Morro Bay City Council
June 9, 2026

CITY OF MORRO BAY
City Council Regular Meeting Agenda

Tuesday, June 9, 2026, 5:30 p.m.

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

Alternatively, members of the public may watch the meeting and speak during general Public Comment or on a specific agenda item by logging into the Zoom webinar using the information provided below. Please use the "raise hand" feature to indicate your desire to provide public comment.
•
• Zoom webinar link: https://us02web.zoom.us/j/82429164990 Or Telephone Attendee: 1 (669) 444-9171 or 1 (669) 900-9128 or 1 (346) 248-7799; Webinar ID: 824 2916 4990. Press *9 to raise hand for public comment. •
• Meetings are also livestreamed on the City's website.

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

1. ESTABLISH QUORUM AND CALL TO ORDER

2. PLEDGE OF ALLEGIANCE

3. REPORTS

3.a Closed Session Report

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

3.c City Manager Reports, Announcements and Presentations

3.d Subcommittee Reports - Verbal Update of Current Subcommittee Activities

1. Water Reclamation Facility & Morro Bay / Cayucos Sanitary District JPA

2. Morro Bay Power Plant (Vistra)

3. Morro Elementary School

4. RECOGNITION AND PRESENTATIONS
None.

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

Public comment is an opportunity for members of the public to provide input to the governing body. To increase the effectiveness of the Public Comment Period, the City respectfully requests the following guidelines and expectations be followed:
•
Those desiring to speak are asked to complete a speaker slip, which are located at the entrance, and submit it to the City Clerk. However, speaker slips are not required to provide public comment.
•
When recognized by the Mayor, please come forward to the podium to speak.

Though not required, it is helpful if you state your name, city of residence and whether you represent a business or group. Unless otherwise established by the Mayor, comments are to be limited to three minutes. •
All remarks should be addressed to Council, as a whole, and not to any individual member thereof.
•
The Council respectfully requests that you refrain from making slanderous, profane or personal remarks against any elected official, commission and/or staff.
•
Please refrain from public displays or outbursts such as unsolicited applause, comments or cheering.
•
Any disruptive activities that substantially interfere with the ability of the City Council to carry out its meeting will not be permitted and offenders will be requested to leave the meeting.
•
Your participation in City Council meetings is welcome and your courtesy will be appreciated.
•
The Council in turn agrees to abide by its best practices of civility and civil discourse according to Resolution No. 07-19.
•

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

Recommended Action
Approve Consent Agenda Items 6.a through 6.f as submitted.

6.a Approval of Minutes
(City Clerk)
Recommended Action
Approve as submitted.

1. May 12, 2026 - Regular Council Meeting 5

6.b Approval of Proclamations
(City Clerk)

Recommended Action
Approve as submitted.

1. Proclamation declaring the third Saturday of June 2026 as "Juneteenth Day"
13 6.c Adoption of Resolution No. 27-26 Updating the City's Conflict of Interest Code and Resolution No. 28-26 Designating Certain Appointed Bodies and Officials for Applicable Ethics and Fiscal Training Requirements
14 (City Clerk)
Recommended Action
Adopt Resolution No. 27-26 approving amendments to the City’s Conflict of Interest Code and Resolution No. 28-26 Designating Certain Appointed Bodies and Officials for Applicable Ethics and Fiscal Training Requirements.

6.d General Municipal Election Resolutions for November 3, 2026 Election 30 (City Clerk)
Recommended Action
Adopt Resolution No. 29-26 calling a general municipal election for November 3, 2026, and requesting consolidation of the election with the County, and Resolution No. 30-26 adopting regulations for candidate statements.

6.e Approval of Owners Association (Operating) Agreement between City and Visit Morro Bay
38 (City Manager/Visit Morro Bay)
Recommended Action
Approve the Operating Agreement between the City and Visit Morro Bay subject to terms set out in the agreement.

6.f Water Reclamation Facility Quarterly Report 96
(Public Works Department)
Recommended Action
Receive and file the Fiscal Year (FY) 2026 Quarterly Report for January – March for the Water Reclamation Facility Program (WRF Program).

7. PUBLIC HEARING ITEMS

7.a An appeal by Solmaz Naghsh of the Planning Commission's approval on April 7, 2026 of a Coastal Development Permit (CDP25-21), Conditional Use Permit (CUP25-01), and Modification Request (MOD26-001) for the demolition of the existing single-story
104
fire station living quarters at 460 Bonita Street, and the construction of a new two-story living quarters totaling 2,431 square feet in its place (Community Development Department)
Recommended Action
Adopt Resolution No. 31-26 denying an appeal and upholding the Planning Commission’s April 7, 2026 approval of the proposed project.

8. BUSINESS ITEMS

8.a Resolutions Approving Fiscal Year (FY) 2026-27 Operating and Capital Budgets; Investment Policy; and FY 2026-27 GANN Appropriations Limit 155
(Finance Department / City Manager)
Recommended Action
Adopt Resolution No. 32-26 adopting the FY 2026-27 Operating and Capital Budgets; and

1. Adopt Resolution No. 33-26 readopting the City’s Investment Policy; and

2. Adopt Resolution No. 34-26 setting the FY 2026-27 GANN Appropriations Limit at $18,802,003.

3. 9. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS

10. ADJOURNMENT
The next Regular Meeting will be held on June 23, 2026.

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

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

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

1 MINUTES - MORRO BAY CITY COUNCIL

REGULAR MEETING
May 12, 2026, 5:30 p.m.

Veterans Memorial Hall
209 Surf St., Morro Bay, CA
Members Present: Mayor Carla Wixom
Council Member Jeff Eckles
Council Member Cyndee Edwards
Council Member Zara Landrum
Council Member Bill Luffee
Staff Present: City Manager John Craig
City Attorney Brian Stack
City Clerk Dana Swanson
Finance Director Emily Conrad
Public Works Director Greg Kwolek
Police Chief Amy Watkins
Fire Chief Dan McCrain
Harbor Business Manager Lori Thompson
_____________________________________________________________________

1. ESTABLISH QUORUM AND CALL TO ORDER
Mayor Wixom called the meeting to order at 5:37 p.m. with all members present.

2. PLEDGE OF ALLEGIANCE

3. REPORTS

3.a Closed Session Report
City Attorney Stack announced the Council met in closed session to discuss four matters: two potential litigation matters, public employee performance evaluation for the City Manager, and public employee performance evaluation for the City Attorney. No reportable action was taken in closed session pursuant to the Brown Act.

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

3.c City Manager Reports, Announcements and Presentations

3.d Subcommittee Reports - Verbal Update of Current Subcommittee Activities

1. Water Reclamation Facility & Morro Bay / Cayucos Sanitary District JPA

2. Morro Bay Power Plant (Vistra)

3. Offshore Wind Energy

2 4. Morro Elementary School

5. Shared Fire Services

4. RECOGNITION AND PRESENTATIONS

4.a Emergency Medical Services Week Proclamation
Presented to Deputy Chief/Fire Marshal Vierra and Fire Department staff.

4.b National Boating Safety Week Proclamation
Presented to Harbor Patrol Supervisor Kelly and Harbor Patrol Officer Stein.

4.c National Police Week and National Peace Officers Memorial Day Proclamation
Presented to Police Chief Watkins.

4.d Public Works Week Proclamation
Presented to Public Works Director Kwolek.

4.e Presentation Recognizing Morro Bay Police Department Volunteers for their support of Grizzly Youth Academy Family Day
Captain Hile and Sgt Jiminez from Grizzly Youth Academy presented Certificates of Appreciation to Morro Bay Police Volunteers.

5. PUBLIC COMMENT
 Felipe Gonzalez, SLO County Department of Social Services Program Specialist, thanked the Council for recognizing May as National Foster Care Month. Those interested in becoming a resource family may call (805) 781-1705 or visit slofostercare.com for more information.
 Linda Winters, Morro Bay, reported on Monday Night Dinners and a ribbon cutting event celebrating a mobile laundry trailer provided by 805 Street Outreach.
 Michelle Leicester-Cadaret, Morro Bay, expressed concern about the use of flock surveillance cameras and hoped they will not be used in Morro Bay.  "Duckie" commented on the departure of Public Works Director Kwolek.  Betty Winholtz, Morro Bay, played a video by Kent Nagano congratulating Friends of Morro Elementary for their efforts and the City for embracing plans to acquire and preserve Morro Elementary.

End of public comment.

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

Mayor Wixom opened public comment.

3  Betty Winholtz, Morro Bay, commented on Items 6.d and 6.f. Regarding Item

6.h, she urged the City to remove language stating the agreement may only be altered by a voter-approved measure that would modify Measure D, preventing that lease site from being used for commercial fishing.  Judy Setting, Morro Bay, spoke in support of Item 6.i and, regarding Item 6.e, requested a line-item expenditure statement showing actual maintenance costs exceed the Cloisters assessment amount by 25-30%.

End of public comment
Council Member Luffee pulled Item 6.c and Council Member Landrum pulled Items 6.d,

6.e, 6.f & 6.h.

Motion by Council Member Eckles
Seconded by Council Member Luffee
Approve Consent Agenda Items 6.a, 6.b, 6.g and 6.i as presented.

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

6.a Approval of Minutes
Approve as submitted.

1. April 28, 2026 - Regular Council Meeting

6.b Approval of Proclamations
Approve as submitted.

1. Proclamation declaring the week of May 17-23, 2026 as "Emergency Medical Services Week"

2. Proclamation declaring the week of May 16-22, 2026 as "National Safe Boating Week"

3. Proclamation acknowledging "National Police Week" and declaring May 15, 2026 as "National Peace Officers Memorial Day"

4. Proclamation declaring the week of May 17-23, 2026 as "National Public Works Week"

5. Proclamation proclaiming May as "National Foster Care Month"

6.c Third Quarter Investment Report (period ending March 31, 2026) for Fiscal Year (FY) 2025-26
Finance Director Conrad responded to Council questions.

Motion by Mayor Wixom
Seconded by Council Member Landrum

4 Receive the attached Third Quarter Investment Report (period ending March 31, 2026) for FY 2025-26.

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

6.d Adopt a Resolution of Intention to Annex Lots 1 through 5 of Tract 2859 (APN 065-386-015) into the Cloisters Landscaping and Lighting Maintenance Assessment District (LLMAD)
Public Works Director Kwolek responded to questions raised regarding Items 6.d,

6.e and 6.f.

Motion by Council Member Landrum
Seconded by Council Member Luffee
Adopt Resolution No. 21-26 declaring the intent to annex Lots 1 through 5 of Tract 2859 (APN 065-386-015) into the Cloisters Landscaping and Lighting Maintenance Assessment District (LLMAD).

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

6.e Adoption of Resolution No. 22-26 Approving the Engineer's Report and Declaring the Intent to Levy the Annual Assessment for the Cloisters Landscaping and Lighting Maintenance Assessment District (LLMAD) Motion by Council Member Landrum
Seconded by Council Member Luffee
Adopt Resolution No. 22-26 declaring the intent to levy the annual assessment for the maintenance of the Cloisters Park and Open Space for Fiscal Year (FY) 2026-27 and approving the Engineer’s Report.

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

6.f Adoption of Resolution No. 23-26 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 Motion by Council Member Landrum
Seconded by Council Member Luffee
Adopt Resolution No. 23-26 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) 2026-27.

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

6.g Quarterly Update on the Status of City Council 2025-2027 Goals Receive an update from staff on the City’s progress on City goals established in March 2025.

6.h Memorandum of Understanding (MOU) between the City of Morro Bay and the Morro Bay Commercial Fishermen's Organization (MBCFO) The Council invited Bill Blue from the Morro Bay Commercial Fishermen's Organization to respond to concerns raised during public comment.

City Attorney Stack explained the point of including this language was to identify the potential for a voter-approved measure changing the zoning in this area as a land use constraint that is beyond what the Council controls. If desired, the Council can direct staff to remove that language from the agreement out of concern the document might convey something that wasn't intended, so long as the administrative record reflects this limitation is accurate.

Motion by Council Member Landrum
Seconded by Council Member Luffee
Adopt Resolution No. 24-26, approving the Memorandum of Understanding (“MOU”) between the City and MBCFO for the Harbor Commercial Fishing Dock Repair Project, striking language in Section 5.5 stating the agreement may only be altered by a voter-approved measure modifying Measure D to prohibit the lease site being used for commercial fishing. The MOU will establish the requirement by MBCFO for the use of $800,000 toward the Harbor Commercial Fishing Dock Repair Project and by the City to dedicate the lease site solely to commercial fishing industry use for a period of thirty (30) years.

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

6.i Review and Authorize the Mayor to sign a letter response to the California Department of Fish and Wildlife Regarding proposed changes to the State Marine Protected Areas (MPAs)
Review and comment on a draft letter response to the California Department of Fish and Wildlife regarding proposed changes to the State Marine Protected Areas (MPAs).

7. PUBLIC HEARING ITEMS
None.

8. BUSINESS ITEMS

6 The Council took a brief recess at 7:02 p.m. and reconvened at 7:11 p.m. with all members present.

8.a Approve a Professional Services Agreement with Cannon Corporation for Design of Phase 1 and Environmental Permitting for all Phases of the North Morro Bay Water Improvements Project
Public Works Director Kwolek and Utilities Project Manager Evers presented the report and responded to Council inquiries.

Mayor Wixom opened public comment on Item 8.a.
 Tina Metzger, Morro Bay, expressed concern about the condition of the Nutmeg tank and insufficient water pressure in a high-risk fire hazard severity zone. She suggested the City strategically locate tie-ins to the Whale Rock Water Transport Pipeline for improved fire fighting capability.  Barry Branin, Morro Bay, requested the staff presentation be made available following the meeting and suggested the method of accomplishing capital projects be analyzed.
 Betty Winholtz, Morro Bay, questioned how the Rancho Colina and Highway 41/1 roundabout projects would impact this project and urged further discussion regarding capacity vs. usage in north and south Morro Bay.
 Onan Champi, Morro Bay, would like to review the proposed plans once they become available and stated an interest in upgrading services on his property from residential to commercial.
 Margaret Carman, Morro Bay, suggested a pause on new housing based on water supply concerns.

End of public comment.

Staff responded to additional questions.

Motion by Council Member Eckles
Seconded by Council Member Luffee
Approve and authorize the City Manager to execute a professional services agreement with Cannon Corporation to provide design and engineering services during construction for Phase 1 of the North Morro Bay Water Improvements Project (Project), and environmental review and permitting for all phases of the Project, in an amount not-to-exceed $525,492.00, and authorize the City Manager to execute amendments if necessary not to exceed $52,549.00 for contingencies.

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

8.b Review of Current Council Sub-committees, Scope of Work, and Consider Discontinuing Subcommittees that have Achieved their Intended purposes

7 City Manager Craig invited the Council to review the list of Council SubCommittees, scope of work (purpose, parameters and duration), and either confirm the current scope of work, update the scope of work or discontinue SubCommittees that have achieved their intended purpose. Recommended to review each Sub-Committee and take action as desired to continue, update or disband.

City Attorney Stack commented on the distinction between ad hoc (limited purpose and scope) vs. standing committees and recommended establishing a purpose and timeframe for subcommittees the Council intends to keep.

Mayor Wixom opened public comment for Item 8.b.
 Betsy Gaudette-Cross, Morro Bay, suggested the offshore wind and fire subcommittees be terminated and the power plant subcommittee remain in place until a permanent ordinance is adopted.
 Michelle Leicester-Cadaret, Morro Bay, agreed based on ongoing concerns related to the power plant property, that subcommittee should continue until a permanent ordinance is in place.
 Betty Winholtz, Morro Bay, agreed the offshore wind and fire subcommittees be concluded and suggested the WRF and Morro Elementary subcommittees remain.
 Margaret Carman, Morro Bay, suggested the offshore wind committee continue as long as there were two leases remaining and questions as to whether cable would be run into the dog beach.

End of public comment.

During Council deliberations, there was concurrence on the following:
 All members agreed to disband the Shared Fire Services subcommittee.  All members agreed to disband the Offshore Wind Subcommittee with the understanding it can be re-established if activity occurred that warranted doing so.
 The Power Plant Subcommittee will remain in place and given an updated purpose statement and duration.
 The WRF Subcommittee will continue with a current focus on IPR and WWTP decommissioning, then re-labeled with attention directed to redevelopment of the former WWTP property.
 The Morro Elementary subcommittee will remain active through the due diligence period then reevaluated by Council.

9. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS
None.

10. ADJOURNMENT
The meeting adjourned at 8:53 p.m.

8 Respectfully submitted,
/s/ Dana Swanson, City Clerk

A PROCLAMATION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY

PROCLAIMING THE THIRD SATURDAY
IN JUNE 2026 AS “JUNETEENTH DAY” IN

THE CITY OF MORRO BAY

CITY COUNCIL
City of Morro Bay, California
WHEREAS, Juneteenth has become the day associated with the ending of the institution of slavery in this great nation; and
WHEREAS, Juneteenth embodies the indomitable human spirit of the past, carried into the present, and an inspiration to the future; and
WHEREAS, the celebration of Juneteenth gives us all the opportunity to rededicate ourselves to the true American spirit; and
WHEREAS, we are citizens who wish to secure the blessings of freedom, justice, and equality for all in this great City of ours;
NOW, THEREFORE, BE IT RESOLVED AND ORDERED that the City Council of the City of Morro Bay, is proclaiming the third Saturday in June 2026 as “Juneteenth Day” and recommends that all citizens of the City of Morro Bay join in recognizing the importance of this day.

IN WITNESS WHEREOF I have
hereunto set my hand and caused
the seal of the City of Morro Bay to
be affixed this 9
th day of June, 2026

CARLA WIXOM, MAYOR
City of Morro Bay, California

Prepared By: DS Dept Review: ____
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 2, 2026 FROM: Dana Swanson, City Clerk
SUBJECT: Adoption of Resolution No. 27-26 Updating the City’s Conflict of Interest Code and Resolution No. 28-26 Designating Certain Appointed Bodies and Officials for Applicable Ethics and Fiscal Training Requirements

RECOMMENDED ACTION
Adopt Resolution No. 27-26 approving amendments to the City’s Conflict of Interest Code and Resolution No. 28-26 Designating Certain Appointed Bodies and Officials for Applicable Ethics and Fiscal Training Requirements.

ALTERNATIVES
No alternatives are recommended.

FISCAL IMPACT
None

BACKGROUND/DISCUSSION
City’s Conflict of Interest Code
Government Code section 83700 requires all cities to adopt a Conflict-of-Interest Code. A Conflictof-Interest Code shall have the force of law, and any violation of a Conflict-of-Interest Code by a designated employee shall be deemed a violation of the Government Code. To simplify the preparation and adoption of Conflict-of-Interest Codes, the Fair Political Practices Commission has adopted a form Conflict of Interest Code, which is found at 2 California Code of Regulations, section 18730. As such, the City may comply with Government Code section 83700 by doing all of the following: (1) adopting the form Conflict of Interest Code, (2) identifying designated positions and boards that must comply with the requirements of the Conflict of Interest Code and (3) identifying financial disclosure categories to which each designated position and board fall within.

In February 2024, the City established an updated Conflict of Interest Code through the adoption of Resolution No. 11-24. Accurate disclosure is essential to monitor whether officials have conflicts of interest and to help ensure public trust in government. Staff has determined it is necessary to update the City’s Conflict of Interest Code to add the newly designated positions, revise titles of existing positions, revise disclosure categories and delete positions that have been eliminated and/or positions that no longer make or participate in making governmental decisions. By adopting the attached Resolution No. 27-26, the City Council will ensure the City’s Conflict of Interest Code is up AGENDA NO: 6.c
MEETING DATE: June 9, 2026

to date and reflects the current organization and operations of the City.

AB 1234 – Ethics Training Requirements
Assembly Bill 1234 establishes ethics training requirements for certain local agency officials who receive, or are eligible to receive, public funds through compensation or reimbursement, and requires completion of at least two hours of ethics training on a biennial basis.

Historically, the City of Morro Bay has required all appointed members of Boards, Commissions and Committees to complete ethics training upon appointment and renew such training on a biennial basis. Under AB 1234, however, ongoing ethics training requirements are not triggered solely by appointment to a board, commission or committee; rather, the statute ties the training obligation to officials who receive, or are eligible to receive, compensation or reimbursement. Currently, the City Council and Planning Commission receive compensation and are eligible to receive travel reimbursement.

To better align City practice with state law and reduce unnecessary administrative tracking, this report proposes ethics training would continue to be required for all appointed boards, commissions and committees upon appointment as a best practice. Ongoing ethics training renewal would be required only for those appointed officials designated as eligible for reimbursement (City Council and Planning Commission), consistent with both AB 1234, in addition to the City Manager, City Attorney, Department Directors, and Finance Manager pursuant to SB 827.

SB 827 – Fiscal and Financial Training Requirements
Along with minor changes to Ethics Training requirements established by AB 1234, Senate Bill 827 (SB 827), effective January 1, 2026, establishes new fiscal and financial training requirements for certain local government officials and staff whose roles involve fiscal oversight or financial decisionmaking. The law requires covered officials to complete a minimum of two hours of fiscal and financial training on an annual basis.

The required training addresses core areas of local government fiscal administration, which may include budgeting and financial reporting, public funds management, debt and capital financing, pensions and other post-employment benefits, procurement and contracting and the ethical stewardship of public resources.

SB 827 applies to members of a local agency’s legislative body and to certain appointed officials and staff whose positions involve fiscal oversight or responsibility for the administration, review, or recommendation of financial matters. The statute requires local agencies to identify which officials and staff are subject to the training requirement based on the nature of their duties.

This report proposes designating the following officials and advisory body members as subject to the fiscal and financial training requirements of SB 827, based on their respective roles in fiscal oversight and financial decision-making:
 City Council;
 Members of the Citizens’ Oversight/Finance Advisory Committee;  City Manager;
 City Attorney;
 Department Directors;
 Finance Manager; and
 Senior Fiscal Analyst

CONCLUSION
By adopting Resolution Nos 27-26 and 28-26, the City Council will ensure the City’s Conflict of Interest Code reflects the current organization and operations of the City and expectations for statemandated training requirements are consistent with AB 1234 and SB 827.

ATTACHMENTS

1. Resolution No. 11-24

2. Proposed Resolution Nos. 27-26 and 28-26 (redline version of Conflict of Interest Code available upon request)

RESOLUTION NO. 27-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA

ADOPTING A REVISED CONFLICT OF INTEREST CODE
AND RESCINDING RESOLUTION NO. 11-24 AND

EACH OTHER RESOLUTION IN CONFLICT HEREWITH

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, the Political Reform Act of 1974 (California Government Code Sections 81000 et seq.) requires local government agencies to adopt and promulgate a Conflict of Interest Code; and
WHEREAS, the Political Reform Act and implementing regulations (California Code of Regulations, Title 2, Division 6, Sections 18104, et seq.) adopted by the Fair Political Practices Commission (FPPC) set forth various rules applicable to such conflict of interest including rules of disclosure and participation; and
WHEREAS, the Fair Political Practices Commission recommends each agency incorporate Commission Regulations 18730 and 18720 by reference as the body of their Code, and all changes to the Political Reform Act and to Regulations 18730 and 18720 will automatically be part of the City’s Conflict of Interest Code; and
WHEREAS, on February 13, 2024, the City Council adopted Resolution No. 11-24, adopting a Conflict of Interest Code for the City of Morro Bay and desires to adopt necessary and appropriate amendments thereto; and
WHEREAS, the City Council has determined the documents attached to this Resolution, as Exhibits A and B, accurately set forth the current designated positions regulated by the Conflict of Interest Code, and the respective categories of financial interests which should be made reportable and those boards and commissions which should be designated and the respective categories of financial interests which should be made reportable by their members; and WHEREAS, this action will ensure the City’s Conflict of Interest Code is up to date and in compliance with the law.

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

SECTION 1. Resolution No. 11-24 and any parts or sections of any other resolutions in conflict with this Resolution are hereby rescinded and/or repealed as necessary to resolve such conflict.

SECTION 2. The terms of Title 2, Division 6 of the California Code of Regulations, Section 18730, and any amendments to it duly adopted by the Fair Political Practices Commission, incorporated herein by reference, along with the attached documents entitled Exhibit A, in which members and employees are designated, and Exhibit B in which disclosure categories are set forth, constitute the Conflict of Interest Code for the City of Morro Bay.

Resolution No. 27-26

SECTION 3. Pursuant to the Code, any person holding a designated position, including any person holding a designated position in an acting capacity, shall file a Statement of Economic Interest with the City Clerk. Additionally, any person hired for a position not covered by the Code, who makes or participates in making a governmental decision shall file a Statement of Economic Interest with the City Clerk.

SECTION 4. Persons holding the positions of Mayor, Councilmember, Planning Commissioner, City Manager, City Attorney, City Treasurer, and other City Officials who manage public investments as defined by 2 California Code of Regulations Section 18700.3(b) must file disclosure statements electronically with the Fair Political Practices Commission pursuant to Government Code section 87200 et seq (Regs. Section 18730(b)(3).

SECTION 5. Any future amendments to the City’s Conflict of Interest Code including, but not limited to, amendments to the designated positions list or to the financial disclosure categories, shall be made by resolution duly adopted by the City Council of the City of Morro Bay.

SECTION 6. This Resolution shall take effect immediately upon its adoption.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on this 9
th day of June 2026 on the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:

CARLA WIXOM, Mayor
ATTEST:

DANA SWANSON, City Clerk

Resolution No. 27-26

EXHIBIT A
RESOLUTION NO. 27-26

CITY OF MORRO BAY

LIST OF DESIGNATED POSITIONS

CONFLICT OF INTEREST CODE
Position Disclosure Category
Mayor, Council Members, City Manager, City Attorney,
City Treasurer, Planning Commission Members & Finance Manager As required
by State law
Members of Boards, Committees & Commissions
Citizens Oversight / Citizens Finance Advisory Committee 1,2 Harbor Advisory Board 1,2
Public Works Advisory Board 1,2
Recreation & Parks Commission 1,2
City Manager’s Office
City Clerk 1,6
Human Resources/Risk Manager 1,6
Administrative Services
Finance Director 1,2,5
Information Technology Manager
Senior Fiscal Analyst
1,5
1,5
Harbor
Harbor Director 1,2,6
Harbor Business Manager
Harbor Patrol Supervisor
3,4,6
4,6
Fire
Fire Chief 1,2,6
Deputy Chief/Fire Marshal
Fire Captain
Administrative Technician
4,6
6 6

Resolution No. 27-26

Police
Police Chief 1,2,6
Police Commander 1,6
Police Support Services Manager 1,6
Public Works
Public Works Director 1,2,6
Management Analyst 1,6
City Engineer 1,2,6
Senior Civil Engineer 1,2,6
Utilities Project Manager 1,2,6
Associate Engineer 2,3,4,6
Assistant Engineer 2,3,4,6
Utilities Division Manager 2,3,4,6
Maintenance Division Manager 4,6
Public Works Inspector
Utilities Division Supervisor
3,4
2,6
Operational Technology Specialist 2,6
Community Development
Community Development Director 1,2,6
Planning Manager
Senior Planner
Associate Planner
Chief Building Inspector/Plans Examiner
Building Inspector
2,3,4,6
2,3,4,6
2,3,4
2,3,4,6
2,3,4
Recreation
Recreation Services Division Manager 1,6
Recreation Supervisor – Sports Services 6
Recreation Supervisor – Youth Services 6
Consultants
Consultants shall be included in the list of designated employees and shall disclose pursuant to the broadest disclosure category in the code subject to the following limitation: The City Manager may determine in writing that a particular consultant, although a “designated position,” is hired to perform a range of duties that is limited in scope and thus is not required to fully comply with the disclosure requirements described in this section. Such written determination shall include a description of the consultant’s duties and, based upon that description, a statement of the extent of disclosure requirements. The City Manager’s determination is a public record and shall be retained for public inspection in the same manner and location as the Conflict of Interest Code.
1,2

Resolution No. 27-26

EXHIBIT B
RESOLUTION NO. 27-26

CITY OF MORRO BAY

DISCLOSURE CATEGORIES
Designated employees shall disclose their financial interests pursuant to the appropriate disclosure category as indicated in Exhibit A.

