Nevertheless, if the FDB continues to follow federal
policy on hemp, that SB 1409 has no impact on
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lines for commercial or other purposes. It also puts
no restrictions on the sale, transport, or possession
of hemp-derived products, so long as those items
are produced in a manner consistent with the law.
Nevertheless, the CBD extracted from industrial
hemp remains largely unregulated and to the
extent that the FDA and FDB have taken positions,
those positions are not well-known. Unregulated
CBD sales have proliferated throughout California,
creating practical and regulatory challenges for
cities. The FDA reports that it will continue to focus
on supporting scientific testing and approval of
drugs that are derived from cannabis. The FDA
also reports that it will solicit input on how to make
legal pathways for the lawful marketing of these
products and continue to protect and promote the
public health. The drafters of this guide recommend
checking the FDA’s website at fda.gov for the most
up-to-date information on the FDA’s position CBD.
These positions will inform the state FDB. The most
up to date information from the state FBD can be
found at cdph.ca.gov.
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PART 4 | Finance and
Taxation
Cannabis operations impose financial challenges
and benefits on both operators and regulators alike.
The goal is to strike a balance that raises revenue
(or, at minimum, defrays the cost of regulation)
without driving operators out of business or
otherwise deterring compliance, thereby indirectly
perpetuating the illegal market. This chapter
discusses financial tools for regulators, including
the imposition of fees and taxes on cannabis
operations, as well as laws affecting operators’
access to banking solutions.
I. FEES AND COSTS
A. Cost to Cities
The costs incurred by cities from cannabis
operations may vary greatly depending on the
unique local regulations of each jurisdiction.
These costs may include costs associated with
the processing and issuance of permits, initial
and ongoing inspection costs, enforcement costs
(including implementation of track-and-trace
programs), and in some cases, costs associated
with the use of public property.
B. Fees
Imposition of fees is one means of cost recovery
attendant to local regulation. Under the California
Constitution, fees are distinct from taxes as an
exercise of local police powers to advance a
regulatory purpose or recover costs for a benefit
conferred or a service provided by a local agency.
Taxes, however, are generally imposed for revenue
purposes.322
322 See Sinclair Paint Co. v. State Bd. of Equalization (1997) 15 Cal.4th 866, 874, 879–880; California Building Industry Association v. State Water Resources Control Board (2018) 4 Cal.5th 1032, 1046.
1. The Distinction Between Fees and Taxes
The constitutional distinction between taxes and
fees was clarified with the adoption of Proposition
26 in 2010, which defined local agency taxes under
the California Constitution as:
. . . [A]ny levy, charge, or exaction of any kind
imposed by a local government, except the
following:
1. A charge imposed for a specific benefit
conferred or privilege granted directly to
the payor that is not provided to those not
charged, and which does not exceed the
reasonable costs to the local government of
conferring the benefit or granting the privilege.
2. A charge imposed for a specific government
service or product provided directly to the
payor that is not provided to those not
charged, and which does not exceed the
reasonable costs to the local government of
providing the service or product.
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3. A charge imposed for the reasonable
regulatory costs to a local government for
issuing licenses and permits, performing
investigations, inspections, and audits,
enforcing agricultural marketing orders,
and the administrative enforcement and
adjudication thereof.
4. A charge imposed for entrance to or use of
local government property, or the purchase,
rental, or lease of local government property.
5. A fine, penalty, or other monetary charge
imposed by the judicial branch of government
or a local government, as a result of a violation
of law.
6. A charge imposed as a condition of property
development.
7. Assessments and property-related fees
imposed in accordance with the provisions of
Article XIII D.323
This definitional distinction is important because
taxes are subject to approval by the electorate,
while certain types of fees can be adopted without
voter approval.324
However, Proposition 26 imposes a burden on
local government agencies to demonstrate “by a
preponderance of the evidence” that:
◆ A fee is not a tax;
323 Cal. Const. art. XIII C, § 1, subd. (e).
324 See Cal. Const. art. XIII C, § 2. See also Johnson v. County of Mendocino (2018) 25 Cal.App.5th 1017, 1032–1033 (construing Proposition 26, which amended section 3 of Article XIII C of the California Constitution, to hold that a charge on the gross receipts of commercial cannabis activities was a tax and not a fee).
325 Cal. Const. art. XIII C, §1, subd. (e).
326 See League of California Cities, Propositions 26 and 218 Implementation Guide (2019), pp. 77–78, available at https://www.calcities.org/detail-pages/ resource/propositions-26-and-218-implementation-guide-may-2019 (opining that the burden applies only to three of the seven exceptions that mention the “reasonable cost requirement”).
327 See generally Newhall County Water Dist. v. Castaic Lake Water Agency (2016) 243 Cal.App.4th 1430, 1449, holding that a water district could not impose conservation rates on a water retailer for groundwater that it did not supply. ◆ The amount of the fee is no more than
necessary to cover the reasonable costs of the
governmental activity; and
◆ The manner in which those costs are
allocated to a payor bears a fair or reasonable
relationship to the payor’s burdens on, or
benefits received from, the governmental
activity.325
There is some debate as to whether the foregoing
burden applies to all seven fees and charges set
forth in subsection (e) of section 1 of Article XIII C of the California Constitution, or to just the first three enumerated fees.326
2. Fees and Local Cannabis Regulation
a. Regulatory Fees
Fees “imposed for the reasonable regulatory
costs to a local government” are undoubtedly one
of the most commonly employed charges in the
regulation of cannabis operations. To impose a
regulatory fee a local agency must first establish a
lawful regulatory process for the cannabis facilities
in its jurisdiction.327 Consequently, the validity of
any city fees will be constrained by the unique
regulatory program of that city. Depending on the
scope of a city’s regulatory scheme, appropriate
fees could include recovery of the reasonable
costs for:
◆ Review and processing of permit applications,
including associated noticing and hearings;
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◆ Investigation of prospective applicants;
◆ Inspections of the premises, products,
equipment, and personnel involved in the
operation;
◆ Review of the tracing and tracking of cannabis
and cannabis products, including any license or
access fees to intellectual property employed
in the process;
◆ Auditing transactional records; and
◆ Reasonably anticipated costs for administrative
enforcement of the agency’s regulations.
Proposition 26 is generally perceived as having
eliminated an agency’s ability to impose a
regulatory fee directed at mitigating the adverse
impacts of the regulated product or business.328
However, agencies may be able to impose such
impact fees as part of a land use approval. (See
discussion of Fees Imposed as a Condition of
Property Development below.)
In determining whether a regulatory fee satisfies
Proposition 26’s constraints, it is not normally
necessary to finely calibrate the fee to each
individual subject to the fee. Instead, the fee is
measured collectively. Proposition 26 should be
satisfied if the fee does not “exceed the reasonable
cost of regulation with the generated surplus used
for general revenue collection.”329
328 See League of California Cities, Proposition 26 and 218 Implementation Guide (2019), pp. 69, available at https://www.calcities.org/detail-pages/ resource/propositions-26-and-218-implementation-guide-may-2019. 329 Griffith v. City of Santa Cruz (2012) 207 Cal.App.4th 982, 997. 330 Cal. Const. art. XIII C, §1, subd. (e)(6).
331 See Russ Bldg. Partnership v. City and County of San Francisco (1987) 199 Cal.App.3d 1496, 1504 (affirmed in part, reversed in part); Trent Meredith, Inc. v. City of Oxnard (1981) 114 Cal.App.3d 317, 325; Cal. Gov. Code §§ 66000 et. seq.
Practice Tip: It is critical to create and
maintain detailed records showing how
the costs of the regulatory program were
determined, and how those costs were
spread among the fee payors. Determining
a reasonable estimate of costs may
prove challenging when establishing a
new regulatory program with no prior
history for such things as anticipated
enforcement costs. You may want to look to
the experience of other more established
regulatory schemes in similar jurisdictions to
gather evidence about likely costs.
b. Fees Imposed as a Condition of Property
Development
Proposition 26 recognizes the longstanding ability
of cities to impose fees as a condition of property
development.330 If a cannabis operation must
obtain a land use permit, the governing agency
has an additional opportunity to recover fees.
Development fees include the costs of reviewing
and processing the application for the proposed
project, and the costs to mitigate the adverse
impacts of the proposed project and to provide for
public facilities and services.331 Development fees
afford local agencies a means to recover funds
necessary to mitigate impacts to natural resources
and public facilities caused by the cultivation,
manufacturing, and processing of cannabis and
cannabis products, such as impacts on water
supplies and infrastructure, transportation, air
quality, and farmland.
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In order to pass constitutional muster, development
fees that are imposed as a condition of
development must have a logical “nexus” between
the impacts of the development and the purpose
for which the fee is imposed,332 as well as “rough
proportionality” in “nature and extent to the impact
of the proposed development.”333
Additionally, the Mitigation Fee Act334 places
further restrictions on the imposition and use of
development fees. Pursuant to the Act, an agency
imposing the fee must:
1. Identify the purpose of the fee.
2. Identify the use to which the fee is to be put.
If the use is financing public facilities, the
facilities shall be identified. That identification
may, but need not, be made by reference
to a capital improvement plan, may be
made in applicable general or specific plan
requirements, or may be made in other public
documents that identify the public facilities for
which the fee is charged.
3. Determine how there is a reasonable
relationship between the fee’s use and the
type of development project on which the fee
is imposed.
332 Nollan v. California Coastal Commission (1987) 483 U.S. 825, 837. 333 Dolan v. City of Tigard (1994) 512 U.S. 374, 391; see also Koontz v. St. Johns River Water Mgmt. Dist. (2013) 570 U.S. 595, 612 (applying the “Nollan/ Dollan test” to ad hoc, in-lieu fees to mitigate environmental impacts). 334 Gov. Code, §§ 66000 et. seq.
335 Gov. Code, § 66001, subd. (a).
336 Gov. Code, § 66001, subd. (b).
337 Gov. Code, §§ 66001, subd. (c), 66006, subd. (a).
338 Gov. Code, §§ 66001, 66006, 66016–66019.
339 Cal. Const. Art. XIIIC, § 1, subd. (e)(4).
340 City of Oakland v Burns (1956) 46 Cal.2d 401, 407. See also Citizens for Fair REU Rates v. City of Redding (2018) 6 Cal. 5th 1, 18 (budget transfer from enterprise fund to general fund that exceeded costs of services incurred by utility from other city departments was not a tax). 341 See League of California Cities, Proposition 26 and 218 Implementation Guide (2019), pp. 77-78, available at https://www.cacities.org/Prop218andProp26.
4. Determine how there is a reasonable
relationship between the need for the public
facility and the type of development project on
which the fee is imposed.335
If the fee is imposed as a condition of approval,
“the local agency shall determine how there is a
reasonable relationship between the amount of the
fee and the cost of the public facility or portion of
the public facility attributable to the development
on which the fee is imposed.”336 The funds must be
deposited in a separate account.337 The Act sets
forth various noticing and reporting requirements,
procedures for adopting fees, and provides for
return of the collected funds if a date is not timely
set for the commencement of the mitigation on
which the funds are to be spent.338
c. Fees for Use of Government Property
Some cities allow the use of their facilities, such as
fairgrounds, for cannabis events. Under Proposition
26, fees charged for use of government property
are one of the exceptions to the general rule that
any levy, charge, or exaction is a tax.339 Historically, this type of fee has not been limited to recovery of
an agency’s costs, allowing the agency to charge
whatever the market would bear.340 Whether
Proposition 26 changed the common law is subject
to debate.341
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d. Property-Related Fees
Proposition 218 as adopted by the voters in 1996
created special rules for fees “imposed by an
agency upon a parcel or upon a person as an
incident of property ownership, including a user
fee or charge for a property related service.”342
In the context of cannabis regulation, propertyrelated fees can arise for water irrigation charges related to cultivation. In this regard, the courts
have drawn a distinction between delivery of water
and regulation of groundwater. While charges for
supplying water through an established connection
are property-related service fees,343 charges on
groundwater pumping for the purpose of “the
conservation of limited groundwater stores, and
remediation of the adverse effects of groundwater
extraction,” are not considered property-related, but
regulatory.344
342 Cal. Const. Art. XIII D, § 2, subd. (e).
343 Bighorn-Desert View Water Agency v. Verjil (2006) 39 Cal.4th 205, 216. 344 City of San Buenaventura v. United Water Conservation Dist. (2017) 3 Cal.5th 1191, 1208. 345 Cal. Const., art. XIIID, §6, subd. (c).
346 Cal. Const., Art. XIIID, §6, subd. (a)(1).
347 Cal. Const., art XIIID, §6, subd. (a)(1).
348 Cal. Const., art. XIIID, §6, subd. (a)(1).
Practice Tip: When enacting fees related
to water use by cannabis cultivators, it is
important to build a clear record of the
purpose for the fee. If the charge is for
regulating the use of the water to avoid
adverse impacts on water supplies, rather
than on merely supplying the water, then
the fee should not be subject to the onerous
procedural requirements that apply to
property-related fees.
While property-related water, sewer, and refuse
collection fees are subject to the substantive and
majority protest requirements of Proposition 218,
those fees are exempt from the voter-approval
requirement that applies to all other propertyrelated fees.345 Procedurally, before adopting a property-related fee, a local agency must:
◆ Identify the parcels on which a fee or charge is
proposed;346
◆ Calculate the amount of the proposed fee
or charge on each parcel in light of costjustification requirements of article XIII D, section 6, subsection b of the California
Constitution;347
◆ Provide written notice by mail of the proposed
fee or charge to the record owner of each
identified parcel on which the fee or charge is
proposed;348 and
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◆ Conduct a public hearing upon the proposed
fee or charge not less than 45 days after
mailing the notice of the proposed fee.349
At the public hearing, “[i]f written protests against
the proposed fee or charge are presented by a
majority of owners of the identified parcels, the
agency shall not impose the fee or charge.”350
Property-related fees other than water, sewer,
or refuse charges must then be approved by
a majority of property owners or two-thirds of
registered voters.351
Substantively, property-related fees must meet the
following requirements:
◆ Revenue derived from the fee or charge must
not exceed the funds required to provide the
property-related service;
◆ Revenue from the fee or charge must not be
used for any purpose other than that for which
the fee or charge was imposed;
◆ The amount of the fee or charge imposed
on any parcel or person must not exceed the
proportional cost of the service attributable to
the parcel on which it is imposed;
◆ The fee or charge may not be imposed for
service unless the service is actually used by,
or immediately available to, the owner of the
property in question. Fees or charges based
on potential or future use of a service are not
allowed. Stand-by charges must be classified
349 Cal. Const., art. XIIID, §6, subd. (b).
350 Cal. Const., art. XIII D, § 6, subd. (a)(2).
351 See Cal. Const., art. XIII D, §6, subd. (c).
352 Cal. Const. art. XIII D, §6, subd. (b).
353 Rev. & Tax. Code, § 7200 et seq.
as assessments and must not be imposed
without compliance with the proportionality
requirements and property-owner mailed ballot
protest proceedings for assessments; and
◆ No fee or charge may be imposed for general
governmental service, where the service is
available to the public in substantially the same
manner as to property owners (e.g., police, fire,
ambulance, or library services).352
For additional information on the imposition of
fees see: League of California Cities, Propositions
26 and 218 Implementation Guide (2019), pp. 53
– 98 (Chapter 4, Fees); The California Municipal
Law Handbook (Cal CEB) §§ 5.161 – 5.181, 10.238 –
10.253.4, 10.418(3).
II. TAXES
A. State Taxes
1. Sales and Use Tax
The general California sales and use tax on all
tangible retail goods, including cannabis and
cannabis products, is 7.25%. Cities may impose
their own sales taxes, subject to the BradleyBurns Uniform Local Sales and Use Tax Law,353 resulting in total sales taxes of between 9 and 11%.
The retail sales of medicinal cannabis, medicinal
cannabis concentrate, edible medicinal cannabis
products, and topical medicinal cannabis are
exempt from these sales and use taxes when
the customer provides a valid Medical Cannabis
Identification Card (MCIC) indicating they are a
qualified patient (or the primary caregiver for a
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qualified patient), and a valid government-issued
identification card.354 Cannabis retailers, cultivators, manufacturers, and distributors making sales must
register with the California Department of Tax and
Fee Administration (CDTFA) for a seller’s permit to
report and pay any sales and use tax due to the
CDTFA.
2. Cannabis Excise Tax
State law also establishes two statewide taxes
specific to cannabis. The first is a cannabis
excise tax that is imposed upon the purchaser of
cannabis or cannabis products at the rate of 15%
of the average market price of any retail sale by
a cannabis retailer.355 The average market price
for an arm’s-length transaction is defined as the
wholesale cost of the product plus a mark-up,
which is determined by the CDTFA on a biannual
basis in six-month intervals. In a non-arm’s-length
transaction, the average market price is defined
as the cannabis retailer’s gross receipts from the
sale.356
The cannabis excise tax does not apply to
medicinal cannabis or medicinal cannabis
products donated for no consideration to qualified
patients.357 Retailers are responsible for collecting
the cannabis excise tax from purchasers at the
354 Rev. & Tax. Code, §34011, subd. (f).
355 Rev. & Tax. Code, §34011, subd. (a)(1). See also Cal. Code of Regs., tit. 18, § 3700.
Rev. & Tax. Code, § 34010, subd. (b)(1).
356 Rev. & Tax. Code, § 34010, subd. (b)(2).
357 Rev. & Tax. Code, § 34011, subd. (g).
358 Rev. & Tax. Code, § 34011, subd. (b).
359 Rev. & Tax. Code, § 34012.
360 Rev. & Tax. Code, § 34012, subd. (a)(1). See also Cal. Code of Regs., tit. 18, § 3700. 361 Rev. & Tax. Code, § 34012, subd. (a)(2). See also Cal. Code of Regs., tit. 18, § 3700. 362 Rev. & Tax. Code, § 34012, subd. (c); Cal. Code of Regs., tit. 18, § 3700. 363 Rev. & Tax. Code, § 34012, subd. (k).
Rev. & Tax. Code, § 34012, subd. (a).
364 Rev. & Tax. Code, § 34012, subd. (i).
365 Rev. & Tax. Code, § 34012, subd. (j).
Rev. & Tax. Code, § 34012, subd. (h).
Rev. & Tax. Code, § 34012, subd. (h)(2).
time of the retail sale and for paying the tax to the
distributor.358
3. Cannabis Cultivation Tax
The second statewide cannabis-specific tax is a
cultivation tax that is imposed on all cultivators.359
The cannabis cultivation tax is imposed at the
following rates: (1) cannabis flowers are $9.25 per
dry-weight ounce,360 (2) cannabis leaves are $2.75
per dry-weight ounce,361 and (3) fresh cannabis
plants are $1.29 per ounce.362 The CDTFA is
required to annually adjust the cannabis cultivation
tax rates for inflation.363
The cultivation tax applies to all harvested
cannabis that enters the commercial market. All
cannabis removed from a cultivator’s premises
are presumed taxable, except for plant waste
or medicinal cannabis or medicinal cannabis
products designated for donation.364 The tax does
not apply to cannabis cultivated for personal use,
or cultivated by a qualified patient or primary
caregiver in accordance with the CUA.365
Cultivators are responsible for paying the cultivation
tax to the distributor or to the manufacturer if the
first transfer or sale of unprocessed cannabis is
to a manufacturer. Manufacturers that collect the
cultivation tax are required to pay the tax to the
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distributor. The distributor, which must register with
the CDTFA for a cannabis tax permit, reports and
pays the cultivation tax and cannabis excise tax to
the CDTFA.
B. Local Taxes
For general guidance on implementing new taxes,
see League of California Cities, Propositions 26 and
218 Implementation Guide (2019), pp. 16-25; The
California Municipal Law Handbook (Cal CEB) §§
5.96 – 5.123, 10.244
Cities have employed a wide range of tax
strategies, including:
1. Percent of Gross Sales
Many cities have opted to tax cannabis businesses
by implementing a voter-approved tax on a
percentage of gross sales receipts. The approved
tax rates range from 2 to 20%. Some cities tax
different segments of the industry at different rates,
often levying higher rates on retailers and lower
rates on, for example, cannabis testing labs. This is
not a consumer sales tax and is a tax levied on the
business.
PRACTICE TIP: Because this local tax will
be placed on top of the state’s 15% excise
tax, a city may opt to propose these tax
rates as “up to” those maximum amounts
(or even with explicit ballot language
authorizing tax rate decreases below a
set maximum tax rate without returning
to the voters), with initial rates set lower.
The purpose would be to give law-abiding
operators an opportunity to establish
themselves and compete with entrenched
illegal market dealers. The trend among
cities is to decrease taxes in order to
lessen the financial burden on legitimate
businesses, so that they can better compete
with the illegal market.
2. Dollar Per Square Foot of Business Space
This method is mostly used for cultivators. Rates
appear to range from $1 to $25 per square foot,
with initial rates often set lower. Several cities tax
indoor growers more than outdoor growers. Others
set gradually decreasing rates based on size – e.g.,
$10 per square foot for the first 5,000 square feet
and gradually dropping to $2 per square foot for
space beyond 40,000 square feet.
3. Miscellaneous
Depending on the segment of the industry, cities
have charged annual flat rates, dollar amounts per
vehicle of a distributor’s fleet, and dollar amounts
per gram of oil or piece of edible produced. They
have also set “tax floors” – i.e., a minimum tax that
is imposed, regardless of gross sales, whether
a business makes a profit or suffers a loss. As a
policy matter, some cities tax medicinal cannabis
purveyors at significantly lower rates than adult-use
cannabis operators.
PRACTICE TIP: Mix and match. None of
the above strategies are mutually exclusive.
Whichever the city employs, the key is to
strike a balance so that taxes are not so
high that they deter operators from doing
business legitimately and encourage them
to continue in the illegal market.
4. Development Agreements
Because it can take months and be very expensive
to get tax measures on a ballot, some cities opt to
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let cannabis businesses open before taxes are in
place to give local operators a competitive edge. In
such instances, also as a way to “test the waters,”
some cities have entered into development
agreements (with corresponding annual
development fees) with cannabis businesses.
PRACTICE TIP: While the potential for
revenue may be appealing, a development
agreement provides the holder a vested
right to continue the operation for the
term of the agreement. Approval of a
development agreement is also a legislative
act that can be the subject of a referendum.
Cities should carefully consider the risks
and benefits before granting a long-term,
contractual right to operate a cannabis
business. A less risky practice is to follow the
business and land use regulation models
discussed earlier in this Guide. Additionally,
whether development agreements are
merely placeholders until a tax measure
can be approved or permanent solutions,
cities should note that entering into a
development agreement in lieu of a formal
tax measure could expose them to liability
for violating Proposition 218, which requires
voter approval for all new taxes.
III. BANKING
It is commonly believed that banks and other
financial institutions are prohibited from doing
business with the cannabis industry. Technically,
this is not the case. As a practical matter, however,
financial institutions refuse to work with cannabis
businesses directly to avoid the burdensome duties
and risks associated with doing so. As described
366 31 U.S.C. § 5311, et seq.
367 31 U.S.C. § 5313; 31 C.F.R. § 1020.315
further below, this refusal creates a de facto ban on
banking that prevents the complete legitimization
of the cannabis industry, and places a significant
burden on cannabis businesses and the cities that
seek to collect tax and fee revenue from them.
A. Federal Law
Federal law pertaining to cannabis banking
includes the Currency and Foreign Transactions
Reporting Act of 1970, which is commonly referred
to as the Bank Secrecy Act (BSA),366 as well as
guidance by the U.S. Department of Treasury’s
Financial Crimes Enforcement Network (FinCEN),
which administers the BSA.
1. The Bank Secrecy Act
The BSA requires U.S. financial institutions to
assist U.S. government agencies in detecting and
preventing money laundering. Specifically, the
Act requires financial institutions to keep records
of cash purchases of negotiable instruments, file
reports of cash transactions exceeding $10,000367
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and to report suspicious activity that might signify
money laundering, tax evasion, or other criminal
activities like the sale of Schedule I drugs.368
2. FinCEN Guidance
In 2014, FinCEN issued guidance (FinCEN
Guidance) regarding “BSA Expectations Regarding
Marijuana-Related Businesses.”369 This guidance
included establishing best practices for customer
due diligence, a Suspicious Activity Report (SAR)
filing structure, and ways to identify business
red flags. The FinCEN Guidance provided that,
in assessing the risk of providing services to a
cannabis-related business, institutions should
conduct extensive customer due diligence that
includes verifying state licenses, reviewing
license applications and other documentation,
understanding the expected activity of the
business, and performing ongoing monitoring for
suspicious activity.
Financial institutions must also file a SAR on any
activity involving a cannabis business. Generally,
BSA regulations require the filing of a SAR when
a financial institution knows, suspects, or has
reason to suspect that a transaction: (1) involves
funds derived from illegal activity or is an attempt
to disguise funds derived from illegal activity; (2) is designed to evade regulations promulgated under
the BSA; or (3) lacks a business or apparent lawful
purpose. Since federal law prohibits the distribution
and sale of cannabis, this means a SAR must be
368 31 U.S.C. § 5313-5316; 31 C.F.R. § 1020.320.
369 U.S. Department of the Treasury, Financial Crimes Enforcement Network, FIN-2014-G001 (February 14, 2014), available at https://www.fincen.gov/sites/ default/files/shared/FIN-2014-G001.pdf.
370 James M. Cole, Deputy Attorney General, U.S. Department of Justice, Memorandum for All United States Attorneys: Guidance Regarding Marijuana Enforcement (August 29, 2013), available at http://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf. The Cole Memo provided a safe harbor from prosecution — including to financial institutions serving the cannabis industry, upon which the FinCEN Guidance is based — provided if federal priorities were met or protected. On January 4, 2018, then-Attorney-General Jeff Sessions announced the rescission of the Cole Memo. Over a year later, on January 31, 2019, FinCEN issued a statement noting “FinCEN’s February 2014 guidance remains in place.” Letter from Drew Maloney, Assistant Sec’y for Legislative Affairs, FinCEN, to Representative Denny Heck (Jan. 31, 2018). See discussion of Federal Controlled Substances Act for more information on the Cole Memo and federal enforcement. filed for every activity with a cannabis business,
regardless of state law.
With this in mind, the FinCEN Guidance established
a three-tier SAR reporting regime for cannabis
businesses that denotes the type of activity
involved:
1. “Marijuana Limited” SAR Filing. This report is
used when the institution reasonably believes
that the cannabis business is consistent with
state law and does not violate any of the eight
Department of Justice (DOJ) priorities set forth
in the Cole Memo,370 such as sales to minors;
2. “Marijuana Priority” SAR Filing. This report is
used when the institution reasonably believes
that the cannabis business has violated
one of the Cole Memo DOJ priorities, or the
business is not in full compliance with state law
requirements; and
3. “Marijuana Termination” SAR Filing. This report
is used when the institution deems it necessary
to terminate the relationship with the cannabis
business “in order to maintain an effective antimoney laundering compliance program.” Furthermore, the FinCEN Guidance also provides a
long list of “red flags” that indicate that a cannabis
business may be engaged in activity that implicates
the Cole Memo priorities or violates state law.
These signs may be circumstances that include:
the business receiving substantially more revenue
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than may reasonably be expected, rapid deposits
of cash followed by immediate cash withdrawals,
the business has been subject to an enforcement
action, or a purported non-profit business is making
excessive payments to its managers or employees.
These red flags, the FinCEN Guidance provides,
may indicate a need for additional due diligence.
Finally, the FinCEN Guidance reminds financial
institutions that they must file currency transaction
reports for cannabis businesses the same as
they would for other businesses. This means, for
instance, that banks need to file reports on the
receipt of withdrawal by any person of more than
$10,000 in cash per day.
B. Legislative Fixes and Alternative
Solutions
Given the added burden of cannabis-specific
customer due diligence and heightened risk of
criminal violations of the BSA/AML by failing to
report possible breaches of the DOJ’s priorities in
the Cole Memo, most federally chartered banks will
simply refuse to serve cannabis-related businesses.
While the Congressional Cannabis Caucus supports
federal legislation to both remove cannabis from
Schedule I of the Controlled Substances Act and
provide a safe haven for financial institutions to do
business with the cannabis industry in states that
have legalized medicinal or adult-use cannabis,
certainty remains elusive on the federal level.
To get around this obstacle, California has
conducted research into the heavier reliance
on credit unions, the establishment of a
state-chartered bank that would bypass the
Federal Reserve,371 and the development of
371 This approach has been generally unsuccessful in other jurisdictions and most recently suffered a setback at the Tenth Circuit Court of Appeals. See Fourth Corner Credit Union v. Federal Reserve Bank of Kansas City (10th Cir. 2017) 861 F.3d 1052 (reversing and remanding trial court’s order with instructions to dismiss credit union’s complaint filed to order the Federal Reserve to issue a “master account” to the credit union for the purpose of serving the banking needs of the cannabis industry in Colorado). cryptocurrencies. Private entrepreneurs have also
developed “closed-loop” app solutions for the
industry, but by and large, cannabis in California
still remains a predominantly cash-based business,
resulting in extreme challenges for cities when it
comes time to collect taxes and fees.
IV. FEE AND TAX COLLECTION
CONSIDERATIONS
Transparent communication is key to providing
cannabis businesses the assurance that their fees
and taxes will be secure upon payment. Cities
have experienced that cannabis fees and taxes are
often paid in cash, creating a significant safety and
security concern for both the cannabis business
and the city in which it is located. This concern
has prompted cities to implement a fee and tax
collection program aimed at mitigating security
risks without compromising convenience, security,
and logistical ease.
Some practical issues with fee and tax collection
include:
◆ Transportation and security risks, like armed
robbery and accompanying violence; and
◆ Time and place of fee and tax collection.
PRACTICE TIP: Prudent practice includes
providing a direct contact to set up
individualized appointments for the
collection of fees and taxes. The individual
appointments should be coordinated
with the finance department and police
department for additional security.
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PRACTICE TIP: Since many financial
institutions are wary of potentially violating
federal anti-money laundering and other
laws related to engaging in transactions
with the proceeds from cannabis
businesses, cities should keep meticulous
records of cannabis fee and tax revenues in
the event of a bank or other governmental
audit.
PRACTICE TIP: Check with the risk
management department of your city’s
financial institution before adopting fees
or taxes for which the city will be collecting
money from cannabis businesses. After
adoption of AUMA, some risk management
departments of banks have issued guidance
on whether the bank will accept funds that
have derived from fees and taxes from
cannabis businesses.
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PART 5 | Enforcement
Tools
Both AUMA and MAUCRSA included language
intended to preserve a municipality’s ability to
regulate commercial cannabis activity within its
jurisdictional boundaries. A city “has a constitutional right to ‘make and enforce within its limits all
local, police, sanitary, and other ordinances and
regulations not in conflict with general laws.’”
Consistent with this constitutional principle the
statute states:
This division shall not be interpreted to
supersede or limit the authority of a local
jurisdiction to adopt and enforce local
ordinances to regulate businesses licensed
under this division, including, but not limited
to, local zoning and land use requirements,
business license requirements, and
requirements related to reducing exposure to
secondhand smoke, or to completely prohibit
the establishment or operation of one or
more types of businesses licensed under this
division within the local jurisdiction.372
Therefore, a commercial cannabis business may be
regulated or completely prohibited by a city.
Cities may consider a variety of options and tools
when enforcement against unlawful cannabis
operations is necessary.373 Potential enforcement
tools include civil injunctions, criminal enforcement,
and administrative enforcement. Each city may
evaluate the most appropriate tool or tools for the
situation.
372 Bus. & Prof. Code, § 26200, subd. (a).
Code Civ. Proc., §§ 526, 527.
Code Civ. Proc., § 527(a) (Emphasis added.).
373 See Appendix 1 regarding selection of defendants in cannabis enforcement. 374 White v. Davis (2003) 30 Cal.4th 528, 554; Hunt v. Superior Court (1999) 21 Cal.4th 984, 999; Cohen v. Board of Supervisors (1985) 40 Cal.3d 277, 286; Butt v. Sup. Court (1992) 4 Cal.4th 668, 677-78.
I. CIVIL ENFORCEMENT
A. Civil Injunction
Cities may consider seeking injunctions to close
unauthorized cannabis operations. State law
authorizes courts to issue temporary restraining
orders, and preliminary and permanent injunctions.
Section 527(a) states, “A preliminary injunction
may be granted at any time before judgment
upon a verified complaint, or upon affidavits if the
complaint in the one case, or the affidavits in the
other, show satisfactorily that sufficient grounds
exist therefor.”
The traditional test for issuance of a preliminary
injunction requires the court to weigh two
interrelated factors: (1) the likelihood that the
moving party will prevail on the merits; and (2)
the relative interim harm to the parties from the
issuance or non-issuance of the injunction.374 The
court evaluates the two factors on a sliding scale,
such that “if the party seeking the injunction can
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make a sufficiently strong showing of likelihood
of successes on the merits, the trial court has
discretion to issue the injunction notwithstanding
that party’s inability to show that the balance of
harms tips in his favor.”375
Where a city seeks to enjoin the violation of a law
and the city is likely to prevail on the merits, courts generally are to presume that public harm will
result if an injunction is not issued.376 No showing of actual harm is required.377
In extreme circumstances when the cannabis
operator fails to comply with the injunction, it could
be enforced through contempt or the appointment
of a receiver.378
B. Nuisance Per Se and Cannabis Law
A nuisance per se exists whenever “a legislative
body with appropriate jurisdiction, in the exercise
of the police power, expressly declares a particular
object or substance, activity, or circumstance, to be
a nuisance.”379 A nuisance may be established and
enjoined through state or local law.
The role of the court in an action to enjoin nuisance
activity is limited to determining whether a statutory
or regulatory violation exists. Where the Legislature
has determined a particular condition or activity is a
nuisance, it would be a usurpation of the legislative
power for a court to arbitrarily deny enforcement.
The function of the courts in such circumstances
375 Common Cause of California v. Bd. of Supervisors of Los Angeles County (1989) 49 Cal.3d 432, 447; King v. Meese (1987) 43 Cal.3d 1217, 1227 (“[T]he more likely it is that [the moving parties] will ultimately prevail, the less severe must be the harm that they allege will occur if the injunction does not issue”.).
376 IT Corp. v. County of Imperial (1983) 35 Cal.3d 63, 72. 377 City of Claremont v. Kruse (2009) 177 Cal.App.4th 1153, 1166. 378 See Code Civ. Proc., §§ 527, 564-570; Health & Saf. Code, § 11573. 379 Beck Development Co. v. Southern Pacific Transportation Co. (1996) 44 Cal.App.4th 1160, 1206; City of Claremont v. Kruse, supra, 177 Cal.App.4th at pp. 1163-1164.
380 City of Bakersfield v. Miller (1966) 64 Cal.2d 93, 100; See also Beck Development Co. v. Southern Pacific Transportation Co., supra, 44 Cal.App.4th at p. 1207 (“[W]here the law expressly declares something to be a nuisance, then no inquiry beyond its existence need be made…”). 381 Bus. & Prof. Code, § 26200, subd. (a).
