Morro Bay City Council
August 11, 2026

CITY OF MORRO BAY
City Council Regular Meeting Agenda

Tuesday, August 11, 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.d as submitted.

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

1. July 28, 2026 - Regular Council Meeting 5

2. July 28, 2026 - Special Closed Session Meeting 9

6.b Adoption of Resolution No. 43-26 Approving a New Lease Agreement with Bayside Landing, Inc. Lease Sites 49-52/49W-52W, Located at 431, 451 and 11

495 Embarcadero
(Harbor Department)
Recommended Action
Adopt Resolution No. 43-26, approving a 40-year Master Lease Agreement with Bayside Landing, Inc., (Paul Gillen) for Lease Sites 49-52/49W-52W.

6.c Adoption of Resolution No. 44-26 approving a Lease Amendment between the City of Morro Bay and THMT, Inc. for Lease Site 122-123/122W-123W located at 1205 Embarcadero (Harbor Hut Restaurant)
64 (Harbor Department)
Recommended Action
Adopt Resolution No. 44-26 approving lease amendment for Lease Site 122- 123/122W-123W (Harbor Hut) located at 1205 Embarcadero.

6.d Adoption of Resolution No. 45-26 authorizing application and acceptance for California's Department of Resources Recycling and Recovery (CalRecycle) Grants for Beverage Container Recycling Grant (BCRG)
73 (City Manager / Maintenance Division Manager)
Recommended Action
Staff recommends the City Council adopt Resolution No. 45-26 authorizing the Public Works Director to:

Submit the application and accept and administer any grant award to CalRecycle for any and all CalRecycle Beverage Container Recycling Grant (BCRG) Program grants;

1. To act as the City’s representative in administration of the grant, including but not limited to, applications, agreements, and amendments that are necessary to implement and secure payment of CalRecycle grants to the City; if the application is successful.

2. 6.e Authorization for the Mayor to Execute and Submit a Letter of Opposition to the California Department of Fish and Wildlife and California Fish and Game Commission Regarding Marine Protected Area Petitions 2023-19MPA, 2023- 20MPA, and 2023-29MPA
75 (City Manager)
Recommended Action
Staff recommends the City Council authorize the Mayor to execute and transmit, on behalf of the City Council, a letter of opposition to the California Department of Fish and Wildlife (CDFW) and the California Fish and Game Commission (CFGC) regarding Marine Protected Area (MPA) petitions 2023- 19MPA (Chitqawi SMCA), 2023-20MPA (Point Buchon SMCA and SMR), and 2023-29MPA (Mishopshno SMCA), requesting denial of petition 2023-19MPA and deferral of petitions 2023-20MPA and 2023-29MPA pending meaningful consultation with the City of Morro Bay and local fishing community stakeholders.

6.f Accept Withdrawal of Public Works Advisory Board Appointee, Lyn Wickham, and Confirm Appointment of Michael Lucas to fill the Unscheduled Vacancy 84

(City Clerk)
Recommended Action
Accept the withdrawal of Public Works Advisory Board Appointee, Lyn Wickham, due to an unforeseen medical condition, and confirm the appointment of Michael Lucas to fill an unscheduled vacancy on the Public Works Advisory Board (“PWAB”) with a term ending January 31, 2027.

7. PUBLIC HEARING ITEMS
None.

8. BUSINESS ITEMS

8.a Morro Bay City Park - Discussion of Current Conditions, Community Input, and Direction to Staff Regarding Near-Term Improvements and a Process for Future Planning
85 (City Manager)
Recommended Action
Staff recommends City Council:

Receive the report prepared by Council Member Jeff Eckles summarizing the findings of four (4) July 2026 City Park town halls;

1. Discuss current conditions, community input, and priorities for the future of City Park; and

2. Provide direction to staff on near-term operational actions and a process for broader community planning, including referral of the Council Member's report to the Recreation and Parks Commission and the Public Works Advisory Board for advisory review and recommendations to City Council.

3. 9. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS

10. ADJOURNMENT
The next Regular Meeting will be held on August 25, 2026.

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

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

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

1 MINUTES - MORRO BAY CITY COUNCIL

REGULAR MEETING
July 28, 2026, 5:30 p.m.

Veterans Memorial Hall
209 Surf St., Morro Bay, CA
Members Present: Mayor Carla Wixom
Council Member Jeff Eckles
Council Member Cyndee Edwards
Council Member Zara Landrum
Council Member Bill Luffee
Staff Present: City Manager John Craig
City Attorney Brian Stack
City Clerk Dana Swanson
Finance Director Emily Conrad
Community Development Director Airlin Singewald
Fire Chief Dan McCrain
Interim Public Works Director Damaris Hanson
Harbor Business Manager Lori Thompson
Police Commander Tony Mosqueda
_____________________________________________________________________

1. ESTABLISH QUORUM AND CALL TO ORDER
Mayor Wixom called the meeting to order at 5:35 p.m. with all members present.

Council Member Edwards announced she was participating remotely under SB 707 "just cause" provisions due to a medical condition and that no other adults were present in the remote location.

2. PLEDGE OF ALLEGIANCE

3. REPORTS

3.a Closed Session Report
City Attorney Stack announced the Council met in closed session to discuss five (5) matters: two (2) Real Property Negotiations regarding lease sites 49/49W, 50- 51/50W-51W & 52/52W located at 431, 451 and 495 Embarcadero Road, and Morro Dunes RV Park located at 1700 Embarcadero; two (2) potential litigation items; and employee performance evaluation of the City Manager. No reportable action was taken on any item under the Brown Act in closed session.

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

3.c City Manager Reports, Announcements and Presentations

2 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

4.a Presentation of "Parks Make Life Better" Proclamation Presented to Recreation Services Manager Kirk Carmichael.

5. PUBLIC COMMENT
 Linda Winters, Morro Bay, appreciated recent City events and provided a Monday night dinner update.
 Tina Clark, Morro Bay Chamber of Commerce, announced upcoming activities and shared the Chamber is accepting nominations for the Annual Awards Gala to be held November 7th. Visit www.morrochamber.org for more information.  Betty Winholtz, Morro Bay, asked the City to publish information regarding the County-proposed desal plant on its website, and expressed frustration with removal of trees at Del Mar Elementary and postponement of the SHPO Historic Designation hearing regarding Morro Elementary.
 Nicole Dorfman, Morro Bay, expressed gratitude for the July 3-4 event and Council Member Luffee's efforts to add beach volleyball. She shared Ms.

Winholtz's concerns about the County-proposed desal plant and was disappointed the SHPO hearing regarding Morro Elementary was moved to November.
 Nathan Churches, Co-Owner & Operator of Grassy Bar Oyster Co., provided background information and requested approval of a License Agreement that would provide increased nursery space for their oyster farm.

End of public comment.

Staff responded to issues raised during public comment.

6. CONSENT AGENDA
Unless an item is pulled for separate action by the City Council, the following actions are approved without discussion. The public will also be provided an opportunity to comment on consent agenda items.
 Betty Winholtz, Morro Bay, spoke to Items 6.c and 6.d.

Council Member Eckles pulled Item 6.e.

Motion by Mayor Wixom
Seconded by Council Member Luffee
Approve Consent Agenda Items 6.a. through 6.d as submitted.

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

6.a Approval of Minutes
Approve as submitted.

1. May 26, 2026 - Regular Council Meeting

2. June 9, 2026 - Regular Council Meeting

3. June 23, 2026 - Special Closed Session Meeting

4. June 23, 2026 - Regular Council Meeting

6.b Proclamations

1. Proclamation Declaring July 2026 "Parks Make Life Better" Month

6.c Approval of Lease Agreements with Visit Morro Bay and the Morro Bay Chamber of Commerce for the Continued Use of Office Space at 695 Harbor Street
Review and approve Lease Agreements for office space at 695 Harbor Street with Visit Morro Bay and the Morro Bay Chamber of Commerce.

6.d San Luis Obispo Urban County 2027-2029 Cooperation Agreements Authorize City Manager to sign the Cooperation Agreement between the County of San Luis Obispo and the City of Morro Bay for joint participation in the Community Development Block Grant (CDBG) Program, the Home Investment Partnerships Program (HOME), and the Emergency Solutions Grant Program (ESG) for Fiscal Years 2027 through 2029.

6.e Approval of a Temporary License Agreement for Grassy Bar FLUPSY on the North T-Pier
Council Member Eckles raised concern the actual cost of utilities may exceed the flat fees listed in the agreement. Staff presented direct billing alternatives for electrical use, either installing a sub-meter and invoicing the tenant for their share plus a 10% admin fee or having PG&E bill the tenant directly for sub-metered usage. It was anticipated the water usage would be minimal. A majority of Council was supportive of whichever method of metering electrical usage could best be implemented.

Motion by Council Member Eckles
Seconded by Council Member Landrum
Approve temporary license agreement for Grassy Bar to dock a FLUPSY and work dock on the North T-Pier for an initial term of 2 years with electricity usage metered in the method preferred by the Harbor Department.

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

4 CARRIED (5 to 0)

7. PUBLIC HEARING ITEMS
None.

8. BUSINESS ITEMS

8.a Advisory Board Interviews and Appointments to Fill Unscheduled Vacancies for terms ending January 31, 2027 on the Citizens Oversight/Finance Advisory Committee and Public Works Advisory Board Citizens Oversight/Finance Advisory Committee
The following applicants were interviewed for consideration of appointment to the Citizens Oversight/Finance Advisory Committee: Michael Jones and Tom Starnes.

The Council voted by written ballot and Clerk Swanson read the results into the record. Tom Starnes received three votes (Edwards, Luffee, Wixom) and Michael Jones received two votes (Eckles, Landrum). Mr. Starnes was appointed to the Committee for the remainder of a term ending January 31, 2027.

Public Works Advisory Board
The following applicants were interviewed for consideration of appointment to the Public Works Advisory Board: Michael Lucas and Lyn Wickham.

The Council voted by written ballot and Clerk Swanson read the results into the record. Lyn Wickham received three votes (Eckles, Edwards, Wixom) and Michael Lucas received two votes (Landrum, Luffee). Ms. Wickham was appointed to the Board for the remainder of a term ending January 31, 2027.

9. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS
In response to Council Member Landrum's request for information regarding the City's use of license plate reader cameras, City Manager Craig committed to having Police Chief Watkins provide an update at the next meeting.

10. ADJOURNMENT
The meeting adjourned at 7:28 p.m.

Respectfully submitted,
/s/ Dana Swanson, City Clerk

1 MINUTES - MORRO BAY CITY COUNCIL

CLOSED SESSION MEETING
July 28, 2026, 3:00 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
Harbor Business Manager Lori Thompson
_____________________________________________________________________

1. ESTABLISH QUORUM AND CALL TO ORDER
Mayor Wixom called the meeting to order at 3:00 p.m. with all members present.

Council Member Edwards announced she was participating remotely under SB 707 "just cause" provisions due to a medical condition and that no other adults were present in the remote location.

2. CLOSED SESSION PUBLIC COMMENT
Paul Gillen, Associated Pacific, stated the lease terms offered to him through staff were acceptable except that he hoped to negotiate a 50 year lease, or as close to that as possible.

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: Lease Sites 49/49W, 50-51/50W-51W & 52/52W; Bayside Landing, located at 431, 451 and 495 Embarcadero Road
Property Negotiator: Paul Gillen, Associated Pacific Constructors Agency Negotiators: Chris Munson, Harbor Director; Lori Thompson, Harbor Business Manager; John Craig, City Manager; Brian Stack, City Attorney Negotiations: Price and Terms of Payment

2 4.b CONFERENCE WITH REAL PROPERTY NEGOTIATOR - GOVERNMENT CODE SECTION 54956.8
Property: 1700 Embarcadero, Morro Dunes RV Park
Property Negotiators: Kathy Claasen, Morro Dunes Trailer Park & Campgrounds, Inc.

Agency Negotiators: John Craig, City Manager; Brian Stack, City Attorney Negotiations: Price and Terms of Payment

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

4.d CONFERENCE WITH LEGAL COUNSEL - POTENTIAL LITIGATION Potential initiation of litigation pursuant to Government Code Section 54956.9(d)(4): (one potential case)

4.e PUBLIC EMPLOYEE PERFORMANCE EVALUATION
Conduct an employee evaluation of the City Manager pursuant to Government Code Section 54957.

5. RECONVENE IN OPEN SESSION
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 5:21 p.m.

Respectfully submitted,
/s/ Dana Swanson, City Clerk

Prepared By: LT Dept Review: LT
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: August 4, 2026 FROM: Chris Munson, Harbor Director
Lori Thompson, Harbor Business Manager
SUBJECT: Adoption of Resolution No. 43-26 Approving a New Lease Agreement with Bayside Landing, Inc. Lease Sites 49-52/49W-52W, Located at 431, 451 and 495 Embarcadero.

RECOMMENDED ACTION
Adopt Resolution No. 43-26, approving a 40-year Master Lease Agreement with Bayside Landing, Inc., (Paul Gillen) for Lease Sites 49-52/49W-52W.

ALTERNATIVES
The City Council can elect to not approve the lease agreement as proposed and/or can propose changes, and direct staff accordingly.

FISCAL IMPACT
The proposed lease will generate direct revenues for both the Harbor Enterprise Fund and the City's General Fund.

The Harbor Enterprise Fund will benefit from increased lease revenues through minimum rent, percentage rent, annual CPI adjustments, and periodic fair market rent appraisals. The lease Annual Minimum (guaranteed rent) rent is set at the current rate of $37,000, increasing to $45,000 upon project completion, then continue at this rate with yearly CPI adjustments until their next appraisal in 2031.

The City's General Fund will benefit from new transient occupancy tax (TOT) generated by the 10 hotel rooms, increased sales tax from a commercial space and slip/dock operations, and additional economic activity resulting from the redevelopment.

BACKGROUND
In October 2023, the City issued a Request for Proposals (RFP) for the redevelopment of lease site 49/49W and 50-51/50W-51W. Associated Pacific Constructors (APC), led by Paul Gillen, submitted the sole proposal, which included APC's existing site 52/52W. The proposal envisioned a comprehensive redevelopment of the property through approximately $3.5 million in private investment.

The proposed redevelopment underwent an extensive public review process. In November 2024, the AGENDA NO: 6.b
MEETING DATE: August 11, 2026

Planning Commission denied the Conditional Use Permit. Following an appeal, the City Council approved the project in January 2025 after revisions were made to address concerns raised during the public process, including modifications to the building design and public space improvements.

The project subsequently received approval from the California Coastal Commission in June 2026 after completion of the Coastal Development Permit process.

During this period, Harbor staff worked closely with Mr. Gillen to negotiate a new master lease that reflects current City policies, protects public assets, and provides the certainty necessary for a project of this scale.

DISCUSSION
The proposed lease replaces two existing leasehold interests with a single comprehensive agreement that governs redevelopment, operation, maintenance, and long-term management of three lease site properties.

The redevelopment will revitalize an aging and underutilized section of the waterfront by introducing a complementary mix of visitor-serving and marine-related uses, commercial space, tapas bar, marine construction office, water recreation businesses, 10 hotel rooms, expanded docking facilities, and improved pedestrian connectivity through a new Harborwalk connection to Tidelands Park. These improvements are expected to increase activity along the Embarcadero while supporting both residents and visitors.

The lease becomes effective upon execution of the lease by all parties, with the forty-year lease term commencing on the scheduled completion date of the redevelopment project, July 1, 2029, following completion of the tenant improvements and issuance of the final Certificate of Occupancy. In the last five years of the lease, the tenant may extend the lease by an additional ten-years by demonstrating that the lease site has been properly maintained and having a survey of their facilities and completing any required repairs. The survey and repairs will include all buildings, structures, improvements, utilities, appurtenances, the pier and wharf, and any other work necessary to maintain the lease site and preserve the service life. This approach encourages long-term private investment while ensuring the property remains in good condition throughout the life of the lease.

The agreement also includes detailed redevelopment milestones requiring the tenant to obtain permits, commence construction, and complete the project within specified timeframes. Completion is defined to include not only the tenant's improvements but also occupancy approvals for all subtenant spaces, ensuring the project is fully operational before the lease term begins. Performance deadlines, default provisions, and liquidated damages provide accountability and protect the City's interests should the project not proceed as required.

The lease further requires the tenant to maintain all buildings, docks, utilities, waterfront improvements, and other lease site infrastructure in good repair throughout the lease term. Periodic inspections and repair requirements near the end of the lease provide additional assurance that the City will receive the property in an appropriate condition at lease expiration.

CONCLUSION
The proposed redevelopment of Lease sites 49-52/49W-52W presents a significant opportunity for economic growth and public benefit. The City's general fund stands to gain from increased sales tax revenues and TOT, while the Harbor Enterprise Fund will benefit from enhanced rental income. The proposed lease incorporates the Harbor Department's Lease Management Policy, establishes clear performance expectations, protects the City's public assets, and provides the certainty necessary to

facilitate a substantial private investment in the waterfront.

Staff, therefore, recommend approval of Resolution No. 43-26 and this new Master Lease Agreement with the Bayside Landing Inc., to memorialize their commitment to the site.

ATTACHMENTS

1. Resolution No. 43-26

2. New Master Lease Agreement for Lease Site 49-52/49W-52W

RESOLUTION NO. 43-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA
APPROVING A 40-YEAR MASTER LEASE AGREEMENT FOR
LEASE SITES 49-52/49W-52W BETWEEN THE
CITY OF MORRO BAY AND BAYSIDE LANDING, INC.,
LOCATED AT 431, 451 AND 495 EMBARCADERO

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 is the lessor of certain properties on the Morro Bay Waterfront described as City Tidelands leases and properties; and WHEREAS, Associated Pacific Constructors, Inc., owned by Paul Gillen (“Tenant”) has been the lessee of Lease Site 52/52W since 2003, and is a tenant in good standing; and
WHEREAS, the City of Morro Bay issued a Request for Proposals (RFP) for the redevelopment of Lease Sites 49/49W, 50-51/50W-51W and 52/52W to encourage private investment and revitalization of an underutilized waterfront property; and WHEREAS, Tenant submitted the sole proposal in response to the RFP, proposing approximately $3.5 million in private improvements to the lease sites, and WHEREAS, the proposed redevelopment includes commercial, visitor-serving, and lodging uses that are anticipated to increase economic activity, enhance the Embarcadero waterfront, generate additional lease revenue, sales tax, and transient occupancy tax for the City; and
WHEREAS, the project has received a City Conditional Use Permit # 24-04 & MAJ25-001 and approval of a Coastal Development Permit by the California Coastal Commission; and
WHEREAS, the City Council has participated in lease negotiations and reviewed the proposed lease terms presented by staff and finds that the negotiated lease terms balance the City's interest in protecting public tidelands while encouraging substantial private investment in the redevelopment of the property; and WHEREAS, in accordance with the City’s Master Lease Policy, the City and Tenants have negotiated a new Lease Agreement for Lease Sites 49–52/49W–52W, located at 431, 451, and 495 Embarcadero, providing for a forty-year lease term commencing on July 1, 2029, following project completion, together with one ten-year option to extend, subject to the terms and conditions of the Lease Agreement.

