43 APPENDIX C: EXCEPTIONS
01181.0006/868863.1 B-1
EXHIBIT B
SPECIAL REQUIREMENTS
(Superseding Agreement Boilerplate)
THE FOLLOWING PROVISIONS OF THE BOILERPLATE CONTRACT ARE HEREBY AMENDED AS FOLLOWS (unless otherwise indicated, deletions shown in strikethrough; additions, new or replacement language shown in red):
Section 1.1 is hereby amended as follows:
1.1 Scope of Services. In compliance with all terms and conditions of this Agreement, Consultant shall provide those services specified in the "Scope of Services" attached hereto as Exhibit A and Incorporated herein by this reference, which may be referred to herein as ser work
Agreement, Consultant represents and warrants: a) all services set forth in the Scope of Services will be performed in a competent and satisfactory manner; b) all materials used for services will be both of good quality as well as fit for the purpose intended; and, c) Consultant shall follow the highest prevailing professional standards and practices in performing the services required hereunder.
Section 5.3, Subdivision (a), is hereby removed and replaced in its entirety with the following:
(a) General Obligations. To the fullest extent permitted by law, Consultant shall indemnify, defend, and hold harmless City and any and all of its officials, employees, agents, and volu
they arise out of, pertain to or relate to the negligence, recklessness, or willful misconduct of the Consultant.
1. incurred by City
percentage of fault.
2. determined, as applicable, by a court of law, jury, or arbitrator. In the event any loss, liability, or damage is incurred by way of settlement or resolution without a court, jury or arbitrator having made a determination of the neutral third- te percentage
of fault for purposes of determining the amount of indemnity and defense cost reimbursement owed to the City.
3. For claims caused by Consultant for professional negligence in performance eunder shall be
limited to Two Million Even Dollars ($2,000,000.00).
01181.0006/868863.1 B-2
Section 5.3, Subdivision (c), is hereby removed and replaced in its entirety with the following:
(c) Professional Liability. Professional liability insurance appropriate to Consultant's profession. This coverage may be written on a "claims made" basis and must include coverage for contractual liability. Any policy inception date, continuity date, or retroactive date must be before the effective date of this Agreement. The professional liability insurance required by this Agreement must be endorsed to be applicable to claims based upon, arising out of, or related to services performed under this Agreement. The insurance must be maintained for at least five (5) consecutive years following the completion of Consultant's services or the termination of this Agreement. During this additional 5-year period, Consultant shall annually and upon request of City submit written evidence of this continuous coverage. Limits shall be no less than per claim and no less than $2,000,000 per claim and no less than $2,000,000 general aggregate.
46 APPENDIX D: ACKNOWLEDGEMENT OF ADDENDUM
ADDENDUM NO. 1
PROJECT: INSPECTION AND ASSESSMENT OF REVETMENTS AND SEAWALLS Project No. MB2024-H01
Request for Proposals (RFP) Due Date – 02/22/24
DATE: February 6, 2024
FROM: Austin Della, PE-Interim City Engineer
TO: Prospective Firms and Consultants
NOTICE: This addendum forms a part of the RFP and modifies the original RFP issued January 12, 2024, as noted herein. Please confirm receipt of Addendum No. -1- by signing and returning this acknowledgement of receipt with your proposal.
ADDENDUM CONTENTS:
ITEM 1: REQUESTS FOR INFORMATION – QUESTIONS AND ANSWERS ITEM 2: CORRECTIONS/ADDITIONS TO RFP- REPLACED IN ITS ENTIRETY UPDATED WITH CORRECTIONS/ADDITIONS DENOTED BY STRIKEOUTS AND RED UNDERLINED TEXT.
CHANGES INCLUDE: EXTENSION OF RFP KEY DATES AND SECTION 3, DELIVERABLES. https://www.morrobayca.gov/bids.aspx
Issued by:
___________________________
Austin Della, PE
Interim City Engineer
Receipt of Addendum No -1-, City of Morro Bay, Project No. MB2024-H1, INSPECTION AND ASSESSMENT OF REVETMENTS AND SEAWALLS, in hereby acknowledged by:
Firm Name: ____________________________
Signatory: __________________________________ Date: ______________________ Signature
__________________________________ Change date of issuance Printed Name
__________________________________
Title
Christopher Dull
Richard Brady & Associates, Inc.
2/22/2024
President
Item No. 1 Per
Addendum No. 1 Dated
02/06/2024, Page 1 of 4
ITEM 1: REQUESTS FOR INFORMATION – QUESTIONS AND ANSWERS
1. Question: “Scope – BASE RFP – Level 2 requests GPR. Is a GPR survey required at each visual inspection section per the Level 1 – Tactile Observation?” ANSWER: GPR is for the whole revetment length so any anomalies can be observed.
2. Question: “What are the City of Morro Bay’s drone use policy for professional engineering/review?”
ANSWER: The City takes no opposition to the use of a Drone to supplement the photo documentation for inspection. However, the City is of the opinion that the evaluator should have eyes on the revetment and inspect in person to conduct a thorough investigation.
3. Question: “Can you clarify the purpose of the soil borings?” ANSWER: If the GPR indicates any anomalies then the City can elect to do select soils borings to obtain physical data at that location as recommended by the consultant.
4. Question: “Does the City have survey information with topography (i.e., base maps) of all of the revetment and seawall areas in CAD format that can be provided to the firm selected for the work?”
ANSWER: The City does not have survey information.
5. Question: “If base maps are available, does the City intend for the firm selected to provide a surveyor as part of the team to accurately locate information developed on the City’s base maps for the final report? Or will plotting of information on the base maps using features available in the field and rough taping/pacing be considered a suitable level of accuracy for the final report?” ANSWER: No survey is required. Taping/pacing is a suitable level of accuracy.
Identification/location of the bench mark is critical.
6. Question: “If base maps are not available, did the City intend for this RFP to include surveying of these areas as part of the team, so that information developed can be accurately located/plotted? If it is not intended for the existing features to be surveyed, will plotting of information on publicly available aerial information (i.e., Google Earth maps) using features available in the field and rough taping/pacing be considered a suitable level of accuracy for the final report?”
ANSWER: Yes, using publicly available aerial information and features within imagery with taping/pacing is considered a suitable level of accuracy for the final report.
7. Question: “Will City crews be available for traffic control (i.e., set up and take down of cones and flagging) in all revetment areas where GPR is to be provided? Or should Traffic Control be added to the project team? If Traffic Control is to be added to the project team, will traffic control plans, City approvals, encroachment permits and fee payments be required?”
Item No. 1 Per
Addendum No. 1 Dated
02/06/2024, Page 2 of 4
ANSWER: No, City Crews will not be available for traffic control. If traffic control is necessary to complete the work, the selected firm will be expected to provide the traffic control. The City sees that the only potential traffic control needed would be redirecting pedestrian traffic and small closures within parking lots. Encroachment permits may or may not be needed and there is no cost to the Consultant, but traffic control plans and coordination with City staff will be required. Traffic control can be quantified and displayed independently in the cost proposal by the consultant if significant costs are projected based upon methods of performing analysis.
8. Question: “Will $1millon per claim/aggregate on the Cyber Liability Insurance be sufficient, or are the respondents required to have $1million/$2million as stated in the Agreement for Consultant Services or $2million/$2million as stated on page 15 of the RFP?” ANSWER: Agreement, Article 5, Insurance and Indemnification, Item 5.1, e Cyber Liability is the correct insurance limits at $1,000,000 per occurrence/loss and $2,000,000 aggregate.
9. Question: “Are you considering an extension to the deadline date? The submittal deadline is only about 4 weeks from when it was issued.”
ANSWER: Deadline for submission of the RFP has been extended to February 22, 2024.
10. Question: “Since Our Firm does not have hyper-local staff, how open are you to considering teams from other counties?”
ANSWER: The City takes no objection to a firm that is outside of the County proposing on this project. However, in review of proposals, the panel may or may not decide to use proximity of consultant in rating staff during the evaluation.
11. Question: “There will be a need to close parking spots and road shoulders to vehicles to perform Ground Penetrating Radar and borings. Will the City be responsible for placing “No Parking” signs and barricades or will this be the responsibility and cost of the consultant?” ANSWER: The Consultant will be responsible for placing and maintaining the “No Parking Signs” and the barricades needed to complete the work.
12. Question: “Will the City provide coordination with private landowners to provide a clear working space for Ground Penetrating Radar and borings? For example, the parking lot in front of Giovanni’s Fish Market?”
ANSWER: The Consultant will be responsible for coordination with the leaseholders on the use of private parking lots. City can assist if needed. All work in public parking lots that are City-owned will be coordinated with the City Harbor and Public Works Departments. At a minimum, 72 hour notice to the leaseholders/City will be required. No work is allowed on Saturdays, Sundays or holidays.
13. Question: “Does the City have a specific budget in mind for this project?”
Item No. 1 Per
Addendum No. 1 Dated
02/06/2024, Page 3 of 4
ANSWER: The City has $200,000 initially budgeted for this assessment. The City has broken up the areas in anticipation of prioritization of the greatest need and funding constraints. The assessment work is necessary to be able to pursue other funding sources such as grants, so the more area covered and assessed is of great importance to the City to use the limited funds efficiently.
14. Question: “The Scope of Work Deliverables section asks the consultant to provide a “final report in format described earlier in Phase IV Facility Condition and Needs Assessment Report” Where is this described in Phase IV? Please describe what the Facility Condition and Needs Assessment Report should include?”
ANSWER:
See Addendum 01, Item 2, reissuance of the RFP in its entirety .
15. Question: “Can the City provide a nearby location to place soil cuttings generated from the soil borings?”
ANSWER: No, it will be the driller’s responsibility to dispose of the cuttings at an approved disposal location.
16. Question: “Does the scope of work under this RFP include repair recommendations and associated pricing to be presented to decision-making bodies? ANSWER: Repairs recommendations with conceptual designs, cost estimates, and other detailed mitigation plans are not part of the scope of this assessment at this time. High level recommendations are most certainly expected as part of the written document as this assessment will be used to support future design and cost estimating efforts. The city may elect to extend / amend a contract with the qualified consultant to add scope if and as funds allow.
17. Question: “For the Proposal submission, the RFP states that “Proposal shall be clearly labeled (Proposer’s Name); PROPOSAL: INSPECTION AND ASSESSMENT OF REVETMENTS AND SEAWALLS; Professional Services; City of Morro Bay.” Is this to be marked on an envelope that will contain the proposal in our submission package to you, or can this be displayed on a printed cover photo?”
ANSWER: The above information is to be included on the RFP proposal and any envelopes or boxes provided.
18. Question: “Has the City performed previous condition assessments that this project can build upon, or should it be assumed that this will be a baseline?” ANSWER: The City has not performed previous condition assessments.
19. Question: “The Level 1 Tactile Observations scope asks for visual inspections down to -2 MLLW and to perform the inspections at minus tides. I checked the monthly minimum tides for April to
Item No. 1 Per
Addendum No. 1 Dated
02/06/2024, Page 4 of 4
June between 1990 and 2023, and it seems there is a low probability that we’ll have consistent minus tides allowing landside inspections down to -2 MLLW. Are you opposed to us using commercial engineer divers for the inspections? I’m picturing a combination of landside inspections and the divers to capture the required 15 ft inspection height.” ANSWER: The City is does not want to use commercial Engineer Divers. The work will have to be coordinated to be done during minus tides. The City will work with the selected firm to ensure adequate and efficient access to the minus tides.
20. Question: “In addition to the visual observations, would you be interested in our team performing a combined LiDAR and multibeam echosounder (MBES) bathymetric survey? The results are continuous images and data that would help provide more detailed information on any anomalies in the revetments and slope shape information.”
ANSWER: At this time, the City does not need that level of inspection.
21. Question: “Does the scope of work include any underwater inspection of the concrete or timber seawalls?”
ANSWER: No, the City does not expect the selected consultant to include any underwater inspections. The Consultant will need to efficiently use minus tide windows to conduct these inspections.
22. Question: “Are there space constraints or other conflicts that could impact drilling of borings behind the revetments and seawalls?”
ANSWER: The City does not expect there to be space constraints, but if space issues are encountered, the City will work with the selected consultant to use an alternate location for the drilling.
23. Question: “What if the GPR tools are unable to achieve penetration coverage to a depth of 10’+ as required in Item 1.A.2?”
ANSWER: Since the subsurface conditions are unknown, the City would ask that the Consultant provide an hourly rate for GPR services for either additional or deletion of scope.
24. Question: “How many borings should be assumed for Items 1.B.b. and 2.Base RFP.a?.” ANSWER: The intent of the unit rate for borings is so that the City has the option to add scope based on budget. The number of borings will be based on the GPR results as stated in Add Service- Soil Boring Item C.
Item No. 2 Per
Addendum No. 1 Dated
02/06/2024
ITEM 2: CORRECTIONS/ADDITIONS TO RFP- REPLACED IN ITS ENTIRETY WITH CORRECTIONS/ADDITIONS DENOTED BY STRIKEOUTS AND RED UNDERLINED TEXT.
CHANGES INCLUDE: EXTENSION OF RFP KEY DATES AND SECTION 3, DELIVERABLES.
UPDATED RFP ON WEBSITE:
https://www.morrobayca.gov/bids.aspx
Prepared By: ___AD_____ Dept Review: ___GK___
City Manager Review: _YK_____ City Attorney Review: _LNL__ Staff Report
TO: Honorable Mayor and Cit Council DATE: April 30, 2024 FROM: Austin Della, P.E. – Senior Civil Engineer
SUBJECT: Approval of Contract Amendment with Cannon Corporation and Project budget Amendment for Kings Tanks and Blanca Tanks Rehabilitation Project
RECOMMENDED ACTION
Authorize the City Manager to execute Amendment No. 2 to the Professional Services Contract with Cannon Corporation (Cannon) for the completion of the Kings Tanks and Blanca Tanks Rehabilitation Project. This amendment is in the amount of $10,050. Additionally, approval of this amendment signifies Council's authorization of a corresponding project budget increase by the same amount, $10,050.
ALTERNATIVE
The alternative to the staff recommendation is not to move forward with the amendments to the contracts and not have the remainder of the project overseen by professional consultant services.
This is not advised since the City does not have the staff capacity to oversee all closeout items for this project.
FISCAL IMPACT
The total cost for Amendment No. 2 with Cannon is $10,050 for a total contract amount of $147,131.
The additional cost required for this amendment will exceed the originally approved budget for the Kings/Blanca Tank Rehabilitation Project. As such, staff recommend increasing the total project budget by $10,050.
The project budget was originally $2,748,000 with the FY 21/22 budget. An increase of $600,000 was added to the project and approved through the FY 22/23 budget process to bring the total project budget to $3,348,000. With this amendment, the total project cost would be $3,358,050. The Water Capital Improvement Projects Fund (921-9944) will fund the budget increase.
DISCUSSION
Cannon was contracted by the City, in February of 2022, to perform construction management and resident engineer services for oversight of the tank rehabilitation construction contract with Superior Tank Solutions. Kings Tank #1 was the last tank remaining in the contract with Superior Tank Solutions to be rehabilitated which began in September of last year and is now substantially complete.
Kings Tank #1 required more work than originally expected including exterior roof repair patches, additional shell exterior prep work, additional chime repair, and additional coating on the exterior roof.
This additional work has added significant time to the construction contract. As a result, additional services from Cannon are needed for construction management to bring this project through close out in compliance with project specifications.
AGENDA NO: 7.f
MEETING DATE: May 14, 2024
01181.0001/759177.1
ATTACHMENTS
1. Amendment No. 2 to the contract with Cannon Corporation for Professional Services for the Kings Tanks and Blanca Tanks Rehabilitation Project
2. Cannon ASA
CITY OF MORRO BAY
AMENDMENT NO. 2 TO THE AGREEMENT
FOR CONSULTANT SERVICES
BETWEEN THE CITY OF MORRO BAY
AND CANNON CORPORATION
This AMENDMENT NO. 2 TO THE AGREEMENT FOR CONSULTANT SERVICES BETWEEN THE CITY OF MORRO BAY AND CANNON CORPORATION. (“Amendment No. 2”) is entered on the 14th day May 2024, by and between the City of Morro Bay, a municipal corporation (“City”) and Cannon Corporation, a California corporation (“Consultant”).
RECITALS
WHEREAS, City and Consultant (collectively, the “Parties”) entered into an agreement as of February 22, 2022, for construction management and resident engineering services for the Kings Tanks and Blanca Tanks Rehabilitation Project, (the “Project") which was approved by the City Manager in the amount of $106,708.00 (the “Agreement”); and
WHEREAS, the Parties amended the Agreement on September 12, 2023, in the amount of $30,373 because of the increase in required construction management and engineering services due to the extended project duration incurred between the City and its contractor; and WHEREAS, the Parties agree to amend the Agreement a second time because of the additional required construction management and engineering services due to the extended project duration incurred between the City and its contractor; and
WHEREAS, City and Consultant now wish to extend the term of the Agreement to January 1, 2025.
NOW THEREFORE, the parties hereto mutually agree as follows:
1. The additional services to be provided by Consultant, pursuant to the Agreement, are hereby amended to include additional professional services as detailed in Additional Services Agreement from Cannon dated March 25, 2024 attached hereto. In the event of any inconsistency between the terms of such Additional Services Agreement, and the Agreement, the terms of the Agreement shall govern. No other terms and conditions from that Additional Services Agreement, other than description of scope of services or work, shall apply to the Agreement, unless specifically agreed to by City in writing.
2. The Additional Work results in a net increase of TEN THOUSAND AND FIFTY DOLLARS EVEN ($10,050) to the amended contract for a new contract total of ONE HUNDRED
FOURTY-SEVEN THOUSAND ONE HUNDRED THIRTY-ONE DOLLARS EVEN ($147,131.00) which will be billed on a time and materials basis according to the approved fee schedule as approved by the City Engineer.
3. Consultant shall not be compensated for any further services rendered in connection with its performance of the Agreement that are in addition to those set forth in this Amendment No. 2, absent further mutual, written amendment(s) and in compliance with the limitations on signing authority in the City’s Purchasing System (Chapter 3.08 of the Morro Bay Municipal Code).
01181.0006/835676.1
4. The Agreement shall remain and continue in effect until all tasks are satisfactorily completed, but in no event later than January 1, 2025, unless sooner terminated pursuant to the provisions of the Agreement.
5. Except as expressly set forth herein the terms and conditions of the Agreement and Amendment 2 shall remain in full force and effect.
6. The effective date of this Amendment No. 2 shall be deemed to be May 14, 2024.
IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their duly authorized representatives.
CITY OF MORRO BAY CANNON CORPORATION
(2 signatures required)
By: ________________________________ By: ____________________________________ Yvonne Kimball Michael Cannon
City Manager President
By: ____________________________________
Attest: Lawrence P. Kraemer, III
Secretary
__________________________________
Dana Swanson, City Clerk
APPROVED AS TO FORM
__________________________________
Chris Neumeyer, City Attorney
01181.0006/835676.1
01181.0006/835676.1
1050 Southwood Drive, San Luis Obispo, CA 93401
T 805.544.7407 F 805.544.3863
CannonCorp.us 200131.01
ADDITIONAL SERVICES AGREEMENT
Project Client: City of Morro Bay Date: March 25, 2024
Project Name: Bay Kings and Blanca Tanks CM Services Project Number: 200131.01 Description of Additional Services and/or Materials:
Cannon is requesting additional budget for CM services due to the extended project duration beyond what was anticipated by Additional Services Agreement No. 01 and numerous unanticipated changes which occurred during the rehabilitation of Kings Tank 1.
Proposed Fee: $10,050.00
Reimbursable expenses are not included in this additional service agreement.
Authorization:
In witness whereof, the parties hereto have caused this agreement consisting of the Request for Additional Services, and the original Agreement for Consultant Services dated February 22, 2022 and any other necessary and applicable documents to be executed and effective as of the date and year first above written. Payment is due within 15 days of completion of work.
Any additions and/or corrections to this agreement will be addressed in a separate agreement.
Client: City of Morro Bay Cannon
x
Client Representative Patrick R. Riddell, PE, CPII
Director, Construction Management
C 72034
Date: Date:
Prepared By: ____KC______ Dept Review: ________
City Manager Review: ___YK_____ City Attorney Review: _________ Staff Report
TO: Honorable Mayor and City Council DATE: May 8, 2024
FROM: Kirk Carmichael, Recreation Services Manager
SUBJECT: Preliminary Schedule for Morro Bay 60th Anniversary Celebration of the City’s Incorporation
RECOMMENDED ACTION
Receive and file.
FISCAL IMPACT
In 2014, the City’s 50th Anniversary Celebration lasted a full year and had a healthy budget funded in part by the City, Tourism, and other local businesses and individuals. This year we expect the costs to be much less for the 60th celebration as there will be fewer planned events. Staff will work toward a lean budget anticipating assistance again from Visit Morro Bay along with funding or in-kind services from businesses and volunteers. $5,000 in funding from the Fiscal Year 25 budget has been allocated for these events.
BACKGROUND
The City of Morro Bay was incorporated on July 17, 1964. To celebrate the 50th Anniversary of incorporation, the City held a series of events throughout calendar year 2014. There is a desire among the City Council, staff, and community members to host a more modest 60th Anniversary Celebration.
DISCUSSION
At the April 23, 2024 City Council meeting, Mayor Wixom was appointed as Council liaison to the Recreation Services Division regarding the City’s 60th Anniversary celebration. Several preliminary planning meetings have been held with Mayor Wixom and City staff resulting in a plan to hold a series of anniversary events between September 5-7, 2024.
Events being considered are as follows (this is a tentative schedule of events that are subject to change):
Thursday, September 5 – Tunes at Tidelands, Tidelands Park, 4:30 – 7:00.
Friday, September 6 – Taste of Morro Bay, location and time TBD.
Saturday, September 7 – Founders Day Parade, 10:00 AM, time and route TBD; Founders Day Celebration at Tidelands Park, time TBD.
AGENDA NO: 7.g
MEETING DATE: May 14, 2024
Initial thoughts of activities include live music, art show, garden show, food, tug-of-war, dunk tank, service organization booths, and hands-on exhibits. These events will require the contribution of many hands to help organize, plan, and execute. To successfully administer this series of events, staff is seeking local service organizations, businesses, and school groups who may be interested in helping with the design and/or execution and will reach out to our local gatekeepers.
CONCLUSION
In recognition of the City of Morro Bay’s 60th anniversary of incorporation, staff is moving forward with planning a series of celebratory events. With a rough event outline, staff seeks council feedback, assistance, funding, and recommendations. Staff is planning to engage the City’s Recreation and Parks Commission for some of the planning efforts. We will also request a $5,000 budget under Council Outreach Expense to accommodate the costs of the celebration.
AGENDA NO: 7.h
MEETING DATE: May 14, 2024
Prepared By: _DS_____ Dept Review: _______
City Manager Review: _YK____ City Attorney Review: _CFN___ Staff Report
TO: Honorable Mayor and City Council
FROM: Dana Swanson, City Clerk
SUBJECT: Adoption of Resolution Amending Council Policies and Procedures related to Order of Business for Regular Meetings
MEETING DATE: May 14, 2024
RECOMMENDED ACTION
Adopt Resolution No. 27-24 amending Council Policies and Procedures subsection 1.2.7 to add Subcommittee Reports to the Order of Business for Regular Meetings.
ALTERNATIVES
Council may choose to not adopt the resolution as presented and direct staff accordingly.
FISCAL IMPACT
None
BACKGROUND/DISCUSSION
At the April 23, 2024, regular meeting, the Council discussed City Policies and practices concerning the formation of subcommittees, scope of work, and desire for improved Council Member onboarding procedures to ensure clarity around the role of subcommittees and how they contribute to and further City Goals and Objectives.
During that discussion, there was Council consensus to have staff and/or subcommittee members verbally report the activities of subcommittees during open session to keep the Council as a whole informed. Given the Order of Business is established in subsection 1.2.7 of the Council Policies & Procedures, staff has prepared a resolution to add this as a report item for regular meetings.
CONCLUSION
As directed by Council at the April 23, 2024, meeting, staff is presenting a resolution amending the Council Policies & Procedures to add Subcommittee Reports to the Order of Business for regular meetings.
ATTACHMENT(S)
1. Resolution No. 27-24 Amending and Readopting the Council Policies & Procedures
RESOLUTION NO. 27-24
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA
AMENDING THE CITY COUNCIL
POLICIES AND PROCEDURES MANUAL
T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, the Council Policies and Procedures Manual for the City of Morro Bay (the “Manual”) is a combination of City Council actions, policies, references, and information regarding the City Council; and
WHEREAS, to ensure all Councilmembers are familiar with and understand the City of Morro Bay’s philosophies and policies regarding serving on the City Council, on July 23, 2001, the City Council adopted Resolution 47-01 approving an early version of the Manual; and WHEREAS, the Manual has been amended several times throughout the years; and WHEREAS, subsection 1.2.7 of the Manual currently establishes the Order of Business for Regular Council Meetings; and
WHEREAS, at a Regular Meeting held April 23, 2024, the City Council directed staff to add Subcommittee Reports to the Order of Business.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay does hereby amend the Council Policies and Procedures section regarding Order of Business to read as follows:
1.2.7 ORDER OF BUSINESS shall be as follows:
1.2.7.1 Establish Quorum and Call to Order
1.2.7.2 Moment of Silence
1.2.7.3 Pledge of Allegiance
1.2.7.4 Recognition (Certificates of Appreciation or other forms of recognition for residents and staff)
1.2.7.5 Closed Session Report
1.2.7.6 Mayor and Council Members Reports, Announcements and Presentations*
1.2.7.7 City Manager Reports, Announcements and Presentations (City Manager, Director and Advisory Board Reports)
1.2.7.8 Subcommittee Reports
1.2.7.89 Presentations (Proclamations and Public Presentations)
1.2.7.910 Public Comment (generally for items not on the agenda)
1.2.7.101 Consent Agenda
1.2.7.112 Public Hearings
1.2.7.123 Business Items
1.2.7.134 Council Declaration of Future Agenda Items
1.2.7.145 Adjournment
*Intended for reporting back to the full Council and the public on items, issues or meetings associated with other Council duties, e.g., assignments to other official bodies, attendance at League of California Cities meetings, etc.
PASSED AND ADOPTED by the City Council, City of Morro Bay at a regular meeting thereof held on the 14th day of May 2024 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSE:
______________________________
CARLA WIXOM, Mayor
ATTEST:
_____________________________
DANA SWANSON, City Clerk
Prepared By: ___AD_____ Dept Review: __GK__
City Manager Review: _YK___ City Attorney Review: __CFN_ Staff Report
TO: Honorable Mayor and City Council DATE: May 8, 2024
FROM: Austin Della, PE – Senior Civil Engineer
SUBJECT: Contract Amendment No. 1 – Project No. MB2022-MA01, Morro Bay Parking Lot Rehabilitation
RECOMMENDED ACTION
Approve Amendment No. 1 to the City’s contract with Ramsey Asphalt and Construction, Inc. for Project No. MB2022-MA01, Morro Bay Parking Lot Rehabilitation Project in an amount not to exceed $64,412.83, with an additional 10% contingency budget of $9,515.30 executable by the City Manager.
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.
ALTERNATIVE
The alternative to the recommended action is to reject Amendment 1 or provide other direction to staff.
FISCAL IMPACT
The total fiscal impact of the staff recommended change order work amounts to $95,153.00, or maximum of $104,668.30 with 10% contingency. However, staff proposes to leverage unspent project savings of $30,740.17 towards these items, so the total project increase is only $73,928.13 inclusive of contingency.
Other funding sources for these change order items include $9,300 from the Police Department Traffic Safety Fund (280-4110), $18,379.30 from Local Road Safety Program (LRSP) implementation funding (915-8045), and $46,248.83 from the FY23 Annual Pavement Management Program (PMP) (915-9614).
BACKGROUND
The Morro Bay Parking Lot Rehabilitation project, initiated to enhance and maintain parking infrastructure within the City, included significant improvements to both the Lila Keiser Park and Police Department parking lots. The formal bidding process for this project commenced with the release of the bid documents on December 14, 2023. Interested contractors were given a deadline of January 11, 2024, AGENDA NO: 7.i
MEETING DATE: May 14, 2024
2 to submit their proposals. Following a competitive bidding process that attracted a total of six bids, Ramsey emerged as the lowest bidder, offering a total contract amount of $236,788.62.
