San Luis Obispo City Council
January 23, 2024

Item 5g
Fiscal Analysis:

Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $0 $0 $0 $0
State
Federal
Fees
Other: CFD
Total $0 $0 $0 $0
There are no fiscal impacts directly associated with the approval of the final map for Tract 3089 Phases 2 & 3. The City will eventually incur costs upon acceptance of the improvements by the City, which will occur by separate Council action once the subdivision improvements are deemed complete.

The General Fund share of costs for constructing public improvements associated with Phase 2 and 3 is approximately $58,000, which represents the City’s proportionate share of costs for the installation of a new sidewalk on S. Higuera between Los Osos Valley Road and the southern City Limit. These funds were programmed for this use in the 2019- 21 Financial Plan and carried forward into the current Financial Plan within the Capital Improvement Program budget. All other Phase 2 & 3 infrastructure improvements eligible for reimbursement will be reimbursed in the form of transportation impact fee credits and/or reimbursement from other private development projects that benefit from these infrastructure improvements.

The CFD structure is designed to be revenue neutral to the City to fund the cost of services, such as police and fire, and infrastructure maintenance. The CFD is analyzed each year and taxes are levied to cover projected costs which will increase incrementally as more of the CFD-maintained services and improvements come online. An analysis of the annual costs to provide the services and infrastructure maintenance to the Avila Ranch development, including administration, is estimated to be $1.7 million at buildout. The City began collecting Special Taxes from the developed parcels within Avila Ranch and incorporated this funding into a maintenance budget for the improvements at the development. The CFD is estimated to generate $1.7 million in annual revenue at buildout, therefore there is no net fiscal impact anticipated for the City’s budget. Costs for maintenance of the new open space and public park lots included in the Phases 2 & 3 final maps will be incorporated into the CFD services budget, which is $232,761 for FY 23-24, as well as future financial plans. The CFD at Avila Ranch was established in-lieu of a Homeowners Association, and therefore the CFD funds of approximately $200 per month per unit provides the maintenance of roads, parks, and other infrastructure within the development. This cost has previously been determined to be within the City’s financial plan policy limits for total property tax burden.

Item 5g

ALTERNATIVES
Deny approval of the final map. Denying approval of the final map is appropriate only if findings are made that the requirements or conditions of the tentative map have not been met or performed (Section 66473 of the Subdivision Map Act) or if findings are made that the final map is not in substantial compliance with the previously approved tentative map (Section 66474.1 of the Subdivision Map Act). Because the final map is in substantial compliance with the tentative map and all the conditions of the map will be met or securities deposited prior to map recordation, Sections 66474.1 and 66473 of the Subdivision Map Act require that City Council approve the map. Therefore, denying approval of the final map is not a recommended alternative unless the required findings are made.

ATTACHMENTS
A - Draft Resolution approving the Phases 2 & 3 Final Map B - Vicinity Map
C - Tentative Map (Tract 3089)
D - Phasing Plan (Tract 3089)
E - Addendum to the Avila Ranch Final EIR
F - Draft Phase 3 Affordable Housing Agreement
G -Park Layout
H - Draft Subdivision Agreement Tract 3089 Phases 2 & 3 I - Draft Final Map Tract 3089 Phases 2 & 3

R ______
RESOLUTION NO. _____ (2024 SERIES)

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS

OBISPO, CALIFORNIA, APPROVING THE FINAL MAP FOR TRACT
3089 PHASES 2 & 3, AVILA RANCH, INCLUDING AN ADDENDUM TO

THE FINAL ENVIRONMENTAL IMPACT REPORT MODIFYING THE
TIMING OF MITIGATION MEASURE TRANS-11 AND AUTHORIZING

THE MAYOR TO EXECUTE A SUBDIVISION AGREEMENT IN A FORM
SUBJECT TO THE APPROVAL OF THE CITY ATTORNEY (175
VENTURE DRIVE, FMAP-0562-2022)
WHEREAS, the City Council made certain findings concerning the vesting tentative map for Tract 3089, as prescribed in Resolution No. 10832 (2017 Series); and WHEREAS, the City Council entered into a Development Agreement with the Subdivider of Tract 3089 with Ordinance No. 1639 (2017 Series); and WHEREAS, the Community Development Director approved minor corrections to the tentative map as allowed by the City Municipal Code and California Government Code; and
WHEREAS, the subdivider has requested that the Council approve the final map for Tract 3089 Phases 2 & 3; and
WHEREAS, there are certain lots that are offered to the City in fee for public purposes; and
WHEREAS, Tract 3089 is required to preserve at least 50 acres of on-site open space and/or agricultural land and preserve at least 50 acres of offsite open space and/or agricultural land by the recordation of deed restrictions, but only a portion of that is required to be preserved with Phases 2 & 3; and
WHEREAS, the subdivider will record a Phase 3 Affordable Housing Agreement in order to implement to the goals and requirements of the Avila Ranch Development Agreement for Phase 3 of the project, as outlined in the 2017 Affordable and Workforce Housing Plan (Development Agreement Exhibit G); and
WHEREAS, the subdivider will be constructing certain improvements that are eligible for fee credits per the project’s development approval documents and the City’s AB1600 fee program; and
WHEREAS, the subdivider will submit appropriate securities to guarantee installation of the required subdivision improvements as shown on the approved plans prior to map recordation, and the required fees will be received prior to map recordation, as prescribed in the Subdivision Agreement, the Development Agreement, and the project approvals; and

Resolution No. _____ (2024 Series) Page 2
R ______
WHEREAS, all requirements, conditions and mitigation measures required per said Council Resolution No. 10832 (2017 Series) approving the tentative map and Ordinance No. 1639 (2017 Series) approving the Development Agreement have been completed or appropriate securities will be in place to guarantee their completion prior to Phases 2 & 3 map recordation; and
WHEREAS, the Avila Ranch Development Plan and associated Final Environmental Impact Report were approved and certified by the City Council on September 19, 2017, pursuant to Resolution No. 10832 (2017 Series); and WHEREAS, an Addendum to the Final Environmental Impact Report (FEIR) has been prepared as shown in Attachment H of the staff report to address modifying the timing of the construction of a bicycle bridge over Tank Farm Creek south of Buckley Road identified in Mitigation Measure TRANS-11, and under the revised timing, the south bicycle bridge will be constructed in Phase 4, concurrent with the bicycle lanes and road widening on Buckley Road, in order to create continuous bicycle routes and to minimize construction impacts to properties on the south side of Buckley Road; and WHEREAS, approval of the final map is statutorily exempt under the California Environmental Quality Act (CEQA) pursuant to Section 15268(b)(3) Ministerial Projects (approval of final subdivision maps) of Title 14 of the California Code of Regulations (State CEQA Guidelines), therefore, no further environmental review is required for approval of the Tract 3089 Phases 2 & 3 final map.

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

SECTION 1. The final map for Tract 3089 Phases 2 & 3 is found to be in substantial conformance with the tentative map.

SECTION 2. Phases 2 & 3 provide sufficient parkland and park improvements to meet City requirements based on the projected population and housing onsite, so there are no "in-lieu" park fees required.

SECTION 3. The City Clerk is authorized to accept fee offers for the open space and park lots with the signing of the Final Map.

SECTION 4. The draft Phase 3 Affordable Housing Agreement, provided as Attachment I of the staff report, is in substantial conformance with the 2017 Affordable and Workforce Housing Plan which was adopted as Exhibit G of the Avila Ranch Development Agreement.

Resolution No. _____ (2024 Series) Page 3
R ______
SECTION 5. Approval of the final map for Tract 3089 Phases 2 & 3 is hereby granted with the understanding that minor changes to the final map for technical accuracy and condition compliance are still needed. The Public Works Director is authorized to approve these changes and record the map when it is deemed to be complete, and all conditions and mitigation measures are complied with.

SECTION 6. The Mayor is authorized to approve revisions to the Subdivision Agreement for Tract 3089 Phases 2 & 3 and execute the agreement in a form substantially the same as shown in Attachment G of the staff report.

SECTION 7. Pursuant to the FEIR Addendum provided as Attachment H of the staff report, the timing of Mitigation Measure TRANS-11 for the bicycle bridge over Tank Farm Creek south of Buckley Road is modified to coincide with the widening of Buckley Road for continuous bike lanes to the east of the new bicycle bridge in Phase 4. Said modification does not trigger one of the events in Section 15162 of the CEQA Guidelines and therefore an addendum is appropriate.

SECTION 8. The Public Works Director is authorized to reduce or release securities for the public improvements once the requirements for release are met and is authorized to cause the improvements to be accepted into the City’s maintenance system.

SECTION 9. The Mayor and City staff are authorized to take action necessary to carry out the intent of this resolution.

Resolution No. _____ (2024 Series) Page 4
R ______
SECTION 10. Environmental Review. The Avila Ranch Development Plan (ARDP) and associated Final Environmental Impact Report, together with the FEIR Addendum, constitute the complete environmental determination for the project and are hereby approved. All mitigation measures adopted as part of the ARDP FEIR that are applicable to the project are carried forward and applied to the project to effectively mitigate the impacts that were previously identified. The final map is substantially in conformance with the tentative map evaluated with these prior environmental determinations. Approval of the final map is statutorily exempt under the California Environmental Quality Act (CEQA) pursuant to Section 15268(b)(3) Ministerial Projects (approval of final subdivision maps) of Title 14 of the California Code of Regulations (State CEQA Guidelines). Therefore, no further environmental review is required.

Upon motion of Council Member ___________, seconded by Council Member ___________, and on the following roll call vote:

AYES:

NOES:

ABSENT:

The foregoing resolution was adopted this _____ day of _______________ 2024. ___________________________
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

Phase 2 Vicinity Map Tract 3089 Avila Ranch

1050 Southwood Drive
San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

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San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

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San Luis Obispo, CA 93401
P 805.544.7407 F 805.544.3863

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San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

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San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

1050 Southwood Drive
San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

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San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

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San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

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San Luis Obispo, CA 93401
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San Luis Obispo, CA 93401
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San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

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San Luis Obispo, CA 93401P 805.544.7407 F 805.544.3863

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TRACT 3089 PHASING PLAN

Addendum to the Final Environmental Impact Report for the Avila Ranch Development Plan
December 11, 2023

1. Project Title:

Avila Ranch Development Plan

2. Lead Agency Name and Address:

City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401

3. Contact Person and Phone Number:

Callie Taylor, Associate Planner
805-781-7016

4. Project Location:
175 Venture Drive
San Luis Obispo, CA 93401

5. Project Applicant and Representative Name and address:

Avila Ranch
WCP Developers, LLC
Dan Garson, Director of Land Development
735 Tank Farm Rd Suite 100, San Luis Obispo, CA 93401

6. General Plan Designation:

Special Focus Area SP-4. Per Avila Ranch Development Plan: Low-Density Residential, Medium-Density Residential, Medium-High Density Residential, High-Density Residential, Neighborhood Commercial, Open Space, Park

7. Zoning:

Per Avila Ranch Development Plan: R-1 Low-Density Residential, R-2 Medium-Density Residential, R-3 Medium-High Density Residential, R-4 High-Density Residential, C-N Neighborhood Commercial, Conservation/Open Space C/OS, PF Public Facility, Airport Area Specific Plan

8. Description of the Project:

The Avila Ranch Development Plan was approved by the San Luis Obispo City Council on September 19, 2017. Project entitlements included certification of the Final EIR, approval of the Avila Ranch Development Plan, Airport Area Specific Plan Amendment, General Plan Amendment, Vesting Tentative Tract Map, Zone Change, Development Agreement, and establishment of a Community Facilities District. The project includes 720 residential units, 15,000 square feet of neighborhood commercial, open space, and parks on a 150-acre area which is to be developed within six (6) phases of development with a phased final map.

9. Project Entitlements Requested:

Previously approved by the City Council on September 19, 2017. Project implementation, Final Map recordation, permits, and construction are in process.

10. Previous Environmental Review:

The Avila Ranch Development Plan (ARDP) and associated Final Environmental Impact Report (EIR) were approved and certified by the City Council on September 19, 2017, pursuant to Resolution No. 10832 (2017 Series). The significance of each impact resulting from implementation of the Project was determined based on impact significance criteria and applicable CEQA Guidelines for each impact topic. The EIR found that the Project would result in significant and unavoidable construction-related and long-term impacts to air quality, construction-related noise, and long-term transportation and traffic impacts.

Mitigation measures were adopted to reduce the potential impacts where feasible, and the City Council adopted CEQA findings and a Statement of Overriding Conditions to address the identified significant and unavoidable impacts described in the Final EIR.

Buildout of the project is currently underway. The Phase 1 Final Map was recorded in December 2018, and the Phase 1 residential units are currently under construction. Onand off-site improvements have been constructed as part of Phase 1, including transportation improvements to mitigate for the increase in traffic generated by the Tract 3089 development.

11. Purpose of the Addendum:

Section 15164 of the State CEQA Guidelines allows a lead agency to prepare an addendum to a Final EIR when only “minor technical changes or additions” are necessary to address the effects of a minor change to the approved project since the Final EIR was certified. In addition, the lead agency is required to explain its decision not to prepare a subsequent EIR pursuant to State CEQA Guidelines Section 15162, which requires subsequent EIRs when proposed changes would require major revisions to the previous EIR “due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects.”

Subsequent to certification of the ARDP Final EIR, additional information has been identified which affects the construction timing of a portion of Mitigation Measure TRANS11. This mitigation measure established an obligation for the project to install two separated bicycle bridges on each side of Buckley Road at Tank Farm Creek. Off-site property acquisition and temporary construction easements are required in order to install these improvements on the south side of Buckley Road. Property negotiations are in process between the developer and the neighboring property owner to the south. Through the negotiation process, the parties have identified the need to update the timing of the south bicycle bridge to be consistent and concurrent with the installation the bicycle lanes and road widening on Buckley Road. The purpose of this Addendum is to document the revised status of the south bicycle bridge construction timing and to confirm the change of mitigation timing would not result in any new or more severe significant environmental effects not previously analyzed in the Final EIR.

The evaluation below discusses the issue areas that are relevant to this Addendum and covered by the previously approved Final EIR. The evaluation concludes that no new environmental effects are created and that there is no increase in the severity of previously identified significant effects.

12. Addendum Requirements:

Pursuant to Section 21166 of CEQA and Section 15162 of the State CEQA Guidelines, when a lead agency has adopted an EIR for a project, a subsequent EIR does not need to be prepared for the project unless the lead agency determines that one or more of the following conditions are met:

1. Substantial project changes are proposed that will require major revisions of the previous EIR due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects;

2. Substantial changes would occur with respect to the circumstances under which the project is undertaken that require major revisions to the previous EIR due to the involvement of new significant environmental effects or a substantial increase in the severity of previously identified significant effects; or

3. New information of substantial importance that was not known and could not have been known with the exercise of reasonable diligence at the time the previous EIR was adopted shows any of the following:
a. The project will have one or more significant effects not discussed in the previous EIR; or
b. Significant effects previously examined will be substantially more severe than identified in the previous EIR; or

c. Mitigation measures or alternatives previously found not to be feasible would in fact be feasible, and would substantially reduce one or more significant effects of the project, but the project proponent declines to adopt the mitigation measures or alternatives; or
d. Mitigation measures or alternatives that are considerably different from those analyzed in the previous EIR would substantially reduce one or more significant effects on the environment, but the project proponent declines to adopt the mitigation measures or alternatives.

Preparation of an Addendum to an EIR is appropriate when none of the conditions specified in Section 15162 (above) are present and some minor technical changes to the previously certified EIR are necessary to address minor changes to an approved project.

Because the new information would not result in any new or more severe significant impacts, an Addendum is the appropriate CEQA document.

NEW INFORMATION AND UPDATED PROJECT ELEMENTS

NEWLY DISCOVERED INFORMATION
The Avila Ranch Final EIR, Mitigation Measure TRANS-11, established an obligation for the project to install two separated bicycle bridges on each side of Buckley Road at Tank Farm Creek to improve access to safe bicycle routing along Buckley Road.

As originally approved, construction of these bridges was required with Phase 2 of the Avila Ranch project and was envisioned to be constructed simultaneously with the Buckley Road Extension, which was also required prior to Phase 2. Avila Ranch has since completed the Buckley Road Extension, choosing to advance this street extension with Phase 1 of the development.

The design for the bicycle bridge on the south side of Buckley Road is being processed through the County of San Luis Obispo permitting review, with issuance of permits pending off-site rightof-way acquisition. The project applicant has been negotiating with the property owner on the south side of Buckley Road to obtain off-site property for right-of-way purposes. One of the primary challenges associated with the right-of-way acquisition is a concern regarding the functionality and safety of constructing the bicycle bridge with Phase 2, when the bridge would connect back to a segment of Buckley Road with no existing bike lanes east of the bridge. The Avila Ranch project is required to construct additional road widening on Buckley east of the bridge with Phase 4, which will provide 8-foot-wide shoulders/bicycle lanes further to the east.

There has been a request by the property owner to the south, who owns the land on which the bicycle bridge will be constructed once right-of-way is acquired, to defer construction of this bicycle bridge until Phase 4 of the Avila Ranch development. Deferral of the bicycle bridge to Phase 4 would result in a continuous bicycle facility along this segment and limit the overall duration of construction impacts to the private property owner on the south side of the roadway.

CHANGED BASELINE CONDITIONS AND UPDATED PROJECT ELEMENTS The 2017 Final EIR identified project impacts under TRANS-11, which states that the project development would increase demand for bicycle facilities in an underserved area and would potentially conflict with the City’s Bicycle Transportation Plan regulations and General Plan thresholds. Mitigation Measure TRANS-11 was identified in order to mitigate this impact. The revised timing of construction of the south separated bicycle bridge, identified in Mitigation Measure TRANS-11, is being evaluated in this Addendum.

The following mitigation measure was adopted in the 2017 Final EIR to provide continuous bicycle facilities along Buckley Road and reduce transportation related impacts to the greatest extent feasible:

MM TRANS-11
The Applicant shall construct two (2) separated bicycle bridges on each side of Buckley Road at Tank Farm Creek and provide connections to Buckley Road so as to provide continuous and safe bicycle routing along Buckley Road. These sections of roadway and creek crossings are under the jurisdiction of the County and would need to meet both City and County design standards to the greatest extent feasible and are subject to approval of the City’s Public Works Director.

Plan Requirements and Timing. Prior to recordation of the final VTM for Phase 2, the Applicant shall submit a Public Improvement Plan for the Buckley Road Class II bicycle lanes and the separated bicycle bridges across Tank Farm Creek. These improvements shall occur concurrently with the extension of Buckley Road to South Higuera Street during Phase 2.

Monitoring. The City shall verify that the Applicant has modified the Project design to be in accordance with the BTP and the AASP.

These improvements were required to address a transportation policy impact related to the City’s Bicycle Transportation Plan, which identified future plans to provide continuous bicycle facilities along Buckley Road. The timing of this mitigation measure was not developed based on any quantitative threshold of significance or number of units, but rather was developed with the general intent to provide for orderly development and infrastructure improvements as the development builds out.

In addition, Mitigation Measure TRANS-11 was also proposed to partially address Air Quality Impact AQ-4, which was a significant but mitigable impact. AQ-4 states that construction and operation of the Project would result in impacts to global climate change from the emissions of Greenhouse Gases and would be potentially inconsistent with the City’s Climate Action Plan.

Mitigation Measure TRANS-11 requires bicycle bridges to facility alternative transportation, which would in turn serve to lower GHGs.

Mitigation Measure TRANS-11, including the north and south separate bicycle bridges, was originally intended to coincide with the Buckley Road Extension in Phase 2. However, the

developer completed the Buckley Road extension ahead of schedule, prior to Phase 1 of the development. Road widening and 8-foot-wide shoulders/bicycle lanes on Buckley Road are required to be installed during Phase 4 of the development, as identified in Tentative Tract Map Condition of Approval #107.

Staff from the City of San Luis Obispo and the County of San Luis Obispo have met with the Avila Ranch project developer and the neighboring property to south who owns the area needed for road widening and installation of the bicycle bridge. The neighboring property owner has brought up concerns with installing the bicycle facilities in a piecemeal fashion. There are also concerns that installing the bicycle bridges near the South Higuera intersection in close proximity to the Bob Jones Trail will attract bicyclists and pedestrians for recreational use on Buckley Road; however, road widening and continuous bicycle lanes to the east of the bridge would not be installed until Phase 4. A Phase 2 bridge installation would thereby create an interim time period where bicycle facilities are sporadic and non-continuous.

As a result of this newly discovered information and the change in conditions described above, the proposed timing of the construction of the south bicycle bridge is being modified to create concurrent construction timing with the rest of the bicycle route on Buckley Road during Phase

4. Both City and County Public Works staff have considered the Avila Ranch representative’s formal request to defer construction of the bicycle bridge on the south side of Buckley Road to Phase 4 of the development and concur with this request. Based on staff’s review, this modification would not result in any new or exacerbated impacts as identified in the approved project EIR and the project would retain the obligation to improve bicycle facilities on Buckley Road for consistency with the City’s adopted Bicycle Transportation Plan (now Active Transportation Plan). Concurrent Phase 4 installation will address the safety concerns of the non-continuous segments of bike paths. It will meet the intent of the mitigation measure to create continuous bicycle facilities on Buckley Road and implement the goals of the Active Transportation Plan. Concurrent construction in Phase 4 will also minimize construction related impacts on the property owner to south, who Avila Ranch is currently working with to acquire offsite property for the bicycle improvements.

Based on the EIR analysis, the timing of the bridges had no bearing on the conclusion that the impact was significant. The impacts analyzed in TRANS-11 of the 2017 EIR will still be mitigated by the mitigation measure in its modified form with revised timing. The revised timing of the bicycle bridge installation will serve the original intention of creating continuous bicycle lanes on Buckley Road and providing alternative transportation methods upon completion of construction.

Impacts identified in TRANS-11 and AQ-4 will be mitigated as originally intended by constructing the bicycle bridges concurrently with the bicycle lanes on Buckley Road.

For clarity, the requirement to construct the bicycle bridge on the north side of Buckley Road will remain a condition tied to Phase 2 of the development, as originally required by Mitigation Measure TRANS-11. Construction of the north bridge facility would not require acquisition of offPage 200 of 682 site right-of-way, and it would be located further to the north and connected to the Class 1 bicycle facilities within Avila Ranch.

MINOR TECHNICAL CHANGES TO THE FINAL EIR
The project timing revisions noted above would result in minor changes to the approved project and Final EIR and are therefore evaluated in this Addendum, below.

Transportation. The Final EIR determined that impacts to Transportation under TRANS-11 are significant but mitigable. Implementation of several required mitigation measures would reduce Transportation impacts to the greatest extent feasible. Mitigation Measure TRANS-11 requires the installation of separated bicycle facilities on both the north and south side of Buckley Road in order to create continuous bicycle routes on Buckley Road along the project frontage. The improvements will be designed and installed as originally required, however, the timing will be modified to be tied to other adjacent bicycle facility improvements in the area. The north bridge over Tank Farm Creek, which is connected to the Class 1 path within Avila Ranch, will be installed during Phase 2, as required by the original mitigation measure. The south bridge over Tank Farm Creek will be installed in Phase 4, concurrent with Buckley Road widening and installation of bicycle lanes on Buckley Road, thereby creating continuous bicycle routes on Buckley Road as was intended by the original mitigation measure. Therefore, no new or more severe impacts would occur beyond what was previously analyzed in the Final EIR.

Mitigation Measure TRANS-11 as updated would be consistent with the City of San Luis Obispo’s Active Transportation Plan. With implementation of Mitigation Measure TRANS-11, the project would continue to reduce impacts identified under TRANS-11 and AQ-4 to the greatest extent feasible. Implementation of revised timing of a portion of Mitigation Measure TRANS-11 would not change the environmental determination of the identified impacts or other resource sections in the Final EIR. Therefore, no new or more severe impacts would occur beyond what was previously analyzed in the Final EIR.

DETERMINATION
In accordance with Section 15164 of the State CEQA Guidelines, the City of San Luis Obispo has determined that this Addendum to the certified Final EIR is necessary to document changes or additions that have occurred since the Final EIR was originally certified. The changes proposed are relatively minor in nature and, as documented above, would not result in any new significant environmental effects or a substantial increase in the severity of previously identified significant effects. Additionally, no new information of substantial importance that was not known and could not have been known with the exercise of reasonable diligence at the time the previous Final EIR was adopted has been identified.

The preparation of a subsequent environmental document is not necessary because:

1. None of the circumstances included in Section 15162 of the CEQA Guidelines have occurred which require a subsequent environmental document:

a. The project changes do not result in new or substantially more severe environmental impacts.
b. The circumstances under which the project is undertaken will not require major changes to the IS/MND.
c. The modified project does not require any substantive changes to previously approved mitigation measures.

2. The changes are consistent with City General Plan goals and polices that promote provision of additional housing within the City.

The City has reviewed and considered the information contained in this Addendum and finds that the preparation of subsequent CEQA analysis that would require public circulation is not necessary. This Addendum does not require circulation because it does not provide significant new information that changes the adopted Final EIR in a way that deprives the public of a meaningful opportunity to comment upon a substantial adverse environmental effect of the project or a feasible way to mitigate or avoid such an effect. The City shall consider this Addendum with the certified Final EIR as part of the basis for potential approval of on- and offsite subdivision improvements for the Avila Ranch Project.