Disclosure Categories
Category 1: Investments/Sources of Income. All investments and business positions in business entities, and sources of income, including gifts, loans and travel payments, that are located in, doing business in, or own real property within the jurisdiction of the City.

Category 2: Real Property Interests. All interests in real property which is located in whole or in part within, or not more than two (2) miles outside, the jurisdiction of the City, including any leasehold, beneficial or ownership interest or option to acquire property.

Category 3: Regulatory/Permits/Licensing Authority. All investments and business positions in business entities, and sources of income, including gifts, loans and travel payments, subject to the regulatory, permit or licensing authority of the designated position’s department.

Category 4: Land Development/Construction/Acquisition. All investments and business positions in business entities, and sources of income, including gifts, loans and travel payments, that are engaged in land development, construction or the acquisition or sale of real property within the jurisdiction of the City.

Category 5: Contracting/Procurement (Citywide). All investments and business positions in business entities, and sources of income, including gifts, loans and travel payments, that provide services, products, materials, machinery, vehicles or equipment of a type purchased or leased by the City.

Category 6: Contracting/Procurement (Department/Division) All investments and business positions in business entities, and sources of income, including gifts, loans and travel payments, that provide services, products, materials, machinery, vehicles or equipment of a type purchased or leased by the designated position’s department or division.

RESOLUTION NO. 28-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA

IDENTIFYING OFFICIAL SUBJECT TO STATE-MANDATED ETHICS AND

FISCAL TRAINING REQUIREMENTS

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, Assembly Bill 1234 (Government Code Sections 53232-53232.4) requires ethics training for local agency officials who receive, or are eligible to receive public funds through compensation or reimbursement; and
WHEREAS, the City Council and Planning Commission receive compensation in the form of stipends and are eligible for travel reimbursement when traveling on City business; and WHEREAS, Senate Bill 827 amended the ethics training requirements established by AB 1234 and established fiscal and financial training requirements for certain agency officials and staff whose roles involve fiscal oversight or financial decision-making including the City Manager and Department Directors; and
WHEREAS, the City Council desires to clearly identify which local agency officials are subject to applicable ethics and fiscal training requirements, consistent with state law and City Policy.

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

SECTION 1. Ethics Training Requirements (AB 1234)
Pursuant to AB 1234 and SB 827, the following officials and City employees are identified as subject to assuming office and ongoing ethics training requirements.  City Council
 Planning Commission
 City Manager
 City Attorney
 Department Directors
 Finance Manager
All other appointed members of Boards, Commissions and Committees shall continue to complete ethics training within six months of assuming office but shall not be subject to ongoing renewal requirements unless otherwise required by state law.

SECTION 2. Fiscal and Financial Training Requirements (SB 827).

Pursuant to Senate Bill 827, the following officials and City employees are identified as subject to the required fiscal and financial training:
 City Council
 Members of the Citizens Oversight/Finance Advisory Committee  City Manager

Resolution No. 28-26

 City Attorney
 Department Directors
 Finance Manager
 Senior Fiscal Analyst
Designation under this section is based on the direct responsibility for budget development, fiscal oversight, financial reporting, or the review and recommendation of financial matters associated with these positions.

SECTION 3. Administration
The City Clerk shall administer and track compliance with applicable ethics and fiscal training requirements consistent with this Resolution and state law.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on this 9
th day of June 2026 on the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:

CARLA WIXOM, Mayor
ATTEST:

DANA SWANSON, City Clerk

Prepared by: DS Dept Review:

City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: May 22, 2026 FROM: Dana Swanson, City Clerk
SUBJECT: General Municipal Election Resolutions for November 3, 2026 Election

RECOMMENDED ACTION
Adopt Resolution No. 29-26 calling a general municipal election for November 3, 2026, and requesting consolidation of the election with the County, and Resolution No. 30-26 adopting regulations for candidate statements.

FISCAL IMPACT
The estimated cost for calling and holding a general municipal election on November 3, 2026 for the election of the mayor and two council members is approximately $30,000. This sum has been provided for in the City Clerk’s Proposed FY 2026/27 Budget.

BACKGROUND/DISCUSSION
In order to initiate the election process for a general municipal election to be held on Tuesday, November 3, 2026, two resolutions are presented for consideration by the Mayor and City Council.

These two resolutions are pursuant to the provisions of law relating to elections in General Law Cities, in the State of California.

Resolution Calling for a General Municipal Election for November 3, 2026:

The first resolution calls and gives notice of the General Municipal Election to be held on November 3, 2026, for the election of the position of Mayor for a full term of two years, and two members of the City Council for full terms of four years each, and further requests that the County Board of Supervisors consolidate the General Municipal Election with the statewide general election to be held on the same date. Services provided by the County in a consolidated election include ballot creation, printing, mailing, collection, and counting, voter registration, and voting site operation. The City’s request for consolidation commits to reimbursing the County for its costs associated with consolidation.

The formal nomination period for candidates will run from July 13 through August 7, 2026, and the filing deadline will be extended to August 12, 2026, if an incumbent does not file. Information regarding the 2026 Election is available on the City website.

Resolution Adopting Regulations for Candidate Statements:

The second resolution adopts regulations pertaining to candidate’s statements to be submitted to the electorate prepared by any candidate for a municipal election, including the costs of such materials, AGENDA NO: 6.d
MEETING DATE: June 9, 2026

01181.0001/478309.1 CFN
foreign language translations, and provision that the candidate’s statements may be 200 words (the City Council may authorize 200 words or 400 words, pursuant to Election Code § 13307(a)(1)).

CONCLUSION
Staff recommend Council approve the two election Resolutions Nos. 29-26 and 30-26 for the holding of a general municipal election on November 3, 2026.

ATTACHMENTS

1. Proposed Resolution No. 29-26 calling for a General Municipal Election for Nov 3, 2026

2. Proposed Resolution No. 30-26 adopting Regulations for Candidate Statements

RESOLUTION NO. 29-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA,

CALLING FOR THE HOLDING OF A GENERAL MUNICIPAL ELECTION TO BE HELD ON TUESDAY, NOVEMBER 3, 2026, FOR THE PURPOSE OF ELECTING

CERTAIN OFFICERS OF SAID CITY AS REQUIRED BY THE PROVISIONS OF THE LAWS

OF THE STATE OF CALIFORNIA RELATING TO GENERAL LAW CITIES AND MORRO BAY MUNICIPAL CODE SECTION 2.09.010; AND, REQUESTING THE BOARD OF

SUPERVISORS OF SAN LUIS OBISPO COUNTY TO CONSOLIDATE SAID ELECTION

WITH THE STATEWIDE GENERAL ELECTION TO BE HELD IN THE COUNTY ON TUESDAY, NOVEMBER 3, 2026 PURSUANT TO SECTION 10403 OF THE ELECTION CODE; AND, OTHER ELECTION MATTERS AS REQUIRED BY LAW

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, Measure “J-14” was passed by the citizens of Morro Bay at the election held in November 2014 and codified as Resolution No. 78-14, amending Morro Bay Municipal Code Section 2.09.010 to have the General Municipal Election held at the time of the Statewide General Election; and
WHEREAS, under the provisions of the laws relating to the general law cities in the State of California and Morro Bay Municipal Code Section 2.09.010, a General Municipal Election shall be held on Tuesday, November 3, 2026 for the purpose of the election of two (2) members of the City Council of the City of Morro Bay for the full term of four (4) years, and for the election of one (1) Mayor of the City Council of the City of Morro Bay for the full term of two (2) years; and WHEREAS, it is desirable that said General Municipal Election be consolidated with the Statewide General Election to be held on the same date and that within the City of Morro Bay the precincts, polling places and election officers of the two elections be the same, and that the County Election Department of the County of San Luis Obispo canvass the returns of the General Municipal Election and that the election be held in all respects as if there were only one election.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MORRO BAY, CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS:

SECTION 1. That pursuant to the requirements of the laws of the State of California and Morro Bay Municipal Code Section 2.09.010, there is called and ordered to be held in the City of Morro Bay, California, on Tuesday, November 3, 2026 a General Municipal Election for the purpose of electing two (2) members of the City Council of the City of Morro Bay for the full term of four (4) years, and for the purpose of electing one (1) Mayor of the City Council of the City of Morro Bay for the full term of two (2) years.

SECTION 2. That the ballots to be used at the election shall be in form and content as required by law.

SECTION 3. That the City Clerk is authorized, instructed and directed to coordinate with the County of San Luis Obispo Clerk-Recorder to procure and furnish any and all official ballots, notices, printed matter and all supplies, equipment and paraphernalia that may be necessary in order to properly and lawfully conduct the election.

Resolution No. 29-26

SECTION 4. That the voting sites for the election shall be open at such hours and on such days as determined by the San Luis Obispo County Clerk Recorder (Registrar of Voters) provided that the opening and closure of voting sites is conducted in accordance with Sections 10242 and 14401 of the Elections Code of the State of California.

SECTION 5. That in all particulars not recited in this resolution, the election shall be held and conducted as provided by law for holding municipal elections.

SECTION 6. That notice of the time and place of holding the election is given and the City Clerk is authorized, instructed and directed to give further or additional notice of the election, in time, form, and manner as required by law.

SECTION 7. That pursuant to the requirements of Section 10403 of the Elections Code, the Board of Supervisors of the County of San Luis Obispo is hereby requested to consent and agree to the consolidation of a General Municipal Election with the Statewide General Election on Tuesday, November 3, 2026, for the purpose of the election of one (1) Mayor, and two (2) Members of the City Council.

SECTION 8. That the County Election Department is authorized to canvass the returns of the General Municipal Election. The election shall be held in all respects as if there were only one election, and only one form of ballot shall be used.

SECTION 9. That the Board of Supervisors is requested to issue instructions to the County Election Department to take any and all steps necessary for the holding of the consolidated election.

SECTION 10. That the City of Morro Bay recognizes that additional costs will be incurred by the County by reason of this consolidation and agrees to reimburse the County for any costs.

SECTION 11. That the City Clerk is hereby directed to file a certified copy of this Resolution with the Board of Supervisors and the County Election Department of the County of San Luis Obispo.

SECTION 12. The City Council authorizes the City Clerk to administer said election and all reasonable and actual election expenses shall be paid by the City upon presentation of a properly submitted bill.

SECTION 13. That the City Clerk shall certify to the passage and adoption of this Resolution and enter it into the book of original resolutions. //
//
//
//
//

Resolution No. 29-26

SECTION 14. This Resolution is effective on the day of its adoption.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 9
th day of June 2026 following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

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

RESOLUTION NO. 30-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA,

ADOPTING REGULATIONS FOR CANDIDATES FOR ELECTIVE OFFICE,

PERTAINING TO, AND COSTS OF, CANDIDATE STATEMENTS SUBMITTED

TO THE VOTERS AT THE CONSOLIDATED GENERAL MUNICIPAL
ELECTION TO BE HELD ON TUESDAY, NOVEMBER 3, 2026

THE CITY COUNCIL
City of Morro Bay, California
WHEREAS, California Elections Code section 13307 provides the governing body of any local agency shall adopt regulations pertaining to materials prepared by any candidate for a municipal election, including costs of each candidate statement.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MORRO BAY, CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE AND ORDER AS FOLLOWS:

SECTION 1. General Provisions. Pursuant to California Elections Code section 13307, each candidate for elective office to be voted for at the Consolidated General Municipal Election to be held in the City of Morro Bay on November 3, 2026, may prepare a candidate's statement on an appropriate form provided by the City Clerk. Such statement may include the name, age, and occupation of the candidate and a brief description, not exceeding 200 words, of the candidate's education and qualifications expressed by the candidate himself/herself. Such statement shall not include party affiliation of the candidate, nor membership or activity in partisan political organizations. The statement shall be filed in the City Clerk’s Office at the time the candidate's nomination papers are filed. The statement may be withdrawn, but not changed, during the period for filing nomination papers and until 5:00 p.m. of the next working day after the close of the nomination period.

SECTION 2. Foreign Language Policy.
a. Candidates have the option to have their statement translated into another language and printed at an additional cost. Translation will be performed by the County of San Luis Obispo prior to publication.
b. Pursuant to the Federal Voting Rights Act, candidate’s statements will be translated into all languages as required by the County of San Luis Obispo. c. The County will mail separate sample ballots and candidates’ statements in non-English languages (as required by the Federal Voting Rights Act) to only those voters who are on the county voter file as having requested a sample ballot in a particular language. The County will make the sample ballots and candidates statements in the required languages available at all polling places, on the County’s website, and in the Election Official’s office.

SECTION 3. Payment.
a. Each candidate is required to pay for the cost of translating and printing his/her candidate statement in English and Spanish (and any language as required by the

Resolution No. 30-26

Federal Voting Rights Act and/or State law) in the voters’ pamphlet. b. The City Clerk shall estimate the total cost of printing, handling, translating, and mailing each candidate statement filed pursuant to this section, including costs incurred as a result of a candidate choosing to translate a statement into another language, and including costs incurred as a result of complying with the Voting Rights Act of 1965, as amended, and require each candidate filing a statement to pay in advance to the City of Morro Bay his/her estimated pro rata share as a condition of having his/her statement included in the voters' pamphlet. The estimate is an approximation of the actual cost that varies from one election to another and the actual cost may be significantly more or less than the estimate, depending upon the actual number of candidates filing statements. Accordingly, the City Clerk is not bound by the estimate and may, on a pro rata basis, bill each candidate for additional actual expense, or refund any excess paid, depending upon the final actual cost. In the event of underpayment, the City Clerk shall require the candidate to pay the balance of the cost incurred. In the event of overpayment, within 30 days of receipt of the invoice from the County of San Luis Obispo, the City Clerk shall pro-rate the excess amount among the candidates and refund to each candidate his/her share of the excess amount.

SECTION 4. Additional Materials. No candidate is permitted to include additional materials in the sample ballot package.

SECTION 5. Miscellaneous.
a. All translations shall be provided by professionally-certified translators pursuant to state and federal law.
b. The Elections Official shall comply with all recommendations and standards set forth by the California Secretary of State regarding occupational designations and other matters relating to elections.

SECTION 6. The City Clerk shall provide each candidate, or his/her representative, a copy of this resolution at the time nominating petitions are issued.

SECTION 7. All previous resolutions establishing City Council policy on payment for candidate statements are hereby rescinded.

SECTION 8. This resolution applies only to the election to be held on November 3, 2026, and shall then be rescinded.

SECTION 9. The City Clerk shall certify to the passage and adoption of this Resolution and enter it into the book of original resolutions.
//
//
//
//

Resolution No. 30-26

SECTION 10. Effective Date. This Resolution is effective on the day of its adoption.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 9
th day of June 2026 by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

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

Prepared By: ________ Dept Review: ___ ___
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 5, 2026 FROM: John Craig, City Manager
Krista Rupp, Executive Director/CEO, Visit Morro Bay
SUBJECT: Approval of Owners Association (Operating) Agreement between City and Visit Morro Bay

RECOMMENDED ACTION
Approve the Operating Agreement between the City and Visit Morro Bay subject to terms set out in the agreement.

FISCAL IMPACT
As Council approved the renewal of the Morro Bay Tourism Business Improvement District (MBTBID) for a 10-year term on March 24, 2026, the action of approving the Operating Agreement has no further fiscal impact.

BACKGROUND
On March 24, 2026 the City Council approved Resolution No. 16-26 renewing the MBTBID for a 10- year term. As part of that renewal, an Operating Agreement has been negotiated and is before you today.

The MBTBID is a benefit assessment district proposed to continue a revenue source to help fund Sales, Marketing, Communications and Destination Development programs for certain Morro Bay lodging businesses and vacation rental businesses. This approach has been used successfully in other destination areas throughout the state to improve tourism and drive additional room nights to assessed businesses. The renewed MBTBID includes all lodging businesses and vacation rental businesses, collectively referred to as “assessed businesses”, existing and in the future, available for public occupancy located within the boundaries of the City of Morro Bay (City).

On April 27, 2009, City Council approved Ordinance No. 546 amending the Morro Bay Municipal Code and establishing the MBTBID pursuant to the Parking and Business Improvement Area Law of 1989 (‘89 Law) with a one-year renewal cycle. On June 8, 2021, the Council adopted Resolution No. 28-21 re-establishing an assessment of 3% of taxable short-term room rental revenue for all lodging businesses and vacation rental businesses pursuant to the Parking and Business Improvement Area Law of 1994 (‘94 Law) for a five-year term ending June 30, 2026.

Assessed business owners decided to pursue renewal of the MBTBID in order to continue a revenue source devoted to marketing Morro Bay as a tourist, meeting and event destination. If renewed, the MBTBID would generate approximately $1,200,000 on an annual basis for promotion of travel and AGENDA NO: 6.e
MEETING DATE: June 9, 2026

tourism specific to Morro Bay.

TOURISM BUISNESS IMPROVEMENT DISTRICTS
Tourism Business Improvement Districts (TBIDs) utilize the efficiencies of private sector operation in the market-based promotion of tourism. These special assessment districts allow assessed business owners to organize their efforts to increase tourism. Business owners within the TBID fund the TBID, and those funds are used to provide services that are desired by and benefit the assessed businesses within the TBID.

TBID benefits:
 Funds cannot be diverted for other government programs;  They are customized to fit the needs of each destination;  They allow for a wide range of services; including: destination marketing, tourism promotion, and sales lead generation;
 They are designed, created and governed by those who will pay the assessment; and  They provide a stable funding source for tourism promotion.

In California, TBIDs are primarily formed pursuant to the Property and Business Improvement District Law of 1994 (94 Law). This law allows for the creation of special benefit assessment districts to raise funds within a specific geographic area. The key difference between TBIDs and other special benefit assessment districts is that funds raised are returned to the private non-profit corporation governing the TBID.

MANAGEMENT DISTRICT PLAN
The Management District Plan (Plan) (Attachment 1) includes the proposed boundary of the MBTBID, a service plan and budget and a proposed means of governance. The MBTBID will include all lodging businesses and vacation rental businesses, collectively referred to as “assessed businesses”, existing and in the future, available for public occupancy located within the boundaries of the City, as shown on the map in the Plan.

The annual assessment rate is three percent (3%) of taxable short-term sleeping room rental revenue.

Based on the benefit received, assessments will not be collected on stays of more than thirty (30) consecutive days; and on any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty.

The renewed MBTBID will have a ten (10) year term, beginning July 1, 2026, or as soon as possible thereafter, and ending ten (10) years from its start date. Once per year beginning on the anniversary of MBTBID renewal, there is a thirty (30) day period in which business owners paying fifty percent (50%) or more of the assessment may protest and begin proceedings to terminate the MBTBID.

The City will be responsible for collecting the assessment on a monthly basis (including any delinquencies, interest, and overdue charges) from each assessed business. The City shall forward the assessments to Visit Morro Bay, which will have the responsibility of managing MBTBID programs as provided in the Plan. The City shall be paid a fee equal to three percent (3%) of the amount of assessment collected to cover its costs of collection and administration.

MBTBID RENEWAL PROCESS
January 27, 2026 RESOLUTION OF INTENTION HEARING (COMPLETED) Upon the submission of a written petition, signed by the business owners in the renewed MBTBID who will pay more than fifty percent (50%) of the assessments proposed to be levied, the City Council (Council) may initiate proceedings to renew the MBTBID by the adoption of a resolution expressing its intention to renew the MBTBID.

Petition Status: Petitions in favor of MBTBID renewal were submitted by assessed businesses, which represent more than fifty percent (50%) of the total MBTBID assessment. This majority petition allowed the Council to initiate proceedings for MBTBID renewal at the January 27, 2026 meeting.

No later than
February 7, 2026 NOTICE (COMPLETED)
The 94 Law requires the City to mail written notice to the owners of all businesses proposed to be assessed within the MBTBID. Mailing the notice begins a mandatory forty-five (45) day period in which assessed business owners may protest MBTBID renewal.

February 24, 2026 PUBLIC MEETING (COMPLETED)
Allow public testimony on the renewal of the MBTBID and levy of assessments.

No Council action required.

March 24, 2026 FINAL PUBLIC HEARING (COMPLETED)
If written protests are received from the owners of businesses in the renewed MBTBID which will pay fifty percent (50%) or more of the assessments proposed to be levied, and protests are not withdrawn so as to reduce the protests to less than fifty percent (50%), no further proceedings to levy the proposed assessment against such businesses shall be taken for a period of one (1) year from the date of the finding of a majority protest by the Council .

If the Council, following the public hearing, decides to establish the renewed MBTBID, the Council shall adopt a resolution of formation.

June 9, 2026 APPROVAL OF AGREEMENT FOR CONTRACTOR SERVICES

CONCLUSION
Staff recommends Council approve the Agreement for Contractor Services between the City and Visit Morro Bay covering the 10-year term beginning July 1, 2026.

ATTACHMENT(S)

1. Morro Bay TBID Management District Plan

2. Resolution No. 16-26 Renewing the MBTBID

3. Visit Morro Bay – MBTBID Owners Association Agreement

2026-2036

MORRO BAY

TOURISM BUSINESS IMPROVEMENT DISTRICT

MANAGEMENT DISTRICT PLAN
Prepared pursuant to the Property and Business Improvement District Law of 1994, Streets and Highways Code section 36600 et seq.

November 18, 2025

Table of Contents
I. OVERVIEW ......................................................................................................................................3 II. BACKGROUND................................................................................................................................5 III. ACCOMPLISHMENTS ....................................................................................................................6 IV. BOUNDARY.....................................................................................................................................7 V. ASSESSMENT BUDGET AND SERVICES ......................................................................................9 A. ANNUAL SERVICE PLAN.................................................................................................................................... 9 B. ANNUAL BUDGET........................................................................................................................................... 11 C. CALIFORNIA CONSTITUTIONAL COMPLIANCE ................................................................................................ 11 D. ASSESSMENT ................................................................................................................................................... 12 E. INTEREST AND OVERDUE CHARGES............................................................................................................... 13 F. TIME AND MANNER FOR COLLECTING ASSESSMENTS..................................................................................... 14 VI. GOVERNANCE.............................................................................................................................. 15 A. OWNERS’ ASSOCIATION.................................................................................................................................. 15 B. BROWN ACT AND CALIFORNIA PUBLIC RECORDS ACT COMPLIANCE ............................................................. 15 C. ANNUAL REPORT............................................................................................................................................ 15 APPENDIX 1 – LAW .................................................................................................................................... 16 APPENDIX 2 – ASSESSED BUSINESSES................................................................................................... 28 Prepared by
Civitas
www.civitasadvisors.com

MBTBID Management District Plan 3
November 18, 2025
I. OVERVIEW
Developed by Morro Bay lodging businesses, Morro Bay vacation rental businesses and Visit Morro Bay (VMB), the Morro Bay Tourism Business Improvement District (MBTBID) is an assessment district proposed to continue to provide specific benefits to payors by funding Sales, Marketing, Communications, and Destination Development promotion efforts for assessed businesses. This approach has been used successfully in other destination areas throughout the country to provide the benefit of additional room night sales directly to payors. The MBTBID was initially formed in 2009 pursuant to the Parking and Business Improvement Area Law of 1989. In 2021, the original MBTBID was disestablished and a new MBTBID was formed under the Property and Business Improvement District Law of 1994 for a five (5) year term. Morro Bay lodging businesses, Morro Bay vacation rental businesses and VMB now wish to renew the MBTBID for an additional ten (10) year term.

Location: The renewed MBTBID includes all lodging businesses and vacation rental businesses, collectively referred to as “assessed businesses”, existing and in the future, available for public occupancy located within the boundaries of the City of Morro Bay (City), as shown on the map in Section IV.

Services: The MBTBID is designed to provide specific benefits directly to payors by increasing awareness and demand for room night sales. Sales, Marketing, Communications and Destination Development programs, and other improvements and activities set forth in this Management District Plan (Plan), will increase demand for overnight tourism and market payors as tourist, meeting and event destinations, thereby increasing demand for room night sales.

Budget: The total MBTBID annual assessment budget for the initial year of its ten (10) year operation is anticipated to be approximately $1,200,000. A similar assessment budget is expected to apply to subsequent years, but this assessment budget is expected to fluctuate as room sales do, and as businesses open and close.

Cost: The annual assessment rate is three percent (3%) of gross short-term sleeping room rental revenue. Based on the benefit received, assessments will not be collected on stays of more than thirty (30) consecutive days; and on any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty.

Collection: The City will be responsible for collecting the assessment on a monthly basis (including any delinquencies, interest, and overdue charges) from each assessed business located in the boundaries of the MBTBID. The City shall take all reasonable efforts to collect the assessments from each assessed business.

Duration: The renewed MBTBID will have a ten (10) year life, beginning July 1, 2026, or as soon as possible thereafter, and ending ten (10) years from its start date. After ten (10) years, the MBTBID may be renewed pursuant to the Property and Business Improvement District Law of 1994, Streets and Highways Code section 36600 et seq. (94 Law) if assessed business owners support continuing the MBTBID programs.

MBTBID Management District Plan 4
November 18, 2025
Management: VMB shall continue to serve as the MBTBID’s Owners’ Association. The Owners’ Association is charged with managing funds and implementing programs in accordance with this Plan, and must provide annual reports to the City Council.

MBTBID Management District Plan 5
November 18, 2025
II. BACKGROUND
TBIDs are an evolution of the traditional Business Improvement District. The first TBID was formed in West Hollywood, California in 1989. Since then, over 100 California destinations have followed suit. In recent years, other states have begun adopting the California model –Illinois, Minnesota, Massachusetts, Montana, South Dakota, Washington, Colorado, Texas and Louisiana have adopted TBID laws. Several other states are in the process of adopting their own legislation. The cities of Wichita, Kansas and Newark, New Jersey used an existing business improvement district law to form a TBID. Additionally, some cities, like Portland, Oregon and Memphis, Tennessee have utilized their home rule powers to create TBIDs without a state law.

California’s TBIDs collectively raise over
$300 million annually for local destination
marketing. With competitors raising their
budgets, and increasing rivalry for visitor
dollars, it is important that Morro Bay lodging
businesses and vacation rental businesses
continue to invest in stable, commercespecific marketing programs.

TBIDs utilize the efficiencies of private
sector operation in the market-based
promotion of tourism districts. TBIDs allow
tourism business owners to organize their
efforts to increase commerce. Business
owners within the TBID pay an
assessment and those funds are used to
provide services that increase commerce.

In California, most TBIDs are formed pursuant to the Property and Business Improvement District Law of 1994. This law allows for the creation of a benefit assessment district to raise funds within a specific geographic area. The key difference between TBIDs and other benefit assessment districts is that funds raised are returned to the private non-profit corporation governing the district.