At their regular meeting on Tuesday, January 23, 2024, the City Council, approved a total project budget of $265,467.48, which included funds for Ramsey’s base bid, a ten percent contingency, and $5,000 for necessary materials testing to ensure the project would not be hindered by unexpected costs or quality concerns.
Staff issued Ramsey a Notice to Proceed (NTP) on March 29, 2024, marking the commencement of active rehabilitation work. Both the Lila Keiser Park and Police parking lots have been thoroughly rehabilitated, enhancing accessibility and usability.
DISCUSSION
During the work, it was identified that adjacent facilities to the PD lot require updates to address access and safety concerns. Staff recommends the additional work to be included in the contract pursuant to a change order. The contractor has submitted pricing for these potential change orders (attached). These additions leverage the current contractual terms and Ramsey’s high-quality workmanship observed thus far, ensuring cost efficiency and continuity in city improvements. The recommended additions are as follows:
1. Crosswalk Signs at MBB and Kern: In response to concerns about pedestrian safety at the intersection of MBB and Kern, which is used by the public as well as PD staff to access their parking lot, our transportation and traffic engineering consultants have developed a crosswalk sign and striping plan. Implementing this plan in phases will allow for immediate enhancements to pedestrian safety with the installation of new crosswalk signs. The subsequent phase will involve updating the striping, aligned with the slurry seal project scheduled for the fall.
2. Alley Paving Between Kern and Piney: This alleyway, which serves the rear PD parking lot, has experienced significant wear and tear, with the existing pavement now largely deteriorated. The restoration of this pavement is critical not only for vehicle access but also for improving drainage and reducing debris spread to adjacent roads. By including this in the current contract, the city can address this deterioration promptly, preventing further degradation and potential increases in restoration costs.
Incorporating these additional scopes into the current contract with Ramsey Asphalt and Construction offers several benefits. It allows the city to take advantage of competitive pricing and proven quality while addressing multiple infrastructure issues in a coordinated effort.
IMPACT TO THE COMMUNITY
The work would be performed at locations as noted above. Motorists, cyclists, and the walking public may experience inconveniences during the project’s construction due to temporary closures of streets, traffic lanes, the presence of the construction equipment, and traffic control efforts. Project rollout will include public notification and temporary "No Parking" signs as applicable. These efforts are intended to allow residents to prepare for the project impacts by adjusting their routes of travel and/or schedules during construction work.
ATTACHMENTS
1. X-Walk Sign Install Quote
2. Alley Paving quote
Prepared By: _JB_ Dept Review: _ __
City Manager Review __YK__ City Attorney Review ____
Staff Report
TO: Honorable Mayor and City Council DATE: May 2, 2024
FROM: Yvonne Kimball, City Manager
SUBJECT: San Luis Obispo Council of Governments (SLOCOG) Presentation “Get Involved: Regional Road Safety Action Plan”
RECOMMENDED ACTION
Receive update and encourage public engagement and participation in upcoming activities related to the SLOCOG Road to Zero Safety Action Plan.
BACKGROUND
This item consists of a presentation by Sarah Woolsley, Rick Engineering, on behalf of SLOCOG staff, provides an update of actions being taken relating to improving roadway safety across the region via the Regional Safety Action Plan.
ATTACHMENT(S)
1. SLOCOG Staff Report
2. Presentation
AGENDA NO: 9.a
MEETING DATE: May 14, 2024
Staff Report
To: City Council & County BOS Staff
From: John DiNunzio, SLOCOG
Date: April 19, 2024
Re: SLOCOG Regional Safety Action Plan for May/June 2024 Councils
SUMMARY
In October 2023, SLOCOG made a Policy Proclamation – “’Road to Zero’ Regional Fatalities and Serious Injuries by 2050” – that is a commitment by SLOCOG Board to an eventual goal of zero roadway fatalities and serious injuries. This was the result of an ongoing effort to address the fact that fatalities on nation’s roads have remained stubbornly high for the past decade, and in the SLO region there were a total of 155 fatalities and 832 serious life changing injuries between 2018 and 2022.
This item provides an update of actions being taken relating to improving roadway safety across the region via the Regional Safety Action Plan.
SLOCOG received a Federal Safe Streets for All (SS4A) grant to prepare a Regional Safety Action Plan to identify actions that can significantly make a difference in evolving our roadway network into a safe mobility network. The Plan will help formulate the best approaches, philosophies, and programs to meet our current and future road safety needs, while identifying opportunities for beneficial safety investments. The plan takes a regional look to establish vision and goals, include holistic and inclusive public engagement, conduct crash data and equity analysis to enhance locally adopted safety plans, and provide data and engagement tools for ongoing use. The plan will conclude with project and programmatic strategies and recommendations for both improving the built environment with safety countermeasures but also regional public safety engagement activities such as campaigns to discourage speeding, drunk & distracted driving. The plan will position the region and agencies to be eligible for future state and federal implementation grants.
RECOMMENDATIONS
Staff: Receive update and encourage public engagement and participate in upcoming activities related to the SLOCOG Road to Zero Safety Action Plan.
Activities
Public engagement through a survey, interactive map, and attendance at local events will occur from April – November 2024. Collecting input from across the region will help provide contextspecific information and regional perspectives related to roadway safety.
A Road to Zero Steering Committee has been formed to oversee the Safety Action Plan development, implementation and monitoring and is meeting approximately quarterly in 2024 and 2025.
A 2024 SLO Safe Streets Forum will be hosted by SLOCOG and other key safety partners on October 2nd to bring information and speakers together to discuss the ongoing roadway safety efforts and vision of the region. This will be the third consecutive year of having a forum.
DISCUSSION
The Road to Zero (RTZ) is a new regional transportation policy focused on eliminating traffic fatalities within 30 years. This safety target goal is based on the fact that traffic fatalities are preventable, and that zero traffic-related fatalities and serious injuries is the only acceptable goal.
The recently approved proclamation by SLOCOG shows that safety is valued across organizations beginning with the highest-ranking city and county officials in the San Luis Obispo region and by accomplishing the leadership commitment and goal setting supporting the RTZ as a strategy to promote safer streets.
Public engagement will be occurring between April and November 2024 as we develop the existing setting and potential strategies for the Regional Safety Action Plan. Community engagement starts with thinking about why the engagement is happening and what the purpose of the interactions are. Incorporating EQUITY into the public engagement and planning process is a key tenant of the effort.
A variety of methods to engage the community and safety partners are planned such as:
Project Website: The project website www.slocogroadtozero.org will be developed as a highly visual and interactive space with the goals of disseminating information (such as public meeting schedules and project fact sheets) and providing opportunities for input or to contact the project team.
Survey: An online questionnaire was created to ask about people’s experiences on the roadways.
Paper surveys will be accessible as an offline alternative.
Interactive Map: An online map will be used to solicit input from the community on locations that have perceived safety concerns and the option for the general public to comment on particular issues. While crash data reports the incidents where a crash actually happened, there are often many locations that have “near misses” or other unique aspects that are of concern. Maps will be available at in-person events for comments to be received as an offline alternative.
Social Media: Project updates, advertising upcoming events, and sharing national safety messages and traffic behavior strategies will be posted on social media platforms.
Community Events: The project team will attend community events, using events to capture feedback without requesting the public to travel to a location that may not be convenient. Some community events include:
• April 30 Caltrans Worker’s Memorial and Safety Fair
• May 16 – SLO Farmers Market Public Works Night
• May 23 – SLO Farmers Market Public Works Night
• June 1 – Paso’s Safety Fest
• October 2: SLO Safe Streets Forum – Ludwick Center 6pm • November 17 Word Day of Remembrance for Road Traffic Victims 2024 – Tentatively El Chorro Regional Park
Both the SLO Safe Streets Forum and World Day of Remembrance are events which have been developed as part of the stakeholder listening that has taken place to date.
SLOCOG formed a Road to Zero Steering Committee that oversees the Action Plan development, implementation and monitoring. The Committee will be convened as it relates to the Regional Safety Action Plan development schedule. Convening this working group will include representation from but not limited to CHP, Fire, City Police, County Public Works and Public Health, and city & county staff from planning, engineering, enforcement, school board, public affairs. The RTZ Steering Committee is anticipated to meet quarterly or every two months, with a larger meeting convening yearly at the October SLO Safe Streets Forum.
On October 2nd 2024 San Luis Obispo regional Street and Road Safety Forum will be held to continue momentum from the 2022 and 2023 forums. The forum brings community, local, regional, state & federal partners together to explore regional transportation safety and continue to push forward the Road to Zero and focus on eliminating roadway fatalities and serious injuries for all modes in the San Luis Obispo region. The Forum website can be seen here:
https://slosafestreetsforum.org/home/
The intended audience has consisted of locally elected and appointed officials, Public Safety and Public from the region. SLOCOG Board Members nominate delegates from City Council Advisory Committees and Community Advisory Councils, with a special interest in improving the culture of transportation safety throughout the region. In order to plan for the forum, SLOCOG staff will
convene a safety working group in June, and meet in order to determine the agenda and speakers for the Forum. This process has culminated in the current format and speaker program.
An additional component of the 2024 Regional Safety Action Plan includes further data analysis and to the existing public facing Safety Dashboard and map to support safety analysis, plan and project development. Maintaining a balance between public transparency and proprietary data will be key moving forward. A Technical Working Group has been created that includes representatives from cities in the region to discuss how to structure the dashboard and what features would be included to benefit future road safety efforts. The Technical Working Group is meeting approximately monthly through September 2024.
For further information contact John DiNunzio, Senior Programming & Project Delivery, SLOCOG [email protected] (805) 781-5764
###
Regional Road Safety
Action Plan
Morro Bay City Council
May 14, 2024
Road to Zero
Crashes by Severity
Fatal
3% Severe Injury
14%
Other Visible Injury
37%
Complaint of Pain
46%
4,005
Injury/Fatal
Crashes
Injury/Fatal Crashes by Severity, 2018 - 2022
SLOCOG Building Momentum
2022 Safe Streets Forum:
Safe System Approach
2023 Safe Streets Forum:
Road to Zero
Regional Road Safety
Action Plan
SLOCOG Board
Road to Zero Policy
Proclamation
2024 Safe Streets Forum
October 2, 2024
Crash Data Analysis
and Tools
Community
Engagement
Strategy
Recommendations
Regional Safety
Steering Committee
SS4A Grant Funding
Purpose
Having a Regional Road Safety Action Plan will:
• help future grant funding opportunities
• prioritize road safety programs, strategies, and locations • engage the community to increase awareness of road safety • provide tools to inform decision -making for current and future needs • bring a diverse set of road safety partners together to share information Anticipated Completion in Summer 2025
Steering Committee
Crash Data Analysis
and Tools
Community
Engagement
Strategy
Recommendations
Regional Safety
Steering Committee
• SLO Council of Governments
• San Luis Obispo County Emergency Medical Services Agency • San Luis Obispo County Public Health
• San Luis Obispo County Public Works
• Paso Robles Fire Department
• Bike SLO County
• California Highway Patrol
• Caltrans
• CalFire
Engagement
Interactive Map
https://maps.kittelson.com/roadtozero
Share to get your community input!
May - October
Crash Data Analysis
and Tools
Community
Engagement
Strategy
Recommendations
Regional Safety
Steering Committee
Engagement
Online Survey
https://www.surveymonkey.com/r/85HMPDY
We want to know about your experiences travelling within the County. Your input will help shape the Action Plan.
Share to get your community input!
May - October
Crash Data Analysis
and Tools
Community
Engagement
Strategy
Recommendations
Regional Safety
Steering Committee
Engagement
English & Spanish
Coordinating in -person events around the region
May - October
Crash Data Analysis
and Tools
Community
Engagement
Strategy
Recommendations
Regional Safety
Steering Committee
Data and Recommendations
Crash data review is in process
Strategy recommendations after engagement and data
Future Phases
Summer 2024 – Winter 2025
Crash Data Analysis
and Tools
Community
Engagement
Strategy
Recommendations
Regional Safety
Steering Committee
Stay updated!
For links, updates, and road safety resources visit the website www.slocogroadtozero.org
Thank you for
your time!
Prepared By: ___CC____ Dept Review: _GK____
City Manager Review: __ _YK___ City Attorney Review: _LNL____ Staff Report
TO: Honorable Mayor and City Council DATE: May 8, 2024
FROM: Cindy Cecil, PE – City Engineer
SUBJECT: Adoption of Resolution No. 28-24 Approving the Engineer’s Report and Declaring the Intent to Levy the Annual Assessment for the Cloisters Landscaping and Lighting Maintenance Assessment District (LLMAD)
RECOMMENDED ACTION
Adopt Resolution No. 28-24 declaring the intent to levy the annual assessment for the maintenance of the Cloisters Park and Open Space for Fiscal Year (FY) 2024/25 and approving the Engineer’s Report.
FISCAL IMPACT
The Engineer’s Report estimates the annual costs of maintaining the Cloisters Park and Open Space for the upcoming year to be in excess of $148,944, which is the total assessment amount as established by Resolution 68-96 in the year 1996 when the district was formed. The true costs of maintaining Cloisters Park, Open Space, trails, as well as the medians and parkways within the district, exceed the assessment revenue received. All maintenance costs in excess of the district’s available revenues will be subsidized by the General Fund per City Council direction on May 24, 2004.
The original formation of the assessment district in 1996 set the fixed assessment of $1,241.20 per parcel or $148,944 for the entire Cloisters Landscaping and Lighting Maintenance Assessment District (CLLMAD). In 1996, the Consumer Price Index (CPI) was 312 and in April of this year, the CPI is at 301 and continues to escalate sharply every year. This alone has resulted in a 91 percent drop in the purchasing power of the assessment district funds.
The district will have a fund balance of $138,364 at the end of FY 2023/24, pending audited actuals from this year. The fund balance is to be used for deferred maintenance and one-time expenses, permits, and savings for future capital projects. Since the assessment collected will no longer have a surplus to be added for further accumulation of this fund, the fund will be exhausted once remaining funds are used for upcoming capital project needs. The fund balance and its use is not part of the content of the Engineer’s Report. In alignment with Government Finance Officers Association (GFOA) recommendations to simplify budgeting and budget presentations to the public, and to reduce duplicate budgeting associated with interfund transfers, the Cloisters Accumulation Fund was AGENDA NO: 9.b
MEETING DATE: May 14, 2024
consolidated with the Cloisters Assessment District Fund (570) at the end of FY 2021-22. This is also consistent with Council direction on April 26, 2022, to eliminate enterprise accumulation funds.
SUMMARY
On April 9, 2024, City Council adopted Resolution No. 23-24, which initiated the proceedings to levy the annual assessment to fund the maintenance of the Cloisters Park and Open Space. As ordered by the Council and required by law, an Engineer’s Report has been prepared detailing the estimated annual assessment for the parcel owners for FY 2024/25 and expenditures for the district. Staff intends to continue to perform most maintenance tasks with City Maintenance staff and directly allocate their time spent maintaining the site to the assessment district. Upon adoption of Resolution No. 28-24, the next and final step in the annual levy of assessment process is the public hearing after which the City Council orders the levy of assessment.
BACKGROUND/DISCUSSION
Tract 1996, known as the Cloisters development, is a 124-lot subdivision bounded by State Highway One at the east, Atascadero State Beach at the west, Morro Bay High School at the south, and Azure, Coral, and San Jacinto Streets at the north.
It was well known that any development at the Cloisters would require a balance between continuation of lateral and vertical access within and through the property, while at the same time conserving the sensitive plant and wildlife resources present. Zoning on most of the Cloisters site is Planned Development, Single-Family Residential with the sand dunes and wetlands zoned Environmentally Sensitive Habitat Area (ESHA). The purpose of the Planned Development (PD) overlay zone is to provide for detailed and substantial analysis of development on parcels, which because of location, size or public ownership, warrant special review. That overlay zone was also intended to allow for the modification of, or exemption from, the development standards of the primary zone, which would otherwise apply if such action would result in better design or other public benefit.
The findings and conditions of approval for the project were numerous. For example, City Council made findings that the Cloisters project could cause significant environmental impacts relating to land use, visual/aesthetics, affordable housing, traffic generation, air quality noise, geology, drainage and water quality, ecological resources, and public services; but those impacts were mitigated by the recommended conditions. In addition, City Council made further findings the Cloisters project was in compliance with the specific policies of the General Plan/Land Use Plan (GP/LUP) and Zoning Ordinance with respect to protection of views, environmentally sensitive resources, public access, circulation, hazards and other requirements so long as the environmental impacts were mitigated.
Finally, City Council made findings that the Cloisters project complies with the Morro Bay Municipal Code (MBMC) with respect to optional subdivision design and related improvements, and the optional design is justified in order to contribute to a better community environment through the dedication of extensive public areas, restoration of the ESHA area, provision of scenic easements, provision of larger than usual lots adjacent to such areas, and maintenance of a consistent lot layout pattern adjacent to existing development on the north side of Azure Street.
In order to mitigate the environmental impacts of the project, and to provide a greater than normal public benefit (upon modification of otherwise applicable standards) as required in a PD overlay zone, the conditions of approval for the project required the applicant to form an assessment district for the maintenance of the public park, bicycle pathway, right-of-way landscaping, coastal access ways,
ESHA restoration areas and any other improved common areas to be privately held or dedicated to the City. The public park area, as well as all open space improvements and the assessment district, were part of many detailed discussions during City and Coastal Commission hearings.
The assessment district formation proceedings began in August 1996, with the owners of the real property within the proposed district petitioning the City and consenting in writing to the formation of the district pursuant to the Landscape and Lighting Act of 1972. The assessment district formation proceedings concluded with the final public hearing for formation on September 23, 1996, which levied the annual assessment of $148,944 for the maintenance of the 27.75 acres of park and open space.
In preparing the various purchase and sale documents for each individual lot, including the Conditions, Covenants, and Restrictions, the developer was especially careful to call out the existence of the assessment district and to make certain the existence of the assessment district would not come as a surprise to anyone who purchased one of the lots. The Developer assured the City, “there will be no surprises to prospective owners about the assessments or their amounts.” In drafting all the project documents, the City and the developer reinforced the special benefits for the residents of the Cloisters Project with the public amenities and easements. Each Cloister’s lot directly benefits from the public park, bicycle pathway, right-of-way landscaping, coastal access ways, ESHA restoration areas and coastal access ways. There was also created and reserved in favor of each owner in the Cloisters Development, Conservation Space in parcels 065-386-005 & 0065-386-016, and a Scenic Conservation Easement in parcel 065-386-020 for view, open space, scenic, passive recreation and coastal access, none of which will be developed with any improvements or structures, unless necessary and proper for the restoration and maintenance of the Environmentally Sensitive Habitat Area.
On September 23, 1996, the City Council passed Resolution No. 69-96, which accepted the final map for Tract 1996 known as the Cloisters Subdivision, consisting of 124 lots. Lots 1 through 120 were for single-family residential purposes, Lots 121, 122 (APN 065-386-005 & 016 on attached Assessor’s Map) were for the 27.75-acre park and open space, Lot 124 was dedicated for a fire station and Lot 123 was offered to the State. Lots 121, 122, 123, and 124 are not part of the assessment district. Lot 124 was declared as surplus by the city and sold in 2021. The new owner is now going through the process of developing and subdividing the property. The City intends to pursue annexation of these new lots into the Cloisters LLMAD. This will require future actions by the City Council to be brought forth by staff.
As part of the annual assessment process, staff is required to provide an Engineer’s Report, which is an estimate of costs for maintenance of the Cloisters LLMAD. The cost estimates are based on the maintenance standards currently adhered to in existing parks within Morro Bay and included in the Flat Rate Manual for Parks Maintenance, as well as maintenance costs from the current fiscal year.
Personnel costs, as well as supplies and services, have risen significantly in the last several years.
The true cost of maintaining the assessment district exceeds the revenue received from the district and is estimated to be 25-30% higher than assessment revenues collected. However, all maintenance costs in excess of the district’s available revenues will be subsidized by the General Fund per City Council direction on May 24, 2004. The assessment for providing maintenance of the Cloisters LLMAD is $1,241.20 per parcel for fiscal year 2024/25 for a total annual assessment of $148,944.
The increase in the cost of goods and services now precludes a fund surplus for carryover to be set aside for capital projects. Once the remaining surplus funds are exhausted, the City will propose capital improvements through the normal budget process with the use of General Funds, Measure Q & E Funds, or other sources such as grant funding.
CONCLUSION
The process for the annual levy of assessment for the Cloisters Landscaping and Lighting Maintenance Assessment District requires the City Council to receive the Engineer’s Report, approve and/or modify the report and adopt a Resolution of Intention. The Resolution of Intention gives notice of the time, date, and place for a public hearing by the City Council on the issue of the levy of assessment.
The public hearing has been set for a regular City Council meeting on June 25, 2024, at or about 5:30 p.m. to be held at the Morro Bay Veterans Hall. A summary of the Resolution of Intention shall be published in the newspaper as legal notice of a public hearing, to which all interested parties are afforded the opportunity to be heard either through written or oral communication. Upon completion of the public hearing, the City Council may adopt a resolution ordering the levy of the annual assessment.
ATTACHMENTS
1. Resolution No. 28-24
2. Cloisters Landscaping and Lighting Maintenance Assessment District 2024/25 Engineer’s Annual Levy Report
RESOLUTION NO. 28-24
RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA,
DECLARING THE CITY’S INTENTION TO LEVY THE ANNUAL ASSESSMENT FOR
CLOISTERS LANDSCAPING AND LIGHTING MAINTENANCE ASSESSMENT DISTRICT PURSUANT TO THE “LANDSCAPING AND LIGHTING ACT OF 1972” (STREETS AND HIGHWAYS SECTIONS 22500 ET.SEQ.) FOR FISCAL YEAR 2024/25
T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, all property owners of the original Cloisters subdivision requested the City of Morro Bay form a maintenance assessment district to fund the maintenance of the Cloisters Park and Open Space; and
WHEREAS, the Landscaping and Lighting Act of 1972 (Streets and Highways Code sections 22500 et. seq.) (the "Act") enables the City to form assessment districts for the purpose of maintaining public improvements; and
WHEREAS, pursuant to Section 22623 of the Act, the City Engineer has filed in the Office of the City Clerk, and submitted for review to the City Council, a report entitled "CLOISTERS LANDSCAPING AND LIGHTING MAINTENANCE ASSESSMENT DISTRICT 2024/25 ENGINEER’S ANNUAL LEVY REPORT," dated May 14, 2024, prepared in accordance with Article 4 of the Act, commencing with Section 22565; and WHEREAS, pursuant to Section 22608.2 of the Act, the subdivider was required by City Ordinance to install improvements for which an assessment district was required to assure continued and uninterrupted maintenance of the Cloisters Park and Open Space; and WHEREAS, pursuant to the intent of Article XIII, Section 4, of the California Constitution, the property owners have elected to form the Cloisters Landscaping and Lighting Maintenance Assessment District.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Morro Bay, Section 1. The City Council approves the Engineer’s Report.
Section 2. It is the intent of the Council to order the annual levy and collection of assessments for the Cloisters Landscaping and Lighting Maintenance Assessment District at a public hearing to be held at the Regular City Council Meeting on June 25, 2024, at or about 5:30 p.m., at the Veterans Hall in Morro Bay.
Section 3. The improvements to be maintained at the Cloisters Park and Open Space are specified in the Engineer's Report dated May 14, 2024, which is hereby approved.
Section 4. The assessment upon assessable lots within the district is proposed to total $148,944 or $1,241.20 per assessable parcel for Fiscal Year 2024/25.
Section 5. Staff is directed to continue the Major Maintenance/Capital Improvement Program that will address items requiring significant expenditures in future budget cycles with
available capital fund balance until it is exhausted. Any projects identified with input from the community shall utilize surplus fund balance and shall be approved through the budget or budget amendment process by the City Council prior to implementation.
PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting held on this 14th day of May, 2024, by the following roll call vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSE:
_______________________________
CARLA WIXOM, Mayor
ATTEST:
__________________________________
DANA SWANSON, City Clerk
CITY OF MORRO BAY
CLOISTERS
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
2024/25 ENGINEER’S ANNUAL LEVY REPORT
May 14, 2024
- ii -
AFFIDAVIT FOR 2024/25 ENGINEER’S ANNUAL LEVY REPORT
CITY OF MORRO BAY
CLOISTERS
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
This report describes the proposed maintenance, improvements, budgets, zone of benefit and assessments to be levied on parcels of land within the Cloisters Landscaping and Lighting Maintenance Assessment District for the fiscal year 2024/25, as the same existed at the time of the passage of the Resolution of Intention. Reference is hereby made to the San Luis Obispo County Assessor’s maps for a detailed description of the lines and dimensions of parcels within the District. The undersigned respectfully submits the enclosed Report as directed by the City Council and, to the best of my knowledge, information, belief, the report, the assessments and diagrams have been prepared and computed in pursuant to the Landscaping and Lighting Act of 1972.
Dated this 14th day of May, 2024
Exp. 03/31/2025
________________________
Cynthia Cecil, PE – City Engineer
- iii -
CITY OF MORRO BAY
CLOISTERS
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
ENGINEER’S REPORT
Table of Contents
Page
I. Overview ............................................................................................................................... 1 A. Introduction ..................................................................................................................... 1 B. Assessment History and Current Legislation .................................................................. 2 II. Description of the District ..................................................................................................... 4 A. Improvements Authorized by the 1972 Act .................................................................... 4 B. Maintenance Items .......................................................................................................... 4 III. Method of Apportionment..................................................................................................... 6 A. General ............................................................................................................................ 6 B. Benefit Analysis.............................................................................................................. 6 C. Maintenance Tasks.......................................................................................................... 7 D. Maintenance Costs .......................................................................................................... 7 E. Apportionment of Assessment ........................................................................................ 8 Detailed Maintenance Tasks………………………………………………………... Attachment A District Budget - Fiscal Year 2024/25……………………………………………. Attachment B Parcel/Assessment Table…………………………………………………………….Attachment C District Boundary Diagram………………………………………………………….Attachment D
- 1 -
I. Overview
A. Introduction
The City Council of the City of Morro Bay (hereafter referred to as “City”), County of San Luis Obispo, State of California, previously formed and has levied and collected annual assessments for the District designated as:
CLOISTERS LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
(hereafter referred to as “District”) pursuant to the provisions of the Landscaping and Lighting Act of 1972, being Part 2 of Division 15 of the California Streets and Highways Code, commencing with Section 22500 (hereafter referred to as the “1972 Act”), and in compliance with the provisions of the California State Constitution Articles XIIIC and XIIID (hereafter referred to as the “Constitution” or “Proposition 218”).
This Report has been prepared in accordance with Chapter 1, Article 4 (commencing with Section 22565) of the 1972 Act and describes the District and changes to the District including: territories annexed; modifications to the improvements or organization; and the proposed budgets and assessments applicable for fiscal year 2024/25.
History
Tract 1996, known as the Cloisters development, is a 124-lot subdivision bounded by State Highway One at the east, Atascadero State Beach at the west, Morro Bay High School at the south, and Azure, Coral, and San Jacinto Streets at the north (the “Cloisters”).
The Cloisters, prior to development, was a privately owned 80-plus acre expanse of open land.
The property was historically used for lateral and vertical access and contained a large area of sensitive sand dunes abutting the eastern edge of Atascadero State Beach. Over the years, it was the subject of various land development proposals including an RV park, a 390-unit condominium development, a 466-unit single family residential development, a 455-unit mixed residential development, and a 213-unit residential development. None of these development proposals were approved by the City.
It was well known that any development at the Cloisters was going to require a balance between continuation of lateral and vertical access within and through the property, while at the same time conserving the sensitive plant and wildlife resources present. In addition, the negative impacts of development on the site would have to be sufficiently offset by public resources and public amenities from the site.
Zoning on most of the Cloisters site is Planned Development, Single-Family Residential with the sand dunes and wetlands zoned Environmentally Sensitive Habitat Area (ESHA). The purpose of the Planned Development (PD) overlay zone is to provide for detailed and substantial analysis of
- 2 -
development on parcels, which because of location, size or public ownership, warrant special review. This overlay zone is also intended to allow for the modification of, or exemption from, the development standards of the primary zone which would otherwise apply if such action would result in better design or other public benefit.
