San Luis Obispo City Council
March 15, 2022

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of Organic Materials collected by Contractor from City divided by the total inbound Tonnage of the Approved Organic Materials Processing Facility to which Contractor delivered such City Tonnage during the applicable measurement period.

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ARTICLE 7.

PAYMENTS TO CITY

7.1 Franchise Fee
In consideration of the exclusive franchise provided for in this Agreement, Contractor shall pay the City ten percent (10%) of its gross revenues for Organic Materials Collection services; provided, however, that such Franchise Fee shall not exceed the costs incurred by the City to deliver service to properties. Such Franchise Fee shall be a “pass-through” expense for purposes of Rate review.

7.2 AB 939/SB 1383 Fee
Contractor shall pay an AB 939/SB 1383 fee to the City each month. The City shall retain the sole right to set priorities for the use of its AB 939/SB 1383 fee. In addition, if the City’s designee implements an AB 939, SB 1383, or Solid Waste Management fee, Contractor shall pay that fee directly to the designee. Said fees shall be an allowable cost in Contractor’s rate application. All AB 939/SB 1383 fees and Solid Waste Management fees paid to the City or its designee shall be considered a pass through cost for purposes of rate setting, and, as such changes these fees shall be adjusted accordingly subject to all applicable laws and regulations. The City or its designee shall have the right to establish and adjust the AB 939, SB 1383, or Solid Waste Management fee at any time, provided that any changes are considered a pass-through cost for the purposes of rate setting, at the time of the change in the AB 939, SB 1383, or Solid Waste Management fee.

7.3 Business License Tax
Contractor shall pay each annual business license tax.

7.4 Other Fees
The City shall reserve the right to set "Other" Fees, as it deems necessary. These expenses will be determined and a fee designed to reimburse the City. Such fees shall be set annually by City resolution and may be considered a pass through cost for purposes of rate setting.

7.5 Time and Method of Payment
If Contractor is directed to pay an AB 939/SB 1383 Fee, Franchise Fee or "Other" fee, it shall do so on or before the fifteenth (15th) day of each month during the Term. Contractor shall remit to City a sum of money equal to the designated percentage of the gross revenue or a flat monthly fee as determined by the City. If any fees are not paid on or before the fifteenth (15th) day of any month, Contractor shall pay to City a late payment penalty in an amount equal to one percent (1%) of the amount owing for that month.

Contractor shall pay an additional late payment penalty of one percent (1%) owing on any unpaid balance for each following thirty (30) day period the fee remains unpaid. Late payment penalty amounts shall not be included in any revenue requirement.

7.6 Adjustment of Fees
The City may adjust the amount of fees annually. Such adjustment shall be reflected in the rates that the Contractor is allowed to charge and collect from customers.

7.7 Review of Fee Payments
The City, or its agent, reserves the right to annually perform an independent review of fee payments, to verify that fees are being paid in accordance with Agreement. The cost of such reviews will be an allowable cost under the rate setting methodology.

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ARTICLE 8.

CONTRACTOR'S COMPENSATION AND RATES

8.1 General
Contractor's compensation provided for in this Article shall be the full, entire and complete compensation due to Contractor pursuant to this Agreement for all labor, equipment, materials and supplies, taxes, insurance, bonds, overhead, profit and all other things necessary to perform all the services required by this Agreement in the manner and at the times prescribed.

The Contractor does not look to the City for payment of any sums under this Agreement. Contractor will perform the responsibilities and duties described in this Agreement in consideration of the right to charge and collect from customers for services rendered at rates fixed by the City from time-totime and the right to sell compost and other beneficial byproducts generated from the Food and Green Waste. The City shall have the right to structure those rates as it deems appropriate so long as the revenues forecasted to be received by Contractor from charging such rates can reasonably be expected to generate sufficient revenues to provide for Contractor's compensation.

8.2 Initial Rates
Contractor will submit required financial documentation for this service as part of an integrated solid waste rate application. The rate application will comply with the guidelines set forth in the City's "Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates". The portion of the rate attributable to this service shall be identified as part of the Council rate-setting process but will not be separated from the integrated rate.

8.3 Subsequent Rates
Contractor may request rate revisions in future solid waste rate applications. The rate application must comply with the City's "Rate Setting Process and Methodology Manual for Solid Waste Management Rates".

8.4 Right to Perform Rate Reviews
City reserves the right to perform, or have a qualified third party perform, a detailed review of Contractor's expenses and revenues for the purposes of adjusting rates. The results of this detailed rate review will be used to adjust rates, and the Contractor's calculated revenue requirements will be used the following year to adjust rates according to Section 8.3 Contractor's Compensation for subsequent Rate Years.

8.5 Extraordinary Adjustments
Contractor or City may request an adjustment to rates at times other than that required in Section 8.3 for unusual changes in the cost of providing service under this Agreement. Such changes may include, but are not limited to, changes in laws, ordinances, or regulations, and significant changes in Contractor's workload due to new residential or commercial development. However, when an extraordinary adjustment is requested, such adjustment shall consider changes in all costs and revenues from Contractor's proposed revenue requirement.

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For each such request, Contractor shall prepare a schedule comparing the original proposed costs and revenues by line item to the then current costs and revenues, including an estimates of the cost impact of the change, using an operating ratio of 93%, applied to Contractor's costs as calculated in Contractor's proposed revenue requirement. Such request shall be prepared in a form acceptable to City with support for assumptions made by Contractor in preparing the estimate, Contractor and City shall negotiate a mutually acceptable adjustment amount.

ARTICLE 9.

RECORDKEEPING AND REPORTING

9.1 Records

9.1.1 General
A. Contractor shall maintain records required to conduct its operations, to support requests it may make to City, and to respond to requests of the City. Adequate record security shall be maintained to preserve records from events that can be reasonably anticipated such as a fire, theft and earthquake. Electronically maintained data and records shall be protected and an adequate backup system shall be provided for such data and records. The protection and backup systems shall be subject to approval by the City.

B. The following records shall be maintained for the City in form and detail satisfactory to the City, relating to:

1. Customer services and billing;

2. Weight of Organic Materials. Information is to be separated by kind of account (Single-Family, Multi-Family, and Commercial);

3. Special annual clean-up event results;

4. Routes;

5. Facilities, equipment, and personnel used;

6. Facilities and equipment operations, maintenance, and repair;

7. Processing of Organic Materials;

8. Complaints; and

9. Missed pick-ups.

C. Contractor shall maintain records of Transfer, Diversion, and Disposal of all Organic Materials Collected in the City for the period of this Agreement and all extensions to this Agreement or successor Agreements. In the event Contractor discontinues providing Organic Materials services to City, Contractor shall provide all records of Diversion and Disposal of all Organic Materials Collected within the City to City within thirty (30) days of discontinuing service.

Records shall be in chronological order, and organized in a form readily and easily interpreted.

D. Records for other programs shall be tailored to specific needs. In general, they shall include:

1. Plans, tasks·, and milestones; and,

2. Accomplishments in terms such as dates, activities conducted, quantities of products used, produced or distributed, and numbers of participants and responses.

E. Unless otherwise required in this Agreement, Contractor shall retain all records and data required to be maintained by this Agreement for the Term of this Agreement plus five (5) years after its expiration or earlier termination. Contractor’s records shall be stored in one central location, physical or electronic, that can be readily accessed by Contractor. Upon request, any such records shall be retrieved in a timely manner, not to exceed ten (10) Working Days of a request by the City and made available to the City; including any record or documentation that the City, requires to fulfill obligations under Applicable Law including, Deleted: ¶
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RECORDS, REPORTS AND INFORMATION,
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but not limited to, AB 939, AB 341, AB 1826, AB 876, AB 901, SB 1383, and other current or future Federal, State, or local regulations, as amended.

9.1.2 Financial Records
Financial records shall separate all records related to the services performed under this Agreement from any and all other types of businesses and operations conducted by the Contractor.

9.1.3 General Records
City approved records (format) shall be maintained for the City separate from other jurisdictions relating to:
• Customer services;
• Weight of Food and Green Waste;
• Routes;
• Facilities, inventory of equipment and personnel used; • facilities and equipment operations, maintenance and repair; • Processing of Food and Green Waste and marketing and sale of Compost including name of the purchaser, the date of sales transaction, processing cost per ton, quantity purchased, value per ton and net sales records;
• Complaints; and,
• Missed pick ups.

Contractor shall maintain records of all Food and Green Waste Collected in the City for the term of this Agreement. In the event Contractor discontinues providing Food and Green Waste services to City, Contractor shall provide all records of all Food and Green Waste Collected in City to City within thirty (30) days of discontinuing service. Records shall be in chronological and organized form and readily and easily interpreted.

9.2 Reports
A. 9.2.1 Report Formats and ScheduleRecords shall be maintained in forms and by methods that facilitate flexible use of data contained in them to structure reports, as needed. Reports are intended to compile recorded data into useful forms of information that can be used to, among other things:

1. Determine and set rates, and evaluate the financial efficacy of operations; and

2. Evaluate past and expected progress towards achieving goals and objectives; and

3. Determine needs for adjustment to programs; and

4. Evaluate Customer service and Complaints.

B. The City may at no cost to itself request that Contractor provide such additional information in the reports set forth below as the City deems necessary or appropriate to meet its needs, including provision of information needed for the City’s compliance with Applicable Law, including, but not limited to AB 939, AB 1826, AB 341, and SB 1383 report information.

Contractor may propose report formats that are responsive to the objectives and audiences for each report. The format of each report shall be subject to approval by the City.

C. Contractor shall submit all reports to the City, electronically via e-mail using software acceptable to the City. The City reserves the right to require the Contractor to maintain records and submit the reports required herein through use of the City-selected web-based software platform and/or Microsoft Excel spreadsheet, at the Contractor’s expense.

D. Monthly reports shall be submitted within ten (10) calendar days after the end of the report month. All reports shall be submitted to:

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Utilities Director
City of San Luis Obispo
879 Morro Street
San Luis Obispo, CA 93401

9.2.2 Monthly Reports
The information listed shall be the minimum reported for each service:

A. Discarded Materials, Collected, Transferred, Diverted and Disposed of, by sector (Commercial, industrial, Residential) of Waste Generator-Collected by Contractor, in Tons, by month.

B. Complaint summary, for month and cumulative for report year, as above, summarized by nature of Complaints.

C. Narrative summary of problems encountered and actions taken with recommendations for the City, as appropriate.

D. All requirements specified in “Exhibit A.”

9.2.3 Annual Report
The Annual Report is to be essentially in the form and content of the monthly reports. Annual reports shall include at a minimum, all data and information described in Exhibit A, unless otherwise specified under this Agreement. In addition, Contractor's annual audited financial reports/statements, with the operations related to the City services segregated, shall be included. The annual report shall also include a complete inventory of equipment used to provide all services.

Financial statements shall include a supplemental schedule combining Contractor's results of operations, separating the specific revenues and expenses, including detailed information with respect to general overhead claimed by the Contractor, in connection with the operations provided for in this Agreement from others included in such financial statements. The financial statements, supplemental schedule, management letter and footnotes shall be prepared in accordance with Generally Accepted Accounting Principles (GAAP) and audited, in accordance with Generally Accepted Auditing Standards (GAAS) by a certified public accountant (CPA) licensed (in good standing) to practice public accounting in the State of California as determined by the State of California Department of Consumer Affairs Board of Accountancy. The CPA opinion on Contractor's annual financial statements and supplemental schedule shall be unqualified, except as to uncertainties for which the ultimate outcome cannot be determined by the date of the CPA's opinion.

9.2.4 Additional Reports.

At the City’s option, the City may require that Contractor provide the City with the aggregate tonnage data related to AB 901 reporting that the City needs for its SB 1383 reporting, to the extent available to Contractor within five (5) Business Days of City request.

9.3 Right to Inspect Records
City shall have the right to inspect or review the payroll tax reports, specific documents or records required expressly or by inference pursuant to this Agreement, or any other similar records or reports of Contractor that City shall deem, in its sole discretion, necessary to evaluate annual reports, compensation applications provided for in this Agreement and Contractor's performance provided for in this Agreement. The City retains the right to have an independent third party or agent of the City's choosing, such as a CPA, participate in the records inspection. The cost of such inspection or review will be an allowable cost under the rate setting methodology.

9.3.1 Right to Review Basis for Landfill Tipping Fee Increases The Contractor shall provide to the City a copy of Cold Canyon Landfill's and/or the designated Food and Green Waste processing facility's request for an increase in tipping fees no later than five (5) days Deleted: Food
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following submittal of said request to the County of San Luis Obispo and/or the designated processing facility.

Additionally, the Contractor shall notify the City of the action taken by the Board of Supervisors and /or the designated processing facility regarding said request within five (5) days following said action, including letter to the Board of Supervisors and related executed resolution and/or appropriate documentation from the designated processing facility. The City retains the right to have an independent third party or agent of the City's choosing, such as a CPA, participate in the review. The cost of such inspection or review will be an allowable cost under the rate setting methodology unless there arc findings pursuant to Section 12.5.

9.4 Waste Generation/Characterization Studies
Contractor acknowledges that the city must perform Solid Waste Generation and Disposal characterization studies periodically to comply with AB 939 requirements. Contractor agrees to participate and cooperate with City and its designated agents to accomplish 1) studies and data collection and prepare reports as needed to determine weights and volumes of Solid Waste generated, Diverted, Disposed, transformed, or otherwise handled/processed to satisfy AB 939 requirements; and 2) other efforts the City may be required to conduct for compliance with Applicable Law, such as SB 1383.

9.5 Performance Hearing
The City maintains the right to hold a public hearing at any time, not more than once each year, al which the Contractor shall be present and shall participate, to review its services and performance.

The purpose of the hearing is to provide for a discussion and review of technological, economic, and regulatory changes in order to achieve a continuing, advanced Solid Waste management system; and to ensure customer service quality and any other areas that may be addressed regarding services are being provided with adequate quality, efficiency and economy.

Sixty (60) days after receiving notice from City of a Performance Hearing, Contractor shall, at a minimum, submit a report to City indicating (1) changes recommended and/or new services to improve City's ability to meet the goals of AB 939 and Ab 1826 to contain costs and minimize impacts on rates; and (2) any specific plans for provision of changed or new services by Contractor.

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ARTICLE 10.

INDEMNIFICATION, INSURANCE AND BOND

10.1 Indemnification
Contractor shall indemnify and hold harmless City, its officers, Directors, employees, and agents from and against any and all loss, liability, penalty, forfeiture, claim, demand, action proceeding or suit of any and every kind and description (including, but not limited to, injury to and death of any Person and damage to property, or for contribution or indemnity claimed by third parties) to the extent arising or resulting from and in any way connected with (1) the negligence or willful misconduct of Contractor, its officers, employees agents and/or sub Contractors in performing services under this Agreement; (2) the failure of Contractor, its officers, employees, agents and/or subcontractors to comply in all respects with the provisions of this Agreement, applicable laws (including, without limitation, the Environmental Laws) and regulations, and/or applicable permits and licenses; (3) the acts of Contractor, its officers, employees, agents and/or subcontractors in performing services under this Agreement for which strict liability is imposed by law (including, without limitation, the Environmental Laws). Contractor further agrees to and shall, upon demand of City, at Contractor's sole cost and expense, defend (with attorneys acceptable to City) the City, its officers, directors, employees, and agents against any claims, actions, suits or other proceedings, whether judicial, quasi-judicial or administrative in nature, arising or resulting from any events described in the immediately preceding paragraph to the extent arising from or related to alleged or actual violations of Proposition 218 and/or its implementing legislation.

Contractor's duty to indemnify and defend shall survive the expiration or earlier termination of this Agreement.

10.2 Landfill Diversion
The Contractor acknowledges that the City has adopted a SRRE which selects Food and Green Waste Collection and Composting programs as a means of diverting an estimated 6,796 tons in 1995 and 8,248 tons per year by the year 2000. It is therefore of foremost importance that the Food and Green Waste and wood debris collected under this Agreement be converted into a functional and marketable product in order that the materials may be diverted from landfill disposal in compliance with the City's SRRE, and AB 939. The Contractor shall therefore use commercially reasonable efforts ensure that the processing method used shall, at all times, meet the intent of the City's SRRE and AB 939.

Should the Contractor find it necessary to utilize another method of processing in order to meet the intent of the SRRE and AB 939, the City shall be given an opportunity to make its own determination as to the suitability and cost- effectiveness of such process and shall approve such process in writing.

The City shall have the right to terminate this Agreement upon the giving of a six (6) month prior written notice to Contractor should it be determined that the Food and Green Waste program being implemented and/or proposed under this Agreement is ineffective in meeting the City's diversion goals and objectives. Upon termination, the Contractor shall be entitled only to revenues less expenses incurred to that date. All revenues received thereafter shall be the property of the City unless otherwise agreed.

10.3 AB 939/SB1383 Indemnification
Contractor agrees to indemnify and hold harmless City, its officers, Directors, employees, and agents from and against all fines and/or penalties imposed by the California Integrated Waste Management Board in the event the source reduction and recycling goals or any other requirements of AB 939 or SB 1383 are not met by City with respect to the waste stream Collected under this Agreement but only to the extent such failure is due to the failure of Contractor to meet its obligations under this Agreement or for delays in providing information that prevents City from submitting reports required by AB 939 or SB 1383 in a timely manner.

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10.4 Insurance
A. Minimum Limits of Insurance. Contractor shall maintain limits no less than:

1. Comprehensive General Liability: One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury, Personal injury and property damage.

2. Automobile Liability: One Million Dollars ($1,000,000) combined single limit per accident for bodily injury and property damage.

3. Workers' Compensation and Employers Liability: Workers' compensation limits as required by the Labor Code of the State of California and Employers Liability limits of

4. $1,000,000 per accident.

B. Deductibles and Self-Insured Retentions. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officials, directors and employees; or Contractor shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses.

C. Other Insurance Provisions. The policies are to contain, or be endorsed to contain, the following provisions:

1. General Liability and Automobile Liability Coverages a) The City, its officials, employees, and directors are to be covered as insured as respects: liability arising out of activities performed by or on behalf of Contractor; products and completed operations of Contractor; Premises owned, leased or used by Contractor; or automobiles owned, leased, hired or borrowed by Contractor. The coverage shall contain no special limitations on the scope of protection afforded to the City, its officials, employees or volunteers. b) Contractor's insurance coverage shall be primary insurance as respects City, its officials, directors, employees and volunteers. Any insurance or self-insurance maintained by City, its officials, or employees shall be excess of Contractor's insurance and shall not contribute with it.
c) Any failure to comply with reporting provisions of the policies shall not affect coverage provided to City, its officials, or employees.Coverage shall state that Contractor's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability.

2. Workers' Compensation and Employers Liability Coverage - The insurer shall agree to waive all rights of subrogation against City, its officials, and employees for losses arising from work performed by Contractor for City.

3. All Coverages - Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or limits except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to City.

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subject to the jurisdiction of the California Insurance Commissioner and with a rating in the most recent edition of Best's Insurance Reports of size category VII or larger and a rating classification of A or better.

E. Verification of Coverage. Contractor shall furnish City with certificates of insurance and with original endorsements affecting coverage required by this clause. The certificates and endorsements for each insurance policy are to be signed by a Person authorized by that insurer to bind coverage on its behalf. The certificates and endorsements are to be on forms provided by or acceptable to City and are to be received and approved by City before work commences. City reserves the right to require complete, certified copies of all required insurance policies, at any time.

10.5 Faithful Performance Bond
Simultaneously with the execution of this Agreement, Contractor shall file with City surety bond, payable to City, securing Contractor's faithful performance of its obligations under this Agreement.

The bond shall be in the amount of 125% of the total annual contract price guaranteeing the faithful performance of the agreement, including any reasonable attorney's fees or other collection costs.

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ARTICLE 11.

CITY'S RIGHT TO PERFORM SERVICE

11.1 General
In the event that Contractor, for any reason whatsoever, fails, refuses or is unable to Collect, transport or process any or all Food and Green Waste materials which it is required by this Agreement to Collect and process, at the time and in the manner provided in this Agreement, for a period of more than seven (7) calendar days, and if, as a result thereof, Food and Green Waste should accumulate in the City to such an extent, in such a manner, or for such a time that the City Manager should find that such accumulation endangers or menaces the public health, safety or welfare, then City shall have the right, but not the obligation, upon twenty-four (24) hour prior written notice to Contractor during the period of such emergency as determined by the City Manager, (1) to perform, or cause to be performed, such services itself with its own or other personnel without liability to Contractor; and/or (2) to take possession of any or all of Contractor's land, equipment and other property to Collect, transport or process any Food and/or Green Waste generated within the City which Contractor would otherwise be obligated to Collect, transport, process or market pursuant to this Agreement. In the event the City takes possession of the Contractor's equipment and other property, the City shall be entitled to have another contractor operate such equipment and property under City direction.

Additionally, in the event the City takes possession of the Contractor's equipment and other property, the City does not guarantee repair of existing problems with equipment and facilities.

Notice of Contractor's failure, refusal or neglect to Collect, transport or process Food and Green Waste may be given orally by telephone to Contractor at its principal office and shall be effective immediately. Written confirmation of such oral notification shall be sent to Contractor within twentyfour (24) hours of the oral notification.

Contractor further agrees that in such event:
• It will take direction from City to effect the transfer of possession of property to City for City's use.
• It will, if City so requests, keep in good repair and condition all of such property, provide all motor vehicles with fuel, oil and other service, and provide such other service as may be necessary to maintain said property in operational condition. • City may immediately engage all or any personnel necessary or useful for the Collection, transpot1ation and processing Green Waste, including, if City so desires, employees previously or then employed by Contractor, Contractor further agrees, if City so requests, to furnish City the services of any or all management or office personnel employed by Contractor whose services arc necessary or useful for Green Waste Collection, Transportation and processing operations and for the billing and collection of fees for these services.

City agrees that it assumes complete responsibility for the proper and normal use of such equipment and facilities while in its possession.

If the interruption or discontinuance in service is caused by any of the reasons listed in Section

12.4 (Excuse From Performance), City shall pay to Contractor the reasonable rental value of the equipment and facilities, possession of which is taken by City, for the period of City's possession, if any, which extends beyond the period of time for which Contractor has rendered bills in advance of service
Except as otherwise expressly provided in the previous paragraph, City's exercise of its rights under this Article 11 (I) does not constitute a taking of private property for which compensation must be paid; (2) will not create any liability on the part of City to Contractor; and (3) does not exempt Deleted: ¶

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Contractor from the indemnity provisions of Article 10, Indemnification, Insurance and Bond, which are meant to extend to circumstances arising under this Section, provided that Contractor is not required to indemnify City against claims and damages arising from the sole negligence of City officers, employees and agents in the operation of Collection vehicles during the time City has taken possession of such vehicles.

11.2 Temporary Possession or Contractor's Property
If the City suffers an interruption or discontinuance of service as described in Section 11.1 (including interruptions and discontinuance due to events described in Section 12.4, Excuse from Performance), City may take possession of and use all of Contractor's property described above until other suitable arrangements can be made for the provision of Food and Green Waste Services which may include the grant of a Contract to another company. The same notice requirements of Section 11.1 are applicable.

11.3 Billing and Compensation to City During City's Possession During such time that city is providing Green Waste services, as above provided, Contractor shall continue to bill and collect payment from all users of the above-mentioned services.

Contractor further agrees that, in such event, it shall reimburse City for any and all costs and expenses incurred by City in taking over possession of the above-mentioned property for Food and Green Waste service in such manner and to an extent as would otherwise be required of Contractor under the Terms of this Agreement. Such reimbursement shall be made from time to time after submission By City to Contractor of each statement listing such costs and expenses, but in no event later than five (5) working days from and after each such submission. The City shall have the right, at its sole discretion, to take over billing and payment collection activities, The City shall then pay any net revenues to the Contractor, after deducting all expenses, including City-incurred expenses.

11.4 City's Right to Relinquish Possession
It is further mutually agreed that City may at any time at its discretion relinquish possession of any or all of the above-mentioned property to Contractor and thereupon demand that Contractor resume the Food and Green Waste services as provided in this Agreement, whereupon Contractor shall be bound to resume the same.