There are many benefits to TBIDs:
• Funds must be spent on services and improvements that provide a specific benefit only to those who pay;
• Funds cannot be diverted to general government programs; • They are customized to fit the needs of payors in each destination; • They allow for a wide range of services;
• They are designed, created and governed by those who will pay the assessment; and • They provide a stable, long-term funding source for tourism promotion. 0 20
40 60
80 100
120
Number of Districts
Operating in California

MBTBID Management District Plan 6
November 18, 2025
III. ACCOMPLISHMENTS
• Staff of three including Executive Director, Tourism Coordinator and Administrative. • Development and launch of new official website in FY2024-26, www.MorroBay.org • Developed three-year strategic plan for 2022-2026.
• Development of “Come Get Salty” destination brand.
• Produced brand awareness study to understand brands impact and awareness. • Develop digital marketing strategy
• Develop social media marketing strategy
• Launched “Salt of Morro Bay” video campaign series to showcase unique businesses and personalities of Morro Bay.
• Published new visitor guide and distributed over 40,000 copies. • Updated the visitor kiosk at the entrance of the city. • Developed and launched promotion months for offseason travel. o Wine Month, Restaurant Month, Adventure Month and Lodging Deals • Relaunched and sponsored events that were lost during Covid o City Wide Yard Sale
o Morro Bay Car Show
o Morro Bay KiteFest
o Lighted Boat Parade
o Morro Bay Bird Festival
o Avocado Margarita Festival 2022
• Partnered with City of Morro Bay and local non-profits to produce new events. o Morro Bay Ironman 70.3
o Morro Bay Family Fun Day
o Morro Bay Maritime Festival
o Tunes at Tidelands
• Grant to Morro Bay in Bloom to support their I HEART Morro Bay beautification project. • Developed strategic sales efforts identify key domestic and international market opportunities.
• Contracted with intentional representation agencies in United Kingdom and German. • Hosted 15 international familiarization tours to Morro Bay, to build awareness in the global marketplace.
• Attended eight international trade shows to create opportunities for our lodging stakeholders.
• Conducted Tourism Economic Impact Study in FY2024-25, to understand and benchmark tourism economic impact
• Conducted Future Visitor Profile Study, to understand the travelers need. • Conducted Equity, Diversity & Inclusion Asset Alignment Study. • Conducted Short Term Vacation Rental Impact Study
• Launched over $600,000 of reserve funds to combat tourism impacting issues. I.E Hwy One closure, weather impacts, tourism slowdowns.

MBTBID Management District Plan 7
November 18, 2025
IV. BOUNDARY
The MBTBID will continue to include all lodging businesses and vacation rental businesses, existing and in the future, available for public occupancy within the boundaries of the City, as shown in the map below.

Lodging business means: any structure, or any portion of any structure, which is occupied or intended or designed for occupancy by transients for dwelling, lodging, or sleeping purposes, and includes any hotel, inn, tourist home or house, motel, studio hotel, bachelor hotel, lodging house, rooming house, apartment house, dormitory, public or private club at a fixed location or other similar structure or portion thereof; and shall further include any space, lot, area or site in any or other similar conveyance that is occupied or intended or designed for occupancy by transients dwelling, lodging or sleeping purposes. For purposes of this Plan, the definition of "lodging business" shall not include mobile homes, house trailers, trailer courts, recreational vehicle parks, mobilehome parks, camps, parks or lot where a trailer, tent, recreational vehicle, mobile home, motorhome or similar conveyance that is occupied or intended or designed for occupancy by transients dwelling, lodging or sleeping purposes.

Vacation rental means: the rental of any structure or any portion of any structure for occupancy for dwelling, lodging or sleeping purposes for thirty (30) consecutive calendar days or less in duration, including detached single-family residences, condominiums, duplexes, twinplexes, townhomes and multiple-family dwellings.

A complete listing of assessed businesses within the renewed MBTBID can be found in Appendix 2.

MBTBID Management District Plan
8 November 18, 2025

MBTBID Management District Plan 9
November 18, 2025
V. ASSESSMENT BUDGET AND SERVICES
A. Annual Service Plan
Assessment funds will be spent to provide specific benefits conferred or privileges granted directly to the payors that are not provided to those not charged, and which do not exceed the reasonable cost to the City of conferring the benefits or granting the privileges. The privileges and services provided with the MBTBID funds are Sales, Marketing, Communications, and Destination Development programs, and other improvements and activities set forth in this Plan, available only to assessed businesses.

A service plan assessment budget has been developed to deliver services that benefit the assessed businesses. A detailed annual assessment budget will be developed and approved by the VMB Board.

The chart below illustrates the initial annual assessment budget allocations. These activities and allocations will also apply in subsequent years. The total initial assessment budget is estimated to be $1,200,000.

Although actual revenues will fluctuate due to market conditions, the proportional allocations of the budget shall remain the same. However, the VMB Board shall have the authority to adjust budget allocations between the categories by no more than fifteen percent (15%) of the total budget per year.

A description of the proposed improvements and activities for the initial year of operation is below.

The same activities are proposed for subsequent years. In the event of a legal challenge against the MBTBID, any and all assessment funds may be used for the costs of defending the MBTBID.

Each budget category includes all costs related to providing that service. For example, the Sales, Marketing, Communications, and Destination Development budget includes the cost of staff time dedicated to overseeing and implementing the Sales, Marketing, Communications, and Destination Development program. Staff time dedicated purely to administrative tasks is allocated to the administrative portion of the budget. The costs of an individual staff member may be allocated to multiple budget categories. The staffing levels necessary to provide the services below will be determined by VMB on an as- needed basis.

Sales, Marketing,
Communications,
and Destination
Development,
$960,000
80%
Administration,
$120,000
10%
Contingency/Reserve,
$84,000
7%
City Collection Fee,
$36,000
3%

INITIAL ANNUAL ASSESSMENT BUDGET -
$1,200,000

MBTBID Management District Plan 10
November 18, 2025
Sales, Marketing, Communications and Destination Development A Sales, Marketing, Communications and Destination Development program will promote assessed businesses as tourist, meeting, and event destinations. The Sales, Marketing, Communications and Destination Development program will have a central theme of promoting the destination as a desirable place for overnight visits. The program will have the goal of increasing overnight visitation and room night sales at assessed businesses, and may include, but is not limited to, the following activities:
• Internet marketing efforts to increase awareness and optimize internet presence to drive overnight visitation and room sales to assessed businesses; Print ads in magazines and newspapers, television ads, and radio ads targeted at potential visitors to drive overnight visitation and room sales to assessed businesses;
• Building the Morro Bay branding and local destination marketing to attract overnight visitation to assessed businesses and the MBTBID;
• Attendance of trade shows to promote assessed businesses; • Sales blitzes for assessed businesses;
• Familiarization tours of assessed businesses;
• Preparation and production of collateral promotional materials such as brochures, flyers and maps featuring assessed businesses;
• Attendance of professional industry conferences and affiliation events to promote assessed businesses;
• Lead generation activities designed to attract tourists and group events to assessed businesses;
• Director of Sales and General Manager meetings to plan and coordinate tourism promotion efforts for assessed businesses;
• Education of hospitality staff on service and safety (related to alcohol and food) designed to create a visitor experience that will bring repeat visits to assessed businesses; • Education of lodging business management and the Owners’ Association on marketing strategies best suited to meet assessed businesses’ needs; • Comprehensive and integrated wayfinding signage system (subject to City approval); • Services designed to improve the visitors experience such as, but not limited to, beautification and/or the creation of new arts, cultural and educational activities to drive overnight visitation and room sales to assessed businesses(subject to City approval); and • Other activities that increase the profile and notoriety of the destination as an overnight travel destination and promote greater room night sales for assessed businesses.

Administration and Operations
The administration and operations portion of the budget shall be utilized for administrative staffing costs, office costs, advocacy, and other general administrative costs such as insurance, legal, and accounting fees.

Collection Fee
The City shall be paid a fee equal to three percent (3%) of the amount of assessment collected to cover its costs of collection and administration.

Contingency / Reserve
The budget includes a contingency line item to account for lower than anticipated assessments. If

MBTBID Management District Plan 11
November 18, 2025
there are contingency funds collected, they may be held in a reserve fund or utilized for other program, administration or renewal costs at the discretion of VMB. Policies relating to contributions to the reserve fund, the target amount of the reserve fund, and expenditure of monies from the reserve fund shall be set by VMB. Contingency/reserve funds may be spent on MBTBID programs or administrative and renewal costs in such proportions as determined by VMB. The reserve fund may be used for the costs of renewing the MBTBID.

B. Annual Budget
The total ten (10) year assessment budget is projected at approximately $1,200,000 annually, or $12,000,000 through the ten (10) year term of the MBTBID. A similar budget is expected to apply to subsequent years, but this budget is expected to fluctuate as room sales do, and as businesses open and close.

C. California Constitutional Compliance
The MBTBID assessment is not a property-based assessment subject to the requirements of Proposition 218. Courts have found Proposition 218 limited the term ‘assessments’ to levies on real property.1 Rather, the MBTBID assessment is a business-based assessment, and is subject to Proposition 26. Pursuant to Proposition 26 all levies are a tax unless they fit one of seven exceptions.

Two of these exceptions apply to the MBTBID, a “specific benefit” and a “specific government service.” Both require that the costs of benefits or services do not exceed the reasonable costs to the City of conferring the benefits or providing the services.

1. Specific Benefit
Proposition 26 requires that assessment funds be expended on, “a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege.”2 The services in this Plan are designed to provide targeted benefits directly to assessed businesses, and are intended only to provide benefits and services directly to those businesses paying the assessment. These services are tailored not to serve the general public, businesses in general, or parcels of land, but rather to serve the specific businesses within the MBTBID. The activities described in this Plan are specifically targeted to increase demand for room night sales for assessed businesses within the boundaries of the MBTBID and are narrowly tailored. MBTBID funds will be used exclusively to provide the specific benefit of increased demand for room night sales directly to the assessees. Assessment funds shall not be used to feature non-assessed businesses in MBTBID programs, or to directly generate sales for non-assessed businesses. The activities paid for from assessment revenues are business services constituting and providing specific benefits to the assessed businesses. Nothing in this Plan limits the ability of the Owners’ Association to enter into private contracts with non-assessed businesses for the provision of services to those businesses.

The assessment imposed by this MBTBID is for a specific benefit conferred directly to the payors that is not provided to those not charged. The specific benefit conferred directly to the payors is an increase in demand for room night sales. The specific benefit of an increase in demand for room night sales for assessed businesses will be provided only to businesses paying the district assessment, with Sales, Marketing, Communications, and Destination Development programs promoting businesses paying the MBTBID assessment. The marketing, sales, communications, and destination development programs will be designed to increase room night sales at each assessed business. 1 Jarvis v. the City of San Diego 72 Cal App. 4th 230
2 Cal. Const. art XIII C § 1(e)(1)

MBTBID Management District Plan 12
November 18, 2025
Because they are necessary to provide the marketing, sales, communications, and destination development programs that specifically benefit the assessed businesses, the administration and contingency services also provide the specific benefit of increased demand for room night sales to the assessed businesses.

Although the MBTBID, in providing specific benefits to payors, may produce incidental benefits to non-paying businesses, the incidental benefit does not preclude the services from being considered a specific benefit. The legislature has found that, “A specific benefit is not excluded from classification as a ‘specific benefit’ merely because an indirect benefit to a nonpayor occurs incidentally and without cost to the payor as a consequence of providing the specific benefit to the payor.”3

2. Specific Government Service
The assessment may also be utilized to provide, “a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product.”4 The legislature has recognized that marketing and promotions services like those to be provided by the MBTBID are government services within the meaning of Proposition 265. Further, the legislature has determined that “a specific government service is not excluded from classification as a ‘specific government service’ merely because an indirect benefit to a nonpayor occurs incidentally and without cost to the payor as a consequence of providing the specific government service to the payor.”6

3. Reasonable Cost
MBTBID services will be implemented carefully to ensure they do not exceed the reasonable cost of such services. The full amount assessed will be used to provide the services described herein. Funds will be managed by VMB, and reports submitted on an annual basis to the City. Only assessed businesses will be featured in marketing materials, receive sales leads generated from MBTBID-funded activities, be featured in advertising campaigns, and benefit from other MBTBID-funded services. The assessed business list was compiled from records provided by the jurisdiction and complies with the requirements of the 94 Law. Pursuant to Streets and Highways Code Section 36615, the City Council’s determination of ownership is final and conclusive, with no obligation to obtain other information.

Non-assessed businesses will not receive these, nor any other, MBTBID-funded services and benefits.

The MBTBID-funded programs are targeted directly to benefit assessed businesses. It is, however, possible that there will be a spill over benefit to non-assessed businesses. If non-assessed businesses receive incremental room nights, that portion of the promotion or program generating those room nights shall be paid with non-MBTBID funds. MBTBID funds shall only be spent to benefit the assessed businesses, and shall not be spent on that portion of any program which directly generates incidental room nights for non-assessed businesses.

D. Assessment
The annual assessment rate is three percent (3%) of gross short term sleeping room rental revenue.

Based on the benefit received, assessments will not be collected on stays of more than thirty (30) consecutive days; and on any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty. 3 Government Code § 53758(a)
4 Cal. Const. art XIII C § 1(e)(2)
5 Government Code § 53758(b)
6 Government Code § 53758(b)

MBTBID Management District Plan 13
November 18, 2025
The assessment was calculated based on the total cost of the activities to be provided for the benefit of the businesses within the MBTBID, with costs allocated based on the proportional benefit conferred to each business. Activities funded by the MBTBID, are specifically targeted to increase room nights at assessed businesses. All room night sales do not represent the same benefit to the payors. For example, a higher priced room night is of greater benefit than a lower priced room night because the assessee derives greater revenue. To account for this benefit differential and to make sure the benefits are proportional, an assessment formula based on a percentage of revenue has been selected. The proposed formula accurately reflects greater benefit to assessed businesses with higher priced room nights.

The term “gross short-term sleeping room rental revenue” as used herein means: the consideration charged on the room rate for the occupancy of space in a lodging business or vacation rental business valued in money, not including other charges such as reservation fees, forfeited deposits, cancelation fees, attrition fees, no-show fees, parking fees, internet fees, roll-a-way beds fees, early and/or late checkout fees, or any other charges or fees (existing or in the future).

Gross sleeping room rental revenue shall not include, and therefore the assessment shall not be charged upon, any federal, state or local taxes collected, including but not limited to transient occupancy taxes.

The assessment is levied upon and a direct obligation of the assessed business. However, the assessed business may, at its discretion, pass the assessment on to transients. The amount of assessment, if passed on to each transient, shall be disclosed in advance and separately stated from the amount of rent charged and any other applicable taxes, and each transient shall receive a receipt for payment from the business. If the MBTBID assessment is identified separately it shall be disclosed as the “MBTBID Assessment.” As an alternative, the disclosure may include the amount of the MBTBID assessment and the amount of the assessment imposed pursuant to the California Tourism Marketing Act, Government Code §13995 et seq. and shall be disclosed as the “Tourism Assessment.” The assessment is imposed solely upon, and is the sole obligation of the assessed business even if it is passed on to transients. The assessment shall not be considered revenue for calculation of transient occupancy taxes.

Bonds shall not be issued.

E. Interest and Overdue Charges
The MBTBID shall reimburse the City for any costs and fees (including, but not limited to, both City staff time as reasonably calculated by the City, as well as any attorney’s fees) associated with collecting unpaid assessments. If sums in excess of the delinquent MBTBID assessment are sought to be recovered in the same collection action by the City, the MBTBID shall bear its pro rata share of such collection costs. Assessed businesses which are delinquent in paying the assessment shall be responsible for paying:

1. Original Delinquency. Any owner who fails to remit any assessment imposed by this Plan within the time required shall pay an overdue charge of ten percent (10%) of the amount of the assessment in addition to the amount of the assessment.

2. Continued Delinquency. Any owner who fails to remit any delinquent remittance on or before a period of thirty (30) days following the date on which the remittance first became delinquent shall pay a second delinquency overdue charge of ten percent (10%) of the amount of the assessment in addition to the amount of the assessment and the ten percent (10%) overdue charge first imposed.

MBTBID Management District Plan 14
November 18, 2025

3. Fraud. If the City determines in its sole reasonable discretion that the nonpayment of any remittance due under this chapter is due to fraud and/or intent to mislead the City, a overdue charge of twenty-five percent (25%) of the amount of the assessment shall be added thereto in addition to the overdue charges stated in subsections 1 and 2 of this section.

4. Interest. In addition to the overdue charges imposed, any owner who fails to remit any assessment imposed by this Plan shall pay interest at the rate of one-half of one percent (0.05%) per month or fraction thereof on the amount of the assessment, exclusive of overdue charges, from the date on which the remittance first became delinquent until paid.

5. Overdue Charges Merged with Assessment. Every overdue charge imposed and such interest as accrues under the provisions of this section shall become a part of the assessment herein required to be paid.

F. Time and Manner for Collecting Assessments
The MBTBID assessment will be implemented beginning July 1, 2026, or as soon as possible thereafter, and ending ten (10) years from its start date. The City will be responsible for collecting the assessment on a monthly basis (including any delinquencies, interest and overdue charges) from each assessed business. The City shall take all reasonable efforts to collect the assessments from each assessed business. The City shall forward the assessments collected to the VMB.

MBTBID Management District Plan 15
November 18, 2025
VI. GOVERNANCE
A. Owners’ Association
The City Council, through adoption of this Plan, has the right, pursuant to Streets and Highways Code §36651, to identify the body that shall implement the proposed program, which shall be the Owners’ Association of the MBTBID as defined in Streets and Highways Code §36612. The City Council has determined that VMB will continue to serve as the Owners’ Association for the MBTBID. The City reserves the right to conduct regular financial and/or operational audits, as reasonably determined to be appropriate by City in City’s sole discretion, of the Owners’ Association. Any such City audits will receive the full and unqualified cooperation and assistance of the Owners’ Association, and upon request by City will be paid for in whole or part with MBTBID funds. Consistent with law, and for good cause as reasonably demonstrated to the satisfaction of the City Council, the City Council at a noticed public hearing may designate a different qualified private nonprofit entity as the Owners’ Association of the MBTBID, to replace either Visit Morro Bay, or any subsequent designated Owners’ Association.

B. Brown Act and California Public Records Act Compliance An Owners’ Association is a private entity and may not be considered a public entity for any purpose, nor may its board members or staff be considered to be public officials for any purpose. The Owners’ Association is, however, subject to government regulations relating to transparency, namely the Ralph M. Brown Act and the California Public Records Act. These regulations are designed to promote public accountability. The Owners’ Association acts as a legislative body under the Ralph M. Brown Act (Government Code §54950 et seq.). Thus, meetings of the VMB Board and certain committees must be held in compliance with the public notice and other requirements of the Brown Act.

Accordingly, the Owners’ Association shall publicly report any action taken and the vote or abstention on that action of each member present for the action. The Owners’ Association is also subject to the record keeping and disclosure requirements of the California Public Records Act.

C. Annual Report
The VMB shall present an annual report at the end of each year of operation to the City Council pursuant to Streets and Highways Code §36650 (see Appendix 1). The annual report shall include:
• Any proposed changes in the boundaries of the improvement district or in any benefit zones or classification of businesses within the district.
• The improvements and activities to be provided for that fiscal year. • An estimate of the cost of providing the improvements and the activities for that fiscal year. • The method and basis of levying the assessment in sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his or her business for that fiscal year.
• The estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year.
• The estimated amount of any contributions to be made from sources other than assessments levied pursuant to this part.

MBTBID Management District Plan 16
November 18, 2025
APPENDIX 1 – LAW
CURRENT THROUGH ALL LEGISLATION OF THE 2024 REGULAR AND SPECIAL SESSIONS

STREETS AND HIGHWAYS CODE
DIVISION 18. PARKING
PART 7. PROPERTY AND BUSINESS IMPROVEMENT DISTRICT LAW OF 1994 CHAPTER 1. General Provisions
ARTICLE 1. Declarations
36600. Citation of part

This part shall be known and may be cited as the “Property and Business Improvement District Law of 1994.” 36601. Legislative findings and declarations; Legislative guidance

The Legislature finds and declares all of the following:
(a) Businesses located and operating within business districts in some of this state’s communities are economically disadvantaged, are underutilized, and are unable to attract customers due to inadequate facilities, services, and activities in the business districts. (b) It is in the public interest to promote the economic revitalization and physical maintenance of business districts in order to create jobs, attract new businesses, and prevent the erosion of the business districts. (c) It is of particular local benefit to allow business districts to fund business related improvements, maintenance, and activities through the levy of assessments upon the businesses or real property that receive benefits from those improvements.
(d) Assessments levied for the purpose of conferring special benefit upon the real property or a specific benefit upon the businesses in a business district are not taxes for the general benefit of a city, even if property, businesses, or persons not assessed receive incidental or collateral effects that benefit them. (e) Property and business improvement districts formed throughout this state have conferred special benefits upon properties and businesses within their districts and have made those properties and businesses more useful by providing the following benefits:
(1) Crime reduction. A study by the Rand Corporation has confirmed a 12-percent reduction in the incidence of robbery and an 8-percent reduction in the total incidence of violent crimes within the 30 districts studied.
(2) Job creation.
(3) Business attraction.
(4) Business retention.
(5) Economic growth.
(6) New investments.
(f) With the dissolution of redevelopment agencies throughout the state, property and business improvement districts have become even more important tools with which communities can combat blight, promote economic opportunities, and create a clean and safe environment. (g) Since the enactment of this act, the people of California have adopted Proposition 218, which added Article XIII D to the Constitution in order to place certain requirements and restrictions on the formation of, and activities, expenditures, and assessments by property-based districts. Article XIII D of the Constitution provides that property-based districts may only levy assessments for special benefits. (h) The act amending this section is intended to provide the Legislature’s guidance with regard to this act, its interaction with the provisions of Article XIII D of the Constitution, and the determination of special benefits in property-based districts.
(1) The lack of legislative guidance has resulted in uncertainty and inconsistent application of this act, which discourages the use of assessments to fund needed improvements, maintenance, and activities in property-based districts, contributing to blight and other underutilization of property. (2) Activities undertaken for the purpose of conferring special benefits upon property to be assessed inherently produce incidental or collateral effects that benefit property or persons not assessed. Therefore, for special benefits to exist as a separate and distinct category from general

MBTBID Management District Plan 17
November 18, 2025
benefits, the incidental or collateral effects of those special benefits are inherently part of those special benefits. The mere fact that special benefits produce incidental or collateral effects that benefit property or persons not assessed does not convert any portion of those special benefits or their incidental or collateral effects into general benefits. (3) It is of the utmost importance that property-based districts created under this act have clarity regarding restrictions on assessments they may levy and the proper determination of special benefits. Legislative clarity with regard to this act will provide districts with clear instructions and courts with legislative intent regarding restrictions on property-based assessments, and the manner in which special benefits should be determined.
36602. Purpose of part

The purpose of this part is to supplement previously enacted provisions of law that authorize cities to levy assessments within property and business improvement districts, to ensure that those assessments conform to all constitutional requirements and are determined and assessed in accordance with the guidance set forth in this act.

This part does not affect or limit any other provisions of law authorizing or providing for the furnishing of improvements or activities or the raising of revenue for these purposes. 36603. Preemption of authority or charter city to adopt ordinances levying assessments

Nothing in this part is intended to preempt the authority of a charter city to adopt ordinances providing for a different method of levying assessments for similar or additional purposes from those set forth in this part. A property and business improvement district created pursuant to this part is expressly exempt from the provisions of the Special Assessment Investigation, Limitation and Majority Protest Act of 1931 (Division 4 (commencing with Section 2800)).
36603.5. Part prevails over conflicting provisions

Any provision of this part that conflicts with any other provision of law shall prevail over the other provision of law, as to districts created under this part.
36604. Severability

This part is intended to be construed liberally and, if any provision is held invalid, the remaining provisions shall remain in full force and effect. Assessments levied under this part are not special taxes.

ARTICLE 2. Definitions
36606. “Activities”

“Activities” means, but is not limited to, all of the following that benefit businesses or real property in the district:
(a) Promotion of public events.
(b) Furnishing of music in any public place.
(c) Promotion of tourism within the district.
(d) Marketing and economic development, including retail retention and recruitment. (e) Providing security, sanitation, graffiti removal, street and sidewalk cleaning, and other municipal services supplemental to those normally provided by the municipality. (f) Other services provided for the purpose of conferring special benefit upon assessed real property or specific benefits upon assessed businesses located in the district. 36606.5. “Assessment”

“Assessment” means a levy for the purpose of acquiring, constructing, installing, or maintaining improvements and providing activities that will provide certain benefits to properties or businesses located within a property and business improvement district.
36607. “Business”

MBTBID Management District Plan 18
November 18, 2025

“Business” means all types of businesses and includes financial institutions and professions. 36608. “City”

“City” means a city, county, city and county, or an agency or entity created pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code, the public member agencies of which includes only cities, counties, or a city and county, or the State of California. 36609. “City council”

“City council” means the city council of a city or the board of supervisors of a county, or the agency, commission, or board created pursuant to a joint powers agreement and which is a city within the meaning of this part. 36609.4. “Clerk”

“Clerk” means the clerk of the legislative body.
36609.5. “General benefit”

“General benefit” means, for purposes of a property-based district, any benefit that is not a “special benefit” as defined in Section 36615.5.
36610. “Improvement”

“Improvement” means the acquisition, construction, installation, or maintenance of any tangible property with an estimated useful life of five years or more including, but not limited to, the following:
(a) Parking facilities.
(b) Benches, booths, kiosks, display cases, pedestrian shelters and signs. (c) Trash receptacles and public restrooms.
(d) Lighting and heating facilities.
(e) Decorations.
(f) Parks.
(g) Fountains.
(h) Planting areas.
(i) Closing, opening, widening, or narrowing of existing streets. (j) Facilities or equipment, or both, to enhance security of persons and property within the district. (k) Ramps, sidewalks, plazas, and pedestrian malls.
(l) Rehabilitation or removal of existing structures.
36611. “Management district plan”; “Plan”

“Management district plan” or “plan” means a proposal as defined in Section 36622. 36612. “Owners’ association”

“Owners’ association” means a private nonprofit entity that is under contract with a city to administer or implement improvements, maintenance, and activities specified in the management district plan. An owners’ association may be an existing nonprofit entity or a newly formed nonprofit entity. An owners’ association is a private entity and may not be considered a public entity for any purpose, nor may its board members or staff be considered to be public officials for any purpose. Notwithstanding this section, an owners’ association shall comply with the Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part 1 of Division 2 of Title 5 of the Government Code), at all times when matters within the subject matter of the district are heard, discussed, or deliberated, and with the California Public Records Act (Division 10 (commencing with Section 7920.000) of Title 1 of the Government Code), for all records relating to activities of the district. 36614. “Property”

MBTBID Management District Plan 19
November 18, 2025

“Property” means real property situated within a district. 36614.5. “Property and business improvement district”; “District”

“Property and business improvement district,” or “district,” means a property and business improvement district established pursuant to this part.
36614.6. “Property-based assessment”

“Property-based assessment” means any assessment made pursuant to this part upon real property. 36614.7. “Property-based district”

“Property-based district” means any district in which a city levies a property-based assessment. 36615. “Property owner”; “Business owner”; “Owner”

“Property owner” means any person shown as the owner of land on the last equalized assessment roll or otherwise known to be the owner of land by the city council. “Business owner” means any person recognized by the city as the owner of the business. “Owner” means either a business owner or a property owner. The city council has no obligation to obtain other information as to the ownership of land or businesses, and its determination of ownership shall be final and conclusive for the purposes of this part. Wherever this part requires the signature of the property owner, the signature of the authorized agent of the property owner shall be sufficient. Wherever this part requires the signature of the business owner, the signature of the authorized agent of the business owner shall be sufficient. 36615.5. “Special benefit”

(a) “Special benefit” means, for purposes of a property-based district, a particular and distinct benefit over and above general benefits conferred on real property located in a district or to the public at large. Special benefit includes incidental or collateral effects that arise from the improvements, maintenance, or activities of property-based districts even if those incidental or collateral effects benefit property or persons not assessed. Special benefit excludes general enhancement of property value. (b) “Special benefit” also includes, for purposes of a property-based district, a particular and distinct benefit provided directly to each assessed parcel within the district. Merely because parcels throughout an assessment district share the same special benefits does not make the benefits general. 36616. “Tenant”

“Tenant” means an occupant pursuant to a lease of commercial space or a dwelling unit, other than an owner.