1076\80\3661235.1

RECORDING REQUESTED BY AND
WHEN RECORDED MAIL TO:

City of San Luis Obispo
Community Development Department
919 Palm Street
San Luis Obispo, CA 93401-3249
Attn: Community Development Director
No fee for recording pursuant to (Space above for Recorder's Use) Government Code Section 27383
AVILA RANCH PHASE 3

AFFORDABLE HOUSING AGREEMENT AND

DECLARATION OF RESTRICTIVE COVENANTS
(For-Sale Moderate-Income Units, WHIP Units, and R-4 For-Rent Affordable Units) This AVILA RANCH PHASE 3 AFFORDABLE HOUSING AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (“Agreement”) is made and entered into on _________________, by and among the City of San Luis Obispo, a California charter city and municipal corporation (the “City”), Avila Ranch Developers, Inc., a California corporation (“ARD”) and FG2 Holdings, LLC, a California limited liability company; Avila Ranch EA, LLC, a California limited liability company; and, CJ Holdings, LP, a California limited partnership (collectively Adjoining Landowners”), and Avila Ranch LP, a California limited partnership (the “Affordable Housing Provider”). The City, ARD, Adjoining Landowners and Affordable Housing Provider are sometimes referred to herein collectively as the “Parties” and individually as a “Party”.

RECITALS
A. On September 19, 2017, the City Council of the City of San Luis Obispo (“City Council”) adopted Resolution No. 10832 approving the Development Plan and Vesting Tentative Tract Map 3089 (“Vesting Tentative Tract Map”) relating to the Avila Ranch Development Plan consisting of 720 residential units across Phases 1 through 6 (the “Project”).

B. On October 3, 2017, the City Council adopted Ordinance No. 1639 approving that certain Development Agreement dated November 2, 2017, and later, on April 2, 2019, adopted Ordinance No. 1662 to amend said agreement (the “Development Agreement”). The Development Agreement sets forth certain terms and conditions regarding the development of Project.

C. The Vesting Tentative Tract Map and Development Agreement, collectively, constitute the “Avila Ranch Project Approvals.”
D. Pursuant to the Development Agreement, the City, ARD and the Adjoining Landowners agree that the affordable housing requirements for the Project will be satisfied by

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providing 24 rental units to Lower-Income Households, 8 two-bedroom/1-bath “rental” units to Low-Income Households, 35 Moderate-Income Units including (27) “for-sale” (“ModerateIncome For-Sale Units”) and (8) two-bedroom/1-bath “rental” units (“Moderate-Income ForRent Units”), and 25 for-sale Workforce Housing Incentive Program units (“WHIP Units”) in the Project.

E. The Development Agreement requires the developer of Avila Ranch, currently Avila Ranch Developers, Inc., (“ARD”), to dedicate Vesting Tentative Tract Map Lot 300 to an affordable housing provider, for the purpose of constructing and managing twenty-four (24) lowerincome rental units (the “R-4 Affordable Component”). In addition, the Development Agreement requires ARD to construct and manage eight (8) two-bedroom/1-bath low-income rental units and eight (8) two-bedroom/1-bath moderate-income rental units (“ARD’s R-4 Affordable Units”) in conjunction with ARD’s 85 market rate R-4 units (“ARD’s R-4 Market Units”) on Vesting Tentative Tract Map Lot No. 301 (now Lot 327 Phase 2&3 Final Map) (“R-4 Market Rate Property”).

F. On December 1, 2022, ARD dedicated Lot 186 commonly referred to as 165 Cessna Court, San Luis Obispo, CA, more particularly described in attached Exhibit A incorporated herein by this reference (the “R-4 Affordable Property”) to Avila Ranch, LP to construct and manage the R-4 Affordable Housing Component.

G. ARD requested and the City has agreed that ARD’s R-4 Affordable Units can and should be constructed and managed by the Affordable Housing Provider on the R-4 Affordable Property, in addition to the R-4 Affordable Component, finding that with a density bonus on the R-4 Affordable Property to provide an additional 19 moderate-income units (“Density Bonus Units”), the transfer of the ARD’s R-4 Affordable Units to the R-4 Affordable Property is consistent with the intent of the Avila Ranch Project Approvals and making the development of the R-4 Affordable Property as affordable housing project more feasible.

H. Density Bonus Law requires the City to ensure continued affordability of the units that qualify an applicant for the density bonus. To satisfy ARD’s Phase 1 and Phase 3 low and moderate rental inclusionary housing requirements established by the Development Agreement and to satisfy the requirements of Density Bonus Law, the Parties have agreed that the Affordable Housing Provider will be required by separate agreement to rent the R-4 Affordable Component, Density Bonus Units and ARD’s R-4 Affordable Units subject to certain affordability restrictions and as generally outlined in these Recitals (“R-4 Affordable Housing Agreement”).

I. ARD is currently under option to purchase the real property that encompasses Phases 2 & 3 Tract Map 3089.

J. ARD and Adjoining Landowners are processing a final map known as “Tract Map No. 3089 Phase 2 & 3” which includes phase 3 of the Project (“Phase 3”).

K. Adjoining Landowners are the owners of that certain real property identified herein as the “Moderate Income For-Sale Units” and “WHIP Units” more particularly described in Exhibit A, attached hereto, and incorporated herein and are sometimes collectively referred to herein individually as the “Moderate-Income Lots” and the “WHIP Lots” and collectively as the

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“Affordable Lots.” The specific locations of the Affordable Lots are more particularly depicted in Exhibit B, attached hereto, and incorporated herein.

L. Consistent with the affordable housing requirements found in the Development Agreement, the City and ARD have agreed that in conjunction with Phase 3, ARD will construct and sell, three (3) Moderate-Income Units to Moderate Income Households, in conformance with the sales prices and income limits set forth in the City's “Below Market Rate Housing Standards” published by the City's Community Development Department to implement the Inclusionary Housing Ordinance pursuant to Title 17 of the City’s Municipal Code Chapter 17.138 at the time of sale of each unit. Additionally, the Parties have further agreed that Phase 3 will include ARD’s construction and sale of five (5) WHIP Units to be sold to Workforce Income Households, in conformance with the sales prices and income limits set forth in Article 4 of this Agreement.

M. The Development Agreement and the Below Market Rate Housing Standards require the Moderate-Income Units first be sold to, and occupied by, buyers from Moderate Income Households (as defined in this Agreement), and the Development Agreement requires the WHIP Units first be sold to, and occupied by, buyers from Workforce Income Households (as defined in this Agreement).

N. Pursuant to the Inclusionary Housing Ordinance, there are different approaches to maintaining long-term affordability of required affordable units, including the property owner agreeing to participate in a Shared Equity Purchase Program (defined below in Section 1.1(aa)).

O. ARD and Adjoining Landowners are electing to proceed under the Shared Equity Purchase Program with respect to the Moderate-Income Units constructed and sold on the Affordable Lots pursuant to this Agreement.

AGREEMENT
NOW, THEREFORE, the Parties agree and acknowledge that the foregoing Recitals are true and accurate, and are incorporated into this Agreement by this reference, and the Parties mutually acknowledge and agree as follows:

ARTICLE 1.

DEFINITIONS AND EXHIBITS
Section 1.1. Definitions. In addition to terms defined in the Recitals and elsewhere in this Agreement, for purposes of this Agreement, the following terms have the following meanings:
(a) “Administrator” means Below Market Rate Program Administrator, whose tasks are described in Section 7.3, which may either be the City itself or a third-party administrator engaged by and acting as an agent for the City in connection with management of the City's Below Market Rate program pursuant to an Agreement entered into between the City and the Administrator, as such Agreement may be amended or replaced from time to time. (b) “Affordable Sales Price” means (i) the maximum allowable sales price for a Moderate-Income For-Sale Unit in effect at the time of its sale to an Eligible Household, which

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is to be calculated in accordance with the formula provided in the Below Market Rate Housing Standards for Moderate Income Households, and (ii) with respect to WHIP Units, such price as is calculated in accordance with the terms set forth in Article 4. (c) “Affordable Units” means collectively the Moderate-Income For-Sale Units and the WHIP Units to be constructed in Phase 3, which are required by this Agreement to be sold to Eligible Households at an Affordable Sales Price. (d) “Area Median Income” shall mean the median gross yearly income adjusted for assumed Household Size, in San Luis Obispo County, California, as published and periodically updated by the State Department of Housing and Community Development (HCD), or in the event that such income determinations are no longer published or are not updated for a period of at least eighteen (18) months, the median gross yearly income adjusted for assumed Household Size, in San Luis Obispo County, California as published and periodically updated by the Department of Housing and Urban Development (HUD).
(e) “ARD’s R-4 Market Units” is described in Recital E. (f) “BMR Underwriter” whose tasks are described in Section 7.4, means Peoples Self Help Housing Corporation, or other similar entity engaged by ARD with the consent of City.
(g) “Director” means the Community Development Director of the City or successor position.
(h) “Down Payment Assistance Program” is described in Section 4.1.3. (i) “Eligible Household” means a household which has been determined by the BMR Underwriter to be a Moderate-Income Household eligible to purchase a ModerateIncome Unit in compliance with Article 3 of this Agreement, and for the purposes of the WHIP Units, a Workforce Income Household eligible to purchase a WHIP Unit in accordance with the terms detailed in Article 4 of this Agreement.
(j) “Eligibility Screening” is defined as the process of determining eligibility in accordance with the City’s Below Market Rate Housing Standards and Below Market Rate Purchase Guidelines.
(k) “Homebuyer/City Deed of Trust” means the Purchase Money Deed of Trust, Deed of Trust Covenants, Assignment of Rents, Security Agreement and Fixture Filing in substantially the form provided in Exhibit D executed by each Initial Eligible Household that secures the Initial Eligible Household’s performance under the Homebuyer/City Note. (l) “Homebuyer/City Note” means the Occupancy, Resale, and Refinancing Restriction Agreement, with Option to Purchase and Promissory Note Secured by Deed of Trust, in substantially the form provided in Exhibit C and executed by each Initial Eligible Household. (m) “Household Income” means the combined gross, pre-tax income of all adult occupants of the applicant household.

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(n) “Household Size” shall mean the actual number of persons residing within the applicable household.
(o) “Income Certification” means an initial Eligible Household income certification/certificate of resident eligibility, and includes all sources used in verifying income and assets (including, but not limited to, third party verification, checking and savings accounts, pay stubs, verification of assets).
(p) “Initial Eligible Household” means the initial purchaser of an Affordable Unit.
(q) “Low Income Household” is defined in the City of San Luis Obispo's Below Market Rate Housing Standards and means a household with a Household Income that equals or exceeds fifty percent (50%) and does not exceed eighty percent (80%) of the Area Median Income.
(r) “Lower-Income Household” is defined in the City of San Luis Obispo's Below Market Rate Housing Standards and means a household with a Household Income that equals or exceeds zero percent (0%) and does not exceed eighty percent (80%) of the Area Median Income.
(s) “Marketing” or “Market” is defined as a service in which the Owner, with respect to new Affordable Units, or the Administrator, with respect to existing Affordable Units will advertise the availability of such Affordable Units. Marketing may utilize social media and in-person outreach as well as the listing of the unit on Multiple Listing Services (MLS) and the Administrator’s website.
(t) “Moderate Income Household” is defined in the City of San Luis Obispo's Below Market Rate Housing Standards and means a household with a Household Income that equals or exceeds eighty percent (80%) and does not exceed one-hundred and twenty percent (120%) of the Area Median Income.
(u) “Moderate-Income For-Rent Unit” means those deed restricted units described in Article 5 which are constructed and rented to Moderate Income Households. (v) “Moderate-Income For-Sale Unit” means those deed restricted units described in Article 3 which are constructed and sold to Moderate Income Buyers. (w) “Moderate-Income Unit Affordability Period” means, subject to the Shared Equity Program, a period of forty-five (45) years from the date of sale to the Initial Eligible Household.
(x) “Multiple Listing Services (MLS)” is a database established by cooperating real estate brokers to provide data about properties for sale. An MLS allows brokers to see one another's listings of properties for sale with the goal of connecting Homebuyers to sellers.

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(y) “Opportunity Drawing” is defined as the process in which interested households are put into an interest list for a specific Affordable Unit that is being marketed. This list is ordered based on the preferences set by the Development Agreement and the City’s Below Market Rate Housing Purchase Guidelines.
(z) “Owner” means ARD and/or Adjoining Landowners, as their respective interests may exist. Whenever the term “Owner” is used in this Agreement, such term shall include any other successors and assigns as herein provided.
(aa) "R-4 Affordable Housing Project" is defined as the development consisting of the R-4 Affordable Component, together with ARD's R-4 Affordable Units and the Density Bonus Units on the R-4 Affordable Property, consisting of fifty-nine (59) Affordable Units and one manager’s unit.
(bb) R-4 Market Rate Property” is described in Recital E. (cc) “Shared Equity Agreement” means the Shared Equity Agreement and Lien, in substantially the form provided in Exhibit C, executed by ARD with respect to each Moderate-Income Unit that secures the performance of ARD and an Initial Eligible Household under the Shared Equity Share Purchase Program provisions stated in Inclusionary Housing Ordinance Section 17.138.100.
(dd) “Shared Equity Purchase Program” means City’s Shared Equity Purchase Program pursuant to Section 17.138.100 of Inclusionary Housing Ordinance. (ee) “Transfer” is defined in Section 7.10.
(ff) “WHIP Unit Affordability Period” means the period described below in Section 4.1.2.
(gg) “Workforce Housing Incentive Program Unit” or “WHIP Unit” means those deed restricted units provided to families in the Workforce Income Household. (hh) “Workforce Income Household” is defined in Article 4 and means a household with a Household Income that equals or exceeds one-hundred and twenty percent (120%) but does not exceed one-hundred and sixty percent (160%) of the Area Median Income.

Section 1.2 Exhibits. The following exhibits are attached to this Agreement and incorporated herein by this reference (Exhibits C through H, are provide as templates and may be amended to reflect consistency with the Development Agreement):

Exhibit A Legal Description of the Property
Exhibit B Map Showing Location of Affordable Units and the R-4 Affordable Housing Project
Exhibit C Form of Shared Equity Agreement
Exhibit D Form of Homebuyer/City Note

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Exhibit E Form of Homebuyer/City Deed of Trust
Exhibit F Down Payment Assistance (DPA) Guidelines
Exhibit G Form of WHIP Homebuyer/City Note
Exhibit H Form of WHIP Homebuyer/City Deed of Trust
ARTICLE 2.

CONSTRUCTION OF PROJECT AND AFFORDABLE UNITS
Section 2.1. Construction of Affordable Units. ARD and City have agreed that in Phase 3, ARD will construct and sell on the Moderate-Income Lots, the Moderate-Income Units, consisting of one (1) home with two bedrooms/one bath and two (2) homes with three bedrooms/two bathsin the approximate location shown and described on Exhibit B in conformance with the provisions of Article 3 herein. Further, ARD and City have agreed that in Phase 3, ARD will construct and sell on the WHIP Lots, the WHIP Units, consisting of two (2) homes with two bedrooms/one bath and three (3) homes with three bedrooms/two baths in the approximate location shown and described on Exhibit B in conformance with the provisions of Article 4 herein.

Section 2.2. Construction of R-4 Affordable Housing Project. The Parties have agreed that the Affordable Housing Provider will construct the R-4 Affordable Housing Project, consisting of thirty-two (32) rental units to Lower-Income Households (including, without limitation, eight (8) two-bedroom/1-bath rental units to Low-Income Households), twenty-seven (27) rental units to Moderate-Income Households (including, without limitation, eight (8) twobedroom/1-bath rental units to Moderate-Income Households), and one (1) manager’s unit, for a total of sixty (60) rental units, in the approximate location shown and described on Exhibit B in conformance with the provisions of Article 5 herein.

Section 2.3. Construction Timing. The Affordable Units will be constructed together with the construction of adjacent units in the Project and will be shown on all planning applications and may be identified on construction documents prior to building permit issuance. No certificates of occupancy or final inspections will be issued for any units in the Project unless the Affordable Units are constructed concurrently with the closest geographic proximity market rate units.

Section 2.4. Design and Appearance of Affordable Units. The design, bedroom count, appearance, and general quality of the Affordable Units will be of the same character as the Project as a whole. If, after recordation of this Agreement, the Owner propose to change the bedroom size or affordability level of any Affordable Unit within the Project, the Owner shall submit a written request for such change to the Director, who shall have sole discretion to approve or deny such request (amendments shall comply with Section 6.16 of this Agreement). Homeowners of the Affordable Units shall have equal access to and enjoyment of all common facilities of the Project.

Section 2.5. Use of Affordable Units. The Affordable Units will be sold only to Initial Eligible Households to be occupied in accordance with the relevant Exhibits applicable to such Affordable Units, and City’s Inclusionary Housing Ordinance.

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ARTICLE 3.

SALE OF MODERATE-INCOME UNITS
The provisions of this Article 3 will apply to the Moderate-Income Lots described in Exhibit “B”:

Section 3.1. Sale of Moderate-Income Units by ARD to Eligible Households. (a) ARD will sell the three (3) Moderate-Income Units to Initial Eligible Households at an Affordable Sales Price as determined by the City’s Below Market Rate Housing Standards and the Development Agreement, respectively. The Affordable Sales Price will be the absolute maximum price that ARD or any other seller may receive as compensation for the sale of a Moderate-Income Unit to an Initial Eligible Household. (b) ARD will actively market the Moderate-Income Units, openly and in the same general manner as the Project as a whole, allow prospective buyers to view the ModerateIncome Units, model units or floor plans, disclosure documents, and any other relevant sales materials, as may be available. ARD's sales agents will provide the same general quality of customer service to the Moderate-Income Units buyers as provided to market-rate buyers, will display information about the availability of the Moderate-Income Units in a readily noticeable manner in the sales office and/or Project sales website, will disclose the restrictions associated with each unit type to any prospective buyers in a timely manner and request that potential purchasers submit eligibility applications to determine if they qualify as Eligible Households.

Marketing and sale of the Moderate-Income Units will be subject to the “SLO Workers First” local preference program set forth in “Exhibit G” to the Development Agreement. (c) Prior to ARD entering into a contract with an Initial Eligible Household to purchase an Affordable Unit, the Initial Eligible Household shall be certified as an Eligible Household by the BMR Underwriter. The Owner shall not self-select buyers nor conduct initial eligibility screenings.
(d) ARD agrees to work with the Administrator, as reasonably necessary, but at no additional cost to ARD (excluding reasonable time and resources), for the effective management of the City’s Below Market Rate program as it relates to the Below Market Rate Units contemplated in this Agreement.
(e) Once certified, Eligible Households will submit any purchase offers directly to ARD, and ARD will accept offers to purchase in the order received, provided that such offers include a letter from the BMR Underwriter, that the buyer is an Eligible Household, a valid check for the required good faith deposit, and a preliminary first mortgage loan approval. ARD will conduct any additional screening of applicants deemed necessary and not in violation of fair housing laws.
(f) Selected Eligible Households will be responsible for obtaining their own financing for their purchase of a Moderate-Income Unit.

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(g) Selected Eligible Households will enter into a Shared Equity Agreement in substantially the form attached hereto as Exhibit C, whereby the agreement is recorded on title against the Moderate-Income Unit, securing and stating City’s Equity Share in the subject unit, and requiring compliance with City’s Shared Equity Purchase Program. (h) Purchase contracts between ARD and Eligible Households will include requirements that each buyer execute the documents for the benefit of the City as described in Section 3.3 below.
(i) The escrow instructions for the sale of an Moderate-Income Unit will stipulate that the Homebuyer/City Note, Homebuyer/City Deed of Trust, and the Shared Equity Agreement, will be recorded against the Unit at close of escrow on the sale to the Eligible Household; and that the Homebuyer/City Note, Homebuyer/City Deed of Trust and the Shared Equity Agreement, will be recorded junior only to the lien of the deed of trust securing the Eligible Household's first purchase money mortgage loan, or to a second mortgage loan only if such loan is provided by a public agency which requires such subordination, or as otherwise approved in writing by the City.
(j) A Request for Notice of Default and Sale for the benefit of the City will be recorded for each deed of trust recorded at close of escrow. (k) Within five (5) days following the sale of any Moderate-Income Unit by ARD to an Initial Eligible Household, ARD will forward, or will cause escrow officer to forward to the City, copies of the buyer's and seller's settlement statement and all closing documents, including the Homebuyer/City Note, the Homebuyer/City Deed of Trust, and the Shared Equity Agreement executed in connection with the sale.
(l) If ARD has not received any purchase offer from an Eligible Household for a Moderate-Income Unit within one hundred eighty (180) days after such unit has been offered for sale, ARD shall provide a one hundred eighty (180) days' notice to the City and shall satisfy any further conditions that may be reasonably required by the City, including but not limited to, further efforts to find an Eligible Household and/or additional marketing by ARD to attract an offer to purchase from an Eligible Household. If escrow has not closed on the Moderate-Income Unit sale within an additional sixty (60) days from date of ARD's acceptance of such an offer under this subsection, if the City consents in writing, ARD may sell the Moderate-Income Unit at its fair market value and pay to the City an amount equal to the difference between the actual contract sales price and the Affordable Sales Price. As an alternative, if the parties mutually agree, ARD may sell the Moderate-Income Unit to the City or the City's designee for the Affordable Sales Price to satisfy ARD's obligations under this Agreement with respect to such Affordable Unit.

Section 3.2. Moderate-Income For-Sale Unit Affordability Period. Subject to the Shared Equity provisions contained below in Section 3.3, the Moderate-Income Units shall be occupied by a Moderate-Income Household for a minimum of forty-five (45) years. If the owner of a Moderate-Income Unit sells that Unit within the initial 45 years, the Unit shall be sold to another Moderate-Income Income Household and subject to a new 45-year deed restriction. After the initial sale of a Moderate-Income Unit, the deed restriction and occupancy of Moderate-Income

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Units will be monitored, controlled, and enforced by the City.

Section 3.3. Shared Equity Homebuyer Documents and Security Instruments. Prior to the sale of each Moderate-Income Unit, ARD will ensure that:
(a) The Initial Eligible Household signs a Shared Equity Agreement in substantially the form shown as Exhibit C.
(b) The Initial Eligible Household and the City execute a Homebuyer/City Note in substantially the form shown as Exhibit D.
(c) The Initial Eligible Household signs a Homebuyer/City Deed of Trust in substantially the form shown as Exhibit E.

ARTICLE 4

SALE OF WHIP UNITS
The provisions of this Article 4 will apply to the WHIP Lots described in Exhibit “B”:

Section 4.1 Workforce Housing Incentive Program (WHIP). (a) In Phase 3, ARD agrees to construct and sell five (5) WHIP Units to families in the Workforce Income Households at prices limited to no more than that required to achieve an Index of Affordability (“Index”) of 31% (cost of housing including mortgage principal, mortgage interest, taxes and insurance divided by 140% of the Area Median Income). The maximum purchase price would be equal to 5.65 times (140% of 4.05 multiplier) the median income for each household size. Marketing and sale of the WHIP Units will be subject to the “SLO Workers First” local preference program set forth in “Exhibit G” to the Development Agreement. The Affordable Sales Price shall be the absolute maximum price that ARD or any other seller may receive as compensation for the sale of a WHIP Unit to an Initial Eligible Household. (b) ARD will actively market the WHIP Units, openly and in the same general manner as the Project as a whole, allow prospective buyers to view the WHIP Units, model units or floor plans, disclosure documents, and any other relevant sales materials, as may be available.

ARD's sales agents will provide the same general quality of customer service to the WHIP Units buyers as provided to market-rate buyers, will display information about the availability of the WHIP Units in a readily noticeable manner in the sales office and/or Project sales website, will disclose the restrictions associated with each unit type to any prospective buyers in a timely manner and request that potential purchasers submit eligibility applications to determine if they qualify as Eligible Households. Marketing and sale of the WHIP Units will be subject to the “SLO Workers First” local preference program set forth in “Exhibit G” to the Development Agreement. (c) Prior to entering ARD into a contract with an Initial Eligible Household to purchase an Affordable Unit, the Initial Eligible Household shall be certified as an Eligible Household by the BMR Underwriter. The Owner shall not self-select buyers nor conduct initial eligibility screenings.

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(d) ARD agrees to work with the Administrator, as reasonably necessary, but at no additional cost to ARD (excluding reasonable time and resources), for the effective management of the City’s Below Market Rate program as it relates to the Below Market Rate Units contemplated in this Agreement.
(e) Once certified, Eligible Households will submit any purchase offers directly to ARD, and ARD will accept offers to purchase in the order received, provided that such offers include a letter from the BMR Underwriter, that the buyer is an Eligible Household, a valid check for the required good faith deposit, and a preliminary first mortgage loan approval. ARD will conduct any additional screening of applicants deemed necessary and not in violation of fair housing laws.
(f) Selected Eligible Households will be responsible for obtaining their own financing for their purchase of a WHIP Unit.
(g) Selected Eligible Households will enter into a WHIP Homebuyer/Deed of Trust in substantially the form attached hereto as Exhibit H, whereby the Deed of Trust is recorded on title against the WHIP Unit, securing and stating Down Payment Assistance for the subject unit (if applicable), in compliance with City’s Down Payment Assistance Guidelines, Exhibit F. (h) Purchase contracts between ARD and Eligible Households will include requirements that each buyer execute the documents for the benefit of the City as described in Section 4.4 below.
(i) The escrow instructions for the sale of a WHIP Unit will stipulate that the WHIP Homebuyer/City Note, and WHIP Homebuyer/City Deed of Trust will be recorded against the Unit at close of escrow on the sale to the Eligible Household; and that the WHIP Homebuyer/City Note and WHIP Homebuyer/City Deed of Trust will be recorded junior only to the lien of the deed of trust securing the Eligible Household's first purchase money mortgage loan, or to a second mortgage loan only if such loan is provided by a public agency which requires such subordination, or as otherwise approved in writing by the City. (j) A Request for Notice of Default and Sale for the benefit of the City will be recorded for each deed of trust recorded at close of escrow. (k) Within five (5) days following the sale of any WHIP Unit by ARD to an Initial Eligible Household, ARD will forward, or will cause escrow officer to forward to the City, copies of the buyer's and seller's settlement statement and all closing documents, including the WHIP Homebuyer/City Note and the WHIP Homebuyer/City Deed of Trust executed in connection with the sale.
(l) If ARD has not received any purchase offer from an Eligible Household for a WHIP Unit within one hundred eighty (180) days after such unit has been offered for sale, ARD shall provide a one hundred eighty (180) days' notice to the City and shall satisfy any further conditions that may be reasonably required by the City, including but not limited to, further efforts to find an Eligible Household and/or additional marketing by ARD to attract an offer to purchase from an Eligible Household. If escrow has not closed on the WHIP Unit sale within an additional sixty (60) days from date of ARD's acceptance of such an offer under

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this sub-section, if the City consents in writing, ARD may sell the WHIP Unit at its fair market value and pay to the City an amount equal to the difference between the actual contract sales price and the Affordable Sales Price. As an alternative, if the parties mutually agree, ARD may sell the WHIP Unit to the City or the City's designee for the Affordable Sales Price to satisfy ARD's obligations under this Agreement with respect to such Affordable Unit.