382 Many municipal ordinances may be enforced civilly without designating cannabis activities as a specific nuisance per se. is limited to determining whether a statutory
violation in fact exists, and whether the statute is
constitutionally valid.380
Accordingly, a nuisance per se arises whenever an
activity occurs that a city or the state has expressly
declared to be a nuisance. Stated differently, the
only element a city must satisfy for a cannabis
business to be a nuisance per se is that the
business engaged in an activity declared to be a
nuisance under state or local law.
As discussed in Part 2 of this Guide, the
development of California’s cannabis law supports
enforcement through nuisance injunctions, as
earlier case law confirmed local land use authority
over cannabis activity. Additionally, under state law,
a commercial cannabis business may be regulated
or completely prohibited by a city.381
1. Establishing Nuisance Through Violation of
Municipal Code
Commercial cannabis businesses may be
specifically prohibited throughout a city and thus
constitute a prohibited land use in the city. A city
ordinance may provide that any violation of the
zoning code is deemed a public nuisance,382 and
that any such violations may be remedied by the
city through whatever civil remedies are available,
including a civil action for injunctive relief. Violations of municipal laws prohibiting cannabis businesses
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have been upheld as nuisances per se subject to
abatement by injunction.383
In City of Claremont v. Kruse,384 the court affirmed
a trial court’s permanent injunction that enjoined
the operation of a cannabis distribution facility
anywhere within the City of Claremont.385 The
court analyzed whether there was express or
implied preemption by the CUA or MMPA that
would prevent local regulations, such as bans,
from restricting the establishment of cannabis
dispensaries.386 The court found that neither the
CUA nor the MMPA expressly or impliedly preempts
local laws in any way.387
Kruse followed the holding in City of Corona v.
Naulls (2008).388 In Naulls, the court affirmed the
issuance of a preliminary injunction to shut down a
medicinal cannabis dispensary that was operating
without any zoning designation. The Naulls court
held that “where a particular use of land is not
expressly enumerated in a city’s municipal code as
constituting a permissible use, it follows that such
use is impermissible.”389 Accordingly, the court held
that the cannabis dispensary was “a nuisance per
se, subject to abatement in accordance with the
City’s municipal code.”390
In County of Los Angeles v. Hill,391 the court
confirmed that local governments have the
ability to regulate the establishment of cannabis
dispensaries. There the court stated, “If there was
ever any doubt about the Legislature’s intention
to allow local governments to regulate marijuana
383 Kruse, supra, 177 Cal.App.4th at pp. 1158, 1163-1166; City of Corona v. Naulls (2008) 166 Cal.App.4th 418, 428, 432-433. 384 (2009) 177 Cal.App.4th 1153 (hereinafter Kruse).
385 Kruse, supra, 177 Cal.App.4th at p. 1158.
386 Id. at pp. 1172-1176.
387 Id. at p. 1176.
388 166 Cal.App.4th 418 (hereinafter Naulls).
389 Naulls, supra, 166 Cal.App.4th at p. 433 (emphases in original). 390 Ibid.
391 (2011) 192 Cal.App.4th 861 (hereinafter Hill).
392 Hill, supra, 192 Cal.App.4th at p. 868.
dispensaries, and we do not believe there was,
the newly enacted section 11362.768, has made
clear that local governments may regulate
dispensaries.”392 Thus, a city has the power to
restrict not only where a cannabis business may
operate (i.e. the location of a dispensary), but also
whether it may operate at all.
Although the foregoing cases were decided
prior to the passage of AUMA, they still provide
legal authority for local regulations relating to
commercial cannabis. The opinions in Naulls,
Kruse, and Hill support enforcement by enjoining
unlawful cannabis businesses. An injunction to
prohibit the continuing nuisance is an appropriate
enforcement tool, and a city is likely to prevail on
the merits of its public nuisance claim based on
violations of local law.
PRACTICE TIP: An ordinance may expressly
declare some or all commercial cannabis
activity to be unlawful. For example, one
ordinance provides as follows: “It shall
be unlawful for any person or entity to
own, manage, conduct, or operate …
any commercial cannabis activity or to
participate as a … employee, contractor,
agent or volunteer, or in any other manner
or capacity, in any commercial cannabis
activity.”
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PRACTICE TIP: Review your city’s municipal
code for additional violations that may be
alleged in the complaint in addition to the
cannabis ordinance. Often building code,
electrical code, property maintenance,
business license, or zoning violations are
present, which may also be alleged in the
complaint.
2. Establishing Nuisance through Violation of
State Law
A nuisance per se supporting an injunction
may also be established through violations of
state law. Civil Code section 3479 and Health
and Safety Code section 11570 both expressly
declare particular activities to be a nuisance,
and may be used for a nuisance per se claim.393
Compliance with state and local cannabis law is
required in order to lawfully engage in commercial
cannabis activities.394 A defendant business may
raise compliance with state and local law as an
affirmative defense in a nuisance action.
a. Civil Code section 3479
Civil Code section 3479, describes a nuisance, in
pertinent part, as: “Anything which is injurious to
health, including, but not limited to, the illegal sale of controlled substances, or is indecent or offensive
to the senses, or an obstruction to the free use of
property, so as to interfere with the comfortable
393 People ex rel. Trutanich v. Joseph (2012) 204 Cal.App.4th 1512, 1524; Lew v. Sup.Ct. (1993) 20 Cal.App.4th 866, 871-872. 394 Health & Saf. Code, §§ 11358, 11359, 11360.
395 People ex rel. Trutanich v. Joseph, supra, 204 Cal.App.4th at p. 1524 (sale of marijuana constitutes a nuisance per se under Civil Code § 3479). 396 Health & Saf. Code, §§ 11007, 11054, subd. (d)(13). 397 Health & Saf. Code, § 11360; Civ. Code, § 3482.
398 Code Civ. Proc., § 731.
399 Health & Saf. Code, §§ 11570–11587.
400 Health & Saf. Code, § 11570.
401 Lew v. Superior Court (1993) 20 Cal.App.4th 866, 871 (property being used to sell and distribute drugs is a nuisance per se under Health and Saf. Code, § 11570); People ex rel. Trutanich v. Joseph, supra, 204 Cal.App.4th at p. 1524. 402 Health & Saf. Code, § 11360.
enjoyment of life or property....” Accordingly,
showing that a cannabis business engaged in the
“the illegal sale of controlled substances” is all that is required for a nuisance per se claim based on
Civil Code section 3479.395 Cannabis remains a
Schedule I controlled substance.396 Unless properly
licensed and allowed by state and local authorities,
the sale of cannabis is illegal.397 Thus, a cannabis
business engaged in the illegal sale of cannabis
is a nuisance per se subject to abatement and
injunction.398
b. Health and Safety Code section 11570
The California Drug Abatement Act399 allows
cities to remove occupants from any building
or place where any illegal drug activity occurs.
Every building or place used for the purpose of
drug activity is expressly declared a nuisance.400
“Cannabis” is listed as a controlled substance
under Health and Safety Code section 11054,
subdivision (d)(13).
Accordingly, evidence that a cannabis business
used a building or place “for the purpose of
unlawfully selling, serving, storing, keeping,
manufacturing, or giving away any controlled
substance” is all that is required for a nuisance per
se claim based on Health and Safety Code section
11570.401
The sale of cannabis is illegal when not conducted
in conformance with state and local law.402 In
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People ex rel. Trutanich v. Joseph, the court
affirmed the trial court’s entry of judgment against
a defendant dispensary owner after the trial court
granted a motion for summary judgment and a
motion for permanent injunctive relief for violations
of the narcotics abatement law.403 The court
observed that:
Plaintiff presented admissible evidence that
[the marijuana dispensary’s] premises were
used ‘for the purpose of unlawfully selling,
serving, storing, keeping, manufacturing,
or giving away a[] controlled substance,’ in
violation of section 11570. Such violations
constitute nuisances per se under Civil Code
section 3479.404
The Court affirmed summary judgment of a
permanent injunction against the defendant
without placing any burden on the city to prove the
403 People ex rel. Trutanich v. Joseph, supra, 204 Cal.App.4th p. 1512; Health & Saf. Code, § 11570 et seq. 404 People ex rel. Trutanich v. Joseph, supra, 204 Cal.App.4th at p. 1524. 405 Id. at p. 1523.
406 Health & Saf. Code, § 11573.5, subd. (b).
407 Health & Saf. Code, § 11573.5, subd. (b).
408 Health & Saf. Code, § 11585.
409 See Rose v. Bank of America, N.A. (2013) 57 Cal.4th 390, 394. defendant’s non-compliance with the CUA or the
MMPA. Joseph also held that “Section 11362.775 …
does not cover dispensing or selling marijuana.”405
Thus, a city is likely to prevail on the merits of
a nuisance per se claim against a dispensary,
whether based on local law, Civil Code section
3479 or Health and Safety Code section 11570.
In addition to injunctive relief, the Drug Abatement
Act provides for unique remedies, including civil
penalties up to $25,000,406 attorney’s fees, costs
of investigation, vacated and boarded against
entry for up to one year,407 a lien on the property,
for the lien to be enforced through the sale of the
property,408 among others.
PRACTICE TIP: The Drug Abatement Act is
particularly useful to compel the cooperation
of a property owner where the property is
occupied by a tenant. The potential liability
of the property owner (a $25,000 fine,
attorney’s fees that can be liened, closure
of the building for a year preventing rerenting, and possible sale of the fixtures and property itself) is often enough to cause the
property owner to collaborate with the City
to eject the dispensary in order to avoid
these severe remedies.
a. Business and Professions Code sections
17200 et seq.
Known as the Unfair Competition Law,409 Business
and Professions Code sections 17200 et seq.
authorizes certain remedies to address repeated
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violations of state and local regulations, so long as
they are a part of a “business practice.”410
An action under the Unfair Competition Law is
usually brought by the Attorney General or a
district attorney; but a city attorney may bring such
an action if the city has a population greater than
750,000 or if the city attorney obtains the consent
of the district attorney.411
b. Business and Professions Code section 26038
MAUCRSA imposes civil penalties for unlicensed
commercial cannabis activity “of up to three times
the amount of the license fee for each violation,
and the court may order the destruction of cannabis
associated with that violation in accordance with
Section 11479 of the Health and Safety Code.”412
This penalty is payable to the city,413 and a separate
penalty may be assessed for each day a violation
persists.414
II. CRIMINAL ENFORCEMENT
Criminal enforcement is an important function
of local government and should be considered
alongside administrative and civil enforcement as
an option to achieve code compliance in a given
case. Criminal enforcement requires different focus
and resources than civil enforcement. Criminal
enforcement often requires schedule flexibility
and a consistent presence in court. Whether to
criminally prosecute a code violation raises the
question of the goals of criminal prosecution. In
general, there are three goals: (1) abatement of the
violation, (2) punishment, and (3) deterrence. While
410 See People v. McKale (1979) 25 Cal.3d 626, 632.
411 Bus. & Prof. Code, § 17204.
412 Bus. & Prof. Code, § 26038, subd. (a).
413 Bus. & Prof. Code, § 26038, subd. (b).
414 Bus. & Prof. Code, § 26038, subd. (a).
415 Gov. Code, § 36900, subd. (a).
abatement is generally the primary goal, the other
goals may be equally important in the context of
cannabis prosecutions. Punishment commensurate
with the crime can be appropriate, and imposition
of punishment will deter future criminal activity.
The criminal enforcement portion of this chapter
will introduce the substantive law and provide
practice tips. It is not possible to cover every
issue that will confront a city attorney in a criminal
prosecution. This section will attempt to provide
some legal background and practical guidance
specific to cannabis. For additional information
on criminal code enforcement, see Cal. Municipal
Law Handbook (Cal CEB 2019) Code Enforcement,
Chapter 12 and for information on criminal law
generally, see California Criminal Law Procedure
and Practice (Cal CEB 2019).
A. Prosecution of Municipal Code
Violations
City attorneys have the authority to prosecute
misdemeanor criminal cases to enforce city
ordinances in the name of the People of the State
of California.415 Accordingly, this section will focus
on the criminal laws most likely to be enforced by
a city attorney, namely, municipal codes. Certain
categories of violations are typical of cannabisrelated activity. Most commonly, criminal cannabis activity implicates a city’s cannabis ordinance
and zoning regulations. Commercial cannabis
activity, such as an illegal dispensary or cultivation
operation, also implicates a city’s business
license requirements and property maintenance
requirements. Establishment or operation of an
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unlawful commercial cannabis business often
entails routine code enforcement violations, such
as building or public nuisance violations. While
a single act may constitute a violation of several
ordinances, keep in mind the prohibition on
multiple punishments.416
A violation of a city ordinance is a misdemeanor,
unless it is made an infraction by ordinance.417
Violations of ordinances that are otherwise
misdemeanors can generally also be charged as
or reduced to infractions in the discretion of the
prosecuting attorney.
A misdemeanor is punishable by six months in jail,
a $1,000 fine, or both, unless otherwise provided
in an ordinance.418 An infraction violation of an
ordinance is punishable by a $100 fine, with fines
increasing upon repeated violations.419
Where the unlawful cannabis activity is highly
profitable, misdemeanor prosecutions are generally
considered to be more effective than infraction
prosecutions given the increased penalties for
misdemeanors and the possibility of jail time.
The minor punishment involved in infraction
prosecutions may cause the fines to be viewed
simply as a “cost of doing business.” Note that if
the prosecuting attorney elects to proceed as a
misdemeanor, the case will be more complex, timeconsuming, and costly for the city. When charged with a misdemeanor, a defendant has the right to
an attorney and a jury trial.420
416 Pen. Code, § 654.
417 Gov. Code, § 36900, subd. (a).
418 Pen. Code, § 19.
419 Gov. Code, § 36900.
420 Pen. Code, § 17, subd. (d)(1).
421 Gov. Code, § 41803.5, subd. (a).
422 Gov. Code, §6254.16.
For further discussion regarding criminal
enforcement of misdemeanors see Appendix I.
B. Prosecutions of State Law Violations
In general, state law misdemeanors must be
prosecuted by the district attorney unless a city
attorney is authorized to bring prosecutions by
the district attorney.421 However, county district
attorney’s offices are often reluctant to prosecute
cannabis crimes, since the consumption of
cannabis has become normalized in many jurors’
minds. Nevertheless, state law prosecutions may
be more viable in the more egregious cases that
may interest prosecutors.
C. Criminal Investigations
Even though district attorneys may not be eager to
prosecute state law cannabis crimes, the suspected
violations may still be the basis of a criminal
investigation by peace officers. Peace officers
have unique resources, training, experience, and
expertise to handle cannabis enforcement efforts.
This is especially the case with illegal cannabis
cultivation sites, which can be dangerous.
One criminal investigation tool that law
enforcement agencies can employ is their access
to power usage records to identify suspected illegal
cannabis cultivation sites.422 That information can
also be used by the law enforcement agency to
obtain a criminal search warrant. The benefit of a
criminal search warrant is that peace officers can
seize any controlled substances and paraphernalia
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that are discovered.423 In addition, any amount of
growing or harvested cannabis in excess of two
pounds, or the amount a medicinal cannabis patient
or designated caregiver is authorized to possess,
may be destroyed without a court order if certain
requirements are satisfied.424
Once the search is conducted, not only can state
law be enforced, but municipal code violations can
be addressed too. And enforcement is not limited
to the criminal prosecution—violations discovered
through the execution of a search warrant may also
be addressed through the civil and administrative
processes.
PRACTICE TIP: One strategy employed by
some cities is to execute criminal search
warrants on suspected illegal cannabis
cultivation sites with peace officers and
building inspectors. If an illegal grow is
discovered, the plants and equipment may
be seized and destroyed, and violators can
be issued administrative penalty citations.
More egregious cases (e.g. large-scale
industrial grows, networks of residential
grow houses) can be addressed with civil
lawsuits or criminal prosecution.
III. ADMINISTRATIVE ENFORCEMENT
A. Administrative Fines
Cities may adopt an ordinance that makes violation
of any ordinance in its municipal code subject to an
423 Health & Saf. Code, § 11472
424 Health & Saf. Code, §11479.
425 Gov. Code, § 53069.4, subd. (a)(1).
426 Gov. Code, §§ 53069.4, subd. (a)(1), 36900, subd. (b). But see County of Los Angeles v. City of Los Angeles (1963) 219 Cal.App.2d 838, 844 (So long as penalty in validly enacted city ordinance does not exceed any maximum limits that are prescribed by its charter, as a freeholders’ charter, or Government Code section 36901 as to other cities which are governed by the general laws, than the penalty that is provided in the ordinance prevails.) 427 Martin v. Riverside County Dept. of Code Enforcement (2008) 166 Cal.App.4th 1406, 1411. 428 Gov. Code, § 53069.4, subd. (a)(2)(B).
administrative fine or penalty.425 Such an ordinance
must establish administrative procedures that
govern the imposition, enforcement, collection, and
review by the city of those administrative fines.
The maximum allowable administrative fines for
violations that would otherwise be infractions are:
$100 for the first violation; $200 for the second
violation that occurs within one year of the first;
$500 for each additional violation that occurs within
one year of the first.426 An administrative order to
pay the fine may be appealed de novo before the
Superior Court or by a writ petition under Code of
Civil Procedure section 1094.5.427
In addition to the general authority to adopt
administrative fines and penalties, state law now
provides an additional tool against illegal cultivation of cannabis. Cities may adopt an ordinance that
immediately imposes an administrative fine for
the violation of “building, plumbing, electrical,
or other similar structural, health and safety, or
zoning requirements, if the violation exists as a
result of, or to facilitate, the unlicensed cultivation of cannabis.428 However, a city must allow for a
reasonable amount of time to correct or remedy the
violation if: (1) a tenant possesses the property that
is subject to the fine, (2) the property owner can
provide evidence that the rental lease agreement
prohibits the cultivation of cannabis, (3) the landlord did not know the tenant was illegally cultivating
cannabis, and (4) the landlord was not given actual
notice of the unlicensed cannabis cultivation
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through a complaint, property inspection, or other
information.429
This additional tool can be helpful for cities dealing
with the proliferation of cannabis grow operations
in residential neighborhoods. Previously, cities
could impose administrative fines for violations of
local ordinances pertaining to building, plumbing,
electrical, or other similar structural issues that
created no immediate danger to health or safety
only after providing a reasonable time to cure the
violations. Now, no opportunity to cure violations
related to the unlicensed cultivation of cannabis
is required unless all three criteria in Government
Code section 53069.4, subdivision (a)(2)(C) are
satisfied.
Given the strictly monetary nature of administrative
fines as an enforcement tool, and the high value
of each cannabis plant that is cultivated, cities may
find that even repeated imposition of such fines
against illegal cannabis businesses may fail to
achieve compliance or closure. Cities may find that
recalcitrant illegal operators are willing to pay the
fine as the “cost of doing business” or simply ignore
the process altogether, necessitating more extreme
measures. In addition, it is sometimes difficult
to identify the person who is actually cultivating
the cannabis plants because they may only be at
the location sporadically and often do not have
identification.
429 Gov. Code, § 53069.4, subd. (a)(2)(C).
As mentioned earlier in this Guide, some personal cultivation is permitted under the AUMA.
Although Government Code section 53069.4 defines “local agency” by reference to the Government Code section 54951 (the Brown Act), which includes “city, whether general law or chartered,” case law supports the argument that charter cities may impose different penalties. See Los Angeles County v. City of Los Angeles (1963) 219 Cal.App.2d 838, 844 (“So long as such penalty does not exceed any maximum limits prescribed by its charter … the penalty provided in the ordinance prevails.”).
PRACTICE TIP: A strategy some cities
have adopted to combat illegal cannabis
cultivation with administrative fines is
to specify that each plant cultivated in
excess of the number allowed represents a
separate violation, meaning each grow may
result in hundreds of fines. Cities can also
impose higher fine amounts if they classify
the offence as a misdemeanor, which avoids
the fine limits set by state law for “violations
that would otherwise be infractions.” Charter
cities may also argue that increased penalty
amounts are authorized under the municipal
affairs doctrine. In addition, ordinances
can be crafted to make the owner on title
to the property liable for the fines. This
makes it more likely that an offender can
be identified and deters property owners
from allowing someone else to illegally grow
cannabis on their property.
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Even with the proper administrative fines
ordinance, the availability of administrative appeal
rights, including seeking writ relief, could make
this particular tool more cumbersome than other
enforcement options. An ordinance with increased
fine amounts will result in raising the stakes in the
administrative appeals, and it will correspondingly
increase the legal scrutiny of the process. The
administrative appeals process should be carefully
constructed and carried out to ensure that the
enforcement efforts will withstand the litigation.
B. Administrative Abatement
1. Inspection Warrants
Cities may seek an inspection warrant to inspect
a facility suspected of harboring unlicensed
commercial cannabis activity for zoning or building
and safety code violations.430 Inspection warrants
issue upon the finding that either reasonable
legislative or administrative standards for inspection
are satisfied, or there is reason to believe the
facility is out of compliance.431 Refusal to permit an
inspection pursuant to an inspection warrant is a
misdemeanor.432
Inspection warrants can be an effective tool for
cities to uncover a variety of potential violations
at unlawful cannabis facilities. Once a violation is
discovered, cities may then pursue abatement,
through summary means if warranted. This
assumes that the city has, by ordinance, declared
the violation to be a nuisance, as it is broadly
authorized to do under state law.433
430 Civ. Proc. Code, § 1822.50, et seq.
431 Civ. Proc. Code, § 1822.52.
432 Civ. Proc. Code, § 1822.57.
433 Gov. Code, § 38771.
434 Gov. Code, § 36900, subd. (c).
435 Flahive v. City of Dana Point (1999) 72 Cal.App.4th 241, 246; Gleaves v. Waters (1985) 175 Cal.App.3d 413, 420.
As with other remedies, inspection warrants can
be combined with other approaches, such as
administrative fines, if building code violations are
discovered, which are subject to increased fines.434
2. Abatement Warrants
An abatement warrant is an inspection warrant, as
described above, that allows city staff to execute
an abatement order that the city issued through its
own administrative abatement procedures. There
is no express statutory law regarding the issuance
of abatement warrants; however, case law has
clearly established that abatement warrants are
properly issued pursuant to the statutory construct
delineated for inspection warrants in the Code of
Civil Procedure.435
A city should carefully follow the procedures
in its municipal code that authorize the city to
abate. Following those procedures ensures the
city complies with due process. The proposed
abatement warrant should describe the city’s
anticipated abatement actions with as much
specificity as possible.
PRACTICE TIP: When seeking an inspection
warrant or an inspection and abatement
warrant be sure to identify all the city
personnel that will be present during the
inspection conducted under the warrant
such as fire, police, building official, etc.
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3. Summary Abatement
In addition to generally declaring zoning and other
municipal code violations to constitute a nuisance
per se, cities should expressly declare that
unlicensed commercial cannabis activity constitutes
a nuisance or that any operation in violation of
its regulations is a public nuisance subject to
abatement.
Summary abatement is an emergency abatement
done without an abatement warrant or any
administrative due process. Cities may establish
procedures for the summary abatement of
commercial cannabis facilities that constitute
a nuisance and may attach liens against such
facilities to account for abatement expenses.436
While summary abatement may be considered an
inherent power of a city, ideally each city should
have a code provision authorizing summary
abatement.
Summary nuisance abatement is authorized in
emergency situations involving the physical safety
of the populace.
437 It is also justified in situations
involving exigent circumstances such as the
destruction of evidence. Cities must be cautioned,
however, that while they have broad authority to
declare certain activity to be a nuisance, ultimately
such a declaration may have to survive judicial
scrutiny, even in the realm of unlawful cannabis
activity.438
If the circumstances warrant summary abatement,
the question is what abatement acts are
436 Gov. Code, § 38773.
437 Leppo v. City of Petaluma (1971) 20 Cal.App.3d 711, 718–19. 438 Allen v. Cty. of Lake (N.D. Cal. 2014) 71 F.Supp.3d 1044, 1052 (“The Ordinance does declare that the violations at issue in this case ‘constitute [] an immediate threat or danger to the health, safety and welfare of the public and may, therefore, be summarily abated . . . .’ County of Lake Ordinance No. 2997 § 72.8. But mere declaration of an immediate threat does not make it so. Further, the other provisions of the Ordinance belie the claim that any outdoor growth whatsoever constitutes an emergency. For example, the Ordinance allows a private resident to grow indoors as many plants as can fit in an area of 100 square feet. It also allows up to six mature plants or twelve immature plants outdoors on parcels greater than one acre. … The apparent arbitrariness of the Ordinance’s razor-thin distinction between emergency violations and permissible growth delegitimizes the Ordinance’s summary abatement provision, and, consequently, Defendants’ argument that the exigency exception applies.”) (internal citations omitted). 439 Gov. Code, § 38773.5, subd. (a).
440 Gov. Code, § 38773, subd. (b).
appropriate to address the violation. Cities
should limit summary abatement to alleviating
only imminently dangerous conditions. Summary
abatement may include disposal of cannabis,
the boarding up of property, or other alternative
measures discussed later in this chapter.
Whenever a city exercises its summary abatement
powers, due process requires that a city must
provide the party responsible for the nuisance with
a post-abatement hearing to contest the validity of
the summary abatement. While many cities have
a code provision authorizing summary abatement,
most do not have clear procedures outlining the
notice and hearing procedures to occur after
completion of summary abatement.
Nuisance abatement procedures may also
provide for the imposition of special assessments
on unlicensed commercial cannabis facilities
that constitute a nuisance.439 Cities may provide
that the prevailing party at nuisance abatement
proceedings are entitled to collect attorneys’
fees.440
C. Notice and Order to Vacate (Also Known
As, Red-Tagging)
If a city’s code enforcement officials determine that
a commercial cannabis business is in violation of
local or state building codes, and such violation(s)
render the structure unsafe for human occupancy,
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ordinances, but is generally understood to refer to
a notice and order to vacate, and is often paired
with an order to repair or demolish, as a means
of abating the nuisance caused by the unsafe
condition of the building.
The authority to red-tag is derived from both state
and local law, with the latter based on cities’ wellestablished police power to enact and enforce ordinances to protect the public health, safety, and
welfare of their residents.441 Standards relating to
fire and life safety, structural safety, and access
compliance are governed by the California Building
Standards Code,442 which applies to all occupancies
in California, along with local amendments adopted
by state agencies and ordinances implemented
by local jurisdictions’ governing bodies. In addition
to setting forth notice requirements, Section 116.1
of the Building Code provides that structures that
are “dangerous to human life or the public welfare
or that involve illegal or improper occupancy or
inadequate maintenance, shall be taken down
and removed or made safe, as the building official
deems necessary and as provided for in this
section. A vacant structure that is not secured
against entry shall be deemed unsafe.” (Emphasis
added.) While this language does not expressly
authorize local building officials to vacate a
structure, it provides broad authority to order that
structures be made safe, as deemed necessary.
The determination of whether a building is unsafe
under California Building Code section 116.1 is within
the discretion of the building official. Common
conditions of a commercial cannabis business that
may render it unsafe are unpermitted construction
(especially unpermitted electrical modifications that
pose an increased fire hazard), and ingress and
441 Cal. Const., art. XI, § 7.
442 Cal. Code Regs., tit. 24.
443 Health & Saf. Code, § 17980, subd. (a).
444 Health & Saf. Code, § 17980, subd. (c)(1).
egress blockages (including unapproved security
doors that prevent emergency egress).
A red tag may also be issued in connection with
revocation of a certificate of occupancy. California
Building Code section 110.4 authorizes the building
official to suspend or revoke a certificate of
occupancy “where it is determined that the building
or structure or portion thereof is in violation of any
ordinance or regulation or any of the provisions of
this code.” California Building Code section 110.1
provides that no building may be used or occupied
until the building has a certificate of occupancy,
meaning that upon revocation of a certificate of
occupancy a building must be vacated. Further,
Section 116.1 of the Building Code provides
that structures that “involve illegal or improper
occupancy…shall be…made safe, as the building
official deems necessary and as provided for in this
section.”
Statutory authority applicable to red-tagging unsafe
structures can also be found in the Health and
Safety Code. An enforcement agency is authorized
to “institute appropriate action or proceeding to
prevent, restrain, correct, or abate the [Building
Code] violation or nuisance,” with less than 30 days’
notice if deemed necessary, in situations involving
“an immediate threat to the health and safety of the
public or occupants of a structure.”443 Whenever
the enforcement agency has determined, after
inspection, that the building is substandard, it is
authorized to commence proceedings to abate
the violation by repair, rehabilitation, vacation,
or demolition of the building.444 Note that this
provision expressly authorizes an order to vacate.
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Cities should also rely on their own applicable
municipal code provisions when ordering that
properties determined to be unsafe be vacated
and secured. A city may adopt distinct red tagging
procedures in its nuisance abatement ordinance
or amend the aforementioned California Building
Code authorities and procedures. Having an
ordinance that makes failure to comply with an
order to vacate a property deemed to be unsafe a
misdemeanor can be a potent enforcement tool.
Whatever code sections are relied upon in issuing
a notice of violation and order to vacate, it is
important to ensure due process is afforded, even
in an emergency situation.445
PRACTICE TIP: Cities should not rely solely
on notice requirements in the California
Building Code (§§116.3-116.4) to ensure
due process is afforded in the red-tagging
process. Supplemental procedures,
including hearing and appeal rights, should
be enacted and followed.
445 Wyss v. City of Hoquiam (9th Cir. 2004) 111 Fed.Appx. 449, 451 (holding when immediate action is necessary to protect the public interest, such as when an unsafe nuisance is present, a hearing is not necessary prior to the exercise of police power as long as adequate post-deprivation procedural safeguards exist). See also Soranno’s Gasco, Inc. v. Morgan (9th Cir. 1989) 874 F.2d 1310, 1318. 446 California Building Code, § 112.3.
PRACTICE TIP: The Fire Marshal, as the
Fire Code official, also has authority to
“red tag” a building and order it vacated
under California Fire Code section 110, if
the conditions are deemed unsafe due
to “hazardous conditions that present
imminent danger” to persons in the
building. These may include conditions
such as unsafe exposed electrical wiring,
overloaded electrical outlets and extension
cords, large accumulations of combustible
materials, and lack of ingress and egress.
In a civil injunction/nuisance action, Courts
place great weight on the declaration of a
Fire Marshal when the Fire Marshal outlines
the life safety conditions they observed that
could cause imminent harm.
D. Disconnection of Utilities
Cities may also consider alternative tools to
gain compliance or prohibit unlawful cannabis
business operations. One such tool may be the
disconnection of utility services. Some cities, which
have their own utilities department with water
or power may consider turning off an unlawful
cannabis business’ utility services if the city has a
local ordinance providing such authority. However,
some businesses may bring in generators or seek
power from other sources to stay open. State law
also authorizes disconnection of utilities “in case
of emergency where necessary to eliminate an
immediate hazard to life or property” or where
the utility connection has been made without the
required certificate of occupancy.446 As with any
administrative provision in the California Building
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Code, the authority to disconnect utilities can be
amended or supplemented by ordinance.
PRACTICE TIP: An ordinance expressly
authorizing this enforcement tool is
advisable to provide notice to the utility
subscriber. In other contexts, California law
is clear that notice must be provided prior to
turning off a utility service.447
E. Permit Modification, Suspension, or
Revocation
Cities that allow and regulate commercial
cannabis businesses typically issue licenses or
permits, subject to requirements and restrictions
specified by ordinance. Such requirements should
be considered an essential part of an effective
regulatory and enforcement system governing
commercial cannabis activity at the local level,
and are clearly within cities’ inherent authority, as
recognized by MAUCRSA.448
Cities seeking to enforce their local license or
permit requirements by modifying, suspending,
or revoking the authorization based on noncompliance with those requirements should have an ordinance that establishes the process for
doing so. In accordance with principles of due
process, the ordinance should provide for notice
regarding the nature of the violation and grounds
for the proposed action (e.g., additional conditions,
447 Pub. Util. Code, §§ 10010, 10010.1 (notice required by a public utility prior to termination of light, heat, water, or power for a delinquent account). But see Goldin v. Public Utilities Commission (1979) 23 Cal.3d 638, 664 (addressing discontinuation of telephone service involving illegal activity, without notice to the subscriber, upon a finding of probable cause by a magistrate; “. . . the rule should provide at the least that in order to justify summary action the magistrate must find that there is probable cause to believe not only that the subject telephone facilities have been or are to be used in the commission or facilitation of illegal acts, but that the character of such acts is such that, absent immediate and summary action in the premises, significant dangers to public health, safety, or welfare will result.”).
448 Bus. & Prof. Code, § 26200, subds. (a)–(b) (providing in part that MAUCRSA shall not be interpreted to supersede or limit the authority of a local jurisdiction to adopt and enforce local ordinances to regulate businesses licensed under MAUCRSA, including “business license requirements,” nor to supersede or limit existing local authority to enforce “local license, permit, or other authorization requirements.”) 449 Coe v. City of San Diego (2016) 3 Cal.App.5th 772, 790 (“In reviewing the severity of the discipline imposed, we look to the correctness of the agency’s decision rather than that of the trial court. The penalty imposed by an administrative body will not be disturbed in mandamus proceedings unless an abuse of discretion is demonstrated.” (Citations omitted.)) a monetary penalty, suspension, or revocation
of the license), and afford an opportunity for a
hearing. Depending on the severity or frequency
of the violation(s), cities may be justified in seeking revocation, rather than a lesser form of discipline
against the cannabis licensee. Absent a clear abuse
of discretion, courts will generally defer to the
city’s discretion regarding the level of punishment
imposed.449
Aside from local cannabis licenses or permits, it
may be possible and prudent to revoke, suspend,
or modify other city approvals, licenses, or permits.
For example, the operation of a non-compliant
cannabis business by a tenant may be a basis
to take action against the business license or a
conditional use permit for the property. A property
owner may decide to take action to eject a tenant
or otherwise cooperate with the city’s efforts
in order to avoid the revocation, suspension,
or modification. Depending on the level of
involvement or culpability of the property owner for
the illegal activity, these may be additional means
of placing pressure on a bad actor.
PRACTICE TIP: While cities are afforded
broad discretion in determining the
appropriate penalty for license violations,
a decision to impose severe discipline is
more likely to be upheld if preceded by
unsuccessful attempts to gain compliance or
other aggravating factors. For instance, if the
totality of circumstances includes warning
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letters, or attempts by the cannabis business
licensee to avoid detection of violations, it
is unlikely a court would deem revocation
an abuse of discretion.450 Cities should
generally avoid “accumulating” violations in
order to impose a more severe penalty than
applicable to a first offense under governing
regulations. In a case involving an ABC
licensee, Walsh v. Kirby,451 this practice was
found to violate both applicable statutory
authority and due process. The court
stated, “Petitioner complains of a practice
whereby the department accumulated
evidence of recurring sales of distilled
spirits below established minimum retail
prices, each sale constituting a different but
essentially identical violation, before it filed
its accusation charging the licensee with
the whole series of violations and assessing
concomitant cumulative penalties. Such
practice, petitioner contends among other
things, constitutes an arbitrary exercise of
the statutory grant of authority and offends
due process limitations. We agree and annul
the imposition of cumulative penalties in
the instant circumstances.” The Walsh court
noted, however, that it expressed no view on
whether such a practice “would be arbitrary if
exercised against a licensee who, the record
would show, was a habitual offender and
unwilling to conform.”452
F. State Law Administrative Enforcement
Each of California’s three licensing agencies
(Bureau of Cannabis Control, California Department
450 Id. at p. 790.
451 (1974) 13 Cal.3d 95, 98.
