Morro Bay City Council
October 13, 2026

13 State statute or regulation. Consultant warrants that it has not paid or given and will not pay or give any third party any money or other consideration for obtaining this Agreement.

8.3 Covenant Against Discrimination. Consultant covenants that, by and for itself, its heirs, executors, assigns, and all persons claiming under or through them, that there shall be no discrimination against or segregation of, any person or group of persons on account of race, color, creed, religion, sex, gender, sexual orientation, marital status, national origin, ancestry or other protected class in the performance of this Agreement. Consultant shall take affirmative action to insure that applicants are employed and that employees are treated during employment without regard to their race, color, creed, religion, sex, gender, sexual orientation, marital status, national origin, ancestry or other protected class.

ARTICLE 9. MISCELLANEOUS PROVISIONS

9.1 Notices. Any notice or other communication either Party desires or is required to give to the other Party or any other person in regards to this Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by a reputable document delivery service, such as but not limited to, Federal Express, which provides a receipt showing date and time of delivery, or (iii) mailing in the United States Mail, certified mail, postage prepaid, return receipt requested, in the case of City addressed to City Clerk at City of Morro Bay, 595 Harbor Street, Morro Bay, CA 93442, and in the case of Consultant, to the person(s) at the address designated on the execution page of this Agreement. Either Party may change its address by notifying the other Party of the change of address in writing. Notice shall be deemed communicated at the time personally delivered or in seventy-two (72) hours from the time of mailing if mailed as provided in this Section.

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

9.3 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, and such counterparts shall constitute one and the same instrument.

9.4 Integration; Amendment. This Agreement including the attachments hereto is the entire, complete and exclusive expression of the understanding of the Parties as to the Agreement.

It is understood that there are no oral agreements between the Parties hereto affecting this Agreement, and this Agreement supersedes and cancels any and all prior and contemporaneous negotiations, arrangements, agreements and understandings, if any, between the Parties, concerning this Agreement, and none shall be used to interpret this Agreement. No amendment to or modification of this Agreement shall be valid unless made in writing and approved by Consultant and (consistent with, as amended, Chapter 3.08 of the MBMC) by City.

9.5 Severability. Should a portion of this Agreement be declared invalid or unenforceable by a judgment or decree of a court of competent jurisdiction, such invalidity or unenforceability shall not affect any of the remaining portions of this Agreement which are hereby declared as severable and shall be interpreted to carry out the intent of the Parties unless the invalid

14 provision is so material that its invalidity deprives either Party of the basic benefit of their bargain or renders this Agreement meaningless.

9.6 No Undue Influence. Consultant declares and warrants that no undue influence or pressure was used against or in concert with any officer or employee of City in connection with the award, terms or implementation of this Agreement, including any method of coercion, confidential financial arrangement, or financial inducement. No officer or employee of City has or will receive compensation, directly or indirectly, from Consultant, or from any officer, employee or agent of Consultant, in connection with the award of this Agreement or any work to be conducted as a result of this Agreement. Violation of this Section shall be a material breach of this Agreement entitling City to remedies in Section 7.4 and any and all remedies at law or equity.

9.7 Corporate Authority. The persons executing this Agreement on behalf of the Parties hereto warrant that (i) such Party is duly organized and existing, (ii) they are duly authorized to execute and deliver this Agreement on behalf of said Party, (iii) by so executing this Agreement, such Party is formally bound to the provisions of this Agreement, and (iv) entering into this Agreement does not violate any provision of any other agreement to which said Party is bound. This Agreement shall be binding upon the heirs, executors, administrators, successors and assigns of the Parties.
[SIGNATURES ON FOLLOWING PAGE]

15 IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date and year first-above written.

CITY:

CITY OF MORRO BAY, a California municipal
corporation
John Craig
City Manager
ATTEST:

Dana Swanson, City Clerk
APPROVED AS TO FORM:

Brian J. Stack, City Attorney
CONSULTANT:

Filippin Engineering, Inc., a California Corporation
By:

Gino Filippin
President
By:

Paul Henderson
Vice President
354 S. Fairview Avenue, Suite D
Goleta, CA 93117
Two corporate officer signatures required when Consultant is a corporation, with one signature required from each of the following groups: 1) Chairperson of the Board, President or any Vice President; and 2) Secretary, any Assistant Secretary, Chief Financial Officer or any Assistant Treasurer. (Cal. Corp. Code § 313.)

APPROPRIATE ATTESTATIONS SHALL BE INCLUDED AS MAY BE REQUIRED BY THE BYLAWS,

ARTICLES OF INCORPORATION, OR OTHER RULES OR REGULATIONS APPLICABLE TO CONSULTANT’S BUSINESS ENTITY.

TABLE OF CONTENTS
COVER LETTER ................................................................................................................................. 1 SECTION A - INTRODUCTION ........................................................................................................... 3 SECTION B - STATEMENT OF QUALIFICATION AND KEY PROJECT STAFF ......................................... 4 SECTION C - PROJECT UNDERSTANDING, TECHNICAL APPROACH AND WORK PLAN ...................... 9 SECTION D - CLIENT REFERENCES AND WORK PROJECT EXAMPLES .............................................. 20 SECTION E - PROJECT BUDGET ESTIMATE AND FEE SCHEDULE ...................................................... 25 SECTION F - AGREEMENT REVIEW ................................................................................................. 25 Appendix A – Addendum Acknowledgement
Appendix B – Earth Systems Proposal
Appendix D – Sample Work Product

COVER LETTER
September 24, 2026 W.O. 265801
Nate Stong City Engineer
City of Morro Bay | 595 Harbor St. | Morro Bay, CA 93442 SUBJECT: CONSTRUCTION MANAGEMENT AND INSPECTION SERVICES FOR THE 2026 PAVEMENT REHABILITATION PROJECT Dear Nate,
Filippin Engineering (FE) is pleased to submit our proposal to provide CONSTRUCTION MANAGEMENT AND INSPECTION SERVICES FOR THE 2026 PAVEMENT REHABILITATION PROJECT
PROVEN MORRO BAY PAVEMENT EXPERIENCE:

PAVING-SPECIFIC INSPECTION & QUALITY CONTROL: This project requires more than simply observing the work as it progresses.

RESPONSIVE CONSTRUCTION MANAGEMENT & CITY COORDINATION:

COMPLETE COMPLIANCE FROM CONSTRUCTION THROUGH CLOSEOUT:
with Caltrans guidance.

PROJECT LEADERSHIP & AUTHORIZED REPRESENTATIVE: P
OWNERSHIP AND ORGANIZATIONAL STRUCTURE:
whenever a project needs them.
date.

Sincerely,

FILIPPIN ENGINEERING
(805) 468-9927 | [email protected]

INTRODUCTION
A Construction Management Team Built for Public Works
For more than 16 years, Filippin Engineering, Inc. (FE) has partnered with public agencies throughout California’s Central Coast to deliver capital improvement projects through and public infrastructure delivery. Our experience encompasses roadway and improvements, parks and public spaces, and other municipal infrastructure. . acceptance.
994 Mill Street Suite 230
San Luis Obispo, Ca 93401
354 S. Fairview Ave., Suite D
Goleta, Ca 93117
(805) 845-4602
950 County Square Dr. Suite 110
Ventura Ca. 93003

STATEMENT OF QUALIFICATION AND KEY

PROJECT STAFF

1. STATEMENT OF QUALIFICATIONS

2. PROJECT TEAM
Team Member Role
Paul Henderson, CCM, CPEng
Project Manager
Tucker Ruble, QSP
Mark Missamore
Cheril Magallanes
Labor Compliance of organized, audit-ready project records.

As-Needed Support

Earth Systems
Contract Documents.

3. INDIVIDUAL QUALIFICATIONS
Paul Henderson, CPEng, CCM, Project Manager
contractual requirements.

Tucker Ruble, Construction Manager & Inspector
minor concrete improvements, pavement striping, and signage. The project also required extensive public outreach and community and phasing, stormwater compliance, and public outreach.

Mark Missamore, Senior Construction Inspector
protect project quality during these concentrated work windows.

Cheril Magallanes, Office Engineer/Labor Compliance Officer Austin Della, As-Needed Local Expertise
while keeping projects on track and on schedule.

pavement program’s history.

ORGANIZATIONAL CHART
FE has assembled a streamlined project team structured to provide the City of Morro Bay with clear lines of responsibility, senior-level oversight and readily available backup resources. This approach provides the City with a clear primary point of contact

4. MATERIAL TESTING – EARTH SYSTEMS
City of Morro Bay

PROJECT MANAGER
CM & Inspector
Tucker Ruble
Construction Inspector
Mark Missamore
Office Engineer &
Labor Compliance
Cheril Magallanes
Material Testing
Earth Systems
Project Manager
Paul Henderson

5. QUALITY ASSURANCE/ QUALITY CONTROL
project deliverables that are:

COMPLETE
Our deliverables will be
accurate and thorough
and include all relevant
project details.

CONSISTENT
Our project administration, products, and
deliverables will be consistent with agency
standards and requirements and will
comply with all applicable guidelines.

CLEAR
Correspondence and
documentation will
be clear and concise.

PROJECT UNDERSTANDING, TECHNICAL

APPROACH AND WORK PLAN

PROJECT UNDERSTANDING
within 15 working days.
slurry placement around weather windows before the season turns. adjusted within 72 hours. Our inspectors will track each requirement street by street. second inspector whenever paving exceeds 1,000 tons per day.

Community impact. The work touches dozens of neighborhoods and runs near Del Mar Elementary. Every street must reopen by 4:30 PM, so schedule or quality.

CHALLENGES & SOLUTION MATRIX
Challenge
Coleman Drive —
Coleman Drive is the sole public access point to
Morro Rock and the adjacent parking area, used by
viewing the rock, and observing wildlife in and
as 50 feet from the bay, and localized digouts and
environmental risk. Any spill or excessive dust has
dumped or fresh slurry odor could raise community
concern.

Engage stakeholders early, including the Harbor Authority, U.S. Coast Guard, Friends of Morro Bay, and the City's on-call biologist, to communicate the work ready, stage equipment away from the work area and limit onsite equipment to cold planing (including the extent of work planned and which half of the roadway elevated — with spill kits sized appropriately for slurry cleanup kept onsite, and close monitoring of squeegee crews to ensure material stays within the roadway Coleman Drive — Roadway Constraints
performed, and the roadway must be restored to
Ensure the Contractor’s n is sequenced so the
outreach and engagement — FE's onsite inspector will be available to speak with Slurry Seal — Temperature and Weather Windows
In FE's recent experience with the 2024 City of
the project due to temperature constraints. Morro
Bay's cool, coastal climate keeps winter
temperatures around 60°F, and slurry consistently
This challenge r
“cause for suspension” once all paving and associated work is complete followed subcontractor early to establish these criteria, closely monitoring weather Slurry Seal —
Slurry subcontractors typically move quickly across
A second, dedicated inspector — separate from the inspector monitoring the

Challenge
personnel to monitor it, which can result in vehicles
making their way onto fresh slurry.

Curb Ramps — Concrete Grading Without
Engineered Plans
The project plans call for a variety of concrete
work, including remove-and-replace sidewalk, curb,
and retaining curb. However, the plans do not
drainage onto adjacent private property. While
most of these concerns can be addressed through
diligent oversight and applied knowledge of
compliant curb ramp where none currently exists
— without established grades or an engineered
challenge.
need to be removed and reconstructed to accommodate compliant slopes, this poured, FE will verify that all slopes meet ADA compliance before acceptance. management strategies we will use to address them.

Project
Challenge

1. Fast-Moving
FE will monitor HMA placement, temperatures, thickness, -control process.

Project
Challenge

3. Variable Paving FE will coordinate
days so adequate coverage is in place without unnecessary

4. Public Access,
businesses, motorists, emergency services, and City
and other City departments.

Communicate before the equipment arrives. FE will
advance, helping reduce surprises and allowing paving
& Change Control
support payment and control changes.

FE will reconcile
installed work.

6. Compliance,
Final Acceptance
Final acceptance depends on more than completed
areas of noncompliance, and contractor compliance,
Build the closeout record from Day One. FE will maintain already complete record—not a scramble to recreate one.

TECHNICAL APPROACH
day.

PROJECT MANAGEMENT
approach to project delivery.

Paul will directly manage FE's team and budget to ensure our services are amendment. FE will never exceed the approved budget without the City's

SUMMARIZED PROJECT SCHEDULE
No. 1:

1. 2.

3.

WORK PLAN
TASK 1 - CONSTRUCTION MANAGEMENT SERVICES
Schedule & Look-Ahead Planning. FE will review the Contractor’s baseline schedule and subsequent updates and use short-term Document & Project Controls.
appropriate.
necessary to keep decisions moving with the work.

CONSTRUCTION PHASE DELIVERABLES
» Weekly Meeting Agendas and Minutes » Submittal Log and Tracking of Response » RFI Log and Tracking of Response » Shop Drawing/Sample Log and Tracking of Response » CCO Log and Tracking of Response » Independent Cost Evaluation of PCOs » Materials Testing Log and Reports » Weekly Statements of Working Days » As-Built Redline Drawings » Labor Compliance Log » SWPPP Compliance Log » Daily Inspection Reports » Daily Photographic Records » Organize and Assemble Documentation for Closeout » Documentation in Accordance With LAPM

TASK 2 - CONSTRUCTION INSPECTION SERVICES

INSPECTION SERVICES PHASE DELIVERABLES
» Daily Field Report records » Photographic records » Punch List Construction redlines for inclusion in Record Drawings TASK 3 - LABORATORY AND MATERIALS TESTING

LABORATORY TESTING PHASE DELIVERABLES
» Sample Collection Reports » Field Test Results » Laboratory Test Results » Coordination and Communication Logs » Testing Frequency Documentation » Non-Compliance Reports » Daily Testing Summaries » Final Laboratory Testing Report

TASK 4 - VERIFICATION, COMPLIANCE AND ACCEPTANCE

VERIFICATION AND DETERMINATION OF COMPLIANCE AND ACCEPTANCE PHASE DELIVERABLES » Final Acceptance Report » Compaction Reports » Non-Compliance Documentation » Summary of Inspections » Photographic Evidence » Communication Logs » Testing Logs » Certification of Compliance TASK 5 - LABOR COMPLIANCE SERVICES
maintain an organized and auditable labor compliance record.

LABOR COMPLIANCE DELIVERABLES
» Complete set of certified payroll hardcopies,
on-site interviews, and written evidence of
apprentices » Complete list of outstanding documentation and written evidence of notifications & sanctions against the Contractor
TASK 6: POST-CONSTRUCTION PHASE SERVICES (ADDITIONAL SCOPE) approach with the City if needed and incorporate this scope into other tasks.

Compliance & Acceptance.

Final Project Record.

CLOSEOUT PHASE DELIVERABLES
» Complete set of record drawings » Recommendation for final payment » Notice of Completion Statement of Final Quantities and/or Final Balancing Change
Order » Compiled outstanding claim information for closeout » Electronic files and Hard copies (in binders) of all project files following Caltrans standard recordkeeping guidelines » Project files kept and submitted in accordance with the Caltrans file system
BridgeDoc
project-control records—for completeness, consistency, and backup, and schedule updates. This review process helps issues.
rather than assembling it at the end, BridgeDoc also supports FE’s “Closeout Starts on Day One” approach and provides the City with an organized, transparent, and defensible record at

BRIDGEDOC PROJECT MANAGEMENT PLATFORM

STAFFING LEVEL OF EFFORT
Note: Hours are based on base bid only. Hours associated with bid alternates are provided in the cost proposal.