Section 4.2. WHIP Unit Affordability Period. The WHIP Units must be occupied by a Workforce Income Household for a minimum of ten (10) years. If the owner of a WHIP Unit sells that Unit within the initial 10 years, the Unit must be sold to another Workforce Income Household and subject to a new 10-year deed restriction. After the initial sale of a WHIP Unit, the deed restriction and occupancy of WHIP Units will be monitored, controlled, and enforced by the City.

Section 4.3. Down Payment Assistance. Prior to the initial Closing of each WHIP Unit, ARD agrees to contribute a sum equal to five (5%) percent of the purchase price of the Workforce home, not to exceed $20,000 to the City’s Down Payment Assistance Program Fund (“DPA Funds”). The parties agree that once paid, this contribution by ARD constitutes compliance with ARD’s down payment assistance obligations under Exhibit G of the Development Agreement. ARD may alternatively make a lump-sum contribution to City for all covered WHIP Units to satisfy ARD’s down payment assistance obligations under Exhibit G of the Development Agreement. The City agrees to utilize said DPA Funds to assist the buyer of such WHIP unit with the purchase of that WHIP unit, including but not limited to, contributing said funds to buyer’s down payment as a loan consistent with the City's DPA program. ARD acknowledges that the DPA Funds will be subject to an interest-bearing promissory note, secured by a deed of trust in favor of the City and when said DPA Funds are recouped by the City, in keeping with the terms of the Development Agreement, City will utilize these recouped DPA Funds to assist any income qualifying household who purchases a home in Avila Ranch. Notwithstanding the foregoing, City may utilize said recouped DPA Funds in City’s discretion in conjunction with affordable housing assistance throughout the City of San Luis Obispo.

Section 4.4. Homebuyer Documents and Security Instruments. Prior to the sale of each WHIP Unit, ARD will ensure that:
(a) The Initial Eligible Household and the City execute a WHIP Homebuyer/City Note in substantially the form shown as Exhibit G. (b) The Initial Eligible Household signs a WHIP Homebuyer/City Deed of Trust in substantially the form shown as Exhibit H.

ARTICLE 5.

CONSTRUCTION OF R-4 FOR-RENT AFFORDABLE UNITS
The provision of this Article 5 shall apply to the R-4 Affordable Property:

Section 5.1. Requirement of Development Agreement. Pursuant to the requirements in Exhibit G to the Development Agreement, on December 1, 2022, ARD dedicated the R-4

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Affordable Property to Affordable Housing Provider, to construct and manage the R-4 Affordable Housing Component. Affordable Housing Provider, in turn, plans to construct the R-4 Affordable Housing Project. Subject to an allocation of low-income housing tax credits and tax credit syndication Affordable Housing Provider shall construct the R-4 Affordable Housing Project on the R-4 Affordable Property, and the Affordable Housing Provider shall enter into the R-4 Affordable Housing Agreement, restricting the R-4 Affordable Property for a period of time consistent with the applicable provisions of Government Code Sections 65915 through 65918, inclusive.

Section 5.2. Affordable Housing Rental Site. Affordable Housing Agreement and Declaration of Restrictive Covenants (Document No. 2021083395) for Phase 1 of Avila Ranch identified Lot 188 as the Land Dedication for an affordable housing provider to construct 24 Lower-Income Units. The City, the Adjoining Landowners, and ARD agree to change the Land Dedication from Lot 188 to the R-4 Affordable Property, to accommodate a larger affordable housing project that will consist of at least 59 affordable housing units. The Phase 1 Affordable Housing Agreement will be amended by separate document to accurately reflect the foregoing change. In addition to the 24 Lower-Income Units that are required to be constructed by ARD, the City and ARD agree to transfer the eight (8) Low-Income 2-bedroom/1-bath units and eight (8) Moderate Income 2-bedroom/1-bath units from ARD’s market rate apartment development to the R-4 Affordable Property in recognition of the Affordable Housing Provider’s commitment to develop and construct the R-4 Affordable Housing Project.

Section 5.3. Restrictive Covenant. To ensure ARD’s and Adjoining Landowners’ obligation to provide the R-4 Affordable Component and ARD’s R-4 Affordable Units, and to ensure the Affordable Housing Provider completes construction of the R-4 Affordable Housing Project, the Parties agree this Agreement shall act as a restrictive covenant burdening the R-4 Affordable Housing Property with the conditions of this Article 5.Once the City and the Affordable Housing Provider reach agreement on the terms of the R-4 Affordable Housing Agreement and such agreement is recorded against the R-4 Affordable Property, the terms of the R-4 Affordable Housing Agreement will supersede this Agreement and in the event of conflict or inconsistency, the terms of the R-4 Affordable Housing Agreement will prevail over this Agreement with respect to the R-4 Affordable Property and the R-4 Affordable Housing Project. The City, ARD and Adjoining Landowners agree to reasonably cooperate with Affordable Housing Developer to prepare and execute any documentation necessary to release the encumbrance of this Agreement from the R-4 Affordable Property effective at the time of or subsequent to issuance of certificate of occupancy related to the R-4 Affordable Housing Project.

Section 5.4. Default by Affordable Housing Provider. ARD and the City acknowledge that Exhibit “G” of the Development Agreement provides, “should an affordable housing provider fail to construct the units, the obligation to provide for the 24 deed-restricted low income affordable housing units on the lot remains with Avila Ranch to complete.” In addition, Exhibit “G” requires ARD to construct eight (8) Low Income 2- bedroom/ 1- bath and eight (8) Moderate Income 2- bedroom/ 1- bath units. ARD has proposed and City agrees to permit these units to be included in the R-4 Affordable Housing Project along with the 24 deed-restricted low income affordable units.

ARD and the City further acknowledge that the Development Agreement does not specifically call out the timing for completion of the R-4 Affordable Project but contemplates that the R-4

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Affordable Housing Project will be completed “early in the Project, rather than leaving them to the end.” If the Affordable Housing Provider does not timely develop and construct the R-4 Affordable Housing Project, ARD and Affordable Housing Provider will meet to discuss the actions required for ARD to step in and take over as necessary to allow the R-4 Affordable Housing Project to be constructed. In the event Affordable Housing Provider elects not to complete the R4 Affordable Housing Project or fails to do so following receipt of written notice by ARD to R-4 Affordable Housing Provider of its intent to complete R-4 Affordable Housing Project and Affordable Housing Provider fails thereafter to diligently and continuously process to completion construction of the R-4 Affordable Housing Project, ARD acknowledges it has or will have the right to step in and take over work necessary to complete the R-4 Affordable Housing Project by delivering written notice to Affordable Housing Provider.

Section 5.5 Construction Timing of Affordable Housing Project. For purposes of this Agreement, the term “Commence Construction” means issuance by the City of a “ready to issue” letter for a building permit for the R-4 Affordable Housing Project, the only condition for which is the payment of City fees. For purposes of this Agreement, the term “Substantially Complete Construction” means completion of seventy-five percent (75%) of the construction of the R-4 Affordable Housing Project as demonstrated by the construction budget attached to the first lender construction loan documents for the R-4 Affordable Housing Project and draw requests approved by the first lender. In order to ensure that the Affordable Housing Project is completed earlier in the Project, as opposed to the last phase of the Project, the City reserves the right to withhold the issuance of building permits to ARD if the Affordable Housing Provider has not Commenced Construction by the issuance of a building permit for ARD’s 500th unit, and/or if the Affordable Housing Provider has not Substantially Completed Construction by the issuance of a building permit for ARD’s 550th unit.

ARTICLE 6.

ENFORCEMENT
Section 6.1. Covenants Running with the Land. The requirements of this Agreement shall be covenants running with the land as defined in California Civil Code Section 1460, and shall apply to the parcels as described in Exhibit A and graphically depicted in Exhibit B. Pursuant to Civil Code Section 1468, which governs such covenants, the provisions of this Agreement shall be binding upon all Parties having any right, title, or interest in any of the properties described herein, or any portion thereof and on their heirs, successors in interest and assigns for the periods set forth below:
(a) Moderate-Income Units for the Moderate-Income Affordability Period as defined in Section 3.2.
(b) WHIP Units for the WHIP Unit Affordability Period defined above in 4.2.

The Parties agree that all future deeds or transfers of interest regarding the properties will show the restrictions of this Agreement for as long as the Agreement is in effect. This Agreement,

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and the covenants running therewith, will terminate as to the Moderate Units at the expiration of the Moderate-Income Affordability Period, unless previously terminated as to a particular Moderate-Income Unit by and through the Shared Equity Program and the WHIP Units at the expiration of the WHIP Unit Affordability Period.

Section 6.2. Default. Failure of ARD and/or Adjoining Landowners to satisfy any of the obligations under the terms of this Agreement within ninety (90) days after the delivery of a notice of default to the defaulting Party from the City will constitute a default under this Agreement and a violation of the Inclusionary Housing Ordinance (“Default”). In addition to remedies for breach of this Agreement, the City may exercise any and all remedies available to it under the Inclusionary Housing Ordinance or other any other provision of law or equity, including, but not limited to:
(a) withholding, conditioning, suspending, or revoking any approvals for the Project, including without limitation final inspections for occupancy and/or the issuance of any certificates of occupancy;
(b) instituting against ARD and/or Adjoining Landowners, or other parties, a civil action for declaratory relief, injunction or any other equitable relief, or relief at law, including without limitation an action to rescind a transaction and/or to require repayment of any funds received in connection with such a violation;
(c) where one or more persons have received financial benefit as a result of violation of this Agreement, the City may assess, and institute legal action to recover as necessary, a penalty in any amount up to and including the amount of financial benefit received, in addition to recovery of the benefit received; and
(d) requiring ARD or its successors in interest to the Property to pay the City payment received by the ARD for the unauthorized sale of the Affordable Units.

Section 6.3. Attorney's Fees and Costs. If either Party takes or commences any actions or proceedings, including litigation or arbitration, against the other by reason of any breach or claimed breach of any provision of, or in any way connected with, this Agreement, or seeks a judicial declaration of rights under this Agreement, the Party prevailing in such action or proceeding shall be entitled to recover from the other Party the prevailing Party's reasonable attorney's fees and costs, including, but not limited to, all expert witness fees, other witness fees and associated expenses, whether or not the proceeding or action proceeds to judgment.

ARTICLE 7

GENERAL PROVISIONS
Section 7.1. Appointment of Other Agencies. At its sole discretion, the City may designate, appoint, or contract with any other public agency, for-profit or non-profit organization to perform some or all of the City's obligations under this Agreement.

Section 7.2. Records. ARD and/or Adjoining Landowners shall retain all records related to compliance with obligations under this Agreement for a period not less than five (5) years from

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the date of origination of such records and make the records available to City employees or others designated by the City for inspection and copying upon five (5) business days' written notice. The City shall be entitled to monitor compliance with this Agreement, and the Owner shall cooperate with City monitoring, including obtaining Eligible Household verification upon request of the City.

Section 7.3. Services by Administrator. In order to maintain compliance with the City’s Below Market Rate Housing Program and reporting requirements, ARD shall utilize the City’s Administrator. The Administrator’s services include but are not limited to Management of the City’s Below Market Rate program. Marketing plans are subject to the City’s approval and will require, at a minimum, that Affordable Units are advertised through the Multiple Listing Service.

Section 7.4. Services by BMR Underwriter. Pursuant to separate agreements between ARD and the BMR Underwriter and City and the BMR Underwriter, the BMR Underwriter will provide eligibility screening and certification of Initial Eligible Households. In the event either of the foregoing agreements is terminated, ARD and City agree to cooperate in the designation of a replacement BMR Underwriter.

Section 7.5 Residential Use. None of the Affordable Units in the Project will at any time be utilized on a transient basis or will ever be used as a hotel, motel, vacation rental, homestay, dormitory, fraternity house, sorority house, rooming house, nursing home, hospital, sanitarium, or trailer court or park, nor shall the Affordable Units be used as a place of business except as may otherwise be allowed by applicable law.

Section 7.6. Nondiscrimination. All of the Affordable Units shall be available to members of the general public who are income eligible. There shall be no discrimination against or segregation of any person or group of persons, on account of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, family status, sex, gender, gender identity, gender expression, age, sexual orientation, source of income, veteran or military status, or on any other basis protected by applicable law in the sale, transferring, use, occupancy, or enjoyment of any Affordable Units, nor shall ARD and/or Adjoining Landowners or any person claiming under or through ARD and/or Adjoining Landowners, establish or permit any such practice or practices of discrimination or segregation with reference to the selection, location, number, use, or occupancy, of purchasers of any Affordable Unit or in connection with the employment of persons for the operation and management of the Project.

Section 7.7. Housing Voucher Certificate Holders. In prequalifying Initial Eligible Households, ARD and/or Adjoining Landowners will require its preferred lender to accept as buyers, on the same basis as all other prospective buyers, persons who are recipients of federal certificates for mortgage subsidies pursuant to the existing housing program under Section 8 of the United States Housing Act, or its successor, or similar any other programs in which lawful, verifiable income is paid to an Eligible Household or to a housing provider on behalf of an Eligible Household. The Owner shall not apply selection criteria to holders of Section 8 certificate or similar certificates or vouchers that is more burdensome than criteria applied to all other prospective buyers, nor shall the Owner apply or permit the application of management policies or lease provisions with respect to the Project which have the effect of precluding occupancy of

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units by such prospective buyers.

Section 7.8. Hold Harmless. ARD and/or Adjoining Landowners shall indemnify and hold harmless (without limit as to amount) City and its elected and appointed officials, officers, employees and agents in their official capacity (hereinafter collectively referred to as “Indemnitees”), and any of them, from and against all loss, all risk of loss and all damage (including expenses and attorney's fees) sustained or incurred because of or by reason of any and all claims, demands, suits, actions, judgments and executions for damages of any and every kind and by whomever and whenever made or obtained, allegedly caused by, arising out of or relating in any manner to ARD's performance or non-performance under this Agreement, including claims pursuant to California Labor Code Section 1720 et seq. In the event Indemnitees are made a party to any action, lawsuit or other adversarial proceeding arising from Owner’s performance of this Agreement, Owner shall provide a defense to the City Indemnitees or at the City’s option, reimburse the City Indemnitees their costs of defense, including reasonable legal fees, incurred in defense of such claims. The provisions of this Section shall survive expiration or other termination of this Agreement or any release of part or all of the Property from the burdens of this Agreement, and the provisions of this Section shall remain in full force and effect.

Section 7.9. Notices. All notices required pursuant to this Agreement shall be in writing and may be given by personal delivery or by registered or certified mail, return receipt requested, to the Party to receive such notice at the addressed set forth below:

TO THE CITY:

City of San Luis Obispo
Community Development
Department
919 Palm Street
San Luis Obispo, CA 93401-3249
Attn: Community Development Director
WITH COPY TO:

City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Attn: City Attorney
TO ARD:

Avila Ranch Developers, Inc.
2505 Alluvial Avenue
Clovis, CA 93611
Attn: Joshua Peterson, President
TO ADJOINING LANDOWNERS:

FG2 Holdings, LLC
1396 W. Herndon Avenue

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18 1076\80\3661235.1
Fresno, CA 93711
Attn: John Bezmalinovic
TO AFFORDABLE HOUSING PROVIDER:

Avila Ranch LP
c/o OHDC Avila Ranch LLC
414 E. Chapman Avenue
Orange, California 92866
Attention: Eunice Bobert
Email: [email protected]
AND
C & C Development Co., LLC
14211 Yorba Street, Suite 200
Tustin, California 92780
Attention: Todd Cottle
Email: [email protected]
WITH A COPY TO:

Goldfarb & Lipman LLP
Attention: Lynn Hutchins
1300 Clay Street, 11th Floor
Oakland, California 94612
Email: [email protected]
Any notice will be deemed delivered on the first business day that delivery is attempted or upon receipt, whichever is sooner. As used herein, “business day” means any day other than a Saturday, Sunday, or any state or federal holiday on which financial institutions in San Luis Obispo County are authorized or required to close for observance thereof. Any Party may change the address to which notices are to be sent by notifying the other Parties of the new address, in the manner set forth above.

Section 7.10. Transfers. For purposes of this Agreement, "Transfer" means any sale, assignment, or transfer, whether voluntary or involuntary, of: (i) any rights and/or duties under the Deed of Trust and this Agreement; and/or (ii) any interest in the Affordable Units, including (but not limited to) a fee simple interest, a joint tenancy interest, a life estate, a partnership interest, a leasehold interest, a security interest, or an interest evidenced by a land contract by which possession of the Affordable Units are transferred and Owner retains title. (a) Future Transfers of Affordable Units shall ensure that (i) the Transfer does not affect the timing and/or number of Affordable Units provided within the Project and as described by this Agreement.
(b) In the event of a proposed Transfer, Owner agrees to provide City at least thirty

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(30) days written notice of such proposed assignment prior to the proposed Transfer and shall provide satisfactory evidence that the assignee will assume in writing, through an assignment and assumption agreement, all obligations of ARD and/or Adjoining Landowners under this Agreement. Notwithstanding the foregoing: (i) the terms, covenants and conditions of this Agreement shall be binding upon any transferee whether or not such an assignment and assumption agreement is signed by the assignee; and (ii) no such transfer shall relieve the Owner (“Transferor”) of any obligations under this Agreement absent express written consent of the City. (c) For all proposed Transfers, ARD and/or Adjoining Landowners shall provide to City an assignment and assumption agreement a form reasonably satisfactory to the City Attorney.

All of the terms, covenants and conditions of this Agreement shall inure to the benefit of the City and its successors and assigns and shall be binding upon the Transferor and any successors in interest to ARD and/or Adjoining Landowner’s interest in this Agreement, the Affordable Units or any part thereof. The covenants shall run in favor of the City and its successors and assigns for the entire period of the Term. The City and its successor and assigns, in the event of any breach of any such covenants, shall have the right to exercise all of the rights and remedies, and to maintain any actions at law or suits in equity or other proper proceedings to enforce the curing of such breach.

Section 7.11. Integrated Agreement. This Agreement sets forth the full and entire understanding of the Parties regarding the matter set forth herein. Any other prior or existing understandings or agreements by the Parties, whether formal or informal, regarding any matters addressed within this Agreement are hereby superseded or terminated in their entirety. To the extent that there are any inconsistencies between this Agreement and the Development Agreement, Development Plan and/or applicable City Ordinances, this Agreement will control unless otherwise required by applicable law.

Section 7.12. Each Party's Role in Drafting the Agreement. Each Party to this Agreement has had an opportunity to review the Agreement, confer with legal counsel regarding the meaning of the Agreement, and negotiate revisions to the Agreement. Accordingly, neither Party will rely upon Civil Code Section 1654 in order to interpret any uncertainty in the meaning of the Agreement.

Section 7.13. Amendment of Agreement. No changes, amendments, or alterations to this Agreement shall be effective unless in writing and signed by all Parties hereto. Amendments to this Agreement may be approved by the Director unless the Development Agreement requires approval by another person/entity. Upon approval, a new Agreement containing the amendments will be executed and recorded.

Section 7.14. Applicable Law. This Agreement will be governed by California law.

Venue will be the County of San Luis Obispo.

Section 7.15. Waivers. Any waiver by the City of any obligation or condition in this Agreement must be in writing. No waiver will be implied from any delay or failure by the City to act on any breach or default of ARD or the Adjoining Landowners or to pursue any remedy allowed

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under this Agreement or applicable law. Any extension of time granted to ARD or the Adjoining Landowners to perform any obligation under this Agreement shall not operate as a waiver or release from any of its obligations under this Agreement. Consent by the City to any act or omission by ARD or the Adjoining Landowners will not be construed tobe a consent to any other or subsequent act or omission or to waive the requirement for the City's written consent to future waivers.

Section 7.16. Title of Parts and Sections. Any titles of the sections, subsections, or subparagraphs of this Agreement are inserted for convenience of reference only and will be disregarded in interpreting any part of the Agreement's provisions.

Section 7.17. Multiple Originals; Counterpart. This Agreement may be executed in multiple originals, each of which is deemed to be an original, and may be signed in counterparts.

Section 7.18. Recording of Agreement. This Agreement will be recorded against the Property in the Official Records of the County of San Luis Obispo.

Section 7.19. Severability. In the event any limitation, condition, restriction, covenant, or provision contained in this Agreement is to be held invalid, void, or unenforceable by anycourt of competent jurisdiction, the remaining portions of this Agreement shall nevertheless be and remain in full force and effect.

Phase 3 of Avila Ranch, Affordable Housing Agreement
[Signature Page to Below Market Rate Housing Agreement and Declaration of Restrictive Covenants (Affordable Units for Phase 2 of Avila Ranch)] 1076\80\3661235.1
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the day and year first above written.

ARD:

Avila Ranch Developers, Inc., a California corporation
By: ______________________________
Joshua E. Peterson, President
ADJOINING LANDOWNERS:

FG2 HOLDINGS, LLC, a California limited liability company By: _________________________
Neema Assemi, Manager
AVILA RANCH EA, LLC, a California limited liability company By: _________________________
Neema Assemi, Manager
By: _________________________
Nader Assemi, Manager
CJ HOLDINGS, LP, a California limited partnership
By: Spyglass Real Estate, Inc., a California corporation, Its General Partner
By: _________________________
Joshua Peterson, President

AVILA RANCH LP,
a California limited partnership
By: OHDC Avila Ranch LLC,
a California limited liability company,
its managing general partner
By: Orange Housing Development Corporation,
a California nonprofit public benefit corporation,
its sole member and manager

Phase 3 of Avila Ranch, Affordable Housing Agreement
[Signature Page to Below Market Rate Housing Agreement and Declaration of Restrictive Covenants (Affordable Units for Phase 2 of Avila Ranch)] 1076\80\3661235.1
By: ___________________________
Eunice Bobert
Chief Executive Officer
By: C & C Development Co., LLC
a California limited liability company,
its developer general partner
By: ___________________________
Todd R. Cottle, Trustee of the 2007 Todd R. Cottle
and Jennifer N. Cottle Revocable Trust, member
Date: _________ __, 2023
CITY:

City of San Luis Obispo, a California charter city and municipal corporation By: ______________________________________________
Timothea Tway, Community Development Director
APPROVED AS TO FORM AND LEGAL EFFECT:

By: _______________________________
Christine Dietrick, City Attorney

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1076\80\3661235.1

STATE OF CALIFORNIA )
)

COUNTY OF )
On , before me, , Notary
Public, personally appeared , who proved to
me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s),or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.
________________________________
Signature of Notary Public (SEAL ABOVE)
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

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STATE OF CALIFORNIA )
)

COUNTY OF )
On , before me, , Notary
Public, personally appeared , who proved to
me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s),or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify UNDER PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.
________________________________
Signature of Notary Public (SEAL ABOVE)
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

Phase 3 of Avila Ranch, Affordable Housing Agreement
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EXHIBIT A

LEGAL DESCRIPTION OF THE PROPERTY
Affordable Lots:

MODERATE-INCOME LOTS
Lots 290, 307 and 321 of Final Map 3089 Phase 2 & 3 as said map was filed and recorded ______________, 2021 at Book ____ of Maps at pages ___ through ___, inclusive, in the office of the San Luis Obispo Recorder

WHIP LOTS
Lots 246, 247, 297, 308, 322 of Final Map 3089 Phase 2 & 3 as said map was filed and recorded ______________, 2021 at Book ____ of Maps at pages ___ through ___, inclusive, in the office of the San Luis Obispo Recorder.

THE R-4 AFFORDABLE PROPERTY
Lot 186 of Final Map 3089 as said map was filed and recorded December 23, 2021 at Book 41 of Maps at pages 48 through 62, inclusive, in the office of the San Luis Obispo County Recorder.