452 Walsh v. Kirby (1974) 13 Cal.3d 95, 105, fn. 14.
453 Bus. & Prof. Code, § 26031.5.
454 Bus. & Prof. Code, § 26038.
of Food and Agriculture and California Department
of Public Health) were empowered to issue a
citation to a licensee or unlicensed person for
any violation of MAUCRSA or its implementing
regulations, however, after July 12, 2021, the DCC is
the enforcement agency.453 MAUCRSA establishes
the basic elements of the associated administrative
process, including provisions requiring the licensing
authority to follow specified notice and hearing
requirements, and consider certain factors in
assessing administrative fines. The potential fines
are steep: up to $5,000 per violation by a licensee
and up to $30,000 per violation by an unlicensed
operator. Additionally, any person engaging in
commercial cannabis activity without a license is
subject to civil penalties of up to three times the
amount of the license fee for each violation, and
the court may order the destruction of cannabis
associated with that violation in accordance with
Section 11479 of the Health and Safety Code.454
This enforcement mechanism has the potential to
be a highly effective tool against illicit cannabis
business and non-compliant licensees. Its actual
effectiveness, however, will depend on the state’s
resources to issue and follow through on citations
as part of a broader enforcement strategy. That
strategy has included coordination with local
law enforcement as well as other state entities,
such as the California Department of Tax and Fee
Administration (CDTFA), in various enforcement
efforts. The state may likewise seek to partner with
local authorities in exercising its citation authority
under Business and Professions Code section
26031.5.
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Appendix I — Criminal Enforcement of Misdemeanors
FIELD CITATION VERSUS COMPLAINT FOR
ARREST WARRANT
There are generally two ways to file a
misdemeanor case and bring the defendant into
court: issuance of a citation or the filing of a longform criminal complaint.
Issuance of Citation Long-Form Criminal Complaint
◆ Offense must have been viewed in the
presence of the officer.455
◆ California law limits who can be arrested
and booked, rather than immediately
issued a citation and released.456
◆ A defendant may be arrested where:
“There was a reasonable likelihood that
the offense or offenses would continue or
resume, or that the safety of persons or
property would be imminently endangered
by release of the person arrested.”457
◆ Offenses do not need to be
committed in officers’ presence and
complaint may be employed when
the property owner or business
owner/entity are the defendants.458
◆ Preparation of long-form complaint
can assist the prosecuting attorney
in identifying issues and making
certain tactical decisions, including
who to charge, what violations to
charge, and how many counts to
allege, etc.
In general, the method of initiating the case tends
to depend on the target of the investigation, with
citations being issued in-person to violators found
at the location and complaints being used for other
defendants.
455 Pen. Code, § 836.5, subd. (a).
456 Pen. Code, § 853.6, subd. (i).
457 Pen. Code, § 853.6, subd. (i)(7).
458 Pen. Code, § 740. See also Pen. Code, §§ 948–949 (authority to file complaints in superior court), 950, 952 (form of complaint). 459 See Civ. Proc. Code, §§ 1822.50, et seq.
IDENTIFICATION AND SELECTION OF
DEFENDANTS
A key to permanently abating illegal activity is
to prosecute those that are most directly and
ultimately responsible for the criminal activity.
As such, it is critical to tailor the approach of the
prosecution to the
defendants who
are responsible for
the illegal activity.
◆ Business
Entity Defendants
Warrants may be
used to obtain
business records
that may disclose
the owners
or operators.
Obtaining and
executing search
warrants require
the participation
and cooperation
of law enforcement, which cities will have to
varying degrees. An inspection warrant can be
a useful evidence gathering tool where there
is insufficient evidence to obtain a warrant
or where law enforcement is not leading the
investigation.459
APPENDIX I | Criminal Enforcement of Misdemeanors
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Appendix I — Criminal Enforcement of Misdemeanors
◆ Property Owner – A property owner may have
an interest in the cannabis activity or may
simply be allowing the illegal activity to occur.
Often property owners collect above-market
rent in exchange for allowing the illegal activity
to continue. Before filing a criminal complaint
against a property owner with no other
ascertainable connection to the illegal activity,
it is necessary to first put the property owner
on notice.460
◆ Employees – Prosecution of only employees
may lead to an illegal business reopening, with
new employees being hired who are unaware
of prior arrests.
RESOLUTION OF CRIMINAL PROSECUTION
The primary advantage of a misdemeanor
prosecution is placing the defendant on one,
two, or three years of summary probation subject
to specific terms and conditions related to the
violation committed.461 Because defendants
often reoffend, reducing misdemeanors to
infractions is not recommended. Pursuing a
misdemeanor plea ensures probation is possible.
Conditions of probation may include orders to
abate outstanding violations and to prevent
the recurrence of violations. At a minimum,
every probation includes the condition that the
defendant must “obey all laws.”
460 See People v. Greene (1968) 264 Cal.App.2d 774, 778 (landowner can be criminally charged for the condition of his or her property, and a municipality can demand affirmative acts to remedy the condition of the premises). 461 Pen. Code, § 1203, subd. (a).
462 Pen. Code, § 1203.2.
A defendant who violates a condition of probation
is subject to the revocation of his or her probation,
and to the imposition of additional sanctions. If
the defendant violates any term or condition of
probation at any time during the probationary
period, the defendant may be rearrested, have
additional fines imposed, or have additional
conditions placed upon the probation.462 Though
jail time is not common, jail time may be imposed
by a court where a defendant’s actions are
egregious or where the defendant has repeatedly
violated terms and conditions of probation imposed
by the court.
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Glossary
Glossary
AUMA: Adult Use of Marijuana Act, adopted
by California voters as Proposition 64 effective
November 9, 2016.
BSA: Bank Secrecy Act. The BSA requires US
financial institutions to assist federal agencies to
detect and prevent money laundering.
Bureau or BCC: Bureau of Cannabis Control,
formerly Bureau of Marijuana Control, formerly
Bureau of Medical Marijuana Regulation. The
Bureau is within the Department of Consumer
Affairs (DCA). The Bureau governs all state licenses
relating to commercial cannabis other than those
governed by CDPH and CDFA. (Bus. & Prof. Code
§26012.)
CBD: Cannabidiol, an extract from cannabis plants.
CDD: Customer Due Diligence. FinCEN’s guidelines
under the BSA include best practices for CDD.
CDFA: California Department of Food & Agriculture.
CDFA governs state licenses for commercial
cultivation of cannabis. (Bus. & Prof. Code §26012.)
CDFTA: California Department of Tax and Fee
Administration. CDFTA determines certain tax rates
relating to commercial cannabis. Cannabis retailers,
cultivators, manufactures, and distributors must also
register with CDTFA.
CDFW: California Department of Fish & Wildlife.
CDFW provides input to CDFA on conditions
relating to the cultivation of cannabis. (Bus. & Prof.
Code §26060(c).)
CDPH: California Department of Public Health.
CDPH governs state licenses for commercial
manufacturing of cannabis. (Bus. & Prof. Code
§26012.)
CEQA: California Environmental Quality Act. (Public
Resources Code §§21000 et seq.)
CSA: Controlled Substances Act (21 USC §§810 et
seq.)
CUA: Compassionate Use Act of 1996 adopted
by California voters as Proposition 215 effective
November 6, 1996. (Health & Safety Code §§11362.5
et seq.)
DCA: Department of Consumer Affairs. The Bureau
is within DCA.
DCC: Department of Cannabis Control, created by
AB 141 in July 2021.
DPR: Department of Pesticide Regulation. DPR
helps develop guidelines for the use of pesticides
in the cultivation of cannabis and residue in
harvested cannabis.
Day Care Center: “[A] child day care facility other
than a family day care home, and includes infant
centers, preschools, extended day care facilities,
and schoolage child care centers, and includes
child care centers licensed pursuant to Section
1596.951.” (Health & Safety Code §1596.76.) Certain
locational restrictions relate to day care centers.
FDA: US Food and Drug Administration. The FDA
regulates CBD and THC if used as a food or drug
additive for humans and animals.
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Glossary
FDB: Food and Drug Branch, within the California
Department of Public Health. FDB regulates the
topical and ingestible forms of hemp-based CBD.
FinCEN: Financial Crimes Enforcement Network,
within the US Department of the Treasury. FInCEN
has issued guidelines relating to cannabis-related
financial transactions.
Hemp: Hemp and cannabis are the same plants,
with hemp plant defined as having less than 0.3%
THC. (Health & Safety Code §11018.5(a).)
MAUCRSA: Medicinal and Adult-Use Cannabis
Regulation and Safety Act, effective June 27, 2017.
MCSB: Manufactured Cannabis Safety Branch,
within the California Department of Public Health.
MCSB regulates the manufacture of cannabis.
MMIC: Medical Marijuana Identification Card. An
MMIC indicates the holder is a qualified patient
or the primary caregiver for a qualified patient
and is exempt from sales and use taxes since the
cannabis is for medicinal use. (Rev. & Tax. Code
§34011(a)(1).)
MMPA: Medical Marijuana Program Act (Health
& Safety Code §§11362.7 et seq.), aka SB 420,
effective January 1, 2004.
MMRSA: Medical Marijuana Regulation and Safety
Act. MMRSA was enacted in 2015 but was repealed
by MAUCRSA.
SARs: Suspicious Activity Reports. A US financial
institution must issue a SARs for certain types of
financial transactions.
SWRCB: State Water Resources Control Board.
SWRCB provides input to CDFA on conditions
relating to the cultivation of cannabis. (Bus. & Prof.
Code §26060(c).)
THC: Tetrahydrocannabinol, an extract from
cannabis plants.
UCSA: Uniform Controlled Substances Act
(California Health & Safety Code §§11000 et seq. ),
effective January 1, 1973.
Youth Center: “[A]ny public or private facility that
is primarily used to host recreational or social
activities for minors, including, but not limited to,
private youth membership organizations or clubs,
social service teenage club facilities, video arcades,
or similar amusement park facilities.” (Health &
Safety Code §11353.1(c)(2).) Certain locational
restrictions relate to youth centers.
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League of California Cities
1400 K Street, Suite 400, Sacramento, CA 95814
Phone: (916) 658-8200 | Fax: (916) 658-8240
www.calcities.org
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Agenda No. 12 C
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Katie Clark, Recreation Manager
MEETING DATE: February 16, 2022
SUBJECT: Special Events Calendar for Fiscal Year 2022-2023 CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378
RECOMMENDATION
1. Approve the Special Event Calendar for Fiscal Year 2022-2023
2. Approve 13 proposed special events as City Sponsored Events and waive fees for City Staff support and facility/equipment use
3. Approve 9 proposed special events as Full Cost Recovery Events and do not approve the Legends of Autobahn event
4. Return with Legends of Autobahn details after they have been developed and approved by staff to seek Council approval per the Recreation Board Recommendations
5. Allow municipal code exceptions for the designated events to allow pets in the parks
6. Do not approve the Feast of Lanterns and the 5 additional events associated with the Feast. Event organizers shall begin discussions with community stakeholders, the DEI Task Force and others with the goal of bringing back a revised event for Fiscal Year 2023-2024 that reflects changes to address concerns and critiques expressed by the public, stakeholder groups, and a City advisory board regarding the event
DISCUSSION
At the beginning of each calendar year, the Recreation Board reviews the list of proposed Special Events scheduled to occur during the upcoming fiscal year (July – June) and approves the level of support required for each event. The Recreation Board reviewed the proposed 2022-2023 Special Events Calendar and staff recommendations at the Recreation Board meeting held on January 31, 2022. The Recreation Board recommends that the Council approve these events as classified pursuant to Council Policy No. 900-1, except for the Legends of the Autobahn until more details are provided regarding that specific event. They also recommend allowing exceptions to Municipal Code
14.08.030 to allow pets in the parks for the designated events.
As the COVID-19 pandemic continues, event organizers have been asked to submit applications with the understanding that City Staff will continue to monitor and adhere to all State of California and Monterey County guidelines as they relate to organized events. Staff will work with event organizers if cancelations, postponements or modifications need to be made as event dates draw near.
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of 23 events which is one more event than appeared on the 2021-2022 Special Events Calendar. The costs and overview associated with each event can be found within Attachment 1.
CITY COUNCIL POLICY #900-1: SPECIAL EVENTS
Policy 900-1-Special Events, provides guidance for conducting special events in the City and ensures an appropriate balance between the number and scope of these events in relation to the ability to accommodate such events in City neighborhoods and facilities.
In alignment of the Policy, all authorized Special Events are to be classified as either, City Sponsored Events: Those that include traditional events that are primarily hosted by the Chamber of Commerce, the School District, or the City and shall receive full City Support or, Special Events: Events that require exclusive use of City property and require support from Police, Fire and / or Public Works. Special Events will be deemed full cost recovery.
CLASSIFICATIONS
City Sponsored: All costs associated with these events including staffing and equipment/facility use are proposed to be waived, with an increased emphasis of utilizing volunteers whenever possible.
City Sponsored Events Include: 4th of July Downtown event, Feast of Lanterns & the 5 associated events, National Night Out, P.G. Concours Auto Rally, Walk with Pride, Butterfly Parade, Butterfly Days, P.G.H.S. Homecoming Parade, Trick or Treat Pacific Grove, Veterans Day Ceremony, Holiday Tree Lighting, Holiday Parade of Lights, Stillwell’s Holiday in the Park, and the Chamber’s Good Old Days events.
Feast of Lanterns & associated events: In consideration of ongoing community dialogue and expressed concerns, as well as numerous discussions at the Diversity, Equality and Inclusion Task force, the City does not recommend the Feast of Lanterns or the 5 events associated with the Feast of Lanterns, including the pet parade, for fiscal year 2022/23. Event organizers should begin discussions with community stakeholders, the DEI Task Force, City staff and other interested parties to address concerns that have been expressed over the last few years.
Full Cost Recovery Events: Events are billed at the full cost recovery rates for staff support and facility/equipment use. Most of these events consist of a variety of fundraisers, races, walks and car shows.
Full Cost Recover Events Include: Pacific Grove Moto Bike Night, Pacific Grove Treffen 23 VW Cruise, Celebration of our Lady of Fatima, Classic Kick-Off Car Show, Little Car Show, Legends of the Autobahn, AIM for Awareness Walk & Rally, BSIM Monterey Bay Half Marathon & Pacific Grove Lighthouse 5K/By the Bay 3K, Rudolph Run 1K & 5K Walk/Run, and BSIM By the Bay 3K.
Legends of the Autobahn: It is anticipated that this event will be held on the front nine of the Pacific Grove Golf Course. Event organizers are working out the event details with the golf course management team. Once these plans are finalized and approved by City staff a new report will be brought to Council for approval.
MUNICIPAL CODE EXCEPTIONS
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As a way of increasing the experience for event participants the following events: Feast of Lanterns Pet Parade, Stillwell’s Holiday in the Park, and Good Old Days are seeking a concession of Municipal Code 14.08.030 - Dogs Prohibited in Public Parks, to allow animals in parks during their events. In past years, these and similar events have conducted temporary petting zoos, pony rides, and dogs in the park as entertainment features.
OPTIONS
1. Take no action
2. Provide alternate direction
FINANCIAL IMPACT:
Of the 23 listed special events,13 events are being proposed as City Sponsored Events, and thereby would be subsidized by the City of Pacific Grove for staffing and event operation costs. The other 10 event requests would be billed at the full cost recovery rate.
In the past, the staffing costs for Public Works, Recreation, Police, and Fire services to provide setup and breakdown of equipment, manage crowd and traffic control and assist with event operations have become very costly. The total estimated costs of personnel support for 2022-2023 events will be $101,687 with $56,651 being allocated toward City Sponsored events. Additionally, it is anticipated that revenues of roughly $73,294 would be collected by Full Cost Recovery Events through fees associated with the use of City parks, facilities, equipment and staff reimbursements. To successfully operate the 23 noted special events, it will cost the City an approximately $28,000. Funding to support the City sponsored events has been allocated through the respective department staffing and operations budgets.
The impacts of the continuing COVID-19 pandemic have caused significant constraints to the City’s overall budget. It is anticipated that City staffing and requested resources may be limited throughout the 2022-2023 fiscal year. City staff will continue working with event organizers to lessen the City’s costs associated with these events by using volunteers, community groups and high school students seeking community service hours. The total economic impact and benefits in the form of increased Transient Occupancy and Sales taxes are not known, but special events traditionally have made a positive impact to the City’s economy. Many of these events attract participants and visitors from outside the peninsula. Many of these same people return to participate in other Pacific Grove event(s).
Additionally, the local non-profits who volunteer and support these events also benefit financially.
GOAL ALIGNMENT: Not Applicable.
Attachments
Calendar and Cost Breakdown
Policy 900-1
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# Event Organization Day Date Time Location
1 4th of July Celebration Chamber of Commerce Monday July 4, 2022 11:00 AM Downtown 2 Pacific Grove Moto Bike Night Chamber of Commerce Thursday July 7, 2022 5:00 PM Downtown (Lighthouse Ave) 3 Pacific Grove Treffen 2 VW Cruise Chamber of Commerce Wednesday July 20, 2022 5:00 PM Downtown (Lighthouse Ave) 4 Feast of Lanterns Week Feast of Lanterns All Week July 23-30, 2022 Varies Varies 5 Pet Parade Feast of Lanterns/PG Rec Friday July 29, 2022 2:00 PM Lighthouse Ave & Caledonia Park 6 National Night Out City of Pacific Grove Tuesday August 2, 2022 5:00 PM Caledonia Park 7 Celebration of Our Lady of Fatima Lady of Fatima Society Sat / Sun August 13-14, 2022 Varies Downtown (Lighthouse Ave) 8 Classic Kick-Off Car Show & Cruise Chamber of Commerce Tuesday August 16, 2022 3:00 PM Downtown (Lighthouse Ave) 9 Little Car Show Marina Motorsports Wednesday August 11, 2022 10:00 AM Downtown (Lighthouse Ave) 10 Legends of the Autobahn Chamber of Commerce Thursday August 18, 2022 9:00 AM Pacific Grove Golf Links 11 PG Concours Auto Rally PG Rotary Club Friday August 19, 2022 12:00 PM Downtown| Chautauqua Hall 12 AIM for Awareness Walk & Rally AIM Youth Mental Health Sunday September 11, 2022 1:00 PM Lover's Point Park 13 Walk With Pride PG Pride Saturday September 17, 2022 9:00 AM Recreation Trail 14 Butterfly Parade PG Unified School District Saturday October 2, 2022 10:30 AM Downtown (Lighthouse Ave) 15 Butterfly Days PG Heritage Society Fri/Sat/Sun Sep 30-Oct 2, 2022 Varies Downtown |Chautauqua Hall 16 PGHS Homecoming Parade PGUSD Friday Late Oct (TBD) 3:15 PM Downtown 17 Trick or Treat Pacific Grove City of Pacific Grove TBD TBD TBD TBD 18 Veterans Day Ceremony City of Pacific Grove Friday November 11, 2022 TBD TBD 19 BSIM 3K/5K & Mty Bay Half Marathon Big Sur International Sat / Sun November 12-13, 2022 Varies Lover's Point | Ocean View 20 Holiday Tree Lighting Ceremony City of Pacific Grove Monday November 28, 2022 6:00 PM Jewell Park 21 Holiday Parade of Lights Chamber of Commerce Thursday December 1, 2022 6:00 PM Downtown (Lighthouse Ave) 22 Stillwell’s Holiday in the Park Chamber of Commerce Saturday December 3, 2022 10:00 AM Caledonia Park 23 Rudolph Run 1K & 5K Walk/Run Arthritis Research Coalition Saturday December 10, 2022 7:30 AM Lover's Point | Ocean View 24 By The Bay 3K Big Sur International Saturday April 29, 2023 6:00 AM Lover's Point | Ocean View 25 Good Old Days Chamber of Commerce Fri-Sun May 5-7, 2023 Varies Downtown | Jewell Park City Sponsored - 15 Full Cost Recovery (F. C. R.) - 10 Not recommended event PG CC 2/16/22
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Total Staff Costs Event Name Hrs Costs Hrs Costs Hrs Costs Hrs Costs 1 4th of July Celebration 12 $1,080.00 $ - $ - 23 $530.00 $1,610.00 2 Pacific Grove Moto Bike Night 18 1,860.36 51 7,749.18 $ - $9,609.54 3 Pacific Grove Treffen 2 VW Cruise 12 $1,080.00 6 $ 978.00 $ - $2,058.00 4 Feast of Lanterns Week 175 $15,750.00 70 $11,550.00 5 $1,000.00 50 $1,150.00 $29,450.00 5 Pet Parade $0.00 6 National Night Out 4 $360.00 4 $92.00 $452.00 7 Celebration of Our Lady of Fatima 4 $660.00 $660.00 8 Classic Kick-Off Car Show & Cruise 6 $584.64 8 $1,282.16 $1,866.80 9 Little Car Show 6 $ 584.64 11 $ 1,757.72 $ - $2,342.36 10 Legends of Autobahn 4 $ 360.00 15 $ 2,475.00 $ - $ - $2,835.00 11 PG Concours Auto Rally 18 $ 1,620.00 15 $ 2,475.00 $ - $ - $4,095.00 12 AIM for Awareness Walk & Rally 4 $360.00 3 $495.00 $855.00 13 Walk With Pride 2 $180.00 2 $180.00 $ - $ - $360.00 14 Butterfly Parade 50 $4,500.00 15 $345.00 $4,845.00 15 Butterfly Days $0.00 16 PGHS Homecoming Parade 4 $ 360.00 6 $ 1,080.00 $ - $ - $1,440.00 17 Trick or Treat Pacific Grove 8 $720.00 $ - $ - 15 $ 345.00 $1,065.00 18 Veterans Day Ceremony 4 $ 360.00 $ - $ - 12 $ 276.00 $636.00 19 BSIM 3K/5K & Mty Bay Half Marathon 80 7,200.00 $ 30 4,950.00 $ -$ 15 345.00 $ $12,495.00 20 Holiday Tree Lighting Ceremony 2 $180.00 8 $184.00 $364.00 21 Holiday Parade of Lights 70 6,300.00 $ 8 1,320.00 $ -$ 10 230.00 $ $7,850.00 22 25 2,250.00 $ $ - -$ 18 414.00 $ $2,664.00 23 Rudolph Run 1K & 5K Walk/Run 30 2,700.00 $ 15 2,475.00 $ -$ -$ $5,175.00 24 By The Bay 3K 50 $4,500.00 16 $2,640.00 $7,140.00 25 Good Old Days 250 $22,500.00 45 $7,425.00 5 $1,000.00 15 345.00 $ $31,270.00 $101,687.70 15 City Sponsored $56,651.00 10 Full Cost Recovery (F. C. R.) $45,036.70 $28,526.92 *All estimates are based on projected hours & resources submitted in application by event organizers. -$28,124.08 *Employee costs are based on Fully Burdened Rates for employees as listed in event applications. 2022-2023 Special Events Budget Estimate Staff Costs Public Works Police Fire Recreation TOTAL Costs Full Cost Recovery City Sponsored Usage Fees Total Staff Costs PG CC 2/16/22
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CITY OF PACIFIC GROVE
CITY COUNCIL POLICY
SUBJECT POLICY NO. EFFECTIVE DATE PAGE NO.
Special Events 900-1 February 16, 2011 1 of 3
PURPOSE
The intent of this policy is to provide guidance for the conduct of special events in the City and ensure an appropriate balance between the number and scope of special events with the ability of City neighborhoods and facilities to adequately handle such events.
POLICY
I. General
The City shall have the discretion to limit the number of special events in any calendar year.
All special events will be limited to those activities that benefit Pacific Grove residents or businesses.
Most special events are either one-time or annual. Certain special events, such as the Farmers' Market, are periodic and ongoing.
The Council reserves the right to take actions creating exceptions to this policy in the event of special circumstances.
II. Types of Special Events
The City will create an annual calendar of special events. Events included in the annual calendar shall have first priority for the scheduled locations and times. Requests for inclusion in the annual calendar shall be submitted to the City by September 31 for any event to be held during the following fiscal year.
The City will also consider the approval of events on an as-proposed basis. Such events will not be approved if they conflict with already approved events. Events requiring City Council approval are those that:
• Require City sponsorship or other City support;
• Preclude others from using an entire outdoor public facility (e.g., Caledonia Park); • Are likely to have a significant impact on substantial numbers of residents or businesses (e.g., closure of multiple or high-traffic streets for a significant amount of time, as determined by the City Manager; or
• Have other characteristics that warrant public consideration by the Council.
More limited events may be approved by staff. A neighborhood event, requiring closure only of a neighborhood street, for example, would not require Council approval. In these cases, those persons incurring the costs of the street closure are the same persons benefiting from the event.
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III. Information Required
Each application for special events shall contain the following information:
A. A description of the proposed event.
B. A statement of the purpose of the event and its benefits to the City.
C. The name of the sponsoring organization.
D. The date, location, and time (to include preparation and clean up) of the event. In the case of a race or parade, a map of the proposed route shall be submitted.
E. An estimate of the number of participants and/or spectators.
F. A description of City facilities, support, and personnel required.
G. A list of personnel to be provided by the sponsor.
H. A description of parking arrangements for the event.
I. If electronic sound amplification equipment will be used, an application for the necessary permit shall be made as required by Chapter 11.94 of the Pacific Grove Municipal Code.
J. A description of the proposed recycling program for plastics, glass, paper, and aluminum during the event.
K. A listing of accommodations provided by the sponsor pursuant to the Americans with Disabilities Act.
L. A listing of fees proposed to be charged, commercial sales, commercial filming, and the service or sale of food and/or alcohol.
III. Conditions of Permit
Once the Council approves an application, the sponsoring organization shall comply with the following conditions:
A. At least 30 days prior to the event, furnish the City with a certificate of insurance in an amount not less than $2 million naming the City of Pacific Grove as an additional insured.
Such insurance shall be primary to any City insurance, and the City must have at least ten days’ notice of cancellation.
B. The sponsoring organization shall reimburse the City for all direct and incidental expenses for the use of the City personnel and facilities. The sponsor has the option of using volunteers or other non-City personnel for some functions (e.g., placing barricades, emptying public trash cans, etc.) Other functions (e.g., Police security) require City personnel. The City has the absolute discretion to determine the number of personnel who will be provided for a particular event.
C. The sponsor is responsible for all sign removal, litter control, clean-up activities, and for providing necessary containers and personnel for recycling activities, as determined by the City.
D. The sponsor shall provide portable restroom facilities if deemed necessary by the City.
E. The sponsor shall be advised that the sponsor is responsible for determining what, if any, accommodations are required of sponsor pursuant to the American with Disabilities Act.
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F. An approved Special Event Application is required for all groups and shall be in the possession of the sponsor or representative at the event.
G. The City will review applications and additional approvals may be deemed necessary.
H. If amplification is to be used a deposit of $500 will need to be paid along with the application fee. If it is determined that amplification exceeds allowable levels or has locations have not been preapproved by City Staff then the deposit may not be returned.
The City of Pacific Grove reserves the right to revoke permissions for an event at any time.
IV. Permitted Events
The Council established the following classification of events to be used in determining the events scheduled for each calendar year: Special Events and City Sponsored Events.
Special Events: These are Special Events that require exclusive use of City property and require support from Police, Fire and / or Public Works. Special Events will be deemed full cost recovery
City Sponsored Events: These events include traditional events that are primarily hosted by the Chamber of Commerce, the School District, or the City and shall receive full City Support. These events will be noted annually on the Special Events Calendar for approval by the City Council.
V. Scheduling of Events
All activities approved are authorized for the subsequent year only and, continued Council approval should not be assumed. Activities may be discontinued if they become too large or if they create problems that would substantially disrupt the peace and quiet of a neighborhood.
Should the City receive requests for more activities than may be accommodated, the City will establish an appropriate random drawing type of system or other suitable method for determining those activities to be approved.
Adopted: April 16, 1986-Resolution No. 5705
Amended: January 7, 1987-Resolution No. 5787
Amended: February 5, 1992-Resolution No. 6238
Amended: March 3, 1993-Resolution No. 6331
Amended: November 15, 1995-Resolution No. 6489
Amended: November 5, 1997-Resolution No. 7-057
Amended: June 2, 2010-Resolution No. 10-044
Amended: February 16, 2011-Resolution No. 11-012
Amended: October 17, 2018 – Resolution 18-037
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Agenda No. 12 D
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM:
Daniel Gho, Public Works Director / Deputy City Manager; Tori Hannah, Administrative Services Director / Assistant City Manager MEETING DATE: February 16, 2022
SUBJECT: Local Water Project Business Plan Peer Review
CEQA: Environmental Impact Report
RECOMMENDATION
Receive the Peer Review of Pacific Grove Local Water Project Business Plan prepared by DTA, validating the City’s assumptions noted in the Business Plan, and authorize staff to being negotiations with CourseCo; and approve a loan repayment plan for the Sewer Fund Interfund Loan.
DISCUSSION
The Local Water Project (The Plant) is owned by the City of Pacific Grove, who orchestrated the financing and construction of the treatment plant. The Plant is operated and maintained under contract by a third-party vendor, PercWater. The Plant was constructed to ensure long term vitality of the Pacific Grove Golf Links and El Carmelo Cemetery by replacing the potable water source with recycled water for irrigation purposes.
Making the switch to recycled water significantly reduced the City’s demand for potable water (approximately 95 acre feet annually), allowed for the repurposing of an abandoned City facility (the former sewer treatment plant at 1313 Oceanview Blvd.), and created a recycled water source for other City facilities and 3rd party customers. To this end, the plant can produce up to .25 Million Gallons of water daily and 125 acre feet annually.
To construct the plant, the City secured $2.4 million in grants and $5.2 million in low-interest loans from the State of California. Total construction cost was $7.6 million. With the reduction in potable water use created by switching the irrigation of the golf course and cemetery over to recycled water, the State allowed the City to sell entitlement water. It was determined that 47.88 acre feet were eligible for entitlement sale, with a price established by the City Council.
The Plant currently operates at a loss. On average, sales of recycled water have totaled approximately $535,000 annually, while The Plant operation and debt service costs total $740,000. Changes to the contract operation of The Plant would not likely yield significant savings, and additional customers of significant scope are not foreseeable at the current time. Water entitlements are recorded as an asset in the City's General Fund. The corresponding entitlement sales, which are currently deposited in the City’s General Fund, could be transferred to the plant’s enterprise fund to assist with bridge funding; however this resource is finite and there is no guarantee of annual sales. From a sustainability PG CC 2/16/22
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perspective, long-term solutions are needed to not only cover operating costs, but also identified capital improvements. A repayment plan also needs to be established for the $600,000 Sewer Fund Interfund Loan.
One potential solution that would allow The Plant to be self-sufficient would be to increase or “ramp-up” the rates charged to all customers to allow for full recovery of operating costs and plan for capital improvements. This includes increasing the rates for the LWP’s largest customer – CourseCo., who operates the Pacific Grove Municipal Golf Links through a City contract. One-time water entitlement sales could be used to repay the Sewer Fund Interfund Loan to avoid an additional impact to the rate structure; and/or could be used to supplement rates during the ramp-up period.
City staff presented potential adjustments to the CourseCo lease at the City Council's August 4, 2021 closed session meeting, to receive authorization to begin negotiations with CourseCo, in an attempt to balance Plant expenditures with increased revenues. The City Council directed staff to retain a third party vendor to review Plant expenditures and revenues and evaluate a break even cost analysis.
At the October 20, 2021 City Council Meeting, the City approved an agreement with DTA to evaluate Plant revenues and expenditures; and conduct a break even cost analysis. Other options presented included initiating a rate study or working with a CPA firm to conduct an Agreed Upon Procedures Review. Staff worked with DTA to review the Draft Local Water Project Business Plan (Attachment 1), as well as the information included in the report. DTA presented the peer review memo to City staff for review dated January 7, 2022 (Attachment 2). It also included updated information for actual revenues and expenditures for Fiscal Year 20/21 to assist in evaluating operations. For consistency purposes, the Draft Local Water Project Business Plan includes the original information from August 4, 2021; and an updated Scenario IV to reflect the actual Fiscal Year 20/21 data. This provides an additional data point for assessing LWP operations, as well as reflects operating levels under drought conditions. The primary difference between the City's and the DTA's scenario, is that the City is assuming water entitlements will be used to assist in supplementing a ramp-up of rates, as well as a loan repayment source.
DTA has determined after review of the City’s Business Plan and rate analysis that the City’s analysis of revenues and costs, debt service and available fund balances on an annual basis is rational, supportable and is consistent with industry practice. The City’s financial model follows closely with the recommendations of American Water Works Association (AWWA) Manual of Water Supply Practices.
Furthermore, DTA has determined that to achieve a sustained, breakeven operation, City must impose steep increases in early years to reach a rate level of over $0.03 per gallon with modest increases thereafter.
With these validations, Staff requests the Council authorize negotiations to begin with CourseCo, using the breakeven cost analysis presented in the DTA memo as a basis for the discussions. Any updates regarding negotiations and proposed adjustments to the lease will be provided to Council in closed session.
Staff is also recommending using the proceeds from the $625,187 promissory note to repay the Sewer Fund Interfund Loan. This note is anticipated to be paid in Fiscal Year 22/23. The use of an alternate repayment source would provide the LWP with a "fresh start". The interest rate on the loan would be based on the percentage earned by the City's investment portfolio from the time the funds were transferred to the LWP Fund to the time of the repayment. The principal would be repaid upon receipt of the promissory note; and interest would be paid to the Sewer Fund at the close of each quarter, with a retroactive payment made for the periods that have elapsed. This would make the Sewer Fund "whole" by restoring all amounts owed to the Sewer Fund, as well as providing an equivalent amount of interest PG CC 2/16/22
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earnings. Approval of the loan terms will also allow the City to formally book the repayment plan and disclose it in the upcoming audited financial statements.
Council may also request that staff update the scenarios included on Page 14 of the Business Plan to reflect the Fiscal Year 20/21 actual amounts; or the complete plan to assist with decision-making. The original plan was not revised to maintain consistency with the peer review process.
OPTIONS
1. Provide alternate direction
2. Request staff to update the complete LWP Business Plan and related scenarios to reflect the Fiscal Year 20/21 actual amounts.
FINANCIAL IMPACT:
There is no fiscal impact by receiving this report. Any potential lease adjustments, the development of a repayment plan, or amendments to the budget will be brought back to the City Council at a later date.