Client: City of Morro Bay
Paul
Henderson
Principal &
PM
Tucker
Ruble
CM &
Inspector
Mark
Missamore
Senior
Inspector
Austin
Della
Senior CM
Cheril
Magallanes
Office
Engineer
1 Construction Management 80 256 0 30 32
2 Construction Inspection 424 200
3 Laboratory Testing
4 Verification & Determination of Compliance and Acceptance 2 8 4 5 Labor Compliance Services 16
6 Post Construction Closeout 8 40 12
Total 90 728 200 30 64
Filippin Engineering
Project: 2026 Pavement Rehabilitation Project

MEETINGS
Base
Bid
Alt Bid
1 Alt Bid
2 Alt Bid
3 Alt Bid
4 Total
1 1
Pre- 1 1
16 3 3 3 3 28
Pre- 1 1
1 1
Total 20 3 3 3 3 32

CLIENT REFERENCES AND WORK PRODUCT

EXAMPLES

REFERENCES

FILIPPIN ENGINEERING
Deputy Director Public Works
City of Atascadero
6500 Atascadero
Atascadero, CA 93422
Email:
[email protected]
Phone: (805) 470-3424
City of Santa Maria
110 S. Pine Street, Suite 221
Santa Maria, CA 93458
Email:
[email protected]
Phone: (805) 800-9171
Capital Projects Manager
City of Pismo Beach
Pismo Beach CA 93449
Email:
[email protected]
Phone: (805) 779-1201
Senior Engineer
City of San Luis Obispo
919 Palm Street
San Luis Obispo, CA 93401
Email:
[email protected]
Phone: (805) 781-7113

PROJECT EXPERIENCE
The following are example projects that FE has performed involving similar scopes of work. 2024 PAVEMENT REHABILITATION
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:
2025 PAVING PROJECT
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:

CITYWIDE ROAD RESURFACING
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:
2024 MEASURE F-14 PAVING REHABILITATION
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:
2022 PAVEMENT REHABILITATION
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:

2022 MEASURE F-14 PAVING PROJECT
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:
2022 ROADWAY SEALING PROJECT
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:

EL CAMINO REAL DOWNTOWN INFRASTRUCTURE ENHANCEMENT
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:

SAMPLE WORK PRODUCT
BridgeDoc
Project, FE will use this same disciplined approach to
acceptance and closeout.
provided in Appendix D
Morro Bay projects in the past, including on the 2024

NORTH CHORRO NEIGHBORHOOD GREENWAY
Client
Contact
Owner Type
FE Role
Project Timeline
FE Staff
FE Services
Project Cost FUNDING SOURCE:

PROJECT BUDGET ESTIMATE AND FEE

SCHEDULE
approach provides the City with responsive project coverage while avoiding member and task and corresponds directly with the Work Plan presented in and other applicable project costs is provided in FE’s separate sealed Cost Proposal, as required by the RFP.

AGREEMENT REVIEW
Filippin Engineering has reviewed the City of Morro Bay’s Professional Services Agreement included with the RFP and understands the terms

CONFLICT OF INTEREST DISCLOSURE
City employment in November 2025 and joined FE on November 10, 2025. While employed by the City, he had no involvement in any part of Proposals.
without any impact to the scope, schedule or fee.

KEYS TO SUCCESS
FAST-MOVING WORK. REAL-TIME OVERSIGHT:

RIGHT INSPECTION. RIGHT TIME:

THE COMMUNITY IS PART OF THE PROJECT:

CLOSEOUT STARTS ON DAY ONE:

THE PAVING OPERATION MAY MOVE QUICKLY;
THE PROJECT RECORD HAS TO LAST.

B-1

EXHIBIT B

SPECIAL REQUIREMENTS
(Superseding Agreement Boilerplate)

NOT APPLICABLE

Client: City of Morro Bay Earth
Systems Total Paul Henderson Principal & PM
Tucker Ruble CM & Inspector Mark Missamore
Senior Inspector Austin Della
Senior CM
Cheril Magallanes
Office
Engineer FE Labor Total FE Expenses
Sub Contract Earth Systems
Sub & Expense
Markup Total
Date: 10/07/2026 $ 216 259 $ 194 $ 227 $ 146 $ 5%
Construction Management
1 Construction Management 80 256 30 32 $ 87,498 $ 25 500 $ $ 88,023 2 Construction Inspection 424 200 $ 130,384 $ - $ 130,384 3 Laboratory Testing $ - $ 3,899 77,980 $ $ 81,879
4 Verification & Determination of Compliance and Acceptance 2 8 4 $ 2,830 $ - $ 2,830 5 Labor Compliance Services 16 $ 2,336 $ - $ 2,336
6 Post Construction Closeout 8 40 12 $ 12,464 $ - $ 12,464 Total 90 728 200 30 64 235,512 $ 500 $ 77,980 $ 3,924 $ 317,916 $ Notes:
1 We have assumed the following durations for the project: Contingencies 2 Weeks duration for Pre-Construction Phase Additional Testing For All Alternative Bids 26,087.25 $ 16 Weeks duration for Construction Phase On-Site (80 Contract Working Days) Additional CM & Inspection for Alternative Bids 86,576.63 $ 2 Weeks duration for Post-Construction Total Alt Bids $ 112,664 2 We have allowed for the following effort during the construction phase of the project:
40 hrs/wk for Mark Missamore, Construction Inspector, onsite full-time during slurry seal operations Base Bid + Awarded Alt Bids 430,580 $ 40 hrs/wk for Tucker Ruble, Construction Manager
2 hrs/wk for Cheril Magallanes, Office Engineer, to support Procore Administration, document control and Labor Compliance 3 We have assumed 8 hours shifts, no weekends and no overtime 4 5 6 Alt Bid 1 $ 13,410.00 +5% markup 14,080.50 $
Alt Bid 2 $ 11,435.00 +5% markup 12,006.75 $ Alt Bid 3 +5% markup - $ Alt Bid 4 +5% markup - $ $ 24,845.00 26,087.25 $ 7 Average Daily Cost for Slurry Days $ 2,885.89 Average Daily Cost Non-Slurry Days $ 2,060.00
Alt Bid 1 - 15 Working Days 43,288.31 $ Slurry
Alt Bid 2 - 15 Working Days 43,288.31 $ Slurry
Alt Bid 3 - 15 Working Days Non Slurry
Alt Bid 4 - 15 Working Days Non Slurry
$ 91,522.51
Additional cost for CM and Inspection are estimated as follows:

Filippin Engineering
FE has allowed for 90 working days for CM and Inspection. If the inclusion of Alt Bids means the contract working days are extended FE will coordinate with the City on budget increase to be onsite for longer, if needed.

Additional cost for Materials Testing are estimated as follows:

Project: 2026 Pavement Rehabilitation Project
For FE's prevailing wage assignments, overtime rates for construction inspection = 1.5 X regular rate. Double time rates = 2.0 X regular rates. Overtime will not be performed unless authorized in writing by the client.

D-1

EXHIBIT D

SCHEDULE OF PERFORMANCE
I. Consultant shall perform all services and deliver all work products timely in accordance with the schedule described in Consultant’s Proposal attached hereto.

Prepared By: AW Dept Review: AW
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: October 1, 2026 FROM: John Craig, City Manager
Amy Watkins, Police Chief
SUBJECT: Discussion Regarding Usage of Motorola Automated License Plate Readers (ALPR) Cameras

RECOMMENDED ACTION
Receive and file this report regarding the City's Automated License Plate Recognition (ALPR) program; and direct staff to continue operating the City's ALPR program under the existing Motorola Vigilant Solutions Enterprise Service Agreement and Police Department policy.

FISCAL IMPACT
Continuing the program requires no new appropriation. The system is funded under the five-year Enterprise Service Agreement that Council approved in January 2023, at a total cost of $153,659.

The funding source was Measure Q/E. The contract was paid in advance to lock in service rates for the term of the contract (Section XII.C).

Ending the program early would not recover prepaid costs. Under Section III.B of the agreement, the City receives no refund if it terminates without cause. The agreement comes up for renewal in early 2028, which is the natural point for Council to revisit terms.

BACKGROUND
On January 10, 2023, the City Council approved, by a 5–0 vote in open session, the City's Automated License Plate Recognition (ALPR) program. The Council's consideration included a staff report, a presentation from the Chief of Police, written correspondence, and public comment.

The City entered into a five-year Enterprise Service Agreement with Motorola Solutions for its Vigilant VehicleManager platform ("Vigilant"). The agreement provides for the deployment and operation of ten fixed ALPR cameras and one mobile camera, for a total of eleven cameras throughout the City.

Prior to selecting Vigilant, the Police Department reviewed available ALPR platforms, including systems offered by Flock Safety and Verkada. The Department selected Vigilant based on several factors, including the level of administrative control provided to the City, the ability to control data intake and sharing, and familiarity with the platform among neighboring law enforcement agencies.

Several neighboring agencies use Vigilant technology, and the San Luis Obispo County Sheriff's Office, which provides contracted communications and dispatch services to the City, also operates the Vigilant system. This interoperability and familiarity provide investigative benefits when incidents AGENDA NO: 8b
MEETING DATE: October 13, 2026

2 extend beyond Morro Bay's jurisdiction.

The Department determined that Vigilant provided the combination of system capability, local operational familiarity, and direct agency control that best met the City's needs.

Flock ALPR System
In mid-2023, unbeknownst to many law enforcement agencies operating the Flock system, Flock had added a new “Nationwide Lookup” search feature. Using this feature, an out-of-state local law enforcement or federal agency could perform a broad search of data from Flock’s entire nationwide network of over 6000 cameras belonging to more than 4000 agencies. The feature did not enable targeted searches of any specific agency’s data. These searches could only be performed systemwide and only when a full 7-digit license plate number was known. All searches required articulation of a legitimate law enforcement purpose. According to Flock, California agencies who were using the Flock feature had been disabled for all California law enforcement agencies by March 2025. (Resource: City of Palo Alto and Flock Safety)

DISCUSSION
 ALPR TECHNOLOGY OVERVIEW
Automated License Plate Recognition (ALPR) technology uses cameras and computer software to capture and process images of vehicle license plates. Cameras may be mounted on fixed infrastructure, such as poles, signs, or other city infrastructure, or may be deployed in a mobile configuration.

ALPR systems can compare captured license plates against law enforcement databases and hot lists involving vehicles associated with stolen vehicles, missing persons, or other legitimate law enforcement investigations.

When a potential match is identified, the system can generate an alert for an authorized law enforcement user. ALPR information can also be searched retrospectively during an investigation to determine whether a vehicle was present at a particular location or time.

The City's ALPR cameras:
 Do not use facial recognition technology.
 Do not target or illuminate vehicle occupants.
 Capture images of vehicles and license plates that pass within the camera's field of view.  Record vehicle plates regardless of whether the vehicle is wanted or otherwise associated with criminal activity.

The system therefore creates a historical record of vehicles passing an ALPR camera. Authorized Police Department personnel may subsequently search that information when there is a legitimate investigative purpose.

An ALPR system match is considered an investigative lead. A match alone does not provide grounds for enforcement action. Officers must independently verify the license plate and associated information before taking action.

3  CITY'S VIGILANT VEHICLEMANAGER AGREEMENT
The City's Vigilant Enterprise Service Agreement establishes specific controls over the City's ALPR data and its use.

Data Ownership
The City retains ownership of the ALPR data collected by its cameras. The vendor is not authorized to sell or independently mine the City's data or use it outside the terms authorized by the City.

Retention
The Police Department establishes the retention period for ALPR information consistent with City policy and applicable law. The current Police Department policy provides for a five-year retention period. The Department has the technical ability to modify that retention period should the City Council direct a change in policy.

Restricted Access
Access to Morro Bay's ALPR system is restricted to authorized Morro Bay Police Department personnel. Each user has an individual login, and searches are recorded through the system's audit capabilities. These audit records allow the Department to identify who accessed the system and review system activity.

The Police Chief and Police Commander conduct reviews of system access and activity.

Retrospective Investigative Use
Morro Bay's ALPR program is an investigative and alerting resource. Images captured by the cameras may be reviewed after they are collected for a legitimate law enforcement purpose. The system does not independently determine that a person has committed a crime. Investigative information obtained through ALPR must be evaluated and corroborated by law enforcement personnel.

Human Verification
An ALPR "hit" or alert is not, by itself, probable cause or sufficient justification for enforcement action.

Officers are required to verify the license plate, vehicle, and underlying information before taking any further action.

Security
The Vigilant platform is subject to security requirements that include compliance with applicable FBI Criminal Justice Information Services (CJIS) security requirements, FIPS 140-2 encryption standards, and breach notification requirements.

The City's agreement also provides the City with audit rights concerning vendor compliance.

4  DATA SHARING AND PRIVACY CONTROLS
The primary privacy considerations associated with any ALPR program are:

1. Who has access to the information;

2. Who the information may be shared with; and

3. How long the information is retained.

These issues are controlled through a combination of the City's agreement with Motorola Solutions, Police Department policy, system settings, user permissions, and audit procedures.

Current Morro Bay Sharing Configuration
Staff has reviewed the City's current system configuration and reports that ALPR information is currently authorized for sharing with 80 California law enforcement agencies.

The City's current configuration does not authorize sharing with federal or out-of-state law enforcement agencies.

Only Morro Bay Police Department personnel maintain system logins for the City's ALPR system.

The most recent audit review was conducted on October 1, 2026, and staff reports that the review identified no unauthorized use or access.
 STATE LAW REQUIREMENTS
California law provides additional requirements concerning the operation of ALPR systems.

California Civil Code Section 1798.90.5 and following, commonly associated with SB 34, establishes requirements for agencies operating ALPR technology. These requirements include adoption and posting of an ALPR usage and privacy policy, maintenance of access information and logs, security safeguards, and restrictions concerning the sharing of ALPR information.

The City's ALPR program operates under the City's adopted Police Department policy and applicable state law.
 FLOCK SAFETY COMPARISON
During the City's original selection process, the Police Department considered multiple ALPR vendors, including Flock Safety.

Morro Bay Police Department does not use Flock Safety cameras or the Flock ALPR platform.

These developments have generated public concern regarding ALPR data sharing and the extent to which information collected by one agency may become accessible to other agencies.

Those concerns, however, involve the Flock Safety platform, which is not the platform used by the City of Morro Bay.

The City has never contracted with Flock Safety for its ALPR program. Morro Bay's ALPR program operates under a different vendor, a different contract, and different agency-controlled sharing and access settings.

5  CONSIDERATION OF CURRENT CONCERNS REGARDING MOTOROLA SOLUTIONS Staff recognizes that the vendor itself does not eliminate the need for oversight.

Motorola Solutions has also been the subject of public scrutiny concerning ALPR data sharing. A proposed class action filed on May 27, 2026, alleges that certain Motorola ALPR systems used by California agencies permitted sharing of information with federal and out-of-state agencies.