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

1. The attached new Master Lease Agreement for Lease Sites 49-52/49W52W is hereby approved. ///
///

2. The Mayor is hereby authorized to execute said Master Lease Agreement.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 11th day of August 2026 with the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:
______________________________
Carla Wixom, Mayor
ATTEST:

Dana Swanson, City Clerk

Bayside Landing Inc.
01181.0024/656492.1 JWP

L E A S E
This LEASE is made and entered into by and between the CITY OF MORRO BAY, a municipal corporation of the State of California herein called CITY, and Bayside Landing Inc., herein called TENANT. (CITY and TENANT, at times, are referred to herein individually as Party and collectively as Parties)

WITNESSETH
WHEREAS, the State of California granted certain tide and submerged lands located within the CITY limits of CITY to the County of San Luis Obispo and to its successors, being Chapter 1076, Statutes of 1947, as amended by Chapter 413, Statutes of 1955, Chapter 1874, Statutes of 1957, and Chapter 70, Statutes of 1960, first extraordinary session; which Statutes may be amended from time to time by the Legislature of the State of California; all of which Statutes are expressly recognized and agreed to be in full force and effect by the Parties; and WHEREAS, the Parties hereto recognize and agree, on July 17, 1964, CITY succeeded to all of the right, title and interest of the County of San Luis Obispo in and to all of the tide and submerged lands conveyed to said County by the State of California pursuant to the above mentioned acts; and
WHEREAS, judgment has been entered on October 14, 1968, in the case of City of Morro Bay, Plaintiff, versus County of San Luis Obispo, and State of California, Defendants, by the Superior Court of the State of California in and for the County of San Luis Obispo, #30417, adjudging and decreeing, among other things, the title to said tide and submerged lands so conveyed by the State of California to the County of San Luis Obispo in trust, as set forth above, passed automatically to CITY upon the date of its incorporation as a city on the 17th day of July, 1964; and
WHEREAS, TENANT accepts the within Lease with full knowledge there is no warranty of title in and to the within described premises by CITY to TENANT; and WHEREAS, in order to develop and improve Morro Bay Harbor and to assist in carrying out the provisions of the tideland grant as aforesaid, and in order to provide facilities for the accommodation of those using Morro Bay Harbor, CITY desires to lease to TENANT the within described property upon the terms and conditions set forth herein;

Bayside Landing Inc.
01181.0024/656492.1 JWP -2-
NOW, THEREFORE, in consideration of the covenants to be performed and the rental to be paid by TENANT to CITY, CITY leases to TENANT, and TENANT leases from CITY, all of the following premises (herein collectively referred to as the "Premises") in the CITY of Morro Bay, County of San Luis Obispo, State of California, described as follows:

Lease Site 49-52/49W-52W
This Premises is delineated on Parcel Map of the CITY of Morro Bay No. 68-30, which map was recorded on October 10, 1968, in Book 3, Page 10 of Parcel Maps in the Office of the County Recorder, San Luis Obispo County, California. A copy of said Map is attached hereto as Exhibit A and made a part hereof by reference.

Article 1 FIXED TERM
Section 1.01 Term.

This Lease shall become effective as of the date it is fully executed by all Parties (the “Effective Date”), with the Lease continuing for a period of 40 years from the date set for completion of TENANT’s Improvements, such date being July 1, 2029 (the "Completion Date").

The term of this Lease will terminate without notice on June 30, 2069, unless sooner terminated as herein provided.

Section 1.02 Extensions.

TENANT may extend the Lease for one (1) additional ten-year term, contingent upon completion of any future repairs required under the terms of this Lease. Between the Thirty-fifth (35th) and Thirty-eighth (38th) year following the Completion Date, TENANT shall provide the CITY with a survey and proposed repair plan addressing the Premises, including any wharfs, revetments, seawalls, bulkheads, pilings, piers, docks, buildings, structures, improvements, utilities, paved areas, drainage facilities, appurtenances and any other work necessary to maintain the service life of the Lease Site and shall complete such repairs prior to lease termination.

TENANT shall give the CITY written notice of its intent to exercise this Option to Extend no less than twenty-four (24) months prior to Lease expiration and obtain CITY approval of the TENANT’s plan in accordance with Section 13.03.

TENANTS’s exercise of the option to extend shall be further contingent upon TENANT not being in default under any term or condition of the Lease at the time of TENANT’s exercise of the option and the time of commencement of the option. Time is of the essence.

Bayside Landing Inc.
01181.0024/656492.1 JWP -3-
Section 1.03 Hold Over.

If TENANT holds the Premises after the expiration of the term of this Lease with the consent of the CITY, express or implied, then such holding over (in the absence of a written agreement between CITY and TENANT with respect thereto) will be deemed to create a tenancy from month-to-month, terminable on 30-days’ written notice from either Party to the other, at a monthly rental equal to two hundred percent (200%) of the average total Rent per month for the twelve (12) months immediately preceding the expiration of this Lease, and otherwise subject to each and every term, covenant and condition of this Lease.

Section 1.04 Replacement.

Subject to the next paragraph, as of the Effective Date, this Lease will extinguish and replace every prior lease between CITY and TENANT respecting the Premises, if any. Any right or interest held by the TENANT pursuant to any existing lease with respect to the Premises, which is not granted pursuant to this Lease, will be extinguished as of the Effective Date of this Lease.
(Note: the following paragraph to be included only if the lease is associated with a development/redevelopment project on the site)
If, after 60 days of receiving all required regulatory approvals, TENANT does not provide satisfactory evidence, as approved by CITY’S Harbor Director and City Attorney, TENANT has obtained all the financing necessary to commence and complete the Project (as defined in Section 13.2), then (i) this Lease will automatically terminate, without any notice to TENANT, and be of no force and effect and (ii) the lease between CITY and TENANT for the Premises that was in effect prior to this Lease, if any, will be automatically reinstituted and remain in full force and effect subject to all of that lease’s terms and conditions.

Article 2 RENT
Section 2.01 Annual Minimum Rent.

TENANT agrees to pay to CITY a minimum guaranteed annual rental for the use and occupancy of the Premises, in an initial amount of $37,000.00 per year (the "Minimum Rent"), payable in advance and at the option of TENANT either in equal semiannual installments or equal monthly instalments. If paid in equal semiannual installments, then such installments must be on January 1 and July 1 each year during the term of the Lease. If the Effective Date is other than January 1 or July 1, then TENANT must pay, on the Effective Date, the proportionate

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amount of the Minimum Rent payable for the period from the Effective Date until the next payment date of January 1 or July 1, as the case may be. If the term of the Lease expires on a date other than December 31 or June 30, then TENANT'S final installment of Minimum Rent must be proportionate to the time remaining in the term. If paid in equal monthly installments, then each monthly installment must be paid no later than the tenth day of each applicable month.

TENANT agrees upon completion of construction of improvements and issuance of a Certificate of Occupancy per CUP24-04, the Minimum Rent shall be increased to $45,000 per year. This adjusted rent shall become effective upon the date the Certificate of Occupancy is issued and shall be payable in the same manner as set forth above.

All Rent, including the Minimum Rent and the Percentage Rent, must be paid in lawful money of the United States of America, without offset or deduction and must be paid to CITY at the Harbor Department Business Office located at 1275 Embarcadero, Morro Bay, California, or at such other place or places CITY may from time to time designate by written notice delivered to TENANT.

Section 2.02 CPI Adjustment to Annual Minimum Rent.
(1) The Parties agree, as of every July 1 following the Effective Date (each, a "CPI Adjustment Date"), except as outlined in section 2.03 hereof, the annual Minimum Rent will be adjusted in direct proportion to any upward or downward movement in the Consumer Price Index for January 1, 2026, which is hereby agreed to be 347.690 (Base Index). The percentage adjustment for any given year will be based on the monthly average Index for the calendar year immediately preceding the CPI Adjustment Date as compared with the Base Index. The Consumer Price Index referred to herein is the Consumer Price Index (all items indexes, all urban consumers) for Los Angeles – Long Beach – Anaheim, California, compiled and published by the United States Department of Labor, Bureau of Labor Statistics, 1982-84 Base Year = 100 (the "Index")
(2) The Annual Minimum Rent will be adjusted as of each CPI Adjustment Date, and will remain in effect as adjusted until the next CPI Adjustment Date. As an illustration only, if the Base Index (Jan. 1, 1999 CPI) is 166.1 and the monthly average CPI for 2000 is 171.6, then the percentage increase is equal to 3.31%. Therefore, the Minimum Rent would be increased by

3.31% as of July 1, 2001, and would continue at that rate through June 30, 2002. (3) If the United States Department of Labor, Bureau of Labor Statistics, ceases to compile and make public the Index as now constituted and issued, but substitutes another index

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in its place, then said substituted index must be used for the purpose of adjusting the Minimum Rent for the Premises. If the Index is changed so the base year differs from that in effect on the Lease Effective Date, then the Index must be converted in accordance with the conversion factor published by the United States Department of Labor, Bureau of Labor Statistics.

Section 2.03 Calculation of New Minimum Rent.

Starting July 1, 2031 (or such earlier date as appropriate should there be sufficiently earlier completion of Improvements), and upon each five-year anniversary thereafter, a new Minimum Rent will be calculated for the following five-year period (each, a "Subsequent Rental Period") as follows:

A. The Minimum Rent will be subject to adjustment by appraisal as of the fifth anniversary of the Completion Date and every five years thereafter (each, an "Appraisal Adjustment Date"). CITY, at its own cost and expense, will retain an independent qualified appraiser for determination of the fair market value of the Premises. Not more than nine months prior to each Appraisal Adjustment Date, CITY will provide written notice to TENANT of the pending appraisal and the appraiser selected by the CITY to determine the fair market value of the Premises, excluding fixtures and improvements, unless such are expressly included in the description of the leasehold interest created by this Lease. If TENANT does not reject CITY's appraiser in writing and within thirty days after CITY's notice of its determination, then the Minimum Rent for the Subsequent Rental Period will be in the amount determined by CITY as outlined in this Section 2.03. If TENANT rejects CITY's appraiser within 30 days following CITY's notice to TENANT, then within 15 days after such 30-day period, each Party, at its own cost, will select an independent professionally designated appraiser who is a member of the American Institute of Real Estate Appraisers, or the Society of Real Estate Appraisers with a designation of MAI (Member of American Institute), SRPA (Senior Real Estate Analysis), to appraise the fair market value of the Premises. CITY may rely on its original appraisal, or select a new appraiser, at its cost. If a Party does not appoint an appraiser within 15 days after the other Party has given notice of the name of its appraiser, then the single appraiser appointed will be the sole appraiser. Each appraiser will conduct an independent appraisal within 30 days after the appointment. If the Parties are unable to agree on the Minimum Rent for the Subsequent Rental Period within 30 days after receiving the appraisal(s), then each Party will select one member of a three-member committee. The two so selected members will select the third member, and this committee will, by majority vote, select one or the other of the appraisals. The Minimum Rent determined on the basis of the selected appraisal will be final and binding and all costs associated with the three-member committee will be paid equally by CITY and TENANT.

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B. In the event the appraisal process is not concluded on or before the Appraisal Adjustment Date, the Minimum Rent will be adjusted retroactively to such Appraisal Adjustment Date as set out hereinbelow when said appraisal process is completed.

C. The total Rent payable, including both the Minimum Rent and the Percentage Rent for each year within the applicable previous five-year period, will be averaged to produce the average annual total Rent payable for such previous period.

D. The new Minimum Rent for the five-year period commencing on each Appraisal Adjustment Date shall be the greater amount of seventy-five percent (75%) of the average of the total yearly Rent payable during the previous five-year period (as set out in paragraph C. above) or eight percent (8%) of the fair market value of the Premises (as established in paragraph A. above.) The new Minimum Rent will be divided by two to determine the semiannual payments and will be paid by TENANT to CITY on the first of each January and July thereafter or paid monthly at the option of TENANT. This new Minimum Rent will be adjusted each following year in proportion to any increase in the Consumer Price Index as set out in Section 2.02 of this Lease. The Base Index will be adjusted upon each Calculation of new Minimum Rent as set out in this section so the Base Index for CPI adjustment will be the Consumer Price Index for January 1 of the year of the calculation of new Minimum Rent.

Section 2.04 Percentage Rent.

A. In addition to the Minimum Rent, TENANT agrees to pay to CITY, at the time and in the manner hereinafter specified, as additional Rent for the use and occupancy of the Premises, a sum equal to the following for all TENANT'S Gross Sales as hereinafter defined: in Schedule A, less the amount of the Minimum Rent paid pursuant to this Lease (the "Percentage Rent").

B. The term "Gross Sales," as used herein, means (subject to the exceptions and authorized deductions as hereinafter set forth), the total selling price and the total gross amount received by TENANT from all rentals, merchandise sold and services rendered in, on or from the Premises by TENANT, its sublessees, licensees, or concessionaires, both for cash and on credit including, but not limited to, rentals of dockage space, leasing and servicing operations and ticket sales, and if on credit whether or not payment be actually made therefore, all charges for services, alterations or repairs made in or upon the Premises; the gross amount received by TENANT for merchandise sold pursuant to orders received in the Premises, though filled elsewhere; and the gross amount received by TENANT from any and all other sources of income derived from the business conducted upon the Premises. “Gross sales” shall also include any sales for merchandise, services or tickets for services rendered in, on or from the Premises even if sold in an off-site location or on the internet either by TENANT or an agent, employee, or other representative of TENANT, its sublessees, licensees or concessionaires.

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C. Notwithstanding the other provisions of Section 2.04, the term "Gross Sales" does not include the following items, and such items may be deducted from Gross Sales to the extent they have been included therein or have been included in a prior computation of Gross Sales or for which a Percentage Rent has been paid under this Lease to CITY:
(1) Credits and refunds made to customers for merchandise returned or exchanged. (2) Any sales or excise taxes otherwise includable in Gross Sales as defined in this Section because such taxes are part of the total selling price of merchandise or services rendered in, from, or on the Premises, where TENANT must account for and remit the taxes to the government entity or entities by which they are imposed; and (3) With respect to credit card sales, fees retained or withheld by the issuer and/or merchant bank pursuant to TENANT'S credit card acceptance agreement, and (4) Rental payments to TENANT from sublessees whose total gross sales are included in gross sales computations.

D. TENANT, must keep or cause to be kept full, complete, and accurate records, and books of account in accordance with accepted accounting practices showing the total amount of Gross Sales, as defined herein, made each calendar month in, on or from the Premises.

TENANT must keep said records and books of account within San Luis Obispo County and will notify CITY in advance of their location at all times. Furthermore, TENANT must, at the time of sale and in the presence of the customer, cause the full selling price of each piece of merchandise, each rental received and each service rendered in, on or from the Premises to be recorded in a cash register or cash registers that have cumulative totals and are sealed in accordance with standard commercial practices. Said records, books of account and cash register tapes, including any sales tax reports or income tax returns TENANT may be required to furnish any government or governmental agency, and income and bank statements must, at all reasonable times, be open to the inspection of CITY, CITY'S auditor, or other authorized representative or agent of CITY, if necessary. TENANT consents to the release of sales tax information to CITY and on demand will provide to CITY a copy of the sales tax reports, quarterly reports and any audit reports of sales for confidential internal use of the CITY in determining Gross Sales for TENANT. TENANT consents and authorizes CITY to request such information directly from the State Board of Equalization or other state agency with which sales tax information is filed.

E. By July 31 of each year, TENANT must furnish CITY with a statement, to be certified by TENANT as current, true and accurate, which must set forth the Gross Sales of each department, sublessee, licensee and concession operating in, on or from the Premises for the previous 12 calendar months, ending June 30, just concluded, and the authorized deductions, if any, therefrom; and with it TENANT must pay to CITY the amount of the Percentage Rent,

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which is due to CITY as shown thereby. If TENANT, at any time, causes an audit of sales of TENANT'S business to be made by a public accountant, then TENANT must furnish CITY with a copy of said audit without cost or expense to CITY. CITY may, once in any twelve-month period, cause an audit of the business of TENANT to be made by a certified public accountant or CITY personnel of CITY'S own selection. TENANT must, upon receiving written notice of CITY'S desire for such an audit, deliver and make available all such books, records and cash register tapes to the certified public accountant or CITY personnel selected by CITY.

Furthermore, TENANT must promptly, on demand, reimburse CITY for the full cost and expense of said audit, if the audit discloses the questioned statement or statements understated Gross Sales by 5 percent or more but less than ten percent. In the event an audit performed at CITY'S request discloses TENANT understated Gross Sales by less than 5 percent, the cost of such audit will be paid by CITY. In the event any audit or other review of records discloses the amounts reported as Gross Sales were understated by TENANT by 10 percent or more, CITY will not only be entitled to recover from TENANT all costs of audit and review, but will also be entitled to recover from TENANT a penalty equal to two times the Percentage Rent due pursuant to this Lease on such unreported amounts. Whenever any audit discloses that Gross Sales were understated by any amount, TENANT must immediately pay the additional Percentage Rent therein shown to be payable by TENANT to CITY, together with interest at the Default Rate thereon, from the date the Percentage Rent was payable until the date paid.

F. CITY will be entitled at any time within five years after the receipt of any such Percentage Rent payment, to question the sufficiency of the amount thereof or the accuracy of the statement or statements furnished by TENANT to justify the same. For the purpose of enabling CITY to check the accuracy of any such statement or statements, TENANT must, for said period of five years after submission to CITY of any such statement, keep all of TENANT'S records, including sales tax returns, all cash register tapes, income tax returns and income and bank statements and other data which in any way bear upon or are required to establish in detail TENANT'S Gross Sales and any authorized deductions therefrom as shown by any such statements and must, upon request, make the same available to CITY for examination.

Section 2.05 Reimbursements.

If TENANT fails to perform any term or covenant of this Lease, then CITY may, but is not obligated to, perform such term or covenant, and TENANT must reimburse CITY therefore as additional Rent hereunder. As an illustration and not as a limitation, if TENANT fails to procure the insurance required by this Lease, then CITY may, but is not obligated to, obtain such insurance, with the cost of the premiums being due to CITY upon demand as additional Rent.

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Section 2.06 Penalty and Interest.
(1) If any Rent is not received within ten days following the date on which the Rent first became due, then TENANT must pay a late penalty of ten percent of the amount of the Rent in addition to the Rent.
(2) In addition to the penalty, TENANT must pay interest at the rate of one percent per month or fraction thereof or the maximum amount permitted by law as of the date this Lease is signed, whichever is greater (the "Default Rate"), on the amount of the Rent, exclusive of the penalty, from the date on which Rent first became delinquent until paid. The term "Rent" includes any sums advanced by the CITY and any unpaid amounts due from TENANT to the CITY.

Article 3 USE OF PREMISES
Section 3.01 Permitted Uses.

The Premises must, from the Effective Date and during the term of this Lease, be used for the purpose of constructing, operating and conducting thereon and therein the uses permitted by, and in compliance with, Conditional Use Permit No. CUP24-04 and MAJ25-001, or any other use permits approved by CITY in its governmental capacity, as they may be amended from time to time, and for no other purpose. Such uses include mixed-used retail, bar & restaurant, coffee shop, transient occupancy (hotel), marine construction, water-based business on the docks (kayak rental), and vessel tie-up.

Section 3.02 Unauthorized Use.

TENANT agrees to allow only those uses authorized in Section 3.01, hereinabove and any unauthorized use thereof constitutes a breach of this Lease and may, at the option of CITY, terminate this Lease.

Section 3.03 Operation of Business - Hours of Operation.

Failure to actively and diligently conduct the business authorized herein constitutes a breach of this Lease and may, at the option of CITY, terminate this Lease. (1) TENANT must, during the term of this Lease, conduct business of the nature specified in Section 3.01 of this Lease on the Premises in an efficient and diligent manner and keep the Premises open for the conduct of business continuously and without interruption for at least six hours each day of the year, except one day each week and legal holidays. This

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provision does not apply if the Premises is closed and the business of TENANT is temporarily shut down for a period not to exceed 14 calendar days in any calendar year to make necessary repairs, maintenance or other construction deemed necessary by TENANT. This provision does not apply if the Premises is closed and the business of TENANT is temporarily shut down as authorized or required by the City Manager or on account of strikes, walkouts, or causes beyond the control of TENANT or for not more than three days out of respect to the memory of an officer, employee, or close relative of any officer or employee of TENANT. (2) TENANT must operate TENANT'S business on the Premises with due diligence and efficiency and in like manner as comparable businesses operated in CITY or the coastal area of San Luis Obispo County, so as to produce the maximum amount of Gross Sales and gross receipts from services, which may be produced from TENANT'S business; and TENANT at all times must carry on Premises, a stock or merchandise of such size, character, and quality as is reasonable, designed to produce the maximum return to TENANT, when the sale of merchandise is a permitted use under this Lease.

Section 3.04 Competition.