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EXHIBIT B
MAP SHOWING LOCATION OF AFFORDABLE UNITS AND R-4 AFFORDABLE

HOUSING PROJECT
Unit Number Square Footage Bedroom Count Affordability
Lot 290 2-bed Moderate
Lot 307 3-bed Moderate
Lot 321 3-bed Moderate
Lot 246 2-bed Workforce
Lot 247 2-bed Workforce
Lot 297 3-bed Workforce
Lot 308 3-bed Workforce
Lot 322 3-bed Workforce

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EXHIBIT C

FORM OF SHARED EQUITY AGREEMENT

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EXHIBIT D

FORM OF HOMEBUYER/CITY NOTE

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EXHIBIT E

FORM OF HOMEBUYER/CITY DEED OF TRUST

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EXHIBIT F

DOWN PAYMENT ASSISTANCE GUIDELINES

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EXHIBIT G

FORM OF WHIP HOMEBUYER/CITY NOTE

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EXHIBIT H

FORM OF WHIP HOMEBUYER/CITY DEED OF TRUST

AVILA RANCH PARK LAYOUT
PHASE 2-3 PARKS
Lot Number on Tract Map
Acrea
ge presented to PRC
Acrea
ge shown on tract map
Park E 326 0.81 0.82 Park D 330 0.38 0.99 Total 1.19 1.81 Other parks shown on exhibit are in phases other than 2-3.

PRC = Parks and Recreation Commission

Subdivision Agreement - Tract 3089, Phase 2 & 3 1
SUBDIVISION AGREEMENT – TRACT 3089 PHASES 2 & 3
THIS AGREEMENT is dated this ______ day of _________________ 202___ by and between Avila Ranch Developers, Inc., a California Corporation, herein referred to as "Subdivider," with the consent of Avila Ranch Developers, Inc., a California Corporation; FG2 HOLDINGS, LLC, a California limited liability company; AVILA RANCH EA, LLC, a California limited liability company; and, CJ HOLDINGS, LP a California limited partnership herein collectively referred to as “Owners” and the CITY OF SAN LUIS OBISPO, herein referred to as the "City."

RECITALS
REFERENCE IS HEREBY MADE to that certain proposed subdivision of real property in the City of San Luis Obispo, County of San Luis Obispo, State of California, a description of which is shown on the Final Map of Tract 3089 Phases 2 & 3, City of San Luis Obispo, California, as approved by the City Council on the ____ day of _______________, 202___, with the consent of Owners who own said real property.

The Subdivider desires that said Tract 3089 Phases 2 & 3 be accepted and approved as a Final Map pursuant to the Subdivision Regulations of the City of San Luis Obispo (Title 16 of the San Luis Obispo Municipal Code), and It is a condition of said regulations that the Subdivider agree to install the improvements as set forth on the plans therefore.

TERMS AND CONDITIONS:

In consideration of the foregoing, the Subdivider does hereby agree to construct and install the following subdivision improvements (collectively “improvements”) in accordance with said subdivision regulations, and in accordance with approved plans and

Subdivision Agreement - Tract 3089, Phase 2 & 3 2
specifications on file in the office of the City Engineer, City of San Luis Obispo, (“Subdivision Improvement Plans and Specifications”) to wit:

1. CURB, GUTTERS AND SIDEWALKS

2. STREET BASE AND SURFACING

3. WATER MAINS and SEWER MAINS, including sewer laterals to the property line and water services to the curb stop.

4. LANDSCAPING

5. DRAINAGE STRUCTURES

6. STREET LIGHTS

7. ELECTRIC, GAS, TELEPHONE AND CABLE TELEVISION: In addition to the inspection and approval of such facilities by the City, each public utility shall be required to file a letter stating that the developer has properly installed all facilities to be provided by him, and that the said utility is prepared to provide service to residents upon request.

8. ANY & ALL OTHER IMPROVEMENTS shown on plans or required by project approvals.

All of the above facilities shall be installed in the locations designated and to the plans and specifications on file and approved by said City Engineer.

The lines and grades for all of said improvements shall be established by the Subdivider in accordance with said approved plans and specifications.

The Subdivider agrees that the work of installing the above improvements shall begin within thirty (30) days from the date of recording of the final map, and that the work shall be completed within twenty-four (24) months of said recording date, unless an extension has been granted by the City, provided that if completion of said work is delayed by acts of God or labor disputes resulting in strike action, the Subdivider shall have an

Subdivision Agreement - Tract 3089, Phase 2 & 3 3
additional period of time equivalent to such period of delay in which to complete such work. Any extension of time hereunder shall not operate to release the surety on the Improvement Security (“Improvement Security shall mean, collectively, the Performance Credit/Bond, Materials Bond, and/or Warranty Bond”) filed pursuant to this agreement. In this connection, the surety waives the provisions of Section 2819 of the Civil Code of the State of California.

No building permits will be issued nor occupancy granted after the expiration date of the agreement, taking into account any authorized extensions, until completion and acceptance of all subdivision improvements unless specifically approved by the City.

The Subdivider does also agree to comply with the conditions established by the City Council and has paid the necessary fees as indicated on the attached Exhibits 1 and 2.

Setting of new survey monuments or resetting of disturbed monuments shall be in accordance with Article 5, paragraph 8771 et seq., of the Professional Land Surveyors Act, Chapter 15 of the Business and Professions Code of the State of California.

The Subdivider attaches hereto, as an integral part hereof, and as security for the performance of this agreement, instrument(s) of credit or bond approved by and in favor of the City of San Luis Obispo, and conditional upon the faithful performance of this agreement (“Performance Credit/Bond”). Said instrument(s) of credit or bond is/are in the amount(s) shown in Exhibit 2, which is the amount of the estimated cost of said improvements.

Subdivider agrees to remedy any defects in the improvements arising from faulty workmanship or materials or defective construction of said improvements occurring within

Subdivision Agreement - Tract 3089, Phase 2 & 3 4
twelve (12) months after acceptance thereof (“Warranty Period”). In accordance with Sections 66499.7 and 66499.9 of the Government Code of the State of California, upon final completion and acceptance of the work, City will release all but 10% of the improvement security in the form acceptable to the City as a warranty bond (“Warranty Bond”), with that amount being deemed sufficient to guarantee faithful performance by the Subdivider of his obligation to remedy any defects in the improvements arising within a period of one year following the completion and acceptance thereof. The Subdivider shall submit a formal request to the City at the end of the warranty period and City shall provide Subdivider with a comprehensive list of any outstanding defects to be remedied by Subdivider. City shall release the warranty bond upon re-inspection and confirmation of the completion of listed repairs.

Completion of the work shall be deemed to have occurred on the date which the City Council shall, by resolution duly passed and adopted, accept said improvements according to said plans and specifications, and any approved modifications thereto.

Neither periodic nor progress inspections or approvals shall bind the City to accept said improvements or waive any defects in the same or any breach of this agreement. “AS-BUILT” record drawings are to be submitted within four weeks of completion of construction and prior to City acceptance of the public improvements.

If the Subdivider fails to complete the work within the prescribed time, the Subdivider agrees that City may, at its option, declare the instrument of credit or bond which has been posted by Subdivider to guarantee faithful performance, forfeited and utilize the proceeds to complete said improvements, or city may complete said improvements and recover the full cost and expense thereof from the Subdivider or his surety.

Subdivision Agreement - Tract 3089, Phase 2 & 3 5
The Subdivider has deposited with the City a labor and materials surety or sureties in the amount of 50% of the above described subdivision improvements in accordance with State law (“Materials Bond”).

Said Subdivider shall pay an inspection fee for City to inspect the installation of said subdivision improvements, and to verify that they have been completed in accordance with the plans and specifications.

If off-site dedication of property is necessary to facilitate the construction of the required subdivision improvements, the Subdivider and City shall adhere to the requirements of Section 6.04 of the Development Agreement adopted by the City Council on October 3, 2017 by Ordinance No. 1639 (2017 Series) with regards to acquiring said off-site dedication.

Title 16 of the San Luis Obispo Municipal Code, entitled "Subdivision," all plans and specifications on file with said City Engineer as a part of said Subdivision Map, and all other documents filed with the City by the Subdivider and approved by the City Engineer are hereby referred to for further particulars in interpreting and defining the obligations of the Subdivider under this agreement.

Pursuant to Government Code Section 66474.9(b), the subdivider shall defend, indemnify and hold harmless the City and/or its agents, officers and employees from any claim, action or proceeding against the City and/or its agents, officers or employees to attack, set aside, void or annul, the approval by the City of this subdivision, and all actions relating thereto, including but not limited to environmental review (“Indemnified Claims”). The City shall promptly notify the subdivider of any Indemnified Claim upon being presented with the Indemnified Claim and City shall fully cooperate in the defense against an Indemnified Claim.

Subdivision Agreement - Tract 3089, Phase 2 & 3 6
It is understood and agreed by and between the Subdivider and the City hereto that this agreement shall bind the heirs, executors, administrators, successors and assigns of the respective Parties to this agreement.
[signatures on following page]

Subdivision Agreement - Tract 3089, Phase 2 & 3 7
IN WITNESS WHEREOF, this agreement has been executed by:

SUBDIVIDER
Avila Ranch Developers, Inc.
a California Corporation
By:____________________________
Josh Peterson, President
OWNERS
The undersigned Owners hereby consent to Avila Ranch Developers, Inc., entering into this Subdivision Agreement
FG2 HOLDINGS, LLC
a California limited liability company
By:____________________________
Neema Assemi, Manager

AVILA RANCH EA, LLC
a California limited liability company
By:____________________________
Neema Assemi, Manager
By:____________________________
Nader Assemi, Manager

CJ HOLDINGS, LP
a California limited partnership
By:____________________________
Josh Peterson, President

CITY OF SAN LUIS OBISPO
See next page

Subdivision Agreement - Tract 3089, Phase 2 & 3 8

CITY OF SAN LUIS OBISPO

MAYOR Erica A. Stewart
ATTEST:

CITY CLERK Teresa Purrington
APPROVED AS TO FORM:

CITY ATTORNEY Christine Dietrick

Subdivision Agreement - Tract 3089, Phase 2 & 3 9
EXHIBIT 1
TRACT 3089 PHASES 2 & 3

SUBDIVISION AGREEMENT

1. The Subdivider has deposited a monumentation security in the amount of $80,000 to guarantee the installation of survey monuments in accordance with the approved map and payment for same. Said guarantee will be released once the installation of monuments has been verified and that existing monuments have not been disturbed, and upon receipt by the City of a letter from the Surveyor indicating that they have completed the work and have been paid. Subdivider shall adhere to the requirements of California Business and Professions Code Section 8771 with regards to monument preservation. The monumentation security also guarantees the replacement of any monuments that were disturbed during construction, along with filing of Records of Survey or Corner Records required by said Section 8771.

2. Phases 2 & 3 provide sufficient parkland and park improvements to meet City requirements based on the projected population and housing onsite, so there are no "in-lieu" park fees required. The subdivision improvement bonds include the requirement to pay for a biological, archeological and Native American monitor per the mitigation measures.

3. Water Impact Fees for irrigation water meters shown on the subdivision improvement plans shall be paid prior to subdivision improvement plan approval per Condition #59.

4. The Subdivider has elected to pay a roadway maintenance fee to satisfy the Conditions of Approval. The fee of $10,000 was approved by the City Engineer in accordance with City Engineering Standards and guidelines.

5. The Subdivider shall comply with all requirements of Council Resolution No. 10832 (2017 Series) approving the tentative map and Ordinance No. 1639 (2017 Series) approving the Development Agreement.

6. Condition 104 S.Higuera and Vachell (Phase 2) start construction prior to issuance of building permits.

7. Condition 109 Bike/Ped bridges over Tank Farm Creek
a. South of Buckley Rd: modify timing per FEIR Addendum to Phase 4 b. North of Buckley Rd: Completion of construction prior to occupancy of the 30th unit in Phases 2 & 3.

8. Condition 111 install sidewalk from LOVR to City; Design and construction of improvements between Los Osos Valley Road and the City limit shall be initiated prior to issuance of building permits for Phase 2 development. Improvements shall be completed prior to issuance of an occupancy permit for Phase 2 development.

9. Condition 116.g Buckley -Vachel fair share mitigation fee re traffic sign

Subdivision Agreement - Tract 3089, Phase 2 & 3 10
EXHIBIT 2
TRACT 3089 PHASES 2 & 3 - FEE AND BOND LIST
175 VENTURE
Amount Form Date Received Bond Release Status
Bonds and Guarantees:

On-Site Faithful Performance: Can be released upon City Council acceptance of improvements, deposit of one-year warranty surety, and approval of record drawings.

Subdivision Improvements
(FMAP-0488-2022)
Includes all Parks
$ 11,579,800 Bond Bold = confirmed (typ.)
Off-Site Faithful Performance:

Can be released upon Public Works Director acceptance of improvements, deposit of one-year warranty surety, and approval of record drawings.

S. Higuera at Vachell Phase 2
Improvements
(FMAP-1537-2018)
$165,700 Bond
Bicycle Bridge over Tank Farm Creek
North of Buckley Road
$TBD Bond
South Higuera Sidewalks; COA 111;
(FMAP-0479-2021)
$79,000 Bond
Labor & Materials (50% of cost of each
of the above improvements)
Can be released 90 days after
acceptance of improvements, if no
claims. (Civil Code Section 8412)
Subdivision Improvements
(FMAP-0488-2022)
Includes all Parks
$ 11,579,800/2
=$ 5,789,900 Bond
Off-Site Labor & Materials:

Can be released upon Public Works Director acceptance of improvements, deposit of one-year warranty surety, and approval of record drawings.

S. Higuera at Vachell Phase 2
Improvements
(FMAP-1537-2018)
$165,700/2
=$ 82,850 Bond
South Higuera Sidewalks Vachell to
South City Limits
$79,000/2
= $39,500 Bond
Bicycle Bridge over Tank Farm Creek
North of Buckley Road
$TBD Bond
Monument Guarantee $80,000 CD or
Letter of
Credit
Can be released upon verification that
monuments have been set and
surveyor has been paid.
10% Warranty 10% of On-Site Faithful Performance above
To be collected prior to release of Faithful
Performance Bonds
Can be released one-year after
acceptance of improvements.

Subdivision Agreement - Tract 3089, Phase 2 & 3 11
Fees:

Plan and Map Check Fees:

Map Check Fee FMAP-0562-2022
Balance Due
$40,969.48
0 Check date Paid in Full
Improvement Plancheck Base Fee:

FMAP‐ 0488‐ 2022
Balance Due
IT surcharge
Total
Improvement Plancheck Remainder Fee:

FMAP‐ 0488‐ 2022
Bicycle Bridge over Tank Farm Creek
North of Buckley Road
Plan Check Fees
Construction Inspection Fees
$90,308.86
$2,764.51
$93,073.37
$12,712.71
$387.74
$13,100.45
Check
Check
Check
Oct 2023
Oct 2023
Oct 2023
Paid in Full
Paid in Full
Paid in Full
Construction Inspection Fees
Construction Inspection Fee:

FMAP‐ 0488‐ 2022
Balance Due
IT surcharge: N/A
$290,722.91 Check Oct 2023 Paid in Full
Construction Inspection Fee:

FMAP‐ 0636‐ 2022
S. Higuera at Vachell Phase 2
Improvements
Balance Due
IT surcharge: N/A
$22,186.75
Amount determined by approved
FMAP-1537-2018 plan set and
engineers estimate
Impact Fees
Roadway Maintenance Fee $10,000 Check To be deposited in Acct # 40050300- 90346953 Streets Reconstruction and
Resurfacing Master per Matt Horn
Water Impact Fees for irrigation
meters
Parkway, 1” meter fee $29,312.41 Calculated at current schedule 7/5/23 Park, 1” meter fee $29,312.41 Calculated at current schedule 7/5/23

Subdivision Agreement - Tract 3089, Phase 2 & 3 12
Ad Hoc and Mitigation Fees
Highway 227/Buckley Fair Share
Mitigation
$TBD Portion was paid this at Phase 1
map recordation but need to be an
additional increment with Phase 2-3
map recordation for the additional
units/traffic generated.

Buckley/Vachell Fair Share Mitigation $18,651.16 Due with map recordation of each phase based on % of total unit count
in that phase. Portion of $107,250.

Buckley Road Corridor Improvements
(at Davenport)
$TBD Portion was paid this at Phase 1
map recordation but need to be an
additional increment with Phase 2-3
map recordation for the additional
units/traffic generated.

Other Ad Hoc and Mitigation Fees Paid with Phase 1 Avila Ranch Affordable Housing Requirements See Affordable Housing Agreement Water Impact Fee1 To be collected with building permit
Wastewater Impact Fee1 To be collected with building permit Transportation Impact Fee1 To be collected with building permit To be collected with building permit

1 All Impact Fees are adjusted annually (July 1) based on CPI. Credit given for demolished units.

City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: January 23, 2024
TO: Mayor and Council
FROM: Rick Scott, Police Chief
VIA: Derek Johnson, City Manager
SUBJECT: ITEM 6A - POLICE DEPARTMENT 5-YEAR STRATEGIC PLAN Staff received the following questions, regarding items contained in the 5-Year Strategic Plan. The questions are below with staff’s response shown in italics:

1. On step 5 of the approval process, there is a note about the plan going back to stakeholder groups for edits and approval by January 31st. Does this step require approval from the stakeholders before implementation? If so, is there a threshold for what percentage of the groups need to sign on to the plan? The final strategic plan was routed to both the PAC and Roundtable groups for review. This has already occurred and there was not a specific vote or approval process, but more of a circling back with these individuals as many of them and the groups they represent provided direct input in the creation of the strategic plan. There were no objections or suggested changes from the members of these groups. The “January 31st” date reflected the anticipated acceptance and file from Council on January 23rd and then the dissemination of the plan by the end of the month, but we were able to get it on the January 23rd agenda. We put the extra step in with PAC and Roundtable to provide an additional level of oversight and inclusion of the work items identified as important by their constituents.

2. Please provide more details about the SWAT/Patrol Medic program with the Fire Dept. Can you provide a few more specifics on what that would look like or other municipalities where this is in place?
The SWAT/Medic program used to exist back in the early part of the 2000’s as a way to integrate paramedics, specially trained in TEMS ”Tactical Emergency Medical Services” into the Regional SWAT Team to provide immediate lifesaving support to victims, suspects and SWAT operators during an activation. The program ended due to limited resources and the FD staff was recalled. There has been mutual interest in rebuilding the program with the prior challenges in mind, and this action item on the strategic plan will develop operating procedures that will ensure that all parties are in agreement and understand the benefits and costs of the program and outline a path forward to include training, equipment and deployment procedures. A swat medic program consists of 2-4 (current/existing)

Item 6a. Police Department 5-Year Strategic Plan Page 2 paramedics (no additional FTEs) that accompany the team during call-out situations and who are trained to provide immediate life saving measures, in the field, and in advance of the full medic team that would cost precious minutes being cleared and escorted into a hostile situation. Medics could also treat injured nonlaw enforcement people who may have become injured in a crisis situation. The County SWAT team also utilizes a swat medic program as do many if not most swat teams. These medics gain a thorough understanding and practice of movements, tactics, and objectives to include receiving heavy body armor so they can enter a hot zone to provide immediate field care. Here is the California POST requirements for the program: https://post.ca.gov/tactical-medicine.

3. On page 23 goal 5 there is mention of incentivized or mandatory annual mental health check ins. Is there a model in place already for how this would work?
The concept of preventative health, wellness, and peer support is a fast-growing area for Law Enforcement agencies. The City currently contracts with The Counseling Team International (TCTI) to provide 10 (voluntary) free counseling sessions to all Fire and PD employees for use as needed. There are programs at other agencies that provide an annual mental health checkup as a way to offer employees an additional opportunity to talk to a mental health professional, without signing up for a more formal procedure. These can be beneficial to both the employee and the Department as a means to help encourage employees to discuss the stressors of their jobs/life etc. and help resolve small issues before they develop into larger ones. These annual checkups can be mandatory or optional, it would depend on the design of the program and subject to meet and confer with the Officers Association. This action item will seek examples of annual check-ins from other Departments to find a program that has proven to be successful and adapted for use here at SLOPD.

Current Agencies who have a program include: Ventura, Santa Barbara, and Oxnard that I am aware of. Santa Maria and the Santa Barbara Sheriffs Office, I’m told, are researching similar programs. The following is an excerpt from the Department of Justice Federal Office of Community Oriented Policing hearings:

4.2.5 Law enforcement agencies should establish policies that mandate an annual mental health check for all sworn law enforcement officers and relevant civilian staff. Similarly, mandatory mental health checks should be required after a critical incident or traumatic incident. This recommendation has been widely discussed within the field of law enforcement; however, it has yet to be implemented across all law enforcement agencies. Law enforcement officers and other criminal justice personnel (e.g., prosecutors, civilian investigators, forensic examiners, dispatchers, evidence collection specialists, and victim witness staff) are regularly exposed to traumatic situations that negatively affect their resiliency. A mental health check is a narrowly defined nondiagnostic meeting that is conducted on agency time

Item 6a. Police Department 5-Year Strategic Plan Page 3 with a designated agency wellness representative (i.e., peer support officer) or mental health clinician. This type of mental health check should be used to inform law enforcement officers and other relevant criminal justice professionals about available wellness resources. The mental health check should also educate the officer about signs of and risk factors associated with psychological distress or impairment. An annual mental health check is not a fitness-for-duty evaluation; it should remain mutually exclusive and separate. A person who has conducted the fitness-for-duty evaluation of a specific employee should not conduct annual mental health checks for the agency of that employee. Additionally, there should be clearly defined policies related to what the annual mental health check involves and the responsibilities of those who conduct them.

4. Can you tell me a bit more about the drone as first responder program? I know it was discussed at our last meeting, but I would love a reference to other places it’s being used or some literature on it if it's available.

Many departments are beginning to explore and institute Drone as a First Responder (DFR) programs. Chula Vista PD, California, is among the top examples of a very successful program that others are modeling nationally, which went live way back in 2018. This program which is supported by the FAA is invaluable in providing first responders with immediate life/safety information about situations they are about to enter. Having critical information early, improves decision making, allocation of proper resources, and promotes de-escalation options regarding the level and necessity of engaging in a critical incident, even reducing code 3 (lights & siren) responses. The program would also fly on serious fire situations such as wildland fires or structure fires, where fire professionals could gain information within minutes to begin sizing up the emergency, well before the first unit physically arrives on the scene. This will help better determine what equipment is needed and exactly where it is required.
https://www.chulavistaca.gov/departments/police-department/programs/uasdrone-program. Here is an overview article from the National League of Cities: https://www.nlc.org/article/2023/08/21/reimagining-emergency-responsedrone-as-first-responder/.

Other cities include Fremont, Santa Monica, Clovis.
https://www.fremont.gov/government/citywide-initiatives/public-safetyinitiatives/drone-as-first-responders-dfr. Grover Beach is in the process of researching and developing a similar program.

Item 6a. Police Department 5-Year Strategic Plan Page 4

5. What outreach occurred with the LGBTQ+ community?
Extensive community outreach was conducted as part of the strategic planning process. Specific outreach with the LGBTQ+ community included members of the GALA Pride and Diversity Center, Tranz Central Coast and the Pride Faculty Staff Association of Cal Poly.

6. What EAP or peer support do we give today?
The City of San Luis Obispo offers all employees EAP resources, coordinated through the Human Resources Department. Aetna Resources For Living is an employer sponsored program, available at no cost the employee and all members of their household. That includes dependent children up to age 26, whether or not they live at home. Services are confidential and available 24 hours a day, 7 days a week. In addition to the City EAP program, Police and Fire employees receive additional wellness benefits through TCTI that were previously described in question 3.

The Police Department has also created a Peer Support Program that is comprised of Department employees who are trained to provide direct support to employees through outreach newsletters, and personal contact during times of need such as in response to critical incidents at work, struggles in personal life, etc. The Peer Support Program has been a continuous evolution since its inception in 2020 and has proven extremely valuable as an in-house resource for our employees.

7. Clarify when we offer incentives for new hires and officers in particular.

Hiring incentives have been authorized as part of a City Manager approved Emergency Staffing Plan, that provides monetary bonus incentives for lateral Police Officers and Dispatchers to attract experienced employees to join the San Luis Obispo Police Department. New hires are not eligible to receive the monetary bonus incentives but may receive other incentives including relocation reimbursement and accelerated vacation accrual depending on their prior experience.

Item 6a
Department: Police
Cost Center: 8001
For Agenda of: 1/23/2024
Placement: Business
Estimated Time: 30 minutes
FROM: Rick Scott, Police Chief
Prepared By: Brian Amoroso, Deputy Chief
SUBJECT: PRESENT THE 2024-2029 SAN LUIS OBISPO POLICE DEPARTMENT

STRATEGIC PLAN

RECOMMENDATION
Receive and file the San Luis Obispo 5-year Strategic Plan, to be presented by Chief Rick Scott and Jacob Green and Associates. The strategic plan outlines goals, objectives and action items that will guide and direct the work effort of the Police Department for the next five years.

POLICY CONTEXT
The Police Department contracted with Jacob Green and Associates in 2023 to aid in the creation of a strategic plan to guide the direction and work effort of the Police Department for the next 5 years. The strategic planning effort is identified as Task 2.51 of the 2023- 2025 Work Program and Financial Plan.

DISCUSSION
Background
In February 2023, the City of San Luis Obispo Police Department (Department) engaged the services of Jacob Green and Associates, Inc. (JGA), to help facilitate the development of the Department’s Strategic Plan. At the direction of the Chief of Police, the team from JGA has spent significant time reviewing City planning documents, conducting field interviews, administering surveys, and meeting with staff and community leaders to ensure a comprehensive and collaborative approach to strategic planning.

The mid-project status update provided by JGA on September 5, 2023, reviewed the strategic planning process efforts to date, including a review of the methodology employed and preliminary city and community input results. Specifically, the presentation highlighted the outcomes of a broad community engagement strategy based on numerous interviews conducted with key community partners that have served as a valuable source of information, offering perspectives from various community leaders,

1 Page #49, 2023-2025 Financial Plan. “Use Community partnerships to help build a 5‐year strategic plan to create transparency and legitimacy”.