The allegations referenced in that litigation concern the configuration and operation of systems used by other agencies. The City of Morro Bay is not a party to that litigation.

Staff is aware of the allegations and has considered them in reviewing Morro Bay's current ALPR configuration.

The important distinction for Morro Bay is that the City's safeguards are not based solely on the name of the vendor. The Department controls the City's sharing configuration, user access, retention settings, and audit process.

At this time:
 Morro Bay does not authorize sharing with federal or out-of-state agencies.  Only authorized Morro Bay Police Department personnel have system logins.  User activity is recorded and subject to audit.
 The current retention period is five years pursuant to Department policy.  The City owns the ALPR data collected by its cameras.  The vendor is prohibited from selling or mining the City's data without authorization.

Accordingly, staff believes the appropriate focus for continued oversight is the City's actual configuration, policy, contractual protections, and audit records, rather than the vendor's name alone.  OVERSIGHT AND TRANSPARENCY
To provide continued transparency and allow the public and City Council to independently review the City's ALPR program, staff will post the following information on the City's website:
 The current ALPR usage and privacy policy;
 The City's ALPR sharing list; and
 The 2023 Vigilant Enterprise Service Agreement.

Staff will also provide the City Council with the results of an annual ALPR audit, including information regarding system access and compliance with the City's established sharing and retention requirements.

This process will allow the Council to periodically review the City's ALPR program and determine whether changes to policy, retention, sharing, or contractual requirements are appropriate.

6 CONCLUSION
The City's ALPR program provides the Morro Bay Police Department with an investigative tool to identify vehicles associated with criminal investigations, stolen vehicles, missing persons, and other legitimate law enforcement purposes.

The program does not use facial recognition and does not identify vehicle occupants. Rather, it captures vehicle and license plate information that can be used by authorized personnel for legitimate law enforcement purposes.

The City selected Vigilant in 2023 following a review of available ALPR platforms. The selection was based in part on the City's ability to control access and sharing, as well as the familiarity of the platform among neighboring law enforcement agencies and the San Luis Obispo County Sheriff's Office.

Staff recognizes that ALPR technology raises legitimate questions regarding privacy, data retention, access, and information sharing. These concerns warrant continuing oversight regardless of which vendor provides the technology.

For Morro Bay, the City's current controls provide that the Police Department determines who can access the system, where information may be shared, and how long information is retained. System access is logged and subject to audit, and the current configuration does not authorize sharing with federal or out-of-state law enforcement agencies.

Staff therefore recommends that the City Council receive this report and direct staff to continue operating the City's ALPR program under the existing Vigilant Solutions agreement and Police Department policy, with continued annual auditing and public transparency regarding the program's configuration and operation.

ATTACHMENT(S)

1. Executed Vigilant Enterprise Service Agreement and Motorola quote

2. MBPD ALPR usage and privacy policy (Lexipol)

3. January 10, 2023 staff report

4. January 10, 2023 City Council Minutes

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Enterprise Service Agreement (ESA)
this Day of , 2023 by and between Vigilant Solutions, LLC, a Delaware company, having its principal place of business at City of Morro Bay, a
law enforcement agency (LEA) or other governmental agency, having its principal place of business at 850 Morro Bay Blvd, Morro Bay CA 93442
WHEREAS, Vigilant designs, develops, licenses and services advanced video analysis software technologies for law enforcement and security markets;
WHEREAS, Customer desires to license from and receive service for the Hardware and Software Products provided by Vigilant;
THEREFORE, In consideration of the mutual covenants contained herein this Agreement, Customer and Vigilant hereby agree as follows:

I. Definitions:
means the FBI CJIS Security Policy document as published by the FBI CJIS Information Security Officer.
or
LPR software (one CLK per camera) to be used with other Vigilant LPR Hardware Products and Software Products. means the FBI division responsible for the collection,
warehousing, and timely dissemination of relevant CJI to the FBI and to qualified law enforcement, criminal justice, civilian, academic, employment, and licensing agencies. means a non-exclusive, non-transferable license to install and operate the Software Products, on any applicable media, without quantity or limitation. This Enterprise Service Agreement allows Customer to install the Software Products on an unlimited number of devices in accordance with the selected Service Package, and allow benefits of all rights granted hereunder this Agreement. refers to LPR data collected by the Customer and available on LEARN for use by the Customer. means the amount due from Customer prior to the renewal of this Agreement as consideration for the continued use of the Software Products and Service Package benefits according to Section XIII of this Agreement. means the Customer designated service option which defines the extent of use of the Software

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Products, in conjunction with any service and/or benefits therein granted as rights hereunder this Agreement. has the meaning set forth in Section III (A) of this Agreement. considered by Vigilant to be applicable for the benefit of security practices. means a non-exclusive, non-transferable license to install and operate the Software Products, on any applicable media, limited to a single licensee.
refers to individuals who are agents of the Customer and who are authorized by the Customer to access LEARN on behalf of Customer through login credentials provided by Customer.

II. Enterprise License Grant; Duplication and Distribution Rights:

Subject to the terms and conditions of this Agreement, Vigilant hereby grants Customer an Enterprise License to the Software Products for the Term provided in Section III below. Except as expressly permitted by this Agreement, Customer or any third party acting on behalf of Customer shall not copy, modify, distribute, loan, lease, resell, sublicense or otherwise transfer any right in the Software Products. Except as expressly permitted by this Agreement, no other rights are granted by implication, estoppels or otherwise. Customer shall not eliminate, bypass, or in any way een) that may appear when Software Products are first started on any computer. Any use or redistribution of Software Products in a manner not explicitly stated in this Agreement, or not agreed to in writing by Vigilant, is strictly prohibited.

III. Term; Termination.

A. Term. The term of this Agreement is five (5) years beginning on the Effective Date unless earlier terminated as provided herein. Vigilant will provide Customer with an invoice for the Service Fee due for the subsequent twelve (12) month
Service Period. The first Service Period must be paid in advance. This Agreement and the Enterprise License granted under this Agreement will be extended for a S
Fee, which is due 30 days prior to the expiration of the Service Period, as the case may be. Pursuant to Section VIII below, Customer may also pay in advance for more than one Service Period.

B. Customer Termination. If Customer terminates this Agreement for no reason prior to the end of any notice is based on an alleged breach by Vigilant, then Vigilant shall have thirty (30) days from the date of receipt of the alleged breach. If within thirty (30) days of written notice of violation from Customer Vigilant has not reasonably cured the described breach of this Agreement, Vigilant shall refund to Customer an amount calculated by multiplying the total amount of Service Fees paid by Customer for the then-current Service Period by the percentage resulting from

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dividing the number of days remaining in the then-current Service Period, by 365. Upon termination, Customer shall delete all copies of Software Products.

C. Vigilant Termination. Vigilant has the right to terminate this Agreement at any time by providing thirty Customer shall have thirty (30) days from the date of its receipt of V notice of violation from Vigilant Customer has not reasonably cured the described breach of this Agreement, Customer shall immediately discontinue all use of Hardware Products and Software Products and certify to Vigilant that it has returned or destroyed all copies of Software Products in its possession or control. If Vigilant terminates this Agreement term or condition of this Agreement, Vigilant shall refund to Customer an amount calculated by multiplying the total amount of Service Fees paid by Customer for the then-current Service Period by the percentage resulting from dividing the number of days remaining in the then-current Service Period, by 365.

IV. Warranty and Disclaimer; Infringement Protection; Use of Software Products Interface.

A. Warranty and Disclaimer. Vigilant warrants that the Hardware Products and Software Products will be the Hardware Product or Software Product. This warranty does not include products not manufactured by Vigilant.

Vigilant will repair or replace any Hardware Product or Software Product with a Significant Defect during the Warranty Period; provided, however, if Vigilant cannot substantially correct a Significant Defect in a commercially reasonable manner, Customer may terminate this Agreement and Vigilant shall refund to Customer an amount calculated by multiplying the total amount of Service Fees paid by Customer for the then-current Service Period by the percentage resulting from dividing the number of days remaining in the then-current Service Period, by 365. The foregoing labor charges for removal or reinstallation of defective Hardware Products or Software Products, charges for transportation, shipping or handling loss, unless such charges are due to Vigilant's gross negligence or intentional misconduct. Vigilant disclaims all warranties, expressed or implied, including but not limited to implied warranties of merchantability and fitness for a particular purpose. In no event shall Vigilant be liable for any damages whatsoever arising out of the use of, or inability to use, the Hardware Products and Software Products.

B. Infringement Protection. If an infringement claim is made against Customer by a third-party in a court that infringe on
third-party intellectual property, patents, or trademarks; Vigilant shall indemnify Customer, and assume all legal responsibility and costs to contest any such claim. If Customer's use of any portion of the Hardware Products or Software Products or documentation provided to Customer by Vigilant in connection with the Hardware Products or Software Products is enjoined by a court of competent jurisdiction, Vigilant shall do one of the following at its option and expense within sixty (60) days of such enjoinment: (1) Procure for Customer the right to use such infringing portion; (2) replace such infringing portion with a non-infringing portion providing equivalent functionality; or (3) modify the infringing portion so as to eliminate the infringement while providing equivalent functionality.

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C. Use of Software Products Interface. Under certain circumstances, it may be dangerous to operate a moving vehicle while attempting to operate a touch screen or laptop screen and any of their applications. It is agreed re Products at times
when it is safe to do so. Vigilant is not liable for any accident caused by a result of distraction such as from viewing the screen while operating a moving vehicle.

V. Software Support, Warranty and Maintenance.

Customer will receive technical support by
available to Customer at no additional charge, although charges may be assessed if the Software Product is requested port
Agents through e-mail and telephone. Customer allows Vigilant Solutions to access the L6Q camera settings for the purposes of optimizing the plate collection process.

VI. Camera License Keys (CLKs).

Customer is entitled to use of the Software Products during the term of this Agreement to set up and install the Service Options. As Customer installs additional units of the Hardware Products or Software Products, Customer is required to obtain a Camera License Key (CLK) for each camera installed and considered in active service. A CLK can be Vigilant technical support staff. Within two (
Support Agent will receive the requested CLK that is set to expire on the last day of the then-current Service Period.

VII. Ownership.

A. Ownership of Software Products. The Software Products are copyrighted by Vigilant and remain the property of Vigilant. The license granted under this Agreement is not a sale of the Software Products or any copy.

Customer owns the physical media on which the Software Products are installed, but Vigilant retains title and ownership of the Software Products and all other materials included as part of the Software Products.

B. Ownership of Hardware Products. The Hardware Products provided under this agreement remain the property of Vigilant. Customer has no ownership or rights to Hardware Products provided under this Agreement during or after the Term of this Agreement.

C. Rights in Software Products. Vigilant represents and warrants that: (1) it has title to the Software and the authority to grant license to use the Software Products; (2) it has the corporate power and authority and the legal right to grant the licenses contemplated by this Agreement; and (3) it has not and will not enter into agreements and will not take or fail to take action that causes its legal right or ability to grant such licenses to be restricted.

VIII. Data Sharing.

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If Customer is a generator of LPR Data, Customer at its option may share its LPR Data with Law Enforcement Agencies who contract with Vigilant. Vigilant will not share any LPR Data generated by the Customer without the permission of the Customer.

IX. Ownership of LPR Data.

Customer retains all rights to LPR Data generated by the Customer. Should Customer terminate agreement with Vigilant, a copy of all LPR Data generated by the Customer will be created and provided to the Customer. After the copy is created, all LPR Data generated by the Customer will be deleted from LEARN at the written request of an authorized representative of the Customer.

X. Data Retention.

LPR Data that reaches its expiration date will be deleted from LEARN.

XI. Account Access.

A. Eligibility. Customer shall only authorize individuals who satisfy the eligibility requir to access LEARN. Vigilant in its sole discretion may deny access to LEARN to any individual based on such User logins may be provided to non-employees of the Customer without the express written consent of Vigilant.

B. Security. Customer shall be responsible for assigning an Agency Manager who in turn will be name and password (one per user account). A limited
number of User accounts is provided. Customer will cause the Users to maintain username and password credentials confidential and will prevent use of such username and password credentials by any unauthorized person(s). Customer shall notify Vigilant immediately if Customer believes the password of any of its Users has, or may have, been obtained or used by any unauthorized person(s). In addition, Customer must notify Vigilant immediately if Customer becomes C. CJIS Requirements. Customer certifies that its LEARN users shall comply with the CJIS requirements outlined in Exhibit A.

XII. Service Package, Fees and Payment Provisions.

A. Service Package. This Enterprise License Agreement is based on the following Service Package:

Service Package - Fixed Camera Subscription Service:

Fixed Camera with Camera Bracket
Solar Panel
Hardware warranty for manufacturer defect
Vigilant Managed/Hosted LPR server LEARN Account
Unlimited user licensing and upgrades for the following applications:
o LEARN and CarDetector

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B. Service Fee. Payment of each Service Fee entitles Customer to all rights granted under this Agreement, including without limitation, use of the Hardware Products and Software Products for the relevant Service Period, replacement of CLKs, and access to the updates and releases of the Software Products and associated equipment driver software to allow the Hardware Products and Software Products to remain current and enable the best possible performance. The annual Service Fee due for a particular Service Period is based on the number of current Vigilant ng, and which will be used by Customer in the upcoming Service Period.

A schedule of Annual Service Fees for years after the first year of this Agreement is shown below:

Annual Fee Per CLK $2,250.00
Payment of the Service Fee is due thirty (30) days prior to the renewal of the then-current Service Period. All Service Fees are exclusive of any sales, use, value-added or other federal, state or local taxes (excluding taxes based on C. Advanced Service Fee Payments. Vigilant will accept advanced Service Fee payment on a case by case basis for Customers who wish to lock in the Service Fee rates for subsequent periods at the rates currently in effect, as listed in the table above. If Customer makes advanced Service Fee payments to Vigilant, advanced credits is reduced to a zero balance. System based advanced credits shall be applied to subsequent Service Fees in the amount that entitles Customer continued operation of the designated camera unit systems for the following Service Period until the credits are reduced to a zero balance.

D. Price Adjustment. Vigilant has the right to increase or decrease the annual Service Fee from one Service Period to another after the 5-Year Term; provided, however, that in no event will a Service Fee be increased by more Period, it must give Customer notice of the proposed increase on or before the date that Vigilant invoices Customer for the upcoming Service Period.

XIII. Miscellaneous.

A. Limitation of Liability. IN NO EVENT SHALL VIGILANT BE LIABLE FOR ANY INDIRECT, INCIDENTAL,

SPECIAL, CONSEQUENTIAL DAMAGES INCLUDING DAMAGES FOR LOSS OF USE, DATA OR PROFIT, ARISING OUT OF OR

CONNECTED WITH THE USE OF THE HARDWARE PRODUCTS AND SOFTWARE PRODUCTS, WHETHER BASED ON

CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE, EVEN IF VIGILANT HAS BEEN ADVISED OF THE POSSIBILITY OF DAMAGES. IN NO EVENT WILL LIABILITY ARISING OUT OF OR RELATED TO THIS AGREEMENT

EXCEED THE FEES PAID BY CUSTOMER TO VIGILANT FOR THE HARDWARE PRODUCTS AND SOFTWARE PRODUCTS LICENSED UNDER THIS AGREEMENT.

