifications (AB 1154) - The revised ordinance updates provisions related to Junior ADUs (JADUs) to reflect recent statutory changes, including:
 Clarification that JADUs may not be rented for periods shorter than 30 days; and  Recognition of limited statutory exceptions to the owner-occupancy requirement, including situations where the JADU contains separate sanitation facilities..  Deed Restriction Requirement - The revised ordinance removes the requirement to record a deed restriction prior to issuance of a certificate of occupancy for an ADU, but maintains the requirement for JADUs, consistent with State Law.

Discretionary Revisions Based on Local Experience:

A. Notice of Application Requirement & Pre-Construction Notice Requirement The current ordinance requires property owners to:
 Notify adjacent neighbors within three business days of submitting an ADU application and provide an affidavit of mailing to the Town; and
 Notify adjacent neighbors at least 30 days prior to commencing ADU construction and submit a signed affidavit confirming compliance.

Based on implementation experience, staff has identified several challenges with these requirements, including confusion among neighbors regarding the purpose of the notice, additional administrative steps for applicants, and staff time required to track affidavit compliance. State ADU law does not require pre-construction neighbor notification, and maintaining separate applicant-driven notice procedures may create unnecessary administrative complexity for a ministerial process.
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State ADU law requires streamlined, objective, ministerial processing and does not mandate neighbor notification at either the application or construction stage.

The City Attorney’s Office has advised that, because these notice requirements are not required by State law and relate to administrative implementation rather than development standards, they should be removed from the Municipal Code. Notice procedures, if desired by the Council, may instead be implemented through department policy. This approach aligns more closely with current HCD guidance and provides greater flexibility in how staff administers courtesy notifications.

Proposed Amendment (Based on Council Feedback):

Eliminate the application-phase and pre-construction notice requirements from Chapter 17.52.

At the Council’s direction, staff will implement a courtesy construction-phase notification process through department policy. Under this approach:
 Notice will be issued by the Town rather than the applicant;  Notice will be provided at permit issuance; and
 The notice will clearly state that ADU approvals are ministerial and include contact information for construction-related concerns.

Staff will coordinate with the Citizens Communication Advisory Committee (CCAC) and the City Attorney’s Office to ensure that the notice language is clear, informative, and consistent with Town communication standards.

B. Notice of Limited Remaining Development Capacity Requirement The current ordinance requires recordation of a notice on title when 500 square feet or fewer of allowable floor area remains under the site’s Floor Area Ratio (FAR).

Staff has found this requirement to be of limited practical benefit. Recorded FAR notices may become outdated if zoning standards change, may not accurately reflect future interpretations, and unnecessarily encumber property titles. Future development limitations are more appropriately addressed through standard zoning review at the time of subsequent permit applications.

Proposed Amendment (Based on Council Feedback):

Eliminate the Notice of Limited Remaining Development Capacity requirement.

D. Objective Standards for ADU Planning Permits
Chapter 17.52 includes objective architectural and landscape standards applicable to ADUs that require a Planning Permit.

Additional Objective Standards Added Through Legal Review In consultation with the City Attorney’s Office, staff incorporated a small number of additional objective standards into the draft ordinance. These were not intended to introduce new policy direction, but rather to ensure the ordinance contains clear, enforceable standards consistent with best practices and recent case law regarding objective development standards.

Because these were identified during the legal review process, they were added to the revised draft prior to Council consideration so that Council could review them alongside the other proposed -136-
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amendments. Staff wanted to flag them for Council’s awareness and confirm that Council is comfortable with their inclusion.

The standards are intended to provide clarity for applicants, neighbors, and staff during ministerial ADU review and to reduce the potential for interpretation issues. Specifically, the added standards address:
 Minimum interior dimensions to ensure the unit is functionally habitable (minimum 10-foot interior width and seven-foot wall height).
 Story limitations clarifying that detached ADUs are limited to a single story while allowing attached ADUs to match the form of the primary dwelling, subject to the 25-foot height cap or the zoning height limit, whichever is lower.
 Objective privacy standards requiring windows and doors to avoid direct lines of sight onto adjacent residential properties, or to be screened through landscaping, fencing, or privacy glazing.

These types of standards are commonly used by jurisdictions to ensure ADU development remains compatible with surrounding residential neighborhoods while maintaining a ministerial, objective review process required by State ADU law.

Any other potential modifications to Architectural Requirements will be considered in conjunction with the forthcoming comprehensive Objective Design Standards project, which will include coordinated review with the Architecture and Design Review Board (ADRB).

Landscape Requirements
For ADUs requiring an ADU Planning Permit, the Town currently requires evergreen landscape screening between the ADU and adjacent parcels.

During implementation, staff identified a practical conflict between State-mandated minimum ADU setbacks (as close as four feet from side or rear property lines) and fire code vegetation clearance requirements, which require certain plant materials to be located at least five feet from structures.

In some cases, strict application of both standards makes compliance infeasible.

In consultation with the Central County Fire Department (CCFD) and the City Attorney’s Office, staff developed a clarifying amendment to preserve the screening intent of the ordinance while ensuring consistency with fire-safety standards.

Additionally, to address concerns regarding visibility of ADUs from the public right-of-way, the revised ordinance clarifies that landscape screening must be planted and maintained not only between the ADU and adjacent parcels, but also between any ADU wall that faces a public rightof-way and the public right-of-way itself. This clarification ensures consistent application of screening requirements and reinforces the Town’s objective design standards.

Proposed Amendment: Where required landscaping cannot be installed in compliance with firesafety standards, screening may instead be achieved through non-combustible fencing or wall materials with a minimum height of six feet.

The revised ordinance also clarifies that evergreen landscape screening must be planted and maintained between the ADU and adjacent parcels, as well as between any ADU wall that -137-
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faces a public right-of-way and the public right-of-way, except where otherwise limited by firesafety requirements.

This amendment maintains the Town’s objective screening requirement while ensuring public safety and regulatory consistency.

NEXT STEPS
 Introduce the ordinance (first reading).
 Return to City Council with a formal ordinance adoption on the Consent Calendar (second reading).

FISCAL IMPACT: There is no fiscal impact associated with this agenda item.

ENVIRONMENTAL ISSUES: Under California Public Resources Code section 21080.17, the California Environmental Quality Act (“CEQA”) does not apply to the adoption of an ordinance by a city or county implementing the provisions of Chapter 13 of Division 1 of Title 7 of the California Government Code, which is California’s ADU law. Therefore, adoption of the Ordinance is statutorily exempt from CEQA in that it implements state ADU law.

ATTACHMENT(S):

1. Ordinance and Exhibit A Chapter 17.52 (Clean)

2. Exhibit A Chapter 17.52 (Redline)
PREPARED BY: Liz Ruess, Assistant Director of Building & Planning RECOMMENDATION: Introduce and waive further reading of the ordinance entitled, “Ordinance of the City Council of the Town of Hillsborough Amending Chapter 17.52 of the Hillsborough Municipal Code Relating to Accessory Dwelling Units and Junior Accessory Dwelling Units and Finding the Action to be Statutorily Exempt from CEQA Under Public Resources Code § 21080.17.”
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ORDINANCE NO.