On September 23, 1996, the City Council passed Resolution No. 69-96, which accepted the final map for Tract 1996, known as the Cloisters Subdivision, consisting of 124 lots. Lots 1 through 120 were for single-family residential purposes; Lots 121,122 and 1241(dedicated for a fire station) were offered to the City subject to the completion of the public improvements; and Lot 123 was offered to the State.
The findings and conditions of approval for the project were numerous. For example, the City Council made findings that the Cloisters project could cause significant environmental impacts relating to land use, visual/aesthetics, affordable housing, traffic generation, air quality, noise, geology, drainage and water quality, ecological resources, and public services; but that these impacts could be mitigated by the recommended conditions. In addition, the City Council made further findings that the Cloisters project was in compliance with the specific policies of the General Plan/Local Coastal Plan (GP/LCP) and zoning ordinance with respect to protection of views, environmentally sensitive resources, public access, circulation, hazards and other requirements so long as the environmental impacts were mitigated. Finally, the City Council made further findings that the Cloisters project complied with MBMC with respect to optional subdivision design and related improvements, and that the optional design was justified in order to contribute to a better community environment through the dedication of extensive public areas, restoration of the ESH area, provision of scenic easements, and provision of larger than usual lots adjacent to such areas, and maintenance of a consistent lot layout pattern adjacent to existing development on the north side of Azure Street.
In order to mitigate the environmental impacts of the project and to provide a greater public benefit as required in a PD overlay zone, the conditions of approval for the project required the applicant to form an assessment district for the maintenance of the public park, bicycle pathway, right of way landscaping, coastal access ways, ESHA restoration areas and any other improved common areas to be privately held or dedicated to the City. The public park area, as well as all open space improvements, and the assessment district were part of many detailed discussions during each City and Coastal Commission hearing. Without this Condition of Approval and the creation of the assessment district, the project would not have been approved and there would not be a Cloisters Development.
B. Assessment History and Current Legislation
In November 1996, California voters approved Proposition 218 that established specific requirements for the ongoing imposition of taxes, assessments and fees. The provisions of the
1 Lot 124 of the Cloisters Subdivision (Tract 1996) has been sold and is going through the entitlement process for development of several single-family homes. The City intends to require annexation of new lots within the Tract.
This may result in an adjustment to the overall assessment or the assessment per lot.
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Proposition are now contained in the California Constitutional Articles XIIIC and XIIID. All assessments described in this Report and approved by the City Council are prepared in accordance with the 1972 Act and in compliance with these provisions of the Constitution.
Pursuant to the Article XIIID Section 5 of the Constitution, certain existing assessments were exempt from the substantive and procedural requirements of the Article XIIID Section 4, and property owner balloting is not required until such time that a new or increased assessment is proposed. Specifically, the City determined that the annual assessments originally established for the Cloisters were imposed in accordance with a consent and waiver as part of the original development approval for the properties within these areas. As such, pursuant to Article XIIID Section 5b, all the property owners approved the existing District assessments at the time the assessments were created (originally imposed pursuant to a 100% landowner petition). Therefore, the pre-existing assessments (the maximum assessment rates adopted prior to the passage of Proposition 218) for this district is exempt from the procedural requirements Article XIIID Section
4. However, any new or increased assessment for the Cloisters shall comply with both the substantive and procedural requirements of Article XIIID Section 4 before such assessments are imposed.
The assessment district formation proceedings began in August 1996 and concluded with the final public hearing on September 23, 1996, for formation of the District pursuant to the 1972 Act. This formation led to the annual assessment levy of $148,944 (the “Assessment”) for the maintenance of the thirty-four (34) acres of public resource lands including open space and natural lands, wetland area and pond used for drainage mitigation for homes constructed in Cloisters, median landscaping, trees, a neighborhood park and recreation area, fencing and other public improvements. The maximum assessment rates that existed and were adopted in fiscal year 1996/1997 did not include the assessment range formulae (inflationary adjustment) for their maximum assessment rates and therefore will remain static unless those being assessed vote to increase the assessments. Refer to section III D – “Maintenance Costs” for an analysis of the decision to not include an inflationary adjustment in the formulae.
In preparing the various purchase and sale documents for each individual lot, including the Conditions, Covenants, and Restrictions, the owners and developer called out the existence of the assessment district and to make certain that the existence of assessment district was disclosed to anyone who purchased one of these lots. In drafting all the project documents, the City and the developer reinforced the special benefits for the residents of the Cloisters Project from the public amenities and easements maintained by the assessment.
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II. Description of the District
A. Improvements Authorized by the 1972 Act
As applicable or may be applicable to this proposed District, the 1972 Act defines improvements to mean one or any combination of the following:
The installation or planting of landscaping;
The installation or construction of statuary, fountains, and other ornamental structures and facilities;
The installation or construction of public lighting facilities; The installation or construction of any facilities which are appurtenant to any of the foregoing or which are necessary or convenient for the maintenance or servicing thereof, including, but not limited to, grading, clearing, removal of debris, the installation or construction of curbs, gutters, walls, sidewalks, or paving, or water, irrigation, drainage, or electrical facilities;
The maintenance or servicing, or both, of any of the foregoing; and The acquisition of any existing improvement otherwise authorized pursuant to this section.
Incidental expenses associated with the improvements including, but not limited to:
The cost of preparation of the report, including plans, specifications, estimates, diagram, and assessment;
The costs of printing, advertising, and the publishing, posting and mailing of notices; Compensation payable to the County for collection of assessments; Compensation of any engineer or attorney employed to render services; Any other expenses incidental to the construction, installation, or maintenance and servicing of the improvements;
Any expenses incidental to the issuance of bonds or notes pursuant to Section 22662.52; and
Costs associated with any elections held for the approval of a new or increased assessment.
The 1972 Act defines "Maintain" or "maintenance" to mean furnishing of services and materials for the ordinary and usual maintenance, operation, and servicing of any improvement, including:
Repair, removal, or replacement of all or any part of any improvement; Providing for the life, growth, health, and beauty of landscaping, including cultivation, irrigation, trimming, spraying, fertilizing, or treating for disease or injury; The removal of trimmings, rubbish, debris, and other solid waste; and The cleaning, sandblasting, and painting of walls and other improvements to remove or cover graffiti.
B. Maintenance Items
The ongoing maintenance for the District, and the costs thereof, paid from the levy of the annual
2 There is no existing bond debt nor is any anticipated at this time.
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assessments, are generally described below.
Replacement, maintenance and servicing of improvements include, but are not limited to, turf, ground cover, shrubs, trees, other landscaping, irrigation systems, fencing, signage, trails, walkways, recreation facilities, lighting, restroom facilities, parking and all necessary appurtenances, and labor, materials, supplies, utilities and equipment. The public resources maintained by the assessments from the District are further summarized as follows:
Parkland: 4 Acres
Open space meadow and natural land: 18.15 Acres
Wetland: 5.5 Acres
Medians and parkways within the public rights-of-way: 1.6 Acres The levy of assessments contributes to the maintenance of the following items:
1. Landscaping
a. Turf
b. Planted medians
c. Planter beds (formerly demonstration
garden)
d. Drainage systems, including gabion
channels
e. Irrigation system (spray and drip)
f. Scrub/meadow plantings
g. Trees & shrubs along the sound wall
h. Willows
i. Wetland area plantings and pond
2. Hardscaping
a. Asphalt path system
b. Concrete walkways
c. Parking lot
d. Decomposed granite paths
e. Play area surfacing
f. Bridge on City owned property
3. Facilities and miscellaneous
a. Barbeques
b. Bike rack
c. Benches
d. Directional signs
e. Drinking fountains
f. Fences:
i. 6' and 3' solid – Bike Path and
Fire Access Fencing
ii. Habitat Area (ESHA) fencing
and keep out signs
g. Interpretive panels
h. Light bollards
i. Monuments with lights
j. Observation pier at pond
k. Picnic tables
l. Play equipment and sand lot
m. Restroom
n. Sound wall
o. Trash cans
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III. Method of Apportionment
A. General
This section of the Engineer's Report includes an explanation of the special benefits to be derived from the installation, maintenance and servicing of the improvements and the methodology used to apportion the total assessment to properties within the District.
The 1972 Act permits the establishment of assessment districts by agencies for the purpose of providing certain public improvements which include the construction, maintenance and servicing of public lights, landscaping and appurtenant facilities. The 1972 Act further requires that the cost of these improvements be levied according to benefit rather than assessed value:
“The net amount to be assessed upon lands within an assessment district may be apportioned by any formula or method which fairly distributes the net amount among all assessable lots or parcels in proportion to the estimated benefits to be received by each such lot or parcel from the improvements.” The proceeds from the District are used to fund the maintenance and upkeep of public resources within the Cloisters development project for the special benefit of the properties located within the project. The continued maintenance and upkeep of these important items is a distinct and special benefit to properties within the District.
Easements were created and reserved in favor of each owner in the Cloisters Development for view, open space, scenic, passive recreation and coastal access across the entirety of Lots 121, 122 and 123; these lots shall not be developed with any improvements or structures unless necessary and proper for the restoration and maintenance of the ESHA. This is another distinct and special benefit conferred on property within the District.
B. Benefit Analysis
Each of the proposed improvements, the associated costs and assessments have been carefully reviewed, identified and allocated based on special benefit pursuant to the provisions of the Constitution and 1972 Act. The improvements associated with the District have been identified as necessary, required and/or desired for the orderly development of the properties within the District to their full potential, consistent with the proposed development plans and applicable portions of the City GP/LCP as identified previously in this report. As such, these improvements would be necessary and required of individual property owners for the development of such properties, and the ongoing operation, servicing and maintenance of these improvements would be the financial obligation of those properties. Therefore, the improvements and the annual costs of ensuring the maintenance and operation of the improvements are of direct and special benefit to the properties.
The method of apportionment (method of assessment) is based on the premise that each assessed parcel within the District receives special benefit from various improvements provided by the
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District. The desirability and security of properties is enhanced by the presence of local improvements in close proximity to those properties. The special benefits associated with landscaped improvements are specifically:
Enhanced desirability of properties through association with the improvements; Improved aesthetic appeal of properties providing a positive representation of the area; and Enhanced adaptation of the urban environment within the natural environment from adequate green space and landscaping.
C. Maintenance Tasks
A list of typical maintenance tasks required to maintain the District in acceptable condition for public use was originally developed based on maintenance standards established for existing parks within the City and is included in this report as Attachment A. Larger maintenance items that are not routine, deferred maintenance, and capital projects are not included in this attachment.
D. Maintenance Costs
The estimated annual cost of maintaining the District was originally developed by the former Recreation and Parks Department based on the tasks required at the time and the City’s Flat Rate Manual for Parks Maintenance. District cost calculations included all labor, utilities, insurance, engineering services and depreciation/reserves. The total costs at that time totaled $148,944. The actual cost of maintenance for the 2023/24 fiscal year is estimated to exceed the assessment amount of $148,944.
The original formation of the assessment district in 1996 set the fixed assessment of $148,944 (or $1,241.20 per assessed parcel) for the entire Cloisters Landscape Lighting Maintenance Assessment District. In 1996, the Consumer Price Index (CPI) was 157 and today (April 2023) the CPI is at 301. This has resulted in a substantial drop in the purchasing power of the assessment district funds, but due to increased efficiency in the service delivery along with some reductions in service originally provided in district, the City has been able to maintain the facilities and accrue an accumulation over time with subsidy from the General Fund. Accumulation of funds ended with the FY 21/22 Engineer’s Report and is not projected to continue due to the shortfall of funding and the maintenance burden to the City versus what is collected in the assessment.
The cost estimate, included in this report as Attachment B, shows the estimated allocation of funds collected for the purposes of maintenance of the district. The true costs of maintaining Cloisters Park, as well as the medians and parkways within the Cloisters Assessment District, exceeds the revenue received from the District. The true cost of maintenance is estimated to be 25-30% higher than revenues collected. However, all maintenance costs in excess of the District’s available revenues will be subsidized by the General Fund per City Council direction on May 24, 2004.
This estimate in Attachment B shows the allocation of expenses as they will be covered by the assessment revenues. A transfer to the City’s General Fund in the amount of $28,083.00 for
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allocation of overhead costs is not directly charged to the District. This Cost Allocation Plan (CAP) includes, but is not limited to, costs for: accounting, management oversight, IT, share of vehicle and equipment use, and general City overhead. This allocation was approved when City Council adopted the updated CAP in April 2023.
E. Apportionment of Assessment
The total assessment for the District is apportioned equally to each of the one hundred and twenty residential lots. Lots 121 and 122 (Parcel 1) are Cloisters Park and dedicated Open Space. Lot 124 was originally dedicated for a future fire station, but it was declared as surplus by the City and sold. Lot 124 is currently vacant, but the new owner is going through the entitlement process to develop several single-family homes which is conditioned to be annexed to the Cloisters LLMAD once developed. Lot 123 offered to the State are not assessed. Individual assessments are listed in the table shown in Attachment C.
A-1
Attachment A
CLOISTERS
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
TYPICAL MAINTENANCE TASKS
Task Weekly Twice
Weekly
Monthly Twice
Annually
Annually As
Needed
I Turf Maintenance
Mow XX
Edge/Trim XX
Fertilize XX XX
Aerate/Seed XX XX
II Other Landscape Maint.
Prune plants/shrubbery XX XX
Maintain weed free XX
Maintain bark mulch XX
Rake/distribute gravel/sand XX XX
Fertilize XX
III Tree Maintenance
Prune trees XX
Maintain tree supports XX
Remove dead trees XX
IV Irrigation
Maintain/repair irrigation
system
XX
Program/check controllers XX XX
Hand water as required XX
Monitor water usage XX
V Weed control
Mow open areas XX XX
Remove noxious weeds XX
Weed identified areas XX XX
VI Wetlands
Coordinate maint. with city XX
VII Paths, walkways, parking
lot maintenance
Conduct general safety
inspection
XX XX
Remove foreign objects XX
Trim/spray pathways XX
A-2
CLOISTERS
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
TYPICAL MAINTENANCE TASKS (cont.)
Task Weekly Twice
Weekly
Monthly Twice
Annually
Annually As
Needed
VII Paths, walkways, parking
lot maintenance (cont.)
Inspect hardscape for
damage
XX XX
Remove dog litter XX
VIII Pest/Disease Control
Control pests/rodents and
plant diseases
XX
IX Litter/trash control
Litter pick up throughout XX
Remove trash from
garbage cans
XX
Empty ashes from bbq’s XX
X Restroom
Clean/sanitize/service Daily
M-F
Maintain roof XX
Maintain plumbing XX
Paint structure XX
B-3
Attachment B
CLOISTERS
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
DISTRICT BUDGET - FISCAL YEAR 2024/25
NAME: Cloisters Landscaping and Lighting Maintenance Assessment District DIAGRAM: Attached, as Attachment D
PLANS AND SPECIFICATIONS: On file in the Office of the City Engineer.
ESTIMATED COST OF MAINTENANCE: The table on the following page outlines the estimated budget for the maintenance of the District for fiscal year 2024/25. It also provides a look back at the previous fiscal year including the current fiscal year with expenses as of March 2024.
CONTRACT SERVICES
Includes non-routine maintenance and repair costs, as needed.
PERSONNEL SERVICES
Includes all daily and routine tasks as well as non-routine maintenance and repair costs.
INTERFUND TRANSFERS
Is the accounting practice that calculates and spreads the proportionate share of agency-wide indirect cost to departments and funds that receive a service from other departments (e.g., Payroll, Administration).
SUPPLIES
Includes all supplies used in daily tasks as well as non-routine repair and maintenance.
SERVICES
Includes utilities, outside engineering, insurance and contract services.
CAPITAL/DEFERRED MAINTENANCE RESERVE (ACCUMULATION)
Accumulated funds to be directed towards future use on capital projects, permits, and other onetime expenses.
CURRENT CAPITAL ALLOCATION OF FUND BALANCE $138,364
ESTIMATED CAPITAL BALANCE END FY 2023/24 $138,364
TOTAL ASSESSMENT: $148,944.00
PER PARCEL YEARLY ASSESSMENT ($148,944/120 parcels) $1,241.20
B-4
Detailed Financial Summary
Fund Name Description ACCOUNT# Account Type
FY23
Actual
FY24
Projected
FY25 Proposed
Cloisters Park
Maint AD Regular Pay XXX-XXXX-4110 Personnel Services $52,216 $43,235 $43,774 Cloisters Park
Maint AD Overtime Pay XXX-XXXX-4120 Personnel Services $102 $150 $0 Cloisters Park
Maint AD Standby Pay XXX-XXXX-4515 Personnel Services $2,472 $0 $0 Cloisters Park
Maint AD Other Pay XXX-XXXX-4599 Personnel Services $1,375 $1,011 $1,000 Cloisters Park
Maint AD Employer Paid Benefits XXX-XXXX-4910 Personnel Services $20,205 $14,051 $5,380 Cloisters Park
Maint AD Pension Normal Cost XXX-XXXX-4911 Personnel Services $7,520 $5,898 $2,782 Cloisters Park
Maint AD
PERS Unfunded Accrued
Liability XXX-XXXX-4912 Personnel Services $0 $9,152 $3,891 Cloisters Park
Maint AD Labor Costs Applied XXX-XXXX-4999 Personnel Services $31 $0 $0 Cloisters Park
Maint AD Uniforms/Safety Equipment XXX-XXXX-5109 Supplies $61 $65 $100 Cloisters Park
Maint AD
Miscellaneous Operating
Supplies XXX-XXXX-5199 Supplies $0 $0 $0
Cloisters Park
Maint AD Grounds Maintenance Supplies XXX-XXXX-5501 Supplies $6,195 $4,062 $14,697 Cloisters Park
Maint AD Building Maint. Supplies XXX-XXXX-5502 Supplies $16 $200 $1,000 Cloisters Park
Maint AD Small Tools XXX-XXXX-5530 Supplies $369 $1,000 $500 Cloisters Park
Maint AD Contractual Services XXX-XXXX-6106 Services $0 $250 $250 Cloisters Park
Maint AD Other Professional Services XXX-XXXX-6199 Services $0 $0 $0 Cloisters Park
Maint AD Utilities XXX-XXXX-6300 Services $0 $0 $0
Cloisters Park
Maint AD Electricity XXX-XXXX-6301 Services $2,712 $2,811 $2,811 Cloisters Park
Maint AD Water XXX-XXXX-6303 Services $35,040 $40,000 $39,361 Cloisters Park
Maint AD Disposal XXX-XXXX-6305 Services $3,562 $4,117 $5,315 Cloisters Park
Maint AD Equipment Rental XXX-XXXX-6810 Services $0 $0 $0 Cloisters Park
Maint AD Transfers Out XXX-XXXX-8501 Interfund Transfers $273 $420 $5,932 Cloisters Park
Maint AD Transfer to General Fund XXX-XXXX-8510 Interfund Transfers $11,203 $11,942 $22,151 Cloisters Park
Maint AD TRFR To Capital Imp Fund XXX-XXXX-8540 Interfund Transfers $0 $0 $0 Total: $143,352 $138,364 $148,944
C-1
Attachment C
CLOISTERS
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
PARCEL/ASSESSMENT TABLE
Lot Number
County Assessor’s
Parcel Number Annual Assessment
1 065-387-001 $1,241.20
2 065-387-002 $1,241.20
3 065-387-003 $1,241.20
4 065-387-004 $1,241.20
5 065-387-005 $1,241.20
6 065-387-006 $1,241.20
7 065-387-007 $1,241.20
8 065-387-008 $1,241.20
9 065-387-009 $1,241.20
10 065-387-010 $1,241.20
11 065-387-011 $1,241.20
12 065-387-012 $1,241.20
13 065-387-013 $1,241.20
14 065-387-014 $1,241.20
15 065-387-015 $1,241.20
16 065-387-016 $1,241.20
17 065-387-017 $1,241.20
18 065-387-018 $1,241.20
19 065-387-019 $1,241.20
C-2
Lot Number
County Assessor’s
Parcel Number Annual Assessment
20 065-387-053 $1,241.20
21 065-387-054 $1,241.20
22 065-387-055 $1,241.20
23 065-387-023 $1,241.20
24 065-387-024 $1,241.20
25 065-387-025 $1,241.20
26 065-387-026 $1,241.20
27 065-387-027 $1,241.20
28 065-387-028 $1,241.20
29 065-387-029 $1,241.20
30 065-387-030 $1,241.20
31 065-387-031 $1,241.20
32 065-387-032 $1,241.20
33 065-387-033 $1,241.20
34 065-387-034 $1,241.20
35 065-387-035 $1,241.20
36 065-387-036 $1,241.20
37 065-387-037 $1,241.20
38 065-387-038 $1,241.20
39 065-387-039 $1,241.20
40 065-387-040 $1,241.20
41 065-387-041 $1,241.20
42 065-387-042 $1,241.20
43 065-387-043 $1,241.20
C-3
Lot Number
County Assessor’s
Parcel Number Annual Assessment
44 065-387-044 $1,241.20
45 065-387-045 $1,241.20
46 065-388-001 $1,241.20
47 065-388-002 $1,241.20
48 065-388-003 $1,241.20
49 065-388-004 $1,241.20
50 065-388-005 $1,241.20
51 065-388-006 $1,241.20
52 065-388-007 $1,241.20
53 065-388-008 $1,241.20
54 065-388-009 $1,241.20
55 065-388-010 $1,241.20
56 065-388-011 $1,241.20
57 065-388-012 $1,241.20
58 065-388-013 $1,241.20
59 065-388-014 $1,241.20
60 065-388-015 $1,241.20
61 065-388-016 $1,241.20
62 065-388-017 $1,241.20
63 065-388-018 $1,241.20
64 065-388-019 $1,241.20
65 065-388-020 $1,241.20
66 065-388-021 $1,241.20
67 065-388-022 $1,241.20
C-4
Lot Number
County Assessor’s
Parcel Number Annual Assessment
68 065-388-023 $1,241.20
69 065-388-024 $1,241.20
70 065-388-025 $1,241.20
71 065-388-026 $1,241.20
72 065-388-027 $1,241.20
73 065-388-028 $1,241.20
74 065-388-029 $1,241.20
75 065-388-030 $1,241.20
76 065-388-031 $1,241.20
77 065-388-032 $1,241.20
78 065-388-033 $1,241.20
79 065-388-034 $1,241.20
80 065-388-035 $1,241.20
81 065-388-036 $1,241.20
82 065-388-037 $1,241.20
83 065-388-038 $1,241.20
84 065-388-039 $1,241.20
85 065-388-040 $1,241.20
86 065-388-041 $1,241.20
87 065-388-042 $1,241.20
88 065-388-043 $1,241.20
89 065-388-044 $1,241.20
90 065-388-045 $1,241.20
91 065-388-046 $1,241.20
C-5
Lot Number
County Assessor’s
Parcel Number Annual Assessment
92 065-388-047 $1,241.20
93 065-388-048 $1,241.20
94 065-388-049 $1,241.20
95 065-388-050 $1,241.20
96 065-388-051 $1,241.20
97 065-388-052 $1,241.20
98 065-388-053 $1,241.20
99 065-388-054 $1,241.20
100 065-388-055 $1,241.20
101 065-388-056 $1,241.20
102 065-388-057 $1,241.20
103 065-388-058 $1,241.20
104 065-388-059 $1,241.20
105 065-388-060 $1,241.20
106 065-388-061 $1,241.20
107 065-388-062 $1,241.20
108 065-388-063 $1,241.20
109 065-388-064 $1,241.20
110 065-388-065 $1,241.20
111 065-388-066 $1,241.20
112 065-388-067 $1,241.20
113 065-388-068 $1,241.20
114 065-388-069 $1,241.20
115 065-388-070 $1,241.20
C-6
Lot Number
County Assessor’s
Parcel Number Annual Assessment
116 065-388-071 $1,241.20
117 065-388-072 $1,241.20
118 065-388-073 $1,241.20
119 065-388-074 $1,241.20
120 065-388-075 $1,241.20
121 065-386-005 0
122 (Parcel 1) 065-386-016 0
123 (Parcel 2) 065-386-017
065-386-018
065-386-019
065-386-012
065-386-013
065-386-014
065-386-010
0 124 065-386-015 0
D-1
Attachment D
CLOISTERS
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
DISTRICT BOUNDARY DIAGRAM
The boundary diagram for the District have previously been submitted to the City Clerk in the format required under the 1972 Act and, by reference, are hereby made part of this Report. The boundary diagram and Tract Map are available for inspection at the office of the City Clerk or the City Engineer during normal business hours. The following diagram provides an overview of the District and the lots that are part of the District.
AGENDA NO: 9.c
MEETING DATE: May 14, 2024
Prepared By: CC Dept. Review: GK
City Manager Review: _YK__ ____ City Attorney Review: __LNL_ Staff Report
TO: Honorable Mayor and City Council DATE: May 8, 2024
FROM: Cindy Cecil, PE – City Engineer
SUBJECT: Adoption of Resolution No. 29-24 Approving the Engineer’s Report and Declaring the Intent to Levy the Annual Assessment for the North Point Natural Area Landscaping and Lighting Maintenance Assessment District
RECOMMENDED ACTION
Adopt Resolution No. 29-24 approving the Engineer’s Report and declaring the intent to levy the annual assessment for maintenance of the North Point Natural Area for Fiscal Year (FY) 2024/2025.
FISCAL IMPACT
Based on the Engineer’s Report, which estimates the annual costs of maintaining the North Point Natural Area for the upcoming fiscal year, the fiscal impact is estimated at $5,645. Those costs will be offset by the collection of an assessment for the same amount from the parcel owners in the North Point Subdivision.
The original formation of the assessment district in 1996 set the fixed assessment of $564.50 per parcel or $5,645 for the entire North Point Landscape Lighting Maintenance Assessment District.
In 1997, the Consumer Price Index (CPI) was 160 and in April of this year, the CPI was 301 which has resulted in a drop in the purchasing power of the assessment district funds. Even after increased efficiency and a reduction in the service originally provided in the district, the City has had to supplement the shortfall from the General Fund.
SUMMARY
On April 9, 2024, the City Council adopted Resolution No. 22-24, which initiated the proceedings to levy the annual assessment to fund the maintenance of the North Point Natural Area.
Additionally, staff was directed to have an Engineer’s Report prepared, detailing the estimated annual assessment for the parcel owners for FY 2024/25. Upon adoption of Resolution No. 29- 24, the next and final step in the annual levy of assessment process is the public hearing after which the City Council orders the levy of assessment.
BACKGROUND/DISCUSSION
As part of the annual assessment process, staff is required to provide an Engineer’s Report, which is an estimate of costs for maintenance of the North Point Natural Area. The cost estimates are based on the maintenance standards currently adhered to in existing parks within Morro Bay and included in the Flat Rate Manual for Parks Maintenance, as well as maintenance costs from the current fiscal year. Personnel costs, as well as supplies and services, have risen significantly in the last several years.
01181.0001/252023.1
The true costs of maintaining the assessment district exceed the revenue received from the district. The true cost of maintenance is estimated to be 25-30% higher than assessment revenues collected. However, all maintenance costs in excess of the district’s available revenues will be subsidized by the General Fund per City Council direction on May 24, 2004. The assessment for providing maintenance of the North Point Natural Area is $564.50 per parcel for FY 2024/25 for a total annual assessment of $5,645. Due to the increase in the cost of goods and services over time there is no excess funding to accumulate to save funding for any capital maintenance projects at the North Point Natural Area. As such, the City must utilize the General Funds, Measure Q & E Funds, or pursue grant funding should any capital needs arise.
CONCLUSION
The process for the annual levy of assessment for the North Point Natural Area Landscaping and Lighting Maintenance Assessment District requires the City Council to receive the Engineer’s Report, approve and/or modify the report and adopt a Resolution of Intention. The Resolution of Intention gives notice of the time, date and place for a public hearing by the City Council on the issue of the levy of assessment.
The public hearing has been set for the regular City Council meeting on June 25, 2024, at or about 5:30 p.m. to be held at the Morro Bay Veterans Hall. A summary of the Resolution of Intention shall be published in the newspaper as legal notice of a public hearing, to which all interested parties are afforded the opportunity to be heard either through written or oral communication. Upon completion of the public hearing, the City Council may adopt a resolution ordering the levy of the annual assessment.
