Agenda packet — San Luis Obispo City Council, February 6, 2024 (part 1 of 2)

City Council
AGENDA

Tuesday, February 6, 2024, 5:30 p.m.

City Hall, 990 Palm Street, San Luis Obispo
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REGULAR MEETING BEGINS AT 5:30 PM
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Pages

1. CALL TO ORDER
Mayor Erica A. Stewart will call the Regular Meeting of the San Luis Obispo City Council to order.

2. PLEDGE OF ALLEGIANCE
Mayor Erica A. Stewart will lead the Council in the Pledge of Allegiance.

3. PRESENTATIONS

3.a BLACK HISTORY MONTH PROCLAMATION
Mayor Stewart will present a proclamation declaring the month of February as "Black History Month".

3.b SLO MUSEUM OF ART ANNUAL REPORT PRESENTATION
Receive a presentation on the San Luis Obispo Museum of Art (SLOMA) Annual Report.

3.c CITY MANAGER REPORT
Receive a brief report from City Manager Derek Johnson.

4. PUBLIC COMMENT PERIOD FOR ITEMS NOT ON THE AGENDA
Not to exceed 15 minutes. The Council welcomes your input. State law does not allow the Council to discuss or take action on issues not on the agenda, except that members of the Council or staff may briefly respond to statements made or questions posed by persons exercising their public testimony rights (Gov. Code sec. 54954.2). Staff may be asked to follow up on such items.

5. CONSENT AGENDA
Not to exceed 15 minutes. Matters appearing on the Consent Calendar are expected to be non-controversial and will be acted upon at one time. A member of the public may request the Council to pull an item for discussion. Pulled items shall be heard at the close of the Consent Agenda unless a majority of the Council chooses another time. The public may comment on any and all items on the Consent Agenda within the three-minute time limit.

Recommendation:

To approve Consent Calendar Items 6a to 6f.

5.a WAIVE READING IN FULL OF ALL RESOLUTIONS AND

ORDINANCES
Recommendation:

Waive reading of all resolutions and ordinances as appropriate.

5.b MINUTES REVIEW - JANUARY 23, 2024 COUNCIL MINUTES 7 Recommendation:

Approve the minutes of the City Council meeting held on January 23, 2024.

5.c SECOND READING OF ORDINANCE NO. 1732 (2024 SERIES)
AMENDING MUNICIPAL CODE SECTION 9.22.040 – SAFETY

ENHANCEMENT ZONES
13 Recommendation:

Adopt Ordinance No. 1732 (2024 Series) entitled “An Ordinance of the City Council of the City of San Luis Obispo, California, amending Chapter 9.22 (Safety Enhancement Zones) of the Municipal Code to revise and expand the dates and times during which the Safety Enhancement Zone applies to St. Patrick’s Day and Halloween.”

5.d APPROVE A GRANT AGREEMENT WITH FRIENDS OF LA LOMA
ADOBE
21 Recommendation:

Authorize the City Manager to execute a Grant Agreement with the Friends of La Loma Adobe in a final form satisfactory to the City Attorney and authorize the disbursement of funds in the amount of $100,000.

5.e AUTHORIZE AN AGREEMENT BETWEEN THE CITY OF SAN LUIS

OBISPO AND SLO MARTIN PROPERTIES, LLC FOR PARK

MAINTENANCE AND OUTDOOR DINING
39 Recommendation:

Authorize the City Manager to execute an agreement with SLO Martin Properties, LLC for park maintenance and outdoor dining on City-owned property, located at 2163 Santa Barbara Street.

5.f AMENDED AND RESTATED EXCLUSIVE NEGOTIATING

AGREEMENT WITH SMART SHARE HOUSING SOLUTIONS
75 Recommendation:

Approve the draft Amended and Restated Exclusive Negotiating Agreement with Smart Share Housing Solutions, in a final form satisfactory to the City Attorney.