ORDINANCE OF THE CITY COUNCIL OF THE TOWN OF HILLSBOROUGH AMENDING CHAPTER 17.52 OF THE HILLSBOROUGH MUNICIPAL CODE

RELATING TO ACCESSORY DWELLING UNITS AND JUNIOR ACCESSORY

DWELLING UNITS AND FINDING THE ACTION TO BE STATUTORILY EXEMPT FROM CEQA UNDER PUBLIC RESOURCES CODE § 21080.17

THE CITY COUNCIL OF THE TOWN OF HILLSBOROUGH HEREBY FINDS AND ORDAINS:

WHEREAS, the Town of Hillsborough, California (“Town”) is a municipal corporation, duly organized under the constitution and laws of the State of California; and WHEREAS, state law authorizes local jurisdictions to act by ordinance to provide for the creation and regulation of accessory dwelling units (“ADUs”) and junior accessory dwelling units (“JADUs”); and
WHEREAS, in recent years, the California Legislature has approved, and the Governor has signed into law, numerous bills that, among other things, amend various sections of the Government Code to impose new limits on local authority to regulate ADUs and JADUs; and WHEREAS, in 2025, the California Legislature approved, and the Governor signed into law, further amendments to state ADU law to, among other things, give clarity to existing provisions regulating quantity and size, and application and review timelines, and establish a new formal appeal process; and
WHEREAS, new updates to state ADU law took effect on January 1, 2026, and for the Town’s ADU ordinance to remain valid, it must be amended to reflect the most recent changes to state law; and
WHEREAS, Chapter 17.52 of the Hillsborough Municipal Code is where such an ordinance is maintained; and
WHEREAS, much of the proposed amendments made to Chapter 17.52’s regulatory scheme for the construction of ADUs and JADUs reflect these most recent updates to state law by aligning the Town’s code more directly with Government Code Sections 66310 through 66342; and
WHEREAS, on September 8, 2025 the City Council held a public discussion regarding the state required amendments as well as possible discretionary amendments affecting locally regulated ADUs and Town procedures; and
WHEREAS, following the public discussion, the City Council gave direction on the discretionary amendments which have been incorporated into the adopting ordinance; and WHEREAS, under advisement from the office of the City Attorney, staff made additional clerical and organizational edits to Chapter 17.52 to improve clarity, reduce ambiguity, and strengthen defensibility, addressing administrative provisions and objective standards and which do not alter the substantive effect of the previously adopted ordinance; and -139-
ATTACHMENT 1
2 WHEREAS, ADUs are now designated by class, Class 1 and Class 2, with Class 1 being approved under Government Code section 66323 and considered by-right, and Class 2 being approved under Government Code sections 66314-66322 and locally regulated by additional objective design standards; and
WHEREAS, as neighbor notifications are not mandated by state ADU law and, as ADUs are ministerial nondiscretionary approvals, do not confer the right of the public to comment, any courtesy neighbor notification should be removed from the Hillsborough Municipal Code and implemented through department policy, as directed; and WHEREAS, Chapter 17.52 creates a more permissive local exception for statutorily regulated certificate of occupancies for ADUs and JADUs which are typically permitted only once the certificate of occupancy has been issued for the primary dwelling, and in statutorily exempt Governor proclaimed state of emergencies, by allowing for certificate of occupancies to be issued for detached ADUs which have passed all inspections and are not attached to the primary dwelling; and
WHEREAS, objective development standards and architectural requirements mandated on Class 2 ADUs are clarified and expanded to capture existing Town development standards, notwithstanding that any such standard may not require the ADU have less than 800 square feet of interior livable space; and
WHEREAS, evergreen landscape screening requirements mandated on Class 2 ADUs are clarified to also include screening between any wall that faces a public right-of-way and the public right-of-way, and that any evergreen landscape screening is also limited to fire-safety requirements and may be substituted with noncombustible fencing if necessary; and WHEREAS, recognizing that there may be a considerable existing stock of potential ADUs in the town representing a valuable housing resource for the community, Chapter 17.52 retains and clarifies legal nonconforming conditions and the establishment of existing residential livable spaces, including withing existing space of a primary dwelling and within an existing accessory structure like a guest house or domestic unit; and WHEREAS, any proposed ADU or JADU that would otherwise be allowed under Chapter

17.52 but does not conform to the objective design to development standards otherwise set forth is still allowed by the town following design review as prescribed by Chapter 2.12 of the Hillsborough Municipal Code; and
WHEREAS, all legal prerequisites to the adoption of the Ordinance have occurred.

NOW, THEREFORE, the City Council of the Town of Hillsborough does ordain as follows:

Section 1. Incorporation of Recitals. The recitals above are each incorporated by reference and adopted as findings by the City Council.

Section 2. CEQA. Under California Public Resources Code section 21080.17, the California Environmental Quality Act (“CEQA”) does not apply to the adoption of an ordinance by a city or county implementing the provisions of Chapter 13 of Division 1 of Title 7 of the -140-
3 California Government Code, which is California’s ADU law. Therefore, adoption of the Ordinance is statutorily exempt from CEQA in that it implements state ADU law.

Section 3. General Plan. The City Council hereby finds that the adoption of the Ordinance is consistent with the General Plan as a matter of law under Government Code section 66314(c).

Section 4. Code Amendment. Chapter 17.52 of the Town of Municipal Code is hereby amended and restated to read in its entirety as provided in Exhibit “A,” attached hereto and incorporated herein by reference.

Section 5. Effective Date. This Ordinance takes effect 30 days after its adoption.

Section 6. HCD Submittal. In accordance with Government Code sections 66326 and 66333.5, the City Clerk is directed to submit a copy of this Ordinance to the California Department of Housing and Community Development within 60 days after adoption.

Section 7. Publication. No less than five days prior to the adoption of this Ordinance, the City Clerk published a summary of this Ordinance in accordance with Government Code section 36933. The City Clerk will certify to the passage of this Ordinance by the City Council of the Town of Hillsborough, California, and cause a summary to be published once within fifteen (15) days after its adoption in accordance with Government Code section 36933.

Section 8. Custodian of Records. The custodian of records for this Ordinance is the City Clerk and the records comprising the administrative record are located at 1600 Floribunda Ave., Hillsborough, CA 94010.

Section 9. Severability. If any provision of this Ordinance or its application to any person or circumstance is held to be invalid by a court of competent jurisdiction, such invalidity has no effect on the other provisions or applications of the Ordinance that can be given effect without the invalid provision or application, and to this extent, the provisions of this Ordinance are severable. The City Council declares that it would have adopted this Ordinance irrespective of the invalidity of any portion thereof.

Mayor of the Town of Hillsborough
Attest: City Clerk
ORDINANCE NO. ____ of the Town of Hillsborough introduced on _____________, and adopted on ________________, by the following vote of the City Council:

AYES: Councilmembers
NOES: Councilmembers
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4 ABSENT: Councilmembers
ABSTAIN: Councilmembers
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Chapter 17.52 ACCESSORY DWELLING UNITS AND JUNIOR ACCESSORY

DWELLING UNITS

17.52.010 Definitions.

As used in this chapter, terms are defined as follows:
"Accessory dwelling unit" or "ADU" means an attached or a detached residential dwelling unit that provides complete independent living facilities for one or more persons and is located on a lot with a proposed or existing primary residence. All references in this code to "second unit" refer to an ADU. An accessory dwelling unit also includes the following:

1. An efficiency unit, as defined by Section 17958.1 of the California Health and Safety Code; and

2. A manufactured home, as defined by Section 18007 of the California Health and Safety Code. "Accessory structure" means a structure that is accessory and incidental to a dwelling located on the same lot.
"Complete independent living facilities" means permanent provisions for living, sleeping, eating, cooking, and sanitation on the same parcel as the single-family or multifamily dwelling is or will be situated. "Efficiency kitchen" means a kitchen that includes all of the following:

1. A cooking facility with appliances.

2. A food preparation counter and storage cabinets that are of a reasonable size in relation to the size of the JADU.
"Junior accessory dwelling unit" or "JADU" means a residential unit that satisfies all of the following:

1. It is no more than 500 hundred square feet of interior livable space in size.

2. It is contained entirely within an existing or proposed single-family structure. An enclosed use within the residence, such as an attached garage, is considered to be a part of and contained within the single-family structure.