Item 6a
and allowed the strategic planning team to align the department's goals with the community's needs and expectations. The insights gleaned from these interviews shed light on areas of alignment and potential areas for improvement, fostering a collaborative and inclusive approach to shaping the department's strategies to help guide and align the future of policing in San Luis Obispo.

The presentation also featured the results from four broad reaching anonymous survey instruments that were utilized as part of the process. The surveys act as a platform for community members and police department staff to voice their opinions, lived experiences, concerns, and suggestions. The aggregated survey data provided quantitative insights into community sentiment, enabling data-driven decision-making and a well-rounded understanding of public perceptions and recommendations.

Finally, the presentation outlined the tasks completed to date, and the forthcoming steps in the strategic planning process, providing transparency and a sense of direction for both the council and the community.

The strategic planning process involved five steps.

1. Project Kickoff & Project Charter Development

2. Current State Assessment

3. Future State Development - Vision, Mission, Values, Priorities, & Paradigm

4. Strategic Plan Development, Action Plan Implementation & Monitoring

5. Approval & Distribution

1. Project Kickoff & Project Charter Development (Completed) During the strategic planning development process, JGA worked with SLOPD and key executive staff to solidify the project committee members, critical strategic planning components, desired outcomes, and associated deadlines. A project charter was created to create mutual expectations and project road-map approval.

2. Current State Assessment (Completed)
JGA collaborated with the department during this phase of the strategic planning process to explore the current context of the organization to include an external and internal review with key stakeholders to include the SLO community and department personal. The process incorporated the SWOT assessment (Strengths, Weaknesses, Opportunities, Threats) for an accurate snapshot of current operations. JGA collected data from a variety of sources including focus groups, working groups, surveys of key players, and one-on-one interviews. Key focus areas and objectives were identified.

Consultants created a process to update the Department’s Vision, Mission, Values, and any other related fundamental department brand identity statements.

Item 6a

3. Future State Development - Vision, Mission, Values, etc. (Completed) JGA worked with all stakeholders to develop the fundamental elements that build organizational alignment: vision, mission, values, priorities, and paradigm. During this step, JGA facilitated a two-day strategic planning retreat as outlined below.

The Department identified a need to bring key leadership together for a facilitated twoday session to assess the department's current and future state. Facilitation services enable all members of the team to actively engage in the meeting process instead of having a designated team member take the role of facilitator and be excluded from group discussion.

Activities facilitated by JGA during the retreat were consolidated into the final Strategic Plan product. Facilitated activities included identifying strategic priorities, objectives, strategies, and metrics. Activities included all-hands discussions and break-out sessions for process efficiency and effectiveness.

4. Strategic Plan Development, Action Plan Implementation (Completed) JGA helped the organization develop a set of priorities, as well as an action plan focusing on achieving the identified priorities during the five-year life span of the strategic plan. The action plan includes priorities, goals and objectives, strategies and actions, indications, target dates, and KPI’s.

As requested in the RFP instructions, the Strategic Plan includes reference to the best timing and approach to conduct the department’s future staffing study. JGA will not conduct the staffing study as part of this process but is available to manage this project at a future date if desired by the city. During this step of the process, the feasibility of a staffing study, recommended schedule, and scope was examined, and the Department is currently in the final stages of preparing an RFP for a staffing study.

5. Approval & Distribution (Expected completion 1/31/2024) A final strategic plan was assembled by JGA and routed to key SLOPD stakeholders for review, edit, and ultimate approval. The plan will be distributed to the organization and JGA will work with the Police Chief to determine the most effective way to educate the Department regarding the final Strategic Plan and associated implementation strategy.

Strategic Plan Summary
Six goals or “pillars” were identified as major work efforts as a result of the collaboration, research, and engagement conducted in the project planning. Each of these pillars were developed as key priorities from those participating in the process. Those goals are:

1. Service to the Community

2. Community Engagement

3. Diversity, Equity and Inclusion

4. Recruitment and Retention

5. Health and Wellness

6. Improve Infrastructure, Equipment and Technology

Item 6a
Within each goal, objectives were developed and refined to guide the work effort over the next five years. Each of the following objectives support the goals of the plan and are specifically linked to each goal (1-6) for reference. The identified objectives are:
1A. Conduct Staffing Analysis
1B. Implement Enhanced SMART Policing and alternative policing models 1C. Empower the Community for Enhanced Safety
2A. Enhance Community Communications
2B. Expand Community Partnerships and Programs
2C. Broaden and Diversify Community Presence
3A. Integrate DE&I Throughout the Department
4A. Create Recruitment Program
4B. Enhance Training Program
4C. Create Retention Program
5A. Create Comprehensive Health and Fitness Program
5B. Enhance Mental and Emotional Support
5C. Create a Comprehensive Employee and Family Support Program 6A. Refine Capital Improvement Plans for Police Department Facility 6B. Improve Departmental Equipment
6C. Evaluate Body Worn Camera and In-Car Camera Solutions 6D. New Computer Aided Dispatch and Records Management System (CAD/RMS) Finally, 79 individual work efforts were identified to directly support the objectives and goals of the Strategic Plan. Each of these work efforts or “Action Items” are grouped logically under each of the objects they directly support.

Previous Council or Advisory Body Action
On September 5th 2023, Chief Scott and Jacob Green and Associates presented to Council the strategic planning process efforts to date, including a review of the methodology employed and preliminary city and community input results. At that time, Council directed additional outreach be conducted to ensure the capture of student responses due to the summer timeframe of the initial outreach. The community engagement surveys were kept open for several weeks to offer an opportunity for further input to the Strategic Plan.

Public Engagement
Extensive public engagement was conducted through in-person interviews and several online survey instruments to solicit broad input from the community on departmental direction. In addition, the Department is coordinating with the Community Safety Advisory Council, which is comprised of both the PAC and Police Roundtable advisory bodies, to review progress and provide important input into the development of the Strategic Plan.

CONCURRENCE
None.

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: N/A Budget Year: 2023-24
Funding Identified: N/A
Fiscal Analysis:

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

Total $0 $0 $0 $0
There are no fiscal impacts directly associated with the presentation of the Strategic Plan.

Implementation of any of the objectives outlined in the Plan may have a fiscal impact, and those impacts will be identified if and when objectives are implemented.

ALTERNATIVES
There are no alternative actions as this presentation is a receive and file of the San Luis Obispo Police Department 5-year Strategic Plan.

ATTACHMENTS
A - 2024-2029 San Luis Obispo Police Department Strategic Plan

PREPARED BY:
2024-2029 Strategic Plan
San Luis Obispo Police Department

San Luis Obispo Police Department
2024-2029 Strategic Plan
Table of Contents
2 CHIEF’S MESSAGE 3
ACKNOWLEDGEMENTS 4
COMMUNITY PARTNERS 5
EXECUTIVE SUMMARY 6
COMMUNITY OVERVIEW 7
ORGANIZATION OVERVIEW 8
a. Organization Chart
OUR VISION & PURPOSE 9
a. Our Vision
b. Our Purpose
OUR VALUES 10
STRATEGIC PLANNING METHODOLOGY 11
PROJECT LIFE CYCLE 12
ONGOING STRATEGIC PLAN MANAGEMENT 13
INFLUENCES 14
OUTREACH 15
SWOT OBJECTIVE & INTRODUCTION 16
RESOURCES 17
SWOT ANALYSIS 18
GOAL 1 – Service to the Community 20
a. Objective 1A: Conduct Staffing Analysis
b. Objective 1B: Implement Enhanced SMART Policing and Alternative Policing Models c. Objective 1C: Empower the Community for Enhanced Safety GOAL 2 – Community Engagement 21
a. Objective 2A: Enhance Community Communications
b. Objective 2B: Expand Community Partnerships and Programs c. Objective 2C: Broaden and Diversify Community Presence GOAL 3 – Diversity, Equity & Inclusion 22
a. Objective 3A: Integrate DE&I Throughout the Department GOAL 4 – Recruitment & Retention 22
a. Objective 4A: Create Recruitment Program
b. Objective 4B: Enhance Training Program
c. Objective 4C: Create Retention Program
GOAL 5 – Health & Wellness 23
a. Objective 5A: Create Comprehensive Health and Fitness Program b. Objective 5B: Enhance Mental and Emotional Support
c. Objective 5C: Create a Comprehensive Employee and Family Support Program GOAL 6 – Improve Infrastructure, Equipment & Technology 24 a. Objective 6A: Refine Capital Improvement Plans for Police Department Facility b. Objective 6B: Improve Departmental Equipment
c. Objective 6C: Evaluate Body Worn Camera and in-Car solutions d. Objective 6D: New Computer Aided Dispatch and Records Management Systems (CAD/RMS) STRATEGIC PLAN TIMELINE 25

Chief’s Message
It is with much anticipation and excitement that we present the San Luis Obispo Police Department’s Five-Year Strategic Plan. This project is a result of diligent work, rigorous and honest assessment, community engagement, and a passionate commitment to best serve every member of our San Luis Obispo community.

San Luis Obispo is not just a place, but a vibrant community with a rich history, diverse population, and a promise for the highest quality of life possible, the SLO Quality of Life. Our responsibility to safeguard and protect is profound. It is not simply about enforcing the law; it’s about trust-building, fostering collaboration, nurturing partnerships, and ensuring that every individual feels safe, respected, and empowered.

In our journey to draft this Strategic Plan, we listened intently and solicited direct and sometimes difficult feedback. We sought to hear and best understand the hopes, concerns, and aspirations of community members and department employees. The result is a strategic roadmap that not only speaks to the present but also best positions us for the challenges and opportunities of the future.

With ever-increasing change in policing, a successful plan must be thought out, definitive, achievable, and most importantly adaptable.

The core pillars of the plan are founded in the principals of modern community policing and is a commitment to our community to provide exemplary police service, while preserving the dignity, equity, and access to justice for all we serve.

I want to extend my sincerest gratitude to our entire community for your support and for partnering with your police department as we change the future of public safety. Together, we are shaping the future of San Luis Obispo and with it our sense of safety and community, promoting community-centric policing, and creating a city where everyone feels truly safe and welcomed.

As we embark on this next chapter, I urge you to actively engage, hold us accountable, and partner with us as we translate this plan into action. It’s not just our Strategic Plan; it’s our blueprint for a safer, more united future for our community.

Respectfully,
Rick Scott, Chief of Police
San Luis Obispo Police Department
San Luis Obispo Police Department
2024-2029 Strategic Plan Page 275 of 6823
San Luis Obispo Police Department
2024-2029 Strategic Plan 4
Acknowledgements
This plan would not be possible if not for the contributions of our professional staff, elected leaders, City departments and community partners. It is truly an honor to serve our community.

Strategic Plan Committee
Erica A. Stewart
Mayor
Jan Marx
Councilmember
Emily Francis
Councilmember
Andy Pease
Vice-Mayor
Michelle Shoresman
Councilmember
Derek J. Johnson
City Manager
Rick Scott
Chief of Police
Fred Mickel
Deputy Chief
Brian Amoroso
Deputy Chief
Chad Pfarr
Lieutenant
Aaron Schafer
Lieutenant
Robert Cudworth
Lieutenant
Jason Dickel
Lieutenant
Trevor Shalhoob
Sergeant
Caleb Kemp
Sergeant
Joseph Hurni
Sergeant
Tim Koznek
Sergeant
Bryan Treanor
Sergeant
Jeff Booth
Sergeant
Evan Stradley
Sergeant
Katherine Miller
Communications Supervisor
Taylor Heath
Communications Supervisor
Majorie Menesez
Records Lead Clerk
Christine Wallace
Public Affairs Manager
Melissa Ellsworth
Senior Buisness Analyst
Alexa Wetmore
Crime Analyst
Tiffan Hopkins
Executive Assistant to the Chief

San Luis Obispo Police Department
2024-2029 Strategic Plan 5
Community Partners
AAPI SLO County
Bend the Arc
Black Faculty Staff Association
California Polytechnic University
CAPSLO (40 Prado)
Central Coast Gymnastics
County Behavioral Health
Covelop
Cuesta College Admin
Diversity Coalition SLO County
Downtown SLO
Farmer and Ready Law Firm
FEMA
Laguna Middle School
Latino Outreach Council
Lumina Alliance
Meathead Movers
Mission College Preparatory High School
NAACP
Police Advisory Committee of SLO
Police Roundtable of SLO
Public Safety SLO
RACE Matters SLO
Residents for Quality Neighborhoods
SLO Chamber
SLO High School
Transitions Mental Health Association
Tranz Central Coast

San Luis Obispo Police Department
2024-2029 Strategic Plan
Executive Summary
The San Luis Obispo Police Department presents its 2024-2029 Strategic Plan, a comprehensive and forward-looking roadmap that will shape the future of our agency and the community we serve.

This plan serves as a guiding document, outlining our goals and objectives, as well as the necessary strategies to achieve success over the next five years.

At the core of this Strategic Plan are six overarching goals, supported by 17 objectives and 76 strategies. These goals encompass our commitment to trust, public engagement, quality of service, accountability, and professional growth through innovation. By implementing this plan, we aim to enhance the effectiveness of our operations and ensure the continuous improvement of our services.

Central to our strategic approach is the recognition of the importance of collaboration and inclusivity, as we actively engage our personnel and community members to develop a plan that aligns with their needs and aspirations. By fostering a collaborative relationship between the Police Department and the community, we aim to create a safer, more inclusive, and thriving environment for all, where everyone feels safe, valued, and heard.

This Strategic Plan serves as a measure of our commitment to transparency and accountability. It will guide our resource allocation and ensure that we are utilizing our capabilities and capacities efficiently and effectively. With this plan as our compass, we are confident in our ability to provide exemplary service and build a police department that meets the highest standards.

In conclusion, the San Luis Obispo Police Department 2024-2029 Strategic Plan is a comprehensive and inclusive roadmap that sets the course for the next five years. It represents our commitment to continuous growth and improvement, ensuring that we are a police department that not only meets the needs of our community but also exceeds their expectations. Together, we can shape a brighter future for San Luis Obispo.

Income & Poverty

0.1% Native Hawaiian and
Other Pacific Islander

70.4% White, not
Hispanic or Latino

17.9%Hispanic
or Latino

0.5% American Indian
and Alaska Native

10.3% Two
or more Races

5.5% Asian

1.3% Black or
African American
San Luis Obispo Police Department
2024-2029 Strategic Plan
Community Overview
The San Luis Obispo Police Department is entrusted with the safety and security of the vibrant City of San Luis Obispo, California. The City is nestled halfway between San Francisco and Los Angeles, encompassing an area of approximately 13.25 square miles. San Luis Obispo accommodates 19,254 households, with a median household income of $65,000. The City was formally incorporated in 1856 and now boasts an estimated population of approximately 48,000 residents. During daylight hours, the City’s multifaceted character becomes most evident, with the population surging to approximately 100,000. This demographic swell is influenced by the student body at California Polytechnic State University, the influx of daily professionals, and its pivotal role as the County seat, hosting the majority of the County’s administrative offices and the main Courthouse.

With a profound sense of community, breathtaking landscapes, and an array of amenities, San Luis Obispo ensures an unparalleled quality of life, paving the way for robust community ties and an enriched living experience.
7 Race
Age & Sex

2.9%
Persons under 5 years

10.6%
Persons under 18 years

13.5%
Persons 65 years and over

49.3%
Female persons
$65,000
Median Household Income (2022)

31.5%
Persons in poverty
$41,749
Per capita income in past 12 months (2022)
Reference: US Census Bureau
https://www.census.gov/quickfacts/sanluisobispocitycalifornia

Detectives (4)
8 San Luis Obispo Police Department
Organization Chart
Chief of Police
Neighborhood Outreach
Manager Night Patrol Lieutenant Crime Analyst
Night Patrol
Sergeants (2)
Swing Patrol
Sergeant
Night Patrol
Officers (12)
Swing Patrol
Officers (3)
Downtown Bicycle
Officers
Days (2) / Nights (2)
Student Neighborhood
Assistance Program (0-8 PT)
Day Patrol
Sergeants (2)
Day Patrol
Officers (12)
Community
Action Team (2)
Day Patrol Lieutenant
Community Service
Officers (6)
Traffic
Officers (3)
Traffic Sergeant
Reserve Officers (3)
Chaplains (1)
Special
Enforcement
Team Sergeant
Detective
Sergeant
Hiring/Training
Manager
Deputy Chief
Administrative Bureau
Communications
Supervisors (2)
Communications
Lieutenant
Communications
Technicians (11)
Administrative/Invest.

Lieutenant
Executive Assistant
to the Chief (1)
Senior Admin
Analyst
Administrative
Assistant (PT)
Detectives (5)
Evidence
Technician
Lead Property
& Evidence
Technician
Property &
Evidence
Technician
Total Employees: 95 FTEs
Sworn Positions: 61
Civilian Positions: 34
Deputy Chief
Operations Bureau
Record Leads
Clerk (1)
Records
Clerks (4)
Record
Supervisor

our community from harm by red
dignity, equity, and justice for all w
San Luis Obispo Police Department
2024-2029 Strategic Plan
Our Vision
A community partnership built on trust,
focused on safety, and shared values to
ensure the SLO quality of life.
9 Our Purpose
To safeguard our community from harm by reducing crime
and ensuring dignity, equity, and justice for all we serve.

San Luis Obispo Police Department
2024-2029 Strategic Plan
Our
Values
Life
We believe in the sanctity of life. Our policies, decisions, and actions are guided by least harm approaches to first protect life and reduce the fear of crime.

Integrity
We are accountable to our community and ourselves
through our professional oath and most importantly,
our actions. We embrace transparency to build trust
and promote credibility in our community.

Service
We take pride in providing the highest quality of service to our community, ensuring we treat each person with
dignity and equity in the pursuit of justice.

Teamwork
We work best when we work together. We support each
other through an organizational culture based on humility, respect,and shared responsibility.

Nurture
We are dedicated to personal and organizational growth
by providing a learning culture, equipped to persevere in adversity. We safeguard our future by supporting one
another through optimism, strength, and resilience.

We L.I.S.T.N. and give voice to our
community through living these shared
values which guide every decision and
action in service to our community and
to one another.

The development of the Strategic Plan was guided by a comprehensive process designed to leverage robust community engagement, City Council input, insights from Police Department staff and broad perspective from other City Departments. Input was gathered utilizing best practices for internal and external engagement including face-to-face interviews and anonymous surveys open to all residents. The input was synthesized in a Strengths, Weakness, Threats, and Opportunities (SWOT) analysis to ensure the Strategic Plan anticipates future trends and challenges. Police Department Leadership staff convened for a two-day retreat to thoroughly consider input and generate goals, objectives and strategies reflecting the needs and desires of the Department and Community.

It is important to note that this Strategic Plan serves as a snapshot in time and is designed to be adaptable to changing circumstances. As such, it demands continuous attention, refinement and further engagement with stakeholders to best serve the interests of public safety and the overall well-being of our Community.

San Luis Obispo Police Department
2024-2029 Strategic Plan
Strategic Planning Methodology
11 INTERVIEWS
Conducted In-Person & Virtual Police Department Staff Commnunity Partners City Council Business Community 11 5
26 12
Police Department Staff
31 Responses
Community Partners
26 Responses
Business Community
28 Responses
Open City Hall
445 Responses

ANONYMOUS SURVEYS
139 Surveys Sent 151 Surveys Sent Open for All residents & College community

METHODOLOGY

HIGHLIGHTS

San Luis Obispo Police Department
2024-2029 Strategic Plan 12
San Luis Obispo Police Department Strategic Plan
Project Life Cycle

Establish/Refine
Strategies
Assign Owners
& Develop
Milestones
Seek Feedback
& Input
Implement
Strategies
Seek Resources/
Budget
Allocations
Report Progress
to Council &
Community
San Luis Obispo Police Department
2024-2029 Strategic Plan
Ongoing Strategic
Plan Management
13 To ensure this plan
evolves and adapts, this
process will be used to
manage, reassess and
revise over the plan’s
lifecycle.

San Luis Obispo Police Department
2024-2029 Strategic Plan 14
San Luis Obispo Police Department Strategic Plan
Influences
• The process to create our strategic plan was
informedbyseveralexternal influencescontemplating
and challenging the concepts of modern policing.
• In response to very notable issues in policing,
communities demanded change, reform, and a
voice in the police-community relationship. San
Luis obispo has listened to these calls for action
and incorporated specific goals and action items
to lower historic barriers to engagement and better
align with the Pillars of 21st Century Policing.
• Our goal is to provide progressive and community
centric policing, by learning from the past to ensure a future which prioritizes the sanctity of life and equity for all.
• This plan remains flexible and adaptable based
on future State and Federal Police Reform efforts.

As improved policies and broader reforms are
developed, our plan will reflect these coordinated
efforts to enhance public trust, accountability, and
transparency in law enforcement.

Reference: 21st Century Policing (https://www.ojp.gov/ncjrs/virtual-library/abstracts/final-report-presidents-task-force-21st-century-policing) Historical Barriers /
Community Action
Social
Justice
Movements
Strategic
Plan
Police
Reform
Pillars of
21st
Century
Policing

San Luis Obispo Police Department
2024-2029 Strategic Plan 15
San Luis Obispo Police Department Strategic Plan
Outreach
• Focused on Inclusivity
• Conducted 54 Interviews
• In person & Zoom
• Distributed 4 Surveys
• Identified 290 Business &
Community Partners
• All Police Department Staff
• All San Luis Obispo Residents

San Luis Obispo Police Department
2024-2029 Strategic Plan
Strengths, Weaknesses,
Opportunities & Threats Analysis
16 OBJECTIVEObjective
This Strengths, Weaknesses, Opportunities and
Threats analysis is an integral segment of our
comprehensive Five-Year Strategic Plan. It aims
to provide the San Luis Obispo Police Department
with an in-depth understanding of the internal
and external factors that could influence the
Department’s strategic direction over the next
half-decade.

INTRODUCTIONIntroduction
The San Luis Obispo Police Department has a
longstanding commitment to ensuring safety and
upholding public order in the community. To
navigate the evolving challenges of modern
policing and community expectations, a thorough
analysis of the Department’s current strengths,
weaknesses, opportunities, and threats are
essential. This section provides analysis, derived
from in-depth external and internal interviews.

San Luis Obispo Police Department
2024-2029 Strategic Plan 17
Resources
Sworn Officer
Status 2023
• In 2023, SLOPD averaged:
• 48 out of 61 Officers working
• 6 Officer vacancies
• 7 Officers on leave/otherwise not
working a shift
Officers Vacancy Sick/IOD/Vacation
Population/Calls for Service/Officer Staffing/Non-Sworn Staffing Reference (Population Data): State of California Department of Finance Historical Population and Housing Estimates Report (https://dof.ca.gov/forecasting/demographics/estimates/) • Since 2009:
• Population in San Luis Obispo has increased by 6.3%
• Calls for service have increased by 29.4%
• Officer staffing has decreased by 4.7%
• Non-Sworn staffing has increased by 21.4%

SWOT
San Luis Obispo Police Department
2024-2029 Strategic Plan 18
Strength, Weakness, Opportunity, and Threat (SWOT) Analysis Strengths
• Strong Community Partnerships: Collaborative
efforts with various city entities provide
opportunities for holistic solutions to
community issues.
• Service to the Community: Officers are
committed to delivering top-tier community
service.
• Collaborative Ethos: Strong inter-departmental
collaborations foster a unified city agency
approach.
• Police Department Staff and Leadership
Team Credibility and Reputation: Department
employees and leadership can be an invaluable
asset in building trust with community.

Weaknesses
• Staffing Challenges: The police profession is
challenged with the lack of workforce and SLO
is not immune to these larger meta forces, hence
this is a weakness that will continue to need
attention locally as well as industry wide.
• Antiquated/Inadequate Facility: The need for
expanded and modern facilities remains, with the
current building having its limitations.
• Service Expectations Misalignment: A disconnect
between what the community expects and what
the police provide can hinder effective policing;
particularly with the homelessness issue.
• Lack of Transparency with Crime Statistics: This
can lead to mistrust between the public and the
police.
• Limited Staffing Resources: Community
expectations for policing and community
engagement have grown consistently while
staffing resources have remained flat, creating a
need for extensive overtime, which impacts team
morale.

Opportunities
• Infrastructure Development: Remodel recently
acquired building adjacent to current police
department to meet immediate and larger
public safety needs while solidifying plans for a
permanent facility.
• Leveraging Industry Focus on Recruitment/
Retention Best Practices: Adopting innovative
approaches from broader industry.
• Engagement with Historically Marginalized
Communities: Building bridges with these
communities can address historical grievances
and improve connection.
• Public Engagement and Noticing Manual:

This presents opportunities for continued
police outreach and building a standardized
communication strategy.
• Leverage City’s New Homelessness Response
Strategic Plan: Aligning with city initiatives can
lead to comprehensive solutions for social
issues.

Threats
• Mandatory OT/Burn-out: Overworked officers
might face burnout, which can impact
performance and health.
• Funding Prioritization Ambiguity: Need to balance
competing needs for a new facility, training and
equipment with scarce resources.
• Recruitment Barriers: Persistent challenges in
attracting and retaining the best officers.
• Community Challenges: The evolving societal
dynamics, with concerns about issues such as
homelessness poses operational challenges and
resource strains.
• Some local, federal and international events
cause civic unrest, protests and other forms
of political demonstration create unexpected
demands for services to ensure protection of free
speech and public safety.

San Luis Obispo Police Department
2024-2029 Strategic Plan 19
SWOT Recommendations
Leverage Strengths:
• Community Engagement: Organize periodic town hall meetings, open forums, and community outreach events to foster dialogue between the Police Department and the community.
• Collaboration: Continue to foster partnerships with other city entities to jointly address community issues and share resources where possible.
• Momentum in Community Credibility & Reputation: Leverage new leadership, positive reputation, and credibility of the police department to further make connections with the community.