ARTICLE 3. Prior Law
36617. Alternate method of financing certain improvements and activities; Effect on other provisions

This part provides an alternative method of financing certain improvements and activities. The provisions of this part shall not affect or limit any other provisions of law authorizing or providing for the furnishing of improvements or activities or the raising of revenue for these purposes. Every improvement area established pursuant to the Parking and Business Improvement Area Law of 1989 (Part 6 (commencing with Section 36500) of this division) is valid and effective and is unaffected by this part.

CHAPTER 2. Establishment
36620. Establishment of property and business improvement district

A property and business improvement district may be established as provided in this chapter.

MBTBID Management District Plan 20
November 18, 2025
36620.5. Requirement of consent of city council

A county may not form a district within the territorial jurisdiction of a city without the consent of the city council of that city. A city may not form a district within the unincorporated territory of a county without the consent of the board of supervisors of that county. A city may not form a district within the territorial jurisdiction of another city without the consent of the city council of the other city. 36621. Initiation of proceedings; Petition of property or business owners in proposed district

(a) Upon the submission of a written petition, signed by the property or business owners in the proposed district who will pay more than 50 percent of the assessments proposed to be levied, the city council may initiate proceedings to form a district by the adoption of a resolution expressing its intention to form a district. The amount of assessment attributable to property or a business owned by the same property or business owner that is in excess of 40 percent of the amount of all assessments proposed to be levied, shall not be included in determining whether the petition is signed by property or business owners who will pay more than 50 percent of the total amount of assessments proposed to be levied. (b) The petition of property or business owners required under subdivision (a) shall include a summary of the management district plan. That summary shall include all of the following:
(1) A map showing the boundaries of the district.
(2) Information specifying where the complete management district plan can be obtained. (3) Information specifying that the complete management district plan shall be furnished upon request.
(c) The resolution of intention described in subdivision (a) shall contain all of the following:
(1) A brief description of the proposed improvements, maintenance, and activities, the amount of the proposed assessment, a statement as to whether the assessment will be levied on property or businesses within the district, a statement as to whether bonds will be issued, and a description of the exterior boundaries of the proposed district, which may be made by reference to any plan or map that is on file with the clerk. The descriptions and statements do not need to be detailed and shall be sufficient if they enable an owner to generally identify the nature and extent of the improvements, maintenance, and activities, and the location and extent of the proposed district. (2) A time and place for a public hearing on the establishment of the property and business improvement district and the levy of assessments, which shall be consistent with the requirements of Section 36623.
36622. Contents of management district plan

The management district plan shall include, but is not limited to, all of the following:
(a) If the assessment will be levied on property, a map of the district in sufficient detail to locate each parcel of property and, if businesses are to be assessed, each business within the district. If the assessment will be levied on businesses, a map that identifies the district boundaries in sufficient detail to allow a business owner to reasonably determine whether a business is located within the district boundaries. If the assessment will be levied on property and businesses, a map of the district in sufficient detail to locate each parcel of property and to allow a business owner to reasonably determine whether a business is located within the district boundaries.
(b) The name of the proposed district.
(c) A description of the boundaries of the district, including the boundaries of benefit zones, proposed for establishment or extension in a manner sufficient to identify the affected property and businesses included, which may be made by reference to any plan or map that is on file with the clerk. The boundaries of a proposed property assessment district shall not overlap with the boundaries of another existing property assessment district created pursuant to this part. This part does not prohibit the boundaries of a district created pursuant to this part to overlap with other assessment districts established pursuant to other provisions of law, including, but not limited to, the Parking and Business Improvement Area Law of 1989 (Part 6 (commencing with Section 36500)). This part does not prohibit the boundaries of a business assessment district created pursuant to this part to overlap with another business assessment district created pursuant to this part. This part does not prohibit the boundaries of a business assessment district created pursuant to this part to overlap with a property assessment district created pursuant to this part.

MBTBID Management District Plan 21
November 18, 2025
(d) The improvements, maintenance, and activities proposed for each year of operation of the district and the estimated cost thereof. If the improvements, maintenance, and activities proposed for each year of operation are the same, a description of the first year’s proposed improvements, maintenance, and activities and a statement that the same improvements, maintenance, and activities are proposed for subsequent years shall satisfy the requirements of this subdivision.
(e) The total annual amount proposed to be expended for improvements, maintenance, or activities, and debt service in each year of operation of the district. If the assessment is levied on businesses, this amount may be estimated based upon the assessment rate. If the total annual amount proposed to be expended in each year of operation of the district is not significantly different, the amount proposed to be expended in the initial year and a statement that a similar amount applies to subsequent years shall satisfy the requirements of this subdivision.
(f) The proposed source or sources of financing, including the proposed method and basis of levying the assessment in sufficient detail to allow each property or business owner to calculate the amount of the assessment to be levied against their property or business. The plan also shall state whether bonds will be issued to finance improvements.
(g) The time and manner of collecting the assessments.
(h) The specific number of years in which assessments will be levied. In a new district, the maximum number of years shall be five. Upon renewal, a district shall have a term not to exceed 10 years.

Notwithstanding these limitations, a district created pursuant to this part to finance capital improvements with bonds may levy assessments until the maximum maturity of the bonds. The management district plan may set forth specific increases in assessments for each year of operation of the district. (i) The proposed time for implementation and completion of the management district plan. (j) Any proposed rules and regulations to be applicable to the district. (k)
(1) A list of the properties or businesses to be assessed, including the assessor’s parcel numbers for properties to be assessed, and a statement of the method or methods by which the expenses of a district will be imposed upon benefited real property or businesses, in proportion to the benefit received by the property or business, to defray the cost thereof. (2) In a property-based district, the proportionate special benefit derived by each identified parcel shall be determined exclusively in relationship to the entirety of the capital cost of a public improvement, the maintenance and operation expenses of a public improvement, or the cost of the activities. An assessment shall not be imposed on any parcel that exceeds the reasonable cost of the proportional special benefit conferred on that parcel. Only special benefits are assessable, and a property-based district shall separate the general benefits, if any, from the special benefits conferred on a parcel. Parcels within a property-based district that are owned or used by any city, public agency, the State of California, or the United States shall not be exempt from assessment unless the governmental entity can demonstrate by clear and convincing evidence that those publicly owned parcels in fact receive no special benefit. The value of any incidental, secondary, or collateral effects that arise from the improvements, maintenance, or activities of a propertybased district and that benefit property or persons not assessed shall not be deducted from the entirety of the cost of any special benefit or affect the proportionate special benefit derived by each identified parcel.
(3) In a property-based district, properties throughout the district may share the same special benefits. In a district with boundaries that define which parcels are to receive improvements, maintenance, or activities over and above those services provided by the city, the improvements, maintenance, or activities themselves may constitute a special benefit. The city may impose assessments that are less than the proportional special benefit conferred, but shall not impose assessments that exceed the reasonable costs of the proportional special benefit conferred. Because one or more parcels pay less than the special benefit conferred does not necessarily mean that other parcels are assessed more than the reasonable cost of their special benefit. (l) In a property-based district, a detailed engineer’s report prepared by a registered professional engineer certified by the State of California supporting all assessments contemplated by the management district plan.
(m) Any other item or matter required to be incorporated therein by the city council. 36623. Procedure to levy assessment

MBTBID Management District Plan 22
November 18, 2025
(a) If a city council proposes to levy a new or increased property assessment, the notice and protest and hearing procedure shall comply with Section 53753 of the Government Code. (b) If a city council proposes to levy a new or increased business assessment, the notice and protest and hearing procedure shall comply with Section 54954.6 of the Government Code, except that notice shall be mailed to the owners of the businesses proposed to be assessed. A protest may be made orally or in writing by any interested person. Every written protest shall be filed with the clerk at or before the time fixed for the public hearing. The city council may waive any irregularity in the form or content of any written protest. A written protest may be withdrawn in writing at any time before the conclusion of the public hearing. Each written protest shall contain a description of the business in which the person subscribing the protest is interested sufficient to identify the business and, if a person subscribing is not shown on the official records of the city as the owner of the business, the protest shall contain or be accompanied by written evidence that the person subscribing is the owner of the business or the authorized representative. A written protest that does not comply with this section shall not be counted in determining a majority protest.

If written protests are received from the owners or authorized representatives of businesses in the proposed district that will pay 50 percent or more of the assessments proposed to be levied and protests are not withdrawn so as to reduce the protests to less than 50 percent, no further proceedings to levy the proposed assessment against such businesses, as contained in the resolution of intention, shall be taken for a period of one year from the date of the finding of a majority protest by the city council. (c) If a city council proposes to conduct a single proceeding to levy both a new or increased property assessment and a new or increased business assessment, the notice and protest and hearing procedure for the property assessment shall comply with subdivision (a), and the notice and protest and hearing procedure for the business assessment shall comply with subdivision (b). If a majority protest is received from either the property or business owners, that respective portion of the assessment shall not be levied. The remaining portion of the assessment may be levied unless the improvement or other special benefit was proposed to be funded by assessing both property and business owners. 36624. Changes to proposed assessments

At the conclusion of the public hearing to establish the district, the city council may adopt, revise, change, reduce, or modify the proposed assessment or the type or types of improvements, maintenance, and activities to be funded with the revenues from the assessments. Proposed assessments may only be revised by reducing any or all of them. At the public hearing, the city council may only make changes in, to, or from the boundaries of the proposed property and business improvement district that will exclude territory that will not benefit from the proposed improvements, maintenance, and activities. Any modifications, revisions, reductions, or changes to the proposed assessment district shall be reflected in the notice and map recorded pursuant to Section 36627. 36625. Resolution of formation

(a) If the city council, following the public hearing, decides to establish a proposed property and business improvement district, the city council shall adopt a resolution of formation that shall include, but is not limited to, all of the following:
(1) A brief description of the proposed improvements, maintenance, and activities, the amount of the proposed assessment, a statement as to whether the assessment will be levied on property, businesses, or both within the district, a statement on whether bonds will be issued, and a description of the exterior boundaries of the proposed district, which may be made by reference to any plan or map that is on file with the clerk. The descriptions and statements need not be detailed and shall be sufficient if they enable an owner to generally identify the nature and extent of the improvements, maintenance, and activities and the location and extent of the proposed district. (2) The number, date of adoption, and title of the resolution of intention. (3) The time and place where the public hearing was held concerning the establishment of the district.
(4) A determination regarding any protests received. The city shall not establish the district or levy assessments if a majority protest was received.
(5) A statement that the properties, businesses, or properties and businesses in the district established by the resolution shall be subject to any amendments to this part. (6) A statement that the improvements, maintenance, and activities to be conferred on businesses and properties in the district will be funded by the levy of the assessments. The revenue from the

MBTBID Management District Plan 23
November 18, 2025
levy of assessments within a district shall not be used to provide improvements, maintenance, or activities outside the district or for any purpose other than the purposes specified in the resolution of intention, as modified by the city council at the hearing concerning establishment of the district.

Notwithstanding the foregoing, improvements and activities that must be provided outside the district boundaries to create a special or specific benefit to the assessed parcels or businesses may be provided, but shall be limited to marketing or signage pointing to the district. (7) A finding that the property or businesses within the area of the property and business improvement district will be benefited by the improvements, maintenance, and activities funded by the proposed assessments, and, for a property-based district, that property within the district will receive a special benefit.
(8) In a property-based district, the total amount of all special benefits to be conferred on the properties within the property-based district.
(b) The adoption of the resolution of formation and, if required, recordation of the notice and map pursuant to Section 36627 shall constitute the levy of an assessment in each of the fiscal years referred to in the management district plan.
36627. Notice and assessment diagram

Following adoption of the resolution establishing district assessments on properties pursuant to Section 36625, the clerk shall record a notice and an assessment diagram pursuant to Section 3114. No other provision of Division 4.5 (commencing with Section 3100) applies to an assessment district created pursuant to this part. 36628. Establishment of separate benefit zones within district; Categories of businesses

The city council may establish one or more separate benefit zones within the district based upon the degree of benefit derived from the improvements or activities to be provided within the benefit zone and may impose a different assessment within each benefit zone. If the assessment is to be levied on businesses, the city council may also define categories of businesses based upon the degree of benefit that each will derive from the improvements or activities to be provided within the district and may impose a different assessment or rate of assessment on each category of business, or on each category of business within each zone. 36628.5. Assessments on businesses or property owners

The city council may levy assessments on businesses or on property owners, or a combination of the two, pursuant to this part. The city council shall structure the assessments in whatever manner it determines corresponds with the distribution of benefits from the proposed improvements, maintenance, and activities, provided that any propertybased assessment conforms with the requirements set forth in paragraph (2) of subdivision (k) of Section 36622. 36629. Provisions and procedures applicable to benefit zones and business categories

All provisions of this part applicable to the establishment, modification, or disestablishment of a property and business improvement district apply to the establishment, modification, or disestablishment of benefit zones or categories of business. The city council shall, to establish, modify, or disestablish a benefit zone or category of business, follow the procedure to establish, modify, or disestablish a property and business improvement district. 36630. Expiration of district; Creation of new district

If a property and business improvement district expires due to the time limit set pursuant to subdivision (h) of Section 36622, a new management district plan may be created and the district may be renewed pursuant to this part.

CHAPTER 3. Assessments
36631. Time and manner of collection of assessments; Delinquent payments

The collection of the assessments levied pursuant to this part shall be made at the time and in the manner set forth by the city council in the resolution levying the assessment. Assessments levied on real property may be collected at the

MBTBID Management District Plan 24
November 18, 2025
same time and in the same manner as for the ad valorem property tax, and may provide for the same lien priority and penalties for delinquent payment. All delinquent payments for assessments levied pursuant to this part may be charged interest and penalties.
36632. Assessments to be based on estimated benefit; Classification of real property and businesses; Exclusion of residential and agricultural property

(a) The assessments levied on real property pursuant to this part shall be levied on the basis of the estimated benefit to the real property within the property and business improvement district. The city council may classify properties for purposes of determining the benefit to property of the improvements and activities provided pursuant to this part.
(b) Assessments levied on businesses pursuant to this part shall be levied on the basis of the estimated benefit to the businesses within the property and business improvement district. The city council may classify businesses for purposes of determining the benefit to the businesses of the improvements and activities provided pursuant to this part.
(c) Properties zoned solely for residential use, or that are zoned for agricultural use, are conclusively presumed not to benefit from the improvements and service funded through these assessments, and shall not be subject to any assessment pursuant to this part. 36633. Time for contesting validity of assessment

The validity of an assessment levied under this part shall not be contested in an action or proceeding unless the action or proceeding is commenced within 30 days after the resolution levying the assessment is adopted pursuant to Section 36625. An appeal from a final judgment in an action or proceeding shall be perfected within 30 days after the entry of judgment.
36634. Service contracts authorized to establish levels of city services

The city council may execute baseline service contracts that would establish levels of city services that would continue after a property and business improvement district has been formed. 36635. Request to modify management district plan

The owners’ association may, at any time, request that the city council modify the management district plan. Any modification of the management district plan shall be made pursuant to this chapter. 36636. Modification of plan by resolution after public hearing; Adoption of resolution of intention

(a) Upon the written request of the owners’ association, the city council may modify the management district plan after conducting one public hearing on the proposed modifications. The city council may modify the improvements and activities to be funded with the revenue derived from the levy of the assessments by adopting a resolution determining to make the modifications after holding a public hearing on the proposed modifications. If the modification includes the levy of a new or increased assessment, the city council shall comply with Section 36623. Notice of all other public hearings pursuant to this section shall comply with both of the following:
(1) The resolution of intention shall be published in a newspaper of general circulation in the city once at least seven days before the public hearing.
(2) A complete copy of the resolution of intention shall be mailed by first class mail, at least 10 days before the public hearing, to each business owner or property owner affected by the proposed modification.
(b) The city council shall adopt a resolution of intention which states the proposed modification prior to the public hearing required by this section. The public hearing shall be held not more than 90 days after the adoption of the resolution of intention.
36637. Reflection of modification in notices recorded and maps

MBTBID Management District Plan 25
November 18, 2025
Any subsequent modification of the resolution shall be reflected in subsequent notices and maps recorded pursuant to Division 4.5 (commencing with Section 3100), in a manner consistent with the provisions of Section 36627. 36638. Assessment as government imposed fee on Civ C § 1770 transaction [Operative July 1, 2024]

(a) A business assessment pursuant to this part is a fee imposed by a government on the transaction for purposes of paragraph (29) of subdivision (a) of Section 1770 of the Civil Code. (b) This section shall become operative on July 1, 2024.

CHAPTER 3.5. Financing
36640. Bonds authorized; Procedure; Restriction on reduction or termination of assessments

(a) The city council may, by resolution, determine and declare that bonds shall be issued to finance the estimated cost of some or all of the proposed improvements described in the resolution of formation adopted pursuant to Section 36625, if the resolution of formation adopted pursuant to that section provides for the issuance of bonds, under the Improvement Bond Act of 1915 (Division 10 (commencing with Section 8500)) or in conjunction with Marks-Roos Local Bond Pooling Act of 1985 (Article 4 (commencing with Section 6584) of Chapter 5 of Division 7 of Title 1 of the Government Code). Either act, as the case may be, shall govern the proceedings relating to the issuance of bonds, although proceedings under the Bond Act of 1915 may be modified by the city council as necessary to accommodate assessments levied upon business pursuant to this part. (b) The resolution adopted pursuant to subdivision (a) shall generally describe the proposed improvements specified in the resolution of formation adopted pursuant to Section 36625, set forth the estimated cost of those improvements, specify the number of annual installments and the fiscal years during which they are to be collected. The amount of debt service to retire the bonds shall not exceed the amount of revenue estimated to be raised from assessments over 30 years.
(c) Notwithstanding any other provision of this part, assessments levied to pay the principal and interest on any bond issued pursuant to this section shall not be reduced or terminated if doing so would interfere with the timely retirement of the debt.

CHAPTER 4. Governance
36650. Report by owners’ association; Approval or modification by city council

(a) The owners’ association shall cause to be prepared a report for each fiscal year, except the first year, for which assessments are to be levied and collected to pay the costs of the improvements, maintenance, and activities described in the report. The owners’ association’s first report shall be due after the first year of operation of the district. The report may propose changes, including, but not limited to, the boundaries of the property and business improvement district or any benefit zones within the district, the basis and method of levying the assessments, and any changes in the classification of property, including any categories of business, if a classification is used.
(b) The report shall be filed with the clerk and shall refer to the property and business improvement district by name, specify the fiscal year to which the report applies, and, with respect to that fiscal year, shall contain all of the following information:
(1) Any proposed changes in the boundaries of the property and business improvement district or in any benefit zones or classification of property or businesses within the district. (2) The improvements, maintenance, and activities to be provided for that fiscal year. (3) An estimate of the cost of providing the improvements, maintenance, and activities for that fiscal year.
(4) The method and basis of levying the assessment in sufficient detail to allow each real property or business owner, as appropriate, to estimate the amount of the assessment to be levied against his or her property or business for that fiscal year.
(5) The estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year.
(6) The estimated amount of any contributions to be made from sources other than assessments levied pursuant to this part.

MBTBID Management District Plan 26
November 18, 2025
(c) The city council may approve the report as filed by the owners’ association or may modify any particular contained in the report and approve it as modified. Any modification shall be made pursuant to Sections 36635 and 36636.

The city council shall not approve a change in the basis and method of levying assessments that would impair an authorized or executed contract to be paid from the revenues derived from the levy of assessments, including any commitment to pay principal and interest on any bonds issued on behalf of the district.
36651. Designation of owners’ association to provide improvements, maintenance, and activities

The management district plan may, but is not required to, state that an owners’ association will provide the improvements, maintenance, and activities described in the management district plan. If the management district plan designates an owners’ association, the city shall contract with the designated nonprofit corporation to provide services.

CHAPTER 5. Renewal
36660. Renewal of district; Transfer or refund of remaining revenues; District term limit

(a) Any district previously established whose term has expired, or will expire, may be renewed by following the procedures for establishment as provided in this chapter. (b) Upon renewal, any remaining revenues derived from the levy of assessments, or any revenues derived from the sale of assets acquired with the revenues, shall be transferred to the renewed district. If the renewed district includes additional parcels or businesses not included in the prior district, the remaining revenues shall be spent to benefit only the parcels or businesses in the prior district. If the renewed district does not include parcels or businesses included in the prior district, the remaining revenues attributable to these parcels shall be refunded to the owners of these parcels or businesses. (c) Upon renewal, a district shall have a term not to exceed 10 years, or, if the district is authorized to issue bonds, until the maximum maturity of those bonds. There is no requirement that the boundaries, assessments, improvements, or activities of a renewed district be the same as the original or prior district.

CHAPTER 6. Disestablishment
36670. Circumstances permitting disestablishment of district; Procedure

(a) Any district established or extended pursuant to the provisions of this part, where there is no indebtedness, outstanding and unpaid, incurred to accomplish any of the purposes of the district, may be disestablished by resolution by the city council in either of the following circumstances:
(1) If the city council finds there has been misappropriation of funds, malfeasance, or a violation of law in connection with the management of the district, it shall notice a hearing on disestablishment.
(2) During the operation of the district, there shall be a 30-day period each year in which assessees may request disestablishment of the district. The first such period shall begin one year after the date of establishment of the district and shall continue for 30 days. The next such 30-day period shall begin two years after the date of the establishment of the district. Each successive year of operation of the district shall have such a 30-day period. Upon the written petition of the owners or authorized representatives of real property or the owners or authorized representatives of businesses in the district who pay 50 percent or more of the assessments levied, the city council shall pass a resolution of intention to disestablish the district. The city council shall notice a hearing on disestablishment.
(b) The city council shall adopt a resolution of intention to disestablish the district prior to the public hearing required by this section. The resolution shall state the reason for the disestablishment, shall state the time and place of the public hearing, and shall contain a proposal to dispose of any assets acquired with the revenues of the assessments levied within the property and business improvement district. The notice of the hearing on disestablishment required by this section shall be given by mail to the property owner of each parcel or to the owner of each business subject to assessment in the district, as appropriate. The city shall conduct the public hearing not less than 30 days after mailing the notice to the property or business

MBTBID Management District Plan 27
November 18, 2025
owners. The public hearing shall be held not more than 60 days after the adoption of the resolution of intention.
36671. Refund of remaining revenues upon disestablishment or expiration without renewal of district; Calculation of refund; Use of outstanding revenue collected after disestablishment of district

(a) Upon the disestablishment or expiration without renewal of a district, any remaining revenues, after all outstanding debts are paid, derived from the levy of assessments, or derived from the sale of assets acquired with the revenues, or from bond reserve or construction funds, shall be refunded to the owners of the property or businesses then located and operating within the district in which assessments were levied by applying the same method and basis that was used to calculate the assessments levied in the fiscal year in which the district is disestablished or expires. All outstanding assessment revenue collected after disestablishment shall be spent on improvements and activities specified in the management district plan. (b) If the disestablishment occurs before an assessment is levied for the fiscal year, the method and basis that was used to calculate the assessments levied in the immediate prior fiscal year shall be used to calculate the amount of any refund.

MBTBID Management District Plan 28
November 18, 2025
APPENDIX 2 – ASSESSED BUSINESSES
Hotel Name Hotel Address City, State, Zip
Harbor Front Suites 593 Embarcadero Morro Bay, CA 93442 La Roche 575 Embarcadero Rd Morro Bay, CA 93442
Salty Sister - Suites at Morro Rock 1170 Front St Morro Bay, CA 93442 Morro Shores Inn & Suites 290 Atascadero Rd Morro Bay, CA 93442 Gray's Inn and Gallery 561 Embarcadero Rd Morro Bay, CA 93442 Motel 6 Morro Bay 298 Atascadero Rd Morro Bay, CA 93442 The Inn at Morro Bay 60 State Park Rd Morro Bay, CA 93442 Marina Street Inn B & B 305 Marina St Morro Bay, CA 93442 Masterpiece Hotel 1206 Main St Morro Bay, CA 93442
Bayview Inn 225 Harbor St Morro Bay, CA 93442
Ascot Suites 260 Morro Bay Blvd Morro Bay, CA 93442
Best Western Tradewinds Motel 225 Beach St Morro Bay, CA 93442 Morro Crest Inn 670 Main St Morro Bay, CA 93442
Morro Bay Sandpiper Inn 540 Main St Morro Bay, CA 93442 Morro Bluff Inn 213 Dunes St Morro Bay, CA 93442
Rhapsody In View Boutique Hotel 2790 Main St Morro Bay, CA 93442 Coastal Breeze Inn 1098 Main St Morro Bay, CA 93442
Harborwalk Inn 833 Embarcadero Morro Bay, CA 93442
Beach Bungalow Inn & Suites 1050 Morro Ave Morro Bay, CA 93442 Sea Air Inn 845 Morro Ave Morro Bay, CA 93442
The Landing at Morro Bay 780 Market Ave Morro Bay, CA 93442 La Serena Inn 990 Morro Ave Morro Bay, CA 93442
Best Western San Marcos Inn 250 Pacific St Morro Bay, CA 93442 Pleasant Inn 235 Harbor St Morro Bay, CA 93442
Estero Inn LLC 501 Embarcadero Morro Bay, CA 93442
Holland Inn And Suites 2630 Main St Morro Bay, CA 93442 Harbor House Inn 1095 Main St Morro Bay, CA 93442
Pacific Cottage Motel 2830 Alder Ave Morro Bay, CA 93442 Front Street Inn & Spa 1140 Front St Morro Bay, CA 93442 Pacific Shores Inn 890 Morro Ave Morro Bay, CA 93442
Hotel Avisa 590 Morro Ave Morro Bay, CA 93442
Inn At Rose's Landing 725 Embarcadero Rd Morro Bay, CA 93442 Fireside Inn 730 Morro Ave Morro Bay, CA 93442
Embarcadero Inn & Suites 456 Embarcadero Rd Morro Bay, CA 93442 Hampton Inn 295 Atascadero Rd Morro Bay, CA 93442
Bayfront Inn 1150 Embarcadero Morro Bay, CA 93442
Blue Sail Inn 851 Market Ave Morro Bay, CA 93442
Anderson Inn 897 Embarcadero Rd Morro Bay, CA 93442
Morro Bay Beach Inn 1100 Main St Morro Bay, CA 93442
Sundown Inn Of Morro Bay Inc. 640 Main St Morro Bay, CA 93442 Rockview Inn & Suites 1080 Market Ave Morro Bay, CA 93442

MBTBID Management District Plan 29
November 18, 2025
Blufftop Inn & Suites 220 Beach St Morro Bay, CA 93442
Harbor View Suites 205 Harbor St Morro Bay, CA 93442
Short-Term Rental Address City, State, Zip
110 Java St Morro Bay, CA 93442
115 Easter St Morro Bay, CA 93442
115 Hatteras St Morro Bay, CA 93442
1174 Main St Morro Bay, CA 93442
1177 Main St Morro Bay, CA 93442
1184 Main St Morro Bay, CA 93442
120 Java St Morro Bay, CA 93442
120 Mindoro St Morro Bay, CA 93442
121 Bradley Ave Morro Bay, CA 93442
121 Easter St Morro Bay, CA 93442
1210 Bolton Drive Morro Bay, CA 93442
1215 Main St Morro Bay, CA 93442
1271 Hillcrest Dr Morro Bay, CA 93442
1275 Morro Ave Morro Bay, CA 93442
1363 Prescott Dr Morro Bay, CA 93442
1364 Clarabelle Dr Morro Bay, CA 93442
1365 Prescott Dr Morro Bay, CA 93442
150 Formosa St Morro Bay, CA 93442
150 Verdon St Morro Bay, CA 93442
155 Formosa St Morro Bay, CA 93442
157 Verdon St Morro Bay, CA 93442
165 Panay St Morro Bay, CA 93442
166 Vashon St Morro Bay, CA 93442
176 Panay St Morro Bay, CA 93442
180 Andros St Morro Bay, CA 93442
180 Bali St Morro Bay, CA 93442
180 Gilbert St Morro Bay, CA 93442
180 Verdon St Morro Bay, CA 93442
184 Tahiti St Morro Bay, CA 93442
1851 Ironwood Ave Morro Bay, CA 93442
1887 Ironwood Ave Morro Bay, CA 93442
1890 Hill St Morro Bay, CA 93442
195 Capri St Morro Bay, CA 93442
195 Orcas St Morro Bay, CA 93442
199 Main St Morro Bay, CA 93442
199 Sienna St Morro Bay, CA 93442
2060 Seaview Ave Morro Bay, CA 93442
2083 Seaview Ave Morro Bay, CA 93442
210 Dunes St Morro Bay, CA 93442
216 Surf St Morro Bay, CA 93442
217 Main St Morro Bay, CA 93442