3. It includes its own separate sanitation facilities or shares sanitation facilities with the existing or proposed single-family structure.

4. If the unit does not include its own separate bathroom, then it contains an interior entrance to the main living area of the existing or proposed single-family structure in addition to an exterior entrance that is separate from the main entrance to the primary dwelling.

5. It includes an efficiency kitchen, as defined above. "Livable space" means a space in a dwelling intended for human habitation, including living, sleeping, eating, cooking, or sanitation.
"Living area" means the interior habitable area of a dwelling unit, including basements and attics, but does not include a garage or any accessory structure.
"Nonconforming zoning condition" means a physical improvement on a property that does not conform with current zoning standards.
"Passageway" means a pathway that is unobstructed clear to the sky and extends from a street to one entrance of the ADU or JADU.
"Proposed dwelling" means a dwelling that is the subject of a permit application and that meets the requirements for permitting.
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EXHIBIT A
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"Public transit" means a location, including, but not limited to, a bus stop or train station, where the public may access buses, trains, subways, and other forms of transportation that charge set fares, run on fixed routes, and are available to the public.
"Tandem parking" means that two or more automobiles are parked on a driveway or in any other location on a lot, lined up behind one another.

17.52.020 General provisions.

A. Purpose. The purpose of this section is to allow and regulate ADUs and JADUs in compliance with Chapter 13 of Division 1 of Title 7 of the California Government Code.

B. Effect of Conforming. An ADU or JADU that conforms to the standards in this section will not be:

1. Deemed to be inconsistent with the town's general plan and zoning designation for the lot on which the ADU or JADU is located.

2. Deemed to exceed the allowable density for the lot on which the ADU or JADU is located.

3. Considered in the application of any local ordinance, policy, or program to limit residential growth.

4. Required to correct a nonconforming zoning condition. This does not prevent the town from enforcing compliance with applicable building standards in accordance with Health and Safety Code Section 17980.12.

C. Approvals. The following approvals apply to ADUs and JADUs created under this section:

1. Ministerial ADU and Building Permits Required. Every ADU and JADU requires an ADU permit and a building permit. The city will review and approve permit applications in accordance with subsection C.3. below.

2. Processing Fee. The city may charge a fee to reimburse it for costs incurred in processing ADU permits, including the costs of adopting or amending the town’s ADU ordinance. The ADU-permit processing fee is determined by the director of community development and approved by the city council by resolution.

3. Process and Timing.
a. Completeness.
(1) Determination in 15 days. The town will determine whether an application to create or serve an ADU or JADU is complete and will provide written notice of the determination to the applicant within 15 business days after the town receives the application submittal.
(2) Incomplete items. If the town’s determination under subsection C.3.a.(1) above is that the application is incomplete, the town’s notice must list the incomplete items and describe how the application can be made complete. (3) Cure. After receiving a notice that the application is incomplete, the applicant may cure and address the items that were deemed by the town to be incomplete.
(4) Subsequent submittals. If the applicant submits additional information to address incomplete items, within 15 business days of the subsequent submittal the town will determine in writing whether the additional information remedies all the incomplete items that the town identified in its original notice. The town -144-
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may not require the application to include an item that was not included in the original notice.
(5) Deemed complete. If the town does not make a timely determination as required by this subsection (A), the application or resubmitted application is deemed complete for the purposes of subsection D.3.c. below.
(6) Appeal of incompleteness. An applicant may appeal the town’s determination that the application is incomplete by submitting a written appeal to the city clerk.

The City Council will review the written appeal and affirm or reverse the completeness determination and provide a final written determination to the applicant within 60 business days after receipt of the appeal. b. No discretion or hearing. Ministerial permits for an ADU or JADU are considered and approved without discretionary review or a hearing.
c. Deadline to approve or deny ministerial approvals. The town must approve or deny an application to create an ADU or JADU within 60 days from the date that the town receives a complete application. If the town has not approved or denied the complete application within 60 days, the application is deemed approved unless either:
(1) The applicant requests a delay, in which case the 60-day time period is tolled for the period of the requested delay, or
(2) When an application to create an ADU or JADU is submitted with a permit application to create a new single-family or multifamily dwelling on the lot, the town may delay acting on the permit application for the ADU or JADU until the town acts on the permit application to create the new single-family or multifamily dwelling, but the application to create the ADU or JADU will still be considered ministerially without discretionary review or a hearing. d. Denial. If the town denies an application to create an ADU or JADU, the town must provide the applicant with comments that include, among other things, a list of all the defective or deficient items and a description of how the application may be remedied by the applicant. Notice of the denial and corresponding comments must be provided to the applicant within the 60-day time period established by subsection D.3.c. above. e. Appeal of denial. An applicant may appeal the town’s denial of the application by submitting a written appeal to the city clerk. The City Council will review the written appeal and affirm or reverse the denial and provide a final written determination to the applicant within 60 business days after receipt of the appeal. f. Concurrent review of demolition. A demolition permit for a detached garage that is to be replaced with an ADU is reviewed with the application for the ADU and issued at the same time.

D. Classes.

1. Class 1: Statutorily Regulated. Class 1 ADUs and JADUs are approved under Government Code Section 66323. If an ADU or JADU complies with each of the general requirements in subsection E. below, it is allowed in each of the scenarios provided in this subsection D.1. An ADU and JADU approved under subsection D.1.a. may be combined with and ADU approved under subsection D.1.b., and ADUs approved under subsection D.1.c. may be combined with ADUs approved under subsection D.1.d. -145-
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a. Converted on Lot with Single-family: One ADU as described in this subsection and one JADU on a lot with a proposed or existing single-family dwelling on it, where the ADU or JADU:
(1) Is either: within the space of a proposed single-family dwelling; within the existing space of an existing single-family dwelling; or (in the case of an ADU only) within the existing space of an accessory structure. Expansions of all existing spaces up to 150 additional square feet are allowed, and may utilize reduced ADU setbacks, if the expansion is limited to accommodating ingress and egress.
(2) Has exterior access that is independent of that for the single-family dwelling. (3) Has side and rear setbacks sufficient for fire and safety, as dictated by applicable building and fire codes.
(4) The JADU complies with the requirements of Government Code sections 66333 through 66339.
b. Limited Detached on Lot with Single-family: One detached, new-construction ADU on a lot with a proposed or existing single-family dwelling , if the detached ADU satisfies each of the following limitations:
(1) The side- and rear-yard setbacks are at least four feet. (2) The total floor area is 800 square feet of livable space or smaller. (3) The peak height above grade does not exceed the applicable height limit in subsection E.2. below.
c. Converted on Lot with Multifamily: One or more ADUs within portions of existing multifamily dwelling structures that are not used as livable space, including but not limited to storage rooms, boiler rooms, passageways, attics, basements, or garages, if each converted ADU complies with state building standards for dwellings. Under this subsection D.1.c., at least one converted ADU is allowed within an existing multifamily dwelling, up to a quantity equal to 25 percent of the existing multifamily dwelling units.
d. Limited Detached on Lot with Multifamily: No more than two detached ADUs on a lot with a proposed multifamily dwelling, or up to eight detached ADUs on a lot with an existing multifamily dwelling, if each detached ADU satisfies all of the following:
(1) The side- and rear-yard setbacks are at least four feet. If the existing multifamily dwelling has a rear or side yard setback of less than four feet, the town will not require any modification to the multifamily dwelling as a condition of approving the ADU. (2) The peak height above grade does not exceed the applicable height limit provided in subsection E.2. below
(3) If the lot has an existing multifamily dwelling, the quantity of detached ADUs does not exceed the number of primary dwelling units on the lot.

