Agenda packet, regular meeting — Morro Bay City Council, June 23, 2026 (part 1 of 2)

CITY OF MORRO BAY
City Council Regular Meeting Agenda

Tuesday, June 23, 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. June 9, 2026 - Special Closed Session Meeting 6

6.b Approval of Resolution No. 35-26 Authorizing the Police Department to Accept a Grant Award from the California Accreditation for Public Safety Program and allow the City Manager to Execute all Necessary Documents to Accept, 8

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Implement, and Carry Out the Terms of the Grant
(Police Department)
Recommended Action
Adopt Resolution No. 35-26 to authorize staff to accept award of $8,100 grant funds for the purpose of enhancing the Morro Bay Police Department’s impaired-driving enforcement, training, and public-education efforts.

6.c Approval of SB-1 Funding Project List for Fiscal Year (FY) 2026/27 Pavement Management Plan Project
11 (Public Works Department)
Recommended Action
Adopt Resolution No. 36-26 approving the FY 2026-27 project list for use of Senate Bill 1 (Road Repair and Accountability Act of 2017) Road Maintenance and Rehabilitation Account (RMRA) funds.

6.d Notice of Completion for Coleman Park Phase 1 16
(Public Works Department)
Recommended Action

1. Accept the work as performed by J. Bruce Kies, Contractor; and Authorize the City Engineer to execute and record a Notice of Completion for the project.

2. 6.e Notice of Completion for Morro Creek Bank Emergency Stabilization Project 18 (Public Works Department)
Recommended Action
Accept the work as performed by David Crye General Engineering Contractor, Inc.; and

1. Authorize the City Engineer to execute and record a Notice of Completion for the project.

2. 6.f Adopt Resolution No. 37-26 Revising the Terms of the City's Reimbursement Agreement with the California Governor's Office of Emergency Services updating Fire Department Job Classifications
20 (Fire Department)
Recommended Action
Adopt Resolution No. 37-26 rescinding and replacing Resolution No. 44-24 and revising the terms of the City’s reimbursement agreement updating the Fire Department job classifications.

7. PUBLIC HEARING ITEMS

7.a Resolution Approving Development Impact Fee Study and Nexus Report, Establishing Development Impact Fees, and Adopting the FY 2026-27 Master Fee Schedule
24 (Community Development Department / Finance Department) Recommended Action

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Adopt Resolution No. 38-26 approving the Development Impact Fee Study and Nexus Report; establishing Development Impact Fees for the City of Morro Bay; and adopting the FY 2026-27 Master Fee Schedule.

7.b Adopt Resolution Nos. 39-26 and 40-26 Approving 2025 Urban Water Management Plan and Water Shortage Contingency Plan
187
(Public Works Department)
Recommended Action
Conduct a public hearing to receive input on the 2025 Urban Water Management Plan and Water Shortage Contingency Plan.

1. Adopt Resolution No. 39-26 approving the 2025 Urban Water Management Plan and authorizing its submittal to the Department of Water Resources.

2. Adopt Resolution No. 40-26 approving the 2025 Water Shortage Contingency Plan and authorizing its submittal to the Department of Water Resources.

3. 7.c Adopt Resolution No. 41-26 Annexing Lots 1 through 5 of Tract 2859 (APN 065-386-015) into the Cloisters Landscaping and Lighting Maintenance Assessment District (LLMAD) and Directing the Levy of the Annual Assessment
195
(Public Works Department)
Recommended Action
Adopt Resolution No. 41-26 annexing Lots 1 through 5 of Tract 2859 (APN 065-386-015) into the Cloisters Landscaping and Lighting Maintenance Assessment District (LLMAD) and directing the levy of the annual assessment.

7.d Adoption of Resolution No. 42-26 Directing the Levy of the Annual Assessment for the North Point Natural Area Landscaping and Lighting Maintenance Assessment District
206
(Public Works Department)
Recommended Action
Conduct the public hearing and approve the levy of the annual assessment for the North Point Natural Area Landscaping and Lighting Maintenance District (LLMAD) by adopting Resolution No. 42-26.

8. BUSINESS ITEMS

8.a Receive Due Diligence Report and Consider Recommendation to Proceed with Closing Under the Purchase and Sale Agreement with the Cayucos Sanitary District for the Jointly Owned Wastewater Treatment Plant Property Located at 160/180 Atascadero Road and
210
1700 Embarcadero
(City Manager / City Attorney)
Recommended Action
Authorize the City Manager to proceed with closing under the Purchase and Sale Agreement (Agreement) between the City of Morro Bay (City) and

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Cayucos Sanitary District (CSD) for the purchase by the City of the CSD portion of the jointly owned Former Wastewater Treatment Plant Property (WWTP) located at 160/180 Atascadero Road and 1700 Embarcadero (Property) and other jointly owned assets and take such other actions and execute documents necessary to complete the acquisition, subject to review and approval by the City Attorney as to form and legal effect.

9. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS

10. ADJOURNMENT
The next Regular Meeting will be held on July 28, 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.

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1 MINUTES - MORRO BAY CITY COUNCIL

CLOSED SESSION MEETING
June 9, 2026, 4:30 p.m.

City Hall Conference Room
595 Harbor Street, 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
Interim Public Works Director Damaris Hanson
_____________________________________________________________________

1. ESTABLISH QUORUM AND CALL TO ORDER
Mayor Wixom called the meeting to order at 4:30 p.m. with all members present.

2. CLOSED SESSION PUBLIC COMMENT
Mayor Wixom opened public comment for items on the agenda; seeing none, the public comment period was closed.

3. SUMMARY OF CLOSED SESSION ITEMS

4. THE COUNCIL WILL CONVENE IN CLOSED SESSION

4.a CONFERENCE WITH REAL PROPERTY NEGOTIATOR - GOVERNMENT CODE SECTION 54956.8
Property: 231 Atascadero Road
Property Negotiator: Interested Parties
Agency Negotiators: Airlin Singewald, Community Development Director; John Craig, City Manager; Brian Stack, City Attorney
Negotiations: Price and Terms of Payment

4.b CONFERENCE WITH LEGAL COUNSEL - POTENTIAL LITIGATION Significant exposure to litigation pursuant to Government Code Section 54956.9(d)(2): (one potential case)

5. RECONVENE IN OPEN SESSION

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2 The City Council reconvened in Open Session. The Council did not take any reportable action in accordance with the Brown Act.

6. ADJOURNMENT
The meeting adjourned at 5:20 p.m.

Respectfully submitted,
/s/ Dana Swanson, City Clerk

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Prepared By: AW Dept Review: AW
City Manager Review: JC City Attorney Review: BS
City Manager Review: City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 10, 2026 FROM: Amy Watkins, Chief of Police
SUBJECT: Approval of Resolution No. 35-26 Authorizing the Police Department to Accept a Grant Award from the California Accreditation for Public Safety Program and allow the City Manager to Execute all Necessary Documents to Accept, Implement, and Carry Out the Terms of the Grant

RECOMMENDED ACTION
Adopt Resolution No. 35-26 to authorize staff to accept award of $8,100 grant funds for the purpose of enhancing the Morro Bay Police Department’s impaired-driving enforcement, training, and publiceducation efforts.

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

BACKGROUND/ DISCUSSION
The Morro Bay Police Department has been awarded grant funding to support participation in the California Accreditation for Public Safety Program (CAPS). Staff recommends that the City Council accept the grant award and authorize its use for accreditation-related expenses.

The California Accreditation for Public Safety Program (CAPS) is a voluntary, standards-based accreditation process administered by the California Police Chiefs Association (CPCA). The program recognizes public safety agencies that demonstrate excellence in ethics, operational effectiveness, community service, transparency, accountability, and professional standards.

While CAPS complements national and international accreditation programs, it is specifically designed to address California's unique legal requirements, diverse public safety environments, and community expectations. The program provides a framework for agencies to review policies, procedures, training, and operational practices to ensure they meet contemporary professional standards and best practices.

To ensure fairness, transparency, and independence, the accreditation process is overseen by the California Accreditation Commission for Public Safety, an independent body responsible for reviewing and approving accreditation awards, maintaining program integrity, advising on policy and procedural improvements, and providing governance oversight. This structure helps ensure that accreditation decisions are objective, consistent, and free from political or organizational influence.

Accreditation is a proven and constructive process that helps public safety agencies strengthen their performance and improve service delivery. Through the adoption and maintenance of established professional standards, accreditation promotes transparency, accountability, operational AGENDA NO: 6.b
MEETING DATE: June 23, 2026

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consistency, and continuous improvement. Participation in CAPS demonstrates a commitment to excellence in leadership, preparedness, officer safety, and public trust.

The benefits of accreditation include:
• Enhancing professional credibility through independent recognition that the agency meets and maintains rigorous standards.
• Improving preparedness by establishing and maintaining effective policies, training programs, and emergency response protocols.
• Supporting informed decision-making through the use of data-driven practices, performance measurement, and organizational assessment.
• Positioning the agency for the future by creating a resilient, adaptable, and professionally recognized organization capable of meeting evolving public safety challenges.

For the Morro Bay Police Department, participation in CAPS aligns with the City's commitment to organizational excellence, accountability, transparency, and high-quality public service. Accreditation will provide an opportunity to evaluate current practices, identify areas for improvement, and further strengthen public confidence in the Department's operations.

Acceptance of the grant award will provide financial resources to support the accreditation process and reduce the impact on the City's General Fund while advancing the Department's professional development and continuous improvement goals.

CONCLUSION
Staff recommends the City Council adopt Resolution No. 35-26 authorizing staff to accept award of $8,100 grant funds for the purpose of enhancing the Morro Bay Police Department’s impaired-driving enforcement, training, and public-education efforts.

ATTACHMENT(S)

1. Resolution No. 35-26

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RESOLUTION NO. 35-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA

TO ACCEPT A GRANT AWARD FROM THE CALIFORNIA

ACCREDITATION FOR PUBLIC SAFETY PROGRAM AND ALLOW THE

CITY MANAGER TO EXECUTE ALL NECESSARY DOCUMENTS

TO ACCEPT, IMPLEMENT, AND CARRY OUT THE TERMS OF THE GRANT

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, the California Police Chiefs Association provides grants to local law enforcement to provide financial resources to support the accreditation process and reduce the impact on the City's General Fund while advancing the Department's professional development and continuous improvement goals; and
WHEREAS, the City Council authorizes the City Manager to apply for and receive grant funds for the purpose of supporting the Morro Bay Police Department’s participation in the California Accreditation for Public Safety Program (CAPS); and WHEREAS, if recommended for funding by the California Accreditation for Public Safety Program, the City Council authorizes the City Manager to accept a grant up to eight thousand one hundred dollars ($8,100).

NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Morro Bay, the City Manager is hereby authorized and directed to execute all necessary documents to implement and carry out the terms of the grant.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 23rd day of June 2026, on the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:
_________________________________
CARLA WIXOM, Mayor
ATTEST:
_________________________________________
DANA SWANSON, City Clerk

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Prepared By: NLS Dept Review: DH
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: May 29, 2026 FROM: Nate Stong, P.E. – City Engineer
SUBJECT: Approval of SB-1 Funding Project List for Fiscal Year (FY) 2026-27 Pavement Management Plan Project

RECOMMENDED ACTION
Adopt Resolution No. 36-26 approving the FY 2026-27 project list for use of Senate Bill 1 (Road Repair and Accountability Act of 2017) Road Maintenance and Rehabilitation Account (RMRA) funds.

ALTERNATIVE
The Council could choose not to approve use of Senate Bill 1 (SB-1) funding. The City may lose its ability to receive SB-1 funds from the State if projects have not been identified through a resolution passed by City Council.

FISCAL IMPACT
Funding from multiple sources, including SB-1 funds, for the Annual Pavement Management Project is included in the adopted Budget for FYr 2026-27. The City anticipates approximately $296,214 in revenue from the State due to the continued implementation of SB-1 for the upcoming fiscal year.

No local matching funds are required to receive this year’s SB-1 funding allocation; however, the City must keep in good standing with its commitment with MOE (Maintenance of Effort) over time to qualify for the continued receipt of SB-1 funds. In addition to SB-1 funds, the City Council budgeted $400,000 from Measure Q&E for the FY 2026-27 pavement management project when it adopted the FY 2026- 27 operating and capital budget on June 9, 2026.

BACKGROUND/ DISCUSSION
The Road Repair and Accountability Act of 2017, SB-1, was passed by the State Legislature and signed into law by the Governor in April 2017. The purpose of the bill is to help State and local agencies address transportation funding shortfalls. SB-1 has generated revenue through increases in gas tax, vehicle registration fees, and fees on zero emission vehicles. The tax and fee rate increases were initiated on November 1, 2017, with final implementation of all the rate and fee increases completed in July 2020.

One of the major components of SB-1 is the RMRA, which is the revenue stream set aside for the maintenance and rehabilitation of roadways. SB-1 generates over $5 billion annually at full implementation for the State, $1.5 billion of which will be distributed to local agencies and counties through the RMRA. The City of Morro Bay is projected to receive $296,214 in revenue from the RMRA for FY 2026-27. Revenue has remained steady for the last 2-3 years between $250,000-$300,000 of state funds dedicated to Morro Bay roadway projects.

AGENDA NO: 6.c
MEETING DATE: June 23, 2026

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SB-1 includes accountability and transparency provisions to enable local residents to remain aware of the projects proposed to be funded by SB-1 in their local area. As part of these provisions, it is a requirement for local agencies to adopt project lists before the start of every fiscal year. The project list must include all projects proposed to receive funding from the RMRA. The required list includes a description and the location of each proposed project, a proposed schedule for the project’s completion, and the estimated useful life of the improvement. Per the requirements of SB-1, the list must be approved by the City Council through resolution and sent to the California Transportation Commission (CTC) no later than July 1, 2026, to be eligible for RMRA funding for the current fiscal year.

The primary focus of the RMRA is maintenance of the existing infrastructure within the City’s rightsof-way. Other transportation funding sources, such as Measure Q/E, General Fund, Growth Mitigation, and other grant programs are available for capital expenditures through the normal budget process. Project selection is developed by the Public Works Department utilizing the City’s pavement management system, Street Saver, in coordination with recommendations from Public Works staff and engineering/pavement consultants. Streets that are heavily traveled generally will be prioritized because of the high volume of usage by the public. Critical point management, which a prioritization strategy that targets roads that are at the bottom of one category of maintenance before they fall into another more costly treatment category, is widely used by many jurisdictions and is a factor in Morro Bay’s street selection. These strategies are standard best practices for pavement management and are incorporated to utilize the limited funds on streets that will have the best possible impact on the pavement condition index (PCI) of the City’s collective road network. Additionally, when possible, the City will make efforts to distribute projects equitably geographically in the community.

For the FY 2026-27 pavement management project, the design and bid documents are scheduled to be complete and staff expects to advertise for construction bids in August 2026. The project will include various pavement rehabilitation and preservation methods depending on pavement condition, including digouts/repairs of failed areas and slurry seal or overlay. Construction is expected to begin in October 2026 and be complete by February 2027.

The following project list is proposed for use of SB-1 funds in FY 2026-27 and illustrates the City has sufficient work to justify the SB-1 allocation:

Annual Pavement Management Project (FY 2026-27)
Description:

This project consists of rehabilitating and restoring pavement on several residential/local streets in the City of Morro Bay. SB-1 funds will be used during the construction phase of the project.

Locations:

Various Streets throughout the City, some of which include:

Pacific Street, Shasta Avenue, Driftwood Street, Panorama Drive, Cedar Avenue, Acacia Street, Andros Street, Sicily Street and Blanca Avenue.

Project Costs (includes contingencies)
Design Consultant: $ 343,000
Construction: $ 2,500,000
Project management, testing: $ 250,000
Estimated Project Schedule: Start construction - 10/2026 Complete construction - 2/2027
Estimated Useful Life: 15-20 years (rehabilitation)

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CONCLUSION
In order to meet the SB-1 funding requirements for FY 2026-27, staff will submit to the California Transportation Commission (CTC) the proposed project and adopted City Council resolution once approved. Submittal of this list to the CTC does not preclude the City from making modifications due to changes in circumstances and scope, such as budget, addition and subtraction of streets from final list, and bidding or Council priorities. The final project details will be reported to the CTC in the project completion expenditure report after the project is complete. The obligation by the City is to spend SB1 funds appropriately and to not reduce the amount of general fund expenditures due to the Maintenance of Effort requirements.

ATTACHMENT

1. Resolution No. 36-26

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RESOLUTION NO. 36-26

A RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA
APPROVING THE FISCAL YEAR 2026/27 PROJECT LIST FOR SENATE BILL 1 (ROAD REPAIR AND ACCOUNTABILITY ACT OF 2017) ROAD

MAINTENANCE AND REHABILITATION ACCOUNT FUNDING

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, Senate Bill 1 (SB-1), the Road Repair and Accountability Act of 2017 (Chapter 5, Statutes of 2017) was passed by the Legislature and signed into law by the Governor in April 2017 to address the significant multi-modal transportation funding shortfalls statewide; and
WHEREAS, SB-1 includes accountability and transparency provisions that will ensure the residents of Morro Bay are aware of the projects proposed for funding in our community and which projects have been completed each fiscal year; and
WHEREAS, the City of Morro Bay must adopt by resolution a list of projects proposed to receive fiscal year funding from the Road Maintenance and Rehabilitation Account (RMRA), created by SB-1, which must include a description and the location of each proposed project, a proposed schedule for the project’s completion, and the estimated useful life of the improvement; and
WHEREAS, the City of Morro Bay will receive an estimated $296,214 in funding in Fiscal Year 2026/27 from the RMRA of SB-1; and
WHEREAS, this is the 10th year in which the City of Morro Bay is receiving RMRA funding which will enable the City to continue essential road maintenance and rehabilitation projects, safety improvements, repairing and replacing aging bridges, and increasing access and mobility options for the traveling public that would not have otherwise been possible without SB-1; and WHEREAS, staff has undergone a robust public process to ensure public input into our community’s transportation priorities/the project list, including public meetings with the City of Morro Bay’s Public Works Advisory Board, City Council’s and their review of the capital improvement program and Operating and Capital Budget; and WHEREAS, the City of Morro Bay consulted with Pavement Engineering, Inc. to develop the SB-1 project list to ensure revenues are being used on high-priority and cost-effective projects that also meet the community’s priorities for transportation investment; and WHEREAS, the funding from SB-1 will help the City of Morro Bay maintain and rehabilitate approximately 5.5 centerline miles of roadway segments this fiscal year and additional street segments each year into the future, as SB-1 funds remain available; and WHEREAS, the 2020 California Statewide Local Streets and Roads Needs Assessment found that the City’s streets and roads are in an “at-risk” condition, and this revenue both will help us increase the overall quality of our road system, as well as over the next decade, with additional local funds, may help bring our streets and roads into a better condition; and WHEREAS, the SB-1 project list and overall investment in our local streets and roads infrastructure, with a focus on basic maintenance and safety, and investing in complete streets infrastructure, and using cutting-edge technology, materials and practices, will have significant positive co-benefits statewide.

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

1. The foregoing recitals are true and correct and incorporated herein by reference.

2. The following is the proposed project that will be funded in-part or solely with fiscal year 2026/27 Road Maintenance and Rehabilitation Account revenues:

Annual Pavement Management Project (FY 26/27)
Description:

This project consists of rehabilitating and restoring pavement on several residential/local streets in the City of Morro Bay. SB-1 funds will be used during the construction phase of the project.

Locations:

Various Streets throughout the City, some of which include:

Pacific Street, Shasta Avenue, Driftwood Street, Panorama Drive, Cedar Avenue, Acacia Street, Andros Street, Sicily Street and Blanca Avenue.

3. The City Council has approved funding more than the SB-1 allocation for the Project List in the FY 2026/27 budget, in accordance with City Council goals and priorities.

PASSED AND ADOPTED by the City Council of the City of Morro Bay, California, at a regular meeting held on the 23rd day of June 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:

CARLA WIXOM, Mayor
ATTEST:

DANA SWANSON, City Clerk

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Prepared By: NS Dept Review: DH
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 18, 2026 FROM: Nate Stong, PE, City Engineer
SUBJECT: Notice of Completion for Coleman Park Phase 1

RECOMMENDED ACTION

1. Accept the work as performed by J. Bruce Kies, Contractor; and

2. Authorize the City Engineer to execute and record a Notice of Completion for the project.

BACKGROUND
On February 24, 2026, City Council awarded the contract for the Coleman Park Phase 1 Project to J.

Bruce Kies Contractor in the amount of $724,874.00, and a 10% contingency in the amount of $72,487.00. The work commenced on March 16, 2026, and was substantially completed on June 1, 2026. The remaining work involves three months of landscaping maintenance to ensure plant establishment.

The project included construction of a replacement playground, park amenities, ADA accessible parking, paths, picnic areas, and installation of a new pre-manufactured restroom building. The prefabricated building was purchased separately by the City and is not a part of the construction contract with J. Bruce Kies.

City Council approval is now needed to accept the construction contract work performed by J. Bruce Kies and authorize staff to file a Notice of Completion for the project.

DISCUSSION
The work was substantially completed on June 1, 2026. Five change orders and bid item quantity adjustments were issued for the project totaling $50,358.09. The final pay request and release of 5% retention will be processed following three months of landscaping maintenance as specified in the contract documents. The total construction contract cost is $775,232.09.

ATTACHMENT(S)

1. Notice of Completion
AGENDA NO: 6.d
MEETING DATE: June 23, 2026

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When recorded mail to:

City of Morro Bay – City Engineer
595 Harbor Street
Morro Bay, CA 93442-1957

Page 1 of 1 ends

This document is recorded for the benefit of the City of Morro Bay, a Municipal Corporation, and is exempt from fee per government code sections 6103 and 27383

NOTICE OF CONTRACT COMPLETION
FOR COLEMAN PARK IMPROVEMENTS, PHASE 1
CONTRACT NO. MB2024-PA01
NOTICE IS HEREBY GIVEN by the City of Morro Bay in the County of San Luis Obispo, State of California, as follows:

1. That on the 23 of June 2026, the project hereunder described was considered completed and accepted by the City Council of the City of Morro Bay.

2. That the description of said project is the construction of a park, including site grading; ADA-compliant parking, walkways, and sidewalks; utility and drainage installation; connections for a prefabricated restroom building; playground surfacing and furnishings; seat walls; and related site improvements.

3. That the name of the political subdivision controlling said project, and the owner of the land upon which the project was constructed, is the City of Morro Bay, in the County of San Luis Obispo, State of California, whose address is 595 Harbor Street, Morro Bay, CA 93442.

4. The name of the owner/contractor on said project is J. Bruce Kies Contractor, 163 Via San Miguel, Paso Robles, CA 93446

5. The name of the Surety on the project is Merchants Bonding Company (Mutual).

6. Final Contract Amount: $775,232.09
I certify (or declare) under penalty of perjury under the laws of the State of California that the forgoing is true and correct
Signed: _____________________________________
Jonathan Stong, PE, City Engineer
The undersigned hereby deposes and says:

That she is the City Clerk of the City of Morro Bay, County of San Luis Obispo, California; that she has read the foregoing Notice and knows the contents thereof and that the same is true of her own knowledge.

I declare the foregoing to be true under penalty of perjury.

Executed at Morro Bay, California, this _________ day of _________________, 20___ ________________________________________
Dana Swanson, City Clerk

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Prepared By: ___NS_____ Dept Review: DH__
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 18, 2026 FROM: Nate Stong, PE, City Engineer
SUBJECT: Notice of Completion for Morro Creek Bank Emergency Stabilization Project

RECOMMENDED ACTION

1. Accept the work as performed by David Crye General Engineering Contractor, Inc.; and

2. Authorize the City Engineer to execute and record a Notice of Completion for the project.

BACKGROUND
On November 18, 2025, City Council authorized the City Manager to negotiate and award an emergency public works contract for the subject project in an amount not to exceed $500,000. Staff solicited three bids from local qualified contractors and executed a construction contract with David Crye General Engineering Contractor, Inc. on March 1, 2026 in the amount of $355,655.00. The work commenced on April 2, 2026, and the majority of the project including earthwork and rock slope protection completed on April 8, 2026. Other items of work including hydroseeding, fencing, landscaping & irrigation, and site restoration were substantially completed by May 20, 2026. The remaining work involves six months of landscaping maintenance to ensure plant establishment.

The project consisted of earthwork and placement of rock slope protection, fine grading, landscaping, irrigation and fencing along the south bank of Morro Creek approximately 250 feet upstream of the Embarcadero.

City Council approval is now needed to accept the work and authorize staff to file a Notice of Completion for the project.

DISCUSSION
The work was substantially completed on May 20, 2026. No change orders were issued for the project.

The final pay request and release of 5% retention will be processed following six months of landscaping maintenance as specified in the contract documents. The total construction contract cost is $355,655.00.

ATTACHMENT(S)

1. Notice of Completion
AGENDA NO: 6.e
MEETING DATE: June 23, 2026

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Recording requested by and
when recorded mail to:

City of Morro Bay – City Engineer
595 Harbor Street
Morro Bay, Ca. 93442-1957

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NOTICE OF COMPLETION
No recording fee per government code sections 6103 and 27383 Date: June 23, 2026
To: David Crye General Engineering Contractor, Inc
From: Public Works Department – Engineering Division

1. Contract No: MB2025-ST03
Dated: 4/29/2026
For: Morro Creek Bank Stabilization Project

2. Contractor: David Crye General Engineering Contractor, Inc 1170 Quintana Rd, Morro Bay, CA 93442

3. Location and Description of Work:

Location – Morro Bay, CA
Description – Earthwork, rock slope protection, fine grading and surface restoration on Morro Creek southern bank approximately 250 feet upstream of the Embarcadero.

4. Commenced Work On: 4/2/2026
Contract Completed On: 4/29/2026
Total Days: 20 Working Days
Contract Days Allowed: 25 Working Days
Extensions: 0 Working Days
Total Days: 20 Working Days

5. That the interest or estate stated in Item 3 herein is owned by the City of Morro Bay.

6. Final Amount: $ 355,665.00
Signed: _____________________________________
Jonathan Stong, PE, City Engineer
The undersigned hereby deposes and says:

I declare the foregoing to be true under penalty of perjury.

Executed at Morro Bay, California, this _________ day of _________________, 20___

________________________________________
Dana Swanson, City Clerk

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Prepared By: DM Dept Review: DM
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 11, 2026 FROM: Daniel McCrain, Fire Chief
SUBJECT: Adopt Resolution No. 37-26 Revising the Terms of the City’s Reimbursement Agreement with the California Governor’s Office of Emergency Services updating Fire Department Job Classifications

RECOMMENDED ACTION
Adopt Resolution No. 37-26 rescinding and replacing Resolution No. 44-24 and revising the terms of the City’s reimbursement agreement updating the Fire Department job classifications.

ALTERNATIVES
Take no action. This would prevent the positions not listed from receiving reimbursement from the California Governor’s Office of Emergency Services, Fire Rescue Division should they participate in mutual aid activities.

FISCAL IMPACT
The recommended action will have a positive fiscal impact on the City. The fiscal impact varies depending on hours committed to Mutual Aid Assignments. The wages paid to classified employees are reimbursed at their actual rate of pay by the California Office of Emergency Services (“OES”) Mutual Aid Agreements. An additional 21.967% administrative fee is paid to the City for all hours reimbursed. Portal to portal pay would result in a larger administrative fee than direct hours worked.

This administrative fee contributes to the Departments operating budget for equipment replacement.

The salary schedule on file with the State of California is updated each time there is a salary adjustment within our department.

BACKGROUND
Fire Department response personnel in Resolution No. 44-24 included Fire Chief, Deputy Chief, Division Chief, Fire Marshal, Fire Captain, Fire Captain Paramedic, Engineer, Engineer Paramedic, Firefighter, Firefighter Paramedic, Reserve Engineer, Reserve Firefighter, and Seasonal Firefighter.

This update includes all of these positions as well as the Administrative Technician position to ensure all department positions are available for reimbursement. Having a resolution that describes all titles and positions is essential for proper reimbursement from OES for mutual aid responses.