6. PUBLIC HEARING AND BUSINESS ITEMS

6.a FISCAL YEAR 2023-24 MID-YEAR BUDGET REVIEW (Estimated Time: 90 minutes)
87 Recommendation:

Receive and discuss the Mid-Year Budget report based on revised projections for all major funds at the mid-point of the 2023-24 fiscal year; and

1. Adopt a Draft Resolution entitled, “A Resolution of the Council of the City of San Luis Obispo, California, approving
amendments to the adopted 2023-24 Budget Appropriations” and approve the allocations as stated in the Mid-Year Budget Report.

2. 6.b UPDATE ON SENATE BILL 1439, ADDITIONAL CAMPAIGN

CONTRIBUTION DISCLOSURES, AND CONSIDER INTRODUCTION

OF AN ORDINANCE TO AMEND MUNICIPAL CODE CHAPTER

2.40.040 (CAMPAIGN CONTRIBUTION LIMITATIONS) (Estimated Time: 60 minutes)
205
Recommendation:

1. Receive an update on Senate Bill 1439; and
Provide direction to staff to create disclosure forms to be included with planning applications and modify public comment cards with disclosure statements; and

2. Consider introduction of a draft Ordinance entitled, “An Ordinance of the City Council of the City of San Luis Obispo, California, amending Chapter 2.40.040 of the Municipal Code related to Campaign Contribution Limitations” reducing the per person contribution limit from $300 to $250.

3. 7. LIAISON REPORTS AND COMMUNICATIONS
Not to exceed 15 minutes. Council Members report on conferences or other City activities. At this time, any Council Member or the City Manager may ask a question for clarification, make an announcement, or report briefly on their activities. In addition, subject to Council Policies and Procedures, they may provide a reference to staff or other resources for factual information, request staff to report back to the Council at a subsequent meeting concerning any matter or take action to direct staff to place a matter of business on a future agenda. (Gov. Code Sec. 54954.2)

8. ADJOURNMENT
The next Regular Meeting of the City Council will be held on February 20, 2024 at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo.

LISTENING ASSISTIVE DEVICES for the hearing impaired - see the Clerk.

The City of San Luis Obispo wishes to make all of its public meetings accessible to the public. Upon request, this agenda will be made available in appropriate alternative formats to persons with disabilities. Any person with a disability who requires a modification or accommodation in order to participate in a meeting should direct such request to the City Clerk’s Office at (805) 781-7114 at least 48 hours before the meeting, if possible. Telecommunications Device for the Deaf (805) 781-7410.

City Council meetings are televised live on Charter Channel 20 and the City's YouTube Chanel: www.youtube.com/CityofSanLuisObispo. Agenda related writings or documents provided to the City Council are available for public inspection in the City Clerk’s Office located at 990 Palm Street, San Luis Obispo, California during normal business hours, and on the City’s website https://www.slocity.org/government/mayor-and-city-council/agendas-andminutes. Persons with questions concerning any agenda item may call the City Clerk’s Office at (805) 781-7114.
1 Council Minutes
January 23, 2024, 5:30 p.m.

Council Chambers, 990 Palm Street, San Luis Obispo
Council Members

Present:

Council Member Emily Francis, Council Member Jan Marx,
Council Member Michelle Shoresman, Vice Mayor Andy Pease, Mayor Erica A. Stewart
City Staff Present: Derek Johnson, City Manager, Christine Dietrick, City Attorney, Teresa Purrington, City Clerk
_____________________________________________________________________

1. CALL TO ORDER
A rescheduled Regular Meeting of the San Luis Obispo City Council was called to order on January 23, 2024 at 5:30 p.m. in the Council Chambers, 990 Palm Street, San Luis Obispo, by Mayor Stewart.

2. PLEDGE OF ALLEGIANCE
Council Member Francis led the Council in the Pledge of Allegiance.

3. PRESENTATIONS

3.a INTRODUCTION - RILEY KUHN, PRINCIPAL BUDGET ANALYST Finance Director Emily Jackson introduced Riley Kuhn, the new Principal Budget Analyst.

3.b WATER RESOURCE RECOVERY FACILITY UPDATE
Council received an update on the Water Resource Recovery Facility from Chris Lehman, Utilities Deputy Director - Wastewater and Miguel Barcenas, Utilities Deputy Director - Engineering and Planning.