2. Class 2: Locally Regulated. Class 2 ADUs are approved under Government Code sections 66314-66322.

Except for Class 1 ADUs approved under subsection D.1. above, all ADUs are subject to the standards set forth in subsections E. and F. below.

E. General Requirements. The following requirements apply to all Class 1 and Class 2 ADUs and JADUs:

1. Zoning.
a. A Class 1 ADU approved under subsection D.1. above may be created on a lot in a residential or mixed-use zone.
b. A Class 2 ADU approved under subsection D.2. above may be created on a lot that is zoned to allow single-family dwelling residential use or multifamily dwelling residential use. -146-
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c. In accordance with Government Code section 66333(a), a JADU may only be created on a lot zoned for single-family residences.

2. Height.
a. Detached.
(1) Except as otherwise provided by subsections E.2.a.(2), E.2.a.(3), or E.2.a.(4) below, a detached ADU created on a lot with an existing or proposed single family or multifamily dwelling unit may not exceed 16 feet in height.
(2) A detached ADU may be up to 18 feet in height if it is created on a lot with an existing or proposed single family or multifamily dwelling unit that is located within one-half mile walking distance of a major transit stop or high quality transit corridor, as those terms are defined in Section 21155 of the Public Resources Code, and the ADU may be up to two additional feet in height (for a maximum of 20 feet) if necessary to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary dwelling unit. (3) The height of a detached ADU that is at least 20 feet from side and rear property lines, and at least 25 feet from all public right-of-ways, may be up to 22 feet in height. (4) A detached ADU created on a lot with an existing or proposed multifamily dwelling that has more than one story above grade may not exceed 18 feet in height. b. Attached. An ADU that is attached to the primary dwelling may not exceed 25 feet in height or the height limitation imposed by the underlying zone that applies to the primary dwelling, whichever is lower. Notwithstanding the foregoing, ADUs subject to this subsection E.2.b. may not exceed two stories
c. For purposes of this subsection E.2., height is measured from existing legal grade or the level of the lowest floor, whichever is lower, to the peak of the structure. Existing legal grade means the legally established grade that exists at the time that an application is submitted.

3. Fire Sprinklers.
a. Fire sprinklers are required in an ADU or JADU if sprinklers are required in the primary residence. b. The construction of an ADU or JADU does not trigger a requirement for fire sprinklers to be installed in the existing primary dwelling.

4. Rental Term.
a. No ADU or JADU may be rented for a term that is shorter than 30 days. This prohibition applies regardless of when the ADU or JADU was created.
b. The renting of the primary dwelling, ADU, or JADU is not considered a business and is not subject to the provisions of Chapter 5.04.

5. No Separate Conveyance. An ADU or JADU may be rented, but except as otherwise provided in Government Code Section 66341, no ADU or JADU may be sold or otherwise conveyed separately from the lot and the primary dwelling (in the case of a single-family lot) or from the lot and all of the dwellings (in the case of a multifamily lot).

6. Septic System. If the ADU or JADU will connect to an onsite wastewater-treatment system, the owner must include with the application a percolation test completed within the last five years or, if the percolation test has been recertified, within the last 10 years.

7. Owner Occupancy.
a. ADUs. ADUs are not subject to an owner-occupancy requirement. b. JADUs.
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(1) Generally. As required by state law, JADUs are generally subject to an owner-occupancy requirement. A natural person with legal or equitable title to the property must reside on the property, in either the primary dwelling or JADU, as the person's legal domicile and permanent residence.
(2) Exceptions. The owner-occupancy requirement in this subsection E.7.b. does not apply in either of the following situations:
i. The JADU has separate sanitation facilities (i.e., does not share sanitation facilities with the existing primary dwelling unit structure).
ii. The property is entirely owned by another governmental agency, land trust, or housing organization.

7. JADU Deed Restriction. Prior to issuance of a certificate of occupancy for a JADU, a deed restriction must be recorded against the title of the property in the county recorder's office and a copy filed with the building and planning department. The deed restriction must run with the land and bind all future owners. The form of the deed restriction will be provided by the town and must provide that:
a. The JADU may not be sold separately from the primary dwelling. b. The JADU is restricted to the approved size and to other attributes allowed by this section. c. The deed restriction runs with the land and may be enforced against future property owners. d. The deed restriction may be removed if the owner eliminates the JADU, as evidenced by, for example, removal of the kitchen facilities. To remove the deed restriction, an owner may make a written request of the building and planning department, providing evidence that the JADU has in fact been eliminated. The building and planning department may then determine whether the evidence supports the claim that the JADU has been eliminated. Appeal may be taken from the building and planning department’s determination consistent with the other provisions of this code. If the JADU is not entirely physically removed, but is only eliminated by virtue of having a necessary component of an JADU removed, the remaining structure and improvements must otherwise comply with applicable provisions of this code. e. The deed restriction is enforceable by the director of building and planning or his or her designee for the benefit of the town. Failure of the property owner to comply with the deed restriction may result in legal action against the property owner, and the town is authorized to obtain any remedy available to it at law or equity, including, but not limited to, obtaining an injunction enjoining the use of the JADU in violation of the recorded restrictions or abatement of the illegal unit.

8. Rent Reporting. In order to facilitate the town's obligation to identify adequate sites for housing in accordance with Government Code Sections 65583.1 and 66330, the following requirements must be satisfied:
a. With the building permit application, the applicant must provide the town with an estimate of the projected annualized rent that will be charged for the ADU or JADU. b. Within ninety days after each January 1 following issuance of the building permit, the owner must report the actual rent charged for the ADU or JADU during the prior year. If the town does not receive the report within the ninety-day period, the owner is in violation of this code, and the town may send the owner a notice of violation and allow the owner another thirty days to submit the report. If the owner fails to submit the report within the thirty-day period, the town may enforce this provision in accordance with applicable law. c. This requirement shall not be the basis for the delay or denial of an ADU application.

9. Building and Safety.
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a. Must Comply with Building Code. Subject to subsection E.9.b. below, all ADUs and JADUs must comply with all local building and fire code requirements. b. No Change of Occupancy. Construction of an ADU does not constitute a group R occupancy change under the local building code, as described in Section 310 of the California Building Code, unless the building official makes a written finding based on substantial evidence in the record that the construction of the ADU could have a specific, adverse impact on public health and safety. Nothing in this subsection E.10.b. prevents the town from changing the occupancy code of a space that was uninhabitable space or that was only permitted for nonresidential use and was subsequently converted for residential use in accordance with this section.

10. Structures and Equipment within Setbacks. No structures or mechanical equipment may be located within the ADU setback area.

11. Certificate of Occupancy Timing.
a. Generally. No certificate of occupancy for an ADU or JADU may be issued before the certificate of occupancy is issued for the primary dwelling unit.
b. Limited Exception for State-declared Emergencies. Notwithstanding subsection E.12.a. above, a certificate of occupancy for an ADU may be issued before a certificate of occupancy for the primary dwelling if each of the following requirements are met:
(1) The county is subject to a proclamation of a state of emergency made by the California Governor on or after February 1, 2025.
(2) The primary dwelling was substantially damaged or destroyed by an event referenced in the Governor’s state of emergency proclamation.
(3) The ADU has been issued construction permits and has passed all required inspections. (4) The ADU is not attached to the primary dwelling.
c. Local Exception for detached ADUs. Notwithstanding subsection E.12.a. above, a six-month temporary certificate of occupancy for a detached ADU may be issued before a certificate of occupancy for the primary dwelling if each of the following requirements are met:
(1) The ADU has been issued construction permits and has passed all required inspections. (2) The ADU is not attached to the primary dwelling.