AGENDA NO: 6.f
MEETING DATE: June 23, 2026

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DISCUSSION
The compensation of a classified employee at “Portal to Portal” means that the employee is paid from the time they depart their home station for a Mutual Aid assignment until the time that they return to their duty station. They are compensated for all hours away from home assisting the State Mutual Aid System. The employee’s salary during this assignment is reimbursed at an agreed upon rate equal to the employees’ actual rate of pay. The employee will be paid at either an overtime rate or straight time rate depending on each individual Memorandum of Understanding or contract.

There must be a resolution specifying department positions for the State to reimburse the Department at the appropriate pay scale. Traditionally Management, overtime exempt employees are compensated overtime pay in addition to their base salary under these agreements because participation in the Mutual Aid System is above and beyond the scope of their normal contractual duties. This is important because unlike performing additional duties at home as expected of managers, these employees are committed away from home for an extended period of time performing a specialized task necessary to the successful mitigation of an incident.

The State OES reimbursement is to eliminate any financial burden of the employee’s agency by allowing participation in the Mutual Aid System without encumbering any additional costs. These agreed upon rates provide a framework to compensate these highly trained and experienced managers for their participation in these crucial Emergency Management roles during Mutual Aid incidents. The advancement of digital technology has made it possible for executive employees to continue performing a majority of their assigned City duties while assigned to these Mutual Aid assignments further reducing the impact on City operations.

CONCLUSION
Ensuring all Morro Bay Fire Department job classifications to the resolution ensures that the City of Morro Bay will be reimbursed at an appropriate pay rate for any time the Department staff are assigned to a Mutual Aid incident. There is no additional financial burden to the City or Fire Department. Portal to Portal pay is the standard compensation because the employee is away from their home station and tasked with additional duties for the greater good of the State Mutual Aid System to manage large or complex incidents.

ATTACHMENT

1. Resolution No. 37-26

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RESOLUTION NO. 37-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA

IDENTIFYING THE TERMS AND CONDITIONS FOR FIRE DEPARTMENT

RESPONSE AWAY FROM THEIR OFFICIAL DUTY STATION AND

ASSIGNED TO AN EMERGENCY MUTUAL AID INCIDENT AND
RESCINDING RESOLUTION NO. 44-24

THE CITY COUNCIL
City of Morro Bay, California
WHEREAS, the City of Morro Bay Fire Department is a public agency located in the County of San Luis Obispo, State of California; and
WHEREAS, it is the City of Morro Bay's desire to provide fair and legal payment to all its employees for time worked; and
WHEREAS, the City of Morro Bay Fire Department has in its employ designated Fire response personnel as follows: Fire Chief, Deputy Chief, Division Chief, Fire Marshal, Fire Captain, Fire Captain Paramedic, Engineer, Engineer Paramedic, Firefighter, Firefighter Paramedic, Reserve Engineer, Reserve Firefighter, and Seasonal Firefighter; and WHEREAS, the City of Morro Bay Fire Department desires to add the position of Administrative Technician to designated Fire response personnel; and WHEREAS, the City of Morro Bay will compensate its employees portal to portal while in the course of their employment and away from their official duty station and assigned to an emergency incident, in support of an emergency incident, or pre-positioned for emergency response; and
WHEREAS, the City of Morro Bay will seek reimbursement for qualifying mutual aid responses such that all City Costs, including but not limited to personnel, apparatus, equipment, and administrative costs, incurred in connection with qualifying mutual aid responses do not have a net negative impact on the City's financial position.

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

1. Resolution No. 44-24 is hereby rescinded.

2. Personnel shall be compensated according to Memorandum of Understanding (MOU), Personnel Rules and Regulations, and/or other directive that identifies personnel compensation in the workplace.

3. In the event a personnel classification does not have an assigned compensation rate, a "Base Rate" as set forth in an organizational policy, administrative directive or similar document will be used to compensate such personnel.

4. The City of Morro Bay Fire Department will maintain a current salary survey or acknowledgement of acceptance of the "base rate" on file with the California Governor's Office of Emergency Services, Fire Rescue Division.

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01181.0004/741016.l

5. All personnel will be compensated (portal to portal) beginning at the time of dispatch to the return to jurisdiction when equipment and personnel are in service and available for agency response.

6. Fire Department response personnel include: Fire Chief, Deputy Chief, Division Chief, Fire Marshal, Fire Captain, Fire Captain Paramedic, Engineer, Engineer Paramedic, Firefighter, Firefighter Paramedic, Reserve Engineer, Reserve Firefighter, Seasonal Firefighter, and Administrative Technician.

7. The Fire Chief, Deputy Chief, and Division Chief, as FLSA-exempt employees, shall be compensated at their base hourly wage, when providing such emergency response services. All other classified response personnel shall be eligible for overtime compensation when providing such emergency response services, in accordance with personnel rules and regulations, their current Memorandum of Understanding, and all other applicable state and federal laws.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 23rd day of June 2026 on the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:
________________________
CARLA WIXOM, Mayor
ATTEST:
_________________________
DANA SWANSON, City Clerk

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Prepared By: AS Dept Review: AS
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: June 8, 2026 FROM: Airlin Singewald, Community Development Director
Emily Conrad, Finance Director
SUBJECT: Resolution Approving Development Impact Fee Study and Nexus Report, Establishing Development Impact Fees, and Adopting the FY 2026-27 Master Fee Schedule

RECOMMENDED ACTION
Adopt Resolution No. 38-26 approving the Development Impact Fee Study and Nexus Report; establishing Development Impact Fees for the City of Morro Bay; and adopting the FY 2026-27 Master Fee Schedule.

ALTERNATIVES
Staff recommends the City Council review the attached development impact fee nexus study (Attachment 1, Exhibit A) and adopt the minimum changes and fee adjustments necessary to ensure the continued legal defensibility of the City’s development impact fees. Alternatively, the Council could increase development impact fees up to the maximum levels identified in the nexus study. However, substantial fee increases may impact the financial feasibility of development and run counter to the City’s housing and economic development goals. The Council could also direct further analysis in the nexus study to justify an alternative approach to fees, such as maintaining separate multi-family and single-family residential development impact fees.

FISCAL IMPACT
The adopted FY 2026-27 budget estimates $122,000 in development impact fee revenue. In the past three years, the City has received between $133,255 and $292,999 annually in impact fee revenue, depending on development activity. The proposed amendments would modestly reduce the City’s estimated future impact fee revenue, as multi-family development projects would pay 38 percent less in impact fees and non-residential development would no longer pay a “parks” fee of $0.03 per square foot. As described in the staff report, the nexus study would have to incorporate additional analysis to justify a separate impact fee for multi-family development and a non-residential “parks” fee. A reduction in development impact fee revenue may necessitate additional allocations towards capital projects from the General Fund, Measure Q/E, or other funding sources. However, maintaining lower impact fees could also stimulate housing and economic development, consistent with Council goals, increasing General Fund property and sales tax revenues.

BACKGROUND
The City charges development impact fees to offset the increased demand that new development places on public facilities and infrastructure, including water and wastewater systems, fire and police AGENDA NO: 7.a
MEETING DATE: June 23, 2026

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services, administrative facilities (e.g., government buildings), parks, storm drainage systems, and transportation systems. The City applies these fees to all building permits that add square footage, except for single family residential additions of less than 500 square feet. Over the past year, 20 projects paid development impact fees including 14 single-family projects, 4 ADUs, and one multifamily project. By requiring new growth to contribute toward the infrastructure needed to support it, these fees help reduce the financial burden on existing ratepayers and taxpayers.

Revenues collected through impact fees may be used to finance capital improvements associated with growth, including the construction of new facilities, acquisition of vehicles and equipment, and the rehabilitation or renovation of existing facilities. Eligible rehabilitation and renovation projects must expand or enhance the City's capacity to provide services to the community. The following table shows the balance in each of the fee categories as of June 11, 2026.

Development Impact Fee Type Balance at 6/11/2026
Administrative Facilities $779,833
Police Department $67,046
Fire Department $30,686
Parks $207,631
Traffic/Streets $318,785
Storm Drainage Systems $26,808
Water Systems $42,452
Wastewater Systems $42,612
TOTAL BALANCE $1,515,853
The City typically uses development impact fees to leverage other funding sources, such as State and federal grants, to pay for eligible capital projects. As a recent example, the Fire Department used development impact fees to pay for architectural design costs for redevelopment of the Bonita Street fire station. The Fire Department will use these architectural plans to obtain grants to fund construction of the project.

State law establishes strict requirements for agencies to establish development impact fees. Enacted in 1987, AB 1600 requires agencies to demonstrate a nexus between fees imposed, use of the fees, and development projects on which the fees are imposed. This requirement was amended in 2006 to clarify that a fee cannot include costs attributable to existing deficiencies but can fund costs used to maintain the existing levels of service (LOS) that is consistent with the General Plan.

In 2022, AB 602 introduced an additional requirement that agencies must complete a nexus study every eight years to support and justify their development impact fees. The City’s most recent nexus study was completed in 2007. To comply with the law, the City retained the public finance firm DTA to prepare the attached nexus study, which establishes the maximum impact fees that can be supported for each fee category. The study also recommends updates to the development impact fee structure, including expanding the range of non-residential land use categories and consolidating residential categories, with corresponding maximum fee levels identified for each. As described below, staff recommends only the minimum amendments to ensure the City’s impact fees remain legally defensible.

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DISCUSSION
Consistent with State law, the attached nexus study identifies the maximum development impact fees the City may impose for each fee category. Because the City does not have a comprehensive capital improvement plan, the study estimated these maximum fees primarily based on the costs needed to maintain existing service levels as the community grows through 2040. The growth projections underlying the analysis include approximately 516 additional housing units, 929,809 square feet of non-residential development, and 210 new hotel rooms.

While the City Council has the authority to increase fees up to the maximum amounts (shown below), staff is recommending only modest adjustments to the current fee schedule. Staff's review indicates that the City's existing fees, which are adjusted annually by the California Construction Cost Index (CCCI), generally fall within the range of comparable jurisdictions. Furthermore, increasing fees to the maximum levels identified in the Nexus study would likely reduce the financial feasibility of many residential development projects, potentially discouraging new housing construction.

While staff is recommending minimal changes to the current fee schedule, some structural changes are necessary per State law and will result in changes to development impact fee levels. The following analyzes the nexus study findings and explains staff’s corresponding recommendations:
 Under State law, the City can no longer apply impact fees to garages or other non-habitable space. To maintain the existing impact fees for a typical single-family dwelling, without applying fees to garage space, staff recommends increasing the residential fees by 20 percent (except the “police” fee, which exceeds the maximum), in addition to the 2025 CCCI of 3.9% This adjustment would produce fee revenues for a typical residential unit that are comparable to those generated under the existing fee schedule while remaining below the maximum fee levels supported by the nexus study.
 The current fee schedule has separate fees for multi-family and single-family development types, with multi-family fees 38 percent higher overall. The 2007 nexus study arrived at higher multi-family impact fees based on a higher density of residents per 1,000 square feet in multifamily development compared to single family development. A similar analysis would have to be incorporated into the recent Nexus study to justify separate fees for multi-family development. Absent this analysis, staff recommends applying a single “residential” development type to single-family and multi-family development, while using the lower singlefamily fees as the basis. This would result in a reduction in impact fee revenue for multi-family development; however, it would also incentivize the development of multi-family housing units, which tend to be more affordable. Alternative: the Council could direct the nexus study to incorporate further analysis to justify a separate fee (up to the nexus study maximum fees) for multi-family housing.
 The nexus study recommends applying the “residential” fee to ADUs, while exempting the first 749 square feet of an ADU from impact fees, as required by State law. However, the City currently has separate impact fees for ADUs that are substantially lower than the single-family residential fee level ($1.82 / SF compared to $8.22 / SF). Note that the current ADU fee includes the $0.49 “Parks fee for residential in-fill lot,” which is listed separately in the impact fee schedule. The revised fee schedule moves this $0.49 / SF fee to the ADU fee section.

This is not a fee increase. The ADU fees would only increase by the 3.9% 2025 CCCI.

As shown below for a 1,000 SF example ADU, applying the nexus study’s recommendation – even while maintaining the current lower fee levels – would significantly increase fees for ADUs:

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o Current Fee: $1.82 / SF x 1,000 SF ADU = $1,820
o Proposed Fee: $1.88 SF x 1,000 SF ADU = $1,880
o Nexus Study: $10.05 / SF x 251 SF (1,000 – 749 SF) = $2,522 To support housing affordability and preserve the existing fee structure, the proposed fee schedule revisions would maintain reduced development impact fees for ADUs and continue to exempt ADUs smaller than 750 square feet from such fees, consistent with State law. In addition, the City does not impose water or wastewater impact fees on new ADUs, even when a separate water meter is installed. It should be noted that the current fee schedule goes above and beyond State law in terms of reducing impact fees for ADUs.  Finally, the parks fee specific to non-residential development must be removed from the updated fee schedule because the nexus study was not able to quantify the impact of nonresidential development on City park facilities. Alternative: the Council could direct the nexus study to incorporate further analysis to justify a non-residential parks fee.

These changes would ensure the continued legal defensibility of the City’s impact fees, as supported by the recent nexus study. Staff recommends the Council adopt these changes, which are discussed in greater detail below, and re-evaluate development impact fees again once the City establishes a comprehensive capital improvement plan, at which time the City would have a more accurate assessment of the capital projects and associated costs needed to serve new growth.

Note: the nexus study attached to the resolution is a draft version that will be updated prior to the City Council meeting to incorporate the consultant’s updated analysis supporting a higher ($0.59 / SF) fee for “police” and including appendices A – C.

Residential Development Impact Fees
The following tables compare the City’s current residential impact fees, the maximum fees according to the nexus study, and staff’s recommended fees, incorporating the changes summarized above.

New residential development (except ADUs) requiring a new water meter and sewer connection would also be subject to separate water and wastewater impact fees.

Single-Family Residential Current Max Proposed*
General Government Administration $1.87 $3.65 $2.32
Police $0.62 $0.59 $0.59
Parks $1.95 $3.17 $2.42
Fire $0.68 $1.33 $0.84
Storm Drain $0.08 $0.14 $0.10
Traffic $3.01 $14.51 $3.73
Total $8.22 $23.39 $10.00
*[Represents a 20 percent increase, since fees will no longer apply to garage floor area, and 2025 CCCI of 3.9%]
Multi-Family Residential Current Max Proposed
General Government $3.08 $3.65 $2.24
Police $1.02 -- $0.74
Parks $3.25 $3.17 $2.34
Fire $1.15 $1.33 $0.82

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Storm Drain $0.09 $0.14 $0.10
Traffic $4.69 $14.51 $3.61
[See “Residential” category]
Accessory Dwelling Unit Current Max* Proposed
General Government Administration $0.42 $3.65 $0.43
Police $0.13 $0.59 $0.14
Parks -- $3.17 $0.51
Fire $0.14 $1.33 $0.15
Storm Drain $0.02 $0.14 $0.02
Traffic $0.62 $14.51 $0.65
Total $1.34 $23.39 $1.90
[Fees do not apply to the first 749 SF of an ADU]
*Max fee shown is the nexus study recommended maximum for residential development. This max fee can be applied to ADUs after deducting the first 749 SF of floor area.

To test the above fees, staff estimated the total impact fees for a typical single-family dwelling (2,346 square feet, including garage) under current, proposed, and maximum fee scenarios, and compared the results to similar jurisdictions. See Attachment 2.

Under the current fee schedule, a building permit for a typical single-family home would pay $40,527 in impact fees. Under the proposed fee structure, the amount would be slightly higher at $41,652, due primarily to the 3.9% CCCI adjustment. In contrast, adopting the maximum recommended fee would raise total impact fees for a typical single-family home to $143,272. Such an increase would place the City’s impact fees significantly outside the range of comparable jurisdictions and likely make many residential development projects financially infeasible.

Compared with similar jurisdictions, Morro Bay’s current and proposed impact fees rank second to highest, behind Pismo Beach and slightly higher than Los Osos (Unincorporated). However, these comparisons should be viewed with caution, as infrastructure needs and funding requirements vary significantly among communities. Coastal jurisdictions often impose higher impact fees because regulations within the Coastal Zone can increase both the cost and complexity of infrastructure planning, design, and construction.

Jurisdiction Fees for Typical SFD
Arroyo Grande $19,808
Carpinteria $24,493
Grover Beach $32,503
Los Osos / Unincorporated $39,778
Morro Bay $40,823 (Proposed) /
$40,527 (Existing)
Pismo Beach $58,767

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Non-residential Development Impact Fees
The City currently has separate fees for three non-residential development types: commercial, office, and industrial. The nexus study recommended adding two new fee types: institutional and hotel (flat rate fee per hotel room). To minimize changes to the current fee schedule, while remaining compliant with State law, staff recommends maintaining the current non-residential impact fee levels and development types. The City would continue to apply the commercial rates to hotel and institutional projects. The nexus study also recommends eliminating the non-residential “parks” fee.

The City’s non-residential impact fees are in range with similar jurisdictions (see Attachment 3). While staff is recommending minimal fee revisions until a capital improvement plan is completed, the City Council could increase non-residential impact fees up to the maximum levels shown below.

Non-residential, commercial Current Max Proposed*
General Government Administration $0.41 $4.78 $0.42
Police $0.09 $1.56 $0.10
Parks $0.03 -- --
Fire $0.37 $3.82 $0.38
Storm Drain $0.05 $0.20 $0.06
Traffic $5.36 $93.16 $5.56
Total $6.31 $103.52 $6.52
*Increased by 3.9% per 2025 CCCI adjustment.

Non-residential, office Current Max Proposed*
General Government Administration $0.52 $5.08 $0.54
Police $0.12 $1.09 $0.13
Parks $0.03 -- --
Fire $0.50 $2.66 $0.52
Storm Drain $0.05 $0.18 $0.06
Traffic $3.27 $40.84 $3.40
Total $4.49 $49.85 $4.64
*Increased by 3.9% per 2025 CCCI adjustment.

Non-residential, industrial Current Max Proposed*
General Government Administration $0.14 $1.82 $0.14
Police $0.05 $0.43 $0.06
Parks $0.03 -- --
Fire $0.12 $1.04 $0.13
Storm Drain $0.05 $0.17 $0.06
Traffic $1.88 $18.33 $1.96
Total $2.28 $21.79 $2.34
*Increased by 3.9% per 2025 CCCI adjustment.

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Water and Wastewater Impact Fees
New residential and non-residential development adding new water meters and/or sewer connections are required to pay water and wastewater impact fees, in addition to the above fees. The City’s current water and wastewater impact fees were calculated based on a Water and Wastewater Impact Fee Update (Bartle Wells Associates; 3/17/2015). The nexus study determined that higher fees are justified. At this time, other than 3.9% CCCI, staff is not recommending increasing water and wastewater impact fees.

Water Impact Fees Current Max Proposed*
Less than 1-inch meter $7,912 $60,051 $8,221
1 inch meter $10,613 $100,286 $11,027
1-1/2 inch meter $21,225 $199,971 $22,053
2 inch meter $33,962 $400,542 $35,286
3 inch meter $63,679 $640,748 $66,163
**Increased by 3.9% per 2025 CCCI adjustment.

Wastewater Impact Fees Current Max Proposed*
Less than 1-inch meter $7,991 $37,704 $8,302
1 inch meter $10,653 $62,966 $11,068
1-1/2 inch meter $21,354 $125,554 $22,187
2 inch meter $34,090 $251,485 $35,420
3 inch meter $63,918 $402,301 $66,411
**Increased by 3.9% per 2025 CCCI adjustment.

CONCLUSION
The City’s last development impact fee nexus study was prepared in 2007. As required by State law, the City commissioned an updated nexus study to calculate the maximum legally defensible fees.

The updated nexus study determined that, with the exception of the “police” fee, the City’s current impact fees are below the maximum levels. However, staff’s analysis determined that increasing fees to the maximum levels identified in the nexus study would impede new housing construction and economic development. Therefore, staff recommends incorporating the minimum changes to the current fee levels and structure, as outlined in this report, to ensure continued legal defensibility.

Although AB 602 requires updated nexus studies at least every eight years, staff recommends reevaluating fees within five years after the City develops a long-term capital improvement plan. This timing reflects best practice and will give a more accurate picture of the capital projects and associated costs to meet the demands of new growth. Impact fees will continue to increase annually based on the CCCI.

ATTACHMENTS

1. Resolution No. 38-26 Approving Development Impact Fee Nexus Study and Amending the Master Fee Schedule
a. Development Impact Fee Justification Study
b. Proposed Development Impact Fees
c. FY 2026-27 Master Fee Schedule Proposed Revisions

2. Development Impact Fee Comparison – Residential

3. Development Impact Fee Comparison – Non-residential

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RESOLUTION NO. 38-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA,

ADOPTING THE DEVELOPMENT IMPACT FEE STUDY AND NEXUS REPORT FOR THE

CITY OF MORRO BAY, CALIFORNIA, ESTABLISHING DEVELOPMENT IMPACT FEES FOR ALL DEVELOPMENT WITHIN THE CITY OF MORRO BAY FOR FISCAL YEAR (FY) 2026-27, AND AMENDING THE FY 2026-27 MASTER FEE SCHEDULE

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 (the “City) is duly authorized pursuant to the Mitigation Fee Act (the “Act”), commencing with California Government Code, § 66000 et seq., to impose development impact fees (DIF) to defray the cost of public facilities related to development projects; and
WHEREAS, Assembly Bill (“AB”) 602 requires local jurisdictions seeking to impose DIFs on development projects to update fee nexus studies at least every eight years, beginning January 1, 2022; and
WHEREAS, the existing DIF nexus study was adopted by Resolution No. 47-07 along with updated impact fees for City Administration, Police, Fire, Parks, Storm Drain, Transportation, Water, and Wastewater on October 8, 2007; and
WHEREAS, the City has annually updated the impact fees by the California Construction Costs Index (CCCI) since the fee adoption in 2007; and
WHEREAS, the City contracted with DTA, a public finance consulting firm, through a Request for Proposals (“RFP”) process, to update the existing impact fee program by preparing a new AB 1600 fee justification study; and
WHEREAS, DTA prepared the Draft Development Impact Fee Justification Study for the City of Morro Bay, California, (attached hereto as Exhibit A) in June 2006 that identifies the maximum development impact fees the City could impose on new development and explains the nexus between the imposition of the fee and the estimated reasonable cost of provided the service for which the fee is charged; and
WHEREAS, the City Council desires that annually the City Manager, or City Manager designee, may update the fees by an amount not to exceed Engineering News Record’s construction cost index (ENR-CCI) as reported for the annual twelve-month period ending in December of each year. If the CCI does not change or goes down in a given year, no change shall be made to the fee schedule that year; and
WHEREAS, staff held two meetings with stakeholder groups (Building Industry Professionals and Business Industry Professionals) in September 2025 to share and invite feedback on the draft DIF report findings; and
WHEREAS, in compliance with the Act, the City Council held a public hearing to solicit public input on the proposed development impact fees on June 23, 2026.

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

SECTION 1. Findings Pursuant to Government Code Section 66001.

The City Council finds and determines that the Development Impact Fee Justification Study (hereinafter referred to as “Report”) complied with California Government Code section 66001 by establishing the basis for the imposition of fees on new development. This finding is based on the fact that the report:
(a) Identifies the purpose of the fee [Government Code Section 66001(a)(1)]; (b) Identifies the use to which the fee will be put [Government Code Section 66001(a)(2)]; (c) Demonstrates a reasonable relationship between the fee’s use and type of development on which the fee is to be imposed [Government Code Section 66001(a)(3)];
(d) Demonstrates a reasonable relationship between the need for the public facility and type of development project on which the fee is to be imposed [Government Code Section 66001(a)(4)]; and
(e) Discusses how there is a reasonable relationship between the amount of the fee and cost of the public facility or portion of the public facility attributable to the development on which the fee is imposed.

SECTION 2. Fees for Uses Consistent with the Report.

The City Council hereby determines that the fees collected pursuant to this resolution shall be used to finance the public facilities described or identified in the Report, the Master Facilities Plan or such other public facility master plans as may from time to time be adopted by the City Council.

SECTION 3. Approval of Items in the Report.

The City Council has considered the specific level of service and cost estimates identified in the Report and hereby approves such level of service and cost estimates and finds them reasonable as the basis for calculating and imposing certain development impact fees.

SECTION 4. Consistency with General Plan.

The City Council finds that the level of service and fee methodology identified in the Report are consistent with the City’s General Plan.

SECTION 5. Differentiation Among Fees.

The City Council finds that the development impact fees recommended in the Report are separate and different from other fees the City may impose as a condition of final map approval, building permit issuance, or tentative or parcel map approval pursuant to its authority under the Subdivision Map Act, the Quimby Act, and the City’s implementing ordinances, as may be amended from time to time, for, among other projects, the construction of storm drainage, major thoroughfares and bridges, and the acquisition of parkland. In no event, however, shall a developer be required to pay for both a fee imposed pursuant to the Subdivision Map Act and/or the Quimby Act and a portion of the development impact fee as that would be used to fund the same type of facility as the fee imposed pursuant to the Subdivision Map Act and/or the Quimby Act. In addition, this resolution shall not be deemed to affect the imposition or collection of the

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water and sewer connection fees authorized by the Municipal Code.

SECTION 6. California Environmental Quality Act Finding.

The adoption of the Report and the development impact fee are categorically exempt from the environmental review pursuant to section 15061(b)(3) of the California Environmental Quality Act (CEQA) guidelines. The intent of the Report and development impact fee is to provide one way to fund projects and services that have been identified in environmental analyses of other planning efforts, including the General Plan Environmental Impact Report (EIR) and various City master plans, among others.

SECTION 7. Adoption of Report.

The Development Impact Fee Justification Study by DTA for the City of Morro Bay, California, is hereby adopted (Exhibit A).

SECTION 8. Timing of Fee.

A development impact fee shall be imposed upon the issuance of any development permit and shall be paid prior to issuance of a certificate of occupancy for a project, or at such earlier time as permitted by law, as set forth in Government Code section 66007. A “development permit” means any permit or approval from the City including, but not limited to, subdivision map, revised final planned development, building permit, or other permit for construction, reconstruction, or addition.

SECTION 9. Amount of Fee.

The City Council hereby approves and adopts the development impact fees as set forth in the Proposed Development Impact Fees (Exhibit B) and FY 2026-27 Master Fee Schedule (Exhibit C) attached to this resolution and incorporated herein. The Report sets forth the aggregate amount imposed as a development impact fee for both residential and non-residential land uses and also sets forth the breakdown of each development impact fee by type of facility or service. The amount of the development impact fee shall be reduced, or a credit shall be applied towards the fee, in proportion to the monetary cost of any improvements installed that would have been funded by the development impact fee. The amount of the development impact fees shall be modified annually each July 1 based on the change in the Engineering News Record’s construction cost index (ENR-CCI) as reported for the annual twelve-month period ending in December of each year. Further, the City Council shall formally review the development impact fees once every two years, or whenever the City Council updates a major City Council policy document that could have an impact on development impact fees, such as the General Plan.

SECTION 10. Use of Fee.

The development impact fees shall be solely used for (1) the purposes described in the Report; (2) reimbursing the City for the development’s fair share of those capital improvements already constructed by the City; or (3) reimbursing developers who have already constructed public facilities described in the Report or the Master Facilities Plan or other facility master plans adopted from time to time by the City Council, where those facilities exceeded that needed to mitigate the impacts of the developers’ project or projects.

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SECTION 11. Fee Determination by Square Footage.

Development impact fees for all land uses shall be based upon the square footage of the building. The development impact fee categories are set forth in the Report, which have been further revised in the Proposed Development Impact Fees set forth in Exhibit B.

SECTION 12. 500 Square Foot Exemption.

Development impact fees shall not apply to the first 500 square feet of new square footage of any proposed addition for single-family residential projects. Should the addition exceed 500 square feet, the calculation of impact fees shall be based on the total additional new square footage area.

SECTION 13. Current Projects Exempt from New Impact Fees.

Any project submitted for either discretionary and/or building permit approval as of August 23, 2026 shall be exempt from paying these new Development Impact Fees. All other currently existing impact fees in effect on August 23, 2026 shall remain in effect.

SECTION 14. Cumulative Additions.