ATTACHMENTS
1. Resolution No. 29-24
2. North Point Natural Area Landscaping and Lighting Maintenance Assessment District 2024/25 Engineer’s Annual Levy Report
01181.0001/252024.1
RESOLUTION NO. 29-24
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF MORRO BAY, CALIFORNIA,
APPROVING THE ENGINEER’S REPORT AND DECLARING
THE CITY'S INTENTION TO LEVY THE ANNUAL ASSESSMENT FOR THE
MAINTENANCE OF THE NORTH POINT NATURAL AREA LANDSCAPING AND LIGHTING MAINTENANCE ASSESSMENT DISTRICT PURSUANT TO THE “LANDSCAPING AND LIGHTING ACT OF 1972” (STREETS AND HIGHWAYS SECTIONS 22500 ET SEQ.) FOR THE 2024/25 FISCAL YEAR
T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, all property owners of the original North Point subdivision requested the City of Morro Bay form a maintenance assessment district to fund the maintenance of the North Point Natural Area; and
WHEREAS, the Landscaping and Lighting Act of 1972, commencing with Streets and Highways Code section 22500 (the "Act") enables the City to form assessment districts for the purpose of maintaining public improvements; and
WHEREAS, pursuant to Section 22623 of the Act, the City Engineer has filed in the Office of the City Clerk, and submitted for review to the City Council, a report entitled "Engineers Report North Point Natural Area Landscaping and Lighting Maintenance Assessment," dated May 14, 2024, prepared in accordance with Article 4 of the Act, commencing with Section 22565 (the “Engineer’s Report”); and
WHEREAS, pursuant to Section 22608.2 of the Act, the subdivider was required by City ordinance to install improvements for which an assessment district was required to assure continued and uninterrupted maintenance of the North Point Natural Area; and WHEREAS, pursuant to the intent of Article XIII, Section 4, of the California Constitution, the property owners have elected to form the North Point Natural Area Landscaping and Lighting Maintenance Assessment District.
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Morro Bay, Section 1. The City Council approves the Engineer’s Report.
Section 2. It is the intent of the Council to order the annual levy and collection of assessments for the North Point Natural Area Landscaping and Lighting Maintenance Assessment District generally located as shown in Exhibit "A" attached hereto at a public hearing to be held at the Regular City Council meeting on June 25, 2024 at or about 5:30 p.m., at the Morro Bay Veterans Hall.
Section 3. The improvements to be maintained at the North Point Natural Area are specified in the Engineer's Report dated May 14, 2024 which is hereby approved. //
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Section 4. The assessment upon assessable lots within the district is proposed to total $5,645 or $564.50 per assessable parcel for fiscal year 2024/25.
PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held this 14th of May 2024 by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
RECUSE:
_______________________________
CARLA WIXOM, Mayor
ATTEST:
________________________________
DANA SWANSON, City Clerk
CITY OF MORRO BAY
NORTH POINT NATURAL AREA
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
2024/25 ENGINEER’S ANNUAL LEVY REPORT
May 14, 2024
ii
AFFIDAVIT FOR 2024/25 ENGINEER’S ANNUAL LEVY REPORT
CITY OF MORRO BAY
NORTH POINT NATURAL AREA
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
This report describes the proposed maintenance, improvements, budgets, zone of benefit and assessments to be levied on parcels of land within the North Point Natural Area Landscaping and Lighting Maintenance Assessment District for the fiscal year 2024/25, as the same existed at the time of the passage of the Resolution of Intention. Reference is hereby made to the San Luis Obispo County Assessor’s maps for a detailed description of the lines and dimensions of parcels within the District. The undersigned respectfully submits the enclosed Report as directed by the City Council and, to the best of my knowledge, information, belief, the report, the assessments and diagrams have been prepared and computed in pursuant to the Landscaping and Lighting Act of 1972.
Exp. 03/31/2025
Dated this 14th day of May, 2024
_________________________________________________
Cynthia Cecil, PE – City Engineer
iii
CITY OF MORRO BAY
NORTH POINT NATURAL AREA
LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
ENGINEER’S REPORT
Table of Contents
Page
I. Overview…………………………………………………………………………………...1
A. Introduction…………………………………………………………………………….1
B. Assessment History and Current Legislation…………………………………………..1 II. Description of the District………………………………………………………………….2 A Improvements Authorized by the 1972 Act…………………………………………...2 B Maintenance Items…………………………………………………………………….2
III. Method of Apportionment………………………………………………………………….3 A. General…………………………………………………………………………………3
B. Benefit Analysis………………………………………………………………………..3
C. Maintenance Tasks……………………………………………………………………..4
D. Maintenance Costs……………………………………………………………………..4
E. Apportionment of Assessment…………………………………………………………4
Detailed Maintenance Task List……………………………………………..Attachment A District Budget – Fiscal Year 2024/25………………………………………Attachment B Parcel/Assessment Table…………………………………………………….Attachment C District Boundary Diagram………………………………………………….Attachment D
1 I. Overview
A Introduction
The City Council of the City of Morro Bay (hereafter referred to as “City”), County of San Luis Obispo, State of California, previously formed and has levied and collected annual assessments for the District designated as:
NORTH POINT NATURAL AREA LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
(hereafter referred to as “District”) pursuant to the provisions of the Landscaping and Lighting Act of 1972, being Part 2 of Division 15 of the California Streets and Highways Code, commencing with Section 22500 (hereafter referred to as the “1972 Act”), and in compliance with the provisions of the California State Constitution Articles XIIIC and XIIID (hereafter referred to as the “Constitution” or “Proposition 218”).
This Report has been prepared in accordance with Chapter 1, Article 4 (commencing with Section 22565) of the 1972 Act and describes the District and changes to the District including: territories annexed; modifications to the improvements or organization; and the proposed budgets and assessments applicable for fiscal year 2024/25.
History
As a condition of approval for Tract No. 2110, the North Point subdivision, the developers were required to offer to the City for dedication Lot 11 of the subdivision for park purposes, and to construct improvements on Lot 11 including a paved parking area, a stairway providing access to the beach, benches, landscaping and irrigation, lighting, and other improvements. The subdivision was also conditioned to provide maintenance of the park by establishing an assessment district.
Lot 11 of Tract No. 2110 is identified as the North Point Natural Area.
B Assessment History and Current Legislation
In November 1996, California voters approved Proposition 218 that established specific requirements for the ongoing imposition of taxes, assessments and fees. The provisions of the Proposition are now contained in the California Constitutional Articles XIIIC and XIIID. All assessments described in this Report and approved by the City Council are prepared in accordance with the 1972 Act and in compliance with these provisions of the Constitution.
Pursuant to the Article XIIID Section 5 of the Constitution, certain existing assessments were exempt from the substantive and procedural requirements of the Article XIIID Section 4, and property owner balloting is not required until such time that a new or increased assessment is proposed. Specifically, the City determined that the annual assessments originally established for the North Point were imposed in accordance with a consent and waiver as part of the original development approval for the properties within these areas. As such, pursuant to Article XIIID Section 5b, all the property owners approved the existing District assessments at the time the assessments were created (originally imposed pursuant to a 100% landowner petition). Therefore, the pre-existing assessments (the maximum assessment rates adopted prior to the passage of Proposition 218) for this District is exempt from the procedural requirements Article XIIID Section
4. However, any new or increased assessment for the North Point Natural Area shall comply with
2 both the substantive and procedural requirements of Article XIIID Section 4 before such assessments are imposed.
II. Description of the District
A. Improvements Authorized by the 1972 Act
As applicable or may be applicable to this proposed District, the 1972 Act defines improvements to mean one or any combination of the following:
The installation or planting of landscaping;
The installation or construction of statuary, fountains, and other ornamental structures and facilities;
The installation or construction of public lighting facilities; The installation or construction of any facilities which are appurtenant to any of the foregoing or which are necessary or convenient for the maintenance or servicing thereof, including, but not limited to, grading, clearing, removal of debris, the installation or construction of curbs, gutters, walls, sidewalks, or paving, or water, irrigation, drainage, or electrical facilities;
The maintenance or servicing, or both, of any of the foregoing; and The acquisition of any existing improvement otherwise authorized pursuant to this section.
Incidental expenses associated with the improvements including, but not limited to:
The cost of preparation of the report, including plans, specifications, estimates, diagram, and assessment;
The costs of printing, advertising, and the publishing, posting and mailing of notices; Compensation payable to the County for collection of assessments; Compensation of any engineer or attorney employed to render services; Any other expenses incidental to the construction, installation, or maintenance and servicing of the improvements;
Any expenses incidental to the issuance of bonds or notes pursuant to Section 22662.51; and
Costs associated with any elections held for the approval of a new or increased assessment.
The 1972 Act defines "Maintain" or "maintenance" to mean furnishing of services and materials for the ordinary and usual maintenance, operation, and servicing of any improvement, including:
Repair, removal, or replacement of all or any part of any improvement; Providing for the life, growth, health, and beauty of landscaping, including cultivation, irrigation, trimming, spraying, fertilizing, or treating for disease or injury; The removal of trimmings, rubbish, debris, and other solid waste; and The cleaning, sandblasting, and painting of walls and other improvements to remove or cover graffiti.
B. Maintenance Items
A list of maintenance tasks required to maintain the North Point Natural Area in acceptable condition for public use was developed by the City based upon established maintenance standards,
1 There is no existing bond debt nor is any anticipated at this time.
3 at the time the assessment was initiated, for existing parks within the City and is described in Section III-C.
III. Method of Apportionment
A General
This section of the Engineer's Report includes an explanation of the special benefits to be derived from the installation, maintenance and servicing of the improvements and the methodology used to apportion the total assessment to properties within the District.
The 1972 Act permits the establishment of assessment districts by agencies for the purpose of providing certain public improvements which include the construction, maintenance and servicing of public lights, landscaping and appurtenant facilities. The 1972 Act further requires that the cost of these improvements be levied according to benefit rather than assessed value:
“The net amount to be assessed upon lands within an assessment district may be apportioned by any formula or method which fairly distributes the net amount among all assessable lots or parcels in proportion to the estimated benefits to be received by each such lot or parcel from the improvements.”
The proceeds from the District are used to fund the maintenance and upkeep of public resources within the North Point development project for the special benefit of the properties located within the project. The continued maintenance and upkeep of these important items is a distinct and special benefit to properties within the District.
B. Benefit Analysis
Each of the proposed improvements, the associated costs and assessments were carefully reviewed, identified and allocated based on special benefit pursuant to the provisions of the Constitution and 1972 Act. The improvements associated with the District have been identified as necessary, required and/or desired for the orderly development of the properties within the District to their full potential, consistent with the proposed development plans and applicable portions of the City General Plan and Local Coastal Plan as identified previously in this report. As such, these improvements would be necessary and required of individual property owners for the development of such properties, and the ongoing operation, servicing and maintenance of these improvements would be the financial obligation of those properties. Therefore, the improvements and the annual costs of ensuring the maintenance and operation of the improvements are of direct and special benefit to the properties. The method of apportionment (method of assessment) is based on the premise that each assessed parcel within the District receives special benefit from various improvements provided by the District. The desirability and security of properties is enhanced by the presence of local improvements in close proximity to those properties. The special benefits associated with landscape improvements are specifically:
Enhanced desirability of properties through association with the improvements; Improved aesthetic appeal of properties providing a positive representation of the area; and Enhanced adaptation of the urban environment within the natural environment from adequate green space and landscaping.
4 C. Maintenance Tasks
A list of maintenance tasks required to maintain the North Point Natural Area in acceptable condition for public use was developed by the Public Works Department based on maintenance standards established for existing parks within the City and is included in this report as Attachment A.
D. Maintenance Costs
The estimated annual cost of maintaining the North Point Natural Area was originally developed by the former Recreation and Parks Department based on the tasks required and the City’s Flat Rate Manual for Parks Maintenance. Annual maintenance is currently provided through contract services and is supplemented by staff in the Public Works Department. Assessment district costs include labor, utilities, insurance, engineering services and depreciation/reserves. The annual cost of maintenance, including any reserves, for the 2024/25 fiscal year is estimated to exceed the assessment amount of $5,645.
The original formation of the assessment district in 1996 set the fixed assessment of $564.50 per parcel or $5,645 for the entire North Point Landscape Lighting Maintenance Assessment District.
In 1997, the Consumer Price Index (CPI) was 160 and today (April 2024) the CPI is at 312. This has resulted in a substantial drop in the purchasing power of the District funds, but due to increased efficiency along with a decreased level in the service originally provided in District, the City has been able to maintain the facilities at a minimal level.
The cost estimate, included in this report as Attachment B, shows the estimated allocation of funds collected for the purposes of maintenance of the District. The true costs of maintaining the assessment District, exceed the revenue received from the District assessment. The true cost of maintenance is estimated to be 25-30% higher than the revenues collected. However, all maintenance costs in excess of the District’s available revenues will be subsidized by the General Fund per City Council direction on May 24, 2004.
E. Apportionment of Assessment
The total assessment for the District is apportioned to each of the ten residential lots equally. Lot 11, the North Point Natural Area; Lot 12, a private street; and Lot 13, an open space parcel granted to the State of California; are not assessed. Individual assessments are listed in Attachment C.
5 Attachment A
NORTH POINT NATURAL AREA LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
MAINTENANCE TASKS
Routine Maintenance Tasks
Review for vandalism/repair
Pick-up – paper, trash, cigarette butts, etc
Empty - trash receptacle(s)
Clean - benches
Inspect and maintain as necessary:
o beach access stairway
o bike rack
o lights
o natural area plantings
Weekly or as needed
Blow paths, parking lot
Monthly or as needed
Check trees
Check/repair sprinkler system
Trim trees and bushes as needed
Critical parts inspections
Annually or as needed
Paint beach access stairway, public access signage
New plantings (replacement)
General safety inspection
Annual tree pruning
Remove graffiti
Mow open space
Pest/gopher control
Trim and spray paths
Repair public access signage
Operational Expenses
Street Lighting
Irrigation
Refuse Service
6 Attachment B
NORTH POINT NATURAL AREA LANDSCAPING AND LIGHTING
MAINTENANCE ASSESSMENT DISTRICT
NAME: North Point Natural Area Landscaping and Lighting Maintenance Assessment District DIAGRAM: Attached
PLANS AND SPECIFICATIONS: For a detailed description of the improvements, refer to the plans and specifications for Tract 2110 on file in the office of the City Engineer. No bonds or notes will be issued for this Maintenance Assessment District.
ESTIMATED COST OF MAINTENANCE: The following outlines the estimated budget for the maintenance of the North Point Natural Area for fiscal year 2024/25. As noted in last year’s report, there is no longer an accumulation fund for this district. All funds necessary for maintenance in excess of the assessment are born by the City’s General Fund.
TOTAL ASSESSMENT: $5,645.00
PER PARCEL YEARLY ASSESSMENT (10 parcels) $564.50
Detailed Financial Summary
ACCOUNT ID Description Fund Name Account Type
FY23
Actual
FY24
Projected
FY25
Proposed
XXX-XXXX-4110 Regular Pay NP Assessment Personnel Svcs $775 $0 $0 XXX-XXXX-4120 Overtime Pay NP Assessment Personnel Svcs $0 $0 $0 XXX-XXXX-4310 Part-Time Pay NP Assessment Personnel Svcs $0 $0 $0 XXX-XXXX-4515 Standby Pay NP Assessment Personnel Svcs $0 $0 $0 XXX-XXXX-4599 Other Pay NP Assessment Personnel Svcs $0 $0 $0 XXX-XXXX-4910 Employer Paid Benefits NP Assessment Personnel Svcs $0 $0 $0 XXX-XXXX-4911 Pension Normal Cost NP Assessment Personnel Svcs $0 $0 $0 XXX-XXXX-4912
PERS Unfunded Accrued
Liability NP Assessment Personnel Svcs $0 $0 $0
XXX-XXXX-4999 Labor Costs Applied NP Assessment Personnel Svcs $0 $0 $0 XXX-XXXX-5501 Grounds Maint. Supplies NP Assessment Supplies $0 $0 $0 XXX-XXXX-5502 Building Maint. Supplies NP Assessment Supplies $0 $0 $0 XXX-XXXX-6106 Contractual Services NP Assessment Services $0 $0 $0 XXX-XXXX-6301 Electricity NP Assessment Services $160 $252 $0 XXX-XXXX-6303 Water NP Assessment Services $538 $538 $538 XXX-XXXX-6305 Disposal NP Assessment Services $2,877 $3,773 $4,109 XXX-XXXX-8501 Transfers Out NP Assessment
Interfund
Transfer $712 $780 $998
Total Total: $5,062 $5,343 $5,645
7 Attachment C
PARCEL/ASSESSMENT TABLE
Lot Number
County Assessor’s
Parcel Number Annual Assessment
1 065-082-10 $564.50
2 065-082-11 $564.50
3 065-082-12 $564.50
4 065-082-13 $564.50
5 065-082-14 $564.50
6 065-082-15 $564.50
7 065-082-16 $564.50
8 065-082-17 $564.50
9 065-082-18 $564.50
10 065-082-19 $564.50
11 065-082-20 $ 0.00
12 065-082-21 $ 0.00
13 065-082-22 $ 0.00
8 Attachment D
DISTRICT BOUNDARY DIAGRAM
The boundary diagram, tract map for the District have previously been submitted to the City Clerk in the format required under the Act and, by reference are hereby made part of this Report.
The boundary diagram is available for inspection at the office of the City Clerk or the City Engineer during normal business hours. The following diagram provides an overview of the District.
Prepared By: ___TS Dept Review: ___TS
City Manager Review: ___YK_____ City Attorney Review: __CFN____ Staff Report
TO: Honorable Mayor and City Council DATE: April 25, 2024 FROM: Ted Schiafone, Harbor Director
SUBJECT: Discussion of Recommendations for improvements to the Harbor Department Lease Management Policy
RECOMMENDED ACTION
Receive a report on the Harbor Director’s recommended improvements to the Harbor Department Lease Management Policy and authorize implementation. Alternatively, provide direction on changes to these recommendations.
FISCAL IMPACT
While there is no immediate fiscal impact, there is a consensus that positive fiscal impacts will be achieved with the implementation of the proposed recommendations.
BACKGROUND
Over the years, the City has changed its leasing practices and policies to better protect the public interest by adopting modern lease formats and standards for fair market rent and periodic rental adjustments. The Harbor Department is charged with tidelands leases which are long term leases.
The Harbor Department has multiple, and often competing, roles in both aiding in the success of its leaseholders, while at the same time carrying out the policies, planning, zoning, land use, legal and insurance issues of the City. The Harbor Department takes all those factors into account when managing and administering the City’s waterfront leases. The Harbor Department is operated through a City enterprise fund known as the Harbor Fund. The Harbor Fund is the sole source for management of the State Tidelands lease sites, Harbor Patrol and facility management including maintenance, repair, and capital improvements.
The current Harbor Department Lease Management Policy (LMP) was approved by City Council on July 14, 2020, upon a two-year process aiming to align the LMP with city policies and streamline lease site management process to achieve the goal of financial and economic sustainability. It has provided direction on subjects such as fair market rent, lease terms, negotiation process, termination, amendments, requests for proposals (RFP’s) and much more. The LMP provides a framework for both City and Leaseholders to understand what to expect when applying for or renewing a Master Lease on State Tidelands.
During this past year, the Harbor Director noticed some issues with a few of the past practices unrelated to the 2020 LMP that could negatively affect potential revenue and those issues were addressed at several closed session meetings during real estate negotiations. As a result, at a regular AGENDA NO: 9.d
MEETING DATE: May 14, 2024
meeting of Council on August 8, 2023, the Harbor Director was asked to create a joint CFAC/HAB Ad-Hoc Committee to review these issues and provide recommendations.
A joint CFAC/HAB Ad-Hoc Committee was formed at the next HAB meeting with the request to analyze the following topics:
- Review of the current lease management policy
- Review of the current approved master lease agreements - Review of the current lease negotiation process
- Identification of specific areas that could improve the financial benefit to the City, including but not limited to, review of market rates
- Quantification of potential improvements to annual rent earned - Specific options for Council consideration
The Committee met several times and requested a considerable amount of documentation to fully understand Harbor leases and how they contribute to revenue. An initial draft report was prepared for the Harbor Director and City Manager. Several questions were asked and answered appropriately by the Ad-Hoc committee members, before a final report was issued. A meeting was held to discuss the final recommendations.
DISCUSSION
Overall CFAC/HAB Ad-Hoc Committee put forward these goals:
1) Make the leasing process more transparent and reduce compliance costs 2) Long term improvement of the economic vitality of the entire Embarcadero Economic Zone 3) Improve the predictability of the revenue stream from the Embarcadero leases Guided by the above goals, CFAC/HAB Ad-Hoc Committee recommended the following actions:
1) Simplify the Rent Terms by utilizing a fixed rent model – In summary, the idea is to move towards a fixed rent model that represents a much higher base rent with CPI adjustments and eliminate percentage rent. Currently annual base rent is established at 8% of the appraised land value. The recommendation is to use 12% of the appraised value and no percentage rent in addition.
2) Update the Appraisal Process - The recommendation is to use the income approach and comparable sales to determine the land value and consider any locational characteristics that could affect valuations.
3) Convert Existing Leases – Provide leaseholders with the opportunity to convert to a fixed rent.
The Ad-Hoc Committee answered the following questions brought forward by staff:
1) What are the optimum percentage rent categories, classifications, and rates? – In summary, the Ad–Hoc Committee does not recommend the use of percentage rent. If percentage rent is used, consider one rate for all sales that can be tracked via taxable retail sales and transient occupancy tax.
2) Should the lease terms be nailed down during the negotiations of the interim lease? (i.e. no items to be “negotiated later”) – Yes
3) Is 8% the right lease factor to use? – No. State Lands Commission uses 9%. The Ad-Hoc
Committee recommends 12% and eliminate percentage lease except in special circumstances. Fixed rent simplifies property management.
CONCLUSION
The current Lease Management Policy has been in place for approximately 4 years. It has provided some improvement to lease revenue, but it has not always been followed due to staff capacity, resource constraints, and special circumstances that call for special solutions. However, creating significant changes to the lease policy can negatively affect the interests of investors in Harbor Tidelands properties. Business owners need stability before investing large sums of money on leased land. Any changes to the Lease Policy should be limited and evaluated over time to determine effectiveness. In the case of Morro Bay, the lease holders often hold long term leases and have invested millions of dollars into the properties. The Ad Hoc committee acknowledges that significant changes such as a fixed lease structure would require a long-term implementation plan. An informal meeting with a group from the Embarcadero Master Leaseholders provided additional insight into the Harbor Director’s recommendations.
Aided by the Ad Hoc Committee analysis and positive feedback from the Embarcadero Master Leaseholders, Staff recommends the following for implementation:
1) Appraisal process – fully support with Ad Hoc recommendation. o Hire a professional appraiser with MAI certification that will use comparable sales and highest and best use for waterfront properties. This recommendation does not require an update of the Lease Policy. o The past appraiser used only non-waterfront properties as comparable and did not hold MAI status. That undervalued Tideland property. Base rents will increase due to higher valuations of waterfront land.
o A plan to use modern real estate property management software was also initiated by the Harbor Department.
2) Fixed Rent vs. Percentage Rent – support Ad Hoc’s overall goal of simplifying the rent structure when practical
o Continue with existing policy of fixed and percentage rent. This recommendation does not require an update of the Lease Policy. o Consider using fixed rent alone when it is beneficial to the Harbor o Consider using fixed rent plus percentage rent when it is beneficial to the Harbor 3) Fixed Rent – Do not recommend implementing fixed rent for all leases at this point. However, this has been used in some cases when appropriate.
o Use 9% of appraised land value to determine base rent. The Lease Policy stipulates that a minimum of 8% is used. This recommendation does not require an update of the Lease Policy.
o Do not offer fixed rent conversion to existing leaseholders. This would take considerable resources and would not benefit the Harbor with increased revenue. o Should Council be interested in changing all leases to a fixed structure, staff recommends Council incorporate this into next year’s strategic goals so that the public can have a chance to provide input to ensure the desired outcome. 4) Lease Negotiations
o Include all terms in the interim lease agreement, including percentage rent.
This recommendation does not require an update of the Lease Policy.
Staff recommends the following for additional analysis through a HAB Ad-Hoc Committee:
5) Percentage Rent
o Move to a single percent rent for all sales, verified by reported sales tax or transient occupancy tax. This will require analysis of what should be the single percent rent.
This will also eliminate the need for annual sales audits. 6) Lease Extensions
o Establish a guideline for determining the number of years for an extension based on cost of improvements and other factors such as square foot of existing lease holder, public benefit, etc.
o This was not an Ad-Hoc recommendation, but the issue has been raised by the Embarcadero Master Leaseholders.
ATTACHMENTS
1. Harbor Department Lease Management Policy
2. HAB & CFAC Review of Embarcadero Master Lease Terms & Conditions
3. Comments from the informal meeting with Master Leaseholders
CITY OF MORRO BAY
HARBOR DEPARTMENT LEASE MANAGEMENT POLICY
Adopted by the City Council
July 14, 2020
July 14, 2020
Morro Bay City Council
John Headding, Mayor
Marlys McPherson, Council Member
Robert Davis, Council Member
Dawn Addis, Council Member
Jeff Heller, Council Member
Lease Policy Update Group
Joan Solu, Citizen
Ron Reisner, Harbor Advisory Board
Cherise Hansson, Harbor Advisory Board
Bob Fowler, Leaseholder
Erica Crawford, Morro Bay Chamber
Marty Lomeli, Facilitator
Staff
CITY OF MORRO BAY
HARBOR DEPARTMENT LEASE MANAGEMENT POLICY (Policy)
TABLE OF CONTENTS
I. Vision Statement ……………………………………………………………………………………………….…….. 1 II. History …………………………………………………………………………………………………………………….. 2 III. General Policy, Purpose and Benefits ……………………………………………….……………………… 3 IV. Background ………………………………………………………………………………………….………………….. 3 A. General Lease Management ……………………………………………………………………….. 3 B. Leasing Areas ………………………………………………………………………………………………. 4 V. Lease Administration ……………………………………………………………………………………………….. 5 A. Master Lease Format …………………………………………………………………………………… 5 B. License Agreements ……………………………………………………………………………………..5 C. Building Leases ……………………………………………………………………………………………. 5 D. Approved Uses ……………………………………………………………………………………………. 5 E. Fair Market Rent …………………………………………………………………………………………. 6 F. Lease Term (duration) …………………………………………………………………………………. 7 G. Lease Negotiation ……………………………………………………………………………………….. 8 H. Lease Amendment, Renewal and Extension ………………………………………………… 8 I. Lease Expiration and Termination ……………………………………………………………….. 9 J. Rent Collection ……………………………………………………………………………………………. 10 K. Putting Lease Sites up for a Competitive RFP Process ………………………………….. 10 L. Lease Site Redevelopment and Coordination with Community Development Department ………………………………………………………………………………………………… 11
M. Lease Site Consolidation ……………………………………………………………………………… 11 N. Lease Site Monitoring, Inspection and Maintenance …………………………………… 11 O. Environmental Considerations ……………………………………………………………………. 12 P. Lease Terms and Site Entitlement Compliance ……………………………………………. 12 Q. Percentage of Gross Sales Audits ………………………………………………………………… 13 R. Lease Sale, Assignment and Assumption …………………………………………………….. 13 S. Sublease Approval ………………………………………………………………………………………. 14 T. Financial Criteria and Financing Considerations ……………………………………………14 U. Force Majeure …………………………………………………………………………………………..… 15 VI. Exhibits to Policy …………………………………………………………………………………………………..…. 16 A. Definitions and Acronyms …………………………………………………………………………… 16 B. Flow Charts …………………………………………………………………………………………………. 20 C. Maps/Surveys ……………………………………………………………………………….…………….. 21 D. City of Morro Bay Zoning Map……….…………………………………………….………………. 22 E. Percent of Gross Sales Rent Schedules ……………………………………………………….. 23 F. Master Lease Template ………………………………………………………………………………. 25 G. Forms ………………………………………………………………………………………………….……… 26
H. Lease Site Inspection Checklists ………………………………………………………………….. 27
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I. VISION STATEMENT
The long-term vision of the City of Morro Bay is to manage and maintain the City’s Tidelands Trust Land (TTL) lease sites along the western side of Embarcadero Road as a vibrant working waterfront, incorporating tourism and various commercial and recreational uses. Positive cash flow to the Harbor Fund is crucial to maintain the integrity of the waterfront and environmental health of the bay and its resources. In order to provide a quality experience for the public, tourism and other recreational uses of the Embarcadero are encouraged and considered in lease management decisions. The waterfront will be pedestrian-friendly with ample access and view corridors to coastal resources.
