STAFF REPORT
Meeting Date:
May 12, 2026
CONSENT
11 SUBJECT: APPROVAL TO PROCEED WITH CONSTRUCTION FOR UNDERGROUND UTILITY DISTRICT 2019-1 (COAST HIGHWAY)
RECOMMENDATION: It is recommended that the City Council:
1. Authorize the use of $5,097,358 Rule 20A credits to proceed with construction for Underground Utility District 2019-1 (Coast Highway);
2. Award and authorize the City Manager to execute a contract with Hot Line Construction, Inc. in the amount of $2,363,255 for the construction of City street lighting and non-Rule 20A private connections;
3. Authorize the City Manager to enter into a utility company agreement with Frontier Communications to construct non-Rule 20A underground utilities and make an advanced payment for a total amount of $1,151,743;
4. Authorize the transfer of $2,780,127 from the Coast Highway UD 2020-1 project (6343150C81000-C2118) to the Coast Highway Utility District 2019-1 project (6343150C-81000-C2614);
5. Appropriate $135,609 (account number 6343150C-81000-C2614) from the Street Lighting and Utility Fund to approve a total budget of $2,915,736 for the Coast Highway Utility District 2019-1 project; and
6. Authorize the City Manager to approve project-related expenses and construction change orders for unforeseen circumstances for an amount not-to-exceed $351,500.
SUMMARY OF THE MATTER
South Coast Highway is a key evacuation route and a high priority for utility undergrounding for fire safety. In May 2018, the City Council directed staff to pursue the formation of a district at Coast Highway between Agate Street and Arch Street to place existing utility poles and overhead utility wires underground. On April 16, 2019, the City Council adopted a resolution to establish Underground Utility District 2019-1 to be funded by Southern California Edison (SCE) Rule 20A credits allocated to the City and provide underground utility service connections to all properties within the district that directly face Coast Highway. Utility designs have been completed, the project received Planning Commission Design Review approval in September 2022, and SCE recently completed encroachment permitting with Caltrans and construction bidding of the project. Construction is scheduled to begin this month and will take approximately 12 months to complete.
DISCUSSION
Rule 20A Credits
The City accrued and purchased Rule 20A credits from other neighboring cities to fund utility undergrounding projects. SCE has determined that their project cost is $5,097,358 in Rule 20A credits which is similar to the $5 million cost estimated in 2019. The SCE cost breakdown is shown in the table below:
APPROVAL TO PROCEED WITH CONSTRUCTION FOR UNDERGROUND UTILITY DISTRICT 2019-1 (COAST HIGHWAY)
May 12, 2026
SCE Rule 20A Expenditures UD 2019-1 Project Cost
Expenditures to Date (Design/Entitlements) $447,294
SCE Construction (Civil) $3,394,816
SCE Construction (Electrical & Overhead Removals) $745,512 Construction Contingency (10%) $509,736
Total $5,097,358
The City’s available Rule 20A allocation balance, as of April 2026, is shown in the table below:
Rule 20A Balance
Available Balance (April 2026) $10,218,346
Coast Highway UD 2019-1 Project Cost ($5,097,358)
Coast Highway UD 2020-1 Estimate ($4,400,000)
Remaining Allocation Balance $720,988
The remaining balance of $720,988 takes into account the 20A credits allocated to this project and the other Coast Hwy (Cajon to Agate) UD 2020-1 project which is under development. The City can complete this project and maintain a sufficient Rule 20A allocation balance for future project cost overruns. If final SCE expenditures are less than $5,097,358, Rule 20A allocations will be applied toward the Coast Highway UD 2020-1 project. It is recommended that the City Council authorize the use of $5,097,358 Rule 20A credits to proceed with construction for Underground Utility District 2019-1.
Utilities
This project will remove 33 utility poles and associated overhead utility wires paralleling Coast Highway as shown on Attachment 1. Costs for the undergrounding of Cox Communications, Frontier Communications, City Street Lighting, and Crown Castle facilities on existing utility poles along Coast Highway will be borne by each utility and are not represented in SCE’s cost estimate. Each utility will make contributions for their proportional share of the joint trench construction.