F. Class 2 ADU Requirements. The following requirements apply only to Class 2 ADUs approved under subsection D.2. above. This subsection F. does not apply to Class 1 ADUs or JADUs approved under subsection D.1. above.

1. Maximum Size.
a. The maximum size of a detached or attached ADU subject to this subsection F. is as follows:
(1) 850 square feet of livable interior space for a studio or one-bedroom unit; and (2) 1,000 square feet of interior livable space for an unit with two or more bedrooms. b. An attached ADU that is created on a lot with an existing primary dwelling is further limited to 50 percent of the floor area of the existing primary dwelling. -149-
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c. Application of other development standards in this subsection F., such as FAR or lot coverage, might further limit the size of the ADU, but no application of the percent-based size limit in subsection F.1.b. above or of an FAR, front setback, lot coverage limit, or open-space requirement may require the ADU have less than 800 square feet of interior livable space.

2. Setbacks.
a. Side and Rear. ADUs that are subject to this subsection F. must conform to 4foot side and rear setbacks.
b. Front. ADUs that are subject to this subsection F. must conform to 25-foot front setbacks, notwithstanding subsection F.1.c. above.
c. No setback is required for an ADU that is subject to this subsection F. if the ADU is constructed in the same location and to the same dimensions as an existing structure.

3. Lot Coverage. Notwithstanding subsection F.1.c. above, no ADU subject to this subsection F. may cause the total lot coverage of the lot to exceed 50 percent, or to exceed 40 percent in any setback area adjacent to a street line. Lot coverage is calculated in square feet as the sum of all hardscape coverage and structural coverage of a lot. Structural coverage and hardscape coverage are defined and calculated as follows:
a. Structural Coverage. Areas of a lot located beneath a structure having a roof and two or more walls, for example a dwelling, a pool house, or a garage. Structural coverage calculations and maximums are outlined as follows:

Table 17.52.020-1
Lot size (net lot area) Maximum Structural Coverage Calculation Up to 17,500 sq. ft. 22 sq. ft. for each 100 sq. ft. or portion thereof of net lot area 17,500 up to 21,780 sq. ft. 3,850 sq. ft. plus 15 sq. ft. for each 100 sq. ft. or portion thereof of net lot area in excess of 17,500 sq. ft.
21,780 up to 32,670 sq. ft. 4,495 sq. ft. plus 10 sq. ft. for each 100 sq. ft. or portion thereof of net lot area in excess of 21,780 sq. ft.
32,670 through 43,560 sq. ft. 5,585 sq. ft. plus 6 sq. ft. for each 100 sq. ft. or portion thereof of net lot area in excess of 32,670 sq. ft.

Over 43,560 sq. ft. 6,239 sq. ft. plus 5 sq. ft. for each 100 sq. ft. or portion thereof of net lot area in excess of 43,560 sq. ft.
b. Hardscape.
(1) Hardscape coverage. Areas of a lot covered by manufactured, non-plant, pervious or impervious material or located beneath a structure with a roof with no more than one wall, for example decking, a concrete slab or walkway, a gazebo.

4. Minimum Open Space. Notwithstanding subsection F.1.c. above, no ADU subject to this subsection F. may cause the total percentage of open space of the lot to fall below 50 percent.

5. Passageway. No passageway is required for an ADU.

6. Parking.
a. Generally. One off-street parking space is required for each ADU or bedroom, whichever is less.

The parking space may be provided in setback areas or as tandem parking, as defined above.. -150-
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b. Exceptions. No parking under subsection F.6.a. is required in the following situations:
(1) The ADU is located within one-half mile walking distance of public transit, as defined above.
(2) The ADU is located within an architecturally and historically significant historic district. (3) The ADU is part of the proposed or existing primary residence or an accessory structure under subsection D.1.a. above.
(4) When on-street parking permits are required but not offered to the occupant of the ADU. (5) When there is an established car share vehicle stop located within one block of the ADU. (6) When the permit application to create an ADU is submitted with an application to create a new single-family or new multifamily dwelling on the same lot, provided that the ADU or the lot satisfies any other criteria listed in subsections F.6.b.(1) through (5) above. c. No Replacement. When a garage, carport, covered parking structure, or uncovered parking space is demolished in conjunction with the construction of an ADU or converted to an ADU, those offstreet parking spaces are not required to be replaced.

7. Architectural Requirements.
a. The materials and colors of the exterior walls, roof, windows, and doors must be the same as those of the primary dwelling.
b. The exterior lighting must be limited to down-lights or as otherwise required by the building or fire code.
c. The ADU must have an independent exterior entrance, apart from that of the primary dwelling. d. All second-story windows and doors in an ADU less than 30 feet from a property line that is not a public right-of-way shall either be (for windows) clerestory with the bottom of the glass at least six feet above the finished floor, or (for windows and for doors) utilize frosted or obscure glass. e. An ADU to be constructed on a lot that has an identified historical resource is subject to the ADU exception process.
f. Outdoor showers are not permitted within setback areas and shall not be visible from adjacent properties or the public right-of-way.
g. No roof decks shall be permitted.
h. The interior horizontal dimensions of an ADU must be at least 10 feet wide in every direction, with a minimum interior wall height of seven feet.
i. Allowed stories. No ADU subject to this subsection F. may have more than one story, except that an ADU that is attached to the primary dwelling may have more than one story, but shall not exceed 25 feet in height, or the maximum height permitted for the primary dwelling in the applicable zoning district, whichever is lower.
j. No window or door of the ADU may have a direct line of sight to an adjoining residential property. Each window and door must either be located where there is no direct line of sight or screened using fencing, landscaping, or privacy glass to recent a direct line of sight. k. The ADU and primary dwelling shall use the same driveway to access the street, notwithstanding fire apparatus access standards, as regulated by Central County Fire Department.

8. Landscape Requirements. Except as required in subsection F.8.e. below, evergreen landscape screening must be planted and maintained between an ADU and adjacent parcels and between any public rightof-way and an ADU wall that faces the right-of-way. Screening shall be installed as follows:
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a. At least one 15-gallon size plant must be provided for every five linear feet of exterior ADU wall.

Alternatively, at least one 24” box size plant must be provided for every ten linear feet of exterior ADU wall.
b. For a ground-level ADU, plant specimens must be at least six feet tall when installed. As an alternative, for a ground-level ADU, a solid fence of at least six feet in height may be installed. c. For a second-story ADU, plant specimens must be at least twelve feet tall when installed. d. All landscaping must be drought tolerant.
e. Notwithstanding any other provision in this code, all landscaping must comply with applicable standards in Title 24 of the California Code of Regulations, including the California Fire Code and California Wildland Urban Interface Code, and any related Central County Fire Department (CCFD) and Town of Hillsborough regulations. If Title 24 or CCFD regulations prevent landscape screening, the screening required by subsection F.8.a. and F.8.b. and F.8.c. above must be achieved using non-combustible fencing that is consistent with fire-related regulations.

9. Historical Protections. An ADU that is on or within 600 feet of real property that is listed in the California Register of Historic Resources must be located so as to not be visible from any public rightof-way.

G. Impact Fees. The following requirements apply to all Class 1 ADUs and JADUs and Class 2 ADUs.

1. School Fees. A JADU or ADU with less than 500 square feet of interior livable space does not increase assessable space by 500 square feet for the purposes of Education Code section 17620(a)(1)(c) and is therefore not subject to school fees under Education Code section 17620.

