Morro Bay City Council
February 27, 2024

CITY OF MORRO BAY
City Council Regular Meeting Agenda

Tuesday, February 27, 2024, 5:30 p.m.

Veterans Memorial Hall, 209 Surf St., Morro Bay, CA
Public Participation
Public participation is offered in the following ways:
• Community members may attend the meeting in person at the Morro Bay Veterans Hall.

Alternatively, members of the public may watch the meeting and speak during general Public Comment or on a specific agenda item by logging into the Zoom webinar using the information provided below. Please use the "raise hand" feature to indicate your desire to provide public comment.
•
Zoom webinar link:
https://us02web.zoom.us/j/82722747698?pwd=aWZpTzcwTHlRTk9xaTlmWVNWRWFU QT09
•
• Password: 135692
Or Telephone Attendee: 1 (408) 638-0968 or 1 (669) 900-6833 or 1 (346) 248-7799; Webinar ID: 827 2274 7698; Password: 135692: Press *9 to raise hand for public comment.
•
• Meetings are also broadcast on cable Channel 20 and streamed on the City's website.

Community Members are encouraged to submit agenda correspondence via email to the City Council at [email protected] prior to the meeting. Agenda correspondence received by 10:00 a.m. on the meeting day will be posted on the City website. •
Pages

1. ESTABLISH QUORUM AND CALL TO ORDER

2. MOMENT OF SILENCE

3. PLEDGE OF ALLEGIANCE

4. REPORTS

4.a Closed Session Report

4.b Mayor and Councilmembers' Reports, Announcements and Presentations

4.c City Manager Reports, Announcements and Presentations

5. RECOGNITION AND PRESENTATIONS

6. PUBLIC COMMENT
Members of the audience wishing to address the Council on City business matters not on the agenda may do so at this time. For those desiring to speak on items on the agenda, but unable to stay for the item, may also address the Council at this time.

Public comment is an opportunity for members of the public to provide input to the governing body. To increase the effectiveness of the Public Comment Period, the City respectfully requests the following guidelines and expectations be followed:
•
Those desiring to speak are asked to complete a speaker slip, which are located at the entrance, and submit it to the City Clerk. However, speaker slips are not required to provide public comment. •
When recognized by the Mayor, please come forward to the podium to speak. Though not required, it is helpful if you state your name, city of residence and whether you represent a business or group. Unless otherwise established by the Mayor, comments are to be limited to three minutes.
•
All remarks should be addressed to Council, as a whole, and not to any individual member thereof.
•
The Council respectfully requests that you refrain from making slanderous, profane or personal remarks against any elected official, commission and/or staff.
•
Please refrain from public displays or outbursts such as unsolicited applause, comments or cheering.
•
Any disruptive activities that substantially interfere with the ability of the City Council to carry out its meeting will not be permitted and offenders will be requested to leave the meeting.
•
Your participation in City Council meetings is welcome and your courtesy will be appreciated.
•
The Council in turn agrees to abide by its best practices of civility and civil discourse according to Resolution No. 07-19.
•

7. CONSENT AGENDA
Unless an item is pulled for separate action by the City Council, the following actions are approved without discussion. The public will also be provided an opportunity to comment on consent agenda items.

Recommended Action
Approve Consent Agenda Items 7.a through 7.b as submitted.

7.a Approval of Minutes
(City Clerk)

Recommended Action
Approve as submitted.

1. January 23, 2024 - Regular Council Meeting 5

2. February 13, 2024 - Regular Council Meeting 12

7.b Second Quarter Investment Report (period ending December 31, 2023) for Fiscal Year (FY) 2023-24
17 (Administrative Services Department)
Recommended Action
Receive the attached Second Quarter Investment Report (period ending December 31, 2023) for Fiscal Year 2023-24.

8. PUBLIC HEARING ITEMS

8.a Review and Adopt Final Funding Recommendations for the 2024 Community Development Block Grant (CDBG) Program
20 (Community Development Department)
Recommended Action
Conduct a public hearing to review and adopt Resolution No. 15-24 approving final funding recommendations for the 2024 Community Development Block Grant (CDBG) funds and forward recommendations to the San Luis Obispo County Board of Supervisors for inclusion with the other final funding requests from the Urban County Consortium.

The funding recommendation is for the two applications received from 5 Cities Homeless Coalition and the City Public Works Department along with City program administration of $3,586 for a total 2024 funding allocation of $51,228. Additionally, staff recommends the City Council authorize the City Manager to make pro rata adjustments to the allocation based on the final funding amount from San Luis Obispo County based on the approval of the federal budget and the U.S.

Department of Housing and Urban Development’s (HUD’s) final grant amount to the County.

9. BUSINESS ITEMS

9.a Presentation and Discussion of the Fiscal Year (FY) 2022-23 Annual Comprehensive Financial Report
28 (Administrative Services Department)
Recommended Action
Receive the presentation and provide feedback on the FY 2022-23 Annual Comprehensive Financial Report (ACFR) for the period of July 1, 2022 through June 30, 2023 (Attachment 1), and

1. 2. Receive FY 2022-23 Annual Streets Report (Attachment 2) and

FY 2023-24 Prop 172 Maintenance of Effort Certification (Attachment 3).

9.b Fiscal Year 2023-24 Midyear Budget and Financial Update 31 (Administrative Services Department)
Recommended Action
Receive the Fiscal Year (FY) 2023-24 Midyear Budget Report; and

1. Adopt Resolution No. 16-24 authorizing the attached Budget Amendments

2. 9.c Response to San Luis Obispo County - Offshore Wind Notice of Funding Availability Scope of Work Questionnaire
60 (City Manager / Harbor Department)
Recommended Action
Acknowledge and Review of the responses to the San Luis Obispo County Notice of Funding Availability for potential offshore wind development on the Central Coast and provide input on additions, deletions and/or edits.

10. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS

11. ADJOURNMENT
The next Regular Meeting will be held on March 12, 2024.

This agenda is subject to amendment up to 72 hours prior to the date and time set for the meeting. Please refer to the agenda posted at City Hall, 595 Harbor Street, Morro Bay, CA 93442 for any revisions or call the Clerk's office at (805) 772-6205 for further information.

Materials related to an item on this agenda submitted to the City Council after distribution of the agenda packet are available for public inspection upon request by calling the City Clerk's office at (805) 772-6205.

In compliance with the Americans Disability Act, if you need special assistance to participate in a City meeting, please contact the Clerk's office 24 hours prior to the meeting to insure reasonable arrangements can be made to provide accessibility to the meeting.

1 MINUTES - MORRO BAY CITY COUNCIL

REGULAR MEETING
January 23, 2024, 5:30 p.m.

Veterans Memorial Hall, 209 Surf St., Morro Bay, CA
Members Present: Mayor Carla Wixom
Council Member Zara Landrum
Council Member Laurel Barton
Council Member Cyndee Edwards
Council Member Jennifer Ford
Staff Present: City Manager Yvonne Kimball
City Attorney Chris Neumeyer
City Clerk Dana Swanson
Asst City Mgr/Admin Svcs Director Steve Conway
Public Works Director Greg Kwolek
Community Development Director Scot Graham
Police Chief Amy Watkins
Fire Chief Dan McCrain
Harbor Director Ted Schiafone
Planning Manager Cindy Jacinth
_____________________________________________________________________

1. ESTABLISH QUORUM AND CALL TO ORDER
Mayor Wixom called the meeting to order at 5:32 p.m., with all members present.

2. MOMENT OF SILENCE

3. PLEDGE OF ALLEGIANCE

4. REPORTS
https://youtu.be/Sula8Wp-v5M?si=IvfpEoIyOMbzEknD&t=87
Mayor Wixom sought Council consensus to hear Business Item 9.a. before Public Hearing Item 8.a.

4.a Closed Session Report
City Attorney Neumeyer announced no closed session meeting was held therefore no reportable action.

4.b Mayor and Councilmembers' Reports, Announcements and Presentations

2 https://youtu.be/Sula8Wp-v5M?si=D8CUG7xxbK3kWemW&t=125

4.c City Manager Reports, Announcements and Presentations None

5. RECOGNITION AND PRESENTATIONS

5.a Measure Q/E Report by CFAC Chair Stephen Peck
https://youtu.be/Sula8Wp-v5M?si=OrY6r4mXFhSjnzY2&t=883

6. PUBLIC COMMENT
https://youtu.be/Sula8Wp-v5M?si=J4KbDzeLUUzpRXDe&t=1280 Jon Elliott introduced Joel Leidinger, a new barber at Northside Mike's located at 2300 Main Street, Suite 2. Visit mikesbarbershop.com for more information.

Joel Leidinger introduced himself and was pleased to be part of the Morro Bay community.

Linda Winters, Morro Bay, shared her appreciation for advisory board volunteers.

Jeanne Marie Colby, Morro Bay, urged residents to vote yes on Measure A-24 and requested a 90-day comment period for the BESS EIR.

Aaron Ochs, Morro Bay, stated his support for Measure A-24 and shared concerns regarding Morro Bay Chamber of Commerce.

Nicole Dorfman, Morro Bay, rejected REACH's proposal for the role Morro Bay may play with regard to the battery project or wind energy. She added her support for Measure A-24 and a 90-day comment period for the BESS EIR.

Cherise Hansson, Chairperson for the Morro Bay Chamber of Commerce, provided an update on Chamber activities and its search for a new CEO/President.

An unnamed person requested a 90-day review period for the Vistra EIR.

Nattalia Merzoyan, Morro Bay, disputed offshore wind and battery storage were green energy and added her support for 90-day review of the Vistra BESS EIR.

Betty Winholtz, Morro Bay, asked why steel plates were placed in several blocks along Morro Avenue.

An unnamed person concurred with Ms. Dorfman's comments and spoke in support of Mr. Ochs' recent blog.

Margaret Carmen, Member of REACT Alliance, spoke in opposition to the BESS project and offshore wind, added her support for Measure A-24 and a 90-day review period of the BESS EIR.

An unnamed person commented on racism and classism.

3 End of public comment.

7. CONSENT AGENDA
Unless an item is pulled for separate action by the City Council, the following actions are approved without discussion. The public will also be provided an opportunity to comment on consent agenda items.
https://youtu.be/Sula8Wp-v5M?si=gdpQVcl_3APpPpar&t=2965 Public Comment:

Betty Winholtz, Morro Bay, was pleased the Lila Keiser parking lot would be repaved and hoped the road leading to the park would also be paved.

End of Public Comment
Motion by Council Member Ford
Seconded by Council Member Landrum
Approve Consent Agenda Items 7.a through 7.d as submitted.

Ayes (5): Mayor Wixom, Council Member Landrum, Council Member Barton, Council Member Edwards, and Council Member Ford
CARRIED (5 to 0)

7.a Approval of Minutes
Approve as submitted.
a. December 12, 2023 Special Closed Session Meeting (Revised) b. January 9, 2024 Special Closed Session Meeting

7.b Application for California Office of Traffic Safety (OTS) Grant Authorize the Fire Department to submit applications to the California Office of Traffic Safety Grant program for hydraulic extrication equipment.

7.c Resolution No. 06-24 for Award of Bid - Project No. MB2022-MA01, Morro Bay Parking Lots Rehabilitation and Improvements Project Adopt Resolution No. 06-24 approving an agreement with Ramsey Asphalt Construction Corp. for Project No. MB2022-MA01, Morro Bay Parking Lots Rehabilitation and Improvements Project, in an amount not to exceed $251,467.48. All agreements implementing such project work shall be processed and based on the review of the City Attorney’s Office to be in form and substance acceptable to City staff and legal counsel.

7.d Adoption of Resolution No. 07-24 Authorizing Submission of Rural Transit Fund Grant Application and Execution of Related Documents Upon Award

4 Adopt Resolution No. 07-24 authorizing submission of Rural Transit Fund (RTF) Grant Application for a new transit bus and execution of related documents upon award.

8. PUBLIC HEARING ITEMS

8.a Adoption of Resolution No. 08-24 approving Conditional Use Permit #CUP22-09 at 801 Embarcadero for redevelopment of the Libertine Brewing site (Lease site 86/86W) and public access improvements https://youtu.be/Sula8Wp-v5M?si=lxii0xhYW-5HAzKW&t=5307 Planning Manager Jacinth presented the report, including proposed language for Condition #25 regarding deferral of plaza improvements until a plan is prepared that addresses relocation of parking spaces.

Public Comment:

Eric Newton, Applicant, thanked staff and the Planning Commission for their hard work and guidance, described the collaborative process and efforts to maximize the property potential, and addressed parking concerns.

Jeff Heller, Morro Bay, spoke in support of the project.

Betty Winholtz, Morro Bay, illustrated her concerns about extending the harborwalk 5 ft. beyond the required 10 ft.

An unnamed resident offered comments on the project and suggested this was an opportunity to consider closing the Embarcadero to private vehicles.

Linda Donnelly, Morro Bay, expressed concern about the elimination of parking spaces, particularly accessible spaces.

Terry Simons, Morro Bay, offered comments on parking credits based on past uses and need to initiate an in-lieu program to fund a parking structure.

End of public comment.

The Council took a brief recess at 8:39 p.m. and reconvened at 8:46 p.m.

Mr. Graham asked Mr. Neumeyer to read language added to Condition 25 into the record (full text of Condition 25, including proposed addition (provided below).

25.Plaza improvements shall be deferred until a relocation plan is prepared that addresses relocation of parking spaces; or unless relocation of parking spaces for street ends is identified and included with approval of the future Waterfront Master Plan update.

Deferral of the plaza improvements shall be included in the lease for the subject property. Plaza improvements shall be installed

5 within 24 months of an approved relocation plan for the relocated parking spaces. Upon written determination by the City Manager and the Community Development Director, that parking relocation is unlikely, including but not limited to, through anticipated untimely delay of the waterfront master plan update, Applicant will within 30 calendar days deposit into the City’s general fund for use in Harbor area by City a sum equal to the total amount of plaza improvement cost as reasonably determined by the Community Development Director based upon industry standards. If within 14 months after the building permit is issued for Applicant’s project, plaza improvements have not been determined by the City to move forward then Applicant has the option of depositing said sum to the City, rather than waiting for a determination on whether or not parking relocation will or will not occur.

Mr. Newton was invited back to the podium and agreed on record to Condition #25,including language read into the record by Mr. Neumeyer.

Mr. Graham noted development without plaza would eliminate four parking spots. Given this, he suggested adding a condition to investigate the ability to place an ADA parking space along the frontage or within street end and/or a passenger drop off loading zone space with priority toward providing an ADA parking space (new Condition #26)
Motion by Mayor Wixom
Seconded by Council Member Ford
Adopt Resolution No. 08-24, making the necessary findings for approval of Conditional Use Permit #CUP22-09 as Concept/Precise Plan approval, located at 801 Embarcadero with the alternative that we modify conditions of approval from the Planning Commission to include conditions 25 and 26 as articulated by staff and Council.

Ayes (5): Mayor Wixom, Council Member Landrum, Council Member Barton, Council Member Edwards, and Council Member Ford CARRIED (5 to 0)

9. BUSINESS ITEMS

9.a Advisory Board Interviews and Appointments
https://youtu.be/Sula8Wp-v5M?si=zOPuqLeWMrVond9t&t=3109 The following applicants were interviewed to the Planning Commission:

Derek Dahlgren and Joe Ingraffia.

The City Council voted by written ballot and City Clerk Swanson read the results: Joe Ingraffia received unanimous support by the Mayor and City

6 Council Members and was appointed to a 4-year term on the Planning Commission.

Given this assignment, there was Council consensus to have Mr. Ingraffia step down from consideration for appointment to the Public Works Advisory Board.

The following applicants were interviewed to the Public Works Advisory Board: Derek Dahlgren and Doug Hill.

See first motion below.

Council Member Landrum recused herself from interviews for the Recreation & Parks Commission given her relationship with one of the applicants. Ms. Merzoyan withdrew from consideration and Council Member Landrum returned to the dais.

The following applicants were interviewed to the Recreation and Parks:

Megan Fazio and Betty Winholtz. Following interviews, Ms. Winholtz offered to serve the partial term.

See second motion below.

Following this item, the Council took a brief recess at 7:00 p.m. and reconvened at 7:13 p.m.

Motion by Council Member Ford
Seconded by Council Member Barton
Appoint Doug Hill and Derek Dahlgren to 4-year terms on the Public Works Advisory Board.

Ayes (5): Mayor Wixom, Council Member Landrum, Council Member Barton, Council Member Edwards, and Council Member Ford CARRIED (5 to 0)
Motion by Council Member Ford
Seconded by Council Member Barton
Appoint Megan Fazio for a 4-year term ending January 31, 2028 and appoint Betty Winholtz to fill the remainder of a term ending January 31, 2025 to the Recreation and Parks Commission.

Ayes (5): Mayor Wixom, Council Member Landrum, Council Member Barton, Council Member Edwards, and Council Member Ford CARRIED (5 to 0)

9.b Update on Fiscal Year (FY) 2023-24 and 2024-25 City Council Goals and Action Items

7 https://youtu.be/Sula8Wp-v5M?si=cFJtyHvzTZN59L-y&t=11447 City Manager Kimball and the Department Directors presented the report and responded to Council inquiries.

There was Council consensus to continue the meeting past 9:30 p.m.

Public comment:

Jeff Heller, Morro Bay, appreciated the report and suggested the goals process be tied to what the City is able to fund and accomplish.

Betty Winholtz, Morro Bay, agreed with the City Manager's first three options as the priorities, along with street striping and STR code enforcement.

An unnamed resident suggested the City should focus on preservation of quality of life, not continued growth.

Terry Simons, Morro Bay, appreciated the City's efforts to address encampments along Quintana Road, suggesting that area is appropriate for some type of low income housing project.

End of public comment.

There was consensus to direct staff to come back a prioritized status report update.

No formal action was taken on this item.

10. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS
None.

11. ADJOURNMENT
The meeting adjourned at 10:19 p.m.
/s/ Dana Swanson, City Clerk

1 MINUTES - MORRO BAY CITY COUNCIL

REGULAR MEETING
February 13, 2024, 5:30 p.m.