Whenever the cumulative quantity of new additional square footage improvements and all other permitted additions during the preceding five-year period is over 500 square feet, payment of impact fees for the total additional area constructed during the said five-year period shall be required.

SECTION 15. Prior Resolutions and Ordinances Superseded.

The development impact fees approved and adopted by this resolution shall take effect in sixty (60) days and shall supersede previously adopted resolutions that set the amounts of development impact fees.

SECTION 16. Severability.

If any action, subsection, sentence, clause or phrase of this resolution or the imposition of a development impact fee for any project described in the Report or the application thereof to any person or circumstance shall be held invalid or unconstitutional by a court of competent jurisdiction, such invalidity shall not affect the \validity of the remaining portions of this resolution or other fees levied by this resolution that can be given effect without the invalid provisions or application of fees.
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SECTION 17. Effective Date
Consistent with California Government Code Section 66017(a), the fees adopted by this resolution shall take effect sixty on Auust 24, 2026, a period no sooner than (60) days following the adoption of this Resolution by the City Council.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 23rd day of June 2026, by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSED:

CARLA WIXOM, Mayor
ATTEST:

DANA SWANSON, City Clerk

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www.FinanceDTA.com
Public Finance
Public-Private Partnerships
Development Economics
Clean Energy Bonds

DEVELOPMENT IMPACT FEE

JUSTIFICATION STUDY

CITY OF MORRO BAY
Report Date: June 15, 2026

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www.FinanceDTA.com 18201 Von Karman Avenue, Suite 220
Irvine, CA 92612

CITY OF MORRO BAY

DEVELOPMENT IMPACT FEE JUSTIFICATION STUDY
Prepared for:

City of Morro Bay
955 Shasta Avenue
Morro Bay, CA 93442
Attention: Emily Conrad

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TABLE

OF CONTENTS

SECTION PAGE
EXECUTIVE SUMMARY ................................................... 1 A Organization of the Fee Study ......................................... 1 B DIF Summary ....................................................................... 2 INTRODUCTION .............................................................. 4

LEGAL REQUIREMENTS TO JUSTIFY
DEVELOPMENT IMPACT FEES ...................................... 6 DEMOGRAPHICS ........................................................... 12 A Existing Residential Land Uses ...................................... 14 B Existing Non-Residential Land Uses ............................. 14 C Future Residential Land Uses (2040) ............................ 15 D Future Non-Residential Land Uses (2040) .................. 16 E ADUs .................................................................................... 16 METHODOLOGY USED TO CALCULATE FEES ........ 18
A Standards-Based Fee Methodology .............................. 18 B Plan-Based Fee Methodology ........................................ 18 C Capacity-Based Fee Methodology ................................ 18 D Summary of Fee Methodology ....................................... 19 E Allocation of Benefit ........................................................20 CALCULATION OF FEES.............................................. 24 A City Administration DIFs ................................................. 24 B Police DIFs .......................................................................... 31 D Parks DIFs ........................................................................... 45 E Transportation DIFs.......................................................... 52 F Water DIFs .......................................................................... 57 G Sewer DIFs .......................................................................... 62 H Storm Drain DIFs ............................................................... 67

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SUMMARY OF FEES ....................................................... 74 IMPLEMENTATION OF FEE SCHEDULE .................... 77
A The Collection of DIFs ..................................................... 77 B The Assignment and Expenditure of Fee Revenue ... 78
C Exemptions, Reductions and Waivers. ......................... 79 D Developer Improvement Credits ................................... 79 E Existing Development Credit ......................................... 79 F Annual Reporting and Accounting of Fees ................. 79 G Refunding Policy ...............................................................80 H Annual Update of the CIP ............................................... 81 I Administration Costs of Fee Implementation ............ 82 J Indexing of DIFs ................................................................ 82 K Infill Development ............................................................ 82 L Updating the Impact Fee Study ..................................... 83 M Administering a Fee Program ........................................ 83

APPENDICES

APPENDIX A FEE DERIVATION WORKSHEETS

APPENDIX B INVENTORY AND FACILITIES NEEDS
LIST

APPENDIX C PROPERTY INVENTORY FOR LAND

ACQUISITION COSTS

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1 SECTION I

EXECUTIVE SUMMARY

City of Morro Bay June 15, 2026
Development Impact Fee Justification Study
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EXECUTIVE SUMMARY
In order to adequately plan for new development and identify the public facilities and costs associated with mitigating the direct and cumulative impacts of new development, DTA Public Finance, Inc. (“DTA”), was retained by the City of Morro Bay, CA (the “City”), to update the existing impact fee program by preparing a new Assembly Bill (“AB”) 1600 fee justification study (the “Fee Study”). The previous fee justification study was completed in 2007, with the last fees updated in 2016; however, the City has annually increased fees by the California Construction Costs Index (CCCI). The categories of Development Impact Fees (“DIFs” or “Fees”) to be determined in this Fee Study include City Administration, Police, Fire, Parks and Recreation, Transportation, Water, Sewer and Storm Drain fees at levels identified by the various City departments as being necessary to meet the needs of new development. The purpose of this Fee Study is to ensure that all new development is required to pay its “fair share” of the cost of new infrastructure through the development fee program by establishing a nexus between the anticipated development and public facilities needs for the City through 2040. This Fee Study is intended to comply with Section 66000 et seq. of the Government Code, which was enacted by the State of California in 1987, by identifying additional public facilities required by new development (“Future Facilities”) and determining the level of fees that may be imposed to pay the costs of the Future Facilities. The Future Facilities and associated construction costs are identified in the Facilities Inventory and Needs List, which is included in the appendix section of the Fee Study. A description of the methodology used to calculate the fees is included in Section V.

A Organization of the Fee Study
This Fee Study will be presented in the following eight (8) sections:

Section I contains an Executive Summary and provides a brief introduction to the Fee Study and includes an overview of the proposed DIFs.

Section II is an Introduction that includes a brief description of the City's surroundings and background information on DIF funding.

Section III provides an overview of the legal requirements for implementing and imposing the DIF amounts identified in the Fee Study and satisfies the nexus requirements for each facility included as part of this Fee Study. Also included is a discussion of the findings and requirements necessary to be satisfied when establishing, increasing, or imposing a fee as a condition of new development.

Section IV includes a discussion of land use characteristics and demand variables of projected new development, such as the number of housing units and the number of non-residential building square feet, assuming current growth trends in residential and non-residential development projected through 2040.

Section V contains a description of the methodology used to determine the Fees for Future Facilities and presents the fees for each of the land use types.

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2 SECTION I

EXECUTIVE SUMMARY

City of Morro Bay June 15, 2026
Development Impact Fee Justification Study
www.FinanceDTA.com
Section VI presents the calculation of the Fees for each land use.

Section VII presents a summary of the Fees.

Section VIII presents recommendations for the adoption and administration of the Fees.

This Fee Study also includes an appendix section presenting the calculations and other relevant material used to determine the fees generated in this Fee Study, as noted below Appendix A includes the calculations used to determine the various Fee levels; Appendix B includes the Facilities Inventory List and Needs List used to determine the various Fee levels; and
Appendix C includes the Property Inventory for Land Acquisition Costs.

B DIF Summary
Per the results of this Fee Study, the total DIF amounts required to finance new development’s share of Future Facilities are identified in the following tables. Fees presented in this Study represent the maximum DIFs that the City may impose under the statutory requirements of Government Code Section 66000 et seq. Cities can set any fee level up to this amount. Residential fees are listed on a per-square-foot basis and are defined as living space and exclude non-living spaces such as garages and patios. Per the City’s 2024-25 Master Fee Schedule, single-family residential additions of 500 square feet or less are exempt. Non-residential fees are listed per room for hotels and per square feet for other non-residential development and is presented in Table ES-1 below.

Table ES-1: Proposed Maximum Allowable DIFs
Land Use 1,2,3 Admin. Police Fire Parks
6 Storm
Drain Trans.

Residential (per Sq. Ft.)4 5 $3.65 $0.59 $1.33 $3.17 $0.14 $14.51 Hotel (per room) $5,343 $866 $1,951 $146 $15,377
Commercial/Retail (per Sq. Ft.) $4.78 $1.70 $3.82 $0.20 $93.16 Office (per Sq. Ft.) $5.08 $1.18 $2.66 $0.18 $40.84
Industrial (per Sq. Ft) $1.82 $0.46 $1.04 $0.17 $18.33
Institutional/Other (per Sq. Ft.) $10.48 $1.87 $4.21 $0.18 $31.50 Notes:

1. Residential fees are for single-family residences, multi-family residences and mobile homes and are per square foot to comply with California AB 602. The square footage for the residential units refers to living space and excludes garages and patios.

2. Hotel Fees are per Room.

3. Other non-residential fees are per square foot.

4. Single-family additions of 500 square feet or less are exempt.

5. Accessory Dwelling Units (“ADUs”), whether infill or non-infill, are exempt from DIFs if they are less than 750 sq. ft. Ft. Above that, square footage ADUs would incur fees at the residential square foot rate.

6. Park Fees for residential infill lots are the same as those listed in the table above.

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3 SECTION I

EXECUTIVE SUMMARY

City of Morro Bay June 15, 2026
Development Impact Fee Justification Study
www.FinanceDTA.com
In contrast to the fees presented in Table ES-1, the proposed water DIFs presented in Table ES-2 and sewer DIFs presented in Table ES-3 below are based on per meter size.

In addition, the DIFs presented below are broken down into the individual infrastructure categories, allowing the City to set fees and direct fee revenue to specific areas of both the water and sewer infrastructure categories. Under AB 1600, the City has the option of charging this maximum fee level or any level up to this maximum amount.

Table ES-2: Proposed Water DIF (Maximum Allowable Fee)
Meter
Size
Hydraulic
Capacity Factor Supply Treatment Distribution Storage Other Total 3/4 " 1.0 $13,841 $6,824 $27,360 $11,088 $938 $60,051
1" 1.67 $23,114 $11,395 $45,692 $18,518 $1,567 $100,286

1.5" 3.33 $46,090 $22,723 $91,109 $36,924 $3,124 $199,971 2" 6.67 $92,319 $45,514 $182,492 $73,960 $6,258 $400,542 3" 10.67 $147,682 $72,808 $291,933 $118,313 $10,011 $640,748 4" 16.67 $230,727 $113,750 $456,094 $184,844 $15,641 $1,001,056 6" 33.33 $461,316 $227,432 $911,915 $369,576 $31,272 $2,001,511 Notes:

1. Numbers may not sum due to rounding.

2. Hydraulic capacity factor refers to a mathematical coefficient that quantifies the relationship between the water movement and the hydraulic gradient. It essentially reflects how easily water can flow through a given material under a certain hydraulic gradient.

Table ES-3: Proposed Sewer DIF (Maximum Allowable Fee)
Meter Size
Hydraulic
Capacity
Factor
Supply Treatment Total
3/4 " 1.0 $17,486 $20,218 $37,704
1" 1.67 $29,201 $33,765 $62,966

1.5" 3.33 $58,227 $67,327 $125,554
2" 6.67 $116,629 $134,857 $251,485
3" 10.67 $186,571 $215,730 $402,301
4" 16.67 $291,484 $337,041 $628,525
6" 33.33 $582,793 $673,880 $1,256,673
The DIFs proposed in this Fee Study are based on Facilities costs in 2025 dollars; it is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current California Construction Cost Index (“CCCI”). This Construction Cost Index (“CCI”) is based upon the Building Cost Index (“BCI”) average as produced by Engineering News-Record (“ENR”).

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4 SECTION II

INTRODUCTION

City of Morro Bay June 15, 2026
Development Impact Fee Justification Study
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INTRODUCTION
Located in San Luis Obispo County, between Los Angeles and San Francisco, the City of Morro Bay spans an area of approximately 10 square miles and has a population of over 10,000 residents. The City is located 12 miles northwest of San Luis Obispo, situated on Highway 1 and is a gateway to the northern coast. The City sits on a natural estuary, formed by the meeting of Chorro Creek and Los Osos Creek with the Pacific Ocean. The town itself was founded in 1870 and officially incorporated in July 1964.

In order to adequately plan for new development and identify the public facilities and costs associated with mitigating the direct and cumulative impacts of new development, DTA was retained by the City of Morro Bay, CA (the “City”) to update the existing impact fee program by preparing a new Assembly Bill (“AB”) 1600 fee justification study (the “Fee Study”). The previous fee justification study was completed in 2007, with the last fees updated in 2016; however, the City has annually increased fees by the California Construction Costs Index (CCCI). The categories of Development Impact Fees (“DIFs” or “Fees”) to be determined in this Fee Study include City Administration, Police, Fire, Parks and Recreation, Transportation, Water, Sewer and Storm Drain fees at levels identified by the various City departments as being necessary to meet the needs of new development. The purpose of this Fee Study is to ensure that all new development is required to pay its “fair share” of the cost of new infrastructure through the development fee program by establishing a nexus between the anticipated development and public facilities needs for the City through 2040.

This Fee Study is intended to comply with Section 66000 et seq. of the Government Code, which was enacted by the State of California in 1987, by identifying additional public facilities required by new development (“Future Facilities”) and determining the level of fees that may be imposed to pay the costs of the Future Facilities. The Future Facilities and associated construction costs are identified in the Facilities Inventory and Needs List, which is included in the appendix section of the Fee Study. A description of the methodology used to calculate the fees is included in Section V.

Fees generated in this Fee Study are one-time fees typically paid prior to the issuance of a building permit and imposed on development projects by local agencies responsible for regulating land use. These Fee amounts to be determined will be at levels identified as being necessary to meet the needs of new development through 2040.

Fees are calculated to fund the cost of facilities needed to meet the needs of new development. Many of the calculations and totals presented in this Study are factored out to several decimal places and may not sum due to the rounding of calculated numbers in the tables provided throughout the Study.

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5 SECTION II

INTRODUCTION

City of Morro Bay June 15, 2026
Development Impact Fee Justification Study
www.FinanceDTA.com
DIFs are calculated to fund the cost of facilities needed to meet the needs of new development. The steps followed in the Fee Study include:

1. Demographic Assumptions: Identify future growth that represents the increased demand for Facilities;

2. Facility Needs and Costs: Identify current and planned facilities inventory to determine Level of Service (“LOS”) requirements and determine the Facilities required to support new development and the costs of such facilities;

3. Cost Allocation: Allocate costs of Facilities on a per-equivalent-dwelling-unit or equivalent-benefit-unit basis; and

4. Fee Schedule: Calculate the Fee amount per square foot for residential development, per room for hotel development, and per square foot for other non-residential development.

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6 SECTION III

LEGAL REQUIREMENTS TO JUSTIFY

DEVELOPMENT IMPACT FEES

City of Morro Bay June 15, 2026
Development Impact Fee Justification Study
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LEGAL REQUIREMENTS TO JUSTIFY DEVELOPMENT IMPACT FEES
The City has identified the need to impose DIFs to pay for City Administration, Police, Fire, Parks, Storm Drain, Transportation, Water, and Sewer. The Fees will finance eligible facilities on the current Inventory and Needs Lists at levels identified by the City as appropriate for new development or on the basis of current LOS. Upon the adoption of the Fee Study and required legal documents by the City Council, all new development will be required to pay its “fair share” of the cost of eligible facilities through these Fees. The Fees are established pursuant to AB 1600, as described below.

Prior to World War II, development in California was held responsible for very little of the cost of public infrastructure. Public improvements were financed primarily through jurisdictional General Funds and utility charges. It was not uncommon during this period for speculators to subdivide tracts of land without providing any public improvements, expecting the closest city to eventually annex a project and provide public improvements and services.

However, starting in the late 1940s, the use of DIFs grew with the increased planning and regulation of new development. During the 1960s and 1970s, the California Courts broadened the right of local government to impose fees on developers for public improvements that were not located on project sites. More recently, with the passage of Proposition (“Prop”) 13, the limits on general revenues for new infrastructure have resulted in new development being held responsible for a greater share of public improvements, and both the use and levels of DIFs have grown substantially. Higher fee levels were undoubtedly driven in part by a need to offset the decline in funds for infrastructure development from other sources.

The imposition of DIFs is one authorized method of financing the public facilities necessary to mitigate the impacts of new development, as the imposition of such fees provides funding to maintain an agency's existing LOS for an increased service population. A fee is “a monetary exaction, other than a tax or special assessment, which a local agency charges to the applicant in connection with approval of a development project for the purpose of defraying all or a portion of the cost of public facilities related to the development project...” (California Government Code, Section 66000). A fee may be levied for each type of capital improvement required for new development, with the payment of the fee occurring prior to the beginning of construction of a dwelling unit or non-residential building (or prior to the expansion of existing buildings of these types). Fees are often due at final map recordation, issuance of a Certificate of Occupancy, or more commonly, at building permit issuance.

AB 1600, which created Section 66000 et seq. of the Government Code, was enacted by the State of California in 1987. This Fee Study is intended to meet the nexus or benefit requirements of AB 1600, which mandates that there is a nexus between fees imposed, use of the fees, and development projects on which the fees are imposed.

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LEGAL REQUIREMENTS TO JUSTIFY

DEVELOPMENT IMPACT FEES

City of Morro Bay June 15, 2026
Development Impact Fee Justification Study
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A Government Code Section 66001
In 2006, Government Code Section 66001 was amended to clarify that a fee cannot include costs attributable to existing deficiencies but can fund costs used to maintain the existing LOS or meet an adopted LOS that is consistent with the General Plan. Section 66000 et seq. of the Government Code requires all public agencies to satisfy the following requirements when establishing, increasing, or imposing a fee as a condition of new development:

1. Identify the purpose of the fee [Government Code Section 66001(a)(1)];

2. Identify the use to which the fee will be put [Government Code Section 66001(a)(2)];

3. Determine that there is a reasonable relationship between the fee’s use and type of development on which the fee is to be imposed [Government Code Section 66001(a)(3)];

4. Determine how there is a reasonable relationship between the need for the public facility and type of development project on which the fee is to be imposed [Government Code Section 66001(a)(4)]; and

5. Discuss how there is a reasonable relationship between the amount of the fee and cost of the public facility or portion of the public facility attributable to the development on which the fee is imposed.

The sections below present each of the five requirements listed above as they relate to the imposition of the proposed fees.

A.1 Purpose of the Fee [Government Code Section 66001(A)(1)] New residential and non-residential development within the City will generate additional residents, employees and visitors who will require additional public facilities. Land for these facilities will have to be acquired and public facilities and equipment will have to be expanded, constructed, or purchased to meet this increased demand.

This Fee Study has been prepared in response to the projected direct and cumulative effect of future development. Each new development will contribute to the need for new public facilities. Without future development, none of the new public facilities on the Needs Lists would be necessary as the existing facilities are adequate for the City’s present population. In instances where facilities would be built regardless of new development, the costs of such facilities have been allocated to new and existing development based on their respective level of benefit.

The proposed DIF will be charged to all future development, irrespective of location, in the City. Even future “infill” development projects contribute to impacts on public facilities because they are an interactive component of a much greater network of development located throughout the City. First, the property owners and/or the tenants associated with any new development in the City can be expected to place additional demands on City facilities funded by the fee. Second, the availability of

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LEGAL REQUIREMENTS TO JUSTIFY

DEVELOPMENT IMPACT FEES

City of Morro Bay June 15, 2026
Development Impact Fee Justification Study
www.FinanceDTA.com
residents, employees, and customers throughout the City has a growth-inducing impact without which some of the “infill” development would not occur. As a result, all development projects in the City contribute to the cumulative impacts of development.

The DIF will be used for the acquisition, installation, and construction of public facilities identified on the Needs Lists and appropriate administrative costs to mitigate the direct and cumulative impacts of new development in the City. In addition, the fee will be used for the expansion, enhancement or improvement to existing facilities to mitigate the direct and cumulative impacts of new development.

A.2 The Use to Which the Fee is to be Put [Government Code Section 66001(A)(2)]
The fee will be used for the acquisition, installation, and construction of the public facilities identified on the Needs Lists, included in Section VI of the Fee Study, and other appropriate costs to mitigate the direct and cumulative impacts of new development in the City. The fee will provide a source of revenue to the City to allow for the acquisition, installation, and construction of public facilities, which in turn will maintain the current standard of service, preserve the quality of life in City, and protect the health, safety, and welfare of the existing and future residents, visitors, and employees.

A.3 Determine That There is a Reasonable Relationship Between the Fee’s Use and the Type of Development Project Upon Which the Fee is Imposed (Benefit Relationship) [Government Code Section 66001(A)(3)] It is the projected direct and cumulative effect of future development that has prompted the preparation of the Fee Study. Each development will contribute to the need for new public facilities. Without future development, the City would have no need to construct many of the public facilities on the Needs Lists. For all other facilities, the costs have been allocated to both existing and new development based on their level of benefit. Even future “infill” development projects, which may be adjacent to existing facilities, further burden existing public facilities. Consequently, all new development within the City, irrespective of location, contributes to the direct and cumulative impacts of development on public facilities and creates the need for new facilities to accommodate growth.

The fees will be expended for the acquisition, installation, and construction of the public facilities identified on the Needs Lists and other authorized uses, as that is the purpose for which the Fee is collected. As previously stated, all new developments create either a direct impact on public facilities or contributes to the cumulative impact on public facilities. Moreover, this impact is generally equalized among all types of development because increased demands for public facilities created by the future residents and employees create impacts upon existing facilities.

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For the foregoing reasons, new development benefits from the acquisition, construction, and installation of the facilities on the Needs Lists.

A.4 Determine How There is a Reasonable Relationship Between the Need for the Public Facility and the Type of Development Project Upon Which the Fee is Imposed (Impact Relationship) [Government Code Section 66001(A)(4)]
As previously stated, all new development within the City, irrespective of location, contributes to the direct and cumulative impacts of development on public facilities and creates the need for new facilities to accommodate growth. Without future development, none of the facilities on the Needs Lists would be necessary. For certain other facilities, the costs have been allocated to both existing and new development based on their level of benefit.

For the reasons presented herein, there is a reasonable relationship between the need for the public facilities included on the Needs List and all new development within the City.

A.5 The Relationship Between the Amount of the Fee and the Cost of the Public Facilities Attributable to the Development Upon Which the Fee is Imposed (“Rough Proportionality” Relationship) [Government Code Section 66001(A)]
As set forth above, all new developments in the City impacts public facilities.

Moreover, each individual development project and its related increase in population and/or employment, along with the cumulative impacts of all development in the City, will adversely impact existing facilities. Thus, imposition of the Fee to finance the facilities on the Needs Lists is an efficient, practical, and equitable method of permitting development to proceed in a responsible manner.

New development impacts facilities directly and cumulatively. In fact, without any future development, the acquisition, construction, and/or installation of many of the facilities on the Needs Lists would not be necessary as existing City facilities are adequate. Even new developments located adjacent to existing facilities will utilize and benefit from facilities on the Needs List.

The proposed fee amounts are roughly proportional to the impacts resulting from new development based on the analysis in Section VI. Thus, there is a reasonable relationship between the amount of the Fee and the cost of the facilities.

Identifying these items will enable DIFs to meet the nexus and rough proportionality requirements established by previous court cases. These findings are discussed in the nexus test for each proposed Fee element as presented in Section VI. Current State financing and fee assessment requirements only allow new development to pay for its fair share of new facilities’ costs. Any current deficiencies resulting from the needs of existing development must be funded through other sources.

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Therefore, a key element to establish legal DIFs is to determine what share of the benefit or cost of a particular improvement can be equitably assigned to existing development, even if that improvement has not yet been constructed. By removing this factor, the true impact of new development can be assessed, and equitable fees can be assigned.

B AB 602
The impact fees included herein were circumscribed by the requirements of AB 602, which was approved by the California State Legislature and signed by Governor Newsom in 2021. Among the significant impacts of AB 602 are the following:

On or after January 1, 2022, fee justification studies must identify the existing LOS for each public facility, identify the proposed new LOS, and (if the proposed new LOS is greater than existing LOS) include an explanation of why the new LOS is necessary.

For housing development projects, Nexus Studies adopted after July 1, 2022, must calculate the amount of fees based on the square footage of proposed units of the development, unless the local agency demonstrates that another metric is more appropriate. The bill would require that a “local agency that calculated fees proportionally to the square footage of the proposed units be deemed to have used a valid method to establish a reasonable relationship between the fee charged and the burden posed by development.” This would also apply to multi-family residences.

The bill also requires the Department of Housing and Community Development (“HCD”), on or before January 1, 2024, to create a Nexus Study template that may be used by local jurisdictions to calculate their fees. The bill requires that the template includes a method of calculating the feasibility of housing being built with a given fee level. The template must be completed by 2024. Local jurisdictions will have the option (it will not be required) to use the HCD template.

The bill authorizes any member of the public, including an applicant for a development project, to submit evidence that the city, county, or other local agency had failed to comply with the Mitigation Fee Act. The bill requires the legislative body of the city, county, or other local agency to consider any timely submitted evidence and authorize the legislative body to change or adjust the proposed fee or fee increase, as specified.

If a Nexus Study supports the increase of an existing fee, the local agency shall review the assumption of the Nexus Study supporting the original fee and evaluate the amount of the fees collected under the original fee.

Large jurisdictions (county population greater than 250,000) and cities within those counties must adopt a Capital Improvement Plan (“CIP”) as part of the Nexus Study.

Nexus Studies shall be updated at least every 8 years from the period beginning January 1, 2023.

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LEGAL REQUIREMENTS TO JUSTIFY

DEVELOPMENT IMPACT FEES

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Importantly, AB 602 does not apply to (i) water and sewer connection and capacity charges, (ii) school fees, and (iii) Mello-Roos or other taxes. These other fees, taxes, and charges are subject to their own statutory accountability measures.

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DEMOGRAPHICS

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DEMOGRAPHICS
To determine the facilities needed to serve new development and establish fee amounts to fund such facilities, DTA has researched and reviewed material containing information of future land use development within the City through 2040. For the purpose of this Fee Study, DTA assumed one category for all residential land uses (e.g. single-family, multi-family and mobile homes). For non-residential land uses within the City, DTA categorized these as hotel, commercial/retail, office, industrial and institutional/other. They are summarized in detail in the following section.

Elements from the City’s 2021 General Plan Update (the “General Plan”), numbers from the California Department of Finance, US Census, and total square footage generated by the CoStar Real Estate Software Platform (“CoStar”) were used as estimates for the number of housing units, hotel rooms and non-residential building square feet to be built within the City. The City’s land use decisions will also affect properties within its sphere of influence (“SOI”). California law requires that a General Plan “cover the territory within the boundaries of an adopted City, as well as any land outside its boundaries which in the planning agency's judgment bears relation to its planning.”
In addition, information from the General Plan and estimates produced by DTA were used to project the additional land use growth resulting from new development in the City.

Notably, DTA attempted to utilize metrics (e.g., average household size, square footage, etc.) that standardized existing demographics with the projections found in the General Plan.

Future residents and employees will create additional demand for facilities that existing public facilities cannot adequately serve. In order to accommodate new development in an orderly manner, while maintaining the current quality of life in the City, the facilities on the Facility Needs List (presented throughout Section VI and in Appendix B, as reviewed and approved by the City staff, will need to be constructed, acquired or enhanced.

For those facilities that are needed to mitigate demand from new development, facility costs have been allocated to new development only. In those instances when it has been determined that the new facilities will serve both existing and new development, facility costs have been allocated based on proportionate benefit [see the Equivalent Dwelling Unit (“EDU”) and Equivalent Benefit Unit (“EBU”) discussion in Section V].

Table 1, presented below, provides a summary of the land uses covered in this Fee Study.

As indicated, the Fee Study will determine Fees for six (6) specific land use categories:
residential, hotel, commercial/retail, office, industrial, and institutional/other. The table shown below is meant to provide an example of typical land uses found in each category and is not intended to be a comprehensive list of all the City’s potential land uses.

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Table 1: Summary of Land Use Categories
Land Use Classification Fee
Study Definition
Residential
Single-Family
One unit detached: Single-family homes that are not attached to any other housing unit; and
One unit attached: Single-family homes that are attached to other housing units by a wall (aka firewall) extending from the ground to the roof, such as duplexes, row houses, or townhouses.