MBTBID Management District Plan 30
November 18, 2025
218 Pacifica St Morro Bay, CA 93442
220 Dunes St Morro Bay, CA 93442
221 Dunes St Morro Bay, CA 93442
221 Piney Way Morro Bay, CA 93442
2250 Hemlock Ave Morro Bay, CA 93442
226 1/2 Pacific St Morro Bay, CA 93442
226 Pacific St Morro Bay, CA 93442
229 Piney Way Morro Bay, CA 93442
234 Beach St Morro Bay, CA 93442
234 Pacific St Morro Bay, CA 93442
238 Pacific Morro Bay, CA 93442
2398 Laurel Ave Morro Bay, CA 93442
240 Bali St Morro Bay, CA 93442
2400 Ironwood Morro Bay, CA 93442
245 Driftwood St Morro Bay, CA 93442
245 Gilbert St Morro Bay, CA 93442
2470 Hemlock Ave Morro Bay, CA 93442
2545 Elm Ave Morro Bay, CA 93442
2575 Greenwood Ave Morro Bay, CA 93442
2585 Ironwood Ave Morro Bay, CA 93442
261 Shasta Ave Morro Bay, CA 93442
2615 Maple Ave Morro Bay, CA 93442
2615 Nutmeg Ave Morro Bay, CA 93442
2629 Koa Ave Morro Bay, CA 93442
263 Main St Morro Bay, CA 93442
263 Main St Cottage A Morro Bay, CA 93442
2630 Greenwood Ave Morro Bay, CA 93442
2640 Maple Ave Morro Bay, CA 93442
2697 Laurel Ave Morro Bay, CA 93442
2700 Greenwood Ave Morro Bay, CA 93442
271 Pacific St Morro Bay, CA 93442
2746 Main St Morro Bay, CA 93442
2799 Elm Ave Morro Bay, CA 93442
2811 Ironwood Ave Morro Bay, CA 93442
2870 Fir Ave Morro Bay, CA 93442
2870 Hemlock Ave Morro Bay, CA 93442
2889 Hemlock Ave Morro Bay, CA 93442
290 Terra St Morro Bay, CA 93442
2910 Fir Ave Morro Bay, CA 93442
2950 Beachcomber Dr Morro Bay, CA 93442
2958 Cedar Ave Morro Bay, CA 93442
2960 Beachcomber Dr Morro Bay, CA 93442
2975 Beachcomber Dr Morro Bay, CA 93442
300 Kings Ave Morro Bay, CA 93442

MBTBID Management District Plan 31
November 18, 2025
301 Trinidad St Morro Bay, CA 93442
3015 Beachcomber Dr Morro Bay, CA 93442
3030 Beachcomber Dr Morro Bay, CA 93442
3033 Beachcomber Dr Morro Bay, CA 93442
310 Bernardo Ave Morro Bay, CA 93442
311 Piney Way Morro Bay, CA 93442
3128 Beachcomber Dr Morro Bay, CA 93442
3130 Beachcomber Dr Morro Bay, CA 93442
3175 Orcas Way Morro Bay, CA 93442
3200 Beachcomber Dr Morro Bay, CA 93442
324 Shasta Ave Morro Bay, CA 93442
325 Shasta Ave Morro Bay, CA 93442
3273 Tide Morro Bay, CA 93442
3350 Beachcomber Dr Morro Bay, CA 93442
337 Bernardo Ave Morro Bay, CA 93442
3370 Beachcomber Dr Morro Bay, CA 93442
3464 Toro Ln Morro Bay, CA 93442
3476 Toro Ln Morro Bay, CA 93442
3480 Toro Ln Morro Bay, CA 93442
356 Shasta Ave Morro Bay, CA 93442
361 Dunes St Morro Bay, CA 93442
370 Vashon St Morro Bay, CA 93442
371 La Jolla Morro Bay, CA 93442
381 Panay St Morro Bay, CA 93442
390 Luzon St Morro Bay, CA 93442
391 Luzon St Morro Bay, CA 93442
395 Avalon St Morro Bay, CA 93442
400 Pico St Morro Bay, CA 93442
401 San Joaquin St Morro Bay, CA 93442
410 Mindoro St Morro Bay, CA 93442
424 Morro Ave Morro Bay, CA 93442
425 Bernardo Ave Morro Bay, CA 93442
431 Panay St Morro Bay, CA 93442
431 Whidbey St Morro Bay, CA 93442
441 Luzon St Morro Bay, CA 93442
449 Panay St Morro Bay, CA 93442
450 Napa Ave Morro Bay, CA 93442
450 Tahiti Morro Bay, CA 93442
452 Sicily St Morro Bay, CA 93442
457 Oahu St Morro Bay, CA 93442
465 Whidbey St Morro Bay, CA 93442
467 La Jolla St Morro Bay, CA 93442
476 Hill St Morro Bay, CA 93442
481 Jamaica Morro Bay, CA 93442

MBTBID Management District Plan 32
November 18, 2025
491 Orcas St Morro Bay, CA 93442
499 La Jolla St Morro Bay, CA 93442
508 Shasta Ave Morro Bay, CA 93442
510 Yerba Buena St Morro Bay, CA 93442
530 Monterey Ave 1 Morro Bay, CA 93442
535 Dunes St Morro Bay, CA 93442
540 Downing St Morro Bay, CA 93442
550 Main St Morro Bay, CA 93442
564 Morro Ave Morro Bay, CA 93442
565 Monterey Ave #A Morro Bay, CA 93442
601 San Jacinto Morro Bay, CA 93442
623 Kern Ave Morro Bay, CA 93442
625 Monterey Ave Morro Bay, CA 93442
630 Embarcadero #C Morro Bay, CA 93442
630 Embarcadero #D Morro Bay, CA 93442
636 Bay Ave Morro Bay, CA 93442
645 Monterey Ave Unit B Morro Bay, CA 93442
647 Estero Ave Morro Bay, CA 93442
650 Avalon St Morro Bay, CA 93442
659 Kern Ave Morro Bay, CA 93442
671 Estero Ave Morro Bay, CA 93442
675 La Loma Ave Morro Bay, CA 93442
700 Sierra Ct Morro Bay, CA 93442
701 San Joaquin St Morro Bay, CA 93442
880 Main St Morro Bay, CA 93442
881 Ridgeway St Morro Bay, CA 93442
895 Monterey Ave Morro Bay, CA 93442
897 Monterey Ave Morro Bay, CA 93442
921 Mesa St Morro Bay, CA 93442
938 Marina St Morro Bay, CA 93442
948 Marina St Morro Bay, CA 93442
958 Pecho St Morro Bay, CA 93442
998 Carmel St Morro Bay, CA 93442
Jurisdiction list as of November 16, 2025

1 RESOLUTION NO. 16-26

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA

DECLARING RESULTS OF MAJORITY PROTEST PROCEEDINGS AND

RENEWING THE MORRO BAY TOURISM BUSINESS IMPROVEMENT

DISTRICT (MBTBID)

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, the City of Morro Bay (City) created the MBTBID on June 8, 2021 by Resolution No. 28-21; and
WHEREAS, the MBTBID was created for a five (5) year term which ends on June 30, 2026; and
WHEREAS, the Property and Business Improvement District Law of 1994, Streets and Highways Code § 36600 et seq., authorizes the City to renew business improvement districts upon petition by a weighted majority of the business owners located within the boundaries of the district; and
WHEREAS, lodging and vacation rental business owners who will pay more than fifty percent (50%) of the proposed assessment, as weighted according to the amount of the assessment to be paid by the petitioner, within the boundaries of the MBTBID have petitioned the City Council of the City of Morro Bay (Council) to renew the MBTBID; and WHEREAS, included with the petitions was a Management District Plan (Plan) summary that describes the proposed assessment to be levied on all lodging and vacation rental businesses, (assessed businesses), existing and in the future, within the MBTBID to pay for Sales, Marketing, Communications, and Destination Development programs, and other improvements and activities set forth in the Plan; and
WHEREAS, the assessed businesses within the MBTBID will receive a specific benefit from the activities and improvements set forth in the Plan; and WHEREAS, on January 27, 2026 at 5:30 PM at the Veterans Memorial Building located at 209 Surf Street, Morro Bay, CA 93442, the Council adopted a Resolution of Intention, Resolution No. 03-26; and
WHEREAS, the public meeting and public hearing to consider the renewal of the MBTBID have been properly noticed in accordance with Streets and Highways Code §36623; and WHEREAS, on February 24, 2026 at 5:30 PM at the Veterans Memorial Building located at 209 Surf Street, Morro Bay, CA 93442, the Council held a public meeting regarding the renewal of the MBTBID, and the Council heard and received objections and protests, if any, to the renewal of the MBTBID and the levy of the proposed assessment; and WHEREAS, on March 24, 2026 at 5:30 PM at the Veterans Memorial Building located at 209 Surf Street, Morro Bay, CA 93442, the Council held a public hearing regarding the renewal

2 of the MBTBID, and the City Council heard and received all objections and protests, if any, to the renewal of the MBTBID and the levy of the proposed assessment; and WHEREAS, the City Clerk has determined that there was no majority protest. A majority protest is defined as written protests received from owners of businesses in the renewed MBTBID which would pay fifty percent (50%) or more of the assessments proposed to be levied. Protests are weighted based on the assessment proposed to be levied on each assessed business; and WHEREAS, the City bears the burden of proving by a preponderance of the evidence that an assessment imposed for a specific benefit or specific government service is not a tax, that the amount is no more than necessary to cover the costs to the City in providing the specific benefit or specific government service, and that the manner in which those costs are allocated to a payor bear a fair or reasonable relationship to the specific benefits or specific government services received by the payor.

NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF MORRO BAY DOES HEREBY RESOLVE AS FOLLOWS:

1. The recitals set forth herein are adopted by the City Council as findings and they are true and correct.

2. The MBTBID is hereby renewed for a ten (10) year term, beginning July 1, 2026, or as soon as possible thereafter, and ending ten (10) years from its start date, unless renewed pursuant to Streets and Highways Code § 36660.

3. The Plan dated November 18, 2025 is hereby adopted and approved.

4. The activities to be provided to benefit businesses in the MBTBID will be funded by the levy of the assessment. The revenue from the assessment levy shall not be used: to provide activities that directly benefit businesses outside the MBTBID; to provide activities or improvements outside the MBTBID; or for any purpose other than the purposes specified in this Resolution, the Resolution of Intention, and the Plan. Notwithstanding the foregoing, improvements and activities that must be provided outside the MBTBID boundaries to create a specific benefit to the assessed businesses may be provided, but shall be limited to marketing or signage pointing to the MBTBID.

5. The Council finds as follows:
a) The activities funded by the assessment will provide a specific benefit to assessed businesses within the MBTBID that is not provided to those not paying the assessment. b) The assessment is a charge imposed for a specific benefit conferred or privilege granted directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of conferring the benefit or granting the privilege.
c) The assessment is a charge imposed for a specific government service or product provided directly to the payor that is not provided to those not charged, and which does not exceed the reasonable costs to the local government of providing the service or product.

3 d) Assessments imposed pursuant to the MBTBID are levied solely upon the assessed business, and the business owner is solely responsible for payment of the assessment when due. If the owner chooses to collect any portion of the assessment from a transient, that portion shall be specifically called out and identified for the transient in any and all communication MBTBID

6. The assessments levied for the MBTBID shall be applied to Sales, Marketing, Communications, and Destination Development programs to market assessed businesses as tourist, meeting and event destinations, and other improvements and activities as set forth in the Plan.

7. Assessments levied on assessed businesses pursuant to this Resolution shall be levied on the basis of benefit. Because the services provided are intended to increase demand for overnight tourism, an assessment based on gross short-term sleeping room rental revenue is the best measure of benefit.

8. The annual assessment rate is three percent (3%) of gross short-term sleeping room rental revenue. Based on the benefit received, assessments will not be collected on stays of more than thirty (30) consecutive days; and on any officer or employee of a foreign government who is exempt by reason of express provision of federal law or international treaty.

9. The assessments for the entire MBTBID will total approximately $1,200,000 in year one (1).

10. Bonds shall not be issued to fund the MBTBID.

11. The MBTBID shall include all lodging and vacation rental businesses, existing and in the future, available for public occupancy located within the boundaries of the City. A boundary map is attached hereto and incorporated herein by reference.

12. The assessments shall be used for the purposes set forth above and any funds remaining at the end of any year may be used in subsequent years in which the MBTBID assessment is levied as long as they are used consistent with the requirements set forth herein.

13. The assessments to fund the activities and improvements for the MBTBID will be collected by the City on a monthly basis, and in accordance with Streets and Highways Code §36631.

14. The Council, through adoption of this Resolution and the Plan, has the right pursuant to Streets and Highways Code §36651, to identify the body that shall implement the MBTBID as defined in Streets
and Highways Code §36612. The Council has determined that Visit Morro Bay (VMB) shall be the MBTBID

15. VMB, pursuant to Streets and Highways Code §36650, shall cause to be prepared a report for each fiscal year, except the first year, for which assessments are to be levied and collected to pay the costs of the improvements and activities described in the report. The first report shall be due after the first year of operation of the MBTBID.

4 16. The MBTBID renewed pursuant to this Resolution will be subject to any amendments to the Property and Business Improvement District Law of 1994 (California Streets and Highways Code §36600 et. seq.).

17. The City Clerk, or his or her designee, is directed to take all necessary actions to complete the renewal of the MBTBID and to levy the assessments.

18. This Resolution shall take effect immediately upon its adoption by the Council.

PASSED AND ADOPTED at a regular meeting of the City Council of the City of Morro Bay on the 24th day of March 2026 by the following vote:

AYES: Wixom, Eckles, Edwards, Landrum, Luffee
NOES: None
ABSENT: None
ABSTAIN: None
RECUSE: None
_____________________________ CARLA WIXOM, Mayor
ATTEST:

DANA SWANSON, City Clerk

5 Boundary Map

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

AGREEMENT FOR CONTRACTOR SERVICES

BETWEEN THE CITY OF MORRO BAY

AND VISIT MORRO BAY
THIS AGREEMENT FOR CONTRACTOR SERVICES (“Agreement”) is made, by and between, the CITY OF MORRO BAY, a California municipal corporation (“City”) and VISIT MORRO BAY, a California non-profit corporation, (“Contractor”), and is entered into and effective as of July 1, 2026. In consideration of the mutual covenants and conditions set forth herein the parties agree as follows:

RECITALS

1. The Property and Business Improvement District Law of 1994, Streets and Highways Code sections 36600 et seq., (“1994 Law”), authorizes the City to establish a business improvement district upon petition by a weighted majority of the lodging business owners and vacation rental business owners located within the boundaries of the district, and such a petition consistent with law was presented to the City Council.

2. On March 24, 2026, the City Council adopted Resolution No. 16-26 (“Resolution”), (re)forming the Morro Bay Tourism Business Improvement District (“MBTBID”), in accordance with the provisions of the 1994 Law, for a ten (10) year term, beginning July 1, 2026 through June 30, 2036, and to include within its boundaries all lodging business and vacation rental businesses, existing and in the future, within the boundaries of the City of Morro Bay.

3. The Resolution was adopted to renew the MBTBID originally formed in 2021 pursuant to the 1994 Law.

4. A MBTBID Management District Plan (“Plan”) was proposed by the lodging business and vacation rental business owners who petitioned the City Council for the formation of the new MBTBID pursuant to the 1994 Law, and the Plan was approved by the City Council.

5. Contractor is designated in the Plan as the Owners’ Association in accordance with Streets and Highways Code section 36612. Contractor was also designated in the Resolution of Formation as the Owners’ Association in accordance with Streets and Highways Code section 36612.

6. Streets and Highways Code section 36651 states if the Plan “designates an owners' association, the city shall contract with the designated nonprofit corporation to provide services.”

7. Pursuant to the Plan and Resolution, there is an assessment of three percent (3%) of taxable short-term room rental revenue, to be levied on lodging businesses and vacation rental businesses within the MBTBID, to pay for sales, marketing, and communications programs

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

to market assessed businesses as tourist, meeting and event destinations, and other improvements and activities as set forth in the Plan.

8. Pursuant to the Plan and Resolution, the activities of the MBTBID will be funded by that assessment, the business owners are solely responsible for payment of such assessment when due, and such assessment will be collected by the City in accordance with Streets and Highways Code section 36631. Pursuant to the Plan, the City shall retain a fee equal to three percent (3%) of the amount of the assessment collected, to cover their costs of collection and administration.

9. Section VI(A) of the Plan states that “Consistent with law, and for good cause as reasonably demonstrated to the satisfaction of the City Council, the City Council at a noticed public hearing may designate a different qualified private nonprofit entity as the Owners’ Association of the MBTBID, to replace either Visit Morro Bay, or any subsequent designated Owners’ Association.”

10. Section VI(A) of the Plan further provides that the “City reserves the right to conduct regular financial and/or operational audits, as reasonably determined to be appropriate by City in City’s sole discretion, of the Owners’ Association. Any such City audits will receive the full and unqualified cooperation and assistance of the Owners’ Association, and upon request by City will be paid for in whole or part with MBTBID funds.”

11. Contractor is willing to provide services to the City on the terms and conditions set forth in this Agreement.

12. The City and Contractor desire that this Agreement be deemed approved, executed and operative as of July 1, 2026.

AGREEMENT

1. TERM
This Agreement shall commence on July 1, 2026 and continue through June 30, 2036, or, if the MBTBID is disestablished prior to June 30, 2036, through the effective date of MBTBID disestablishment, unless sooner terminated pursuant to the provisions of this Agreement.

2. SERVICES
Contractor shall perform the tasks described and set forth in Exhibit A, attached hereto and incorporated herein as though set forth in full.

3. PERFORMANCE
Contractor shall at all times faithfully, competently and to the best of their ability, experience, and talent, perform all tasks described herein. Contractor shall employ, at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

services as are required of Contractor hereunder in meeting its obligations under this Agreement.

Contractor warrants that it has the ability to perform all work and services required hereunder and that it shall diligently perform such work and services in a professional and satisfactory manner as reasonably determined by both parties.

4. CITY MANAGEMENT
City’s City Manager, or his/her designee, shall represent City in all matters pertaining to the administration of this Agreement, review and approval of all products submitted by Contractor.

5. PAYMENT
City shall forward to Contractor all MBTBID assessment funds collected within thirty (30) days of completion of the monthly collection process, less any City administrative fees and costs as authorized in the MBTBID Management District Plan.

6. SUSPENSION OR TERMINATION OF AGREEMENT
a) The City has and reserves the right, consistent with the 1994 Law, to suspend or terminate this Agreement at any time, consistent with applicable law, with or without cause, upon written notice to Contractor, except that where termination is due to the default of the Contractor, the period of notice may be the cure period set forth in Section 7. Contractor shall be entitled to compensation for all services rendered prior to the effective date of the notice of termination. In the event of termination without cause pursuant to this Section, the terminating party need not provide the non-terminating party with the opportunity to cure pursuant to Section 7 of this Agreement, however the Council will hold a noticed public hearing on the matter before taking any such action, unless the Owner’s Association at issue requests in writing no such public hearing be noticed.
b) City Council, pursuant to Section VI(A) of the Plan, consistent with applicable law, and for good cause as reasonably demonstrated to the satisfaction of the City Council, may at a noticed public hearing designate a different qualified private nonprofit entity as the Owners’ Association of the MBTBID, thereby replacing Visit Morro Bay as the Owners’ Association of the MBTBID, and upon such City Council action this Agreement will be terminated upon reasonable terms approved by City Council.
c) The City has and reserves the right to suspend, terminate or abandon the execution of any work by Contractor upon adoption of a resolution disestablishing the MBTBID pursuant to the 1994 Law. Per the 1994 Law, such a resolution may be adopted if (1) the Morro Bay City Council finds there has been misappropriation of funds, malfeasance, or a violation of law in connection with the management of the district and a noticed hearing on disestablishment is held, or (2) in the thirty-day period following the anniversary of the district’s formation, business owners paying fifty percent (50%) or more of the assessment file a written protest with the City and a hearing on disestablishment is held. Any retention of MBTBID revenues by Contractor shall comply with the 1994 Law.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

7. DISPUTES AND DEFAULT OF AGREEMENT
In the event that Contractor is in default under the terms of this Agreement, the City shall not have any obligation or duty to forward any assessment monies collected to the Contractor.

Instead, the City may give written notice to the Contractor of the default and the reasons for the default. The notice shall include the timeframe in which Contractor may cure the default. This timeframe is presumptively thirty (30) days. During the period of time that Contractor is in default, the City shall hold all assessment monies collected and shall, when the default is cured, proceed with forwarding the assessment monies to the Contractor. In the alternative, the City may, in its sole discretion, elect to pay some or all of the outstanding assessment monies during the period of default. If the Contractor does not cure the default, the City may take necessary steps to terminate this Agreement under Section 6 of this Agreement. Any failure on the part of the City to give notice of the Contractor’s default shall not be deemed to result in a waiver of the City’s legal rights or any rights arising out of any provision of this Agreement.

8. TAXES
Payment of all applicable federal, state and local taxes shall be Contractor’s sole responsibility.

9. DOCUMENTS AND RECORDS
a) Ownership of Documents. The work product prepared or acquired by Contractor pursuant to this Agreement including, but not limited to, any and all data, documents, memoranda, sketches, drawings, photographs, audio tapes, video tapes, computer disks, designs, plans, reports, investigations and materials (collectively and individually, the “Work Product”) shall be and shall remain property of City and the MBTBID for the exclusive use of the MBTBID. With respect to any Work Product that may qualify as “works made for hire” as defined in 17 U.S.C. § 101, such Work Product is hereby deemed “works made for hire” for the City and the MBTBID. Contractor shall have the right to retain copies of the Work Product. Contractor acknowledges the Work Product shall be and shall remain confidential, to the extent permitted by law, and shall not be made available to any individual or organization without the prior written consent of City.

Contractor shall maintain all Work Product in accordance with the California Public Records Act, Government Code section 6250 et seq. The Work Product shall, upon both demand of City as well as upon termination of this Agreement, be delivered to City without additional cost or expense to City.
b) Record Keeping. Contractor shall keep, and require subcontractors to keep, such ledgers, books of accounts, invoices, vouchers, canceled checks, reports, studies or other documents relating to disbursements of funds and services performed hereunder (the “books and records”), as shall be necessary to perform the services required by this Agreement and enable the City to evaluate the performance of such services and shall keep such records for a period of three years following completion of the services hereunder. The City shall have full and free access to such books and records at all times during normal business hours of City, including the right to inspect, copy, audit and make records and transcripts from such records.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

10. INDEMNIFICATION
a) To the full extent permitted by law, Contractor agrees to indemnify, defend and hold harmless the City, its officers, employees and agents (“Indemnified Parties”) against, and will hold and save them and each of them harmless from, any and all actions, either judicial, administrative, arbitration or regulatory claims, damages to persons or property, losses, costs, penalties, obligations, errors, omissions or liabilities whether actual or threatened (herein “claims or liabilities”) that may be asserted or claimed by any person, firm or entity arising out of or in connection with the negligent performance of the work, operations or activities provided herein of Contractor, its officers, employees, agents, subcontractors, or invitees, or any individual or entity for which Contractor is legally liable (“indemnitors”), or arising from Contractor’s or indemnitors’ reckless or willful misconduct, or arising from Contractor’s or indemnitors’ negligent performance of or failure to perform any term, provision, covenant or condition of this Agreement, and in connection therewith:
i. Contractor will defend any action or actions filed in connection with any of said claims or liabilities and will pay all costs and expenses, including legal costs and attorneys’ fees incurred in connection therewith;
ii. Contractor will promptly pay any judgment rendered against the City, its officers, agents or employees for any such claims or liabilities arising out of or in connection with the negligent performance of or failure to perform such work, operations or activities of Contractor hereunder; and Contractor agrees to save and hold the City, its officers, agents, and employees harmless therefrom;
iii. In the event the City, its officers, agents or employees is made a party to any action or proceeding filed or prosecuted against Contractor for such damages or other claims arising out of or in connection with the negligent performance of or failure to perform the work, operation or activities of Contractor hereunder, Contractor agrees to pay to the City, its officers, agents or employees, any and all costs and expenses incurred by the City, its officers, agents or employees in such action or proceeding, including but not limited to, legal costs and attorneys’ fees.
b) Contractor shall incorporate similar indemnity agreements with its subcontractors and if it fails to do so Contractor shall be fully responsible to indemnify City hereunder therefore, and failure of City to monitor compliance with these provisions shall not be a waiver hereof. This indemnification includes claims or liabilities arising from any negligent or wrongful act, error or omission, or reckless or willful misconduct of Contractor in the performance of professional services hereunder. The provisions of this Section do not apply to claims or liabilities occurring as a result of City’s sole negligence or willful acts or omissions, but, to the fullest extent permitted by law, shall apply to claims and liabilities resulting in part from City’s negligence, except that design professionals’ indemnity hereunder shall be limited to claims and liabilities arising out of the negligence, recklessness or willful misconduct of the design professional. The indemnity obligation shall be binding on successors and assigns of Contractor and shall survive termination of this Agreement.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

11. INSURANCE
Contractor shall maintain prior to the beginning of and for the duration of this Agreement insurance coverage as specified in Exhibit B attached to and part of this agreement.

12. INDEPENDENT CONTRACTOR
No relationship of employer and employee is created by this Agreement; it being understood and agreed that Contractor is an independent contractor. Contractor is not the agent or employee of the City in any capacity whatsoever, and the City shall not be liable for any acts or omissions by Contractor nor for any obligations or liabilities incurred by Contractor. Neither the City nor any of its employees shall have any control over the manner, mode or means by which Contractor, its agents or employees, perform the services required herein, except as otherwise set forth or as provided for by law. Contractor shall perform all services required herein as an independent contractor of City with only such obligations as are consistent with that role.