During the term of this Lease, TENANT must not directly nor indirectly acquire or establish any similar or competing business within a radius of five miles from the location of the Premises; provided, however, that TENANT may, with prior written approval from CITY, own or operate more than one business, whether or not competing and similar, along the Embarcadero upon one or more CITY lease sites. The purpose of this section is to prevent and prohibit TENANT from reducing revenue to CITY by diverting business from the operation at the Premises to another similar business owned by TENANT within the CITY, but not upon a CITY lease site from which CITY is paid rent based on Gross Sales.

Section 3.05 Environmental Considerations and Hazardous Materials. (1) TENANT must, at all times, comply with applicable environmental regulations, including, where applicable and practical, government- and industry-adopted environmental best management practices and programs.
(2) TENANT must not transport, use, store, maintain, generate, dispose, release, treat or discharge any "Hazardous Material" (as defined below) upon or about the Premises (such activities being hereafter referred to as "Hazardous Materials Activities"), nor permit TENANT'S employees, agents, or contractors to engage in Hazardous Materials Activities upon or about the Premises, except as allowed by applicable law. The term "Hazardous Material" for purposes hereof means any chemical, substance, material or waste or component thereof which is now or

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hereafter listed, defined or regulated as a hazardous or toxic chemical, substance, material or waste or component thereof by any federal, state or local governing or regulatory body having jurisdiction, or which would trigger any employee or community "right-to-know" requirements adopted by any such body. All Hazardous Materials Activities at the Premises must be conducted strictly in accordance with all applicable laws and regulations. If TENANT transports, or has transported, any hazardous waste from the Premises, then such transportation must be done only by a contractor duly licensed to haul hazardous waste and only a duly licensed site approved by TENANT'S liability insurer must be used for disposal of that hazardous waste.
(3) TENANT must promptly notify CITY of: (i) any enforcement, cleanup or other regulatory action taken or threatened by any governmental or regulatory authority with respect to the presence of any Hazardous Material on the Premises or the migration thereof from or to other property, (ii) any demands or claims made or threatened by any party against TENANT or the Premises relating to any loss or injury resulting from any Hazardous Material on or from the Premises, and (iii) any matters where TENANT is required by applicable law to give a notice to any governmental or regulatory authority respecting any Hazardous Material on the Premises.

CITY has the right (but not the obligation) to inspect the Premises, to take such remedial action on the Premises, as CITY may deem appropriate, and to join and participate, as a party, in any legal proceedings or actions affecting the Premises initiated in connection with any environmental, health or safety law.
(4) If any Hazardous Material is released, discharged or disposed of by TENANT or its employees, agents or contractors, on or about the Premises in violation of the foregoing provisions, TENANT must immediately notify CITY. CITY may elect either to take such remedial action as CITY deems appropriate, in which event TENANT must reimburse CITY for all costs thereof within ten days after demand, or direct TENANT to perform such remediation.

If CITY directs TENANT to perform the remediation, then TENANT must immediately take such remedial action, as CITY directs. TENANT must, properly and in compliance with applicable laws, clean up and remove the Hazardous Material from the Premises and any other affected property at TENANT'S expense. If CITY directs TENANT to perform remediation hereunder and if TENANT fails to comply with the provisions of this Section within five days after written notice by CITY, or such shorter time as may be required by applicable law or in order to minimize any hazard to persons or property, then CITY may (but is not be obligated to) arrange for such compliance directly or as TENANT'S agent through contractors or other parties selected by CITY at TENANT'S expense (without limiting CITY'S other remedies under this Lease or applicable law).

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Section 3.06 Tidelands Trust.

In addition to the obligations set forth in this Article, TENANT must use and occupy the Premises in strict compliance with the Tidelands Trust purposes, as established by law or interpretation of the California State Lands Commission.

Section 3.07 Compliance with Law.

TENANT must, at no cost to CITY, comply with all of the requirements of all local, municipal, county, state and federal authorities now in force, or which may hereafter be in force, pertaining to the Premises, and faithfully observe in the use of the Premises all local, municipal and county rules, regulations and ordinances and state and federal statutes, rules, regulations and orders now in force or which may hereafter be in force (collectively, "Legal Requirements"); provided, that TENANT will not be required to comply with any Legal Requirement imposed by CITY that would substantially deprive TENANT of a material benefit under this Lease, unless such Legal Requirement has been imposed or required (i) by a county, state or federal authority or (ii) to preserve public health and safety and applied to similar businesses within CITY’S jurisdiction. The judgment of any court of competent jurisdiction, or the admission of TENANT in any action or proceeding against TENANT, whether CITY be a party thereto or not, that TENANT has violated any such Legal Requirement in the use of the Premises will be conclusive of that fact as between CITY and TENANT.

Section 3.08 Waste or Nuisance.

TENANT must not commit or permit the commission by others of any waste on the Premises; TENANT must not maintain, commit, or permit the maintenance or commission of any nuisance as defined by law on the Premises; and TENANT must not use or permit the use of the Premises for any unlawful purpose.

Section 3.09 Use by CITY.
(1) Subject to TENANT's rights hereunder to possession of the Premises, CITY may grant licenses to, or otherwise authorize, other persons and entities permitting uses of the Morro Bay Harbor.
(2) CITY also retains and reserves for itself, its successors and assigns, all oil, gas, petroleum and other mineral or hydrocarbon substances in and under the lands leased hereby together with right to prospect and extract all such substances.

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Article 4 CONSTRUCTION, ALTERATION AND REPAIRS
Section 4.01 Construction Approval.
(1) TENANT must not make or permit any other person to make any alterations or structural additions or structural modifications to the Premises or to any structure thereon or facility appurtenant thereto if the cost thereof exceeds Ten Thousand Dollars ($10,000), without the prior written consent of CITY. The consent to be obtained pursuant to this Section 4.01(1) must be requested from the Harbor Director, or the City’s designee, for CITY. If the Harbor Director or any future successor to the duties of the City’s Harbor Director, or the City’s designee, gives such consent to proceed, then it is understood such consent is given by CITY only in its capacity as the landlord under this Lease and not as the permit-issuing authority.

TENANT remains obligated to obtain any building permits needed and comply with all applicable land use entitlement processes.
(2) Where required by the Morro Bay Municipal Code, California Coastal Act, Corps of Engineers or any other state or federal agency having authority over the proposed project, then all Conditional Use Permits, Concept Plans, Precise Plans, Coastal Development Plans, and any other required plans or permits must be applied for and approved prior to any construction, alteration or repairs.

Section 4.02 Construction Bond.
(1) Prior to the commencement of any construction the cost of which is greater than the amount of One Hundred Thousand Dollars ($100,000), TENANT must file, with CITY’S City Clerk, a final detailed Civil Engineer's, Registered Architect's or Licensed and Bonded General Contractor's estimate of the cost of construction and installation of improvements on the Premises. Said estimate must be submitted to CITY’S City Engineer for approval. TENANT must file with the City Clerk a faithful performance bond, in a form and issued by a corporate surety company satisfactory to CITY, in an amount satisfactory to CITY, but not in excess of 100% of the final detailed cost estimate, securing the faithful performance of TENANT or its contractor in the completion of said construction.
(2) TENANT must also file with the City Clerk a labor and materials bond, in a form and issued by a corporate surety company satisfactory to CITY, in an amount satisfactory to CITY, but not in excess of 100% of the final detailed cost estimate, securing the payment of all claims for the performance of labor or services on, or the furnishing of materials for, the performance of said construction.

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(3) In lieu of the above referenced bonds, TENANT may post cash deposits or may make other mutually satisfactory arrangements to guarantee the completion of construction projects.

In the event the contractor bonds the project, CITY may be named as additional indemnitee to comply with these requirements.

Section 4.03 Mechanics' Liens.

At all times during the term of this Lease, TENANT must keep the Premises and all buildings, installations and other improvements now or hereafter located on the Premises free and clear of all liens and claims of liens for labor, services, materials, supplies, or equipment performed on or furnished to the Premises. TENANT further agrees to, at all times, save CITY free and harmless and indemnify and defend CITY against all claims for labor or materials in connection with any improvement, repairs, or alterations on the Premises, and the cost of defending against such claims, including reasonable attorneys' fees. If TENANT fails to pay and discharge or cause the Premises to be released from such liens or claim of liens within 10 days after the filing of such lien or levy, then TENANT must, upon written notification, immediately deposit with CITY a bond conditioned for payment in full of all claims on which said lien or levy has been filed. Such bond must be acknowledged by TENANT as principal and by a company or corporation, licensed by the Insurance Commissioner of the State of California to transact the business of a fidelity and surety insurance company as surety. The beneficiary of any security instrument, which instrument is on record with CITY, must have the right to file a claim for payment from such a bond on behalf of TENANT. CITY has the right to post and keep posted on the Premises notices of non-responsibility and any other notices that may be provided by law or which CITY may deem proper for the protection of CITY and Premises from such liens.

TENANT must give CITY notice at least 20 days prior to commencement of any work on the Premises to afford CITY the opportunity to post such notices.

Section 4.04 Ownership of Improvements.

The Parties agree CITY has the option and right to require TENANT to remove all buildings, structures, installations, improvements of any kind or other property belonging to or placed upon the Premises by TENANT at the termination of this Lease, however occurring, providing CITY gives notice, in writing, no later than thirty days prior to the termination of this Lease, of its decision to require such improvements be removed. The Parties agree, if CITY exercises its option, then at the termination of this Lease, however occurring, TENANT will have sixty days thereafter to remove all buildings, structures, facilities, installations, improvements and other property belonging to TENANT from the Premises. If CITY exercises such option and TENANT fails to remove all such improvements and other property within sixty

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days after the termination of this Lease, then CITY has the right to have any or all such improvements and other property removed at the expense of TENANT. If CITY does not exercise its option to remove (or require the removal of) the improvements and other property, then title to such improvements and other property vests in CITY and TENANT must not remove same.

Article 5 LEASEHOLD MORTGAGES
Tenant must not mortgage, securitize or hypothecate the leasehold interest created by this Lease, in whole or any part, without the prior written approval of CITY, as evidenced by a resolution of the City Council of CITY.

CITY will not approve financing related to or using that leasehold interest created by this Lease as collateral, unless such financing is (i) to install or construct capital improvements on the Premises, (ii) to install or construct CITY-requested public improvements or provide other benefits in the Tidelands Trust area, the latter as approved by the Harbor Director or (iii) to reduce the interest rate of existing, approved debt secured by leasehold interest created by this Lease without redeeming any equity in the leasehold interest. CITY shall not agree to subordinate any of its interests in the Premises themselves or other direct interests held by the CITY as may result in a forfeiture, foreclosure upon, or subordination of any CITY interests other than the leasehold interest created by this Lease.

Article 6 REPAIRS, MAINTENANCE AND RESTORATION
Section 6.01 Maintenance by TENANT.
(1) At all times during the term of this Lease, TENANT must, at TENANT'S own cost and expense, keep and maintain, in good order and repair and in a safe and “broom clean” condition, all improvements now or hereafter on the Premises, including any public spaces, common areas, rights-of-way, sidewalks and other areas or spaces, even if not on the Premises but utilized as part of TENANT’S business operations. Furthermore, TENANT must, at TENANT'S own cost and expense, maintain at all times during the term of this Lease the whole of the Premises and other areas utilized for TENANT’S business operations as described above in a clean, sanitary, neat and orderly “broom clean” condition. CITY may, at the sole option of CITY, but not obligation,, clean, clear, maintain or repair the Premises, any improvements thereon or areas used by TENANT, as described above, at TENANT'S cost and expense, in the event TENANT fails to clean, clear maintain or make repairs, in accordance with this Section to

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the satisfaction of CITY, after 15-days' written notice to TENANT from CITY of CITY'S intent to exercise this option. Maintenance and repairs shall be in conformance with the City Council adopted Master Lease Management Policy, Exhibit H Inspection check list. (2) In addition to, and not exclusive of, any other remedies available to CITY under law or equity, the parties agree that in the event TENANT fails to comply with any terms of maintenance or repair requirements under this Section 6.01 or Section 6.04, CITY’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict impacts to environment, CITY sales tax or Rent revenues, health or safety matters, and other relevant factors. Within the (15) days following written notice as described in this section, TENANT will either correct the deficiencies or have a schedule for repairs approved by the Habor Director in writing. It is therefore agreed that the TENANT may be required by CITY to pay to the CITY, in accordance with the following schedule for each and every calendar day of delay beyond fifteen (15) days following written notice from CITY or exceedance of the schedule for repair of such maintenance or repair deficiencies, the following sums due for each day’s delay:
 The sum of two hundred dollars ($200.00) per day for the first sixty (60) days.  The sum of four hundred dollars ($400.00) per day for the following sixty (60) days.
 The sum of six hundred dollars ($600.00) per day for the following sixty (60) days.

If maintenance and repair deficiencies are not corrected within one hundred and eighty days (180), TENANT may be declared in default of this Lease. Nothing in this Section shall limit or waive any legal rights or remedies available to the CITY; the remedies available to CITY in this Section are not exclusive, but are cumulative with and in addition to all remedies now or hereafter allowed by law or elsewhere provided in this Lease.

Section 6.02 Seawalls and Revetment.

At all times during the term of this Lease, TENANT must, at TENANT'S own cost and expense, repair, maintain, replace and rebuild, as necessary, the improvements, pilings, bulkheads, seawalls, revetment, piers, posts and any structures or other improvements located in the water portion of the Premises. Further, TENANT must, at TENANT'S own cost and expense, conduct maintenance and structural inspections, evaluations or surveys, by a qualified

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individual or firm, at reasonable intervals not to exceed ten years, to locate and determine needed maintenance, repairs or replacements of these improvements.

Section 6.03 Legal Requirements.

At all times during the term of this Lease, TENANT, at no cost to CITY, must:
(1) Make all alterations, additions, or repairs to the Premises or the improvements or facilities on the Premises required by any Legal Requirements (as defined in Section 3.07, above);
(2) Observe and comply with all Legal Requirements respecting the Premises or the improvements or facilities located thereon;
(3) Obtain all required permits pursuant to the Morro Bay Municipal Code or State law prior to the initiation of any repair or maintenance activity; and (4) Indemnify, defend and hold harmless CITY and the property of CITY, including the Premises, from any and all liability, loss, damages, fines, penalties, claims and actions resulting from TENANT'S failure to comply with and perform the requirements of this section.

Section 6.04 Failure to Repair.

In the event failure to repair results in a hazardous or unsafe condition, CITY has the right and option, but not the obligation, to close and prohibit access to the unsafe portion of the Premises until such repairs are completed and accomplished and the Premises rendered safe for public use. In addition, if TENANT fails to repair any hazardous or unsafe condition within ten days after written notice thereof from CITY, then CITY has the right, but not the obligation, to perform such repair at TENANT'S expense. TENANT must reimburse CITY for any such repair undertaken by CITY, promptly upon CITY'S demand, as additional Rent. Failure by CITY to enforce any of the provisions of this Article does not constitute a waiver of these provisions and CITY may, at any time, enforce all of the provisions of this Article, requiring all necessary repairs, rebuilding or replacement.

Section 6.05 Inspection by CITY.

CITY or CITY'S agents, representatives, or employees may enter the Premises at all reasonable times for the purpose of inspecting the Premises to determine whether TENANT is complying with the terms of this Lease and for the purpose of doing other lawful acts that may be necessary to protect CITY'S interest in the Premises under this Lease or to perform CITY'S duties under this Lease or in its governmental capacity.

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Section 6.06 TENANT'S Duty to Restore Premises.
(1) Except as provided in Section 6.07 below, if at any time during this Lease, any improvements now or hereafter on the Premises are destroyed in whole or in part by the elements, or any other cause not the fault of TENANT or CITY, then this Lease will continue in full force and effect and TENANT, at TENANT'S own cost and expense, must repair and restore the damaged or destroyed improvement(s) according to the original plan thereof or according to such modified plans therefor as are approved in writing by CITY. The work of permitting, repair and restoration must be (i) commenced by TENANT within 180 days after the damage or destruction occurs, (ii) pursued with due diligence, and (iii) completed not later than 12 full calendar months after the work is commenced, unless the Parties mutually agree, in writing, to an extension. In all other respects, the work of repair and restoration must be done in accordance with the requirements for construction work on the Premises set forth in Article 4 of this Lease.

Any failure by TENANT either to commence or to complete repair and restoration as required by this Section 6.06 constitutes a material default under this Lease. (2) Any and all insurance proceeds that become payable at any time during the term of this Lease because of damage to or destruction of any improvements on the Premises will be paid to TENANT and applied by TENANT toward the cost of repairing and restoring the damaged or destroyed improvements in the manner required by this Section 6.06, or, if this Lease is terminated, then applied as provided in Section 6.07. Except as set forth in Section 6.08 below, TENANT'S obligation to restore pursuant to this Section exist whether or not funds are available from insurance proceeds.

Section 6.07 Termination of Lease for Destruction.
(1) Notwithstanding the provisions of Section 6.06 of this Lease, TENANT has the option of terminating this Lease as provided in this Section 6.07 if:
(a) During the last 15 years of the term of this Lease, any improvement now or hereafter on the Premises are so damaged or destroyed by the elements or any cause, not the fault of TENANT or CITY, the improvement cannot be repaired and restored as required by Section 6.06 of this Lease at a cost not exceeding 35 percent of the cost of replacing all improvements if they had been totally destroyed at the time of such damage; or (b) During the last 10 years of the term of this Lease, any improvement now or hereafter on the Premises are so damaged or destroyed by the elements or any cause, not the fault of TENANT or CITY, the improvement cannot be repaired and restored as required by

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Section 6.06 of this Lease at a cost not exceeding 15 percent) of the cost of replacing all improvements if they had been totally destroyed at the time of such damage. (2) TENANT may exercise its right to terminate pursuant to this Section 6.07 by providing written notice to CITY within 180 days following damage or destruction as described herein. Such termination is effective on the last day of the calendar month following the month in which TENANT provides its notice.
(3) If TENANT fails to commence or complete repair and restoration as required by Section 6.06, then CITY has all rights and remedies with respect to TENANT’S default, including, but not limited to, termination of this Lease pursuant to Article 11. (4) If this Lease is terminated as a result of damage or destruction, then any insurance proceeds received with respect to the improvements will be applied or distributed in the following order:
(a) first, to the demolition of the improvements and removal of all demolition debris; then
(b) to any accrued and unpaid Rent as of the effective date of the termination; then
(c) to each Lender under a Leasehold Encumbrance, in order of lien priority, an amount not to exceed the amount due under such Leasehold Encumbrance; then (d) to CITY, an amount equal to the present value, as of the date of termination, of the total Minimum Rent for the remainder of the Term; then (e) the remaining proceeds, if any, to TENANT.

Section 6.08 Destruction Due to Risk Not Covered by Insurance.

Notwithstanding anything to the contrary in Section 6.06 of this Lease, TENANT has the right to terminate this Lease, at any time, if the improvements on the Premises are damaged or destroyed by a casualty for which TENANT is not required under this Lease to carry insurance and the cost to repair or restore such improvements exceeds 50 percent of the fair market value of all the improvements on the Premises immediately prior to the damage or destruction.

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Article 7 INDEMNITY AND INSURANCE
Section 7.01 Indemnity Agreement.
(1) TENANT hereby agrees to indemnify, defend and hold harmless CITY, and the property of CITY (including the Premises and any improvements now or hereafter on the Premises), and CITY'S officers, officials, employees and volunteers from any and all liability, claims, loss, damages, and expenses, including reasonable attorney’s fees and litigation expenses, resulting from TENANT'S occupation and use of the Premises or any negligent act or omission of the TENANT or any of its officers, subtenants, employees, contractors, invitees or anyone for whom TENANT may be liable, specifically including, without limitation, any liability, claim, loss, damage, or expense arising by reason of:
(a) The death or injury of any person, including TENANT or any person who is an officer, employee, contractor, subtenant, invitee or agent of TENANT, or by reason of the damage to or destruction of any property, including property owned by TENANT or by any person who is an employee or agent of TENANT, from any cause whatever while such person or property is in or on the Premises or in any way connected with the Premises or with any of the improvements or personal property on the Premises;
(b) The death or injury of any person, including TENANT or any person who is an officer, employee, contractor, subtenant, invitee or agent of TENANT, or by reason of the damage to or destruction of any property, including property owned by TENANT or any person who is an officer, employee, contractor, subtenant, invitee or agent of TENANT, caused or allegedly caused by either (i) the condition of the Premises or any improvement placed on the Premises by TENANT, or (ii) any act or omission on the Premises by TENANT or any person in, on, or about the Premises with or without the permission and consent of TENANT; (c) Any work performed on the Premises or materials furnished to the Premises at the insistence or request of TENANT or any person or entity acting for or on behalf of TENANT;
(d) TENANT'S failure to perform any provision of this Lease or to comply with any Legal Requirement imposed on TENANT or the Premises. (2) TENANT'S obligations pursuant to this Section to indemnify and hold harmless do not extend to any liability, claim, loss, damage or expense arising from CITY'S active negligence or willful misconduct.