11.5 Duration of City's Possession
City's right pursuant to this Article to retain temporary possession of Contractor's facilities and equipment, and to render Collection services, shall terminate when City determines that such services can be resumed by Contractor, or when City no longer reasonably requires such facilities or equipment. In any case, City has no obligation to maintain possession of Contractor's property and/or continue its use for any period of time and may at any time, in its sole discretion, relinquish possession to Contractor.

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ARTICLE 12.

DEFAULT, REMEDIES AND LIQUIDATED DAMAGES

12.1 Events of Default
All provisions of this Agreement to be performed by Contractor arc considered material. Each of the following shall constitute an event of default.

A. Fraud or Deceit. If Contractor practices, or attempts to practice, any fraud or deceit upon city.

B. Insolvency or Bankruptcy. If Contractor becomes insolvent, unable, or unwilling to pay its debts when due, or upon listing of an order for relief in favor of Contractor in a bankruptcy proceeding. The Contractor is also in default if there is an assignment of this contract for the benefit of its creditors.

C. Failure to Maintain Coverage. If Contractor fails to provide or maintain in full force and effect the Workers' Compensation, liability, indemnification coverage or any insurance coverage or bond required under this Agreement.

D. Violations of Regulation. If Contractor facilities fall out of full regulatory compliance or if Contractor violates any orders or filings of any regulatory body having jurisdiction over Contractor relative to this Agreement, provided that Contractor may contest any such orders or filings by appropriate proceedings conducted in good faith, in which case no breach of the Agreement shall be deemed to have occurred.

E. Failure to Perform. If Contractor ceases to provide Food and Green Waste services as required under this Agreement for a period of two (2) days or more, for any reason within the control of Contractor.

F. Failure to Pay/Report. If Contractor fails to make any timely payments, including liquidated damages and penalties, required under this Agreement and/or fails to provide City with required information, reports, and/or records in a timely manner as provided for in the Agreement.

G. Acts or Omissions. Any other act or omission by Contractor which violates the terms, conditions, or requirements of this Agreement, the California Integrated Waste Management Act of 1989, as it may be amended from time to time, or any order, directive, rule, or regulation issued there under and which is not corrected or remedied within the time set in the written notice the violation or, if Contractor cannot reasonably correct or remedy the breach within the time set forth in such notice, if Contractor should fail to commence to correct or remedy such violation within the time set forth in such notice and diligently effect such correction or remedy thereafter.

H. False or Misleading Statements. Any representation or disclosure made to City by Contractor in connection with or as an inducement to entering into this Agreement, or any future amendment to this Agreement, which proves to be false or misleading in any material respect as of the time such representation or disclosure is made, whether or not any such representation or disclosure appears as part of this Agreement. a. Attachment. There is a seizure of attachment at: or levy on, the operating equipment of Contractor, including without limits its equipment, maintenance or office facilities, or any part thereof.

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I. Suspension or Termination of Service. There is any termination or suspension of the transaction of business by Contractor, including without limit, due to labor unrest including strike, work stoppage or slowdown, sickout, picketing, or other concerted job action lasting more than two (2) days.

Upon default by the Contractor, the City Manager shall provide written notice to Contractor of the violation. The City Manager shall include in the notice, a demand that the Contractor correct the violation within 10 days following the delivery of said notice. If the violation is not corrected within the IO days, the City shall have the right to terminate the Agreement per the provisions provided in Section 12.2. for purposes of this Agreement and any notice required thereunder, the term "days" shall mean calendar days.

12.2 Right to Terminate Upon Default
Upon a default by Contractor, City shall have the right to terminate this Agreement upon a ten (IO) days notice if the public health or safety is threatened, or otherwise a thirty (30) days notice, but without the need for any hearing, suit or legal action. This right of termination is in addition to any other rights of City upon a failure of Contractor to perform its obligations under this Agreement.

City's right to terminate this Agreement and to take possession of Contractor's equipment and facilities are not exclusive, and City's termination of this Agreement shall not constitute an election of remedies. Instead, they shall be in addition to any and all other legal and equitable rights and remedies which City may have.

By virtue of the nature of this Agreement, the urgency of timely, continuous and high-quality service, the lead time required to effect alternative service, and the rights granted by City to Contractor, the remedy of damages for a breach hereof by Contractor is inadequate and City shall be entitled in injunctive relief.

12.3 Liquidated Damages
A. General. City finds, and Contractor agrees, that as of the time of the execution of this Agreement, it is impractical, if not impossible, to reasonably ascertain the extent of damages which shall be incurred by City as a result of a breach by Contractor of its obligations under this Agreement. The factors relating to the impracticability of ascertaining damages include, but are not limited to, the fact that: (i) substantial damage results to members of the public who are denied services or denied quality or reliable service; (ii) such breaches cause inconvenience, anxiety, frustration, and deprivation of the benefits of the Agreement to individual members of the general public for whose benefit this Agreement exists, in subjective ways and in varying degrees of intensity which are incapable of measurement in precise monetary terms; (iii) that exclusive services might be available at substantially lower costs than alternative services and the monetary loss resulting from denial of services or denial of quality or reliable services is impossible to calculate in precise monetary terms; and, (iv) the termination of this Agreement for such breaches, and other remedies are, at best, a means of future correction and not remedies which make the public whole for past breaches.

B. Service Performance Standards; Liquidated Damages for Failure to Meet Standards. The parties acknowledge that consistent, reliable Organic Materials Collection service is of utmost importance to City and that city has considered and relied on Contractor's representations as to its quality of service commitment in awarding the Agreement to it. The Parties further recognize that if Contractor fails to achieve the performance standards defined in this Section, comply with Complaint resolution criteria, or fails to submit required documents in a timely manner, City and Deleted: ¶
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its residents will suffer damages and that it is and will be impractical and extremely difficult to ascertain and determine the exact amount of damages which City will suffer. Therefore, without prejudice to City's right to treat such non-performance as an event of default under this Article 12, the parties agree that the following Liquidated Damage amounts represent a reasonable estimate of the amount of such damages considering all of the circumstances existing on the date of this Agreement, including the relationship of the sums to the range of harm to City that reasonably could be anticipated and the anticipation that proof of actual damages would be costly or inconvenient.

The City may monitor the Contractor’s performance under the Agreement in each of the performance areas listed below. In the event that the City determines that Contractor has failed to meet the performance standard established for any of the areas identified below, the City may assess Liquidated Damages pursuant to this Section of the Agreement. Contractor agrees to pay (as Liquidated Damages and not as a penalty) the amounts set forth below:

Event of Non-Performance Liquidated Damage
Collection Reliability and Quality
1 Failure to Implement three-Container System. For each occurrence of failing to provide Customers with Organic Materials Containers as part of the three-Container system required by and compliant with the City’s Municipal Code (excluding Generators and Customers that demonstrate
compliance with Recycling and Organic Waste Self-Hauling requirements pursuant to the Municipal Code and 14 CCR
Division 7, Article 12, Article 7.)
$150 / Generator or Customer /
occurrence / Day until compliance
achieved
2 For each failure over five (5) annually to commence service to a new Customer account within seven (7) days after order:
$150.00
3 For each failure over ten (IO) annually to Collect Food and/or Green Waste, which has been properly set out for Collection, from an established Customer account on the scheduled
Collection day
$150.00
4 For each failure to Collect Food and/or Green Waste which have been properly set out for Collection, from the same Customer on two (2) consecutive scheduled pickup days:
$150.00
5 For each occurrence over five (5) annually of damage to private property:
$250.00
6 For each occurrence of discourteous behavior: $250.00 7 For each failure over ten (10) annually to clean up Food and/or Green Waste spilled by Contractor from Containers $150.00
8 For each occurrence over five (5) annually of Collecting Food and/ or Green Waste during unauthorized hours:
$250.00
9 For each failure to respond to a Customer Complaint within twenty-four (24) working hours:
$100.00
10 Failure to Comply with Container Labeling and Colors.

For each occurrence of Contractor’s failure to comply with Container labeling and color requirements pursuant to Section

5.7 of this Agreement.
$150 / Container / occurrence
11 Use of Unauthorized Facilities. For each individual
occurrence of delivering Discarded Materials to a Facility $150 / Ton / occurrence
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any failure to meet the service performance standard,
the City shall contact Contractor within two (2) days of any failing reported directly to the City.

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For each failure over five (5) annually to commence service to¶
a new customer account within seven (7) days after
order: $150.00¶
For each failure over ten (IO) annually to Collect Food and/or Green Waste, which has been properly set out for Collection, from¶
an established customer account on the scheduled Collection day: $150.00¶
For each failure to Collect Food and/or Green Waste which have been properly set out for Collection, from the same customer on¶
two (2) consecutive scheduled pickup days:¶
For each occurrence over five (5) annually of damage lo private property:¶
For each occurrence of discourteous behavior:¶
For each failure over ten (10) annually to clean up Food and/or Green waste spilled from Bins:¶
¶
For each occurrence over five (5) annually of Collecting Column Break
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$250.00¶
$250.00¶
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$150.

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Food and/ or Green Waste during unauthorized hours:¶
Food and/ or Green Waste during unauthorized hours:¶
¶
for each failure to respond to a customer complaint within twenty-four (24) working hours:¶
Column Break
$250.00¶
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$100.00¶
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Timeliness of Submissions to City¶
REPORTS Any report shall be considered late until such
time as a correct and complete report is received by City. For each calendar day a report is late, the daily assessment shall be:¶
Monthly Reports: Annual Reports:¶
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Event of Non-Performance Liquidated Damage
other than an Approved Facility(ies) for each Discarded Material type under this Agreement.

Reports and Timeliness of Submissions to the City
13 REPORTS. Any report shall be considered late until such time as a correct and complete report is received by City. For each calendar day a report is late, the daily assessment shall be:

Monthly Reports: For each infraction $100 per day
Annual Reports: For each infraction $500 per day
14 Failure to Allow Access to Records. For each failure to provide access to records in compliance with and in the timeframe specified in this Agreement.
$120 / day
Other
15 Failure to Perform Public Education and Outreach. For each failure to perform any individual education and outreach activity as required and in the timeframe specified by this Agreement.
$180 / occurrence
16 Failure to Issue Contamination Notices. For each failure of Contractor Collection personnel to issue contamination warning notices and maintain documentation of issuance as required by Section 5.4 of this Agreement.
$100 / Contractor Route / day
17 Improper Fee Issuance. For each fee that is issued to a Generator without prior authorization from City under this agreement.
$100 /Customer/Day
Liquidated Damages will only be assessed after Contractor has been given the opportunity but failed to rectify the damages, as described in this Agreement (e.g., twenty-four (24) working hours to respond to a Complaint). City may determine the occurrence of events giving rise to Liquidated Damages through the observation of its own employees or representative or investigation of Customer Complaints.

Prior to assessing Liquidated Damages, City shall give Contractor notice of its intention to do so. The notice will include a brief description of the incident(s)/non-performance. Contractor may review (and make copies at its own expense) all information in the possession of City relating to incident(s)/non-performance. Contractor may, within ten (10) days after receiving the notice, request a meeting with City. If a meeting is requested, it shall be held by the City Manager or their designee.

Contractor may present evidence in writing and through testimony of its employees and others relevant to the incident(s)/non performance. The City Manager or designee will provide Contractor with a written explanation of their determination on each incident(s)/non-performance prior to authorizing the assessment of Liquidated Damages. The decision of the City Manager or designee shall be final.

12.4 Excuse from Performance
The parties shall be excused from performing their respective obligations hereunder in the event they are prevented from so performing by reason of floods, earthquakes, other "acts of God", war, civil insurrection, riots, acts of any government (including judicial action), and other similar catastrophic events which are beyond the control of and not the fault of the party claiming excuse from performance hereunder. Labor unrest, including but not limited to strike, work stoppage or slowdown, sick-out, picketing, or other concerted job action conducted by Contractor's employees or directed at Contractor or its selected facilities is not an excuse from performance and Contractor shall be obligated to continue to provide service notwithstanding the occurrence of any or all such events.

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Amount. The City Manager may assess liquidated damages
for each calendar day or event, as appropriate, that
Contractor is determined to be liable in accordance with this Agreement.¶
¶
Timing of Payment. Contractor shall pay any liquidated
damages assessed by City within ten (10) days after they are assessed. If they are not paid within the ten (10) day period, City may proceed against the performance bond required by this Agreement or order the termination of this Agreement, or both pursuant to the terms of this Agreement.¶

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The party claiming excuse from performance shall, within two (2) days after such party has notice of such cause, give the other party notice of the facts constituting such cause and asserting its claim to excuse under this Section.

The interruption or discontinuance of Contractor's services caused by one or more of the events excused shall not constitute a default by Contractor under this Agreement Notwithstanding the foregoing, however, if Contractor is excused from performing its obligations hereunder for any of the causes listed in this Section for a period of seven (7) days or more, City shall have the right to review the circumstances under which the excuse from performance was granted. After such review, if the City determines the excuse from service is no longer valid, the City shall notify the Contractor in writing to resume service within two (2) days from the receipt of such notification. If the Contractor fails to resume service within the two (2) days, the City shall have the right to terminate this Agreement by giving ten (10) days notice, in which case the provisions relative to taking possession of Contractor's land, equipment and other property and engaging Contractor's personnel in Article 11, City's Right to Perform Services, and this Article 12 shall apply.

12.5 Financial Material Errors, Omissions or Irregularities The City may review, test and audit the books and records of the Contractor for the purpose of determining whether the contractor is complying with the terms of the Agreement. In the event that material errors or omissions or irregularities are identified, and then the cost associated with the audit, test or review shall be paid by the Contractor to the City. In the case of financial errors, materiality shall be deemed to be two percent (2%) or greater of the gross revenues of the Contractor from activities performed under this agreement. Recovery of any overpayment will be negotiated on a case by case basis, either immediately or through the next rate setting evaluation.

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ARTICLE 13.

OTHER AGREEMENTS OF THE PARTIES

13.1 Relationship of Parties
The parties intend that Contractor shall perform the services required by this Agreement as an independent Contractor engaged by City and not as an officer or employee of City nor as a partner of or joint venture with City. No employee or agent or Contractor shall be or shall be deemed to be an employee or agent of City. Except as expressly provided herein, Contractor shall have the exclusive control over the manner and means of conducting the Green Waste services performed under this Agreement, and all Persons performing such services.

Contractor shall be solely responsible for the acts and omissions of its officers, employees, subcontractors and agents. Neither Contractor nor its officers, employees, subcontractors and agents shall obtain any rights to retirement benefits, workers compensation benefits, or any other benefits which accrue to City employees by virtue of their employment with City.

13.2 Compliance with law
In providing the services required under this Agreement, Contractor shall at all times, at its sole cost, comply with all applicable laws of the United States, the State of California, City, and with all applicable regulations promulgated by federal, state, regional or local administrative and regulatory agencies, now in force and as they may be enacted, issued or amended during the Term.

13.3 Governing Law
This Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of California.

13.4 Jurisdiction
Any lawsuits between the parties arising out of this Agreement shall be brought and concluded in the courts of the State of California, which shall have exclusive jurisdiction over such lawsuits.

13.5 Assignment
Except as may be provided for in Article 11, (City's Right to Perform Service), neither party shall assign its rights, nor delegate, subcontract or otherwise transfer its obligations under this Agreement to any other Person without the prior written consent of the other party. Any such assignment made without the consent of the other party shall be void and the attempted assignment shall constitute a material breach of this Agreement. The Contractor shall consent to any assignment to a joint powers authority, or any similar public entity assignee of the City.

For purposes of this Section when used in reference to Contractor, "assignment" shall include, but not be limited to (1) a sale, exchange or other transfer of at least fifty-one percent (51%) all of Contractor's assets dedicated to service under this Agreement to a third party; (2) a sale, exchange or other transfer of outstanding common stock of Contractor to a third party provided said sale, exchange or transfer may result in a change of control of Contractor; (3) any dissolution, reorganization, consolidation, merger, re-capitalization, stock issuance or re- issuance, voting trust, pooling agreement, escrow arrangement, liquidation or other transaction to which results in a change of ownership or control of Contractor; (4) any assignment by operation of law, including insolvency or bankruptcy, making assignment for the benefit of creditors, writ of attachment for an execution being levied against this Agreement, appointment of a receiver taking possession of Contractor's property, or transfer occurring in the event of a probate proceeding; and (5) any combination of the foregoing (whether or not in related or contemporaneous transactions) which has the effect of any such transfer or change of ownership, or change of control of Contractor.

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Contractor acknowledges that this Agreement involves rendering a vital service to City's residents, and that City has selected Contractor to perform the services specified herein based on (1) Contractor's experience, skill and reputation for conducting its Solid Waste management operations in a safe, effective and responsible fashion, at all times in keeping with applicable Environmental Laws, regulations and best waste management practices, and (2) Contractor's financial resources to maintain the required equipment and to support its indemnity obligations to City under this Agreement. City has relied on each of these factors, among others, in choosing Contractor to perform the services to be rendered by Contractor under this Agreement.

If Contractor requests City's consideration of and consent to an assignment, City may deny or approve such request in its complete discretion. The City is concerned about the possibility that assignment could result in significant rate increases, as well as a change in the quality of service. Accordingly, the following standards have been set to ensure that assignment will result in continued quality service. In addition, the City reserves the right to solicit competitive bids for these services if the assignment results in a request by the assignee for rate increases that are higher than the inflationary index and do not reflect value changes in service standards. At a minimum, no request by Contractor for consent to an assignment need be considered by City unless and until Contractor has met the following requirements:

A. Contractor shall undertake to pay City its reasonable expenses for attorney's fees and investigation costs necessary to investigate the suitability of any proposed assignee, and to review and finalize any documentation required as a condition for approving any such assignment; B. Contractor shall furnish City with audited financial statements of the proposed assignee's operations for the immediately preceding three (3) operating years; C. Contractor shall furnish City with satisfactory proof: 1) that the proposed assignee has at least ten (10) years of Green Waste management experience on a scale equal to or exceeding the scale of operations conducted by Contractor under this Agreement; 2) that in the last five (5) years, the proposed assignee has not suffered any significant citations or other censure from any federal, state or local agency having jurisdiction over its Solid Waste management operations due to any significant failure to comply with state, federal or local Environmental Laws and that the assignee has provided City with a complete list of such citations and censures; 3) that the proposed assignee has at all times conducted its operations in an environmentally safe and conscientious fashion;4) that the proposed assignee conducts its Green Waste management practices in accordance with sound waste management practices in full compliance with all federal, state and local laws regulating the collection, transportation, processing, marketing and disposal of Solid Waste including Hazardous Wastes; and, 5) of any other information required by City to ensure the proposed assignee can fulfill the Terms of this Agreement in a timely safe and effective manner.

Under no circumstances shall the City be obliged to consider any proposed assignment by City if Contractor is in default at any time during the period of consideration.

13.6 Subcontracting
Except as approved in writing by the City, Contractor shall not enter into an agreement to have another Person perform Contractor's duties of this Agreement. Contractor shall undertake to pay City its reasonable expenses for attorney's fees and investigation costs necessary to investigate the suitability of any proposed subcontractor, and lo review and finalize any documentation required as a condition for approving any such subcontracting agreement.

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13.7 Binding on Assigns
The provisions of this Agreement shall inure to the benefit to and be binding on the permitted assigns of the parties.

13.8 Transition to Next Contractor
If the transition of services to another Contractor occurs through expiration of term, default and termination, or otherwise, Contractor will cooperate with City and subsequent Contractor(s) to assist in an orderly transition which will include Contractor providing route lists and billing information.

Contractor will not be obliged to sell collection vehicles or Containers to the next Contractor.

Depending on Contractor’s circumstances at the point of transition, Contractor at its option may enter into negotiations with the next Contractor to sell (in part or all) Collection vehicles and/or containers.

13.9 Parties in Interest
Nothing in the Agreement, whether express or implied, is intended to confer any rights on any persons other than the parties to it and their representatives, successors and permitted assigns.

13.10 Waiver
The waiver by either party of any breach or violation of any provisions of this Agreement shall not be deemed to be a waiver of any breach or violation of any other provision nor of any subsequent breach of violation of the same or any other provision. The subsequent acceptance by either party of any monies which become due hereunder shall not be deemed to be a waiver of any pre-existing or concurrent breach or violation by the other party of any provision of this Agreement.

13.11 Contractor's Investigation
Contractor has relied on its own investigations, and not on any representations of the City or its agents of the conditions and circumstances surrounding the Agreement and the work to be performed by it.

13.12 Notice
All notices, demands, requests, proposals, approvals, consents and other communications which this Agreement requires, authorizes or contemplates shall be in writing and shall either be personally delivered to a representative of the parties at the address below or be deposited in the United States mail, first class postage prepaid, addressed as follows:

If to City: Utilities Director
City of San Luis Obispo
879 Morro Street
San Luis Obispo, CA 93401
If to Contractor: ________________
San Luis Garbage Company
4388 Old Santa Fe Springs Road
San Luis Obispo, CA 93401
The address to which communications may be delivered may be changed from time to time by a notice given in accordance with this Section. The notice, if mailed, is deemed served three (3) days after the mailing.

13.13 Representatives of the Parties
References in this Agreement to the "City" shall mean the City Council and all actions to be taken by City shall be taken by the City Council except as provided below. The City Council may delegate, in Deleted: Mike Dean

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writing, authority to the City Manager, Utilities Director, and/or to the City employees and may permit such employees, in turn, to delegate in writing some or all of such authority to subordinate employees. Contractor may rely upon actions taken by such delegates if they are within the scope of the authority properly delegated to them.

Contractor shall, by the Effective Date, designate in writing a responsible officer who shall serve as the representative of Contractor in all matters related to the Agreement and shall inform City in writing of such designation and of any limitations upon their authority to bind Contractor. City may rely upon action taken by such designated representative as actions of Contractor unless they are outside the scope of the authority delegated to them by Contractor as communicated to City.

13.14 City Free to Negotiate with Third Parties
City may investigate all options for the Collection and processing of Food and Green Waste after the expiration of the Term. Without limiting generality of the foregoing, City may solicit proposals from Contractor and from third parties for the provision of Food and Green Waste services, and any combination thereof, and may negotiate and execute Agreements for such services which will take effect upon the expiration or earlier termination under Section 12.1 (Events of Default) of this Agreement.

13.15 Compliance with City Code
Contractor shall comply with those provisions of the City code which arc applicable, and with any and all amendments to such applicable provisions during the Term of this Agreement.

13.16 Privacy
Contractor shall strictly observe and protect the rights of privacy of customers. Information identifying individual customers or the composition or contents of a customer's waste stream shall not be revealed to any person, governmental unit, private agency, or contractor, unless upon the authority of a court of law, by statute, or upon valid authorization of the customer. This provision shall not be construed to preclude Contractor from preparing, participating in, or assisting in the preparation of waste characterization studies or waste stream analyses which may be required by AB 939.

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ARTICLE 14.

MISCELLANEOUS AGREEMENTS

14.1 Entire Agreement
This Agreement, including the exhibits, represents the full and entire Agreement between the parties with respect to the matters covered herein.

14.2 Section Headings
The article headings and section headings in this Agreement are for convenience of reference only and arc not intended to be used in the construction of this Agreement nor to alter or affect any of its provisions.

14.3 References to laws and Other Agreements
All references in this Agreement to laws shall be understood to include such laws as they may be subsequently amended or recodified, unless otherwise specifically provided. This Agreement supersedes any and all Agreements for Food and Green Waste Collection, processing and/or marketing heretofore entered into by the parties and the City.

14.4 Interpretation
This Agreement, including the exhibits attached hereto, shall be interpreted and construed reasonably and neither for nor against either party, regardless of the degree to which either party participated in its drafting.

14.5 Agreement
This Agreement may not be modified or amended in any respect except by a writing signed by the parties.

14.6 Severability
If any non-material provision of this Agreement is for any reason deemed to be invalid and unenforceable, the invalidity or unenforceability of such provision shall not affect any of the remaining provisions of this Agreement which shall be enforced as if such invalid or unenforceable provision had not been contained herein.

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EXHIBIT A
A. Exhibit A – Recordkeeping and Reporting is hereby incorporated into the Agreement, as attached to this Amendment.