Veterans Memorial Hall, 209 Surf St., Morro Bay, CA
Members Present: Mayor Carla Wixom
Council Member Zara Landrum
Council Member Jennifer Ford
Council Member Laurel Barton
Council Member Cyndee Edwards
Staff Present: City Manager Yvonne Kimball
City Attorney Chris Neumeyer
City Clerk Dana Swanson
Interim Asst City Mgr/Admin Svcs Director Steve Conway
Public Works Director Greg Kwolek
Police Chief Amy Watkins
Fire Chief Dan McCrain
Planning Manager Cindy Jacinth
Human Resources Manager Rachael Hendricks
_____________________________________________________________________

1. ESTABLISH QUORUM AND CALL TO ORDER
https://youtu.be/nKFMfJVrw1o?si=EOiP-1y0Adl1amtH&t=45
Mayor Wixom called the meeting to order at 5:30 p.m., with all members present.

Mayor Wixom announced she was participating via teleconference while traveling on City business.

2. MOMENT OF SILENCE

3. PLEDGE OF ALLEGIANCE

4. REPORTS

4.a Closed Session Report
https://youtu.be/nKFMfJVrw1o?si=RG5TU9JYI6nRCHWC&t=104
City Attorney Neumeyer announced no closed session meeting was held.

Council Member Landrum announced she was teleconferencing from Washington DC traveling on City business.

2 4.b Mayor and Councilmembers' Reports, Announcements and Presentations
https://youtu.be/nKFMfJVrw1o?si=jvY48uJHwGBQfBPP&t=125

4.c City Manager Reports, Announcements and Presentations https://youtu.be/nKFMfJVrw1o?si=tGXrKSTEJczThWrK&t=460

5. RECOGNITION AND PRESENTATIONS

6. PUBLIC COMMENT
https://youtu.be/nKFMfJVrw1o?si=kWRgVYTkijjErsYp&t=768
Rachel Wilson, Cayucos, commented on the lack of wildlife observed during a recent visit to several industrial ports.

Aaron Ochs, Morro Bay, commented on Chamber of Commerce activities and a recent mailer to Morro Bay residents.

Linda Winters, Morro Bay, expressed appreciation for staff assistance and support.

Nicole Dorfman, Morro Bay, announced 'Save our Seas - Stop Offshore Wind' event hosted by REACT Alliance on Saturday, March 9th, from 12:00-5:00 p.m. at the Morro Bay Veterans Hall.

Seychelle Cannes, Morro Bay, requested information about REACH and appreciated the review period for the BESS Project EIR had been extended to 60 days.

Ken Vesterfelt, Morro Bay, announced the 28th Annual Morro Bay Car Show will be held May 2nd - 4th and requested the City consider waiving permit fees for the event.

Betty Winholtz, Morro Bay, complained about odors resulting from the roasting process at Scout Coffee, commented on AT&T's recent request to the CPUC to no longer provide landlines, and reminded the public no tree trimming or removal is allowed February 1st through June 30th.

An unnamed resident offered comments.

End of public comment.

7. CONSENT AGENDA
https://youtu.be/nKFMfJVrw1o?si=cm_xXYZCIfa3fMXU&t=2217 Unless an item is pulled for separate action by the City Council, the following actions are approved without discussion. The public will also be provided an opportunity to comment on consent agenda items.

Betty Winholtz, Morro Bay, commented on Items 7.b and 7.c.

3 Scott Collins, HASLO Executive Director, appreciated the City's support of affordable housing projects.

An unnamed person commented on Item 7.d.

End of public comment.

Motion by Council Member Barton
Seconded by Council Member Edwards
Approve Consent Agenda Items 7.a through 7.e as submitted.

Ayes (5): Mayor Wixom, Council Member Landrum, Council Member Ford, Council Member Barton, and Council Member Edwards
CARRIED (5 to 0)

7.a Approval of Minutes
Approve as submitted.
a. December 12, 2023 - Regular Council Meeting
b. January 9, 2024 - Regular Council Meeting
c. January 23, 2024 - Special Joint City Council and Citizens' Finance Advisory Committee Meeting

7.b Consideration and Discussion of City Signature Community Events Adopt Resolution No. 09-24, updating and adopting the City's sponsored and/or partnered events.

7.c Authorization to provide a total of $25,000 in financial assistance to the HASLO affordable housing project located at 405 Atascadero Road. The proposed financial assistance will be in the form of a loan from the Affordable Housing In-Lieu Fund
Adopt Resolution No. 10-24 authorizing a loan in the amount of $25,000 from the Affordable Housing In-Lieu Funds to assist with the funding for the Housing Authority of San Luis Obispo (HASLO) affordable rental housing development located at 405 Atascadero Road.

7.d Adoption of Resolution No. 11-24 Updating the City's Conflict of Interest Code
Adopt Resolution No. 11-24 approving amendments to the City's Conflict of Interest Code.

7.e Adopting of Resolutions No. 12-24 and No. 13-24 Approving Amendment No. 2 to the MOU between the City of Morro Bay and SEIU Local 620 Updating the Compensation Range for Five SEIU Represented Classifications and FY 23-24 Combined Pay Schedule

4 1. Adopt Resolution No. 12-24 approving Amendment No. 2 to the Service Employees International Union Local 620 (SEIU) MOU 2022-24 updating the compensation ranges for five SEIU
represented classifications, and

2. Adopt Resolution No. 13-24 approving the revised Fiscal Year (FY) 2023-24 Combined Pay Schedule.

8. PUBLIC HEARING ITEMS

9. BUSINESS ITEMS

9.a Consideration of Conditional Appointment of Michael Codron as Interim Community Development Director and Conditional Approval of Employment Agreement between the City of Morro Bay and Michael Codron
https://youtu.be/nKFMfJVrw1o?si=oJuowlaKJCwtiM1I&t=2796 Human Resources Manager Hendricks presented the report and invited Michael Codron to say a few words.

Public comment:

Terry Simons, Morro Bay, spoke in support of Mr. Codron as Interim Community Development Director.

End of Public Comment.

Motion by Council Member Edwards
Seconded by Council Member Landrum
Appoint Michael Codron as the Interim Community Development Director, contingent upon the successful completion of the City’s background check. Additionally, it is recommended that the City Council authorize the City Manager to execute the attached employment agreement following the successful background check.

Ayes (5): Mayor Wixom, Council Member Landrum, Council Member Ford, Council Member Barton, and Council Member Edwards
CARRIED (5 to 0)

9.b Adoption of Local Roadway Safety Plan and Vision Zero https://youtu.be/nKFMfJVrw1o?si=0tpUhIARgeU6k6Bi&t=3346 Public Works Director Kwolek introduced Darryl DePencier from KimleyHorn who presented the report and responded to Council inquiries.

Mayor Wixom opened public comment.
https://youtu.be/nKFMfJVrw1o?si=kPuQ0HL6Id5TX97s&t=4427

5 Betty Winholtz, Morro Bay, requested clarification on terminology used in the report and felt many of the suggestions were not appropriate for Morro Bay.

End of public comment
Mr. Kwolek and Mr. DePencier responded to questions raised during public comment and additional questions posed by Council.

Motion by Council Member Ford
Seconded by Council Member Barton
Adopt Resolution No. 14-24 acknowledging adoption of the plan and a goal of working toward zero traffic fatalities so that City may apply and potentially qualify for various roadway safety grant programs and to ensure we have all comments included in that document from the public.

Ayes (5): Mayor Wixom, Council Member Landrum, Council Member Ford, Council Member Barton, and Council Member Edwards
CARRIED (5 to 0)

10. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS
None.

11. ADJOURNMENT
The meeting adjourned at 7:02 p.m.
/s/ Dana Swanson, City Clerk

Prepared By: ___SC_______ Dept Review: ___SC______
City Manager Review: YK____ City Attorney Review: ____
Staff Report
TO: Honorable Mayor and City Council DATE: February 14, 2024 FROM: Steve Conway, Interim Asst City Manager/Admin Services Director Emily Conrad, Finance Manager
SUBJECT: Second Quarter Investment Report (period ending December 31, 2023) for Fiscal Year (FY) 2023-24

RECOMMENDED ACTION
Receive the attached Second Quarter Investment Report (period ending December 31, 2023) for Fiscal Year 2023-24.

FISCAL IMPACT
There is no fiscal impact associated with this recommendation.

DISCUSSION
The Second Quarter Investment Report for FY 2023-24, attached, demonstrates that as of December 31, 2023, the City’s weighted portfolio yield of 3.72% for the quarter was in line with the Local Agency Investment Fund (LAIF) average yield of 3.81% for that quarter. Interest rates shifted slightly lower in the second quarter anticipating future Federal Reserve target reductions on interest rates.

The City recorded $568,522 in interest earnings for the second quarter. For comparison, in the second quarter of FY 2022-23 the City recorded $170,764 in interest earnings. The significant increase in interest earnings is a result of higher interest rates in the market, higher cash balances for the City due to the ability to rebuild reserves, and staff efforts to pursue improved investment options consistent with Council’s Investment Policy and State law.

This quarter, staff re-invested in one new certificate of deposit (BMW Bank NA) with interest rates in the 4.9 percent range to take advantage of available high-yield instruments. LAIF interest rates also continued to increase climbing over the last two years, increasing from 0.9% on December 31, 2021 to 3.9% on December 31, 2023. The interest rate increase has substantially boosted the City’s earnings in this large portfolio that provides safety and liquidity through the State Treasurer’s Office. These efforts, on top of actions earlier in the calendar year to procure other high-yield certificates of deposit, as well as larger U.S. Treasury Notes and a Federal Home Loan Bank (FHLB) investment, have yielded significant returns for the City. These higher interest revenues in FY 2022-23 and FY 2023-24 will help mitigate other areas of revenue cooling such as sales tax and other economically sensitive revenues.

Staff is currently evaluating investment options more comprehensively, including the exploration of utilizing an investment firm. The City recently issued requests for proposals for investment advisory services and received responses from seven firms. Many small cities utilize investment AGENDA NO: 7.b
MEETING DATE: February 27, 2024

advisors with extensive expertise in municipal investments to ensure ongoing maximization of interest revenues within the confines of State law and local investment policies.

CONCLUSION
Staff recommends that the City Council receive the Second Quarter Investment Report (period ending December 31, 2023) for Fiscal Year 2023-24.

ATTACHMENT

1. Second Quarter Investment Report for FY 2023-24 (period ending December 31, 2023)

CITY OF MORRO BAY

QUARTERLY PORTFOLIO PERFORMANCE

INVESTMENT

OR CUSIP PURCHASE MARKET INTEREST PURCHASE MATURITY DAYS TO

NUMBER INSTITUTION PRICE VALUE RATE DATE DATE MATURITY
POOLED MONEY INVESTMENT ACCOUNT:

LAIF $ 37,189,891 $ 37,189,891 2.07% DAILY DAILY 1
MONEY MARKET ACCOUNT:

MM 15,711,622.53 15,711,623 4.59% DAILY DAILY 1
SWEEP 6,253,213.03 6,253,213 0.01% DAILY DAILY 1
SUBTOTAL LIQUID INSTRUMENTS: 59,154,726 59,154,726
CERTIFICATES OF DEPOSIT:
3090683803 US BANK (FORMERLY STATE FARM BANK) 10/24/2024 Matured 61690UDL1 MORGAN STANLEY 246,000 245,559 3.100% 1/24/2019 1/24/2024 24 17312Q2F5 CITIBANK NA 246,000 245,560 3.200% 1/25/2019 1/25/2024 25 90307LAB0 UNCLE CR. UNION, LIVERMORE,C A 248,000 247,937 5.000% 1/25/2023 1/25/2024 25 052392BM8 AUSTIN TELCO FED CREDIT UNION, TX 249,000 246,438 3.400% 8/12/2022 8/12/2024 225 33715LFH8 FIRST TECHNOLOGY CR. UNION 248,000 248,156 5.050% 5/26/2023 5/27/2025 513 53052LAT6 LIBERTY FED CR UNION, EVANSVILLE 248,000 248,013 5.400% 5/24/2023 5/27/2025 513 795451BQ5 SALLIE AE BK MURRAY, UT 245,000 239,411 3.400% 7/6/2022 7/7/2025 554 20825WAZ3 CONNEXUS CREDIT UNION, WAUSAU 249,000 243,110 3.400% 8/15/2022 8/15/2025 593 27002YFE1 EAGLEBANK, BETHESDA, MD 249,000 242,686 3.300% 8/18/2022 8/18/2025 596 90352RDA0 US ALLIANCE FCU RYE, NY 249,000 248,271 4.700% 5/26/2023 5/26/2026 877 39573LEC8 GREENSTSATE CREDIT UNION 248,000 248,390 4.900% 5/31/2023 6/1/2026 883 254673Q33 DISCOVER BANK CD 245,000 235,903 3.350% 8/16/2022 8/17/2026 960 130162AX8 CALIFORNIA CREDIT UNION, GLENDALE 243,000 244,786 5.150% 8/28/2023 8/28/2026 971 444425AC6 HUGHES FED. CREDIT UNION, TUSON, AZ 248,000 249,847 5.150% 8/29/2023 8/31/2026 974 856285G21 STATE BK, INDIA, NY 250,000 227,599 1.750% 2/9/2022 2/9/2027 1,136 25844MBN7 DORT FINANCIAL CREDIT UNION, GRAND BLANC 246,000 246,888 5.000% 8/28/2023 2/26/2027 1,153 41138NAB4 HAPO COMMUNITY CREDIT UNION, RICHLAND 248,000 248,878 5.000% 8/31/2023 2/26/2027 1,153 02589ABQ4 AMERICAN EXPRESS NATIONAL BANK 247,000 226,271 2.000% 3/9/2022 3/9/2027 1,164 14042TFJ1 CAPITAL ONE BANK (USA) 246,000 230,066 2.700% 4/6/2022 4/13/2027 1,199 05580A4P6 BMW BANK NORTH AMERICA, UT 244,000 249,362 4.900% 11/16/2023 11/17/2028 1,783 4,942,000 4,863,130
U.S. OBLIGATIONS
3130AV3G5 401,974 399,773 5.125% 3/20/2023 2/23/2024 54 3130ARHG9 3,590,680 3,652,235 2.125% 3/27/2023 2/28/2024 59 3,992,654 4,052,008
U.S. TREASURY BILLS
91282CFQ9 2,998,673 3,087,420 4.580% 4/26/2023 3/21/2024 81 U.S. TREASURY NOTES & BONDS
91282CFQ9 996,718 995,742 4.375% 10/31/2022 10/31/2024 305 SUBTOTAL NON-LIQUID INSTRUMENTS: 12,930,045 12,998,300
TOTAL INVESTMENTS: $ 72,084,771 $ 72,153,026

WEIGHTED
YTD RECORDED % OF LIQUID AVERAGE WEIGHTED

INTEREST AS OF PORTFOLIO RATE OF AVERAGE
OCT 23-DEC 23 12/31/2023 HOLDINGS EARNINGS MATURITY
568,522 800,701 82.063% 2.728% 64

PUBLIC AGENCY RETIREMENT SERVICES (PARS) - LEAGALLY RESTRICTED INVESTMENTS EXCLUDED FROM WEIGHTED PORTFOLIO PARS OPEB Public Agency Retirement Services 2,323,090.62 5.09% DAILY DAILY 1 PARS Pension TrusPublic Agency Retirement Services 2,352,734.31 4.86% DAILY DAILY 1 4,675,825

82.063%
12/31/2023
of the portfolio held in liquid instruments, allowing the City to meet cash flow needs for at least six months, in compliance with the investment policy approved by the City Council in June 2023. The investment policy will be updated annually as required by state law.

Portfolio holdings as of the quarter ended December 31, 2023, are in compliance with the current Investment Policy. With

LOCAL AGENCY INVESTMENT FUND

MECHANICS BANK - MONEY MARKET

MECHANICS BANK - SWEEP
US Treasury Notes
Federal Home Loan Banks
US Treasury Bills
Federal Home Loan Banks

QUARTERLY

INTEREST
EARNED

Prepared By: ___CJ____ Dept Review: ____CJ_____
City Manager Review: _YK_______ City Attorney Review: __LNL_ Staff Report
TO: Honorable Mayor and City Council DATE: February 16, 2024 FROM: Cindy Jacinth, Planning Manager
SUBJECT: Review and Adopt Final Funding Recommendations for the 2024 Community Development Block Grant (CDBG) Program

RECOMMENDED ACTION
Conduct a public hearing to review and adopt Resolution No. 15-24 approving final funding recommendations for the 2024 Community Development Block Grant (CDBG) funds and forward recommendations to the San Luis Obispo County Board of Supervisors for inclusion with the other final funding requests from the Urban County Consortium. The funding recommendation is for the two applications received from 5 Cities Homeless Coalition and the City Public Works Department along with City program administration of $3,586 for a total 2024 funding allocation of $51,228.

Additionally, staff recommends the City Council authorize the City Manager to make pro rata adjustments to the allocation based on the final funding amount from San Luis Obispo County based on the approval of the federal budget and the U.S. Department of Housing and Urban Development’s (HUD’s) final grant amount to the County.

ALTERNATIVES
Council could choose to fund 5 Cities Homeless Coalition above the requested application amount to a maximum of $7,684 to match the 15 percent maximum federal expenditure for public services activities with a corresponding reduction in funding to the Public Works Department ADA Accessibility application.

FISCAL IMPACT
Approving staff recommendations includes an application for administrative funds as allowed by HUD in the amount of $3,586. If awarded, this amount would offset City administrative costs which are expected to be minimal. The majority of CDBG administration, including coordination with HUD staff and reporting, is performed by County staff pursuant to the City’s Urban County Participation Agreement.

SUMMARY
The City entered a Cooperation Agreement with the County on July 7, 2020, by which the City agreed to become a participant for a period of three years with the County and other cities within an “Urban County” as defined by HUD. A renewal to the Cooperation Agreement was entered into on July 11, 2023 for fiscal years 2024 through 2026. Under the Cooperation Agreement, the City retains the authority to recommend which projects are to be funded with its allotment of CDBG Program funds.

