STAFF REPORT
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Meeting Date:
August 12, 2025
SUBJECT: REVIEW OF LAGUNA CANYON ROAD CONDITIONAL RELINQUISHMENT OFFER
RECOMMENDATION: It is recommended that the City Council:
1. Receive an update on the Laguna Canyon Road: Protect & Connect Project.
2. Authorize the City Manager to submit a formal written acceptance of Caltrans’ conditional offer of $14,400,000 for the relinquishment of State Route 133 (Laguna Canyon Road).
3. Authorize the City Manager to negotiate the Relinquishment Agreement, coordinate with Caltrans and the California Transportation Commission (CTC) regarding the same, and bring back a final version of the Relinquishment Agreement for review and approval by the City Council.
4. Determine that the action consists of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment and therefore, does not constitute a “project” within the meaning of the California Environmental Quality Act.
Appropriation: $0 Fund: N/A
Submitted By: .
Mark McAvoy
Approved:
Mark McAvoy, Director of Public
Works & Utilities
Dave Kiff, City Manager
SUMMARY OF THE MATTER
State Route 133 (Laguna Canyon Road) provides critical access to the City of Laguna Beach and serves as a key evacuation corridor. The City is currently leading the Laguna Canyon Road: Protect & Connect project that would have the City acquire the facility and then move to construct the project, whose goal is to enhance public safety, underground utilities, and improve multimodal access along the facility while preserving the rural character of the canyon (“Project”). To be clear, the City would prefer that Caltrans keep the SR-133 facility, but after multiple discussions with Caltrans, the envisioned project is not possible under Caltrans’ design regulations.
To support the relinquishment effort, the City has advanced the Project through the Project Study Report (PSR), initiated SCE utility undergrounding design, secured a cooperative agreement with Caltrans, and initiated the Project Approval and Environmental Document (PA&ED) phase. Additionally, the City is
REVIEW OF LAGUNA CANYON ROAD CONDITIONAL RELINQUISHMENT OFFER August 12, 2025
actively pursuing state and federal grants to support project final design and construction.
In 2020, the State Legislature approved Assembly Bill 2172 authorizing Caltrans to relinquish a portion of SR-133 to the City, subject to CTC approval. The roadway segment is depicted in Attachment 1. On January 9, 2024, the City Council authorized the City Manager to submit a Relinquishment Initiation Letter to Caltrans to enter negotiations for the acquisition of Laguna Canyon Road through the Caltrans relinquishment process. On June 3, 2025, Caltrans issued a conditional offer of $14.4 million to support the transfer of ownership and maintenance responsibilities from Caltrans to the City for Laguna Canyon Road, with direction to the City to respond by September 1, 2025, as to the City’s interest in accepting the amount and moving forward along the pathway to relinquishment (Attachment 2).
The City’s action to accept the relinquishment amount does not bind the City to accept SR-133, but it does move us further towards acceptance.
DISCUSSION
Laguna Canyon Road is one of three gateways into the city and provides critical access to adjacent recreational spaces as well as key destinations and activities in the city. As such, ensuring that Laguna Canyon Road provides efficient, safe access to the area is vital both to the region and to the city itself.
Laguna Canyon Road within the Project limits consists of a two-lane conventional highway with a two-way left turn lane, limited shoulders, and sporadic off-street angled and parallel parking located along the northbound (NB) side of the roadway. The right-of-way (ROW) is constrained by residential and light commercial land uses, as well as various trails, park uses, institutional uses, and open space preservation areas. This portion of roadway is further constrained by overhead utilities including Southern California Edison’s (SCE) transmission and distribution facilities near the travel way within the Clear Recovery Zone (CRZ). Furthermore, the existing roadway within the Project limits lacks pedestrian paths or sidewalks, or a designated bikeway, forcing pedestrians and bicyclists to use the limited shoulders to gain access to the various businesses, schools, recreational areas and trails, and transit stops along LCR.
The proposed Project generally consists of bicycle lanes, pedestrian pathways/sidewalks, improved access to transit facilities, improved shoulders, and undergrounding of the overhead utilities including, SCE transmission, SCE distribution, and various communication lines. The exhibits detailing the two options currently being evaluated are provided in Attachment 3. These alternatives are estimated to be $130 million to $136 million (escalated to Year 2030).
City’s consultant, Mark Thomas, conducted a robust Public Engagement effort to develop and refine the two options for the Project. The Public Engagement gathered input across four primary means of outreach:
pop-up events, community group and agency meetings, door-to-door business visits, and a community workshop. An online survey was also conducted to reach residents, businesses and their employees, and visitors. Although questions and concerns about the project were raised, most people expressed support for the Laguna Canyon Road: Protect & Connect Project, with most favoring the off-street bike trail option, and overwhelming support was seen across for undergrounding utilities, with few opposing.