The principal tenets in the State Tidelands Grant will be followed and future development or redevelopment of the TTL will conform with the City’s General Plan, Downtown and Waterfront Master Plan, Local Coastal Program and the voter-approved initiative known as Measure D that protects commercial and recreational fishing uses, while remaining true to the historic fishing heritage of the harbor and community.
This Policy is intended as an advisory tool to provide guidance for current and future lease site management, development, and redevelopment decisions considered by the City, with the ultimate dual goals of maintaining the vitality of the City’s waterfront, as well as the fiscal health of the department charged with managing it.
This Policy will follow guiding principles that are designed to serve as a bridge between the Harbor’s goals, purpose, and regulatory environment, and management and leasing needs. These guiding principles are:
A. The City shall foster a spirit of partnership with its tenants in the application of this Policy, while fulfilling its duties as a steward of vital public enterprise, assets and resources.
B. The City will make TTL lease sites available on fair and reasonable terms without discrimination.
C. The City, in its role as a TTL trustee, may consider more than just the maximum revenue that can be generated by a new lease. The City will also consider what is in the best interests to ensure the public’s enjoyment of the TTL, as well as to serve the City of Morro Bay, including the essential role all parties and businesses play in maintaining growth and job creation, as well as the need to maintain a diversified mix of water dependent uses.
D. The City shall retain effective management controls over the use of TTL assets and will structure management controls in all leases and rental agreements in order to:
E. Achieve highest and best use of TTL assets;
F. Ensure timely development as-needed; and
G. Foster open and competitive access for new entrant and incumbent TTL tenants.
H. The City will establish and maintain a level and structure of rents, fees, and charges that are fair and equitable for all tenants, and which are based on current appraised lease site values.
I. The City will establish minimum operational maintenance standards for users of TTL lease sites in order to promote safety and maintain appropriate levels and quality of service.
J. The City and its leaseholders will at a minimum follow good environmental practices, including but not limited to all applicable environmental laws, regulations, established guidelines and best management practices.
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K. The City will actively monitor compliance with provisions of lease agreements, file timely notice of non-compliance and employ available remedies to enforce compliance when appropriate.
L. The City shall be open and transparent in its selection of new tenants and in lease negotiations per State law, including exercising the City’s right to negotiate confidentially under Government Code Section 54956.8.
II. HISTORY
Tracing back to English Common Law, the Public Trust Doctrine establishes navigable water or lands subject to tidal influence are “sovereign,” held open to the public for commerce, fisheries or navigation. As sited in the Doctrine, “by the law of nature these things are common to mankind, the air, running water, the sea, and consequently the shores of the sea.” In order to establish a Navy amphibious training base to aid the war effort, in 1942-44 the federal government constructed a revetment along the Morro Bay waterfront and filled most of the area now known as the commercial strip along the Embarcadero. After the war, the State of California claimed ownership of the newly created land as at least a portion of it had previously been below the high tide line. In 1947, the State of California granted those public trust lands in Morro Bay to the County of San Luis Obispo (Chapter 1076 of the California Statutes of 1947, and amended by Chapter 1874 of the California Statutes of 1957). After many years of dispute with private property owners, who also claimed an interest in the land, most title issues were settled in the 1950s-1960s by designating those lands west of Embarcadero Road as public trust lands owned by the State, and those lands east of Embarcadero Road as privately owned. The City of Morro Bay assumed trusteeship of the granted lands upon incorporation in 1964-1965. The Tidelands Grant in Morro Bay is in perpetuity; provided, that the City conforms to the terms of the legislative grant.
The granted lands must be used for commerce, fisheries, navigation, recreational purposes, parklands, public access, public parking and environmental protection or enhancement. Residential use of these public lands is specifically prohibited. The City will lease out these lands to private businesses, government entities or non-profit organizations for a period up to 50 years and all revenues from such leases must be expended within the area of the granted lands for the purposes of the public trust.
Over the years, the City has changed its leasing practices and policies to better protect the public interest by adopting modern lease formats and standards for fair market rent and periodic rental adjustments. Prior to the mid 1980’s, the City’s leasing process included the active participation of a ten-member Harbor Commission. In addition to leasing activity, the Commission set policies and had an active role in managing the business of the harbor. In 1985, the City created the Harbor Department to focus property management efforts in the TTL and to assure the State TTL revenues were properly accounted for; and, in 1987, the City Council reorganized the Harbor Commission into a seven-member Harbor Advisory Board whose role became advisory-only in nature. The result of those changes was a streamlined process, more responsive to the business environment and improved lease management because Harbor Department familiarity on each lease site’s history, operator and lease terms allows for smoother lease negotiations and hastened resolution on contract interpretation and other issues. The Harbor Department has multiple, and often competing, roles in both aiding in the success of its leaseholders, while at the same time carrying out the policies,
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planning, zoning, land use, legal and insurance issues of the City. As the most informed entity, the Harbor Department will take all those factors into account when managing and administering the City’s waterfront leases.
The Harbor Department is operated through a City enterprise fund known as the Harbor Fund.
Similar to the Water and Wastewater enterprise funds, all Harbor services are funded with either user fees or property management income (no sale, property or transient occupancy tax revenues).
The Harbor Fund is the sole-source for management of the TTL leases, Harbor Patrol and various public and other facility management including maintenance, repair and capital improvements.
III. GENERAL POLICY, PURPOSE AND BENEFITS
The City of Morro Bay shall manage the TTL to provide, support and enhance harbor facilities, and must act in accordance with the stipulations of the Tidelands Grant and granting statutes asinterpreted and managed by the State Lands Commission. With those obligations fully in mind, the primary goal of this Policy will be to maximize the City’s financial return from valuable public real estate assets in a manner, which:
A. Is consistent with the City’s General Plan, Local Coastal Program, Downtown and Waterfront Strategic Plan, zoning ordinances and all other adopted plans and policies, consistent with the City’s goals of maintaining a small commercial and recreational fishing harbor, a working waterfront and visitor-serving environment,
B. Provides for, supports and enhances harbor facilities and services in a manner which its residents can be proud of,
C. Protects and enhances the environment, while serving the broader economic and recreational needs of the community,
D. Allows tenants to earn a fair return on their investments in a predictable business climate, E. Appropriately accounts for TTL revenues and expenses in compliance with State law and the Tidelands Grant, and
F. Promotes and enhances economic development to serve the Morro Bay community’s present and future generations.
IV. BACKGROUND
A. General Lease Management
Under the supervision of the Harbor Director, the Harbor Department is responsible for the negotiation of leases, the Request for Proposals (RFP) process for lease site development and redevelopment and for the day-to-day administration of the leases under this Policy.
The Harbor Director hasthe authority to interpret the provisions of the Leases and Subleases and where appropriate, in the Harbor Director’s discretion, to seek counsel from the City Attorney, City Manager or the City Council.
The Harbor Department is also tasked with the collection of rents and fees, property inspections, financial audits communications with Master Tenant and subtenants and coordinating lease activity with the administrative, community development, legal and governance (City Council) functions of the City.
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The Harbor Director, with oversight by the City Manager and guidance/direction from the City Council, will conduct negotiations with Master Tenants for new and existing leases, and manage the process for marketing vacant lease sites and sites subject to redevelopment.
The terms and conditions of the leases and/or the processes for negotiation, as adopted in this Policy, shall be observed and applied consistently throughout the TTL area. All leases, and unless otherwise provided in a lease, all amendments to leases, all license agreements and requests for proposals to develop/redevelop lease sites must be approved by a majority vote of the City Council, and the Harbor Director shall keep the City Manager and/or the City Council informed of progress, as well as to seek direction from them on specific lease issues.
In the event of a dispute between the leaseholder and the Harbor Director as to the application of policies and procedures, the parties may submit the dispute to the City Manager and/or City Council for resolution.
The Harbor Director will confer and coordinate with the Community Development Department on specific development, permitting, land use and zoning issues concerning the development, redevelopment or management of lease sites subject to this Policy. Master Tenants must work directly with the Community Development Department for use permit applications for development or redevelopment. The Harbor Director will coordinate insurance issues with the City’s Risk Manager, and legal issues with the City Attorney.
The Harbor Director approves subleases under the Consent to Sublease process providing subleases conform to the terms and conditions of the Master Lease under which they are being approved, including compliance with the uses allowed in the site’s Conditional Use and other permits, as-applicable.
B. Leasing Areas
The City recognizes there are three distinct zoning areas on the waterfront that require different considerations in leasing and lease issues; in managing waterfront development and redevelopment, the City’s leasing practices shall recognize and implement the City’s vision for the leased properties as reflected in the City’s General Plan, Local Coastal Program, Zoning Code and applicable Master Plans. The three areas from north to south are as follows:
1. Embarcadero Road from Beach Street North. This area is designated with specific voterapproved zoning known as “Measure D” to preserve commercial and non-commercial recreational fishing-dependent uses. Measure D stipulates all TTL subject to City lease between Beach Street and Target Rock be primarily for the purposes of serving or facilitating licensed commercial fishing activities, or non-commercial recreational fishing activities, or is clearly incidental thereto. Measure D further stipulates existing nonconforming restaurants or retail uses are allowed but cannot be expanded or enlarged.
The City will strongly encourage Master Tenants who propose enhancements of commercial fishing uses or marine dependent uses by considering new long-term leases that facilitate those types of projects. Leases for existing restaurant/retail sites may be amended to provide a longer term, or a new lease executed, if the Master Tenant can develop plans to maintain the lease site and improve public benefits and access, enhancing the general business environment and marine-related usesin the TTL. Within the general outlines of this Policy the City Council will provide specific direction to the City’s designated negotiator on the Morro Bay Power Plant outfall lease.
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2. Embarcadero Road from Beach Street to Tidelands Park/Public Boat Launch. In this core commercial area of the waterfront, the City controls and manages the public property on the west side of Embarcadero Road, where land and water area leases exist for commercial development. In this area, Master Tenants are encouraged to propose redevelopment of lease sites to improve public benefits, enhance the business and working waterfront environment in the TTL and renegotiate leases to modern terms.
3. Tidelands Park South Water Area Only Leases. In this area the City leases only the water areas, as the upland property and access to the water is owned and controlled by private parties. The City will encourage continuation/enhancement of marine dependent uses such as boat slips and boat repair facilities where feasible; however, this area is not suitable for large redevelopment projects.
V. LEASE ADMINISTRATION
A. Master Lease Format
The City has developed a master lease format based on modern leasing practices and similar formats used by other public agencies. The Master Lease Template attached to this Policy in Exhibit F, will be the template for all future master leases, until such time as modified by the City Council. Terms such as rental amount, term of the lease and other data or circumstances particular to an individual lease or lease site may be altered within the text of the Master Lease Template to suit a particular leasing situation. Section 13 of the Master Lease Template is for special provisions peculiar to a particular lease such as redevelopment or improvement provisions, special circumstances or other provisions not common to all Master Leases.
B. License Agreements
A License Agreement format will be used for temporary, interim or non-exclusive use of TTL property, or for regulating non lease site-based businesses operating in the TTL areas when appropriate. A separate License Agreement Policy will be used to manage License Agreements.
C. Building Leases
If a City lease site reverts to City ownership for any reason and recognizing there is a potential conflict of interest if the City is both landlord to Master Tenants and a building lease landlord competing with Master Lessees to fill vacancies on the waterfront, then the City will only enter into building leases for those sites under one or more of the following circumstances:
1. When it becomes absolutely necessary,
2. To maintain the improvements,
3. For business continuity or
4. To take advantage of an unusual opportunity.
Such building leases will be only on a short-term basis (generally three years or less), provide for fair market value terms and conditions and be in compliance with the Tidelands Trust Act.
D. Approved Uses
Only those uses as-described in Article 3 Use of Premises section of the master lease and asprovided in a City-approved applicable Conditional Use Permit or other entitlement for the lease site, all in conformance with the Tidelands Trust, will be allowed. Those uses must
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conform with the applicable City land use entitlement regulations and policies. Master Tenants proposing new uses for a lease site shall be referred to the Community Development Department of the City for review and approval through the applicable land use entitlement process; and, upon such approval, the new permitted uses of the subject lease will be incorporated into the lease by amendment.
E. Fair Market Rent
State Law requires fair market rent be charged for use of the TTL and City leases and licenses thereon. Fair market rent will be determined by the City through the use of an independent appraiser to appraise the fair market value of the leased property, and the City will set an annual rent minimum of 8% of the appraised value of the land and/or improvements if the improvements have reverted to the City. The lease will be structured to provide for a minimum annual fair market rent or a percentage of gross sales rent, whichever is greater, per the City’s adopted percent gross rent schedules included in Exhibit E.
In order maintain fair market percent rent rates, the City will periodically conduct or have conducted a percent rent rate study of then-current percent rents of other similar coastwide public agencies on an as-needed basis, and all new leases and/or applicable lease amendments will incorporate the most current percent rent rates, unless the City Council determines the public interest can be better served by a different rate.
In cases where the Master Tenant is proposing complete site redevelopment or an improvement project involving remodeling or replacement of 50% or more of the existing improvements, or of a lease site requiring significant private investment costing 50% or more of the appraised value of the property, the City may allow both temporary reductions in the outlined minimum rent to offset the Master Tenant’s period of reduced revenues during construction, as well as a reduction in the standard percentage of gross sales requirements as negotiated with the Master Tenant, on a case-by-case basis.
1. Non-Profits/Public Benefit
It is recognized both community-based non-profit organizations and public benefit entities, because of their purpose and function, provide intrinsic benefits to the City at large. Those organizations, however, must pay market lease rates on all operations/uses to provide needed revenue for the Harbor Fund, unless they provide direct or indirect benefits to the TTL areas, waterfront, or harbor community, which are sufficient to justify a reduction in rent based on the following criteria;
a) An independent fiscal and/or cost-benefit analysis is conducted, at the cost of the non-profit or public benefit organization, to quantify the direct or indirect economic or other impacts (positive and/or negative) to other businesses in the TTL, and determine if there are other (positive and/or negative) fiscal or other impacts associated with the use, including those of potential unfair competitive advantages over the private sector. Lease rates can be negotiated at less than market rate if it is determined other quantifiable direct or indirect financial, public or other benefits, as determined by the City Council.
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b) Other revenue options may be considered in establishing leases with revenue-generating non-profit entities, such as an admission tax or fee, a lease payment based on a percentage of membership fees or dues, an in-lieu sales tax fee, or any other alternative measures developed through negotiation with the City, as approved by the City Council.
2. Government
Government Master Lessees that provide coastal or marine-dependent services to the City, the bay or boating community, and enhance the quality of life of in the City should be allowed to lease space on the Embarcadero. Governmental uses may pay reduced rent based upon the limitations and restrictions of the agency and the value of the services provided by it to the City.
F. Lease Term (duration)
The appropriate term for a new lease will be determined by the City Council based generally on the size of lease site and the level of private investment proposed for the site and TTL public property. The term of a lease is primarily related to the dollar amount of the investment in improvements made on the site and TTL, and relative to the size of the lease site in relation to its revenue-generating capacity. Because of the differing values and revenue-generating potentials of the different leaseholds, the relationship of the investment to the term of the lease needs to be assessed on a case-by-case basis, and can be difficult to define in a centralized numerical formula.
Because lease and property negotiations are a fluid and dynamic environment, in negotiating the lease term the City Council may take into consideration recent past negotiations as examples of appropriate term-to-investment ratios. In addition, the City Council may also consider other relevant information in determining if a longer lease term is warranted in approving a lease, such as but not limited to, and with differing degrees of weighting the importance of each as the City Council may deem appropriate:
1. The desirability or marketability of the leasehold in question,
2. Business or revenue-generating potential of the site and improvements,
3. Useful life of the improvements,
4. Jobs potentially created by the business mix of the facility,
5. Challenges or other limitations inherent in a particular leasehold (such as land use entitlement limitations or physical conditions or obstacles to development),
6. The extent of the capital investment being expended by the potential Master Tenant,
7. If the capital investment is expected to generate above average returns to the City, and
8. The investment/redevelopment will reposition the lease site to a higher aesthetic, increase the site’s property value or inherent revenue-generating potential or increase/improve public benefits.
Capital investment can take the form of: purchase of leasehold interest and improvements; cost of remodeling and refurbishing existing improvements; the cost of new improvements/site redevelopment; the cost of public benefits; or other public improvements, provided that personal property and Tenant Improvements (or “TI’s”) will not qualify as capital investment toward measuring lease term.
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G. Lease Negotiation
Negotiations relative to leasing public tidelands shall commence and remain at the appropriate staff levels and follow appropriate chains of command, with the Harbor Director serving as the main point of contact with the prospective Master Tenant. Participation from the Administration, Community Development, Legal or Public Works departments may be necessary when issues relative to their respective departments arise.
The City Council may exercise its authority under California Government Code Section 54956.8 to meet in Closed Session to give instructions to the City’s negotiator(s) regarding negotiations for lease of real property. During the Closed Session, the City’s negotiators will be properly instructed and authorized to finalize negotiations and the lease with the prospective Master Tenant/Subtenant. Negotiations are to be conducted to the maximum extent possible in private at the staff level, prior to City Council consideration of the lease in regular open session, to avoid the City Council negotiating a lease in public.
In some cases, parties who are considering buying a Tidelands Master leasehold interest may desire to renegotiate portions of the existing lease prior to completing the sale/assignment of the lease. Normally, City staff will not negotiate with prospective Master Tenants due to the fact the City does not have a leasehold relationship with a prospective Master Tenant, and the potential impact on the “sale” price of a lease. Prospective buyers of leasehold interest are buying the existing lease agreement only.
All lease sites eventually need to be reconstructed or significantly remodeled. In general, the City desires such reconstruction to bring improvements up to then current modern building codes, design criteria, and market conditions. The City acknowledges Leaseholders will need to renegotiate leases in those instances. The normal stage for lease negotiation to commence in a reconstruction redevelopment situation is when the Master Lessee has received City Council approval of a Concept Plan for a land use entitlement (many times a Conditional Use Permit (CUP)) for the site. The project will then be at a stage when the land use entitlement approval can be attached to a lease, and the Master Tenant can be required to construct the improvements in compliance with the land use entitlement in a given period of time.
Upon execution of any new Master Lease, as a matter of course a Memorandum of Lease will be recorded with the County Clerk-Recorder for the leased property to ensure the public and any interested parties can be made aware of the existence of the lease.
H. Lease Amendment, Renewal and Extension
1. Amendment
Lease amendments may be used for various functions where the existing lease agreement is retained, including, but not limited to, the addition of time to the lease term. Master Tenant-desired amendments may be contingent on updating other sections of the lease, or a rent adjustment desired by the City, depending on the nature of the Master Tenant amendment.
Lease amendments must be consistent with the City’s then applicable land use entitlement regulations and vision for the lease site, and conform to then-current standard lease language in effect at the time, and will only be made with Master Lessees in Good Standing, as-defined herein.
A lease amendment process flow chart is included in Exhibit B.
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2. Renewal
Leases will not be renewed, as-defined herein, because automatically renewing a lease with an existing Master Lessee can lead to a false sense of private ownership of the lease site, with the consequence some Master Lessees may not maintain or reconstruct the improvements prior to the expiration of a given lease term.
3. Extension
Leases will not be extended, as-defined herein. Any additional lease term (duration) to a lease must be by lease amendment, and generally only in exchange for additional consideration from the Master Tenant. Lease “extension” is not to be confused with lease “holdover,” as defined in the individual lease agreements.
I. Lease Expiration and Termination
In general, there are three options for leases that are nearing their expiration or are terminated:
1. Advertise the lease site is available through a Request for Proposals (RFP) process.
The RFP process is addressed in Section K.
2. Keep the site in a short-term interim lease arrangement until the City Council determines its intent for lease site’s future, including but not limited to consolidation with another lease site or site redevelopment.
3. Work with the existing Master Tenant on a new, replacement lease.
In the case of an expiring lease when an existing Master Tenant proposes to continue occupancy and they desire to make additional or new capital improvements, or when the Master Tenant proposes to completely redevelop the site, they must make their intentions known to the City no less than five years prior to the expiration of their existing lease. Such a proposal must be consistent with the City’s vision for the lease site in terms of business mix, amenities and public benefits and improvements, as such vision is previously determined by the City Council. In the absence of such a proposal from the existing Master Tenant, or if such a proposal is rejected by the City Council, the City may utilize an RFP process to solicit the lease site opportunity, with the intent that such solicitation will be initiated not less than four years prior to the expiration of the existing lease, at the City’s discretion.
For a new lease request not involving significant new capital investment, other consideration, such as higher rents to the City or additional public benefits, may be employed. Additionally, the City may, with the assistance of professional property inspectors and/or the City’s Building Inspector, Fire Marshall and Code Enforcement Officer, evaluate existing facility conditions, and propose additional site capital investments that would justify a new lease with an existing Master Tenant.
Proposals for a new lease will be evaluated on a case-by-case basis upon, but not necessarily limited to, the following:
a. Master Tenant is in Good Standing, as-defined herein. b. The City desires to continue a proven, mutually beneficial leasing relationship.
c. Master Tenant’s proposal is desirable, their plan is acceptable, it matches the City’s vision and plan for the site, and is in compliance with the City’s land use entitlement regulations.
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d. Proposed capital or other improvements (including public benefits) justify amortizing the Master Tenant’s investment over a longer period of time than is available in the existing lease.
e. An older lease is to be replaced with a new lease incorporating then current modern leasing terms and fair market rates, and be consistent with the City’s vision.
f. Competitiveness or desirability of proposed lease terms.
A new lease establishment process (with an existing Master Tenant) flow chart is included in Exhibit B.
J. Rent Collection
Master Tenants must pay to the City minimum guaranteed annual rent as-stipulated in their individual lease agreements.
Additional percentage rents for the twelve-month periods ending June 30 are due by July 31 for that prior fiscal year. In order to calculate percent gross rents due, Master Tenants are required to provide records of their gross sales and/or the gross sales from their subtenants and slip tenants, with percent rents calculated per the requirements in their individual lease agreements. The calculated total dollar value of all percentage rents, minus the minimum guaranteed annual rent (but no refund if less than zero) is the amount of the percentage rent due to the City.
Acceptable payment methods are to be made by check, money order, cashier’s check, credit card or cash, received by mail or hand delivered to the Harbor Department.
Receipts will be available if payment is hand delivered to the Harbor Department.
If rent is not received within ten days following the date on which the rent first become due, then the Master Tenant must pay a late fee of ten percent of the amount of the rent, or as stipulated in the lease agreement, as well as the full rental amount due. In addition to the late fee, the Master Tenant must pay interest at the rate of one percent per month or fraction thereof, the amount stipulated in the lease agreement or the maximum amount permitted by law as of the date the lease is signed, whichever is greater, on the amount of the rent, exclusive of the late fee, from the date on which rent first became delinquent until paid.
Returned checks shall be handled by the terms of the City’s current Return Check Policy.
K. Putting Lease Sites up for a Competitive RFP Process Where it is desired to solicit competitive proposals from the public for a given lease site, a RFP process will be employed. That process can be done “in-house” with City staff or be done in conjunction with or by a real estate development broker or other qualified private party, as determined by the City Council. In general, putting a site out for public proposals shall have the following top four priorities:
1. Ensuring lease sites match the City’s plans and vision for the sites in terms of business mix, amenities and public benefits.
2. Redeveloping or upgrading lease site improvements to then current modern designs, codes and market conditions,
3. Enhance and/or maximize revenues to the City, and
4. Improved public benefits.
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A lease site RFP process flow chart is included in Exhibit B.
L. Lease Site Redevelopment and Coordination with Community Development Department When lease site remodels or redevelopments are being considered, close coordination with the Community Development Department is necessary to ensure consistency with the City’s policies, plans, zoning and economic development goals and objectives, especially where multiple site consolidation is under consideration.
In addition, past land use entitlements and history on a given site will be consistently interpreted and applied to future development and use, which can only be established with close inter-departmental coordination.
M. Lease Site Consolidation
Lease expiration dates may be established to coincide where adjoining sites might have mutual planning benefits. In some cases, the City may not add time to the term of an existing lease, either for the purpose of consolidating sites or to pursue other extenuating public benefit.
Lease site consolidation may be considered in instances where:
1. Opportunities exist for financial economies of scale not otherwise achievable with smaller sites,
2. Achieving long-term planning goals as identified in the City’s General Plan, Local Coastal Program and various master plans,
3. Policy implementation, or
4. Realizing desired public amenities or benefits.
N. Lease Site Monitoring, Inspection and Maintenance
1. Lease Site Monitoring and Inspection
The City has a paramount interest in ensuring the improvements on the City’s lease sites are being properly maintained and are in a safe and secure condition. The City shall have the lease sites inspected and a report made on such inspections at least every five years, or as often as the Harbor Director or City Manager deems necessary, with approximately one-fifth of the lease sites inspected every year on a rotating basis. A checklist for lease site criteria is included in this Policy under Exhibit G. In conducting lease site inspections, the City may utilize any or all of the following:
a. Harbor Department staff,
b. Fire Marshall,
c. Building Inspectors,
d. Code Enforcement Officers, including reports from agencies such as County Health and others,
e. Private Contractors, and
f. Other resources as-identified
City staff will require deficiencies noted in the lease site inspection reports to be repaired or cured by Master Tenants in a timely manner, depending on the nature and urgency of the deficiencies identified. Any deficiencies that pose, in the sole determination of the Harbor Director, in consultation with the Building Official and/or Fire Marshall, a public or life-safety issue must be cured immediately.
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Ultimate disposition of any uncured deficiency will be handled according to the provisions in the individual lease agreements.
As long-term leases draw close to expiration, there can be a tendency for maintenance deferment. The City must carefully monitor and strictly enforce lease maintenance provisions to protect the reversionary interest in the lease site improvements. Site inspections shall be conducted with appropriate and reasonable advanced notification.
2. Maintenance of Improvements and Leased Premises
Unless otherwise provided in individual lease agreements, Master Tenants are solely responsible for the upkeep and maintenance of the leased premises and improvements, including any seawalls and/or revetments, and must, at the Master Tenant’s sole cost and expense, repair, replace, restore and otherwise maintain the leased premises and all improvements thereon in a fully functional, safe and secure condition per the terms of their leases.
In addition, Master Tenants must, at all times during the term of their leases, repair, keep and maintain the interior and exterior appearance of their premises and improvements in good, clean, vermin-free and sanitary order. Such repair and maintenance will include, but not necessarily be limited to, removing all obstructions, trash, debris, vermin and refuse, and maintaining improvement appearance and landscaping in an attractive manner.
For all maintenance and repair performed under the provisions of a lease agreement, Master Tenants must comply with all applicable laws, codes, ordinances, regulations and requirements of any governmental agency having jurisdiction over the leased premises. Ultimate disposition of uncured deficiencies will be handled according to the provisions in the individual lease agreements.
3. Maintenance of Public Spaces, Common Areas, Rights-of-Way and Sidewalks Public spaces, common areas, rights-of-way, sidewalks and other areas or spaces not necessarily on a given lease site’s premises, but utilized as part of a lease site’s business operations (the path of travel for a site’s dumpsters to the roadway for collection, for example) will be cleaned and kept free of litter, debris and contamination, and maintained without surface contamination in a “broom clean” condition at all times by the Master Tenants utilizing those areas.
O. Environmental Considerations
Lease negotiations shall be consistent with the City of Morro Bay’s intent to be protective of natural and human resources in and around Morro Bay Harbor. Leases should specifically include or incorporate by reference applicable environmental regulations that may include, but not be limited to, boater and/or marina Best Management Practices, the Clean Marina Program, or similar programs and initiatives of the Morro Bay National Estuary Program.
P. Lease Terms and Site Entitlement Compliance
The City will monitor compliance with, inspect for and ensure compliance with all lease terms, conditions and provisions on an ongoing basis. In addition, as part of the five-year site inspections, the City will inspect for and ensure compliance with Master Lessee adherence to all entitlements (permits and permit conditions, including sign permits) associated with the premises and improvements.
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Deficiencies noted in the lease terms or entitlements must be repaired or cured by Master Tenants in a timely manner, depending on the nature and urgency of the deficiencies identified. Ultimate disposition of uncured deficiencies will be handled according to the provisions in the individual lease agreements.