At a continued meeting on December 13, 2023, the City Council approved draft CDBG funding AGENDA NO: 8.a
MEETING DATE: February 27, 2024

2 recommendations for the 2024 CDBG Program year. As noted in the table on the next page, the funding recommendations included funding for 5 Cities Homeless Coalition’s Rapid Re-housing Program and Public Works Department ADA Accessibility Upgrade Project for a total funding allocation of $51,228. This also included a recommendation for $3,586 for City administrative costs (Resolution No. 77-23, Attachment 2). The draft funding recommendations were forwarded to the County Board of Supervisors for inclusion in the 2024 Draft Action Plan. The next step in the process per HUD requirements requires jurisdictions to make final funding recommendations to the County as part of the annual Action Plan adoption.

BACKGROUND
On December 13, 2023, the City Council held a public hearing to review and adopt Council Resolution 77-23 which included Draft CDBG funding recommendations to be forwarded to the County Board of Supervisors for funding and incorporation into the 2024 Action Plan. Total Morro Bay funding is anticipated to be approximately $51,228 for the 2024 program year which is an amount consistent with prior years’ funding allocations. Final funding amounts are subject to change and will likely be released by the Department of Housing and Urban Development (HUD) in April 2024.

DISCUSSION
The recommended projects for the 2024 CDBG Program Year are included in the table below.

Federal Funding Category / Applications
Received
Amount
Requested
Amount Recommended
(includes both current and
rollover amount)
Public Services – Limited to 15% of 2024
Allocation (or a maximum of $7,684)

1. Project Name: Rapid Rehousing and
Homeless Prevention Program
Applicant: 5 Cities Homeless Coalition (5CHC)
Project Description: 5CHC proposes
continued and expanded comprehensive
homeless services of their Rapid-Rehousing
Program, which includes connecting families
and individuals with time-limited financial
assistance and targeted supportive services,
and housing stabilization services.
$3,500 CDBG
funding request
to Morro Bay
(Total request is
$92,333
combined to all
jurisdictions)
countywide)
$3,500
Public Facilities

3 2. Project Name: ADA Accessibility Upgrade
at Quintana and Main Streets.

Applicant: Public Works Department, City of
Morro Bay.

Project Description: Installation of an audible
signal crossing and ADA compliant pedestrian
push button at the intersection of Main &
Quintana Streets, the primary traffic signal in the
city, and the installation of ADA curb ramps with
detectable surfaces. Goal of program is to
increase safety and facilitate improved
accessibility for senior residents and persons
with disabilities.
$40,000 $37,482
Administration – Limited to 20% of 2024
Allocation: $10,246 (per County agreement:

City=35% / County =65%)
City Program Administration Costs:
(Required County Administration Costs):
$3,586
($6,660)
$3,586
($6,660)
Total Funds Requested $53,746
Total Funds Recommended $51,228
Estimated Total 2024 Funding Available $51,228
As stated in the December 13, 2023 Council staff report (link below), the approved draft funding recommendations were forwarded to the County along with recommendations from all participating jurisdictions. Funding recommendations for Public Services funding including the request by 5 Cities Homeless Coalition were reviewed and approved by HSOC on January 17, 2024.

All other categories of funding recommendations will be published by the County on March 6, 2024 which will include the full 2024 Action Plan. Publication will then allow for a 30 day public comment period, followed by the Board of Supervisors holding a public hearing on April 9, 2024 to take public comment, accept each city’s final recommendation, and lastly adopt the 2024 Action Plan.

The funding applications received are limited by federal regulations in how much funding they can receive. The 5 Cities Homeless Coalition application is considered a public service activity which is limited to no more than 15% of a jurisdiction’s allocation. Based on this year’s anticipated funding, that 15% cap equates to a maximum amount available of $7,684. The application from the Public Works Department is for an ADA Accessibility project at the intersection of Quintana and Main. Per HUD, this is considered a public facilities application with no specific federal percentage limitation on funding. The Public Works Department is seeking additional funding in order to close the funding gap for the project. The funding recommendation is for $37,482. The funding allocation will be utilized in combination with a SLOCOG Community Betterments Grant award and local funds from Measure Q and E to complete the project. This project would enable ADA accessibility for seniors and persons with disabilities.

Upon City Council review of CDBG funding requests, the funding recommendations will be forwarded to the County Board of Supervisors in order to adopt the 2024 Action Plan in April 2024.

4 PUBLIC NOTICE
HUD requires through the City’s partnership agreement with the County that funding recommendations for the CDBG program be conducted as a public hearing. Notice of a public hearing of this item was published in the San Luis Obispo Tribune newspaper on February 16, 2024, and posted in public kiosks at City Hall, the Community Development Department building, and the Morro Bay Public Library.

CONCLUSION
Staff is recommending Council approve the 2024 Final Funding Recommendation for the requests from the 5 Cities Homeless Coalition and the City Public Works Department along with the City application of $3,586 for program administration by adopting Resolution No. 15-24.

ATTACHMENTS

1. Resolution No. 15-24

2. Council Resolution No. 77-23 adopted December 13, 2023 ONLINE LINKS:

1. December 12, 2023 Council Staff Report & Applications, Agenda Item B-1 (Final direction at 12/13/2023 continued meeting.)

RESOLUTION NO. 15-24

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA

APPROVING COMMUNITY DEVELOPMENT BLOCK GRANT
PROJECTS FOR YEAR 2024

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, via a Cooperation Agreement with County of San Luis Obispo (hereafter referred to as “County”), a political subdivision of the State of California, executed by the City of Morro Bay (hereafter referred to as “City”) a municipal corporation, on July 7, 2020, the City agreed to become a participant for a period of three years with the County and other cities therein as an “Urban County” under the U.S. Department of Housing and Urban Development (HUD); and
WHEREAS, under the Cooperation Agreement, the City retains the authority to determine which projects are to be funded with its allotment of Community Development Block Grant (CDBG) Program funds; and WHEREAS, the CDBG Program promotes the public health, safety and welfare by providing grant funds to be used by the City and County to improve housing opportunities for low- and moderate- income households, to encourage economic reinvestment, to improve community facilities and public services, and to provide other housing-related facilities, or services; and
WHEREAS, the City expects to receive $51,228 in CDBG funds in 2024; and WHEREAS, in 2023, the County published a “Notice of Funding Availability” on October 6, 2023 for projects to be funded under the 2024 CDBG Programs, with County needs assessment workshops held in October 2023; and
WHEREAS, at a duly noticed public hearing on February 27, 2024, the City Council gave approval for final funding recommendations to be forwarded to the County Board of Supervisors for 2024 CDBG projects.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California:

1. City will timely submit final funding recommendations for the current CDBG funding cycle to the Board of Supervisors for the County of San Luis Obispo consistent with the programs and allocations listed in Exhibit “A,” attached hereto and incorporated herein by this reference, to be funded with the City’s allocation of CDBG Program funds.

2. City Manager is authorized for the current CDBG funding cycle to make pro rata adjustments to the allocation based on the final funding amount from San Luis Obispo County based on the approval of the federal budget and HUD’s final grant amount to San Luis Obispo County PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 27th day of February 2024 on the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:
______________________________
CARLA WIXOM, Mayor
ATTEST:
_____________________________
DANA SWANSON, City Clerk Page 24 of 71
RESOLUTION NO. 15-24
EXHIBIT “A”

DRAFT FUNDING RECOMMENDATIONS

TO FORWARD TO THE

COUNTY BOARD OF SUPERVISORS
Public Services – Limited to 15% of 2024
Allocation (or a maximum of $7,684)
Amount
Requested
Amount Recommended

1. Project Name: Rapid Re-Housing and
Homeless Prevention Program
Applicant: 5 Cities Homeless Coalition
(5CHC)
$3,500 $3,500
Public Facilities

2. Project Name: ADA Accessibility
Upgrade at Quintana and Main Streets
Applicant: Public Works Department, City of
Morro Bay
$40,000 $37,482
Administration – Limited to 20% of 2024
Allocation, $10,246 (per County
agreement City=35% / County =65%)
City Program Administration Costs
(Required County Administration Costs)
$3,586
($6,660)
$3586
($6,660)
Total Funds Requested $53,746
Total Funds Recommended $51,228
Estimated Total 2024 Funding Available $51,228

Attachment 2

Attachment 2

AGENDA NO: 9.a
MEETING DATE: February 27, 2024
Prepared By: __EC__ Department Review: ____SC_____
City Manager Review: __YK___ City Attorney Review: __LNL__ Staff Report
TO: Honorable Mayor and City Council DATE: February 21, 2024 FROM: Steve Conway, Interim Assistant City Manager & Admin Services Director Emily Conrad, Finance Manager
SUBJECT: Presentation and Discussion of the Fiscal Year (FY) 2022-23 Annual Comprehensive Financial Report

RECOMMENDED ACTION

1. Receive the presentation and provide feedback on the FY 2022-23 Annual Comprehensive Financial Report (ACFR) for the period of July 1, 2022 through June 30, 2023 (Attachment 1), and

2. Receive FY 2022-23 Annual Streets Report (Attachment 2) and FY 2023-24 Prop 172 Maintenance of Effort Certification (Attachment 3).

BACKGROUND
In the City’s ongoing commitment to transparency and fiscal accountability, in 2021 the City issued a Request for Proposal (RFP) for auditing services and Brown Armstrong Accountancy Corporation (Brown Armstrong) was selected as the most responsive proposer. The City entered into agreement with Brown Armstrong to perform auditing services for the fiscal years ending June 30, 2021, 2022, 2023, 2024, and 2025, with the option to renew for two additional fiscal years (2026 through 2027). The auditors performed remote review of expenditures, revenues, contracts, and general accounting processes for both accuracy and internal controls (fraud prevention).

DISCUSSION
Annual Comprehensive Financial Report
Lindsey Zimmerman, Certified Public Accountant (CPA) and Partner at Brown Armstrong, was the partner-in-charge of this year’s audit. Ms. Zimmerman has over 17 years of auditing experience including over 9 years of governmental auditing experience. She will present the FY 2022-23 auditor’s report to the City Council on February 27th, including highlights from the Annual Comprehensive Financial Report (ACFR).

Highlights of the FY 2022-23 ACFR results include the following:

Independent Auditor’s Report (pages 1-3)
The auditors have given reasonable assurance that the City’s financial statements for the year

ended June 30, 2023 “present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2023, and the respective changes in financial position, and, where applicable, cash flows thereof for the fiscal year then ended in accordance with accounting principles generally accepted in the United States of America.” Management’s Discussion and Analysis (MD&A) (pages 5-13) This section provides an explanation of what is included in the City’s basic financial statements and provides supplementary information in addition to the financial statements. It outlines financial highlights for the fiscal year and presents summary data for the City on an entity-wide basis.

Information is provided in this section with a year-to-year view, explaining how net position and fund balances have changed between fiscal years ending June 30, 2022 and June 30, 2023. This section outlines what is reported as part of the General Fund, Nonmajor Governmental Funds, and Proprietary Funds throughout the report. The section also breaks down the unassigned fund balance in the General Fund’s components, including the operating fund ($6.4 million), Unfunded Compensable Leave ($0.2 million), Emergency Reserve ($3.9 million), Capital Accumulation Fund ($0.6 million), and Vehicle Replacement Fund ($0.7 million). This total unassigned fund balance of $11.9 million is a slight improvement over the prior fiscal year when the total unassigned fund balance across all components of the General Fund was $11.8 million. This section also highlights the ending fund balances and net position in the City’s other major funds, including Measure E at $1.3 million, the Water Fund at $35.1 million, the Sewer Fund at $42.8 million, the Harbor Fund at $1.0 million, and the Transit Fund at $0.6 million.

Statement of Net Position (pages 18-19)
The Statement of Net Position serves as a useful indicator of a government’s financial position.

On June 30, 2023, the City’s net position had increased by $16.7 million over June 30, 2022, primarily due to the Business-Type Activities which had an increased net position of $15.9 million while Governmental Activities net position increased by $0.8 million. The increase in BusinessType Activities is due to continued loan draws from the U.S. Environmental Protection Agency and State Water Resources Control Board loans secured to partially fund the planning and construction of the WRF. During FY 2022-23 the City received reimbursement for expenditures already paid from operating cash flow in both the current and prior fiscal years. The increase in Governmental Activities net position is due to increased revenues from property tax, franchise tax, transient occupancy tax, cannabis tax, investment returns, and pension earnings.

Basic Financial Statements (pages 18-84)
This section contains basic financial statements, including the Government-wide statement of Net Position and Statement of Activities, financial statements for the fund types including Governmental Funds, Proprietary Funds, and Fiduciary Funds. The footnotes portion of this section provides details on significant items such as the City’s cash and investments, its longterm obligations related to loan payables, pension related debt and compensated absences, the net pension liability for both the City’s miscellaneous and public safety pension plans, and a discussion of the City’s other post-employment benefit plans.

The Citywide total net pension liability was approximately $31.3 million as of the most recent measurement date of June 30, 2022, a, increase of approximately $15.4 million since the prior measurement date of June 30, 2021 due to the year of significant CalPERS losses. The Citywide net Other Post-Employment Benefit (OPEB) liability was approximately $0.6 million as of June 30, 2023, a decrease of approximately $0.4 million since June 30, 2022. In FY 2022-23, the City established a Section 115 Trust to build funds for future pension contribution increases, beginning with a contribution of $1.06 million.

Required Supplementary Information (pages 87-95)
The Budgetary Comparison Schedule for the General Fund and Pension Plan Contributions are provided in this section.

Supplementary Information (pages 98-128)
This section lists the nonmajor governmental special revenue funds and provides balance sheets and budget to actual information and changes in fund balance for nonmajor governmental funds.

These funds each represent less than 10% of the City’s total governmental fund assets/liabilities/revenues or expenditures and approximately 5% of the City’s total assets/liabilities/revenues or expenditures across all funds.

Statistical Section (pages 131-181)
This section presents ten-year historical financial data for the City to help the reader understand how the City’s financial well-being has changed over time, the City’s revenue and debt capacity, demographic and economic information to provide context for the City’s financial activities.

State Mandated Reports (Attachments 2 and 3)
The following annual reports have been completed and attached for your review:
 FY2022-23 Annual Street Report
 FY2023-24 Prop 172 MOE Report
The FY2022-23 Annual Street Report is required to be filed annually with the State of California State Controller’s Office and summarizes street-related fiscal year revenues and expenditures.

The FY2023-24 Prop 172 MOE Report is also required to be filed annually with the county and state regarding the reporting of City Prop 172 sales tax revenues received and the City’s budgeted allocation of funding to Public Safety from other City revenue sources not including Prop 172 revenues.

CONCLUSION
Lindsey Zimmerman from Brown Armstrong will present the FY 2022-23 audit report to the City Council.

The FY 2021-22 ACFR was awarded a Certificate of Achievement for Excellence in Financial Reporting. The FY 2022-23 ACFR will also be submitted to the Government Finance Officers Association (GFOA) for consideration for excellence in financial reporting.

Weblinks and Attachments

1. FY 2022-23 Annual Comprehensive Financial Report-Draft (Please note that due to timing, this is the draft version; the final version will be available Monday February 26, 2024. Changes from draft to final will not be material and may only include the addition of page numbers, correction of punctuation or typographical errors.)

2. FY 2022-23 Annual Street Report

3. FY 2023-24 Prop 172 MOE Report

AGENDA NO: 9.b
MEETING DATE: February 27, 2024
Prepared By: MAG Dept Review: SC, EC
City Manager Review: _YK___ City Attorney Review: _CFN__ Staff Report
TO: Honorable Mayor and City Council DATE: February 20, 2024 FROM: Yvonne Kimball, City Manager
Steve Conway, Interim Assistant City Manager/Admin Services Director Melissa Green, Senior Budget Analyst
SUBJECT: Fiscal Year 2023-24 Midyear Budget and Financial Update

RECOMMENDED ACTION

1. Receive the Fiscal Year (FY) 2023-24 Midyear Budget Report; and

2. Adopt Resolution No. 16-24 authorizing the attached Budget Amendments

FISCAL IMPACT
Several budget adjustments are needed to reflect items previously approved by Council. These result in a total net expenditure budget decrease of approximately $2,000 across all funds.

Additional amendments are recommended to maintain core city services and recognize new grant revenues and associated expenditures. These recommended budget amendments yet to be considered by Council result in a total net expenditure increase of approximately $202,000 citywide, across all funds.

Each recommended change is detailed by fund in the attached Midyear Budget Report (Attachment 1) and in list format in Attachment 3.

BACKGROUND
The City traditionally evaluates its primary revenues and expenditures in its major funds at the middle of the fiscal year and recommends any necessary budget amendments. The Midyear Budget Report covers the first seven months of the fiscal year, beginning July 1, 2023, and ending January 31, 2024. The report presents an analysis of the key General Fund revenues and expenditures by category and the City’s other major funds.

The midyear report was taken to the Citizens’ Finance Advisory Committee (CFAC) for their input on February 20, 2024. An oral update on CFAC recommendations will be provided as part of this regular business item.

Staff has traditionally presented the City Council with a fiscal update at or around midyear as well, which also serves as the precursor to the subsequent fiscal year budget development cycle.

DISCUSSION
Midyear Budget Report

The Midyear Budget Report provides a high level of detail regarding fiscal year-to-date revenues and expenditures in the City’s major funds and a detailed breakout of recommended budget amendments by fund.

Fiscal-Year-to-Date Update - Overall, this year’s midyear report demonstrates revenues and expenditures that are on track. Citywide, across all funds, the City has received approximately 60% of revenues as of January 31, 2024, and expended approximately 43% of all budgeted expenditures. This indicates that revenues are consistent with projections. Given that the City’s major revenue sources (sales tax, property tax, and Transient Occupancy Tax (TOT)) experience a routine lag in receipts of one to two months, there is reason to be cautiously optimistic that revenues will meet or exceed budgeted amounts.