Multi-Family
Two or more units attached: Residential buildings containing units built one on top of another and those built side-by-side which do not have a ground-to-roof wall (e.g., firewall) and or have common facilities, (i.e., attic, basement, heating plant, plumbing, etc.

Mobile Homes
A movable dwelling that is 8 feet or more wide and 40 feet or more long, designed to be towed on its own chassis, with transportation gear integral to the unit when it leaves the factory, and does not require a permanent foundation. (US Census Definition).

Accessory Dwelling Units (“ADUs”)
For the purpose of determining the Fees due, any “second unit” or “accessory dwelling unit” (as determined pursuant to Section 65852.23 of the Government Code) shall be considered a separate residential unit and shall be subject to this fee.

Hotel Includes hotels, motels, spas and resorts
Commercial/Retail
Includes but is not limited to buildings used as the following:

Retail;
Service-oriented business activities, wineries/vineyards, and car washes; Department stores, discount stores, furniture/appliance outlets, home improvement centers, and shopping centers;
Entertainment centers; and
Grocery stores and storage facilities.

Office
Includes but is not limited to buildings used as the following:

Business/professional offices;
Medical/dental offices;
Office parks, research parks, and business parks; and
General Office Buildings.

Industrial
Includes but is not limited to buildings used as the following:

Light manufacturing, warehouse/distribution, and logistics wholesaling; Wholesale and warehouse retail;
Food processing;
Industrial park; and
Industrial/light industrial.

Institutional/Other
Include but is not limited to buildings used as the following:

Professional urgent care and private hospitals and rehabilitation centers; Private schools, trade and vocational schools, and veteran’s organizations; and Rehabilitation centers, assisted living, and memory care facilities, houses of worship.

Demographic data provided by the US Census Bureau, The Nielsen Company (“Nielsen,” a leading information, measurement, and data analytics company), and the California

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Department of Finance were used to estimate the existing number of housing units and population in the City. DTA attempted to utilize metrics (e.g., average household size, square footage, etc.) that standardized existing demographics with DTA’s projections.

A Existing Residential Land Uses
According to the information provided by the 2025 California Department of Finance, the US Census Bureau, and Nielsen, there are currently 10,404 existing residents residing in 6,640 residential housing units in the City. The residential persons-per-unit figure of 1.57 listed was derived from 2025 data published by the California Department of Finance.

Specifically, the 1.57 residents per unit estimate for the City included units in the City that are currently vacant. As a result, this figure is lower than the calculated California Department of Finance 1.99 residents per unit figure, which includes only occupied housing units. Table 2, presented below, summarizes the existing demographics for the City’s residential land uses.

Table 2: Existing Residential Development 2025
1 Residential Land Use Existing
Residents Existing Housing Units Residents per Unit
Residential 10,404 6,640 1.57
Total 10,404 6,640 1.57
Note:

1. Numbers may not sum due to rounding.

B Existing Non-Residential Land Uses
The existing non-residential square footage was compiled and estimated using the CoStar Real Estate Software Platform. In addition, the employees per square foot for non-residential land use was based on information published in Nielsen’s Employment Profiles by NAICS Codes 2025. The North American Industry Classification System (“NAICS”) is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. The number of non-residential building square footage presented below in Table 3 is considered “existing non-residential development.” As shown in the table below, the City has approximately 2,245,195 total square feet of existing non-residential development and 468 hotel rooms. Per Nielsen’s Employment Profiles (2025), the City has 4,844 employees in these non-residential sectors, specifically 480 hotel, 2,979 commercial/retail, 432 Office, 300 industrial, and 653 institutional/other employees. These numbers were based on existing employee data and existing square footage data, generating employees-per-thousand-square-foot factors (“EPSFs”) of 1.03 for hotel, 1.99 for commercial/retail, 2.12 for office, 0.76 for industrial and 4.37 for the institutional/other sector. These EPSF numbers are presented in detail in Appendix A.

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Table 3: Existing Non-Residential Development 2025
1 Non-Residential Land Use Existing
Employees
Existing
Building
Square Feet
Existing
Hotel
Rooms
Employees per
Square Feet
Hotel 480 468 1.03
Commercial/ Retail 2,979 1,496,317 1.99
Office 432 204,000 2.12
Industrial 300 395,368 0.76
Institutional/Other 653 149,510 4.37
Total 4,844 2,245,195 468
Note:

1. Numbers may not sum due to rounding.

C Future Residential Land Uses (2040)
Using population projections based on the City of Morro Bay 2021 General Plan, DTA determined that the City is expected to grow by 516 residential units by the end of the 2040 build-out period in this Study. The projected residential growth used over the build-out period to generate the number of residents and future housing units are shown below. As indicated in Table 4, over the 15-year build-out period, this is a compounded residential unit annual growth rate (CAGR) of 0.50%
Table 4: Projected Residential Development over Build-Out Period through 20401 Residential Land Use Future
Residents Future Housing Units Residents per Unit
Residential 808 516 1.57
Total 808 516 1.57
Note:

1. Numbers may not sum due to rounding.

To comply with AB 602, DTA worked with the City staff to determine the average square footage for both single-family and multi-family residences. Using building permit information provided by the City, along with information provided by Zillow, DTA calculated that the combined average residential square foot unit was 2,060 square feet across singlefamily and multi-family residences. This includes living space and excludes garages and patios. Based on the total anticipated future residential development of 516 units, this results in a total of 1,062,401 Sq. Ft. of future residential development, as shown in the table below.

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Table 5: Future Residential Development Sq. Ft.

Category Total
Total Residential Units 516
Average Sq. Ft. per Unit 2,060
Total Residential Sq. Ft. 1,062,401
D Future Non-Residential Land Uses (2040)
To generate the 2040 non-residential build-out square footage totals presented in this Fee Study, DTA used a normalized growth rate of 2.5% for hotel and commercial/retail and 2.0% for office, industrial, and institutional/other non-residential sectors. This was discussed with the City staff and is considered best practices absent an official projection. Based on the EPSF derived above, this translates to the development of approximately 929,809 square feet of non-residential development and 210 hotel rooms over the build-out period. This is presented for each of the non-residential categories below in Table 6.

Table 6: Projected Non-Residential Development over Build-Out Period through 20401 Non-Residential Land Use Future
Employees
Future
Building
Square Feet
Future
Hotel
Rooms
Employees per
Square Foot
Hotel 215 210 1.03
Commercial Retail 1,335 670,796 1.99
Office 149 70,557 2.12
Industrial 104 136,745 0.76
Institutional/Other 226 51,711 4.37
Total 2,030 929,809 210 N/A
Note:

1. Numbers may not sum due to rounding.

E ADUs
An ADU is a secondary housing unit on a single-family residential lot, typically smaller than the primary dwelling unit. ADUs can be detached, attached to the main house, or converted from existing space, like a garage or basement. ADUs are, by definition, created in areas that are already developed but where land may be underutilized. Moreover, restrictions on parking requirements for ADUs that are located near transit create further incentives to build ADUs, particularly in places that provide easy access to jobs and other amenities, further reducing reliance on vehicles.

Also included in this category are Junior ADUs (“JADUs”). The key difference between an ADU and a JADU lies in their size, location, and relationship to the primary dwelling. ADUs are generally larger, detached or attached, and fully self-contained, while JADUs are smaller (usually under 500 square feet), always within the footprint of the existing house or attached

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garage, and may share some amenities with the main house. In essence, a JADU is a smaller, more integrated version of an ADU, often created by converting existing space within a home. For example, a homeowner might convert a bedroom into a JADU, adding a kitchenette and a separate entrance, while still sharing the main house's bathroom.

As a result, ADU construction is a key infill development strategy that contributes to, among other things, reducing greenhouse gas emissions and improving air quality by reducing the distance people need to travel; reducing conversion of agricultural land, sensitive habitat, and open space for new development; reducing costs to build and maintain expensive infrastructure; and facilitating healthy and environmentally friendly active transportation.

In Government Code Section 66310, subdivision (d), the California Legislature declared that allowing ADUs in zones that allow single-family and multifamily uses provides additional rental housing and is an essential component in addressing California’s housing needs. Over the years, State ADU Law has been revised to improve its effectiveness in creating more housing units. Major changes to State ADU Law, effective January 1, 2023, January 1, 2024, and January 1, 2025, further reduced barriers to the development of ADUs.

DIFs charged for the construction of ADUs must be determined in accordance with the Mitigation Fee Act and include any monetary exaction other than a tax or special assessment that is charged by a local agency in connection with the approval of an ADU for the purpose of defraying all or a portion of the cost of public facilities relating to the ADU. (Gov. Code, §§ 66324, subd. (a); 66000). A local agency, special district, or water corporation shall not consider ADUs as a new residential use for the purpose of calculating connection fees or capacity charges for utilities, including water and sewer services. However, these provisions do not apply to ADUs that are constructed concurrently with a new single-family home [Gov. Code, § 66324, subds. (b), (d)].

An ADU is exempt from incurring DIFs from local agencies, special districts, and water corporations if it is less than 750 square feet. If an ADU is 750 square feet or larger, impact fees shall be charged proportionately in relation to the square footage of the ADU to the square footage of the primary dwelling unit [Gov. Code, § 66324 subd. (c)(1)]. In this specific instance, impact fees also include Quimby fees specified in Government Code Section 66477 [Gov. Code, § 66324 subd. (c)(2)].

From 2020 to 2024 the City issued building permits for 62 ADUs averaging 571 Square feet per ADU. Of those permits, 9 were for ADUs greater than 750 square feet and subject to DIFs. This is presented in Table 7 below.

Table 7: ADU Building Permits from 2020 to 2024
ADU Building Permits
Issued
Average Square
Feet
ADUs > 750 SQ.

Ft.
62 571 9

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METHODOLOGY USED TO CALCULATE FEES
There are several accepted methodologies used in calculating fees, but they are all based on determining the cost of needed improvements and assigning those costs equitably to various types of development. In determining a reasonable nexus for each specific type of public facility, DTA utilized the methodologies described below, depending upon the data and information available from the City and its current infrastructure policies.

A Standards-Based Fee Methodology
The methodology used to establish the DIFs outlined in this Study for City Administration, Police, Fire, Parks, water and sewer facilities are based on “standards,” where costs are based on existing LOS. This Standards-Based Methodology establishes a generic unit cost for capacity which is then applied to each land use per the existing LOS. The LOS is based on the existing number of applicable units, such as square feet of building space or acres of land or per resident for each facility. This standard is not based on cost but rather on a standard of service. The Standards-Based Methodology ensures that City facilities are appropriately developed and sized so that future residents and employees do not cause a reduced LOS by unduly burdening the infrastructure system, thus leading to decay and deterioration. This methodology provides several advantages, including not needing to know the cost of a specific facility, how much capacity or service is provided by the current system, or having to commit to a specific size of the facility.

B Plan-Based Fee Methodology
The methodology used to establish the DIFs outlined in this Study for Transportation, and Storm Drain fees are based on a “plan,” such as a Master Plan of Facilities, CIP, or General Plan, which identifies a finite set of improvements to be implemented. These Facility Plans generally identify a finite set of facilities needed by the public agency and are developed according to assessments of facilities needs prepared by staff and/or outside consultants and adopted by the public agency’s legislative body. Using this plan-based approach, specific costs can be projected and assigned to all land uses planned, often with a specific time period in mind that reflects new development projections. By using population, units, and residential and non-residential square footage numbers, it is possible to assign a cost allocation percentage for both new and existing development. In preparing an impact fee analysis, facilities costs attributed to future development can then be allocated to each land use class in proportion to the demand caused by each type of development.

C Capacity-Based Fee Methodology
Another method of fee assessment used is based on the “capacity” of a service or system, such as a water tank, a sewer plant, or a storm drain. This kind of fee is not dependent on a particular land use plan (i.e., amount or intensity) but rather it is based on a rate or cost per unit of capacity that can be applied to any type of development, as long as the system has adequate capacity. This fee is useful when the costs of the facility or system are unknown at the outset. However, it requires that the capacity used by a particular land use type be measurable or estimable and the information to be available. Capacity-based Fees

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are assessed based on the demand rate per unit. Although this methodology is not used to calculate any of the fees generated in this Study, the description is provided so that the City understands the various methodologies available for calculating fees.

D Summary of Fee Methodology
In this Fee Study, the Standards-based LOS methodology based on a City facilities inventory is used to generate fees for City Administration, Police, Fire, Parks and Recreation, and water and sewer and a Plan-based methodology is used to generate the fees for Transportation and Storm Drain. This is summarized in Table 8 below.

Table 8: Fee Methodology (by Fee Category Type)
Fee Category Methodology Basis of Methodology
City Administration LOS Existing Standard
Police LOS Existing Standard
Fire LOS Existing Standard
Parks and Recreation LOS Existing Standard
Transportation Plan-Based Needs List
Water LOS Existing Standard
Sewer LOS Existing Standard
Storm Drain Plan-Based Needs List
For Fee calculations using the Plan-Based approach, the City has provided DTA with the list of Future Facilities to be included in the Fee Study (the “Needs List”). For the purposes of the City’s DIF program, the Needs List is intended to be the official public document identifying the facilities eligible to be financed, in whole or in part, through the imposition of a DIF on new development within the City. The Needs List is organized by facility element (or type) and includes cost information, as outlined in Table 9 below.

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Table 9: Description of Needs List Cost Sections
Column Title Contents Source
Total Cost for Facility The total estimated facility value, including engineering, design, construction, land acquisition, and equipment (as applicable). City Offsetting Revenues to
New and Existing
Development
Share of total offsetting revenues allocated to new and existing development. City
Net Cost to City The difference between the total cost and the offsetting revenues. Calculated by DTA Percent of Cost
Allocated to New
Development
Net cost allocated to new development based on new
development’s share of facilities.

Calculated by DTA
and the City
Net Cost Allocated to
New Development
The net cost to the City multiplied by the percentage cost allocated to new development. Calculated by DTA
Policy Background or
Objective Identifies the policy source or rationale for facility need. City General Plan, CIP, City Staff The facilities included on the Needs List for each Fee (presented in Appendix B) are provided by the City and reflect either the City’s goals of maintaining and improving a specific area, or they are part of a more formal policy document, such as a General Plan, Master Plan, CIP, or other official policy or document etc. Specific estimated facility costs are provided by the City and used as a basis for determining the allocation of revenues between new and existing development. DTA surveyed City staff and comparable development on the required facilities needed to serve new development as a starting point for its fee calculations.

E Allocation of Benefit
E.1 EDUs and EBUs
The methodologies employed in this Fee Study use EDUs and EBUs as the method of identifying and quantifying benefits of certain facilities and ensuring that an equitable portion of the total facilities costs are allocated to future growth, based on the proportion of need generated by that growth. Specifically, EDUs are generated in the demographic portion of this Fee Study and are used to generate the land use calculations. EDUs are a means of quantifying different land uses in terms of their equivalence to a residential dwelling unit, where equivalence is measured in terms of potential infrastructure use or benefit for each type of public facility. In this Study, EDUs are used as a basis of allocation for City Administration, Police, and Fire. In contrast for Transportation, Parks and Recreation, Water, Sewer and Storm Drain EBUs are used to allocate costs to future growth and generate fees.

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Table 10: Basis of Allocation (by Fee Category Type)
Fee Category Basis of Allocation of Benefit (EDU/EBU) Factor City Administration Persons Served (Residents, Employees) Police Persons Served (Residents, Employees, Visitors)
Fire Persons Served (Residents, Employees, Visitors)
Parks and Recreation Acres per 1,000 Residents
Transportation Peak Hour Trips
Water Water Usage Rates (Gallons per Day)
Sewer Sewer Generation Rates (Gallons per Day)
Storm Drain Stormwater Impervious Square Feet
A summary of the EDUs/EBUs applied in the Fee Study is presented in the table below.

Table 11: EBUs
Facility Type EBU/EDU Existing Projected Total
City Administration EDU 8,365 1,244 9,609
Police EDU 9,631 1,798 11,428
Fire EDU 9,631 1,798 11,428
Parks EBU 6,640 516 7,156
Transportation EBU 100,729 24,306 125,034
Water EBU 1,141,399 101,784 1,243,183
Sewer EBU 512,245 70,271 561,159
Storm Drain EBU 257 39 296
E.2 Persons Served
For many of the facilities considered in this Fee Study, service population (or Persons Served) will be used to allocate benefits among fee categories. For the purposes of this Fee Study, the Persons Served calculations are based on the number of residents per dwelling unit (i.e., persons per household) and the number of employees per 1,000 Sq. Ft. generated by each land use class. Notably, the Persons Served (or service population) is determined for City Administration, Police, Fire, and Parks, based on the following:

For public safety (i.e., Police and Fire), and Parks and Recreation the calculation of the number of Persons Served (or service population), is based on residents, plus 50% of employees, plus 5% of visitors (where visitors to non-residential land uses are estimated based on the trip generation rate associated with that land use). Notably, this service population estimate accounts for the fact that generally, residents require services for 16 hours per day, employees/business require services for 8 hours per day, and visitors (e.g., shoppers at a retail site) require services for approximately 30-60

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minutes while on site. As a result, this estimate of services population would best approximate the need for service (e.g., responding to emergencies) by each land use, and therefore the need for Future Facilities by such land use.

For City Administration, Utilities Administration. Corporate Yard, Storm Drain and Water and Sewer, the calculation of the number of Persons Served is based on residents, plus 50% of employees. Similar to public safety, this service population estimate accounts for the fact that generally, residents would have access to facilities for 16 hours per day and employees have access to facilities for 8 hours per day. However, unlike public safety, DTA assumes that the impact of visitors to non-residential land uses in these facilities is negligible.

Finally, Libraries, the calculation of the number of Persons Served is based on residents only.

E.3 Average Daily Trips (“ADTs”)
Transportation Impact Fees were calculated for each of the six (6) land use categories; residential, hotel, commercial/retail, office, industrial and institutional/other are based on the number of ADTs generated by each land use.

ADTs are published by the Institute of Transportation Engineers’ (“ITE’s”) Publication Trips Generation, 10th Edition. The ADT generation rates are per dwelling unit (for residential units), daily trip generation per 1,000 building square feet of each category of non-residential development, and per room for hotels. Per the ITE, a trip or trip end is a single or one-direction person or vehicle movement with either the origin or the destination existing or entering) inside a study site. In technical terms, a trip has an origin and a destination at its respective ends (known as trip ends). Each trip end is part of a trip. For trip site generation, the focus is the trips entering and existing a single site. Specifically, ADTs are the total number of trips, both inbound and outbound, within a 24-hour weekday period, generated by a particular use or development
E.4 Stormwater Runoff Coefficients
The methodology used to allocate drainage costs to future development is relative runoff contribution. Storm Drain Fees were calculated for each of the six (6) land use categories based on the runoff rates, measured in terms relative contribution of runoff, (i.e., the EBU factor - see Section V) generated by each land use. Specifically, the reasonable relationship used to allocate storm drain costs between existing, converted use and future development is relative runoff contribution. The Rational Method of computing runoff rates was used in the form of Q = C x I x A, where “Q” is equal to runoff volume, “C” is the ratio of impervious area to total area studied, “I” is rainfall intensity, and “A” is Area, in acres of the study area. A runoff factor, “C” of

1.00, indicates a totally impervious site, where every drop of rain would find its way to the public streets as runoff. However, it can be shown that only the relative

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contribution of runoff needs to be considered if a unit of runoff is computed (Q/A), where only the runoff factor and acreage are considered. This is the assumption used in this calculation.

The following sections present the reasonable relationship of benefit, impact, and proportionality tests for each fee element (i.e., City Administration facilities, Police facilities, Fire facilities, Parks and Recreation facilities, Transportation facilities, Sewer and Water facilities, and Storm Drain facilities, as well as the analysis undertaken to apportion costs for each type of facility. More detailed fee calculation worksheets for each type of facility are included in Appendix A.

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CALCULATION OF FEES
A City Administration DIFs
A.1 City Administration (Nexus Requirement AB 1600)
The City Administration element includes the facilities necessary to provide basic governmental services and public facilities services, excluding public safety, throughout the City. The facilities in this section are defined as buildings, land, vehicles, and property and equipment; basically, any capital asset with a life of 5 years or longer. The proposed DIF discussed in this section, if adopted, would be imposed, collected, and spent on the acquisition of land, construction, and expansion of existing City facilities to accommodate new growth. The fees collected from the new development will be used exclusively for City Administration purposes.

All new development within the City contributes to the direct and cumulative impacts of development on City Administration facilities and creates the need for new facilities to accommodate growth. The City element includes the facilities necessary to provide basic City Administration services and facilities services throughout the City.

Table 12 below illustrates how the City Administration Facilities Fee will meet the requirements of AB 1600 with regard to use of the fee, type of development funded or partially funded by the fee revenue, reasonable relationship to the need for facilities, and proportionality requirements.

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Table 12: City Administration Facilities Element
AB 1600 Code
Section Description Justification
66001(a)(1) Identify the purpose of the Fee.

Provide a revenue source that will provide funds to
construct or enhance City Administration facilities that will mitigate the impacts of new residential and non-residential development to the City’s Administration facilities.
66001(a)(2) Identify the use to which the Fee is
to be put.

Construction and expansion of city hall buildings,
supporting City Administration facilities, public works office, garage facilities, vehicles, equipment, and parking facilities.
66001(a)(3)
Demonstrate how there is a
reasonable relationship between the
Fee’s use and the type of
development project on which the
Fee is imposed.

New residential and non-residential development in the
City will generate additional residents and employees, thus increasing the need for City Administration facilities. The equipment, vehicles, buildings, and parking used to provide these services will have to be enhanced, expanded,
constructed, or purchased to meet this increased demand and maintain the current level of service to the City.
66001(a)(4)
Demonstrate how there is a
reasonable relationship between the
need for the public facilities and the
type of development project on
which the Fee is imposed.

The additional residents and employees from the new
development will impact demand for general
administration facilities. Expanded or enhanced city hall buildings, supporting government administration facilities, public works office, garage facilities, vehicles, equipment, and parking facilities are needed to mitigate the impacts of the additional residents and employees. If City
Administration facilities are not constructed, expanded, or enhanced, then overall general services provided to the residents and employees in the City will suffer.
66001(b)
Demonstrate how there is a
reasonable relationship between the
amount of the Fee and the cost of
the public facility.

The City Administration fee is based on the cost to provide new city hall buildings, supporting government
administration facilities, public works office, garage
facilities, equipment, vehicles, field operations buildings, and parking facilities. The fee is based on the cost to provide new materials at the same levels as provided to existing residents and employees.

Table 13 below identifies the current inventory for City Administration Facilities. As noted previously, all furniture, fixtures, and equipment have been consolidated into one (1) integrated unit that includes all department equipment, such as furniture modules and other equipment, to simplify the representation of the data. This is presented in detail in Appendix A and Appendix B.

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Table 13: City Administration Facilities Inventory as of 2025 Facility Quantity
Buildings (Square Feet) 58,797
Land (Acres) 22.9
Vehicles (Number of Vehicles) 29.0
Furniture, Fixtures, and Equipment (Integrated Unit) 1.00 A.2 Calculation Methodology
The City Administration Facilities Fee was calculated using the Standards-Based Methodology discussed in Section V. For future development to receive the same LOS as exists today, the City will need to acquire, construct or enhance additional public building facilities, vehicles, and equipment. Assuming the City’s growth through 2040, the City will need to acquire, construct or expand additional infrastructure in order to continue to maintain the existing LOS.

A.3 LOS
As stated earlier in Section III, in September of 2021 the Governor of California signed AB 602 which provides new statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these new requirements is that when applicable, a nexus study shall identify the existing LOS for each public facility, identify the proposed new LOS, and include an explanation of why the new LOS is necessary. The LOS used to calculate the DIFs in this section is the existing LOS as defined as the relationship between the replacement cost of City Administration Facilities (as described in this section) and the City’s existing persons served population as discussed in Section V. The current LOS is calculated by dividing the total inventory of a facility type, as noted above, by the existing number of EDUs within the City. As indicated below, the existing LOS for every 1,000 EDUs is 7,029 square feet of building space. The same LOS methodology applies to land, vehicles and integrated equipment and is presented below in Table 14.

Table 14: City Administration Facilities Current LOS as of 2025 Facility Type Facility Units per
1,000 EDUs
Buildings (Square Feet) 7,029
Land (Acres) 2.74
Vehicles (Number of Vehicles) 3.47
Furniture, Fixtures, and Equipment (Integrated Unit) 0.12

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Development Impact Justification Study
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The facility units generated in the table above are used to determine future City Administration Facility Units funded by new development in 2040 and are presented below in Table 15. The mathematics behind these calculations are presented in detail in Appendix A.

Table 15: Future City Administration Facilities in 2040 Facility Type
Number of Facility
Units Funded by
New Development
Buildings (Square Feet) 8,743
Land (Acres) 3.402
Vehicles (Number of Vehicles) 4.312
Furniture, Fixtures, and Equipment (Integrated Unit) 0.149 It’s important to note that construction costs and acquisition costs are dependent on the real estate market at the time of development. Location, demand for land, encumbrances, comparable acquisitions, and construction costs are a few of the many variables that play into appraisals and negotiations. Each facility will have its own location and improvement requirements. However, DTA was able to determine general cost estimates, on a per square foot basis for City Administration facilities, based on historical and current data available and input from the City. These cost estimates were then applied to the future facility units.

Table 16: City Administration Facilities Total Costs in 2040 1 Facility Type
Facility Units
Funded by New
Development
Cost Per
Unit
Total Facility Cost
for Future
Development
Buildings (Square Feet) 8,743 $622 $5,440,629
Land (Acres) 3.40 $1,264,732 $4,302,847
Vehicles (Number) 4.31 $20,346 $87,738
Equipment (Integrated Unit) 2 0.15 $1,487,900 $221,246
Less: Offsetting Revenue $695,560
Equals: Total Facilities Cost $9,356,900
Total Future EDUs 1,244
Cost per EDU $7,523
Notes:

1. Numbers may not sum due to rounding.

2. City Administration total equipment inventory presented in Appendix B.

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Development Impact Justification Study
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A.4 Offsetting Revenues
In calculating DIFs, it is important to consider any offsetting revenue in the City Administration facilities calculations total, as any existing account balance or other offsetting revenue funds must be subtracted from the facilities cost total. As of the end of August 2025, the City had $695,560 in its current City Administration Facilities account that needed to be subtracted from the facilities cost total as indicated in Table 16 above.

A.5 City Administration Facilities Fee Calculations
Once the total future facility cost has been determined, the maximum calculated fee for each land use category can be generated. This is done by dividing the total future facility cost by the projected City Administration Facilities EDUs to generate a per EDU rate, which equals $7,523 per EDU as shown above in Table 16. As discussed in Section III, per the directive of AB 602, for housing development projects, nexus studies adopted after July 1, 2022, will no longer be on a per unit basis, but will be calculated based on square footage of proposed units of the development, unless the local agency demonstrates that another metric is more appropriate.

The residential Fee per Sq. Ft. was determined by first multiplying the cost per EDU of $7,523 by the total number of residential EDUs (516), resulting in the total amount funded from residential property of $3,880,241. This result was then divided by the total anticipated residential square feet of 1,062,401 to generate the residential Fee per square foot of $3.65. Details of this calculation are shown in the table below.

Table 17: Residential City Administration Facilities Costs Financed by Fees Summary per Land Use Category
1 Land Use Type EDUs per Unit Number of
Projected Units Calculation Total EDUs
Residential 1.00 516 516
Total EDUs [a] 516
Total Cost per EDU [b] $7,523
Total Fees [c] = [a] x [b] $3,880,241
Total Residential Sq. Ft. [d] 1,062,401
Total Cost per Residential Sq. Ft. [e] = [c]/[d] $3.65
Note:

1. Numbers may not sum due to rounding.

Similarly, the non-residential Fee per Sq. Ft. was determined by multiplying the cost per EDU of $7,523 by the total number of non-residential EDUs applicable to each land use type. The table below summarizes the Fee amounts per hotel room and per non-residential 1,000 Sq. Ft. and the total cost financed by Fees imposed on non-residential land uses.

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Development Impact Justification Study
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Table 18: Non-Residential City Administration Facilities Costs Financed by Fee Summary per Land Use Category 1
Land Use Type
EDUs per
Room/1,000
Non-Res.