Q. Percentage of Gross Sales Audits
Without limiting the City’s right of audit and oversight contained in its individual lease agreements, it will be the City’s policy to require the annual submission to the City of all applicable business sales tax records as-submitted to the State of California, in addition to the hotel room night sales and transient occupancy tax (“TOT”) payments as-submitted to the City, with the Master Tenant’s annual percent gross sales reports each year. Harbor Department staff, with the assistance from the Finance Department and/or other resources, will annually audit the submitted documents for accuracy against each other, and with the sales tax records received by the City from the State and the City’s sales tax reporting service.
The disposition of any amounts owed or owing will be handled in accordance with the terms in the individual leases themselves.
While sales tax reporting, TOT reporting and percent gross reporting should match in terms of sales numbers reported, discrepancies between the reporting will be handled as follows:
1. Any discrepancy that constitutes a difference in gross receipt reporting versus sales tax and/or TOT reporting of less than 5% will result in no further auditing action.
2. Any discrepancy that constitutes a difference in gross receipt reporting versus sales tax and/or TOT reporting of 5% or more will result in City taking whatever further auditing action is necessary to satisfy City the amounts reported are correct, including but not limited to conducting a full traditional financial audit.
For lease sites that have sales or revenues that are not subject to sales tax or TOT, those sales will be subject to traditional financial auditing every three years as-follows:
1. The non-taxable sales of one-third of the sites with such sales will be audited each year on a rotating basis, with sites chosen to reflect approximately one-third of the total non-taxable sales in the TTL, and
2. Each audit will select any one or more of the immediate past three years to review.
In any event, the City reserves the right to conduct a full traditional financial audit of any lease site, within the limits of any lease agreement’s terms, should, in the City’s sole determination, such an audit be justified.
R. Lease Sale, Assignment and Assumption
All City leases require City Council approval for the sale or assignment and assumption of a lease agreement. Any Master Lessee requesting such approval will be required to:
1. Pay the appropriate fees noted in the City’s Master Fee Schedule,
2. Complete the appropriate forms,
3. Submit financial and other documentation to indicate the qualifications and experience of the proposed Leaseholder to the satisfaction of the Finance Director, Harbor Director and City Attorney,
4. Be a Master Lessee in Good Standing, as defined herein, in full compliance with the terms and conditions of their lease agreement, and
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5. Provide proof of proposed Master Tenant’s City of Morro Bay current valid business license/tax certificate, general liability insurance and all applicable governmental licenses.
If the proposed assignment or sale includes a change in use of the site, then the change in use shall be reviewed by the Community Development Department for conformance with planning and zoning regulations. Proposed changes in uses for lease sites must comply with the City’s land use entitlement regulations, including, but not limited to, the adopted General Plan, Local Coastal Program, and Measure D’s limitations for properties north of Beach Street. Where zoning allows a variety of uses, whenever possible preference will be given to coastal-related uses.
S. Sublease Approval
All leases require City approval of subtenant/sublease agreements. Any Master Lessee requesting subtenant approval will be required to:
1. Pay the appropriate fees noted in the City’s Master Fee Schedule,
2. Complete the appropriate forms,
3. Submit documentation to indicate the qualifications and experience of the proposed subtenant to the satisfaction of the Harbor Director,
4. Submit a properly executed copy of the City’s standard Consent to Sublease/ Subtenant Agreement,
5. Submit a copy of the proposed subtenant/sublease agreement between the Master Lessee and subtenant, and
6. Obtain proposed subtenant’s City of Morro Bay current valid business license/tax certificate, general liability insurance and all applicable governmental licenses.
T. Financial Criteria and Financing Considerations
In making a determination of whether or not a Master Tenant, proposed Master Tenant or Subtenant is a financially acceptable partner the City wishes to do business with, the City will use any or all of the following criteria:
1. Experience and history in commercial leasing situations, property management and development/redevelopment,
2. Demonstrated financial capacity and capitalization,
3. Financial strength and current relationships with financing sources, including credit scores,
4. History, if any, of defaults, bankruptcies or litigation that indicates a bad partnership risk, and
5. Properly and professionally-prepared business plans and/or financial proformas with industry-standard elements expected of such documents.
While there is the need to foster financing, refinancing and investment on the waterfront, while protecting the City’s interests and fiduciary responsibility, the City will not approve financing related to or using the lease site, or leasehold interest as collateral, unless such financing is for sole investment upon the TTL, for City-requested public improvements or benefits in the TTL or to reduce the interest rate of existing debt secured by the lease.
15 | P a g e
U. Force Majeure
1. In response to a declared local, State or Federal emergency, the City Manager or City Council may suspend any portion of this lease policy. Additionally, the City Manager or City Council may adopt temporary lease policies and strategies to address the declared emergency, and will determine the period of calendar time such temporary policies and strategies would be in effect.
END OF POLICY
EXHIBITS FOLLOW
>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>
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VI. Exhibits to Policy (Exhibits B, C, D and G subject to administrative change without notice) A. Definitions and Acronyms
1. Allowed Use: a use that is allowed on a lease site per that site’s Master Lease, but that must also be an approved use per that site’s various land entitlement use permits.
2. Annual Minimum Rent: also known as “Minimum Rent” or “Base Rent.” The minimum rent charged a Master Tenant on an annual basis for use of the premises.
The Annual Minimum Rent is established as a percentage of the Appraised Value of the property, as-defined, and established in individual lease agreements.
3. Appraised Value: the estimated fair market value of a subject property asdetermined by a qualified commercial property appraiser. Assumptions made for appraising a leasehold property are:
a. “Fair market value” is the most probable price in terms of money which a property should bring in a competitive and open market under all conditions requisite to a fair sale, the buyer and seller, each acting prudently, knowledgably and assuming the price is not affected by undue stimulus. b. The property rights appraised are those of the fee simple interest in the subject property as if free of all liens, leases and encumbrances. c. The subject property is vacant and available for development to its highest and best use.
4. Approved Use: a use that is approved on a lease site per that site’s various land entitlement use permits, including but not limited to Conditional Use Permits, Temporary Use Permits or Minor Use Permits.
5. Base Rent: also known as “Annual Minimum Rent” or “Base Rent.” See “Annual Minimum Rent.”
6. Building Lease: a lease in which the City owns and maintains the building and improvements, and tenants lease space on a monthly or annual basis and perform their own Tenant Improvements.
7. City Council, Departments and Staff: all references in this document to City Council, Departments or Staff refer to the Council, Departments and Staff of the City of Morro Bay, California.
8. Closed Session: A meeting of the City Council to discuss confidential matters, asallowed by law, such as litigation, employee relations or property/lease negotiations, conducted in private without the attendance of the public to avoid revealing information that could jeopardize the public interest and City’s position on those matters.
9. Coastal Development Permit: a permit for any development within the Coastal Zone that is required pursuant to subdivision (a) of Section 30600 of the California Public Resources Code.
10. Concept Plan: a basic conceptual development plan for a property requiring approval from the Planning Commission and City Council to move forward to full permitting approval and construction.
11. Conditional Use Permit or “CUP”: a use that is generally compatible with other uses permitted in a zoning district, but that requires individual review of its location, design, configuration, and intensity and density of use and structures, and may require the imposition of conditions pertinent thereto to ensure the appropriateness of the use at that particular location.
12. Downtown Waterfront Strategic Plan: the purpose of this Strategic Plan is to connect and enhance Morro Bay’s downtown and waterfront areas and provide a
17 | P a g e
more uniform feel to each district. The Strategic Plan summarizes the outcomes of a community-based visioning process and will serve as a guide for private development and public investment and decision-making over the downtown and waterfront areas.
13. Fair Market Rent: the rent charged a tenant (through negotiation) based on the Appraised Value of the leased property and including Percent Gross Sales Rent in the case of a Ground Lease. Ground Lease Annual Minimum Rent is typically set at 8% of the Appraised Value of the leased premises. In the case of a Building Lease, the rent charged a tenant will be based on current average waterfront per-squarefoot space rent rates.
14. Fair Market Value: see “Appraised Value.”
15. General Plan or “GP”: the City’s comprehensive, long-term plan for the physical development of the City.
16. Ground Lease: a long-term lease of land only, with improvements that are built by the lessee that usually revert to the City at the termination of the lease.
17. Harbor Fund: a fund of the City of Morro Bay with revenues and expenditures separate from the City’s General Fund, managed by the Harbor Department as an enterprise fund to account for all revenues and expenses connected with the operation of the harbor in accordance with the Tidelands Trust Land granting statutes. The sole sources for all Harbor Fund revenues are lease site minimum and percent gross of sales rents and boating and boating facility-related fees.
18. Holdover: occupancy of the leased premises after the lease term has expired, in accordance with the terms of the individual lease agreements.
19. Interim Lease: a short-term lease, typically five years or less, executed for an intervening period of time while a lease site’s future is being contemplated or developed.
20. Internet Sales: sales physically conducted on the internet, although conducted as part of a business entity on a lease site.
21. Lease Amendment: any formal revision or change to an existing lease by adding, deleting or changing a provision, or by modifying the wording.
22. Lease Assignment: transfer by sale or other arrangement of a leasehold interest from a Master Lessee to a new owner. All such assignments must be approved by the City Council. Also referred to as “Assignment and Assumption.”
23. Leases Assumption: see “Lease Assignment.”
24. Lease Extension: the continuation of an existing lease with no changes in its terms and conditions other than providing a longer period of time (term) for which the lease is valid. “Extension” is not to be confused with nor affect lease “holdover,” as defined in individual leases.
25. Lease Renewal: the exact re-creation of an existing lease that is expiring with no changes to that lease, including duplication of the original term.
26. Lease Term: the period of time in which a lease agreement is valid.
27. License Agreement: an agreement for use of public property that does not convey the typical exclusive use or rights as in a lease agreement.
28. Local Coastal Program or “LCP”: the documents included in the LCP implement the California Coastal Act at the local level in Morro Bay. This includes addressing all major policy topics of the Coastal Act, incorporating analysis needed to support coastal policies and incorporating local context in conjunction with the legal requirements of the Coastal Act.
29. Master Lease: the ground lease agreement or contract held by a Master Tenant for rightful possession of the City’s Tidelands Trust Land lease sites along the Embarcadero.
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30. Master Lease Template: the City Council-approved “standard” lease agreement from which all lease negotiations for new leases are to be initially based.
31. Master Tenant: the tenant or lessee named in a lease agreement who holds or possesses a given leasehold.
32. Master Tenant in Good Standing: the Master Tenant has a good history of performance and lease compliance and the improvements on the site are well maintained. Example standards for determining “good history” of Master Tenant performance are:
a. The Master Tenant’s record with respect to the prompt and accurate payment of rent and related fees due the City, and cures any audit discrepancies in a timely and appropriate manner;
b. Master Tenant maintains accurate and complete financial records in accordance with the lease agreement that are made accessible to the City and/or City’s auditors when requested;
c. The Master Tenant’s record of compliance with existing lease conditions, and corrective measures for any non-compliance issues taken in a timely manner;
d. The appropriateness of the proposed Master Tenant business and/or subtenants with respect to the long-term planning and vision goals of the City;
e. The Master Tenant’s financial and personal investment in the leasehold improvements, Master Tenant business and overall management of the site; f. Master Tenant has proven investment and maintained accurate financial records for the amounts committed in the lease for redevelopment, remodeling and/or improvements;
g. The contribution to the surrounding business community made by the Master Tenant’s business;
h. The quality and value of goods and services provided to the public by the Master Tenant, their tenant and/or its subtenant(s);
i. The Master Tenant has obtained, maintained and remained in compliance with all required permits and entitlements;
j. The total financial return (revenue) to City from the leasehold is maximized and within industry norms;
k. Other pertinent considerations as may be appropriate as determined by the City Council.
33. Measure D: a 1981 land use ordinance of the City of Morro Bay restricting lease site development and use between Beach Street and Target Rock to those uses “primarily for the purpose of serving or facilitating licensed commercial fishing activities or noncommercial recreational activities.”
34. Minimum Rent: also known as “Annual Minimum Rent” or “Base Rent.” See “Annual Minimum Rent.”
35. Minor Use Permit or “MUP”: a discretionary permit which may be granted by the appropriate City of Morro Bay authority to provide for the accommodation of land uses with special site or design requirements, operating characteristics, or potential adverse effects on surroundings, which are not permitted by right, but which may be approved upon completion of a review process and, where necessary, the imposition of special conditions of approval.
36. Percent Gross Sales Rent: rent based on a percentage of a tenant’s gross sales according to Exhibit E. Percent gross rent is typically only owed in the amount the percent gross rent exceeds the annual minimum rent.
37. Sublease: a lease to a third party, commonly known as a subtenant, by a Master Tenant, conveying some or all of the Master Tenant’s leased property.
19 | P a g e
38. Subtenant: a third-party tenant or lessor that enjoys a sublease.
39. Temporary Use Permit of “TUP”: a discretionary permit which may be granted by the appropriate City of Morro Bay authority to provide for the accommodation of land uses with special site or design requirements, operating characteristics, or potential adverse effects on surroundings, which are not permitted by right, but which may be approved upon completion of a review process and, where necessary, the imposition of special conditions of approval.
40. Tenant Improvements or “TI’s”: removeable personal or business property or trade fixtures affixed to leased premises for business purposes that the tenant can detach and take away.
41. Tidelands Trust Land or “TTL”: those properties on Morro Bay’s waterfront and surrounding areas, in some cases formerly underwater and filled, owned by the public and held in trust by the City for the people of the State of California. Per the California Constitution and State Law, those properties are to be used in furtherance of navigation, commerce, fisheries, environmental protection, recreation and open space.
20 | P a g e
B. Flow Charts
I. New Master Lease
II. Sublease Approval
III. Lease Amendment
IV. Assignment and Assumption (lease sale)
V. Expiring Lease/Lease Site Redevelopment
VI. Consent to Encumber (loan) Approval
(immediately following this page)
Exhibit B
NEW MASTER LEASE - Flow Chart
Master Tenant meets with Harbor Staff to discuss need and proposed new lease.
Is the Tenant in Good Standing, in compliance with all terms of the existing lease agreement, and is the new lease needed and/or justified in Harbor Staff's view?
Tenant to get into Good
Standing, and/or revise
Tenant’s proposal and
resubmit.
Tenant makes formal written proposal and submits application.
Is the application complete with current fee paid, and the following provided by Tenant:
a. Statement of qualifications, experience and proposed operation for lease site
b. Financial report and current credit report with credit score rating
c. Proof of application for City business license at proposed location
d. Proof of general liability insurance with endorsements Tenant meets with Harbor Staff to discuss proposed new lease, approval process, tentative City Council meeting dates.
Concurrently, submitted financial documentation sent to Finance Department for evaluation.
Harbor Staff schedules Closed session with the City Council for initial review and direction. Does Tenant-submitted documentation pass staff and City Council evaluation, and does City Council agree with new lease?
Application incomplete
and/or fee not paid.
Revise and resubmit.
Revise new lease for
reconsideration or
withdraw.
Revise and
resubmit.
New lease is negotiated with Tenant based on City Council direction, and any necessary accompanying documents are drawn-up by the Harbor Department and approved by the City Attorney.
Appropriate City Council meeting date is chosen, and new lease scheduled for approval.
Is the new lease approved by the City Council?
Congratulations, new lease executed!
Memorandum of Lease sent to San Luis Obispo County for recording.
NO
NO
NO
NO
YES
YES
YES
YES
YES
YES
Exhibit B
SUBLEASE APPROVAL - Flow Chart
Master Tenant meets with Harbor Staff to discuss new
proposed Subtenant. Does the proposed Subtenant’s
business conform with the allowed uses in the Master
Lease and existing use permits at the lease site area?
May submit to the
Community
Development
and/or Harbor
Department(s) to
change their
allowed and
approved uses
and resubmit.
Tenant submits application. Is the sublease application complete with current fee, executed lease between Tenant & proposed Subtenant, consent to sublease agreement
executed by Tenant & proposed Subtenant, statement of
qualifications, experience and proposed operation for lease site, proof of application for City business license and certificate of general liability insurance with endorsements at proposed location? Is Tenant in compliance with all terms of existing master lease agreement?
Harbor staff to review all submitted documents for
compliance with zoning, use of lease and all application requirements. Are documents submitted complete?
Application is
incomplete.
Revise and
resubmit.
Harbor Director to execute consent to sublease provided by Tenant & Subtenant. Sublease complete, congratulations! Application is
incomplete.
Revise and
resubmit.
NO
NO
YES
YES
YES
NO
Exhibit B
LEASE AMENDMENT - Flow Chart
Master Tenant meets with Harbor Staff to discuss need and proposed amendment.
Is the Tenant in Good Standing, and is the amendment
needed and/or justified in Harbor Staff's view?
Amendment or
Tenant can appeal
decision to the City
Manager
Tenant makes formal proposal and submits application.
Is the application complete with current fee and Tenant's statement of proposed amendment?
Tenant meets with Harbor Staff to discuss proposed
amendment, approval process, tentative City Council
meeting dates
Complete
application.
Revise and
resubmit.
Harbor Staff schedules Closed session with City Council for initial review and input.
Does Council agree with amendment?
Amendment language is negotiated with Tenant, and any
necessary accompanying documents are drawn-up by the
Harbor Department and approved by the City Attorney.
Amendment.
Revise and
resubmit.
Next available City Council meeting date is chosen and
amendment scheduled for approval.
Amendment approved as-proposed?
Approved amendment provided to Tenant for signatures and execution.
Approval. Revise
amendment for
reconsideration or
withdraw.
YES
YES
NO
NO
NO
YES
YES
YES
YES
NO
Exhibit B
ASSIGNMENT & ASSUMPTION - Flow Chart
Master Tenant meets with Harbor Staff to discuss
proposed assignment and assumption.
Is the Tenant in Good Standing?
Assignment until Tenant
is in good standing, or
proposed Assignee to
correct deficiencies.
and resubmit.
Tenant and proposed Assignee meet with Harbor Staff to discuss City’s leasing practices and policies, the assignment and assumption process and to make a formal proposal and submit an application.
Is the application complete with current fee?
City Staff review documents received from Assignee relative to statement of qualifications, experience and proposed operation for lease site, current credit report with credit score rating and financial report and other necessary documentation.
Is Assignee a financially acceptable partner the City wishes to do business with as determined by Staff?
Tenant and Assignee meet with Harbor Director to review timelines, potential City Council approval dates for assignment and assumption and necessary documents to execute the assignment.
Assignment and assumption negotiated, and any necessary accompanying documents are drawnup. The next available City Council meeting date is chosen, and assignment and assumption is scheduled for approval.
Complete
application.
Revise and
resubmit.
Revise assignment and
assumption for
reconsideration or
withdraw.
Not
qualified
with
provided
documents.
Revise and
resubmit.
Assignment and assumption taken to the City Council for approval.
Assignment and assumption approved as-proposed?
Assignment and assumption executed. Memorandum of Lease under Assignee provided to Tenant and Assignee for notarized signatures and execution.
NO
NO
NO
NO
YES
YES
YES
YES
YES
Exhibit B
Expiring Lease/Lease Site Redevelopment – Flow Chart
Lease is expiring in ~5 years. Does the existing Tenant have a proposal to retain/redevelop the site, and is Tenant in Good Standing?
Master Tenant meets with Harbor Staff to
discuss proposal. Does Staff believe the
proposal is acceptable for development?
Tenant and Staff meet to discuss proposal, approval process, tentative City Council meeting dates. Tenant prepares basic project architectural renderings and proposal narrative for presentation to City Council for Consent of Landowner (COL) approval.
Tenant submits plans to Community Development
Department for Concept Plan approval process with
the Planning Commission.
Complete
application / fee.
Revise and
resubmit.
Revise and resubmit,
or go to RFP.
Project plans and proposal narrative brought to City
Council for consideration of COL approval. Does City
Council approve COL?
Tenant plans brought to Planning Commission
for Concept Plan approval. Plans approved by
the Planning Commission?
Revise
and
resubmit.
Tenant submits application to the Harbor Department for a long-term lease, including payment of appropriate fee. Is the application complete with current fee paid?
Tenant negotiates long-term lease with staff based on site redevelopment plans, including bringing draft terms and conditions to City Council in closed session for direction. Concurrently, Tenant seeks California Coastal Commission and other necessary permit approvals of their Concept Plan.
Congratulations, new lease!
Negotiated long-term lease brought to City Council for approval.
Does City Council approve long-term lease?
With direction received from the City
Council staff prepare Request for
Proposals (RFP) bid package for public
solicitation of redevelopment
proposals on lease site.
RFP package brought to City
Council for approval of
issuance. Any Councilrequested changes made asappropriate.
RFP advertised with City's
requirements and
Proposer submittal
deadline.
Collect proposer submittals
and good faith deposit checks.
Perform initial staff review
of proposals received for
compliance with the RFP
requirements and deposit
good faith checks.
Were sufficient,
compliant proposals
received?
Selection Panel
recommendations brought to
City Council for consideration
of Consent to Landowner
approval.
Consent of Landowner
approved?
Convene Selection Panel to conduct review,
evaluate and rank proposals, including
interviewing Proposers. Selection Panel ranks
proposals and provides Primary and
Secondary Proposer recommendations to the
City Council.
Replace “Tenant” with
“Proposer” in next steps
and follow process
forward.
Bring RFP package
to City Council for
consideration.
Revise and
meet in the
future.
Revise and
resubmit, or
go to RFP.
Revise
and
resubmit.
Harbor Staff to prepare concept presentation for City
Council. Proposal concept brought to City Council for
consideration. Does City Council approve of the concept, or a modified concept Tenant agrees to?
NO
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
NO
NO
NO
NO
NO
NO
Exhibit B
CONSENT TO ENCUMBER APPROVAL - Flow Chart
(Loan)
Tenant meets with Harbor Staff to discuss need to encumber their leasehold interest.
Is the Tenant in Good Standing, in compliance with all terms of the existing lease agreement, and is the need justified in Harbor Staff's view?
Tenant to get into
Good Standing and
resubmit, and/or may
appeal to the City
Manager.
Tenant submits application with current fee for Council approval. Is application complete?
Application
incomplete and/or
fee not paid. Revise
and resubmit.
Memorandum is
drafted and may be
recorded concurrently
with closing of loan
documents.
Harbor Staff schedules item for the next available City Council Consent Calendar for approval. Staff drafts staff report and Resolution with Tenant’s requested loan amount and Lender information. Does Council approve?
Is there a current memorandum of lease recorded with San Luis Obispo County?
May appeal
to City
Council in
writing.
Consent to Encumber is drafted by Staff and executed to be provided to the Title Company. Tenant to provide a draft Deed of Trust for City approval.
Is the Deed of Trust approved by City?
Once the loan is funded. Tenant is required to provide the City with the executed, recorded, final Deed of Trust.
Tenant and Tenant’s Bank
to resubmit Deed of Trust
with City approved
language.
NO
NO
NO
NO
NO
YES
YES
YES
YES
YES
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C. Maps/Surveys
(immediately following this page)
Exhibit C
Exhibit C
102
102W
Exhibit C
90 89
87-88
93-95
86 82-85
96 Anchor Park
96W
93W-95W
91W-92W
90W
102W
87W-88W
86W
82W-85W
91-92
Exhibit C
82-85 82W-85W
71W-74W 71W-74W
71-72-73-74
69-70
68 67
62 75-76-77
57-58-59-60-61
75W-76W-77W
71W-72W-73W-74W
68W
65-66
63-64
69W70W
62W
65W66W
57W-58W-59W-60W-61W
62W
57W-58W-59W-60W-61W
Exhibit C
53W-54W-55W-56W
52 50-51
50W-51W
52W
50W-51W
Exhibit C
Exhibit C
34W
Exhibit C
Exhibit C
22 | P a g e
D. City of Morro Bay Zoning Map
(immediately following this page)
GOLF COURSE
OA-1/PD
OA-2/PD
H
H
H
R-1/S.2
H R-1
OA-1
OA-1
OA-2/PD
AG
OA-1/PD
R-1/S.2
R-2
AG
R-1/S.1
SCH
C-1/S.4
M-2/PD/I
R-A/PD
R-A/PD
R-1
R-2
R-4
OA-1/R
CF/PD
R-1/S.2
R-1/S.2A
H
R-A
OA-1/PD
R-1
R-2
M-1/PD/I
R-1/S.2A
CRR/GC/PD
R-2
OA-1
C-1
C-1
R-A
R-2
R-1
C-2
C-VS
M-1/I
C-VS/PD
C-VS
M-2/PD/I
MMR/CRR/GC(PD)
R-2/PD
G-O/S.4
R-4/PD
R-2
R-1/PD
C-VS
OA-2/PD
ESH/R
R-2
R-1
R-4
MCR/R-4/SP
OA-2/PD
M-1/PD/I/SP
R-2/PD
R-3/PD/SP
M-1
(PD/1)
C-VS/PD/
S.4
C-1/C-2
WF/PD/S.4
R-2
R-4/SP
OA-2/PD
C-2/S.4
R-2/PD/S.4
C-1/S.4/
PD
OA-1/PD
MCR/S.4
MCR/R-4/SP
OA-2/CF/PD
WF/PD
R-1/PD
R-3
R-2
M-2/PD
C-VS/PD/SP
R-3
R-2/
PD/
SP
C-1/R-4/
S.4
C-1/S.4/
PD
OA-2/PD
R-4
OA-1
C-1/R-4
OA-2/PD
C-2
C-VS/R-3/
PD/S.4/S.6
R-2/PD/SP
R-4
OA-1/PD
C-VS/PD
C-2/PD/
SP
C-VS/SP
M-1/PD/I
OA-1
OA-1
R-4/S.4
C-VS/S.4
R-1/PD/S.2B
C-VS/PD/
S.3/S.4
OA-1
M-2
C-VS/R-4
OA-1/PD
R-3/S.3
R-4/SP
MCR/R-4/PD/SP
C-1/C-2/SP
R-1/S.1/SP
OA-1/PD
G-O/R-2/PD
R-1/S.1/SP
C-1/S.4/
S.6
M-2/PD
C-VS/S.3/S.4
M-1/PD/I
C-VS/PD/
S.4/SP
CRR/CRR/GC/PD
Kern Ave.
Kings Ave.
Piney Way.
San Jacinto St.
Radcliff Ave.
Ironwood Ave.
Elena St.
Sandalwood Ave.
Coral Ave.
Market Ave.
Main St.
Avalon St.
Greenwood Ave.
Harbor St.
Highway 41
Ridgeway St.
Bonita St.
Pacific St.
Easter St.
Yerba Buena St.
Embarcadero Rd.
Marina St.
Front St.
Quintana Rd.
Kennedy Way.
Atascadero Rd.
Highway 1 .
Highway 1 .
Highway 1
Panorama Dr.
Marengo Dr.
Main St.
Zanzibar Terrace Dr.
Surf St.
Madera Ave.
Luisita St.
Morro Bay Blvd.
Hill St.
Laurel Rd.
Cabrillo P l.
Dunes St.
Ko aAve.
Prescott Dr.
Selby St.
Pico St.
Downing St.
Cuesta Ave.
San Joaquin St.
South St.
Sequoia St.
Olive St.
Sunset Ave.
Clarabelle Dr.
Quintana Pl.
Beach St.
Napa Ave.
Beachcomber Dr.
Anchor St.
Gilbert St.
Tide Ave.
Bernardo Ave.
Tusc an Ave.
La Loma St.
South Bay Blvd.
Oak St.
Fig St.
Cypress Ave.
Formosa St.
Pecho St.
Driftwood St.
State Park Rd.
Sienna St.
Orton St.
Nassau St.
Paula St.
Conejo St.
Kern Ave.
Hillview St.
Walnut St.
Monterey Ave.
Morro Ave.
Norwich Ave.
San Juan St.
Elena St.
Whidbey St.
Nevis St.
Damar St.
Laurel Ave.
Carmel St.
Bella Vista Dr.
Capri St.
Acacia St.
Dunbar St.
Casitas St. Hatteras St.
Bali St.
Ironwood Ct.
Andros St.
Terra St.
Zanzibar St.
Allesandro St.
Palm Ave.
Alta Ct.
Las Tunas St.
Marina St.
Center Ct.
Butte Ave.
Sierra Ct.
Pelican Dr.
Vista St.
El Morro Trailer Ct.
Monterey Alley .
Mindoro
Way
Orcas Way.
Coral St.
Bay Ave.