Recommended Budget Amendments –
 Previously Approved by Council – Several budget amendments are needed to reflect items previously approved by Council. These add approximately $609,000 to the revenue or transfers in budget and approximately $607,000 to the expenditure or transfers out budget citywide, for a total net expenditure budget decrease of approximately $2,000 across all funds. Each change is detailed by fund herein. Grant revenues and intrafund revenue transfers fund this category of changes.
 New Recommended Budget Amendments – Additional amendments are recommended to maintain core city services and recognize new grant revenues and associated expenditures.

These recommended budget amendments yet to be considered by Council include approximately $608,000 in increased revenues. The recommended expenditure budget amendments include approximately $810,000 in increased expenses for a total net expenditure increase of approximately $202,000 citywide across all funds. Each recommended change is detailed by fund herein. Property tax revenue increases, developer reimbursement agreements, donations, insurance proceeds, and available fund balance are the funding sources for this budget request category. Most recommended expenditure changes are one-time rather than ongoing, making fund balance an appropriate source.

ATTACHMENTS

1. Midyear Budget Report for FY 2023-24

2. Budget Performance Report through January 31, 2024

3. Resolution No. 16-24 authorizing the attached Budget Amendments

Midyear Budget Report FY 2023-24
- 1 -
FEBRUARY 2024
City of Morro Bay
Authored by: Administrative Services
Midyear
Budget Report
FISCAL YEAR 2023-24
This Report covers the sevenmonth period through January 31, 2024. It provides an update
on the City’s primary revenues
and expenditures in its major
funds and outlines
recommended budget
amendments.

Midyear Budget Report FY 2023-24
- 2 -
Table of Contents
Executive Summary.................................................................................................3 Introduction............................................................................................................4 Fiscal Outlook .........................................................................................................4 Major Revenue Sources .................................................................................................................................. 4 Major Expenditures......................................................................................................................................... 5 General Fund ..........................................................................................................6 Key General Fund Revenue Sources Analysis.................................................................................................. 7 Recommended General Fund Revenue Budget Amendments....................................................................... 9 General Fund Expenditures Analysis............................................................................................................. 10 Recommended General Fund Expenditure Budget Amendments................................................................ 11 Measure E Fund ....................................................................................................13 Measure E Fund Revenues............................................................................................................................ 14 Measure E Fund Expenditures ...................................................................................................................... 14 Recommended Measure E Fund Budget Amendments................................................................................ 14 Enterprise Funds...................................................................................................14 Harbor Operating Fund ................................................................................................................................. 14 Water Funds.................................................................................................................................................. 16 Sewer Funds.................................................................................................................................................. 16 Transit Fund................................................................................................................................................... 16 Other Funds................................................................................................................................................... 17 Summary Current Year and Five-Year Financial Forecasts .....................................18

Midyear Budget Report FY 2023-24
- 3 -
Executive Summary
Overall, this year’s midyear report demonstrates revenues and expenditures that are on track. Citywide, across all funds, the City has received approximately 60% of revenues as of January 31, 2024, and expended approximately 43% of all budgeted expenditures. This indicates that revenues are consistent with projections.

Given that the City’s major revenue sources (sales tax, property tax, and Transient Occupancy Tax (TOT)) experience a routine lag in receipts of one to two months, there is reason to be cautiously optimistic that revenues will meet or exceed budgeted amounts.

Several budget amendments are needed to reflect items previously approved by Council. These add approximately $609,000 to the revenue or transfers in budget and approximately $607,000 to the expenditure or transfers out budget citywide, for a total net expenditure budget decrease of approximately $2,000 across all funds. Each change is detailed by fund herein. Grant revenues and intrafund revenue transfers fund this category of changes.

Additional amendments are recommended to maintain core city services and recognize new grant revenues and associated expenditures. These recommended budget amendments yet to be considered by Council include approximately $608,000 in increased revenues. The recommended expenditure budget amendments include approximately $810,000 in increased expenses for a total net expenditure increase of approximately $202,000 citywide across all funds. Each recommended change is detailed by fund herein. Property tax revenue increases, developer reimbursement agreements, donations, insurance proceeds, and available fund balance are the funding sources for this budget request category. Most recommended expenditure changes are one-time rather than ongoing, making fund balance an appropriate source.

For the reporting period, the City has received 60% of
budgeted revenues and spent 43% of budgeted expenditures.

Midyear Budget Report FY 2023-24
- 4 -
Introduction
This report covers the seven-month period ending January 31, 2024. This report provides an update on the City's primary revenues and expenditures in the major funds and outlines recommended budget amendments. If no significant change is anticipated, no budget amendment will be recommended.

The major funds being reviewed in detail as part of the mid-year report include General Fund (001), Measure E Fund (003), Harbor Operating Fund (331), Water Operating Fund (311), Sewer Operating Fund (321), and Transit Operating Fund (301). Minor amendments are recommended in a few of the City’s smaller special purpose funds, outlined under this report's “Other Funds” section.

The information in this report is the most accurate and updated information available at the time of publication and represents a snapshot of City revenues and expenditures as of January 31, 2024. It may not represent pending payments and revenues, irregular payments, or revenue timing. As this is not an audited financial statement, the figures are preliminary and will change as the fiscal year progresses.

Fiscal Outlook
At this time, the fiscal outlook for the City remains cautious. Flat revenues coupled with increased expenditures can significantly impact the City's financial health and operational capacity. Proactive strategies must be evaluated to navigate the City’s financial constraints effectively and ensure the delivery of essential services to residents and visitors. Such strategies may include exploring efficiency improvements, revenue diversification, prioritization and resource allocation, collaboration and advocacy, and continued long-term financial planning.

Major Revenue Sources
Overall, revenues are projected to level off or to grow much more slowly than in prior years.

Property tax – The County Assessor’s Office provides property tax estimates each year in January and then again in the fall. The latest estimates show modest growth over budgeted amounts. According to the most recent Annual Report of the County Assessor’s Office, real estate prices continue to rise due to limited housing stock. In 2023, the county-wide assessed value increased by 6.24% compared to the prior year. Locally, the assessed value for Morro Bay increased 5.6%. The County Assessor’s Office is projecting 4% growth for FY 2024-

25. Sales tax – The City contracts with HdL to forecast sales tax revenue for both the General Fund Bradley Burns sales tax revenue and the Measure E local sales and use tax revenues. Their midyear projection is consistent with adopted budget. While the City has seen sales tax growth in the 10-15% ranges in recent years due to recovery from the pandemic, FY 2023-24 sales tax revenues were projected to grow only 0.6% from current year revenues. For 2024-25, HdL is forecasting 3% growth.

Transient Occupancy Tax (TOT) – Budget estimates were developed in coordination with Visit Morro Bay and are based on review of occupancy rates, average daily room rates, and regional trends. Staff’s midyear analysis projects TOT revenue consistent with budget as occupancy rates remain steady across the Central Coast and statewide.

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Major Expenditures
While revenues are projected to level off or grow more slowly in the years ahead, expenditures are projected to continue to increase more rapidly.

Current personnel costs – The City’s core services are delivered to citizens and visitors by a dedicated workforce, the cost of which represents a large portion of the City’s expenditure budget. The City of Morro Bay’s current Memorandums of Understanding (MOUs) with bargaining groups representing City employees are expiring, and negotiations will occur this spring. The recently completed compensation study shows that many city salary ranges are below market, exacerbating an already challenging recruitment and retention landscape. Salary increases will almost certainly be requested by all bargaining units, in addition to other increases in employee benefits. Balancing the need to compensate employees fairly with the imperative to maintain fiscal sustainability is crucial for the long-term health of the city’s finances and its ability to meet the needs of its residents.

Pension liability payments – Pension obligations for the City of Morro Bay are comprised of payments to CalPERS for current employees’ current-year pension contributions and minimum payments toward the much larger amount associated with past pension obligations, called the “unfunded accrued liability” or UAL. The UAL is primarily associated with prior employees and more generous pension tiers that have since been phased out under State law with pension reform. The City expects to see increasing minimum UAL payments due annually for the next several years after FY 23-24, as shown visually in the scenario below (provided by NHA Advisors, the municipal advisors that the City utilized for pension reserve guidance). The City’s UAL payments are a moving target impacted by CalPERS’s achieved rate of returns in the market. While CalPERS recently had one good year of returns over 21%, which will result in lower payments in FY 2023-24, it was followed by one year of negative returns and a second year of positive returns below the forecasted rate (-6.1% in FY 2021/22 and a +5.8% in FY 2022/23) which is a significant improvement but will still result in higher payments again starting in FY 2024-25 and beyond.

Based on Council and CFAC direction, the City has made additional progress recently toward addressing this liability by creating a pension reserve policy and appropriating initial funding for a pension reserve. Further

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planning will be needed in the FY 2024-25 budget cycle and beyond to ensure the City can maintain current service levels while meeting this obligation.

Storm emergency recovery costs – The FY 2023-24 budget includes $1.9 million for storm recovery efforts, in addition to $1.8 million budgeted in FY 2022-23. Staff continue actively working toward reimbursement for these expenditures and applying for funding to help the City mitigate the impacts of future storms.

Unfunded capital needs – In addition to the challenges of attracting and retaining a diverse workforce to provide high-quality services to Morro Bay’s residents and responding to and preparing for future natural disasters, the City must also maintain and improve its existing facilities and infrastructure while also planning for growth and new development. Neglecting essential infrastructure projects can lead to increased costs and service disruptions in the future. To navigate these competing priorities effectively, the city must invest in comprehensive financial planning, prioritize projects based on their impact and urgency, seek alternative funding sources, and explore innovative solutions such as public-private partnerships. By adopting a strategic and proactive approach to budgeting and resource allocation, the City can better address its immediate needs while laying the groundwork for long-term sustainability and resilience.

In summary, maintaining adequate (but not excessive) reserves, conducting thorough cost-benefit analyses for major projects, and implementing robust risk management strategies are essential steps to mitigate potential fiscal risks. Staff hopes that transparent communication about the City's budgetary challenges and priorities will foster understanding and support for the difficult decisions that may need to be made in the coming budget years.

By adopting a cautious and proactive approach to fiscal management, the city can better position itself to weather uncertainties and maintain its financial stability over the long term.

General Fund
The General Fund remains stable at midyear, with expenditures and revenue tracking aligned with budget. The unaudited fund balance at the end of FY 2022-23 was higher than anticipated. As a result, the spendable fund balance, net of funds already appropriated as part of the FY 2023-24 Adopted Budget, is estimated to be approximately $2.6 million. This is in addition to the General Fund Emergency Reserve Balance, which is anticipated to be approximately $7.1 million at the end of FY 2023-24.

Table 1 Fund Balance Summary (in thousands)
Fund Description Fund
Number
FY 2020 FY 2021 FY 2022 FY 2023
(Unaudited)
FY 2024
Budgeted
FY 2024
Estimated
General Fund (nonspendable) 001 3,972 3,974 3,163 3,190 3,163 3,163 General Fund (committed – GF only) 798
General Fund (unassigned – GF only) 001 407 2,763 6,412 6,449 548 2,600 These reserves, which have been built up by prudent fiscal policies, will be needed for ongoing storm recovery activities, contributions to the City’s pension reserve in accordance with the pension reserve policy, capital needs, and to continue to achieve balanced operating budgets given that the cost of providing core services is rising faster than revenues are projected to increase in the years ahead. Council may wish to consider directing

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staff to complete a new, in-depth risk analysis to determine optimal reserve levels that protect against unplanned, unavoidable costs or losses while mitigating the increased opportunity costs of tying up funds in reserve. Reserves in excess of the optimal amount could be invested in areas that yield higher returns or provide more immediate benefits to the community.

Key General Fund Revenue Sources Analysis
The adopted General Fund Revenue Budget for FY 2023-24 is approximately $19.6 million. As of January 31, 2024, the General Fund had received 60% of its revenues, or $11.8 million. Based on updated County Assessor's Office projections, staff recommends revenue budget increases for various property taxes.

Overall, General Fund revenues fiscal-year-to-date are on track. The total percentage collected is slightly higher than the 58% one may expect seven months through the year despite the routine lag in collections of major revenue sources such as property tax, sales tax, and TOT. The top revenue sources are described below in more detail, as they collectively account for over three-quarters of budgeted General Fund revenues.

Table 2 Key Revenue Sources 2021 to Current
Revenue Source 2021 Actual 2022 Actual 2023 Actual 2024 Actual
Thru 1-31
2024
Adopted
FY 2024 %
Rcv'd
FY 2024
Estimated
Property Taxes 4,842,761 4,981,027 5,275,945 3,103,190 5,214,900 60% 5,469,112 Intergovernmental
Revenues
178,234 97,661 213,615 92,162 158,120 58% 156,586
Sales & Use Tax 2,389,194 2,753,611 2,249,114 959,546 2,690,000 35% 2,697,615 Cannabis City Tax 220,353 512,944 502,149 246,608 490,000 42% 420,830 Transient Occupancy
Tax
3,826,276 4,255,140 4,681,648 2,289,076 4,400,000 52% 4,406,692 Franchise Fees 594,229 641,869 698,791 233,811 674,000 32%1 655,668 Licenses & Permits 574,672 761,616 660,964 418,995 577,545 71% 725,006 Revenues From
Current Services
2,027,544 2,434,859 2,219,441 1,064,373 2,084,628 49% 2,003,194 Fines & Forfeitures 11,765 22,062 27,056 17,107 21,270 80% 26,100 Other Revenues 119,379 330,052 505,615 499,836 672,748 74% 517,911 Revenues From Use
of Money & Property
413,954 593,997 615,133 1,162,692 587,743 197%2 683,648 Interfund Revenue
Transfers
1,221,987 1,224,866 3,088,584 1,710,615 2,023,602 86% 2,023,602 Total Revenue: 16,420,349 18,609,703 20,738,055 11,798,012 19,594,556 60% 19,785,963 Property Tax Revenue
Property tax is the largest revenue category for the City’s General Fund, accounting for 27% of budgeted General Fund revenues in FY 2023-24. Property tax is levied by the San Luis Obispo County Assessor’s Office at 1% of a 1 Franchise fee revenue primarily posts in the last two quarters of the fiscal year. 2 This revenue category includes interest income distributed across funds as part of the year-end process. As a result, this revenue will appear to exceed budget until those year-end entries are made. Less interest income, actual revenue budget received is 70%.

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property’s assessed value, of which the City receives approximately 13.7 cents per dollar paid on property located within the municipal limits of Morro Bay.

FY 2023-24 revenue was budgeted higher than the prior fiscal year. Property tax distributions are typically received in the fiscal year's third and fourth quarters. The County Assessor’s most recent projections show slight growth over budgeted amounts.

Recommendation: A few midyear budget changes are recommended in this area, outlined below, given the latest County Assessor’s Office estimates.

Transient Occupancy Tax Revenue
Transient Occupancy Tax (TOT) is the General Fund’s second largest revenue source, accounting for 22.5% of the City’s budgeted General Fund revenues for FY 2023-24. The city levies and retains a 10% TOT on all hotels, motels, vacation rentals, and RV parks to fund city services provided to visitors to Morro Bay. In addition, the City collects and remits an additional 3% to Visit Morro Bay, the Morro Bay Tourism Business Improvement District (TBID), and an additional 1.5% to Visit SLOCAL, the Countywide Tourism program.

As a highly economically sensitive revenue source, the City monitors TOT closely. In recent years, TOT revenues have plateaued. Staff anticipates FY 2023-24 revenues to come near or slightly above the budgeted amount.

Recommendation: Staff recommends no increases to the TOT revenue for the current fiscal year.

Sales Tax Revenue
Sales tax is the third largest revenue source for the City’s General Fund in FY 2023-24, budgeted to generate 14% of the Fund’s revenue for the year. The base statewide sales and use tax rate is 7.25 percent, and the City’s General Fund receives 1 percent of that base tax. This sales tax revenue does not include the 1.5 cent local sales tax collected through voter-approved Measure E-20.

The City contracts with industry expert HdL to analyze collections history, forecast sales tax revenues, and pursue revenues on the City’s behalf that belong to the City. Sales Tax receipts are tracking slightly low, adjusted for the delay in receipts; however, HdL is projecting revenues close to budgeted amounts. As with TOT tax receipts, sales tax trends are flattening, with only a modest 3% growth projected for FY 2024-25.

Recommendation: Staff does not recommend any revenue increases to Sales Tax revenue.

Revenues from Current Services (Charges for Service)
City Revenues from Current Services consist primarily of plan check fees, building inspection fees, and recreation sports and youth services fees. These fees are assessed based on recovery formulas, which reflect the approximate costs of providing these services and, as a total category, account for 11% of the City’s General Fund budget for FY 2023-24. These revenues include fees for the Recreation Division programs and Community Development planning fees. These revenues are tracking slightly low with seven months behind us; however, the major revenues in this category post late in the fiscal year.

Recommendation: One amendment is recommended to increase the Other Fire Services – Mutual Aid Reimbursement revenue budget based on actual invoices approved by CalOES.

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Other General Fund Revenues
Other General Fund revenues comprise less than a quarter of the Fund’s budgeted revenues. These include Transfers in, Franchise Fees, Cannabis City Tax, Business Tax, Rental Income, Licenses and Permits, and Grant Revenues. The status of each primary source of other General Fund revenues is summarized in the above table.