EXHIBIT A

RECORD KEEPING AND REPORTING
A.1 General
Contractor shall maintain such accounting, statistical, and other records related to its performance under this Agreement as shall be necessary to develop the reports required by this Agreement or City Municipal Code. Contractor agrees to conduct data collection, information and record keeping, and reporting activities needed to comply with Applicable Laws and regulations and to meet the reporting and Discarded Materials Collection, Processing, and Disposal program management needs of the City. At the written direction or approval of City, the records and reports to be maintained and provided by Contractor in accordance with this Exhibit and other Articles of the Agreement may be adjusted in number, format, and frequency, if required to comply with State or Federal regulatory or reporting requirements.

Information from Contractor’s records and reports can be used to, among other things:

Determine and set Rates and evaluate the financial efficacy of operations; Evaluate past and expected progress toward achieving the Contractor’s Landfill Disposal reduction or Diversion goals and objectives;
Provide concise and comprehensive program information and metrics for use in fulfilling reporting requirements under Applicable Law;
Determine needs for adjustment to programs;
Evaluate Customer service and Complaints; and,
Determine Customer compliance with AB 341, AB 1826, and SB 1383 statutes and corresponding regulations; and, any subsequent State-mandated landfill Disposal reduction, Recycling, recovery, or Diversion statutes, regulations, or other requirements.

A.2 Record Keeping
A. General. Contractor shall maintain Customer contact data, Customer service, accounting, statistical, operational, and other records related to its performance as shall be necessary to provide reporting required by this Agreement and Applicable Law and to demonstrate compliance with this Agreement and Applicable Law (such as, but not limited to, AB 939, AB 341, AB 1826, AB 876, AB 901, and SB 1383 statutes and corresponding regulations).

Record keeping and reporting requirements specified in this Agreement shall not be considered a comprehensive list of reporting requirements. In particular, this Exhibit is intended to highlight the general nature of records and reports and their minimum content and is not meant to comprehensively define the scope and content of the records and reports that Contractor is required to maintain and report by Applicable Law or this Agreement. Upon written direction or approval of City, the records and reports required by Contractor in accordance with this and other Articles of the Agreement shall be adjusted in number, format, or frequency.

Contractor shall maintain adequate records, and corresponding documentation, of information required by this Exhibit, such that the Contractor is able to produce accurate monthly and annual reports and is able to provide records to verify such reports. Contractor will make these records available and provide to the City any record or documentation necessary for the City to fulfill obligations under Applicable Law including, but not limited to, AB 939, AB 341, AB 1826, AB 876, AB 901, and SB 1383 statutes and corresponding regulations; and, other current or future Federal, State, or local statutes and regulations, as amended. Upon request by the City, Contractor shall Deleted: ¶
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provide access to Contractor’s requested records in a timely manner, not to exceed ten (10) Business Days from the time of City’s request to Contractor.

B. Record Retention and Security. Records shall be maintained in forms and by methods that facilitate flexible use of data contained in them to structure reports, as needed, pursuant to this Exhibit.

Contractor’s records shall be stored in one central location, physical or electronic, that can be readily accessed by Contractor. City reserves the right to require the Contractor to maintain the records required herein through the use of a City-selected web-based software platform, at Contractor’s expense. Unless otherwise required in this Exhibit, Contractor shall retain all records and data required to be maintained by this Agreement for the Term of this Agreement plus five (5) years after its expiration or earlier termination.

Records and data shall be in chronological and organized form and readily and easily interpreted.

Contractor shall maintain adequate record security to preserve records from events that can be reasonably anticipated such as a fire, theft, and an earthquake. Electronically-maintained data and records shall be protected and backed-up. To the extent that Contractor utilizes its computer systems to comply with record keeping and reporting requirements under this Agreement, Contractor shall, on a monthly basis, save all system-generated reports supporting those record keeping and reporting requirements in a static format in order to provide an audit trail for all data required.

C. Compilation of Information for State Law Purposes. Contractor shall maintain accurate records for its operation, including, but not limited to, Discarded Materials quantities Collected and quantities Transported to or Transferred to each Approved Facility, listed separately by material type, Customer type, and Facility. Records shall be maintained in such form by methods that facilitate the use of data for the production of reports as needed. Contractor will make these records available and provide to the City, any record or documentation necessary for the City to fulfill obligations under Applicable Law including, but not limited to, AB 939, AB 341, AB 1826, AB 876, AB 901, AB 1595, and SB 1383 statutes and corresponding regulations; and, other current or future local, Federal or State statutes and regulations, as amended.

A.3 Reporting
A.3.1 General
A. General Purpose. Reports are intended to compile recorded data into useful forms of information that can be used by the City. All reports shall be adequate to meet City’s current and future reporting requirements to CalRecycle, including AB 939, AB 341, AB 1826, and SB 1383 statutes and corresponding regulations, or any other State or Federal agency statutes and regulations throughout the Term of this Agreement.

B. Failure to Report. Failure of Contractor to comply with the reporting requirements as set forth in this Section may result in an assessment of Liquidated Damages in accordance with the Liquidated Damages provision in Section 12.3 of this Agreement. Contractor’s repeated failure to submit reports, and/or failure to submit reports on time, may be deemed an event of default and may result in the termination of the Agreement at the discretion of the City Manager, in accordance with Article 12 of this Agreement.

C. Report Format. Contractor shall submit all reports to the City electronically via e-mail using software acceptable to the City. The City reserves the right to require the Contractor to maintain records and submit the reports required herein through use of the City-selected web-based software platform and/or Microsoft Excel spreadsheet, at the Contractor’s expense.

D. Submittal Process. Reports shall be submitted to the Utilities Director per Section 9.2 of the Organic Materials Services Agreement. Reports shall be submitted electronically via email or Deleted: B.

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uploaded to a document sharing platform agreed upon by the Parties. City reserves the right to require the Contractor to maintain records and submit the reports required herein through use of a Cityselected web-based software platform, at the Contractor’s expense.

Monthly reports shall be submitted within twenty (20) calendar days after the end of the reporting month; and annual reports shall be submitted before June 30th, for the previous reporting year.

A.3.2 Monthly Reports
Monthly reports shall be submitted by Contractor to City and shall include the following information pertaining to the most recently completed calendar month. In addition, each monthly report shall include a year-to-date summary page that includes the data submitted from the monthly report(s) submitted in the calendar year prior to the submittal of the current monthly report. Contractor shall report the information included in the following subsections.

A. Tonnage Report

1. Contractor shall report the total quantities in Tons of Discarded Materials Collected, Transferred, Processed, and Disposed by the Contractor, all of which shall be based on actual certified scale weights for each load, if available, or similarly accurate methodology pursuant to weighing protocol. Tonnage shall be reported separately by:
a. Material type, which shall include, at a minimum, separate reporting of Source Separated Organic Materials and any other type of Discarded Material separately Collected by Contractor;
b. Customer/sector type (Single-Family, Multi-family, Commercial, Roll-off, C&D); and, c. Approved Facility and Facility type.

2. Report Residue level and Tonnage for all Discarded Materials Processed, listed separately by material type Collected and Approved Facility(ies) used.

3. Source Separated Recyclable Materials Tonnage Marketed, by commodity, and including average commodity value for each, and Processing Residue Tonnage Disposed, listed separately by material type Collected and Approved Facility(ies) used.

4. Documentation of all Discarded Materials exported out of State, as provided in 14 CCR Sections 18800 through 18813.

B. Collection and Subscription Report

1. Number of Containers at each Service Level by Customer Type and program, including:
a. A summary of the total gallons of Cart service, cubic yards of Bin service, and pulls; and cubic yards or Tons of Drop Box and Compactor service by Customer Type. b. Calculation of the average volume of service received per: Single-Family Dwelling Unit (separately identifying Dwelling Units in a duplex, triplex, or fourplex); Multi-Family Dwelling Unit; and Commercial Customer.

2. A summary of Customer subscription data, including the number of accounts; the number of Customers subscribing to each Cart, Bin, and Roll-Off Service Level listed separately for Single-Family, Multi-Family, and Commercial and separately for each type of Discarded Material; the number and type of waivers (i.e., de minimis or physical space constraint) active for Customers for each type of Discarded material; and the number of Bulky Items Collections performed.

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C. Contamination Monitoring Report
The Contractor shall submit the following information regarding Contractor conducted contamination monitoring and issuance of Prohibited Container Contaminant Notices conducted pursuant to Section 5.4 of this Agreement:

1. Description of the Contractor’s Process for determining the level of contamination;

2. Summary report of Customer Notices issued, which for each notice shall include the date of issuance, Customer name, and service address.

3. A record of each inspection and contamination incident, which shall include, at a minimum:
a. Name of the Customer
b. Address of the Customer
c. The date the contaminated Container was observed
d. The staff who conducted the inspection
e. The total number of violations found and a description of what action was taken for each f. Copies of all notices issued to Generators with Prohibited Container Contaminants g. Any photographic documentation or supporting evidence.

Any other information reasonably requested by the City or specified in contamination monitoring provisions of this Agreement.

D. Customer Service Report

1. Contractor shall maintain a record of all SB 1383 non-compliance Complaints as defined in 14 CCR Section 18995.3 and responses and submit the following information:
a. Total number of SB 1383 non-compliance Complaints received and total number of SB 1383 non-compliance Complaints investigated
b. Copies of documentation recorded for each SB 1383 non-compliance Complaint received, which shall at a minimum include the following information:
i. The SB 1383 non-compliance Complaint as received;
ii. The name and contact information of the complainant, if the SB 1383 noncompliance Complaint is not submitted anonymously; iii. The identity of the alleged violator, if known;
iv. A description of the alleged violation; including location(s) and all other relevant facts known to the complainant;
v. Any relevant photographic or documentary evidence submitted to support the allegations in the SB 1383 non-compliance Complaint; and, vi. The identity of any witnesses, if known.
c. Copies of all SB 1383 non-compliance Complaint reports submitted by Contractor to the City.
d. Copies of all investigation reports submitted to the City which shall include at a minimum:
i. The SB 1383 non-compliance Complaint as received;
ii. The date the Contractor investigated the SB 1383 non-compliance Complaint; iii. Documentation of the findings of the investigation; iv. Any photographic or other evidence collected during the investigation; and, v. Contractor’s recommendation to the City on whether or not the entity investigated is in violation of SB 1383 Regulations based on the Contractor’s investigation.

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H. Compliance Monitoring and Enforcement Report

1. A summary of the total number of SB 1383 Regulatory non-compliance Complaints that were received and forwarded to the City or their designee.

2. The total number of contamination notices issued, categorized by type of Generator.

3. Copies of all Prohibited Container Contaminant Courtesy Pick-Up and Non-Collection Notices issued and educational materials issued to non-compliant Generators.

I. Public Education and Outreach Report

1. A copy of all education and outreach materials provided to Generators, or otherwise used for education and outreach efforts in accordance with this Agreement, including, but not limited to: flyers, brochures, newsletters, invoice messaging/billing inserts, and website and social media postings.

2. A record of the date and to whom the information was disseminated or direct contact made, in the form of a list that includes: the Generator’s name or account name, the type of education or outreach received; the distribution date, and the method of distribution.

3. For any mass distribution through mailings or bill inserts, the Contractor shall maintain a record of the date, a copy of the information distributed, and the type and number of accounts that received the information.

4. A copy of electronic media, including the dates posted of: social media posts, e-mail communications, or other electronic messages.

5. A summary of the status of the annual education plan of the reporting year, including activities conducted and the quantitative and/or qualitative results of those activities.

6. The annual public education plan required by Section 6.5 of the Agreement for the upcoming then-current calendar year. For example, Contractor submittal of a 2022 annual report in February 2023 shall include Contractor submittal of the annual public education plan for calendar year 2023.

A.3.4 Additional Reports
A. Upon Request Reporting. City reserves the right to request additional reports or documents in the case of unforeseen legislative or regulatory changes, requests from CalRecycle, or additional requirements imposed upon the City. The Contractor shall provide the requested reports, documents, or information within ten (10) Business Days upon receipt of the request or within a timeframe determined by the City Manager, which shall not to exceed ten (10) days.

B. Facility Capacity Planning Information. To the extent such information is available to Contractor, City may require Contractor to provide City with information of available Organic Waste Processing capacity for any Approved Processing Facilities, where available capacity may include identification of monthly Tons of additional Organic Waste such Approved Facilities have the ability to receive within permitted limits.

Contractor shall respond to City within sixty (60) days of City’s request for information regarding available new or expanded capacity, to the extent such information is available to Contractor and, at City’s option, may be required to submit reports on a more regular basis (such as monthly, quarterly, or annually). If Contractor uses a Subcontractor to perform some or all of the Facility-related services required by this Agreement, Contractor shall use commercially reasonable efforts to secure any City-requested Facility capacity planning information from its Subcontractor(s). The annual Facility capacity planning report shall comply with the following:

1. Include reports of current throughput and permitted capacity and available capacity for Organic Materials Processing for any Facility in the City that Processes Organic Materials.

Existing capacity may include identification of monthly Tons of additional Source Separated Recyclable Materials, Source Separated Organic Materials, and/or Solid Waste capacity such Facility has the ability to receive within permitted limits.

2. Include description of potential new or expanded Processing capacity at those Facilities,

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operations, and activities for Processing of Organic Materials, including information about throughput and permitted capacity necessary for planning purposes.

3. Be submitted using a form or format approved by the City Manager.

IN WITNESS WHEREOF, City and Franchisee have executed this Agreement as of the day and year first above written.

The City of San Luis Obispo San Luis Garbage Company
“City” “Franchisee”
By: ___________________________ By: _______________________________ City Manager Name:

Title:

Attest:

City Clerk
Approved to Form:
________________________________
City Attorney
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ORDINANCE NO 1706 (2021 SERIES)

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AMENDING TITLE 8, CHAPTERS 8.04 AND 8.05

OF THE SAN LUIS OBISPO MUNICIPAL CODE
WHEREAS, State recycling law, Assembly Bill 939 of 1989, the California Integrated Waste Management Act of 1989 (California Public Resources Code Section 40000, et seq., as amended, supplemented, superseded, and replaced from time to time), requires cities and counties to reduce, reuse, and recycle (including composting) Solid Waste generated in their City to the maximum extent feasible before any incineration or landfill disposal of waste, to conserve water, energy, and other natural resources, and to protect the environment; and
WHEREAS, State recycling law, Assembly Bill 341 of 2011 ( approved by the Governor of the State of California on October 5, 2011, which amended Sections 41730, 41731, 41734, 41735, 41736, 41800, 42926, 44004, and 50001 of, and added Sections 40004, 41734.5, and 41780.01 and Chapter 12.8 (commencing with Section 42649) to Part 3 of Division 30 of, and added and repealed Section 41780.02 of, the Public Resources Code, as amended, supplemented, superseded and replaced from time to time), places requirements on Commercial Businesses and Multi-Family Premises that generate a specified threshold amount of Solid Waste to arrange for recycling services and requires jurisdictions to implement a mandatory Commercial recycling program; and WHEREAS, State Organics Materials recycling law, Assembly Bill 1826 of 2014 approved by the Governor of the State of California on September 28, 2014, which added Chapter 12.9 (commencing with Section 42649.8) to Part 3 of Division 30 of the Public Resources Code, relating to Solid Waste, as amended, supplemented, superseded, and replaced from time to time), requires Commercial Businesses and Multi-Family Premises that generate a specified threshold amount of Solid Waste, Recyclable Materials, and Organic Materials per week to arrange for recycling services for that waste, requires jurisdictions to implement a recycling program to divert Organic Materials from Commercial Businesses and Multi-Family Premises subject to the law, and requires jurisdictions to implement a mandatory Commercial Organic Materials recycling program; and
WHEREAS, SB 1383, the Short-lived Climate Pollutant Reduction Act of 2016, requires CalRecycle to develop regulations to reduce Organic Waste in landfills as a source of methane. The regulations place requirements on multiple entities including jurisdictions, residential households, Multi-Family Premises, Commercial Businesses, Commercial Edible Food Generators, haulers, Self-Haulers, Food Recovery Organizations, and Food Recovery Services to support achievement of the SB 1383 statewide Organic Waste disposal reduction targets; and DocuSign Envelope ID: EC05CE7A- BEB0- 41AF-ADF1- 5432C79D7715

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WHEREAS, SB 1383, the Short-lived Climate Pollutant Reduction Act of 2016, requires jurisdictions to adopt and enforce an ordinance or enforceable mechanism to implement relevant provisions of SB 1383 Regulations. This ordinance will also help reduce food insecurity by requiring Commercial Edible Food Generators to arrange to have the maximum amount of their Edible Food, that would otherwise be disposed, be recovered for human consumption.

NOW THEREFORE, BE IT ORDAINED by the City Council of the City of San Luis Obispo as follows:

SECTION 1: Environmental Review. The proposed ordinance is exempt per California Environmental Quality Act ( CEQA) Guidelines Section 15061(b)(3), the Common Sense” exemption because the proposed action consists only of the adoption of new standards and will have no physical effects on the environment and has no possibility of a significant effect on the environment.

SECTION 2: Chapter 8.04 ( Solid Waste Disposal) of the San Luis Obispo Municipal Code is hereby amended as follows:

8.04 Solid Waste, Recycling, and Organic Waste
Sections:

8.04.010 Definitions.

8.04.020 Accumulation—Type and placement of containers.

8.04.030 Transportation.

8.04.040 Collection required at least once a week.

8.04.050 Health officer and city engineer to direct removal.

8.04.060 Disposal site.

8.04.070 Use of disposal service mandatory—Collection of charges.

8.04.080 Collection rates.

8.04.090 Condition of collection trucks.

8.04.100 Refuse—Burning or burying.

8.04.110 Emergency removal.

8.04.120 Disposal by producer.

8.04.130 Certain hauling prohibited.

8.04.140 Health regulations—Establishment.

8.04.150 Franchise for collection—Authorization.

8.04.160 Placement of receptacles for pickup—Disputes settlement.

8.04.170 Dumping on private or public premises prohibited.

8.04.180 Owners responsibility to maintain premises free of debris and waste matter.

8.04.190 Placing of handbills or advertising matter in or upon vehicles.

8.04.200 Storage of certain vehicles prohibited.

8.04.210 Clearing of waste matter, debris and vehicles from private property.

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8.04.211 Mandatory organic waste disposal requirements for single-family premises.

8.04.212 Mandatory organic waste disposal requirements for multi-family residential dwellings.

8.04.213 Mandatory organic waste disposal requirements for commercial businesses.

8.04.214 Organic waste and/or organics collection waivers for multi-family premises and commercial premises.

8.04.215 Requirements for commercial edible food generators.

8.04.216 Requirements for food recovery organizations and services.

8.04.217 Requirements for haulers and facility operators.

8.04.218 Recyclable and organic materials self-hauling requirements.

8.04.219 Inspections and investigations.

8.04.220 Enforcement.

8.04.230 Violation – Penalty.

SECTION 3: Chapter 8.04.010 ( Definitions) of the San Luis Obispo Municipal Code is hereby amended as follows:

Alternative Daily Cover (ADC)” has the same meaning as in Section 20690 of Title 27 of the California Code of Regulations.

Alternative Intermediate Cover (AIC)” has the same meaning as in Section 20700 of Title 27 of the California Code of Regulations.

Bin” means a container with capacity of approximately one (1) to eight (8) cubic yards, with a hinged lid, and with wheels (where appropriate), that is serviced by a front endloading collection vehicle, including bins with compactors attached to increase the capacity of the bin.

C&D (debris)” or “Construction and demolition debris” means building materials and solid waste resulting from construction, remodeling, repair, cleanup, or demolition operations that are not hazardous as defined in California Code of Regulations, Title 22 section 66261.3 et seq. This term includes, but is not limited to, asphalt, concrete, brick, gypsum wallboard, cardboard, and other associated packaging, roofing material, ceramic tile, carpeting, plastic pipe and steel.

CalRecycle” means California's Department of Resources Recycling and Recovery, which is the Department designated with responsibility for developing, implementing, and enforcing SB 1383 Regulations on jurisdictions (and others).

Cart” means a plastic container with a hinged lid and wheels that is serviced by an automated or semi-automated collection vehicle. A cart has capacity of 20, 35, 64 or 96 gallons (or similar volumes). “City disposal site” means and refers to that certain tract of land which the franchisee shall furnish and use as a place of depositing garbage, rubbish and C&D.

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Container(s)” mean bins, carts, compactors, and roll-offs.

Contractor” means a corporation organized and operating under the laws of the State and its officers, directors, employees, agents, companies, related-parties, affiliates, subsidiaries, and subcontractors.

Compactor” means a mechanical apparatus that compresses materials together with the container that holds the compressed materials or the container that holds the compressed materials if it is detached from the mechanical compaction apparatus. Compactors include two ( 2) to eight ( 8) cubic yard bin compactors serviced by front-end loader collection vehicles and ten (10) to fifty (50) cubic yard drop box compactors serviced by roll-off collection vehicles.

Commercial Business” or “Commercial” means a firm, partnership, proprietorship, jointstock company, corporation, or association, whether for-profit or nonprofit, strip mall, or industrial facility.

Commercial Edible Food Generator” includes a tier one or a tier two commercial edible food generator as defined in 14 CCR Section 18982(a)(73) and (a)(74). For the purposes of this definition, food recovery organizations and food recovery services are not commercial edible food generators pursuant to 14 CCR Section 18982(a)(7).

Compost” has the same meaning as in 14 CCR Section 17896.2(a)(4), (or any variation thereof) includes a controlled biological decomposition of organic materials yielding a safe and nuisance free compost product.

Creek” means a natural stream of water normally smaller than and often tributary to a river. May be seasonal in that it is dry during certain times of the year.

Customer” means the person whom contractor submits its billing invoice to and collects payment from for collection services provided to a premises. The customer may be either the occupant or owner of the premises.

Designee” means an entity that the city contracts with or otherwise arranges to carry out any of the city’s responsibilities of this chapter as authorized in 14 CCR Section 18981.2.

A designee may be a government entity, a hauler, a private entity, or a combination of those entities.

Developed Property” means any property which has been altered from its natural state by the construction or erection of materials located in, upon, or attached to something located in or upon the ground.

Discarded Materials” means recyclable materials, organic materials, and solid waste placed by a generator in a collection container and/or at a location for the purposes of collection excluding excluded waste.

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Drainageway” means a route or course along which water moves or may move to drain a region. These are generally manmade as compared to “creeks”.

Edible Food” means food intended for human consumption, or as otherwise defined in 14 CCR Section 18982(a)(18). For the purposes of this chapter or as otherwise defined in 14 CCR Section 18982(a)(18), “edible food” is not solid waste if it is recovered and not discarded. Nothing in this chapter or in 14 CCR, Division 7, Chapter 12 requires or authorizes the recovery of edible food that does not meet the food safety requirements of the California Health and Safety Code, including the California Retail Food Code.

Enforcement Action" means an action of the city to address non-compliance with this chapter including, but not limited to, issuing administrative citations, fines, penalties, or using other remedies.

Food Recovery” means actions to collect and distribute food for human consumption that otherwise would be disposed, or as otherwise defined in 14 CCR Section 18982(a)(24).

Food Recovery Organization” means an entity that engages in the collection or receipt of edible food from commercial edible food generators and distributes that edible food to the public for food recovery either directly or through other entities or as otherwise defined in 14 CCR Section 18982(a)(25), including, but not limited to:
1) A food bank as defined in Section 113783 of the Health and Safety Code; 2) A nonprofit charitable organization as defined in Section 113841 of the Health and Safety code; and,
3) A nonprofit charitable temporary food facility as defined in Section 113842 of the Health and Safety Code.

Food Recovery Service” means a person or entity that collects and transports edible food from a commercial edible food generator to a food recovery organization or other entities for food recovery, or as otherwise defined in 14 CCR Section 18982(a)(26). A food recovery service is not a commercial edible food generator for the purposes of this chapter and implementation of 14 CCR, Division 7, Chapter 12 pursuant to 14 CCR Section 18982(a)(7).

Food Waste” means source separated food scraps and food-soiled paper.

Franchisee” means and includes a person whom the city has granted the privilege of collecting and disposing of refuse, garbage, rubbish, and other solid waste produced within the limits of the city under the terms set out in this chapter, and under the provisions of the Charter of the city, as amended.