Contractor shall not at any time or in any manner represent that it or any of its agents or employees are agents or employees of City, or that it is a member of a joint enterprise with City. a) Contractor shall have no claim under this Agreement or otherwise, for seniority, vacation time, vacation pay, sick leave, personal time off, overtime, health insurance, medical care, hospital care, retirement benefits, social security, disability, Workers’ Compensation, unemployment insurance benefits, civil service protection, or employee benefits of any kind. b) Contractor shall be solely liable for and obligated to pay directly all applicable payroll taxes (including federal and state income taxes) or contributions for unemployment insurance or old age pensions or annuities which are imposed by any governmental entity in connection with labor used or which are measured by wages, salaries or other remuneration paid to its officers, agents or employees and agrees to indemnify and hold City harmless from any and all liability which City may incur because of Contractor’s failure to pay such amounts. c) In carrying out the work contemplated herein, Contractor shall comply with all applicable federal and state Workers’ Compensation and liability laws and regulations with respect to the officers, agents and/or employees conducting and participating in the work; and agrees that such officers, agents, and/or employees will be considered independent contractors and shall not be treated or considered in any way as officers, agents and/or employees of City. d) Contractor agrees to perform its work and functions at all times in strict accordance with all applicable federal, state, City and City laws, resolutions, regulations, titles, departmental procedures and currently approved methods and practices in the field; and that the sole interest of City is to ensure that said service shall be performed and rendered in a competent, efficient, timely and satisfactory manner and in accordance with standards required by the City. e) Notwithstanding the foregoing, if the City determines that pursuant to state and federal law Contractor is an employee for purposes of income tax withholding, City may upon two (2) week’s written notice to Contractor, withhold from payments to Contractor hereunder federal and state income taxes and pay said sums to the federal and state governments.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

f) Contractor represents and warrants that the personnel used to provide services to the City pursuant to this Agreement are classified by Contractor as employees. In the event that Contractor or any employee, agent, or subcontractor of Contractor providing services under this Agreement claims or is determined by a federal or state agency, a court of competent jurisdiction, or the California Public Employees’ Retirement System (“CalPERS”) to be classified as other than an independent contractor for the City, then Contractor shall indemnify, defend, and hold harmless the City for the payment of any and all assessed fines, penalties, judgments, employee and/or employer contributions, and any other damages and costs assessed to the City as a consequence of, or in any way attributable to, the assertion that Contractor or any staff Contractor used to provide services under this Agreement are employees of the City.

13. LEGAL RESPONSIBILITIES
Contractor shall keep itself informed of State and Federal laws and regulations which in any manner affect those employed by it or in any way affect the performance of its service pursuant to this Agreement. City, and its officers and employees, shall not be liable at law or in equity occasioned by failure of Contractor to comply with this Section.

14. UNDUE INFLUENCE
Contractor declares and warrants that no undue influence or pressure is used against or in concert with any officer or employee of City in connection with the award, terms or implementation of this Agreement, including any method of coercion, confidential financial arrangement, or financial inducement. No officer or employee of City will receive compensation, directly or indirectly, from Contractor, or from any officer, employee or agent of Contractor, in connection with the award of this Agreement or any work to be conducted as a result of this Agreement. Violation of this Section shall be a material breach of this Agreement entitling City to any and all remedies at law or inequity.

15. NO BENEFIT TO ARISE TO LOCAL EMPLOYEES
No member, officer, or employee of City, or their designees or agents, and no public official who exercises authority over or responsibilities with respect to the Project during his/her tenure or for one year thereafter, shall have any interest, direct or indirect, in any agreement or sub-agreement, or the proceeds thereof, for work to be performed in connection with the Project performed under this Agreement.

16. RELEASE OF INFORMATION/CONFLICTS OF INTEREST
a) All information gained by Contractor in performance of this Agreement shall be considered confidential and shall not be released by Contractor without City’s prior written authorization. Contractor, its officers, employees, agents, or sub-contractors, shall not without written authorization from the City Manager or unless requested by the City Attorney, voluntarily provide declarations, letters of support, testimony at depositions, response to interrogatories, or other information concerning the work performed under this Agreement or relating to any project

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

or property located within City. Response to a subpoena or court order shall not be considered “voluntary” provided Contractor gives City notice of such court order or subpoena. If Contractor provides any information or work product in violation of this Agreement, then the City shall have the right to reimbursement and indemnity from Contractor for any damages, costs and fees, including attorney’s fees, caused by or incurred as a result of Contractor’s conduct. b) Contractor shall promptly notify City if Contractor, or any of its officers, employees, agents, or sub-contractors are served with any summons, complaint, subpoena, notice of deposition, request for documents, interrogatories, request for admissions, or other discovery request, court order, or subpoena from any person or party regarding this Agreement and the work performed thereunder or with respect to any project or property located within City. City retains the right, but has no obligation, to represent Contractor or be present at any deposition, hearing, or similar proceeding. Contractor agrees to cooperate with City by providing the opportunity to review any response to discovery requests provided by Contractor. However, City’s right to review any such response does not imply or mean the right by City to control, direct, or rewrite said response.

17. NOTICES
Any notices which either party may desire to give to the other party under this Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by a reputable document delivery service, such as but not limited to, Federal Express, which provides a receipt showing date and time of delivery, (iii) electronic mail when the recipient, by an email sent to the email address for the sender stated in this section, acknowledges having received that email, with an automatic “read receipt” constituting acknowledgment of an email for purposes of this section, or (iii) mailing in the United States Mail, certified mail, postage prepaid, return receipt requested, addressed to the address of the party as set forth below or at any other address as that party may later designate by notice:

To City: City of Morro Bay
595 Harbor Street
Morro Bay, CA 93442
Attention: City Clerk
Email Address: [email protected]
To Contractor: Visit Morro Bay
695 Harbor Street
Morro Bay, CA 93442
Attention: Executive Director
Email Address: [email protected]

18. ASSIGNMENT

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

Contractor shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of City.

19. EQUAL EMPLOYMENT OPPORTUNITY PRACTICES PROVISIONS
Contractor certifies that it is in compliance with the Equal Employment Opportunity Requirement of Executive Order 11246, as amended by Executive Order 11375 and supplemented I 45CFR, Part 60, Title VII of the Civil Rights Act and any other federal or state laws pertaining to equal employment opportunity and that it shall not discriminate against any employee or applicant for employment on the basis of race, color, religion, age, sex, national origin, ancestry, marital status, political affiliation or physical or mental condition, in matters pertaining to recruitment, hiring, training, upgrading, transfer, compensation or termination.

20. LICENSES AND PERMITS
At all times during the term of this Agreement, Contractor shall have in full force and effect, all licenses and permits required of it by law for the performance of the services described in this Agreement, and Contractor shall obtain at its sole cost and expense all such licenses and permits. Contractor shall comply with all necessary licensing and permitting requirements and shall obtain appropriate licenses and permits, and display the same in a location that is reasonably conspicuous, and file copies of same with the City.

21. GOVERNING LAW
City and Contractor understand and agree that the laws of the State of California shall govern the rights, obligations, duties, and liabilities of the parties to this Agreement and also govern the interpretation of this Agreement. Any litigation concerning this Agreement shall be instituted in a court of competent jurisdiction with venue in County of San Luis Obispo, State of California.

22. AMENDMENTS
a) General. This Agreement may be amended at any time by the mutual consent of the parties by an instrument in writing.
b) Services. The services to be provided hereunder shall be subject to any changes in the Plan. Such changes, which are mutually agreed upon by and between City and Visit Morro Bay, after a hearing process pursuant to the 1994 Law, and pursuant to all other provisions of the 1994 Law, shall be incorporated in written amendments to this Agreement.

23. NON-LIABILITY OF CITY OFFICERS AND EMPLOYEES
No officer or employee of the City shall be personally liable to the Contractor, or any successor in interest, in the event of any default or breach by the City or for any amount, which may become due to the Contractor or to its successor, or for breach of any obligation of the terms of this Agreement.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

24. ASSETS OF MBTBID
In the event the MBTBID is disestablished or otherwise discontinued, the existing assets of the MBTBID shall only be used, and will be refunded, in accordance with the 1994 Law. In the event the City terminates or suspends this Agreement with Visit Morro Bay, and the City designates a replacement Owners’ Association, Visit Morro Bay shall transfer all existing assets of the MBTBID in a timely manner to such replacement Owners’ Association consistent with the 1994 Law.

25. ATTORNEY FEES
If any action is brought in law or equity to enforce or interpret the provisions of the Agreement, then the prevailing party shall be entitled to reasonable attorney fees in addition to any other relief to which it may be entitled.

26. SEVERABILITY
If any clause, provision, or section of the Agreement shall be ruled invalid by any court of competent jurisdiction, the invalidity of such clause, provision or section shall not affect any of the remaining provisions hereof.

27. WAIVER
Waiver by either party of any breach of any term, covenant or condition herein contained shall not be deemed a waiver of such term, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained.

28. SECTION HEADINGS
The section headings of the Agreement are for convenience and reference only, and shall in no way be deemed to define, limit or add to the meaning of any provision of the Agreement.

29. INTERPRETATION
The terms of this Agreement shall be construed in accordance with the meaning of the language used and shall not be construed for or against either party by reason of the authorship of this Agreement or any other rule of construction which might otherwise apply.

30. COUNTERPARTS
The Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

31. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties relating to the obligations of the parties described in this Agreement. All prior or contemporaneous agreements, understandings, representations, and statements, oral or written, are merged into this Agreement and shall be of no further force or effect. Each party is entering into this Agreement based solely upon the representations set forth herein and upon each party’s own independent investigation of any and all facts such party deems material.

32. AUTHORITY TO EXECUTE THIS AGREEMENT
The person or persons executing this Agreement on behalf of Contractor warrants and represents he/she has the authority to execute this Agreement on behalf of Contractor and has the authority to bind Contractor to the performance of its obligations hereunder. [Signatures on the following page.]

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed.

CITY: CONTRACTOR:

CITY OF MORRO BAY, a California VISIT MORRO BAY, a California municipal corporation non-profit corporation
By: _____________________________ *By: ____________________________ John Craig, City Manager Krista Rupp, Executive Director/CEO Date: ____________________________ Date: ___________________________ Attest:
_________________________________ *By: _____________________________ Dana Swanson, City Clerk Amish Patel, Board Director
Date: ____________________________ Date: ____________________________ Approved As To Form:
________________________________
Brian J. Stack, City Attorney
Date: ____________________________
*Two corporate officer signatures required from Contractor, with one signature required from each of the following groups: 1) Chairman of the Board, President or any Vice President; and 2) Secretary, any Assistant Secretary, Chief Financial Officer or any Assistant Treasurer. CONTRACTOR’S SIGNATURES SHALL BE

DULY NOTARIZED, AND APPROPRIATE ATTESTATIONS SHALL BE INCLUDED AS MAY BE

REQUIRED BY THE BYLAWS, ARTICLES OF INCORPORATION, OR OTHER RULES OR REGULATIONS APPLICABLE TO CONTRACTOR’S BUSINESS ENTITY.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

EXHIBIT A
Scope of Services
Contractor shall fully and timely cooperate with City and City staff in the performance of all work hereunder, and Contractor shall provide the following services:

1. Timely perform all owners’ association services detailed in the MBTBID Management District Plan (“Plan”), attached as Exhibit C and incorporated herein as if set forth in full.

2. Diligently adhere to all requirements for the MBTBID Owners’ Association in the Plan.

3. Provide projects, programs and activities that benefit businesses within the MBTBID in accordance with the Plan.

4. Perform all responsibilities of an Owners’ Association under the Property and Business Improvement District Law of 1994, Streets and Highways Code sections 36600 et seq. (the “1994 Law”), including, but not limited to:
a. Preparation of an annual report pursuant to Streets & Highways Code section 36650 (“Annual Report”) as required by the 1994 Law, to include, but not be limited to:
i. Any recommended changes to boundaries;
ii. The improvements and activities to be provided for that fiscal year; iii. An estimate of cost for providing the improvements and activities for that fiscal year;
iv. The method and basis of levying the assessment in sufficient detail to allow each business owner to estimate the amount of the assessment to be levied against his/her business for that fiscal year;
v. The estimated amount of any surplus or deficit revenues to be carried over from a previous fiscal year; and
vi. The estimated amount of any contributions to be made from sources other than the assessments levied pursuant to the 1994 Law.
b. Delivering to the Morro Bay City Council the Annual Report at least ninety (90) days preceding the fiscal year for which assessments are to be levied and collected to pay the costs of the improvements and activities.
c. Management of the assessments levied pursuant to the 1994 Law for the benefit of the MBTBID in accordance with the City Council approved Annual Report. d. Provision of all services for improvements and activities called for in the City Council approved Annual Report.

5. Develop and maintain financial records related to receipt and/or expenditure of all funds received from City to the full satisfaction of City staff in accordance with this Agreement.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

EXHIBIT B

INSURANCE REQUIREMENTS
Prior to the beginning of and throughout the duration of the Agreement, Contractor will maintain insurance in conformance with the requirements set forth below. Contractor will use existing coverage to comply with these requirements. If that existing coverage does not meet the requirements set forth here, Contractor agrees to amend, supplement or endorse the existing coverage to do so. Contractor acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. Any insurance proceeds available to City in excess of the limits and coverage required in this agreement and which is applicable to a given loss, will be available to City.

Contractor shall provide the following types and amounts of insurance:

Commercial General Liability Insurance using Insurance Services Office “Commercial General Liability” policy from CG 00 01 or the exact equivalent. Defense costs must be paid in addition to limits. There shall be no cross liability exclusion for claims or suits by one insured against another. Limits are subject to review but in no event less than $1,000,000 per occurrence.

Business Auto Coverage on ISO Business Auto Coverage from CA 00 01 including symbol 1 (Any Auto) or the exact equivalent. Limits are subject to review, but in no event to be less than $1,000,000 per accident. If Contractor owns no vehicles, this requirement may be satisfied by a non-owned auto endorsement to the general liability policy described above. If Contractor or Contractor’s employees will use personal autos in any way to perform the Scope of Services, then Contractor shall provide evidence of personal auto liability coverage for each such person.

Property Damage Insurance in an amount of not less than $1,000,000 for damage to the property of each person on account of any one occurrence.

Workers Compensation on a state-approved policy form providing statutory benefits as required by law with employer’s liability limits.

Excess or Umbrella Liability Insurance (Over Primary) if used to meet limit requirements, shall provide coverage at least as broad as specified for the underlying coverages. Any such coverage provided under an umbrella liability policy shall include a drop down provision providing primary coverage above a maximum $25,000 self-insured retention for liability not covered by primary but covered by the umbrella. Coverage shall be provided on a “pay on behalf” basis, with defense costs payable in addition to policy limits. Policy shall contain a provision obligating insurer at the time insured’s liability is determined, not requiring actual payment by the insured first. There shall be no cross liability exclusion precluding coverage for claims or suits by one insured against another. Coverage shall be applicable to City for injury to employees of Contractor, subcontractors or others involved in the Work. The scope of coverage provided is subject to approval of City following receipt of proof of insurance as required herein. Limits are subject to review but in no event less than $1,000,000 per occurrence.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

Professional Liability or Errors and Omissions Insurance as appropriate shall be written on a policy form coverage specifically designated to protect against acts, errors or omissions of Contractor and “Covered Professional Services” as designated in the policy must specifically include work performed under this agreement. The policy limit shall be no less than $2,000,000 per claim and in the aggregate. The policy must “pay on behalf of” the insured and must include a provision establishing the insurer’s duty to defend. The policy retroactive date shall be on or before the effective date of this agreement.

Insurance procured pursuant to these requirements shall be written by insurer that are admitted carriers in the state California and with an A.M. Best’s rating of A- or better and a minimum financial size VII.

General conditions pertaining to provision of insurance coverage by Contractor. Contractor and City agree to the following with respect to insurance provided by Contractor:

1. Contractor agrees to have its insurer endorse the third party general liability coverage required herein to include as additional insureds the City of Morro Bay, its officials, employees and agents, using standard ISO endorsement No. CG 2010 with an edition prior to 1992. Contractor also agrees to require all Contractors, and subcontractors to do likewise.

2. No liability insurance coverage provided to comply with this Agreement shall prohibit Contractor, or Contractor’s employees, or agents, from waiving the right of subrogation prior to a loss. Contractor agrees to waive subrogation rights against City regardless of the applicability of any insurance proceeds, and to require all Contractors and subcontractors to do likewise.

3. All insurance coverage and limits provided by Contractor and available or applicable to this agreement are intended to apply to the full extent of the policies. Nothing contained in this Agreement or any other agreement relating to City or its operations limits the application of such insurance coverage.

4. None of the coverages required herein will be in compliance with these requirements if they include any limiting endorsement of any kind that has not been first submitted to City and approved of in writing.

5. No liability policy shall contain any provision or definition that would serve to eliminate socalled “third party action over” claims, including any exclusion for bodily injury to an employee of the insured or of any Contractor or subcontractor.

6. All coverage types and limits required are subject to approval, modification and additional requirements by City, as the need arises. Contractor shall not make any reductions in scope of coverage (e.g. elimination of contractual liability or reduction of discovery period) that may affect City’s protection without City’s prior written consent.

7. Proof of compliance with these insurance requirements, consisting of certificates of insurance evidencing all of the coverages required and an additional insured endorsement to

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

Contractor’s general liability policy, shall be delivered to City at or prior to the execution of this Agreement. In the event such proof of any insurance is not delivered as required, or in the event such insurance is canceled at any time and no replacement coverage is provided, City has the right, but not the duty, to obtain any insurance it deems necessary to protect its interests under this or any other agreement and to pay the premium. Any premium so paid by City shall be charged to and promptly paid by Contractor or deducted from sums due Contractor, at City’s option.

8. It is acknowledged by the parties of this agreement that all insurance coverage required to be provided by Contractor or any subcontractor, is intended to apply first and on a primary, noncontributing basis in relation to any other insurance or self-insurance available to City.

9. Contractor agrees to ensure that subcontractors, and any other party involved with the Scope of Services who is brought onto or involved in the Scope of Services by Contractor, provide the same minimum insurance coverage required of Contractor. Contractor agrees to monitor and review all such coverage and assumes all responsibility for ensuring that such coverage is provided in conformity with the requirements of this section. Contractor agrees that upon request, all agreements with subcontractors and others engaged in the Scope of Services will be submitted to City for review.

10. Contractor agrees not to self-insure or to use any self-insured retentions or deductibles on any portion of the insurance required herein and further agrees that it will not allow any Contractor, Subcontractor, Architect, Engineer or other entity or person in any way involved in the performance of the Scope of Services to self-insure its obligations to City. If Contractor’s existing coverage includes a deductible or self-insured retention, the deductible or self-insured retention must be declared to City. At the time City shall review options with Contractor, which may include reduction or elimination of the deductible or self-insured retention, substitution of other coverage, or other solutions.

11. City reserves the right at any time during the term of the contract to change the amounts and types of insurance required by giving Contractor ninety (90) days advance written notice of such change. If such change results in substantial additional cost to Contractor, the City will negotiate additional compensation proportional to the increase benefit to City.

12. For purposes of applying insurance coverage only, this Agreement will be deemed to have been executed immediately upon any party hereto taking any steps that can be deemed to be in furtherance of or towards performance of this Agreement.

13. Contractor acknowledges and agrees that any actual or alleged failure on the part of City to inform Contractor of non-compliance with any insurance requirements in no way imposes any additional obligations on City nor does it waive any rights hereunder in this or any other regard.

14. Contractor will renew the required coverage annually as long as City, or its employees or agents face an exposure from operations of any type pursuant to this agreement. This obligation applies whether or not the agreement is canceled or terminated for any reason.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

Termination of this obligation is not effective until City executes a written statement to that effect.

15. Contractor shall provide proof that policies of insurance required herein expiring during the term of this Agreement have been renewed or replaced with other policies providing at least the same coverage. Proof that such coverage has been ordered shall be submitted prior to expiration. A coverage binder or letter from Contractor’s insurance agent to this effect is acceptable. A certificate of insurance and/or additional insured endorsement as required in these specifications applicable to the renewing or new coverage must be provided to City within five days of the expiration of the coverages.

16. The provisions of any workers’ compensation or similar act will not limit the obligations of Contractor under this agreement. Contractor expressly agrees not to use any statutory immunity defenses under such laws with respect to City, its employees, officials and agents.

17. Requirements of specific coverage features or limits contained in this section are not intended as limitations on coverage, limits or other requirements nor as a waiver of any coverage normally provided by any given policy. Specific reference to a given coverage feature is for purposes of clarification only as it pertains to a given issue, and is not intended by any party or insured to be limiting or all-inclusive.

18. These insurance requirements are intended to be separate and distinct from any other provision in this agreement and are intended by the parties here to be interpreted as such.

19. The requirements in this Section supersede all other sections and provisions of this Agreement to the extent that any other section or provision conflicts with or impairs the provisions of this Section.

20. Contractor agrees to be responsible for ensuring that no contract used by any party involved in any way with the Scope of Services reserves the right to charge City or Contractor for the cost of additional insurance coverage required by this agreement. Any such provisions are to be deleted with reference to City. It is not the intent of City to reimburse any third party for the cost of complying with these requirements. There shall be no recourse against City for payment of premiums or other amounts with respect thereto.

21. Contractor agrees to provide immediate notice to City of any claim or loss against Contractor arising out of the work performed under this agreement. City assumes no obligation or liability by such notice, but has the right (but not the duty) to monitor the handling of any such claim or claims if they are likely to involve City.

AGREEMENT FOR CONTRACTOR SERVICES BETWEEN THE CITY OF MORRO BAY AND VISIT MORRO BAY

EXHIBIT C
MBTBID Management District Plan
Adopted by Morro Bay City Council on March 24, 2026 through Resolution No. XX-26

Prepared By: DH Dept Review: DH
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 1, 2026 FROM: Damaris Hanson – Interim Public Works Director
SUBJECT: Water Reclamation Facility Quarterly Report

RECOMMENDED ACTION
Receive and file the Fiscal Year (FY) 2026 Quarterly Report for January – March for the Water Reclamation Facility Program (WRF Program).

DISCUSSION

1. Fiscal Year 2026 Quarterly Report Q3 (Jan 1 – March 31, 2026) The purpose of the WRF Quarterly report is to provide project status updates on schedule, budget, key activities, and critical path items as they relate to the WRF program. While the report is intended to focus on the Recycled Water project, it also contains historical information regarding budget and funding for the overall WRF Program. The FY26 Q3 Quarterly Report includes information on project activities between January 1, 2026 and March 31, 2026. The Quarterly report was brought to Public Works Advisory Board on May 20th.

ATTACHMENT(S)

1. FY26 Q3 (January-March, 2026) Report for WRF Program AGENDA NO: 6.f

MEETING DATE: June 9, 2026

MAY 6, 2026 1
City of Morro Bay
Water Reclamation Facility Program

QUARTERLY REPORT
Jan 1, 2026 THROUGH MAR 31, 2026

INTRODUCTION
The Recycled Water Facilities (RWF) project is a portion of the larger Water Reclamation Facility (WRF) Program. The RWF project is anticipated to be complete by early 2028. This quarterly report includes updates on project status, schedule, program funding, and program budget. The current program budget is $159.84 million and $147.43 million has been spent to date.

RECYCLED WATER PROJECT STATUS
The RWF project is currently in the design phase, and the following activities were completed during this quarter:

Recycled Water Project Status Update (Jan 1, 2026 – Mar 31, 2026) • Environmental/Permitting
o Ongoing activities and upcoming timelines
 On February 24, 2026, City Council approved the following contract amendments:
• Rincon WRF Contract Amendment #2 – no cost amendment to extend contract date until Dec 31, 2026
• KMA WRF Contract Amendment #5 – $39,500 amendment for biological support services and extend contract date until Dec 31, 2026  During this quarter, the United States Bureau of Reclamation (USBR) was added as a signatory to the City’s existing Programmatic Agreement (PA) with the Environmental Protection Agency (EPA) and the State Historic Preservation Office (SHPO). Becoming an added signatory allows USBR to utilize the PA prepared for the WRF Program to fulfill USBR’s Section 106 historical/archeological preservation requirements for the ~$9.3M Title XVI Recycled Water Program Grant.
 On March 4, 2026, the City received the Finding of No Significant Impact (FONSI). This is an official determination by USBR that the project will not have significant environmental impacts based on the findings of the Environmental Assessment (EA) completed under the EPA’s PA. With this determination, no further environmental studies are required by USBR.
 On March 10, 2026, the City received the Determination of NEPA Adequacy (DNA) from USBR. This is an official determination from USBR that all relevant information raised in the NEPA process has been considered and the NEPA

QUARTERLY REPORT | WATER RECLAMATION FACILITY PROGRAM | CITY OF MORRO BAY MAY 6, 2026 2
process has been concluded. USBR reviewed the City’s relevant information (the EPA’s PA and USBR’s FONSI) and determined that the City is compliant with their requirements for NEPA compliance.
 During this quarter, the project archeologist continued to prepare the Phase 3 Report Addendum for the EPA/SHPO to incorporate the additional Phase 3 testing results.
• Recycled Water Permitting
o Activities completed
 On January 15, 2026, the City met with Regional Water Quality Control Board (RWQCB) to coordinate on the Aquifer Storage and Recharge (ASR) Permit, Groundwater Replenishment Permit (GRRP), and Engineering Report. The City is continuing to coordinate with Division of Drinking Water (DDW) to complete these items.
o Ongoing activities and upcoming timelines
 During this quarter, the City continued to coordinate with the Coastal San Luis Resource Conservation District (CSLRCD) and California Coastal Commission (CCC) on the Chorro Levee Project and on the Agricultural Mitigation Program update. • Engineering Design
o Ongoing activities and upcoming timelines
 During this quarter, the City received a draft appraisal for the easements for the proposed injection and monitoring wells. The Project Team finalized the appraisal documentation for the easement swap and provided the property owner an offer in April 2026.
 During this quarter, the project design engineer and hydrogeologist progressed toward completion of design plans and bid docs for injection and monitoring well drilling and well construction.
 During this quarter, the project design engineer progressed toward completion of design plans and bid docs for injection well equipping and recycled water pipelines.
• Hydrogeologic Analysis and Design
o Activities completed
 On January 15, 2026 the City met with RWCQB to coordinate on the ASR Permit, GRRP Permit, and Engineering Report. The City is continuing to coordinate with DDW to complete these items.
 On February 24, 2026, City Council approved the following contract amendment:
• GSI Contract Amendment #6 – $44,000 amendment for preparation of an ASR permit application and compliance reports for the next interim tracer study.
 During this quarter, the project hydrogeologist prepared a draft ASR permit application for the Interim Injection Test planned for the next phase of injection wells. Currently, the application has been submitted to the RWQCB for review. o Ongoing activities and upcoming timelines
 During this period, the project hydrogeologist preparation of the design of the downhole components of the injection wells.
• Funding/Financing
o Activities completed

QUARTERLY REPORT | WATER RECLAMATION FACILITY PROGRAM | CITY OF MORRO BAY MAY 6, 2026 3
 On March 11, 2026, the City was issued the Environmental Notice to Proceed (NTP) from USBR for construction of the Recycled Water Facilities. Since the environmental requirements have been fulfilled and the NTP has been issued, the City is eligible to begin seeking grant disbursements. The City is in the process of preparing grant funding match and disbursement packages.  The City prepared and submitted the Water Infrastructure Finance and Innovation Act (WIFIA) Funding and Financing Quarterly Report.  The City prepared and submitted the Integrated Regional Water Management (IRWM) Funding and Financing Quarterly Report.
 The City continued to prepare a funding/financing strategy for the remainder of the Project.
o Ongoing activities and upcoming timelines
 City Staff and the Recycled Water Program Team are coordinating with the funding financing agencies to provide quarterly reports, disbursement packages, environmental documentation, and other required materials.

MAY 6, 2026 4

RECYCLED WATER PROJECT SCHEDULE
Figure 1. Recycled Water Summary Schedule

MAY 6, 2026 5

PROGRAM BUDGET
Table 1 lists actual expenditures for each program component and the percent of the budget expended. The WRC and Conveyance Facilities components of the project were closed out in 2024.