B. Confidentiality. Customer acknowledges that Hardware Products and Software Products contain valuable and proprietary information of Vigilant and Customer will not disassemble, decompile or reverse engineer any Hardware Products or Software Products to gain access to confidential information of Vigilant.

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C. Assignment. Neither Vigilant nor Customer is permitted to assign this Agreement without the prior written consent of the other party. Any attempted assignment without written consent is void.

D. Amendment; Choice of Law. No amendment or modification of this Agreement shall be effective unless in writing and signed by authorized representatives of the parties. This Agreement shall be governed by the laws of the state of California without regard to its conflicts of law.

E. Complete Agreement. This Agreement constitutes the final and complete agreement between the parties with respect to the subject matter hereof, and supersedes any prior or contemporaneous agreements, written or oral, with respect to such subject matter.

F. Relationship. The relationship created hereby is that of contractor and customer and of licensor and Customer. Nothing herein shall be construed to create a partnership, joint venture, or agency relationship between the parties hereto. Neither party shall have any authority to enter into agreements of any kind on behalf of the other and shall have no power or authority to bind or obligate the other in any manner to any third party. The employees or agents of one party shall not be deemed or construed to be the employees or agents of the other party for any purpose whatsoever. Each party hereto represents that it is acting on its own behalf and is not acting as an agent for or on behalf of any third party.

G. No Rights in Third Parties. This agreement is entered into for the sole benefit of Vigilant and Customer and their permitted successors, executors, representatives, administrators and assigns. Nothing in this Agreement shall be construed as giving any benefits, rights, remedies or claims to any other person, firm, corporation or other entity, including, without limitation, the general public or any member thereof, or to authorize anyone not a party to this Agreement to maintain a suit for personal injuries, property damage, or any other relief in law or equity in connection with this Agreement.

H. Construction. The headings used in this Agreement are for convenience and ease of reference only, and do not define, limit, augment, or describe the scope, content or intent of this Agreement. Any term referencing time, days or period for performance shall be deemed calendar days and not business days, unless otherwise expressly provided herein.

I. Severability. If any provision of this Agreement shall for any reason be held to be invalid, illegal, unenforceable, or in conflict with any law of a federal, state, or local government having jurisdiction over this Agreement, such provision shall be construed so as to make it enforceable to the greatest extent permitted, such provision shall remain in effect to the greatest extent permitted and the remaining provisions of this Agreement shall remain in full force and effect.

J. Federal Government. Any use, copy or disclosure of Software Products by the U.S. Government is subject to restrictions as set forth in this Agreement and as provided by DFARS 227.7202-1(a) and 227.7202-3(a) (1995), DFARS 252.227-7013(c)(1)(ii) (Oct 1988), FAR 12.212(a)(1995), FAR 52.227-19, or FAR 52.227 (ALT III), as applicable.

K. Right to Audit. Customer, upon thirty (30) days advanced written request to Vigilant, shall have the right to investigate, examine, and audit any and all necessary non-financial books, papers, documents, records and personnel that pertain to this Agreement.

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L. Notices; Authorized Representatives; Technical Support Agents. All notices, requests, demands, or other communications required or permitted to be given hereunder must be in writing and must be addressed to the parties at their respective addresses set forth below and shall be deemed to have been duly given when (a) delivered in person; (b) one (1) business day after being deposited with a reputable overnight air courier service; or (c) three (3) business days after being deposited with the United States Postal Service, for delivery by certified or registered mail, postage pre-paid and return receipt requested. All notices and communications regarding default or termination of this Agreement shall be delivered by hand or sent by certified mail, postage pre-paid and return receipt requested.

Either party may from time to time change the notice address set forth below by delivering 30 days advance notice to the other party in accordance with this section setting forth the new address and the date on which it will become effective.

Vigilant Solutions, LLC
Attn: Sales Administration
1152 Stealth Street
Livermore, CA 94551
Customer: Morro Bay Police Department
Attn:

Address: 850 Morro Bay Blvd.

Morro Bay, CA 93442
M. Authorized Representatives; Technical Support Agents Software Products support contact. Either party may from time to time change its Authorized Representative, and Customer may from time to time change its Technical Support Agents, in each case, by delivering 30 days advance notice to the other party in accordance with the notice provisions of this Agreement.

N. Insurance. Vigilant shall, after execution of the Agreement, provide the City of Morro Bay with a Certificate of Insurance and include the City of Morro Bay as additional insured under General Liability and Auto Liability with limits of $1m per occurrence and $2m aggregate for General Liability and $1m combined single limit for automobile liability.

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IN WITNESS WHEREOF, the parties have executed the Agreement as of the Effective Date.

Manufacturer: Vigilant Solutions, LLC
Authorized Agent: Sean Heieck
Title: Area Sales Manager
Date: ____________________________________________________ Signature: ____________________________________________________ Customer:

Authorized Agent: ____________________________________________________ Title: ____________________________________________________ Date: ____________________________________________________ Signature: ____________________________________________________ 01/20/23

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Exhibit A: CJIS Requirements
Vigilant and the Customer agree on the importance of data security, integrity and system availability and that these security objectives will only be achieved through shared responsibility. Vigilant and the Customer agree they will more likely be successful with information security by use of the Vigilant supplied technical controls and client Customer use of those controls; in conjunction with agency and personnel policies to protect the systems, data and privacy.

Vigilant agrees to treat the Customer-supplied information in Vigilant systems as CJI. The FBI CJIS Security Policy is Vigilant will strive to meet those technical and administrative controls; ensuring the tools are in place for the proper protection of systems, information and privacy of individuals to the greatest degree possible.

Vigilant and the Customer agree that information obtained or incorporated into Vigilant systems may be associated with records that are sensitive in nature having, tactical, investigative and Personally Identifiable Information. As such, that information will be treated in accordance with applicable laws, policies and regulations governing protection and privacy of this type of data.

Vigilant and the Customer agree that products and services offered by Vigilant are merely an investigative tool to aid the client in the course of their duties and that Vigilant make no claims that direct actions be initiated based solely upon the information responses or analytical results. Further, Vigilant and the Customer agree that the Customer is ultimately responsible for taking the appropriate actions from results, hits, etc. generated by Vigilant products and require ongoing training, human evaluation, verifying the accuracy and currency of the information, and appropriate analysis prior to taking any action.

As such, the parties agree to do the following:

Vigilant:

1. Vigilant has established the use of FBI-CJIS Security Policy as guidance for implementing technical security controls in an effort to meet or exceed those Policy requirements.

2. Vigilant agrees to appoint a CJIS information security officer to act as a conduit to the client contracting government agency, agency coordinator, to receive any security policy information and disseminate to the appropriate staff.

3. Vigilant agrees to adhere to FBI-CJIS Security Policy awareness training and personnel screening standards as required by the Customer.

4. Vigilant agrees, by default, to classify all client supplied data and information related to client owned will be treated at the highest level of confidentiality by all Vigilant staff and authorized partners. Vigilant has supporting guidance/policies for staff handling the full life cycle of information in physical or electronic form and has accompanying disciplinary procedures for unauthorized access, misuse or mishandling of that information.

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5. Vigilant will not engage in data mining, commercial sale, unauthorized access and/or use of any of Customer owned data.

6. Vigilant agrees to use their formal cyber incident response plan if such event occurs.

7. Vigilant agrees to immediately inform Customer of any cyber incident or data breach, to include DDoS, Malware, Virus, etc. that may impact or harm client data, systems or operations so proper analysis can be performed and client incident response procedures can be initiated.

8. Vigilant will only allow authorized support staf
of Customer as permitted by the terms of contracts.

9. Vigilant agrees to use training, policy and procedures to ensure support staff use proper handling, processing, storing, and communication protocols for Customer data.

10. Vigilant agrees to protect client systems and data by monitoring and auditing staff user activity to ensure that it is only within the purview of system application development, system maintenance or the support roles assigned.

11. Vigilant agrees to inform the Customer of any unauthorized, inappropriate use of data or systems.

12. Vigilant will design software applications to facilitate FBI-CJIS compliant information handling, processing, storing, and communication of Customer.

13. Vigilant will advise Customer when any software application or equipment technical controls are not consistent with meeting FBI-CJIS Security Policy criteria for analysis and due consideration.

14. Vigilant agrees to use the existing Change Management process to sufficiently plan for system or software changes and updates with Rollback Plans.

15. Vigilant agrees to provide technical security controls that only permit authorized user access to Customer owned data and Vigilant systems as intended by the Customer and data owners.

16. Vigilant agrees to meet or exceed the FBI-CJIS Security Policy complex password construction and change rules.

17. Vigilant will only provide access to Vigilant systems and Customer owned information through Customer managed role-based access and applied sharing rules configured by the Customer.

18. Vigilant agrees to provide technical controls with additional levels of user advanced authentication in physically non-secure locations.

19. Vigilant agrees to provide compliant FIPS 140-2 Certified 128-bit encryption to Customer owned data during

20. Vigilant agrees to provide firewalls and virus protection to protect networks, storage devices and data.

21. Vigilant agrees to execute archival, purges and/or deletion of data as configured by the data owner.

22. Vigilant agrees to provide auditing and alerting tools within the software applications so Customer can monitor access and activity of Vigilant support staff and Customer users for unauthorized access, disclosure, alteration or misuse of Customer owned data. (Vigilant support staff will only have access when granted by the Customer.)

23. Vigilant will only perform direct support remote access to Customer systems/infrastructure when requested, authorized and physically granted access to the applications/systems by the Customer. This activity will be documented by both parties.

24. Vigilant creates and retains activity transaction logs to enable auditing by the Customer data owners and Vigilant staff.

25. Vigilant agrees to provide physical protection for the equipment-storing Customer data along with additional technical controls to protect physical and logical access to systems and data.

26. Vigilant agrees to participate in any information or technical security compliance audit performed by the Customer, state CJIS system agency or FBI-CJIS Division.

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27. Vigilant agrees to perform independent employment background screening for its staff and participate in additional fingerprint background screening as required by Customer.

28. -
information etc., is only shared as designated by the client and remains the responsibility and property of the Customer.

Customer:

1. oordinator as a central Point of Contact for all FBI-CJIS Security Policy related matters and to assign staff that are familiar with the contents of the FBI-CJIS Security Policy.

2. Customer agrees to have the Agency Coordinator provide timely updates with specific information regarding any new FBI-CJIS, state or local information security policy requirements that may impact Vigilant compliance or system/application development and, to facilitate obtaining certifications, training, and fingerprint-based background checks as required.

3. Customer agrees to inform Vigilant when any FBI-CJIS Security Awareness Training, personnel background screening or execution of FBI-CJIS Security Addendum certifications are required.

4. Customer agrees to immediately inform Vigilant of any relevant data breach or cyber incident, to include DDoS, Malware, Virus, etc. that may impact or harm Vigilant systems, operations, business partners and/or other Customers, so proper analysis can be performed, and Incident Response Procedures can be initiated.

5. Customer agrees that they are responsible for the legality and compliance of information recorded, submitted or placed in Vigilant systems and use of that data.

6. Customer agrees that they are responsible for proper equipment operation and placement of equipment.

7. Customer agrees that they are responsible for vetting authorized user access to Vigilant systems with due consideration of providing potential access to non-Customer information.

8. Customer agrees that responsibility and control of persons granted access to purchased Vigilant systems, along with data stored and transmitted via Vigilant systems, is that of the Customer.

9. Customer agrees that they have responsibility for all data security, handling and data protection strategies from

10. Customer agrees to reinforce policies and procedures for secure storage and protection of Vigilant system passwords.

11. Customer agrees to reinforce client staff policies for creating user accounts with only government domain email addresses. Exceptions will be granted in writing.

12. Customer agrees to reinforce client staff policies for not sharing user accounts.

13. Customer agrees to use Vigilant role-based access as designed to foster system security and integrity.

14. Customer agrees that they control, and are responsible for, appropriate use and data storage policies as well as procedures for the data maintained outside the Vigilant systems. This includes when any information is disseminated, extracted or exported out of Vigilant systems.

15. Customer agrees that they control and are responsible for developing policies, procedures and enforcement for applying deletion/purging and dissemination rules to information within and outside the Vigilant systems.

16. Customer agrees that it is their responsibility to ensure data and system protection strategies are accomplished through the tools provided by Vigilant for account and user management features along with audit and alert threshold features.

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17. and monitor Vigilant support staff when authorized to assist the client.

18. Customer agrees that the Vigilant designed technical controls and tools will only be effective in conjunction with Customer created policies and procedures that guide user access and appropriate use of the system.

19. Customer agrees that information and services provided through Vigilant products do not provide any actionable information, Customer users are responsible for the validity and accuracy of their data and developing procedures to verify information with the record owner and other systems (NCIC) based upon the potential lead generated.

Policy
435
Morro Bay Police Department
Morro Bay PD Policy Manual
Copyright Lexipol, LLC 2026/09/22, All Rights Reserved.

Published with permission by Morro Bay Police Department Automated License Plate Readers (ALPRs) - 1
Automated License Plate Readers (ALPRs)
435.1 PURPOSE AND SCOPE
The purpose of this policy is to provide guidance for the capture, storage and use of digital data obtained through the use of Automated License Plate Reader (ALPR) technology. 435.2 POLICY
The policy of the Morro Bay Police Department is to utilize ALPR technology to capture and store digital license plate data and images while recognizing the established privacy rights of the public.

All data and images gathered by the ALPR are for the official use of this department. Because such data may contain confidential information, it is not open to public review. 435.3 ADMINISTRATION
The ALPR technology, also known as License Plate Recognition (LPR), allows for the automated detection of license plates. It is used by the Morro Bay Police Department to convert data associated with vehicle license plates for official law enforcement purposes, including identifying stolen or wanted vehicles, stolen license plates and missing persons. It may also be used to gather information related to active warrants, homeland security, electronic surveillance, suspect interdiction and stolen property recovery.

All installation and maintenance of ALPR equipment, as well as ALPR data retention and access, shall be managed by the Administration Commander. The Administration Commander will assign members under his/her command to administer the day-to-day operation of the ALPR equipment and data.
435.3.1 ALPR ADMINISTRATOR
The Administration Commander shall be responsible for developing guidelines and procedures to comply with the requirements of Civil Code § 1798.90.5 et seq. This includes, but is not limited to (Civil Code § 1798.90.51; Civil Code § 1798.90.53):
(a) A description of the job title or other designation of the members and independent contractors who are authorized to use or access the ALPR system or to collect ALPR information.
(b) Training requirements for authorized users.
(c) A description of how the ALPR system will be monitored to ensure the security of the information and compliance with applicable privacy laws. (d) Procedures for system operators to maintain records of access in compliance with Civil Code § 1798.90.52.
(e) The title and name of the current designee in overseeing the ALPR operation. (f) Working with the Custodian of Records on the retention and destruction of ALPR data.

Morro Bay Police Department
Morro Bay PD Policy Manual
Automated License Plate Readers (ALPRs)
Copyright Lexipol, LLC 2026/09/22, All Rights Reserved.