Recommended General Fund Revenue Budget Amendments
Staff is recommending the following General Fund revenue budget amendments at midyear:

Table 3 Previously Approved by Council General Fund Revenue Budget Amendments Description Department Increase (Decrease)
Amount
One-time/
Ongoing
G/L
Nuclear Preparedness Program
Grant
Fire 30,827 One-Time 001-4210-3393
Correct Transfers In for
Community Grants Budget
Interfund Transfers 25,000 One-Time 001-7710-3801
Office of Traffic Safety Grant Fire 48,000 One-Time 001-4210-3303 FUND 001 REV TOTAL 103,827
Table 4 New General Fund Revenue Budget Amendments
Description Department Increase (Decrease)
Amount
One-time/
Ongoing
G/L
Property Tax Current Secured Accounting & Treasury 52,721 Ongoing 001-3510-3011 Property Tax Current
Unsecured
Accounting & Treasury 6,373 Ongoing 001-3510-3012
Property Tax Cnty Adm Fee Accounting & Treasury 7,486 Ongoing 001-3510-3020 Property Tax in Lieu-VLF Accounting & Treasury 184,772 Ongoing 001-3510-3021 Increase Mutual Aid ReimbOther Fire Services per
Approved Invoices to CalOES
Fire 36,000 One-time 001-4210-3472
Reimbursement for solid waste
rate study
Public Works 14,267 One-Time 001-5205-3990
Insurance claim proceeds Consolidated
Maintenance
54,015 One-Time 001-5215-3990
Pickleball Court Resurfacing
Donations – Move to CIP
Consolidated
Maintenance
(18,973) One-Time 001-5215-3970
Developer Reimbursement
Agreement Increase - Vistra
Community
Development
175,000 One-Time 001-7105-3994
FUND 001 REV TOTAL 511,660
Table 5 Previously Approved by Council General Capital Fund Revenue and Expense Budget Amendments Description Department Increase (Decrease)
Amount
One-time/
Ongoing
G/L
Revenue
DWR Grant – Sequoia Storm
Drain Improvements
Sequoia Ct Emergency
Storm Drain Repair
300,000 One-Time 915-9950-3370
FUND 915 REV TOTAL 300,000
Expenses
Offsetting expenditure for DWR
grant – Sequoia Storm Drain
Sequoia Ct Emergency
Storm Drain Repair
300,000 One-Time 915-9950-6106

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Contractual services reallocated
to Sequoia Storm Drain from
Juniper/Elena project surplus
Juniper/Elena
Emergency Storm Drain
Repair
(164,041) One-Time 915-9949-6106
Contractual services reallocated
to Sequoia Storm Drain from the
completed Juniper/Elena
project
Sequoia Ct Emergency
Storm Drain Repair
164,041 One-Time 915-9950-6106
FUND 915 EXP TOTAL 300,000
Table 6 New General Capital Fund Revenue and Expense Budget Amendments Description Department Increase (Decrease)
Amount
One-time/
Ongoing
G/L
Revenue
Move Pickleball Court
Resurfacing Donations to CIP
Pickleball Courts 31,400 One-Time 915-8400-3281
FUND 915 REV TOTAL 31,400
Expenses
Offsetting contractual services
expenditure for pickleball court
resurfacing donations
Pickleball Courts 31,400 One-Time 915-8400-6106
FUND 915 EXP TOTAL 31,400
General Fund Expenditures Analysis
The adopted General Fund expenditure budget for FY 2023-24 is approximately $23.5 million. As of January 31, 2024, General Fund expenditures totaled $15.4 million, or 69% of budget. The percent of budget spent less transfers and one-time expenditures is 55%, which is on track for seven months into the fiscal year. The tables below demonstrate expenditures for the fiscal year to date by expense type and by Department.

Table 7 General Fund Expenditures by Expense Type 2021 to Current Expenditure
Type
2021 Actual 2022 Actual 2023 Actual 2024 thru
1-31
2024
Adopted
Budget
FY 24 %
Spent
FY 24
Estimated
Personnel
Services
$10,185,594 $10,351,919 $12,129,881 $7,873,007 13,082,007 60% 12,151,332 Supplies $402,762 $600,869 $749,177 $378,974 648,611 58% 675,433 Other Expense $9,361 $52,371 $205,500 $152,474 162,000 94%3 165,113 Services $2,866,061 $3,504,596 $4,439,813 $1,737,267 4,279,651 54% 3,405,497 Capital Outlay $0 $4,002 $101,742 $31,929 4,000 1396%4 34,000 Debt Service $35,101 $35,076 $1,233,788 $17,595 35,190 50% 35,600 Interfund
Transfers
$563,000 $1,289,688 $2,566,190 $5,253,216 5,253,216 100% 5,253,216 Total Expense
Objects:
$14,061,879 $15,838,521 $21,426,091 $15,444,461 23,464,675 69% 21,720,191 3 This expense category includes one-time payments to other agencies, such as dispatch fees paid to SLO County, that occur at the start of the fiscal year.
4 This expense category includes transactions subject to a midyear budget amendment request to recognize both an insurance claim revenue budget increase and offsetting expenditure.

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Table 8 General Fund Expenditures by Department 2021 to Current Department 2021 Actual 2022 Actual 2023 Actual 2024 Thru 1-31
2024 Adopted
Budget
FY 24 %
Spent
FY 24
Estimated
City Council $60,166 $108,114 159,494 111,278 184,539 60% 183,995 City Manager's
Office
$776,881 $890,770 1,244,805 664,023 1,283,108 52% 1,158,993 City Attorney $434,374 $498,343 501,437 205,763 483,231 43% 352,603 Administrative
Services
$647,550 $865,646 1,067,829 617,103 1,211,112 51% 1,102,161 Police
Department
$3,820,833 $3,582,230 4,143,291 2,259,836 4,531,070 50% 3,561,777 Fire $3,219,810 $2,764,102 3,298,872 1,907,394 3,001,547 64% 3,052,539 Public Works $2,277,081 $2,607,967 3,644,219 1,762,339 3,041,046 58% 3,010,099 Recreation $780,950 $1,210,309 1,298,201 759,125 1,428,889 53% 1,251,646 Community
Development
$991,689 $1,401,346 1,584,349 979,002 1,874,732 66%5 1,624,496 NonDepartmental/
Transfers
$1,052,547 $1,909,695 4,483,592 6,178,608 6,425,401 96% 6,421,882 Total Dept.

Expenditures:
$14,061,879 $15,838,521 21,426,091 15,444,461 23,464,675 69% 21,720,191 Recommended General Fund Expenditure Budget Amendments
Staff is recommending the following General Fund expenditure budget amendments at midyear. The available General Fund spendable balance would cover the proposed expenditure budget amendments. Most recommended expenditure increases are one-time rather than ongoing, making available fund balance an appropriate source of funds.

Amendments Previously Approved by Council
Council previously considered these items, and staff was given direction to expend funds and return with a budget amendment at midyear, as has been the City’s past administrative practice. These items are primarily one-time expenditures that can be funded from available fund balance in the General Fund.

Table 9 Previously Approved by Council General Fund Expenditure Budget Amendments Description Department Increase
(Decrease)
One-time/
Ongoing
G/L
Nuclear Preparedness Program Grantfunded Communication SuppliesFire 30,827 One-Time 001-4210-5108 OTS Grant-funded equipment acquisition Fire 48,000 One-Time 001-4210-7302 Correct G/L for Community Grants Funding
Source
City Council 25,000 One-Time 001-2110-8721
EXP TOTAL 103,827
5 Community Development has high encumbrance amounts for consulting services, which inflates the percentage spent.

The actual percentage spent less encumbrances is 52% of budget.

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Amendments for Midyear Consideration
The items below are recommended budget amendments to be considered by Council with the midyear report.

Most of these items are also one-time expenditures. However, approximately $84,000 in spending may be ongoing and should be considered with future year budget adoptions, depending on available funding. The source of funds for these amendments in FY 2023-24 would be the increased revenues outlined above and available General Fund balance.

Table 10 New Recommended General Fund Expenditure Budget Amendments Description Department Increase
(Decrease)
One-time/
Ongoing
G/L
Increased Fuel Expenditures Fire 12,000 One-Time 001-4210-5110 Increased Telephone Expenditures Fire 2,000 One-Time 001-4210-6201 Increased Electricity Expenditures Fire 8,800 One-Time 001-4210-6301 Increased Meals & Lodging Exp Fire 4,500 One-Time 001-4210-6513 Additional Vehicle Repair Costs Fire 40,000 One-Time 001-4210-6604 Increased Overtime Pay (Mutual Aid
Response and Coverage)
Fire 156,000 One-Time 001-4210-4120
Increased Employer Paid Benefits (tied to
Mutual Aid OT)
Fire 95,000 One-Time 001-4210-4910
Increased Other Pay Fire 50,000 One-Time 001-4210-4599
Increased consulting services due to rise in
permit counter activity; partially offset by
increase in fee revenues
Public Works 34,267 Ongoing 001-5205-6105
New truck transmission funded by insurance
claim proceeds
Consolidated
Maintenance
5,025 One-Time 001-5215-6604
Truck purchase funded by insurance claim
proceeds
Consolidated
Maintenance
31,725 One-Time 001-5215-7202
New truck transmission funded by insurance
claim proceeds
Street
Maintenance
5,025 One-Time 001-5230-6604
Homeless encampment cleanup Street
Maintenance
50,000 Ongoing 001-5230-6106
Developer Reimbursement Agreement
Increase – Vistra
Community
Development
175,000 One-Time 001-7105-6105
FUND 001
TOTAL
669,341
If all General Fund Budget Amendments are approved, the spendable General Fund balance at the end of Fiscal Year 2023-24 would be reduced by approximately $158,000, subject to change as the remainder of the fiscal year progresses.

Table 11 Summary of All Recommended General Fund Midyear Budget Amendments Adopted Budget Increase (Decrease) Amended Budget
Total Revenues 19,594,556 615,488 20,210,044
Total Expenditures 23,464,675 773,169 24,237,844
GRAND TOTALS (3,870,119) (157,681) (4,027,800)
Note: Expenditure budget exceeds revenue budget due to budgeted use of fund balance from prior years.

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Measure E Fund
Measure E was approved by the voters in November 2020 as a one percent local transaction and use tax, in addition to the half-cent local transaction and use tax from Measure Q, which was approved by the voters in 2006. The State administers the taxes as one tax, totaling one and a half percent. This is codified and explained in detail in Chapter 3.26 of Morro Bay’s Municipal Code. While Measure E is a General Tax, the City Council has identified priority spending areas consistent with the ballot measure language in 2020 and the prior 2006 ballot language used when Measure Q was approved. As directed by City Council on April 13, 2021, the four priority areas of spending for Measure E include:
- Maintain public safety services by funding staff positions that are most closely aligned with the purposes of Measures Q and E. Expenses include costs associated with Morro Bay Fire Department, Morro Bay Police Department, and Morro Bay Harbor personnel and equipment, in addition to the Fire Headquarter Debt service and the Fire Engine loan repayment;
- Maintain or enhance cleanliness and safety of public spaces such as parks, waterfront, and the beach by funding personnel, supplies, expenses, and equipment to support City operations in departments including Public Works Consolidated Maintenance and Harbor Department; - Invest in infrastructure and equipment such as street paving, storm drains, and vehicle replacements that support City services. This priority may include increasing the capacity to implement the backlog of unfunded capital projects; and
- Ensure the City's financial health by maintaining appropriate reserves to protect against economic downturns, natural/health emergencies, and other unforeseen challenges or opportunities.

Measure E (like Measure Q before it) requires an independent annual financial audit and the establishment of an independent citizens' advisory committee to review yearly expenditures. The Citizens’ Finance Advisory Committee (CFAC) serves as that oversight committee and is to receive annual and annual reporting on expenditures from Measure E revenues. The annual report through June 30, 2023, was on the CFAC meeting agenda for January 16, 2024.

The data here is through January 31, 2024, to be consistent with the remainder of the citywide midyear report and present as much data as possible through this point in the fiscal year. As of January 31, 2024, the Measure E Fund (fund 003) had received 33% of budgeted revenues and expended 75% of budgeted expenditures, as follows:

Table 12 FY 2023-24 Measure E Total Revenues and Expenditures Adopted Budget 1/31/24 Actuals % Rec'd/ Used Estimated
Total Revenues 4,550,000 1,507,274 33% 4,374,475
Total Expenditures 5,715,712 3,987,948 75% 5,476,782
GRAND TOTALS (1,165,712) (2,480,674) (1,102,307)
*Expenditure budget exceeds revenue budget due to budgeted use of fund balance from prior years.

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Measure E Fund Revenues
Fund revenues are slightly low, given that they represent five months of sales tax collected due to the twomonth lag in receipts. Based on consultation with HdL, staff is projecting year-end revenue totals just below budget. Sales tax revenue growth is anticipated to remain flat in FY 2024-25.

As City expenditures increase faster due to inflation and rising personnel costs, the City will likely face increasing resource constraints in the near to mid-term absent new revenue streams. For Measure E funds, this may mean reducing funding for capital improvements to maintain existing public safety service levels and improve existing city streets, sidewalks, and landscaping.

Measure E Fund Expenditures
Fund-wide, expenditures for the first seven months of the year are on track at 49% of the budget expended as of January 31, 2024, excluding one-time transfers, which are completed at the start of the fiscal year. The table below presents expenditures by Department. Interfund transfers represent transfers out to the Capital Improvement Fund and General Fund Cost Allocation Plan contributions, with no changes since budget adoption.

Table 13 FY 2023-24 Measure E Fund Expenditures by Department Department Adopted Budget Actuals % Used Estimated
Police 897,479 542,043 62% 962,654
Fire 952,439 588,076 62% 933,343
Public Works 1,096,730 287,139 26% 899,845
Harbor 359,830 211,456 59% 321,706
Interfund Transfers 2,359,234 2,359,234 100% 2,359,234
Total 5,715,712 3,987,948 75% 5,476,782
A portion of Fire Department overtime and employer-paid benefit expenditures will be reclassified to the General Fund to reconcile mutual aid expenditures with CalOES reimbursements.

Recommended Measure E Fund Budget Amendments
Revenues. No revenue amendments are recommended.

Expenditures. No expenditure amendments are recommended.

Enterprise Funds
The Enterprise Funds are Proprietary Funds that report the same functions as business-type activities. The following funds are included in this category: Harbor Funds, Water Funds, Sewer Funds, and Transit Funds.

Currently, each enterprise fund has an operating fund and a capital improvement fund. The following gives an update on significant changes or activities in these funds.

Harbor Operating Fund
The Harbor Enterprise Fund accounts for revenues from harbor leases, slips, moorings, and other sources expended for maintenance, operation, patrolling, and harbor improvements. As of January 31, 2024, the Harbor Operating Fund had received approximately 42% of budgeted revenue ($1 million of $2.4 million) and expended approximately 70% of its budget ($1.8 million of $2.6 million). After netting out transfers and one-time expenses paid at the start of the fiscal year, the actual percent of the expenditure budget spent is 55%, which is on track

Midyear Budget Report FY 2023-24
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with seven months behind us. As lease agreements outline, a large portion of Harbor Fund revenues are received at the end of the fiscal year for the prior year's percentage rent. Due to that contractual timing, it can be difficult to project revenue budgets in the Harbor Fund.

Last fiscal year (22-23), the Harbor Funds had an operating budget surplus of approximately $1.2M, resulting in a working capital balance (spendable fund balance) of approximately $1.1 million at fiscal year-end (June 30, 2023).

Harbor Department staff continues to evaluate capital improvement projects for FY 2023-24. Significant storm damage in 2023 shifted priorities to address commercial fishing dock repairs/replacement. Budgeted funding from current operations and grant funding from the Morro Bay Commercial Fisheries Organization will support the estimated $300,000 project. More funding in the FY 2024-25 budget will be necessary to complete this work.

The funding for the Beach Street Dock Replacement project has been deemed inadequate to finish the project.

Continuing to spend funds on design, engineering, and permitting is not recommended by the Harbor Director. The Harbor Director recommends reallocating Beach Street project funds to the Commercial Fishing Dock repair/replacement project in the FY 2024-25 budget. Significant underfunded capital improvement needs for much of the Harbor infrastructure remain a critical consideration for future budget cycles.

Recommended Harbor Fund Budget Amendments
Several budget amendments in Harbor Funds are recommended at midyear. Amendments previously approved by Council, including offsetting revenues, resulted in a net decrease of $2,265. New recommended mid-year budget amendments have no net impact on the budget. The recommended changes are outlined below.

Table 14 Previously Approved Harbor Operating Fund Revenue and Expenditure Budget Amendments Description Department Increase
(Decrease)
One-time/
Ongoing
G/L
Revenues
SAVE Grant for removal of abandoned
vessels
Harbor Operating 38,000 One-Time 331-6510-3371
Oil Spill Response Grant for trailer and
supplies
Harbor Operating 40,000 One-Time 331-6510-3371
Household Hazardous Waste Grant for
flare removal
Harbor Operating 50,000 One-Time 331-6510-3371
Correct typo in adopted budget Harbor Operating (22,500) One-Time 331-6510-3469 REV TOTAL 105,500
Expenditures
Grant-funded contractual services
expenditure for removal of abandoned
vessels
Harbor Operating 38,000 One-Time 331-6510-6106
Grant-funded disposal expenditures for
oil spill response
Harbor Operating 40,000 One-Time 331-6510-6305
Grant-funded disposal expenditures for
flare removal
Harbor Operating 17,000 One-Time 331-6510-6305
Grant-funded supplies for flare removal Harbor Operating 5,873 One-Time 331-6510-5504 Grant-funded promotion & advertising
expenditures for flare removal
Harbor Operating 2,363 One-Time 331-6510-6107
EXP TOTAL 103,236

Midyear Budget Report FY 2023-24
- 16 -
Table 15 New Harbor Capital Fund Revenue and Expenditure Budget Amendments Description Department Increase
(Decrease)
One-time/
Ongoing
G/L
Revenues
MBCFO Grant for dock repairs Storm Recovery –
Dock Repairs
100,000 One-Time 923-9960-3390
REV TOTAL 100,000
Expenditures
MBCFO Grant-funded contractual
services expenditures for dock repairs
Storm Recover –
Dock Repairs
100,000 One-Time 923-9960-6106
EXP TOTAL 100,000
Water Funds
The Water Enterprise Fund accounts for revenues received primarily from water service charges, which are expended for maintenance, operations, and capital improvements to the water system. As of January 31, 2024, the Water Operating Fund had received approximately 57% of its budgeted revenues ($4.4 of $7.7 million) and expended approximately 40% of its budgeted expenditures ($3.7 million of $9.4 million).

As of June 30, 2023, the amount of unaudited working capital (spendable fund balance) in the Water Fund was approximately $11.9 million.

Recommended Water Funds Budget Amendments
No budget amendments are recommended for the Water Fund.