Address Weaknesses:
• Staffing: Consider offering incentives that are in line with labor relations objectives and both market and financial conditions to attract and retain officers. • Facilities: Explore and secure funding opportunities, either through the City’s budget, grants, or public-private partnerships, to update and enhance police facilities. • Service Expectations: Conduct public surveys to better understand community expectations and align the Department’s services accordingly.
• Transparency: Develop a transparent system for reporting and communicating crime statistics to the public, ensuring accuracy and clarity.

Capitalize on Opportunities:
• Community Events: Actively participate in post-pandemic community events to showcase the Department’s commitment to the community.
• Engagement with Marginalized Communities: Design outreach programs to engage with and understand the needs of historically marginalized groups. • Public Engagement Manual: Examine opportunities to incorporate the City’s new Public Engagement Manual to better standardize community engagement practices, ensuring consistency and effectiveness.
• Recruitment and Retention: Research and adopt best practices from other successful police departments to address staffing challenges.

Mitigate Threats:
• Officer Burn-out: Expand existing wellness programs for officers, ensure manageable work hours, and offer mental health resources.
• Facilities: Prioritize updates to the most critical facilities and explore temporary solutions or partnerships to address immediate needs.
• Community Challenges: Continue community policing initiatives, encouraging police officers to build relationships with residents.

Concluding Note
This SWOT analysis provides the Police Department with a clear view of the current challenges and opportunities facing the San Luis Obispo Police Department. Using this information, the Department can make data-driven decisions to meet the needs of the San Luis Obispo community effectively and efficiently.

GOAL 1
Service to the Community
San Luis Obispo Police Department
2024-2029 Strategic Plan 20
Goals
Objective 1A: Conduct Staffing Analysis

1. Contract an organizational assessment to examine staffing needs, recent growth, and the future build out of the city based on best practices and any adjustments to operations to achieve peak service performance

2. Review the scheduling model, evaluate against best practices

3. Explore viability of SWAT/Patrol Medic Program with San Luis Obispo Fire Department

4. Consider opportunities for alternative policing models

5. Explore the viability of a Computer Forensic Specialist and a Physical Forensic Specialist instead of the combined position

6. Explore viability of implementing a K-9 program

7. Explore viability of a Crime Scene Investigation Callout Team Objective 1B: Implement Enhanced SMART Policing and alternative policing models

1. Evaluate and reimagine Crime Analyst role

2. Roll out/train innovative data driven policing tools to reduce crime

3. Develop new resources to enhance unhoused and mental health roll out / train

4. Evaluate beat or zone style policing models

5. Explore the viability of a real-time crime center to track crime trends, monitor video assets, and support field teams with information
Objective 1C: Empower the Community for Enhanced Safety

1. Enhance visibility of crime data, including evaluation of assigning case numbers to all Officer activity

2. Develop additional opportunities to increase amount of Crisis Intervention Training (CIT)

3. Host Crime Prevention Through Environmental Design (CPTED) seminars to promote safety through environment design

4. Evaluate expanded reservist program

5. Develop County partnerships for diversionary/restorative justice programs for “least harm” approaches and outcomes (i.e. Care Court)

6. Explore Officer staffing at high call-for-service locations such as hospitals/shelters etc.

7. Enhance neighborhood watch programs

8. Assess the effectiveness of implemented measures, gather feedback from stakeholders, and make operational adjustments as needed to continually enhance service

9. Continuous Evaluation and Improvement: Establish a system for ongoing evaluation and improvement of internal investigation transparency

San Luis Obispo Police Department
2024-2029 Strategic Plan 21
Objective 2A: Enhance Community Communications

1. Review and refine standard communication guidelines and protocols which are consistent with the City’s Public Engagement Manual

2. Explore modern technologies and cadence for one-way and two-way communication (i.e. scheduled newsletter)

3. Create program for directed stakeholder communications

4. Implement resources for sharing information, objective progress tracking, and providing accessible updates to stakeholders and leadership
Objective 2B: Expand Community Partnerships and Programs

1. Expand participation in business and civic organization activities

2. Increase opportunities for community member volunteerism

3. Research the viability of a Citizens Academy to provide immersive opportunities which further complements the City’s Community Academy

4. Research the viability of an Explorer Program
Objective 2C: Broaden and Diversify Community Presence

1. Expand presence in community programs

2. Expand presence at community events

3. Expand partnerships with organizations representing marginalized communities

4. Create program for periodic Town Hall or other Listening Sessions for community input GOAL 2
Community Engagement

Objective 4A: Create Recruitment Program

1. Maximize Exposure for Job Opportunities: Increase the visibility of hiring opportunities by strategically advertising on high-profile assets, including patrol vehicles; this ensures that the department’s recruitment efforts are showcased prominently, reaching a broader audience

2. Establish an Engaging Recruitment Webpage: Develop a dynamic and informative webpage dedicated to promoting the department to potential recruits; this online platform serves as a comprehensive resource, offering insights into the department’s culture, values, and career opportunities, thereby attracting qualified candidates

3. Institute a Comprehensive Mentorship Program: Formalize an innovative mentorship initiative by leveraging internal and external partnerships; this program aims to provide invaluable guidance and support to new recruits, fostering their professional growth within the department through a structured and supportive mentor-mentee relationship

4. Pioneer a Student Intern Program: Explore the creation of an enriching student intern program, offering hands-on experience and exposure to the workings of law enforcement; this initiative not only provides valuable insights to students but also serves as a pipeline for potential future recruits

5. Craft a Compelling Recruitment Video: Produce a modern video showcasing the diverse array of law enforcement careers available within the department; this visual representation serves as an engaging tool to communicate the excitement, challenges, and rewards associated with a career in law enforcement, attracting prospective candidates

6. Broaden Outreach at Educational Venues: Expand the department’s presence at key job-seeking venues, including institutions such as Cal Poly, Cuesta College, trade schools, and career fairs; actively participate in these events to interact with potential candidates, share information about career opportunities, and strengthen connections with the local academic and vocational communities
San Luis Obispo Police Department
2024-2029 Strategic Plan 22
Objective 3A: Integrate DE&I Throughout the Department

1. Enhance Diversity, Equity, and Inclusion (DE&I) efforts to create an environment where all staff feel valued and included (Health & Wellness)

2. Develop practical DE&I training for police employees (Service to the Community)

3. Incorporate DE&I values to improve recruiting and attract historically marginalized/underrepresented persons to the department (Recruiting & Retention)

4. Incorporate DE&I values to increase retention of historically marginalized/under-represented persons within the department (Recruiting & Retention)

5. Promote DE&I values for opportunities to build trust in the community based on personal safety (Community Engagement)
GOAL 3
Diversity, Equity & Inclusion
GOAL 4
Recruitment & Retention

San Luis Obispo Police Department
2024-2029 Strategic Plan 23
Objective 5A: Create Comprehensive Health and Fitness Program

1. Seek opportunities to improve the department’s existing physical fitness facility

2. Explore practices to encourage exercise / fitness incentive program

3. Seek partnerships with wellness practitioners to promote practices in nutrition and exercise

4. Develop method to track effectiveness of fitness program

5. Provide assistance to create personalized fitness / nutritional programs Objective 5B: Enhance Mental and Emotional Support

1. Continue partnership with Human Resources for expanded and ongoing mental health access

2. Enhance and standardize protocols for support after major incidents

3. Leverage new partnerships with practitioners to promote mental / emotional fitness

4. Explore mandatory or incentivized annual mental health check-ins

5. Evaluate expanded use of comprehensive retreat-based support programs Objective 5C: Create a Comprehensive Employee and Family Support Program

1. Create a central resource guide with tips for wellness and practitioner contact information

2. Create and promote a clearinghouse of support information for easy access

3. Enhance employee entrance program as part of onboarding

4. Create trainings for employees and family members teaching coping and support skills GOAL 5
Health & Wellness
Objective 4B: Enhance Training Program

1. Develop Standard Career Tracks for: Police, Dispatch, Records and Support Positions

2. Conduct a department-wide training resource analysis Objective 4C: Create Retention Program

1. Create a committee to vet and recommend program components:
a. Formalize a succession plan encouraging viable candidates and promotion pathways b. Support monetary and non-monetary retention incentives c. Continue to work with the City on employee housing initiatives d. Continue to work with the City on childcare initiatives e. Evaluate seniority-based rules when on specialty assignments

San Luis Obispo Police Department
2024-2029 Strategic Plan 24
Objective 6A: Refine Capital Improvement Plans for Police Department Facility.

1. Explore internal and external options for an evidence protocol audit and identify best practices

2. Develop and implement interim plan to move portions of the police department to 1106 Walnut

3. Develop and implement interim plan to reallocate workspace at 1042 Walnut

4. Create a drone-as-a-first-responder program

5. Remodel areas of 1042 Walnut to update and improve critical workspace

6. Develop and implement long-range working plan for new public safety center which connects and makes operationally efficient both existing facilities or a future new single facility

7. Evaluate the need for a state-of-the-art forensic processing laboratory to process evidence while protecting the health of staff

8. Evaluate and provide ongoing input to impact fees related to new development in the city Objective 6B: Improve Departmental Equipment

1. Evaluate existing Dispatch equipment replacement schedules and amend as necessary

2. Continue to evaluate Fleet needs and replacement schedules; pursuing hybrid and electric solutions

3. Explore the creation of a committee to evaluate Officer Equipment needs on an ongoing basis a. Evaluate existing officer equipment replacement schedules for price and term

4. Explore opportunity to partner with the Fire Department’s Fleet Support Team for broader public safety support
Objective 6C: Evaluate Body Worn Camera and in-Car Camera solutions

1. Evaluate new body worn and in-car camera technologies on the market for improved function and cost

2. Pursue opportunities to enhance equipment integration and functionality with new and existing technologies
Objective 6D: New Computer Aided Dispatch and Records Management Systems (CAD/RMS)

1. Study needs and create a Request for Proposal for a new CAD/RMS system

2. Review and recommend replacement CAD/RMS system

3. Along with IT staff, implement and transition from current system

4. Conduct end-user training
GOAL 6
Improve Infrastructure,
Equipment & Technology

San Luis Obispo Police Department
2024-2029 Strategic Plan 25
Strategic Plan Timeline
This timeline is a visual representation of all goals and objectives over the course of the five-year planning horizon. However, this plan is designed to be flexible and to evolve over time as the department responds to changing circumstances and considers new priorities. All timelines are estimates and dependent on available resources.

2024-2029 Strategic Plan
San Luis Obispo Police Department
1042 Walnut Street
San Luis Obispo, CA 93401
(805) 781-7317
Prepared By:

JacobGreenAndAssociates.com Page 298 of 682
Item 6b
Department: Finance
Cost Center: 2005
For Agenda of: 1/23/2024
Placement: Business
Estimated Time: 30 Minutes
FROM: Emily Jackson, Finance Director
Prepared By: Debbie Malicoat, Deputy Director of Finance/Controller SUBJECT: ACCEPTANCE OF THE ANNUAL COMPREHENSIVE FINANCIAL

REPORT, FEDERAL SINGLE AUDIT REPORT AND TRANSPORTATION
DEVELOPMENT ACT REPORT FOR FISCAL YEAR 2022-23

RECOMMENDATION
Review and accept the Annual Comprehensive Financial Report, the Federal Single Audit Report, and Transportation Development Act Report for Fiscal Year 2022-23.

POLICY CONTEXT
The City’s Charter under Section 810 requires the employment of an independent certified public accountant to examine the City’s financials.

REPORT-IN-BRIEF
The City produces general-purpose financial statements as well as specifically focused financial statements annually, which are audited by independent auditors. This report presents three audited financial statements to the City Council for review and acceptance:
the Annual Comprehensive Financial Report (ACFR), which are general purpose financial statements; the Federal Single Audit Report, which is specifically focused on revenues and expenditures of Federal funding; and the Transportation Development Act (TDA) Report, which is specifically focused on revenues and expenditures related to this funding source.

As more fully discussed herein, the auditors have issued an unqualified opinion on the City’s financial statements, which means that in their opinion, the financial statements are presented fairly and in conformity with generally accepted accounting principles.

DISCUSSION
The accompanying Annual Comprehensive Financial Report (ACFR) has been prepared as required by the City’s Charter and applicable State laws regarding financial reporting for municipalities. The ACFR provides a final and audited representation of the City’s financial condition across all funds for the fiscal year that ended June 30, 2023. The ACFR was

Item 6b
published on the City’s website on December 18, 2023, hard copies were provided to the City Council, if requested. The document is included as Attachment A to this report.

In accordance with the City Charter1, the City’s financial statements have been audited by independent certified public accountants from Badawi & Associates. The objective of the financial audit is to provide users of the financial reports with reasonable assurance from an independent source that the financial reports are reliable and represent a fair assessment of the City’s financial condition. The auditor issued the financial statements with an unmodified opinion which means that they are presented fairly and in conformity with generally accepted accounting principles (see pages 1-3 of the ACFR- Independent Auditors’ Report).

The independent auditors also reviewed the City’s Federal Single Audit Report and Transportation Development Act (TDA) annual audit for the Fiscal Year. Results and findings are discussed further below. Presenting the Single Audit and TDA reports at the same meeting as the ACFR represents a significant accomplishment by the accounting division and the independent auditors. This is not something that the accounting division has had the capacity to accomplish since going live with the City’s Oracle ERP system in 2018 and is attributable to the hard work and dedication of the entire division.

New Government Accounting Standard Board (GASB) Statements As described more fully in Note 18 to the financial statements, the City implemented three new GASB statements for this fiscal year. The most impactful to the City was Statement No.

96. Statement No. 96 relates to Subscription-Based Information Technology Arrangements (SBITAs). The objective of this statement is to provide guidance on the accounting and financial reporting for subscription-based information technology arrangements. The statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset – an intangible asset – and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. The City recognized intangible assets and SBITA liabilities as part of implementing this statement and note 7 of the financial statements includes detailed information.

1 Section 810. Independent Audits.

The Council shall employ, at the beginning of each fiscal year, an independent certified public accountant who, at such time or times as may be specified by the Council, at least annually, shall examine the books, records, inventories, and reports of all officials, employees, departments, and agencies who receive, handle, or disburse public funds. As soon as practicable after the end of the fiscal year, a final audit and report shall be submitted by such accountant to the Council, one copy thereof to be distributed to each member, one each to the City Clerk, the City Treasurer, the City Manager, and City Attorney respectively, and three (3) additional copies to be placed on file in the office of the City Clerk where they shall be available for inspection by the general public for the period required by the laws of the State of California. Restricted and special assessment district funds shall be segregated in the audit report.

Item 6b
Financial Results Highlighted in the ACFR
Within the ACFR, the Transmittal Memorandum and Management’s Discussion and Analysis (MD&A) summarize the City’s fiscal performance and provide an analysis by management of the influencing factors. They also provide information on the City’s fiscal policies, practices, and financial results. Key variances from projected ending balances for Fiscal Year 2022-23 are highlighted in the Transmittal Memorandum. Both documents allow the reader to gain insight into the City’s fiscal year experiences that lead to the audited financials and provide context to the statements that follow.

Financial results for Fiscal Year 2022-23 were generally positive, however the City was impacted by winter storms in January and March 2023 that continue to have financial effects. Revenues and expenditures in the General Fund came in favorably compared to budget estimates. Revenues were $8.7 million above the final budget, and expenditures were $292,000 under budget. Net other sources and uses ended above budget by $4.1 million. The result was an ending fund balance of $42.5 million, which was $4.9 million above budget estimates. As the chart below outlines, most of the ending balance is committed or assigned for future spending or reserve requirements, and not available for spending in conformance with GASB 54.

The unassigned balance of $8.3 million represents the amount available for additional spending, although approximately $2.0 million has been spent on storm related projects and is therefore unavailable for consideration at mid-year.

Capital Outlay Fund
The Capital Outlay Fund meets the definition of a major fund and is displayed separately on the financial statements. This is due, in large part to the current unexpended balance in the fund. Major capital projects are planned, but have been delayed, resulting in the fund balance. Staff expects to be able to significantly spend down this balance with upcoming capital investments.

General Fund 2022-23
Final Budget
2022-23
Actual
Positive (Negative)
Variance
Revenues $ 106,805,814 $ 115,463,540 $ 8,657,726
Expenditures 90,558,639 90,266,388 292,251
Other sources (uses) (19,320,374) (23,404,590) (4,084,216) Beginning fund balance 40,745,506 40,745,506 -
Ending fund balance $ 37,672,307 $ 42,538,068 $ 4,865,761 Ending fund balance
Nonspendable - 101,462 101,462
Restricted - - -
Committed - 19,620,444 19,620,444
Assigned - 14,540,709 14,540,709
Unassigned - 8,275,453 8,275,453
Total ending fund balance $ 37,672,307 $ 42,538,068 $ 4,865,761 Budget - Actual Comparison

Item 6b
Enterprise Funds
The City maintains four Enterprise Funds for its Water and Sewer utility, and Parking and Transit operations. Enterprise Funds are business-type activities within governmental accounting and are reported separately from the General Fund.

The primary sources of revenue for the Water, Sewer, and Parking Funds are fees for sales and services. In the Transit Fund, Federal and State grants represent most of the annual revenue. All four funds experienced an increase in net position for the year, as reflected in the table below (ACFR page 39).

ACFR Organization
In accordance with generally accepted accounting principles for state and local governments, the City’s ACFR is organized into three major sections: Introduction, Financial Reports and Statistical Tables. The following is a brief summary of the contents of each of these sections.

Introduction. The Transmittal Memorandum and other information of general interest are presented in this section, including directory of officials, advisory bodies, and organization chart.

Financial Reports. This section includes the City’s primary financial statements in five major parts:
2022-23 2021-22
Revenues:

Program Revenues:

Charges for services $ 56,894,331 $ 59,140,271
Operating grants and contributions 7,355,896 5,156,782
Investment earnings 3,010,333 (1,207,118)
Miscellaneous and other 585,101
Total revenues $ 67,260,560 $ 63,675,036
Program Expenses:

Public utilities $ 35,569,549 $ 33,468,921
Transportation 9,546,264 8,368,389
Total expenses $ 45,115,813 $ 41,837,310
Increase (decrease) in net position before transfers 22,144,747 21,837,726 Transfers (2,243,612) (1,685,314)
Change in net position $ 19,901,135 $ 20,152,412
Net position - beginning of year 240,384,486 217,715,565 Prior year restatement 2,516,509
Net position - end of year $ 260,285,621 $ 240,384,486
Summary of Changes in Net Position
Business-Type Activities

Item 6b

1. Auditors’ opinion regarding the financial statements.

2. Management’s discussion and analysis provides a narrative overview of City-wide finances, influencing factors, and operations experiences throughout the year.

3. The basic financial statements presenting the government-wide year-end results combining the activities of the major funds (General, Capital Outlay and all four Enterprise Funds) into governmental and business-type categories; the fund financial statements; and the notes to the financial statements.

4. Required supplementary information presenting the General Fund's actual results with both the original and final adjusted budgets.

5. Other supplemental schedules and financial statements provide financial information for each of the City’s non-major governmental and agency funds. This includes a financial schedule presenting Local Revenue Measure revenues and uses in 2022-23.

Statistical Tables. This section provides demographic and financial tables showing current and historical trend information for the City and is organized into six major parts:

1. Statistical overview. General information about the San Luis Obispo community.

2. General financial trends. Ten-year summary information on net assets, governmental revenues and expenditures and fund balances.

3. Revenue capacity. Ten-year summary information on property and sales tax trends.

4. Debt capacity. Ten-year summary information on debt service requirements.

5. Economic and demographic trends. Ten-year summaries of taxable sales, building permits and valuations, housing, population and other demographic trends.

6. Operating information. Ten-year trend information on operating indicators by function.

The City structures its statistical section to consider debt disclosure requirements including all relevant information so the ACFR can be used for submission to the Electronic Municipal Market Access (EMMA) system.

Recognition for Excellence in Financial Reporting
Beginning in Fiscal Year 1983-84, all of the City’s ACFRs have been awarded the certificate of achievement for excellence in financial reporting from the Government Finance Officers Association of the United States and Canada (GFOA). This is a prestigious national award recognizing the City’s use of the highest standards in preparing its annual financial report.

The certificate for Fiscal Year 2021-22 is included in the ACFR document and staff will submit the Fiscal Year 2022-23 ACFR for the award program.

Single Audit Reports
This document provides several items. 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 in how the City’s assets are safeguarded, and its finances are accurately reported, which then translates into the proper administration of federal funding.

Item 6b
There are two findings and no questioned costs. The City’s responses to the auditor’s findings are incorporated into the Single Audit Report (Attachment B). The auditor’s comments generally reflect the difficulties encountered when implementing the new Enterprise Resource Planning/Human Capital Management (ERP/HCM) cloud-based Oracle system and both are continuations from the prior year. The City is currently at some stage of resolution on these issues, utilizing an Oracle consultant for the necessary reconfigurations. The number of findings has decreased compared to prior years and reflects the significant time and effort that has been dedicated to ongoing configuration work. Again, these are areas of improvement and neither of them put the City’s revenues in jeopardy or question the appropriate accounting of expenditures.

TDA Report and Financial Statements
This document (Attachment C) provides information on the revenues received by the City pursuant to the TDA. 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 $76,869 in TDA funding during Fiscal Year 2022-23. Of these revenues, $76,869 was spent on pedestrian facility improvements. There remains $8,681 unspent at year end, from unspent prior year allocations.

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 statutes and are legally restricted to pay for transit operations, the development of public transportation systems and transportation planning. The Transit Fund received $3,078,487 in TDA operating grants during the fiscal year. Of these funds, $2,708,131 were also unspent at fiscal year-end due to Federal 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 2023, the City was required to maintain a fare revenue ratio of 20%, the actual ratio was 159% 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.

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

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.

Item 6b

FISCAL IMPACT
Budgeted: Yes Budget Year: 2023-24
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 $
State
Federal
Fees
Other:

Total $75,000 $62,405 $12,595 $
The City budgets the cost for the auditing firm annually. The cost is appropriated with the annual budget approval. The current fiscal year contains a budget of $75,000 for the previous fiscal year audit. Actual costs are anticipated to be $62,405 in accordance with the City’s contract with the auditing firm.

ALTERNATIVES
The City Council could decide to revise or not accept the Annual Comprehensive Financial Report for Fiscal Year 2022-23. This is not recommended as the report has been prepared in conformance with a variety of accounting and other reporting requirements and represents the professional evaluation and analysis by the City’s independent auditors. The auditors have rendered an unqualified opinion which means that the reports are presented fairly and in conformity with generally accepted accounting principles.

ATTACHMENTS
A - Annual Comprehensive Financial Report, Fiscal Year Ended June 30, 2023 B - Single Audit Report, Fiscal Year Ended June 30, 2023 C - Transportation Development Act Report, Fiscal Year Ended June 30, 2023

City of San Luis O bispo, CA
Annual Com prehensive Financial Report
Fiscal Year Ended June 30, 2023

1 San Luis Obispo is home to some of the best weather in California. Warm summers and mild winters bring the perfect climate for growing a variety of flowers, fruits, and vegetables. The city and community of San Luis Obispo has made it easy for those interested in gardening by creating spaces around the city for multiple community gardens including over 100 plots available for city residents.

Community gardens can be found at Emerson Park, Meadow Park, Laurel Lane next to Fire Station #3, and Los Osos Valley Road by the Laguna Lake Golf course.