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Garbage” means and includes kitchen and table refuse, offal, swill and also every accumulation of animal and vegetable refuse, and other matter that attends the preparation, consumption, decay or dealing in or storage of meats, fish, fowl, birds, fruits or vegetables. It shall also include crockery, bottles, tin vessels, fireplace ashes and all or any refuse, save and excepting as defined in this section as rubbish or C&D.

Generator” means a person or entity that is responsible for the initial creation of one or more types of discarded materials.

Grocery Store” means a store primarily engaged in the retail sale of canned food; dry goods; fresh fruits and vegetables; fresh meats, fish, and poultry; and any area that is not separately owned within the store where the food is prepared and served, including a bakery, deli, and meat and seafood departments, or as otherwise defined in 14 CCR Section 18982(a)(30).

Hazardous Waste” means all substances defined as hazardous waste, acutely hazardous waste, or extremely hazardous waste by the State in Health and Safety Code 25110.02, §25115, and §25117 or in the future amendments to or recodifications of such statutes or identified and listed as solar panels from residential premises, and hazardous waste by the U.S. Environmental Protection Agency ( EPA), pursuant to the Federal Resource Conservation and Recovery Act ( 42 USC § 6901 et seq.), all future amendments thereto, and all rules and regulations promulgated thereunder.

High Diversion Organic Waste Processing Facility” means a facility that is in compliance with the reporting requirements of 14 CCR Section 18815.5(d) and meets or exceeds an annual average mixed waste organic content recovery rate of 50 percent between January 1, 2022 and December 31, 2024, and 75 percent after January 1, 2025, as calculated pursuant to 14 CCR Section 18815.5(e) for organic waste received from the mixed waste organic collection stream” as defined in 14 CCR Section 17402(a)(11.5); or, as otherwise defined in 14 CCR Section 18982(a)(33).

Incinerator” means and includes fireproof receptacles approved by the city engineer or fire chief, and used for disposing of combustible rubbish on private premises.

Inspection” means a site visit where a city reviews records, containers, and an entity’s collection, handling, recycling, or landfill disposal of recyclable materials, organic waste, solid waste or edible food handling to determine if the entity is complying with requirements set forth in this chapter, or as otherwise defined in 14 CCR Section 18982(a)(35).

Lake” means a considerable inland body of standing water, an expanded part of a river, a reservoir formed by a dam, or a lake basin intermittently or formerly covered by water.

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Large Event” means an event, including, but not limited to, a sporting event or a flea market, that charges an admission price, or is operated by a local agency, and serves an average of more than 2,000 individuals per day of operation of the event, at a location that includes, but is not limited to, a public, nonprofit, or privately owned park, parking lot, golf course, street system, or other open space when being used for an event. If the definition in 14 CCR Section 18982(a)(38) differs from this definition, the definition in 14 CCR Section 18982(a)(38) shall apply to this chapter.

Large Venue” means a permanent venue facility that annually seats or serves an average of more than 2,000 individuals within the grounds of the facility per day of operation of the venue facility. For purposes of this chapter and implementation of 14 CCR, Division 7, Chapter 12, a venue facility includes, but is not limited to, a public, nonprofit, or privately owned or operated stadium, amphitheater, arena, hall, amusement park, conference or civic center, zoo, aquarium, airport, racetrack, horse track, performing arts center, fairground, museum, theater, or other public attraction facility. For purposes of this chapter and implementation of 14 CCR, Division 7, Chapter 12, a site under common ownership or control that includes more than one Large Venue that is contiguous with other large venues in the site, is a single large venue. If the definition in 14 CCR Section 18982(a)(39) differs from this definition, the definition in 14 CCR Section 18982(a)(39) shall apply to this chapter.

Multi-Family Residential Dwelling” or “ Multi-Family” or “ MFD” means of, from, or pertaining to residential Premises with five ( 5) or more dwelling units including such premises when combined in the same building with commercial establishments, that receive centralized, shared, collection service for all units on the premises which are billed to one ( 1) customer at one ( 1) address. Customers residing in townhouses, mobile homes, condominiums, or other structures with five (5) or more dwelling units who receive individual service and are billed separately shall not be considered multi-family. MultiFamily Premises do not include hotels, motels, or other transient occupancy facilities, which are considered commercial businesses.

Occupant” means the person who occupies a premises.

Organic Materials” means yard trimmings and food waste, individually or collectively that are set aside, handled, packaged, or offered for collection in a manner different from solid waste for the purpose of processing. No discarded material shall be considered to be organic materials, however, unless it is separated from recyclable material and solid waste. organic materials are a subset of organic waste.

Organic Materials Container” shall be used for the purpose of storage and collection of source separated organic materials.

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Organic Waste” means wastes containing material originated from living organisms and their metabolic waste products, including but not limited to food, green material, landscape and pruning waste, organic textiles and carpets, lumber, wood, paper products, printing and writing paper, manure, biosolids, digestate, and sludges or as otherwise defined in 14 CCR Section 18982(a)(46). Biosolids and digestate are as defined by 14 CCR Section 18982(a).

Owner” means the person(s) holding legal title to real property and/or any improvements thereon and shall include the person(s) listed on the latest equalized assessment roll of the County Assessor.

Premises” means and includes any land, building and/or structure, or portion thereof, in the city where discarded materials are produced, generated, or accumulated. all structures on the same legal parcel, which are owned by the same person shall be considered as one premises.

Prohibited Container Contaminants” means the following: (i) discarded materials placed in the recyclable materials container that are not identified as acceptable source separated recyclable materials for the city’s recyclable materials container; (ii) discarded materials placed in the organic materials container that are not identified as acceptable source separated organic materials for the city’s organic materials container; ( iii) discarded materials placed in the solid waste container that are acceptable source separated recyclable materials and/or source separated organic materials to be placed in city’s organic materials container and/or recyclable materials container; and, (iv) excluded waste placed in any container.

Recovery” means any activity or process described in 14 CCR Section 18983.1(b), or as otherwise defined in 14 CCR Section 18982(a)(49).

Recyclable Materials” means those discarded materials that the generators set out in recyclables containers for collection for the purpose of recycling by the service provider and that exclude excluded waste. No discarded materials shall be considered recyclable materials unless such material is separated from organic materials, and solid waste. recyclable materials shall include, but not be limited to aluminum, newspaper, clear and colored glass, tin and bi-metal, high density polyethylene ( HDPE), polyethylene terephthalate ( PET), cardboard, chipboard, and mixed paper. For the purpose of collection of recyclable materials through contractor’s collection services, recyclable materials shall be limited to those materials identified by the collection contractor as acceptable recyclable materials.

Recyclable Materials Container” shall be used for the purpose of storage and collection of source separated recyclable materials.

Refuse” means and includes garbage, rubbish or both.

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Refuse collector” means and includes the same as the term franchisee.

Residential” shall mean of, from, or pertaining to a single-family premises or multi-family premises including single-family homes, apartments, condominiums, townhouse complexes, mobile home parks, and cooperative apartments.

Responsible Party” means the owner, property manager, tenant, lessee, occupant, or other designee that subscribes to and pays for recyclable materials, organic materials, and/or solid waste collection services for a premises in the city, or, if there is no such subscriber, the owner or property manager of a single-family premises, multi-family premises, or commercial premises. In instances of dispute or uncertainty regarding who is the responsible party for a premises, responsible party shall mean the owner of a singlefamily premises, multi-family premises, or commercial premises.

Restaurant” means an establishment primarily engaged in the retail sale of food and drinks for on-premises or immediate consumption, or as otherwise defined in 14 CCR Section 18982(a)(64).

Rubbish” means and includes all combustible and noncombustible waste matter, excepting garbage ordinarily accumulating in and about residences, flats, buildings, apartment houses, lodging houses, hotels, restaurants, eating houses, stores, shops, offices and other public buildings. Among other things, it shall include tree trimmings, grass cuttings, dead plants and weeds, but shall not include C&D.

SB 1383” means Senate Bill 1383 of 2016 approved by the Governor on September 19, 2016, which added Sections 39730.5, 39730.6, 39730.7, and 39730.8 to the Health and Safety Code, and added Chapter 13.1 (commencing with Section 42652) to Part 3 of Division 30 of the Public Resources Code, establishing methane emissions reduction targets in a Statewide effort to reduce emissions of short-lived climate pollutants as amended, supplemented, superseded, and replaced from time to time.

SB 1383 Regulations” or “SB 1383 Regulatory” means or refers to, for the purposes of this chapter, the Short-Lived Climate Pollutants: Organic Waste Reduction regulations developed by CalRecycle and adopted in 2020 that created 14 CCR, Division 7, Chapter 12 and amended portions of regulations of 14 CCR and 27 CCR.

Self-Haul” means to act as a self-hauler.

Self-Hauler” means a person, who hauls solid waste, organic waste or recyclable material they have generated to another person. Self-hauler also includes a landscaper, or a person who back-hauls waste. back-haul means generating and transporting recyclable materials or organic waste to a destination owned and operated by the generator or responsible party using the generator’s or responsible party’s own employees and equipment.

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Service Level” refers to the size of a customer’s container and the frequency of collection service.

Single-Family” or “SFD” refers to any detached or attached house or residence of four 4) units or less designed or used for occupancy by one (1) family, provided that collection service feasibly can be provided to such premises as an independent unit, and the owner or occupant of such independent unit is billed directly for the collection service. Singlefamily includes townhouses, and each independent unit of duplex, tri-plex, or four-plex residential structures, regardless of whether each unit is separately billed for their specific service level.

Solid Waste” has the same meaning as defined in State Public Resources Code Section 40191, which defines solid waste as all putrescible and non-putrescible solid, semisolid, and liquid wastes, including garbage, trash, refuse, paper, rubbish, ashes, industrial wastes, C&D debris, abandoned vehicles and parts thereof, discarded home and industrial appliances, dewatered, treated, or chemically fixed sewage sludge which is not hazardous waste, manure, vegetable or animal solid and semi-solid wastes, and other discarded solid and semisolid wastes, with the exception that Solid Waste does not include any of the following wastes:
1) Hazardous waste, as defined in the State Public Resources Code Section 40141.
2) Radioactive waste regulated pursuant to the State Radiation Control Law Chapter 8 (commencing with Section 114960) of Part 9 of Division 104 of the State Health and Safety Code).
3) Medical waste regulated pursuant to the State Medical Waste Management Act (Part 14 (commencing with Section 117600) of Division 104 of the State Health and Safety Code). Untreated medical waste shall not be disposed of in a solid waste landfill, as defined in State Public Resources Code Section 40195.1. Medical waste that has been treated and deemed to be Solid Waste shall be regulated pursuant to Division 30 of the State Public Resources Code.
4) Recyclable materials, organic materials, and construction and demolition debris when such materials are source separated.

Solid waste includes salvageable materials only when such materials are included for collection in a solid waste container not source separated from solid waste at the site of generation.

Solid Waste Container” shall be used for the purpose of storage and collection of solid waste.

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Source Separated” or “ Source-Separated ( materials)” means materials, including commingled recyclable materials and organic materials, that have been separated or kept separate from the solid waste stream, at the point of generation, for the purpose of additional sorting or processing those materials for recycling or reuse in order to return them to the economic mainstream in the form of raw material for new, reused, or reconstituted products, which meet the quality standards necessary to be used in the marketplace, or as otherwise defined in 14 CCR Section 17402.5(b)(4). For the purposes of the chapter, source separated shall include separation of materials by the generator, responsible party, or responsible party’s employee, into different containers for the purpose of collection such that source-separated materials are separated from solid waste for the purposes of collection and processing.

Source Separated Organic Materials” means organic materials that are source separated and placed in an organic materials container.

Source Separated Recyclable Materials” means recyclable materials that are source separated and placed in a recyclable materials container.

Tier Two Commercial Edible Food Generator” means a commercial edible food generator that is one of the following:
1) Restaurant with 250 or more seats, or a total facility size equal to or greater than 5,000 square feet.
2) Hotel with an on-site food facility and 200 or more rooms. 3) Health facility with an on-site food facility and 100 or more beds. 4) Large venue.
5) Large event.
6) A State agency with a cafeteria with 250 or more seats or total cafeteria facility size equal to or greater than 5,000 square feet.
7) A local education agency facility with an on-site food facility.

If the definition in 14 CCR Section 18982(a)(74) of tier two commercial edible food generator differs from this definition, the definition in 14 CCR Section 18982(a)(74) shall apply to this chapter.

Ton” or “Tonnage” means a unit of measure for weight equivalent to two thousand (2,000) standard pounds where each pound contains sixteen (16) ounces.

Waste” means solid waste and source-separated waste.

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SECTION 4: Section 8.04.020 (Accumulation – Type and placement of containers) of the San Luis Obispo Municipal Code is hereby amended as follows:

No person shall deposit, keep, accumulate or permit any C&D debris, source separated materials, or other solid waste to be deposited, kept or accumulated upon any lot or parcel of land, or on any public or private place, creek, lake or drainageway, street, lane, alley or drive, unless the same shall be kept, deposited or allowed to accumulate as provided in this chapter.

A. Waste. No person shall keep, accumulate or permit to be kept or accumulated any waste upon any lot or parcel of land, or on any public or private place, street, lane, alley or drive, unless the same shall be in metal or plastic receptacles provided or approved by the franchisee. The maximum weight of a receptacle and its contents at collection time shall not exceed seventy-five pounds. Each receptacle shall be provided with close-fitting metal or plastic lids or covers which shall be kept closed at all times except when necessarily opened to permit waste to be taken therefrom or deposited therein. Each receptacle shall be kept in a clean, neat, sanitary condition at all times. The outside of each receptacle, including its cover, shall be kept clean from accumulating grease or decomposing material. Waste shall not be kept in any creek, lake or drainageway whether it is in a receptacle or not.

B. Location of Waste Containers. Each container provided or approved by the franchisee shall be kept or placed entirely above ground level at a location which is convenient for access by collection personnel during the time for collection, as follows:

1. Where there is an alley, other than a blind alley, in the rear of the premises, such container shall be placed on the premises within five feet of the rear property line.

2. Where there is no alley, such container shall be placed on the premises within twenty feet of the rear of the restaurant, cafe, cafeteria, hospital, hotel, boardinghouse, and other like eating places, apartment houses, or dwelling from which waste is accumulated. It may not be placed in any creek, lake or drainageway.

C. Containers which do not comply with the requirements as stipulated in this chapter or which deteriorate to the point where they do not comply will be tagged by the franchisee and, if not replaced by the next regular collection day, will be considered as waste and will be removed by the franchisee in the same manner as any other waste.

D. No person shall place, store or otherwise keep any waste container in a receptacle or pit in an exterior location which is not entirely above ground level.

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E. Waste containers shall not be placed adjacent to the street for pickup more than twenty-four hours before pickup time, and such containers shall be removed within the twelve-hour period following pickup, except in the Business Improvement Area (as defined in Chapter 12.36). In the Business Improvement Area, waste containers shall not be placed adjacent to the street for pickup before 5:00 p.m. or the close of business on the day preceding pickup, whichever is later. Such containers shall be removed before 10:00 a.m. following pickup.

F. No person shall place any waste into a waste container without permission of the owner or tenant of the property on which the container sits. (Ord. 1192 § 1, 1990; Ord. 1176 § 1, 1990; Ord. 1040 (part), 1985; prior code § 5200.1) SECTION 5: Section 8.04.030 (Transportation) of the San Luis Obispo Municipal Code is hereby amended as follows:

A. Solid Waste and C&D Debris Transportation. No solid waste or C&D debris shall be removed and carried on and along the streets and alleys of the city except that the same be carried, conveyed or hauled in conveyances so constructed as to be absolutely dustproof, and so arranged as not to permit dust or other matter to shift through or fall upon the streets and alleys. The contents of such conveyances must be further protected so as to prevent the same from being blown upon the streets, alleys and adjacent lands.

B. Wet Waste Transportation. No wet waste shall be removed and carried on or along any street or alley of the city except the same be transported in watertight containers with proper covers, so that the waste shall not be offensive and every such container shall be kept clean and the waste shall be so loaded that none of it shall fall, drip or spill to or on the ground, sidewalk or pavement. (Prior code § 5200.2)
SECTION 6: Section 8.04.040 (Collection required at least once a week) of the San Luis Obispo Municipal Code is hereby amended as follows:

All waste of any kind, shall be removed by the city, its agent, employees, or permittees or representatives, at least once every seven days, unless otherwise directed by the city health office or the city engineer. (Prior code § 5200.3) SECTION 7: Section 8.04.050 (Health officer and city engineer to direct removal) of the San Luis Obispo Municipal Code is hereby amended as follows:

It shall be the duty of any franchisee engaged in or conducting the business of collecting waste to remove waste to which the attention of the franchisee may be directed by the health officer or city engineer, and where waste is accumulated and thence removed, any and all the cost of the removal of waste shall be collected in accordance with the provisions of this chapter. (Prior code § 5200.4)
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SECTION 8: Section 8.04.060 ( Disposal site) subsection ( A) of the San Luis Obispo Municipal Code is hereby amended as follows:

A. The franchisee shall contract with the operator of a disposal site situated without the city limits for disposal of waste collected within the city. All waste collected within the city and not separated for recycling or composting shall be delivered to the disposal site and disposed of according to the regulations of the disposal site.

SECTION 9: Section 8.04.070 (Use of disposal service mandatory – collection of charges) of the San Luis Obispo Municipal Code are hereby amended as follows:

A. The city has determined that periodic collection and disposal of waste from all developed properties in the city benefits all occupants of developed properties in the city.

B. The city will provide waste collection and disposal service through its franchisee; and all developed properties in the city must use the city’s waste collection and disposal service, except that there may be joint or multiple use of waste containers, subject to conditions established by the city.

C. The franchisee shall collect all fees for waste collection and disposal.

D. The owner of developed property shall be responsible and liable for paying the waste collection and disposal fees for that property, although the franchisee will bill a tenant if requested by the owner.

E. The owner of developed property shall be responsible for modifying frequency and volume of waste collection and disposal service to remain compliant with this chapter.

F. Once each year, prior to a date established by the city, the franchisee may take the following actions to collect delinquent waste collection and disposal accounts:

1. Present to the city a list of property owners ( with corresponding parcel numbers) within the city whose accounts are more than one hundred twenty days past due;

2. Send a certified letter requesting payment to each property owner with a delinquent account;

3. At least thirty days after receiving delivery certification for payment requests, present to the city a list of property owners (with corresponding parcel numbers) whose accounts are still past due.

G. After the franchisee has completed all of the actions listed in paragraph E, the city council will adopt a resolution authorizing the San Luis Obispo county assessor to assess the amounts due on delinquent accounts as liens against the properties. The franchisee shall bear the full cost of any fees charged by the San Luis Obispo county assessor to lien affected properties. (Ord. 1176 3, 1990: prior code § 5200.6)
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SECTION 10: Section 8.04.080 (Collection rates) of the San Luis Obispo Municipal Code is hereby amended as follows:

Collection rates for waste disposal shall be set by a resolution of the council. (Prior code 5200.6A)
SECTION 11: Section 8.04.090 ( Condition of collection trucks) of the San Luis Obispo Municipal Code is hereby amended as follows:

Every truck used in the collection and removal of waste shall be kept well painted, clean inside and out, and in a prominent place on each truck display the following sign with appropriate number:

SOLID WASTE” or “RECYCLING” or “ORGANIC WASTE” SERVICE
San Luis Obispo, California
No. ____________
Prior code § 5200.7)
SECTION 12: Section 8.04.100 (Refuse – Burning or burying) of the San Luis Obispo Municipal Code is hereby amended as follows:

8.04.100 Waste—Burning or burying.

A. No waste matter shall be burned in the open air within the city, except barbecue fires.

B. No waste matter which shall, in burning, cause or create a dense or offensive smoke, shall be burned upon any premises within the corporate limits of the city, whether in an incinerator or not, except as noted in subsection A of this section.

C. No waste shall be disposed of by burying the same underground, except that waste may be made use of for the filling of low areas within the city when it is properly leveled and covered with dirt and upon written permission of the health officer or city engineer. (Prior code § 5200.8)
SECTION 13: Section 8.04.120 (Disposal by producer) of the San Luis Obispo Municipal Code is hereby amended as follows:

A. Nothing in this chapter contained shall be construed to prohibit any producer of waste from personally hauling in producer’s vehicle, through the streets of the city and disposing of same at the city disposal site; provided, that such hauling and disposal shall at all times be subject to the approval of the health officer.

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B. The person in charge of any vehicle used to haul waste under the permission granted by the provisions of this chapter shall, on request from the custodian of or person in charge at the city disposal site, exhibit satisfactory evidence showing that such waste accumulated in, and was hauled from, the city, and that the producer thereof is a resident of the city.

C. The permission granted by the provisions of this chapter shall not include the right to haul and dispose of dead animals, C&D debris, old automobile bodies or frames, nor any refuse or rubbish originating in a commercial establishment where the quantity exceeds one cubic yard.

D. The city is authorized, by resolution duly adopted by the council, to provide that any person who shall haul his or her own solid waste and dispose of the same at the city disposal site shall pay to the franchisee holding a franchise from the city, a fee for such privilege. The rate of such fee shall be established by such resolution and may be changed from time to time by the council by resolution duly adopted by the council. (Prior code § 5200.10)
SECTION 14: Section 8.04.130 (Certain hauling prohibited) of the San Luis Obispo Municipal Code is hereby amended as follows:

No person, other than the franchisee, shall collect, remove or haul solid wastesover the streets of the city; provided, however, that this section shall not apply to producer-hauling as provided in Section 8.04.120, nor to persons who have a permit from the health officer or city engineer for emergency removal of the same. (Prior code § 5200.11) SECTION 15: Section 8.04.140 (Health regulations—Establishment) of the San Luis Obispo Municipal Code is hereby amended as follows:

The city engineer in conjunction with the health officer have power to establish rules and regulations not inconsistent with this chapter governing the collection and disposal of waste; provided, that such rules and regulations shall have as their purpose the enforcement of the provisions of this chapter and the health and sanitary laws and ordinances in effect in the city. (Prior code § 5200.12) SECTION 16: Section 8.04.150 (Franchise for collection—Authorization) of the San Luis Obispo Municipal Code is hereby amended as follows:

For the collection and disposal of waste a franchise may be granted by the city in accordance with and subject to the terms and conditions of this chapter and the City Charter. (Prior code § 5200.14)
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SECTION 17: Section 8.04.160 (Placement of receptacles for pickup—Disputes settlement) of the San Luis Obispo Municipal Code is hereby amended as follows:

In all cases of disputes or complaints arising from or concerning the place where the waste containers shall be placed while awaiting the removal of their contents, or concerning the cost of such removal, the same shall be determined by the city council or the health officer, and such decision shall be final. (Prior code § 5200.15) SECTION 18: Section 8.04.170 (Dumping on private or public premises prohibited) of the San Luis Obispo Municipal Code is hereby amended as follows:

No person shall dump, deposit, keep or accumulate any C&D debris or any other waste material which, if thrown or deposited, tends to create a hazard to public health, safety and welfare on any public or private place, creek, lake, drainageway, street, lane, alley or drive, except the same be kept, deposited or allowed to accumulate temporarily, during the period of factual construction on premises under construction or alteration, and in a manner approved by the building inspector. Failure of a building permittee to clean up unapproved accumulations within three working days after the building inspector serves written notice upon the permittee or his or her agent so to do shall result in summary suspension of the building permit until such time as the condition is corrected to the satisfaction of the building inspector. The suspension authorized in this section shall be in addition to the misdemeanor penalties provided for elsewhere in this code. (Ord. 1040 part), 1985: prior code § 5200.16)
SECTION 19: Section 8.04.180 (Owners responsibility to maintain premises free of debris and waste matter) of the San Luis Obispo Municipal Code is hereby amended as follows:

The owner or person in control of any private property shall, at all times, maintain the premises free of waste, debris or any other waste material, except pursuant to a permit approved by the city engineer for fill and compaction work, and provided that this section and Section 8.04.170 shall not prohibit the storage of such waste materials in private receptacles for collection. (Prior code § 5200.17)
SECTION 21: Sections 8.04.211-8.04.219 of the San Luis Obispo Municipal Code are hereby added as follows:

8.04.211 Mandatory organic waste disposal reduction requirements for Single-Family Premises.

A. Except responsible parties of single-family premises that meet the self-hauler requirements in section 8.04.218 of this chapter, responsible parties of singlefamily premises shall comply with the following requirements:

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1. Subscribe to and pay for city’s three-container collection services for weekly collection of recyclable materials, organic materials, and solid waste generated by the single-family premises and comply with requirements of those services set forth in this chapter. The franchisee, city and its designee(s) shall have the right to review the number and size of a generator’s containers to evaluate adequacy of capacity provided for each type of collection service for proper separation of materials and containment of materials. The responsible parties for single-family premises shall adjust their service level for their collection services as requested by the city.