Sewer Funds
The sewer enterprise funds account for revenues received primarily from sewer service charges, which are expended for maintenance, operations, and improvements to the sanitary sewer system. As of January 31, 2024, the Sewer Fund had received approximately 56% of budgeted revenue ($5.4 of $9.8 million) and expended approximately 49% of its budget ($7 of $14.5 million).

As of June 30, 2023, the unaudited working capital (spendable fund balance) amount in the Sewer Fund was approximately $22.7 million.

Recommended Sewer Funds Budget Amendments
No budget amendments are recommended for the Sewer Fund.

Transit Fund
The Transit Fund accounts for the operations and activities associated with the City’s public transit system, Morro Bay Transit, which operates a year-round deviated fixed route with fixed route, Call-A-Ride services, and a seasonal Trolley service. The deviated fixed route operates one fixed route that flexes, or deviates, off-route to provide limited, advance-scheduled, curb-to-curb service (Call-A-Ride), then returns to the next fixed route stop.

The primary source of revenue for this Fund is Transportation Development Act (TDA) money. TDA was enacted by the State Legislature in 1971 to make funds available for transit, pedestrian way and bikeway projects, transportation planning, ridesharing, and street and road improvements. Funds for the TDA come from 1/4 cent of the retail sales tax for Local Transportation Funds (LTF) and from sales taxes on diesel fuel for State Transit Assistance (STA). These funds are allocated annually by the San Luis Obispo Council of Governments (SLOCOG)

Midyear Budget Report FY 2023-24
- 17 -
to eligible claimants under two funding programs: Local Transportation Fund (LTF) and State Transit Assistance (STA).

As of June 30, 2023, the unaudited working capital (spendable fund balance) amount in the Transit Fund was approximately $1.9 million.

Recommended Transit Fund Budget Amendments
More funds are necessary to complete the MBT Replacement Bus purchase. The funding source for this request is Transportation Development Act revenue, which reduces the FY 2023-24 projected revenue surplus by $20,000.

Table 16 New Transit Operating Fund Expenditure Budget Amendments Description Department Increase
(Decrease)
One-time/
Ongoing
G/L
Transfer to Capital Improvement
Fund
Interfund
Transactions
20,000 One-Time 301-7710-8540
EXP TOTAL 20,000
Table 17 New Transit Capital Fund Budget Amendments
Description Department Increase
(Decrease)
One-time/
Ongoing
G/L
Revenues
Intrafund Revenue Transfers MBT Replacement
Vehicle - Bus
20,000 One-Time 920-9917-3802
REV TOTAL 20,000
Expenditures
MBT Replacement Bus Purchase MBT Replacement
Vehicle - Bus
20,000 One-Time 920-9917-7204
EXP TOTAL 20,000
Other Funds
Morro Bay has several other smaller (non-major) funds with special purposes. They are all outlined in detail each year in the Adopted Budget document.

Recommended Other Funds Budget Amendments
Minor midyear budget amendments are recommended in Other Funds, as outlined below. The only request resulting in a change in fund balance is from IT. As of June 30, 2023, the IT Fund's unaudited working capital (spendable fund balance) amount was approximately $382,000, which exceeds both the minimum (200k) and target ($300k) reserve policy for this fund.

Table 18 New Other Funds (non-major) Recommended Budget Amendments Fund Description Department Increase
(Decrease)
One-time/
Ongoing
G/L
Expenditures
American Rescue
Plan Fund
Correct G/L for Community Grants
budget
Non-departmental (25,000) One-Time 019-1111-8721
American Rescue
Plan Fund
Correct G/L for Community Grants
budget
Interfund
Transfers
25,000 One-Time 019-7710-8510
FUND 019 TOTAL 0
Revenues

Midyear Budget Report FY 2023-24
- 18 -
Developer
Reimbursement
Agreement Fund
Increased developer
reimbursement funding
DRA: Panorama
Drive
45,000 One-Time 045-8801-3994
FUND 045 TOTAL 45,000
Expenditures
Developer
Reimbursement
Agreement Fund
Increased developer
reimbursement funding
DRA: Panorama
Drive
45,000 One-Time 045-8801-6104
FUND 045 TOTAL 45,000
Information
Technology Fund
Increased consulting services for
acquisition of Microsoft Licenses
Information
Technology
23,980 One-Time 450-3520-6105
FUND 450 TOTAL 23,980
Summary Current Year and Five-Year Financial Forecasts
In addition to the discussion of Mid-Year budget status and budget revisions, staff is also providing summary Five Year Financial Forecasts prepared for both the General Fund and the Measure E fund. The summaries include estimated actuals for the current fiscal year at a summary level and five future fiscal years through FY 2028/29. The forecasts reflect a continuing effort by staff to analyze the City’s long-term fiscal condition based on current revenue and expense trends and information provided by sources such as the City’s sales tax consultant, the State of California, and the County of San Luis Obispo. The forecast represents a point-in-time snapshot and an approximate view of what could occur if all assumptions are proven correct. The summaries for both funds indicate revenue shortfalls in the out years based upon operating revenue versus operating expenditure deficits projected in the General Fund beginning in FY 2027/28. Additionally, Measure E appears to be unable to fully fund planned capital project support beginning in the next fiscal year and the condition extending for each of the following forecasted fiscal years. The summary reports emphasize the importance for the City to closely monitor local economic conditions and county and national economic trends and make the necessary budgetary recommendations to align future service delivery and essential capital improvements with estimated available financial resources.

Midyear Budget Report FY 2023-24
- 19 -
FY 2023 Actual
FY 2024
Budget
FY 2024
Estimated FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Beginning Fund Balance 9,625,766 9,639,131 9,639,131 5,769,011 5,505,425 4,845,966 4,506,113 3,842,880 Revenue
Property Tax 5,294,352 5,232,900 5,469,082 5,631,123 5,800,056 5,974,058 6,153,280 6,337,878 Sales Tax 2,739,864 2,690,000 2,697,615 2,786,504 2,870,414 2,956,526 3,045,222 3,136,578 Transient Occupancy Tax 4,681,648 4,400,000 4,406,962 4,517,136 4,630,065 4,768,967 4,959,725 5,108,517 Other Revenue 5,424,357 5,248,054 5,188,702 5,487,337 5,651,957 5,821,516 5,996,161 6,176,046 Transfers In 3,299,443 2,023,602 2,023,602 1,484,458 1,528,991 1,574,861 1,622,107 1,670,770 TOTAL REVENUE 21,439,664 19,594,556 19,785,963 19,906,558 20,481,483 21,095,928 21,776,495 22,429,790 Expense
Personnel 11,303,881 12,195,007 11,685,175 12,845,394 13,581,328 14,324,488 15,053,819 15,505,433 Operational costs 9,103,914 9,790,966 9,342,591 10,182,605 10,589,909 11,013,505 11,454,046 11,797,667 Ongoing costs for long-term liabilities (PERS) 2,199,967 2,404,041 2,342,584 2,662,789 2,991,419 3,310,983 3,599,773 3,707,766 Other Operations & Maintenance 5,496,233 5,094,262 4,829,445 5,348,875 5,616,216 5,840,811 6,074,389 6,256,621 Transfers Out (Ongoing) 638,190 725,851 725,851 762,144 800,251 840,263 882,276 908,745 Debt Service Payments 1,233,788 35,190 35,600 35,190 35,190 35,190 35,190 36,246 TOTAL EXPENSE 18,672,091 18,050,310 17,276,071 18,991,602 20,032,985 21,040,753 22,045,674 22,707,044 Net Surplus (Shortfall)-Operating 2,767,573 1,544,246 2,509,892 914,955 448,499 55,175 (269,179) (277,254) Capital 490,000 1,106,865 1,106,865 675,000 500,000 - - Storm and Flooding Damages -
Facilities and Equipment 300,000 300,000 - - - -
Veteran's Hall Building Improvements
185,027 185,027 175,000 - - -
Storm and Flooding Damages -
Pavement and Pavement Repairs 400,000 400,000 - - - -
Lila Keiser Parking Lot Rehabilitation and ADA Upgrades 80,000 80,000 - - - -
Annual Storm Drain Replacement and Major Maintenance
Project - - 500,000 500,000 - -
Waterways and Storm Systems Management Plan 141,838 141,838 - - - - Citywide Capital and Facilities Planning - - - - -
Net Surpluse (Shortfall)-including Capital 2,277,573 437,381 1,403,027 239,955 (51,501) 55,175 (269,179) (277,254) Contribution to 115 Trust 826,000 887,000 887,000 200,000 200,000 - - Transfers Out (One-Time)
General Fund Emergency Reserve Fund (GFER) 1,087,000 3,292,000 3,292,000 303,542 407,958 395,028 394,054 287,532 Vehicle Replacement Fund 270,000 107,000 107,000
Compensable Leave Fund 81,000 21,500 21,500
Ending Total Fund Balance 9,639,131 5,769,011 6,734,658 5,505,425 4,845,966 4,506,113 3,842,880 3,278,094 Less Non-Spendable Fund Balance 3,189,840 3,163,000 3,163,000 3,163,000 3,163,000 3,163,000 3,163,000 3,163,000 Ending Available Fund Balance 6,449,291 2,606,011 3,571,658 2,342,425 1,682,966 1,343,113 679,880 115,094 Measure E Fund Operating Expenses
(excluding transfers) 2,425,167 3,448,713 3,448,713 3,625,440 3,820,293 4,009,579 4,198,761 4,408,699 General Fund Emergency Reserve Fund
(GFER) Balance 3,868,082 7,160,082 7,160,082 7,463,624 7,871,582 8,266,610 8,660,664 8,948,195 Total Fund Balance as % of Total Operating Expenses
(General Fund + GFER) /
(General Fund + Q&E Operating) 48.9% 45.4% 51.8% 43.4% 40.1% 38.4% 35.6% 33.4% Minimum Reserve Levels MET MET MET MET MET MET MET MET
General Fund Emergency Reserve Policy: 33% operating
expenses. Includes Measure E fund operating expenses.
6,962,095 7,094,678 6,839,179 7,463,624 7,871,582 8,266,610 8,660,664 8,948,195 AVAILABLE FUND BALANCE (EXCESS OF MINIMUM RESERVES) 3,355,278 2,671,416 3,892,561 2,342,425 1,682,966 1,343,113 679,880 115,094 GENERAL FUND (001)
Forecast

Midyear Budget Report FY 2023-24
- 20 -
FY 2023 Actual
FY 2024
Budget
FY 2024
Estimated FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Starting Fund Balance 1,944,836 1,251,233 1,325,072 85,521 (2,662,168) (4,802,117) (6,687,941) (8,615,235) Revenue
Tax Revenue 4,566,654 4,550,000 4,364,475 4,663,750 4,780,344 4,923,754 5,071,467 5,223,611 Other Revenue 7,486 - 10,000 - - - - -
Transfers In - - - - - - - -
TOTAL REVENUE 4,574,140 4,550,000 4,374,475 4,663,750 4,780,344 4,923,754 5,071,467 5,223,611 Expense
Personnel 2,123,431 2,454,606 2,250,520 2,581,628 2,724,290 2,868,719 3,011,200 3,151,741 Operational Costs 1,782,094 2,036,666 1,800,713 2,118,133 2,202,858 2,290,972 2,382,611 2,477,916 Ongoing costs for long-term liabilities (PERS) 341,337 417,940 449,807 463,495 521,432 577,747 628,589 673,825 Other Operations & Maintenance 316,473 901,872 867,028 946,966 994,314 1,034,086 1,075,450 1,116,083 Transfers Out (operating) 240,000 92,234 92,234 96,846 101,688 106,772 112,111 117,717 Debt Service Payments - - - - - - -
TOTAL EXPENSE 2,679,903 3,448,712 3,209,782 3,625,439 3,820,292 4,009,578 4,198,761 4,385,540 Net Surplus (Shortfall)-Operating 1,894,236 1,101,288 1,164,693 1,038,311 960,052 914,176 872,706 838,070 Capital 2,514,000 2,267,000 2,267,000 3,786,000 3,100,000 2,800,000 2,800,000 2,800,000 Active Transportation Plan / Active Corridor
Studies 67,000 67,000 136,000 - - -
Local Road Safety Plan (LRSP) Implementation
and Safety Improvements 150,000 150,000 200,000 200,000 200,000 200,000 200,000 ADA Accessibility Upgrades at Quintana and Main
Streets Intersection - - - - - -
Trash and Recycling Can Replacements 60,000 60,000 - - - - Sidewalk Improvements and Street Tree
Replacements Project 150,000 150,000 250,000 300,000 - - SR1/SR41/Main St Intersection Improvements - - 600,000 - - - Annual Pavement Management Program 1,840,000 1,840,000 2,600,000 2,600,000 2,600,000 2,600,000 2,600,000 Harbor Patrol Response Vehicle 72,000 - - - -
Unmarked Police Vehicle
(Replace Administrative Sergeant Vehicle) 49,000 - - - - Unmarked Police Vehicle (Detective Vehicle) 49,000 - - - - Net Surplus (Shortfall) including Capital (619,764) (1,165,712) (1,102,307) (2,747,689) (2,139,948) (1,885,824) (1,927,294) (1,961,930) ENDING FUND BALANCE 1,325,072 85,521 222,765 (2,662,168) (4,802,117) (6,687,941) (8,615,235) (10,577,165) NOTE
MEASURE E FUND (003)
Forecast
Measure E does not have its own reserve policy, as it is covered in the General Fund Emergency Reserve policy.

Midyear Budget Report FY 2023-24
- 21 -
FY 2024 Budget FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Available Fund Balance-Beginning 10,890,364 909,489 (2,459,692) (5,004,975) (7,272,123) (9,897,285) General Fund 19,594,556 19,906,558 20,481,483 21,095,928 21,776,495 22,429,790 Measure E 4,550,000 4,663,750 4,780,344 4,923,754 5,071,467 5,223,611 TOTAL REVENUE 24,144,556 24,570,308 25,261,827 26,019,682 26,847,962 27,653,401 General Fund 18,050,310 18,991,602 20,032,985 21,040,753 22,045,674 22,707,044 Measure E 3,448,712 3,625,440 3,820,293 4,009,579 4,198,761 4,385,540 TOTAL EXPENSE 21,499,022 22,617,042 23,853,278 25,050,332 26,244,435 27,092,584 OPERATING REVENUE OVER EXPENDITURE (Operating)
Combined Revenue 24,144,556 24,570,308 25,261,827 26,019,682 26,847,962 27,653,401 Combined Expenditure (Operating) 21,499,022 22,617,042 23,853,278 25,050,332 26,244,435 27,092,584 Combined Surplus (Deficit) 2,645,534 1,953,265 1,408,550 969,350 603,527 560,817 General Fund Surplus (Deficit) 1,544,246 914,955 448,499 55,175 (269,179) (277,254) Measure E Surplue (Deficit) 1,101,288 1,038,310 960,051 914,175 872,706 838,071 2,645,534 1,953,265 1,408,550 969,350 603,527 560,817
COMBINED REVENUE OVER EXPENDITURE (Op + One-time
Transfers + Capital)
Combined Revenue 24,144,556 24,570,308 25,261,827 26,019,682 26,847,962 27,653,401 Combined Expenditure (Op + One-time Transfers & Section 115 + Capital) 29,180,388 27,581,584 28,061,235 28,245,360 29,438,489 30,180,116 Combined Surplus (Deficit) including all expenditures (5,035,832) (3,011,277) (2,799,408) (2,225,678) (2,590,527) (2,526,715) Total Operating 21,499,023 22,617,042 23,853,278 25,050,332 26,244,435 27,092,584 Total One-Time Transfers + Section 115 4,307,500 503,542 607,958 395,028 394,054 287,532 Total Capital 3,373,865 4,461,000 3,600,000 2,800,000 2,800,000 2,800,000 General Fund Operating 18,050,310 18,991,602 20,032,985 21,040,753 22,045,674 22,707,044 General Fund One-Time Transfers + Section 115 4,307,500 503,542 607,958 395,028 394,054 287,532 General Fund Capital 1,106,865 675,000 500,000 - - -
Measure E Operating 3,448,713 3,625,440 3,820,293 4,009,579 4,198,761 4,385,540 Measure E One-Time Transfers + Section 115 - - - - - -
Measure E Fund Capital 2,267,000 3,786,000 3,100,000 2,800,000 2,800,000 2,800,000 General Fund Available Fund Balance 2,606,011 3,571,658 2,342,425 1,682,966 1,343,113 679,880 Measure E Available Fund Balance 85,521 (2,662,169) (4,802,117) (6,687,941) (8,615,235) (10,577,165) ENDING FUND BALANCE BEFORE RESERVES 2,691,532 909,489 (2,459,692) (5,004,975) (7,272,123) (9,897,285) Minimum Reserve Levels
General Fund Emergency Reserve Policy: 33% operating
expenses. Includes Measure E fund operating expenses.
7,094,678 7,463,624 7,871,582 8,266,610 8,660,664 8,948,195 UNRESERVED/ AVAILABLE FUND BALANCE 2,756,937 909,489 (2,459,692) (5,004,975) (7,272,123) (9,897,285) General Fund (001) and Measure E (003) Forecast

RESOLUTION NO. 16-24

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA,
APPROVING AMENDMENTS TO THE CITY’S FISCAL YEAR 2023-24 BUDGET

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, Fiscal Year 2023-24 Midyear Budget adjustments were discussed and approved during the February 27, 2024 Council meeting; and WHEREAS, the Council now desires to amend its Adopted Fiscal Year 2023-24 Budget to include the amendments outlined in Exhibit 1.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California,

1. The operating and capital budgets of the City are amended by the additional and revised revenues, expenditures and transfers, as shown on the attached Exhibit 1, that were discussed at the February 27, 2024, Council Meeting; and PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 27th day of February 2024, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSED:
______________________________
CARLA WIXOM, Mayor
ATTEST:
_____________________________
DANA SWANSON, City Clerk

Revenues and Transfers In ‐ CURRENT REQUESTS (Previously Approved by Council) Fund Department Account G/L String
AdoptedBudget
Increase/
(Decrease)
AmendedBudget
One‐time/
Ongoing Justification and further detailed information for request:

Fund
Subtotal
General Fund Interfund Transfers Transfers In 001‐7710‐3801 ‐            25,000 25,000 One‐Time Correct GL for Community Grants budget General Fund Fire Nuclear Planning Assist 001‐4210‐3393 12,360 30,827 43,187 One‐Time Recognize grant award received for new radios and laptop.