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Section 7.02 Liability Insurance.

During the term of this Lease, TENANT must maintain at its cost Commercial General Liability insurance with coverages as described in CITY’S HARBOR DEPARTMENT LEASE MANAGEMENT POLICY, as may be updated or changed from time to time at the sole discretion of the CITY. Such coverages must insure against claims for bodily injury (including death), property damage, contractual liability, personal injury and advertising injury occurring on the Premises or from operations located in any part of the Premises. Such insurance must afford protection in amounts no less than One Million Dollars ($1,000,000) per occurrence for bodily injury, personal injury and property damage; provided, that if insurance with a general aggregate limit is used, then either the general aggregate limit will apply separately to the Premises or the general aggregate limit will be twice the occurrence limit stated in this Section. All liability insurance carried by TENANT hereunder will name CITY, its officers, officials, employees and volunteers as additional insureds, and be primary insurance with respect to such additional insureds. TENANT must include all its subtenants as insureds under TENANT's liability policies or furnish separate certificates and endorsements for each subtenant. All coverages for subtenants must comply with all requirements of this Article Seven.

Section 7.03 Worker's Compensation.

TENANT must maintain at TENANT'S own expense and keep in full force and effect during the term of this Lease, Worker's Compensation Insurance as provided by law. Said insurance must contain a waiver of subrogation rights against CITY. TENANT must also maintain employer's liability insurance with minimum coverage of $1,000,000 per accident for bodily injury or disease.

Section 7.04 Property Insurance.

TENANT must, at its cost, at all times during the term of this Lease keep all improvements and other structures on the Premises, as well as any and all additions, improvements and betterments thereto, insured for 100 percent) of their full replacement cost with no co-insurance provision against loss or destruction by the perils covered by "all risk" (excluding earthquake) property damage insurance policies. Any loss coverage under such insurance must be payable to TENANT, CITY, and any Lender under a Leasehold Encumbrance approved pursuant to Article 5 of this Lease, as their interests may appear, and such proceeds must be used and applied in the manner required by Article 6 of this Lease.

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Section 7.05 Additional Coverage.

TENANT must also maintain, at its sole expense, the insurance described in this Section 7.05.
(1) If TENANT has (or is required by any Legal Requirement to have) a liquor license and is selling or distributing alcoholic beverages on the Premises, then TENANT must maintain liquor liability coverage in appropriate amounts. TENANT must require any subtenant who has (or is required by any Legal Requirement to have) a liquor license and who is selling or distributing alcoholic beverages on the Premises, to maintain such coverage. (2) TENANT must maintain "all risk" (excluding earthquake) property damage insurance covering TENANT's personal property located at the Premises, in amounts not less than the full replacement value of such personal property. CITY has no interest in the proceeds of such insurance.
(3) TENANT must obtain and maintain any additional insurance coverages CITY may reasonably require. As illustration only and not as a limitation, in appropriate circumstances such additional insurance may include increased general liability limits, business interruption coverage, business automobile liability, boiler and machinery insurance or builder's risk insurance. TENANT, however, is not required to maintain additional coverages that are in excess of those typically maintained by similarly situated tenants in the Morro Bay area.

Section 7.06 General Requirements.

Except as specifically provided to the contrary, all the insurance required pursuant to this Article Seven is subject to the requirements of this Section 7.06. (1) Maintenance of proper insurance coverage is a material element of this Lease and failure to maintain or renew coverage or to provide evidence of coverage and/or renewal may be treated by the CITY as a material breach of contract. TENANT must forward CITY”S specifications and forms to TENANT’S insurance agent for compliance. (2) CITY may, at any time, require TENANT to increase the minimum coverage limits for insurance required by this Lease, but every such increase must be reasonable under the circumstances.
(3) All policies must be issued by insurance companies authorized to issue such insurance in California, with an A.M. Best's rating of no less than A:VII. (4) Any deductibles or self-insured retentions must be declared to and approved by CITY. At the option of CITY, either: (i) the insurer must reduce or eliminate such deductibles

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or self-insured retentions as respects CITY, its officers, officials, employees and volunteers or (ii) TENANT must provide a financial guarantee satisfactory to CITY guaranteeing payment of losses and related investigations, claim administration and defense expenses. (5) Each insurance policy required by this Lease must be endorsed to state coverage will not be cancelled or reduced, except after 30-days' prior written notice by certified mail, return receipt requested, has been given to CITY.
(6) TENANT must furnish CITY with certificates and amendatory endorsements effecting the coverage required by this Lease. The endorsements must be on forms provided by CITY or on other than CITY's forms; provided, that those endorsements or policies conform to the requirements. All certificates and endorsements are to be received and approved by CITY before use of the Premises, and promptly following any renewal or replacement. CITY reserves the right, at any time, to require complete, certified copies of all required insurance policies, including endorsements effecting the coverage required by these specifications. (7) TENANT'S insurance coverage must be primary insurance as respects CITY, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by CITY, its officers, officials, employees, or volunteers will be excess of TENANT'S insurance and will not contribute with it.

Section 7.07 No Subrogation.

TENANT agrees, in the event of loss due to any of the perils for which it has agreed to provide insurance, TENANT will look solely to its insurance for recovery. TENANT hereby grants to the CITY, on behalf of any insurer providing insurance to either TENANT or CITY with respect to TENANT'S occupancy of the Premises, a waiver of any rights to subrogation, which any such insurer of TENANT may acquire against CITY by virtue of the payment of any loss under such insurance. Each insurance policy required under this Lease, including those insuring TENANT against claims, expense, or liability for injury to persons or property, must provide the insurer will not acquire by subrogation any right to recovery.

Section 7.08 TENANT'S Waiver.

TENANT hereby waives any right of recovery against CITY for each claim, expense, liability, or business interruption, or other loss, except where caused by CITY'S active negligence or willful misconduct. TENANT agrees, to the extent TENANT fails to acquire insurance, TENANT will not have any claim against CITY for any loss that results from a risk or peril that would have been included in such insurance.

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Section 7.09 Insurance Not a Limit.

The insurance requirements of this Article 7 are independent of, and do not limit or modify, TENANT'S indemnification, defense, hold harmless and other obligations pursuant to this Lease.

Article 8 TAXES AND FEES
Section 8.01 TENANT to Pay Taxes.

TENANT must pay, before delinquency, all taxes and assessments levied upon or assessed to TENANT on the Premises by reason of this Lease or of any equipment, appliances, improvement, or other development of any nature whatsoever, erected, installed, or maintained by TENANT or by reason of the business or other activity of TENANT upon or in connection with the Premises. TENANT must pay all possessory interest taxes applicable to the Premises.

Section 8.02 TENANT to Pay License and Permit Fees.

TENANT must pay any fees imposed by Legal Requirements for licenses or permits for any business or activities including construction by TENANT upon the Premises.

Section 8.03 Utilities.

TENANT must (i) pay, or cause to be paid and (ii) hold harmless CITY and the property of CITY, including the Premises, from all charges for the furnishing of gas, water, electricity, telecommunication service, and for other public utilities to the Premises during the term of this Lease and for the removal of garbage and rubbish from the Premises during the term of this Lease.

Article 9 CONDEMNATION
Section 9.01 Total Condemnation.

If title and possession to all of the Premises is permanently taken for any public or quasipublic use under any statute, or by the right of eminent domain, then this Lease will be considered terminated on the date that possession of the Premises is taken; and both CITY and TENANT will thereafter be released from all obligations, including Rent, all of which will be prorated to the date of termination, except those specified in Section 9.02 of this Lease.

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Section 9.02 Condemnation Award.

Any compensation or damages awarded or payable because of the permanent taking of all or any portion of the Premises by eminent domain will be allocated between CITY and TENANT as follows:
(1) All compensation or damages awarded or payable for the taking by eminent domain of any land that is part of the Premises will be paid to and be the sole property of CITY free and clear of any claim of TENANT or any person claiming rights to the Premises through or under TENANT.
(2) All compensation or damages awarded or payable which is specifically attributed by the taking party to the "good will" of TENANT'S business will be paid to and be the sole property of TENANT.
(3) All compensation or damages awarded or payable because of any improvements constructed or located on the portion of the Premises taken by eminent domain where only a portion of the Premises is taken by eminent domain, and TENANT is not entitled to or does not terminate this Lease, will be applied in the manner specified in Section 9.04 toward the replacement of such improvements with equivalent new improvements on the remaining portions of the Premises.
(4) All compensation or damages awarded or payable because of any improvements constructed or located on the portion of the Premises taken by eminent domain where this Lease is terminated because of the taking by eminent domain, whether all or only a portion of the Premises is taken by eminent domain, will be allocated between CITY and TENANT as follows:
(a) That percentage of the compensation or damages awarded or payable because of the improvements that equals the percentage of the full term of this Lease that has, at the time of the taking, not expired will belong to and be the sole property of TENANT. (b) That percentage of the compensation or damages awarded or payable because of the improvements that equals the percentage of the full term of this Lease that has, at the time of the taking, expired will belong to and be the sole property of CITY. (c) The term "time of taking," as used in this Section, means 12:01 a.m. of the date the agency or entity exercising the eminent domain power, takes title to or the date it takes physical possession of the portion of the Premises, whichever first occurs. (5) Any severance damages awarded or payable because only a portion of the Premises is taken by eminent domain will be the sole and separate property of CITY.

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Section 9.03 Termination for Partial Taking.

If, during the term of this Lease, title and possession of only a portion of the Premises is taken for any public or quasi-public use under any statute, or by right of eminent domain, then TENANT may, at TENANT'S option, terminate this Lease by serving written notice of termination on CITY within 90 days after TENANT has been deprived of actual physical possession of the portion of the Premises taken for such public use. This Lease will terminate on the first day of the calendar month following the calendar month in which the notice of termination described in this section is served on CITY. On termination of this Lease, pursuant to this Article, all subleases and subtenancies in or on the Premises or any portion of the Premises created by TENANT under this Lease will also terminate and the Premises must be delivered to CITY free and clear of all such subleases and subtenancies; provided, however, that CITY may, at CITY'S option, by mailing written notice to a subtenant allow any subtenant to attorn to CITY and continue such subtenant's occupancy on the Premises as a TENANT of CITY. On termination of this Lease pursuant to this section, however, both CITY and TENANT will be released from all obligations under this Lease, except those specified in Section 9.02 of this Lease.

Section 9.04 Rent Abatement for Partial Taking.

If, during the term of this Lease, title and possession of only a portion of the Premises is taken under the power of eminent domain by any public or quasi-public agency or entity and TENANT does not terminate this Lease, then this Lease will terminate as to the portion of the Premises taken under eminent domain on the date actual physical possession of the portion taken by eminent domain is taken by the agency or entity exercising the eminent domain power.

Furthermore, the Rent payable under this Lease will, as of that time be reduced in the same proportion of the Premises taken by eminent domain bears to the full value of the Premises at that time; provided however, that TENANT will make a good faith effort to replace any improvements or facilities with equivalent new facilities on the remaining portion of the Premises and do all other acts at TENANT'S own cost and expense required by the eminent domain taking to make the remaining portion of the Premises fit for the use specified in this Lease.

Section 9.05 Conveyance in Lieu of Eminent Domain.

A voluntary conveyance by CITY, with the consent of TENANT, of title to all or a portion of the Premises to a public or quasi-public agency or entity in lieu of and under threat by such agency or entity to take the same by eminent domain proceedings will be considered a

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taking of title to all or such portion of the Premises under the power of eminent domain subject to the provisions of this Article.

Section 9.06 Temporary Taking.

If the possession of the Premises or any portion thereof are taken under the power of eminent domain by any public or quasi-public agency or entity for a limited period not extending beyond the term of this Lease, then this Lease will not terminate (except as provided in this Section 9.06) and TENANT must continue to perform all its obligations hereunder, except only to the extent TENANT is prevented from performing such obligations by reason of such taking.

TENANT will be entitled to receive the entire amount of compensation or damages awarded because of such temporary taking. If a temporary taking extends for more than 36 months, then TENANT will have the right to terminate this Lease, and TENANT will be entitled to receive, out of the compensation or damages awarded because of such temporary taking, the amount that is attributable to the period of time up until the effective date of TENANT'S termination of this Lease.

Article 10 ASSIGNMENT AND SUBLEASING
Section 10.01 No Assignment Without CITY'S Consent.

Except as provided in this Article 10, TENANT must not assign or otherwise transfer this Lease, any right or interest in this Lease, or any right or interest in the Premises or any of the improvements that may now or hereafter be constructed or installed on the Premises without the express written consent of CITY first had and obtained. Any assignment or transfer by TENANT without the prior written consent of CITY, as evidenced by a resolution of the City Council, whether it be voluntary or involuntary, by operation of law or otherwise, is void and may, at the option of CITY, terminate this Lease. A consent by CITY to one assignment will not be deemed to be a consent to any subsequent assignment of this Lease by TENANT. CITY will not unreasonably nor arbitrarily withhold its approval to the assignment or transfer of this Lease to an assignee who is financially reliable and qualified to conduct the business for which this Lease was granted. It is mutually agreed TENANT'S qualifications are a part of the consideration for granting of this Lease and said party does hereby agree to maintain active control and supervision of the operation conducted on the Premises.

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Section 10.02 Change of Ownership as Assignment.

For purposes of this Article 10, the following transactions will be deemed to be assignments or transfers:
(1) If TENANT is a partnership or limited liability company:
(a) A change in ownership effected voluntarily, involuntarily, or by operation of law, within a 12-month period, of 25 percent or more of the partners or members or 25 percent or more of the partnership or membership interests; or
(b) The dissolution of the partnership or limited liability company without its immediate reconstitution.
(2) If TENANT is a closely held corporation (i.e., one whose stock is not publicly held and not traded through an exchange or over the counter):
(a) The sale or other transfer, within a 12-month period, of more than an aggregate of 25 percent of the voting shares of TENANT (other than to immediate family members by reason of gift or death); or
(b) The dissolution, merger, consolidation, or other reorganization of TENANT.

Section 10.03 Application for Assignment.

A condition of an assignment is TENANT must file with CITY an application to assign its leasehold interest prepared by the prospective assignee. Concurrently with filing the application, TENANT must pay a reasonable fee associated with the cost of processing said application, in cash or certified or cashier's check to enable CITY adequately to investigate the proposed assignee's qualifications, financial reliability and suitability as a permitted assignee.

CITY is not be required to account for the use of the sum paid. If the proposed assignee's net worth, financial reliability and qualifications on the date of assignment are not sufficient to reasonably guarantee successful operation of the Premises in compliance with all applicable CITY, County, State and federal requirements, then CITY may withhold approval of the assignment or condition it upon TENANT'S guarantee of such assignee's obligations hereunder for such period as CITY deems advisable. Net worth means the amount by which the total of all assets exceed the total of all liabilities as determined in accordance with general accepted accounting principles as approved by CITY'S auditor, or other authorized representative or agent.

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Section 10.04 Probate Transfer of Assignment.

If TENANT is an individual, nothing herein contained will prevent the transfer of this Lease by trust, will, or by operation of law under the intestacy provisions of the California Probate Code as it may be amended from time to time. Probate sale of the leasehold interest will not be permitted without the consent of the CITY, evidenced by a City Council resolution, first had and obtained.

Section 10.05 No Sublease Without CITY'S Consent.

TENANT must not sublease the whole nor any part of the Premises, or license, permit, or otherwise allow any other person (the employees of TENANT excepted) to occupy or use the Premises, or any portion thereof, without the prior written consent of CITY’s Harbor Director, or any future successor to the duties of the City’s Harbor Director. The process for obtaining that consent will not begin until TENANT has filed an application to sublease and paid a reasonable fee, as determined by CITY, associated with the cost of processing the application. A consent to one subletting, occupation, licensing or use will not be deemed to be a consent to any subsequent subletting, occupation, licensing or use by another person. Any sublease or license without CITY'S written consent is void, and may, at CITY'S option, terminate this Lease. CITY will not unreasonably nor arbitrarily withhold its consent to sublet to one who is qualified and financially reliable. CITY'S consent to any occupation, use, or licensing will be in CITY'S sole and absolute discretion. Notwithstanding any provisions herein to the contrary, the terms "assignment," "subletting," "occupation," or "use," are not to be construed or interpreted to mean or include the temporary, short-term renting or leasing of boat slips, motel, hotel, or apartment accommodations, if any, on the Premises.

Section 10.06 Subtenant Subject to Lease Terms.

Any and all subleases must be expressly made subject to all the terms, covenants, and conditions of this Lease. In no event will the term of any sublease extend beyond the term of this Lease. Subject to Section 10.09, termination of this Lease prior to the expiration of this Lease term also terminates any and all subleases. A breach of the terms of this Lease by a subtenant constitutes a breach on the part of TENANT and subjects both the subtenant and TENANT to all the remedies provided to CITY herein and by law. Failure by any subtenant to report Gross Sales or to pay Percentage Rent due from subtenant constitutes a breach of this Lease. TENANT hereby agrees to and does guarantee payment of such Percentage Rent due by a subtenant under the terms of this lease.

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Section 10.07 Consent to Sublease Agreement.

Prior to any consent by CITY to any sublease hereof, TENANT, CITY and any subtenant must have executed the CITY’S Consent to Sublease Agreement making CITY a third party beneficiary, whereby the subtenant agrees to be bound by all of the terms, covenants and conditions of this Lease. Further, it is agreed by TENANT any default by the subtenant of any of the terms, covenants and conditions of this Lease will be a violations by TENANT of this Lease and all remedies of CITY for such violation, including termination of this Lease, may immediately be enforceable by CITY against TENANT. TENANT must apply any and all monies received from any subtenant first to the payment of obligations of the subtenant to CITY.

Section 10.08 TENANT and Guarantor Remain Liable.

Prior to approval by CITY to any sublease hereof, TENANT must agree to be primarily and jointly and severally liable to CITY for all obligations due CITY by any subtenant, including the payment of rents; and TENANT must agree CITY may proceed directly against TENANT for any obligation owed to CITY by the subtenant. If this Lease is guaranteed, then neither the sublease nor CITY'S approval thereof will release the guarantor from its obligations pursuant to the guaranty.

Section 10.09 Nondisturbance.

On the terms set forth below, CITY may enter into agreements with subtenants establishing, in the event of any termination of this Lease prior to the expiration date, CITY will not terminate or otherwise disturb the rights of the subtenant under such sublease, but will instead honor such sublease as if that sublease had been entered into directly between CITY and such subtenant, conditioned upon such subtenant's agreement to attorn to CITY and full performance of all obligations under the sublease in question ("Non-Disturbance Agreement").

CITY agrees to execute a Non-Disturbance Agreement in connection with a particular sublease; provided, that Tenant provides CITY with a copy of the sublease, and the Non-Disturbance Agreement is customary in form and substance and otherwise reasonably acceptable to CITY.

Article 11 DEFAULT AND TERMINATION
Section 11.01 Abandonment by TENANT.

If TENANT breaches this Lease and abandon all or any part of the Premises prior to the scheduled expiration of the term of this Lease, then CITY may continue this Lease in effect by not terminating TENANT'S right to possession of the Premises, in which event CITY may, at its

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option, enforce all CITY'S rights and remedies under this Lease including the right to recover the Rent specified in this Lease as it becomes due under this Lease.