2. Participate in the city’s three-container collection service(s) in the manner described below.
a. Place, or, if responsible party is not an occupant of the single-family premises, direct its generators to place source separated organic materials, including food waste, in the organic materials container; source separated recyclable materials in the recyclable materials container; and solid waste in the solid waste container. b. Not place, or, if responsible party is not an occupant of the single-family premises, direct its generators to not place prohibited container contaminants in collection containers and not place materials designated for the organic materials containers or recyclable materials containers in the solid waste containers.

B. Nothing in this section prohibits a responsible party or generator of a singlefamily premises from preventing or reducing discarded materials generation, managing organic waste on site, and/or using a community composting site pursuant to 14 CCR Section 18984.9(c).

8.04.212 Requirements for Multi-Family Residential Dwelling.

A. Responsible parties of multi-family premises shall provide or arrange for recyclable materials, organic materials, and solid waste collection services consistent with this chapter and for employees, contractors, and tenants.

Responsible parties of multi-family premises may receive waivers pursuant to Section 8.04.214 for some requirements of this section.

B. Except for responsible parties of multi-family premises that meet the self-hauler requirements in Section 8.04.218 of this chapter, including hauling services arranged through a landscaper, responsible parties of multi-family premises shall:

1. Subscribe to and pay for city’s three or more-container collection services and comply with requirements of those services for all recyclable materials, organic materials, and solid waste generated at the multi-family premises as further described below in this section. The franchisee, city and its DocuSign Envelope ID: EC05CE7A- BEB0- 41AF-ADF1- 5432C79D7715

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designee(s) shall have the right to review the number and size of the generators’ collection containers and frequency of collection to evaluate adequacy of capacity provided for each type of collection service for proper separation of materials and containment of materials. The generator of a multi-family premises shall adjust their service level for their collection services as requested by the city or its designee.

2. Participate in the city’s three or more-container collection service(s) for at least weekly collection of recyclable materials, organic materials, and solid waste in the manner described below.
a. Place and/or direct its generators to place source separated organic materials, including food waste, in the organic materials container; source separated recyclable materials in the recyclable materials container; and solid waste in the solid waste container. b. Not place and/or direct its generators to not place prohibited container contaminants in collection containers and to not place materials designated for the organic materials containers or recyclable materials containers in the solid waste containers.

3. Supply and allow access to adequate number, size and location of collection containers with sufficient labels or colors for employees, contractors, tenants, and customers, consistent with city’s recyclable materials container, organic materials container, and solid waste container collection service or, if self-hauling, consistent with the multi-family premises’ approach to complying with self-hauler requirements in Section 8.04.218 of this chapter.

4. Annually provide best practice information to employees, contractors, tenants, and customers about recyclable materials and organic waste recovery requirements and about proper sorting of recyclable materials, organic materials, and solid waste.

5. Provide education information before or within fourteen ( 14) days of occupation of the premises to new tenants that describes requirements to source separate recyclable materials and organic materials and to keep source separated organic materials and source separated recyclable materials separate from each other and from solid waste (when applicable) and the location of containers and the rules governing their use at each property.

6. Provide or arrange access for city and/or its designee(s) to their properties during all inspections conducted in accordance with this chapter to confirm compliance with the requirements of this chapter.

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C. If the responsible party of a multi-family premises wants to self-haul, the responsible party must meet the self-hauler requirements in Section 8.04.218 of this chapter.

D. Multi-family premises that generate two (2) cubic yards or more of total solid waste, recyclable materials, and organic materials per week (or other threshold defined by the State) that arrange for gardening or landscaping services shall require that the contract or work agreement between the owner, occupant, or operator of a multi-family premises and a gardening or landscaping service specifies that the designated organic materials generated by those services be managed in compliance with this chapter.

E. Nothing in this section prohibits a responsible party or generator of a multifamily premises from preventing or reducing discarded materials generation, managing organic waste on site, or using a community composting site pursuant to 14 CCR Section 18984.9(c).

8.04.213 Requirements for Commercial Businesses.

A. Responsible parties of commercial businesses shall provide or arrange for recyclable materials, organic materials, and solid waste collection services consistent with this chapter and for employees, contractors, tenants, and customers. responsible parties of commercial premises may receive waivers pursuant to Section 8.04.214 for some requirements of this section.

B. Except responsible parties of commercial businesses that meet the self-hauler requirements in Section 8.04.218 of this chapter, including hauling services arranged through a landscaper, responsible parties of commercial premises shall:

1. Subscribe to and pay for city’s three or more-container collection services and comply with requirements of those services for all recyclable materials, organic materials, and solid waste generated at the commercial premises as further described below in this section. City and its designee(s) shall have the right to review the number and size of a commercial premises’ containers and frequency of collection to evaluate adequacy of capacity provided for each type of collection service for proper separation of materials and containment of materials. the responsible party of the commercial business shall adjust their service level for their collection services as requested by the city or its designee.

2. Participate in the city’s three or more-container collection service(s) for at least weekly collection of recyclable materials, organic materials, and solid waste in the manner described below.

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a. Place and/or direct its generators to place source separated organic materials, including food waste, in the organic materials container; source separated recyclable materials in the recyclable materials container; and solid waste in the solid waste container. b. Not place and/or direct its generators to not place prohibited container contaminants in collection containers and to not place materials designated for the organic materials containers or recyclable materials containers in the solid waste containers.

3. Supply and allow access to adequate number, size and location of collection containers with sufficient labels or colors for employees, contractors, tenants, and customers, consistent with city’s recyclable materials container, organic materials container, and solid waste container collection service or, if self-hauling, consistent with the commercial premises’ approach to complying with self-hauler requirements in Section 8.04.218 of this chapter.

4. Provide containers for customers for the collection of source separated recyclable materials and source separated organic materials in all indoor and outdoor areas where solid waste containers are provided for customers, for materials generated by that commercial business. Such containers shall be visible and easily accessible. Such containers do not need to be provided in restrooms. If a commercial business does not generate any of the materials that would be collected in one type of container, as demonstrated through an approved de minimis waiver per Section 8.04.214(A), then the responsible party of the commercial business does not have to provide that particular container in all areas where solid waste containers are provided for customers. Pursuant to 14 CCR Section 18984.9(b), the containers provided by the responsible party of the commercial business shall have either:
a. A container body or lid that conforms with the container colors provided through the collection service provided by city, with either lids conforming to the color requirements or bodies conforming to the color requirements or both lids and bodies conforming to color requirements.

The responsible party of the commercial business is not required to replace functional containers that do not comply with the requirements of this subsection prior to whichever of the following comes first: (i) the end of the useful life of those containers, or (ii) January 1, 2036. b. Container labels that include language or graphic images, or both, indicating the primary material accepted and the primary materials prohibited in that container, or containers with imprinted text or graphic images that indicate the primary materials accepted and primary materials prohibited in the container. Pursuant 14 CCR Section 18984.8, DocuSign Envelope ID: EC05CE7A- BEB0- 41AF-ADF1- 5432C79D7715

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the container labeling requirements are required on new containers commencing January 1, 2022.

5. To the extent reasonably practical through education, training, inspection, and/or other measures, prohibit employees from placing materials in a container not designated for those materials per the city’s recyclable materials container, organic materials container, and solid waste collection service or, if self-hauling, per the instructions of the commercial business’s responsible party to support its compliance with self-hauler requirements in Section 8.04.218 of this chapter.

6. Periodically inspect recyclable materials containers, organic materials containers, and solid waste containers for contamination and inform employees if containers are contaminated and of the requirements to keep contaminants out of those containers pursuant to 14 CCR Section 18984.9(b)(3).

7. Annually provide information to employees, contractors, tenants, and customers about recyclable materials and organic waste recovery requirements and about proper sorting of recyclable materials, organic materials, and solid waste.

8. Provide education information before or within fourteen ( 14) days of occupation of the premises to new tenants that describes requirements to source separate recyclable materials and organic materials and to keep source separated organic materials and source separated recyclable materials separate from each other and from other solid waste ( when applicable) and the location of containers and the rules governing their use at each property.

9. Provide or arrange access for city or its designee to their properties during all inspections conducted in accordance with this chapter to confirm compliance with the requirements of this chapter.

C. If the responsible party of a commercial business wants to self-haul, meet the self-hauler requirements in Section 8.04.218 of this chapter.

D. Nothing in this section prohibits a responsible party or a generator of a commercial business from preventing or reducing discarded materials generation, managing organic waste on site, or using a community composting site pursuant to 14 CCR Section 18984.9(c).

E. Responsible parties of commercial businesses that are tier one or tier two commercial edible food generators shall comply with food recovery requirements, pursuant to Section 8.04.215 of this chapter.

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8.04.214 Waivers for Multi-Family Premises and Commercial Premises.

A. De minimis waivers for multi-family premises and commercial premises. The city or its designee, may waive a responsible party’s obligation to comply with some or all recyclable materials and organic waste requirements set forth in this chapter if the responsible party of the commercial business or multi-family premises provides documentation that the commercial business or multi-family premises meets one of the criteria in subsections (1) and (2) below. For the purposes of subsections (1) and (2), the total solid waste shall be the sum of weekly container capacity measured in cubic yards for solid waste, recyclable materials, and organic materials collection service. Hauling through paper shredding service providers or other incidental services may be considered in granting a de minimis waiver.

1. The commercial business’s or multi-family premises’ total solid waste collection service is two (2) cubic yards or more per week and recyclable materials and organic materials subject to collection in recyclable materials container(s) or organic materials container(s) comprises less than twenty 20) gallons per week per applicable material stream of the multi-family premises’ or commercial business’s total waste (i.e., recyclable materials in the recyclable materials stream are less than twenty (20) gallons per week or organic materials in the organic materials stream are less than twenty 20) gallons per week); or,

2. The commercial business’s or multi-family premises’ total solid waste collection service is less than two (2) cubic yards per week and recyclable materials and organic materials subject to collection in a recyclable materials container(s) or organic materials container(s) comprises less than ten (10) gallons per week per applicable material stream of the multi-family premises’ or commercial business’s total waste (i.e., recyclable materials in the recyclable materials stream are less than ten (10) gallons per week or organic materials in the organic materials stream are less than ten ( 10) gallons per week).

B. Physical Space Waivers. The city or its designee may waive a commercial business’s or multi-family premises’ obligation to comply with some or all of the recyclable materials and/or organic waste collection service requirements if the city or its designee has evidence from its own staff, a hauler, licensed architect, or licensed engineer demonstrating that the premises lacks adequate space for recyclable materials containers and/or organic materials containers required for compliance with the recyclable materials and organic materials collection requirements of Section 8.04.212 or 8.04.213 as applicable. Commercial business’s and multi-family premises’ should defer to the City’s Engineering Standards for trash enclosure specifications.

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C. Review and approval of waivers (deminimis or physical space). Waivers shall be granted to responsible parties by the city or its designee according to the following process:

1. Responsible parties of premises seeking waivers shall submit a completed application form to the city’s designee, or the city if there is no designee, for a waiver specifying the waiver type requested, type(s) of collection services for which they are requesting a waiver, the reason(s) for such waiver, and documentation supporting such request.

2. Upon waiver approval, the city’s designee, or the city if there is no designee, shall specify that the waiver is valid for the following duration:
a. For commercial premises, five ( 5) years, or if property ownership changes, or if occupancy changes, whichever occurs first. b. For multi-family premises, five ( 5) years, or if property ownership changes, or if the property manager changes, whichever occurs first.

3. Waiver holder shall notify city’s designee, or the city if there is no designee, if circumstances change such that commercial business’s or multi-family premises’ may no longer qualify for the waiver granted, in which case waiver will be rescinded.

4. Any waiver holder must cooperate with the city and/or its designee for any on-site assessment of the appropriateness of the waiver.

5. Waiver holder shall reapply to the city’s designee, or the city if there is no designee, for a waiver upon the expiration of the waiver period and shall submit any required documentation, and/or fees/payments as required by the city and/or its designee. Failure to submit a completed application shall equate to an automatic denial of said application.

6. The city or its designee may revoke a waiver upon a determination that any of the circumstances justifying a waiver are no longer applicable.

7. If the city or its designee does not approve a waiver application or revokes a waiver, the waiver applicant may appeal the decision for additional review pursuant to Chapter 1.20. The city may also, after meeting and conferring with the designee, direct the designee to approve the waiver application and/or repeal the revocation of the waiver.

8.04.215 Requirements for Commercial Edible Food Generators.

A. Tier one commercial edible food generators must comply with the requirements of this section commencing January 1, 2022, and tier two commercial edible food generators must comply commencing January 1, 2024, pursuant to 14 CCR Section 18991.3.

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B. Large venue or large event operators not providing food services, but allowing for food to be provided by others, shall require food facilities operating at the large venue or large event to comply with the requirements of this section, commencing January 1, 2024.

C. Commercial edible food generators shall comply with the following requirements:

1. Arrange to recover the maximum amount of edible food that would otherwise be disposed. Food that is donated shall be free from adulteration, spoilage, and meet the food safety standards of the California Health and Safety Code. Food cannot be donated if it is not in compliance with the food safety standards of the California Health and Safety Code, including food that is returned by a customer, has been served or sold and in the possession of a consumer, or is the subject of a recall.

2. Contract with or enter into a written agreement with food recovery organizations or food recovery services for: (i) the collection of edible food for food recovery; or, (ii) acceptance of the edible food that the commercial edible food generator self-hauls to the food recovery organization for food recovery.

3. Not intentionally spoil edible food that is capable of being recovered by a food recovery organization or a food recovery service.

4. Allow city’s designated enforcement entity or designated third party enforcement entity to access the premises and review records pursuant to 14 CCR Section 18991.4.

5. Keep records that include the following information, or as otherwise specified in 14 CCR Section 18991.4:
a. A list of each food recovery service or organization that collects or receives its edible food pursuant to a contract or written agreement established under 14 CCR Section 18991.3(b).
b. A copy of all contracts or written agreements established under 14 CCR Section 18991.3(b).
c. A record of the following information for each of those food recovery services or food recovery organizations:
i. The name, address and contact information of the food recovery service or food recovery organization.
ii. The types of food that will be collected by or self-hauled to the food recovery service or food recovery organization.
iii. The established frequency that food will be collected or self-hauled. iv. The quantity of food, measured in pounds recovered per month, collected or self-hauled to a food recovery service or food recovery organization for food recovery.

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6. Maintain records required by this section for five (5) years.

7. No later than January 31 of each year commencing no later than January 31, 2023 for tier one commercial edible food generators and January 31, 2025 for tier two commercial edible food generators, provide an annual food recovery report to city’s designee, or the city if there is no designee, that includes the following information:
a. The amount, in pounds, of edible food donated to a food recovery service or food recovery organization annually; and,
b. The amount, in pounds of edible food rejected by a food recovery service or food recovery organization annually.
c. Any additional information required by the City Manager or their designee.

D. Nothing in this chapter shall be construed to limit or conflict with the protections provided by the California Good Samaritan Food Donation Act of 2017, the Federal Good Samaritan Act, or share table and school food donation guidance pursuant to Senate Bill 557 of 2017 (approved by the Governor of the State of California on September 25, 2017, which added Article 13 [commencing with Section 49580] to Chapter 9 of Part 27 of Division 4 of Title 2 of the Education Code, and to amend Section 114079 of the Health and Safety Code, relating to food safety, as amended, supplemented, superseded and replaced from time to time).

8.04.216 Requirements for Food Recovery Organizations and Services.

A. Food Recovery Services collecting or receiving edible food directly from commercial edible food generators, via a contract or written agreement established under 14 CCR Section 18991.3(b), shall maintain the following records, or as otherwise specified by 14 CCR Section 18991.5(a)(1):

1. The name, address, and contact information for each commercial edible food generator from which the service collects edible food.

2. The quantity in pounds of edible food collected from each commercial edible food generator per month.

3. The quantity in pounds of edible food transported to each food recovery organization per month.

4. The name, address, and contact information for each food recovery organization that the food recovery service transports edible food to for food recovery.

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B. Food recovery organizations collecting or receiving edible food directly from commercial edible food generators, via a contract or written agreement established under 14 CCR Section 18991.3(b), shall maintain the following records, or as otherwise specified by 14 CCR Section 18991.5(a)(2):

1. The name, address, and contact information for each commercial edible food generator from which the organization receives edible food.

2. The quantity in pounds of edible food received from each commercial edible food generator per month.

3. The name, address, and contact information for each food recovery service that the organization receives edible food from for food recovery.

C. Maintain records required by this section for five (5) years.

D. Food recovery organizations and food recovery services that have their primary address physically located in the city and contract with or have written agreements with one or more commercial edible food generators pursuant to 14 CCR Section 18991.3(b) shall report to the city it is located in and the city’s designee, if applicable, the total pounds of edible food recovered in the previous calendar year from the tier one and tier two commercial edible food generators they have established a contract or written agreement with pursuant to 14 CCR Section 18991.3(b). The annual report shall be submitted to the city’s designee, or the city if there is no designee, if applicable, no later than January 31 of each year.

E. In order to support edible food recovery capacity planning assessments or other studies conducted by the city that provides solid waste collection services, or its designated entity, food recovery services and food recovery organizations operating in the city shall provide information and consultation to the city’s designee, or the city if there is no designee, if applicable, upon request, regarding existing, or proposed new or expanded, food recovery capacity that could be accessed by the city and its commercial edible food generators. A food recovery service or food recovery organization contacted by the city and/or its designee shall respond to such request for information within 60 days, unless a shorter timeframe is otherwise specified by the city.

F. Nothing in this chapter prohibits a food recovery organization or food recovery service from refusing to accept edible food from a commercial edible food generator.

8.04.217 Requirements for Haulers and Facility Operators.

A. Requirements for Haulers
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1. Franchise hauler(s) providing recyclable materials, organic waste, and/or solid waste collection services to generators within the city’s boundaries shall meet the following requirements and standards as a condition of approval of its contract, agreement, permit, or other authorization with the city to collect recyclable materials, organic materials, and/or solid waste:
a. Through written notice to the city annually on or before January 31 of each year, identify the facilities to which they will transport discarded materials, including facilities for source separated recyclable materials, source separated organic materials, and solid waste unless otherwise stated in the franchise agreement, contract, permit, or license, or other authorization with the city.
b. Transport source separated recyclable materials to a facility that recovers those materials; transport source separated organic materials to a facility, operation, activity, or property that recovers organic waste as defined in 14 CCR, Division 7, Chapter 12, Article 2; transport solid waste to a disposal facility or transfer facility or operation that processes or disposes of solid waste; and transport manure to a facility that manages manure in conformance with 14 CCR Article 12 and such that the manure is not landfilled, used as alternative daily cover (ADC), or used as alternative intermediate cover (AIC).
c. Obtain approval from the city to haul organic waste, unless it is transporting source separated organic waste to a community composting site or lawfully transporting C&D in a manner that complies with 14 CCR Section 18989.1 and city’s Construction and Demolition Debris Recycling Program.

2. Franchise hauler(s) authorized to collect recyclable materials, organic materials, and/or solid waste shall comply with education, equipment, signage, container labeling, container color, contamination monitoring, reporting, and other requirements contained within its franchise agreement, permit, or other agreement entered into with city.

B. Requirements for Facility Operators and Community Composting Operations

1. Owners of facilities, operations, and activities located in the city’s boundaries that recover organic waste, including, but not limited to, compost facilities, in-vessel digestion facilities, and publicly-owned treatment works shall, upon city request, provide information regarding available and potential new or expanded capacity at their facilities, operations, and activities, including information about throughput and permitted capacity necessary for planning purposes. Entities contacted by the city shall respond within 60 days.

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2. Community composting operators with operations located in the city’s boundaries, upon city request, shall provide information to the city to support organic waste capacity planning, including, but not limited to, an estimate of the amount of organic waste anticipated to be handled at the community composting operation. entities contacted by the city shall respond within 60 days.

8.04.218 Recyclable and Organic Materials Self-Hauling Requirements.

A. Every self-hauler shall source separate its recyclable materials and organic materials ( materials that city otherwise requires generators or responsible parties to separate for collection in the city’s recyclable materials and organic materials collection program) generated on-site from solid waste in a manner consistent with 14 CCR Section 18984.1 and the city’s collection program. Selfhaulers shall deliver their materials to facilities described in subsection ( b) below.

B. Self-haulers that source separate their recyclable materials and organic materials shall haul their source separated recyclable materials to a facility that recovers those materials; haul their source separated organic waste to a facility, operation, activity, or property that processes or recovers source separated organic waste; and, haul their solid waste to a disposal facility or transfer facility or operation that processes or disposes of solid waste.

C. Self-haulers that are responsible parties of commercial businesses or multifamily premises shall keep records of the amount of recyclable materials, organic waste, and solid waste delivered to each facility, operation, activity, or property that processes or recovers recyclable materials and organic waste and processes or disposes of solid waste or shall keep records of solid waste delivered to high diversion organic waste processing facilities. These records shall be subject to review by the city and/or its designee(s). The records shall include the following information:

1. Delivery receipts and weight tickets from the entity accepting the recyclable materials, organic materials, and solid waste.

2. The amount of material in cubic yards or tons transported by the generator or responsible party to each entity.

3. If the material is transported to an entity that does not have scales on-site or employs scales incapable of weighing the self-hauler’s vehicle in a manner that allows it to determine the weight of materials received, the selfhauler is not required to record the weight of material but shall keep a record of the entities that received the recyclable materials, organic materials, and solid waste.

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D. Self-haulers of food waste shall retain all records and data required to be maintained by this section for no less than five (5) years after the waste was first delivered to the facility accepting the material.

8.04.219 Inspections and Investigations.

A. City representatives or its designee(s) are authorized to conduct inspections and investigations, at random or otherwise, of any collection container, collection vehicle loads, or transfer, processing, or disposal facility for materials collected from generators, or source separated materials to confirm compliance with this chapter by generators, responsible parties of single-family premises, responsible parties of commercial businesses, responsible parties of multifamily premises, commercial edible food generators, haulers, self-haulers, food recovery services, and food recovery organizations, subject to applicable laws.

Inspection of residential containers may only be conducted once container is placed on a curb or sidewalk for the intended purpose of being serviced. This section does not permit city or its designee to enter the interior of a private residential property for Inspection, nor does it allow city or its designee to approach a residential structure if containers are not pulled out to curb or sidewalk for service.

B. Entities regulated by this chapter shall provide or arrange for access during all inspections ( with the exception of residential property interiors) and shall cooperate with the city’s representative or its designee during such inspections and investigations. Such inspections and investigations may include confirmation of proper placement of materials in containers, inspection of edible food recovery activities, review of required records, or other verification or inspection to confirm compliance with any other requirement of this chapter. failure of a responsible party to provide or arrange for: (i) access to an entity’s premises; or ( ii) access to records for any inspection or investigation is a violation of this chapter and may result in penalties described in Chapter 8.04.

C. Any records obtained by a city or its designee during its Inspections, and other reviews shall be subject to the requirements and applicable disclosure exemptions of the Public Records Act as set forth in Government Code Section 6250 et seq.

D. City or its designee shall receive written complaints from persons regarding an entity that may be potentially non-compliant with SB 1383 Regulations, including receipt of anonymous complaints.

E. City representatives and/or their designee are authorized to provide informational notices to entities regulated by this chapter regarding compliance with this chapter.

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SECTION 22: Section 8.04.220 (Enforcement) of the San Luis Obispo Municipal Code is hereby amended as follows:

A. The city’s Code Enforcement Division, city engineer, and the police department are specifically empowered to enforce the provisions of this chapter.