Rockview St.
Piney Ln.
Reno Ct.
Vashon St.
Juniper Ave.
Estero Ave.
Dana Way.
Agave Dr.
Toro Ln.
Java St.
Jamaica St.
Island St.
Ironwood Place .
Kodiak St.
Sicily St.
Orcas St.
Panay St.
Tahiti St.
Balboa St.
Rennel St.
Trinidad St.
Oahu St.
Luzon St.
Fresno Ave.
Verdon St.
Mindoro St.
Morro Bay Alley .
Hillcrest Dr.
Park St.
Azure St.
Preston Ln.
Bradley Ave.
Whidbey Way.
West Ave.
Market Ave.
Berwick Dr.
Crest St.
Barlow Ln.
Fairview Ave.
Arcad ai Ave.
Tulare Ave.
Arbutus Ave.
Fir Ave.
Morro Cove Rd.
Cerrito P l.
Ironwood Ave.
Coral Ave.
Maple Ave.
Elm Ave.
Blanca St.
Surf Alley .
Dogwood Ave.
Dawson St.
Mobile Home Park .
Cedar Ave.
Alder Ave.
Birch Ave.
Hemlock Ave.
Atascadero Rd.
Mimosa St.
Bolton Dr.
Nutmeg Ave.
Las Vegas St.
Scott St.
Mesa St.
Ponderosa St.
Bayview Ave. La Jolla St.
Bayshore Dr.
Teresa Rd.
Quintana Rd.
Em e rald Cir.
Oceanside Rd.
Little Morro Creek Rd.
Indigo Cir.
CITY OF MORRO BAY ZONING
Primary Zoning Districts
Areas with multiple zoning districts are fully
labeled with the more restrictive zone colored.
Overlay Zones, Combining Districts
S.3, Special Mixed Use
S.4, Design Criteria
S.5, Precise Plan Area
S.6, Combining Districts
PD, Planned Development
S.1, Special Building Site & Yard Standards
S.2A, Special Building Site & Yard Standards
S.2, Special Building Site & Yard Standards
M, Mobile Home
R, Restricted
I, Interim Use
UV1
ESH, Environmentally Sensitive Habitat
City Limit
R-A, Suburban Residential
R-1, Single Family Residential
R-2, Duplex Residential
R-3, Multiple-family Residential
R-4, Multiple Residential-Hotel-Professional
C-1, Central Business
C-2, General Commercial
C-VS, Visitor Serving Commercial
MCR, Mixed Commercial/Residential
G-O, General Office
M-1, Light Industrial
M-2, Coastal Dependent Industrial
H, Harbor
CF, Commercial/Recreation Fishing
WF, Waterfront
SCH, School
AG, Agriculture
OA-1, Open Area 1
OA- 2, Open Area 2
CRR, Coastal Resource Residential
MMR, Mariculture and Marine Research
SP, Specific Plan
S.2B, Special Building Site & Yard Standards
0 0.25 0.5 0.75 1 0.125 Miles
¹
UV1
UV1
UV1
Source: City of Morro Bay 1995, LCP 3-95 certified 1997 (Published April 2019) Exhibit D
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E. Percent of Gross Sales Rent Schedules A & B
SCHEDULE A
PERCENTAGE RENT FOR GROUND LEASES
SALES % GROSS
FOOD SERVICE: Restaurant, Dining Room 3-5
Snack Bar, Delicatessen, 5
Fast Food, Convenience Food 5
Bar/Lounge, Beer & Wine Sales 10
RETAIL SALES & SERVICE: Tenant 3-5
FISH & SEAFOOD: Retail Sales 3-5
Wholesale Sales 0
MOORINGS, TIES & SLIPS: Pier/Fixed Piles 10
Pier/Floating 10
BOAT REPAIR & SALES: Boat & Marine Repair 3
New Boat Sales 1
Used Boat Sales 2
FUEL: Gasoline $0.02/gal.
Diesel
$0.015/gal.
HOTEL/MOTEL: 5-9
ALL OTHER USES: 5
Percentage Rental is to be based on the gross amount received from any and all sources of income derived from the lease site.
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SCHEDULE B
PERCENTAGE RENT FOR BUILDING LEASES
SALES % GROSS
FOOD SERVICE: Restaurant, Dining Room 5
Snack Bar, Delicatessen, 7
Fast Food, Convenience Food 7
Bar/Lounge, Beer & Wine Sales 10
RETAIL SALES & SERVICE: Tenant 7
Sublease 7
FISH & SEAFOOD: Retail Sales 5
Wholesale Sales 0.5
MOORINGS, TIES & SLIPS: Pier/Fixed Piles 20
Pier/Floating 20
BOAT REPAIR & SALES: Boat & Marine Repair 5
New & Used Boat Sales 2
FUEL: Gasoline .02/gal.
Diesel
$0.015/gal.
HOTEL/MOTEL: 10
RV PARK: 25
ALL OTHER USES: 10
Percentage Rental is to be based on the gross amount received from any and all sources of income derived from the lease site.
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F. Master Lease Template
(immediately following this page)
City of Morro Bay Master Lease Template, July 2020
01181.0024/656492.1 JWP
L E A S E
by and between
the CITY OF MORRO BAY
("CITY")
and
[insert tenant name here]
("TENANT")
Exhibit F
City of Morro Bay Master Lease Template, July 2020
01181.0024/656492.1 JWP -iTABLE OF CONTENTS
Article 1 FIXED TERM.............................................................................................................2 Section 1.01 Term..............................................................................................2 Section 1.02 No Extensions. ..............................................................................2 Section 1.03 Hold Over......................................................................................2 Section 1.04 Replacement..................................................................................3 Article 2 RENT..........................................................................................................................3 Section 2.01 Annual Minimum Rent. ................................................................3 Section 2.02 CPI Adjustment to Annual Minimum Rent. .................................4 Section 2.03 Calculation of New Minimum Rent..............................................4 Section 2.04 Percentage Rent. ...........................................................................6 Section 2.05 Reimbursements............................................................................8 Section 2.06 Penalty and Interest.......................................................................8 Article 3 USE OF PREMISES...................................................................................................8 Section 3.01 Permitted Uses. .............................................................................8 Section 3.02 Unauthorized Use..........................................................................9 Section 3.03 Operation of Business - Hours of Operation.................................9 Section 3.04 Competition...................................................................................9 Section 3.05 Environmental Considerations and Hazardous Materials...........10 Section 3.06 Tidelands Trust. ..........................................................................11 Section 3.07 Compliance with Law.................................................................11 Section 3.08 Waste or Nuisance. .....................................................................12 Section 3.09 Use by CITY...............................................................................12 Article 4 CONSTRUCTION, ALTERATION AND REPAIRS .............................................12 Section 4.01 Construction Approval................................................................12 Section 4.02 Construction Bond. .....................................................................13
City of Morro Bay Master Lease Template, July 2020
01181.0024/656492.1 JWP -iiSection 4.03 Mechanics' Liens.........................................................................13 Section 4.04 Ownership of Improvements.......................................................14 Article 5 LEASEHOLD MORTGAGES .................................................................................14 Article 6 REPAIRS, MAINTENANCE AND RESTORATION ............................................15 Section 6.01 Maintenance by TENANT..........................................................15 Section 6.02 Seawalls and Revetment. ............................................................15 Section 6.03 Legal Requirements. ...................................................................15 Section 6.04 Failure to Repair. ........................................................................16 Section 6.05 Inspection by CITY.....................................................................16 Section 6.06 TENANT'S Duty to Restore Premises........................................16 Section 6.07 Termination of Lease for Destruction.........................................17 Section 6.08 Destruction Due to Risk Not Covered by Insurance...................18 Article 7 INDEMNITY AND INSURANCE ..........................................................................18 Section 7.01 Indemnity Agreement. ................................................................18 Section 7.02 Liability Insurance. .....................................................................19 Section 7.03 Worker's Compensation..............................................................20 Section 7.04 Property Insurance. .....................................................................20 Section 7.05 Additional Coverage. ..................................................................20 Section 7.06 General Requirements.................................................................21 Section 7.07 No Subrogation. ..........................................................................22 Section 7.08 TENANT'S Waiver.....................................................................22 Section 7.09 Insurance Not a Limit. ................................................................22 Article 8 TAXES AND FEES..................................................................................................22 Section 8.01 TENANT to Pay Taxes...............................................................22 Section 8.02 TENANT to Pay License and Permit Fees. ................................23 Section 8.03 Utilities........................................................................................23
City of Morro Bay Master Lease Template, July 2020
01181.0024/656492.1 JWP -iiiArticle 9 CONDEMNATION..................................................................................................23 Section 9.01 Total Condemnation....................................................................23 Section 9.02 Condemnation Award. ................................................................23 Section 9.03 Termination for Partial Taking. ..................................................24 Section 9.04 Rent Abatement for Partial Taking. ............................................25 Section 9.05 Conveyance in Lieu of Eminent Domain....................................25 Section 9.06 Temporary Taking. .....................................................................25 Article 10 ASSIGNMENT AND SUBLEASING .....................................................................26 Section 10.01 No Assignment Without CITY'S Consent. .................................26 Section 10.02 Change of Ownership as Assignment.........................................26 Section 10.03 Application for Assignment........................................................27 Section 10.04 Probate Transfer of Assignment. ................................................27 Section 10.05 No Sublease Without CITY'S Consent.......................................27 Section 10.06 Subtenant Subject to Lease Terms..............................................28 Section 10.07 Consent to Sublease Agreement. ................................................28 Section 10.08 TENANT and Guarantor Remain Liable....................................28 Section 10.09 Nondisturbance. ..........................................................................29 Article 11 DEFAULT AND TERMINATION..........................................................................29 Section 11.01 Abandonment by TENANT........................................................29 Section 11.02 Termination for Breach by TENANT.........................................29 Section 11.03 Termination for Failure to Pay Rent. ..........................................30 Section 11.04 Lender May Cure Default. ..........................................................30 Section 11.05 Damages for Breach....................................................................30 Section 11.06 Cumulative Remedies. ................................................................31 Section 11.07 Waiver of Breach. .......................................................................31 Section 11.08 Surrender of Premises. ................................................................31
City of Morro Bay Master Lease Template, July 2020
01181.0024/656492.1 JWP -ivArticle 12 MISCELLANEOUS .................................................................................................31 Section 12.01 Notices. .......................................................................................31 Section 12.02 Governing Law and Jurisdiction.................................................32 Section 12.03 Binding on Successors. ...............................................................32 Section 12.04 Partial Invalidity..........................................................................32 Section 12.05 Sole and Only Agreement...........................................................32 Section 12.06 Modification................................................................................32 Section 12.07 Time of Essence..........................................................................33 Section 12.08 Memorandum of Lease for Recording........................................33 Section 12.09 Force Majeure. ............................................................................33 Article 13 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE.................................34 Section 13.01 [reserved]....................................................................................34
City of Morro Bay Master Lease Template, July 2020
01181.0024/656492.1 JWP
L E A S E
This LEASE is made and entered into by and between the CITY OF MORRO BAY, a municipal corporation of the State of California herein called CITY, and ____________________________________, herein called TENANT. (CITY and TENANT, at times, are referred to herein individually as Party and collectively as Parties)
WITNESSETH
WHEREAS, the State of California granted certain tide and submerged lands located within the CITY limits of CITY to the County of San Luis Obispo and to its successors, being Chapter 1076, Statutes of 1947, as amended by Chapter 413, Statutes of 1955, Chapter 1874, Statutes of 1957, and Chapter 70, Statutes of 1960, first extraordinary session; which Statutes may be amended from time to time by the Legislature of the State of California; all of which Statutes are expressly recognized and agreed to be in full force and effect by the Parties; and WHEREAS, the Parties hereto recognize and agree, on July 17, 1964, CITY succeeded to all of the right, title and interest of the County of San Luis Obispo in and to all of the tide and submerged lands conveyed to said County by the State of California pursuant to the above mentioned acts; and
WHEREAS, judgment has been entered on October 14, 1968, in the case of City of Morro Bay, Plaintiff, versus County of San Luis Obispo, and State of California, Defendants, by the Superior Court of the State of California in and for the County of San Luis Obispo, #30417, adjudging and decreeing, among other things, the title to said tide and submerged lands so conveyed by the State of California to the County of San Luis Obispo in trust, as set forth above, passed automatically to CITY upon the date of its incorporation as a city on the 17th day of July, 1964; and
WHEREAS, TENANT accepts the within Lease with full knowledge there is no warranty of title in and to the within described premises by CITY to TENANT; and WHEREAS, in order to develop and improve Morro Bay Harbor and to assist in carrying out the provisions of the tideland grant as aforesaid, and in order to provide facilities for the accommodation of those using Morro Bay Harbor, CITY desires to lease to TENANT the within described property upon the terms and conditions set forth herein;
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NOW, THEREFORE, in consideration of the covenants to be performed and the rental to be paid by TENANT to CITY, CITY leases to TENANT, and TENANT leases from CITY, all of the following premises (herein collectively referred to as the "Premises") in the CITY of Morro Bay, County of San Luis Obispo, State of California, described as follows:
Lease Site _____________________
This Premises is delineated on Parcel Map of the CITY of Morro Bay No. 68-30, which map was recorded on October 10, 1968, in Book 3, Page 10 of Parcel Maps in the Office of the County Recorder, San Luis Obispo County, California. A copy of said Map is attached hereto as Exhibit A and made a part hereof by reference.
Article 1 FIXED TERM
Section 1.01 Term.
The term of this Lease is a period of ___ years, commencing ______________, 20__ (the "Commencement Date"). The term of this Lease will terminate without notice on _____________, 20__, unless sooner terminated as herein provided.
Section 1.02 No Extensions.
The term of this Lease will not be extended nor will this Lease be renewed. Requests for continued use of the Premises will be treated as an application for a new lease and will require appropriate application to the CITY with all required supporting information and documents, CITY Council approval and the execution of a new CITY lease, containing the then most current terms, covenants, conditions and rent schedules.
Section 1.03 Hold Over.
If TENANT holds the Premises after the expiration of the term of this Lease with the consent of the CITY, express or implied, then such holding over (in the absence of a written agreement between CITY and TENANT with respect thereto) will be deemed to create a tenancy from month-to-month, terminable on 30-days’ written notice from either Party to the other, at a monthly rental equal to two hundred percent (200%) of the average total Rent per month for the twelve (12) months immediately preceding the expiration of this Lease, and otherwise subject to each and every term, covenant and condition of this Lease.
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Section 1.04 Replacement.
Subject to the next paragraph, as of the Commencement Date, this Lease will extinguish and replace every prior lease between CITY and TENANT respecting the Premises, if any. Any right or interest held by the TENANT pursuant to any existing lease with respect to the Premises, which is not granted pursuant to this Lease, will be extinguished as of the Commencement Date of this Lease.
(Note: the following paragraph to be included only if the lease is associated with a development/redevelopment project on the site)
If on or before ___________, 20__, TENANT does not provide satisfactory evidence, as approved by CITY’S Harbor Director and City Attorney, TENANT has obtained all the financing necessary to commence and complete the Project (as defined in Section 13.__), then (i) this Lease will automatically terminate, without any notice to TENANT, and be of no force and effect and (ii) the lease between CITY and TENANT for the Premises that was in effect prior to this Lease, if any, will be automatically reinstituted and remain in full force and effect subject to all of that lease’s terms and conditions.
Article 2 RENT
Section 2.01 Annual Minimum Rent.
TENANT agrees to pay to CITY a minimum guaranteed annual rental for the use and occupancy of the Premises, in an initial amount of $___________ per year (the "Minimum Rent"), payable in advance and at the option of TENANT either in equal semiannual installments or equal monthly instalments. If paid in equal semiannual installments, then such installments must be on January 1 and July 1 each year during the term of the Lease. If the Commencement Date is other than January 1 or July 1, then TENANT must pay, on the Commencement Date, the proportionate amount of the Minimum Rent payable for the period from the Commencement Date until the next payment date of January 1 or July 1, as the case may be. If the term of the Lease expires on a date other than December 31 or June 30, then TENANT'S final installment of Minimum Rent must be proportionate to the time remaining in the term. If paid in equal monthly installments, then each\ monthly installment must be paid no later than the tenth day of each applicable month. All Rent, including the Minimum Rent and the Percentage Rent, must be paid in lawful money of the United States of America, without offset or deduction and must be paid to CITY at City Hall located at 595 Harbor Street, Morro Bay, California, or at such other place or places CITY may from time to time designate by written notice delivered to TENANT.
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Section 2.02 CPI Adjustment to Annual Minimum Rent.
(1) The Parties agree, as of every July 1 following the Commencement Date (each, a "CPI Adjustment Date"), except as outlined in section 2.03 hereof, the annual Minimum Rent will be adjusted in direct proportion to any upward or downward movement in the Consumer Price Index for January 1, 20__, which is hereby agreed to be _______ (Base Index). The percentage adjustment for any given year will be based on the monthly average Index for the calendar year immediately preceding the CPI Adjustment Date as compared with the Base Index.
The Consumer Price Index referred to herein is the Consumer Price Index (all items indexes, all urban consumers) for Los Angeles – Long Beach – Anaheim, California, compiled and published by the United States Department of Labor, Bureau of Labor Statistics, 1982-84 Base Year = 100 (the "Index")
(2) The Annual Minimum Rent will be adjusted as of each CPI Adjustment Date, and will remain in effect as adjusted until the next CPI Adjustment Date. As an illustration only, if the Base Index (Jan. 1, 1999 CPI) is 166.1 and the monthly average CPI for 2000 is 171.6, then the percentage increase is equal to 3.31%. Therefore, the Minimum Rent would be increased by
3.31% as of July 1, 2001, and would continue at that rate through June 30, 2002. (3) If the United States Department of Labor, Bureau of Labor Statistics, ceases to compile and make public the Index as now constituted and issued, but substitutes another index in its place, then said substituted index must be used for the purpose of adjusting the Minimum Rent for the Premises. If the Index is changed so the base year differs from that in effect on the Lease Commencement Date, then the Index must be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics.
Section 2.03 Calculation of New Minimum Rent.
At the end of the initial five years and of each five-year period thereafter, a new Minimum Rent will be calculated for the following five-year period (each, a "Subsequent Rental Period") as follows:
A. The Minimum Rent will be subject to adjustment by appraisal as of the fifth anniversary of the Commencement Date and every five years thereafter (each, an "Appraisal Adjustment Date"). CITY, at its own cost and expense, will retain an independent qualified appraiser for determination of the fair market value of the Premises. Not more than nine months prior to each Appraisal Adjustment Date, CITY will provide written notice to TENANT of the pending appraisal and the appraiser selected by the CITY to determine the fair market value of the Premises, excluding fixtures and improvements, unless such are expressly included in the
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description of the leasehold interest created by this Lease. If TENANT does not reject CITY's appraiser in writing and within thirty days after CITY's notice of its determination, then the Minimum Rent for the Subsequent Rental Period will be in the amount determined by CITY as outlined in this Section 2.03. If TENANT rejects CITY's appraiser within 30 days following CITY's notice to TENANT, then within 15 days after such 30-day period, each Party, at its own cost, will select an independent professionally designated appraiser who is a member of the American Institute of Real Estate Appraisers, or the Society of Real Estate Appraisers with a designation of MAI (Member of American Institute), SRPA (Senior Real Estate Analysis), to appraise the fair market value of the Premises. CITY may rely on its original appraisal, or select a new appraiser, at its cost. If a Party does not appoint an appraiser within 15 days after the other Party has given notice of the name of its appraiser, then the single appraiser appointed will be the sole appraiser. Each appraiser will conduct an independent appraisal within 30 days after appointment. If the Parties are unable to agree on the Minimum Rent for the Subsequent Rental Period within 30 days after receiving the appraisal(s), then each Party will select one member of a three-member committee. The two so selected members will select the third member, and this committee will, by majority vote, select one or the other of the appraisals. The Minimum Rent determined on the basis of the selected appraisal will be final and binding and all costs associated with the three-member committee will be paid equally by CITY and TENANT.
B. In the event the appraisal process is not concluded on or before the Appraisal Adjustment Date, the Minimum Rent will be adjusted retroactively to such Appraisal Adjustment Date as set out hereinbelow when said appraisal process is completed.
C. The total Rent payable, including both the Minimum Rent and the Percentage Rent for each year within the applicable previous five-year period, will be averaged to produce the average annual total Rent payable for such previous period.
D. The new Minimum Rent for the five-year period commencing on each Appraisal Adjustment Date will be eight percent of the fair market value of the Premises (as established in paragraph A. above.) The new Minimum Rent will be divided by two to determine the semiannual payments and will be paid by TENANT to CITY on the first of each January and July thereafter, or paid monthly at the option of TENANT. This new Minimum Rent will be adjusted each following year in proportion to any increase in the Consumer Price Index as set out in Section 2.02 of this Lease. The Base Index will be adjusted upon each Calculation of new Minimum Rent as set out in this section so the Base Index for CPI adjustment will be the Consumer Price Index for January 1 of the year of the calculation of new Minimum Rent.
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Section 2.04 Percentage Rent.
A. In addition to the Minimum Rent, TENANT agrees to pay to CITY, at the time and in the manner hereinafter specified, as additional Rent for the use and occupancy of the Premises, a sum equal to the following for all TENANT'S Gross Sales as hereinafter defined:
____________________________________, less the amount of the Minimum Rent paid pursuant to this Lease (the "Percentage Rent").
B. The term "Gross Sales," as used herein, means (subject to the exceptions and authorized deductions as hereinafter set forth), the total selling price and the total gross amount received by TENANT from all rentals, merchandise sold and services rendered in, on or from the Premises by TENANT, its sublessees, licensees, or concessionaires, both for cash and on credit including, but not limited to, rentals of dockage space, leasing and servicing operations and ticket sales, and if on credit whether or not payment be actually made therefore, all charges for services, alterations or repairs made in or upon the Premises; the gross amount received by TENANT for merchandise sold pursuant to orders received in the Premises, though filled elsewhere; and the gross amount received by TENANT from any and all other sources of income derived from the business conducted upon the Premises.
C. Notwithstanding the other provisions of Section 2.04, the term "Gross Sales" does not include the following items, and such items may be deducted from Gross Sales to the extent they have been included therein or have been included in a prior computation of Gross Sales or for which a Percentage Rent has been paid under this Lease to CITY:
(1) Credits and refunds made to customers for merchandise returned or exchanged; (2) Any sales or excise taxes otherwise includable in Gross Sales as defined in this Section because such taxes are part of the total selling price of merchandise or services rendered in, from, or on the Premises, where TENANT must account for and remit the taxes to the government entity or entities by which they are imposed; and (3) With respect to credit card sales, fees retained or withheld by the issuer and/or merchant bank pursuant to TENANT'S credit card acceptance agreement, and (4) Rental payments to TENANT from sublessees whose total gross sales are included in gross sales computations.
D. TENANT ,must keep or cause to be kept full, complete, and accurate records, and books of account in accordance with accepted accounting practices showing the total amount of Gross Sales, as defined herein, made each calendar month in, on or from the Premises.
TENANT must keep said records and books of account within San Luis Obispo County and will notify CITY in advance of their location at all times. Furthermore, TENANT must, at the time of sale and in the presence of the customer, cause the full selling price of each piece of
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merchandise, each rental received and each service rendered in, on or from the Premises to be recorded in a cash register or cash registers that have cumulative totals and are sealed in accordance with standard commercial practices. Said records, books of account and cash register tapes, including any sales tax reports or income tax returns TENANT may be required to furnish any government or governmental agency, and income and bank statements must, at all reasonable times, be open to the inspection of CITY, CITY'S auditor, or other authorized representative or agent of CITY, if necessary. TENANT consents to the release of sales tax information to CITY and on demand will furnish to CITY a copy of the sales tax reports, quarterly reports and any audit reports of sales for confidential internal use of the CITY in determining Gross Sales for TENANT. TENANT consents and authorizes CITY to request such information directly from the State Board of Equalization or other state agency with which sales tax information is filed.
E. By July 31 of each year, TENANT must furnish CITY with a statement, to be certified by TENANT as current, true and accurate, which must set forth the Gross Sales of each department, sublessee, licensee and concession operating in, on or from the Premises for the previous 12 calendar months, ending June 30, just concluded, and the authorized deductions, if any, therefrom; and with it TENANT must pay to CITY the amount of the Percentage Rent, which is due to CITY as shown thereby. If TENANT, at any time, causes an audit of sales of TENANT'S business to be made by a public accountant, then TENANT must furnish CITY with a copy of said audit without cost or expense to CITY. CITY may, once in any twelve-month period, cause an audit of the business of TENANT to be made by a certified public accountant or CITY personnel of CITY'S own selection. TENANT must, upon receiving written notice of CITY'S desire for such an audit, deliver and make available all such books, records and cash register tapes to the certified public accountant or CITY personnel selected by CITY.
Furthermore, TENANT must promptly, on demand, reimburse CITY for the full cost and expense of said audit, if the audit discloses the questioned statement or statements understated Gross Sales by 5 percent or more but less than ten percent. In the event an audit performed at CITY'S request discloses TENANT understated Gross Sales by less than 5 percent, the cost of such audit will be paid by CITY. In the event any audit or other review of records discloses the amounts reported as Gross Sales were understated by TENANT by 10 percent or more, CITY will not only be entitled to recover from TENANT all costs of audit and review, but will also be entitled to recover from TENANT a penalty equal to two times the Percentage Rent due pursuant to this Lease on such unreported amounts. Whenever any audit discloses that Gross Sales were understated by any amount, TENANT must immediately pay the additional Percentage Rent therein shown to be payable by TENANT to CITY, together with interest at the Default Rate thereon, from the date the Percentage Rent was payable until the date paid.
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F. CITY will be entitled at any time within five years after the receipt of any such Percentage Rent payment, to question the sufficiency of the amount thereof or the accuracy of the statement or statements furnished by TENANT to justify the same. For the purpose of enabling CITY to check the accuracy of any such statement or statements, TENANT must, for said period of five years after submission to CITY of any such statement, keep all of TENANT'S records, including sales tax returns, all cash register tapes, income tax returns and income and bank statements and other data which in any way bear upon or are required to establish in detail TENANT'S Gross Sales and any authorized deductions therefrom as shown by any such statements and must, upon request, make the same available to CITY for examination.
Section 2.05 Reimbursements.
If TENANT fails to perform any term or covenant of this Lease, then CITY may, but is not obligated to, perform such term or covenant, and TENANT must reimburse CITY therefore as additional Rent hereunder. As an illustration and not as a limitation, if TENANT fails to procure the insurance required by this Lease, then CITY may, but is not obligated to, obtain such insurance, with the cost of the premiums being due to CITY upon demand as additional Rent.
Section 2.06 Penalty and Interest.
(1) If any Rent is not received within ten days following the date on which the Rent first became due, then TENANT must pay a late penalty of ten percent of the amount of the Rent in addition to the Rent.
(2) In addition to the penalty, TENANT must pay interest at the rate of one percent per month or fraction thereof or the maximum amount permitted by law as of the date this Lease is signed, whichever is greater (the "Default Rate"), on the amount of the Rent, exclusive of the penalty, from the date on which Rent first became delinquent until paid. The term "Rent" includes any sums advanced by the CITY and any unpaid amounts due from TENANT to the CITY.
Article 3 USE OF PREMISES
Section 3.01 Permitted Uses.
The Premises must, during the term of this Lease, be used for the purpose of operating and conducting thereon and therein the uses permitted by, and in compliance with, Conditional Use Permit No. ______________, or any other use permits approved by CITY in its governmental capacity, as they may be amended from time to time, and for no other purpose. At the Commencement Date, such uses include ______________________________.
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Section 3.02 Unauthorized Use.
TENANT agrees to allow only those uses authorized in Section 3.01, hereinabove and any unauthorized use thereof constitutes a breach of this Lease and may, at the option of CITY, terminate this Lease.
Section 3.03 Operation of Business - Hours of Operation.