General Fund Fire Federal Grant Other Govt Svc 001‐4210‐3303 ‐            48,000 48,000 One‐Time Recognize grant award received for auto extrication tool.

Harbor Operating Harbor Dept State Grant 331‐6510‐3371 15,000 38,000 53,000 2 year grant Recognize grant award received for removal of abandoned vessels and hazards to navigation.

Harbor Operating Harbor Dept Special Events 331‐6510‐3469 25,000 (22,500) 2,500 One‐Time Correct amount, should have been 2500.00 Harbor Operating Harbor Dept State Grants 331‐6510‐3371 ‐            40,000 40,000 One‐Time Recognize grant award received Harbor Operating Harbor Dept State Grants 331‐6510‐3371 50,000 50,000 One‐Time Recognize grant award received General CIP
Sequoia Ct Emerg
Storm Drain Repair
State Grant Capital
Improvement 915‐9950‐3370 ‐          300,000 300,000 One‐Time Recognize grant award received for storm drain replacement project. 300,000
Harbor CIP Harbor Dept Intrafund Revenue Transfers 923‐8351‐3802 280,000 (280,000) ‐                One‐Time Correct adopted budget; should have been split to three projects
Harbor CIP Harbor Dept Intrafund Revenue Transfers 923‐9930‐3802 ‐            40,000 40,000 One‐Time Correct adopted budget; move from 8351 Harbor CIP Harbor Dept Intrafund Revenue Transfers 923‐9941‐3802 ‐            40,000 40,000 One‐Time Correct adopted budget; move from 8351 Harbor CIP
Storm Recovery‐Dock Repairs
Other Grant Capital
Improvement 923‐9960‐3390 ‐          100,000 100,000 One‐Time Recognize grant award received for dock repairs.(this is already posted to account)
Harbor CIP Harbor Dept Intrafund Revenue Transfers 923‐9960‐3802 ‐          200,000 200,000 One‐Time Correct adopted budget; move from 8351 332,360 609,327 941,687
103,827105,500100,000
Exhibit 1 to Resolution No. 16-24

Expenditures and Transfers Out ‐ CURRENT REQUESTS (Previously Approved by Council) Fund Department Account G/L String
AdoptedBudget
Increase/
(Decrease)
AmendedBudget
One‐time/
Ongoing Justification and further detailed information for request:

Fund
Subtotal
General Fund City Council Payments to Other Agencies 001‐2110‐8721 36,500 25,000 61,500 One‐Time Correct GL for Community Grants budget General Fund Fire Communication Supplies 001‐4210‐5108 4,590 30,827 35,417 One‐Time Grant funded expenditures for new radios and laptop.

General Fund Fire Equipment Acquisition 001‐4210‐7302 ‐            48,000 48,000 One‐Time Grant funded expenditure for auto extrication tool.

ARPA Admin Payments to Other Agencies 019‐1111‐8721 25,000 (25,000) ‐ One‐Time Correct GL for Community Grants budget ARPA Admin Transfers Out 019‐7710‐8510 ‐            25,000 25,000 One‐Time Correct GL for Community Grants budget Harbor Operating Harbor Dept Equipment Supplies 331‐6510‐5504 20,000 5,873 25,873 One‐Time Recognize grant award received Harbor Operating Harbor Dept Contractual Services 331‐6510‐6106 44,500 38,000 82,500 2 year Grant Grant funded expenditures for removal of abandoned vessels and hazards to navigation.

Harbor Operating Harbor Dept Promotion and Advertising 331‐6510‐6107 500 2,363 2,863 One‐Time Recognize grant award received Harbor Operating Harbor Dept Disposal 331‐6510‐6305 1,306 40,000 41,306 One‐Time Recognize grant award received Harbor Operating Harbor Dept Disposal 331‐6510‐6305 17,000 17,000 One‐Time Recognize grant award receivedGeneral CIP Juniper/ElenaEmergency Storm
Drain Repair Contractual Services 915‐9949‐6106 184,124 (164,041) 20,083 One‐Time Reallocate the remaining project balance from Juniper/Elena Emergency Storm Drain Repair (complete) to Sequoia Ct StormDrain Replacement.

General CIP
Sequoia Ct EmergStorm Drain Repair Contractual Services 915‐9950‐6106 300,000 One‐Time Grant funded expenditures for storm drain replacement.

General CIP
Sequoia Ct EmergStorm Drain Repair Contractual Services 915‐9950‐6106 164,041 One‐Time Reallocate the remaining project balance from Juniper/Elena Emergency Storm Drain Repair (complete) to Sequoia Ct StormDrain Replacement.

Harbor CIP
Storm Recovery‐Dock Repairs Contractual Services 923‐9960‐6106 200,000 100,000 300,000 One‐Time Grant funded expenditures for dock repairs. 100,000 611,520 607,063 1,218,583
95,000 559,041
103,827
‐
103,236300,000
Exhibit 1 to Resolution No. 16-24

Revenues and Transfers In ‐ NEW REQUESTS
Fund Department Account G/L String
AdoptedBudget
Increase/
(Decrease)
AmendedBudget
One‐time/
Ongoing Justification and further detailed information for request:

Fund
Subtotal
General Fund
Accounting &Treasury Property Tax Current Secured 001‐3510‐3011 3,691,000 52,721 3,743,721 One‐Time Per SLO County Assessor's Office updated projections General Fund
Accounting &Treasury Property Tax Current Unsecured 001‐3510‐3012 118,000 6,373 124,373 One‐Time Per SLO County Assessor's Office updated projections General Fund
Accounting &Treasury Property Tax ‐ Cnty Adm Fee 001‐3510‐3020 (74,500) 7,486 (67,014) One‐Time Per SLO County Assessor's Office updated projections General Fund
Accounting &Treasury Property Tax in Lieu ‐ VLF 001‐3510‐3021 1,235,400 184,772 1,420,172 One‐Time Per SLO County Assessor's Office updated projections General Fund Fire Other Fire Services 001‐4210‐3472 400,000 36,000 436,000 One‐time Recognize additional mutual aid reimbursements invoiced to date.

General Fund Public Works Other misc revenues 001‐5205‐3990 ‐                        14,267 14,267 One Time Reimbursement for solid waste rate study General Fund
ConsolidatedMaintenance Donations 001‐5215‐3970 68,973 (18,973) 50,000 One‐Time Reduce revenue in General Fund, Consolidated Maintenance Department. Revenue will be posted to the project in the General Capital Improvement Fund.

General Fund
ConsolidatedMaintenance Other misc revenues 001‐5215‐3990 ‐               43,965 43,965 One‐time Proceeds from insurance claim for PW trucks.

General Fund
ConsolidatedMaintenance Other misc revenues 001‐5215‐3990 ‐                          5,025 5,025 One‐time Proceeds from insurance claim for storm‐related damage to City vehicle.

General Fund Street Maintenance Other misc revenues 001‐5230‐3990 ‐                          5,025 5,025 One‐time Proceeds from insurance claim for storm‐related damage to City vehicle.

General Fund
CommunityDevelopment
Vistra Deposits for City Costs
Related to Battery Project 001‐7105‐3994 300,000 175,000 475,000 One‐time Recognize additional deposits requested by developer to cover city costs related to the battery project.

DRA DRA: 3300 Panorama Developer Reimbursement Agree045‐8801‐3994 140,000 45,000 185,000 One Time Reimbursement for traffic engineering, surveying, and plan review services for the 3300 Panorama Dr development project. 45,000 General CIP Pickelball Court Donations from Private Agency 915‐8400‐3281                   ‐            31,400 31,400 One‐time Recognize donations received from community group to pay forpickelball court resurfacing project. 31,400 Transit Capital
Impv Fund Transit Fund Intrafund Revenue Transfers 920‐9917‐3802 ‐               20,000 20,000 One‐time Transfer from Transit Operating to fund bus purchase 20,000 5,878,873 608,060 6,486,933
511,660
Exhibit 1 to Resolution No. 16-24

Expenditures and Transfers Out ‐ NEW REQUESTS
Fund Department Account G/L String
AdoptedBudget
Increase/
(Decrease)
AmendedBudget
One‐time/
Ongoing Justification and further detailed information for request:

Fund
Subtotal
General Fund Fire Telephone 001‐4210‐6201 17,979 2,000 19,979 Ongoing Increased monthly cost due to MDCs put in engines (per County requirements) that require cellular data connection.

General Fund Fire Electricity 001‐4210‐6301 35,000 8,800 43,800 Ongoing Increased monthly cost due to increase in utility rates and more city/Astound equipment in server room. Additional server equipment is increasing energy consumption.

General Fund Fire Fuel Oil & Lubricants 001‐4210‐5110 30,000 12,000 42,000 Ongoing Fuel prices increased and call volume increased 11%/ Partiallyoffset by $1,110 Mutual Aid (MA) reimbursement received forfuel use.

General Fund Fire Meals & Lodging 001‐4210‐6513 5,500 4,500 10,000 Ongoing Offset by $5,880 MA reimbursement from CalOES for meals and lodging on MA incidents.

General Fund Fire Outside Vehicle Repair/Maint 001‐4210‐6604 11,353 40,000 51,353 One Time Emergency repair ‐ pump failure on Truck 5341/parts over $10k+ a week of labor. Truck still has 16 yrs of life/replacementwould be appx $2million ‐ 4 yr build time to order a new one General Fund Fire Overtime Pay 001‐4210‐4120 284,062 71,000 355,062 Ongoing Overtime costs due to MA response. Overtime costs offset by CalOES Wildland Fire Reimbursement. Mutual aid
reimbursements are estimated at budget development, but overtime costs are adjusted at midyear based on actual MAresponse.

General Fund Fire Other Pay 001‐4210‐4599 47,474 50,000 97,474 Ongoing This line item adjustment can be covered by MAreimbursement.

General Fund Fire Employer Paid Benefits 001‐4210‐4910 218,351 75,000 293,351 Ongoing This GL code increases based on overtime worked and can be offset by MA reimbursement dollars.

General Fund Fire Overtime Pay 001‐4210‐4120 98,223 85,000 183,223 Ongoing Mutual Aid overtime posted to Measure E to be reclassed to General Fund to reconcile against Mutual Aid Reimbursement.

Budget numbers reflect Measure E adopted.

General Fund Fire Employer Paid Benefits 001‐4210‐4910 86,110 20,000 106,110 Ongoing Mutual Aid benefit costs posted to Measure E to be reclassed to General Fund to reconcile against Mutual Aid Reimbursement.

Budget numbers reflect Measure E adopted.

General Fund Public Works Engineering Services 001‐5205‐6105 20,000 Ongoing Increased demand; City Surveyor, plan review for large
developments
General Fund Public Works Engineering Services 001‐5205‐6105 14,267 One‐Time Offsetting expenditure for solid waste rate study
reimbursement.
95,000 129,267
Exhibit 1 to Resolution No. 16-24

General Fund
ConsolidatedMaintenance Outside Vehicle Repair/Maint 001‐5215‐6604 0 5,025 5,025 One‐time Initial payment for repair of storm‐related damages to citytruck. Insurance proceeds will offset expenditure. Costs split between Consolidated Maintenace and Street Maintenance.

General Fund
ConsolidatedMaintenance Trucks 001‐5215‐7202 ‐            31,725 31,725 One‐time Offsetting expenditure for insurance claim proceeds.

General Fund Streets Contractual Services 001‐5230‐6106 0 50,000 50,000 Ongoing Cleanup along Quintana Road due to new City ordinance
adopted in January 2024; additional funds will need to be requested for next fiscal year to address this and otherencampment locations General Fund Street Maintenance Outside Vehicle Repair/Maint 001‐5230‐6604 0 5,025 5,025 One‐time Initial payment for repair of storm‐related damages to citytruck. Insurance proceeds will offset expenditure. Costs split between Consolidated Maintenace and Street Maintenance.

General Fund
CommunityDevelopment Consulting Services 001‐7105‐6105 ‐          175,000 175,000 One‐Time Offset by developer reimbursement agreement.

DRA
DRA: 3300
Panorama Dr Engineering Services 045‐8801‐6104 140,000 45,000 185,000 One‐time Offsetting expenditures for developer reimbursement of traffic engineering, surveying, and plan review services for the 3300Panorama Dr development project. 45,000 Transit OperatingFund Transit Fund Transfer to CIP 301‐7710‐8540 ‐                20,000 20,000 One‐time Fund remaining balance of bus replacement 20,000 IT Fund IT Consulting Services 450‐3520‐6105 467,000 23,980 490,980 One‐Time The increased budget request is to bring the city into
contractual compliance with Microsoft and will enable IT tocontinue improving the operations of the city. 23,980 General CIP Pickelball Court Contractual Services 915‐8400‐6106 ‐            31,400 31,400 One‐Time Project will resurface pickelball courts and is funded by donations from Morro Bay Active Adults. 31,400
Transit Capital
Impv Fund Transit Fund Other Vehicles 920‐9917‐7204 110,000 20,000 130,000 One‐time Purchase cost increased; revenue to come from Transit Fund balance 20,000
1,646,052 809,721 2,455,773
669,341
Exhibit 1 to Resolution No. 16-24

Prepared By: ___TS Dept Review: ___TS
City Manager Review: YK_ _______ City Attorney Review: ______ Staff Report
TO: Honorable Mayor and City Council DATE: February 21, 2024 FROM: Yvonne Kimball, City Manager
Ted Schiafone, Harbor Director
SUBJECT: Response to San Luis Obispo County – Offshore Wind Notice of Funding Availability Scope of Work Questionnaire

RECOMMENDED ACTION
Acknowledge and Review of the responses to the San Luis Obispo County Notice of Funding Availability for potential offshore wind development on the Central Coast and provide input on additions, deletions and/or edits.

FISCAL IMPACT
No immediate fiscal impact. However, the demand for technical expertise in the areas of energy, engineering, environmental studies, contract and land use, has become increasingly critical as statewide and nationwide discussions of OSW expands.

It should be noted that City has no designated staffing resources for OSW discussions. It is an increasingly frustrating situation.

BACKGROUND
As part of the 2022 State Budget (AB 178), the County was awarded a $1,000,000 earmark for “the Deep-Water Port Feasibility Study for Offshore Wind Procurement.” The County intends to use the funds to 1) hire a consultant to complete a technical analysis pertaining to topics related to offshore wind development, including infrastructure, workforce development, environmental matters in San Luis Obispo County; 2) develop a communication and community engagement strategy for promoting the Study and related offshore wind matters; and 3) provide County administrative resources to accomplish the aforementioned scopes of work, including internal staff resources and external consultant resources. The funds must be encumbered by June 30, 2024, and expended by June 30, 2026, or the funds will revert to the State’s General Fund by operation of law.

The County intends to award 100% of the funds toward the purpose of supporting the public entity capacity and technical assistance in advancing the development of offshore wind waterfront infrastructure at Morro Bay, Port San Luis, and the Cal Poly pier.

The amount of fiscal impact is undetermined at this time, dependent upon the amount of funding appropriated towards a study for the City of Morro Bay.

For the past twelve months, the City has expended significant time towards understanding offshore AGENDA NO: 9.c
MEETING DATE: February 27, 2024

wind development, attending conferences, meetings with Federal, State & local agencies, meetings with consultants, contractors, OSW leaseholders and developers. As a small City with limited budget and staffing, we have recognized that outside funding is necessary to provide for necessary staffing and/or consultant capacity to help the City decision makers fully understand OSW development impacts to our community and provide that information to our stakeholders.

Over the past several months, the City has made numerous contacts and had meetings with Federal legislators and State legislators regarding our needs as a small community for direct funding to provide for staff and consultant resources. Eventually we were directed to make a request to the County of San Luis Obispo regarding the earmark they received in 2022 (AB 178 money). Through a series of meetings with SLO County, we learned in late 2023, the funds they received would be used on a consultant they had already chosen to perform studies at the three Ports: Morro Bay, Port San Luis, and Cal Poly.

To facilitate one of the studies, Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans, the County decided to develop a questionnaire that would require a response by each Port, including Morro Bay. Each Port would be allowed to develop a scope of work specific to their needs. SLO County would hold the contract with the consulting firm of Mott McDonald.

If there were any funds remaining after the scope of work was developed with the consultant, the County would consider additional specific funding to each Port for internal staffing.

The questionnaire in a form of Notice of Funding Availability Scope of Work Form was released on January 24, 2024, with a requirement to reply by February 23, 2024. See attached Notice of Funding Availability.

DISCUSSION
The Scope of Work states that “The intent of the Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans is to determine specifically how offshore wind waterfront infrastructure (e.g., berths of SOVs and CTVs, warehouses, offices, and storage yards, etc.) could be located at Morro Bay, Port San Luis, and the Cal Poly pier, where each entity would prefer the facilities to be sited within each of their respective jurisdictions, and the required next steps in developing the sites.“
In an effort to effectively answer the questionnaire with technical details, staff had originally reached out to a few consultants who have experiences in the energy and OSW sectors. Only one firm responded with a quote of $24,000 to answer the questionnaire for the City. We requested that County to fund the response and did not receive a clear commitment. The City does not have local fund to hire a consultant.

We realize that we are left to answer the above questionnaire without expertise and staff capacity that Morro Bay needs to be an effective partner in County’s effort to consider OSW efforts. We are disappointed not only by the inability to direct funds to the City for discretionary use, but also by the unrealistic expectation that existing city staff could answer the questionnaire unaided.

Despite these constraints, we believe it is essential to remain participation in regional discussions and demonstrating our commitment in the face of considerable adversity (and hopefully we will receive the resources we need eventually). At the OSW Sub-Committee’s direction, Staff decided to respond to the questionnaire in house. We prepared a comprehensive yet concise response. Our focus lies on emphasizing the imperative need for evaluating environmental and other potential impacts associated with offshore wind development before considering infrastructure work. Furthermore, our response

stresses the urgency of involving the community from the onset.