GOAL ALIGNMENT: Financial Stability: Develop a strategic plan to better address current and future City expenditure and revenue needs.
Attachments
Local Water Project Business Plan
DTA memo
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PACIFIC GROVE LOCAL WATER PROJECT BUSINESS PLAN
CITY HALL
300 FOREST AVENUE
PACIFIC GROVE CA 93950
WWW.CITYOFPACIFICGROVE.ORG
CITY OF PACIFIC GROVE
1313 OCEAN VIEW BOULEVARD
PACIFIC GROVE, CA 93950
Prepared by
Daniel Gho: Public Works Director
Tori Hannah: Administrative Services Director
July 21, 2021
(Includes the original Scenario IV and a revision to reflect FY 20/21 Actual revenues and expenditures) PG CC 2/16/22
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Executive Summary
The Local Water Project (The Plant) is owned by the City of Pacific Grove, who orchestrated the financing and construction of the treatment plant. The Plant is operated and maintained under contracted by a third-party vendor, PercWater. The Plant was constructed to ensure long term vitality of the Pacific Grove Golf Links and El Carmelo Cemetery by replacing the potable water source with recycled water for irrigation purposes.
Making the switch to recycled water significantly reduced the City’s demand for potable water (approximately 95 acre feet annually), allowed for the repurposing of an abandoned City facility (the former sewer treatment plant at 1313 Oceanview Blvd.), and created a recycled water source for other City facilities and 3rd party customers. To this end, the plant can produce up to .25 Million Gallons of water daily and 125 acre feet annually.
To construct the plant, the City secured $2.4 million in grants and $5.2 million in low-interest loans from the State of California. Total construction cost was $7.6 million. With the reduction in potable water use created by switching the irrigation of the golf course and cemetery over to recycled water, the State allowed the City to sell entitlement water. It was determined that 47.88 acre feet were eligible for entitlement sale, with a price established by the City Council. Currently, the established price for entitlement water is $175k/acre foot, a price that is available through the end of December, 2021.
The Plant currently operates at a loss. On average, sales of recycled water have totaled approximately $510,000 annually, while The Plant operation and debt service costs total $740,000 (1)
. Changes to the contract operation of The Plant would not likely yield significant savings, and additional customers of significant scope are not forseeable at the current time. Entitlement water sales, which currently are deposited to the City’s General Fund, could be deposited instead to the plant’s enterprise fund. But water entitlement sales do not yield a consistent and steady stream of income. While there has been at least one significant sale of entitlement water (promissory note in the amount of approximately $600k), and another potential promissory note (pending City Council review and approval) of approximately $1.2 million on the horizon, it is not sufficient to supplement long-term operations, or use as set aside funds for identified capital improvements.
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One potential solution that would allow The Plant to be self-sufficient would be to increase the rates charged to all customers to allow for full recovery of operating costs and plan for capital improvements. This includes increasing the rates for the LWP’s largest customer – CourseCo., who operates the Pacific Grove Municipal Golf Links through a City contract; and the city-owned Cemetery.
(1) This amount reflects the prior year and FY 20/21 budgeted revenues and expenditures. The preliminary revenues are trending approximately $65,000 higher than anticipated, while expenditure accruals are still pending.
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Table of Contents
1. The Business
a. Description of Business 5
b. Competition 5
c. Marketing/ Customers 6
d. Operating Procedures 7
e. Personnel 7
f. Insurances 8
2. Financial Data
a. Current Fiscal Conditions 8
b. Cash Flow 9
c. Debt 10
d. Capital Equipment 11
e. Recycled Water Rates 12
f. Alternatives 13
3. Recommendations 14
4. Appendix 17
a. Engineer’s Equipment Replacement Schedule
b. CalAm Water Company Rate Schedule
c. Sample Operating Statement, Scenario IV
d. Revised Sample Operating Statement, Scenario IV
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THE BUSINESS
Description of Business
The City of Pacific Grove (City) has developed the Pacific Grove Local Water Project (PGLWP).
The primary purpose of the project is to produce and distribute high quality recycled water to replace potable water used for non-potable water demands. The PGLWP consisted of the construction of a sewer diversion structure, a 0.25 million gallons per day satellite recycled water treatment plant (SRWTP), waste pump station and force main pipeline, recycled water pump station, approximately 0.50 miles (2,800 linear feet (LF)) of 8-inch pipeline to convey recycled water to existing irrigation systems, connections to two public restroom for toilet flushing, and onsite retrofits required for the use of recycled water and 1,100 feet of 1-inch diameter potable water pipeline. The project can serve up to 125 acre-feet per year (AFY) of recycled water primarily to the City of Pacific Grove Golf Links, Point Pinos Lighthouse and El Carmelo Cemetery. The predominant use of recycled water is for landscape irrigation. Irrigation occurs primarily at night to maximize water management efficiency and minimize public contact.
Competition
The City of Pacific Grove is located on the tip of the Monterey Peninsula on the Central California Coast. The region is dependent on local rainfall for replenishment of its water supplies. Rainfall patterns have resulted in severe droughts. Near coastal groundwater pumping has resulted in increasing total dissolved solids concentrations, seawater intrusion and overdraft of the local aquifers. Diversions and pumping of the under drain of the Carmel River has put critical riparian habitat, as well as federal and state listed endangered and threatened species, at risk.
The City’s water purveyor, California American Water Company (CAW), is now subject to pumping restrictions pursuant to State Water Resourced Control Board (SWRCB) Order 95-10, the related issuance of a Cease and Desist Order (CDO) by the SWRCB (Order WR2009-0060), and their reduced pumping of the Seaside Groundwater Basin (SGWB), mandated by its adjudication.
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The PGLWP has replaced City irrigation and other demands, that was once met with potable sources, with non-potable supplies creating a new water supply offset up to 125 AFY of potable water. The potable water offset would assist CAW in meeting its obligations to find a replacement to its use of water from the Carmel River and reduce pumping in the SGWB. The PGLWP can reduce the operational production of CAW’s up to 125 AFY. The current Cal Am cost for water and delivery for irrigation uses is approximately .029 per gallon, when all surcharges, fees, and taxes are included. The PGLWP is selling reclaimed water at .0173 per gallon, or $5,637 per acre foot.
Marketing / Customers
Sites may use recycled water for a variety of uses approved by the State Department of Public Health. These include but are not limited to: landscape irrigation; agricultural irrigation; construction uses such as dust control, soil compaction, and backfill consolidation; commercial/industrial purposes such as cooling towers, boiler feed, air conditioning, commercial laundries, commercial car washes, concrete mixing, process rinsing and textile dying; landscape impoundments such as fountains and water features; and toilet and urinal flushing in nonresidential facilities.
The PGLWP is sized to serve up to 125 acre-feet per year (AFY) of recycled water, mostly to the City of Pacific Grove Golf Links, Point Pinos Lighthouse landscaping and El Carmelo Cemetery.
Additionally, the PGLWP provides reclaimed water for construction truck fill and toilet flushing at Crespi Pond bathroom and the golf course restroom on the 5th hole of the links (toilet flushing included in golf totals). The City of Pacific Grove is the responsible party for the distribution and use of the recycled water at the customer sites.
Below is a summary of water sold since the plant began operations:
Acre Feet of Water Sold per Calendar Year
Location 2018 2019 2020 (Jan - Dec)
Golf Course 80.23 77.09 72.13
Cemetery/ Lighthouse 14.28 17.1 19.17
Truck Fill 1.3 1.52 2.07
Total 95.81 95.71 93.37
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The project was sized to deliver up to 125 Acre feet of reclaimed water annually, and as noted above there are numerous uses for reclaimed water, but the challenge is increasing the volume of reclaimed water sales, to maximize the plants capacity, and produce the 125 acre feet. The City is constrained by steep capital costs associated with extending underground infrastructure to expand reclaimed water use to additional sites.
To efficiently expand the PGLWP end users would have to be within proximity of the golf course to keep infrastructure delivery costs down. The golf course has reclaimed pipe running within its 65 acres of turf. Parks that could realize the use of reclaimed water would be Perkins Park, Lovers Point Park and Caledonia Park. Expansion to these parks would only generate an additional 5-6 acre feet of reclaimed water sales annually, but the reduction of potable water for irrigation and not having to rely on the potable source to irrigate these parks has significant environmental and sustainability aspects. Additionally, the potable offset with any expansion, may generate an increase of potable water entitlements.
Location Distance to connect Cost of
expansion @
$100 L.F
Estimated
revenues
annually
Lovers Point Park 1100 Linear Feet $110,000 $15,641
Caledonia Park 549 Linear Feet $54,900 $11,731
Perkins Park 2900 Linear Feet $290,000 $10,167
At a potential base price of .024 the expansion of the LWP may produce an additional $37,500 annually; or $48,500 at the estimated plant recovery rate of $.0310. The cost of expansions noted in the table above are only estimates, but a significant expense would need to be approved to initiate the expansion. That cost is estimated at $454,900 for the potential expansion of the service area. Grant opportunities to pursue this effort could also be explored.
In addition to the infrastructure improvements, approvals will have to be granted by the Central Coast Regional Water Board and also by the State Water Resource Control Board, Department of Drinking Water. This approval would come after the completion of a cross connect test and a report specifying the validate of the test to ensure that there are no cross connections of the reclaimed water supply with the potable supply at the noted locations.
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Operating Procedures
The City completed construction of the LWP via a design-build contract in January of 2018. The primary purpose of the Project is to produce and distribute high quality recycled water to replace potable water used for non-potable irrigation and toilet flushing demands. The LWP consists of a
0.25 million gallon per day Water Recycling Facility with an annual production capacity of 125 acre-feet per year.
In November of 2017, the City entered into an agreement with PercWater for operations and maintenance of the LWP. The high level scope of the agreement is to provide operations, maintenance, and management of the treatment plant. The operator is also tasked with providing all monitoring, reporting and State compliance. The agreement has a fixed cost for operations at $214,968 per year for a five-year period, with an annual increase tied to the Rider Levett Bucknall Quarterly Construction Cost Report local to Los Angeles. Additionally, there is a charge per acre foot of treated water set at $196.00 per acre foot of all influent.
The Asset Management Agreement is effective for a five-year period. Upon completion of the five-year period, the City may choose to renegotiate and implement a contract extension, if this is the desired approach. PercWater has been meeting the requirements of the Operations and Maintenance Agreement and is a suitable partner to the City for the operations of the plant.
Personnel
To properly manage and operate the plant, PercWater is required to staff the facility at least 6 hours a day during weekdays, and two hours per day on the weekends and holidays, with operators possessing at least a Grade III wastewater certificate. Their team consists of two onsite employees that rotate shifts, an Area Operations Manager that completes all reporting requirements and provides management to the onsite employees, and the Vice President of Operations.
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Insurances
PercWater is required to maintain and require all of its subcontractors, consultants and other agents to maintain insurances noted within the agreement also. The required insurances include:
1. Workers Compensation and Employer Liability Insurance
2. General Liability Insurance
3. Automobile Liability Insurance
4. Pollution Liability Insurance
5. Professional Liability/Error & Omissions Insurance
6. Standards for Insurance Companies and Documentation
FINANCIAL DATA
Current Financial Condition
The Local Water Project initiated operations in the middle of Fiscal Year 17/18. In the first year of operations, there were remaining project expenditures of approximately $76,500 that were not covered by the State Water Resources Loan. These costs were paid through a transfer from the General Fund in Fiscal Year 19/20. In the first two full years of operations, operational costs continued to exceed operating revenues. The average operational deficit, net of transfers was approximately $260,000. This amount is reduced to $230,000 when the Fiscal Year 20/21 estimates are included in the calculation.
In Fiscal Year 20/21, the City approved a $600,000 loan from the Sewer Fund to the Local Water Project to assist in covering the negative fund balance. This 2021 LWP Interfund Loan was intended to supplement the current deficit fund balance and to allow time to assess the LWP operations and develop a financial sustainability plan. The addition of an unanticipated prior period utility payment is estimated to create a negative fund balance of $93,000 at the end of Fiscal Year 20/21.
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An overview of the operating trends is presented in the chart below.
The additional information included in this document provides a foundation to assist in evaluating fiscal sustainability options, as well as sample recommendations.
Cash Flow
The Local Water Project has uneven cash receipting patterns. Recycled water is consumed on a seasonal basis, with demand peaking in summer months and declining in winter or rainy seasons.
An overview of consumption trends is presented in the subsequent chart.
The Local Water Project’s revenue receipting patterns is similar to demand trends; however an annual debt service payment of approximately $206,448 is payable in February. In addition to a ($77,000)
($326,000)
($519,000)
($93,000)
-$600,000
-$400,000
-$200,000
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
FY 17/18 FY 18/19 FY 19/20 FY 20/21 Est
Revenues, Expenditures, and Available Fund Balance
Expenditures Avail. Fund Balance Revenues and Transfers -
1 2
3 4
5 6
July Aug. Sept. Oct. Nov. Dec. Jan. Feb. March April May June Million Gallons
LWP Recycled Water Demand
(in gallons)
FY 18/19 FY 19/20 FY 20/21 YTD
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reduction in recycled water sales during winter months, this payment contributes to the temporary decline in operating cash. Water sales are billed to external customers in the month following consumption, while cash for internal customers, such as the Cemetery and City are transferred at the point of invoice. Revenues from external customers are typically received within 30 days of billing. The chart listed below represents the Local Water Project’s cash receipting trends. Any supplementary loans or transfers have been excluded to illustrate the typical cash flow patterns.
The chart identifies the seasonal troughs which are fairly consistent within the three-year period.
The average lowest points within the period is approximately $250,000.
Debt
California State Water Resources Revolving Loan
To construct the project, the City received an $2.4 million California Prop 13, Safe and Reliable Water Sources construction grant and a $5.2 million 1% State Revolving Fund Loan. The term of the loan is from November 17, 2015 to February 1, 2048, with an annual repayment of $206,448.28.
2021 LWP Interfund Loan
In Fiscal Year 20/21, the City approved a loan from the Sewer Fund to the Local Water Project for $600,000. This loan was initiated to assist in covering the deficit fund balance, while providing additional time to review operating solutions.
-$300,000
-$200,000
-$100,000
$0
$100,000
$200,000
$300,000
July Aug Sept Oct Nov Dec Jan Feb Mar Apr May June
Cash Flow, Net of Transfers
FY 19/20 FY 18/19 FY 20/21 YTD
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An overview of recommended repayment strategies and terms are provided in the Recommendations section of this document.
Capital Equipment
There are numerous pieces of equipment associated with the operations of the LWP, some pieces are minor and will not require significant capital to repair or replace. These pieces of equipment are typically flowmeters, smaller pumps, compressors, and control panels.
The major pieces of equipment, which will require replacement or major maintenance and /or repair include the reuse pump station, the screens, UV disinfection, membranes, and permeate pumps.
During the first three full years of operations, there has not been a need to purchase capital equipment. The initial project documents included an Estimated Costs for the Major Maintenance, Repair and Replacement Schedule for the 0.25 MGD facility over a 30-year timeframe. This information is included in the Appendix. In addition to recovering operating costs through a new rate structure, funds for major purchases should also be incorporated into the rate. While debt financing could be considered for significant capital improvements, it is also typical to pay for planned costs through an equipment reserve. The use of financing could also be initially challenging due to debt service coverage ratios that may be required by lenders.
The base engineer’s estimate is provided, along with an estimate of the costs adjusted by a 2% CPI for the outlying years.
(1) Membrane costs allocated to be in alignment with capital expenditures. (2) Capital equipment estimate of $5,205,249 in 2015 dollars, with annual contribution of $173,508 Capital Replacement and Membranes
Replacement
Interval
Assumed
Purchase Year
Membrane
Replacement
Costs (1)
Capital
Expenditure
Total Adjusted for
current dollars at
est. 2.0% CPI (2)
1-5 FY 22/23 YR 5 $ 90,750 $ 90,750 $ 104,243
6-10 FY 27/28 YR 10 42,500 619,468 661,968 839,535
11-15 95,000 1,220,558 1,315,558 1,842,099
16-20 1,477,698 1,477,698 2,284,491
21-25 95,000 662,203 757,203 1,292,460
26-30 95,000 1,134,573 1,229,573 2,317,180
-
$ 327,500 $ 5,205,250 $ 5,532,750 $ 8,680,008
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The engineer estimated that an annual accrual of $173,508 the 30-year term totaling $5,205,249 for capital expenditures should be reserved. This amount was represented in 2015 dollars. When this amount is adjusted for inflation, the annual contribution to support capital expenditures and membrane replacements is $289,344 or an average of both rates at approximately $237,000.
Recycled Water Rates
The current rate for recycled water is 0.0173. The break-even rate for the last fiscal years is presented below. The first table includes the cost recovery rate for operating expenditures and debt service. The second table calculates the average cost per gallon using expenditures for the three fiscal years, along with the average capital equipment and membrane costs in 2015 dollars; and the average costs inflated by a 2% CPI over the forecast period.
Cost per Gallon Based on Actual and Estimated Costs
FY 18/19 FY 19/20 FY 20/21 Est.
Expenditures $737,088 $795,819 $675,000
Gallons sold 29,741,422 31,126,940 30,434,000
Avg. Cost per gallon $0.0248 $0.0256 $0.0222
Avg. Cost per Gallon (CPG) with Capital and Significant Equipment Replacement Costs FY 18/19 FY 19/20 FY 20/21 Est.
CPG with avg. capital costs at $184,000 $0.0310 $0.0315 $0.0282 CPG with avg. capital costs at $232,000 $0.0326 $0.0330 $0.0298 Based on the current and estimated demand, the average cost per gallon is $0.024 when considering only operating costs. When the capital costs are included in the calculation, the average three-year rate is approximately $0.0310. This would increase the rates included in the forecast period by approximately 40% to cover operational costs; or 79% to establish a reserve for capital equipment purchases. The estimated California American Water Company rate per gallon is approximately $0.0290, when surcharges, fees, and taxes are included. This calculation was based on the Cal Am online bill estimation tool, with similar estimates calculated internally and by the Golf Course lessee. A copy of the rate schedule is included in the Appendix.
The current lease agreement for the City’s golf course caps the amount the Local Water Project can charge for recycled water. This limitation prohibits full-cost recovery. An increase in demand could assist in funding fixed costs, while variable amounts, such as chemicals and utilities would PG CC 2/16/22
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increase with consumption. Based on the three-year data, the current demand, and customer base may not be sufficient to yield significant economies of scale. This is largely due to the amount of fixed costs, which include an annual debt service payment of $206,448; and the base operator costs of $214,968 which are adjusted for inflation.
Alternatives
Multiple scenarios were evaluated when reviewing sustainability options for the Local Water Project. The assumptions included an average increase in operating costs of 3%, debt service remaining constant, and increases greater than 2%, being phased-in over the eight-year period.
All scenarios rely on water entitlement sales to assist in repaying the 2021 Temporary Loan or to supplement operating costs through Fiscal Year 25/26. Scenarios I-VI also rely on the use of proceeds from a $625,187 promissory note. Scenarios I, IV, and V are primarily provided for illustration purposes only. They have been included in the analysis to show the potential impact when all or a portion of a potential $1.2 million promissory note is incorporated into the estimates.
These three scenarios would not be considered a viable option until an adequate agreement is reached with the developer. An overview is presented below:
Impact of Alternate Scenarios through Fiscal Year 28/29 EightYear
Increas
e
Average
Increase
Water
Entitlement
Sales
Promissory
Note Water
Entitlement
Flat
Charge
Projected
FY 28/29
rate
per gallon
Ending
Fund
Balance FY
28/29
Scenario I 16% 2.0% $650,000 $1,853,187 - 0.0202 ($630,837) Scenario II 16% 2.0% 1,025,000 625,187 $1,496,000 0.0202 25,505 Scenario III 16% 2.0% 600,000 625,187 $2,000,000 0.0202 99,087 Scenario IV 55% 6.9% 350,000 1,853,187 - 0.0292 499,010 Scenario V 61% 7.6% 350,000 1,239,187 - 0.0305 402,585
Scenario VI 66% 8.3% 625,000 625,187 - 0.0320 220,188
Scenario VII 70% 8.8% 1,000,000 - - 0.0332 99,113
A sample financial statement for Scenario VI is included in the Appendix, while an overview of the projected fund balance is presented in the chart on the subsequent page. The chart illustrates the effect of the increased rates on the estimated available fund balance, and the use of equipment reserves to fund capital improvements in Fiscal Year 27/28. In Fiscal Year 28/29, the chart also PG CC 2/16/22
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identifies the beginning of the fund balance replenishment process. These funds would be used to support cash flow and future improvements.
RECOMMENDATIONS
Debt Repayment Plan
A debt repayment plan needs to be established to repay the Sewer Fund for the $600,000 loan to the Local Water Project.
To assist with fiscal sustainability, consideration may be given to applying the proceeds from a $625,187 water entitlement promissory note to cover the loan repayment. This would provide the Local Water Project with a “fresh start”. The annual interest could be established based on the average interest rate that is equivalent to City’s investment portfolio. This could be charged annually against the outstanding loan balance. This would provide the Sewer Fund with the amount of interest that it would have earned if the $600,000 was retained in the Sewer Fund. The principal could be repaid to the Sewer Fund when the proceeds from the promissory note are received. It is estimated that this would be take place in Fiscal Year 22/23.
The use of operating cash or an increase in rates beyond the forecasted amount to fund the 2021 LWP Interfund Loan is not recommended due to the increase burden on ratepayers. (600,000)
(400,000)
(200,000)
-
200,000
400,000
600,000
800,000
FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29 Estimated Available Fund Balance
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If there are concerns that the promissory note would not be fulfilled, the City could elect one of the following alternatives:
• Allocate 100% of all prospective water entitlement sales to the Local Water Project. In most forecast scenarios, approximately 50-70% of the entitlement sales are allocated to the LWP fund, with the balance retained in the General Fund. While this could be an option, there is still some uncertainty as to whether the water entitlement sales will continue to perform at their current level.
• Work with the City’s auditors and legal staff to confirm the implications of a longer-term loan from the General Fund’s Strategic Opportunities Reserve. This could be a ten-year loan with interest equivalent to the average rate within the City’s debt portfolio, the City’s investment portfolio, or the current market rate.
Rate Structure and On-Going Operations
A financial plan needs to be established to assist the Local Water Project in becoming selfsufficient. Scenario VI, establishes a rate structure that ramps-up over a two-year period to cover operating costs, as well as begins to set aside funds for the recommended capital purchases through Fiscal Year 27/28. This scenario also includes a variable water rate that is applicable to all customers, rather than a fixed component, cap, or a surcharge. The rate could be adjusted based on cost recovery needs, as well as support any changing capital purchases.
While the Business Plan includes a multi-year forecast, a procedure for rate increases would also need to be established to reflect any significant variations from the Plan estimates. Updates on an annual basis may be difficult to calculate due to lead times, as well as fluctuations that may occur within a single year. An alternative would be to establish a three-year rate schedule that is based on the forecast. This would provide customers with the opportunity to incorporate the new rates into their operating budgets, as well as assist the City with budgetary planning. Future rate adjustments could be based on rolling three-year or historical consumption trends, with financial updates based on more current cost recovery needs.
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The implementation of a rate increase would require a change in the contract with the current Golf Course lease. The information related to preliminary discussions with the lessee will be presented outside of this Business Plan.
Reserves
A cash flow reserve should be established at approximately $250,000 to assist the Local Water Project in becoming independent. While pooled cash would be available to supplement short-term cash flow needs, it isn’t viable as a long-term solution.
A capital reserve should also be established to retain funds to pay for projected capital improvements and major maintenance costs. Scenario IV presents a plan to support these costs through the forecast period.
Similar capital-intensive entities have established rate stabilization funds to assist in smoothing rates when there is less demand, as well as emergency reserves to support unanticipated costs.
These additional reserves could be considered once the Local Water Project’s finances have been stabilized.
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Appendix
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California American Water Company Rate Schedule
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APPLICABILITY
Applicable to all water furnished on a metered basis to non-residential customers in the service areas defined below.
TERRITORY
The incorporated cities of Monterey, Pacific Grove, Carmel-by-the-Sea, Del Rey Oaks, Sand City, a portion of Seaside, Hidden Hills and Ryan Ranch subdivisions, Bishop subdivision including the area known as Laguna Seca Ranch Estates and vicinity and certain unincorporated areas in the County of Monterey.
RATES
Quantity Rates:
Non-Residential Customers: Base Rate
Per 100 gal (CGL)
Division 1………………………………………………… $1.9329
Division 2………………………………………………… $2.1745
Division 3………………………………………………… $2.4161
Division 4………………………………………………… $4.8322
Service charge: General Metered:
Per Meter
Per Month
For 5/8 x 3/4-inch meter…………………………………… $25.27
For 3/4-inch meter…………………………………………. $37.90
For 1-inch meter……………………………………………. $63.16
For 1-1/2-inch meter……………………………………….. $126.33
For 2-inch meter……………………………………………. $202.12
For 3-inch meter……………………………………………. $378.98
For 4-inch meter……………………………………………. $631.63
For 6-inch meter……………………………………………. $1,262.26
For 8-inch meter……………………………………………. $2,021.22
The Meter Charge is a readiness-to-serve charge which is applicable to all metered service and to which is added the charge for water used computed at the Quantity Rate. (I)
(I)
(I)
(I)
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DEFINITIONS:
1. WATER FACTOR - “Water Factor” shall mean a rating of water efficiency established by the U.S Environmental Protection Agency and the U.S. Department of Energy through the Energy Star Program. The Water Factor is the number of gallons per cycle per cubic foot that the Clothes Washer uses. The lower the Water Factor, the more efficient the washer is. So, if a Clothes Washer uses 30 gallons per cycle and has a tub volume of 3.0 cubic feet, then the Water Factor is 10.0.
2. WATER EFFICIENT ICE MACHINE – “Water Efficient Ice Machine” shall mean a commercial ice machine that meets or exceeds Energy Star standards for air-cooled ice machines.
3. SUPPLEMENTAL IRRIGATION SYSTEM – “Supplemental irrigation system” shall mean irrigation systems other than natural precipitation.
4. WATER BUDGET FEATURE – “Water budget feature” shall mean percent up/down adjust feature such as a button or dial on an irrigation controller that permits the user to increase or decrease the runtimes or application rate as for each zone by a prescribed amount or percent, by means of one adjustment without modifying the settings for that individual zone.
5. GEAR DRIVE ROTOR SPRINKLERS – “Gear drive rotor sprinklers” shall mean Irrigation sprinklers with high uniformity rates and lower precipitation rates than conventional sprinkler heads or impact rotors resulting in more efficient irrigation.
6. MULTI STREAM, MULTI TRAJECTORY ROTATING SPRINKLERS (MSMTR) – “Multi stream, multi trajectory rotating sprinklers” shall mean slowly turning irrigation sprinklers distributing water in a number of individual streams of varying trajectories with lower precipitation rates and higher uniformity than traditional fixed spray head sprinklers.
7. HIGH EFFICIENCY FIXED SPRAY NOZZLES – “High efficiency fixed spray nozzles” shall mean precision irrigation spray nozzles with larger and more uniform droplet size resulting in better wind resistance, lower precipitation rates and higher irrigation efficiency.
8. DRIP IRRIGATION - “Drip Irrigation” shall mean a low pressure, low volume watering system that applies water slowly to plants, near or at ground level, to minimize runoff and loss to evaporation.
The term “Drip Irrigation” shall have the same meaning as “Micro Irrigation” and “Trickle Irrigation.”
9. SUB SURFACE LOW VOLUME EMITTERS – “Sub surface low volume emitters” shall mean drip or low volume, low pressure irrigation systems that deliver a low flow of water at or near the root zone of plants - measured in gallons per hour versus gallons per minute. (T)
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DEFINITIONS (Continued):
10. LOW VOLUME IRRIGATION – “Low volume irrigation” shall mean drip, low volume or Micro Spray Irrigation, includes Low volume fixed spray nozzles.
11. Best Management Practices - “BMP” as referenced in Section V of the Settlement attached to D.13- 07-041.
12. Customer Classification Conservation Base Rate – “CCCBR”. the “Customer Class Conservation Base Rate” (“CCCBR”) is defined as the low block or division quantity rate from each billing customer classification under conservation rates, and is determined as the rate necessary to equal the billing classification revenue requirement given the defined rate design parameters.
SPECIAL CONDITIONS:
General Items:
1. The boundaries in which the above rates apply are as set forth in the Preliminary Statement and delineated on the Tariff Service Area Maps filed as a part of these tariff schedules.
2. This non-residential rate design shall remain in effect and until ordered otherwise by the Commission.
3. Abbreviations as used in this tariff are defined above.
4. Non-residential customers billed under this tariff shall be placed into one of four divisions for billing purposes. The determination of under which Division each individual customer shall be billed will be based on the following:
a. Division 1: Customers that are indoor/outdoor Rate BMP-compliant and have outdoor landscape irrigation of no more than 10% of total parcel size covered by the meter (or meters) meant to serve such parcel, and excluding from the total parcel size for purposes of the 10% calculation areas of natural, non-irrigated open space. Meters designated as irrigation only meters will not be included in Division 1 regardless of the 10% parcel size allowance noted above.
b. Division 2: Customers that are indoor/outdoor Rate BMP-compliant and have a business where the watering is essential to the product of the business (nurseries), golf courses and government parks, ball fields, and cemeteries.
c. Division 3: Customers that are indoor/outdoor Rate BMP-compliant and have outdoor landscape irrigation exceeding the 10% parcel limit for Division 1, as well all Rate BMPcompliant irrigation meters, as previously noted in Special Condition 6 (a). d. Division 4: Customers that are not in compliance with Rate BMPs.
5. Upon approval of the tariff all customers who respond to the request to provide self-certified Rate BMP information will be appropriately categorized into Division 1, 2, 3 or 4 immediately so that all bills issued under the new tariff reflect the provision of a completed survey.
6. Customers that are subsequently found to be non Rate BMP compliant will be given 30 days from the date of notification to achieve compliance as noted in the non-compliance letter.
7. All Del Monte Forest golf courses served with emergency potable water from the connection at the Viscaino tank will be assigned an emergency allocation of 30 AF/year. Any potable use within this allotment will be billed at customer Division 1 rates. Usage above the annual allotment would be billed at customer Division 2 rates.
(T)
(T)
(T)
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SPECIAL CONDITIONS (Continued):
General Items:
8. Rate BMP Compliant will be defined as follows:
a. Indoor Usage
i. Showerheads – Rain Bars, or Body Spray Nozzles shall be designed and manufactured to emit a maximum of 2.0 gallons per minute GPM.
ii. Public Washbasins shall emit a maximum of 0.5 GPM.
iii. Public Washbasins equipped with automatic shut off devices or sensor faucets shall operate with a maximum flow rate of 0.25 gallons per cycle.
iv. Private Washbasins (e.g.; Washbasins in hotel or motel guest rooms and hospital patient rooms) shall emit a maximum of 1.5 GPM.
v. All other sinks shall be restricted to flow at a maximum of 1.5 GPM. vi. Ultra low flow toilets (1.6 gallons per flush (“GPF”)), High Efficiency Toilets (1.28 GPF) or Ultra High Efficiency Toilets (0.8 GPF). All toilets replaced after December 31, 2014 will have to be High Efficiency or Ultra High Efficiency
vii. Water efficient urinals designed to flush with a maximum of 0.5 GPF. Includes High Efficiency Urinals (0.5 GPF), pint urinals (0.125 GPF), or waterless urinals. viii. Water Efficient (1.6 GPM) Pre-Rinse spray valves (as applicable), Medical and laboratory photographic, and/or X-Ray processing systems must recirculate water used in the rinse process.
ix. All Visitor-Serving Facilities must use Water Efficient Ice Machines x. All Clothes Washers must be rated with a Water Factor of 5.0 or below. There is an exception when the existing appliance was purchased between December 31, 2005 and December 31, 2012, and rates a Water Factor of 5.1-6.0. xi. Visitor-serving, Public, and Quasi-Public facilities must display placards or decals promoting water awareness and the need for conservation in visible locations in restrooms, kitchens, and dining areas.
xii. Visitor-serving facilities must offer towel and linen reuse programs by providing written notice in the rooms.
xiii. Restaurants must provide written notice that drinking water is available only upon request.
Notices must be placed on tables and/or menus. Drinking water will not be provided from the Monterey Peninsula Water Resource System, unless specifically requested. b. Outdoor Usage
i. All supplemental irrigation systems require the use of an automated irrigation controller, which must include a water budget feature and may include products, which rely on soil or weather sensors to adjust irrigation schedules.
ii. Turf grass areas that receive supplemental irrigation must be watered with gear drive rotor sprinklers, multi stream, multi trajectory rotating sprinklers, high efficiency fixed spray nozzles or sub surface low volume emitters.
iii. Low volume irrigation is encouraged for landscaped areas containing trees, shrubs and groundcover. The use of standard fixed spray nozzles will not be allowed in landscape beds measuring 3’ or less.
iv. All automated irrigation controllers must include sensors, or devices that interrupt, or delay a scheduled irrigation event due to rainfall that equals or exceeds an established threshold. v. Hoses, used to hand water landscaped areas must be equipped with a positive shut off device.
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SPECIAL CONDITIONS (Continued):
General Items
9. Every meter will be categorized and issued a single bill unless a customer requests that a single consolidated bill be provided and then only if the system is capable of doing so without loss of any necessary data or delays in billing.
10. Moratorium: In portions of the Monterey Service Area served, in whole or part, by Carmel River diversions, and subject to the following conditions and restrictions, California-American Water Company shall deny requests for new service connections and prohibit any increased use of water at existing service addresses resulting from a change in zoning or use:
a. California-American Water Company shall not deny such requests or prohibit such increased use where all necessary written approvals for project construction and connection to California-American Water Company’s system had been obtained prior to October 20, 2009;
b. California-American Water Company shall not deny the installation of additional meters at an existing service provided that the additional metering does not result in an increase in water use.
c. This special condition does not authorize California-American Water Company to deny service to:
i. the area served by the Carmel Area Wastewater District Water Entitlement pursuant to Monterey Peninsula Water Management District Ordinances 39 and 109 and Rule 23.5, prior to January 1, 2017 ;
ii. the area served by the Sand City Water Entitlement pursuant to Monterey Peninsula Water Management District Ordinance 132 and Rule 23.6; iii. Security National Guaranty, Inc. under its frontloading agreement; iv. a connection or increased use where an authorized official of the State Water Resources Control Board has given written approval.