3.c CITY MANAGER REPORT
City Manager Derek Johnson provided a report on upcoming projects.

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2 4. PUBLIC COMMENT PERIOD FOR ITEMS NOT ON THE AGENDA
Public Comment:

Brenden Jacoby
Gerri Clemons
Diego Cervantez
Olivia Momberg
Barry Price
Shawna Stillwell
Gene Nelson
Yiming Luo
--End of Public Comment--

5. CONSENT AGENDA
Item 5g was pulled by Mayor Stewart - Community Development Director Tway provided a brief presentation regarding agenda correspondence received from Stephanie Papayanis, Attorney for Western States Regional Council of Carpenters.

Motion By Council Member Shoresman
Second By Vice Mayor Pease
To approve Consent Calendar Items 5a through 5g.

Ayes (5): Council Member Francis, Council Member Marx, Council Member Shoresman, Vice Mayor Pease, and Mayor Stewart
CARRIED (5 to 0)

5.a WAIVE READING IN FULL OF ALL RESOLUTIONS AND ORDINANCES Waive reading of all resolutions and ordinances as appropriate.

5.b MINUTES REVIEW - JANUARY 9, 2024 COUNCIL MINUTES
Approve the minutes of the City Council meeting held on January 9, 2024.

5.c AUTHORIZE REQUEST FOR PROPOSALS FOR TOURISM

MARKETING SERVICES FOR THE SAN LUIS OBISPO TOURISM

BUSINESS IMPROVEMENT DISTRICT (VISIT SAN LUIS OBISPO)
As recommended by the Tourism Business Improvement District (TBID) Board,

1. Authorize the issuance of a Request for Proposals (RFP) for contract services for tourism marketing services; and

2. Authorize the City Manager to award the contract if proposals for required marketing services are within the project budget of $1,150,000; and

3. Authorize the City Manager to approve additional services as outlined in the RFP not to exceed the FY 2024-25 projected TBID revenue of $2,183,616 and based on the recommendation by the TBID Board and within the adopted TBID Fund revenue projections as part of the 2023- 25 Financial Plan.

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2 5.d FISCAL YEAR 2022-23 AB1600 DEVELOPMENT IMPACT FEE ANNUAL REPORT

1. Review and approve the Fiscal Year 2022-23 Assembly Bill 1600 (AB 1600) Development Impact Fee Annual Report; and

2. Adopt Resolution No. 11469 (2024 Series) entitled, "A Resolution of the City Council of the City of San Luis Obispo, California, accepting the 2022-23 Annual Report on Development Impact Fees and make findings related to impact fees held longer than five years.”

5.e AUTHORIZATION TO PURSUE CONSTRUCTION FINANCING FOR THE SANTA ROSA – STENNER CREEK TO HIGHLAND 30” PIPELINE
REPLACEMENT PROJECT, PROJECT NO. 2001048

1. Authorize the City Manager or their designee to pursue and apply for construction financing for the Santa Rosa - Stenner Creek to Highland 30-inch Pipeline Replacement Project (Project 2001048) and submit requisite application documents to the Drinking Water State Revolving Fund (DWSRF), California Infrastructure and Economic Development (I-Bank), and/or private lenders; and

2. Adopt Resolution No. 11470 (2024 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, authorizing the City Manager to apply for Construction Financing and appointing the Utilities Director as the Authorized Designee to certify documents for the Santa Rosa – Stenner Creek to Highland 30” Pipeline Project” authorizing staff to submit financing application documents and designating the City Manager or their designee to be the authorized representatives to execute any certificates or documents necessary to apply for financing for this project.

5.f DECLARATION OF CERTAIN REAL PROPERTY AS EXEMPT SURPLUS (610 AND 614 MONTEREY STREET, A PORTION OF 972 NIPOMO
STREET, AND A PORTION OF CITY PARKING LOT NO. 14) UNDER

THE CALIFORNIA SURPLUS LAND ACT
Adopt Resolution No. 11471 (2024 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, declaring pursuant to Government Code Section 54221(b) that certain real property owned by the City located at 610 and 614 Monterey Street, a portion of 972 Nipomo Street and a portion of City Parking Lot 14, identified as Assessor’s Parcel Nos. 002-412-011, 002-412-012, 002-412-002 (portion) and 002-412-004 (portion) is Exempt Surplus Land.”