2. Other Development Impact Fees.
a. No impact fee is required for a JADU or for an ADU that is less than 750 square feet of interior livable space. For purposes of this subsection G.2., "impact fee" means a "fee" under the Mitigation Fee Act (Government Code Section 66000(b)) and a fee under the Quimby Act (Government Code Section 66477). "Impact fee" here does not include any connection fee or capacity charge for water or sewer service.
b. Any impact fee that is required for an ADU that is 750 square feet or more of interior livable space must be charged proportionately in relation to the square footage of the primary dwelling unit (e.g. the floor area of the ADU, divided by the floor area of the primary dwelling, times the typical fee amount charged for a new dwelling).

H. Nonconforming Zoning Code Conditions, Building Code Violations, and Unpermitted Structures.

1. Generally. The town will not deny an ADU or JADU application due to a nonconforming zoning condition, building code violation, or unpermitted structure on the lot that does not present a threat to the public health and safety and that is not affected by the construction of the ADU or JADU.

2. Unpermitted ADUs and JADUs constructed before 2020.
a. Permit to Legalize. As required by state law, the town may not deny a permit to legalize an existing but unpermitted ADU or JADU that was constructed before January 1, 2020, unless denial is based on either of the following grounds:
(1) The ADU or JADU violates applicable building standards, or (2) The ADU or JADU does not comply with state ADU or JADU law or this ADU ordinance (Chapter 17.52).
b. Exceptions:
(1) Notwithstanding subsection H.2.a. above, the town may deny a permit to legalize an existing but unpermitted ADU or JADU that was constructed before January 1, 2020, if the -152-
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town makes a finding that correcting a violation is necessary to comply with the standards specified in California Health and Safety Code section 17920.3. (2) Subsection H.2.a. above does not apply to a building that is deemed to be substandard in accordance with California Health and Safety Code Section 17920.3.

3. Encouragement of ADU Establishment in Existing Residential Livable Spaces and Domestic Units.

Recognizing that there may be a considerable existing stock of potential ADUs in the town representing a valuable housing resource for the community, including guest suites, guest quarters, pool houses, carriage houses, domestic quarters, and similar spaces, the town encourages property owners to apply to establish an ADU or JADU within existing space in accordance with this chapter. a. No Penalty for Seeking Legalization. Upon receipt of an application to legalize an unpermitted ADU or JADU described in subsection H, the town shall not penalize the applicant solely for having established the unpermitted or nonconforming unit. b. Existing Detached Domestic Units – Legal Nonconforming Status. (1) A detached domestic unit that was lawfully established and existing as of January 10,1983, is deemed a legal nonconforming accessory structure.
(2) Detached domestic unit means living quarters designed, capable of being used, or intended to be used to house household help, such quarters being not structurally attached to the single-family dwelling served by the household help.
(3) Except as provided in subsection H.3.c. below, alterations to a legal nonconforming detached domestic unit that is not being permitted as an ADU shall be confined to the interior of the structure; exterior improvements shall be limited to normal upkeep and repair and to improvements that do not enlarge or alter the existing exterior dimensions of the structure.
c. Establishing an ADU Within Existing Residential Livable Space or an Existing Accessory Structure. (1) An applicant may apply to permit and legalize an ADU or JADU within existing space of a primary dwelling or withing an existing accessory structure, including an existing detached domestic unit.
(2) When an existing detached domestic unit or other existing space is proposed to be established as an ADU, the town shall not require correction of unrelated nonconforming zoning conditions, building code violations, or unpermitted structures found elsewhere on the lot that are not impacted by the ADU and do not pose a threat to public health and safety.
(3) Improvements to an existing structure in connection with establishing an ADU may include those alterations necessary to comply with applicable building standards and this chapter.

Any expansion beyond the existing structure shall be regulated by Chapter 17.52 and applicable state law
d. Disaster Reconstruction. If a natural disaster (such as a fire, earthquake, flood, landslide, etc.) damages or destroys an existing detached domestic unit or other existing accessory structure that is proposed to be established as an ADU, the structure may be reconstructed in the same location and to the same or smaller exterior dimensions as the damaged or destroyed structure, consistent with this chapter and applicable state law.
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17.52.030 ADU Exception Review.

A. Any proposed ADU or JADU that would otherwise be allowed under this chapter but does not conform to the objective design to development standards set forth in this chapter may be allowed by the town following design review as prescribed by Chapter 2.12 of this code.

B. Discretionary design review. An ADU or JADU application submitted under this section 17.52.030 will be considered, reviewed, and noticed as a "type B project" under Section 2.12.070.A.

C. Findings Required. The following findings shall be made in advance of any approval of an ADU or JADU Exception:

1. The project is consistent with the town general plan.

2. The project is consistent with this code, including the town zoning ordinance.

3. The project is consistent with the town residential design guidelines.

4. The project is consistent with all other town land use policies and plans.

5. The project has undergone the design review process outlined in Chapter 2.12 of this code.

6. The project has been publicly noticed as a "type B project” under Section 2.12.070.A of this code.

7. The project does not constitute a risk to the welfare of the town and its residents;

8. The project does not constitute a risk to the health and safety of the town and its residents. -154-

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Chapter 17.52 ACCESSORY DWELLING UNITS AND JUNIOR ACCESSORY

DWELLING UNITS

17.52.010 Definitions.

1. An efficiency unit, as defined by Section 17958.1 of the California Health and Safety Code; and

1. A cooking facility with appliances.

1. IsIt is no more than five500 hundred square feet of interior livable space in size.

2. IsIt is contained entirely within an existing or proposed single-family structure. An enclosed use within the residence, such as an attached garage, is considered to be a part of and contained within the single-family structure.

3. IncludesIt includes its own separate sanitation facilities or shares sanitation facilities with the existing or proposed single-family structure.

5. IncludesIt includes an efficiency kitchen, as defined above. "Livable space" means a space in a dwelling intended for human habitation, including living, sleeping, eating, cooking, or sanitation.
"Living area" means the interior habitable area of a dwelling unit, including basements and attics, but does not include a garage or any accessory structure.
"Nonconforming zoning condition" means a physical improvement on a property that does not conform with current zoning standards.
"Passageway" means a pathway that is unobstructed clear to the sky and extends from a street to one entrance of the ADU or JADU.
"Proposed dwelling" means a dwelling that is the subject of a permit application and that meets the requirements for permitting.

ATTACHMENT 2
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EXHIBIT A (REDLINE)

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"Public transit" means a location, including, but not limited to, a bus stop or train station, where the public may access buses, trains, subways, and other forms of transportation that charge set fares, run on fixed routes, and are available to the public.
"Tandem parking" means that two or more automobiles are parked on a driveway or in any other location on a lot, lined up behind one another.

17.52.020 General provisions.

A. Purpose. The purpose of this chaptersection is to allow and regulate ADUs and JADUs in compliance with Chapter 13 of Division 1 of Title 7 of the California Government Code.

B. Effect of Conforming. An ADU or JADU that conforms to the standards in this section will not be:

1. Deemed to be inconsistent with the town's general plan and zoning designation for the lot on which the ADU or JADU is located.

2. Deemed to exceed the allowable density for the lot on which the ADU or JADU is located.

3. Considered in the application of any local ordinance, policy, or program to limit residential growth.

4. Required to correct a nonconforming zoning condition, as defined in Section 17.52.010.. This does not prevent the town from enforcing compliance with applicable building standards in accordance with Health and Safety Code Section 17980.12.

C. Approvals. The following approvals apply to ADUs and JADUs created under this section:

1. 1. Ministerial ADU and Building Permits Required. Every ADU and JADU requires an ADU permit and a building permit. The city will review and approve permit applications in accordance with subsection (d)(3)C.3. below.