(T)
(T)
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SPECIAL CONDITIONS (Continued):
General Items
10. Moratorium(Continued): In portions of the Monterey Service Area served, in whole or part, by Carmel River diversions, and subject to the following conditions and restrictions, CaliforniaAmerican Water Company shall deny requests for new service connections and prohibit any increased use of water at existing service addresses resulting from a change in zoning or use:
d. California-American Water Company shall not deny a request for new service or prohibit the increased use of water at an existing service address if an authorized official of the State Water Resources Control Board has given written approval for such service or increased use.
e. This special condition shall expire at the filing by California-American Water Company of a Tier 1 advice letter with the Commission transmitting the written concurrence of the Deputy Director of Water Rights of the State Water Resources Control Board with California-American Water Company’s finding that a permanent supply of water is ready to serve as a replacement for the unlawful diversions of Carmel River water
11. Customers that have heretofore been billed as mixed use customers prior to March 1, 2017 will now be reclassified into either a multi-residential or non-residential classification. Those prior mixed use customers with a large number of individual dwelling units on large parcels will be classified as a multi-residential customer after March 1, 2017 and be billed under the same methodology as all other multi-residential customers, which is based on a block use allowance per dwelling unit. All other former mixed use customers will be billed under the divisional billing parameters and rates for non-residential customers.
(T)
(T)
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SPECIAL CONDITIONS (Continued):
Fees and Surcharges
1. All bills are subject to the reimbursement fee set forth in Schedule No.UF.
2. A surcharge is included on each bill to collect franchise taxes and/or business license fees paid to various municipalities. The amount collected is based on a percentage of the gross revenues of each bill. The percentages are as follows:
Franchise Fees: Ryan Ranch 1.00%, City of Pacific Grove 2.00%, City of Carmel-by-the-Sea
2.00%, City of Seaside 1.00%, City of Del Rey Oaks Franchise Fee 2.00%, City of Monterey 1.00%, and unincorporated areas of Monterey County 1.00%.
Business Fees: City of Del Rey Oaks 0.11% and City of Sand City 0.12%.
Per D.18-12-021 a three-year conservation budget of $2,298,500 for 2018-2020 for Monterey Service Area. Effective November 23, 2020, the Conservation Surcharge will be removed from customer bill.
3. Per Advice Letter 1230-B, a surcharge of $1.81 for the Customer Assistance Program (CAP) Balancing Account will be collected from all non-customer assistance program water and wastewater customers
4. Per Advice Letter 1152, a fee of 8.325%, imposed by the Monterey Peninsula Water Management District (MPWMD), will be assessed against the customer’s monthly base bill to fund MPWMD’s environmental mitigation, water supply, and conservation programs, as well as other activities. The fee will remain in effect until otherwise directed by the Commission.
This fee is applicable to customers in the Monterey Main, Bishop, Hidden Hills and Ryan Ranch areas.
6. Per Advice Letter 1199, the balance of the 2017 Non-Residential WRAM/MCBA is $2,762,923 as of December 31, 2017. The surcharge is shown in the table below and will remain effective until December 2021.
Non-Residential
Monterey Main, Hidden Hills,
Ryan Ranch, & Bishop Systems:
Surcharge
per 100 gal Months
Division 1 $0.1363 18
Division 2 $0.1533 18
Division 3 $0.1703 18
Division 4 $0.3407 18
(C)
(C)
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SPECIAL CONDITIONS (Continued):
Fees and Surcharges
7. In accordance with Decision 16-12-003, the WRAM/MCBA balance through 2014 for the Monterey Service Area shall be recovered over five years with interest at the 90-day commercial paper rate.
The surcharge is shown in the table below and will remain effective for 60 months upon approval of Advice Letter 1146-A, ending February 28, 2022.
Meter Size Meter Surcharge
For 5/8” x 3/4" meter $4.21
For 3/4" meter $8.42
For 1” meter $12.63
For 1-1/2” meter $21.05
For 2” meter $33.68
For 3” meter $63.15
For 4” meter $102.25
For 6” meter $210.50
For 8” meter $336.80
8. Per Advice Letter 1322, the under-collected balance in the Monterey Service Area Consolidated Expense Balancing Account will be recovered through a quantity-based surcharge of $0.0669 per 100 gallons over 12 months effective March 18, 2021. This total amount will be recovered from all classes of customers except Chualar customers.
9. Per D.18-12-021 a meter based bill credit for the 2018 Excess Non-Plant Accumulated Deferred Income Tax will be refunded to customers over the 24-month period beginning October 17, 2019.
Meter Size
Refunds by Meter
Equivalents
5/8 x 3/4 $1.47
3/4 $2.21
1 $3.68
1 1/2 $7.35
2 $11.77
3 $22.06
4 $36.77
6 $73.54
8 $117.66
10 $169.14
10. Per Advice Letter 1265-A, the net under-collected balance of the 2018 Non-Residential WRAM/MCBA is $106,180, including interest. D.18-12-021 raises the cap on WRAM/MCBA surcharges to 15% of the authorized revenue requirement. Rates will be established through a separate Tier 1 filing to update the tariff language and surcharge based upon the then current authorized amortization.
(C)
(C)
(C)
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SPECIAL CONDITIONS (Continued):
Fees and Surcharges:
11. Per Advice Letter 1291-A, the net under-collected balance of the 2019 residential WRAM/MCBA is $982,007, including interest. D. 18-12-021 raises the cap on WRAM/MCBA surcharges to 15% of the authorized revenue requirement. Rates will be established through a separate Tier 1 filing to update the tariff language and surcharge based upon the then current authorized amortization.
12. Per D.18-12-021 a meter-based bill credit for the 2018 Excess Plant Related Accumulated Deferred Income Tax will be refunded to customers over the 12-month periods beginning January 21, 2020.
Meter Size
Refunds by Meter
Equivalents
5/8-inch meter $0.30
3/4-inch meter $0.45
1-inch meter $0.75
1-1/2-inch meter $1.51
2-inch meter $2.41
3-inch meter $4.52
4-inch meter $7.53
6-inch meter $15.05
8-inch meter $24.08
10-inch meter $34.62
13. Per Advice Letter 1311, a surcharge is applied to each bill to offset increases in purchased water costs imposed by Monterey Peninsula Water Management District (MPWMD). The offset results in a needed increase of $405,474 or 0.53%. The surcharge of $0.2011 per cgl is added to the quantity charge beginning October 21, 2020.
14. Per D.18-12-021 a meter-based bill credit for the 2019 Excess Plant Related Accumulated Deferred Income Tax will be refunded to customers over the 12-months periods beginning November 1, 2020.
Meter Size
Refunds by Meter
Equivalents
5/8x3/4inch meter $0.21
3/4-inch meter $0.32
1-inch meter $0.53
1-1/2-inch meter $1.07
2-inch meter $1.70
3-inch meter $3.20
4-inch meter $5.33
6-inch meter $10.66
8-inch meter $17.05
10-inch meter $24.51
(C)
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SPECIAL CONDITIONS
Fees & Surcharges: (continued):
1. Per Decision (D.) 19-12-048, intervenor compensation paid to the Surfrider Foundation will be recovered through a meter surcharge for six billing cycles upon approval of Advice letter 1295. The total amount of $441,448.05 will be recovered from all classes of metered customers.
Meter Size Surcharge
5/8 x 3/4 $1.21
3/4 $1.82
1 $3.03
1 1/2 $6.07
2 $9.71
3 $18.20
4 $30.34
6 $60.68
8 $97.09
10 $139.57
12 $200.25
2. Per Decision 19-12-049, intervenor compensation paid to the Salinas Valley Water Coalition will be recovered through a meter surcharge for six billing cycles upon approval of Advice Letter 1302. The total amount of $496,798.25 will be recovered from all classes of metered customers.
Meter Size Surcharge
5/8 x 3/4 $1.64
3/4 $2.46
1 $4.10
1 1/2 $8.20
2 $13.12
3 $24.60
4 $41.01
6 $82.01
8 $131.22
10 $188.62
12 $270.63
(N)
(N)
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SPECIAL CONDITIONS:
Fees & Surcharges (continued):
3. Per Decision 20-02-060, intervenor compensation paid to Landwatch Monterey County will be recovered through a meter surcharge for three billing cycles upon approval of Advice Letter 1313.
The total amount of $107,231.63 will be recovered from all classes of metered customers.
Meter Size Surcharge
5/8 x 3/4 $0.59
3/4 $0.88
1 $1.47
1 1/2 $2.94
2 $4.70
3 $8.81
4 $14.68
6 $29.37
8 $46.99
10 $67.54
12 $96.91
4. Per Decision 20-02-058, intervenor compensation paid to the Planning and Conservation League Foundation will be recovered through a meter surcharge for four billing cycles upon approval of Advice Letter 1314. The total amount of $215,019.80 will be recovered from all classes of metered customers.
Meter Size Surcharge
5/8 x 3/4 $1.18
3/4 $1.77
1 $2.95
1 1/2 $5.90
2 $9.45
3 $17.71
4 $29.52
6 $59.04
8 $94.46
10 $135.78
12 $194.82
(P)
(P)
(N)
(N)
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SPECIAL CONDITIONS
Fees & Surcharges (Continued):
5. Per Decision 20-08-040, intervenor compensation paid to Public Water Now will be recovered through a meter surcharge for 8 billing cycles upon approval of Advice Letter 1321. The total amount of $10,095 will be recovered from all classes of metered customers.
Meter Size Surcharge
5/8 x 3/4 $0.02
3/4 $0.03
1 $0.05
1 1/2 $0.10
2 $0.16
3 $0.30
4 $0.49
6 $0.99
8 $1.58
10 $2.27
12 $3.25
(N)
(N)
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Engineer’s Estimated Capital Purchases
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Draft Financial Statements
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Cost per gallon Cost per gallon Cost per gallon Cost per gallon Cost per
gallon
$ 0.01721 0.0207 0.0248 0.0258
20.0% 20.0% 4.0%
Year 2 Year 3 Year 4 Year 5 Year 6
FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24
Beginning Fund Balance (326,361) (527,571) (93,219) (37,261) 39,210 Revenues
Reclaimed Water 524,041 536,000 642,901 771,481 802,340 Interest Earned 421 800 9,721 421 392
Other - - - - -
524,462 536,800 652,622 771,902 802,732
Expenses
Contract Services 356,606 327,000 336,810 346,914 357,322 Legal Services - - - - -
Postage - - - - -
Telephone - - - - -
Utilities 206,168 140,000 144,200 148,526 152,982
Internal Service Charges 4,357 5,000 4,356 4,356 4,356
Indirect Costs 28,600 24,000 25,200 25,830 26,476
Equipment Repair - - - - -
Misc. Expense - - - - -
595,731 496,000 510,566 525,626 541,135
Net operating difference (71,269) 40,800 142,056 246,276 261,597 Non-Operating
Capital Outlay (104,243)
One-time water entitlement sales - 125,000 750,187 125,000 Loan Proceeds - Sewer Loan 600,000 -
Debt Service - State Loan (206,448) (206,448) (206,448) (206,448) (206,448) Debt Service - Sewer Loan - (4,650) (609,300)
Interfund Transfers 76,507 - - - -
(129,941) 393,552 (86,098) (169,804) (81,448)
Net Operating Difference (201,210) 434,352 55,958 76,471 180,149 Ending Fund Balance (527,571) (93,219) (37,261) 39,210 219,359 Fund Balance Allocation
Unassigned (527,571)
-
(527,571) (93,219) (37,261) 39,210 219,359
Scenario VI - Original
(93,219) (37,261) -
Cash Flow - - - 39,210 2 19,359
Capital Equip. Reserve - - - -
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Beginning Fund Balance
Revenues
Reclaimed Water
Interest Earned
Other
Expenses
Contract Services
Legal Services
Postage
Telephone
Utilities
Internal Service Charges
Indirect Costs
Equipment Repair
Misc. Expense
Net operating difference
Non-Operating
Capital Outlay
One-time water entitlement sales
Loan Proceeds - Sewer Loan
Debt Service - State Loan
Debt Service - Sewer Loan
Interfund Transfers
Net Operating Difference
Ending Fund Balance
Fund Balance Allocation
Unassigned
Cash Flow
Capital Equip. Reserve
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon Cost per gallon
0.0268 0.0279 0.0290 0.0304 0.0320
4.0% 4.0% 4.0% 5.0% 5.0%
Year 7 Year 8 Year 9 Year 10 Year 11
FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29
219,359 417,432 636,504 751,637 56,647
834,434 867,811 902,524 947,650 995,032
2,194 6,261 9,548 11,275 850
- - - - -
836,627 874,073 912,071 958,924 995,882
368,041 379,083 390,455 402,169 414,234
- - - - -
- - - - -
- - - - -
157,571 162,298 167,167 172,182 177,348
4,356 4,356 4,356 4,356 4,356
27,138 27,816 28,511 29,224 29,955
- - - - -
- - - - -
557,106 573,553 590,490 607,931 625,893
279,521 300,520 321,581 350,993 369,989
(839,535)
125,000 125,000 - - -
(206,448) (206,448) (206,448) (206,448) (206,448)
- - - - -
(81,448) (81,448) (206,448) (1,045,983) (206,448)
198,073 219,072 115,133 (694,991) 163,541
417,432 636,504 751,637 56,647 220,188
0 (0) 0 (0)
250,000 56,647 220,188
167,432 386,504 501,637 - -
417,432 636,504 751,637 56,647 220,188
0 2 50,000 250,000
Scenario VI - Original
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Scenario VI - Updated for Fiscal Year 20/21 Actuals
Cost per gallon Cost per gallon Cost per gallon Cost per gallon Cost per
gallon
$ 0.01721 0.0207 0.0248 0.0258
Actual Actual 20.0% 20.0% 4.0%
Year 2 Year 3 Year 4 Year 5 Year 6
FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24
Beginning Fund Balance (326,361) (527,571) (36,689) 31,781 123,745 Revenues
Reclaimed Water 524,041 597,833 658,348 790,017 821,618 Interest Earned 421 - 9,721 421 1,237
Other - - - - -
524,462 597,833 668,069 790,438 822,855
Expenses
Contract Services 356,606 335,610 345,678 356,049 366,730 Legal Services - - - - -
Postage - - - - -
Telephone - - - - -
Utilities 206,168 138,317 142,467 146,741 151,143
Internal Service Charges 4,357 5,000 4,356 4,356 4,356
Indirect Costs 28,600 20,000 21,000 21,525 22,063
Equipment Repair - 1,576 - - -
Misc. Expense - - - - -
595,731 500,503 513,501 528,670 544,292
Net operating difference (71,269) 97,330 154,568 261,768 278,563 Non-Operating
Capital Outlay (104,243)
One-time water entitlement sales - 125,000 750,187 125,000 Loan Proceeds - Sewer Loan 600,000 -
Debt Service - State Loan (206,448) (206,448) (206,448) (206,448) (206,448) Debt Service - Sewer Loan - (4,650) (609,300)
Interfund Transfers 76,507 - - - -
(129,941) 393,552 (86,098) (169,804) (81,448)
Net Operating Difference (201,210) 490,882 68,470 91,964 197,115 Ending Fund Balance (527,571) (36,689) 31,781 123,745 320,860 Fund Balance Allocation
Unassigned (527,571) (36,689) - - -
Cash Flow - - 31,781 123,745 250,000
Capital Equip. Reserve - - - - 70,860
(527,571) (36,689) 31,781 123,745 320,860
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Beginning Fund Balance
Revenues
Reclaimed Water
Interest Earned
Other
Expenses
Contract Services
Legal Services
Postage
Telephone
Utilities
Internal Service Charges
Indirect Costs
Equipment Repair
Misc. Expense
Net operating difference
Non-Operating
Capital Outlay
One-time water entitlement sales
Loan Proceeds - Sewer Loan
Debt Service - State Loan
Debt Service - Sewer Loan
Interfund Transfers
Net Operating Difference
Ending Fund Balance
Fund Balance Allocation
Unassigned
Cash Flow
Capital Equip. Reserve
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon Cost per gallon
0.0268 0.0279 0.0290 0.0304 0.0320
4.0% 4.0% 4.0% 5.0% 5.0%
Year 7 Year 8 Year 9 Year 10 Year 11
FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29
320,860 536,723 775,041 910,418 236,929
854,483 888,662 924,208 970,419 1,018,940
3,209 8,051 11,626 13,656 3,554
- - - - -
857,691 896,713 935,834 984,075 1,022,494
377,732 389,064 400,736 412,758 425,141
- - - - -
- - - - -
- - - - -
155,677 160,347 165,158 170,112 175,216
4,356 4,356 4,356 4,356 4,356
22,615 23,180 23,760 24,354 24,962
- - - - -
- - - - -
560,380 576,947 594,009 611,580 629,675
297,311 319,765 341,825 372,495 392,819
(839,535)
125,000 125,000 - - -
(206,448) (206,448) (206,448) (206,448) (206,448)
- - - - -
(81,448) (81,448) (206,448) (1,045,983) (206,448)
215,863 238,317 135,377 (673,488) 186,371
536,723 775,041 910,418 236,929 423,300
- - - - -
250,000 250,000 250,000 56,647 220,188
286,723 525,041 660,418 180,282 203,112
536,723 775,041 910,418 236,929 423,300
Scenario VI - Updated for Fiscal Year 20/21 Actuals
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January 7, 2022
To: Tori Hannah
Daniel Gho
From: Andrea Roess, Managing Director, DTA
Steve Runk, Vice President Engineering, DTA
Subject: Peer Review of City Business Plan
The City of Pacific Grove (“City”) recently constructed a 0.250 MGD reclaimed water treatment plant (“Plant”) for the purpose of replacing potable water deliveries with reclaimed water to three principal customers, Pacific Grove Golf Links, El Carmelo Cemetery and Point Pinos Lighthouse landscaping. A detailed background of the existing physical and financial conditions of the reclaimed water system can be found in Pacific Grove Local Water Project Business Plan dated June 21, 2021 (“Business Plan”). City has asked DTA to conduct a peer review, consisting of: 1) an evaluation of the assumptions, methodology and calculations used to determine the proposed reclaimed water rate described in the Business Plan; and 2) provide a break-even rate analysis.
After review of the City’s Business Plan and rate analysis, DTA has determined that the City’s analysis of revenues and costs, debt service and available fund balances on an annual basis is rational, supportable and is consisted with industry practice. The City’s financial model follows closely with the recommendations of American Water Works Association (AWWA) Manual of Water Supply Practices, M1. Furthermore, DTA has determined that to achieve a sustained, breakeven operation, City must impose steep increases in early years to reach a rate level of over $0.03 per gallon with modest increases thereafter.
EVALUATION OF THE BUSINESS PLAN
City looked at proposed revenues and expected expenses through FY28/29 (Year 11) for seven different revenue and cost assumption scenarios. Scenarios I-VII considered various combinations of supplementary water entitlementsales and debt repayment of operating loans. An overview of the findings for the seven scenarios can be found in the “Alternatives” section of the Business Plan. A rate analysis for Scenario VI, titled LWP Proforma, Scenario VI, was provided by City (“rate model”). This rate model was subsequently updated by City to include actual operating costs for FY20/21 as well as adjustments for recent average water demand. This analysis included one-time water rights sales in years 4 through 8.
Also included are proceeds in year 3 from a $600,000 sewer fund loan, with loan repayments plus interest occurring in years 4 and 5. Operating costs were adjusted for inflation in subsequent years. Investment earnings on annual reserve balances included as a revenue source.
Revenues
The rate revenue in any given year is determined by multiplying the expected reclaimed water consumption, in gallons of reclaimed water, by the assumed rate, in dollars per gallon for that year. The expected consumption for each fiscal year is based on historical data and is discussed in the Business Plan. Other revenue shown in Scenario VI included one-time sales of water rights in years 4 through 8, and interest earned on fund balances.
Operating Expenses
Annual expenses such as contract services and utilities are based on actual costs incurred for FY20/21 and adjusted for inflation every year thereafter. In FY20/21 equipment repair and maintenance costs were incorporated into the contract services line item, in the amount of $21,000. Indirect costs are adjusted annually for inflation. Internal service charges are PG CC 2/16/22
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assumed constant at $4,356 annually. Membranes have a useful life significantly greater than one year and therefore its replacement cost is considered a capital outlay.
Capital Outlay
Capital outlay costs, which include capital expenditures and membrane replacement, are identified in the Business Plan by fiscal year. In this model capital outlays occur in FY22/23 and FY 27/28. The remainder of the 30-year C.I.P. expenses occur in fiscal years beyond this study horizon. Funding for the capital outlay will be on a pay-as-you-go basis from the fund balances and therefore there will be no debt service related to capital outlays. The amount and timing of capital outlays are based on engineering estimates and are as shown in the Business Plan.
Debt Service
The rate model includes annual debt service payments for a State Revolving Loan of $206,448. In FY 21/22 and FY22/23 the project will repay a sewer fund loan of $600,000, with interest, in lump sum payments.
City Rate Increase Recommendations and Fund Balances
In Scenario VI the City proposes rate increases of 20% in Year 4 and Year 5, with 4% and 5% annual increases thereafter.
This will result in positive fund balances in year 4 and each year thereafter, with a positive fund balance of $423,300 in Year 11. A substantial fund balance in year 11 is necessary to assist in providing sufficient funds in later years to pay for the remainder of the C.I.P. program.
BREAK EVEN ANALYSIS
As stated in the Business Plan, the project has been operating at an annual loss. City Staff has asked DTA to provide an independent analysis of rates that assumes that 1) annual revenues will cover annual expenses, and 2) provide fund balances that can pay for capital improvements in the near term as well as establish a reserve fund that will assist in funding future capital improvements beyond the horizon of this analysis. For the purposes of DTA’s analysis, it is assumed that steep increases are imposed in the first two years to remove all annual negative operating balances, with modest increases thereafter. For instance, the attached model shows that rate increases of 35% and 21% in the first two years are required to prevent negative operating fund balances, and annual increases of 3% thereafter will build a fund balance of just under $500,000 in year 7 that will assist in meeting the C.I.P. requirements in later years.
Revenue, Expense and Debt Service Assumptions
DTA’s analysis uses the same annual water consumption and annual expense data shown in the City’s rate model discussed above. Also, the Capital Outlay expenses are repeated from the City’srate model. This analysisincludes annual debt service payments for a State Revolving Loan. The interfund transfer of $76,507 was provided by the General Fund and repayment was not required. In FY20/21 the project received a loan of $600,000 from the sewer fund, as well as $37,000 in temporary funds to assist with cash flow. City staff assumes that this will be repaid through other sources also, rather than operating revenues shown herein. This analysis also assumes that any water rights sales that occur during this study period are not made a part of this analysis.
Findings
Based on the above assumptions, DTA finds that rate increases of 35% in Year 4, 21% in year 5 and 3% per year in Years 6 through 11 are necessary to achieve positive fund balances from this point forward, while accumulating a fund balance of just under $500,000 by year 11, to be used to fund capital improvements in later years. Steep increases in Years 4 and 5 are necessary to increase the rate levels from 0.017 per gallon to around $0.03 per gallon by Year 8. A rate level of around $0.03 per gallon with modest annual increases thereafter will enable City to not only achieve a break-even operation but allow fund balances to accumulate so that by year 11 these balances can carry forward to help fund future C.I.P. projects.
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If the City choses to increase rates at a slower pace, the enterprise will continue to experience annual budget shortfalls, which will need to be offset by other sources.
BREAK EVEN ANALYSIS MODEL
Key Assumptions:
No water rights sales revenue Included in this model
Debt repayment for sewer fund loan made from other sources Interfund transfer repayment made from other sources
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
Cost per
gallon
$ 0.01721 0.0232 0.0281 0.0290 0.0298 0.0307 0.0316 0.0326 0.0336 Actual Actual 35.0% 21.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year 8 Year 9 Year 10 Year 11 FY 19/20 FY 20/21 FY 21/22 FY 22/23 FY 23/24 FY 24/25 FY 25/26 FY 26/27 FY 27/28 FY 28/29 Beginning Fund Balance (326,361) (527,571) 311 21,003 77,924 250,740 436,308 635,624 849,180 237,954 Operating Revenues
Reclaimed Water 524,041 597,833 740,641 896,176 923,061 950,753 979,275 1,008,654 1,038,913 1,070,081 Interest Earned 421 - 107 495 1,643 3,435 5,360 7,424 5,436 Non Opereating Revenues
One Time Entitlement Sales
Interfund Transfers 76,507
Operating Loan Proceeds - 637,000 - - - - - - - -
Subtotal - Revenues 600,969 1,234,833 740,641 896,282 923,556 952,396 982,711 1,014,013 1,046,337 1,075,516 Expenses
Contract Services 356,606 335,610 345,678 356,049 366,730 377,732 389,064 400,736 412,758 425,141 Legal Services - - - - - - - - - -
Postage - - - - - - - - - -
Telephone - - - - - - - - - -
Utilities 206,168 138,317 142,467 146,741 151,143 155,677 160,347 165,158 170,112 175,216 Internal Service Charges 4,357 5,000 4,356 4,356 4,356 4,356 4,356 4,356 4,356 4,356 Indirect Costs 28,600 20,000 21,000 21,525 22,063 22,615 23,180 23,760 24,354 24,962 Equipment Repair - 1,576 - - - - - - - -
Misc. Expense - - - - - - - - - -
subtotal - Expenses 595,731 500,503 513,501 528,670 544,292 560,380 576,947 594,009 611,580 629,675 Net operating difference 5,238 734,330 227,140 367,612 379,264 392,016 405,763 420,004 434,757 445,841 Non-Operating:
Capital Outlay (104,243) (839,535)
Debt
Debt Service - State Loan (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) Repayment of Interfund Transfer - - - - - - - -
Debt Service - Sewer Loan -
sub total - Debt (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) (206,448) Net Revenue/Deficit (201,210) 527,882 20,692 56,921 172,816 185,568 199,315 213,556 (611,226) 239,393 Ending Fund Balance (527,571) 311 21,003 77,924 250,740 436,308 635,624 849,180 237,954 477,347 DTA Break Even Analysis
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Agenda No. 12 E
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Sandra Kandell, City Clerk
MEETING DATE: February 16, 2022
SUBJECT: Hybrid Meeting Update
CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378
RECOMMENDATION
Approve staff recommendation to commence hybrid meetings by phases as outlined in the Discussion section of agenda report.
DISCUSSION
The City Clerk has been working with the City Manager, IT Department, Public Works, and the Police Department in order to provide this status update. As the Council was informed earlier, all metrics on the technology side have been accomplished except for a time clock. The time clock method currently used will continue to be used until another is put into place. This report provides phases staff believes applicable in commencing hybrid meetings on March 2, 2022. The phases are pursuant to safety recommendations by the City's Human Resources Department, Safety Committee, the California Department of Public Health (CDPH) and the California Joint Powers Insurance Agency (CJPIA). Phases cover masks/vaccination cards, plexiglass inserts, chamber capacity limits, and social distancing.
The State's indoor mask requirement will end February 15, 2022, and will revert to the previous guidance. Effective February 16, 2022, masks will be required for unvaccinated individuals in all indoor public settings, and for all individuals regardless of vaccination status, in higher risk settings such as public transit, etc. Businesses, venue operators, hosts, etc. may determine their own paths forward to protect staff and patrons and may choose to require all patrons to wear masks. The California Department of Public Health's February 7, 2022, is attached for ease of reference. AB 361 expires in January 2024, so long as the Governor has declared a state of emergency. The Governor’s Executive Order declaring a state of emergency is set to expire on March 31, 2022. It is unknown at this time whether it will be extended by a further order. A County of Monterey State of Emergency Declaration could continue the virtual meetings, however, it is unknown whether the County of Monterey will issue one. AB 361 and Executive Order N-1-22 are attached for the Council's ease of reference.
The Council should note that the Mayor's State of the City Address set for February 23, 2022, at 6:00 PM will be held via hybrid. The Mayor will attend in-person. Capacity in Chamber limited to approximately 20 will be established for the public and attendance will be on a first come, first served basis. No public will be allowed to stand in Council Chamber, unless in line for public speaking and PG CC 2/16/22
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then no more than a line of 3 members of the public is recommended. Outdoor speakers will be turned on and chairs will be made available for outdoor seating. Due to inadequate spacing, no hallway seating is recommended. The public may continue attending via Zoom. The City Clerk, Deputy, IT, and AMP staff will attend in-person. Medical grade masks will be required and Chamber will be supplied with hand sanitizer, wipes, and extra masks where needed. Open doors and windows will provide ventilation.
Based on the information above, staff recommends the following phases to ease into hybrid meetings.
Phase 1: For City Council Meetings of March 2, 2022, and March 16, 2022, the Mayor plus three other members of the Council attend in-person. This could alternate for the March 16, 2022, meeting.
Capacity in Chamber limited to approximately 20 will be established for the public and attendance will be on a first come, first served basis. No public will be allowed to stand in Council Chamber, unless in line for public speaking and then no more than a line of 3 members of the public is recommended.
Outdoor speakers will be turned on and chairs will be made available for outdoor seating. Due to inadequate spacing, no hallway seating is recommended. The public may continue attending via Zoom. The City Clerk, Deputy, IT, and AMP staff will attend in-person. City Staff will continue to attend via Zoom. Medical grade masks will be required and Chamber will be supplied with hand sanitizer, wipes, and extra masks if needed. Open doors and windows will provide ventilation.
Phase 2: For City Council Meetings of April 6, 2022, and April 20, 2022, Mayor plus all members of the Council attend in-person (dependent upon a further State/Local Order). Capacity in Chamber limited to approximately 20 will be established for the public and attendance will be on a first come, first served basis. No public will be allowed to stand in Council Chamber, unless in line for public speaking and then no more than a line of 3 members of the public is recommended. Outdoor speakers will be turned on and chairs will be made available for outdoor seating. Due to inadequate spacing, no hallway seating is recommended. The public may continue attending via Zoom. The City Clerk, Deputy, IT, and AMP staff would attend in-person. Optional attendance of either in-person or Zoom for City Staff. Medical grade masks will be required and Chamber will be supplied with hand sanitizer, wipes, and extra masks if needed. Open doors and windows will provide ventilation.
Phase 3: For City Council Meetings of May 4 to future, Mayor plus all members of the Council attend in-person (dependent upon a further State/Local Order). Capacity in Chamber limited to approximately 20 will be established for the public and attendance will be on a first come, first served basis. No public will be allowed to stand in Council Chamber, unless in line for public speaking and then no more than a line of 3 members of the public is recommended. Outdoor speakers will be turned on and chairs will be made available for outdoor seating. Due to inadequate spacing, no hallwayis recommended. The public can continue to attend via Zoom. The City Clerk, Deputy, IT, and AMP staff would attend in-person.
Optional attendance of either in-person or Zoom for City Staff. Medical grade masks will be required and Chamber will be supplied with hand sanitizer, wipes, and extra masks if needed. Open doors and windows will provide ventilation.
City staff will continue to review changes that could occur with respect to COVID.
OPTIONS
1. Accept all recommendations.
2. Provide alternate direction.
FINANCIAL IMPACT:
Council budget funds will be used for miscellaneous costs to support hybrid meetings. An approximate PG CC 2/16/22
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Council budget funds will be used for miscellaneous costs to support hybrid meetings. An approximate cost ranges between $600-800.
GOAL ALIGNMENT: Transparency, Accountability and Communication: Implement programs, processes, revisions, and training to improve and advance the City's efforts.
Attachments
CHPH Letter
AB 361
N-1-22 Order
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February 7, 2022
TO:
SUBJECT:
TOMÁS J. ARAGÓN, M.D., Dr.P.H.
State Public Health Officer & Director
GAVIN NEWSOM
Governor
State of California—Health and Human
Services Agency
California Department of
Public Health
All Californians
Guidance for the Use of Face Masks
This guidance will take effect on February 16, 2022. For current Guidance for the Use of Face Masks, see the current guidance for face coverings .
Changes Taking Effect February 16, 2022:
Universal masking shall remain required in only specified settings.
Only unvaccinated persons are required to mask in all Indoor Public Settings. Fully vaccinated individuals are recommended to continue indoor masking when the risk may be high.
Related Materials: Face Coverings Q&A | Face Coverings Fact Sheet (PDF) | Face Mask Tips and Resources | Face Shields Q&A (PDF) | Safe Schools for All Hub | More Home & Community Guidance |All Guidance | More Languages Guidance For the Use of Masks
Background
COVID-19 cases and hospitalization are declining across the state. This is due in large part to the collective efforts of Californians to get vaccinated, get boosted, and wear masks.
A universal indoor masking requirement was reinstated on December 15, 2021, to add a layer of mitigation as the Omicron variant, a Variant of Concern as labeled by the World Health Organization, increased in prevalence across California, the United States, and the world and spread much more easily than the original SARS-CoV-2 virus and PG CC 2/16/22
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the Delta variant. Implementing the universal masking requirement in all indoor public settings during the winter season was an important tool to decrease community transmission during the highly infectious Omicron surge.
The current hospital census is still over capacity, but the dramatic surge in cases and hospitalizations due to the highly infectious Omicron variant over the last two months has declined significantly. Californians are also increasingly knowledgeable about how to protect themselves and their loved ones with effective masks when there may be risk of COVID-19 exposure. Accordingly, it is now appropriate for the universal indoor masking requirement to expire on February 15, 2022 as scheduled.
The COVID-19 vaccines remain effective in preventing serious disease, hospitalization, and death from the SARSCoV-2 virus. Unvaccinated individuals are much more likely to become infected when compared to vaccinated and boosted individuals. Vaccination continues to remain the ultimate exit strategy out of the COVID-19 pandemic.
While the percentage of Californians fully vaccinated and boosted continues to increase, we continue to have areas of the state where vaccine coverage is low, putting individuals and communities at greater risk for COVID-19.
A series of cross-sectional surveys in the U.S. suggested that a 10% increase in self-reported mask wearing tripled the likelihood of slowing community transmission.[1] Our recently published case-control study conducted in California from February 18 to December 1, 2021 demonstrated that consistently wearing a face mask or respirator in indoor public settings reduces the risk of acquiring SARS-CoV-2 infection. [2] The masking requirement in California schools has allowed us to keep schools open when compared to other parts of the country. California accounts for roughly 12% of all U.S. students, but accounted for only 1% of COVID19 related school closures during the Omicron surge. Nationally during the Delta surge in July and August 2021, jurisdictions without mask requirements in schools experienced larger increases in pediatric case rates, and school outbreaks were 3.5 times more likely in areas without school mask requirements.[3], [4].
Maintaining the masking requirements in other specified, high-risk settings continues to be consistent with CDC recommendations and allows us to protect our most vulnerable populations and the workforce that delivers critical services in these settings.
In workplaces, employers are subject to the Cal/OSHA COVID-19 Emergency Temporary Standards (ETS) or in some workplaces the Cal/OSHA Aerosol Transmissible Diseases (ATD) (PDF) Standard and should consult those regulations for additional applicable requirements.
Masking Requirements
Masks are required for all individuals in the following indoor settings, regardless of vaccination status. Surgical masks or higher-level respirators (e.g., N95s, KN95s, KF94s) with good fit are highly recommended.