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3 5.g APPROVAL OF THE FINAL MAP FOR TRACT 3089 PHASES 2 & 3, AVILA RANCH, 175 VENTURE DRIVE (FMAP-0562-2022)
Adopt Resolution No. 11472 (2024 Series) entitled, “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).”

6. PUBLIC HEARING AND BUSINESS ITEMS

6.a PRESENT THE 2024-2029 SAN LUIS OBISPO POLICE DEPARTMENT STRATEGIC PLAN (Estimated Time: 30 minutes)
Chief Rick Scott and Jacob Green, with Jacob Green and Associates, provided an in-depth staff report and responded to Council questions.

Public Comments:

None
---End of Public Comment---
ACTION: By consensus, the City Council directed staff to receive and file the San Luis Obispo 5-year Strategic Plan. 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.

6.b ACCEPTANCE OF THE ANNUAL COMPREHENSIVE FINANCIAL

REPORT, FEDERAL SINGLE AUDIT REPORT AND TRANSPORTATION
DEVELOPMENT ACT REPORT FOR FISCAL YEAR 2022-23
(Estimated Time: 30 minutes)
Finance Director Emily Jackson and Deputy Director of Finance Debbie Malicoat provided an in-depth staff report and responded to Council questions.

Public Comments:

None
---End of Public Comment---
Motion By Vice Mayor Pease
Second By Council Member Shoresman

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

Ayes (5): Council Member Francis, Council Member Marx, Council Member Shoresman, Vice Mayor Pease, and Mayor Stewart
CARRIED (5 to 0)

7. STUDY SESSION

7.a STUDY SESSION: TRANSIT INNOVATION STUDY REVIEW
(Estimated Time: 90 minutes)
Public Works Director Matt Horn, and Mobility Services Business Manager Alexander Fuchs provided an in-depth staff report and responded to Council questions.

Public Comments:

Dona Hare Price
Yiming Luo
Kyle Finger
Shawn McNabb
---End of Public Comment---
Motion By Vice Mayor Pease
Second By Council Member Francis

1. Receive and file Transit Innovation Study; and

2. Provided direction to staff to finalize the report and begin implementation; and

3. Adopt Resolution No. 11473 (2024 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving a pilot program expanding fare options for K-12 students for San Luis Obispo (SLO) Transit” with a change to the fare to make it consistent with the senior rate.

Ayes (5): Council Member Francis, Council Member Marx, Council Member Shoresman, Vice Mayor Pease, and Mayor Stewart
CARRIED (5 to 0)

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5 8. LIAISON REPORTS AND COMMUNICATIONS
Vice Mayor Pease attended the Joint RTA and SLOCOG meeting and was elected as Chair. She also met with Michelle Jenkins from the Children's Museum and received a tour.

Council Member Francis attended the CAPSLO board meeting, the Cal Poly Hack-a-thon, and the winter celebration. She participated in the County Point in Time Count. She also met with the ASI Executive Cabinet.

Council Member Shoresman attended the HSOC meeting and was elected Chair, the Cal Cities Community Services committee meeting, and the Cal Poly Hack-athon.

Mayor Stewart attended the County Mayors meeting and the Cal Cities Community Services committee meeting. She also appeared on Dave Congalton show.

9. ADJOURNMENT
The meeting was adjourned at 11:01 p.m. The next Regular City Council Meeting is scheduled for February 6, 2024 at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo.
_________________________
APPROVED BY COUNCIL: XX/XX/2024

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Item 5c
Department: Police
Cost Center: 8001
For Agenda of: 2/6/2024
Placement: Consent
Estimated Time: N/A
FROM: Rick Scott, Police Chief
Prepared By: Fred Mickel, Operations Deputy Chief
SUBJECT: SECOND READING OF ORDINANCE NO. 1732 (2024 SERIES) AMENDING MUNICIPAL CODE SECTION 9.22.040 – SAFETY

ENHANCEMENT ZONES

RECOMMENDATION
Adopt Ordinance No. 1732 (2024 Series) entitled “An Ordinance of the City Council of the City of San Luis Obispo, California, amending Chapter 9.22 (Safety Enhancement Zones) of the Municipal Code to revise and expand the dates and times during which the Safety Enhancement Zone applies to St. Patrick’s Day and Halloween.”