Section 11.02 Termination for Breach by TENANT.

All covenants and agreements contained in this Lease are declared to be conditions to this Lease and to the term hereby demised to TENANT. If TENANT fails to perform any covenant, condition, or agreement contained in this Lease, except for payment of any Rent or other monetary amount due, and such failure is not cured within 30 days after written notice thereof is served on TENANT, then CITY may terminate this Lease immediately, and in the event of such termination, TENANT will have no further rights hereunder and TENANT must thereupon forthwith remove from the Premises and will have no further right or claim thereto and CITY will immediately thereupon have the right to re-enter and take possession of the Premises, subject only to appropriate legal process.

Section 11.03 Termination for Failure to Pay Rent.

If any payment of Rent is not made as herein provided and such failure to pay is not cured within three days after written notice thereof is served on the TENANT, then CITY will have the option to immediately terminate this Lease; and in the event of such termination, TENANT will have no further right or claim thereto and CITY will immediately thereupon have the right to re-enter and take possession of the Premises, subject only to appropriate legal process.

Section 11.04 Lender May Cure Default.

CITY hereby affords the lender under any Leasehold Encumbrance of record with CITY the right to cure any default by TENANT of the covenants, conditions, or agreements hereof, as provided in Article 5 of this Lease.

Section 11.05 Damages for Breach.

If TENANT defaults in the performance of any covenant, condition or agreement contained in this Lease and the default be incurable or not be cured within the time period set forth hereinabove, then CITY may terminate this Lease and:
(1) Bring an action to recover from TENANT:
(a) The worth at the time of award of the unpaid Rent which had been earned at the time of termination of the Lease;

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(b) The worth at the time of award of the amount by which the unpaid Rent, which would have been earned after termination of the Lease until the time of award exceeds the amount of rental loss that TENANT proves could have been reasonably avoided; (c) The worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of rental loss that TENANT proves could be reasonably avoided; and
(d) Any other amount necessary to compensate CITY for all detriment proximately caused by TENANT'S failure to perform its obligations under this Lease; and (2) Bring an action, in addition to or in lieu of the action described in subparagraph (1) of this Section, to re-enter and regain possession of the Premises in the manner provided by the laws of unlawful detainer of the State of California then in effect.

Section 11.06 Cumulative Remedies.

The remedies available to CITY in this Article are not exclusive, but are cumulative with and in addition to all remedies now or hereafter allowed by law or elsewhere provided in this Lease.

Section 11.07 Waiver of Breach.

The waiver by CITY of any breach by TENANT of any of the provisions of this Lease does not constitute a continuing waiver or a waiver of any subsequent breach by TENANT either of the same or a different provision of this Lease.

Section 11.08 Surrender of Premises.

On expiration or sooner termination of this Lease, TENANT must surrender the Premises, and, subject to Section 4.04, all improvements in or on the Premises, and all facilities in any way appertaining to the Premises, to CITY in good, safe, and clean condition, reasonable wear and tear excepted.

Section 11.09 Cross-Defaults.

The Improvements to the Premises attendant to this Lease are described in Conditional Use Permit CUP24-04 and MAJ25-001. However, Conditional Use Permit CUP24-04 and MAJ25-001includes project construction and conditions for improvements located outside the Premises. Nonetheless, the project as a whole described in Conditional Use Permit CUP24-04 and MAJ25-001are intended and designed to harmonize with TENANT’S use of the Premises

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and Improvements thereto. A default under the terms and conditions of any of Conditional Use Permit CUP24-04 shall be a default under this Lease.

Article 12 MISCELLANEOUS
Section 12.01 Notices.

Any and all notice or demands by or from CITY to TENANT, or TENANT to CITY, must be in writing. They must be served either personally, or by registered or certified mail.

Any notice or demand to CITY must be given to:

Harbor Director
1275 Embarcadero
Morro Bay, CA 93442
with a copy to:

City Manager of the City of Morro Bay
City Hall
595 Harbor Street
Morro Bay, CA 93442
Any notice or demand to TENANT must be given at:

Bayside Landing, Inc.
495 Embarcadero
Morro Bay, CA 93442
Such addresses may be changed by written notice by either Party to the other Party.

Section 12.02 Governing Law and Jurisdiction.

This Lease, and all matters relating to this Lease, are governed by the laws of the State of California in force at the time any need for interpretation of this Lease or any decision concerning this Lease arises. CITY and TENANT consent to exclusive personal and subject matter jurisdiction in the Superior Court of the State of California in and for the county where the Premises are located, and each Party waives any claim such court is not a convenient forum.

Each Party hereby specifically waives the provisions of California Code of Civil Procedure Section 394, and any successor statute thereto.

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Section 12.03 Binding on Successors.

Subject to the provisions herein relating to assignment and subletting, each and all of the terms, conditions, and agreements herein contained will be binding upon and inure to the benefit of the successors and assigns of any and all of the Parties; and all of the Parties hereto are jointly and severally liable hereunder.

Section 12.04 Partial Invalidity.

If any provision of this Lease is held by a court of competent jurisdiction to be either invalid, void, or unenforceable, then the remaining provisions of this Lease will remain in full force and effect unimpaired by the holding.

Section 12.05 Sole and Only Agreement.

Subject to the provisions of the second paragraph of Section 1.04 (i) this Lease, including all exhibits incorporated by reference, constitutes the sole and only agreement between CITY and TENANT respecting the Premises and the leasing of the Premises to TENANT and (ii) any other agreements or representations respecting the Premises and their leasing to TENANT by CITY, which are not expressly set forth in this Lease, are null and void. The lease terms herein specified correctly set forth the obligations of CITY and TENANT as of the date of this Lease.

Section 12.06 Modification.

This Lease can only be modified, amended or altered pursuant to a written amendment executed by the Mayor and attested to by City Clerk, pursuant to prior City Council approval.

Notwithstanding City Council approval, no amendment will become effective until it is in fact executed by the Mayor and attested to by City Clerk and approved as to form by the City Attorney (or designee). TENANT understands this Lease cannot be modified, amended or altered by oral statements by any person representing CITY, including the Mayor and City Clerk.

TENANT specifically agrees not to rely on oral statements, purported oral waivers, or purported oral modifications and agrees not to rely upon purported written modifications unless they meet the requirements of this Section. If the title of any person authorized to act for CITY under this Lease is changed during the term of this Lease, then the person who succeeds to substantially the same responsibilities with respect to CITY will have the authority to act for CITY under this Lease.

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Section 12.07 Time of Essence.

Time is expressly declared to be the essence of this Lease.

Section 12.08 Memorandum of Lease for Recording.

CITY and TENANT agree, at the request of either at any time during the term of this Lease, to execute a Memorandum of Lease or "short form" of this Lease, which shall describe the Parties, set forth a description of the Premises, specify the term of this Lease, and incorporate this Lease by reference.

Section 12.09 Force Majeure.

If either Party hereto is delayed or hindered in or prevented from the performance of any act required hereunder by reason of a strike, lock-out, labor trouble, inability to procure materials, failure of power, governmental moratorium, riot, insurrection, war, pandemic or other reason of a like nature not the fault of the Party delaying in performing work or doing any act required under the terms of this Lease, then performance and doing of such act will be excused for the period of such delay. The Parties understand and agree, the foregoing will not extend any period of time for the payment of Rent or other sums payable by either Party or any period of time for the written exercise of an option or right by either Party.

Article 13 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE The following provisions apply to this Lease site only:

Section 13.01 Public Restrooms
Restrooms completed in conformance with Conditional Use Permit CUP24-04 and MAJ25-001 shall be made available to the public during business hours and TENANT shall maintain signage in prominent locations which clearly identifies that the restrooms are available to the general public. In the case of a dispute over location and design of signage, the CITY’s Harbor Staff may designate two locations for “public restroom” signs of a type and size to be determined by the CITY.

Section 13.02 TENANT’S Obligation to Redevelop Site.
(1) CITY and TENANT agree TENANT will construct improvements to the Premises as outlined in the approved Conditional Use Permit No. CUP24-04 and MAJ25-001( the “Project”)

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and consisting of the following (the “Improvements”). Improvements specific to the Lease Premises include: the renovation of an existing office building, demolition of existing vacation rental buildings, construction of a new two-story building with a total of ten (10) hotel rooms, and construction of commercial space on the ground floor.. A new water area will include one (1) new floating dock, three (3) new finger slips, and one (1) finger dock space with a low floating dock for a kayak rental business. A new Harborwalk connection is proposed to connect pedestrians along the Embarcadero to Tidelands Park.
(2) TENANT shall perform the Improvements specific to the Premises in accordance with the following PERFORMANCE SCHEDULE (to be completed after Lease Execution):

PERFORMANCE SHEDULE
Lease Execution Date:_______________________

ITEM PERIOD AFTER EXECUTION EFFECTIVE DATE
Submit Building Permits 1 Months
Commence Construction 6 Months
Complete Construction 36 Months
A. TENANT to submit for Building Permits for the Improvements no later than the EFFECTIVE DATE in the PERFORMANCE SCHEDULE
B. Commence construction of the Improvements within 1 month of receipt of building permit, (Estimated 3-4 month for plan check) on or before the EFFECTIVE DATE in the PERFORMANCE SCHEDULE
C. Completion of construction of all components of the Improvements no later than within 30 months of receipt of building permit, on or before the EFFECTIVE DATE in the PERFORMANCE SCHEDULE. Completion shall mean when the Improvements are entitled to be issued a final Certificate of Occupancy, including any and all Certificates of Occupancy required for any subtenant of TENANT, as well as all Certificates of Occupancy required of TENANT. TENANT shall provide evidence TENANT has incurred at least $ 3,500.000.00 in costs to satisfactorily complete the Improvements on the Premises pursuant of issuance of final Certificate of Occupancy.

D. Master lease construction and occupancy deadlines shall supersede the consent of landowner deadlines approved by City Council on January 9, 2024, whereas, if

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master lease deadlines are not met due to any reason within or outside the control of TENANT, an extension of up to 180-days may be granted as reasonably determined by the City Manager. Additional extensions to any or all of these dates may be granted by the City Council in its sole discretion. During construction of the Improvements, TENANT shall take all measures to:
a. Avoid any pollution of the atmosphere or littering of land or water by or originating in or about the Premises or caused by TENANT’S construction activities.
b. Keep the noise level on the Premises to a minimum so that persons in the neighborhood will be able to comfortably enjoy business and facilities in the area.
c. Prevent any pollutants, including but not limited to petroleum products, from entering Morro Bay waters.
d. Reasonably avoid negative impacts on surrounding businesses. e. Prohibit storage of materials or equipment on public property and avoid parking or traffic delays or impairment without prior consent of CITY.
f. Keep the construction site in a sightly, orderly, and safe manner at all times.

Section 13.03 Future Premise Survey and Repairs
As set forth in Section 1.02, between the Thirty-fifth (35th) and Thirty-eighth(38th) year after the Completion Date of this Lease, TENANT shall provide the CITY with a survey and proposed repair plan addressing the condition of the Lease Site, including any wharfs, revetments, seawalls, bulkheads, pilings, piers, docks, buildings, structures, improvements, utilities, paved areas, drainage facilities, appurtenances, and any other work necessary to maintain the Lease Site and preserve the service life of the foregoing improvements. TENANT shall deliver written notice to the CITY of TENANT's intent to exercise the Extension Option at least twenty-four (24) months prior to Lease expiration and shall obtain CITY approval of the survey and repair plan prior to Lease expiration. All repairs identified in the approved repair plan shall be completed prior to Lease expiration. The Premises must also be in Good Repair and Condition as defined below. The determination of whether the Premises are in Good Repair and Condition shall be made by CITY following review of the survey and repair plan submitted by Tenant and a reasonable inspection conducted by the CITY. CITY shall complete its review and

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inspection within ninety (90) days after Tenant provides notice of its intent to exercise the Extension Option.

Good Repair and Condition means that the Premises, including all wharfs, revetments, seawalls, bulkheads, pilings, piers, docks, buildings, structures, improvements, utilities, paved areas, landscaping, drainage facilities, fences, signage, and other appurtenances for which Tenant is responsible under this Lease:
(a) have been maintained in accordance with the requirements of this Lease and all applicable federal, state, and local laws, regulations, codes, permits, and ordinances; (b) are structurally sound, safe, clean, and fully functional for their intended use, with all building systems, mechanical, electrical, plumbing, utility, fire and life safety systems, and other improvements in proper working order, subject only to ordinary wear and tear that does not materially impair their function or appearance; (c) are free from deferred maintenance, deterioration, waste, hazardous conditions, material defects, and broken, damaged, faded, peeling, rusted, or other unsightly conditions that would adversely affect the value, safety, operation, or appearance of the Premises;
(d) are maintained in a neat, orderly, and visually appealing condition consistent with a professionally maintained waterfront property and do not detract from the appearance of the Harbor or surrounding properties;
(e) have no outstanding notices of violation, code enforcement actions, or uncorrected deficiencies issued by any governmental authority that are the responsibility of Tenant; and
(f) have been restored following any casualty or damage as required by this Lease.

Section 13.04 Liquidated Damages.

If TENANT is not in strict compliance with Sections 13.01 through. 13.03 of this Lease, it is understood, acknowledged and agreed that the CITY will suffer damage. It is therefore agreed that the TENANT and its sureties shall pay to the CITY the sum of One Hundred Dollars ($100.00) for each and every calendar day of delay beyond the Completion Date set in this Lease. TENANT expressly understands, acknowledges and agrees that such liquidated damages can and shall be imposed if the TENANT does not make the identified improvements by the

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completion date. If the CITY accepts work or makes any payment under this Lease after a default by reason of delays, the acceptance of such work and/or payment(s) shall in no respect constitute a waiver or modification of any provisions regarding Improvement deadlines, a completion schedule, or the accrual of liquidated damages. This Section does not exclude recovery of damages under the default provisions of this Lease and is expressly in addition to the City’s ability to seek other legal or equitable damages. To the extent required by Government Code section 4215, TENANT shall not be assessed liquidated damages for delay in completion of the work when such delay was caused by the failure of the CITY or owner of a utility to provide for removal or relocation of utility facilities.

EXECUTED on ________________, 2026, at________________________ County, California.

CITY OF MORRO BAY TENANT – BAYSIDE LANDING INC
_________________________________
Carla Wixom, MAYOR
By: ________________________________
Paul Gillen, Chief Executive Officer
By: ________________________________
ATTEST:
_________________________________
Dana Swanson, CITY CLERK
APPROVED AS TO FORM:
_______________________________________
Brian Stack, CITY ATTORNEY

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01181.0024/656492.1 JWP A-1

EXHIBIT A

COPY OF PARCEL MAP

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01181.0024/656492.1 JWP

L E A S E
by and between
the CITY OF MORRO BAY
("CITY")
and
Bayside Landing, Inc.
("TENANT")

Bayside Landing Inc.
01181.0024/656492.1 JWP -iTABLE OF CONTENTS
Article 1 FIXED TERM.............................................................................................................2 Section 1.01 Term..............................................................................................2 Section 1.02 Extensions.....................................................................................2 Section 1.03 Hold Over......................................................................................3 Section 1.04 Replacement..................................................................................3 Article 2 RENT..........................................................................................................................3 Section 2.01 Annual Minimum Rent. ................................................................3 Section 2.02 CPI Adjustment to Annual Minimum Rent. .................................4 Section 2.03 Calculation of New Minimum Rent..............................................5 Section 2.04 Percentage Rent. ...........................................................................6 Section 2.05 Reimbursements............................................................................8 Section 2.06 Penalty and Interest.......................................................................9 Article 3 USE OF PREMISES...................................................................................................9 Section 3.01 Permitted Uses. .............................................................................9 Section 3.02 Unauthorized Use..........................................................................9 Section 3.03 Operation of Business - Hours of Operation.................................9 Section 3.04 Competition.................................................................................10 Section 3.05 Environmental Considerations and Hazardous Materials...........10 Section 3.06 Tidelands Trust. ..........................................................................12 Section 3.07 Compliance with Law.................................................................12 Section 3.08 Waste or Nuisance. .....................................................................12 Section 3.09 Use by CITY...............................................................................12 Article 4 CONSTRUCTION, ALTERATION AND REPAIRS .............................................13 Section 4.01 Construction Approval................................................................13 Section 4.02 Construction Bond. .....................................................................13

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01181.0024/656492.1 JWP -iiSection 4.03 Mechanics' Liens.........................................................................14 Section 4.04 Ownership of Improvements.......................................................14 Article 5 LEASEHOLD MORTGAGES .................................................................................15 Article 6 REPAIRS, MAINTENANCE AND RESTORATION ............................................15 Section 6.01 Maintenance by TENANT..........................................................15 Section 6.02 Seawalls and Revetment. ............................................................16 Section 6.03 Legal Requirements. ...................................................................17 Section 6.04 Failure to Repair. ........................................................................17 Section 6.05 Inspection by CITY.....................................................................17 Section 6.06 TENANT'S Duty to Restore Premises........................................18 Section 6.07 Termination of Lease for Destruction.........................................18 Section 6.08 Destruction Due to Risk Not Covered by Insurance...................19 Article 7 INDEMNITY AND INSURANCE ..........................................................................20 Section 7.01 Indemnity Agreement. ................................................................20 Section 7.02 Liability Insurance. .....................................................................21 Section 7.03 Worker's Compensation..............................................................21 Section 7.04 Property Insurance. .....................................................................21 Section 7.05 Additional Coverage. ..................................................................22 Section 7.06 General Requirements.................................................................22 Section 7.07 No Subrogation. ..........................................................................23 Section 7.08 TENANT'S Waiver.....................................................................23 Section 7.09 Insurance Not a Limit. ................................................................24 Article 8 TAXES AND FEES..................................................................................................24 Section 8.01 TENANT to Pay Taxes...............................................................24 Section 8.02 TENANT to Pay License and Permit Fees. ................................24 Section 8.03 Utilities........................................................................................24

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01181.0024/656492.1 JWP -iiiArticle 9 CONDEMNATION..................................................................................................24 Section 9.01 Total Condemnation....................................................................24 Section 9.02 Condemnation Award. ................................................................25 Section 9.03 Termination for Partial Taking. ..................................................26 Section 9.04 Rent Abatement for Partial Taking. ............................................26 Section 9.05 Conveyance in Lieu of Eminent Domain....................................26 Section 9.06 Temporary Taking. .....................................................................27 Article 10 ASSIGNMENT AND SUBLEASING .....................................................................27 Section 10.01 No Assignment Without CITY'S Consent. .................................27 Section 10.02 Change of Ownership as Assignment. ........................................28 Section 10.03 Application for Assignment........................................................28 Section 10.04 Probate Transfer of Assignment. ................................................29 Section 10.05 No Sublease Without CITY'S Consent.......................................29 Section 10.06 Subtenant Subject to Lease Terms..............................................29 Section 10.07 Consent to Sublease Agreement. ................................................30 Section 10.08 TENANT and Guarantor Remain Liable....................................30 Section 10.09 Nondisturbance. ..........................................................................30 Article 11 DEFAULT AND TERMINATION..........................................................................30 Section 11.01 Abandonment by TENANT........................................................30 Section 11.02 Termination for Breach by TENANT.........................................31 Section 11.03 Termination for Failure to Pay Rent. ..........................................31 Section 11.04 Lender May Cure Default. ..........................................................31 Section 11.05 Damages for Breach....................................................................31 Section 11.06 Cumulative Remedies. ................................................................32 Section 11.07 Waiver of Breach. .......................................................................32 Section 11.08 Surrender of Premises. ................................................................32 Section 11.09 Cross-Defaults.............................................................................32

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01181.0024/656492.1 JWP -ivArticle 12 MISCELLANEOUS .................................................................................................33 Section 12.01 Notices. .......................................................................................33 Section 12.02 Governing Law and Jurisdiction.................................................33 Section 12.03 Binding on Successors. ...............................................................34 Section 12.04 Partial Invalidity..........................................................................34 Section 12.05 Sole and Only Agreement...........................................................34 Section 12.06 Modification................................................................................34 Section 12.07 Time of Essence..........................................................................35 Section 12.08 Memorandum of Lease for Recording........................................35 Section 12.09 Force Majeure. ............................................................................35 Article 13 SPECIAL PROVISIONS PECULIAR TO THIS LEASE SITE.................................35 Section 13.01 Public Restrooms........................................................................35 Section 13.02 TENANT’S Obligation to Redevelop Site. ................................35 Section 13.03 Future Premise Survey and Repairs............................................37 Section 13.04 Liquidated Damages. ..................................................................38

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1 | P a g e

SCHEDULE A

PERCENTAGE RENT FOR GROUND LEASES
SALES % GROSS
FOOD SERVICE: Restaurant, Dining Room 3
Snack Bar, Delicatessen, 5
Fast Food, Convenience Food 5
Bar/Lounge, Beer & Wine Sales 5
RETAIL SALES & SERVICE: Tenant 5
FISH & SEAFOOD: Retail Sales 5
Wholesale Sales 0.5
MOORINGS, TIES & SLIPS: Pier/Fixed Piles 10
Pier/Floating 10
BOAT REPAIR & SALES: Boat & Marine Repair 5
New Boat Sales 5
Used Boat Sales 5
FUEL: Gasoline $0.02/gal.