On public transit[5] (examples: airplanes, ships, ferries, trains, subways, buses, taxis, and ride-shares) and in transportation hubs (examples: airport, bus terminal, marina, train station, seaport or other port, subway station, or any other area that provides transportation) Indoors in K-12 schools[6], childcare[7]
Emergency[8] shelters and cooling and heating centers[9] Healthcare settings[10]
State and local correctional facilities and detention centers[11] Homeless shelters[12]
Long Term Care Settings & Adult and Senior Care Facilities[13] Additionally, masks are required* for unvaccinated individuals in indoor public settings and businesses (examples: retail, restaurants, theaters, family entertainment centers, meetings, state and local government offices serving the public). Fully vaccinated individuals are recommended to continue indoor masking when the risk may PG CC 2/16/22
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be high. Surgical masks or higher-level respirators (e.g., N95s, KN95s, KF94s) with good fit are highly recommended.
See State Health Officer Order, issued on July 26, 2021, for a full list of high-risk congregate and other healthcare settings where surgical masks are required for unvaccinated workers, and recommendations for respirator use for unvaccinated workers in healthcare and long-term care facilities in situations or settings not covered by Cal OSHA ETS or ATD.
For additional information on types of masks, the most effective masks, and ensuring a well-fitted mask, individuals should refer to CDPH Get the Most out of Masking and see CDPH Masking Guidance Frequently Asked Questions for more information.
*Guidance for Businesses, Venue Operators or Hosts
In settings where masks are required only for unvaccinated individuals, businesses, venue operators or hosts may choose to:
Provide information to all patrons, guests and attendees regarding vaccination requirements and allow vaccinated individuals to self-attest that they are in compliance prior to entry.
Implement vaccine verification to determine whether individuals are required to wear a mask.
Require all patrons to wear masks.
No person can be prevented from wearing a mask as a condition of participation in an activity or entry into a business.
Exemptions to masks requirements
The following individuals are exempt from wearing masks at all times:
Persons younger than two years old. Very young children must not wear a mask because of the risk of suffocation.
Persons with a medical condition, mental health condition, or disability that prevents wearing a mask. This includes persons with a medical condition for whom wearing a mask could obstruct breathing or who are unconscious, incapacitated, or otherwise unable to remove a mask without assistance.
Persons who are hearing impaired, or communicating with a person who is hearing impaired, where the ability to see the mouth is essential for communication.
Persons for whom wearing a mask would create a risk to the person related to their work, as determined by local, state, or federal regulators or workplace safety guidelines. [1] Rader B, White LF, Burns MR, et al. Mask-wearing and control of SARS-CoV-2 transmission in the USA: a crosssectional study. The Lancet Digital Health. 2021;3(3):e148–e157. [2] Andrejko KL, Pry JM, Myers JF, et al. Effectiveness of Face Mask or Respirator Use in Indoor Public Settings for Prevention of SARS-CoV-2 Infection — California, February–December 2021. MMWR Morb Mortal Wkly Rep. ePub: 4 February 2022
[3] Jehn M, McCullough JM, Dale AP, Gue M, Eller B, Cullen T, Scott SE. Association between K–12 school mask policies and school-associated COVID-19 outbreaks — Maricopa and Pima Counties, Arizona, July–August 2021. MMWR Morb Mortal Wkly Rep. 2021; 70(39);1372–1373.
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[4] Budzyn SE, Panaggio MJ, Parks SE, Papazian M, Magid J, Eng M, Barrios LC. Pediatric COVID-19 cases in counties with and without school mask requirements — United States, July 1–September 4, 2021. MMWR Morb Mortal Wkly Rep. 2021; 70(39);1377–1378.
[5] CDC Requirement for Face Masks on Public Transportation Conveyances and at Transportation Hubs [6] CDC Guidance for COVID-19 Prevention in K-12 Schools [7] CDC COVID-19 Guidance for Operating Early Care and Education/Child Care Programs [8] CDC's Interim Guidance for General Population Disaster Shelters During the COVID-19 Pandemic [9] CDC COVID-19 and Cooling Centers
[10] CDC Interim Infection Prevention and Control Recommendations for Healthcare Personnel During the Coronavirus Disease 2019 (COVID-19) Pandemic
[11] CDC Interim Guidance on Management of Coronavirus Disease 2019 (COVID-19) in Correctional and Detention Facilities
[12] CDC Interim Guidance for Homeless Service Providers to Plan and Respond to Coronavirus Disease 2019 (COVID-19)
[13] CDC Nursing Homes and Long-Term Care Facilities
California Department of Public Health
PO Box, 997377, MS 0500, Sacramento, CA 95899-7377
Department Website (cdph.ca.gov)
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SHARE THIS: Date Published: 09/17/2021 09:00 PM
AB-361 Open meetings: state and local agencies: teleconferences. (2021-2022) Assembly Bill No. 361
CHAPTER 165
An act to add and repeal Section 89305.6 of the Education Code, and to amend, repeal, and add Section 54953 of, and to add and repeal Section 11133 of, the Government Code, relating to open meetings, and declaring the urgency thereof, to take effect immediately. [ Approved by Governor September 16, 2021. Filed with Secretary of State September 16, 2021. ]
LEGISLATIVE COUNSEL'S DIGEST
AB 361, Robert Rivas. Open meetings: state and local agencies: teleconferences. (1) Existing law, the Ralph M. Brown Act requires, with specified exceptions, that all meetings of a legislative body of a local agency, as those terms are defined, be open and public and that all persons be permitted to attend and participate. The act contains specified provisions regarding the timelines for posting an agenda and providing for the ability of the public to directly address the legislative body on any item of interest to the public.
The act generally requires all regular and special meetings of the legislative body be held within the boundaries of the territory over which the local agency exercises jurisdiction, subject to certain exceptions. The act allows for meetings to occur via teleconferencing subject to certain requirements, particularly that the legislative body notice each teleconference location of each member that will be participating in the public meeting, that each teleconference location be accessible to the public, that members of the public be allowed to address the legislative body at each teleconference location, that the legislative body post an agenda at each teleconference location, and that at least a quorum of the legislative body participate from locations within the boundaries of the local agency’s jurisdiction. The act provides an exemption to the jurisdictional requirement for health authorities, as defined. The act authorizes the district attorney or any interested person, subject to certain provisions, to commence an action by mandamus or injunction for the purpose of obtaining a judicial determination that specified actions taken by a legislative body are null and void.
Existing law, the California Emergency Services Act, authorizes the Governor, or the Director of Emergency Services when the governor is inaccessible, to proclaim a state of emergency under specified circumstances.
Executive Order No. N-29-20 suspends the Ralph M. Brown Act’s requirements for teleconferencing during the COVID-19 pandemic provided that notice and accessibility requirements are met, the public members are allowed to observe and address the legislative body at the meeting, and that a legislative body of a local agency has a procedure for receiving and swiftly resolving requests for reasonable accommodation for individuals with disabilities, as specified.
This bill, until January 1, 2024, would authorize a local agency to use teleconferencing without complying with the teleconferencing requirements imposed by the Ralph M. Brown Act when a legislative body of a local agency holds a meeting during a declared state of emergency, as that term is defined, when state or local health officials Home Bill Information California Law Publications Other Resources My Subscriptions My Favorites PG CC 2/16/22
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have imposed or recommended measures to promote social distancing, during a proclaimed state of emergency held for the purpose of determining, by majority vote, whether meeting in person would present imminent risks to the health or safety of attendees, and during a proclaimed state of emergency when the legislative body has determined that meeting in person would present imminent risks to the health or safety of attendees, as provided.
This bill would require legislative bodies that hold teleconferenced meetings under these abbreviated teleconferencing procedures to give notice of the meeting and post agendas, as described, to allow members of the public to access the meeting and address the legislative body, to give notice of the means by which members of the public may access the meeting and offer public comment, including an opportunity for all persons to attend via a call-in option or an internet-based service option, and to conduct the meeting in a manner that protects the statutory and constitutional rights of the parties and the public appearing before the legislative body. The bill would require the legislative body to take no further action on agenda items when there is a disruption which prevents the public agency from broadcasting the meeting, or in the event of a disruption within the local agency’s control which prevents members of the public from offering public comments, until public access is restored. The bill would specify that actions taken during the disruption are subject to challenge proceedings, as specified.
This bill would prohibit the legislative body from requiring public comments to be submitted in advance of the meeting and would specify that the legislative body must provide an opportunity for the public to address the legislative body and offer comment in real time. The bill would prohibit the legislative body from closing the public comment period and the opportunity to register to provide public comment, until the public comment period has elapsed or until a reasonable amount of time has elapsed, as specified. When there is a continuing state of emergency, or when state or local officials have imposed or recommended measures to promote social distancing, the bill would require a legislative body to make specified findings not later than 30 days after the first teleconferenced meeting pursuant to these provisions, and to make those findings every 30 days thereafter, in order to continue to meet under these abbreviated teleconferencing procedures.
Existing law prohibits a legislative body from requiring, as a condition to attend a meeting, a person to register the person’s name, or to provide other information, or to fulfill any condition precedent to the person’s attendance.
This bill would exclude from that prohibition, a registration requirement imposed by a third-party internet website or other online platform not under the control of the legislative body. (2) Existing law, the Bagley-Keene Open Meeting Act, requires, with specified exceptions, that all meetings of a state body be open and public and all persons be permitted to attend any meeting of a state body. The act requires at least one member of the state body to be physically present at the location specified in the notice of the meeting.
The Governor’s Executive Order No. N-29-20 suspends the requirements of the Bagley-Keene Open Meeting Act for teleconferencing during the COVID-19 pandemic, provided that notice and accessibility requirements are met, the public members are allowed to observe and address the state body at the meeting, and that a state body has a procedure for receiving and swiftly resolving requests for reasonable accommodation for individuals with disabilities, as specified.
This bill, until January 31, 2022, would authorize, subject to specified notice and accessibility requirements, a state body to hold public meetings through teleconferencing and to make public meetings accessible telephonically, or otherwise electronically, to all members of the public seeking to observe and to address the state body. With respect to a state body holding a public meeting pursuant to these provisions, the bill would suspend certain requirements of existing law, including the requirements that each teleconference location be accessible to the public and that members of the public be able to address the state body at each teleconference location. Under the bill, a state body that holds a meeting through teleconferencing and allows members of the public to observe and address the meeting telephonically or otherwise electronically would satisfy any requirement that the state body allow members of the public to attend the meeting and offer public comment.
The bill would require that each state body that holds a meeting through teleconferencing provide notice of the meeting, and post the agenda, as provided. The bill would urge state bodies utilizing these teleconferencing procedures in the bill to use sound discretion and to make reasonable efforts to adhere as closely as reasonably possible to existing law, as provided.
(3) Existing law establishes the various campuses of the California State University under the administration of the Trustees of the California State University, and authorizes the establishment of student body organizations in PG CC 2/16/22
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connection with the operations of California State University campuses.
The Gloria Romero Open Meetings Act of 2000 generally requires a legislative body, as defined, of a student body organization to conduct its business in a meeting that is open and public. The act authorizes the legislative body to use teleconferencing, as defined, for the benefit of the public and the legislative body in connection with any meeting or proceeding authorized by law.
This bill, until January 31, 2022, would authorize, subject to specified notice and accessibility requirements, a legislative body, as defined for purposes of the act, to hold public meetings through teleconferencing and to make public meetings accessible telephonically, or otherwise electronically, to all members of the public seeking to observe and to address the legislative body. With respect to a legislative body holding a public meeting pursuant to these provisions, the bill would suspend certain requirements of existing law, including the requirements that each teleconference location be accessible to the public and that members of the public be able to address the legislative body at each teleconference location. Under the bill, a legislative body that holds a meeting through teleconferencing and allows members of the public to observe and address the meeting telephonically or otherwise electronically would satisfy any requirement that the legislative body allow members of the public to attend the meeting and offer public comment. The bill would require that each legislative body that holds a meeting through teleconferencing provide notice of the meeting, and post the agenda, as provided.
The bill would urge legislative bodies utilizing these teleconferencing procedures in the bill to use sound discretion and to make reasonable efforts to adhere as closely as reasonably possible to existing law, as provided.
(4) This bill would declare the Legislature’s intent, consistent with the Governor’s Executive Order No. N-29-20, to improve and enhance public access to state and local agency meetings during the COVID-19 pandemic and future emergencies by allowing broader access through teleconferencing options. (5) This bill would incorporate additional changes to Section 54953 of the Government Code proposed by AB 339 to be operative only if this bill and AB 339 are enacted and this bill is enacted last. (6) The California Constitution requires local agencies, for the purpose of ensuring public access to the meetings of public bodies and the writings of public officials and agencies, to comply with a statutory enactment that amends or enacts laws relating to public records or open meetings and contains findings demonstrating that the enactment furthers the constitutional requirements relating to this purpose.
This bill would make legislative findings to that effect. (7) Existing constitutional provisions require that a statute that limits the right of access to the meetings of public bodies or the writings of public officials and agencies be adopted with findings demonstrating the interest protected by the limitation and the need for protecting that interest.
This bill would make legislative findings to that effect. (8) This bill would declare that it is to take effect immediately as an urgency statute.
Vote: 2/3 Appropriation: no Fiscal Committee: yes Local Program: no THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 89305.6 is added to the Education Code, to read:
89305.6. (a) Notwithstanding any other provision of this article, and subject to the notice and accessibility requirements in subdivisions (d) and (e), a legislative body may hold public meetings through teleconferencing and make public meetings accessible telephonically, or otherwise electronically, to all members of the public seeking to observe and to address the legislative body. (b) (1) For a legislative body holding a public meeting through teleconferencing pursuant to this section, all requirements in this article requiring the physical presence of members, the clerk or other personnel of the legislative body, or the public, as a condition of participation in or quorum for a public meeting, are hereby suspended.
(2) For a legislative body holding a public meeting through teleconferencing pursuant to this section, all of the following requirements in this article are suspended:
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(A) Each teleconference location from which a member will be participating in a public meeting or proceeding be identified in the notice and agenda of the public meeting or proceeding. (B) Each teleconference location be accessible to the public. (C) Members of the public may address the legislative body at each teleconference conference location. (D) Post agendas at all teleconference locations.
(E) At least one member of the legislative body be physically present at the location specified in the notice of the meeting.
(c) A legislative body that holds a meeting through teleconferencing and allows members of the public to observe and address the meeting telephonically or otherwise electronically, consistent with the notice and accessibility requirements in subdivisions (d) and (e), shall have satisfied any requirement that the legislative body allow members of the public to attend the meeting and offer public comment. A legislative body need not make available any physical location from which members of the public may observe the meeting and offer public comment.
(d) If a legislative body holds a meeting through teleconferencing pursuant to this section and allows members of the public to observe and address the meeting telephonically or otherwise electronically, the legislative body shall also do both of the following:
(1) Implement a procedure for receiving and swiftly resolving requests for reasonable modification or accommodation from individuals with disabilities, consistent with the federal Americans with Disabilities Act of 1990 (42 U.S.C. Sec. 12101 et seq.), and resolving any doubt whatsoever in favor of accessibility. (2) Advertise that procedure each time notice is given of the means by which members of the public may observe the meeting and offer public comment, pursuant to paragraph (2) of subdivision (e). (e) Except to the extent this section provides otherwise, each legislative body that holds a meeting through teleconferencing pursuant to this section shall do both of the following:
(1) Give advance notice of the time of, and post the agenda for, each public meeting according to the timeframes otherwise prescribed by this article, and using the means otherwise prescribed by this article, as applicable. (2) In each instance in which notice of the time of the meeting is otherwise given or the agenda for the meeting is otherwise posted, also give notice of the means by which members of the public may observe the meeting and offer public comment. As to any instance in which there is a change in the means of public observation and comment, or any instance prior to the effective date of this section in which the time of the meeting has been noticed or the agenda for the meeting has been posted without also including notice of the means of public observation and comment, a legislative body may satisfy this requirement by advertising the means of public observation and comment using the most rapid means of communication available at the time. Advertising the means of public observation and comment using the most rapid means of communication available at the time shall include, but need not be limited to, posting such means on the legislative body’s internet website. (f) All legislative bodies utilizing the teleconferencing procedures in this section are urged to use sound discretion and to make reasonable efforts to adhere as closely as reasonably possible to the otherwise applicable provisions of this article, in order to maximize transparency and provide the public access to legislative body meetings. (g) This section shall remain in effect only until January 31, 2022, and as of that date is repealed.
SEC. 2. Section 11133 is added to the Government Code, to read:
11133. (a) Notwithstanding any other provision of this article, and subject to the notice and accessibility requirements in subdivisions (d) and (e), a state body may hold public meetings through teleconferencing and make public meetings accessible telephonically, or otherwise electronically, to all members of the public seeking to observe and to address the state body.
(b) (1) For a state body holding a public meeting through teleconferencing pursuant to this section, all requirements in this article requiring the physical presence of members, the clerk or other personnel of the state body, or the public, as a condition of participation in or quorum for a public meeting, are hereby suspended.
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(2) For a state body holding a public meeting through teleconferencing pursuant to this section, all of the following requirements in this article are suspended:
(A) Each teleconference location from which a member will be participating in a public meeting or proceeding be identified in the notice and agenda of the public meeting or proceeding. (B) Each teleconference location be accessible to the public. (C) Members of the public may address the state body at each teleconference conference location. (D) Post agendas at all teleconference locations.
(E) At least one member of the state body be physically present at the location specified in the notice of the meeting.
(c) A state body that holds a meeting through teleconferencing and allows members of the public to observe and address the meeting telephonically or otherwise electronically, consistent with the notice and accessibility requirements in subdivisions (d) and (e), shall have satisfied any requirement that the state body allow members of the public to attend the meeting and offer public comment. A state body need not make available any physical location from which members of the public may observe the meeting and offer public comment. (d) If a state body holds a meeting through teleconferencing pursuant to this section and allows members of the public to observe and address the meeting telephonically or otherwise electronically, the state body shall also do both of the following:
(1) Implement a procedure for receiving and swiftly resolving requests for reasonable modification or accommodation from individuals with disabilities, consistent with the federal Americans with Disabilities Act of 1990 (42 U.S.C. Sec. 12101 et seq.), and resolving any doubt whatsoever in favor of accessibility. (2) Advertise that procedure each time notice is given of the means by which members of the public may observe the meeting and offer public comment, pursuant to paragraph (2) of subdivision (e). (e) Except to the extent this section provides otherwise, each state body that holds a meeting through teleconferencing pursuant to this section shall do both of the following:
(1) Give advance notice of the time of, and post the agenda for, each public meeting according to the timeframes otherwise prescribed by this article, and using the means otherwise prescribed by this article, as applicable. (2) In each instance in which notice of the time of the meeting is otherwise given or the agenda for the meeting is otherwise posted, also give notice of the means by which members of the public may observe the meeting and offer public comment. As to any instance in which there is a change in the means of public observation and comment, or any instance prior to the effective date of this section in which the time of the meeting has been noticed or the agenda for the meeting has been posted without also including notice of the means of public observation and comment, a state body may satisfy this requirement by advertising the means of public observation and comment using the most rapid means of communication available at the time. Advertising the means of public observation and comment using the most rapid means of communication available at the time shall include, but need not be limited to, posting such means on the state body’s internet website. (f) All state bodies utilizing the teleconferencing procedures in this section are urged to use sound discretion and to make reasonable efforts to adhere as closely as reasonably possible to the otherwise applicable provisions of this article, in order to maximize transparency and provide the public access to state body meetings. (g) This section shall remain in effect only until January 31, 2022, and as of that date is repealed.
SEC. 3. Section 54953 of the Government Code is amended to read:
54953. (a) All meetings of the legislative body of a local agency shall be open and public, and all persons shall be permitted to attend any meeting of the legislative body of a local agency, except as otherwise provided in this chapter.
(b) (1) Notwithstanding any other provision of law, the legislative body of a local agency may use teleconferencing for the benefit of the public and the legislative body of a local agency in connection with any meeting or proceeding authorized by law. The teleconferenced meeting or proceeding shall comply with all PG CC 2/16/22
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otherwise applicable requirements of this chapter and all otherwise applicable provisions of law relating to a specific type of meeting or proceeding.
(2) Teleconferencing, as authorized by this section, may be used for all purposes in connection with any meeting within the subject matter jurisdiction of the legislative body. All votes taken during a teleconferenced meeting shall be by rollcall.
(3) If the legislative body of a local agency elects to use teleconferencing, it shall post agendas at all teleconference locations and conduct teleconference meetings in a manner that protects the statutory and constitutional rights of the parties or the public appearing before the legislative body of a local agency. Each teleconference location shall be identified in the notice and agenda of the meeting or proceeding, and each teleconference location shall be accessible to the public. During the teleconference, at least a quorum of the members of the legislative body shall participate from locations within the boundaries of the territory over which the local agency exercises jurisdiction, except as provided in subdivisions (d) and (e). The agenda shall provide an opportunity for members of the public to address the legislative body directly pursuant to Section 54954.3 at each teleconference location.
(4) For the purposes of this section, “teleconference” means a meeting of a legislative body, the members of which are in different locations, connected by electronic means, through either audio or video, or both. Nothing in this section shall prohibit a local agency from providing the public with additional teleconference locations. (c) (1) No legislative body shall take action by secret ballot, whether preliminary or final. (2) The legislative body of a local agency shall publicly report any action taken and the vote or abstention on that action of each member present for the action.
(3) Prior to taking final action, the legislative body shall orally report a summary of a recommendation for a final action on the salaries, salary schedules, or compensation paid in the form of fringe benefits of a local agency executive, as defined in subdivision (d) of Section 3511.1, during the open meeting in which the final action is to be taken. This paragraph shall not affect the public’s right under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1) to inspect or copy records created or received in the process of developing the recommendation.
(d) (1) Notwithstanding the provisions relating to a quorum in paragraph (3) of subdivision (b), if a health authority conducts a teleconference meeting, members who are outside the jurisdiction of the authority may be counted toward the establishment of a quorum when participating in the teleconference if at least 50 percent of the number of members that would establish a quorum are present within the boundaries of the territory over which the authority exercises jurisdiction, and the health authority provides a teleconference number, and associated access codes, if any, that allows any person to call in to participate in the meeting and the number and access codes are identified in the notice and agenda of the meeting. (2) Nothing in this subdivision shall be construed as discouraging health authority members from regularly meeting at a common physical site within the jurisdiction of the authority or from using teleconference locations within or near the jurisdiction of the authority. A teleconference meeting for which a quorum is established pursuant to this subdivision shall be subject to all other requirements of this section. (3) For purposes of this subdivision, a health authority means any entity created pursuant to Sections 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, and 14087.9605 of the Welfare and Institutions Code, any joint powers authority created pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 for the purpose of contracting pursuant to Section 14087.3 of the Welfare and Institutions Code, and any advisory committee to a county-sponsored health plan licensed pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code if the advisory committee has 12 or more members. (e) (1) A local agency may use teleconferencing without complying with the requirements of paragraph (3) of subdivision (b) if the legislative body complies with the requirements of paragraph (2) of this subdivision in any of the following circumstances:
(A) The legislative body holds a meeting during a proclaimed state of emergency, and state or local officials have imposed or recommended measures to promote social distancing. (B) The legislative body holds a meeting during a proclaimed state of emergency for the purpose of determining, by majority vote, whether as a result of the emergency, meeting in person would present imminent risks to the health or safety of attendees.
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(C) The legislative body holds a meeting during a proclaimed state of emergency and has determined, by majority vote, pursuant to subparagraph (B), that, as a result of the emergency, meeting in person would present imminent risks to the health or safety of attendees. (2) A legislative body that holds a meeting pursuant to this subdivision shall do all of the following:
(A) The legislative body shall give notice of the meeting and post agendas as otherwise required by this chapter. (B) The legislative body shall allow members of the public to access the meeting and the agenda shall provide an opportunity for members of the public to address the legislative body directly pursuant to Section 54954.3. In each instance in which notice of the time of the teleconferenced meeting is otherwise given or the agenda for the meeting is otherwise posted, the legislative body shall also give notice of the means by which members of the public may access the meeting and offer public comment. The agenda shall identify and include an opportunity for all persons to attend via a call-in option or an internet-based service option. This subparagraph shall not be construed to require the legislative body to provide a physical location from which the public may attend or comment.
(C) The legislative body shall conduct teleconference meetings in a manner that protects the statutory and constitutional rights of the parties and the public appearing before the legislative body of a local agency. (D) In the event of a disruption which prevents the public agency from broadcasting the meeting to members of the public using the call-in option or internet-based service option, or in the event of a disruption within the local agency’s control which prevents members of the public from offering public comments using the call-in option or internet-based service option, the body shall take no further action on items appearing on the meeting agenda until public access to the meeting via the call-in option or internet-based service option is restored. Actions taken on agenda items during a disruption which prevents the public agency from broadcasting the meeting may be challenged pursuant to Section 54960.1.
(E) The legislative body shall not require public comments to be submitted in advance of the meeting and must provide an opportunity for the public to address the legislative body and offer comment in real time. This subparagraph shall not be construed to require the legislative body to provide a physical location from which the public may attend or comment.
(F) Notwithstanding Section 54953.3, an individual desiring to provide public comment through the use of an internet website, or other online platform, not under the control of the local legislative body, that requires registration to log in to a teleconference may be required to register as required by the third-party internet website or online platform to participate.
(G) (i) A legislative body that provides a timed public comment period for each agenda item shall not close the public comment period for the agenda item, or the opportunity to register, pursuant to subparagraph (F), to provide public comment until that timed public comment period has elapsed. (ii) A legislative body that does not provide a timed public comment period, but takes public comment separately on each agenda item, shall allow a reasonable amount of time per agenda item to allow public members the opportunity to provide public comment, including time for members of the public to register pursuant to subparagraph (F), or otherwise be recognized for the purpose of providing public comment. (iii) A legislative body that provides a timed general public comment period that does not correspond to a specific agenda item shall not close the public comment period or the opportunity to register, pursuant to subparagraph (F), until the timed general public comment period has elapsed. (3) If a state of emergency remains active, or state or local officials have imposed or recommended measures to promote social distancing, in order to continue to teleconference without compliance with paragraph (3) of subdivision (b), the legislative body shall, not later than 30 days after teleconferencing for the first time pursuant to subparagraph (A), (B), or (C) of paragraph (1), and every 30 days thereafter, make the following findings by majority vote:
(A) The legislative body has reconsidered the circumstances of the state of emergency. (B) Any of the following circumstances exist:
(i) The state of emergency continues to directly impact the ability of the members to meet safely in person. (ii) State or local officials continue to impose or recommend measures to promote social distancing.
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(4) For the purposes of this subdivision, “state of emergency” means a state of emergency proclaimed pursuant to Section 8625 of the California Emergency Services Act (Article 1 (commencing with Section 8550) of Chapter 7 of Division 1 of Title 2).
(f) This section shall remain in effect only until January 1, 2024, and as of that date is repealed.
SEC. 3.1. Section 54953 of the Government Code is amended to read:
54953. (a) All meetings of the legislative body of a local agency shall be open and public, and all persons shall be permitted to attend any meeting of the legislative body of a local agency in person, except as otherwise provided in this chapter. Local agencies shall conduct meetings subject to this chapter consistent with applicable state and federal civil rights laws, including, but not limited to, any applicable language access and other nondiscrimination obligations.
(b) (1) Notwithstanding any other provision of law, the legislative body of a local agency may use teleconferencing for the benefit of the public and the legislative body of a local agency in connection with any meeting or proceeding authorized by law. The teleconferenced meeting or proceeding shall comply with all otherwise applicable requirements of this chapter and all otherwise applicable provisions of law relating to a specific type of meeting or proceeding.
(2) Teleconferencing, as authorized by this section, may be used for all purposes in connection with any meeting within the subject matter jurisdiction of the legislative body. All votes taken during a teleconferenced meeting shall be by rollcall.
(3) If the legislative body of a local agency elects to use teleconferencing, it shall post agendas at all teleconference locations and conduct teleconference meetings in a manner that protects the statutory and constitutional rights of the parties or the public appearing before the legislative body of a local agency. Each teleconference location shall be identified in the notice and agenda of the meeting or proceeding, and each teleconference location shall be accessible to the public. During the teleconference, at least a quorum of the members of the legislative body shall participate from locations within the boundaries of the territory over which the local agency exercises jurisdiction, except as provided in subdivisions (d) and (e). The agenda shall provide an opportunity for members of the public to address the legislative body directly pursuant to Section 54954.3 at each teleconference location.
(4) For the purposes of this section, “teleconference” means a meeting of a legislative body, the members of which are in different locations, connected by electronic means, through either audio or video, or both. Nothing in this section shall prohibit a local agency from providing the public with additional teleconference locations. (c) (1) No legislative body shall take action by secret ballot, whether preliminary or final. (2) The legislative body of a local agency shall publicly report any action taken and the vote or abstention on that action of each member present for the action.
(3) Prior to taking final action, the legislative body shall orally report a summary of a recommendation for a final action on the salaries, salary schedules, or compensation paid in the form of fringe benefits of a local agency executive, as defined in subdivision (d) of Section 3511.1, during the open meeting in which the final action is to be taken. This paragraph shall not affect the public’s right under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1) to inspect or copy records created or received in the process of developing the recommendation.
(d) (1) Notwithstanding the provisions relating to a quorum in paragraph (3) of subdivision (b), if a health authority conducts a teleconference meeting, members who are outside the jurisdiction of the authority may be counted toward the establishment of a quorum when participating in the teleconference if at least 50 percent of the number of members that would establish a quorum are present within the boundaries of the territory over which the authority exercises jurisdiction, and the health authority provides a teleconference number, and associated access codes, if any, that allows any person to call in to participate in the meeting and the number and access codes are identified in the notice and agenda of the meeting. (2) Nothing in this subdivision shall be construed as discouraging health authority members from regularly meeting at a common physical site within the jurisdiction of the authority or from using teleconference locations within or near the jurisdiction of the authority. A teleconference meeting for which a quorum is established pursuant to this subdivision shall be subject to all other requirements of this section.
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(3) For purposes of this subdivision, a health authority means any entity created pursuant to Sections 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, and 14087.9605 of the Welfare and Institutions Code, any joint powers authority created pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 for the purpose of contracting pursuant to Section 14087.3 of the Welfare and Institutions Code, and any advisory committee to a county-sponsored health plan licensed pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code if the advisory committee has 12 or more members. (e) (1) A local agency may use teleconferencing without complying with the requirements of paragraph (3) of subdivision (b) if the legislative body complies with the requirements of paragraph (2) of this subdivision in any of the following circumstances:
(A) The legislative body holds a meeting during a proclaimed state of emergency, and state or local officials have imposed or recommended measures to promote social distancing. (B) The legislative body holds a meeting during a proclaimed state of emergency for the purpose of determining, by majority vote, whether as a result of the emergency, meeting in person would present imminent risks to the health or safety of attendees.
(C) The legislative body holds a meeting during a proclaimed state of emergency and has determined, by majority vote, pursuant to subparagraph (B), that, as a result of the emergency, meeting in person would present imminent risks to the health or safety of attendees. (2) A legislative body that holds a meeting pursuant to this subdivision shall do all of the following:
(A) The legislative body shall give notice of the meeting and post agendas as otherwise required by this chapter. (B) The legislative body shall allow members of the public to access the meeting and the agenda shall provide an opportunity for members of the public to address the legislative body directly pursuant to Section 54954.3. In each instance in which notice of the time of the teleconferenced meeting is otherwise given or the agenda for the meeting is otherwise posted, the legislative body shall also give notice of the means by which members of the public may access the meeting and offer public comment. The agenda shall identify and include an opportunity for all persons to attend via a call-in option or an internet-based service option. This subparagraph shall not be construed to require the legislative body to provide a physical location from which the public may attend or comment.
(C) The legislative body shall conduct teleconference meetings in a manner that protects the statutory and constitutional rights of the parties and the public appearing before the legislative body of a local agency. (D) In the event of a disruption which prevents the public agency from broadcasting the meeting to members of the public using the call-in option or internet-based service option, or in the event of a disruption within the local agency’s control which prevents members of the public from offering public comments using the call-in option or internet-based service option, the body shall take no further action on items appearing on the meeting agenda until public access to the meeting via the call-in option or internet-based service option is restored. Actions taken on agenda items during a disruption which prevents the public agency from broadcasting the meeting may be challenged pursuant to Section 54960.1.
(E) The legislative body shall not require public comments to be submitted in advance of the meeting and must provide an opportunity for the public to address the legislative body and offer comment in real time. This subparagraph shall not be construed to require the legislative body to provide a physical location from which the public may attend or comment.
(F) Notwithstanding Section 54953.3, an individual desiring to provide public comment through the use of an internet website, or other online platform, not under the control of the local legislative body, that requires registration to log in to a teleconference may be required to register as required by the third-party internet website or online platform to participate.
(G) (i) A legislative body that provides a timed public comment period for each agenda item shall not close the public comment period for the agenda item, or the opportunity to register, pursuant to subparagraph (F), to provide public comment until that timed public comment period has elapsed. (ii) A legislative body that does not provide a timed public comment period, but takes public comment separately on each agenda item, shall allow a reasonable amount of time per agenda item to allow public members the opportunity to provide public comment, including time for members of the public to register pursuant to subparagraph (F), or otherwise be recognized for the purpose of providing public comment.
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(iii) A legislative body that provides a timed general public comment period that does not correspond to a specific agenda item shall not close the public comment period or the opportunity to register, pursuant to subparagraph (F), until the timed general public comment period has elapsed. (3) If a state of emergency remains active, or state or local officials have imposed or recommended measures to promote social distancing, in order to continue to teleconference without compliance with paragraph (3) of subdivision (b), the legislative body shall, not later than 30 days after teleconferencing for the first time pursuant to subparagraph (A), (B), or (C) of paragraph (1), and every 30 days thereafter, make the following findings by majority vote:
(A) The legislative body has reconsidered the circumstances of the state of emergency. (B) Any of the following circumstances exist:
(i) The state of emergency continues to directly impact the ability of the members to meet safely in person. (ii) State or local officials continue to impose or recommend measures to promote social distancing. (4) For the purposes of this subdivision, “state of emergency” means a state of emergency proclaimed pursuant to Section 8625 of the California Emergency Services Act (Article 1 (commencing with Section 8550) of Chapter 7 of Division 1 of Title 2).
(f) This section shall remain in effect only until January 1, 2024, and as of that date is repealed.
SEC. 4. Section 54953 is added to the Government Code, to read:
54953. (a) All meetings of the legislative body of a local agency shall be open and public, and all persons shall be permitted to attend any meeting of the legislative body of a local agency, except as otherwise provided in this chapter.
(b) (1) Notwithstanding any other provision of law, the legislative body of a local agency may use teleconferencing for the benefit of the public and the legislative body of a local agency in connection with any meeting or proceeding authorized by law. The teleconferenced meeting or proceeding shall comply with all requirements of this chapter and all otherwise applicable provisions of law relating to a specific type of meeting or proceeding.
(2) Teleconferencing, as authorized by this section, may be used for all purposes in connection with any meeting within the subject matter jurisdiction of the legislative body. All votes taken during a teleconferenced meeting shall be by rollcall.