Sq. Ft.1
Fee per Room/1,000
Non-Res. Sq. Ft..

Number of Projected
Rooms/Non-Res. Sq. Ft.

Costs Financed by
Fees
[a] [b] = [a] x [$ per EDU] [c] [d] = [c] x [b]
Hotel 0.71 $5,343 210 $1,120,913
Commercial/Retail 0.64 $4,779 670,796 $3,205,836
Office 0.68 $5,083 70,557 $358,673
Industrial 0.24 $1,821 136,745 $249,078
Institutional/Other 1.39 $10,484 51,711 $542,160
Total $5,476,660
Note:

1. Numbers may not sum due to rounding.

A.6 Proposed Fees
A summary of the proposed City Administration Facilities Fee is presented on the table below. A summary of the proposed City Administration fees is presented in Tables 19 and 20 below. The Fees recommended in this Fee Study reflect the maximum justifiable Fee level that may be imposed on new residential and nonresidential development by the City under the statutory requirements of California Code Section 6600 et seq.

Table 19: City Administration Facilities Costs Financed by Fees Summary per Land Use Category Land Use Type
Residential Fee
per Sq. Ft./per
Room/1,000
Non-Res. Sq. Ft.

Number of Projected
Res Sq. Ft., Rooms, and
Non-Res. Sq. Ft
Costs Financed by
Fees
Residential $3.65 1,062,401 $3,880,241
Hotel $5,343 210 $1,120,913
Commercial/Retail $4,779 670,796 $3,205,836
Office $5,083 70,557 $358,673
Industrial $1,821 136,745 $249,078
Institutional/Other $10,484 51,711 $542,160
Total $9,356,900

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Table 20: City Administration Facilities Fee Summary
Land Use Calculated Fees
Residential (Per Sq. Ft.) $3.65
Hotel (Per Room) $5,343
Commercia /Retail (Sq. Ft.) $4.78
Office (Per Sq. Ft.) $5.08
Industrial (Per Sq. Ft.) $1.82
Institutional/Other (Per Sq. Ft.) $10.48
A.7 DIF Annual Cost Escalation Recommendations
The DIFs proposed in this section are based on facility costs in 2025 dollars. It is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current California Construction Cost Index (“CCCI”).

This Construction Cost Index (“CCI”) is based upon the Building Cost Index (“BCI”) average as produced by Engineering News-Record (“ENR”).

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B Police DIFs
B.1 Police Facilities (Nexus Requirement AB 1600)
The Police Facilities element includes those facilities used by the City Police Department to maintain police services. The fees collected from the new development will be used exclusively for Police Department purposes. All new development within the City contributes to the direct and cumulative impacts of development on Police Department facilities and creates the need for new facilities to accommodate growth. The facilities in this section are defined as buildings, land, vehicles, property, and equipment; basically, any capital asset with a life of 5 years or longer. The facilities, equipment, and vehicles used to provide these services will have to be purchased or replaced to meet this increased demand. Thus, a reasonable relationship exists between the need for Police Facilities and the impact of residential and non-residential development.

Table 21 below illustrates how the police fee will meet the requirements of AB 1600 with regard to use of the fee, type of development funded or partially funded by the fee revenue, reasonable relationship to the need for facilities, and proportionality requirements.

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Table 21: Police Facilities Element
AB 1600 Code
Section Description Justification
66001(a)(1) Identify the purpose of the
Fee.

Provide a revenue source that will provide funds to
acquire vehicles, property and equipment, and additional facilities that will mitigate the impacts of new residential and non-residential development to the City’s Police
facilities.
66001(a)(2) Identify the use to which the
Fee is to be put.

Expansion or enhancement of additional police
headquarters or substations, police vehicles, property and equipment.
66001(a)(3)
Demonstrate how there is a
reasonable relationship
between the Fee’s use and
the type of development
project on which the Fee is
imposed.

New residential and non-residential development in the
City will generate additional residents and visitors and employees in the City, thus increasing the need for trained police personnel. Buildings, vehicles, property and
equipment used to provide these services will have to be purchased or enhanced to meet this increased demand
and maintain the same LOS to the City.
66001(a)(4)
Demonstrate how there is a
reasonable relationship
between the need for the
public facilities and the type
of development project on
which the Fee is imposed.

The additional residents and employees from new
development will impact the demand for police vehicles, property and equipment. New Police headquarters,
vehicles and equipment are needed to mitigate the
impacts of the additional residents and employees. If
additional buildings, vehicles and equipment are not
acquired, then overall public safety LOS in the City will suffer.
66001(b)
Demonstrate how there is a
reasonable relationship
between the amount of the
Fee and the cost of the public
facility.

The police fee is based on the cost to provide
expand/enhance buildings, and to purchase additional
vehicles, property and equipment, and additional facilities. at the same levels as provided to existing residents.

The table below identifies the current inventory for Police facilities. Notably, all furniture, fixtures, and equipment have been consolidated into one integrated unit that includes all department equipment, such as furniture modules and other equipment, to simplify the representation of the data. This is presented in detail in Appendix A and Appendix B.

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Table 22: Police Facilities Inventory as of 2025
Facility Quantity
Buildings (Square Feet) 7,730
Land (Acres) 0.73
Vehicles (Number of Vehicles) 30
Furniture, Fixtures, and Equipment (One Integrated Unit) 1 B.2 Calculation Methodology
The Police Fee was calculated using the Standards-Based Methodology discussed in Section V. For future development to receive the same LOS as exists today, the City will need to acquire or construct or enhance additional Police facilities and purchase vehicles and equipment. Assuming the City’s projected growth over the next 15 years, the City will need to acquire or construct additional infrastructure in order to continue to maintain the existing LOS.

B.3 LOS
As stated earlier in Section III, in September of 2021 the Governor of California signed AB 602 which provides new statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these new requirements is that when applicable, a nexus study shall identify the existing LOS for each public facility, identify the proposed new LOS, and include an explanation of why the new LOS is necessary. The LOS used to calculate the Police Fees in this section is the existing LOS as defined as the relationship between the replacement cost of Police Facilities (as described in this section) and the City’s existing EDUs as discussed in Section V.

The current LOS is calculated by dividing the total inventory of a facility type, as noted above, by the existing EDUs Served within the City. As indicated below, the existing LOS for every 1,000 EDUs is 803 square feet of building space. The same LOS methodology applies to land, vehicles and integrated equipment and is presented below in Table 23.

Table 23: Police Facilities Current LOS as of 2025
Facility Type Facility Units per
1,000 EDUs
Buildings (Square Feet) 803
Land (Acres) 0.076
Vehicles (Number of Vehicles) 3.115
Furniture, Fixtures, and Equipment (Integrated Unit) 0.104

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City of Morro Bay August 19, 2025
Development Impact Justification Study
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The facility units generated in the table above are used to determine future Police Facility Units (buildings, land, vehicles, and equipment) funded by new development by 2040. This is presented below in Table 24. The mathematics behind these calculations are presented in detail in Appendix A.

Table 24: Police Future Facilities Required to Maintain the Current LOS by 2040 Facility Type
Number of Facility
Units Funded by
New Development
Buildings (Square Feet) 1,443
Land (Acres) 0.136
Vehicles (Number of Vehicles) 6.159
Furniture, Fixtures, and Equipment (Integrated Unit) 0.187 It’s important to note that construction and acquisition costs are dependent on the real estate market at the time of development. Location, demand for land, encumbrances, comparable acquisitions, and construction costs are a few of the many variables that play into appraisals and negotiations. Each facility will have its own location and improvement requirements. However, DTA determined general cost estimates, on a per square foot basis, for Police facilities, based on historical and current data available. It’s also important to note that building costs for public safety facilities are somewhat higher than conventional structures as they must be built to a higher standard and assume a higher level of use (24-hour use). These cost estimates were then applied to the future facility units. Please see Table 25 below for additional detail regarding the costs for Police facilities.

Table 25: Police Total Facilities Costs in 2040
1 Facility Type
Facility Units
Funded by New
Development
Cost Per
Unit
Total Facility Cost
for Future
Development
Buildings (Square Feet) 1,443 $1,088 $1,569,130
Land (Acres) 0.136 $1,264,732 $172,321
Vehicles (Number) 6.159 $47,327 $291,502
Equipment (Integrated Unit) 2 0.187 $1,087,191 $202,919 Offsetting Revenue $45,093
Total Facilities Cost $2,190,779
Total Future EDUs 1,798
Cost per EDU $1,219
Notes:

1. Numbers may not sum due to rounding.

2. Total Police equipment inventory presented in Appendix B.

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City of Morro Bay August 19, 2025
Development Impact Justification Study
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B.4 Offsetting Revenues
In calculating DIFs, it is important to consider any offsetting revenue in the Police facilities calculations total, as any existing account balance or other offsetting revenue funds must be subtracted from the facilities cost total. As of the end of August 2025, the City had $45,093 in its current Police Facilities account that needed to be subtracted from the facilities cost total as indicated in Table 25 above.

B.5 Police Facilities Fee Calculation
Once the total future facility cost has been determined, the maximum calculated fee for each land use category can be generated. This is done by dividing the total future facility cost by the projected Police Facilities EDUs to generate a per EDU rate, which equals $1,219 per EDU as shown above in Table 25. As discussed in Section II, per the directive of AB 602, for housing development projects, nexus studies adopted after July 1, 2022, will no longer be on a per unit basis, but will be calculated based on the square footage of proposed units of the development, unless the local agency demonstrates that another metric is more appropriate.

Again, the residential Fee per Sq. Ft. was determined by first multiplying the cost per EDU of 1,219 by the total number of residential EDUs (516), resulting in the total amount funded from residential property of $628,655. This result was then divided by the total anticipated residential 1,062,401 square feet to generate the residential Fee per square foot of $0.59. Details of this calculation are shown in the table below.

Table 26: Residential Police Facilities Costs Financed by Fees Summary per Land Use Category 1 Land Use Type EDUs per Unit Number of
Projected Units Calculation Total EDUs
Residential 1.00 516 516
Total EDUs [a] 516
Total Cost per EDU [b] $1,219
Total Fees [c] = [a] x [b] $628,655
Total Residential Sq. Ft. [d] 1,062,401
Total Cost per Residential Sq. Ft. [e] = [c]/[d] $0.59
Note:

1. Numbers may not sum due to rounding.

Similarly, the non-residential fee per 1,000 Sq. Ft. was determined by multiplying the cost per EDU of $1,219 by the total number of non-residential EDUs applicable to each land use type. The table below summarizes the Fee amounts per hotel room and per 1,000 Sq. Ft. and the total cost financed by Fees imposed on non-residential land uses.

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Development Impact Justification Study
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Table 27: Non-Residential Police Facilities Costs Financed by Fees Summary per Land Use Category
1 Land Use Type
EDUs per
Unit /NonRes. Sq. Ft.
1 Fees per Projected
Units/
1,000 Non-Res. Sq. Ft
Number of
Projected
Homes/NonRes. Sq. Ft.

Costs Financed
by Fees
[a] [b]= [a] x [$ per EDU] [c] [e] = [c] x [b]
Hotel 0.71 $866 210 $181,604
Commercial/Retail 1.39 $1,696 670,796 $1,137,599
Office 0.97 $1,179 70,557 $83,198
Industrial 0.38 $462 136,745 $63,203
Institutional/Other 1.53 $1,867 51,711 $96,521
Total $1,562,124
Note:

1. Numbers may not sum due to rounding.

B.6 Proposed Fees
A summary of the proposed Police fees is presented in Tables 28 and 29 below. The Fees recommended in this Fee Study reflect the maximum justifiable Fee level that may be imposed on new residential and non-residential development by the city under the statutory requirements of California Code Section 6600 et seq.

Table 28: Police Facilities Costs Financed by Fees Summary per Land Use Category Land Use Type
Residential Fee
per Sq. Ft./
Unit/Non-Res.

Sq. Ft.

Number of
Projected Res Sq.

Ft./Units/Non-Res.

Sq. Ft
Costs Financed by Fees
Residential $0.59 1,062,401 $628,655
Hotel $866 210 $181,604
Commercial/Retail $1,696 670,796 $1,137,599
Office $1,179 70,557 $83,198
Industrial $462 136,745 $63,203
Institutional/Other $1,867 51,711 $96,521
Total $2,190,779

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City of Morro Bay August 19, 2025
Development Impact Justification Study
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Table 29: Police Fee Summary
Land Use Calculated Fees
Residential (Per Sq. Ft.) $0.59
Hotel (Per Sq. Ft.) $866
Commercial /Retail (Per Sq. Ft.) $1.70
Office (Per Sq. FT.) $1.18
Industrial (Per Sq. Ft) $0.46
Institutional/Other (Per Sq. Ft.) $1.87
B.7 DIF Annual Cost Escalation Recommendations
The DIFs proposed in this section are based on Facilities costs in 2025 dollars, it is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current CCCI. This construction cost index is based upon the BCI average as produced by ENR.

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C Fire DIFs
C.1 Fire Facilities (Nexus Requirement AB 1600)
The Fire Facilities element includes the facilities and equipment necessary to provide fire suppression, emergency medical services, fire prevention, emergency management, fire investigation, and rescue services throughout the City and surrounding jurisdictions. The facilities in this section are defined as buildings, land, vehicles, and the purchase of property and equipment; basically, any capital asset with a life of 5 years or longer. The proposed DIF discussed in this section, if adopted, would be imposed, collected, and spent on the acquisition of land, construction, and expansion of existing City facilities to accommodate new growth. The fees collected from the new development will be used exclusively for Fire Department purposes.

All new development within the City contributes to the direct and cumulative impacts of development on Fire Department facilities and creates the need for new facilities to accommodate growth. The Fire element includes the facilities necessary to provide basic Fire Department services and facilities services throughout the City.

Table 30 below illustrates how the Fire DIF will meet the requirements of AB 1600 with regard to use of the fee, type of development funded or partially funded by the fee revenue, reasonable relationship to the need for facilities, and proportionality requirements.

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Development Impact Justification Study
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Table 30: Fire Facilities Element
AB 1600 Code
Section Description Justification
66001(a)(1) Identify the purpose of the Fee.

Provide a revenue source that will provide funds to
construct and expand/enhance the various Fire
facilities, acquire equipment and property, and a
variety of specialized fire and emergency vehicles
that will mitigate the impacts of new residential and
non-residential development to the City’s Fire
facilities.
66001(a)(2) Identify the use to which the Fee
is to be put.

Expansion/construction/acquisition of Fire facilities,
property and equipment, and vehicles.
66001(a)(3)
Demonstrate how there is a
reasonable relationship between
the Fee’s use and the type of
development project on which
the Fee is imposed.

New residential and non-residential development in
the City will generate additional residents and
employees, thus increasing the need for trained Fire
personnel. Multiple buildings, property and
equipment, and the purchase of vehicles used to
provide these facilities to meet this increased
demand and maintain the current LOS to the City.
66001(a)(4)
Demonstrate how there is a
reasonable relationship between
the need for the public facilities
and the type of development
project on which the Fee is
imposed.

The additional residents and employees from new
development will impact demand for fire facilities.

Expanded /enhanced Fire facilities, vehicles, and
equipment are needed to mitigate the impacts of the
additional residents and employees. If additional Fire
facilities, vehicles, and equipment are not
constructed and equipment and vehicles are not
acquired, then overall public safety LOS in the City
will suffer.
66001(b)
Demonstrate how there is a
reasonable relationship between
the amount of the Fee and the
cost of the public facility.

The Fire Fee is based on the cost to expand/enhance
facilities, and to purchase property and equipment,
and a variety of firefighting and emergency vehicles
at the same levels as provided to existing residents.

The table below identifies the current inventory for Fire facilities. All the furniture, fixtures, property, and equipment have been consolidated into one integrated unit that includes all department equipment, such as furniture modules and other equipment, to simplify the representation of the data. This is presented in detail in Appendix A and Appendix B.

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Development Impact Justification Study
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Table 31: Fire Facilities Inventory as of 2025
Facility Quantity
Buildings (Square Feet) 14,500
Land (Acres) 0.95
Vehicles (Number of Vehicles) 14.00
Furniture, Fixtures, and Equipment (One Integrated Unit) 1.00 C.2 Calculation Methodology
The Fire Fee was calculated using the Standards-Based Methodology discussed in Section V. For future development to receive the same LOS as exists today, the City will need to acquire or construct additional Fire facilities, land, and purchase new vehicles, property, and equipment. Assuming the City’s projected growth over the next 15 years, the City will need to acquire, construct, or enhance additional infrastructure in order to continue to maintain the existing LOS.

The Standards-Based Methodology (LOS) ensures that City facilities are appropriately developed and sized so that future residents and employees do not cause a reduced LOS by unduly burdening the infrastructure system, thus leading to decay and deterioration. This methodology provides several advantages, including not needing to know the cost of a specific facility, how much capacity or service is provided by the current system, or having to commit to a specific size of the facility. Another advantage of this methodology is that it does not involve the planning of any future facilities. This methodology assigns 100% of the fees to new development and allows the City to apply the fee revenue to any eligible project it wants to.

C.3 LOS
As stated earlier in Section III, in September of 2021 the Governor of California signed AB 602 which provides new statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these new requirements is that when applicable, a Nexus study shall identify the existing LOS for each public facility, identify the proposed new LOS, and include an explanation of why the new LOS is necessary. The LOS used to calculate the Fire Fees in this section is the existing LOS as defined as the relationship between the replacement cost of Fire Facilities (as described in this section) and the City’s existing persons served population as discussed in Section IV. The current LOS is calculated by dividing the total inventory of a facility type, as noted above, by the existing number of EDUs within the City. As indicated below, the existing LOS for every 1,000 EDUs is 1,506 square feet of building space. The same LOS methodology applies to land, vehicles, and integrated equipment and is presented below in Table 32.

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Development Impact Justification Study
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Table 32: Fire Facilities Current LOS as of 2025
Facility Type Facility Units per 1,000 EDUs
Buildings (Square Feet) 1,506
Land (Acres) 0.099
Vehicles (Number of Vehicles) 1.454
Furniture, Fixtures, and Equipment
(Integrated Unit) 0.104
The facility units generated in the table above are used to determine future Fire Facility Units (buildings, land, vehicles, and property and equipment) funded by new development in 2040. This is presented below in Table 33. The mathematics behind these calculations are presented in detail in Appendix A.

Table 33: Fire Future Facilities Required to Maintain the Current LOS by 2040 Facility Type Number of Facility Units Funded by New
Development
Buildings (Square Feet) 2,706
Land (Acres) 0.177
Vehicles (Number of Vehicles) 2.613
Furniture, Fixtures, and Equipment
(Integrated Unit) 0.187
Notably, it’s important to note that construction and acquisition costs are dependent on the real estate market at the time of development. Location, demand for land, encumbrances, comparable acquisitions, and construction costs are a few of the many variables that play into appraisals and negotiations. Each facility will have its own location and improvement requirements. However, DTA determined general cost estimates, on a per square foot basis, for Fire Facilities, based on historical and current data available. It’s also important to note that building costs for public safety facilities are somewhat higher than conventional structures as they must be built to a higher standard and assume a higher level of use (24-hour use). These cost estimates were then applied to the future facility units. Please see Table 34 below for additional detail regarding the costs for Fire facilities.

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Development Impact Justification Study
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Table 34: Fire Total Facilities Costs in 2034 1
Facility Type
Facility Units
Funded by New
Development
Cost Per Unit
Total Facilities
Costs for Future
Development
Buildings (Square Feet) 2,706 $1,200 $3,247,634
Land (Acres) 0.177 $1,264,732 $224,254
Vehicles (Number) 2.613 $432,064 $1,129,001
Equipment (Integrated Unit) 0.187 $2,055,884 $383,722
Less: Offsetting Revenue $45,616
Equals: Total Facilities Costs $4,938,995
Total Future EDUs 1,798
Cost Per EDU $2,748
Notes:

1. Numbers may not sum due to rounding.

2. Total Fire Equipment inventory presented in Appendix B.

C.4 Offsetting Revenues
In calculating DIFs, it is important to consider any offsetting revenue in the Fire facilities calculations total, as any existing account balance or other offsetting revenue funds must be subtracted from the facilities cost total. As of August of 2025, the City has $45,616 in its current Fire Facilities account that needs to be subtracted from the facilities cost total as indicated in Table 34 above.

C.5 Fire DIF Calculation
Once the total future facility cost has been determined, the maximum calculated fee for each land use category can be generated. This is done by dividing the total future facility cost by the projected Fire Facilities EDUs to generate a per EDU rate, which equals $2,748 per EDU as shown above. As discussed in Section II, per the directive of AB 602, for housing development projects, nexus studies adopted after July 1, 2022, will no longer be on a per unit basis, but will be calculated based on the square footage of proposed units of the development, unless the local agency demonstrates that another metric is more appropriate.

Again, the residential fee per Sq. Ft. was determined by first multiplying the cost per EDU of $2,748 by the total number of residential EDUs (516), resulting in the total amount funded from residential property of $1,417,269. This result was then divided by the total anticipated residential 1,062,401 square feet to generate the residential Fee per square foot of $1.33. Details of this calculation are shown in the table below.

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Table 35: Residential Fire Facilities Costs Financed by Fees Summary per Land Use Category 1 Land Use Type EDUs per Unit Number of
Projected Units Calculation Total EDUs
Residential 1.00 516 516
Total EDUs [a] 516
Total Cost per EDU [b] $2,748
Total Fees [c] = [a] x [b] $1,417,269
Total Residential Sq. Ft. [d] 1,062,401
Total Cost per Residential Sq. Ft. [e] = [c]/[d] $1.33
Note:

1. Numbers may not sum due to rounding.

Similarly, the non-residential Fee per 1,000 Sq. Ft. was determined by multiplying the cost per EDU of $2,748 by the total number of non-residential EDUs applicable to each land use type. The table below summarizes the Fee amounts per hotel room and per non-residential per 1,000 Sq. Ft. and the total cost financed by Fees imposed on non-residential land uses.

Table 36: Non-Residential Fire Facilities Costs Financed by Fees Summary per Land Use Category
1 Land Use Type
EDUs per
Room/NonRes. Sq. Ft.
1 Fees per Room/
1,000 Non-Res. Sq.

Ft
Number of Projected
Rooms/Non-Res. Sq. Ft.

Costs Financed by
Fees
[a] [b]= ($ per EDU) [c] [e] = [c] x [b]
Hotel 0.71 $1,951 210 $409,417
Commercial 1.39 $3,823 670,796 $2,564,657
Office 0.97 $2,658 70,557 $187,565
Industrial 0.38 $1,042 136,745 $142,487
Institutional/Other 1.53 $4,208 51,711 $217,601
Total $3,521,726
Note:

1. Numbers may not sum due to rounding.

C.6 Proposed DIFs
A summary of the proposed Fire DIFs is presented in Tables 37 and 38 below. The fees recommended within this Fee Study reflect the maximum justifiable fee level that may be imposed on new residential and non-residential development that the City may impose under the statutory requirements of Government Code Section 66000 et seq.

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Table 37: Fire Facilities Costs Financed by Fees Summary per Land Use Category Land Use Type
Residential Fee per
Sq. Ft./Room/per
1000 Non-Res. Sq.

Ft.
1 Number of
Projected Res Sq.

Ft./ Room/Non-Res.

Sq. Ft/Rooms
Costs Financed by Fees
Residential $1.33 1,062,401 $1,417,269
Hotel $1,951 210 $409,417
Commercial/Retail $3,823 670,796 $2,564,657
Office $2,658 70,557 $187,565
Industrial $1,042 136,745 $142,487
Institutional/Other $4,208 51,711 $217,601
Total $4,938,995
Table 38: Fire Fee Summary
Land Use Calculated Fees
Residential (Per Sq. Ft.) $1.33
Hotel (Per Room) $1,951
Commercial/Retail (Per Sq. Ft.) $3.82
Office (Per Sq. Ft.) $2.66
Industrial (Per Sq. Ft.) $1.04
Institutional/other (Per Sq. Ft.) $4.21
C.7 DIF Annual Cost Escalation Recommendations
The DIFs proposed in this section are based on facility costs in 2025 dollars. It is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current CCCI. This CCI is based upon the BCI average as produced by ENR.

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D Parks DIFs
D.1 Parks Development Facilities Fees (Nexus Requirement AB 1600) The parks and recreation facilities will serve the residents of Morro Bay by providing facilities for recreation while enhancing the community’s appeal and quality of life.

The Fee Study includes a component for the development of new park and recreation facilities to serve new residential development for the City through 2040.

Covered in this fee category are park improvements, as well as enhancements to parks and recreation facilities. In maintaining the overall quality of life for residents, excellent park and recreation programs are important for the well-being of a city's community. Not only do parks make the community more attractive to residents (providing a stronger market base for local businesses), but they can also directly influence a city's ability to enhance its fiscal base by attracting commercial and industrial businesses. As noted in Section IV, the fee analysis for Parks will be limited to City Residents and will exclude other non-residential developments.

Table 39 below illustrates how the Parks Fee will meet the requirements of AB 1600 with regard to use of the Fee, type of development funded or partially funded by the Fee revenue, reasonable relationship to the need for facilities, and proportionality requirements.

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Table 39: Parks Facilities
Description Justification
Identify the purpose of the Fee.

Provide a revenue source that will provide funds to
develop parks and recreation facilities and acquire
vehicles and equipment that will mitigate the impacts
of new residential development to the City’s park and
recreation facilities.

Identify the use to which the Fee
is to be put.

Acquisition of parks and recreation facilities, and the further development of Park land.

Demonstrate how there is a
reasonable relationship between
the Fee’s use and the type of
development project on which
the Fee is imposed.

New residential development in the City will generate
additional residents, thereby increasing the need for
parks and recreational facilities. Park and recreational facilities equipment used to provide these services
will have to be expanded or constructed to meet this
increased demand and maintain the same LOS to the
City.

Demonstrate how there is a
reasonable relationship between
the need for the public facilities
and the type of development
project on which the Fee is
imposed.

The additional residents from the new development
will impact demand for parks and recreational
facilities. New parks and recreational facilities are
needed to mitigate the impact of the additional
residents. If additional park and recreational facilities are not constructed, then the LOS will decline and the
overall quality of life for residents in the City will
suffer.

Demonstrate how there is a
reasonable relationship between
the amount of the Fee and the
cost of the public facility.

The parks and recreation facilities fee is based on the cost to provide park and recreational facilities. The
fee is based on the cost of providing new materials at
the same levels as provided to existing residents.

The table below identifies the current inventory for Parks facilities. Notably, using information provided by the City, DTA has determined that the City has 50.22 total acres of usable park land as shown below in Table 40.

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Table 40: Current Park Facilities Inventory
Park Inventory Acres
Anchor Memorial Park 0.06
Bayshore Bluffs Park 3.84
Centennial Parkway Project 0.1
City Park 0.91
Cloisters Park 28.41
Coleman Park 1.04
Del Mar Park 10.31
Mariner Memorial Park 0.06
Monte Young Park 0.8
North Point 1.05
Tidelands Park 2.24
Skate Park 1.4
Total 50.22
D.2 Calculation Methodology
The Parks Fee was calculated using the standards-based methodology discussed in Section V. For future development to receive the same LOS as exists today, the City will need to construct or enhance park facilities and equipment. Assuming the City’s growth over the next 15 years, the City will need to acquire or construct additional infrastructure in order to continue to maintain the existing LOS. Non-residential development was excluded from the Parks Fee calculation.

D.3 LOS
As stated in Section III, in September of 2021 the Governor of California signed AB 602, which provides new Statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these new requirements is that, when applicable, a Nexus Study shall identify the existing LOS for each public facility, identify the proposed new LOS, and include an explanation of why the new LOS is necessary. The LOS used to calculate the Parks Fee in this section is the existing LOS, defined as the relationship between the cost of park facilities (as described in this section) and the City’s existing EDUs as discussed in Section IV.

The standards-based LOS ensures that City facilities are appropriately developed and sized so that future residents do not cause a reduced LOS by unduly burdening the infrastructure system, thus leading to decay and deterioration. This methodology provides several advantages, including not needing to know the size or cost of a specific facility. Another advantage of this methodology is that it does not involve the planning of any future facilities. This methodology assigns 100% of the Fees to new development and allows the City to apply the Fee revenue to any Fee-eligible project.