Diesel $0.015/gal.

HOTEL/MOTEL: 5
ALL OTHER USES: 5
MARINE RESEARCH 5
Percentage Rental is to be based on the gross amount received from any and all sources of income derived from the lease site.

Prepared By: CM Dept Review: LS
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council
FROM: Chris Munson, Harbor Vitality Director
Lori Thompson, Harbor Business Manager
SUBJECT: Adoption of Resolution No. 44-26 approving a Lease Amendment between the City of Morro Bay and THMT, Inc. for Lease Site 122-123/122W-123W located at 1205 Embarcadero (Harbor Hut Restaurant)

RECOMMENDED ACTION
Adopt Resolution No. 44-26 approving lease amendment for Lease Site 122-123/122W-123W (Harbor Hut) located at 1205 Embarcadero.

ALTERNATIVES
The City Council can elect not to approve the lease agreements.

FISCAL IMPACT
None.

BACKGROUND
In June 2018, a new 32-Year Master Lease was approved for Harbor Hut. The lease included the remaining five years from the existing term and an additional 27 years for a total of 32 years. The lease agreement was predicated on:
i. Developing the site to fuller use and revenue potential through completion of dock/slip improvement project in the water lease area
ii. Completion of significant structural repair improvements to the underpinnings of the Harbor Hut building, decks, and other structures including headwalls, pilings and piling caps and other associated items and
iii. Fair share contribution to the HarborWalk improvements completed by the City.

The sum of these improvements was estimated to cost approximately $500,000 and were completed.

However, the dock system exceeded estimates, and the required pile repairs were much more extensive than what was originally surveyed. The additional cost exceeded $500,000, more than double the initial estimate.

Harbor Hut is proposing an additional $255,000 in future improvements. The future improvements and exceedances from prior work total nearly $800,000. Harbor Hut is a lease in good standing and has done an excellent job of keeping the facility in good repair and presentation. The current lease term expires in 2050.

AGENDA NO: 6.c
MEETING DATE: August 11, 2026

TERMS
Term Length: Additional 5 years, option to extend an additional 10 years if conditions met.

Since the lease sites are in the Measure D area, which limits expansion and further development of non-commercial fishing-related uses, leaseholders within this area are restricted on what they can propose to obtain long-term lease extensions.

Harbor Hut committed over $500,000 in additional improvement costs beyond what was originally proposed for their last lease negotiations. In addition, they are committing to an additional $255,000 in future improvements to be completed by December 31, 2029.

In the last five years of the lease, Harbor Hut may extend the lease by an additional 10 years by having a survey of their facilities and performing the associated repairs to them. The survey and repairs will include all buildings, structures, improvements, utilities, appurtenances, the pier and wharf, and any other work necessary to maintain the Lease Site and preserve the service life.

Updated Lease Language
Penalties for delinquent maintenance and repairs. After 15 days of written notice, tenant needs to address the issue or provide a written schedule for repairs for approval by the Harbor Director. If the deficiencies are not addressed within the stated timeframe, a penalty of $100/day will be issued. The penalty amount increases every 60 days until default at 180 days. Other standard lease provisions were updated to be consistent with the Harbor Lease Management Policy.

Harbor Hut will have until December 31, 2029 to complete the future improvements proposed. If the improvements remain incomplete past that date, the lease holder will incur liquidated damages at the rate of $100 per day.

CONCLUSION
The leaseholder has accepted the City’s terms after negotiations. They are motivated to continue doing business in Morro Bay and complete the proposed improvements.

ATTACHMENTS

1. Resolution No. 44-26 Approving the Lease Amendment for Harbor Hut

2. Amendment #1 to the Lease Agreement for Lease Site 122-123/122W-123W and Extension of 122W-123W, Located at 1205 Embarcadero

RESOLUTION NO. 44-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA
APPROVING AMENDMENT 1 TO THE MASTER LEASE AGREEMENT FOR LEASE SITE 122-123/122W-123W, AND EXTENSION OF 122W-123W BETWEEN THE CITY OF MORRO BAY AND THMT, INC., LOCATED AT 1205

EMBARCADERO

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 is the lessor of certain properties on the Morro Bay Waterfront described as City Tidelands leases and properties; and WHEREAS, THMT, Inc. (Tenant) has been the lessee of Lease Site 122-123/122W123W, and Extension of 122W-123W, since 2009 and is a tenant in good standing; and WHEREAS, the City and Tenant have negotiated Amendment No. 1 to extend the lease term, establish additional maintenance, repair, and capital improvement requirements, and provide a conditional ten-year extension based upon the City's determination that the Premises are in Good Repair and Condition; and
WHEREAS, Amendment 1 requires the Tenant, to submit a survey and repair plan addressing the condition of the Lease Site and to complete all approved repairs before lease expiration, with any extension contingent upon the City's determination that the Premises are in Good Repair and Condition, and
WHEREAS, Amendment 1 further requires the Tenant to complete not less than Two Hundred Fifty-Five Thousand Dollars ($255,000) in specified capital improvements to the Premises by December 31, 2029, and provides for documentation of those improvements and appropriate remedies for noncompliance; and
WHEREAS, the City Council finds that Amendment No. 1 protects public tidelands assets, encourages continued investment in the waterfront, and is in the best interests of the City and consistent with the Public Trust.

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

1. The attached Amendment #1 to the Master Lease Agreement for Lease Site 122- 123/122W-123W, and Extension of 122W-123W is hereby approved. ///
///
///

2. The Mayor is hereby authorized to execute said Master Lease Agreement.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 11th day of August 2026 on the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

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

AMENDMENT #1 TO THE LEASE AGREEMENT FOR
LEASE SITE 122-123/122W-123W AND EXTENSION OF 122W-123W, LOCATED AT 1205 EMBARCADERO
This Amendment ("Amendment #1") is made and entered into as of this 28th day of July 2026, by and among the City of Morro Bay, a municipal corporation of the State of California, whereinafter called "City," and THMT, Inc., hereinafter called "Tenant." (Collectively, City and Tenant are sometimes referred to herein as the "Parties.") WHEREAS, this Amendment #1 is to that certain Lease, which was signed on behalf of the Parties and is effective as of July 3, 2018 (the "Lease"); and WHEREAS, the Lease is currently in effect and in good standing; and WHEREAS, Tenant intends to make certain improvements to the Premises and desires a lease extension to justify the capital expenditure; and WHEREAS, subject to completion of the improvements, the Parties agree to extend the Lease for an additional five (5) years beyond the termination date of July 1, 2050 to a new termination date of June 30, 2055 and provide for one option to extend the Lease for an additional ten years if in good standing and subject to completion of any required repairs; and WHEREAS, the Parties also agree to update language in the Lease regarding penalties for any delinquent maintenance and repairs or improvement delays consistent with the City’s current master lease template.

NOW THEREFORE, Tenant and City agree to amend the Lease as follows:

1. Section 1.01 Term.

Shall be amended to read:

The term of this Lease shall be a period of thirty-seven (37) years, commencing July 1, 2018, (the "Commencement Date") and terminating, without notice, on June 30, 2055, unless sooner terminated as herein provided (the “Term”).

2. Section 1.02 Extensions.

Shall be amended to read:

The term of this Lease will not be extended nor will this Lease be renewed. Requests for continued use of the Premises will be treated as an application for a new lease and will require appropriate application to the CITY with all required supporting information and documents, CITY Council approval and the execution of a new CITY lease, containing the then most current terms, covenants, conditions and rent schedules.

Notwithstanding the foregoing TENANT may extend the Lease for one (1) additional tenyear term (“Extension Option”), contingent upon completion of any future repairs required under the terms of this Lease. Between the Thirtieth (30th) and Thirty-fifth (35th) year following the Commencement Date, TENANT shall provide the CITY with a survey and proposed repair plan addressing the condition of the Lease Site, including all buildings, structures, improvements, utilities, appurtenances, the pier and wharf, and any other work necessary to maintain the service life of the wharf and other improvements at Lease Sites 122-123/122W-123W and shall complete such repairs prior to lease termination. TENANT

shall give the CITY written notice of its intent to exercise the Extension Option no less than twenty-four (24) months prior to Lease expiration and obtain CITY approval of the TENANT’s plan in accordance with Section 13.06.

TENANTS’s exercise of the option to extend shall be further contingent upon TENANT not being in default under any term or condition of the Lease at the time of TENANT’s exercise of the option and the time of commencement of the option. Time is of the essence.

3. Section 6.01 Maintenance by TENANT.

Shall be amended to read:
(A) At all times during the term of this Lease, TENANT must, at TENANT'S own cost and expense, keep and maintain, in good order and repair and in a safe and “broom clean” condition, all improvements now or hereafter on the Premises, including any public spaces, common areas, rights-of-way, sidewalks and other areas or spaces, even if not on the Premises but utilized as part of TENANT’S business operations. Furthermore, TENANT must, at TENANT'S own cost and expense, maintain at all times during the term of this Lease the whole of the Premises and other areas utilized for TENANT’S business operations as described above in a clean, sanitary, neat and orderly “broom clean” condition. CITY may, at the sole option of CITY, but not obligation, clean, clear, maintain or repair the Premises, any improvements thereon or areas used by TENANT, as described above, at TENANT'S cost and expense, in the event TENANT fails to clean, clear, maintain or make repairs, in accordance with this Section to the satisfaction of CITY, after 15-days' written notice to TENANT from CITY of CITY'S intent to exercise this option. (B) In addition to, and not exclusive of, any other remedies available to CITY under law or equity, the parties agree that in the event TENANT fails to comply with any terms of maintenance or repair requirements under this Section 6.01 or Section 6.04, CITY’s damages would be uncertain and difficult (if not impossible) to accurately estimate because of the parties’ inability to predict impacts to environment, CITY sales tax or Rent revenues, health or safety matters, and other relevant factors. Within the (15) days following written notice as described in this section, TENANT will either correct the deficiencies or have a schedule for repairs approved by the Habor Director in writing. It is therefore agreed that the TENANT may be required by CITY to pay to the CITY, in accordance with the following schedule for each and every calendar day of delay beyond fifteen (15) days following written notice from CITY or exceedance of the schedule for repair of such maintenance or repair deficiencies, the following sums due for each day’s delay:

The sum of one hundred dollars ($100.00) per day for the first sixty (60) days.

The sum of two hundred dollars ($200.00) per day for the following sixty (60) days.

The sum of three hundred dollars ($300.00) per day for the following sixty (60) days. (C) If maintenance and repair deficiencies are not corrected within one hundred and eighty days (180), TENANT may be declared in default of this Lease. Nothing in this Section shall limit or waive any legal rights or remedies available to the CITY; the remedies available to CITY in this Section are not exclusive but are cumulative with and in addition to all remedies now or hereafter allowed by law or elsewhere provided in this Lease.

4. Shall be amended to add:

Section 13.05 Tenant Improvements and Documentation of Cost

TENANT must complete improvements to the Premises with minimum hard and soft construction costs of Two Hundred Thousand, Fifty-Five Thousand Dollars $255,000, as follows:

1. Demolition of Harbor Hut flat roof section and installation of new thermoplastic polyolefin (TPO) roof with a minimum cost of $100,000.

2. Electrical and security camera utilities with a minimum cost of $25,000.

3. Replacement of kitchen hood fan and compressors with a minimum cost of $ 10,000.

4. Fire suppression system for roofing area of building with a minimum cost of $120,000.

Completion of improvements to Premises as outlined in this section 13.05, shall be completed no later than December 31, 2029.

TENANT shall, within sixty (60) days following completion of the improvements required under this Section 13.05, provide CITY with copies of all receipts, paid invoices, contracts, and other documentation reasonably requested by CITY to verify that TENANT has satisfied the minimum required hard and soft construction costs of Two Hundred Thousand, Fifty-Five Thousand Dollars ($255,000). TENANT'S obligations under this Section shall not be deemed satisfied until such documentation has been provided and accepted by CITY as reasonably demonstrating compliance.

5. Shall be amended to add:

Section 13.06 10-year Extension Option.

As set forth in Section 1.02, between the Thirtieth (30th) and Thirty-fifth (35th) years after the Commencement Date of this Lease, TENANT shall provide the CITY with a survey and proposed repair plan addressing the condition of the Lease Site, including all buildings, structures, improvements, utilities, appurtenances, the pier and wharf, and any other work necessary to maintain the Lease Site and preserve the service life of the foregoing improvements. TENANT shall deliver written notice to the CITY of TENANT's intent to exercise the Extension Option at least twenty-four (24) months prior to Lease expiration, and shall obtain CITY approval of the survey and repair plan prior to Lease expiration. All repairs identified in the approved repair plan shall be completed prior to Lease expiration. The Premises must also be in Good Repair and Condition as defined below. The determination of whether the Premises are in Good Repair and Condition shall be made by CITY following review of the survey and repair plan submitted by Tenant and a reasonable inspection conducted by the CITY. CITY shall complete its review and inspection within ninety (90) days after Tenant provides notice of its intent to exercise the Extension Option.

Good Repair and Condition means that the Premises, including all buildings, structures, docks, wharfs, revetments, improvements, utilities, paved areas, landscaping, drainage facilities, fences, signage, and other appurtenances for which Tenant is responsible under this Lease:
(a) have been maintained in accordance with the requirements of this Lease and all applicable federal, state, and local laws, regulations, codes, permits, and ordinances; (b) are structurally sound, safe, clean, and fully functional for their intended use, with all building systems, mechanical, electrical, plumbing, utility, fire and life safety systems, and

other improvements in proper working order, subject only to ordinary wear and tear that does not materially impair their function or appearance; (c) are free from deferred maintenance, deterioration, waste, hazardous conditions, material defects, and broken, damaged, faded, peeling, rusted, or other unsightly conditions that would adversely affect the value, safety, operation, or appearance of the Premises;
(d) are maintained in a neat, orderly, and visually appealing condition consistent with a professionally maintained waterfront property and do not detract from the appearance of the Harbor or surrounding properties;
(e) have no outstanding notices of violation, code enforcement actions, or uncorrected deficiencies issued by any governmental authority that are the responsibility of Tenant; and
(f) have been restored following any casualty or damage as required by this Lease.

6. Shall be amended to add:

Section 13.07 Liquidated Damages.

If work is not completed in strict compliance with Sections 13.05 through 13.06 of this Lease or in strict accordance with the schedule of performance provided by any Improvement entitlements, it is understood, acknowledged and agreed that the CITY will suffer damage. It is therefore agreed that the TENANT and its sureties shall pay to the CITY the sum of $100.00 for each and every calendar day of delay beyond the completion date set in this Lease, or beyond any completion schedule, construction schedule or Improvement milestones established in or pursuant to related Improvement entitlements.

TENANT expressly understands, acknowledges and agrees that such liquidated damages can and shall be imposed if the TENANT does not meet each and every aspect of any activity schedule, completion schedule, construction schedule or Improvement milestones. If the CITY accepts work or makes any payment under this Lease after a default by reason of delays, the acceptance of such work and/or payment(s) shall in no respect constitute a waiver or modification of any provisions regarding Improvement deadlines, a completion schedule, or the accrual of liquidated damages. This Section does not exclude recovery of damages under the default provisions of this Lease, entitlements, and is expressly in addition to the CITY’s ability to seek other legal or equitable damages.

To the extent required by Government Code section 4215, TENANT shall not be assessed liquidated damages for delay in completion of the work when such delay was caused by the failure of the CITY or owner of a utility to provide for removal or relocation of utility facilities.

7. Except as expressly stated herein, all other provisions of the lease shall remain in full force and effect.

8. The effective date of this Amendment # 1 shall be deemed to be the date first noted above.
(Signatures on next page)

IN WITNESS WHEREOF, the parties hereto have executed this Amendment #1 as of the date written above.

CITY OF MORRO BAY Tenant

By: ______________________ By:

Carla Wixom, Mayor Troy Leage, President
By:

Heather Leage, Secretary
APPROVED AS TO FORM:

Brian J. Stack, City Attorney
ATTEST:
_____________________________
Dana Swanson, City Clerk

Prepared By: JC Department Review: JC
City Manager Review: JC City Attorney Review: BS

Staff Report
TO: Honorable Mayor and City Council DATE: August 6, 2026

FROM: John Craig, City Manager
Carlos Mendoza, Maintenance Division Manager
SUBJECT: Adoption of Resolution No. 45-26 authorizing application and acceptance for California’s Department of Resources Recycling and Recovery (CalRecycle) Grants for Beverage Container Recycling Grant (BCRG)

RECOMMENDED ACTION
Staff recommends the City Council adopt Resolution No. 45-26 authorizing the Public Works Director to:

1. Submit the application and accept and administer any grant award to CalRecycle for any and all CalRecycle Beverage Container Recycling Grant (BCRG) Program grants;

2. To act as the City’s representative in administration of the grant, including but not limited to, applications, agreements, and amendments that are necessary to implement and secure payment of CalRecycle grants to the City; if the application is successful.

ALTERNATIVES
There are no alternatives recommended

FISCAL IMPACT
There is no City match to the grant.

BACKGROUND/ DISCUSSION
The CalRecycle Beverage Container Recycling Grant (BCRG) Program aims to reach and maintain an 80% recycling rate for all California Refund Value (CRV) beverage containers – aluminum, glass, plastic, and bi-metal. The City is applying for grant funds of up to $200,000 for two main purposes: the purchase and installation of the final phase (20) of Trash/Recycle/ Planter Containers throughout the City; and the purchase and installation of 11 water fountain/ bottle filling stations throughout the City.

CONCLUSION
Staff recommends the City Council adopt Resolution No. 45-26 authorizing the Public Works Director to execute and submit the application to CalRecycle for The CalRecycle Beverage Container Recycling Grant (BCRG) Program.

ATTACHMENT

1. Resolution No. 45-26
AGENDA NO: 6.d
MEETING DATE: August 11, 2026

RESOLUTION NO. 45-26

RESOLUTION OF THE CITY COUNCIL

OF THE CITY OF MORRO BAY, CALIFORNIA

AUTHORIZING SUBMITTAL OF AN INDIVIDUAL

GRANT APPLICATION FOR THE BEVERAGE CONTAINER

RECYCLING GRANT (BCRG) PROGRAM

T H E C I T Y C O U N C I L
City of Morro Bay, California
WHEREAS, the California Public Resources Code authorizes the California Department of Resources Recycling and Recovery (CalRecycle) to administer various Grant Programs; and
WHEREAS, in furtherance of this authority, CalRecycle is required to establish procedures governing the administration of the Grant Programs; and WHEREAS, CalRecycle grant application procedures require, among other things, an applicant’s governing body to declare by resolution certain authorizations related to the administration of CalRecycle Grants; and WHEREAS, the City of Morro Bay wishes to apply to the Beverage Container Recycling Grant (BCRG) Program offered by CalRecycle; and NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Morro Bay, California, that the City of Morro Bay is authorized to submit an application and the Director of Public Works is authorized to accept and administer any grant award to CalRecycle for the Beverage Container Recycling Grant (BCRG) Program offered by CalRecycle as described in the accompanying staff report.

PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 11th day of August 2026 with the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

RECUSE:
______________________________
CARLA WIXOM, Mayor
ATTEST:

DANA SWANSON, City Clerk

Prepared By: JC Department Review: JC
City Manager Review: JC City Attorney Review: BS

Staff Report
TO: Honorable Mayor and City Council DATE: August 6, 2026 FROM: John Craig, City Manager
SUBJECT: Authorization for the Mayor to Execute and Submit a Letter of Opposition to the California Department of Fish and Wildlife and California Fish and Game Commission Regarding Marine Protected Area Petitions 2023- 19MPA, 2023-20MPA, and 2023-29MPA

RECOMMENDED ACTION
Staff recommends the City Council authorize the Mayor to execute and transmit, on behalf of the City Council, a letter of opposition to the California Department of Fish and Wildlife (CDFW) and the California Fish and Game Commission (CFGC) regarding Marine Protected Area (MPA) petitions 2023-19MPA (Chitqawi SMCA), 2023-20MPA (Point Buchon SMCA and SMR), and 2023-29MPA (Mishopshno SMCA), requesting denial of petition 2023-19MPA and deferral of petitions 2023-20MPA and 2023-29MPA pending meaningful consultation with the City of Morro Bay and local fishing community stakeholders.

ALTERNATIVES
Direct staff to submit a letter of support, or take no position, on the petitions.

FISCAL IMPACT
None

BACKGROUND / DISCUSSION
In December 2023, the California Fish and Game Commission (CFGC) received 20 petitions from tribes and the public requesting changes to California's Marine Protected Area (MPA) Network—a statewide system of marine reserves and conservation areas established under the Marine Life Protection Act (MLPA). The petitions were referred to the California Department of Fish and Wildlife (CDFW) for evaluation and recommendation. Of the 20 petitions, five were identified as Tribally-led, meaning they were submitted by or in partnership with a California Native American tribe. CDFW released its evaluations of the five Tribally-led petitions on July 30, 2026, and the Ocean Protection Council (OPC) released its policy recommendations on July 31, 2026.

The CFGC Tribal Committee is scheduled to meet on August 11, 2026, and the full Commission will consider these petitions at its August 12–13, 2026 meeting. The City of Morro Bay received no advance notice of these proceedings and was not included in any of the outreach or consultation efforts conducted by CDFW or CFGC related to these petitions.

AGENDA NO: 6.e
MEETING DATE: August 11, 2026

The Three Petitions at Issue
Petition 2023-19MPA — Proposed Chitqawi SMCA (near Morro Rock). This petition, submitted by the Santa Ynez Band of Chumash Indians (SYBCI), proposes to designate a new State Marine Conservation Area (SMCA) in waters directly adjacent to the entrance of Morro Bay Harbor, immediately offshore of Morro Rock. The area would be named "Chitqawi," the northernmost coastal Chumash village site. The proposed SMCA would restrict take in these waters while providing a tribal take exemption for SYBCI members.

OPC, in its July 31, 2026 recommendations, recommended denial of this petition, explicitly noting that the proposed SMCA "would be located immediately adjacent to Morro Bay Harbor, a critical regional port, potentially presenting significant challenges." Staff concurs. Placing a new MPA at the entrance of Morro Bay Harbor raises serious concerns about navigational safety, harbor access, commercial fishing operations, and gear conflicts in one of the busiest stretches of coastal water in our jurisdiction.

Petition 2023-20MPA — Point Buchon SMCA and SMR Modifications. This petition, also submitted by SYBCI, proposes to (1) add a tribal take exemption for SYBCI members at the existing Point Buchon SMCA, located approximately eight miles south of Morro Bay; (2) rename the SMCA to reflect Chumash cultural heritage; and (3) adjust the northern boundary of the adjacent Point Buchon State Marine Reserve (SMR). Morro Bay's commercial fleet regularly fishes these waters, and the Morro Bay Harbor is the nearest commercial port to this area.

OPC recommended approval of the tribal take exemption and renaming, but denial of the proposed SMR boundary change. Staff does not oppose the concept of tribal co-management at Point Buchon but is concerned that the City and local fishing industry were not consulted, and that the potential operational and gear-conflict implications of a tribal take exemption in these waters have not been assessed. Staff recommends deferral pending that consultation.

Petition 2023-29MPA — Proposed Mishopshno SMCA (near Carpinteria). This petition, cosubmitted by SYBCI, the Natural Resources Defense Council, and the Environmental Defense Center, proposes a new SMCA near Carpinteria named "Mishopshno" covering approximately 9 square miles in the Santa Barbara Channel. While this area is geographically more distant from Morro Bay, Morro Bay fishermen operate across the Central Coast bioregion, and the cumulative effect of multiple new and expanded MPAs throughout this region has not been assessed with respect to Central Coast fishing community impacts.

OPC recommended approval of this petition. Staff's concern is not primarily with this individual petition but with the absence of cumulative socioeconomic impact analysis for the Central Coast fishing communities—including Morro Bay—that would be affected by the combined effect of the five Tribally-led petitions and the newly designated Chumash Heritage National Marine Sanctuary.

Statutory Process Deficiencies
Fish and Game Code section 2853 requires the MPA management process to involve "all interested parties, including, but not limited to, individuals from the sport and commercial fishing industries, aquaculture industries, coastal and ocean tourism and recreation industries, marine conservation organizations, local governments, marine scientists, and the public." Fish and Game Code section 2855 requires CDFW to take into account the "socioeconomic and

environmental impacts of various alternatives" when siting new MPAs or making major modifications to existing ones.

CDFW's own July 2026 Companion Document acknowledges that it "did not have the ability to provide a supplemental analysis of the economic or fiscal impacts" for the petitions. CFGC staff similarly acknowledged in July 2026 that they were "unable to make determinations about whether, or to what extent, any specific petition advances or conflicts with the goals of" CFGC's Coastal Fishing Communities Policy because "CFGC does not yet have detailed economic, demographic, or cultural data to determine how proposed regulatory changes may affect specific coastal fishing communities." These are admissions that the statutory standard has not been met—particularly for a community like Morro Bay, which was never contacted, identified as an affected party, or given an opportunity to be heard.

CONCLUSION
Staff recommends the City Council authorize the Mayor to execute and transmit the attached letter of opposition to CDFW and CFGC, requesting denial of petition 2023-19MPA and deferral of petitions 2023-20MPA and 2023-29MPA pending a legally adequate consultation process that includes the City of Morro Bay. Staff also recommends the Council authorize the City Manager to take any additional follow-up actions necessary to protect Morro Bay's interests in this matter, including requesting an opportunity to testify at the August 12–13, 2026 CFGC Commission meeting.

ATTACHMENT

1. Draft Letter of Opposition — City of Morro Bay to CDFW and CFGC, dated August 6, 2026

August 11, 2026
Meghan Hertel, Director
California Department of Fish and Wildlife
1416 Ninth Street, 12th Floor
Sacramento, California 95814
Eric Sklar, President
California Fish and Game Commission
715 P Street, 16th Floor
Sacramento, California 95814
Re: City of Morro Bay Opposition to Marine Protected Area Petitions 2023-19MPA, 2023-20MPA, and 2023-29MPA — Request for Denial or Deferral Pending Local Consultation Dear Director Hertel and President Sklar,
On behalf of the Morro Bay City Council, we write in strong opposition to the proposed regulatory changes set forth in Marine Protected Area petitions 2023-19MPA (Chitqawi SMCA), 2023-20MPA (Point Buchon), and 2023-29MPA (Mishopshno SMCA), which are scheduled for consideration at the California Fish and Game Commission (CFGC) Tribal Committee meeting on August 11, 2026, and the full Commission meeting on August 12–13, 2026. We respectfully urge the Commission to deny or defer action on these petitions until a meaningful and legally adequate process of consultation with the City of Morro Bay and other directly affected local stakeholders has been completed.

I. Background: Morro Bay's Stake in These Proceedings
Morro Bay is a small coastal city of approximately 10,000 residents in San Luis Obispo County, anchored by one of the Central Coast's most productive commercial and recreational fishing harbors. The Morro Bay commercial fishing fleet—which targets Dungeness crab, rock crab, sablefish, rockfish, salmon, and other species—operates in the very waters at issue in these petitions. Our harbor supports local fish processing operations, charter boat services, recreational fishing, whale watching, kayaking, and an active marine tourism economy that is central to the fiscal health and identity of our community.

August 11, 2026
Petition 2023-19MPA proposes to designate a new State Marine Conservation Area (SMCA) to be named "Chitqawi" in waters directly adjacent to Morro Bay Harbor, immediately offshore of Morro Rock—at the entrance to our harbor. Petition 2023-20MPA proposes significant changes to the Point Buchon SMCA and State Marine Reserve (SMR) located approximately eight miles south of Morro Bay, within routine fishing range of our local fleet. Petition 2023-29MPA proposes a new SMCA near Carpinteria named "Mishopshno," which, while geographically more distant, is co-petitioned by parties whose broader network of petitions affects the fisheries on which Morro Bay depends.

II. The City Was Never Consulted and the Process Has Been Legally Deficient Fish and Game Code section 2853 requires that any process for the establishment, modification, or abolishment of MPAs must involve "all interested parties, including, but not limited to, individuals from the sport and commercial fishing industries, aquaculture industries, coastal and ocean tourism and recreation industries, marine conservation organizations, local governments, marine scientists, and the public." Fish and Game Code section 2855 further requires that the California Department of Fish and Wildlife (CDFW) "take into account relevant information including, but not limited to, the socioeconomic and environmental impacts of various alternatives" when siting new MPAs or making major modifications to existing ones.

The City of Morro Bay was not notified of, consulted regarding, or invited to participate in any stage of the evaluation process for petitions 2023-19MPA, 2023-20MPA, or 2023-29MPA. We were not included in any of the regional public meetings held in April and May 2026. We were not identified as an affected local government in CDFW's evaluations. We received no advance notice of the July 30, 2026 release of CDFW's tribally-led petition evaluations, and we had fewer than 14 days between that release and the August 11, 2026 Tribal Committee meeting.

CDFW's own July 2026 Companion Document acknowledges that "CDFW did not have the ability to provide a supplemental analysis of the economic or fiscal impacts" for petitions, and that the evaluations "do not include an assessment of any socioeconomic benefits or impacts beyond impacts to commercial and recreational fisheries." CFGC staff similarly conceded in July 2026 that they were "unable to make determinations about whether, or to what extent, any specific petition advances or conflicts with the goals of" CFGC's own Coastal Fishing Communities Policy—adopted specifically to protect communities like Morro Bay—because "CFGC does not yet have detailed economic, demographic, or cultural data" to assess impacts on specific communities. This is an admission that the evaluations fall short of the statutory standard imposed by Fish and Game Code section 2855.

August 11, 2026
III. Specific Objections by Petition
A. Petition 2023-19MPA: Proposed Chitqawi SMCA near Morro Rock The City of Morro Bay opposes the designation of the proposed Chitqawi SMCA. The proposed SMCA would be located immediately adjacent to the entrance of Morro Bay Harbor—one of the most actively used commercial and recreational fishing ports on the Central Coast. The Ocean Protection Council (OPC), in its own July 31, 2026 recommendations to CFGC, recommended denial of petition 2023-19MPA, explicitly noting that "the proposed SMCA would be located immediately adjacent to Morro Bay Harbor, a critical regional port, potentially presenting significant challenges." The City concurs strongly with this assessment.

Morro Rock and the waters surrounding it are the gateway to our harbor. Any restriction on navigation, fishing access, or vessel operations in this area would have direct and potentially severe consequences for our commercial fishing fleet, charter vessel operators, harbor maintenance vessels, and recreational users. Beyond the operational impacts, a new MPA at this location could interfere with port safety and create dangerous ambiguities in an area with active vessel traffic, including vessels entering and exiting the harbor channel.

We further note that CDFW's own evaluation framework requires new MPAs to meet minimum size guidelines (at least 9 square miles) and high levels of protection to contribute meaningfully to the MPA Network. The proposed Chitqawi SMCA, as presented, would not meet these thresholds and—as OPC noted—may be an "irregular fit" for the tribal co-management goals it seeks to achieve. Those goals deserve to be pursued through alternative, non-regulatory pathways that do not impose navigational and economic burdens on Morro Bay.

The City of Morro Bay urges the Commission to deny petition 2023-19MPA.

B. Petition 2023-20MPA: Point Buchon SMCA and SMR Modifications The Point Buchon SMCA and SMR are located approximately eight miles south of Morro Bay in San Luis Obispo County. Morro Bay fishermen regularly access these waters, and our harbor is the nearest commercial port. Petition 2023-20MPA proposes to (1) add a tribal take exemption for the Santa Ynez Band of Chumash Indians (SYBCI), (2) rename the SMCA to reflect Chumash cultural heritage, and (3) adjust the northern boundary of the Point Buchon SMR.

While the City of Morro Bay recognizes and respects the deep cultural and historical ties of the Chumash people to these waters, we object to the process by which this petition has proceeded without local government notification or input. At minimum, the City requests that before any action is taken on this petition, CDFW conduct formal consultation with the Morro Bay Harbor Department and our commercial fishing community regarding the operational implications of a

August 11, 2026
tribal take exemption and boundary changes on fishing access and gear conflicts in waters near the Point Buchon area.

We also express concern regarding the proposed northern boundary expansion of the Point Buchon SMR. The OPC itself recommended denial of this boundary change, noting it could cause "confusion and enforcement challenges" and result in a misalignment of the boundaries of Point Buchon SMR and SMCA. The City agrees. Boundary changes to fully protected State Marine Reserves require particularly strong justification and should not proceed without thorough analysis of impacts on nearby coastal fishing communities—analysis that CFGC staff has acknowledged has not been completed.

The City of Morro Bay urges the Commission to defer action on petition 2023-20MPA pending meaningful consultation with the Morro Bay Harbor Department and local fishing industry, and to deny the proposed northern boundary change to the Point Buchon SMR.

C. Petition 2023-29MPA: Proposed Mishopshno SMCA near Carpinteria Petition 2023-29MPA proposes a new SMCA near Carpinteria, co-petitioned by the Santa Ynez Band of Chumash Indians, the Natural Resources Defense Council, and the Environmental Defense Center. While this area is geographically distant from Morro Bay, we note that the petitioners driving this and the other tribally-led petitions are simultaneously seeking to encumber the fishing grounds of Central Coast fishermen who operate from Morro Bay across the broader Santa Barbara Channel and Central Coast bioregion.

The cumulative impact of multiple new and modified MPAs in this bioregion—particularly when layered onto existing MPAs, the newly designated Chumash Heritage National Marine Sanctuary, and ongoing Vandenberg-adjacent restrictions—has not been assessed in a way that adequately captures the compounding effect on the livelihoods of Central Coast fishing families. CDFW's own evaluations acknowledge the absence of cumulative socioeconomic analysis. Approving petition 2023-29MPA without that analysis, and without meaningful engagement with the communities most affected, is inconsistent with both the letter and spirit of Fish and Game Code sections 2853 and 2855.

The City of Morro Bay urges the Commission to defer action on petition 2023-29MPA pending a cumulative socioeconomic impact analysis that includes Central Coast fishing communities, including those operating from the Port of Morro Bay.

August 11, 2026
IV. Requests
The Morro Bay City Council respectfully requests that the California Fish and Game Commission:

1. Deny petition 2023-19MPA in its entirety, consistent with the recommendation of the Ocean Protection Council, given its proximity to the entrance of Morro Bay Harbor and the significant operational and safety challenges a new SMCA in that location would create.

2. Defer action on petitions 2023-20MPA and 2023-29MPA until CDFW has completed the socioeconomic impact analysis required by Fish and Game Code section 2855, and until the City of Morro Bay, the Morro Bay Harbor Department, and representatives of the Morro Bay commercial fishing fleet have had a meaningful opportunity to consult with CDFW and appear before the Commission.

3. Formally add the City of Morro Bay and the Morro Bay Harbor Department to the notification and outreach list for all future proceedings related to marine protected areas in the Central Coast bioregion, including any subsequent rulemaking proceedings arising from these petitions.

4. Direct CDFW to schedule a dedicated consultation with City of Morro Bay officials and harbor stakeholders prior to any further action on petitions affecting the Central Coast bioregion, consistent with the requirements of Fish and Game Code section 2853.

The City of Morro Bay supports responsible stewardship of California's coastal and marine resources. We respect the rights and cultural connections of California Native American tribes to the ocean and to the resources that have sustained their communities since time immemorial.

We recognize the importance of the Marine Life Protection Act's goals and the significant conservation achievements of the MPA Network. These values, however, must be balanced with the equally important mandate to protect the livelihoods, safety, and economic vitality of the coastal communities that depend on access to these same waters—communities that were not consulted in this process and who have much at stake in its outcome.

We are prepared to engage constructively with CDFW, CFGC, and with the Santa Ynez Band of Chumash Indians to find approaches that honor Chumash cultural heritage while protecting the operational integrity of Morro Bay Harbor and the well-being of our fishing community. We ask only that we be given the opportunity to do so.

Please direct correspondence to the Office of the City Manager at 595 Harbor Street, Morro Bay, California 93442, or by email at [email protected]. We respectfully request the opportunity to provide public testimony at the August 12–13, 2026 Commission meeting.

Respectfully submitted,

August 11, 2026
Carla Wixom
Mayor, City of Morro Bay
On behalf of the Morro Bay City Council:

Jeff Eckles, Mayor Pro Tem
Zara Landrum, Council Member
Cyndee Edwards, Council Member
Bill Luffee, Council Member
cc:

Craig Shuman, Marine Regional Manager, CDFW
Jenn Eckerle, Executive Director, Ocean Protection Council Melissa Miller-Henson, Executive Director, Fish and Game Commission Senator John Laird, California State Senate, 17th District Assembly Member Dawn Addis
San Luis Obispo County Board of Supervisors
Morro Bay Harbor Department

Prepared By: DS Dept Review:____________
City Manager Review: City Attorney Review: BS
Staff Report
TO: Honorable Mayor & City Council
FROM: Dana Swanson, City Clerk
SUBJECT: Accept Withdrawal of Public Works Advisory Board Appointee, Lyn Wickham, and Confirm Appointment of Michael Lucas to fill the Unscheduled Vacancy

RECOMMENDED ACTION
Accept the withdrawal of Public Works Advisory Board Appointee, Lyn Wickham, due to an unforeseen medical condition, and confirm the appointment of Michael Lucas to fill an unscheduled vacancy on the Public Works Advisory Board (“PWAB”) with a term ending January 31, 2027.

ALTERNATIVES
The Council may choose not to fill the PWAB vacancy and direct staff accordingly.

BACKGROUND/DISCUSSION
At the July 28, 2026 Regular Meeting, the Council conducted interviews to fill an unscheduled vacancy on the Public Works Advisory Board. Two candidates (Michael Lucas and Wendelyn (Lyn) Wickham) participated and, following interviews, the Council voted 3-2 to appoint Ms.

Wickham to fill the remainder of a term ending January 31, 2027.

A link to the July 28, 2026 staff report and applications is provided as Attachment 1.

Ms. Wickham contacted the Clerk’s office Monday, August 3rd, to notify staff of an unfortunate injury that would require medical follow-up and potentially prevent her from serving on the PWAB.

After further consideration, on August 6th, Ms. Wickham confirmed she would decline the appointment to focus on her recovery.

Mr. Lucas confirmed by phone he remains interested in serving the remainder of the term while Ms. Wickham recovers.