Table 1. WRF Program Expenditures
Program
Component
Previous
Total
Expenditures
Jan-Mar 2026
Expenditures (1)
Total Expenditures
To Date
FY 25/26 Budget
(2)
Percent
Budget
Expended
RWF $3,464,986 $85,902 $3,550,888 $9,424,174 38%
General Project $24,932,246 $138,584 $25,070,830 $30,968,609 81% WRC Plant $77,895,236 $0 $77,895,236 $79,123,216 98%
Conveyance $40,917,354 $1,268 $40,918,622 $40,324,350 101% Total $147,209,822 $225,754 $147,435,575 $159,840,349 92% (1) Jan-Mar 2026 total expenditures as tallied on the Accounts Payable Report run on April 23, 2026, including all invoices accrued through March 31, 2026.
(2) See page 352 of the FY 24/25 budget adopted by Council. No additional funds for this project were added with the approval of the FY 25/26 budget.
(3) Although the Conveyance budget has been closed out, invoices for Phase 2 archeological testing (conveyance) sample processing was received this quarter

QUARTERLY REPORT | WATER RECLAMATION FACILITY PROGRAM | CITY OF MORRO BAY MAY 6, 2026 6

PROGRAM FUNDING
Table 2. WRF Program Funding Sources
Funding
Agency/
Program(1)
Funding Type Funding
Awarded
Spent to
Date(2)
Funding
Available Notes
SWRCB

CWSRF/WRFP
CWSRF
Construction Loan $61,604,638 $59,910,849 $1,693,789 Terms: 0.9%, 30 years WRFP Water
Recycling Grant $5M $5M $0
SWRCB
CWSRF
Construction Loan
Amendment $21,172,000 $0 $21,172,000 Terms: 0.9%, 30 years SWRCB
CWSRF Planning Loan $10,300,000 $10,300,000 $0 Terms: 0.9%, 30 years EPA WIFIA Loan $61,700,336 $46,259,157 $15,441,179 Terms: 0.83%, 35 years SWRCB WRFP Recycled Water
Planning Grant $75,000 $75,000 $0 Costs reimbursed upon request USBR Title XVI Grant $9,310,095 $0 $9,310,095
Executed Agreement.

Grant amount is
subject to a 75% cost
share match.

DWR IRWM Grant $1,200,000 $0 $1,200,000
Executed Agreement.

Grant amount is
subject to a $3.74M
non-State cost share
and a $1.78M cost
share from any source.

City of Morro
Bay Water/Sewer Fund $25,890,569 $25,890,569 $0
May be eligible for loan
reimbursement within
program deadlines.

All Sources Total $196,252,638 $147,435,575 $48,817,063 (1) Abbreviations: SWRCB – State Water Resources Control Board; WRFP – Water Recycling Funding Program; WIFIA – Water Infrastructure and Finance Innovation Act; DWR – Department of Water Resources; CWSRF – Clean Water State Revolving Fund; EPA – Environmental Protection Agency; WIFIA – Water Infrastructure Finance & Innovation Act; USBR – United States Bureau of Reclamation; IRWM – Integrated Regional Water Management.
(2) Updated through March 31, 2026.

OTHER PROGRAM UPDATES
WWTP Decommissioning
• Although the WWTP Decommissioning is part of the WRF Project, it is funded separately from

QUARTERLY REPORT | WATER RECLAMATION FACILITY PROGRAM | CITY OF MORRO BAY MAY 6, 2026 7
the other phases of the project and is not included in the budget and expenditures listed in the tables above.
• While the City had intended to complete the Phase 4 (WWTP Decommissioning) archeological investigations at the same time as the Phase 3 (Recycled Water Facilities) investigations in August 2025 to save on mobilization costs, the City was not able to conduct the Phase 4 investigations at that time. Consent from Cayucos Sanitary District was required to complete the Phase 4 investigations on the jointly-owned property, and Cayucos Sanitary District did not grant permission, as negotiations regarding the other aspects of decommissioning are still ongoing.
• The new timeline for the archeological investigation is yet to be determined but is anticipated to be completed in July or August 2026. The City is waiting for escrow to close for the WWTP buyout from Cayucos Sanitary District before scheduling archeological investigations.

Extraction Well Siting
• The Extraction Well Project is funded through the Water Fund and is separate from the WRF Project. The project is not included in the budget and expenditures listed in the tables above. • During this quarter, the City provided the property owner of the preferred extraction well site with an offer package. The City is awaiting a response from the property owner.

Historical information on the WRF Program and previous quarterly reports are available on the program website: https://morrobaywrf.com/.

AGENDA NO: 7.a
MEETING DATE: June 9, 2026
Prepared By: DM Dept Review:

City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: May 22, 2026 FROM: Airlin Singewald, Community Development Director
SUBJECT: An appeal by Solmaz Naghsh of the Planning Commission’s approval on April 7, 2026 of a Coastal Development Permit (CDP25-21), Conditional Use Permit (CUP25-01), and Modification Request (MOD26-001) for the demolition of the existing single-story fire station living quarters at 460 Bonita Street, and the construction of a new two-story living quarters totaling 2,431 square feet in its place

RECOMMENDED ACTION
Adopt Resolution No. 31-26 denying an appeal and upholding the Planning Commission’s April 7, 2026 approval of the proposed project.

ALTERNATIVES
1) Uphold the appeal, overturning the Planning Commission’s approval of the proposed project, and provide staff direction as necessary.

APPELANT: Solmaz Naghsh
APPLICANT: Chief Daniel McCrain, Morro Bay Fire Department LEGAL DESCRIPTION / APN: 460 Bonita Street; 068-262-042

FISCAL IMPACT
The Department is using General Fund budget to process permits for this City project. The City’s 2025 user fee study determined that the actual cost to process an appeal is, on average, $3,438.

The appellant’s $370 appeal fee will offset a portion of this cost. The appeal fee will be returned to the appellant if the appeal is upheld.

SUMMARY
In June 2025, the City Council received a presentation (City Council Regular Meeting - June 10, 2025) from the Fire Chief regarding the need to redevelop the Bonita Street fire station to adequately meet the community’s emergency response needs and considered three redevelopment options. The Council directed the Fire Department to proceed with Option B to demolish and replace the existing uninhabitable one-story living quarters with a new two-story structure, with an operational area on the first floor and living quarters on the second floor. The

other options included renovating (Option A) and demolishing and replacing (Option C) the existing one-story living quarters. While less expensive, the Council rejected these options as they did not meet the Fire Department’s long-term operational needs and could be more costly in the end, due to the need for subsequent expansion and escalating construction costs.

Per Council direction, the Fire Department proceeded with plans for the two-story option (Option B). During the design process, the Fire Chief and Community Development Director both met with the neighbor (now the Appellant) to understand and consider her concerns regarding impacts to her private views. While the City’s planning regulations do not protect private views, to be a good neighbor, the Fire Department incorporated her feedback into the design by setting the building another 10 feet back from the property line (a 25-foot setback compared to the existing 10-foot building setback). The minimum setback requirement is 20 feet. A viewshed analysis shows that the neighbor’s view, both to the north and of the Rock, are preserved under this proposal. Because the structure has enlarged setbacks in each direction, the overall massing of the building is also reduced. The building was designed to resemble other two-story homes in the neighborhood. The Fire Department also relocated windows on the eastern second story building elevation to address privacy concerns.

On April 7, 2026, the Planning Commission approved entitlements for the two-story option, incorporating the Fire Department’s revisions to address neighbor concerns regarding massing, views, and privacy. The public comment and Commission deliberations during the hearing centered on the proposed parking modification to allow the Fire Department to establish one of its three required off-street parking spaces in the front setback. The proposed project includes two tandem parking spaces within the side setback, as allowed under the zoning code. The third required parking space would be located in the front setback in front of the new two-story structure. The Planning Commission supported a modification to allow one of the required parking spaces in the front setback because it is necessitated by site conditions and the operational requirements of the fire station. Given the need to use the existing apparatus bay with a clear driveway, the size requirements for the living quarters and operational areas, and limited areas available for new development, a modification is needed to allow a third required parking space in the front setback.

The neighbor also asked for all three required parking spaces to be located in the front setback, rather than including two tandem spaces in the eastern side yard and one in the front setback.

However, this would require a further parking modification and would eliminate a public curbside parking space, in conflict with the Zoning Code.

On April 15, 2026, the neighbor filed an appeal (Attachment 2) of the Planning Commission’s approval. The appeal raises the parking and design concerns summarized above and asks the City Council to consider the one-story design option. As discussed at the June 10, 2025 City Council meeting and as summarized above, the one-story design does not meet the Fire Department’s long-term operational needs and could be more costly for the City in the long run.

Staff recommends the City Council adopt Resolution No. 31-26 (Attachment 1), denying the appeal and upholding the Planning Commission’s approval of a Coastal Development Permit, Conditional Use Permit, and Modification Request for the demolition of the existing single-story fire station living quarters at 460 Bonita Street and the construction of a new, two-story living quarters totaling 2,431 square feet in its place.

GROUNDS FOR APPEAL AND STAFF RESPONSES
The stated grounds for the appeal are listed below, followed by a staff response in italics. The Fire Department’s response to the appeal contentions is included separately in Attachment 4. Note:

The grounds for appeal below have been paraphrased, the full text of each of the stated grounds for appeal are included in Attachment 2.

1. Failure to Evaluate a Feasible, Lower-Impact Alternative. A single-story design, like Option C as presented to the City Council during the June 10, 2025 meeting included during agenda item 9c, combined with modest setback variances and parking reconfiguration, was not fully evaluated despite being a feasible, lower-impact, and more cost-effective alternative.

Staff Response: Planning Commission did not evaluate a single-story design because it was not in their purview to do so. The role of the Planning Commission is to evaluate projects that come before them for consistency with Plan Morro Bay and the Zoning Code, and not to consider financial policy decisions or propose project alternatives. The Planning Commission reviewed the project, held a public hearing, and found that it was consistent with all provisions of Title 17 (Zoning) and Plan Morro Bay. As described above, in June 2025, the City Council determined the proposed two-story option is necessary to meet the long-term operational needs of the Fire Department.

2. Erroneous Finding that No Less Detrimental Alternative Exists. The record supports a feasible alternative [is possible] that reduces building height and mass, eliminates sideyard tandem parking, and improves site efficiency and circulation. Accordingly, the finding that no less detrimental alternative exists [the finding to grant a modification request to allow for one parking space to be provided in the front-yard setback] is not supported by substantial evidence.

Staff Response: The two-story design that was approved by the Planning Commission complies with all development standards for the RS-A zone. The requested modification was only for the location of one parking space within the front yard setback. Otherwise, the design of the building meets all applicable standards. The proposed design is more than two-feet under the allowed height limit and provides larger setbacks in all directions within the project’s scope (the existing apparatus bay has a 1.5-foot setback from the western property line, which was allowed under the Zoning Code in place at the time).

Further, tandem parking within the side-yard is allowed by right in the Zoning Code, and did not require any modification or variance. It is common for driveways to be sited within a property’s side-yard setback in Morro Bay. There are two alternatives to allowing one parking space within the front-yard setback: reducing the footprint of the building to accommodate the third space, or providing it off-site (on the street). A reduction in the footprint of the building would result in a structure that is unfit for the Fire Department’s needs, making this an unviable alternative. Allowing the third space to be provided on the street would be detrimental to surrounding owners and the general public, as it would take away a public parking space. Policy CIR-4.1 in Plan Morro Bay states that “in all cases parking shall be provided in a manner that does not adversely impact the public’s ability to park…” Taking an on-street parking space away from the public would adversely impact their ability to park, making this option a detrimental alternative.

3. Improper Reliance on Self-Imposed Constraints. The justification for the two-story design is driven by discretionary choices, including: the retention of curbside parking and the avoidance of setback variances. These are not true physical constraints. The resulting design reflects a self-created limitation, not a site necessity.

Staff Response: The decision to retain a curbside parking space was based on policies included within Plan Morro Bay and the Zoning Code, as outlined above.

One of the required findings is that the modification is necessary due to the physical characteristics of the property. In this case, a modification is necessary based on the available site area, existing building configuration, and operational requirements of the fire station, including the need to maintain a clear driveway in front of the apparatus bay for emergency vehicle access.

4. Inadequate Consideration of Cost and Fiscal Efficiency. Project cost and funding implications were not fully evaluated. A materially lower-cost alternative ($1.5 million vs. $2.5 million) exists and warrants meaningful consideration, particularly given current public funding constraints.

Staff Response: With information on the expected costs of each design, the City Council directed staff to move forward with the two-story approach. As discussed in June 2025, the one-story option could be more costly in the long run, when considering subsequent expansion needs and escalating construction costs.

5. Failure to Ensure Neighborhood Compatibility. The approved design introduces unnecessary height and massing, privacy impacts, and inefficient site layout. Parking in the immediate vicinity is sufficient, and the removal of a curbside parking space would not result in a meaningful parking deficiency. To the contrary, retention of curb parking creates impacts by forcing an inefficient site layout, shifting vehicle parking to the side yard, and ultimately necessitating a taller, two-story structure, while also introducing safety and functional concerns associated with tandem parking.

Staff Response: As described above, the Fire Department redesigned the project to address neighbor concerns regarding massing, views, and privacy. Further, tandem parking is allowed by right in the Zoning Code and, in this case, avoids the loss of a public curbside parking space. Relocating tandem parking spaces into the front setback would eliminate a curbside parking space and conflicts with the Zoning Code.

6. Incomplete Consideration of Relevant Information. Independent analysis, including findings from the McMullen Company, was not fully incorporated into the decision-making process.

Staff Response: The McMullen Company’s report (the TMC Report) was provided to the Planning Commission ahead of the April 7, 2026 hearing as a part of the agenda correspondence packet. The Planning Commission’s role in the project was to decide if the design as proposed was compliant with the development standards set forth in the Zoning Code, which they did by a unanimous 5-0 vote. Several of the topics covered in the TMC Report were outside of the scope of the Planning Commission’s review, including but not limited to the programming of the building and response time. The TMC Report is included with the appeal (Attachment 2) and the Fire Chief’s response is included in Attachment 5.

REQUESTED ACTION OF APPEAL
The requested relief or actions requested by the Appellant are bellow, followed by a staff response in italics.

The Appellant contends that the City Council should:

1. Deny the approved two-story design (CDP25-021 / CUP25-01 / MOD26-001)

2. Direct staff to fully evaluate a single-story alternative (Option C)

3. Approve targeted variances/modifications to make the single-story design feasible, including:
a. Modest expansion into side and rear setbacks
b. Reconfiguration of front setback parking to allow three sequential spaces by removing one curb parking spot.

Staff Response: Staff does not recommend granting any of the above requested reliefs or actions.

The two-story design that the Planning Commission approved through CDP25-021 / CUP25-01 / MOD26-001 complies with all provisions of Plan Morro Bay and the Zoning Code and is the fulfillment of a Council directive given on June 10, 2025. A single-story alternative like Option C has already been evaluated by staff, and it was determined that the approach would not meet the current and future needs of the Fire Department. As described above, eliminating a public curbside parking space to allow three spaces in the front setback would be inconsistent with the Zoning Code.

ENVIRONMENTAL DETERMINATION
Pursuant to the California Environmental Quality Act, the project meets the requirements for a categorical exemption under CEQA Guidelines Section 15303, Class 3, New Construction or Conversion of Small Structures, which applies to residential dwelling units and commercial structures not exceeding 2,500 square feet. Additionally, none of the Categorical Exemption exceptions, noted under Section 15300.2, apply to the project.

PUBLIC NOTICE
Notice of this item was published in the New Times newspaper on May 28, 2026, and all property owners of record within 500 feet of the subject site were notified of this evening’s public hearing and invited to voice any concerns on this appeal or related to the proposed project.

CONCLUSION
The Planning Commission’s approval meets all applicable development standards. The design of the project ensures neighborhood compatibility, respects the privacy of neighbors, and preserves private views to the extent practicable (although not required). The Fire Department and their architect received communications from the Appellant during the design process and responded to her concerns. The fire station at 460 Bonita Street was established well before the City’s incorporation and pre-dates the construction of nearly every home in the surrounding neighborhood. The two-story design meets the needs of the Fire Department and community right now, and is the only design concept that will continue to do so in the future without additional costly modifications. Finally, the Planning Commission’s approval of this project is in alignment with the City Council’s directive from June 10, 2025, which affirmed the City’s intent to support the Bonita Street station and directed staff to pursue a two-story design concept.

ATTACHMENTS

1. Resolution No. 31-26 to Deny the Appeal and Uphold the Planning Commission’s Approval

2. Appeal Received from Appellant dated April 15, 2026 (Includes the McMullen Report)

3. Planning Commission Resolution 03-26

4. Fire Department Response to Appeal Contentions
LINKS
Planning Commission staff report
Minutes of the April 7, 2026 Planning Commission meeting Fire Chief’s Response to the McMullen Report

RESOLUTION NO. 31-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA

DENYING AN APPEAL, AND UPHOLDING THE PLANNING

COMMISSION APPROVAL OF A COASTAL DEVELOPMENT
PERMIT (CDP25-021), CONDITIONAL USE PERMIT (CUP25-
01), AND A MODIFICATION REQUEST (MOD26-001) FOR THE

DEMOLITION OF THE EXISTING SINGLE-STORY FIRE
STATION LIVING QUARTERS AT 460 BONITA STREET, AND

THE CONSTRUCTION OF A NEW, TWO-STORY LIVING
QUARTERS TOTALLING 2,431 SQUARE FEET IN ITS PLACE.

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, the Planning Commission of the City of Morro Bay conducted a public hearing at the Morro Bay Veteran’s Hall, 209 Surf Street, Morro Bay, California, on April 7, 2026, for the purpose of considering approval of Coastal Development Permit (CDP25-021), Conditional Use Permit (CDP25-01), and Modification Request (MOD26-001) for the demolition of the existing single-story fire station living quarters at 460 Bonita Street, and the construction of a new twostory facility in its place (“the Project”); and WHEREAS, on April 7, 2026, the Planning Commission of the City of Morro Bay adopted Resolution 03-26 to approve the Coastal Development Permit (CDP25-021), Conditional Use Permit (CDP25-01), and Modification Request (MOD26-001); and WHEREAS, on April 15, 2026, Solmaz Naghsh (“Appellant”) filed an appeal of the Planning Commission’s decision to approve the Project.

WHEREAS, on June 9, 2026, the City Council of Morro Bay (“City Council”) conducted a duly noticed public hearing at the Morro Bay Veteran’s Hall, 209 Surf Street, Morro Bay, California, to consider the appeal; and
WHEREAS, notices of said public hearing were made at the time and in the manner required by law; and
WHEREAS, the City Council has duly considered all evidence, including the recommendations made by the Planning Commission, the testimony of the Appellant, public comment, and the evaluation and recommendations by staff, presented at said hearing.

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

Section 2: Action. The City Council does hereby deny the appeal filed by Solmaz Naghsh, on April 15, 2026, and upholds the Planning Commission approval of Coastal Development Permit (CDP25-021), Conditional Use Permit (CUP25-01), and Modification Request (MOD26-001), based on the Findings and Conditions of Approval listed below.

FINDINGS
California Environmental Quality Act (CEQA)
For the purposes of the California Environmental Quality Act, the project meets the requirements for a Categorical Exemption under CEQA Guidelines Section 15303, Class 3, New Construction or Conversion of Small Structures. This exemption applies to residential dwelling units and commercial structures not exceeding 2,500 square feet. Additionally, none of the Categorical Exemption exceptions, noted under Section 15300.2, apply to the project.

Coastal Development Permit Findings

1. LCP Consistency. The project is consistent with the LCP.

Plan Morro Bay was adopted in 2021, encompassing both the City’s General Plan and Coastal Land Use Plan (LCP). The property falls within the General Plan’s land use designation of Moderate Density Residential, which is intended for detached or attached single-family homes and some group housing uses. The living quarters and fire station on the property have a legal nonconforming status because they were legally established prior to the adoption of Plan Morro Bay and Title 17 of the Morro Bay Municipal Code, which outlines their right to continue and expand with Planning Commission approval.

2. Public Views. The project protects or enhances public views.

Plan Morro Bay includes various policies related to the protection and enhancement of coastal public views. This project, however, is not located along the coast and therefore does not negatively impact coastal public views.

3. Habitat Protection. The project protects vegetation, natural habitats and natural resources consistent with LCP.

The Conservation Element of Plan Morro Bay addresses the use and preservation of natural resources to improve the environmental quality of Morro Bay. This property is not located within a mapped environmentally sensitive habitat area and therefore is not expected to compromise existing vegetation, natural habitats or natural resources with proper erosion control measures.

4. Design Consistency. The design, location, size, and operating characteristics of the proposed development is consistent with applicable LCP design requirements, including design plans and area plans incorporated into the LCP.

Plan Morro Bay designates the City of Morro Bay’s Zoning Code (Title 17 of the Municipal Code) as the regulatory authority for implementation of coastal requirements including allowed uses, development standards, and coastal resource protection standards. The design, size, location, and operating characteristics of this project are consistent with applicable sections of the Morro Bay Zoning Code. Further, Plan Morro Bay places this property in the North Morro Bay Character Area, in which most buildings are one- or two-story single-family homes. The living quarters have been designed to be compatible with the North Morro Bay Character Area.

5. Coastal Access. The project protects or enhances public access to and along the coast.

Plan Morro Bay includes various policies related to the protection and enhancement of public

access to and along the coast. This project, however, is not located along the coast and therefore does not negatively affect public access to and along the coast.

6. Visitor Serving. The project supports the LCP goal of providing for visitor-serving needs as appropriate, including providing low- and no-cost visitor and recreational facilities.

Plan Morro Bay includes various policies related to visitor-serving needs. This project, however, is a proposal to redevelop living quarters and is therefore not required to provide low- and no-cost visitor and recreational facilities.

7. Appropriate Use. The project is consistent with the allowed LCP uses associated with the property.

Plan Morro Bay was adopted in 2021, encompassing both the City’s General Plan and Coastal Land Use Plan (LCP). The property falls within the General Plan’s land use designation of Moderate Density Residential, which is intended for detached or attached single-family homes and some group housing uses. The living quarters and fire station on the property have a legal nonconforming status because they were legally established prior to the adoption of Plan Morro Bay and Title 17 of the Morro Bay Municipal Code, which outlines their right to continue and expand with Planning Commission approval.

Plan Morro Bay designates the City of Morro Bay Zoning Code as the regulatory authority for implementation of coastal requirements including allowed uses, development standards, and coastal resource protection standards. The design, size, location, and operating characteristics of this project are consistent with applicable sections of the Morro Bay Zoning Code.

8. Coastal Resources. The proposed development protects or enhances coastal resources, where applicable.

Plan Morro Bay includes various policies related to the protection or enhancement of coastal resources. The proposed project is consistent with the protection of coastal resources.

9. Environmental Justice. The project addresses whether proposed development results in environmental justice impacts, consistent with LCP environmental justice policies. When relevant, the project includes mitigation measures to minimize or eliminate potential adverse and/or disproportionate impacts of development on environmental justice communities.

The project does not trigger environmental justice impacts. No mitigation measures are required to minimize or eliminate potential adverse and/or disproportionate impacts of development on environmental justice communities.

10. Hazards. The proposed development is consistent with the LCP’s coastal hazards provisions.

Coastal hazards include, but are not limited to, episodic and long-term shoreline retreat and coastal erosion, high seas, ocean waves, storms, tsunami, coastal flooding, landslide, bluff and geologic instability, and the interaction of same, and all is impacted by sea level rise. This project, however, is not located along the shoreline and therefore is not subject to the LCP’s coastal hazards provisions.

Conditional Use Permit Findings

1. The nonconforming use was legally established.

The fire station and living quarters at 460 Bonita Street were established prior to the City’s incorporation. Although the property has gone through various uses in recent decades, the apparatus bay was rebuilt after City Council action in 2004, and in July 2025 the City Council affirmed that it is their intent to redevelop and staff the Bonita Street Fire Station. This will allow the City’s emergency personnel to better serve the needs of North Morro Bay, which has been deemed critical through various commissioned studies and surveys.

2. The proposed expansion of the nonconforming use would not be detrimental to public health, safety, or general welfare.

The proposed expansion of the fire station living quarters will allow the Fire Department to fully staff the station, allowing them to best meet the needs of North Morro Bay residents, and thereby benefit the public health, safety, and general welfare.

3. With the exception of the nonconforming use, the proposed expansion would not be inconsistent with the general plan and land use plan and would not preclude or interfere with implementation of any applicable city specific plan.

With the exception of the nonconforming use, the project is consistent with the general plan and land use plan through the approval of MOD26-001. There are no applicable city specific plans in effect over this property.

Modification Request Findings

1. The modification is necessary due to the physical characteristics of the property and the proposed use or structure or other circumstances, including, but not limited to, topography, noise exposure, irregular property boundaries, or other unusual circumstance.

The requested modification is necessary due to the proposed use of the site. Under MBMC Section 17.27.040(A)(2), the Community Development Director has the authority to determine the number of parking spaces required for a use not identified in the Zoning Code’s parking table. In consultation with the Chief of the Fire Department, the Director has determined that three parking spaces are the minimum number required for the living quarters. MBMC

17.27.110(C)(1) allows a maximum of two tandem parking spaces. Given the minimum required building footprint for public safety needs, the only feasible location for the third parking space is within the front setback.

2. There are no alternatives to the requested modification that could provide an equivalent level of benefit to the applicant with less potential detriment to surrounding owners and occupants or to the general public.

Requiring the third parking space to be pushed out of the front setback would correspond with a reduction in proposed building footprint, which would result in a building unsuitable for the Fire Department’s needs. Additionally, only requiring two parking spaces would not be conducive to the staffing needs of the station. Further, the third parking space may not be provided within the existing driveway of the apparatus bay, as it would impede emergency response vehicles during calls to service.

3. The granting of the requested modification would not be detrimental to the health or safety of the public or the occupants of the property or result in a change in land use or density that would be inconsistent with the requirements of this title.

The granting of the requested modification would bring an added benefit to the public by allowing the Fire Department to provide adequate onsite parking for their personnel without taking a space away from an already parking-congested neighborhood. The requested modification to this development standard would not result in a change in land use or density that would be inconsistent with the requirements of Title 17.

CONDITIONS OF APPROVAL

1. Authorized Development: CDP25-021 / CUP25-01 / MOD26-001 for the land described as Assessor’s Parcel Number 068-262-042 to allow for the demolition of the existing 1,145 square foot, single-story living quarters for Fire Department personnel located at 460 Bonita Street, and the construction of a new, two-story living quarters totaling 2,431 square feet in its place, as shown on plans date-stamped and approved on April 7, 2026, and on file with the Community Development Department, as modified by these conditions of approval. Site development, including all buildings and other features, shall be located and designed substantially as shown on plans, unless otherwise specified herein.

2. Inaugurate Within Two Years: Unless the construction or operation of the structure, facility, or use is commenced not later than five (5) years after the effective date of this Resolution and is diligently pursued, thereafter, this approval will automatically become null and void; provided, however, that upon the written request of the applicant, prior to the expiration of this approval, the applicant may request up to two extensions for not more than one (1) additional year each. Any extension may be granted by the Director, upon finding the project complies with all applicable provisions of the Morro Bay Municipal Code (the “MBMC”), General Plan and certified Local Coastal Program Land Use Plan (LCP) in effect at the time of the extension request.

3. Changes: Minor changes to the project description and/or conditions of approval shall be subject to review and approval by the Community Development Director. Any changes to this approved permit determined, by the Director, not to be minor shall require the filing of an application for a permit amendment subject to Planning Commission review.

4. Compliance with the Law: (a) All requirements of any law, ordinance or regulation of the State of California, the City, and any other governmental entity shall be complied with in the exercise of this approval, (b) This project shall meet all applicable requirements under the MBMC and shall be consistent with all programs and policies contained in the LCP and General Plan for the City.

5. Hold Harmless: The Applicant, as a condition of approval, hereby agrees to defend, indemnify, and hold harmless the City, its agents, officers, and employees, from any claim, action, or proceeding against the City as a result of the action or inaction by the City, or from any claim to attack, set aside, void, or annul this approval by the City of the applicant's project; or applicant’s failure to comply with conditions of approval. Applicant understands and acknowledges the City is under no obligation to defend any legal actions challenging the City’s actions with respect to the project. This condition and agreement shall be binding on all successors and assigns.

6. Compliance with Conditions: The Applicant’s establishment of the use or development of the subject property constitutes acknowledgement and acceptance of all Conditions of Approval.