During design, Frontier Communications determined they have limited customers served by their existing overhead system along Coast Highway. As a result, their Rule 20A portion of work will be limited to converting these existing services to wireless, thereby eliminating the need to be part of the 20A joint trench in Coast Highway. However, many Coast Highway facing properties on the inland side receive their existing overhead telephone services from utility poles located at the rear property lines and outside of the Rule 20A boundary. Since those poles will be removed by the ongoing Woods Cove project, new services to these properties will now come from the Coast Highway side. Frontier will not cover the cost to underground utilities for utility poles and overhead wires that are located outside of the Rule 20A project boundary.
As a result, the City is proposing to cover the cost to construct Frontier’s new, underground system in Coast Highway in order to facilitate removals of all utility poles located at the rear of these properties as designed by the Woods Cove project for which those properties were assessed. This cost is estimated by Frontier to be $1,151,743 as shown in Attachment 2. It is recommended that the City Council authorize the City Manager to enter into a utility company agreement with Frontier to construct non-Rule 20A underground
APPROVAL TO PROCEED WITH CONSTRUCTION FOR UNDERGROUND UTILITY DISTRICT 2019-1 (COAST HIGHWAY)
May 12, 2026
utilities and make an advanced payment to Frontier for a total amount of $1,151,742.
Private Utility Connections
Eight properties currently receiving services from overhead utilities on Coast Highway are covered by Rule 20A allocations to underground those connections at no cost to property owners. For properties not currently being served from the existing overhead system on Coast Highway, Rule 20A allocations cannot be used for private connection work. There are 24 parcels that are not covered under the Rule 20A allocations since the majority of parcels along Coast Highway currently receive their overhead services from utility poles at the rear property lines. However, it would not be equitable if some properties receive their private connection work through Rule 20A allocations while their neighbors who do not qualify under the rule would be forced to pay for their connections. As a result, the City Council adopted a resolution which established the district in 2019 (Resolution No. 19.023) which stipulated that non-Rule 20A connections will be paid for by the City. Therefore, the costs for this work on private property, including trenching, conduit installation, and restoration will be paid for by the City.
The cost for electrical work, potential meter panel conversions, and electrical cutovers have not been determined yet and will be separately bid through a formal, competitive bidding process. Similarly, proposals for construction management and inspection to inspect the private connection work, City street lighting work, and trenching within the City’s public right-of-way will be requested separately City Street Lighting
There are 18 existing SCE street lights and four existing City-owned street lights within the district that will be removed and replaced with 22 City-owned decorative street lights, one street light meter pedestal, and approximately 5,000 linear feet of street light conduit. As a result, the City is a project participant and responsible for the cost to install the street lighting system and pay its proportional share of the joint trench construction including digging the trench, backfilling, and restoring the trench with final paving or concrete repairs.
Construction Contract
SCE conducted a closed bidding process at prevailing wage which ended on February 13, 2026. One bid was received from the prospective bidders list including total costs for SCE, Frontier, Cox, Crown Castle, and City of Laguna Beach Street Lighting. After reviewing the bid for qualifications and responsiveness, SCE approved Hot Line Construction, Inc. as the properly licensed, qualified, and responsive bidder for a total bid amount of $9,450,992 which is inclusive of all utility costs.
Hot Line Construction, Inc., is properly licensed and qualified to perform the work. Hot Line Construction, Inc. is currently constructing the Woods Cove AD 2014-2 and West Street AD 2021-1 projects. They are familiar with working in the City and have performed well with current and past projects. The bid received by Hot Line Construction for constructing City Street Lighting and 24 private connections is $2,363,255 as detailed below:
APPROVAL TO PROCEED WITH CONSTRUCTION FOR UNDERGROUND UTILITY DISTRICT 2019-1 (COAST HIGHWAY)
May 12, 2026
Hot Line Construction Bid Cost
City Street Lighting $1,644,515
Private Connections (24 total) $718,740
Total $2,363,255
It is recommended that the City Council award and authorize the City Manager to execute a contract with Hot Line Construction based on their bid amount of $2,363,255. It is also recommended that the City Manager be authorized to approve project-related expenses and construction change orders for unforeseen circumstances in the amount not to exceed $351,500. This contingency would also cover any change orders affecting the installation of Frontier facilities for which the City is paying for.