Published with permission by Morro Bay Police Department Automated License Plate Readers (ALPRs) - 2
(g) Ensuring this policy and related procedures are conspicuously posted on the department’s website.
435.4 OPERATIONS
Use of an ALPR is restricted to the purposes outlined below. Department members shall not use, or allow others to use the equipment or database records for any unauthorized purpose (Civil Code § 1798.90.51; Civil Code § 1798.90.53).
(a) An ALPR shall only be used for official law enforcement business. (b) An ALPR may be used in conjunction with any routine patrol operation or criminal investigation. Reasonable suspicion or probable cause is not required before using an ALPR.
(c) While an ALPR may be used to canvass license plates around any crime scene, particular consideration should be given to using ALPR-equipped cars to canvass areas around homicides, shootings and other major incidents. Partial license plates reported during major crimes should be entered into the ALPR system in an attempt to identify suspect vehicles.
(d) No member of this department shall operate ALPR equipment or access ALPR data without first completing department-approved training.
(e) No ALPR operator may access department, state or federal data unless otherwise authorized to do so.
(f) If practicable, the officer should verify an ALPR response through the California Law Enforcement Telecommunications System (CLETS) before taking enforcement action that is based solely on an ALPR alert.
435.5 DATA COLLECTION AND RETENTION
The Administration Commander is responsible for ensuring systems and processes are in place for the proper collection and retention of ALPR data. Data will be transferred from vehicles to the designated storage in accordance with department procedures.

All ALPR data downloaded to the server should be stored for a minimum of one year and in accordance with the established records retention schedule. Thereafter, ALPR data should be purged unless it has become, or it is reasonable to believe it will become, evidence in a criminal or civil action or is subject to a discovery request or other lawful action to produce records. In those circumstances the applicable data should be downloaded from the server onto portable media and booked into evidence.
435.6 ACCOUNTABILITY
All data will be closely safeguarded and protected by both procedural and technological means.

The Morro Bay Police Department will observe the following safeguards regarding access to and use of stored data (Civil Code § 1798.90.51; Civil Code § 1798.90.53):

Morro Bay Police Department
Morro Bay PD Policy Manual
Automated License Plate Readers (ALPRs)
Copyright Lexipol, LLC 2026/09/22, All Rights Reserved.

Published with permission by Morro Bay Police Department Automated License Plate Readers (ALPRs) - 3
(a) All ALPR data downloaded to the mobile workstation and in storage shall be accessible only through a login/password-protected system capable of documenting all access of information by name, date and time (Civil Code § 1798.90.52). (b) Members approved to access ALPR data under these guidelines are permitted to access the data for legitimate law enforcement purposes only, such as when the data relate to a specific criminal investigation or department-related civil or administrative action.
(c) ALPR system audits should be conducted on a regular basis.

For security or data breaches, see the Records Release and Maintenance Policy. 435.7 RELEASING ALPR DATA
The ALPR data may be shared only with other law enforcement or prosecutorial agencies for official law enforcement purposes or as otherwise permitted by law, using the following procedures:
(a) The agency makes a written request for the ALPR data that includes:

1. The name of the agency.

2. The name of the person requesting.

3. The intended purpose of obtaining the information.
(b) The request is reviewed by the Administration Commander or the authorized designee and approved before the request is fulfilled.
(c) The approved request is retained on file.

Requests for ALPR data by non-law enforcement or non-prosecutorial agencies will be processed as provided in the Records Maintenance and Release Policy (Civil Code § 1798.90.55). 435.8 TRAINING
The Training Sergeant should ensure that members receive department-approved training for those authorized to use or access the ALPR system (Civil Code § 1798.90.51; Civil Code § 1798.90.53).

Prepared By: __AW________ Dept Review: ________
City Manager Review: __SC______ City Attorney Review: __LNL__ Staff Report
TO: Honorable Mayor and City Council DATE: January 4, 2023 FROM: Amy Watkins, Interim Police Chief
SUBJECT: Approval of Purchase of Eleven Mobile License Plate Recognition Cameras from Vigilant Solutions

RECOMMENDATION
City Council authorize the City Manager to enter into an agreement with Vigilant Solutions for the lease of ten and City purchase of one Mobile License Plate Recognition Cameras for a total cost of $153,658.75.

ALTERNATIVES
None proposed.

BACKGROUND/DISCUSSION
The City Council has directed staff to research and procure License Plate Recognition (LPR) Camera Technology to be distributed widely throughout the City as a crime prevention tool. Automated license plate reader systems are an excellent tool to assist law enforcement by providing real-time intelligence to improve situational awareness and keep communities and officers safe. Installing fixed LPR units at the entrance/exit points to the City will assist the Police Department with major crime investigations, suspect apprehensions, and recovery of stolen and wanted vehicles. Due to the unique geographical location of Morro Bay, entrance/exit points are limited which would result in fewer cameras being required to obtain maximum coverage as compared to other cities. Both recent and historical criminal investigation data have determined a large portion of the criminal activity within Morro Bay is caused by subjects coming into our City from outside jurisdictions traveling by vehicle and recent data has indicated that approximately seventy percent (70%) of criminal activity involves a vehicle.

LPR technology will be used for solving crimes and other public safety related activities; LPR technology will not be used for surveillance purposes. LPR systems do not provide constant surveillance of vehicles. The systems do provide authorized law enforcement personnel with a pointer for one moment in time and the location where a vehicle's license plate passed an LPR device. LPR devices do not have illumination to aid in identifying the driver or potential passengers of the vehicle.

The purpose of LPR technology is to identify vehicles, not the occupants. If ambient lighting is sufficient or a subject is outside and near the vehicle at the time it passes LPR equipment, their image may be captured in the contextual photo taken by the LPR unit of the vehicle. This contextual photo is simply designed to provide context, i.e., to identify the specific vehicle to which the license AGENDA NO: C-3
MEETING DATE: January 10, 2023
2023-01-10 CC Mtg Page 119 of 146

plate is attached to aid the operator in quickly identifying which of several vehicles in the immediate vicinity are carrying the alerted tag. LPR systems are not designed to collect images of drivers or vehicle occupants, nor are they integrated with facial recognition technology or any applications that simultaneously identify the registered owner or passengers.

Vigilant Solutions License Plate Recognition is well-established in the field of LPR technology and offers equipment that is easy-to-install and deploy, powered by solar-charged batteries, and will meet the City’s operational needs. If this expenditure is authorized by the City Council, the cameras will be affixed throughout the City at strategic locations, using powerful analytics to complete the investigative triangle of person, license plate, and location, critical for law enforcement investigations and crime prevention.

Staff reached out to two LPR companies to obtain quotes for LPR cameras. These companies are considered industry leaders and provide most of the LPR services to law enforcement agencies nationwide. Department objectives for the cameras are to install fixed cameras at several locations within the City, and upfit our current Stalker Radar Trailer (currently owned by the City) to provide the option for a mobile LPR to assist with data collection along State Highway 1 and other locations not conducive for permanent mounting of cameras. At present, Vigilant Solutions is the only LPR company that provides the upfitting equipment and camera system necessary for a successful upfit to the current mobile trailer. Additionally, several neighboring agencies have contracted with and currently use Vigilant Solutions for LPR cameras. These agencies include Paso Robles Police, Pismo Beach Police, and the San Luis Obispo County Sheriff’s Office. Congruency of service with the San Luis Obispo Sheriff’s Office and other surrounding agencies is a crucial element of the LPR system as data collection and intelligence gathering within the same software system will increase efficiency.

As such, the Vigilant Solutions expenditure is being recommended as a sole source acquisition since the product compatibility with the department’s current mobile radar trailer equipment is available from only this one vendor. The agreement documents provided for Vigilant Solutions (Attachment 1 hereto) have been reviewed by the City Attorneys’ Office in coordination with City staff. The contract documents include some legal terms not typically included in City form contracts, such as certain restrictions on damages and limited indemnities. Upon discussion of these issues with City staff, a policy determination was made by City staff to accept these potentially remote risks and accept the form of the Vigilant contract documents given (i) the substantial public policy benefits attendant to the Vigilant Solutions system, (ii) the fact that such legal limitations are not unusual for softwarerelated contracts, and (iii) that our neighboring local jurisdictions (like Pismo Beach and Paso Robles) have entered into the same or very similar contract arrangements for this system.

FISCAL IMPACT
The Vigilant Solutions quote is provided as Attachment 2. The fiscal impact is $153,658.75 in fiscal year (FY) 2022-2023. The funding source for this project is from Measure Q & E for the total cost.

The contract is for five years with the total cost of the contract being paid during the first year, FY 2022-2023.

The following table illustrates the various ongoing and one-time costs:
1 year
Ongoing
Camera Subscription $112,500
Annual replacement plan 5,000
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Camera Licensing & LEARN 4,500
Total Ongoing $122,000
One-time
Stalker Trailer L5F Camera $15,700
Additional Camera Hardware 4,500
Remote Technical Services 1,275
On-Site Technical Services 6,045
Delivery 770
Sales Tax 3,368.75
Total One-Time $31,658.75
Total Agreement $153,658.75

CONCLUSION
Staff recommends the Council authorize the City Manager to enter into an agreement with Vigilant Solutions for the lease of ten and purchase of one LPR cameras in the amount of $153,658.75.

ATTACHMENTS

1. Vigilant Solutions Agreement Documents

2. Project quote from Vigilant Solutions.
2023-01-10 CC Mtg Page 121 of 146

MINUTES - MORRO BAY CITY COUNCIL
REGULAR MEETING – JANUARY 10, 2023
VETERAN’S MEMORIAL HALL /
TELECONFERENCE – 5:30 P.M.

Pursuant to Assembly Bill 361 (2021-22) and Government Code section 54953 this Meeting will be conducted in a hybrid format with both in-person and virtual public participation.

PRESENT: Carla Wixom
Jennifer Ford
Laurel Barton
Cyndee Edwards
Zara Landrum
Mayor
Council Member
Council Member
Council Member
Council Member
ABSENT: None
STAFF: Scott Collins
Chris Neumeyer
Dana Swanson
Emily Conrad
Greg Kwolek
Scot Graham
Daniel McCrain
Jody Cox
Eric Endersby
City Manager
City Attorney
City Clerk
Acting Assistant City Manager/Admin Services Dir.

Public Works Director
Community Development Director
Fire Chief
Police Chief
Harbor Director

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

Council Member Barton joined the meeting at 5:35 p.m.

MOMENT OF SILENCE

PLEDGE OF ALLEGIANCE
RECOGNITION – None
CLOSED SESSION REPORT – City Attorney Neumeyer stated no reportable action was taken by the City Council in accordance with the Brown Act.

MAYOR & COUNCILMEMBERS’ REPORTS, ANNOUNCEMENTS & PRESENTATIONS https://youtu.be/E_JWySiBjz8?t=174
Mayor Wixom announced that due to the storm and to minimize travel, Item C-1, Advisory Board interviews would be continued to a future meeting, likely on January 24, 2023.

CITY MANAGER REPORTS, ANNOUNCEMENTS AND PRESENTATIONS
https://youtu.be/E_JWySiBjz8?t=729

PRESENTATIONS
https://youtu.be/E_JWySiBjz8?t=1065
• Proclamation commending and honoring Police Chief Jody Cox on his retirement

PUBLIC COMMENT
https://youtu.be/E_JWySiBjz8?t=1545
Joan Behrick, Morro Bay, spoke in opposition to the Vistra battery storage project.

AGENDA NO: A-1
MEETING DATE: February 14, 2023

2 MINUTES - MORRO BAY CITY COUNCIL MEETING – JANUARY 10, 2023 MOTION: Council Member Barton moved to adopt Resolution No. 03-23 to award the bid for this project, the Elena Slope Repair and Utilities Replacement Project, in an amount not to exceed $411,838 to Rehak Construction. The motion was second by Council Member Edwards and carried 5-0 by roll call vote.

A-1 APPROVAL OF PURCHASE OF ELEVEN MOBILE LICENSE PLATE RECOGNITION CAMERAS FROM VIGILANT SOLUTIONS; (POLICE DEPARTMENT)
https://youtu.be/E_JWySiBjz8?t=12053
Interim Police Chief Watkins presented the staff report and responded to Council inquiries.

There was Council consensus the meeting go past 9:30 p.m. to complete the remaining business items.

Mayor Wixom opened public comment for Item C-3.
https://youtu.be/E_JWySiBjz8?t=13888
Terry Simons, Morro Bay, spoke in support of the item.

Nicole Dorfman, Morro Bay, opposed the purchase, expressing concern about the growing security and surveillance in our country.

Nattalia Merzoyan, Morro Bay, suggested starting with one camera for one year.

Betty Winholtz, Morro Bay, was concerned with how much time the coordinator will spend on the program.

The public comment period for Item C-3 was closed.

MOTION: Mayor Wixom moved to approve Item C-3, approval of purchase of license plate recognition cameras. The motion was seconded by Council Member Ford and carried 5-0 by roll call vote.

A-2 ADOPTION OF RESOLUTION NO. 04-23 ESTABLISHING THE 2023 CITY COUNCIL MEETING CALENDAR, AND CITY GOALS AND BUDGET DEVELOPMENT SCHEDULE; (CITY

MANAGER)
https://youtu.be/E_JWySiBjz8?t=14861
City Manager Collins presented the staff report and responded to Council inquiries.

Mayor Wixom opened public comment for Item C-4.

Terry Simons, Morro Bay, agreed the Council can accomplish the work needed in 21 meetings, recommended staff compress the agendas, and looked forward to goal development process.

Betty Winholtz, Morro Bay, objected to a July meeting break and asked to add a meeting in July.

Linda Donnelly, Morro Bay, requested Council meeting start time return to 6:00 p.m.

Erica Crawford, Morro Bay Chamber of Commerce, looked forward to participating in the goals development process and announced related upcoming events.

The public comment period for Item C-4 was closed.

3 MINUTES - MORRO BAY CITY COUNCIL MEETING – JANUARY 10, 2023 MOTION: Mayor Wixom moved approval of Item C-4. The motion was seconded by Council Member Barton and carried 5-0 by roll call vote.

B. COUNCIL DECLARATION OF FUTURE AGENDA ITEMS
None
C. ADJOURNMENT
The meeting adjourned at 9:54 p.m.

Recorded by:

Dana Swanson
City Clerk

Prepared By: JC Dept Review: EC
City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: October 8, 2026 FROM: John Craig, City Manager
Brian Stack, City Attorney
SUBJECT: Approval of Seller Financing with the San Luis Coastal Unified School District for the Morro Elementary School Site Purchase

RECOMMENDED ACTION

1. Approve the First Amendment to the Agreement for Purchase and Sale of Real Property with the San Luis Coastal Unified School District (District);

2. Approve the Loan Agreement with the District for $4,800,000 in seller-carried financing (Attachment 2); and

3. Authorize the City Manager to sign both documents and any related loan documents and take such other actions and execute documents necessary to complete the acquisition, subject to review and approval by the City Attorney as to form and legal effect.

BACKGROUND
The City and the District entered into a purchase agreement, effective March 13, 2026, for the 9.70- acre former Morro Elementary School site at 1130 Napa Avenue. The purchase price is $5,300,000.

The original agreement required the full price in cash at the close of escrow.