Caltrans’ conditional offer proposes a $14.4 million contribution to the City for the relinquishment of SR133 from Postmile 0.059 (approximately 300 feet north of Coast Highway) to Postmile 3.416 (El Toro
REVIEW OF LAGUNA CANYON ROAD CONDITIONAL RELINQUISHMENT OFFER August 12, 2025
Road) as identified in the location map. Upon acceptance of the conditional offer, Caltrans will pursue the preparation of a Project Initiation Document (PID), Relinquishment Agreement, and other requirements for CTC approval.
Acceptance of the offer is requested by Caltrans by September 1, 2025, with programming of the funds expected in summer 2026, and final approval by CTC anticipated in fiscal year 2028–29. We do not anticipate that the $14.4 million will have a cost-of-living adjustment applied to it by the time it is awarded to us in 2028-29.
Below is a discussion of the benefits and risks of relinquishment.
Benefits of Relinquishment
1. Schedule: A reduction of approximately two years in the overall project delivery would be realized, because the City would be the lead agency for permitting and the California Environmental Quality Act (CEQA) process. The shorter time to completion is expected to result in significant cost savings likely totaling in the millions.
2. City Control of Project Design: The City would have control of the design and proposed improvements without being limited to Caltrans design standards. This will enable the Project to address the 2015 Laguna Canyon Task Force's desire to maintain the rural character of the canyon, and will provide flexibility to design utility undergrounding, roadway, pedestrian, and bicycle improvements that best fit the City's vision and public input and will minimize impacts to the open space and maximize benefits to the community.
3. Undergrounding of Utilities: Utility undergrounding is an essential project feature. Without the undergrounding, there is no room for roadway, bicycle, and pedestrian improvements to be constructed.
The Project team has done extensive analysis of whether the undergrounding can be accomplished with the road remaining under Caltrans ownership and has determined for multiple reasons that the answer to that question is no. Caltrans’ policies and standards do not allow utilities in the roadway unless there is no other alternative such as the case along Coast Highway. To explore all possibilities, the Project team asked Caltrans staff and their Executive Director for a waiver to this requirement for the Project. After vetting the City’s request with Caltrans Headquarters staff, the answer was still no. Undergrounding outside of the roadway is an inferior approach. First, based on numerous discussions with SCE, there is a significant risk that SCE will deem utility undergrounding outside the roadway to be infeasible., Second, even if SCE were willing to underground their facilities outside the roadway, this approach would result in substantial cost increases, utility conflicts and environmental and property impacts, including to the open space abutting the roadway. With City ownership, the utility undergrounding can be designed in the most effective and efficient location to reduce costs, minimize right-of-way impacts, reduce environmental impacts, and better retain the rural character of the roadway.
4. Funding: If the City can advance preliminary engineering and obtain environmental approval of the Project, the City will be significantly more competitive for state and federal grant opportunities. In addition, the time savings realized under City ownership will allow the City to be in a better position to meet
REVIEW OF LAGUNA CANYON ROAD CONDITIONAL RELINQUISHMENT OFFER August 12, 2025
milestones required by grant deadlines.
Risks and Mitigation
1. Operational Costs: Additional annual costs will be incurred by the City for annual operations and maintenance, as well as discretionary costs related to future improvement projects. Estimated annual costs for routine roadway maintenance are approximately $200,000 and an additional $200,000 for emergency road closures related to traffic accidents, flooding, or other unforeseen events. It is acknowledged that the City is already expending resources performing maintenance related to landscape, street lighting, and providing emergency and special event related traffic control along Laguna Canyon Road. The proposed Project would yield a nearly brand-new facility that would significantly reduce ongoing maintenance costs post construction. As an example, Project pavement construction would provide a 20-year lifespan.
2. Risk Management: With ownership of the roadway comes the potential for claims and settlements related to incidents along the corridor, as well as responsibility for closures due to emergencies or disaster events. While accidents cannot be eliminated completely, the proposed Project will implement a number of safety features, such as the elimination of power poles, separated or protected bike lanes, geometric, and speed reduction measures that are likely to have a measured reduction in accident potential and severity, which similarly has the potential to lower the City's liability. The City has insurance that is expected to cover any liability for accidents above the self-insured retention (currently $400,000 per claim). If the City has losses related to Laguna Canyon Road approaching $11 million annually, the City's insurance premiums would likely increase. Additionally, if the City experiences significant losses, the City could be in a position where the excess carriers above California Insurance Pool Authority (CIPA) refuse to cover the Laguna Canyon Road. Therefore, the City should not pursue relinquishment, unless there is a commitment to construct the proposed improvements to mitigate the City's risk.