For more information visit:https://www.slocity.org/government/departmentͲdirectory/parksͲandͲ rec/communityͲgardens
About the Cover
Photo credit: @wildflowerfolie

ANNUAL COMPREHENSIVE FINANCIAL REPORT
Fiscal Year Ended June 30, 2023
ERICA A. STEWART, MAYOR

JAN MARX, VICE MAYOR

MICHELLE SHORESMAN, COUNCIL MEMBER

ANDY PEASE, COUNCIL MEMBER

EMILY FRANCIS, COUNCIL MEMBER

DEREK JOHNSON, CITY MANAGER
Prepared by the Department of Finance
Emily Jackson, Finance Director
Debbie Malicoat, Deputy Finance Director/Controller
Tavy Garcia, Senior Accountant
Traci Kawaguchi, Accountant
Courtney Miles, Accounting Specialist
City of San Luis Obispo, California
www.slocity.org

City of San Luis Obispo, California
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2023
Table of Contents
Page
Introductory Section
Transmittal Memorandum ...................................................................................................................................................... vii-xxii Report Purpose and Organization ............................................................................................................................................... vii Profile of the City of San Luis Obispo ........................................................................................................................................ ix Factors Affecting Financial Condition ........................................................................................................................................ xi Financial Condition Overview ...................................................................................................................................................xiii Relevant Financial Policies ........................................................................................................................................................ xvi Major Initiatives ......................................................................................................................................................................... xx Award for Excellence in Financial Reporting ........................................................................................................................... xxi Acknowledgments .................................................................................................................................................................... xxii Directory of Officials and Advisory Bodies ................................................................................................................................xxiii City Council .............................................................................................................................................................................xxiii Advisory Bodies ......................................................................................................................................................................xxiii Appointed Officials and Department Heads ............................................................................................................................xxiii Mission Statement ....................................................................................................................................................................... xxiv Organizational Values ......................................................................................................................................................... xxv-xxvi Organization of the City of San Luis Obispo ............................................................................................................................. xxvii GFOA Certificate ..................................................................................................................................................................... xxviii Financial Section
Independent Auditors’ Report .......................................................................................................................................................1-4 Management’s Discussion and Analysis ..................................................................................................................................... 5-21 Overview of the Financial Statements .......................................................................................................................................... 5 Financial Highlights ..................................................................................................................................................................... 7 Government-Wide Financial Analysis .......................................................................................................................................... 9 Financial Analysis of Governmental Funds ................................................................................................................................ 13 Financial Analysis of Enterprise Funds ...................................................................................................................................... 14 Combined Program Expense and Revenue for Business-Type Activities .................................................................................. 15 General Fund Budgetary Highlights ........................................................................................................................................... 16 Capital Asset and Debt Administration ...................................................................................................................................... 18 Economic Factors and Next Year’s Budget and Rates ............................................................................................................... 19 Requests for Additional Information .......................................................................................................................................... 21 i

City of San Luis Obispo, California
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2023
Table of Contents Page 2
Page
Basic Financial Statements
Government-wide Financial Statements:

Statement of Net Position ........................................................................................................................................................ 27 Statement of Activities ............................................................................................................................................................ 28 Fund Financial Statements:

Balance Sheet – Governmental Funds ..................................................................................................................................... 31 Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position ...................................................................................................................... 32 Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds ........................................................................................................................................................... 33 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities ................................................................................................... 35 Statement of Fund Net Position Business-Type Activities – Enterprise Funds .................................................................. 39-40 Statement of Revenues, Expenses and Changes in Fund Net Position Business-Type Activities – Enterprise Funds .................................................................................................................................................................. 41 Statement of Cash Flows Business-Type Activities – Enterprise Funds ............................................................................ 42-43 Statement of Fiduciary Net Position - Fiduciary Funds .......................................................................................................... 47 Statement of Changes in Fiduciary Net Position - Fiduciary Funds ....................................................................................... 48 Notes to the Basic Financial Statements ................................................................................................................................ 49-96 Required Supplementary Information Section
Budgetary Comparison Schedule – General Fund ............................................................................................................... 99-102 Schedule of the Changes in the Net Pension Liability and Related Ratios – Miscellaneous Agent Multiple – Employer Plan .......................................................................................................................................... 103 Schedule of the Pension Plan Contributions – Miscellaneous Agent Multiple – Employer Plan ............................................. 104 Schedule of the City’s Proportionate Share of the Net Pension Liability – Safety Cost-Sharing Plan ..................................... 105 Schedule of the City’s Pension Contributions – Safety Cost-Sharing Plan .............................................................................. 106 Schedule of the Changes in the Net OPEB Liability and Related Ratios ................................................................................. 107 Schedule of Employer OPEB Contributions ............................................................................................................................. 108 Notes to Required Supplementary Information ........................................................................................................................ 109 ii

City of San Luis Obispo, California
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2023
Table of Contents Page 3
Page
Other Supplementary Information and Combining and Individual Fund Statements and Schedules Local Transaction Tax Measure Funding Schedule ........................................................................................................... 114-116 Nonmajor Governmental Funds ........................................................................................................................................ 117-120 Combing Balance Sheet – Nonmajor Governmental Funds .............................................................................................. 122-129 Combining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Governmental Funds ................................................................................................................................... 130-137 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual:

Downtown Business Improvement District Fund ................................................................................................................. 138 Transportation Development Act (TDA) Fund ..................................................................................................................... 139 Tourism Business Improvement District Fund ...................................................................................................................... 140 Gas Tax Fund ........................................................................................................................................................................ 141 Community Development Block Grant (CDBG) Fund ......................................................................................................... 142 Law Enforcement Grants Fund ............................................................................................................................................. 143 Public Art Contributions Fund .............................................................................................................................................. 144 Avila Ranch CFD .................................................................................................................................................................. 145 SB1 Road Repair Fund ......................................................................................................................................................... 146 SB1186 ASP Certify ............................................................................................................................................................. 147 Affordable Housing BEGIN Loan Fund ............................................................................................................................... 148 Debt Service Fund ................................................................................................................................................................. 149 Custodial Funds ................................................................................................................................................................. 151-155 Combining Statement of Fiduciary Net Position – Custodial Funds .............................................................................. 152-153 Combining Statement of Changes in Fiduciary Net Position – Fiduciary Funds............................................................ 154-155 Statistical Section
Statistical Section – Overview (Unaudited) .............................................................................................................................. 159 Financial Trends:

Net Position by Component – Last Ten Fiscal Years ............................................................................................................ 160 Changes in Net Position – Last Ten Fiscal Years ........................................................................................................... 161-162 Changes in Net Position – Last Ten Fiscal Years ........................................................................................................... 161-162 Governmental Activities Tax and Franchise Revenues by Source – Last Ten Fiscal Years ................................................. 163 Fund Balances, Governmental Funds – Last Ten Fiscal Years ...................................................................................... 164-165 iii

City of San Luis Obispo, California
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2023
Table of Contents Page 4
Page
Revenues, Expenditures and Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years ................................................................................................................................................. 166-168 General Fund Operating Expenditure Trends by Type – Last Ten Fiscal Years ................................................................... 169 Revenue Capacity:

Assessed and Estimated Actual Value of Taxable Property – Last Ten Fiscal Years ........................................................... 170 Property Tax Rates – Last Ten Fiscal Years .......................................................................................................................... 171 Principal Property Taxpayers – Current Year and Nine Years Ago ...................................................................................... 172 Secured Property Tax Roll Levies and Collections – Last Ten Fiscal Years ......................................................................... 173 Schedule of Taxable Sales and Permits by Category – Last Ten Calendar Years ................................................................. 174 Historical Sales and Use Tax Rates ....................................................................................................................................... 175 Schedule of Business Tax Certificates Issued ....................................................................................................................... 176 Debt Capacity:

Per Capital Outstanding Debt by Type – Last Ten Fiscal Years ........................................................................................... 177 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per Capita Last Ten Fiscal Years ........................................................................................................................................................ 178 Direct and Overlapping Long-Term Debt – Fiscal Year Ended June 30, 2023 ..................................................................... 179 Computation of Legal Debt Margins – Last Ten Fiscal Years .............................................................................................. 180 Revenue Bond Coverage:

Water Fund – Last Ten Fiscal Years ..................................................................................................................................... 181 Parking Fund – Last Ten Fiscal Years .................................................................................................................................. 182 Demographic and Economic Information:

Demographic and Economic Statistics – Last Ten Fiscal Years ........................................................................................... 183 Principal Employers – Current Year and Nine Years Ago .................................................................................................... 184 Regular Authorized Positions – Last Ten Fiscal Years ......................................................................................................... 185 Operating Information:

Operating Indicators and Capital Asset Statistics by Function – Last Ten Fiscal Years ................................................ 186-189 Water System Statistical Data ............................................................................................................................................... 190 Water and Sewer Rates – Last Ten Fiscal Years ............................................................................................................ 191-192 Water System Ten Largest Users – Fiscal Year Ended June 30, 2023 .................................................................................. 193 iv

INTRODUCTORY SECTION
v

vi

City of San Luis Obispo, Finance and Information Technology, 990 Palm Street, San Luis Obispo, CA, 93401‐3249, 805.781.7130, slocity.org
Date December 15, 2023
TO: The Honorable Mayor and Members of the City Council and Citizens of the City of San Luis Obispo
FROM: Derek Johnson, City Manager
Emily Jackson, Finance Director
SUBJECT: TRANSMITTAL MEMORANDUM FOR ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR FISCAL YEAR 2022-23
We are pleased to submit the City of San Luis Obispo’s 2022-23 Annual Comprehensive Financial Report (ACFR). Section 810 of the City’s Charter requires that an audit of the City financial records be conducted each year by an independent certified public accountant. Such an audit has been performed and this report is being published as part of the requirement for the fiscal year ended June 30, 2023, within applicable timelines.

Though the audit is conducted by an independent certified public account firm, City management assumes full responsibility for the completeness and reliability of the information contained in this report. We attest that, to the best of our knowledge, the data presented is accurate in all material respects and all statements and disclosures needed for the reader to obtain a thorough understanding of the City’s financial activities have been included.

To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control and review framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient and reliable information for the preparation of the City’s financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. However, it is critically reviewed by the auditors annually and Finance staff throughout the year to assure compliance with applicable Governmental Accounting Standards Board (GASB) rules and best practices in government accounting. Additionally, the City’s governing body receives reports on a quarterly basis and additional reports in accordance with State requirements are posted online on the City’s website at www.slocity.org.

REPORT PURPOSE AND ORGANIZATION
Audited Financial Statements
The City’s financial statements were audited by Badawi and Associates, a firm of licensed certified public accountants currently under contract with the City. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2023, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and vii

TRANSMITTAL MEMORANDUM
disclosures in the financial statements; assessing the overall accounting principles used and significant estimates1 made by management; and evaluating the overall financial statement presentation.

The independent auditor concluded that the City’s financial statements present fairly2 , in all material respects,
the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2023. They also fairly represent the respective changes in financial position, and, where applicable, cash flows in accordance with accounting principles generally accepted in the United States of America. The independent auditors’ report is presented as the first component of the financial section of this report beginning on page 1. “Single Audit” for Federal Grant Programs. The independent audit of the financial statements of the City was part of a broader, federally mandated “Single Audit” designed to meet the special needs of Federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls3 and
compliance with legal requirements, with special emphasis on the administration of Federal awards (such as Transit funding). This audit has been completed and will be filed and distributed to appropriate agencies to meet Federal requirements and deadlines.

GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors beginning on page 5.

Organization of the Annual Comprehensive Financial Report The report is presented in three sections: introductory, financial, and statistical.

SECTION ONE - The Introductory section includes this transmittal memorandum and other information to familiarize the reader with the City, including a directory of officials and advisory bodies, the City's mission statement and organizational values, and charts.

SECTION TWO - The Financial section consists of six parts: 1) the independent auditors’ report; 2) Management’s Discussion and Analysis; 3) the basic financial statements including the government-wide financial statements; 4) fund financial statements; 5) notes to the financial statements; and 6) required supplementary information; and additional statements and schedules including the local transaction tax information, non-major governmental funds, and agency funds.

SECTION THREE - The Statistical section includes selected unaudited financial and demographic information generally presented on a multi-year basis. This information includes financial trends, revenue trends, debt capacity, demographics, and economic and operating information. This section also contains important information for the benefit of the required bond disclosures and rating agencies. 1 Significant estimates included in the financial statements are made in conformity with GAAP. 2 The Term “present fairly” means that the financial statements give a reasonable view of the financial results, financial position, and cash-flow of the reporting entity. 3 Internal controls are systematic measures instituted by an organization to conduct its business in an orderly and efficient manner; safeguard its assets and resources; deter and detect errors, fraud, and theft; ensure accuracy and completeness of its accounting data; produce reliable and timely financial and management information; and ensure adherence to its policies and plans.
viii

TRANSMITTAL MEMORANDUM
As required by GAAP, these financial statements present the City (the primary government) and its component units (entities for which the government is financially accountable). Blended component units (although legally separate entities) are in substance part of the government's operations, and so data from these units are combined with data of the primary government. The City has two component units, the San Luis Obispo Capital Improvement Board and the San Luis Obispo Public Financing Authority, both of which provide financing for the construction and acquisition of City facilities. The Board/Authority is comprised solely of members of the City Council. Activities of the Board/Authority are accounted for in the applicable City governmental or enterprise funds.

PROFILE OF THE CITY OF SAN LUIS OBISPO
With a population of 47,063 (2020 Census), the City is located eight miles from the Pacific Ocean and is midway between San Francisco and Los Angeles at the junction of Highway 101 and scenic Highway 1. The City serves as the commercial, governmental, and cultural hub of San Luis Obispo County. San Luis Obispo is the county seat and a number of Federal and State regional offices and facilities are located within the City and California Polytechnic State University and Cuesta College are in its sphere of influence.

One of California’s oldest communities, the City began with the founding of Mission San Luis Obispo de Tolosa in 1772 by Father Junipero Serra as the fifth mission in the California chain of 21 missions. It was first incorporated in 1856 as a General Law City and became a Charter City in 1876. As a Charter City, San Luis Obispo has more local authority than cities that incorporate under the general laws of the State of California.

The Charter is the City’s governing document, and any changes must be approved by the voters. The City’s Charter has been amended several times since its adoption, most recently in August 2011.

Form of Government
As set forth in the City Charter, the City operates under the “Council-Mayor-City Manager” form of government.

The City Council has the authority to make and enforce all laws and regulations with respect to municipal affairs, subject only to the limitations of the City Charter and the State Constitution. There are four Council members, who are elected at-large and serve overlapping, four-year terms. The Mayor is also elected at-large for a twoyear term and serves as an equal member of the Council. The City Council appoints the City Manager and City Attorney. All other department heads are appointed by the City Manager.

City Services
The City provides a wide range of municipal services, including police and fire protection, water and sewer utilities, street and parks maintenance, public transportation, parking, parks and recreation, planning, building and safety, and other general government services. Financial data for all funds through which services are provided by the City have been included in this report. Several municipal services are provided through other governmental agencies or private utility companies, including:

Service Agency
Courts, Health and Social Services County of San Luis Obispo Elementary and Secondary Schools San Luis Coastal Unified School District Community College San Luis Obispo County Community College District Solid Waste Collection and Disposal San Luis Garbage Company Gas, Electric and Telephone Private Utility Companies
ix

TRANSMITTAL MEMORANDUM
The City is also a member of a Joint Powers Authority called Central Coast Community Energy (3CE) which sources clean and renewable electricity at competitive prices for the community and is delivered through the grid by PG&E. 3CE follows a Community Choice Aggregator or “CCA” model, a community-focused, “not-forprofit” model that allows for greater commitment to clean and renewable energy while supporting community reinvestment for affordable and fair rates and equitable access to clean-energy resources. It is locally controlled and governed by board members who represent the communities served by 3CE. Becoming a member of 3CE was an integral part of the City’s Major City Goal for Climate Action. For more information visit:
www.3cenergy.org
Budgetary Policy and Control
Though the City adopts a two-year Financial Plan, annual budgets are legally appropriated by the City Council by resolution and are prepared for each fund in accordance with its basis of accounting. As provided under the City Charter, the City Manager is responsible for preparing the budget and for its implementation after adoption.

Financial reports are presented to the City Council and posted online on a quarterly basis. At mid-year, staff prepares a more in-depth status report for the City Council for the first six months of the fiscal year in addition to any fund balance information and long-term forecast based on the audited annual comprehensive financial report.

Since the City uses a two-year Financial Plan, operating appropriations not expended during the first year may be carried forward into the second year for specific purposes with the approval of the City Manager. When applicable, these amounts are shown as assigned for subsequent year expenditures in the financial statements.

At the end of the second year of the two-year plan, operating appropriations lapse unless they are committed by contract or purchase order. Multi-year budgets are adopted for capital projects as necessary but revert to fund balance after three years of non-activity.

The City Council has the legal authority to amend the budget at any time during the fiscal year. The City Manager has the authority to make administrative adjustments to the appropriated budget if those changes will have neither a significant policy impact nor affect budgeted year-end fund balances. The City's budgetary policies are more fully described in Note 1 of the financial statements.

Expenditure and budgeting details are maintained by the City for each fund and department by program area at the line-item level. Budgetary control is exercised through a computerized Enterprise Resource Planning (ERP) system, which interfaces with the City's general ledger. The system maintains an ongoing record of budget balances and any authorized adjustments throughout the year based on actual expenditures and purchase order obligations. Open purchase orders at year-end are reported as assigned fund balance. The ERP system also maintains the City’s list of fixed assets.

It is the City's policy to maintain an operating reserve in the General Fund of at least 20% of operating expenditures which is reflected in the committed fund balance. This policy objective has been achieved for fiscal year 2022-23. The City maintains a similar policy for working capital balances in the water, sewer, and parking enterprise funds. The Fleet Replacement Fund reserve policy is $500,000 and the Information Technology (IT) Replacement Fund reserve policy is $400,000 which have been met for 2022-23. With the 2021-22 fiscal year, the City also adopted a capital reserve in its Capital Outlay Fund of 20% of budgeted capital investments from the Local Revenue Measure for the fiscal year. This reserve is adjusted with each budget adoption, funded from the local transactions tax, and is reflected in the Capital Outlay Fund. x

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FACTORS AFFECTING FINANCIAL CONDITION
The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operated in 2022-23.

Recovery from Global Pandemic
The City Council adopted its two-year Financial Plan for 2021-23 considering the effects of the worldwide pandemic brought on by COVID-19. Given the ongoing uncertainty regarding economic recovery, workforce reintegration and issues with supply chain shortfalls, the budget approach, while cautiously optimistic based on better than anticipated results in 2020-21, remained relatively conservative in its forecasting.

As the second year of the Financial Plan, the 2022-23 fiscal year budget continued investments into the adopted Major City Goals and concentrated on assisting the community with the recovery from the depth of the pandemic as well as addressing emerging trends and needs. The following goals were adopted, and specific work programs implemented to deliver on the community’s ambitions:
 Economic Recovery, Resiliency & Fiscal Sustainabiltiy  Diversity, Equity, Inclusion
 Housing and Homelessness
 Climate Action, Open Space, and Sustainable Transportation Significant Storms in January and March 2023
As the year unfolded, the City’s major revenue sources continued to recover and grow, providing an improved fiscal outlook. However, in January and March 2023, the City and region experienced severe winter storms that resulted in two separate emergency declarations at the Federal and State level, as well as emergency proclamations at the local level. The City is eligible and is seeking reimbursement from Federal and State resources for most costs related to the storms. As of the end of the fiscal year, the City had spent about $3.6 million for operating costs in response to the storms, including supplies, emergency protective measures and for immediate repair of damages to City infrastructure, and an additional $7 million remained on purchased orders for future planned expenditures. It will take years to fully recover and repair all damages, which is now currently estimated to exceed $35 million; however, staff are working to prioritize the repairs and identify projects eligible for reimbursement.

The City’s strong fiscal policies and General Fund reserve provided the first line of defense in addressing the immediate impact of the storms to the community. The City drew down reserves as the City Council authorized the use of the balance to pay for these unanticipated emergency costs and activated the City’s Fiscal Health Contingency Plan during the second half of the fiscal year. In addition to the impact of the winter storms, several other factors played into the City’s financial condition at 2022-23 year-end:

1. Strong tax revenue including Sales and Use Tax, Property Tax, Transient Occupancy Tax (TOT), as well as Utility User Tax. Despite worries of economic cooling, real estate market concerns and tourism impacted by winter storms, the City’s major tax revenues performed well for 2022-23. The 2020 voter approved local transaction tax continues to be the City’s largest single tax revenue. Property taxes remained strong due to ownership transfers as well as new housing units on the market. The prior year saw record high TOT, which was surpassed in the current fiscal year, in large part due to an incredibly xi

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strong fourth quarter. Utility User Tax was also higher than anticipated due to increases in all categories of utilities: electricity, natural gas, telecommunications, cable and water.

2. Expenditure Savings. With the activation of the Fiscal Health Contingency Plan, expenditures for nonessential items were deferred or cancelled, the City delayed filling vacant positions, and a travel/training “chill” was put in place. These actions contributed to General Fund budgetary savings of over 6%, which will provide added flexibility in addressing the unanticipated storm expenses and restoration of the General Fund reserve.

3. Favorable Fair Market Value Adjustment. The Fair Market Value (FMV) adjustment is essentially an accounting practice that reassesses the value of the City’s investments when there is a difference between the market value and the value recorded on the City’s books. Interest earnings and FMV adjustments have been volatile the past few years. In the prior year, the FMV adjustment was negative $1.5 million; in the current year, it was $1.2 million positive.

Economic Indicators for San Luis Obispo in General
Local Economic Environment
Historically, the City has experienced a relatively stable economy, largely insulated from economic downturns in other parts of the State or the nation due to major State and federal employers such as the California Polytechnic State University (Cal Poly), California Men’s Colony, California Department of Transportation (Cal Trans) District 5 offices, the Regional Water Control Board, and Camp San Luis Army base. It is also the County seat with significant county administrative offices and the regional courts. The continued operation of the Diablo Canyon Nuclear Powerplant also contributes to a stable economy as it generates approximately 10% of the State’s electricity.

Employment. Due to the local economic environment and a large government presence and diversity, employment in the San Luis Obispo County region has historically been relatively stable. As noted above, the State has a major university, correctional facility, and other regional offices located in the community. The County government and school districts are also major employers. Other major employers include two major hospital facilities, several engineering and software companies, and Pacific Gas and Electric. The announcement to prolong the use of the Diablo Canyon Nuclear Power Plan presents an opportunity to continue jobs for trained professionals in the region.

Key Revenue Sources. As the commercial, governmental, and cultural hub of San Luis Obispo County, the City is fortunate to attract a diverse array of strong revenue sources. The top three revenue sources for the City are Sales & Use Tax, Property Tax, and Transient Occupancy Tax (TOT). The 2020 voter approved local transaction tax of one-and-a-half cent (Local Revenue Measure) went into effect in April 2021 to provide for a variety of City services including infrastructure. This Local Revenue Measure has become the largest single tax revenue to the City, growing to over $30 million.

Long-Term Financial Planning.

The City engages in several activities focused on long-term financial planning to gauge and adjust to current economic conditions and trends. Various scenarios are developed considering a multitude of information and resources. This effort was very rigorous in FY 2022-23 due to the uncertainties surrounding the economic environment.
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Long-Term Fiscal Forecast. Before the two-year Financial Plan and budget process begins, the City Council reviews long-term fiscal forecasts for the General and the Enterprise Funds to help set the stage for sustainable decision-making. The purpose of the forecast is to consider long-term fiscal health and to identify the funds’ ability, on an order of magnitude basis, to maintain current services and existing assets and look at the opportunity to fund new initiatives. The 2022-27 forecast was completed in April 2021, before the City Council considered the 2021-23 Financial Plan and was updated before adoption of the 2022-23 budget.

CalPERS and the City’s Unfunded Liability
In 2018-19, the City developed a three-year Fiscal Health Response plan and prepared a path to pay-down the City’s pension liability over a 20-year term, shortening the duration of prescribed payments and saving approximately $19 million in payments due. It did so by aligning its expenditures with the revenue forecast tto allow for additional annual payments. A first payment of $4.2 million was made in April 2019 and a second payment of equal amount was scheduled for April 2020. Due to the state of the health emergency, the City Council decided to retain any unassigned fund balance until the fiscal situation could be better assessed. It did so again in February 2021 when the next payment of $3 million was scheduled and uncertainties with pandemic driven restrictions continued. Given the City’s commitment to the additional payments and the year-end results, the previously earmarked amounts for the past three fiscal years were paid through unassigned fund balance, making good on $10.2 million in additional funding toward the City’s pension liability. An additional $2.2 million was paid through the City’s four enterprise funds as well as the Whale Rock Reservoir custodial fund and Tourism Business Improvement District Fund.

In July 2021, CalPERS announced having ended the 2020-21 Fiscal Year with a 21.3% investment gain. This result triggered the previously adopted Risk Mitigation policy, lowering the future discount rate to 6.8%. The CalPERS board ratified the discount rate in November 2021, and it will become effective for the City with the 2023-24 fiscal year. Given this new reality, further influenced by a 6.1% investment loss at June 30, 2022, and a lackluster 5.8% investment return for fiscal year 2022-23, the City continues to gauge the appropriate level of additional payments moving forward.

FINANCIAL CONDITION OVERVIEW
Despite the background of economic uncertainty, the City ended the 2022-23 fiscal year in a better fiscal position than originally anticipated. General Fund revenues exceeded budgetary estimates by approximately 4% and expenditures were 6% under budget. On June 30, 2023, the total General Fund balance was $42.5 million; an increase of $1.8 million over 2021-22 despite the unexpected storm related costs. Enterprise Funds similarly experienced increases in net position. Overall, the City’s total net position increased by $60.7 million from the prior year.

The table below shows the General Fund levels of fund balance in accordance with GASB 54 and the City’s policy pertaining to fund balance assignments. Fund Balance & Reserve Policy xiii

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General Fund – Fund Balance per June 30, 2023
Non-spendable $101,462
Committed
Contingency Fund – 20% policy level 13,727,000
General government programs 5,307,988
Risk Management 585,456
Assigned to:

Encumbrances
SLO Rep Theater grant
2,455,573
3,940,000
115 Trust Fund 2,000,000
CalPERS Payment 2,000,000
Revenue Stabilization 2,000,000
Tenant Improvement 1,400,000
Development Services 464,136
Solid Waste AB939 281,000
Unassigned 8,275,453
Total Fund Balance $42,538,068
Continue to Focus on Sustainability and Long-term Fiscal Health With its Major City Goal for Economic Recovery, Resiliency & Fiscal Sustainability, the City continues its commitment to long-term fiscal health. The goal program aims to, in collaboration with local partners, continue to assist with economic recovery for all from the pandemic and sustain a thriving local economy by supporting local businesses, arts and culture, downtown vitality. It commits to practicing fiscal responsibility, paying down unfunded pension liabilities, and investing in critical infrastructure.

Revenue Base Growth. Since the Great Recession, the US had experienced an unprecedented long-term expansion that continued into the latter part of 2019-20. Sales tax (including the local Transaction tax), Property Tax and Transient Occupancy Tax (TOT) had accounted for 69% of all funding sources in the General Fund. All of these revenues showed slow but steady growth over the past several years with Property Tax seeing the largest increase. However, all of this came to an abrupt halt with the onset of COVID-19 and the resulting global pandemic that placed the national and local economy on temporary halt.