Staff has since negotiated seller financing with the District. Under the proposed terms, the City's $500,000 deposit is released to the District at closing, and the District carries the remaining $4,800,000 as a short-term, unsecured loan. This keeps City cash available during the transition and planning period before the site is reused.

Two documents carry out this financing agreement. The First Amendment to the Agreement for Purchase and Sale of Real Property (Attachment 1) revises the purchase agreement so the balance is paid under a loan instead of at closing and makes delivery of the signed loan documents a condition of closing. The Loan Agreement (Attachment 2) sets the repayment terms.

DISCUSSION
Loan terms
The loan is interest-free for the first year and can be extended twice, one year at a time, at 2 percent simple interest.
 Amount: $4,800,000, credited against the purchase price at closing.  Initial term: one year, maturing October 31, 2027, at 0 percent interest.  Extensions: two one-year options, exercised by written notice and a principal payment.

Interest of 2.00 percent per year accrues on the remaining principal from November 1, 2027.

AGENDA NO: 8.c
MEETING DATE: October 13, 2026

2  Prepayment: allowed at any time, in full or in part, with no penalty. Interest stops on any amount prepaid.
 Security: none. The loan is unsecured, and the District’s recourse is limited to identified repayment sources.
 Repayment sources: economic development funds, eligible development impact fees, general fund balances, proceeds from the future sale of other City property including the Teen Center, and other existing general tax revenues. No new taxes may be levied to repay the loan.
 Late payment: a 3 percent late fee after 30 days, and default interest thereafter on the past due balance at the prime rate plus 2 percent.

Each year, as part of the budget process, the Council decides whether to pay off the balance or exercise the next extension.

Annual principal and interest
If the Council uses both extensions, the City makes three payments totaling $4,932,000, of which $132,000 is interest over the course of the full three years.

Payment date Fiscal year Principal Interest Total due
October 31, 2027 2027-28 $500,000 $0 $500,000
October 31, 2028 2028-29 $2,000,000 $0 (deferred) $2,000,000 October 31, 2029 2029-30 $2,300,000 $132,000 $2,432,000 Total $4,800,000 $132,000 $4,932,000
The $132,000 is $86,000 accrued in the first extension year (2 percent of $4,300,000) and $46,000 accrued in the second (2 percent of $2,300,000). Both are paid with the final payment.

Fiscal Impact
The City’s $500,000 deposit previously budgeted in FY 2025-2026 would be released to the District at closing. The next payment falls in FY 2027-28: $500,000 if the Council extends, or $4,800,000 if it pays the loan in full. Maximum interest over the life of the loan is $132,000. The City would also have additional costs related to preparing the loan documents estimated at $25,000, as well as its share of closing costs estimated at $10,000. A budget amendment will be brought back to Council once acquisition-related costs are finalized.

The Loan Agreement commits the City to include each payment in its annual budget. The payments are subject to annual appropriation and are payable only from existing, lawfully available revenues from existing taxes.

CONCLUSION
The seller financing lets the City close on the site by October 31, 2026, with one year at no interest and up to two more years at 2 percent. Staff recommend approval of the First Amendment and the Loan Agreement.

3 ATTACHMENT(S)

1. First Amendment to Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions

2. Loan Agreement

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FIRST AMENDMENT TO

AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY

AND JOINT ESCROW INSTRUCTIONS BETWEEN

THE SAN LUIS COASTAL UNIFIED SCHOOL DISTRICT

AND CITY OF MORRO BAY
(1130 Napa Avenue, Morro Bay, CA 93442)
This FIRST AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE OF REAL PROPERTY AND JOINT ESCROW INSTRUCTIONS (this “First Amendment”), effective ________ __, 2026 (the “Effective Date”), is entered by and between the SAN LUIS COASTAL UNIFIED SCHOOL DISTRICT, a public corporation (“Seller”), and CITY OF MORRO BAY, a municipal corporation (“Buyer”). Seller and Buyer may also be referred to in this Agreement singularly as a “Party” and collectively as the “Parties.” Capitalized terms that are not defined in this First Amendment shall have the meanings given to them in the Original Agreement.

RECITALS
A. The Parties entered into that certain Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions effective March 13, 2026 (the “Original Agreement”), pursuant to which Seller agreed to sell, and Buyer agreed to purchase, that certain real property consisting of approximately 9.70 acres commonly known as the former site of Morro Elementary School, located at 1130 Napa Avenue, Morro Bay, California 93442, Assessor’s Parcel Numbers 066-044-011 and 066-280-045, and more particularly described in the Original Agreement (the “Property”), for a purchase price of Five Million Three Hundred Thousand Dollars ($5,300,000.00) (the “Purchase Price”). The Original Agreement as amended by the First Amendment shall be referred to as the “Amended Agreement.” B. The Original Agreement states at Section 1.3 that the Purchase Price is payable in full through Escrow at the Close of Escrow.

C. The Parties now desire to restructure the payment of the Purchase Price to provide for, among other things, Seller-carried financing whereby a portion of the Purchase Price is paid in cash at Closing and the remaining balance paid in accordance with a loan agreement (the “Loan Agreement”) between the Parties, due and payable within one year after the Closing unless extended at Buyer’s option pursuant to the terms of the Loan Agreement (the “Extension Option”).

D. Buyer has determined that it has sufficient general fund balances and other assets from which Buyer can reasonably expect to receive revenue sufficient to pay balance due under the Loan Agreement within one (1) year of its making without having to levy additional taxes.

Specifically, Buyer has identified the following existing and anticipated revenue sources and assets that are lawfully available to fund the Purchase Price and the repayment of the seller-carried financing contemplated herein: (i) economic development funds; (ii) development impact fees lawfully available for such purpose; (iii) existing general fund balances; (iv) anticipated proceeds from the future disposition of other Buyer-owned real property, including without limitation the

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2 property commonly known as the “Teen Center”; and (v) other lawfully available revenues from currently approved general taxes (collectively, the “Available Revenue Sources”).

E. Buyer desires to enter into the Loan Agreement for short-term, seller-carried, financing at a below-market interest rate, because the City has determined it is in the public interest to minimize the expenditure of Buyer’s resources during the transition period associated with the acquisition of the Property and future planning efforts that would occur prior to reuse of the Property, which is a former school site being transferred for other community use or purposes. As part of Buyer’s regular annual budget process, the City Council of the City of Morro Bay (the “City Council”) will determine whether it desires to pay off the sum then due under the Loan Agreement or to exercise the Extension Option, as defined below, to extend the term under the Loan Agreement for one (1) additional year.

F. The Parties now desire to amend the Original Agreement as set forth in this First Amendment to provide for Seller-carried financing of a portion of the Purchase Price, and to make such other modifications to the Original Agreement as are necessary or appropriate in connection therewith.

AMENDMENT
NOW, THEREFORE, in consideration of the above Recitals, which are hereby incorporated by reference as if set in full herein, and of the mutual covenants and agreements in this First Amendment, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Seller and Buyer hereby agree as follows:

1. Amendments to Original Agreement. The following amendments are made to the Original Agreement:

1.1 Amendment to Section 1.3 (Purchase Price). Section 1.3 of the Original Agreement is hereby amended by amending and restating Section 1.3(C) and adding a new Section 1.3(D) as follows:
“(C) Buyer will pay the Purchase Price to Seller through Escrow as follows:
(i) at the Close of Escrow, Escrow Holder shall release the sum of the Deposit previously delivered to Escrow Holder pursuant to Section 1.3(B) above; and (ii) the balance of the Purchase Price (the “Loan Amount”) shall be paid in accordance with the Loan Agreement (as defined in Section

1.3(D) below). Escrow shall be opened at Chicago Title Company (“Escrow Holder” or “Title Company”) at the address specified in Article 5 below.”
“(D) As used in this Agreement: (i) “Loan Agreement” means that certain Loan Agreement between the Parties (the form of which is attached hereto as Exhibit C); and (ii) “Loan Documents” means, collectively, the Loan Agreement and all other documents, instruments, and agreements executed in connection with the seller-carried financing of the Loan Amount.

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3 1.2 Amendment to Section 3.1 (Seller’s Conditions Precedent to Closing of Escrow).

Section 3.1 of the Original Agreement is hereby amended as follows:

1.2.1 Section 3.1(A) is hereby amended and restated in its entirety to read as follows:
“(A) Buyer must deliver to Escrow Holder the duly executed Loan Documents”;

1.2.2 A new Section 3.1(F) is hereby added to the Original Agreement to read as follows:
“(F) Buyer shall have delivered to Escrow Holder the duly executed Loan Documents.”

1.3 Amendment to Section 3.2 (Buyer’s Conditions Precedent to Closing of Escrow).

A new Section 3.2(F) is hereby added to the Original Agreement to read as follows:
“(F) Seller shall (i) have approved the form and substance of all Loan Documents, (ii) have delivered to Escrow Holder the duly executed Loan Agreement and any other Loan Document requiring Seller’s signature, and (iii) shall be prepared to credit the Loan Amount against the Purchase Price at the Close of Escrow.”

1.4 Amendment to Section 4.6 (Escrow Closing Costs). Section 4.6 of the Original Agreement is hereby amended by adding a new Section 4.6(D) to read as follows:
“(D) Buyer shall pay all costs and expenses associated with the Loan Documents.”

1.5 Amendment to Section 4.7 (Obligations of Buyer). Section 4.7 of the Original Agreement is hereby amended as follows:

1.5.1 The introductory paragraph of Section 4.7 is hereby amended and restated in its entirety to read as follows:
“4.7 Obligations of Buyer. If all of the conditions precedent have been met or waived, then by Close of Escrow, Buyer must deposit with Escrow Holder all amounts for which Buyer is responsible. Buyer must also deposit the following documents:”

1.5.2 A new Section 4.7(E) is hereby added to the Original Agreement to read as follows:
“(E) Original duly executed counterparts of all Loan Documents required to be executed by Buyer at the Close of Escrow.”

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4 1.6 Amendment to Section 4.8 (Obligations of Seller). Section 4.8 of the Original Agreement is hereby amended by adding a new Section 4.8(F) to read as follows:
“(F) Such Loan Documents as may be reasonably required by Escrow Holder to evidence Seller’s crediting of the Loan Amount and to effectuate the seller-carried financing, including without limitation the Loan Agreement.”

1.7 Amendment to Section 4.12 (Recording of Documents and Delivery of Funds).

Section 4.12 of the Original Agreement is hereby amended as follows:

1.7.1 Section 4.12(A) is hereby amended and restated in its entirety to read as follows:
“(A) Disburse to Seller the Deposit, less any Closing Costs owed by Seller under this Agreement;”

1.7.2 A new Section 4.12(E) is hereby added to the Agreement to read as follows:
“(E) Deliver to Seller the fully executed original of the Loan Agreement.”

1.8 Amendment to Exhibits. Exhibit A to this First Amendment is hereby added to the Original Agreement as Exhibit C – Form of Loan Agreement

2. Further Assurances; Cooperation. Each of the Parties shall execute such other and further documents and do such further acts as may be reasonably required to effectuate the intent of the Parties and carry out the terms of this First Amendment, including without limitation execution and delivery of the Loan Documents.

3. No Further Amendment. Except as expressly provided in this First Amendment, the Original Agreement remains unmodified and in full force and effect. Further, all the terms and provisions of the Original Agreement apply to this First Amendment except as explicitly modified by this First Amendment.

4. Interpretation. The provisions of this First Amendment shall be construed as to the fair meaning and not for or against any Party based upon any attribution of such Party as the sole source of the language in question. In the event of any inconsistency between this First Amendment and the Original Agreement, the terms of this First Amendment shall prevail.

5. Counterparts. This First Amendment may be executed in counterparts, each of which shall be deemed an original, but all of which, taken together, shall constitute one and the same instrument. To facilitate execution of this First Amendment, the Parties may execute and exchange by electronic mail counterparts of the signature pages. [Signature Page Follows]

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IN WITNESS WHEREOF, the Parties have executed this First Amendment as of the Effective Date first set forth above.

SELLER:

SAN LUIS COASTAL UNIFIED SCHOOL

DISTRICT,
a public corporation
By:

Name:

Title:

BUYER:

CITY OF MORRO BAY,
a municipal corporation
By:

Name:

Title:

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EXHIBIT A

FORM OF LOAN AGREEMENT
[See attached]

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LOAN AGREEMENT
BASIC TERMS:

Effective as of: ________________ (the “Effective Date”) LENDER:

San Luis Coastal Unified School District, a
public corporation
BORROWER:

City of Morro Bay, a municipal corporation
Business Address: Business Address:
1500 Lizzie Street, San Luis Obispo, CA
93401
595 Harbor Street, Morro Bay, CA 93442
Loan Amount:

Four Million Eight Hundred Thousand Dollars
($4,800,000.00)
Loan Term:

One (1) year from the Close of Escrow, with the
option to elect to extend the Maturity Date up to two
(2) times (see Section 3)
Interest Rate:
0% per annum for the original loan term, and

2.00% per annum on any remaining Loan
Amount commencing November 1, 2027 (see
Section 3)
Loan Maturity Date:

October 31, 2027 for the original loan term,
October 31, 2028 if the First Option Term is
exercised and October 31, 2029 if the Second
Option Term is exercised (see Section 3)
Loan Disbursement:

Credit applied against Purchase Price at Close
of Escrow
Property:

Approximately 9.70 acres commonly known as the
former site of Morro Elementary School, located at
1130 Napa Avenue, Morro Bay, California 93442,
Assessor’s Parcel Numbers 066-044-011 and 066-
280-045

RECITALS
A. Lender is the owner of the real property consisting of approximately 9.70 acres commonly known as the former site of Morro Elementary School, located at 1130 Napa Avenue, Morro Bay, California 93442, Assessor’s Parcel Numbers 066-044-011 and 066-280-045, and as more particularly described in Exhibit A attached hereto (the “Property”).

B. Pursuant to that certain Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions Between The San Luis Coastal Unified School District and City of Morro Bay dated March 13, 2026, as amended by that certain First Amendment to Agreement for Purchase and Sale of Real Property and Joint Escrow Instructions Between

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2 The San Luis Coastal Unified School District and City of Morro Bay dated [____________] (collectively, the “PSA”), by and between Lender, as seller, and Borrower, as buyer, Lender has agreed to sell to Borrower, and Borrower has agreed to purchase from Lender, the Property, for a purchase price of Five Million Three Hundred Thousand Dollars ($5,300,000.00) (the “Purchase Price”).

C. Borrower has requested that Lender provide seller-carried financing in the amount of Four Million Eight Hundred Thousand Dollars ($4,800,000.00) (the “Loan Amount”) in order to finance a portion of the Purchase Price for the Property, and Lender has agreed to make a loan (the “Loan”), in the Loan Amount, on the terms and conditions set forth in this Loan Agreement and any other documents, instruments, and agreements executed by Borrower in connection with the Loan (collectively, the “Loan Documents”). The Loan is unsecured.

D. Borrower has determined that it has sufficient general fund balances and other assets from which Borrower can reasonably expect to receive revenue sufficient to pay the balance due under the Loan within one (1) year without having to levy additional taxes. Specifically, Borrower has identified the following existing and anticipated revenue sources and assets that are lawfully available to fund the Purchase Price and the repayment of the seller-carried financing contemplated herein: (i) economic development funds; (ii) development impact fees lawfully available for such purpose; (iii) existing general fund balances; (iv) anticipated proceeds from the future disposition of other Borrower-owned real property, including without limitation the property commonly known as the “Teen Center”; and (v) other lawfully available revenues from currently approved general taxes (collectively, the “Available Revenues”).