Park DIFs in this study are calculated utilizing the "Standards-Based" LOS

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methodology introduced in Section V. As cited in the 2021 Morro Bay General Plan, “under the California Quimby Act, cities can require land or in-lieu fees in order to achieve a minimum of 3 acres per 1,000 residents, with the possibility of increasing the requirement to a maximum of 5 acres per 1,000 residents if the city already provides more than 3 acres per 1,000 residents.” Given this, the Parks standard objective used in this calculation is 3 acres per 1,000 residents.

Currently, the City has 50.22 total acres of usable parkland as shown in the Park Facilities Inventory presented above in Table 40. The current LOS is calculated by multiplying the acres per 1,000 residents by the residents per EDU to generate the Facility Units per 1,000 EDUs. As indicated below in Table 41, the existing LOS for every 1,000 EDUs is 4.70 acres, currently exceeding the 3.0 LOS established by the Quimby Act.

Table 41: Park Facilities Current LOS
Acres per 1,000
Residents Residents per EDU Facility Units per 1,000 EDUs [a] [b] [c] = [a] x [b]

3.0 1.57 4.70
The facility units generated in the table above are used to determine future Parks Facility Units (i.e., acres of parks) funded by new development in 2040. This is presented below in Table 42 and presented in detail in Appendix A.

Table 42: Park Future Facilities in 2040
Facility Units per EDU Future EDUs
Number of Facility
Units Funded by New
Development
[a] [b] [c] = [b]/1,000 x [a]

4.70 516 2.42
This Park fee calculation will look at both development and land costs. It’s important to note that park development construction costs are dependent on the real estate market at the time of development. Location, demand for land, encumbrances, comparable acquisitions, and construction costs are a few of the many variables that play into appraisals and negotiations.

Each Park facility will have its own location and improvement requirements. To determine a fair and accurate land acquisition cost, DTA utilized the CoStar Real Estate Software Platform and obtained a sample of 2 undeveloped properties within the City. Each of the properties in the sample were sold between 2018 and 2021 and an average of their sales price was determined. Based on this inventory, DTA used an average of $1,264,732 per acre as an estimated cost of land acquisition. In

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addition, using information provided by City staff and cost research into comparable facilities, DTA determined that the cost for park development, which includes buildings, vehicles, property, and equipment, was $177,689 per acre. Combined, the cost per acre, including land and development, is $1,442,420 per acre as indicated in Table 43 below.

Table 43: Morro Bay Park Cost Summary

Park Land Categories Cost Per Acre
Land Acquisition $1,264,732
Park Development $177,689
Total Costs $1,442,420
Based on the costs per acre above, the total costs of new park improvements equal approximately $3,476,364 in order to maintain the required LOS of 3.0 acres per 1,000 residents. This is presented in Table 44 below.

Table 44: Park Total Facilities Costs in 2040
1 Facility Type
Facility Units
Funded by New
Development
Cost Per Unit
Total Facility
Cost for Future
Development
Parks (Acres) 2.42 $1,442,420 $3,497,341
Offsetting Revenue $128,923
Total Facilities Cost $3,368,418
Total Future EDUs 516
Cost per EDU $6,530
Note:

1. May not sum due to rounding.

D.4 Offsetting Revenues
According to information obtained by DTA, there are offsetting revenues that need to be considered in the park facilities calculation total. The current balance as of August 2025 has $128,923 in its current parks fee account that must be subtracted from the Parks facilities cost total. This is reflected above in Table 44.

D.5 Park Facilities Fee Calculation
Once the total future facility cost has been determined, the maximum calculated Fee for each land use category can be generated. This is done by dividing the total future facility cost by the projected Park Facilities EDUs to generate a per EDU rate, which equals $6,530 per EDU as shown below. As discussed in Section II, per the directive of AB 602, for housing development projects, Nexus Studies adopted after July 1, 2022, will no longer be on a per unit basis and will instead be calculated based on the square footage of proposed units of the development, unless the local agency

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demonstrates that another metric is more appropriate.

The residential Fee per Sq. Ft. was determined by first multiplying the cost per EDU of $6,530 by the total number of residential EDUs (516), resulting in a total amount funded from residential property of $3,368,418. This result was then divided by the total anticipated residential square feet, 1,062,401, to generate the Fee per square foot of $3.17. Details of this calculation are shown in Table 45 below.

Table 45: Park Facilities Costs Financed by Fees Summary per Land Use Category 1 Land Use Type EDUs per Unit Number of
Projected Units
Conversion
Factor Total EDUs
Residential 1.00 516 516
Total EDUs [a] 516
Total Cost per EDU [b] $6,530
Total Costs Financed by Residential Fees [c] = [a] x [b] $3,368,418 Total Residential Sq. Ft. [d] 1,062,401
Total Fee per Residential Sq. Ft. [e] = [c]/[d] $3.17
Note:

1. May not sum due to rounding.

D.6 Proposed Fees
A summary of the proposed Park Fees is presented in Table 46 below. The Fees recommended within this Fee Study reflect the maximum justifiable Fee level that may be imposed on new residential and non-residential development by the City under the statutory requirements of Government Code Section 66000 et. seq.

Table 46: Park Facilities Costs Financed by Fees Summary per Land Use Category Land Use Res. Fee per
Sq. Ft.

Projected Res.

Sq. Ft.

Costs Financed by
Fees
Residential $3.17 1,062,401 $3,368,418
Total $3,368,418
The Parks Fee is summarized in the table below.

Table 47: Park Facilities Fees Summary
Land Use Calculated Fees
Residential (per Sq. Ft.) $3.17

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D.7 DIF Annual Cost Escalation Recommendations
The DIFs proposed in this section are based on Facilities costs in 2025 dollars, it is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current CCCI. This construction cost index is based upon the BCI average as produced by ENR.

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E Transportation DIFs
E.1 Transportation Facilities (Nexus Requirement AB 1600) The City’s goal is to improve the streets and transportation infrastructure of the City over the build-out horizon. Improvements for each street will focus on roadway and interchange improvements, pavements, curbs and gutters, signal installation, multibridges, traffic signals, arterials, roads and additional miscellaneous projects. This additional infrastructure support is necessary to provide safe and efficient vehicular access throughout the City. The proposed DIF is to help meet the transportation demand of new development through 2040. The DIF will provide a source of revenue to the City to allow for the acquisition, installation, and construction of needed transportation facilities, which in turn will both preserve the quality of life in the City and protect the health, safety, and welfare of the existing and future residents and employees.

Table 48 below illustrates how the transportation fee will meet the requirements of AB 1600 with regard to use of fees, type of development funded or partially funded by the Fee revenue, reasonable relationship to the need for facilities, and proportionality requirements.

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Table 48: Transportation Facilities Nexus Requirement
AB 1600 Code
Section Description Justification
66001(a)(1) Identify the purpose of the Fee.

Provide a revenue source that will provide funds to
expand/enhance various transportation projects,
including interchange improvements, on/off ramps,
traffic signals, and other infrastructure that will
mitigate the impact of new development on the City's
transportation system.
66001(a)(2) Identify the use to which the Fee
is to be put.

Fund or partially fund the construction of interchange
improvements, on/off ramps, traffic signals, and other
infrastructure projects within the City limits.
66001(a)(3)
Demonstrate how there is a
reasonable relationship between
the Fee’s use and the type of
development project on which
the fee is imposed.

New residential and non-residential development will
generate additional traffic on City streets. The Fee
revenue will be used to expand/enhance
transportation projects that new residents and
employees will use. A Fee imposed on new residential
and non-residential development is a reasonable
method for mitigating the impacts of such new
development and any resulting increase in LOS above
and beyond the current LOS that is required to meet
the plan approved by the City.
66001(a)(4)
Demonstrate how there is a
reasonable relationship between
the need for the public facilities
and the type of development
project on which the Fee is
imposed.

The additional traffic volumes generated by new
development will impact current levels of congestion.

New interchange improvements, on/off ramps, traffic
signals, and other infrastructure are needed to
mitigate the impacts of the increased traffic volumes.

If the proposed projects are not constructed in
concert with new development, the City's
transportation system will experience higher traffic
volumes and increase the level of congestion to a
condition well below City standards.
66001(b)
Demonstrate how there is a
reasonable relationship between
the amount of the Fee and the
cost of the public facility.

Project costs are allocated to new development based
on the percentage of traffic volume generated by new
development to the total traffic volume at build-out.

The specific fee imposed on the various land uses is
based on the relative trip generation rate as compared
to a residential unit (baseline rate or EDU factor).

Table 49 below identifies the current inventory for Transportation facilities. Based on the information received from the City, the current inventory lists six (6) categories: pavement, curbs and gutters, sidewalks, bridges, traffic signals, and arterials, roads, etc. Notably, the value of this inventory has been estimated in 2025 dollars to adequately capture the cost of any new expansion/enhancement required to mitigate the impacts of new development

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Table 49: Current Transportation Infrastructure Inventory as of 2025 Facility Replacement Cost
Pavement $96,919,500
Curbs and Gutters $37,300,000
Sidewalks $59,343,000
Bridges $11,500,000
Traffic Signals $250,000
Arterials, Roads, etc. $160,000,000
Total $365,312,500
E.1 Calculation Methodology
The Transportation Facilities Fee was calculated using the Standards-Based Methodology discussed in Section V. For future development to receive the same LOS as exists today, the City will need to acquire or construct additional Transportation Facilities and equipment. Assuming the City’s growth over the next 15 years, the City will need to acquire or construct additional infrastructure in order to continue to maintain the existing LOS. The LOS ensures that City facilities are appropriately developed and sized so that future residents and employees do not cause a reduced LOS by unduly burdening the infrastructure system, thus leading to decay and deterioration.

E.2 LOS
As stated earlier in Section III, in September of 2021 the Governor of California signed AB 602 which provides new statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these new requirements is that when applicable, a Nexus study shall identify the LOS for each public facility, identify the proposed new LOS, and include an explanation of why the new LOS is necessary.

The LOS used to calculate the Transportation DIFs in this section is the existing LOS, as defined by the relationship between the replacement cost of Transportation Facilities (as described in this section) and the City’s existing water usage, as discussed in Section IV.

E.3 Offsetting Revenues
In calculating the DIF, it is important to consider any existing account balance or offsetting revenue in the Transportation Fee calculations total, The current balance as of August 2025 in the Transportation DIF account is $211,604. These funds should be held in a separate account and spent down to a zero balance before the revenue from the new Transportation impact fees are spent.

E.4 Transportation Facilities Fee Calculation
For purposes of this Study, the LOS is estimated as (i) the replacement cost of the

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City’s existing Transportation Facilities (identified above), divided by (ii total daily trips in the City. In other words, the LOS is the current replacement cost of transportation facilities per cost per trip. This is presented below and presented in detail in Appendix A.

Table 50: Current Transportation Inventory as of 2025
Inventory Quantity
Total Existing Facilities $365,312,500
Total Daily Trips 100,729
Cost per Trip $3,627
E.5 Transportation Facilities Fee Calculation
The residential Fee per Sq. Ft. was determined by first multiplying the cost per trip of $3,627 by the total number of average residential daily trips of 8.24 resulting in a fee per unit of $29,884. The fee per unit is multiplied by the 516 units projected over the build-out period resulting in a total cost of $15,414,562. This result was divided by the total anticipated residential 1,062,401 square feet to generate the residential Fee per square foot of $14.51. Details of this calculation are shown in Table 51 below.

Table 51: Residential Transportation Fee Calculation
Non-Residential Land Use
Category Conversion Fee Calculation
ADTs [a] 8.24
Cost per Trip [b] $3,627
Fee per Unit [c] = [a] x [b] $29,884
Projected Units [d] 516
Total Costs [e] = [c] x [d] $15,414,562
Projected Square Feet [f] 1,062,401
Residential Fee per Sq. Ft. [g] $14.51
Similarly, the non-residential Fee per room and per 1,000 Sq. Ft. was determined by multiplying the cost per trip of $3,627 by the total number of ADTs applicable with each land use type as presented in Table 52. In the case of commercial/retail, office, industrial and institutional/other, the total generated was divided by 1,000 to generate the fee per 1,000 square feet. The table below summarizes the Fee amounts per hotel room and other non-residential development per 1,000 Sq. Ft.

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Table 52: Non-Residential Transportation Fee Calculation Non-Residential Land Use Category ADTs Cost per Trip Fee per Unit/1,000 Sq.

Ft.
[a] [b] [c] = [a] x [b]/ 1,000
Hotel (Per Room) 4.24 $3,627 $15,377
Commercia/ Retail (Per SF) 25.69 $3,627 $93.16
Office (Per SF) 11.26 $3,627 $40.84
Industrial (Per SF) 5.06 $3,627 $18.33
Institutional/Other (Per SF) 8.69 $3,627 $31.50
E.6 Proposed Fees
A summary of the proposed Transportation Fees is presented in Table 53 below. The Fees recommended within this Fee Study reflect the maximum justifiable Fee level that may be imposed on new residential and non-residential development by the City under the statutory requirements of Government Code Section 66000 et. seq.

Table 53: Non-Residential Transportation Fee Calculation (Maximum Allowable Fees) Land Category TransportationFee
Residential (Per Sq. Ft.) $14.51
Hotel (Per Room) $15,377
Commercial Retail (Per Sq. Ft) $93.16
Office (Per Sq. Ft) $40.84
Industrial (Per Sq. Ft) $18.33
Institutional/Other (Per Sq. Ft.) $31.50
E.7 DIF Annual Cost Escalation Recommendations
The DIFs proposed in this section are based on facility costs in 2025 dollars. It is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current CCCI. This CCI is based upon the BCI average as produced by ENR.

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F Water DIFs
F.1 Water Facilities (Nexus Requirement AB 1600)
The Water Facilities element includes the facilities necessary to ensure adequate supply, storage, and distribution throughout the City. The proposed DIFs discussed in this section, if adopted, would be imposed, collected, and spent on the construction of new facilities, or expansion/enhancement of existing City facilities to accommodate new growth, and the fees collected from the new development will be used exclusively for such purposes. All new development within the City contributes to the direct and cumulative impacts of development on water facilities and creates the need for new facilities to accommodate growth. The Water element includes the facilities necessary to provide basic water supply, storage, and distribution services throughout the City.

Table 54 below illustrates how the Water DIF will meet the requirements of AB 1600 with regard to use of the Fee, type of development funded or partially funded by the fee revenue, reasonable relationship to the need for facilities, and proportionality requirements.

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Table 54: Water Facilities
AB 1600 Code
Section Description Justification
66001(a)(1) Identify the purpose of the Fee.

Provide a revenue source that will provide funds to
construct, expand, or enhance the various Water
facilities, acquire equipment and property, that will
mitigate the impacts of new residential and
non-residential development to the City’s Water
facilities.
66001(a)(2) Identify the use to which the Fee
is to be put.

Expansion/construction/acquisition of Water supply,
storage, and distribution facilities, as well as fixtures and equipment.
66001(a)(3)
Demonstrate how there is a
reasonable relationship between
the Fee’s use and the type of
development project on which
the Fee is imposed.

New residential and non-residential development in
the City will generate additional residents and
employees, thus increasing the demand for potable
water. The facilities used to provide these services
will have to be expanded/enhanced, or new facilities
will have to be constructed, to meet this increased
demand and maintain the current LOS to the City.
66001(a)(4)
Demonstrate how there is a
reasonable relationship between
the need for the public facilities
and the type of development
project on which the Fee is
imposed.

The additional residents and employees from the new
development will impact demand for water, based on
their water usage. New, expanded, or enhanced
facilities would be needed to mitigate the impact of
the additional residents and employees and maintain
the existing LOS.
66001(b)
Demonstrate how there is a
reasonable relationship between
the amount of the Fee and the
cost of the public facility.

The Water Fee is based on the cost to fund new or
enhanced facilities. The fee is based on the cost of
providing such facilities at the same level as provided to existing residents.

The table below identifies the current inventory for Water facilities. Based on the information received from the City, the inventory lists five (5) categories: Water Distribution, Water Storage, Water Supply, Water Treatment, and Other Water Facilities. The value of this inventory has been estimated in 2025 dollars, to adequately capture the cost of any new expansion/enhancement required to mitigate the impacts of new development.

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Table 55: Current Water Facilities Inventory as of 2025 Facility Replacement
Cost
Supply $81,135,000
Treatment $40,000,000
Distribution $160,385,000
Storage $65,000,000
Other $5,500,000
Total $352,020,000
F.2 Calculation Methodology
The Water Facilities Fee was calculated using the Standards-Based Methodology (LOS) discussed in Section V. For future development to receive the same LOS as exists today, the City will need to acquire or construct additional Water Facilities and equipment. Assuming the City’s growth over the next 15 years, the City will need to acquire or construct additional infrastructure in order to continue to maintain the existing LOS. The LOS ensures that City facilities are appropriately developed and sized so that future residents and employees do not cause a reduced LOS by unduly burdening the infrastructure system, thus leading to decay and deterioration.

F.3 LOS
As stated earlier in Section III, in September of 2021 the Governor of California signed AB 602 which provides new statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these new requirements is that when applicable, a Nexus Study shall identify the existing LOS for each public facility, identify the proposed new LOS, and include an explanation of why the new LOS is necessary. The LOS used to calculate the Water DIFs in this section is the existing LOS, as defined by the relationship between the replacement cost of Water Facilities (as described in this section) and the City’s existing water usage, as discussed in Section IV.

F.4 Offsetting Revenues
Currently, there are no offsetting revenues in the City’s Water Facilities account that need to be subtracted from the facilities cost total.

F.5 Water Facilities Fee Calculation
For purposes of this Study, the LOS is estimated as (i) the replacement cost of the City’s existing Water Facilities (identified above), divided by (ii) the current water usage per day in the City. In other words, the LOS is the current replacement cost of Water Facilities per Gallon-per-Day (“GPD”) used. Notably, the estimated current water usage is based on the City’s Water Master Plan Update from 2020, of

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approximately 1,090 acre-feet per year, or 355,177,590 GPD. (These calculations are presented in detail in Appendix A) The LOS calculations presented below are broken down into the individual water infrastructure categories listed in the current inventory, as shown in Table 56 allowing the City to set fees and direct fee revenue to specific areas of water infrastructure.

Table 56: Current Water Facilities LOS
Facilities Value Supply Treatment Distribution Storage Other Total Replacement Cost for Existing
Facilities $81,135,000 $40,000,000 $160,385,000 $65,000,000 $5,500,000 Estimated Water Usage per Day for
Existing Land Use $973,089 $973,089 $973,089 $973,089 $973,089 Replacement Cost per GPD $83.0 $41.0 $165.0 $67.0 $6.0
As stated, Water Fees in this Study are based on meter size, assuming the ¾” is the standard for single-family residential. As a result, the Fee for single-family units is calculated using the estimated water usage for such units. As shown above, Total Replacement Costs for Existing Facilities by the Estimated Water Usage for Existing Land Uses (GPD) range from $6.0 to $83.0. Based on information from the City of Morro Bay 2020 Water Master Plan Update, the single-family residential water usage was 166.0 gallons per day. Therefore, the resulting Fee for a single-family residential unit (which represents the fee for a ¾” meter) is equal to the per GPD multiplied by the average usage of 166 GPD, and ranges from $938 to $13,841.

Table 57: Water Residential 3/4” DIF Calculation
1 Inventory Classification Supply Treatment Distribution Storage Other Water Usage per Day [a] 973,089 973,089 973,089 973,089 973,089 Value per EBU [b] $83.0 $41.0 $165.0 $67.0 $6.0
Gallons per Day (GPD) [c] 166 166 166 166 166
Residential Fee 3/4 '
Meter
[d] =
[b] x [c] $13,841 $6,824 $27,360 $11,088 $938
Notes:

1. Calculation may not total due to rounding.

2. GPD calculation of 166 based on information taken from the City of Morro Bay 2020 Water Master Plan Update.

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Presented below in Table 58, residential units are grouped together using a 3/4“ meter. For hotel, commercial/retail, office, industrial and institutional/other land uses, a cost apportionment based on meter size is appropriate since average water consumption varies widely between different uses permitted on property designated for non-residential land use. To determine fees based on fixture counts for new units is both cumbersome and difficult to enforce when fixture additions occur. As illustrated below, the fee amounts vary depending on the meter size, ranging from $60,051 for a residence or business with a 3/4“ meter to $2,001,511 with a 6” meter.

Under AB 1600, the City has the option of charging this maximum fee level or any level up to this maximum amount.

Table 58: Water DIFs by Meter Size 1 (Maximum Allowable Fee) Meter
Size 2
Hydraulic
Capacity
Factor
Supply Treatment Distribution Storage Other Total
3/4 " 1.0 $13,841 $6,824 $27,360 $11,088 $938 $60,051
1" 1.67 $23,114 $11,395 $45,692 $18,518 $1,567 $100,286

1. Numbers may not sum due to rounding.

Assessing fees based upon meter size has the advantage of charging a fee based upon an upper limit of usage inherent in the meter size, covering potential changes in demand as building uses and fixture counts change over time. The disadvantage of meter size fee structuring is that the larger meters have a much wider capacity range that may not necessarily reflect usage levels.

F.6 DIF Annual Cost Escalation Recommendations
The DIFs proposed in this section are based on facility costs in 2025 dollars. It is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current CCCI. This CCI is based upon the BCI average as produced by ENR.

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G Sewer DIFs
G.1 Sewer Facilities (Nexus Requirement AB 1600)
The Sewer Facilities element includes the facilities necessary to ensure adequate wastewater distribution and treatment throughout the City. The proposed DIFs discussed in this section, if adopted, would be imposed, collected, and spent on the construction of new facilities, or expansion/enhancement of existing City facilities to accommodate new growth, and the fees collected from the new development will be used exclusively for such purposes. All new development within the City contributes to the direct and cumulative impacts of development on sewer facilities and creates the need for new facilities to accommodate growth. The Sewer element includes the facilities necessary to provide basic collection and treatment of wastewater throughout the City.

Table 59 below illustrates how the Sewer DIF will meet the requirements of AB 1600 with regard to use of the Fee, type of development funded or partially funded by the fee revenue, reasonable relationship to the need for facilities, and proportionality requirements.

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[Table 59: Sewer Facilities
AB 1600 Code
Section Description Justification
66001(a)(1) Identify the purpose of the Fee.

Provide a revenue source that will provide funds to
construct, expand, or enhance the various Sewer
facilities that will mitigate the impacts of new
residential and non-residential development to the
City’s Sewer facilities.
66001(a)(2) Identify the use to which the Fee
is to be put.

Expansion/construction/acquisition of Sewer
collection and treatment facilities, as well as fixtures and equipment.
66001(a)(3)
Demonstrate how there is a
reasonable relationship between
the Fee’s use and the type of
development project on which
the Fee is imposed.

New residential and non-residential developments in
the City will generate additional residents and
employees, thus increasing the demand for sewer
collection and treatment. The facilities used to
provide these services will have to be
expanded/enhanced, or new facilities will have to be
constructed, to meet this increased demand and
maintain the current LOS to the City.
66001(a)(4)
Demonstrate how there is a
reasonable relationship between
the need for the public facilities
and the type of development
project on which the Fee is
imposed.

The additional residents and employees from the new
development will impact the need for sewer
collection and treatment, based on their wastewater
generation. New, expanded, or enhanced facilities
would be needed to mitigate the impact of the
additional residents and employees and maintain the
existing LOS.
66001(b)
Demonstrate how there is a
reasonable relationship between
the amount of the Fee and the
cost of the public facility.

The Sewer Fee is based on the cost to fund new or
enhanced facilities. The fee is based on the cost of
providing such facilities at the same level as provided to existing residents.

The table below identifies the current inventory for Sewer facilities. Based on the information received from the City, all assets attributable to sewer collection and treatment have been included. Notably, the value of this inventory has been estimated in 2025 dollars, to adequately capture the cost of any new expansion/enhancement required to mitigate the impacts of new development.

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Table 60: Current Sewer Facilities Inventory as of 2025 Facility Replacement Cost
Treatment $102,500,000
Distribution $118,520,000
Total $221,020,000
G.2 Calculation Methodology
The Sewer Facilities Fee was calculated using the Standards-Based Methodology (LOS) discussed in Section V. For future development to receive the same LOS as exists today, the City will need to acquire or construct additional Sewer Facilities and equipment. Assuming the City’s growth over the next 15 years, the City will need to acquire or construct additional infrastructure in order to continue to maintain the existing LOS. The LOS ensures that City facilities are appropriately developed and sized so that future residents and employees do not cause a reduced LOS by unduly burdening the infrastructure system, thus leading to decay and deterioration.

G.3 LOS
As stated earlier in Section III, in September of 2021 the Governor of California signed AB 602 which provides new statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these new requirements is that when applicable, a Nexus Study shall identify the existing LOS for each public facility, identify the proposed new LOS, and include an explanation of why the new LOS is necessary. The LOS used to calculate the Sewer DIFs in this section is the existing LOS, as defined by the relationship between the replacement cost of Sewer Facilities (as described in this section) and the City’s existing usage, as discussed in Section IV.

G.4 Offsetting Revenues
Currently there are no offsetting revenues in the City’s Sewer Facilities account that need to be subtracted from the facilities cost total.

G.5 Sewer Facilities Fee Calculation
For purposes of this Study, the LOS is estimated as (i) the replacement cost of the City’s existing Sewer Facilities (identified above), divided by (ii) the current wastewater generation in the City. In other words, the LOS is the current replacement cost of Sewer Facilities per Gallon-per-Day (“GPD”) of wastewater generation. Notably, the estimated current sewer generation is based on the water usage that is documented in the City’s Water Master Plan Update from 2023, of approximately 1,090 acre-feet per year, or 355,177,590 GPD as discussed in the last section. Importantly, sewer generation is directly related to water demand. Interior water usage (excluding landscape irrigation since it is considered a component of water demand) generally constitutes half (and often times more) of the total water demand for a residential unit. Therefore, for purposes of this analysis, DTA assumed

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that approximately 20% of water usage would be associated with irrigation, and 55% of non-irrigation related uses would generate wastewater. This results in total sewer generation citywide, of 428,159 gallons per day (GPD). The LOS calculations presented below are broken down into the individual water infrastructure categories listed in the Current inventory listed in Table 60, allowing the City to set fees and direct fee revenue to specific areas of water infrastructure.

Table 61: Current Sewer Facilities LOS
Inventory Treatment Distribution
Total Replacement Cost for Existing
Facilities $102,500,000 $118,520,000
Estimated Sewer Usage per day for
Existing Land Use 428,159 428,159
Replacement Cost per GPD $239 $277
As stated, Sewer Fees in this Study is determined based on meter size, assuming the ¾” is the standard for single-family residential. As a result, the Fee for single-family units is calculated using the estimated sewer generation for such units. As shown above, Total Replacement Costs for Existing Facilities by the Estimated Sewer Usage for Existing Land Uses (GPD) generates replacement costs per GPD of $239 for treatment and $277 for Distribution. Given the single-family residential water usage was 166.0 gallons per day and applying the same factors (i.e., water generation, multiplied by 80% for non-irrigation purposes, multiplied by 55% for sewer generation), DTA calculated a sewer generation rate of 73.4 GPD. Therefore, the resulting fee for a single-family residential unit (which represents the fee for a ¾” meter) is equal to the per GPD multiplied by the average usage of 73.4 GPD, generating a fee of $17,486 for Treatment facilities and $20,218 for Distribution facilities.

Table 62: Sewer Residential 3/4” DIF Calculation 1
Inventory Classification Treatment Distribution
Wastewater Usage per day [a] 428,159 428,159
Value per EBU [b] $239 $277
Gallons per Day (GPD) [c] 73.4 73.4
Residential Fee 3/4 ' Meter [d] = [b] x [c] $17,486 $20,218 Note:

1. Totals may not sum due to rounding

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Presented below in Table 63, residential units are grouped together using a 3/4“ meter. For hotel, commercial/retail, office, industrial and institutional/other land uses, a cost apportionment based on meter size is appropriate since average water consumption varies widely between different uses permitted on property designated for non-residential land use. To determine fees based on fixture counts for new units is both cumbersome and difficult to enforce when fixture additions occur. As illustrated below, the fee amounts vary depending on the meter size, ranging from $37,704 for a residence or business with a 3/4“ meter to $1,256,673 with a 6” meter.