ATTACHMENT(S)

1. Link to July 28, 2026 Agenda Item - Advisory Board Interviews AGENDA NO: 6.f
MEETING DATE: August 11, 2026

Prepared By: JC Department Review: JC
City Manager Review: JC City Attorney Review: BS

Staff Report
TO: Honorable Mayor and City Council DATE: August 6, 2026 FROM: John Craig, City Manager
SUBJECT: Morro Bay City Park — Discussion of Current Conditions, Community Input, and Direction to Staff Regarding Near-Term Improvements and a Process for Future Planning

RECOMMENDED ACTION
Staff recommends City Council:

1. Receive the report prepared by Council Member Jeff Eckles summarizing the findings of four (4) July 2026 City Park town halls;

2. Discuss current conditions, community input, and priorities for the future of City Park; and

3. Provide direction to staff on near-term operational actions and a process for broader community planning, including referral of the Council Member's report to the Recreation and Parks Commission and the Public Works Advisory Board for advisory review and recommendations to City Council.

ALTERNATIVES
Take no action

FISCAL IMPACT
None

BACKGROUND / DISCUSSION
City Park is a 2.0-acre public park located at the eastern end of downtown Morro Bay at the intersection of Morro Bay Boulevard and Harbor Street. It is one of the first parks dedicated within the City and has long served multiple overlapping roles: neighborhood park, recreation area, civic gathering place, public-art location, visitor amenity, transit hub, and a potential focal point for downtown economic activity.

In recent years, the park's conditions have deteriorated. Vandalism, misuse of the permanent restroom building, extended disruptive occupation of portions of the park, inadequate lighting, and a general decline in ordinary public use have collectively undermined the park's function as a welcoming community space. In response to vandalism and public-safety concerns, the City closed the permanent public restroom facility and placed a portable toilet in its place.

Families, nearby residents, and visitors have also reported avoiding the park as a result of these conditions.

CONCLUSION
AGENDA NO: 8.a
MEETING DATE: August 11, 2026

Staff recommends the City Council discuss the topic and provide direction to staff as appropriate.

ATTACHMENT

1. "Reimagining City Park: Town Hall Report and Possible Paths Forward," prepared by Council Member Jeff Eckles, August 2026

MORRO BAY CITY PARK

REIMAGINING

CITY PARK
Town Hall Report and Possible Paths Forward
Prepared by Council Member Jeff Eckles
August 2026
For City Council, advisory-body, staff, and community discussion

MORRO BAY CITY PARK | TOWN HALL REPORT
Prepared August 2026 | Page 2

1. Purpose and Executive Summary
I hosted four City Park town halls in July 2026 to hear directly from residents about existing conditions, community priorities, and possibilities for the future of the park. Two meetings were conducted online and two were held in person at City Park. Approximately a dozen people participated in each session, with only limited overlap among attendees. Additional written comments were also received.

The purpose of this report is to document what was observed and heard, identify recurring themes, and provide possible paths for a broader City process. It is not a final park plan, a request to approve a particular design, or a statistically representative survey of the community. Instead, it is intended to provide a foundation for referral to the City’s citizen advisory bodies and for a broader, more deliberative public discussion.

CENTRAL MESSAGE
City Park is an important public space whose current condition has discouraged many residents, families, and visitors from using it. The City now has an opportunity to begin a communitywide conversation about how to reclaim the park as a safe, welcoming, active, and valued civic space.

Outreach at a Glance
4 TOWN HALLS
Two online sessions and two in-person sessions at City
Park
APPROXIMATELY 12 PARTICIPANTS PER SESSION
Only limited overlap - approximately three participants attended more than one session

PERSPECTIVES REPRESENTED
Nearby Harbor Street residents, Art in the Park
leadership, park users, and other interested residents

ADDITIONAL INPUT
Written comments received before and during the
outreach period

PROCESS PURPOSE
Begin a Citywide conversation and support advisory-body review

REPORT FOCUS
Current conditions, community themes, and possible
paths forward
Town Hall Schedule
Date Format Time / Location
Thursday, July 16, 2026 Online via Zoom 7:00-8:30 p.m.

Saturday, July 18, 2026 In person 10:00-11:30 a.m. | City Park Tuesday, July 21, 2026 Online via Zoom 7:00-8:30 p.m.

Saturday, July 25, 2026 In person 10:00-11:30 a.m. | City Park

2. Current Conditions: A Public Space in Need of Attention The concerns described in this report are based on documented and observed conditions, including firsthand observations by nearby residents, City personnel, law enforcement, park users, and the report author. These conditions were repeatedly described and discussed during the town halls.  The permanent restroom building had been repeatedly vandalized and was reported to be a location for illegal and illicit activity, including drug dealing.
 The City closed the permanent restrooms in response to vandalism, misuse, and public-safety concerns.  After the closure, urination and defecation were observed behind the restroom building.  The City placed a portable toilet at the park to provide at least a minimum restroom amenity for the public.  Cigarette butts were observed throughout the park even though smoking is prohibited in the park.

MORRO BAY CITY PARK | TOWN HALL REPORT
Prepared August 2026 | Page 3
 Extended occupation of portions of the park, combined with illegal or disruptive conduct, has discouraged ordinary public use.
 The park is very dark at night. Nearby residents reported that they do not feel safe or comfortable walking into or through the park after dark.
 Families, residents, and visitors have avoided the park because of its condition and atmosphere.

The central issue is not a person’s housing status. The concern is conduct and conditions that interfere with the public’s ability to safely and comfortably use a public space. The park should be welcoming to all people who use it lawfully and respectfully.

Direct quotes from constituents:
“The City needs to reclaim this space for the use of our residents and visitors.” “The City has essentially waved a white flag and surrendered this space to undesirable activity.”

3. Community Outreach and Participation
The four town halls included a range of perspectives. Two of the three residential neighbors immediately adjacent to the park on Harbor Street participated. Representatives of Art in the Park also attended, along with residents interested in recreation, public safety, downtown vitality, family activities, and community stewardship.

The adjacent neighbors were generally receptive to improvements and increased positive activity. They expressed that thoughtful programming and investment would be preferable to the unsafe and uncomfortable conditions that currently exist, especially at night. Their primary immediate concern was inadequate lighting and the resulting sense of insecurity.

Art in the Park representatives discussed preserving the successful event while considering open space, access, parking, infrastructure, and compatibility with future park improvements. No single issue dominated their input; rather, they emphasized the need for future planning to accommodate the event and its operational needs.

4. Major Themes Heard from the Community
The town halls did not produce one preferred design. They did produce a clear set of recurring themes and a broad consensus that the City should reclaim the park by bringing more people, more legitimate activity, and more community ownership into the space.

A. Reclaiming the Park Through Positive Use
One of the strongest themes was that regular, positive public use can help discourage illegal, disruptive, and intimidating activity. When residents, families, youth, seniors, and visitors are present and engaged in healthy activities, there are more people watching over the space and a stronger sense of community ownership.

Participants repeatedly expressed the view that activation and safety are connected: the more people use the park for legitimate purposes, the less opportunity there is for illicit behavior to dominate the space. This concept underlies many of the programming, recreation, and economic-development ideas described below.

B. Safety, Lighting, Sanitation, and Enforcement
Participants viewed safety as a coordinated responsibility involving physical design, maintenance, enforcement, programming, and public presence. Possible paths raised during the outreach included:
 Improve lighting throughout the park, including paths, gathering areas, the restroom area, and locations near adjacent residences.
 Evaluate security cameras at appropriate locations.
 Provide more visible and consistent patrols and enforcement.  Enforce the no-smoking ordinance and regularly remove cigarette litter.

MORRO BAY CITY PARK | TOWN HALL REPORT
Prepared August 2026 | Page 4
 Establish clear permanent-restroom operating hours and lock the facility at night.  Use routine restroom inspection and cleaning logs with defined responsibility and response procedures.  Explore staffing or partnership models for restroom oversight.  Continue portable-toilet access until a reliable permanent-restroom solution is in place.  Repair damaged facilities and improve the basic appearance and upkeep of the park.

No single measure is likely to solve the problem. The most promising approach may be a combination of consistent management, improved visibility, clear expectations, appropriate enforcement, and greater legitimate public use.

C. Programming and Park Activation
A major theme was the need for regular programming that gives residents and visitors a reason to use the park. Participants emphasized that activation does not need to wait for a major capital project. The Recreation Department could help develop a recurring City Park calendar, potentially in partnership with schools, nonprofits, businesses, and resident volunteers.  Morning yoga, stretching, tai chi, or low-impact fitness classes  Family movie nights
 Family game days and community picnics
 Dog meet-ups and dog-training demonstrations or clinics  Youth basketball clinics and informal sports activities  Senior recreation and social activities
 Outdoor art classes and public-art activities
 Small concerts and acoustic performances
 Seasonal celebrations and neighborhood gatherings
 Community cleanup and beautification days
 Weekend food trucks, small vendors, and pop-up activities  Markets and other recurring community events
D. Children, Youth, and School Partnerships
Participants supported stronger connections between City Park and local young people. Youth involvement could bring energy to the park while helping students develop a sense of ownership and civic connection.  Restore or replace the children’s playground.
 Offer after-school recreation and youth basketball programs.  Invite Morro Bay High School’s band and drama club to present informal, free, community-based performances.
 Create student volunteer days for cleanup, beautification, gardening, and event support.  Develop youth public-art projects and outdoor exhibitions.  Invite students to help develop park concepts or participate in design workshops.  Provide community-service opportunities for high school students.  Involve elementary-school students in art, gardening, environmental education, and family events.  Develop intergenerational programs that bring students and older residents together.

The park could become an informal community stage and learning space where students contribute to civic life while families enjoy free local programming.

E. Economic Development and Downtown Connectivity
City Park sits at the eastern end of downtown at Morro Bay Boulevard and Harbor Street. The established center node of downtown is farther west near the intersection of Morro Bay Boulevard and Main Street. A revitalized City Park could function as an eastern anchor or complementary node, drawing residents and visitors along Morro Bay Boulevard and helping create greater activity at the eastern end of downtown.

MORRO BAY CITY PARK | TOWN HALL REPORT
Prepared August 2026 | Page 5

ECONOMIC-DEVELOPMENT OPPORTUNITY
A more active City Park could be both a community amenity and an economic-development asset: a destination that draws foot traffic, supports nearby businesses, encourages people to remain downtown longer, and strengthens the connection between the park and the downtown core.

Potential economic-development benefits and activities identified during the outreach included:
 Increase pedestrian activity along Morro Bay Boulevard between Harbor Street and Main Street.  Create greater visibility and customer activity for businesses at the eastern end of downtown.  Host weekend food trucks, small vendors, artisan activities, and community markets.  Use concerts, family movie nights, school performances, and other events to encourage visitors to remain downtown longer.
 Strengthen connections among City Park, downtown businesses, the waterfront, and the transit system.  Provide dependable public restrooms that serve park users and can also function as a downtown amenity, even though the park is a walk from the Main Street intersection.

Possible Relocation of the Saturday Farmers Market / Street Faire The existing Saturday farmers market or street faire operates on public streets near Morro Bay Boulevard and Main Street and requires street closures on Saturday afternoons. Participants suggested evaluating whether the event, or a similar recurring market activity, could be relocated to City Park.

Potential benefits could include reducing street closures, activating the park on a consistent basis, drawing foot traffic to the eastern end of downtown, providing a more open setting for vendors and visitors, and encouraging people to walk between the park and the downtown core.

F. A Focal Point and Community Gathering Structure
A gazebo, pavilion, stage, or similar gathering structure was one of the most frequently mentioned physical improvements. Participants envisioned a focal point for concerts, family movie nights, school performances, drama presentations, classes, public gatherings, community celebrations, picnics, art activities, and informal daily use.

The historical record identifies a 1988 voter-approved measure concerning a gazebo in City Park. The concept of a pavilion or gathering structure can remain part of the discussion, but the current legal effect of that measure should be confirmed before a specific permanent structure is advanced. See Appendix A.

G. Transportation, Access, and Possible Bus-Stop Relocation Relocation of the bus stop or transit hub was raised several times. Participants questioned whether the current transit use is fully compatible with the desired future use and character of the park and suggested evaluating whether some or all transit activity could be moved to another suitable location.

The 2023 transit-hub project formalized City Park’s role in serving local, regional, and school transportation.

Any relocation would therefore require careful analysis of:
 Passenger convenience and accessibility
 School-bus service and regional transit connections
 Pedestrian safety and traffic circulation
 Visibility, lighting, and public safety
 Available park space and compatibility with events
 Effects on nearby residents and businesses
 Operational needs and potential alternative locations At this stage, the issue is appropriately framed as a question for further evaluation rather than a recommendation to relocate the transit hub.

MORRO BAY CITY PARK | TOWN HALL REPORT
Prepared August 2026 | Page 6
H. Recreation and Multigenerational Amenities
Residents expressed interest in a park that serves children, families, seniors, nearby neighbors, and visitors.

Ideas raised through town halls and written comments included:
 A restored or new children’s playground
 Basketball opportunities, youth programs, and informal tournaments  Pickleball, shuffleboard, badminton, and ring toss
 Fitness stations or a par-course-style amenity
 Senior-oriented activities and accessible recreation
 Community garden space
 Picnic areas and flexible gathering space
 Public art, murals, and improved landscaping
 Evaluation of the future role and location of the bocce court  Preservation and continued support of Art in the Park Future review should consider the compatibility of different uses, including noise, parking, circulation, access, open-space needs, and impacts on neighboring properties and existing community events.

5. Community Stewardship and Volunteer Participation
A resident volunteer group could provide ongoing stewardship, programming support, and community ownership. A possible future organization - tentatively described as Friends of Morro Bay City Park - could be considered after the City and community have had an opportunity to respond to this report.

Possible functions could include:
 Volunteer cleanups and beautification projects
 Support for community programming and special events
 Outreach to residents, schools, organizations, and local businesses  Reporting maintenance concerns through appropriate City channels  Assistance with public art, gardening, and stewardship activities  Support for future fundraising, grants, or sponsorships if appropriate  Ongoing communication among park users, nearby residents, and City departments A volunteer group would not replace City maintenance, Recreation Department responsibilities, law enforcement, or professional park management. Volunteers should not be expected to confront individuals or enforce laws. The value of such a group would be in activation, stewardship, communication, and sustained civic involvement.

6. Historical Context
City Park has historically served several overlapping roles: neighborhood park, recreation area, civic gathering place, public-art location, visitor-service site, transit point, and potential downtown focal point. The historical record repeatedly reflects the need to balance safety, neighboring properties, public participation, transportation, recreation, landscaping, and community use.

The park has evolved primarily through incremental projects rather than one comprehensive redesign. Prior planning also contemplated expansion beyond the current footprint; however, the 2026 town halls focused on improving and activating the existing park area. The full chronological research packet is included as Appendix A.

MORRO BAY CITY PARK | TOWN HALL REPORT
Prepared August 2026 | Page 7

7. Possible Paths Forward
The town halls did not produce a single preferred design or comprehensive solution. They did establish a strong desire to reclaim City Park as a safe, active, welcoming, and economically beneficial public space.

The following possible paths are offered to support further community, staff, and advisory-body discussion:

COMMUNITY

PROCESS
Community Review and Coordination
Advisory review. Refer the report and community input to the Recreation and Parks Commission, Public Works Advisory Board, and other appropriate citizen advisory bodies.

Departmental input. Invite perspectives from Police, Recreation, Public Works, Community Development, Transit, City management, and other relevant departments.

Return to Council. Bring advisory-body and departmental recommendations back for further public discussion and Council consideration.

NEAR-TERM
ACTION
Activation, Safety, and Sanitation
Positive activity. Identify programming that can begin without waiting for major capital improvements.

Restroom management. Evaluate reopening options, operating hours, inspections, cleaning protocols, oversight, and security.

Safer conditions. Evaluate lighting, security cameras, patrol visibility, ordinance enforcement, and related safety measures.

YOUTH &

STEWARDSHIP
Community Participation
Youth partnerships. Explore school performances, volunteer activities, public art, and afterschool recreation.

Resident stewardship. Consider the future formation of a resident-led park stewardship group.

DOWNTOWN &
ACCESS
Economic Development and Transportation
Eastern downtown anchor. Examine food vendors, markets, events, and pedestrian connections along Morro Bay Boulevard.

Saturday market. Consult with stakeholders about possible relocation of the farmers market or street faire to City Park.

Transit hub. Evaluate the future role and location of the bus stop or transit hub.

PARK

IDENTITY
Traditions and Gathering Space
Art in the Park. Preserve and support the event while considering access, parking, open space, infrastructure, and compatibility with improvements.

Focal feature. Explore a gathering structure or feature, subject to legal review of the 1988 voter measure and later design analysis.

Cost estimates, funding plans, final designs, and construction schedules are premature at this stage. The immediate objective is to establish a thoughtful process, encourage creative consideration, and develop informed recommendations for later Council review.

MORRO BAY CITY PARK | TOWN HALL REPORT
Prepared August 2026 | Page 8

8. Conclusion
The four town halls demonstrated that residents care deeply about City Park and believe it can once again become a safe, welcoming, and active community space. The ideas received ranged from immediate improvements in lighting, sanitation, enforcement, and programming to longer-term concepts involving recreation, community events, youth participation, transportation, a focal gathering place, and downtown economic development.

I submit this report to help begin a thoughtful, inclusive, and deliberative process. The next step is not to select a final design, but to place the community’s concerns and ideas before the City, invite review by the appropriate advisory bodies and departments, and develop possible recommendations for future Council consideration.

CLOSING THOUGHT
The opportunity before the City is to reclaim City Park not only by improving the physical space, but by restoring its purpose as a place where residents, families, visitors, students, artists, and local businesses can come together.

Basis of Report
This report is based on four public town halls, written community input, firsthand observations, reports from adjacent residents, and information provided by City personnel. Appendix A provides historical context.

Appendix B summarizes the recurring community themes and ideas received.

MORRO BAY CITY PARK | APPENDIX B
Prepared August 2026 | Page 16
Appendix B
Community Input Theme Summary
This appendix consolidates recurring ideas received through the four town halls and written community comments. It is organized by theme.

Park Activation & Community Gathering
 Create a concert and picnic venue.
 Increase regular weekday and weekend
programming.
 Make the park a destination for nearby
neighborhoods and downtown visitors.
 Host community events, family movie nights,
markets, food trucks, and small vendors.
 Invite school band and drama performances.

Restrooms, Safety & Management
 Reopen and maintain permanent restrooms.
 Establish operating hours, monitoring logs, cleaning
protocols, and nighttime locking.
 Improve lighting and evaluate security cameras.
 Provide consistent enforcement and address
smoking and cigarette litter.
 Pilot management solutions before long-term
implementation.

Children, Youth & Families
 Restore or replace the playground.
 Offer after-school and youth recreation.
 Create family gathering, picnic, and game spaces.
 Engage high school and elementary students in
performances, art, gardening, and service.

Recreation & Multigenerational Use
 Support basketball and youth programs.
 Consider pickleball, shuffleboard, badminton, ring
toss, and fitness amenities.
 Provide activities for seniors and users of all ages.  Evaluate the future role and location of the bocce
court.

Economic Development & Downtown
Connectivity
 Use City Park as an eastern downtown anchor.
 Draw foot traffic along Morro Bay Boulevard.
 Support nearby businesses through events and
regular activity.
 Evaluate relocating the Saturday farmers market or
street faire.
 Provide restrooms that also serve downtown
visitors.

Transportation, Parking & Access
 Evaluate possible relocation of the bus stop or
transit hub.
 Address parking, circulation, accessibility, and
pedestrian safety.
 Consider event operations and impacts on adjacent
residents.

Community Character & Stewardship
 Preserve and support Art in the Park.
 Repair damaged facilities and improve landscaping.
 Expand public art and community gardening.
 Consider a resident-led Friends of Morro Bay City
Park group.

Focal Point & Long-Term Vision
 Explore a pavilion, stage, or similar gathering
feature.
 Support concerts, movies, performances, classes,
and celebrations.
 Confirm the legal effect of the 1988 voter measure
before advancing a permanent structure.
 Develop a phased, inclusive planning process.

Note: These themes summarize ideas received; they do not indicate that every participant supported every individual proposal.