Action by Congress and substantial aid packages ranging from additional unemployment benefits, one-time payments to households, and protection from rent and utility payments, lead to an accumulation of wealth that resulted in continued purchasing power and consumption. The beginning trends of the migration to online shopping were accelerated and sales tax revenue did not see the originally anticipated decline. Property tax remained strong as the real estate market continued to deliver. Tourism did clearly take a hit but continued to see activity and bounced back due to pent-up demand in the last quarter into the summer months. Development related fee revenue continued to see significant growth as development activity remained at unprecedented levels in the City, with two Community Facilities Districts beginning construction and housing continuing as a Major City Goal.

These trends largely continued during FY 2022-23 with travel activities returning strongly, retail shopping rediscovered, and housing markets retaining momentum. Development began to tighten due to inflationary pressures and resulting monetary policy from the Federal Reserve to counter-act inflation. Labor shortages as xiv

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well as supply chain challenges began to take a toll in the prior fiscal year and continue to influence the second year of the Financial Plan.

Containment of Operating Costs. The City’s efforts to control costs are ongoing while also addressing the need to remain an attractive employer and provide the services the community expects. The City has an extensive policy framework that allows immediate and nimble action to address adverse changes in economic and fiscal condition and will continue to activate as needed. The City’s implementation of a 2nd and 3rd tier retirement benefit program continues to change the City’s annual retirement contributions as 67% of the workforce is now enrolled in those retirement plan tiers. These actions have been instrumental in helping the City contain current costs and long-term liabilities related to retirement benefit programs; furthermore, two of the City’s bargaining units as well as the Management & Confidential group pay additional contributions toward the City’s pension obligation.

Infrastructure and Facilities Maintenance. As a growing city, San Luis Obispo has seen the need for capital expenditures grow steadily over the past decade. The need to maintain, repair or replace its current infrastructure is met with the need to build amenities for the community at large and the City’s Local Revenue Measure plays a vital part. The City plans on using 75 to 85% of the revenue in any given year for infrastructure improvements and enhancements and the Public Works department is continuing work to determine how best to deliver projects that have increased in number, scope and complexity. For a list of projects delivered in FY 2022-23 see page 18 in the Management Discussion and Analysis.

The City’s Capital Improvement Plan Review Committee evaluates projects for funding based on established criteria and funding is allocated to projects in coordination of a number of adopted plans including the General Plan, Bicycle Transportation Plan, Downtown Concept Plan, and Mission Plaza Concept Plan. Each plan represents hours of community input and a vision to maintain and improve San Luis Obispo now and into the future.

Ongoing Commitment to Local Transaction Tax Measure Priorities (Local Revenue Measure) The City remains committed to the priorities for the use of the local transaction tax measure as identified by the community. They include public safety, youth and senior services, code enforcement, economic development, neighborhood street paving, open space preservation, traffic congestion relief and flood protection. The following table summarizes how the local transaction tax measure funds were used during fiscal year 2022-23. xv

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Total uses of the funding during 2022-23 amounted to $30.9 million, with an additional $1.4 million encumbered through purchase orders or contracts; the remaining balances of these resources are designated for future year expenditures. A more detailed schedule of local transaction tax measure sources and uses is provided in the Other Supplementary Information section of this report beginning on page 113.

Local Sales Tax Measure Revenue & Uses Summary
2022-23
Revenues:

Sales and use tax - Measure G add-on tax $ 30,508,731
Investment income 7,899
Total Revenues $ 30,516,630
Uses:

Operating Programs ($8,778,263)
Capital Projects (22,127,243)
Total Uses ($32,491,617)
Change in Fund Balance ($30,905,506)
Prior Sales Tax Measure Balance $5,696,864
Encumbered or designated for carryover for future year
expenditures ($1,435,051)
Net available for future year appropriations (note 1) $ 3,872,937

RELEVANT FINANCIAL POLICIES
The City of San Luis Obispo has adopted a comprehensive set of budget and financial policies to provide guidance for all fiscal matters and resource allocations. The policies are reviewed, amended, and updated with each Financial Plan adoption and as needed throughout the year. The policies cover virtually every aspect of financial management but several of these policies are particularly relevant to the understanding of the City’s financial performance in 2022-23.

Debt Administration Policies
The City’s Capital Financing and Debt Management policies contain general guidelines for refinancing of outstanding debt. These guidelines call for periodic review of all outstanding debt to determine refinancing opportunities, particularly to create economic benefit such as lower debt service payment or reduction of principal. The City always evaluates various options when considering the issuance of debt in order to benefit from the best long-term terms and conditions.

Information on the City’s outstanding debt issues and other long-term liabilities is provided in Note 7 in the notes to the financial statements.

In February 2023, Fitch Ratings, a nationally recognized statistical rating organization, reviewed the City’s financials, its fiscal outlook, and the current rating. On February 21, 2023, Fitch Ratings subsequently concluded that there should be no change to the existing rating at AA+ with a stable rating outlook. Fitch Ratings’ long xvi

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term credit ratings are assigned on an alphabetic scale from AAA to D. The City’s AA+ bond rating means that the City’s investment grade is “quality”. Specifically, current lease revenue bonds (LRBs) issued by the San Luis Obispo Public Financing Authority remain at an 'AA’ rating and the LRBs issued by the City of San Luis Obispo Capital Improvement Board at an 'AA' rating. In addition, in April 2023, Standard & Poor’s Global Ratings upgraded the City’s Water Revenue bonds from ‘AA-’ to ‘AA.’ At this time, the City of San Luis Obispo has no general obligation debt.

Fitch Ratings’ analysts had previously commended the City’s ability to respond to the economic impacts of the COVID-19 pandemic, “budget management at times of recovery is very strong, leaving the city well prepared to manage the current period of economic stress. The city engages in thorough and conservative long-term financial planning with a focus on maintaining structural budget balance, maintaining the city's capital assets with minimal debt reliance, and proactive efforts to pay down its unfunded retirement liabilities above actuarially determined levels.”
Budgetary Policies
The City of San Luis Obispo has a policy that requires the adoption of a balanced budget over the two-year period of the Financial Plan. This means that operating revenues must fully cover operating expenditures, including debt service. Additionally, ending fund balance (or working capital in the enterprise funds) must meet minimum policy reserve levels. Under this policy it is allowable for total expenditures to exceed revenues in any given year but only when fund balance is used to pay for capital improvement plan projects or other “one-time,” non-recurring expenditures.

Fund Balance and Reserve Policies
The City’s policies recognize the importance of long-range planning in managing the City’s fiscal affairs in order to provide for stable operations, promote more orderly spending patterns, and assure the City’s long-term fiscal health. The reserves contained in the General Fund and Enterprise Funds play a pivotal role in this strategy. The reserve policies call for a minimum fund balance of at least 20% of operating expenditures in the General Fund and a working capital level of 20% of operating expenses in the Water, Sewer, and Parking Enterprise Funds.

The policies also require the Fleet Management and Information Technology Replacement Funds to provide for the timely replacement of vehicles and equipment as well as IT equipment and software and a reserve is retained in these funds to safeguard against unforeseen and unfunded issues. All reserve policies continue to be met.

To further strengthen the Water and Sewer fund against revenue fluctuations, both funds carry a Rate Stabilization reserve of 10% of sales revenue for Water and 5% of sales revenue for Sewer.

Long-Term Liabilities and Maintenance of Infrastructure With the 2017-19 Financial Plan, the City began to incorporate the use of one-time funds above policy reserve to unfunded pension liabilities and infrastructure into the City’s fiscal policies. Additionally, the City began addressing the long-term needs of its capital assets and categorizing asset maintenance, asset replacement, and new assets driven by new development. The City Council received a first presentation of the long-term needs of its infrastructure in early 2018 and the assessment continued into FY 2019-20 with the beginning stages of the SLOForward effort. It culminated in the City Council’s decision to place a measure on the November 2020 ballot for a 1.5 cent local transaction tax measure to supplant the 2006 enacted half-cent measure. The measure was successfully approved by 58% of the voters and the new local transaction tax went into effect on April 1, 2021. xvii

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This Local Revenue Measure has now become the City’s largest tax revenue and the City remains committed to the majority of the funds being used to maintain, replace, and renew its growing infrastructure needs.

Pension and Other Post-Employment Benefits
The City contributes to the California Public Employees’ Retirement System (CalPERS), an agent multipleemployer public employee defined benefit pension plan. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California.

Benefit provision and all other requirements are established by State statute and City ordinance. The amount of the City’s required annual contribution is determined actuarially and is reported to the City via the Annual Valuation Reports provided by CalPERS for each retirement plan.

It is the policy of the City to fully fund the annual contribution to ensure that the plan will fully meet its obligation to retired employees on a timely basis. Prepaying the City’s unfunded liability will also reduce overall annual cost depending on whether approved actuarial assumptions are realized and are not adjusted by the CalPERS Board.

As part of its cost reduction strategy, the City has implemented 2nd Tier and the state mandated 3rd Tier retirement benefit programs for new hires while also requiring all employees to pay at least the full amount of the member share of the annual retirement contribution. Beginning in 2018-19, and increasing in 2019-20, the City negotiated further cost sharing with employee groups to pay into CalPERS which will help lessen pension impacts to the City’s budget. The City continues to monitor legal developments and legislation that could positively or negatively impact the City’s finances and plans to counteract any adverse investment results with additional payments to CalPERS.

The City has also established a Section 115 Trust fund with the California Employer’s Pension Prefunding Trust (CEPPT), and based on the audited financials, plans on making its first contribution of $2.4 million in FY 2022-

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All employees currently pay the full employee contribution. Total contribution rates, including the additional percentages agreed upon are listed in the table below:

Police (Sworn) Employee Contribution Levels to PERS Retirement (Percent of Salary)
Safety PERS Tier Jul-22
Tier 1 (3% @ 50) 15%
Tier 2 (2% @ 50) 15%
Tier 3 (2.7% @ 57) 16.75%
Police (Non-Sworn) Employee Contribution Levels to PERS Retirement (Percent of Salary)
Miscellaneous PERS Tier Jul-22
Tier 1 (2.7% @ 55) 14%
Tier 2 (2% @ 60) 13%
Tier 3 (2% @ 62) 10%
Fire (Sworn) Employee Contribution Levels to PERS Retirement Safety PERS Tier Jul-22
Tier 1 (3% @ 50) 12%
Tier 2 (2% @ 50) 12%
Tier 3 (2.7% @ 57) 16.75%
Employee Contribution Levels (includes appointed officials, department heads, unrepresented management, unrepresented confidential and non-sworn fire employees) to PERS Retirement Miscellaneous PERS Tier Jul-22
Tier 1 (2.7% @ 55) 11%
Tier 2 (2% @ 60) 10%
Tier 3 (2% @ 62) 10%
Other Post-Employment Benefits (OPEB). The City’s primary OPEB cost obligation is for retiree health benefits under its election to participate in the CalPERS Health Benefit Program under the “unequal contribution option.”
When the City joined the CalPERS health plan in 1993, it immediately experienced an increase in the plan choices available along with a significant reduction in rates. Due to CalPERS purchasing power, the City continues to experience competitive health care rates. However, as a condition of joining the CalPERS health program, the City agreed to contribute the minimum monthly amount required by law towards retiree health care coverage for both active and retired employees. This allows retired employees to purchase health insurance at the same rate offered to active employees.

Additionally, the City had established certain post-retirement health care benefits available to executive management employees appointed prior to August 2000. There is only one employee remaining who receives one-half of the retiree health insurance premiums paid by the City through the City's group health plan. This xix

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provision ceases upon the death of the retired employee or upon the retired employee reaching age 65. These OPEB benefits were financed on a pay-as-you-go basis in the past. As directed by Council in May 2008, the City began fully pre-funding the OPEB obligation via an irrevocable trust in 2008-09.

Additional information on the City’s retirement and post-employment benefits can be found in Note 8 in the notes to the financial statements.

MAJOR INITIATIVES
The City continued its efforts on a number of significant initiatives in 2022-23 as adopted with the 2021-23 Financial Plan. As such, the Major City Goals drive the City’s strategic direction while maintaining the established core services the community expects and is accustomed to. For additional information on the City’s strategic initiatives go to 2021-23 Financial Plan
Economic Recovery, Resiliency & Fiscal Sustainability
In collaboration with local partners, continue to support economic recovery for all from the COVID-19 pandemic and support a thriving local economy by supporting local businesses, arts and culture, downtown vitality, practicing fiscal responsibility, paying down unfunded pension liabilities, and investing in critical infrastructure.

Housing and Homelessness
To expand housing options for all, continue to facilitate the production of housing, including the necessary supporting infrastructure, with an emphasis on affordable and workforce housing.

Collaborate with local non-profit partners and the county, the state, and federal governments to discover and implement comprehensive and effective strategies to reduce chronic homelessness.

Diversity, Equity, Inclusion (DEI)
In response to our commitment to making San Luis Obispo a more welcoming and inclusive city for all, continue to develop programs and policies to support diversity, equity, and inclusion initiatives and advance the recommendations of the DEI Task Force.

Climate Action, Open Space, and Sustainable Transportation To proactively address the climate crisis, continue to update and implement the Climate Action Plan for carbon neutrality, including preservation and enhancement of open space and the urban forest, alternative and sustainable transportation, and planning and implementation for resilience.

GASB Pronouncements for FY 2022-23
GASB Statement No. 91, Conduit Debt Obligations
The objective of this Statement is to provide a single method of reporting conduit debt obligations by issuers and eliminate diversity in practices associated with (1) commitments extended by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. The requirements of this Statement are effective for the City’s year ending June 30, 2023. Conduit debt disclosures are reflected in note 7 to these financial statements.
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GASB Statement 96 – Subscription-Based Information Technology Arrangements The objective of this Statement is to provide guidance on the accounting and financial reporting for subscriptionbased information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA, (2) establishes that a SBITA results in a right-to-use subscription asset – an intangible asset – and a corresponding subscription liability, (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA, and (4) requires note disclosures regarding a SBITA. The requirements of this Statement are effective for the City’s year ending June 30, 2023. SBITA disclosures are reflected in note 7 to these financial statements.

AWARD FOR EXCELLENCE IN FINANCIAL REPORTING
The City submitted its ACFR for the fiscal year ended June 30, 2022, to the Government Finance Officers Association of the United States and Canada (GFOA) Certificate of Achievement for Excellence in Financial Reporting program. The City received the award and certification for its 2021-22 ACFR.

The Award Program
The Certificate of Achievement is a prestigious national award recognizing conformance with the highest standards for preparation of State and local government financial reports.

In order to be awarded a Certificate of Achievement, a government unit must publish an easily readable and efficiently organized annual comprehensive financial report whose contents conform to program standards. This report must satisfy both U.S. generally accepted accounting principles and applicable legal requirements.

A Certificate of Achievement is valid for a period of one year only. The City has received a Certificate of Achievement each year since 1984. Staff believe that the City’s current ACFR continues to conform to the Certificate of Achievement program requirements and will submit it to GFOA to determine its eligibility for another certificate.

Value of Program Participation. There are benefits to participating in these programs beyond simply receiving recognition for the City’s efforts. For example, by striving to meet program standards and goals, the City produces better reports. Additionally, as part of the review process, comments for improvement from other municipal finance professionals who review the reports from a “fresh” perspective are received. Staff believes that this results in continuous improvements in reporting the City’s financial results to elected officials, staff, and other interested parties such as bondholders, credit agencies, and the public at-large. xxi

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ACKNOWLEDGMENTS
The preparation and development of this report would not have been possible without the year-round dedication of the Finance Department staff and their special efforts, working in conjunction with the City's independent auditors, to produce this document.

We would like to take this opportunity to compliment all those staff members within the Finance Department and in the other departments as well as our independent auditors who were associated with the preparation of this report. We would also like to thank the City Council for the continued support and dedication in planning and conducting the financial operations of the City in a fiscally responsible and progressive manner.

Derek Johnson, City Manager
Emily Jackson, Finance Director
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DIRECTORY OF OFFICIALS AND ADVISORY BODIES

CITY COUNCIL
Erica A. Stewart Mayor
Jan Marx Vice Mayor
Andy Pease Council Member
Michelle Shoresman Council Member
Emily Francis Council Member

ADVISORY BODIES
Active Transportation Committee
Administrative Review Board
Architectural Review Commission
Construction Board of Appeals
Council Compensation Committee
Cultural Heritage Committee
Housing Authority
Human Relations Commission
Investment Oversight Committee
Mass Transportation Committee
Parks and Recreation Commission
Personnel Board
Planning Commission
Promotional Coordinating Committee
Revenue Enhancement Oversight Commission
Tourism Business Improvement District Board
Tree Committee

APPOINTED OFFICIALS AND DEPARTMENT HEADS
Appointed Officials
Derek Johnson City Manager
J. Christine Dietrick City Attorney
Department Heads
Whitney McDonald Assistant City Manager
Greg Hermann Deputy City Manager
Timmi Tway Director of Community Development
Emily Jackson Director of Finance
Todd Tuggle Fire Chief
Nickole Domini Director of Human Resources
Richard Scott Police Chief
Aaron Floyd Director of Utilities
Greg Avakian Director of Parks & Recreation
Matt Horn Director of Public Works
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MISSION STATEMENT

SAN LUIS OBISPO STYLE
Quality with Vision WHO ARE WE?
People Serving People
A team that puts high value on each citizen it serves.

Providers of programs that meet basic service needs of each citizen.

Enhancers of the quality of life for the community as a whole.

WHAT DO WE STAND FOR?
Quality in all Endeavors – Pride in Results
Service to the community – the best – at all times.

Respect – for each other and for those we serve.

Value – ensuring delivery of service with value for cost.

Community involvement – the opportunity to participate in attaining the goals of the City.

WHERE ARE WE GOING?
Into the Future with a Design
Planning and managing for levels of service consistent with the needs of the citizens.

Offering skills development and organizational direction for employees in order to improve the delivery of municipal services.

Developing sources of funding and establishing a sound financial management program which will result in fiscal independence and flexibility in the delivery of City services.

Providing the residents of the City with accurate and timely information on issues which affect them, and encouraging the full utilization of City services.

Promoting the City as a regional trade, recreational and tourist center and improving the quality of life for residents and visitor.
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ORGANIZATIONAL VALUES
We, as an organization, embrace opportunities to improve our services and the quality and effectiveness of our relationships with the community and our teams. The following values guide and inspire our efforts.

Shared Vision, Mission and Goals
We have a sense of common purpose and direction pursued with passion and translated into concrete actions.

Service
We are dedicated to the best use of resources to fulfill identified community goals and needs.

Leadership and Support
We recognize that the ability to lead can be found at all levels and that to create an environment to succeed requires leading by example.

Communication
We foster open and clear discussion that encourages the willingness to speak up and to listen, within a framework of respect and understanding.

Team Players
We encourage effective working relationships within and between departments and the public to address issues and achieve valuable results.

Honesty, Respect and Trust
We honor commitments, acknowledge legitimate differences of opinion and accept decisions reached with integrity.

Initiative and Accountability
We take personal responsibility to do what needs to be done and report the results in a straightforward manner.

Innovation and Flexibility
We are open to change and willing to try new ways to fulfill the organization’s vision, mission, and goals more effectively.
xxv

Employee Development and Recognition
We encourage and support each employee to improve relevant job skills and celebrate personal and team accomplishments.

Stewardship and Ethics
We promote public trust by using City resources wisely, and through consistent fulfillment of these values. xxvi

Patrol Fire, Medical & Haz Mat Natural Resources Recruitment Assistant City Manager Traffic Safety Emergency Response Economic Development Labor Relations Investigations Hazard Prevention Cultural Activities Fair Employment Neighborhood Services Fire Inspections City Clerk Services Risk Management Animal Regulation Disaster Planning General Administration Human Relations Information TechnologyGIS Management
Budget Recreation Programs Water Engineering Long Range Planning Purchasing Ranger Services Sewer Transportation Development Review Accounting & Revenue Park Planning Utilities Resource Creek & Flood Protection Building & Safety Support Services Golf Course Conservation Maintenance Services: CDBG AdministrationFinance Administration Public Art Whale Rock Reservoir Streets, Parks, Bldgs Housing Community
Development
Administration
Dept Reporting to the Assistant City Manager
Utilities
Human
Resources
Parks &
Recreation
Public
Works
Community Services

RESIDENTS

ADVISORY
BODIES
CITY

MANAGER

MAYOR &

CITY COUNCIL
Appointed by the City Council Appointed by the City Manager Dept CITY

ATTORNEY
Police Fire
Finance
xxvii

Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of San Luis Obispo
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2022
Executive Director/CEO
xxviii

FINANCIAL SECTION
xxix

xxx

INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the City Council
of the City of San Luis Obispo
San Luis Obispo, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, the businesstype 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, 2023, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2023, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions
We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Responsibilities of Management for the Financial Statements The City’s management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.

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

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with GAAS, we:
x Exercise professional judgment and maintain professional skepticism throughout the audit. x Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
x Obtain an understanding of internal control relevant to the audit 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 City’s internal control. Accordingly, no such opinion is expressed.
x Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
x Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control– related matters that we identified during the audit.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, pension plan and OPEB plan information on pages 5-21 and 99-109 be presented to supplement the basic financial statements. 2

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

Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information
Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City’s basic financial statements. The local sales tax measure funding schedule, combining and individual nonmajor fund financial statements and budgetary comparison schedules, are presented for purposes of additional analysis and are not a required part of the basic financial statements.

The local sales tax measure funding schedule, the combining and individual nonmajor fund financial statements and budgetary comparison schedules on pages 113-155 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic 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 local sales tax measure funding schedule, the combining and individual nonmajor fund financial statements and budgetary comparison schedules are fairly stated in all material respects in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual report. The other information comprises the introductory and statistical sections but does not include the financial statements and our auditor's report thereon. Our opinions on the financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.
3

To the Honorable Mayor and Members of the 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 December 15, 2023, 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 the City’s internal control over financial reporting and compliance.

Badawi & Associates, CPAs
Berkeley, California
December 15, 2023
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Management’s Discussion and Analysis
Overview of the Financial Statements
The discussion and incorporated analysis in this document are intended to serve as an introduction to the City’s basic financial statements, which include the following components: (1) government-wide financial statements, (2) fund financial statements and (3) notes to financial statements. This report also contains required supplementary information (RSI) as well as other supplemental financial information.

Government-wide Financial Statements. This set of statements is designed to provide readers with a broad overview of the City’s finances, in a manner similar to private-sector business reporting.

The Statement of Net Position presents financial information on all the City’s assets/deferred outflows of sources and liabilities/deferred inflows of sources, with the difference reported as net position. In the private sector, it is similar to a balance sheet.

Over time, increases or decreases in net financial position may serve as a useful indicator of whether the financial position of the City is improving or declining. In conformance with GASB 68, the Statement of Net Position reported for fiscal year 2022-23 considers the City’s long-term pension liabilities, effectively decreasing the City’s net financial position.

The Statement of Activities presents changes in the government’s net position during the most recent fiscal year. All changes in net position are reported during the period when the underlying events giving rise to the change occur, regardless of the timing of the related cash flow. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods such as revenue pertaining to uncollected taxes.

The City’s government-wide financial statements distinguish the functions of the City that are principally supported by taxes and intergovernmental revenues (governmental activities) from functions that are intended to recover all or a significant portion of their cost through user fees or that are required by grantor agencies or City policies to be accounted for in this fashion (business-type activities).

The governmental activities include: (1) public safety, (2) transportation, (3) leisure, cultural and social services, (4) community development and (5) general government support services such as legal services, elections, human resources, risk management, finance, and information technology. The business-type activities of the City include:
(1) water, (2) sewer, (3) parking operations and the (4) transit program.

As required by U.S. Generally Accepted Accounting Principles (GAAP), these financial statements present the City (the primary government) and its component units (entities for which the government is considered to be financially accountable). Blended component units, although legally separate entities, are in substance, part of the government's operations and data from these units are combined with data of the primary government.

The San Luis Obispo Capital Improvement Board and the San Luis Obispo Public Financing Authority are reported as blended component units in these statements. Both provide financing for the construction and acquisition of City facilities and consist of members of the City Council. Activities of both units are accounted for in the applicable City governmental funds. Separate financial statements are not prepared for the San Luis Obispo Capital Improvement 5

Management’s Discussion and Analysis
Board or San Luis Obispo Public Financing Authority. The City has no component units that require discrete presentation in accordance with Governmental Accounting Standards Board (GASB) standards.

Pension Obligation. Pursuant to GASB Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions, the City reports on the unfunded pension liability on the full accrual basis of accounting in the governmentwide financial statements. The reports also include note disclosure requirements and supplementary schedules as required by GASB 68. The measurement date for fiscal year 2022-23 pension liabilities is as of the fiscal year ended June 30, 2022. This date reflects a one-year lag and was used so that these financial statements could be issued in an expedient manner. Activity (i.e., contributions made by the City) occurring during fiscal year 2022-23 are reported as deferred outflows of resources in accordance with GASB Statement No. 71.

Fund Financial Statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. All of the funds of the City can be divided into three categories: (1) governmental funds, (2) proprietary funds, and (3) fiduciary funds.

Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information reflects financial resources available in the near future to finance the City’s programs.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financial decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains several individual governmental funds organized according to their purpose (general, special revenue, debt services, and capital projects). Information is presented in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances. The General Fund and Capital Outlay Fund are both considered major funds. Data from the non-major governmental funds are combined into one aggregated presentation. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements in the supplementary information section in this report.

Of the major funds, the City adopts an annual appropriated budget for the General Fund. A budgetary comparison statement has been provided as required supplementary information to demonstrate compliance with the budget.

Budgetary information for non-major governmental funds with annual budgets has been provided with the fund financial statements in the supplementary information section in this report.

Proprietary Funds. Proprietary funds are generally used to account for services for which the City charges customers; either outside customers or internal units/divisions of the City. Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail. 6