(3) If the legislative body of a local agency elects to use teleconferencing, it shall post agendas at all teleconference locations and conduct teleconference meetings in a manner that protects the statutory and constitutional rights of the parties or the public appearing before the legislative body of a local agency. Each teleconference location shall be identified in the notice and agenda of the meeting or proceeding, and each teleconference location shall be accessible to the public. During the teleconference, at least a quorum of the members of the legislative body shall participate from locations within the boundaries of the territory over which the local agency exercises jurisdiction, except as provided in subdivision (d). The agenda shall provide an opportunity for members of the public to address the legislative body directly pursuant to Section 54954.3 at each teleconference location.
(4) For the purposes of this section, “teleconference” means a meeting of a legislative body, the members of which are in different locations, connected by electronic means, through either audio or video, or both. Nothing in this section shall prohibit a local agency from providing the public with additional teleconference locations (c) (1) No legislative body shall take action by secret ballot, whether preliminary or final. (2) The legislative body of a local agency shall publicly report any action taken and the vote or abstention on that action of each member present for the action.
(3) Prior to taking final action, the legislative body shall orally report a summary of a recommendation for a final action on the salaries, salary schedules, or compensation paid in the form of fringe benefits of a local agency executive, as defined in subdivision (d) of Section 3511.1, during the open meeting in which the final action is to be taken. This paragraph shall not affect the public’s right under the California Public Records Act (Chapter 3.5 PG CC 2/16/22
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(commencing with Section 6250) of Division 7 of Title 1) to inspect or copy records created or received in the process of developing the recommendation.
(d) (1) Notwithstanding the provisions relating to a quorum in paragraph (3) of subdivision (b), if a health authority conducts a teleconference meeting, members who are outside the jurisdiction of the authority may be counted toward the establishment of a quorum when participating in the teleconference if at least 50 percent of the number of members that would establish a quorum are present within the boundaries of the territory over which the authority exercises jurisdiction, and the health authority provides a teleconference number, and associated access codes, if any, that allows any person to call in to participate in the meeting and the number and access codes are identified in the notice and agenda of the meeting. (2) Nothing in this subdivision shall be construed as discouraging health authority members from regularly meeting at a common physical site within the jurisdiction of the authority or from using teleconference locations within or near the jurisdiction of the authority. A teleconference meeting for which a quorum is established pursuant to this subdivision shall be subject to all other requirements of this section. (3) For purposes of this subdivision, a health authority means any entity created pursuant to Sections 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, and 14087.9605 of the Welfare and Institutions Code, any joint powers authority created pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 for the purpose of contracting pursuant to Section 14087.3 of the Welfare and Institutions Code, and any advisory committee to a county-sponsored health plan licensed pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code if the advisory committee has 12 or more members. (e) This section shall become operative January 1, 2024.
SEC. 4.1. Section 54953 is added to the Government Code, to read:
54953. (a) All meetings of the legislative body of a local agency shall be open and public, and all persons shall be permitted to attend any meeting of the legislative body of a local agency, in person except as otherwise provided in this chapter. Local agencies shall conduct meetings subject to this chapter consistent with applicable state and federal civil rights laws, including, but not limited to, any applicable language access and other nondiscrimination obligations.
(b) (1) Notwithstanding any other provision of law, the legislative body of a local agency may use teleconferencing for the benefit of the public and the legislative body of a local agency in connection with any meeting or proceeding authorized by law. The teleconferenced meeting or proceeding shall comply with all requirements of this chapter and all otherwise applicable provisions of law relating to a specific type of meeting or proceeding.
(2) Teleconferencing, as authorized by this section, may be used for all purposes in connection with any meeting within the subject matter jurisdiction of the legislative body. All votes taken during a teleconferenced meeting shall be by rollcall.
(3) If the legislative body of a local agency elects to use teleconferencing, it shall post agendas at all teleconference locations and conduct teleconference meetings in a manner that protects the statutory and constitutional rights of the parties or the public appearing before the legislative body of a local agency. Each teleconference location shall be identified in the notice and agenda of the meeting or proceeding, and each teleconference location shall be accessible to the public. During the teleconference, at least a quorum of the members of the legislative body shall participate from locations within the boundaries of the territory over which the local agency exercises jurisdiction, except as provided in subdivision (d). The agenda shall provide an opportunity for members of the public to address the legislative body directly pursuant to Section 54954.3 at each teleconference location.
(4) For the purposes of this section, “teleconference” means a meeting of a legislative body, the members of which are in different locations, connected by electronic means, through either audio or video, or both. Nothing in this section shall prohibit a local agency from providing the public with additional teleconference locations. (c) (1) No legislative body shall take action by secret ballot, whether preliminary or final. (2) The legislative body of a local agency shall publicly report any action taken and the vote or abstention on that action of each member present for the action.
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(3) Prior to taking final action, the legislative body shall orally report a summary of a recommendation for a final action on the salaries, salary schedules, or compensation paid in the form of fringe benefits of a local agency executive, as defined in subdivision (d) of Section 3511.1, during the open meeting in which the final action is to be taken. This paragraph shall not affect the public’s right under the California Public Records Act (Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1) to inspect or copy records created or received in the process of developing the recommendation.
(d) (1) Notwithstanding the provisions relating to a quorum in paragraph (3) of subdivision (b), if a health authority conducts a teleconference meeting, members who are outside the jurisdiction of the authority may be counted toward the establishment of a quorum when participating in the teleconference if at least 50 percent of the number of members that would establish a quorum are present within the boundaries of the territory over which the authority exercises jurisdiction, and the health authority provides a teleconference number, and associated access codes, if any, that allows any person to call in to participate in the meeting and the number and access codes are identified in the notice and agenda of the meeting. (2) Nothing in this subdivision shall be construed as discouraging health authority members from regularly meeting at a common physical site within the jurisdiction of the authority or from using teleconference locations within or near the jurisdiction of the authority. A teleconference meeting for which a quorum is established pursuant to this subdivision shall be subject to all other requirements of this section. (3) For purposes of this subdivision, a health authority means any entity created pursuant to Sections 14018.7, 14087.31, 14087.35, 14087.36, 14087.38, and 14087.9605 of the Welfare and Institutions Code, any joint powers authority created pursuant to Article 1 (commencing with Section 6500) of Chapter 5 of Division 7 for the purpose of contracting pursuant to Section 14087.3 of the Welfare and Institutions Code, and any advisory committee to a county-sponsored health plan licensed pursuant to Chapter 2.2 (commencing with Section 1340) of Division 2 of the Health and Safety Code if the advisory committee has 12 or more members. (e) This section shall become operative January 1, 2024.
SEC. 5. Sections 3.1 and 4.1 of this bill incorporate amendments to Section 54953 of the Government Code proposed by both this bill and Assembly Bill 339. Those sections of this bill shall only become operative if (1) both bills are enacted and become effective on or before January 1, 2022, but this bill becomes operative first, (2) each bill amends Section 54953 of the Government Code, and (3) this bill is enacted after Assembly Bill 339, in which case Section 54953 of the Government Code, as amended by Sections 3 and 4 of this bill, shall remain operative only until the operative date of Assembly Bill 339, at which time Sections 3.1 and 4.1 of this bill shall become operative.
SEC. 6. It is the intent of the Legislature in enacting this act to improve and enhance public access to state and local agency meetings during the COVID-19 pandemic and future applicable emergencies, by allowing broader access through teleconferencing options consistent with the Governor’s Executive Order No. N-29-20 dated March 17, 2020, permitting expanded use of teleconferencing during the COVID-19 pandemic.
SEC. 7. The Legislature finds and declares that Sections 3 and 4 of this act, which amend, repeal, and add Section 54953 of the Government Code, further, within the meaning of paragraph (7) of subdivision (b) of Section 3 of Article I of the California Constitution, the purposes of that constitutional section as it relates to the right of public access to the meetings of local public bodies or the writings of local public officials and local agencies. Pursuant to paragraph (7) of subdivision (b) of Section 3 of Article I of the California Constitution, the Legislature makes the following findings:
This act is necessary to ensure minimum standards for public participation and notice requirements allowing for greater public participation in teleconference meetings during applicable emergencies.
SEC. 8. (a) The Legislature finds and declares that during the COVID-19 public health emergency, certain requirements of the Bagley-Keene Open Meeting Act (Article 9 (commencing with Section 11120) of Chapter 1 of Part 1 of Division 3 of Title 2 of the Government Code) were suspended by Executive Order N-29-20. Audio and video teleconference were widely used to conduct public meetings in lieu of physical location meetings, and public meetings conducted by teleconference during the COVID-19 public health emergency have been productive, have increased public participation by all members of the public regardless of their location in the state and ability to travel to physical meeting locations, have protected the health and safety of civil servants and the public, and have reduced travel costs incurred by members of state bodies and reduced work hours spent traveling to and from meetings.
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(b) The Legislature finds and declares that Section 1 of this act, which adds and repeals Section 89305.6 of the Education Code, Section 2 of this act, which adds and repeals Section 11133 of the Government Code, and Sections 3 and 4 of this act, which amend, repeal, and add Section 54953 of the Government Code, all increase and potentially limit the public’s right of access to the meetings of public bodies or the writings of public officials and agencies within the meaning of Section 3 of Article I of the California Constitution. Pursuant to that constitutional provision, the Legislature makes the following findings to demonstrate the interest protected by this limitation and the need for protecting that interest:
(1) By removing the requirement that public meetings be conducted at a primary physical location with a quorum of members present, this act protects the health and safety of civil servants and the public and does not preference the experience of members of the public who might be able to attend a meeting in a physical location over members of the public who cannot travel or attend that meeting in a physical location. (2) By removing the requirement for agendas to be placed at the location of each public official participating in a public meeting remotely, including from the member’s private home or hotel room, this act protects the personal, private information of public officials and their families while preserving the public’s right to access information concerning the conduct of the people’s business.
SEC. 9. This act is an urgency statute necessary for the immediate preservation of the public peace, health, or safety within the meaning of Article IV of the California Constitution and shall go into immediate effect. The facts constituting the necessity are:
In order to ensure that state and local agencies can continue holding public meetings while providing essential services like water, power, and fire protection to their constituents during public health, wildfire, or other states of emergencies, it is necessary that this act take effect immediately.
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EXECUTIVE DEPARTMENT
STATE OF CALIFORNIA
EXECUTIVE ORDER N-1-22
WHEREAS on March 4, 2020, I proclaimed a State of Emergency to exist in California as a result of the threat of COYID-19; and WHEREAS on March 12, 2021, I issued Executive Order N-25-20, paragraph 11, and on March 17, 2020, I issued Executive Order N-29-20, paragraph 3, waiving certain requirements that public meetings of state bodies occur in-person; and
WHEREAS on June 11, 2021, I issued Executive Order N-08-21 to roll back certain provisions of my COVID-19-related Executive Orders and to clarify that other provisions remained necessary to help California respond to, recover from, and mitigate the impacts of the COYID-19 pandemic; and
WHEREAS paragraph 42 of Executive Order N-08-21 specified that the waiver of requirements that public meetings of state bodies occur inperson would be valid through September 30, 2021; and WHEREAS on September 16, 2021, I signed into law Assembly Bill 361 (AB 361), which amended the Government Code and Education Code to provide additional flexibility for state bodies to conduct public meetings via teleconference through January 31, 2022; and
WHEREAS since Thanksgiving, the statewide seven-day average case rate has increased by 805% and the number of COVID-19 hospitalized patients has increased by 154%; and
WHEREAS this surge is being driven by the recent emergence of the Omicron variant, which has recently been estimated to account for approximately 70% of cases sequenced nationally; and
WHEREAS early data suggest that the Omicron variant is more transmissible than the Delta variant; and
WHEREAS requiring large numbers of individuals to gather, and potentially travel long distances, for in-person public meetings could potentially, and unnecessarily, expose numerous people to COYID-19, further contribute to the ongoing surge in cases caused by the Omicron variant, compound disruptions to our economy, and undermine public health measures during the current State of Emergency; and WHEREAS when the Legislature considered AB 361 this past fall, the Omicron variant had not emerged, and the virus had not demonstrated the ability to evade immunity; and
WHEREAS in light of the present surge in cases due to the Omicron variant, and to protect the public health and safety, it is necessary to temporarily extend the flexibilities for state bodies to conduct teleconferences under AB 361 beyond January 31, 2022, to provide state bodies the option of conducting public meetings remotely to reduce the risk of in-person exposure to members of the staff body, staff, and members of the public; and
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WHEREAS under the provisions of Government Code section 8571, I find that strict compliance with the statutes specified in this Order would prevent, hinder, or delay appropriate actions to prevent and mitigate the effects of the COVID-19 pandemic.
NOW, THEREFORE, I, GAVIN NEWSOM, Governor of the State of California, in accordance with the authority vested in me by the State Constitution and statutes, and in particular, Government Code sections 8567, 8571, and 8627 do hereby issue the following Order to become effective immediately:
IT IS HEREBY ORDERED THAT:
1. The sunset dates in Education Code section 89305.6, subdivision (g), and Government Code section 11133, subdivision (g), are suspended until March 31, 2022.
2. This Order shall expire at 11 :59 p.m. on April 1, 2022.
I FURTHER DIRECT that as soon as hereafter possible, this Order be filed in the Office of the Secretary of State and that widespread publicity and notice be given of this Order.
This Order is not intended to, and does not, create any rights or benefits, substantive or procedural, enforceable at law or in equity, against the State of California, its agencies, departments, entities, officers, employees, or any other person.
IN WITNESS WHEREOF I have
hereunto set my hand and caused
the Great Seal of the State of
California to be affixed this 5th day
of January 2022.
GAVIN NEWSOM
Governor of California
ATTEST:
SHIRLEY WEBER, PH.D.
Secretary of State
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Agenda No. 12 F
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Bill Peake, Mayor, Chaps Poduri, Councilmember
MEETING DATE: February 16, 2022
SUBJECT: Financial Report Subcommittee
CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378
RECOMMENDATION
Direct staff to implement Financial Report Subcommittee recommendations listed below.
DISCUSSION
On October 20, 2021 Council approved the formation of a Financial Report Subcommittee consisting of Councilmember Poduri and Mayor Peake that would be responsible with working with staff to:
Create additional financial report and/or review reporting options Review any potential changes to OpenGov transparency site or migrate to another transparency software
Review the best location to publish or access the corresponding documents Meetings were held:
1. October 27, 2021; Chaps Poduri, Bill Peake, Mary Lagasca, and Tori Hannah
2. November 29, 2021; Chaps Poduri, Bill Peake, Mary Lagasca, and Tori Hannah
3. January 6, 2022; Chaps Poduri, Bill Peake, and Tori Hannah
4. February 3, 2022; Chaps Poduri, Bill Peake, and Tori Hannah An online survey was conducted to obtain public input on the City’s financial reporting platform.
Although the number of responses were small it provided good insights. Responses included items such as webpage was not easy to navigate, missing information related to CIP and CalPERS, and suggestions for better design.
During subcommittee meetings, examples of OpenGov and ClearGov financial transparency websites were reviewed. It was observed that ClearGov standard charts were easy to understand and preferable over the more flexible but harder to use OpenGov charts.
Current financial reports and website design were reviewed for ease of use and type of information provided.
Recommendations from the outcome of the subcommittee meetings included:
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#1. A single Financial Statements webpage consolidating all financial reports:
Budget / Quarterly Budget
Annual Comprehensive Financial
Pension Obligations
Expanded to include an overview and pension obligation bond data Sales Tax
Treasurer
Workers Compensation
Core Revenue
Check Register
Purchase Order
Capital Improvement Project Budget Report (Previously included in the Quarterly Budget Report) #2. Transitioning from OpenGov to ClearGov when feasible. Standard ClearGov charts would provide an easy way to understand financial information.
#3. Staff providing Council with an implementation update before the end of fiscal year 2022.
GOAL ALIGNMENT –
a. Financial Stability
b. Create additional City finance reports through a City Council subcommittee
OPTIONS
Provide alternate direction.
FINANCIAL IMPACT:
There is minimal fiscal impact.
GOAL ALIGNMENT: See Goal Alignment within Discussion section.
Attachments
PPT
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City Council
City of Pacific Grove
Financial Report
Subcommittee
Recommendations
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Examine possibility of creating new financial reports and/or review reporting options
Review current software (OpenGov) and potential to
migrate to new software
Review locations to publish/access related documents
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# Date Attended by
1 10/27/21 Poduri, Peake, Lagasca, Hannah
2 11/29/21 Poduri, Peake, Lagasca, Hannah
3 01/06/22 Poduri, Peake, Hannah
4 02/03/22 Poduri, Peake, Hannah
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Survey was posted through 11/21/21 for public comment Public responses included:
Difficulties in navigating website/page
Missing CIP and PERS information
Suggestions for better design
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Single webpage to consolidate all financial reports:
Budget / Quarterly Budget
Annual Comprehensive Financial
Pension Obligations (expanded to include an overview and pension obligation bond data) Sales Tax
Treasurer
Workers Compensation
Core Revenue
Check Register
Purchase Order
Capital Improvement Project Budget Report (previously included in the Quarterly Budget Report)
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Transition from OpenGov to ClearGov when feasible
Staff to provide Council with implementation
update(s) before end of FY21/22
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City Council
City of Pacific Grove
Questions?
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Agenda No. 12 G
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Bill Peake, Mayor
MEETING DATE: February 16, 2022
SUBJECT: Monarch Resort Homekey Project
CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378
RECOMMENDATION
Direct City Manager to begin public outreach on the Monarch Resort Homekey project no later than March 16, 2022.
DISCUSSION
INTRODUCTION
On January 19, 2022, Council authorized an application to the CA Department of Housing and Community Development (HCD) for up to $15,000,000 for the conversion of the Monarch Resort 1111 Lighthouse Ave. into a Homekey project. The application was subsequently filed with HCD.
Council also authorized the City Manager to fund, acquire, rehabilitate, and operate (with partners) the Monarch Resort Homekey project.
DISCUSSION
Our community has a decades long history of welcoming residents in need. They include: The Bridge Restoration Ministry (addictions), Gateway Center (intellectual disabilities), Vista Point Apartments (low-income seniors), and New Start Recovery Solutions – formerly Beacon House (addictions). The addition of a Homekey project to help those experiencing homelessness, including youth and those with disabilities is in keeping with this tradition of helping others.
As with any new facility or program, Council and the community should understand how the program works and what is city government’s role. A sound public outreach program could answer questions and allay concerns including:
City responsibilities
a. What does the state require of the city for the life of this 55-year project? b. What responsibilities will the city have in its partnership with Shangri La Industries? c. What responsibilities will the city have in its partnership with Step Up Second Street? Finances
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What is the budget and funding sources for the first 5 years (acquisition, rehabilitation, operation, and resident supportive services)?
d.
If funding sources decline after 5 years, what is the financial backstop for operation and resident supportive services expenses?
e.
f. What is the expected municipal tax loss?
Neighborhood
g. Will this program attract more homeless people than can be housed? h. Could local drug use or crime increase and how would that be prevented? i. What assurance exists that the site will continue to be well maintained and attractive? Residents
j. Will locals be given priority to rent?
k. Will on site supportive services for residents be available round the clock? l. Will supportive services include transportation to meet needs not available nearby? m. What is the quota system for categories of residents? n. Will residents include families?
OPTIONS
N/A
FINANCIAL IMPACT:
There is no fiscal impact in the writing of this agenda report.
GOAL ALIGNMENT: Transparency, Accountability and Communication: Implement programs, processes, revisions, and training to improve and advance the City's efforts.
Attachments
Summary
Letter of Operating Support
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Agenda No. 13 A
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Joyce Halabi, Deputy Public Works Director
MEETING DATE: February 16, 2022
SUBJECT: FY21/22 Street Rehabilitation Project – Ocean View Blvd CEQA: Categorical Exemption, CEQA Guidelines Section 15301, Class I, Existing Facilities
RECOMMENDATION
Authorize an agreement with Monterey Peninsula Engineering for the FY21/22 Street Rehabilitation Project on Ocean View Blvd in an amount not to exceed $1,145,323 plus a 15% contingency.
DISCUSSION
The FY21/22 Street Rehabilitation Project on Ocean View Blvd was approved as part of the FY21/22 Capital Improvement Plan (CIP). This project serves as a vital road rehabilitation project that will address two segments of Ocean View Blvd:
1. Ocean View Blvd from 2nd St to Carmel Ave
2. Ocean View Blvd from 17th St to Sea Palm Ave
These segments were selected for rehabilitation based on a thorough review of the City’s Pavement Management Program, existing road conditions, and in-field observations.
Existing Conditions
These heavily trafficked road segments of Ocean View Blvd are currently in "poor" condition with a Pavement Condition Index (PCI) rating ranging from 33-40. Rehabilitation of these segments will vastly improve road conditions and allow for aging stormwater and sewer infrastructure to be addressed prior to road treatments.
Construction documents and specifications were completed in December 2021. On December 13, 2021, the City released a call for bids. 4 bids were received:
Contractor Bid
Monterey Peninsula Engineering $1,145,323
Anderson Pacific Engineering Construction Inc. $1,307,271 Granite Rock Company $1,398,084
Mckim Corporation $1,536,301.70
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Monterey Peninsula Engineering (MPE) has been qualified as the lowest responsible bidder. MPE has performed numerous street rehabilitation, stormwater and sewer improvement projects for the City and is qualified to perform this work.
Scope of Work
The scope of work for the project includes:
Approximately 182,000 SF of asphalt concrete (AC) overlay Approximately 3,000 SF of pavement patching
Various stormwater improvements including installation of 184 LF of storm water pipe, reconstruction of 5 catch basins, construction of 2 new catch basins, and 3 storm drain manhole access points
Reconstruction of 300 SF of sidewalk and 140 LF of curb/gutter Reconstruction of 3 curb ramps, construction of 1 new curb ramp Thermoplastic pavement markings
Replacement of 725 LF of sanitary sewer pipe, and
Rehabilitation of 8 manholes
It is anticipated that construction will be substantially complete before Memorial Day, May 30, 2022.
Additionally, the City has been working closely with California American Water to coordinate vital water main replacements to occur on segments Ocean View Blvd within the project area, between 17th St and Mermaid Ave and 1st St to 11th St, prior to the pavement improvements. Project coordination with California American Water allows for improved long-term pavement preservation.
OPTIONS
1. Authorize an agreement
2. Do not authorize the agreement
FINANCIAL IMPACT:
The proposed construction contract is within the approved project budget. A total budget of $1,576,443 was approved via the FY21/22 CIP and is derived from the General Fund, Road Maintenance and Rehabilitation Account (RMRA)/Senate Bill 1, Measure X, and the Sewer Fund as noted below.
Funding Source Approved CIP Funding
City of Pacific Grove General Fund $300,000
RMRA/Senate Bill 1 (SB1) $310,428
Measure X $566,015
Sewer Fund $400,000
Total $1,576,443
The General Fund allocation will be fully expended first in order to meet Maintenance of Effort (MOE) requirements. It is anticipated that the SB1 allocation will also be fully expended, and project savings will be derived from Measure X and the Sewer Fund.
GOAL ALIGNMENT: City Asset Stewardship: Repair, maintain and improve City assets, including streets, sidewalks, sewer systems, buildings, and parks and trails.
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Attachments
Draft Agreement
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CITY OF PACIFIC GROVE
CONSTRUCTION SERVICES AGREEMENT
FY21/22 STREET REHABILITATION PROJECT – OCEAN VIEW BLVD This CONSTRUCTION SERVICES AGREEMENT (“Agreement”), is made and effective February 28, 2022, by and between the City of Pacific Grove, a municipal corporation (“City”), and Monterey Peninsula Engineering (“CONTRACTOR”). In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows:
1. TERM
This Agreement shall commence on February 28, 2022 and shall remain and continue in effect until tasks described herein are completed, but in no event later than June 30, 2022, unless sooner terminated pursuant to the provisions of this Agreement.
2. SCOPE OF WORK
CONTRACTOR shall perform within the time set forth in the project specifications and shall furnish all labor, materials, equipment, tools, utility services, and transportation and perform and complete all work required in connection with the construction of road rehabilitation, and sewer and stormwater improvements “Work” for the FY21/22 Street Rehabilitation Project on Ocean View Blvd (hereinafter “Project”).
By entering into this Agreement, CONTRACTOR acknowledges that there may be other contractors on the site whose work will be coordinated with that of its own.
CONTRACTOR expressly warrants and agrees that it will cooperate with other contractors and will do nothing to delay, hinder, or interfere with the work of other separate contractors, the City, the Construction Manager, the Architect, or utilities.
CONTRACTOR also expressly agrees that, in the event its work is hindered, delayed, interfered with, or otherwise affected by a separate contractor, its sole remedy will be a direct action against the separate contractor. To the extent allowed by law, CONTRACTOR will have no remedy, and hereby expressly waives any remedy against the City, the Construction Manager, or the Architect on account of delay, hindrance, interference or other events caused by a separate contractor.
3. PERFORMANCE
a. CONTRACTOR shall at all times faithfully, competently and to the best of its ability, experience, and talent, perform all tasks described herein. CONTRACTOR shall employ, at a minimum, generally accepted standards and practices utilized by persons engaged in providing similar services as are required of CONTRACTOR hereunder in meeting its obligations under this Agreement.
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b. CONTRACTOR shall conform to the rules and regulations pertaining to safety established by the California Division of Industrial Safety. CONTRACTOR further agrees to take all necessary precautions for the safety of its employees and shall comply with all applicable provisions of federal, state and local regulations, ordinances and codes. CONTRACTOR shall be responsible for erecting and properly maintaining at all times as required by the conditions and progress of the work, all necessary safeguards for the protection of workers and the public and shall post danger signs warning against known or reasonably foreseeable or unusual hazards. c. CONTRACTOR must possess at the time of commencing work and throughout the Project duration, a Contractor’s License, issued by the State of California, which is current and in good standing. CONTRACTOR shall ensure that any subcontractor working on the Project possesses at the time of commencing work and throughout the Project duration, a Contractor’s License, issued by the State of California, which is current and in good standing.
d. CONTRACTOR shall obtain a valid City Business License and shall maintain said Business License for the term of this Agreement and any extensions. e. CONTRACTOR shall keep itself informed of State and Federal laws and regulations which in any manner affect those employed by CONTRACTOR or in any way affect the performance of its service pursuant to this Agreement. CONTRACTOR shall at all times observe and comply with all such laws and regulations. City, and its officers and employees, shall not be liable at law or in equity occasioned by failure of CONTRACTOR to comply with this Section.
f. CONTRACTOR agrees to comply with all the applicable provisions of Sections 1777.5 and 1777.6 of the Labor Code, which Sections are hereby specifically referred to, incorporated herein by reference and made a part hereof as though set forth at length herein.
g. CONTRACTOR agrees that in the performance of this Agreement or any subagreement hereunder, neither CONTRACTOR nor any person acting on CONTRACTOR’s behalf shall refuse to employ or refuse to continue in any employment any person on the basis of race, religious creed, color, national origin, ancestry, physical handicap, medical condition, marital status, sexual preference, sex or age. Harassment in the workplace is not permitted in any form. CONTRACTOR further agrees to comply with all laws with respect to employment when performing this Agreement.
h. CONTRACTOR shall maintain prior to the beginning of and for the duration of this Agreement insurance coverage as specified in Exhibit B attached to and part of this Agreement.
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i. To ensure performance, CONTRACTOR must provide Faithful Performance and Labor and Material Bonds in favor of City, each in the amount of one hundred percent (100%) of the value of the Agreement.
j. CONTRACTOR declares and warrants that no undue influence or pressure is used against or in concert with any officer or employee of the City in connection with the award, terms or implementation of this Agreement, including any method of coercion, confidential financial agreement or financial inducement. No officer or employee of the City will receive compensation, directly or indirectly, from CONTRACTOR, or from any officer, employee or agent of CONTRACTOR, in connection with the award of this Agreement or any work to be conducted as a result of this Agreement. Violation of this Section shall be a material breach of this Agreement entitling City to any and all remedies at law or in equity.
4. REGISTRATION REQUIREMENTS
Pursuant to Section 1771.1(a) of the Labor Code:
a. “A contractor or subcontractor shall not be qualified to bid on, be listed in a bid proposal, subject to the requirements of Section 4104 of the Public Contract Code, or engage in the performance of any contract for public work, as defined in this chapter, unless currently registered and qualified to perform public work pursuant to Section 1725.5. It is not a violation of this section for an unregistered contractor to submit a bid that is authorized by Section 7029.1 of the Business and Professions Code or by Section 10164 or 20103.5 of the Public Contract Code, provided the contractor is registered to perform public work pursuant to Section 1725.5 at the time the contract is awarded.”
b. CONTRACTOR must be registered with the Department of Industrial Relations (DIR) of the State of California in order to be eligible to work on public works projects. CONTRACTOR shall ensure registration with the DIR that is active and in good standing.
c. No contractor or subcontractor may be listed on a bid proposal for a public works project (submitted on or after March 1, 2015) unless registered with the DIR pursuant to Labor Code section 1725.5 [with limited exceptions from this requirement for bid purposes only under Labor Code section 1771.1(a)].
d. No contractor or subcontractor may be awarded a contract for public work on a public works project (awarded on or after April 1, 2015) unless registered with the DIR pursuant to Labor Code section 1725.5.
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the same CONTRACTOR will be awarded total project costs in excess of $1,000 for a given year.
5. CONTENTS OF REQUEST FOR PROPOSAL AND PROPOSAL
CONTRACTOR is bound by the contents of City’s Request for Proposal on file at the Public Works Department hereto and incorporated herein by this reference, and the contents of the proposal submitted by CONTRACTOR, available on file at the Public Works Department, hereto and incorporated herein by this reference. In the event of conflict, the requirements of City’s Request for Proposals and this Agreement shall take precedence over those contained in CONTRACTOR’s proposals.
6. CITY MANAGEMENT
Public Works Director shall represent City in all matters pertaining to the administration of this Agreement, review and approval of all products submitted by CONTRACTOR, but not including the authority to enlarge the Scope of Work or change the compensation due to CONTRACTOR. The City Manager shall be authorized to act on City’s behalf and to execute all necessary documents which enlarge the Scope of Work or change CONTRACTOR’s compensation, subject to Section 7 hereof.
7. PAYMENT
a. City agrees to pay CONTRACTOR monthly, in accordance with the bid on file at the Public Works Department attached hereto and incorporated herein by this reference as though set forth in full, based upon actual time spent on the above tasks. THIS AMOUNT SHALL NOT EXCEED $1,145,323 plus a 15% contingency which sum shall include all costs, if any, for the total term of the Agreement unless additional payment is approved as provided in this Agreement.
b. The City Manager’s contract authority is limited to a total threshold of $40,000, which includes all costs. Contracts, including any contract amendments that exceed the total threshold, require City Council approval. Any contracts, including contract amendments that exceed the total threshold, which do not have City Council approval, shall be void.
c. CONTRACTOR will submit invoices monthly for actual services performed. Invoices shall be submitted on or about the first business day of each month, or as soon thereafter as practical, for services provided in the previous month. Payment shall be made within thirty (30) days of receipt of each invoice as to all non-disputed fees. If the City disputes any of CONTRACTOR’s fees, it shall give written notice to CONTRACTOR within thirty (30) days of receipt of an invoice of any disputed fees set forth on the invoice.
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d. Retention of securities: Public Contract Code Section 22300 permits the substitution of securities for any monies withheld by a public agency to ensure performance under a contract, at the request and expense of CONTRACTOR.
e. Final Payment: Final payment, constituting the entire unpaid balance of the Agreement Sum, shall be paid by the City to the CONTRACTOR no sooner than thirty-five (35) days after a Notice of Completion has been recorded, unless otherwise stipulated in the Notice of Completion, provided the work has then been completed, the Agreement fully performed, and a final Certificate for Payment has been issued by the Architect.
8. INSPECTION
City shall at all times have the right to inspect the work and materials. CONTRACTOR shall furnish all reasonable aid and assistance required by City for the proper examination of the work and all parts thereof. Such inspection shall not relieve CONTRACTOR from any obligation to perform said work strictly in accordance with the specifications or any modifications thereof and in compliance with the law.
9. CONTRACTOR’S FAILURE TO PROCURE COMPLETION OF PROJECT In the event CONTRACTOR fails to furnish tools, equipment, or labor in the necessary quantity or quality, or fails to prosecute the work or any part thereof contemplated by this Agreement in a diligent and workmanlike manner, and if CONTRACTOR for a period of three (3) calendar days after receipt of written demand from City or its designated representative to do so, fails to furnish tools, equipment, or labor in the necessary quantity or quality, and to prosecute its work and all parts thereof in a diligent and workmanlike manner, or after commencing to do so within said three (3) calendar days, fails to continue to do so; then City may exclude the CONTRACTOR from the premises, or any portion thereof, and take possession of said premises or any portion thereof, together with all material and equipment thereon, and may complete the work contemplated by this Agreement or any portion of said work, either by furnishing the tools, equipment, labor or material necessary, or by letting the unfinished portion of said work, or the portion taken over by the City to another contractor or by a combination of such methods. In any event, the procuring of the completion of said work, or the portion thereof taken over by the City, shall be a charge against the CONTRACTOR, and may be deducted from any money due or becoming due to CONTRACTOR from the City, or the CONTRACTOR shall pay the City the amount of said charge, or the portion thereof unsatisfied. The sureties, provided for under this Agreement shall become liable for payment should CONTRACTOR fail to pay in full any said cost incurred by the City.
10. SUSPENSION OR TERMINATION OF AGREEMENT WITHOUT CAUSE a. City may at any time, for any reason, with or without cause, suspend or terminate this Agreement, or any portion hereof, by serving upon CONTRACTOR at least thirty (30) days prior written notice. Upon receipt of said notice, CONTRACTOR shall immediately cease all work under this Agreement, unless the notice provides otherwise.
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If the City suspends or terminates a portion of this Agreement such suspension or termination shall not make void or invalidate the remainder of this Agreement. b. In the event this Agreement is terminated pursuant to this Section, City shall pay to CONTRACTOR the actual value of the work performed up to the time of termination, provided that the work performed is of value to the City. Upon termination of the Agreement pursuant to this Section, CONTRACTOR will submit an invoice to the City pursuant to Section 7.c.
11. DEFAULT OF CONTRACTOR
a. CONTRACTOR’s failure to comply with the provisions of this Agreement shall constitute a default. In the event CONTRACTOR is in default for cause under the terms of this Agreement, City shall have no obligation or duty to continue compensating CONTRACTOR for any work performed after the date of default and can terminate this Agreement immediately by written notice to CONTRACTOR. If such failure by CONTRACTOR to make progress in the performance of work hereunder arises out of causes beyond CONTRACTOR’s control, and without fault or negligence of CONTRACTOR, it shall not be considered a default. b. If the City Manager or designee determines CONTRACTOR is in default in the performance of any of the terms or conditions of this Agreement, they shall cause to be served upon CONTRACTOR a written notice of the default. CONTRACTOR shall have ten (10) days after service upon it of said notice in which to cure the default by rendering a satisfactory performance. In the event CONTRACTOR fails to cure its default within such period of time, City shall have the right, notwithstanding any other provision of this Agreement, to terminate this Agreement without further notice and without prejudice to any other remedy to which it may be entitled at law, in equity or under this Agreement.