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all the incomplete items that the town identified in its original notice. The town may not require the application to include an item that was not included in the original notice.
(5) Deemed complete. If the town does not make a timely determination as required by this subsection a(A), the application or resubmitted application is deemed complete for the purposes of subsection D.3.c.(a)3.c below(d)(3)(C) below. (6) Appeal of incompleteness. An applicant may appeal the town’s determination that the application is incomplete by submitting a written appeal to the city clerk.

The City Council will review the written appeal and affirm or reverse the completeness determination and provide a final written determination to the applicant within 60 business days after receipt of the appeal. b. No discretion or hearing. Ministerial permits for an ADU or JADU are considered and approved without discretionary review or a hearing.
c. Deadline to approve or deny ministerial approvals. The town must approve or deny an application to create an ADU or JADU within 60 days from the date that the town receives a complete application. If the town has not approved or denied the complete application within 60 days, the application is deemed approved unless either:
(1) The applicant requests a delay, in which case the 60-day time period is tolled for the period of the requested delay, or
(2) When an application to create an ADU or JADU is submitted with a permit application to create a new single-family or multifamily dwelling on the lot, the town may delay acting on the permit application for the ADU or JADU until the town acts on the permit application to create the new single-family or multifamily dwelling, but the application to create the ADU or JADU will still be considered ministerially without discretionary review or a hearing. d. Denial. If the town denies an application to create an ADU or JADU, the town must provide the applicant with comments that include, among other things, a list of all the defective or deficient items and a description of how the application may be remedied by the applicant. Notice of the denial and corresponding comments must be provided to the applicant within the 60-day time period established by subsection D.3.c(a)3.c above.(d)(3)(C) above.
e. Appeal of denial. An applicant may appeal the town’s denial of the application by submitting a written appeal to the city clerk. The City Council will review the written appeal and affirm or reverse the denial and provide a final written determination to the applicant within 60 business days after receipt of the appeal. f. Concurrent review of demolition. A demolition permit for a detached garage that is to be replaced with an ADU is reviewed with the application for the ADU and issued at the same time.

D. Classes.

1. Class 1: Statutorily Regulated.. Class 1 ADUs and JADUs are approved under Government Code Section 66323. If an ADU or JADU complies with each of the general requirements in subsection DE. below, it is allowed with only a building permit in each of the following scenarios: provided in this subsection D.1. -157-

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An ADU and JADU approved under subsection D.1.a. may be combined with and ADU approved under subsection D.1.b., and ADUs approved under subsection D.1.c. may be combined with ADUs approved under subsection D.1.d.
a. Converted on Lot with Single-family Lot: one: One ADU as described in this subsection and one JADU on a lot with a proposed or existing single-family dwelling on it, where the ADU or JADU:
(1) Is either: within the space of a proposed single-family dwelling; within the existing space of an existing single-family dwelling; or (in the case of an ADU only) within the existing space of an accessory structure, plus. Expansions of all existing spaces up to one hundred fifty150 additional square feet are allowed, and may utilize reduced ADU setbacks, if the expansion is limited to accommodating ingress and egress may utilize reduced ADU setbacks. An expansion for purposed other than accommodating ingress and egress must comply with applicable setbacks.
(2) Has exterior access that is independent of that for the single-family dwelling. (3) Has side and rear setbacks sufficient for fire and safety, as dictated by applicable building and fire codes.
(4) The JADU complies with the requirements of Government Code sections 66333 through 66339.
b. Limited Detached on Lot with Single-family Lot: one: One detached, new-construction ADU on a lot with a proposed or existing single-family dwelling (in addition to any JADU that might otherwise be established on the lot under subsection C.1.a. above),, if the detached ADU satisfies each of the following limitations:
(1) The side- and rear-yard setbacks are at least four feet from the property line.. (2) The total floor area is eight hundred800 square feet of livable space or smaller. (3) The peak height above grade does not exceed the applicable height limit in subsection E.62. below.
c. Converted on Lot with Multifamily: oneOne or more ADUs within portions of existing multifamily dwelling structures that are not used as livable space, including but not limited to storage rooms, boiler rooms, passageways, attics, basements, or garages, if each converted ADU complies with state building standards for dwellings. Under this subsection CD.1.c., at least one converted ADU is allowed within an existing multifamily dwelling, up to a quantity equal to twenty-five25 percent of the existing multifamily dwelling units.
d. Limited Detached on Lot with Multifamily: noNo more than two detached ADUs on a lot with a proposed multifamily dwelling, or up to eight detached ADUs on a lot with an existing multifamily dwelling, if each detached ADU satisfies bothall of the following limitations:
(1) The side- and rear-yard setbacks are at least four feet. If the existing multifamily dwelling has a rear or side yard setback of less than four feet, the citytown will not require any modification to the multifamily dwelling as a condition of approving the ADU. (2) The peak height above grade does not exceed the applicable height limit provided in subsection E.62. below
(3) If the lot has an existing multifamily dwelling, the quantity of detached ADUs does not exceed the number of primary dwelling units on the lot.

2. ADU Planning Permit.
a. Class 2: Locally Regulated. Class 2 ADUs are approved under Government Code sections 66314-66322.

Except as allowedfor Class 1 ADUs approved under subsection C.1. (building permit only), no ADU may be created without an ADU planning permit and a building permit in compliance with D.1. above, all -158-

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ADUs are subject to the standards set forth in subsections D. (ADU and JADU requirements) and E. (ADU planning permit requirements), below.Error! Reference source not found.(E.) and Error! Reference source not found.(F.) below.
b. The town may charge a fee to reimburse it for costs incurred in processing ADU planning permits, including the costs of adopting or amending the town's ADU ordinance. The ADU planning permit processing fee is determined by the town council by resolution.

D. ADU and JADUE. General Requirements. The following requirements apply to all ministerialClass 1 and Class 2 ADUs and JADUs that are applied for under subsections C.1. (building permit only) or C.2. (ADU planning permit) above:

1. Zoning.
a. AnA Class 1 ADU or JADU subject only to a building permitapproved under subsection CD.1. above may be created on a lot in a residential or mixed-use zone. b. AnA Class 2 ADU or JADU subject to an ADU permitapproved under subsection CD.2. above may be created on a lot that is zoned to allow single-family dwelling residential use or multifamily dwelling residential use.
c. In accordance with Government Code section 66333(a), a JADU may only be created on a lot zoned for single-family residences.

2. Height.
a. Detached.
(1) Except as otherwise provided by subsections A.1.A.1.a.aE.2.a.(2), Error! Reference source not found.E.2.a.(3), or E.2.a.(4) below, a detached ADU created on a lot with an existing or proposed single family or multifamily dwelling unit may not exceed 16 feet in height. (2) A detached ADU may be up to 18 feet in height if it is created on a lot with an existing or proposed single family or multifamily dwelling unit that is located within one-half mile walking distance of a major transit stop or high quality transit corridor, as those terms are defined in Section 21155 of the Public Resources Code, and the ADU may be up to two additional feet in height (for a maximum of 20 feet) if necessary to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary dwelling unit. (3) The height of a detached ADU that is at least 20 feet from side and rear property lines, and at least 25 feet from all public right-of-ways, may be up to 22 feet in height. (4) A detached ADU created on a lot with an existing or proposed multifamily dwelling that has more than one story above grade may not exceed 18 feet in height. b. Attached. An ADU that is attached to the primary dwelling may not exceed 25 feet in height or the height limitation imposed by the underlying zone that applies to the primary dwelling, whichever is lower. Notwithstanding the foregoing, ADUs subject to this subsection Error! Reference source not found.E.2.b. may not exceed two stories c. For purposes of this subsection Error! Reference source not found.E.2., height is measured from existing legal grade or the level of the lowest floor, whichever is lower, to the peak of the structure. Existing legal grade means the legally established grade that exists at the time that an application is submitted.