E. Borrower desires to enter into this Loan Agreement for short-term, seller-carried, financing at a below-market interest rate, because it is in the public interest to minimize the expenditure of Borrower’s resources during the transition period associated with the acquisition of the Property and future planning efforts that would occur prior to reuse of the Property, which is a former school site being transferred for other community use or purposes. As part of Borrower’s regular annual budget process, the City Council of the City of Morro Bay (the “City Council”) will determine whether it desires to pay off the sum then due under this Loan Agreement or to exercise the Extension Option (as defined in the PSA) to extend the term under this Loan Agreement for one (1) additional year.

F. Lender desires to make the Loan to Borrower, on the terms and conditions set forth herein.

NOW THEREFORE, in consideration of the above Recitals, which are hereby incorporated by reference as if set in full herein, and the representations, warranties, covenants and conditions contained herein, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, Lender and Borrower agree as follows:

1. LOAN. Lender shall lend to Borrower, and Borrower shall borrow from Lender, the Loan Amount, in accordance with the Basic Terms and the provisions of this Loan Agreement.

Borrower hereby promises to pay Lender the Loan Amount, together with interest thereon,

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3 if any, as provided in this Loan Agreement. All payments under this Loan Agreement shall be made in lawful money of the United States of America.

2. USE OF LOAN FUNDS. The Borrower shall only use the Loan proceeds for payment of the Purchase Price for the Property.

3. LOAN MATURITY DATE AND OPTIONS TO EXTEND. The Loan shall mature on October 31, 2027 (the “Maturity Date”), and shall be all and due and payable by Borrower to Lender. The Loan may be repaid in full or in part at any time prior to the applicable Maturity Date without the consent of Lender and without penalty, premium or bonus.

Upon any prepayment, interest shall accrue on the prepaid principal only through the date of such prepayment, and Borrower shall pay all interest accrued on the prepaid principal through such date; no interest shall accrue on any prepaid principal after the date of prepayment. No written demand is required from Lender for any payment due under this Loan Agreement. Notwithstanding the foregoing, the Borrower may, at its option, elect to extend the Maturity Date up to two (2) times, pursuant to the terms set forth in Sections

3.1 through 3.3 below. The amounts due under each alternative are summarized in the Loan Payment Schedule set forth in Section 3.4 below.

3.1 First Option Term (November 1, 2027). On or before the Maturity Date, Borrower may elect by written notice to the Lender to enter into an optional extension term of one (1) year commencing on November 1, 2027 and terminating on October 31, 2028 (the “First Option Term”). With such written notice of extension, Borrower shall pay Lender a first installment of Five Hundred Thousand Dollars ($500,000.00). Such installment shall be applied entirely to principal. During the First Option Term, interest shall accrue annually on the remaining outstanding principal balance. Assuming that no sum has been prepaid, the outstanding principal balance to which the interest shall accrue at the Interest Rate shall be Four Million Three Hundred Thousand Dollars ($4,300,000.00). In event of such written notice of extension, October 31, 2028 will become the Extended Maturity Date.

3.2 Second Option Term (November 1, 2028). On or before the Extended Maturity Date (October 31, 2028), Borrower may elect by written notice to the Lender to enter into an additional optional extension term of one (1) year commencing on November 1, 2028 and terminating on October 31, 2029 (the “Second Option Term”). With such written notice of extension, Borrower shall pay Lender a second installment of Two Million Dollars ($2,000,000.00). Such installment shall be applied entirely to principal, and all interest accrued during the First Option Term shall be deferred and due and payable on the Outside Maturity Date or upon earlier repayment of the Loan in full. During the Second Option Term, interest shall accrue annually on the remaining outstanding principal balance. Assuming that no sum has been prepaid, the outstanding principal balance to which interest shall accrue at the Interest Rate shall be Two Million Three Hundred Thousand Dollars ($2,300,000). In event of such written notice extension, October 31, 2029 will become the Outside Maturity Date.

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4 3.3 Outside Maturity Date (October 31, 2029). On the Outside Maturity Date (October 31, 2029) the entire then-outstanding principal balance of the Loan in the amount of Two Million Three Hundred Thousand Dollars ($2,300,000.00) (assuming that no sum has been prepaid), together with all accrued and unpaid interest thereon, and any other fees or costs due under this Loan Agreement shall be due and payable by Borrower to Lender.

3.4 Loan Payment Schedule. The following schedule (the “Loan Payment Schedule”) sets forth the amounts due on or before the Maturity Date, the Extended Maturity Date, and the Outside Maturity Date, depending on whether Borrower elects to repay the Loan or to exercise an option to extend and assuming that no prepayments are made:

Loan Repayment Schedule:

Borrower's
Election
October 31,
2027
(Maturity
Date)
October 31, 2028
(Extended
Maturity Date)
October 31, 2029
(Outside
Maturity Date)
Total
Interest
Total Paid
No option
exercised.

Repay in full at
the Maturity
Date.
$4,800,000 N/A N/A $0 $4,800,000
First Option
exercised.

Repay in full at
the Extended
Maturity Date.
$500,000, plus
written notice
$4,386,000
($4,300,000
principal +
$86,000 interest)
N/A $86,000 $4,886,000
Both options
exercised.

Repay in full at
the Outside
Maturity Date.
$500,000, plus
written notice
$2,000,000, plus
written notice
$2,432,000
($2,300,000
principal +
$86,000 interest +
$46,000 interest)
$132,000 $4,932,000
Prepayment
(any election)
Permitted at
any time
without
penalty. No
interest
accrues.

Permitted at any
time without
penalty. Interest
accrues only
through the date of
prepayment.

Permitted at any
time without
penalty. Interest
accrues only
through the date of
prepayment.

4. SOURCE OF REPAYMENT / AVAILABLE REVENUES. Borrower’s obligation to repay the Loan Amount under this Loan Agreement shall be payable solely from Borrower’s lawfully available funds, including, without limitation, the Available

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5 Revenues. The amount of any repayment under this Loan Agreement shall not be raised by the levy of additional taxes.

5. CONSTITUTIONAL DEBT PROTECTIONS. Borrower covenants to take such action as may be necessary to include all payments due under this Loan Agreement in its annual budget and to make the necessary annual appropriations for all such payments. The obligation of Borrower to make such payments shall be limited to the Available Revenues identified in Section 4 above or Borrower’s other lawfully available sources, but in no event from Borrower’s revenue raised by the levy of additional taxes. In the event of any default or breach of this Loan Agreement or the Loan Documents by Borrower, and subject to any applicable notice and cure periods set forth in Sections 13 and 14, Lender may, to the extent permitted by law, declare the Loan to be due and payable from the Available Revenues or Borrower’s other lawfully available sources, but in no event from revenue raised by the levy of additional taxes. The Parties acknowledge and agree that the obligations of Borrower under this Loan Agreement are not intended to constitute an indebtedness or liability of Borrower in contravention of any constitutional or statutory debt limitation, including without limitation Article XVI of the California Constitution.

6. ANNUAL BUDGET REVIEW. Borrower shall review the outstanding balance of the Loan annually as part of its regular budget process. In connection with each such annual review, the City Council may determine, in its sole and absolute discretion, whether to pay off the remaining balance of the Loan in full as set forth in the Loan Agreement or to extend payments under this Loan Agreement for the ensuing fiscal year, as set forth in Section 3 above. Nothing in this provision shall relieve Borrower of its obligation to make payments when due under is Loan Agreement, subject to the appropriation requirement set forth in Section 5 above.

7. LENDER’S ACKNOWLEDGMENT. Lender acknowledges and agrees that: (i) Borrower’s payment obligations under this Loan Agreement are subject to annual appropriation; (ii) the Loan does not create a general obligation or indebtedness of Borrower within the meaning of any constitutional or statutory debt limitation; and (iii) the Loan is unsecured, and Lender shall have no recourse to any assets, properties, or revenues of Borrower other than the Available Revenues.

8. FEES.

8.1 Late Fees. If payments of any amount due under this Loan Agreement or the other Loan Documents are not paid within thirty (30) days after such amount is due, a one (1) time late fee of three percent (3.00%) of the past due amounts shall be due by Borrow to Lender (“Late Charge”). Following payment of any overdue amount and any related Late Charge, if payments of any subsequent amount due under this Loan Agreement or other Loan Documents is thereafter not paid within thirty (30) days after such amount is due, a new Late Charge shall apply to such nonpayment.

8.2 Default Interest. If any amount due under this Loan Agreement or any Loan Document is not paid when due and remains unpaid for thirty (30) days thereafter, interest (“Default Interest”) shall accrue on such past due amount commencing on

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6 the thirty-first (31st) day at a rate equal to the Prime Rate (as published in The Wall Street Journal on the date of default, or if not published on such date, the most recently published Prime Rate) plus two percent (2.00%) per annum (the “Default Rate”). The Default Rate shall apply from the date such payment was originally due until paid in full.

8.3 Collection Costs. In the event either party institutes any action or proceeding to enforce or collect any amount due under this Loan Agreement, the prevailing party shall be entitled to recover its reasonable attorneys’ fees and court costs, as the court may adjudge reasonable.

9. OBLIGATIONS OF LENDER.

9.1 Lender shall credit the Loan Amount against the Purchase Price at the Close of Escrow in accordance with the PSA.

9.2 Upon receipt of payment in full of all amounts due under this Loan Agreement, Lender shall, within ten (10) business days, deliver to Borrower a written acknowledgment that the Loan has been paid in full and that Borrower has been released from all obligations under the Loan Documents.

10. BORROWER DUTIES DURING THE LOAN TERM. Borrower agrees that, so long as the Loan has not been paid in full, Borrower shall:

10.1 Promptly inform Lender in writing of any event or circumstance that could reasonably be expected to materially impair Borrower’s ability to make payments under this Loan Agreement.

10.2 Maintain its existence as a municipal corporation duly organized and validly existing under the laws of the State of California.

10.3 Make available to Lender, upon request, Borrower’s annual financial reports as published and available to the general public.

10.4 Notify Lender immediately in writing if it cannot or is not in compliance with any of the terms and conditions of this Loan Agreement.

10.5 Pay and indemnify, defend, and hold Lender and its respective officers, directors, employees, contractors and representatives (collectively the “Protected Parties”) harmless from and against any costs, expenses, claims, suits (including attorneys’ fees with counsel approved by Lender) and any other liabilities (collectively, “Claims”) which Lender may incur arising out of or in connection with Borrower’s breach of this Loan Agreement or Borrower’s negligent or wrongful acts or omissions. However, this Section 10.5 does not apply to any Protected Parties to the extent a Claim is caused by the gross negligence or intentional acts of such Protected Parties. This obligation on the part of Borrower shall survive the closing of the Loan, and shall continue for a period of one (1) year following the repayment of the Loan in full.

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7 11. BORROWER REPRESENTATIONS AND WARRANTIES. In making its decision to make the Loan to Borrower, Lender has relied on the following representations and warranties from Borrower as Lender would not have approved or made the Loan to Borrower if such representations and warranties are not, and were not, made and true:

11.1 All information and materials Borrower has provided to Lender for this Loan and all supplemental and additional materials provided in connection with the Loan Agreement are true and complete and any material or other important information has not been left out and information has not been provided in a way which is misleading.

11.2 Borrower is a municipal corporation duly organized and validly existing under the laws of the State of California. Borrower has full power and authority to enter into this Loan Agreement and the other Loan Documents and to perform its obligations hereunder and thereunder. The execution and delivery of this Loan Agreement and the other Loan Documents have been duly authorized by the City Council of the City of Morro Bay. All parties signing this Loan Agreement on behalf of Borrower are authorized to do so.

11.3 The Business Address for Borrower provided in the Basic Terms is the Borrower’s primary place of business and it is located in the County of San Luis Obispo.

11.4 There is no pending or, to Borrower’s knowledge, threatened litigation, proceeding, or claim against Borrower that could reasonably be expected to materially impair Borrower’s ability to perform its obligations under this Loan Agreement.

Borrower agrees that all of the representations and warranties of Borrower set forth in this Loan Agreement and the other Loan Documents shall be deemed given and made as of the date hereof and survive for so long as any amount remains owing to Lender under this Loan Agreement and the other Loan Documents by Borrower unless a longer survival period is expressly stated in this Loan Agreement or the other Loan Documents with respect to a specific representation or warranty, in which case, for such longer period.

12. EVENTS OF DEFAULT. Each of the following shall be an “Event of Default” under this Loan Agreement:

12.1 Borrower fails to make any payment due under this Loan Agreement within thirty (30) days after such payment is due.

12.2 Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Loan Agreement or the Loan Documents after any applicable notice and cure period set forth in the applicable agreement or in Section 14 below, as applicable.

12.3 Any covenant, representation, warranty, or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Loan Agreement or the Loan Documents is false or misleading in any significant respect as of the date made.

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8 12.4 Borrower’s dissolution or disincorporation as a municipal corporation, or the commencement of any proceeding under Chapter 9 of the United States Bankruptcy Code by or against Borrower.

12.5 Any breach or default under any of the other Loan Documents, subject to any applicable notice and cure periods set forth therein.

13. BORROWER RIGHT TO CURE. If any default, other than a default with regard to payments due under this Loan Agreement, can be cured by Borrower’s reasonable action, Borrower shall have thirty (30) days after the notice of the default has been given by Lender to cure the default. If the cure reasonably requires more than thirty (30) days Borrower shall have up to a total of ninety (90) days to cure the default as long as Borrower is diligently and in good faith attempting to cure the default in the initial 30-day period and continues to prosecute such cure at all times. From the thirty-first (31st) day, Default Interest shall accrue while Borrower takes reasonable action to cure the default.

14. EFFECT OF AN EVENT OF DEFAULT. If any Event of Default shall occur, Lender may, at its option and upon not less than thirty (30) days’ prior written notice to Borrower, declare all outstanding amounts relating to this Loan Agreement including, but not limited to, the Loan Amount and accrued interest to be immediately due and payable. Subject to Sections 5,7, and 13 of this Loan Agreement, and except as may be prohibited by applicable law, Lender’s rights and remedies under this Loan Agreement shall be cumulative and may be exercised singularly or concurrently. Lender may pursue any remedy without limiting its ability to pursue a different remedy at the same time or later. Notwithstanding the foregoing, all remedies of Lender under this Loan Agreement are subject to the constitutional debt protections and limitations on recourse set forth in this Loan Agreement.

In no event shall Lender have recourse to revenues raised by the levy of additional taxes.

15. NOTICES. Any notice required to be given under this Loan Agreement shall be given in writing, and shall be effective when actually delivered, when deposited with a nationally recognized overnight courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid, directed to the Business Addresses shown in the Basic Terms of this Loan Agreement. Any party may change its Business Address for notices under this Loan Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s Business Address.

For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current Business Address. Notwithstanding the above, if a party refuses to accept notices given by courier or certified mail after two (2) attempts have been made to deliver notice by such means, then such notice shall be deemed received as of the date the first attempt at service of such notice was made.