Under AB 1600, the City has the option of charging this maximum fee level or any level up to this maximum amount.

Table 63: Sewer DIF by Meter 1 (Maximum Allowable Fee)
Meter Size 2 Equivalency
Factor
Water Fee
(Supply)
Water Fee
(Treatment) Total
3/4 " 1.0 $17,486 $20,218 $37,704
1" 1.67 $29,201 $33,765 $62,966

1.5" 3.33 $58,227 $67,327 $125,554
2" 6.67 $116,629 $134,857 $251,485
3" 10.67 $186,571 $215,730 $402,301
4" 16.67 $291,484 $337,041 $628,525
6" 33.33 $582,793 $673,880 $1,256,673
Notes:

1. Numbers may not sum due to rounding.

G.6 DIF Annual Cost Escalation Recommendations
The DIFs proposed in this section are based on facility costs in 2025 dollars. It is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current CCCI. This CCI is based upon the BCI average as produced by ENR.

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H Storm Drain Fees
H.1 Storm Drain Facilities (Nexus Requirement AB 1600)
The Storm Drain Facilities element will serve the residents of the City by providing facilities that ensure proper water drainage in those areas susceptible to stormwater runoff. Storm Drain Facilities include those used by the City to provide storm drainage services to both residents and employees within the City. The Storm Drain Fee will include facilities and expansion necessary to handle the storm drain runoff created by new development through build-out by the year 2040.

Table 64 below illustrates how the Storm Drain Facilities Fee will meet the requirements of AB 1600 with regard to the use of the Fee, type of development funded or partially funded by the Fee revenue, reasonable relationship to the need for the facilities, and proportionality requirements.

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Table 64: Storm Drain Facilities Nexus Requirement
AB 1600 Code
Section Description Justification
66001(a)(1) Identify the purpose of the Fee.

Provide a revenue source that will provide funds to
construct, and expand/enhance storm drain improvements
that will mitigate the impacts of new development on the City's storm drain system.
66001(a)(2) Identify the use to which the
Fee is to be put.

Fund or partially fund the construction and expansion of storm basins, laterals, tributary drains, and related projects within the City limits.
66001(a)(3)
Demonstrate how there is a
reasonable relationship
between the Fee’s use and the
type of development project
on which the fee is imposed.

New residential and non-residential development will
generate additional traffic on City streets. The Fee revenue will be used to construct and expand storm drain basins, laterals, tributary drains and related improvements. Storm drain fees collected from new development will be used
exclusively for construction-related costs associated with these projects. Fees imposed on new residential and nonresidential development is a reasonable method for mitigating the impacts of such new development and any
resulting increase in LOS above and beyond the current
LOS that is required to meet the plan approved by the City. 66001(a)(4)
Demonstrate how there is a
reasonable relationship
between the need for the
public facilities and the type of
development project on which
the Fee is imposed.

Storm Drain Fee revenue will go towards new facilities and improvements necessary to handle the storm drain runoff created by new development. The construction and
expansion of storm drain basins, laterals, tributary drains, and related improvements are needed to ensure proper
drainage of storm water runoff to protect from flooding. 66001(b)
Demonstrate how there is a
reasonable relationship
between the amount of the
Fee and the cost of the public
facility.

Project costs are allocated to new development based on the storm water runoff and impervious runoff per acre
generated by new development. The specific Fee imposed
on the various land uses are based on stormwater runoff coefficients as compared to a residential unit (baseline rate or EDU factor.

For Storm Drain Facilities, the City has provided DTA with the list of Future Facilities to be included in the Fee Study (the “Needs List”). Please refer to Section V for details on the Needs List. Table 65 below provides a summary of the Needs List. The facilities presented below are based on estimates provided by the City.

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Table 65: Storm Drain Facilities Costs
Storm Drain Facilities Facility Cost
Storm Water Collection System SD-01A Pipeline along Kern Street and Anchor Street $66,000
Storm Water Collection System SD-01B Pipeline along Kern Street and Anchor Street $1,530,000
Storm Water Collection System SD-02A Pipeline along Marina Street $106,000 Storm Water Collection System SD-02B Pipeline along Kern Street and Anchor Street $189,000
Storm Water Collection System SD-03 Pipeline along Harbor Street $421,000 Storm Water Collection System SD-03 Pipeline along Beach Street $472,000 Storm Drain Facilities Subtotal $2,784,000
Offsetting Revenues $14,988,
Storm Drain Facilities Total $2,769,012
H.2 Offsetting Revenues
In calculating DIFs, it is important to consider any offsetting revenue in the City Storm Drain calculations total, as any existing account balance or other offsetting revenue funds must be subtracted from the facilities cost total. As of August 2025, there is $14,988 in the Storm Drain Facilities account that needs to be subtracted from the facilities cost total as indicated in Table 65 above.

H.3 LOS
As stated earlier in Section III, in September of 2021, the Governor of California signed AB 602, which provides new statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these new requirements is that when applicable, a Nexus Study shall identify the existing LOS for each public facility, identify the proposed new LOS, and include an explanation of why the new LOS is necessary. This section looks at the LOS for Storm Drain facilities to ensure that there will be sufficient system-wide capacity to direct storm drain runoff at storm recurrence intervals as dictated by City policy from new and existing development.

The list of projects to be built by the City (and presented in detail in Appendix __ to this Study) details the planned facilities necessary to provide required services to the City, and it also outlines the criteria used to design a system needed to serve both existing and future development. The portion of the fee associated with existing Storm Drain facilities represents the current LOS which would be applied to new development. Notably, the future facilities have been identified by the City (on their CIP) as facilities required to serve both new and existing development, and therefore any increase in LOS above and beyond the current LOS would be an increase required to meet the plan approved by the City.

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H.4 Calculation Methodology
Storm Drain Fees were calculated for each of the six (6) land use categories based on the runoff rates, measured in terms relative contribution of runoff, (i.e., the EBU factor - see Section V) generated by each land use. Specifically, the reasonable relationship used to allocate storm drain costs between existing, converted use and future development is relative runoff contribution. The Rational Method of computing runoff rates was used in the form of Q = C x I x A, where “Q” is equal to runoff volume, “C” is the ratio of impervious area to total area studied, “I” is rainfall intensity, and “A” is Area, in acres of the study area. A runoff factor, “C” of 1.00, indicates a totally impervious site, where every drop of rain would find its way to the public streets as runoff. However, it can be shown that only the relative contribution of runoff needs to be considered if a unit of runoff is computed (Q/A), where only the runoff factor and acreage are considered. This is the assumption used in this calculation.

Total Runoff was calculated by applying these runoff factors to the estimated acreage attributable to the various dwelling unit counts and non-residential square feet identified in the demographics section of this Fee Study. As discussed in Section V, runoff factors per acre for residential units and non-residential development, are based on guidelines provided by the Morro Bay 2021 General Plan and reviewed with the City.

All proposed Storm Drain facilities were sized to meet the needs of both existing and future residents and employees. Therefore, the costs of these facilities have been allocated between existing development and new development based on their percentage of build-out EBUs. As illustrated in Table 66 below, based on the allocation by 257 existing runoff EBUs and 39 new development EDUs, 86.81% of the costs will be allocated to existing development and 13.19% of the costs will be allocated to new development. Based on this allocation between new and existing development, $365,253 of the $2,769,012 in Storm Drain facilities costs would be funded by the Fee imposed on new development. The remaining $2,403,759 must be funded through other sources to be determined by the City Table 66, presented below, summarizes the cost per unit runoff, which is generated by dividing the cost of new development of $365,253 by the future unit runoff that will be generated by new development (39). When accounting for the anticipated unit runoff (EBUs) from new development, the cost per unit runoff totals $9,339 as shown in the table below. This cost per unit runoff will be applied to the various land uses and their respective total runoff rates to determine the proposed Fee.

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Table 66: Storm Drain Facilities Cost Allocation Summary 1 Development Type
Allocation by
Total Unit
Runoff (EBUs)
Percentage Allocations Facility Cost
Allocation
Existing Development 257 86.81% $2,403,759
New Development 39 13.19% $365,253
Total 100.00% $2,769,012
Cost per Unit of Runoff
1 $9,339
Note:

1. Some figures may not sum due to rounding.

H.5 Floor Area Ratios (FARs) and Runoff Coefficients
To generate the Storm Drain Fees, DTA calculated the total runoff expected through 2040 based on the anticipated residential and non-residential growth in the City. To do this, residential developed acreage was calculated using dwelling units per acre and non-residential development was calculated using floor area ratios (FAR) listed in the City’s General Plan and with information reviewed and provided by the City.

In addition, runoff coefficients were estimated for each of the land uses. Runoff coefficients are used to calculate the volume of water that will flow from the surface during a storm event. They represent the fraction of rainfall that becomes surface runoff and are used to estimate peak flow rates for drainage systems. A coefficient of 0 means all rainfall is absorbed or lost, while a coefficient of 1 signifies all rainfall becomes runoff. Essentially, runoff coefficients help determine how much water a drainage system needs to handle. Runoff coefficients generally vary by project but in this Study, they are based on current Municipal Separate Storm Sewer System (“MS4”) guidelines and Caltrans Highway Design Manual Hydrology numbers. The calculations explaining this in detail are presented in Appendix A at the end of this study.

H.6 Storm Drain Facilities Fee Calculation
The Storm Drain fees are calculated based on the amount of impervious surface area on a property. Impervious surfaces are hard surfaces like buildings, driveways, patios, and parking lots that prevent rainwater from soaking into the ground, leading to increased stormwater runoff. This runoff needs to be managed to prevent flooding and protect water quality. In this analysis, the storm drain fees are based on impervious square feet.

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Table 67: Projected Storm Drain Usage by Land Use
Land Use Category Runoff Rate
Coefficient "C"
Cost per Unit Runoff
Allocation Rate
(Cost per Acre)
Total Acres Cost Financed
[a] [b] = [a] x $9,339 [c] [d] = [b] x [c]
Residential 0.62 $5,790 25.16 $145,690
Hotel 0.83 $7,751 3.94 $30,569
Commercial Retail 0.95 $8,872 12.61 $111,867
Office 0.83 $7,751 1.33 $10,280
Industrial 0.80 $7,471 6.43 $48,010
Institutional/Other 0.83 $7,751 2.43 $18,836
Total New Development $365,253
The Storm Drain Fee per acre was determined by first multiplying the runoff coefficient of each land use by the cost per unit runoff of $9,339 from Table 66 and generating a fee per acre as indicated in Table 67 above. This calculation is repeated for each of the six land uses listed above. The residential fee calculations per square foot, hotel fee calculation per room and additional non-residential fees per square foot are presented below in Table 68.

Table 68: Storm Drain Fee Calculation
Land Use Category Fees per Sq. Ft/Room Square Feet Cost Financed [a] = Cost per Acre/43,560 or
[a] = Cost per Acres/43,560 x 1,000 [b] = Total Acres x 43,560 [c] = [a] x [b] or [c] = [a] x [b]/1,000 Residential (per SF) $0.13 1,096,041 145,690
Hotel (per room) $178 171,787 $30,569
Commercial Retail (per SF) $0.20 549,246 $111,867
Office (per SF) $0.18 57,772 $10,280
Industrial (per SF) $0.17 279,917 $48,010
Institutional/Other (per SF) $0.18 105,852 $18,836
Total New Development $365,253
H.7 Proposed Fees
A summary of the proposed Storm Drain Fees is presented in Table 69 below. The Fees recommended within this Fee Study reflect the maximum justifiable Fee level that may be imposed on new residential and non-residential development by the City under the statutory requirements of Government Code Section 66000 et. seq.

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Table 69: Storm Drain Fee Summary
Land Use Fee per Sq. Ft/Room
Residential (per SF) $0.13
Hotel (per room) $178
Commercial Retail (per SF) $0.20
Office (per SF) $0.18
Industrial (per SF) $0.17
Institutional/Other (per SF) $0.18
H.8 DIF Annual Cost Escalation Recommendations
The DIFs proposed in this section are based on facility costs in 2025 dollars. It is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current CCCI. This CCI is based upon the BCI average as produced by ENR.

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SUMMARY OF FEES
The total proposed fee amounts to finance new development’s share of the costs of new facilities are summarized below.

Table 70: Proposed Maximum Allowable DIFs
Land Use 1,2,3 Admin. Police Fire Parks 6 Storm
Drain Trans.

2. Hotel Fees are per Room.

3. Other non-residential fees are per square foot.

4. Single-family additions of 500 square feet or less are exempt.

5. ADUs, whether infill or non-infill are exempt from DIFs if they are less than 750 Sq. Ft. Above that square footage, ADUs would incur fees at the residential square foot rate.

6. Park Fees for residential infill lots are the same as those listed in the table above.

In contrast to the fees presented in Table 70, the proposed water DIFs presented in Table 71 and sewer DIFs presented in Table 72 below are based on per meter size. In addition, the DIFs presented below are broken down into the individual infrastructure categories, allowing the City to set fees and direct fee revenue to specific areas of both water and sewer infrastructure.

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Table 71: Proposed Water DIF (Maximum Allowable Fee)1
Meter Size2
Hydraulic
Capacity
Factor
Supply Treatment Distribution Storage Other Total
3/4 " 1.0 $13,841 $6,824 $27,360 $11,088 $938 $60,051
1" 1.67 $23,114 $11,395 $45,692 $18,518 $1,567 $100,286

1. Numbers may not sum due to rounding.

Table 72: Proposed Sewer DIF (Maximum Allowable Fee)
Meter Size
Hydraulic
Capacity
Factor
Supply Treatment Total
3/4 " 1.0 $17,486 $20,218 $37,704
1" 1.67 $29,201 $33,765 $62,966

1.5" 3.33 $58,227 $67,327 $125,554
2" 6.67 $116,629 $134,857 $251,485
3" 10.67 $186,571 $215,730 $402,301
4" 16.67 $291,484 $337,041 $628,525
6" 33.33 $582,793 $673,880 $1,256,673
At the time of permit issuance, new development shall pay the appropriate fee for each facility category, and the City shall deposit the funds in a separate account dedicated to the construction of the proposed facilities in accordance with Government Code Section 66006(a)
Future development may result from intensification and/or redevelopment of existing land uses. Each such redevelopment project will be evaluated in order to calculate the applicable fees on the new proposed development, taking into account the development previously mitigated.

As stated in Section VI, fees recommended within this Fee Study reflect the maximum justifiable level that mat be imposed on new development under the statutory requirements of Government Code Section 66000 et seq. As the DIFs proposed in this Fee Study are based

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on Facilities costs in 2025 dollars, it is appropriate for the City to apply an annual escalator to these fee levels to account for inflation in acquisition and construction costs. DTA further recommends that, after adoption, the above Fees be reviewed each year and include a provision for an annual adjustment based on the current CCCI. This CCI is based upon the BCI average for Los Angeles as produced by ENR.

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IMPLEMENTATION OF FEE SCHEDULE
In addition to the legal requirements covered in Section III, there are a number of recommendations for the adoption and administration of the DIFs presented in this Fee Study. All recommendations presented in this section are based on the Mitigation Fee Act (Government Code §66000 et seq.), also referred to as the “Act,” which provides specific requirements for establishing and administering DIF programs. The Act also mandates procedures for administering impact fee programs, such as the collection and accounting of impact fees, refunds, mandatory updates, and reporting requirements.

At the time the City imposes an impact fee, Government Code 66020 requires a written statement of the amount of the fee and a written notice of a 90-day period during which the imposition of the fee can be protested. Prior to the enactment of Section 66020, a developer could not challenge the validity of fees imposed on a residential development without refusing to pay them. Under these circumstances, developers were required to pay disputed fees before they could be challenged. Section 66020 was drafted to correct that problem.

The various subparts of Section 66020 allow for a procedure that permits a developer to pay the fees under protest, obtain the relevant building permit, and then proceed with the project while pursuing an action to challenge the fees. If the action is successful, the fees will be refunded with interest. However, failure to protest the imposition of the fee during the allowed period may deprive the fee payer of the right to any subsequent legal challenges. Any challenges to be filed must be submitted within 90 days of enactment. The subsequent sections provide specific guidelines for implementing DIFs.

A The Collection of DIFs
According to Government Code Section 66007, any local agency that imposes any fees or charges on a residential development for the construction of public improvements or facilities shall not require the payment of those fees or charges, notwithstanding any other provision of law, until the date of the final inspection, or the date the Certificate of Occupancy is issued, whichever occurs first.

However, utility service fees may be collected at the time an application for utility service is received. If the residential development contains more than one dwelling, the local agency may determine whether the fees or charges shall be paid on a pro rata basis for each dwelling when (i) it receives its final inspection or Certificate of Occupancy, (ii) on a pro rata basis when a certain percentage of the dwellings have received their final inspection or Certificate of Occupancy, or (iii) on a lump sum basis when the first dwelling in the development receives its final inspection or Certificate of Occupancy, whichever of the three occur first.

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An exception allows DIFs to be collected at an earlier time if they are used to reimburse the agency for expenditures previously made or for public improvements or facilities for which money has already been appropriated. If any fee or charge specified is not fully paid prior to the issuance of a building permit for construction, the local agency issuing the building permit may require the property owner, or lessee if the lessee’s interest appears of record, as a condition of issuance of the building permit, to execute a contract to pay the fee or charge, or applicable portion.

Statutory restrictions in place for residential development at the time at which fees may be collected do not apply to non-residential development. In cases where the fees are not collected upon the issuance of building permits, Sections 6607(c)(1) and (2) provide that the City may require the property owner of a non-residential development to execute a contract to pay the fee, and subsequently record that contract as a lien against the property owner.

In addition, pursuant to Government Code Section 65852.2(f), ADUs are exempt from incurring impact fees from local agencies, special districts, and water corporations if such unit is less than 750 square feet. If an ADU is 750 square feet or larger, impact fees shall be charged proportionately in relation to the square footage of the ADU to the square footage of the primary dwelling unit. Furthermore, the water capital improvement fee, water supply fee, and sewer capital improvement fee shall not be applicable to any ADU created within the existing space of a single-family residence or accessory structure, including, but not limited to, a studio, pool house, or other similar structure. Please note that for the purpose of this Fee Study, future ADUs are included in the build-out projections, but some of these units may not be required to pay an impact fee. As a result, the City may not collect the full amount of costs as shown in the Needs Lists included herein.

B The Assignment and Expenditure of Fee Revenue
According to Section 66006, if a local agency requires the payment of a fee specified in connection with the approval of a development project, the local agency receiving the fee shall deposit it with the other fees for the improvement to be funded in a separate capital facilities account or fund in a manner to avoid any commingling of the fees with other revenues and funds of the local agency, except for temporary investments, and expend those fees solely for the purpose for which the fee was collected.

Any interest income earned in the capital facilities account or fund shall also be deposited in that account or fund and shall be expended only for the purpose for which the fee was originally collected.

Common practice is to maintain separate funds or accounts for impact fee revenues by facility category (i.e., streets, park improvements, but not for individual projects). DTA recommends the continuation of that approach.

DIF revenue should not be spent on any infrastructure, property or equipment needed to mitigate an existing deficiency.

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C Exemptions, Reductions and Waivers.

If a project has characteristics that indicate its impact on a particular public facility or infrastructure system will be significantly and permanently smaller than the average impact used to calculate impact fees in this study, the fees should be reduced accordingly. The City may decide to voluntarily waive or reduce the fees that would otherwise apply to a project to promote goals such as affordable housing or economic development. However, the implementation of this policy may not result in increased costs for other development projects and is allowed only if such costs are offset by other revenue sources.

D Developer Improvement Credits
If the City maintains a policy that requires a developer, as a condition of project approval, to construct facilities for which impact fees have been or will be charged, the impact fee imposed on that development project for that type of facility must be adjusted to reflect a credit for such dedication or construction. Furthermore, the impact fee imposed on that development project for that type of facility must be adjusted to reflect a credit for the cost of the facilities or improvements constructed by the developer. If circumstances allow a developer to dedicate land, buildings, or other valuable considerations in lieu of paying fees, the City maintains the discretion to accept or reject such offers and may negotiate the terms under which an offer would be accepted.

E Existing Development Credit
If a project involves replacement, redevelopment, or intensification of previously existing development, impact fees should be applied only to the portion of the project which represents a net increase in demand for relevant facilities, applying the measure of demand used in this study to calculate that particular fee. Since residential service demand is normally estimated on the basis of demand per dwelling unit, an addition to a single-family dwelling unit typically would not be subject to an impact fee if it does not increase the number of dwelling units in the structure. In any project that results in a net increase in the number of dwelling units, the added units would normally be subjected to impact fees. A similar analysis can be applied to non-residential development using a measure of demand on which impact fees are based.

F Annual Reporting and Accounting of Fees
AB 1600 requires that both general law and charter cities account for every fee that they collect under its terms. Funds collected for each capital facility or service shall be deposited in separate accounts and not commingled with any other funds for other impact fees. While funds are accrued for individual capital facilities, the City must keep track of each fund and provide an annual report. Section 66006 requires that for each separate account or fund established, the local agency shall, within 180 days after the last day of each fiscal year, make available to the public the following information for the fiscal year:

1. A brief description of the type of fee in the account or fund;

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2. The amount of the fee;

3. The beginning and ending balance of the account or fund;

4. The amount of the fees collected, and the interest earned;

5. An identification of each public improvement on which fees were expended and the amount of the expenditures on each improvement, including the total percentage of the cost of the public improvement that was funded with fees;

6. An identification of an approximate date by which the construction of the public improvement will commence if the local agency determines that sufficient funds have been collected to complete financing on an incomplete public improvement, as identified in Paragraph (2) of Subdivision (a) of Section 66001, and the public improvement remains incomplete;

7. A description of each interfund transfer or loan made from the account or fund, including the public improvement on which the transferred or loaned fees will be expended, and, in the case of an interfund loan, the date on which the loan will be repaid and the rate of interest that the account or fund will receive on the loan; and

8. The amount of refunds made pursuant To Subdivision (e) of Section 66001 and any allocations pursuant to Subdivision (f) of Section 66001.

The City must review the information made available at the next regularly scheduled public meeting, not less than 15 days after this information is made available to the public. Notice of the time and place of the meeting, including the address where this information may be reviewed, shall be mailed at least 15 days prior to the meeting to any interested party who files a written request with the local agency for mailed notice of the meeting.

G Refunding Policy
Under the Mitigation Fee Act, Govt. Code §66000 et seq., each DIF must be deposited in a separate capital facilities account and may be expended only for the purposes for which it was collected. For all unexpended fees, the agency must make findings every 5 years that:

1. Identify the purpose to which the fee will be put;

2. Demonstrate a reasonable relationship between the unexpended balance and the purpose for which the fee was charged;

3. Ascertain the sources and funding for any as-yet-incomplete public improvements; and

4. Designate the approximate date the agency expects the funding for uncompleted improvements to be deposited in the account [§66001(d)(1)]. The Act provides that “if the findings are not made as required by [the Act], the local agency shall refund the moneys in the account” to the current owners of the properties for which the fees were paid [§66001(d)(2)].

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Failure to make the findings specified in Mitigation Fee Act requires a refund of all unexpended DIFs. When sufficient funds have been collected to complete financing of the public improvements contained in the CIP, the public agency shall identify "an approximate date by which the construction of the public improvement will be commenced" within 180 days of collection of the required funds (Gov. Code §66001(e)]. Failure to comply with this requirement also mandates the return of the collected funds, as stated above.

In addition, pursuant to Government Code Section 65852.2(f), ADUs are exempt from incurring impact fees from local agencies, special districts, and water corporations if such unit is less than 750 square feet. If an ADU is 750 square feet or larger, impact fees shall be charged proportionately in relation to the square footage of the ADU to the square footage of the primary dwelling unit. Furthermore, as mentioned earlier, the water capital improvement fee, water supply fee, and sewer fee shall not be applicable to any ADU created within the existing space of a single-family residence or accessory structure, including, but not limited to, a studio, pool house, or other similar structure.

This report does not address, nor has DTA been asked to determine, whether any current or proposed DIFs are valid under the U.S. Constitution’s Fifth Amendment Takings Clause. In Sheetz v. County of El Dorado (2024) ___U.S.___, the U.S. Supreme Court held that its decisions in Nollan v. California Coastal Comm’n (1987) 483 U.S. 825 and Dolan v.

City of Tigard (1994) 512 U.S. 374 apply to legislatively imposed conditions on land-use permits. However, the Supreme Court left it to the California appellate court on remand to address the validity of the traffic impact fee at issue in the case and determine how to apply Nollan/Dolan in this context. DTA cannot predict how courts will resolve such issues in the future and is providing no services or guarantees of any kind concerning the validity of any impact fees under the U.S. Constitution’s Fifth Amendment Takings Clause.

H Annual Update of the CIP
It is common for jurisdictions to prepare a CIP in conjunction with a fee program. In fact, AB 1600 encourages the use of a CIP to assist in scheduling and implementing the services and improvements funded through impact fees (Gov. Code §66002). A good CIP establishes a schedule of improvements necessary to accommodate the projected growth. The CIP must indicate the approximate size, location, time of availability, and estimated costs of all improvements to be financed through fees [Gov. Code §66002(a)]. In order to create a usable CIP, a municipality must have an accurate understanding of its current service baseline and its projected growth. This requires an understanding of when, where, and how growth may occur within the area. The more information collected about future growth, the more comprehensive and accurate the CIP will be. A CIP can also help a municipality determine when new public improvements or the expansion of existing public improvements is needed in relation to the timing of new development.

If the public agency adopts a CIP, it must be updated annually [Gov. Code §66002(b)]. 10 days’ published notice is provided pursuant to Government Code §65090 and is also provided to any city or county that may be significantly affected by the CIP. If a CIP is

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adopted and is used as a basis for identifying the use of impact fees, the CIP must be adopted and updated annually by a resolution of the governing body at a public hearing. In the absence of a CIP, an alternative is to identify improvements in other public documents, such as General Plans, land studies, and other documents.

I Administration Costs of Fee Implementation
The cost of implementing the DIFs is not included in the fees themselves and must be determined by the City. To recover the periodic costs of updating the fee studies, implementing the program, ongoing staff costs, managing the updates, and preparing annual and 5-year updates required by the Mitigation Fee Act, an administration fee may be added to the Fees calculated in this Fee Study. DTA recommends that these fee expenses are handled administratively and pass the costs on to user fees charged to applicants for processing fee applications. The calculation of the administrative cost for each fee in this study is presented in each respective fee section and in the Executive Summary.

J Indexing of DIFs
The DIFs presented in this report are based on current facility costs provided by the City and should be adjusted annually to account for inflation. The purpose of the adjustment is to account for future escalation in costs for land, equipment, vehicles, and construction.

DTA recommends that after adoption, the fee should be reviewed each year and adjusted by a reliable index such as the ENR BCI generally used as the primary basis for indexing construction costs. Ordinarily, land costs make up a significant portion of the costs covered by the fees and do not lend themselves to traditional cost indexes. As such, land costs should be adjusted to changes in local land prices.

K Infill Development
Infill development generally refers to building within existing urban areas, utilizing vacant or underutilized land, while non-infill development involves constructing on undeveloped land, typically at the edge of a city. Infill development reuses existing infrastructure and can reduce sprawl, and can revitalize older neighborhoods, but may face challenges with integration into existing structures and infrastructure. To encourage infill development cities often implement strategies such as rezoning, providing incentives, streamlining the development process and reducing fees and permits. Often, cities either reduce or waive development impact fees (DIFs) to make infill projects more attractive. It is perfectly legal to group certain impacts and finely delineate other types of impacts, as long as individual impact fees and the overall fee programs remain reasonably related to the impacts created by the respective uses.