POLICY CONTEXT
San Luis Obispo Municipal Code serves as the legal framework for governing various aspects within the city. Adopting this amendment to the Municipal Codes Safety Enhancement Zone will help mitigate the nuisance and safety issues that impact the City during the weekends leading up to and the days of St. Patrick’s Day and Halloween.

DISCUSSION
On January 9, 2024, City Council introduced Ordinance No. 1732 (2024 Series) (Attachment A) amending section 9.22.040 of the City of San Luis Obispo Municipal Code, expanding Safety Enhancement Zones to include additional city-wide safety periods surrounding St. Patrick's Day and Halloween. Originally enacted in 2004, the Safety Enhancement Zone Ordinance designates the entire city as a safety zone during specified times, imposing higher fines for related code violations. The amendment seeks to address challenges arising from events like "St. Fratty's Day" and Halloween celebrations, causing disruptions, property damage, and public safety concerns.

The expansion is prompted by the unpredictable nature of these events, leading to difficulties in predicting and managing spontaneous celebrations. Data on calls for service, noise complaints, citations, and operational expenses associated with St.

Patrick's Day, "St. Fratty's Day," and Halloween are presented. The changes include expanding the Safety Enhancement Zone for St. Patrick's Day to cover the two weekends before the holiday and adjusting Halloween's zone to include the weekend before October 31st.

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Item 5c
The Safety Enhancement Zone Ordinance was initially enacted in response to issues during Mardi Gras in 2004. Over time, the City Council has adopted and amended various public safety-related Municipal Code chapters, imposing higher fines during safety enhancement zone periods. The Police Department conducts extensive outreach annually to inform residents, students, and businesses about safety enhancement zones.

The history of St. Fratty's Day includes a significant incident in 2015, where a roof collapse led to injuries and prompted investigations. Since then, the Police Department has implemented measures to discourage unacceptable behavior, working with educational institutions and engaging in early outreach to student groups. The impact of St. Fratty's Day on neighborhoods has steadily increased, necessitating increased police staffing and operational expenses.

Data from recent years show the challenges faced during St. Patrick's Day, St. Fratty's Day, and Halloween, including calls for service, noise complaints, citations, and violations. Operational expenses for managing St. Fratty's Day in 2023 were estimated at $38,000. Similar issues surrounding Halloween require a maximum deployment of officers for the entire weekend.

The changes aim to reduce the impact of these events by expanding safety enhancement zones. For St. Patrick's Day, this change includes the two weekends before the holiday.

For Halloween, this change extends the zone to cover the weekend before October 31st.

In summary, the amendments to the Safety Enhancement Zone Ordinance seek to address ongoing challenges associated with disruptive events, enhance public safety, and mitigate the impact of spontaneous celebrations on the community.

Public Engagement
Public engagement has been a part of the process, with outreach to stakeholders, including students, cultural organizations, sororities, fraternities, neighborhood groups, and businesses.

CONCURRENCE
The City Attorney’s Office authored the draft ordinance.

ENVIRONMENTAL REVIEW
Amendment of the City’s Safety Enhancement Zone is not a project under the California Environmental Quality Act (CEQA), and enforcement actions are categorically exempt pursuant to CEQA Guidelines section 15321(b).

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Item 5c

FISCAL IMPACT
Budgeted: No Budget Year: 2024-25
Funding Identified: N/A
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:

Total $0 $0 $0 $0
In general, revenue resulting from violations does not correlate to the cost of providing law enforcement services nor can the City create a method by which the revenue from fines pay for specific services.