Public Outreach
A comprehensive public outreach effort by City staff and the contractor will be implemented as part of this project. Outreach will include social media, mailed notices, website postings, door hanger notices, project information signs, and phone/email inquiry responses. Construction is scheduled to begin this month and be completed by May 2027. The project contractor will not perform any work along Coast Highway during the summer construction moratorium which occurs between Memorial Day and Labor Day. After the pause during the summer months, full construction activity will start back up after Labor Day.
FINANCIAL ANALYSIS
There is available funding of $965,762 for the Coast Highway UD 2019-1 project. This was a rough amount earmarked during the early planning phase and well before additional information came to light regarding Frontier’s participation in the project. Supplemental funding in the amount of $2,915,736 is needed to cover costs for construction, encroachment permitting, and contingencies. Below is a breakdown of the project costs:
Description Expenditures
Construction Contract $2,363,255
Construction Contingency $351,500
Frontier Construction $1,151,743
CalTrans Encroachment Permit $15,000
TOTAL EXPENDITURES $3,881,498
FUNDING EARMARKED $965,762
FUNDING NEEDED ($2,915,736)
To fully fund the project, staff recommend transferring $2,780,127 in existing appropriations from the delayed Coast Highway UD 2020-1 utility undergrounding project and appropriate $135,609 from the Street Lighting and Utility Fund. The available fund balance in the Street Lighting & Utility Fund (134/634) is $647,305. The Coast Highway UD 2020-1 project account will be considered for replenishment in future budget cycles as necessary. The proposed funding transfers are summarized below:
APPROVAL TO PROCEED WITH CONSTRUCTION FOR UNDERGROUND UTILITY DISTRICT 2019-1 (COAST HIGHWAY)
May 12, 2026
Fund/Project Account Amount
Coast Highway UD 2020-1 6343150C-81000-C2118 ($2,780,127) Street Lighting & Utility Fund Balance N/A ($135,609)
Coast Highway UD 2019-1 6343150C81000-C2614 $2,915,736
ENVIRONMENTAL ANALYSIS
The proposed undergrounding project is exempt from the provisions of the California Environmental Quality Act (CEQA) pursuant to State CEQA Guidelines Section 15302(d), which authorizes an exemption for “conversion of overhead electric utility distribution systems facilities to underground.” Furthermore, State CEQA Guidelines Section 15303 provides a Categorical Exemption for the construction and location of a limited number of new, small facilities and structures, including electrical and other improvements (e.g., transformers and utility boxes). In addition, State CEQA Guidelines Section 15301 provides a Categorical Exemption for the operation or minor alteration of existing structures, facilities, or mechanical equipment involving negligible or no expansion of use, including electric power services. On September 7, 2022, the Planning Commission approved Design Review 22-1617 and Coastal Development Permit 22- 1625 for the Underground Utility District 2019-1 (Coast Highway) project. On September 4, 2024, an administrative design review hearing was held, granting approval for a two-year extension of time for DR 22-1617 and CDP 22-1625.
ATTACHMENTS
1. Boundary Map (Pg. 6)
2. Frontier Agreement (Pgs. 7-8)
3. Construction Contract (Pgs. 9-13)
Submitted By: Mark McAvoy Approved: .David A Kiff
Mark McAvoy, Director of Public
Works & Utilities
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Pierre Sawaya, Capital Program Manager Thomas Perez, City Engineer Michelle Bannigan, Director of Administrative
Services
Patrick Donegan, Assistant City Attorney