Compliance with and execution of all conditions listed hereon shall be required prior to obtaining final building inspection clearance. Deviation from this requirement shall be permitted only by written consent of the Director or as authorized by the Planning Commission.

Failure to comply with any of these conditions shall render this entitlement, at the discretion of the Director, null and void. Continuation of the use without a valid entitlement will constitute a violation of the MBMC and is a misdemeanor.

7. Compliance with Morro Bay Standards: This project shall meet all applicable requirements under the MBMC and shall be consistent with all programs and policies contained in the LCP and General Plan of the City.

8. Archaeology: In the event of the unforeseen encounter of subsurface materials suspected to be of an archaeological or paleontological nature, all grading or excavation shall immediately cease in the immediate area, and the find should be left untouched until a qualified professional archaeologist or paleontologist, whichever is appropriate, is contacted and called in to evaluate and make recommendations as to disposition, mitigation and/or salvage. The developer shall be liable for costs associated with the professional investigation.

9. Conditions of Approval: The Findings and Conditions of Approval shall be included as a fullsize sheet in the Building Plans.

Building Division Conditions
All construction will conform to the 2025 California Building Code (CBC), 2025 California Residential Code (CRC), 2025 California Fire Code (IFC), 2025 California Mechanical Code (CMC), 2025 California Plumbing Code (CPC), 2025 California Electrical Code (CEC), 2025 California Energy Code, 2025 California Green Code (CGBC), Title 14 and 17 of the Morro Bay Municipal Code.
(Code adoption dates are subject to change. The code adoption year is established by the application date of plans submitted to the Building Division for plan review.) Prior to issuance of a construction permit:

10. Building permit plans shall be submitted by a California licensed architect or engineer when required by the Business & Professions Code, except when otherwise approved by the Chief Building Official.

11. The owner shall designate on the building permit application a registered design professional who shall act as the Registered Design Professional in Responsible Charge. The Registered Design Professional in Responsible Charge shall be responsible for reviewing and coordinating submittal documents prepared by others including phased and staggered submittal items, for compatibility with design of the building.

12. The owner shall comply with the City’s Structural Observation Program. The owner shall employ the engineer or architect responsible for the structural design, or another engineer or architect designated by the engineer of record or architect responsible for the structural design, to perform structural observation as defined in Section 220. Observed deficiencies shall be reported in writing to the owner’s representative, special inspector, contractor and the building official. The structural observer shall submit to the building official a written statement that the site visits have been made and identify any reported deficiencies that, to the best of the structural observer’s knowledge, have not been resolved.

13. The owner shall comply with the City’s Special Inspection Program. Special inspections will be required by Section 1704 of the California Building Code. All Special Inspectors shall first be approved by the Building Official to work in the jurisdiction. All field reports shall be provided to the City Building Inspector when requested at specified increments in order for the construction to proceed. All final reports from Special Inspectors shall be provided to the Building Official when they are complete and prior to final inspection.

14. A soils investigation performed by a qualified professional shall be required for this project. All cut and fill slopes shall be provided with subsurface drainage as necessary for stability; details shall be provided. Alternatively, submit a completed City of Morro Bay soils report waiver request.

15. Mitigation measures for naturally occurring asbestos require approval from San Luis Obispo County Air Pollution Control District.

16. BUILDING PERMIT APPLICATION. To apply for building permits, submit three (3) sets of construction plans, fire sprinkler plans, if applicable, and supplemental documents to the Building Division.

17. The Title sheet of the plans shall include, but not be limited to:
a. Street address, lot, block, track and Assessor Parcel Number. b. Occupancy Classification(s)
c. Construction Type
d. Maximum Height of the building allowed and proposed. e. Floor area of the building(s).
f. Fire sprinklers proposed or existing
g. Minimum building setback allowed and proposed
Conditions to be met during construction:

18. SITE MAINTENANCE. During construction, the site shall be maintained so as to not infringe on neighboring property, such as debris and dust. A storm water management plan shall be maintained throughout the duration of the project. The storm water management measures such as fiber rolls, silt fencing, etc. will be enforced by City staff by random site visits.

19. ARCHAEOLOGICAL MATERIALS. In the event unforeseen archaeological resources are unearthed during any construction activities, all grading and or excavation shall cease in the immediate area and the find left untouched. The Building Official shall be notified so that the extent and location of discovered materials may be recorded by a qualified archaeologist, Native American, or paleontologist, whichever is appropriate. The qualified professional shall evaluate the find and make reservations related to the preservation or disposition of artifacts in accordance with applicable laws and ordinances. If discovered archaeological resources are found to include human remains, or in any other case when human remains are discovered during construction, the Building Official shall notify to county coroner. If human remains are found to be of ancient age and of archaeological and spiritual significance, the Building Official shall notify the Native American Heritage Commission. The developer shall be liable for costs associated with the professional investigation.

20. FOUNDATION SETBACK VERIFICATION. Prior to the placement of concrete and upon completed form installation, a licensed surveyor is required to measure and record the distance from the proposed foundation walls to the established lot lines. The contractor shall submit these findings in letter format to the building inspector upon the request for a foundation inspection. Letter shall specify findings of front, sides and rear yard setbacks as defined by Title 17 of the MBMC. The Building Official shall have discretion on a case-by-case basis for some lot types.

21. BUILDING HEIGHT VERIFICATION. Prior to roof sheathing or shear wall inspection, a licensed surveyor is required to measure and record the height of the structure. The contractor shall submit this finding in letter format to the building inspector upon request for roof sheathing/shear wall inspection. Letter shall specify the recorded height of structure as defined in Title 17 of the MBMC. The Building Official shall have discretion on a case-by-case basis for some site-specific projects.

22. EXISTING BUILDINGS. Where windows are required to provide emergency escape and rescue openings, replacement windows shall comply with the maximum sill height requirements of Section R310.2.2 and the minimum opening area requirements of Section R310.2.1 of the 2022 California Building Code.

Conditions to be met prior to final inspection and issuance of certificate of occupancy:

23. Prior to building division final approval all required inspections from the other various divisions must have been completed and verified by a city inspector. All required final inspection approvals must be obtained from the various departments and documented on the permit card. This permit card shall then be turned into the building division for scheduling of the final building inspection.

24. Any as-built drawings that were required by the building inspector or plans examiner must be submitted for approval prior to the request for final inspection.

25. If structural observations were required, the final structural observation report shall be submitted to the building division prior to issuance of the certificate of occupancy or final inspection approval.

26. If special inspections were required, the final special inspection report shall be submitted to the building division prior to the issuance of the certificate of occupancy or final inspection approval.

27. Final soils summary report from the geotechnical representative indicating compliance with the required conditions set forth in the soils report.

28. Final T-24 energy reports (Certificates of Installation).

Public Works Conditions

29. Stormwater Management: All projects must complete the “Performance Requirement Determination Form” and identify all proposed new and replaced impervious surfaces to determine applicable performance requirements. Additional guidance can be found in the

City’s Stormwater Management EZ Manual:
https://www.morrobayca.gov/DocumentCenter/View/11114/MB-Stormwater-ManagementEZ-manual

30. Frontage Improvements: The installation of frontage improvements is required. Show the installation of a City standard driveway approach per detail B-6, sidewalk per detail B-5, curb and gutter per B-1 and street tree (one per every 50’ frontage). Show and label 18” minimum to 10’ maximum asphalt cut and pave back at all portions of concrete curb and gutter to be installed. Add note that asphalt cut and pave back will be needed to be replaced at nearest clean edge extending to competent street material, per Public Works inspector’s recommendations. (MBMC 14.44.020)

31. ADA: All nonconforming sidewalks must be replaced or repaired to comply with current ADA slope requirements. Show and label existing grades and proposed grades to comply with ADA requirements.

32. Construction Details: Add construction details of proposed installations.

33. Sewer Lateral: Perform a video inspection of the sewer lateral from the clean-out to the sewer main and submit it to Public Works (via portal upload). The lateral must be repaired or replaced as necessary to prevent inflow or infiltration, and all required work must be shown on the approved plans. Refer to the City’s PSL Video Inspection Requirements for specific details on video content and standards, https://www.morrobay.ca.us/DocumentCenter/View/13500/Private-Sewer-Line-Video-Requirements. (MBMC §14.07.030)

34. Water Meter: Indicate on plans location and sizes of both water meter and water lateral.

Coordinate sizes with Fire Sprinkler plans. Separate residential, commercial or industrial occupancies, if situated on the same premises and not under a common roof, shall have separate service connections and meters. (MBMC 13.04.140 & 14.04.010.C)

35. Fire Line: For non-residential structures only, label all new or existing water backflow preventers for fire water systems, irrigation systems (on a dedicated water meter), systems which may change in character of use (commercial rentals, etc.), gray water systems, or any plumbing system which has cross-connections or the ability to allow water of deteriorated sanitary quality to enter the public water supply. Add note to plan that device is required to be an approved domestic water backflow prevention device. (MBMC 13.08.040)

36. County Cross-Connection Inspection: For non-residential structures only, add note to plan that contractor is required to contact the County Cross-Connection Control Program at (805)781- 5544 to confirm prevention device location and completed test form. The contractor must provide the city a copy of the rest results. (MBMC 13.08.040)

37. Grading and Drainage: Show and label existing and proposed contours, drainage patterns, spot elevations, finish floor elevation, roof downspouts, and all drainage pipes and structures draining to City right of way on the plans. All runoff shall be directed to vegetated areas prior to overflowing into City right of way. (CBC 107.2.1/CRC R106.1.1)

38. Historic Drainage: Design should maintain the historic drainage patterns, with no concentrated flow onto adjacent private property. If drainage cannot be easily conveyed to landscape and

then City ROW, at historic discharge location, provide for a "level spreader" to result in sheet flow discharge.

39. Utilities: Show and label all existing and proposed locations of the sewer lateral, water service, water mainline, sewer mainlines, and gas lines on the building plans. Include sizes where appropriate. Note the location of all overhead utilities. See uploaded utility maps.

40. Drainage System: All drainage basins and other physical drainage system elements (i.e. bubblers, area drains, or trench drains) are not allowed within the City’s right of way.

41. Easements: Identify and label all easements. Provide preliminary title report to verify all easements and property boundaries.

42. Erosion and Sediment Inspection: Add note to contact Public Works Inspector (Matt Bishop) at (805)772-6232 prior to starting any onsite work for erosion and sediment control inspection.

43. Add the following Notes to the Plans:

1. Any drainage to City facilities (curb, berm, street, sewer, water, or other public improvements) from construction shall be repaired at no cost to the City of Morro Bay.

2. The designer and contractor are responsible for verifying all utility locations and connections.

3. No work or use of the City right-of-way or easements is allowed without an Encroachment Permit. Permit information: https://www.morro-bay.ca.us/197/PublicWorks a. Driveway requires a standard encroachment permit and must meet Detail B9. b. Sewer encroachment permit required for sewer lateral work in right of way or easements.
c. A water encroachment permit and water meter application shall be required for new water meter installations within the City right-of-way. d. Dumpsters must be on private property unless approved under a temporary encroachment permit.

Planning Conditions

44. Construction Hours: Construction or Repairing of Buildings, the erection (including excavating), demolition, alteration or repair of any building or general land grading and contour activity using equipment in such a manner as to be plainly audible at a distance of fifty feet from the building other than between the hours of seven a.m. and seven p.m. on weekdays and eight a.m. and seven p.m. on weekends except in case of urgent necessity in the interest of public health and safety, and then only with a permit from the Community Development Department, which permit may be granted for a period not to exceed three days or less while the emergency continues and which permit may be renewed for a period of three days or less while the emergency continues (MBMC Section 9.28.030.I).

45. Dust Control: Prior to issuance of a grading permit, a method of control to prevent dust and wind blow earth problems shall be submitted for review and approval by the Building Official.

46. Architecture: Building colors and materials shall be as shown on plans approved by the

Planning Commission and specifically called out on the plans submitted for a Building Permit to the satisfaction of the Community Development Director.

47. Boundaries and Setbacks: The property owner is responsible for verification of lot boundaries.

Prior to requesting foundation inspection, a licensed land surveyor shall verify lot boundaries and building setbacks to the satisfaction of the Community Development Director. A copy of the surveyor’s Form Certification based on a boundary survey shall be submitted with the request for foundation inspection.

48. Structure Height Verification: Prior to foundation inspection, a licensed land surveyor shall measure and inspect the forms and submit a letter to the Community Development Director certifying that the tops of the forms are in compliance with the finish floor elevations as shown on approved plans. Prior to either roof nail or framing inspection, a licensed surveyor shall submit a letter to the building inspector certifying that the height of the structures is in accordance with the approved plans and complies with the maximum height requirements as approved for this project.

49. Inspection: The Applicant shall comply with all City conditions of approval and obtain final inspection clearance from the Planning Division at the necessary time in order to ensure all conditions have been met.

50. Conditions of Approval on Building Plans: Prior to the issuance of a Building Permit, the final Conditions of Approval for both the Conditional Use Permit and the Coastal Development Permit shall be attached to the set of approved plans. The sheet containing Conditions of Approval shall be the same size as other plan sheets and shall be the last sheet in the set of Building Plans.

51. Exterior Lighting and Illumination Plan: Exterior lighting and illumination shall comply with MBMC Section 17.14.090.B.

52. Walls and Fences: Walls and fences shall be maintained in a safe, neat, and orderly condition at all times.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on this 9th day of June 2026 on the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:

CARLA WIXOM, Mayor
ATTEST

DANA SWANSON, City Clerk

City of Morro Bay
Fire Department
Daniel McCrain, Fire Chief
715 Harbor St.

Morro Bay, CA 93442
Date: 05/21/2026
Subject: Fire Department response to the grounds for appeal statements regarding Bonita Street Fire Station project.

1. Failure to evaluate a feasible, lower-impact alternative. a. Department staff worked with the architectural firm to evaluate three design options, remodel of the existing building, a new construction one-story building, and a new construction two-story building. There were multiple discussions about programming needs, daily use, zoning requirements, etc. These three options were presented to the MBCC and the benefits and drawbacks of each option were discussed. Ultimately a twostory option was approved because it fully met the needs of the department.

Additionally the final design of the two-story station was altered to reduce visual impacts to the neighboring house.

2. Erroneous finding that no less detrimental alternative exists. a. Yes, it is possible to reduce building height and mass but this would be to the detriment of operational needs. There is no provision in the zoning codes or municipal code to protect private property viewsheds. Based on concerns received from the neighbor the design of the building was altered in an attempt to preserve the view and address privacy concerns. The tandem parking that was approved by the planning commission was an alternate design to preserve the on street parking. The original design proposed three parking spaces in front of the structure within the required front setback. After discussing design options for parking with the planning department the design with tandem parking was determined to be the least impactful to the neighborhood.

3. Improper reliance on self-imposed constraints.
a. The Morro Bay zoning codes, building and design standards and municipal codes are publicly accepted design guidelines that are utilized to ensure all development in the city is appropriate for the area. The city is not exempt from these standards. The design options created in collaboration with the architect firm were intended to comply with these requirements. The variance requested for parking within the front setback was a result of collaboration with the planning department to maintain the street parking spot available to the public. The existence of the apparatus garage within the setbacks are existing non-conforming and are not part of this project. The physical characteristics of this parcel do limit the options for parking and this factor would only be compounded with a larger one-story design ultimately requiring staff parking to be placed on the street taking up public parking in the neighborhood further impacting the residents.

4. Inadequate consideration of cost and fiscal efficiency.

www.morro-bay.ca.us | Bus: (805)772-6242 | https://www.facebook.com/CityofMorroBay a. Yes the two-story station costs more to build than the one-story option. As stated before, the one-story building would not be large enough to meet the current or anticipated needs of the department. Building a station that is too small to start with sets the city up for future renovation expenses. Construction costs continue to rise annually, and the renovation costs could easily exceed the difference in construction costs today. Per a report on construction inflation and producer price index Long-term construction cost inflation is normally about double consumer price index (CPI).

In times of high construction spending growth, nonresidential construction annual inflation averages about 8%. Residential has gone as high as 10%.

Nonresidential buildings inflation (prior to 2021-2022) averaged 3.7% since the recession bottom in 2011. Six-year 2014-2019 average is 4.4%.In 2022 it hit 12.8%, the highest since 1980-81. https://edzarenski.com/2025/02/21/construction-inflation-2025-2-21- 25/#:~:text=All%20of%20these%20long%20term,for%208%20years%202013%2D2020.

5. Failure to ensure neighborhood compatibility.
a. This fire station existed in this neighborhood since before the incorporation of the city and preceded most of the buildings in this neighborhood. Although it is not staffed daily it is used for department operations currently. Department staff worked closely with the architectural firm to ensure the design fit in with the surrounding neighborhood including site visits by the architect team. The approved design is similar in size and appearance to many houses in the neighborhood including the house next door. The design was altered to address complaints from the next-door neighbor regarding obstruction of their view and privacy concerns. These changes included moving the front of the building back from Bonita Street to 25’ 1” from the existing 15’4.5” to assist in maintaining the view to the North. We also changed the second story floor plan to allow for removing one window facing the house to the east to address privacy concerns. The discussion about parking deficiencies related to tandem parking should not impact neighboring residents as these would be used by staff that work 24- and 48- hour shifts and prevents the need for staff to occupy a street parking spot in the neighborhood. The smaller footprint of the two-story building compared to that of a single-story option that extends into the required setbacks provides greater opportunity for off street staff parking.

6. Incomplete consideration of relevant information.
a. The McMullen Company report provided by Mrs. Nagash was submitted to the planning commission and the points listed to consider were addressed in a staff report titled “Response to McMullen Company Report” that was also submitted to the planning commission. The response to the four main points in the McMullen Company report are as follows;

6.1 Building earthquake resiliency and ability for personnel and apparatus to operate postearthquake in an older existing apparatus bay and two-story crew quarters.

The design of the proposed two-story living quarters conforms to all applicable design and safety standards required for this project including current building codes. The apparatus bay

www.morro-bay.ca.us | Bus: (805)772-6242 | https://www.facebook.com/CityofMorroBay was rebuilt in 2007 as part of a phased approach to recommission this fire station. The economic downturn of 2008 stalled this project and new living quarters were not built. The apparatus bay has been in use for fire department operations regularly in various capacities since this time. At the time of construction, the apparatus bay met all building code requirements in place with the intent this garage would be part of an active fire station serving North Morro Bay for 30-50 years. The existing apparatus bay does not require structural modifications and currently operates as a functioning fire department apparatus bay.

6.2 Turnout Time of personnel to meet the desired 1:30 (min:sec) Morro Bay goal and NFPA standard of one-minute.

NFPA Standards are industry guidelines and best practices for ideal performance. Some NFPA standards are adopted and are required to comply with such as NFPA 13 fire sprinkler standards.

Others are guidelines and performance standards that few departments are fully able to meet due to local realities. Factors such as city budgets, population density, physical limitations, etc. impact a department’s ability to meet these operational standards. The reality is purchasing a different parcel to allow for a one-story fire station that is large enough to meet the operational needs of the department is not within the capacity of current city finances.

Currently fire apparatus respond from the Harbor Street Fire Station to North Morro Bay. This station is also a two-story station with sleeping quarters upstairs and offices on the first floor.

During business hours the personnel are primarily downstairs in the offices or apparatus bay.

While this two-story design does slightly impact the time it takes personnel to get to the engine it is factored into the response time standard for Morro Bay Fire. We conducted an experiment and determined it took department personnel an average of 18 seconds to walk downstairs from being seated in the living room to the apparatus bay of the Harbor Street station. Having an operational fire station in this location will provide a much faster response to the residents in North Morro Bay than waiting for an engine to respond from the Harbor Street Station. The driving time from the Headquarters Fire Station located at 715 Harbor Street to the Bonita Street Fire station is approximately 6 minutes depending on traffic. While station design does trend toward one story designs, the decision to build a two-story station is typically driven by the size of the available plot rather than the preference for the design. In areas where land is limited or expensive two-story designs tend to be more common.

6.3 Rear yard setback of the existing apparatus bay that exceeds the Morro Bay standard and the encroachment into the neighbor on La Jolla Street view.

The rear yard setback of the apparatus bay is considered existing non-conforming and met the requirements in place at the time of construction. The apparatus bay is a standalone structure that is not part of the proposed construction project. The scope of this project does not include altering the apparatus bay as the current design meets the requirements of the department and is functioning as intended. There are no plans to alter the existing apparatus bay except for exterior paint to match the new structure.

According to the As-Built drawing submitted with this application, all three adjacent properties have structures within the currently required 10-foot setback from the

www.morro-bay.ca.us | Bus: (805)772-6242 | https://www.facebook.com/CityofMorroBay property boundary of this project. The City of Morro Bay does not have an ordinance or design standard to protect private property views.

6.4 A one-story building that could be expanded above Option C with a variance producing a more effective station with direct access to the apparatus bay, and roof line that could better fit into the neighborhood.

Building a one-story option was evaluated and considered for this project. While it would meet the goal of providing a location for fire services in North Morro Bay, this design option did not meet the operational and functional needs of the department. When constructing a fire station, we do plan for a facility that will meet the needs of the organization for the next 30-50 years.

The one-story option did not provide sufficient space for the needs of today let alone as the department needs evolve. Personnel need adequate office space to perform the numerous duties assigned to each member as well as an area to eat and sleep as they are on duty for 48- hour shifts. Initially, the intent is to staff this station with a two-person engine company yearround. This staffing will increase to three personnel in the summer with the addition of Seasonal Firefighters and ultimately year-round as city finances allow the addition of positions. The proposed option also allows for a shared office space for Morro Bay Police to use as a substation in North Morro Bay for report writing if they desire at the request of the Morro Bay City Council. The one-story option was determined to be too small to meet today’s needs let alone any additional needs in the future.

As far as fit in the neighborhood, the architect looked at the existing buildings on Bonita Street including multiple two-story buildings and designed this building in a similar aesthetic style to the neighborhood including the two-story house next door to the East and two properties down to the West (see pictures below). While the city does not have a requirement to protect private property views, in an attempt to be sensitive to the concerns raised by a neighbor, we worked with the architect to modify the floor plan of the second story to address concerns raised regarding privacy and maintaining their view. Altering the floor plan on the second story allowed us to limit the number of exterior windows facing the neighbor’s house. The existing setback from the front of the existing building to Bonita Street is 15’4.5” and the conceptual design presented to city council had a front setback of 20’ 0”. By altering the floor plan, we moved the front setback to 25’ 1” from Bonita Street to help maintain a view to the north. From the rear of the proposed structure the setback is 12’ 10” this is 2’ 10” in excess of the required 10-foot setback from the property line.

www.morro-bay.ca.us | Bus: (805)772-6242 | https://www.facebook.com/CityofMorroBay Daniel McCrain
Fire Chief
Morro Bay Fire Department

www.morro-bay.ca.us | Bus: (805)772-6242 | https://www.facebook.com/CityofMorroBay

Prepared By: EC Dept Review: EC
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 3, 2026 FROM: Emily Conrad, Finance Director
John Craig, City Manager
SUBJECT: Resolutions Approving Fiscal Year (FY) 2026-27 Operating and Capital Budgets; Investment Policy; and FY 2026-27 GANN Appropriations Limit

RECOMMENDED ACTION

1. Adopt Resolution No. 32-26 adopting the FY 2026-27 Operating and Capital Budgets; and

2. Adopt Resolution No. 33-26 readopting the City’s Investment Policy; and

3. Adopt Resolution No. 34-26 setting the FY 2026-27 GANN Appropriations Limit at $18,802,003.

FISCAL IMPACT
The total Citywide revenue budget for FY 2026-27 is $58.4 million, and the total citywide expenditure budget is $52.4 million. After accounting for transfers between funds, the total revenue anticipated is $52.9 million across 28 City funds. The five major funds, General Fund, Measure Q/E Fund, Water Operating Fund, Sewer Operating Fund, and Harbor Operating Fund, are expected to generate $48.2 million, or 91% of total revenue. Excluding transfers between funds, the total new expenditure anticipated is $46.9 million across 23 City funds. Similar to revenues, the five major funds represent the vast majority of City expenditures at $42.2 million, or 90% of total expenditures. The citywide budget anticipates a surplus of $9.0 million, largely in the Water and Sewer Operating Funds. The surplus in those funds will be utilized in the near term for capital projects and debt service obligations.

BACKGROUND
On April 21, 2026, there was a Special Joint Meeting of the City Council and Citizens Finance Advisory Committee (CFAC) at which the FY 2026-27 draft Measure Q/E budget was presented and discussed. At that time, there were no recommended changes made by either body. The regularly scheduled May CFAC meeting had to be cancelled due to lack of quorum, so there is no feedback from that meeting to report. The City Council conducted a budget study session on May 26, 2026.

During the discussion, the Council reviewed the FY 2026-27 Proposed Operating and Capital Budget and directed specific changes to bring the General Fund budget into structural balance (operating revenues equal or exceed operating expenditures).

DISCUSSION
Budget Changes: City Council made several recommended changes to the FY 2026-27 Proposed Budget during the budget study session on May 26, 2026, largely to reduce the budget gap in the General Fund and Measure Q/E Fund. The changes impact four different funds: General Fund, AGENDA NO: 8a
MEETING DATE: June 9, 2026

Measure Q/E Fund, Governmental Capital Improvement Fund, and Economic Development Fund.

All changes were implemented and are detailed in Attachment 1, Exhibit 1, and are summarized below.

Budgeted expenditures for the Morro Elementary School site acquisition have been removed while due diligence continues under the purchase and sale agreement with the San Luis Coastal Unified School District. The specific financing details are still being determined and will be addressed once the sale is finalized, at which point staff will return with an expenditure and financing budget amendment.
 Remove:
o Financing for Morro Elementary School Site acquisition ($5.3M Gov’t Cap Imprv Fund) o Cost for Morro Elementary School Site acquisition ($5.3M Gov’t Cap Imprv Fund) o Estimated debt service for Morro El School Site acquisition financing ($664,221 Gen Fund) o Assistant to the City Manager position ($148,577 Gen Fund & Econ Dev Fund) o Part-time/temporary Homeless Outreach Case Manager position ($54,411 Gen Fund)  Reduce:
o Measure Q/E Annual Pavement Mgmt Program funding ($600,000 Measure Q/E Fund) o Annual Pavement Mgmt Program project rev budget ($600,000 Gov’t Cap Imprv Fund) o Annual Pavement Mgmt Program project exp budget ($600,000 Gov’t Cap Imprv Fund)  Increase:
o Sales & Use Tax (to +2% over FY 2025-26 budget) ($20,219 Gen Fund) o Transient Occupancy Tax (to +2% over FY 2025-26 budget) ($81,800 Gen Fund) o Support Services Tech from 0.75 FTE (¾ time) to 1.0 FTE (full-time) ($26,027 Gen Fund) In addition to changes directed by City Council, staff identified and made a few corrections, also detailed in Exhibit 1 of Attachment 1. The changes impact four different funds: Sewer Operating Fund, Affordable Housing In-Lieu Fund, General Fund, and Harbor Capital Improvement Fund. The changes are as follows:
 Remove:
o Rental Income for concrete plant due to no tenant ($20,000 Sewer Operating Fund)  Reduce:
o Cost of Housing Element Update to year one cost only ($135,000 Affordable Housing InLieu Fund). (Additional funding will be required in FY 27-28 to complete the State-mandated Housing Element update.)
 Increase:
o Vacancy Factor to 3%, consistent with prior year ($25,659 Gen Fund) o North T-Pier rev budget consistent with federal grant award ($1.2M Harbor Cap Imprv) o North T-Pier exp budget consistent with federal grant award ($1.2M Harbor Cap Imprv) These changes result in an overall revenue decrease of $4.6 million and overall expenditure decrease of $6.3 million, as listed in the following tables (Table 1 and Table 2).