Additional enforcement resources are not being requested to support the additional safety enhancement period. The proposed ordinance expands the time period for existing safety enhancement zone designations. It is unknown the amount of revenue that may be generated from safety enhancement zone violations since it is not yet known to what extent violations will increase or decrease. However, changes that result in increased fines are not likely to generate significant revenue to offset the existing enforcement costs.

Staffing costs (for overtime deployment) for this time period would be consistent with the costs during the 2023 St. Patrick’s / Fratty’s Day and Halloween deployments. Those overtime costs were estimated to be up to $38,000 for each holiday.

ALTERNATIVES
Do not amend the ordinance. Staff does not recommend this alternative as safety enhancement has proven to be an effective deterrent to address negative behaviors when coupled with enforcement.

ATTACHMENTS
A - O-1732 adopting Safety Enhancement Zone Ordinance Amendment

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O 1732
ORDINANCE NO. 1732 (2024 SERIES)

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AMENDING CHAPTER 9.22 (SAFETY

ENHANCEMENT ZONES) OF THE MUNICIPAL CODE TO REVISE AND

EXPAND THE DATES AND TIMES DURING WHICH THE SAFETY
ENHANCEMENT ZONE APPLIES TO ST. PATRICK’S DAY AND

HALLOWEEN
WHEREAS, City of San Luis Obispo Municipal Code Section 9.22.040 B. currently provides, regulations for the Safety Enhancement Zone to St. Patrick’s Day:

B. The entire area within the city limits of San Luis Obispo is designated a safety enhancement zone from 12:01 a.m. on March 17th (St. Patrick’s Day) until seven a.m. on March 18th of each year.

WHEREAS, City of San Luis Obispo Municipal Code Section 9.22.040 C. currently provides, regulations for the Safety Enhancement Zone to Halloween:

C. The entire area within the city limits of San Luis Obispo is designated a safety enhancement zone from 12:01 a.m. on October 31st (Halloween) until seven a.m. on November 1st of each year. If Halloween falls on a Thursday, Friday, Saturday or Sunday, the safety enhancement zone period will be effective at 12:01 a.m. on the Thursday falling on or preceding October 31st until seven a.m. on the Monday following October 31st.

WHEREAS, these two events (St. Patrick’s Day and Halloween) have celebration activities associated with them on, before and around the actual dates of the events (March 17 for St. Patrick’s Day, October 31 for Halloween) that result in large numbers of individuals, which can be into the thousands, celebrating in public, particularly in the downtown and certain neighborhood areas of the City near the Cal Poly campus. The impacts of unlawful and adverse behaviors associated with these events have steadily increased over the past few years; and
WHEREAS, to maintain public health, safety, and welfare, and to address increased unlawful and adverse behaviors that occur during the celebrations associated with St. Patrick’s Day and Halloween, the City of San Luis Obispo Police Department fully deploys available officers and dispatchers to be prepared for and respond to increased unlawful and adverse activity during these celebrations, in addition to conducting public outreach via social media and other sources to try to minimize unlawful and adverse behaviors. This results in the Police Department using overtime and incurring substantial unbudgeted expenses to provide adequate staffing to cover these events. At times, the magnitude of these celebrations has resulted in the need to request mutual aid assistance from other police agencies, including Cal Poly Police, the California Highway Patrol, and the San Luis Obispo County Sheriff’s Department; and

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Ordinance No. 1732 (2024 Series) Page 2
O 1732
WHEREAS, determining the exact times when celebrations associated with St.

Patrick’s Day and Halloween will occur is difficult to predict but, based on historical data and information, celebrations and the need for enhanced law enforcement staffing associated with St. Patrick’s Day (including so-called “St. Fratty’s Day celebrations) tend to occur primarily during the two weekends before and on the day of the event, and celebrations associated with Halloween tend to occur primarily from the Thursday of or before Halloween through the following Monday morning; and WHEREAS, the Police Department conducts public outreach to attempt to mitigate adverse impacts of the activities associated with the celebration of St. Patrick’s Day and Halloween and has found that adverse activities tend to be reduced significantly when a Safety Enhancement Zone, with its resulting increased fines and penalties, is in place; and
WHEREAS, expansion of the dates and times during which a Safety Enhancement Zone is in effect related to St. Patrick’s Day and Halloween will help reduce the unlawful and adverse activities that occur during celebrations associated with these events and will enhance the Police Department’s ability to maintain public health, safety, and welfare during the celebrations associated with these events within available department resources.