12. OWNERSHIP OF DOCUMENTS
a. CONTRACTOR shall maintain complete and accurate records with respect to sales, costs, expenses, receipts, and other such information required by City that relate to the performance of services under this Agreement. CONTRACTOR shall maintain adequate records of services provided in sufficient detail to permit an evaluation of services. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible.
CONTRACTOR shall provide free access to the representatives of City or its designees at reasonable times to such books and records; shall give City the right to examine and audit said books and records at CONTRACTORS office; shall permit City to make copies and transcripts there from as necessary; and shall allow inspection of all work, data, documents, proceedings, and activities related to this Agreement. Such records, together with supporting documents, shall be maintained at the City of Pacific Grove City Hall for a minimum period of three (3) years after receipt of final payment.
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b. Upon completion of, or in the event of termination or suspension of this Agreement, all original documents, designs, drawings, maps, models, computer files, surveys, notes, and other documents prepared in the course of providing the services to be performed pursuant to this Agreement shall become the sole property of City and may be used, reused, or otherwise disposed of by City without the permission of CONTRACTOR.
With respect to computer files, CONTRACTOR shall make available to City, at City’s office and upon reasonable written request by City, the necessary computer software and hardware for purposes of accessing, compiling, transferring, and printing computer files.
13. RECORD AUDIT
In accordance with Government Code, Section 8546.7, records of both City and CONTRACTOR shall be subject to examination and audit by the Auditor General for a period of three (3) years after final payment.
14. INDEMNIFICATION
CONTRACTOR shall indemnify, defend with legal counsel approved by City, and hold harmless City, its officers, officials, employees and volunteers from and against all liability, loss, damage, expense, cost (including without limitation reasonable legal counsel fees, expert fees and all other costs and fees of litigation) of every nature arising out of or in connection with CONTRACTOR’s negligence, recklessness or willful misconduct in the performance of work hereunder or its failure to comply with any of its obligations contained in this Agreement, except such loss or damage which is caused by the sole or active negligence or willful misconduct of the City. Should conflict of interest principles preclude a single legal counsel from representing both City and CONTRACTOR, or should City otherwise find CONTRACTOR’s legal counsel unacceptable, then CONTRACTOR shall reimburse the City its costs of defense, including without limitation reasonable legal counsel fees, expert fees and all other costs and fees of litigation. The CONTRACTOR shall promptly pay any final judgment rendered against the City (and its officers, officials, employees and volunteers) with respect to claims determined by a trier of fact to have been the result of the CONTRACTOR’s negligent, reckless or wrongful performance. It is expressly understood and agreed that the foregoing provisions are intended to be as broad and inclusive as is permitted by the law of the State of California and will survive termination of this Agreement.
CONTRACTOR obligations under this section apply regardless of whether such claim, charge, damage, demand, action, proceeding, loss, stop notice, cost, expense, judgment, civil fine or penalty, or liability was caused in part or contributed to by an Indemnitee.
However, without affecting the rights of City under any provision of this agreement, CONTRACTOR shall not be required to indemnify and hold harmless City for liability attributable to the active negligence of City, provided such active negligence is determined by agreement between the parties or by the findings of a court of competent jurisdiction. In instances where City is shown to have been actively negligent and where PG CC 2/16/22
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City’s active negligence accounts for only a percentage of the liability involved, the obligation of CONTRACTOR will be for that entire portion or percentage of liability not attributable to the active negligence of City.
15. INSURANCE
Prior to the beginning of and throughout the duration of the Work, CONTRACTOR and its subcontractors shall maintain insurance in conformance with the requirements set forth below. CONTRACTOR will use existing coverage to comply with these requirements. If that existing coverage does not meet the requirements set forth herein, CONTRACTOR agrees to amend, supplement or endorse the existing coverage to do so.
CONTRACTOR acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. Any insurance proceeds available to CONTRACTOR or its subcontractors in excess of the limits and coverage identified in this Agreement and which is applicable to a given loss, claim or demand, will be equally available to City.
16. INDEPENDENT CONTRACTOR
a. CONTRACTOR is and shall at all times remain as to City a wholly independent contractor. The personnel performing the services under this Agreement on behalf of CONTRACTOR shall at all times be under CONTRACTOR’s exclusive direction and control. Neither City nor any of its officers, employees, or agents shall have control over the conduct of CONTRACTOR or any of CONTRACTOR’s officers, employees, or agents, except as set forth in this Agreement. CONTRACTOR shall not at any time or in any manner represent that it or any of its officers, employees, or agents are in any manner officers, employees, or agents of the City. CONTRACTOR shall not incur or have the power to incur any debt, obligation, or liability whatever against City, or bind City in any manner.
b. No employee benefits shall be available to CONTRACTOR in connection with the performance of this Agreement. Except for the fees paid to CONTRACTOR as provided in the Agreement, City shall not pay salaries, wages, or other compensation to CONTRACTOR for performing services hereunder for City. City shall not be liable for compensation or indemnification to CONTRACTOR for injury or sickness arising out of performing services hereunder.
c. Any and all employees or sub-contractors of CONTRACTOR under this Agreement, while engaged in the performance of any work or services required by CONTRACTOR under this Agreement, shall be considered employees or sub-contractors of CONTRACTOR only and not of city. Any and all claims that may arise under the Workers’ Compensation Act on behalf of said employees or sub-contractors, while so engaged and all claims made by a third party as a consequence of any negligent act or PG CC 2/16/22
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omission on the part of the CONTRACTOR’s employees or sub-contractors, while so engaged in any of the work or services provided for or rendered herein shall not be City’s obligation.
17. PREVAILING WAGE
Wage rates for this Project shall be in accordance with the “General Wage Determination Made by the Director of Industrial Relations Pursuant to California Labor Code, Part 7, Chapter 1, Article 2, Sections 1770, 1773 and 1773.1”, for Monterey County. Wage rates shall conform with those posted by Contractor and at the Project site. The following Labor Code sections are hereby referenced and made a part of this Agreement:
a. Section 1775 - Penalty for Failure to Comply with Prevailing Wage Rates. b. Section 1777.4 - Apprenticeship Requirements.
c. Section 1777.5 - Apprenticeship Requirements.
d. Section 1813 - Penalty for Failure to Pay Overtime.
e. Sections 1810 and 1811 - Working Hour Restrictions.
f. Section 1775 - Payroll Records.
g. Section 1773.8 - Travel and Subsistence Pay.
h. Section 1778 – Kickbacks.
i. Section 1779, 1780 – Acceptance of Fees.
j. Section 1771.4 – Certified Payroll.
Pursuant to the Labor Code, City is required to withhold from any progress payments owed to a contractor any amount that has been forfeited as penalties, or as wages owed to employees who have not been paid the prevailing wage for work performed. This allows the intervention by the Division of Labor Standards Enforcement, which is headed by the State Labor Commission, in a contractor’s lawsuit for recovery of amounts withheld by an awarding body. All withheld wages and penalties will be transferred to the Labor Commissioner for disbursement in those cases where a contractor fails to bring a lawsuit for amounts withheld within ninety (90) days after completion of the public works contract and formal acceptance of the job by the awarding body. The Labor Commissioner is then permitted to intervene in any lawsuit brought by the contractor against an awarding body for recovery of amounts withheld.
18. NO BENEFIT TO ARISE TO LOCAL EMPLOYEES
No member, officer, or employee of City, or their designees or agents, and no public official who exercises authority over or responsibilities with respect to the Project during their tenure or for one year thereafter, shall have any interest, direct or indirect, in any agreement or sub-agreement, or the proceeds thereof, for Work to be performed in connection with the Project performed under this Agreement.
19. CONFLICT OF INTEREST
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CONTRACTOR shall at all times avoid conflicts of interest, or the appearance of conflicts of interest, in the performance of this Agreement.
CONTRACTOR covenants that neither they nor any officer or principal of their firm have any interest in, or shall acquire any interest, directly nor indirectly, which will conflict in any manner or degree with the performance of their services hereunder. CONTRACTOR further covenants that in the performance of this Agreement, no person having such interest shall be employed by them as an officer, employee, agent, or sub-contractor.
CONTRACTOR further covenants that CONTRACTOR has not contracted with nor is performing any services, directly or indirectly, with any developer(s) and/or property owner(s) and/or firm(s) and/or partnership(s) owning property in the City or the study area and further covenants and agrees that CONTRACTOR and/or its sub-contractors shall provide no service or enter into any agreement or agreements with a/any developer(s) and/or property owner(s) and/or firm(s) and/or partnership(s) owning property in the City or the study area prior to the completion of the work under this Agreement.
If City determines CONTRACTOR comes within the definition of Contractor under the Political Reform Act (Government Code §87100 et seq.), CONTRACTOR shall complete and file and shall require any other person doing work under this Agreement to complete and file a “Statement of Economic Interest” with City disclosing CONTRACTOR’s and/or such other person’s financial interests.
20. NO WAIVER OF BREACH/TIME
The waiver by City of any breach of any term or promise contained in this Agreement shall not be deemed to be a waiver of such term or provision or any subsequent breach of the same or any other term or promise contained in this Agreement. Time is of the essence in carrying out the duties hereunder.
21. CONFIDENTIAL INFORMATION/RELEASE OF INFORMATION
a. All information gained by CONTRACTOR in performance of this Agreement shall be considered confidential and shall not be released by CONTRACTOR without City’s prior written authorization. CONTRACTOR, its officers, employees, agents, or subcontractors, shall not without written authorization from the City Manager or unless requested by the City Attorney, voluntarily provide declarations, letters of support, testimony at depositions, response to interrogatories, or other information concerning the work performed under this Agreement or relating to any project or property located within the City. Response to a subpoena or court order shall not be considered “voluntary” provided CONTRACTOR gives City notice of such court order or subpoena.
b. CONTRACTOR shall promptly notify City should CONTRACTOR, its officers, employees, agents, or sub-contractors be served with any summons, complaint, subpoena, notice of deposition, request for documents, interrogatories, request for admissions, or other discovery request, court order, or subpoena from any person or PG CC 2/16/22
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party regarding this Agreement and the work performed there under or with respect to any project or property located within the City. City retains the right, but has no obligation, to represent CONTRACTOR and/or be present at any deposition, hearing, or similar proceeding. CONTRACTOR agrees to cooperate fully with City and to provide the opportunity to review any response to discovery requests provided by CONTRACTOR. However, City’s right to review any such response does not imply or mean the right by City to control, direct, or rewrite said response.
22. SUBSURFACE HAZARDOUS MATERIALS
a. In the event trenches or other excavations extend deeper than four (4) feet below the surface, CONTRACTOR shall promptly, and before the following conditions are disturbed, notify the City in writing of any:
i. Material that CONTRACTOR believes may be material that is hazardous waste, as defined in Section 25117 of the Health and Safety Code, that is required to be removed to a Class I, Class II or Class III disposal site in accordance with the provisions of existing law.
ii. Subsurface or latent physical conditions at the site differing from those indicated.
iii. Unknown physical conditions at the site of any unusual nature, different materially from those ordinarily encountered and generally recognized as inherent in the Work or the character provided for in the Agreement. b. Upon receipt of said notification, City will investigate the conditions, and if it finds that the conditions do materially so differ, or do involve hazardous waste, and cause a decrease or increase in the CONTRACTOR’s cost of or the time required for performance of any part of the work, the City will issue a change order under the procedures described in the Specifications.
c. In the event a dispute arises between the City and CONTRACTOR whether the conditions materially differ, or involve hazardous waste or cause a decrease or increase in the CONTRACTOR’s cost of or time required for performance of any part of the work, CONTRACTOR shall not be excused from any scheduled completion date provided for by the Agreement, but shall proceed with all work to be performed under the Agreement. CONTRACTOR shall retain any and all rights provided either by Agreement or by law which pertain to the resolution of disputes and protests between the contracting parties.
23. LIQUIDATED DAMAGES
Pursuant to Government Code Section 53069.85, if Work is not completed within the Agreement time or in strict accordance with the Project Schedule, it is understood, acknowledged and agreed that the City will suffer damage. It is therefore agreed that the PG CC 2/16/22
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CONTRACTOR shall pay to the City the $1,000 or each and every calendar day of delay beyond the Agreement Time, or beyond any completion schedule, construction schedule or Project milestones established in or pursuant to the Project Schedule, or beyond the time indicated in the Project Schedule for any individual Agreement activity.
CONTRACTOR expressly understands, acknowledges and agrees that such liquidated damages can and shall be imposed if the CONTRACTOR does not meet each and every aspect of any activity schedule, completion schedule, construction schedule or Project milestones established in or pursuant to the Project Schedule. If the City accepts work or makes any payment under this Agreement after a default by reason of delays, the acceptance of such work and/or payment(s) shall in no respect constitute a waiver or modification of any provisions regarding Agreement Time, a completion schedule, the Project Schedule or the accrual of liquidated damages. In the event the same is not paid, the CONTRACTOR further agrees that City may deduct the amount thereof from any money due or that may become due the CONTRACTOR under the Agreement. This Section does not exclude recovery of damages under provisions of the Agreement Documents and is expressly in addition to the City’s ability to seek other damages.
Parties will meet and agree on a contract schedule. Liquidated damages may be assessed if any individual activity duration exceeds the time indicated for that activity on the Project Construction Schedule.
24. WARRANTY
In addition to any and all warranties provided or implied by law or public policy, CONTRACTOR warrants that all Services (including but not limited to all equipment and materials supplied in connection therewith) shall be free from defects in design and workmanship, and that CONTRACTOR shall perform all Services in accordance with all applicable engineering, construction and other codes and standards, and with the degree of high professional skill normally exercised by or expected from recognized professional firms engaged in the practice of supplying services of a nature similar to the Services in question. CONTRACTOR further warrants that, in addition to furnishing all tools, equipment and supplies customarily required for performance of work, CONTRACTOR shall furnish personnel with the training, experience and physical ability, as well as adequate supervision, required to perform the Services in accordance with the preceding standards and the other requirements of this Agreement. In addition to all other rights and remedies which City may have, City shall have the right to require, and CONTRACTOR shall be obligated at its own expense to perform, all further services which may be required to correct any deficiencies which result from CONTRACTOR’s failure to perform any Services in accordance with the standards required by this Agreement. Moreover, if, during the term of this Agreement (or during the one (1) year period following the term hereof), any equipment, goods or other materials or Services used or provided by CONTRACTOR under this Agreement fail due to defects in material and/or workmanship or other breach of this Agreement, CONTRACTOR shall, upon any reasonable notice from City, replace or repair the same to City’s satisfaction. Unless otherwise expressly permitted, all materials PG CC 2/16/22
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and supplies to be used by CONTRACTOR in the performance of the Services shall be new and best of kind.
CONTRACTOR hereby assigns to City all additional warranties, extended warranties, or benefits like warranties, such as insurance, provided by or reasonably obtainable from suppliers of equipment and material used in the Services.
25. CLAIM PROCEDURES UNDER PUBLIC CONTRACT CODE SECTION 9204 CONTRACTOR shall comply with the procedure set forth in Public Contracts Code section 9204 for any claim, as that term is defined therein, for one or more of the following: 1) a time extension, including, without limitation, for relief from damages or penalties for delay, 2) payment of money or damages arising from work done pursuant to this Agreement, and/or 3) payment of an amount disputed by the City under this Agreement.
26. NOTICES
Any notices which either party may desire to give to the other party under this Agreement must be in writing and may be given either by (i) personal service, (ii) delivery by a reputable document delivery service, such as but not limited to, Federal Express, which provides a receipt showing date and time of delivery, or (iii) mailing in the United States Mail, certified mail, postage prepaid, return receipt requested, addressed to the address of the party as set forth below or at any other address as that party may later designate by notice:
To City: Daniel Gho, Public Works Director
City of Pacific Grove
300 Forest Avenue
Pacific Grove, CA 93950
To CONTRACTOR: Peter J Taormina, Manager
Monterey Peninsula Engineering
PO BOX 400
Marina, CA 93933
27. THIRD PARTY BENEFICIARIES
Nothing contained in this Agreement shall be construed to create, and the parties do not intend to create, any rights in third parties.
28. ASSIGNMENT
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CONTRACTOR shall not assign the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without prior written consent of the City. Subject to the foregoing, all terms of the Agreement will be binding upon, enforceable by and inure to the benefit of the parties and their successors and assigns.
29. GOVERNING LAW
City and CONTRACTOR understand and agree that the laws of the State of California shall govern the rights, obligations, duties, and liabilities of the parties to this Agreement and also govern the interpretation of this Agreement. Any litigation concerning this Agreement shall take place in Monterey County, or the federal district court with jurisdiction over the City. CONTRACTOR agrees not to commence or prosecute any dispute arising out of or in connection with this Agreement other than in the aforementioned courts and irrevocably consents to the exclusive personal jurisdiction and venue of the aforementioned courts.
30. ATTORNEY’S FEES AND COURT VENUE
Should either party to this Agreement bring legal action against the other (formal judicial proceeding, mediation or arbitration) the party prevailing in such action shall be entitled to a reasonable attorney’s fee which shall be fixed by the judge, mediator or arbitrator hearing the case, and such fee shall be included in the judgment together with all costs.
31. AUTHORITY TO EXECUTE THIS AGREEMENT
The person or persons executing this Agreement on behalf of CONTRACTOR warrants and represents that they have the authority to execute this Agreement on behalf of the CONTRACTOR and the authority to bind CONTRACTOR to the performance of its obligations hereunder.
32. ENTIRE AGREEMENT
This Agreement contains the entire understanding between the parties relating to the obligations of the parties described in this Agreement. All prior or contemporaneous agreements, understandings, representations, and statements, oral or written, are merged into this Agreement and shall be of no further force or effect. Each party is entering into this Agreement based solely upon the representations set forth herein and upon each party’s own independent investigation of any and all facts such party deems material.
33. AGREEMENT CONTAINS ALL UNDERSTANDINGS: AMENDMENT
a. This document represents the entire and integrated Agreement between City and CONTRACTOR, and supersedes all prior negotiations, representations and agreements, either written or oral.
b. Any modification or amendment to this Agreement must be in writing.
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c. Neither City nor CONTRACTOR shall be deemed to have waived any obligation of the other, or to have agreed to any modification to this Agreement unless it is in writing, and signed by the party giving the waiver.
34. SEVERABILITY
If any term of this Agreement is held invalid by a court of competent jurisdiction or arbitrator the remainder of this Agreement shall remain in effect.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written.
CITY OF PACIFIC GROVE CONTRACTOR
By: By:
Public Works Director .
Date: Date:
By: ___________________________ By: ____________________________ City Mayor
Date: ___________________________ Date: ___________________________ Approved As To Form:
City Attorney
_______________________________
Date
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Exhibit A
Scope of Work/Services
CONTRACTOR shall provide construction services per bid specifications and engineered drawings titled “STREET REHABILITATION PROJECT OCEAN VIEW BOULEVARD BETWEEN 2ND & CARMEL AVE AND BETWEEN 17TH ST & SEAL PALM AVE” prepared by Neill Engineers Corp, dated December 13, 2021. The bid specifications and engineered drawings are incorporated herein by reference and are made an integral part of this Agreement.
Contractor and /or sub-contractors shall provide the City of Pacific Grove’s project manager daily field observation/inspection reports and testing results. All areas of project requiring compaction testing shall be done in conformance with job specifications.
The work, as indicated by the plans shall be done in accordance with the special provisions/technical specifications as designated and engineered by Neill Engineers Corp, in accordance with the current edition of Standard Specifications of the State of California Department of Transportation.
Contractor shall remove of all existing unused soils, base and asphalt materials and properly dispose said materials at a State approved disposal site.
Contractor shall submit a traffic control plan to the City’s Traffic Engineer for approval no less than 10 days prior to the commencement of work.
Contractor shall notice all residents and business properties that abut streets of this project and all residents and business within 300 feet of this project with dates, times, and type of work to be performed no less than 10 days prior to commencement of any work.
All work as outlined in this contract, project specifications and engineered plans shall be performed in a workman like manner and in accordance with industry standards.
All Environmental and water pollution prevention requirements as specified in the plans and specification shall be met and constantly monitored throughout the project.
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Exhibit B
Insurance Specifications
General liability insurance. CONTRACTOR shall maintain commercial general liability insurance with coverage at least as broad as Insurance Services Office form CG 00 01, in an amount not less than $1,000,000 per occurrence, $2,000,000 general aggregate, for bodily injury, personal injury, and property damage, and a $2,000,000 completed operations aggregate. The policy must include contractual liability that has not been amended. Any endorsement restricting standard ISO “insured contract” language will not be accepted.
Automobile liability insurance. CONTRACTOR shall maintain automobile insurance at least as broad as Insurance Services Office form CA 00 01 covering bodily injury and property damage for all activities of the CONTRACTOR arising out of or in connection with Work to be performed under this Agreement, including coverage for any owned, hired, nonowned or rented vehicles, in an amount not less than $1,000,000 combined single limit for each accident.
Workers’ compensation insurance. CONTRACTOR shall maintain Workers’ Compensation Insurance (Statutory Limits) and Employer’s Liability Insurance (with limits of at least $1,000,000) for CONTRACTOR’s employees in accordance with the laws of the State of California, Section 3700 of the Labor Code In addition, CONTRACTOR shall require each subcontractor to similarly maintain Workers’ Compensation Insurance and Employer’s Liability Insurance in accordance with the laws of the State of California, Section 3700 for all of the subcontractor’s employees.
CONTRACTOR shall submit to City, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of City, its officers, agents, employees and volunteers.
Builder’s risk insurance (construction contracts as applicable). Upon commencement of construction and with approval of City, CONTRACTOR shall obtain and maintain builder’s risk insurance for the entire duration of the Project until only the City has an insurable interest. The Builder’s Risk coverage shall include the coverages as specified below.
The named insureds shall be CONTRACTOR and City, including its officers, officials, employees, and agents. All Subcontractors (excluding those solely responsible for design Work) of any tier and suppliers shall be included as additional insureds as their interests may appear. CONTRACTOR shall not be required to maintain property insurance for any portion of the Project following transfer of control thereof to City. The policy shall contain a provision that all proceeds from the builder’s risk policy shall be made payable to the City.
The City will act as a fiduciary for all other interests in the Project.
Policy shall be provided for replacement value on an “all risk” basis for the completed value of the project. There shall be no coinsurance penalty or provisional limit provision in any such policy. Policy must include: (1) coverage for any ensuing loss from faulty PG CC 2/16/22
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workmanship, Nonconforming Work, omission or deficiency in design or specifications; (2) coverage against machinery accidents and operational testing; (3) coverage for removal of debris, and insuring the buildings, structures, machinery, equipment, materials, facilities, fixtures and all other properties constituting a part of the Project; (4) Ordinance or law coverage for contingent rebuilding, demolition, and increased costs of construction; (5) transit coverage (unless insured by the supplier or receiving contractor), with sub-limits sufficient to insure the full replacement value of any key equipment item; (6) Ocean marine cargo coverage insuring any Project materials or supplies, if applicable; (7) coverage with sub-limits sufficient to insure the full replacement value of any property or equipment stored either on or off the Site or any staging area. Such insurance shall be on a form acceptable to City to ensure adequacy of terms and sublimits and shall be submitted to the City prior to commencement of construction.
1. Other provisions or requirements
Proof of insurance. CONTRACTOR shall provide certificates of insurance to City as evidence of the insurance coverage required herein, along with a waiver of subrogation endorsement for workers’ compensation. Insurance certificates and endorsements must be approved by City’s risk manager prior to commencement of performance. Current certification of insurance shall be kept on file with City at all times during the term of this Agreement. City reserves the right to require complete, certified copies of all required insurance policies, at any time.
Duration of coverage. CONTRACTOR shall procure and maintain for the duration of the Agreement insurance against claims for injuries to persons or damages to property, which may arise from or in connection with the performance of the Work hereunder by CONTRACTOR, his agents, representatives, employees or subcontractors. CONTRACTOR must maintain general liability and umbrella or excess liability insurance for as long as there is a statutory exposure to completed operations claims. City and its officers, officials, employees, and agents shall continue as additional insureds under such policies.
Primary/noncontributing. Coverage provided by CONTRACTOR shall be primary and any insurance or self-insurance procured or maintained by City shall not be required to contribute with it. The limits of insurance required herein may be satisfied by a combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall contain or be endorsed to contain a provision that such coverage shall also apply on a primary and noncontributory basis for the benefit of City before the City’s own insurance or self-insurance shall be called upon to protect it as a named insured.
Products/completed operations coverage. Products/completed operations coverage shall extend a minimum of three (3) years after project completion. Coverage shall be included on behalf of the insured for covered claims arising out of the actions of independent contractors.
If the insured is using subcontractors, the Policy must include work performed “by or on behalf” of the insured. Policy shall contain no language that would invalidate or remove the insurer’s duty to defend or indemnify for claims or suits expressly excluded from coverage.
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officials, officers, agents, and employees, shall be included as additional insureds under the Products and Completed Operations coverage.
City’s rights of enforcement. In the event any policy of insurance required under this Agreement does not comply with these requirements or is canceled and not replaced, City has the right but not the duty to obtain the insurance it deems necessary and any premium paid by City will be promptly reimbursed by CONTRACTOR or City will withhold amounts sufficient to pay premium from CONTRACTOR payments. In the alternative, City may cancel this Agreement.
Acceptable insurers. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance or is on the List of Approved Surplus Line Insurers in the State of California, with an assigned policyholders’ Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best’s Key Rating Guide, unless otherwise approved by the City’s Risk Manager.
Waiver of subrogation. All insurance coverage maintained or procured pursuant to this agreement shall be endorsed to waive subrogation against City, its elected or appointed officers, agents, officials, employees and volunteers or shall specifically allow CONTRACTOR or others providing insurance evidence in compliance with these specifications to waive their right of recovery prior to a loss. CONTRACTOR hereby waives its own right of recovery against City, and shall require similar written express waivers and insurance clauses from each of its subconsultants.
Enforcement of Agreement provisions (non estoppel). CONTRACTOR acknowledges and agrees that any actual or alleged failure on the part of the City to inform CONTRACTOR of non-compliance with any requirement imposes no additional obligations on the City nor does it waive any rights hereunder.
Requirements not limiting. Requirements of specific coverage features or limits contained in this Section are not intended as a limitation on coverage, limits or other requirements, or a waiver of any coverage normally provided by any insurance. Specific reference to a given coverage feature is for purposes of clarification only as it pertains to a given issue and is not intended by any party or insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type. If the CONTRACTOR maintains higher limits than the minimums shown above, the City requires and shall be entitled to coverage for the higher limits maintained by the CONTRACTOR. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City.
Notice of cancellation. CONTRACTOR agrees to oblige its insurance agent or broker and insurers to provide to City with a thirty (30) day notice of cancellation (except for nonpayment for which a ten (10) day notice is required) or nonrenewal of coverage for each required coverage.
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Additional insured status. General liability policies shall provide or be endorsed to provide that City and its officers, officials, employees, agents, and volunteers shall be additional insureds under such policies. This provision shall also apply to any excess/umbrella liability policies.
Prohibition of undisclosed coverage limitations. None of the coverages required herein will be in compliance with these requirements if they include any limiting endorsement of any kind that has not been first submitted to City and approved of in writing.
Separation of Insureds. A severability of interests provision must apply for all additional insureds ensuring that CONTRACTOR’s insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the insurer’s limits of liability. The policy(ies) shall not contain any cross-liability exclusions.
Pass Through Clause. CONTRACTOR agrees to ensure that its subconsultants, subcontractors, and any other party involved with the project who is brought onto or involved in the project by CONTRACTOR, provide the same minimum insurance coverage and endorsements required of CONTRACTOR. CONTRACTOR agrees to monitor and review all such coverage and assumes all responsibility for ensuring that such coverage is provided in conformity with the requirements of this section. CONTRACTOR agrees that upon request, all agreements with consultants, subcontractors, and others engaged in the project will be submitted to City for review.
City’s right to revise requirements. The City reserves the right at any time during the term of the Agreement to change the amounts and types of insurance required by giving the CONTRACTOR a ninety (90)-day advance written notice of such change. If such change results in substantial additional cost to the CONTRACTOR, the City and CONTRACTOR may renegotiate CONTRACTOR’s compensation.
Self-insured retentions. Any self-insured retentions must be declared to and approved by City. City reserves the right to require that self-insured retentions be eliminated, lowered, or replaced by a deductible. Self-insurance will not be considered to comply with these specifications unless approved by City.
Timely notice of claims. CONTRACTOR shall give City prompt and timely notice of claims made or suits instituted that arise out of or result from CONTRACTOR’s performance under this Agreement, and that involve or may involve coverage under any of the required liability policies.
Additional insurance. CONTRACTOR shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection and prosecution of the Work
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Agenda No. 13 B
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Jenny McAdams, Mayor Pro Tem
MEETING DATE: February 16, 2022
SUBJECT: City of Pacific Grove Youth Commission
CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378
RECOMMENDATION
Direct the City Manager to return with a draft ordinance and resolution to form a Youth Commission.
DISCUSSION
At the November 3, 2021 City Council meeting the Council held a discussion regarding the formation of a Youth Commission. City Youth Commissions provide recommendations to the Council on issues affecting that City’s youth and typically work with their Recreation Departments on attracting youth participation. Youth Commissioners often serve at City events as volunteers, learn the importance of being involved in local governance, and develop lifelong leadership skills. Youth Commissioners are also exposed to city municipal jobs and the public service career path.
At Council’s request I have met with our Recreation Program Manager and located a local educator, Lauralea Gaona, who is willing to partner with the City and serve as the initial “adult member”.
Lauralea Gaona has been a teacher since 2000 and started teaching for the Pacific Grove Unified School District in 2013. Mrs. Gaona currently teaches at: 9th Grade Honors Social Studies, 12th grade Government, AP Government and Politics Teacher, and is the High School’s Close Up Advisor. Mrs.
Gaona chaperoned 22 Pacific Grove High School students on the High School’s bi-annual trip to Washington D.C. this past November as pictured below with Congressman Jimmy Panetta at our Nation's Capital. Photos are attached.
The Diversity, Equity, and Inclusion Task Force was met with similar Council hesitation which has become a critical and permanent Commission. I am encouraged the City’s Youth Commission will have a similar positive impact to our City, and be an excellent opportunity to engage our families and youth.
City of Pacific Grove Youth Commission Purpose
The purpose of the Youth Commission is to provide a voice to our youth, empower our youth to engage with local government, and provide the Council with recommendations to better serve our youth.
City of Pacific Grove Youth Commission Formation
The Youth Commission would consist of seven youth members and one adult (non-voting) member who is an educator at the Pacific Grove Unified School District. The youth members of the Youth PG CC 2/16/22
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Commission shall be between 13 and 18 years of age at time of appointment, a student in grades 7 through 12, and live in the City of Pacific Grove. The Youth Commission would meet one time a month during the school year and supported by the Recreation Department Director.
GOAL ALIGNMENT
Community Responsiveness: Develop and implement systems, interfaces and infrastructure to better communicate with the public.
ELECTRONIC ATTACHMENTS
1. CA Youth Commissions and Councils- Institute for Local Government
2. Youth Commission and Engagement Resources- Institute for Local Government
3. Sample Ordinance to Establish Youth Advisory Commission - City of Lathrop
OPTIONS
1. Provide other direction.
2. Take no action.
FINANCIAL IMPACT:
None.
GOAL ALIGNMENT: See Goal Alignment within Discussion section.
Attachments
Photos
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Agenda No. 13 C
CITY OF PACIFIC GROVE
300 Forest Avenue, Pacific Grove, California 93950
TO: Honorable Mayor and Members of the City Council
FROM: Jenny McAdams, Mayor Pro Tem
MEETING DATE: February 16, 2022
SUBJECT: Removal of Library Fines and Forgiveness of Current Outstanding Overdue Fines CEQA: Does not constitute a “Project” per California Environmental Quality Act Guidelines Section 15378
RECOMMENDATION
Discuss the removal of library fines and forgiveness of current outstanding overdue fines. Direct the City Manager to return with a resolution and amendment to the Master Fee Schedule.
DISCUSSION
To support library patrons and our communities, the Pacific Grove Public Library has not charged overdue fines since the beginning of the pandemic. Library fees for the City of Pacific Grove are located on page 22 of the City’s Master Fee Schedule.
Per communications with our Library Director, Diana Godwin: “Our county library consortium has been looking at the feasibility of combining catalogs to allow county library users the ability to place materials from any library on hold and have these items delivered. It's a work in progress, but one important criteria was the agreement that all participating libraries would not charge late fines. Fines have been shown to prevent patrons from returning to the library, the shame of an account with large overdue fees results in lower circulation numbers and additional loss of materials. Collecting the small amount of money that late fees produce is not worth the negative perceptions.” Ms. Godwin supports both a resolution to remove overdue fines and the needed amendment to the Master Fee Schedule.
The below information is taken from the Monterey County Board of Supervisor's November 16, 2021 Board Report regarding their recent actions of omitting fees for our Monterey County Free Libraries.
Like the County, the City of Pacific Grove are also members of GARE (Government Alliance on Race and Equity).
The American Library Association passed a resolution on overdue fines as a form of social inequity, and research has shown the critical importance of books in the home for early literacy and school readiness. A family that fears risk of accruing fines they cannot readily pay can too easily end up not allowing their young children to bring books home during a critical reading period. A family with access blocked due to overdue fines may not be able to use other resources, such as library computers, or access resources required for school success.
A GARE (Government Alliance on Race and Equity) Issue Brief Advancing Racial Equity in Public Libraries specifically calls out library fines as both institutional and structural racism, stating a “library’s enforcement of fines has a disproportionate impact on people of color, who are overrepresented in among low-income populations due to the racial wealth gap” and detailing PG CC 2/16/22
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how users blocked from borrowing resources or using services such as computers then have impacts compounded across multiple institutions and throughout other areas. GARE Issue Brief Other California public library systems have stopped charging overdue fines. These include San Jose Public Library, Los Angeles County Public Library, Sonoma County Library, Tulare County Library, Santa Clara County Library, Sacramento Public Library, San Luis Obispo City/County Library, Marin County Library, and San Diego Public Library. ULC Fine Free Map
GOAL ALIGNMENT
Transparency, Accountability and Communication: Implement programs, processes, revisions, and training to improve and advance the City’s efforts.
Financial Stability: Develop a strategic plan to better address current and future City expenditure and revenue needs while continuing to provide high quality municipal service.
ELECTRONIC ATTACHMENTS
1. Monterey County Board of Supervisor Board Report and Resolution
2. Master Fee Schedule
3. Godwin/McAdams Email
OPTIONS
1. Provide other direction.
2. Take no action.
FINANCIAL IMPACT:
The City does not separate library fines and fees from replacement fees for lost or damaged books. The financial impact associated with removal of library late fees and fines is anticipated to be very minimal.
GOAL ALIGNMENT: See Goal Alignment within Discussion section.
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