The timeframe to respond is short, which did not allow for a response to be submitted to a Council meeting prior to the February 23 deadline. The attached Notice of Funding Availability Response has been submitted by the required deadline of February 23, 2024. However, staff has received a verbal acknowledgement from the County to provide any additional comments after Council review on February 27.

CONCLUSION
Staff recommends review of the responses to the San Luis Obispo County Notice of Funding Availability for potential offshore wind development on the Central Coast and provide input on additions, deletions and/or edits.

At this meeting, the OSW Subcommittees will also provide additional updates on OSW related activities.

Staff ask for Council continued advocacy and persistent pressure for federal/ state/ county funding to provide Morro Bay with essential capacity required to respond to OSW mandates and programs.

ATTACHMENT

1. Notice of Funding Availability SLO County with Morro Bay responses (MB response begins on page 5)

1 Notice of Funding Availability
Background on Regional Economic Development and Energy Collaboration San Luis Obispo County has an opportunity to become a hub for offshore wind and clean tech innovation, building on its long-standing energy leadership. The County and other government entities, including the City of Morro Bay, Port San Luis, and Cal Poly, and organizations have worked collaboratively over several years to develop a joint approach towards economic development and emerging energy opportunities.

The County supported the development of the REACH 2030 Plan released in 2020 which identified the potential to create a world-class hub of research and development in cleantech and renewable energy innovation, building on the federally designated offshore wind areas, existing transmission infrastructure, reuse of power plants, and regional educational institutions.

To advance these efforts, in 2021, the County, REACH, Cal Poly, state, federal and other partners representing tribal, environmental, and labor interests formed the Diablo MOU to coordinate on a shared vision for economic development.

Work under the Diablo MOU led to a joint letter to Governor Newsom and President Biden committing to proactive planning on offshore wind and infrastructure planning, adoption by the County of a resolution supporting offshore wind, and an open letter including the County and all cities on a unified vision for offshore wind and cleantech innovation around Diablo Canyon, which later was instrumental in securing $160 million in funding in SB 846 for economic development and land conservation.

In late 2022, Central Coast government, education and civic leaders issued an open letter to the winners of the Morro Bay Wind Energy Area expressing a commitment to collaborate on issues including waterfront infrastructure. The Harbor Commission of Port San Luis has also adopted resolutions including in 2023 regarding offshore wind efforts.

Background on Offshore Wind Infrastructure Efforts
In 2022, the County partnered with the City of Morro Bay and County of Santa Barbara to assess waterfront infrastructure siting options that would support the offshore wind and aerospace industries. The resulting study, the Central Coast Emerging Industries Waterfront Siting and Infrastructure Study, developed by REACH and authored by Mott MacDonald, was published on December 15, 2022. It was the first to examine in detail how waterfront infrastructure constructed specifically on the Central Coast could support the emerging offshore wind energy industry. The study explored the breadth of possibilities on the Central Coast to inform further examination and decision-making on policy and investment.

This study investigated how waterfront infrastructure constructed in San Luis Obispo or Santa Barbara Counties can support the emerging offshore wind industry and identified site options for further investigation. The study took into account a variety of floating offshore wind functions including small facilities to support servicing offshore wind operations. Small facilities include

2 support servicing of the windfarm over its operational lifetime and/or staging of anchors, mooring lines, barges, and vessels during construction. The study identified that Morro Bay, Diablo Canyon, Port San Luis, Cal Poly Pier, Ellwood Pier, and Stearns Wharf meet the screening criteria to serve as a small facility, with varying degrees of site improvements needed, though some may not be suitable for construction staging.

In July 2023, the California State Lands Commission released its AB 525 Port Readiness Plan Final Report. The purpose of the report is to provide “a detailed assessment of the necessary investments in California ports to support offshore wind energy activities, including construction, assembly, and operations and maintenance.”1 The report identifies Morro Bay, Port San Luis, Diablo Canyon’s Parcel P, and the Cal Poly pier as potential Operations and Maintenance facilities. Infrastructure associated with Operations and Maintenance facilities includes berths of Service Operation Vessels (SOVs) and Crew Transfer Vessels (CTVs), warehouses, offices, and storage yards. The report provides details regarding the potential upgrades required at Morro Bay, Port San Luis, Diablo Canyon Parcel P, and the Cal Poly pier, which could include: demolition of existing structures or features; available site acreage; a new wharf or modifications to existing wharfs; and berth pocket dredging.2 Similar results were found in the Bureau of Ocean and Energy Management California Floating Offshore Wind Regional Port Assessment issued in January 2023.

Following the conclusion of these studies, state and federal agencies are looking to support the development of California offshore wind waterfront infrastructure. The California Energy Commission is developing a grant program under AB 209 that is expected to open in 2024, and other California ports have begun seeking federal grant funding for offshore wind purposes.

Conducting pre-development studies to prepare sites on the Central Coast for offshore wind infrastructure development is important to be ready to compete for larger state and federal grant opportunities and other investments.

As part of the 2022 State Budget (AB 178), the County was awarded a $1,000,000 earmark for “the Deep Water Port Feasibility Study for Offshore Wind Procurement.” The County intends to use the funds to 1) hire a consultant to complete a technical analysis pertaining to topics related to offshore wind development, including infrastructure, workforce development, environmental matters in San Luis Obispo County; 2) develop a communication and community engagement strategy for promoting the Study and related offshore wind matters; and 3) provide County administrative resources to accomplish the aforementioned scopes of work, including internal staff resources and external consultant resources. The funds must be encumbered by June 30, 2024, and expended by June 30, 2026, or the funds will revert to the State’s General Fund by operation of law. As part of the 2023 State Budget, the County was awarded additional funds for staffing resources.

1 California State Lands Commission, AB 525 Port Readiness Plan Final Report, July 2023, page 1. 2 Ibid.,100, 101

3 Program Goals
The $1,000,000 2022 state budget appropriation to the County provides an opportunity to support regional public entities to conduct the next phase of offshore wind operations and maintenance facility development studies by evaluating the specific infrastructure development and improvements needed at Morro Bay, Port San Luis, and the Cal Poly pier, and where the development and improvements would be located at each site. The County intends to award 100% of the funds toward the purpose of supporting the public entity capacity and technical assistance in advancing the development of offshore wind waterfront infrastructure at Morro Bay, Port San Luis, and the Cal Poly pier.

Use of the funds would be divided into two categories: 1) a technical study for the preparation of detailed Operations and Maintenance Waterfront Infrastructure Facility Site Readiness Plans and 2) funding to the City of Morro Bay, Port San Luis, and Cal Poly for staff resourcing associated with the development of study and related offshore wind activities. Each of these categories is discussed in more detail below.

Use of Funds
Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans The purpose of the Operations and Maintenance Waterfront Infrastructure Facility Siting Study and Site Readiness Plans would be to determine specifically how offshore wind waterfront infrastructure (e.g., berths for SOVs and CTVs, warehouses, offices, and storage yards, etc.) could be located at Morro Bay, Port San Luis, and the Cal Poly pier, where each entity would prefer the facilities to be sited within each of their respective jurisdictions, and the required next steps in developing the sites. The study and site readiness plans would include scope provided by the City of Morro Bay, Port San Luis, and Cal Poly based on their specific needs and information provided in the Scope of Work Form (see Attachment A).

To provide a regional collaborative approach and greater efficiency, a technical contractor, under contract to the County (given its responsibilities as the grant recipient) would work directly with the City of Morro Bay, Port San Luis, and Cal Poly to execute each scope of work and develop site readiness plans with each entity. The contractor would also confer with offshore wind developers and other stakeholders to identify their specific needs and how those needs could be addressed through the development of waterfront infrastructure at Morro Bay, Port San Luis, and the Cal Poly pier.

The resulting site readiness plans would provide a blueprint for the actual development of an operations and maintenance facility within each of the jurisdictions. This would include a description of next steps including, the required engineering and design work, timelines, estimated construction costs, identification of required environmental permits, and the estimated timeline for obtaining those permits.

4 Funding for Staffing Resources and Potential Related Offshore Wind Activities The remainder of the $1,000,000 appropriation would be divided between the three public entities.

The funds would be used for staffing costs associated with development of the Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans. Additional activities beyond staffing would depend on the actual cost of the Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans and the remaining funds.

The Scope of Work Form in Attachment A provides an opportunity for each entity to identify uses of additional funds.

Regional Coordination and Memorandum of Understanding
Given that the $1,000,000 was appropriated by the State to the County, and pursuant to County policies and guidelines, Memorandums of Understanding must be executed between the County and the City of Morro Bay, Port San Luis, and Cal Poly in order to provide the funds. To that end, information must be provided detailing how the funds would be used and the work product that will be produced. The attached Scope of Work form (Attachment A) has been developed to assist in providing this information. The information will then be incorporated by the County into the agreements between the County and each fund recipient.

Each public entity will coordinate directly with the shared technical contractor to execute their respective scope of work towards developing their site readiness plans. To ensure regional coordination, a regular technical coordinating meeting (e.g., monthly) will be held amongst the City of Morro Bay, Port San Luis, Cal Poly, the County, and the shared contractor. Each entity shall designate 1-2 technical leads from their agency to participate in regular coordination meetings. In addition, leadership coordination meetings will be scheduled from time to time. Each entity shall designate 1-2 senior executives or elected leads to participate in these meetings. The three Morro Bay Wind Energy Area leaseholders will be invited to jointly participate in the program by providing technical input and feedback throughout the project.

Schedule
As stated above, the $1,000,000 must be encumbered by June 30, 2024, and expended by June 30, 2026. Given that, the following schedule is proposed:
● Scope of Work Form due by 5:00 p.m., February 23, 2024 (forms shall be submitted by email to Susan Strachan at [email protected])
● Memorandums of Understanding executed by each entity: March 29, 2024 ● Memorandums of Understanding executed by the County: April 23, 2024 ● County contract with consultant to prepare the Operations and Maintenance Waterfront Infrastructure Facility Siting Study executed by: April 23, 2024 The detailed schedules for the Scope of Work for the Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans and any additional scopes of work for the City of Morro Bay, Port San Luis, Cal Poly, based on the availability of funds once the study cost

5 is determined will be developed and incorporated prior to execution of the consultant contract and the Memorandums of Understanding.

Attachment A
Scope of Work Form
Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans

1. The intent of the Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans is to determine specifically how offshore wind waterfront infrastructure (e.g., berths of SOVs and CTVs, warehouses, offices, and storage yards, etc.) could be located at Morro Bay, Port San Luis, and the Cal Poly pier, where each entity would prefer the facilities to be sited within each of their respective jurisdictions, and the required next steps in developing the sites.

Each scope of work is suggested to include the following categories of analysis:
● Business case development (e.g., developing potential financing and delivery models and the potential business model and funding strategy for waterfront infrastructure facilities)
● Engineering and design work to develop Offshore Wind operations and maintenance infrastructure concepts, estimated costs, and timing
● Environmental and permitting analysis and strategy for facility development, including the estimated timeline for obtaining the permits.
● Targeted stakeholder engagement
Please describe how each of the above categories of work might apply to your jurisdiction to tailor an appropriate scope of work for your agency. Please include additional pages for your response, if necessary.

City of Morro Bay Response:

The City of Morro Bay appreciates the opportunity to be invited to respond to County’s Scope of Work Questionnaire. However, the City has no technical staff or consultants to provide the comprehensive and technical responses that this Questionnaire intends to seek. We have repeatedly requested funding including reaching out to the SLO county.

Unfortunately, we have not received any assistance thus far. This has left us with almost no resources to address the technical aspects of the Questionnaire, resulting in our responses being high-level and general in nature. We believe that with the appropriate resources, we can contribute significantly to the success of the project and fulfill the objectives outlined in the Questionnaire. Until then, we appreciate your understanding of our situation and any support and flexibility you can extend.

6 With the above circumstances in mind, all above categories of work apply to the City of Morro Bay in the sense that they need to be analyzed in the context of Morro Bay’s existing planning documents and applicable design and improvement standards, including but not limited to the City’s General Plan / Local Coastal program, zoning ordinances, Downtown Masterplan, Waterfront Masterplan, (proposed) Power Plant Masterplan, Morro Bay Economic Development Roadmap.

We need to see a full programmatic environmental impact report for the entire harbor and bay and also specific to locations identified by the City as being potential locations for onwater and offwater OSW facilities before any design concept being introduced. The data from this study will be presented to community stakeholders before any design concepts are started. The design concepts and locations will be discussed and approved by City staff prior to any work commencement.

The study is expected to review permitting framework required for any design or development options and assess how those options would identify protected lands, critical habitat and endangered spices specific to Morro Bay and Estero Bay, analyze potential impacts on a tourism-based economy, city circulation, commercial fishing, and cultural/tribal resources. The study must include impacts from vessels ranging in size from 225’ to 250’ entering and exiting the Harbor on a routine basis and include sea level rise in evaluating the impacts.

The City emphasizes the importance of community engagement in the analysis of each category in recognizing social/ economic, and political sensitivity of OSW development in Morro Bay community. A schedule for upfront and regular community engagement meetings should be provided in advance of any work.

Morro Bay also expects reviews and analysis of how Measure D, state tideland property practice and regulations, Measure F, the proposed Measure A-24 (Ordinance-659-forSubmission-to-Voters-Ballot-Measure- (morrobayca.gov)), and Morro Bay Harbor Department Lease Management Policies. Should additional measures, pertinent regulations, and guidelines become available during the course of the study, they should be reviewed as well.

Furthermore, significant permit coordination and stakeholder engagement are critical aspects of the planning process. Outline of stakeholder engagement strategies, including identifying groups, is needed in this study.

Ultimately, we expect a comprehensive study that has been vetted by the community at large and presenting development alternatives with environmental/ permitting, economic social and technical details for how OSW waterfront infrastructure may be implemented in Morro Bay, if possible. We assume that the study will review constraints and opportunities associated with zoning, natural and marine resources, cultural and tribal resources,

7 community sensitivities, consider existing federal, state and local regulatory framework, analyze financing feasibilities to identify development location options, designs and costs.

2. Since you would be working directly with the technical contractor, are there any additional issue areas you would like the Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans to include? Examples include:
● Evaluation of related waterfront infrastructure and synergies with other users such as fishing or R&D/clean tech innovation
● Economic and fiscal analysis
● Other technical analysis or advising
Please provide details for each additional work item included, including those listed above, if applicable. Please include additional pages for your response, if necessary.

City of Morro Bay Response:

This Study should consider the above-mentioned documents which are specific to Morro Bay as well as comprehensive stakeholder engagement in order to evaluate waterfront infrastructure and synergies. We expect the Study provides strategic and detailed analysis of OSW development impacts on city owned vacant properties, city or state parks, and harbor infrastructure, including the “teen center” property, property located at 781 Market St., Harbor piers, ramps, marinas. The Study should also consider the same for the old powerplant property (with 107 acres in size, it is the largest unoccupied waterfront property).

We recognize developing OSW facilities requires significant investments in physical infrastructure and social / economic resources. An overall cost estimate analysis in today’s dollar that details all aspects of a project is necessary for our community to evaluate the best steps forward. The study should identify the next steps and anticipated timeframe for each milestone. It also should include a “community benefit” template that can be used by Morro Bay when necessary.

Ultimately this study can be utilized for future city-wide strategic planning for infrastructure and economic development needs.

Funding for Staffing Resources and Related Offshore Wind Activities

1. Additional funds will be available for staffing resources to support development of the Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans and participate in coordinating activities. Please describe your expected staffing resource needs. Please include additional pages for your response, if necessary.

City of Morro Bay Response:

8 Morro Bay has no dedicated staff or consultants specifically designated to OSW. This has placed us at a disadvantage compared to other regional agencies. This situation has posed a significant impediment to our ability to actively and effectively engage in OSW discussions.

Understanding the funding limitation of this study, we request a minimum of $220,000 to support staff time and consultant resources to support county’s study goal. This estimate is made under the assumption that the study has a target completion date of December 2024 and staff devoting about 1/3 of time to coordinate and review of the study effort.

Detailed scope is as follows:
~ $100,000 for consultants with appropriate technical and communication expertise. As a background, to respond to this questionnaire, Morro Bay had originally reached out to a few consulting firms. Only Rincon Consulting responded with a quote of $24,000 to help the city to fill out the questionnaire. In discussion with County representatives, it was understood that Rincon’s proposal can be included in the upcoming study. Given the shortage of city staff and the anticipated complexity of the study, we now anticipate $100,000 for one or more consultants to assist us during the study. ~ To provide coordination and direction for the study, we anticipate $120,000 of staff time, which represents approximately personnel cost for two full time department head level positions working 1/3 of their time coordinating the study within a 6-month period (or any equivalent combination of labor distribution).

As stated above, we assume this study will be completed by December 2024. Should the Study take longer to complete, our cost will increase accordingly.

2. Depending on the final costs of the Operations and Maintenance Waterfront Infrastructure Facility Study and Site Readiness Plans and staffing resource needs, additional funds could be available. Are there other offshore wind related items for which you would like to receive funding? If so, please describe them below. Please include the estimated amount needed for each item. Please include additional pages for your response, if necessary.

City of Morro Bay Response:

Morro Bay has no designated staff or consultants that are responsible for OSW. This has been a known disadvantage for us to participate effectively in OSW discussions. We request a minimum of $500,000 to support staff time and resources to support state and the county in meeting its OSW development goals. The funding request includes participating in intergovernmental taskforces, engaging with developers, representing city and county interests in the federal lease process and processes, and collaborating with other local, state, and federal stakeholders. Detailed scope is as follows:
$300,000 for City staff time dedicated to engaging with stakeholders and agencies on infrastructure development, including engineering, permitting and planning needs. Salary and benefits
$25,000 for education, conferences, travel.

9 $25,000 for additional office space, furniture, network, computer, software, phone/communication device.
$150,000 for consultants, lobbyists, financial advisors, legal advisors to advise city officials, or represents city’s interest in local, county, state, and federal OSW activities.

Assist City engaging with developers, stakeholders, and policy/ regulatory agencies.