Except as otherwise provided by subsections E.2.a.(2), E.2.a.(3), or E.2.a.(4) below, a detached ADU created on a lot with an existing or proposed single family or multifamily dwelling unit may not exceed 16 feet in height.
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A detached ADU may be up to 18 feet in height if it is created on a lot with an existing or proposed single family or multifamily dwelling unit that is located within one-half mile walking distance of a major transit stop or high quality transit corridor, as those terms are defined in Section 21155 of the Public Resources Code, and the ADU may be up to two additional feet in height (for a maximum of 20 feet) if necessary to accommodate a roof pitch on the ADU that is aligned with the roof pitch of the primary dwelling unit.

The height of a detached ADU that is at least 20 feet from side and rear property lines, and at least 25 feet from all public right-of-ways, may be up to 22 feet in height.

A detached ADU created on a lot with an existing or proposed multifamily dwelling that has more than one story above grade may not exceed 18 feet in height.

An ADU that is attached to the primary dwelling may not exceed 25 feet in height or the height limitation imposed by the underlying zone that applies to the primary dwelling, whichever is lower. Notwithstanding the foregoing, ADUs subject to this subsection E.2.b. may not exceed two stories
For purposes of this subsection E.2., height is measured from existing legal grade or the level of the lowest floor, whichever is lower, to the peak of the structure. Existing legal grade means the legally established grade that exists at the time that an application is submitted.

34. Rental Term.
a. No ADU or JADU may be rented for a term that is shorter than thirty30 days. This prohibition applies regardless of when the ADU or JADU was created. b. The renting of the primary dwelling, ADU, or JADU is not considered a business and is not subject to the provisions of Chapter 5.04.

45. No Separate Conveyance. An ADU or JADU may be rented, but except as otherwise provided in Government Code Section 66341, no ADU or JADU may be sold or otherwise conveyed separately from the lot and the primary dwelling (in the case of a single-family lot) or from the lot and all of the dwellings (in the case of a lot with multifamily lot).

5. 6. Septic System. If the ADU or JADU will connect to an onsite wastewater-treatment system, the owner must include with the application a percolation test completed within the last five years or, if the percolation test has been recertified, within the last 10 years.

7. Owner Occupancy.
a. ADUs created under this section on or after January 1, 2020. ADUs are not subject to an owneroccupancy requirement. b. JADUs.
(1) Generally. As required by state law, all JADUs are generally subject to an owner-occupancy requirement. A natural person with legal or equitable title to the property must reside on the property, in either the primary dwelling or JADU, as the person's legal domicile and permanent -160-

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residence. However, the owner-occupancy requirement of this subsection does not apply if the property is entirely owned by another governmental agency, land trust, or housing organization.

6. (2) Exceptions. The owner-occupancy requirement in this subsection E.7.b. does not apply in either of the following situations:
i. The JADU has separate sanitation facilities (i.e., does not share sanitation facilities with the existing primary dwelling unit structure).
ii. The property is entirely owned by another governmental agency, land trust, or housing organization.

7. JADU Deed Restriction. Prior to issuance of a certificate of occupancy for an ADU ora JADU, a deed restriction must be recorded against the title of the property in the county recorder's office and a copy filed with the town. Evidence of recordation is not required for issuance of a building permit or ADU permit.building and planning department. The deed restriction must run with the land and bind all future owners. The form of the deed restriction will be provided by the town and must provide that:
a. Except as otherwise provided in Government Code Section 66341, the ADU orThe JADU may not be sold separately from the primary dwelling.
b. The ADU or JADU is restricted to the approved size and to other attributes allowed by this section.
c. The deed restriction runs with the land and may be enforced against future property owners. d. The deed restriction may be removed if the ADU or JADU is entirely physically removed.

Theowner eliminates the JADU, as evidenced by, for example, removal of the kitchen facilities. To remove the deed restriction, an owner may make a written request of the building and planning department, providing evidence that the JADU has in fact been eliminated. The building and planning department may then determine whether the evidence supports the claim that the JADU has been eliminated. Appeal may be taken from the building and planning department’s determination consistent with the other provisions of this code. If the JADU is not entirely physically removed, but is only eliminated by virtue of having a necessary component of an JADU removed, the remaining structure and improvements must otherwise comply with applicable provisions of this code.
e. The deed restriction is enforceable by the director of building and planning or his or her designee for the benefit of the town. Failure of the property owner to comply with the deed restriction may result in legal action against the property owner, and the town is authorized to obtain any remedy available to it at law or equity, including, but not limited to, obtaining an injunction enjoining the use of the ADU or JADU in violation of the recorded restrictions or abatement of the illegal unit.

78. Rent Reporting. In order to facilitate the town's obligation to identify adequate sites for housing in accordance with Government Code Sections 65583.1 and 66330, the following requirements must be satisfied:
a. With the building permit application, the applicant must provide the town with an estimate of the projected annualized rent that will be charged for the ADU or JADU. b. Within ninety days after each January 1 following issuance of the building permit, the owner must report the actual rent charged for the ADU or JADU during the prior year. If the town does not receive the report within the ninety-day period, the owner is in violation of this code, and the town may send the owner a notice of violation and allow the owner another thirty days to submit the report. If the owner fails to submit the report within the thirty-day period, the town may enforce this provision in accordance with applicable law. c. This requirement shall not be the basis for the delay or denial of an ADU application. -161-

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9. Building and Safety.
a. Must Comply with Building Code. Subject to subparagraph 9subsection E.9.b. below, all ADUs and JADUs must comply with all local building and fire code requirements. b. No Change of Occupancy. Construction of an ADU does not constitute a group R occupancy change under the local building code, as described in Section 310 of the California Building Code, unless the building official makes a written finding based on substantial evidence in the record that the construction of the ADU could have a specific, adverse impact on public health and safety. Nothing in this subsection E.910.b. prevents the citytown from changing the occupancy code of a space that was uninhabitable space or that was only permitted for nonresidential use and was subsequently converted for residential use in accordance with this section. 1010. Structures and Equipment within Setbacks. No structures or mechanical equipment may be located within the ADU setback area.
112. Certificate of Occupancy Timing.
a. Generally. No certificate of occupancy for an ADU or JADU may be issued before the certificate of occupancy is issued for the primary dwelling unit.
b. Limited Exception for State-declared Emergencies. Notwithstanding subsection aE.1210.a. above, a certificate of occupancy for an ADU may be issued before a certificate of occupancy for the primary dwelling if each of the following requirements are met:
(1) The county is subject to a proclamation of a state of emergency made by the California Governor on or after February 1, 2025.
(2) The primary dwelling was substantially damaged or destroyed by an event referenced in the Governor’s state of emergency proclamation.
(3) The ADU has been issued construction permits and has passed all required inspections. (4) The ADU is not attached to the primary dwelling.
c. Local Exception for detached ADUs. Notwithstanding subsection E.1210.a. above, a six-month temporary certificate of occupancy for a detached ADU may be issued before a certificate of occupancy for the primary dwelling if each of the following requirements are met:
(1) The ADU has been issued construction permits and has passed all required inspections. (2) The ADU is not attached to the primary dwelling.

F. Class 2 ADU Requirements. The following requirements apply only to ADUs that require an ADU planning permit as describedClass 2 ADUs approved under subsection DC.2. above. above. This subsection F. does not apply to Class 1 ADUs or JADUs approved under subsection DC.1. above.

1. Maximum Size.
a. The maximum size of a detached or attached ADU subject to this subsection EF. is as follows:
(1) Eight hundred fifty850 square feet of livable interior space for a studio or one-bedroom unit; and
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Hillsborough City CouncilMarch 9, 2026

Hillsborough City Council
March 9, 2026