3. Standards and Compliance: Assuming ownership of the roadway results in potential liabilities related to right-of-way encroachments, address compliance under the Americans with Disabilities Act (ADA), and substandard geometrics. The design of the proposed Project will incorporate current design standards and will address ADA compliance and substandard geometrics to the extent feasible.
Relinquishment Process and Timeline
City submits acceptance August 2025
Caltrans prepares Project Initiation Document Fall 2026 City-Caltrans Relinquishment Agreement 2027
Final CTC approval and transfer effective FY 2028–2029
Recommendation
The LCR Ad Hoc Committee recommends that the City Council accept the conditional offer of $14,400,000 for the relinquishment of State Route 133 from postmile 0.059 to postmile 3.416. The LCR Ad Hoc Committee’s recommendation is based on its conclusion that the benefits described above outweigh the risks of relinquishment. The underlying reasoning is summarized below:
REVIEW OF LAGUNA CANYON ROAD CONDITIONAL RELINQUISHMENT OFFER August 12, 2025
1. Completion of the Project is a critical public safety measure that reduces wildfire risk, improves safety for drivers, pedestrians and bicyclists, will protect and enhance a key evacuation route for all residents and improve access for first responders during emergency events. Completing this Project two years sooner through relinquishment provides the public safety protection and benefits much sooner.
2. Designing the undergrounding improvements to Caltrans standards (i.e. outside of the roadway) may preclude the entire Project from SCE's perspective and, if not precluded, will add significant costs, time delays, and adverse environmental impacts.
3. Designing the roadway, pedestrian, and bicycle improvements to Caltrans standards will make it difficult to achieve the objective of preserving the rural look of the canyon.
4. Project cost savings associated with relinquishment are substantial.
5. Liability and other risks associated with relinquishment can be mitigated by designing and completing the Project to current safety standards and through liability insurance with respect to accidents.
FINANCIAL ANALYSIS
The proposed relinquishment would include a $14.4 million payment from Caltrans to the City. These funds will be applied to the Laguna Canyon: Protect and Connect project.
SCE Financial Commitment
Staff has been working extensively with SCE to determine what level of financial commitment SCE will provide with respect to the undergrounding portion of the Project. These discussions resulted in SCE issuing a letter of support for the Project (Attachment 4). In this letter, SCE identified potential funding sources from the City's existing Rule 20A credit reserve balance of $1.4 million, and an anticipated overhead equivalent credit of $3.4 million. Additionally, the letter detailed the potential to include a portion of the Laguna Canyon Road undergrounding into SCE's Targeted Undergrounding (TUG) program. Under the TUG program, SCE would underground the distribution lines within the Project limits at SCE's own cost.
It is important to note that the SCE support letter highlighted that funding for the TUG program is a matter under discussion in SCE's 2025 General Rate Case (GRC) at the California Public Utilities Commission (CPUC). Staff is actively working with SCE staff to determine how the City may assist in ensuring that the CPUC will authorize the necessary funding for Laguna Canyon Road undergrounding in the GRC.
Further financial strategies, including funding for construction and grant matching, will be brought forward in future budget cycles.
ALIGNMENT WITH CITY COUNCIL GOALS AND PRIORITIES
ENVIRONMENTAL ANALYSIS
The recommended action consists of the creation of government funding mechanisms or other government fiscal activities, which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. (Public Resources Code Section 21065; CEQA Guidelines Section 15378(b)(5).) Before the City Council tonight is a request to direct the City Manager to submit a written acceptance of Caltrans’ conditional offer of $14,400,000 for the relinquishment of State Route 133 to continue the process towards a formal Relinquishment Agreement. The final agreement must
REVIEW OF LAGUNA CANYON ROAD CONDITIONAL RELINQUISHMENT OFFER August 12, 2025
come back for final approval with specific details and conditions of the relinquishment. If necessary and applicable, future approval of the Relinquishment Agreement may necessitate independent environmental review.
ATTACHMENTS
1. Location Map (Pg. 7)
2. Caltrans Conditional Offer Letter (Pgs. 8 - 9)
3. Project Alternatives (Pgs. 10 - 13)
4. SCE Letter of Support (Pgs. 14 - 16)
Report Prepared By: Coordinated With:
Thomas Perez, City Engineer Patrick Donegan, Assistant City Attorney