B. No person shall in any manner interfere with the collection or disposal of waste by any person authorized by franchise to collect and dispose of the same. (Prior code § 5200.13)
C. Beginning January 1, 2024, if the city determines that a generator, responsible party, self-hauler, hauler, tier one or tier two commercial edible food generator, food recovery organization, food recovery service, or other entity is not in compliance with Sections 8.04.211-8.04.219, it shall document the noncompliance or violation, issue a Notice of Violation, and take enforcement action pursuant to this section, as needed.

SECTION 23: Section 8.04.230 ( Violation - Penalty) of the San Luis Obispo Municipal Code is hereby amended as follows:

In addition to any other remedy authorized by this chapter, any violation of the provisions of this chapter by any person or restaurant is subject to provisions set forth in Chapter 1.24. (Ord. 1640 § 3 (part), 2017)
SECTION 24: Chapter 8.05 ( Construction and Demolition Debris Recycling Program) of the San Luis Obispo Municipal Code is hereby amended as follows:

Sections:

8.05.010 Definitions.

8.05.020 Compliance with CALGreen recycling requirements.

8.05.030 Submission of recycling plan.

8.05.040 Review of recycling plan.

8.05.050 Compliance with recycling plan.

8.05.060 Infeasible exemption.

8.05.070 Appeals.

8.05.080 Civil penalties.

SECTION 25: Section 8.05.010 ( Definitions) of the San Luis Obispo Municipal Code is hereby amended as follows:

8.05.010 Definitions.

Applicant” means any individual, firm, limited liability company, association, partnership, political subdivision, government agency, municipality, industry, public or private corporation, or any other entity whatsoever who applies to the city for the applicable permits to undertake any construction, demolition, or renovation project within the city, unless otherwise specifically exempted by law.

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California Code of Regulations” or “ CCR” means the State of California Code of Regulations. CCR references in this chapter are preceded with a number that refers to the relevant Title of the CCR ( e.g., “ 14 CCR” refers to Title 14 of CCR). “ Compliance official” means the utilities conservation coordinator or his/her designee.

Construction” means the building of any structure or any portion thereof including any tenant improvements to an existing facility or structure.

Construction and demolition debris” means used or discarded materials removed from premises during construction or renovation of a structure resulting from construction, remodeling, repair, or demolition operations on any pavement, house, commercial building, or other structure.

Conversion rate” means the rate set forth in the standardized conversion rate table approved by the city pursuant to this chapter for use in estimating the volume or weight of materials identified in a recycling plan.

Covered project” shall have the meaning set forth in Section 8.05.020(A).

Deconstruction” means the systematic removal of usable items from a structure.

Demolition” means the decimating, razing, ruining, tearing down or wrecking of any facility, structure, pavement or building, whether in whole or in part, whether interior or exterior.

Divert” means to use material for any purpose other than disposal in a landfill.

Diversion requirement” means the diversion of at least fifty percent by weight of the total construction and demolition debris generated by a project via reuse or recycling, unless the applicant has been granted an infeasible exemption pursuant to Section 8.05.060, in which case the diversion requirement shall be the maximum feasible diversion rate established by the recycling plan compliance official for the project.

Noncovered project” shall have the meaning set forth in Section 8.05.020(C).

Enforcement Action" means an action of the city to address non-compliance with this chapter including, but not limited to, issuing administrative citations, fines, penalties, or using other remedies.

Project” means any activity which requires an application for a building or demolition permit or any similar permit from the city.

Renovation” means any change, addition, or modification in an existing structure.

Reuse” means further or repeated use of construction or demolition debris.

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Salvage” means the controlled removal of construction or demolition debris from a permitted building or demolition site for the purpose of recycling, reuse or storage for later recycling or reuse.

Recycling plan” means a completed recycling plan form, approved by the city for the purpose of compliance with this chapter, submitted by the applicant for any covered or noncovered project. (Ord. 1381 § 1 (part), 2001)
SECTION 26: Section 8.05.020 (Threshold for covered projects) of the San Luis Obispo Municipal Code is hereby amended as follows:

8.05.020 Compliance with CALGreen recycling requirements.

A. Persons applying for a permit from the city for new construction and building additions and alterations shall comply with the requirements of this section and all required components of the California Green Building Standards Code, 24 CCR, Part 11, known as CALGreen, as amended, if its project is covered by the scope of CALGreen or more stringent requirements of the city. If the requirements of CALGreen are more stringent than the requirements of this section, the CALGreen requirements shall apply.

B. For projects covered by CALGreen or more stringent requirements of the city, the applicants must, as a condition of the city’s permit approval, comply with the following:

1. Where five ( 5) or more multi-family dwelling units are constructed on a building site, provide readily accessible areas that serve occupants of all buildings on the site and are identified for the storage and collection of recyclable materials container and organic materials container materials, consistent with the three or more-container collection program offered by the city, or comply with provision of adequate space for recycling for multifamily premises and commercial premises pursuant to Sections 4.408.1,

4.410.2, 5.408.1, and 5.410.1 of the California Green Building Standards Code, 24 CCR, Part 11 as amended provided amended requirements are more stringent than the CALGreen requirements for adequate recycling space effective January 1, 2020.

2. New commercial or multi-family construction or additions resulting in more than 30% of the floor area shall provide readily accessible areas identified for the storage and collection of recyclable materials container and organic materials container materials, consistent with the three or more-container collection program offered by the city, or shall comply with provision of adequate space for recycling for multi-family premises and commercial premises pursuant to Sections 4.408.1, 4.410.2, 5.408.1, and 5.410.1 of the California Green Building Standards Code, 24 CCR, Part 11 as amended provided amended requirements are more stringent than the CALGreen requirements for adequate recycling space effective January 1, 2020.

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3. Comply with CALGreen requirements and applicable law related to management of C&D, including diversion of organic waste in C&D from disposal. Comply with city’s Construction and Demolition Debris Recycling Program Ordinance, Chapter 8.05 of City’s Municipal Code, and all written and published city policies and/or administrative guidelines regarding the collection, recycling, diversion, tracking, and/or reporting of C&D debris.

C. Compliance as a Condition of Approval. Compliance with the provisions of this chapter shall be listed as a condition of approval on any building or demolition permit issued for a covered project.

D. Control of Waste. Regardless of the project size and requirement for a formal recycling plan, all projects shall implement control of waste to prevent the release of pollutants to the storm drain system in accordance with the city’s storm water quality ordinance, set forth in Chapter 12.08. (Ord. 1543 § 4, 2010; Ord. 1381 § 1 (part), 2001)
SECTION 27: Section 8.05.030 (Submission of a recycling plan) subsections (AB) of the San Luis Obispo Municipal Code are hereby amended as follows:

A. Recycling Plan Forms. Applicants for building or demolition permits involving any covered project shall complete and submit a recycling plan on a recycling plan form approved by the city for this purpose as part of the application packet for the building or demolition permit. The completed recycling plan shall indicate all of the following:

1. Identify the construction and demolition waste materials to be diverted from disposal by recycling, reuse on the project, or salvage for future use or sale.

2. Specify if construction and demolition waste materials will be sorted on-site source-separated) or bulk mixed (single stream).

3. Identify diversion facilities where the construction and demolition waste material will be taken.

4. Identify construction methods employed to reduce the amount of construction and demolition waste generated.

5. Specify that the amount of construction and demolition waste materials diverted shall be calculated by weight.

SECTION 28: Section 8.05.040 (Review of recycling plan) of the San Luis Obispo Municipal Code is hereby amended as follows:

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A. Approval. Notwithstanding any other provision of this code, no building or demolition permit shall be issued for any covered project unless and until the recycling plan compliance official has approved the recycling plan. Approval shall not be required, however, where an emergency demolition is required to protect the public health, welfare or safety as determined by the chief building official. The recycling plan compliance official shall only approve a recycling plan if he or she first determines that all of the following conditions have been met:

1. The recycling plan provides all of the information set forth in Section

8.05.030(A); and

2. The recycling plan indicates that at least sixty-five percent by weight of all construction and demolition debris generated by the project will be diverted.

If the recycling plan compliance official determines that these conditions have been met, he or she shall mark the recycling plan “Approved,” return a copy of the recycling plan to the applicant, and notify the building department that the recycling plan has been approved.

SECTION 29: Section 8.05.050 (Compliance with recycling plan) subsection (A) of the San Luis Obispo Municipal Code is hereby amended as follows:

A. Documentation. Prior to receiving a certificate of occupancy for the project, the applicant shall submit to the recycling plan compliance official documentation that the diversion requirement for the project has been met. The diversion requirement shall be that the applicant has diverted at least sixty-five percent of the total construction and demolition debris generated by the project via reuse or recycling, unless the applicant has been granted an infeasible exemption pursuant to Section 8.05.060, in which case the diversion requirement shall be the maximum feasible diversion rate established by the recycling plan compliance official for the project. This documentation shall include all of the following:

1. Receipts from the vendor or facility which collected or received each material showing the actual weightof that material;

2. Any additional information the applicant believes is relevant to determining its efforts to comply in good faith with this chapter.

SECTION 30: Section 8.05.060 (Infeasible exemption) subsections (B-C) of the San Luis Obispo Municipal Code are hereby amended as follows:

B. Meeting with Recycling Plan Compliance Official. The recycling plan compliance official shall review the information supplied by the applicant and may meet with the applicant to discuss possible ways of meeting the diversion requirement.

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C. Granting of Exemption. If the recycling plan compliance official determines that it is infeasible for the applicant to meet the diversion requirement due to unique circumstances, he or she shall determine the maximum feasible diversion rate for each material and shall indicate this rate on the recycling plan submitted by the applicant. The recycling plan compliance official shall return a copy of the recycling plan to the applicant marked “Exempt” and shall notify the building division that the recycling plan has been approved.

SECTION 31. Severability. If any subdivision, paragraph, sentence, clause, or phrase of this ordinance is, for any reason, held to be invalid or unenforceable by a court of competent jurisdiction, such invalidity or unenforceability shall not affect the validity or enforcement of the remaining portions of this ordinance, or any other provisions of the city's rules and regulations. It is the city's express intent that each remaining portion would have been adopted irrespective of the fact that any one or more subdivisions, paragraphs, sentences, clauses, or phrases be declared invalid or unenforceable.

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SECTION 32. A summary of this ordinance, approved by the City Attorney, together with the ayes and noes shall be published at least five days prior to its final passage in the New Times, a newspaper published and circulated in said city, and the same shall go into effect at the expiration of 30 days after its final passage. A copy of the full text of this ordinance shall be on file in the Office of the City Clerk on and after the date following introduction and passage to print and shall be available to any member of the public.

INTRODUCED on the 16th day of November 2021, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the 7th day of December 2021, on the following vote:

AYES: Council Member Marx, Pease, Shoresman, Vice Mayor Christianson, and Mayor Stewart
NOES: None
ABSENT: None
Mayor Erica A. Stewart
ATTEST:

Teresa Purrington
City Clerk
APPROVED AS TO FORM:

J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________.

Teresa Purrington
City Clerk
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Item 6a
Department: Finance
Cost Center: 2005
For Agenda of: 3/15/2022
Placement: Business
Estimated Time: 30 Minutes
FROM: Brigitte Elke, Finance Director
Prepared By: Debbie Malicoat, Accounting Manager/Controller SUBJECT: ACCEPTANCE OF THE TRANSPORTATION DEVELOPMENT ACT AND FEDERAL SINGLE AUDITS FOR FISCAL YEAR 2020-21

RECOMMENDATION
Review and accept the Transportation Development Act (TDA) and Federal Single Audits for Fiscal Year 2020-21.

DISCUSSION
On January 18, 2022, the City Council reviewed and accepted the City’s audited financial statements for the fiscal year that ended June 30, 2021. As discussed in that report, the City’s independent auditors were finalizing the Single Audit Report and TDA annual audit for review at a later meeting. Both audits are now complete and ready for Council review.

TDA Report and Financial Statements
This document provides information on the revenues received by the City pursuant to the TDA. (Attachment A) The City receives funding from the TDA for two specific purposes:

1. The development and construction of local streets and roads, including pedestrian and bicycle facilities. Since these funds are legally restricted, the City has a special revenue fund created to account for this portion of TDA revenues. The City received $36,409 in TDA funding during the 2020-21 fiscal year. These revenues were unspent at the end of the fiscal year and will be utilized in FY 2021-22 for a transportation project that was delayed due to COVID-19. As such, the City Council took action with the mid-year budget adjustments on February 15, 2022, that allocated the carryover funding to the construction phase of the current Pedestrian Crossing Improvements project.

Item 6a

2. The Transit Fund is an enterprise fund to account for the revenues received pursuant to the TDA, the Federal Transit Authority (FTA), and revenues from transit operations. These revenues are allocated under specific statues and are legally restricted to pay for transit operations, the development of public transportation systems, and transportation planning. The Transit Fund received $351,998 in TDA operating grants during the fiscal year. These funds were also unspent at fiscal yearend due to CARES Act funding received for Transit and will be available for future use.

In addition, this report demonstrates the City’s compliance with applicable TDA regulations pertaining to acceptable fare revenue ratios. For the fiscal year ended in 2021, the City was required to maintain a fare revenue ratio of 20%, the actual ratio was 90% due to a change in calculation allowing the inclusion of federal grant funds as local funds for the purpose of computing fare revenue ratios. This mandate is discussed further in Note 7 of the report.

Single Audit Reports
The Single Audit (Attachment B) fulfills several criteria required by federal regulations. First, it provides a report on the City’s internal control when it comes to financial reporting. Second, it provides a schedule of expenditures that were funded by federal grants and the City’s compliance with applicable Federal regulations. Third, it provides a schedule of findings and questioned costs, if any. The findings are areas of improvement for the City when it comes to the internal controls that are designed to manage the risk with which the City’s assets are safeguarded, and its finances are accurately reported which then translates into the proper administration of federal funding.

As previously presented to the City Council, there are four findings and no questioned costs.

The City’s responses to the auditor’s findings are incorporated into the document. City staff remain committed to continuous improvements over internal controls and system performance and incorporating the concerns raised by the auditors. To reiterate, these are areas of improvement and none of them put the City’s revenues in jeopardy or appropriate accounting of expenditures in question. Staff can also report that the remaining imbalance in bank reconciliation was caused by a timing issue related to recording revenue of $39,697, leaving approximately $2,500 unreconciled on June 30, 2021.

Policy Context
The City’s Charter under Section 810 requires the employment of an independent certified public account to examine the City’s financial statements.

Public Engagement
The City’s annual audit and issuance of the financial reports fulfills a legal requirement and does not have a public engagement component outside the required presentation before Council during a public session.

Item 6a

ENVIRONMENTAL REVIEW
The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15378.

FISCAL IMPACT
Budgeted: Yes Budget Year: 2021-22
Funding Identified: Yes
Fiscal Analysis:

Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $75,000 $62,405 $12,595 $75,000
State
Federal
Fees
Other:

Total $75,000 $62,405 $12,595 $75,000
The City budgets the cost for the auditing firm annually. The cost is appropriated with the annual budget adoption and encompasses the Annual Comprehensive Financial Report (ACFR), TDA, Single Audit, and the Whale Rock Reservoir audit. The current fiscal year contains a budget of $75,000 for the previous fiscal year audit. The City had received a five-year fee schedule with the audit contract and for this fiscal year, the cost is $62,405.

ALTERNATIVES
The City Council could decide to revise or not accept the presented reports for fiscal year 2020-21. This is not recommended as the reports have been prepared in conformance with a variety of accounting, federal, and state reporting requirements and represent the professional evaluation and analysis by the City’s independent auditors.

ATTACHMENT
A - Single Audit Reports for the year ended June 30, 2021 B - Transportation Development Act Funds Financial Statements Years Ended June 30, 2021 and 2020

City of San Luis Obispo
Financial Statements
Years Ended
June 30, 2021 and 2020

City of San Luis Obispo,
California
Transportation Development Act Funds
Financial Statements
Years Ended June 30, 2021 and 2020

City of San Luis Obispo, California
Transportation Development Act
Funds Report and Financial
Statements
Year Ended June 30, 2021 and 2020
Table of Contents
Page
Independent Auditors’ Report 1
Balance Sheets June 30, 2021 and 2020 5
Statements of Revenues, Expenditures and Changes in Fund Balance Years Ended June 30, 2021 and 2020 6
Statements of Fund Net Position June 30, 2021 and 2020 7 Statements of Revenues, Expenses and Changes in Fund Net Position Years Ended June 30, 2021 and 2020 8
Statements of Cash Flows Years Ended June 30, 2021 and 2020 9 Notes to Financial Statements 11
TDA Fund Supplementary Information
Schedule of Revenues and Expenditures Budget and Actual Years Ended June 30, 2021 and 2020 21
Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in accordance with Government Auditing Standards 23
Independent Auditor’s Report on Transportation Development Act Compliance 25

INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California
Report on the Financial Statements
We have audited the accompanying financial statements of the Transportation Development Act (TDA) Fund and the Transit Fund of the City of San Luis Obispo, California (City), as of and for the years ended June 30, 2021 and 2020, and the related notes to the financial statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditors’ Responsibility
Our responsibility is to express opinions on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error.

In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California

Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Transportation Development Act (TDA) Fund and the Transit Fund of the City as of June 30, 2021 and 2020, the changes in financial position and cash flows where applicable for the years then ended in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter
As discussed in Note 1, the financial statements present only the Transportation Development Act (TDA) Fund and the Transit Fund and do not purport to, and do not, present fairly the financial positions of the City as of June 30, 2021 and 2020, the changes in its financial position or where applicable, its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter.

Other Matters
Other Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Transportation Development Act (TDA) Fund and the Transit Fund’s financial statements.

The supplementary information is presented for purposes of additional analysis and is not a required part of the financial statements.

The supplementary schedules on page 21 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the financial statements.

Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary schedules are fairly stated in all material respects in relation to the financial statements as a whole. 2

To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 26, 2022 on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering City’s internal control over financial reporting and compliance.

Badawi & Associates, CPAs
Berkeley, California
January 26, 2022
3

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4

2021 2020
Assets
Cash and investments $ - 4,421 $
Total assets $ - 4,421 $
Liabilities and Fund Balance
Liabilities
Unearned revenue $ 4,421 $ -
Total liabilities 4,421 -
Total liabilities and fund balance 4,421 $ - $
City of San Luis Obispo, California
Transportation Development Act (TDA) Fund
Balance Sheets
June 30, 2021 and 2020
The accompanying notes are an integral part of these financial statements. 5

2021 2020
Revenues - intergovernmental allocations $ 48,608 36,409 $ Other financing uses - operating transfers to City of San Luis Obispo (36,409) (48,608) Excess of revenues over other financing uses --
Fund balance - beginning of year --
Fund balance - end of year $ - $ -
City of San Luis Obispo, California
Transportation Development Act (TDA) Fund
Statements of Revenues, Expenditures and Changes in Fund Balance June 30, 2021 and 2020
The accompanying notes are an integral part of these financial statements. 6

2021 2020
Assets
Current assets:

Cash and investment $ 2,317,89 3,610,074 $ 3
Accounts receivable 3,234 26,115
Interest receivable 8,401 8,492
Due from other governments 2,805,689 2,307,585
Total current assets 6,427,398 4,660,085
Capital assets:

Infrastructure 221,743 221,744
Buildings and improvements 5,101,506 5,101,506
Transit operating equipment 9,021,099 9,021,099
Construction in progress 2,182 1
Total capital assets 14,346,530 14,344,350
Less accumulated depreciation (9,552,679) (9,016,878)
Total capital assets, net of accumulated depreciation 4,793,851 5,327,472 Total assets 11,221,249 9,987,557
Deferred Outflows of Resources
Pension related 101,832 90,898
Other post‐employment benefits related 9,274 14,698
Total deferred outflows of resources 111,106 105,596
Liabilities
Current liabilities:

Accounts payable 450,885 384,440
Accrued salaries and compensated absences 25,184 28,380 Unearned revenues 3,235,731 1,546,765
Total current liabilities 3,711,800 1,959,585
Noncurrent liabilities:

Compensated absences, net of current portion 3,452 6,650 Net pension liability 753,586 710,153
Net other post‐employment benefits liability 39,427 47,123 Total noncurrent liabilities 796,465 763,926
Total liabilities 4,508,265 2,723,511
Deferred Inflows of Resources
Pension related 688 11,159
Other post‐employment benefits related 15,642 17,104
Total deferred inflows of resources 16,330 28,263
Net Position
Net investment in capital assets 4,793,851 5,327,472
Restricted 2,013,909 2,013,907
Total net position 7,341,379 6,807,760
City of San Luis Obispo, California
Transit Fund
Statements of Fund Net Position
June 30, 2021 and 2020
The accompanying notes are an integral part of these financial statements. 7

2021 2020
Operating revenues:

Passenger fares $ 178,184 $ 196,892
Special transit fares 150,000 433,175
Other revenue 3,168 3,500
Total operating revenues 331,352 633,567
Operating expenses:

Purchased transportation 2,414,328 2,358,879
Other transportation services 168,252 259,334
Fuel and lubricants 204,966 251,412
Other materials and supplies 43,979 43,562
Salaries and wages 212,935 199,732
Fringe benefits 121,548 154,977
General and administrative 321,727 276,806
Depreciation 535,801 662,873
Total operating expenses 4,023,536 4,207,575
Operating loss (3,692,184) (3,574,008)
Nonoperating revenues:

Transportation Development Act operating grants 351,998 779,666 Federal Transit Administration operating grants 2,805,689 2,307,585 Interest 878 58,438
Other nonoperating revenues (expenses) - (13,048)
Total nonoperating revenues 3,158,565 3,132,641
Change in net position (533,619) (441,367)
Net position - beginning of year 7,341,379 8,420,245
Prior year restatement - (637,499)
Net position - beginning of year, as restated 7,341,379 7,782,746 Net position - end of year $ 6,807,760 $ 7,341,379
City of San Luis Obispo, California
Transit Fund
Statements of Revenues, Expenses and Changes in Net Position Years Ended June 30, 2021 and 2020
The accompanying notes are an integral part of these financial statements. 8

2021 2020
Cash flows from operating activities:

Cash received from customers $ 354,233 $ 773,552
Cash payments to suppliers for goods and services (2,765,080) (2,764,787) Cash payments to General Fund for interfund services (321,727) (276,806) Cash payments to employees for services (322,583) (300,633) Net cash used in operating activities (3,055,157) (2,568,674) Cash flows from noncapital financing activities:

Operating grants received 4,348,549 3,811,301
Net cash provided by noncapital financing activities 4,348,549 3,811,301 Cash flows from capital and related financing activities:

Acquisition and construction of capital assets (2,180) (231,546) Net cash used in capital and related financing activities (2,180) (231,546) Cash flows from investing activities:

Interest on investments 969 56,337
Net cash provided by (used in) investing activities 969 56,337 Net increase (decrease) in cash and cash equivalents and investments 1,292,181 1,067,418 Cash and cash equivalents and investments - beginning of year 2,317,893 1,250,475 Cash and cash equivalents and investments - end of year $ 3,610,074 $ 2,317,893 City of San Luis Obispo, California
Transit Fund
Statements of Cash Flows
Years Ended June 30, 2021 and 2020
The accompanying notes are an integral part of these financial statements. 9

2021 2020
Reconciliation of operating loss to net cash used in operating activities:

Operating loss $ (3,692,184) $ (3,506,183)
Adjustments to reconcile operating loss to net cash used in operating activities:

Depreciation 535,801 592,039
Changes in operating assets, deferred outflows, liabilities, and deferred inflows:

Accounts receivable 22,881 139,985
Accounts payable 66,445 148,400
Accrued salaries and compensated absences (6,394) 4,795 Pension related deferred outflows and inflows and net pension liability 22,028 60,954 OPEB related deferred outflows and inflows and net OPEB liability (3,734) (8,664) Net cash used in operating activities $ (3,055,157) $ (2,568,674) Reconciliation of cash and cash equivalents and investments to the statement of fund net position:

Cash and investment $ 2,317,89 3,610,074 $ 3
Total cash and cash equivalents and investments $ 2,317,89 3,610,074 $ 3 Non cash transactions
Gain (loss) on sale of capital assets $ (13,048) - $
Statements of Cash Flows, Continued
Years Ended June 30, 2020 and 2019
City of San Luis Obispo, California
Transit Fund
The accompanying notes are an integral part of these financial statements. 10

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020
NOTE 1 - The Reporting Entity
The City of San Luis Obispo (the City) operates a fixed route public transportation system within the City limits and to the California Polytechnic State University (Cal Poly). Vehicle operations and vehicle maintenance are provided under contract by a private transportation company. Nonvehicle-related support and administrative services are provided by City staff.