16. ADDITIONAL PROVISIONS. Borrower and Lender also agree to the following terms and conditions:

16.1 This Loan Agreement and the other Loan Documents entered into in connection with this Loan are the entire understanding and agreement of Borrower and Lender as to the matters set forth in this Loan Agreement. No other promises or terms or

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9 conditions are intended unless otherwise set forth in the PSA. If any other promises or terms or conditions have been made to Borrower by any person including any representative of Lender and they are not stated in this Loan Agreement they shall not be considered a part of this Loan Agreement or relevant to the interpretation of the promises or terms or conditions made in this Loan Agreement.

16.2 No amendment or other change to the promises or terms or conditions of this Loan Agreement shall be effective unless given in writing and signed by Borrower and Lender.

16.3 If Lender institutes any suit or action to enforce any of the terms of this Loan Agreement, the prevailing party shall be entitled to recover such sum as the court may adjudge reasonable.

16.4 Borrower is not, nor has it ever been (i) listed on any Government Lists (as defined below), (ii) a person who has been determined by a Governmental Authority to be subject to the prohibitions contained in Presidential Executive Order No. 13224 (Sept. 23, 2001) or any other similar prohibitions contained in the rules and regulations of the Office of Foreign Assets Control (“OFAC”) or in any enabling legislation or other Presidential Executive Orders in respect thereof, (iii) indicted for or convicted of any felony involving a crime or crimes of moral turpitude or for any Patriot Act Offense, or (iv) under investigation by any Governmental Authority for alleged criminal activity. For purposes hereof, the term “Patriot Act Offense” shall mean any violation of the criminal laws of the United States of America or of any of the several states, or that would be a criminal violation if committed within the jurisdiction of the United States of America or any of the several states, relating to terrorism or the laundering of monetary instruments, including any offense under (A) the criminal laws against terrorism; (B) the criminal laws against money laundering, (C) Bank Representative Secrecy Act, as amended, (D) the Money Laundering Control Act of 1986, as amended, or (E) the Patriot Act. Patriot Act Offense also includes the crimes of conspiracy to commit, or aiding and abetting another to commit, a Patriot Act Offense. For purposes hereof, the term “Government Lists” shall mean (1) the Specially Designated Nationals and Blocked Persons Lists maintained by OFAC, (2) any other list of terrorists, terrorist organizations or narcotics traffickers maintained pursuant to any of the Rules and Regulations of OFAC, or (3) any similar lists maintained by the United States Department of State, the United States Department of Commerce or any other Governmental Authority or pursuant to any Executive Order of the President of the United States of America.

16.5 Whenever the context requires, all words used in the singular will be construed to have been used in the plural, and vice versa, and each gender will include any other gender. The captions of the paragraphs of this Loan Agreement are for convenience only and do not define or limit any terms or provisions. Time is of the essence in the performance of this Loan Agreement by Borrower. This Loan Agreement shall not be interpreted in favor of or against any Party on account of relative responsibilities in drafting. As used in this Loan Agreement, the word “includes”

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10 or “including” means including without limitation, the word “or” is not exclusive and the words “herein,” “hereof,” “hereto” and hereunder refer to this Loan Agreement as a whole. Unless the context otherwise requires, references herein:
(i) to articles, paragraphs, sections and exhibits mean the articles, paragraphs, sections and exhibits which are part of this Loan Agreement, (ii) to an agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and by this Loan Agreement and (iii) to a statute means such statute as amended from time to time and includes any successor legislation thereto. This Loan Agreement is made solely for the benefit of Lender and Borrower and their respective permitted successors and assigns, and no other person or entity shall have or acquire any rights under this Loan Agreement unless expressly stated to the contrary in this Loan Agreement. Notwithstanding any other provision of this Loan Agreement, nothing herein or in this Loan Agreement shall be deemed to require Borrower to pay interest in an amount in violation of any applicable usury law or other legal limitation on interest, and the terms hereof shall be interpreted to require in each instance the lesser of (i) the amount stated in this Loan Agreement; and (ii) the maximum applicable legal limit.

16.6 Any waiver by Lender must be in writing and will not be construed as a continuing waiver. No waiver will be implied from any delay or failure by Lender to take action on account of any default of Borrower. Consent by Lender to any act or omission by Borrower will not be construed to be a consent to any other or subsequent act or omission or to waive the requirement for Lender’s consent to be obtained in any future or other instance.

16.7 An electronic signature or digital signature is recognized as a valid signature under California Government Code §16.5. Borrower promises and confirms that if it is using a digital signature, the digital signature it is using to sign this Loan Agreement complies with the regulation issued by the California Secretary of State with regard to digital signature which can be found at Title 2, Division 7, Chapter 10 of the California Code of Regulations. Borrower authorizes Lender to send and receive communications with Borrower by e-mail and Borrower understands that e-mail communications may not be private or secure and Lender shall have no liability for communicating with Borrower using e-mail. Because of potential risks or computer virus and malware infection, either party may at any time elect to not receive e-mail communications from the other. Lender may require Borrower to deliver an original ink signed duplicate of any document received with a digital signature.

16.8 All promises, terms and conditions contained in this Loan Agreement shall be legally binding on Borrower’s successors and assigns and shall be enforceable by Lender and its successors and assigns. Borrower shall not, however, have the right to assign Borrower’s rights under this Loan Agreement or any interest therein except as may be set forth in Section 16.13.

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11 16.9 Borrower understands and agrees that in making the Loan, Lender is relying on all promises and statements made by Borrower in this Loan Agreement or in any certificate or other instrument delivered by Borrower to Lender under this Loan Agreement. Borrower agrees that regardless of any investigation made by Lender, all such promises and statements will survive the making of the Loan, shall be continuing in nature, and shall remain in full force and effect until such time as all obligations related to this Loan Agreement are paid in full.

16.10 This Loan Agreement will be governed by the laws of the State of California without regard to its conflicts of law provisions. This Loan Agreement has been accepted by Lender in the State of California. Any action or proceeding seeking any relief under or with respect to this Loan Agreement shall be brought solely in the Superior Court of the State of California for the County of San Luis Obispo.

16.11 This Loan Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute one and the same document.

16.12 Borrower shall promptly notify Lender in writing in the event of any change in the Borrower’s name, legal structure or principal place of business.

16.13 Borrower and Lender acknowledge and agree that this Loan Agreement is made between them as California governmental entities in performance of each of their unique governmental missions; consequently, neither this Loan Agreement nor any rights or obligations under this Loan Agreement may be assigned or assumed by any other entity other than a successor agency performing the Borrower or Lender’s entire mission pursuant to California law.

16.14 If any provision of this Loan Agreement is held to be invalid, illegal, or unenforceable by a court of competent jurisdiction, such invalidity, illegality, or unenforceability shall not affect any other provision of this Loan Agreement, and this Loan Agreement shall be construed as if such invalid, illegal, or unenforceable provision had never been contained herein.

16.15 The Loan is evidenced solely by this Loan Agreement, and no promissory note shall be required in connection with the Loan. Notwithstanding the foregoing, upon Lender’s written request, Borrower shall prepare and deliver to Lender a commercially reasonable promissory note consistent with, and limited to, the terms of this Loan Agreement. In the event of any conflict between any such promissory note and this Loan Agreement, this Loan Agreement shall control. [Signature pages start after this page]

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IN WITNESS WHEREOF, the Parties have executed this Loan Agreement as of the Effective Date.

BORROWER:

City of Morro Bay,
a municipal corporation
By:

Name:

Title:

LENDER:

San Luis Coastal Unified School District,
a public corporation
By:

Name:

Title:

Loan Agreement Signature Page
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Exhibit A
Legal Description
4925-2861-0518, v. 2

Prepared By: JC Dept Review:

City Manager Review: JC City Attorney Review: BS
Staff Report
TO: Honorable Mayor and City Council DATE: October 8, 2026 FROM: John Craig, City Manager
Brian Stack, City Attorney
SUBJECT: Council Subcommittee on Morro Elementary Deliverables and Anticipated Timeline

RECOMMENDED ACTION

1. Receive the subcommittee's proposed work plan.

2. Discuss whether the areas identified in this report should be added to the subcommittee's analysis over the coming four to six months.

3. Provide direction on staff support, dates for interim progress updates, and a date for the subcommittee's final report to the full Council.

BACKGROUND
On September 22, 2026, the Council chose a Council subcommittee to lead post-closing planning for the former Morro Elementary School site at 1130/1330 Napa Avenue. The members are Councilmembers Landrum and Luffee.

The subcommittee provided the proposed work plan, titled Morro Bay City Campus Subcommittee Report (Attachment 1). It describes a four- to six-month visioning process led by the subcommittee, with:
 An introductory town hall on November 14, 2026, at the Veterans' Memorial Building, and a closing town hall on outcomes and next steps.
 "Saturdays on the Porch," informal sessions most Saturdays from noon to 1 p.m. at the school.  Monthly updates at City Council meetings.
 Four research topics with invited topic advisors: event spaces, open space, and fields; City Hall relocation and reuse of the existing City Hall site; city-wide visioning; and finance.

The work plan gives the public an early and visible role and identifies several of the issues necessary to move forward. This staff report compares it with the record from the Council's August 25, 2026, suitability determination. That record includes a $5.3 million purchase closing by October 31, 2026, and a $8.5 million rough order of magnitude estimate for rehabilitation as a new City Hall.

The areas below are other considerations the Council might want to include in the work plan. What to add is a decision for the Council and the subcommittee. Staff offers the list as a starting point for that discussion.

AGENDA NO: 8.d
MEETING DATE: October 13, 2026

2 DISCUSSION
A. Scope parameters for the subcommittee
The subcommittee's product should be a recommendation on what the site should become and how the City gets that result, tested against the constraints already on the record. To ensure the end product meets this objective, staff recommend the Council discuss the following ten topics and provide any necessary direction to the Subcommittee.

Area Council consideration
Funding for purchase and
renovation
How much information does Council want to know about how each concept works to cover the $5.3 million purchase price and $8.5 million renovation estimate?
Carrying and operating costs What does the site cost each year to maintain before reuse and after, and is there an interim use planned?
Housing on the school site
The site is zoned for housing and will likely be needed to meet the City’s housing goals in the upcoming Housing Element update. As described in the Due Diligence Report, the site’s housing potential is also a critical part of the plan to pay for the purchase of the site and preservation of the historic schoolhouse into a civic use. Should the Due Diligence Report's housing scenarios (A, B, C) be evaluated, since they are a potential source of closing the funding gap? What is expected in terms of housing?
Historic resource How would each concept treat the character-defining features and keep tax credit eligibility?
Entitlements and
environmental review
What land use permit, coastal permit, and CEQA steps would each concept need, and how long would they take to accomplish?
Scope beyond the site What is anticipated to be discussed beyond the school site, or should the focus be kept on the school site alone?
Topic advisors How are advisors chosen, and how are conflicts handled if an advisor later seeks City work on the site?
Advisory bodies and partners
When do the Planning Commission, Recreation and Parks Commission, Citizens Finance Advisory Committee, and Friends of Morro Elementary weigh in? What role does each have?
Outreach logistics and cost Who handles venues, noticing, site access and insurance, and where should those expenses be charged?
End product What decision will the Council be asked to make at the end, and will there be a written final report?
B. Staff support
The work plan describes the research and public sessions as subcommittee-led, and staff supports that approach. No additional staff position is budgeted for this effort. Community Development time assigned to it would come out of permit processing and other adopted Council priorities.

Staff proposes to support the subcommittee in three ways:
 Check-ins with the City Manager, Community Development Director, City Attorney, with other

3 directors joining as topics require to answer questions on development process, entitlements, building code, and City finances.
 Providing copies of existing records, including the Due Diligence Report, historic resource report, and cost estimates.
 Placing the subcommittee's updates and reports on Council agendas.

Research, writing, advisor coordination, and town hall logistics would remain with the subcommittee.

If the work turns out to need more staff time, a consultant, or an outreach budget, staff suggests the subcommittee request those from the full Council.

C. Reporting dates
The work plan sets a four- to six-month window and a first town hall on November 14, but no final report out or written report for Council. The Council may wish to ask for a written interim update near the midpoint (for example, January 26, 2027) and a written final report by a set date (for example, April 27, 2027). The midpoint gives the three members not on the subcommittee a chance to weigh in before recommendations take shape.

D. Procedural note
The subcommittee can meet without having to comply with Brown Act requirements if it remains a temporary, advisory body of fewer than three Council Members. The following practices will help maintain that status:
 Keep Subcommittee membership to the two Council Members. Adding community members or outside partners as members would result in a Council formed subsidiary body subject to the Brown Act. The subcommittee can consult with outside parties, but it should not seat them or identify them as members.
 Avoid serial meetings. Subcommittee members should not brief or poll a third Council Member outside a noticed meeting. Oral or written updates to the rest of the Council will occur at an open and noticed meeting in full compliance with Brown Act requirements.  Treat the work as a public record. Subcommittee emails, notes, and drafts about City business are potential public records regardless of the account or device used. Subcommittee members should use their City email account when engaged in Subcommittee related communications or work.

CONCLUSION
The subcommittee's work plan gets public engagement underway quickly. Council discussion of the added analysis areas, staff support, and a final report date would help the process end with recommendations the full Council can act on.

The interim report is the initial control point. It lets the three members not on the subcommittee redirect the work at the halfway mark, as necessary, before any preferred concept is finalized by the subcommittee. It is also where the Council can decide whether the work needs resources beyond the monthly check-ins.

After the final report, the Council would decide the next steps. Options at that point include directing staff to scope a follow up work plan, issue a request for proposals, or returning items to the subcommittee under a defined extension of scope and timing expectations.

ATTACHMENT(S)

1. Morro Bay City Campus Subcommittee Report

Morro Bay City Campus
Two City Council member adhoc SubCommittee-
-public meetings
-research & information gathering
Proposed agenda and topics:
•a 4 to 6-month post-closing visioning process
Public Input sessions, City Council SubCommittee-led:

1. Introductory Town Hall Meeting, November 14, 2026 at Vet’s Hall: introduce SubCommittee agenda and topics with invited topic leaders for community discussion

2. “Saturdays on the Porch” with Zara & Bill: SubCommittee Members available for input and discussion, most Saturdays 12-1 pm on Morro Elementary front porch

3. Monthly Update report at City Council meetings: by the City Council Subcommittee members

4. Summation Town Hall Meeting: for Outcomes / Next Steps / Community Comments and Recommendations
Research & Information Gathering Topics, City Council
SubCommittee-led:
•Topic Advisors invited by Subcommittee Council members A. Event Spaces / Open Spaces / Soccer Fields: management / income / programming / landscape design
B. City Hall Relocation to Morro Elementary: phasing adaptive reuse renovations, scope / cost / financing / State Historic Building Code Existing City Hall Site Reimagining: uses / housing / capacity / zoning / partnerships C. City Wide Visioning / connecting the dots and ‘curated development’:

Summations / Zoning / Housing Element / Land-use
D. Finance / Income Considerations:
fundraising / grants / foundation participation / historic tax credits / public-private partnerships
•City Council Subcommittee Mission is to introduce and connect the topics to provide an inclusive overview and facilitate visioning with next step recommendations by the City Council Subcommittee through community and professional input.