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L Updating the Impact Fee Study
As stated in Section III, AB 602 was signed into law in September of 2021 by the Governor of California, and it provides new Statewide requirements for local jurisdictions seeking to impose DIFs on development projects. Among these requirements is that Nexus Studies shall be updated at least every 8 years as of January 1, 2023. However, DTA concurs with the generally accepted policy that 5 years is a good rule-of-thumb time period Fee updates, particularly because the required 5-Year findings (see above) can be approved at that same time. In some instances, fees may remain valid for a longer period of time if the City’s land use and facility plans do not change. A case in point is a municipality at or near full buildout capacity. However, a dynamic, growing municipality facing significant changes in land use would do itself a disservice if it maintained the current fee structure for too long without a fee study to update the current rates.

M Administering a Fee Program
Creating and administering an impact fee program can be a labor-intensive process requiring considerable preparation and training that should not be undertaken more often than necessary. A well-planned fee program can generate sufficient funds to allow the City to adequately mitigate impacts created by future development. Conversely, a poorly planned fee can result in either collecting too little money and being forced to pay for public facilities required as a result of future development through its General Fund or collecting too much money based on an unsupported fee program, thus exposing the City to a fee challenge or a requirement to refund unexpected proceeds.

All personnel involved in the process, including accounting, capital budgeting, and project management of any other area, must be made fully aware of the difference between impact fees and other fees, such as user fees, and of the guidelines and restrictions placed on the expenditure of Fee revenues. The building Fees generated in this report are tied to specific facility improvements and cost estimates provided by the City. The fees must be expended accordingly and must be able to withstand any challenges and show that the funds have been properly directed in accordance with proper AB 1600 guidelines.

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APPENDIX A
City of Morro Bay
Development Impact Fee Justification Study

FEE DERIVATION

WORKSHEETS

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I. Inventory of Existing Facilities
Facility Facility Units Quantity
Buildings Square Feet 58,797
Land Acres 22.88
Vehicles Vehicle 29
Equipment & Property Integrated Unit 1
II. Existing Facility Standard [a] [b] [c] = [a] / ([b] / 1,000) Existing Facility Units per
Facility Type Facility Units Quantity EDUs* 1,000 EDUs
Buildings Square Feet 58,797 8,365 7,029
Land Acres 22.9 8,365 2.735
Vehicles Vehicle 29 8,365 3.467
Equipment & Property Integrated Unit 1 8,365 0.120
III. Future Facility Standard [a] [b] [c] = [a] x [b]
Facility Units Future Facilities Units Funded
Facility Type Facility Units per 1,000 EDUs EDUs by New Development Buildings Square Feet 7029 1,244 8,743
Land Acres 2.735 1,244 3.402
Vehicles Vehicle 3.467 1,244 4.31
Equipment & Property Integrated Unit 0.120 1,244 0.149
IV. Summary Cost Data [a] [b] [c] = [a] x [b] [d] = [c] / 1244 Facility Units Funded Total Facility Cost for Cost
Facility Type Facility Units by Future Development Cost Per Unit Future Development per EDU Buildings Square Feet 8,743 $622 $5,440,629 $4,374
Land Acres 3.402 $1,264,732 $4,302,847 $3,459
Vehicles Vehicle 4.312 $20,346 $87,738 $71
Equipment & Property Integrated Unit 0.149 $1,487,900 $221,246 $178 Offsetting Revenue $695,560 $559
Total NA NA $9,356,900 $7,523
V. Residential Fee Calculation
Land Use Type EDUs per Unit No. of Projected Units Total EDUs Residential 1.00 516 516
[a] 516
[b] $7,523
[c] = [a] x [b] $3,880,241
[d] 1,062,401
[e] = [c] / [d] $3.65
VI. Non-Residential Fee Calculation
EDUs per Room/ Fee per Room / Rooms / Costs Financed
Land Type 1,000 Non-Res. Sq. Ft.per 1,000 Non-Res Sq. Ft. Non-Res. Sq. Ft. by Fees [a] [b] = [a] x 7523 [c] [d] = ([c] / 1,000) x [b]
Hotel 0.71 $5,343 210 $1,120,913
Commercial Retail 0.64 $4,779 670,796 $3,205,836
Office 0.68 $5,083 70,557 $358,673
Industrial 0.24 $1,821 136,745 $249,078
Institutional / Other 1.39 $10,484 51,711 $542,160
Total NA NA NA $5,476,660
VII. Fee Calculation Summary
Res. Fee per Sq. Ft./
per Room / Projected Res. Sq. Ft./ Costs Financed
Land Type per 1,000 Non Res Sq. Ft. Rooms/Non-Res. Sq. Ft. by Fees Residential $3.65 1,062,401 $3,880,241
Hotel $5,343 210 $1,120,913
Commercial Retail $4,779 670,796 $3,205,836
Office $5,083 70,557 $358,673
Industrial $1,821 136,745 $249,078
Institutional / Other $10,484 51,711 $542,160
Total NA NA $9,356,900
Land Use Fees
Residential $3.65
Hotel $5,343
Commercial Retail $4.78
Office $5.08
Industrial $1.82
Institutional / Other $10.48
Total Residential Sq. Ft.

Total Fee per Residential Sq. Ft.

APPENDIX A-1

CITY OF MORRO BAY

ADMINISTRATION FEE CALCULATION
Total Residential EDUs
Total cost per EDU
Total Fees

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I. Inventory of Existing Facilities
Facility Facility Units Quantity
Buildings Square Feet 7,730
Land Acres 0.73
Vehicles Vehicle 33
Equipment & Property Integrated Unit 1
II. Existing Facility Standard [a] [b] [c] = [a] / ([b] / 1,000) Existing Facility Units per
Facility Type Facility Units Quantity EDUs* 1,000 EDUs
Buildings Square Feet 7,730 9,631 803
Land Acres 0.7 9,631 0.076
Vehicles Vehicle 33 9,631 3.427
Equipment & Property Integrated Unit 1 9,631 0.104
III. Future Facility Standard [a] [b] [c] = [a] x [b]
Facility Units Future Facilities Units Funded
Facility Type Facility Units per 1,000 EDUs EDUs by New Development Buildings Square Feet 803 1,798 1,443
Land Acres 0.076 1,798 0.136
Vehicles Vehicle 3.427 1,798 6.16
Equipment & Property Integrated Unit 0.104 1,798 0.187
IV. Summary Cost Data [a] [b] [c] = [a] x [b] [d] = [c] / 1798 Facility Units Funded Total Facility Cost for Cost
Facility Type Facility Units by Future Development Cost Per Unit Future Development per EDU Buildings Square Feet 1,443 $1,088 $1,569,130 $872.93
Land Acres 0.136 $1,264,732 $172,321 $95.87
Vehicles Vehicle 6.159 $47,327 $291,502 $162.17
Equipment & Property Integrated Unit 0.187 $1,087,191 $202,919 $112.89 Offsetting Revenue $45,093 $25.09
Total NA NA $2,190,779 $1,219
V. Residential Fee Calculation
Land Use Type EDUs per Unit No. of Projected Units Total EDUs Residential 1.00 516 516
[a] 516
[b] $1,219
[c] = [a] x [b] $628,655
[d] 1,062,401
[e] = [c] / [d] $0.59
VI. Non-Residential Fee Calculation
EDUs per Room/ Fee per Room / Rooms / Costs Financed
Land Type 1,000 Non-Res. Sq. Ft.per 1,000 Non-Res Sq. Ft. Non-Res. Sq. Ft. by Fees [a] [b] = [a] x 1219 [c] [d] = ([c] / 1,000) x [b]
Hotel 0.71 $866 210 $181,604
Commercial Retail 1.39 $1,696 670,796 $1,137,599
Office 0.97 $1,179 70,557 $83,198
Industrial 0.38 $462 136,745 $63,203
Institutional / Other 1.53 $1,867 51,711 $96,521
Total NA NA NA $1,562,124
VII. Fee Calculation Summary
Res. Fee per Sq. Ft./
per Room / Projected Res. Sq. Ft./ Costs Financed
Land Type per 1,000 Non Res Sq. Ft. Rooms/Non-Res. Sq. Ft. by Fees Residential $0.59 1,062,401 $628,655
Hotel $866 210 $181,604
Commercial Retail $1,696 670,796 $1,137,599
Office $1,179 70,557 $83,198
Industrial $462 136,745 $63,203
Institutional / Other $1,867 51,711 $96,521
Total NA NA $2,190,779
Land Use Fees
Residential $0.59
Hotel $866
Commercial Retail $1.70
Office $1.18
Industrial $0.46
Institutional / Other $1.87
Total Residential Sq. Ft.

Total Fee per Residential Sq. Ft.

APPENDIX A-1

CITY OF MORRO BAY, CA

POLICE FEE CALCULATION
Total Residential EDUs
Total cost per EDU
Total Fees

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I. Inventory of Existing Facilities
Facility Facility Units Quantity
Buildings Square Feet 14,500
Land Acres 0.95
Vehicles Vehicle 14
Equipment & Property Integrated Unit 1
II. Existing Facility Standard [a] [b] [c] = [a] / ([b] / 1,000) Existing Facility Units per
Facility Type Facility Units Quantity EDUs* 1,000 EDUs
Buildings Square Feet 14,500 9,631 1,506
Land Acres 1.0 9,631 0.099
Vehicles Vehicle 14 9,631 1.454
Equipment & Property Integrated Unit 1 9,631 0.104
III. Future Facility Standard [a] [b] [c] = [a] x [b]
Facility Units Future Facilities Units Funded
Facility Type Facility Units per 1,000 EDUs EDUs by New Development Buildings Square Feet 1506 1,798 2,706
Land Acres 0.099 1,798 0.177
Vehicles Vehicle 1.454 1,798 2.61
Equipment & Property Integrated Unit 0.104 1,798 0.187
IV. Summary Cost Data [a] [b] [c] = [a] x [b] [d] = [c] / 1798 Facility Units Funded Total Facility Cost for Cost
Facility Type Facility Units by Future Development Cost Per Unit Future Development per EDU Buildings Square Feet 2,706 $1,200 $3,247,634 $1,806.71 Land Acres 0.177 $1,264,732 $224,254 $124.76
Vehicles Vehicle 2.613 $432,064 $1,129,001 $628.08
Equipment & Property Integrated Unit 0.187 $2,055,884 $383,722 $213.47 Offsetting Revenue $45,616 $25.38
Total NA NA $4,938,995 $2,748
V. Residential Fee Calculation
Land Use Type EDUs per Unit No. of Projected Units Total EDUs Residential 1.00 516 516
[a] 516
[b] $2,748
[c] = [a] x [b] $1,417,269
[d] 1,062,401
[e] = [c] / [d] $1.33
VI. Non-Residential Fee Calculation
EDUs per Room/ Fee per Room / Rooms / Costs Financed
Land Type 1,000 Non-Res. Sq. Ft.per 1,000 Non-Res Sq. Ft. Non-Res. Sq. Ft. by Fees [a] [b] = [a] x 2748 [c] [d] = ([c] / 1,000) x [b]
Hotel 0.71 $1,951 210 $409,417
Commercial Retail 1.39 $3,823 670,796 $2,564,657
Office 0.97 $2,658 70,557 $187,565
Industrial 0.38 $1,042 136,745 $142,487
Institutional / Other 1.53 $4,208 51,711 $217,601
Total NA NA NA $3,521,726
VII. Fee Calculation Summary
Res. Fee per Sq. Ft./
per Room / Projected Res. Sq. Ft./ Costs Financed
Land Type per 1,000 Non Res Sq. Ft. Rooms/Non-Res. Sq. Ft. by Fees Residential $1.33 1,062,401 $1,417,269
Hotel $1,951 210 $409,417
Commercial Retail $3,823 670,796 $2,564,657
Office $2,658 70,557 $187,565
Industrial $1,042 136,745 $142,487
Institutional / Other $4,208 51,711 $217,601
Total NA NA $4,938,995
Land Use Fees
Residential $1.33
Hotel $1,951
Commercial Retail $3.82
Office $2.66
Industrial $1.04
Institutional / Other $4.21
Total Residential Sq. Ft.

Total Fee per Residential Sq. Ft.

APPENDIX A-1

CITY OF MORRO BAY, CA

FIRE FEE CALCULATION
Total Residential EDUs
Total cost per EDU
Total Fees

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I. Inventory of Existing Park Facilities
Facility Facility Units Quantity
Parks Acres 56.97
II. Existing Facility Standard [a] [b] [c] = [a] / ([b] / 1,000) Existing Facility Units per
Facility Type Facility Units Quantity EDUs 1,000 EDUs
Parks Acres 56.97 6,640 8.580
III. Targeted Standard [a] [b] [c] = [a] x [b]
Acres per Residents per Facility Units per
Facility Type 1,000 Residents EDU 1,000 EDUs
Parks 3.00 1.57 4.70
IV. Future Facility Standard [a] [b] [c] = [a] x [b]
Facility Units Future Facilities Units Funded
Facility Type Facility Units per 1,000 EDUs * EDUs by New Development Parks Acres 4.701 516 2.425
* Utilizing Targeted Standard per City's General Plan.

V. Summary Cost Data [a] [b] [c] = [a] x [b] [d] = [c] / 516 Facility Units Funded Total Facility Cost for Cost
Facility Type Facility Units by Future Development Cost Per Unit Future Development per EDU Parks Acres 2.425 $1,442,420 $3,497,341 $6,780
Offsetting Revenue $128,923 $250
Total $3,368,418 $6,530
VI. Residential Fee Calculation
Land Type EDUs per Unit No. of Projected Units TOTAL EDUs Residential 1.00 516 516
[a] 516
[b] $6,530
[c] = [a] x [b] $3,368,418
[d] 1,062,401
[e] = [c] / [d] $3.17
VII. Fee Calculation Summary
Res. Fee per Sq. Ft./
per Room / Projected Res. Sq. Ft./ Costs Financed
Land Type per 1,000 Non Res Sq. Ft. Rooms/Non-Res. Sq. Ft. by Fees Residential $3.17 1,062,401 $3,368,418
Total NA NA $3,368,418
Land Use Fees
Residential (per SF) $3.17
Total Residential Sq. Ft.

Total Fee per Residential Sq. Ft.

APPENDIX A-1

MORRO BAY , CALIFORNIA

PARKS FEE CALCULATION
Total Residential
Total cost per EDU
Total Fees

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Facility Replacement Cost
Pavement $96,919,500
Curbs and Gutters $37,300,000
Sidewalks $59,343,000
Bridges $11,500,000
Traffic Signals $250,000
Arterials, Roads, etc $160,000,000
Total $365,312,500
Current Trasportation LOS
Quantity
Total Existing Facilities $365,312,500
Total Daily Trips 100,729
Cost per Trip $3,627
Residential Fee Calculation
Conversion Fee
Calculation
Average Daily Trips [a] 8.24
Cost per Trip [b] $3,627
Fee per Unit [c] = [a] x [b] $29,884
Projected Units [d] 516
Total Costs [e] = [c] x [d] $15,414,562
Projected Square Feet [f] 1,062,401
Residential Fee per Sq. Ft. [g] $14.51
Non - Residential Fee Calculation
Non-Residential Land Use
Category Average Daily Trips Cost per Trip
Fee per Unit /
1,000 Sq. Ft.
[a] [b] [c] = [a] x [b]
Hotel (Per Room) 4.24 $3,627 $15,377
Commercial Retail (Per SF) 25.69 $3,627 $93.16
Office (Per SF) 11.26 $3,627 $40.84
Industrial (Per SF) 5.06 $3,627 $18.33
Institutional / Other (Per SF) 8.69 $3,627 $31.50
Transportation Fee Summary
Land Category Transportation Fee
Residential (Per Sq. Ft.) $14.51
Hotel (Per Room) $15,377
Commercial Retail (Per Sq. Ft) $93.16
Office (Per Sq. Ft) $40.84
Industrial (Per Sq. Ft) $18.33
Institutional / Other (Per Sq. Ft.) $31.50
APPENDIX A-1

CITY OF MORRO BAY, CA

TRANSPORTATION CALCULATION

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APPENDIX A-1

MORRO BAY , CALIFORNIA

WATER INFRASTRUCTURE
Existing Facultiy Categories
Current
Replacement
Costs
Supply $81,135,000
Treatment $40,000,000
Distribution $160,385,000
Storage $65,000,000
Other $5,500,000
Total Existing Faculties $352,020,000
Existing Facultiy Categories Supply Treatment Distribution Storage Other Replacement Costs [a] $81,135,000 $40,000,000 $160,385,000 $65,000,000 $5,500,000 Gallons per day for entire city [b] 973,089 973,089 973,089 973,089 973,089 Facilties / EBUs [c] = [a] / [b] 83 41 165 67 6
Residential Gallons Per Day [d] 166.0 166.0 166.0 166.0 166.0 Residential Fee [e] = c x d $13,841 $6,824 $27,360 $11,088 $938 Supply Treatment Distribution Storage Other
Total Replacement Costs for
Existing Facilities $81,135,000 $40,000,000 $160,385,000 $65,000,000 $5,500,000 Estimated Water Usage for
Existing Land Use 973,089 973,089 973,089 973,089 973,089 Replacement Cost per GPD $83.38 $41.11 $164.82 $66.80 $5.65 Supply Treatment Distribution Storage Other
Water Usage [a] 973,089 973,089 973,089 973,089 973,089 Value per EBU [b] $83.38 $41.11 $164.82 $66.80 $5.65
Gallons per Day (GPD) [c] 166.0 166.0 166.0 166.0 166.0 Residential Fee 3/4 ' Meter [d] = [b] x [c] $13,841 $6,824 $27,360 $11,088 $938 Meter Size Hydraulic Capacity
Factor Supply Treatment Distribution Storage Other Total 3/4 " 1.0 $13,841 $6,824 $27,360 $11,088 $938 $60,051
1" 1.67 $23,114 $11,395 $45,692 $18,518 $1,567 $100,286

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APPENDIX A-1

MORRO BAY , CALIFORNIA

SEWER INFRASTRUCTURE
Existing Facultiy Categories
Current
Replacement Costs
Treatment $102,500,000
Distribution $118,520,000
Total Existing Faculties $221,020,000
Existing Facultiy Categories Treatment Distribution
Replacement Costs [a] $102,500,000 $118,520,000
Total Wastewater Volume EBUs [b] 428,159 428,159
Facilties / EBUs [c] = [a] / [b] 239 277
Residential Gallons Per Day [d] 73.04 73
Residential Fee [e]= c x d $17,486 $20,218
75% 50% 25%
Meter Size Hydraulic Capacity
Factor
Calculated
Maximum
Wastewater Fee
Calculated
Wastewater Fee
75%
Calculated
Wastewater
Fee 50%
Calculated
Wastewater
Fee 25%
3/4 " 1.0 $17,486 $13,114 $8,743 $4,371
1" 1.67 $29,201 $21,901 $14,600 $7,300

1.5" 3.33 $58,227 $43,670 $29,113 $14,557
2" 6.67 $116,629 $87,471 $58,314 $29,157
3" 10.67 $186,571 $139,928 $93,285 $46,643
4" 16.67 $291,484 $218,613 $145,742 $72,871
6" 33.33 $582,793 $437,095 $291,397 $145,698

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APPENDIX A-1
Morro Bay, CALIFORNIA

STORM DRAIN FEE CALCULATION
Existing Units/SQ ft. Units per Acre / FAR Developed Acreage Residential 6,640 20.5 324
Hotel 468,000 1.25 8.6
Commercial Retail 1,496,317 1.25 27.5
Office 204,000 1.25 3.7
Industrial 395,368 0.5 18.2
Institutional / Other 149,510 0.5 6.9
I Run off Rate Coeffificiant Calculation
Runoff Rate Current
Land Use Category Coefficient "C" Developed Acreage Total Unit Runoff Residential 0.62 324 201
Hotel 0.83 9 7
Commercial Retail 0.95 27 26
Office 0.83 4 3
Industrial 0.80 18 15
Institutional / Other 0.83 7 6
389 257
Build out thru 2043 Units/SQ ft. Units per Acre / FAR Developed Acreage Residential 516 20.5 25
Hotel 209,804 1.3 3.9
Commercial Retail 670,796 1.25 13
Office 70,557 1.25 1
Industrial 136,745 0.5 6
Institutional / Other 51,711 0.5 2
I Run off Rate Coeffificiant Calculation
Runoff Rate Future
Land Use Category Coefficient "C" Developed Acreage Total Unit Runoff Residential 0.62 25 16
Hotel 0.83 4 3
Commercial Retail 0.95 13 12
Office 0.83 1 1
Industrial 0.80 6 5
Institutional / Other 0.83 2 2
52 39
II Proposed Facilities
New Development
Facility Facility Costs
Storm Drain Facilities City $ 2,784,000
Offsetting Revenues $ 14,988
Total $ 2,769,012
Overall
Cost Per Unit Runoff
Cost Per unit Run off $70,800
Cost Per Unit Runoff
Runoff Rate Allocation Rate
Land Use Category Coefficient "C" per Acre Cost Financed Residential 0.62 $43,896 $1,104,491
Hotel 0.83 $58,764 $231,745
Commercial Retail 0.95 $67,260 $848,075
Office 0.83 $58,764 $77,936
Industrial 0.80 $56,640 $363,967
Institutional / Other 0.83 $58,764 $142,797
$2,769,012
Allocation by
Land Use Category Total Unit Runoff (EBUs) Percentage New Development Costs Existing Development 257 86.81% $2,403,759
New Development 39 13.19% $365,253
Total 296 100.00% $2,769,012
Cost per Unit of Runoff $9,339
[a] [b] = [a] x Cost per
Unit Runoff [c] [d] = [b] x [c]
Residential 0.62 $5,790 25.16 $145,690
Hotel 0.83 $7,751 3.94 $30,569
Commercial Retail 0.95 $8,872 12.61 $111,867
Office 0.83 $7,751 1.33 $10,280
Industrial 0.80 $7,471 6.43 $48,010
Institutional / Other 0.83 $7,751 2.43 $18,836
Total New Development $365,253
Land Use Category Per acre
Residential $5,790
Hotel $7,751
Commercial Retail $8,872
Office $7,751
Industrial $7,471
Institutional / Other $7,751
[a] = Acres / 43,560 or
[a] = Acres/43,560 x 1,000
[b] = Total Acres x
43,560
[c] = [a] x [b] or
[c] = [a] x [b] / 1,000
Residential (per SF) $0.13 1,096,041 145,690
Hotel (per room) $178 171,787 $30,569
Commercial Retail (per SF) $0.20 549,246 $111,867
Office (per SF) $0.18 57,772 $10,280
Industrial (per SF) $0.17 279,917 $48,010
Institutional / Other (per SF) $0.18 105,852 $18,836
$365,253
Residential (per SF) $0.13
Hotel (per room) $178
Commercial Retail (per SF) $0.20
Office (per SF) $0.18
Industrial (per SF) $0.17
Institutional / Other (per SF) $0.18
` Per SF Square Feet Cost Financed
Land Use Category Per SF
Land Use Category Ruinnoff Rate Coefficient
"C"
Cost per Unit Runoff
Allocation Rate per
Acre
Total Acres Cost Financed

Page 131 of 218 ends

APPENDIX B
City of Morro Bay
Development Impact Fee Justification Study

INVENTORY AND

FACILITIES NEEDS
LIST

Page 132 of 218 ends

Buildings Address (Sq. Ft.) Cost / Sq. Ft. Value
City Hall 595 Harbor Street, Morro Bay, CA 93 3,607 $750 $2,705,250 City Hall Annex 955 Shasta Avenue, Morro Bay CA 1,275 $750 $956,250 Chamber of Commerce Building 695 Harbor Street, Morro Bay 93442 2,433 $750 $1,824,750 Community Center 1001 Kennedy Way, Morro Bay CA 17,292 $750 $12,969,000 Veterans Memorial Building 209 Surf Street, Morro Bay CA 9,160 $750 $6,870,000 Maintenance Yard Bldg.s 15,176 $450 $6,829,200
PW/CD Building 955 Shasta Avenue, Morro Bay CA 5,273 $450 $2,372,850 Youth Building 2,500 $450 $1,125,000
House 570 Dunes 2,081 $450 $936,450
Total 58,797 $36,588,750
Pending
Land (Acres) Cost / Acre Value
City Hall 595 Harbor Street, Morro Bay, CA 93 2.64 $1,264,732 $3,338,891 City Hall Annex 955 Shasta Avenue, Morro Bay CA -
Chamber of Commerce Building 695 Harbor Street, Morro Bay 93442 - Community Center 1001 Kennedy Way, Morro Bay CA 1.28 $1,264,732 $1,618,856 Veterans Memorial Building 209 Surf Street, Morro Bay CA 0.66 $1,264,732 $834,723 Maintenance Yard Bldg.s 18.3 $1,264,732 $23,144,588
PW/CD Building 955 Shasta Avenue, Morro Bay CA -
Youth Building -
House 570 Dunes -
Total 22.88 28,937,059
Equipment & Property Quantity Replacement Cost
Desks 17 $ 34,000
Shelving Units 7 $ 3,500
Storage Cabinets 3 $ 6,000
Filing Cabinets 25 $ 175,000
Pedestal Filing Drawers 16 $ 5,200
Desktop Scanners 2 $ 1,000
Meeting Tables 3 $ 1,500
Desk/Meeting Chairs 40 $ 16,000
Refrigerator 1 $ 1,000
Conference Room Table 1 $ 2,500
Bathroom Cabinets 2 $ 600
Safe/Vault 1 $ 5,000
ERP/finance System 1 $ 100,000
SANs/HCs/storage/backup systems 3 $ 130,000
Land Management (enterprise software) 1 $ 100,000
Enterprise Camera and Unified Security Platform 10 $ 10,000 PCs - 95 95 $ 142,500
Telephone System 16 $ 1,600
Telecommuter Laptops - 50 50 $ 75,000
Network Switches 22 $ 22,000
Cyber Security Hardware - firewalls 2 $ 20,000
Large Copiers - 8 of them leased $ 24,000
Printers - 16 16 $ 8,000
PD UPS and battery replacements 1,000 $ 25,000
Computer Equipment (Servers) 5 $ 75,000
Audio Visual Equipment 5 buildings $ 500,000
Check Scanner 1 $ 500
Label Printer 2 $ 3,000
Total 0 $ 1,487,900
Vehicles
Description Type Cost Replacement Cost
1976 TILT FLATBED TRAILER Trailer $5,000 $20,000
1999 SAVANA CARGO VAN Passenger $8,000 $20,213
2000 Pickup $3,600 $5,000
Truck - pot hole patch $61,145 $80,000
2000 INGERSOLL RAND TURF 1 Light Utility $1,500 $8,000
2000 INGERSOLL RAND TURF 1 Light Utility $1,500 $8,000
2001 CHEVROLET 4X4 PICKUP 1500 Light $6,000 $12,492
2002 CHEVY SILVERADO 1500 2WD Light $6,000 $12,180
2003 CHEVY 1500 1/2 TON PICK-UP Light $16,608 $22,014
2003 Taurus LX $15,274 $30,000
2004 Chevy Silverado $27,500 $30,000
2005 Toyota Camry $23,902 $40,000
2007 BBT TRAILER Trailer $2,500 $4,245
2007 Gibbs Dump Truck $70,000 $70,000
2007 SUPER 2 MOWER Tractor $5,000 $35,000
2008 GMC 2500 UTILITY Light $15,000 $28,161
2009 Chevy Aveo (3770) $14,000 $14,541
2009 Ford Escape Truck (3763) $31,000 $31,034
2011 JOHN DEERE MOWER Tractor $4,500 $6,802
2011 R & J TRAILER TO TOW JOHN Trailer 4,000 $6,046
2001 Ford Escape Hybrid Passenger 26185 40000
2013 FORD E-150 ECONOLINE VANLight 12000 17794.88157
2024 CHEVROLET 2500 VIN 77413 Passenger 60000 60000
2024 Chevy Silverado 2500 VIN 772Passenger 60000 60000
Ford Ranger Mini Pickup 11232 45000
Truck w/ standard dump 2.5 ton 28441 80000
Tractor/Loader/Mower 32159 40000
HOT WATER PRESSURE WASHER Trailer 8000 16000
Kubota RTV 30000 30000
29 $590,046 $872,523
APPENDIX B-1
Morro Bay, CALIFORNIA

GENERAL FACILITIES INVENTORY

Page 133 of 218 ends

Morro Bay City CouncilJune 23, 2026

Morro Bay City Council
June 23, 2026