Failure to actively and diligently conduct the business authorized herein constitutes a breach of this Lease and may, at the option of CITY, terminate this Lease. (1) TENANT must, during the term of this Lease, conduct business of the nature specified in Section 3.01 of this Lease on the Premises in an efficient and diligent manner and keep the Premises open for the conduct of business continuously and without interruption for at least six hours each day of the year, except one day each week and legal holidays. This provision does not apply if the Premises is closed and the business of TENANT is temporarily shut down for a period not to exceed 14 calendar days in any calendar year to make necessary repairs, maintenance or other construction deemed necessary by TENANT. This provision does not apply if the Premises is closed and the business of TENANT is temporarily shut down as authorized or required by the City Manager or on account of strikes, walkouts, or causes beyond the control of TENANT or for not more than three days out of respect to the memory of an officer, employee, or close relative of any officer or employee of TENANT. (2) TENANT must operate TENANT'S business on the Premises with due diligence and efficiency and in like manner as comparable businesses operated in CITY or the coastal area of San Luis Obispo County, so as to produce the maximum amount of Gross Sales and gross receipts from services, which may be produced from TENANT'S business; and TENANT at all times must carry on Premises, a stock or merchandise of such size, character, and quality as is reasonable, designed to produce the maximum return to TENANT, when the sale of merchandise is a permitted use under this Lease.
Section 3.04 Competition.
During the term of this Lease, TENANT must not directly nor indirectly acquire or establish any similar or competing business within a radius of five miles from the location of the Premises; provided, however, that TENANT may, with prior written approval from CITY, own or operate more than one business, whether or not competing and similar, along the Embarcadero upon one or more CITY lease sites. The purpose of this section is to prevent and prohibit TENANT from reducing revenue to CITY by diverting business from the operation at the
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Premises to another similar business owned by TENANT within the CITY, but not upon a CITY lease site from which CITY is paid rent based on Gross Sales.
Section 3.05 Environmental Considerations and Hazardous Materials. (1) TENANT must, at all times, comply with applicable environmental regulations, including, where applicable and practical, government- and industry-adopted environmental best management practices and programs.
(2) TENANT must not transport, use, store, maintain, generate, dispose, release, treat or discharge any "Hazardous Material" (as defined below) upon or about the Premises (such activities being hereafter referred to as "Hazardous Materials Activities"), nor permit TENANT'S employees, agents, or contractors to engage in Hazardous Materials Activities upon or about the Premises, except as allowed by applicable law. The term "Hazardous Material" for purposes hereof means any chemical, substance, material or waste or component thereof which is now or hereafter listed, defined or regulated as a hazardous or toxic chemical, substance, material or waste or component thereof by any federal, state or local governing or regulatory body having jurisdiction, or which would trigger any employee or community "right-to-know" requirements adopted by any such body. All Hazardous Materials Activities at the Premises must be conducted strictly in accordance with all applicable laws and regulations. If TENANT transports, or has transported, any hazardous waste from the Premises, then such transportation must be done only by a contractor duly licensed to haul hazardous waste and only a duly licensed site approved by TENANT'S liability insurer must be used for disposal of that hazardous waste.
(3) TENANT must promptly notify CITY of: (i) any enforcement, cleanup or other regulatory action taken or threatened by any governmental or regulatory authority with respect to the presence of any Hazardous Material on the Premises or the migration thereof from or to other property, (ii) any demands or claims made or threatened by any party against TENANT or the Premises relating to any loss or injury resulting from any Hazardous Material on or from the Premises, and (iii) any matters where TENANT is required by applicable law to give a notice to any governmental or regulatory authority respecting any Hazardous Material on the Premises.
CITY has the right (but not the obligation) to inspect the Premises, to take such remedial action on the Premises, as CITY may deem appropriate, and to join and participate, as a party, in any legal proceedings or actions affecting the Premises initiated in connection with any environmental, health or safety law.
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(4) If any Hazardous Material is released, discharged or disposed of by TENANT or its employees, agents or contractors, on or about the Premises in violation of the foregoing provisions, TENANT must immediately notify CITY. CITY may elect either to take such remedial action as CITY deems appropriate, in which event TENANT must reimburse CITY for all costs thereof within ten days after demand, or direct TENANT to perform such remediation.
If CITY directs TENANT to perform the remediation, then TENANT must immediately take such remedial action, as CITY directs. TENANT must, properly and in compliance with applicable laws, clean up and remove the Hazardous Material from the Premises and any other affected property at TENANT'S expense. If CITY directs TENANT to perform remediation hereunder and if TENANT fails to comply with the provisions of this Section within five days after written notice by CITY, or such shorter time as may be required by applicable law or in order to minimize any hazard to persons or property, then CITY may (but is not be obligated to) arrange for such compliance directly or as TENANT'S agent through contractors or other parties selected by CITY at TENANT'S expense (without limiting CITY'S other remedies under this Lease or applicable law).
Section 3.06 Tidelands Trust.
In addition to the obligations set forth in this Article, TENANT must use and occupy the Premises in strict compliance with the Tidelands Trust purposes, as established by law or interpretation of the California State Lands Commission.
Section 3.07 Compliance with Law.
TENANT must, at no cost to CITY, comply with all of the requirements of all local, municipal, county, state and federal authorities now in force, or which may hereafter be in force, pertaining to the Premises, and faithfully observe in the use of the Premises all local, municipal and county rules, regulations and ordinances and state and federal statutes, rules, regulations and orders now in force or which may hereafter be in force (collectively, "Legal Requirements"); provided, that TENANT will not be required to comply with any Legal Requirement imposed by CITY that would substantially deprive TENANT of a material benefit under this Lease, unless such Legal Requirement has been imposed or required (i)_ by a county, state or federal authority or (ii) to preserve public health and safety and applied to similar businesses within CITY’S jurisdiction.. The judgment of any court of competent jurisdiction, or the admission of TENANT in any action or proceeding against TENANT, whether CITY be a party thereto or not, that TENANT has violated any such Legal Requirement in the use of the Premises will be conclusive of that fact as between CITY and TENANT.
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Section 3.08 Waste or Nuisance.
TENANT must not commit or permit the commission by others of any waste on the Premises; TENANT must not maintain, commit, or permit the maintenance or commission of any nuisance as defined by law on the Premises; and TENANT must not use or permit the use of the Premises for any unlawful purpose.
Section 3.09 Use by CITY.
(1) Subject to TENANT's rights hereunder to possession of the Premises, CITY may grant licenses to, or otherwise authorize, other persons and entities permitting uses of the Morro Bay Harbor.
(2) CITY also retains and reserves for itself, its successors and assigns, all oil, gas, petroleum and other mineral or hydrocarbon substances in and under the lands leased hereby together with right to prospect and extract all such substances.
Article 4 CONSTRUCTION, ALTERATION AND REPAIRS
Section 4.01 Construction Approval.
(1) TENANT must not make or permit any other person to make any alterations or structural additions or structural modifications to the Premises or to any structure thereon or facility appurtenant thereto if the cost thereof exceeds Ten Thousand Dollars ($10,000), without the prior written consent of CITY. The consent to be obtained pursuant to this Section 4.01(1) must be requested from the Harbor Director, or the City’s designee, for CITY. If the Harbor Director or any future successor to the duties of the City’s Harbor Director, or the City’s designee, gives such consent to proceed, then it is understood such consent is given by CITY only in its capacity as the landlord under this Lease and not as the permit-issuing authority.
TENANT remains obligated to obtain any needed building permits and comply with all applicable land use entitlement processes.
(2) Where required by the Morro Bay Municipal Code, California Coastal Act, Corps of Engineers or any other state or federal agency having authority over the proposed project, then all Conditional Use Permits, Concept Plans, Precise Plans, Coastal Development Plans, and any other required plans or permits must be applied for and approved prior to any construction, alteration or repairs.
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Section 4.02 Construction Bond.
(1) Prior to the commencement of any construction the cost of which is greater than the amount of One Hundred Thousand Dollars ($100,000), TENANT must file, with CITY’S City Clerk, a final detailed Civil Engineer's, Registered Architect's or Licensed and Bonded General Contractor's estimate of the cost of construction and installation of improvements on the Premises. Said estimate must be submitted to CITY’S City Engineer for approval. TENANT must file with the City Clerk a faithful performance bond, in a form and issued by a corporate surety company satisfactory to CITY, in an amount satisfactory to CITY, but not in excess of 100% of the final detailed cost estimate, securing the faithful performance of TENANT or its contractor in the completion of said construction.
(2) TENANT must also file with the City Clerk a labor and materials bond, in a form and issued by a corporate surety company satisfactory to CITY, in an amount satisfactory to CITY, but not in excess of 100% of the final detailed cost estimate, securing the payment of all claims for the performance of labor or services on, or the furnishing of materials for, the performance of said construction.
(3) In lieu of the above referenced bonds, TENANT may post cash deposits or may make other mutually satisfactory arrangements to guarantee the completion of construction projects.
In the event the contractor bonds the project, CITY may be named as additional indemnitee to comply with these requirements.
Section 4.03 Mechanics' Liens.
At all times during the term of this Lease, TENANT must keep the Premises and all buildings, installations and other improvements now or hereafter located on the Premises free and clear of all liens and claims of liens for labor, services, materials, supplies, or equipment performed on or furnished to the Premises. TENANT further agrees to, at all times, save CITY free and harmless and indemnify and defend CITY against all claims for labor or materials in connection with any improvement, repairs, or alterations on the Premises, and the cost of defending against such claims, including reasonable attorneys' fees. If TENANT fails to pay and discharge or cause the Premises to be released from such liens or claim of liens within 10 days after the filing of such lien or levy, then TENANT must, upon written notification, immediately deposit with CITY a bond conditioned for payment in full of all claims on which said lien or levy has been filed. Such bond must be acknowledged by TENANT as principal and by a company or corporation, licensed by the Insurance Commissioner of the State of California to transact the business of a fidelity and surety insurance company as surety. The beneficiary of any security instrument, which instrument is on record with CITY, must have the right to file a claim for
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payment from such a bond on behalf of TENANT. CITY has the right to post and keep posted on the Premises notices of non-responsibility and any other notices that may be provided by law or which CITY may deem proper for the protection of CITY and Premises from such liens.
TENANT must give CITY notice at least 20 days prior to commencement of any work on the Premises to afford CITY the opportunity to post such notices.
Section 4.04 Ownership of Improvements.
The Parties agree CITY has the option and right to require TENANT to remove all buildings, structures, installations, improvements of any kind or other property belonging to or placed upon the Premises by TENANT at the termination of this Lease, however occurring, providing CITY gives notice, in writing, no later than thirty days prior to the termination of this Lease, of its decision to require such improvements be removed. The Parties agree, if CITY exercises its option, then at the termination of this Lease, however occurring, TENANT will have sixty days thereafter to remove all buildings, structures, facilities, installations, improvements and other property belonging to TENANT from the Premises. If CITY exercises such option and TENANT fails to remove all such improvements and other property within sixty days after the termination of this Lease, then CITY has the right to have any or all such improvements and other property removed at the expense of TENANT. If CITY does not exercise its option to remove (or require the removal of) the improvements and other property, then title to such improvements and other property vests in CITY and TENANT must not remove same.
Article 5 LEASEHOLD MORTGAGES
Tenant must not mortgage, securitize or hypothecate the leasehold interest created by this Lease, in whole or any part, without the prior written approval of CITY, as evidenced by a resolution of the City Council of CITY.
CITY will not approve financing related to or using that leasehold interest created by this Lease as collateral, unless such financing is (i) to install or construct capital improvements on the Premises, (ii) to install or construct CITY-requested public improvements or provide other benefits in the Tidelands Trust area, the latter as approved by the Harbor Director or (iii) to reduce the interest rate of existing, approved debt secured by leasehold interest created by this Lease without redeeming any equity in the leasehold interest.
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Article 6 REPAIRS, MAINTENANCE AND RESTORATION
Section 6.01 Maintenance by TENANT.
At all times during the term of this Lease, TENANT must, at TENANT'S own cost and expense, keep and maintain, in good order and repair and in a safe and “broom clean” condition, all improvements now or hereafter on the Premises, including any public spaces, common areas, rights-of-way, sidewalks and other areas or spaces, even if not on the Premises but utilized as part of TENANT’S business operations. Furthermore, TENANT must, at TENANT'S own cost and expense, maintain at all times during the term of this Lease the whole of the Premises and other areas utilized for TENANT’S business operations as described above in a clean, sanitary, neat and orderly “broom clean” condition. CITY may, at the sole option of CITY, but not obligation,, clean, clear, maintain or repair the Premises, any improvements thereon or areas used by TENANT, as described above, at TENANT'S cost and expense, in the event TENANT fails to clean, clear maintain or make repairs, in accordance with this Section to the satisfaction of CITY, after 15-days' written notice to TENANT from CITY of CITY'S intent to exercise this option.
Section 6.02 Seawalls and Revetment.
At all times during the term of this Lease, TENANT must, at TENANT'S own cost and expense, repair, maintain, replace and rebuild, as necessary, the improvements, pilings, bulkheads, seawalls, revetment, piers, posts and any structures or other improvements located in the water portion of the Premises. Further, TENANT must, at TENANT'S own cost and expense, conduct maintenance and structural inspections, evaluations or surveys, by a qualified individual or firm, at reasonable intervals not to exceed ten years, to locate and determine needed maintenance, repairs or replacements of these improvements.
Section 6.03 Legal Requirements.
At all times during the term of this Lease, TENANT, at no cost to CITY, must:
(1) Make all alterations, additions, or repairs to the Premises or the improvements or facilities on the Premises required by any Legal Requirements (as defined in Section 3.07, above);
(2) Observe and comply with all Legal Requirements respecting the Premises or the improvements or facilities located thereon;
(3) Obtain all required permits pursuant to the Morro Bay Municipal Code or State law prior to the initiation of any repair or maintenance activity; and
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(4) Indemnify, defend and hold harmless CITY and the property of CITY, including the Premises, from any and all liability, loss, damages, fines, penalties, claims and actions resulting from TENANT'S failure to comply with and perform the requirements of this section.
Section 6.04 Failure to Repair.
In the event failure to repair results in a hazardous or unsafe condition, CITY has the right and option, but not the obligation, to close and prohibit access to the unsafe portion of the Premises until such repairs are completed and accomplished and the Premises rendered safe for public use. In addition, if TENANT fails to repair any hazardous or unsafe condition within ten days after written notice thereof from CITY, then CITY has the right, but not the obligation, to perform such repair at TENANT'S expense. TENANT must reimburse CITY for any such repair undertaken by CITY, promptly upon CITY'S demand, as additional Rent. Failure by CITY to enforce any of the provisions of this Article does not constitute a waiver of these provisions and CITY may, at any time, enforce all of the provisions of this Article, requiring all necessary repairs, rebuilding or replacement.
Section 6.05 Inspection by CITY.
CITY or CITY'S agents, representatives, or employees may enter the Premises at all reasonable times for the purpose of inspecting the Premises to determine whether TENANT is complying with the terms of this Lease and for the purpose of doing other lawful acts that may be necessary to protect CITY'S interest in the Premises under this Lease or to perform CITY'S duties under this Lease or in its governmental capacity.
Section 6.06 TENANT'S Duty to Restore Premises.
(1) Except as provided in Section 6.07 below, if at any time during this Lease, any improvements now or hereafter on the Premises are destroyed in whole or in part by the elements, or any other cause not the fault of TENANT or CITY, then this Lease will continue in full force and effect and TENANT, at TENANT'S own cost and expense, must repair and restore the damaged or destroyed improvement(s) according to the original plan thereof or according to such modified plans therefor as are approved in writing by CITY. The work of permitting, repair and restoration must be (i) commenced by TENANT within 180 days after the damage or destruction occurs, (ii) pursued with due diligence, and (iii) completed not later than 12 full calendar months after the work is commenced, unless the Parties mutually agree, in writing, to an extension. In all other respects, the work of repair and restoration must be done in accordance with the requirements for construction work on the Premises set forth in Article 4 of this Lease.
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Any failure by TENANT either to commence or to complete repair and restoration as required by this Section 6.06 constitutes a material default under this Lease. (2) Any and all insurance proceeds that become payable at any time during the term of this Lease because of damage to or destruction of any improvements on the Premises will be paid to TENANT and applied by TENANT toward the cost of repairing and restoring the damaged or destroyed improvements in the manner required by this Section 6.06, or, if this Lease is terminated, then applied as provided in Section 6.07. Except as set forth in Section 6.08 below, TENANT'S obligation to restore pursuant to this Section exist whether or not funds are available from insurance proceeds.
Section 6.07 Termination of Lease for Destruction.
(1) Notwithstanding the provisions of Section 6.06 of this Lease, TENANT has the option of terminating this Lease as provided in this Section 6.07 if:
(a) During the last 15 years of the term of this Lease, any improvement now or hereafter on the Premises are so damaged or destroyed by the elements or any cause, not the fault of TENANT or CITY, the improvement cannot be repaired and restored as required by Section 6.06 of this Lease at a cost not exceeding 35 percent of the cost of replacing all improvements if they had been totally destroyed at the time of such damage; or (b) During the last 10 years of the term of this Lease, any improvement now or hereafter on the Premises are so damaged or destroyed by the elements or any cause, not the fault of TENANT or CITY, the improvement cannot be repaired and restored as required by Section 6.06 of this Lease at a cost not exceeding 15 percent) of the cost of replacing all improvements if they had been totally destroyed at the time of such damage. (2) TENANT may exercise its right to terminate pursuant to this Section 6.07 by providing written notice to CITY within 180 days following damage or destruction as described herein. Such termination is effective on the last day of the calendar month following the month in which TENANT provides its notice.
(3) If TENANT fails to commence or complete repair and restoration as required by Section 6.06, then CITY has all rights and remedies with respect to TENANT’S default, including, but not limited to, termination of this Lease pursuant to Article 11. (4) If this Lease is terminated as a result of damage or destruction, then any insurance proceeds received with respect to the improvements will be applied or distributed in the following order:
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(a) first, to the demolition of the improvements and removal of all demolition debris; then
(b) to any accrued and unpaid Rent as of the effective date of the termination; then
(c) to each Lender under a Leasehold Encumbrance, in order of lien priority, an amount not to exceed the amount due under such Leasehold Encumbrance; then (d) to CITY, an amount equal to the present value, as of the date of termination, of the total Minimum Rent for the remainder of the Term; then (e) the remaining proceeds, if any, to TENANT.
Section 6.08 Destruction Due to Risk Not Covered by Insurance.
Notwithstanding anything to the contrary in Section 6.06 of this Lease, TENANT has the right to terminate this Lease, at any time, if the improvements on the Premises are damaged or destroyed by a casualty for which TENANT is not required under this Lease to carry insurance and the cost to repair or restore such improvements exceeds 50 percent of the fair market value of all the improvements on the Premises immediately prior to the damage or destruction.
Article 7 INDEMNITY AND INSURANCE
Section 7.01 Indemnity Agreement.
(1) TENANT hereby agrees to indemnify, defend and hold harmless CITY, and the property of CITY (including the Premises and any improvements now or hereafter on the Premises), and CITY'S officers, officials, employees and volunteers from any and all liability, claims, loss, damages, and expenses, including reasonable attorney’s fees and litigation expenses, resulting from TENANT'S occupation and use of the Premises or any negligent act or omission of the TENANT or any of its officers, subtenants, employees, contractors, invitees or anyone for whom TENANT may be liable, specifically including, without limitation, any liability, claim, loss, damage, or expense arising by reason of:
(a) The death or injury of any person, including TENANT or any person who is an officer, employee, contractor, subtenant, invitee or agent of TENANT, or by reason of the damage to or destruction of any property, including property owned by TENANT or by any person who is an employee or agent of TENANT, from any cause whatever while such person or
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property is in or on the Premises or in any way connected with the Premises or with any of the improvements or personal property on the Premises;
(b) The death or injury of any person, including TENANT or any person who is an officer, employee, contractor, subtenant, invitee or agent of TENANT, or by reason of the damage to or destruction of any property, including property owned by TENANT or any person who is an officer, employee, contractor, subtenant, invitee or agent of TENANT, caused or allegedly caused by either (i) the condition of the Premises or any improvement placed on the Premises by TENANT, or (ii) any act or omission on the Premises by TENANT or any person in, on, or about the Premises with or without the permission and consent of TENANT; (c) Any work performed on the Premises or materials furnished to the Premises at the insistence or request of TENANT or any person or entity acting for or on behalf of TENANT;
(d) TENANT'S failure to perform any provision of this Lease or to comply with any Legal Requirement imposed on TENANT or the Premises. (2) TENANT'S obligations pursuant to this Section to indemnify and hold harmless do not extend to any liability, claim, loss, damage or expense arising from CITY'S active negligence or willful misconduct.
Section 7.02 Liability Insurance.
During the term of this Lease, TENANT must maintain at its cost Commercial General Liability insurance with coverages as described in CITY”S HARBOR DEPARTMENT LEASE MANAGEMENT POLICY, as may be updated or changed from time to time at the sole discretion of the CITY. Such coverages must insure against claims for bodily injury (including death), property damage, contractual liability, personal injury and advertising injury occurring on the Premises or from operations located in any part of the Premises. Such insurance must afford protection in amounts no less than One Million Dollars ($1,000,000) per occurrence for bodily injury, personal injury and property damage; provided, that if insurance with a general aggregate limit is used, then either the general aggregate limit will apply separately to the Premises or the general aggregate limit will be twice the occurrence limit stated in this Section. All liability insurance carried by TENANT hereunder will name CITY, its officers, officials, employees and volunteers as additional insureds, and be primary insurance with respect to such additional insureds. TENANT must include all its subtenants as insureds under TENANT's liability policies or furnish separate certificates and endorsements for each subtenant. All coverages for subtenants must comply with all requirements of this Article Seven.
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Section 7.03 Worker's Compensation.
TENANT must maintain at TENANT'S own expense and keep in full force and effect during the term of this Lease, Worker's Compensation Insurance as provided by law. Said insurance must contain a waiver of subrogation rights against CITY. TENANT must also maintain employer's liability insurance with minimum coverage of $1,000,000 per accident for bodily injury or disease.
Section 7.04 Property Insurance.
TENANT must, at its cost, at all times during the term of this Lease keep all improvements and other structures on the Premises, as well as any and all additions, improvements and betterments thereto, insured for 100 percent) of their full replacement cost with no co-insurance provision against loss or destruction by the perils covered by "all risk" (excluding earthquake) property damage insurance policies. Any loss coverage under such insurance must be payable to TENANT, CITY, and any Lender under a Leasehold Encumbrance approved pursuant to Article 5 of this Lease, as their interests may appear, and such proceeds must be used and applied in the manner required by Article 6 of this Lease.
Section 7.05 Additional Coverage.
TENANT must also maintain, at its sole expense, the insurance described in this Section 7.05.
(1) If TENANT has (or is required by any Legal Requirement to have) a liquor license and is selling or distributing alcoholic beverages on the Premises, then TENANT must maintain liquor liability coverage in appropriate amounts. TENANT must require any subtenant who has (or is required by any Legal Requirement to have) a liquor license and who is selling or distributing alcoholic beverages on the Premises, to maintain such coverage. (2) TENANT must maintain "all risk" (excluding earthquake) property damage insurance covering TENANT's personal property located at the Premises, in amounts not less than the full replacement value of such personal property. CITY has no interest in the proceeds of such insurance.
(3) TENANT must obtain and maintain any additional insurance coverages CITY may reasonably require. As illustration only and not as a limitation, in appropriate circumstances such additional insurance may include increased general liability limits, business interruption coverage, business automobile liability, boiler and machinery insurance or builder's risk
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insurance. TENANT, however, is not required to maintain additional coverages that are in excess of those typically maintained by similarly situated tenants in the Morro Bay area.
Section 7.06 General Requirements.
Except as specifically provided to the contrary, all the insurance required pursuant to this Article Seven is subject to the requirements of this Section 7.06. (1) Maintenance of proper insurance coverage is a material element of this Lease and failure to maintain or renew coverage or to provide evidence of coverage and/or renewal may be treated by the CITY as a material breach of contract. TENANT must forward CITY”S specifications and forms to TENANT’S insurance agent for compliance. (2) CITY may, at any time, require TENANT to increase the minimum coverage limits for insurance required by this Lease, but every such increase must be reasonable under the circumstances.
(3) All policies must be issued by insurance companies authorized to issue such insurance in California, with an A.M. Best's rating of no less than A:VII. (4) Any deductibles or self-insured retentions must be declared to and approved by CITY. At the option of CITY, either: (i) the insurer must reduce or eliminate such deductibles or self-insured retentions as respects CITY, its officers, officials, employees and volunteers or (ii) TENANT must provide a financial guarantee satisfactory to CITY guaranteeing payment of losses and related investigations, claim administration and defense expenses. (5) Each insurance policy required by this Lease must be endorsed to state coverage will not be cancelled or reduced, except after 30-days' prior written notice by certified mail, return receipt requested, has been given to CITY.
(6) TENANT must furnish CITY with certificates and amendatory endorsements effecting the coverage required by this Lease. The endorsements must be on forms provided by CITY or on other than CITY's forms; provided, that those endorsements or policies conform to the requirements. All certificates and endorsements are to be received and approved by CITY before use of the Premises, and promptly following any renewal or replacement. CITY reserves the right, at any time, to require complete, certified copies of all required insurance policies, including endorsements effecting the coverage required by these specifications. (7) TENANT'S insurance coverage must be primary insurance as respects CITY, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by
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CITY, its officers, officials, employees, or volunteers will be excess of TENANT'S insurance and will not contribute with it.
Section 7.07 No Subrogation.
TENANT agrees, in the event of loss due to any of the perils for which it has agreed to provide insurance, TENANT will look solely to its insurance for recovery. TENANT hereby grants to the CITY, on behalf of any insurer providing insurance to either TENANT or CITY with respect to TENANT'S occupancy of the Premises, a waiver of any rights to subrogation, which any such insurer of TENANT may acquire against CITY by virtue of the payment of any loss under such insurance. Each insurance policy required under this Lease, including those insuring TENANT against claims, expense, or liability for injury to persons or property, must provide the insurer will not acquire by subrogation any right to recovery.
Section 7.08 TENANT'S Waiver.
TENANT hereby waives any right of recovery against CITY for each claim, expense, liability, or business interruption, or other loss, except where caused by CITY'S active negligence or willful misconduct. TENANT agrees, to the extent TENANT fails to acquire insurance, TENANT will not have any claim against CITY for any loss that results from a risk or peril that would have been included in such insurance.
Section 7.09 Insurance Not a Limit.
The insurance requirements of this Article 7 are independent of, and do not limit or modify, TENANT'S indemnification, defense, hold harmless and other obligations pursuant to this Lease.
Article 8 TAXES AND FEES
Section 8.01 TENANT to Pay Taxes.
TENANT must pay, before delinquency, all taxes and assessments levied upon or assessed to TENANT on the Premises by reason of this Lease or of any equipment, appliances, improvement, or other development of any nature whatsoever, erected, installed, or maintained by TENANT or by reason of the business or other activity of TENANT upon or in connection with the Premises. TENANT must pay all possessory interest taxes applicable to the Premises.
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Section 8.02 TENANT to Pay License and Permit Fees.
TENANT must pay any fees imposed by Legal Requirements for licenses or permits for any business or activities including construction by TENANT upon the Premises.
Section 8.03 Utilities.
TENANT must (i) pay, or cause to be paid and (ii) hold harmless CITY and the property of CITY, including the Premises, from all charges for the furnishing of gas, water, electricity, telecommunication service, and for other public utilities to the Premises during the term of this Lease and for the removal of garbage and rubbish from the Premises during the term of this Lease.
Article 9 CONDEMNATION
Section 9.01 Total Condemnation.
If title and possession to all of the Premises is permanently taken for any public or quasipublic use under any statute, or by the right of eminent domain, then this Lease will be considered terminated on the date that possession of the Premises is taken; and both CITY and TENANT will thereafter be released from all obligations, including Rent, all of which will be prorated to the date of termination, except those specified in Section 9.02 of this Lease.
Section 9.02 Condemnation Award.
Any compensation or damages awarded or payable because of the permanent taking of all or any portion of the Premises by eminent domain will be allocated between CITY and TENANT as follows:
(1) All compensation or damages awarded or payable for the taking by eminent domain of any land that is part of the Premises will be paid to and be the sole property of CITY free and clear of any claim of TENANT or any person claiming rights to the Premises through or under TENANT.
(2) All compensation or damages awarded or payable which is specifically attributed by the taking party to the "good will" of TENANT'S business will be paid to and be the sole property of TENANT.
(3) All compensation or damages awarded or payable because of any improvements constructed or located on the portion of the Premises taken by eminent domain where only a portion of the Premises is taken by eminent domain, and TENANT is not entitled to or does not