The Transportation Development Act (TDA) Fund (the Fund) of the City of San Luis Obispo, California (the City) is a special revenue fund created by resolution of the City Council to account for the revenues received pursuant to the TDA. Such revenues allocated under specific state statutes are legally restricted to financial expenditures made of the development and construction of local streets and roads, including pedestrian and bicycle facilities.

The Transit Fund is an enterprise fund of the City created by resolution of the City Council to account for the revenues received pursuant to the Transportation Development Act (TDA), Federal Transit Authority (FTA) and the revenues received from the transit operations described above. Such revenues are allocated under specific statutes and are legally restricted to finance expenditures made for transit operations, the development of public transportation systems and transportation planning. When both restricted and unrestricted resources are available for the same purpose, it is the City’s policy to use restricted funds first.

NOTE 2 - Summary of Significant Accounting Policies
Measurement Focus, Basis of Accounting and Basis of Presentation The Transportation Development Act (TDA) Fund’s financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized when measurable and available.

Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay the liabilities of the current period. For this purpose, the City considers interest and grant revenues earned but not received as susceptible to accrual under this method. Expenditures are generally recognized at the time liabilities are incurred.

The Transit Fund’s financial statements are reported using the economic resources measurement focus and the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred regardless of the timing of related cash flows. The Fund distinguishes operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services in connection with the Fund’s principal ongoing operations. The principal operating revenues of the Fund are charges to customers for transit services. Operating expenses for the Fund include cost of services, administrative expenses, and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses, including non-exchange transactions such as TDA and FTA grants.

Non-exchange transactions, in which the Transit Fund receives value without directly giving equal value in return, include grants.

Revenue from grants is recognized in the fiscal year in which all eligibility requirements have been satisfied. Eligibility requirements include timing requirements, which specify the fiscal year when the resources are to be used or the fiscal year when use is first permitted; matching requirements, in which the Transit Fund must provide local resources to be used for a specific purpose; and expenditures requirements, in which the resources are provided to the Transit Fund on a reimbursement basis. 11

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 2 - Summary of Significant Accounting Policies, Continued Measurement Focus, Basis of Accounting and Basis of Presentation, Continued Annual Financial Statements
The financial statements of the Transportation Development Act (TDA) Fund and the Transit Fund are intended to reflect the financial position; results of operations and cash flows where applicable in conformity with generally accepted accounting principles and are not intended to present the financial position, results of operations, or cash flows of the City of San Luis Obispo, California.

Special Revenue Fund – Transportation Development Act Fund This fund is used to account for the City’s share of Transportation Development Act (TDA) Article 3 funds that are legally restricted for the improvement and maintenance of street systems including pedestrian and bicycle facilities. Under the City's Financial Plan policies, all TDA Article 3 revenues are allocated for alternative transportation purposes. The purpose of this fund is to account for these revenues.

Enterprise Fund - Transit
This fund is used to account for the operation and maintenance of the City’s transit system. TDA Article 4 and FTA allocations for transit operations are accounted for in this fund.

Cash, Cash Equivalents, and Investments
Cash and cash equivalents consist of cash on hand, cash balances in checking and money market accounts and short- term investments, with an original maturity of three months or less. Investments which are in the City’s internal investment pool are also treated as cash equivalents for the purposes of the statement of cash flows.

Amounts Due from Other Governments
Generally, amounts due from other governments are recorded as revenues when earned. However, when the use of funds is the prime factor for determining eligibility for grants, revenue is accrued when the related expenses have been made on an approved grant.

Capital Assets
Capital assets are recorded at cost and depreciated using the straight-line method over their estimated useful lives, ranging from 5 to 20 years. Capital assets are defined by the City as assets with an initial, individual cost of more than $25,000. Detailed capital assets can be found in Note 5.
12

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 2 - Summary of Significant Accounting Policies, Continued Net Pension Liability, Deferred Outflows and Deferred Inflows The City recognizes a net pension liability, which represents the City’s excess of the total pension liability over the fiduciary net position of the pension reflected in the actuarial reports provided by the California Public Employees’ Retirement System (CalPERS) plans (Plans). The City has allocated a proportionate share of the net pension liability, deferred outflows, deferred inflows and pension expense to the Transit Fund. The net pension liability is measured as of the City’s prior fiscal year-end.

Changes in the net pension liability are recorded, in the period incurred, as pension expense or as deferred inflows of resources or deferred outflows of resources depending on the nature of the change. The changes in the net pension liability that are recorded as deferred inflows of resources or deferred outflows of resources (that arise from changes in actuarial assumptions or other inputs and differences between expected or actual experience) are amortized over the weighted average remaining service life of all participants in the respective pension plan and are recorded as a component of pension expense beginning with the period in which they are incurred.

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the City’s CalPERS Plans and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Projected earnings on pension investments are recognized as a component of pension expense.

Other Post-Employment Benefits (OPEB) Liability, Deferred Outflows and Deferred Inflows For purposes of measuring net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the City’s plan (OPEB Plan), and additions to or deductions from the OPEB Plan’s fiduciary net position, have been determined on the same basis as they are reported by the California Employer’s Retiree Benefit Trust Program (CERBT). For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with benefit terms. Investments are reported at fair value.

Generally accepted accounting principles require that the reported OPEB results must pertain to liability and asset information within certain defined timeframes. For this report, the following timeframes are used:

Valuation Date June 30, 2019
Measurement Dates June 30, 2020 and 2019
Measurement Periods July 1, 2019 to June 30, 2020,
and July 1, 2018 to June 30, 2019
13

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 2 - Summary of Significant Accounting Policies, Continued Fund Balance
The TDA Fund’s financial statements report fund balance in classifications that comprise a hierarchy based primarily on the extent to which the City is bound to honor constraints on the specific purpose for which amounts in the funds can be spent. The Fund does not have a fund balance in the current fiscal year, therefore classification is not necessary. However, GASB Statement No. 54, Fund Balance Reporting and Governmental Fund Type Definitions, identifies five components of fund balance – nonspendable, restricted, committed, assigned and unassigned.

Nonspendable - This component includes amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.

Restricted - This component consists of amounts that have constraints placed on them either externally by third-parties (creditors, grantors, contributors, or laws or regulations of other governments) or by law through constitutional provisions or enabling legislation. Enabling legislation authorizes the City to assess, levy, charge or otherwise mandate payment of resources (from external resource providers) and includes legally enforceable requirements (compelled by external parties) that those resources be used only for the specific purposes stipulated in the legislation.

Committed - This component consists of amounts that can only be used for specific purposes pursuant to constraints imposed by minute order authorized by the City Council. Also included in this component are encumbrances which represent legal and binding obligations for the acquisition of future goods and services. Those committed amounts established by minute order cannot be used for any other purpose unless the City Council adopts a new minute order so directing. With respect to encumbered amounts, the City may take steps to cancel the order for goods or services and thereby terminate the obligation.

Assigned - This component consists of amounts that are constrained by the City’s intent to be used for specific purposes, but are neither restricted nor committed. The City Manager or Director of Finance are authorized to assign amounts to a specific purpose.

Constraints imposed on the use of assigned amounts can be removed with no formal Council actions.

Unassigned - This classification represents amounts that have not been restricted, committed or assigned to specific purposes.

Fund Balance Spending Policy
The City follows a practice in which restricted, committed, assigned, and unassigned fund balances are spent when more than one amount is available for a specific purpose. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources (committed, assigned and unassigned) as they are needed. When unrestricted resources (committed, assigned and unassigned) are available for use, it is the City’s policy to use committed resources first, then assigned, and then unassigned as they are needed. 14

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 2 - Summary of Significant Accounting Policies, Continued Budgets and Budgetary Accounting
The City has received national recognition for its use of a two-year Financial Plan and budgetary process that emphasizes longrange planning and effective program management. Significant features of the City’s two-year Financial Plan include the integration of Council goal-setting into the budgetary process and the extensive use of formal policies and measureable objectives.

The Financial Plan includes operating budgets for two years and a capital improvement plan (CIP) for five years.

Under this multi-year approach, appropriations continue to be made annually; however, the Financial Plan is the foundation for preparing the budget for the second year. Additionally, unexpended operating appropriations from the first year may be carried over for specific purposes into the second year with the approval of the City Manager.

Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures.

Accordingly, actual results could differ from those estimates.

NOTE 3 - Cash and Cash Equivalents and Investments
Transportation Act Development (TDA) Fund and Transit Fund are pooled with the City’s cash and investments in order to generate optimum interest income. The City pools its available cash for investment purposes. Cash and cash equivalents are combined with investments and displayed as Cash and Investments.

At June 30, 2020 and 2019, cash and investments consisted of the following:

Investment Fair Value Measurements
The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. Investment securities classified in Level 1 of the fair value hierarchy are valued using prices quoted in active markets for those securities. Investment securities classified in Level 2 of the fair value hierarchy are valued using matrix pricing or market corroborated pricing. Matrix pricing is used to value securities based on the securities’ relationship to benchmark quoted prices.

Custodial Credit Risk – Deposits
Custodial credit risk is the risk that in the event of a bank failure, the City’s deposits may not be returned to it. Cash balances held in banks are insured up to $250,000 by the Federal Depository Insurance Corporation. For custodial credit risk associated with deposits, the City follows California Government Code, which requires California financial institutions to secure the City’s deposits by pledging government securities as collateral. The market value of the pledged securities must equal 110% of the City’s deposits. California law also allows financial institutions to secure the City’s deposits by pledging first trust deed mortgage notes equal to 150% of the City’s deposits. All deposits held by financial institutions are fully insured or collateralized with securities, held by the pledging financial institutions’ trust departments in the City’s name. 15

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 3 - Cash and Cash Equivalents and Investments, Continued Custodial Credit Risk – Deposits, Continued
The City follows the practice of pooling cash and investments for all funds under its direct daily control. Funds held by outside fiscal agents under provisions of bond indentures are maintained separately.

Interest earned on pooled cash and investments is allocated quarterly to the various funds based on the respective fund’s average quarterly cash balance. Interest earned from cash and investments with fiscal agents is credited directly to such funds.

Interest Rate Risk
This is the risk that the market value of securities in the portfolio will fall due to changes in general interest rates. In accordance with its policies in the Investment Management Plan, the City mitigates interest rate risk by:
x Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market before maturity. x Investing operating funds primarily in shorter-term securities.

The City’s investment policy also includes portfolio maturity targets. A minimum of 20% of the portfolio will be invested in securities maturing in one year or less. Up to 80% of the portfolio can be invested in securities with a maturity over one year, with no more than 10% of the portfolio invested in securities with a maturity over five years.

Credit Risk
This is the risk of loss due to the failure of the security issuer or backer. The City’s policies to mitigate credit risk include:
x Limiting investments to the safest types of securities. The California Government Code limits the investment vehicles available to local agencies. The credit risk of these securities is measured by the assignment of a rating by a nationally recognized statistical rating organization.
x Pre-qualifying the financial institutions, broker/dealers, intermediaries and advisors with which the City will do business.

Concentration of Credit Risk
The City’s policies contained in the Investment Management Plan provide guidelines (by type of investment that limits either the dollar amount, the percent of the portfolio or the maturity term) for diversifying the investment portfolio so that potential losses on individual securities will be minimized.

The City’s Investment Management Plan outlines the following criteria related to portfolio diversification:
x No more than 5% of the City’s portfolio (exclusive of government agency issues or LAIF) shall be placed with any financial institution.
x No more than 25% of the City’s portfolio shall be invested in collateralized certificates of deposit issued by financial institutions.
16

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 3 - Cash and Cash Equivalents and Investments, Continued Concentration of Credit Risk, Continued
x Certificates of deposit (negotiable and collateralized) placed by the City shall not constitute more than 15% of the total assets of the institution; and negotiable certificates of deposit will only be placed with institutions with total assets in excess of $200 million and that maintain a ratio of equity to total assets of at least 5%.

Additional Cash and Investment Disclosures
See the City of San Luis Obispo June 30, 2021 and 2020 Annual Comprehensive Financial Reports for additional cash and investment disclosures.

NOTE 4 - Due from Other Governments
At June 30, 2021 and 2020, the amounts due from other governments were as follows:

NOTE 5 - Capital Assets
Capital Assets activity for the fiscal year ended June 30, 2021, was as follows:
17

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 5 - Capital Assets, Continued
Capital Assets activity for the fiscal year ended June 30, 2020, was as follows:

NOTE 6 - Intergovernmental Allocations
The City has been allocated the following funds from the State Transit Assistance Fund (STAF), Local Transportation Fund (LTF) and State of Good Repair (SGR) for the years ended June 30, 2021 and 2020. The amounts have been and will be used for both operating expenses and capital assets.

For the years ended June 30, 2021 and 2020, the City also directly allocated $501,789, and $603,019, respectively, of LTF Article

4.0, Section 99260 funds to San Luis Obispo Regional Transit Authority (SLORTA). These funds are not shown in the accompanying financial statements.

In addition to TDA allocations, the City was also received a Low-Carbon Transit Operations Program (LCTOP) allocation of $256,731 to be spent toward the purchase of two electric transit vehicles. As of June 30, 2021, the City had not yet purchased the vehicles. The LCTOP amount is part of the unearned revenue balance at June 30, 2021.

Article Section 2021 2020
LTF 3.0 99233.3 $ 40,830 $ 48,608
LTF 4.0 99260 1,286,416 1,702,662
STAF 6.5 99313 189,658 379,185
STAF 6.5 99314 29,816 51,819
SGR 6.5 99314 8,481 8,007
SGR 6.5 99313 269,862 184,759
$ 1,825,063 $ 2,375,040
Applicable
Allocating TDA Statute Amount
18

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 7 - Fare Revenue Ratios
For the years ended June 30, 2021 and 2020 the City had fare revenue ratios of 90%, and 18%, respectively, computed as follows:

Due to the global pandemic, the California legislature passed AB 90 and AB 149. AB 90 prohibits the imposition of a penalty on an operator that does not maintain the required ratio of fare revenues to operating cost during the 2019–20, 2020–21, and 2021-22 fiscal years. AB 149 extends the penalty exemption through the fiscal year 2022-23 as well as authorizes transit operators to include federal grant funds as local funds for the purpose of computing fare revenue ratios.

TDA regulations require a minimum ratio of 20% for a municipality the size of the City. The City is in compliance with the applicable TDA regulations for the year ended June 30, 2021, but not in compliance for the year ended June 30, 2020 due to the fare revenue ratio of 18% for the fiscal year ended June 30, 2020.

NOTE 8 - Pensions
The City contributes to the California Public Employees’ Retirement System (CalPERS) for its employees and participates in an agent-multiple employer plan (Miscellaneous Plan) for its miscellaneous employees. The City has allocated a portion of the Miscellaneous Plan that relates to the Transit Fund. The portion of the net pension liability allocated to the Transit Fund for the years ended June 30, 2021 and 2020 were $753,586 and $710,153, respectively. The portion of the deferred outflows of resources allocated to the Transit Fund for the years ended June 30, 2021 and 2020 were $101,832 and $90,898, respectively. The portion of the deferred inflows of resources allocated to the Transit Fund for the years ended June 30, 2021 and 2020 were $688 and $11,159, respectively. The portion of the pension expense allocated to the Transit Fund for the years ended June 30, 2021 and 2020 were $22,028 and $60,954, respectively, and is shown as a part of total fringe benefits in the related fiscal year.

Additional Pension Disclosures
See the City of San Luis Obispo June 30, 2021 and 2020 Annual Comprehensive Financial Reports for additional pension disclosures as well as required supplementary information.

NOTE 9 - Other Post-Employment Benefits (OPEB)
The City’s primary other post-employment benefits (OPEB) cost obligation is for retiree health benefits under its election to participate in the CalPERS Health Benefit Program, an agent multiple-employer defined benefit OPEB plan, under the “unequal contribution option.” The City has allocated a portion of the plan that relates to the Transit Fund. The portion of the net OPEB liability allocated to the Transit Fund for the years ended June 30, 2021 and 2020 were $39,427 and $47,123, respectively. The portion of the deferred outflows of resources allocated to the Transit Fund for the years ended June 30, 2021 and 2020 were $9,274 and $14,698, respectively. The portion of the deferred inflows of resources allocated to the Transit Fund for the years ended June 30, 2021 and 2020 were $15,542 and $17,104, respectively. The portion of the OPEB expense allocated to the Transit Fund for the years ended June 30, 2021 and 2020 were $(565) and $(5,165), respectively, and is shown as a part of total fringe benefits in the related fiscal year.
19

City of San Luis Obispo, California
Transportation Development Act (TDA) Fund and Transit Fund Notes to the Financial Statements
June 30, 2021 and 2020

NOTE 9 - Other Post-Employment Benefits (OPEB), Continued Additional OPEB Disclosures
See the City of San Luis Obispo June 30, 2021 and 2020 Annual Comprehensive Financial Reports for additional OPEB disclosures as well as required supplementary information.

NOTE 10 - Operating Transfers
The City expends all amounts for alternate transportation projects in its General Fund or Capital Outlay Fund. LTF monies received by the City are initially deposited in the Transportation Development Act (TDA) Fund and subsequently transferred to the General Fund, where such funds are expended or transferred to the Capital Outlay Fund to be expended on designated transportation projects.

NOTE 11 - Commitments and Contingencies
Regional Transit Authority Pension Expense
The City is presently a member agency of the San Luis Obispo Regional Transit Authority (see ACFR Note 10), a duly established Joint Powers Authority (JPA) comprised of all local cities and the County of San Luis Obispo. The City’s contractual contribution to that entity is approximately 18% of the total expense. The City was advised that the Regional Transit Authority was working with CalPERS to determine whether it is required to enroll certain previously unenrolled transit employees in the CalPERS pension system and whether the entity may be liable for obligations related to the failure to enroll those employees and make contributions on their behalf. On December 10, 2019 the County Board of Supervisors approved a contract for participation of the JPA in the San Luis Obispo County Pension Trust and the Employees Retirement Plan. The current amount of potential CalPERS unfunded liability for the JPA may reach as high as $4 million. It is not anticipated that the City’s annual payment to the JPA will increase to satisfy this unfunded liability.

NOTE 12 - Subsequent Events
Events subsequent to June 30, 2021 have been evaluated through January xx, 2022, which is the date the financial statements were available to be issued. Management did not identify subsequent events that required disclosure.

NOTE 13 - Prior Period Adjustment
A prior period adjustment of $(637,499) was made for June 30, 2019 in the Transit Fund to account for missing depreciation for a bus resulting in a restated beginning net position of $7,782,746 from the original $8,420,245.

NOTE 14 - COVID-19 Pandemic
During December 2019, the Novel Corona Virus Disease (COVID-19) was discovered and subsequently declared a world-wide pandemic by the World Health Organization on March 11, 2020. On March 4, 2020, California State Governor Gavin Newsom proclaimed a State of Emergency as a result of the threat of the COVID-19 in the State of California, leading to the San Luis Obispo County Health Officer issuing a shelter-at-home order on March 18, 2020 and the City Council declaring a health emergency on March 17, 2020. This halted all business within San Luis Obispo County outside of essential activities and largely stifled economic activity in the last quarter of the 2019-20 fiscal year, impacting ridership of the transit system. In addition, The Coronavirus Aid, Relief, and Economic Security (CARES) Act provided $25 billion to transit agencies to help to prevent, prepare for and respond to the COVID-19 pandemic. Of this, $2.8 million and nearly $1.4 million was received by the Transit Fund during the fiscal years ending June 30, 2021 and 2020 respectively. 20

2021 Original Final Actal
Revenues - intergovernmental allocations $ 45,900 $ 45,900 $ 36,409 $ (9,491) Other financing uses - operating transfers
to City of San Luis Obispo (45,900) (45,900) (36,409) 9,491 Excess of revenues over other financing uses $ -$ - -$ $ - 2020 Original Final Actal
Revenues - intergovernmental allocations $ 45,000 $ 45,000 $ (48,608) $ (93,608) Other financing uses - operating transfers
to City of San Luis Obispo (45,000) (45,000) 48,608 93,608 Excess of revenues over other financing uses $ -$ - -$ $ - Budget Variance with
Final Budget
Positive
City of San Luis Obispo, California
Transportation Development Act (TDA) Fund
Supplementary Information
Schedules of Revenues and Expenditures - Budget and Actual June 30, 2021 and 2020
Variance with
Final Budget
Positive
(Negative)
Budget
21

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22

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND

OTHER MATTERS BASED ON AN

AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the Transportation Development Act (TDA) Fund and the Transit Fund (TDA Program) of the City of San Luis Obispo, California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, and have issued our report thereon dated December 23, 2021.

Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
23

To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California

Compliance and Other Matters
As part of obtaining reasonable assurance about whether the TDA Program’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Badawi & Associates
Certified Public Accountants
Berkeley, California
January 26, 2022
24

INDEPENDENT AUDITOR’S REPORT ON TRANSPORTATION

DEVELOPMENT ACT FUNDS COMPLIANCE
To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California
Report on Compliance
We have audited the City of San Luis Obispo’s (City) compliance with the types of compliance requirements described in Section 6666 and 6667 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act) and the allocation instructions and resolutions of the San Luis Obispo Council of Governments applicable to the City’s Transportation Development Act Article 3, 4 and 6.5 Program (TDA Program) for the years ended June 30, 2021 and 2020.

Management’s Responsibility
Compliance with the requirements referred to above is the responsibility of the City’s management.

Auditors’ Responsibility
Our responsibility is to express an opinion on the City’s compliance based on our audit.

We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States; the standards applicable to financial audits contained in Government Audit Standards issued by the Comptroller General of the United States; Section 6666 and 6667 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act) and the allocation instructions and resolutions of the San Luis Obispo Council of Governments.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a material effect on the TDA Program occurred. An audit also includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Our audit does not provide a legal determination of the City’s compliance with those requirements. 25

To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California

Opinion on Compliance Requirements in PUC Section 99268.3 In our opinion, the City complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on TDA Program for the years ended June 30, 2021 and 2020.

Internal Control Over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit, we considered the City’s internal control over compliance to determine the auditing procedures for the purpose of expressing our opinion on compliance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a compliance requirement will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be deficiencies, significant deficiencies, or material weaknesses in internal control over compliance. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on Section 6666 and 6667 of the Rules and Regulations of the California Administrative Code in the Transportation Development Act Statutes and Administrative Code for 1987 (the Act), and the allocation instructions and resolutions of the San Luis Obispo Council of Governments, this report is not suitable for any other purpose.

Badawi & Associates
Certified Public Accountants
Berkeley, California
January 26, 2022
26

San Luis Obispo, California
Single Audit Reports
For the year ended June 30, 2021

City of San Luis Obispo
Single Audit Reports
For the year ended June 30, 2021
Table of Contents
Page
Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards .................................................................... 1 Report on Compliance for Each Major Federal Program and on Internal Control over Compliance in Accordance with the Uniform Guidance And on the Schedule of Expenditures of Federal Awards ................................................................................ 3 Schedule of Expenditures of Federal Awards ..................................................................................................... 7 Notes to the Schedule of Expenditures of Federal Awards .............................................................................. 8 Schedule of Findings and Questioned Costs ....................................................................................................... 9

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND

OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH

GOVERNMENT AUDITING STANDARDS
INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California
We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of San Luis Obispo, California (City), as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements and have issued our report thereon dated February 24 , 2022.

Internal Control Over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control.

Our consideration of internal control over financial reporting was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying schedule of findings and responses, we did identify certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and questioned costs as items 2021-001, 2021-002 and 2021-003 to be material weaknesses.

To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California

A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. We consider the deficiencies described in the accompany schedule of findings and questioned costs as item 2021-004 to be significant deficiency.

Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

City of San Luis Obispo’s Response to Findings
City’s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. City’s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it.

Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Badawi & Associates
Certified Public Accountants
Berkeley, California
February 24, 2022
2

REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON

INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH THE UNIFORM

GUIDANCE AND ON THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California
Report on Compliance for Each Major Federal Program
We have audited the City of San Luis Obispo, California’s (City) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the City’s major federal programs for the year ended June 30, 2021. The City’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs.

Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for each of the City’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the City’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the City’s compliance.

To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California

Opinion on Each Major Federal Program
In our opinion, the City, complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2021.

Report on Internal Control over Compliance
Management of the City is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the City’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the City’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 4

To the Honorable Mayor and Members of City Council
of the City of San Luis Obispo
San Luis Obispo, California

Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of and for the year ended June 30, 2021, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated December 23, 2021, which contained unmodified opinions on those financial statements. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Badawi & Associates
Certified Public Accountants
Berkeley, California
February 24, 2022, except for the schedule of expenditures of federal awards, which is as of December 23, 2021
5

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6

City of San Luis Obispo
Schedule of Expenditures of Federal Awards
For the year ended June 30, 2021
Federal State
Catalog Pass-through Program Subrecipient
Grantor Agency and Grant Title Number Number Expenditures Payments U.S. Department of Transportation
Highway Planning and Construction Cluster
Passed Through the State of California Department of Transportation Highway Planning and Construction 20.205 BRLS-5016(050) $ 3,048,859 $ - Highway Planning and Construction 20.205 HSIPL-5016(053) 5,838 - Highway Planning and Construction 20.205 ATPL-5016(057) 1,424,305 - Subtotal Highway Planning and Construction Cluster 4,479,002 - Federal Transit Cluster
Direct Program:

Federal Transit Formula Grants 20.507 2,805,681 -
Subtotal Federal Transit Cluster 2,805,681 -
Total U.S. Department of Transportation 7,284,683 -
U.S. Department of Justice
Direct Programs
Bulletproof Vest Partnership Program 16.607 4,146
Edward Bryne Memorial Justice Assistance Grant Program 16.738 15,644 - Total U.S. Department of Justice 19,790 -
U.S. Department of Housing and Urban Development
CDBG-Entitlement Grants Cluster
Passed Through County of San Luis Obispo
Community Development Block Grants/Entitlement Grants 14.218 B-20-UC-06-0508 36,493 - Subtotal CDBG-Entitlement Grants Cluster 36,493 -
Total U.S. Department of Housing and Urban Development 36,493 - U.S. Department of the Treasury
Passed through California Department of Finance
COVID-19--Coronavirus Relief Fund 21.019 566,980 -
Total U.S. Department of the Treasury 566,980 -
Total Expenditures of Federal Awards $ 7,907,946 $ -
See accompanying Notes to Schedule of Expenditures of Federal Awards. 7

City of San Luis Obispo
Notes to the Schedule of Expenditures of Federal Awards For the year ended June 30, 2021
A. Reporting Entity
The City is a California charter city. It was incorporated on February 19, 1856 and chartered on May 1, 1876. It is organized in accordance with the Council-Mayor-City Manager form of government. With a population of approximately 46,802, the City provides a broad range of municipal services, including police and fire protection, parks and recreation, water and sewer utilities, street maintenance, public transportation, parking, planning, and building and safety.

B. Basis of Accounting
Funds received under the various grant programs have been recorded within the special revenue funds of the City. The City utilizes the modified accrual method of accounting for the special revenue funds.

Modified accrual accounting recognizes revenues when they become available and measurable and, with a few exceptions, recognizes expenditures when liabilities are incurred. The accompanying Schedule of Expenditures of Federal Awards (Schedule) has been prepared on the modified accrual basis of accounting.

C. Relationship of Schedule of Expenditures of Federal Awards to Financial Statements The accompanying Schedule presents the activity of all federal financial assistance programs of the City.

Federal financial assistance received directly from federal agencies as well as federal financial assistance passed through the State of California is included in the Schedule.

The Schedule was prepared only from the accounts of various grant programs and, therefore, does not present the financial position or results of operations of the City.

D. Pass-Through Entities’ Identifying Number
When federal awards were received from a pass-through entity, the Schedule shows, if available, the identifying number assigned by the pass-through entity. When no identifying number is shown, the City determined that no identifying number is assigned for the program or the City was unable to obtain an identifying number from the pass-through entity.

E. Indirect Costs
The City did not elect to use the 10% de minimis indirect cost rate. 8

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section I - Summary of Auditor’s Results
Financial Statements
Types of auditor’s report issued: Unmodified
Internal control over financial reporting:
x Material weakness(es) identified? Yes
x Significant deficiency(ies) identified? Yes
Any noncompliance material to the financial statements noted? No Federal Awards
Internal control over major programs:
x Material weakness(es) identified? No
x Significant deficiency(ies) identified? None noted
Type of auditor’s report issued on compliance for major programs Unmodified Any audit findings disclosed that are required to be reported in Accordance with section 200.516(a) No
Identification of major programs:

Dollar threshold used to distinguish between type A and type B program $750,000 Auditee qualified as low-risk auditee under
section 200.520? No
9

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section II – Current Year Findings
A. Financial Statement Audit Finding
2021-001 Year-End Close and Balance Sheet Account Reconciliations (Material Weakness) Criteria: The City is responsible for fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. In addition, an effective internal control system over financial closing and reporting provides reasonable assurance for the safeguarding of assets, the reliability of financial information, and compliance with laws and regulations.

Condition: During the performance of the audit, we noted that the City had to record a large number of adjusting entries after the closing process was complete to record transactions not previously recorded or to correct transactions or balances previously recorded in error. Those adjusting entries should have been part of the closing process and the timing of recording those adjusting entries have caused some delays and added complexity in the audit.

Cause: The City’s closing process was not comprehensive enough to identify timely all the journal entries and adjustments needed to ensure the accuracy of the various account balances. Additionally, multiple employees were granted access to post journal entries after the City closed the book without enough monitoring from the management.

Effect: The City’s accounting records needed significant adjustments after the closing of the books and during the audit which caused delays in the audit and added more complexity in dealing with the large volume of adjustments.

Recommendation: We recommend that the City update its closing process to ensure all transactions and adjustments are accounted for timely before the audit starts. Additionally, we recommend that the City restrict the employees access to post adjustments after the close of the book.

The City should furthermore develop formal written policies over significant accounts that include the timely reconciling of accounts to activity reported in related subsidiary ledgers. Also, the City should restrict journal entries posting after the closing process.

Management’s response:

This is the third year-end close utilizing the new Oracle Cloud financial system. The City has been working with Oracle Consulting to make improvements to the system to assist with many of the control functions.

This resulted in significantly fewer post-closing adjustments than the prior fiscal years and significantly fewer delays in finalizing the audit. Management continues to refine processes and procedures and address deficiencies in the ERP system, including improving the year-end close process. A year-end close checklist has been development and will continue to be utilized and refined. In addition, City staff are performing monthly closing procedures, which will improve the timeliness of year-end closing. Integrated into the month-end procedures will be the review and reconciliation of the City’s balance sheet accounts.

This will help to identify issues prior to closing the books and the start of the audit. 10

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section II – Current Year Findings, continued
A. Financial Statement Audit Finding, continued
2021-002 Journal Entries Posting and Numbering (Material Weakness) Criteria: Journal entries should be independently prepared, reviewed, and posted to the general ledger with unique identification number. In addition, journal entries should be adequately documented to support its accuracy and purpose.

Condition: During the performance of the audit, we noted the following regarding the City’s journal entry process:
x For 9 out of 60 testing samples, the City was unable to provide us with documentation or documentation was insufficient for journal entries selected for review. x For 8 out of 60 testing samples, the journal entries were not appropriately approved. x For 3 out of 60 testing samples, the journal entries were not properly recorded or calculated though they were still approved.
x The City uses various numbering schemes (a date and time format, a subsidiary ledger-month format, other) that makes it difficult to determine the number of journal entries recorded and the sequence of entries.
x Journal entries can be prepared and posted without system restriction, and no controls in place to ensure the journal entries are approved before posted.

Cause: The City didn’t consistently and effectively execute the review procedures across the fiscal year and no formal written policy regarding the journal entries posting and numbering.

Effect: Journal entries recorded in the City’s accounting system may be inaccurate, unapproved or unsupported.

Recommendation: We recommend that the City implement formal written procedures and policies over journal entries to ensure only accurately prepared and supported journal entries are recorded to the general ledger.

Management’s Response:

Staff acknowledges that, of the 60 testing samples selected, 8 were indeed not properly approved and were insufficiently documented. This was the result of a system clean-up for project related expenditures that were not correctly reported. Unfortunately, the usual control flow was not adhered to for this process. This issue should not occur going forward. One journal entry was properly approved, however insufficiently documented and three had variances from the documentation. 11

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section II – Current Year Findings, continued
A. Financial Statement Audit Finding, continued
2021-002 Journal Entries Posting and Numbering (Material Weakness), continued Management’s Response, continued:

Management has developed written policies over journal entries to ensure that all journal entries have adequate and complete documentation when they are posted to the general ledger. In addition, management has worked with Oracle Consulting to automate the journal entry approval flow in the system and apply a numbering system. This project was finalized on December 14, 2021 and is now fully functional. These issues should therefore no longer occur going forward. However, staff would like to point out that even under manual conditions, the majority of journal entries followed the process implemented which was to have a separate person prepare the journal entry and then have another person post the journal entry. This process can be audited by running a report to show the “prepared by” and “posted by” fields for each journal entry transaction. Before the improvements to the system, journal entries were recorded with a system generated unique identification number; however, it was not a sequential number, which made it challenging to identify the sequence of entries. 12

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section II – Current Year Findings, continued
A. Financial Statement Audit Finding, continued
2021-003 Bank Reconciliation (Material Weakness)
Criteria: An effective internal control system over cash and investments includes frequent and timely reconciling of account balances to information provided by the bank and custodians.

Condition: During the performance of the audit, we noted that the City was behind in performing the monthly bank reconciliation, and the June 2021 bank reconciliation process were not appropriately performed until the start of the engagement in October 2021. Also, the final June 2021 bank reconciliation was not balanced and had an unreconciled variance of around $40,000, which was still under investigation by the City.

Cause: The City was not able to perform the bank reconciliations timely as there was not sufficient procedures in place to ensure completion of the process.

Effect: Errors and fraud can go undetected without frequent and timely bank reconciliation.

Recommendation: We recommend the City develop formal written policies over cash and investments that include the timely reconciling of accounts and include cash and investment accounts reported in each fund.

Management’s Response:

Management agrees that timely bank reconciliations are an important part of the effective internal controls over cash and investments. The Oracle financial system has functionality that assists with the reconciliation of the City’s books and the bank statement, however that functionality was not configured during the implementation, making bank reconciliation a complicated and time-consuming manual process.

Management had been working with Oracle Consulting and staff to configure and implement this functionality which finally went live in June 2021. Staff can also report that the remaining imbalance was caused by a timing issue related to recording revenue of $39,697, leaving approximately $2,500 unreconciled at June 30, 2021. Additionally, management has implemented additional oversight and review of the monthly reconciliation to make sure it is working properly and timely in coordination with monthend closing. 13

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section II – Current Year Findings, continued
A. Financial Statement Audit Finding, continued
2021-004 Payroll Module Implementation (Significant Deficiency) Criteria: An effectively implemented payroll system should process the payroll accurately, and an effective internal control system over payroll requires timely and accurate payroll processing.

Condition: During the performance of the audit, we noted that – • The Oracle payroll module has overtime configuration implemented incorrectly, and the City has to manually track the payroll in a spreadsheet and correct the error as it occurs since the implementation.
• The configuration of payroll journal entries posting was implemented incorrectly which caused the variance between the bank record and the City’s general ledger.

Cause: The Oracle payroll module has not been implemented correctly.

Effect: Errors and fraud can go undetected in payroll processing with a large volume of manual corrections needed.

Recommendation: We recommend the City to work with the third-party vendor to correct the implementation of payroll module.

Management’s Response:

Management is in full agreement with this finding and is currently working with Oracle Consulting to correct payroll configurations, as recommended. During the fiscal year the payroll team performed an internal audit of the payroll processing to identify and address issues with the system configuration. As stated, the payroll team is currently manually tracking the overtime results of each payroll and manually correcting any calculation errors that result. Additionally, the payroll team has corrected the costing errors that produced incorrect journal entries which also hugely complicated the aforementioned bank reconciliation efforts.
14

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section II – Current Year Findings, continued
B. Federal Award Program Audit Finding
No findings or questioned costs were noted in the current year. 15

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section III – Prior Year Findings
A. Financial Statement Audit Finding
2020-001 Year-End Close and Balance Sheet Account Reconciliations (Material Weakness) Criteria: The City is responsible for fair presentation of the financial statements in conformity with accounting principles generally accepted in the United States of America. In addition, an effective internal control system over financial closing and reporting provides reasonable assurance for the safeguarding of assets, the reliability of financial information, and compliance with laws and regulations.

Condition: During the performance of the audit, we noted that the City had to record a large number of adjusting entries after the closing process was complete to record transactions not previously recorded or to correct transactions or balances previously recorded in error. Those adjusting entries should have been part of the closing process and the timing of recording those adjusting entries have caused some delays and added complexity in the audit.

Cause: The City’s closing process was not comprehensive enough to identify timely all the journal entries and adjustments needed to ensure the accuracy of the various account balances. Additionally, the City implemented a new financial software, however formally written accounting policies and procedures related to the system were not developed.

Effect: The City’s accounting records needed significant adjustments after the closing of the books and the start of the audit which caused delays in the audit and added more complexity in dealing with the large volume of adjustments.

Recommendation: We recommend that the City update its closing process to ensure all transactions and adjustments are accounted for timely before the audit starts.

The City should furthermore develop formal written policies over significant accounts that include the timely reconciling of accounts to activity reported in related subsidiary ledgers. Also, the City should develop a checklist for year-end closing procedures.

Status: See current year finding 2021-001
16

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section III – Prior Year Findings, continued
A. Financial Statement Audit Finding, continued
2020-002 Journal Entries Posting and Numbering (Material Weakness) Criteria: Journal entries should be independently prepared, reviewed, and posted to the general ledger with unique identification number. In addition, journal entries should be adequately documented to support its accuracy and purpose.

Condition: During the performance of the audit, we noted the following regarding the City’s journal entry process:
x The City was unable to provide us with documentation or documentation was insufficient for journal entries selected for review.
x The City uses various numbering schemes (a date and time format, a subsidiary ledger-month format, other) that makes it difficult to determine the number of journal entries recorded and the sequence of entries.
x The City does not maintain a log of manual journal entries to document the accountability of all journal entries, the preparer, the approver, and the purpose of why the entry was recorded. x Journal entries can be prepared and posted without system restriction, and no controls in place to ensure the journal entries are approved before posted.

The City implemented review procedures towards the end of the fiscal year, so significant number of journal entries we tested before the implementation have the conditions above.

Cause: The City didn’t fully implement the review procedures across the fiscal year.

Effect: Journal entries recorded in the City’s accounting system may be inaccurate, unapproved or unsupported.

Recommendation: We recommend that the City implement formal written procedures and policies over journal entries to ensure only accurately prepared and supported journal entries are recorded to the general ledger.

Status: See current year findings 2021-002
17

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section III – Prior Year Findings, continued
A. Financial Statement Audit Finding, continued
2020-003 Bank Reconciliation (Material Weakness)
Criteria: An effective internal control system over cash and investments includes frequent and timely reconciling of account balances to information provided by the bank and custodians.

Condition: During the performance of the audit, we noted that bank reconciliations were not performed until the start of the engagement. Also, the June 2020 bank reconciliation was not balanced and had an unreconciled variance of around $600,000, which was still under investigation by the City.

Cause: The City was not able to perform the bank reconciliations timely as there was not sufficient policy and procedures in place to ensure completion of the process.

Effect: Errors and fraud can go undetected without frequent and timely bank reconciliation.

Recommendation: We recommend the City develop formal written policies over cash and investments that include the timely reconciling of accounts and include cash and investment accounts reported in each fund.

Status: See current year finding 2021-003
18

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section III – Prior Year Findings, continued
A. Financial Statement Audit Finding, continued
2020-004 Capital Assets Reconciliation (Significant Deficiency) Criteria: A good internal control reporting system over capital assets requires the maintenance of detail records of all capital assets to be able to support amounts reported on the financial statements and to ensure safeguarding of assets.

Condition: The City has established basic procedures to ensure that capital asset additions are properly capitalized, capital asset disposals are properly recorded, and current year depreciation expense for capital assets are recorded at the fund-financial statement level for proprietary funds and at the government-wide financial statement level for governmental funds.

However, during the audit, we noted a $4.5 million construction-in-progress addition was not captured in the general ledger. Additionally, we noted infrastructure assets were added to the capital assets module to replace existing infrastructure without corresponding fully-depreciated infrastructure assets removed.

Finally, the City had also not performed a physical inventory of assets to determine whether all capital assets reported were still in the City’s possession at the end of the fiscal year.

Cause: The City doesn’t have sufficient procedures in place to ensure the completeness and accuracy of capital assets.

Effect: The capital assets balance can be misstated on the financial statements.

Recommendation: We recommend that the City implement procedures to ensure all capital assets additions are captured properly and replaced capital assets are removed timely. We also recommend that the City perform a physical inventory of all capital assets to ensure the completeness and accuracy of the subsidiary ledgers and general ledger.

Status: Implemented.
19

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section III – Prior Year Findings, continued
A. Financial Statement Audit Finding, continued
2020-005 Segregation of Duties in Cash Disbursement (Significant Deficiency) Criteria: An effective internal control system over cash disbursement requires the segregation of incompatible duties. An effective internal control system over cash disbursement provides reasonable assurance for the safeguarding of assets.

Condition: During the performance of the audit, we noted Accounts Payable Analyst was granted edit access to the vendor master file, who also has the access to check printing and invoices data entry.

Additionally, the financial system doesn’t prevent unauthorized invoices to be processed and the Accounting Manager doesn’t review the check register against invoices when doing the review process.

Cause: The City does not have sufficient internal controls over cash disbursement processes.

Effect: Unauthorized payments or incorrect payment can occur undetected.

Recommendation: We recommend the City to implement internal controls to prevent unauthorized or inaccurate cash disbursement, for example, to generate a change report of vendor master file and have management reviewed regularly.

Status: Implemented.
20

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section III – Prior Year Findings, continued
A. Financial Statement Audit Finding, continued
2020-006 Payroll Module Implementation (Significant Deficiency) Criteria: An effectively implemented payroll system should process the payroll accurately, and an effective internal control system over payroll requires timely and accurate payroll processing.

Condition: During the performance of the audit, we noted that – • The City has not implemented Goals and Performance module in Oracle for all employees, evaluation tracking and reporting has transitioned to a completely manual process. During the interview of payroll employees, we learned that a significant number of employee reviews were performed late, causing manual retroactive payroll payments to be made. • The Oracle payroll module has overtime configuration implemented incorrectly, and the City has to manually track the payroll in a spreadsheet and correct the error as it occurs since the implementation.

Cause: The Oracle payroll module has not been implemented correctly.

Effect: Errors and fraud can go undetected in payroll processing with a large volume of manual corrections needed.

Recommendation: We recommend the City to work with third-party vendor to correct the implementation of payroll module.

Status: See current year finding 2021-004.
21

City of San Luis Obispo
Single Audit Reports
Schedule of Findings and Questioned Costs
For the year ended June 30, 2021
Section III - Prior Year Findings, continued
A. Federal Award Audit Finding
No findings or questioned costs were noted in the prior year. 22

Item 6b
Department: Fire
Cost Center: 8501
For Agenda of: 3/15/2022
Placement: Business
Estimated Time: 45
FROM: Keith Aggson, Fire Chief
Prepared By: James Blattler, Senior Administrative Analyst SUBJECT: FIRE DEPARTMENT ANNUAL REPORT

RECOMMENDATION
Receive and file the Fire Department’s 2021 Annual Report.

DISCUSSION
The 2021 Fire Department Annual Report (Attachment A) provides an overview of the Fire Department’s past operational year. The report highlights both department activity and statistics that the department utilizes to analyze performance and workload. Included in the report are some of the major accomplishments made by staff during the last year highlighting the work performed by Department staff.

To help keep the community informed of the efforts staff completed over the past year, the report and an accompanying video is scheduled to be released to the public on March 16th through a formal media release, Department and City social media platforms, and by posting to the Department website.

Background
The report focuses on the six major programs within the Fire Department: (1) Administration, (2) Fire Prevention, (3) Emergency Response, (4) Training, (5) Fire Apparatus, and (6) Emergency Management. Additionally, the report highlights the staffing changes and major accomplishments of 2021 and outlines the major work efforts anticipated in 2022.

The report aligns with three of the department’s five strategic directions in the Department’s 2018-2023 Strategic Plan (Attachment B): (1) Connecting with the Community, (2) Continuously Evaluating Programs and Service Delivery, and (3) Analyzing Relevant Data to Inform Decision Making.

Previous Council or Advisory Body Action
On March 16, 2021, the City Council received and filed the Fire Department’s 2020 Annual Report.

Item 6a
Public Engagement
This item is a business item for the March 15, 2022, City Council meeting and will follow all required postings and notifications. The public will have the opportunity to provide comment on this item at or before the meeting.

ENVIRONMENTAL REVIEW
The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a " Project" under CEQA Guidelines Sec. 15378.

FISCAL IMPACT
Budgeted: Yes Budget Year: 2020-21 and 2021-22
Funding Identified: Yes
Fiscal Analysis:

Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund N/A $0 $0 $0
State
Federal
Fees
Other:

Total N/A $0 $0 $0
The Fire Department is funded through the General Fund's annual budget appropriation adopted by the City Council. All activities within the report are covered through the annual program appropriations as outlined in the City' s Financial Plan.

ALTERNATIVES
The City Council could choose to not receive and file the report. This is not recommended as the report provides a record of essential statistics and trends that are important for policy makers and the public awareness in our community.

ATTACHMENTS
A - Fire Department 2021 Annual Report
B - 2018-2023 Fire Department Strategic Plan

2021
ANNUAL
REPORT

SAN LUIS OBISPO FIRE
W W W . S L O C I T Y . O R G / F I R E | 2 1 6 0 S A N T A B A R B A R A A V E | 8 0 5 . 7 8 1 . 7 3 8 0

TABLE OF CONTENTS

I am pleased to share the San Luis Obispo City Fire Department's annual report for 2021, which highlights the great work of your Fire Department. Our dedicated staff has continued to provide exceptional services to the community of San Luis Obispo, none of which would be possible without the trust and support we have with our community, City Council, City Leadership, and each other. For example, while enduring the second year of COVID Pandemic response, members of the department on the XSL Incident Management Team supported SLO Public Health Department Public Points of Distribution for COVID vaccinations county-wide. Conversely, the department obtained a 94% staff vaccination rate when vaccines became available.

CHIEF'S MESSAGE
1 The department experienced considerable staffing changes in 2021 with five retirements and the addition of a new Training Captain position. These changes resulted in four members being promoted to Fire Captain and one member to Fire Engineer. Additionally, a new Mechanic Helper, and Haz-Mat Coordinator were brought on board and the department hired nine new firefighters to fill long-term vacancies from 2020. Upon appointment, the new Training Captain immediately began coordinating a ten-week recruit firefighter academy for the new firefighters.

Our employees remain at the heart of the organization and continue to bring new ideas and concepts forward, improving everyday service to the community through operational improvements. Special operations continued to advance with the expansion of the Technical Rescue Team with three additional members, which further prepares our agency for all types of technical rescue emergencies, including the open space areas. In addition, the Training Battalion Chief began the implementation of the training plan to guide our firefighters and prepare for the various challenges the profession encounters in providing public safety. The department improved incident management capabilities through the implementation of the FIRESCOPE 500 Command and Control training. Our Fire Prevention staff remained engaged in meeting the building community's needs while enhancing capabilities by implementing the Self-Inspection program, adopting a new software prevention management system, and continuing responsive service to customers. Fire Prevention staff also supported the City EOC COVID response at various levels, assuring EOC staff's safety during the initial phases of response while working with City staff to support safe business openings and operations.

Our employees remain at the heart of the organization and continue to bring new ideas and concepts forward improving everyday service to the community.