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

SECTION 1. Findings. The Council hereby finds and declares the following:
a) St. Patrick’s Day and Halloween have celebration activities associated with them on, before, and around the actual dates of the events (March 17 for St.

Patrick’s Day, October 31 for Halloween) that result in large numbers of individuals, which can be into the thousands, celebrating in public, particularly in the downtown and certain neighborhood areas of the City near the Cal Poly campus. Impacts of unlawful and adverse behaviors associated with these events have steadily increased over the past few years. b) To maintain public health, safety, and welfare, and to address increased unlawful and adverse behaviors that occur during the celebrations associated with St. Patrick’s Day and Halloween, the City of San Luis Obispo Police Department fully deploys available officers and dispatchers to be prepared for and respond to increased unlawful and adverse activity during these celebrations, in addition to conducting public outreach via social media and other sources to try to minimize unlawful and adverse behaviors. This results in the Police Department using overtime and incurring substantial unbudgeted expenses to provide adequate staffing to cover these events. At times, the magnitude of these celebrations has resulted in the need to request mutual aid assistance from other police agencies, including Cal Poly Police, the California Highway Patrol, and the San Luis Obispo County Sheriff’s Department.

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Ordinance No. 1732 (2024 Series) Page 3
O 1732
c) Determining the exact times when celebrations associated with St. Patrick’s Day and Halloween will occur is difficult to predict but, based on historical data and information, celebrations and the need for enhanced law enforcement staffing associated with St. Patrick’s Day (including so-called “St. Fratty’s Day celebrations) tend to occur primarily during the two weekends before and on the day of the event, and celebrations associated with Halloween tend to occur primarily from the Thursday of or before Halloween through the following Monday morning.
d) Having a Safety Enhancement Zone in effect, with increased fines for municipal code violations, has proven to reduce unlawful or adverse activities while the Safety Enhancement Zone is in effect. Expansion of the dates and times during which a Safety Enhancement Zone is in effect related to St. Patrick’s Day and Halloween will help reduce the unlawful and adverse activities that occur during celebrations associated with these events and will enhance the Police Department’s ability to maintain public health, safety, and welfare during the celebrations associated with these events within available department resources.

SECTION 2. Section 9.22.040 B. of the San Luis Obispo Municipal Code shall be amended to expand the dates and times during which a Safety Enhancement Zone is in effect in relation to St. Patrick’s Day, to read as follows:

B. The entire area within the city limits of San Luis Obispo is designated a safety enhancement zone from 12:01 a.m. on March 17th (St. Patrick’s Day) until seven a.m. on March 18th of each year with the following modifications and additions. If St. Patrick’s Day falls on a Friday, Saturday, or Sunday, the safety enhancement zone period will be in effect from 12:01 a.m. on the Friday of or prior to St. Patrick’s Day to seven a.m. the following Monday. The safety enhancement zone period will also be in effect during the two weekends immediately prior to St. Patrick’s Day from 12:01 a.m. Friday until seven a.m. Monday for each weekend unless St. Patrick’s Day falls on a Monday, in which case the safety enhancement zone period for the weekend immediately prior to St. Patrick’s Day will be in effect from 12:01 a.m. on the Friday prior to St. Patrick’s Day until seven a.m. on March 18th.

SECTION 3. Section 9.22.040 C. of the San Luis Obispo Municipal Code shall be amended to expand the dates and times during which a Safety Enhancement Zone is in effect in relation to Halloween, to read as follows:

C. The entire area within the city limits of San Luis Obispo is designated a safety enhancement zone related to Halloween (October 31st) during the following time periods.

If Halloween falls on a Monday, Tuesday, or Wednesday, the safety enhancement zone period will be in effect from 12:01 a.m. on the previous Thursday until seven a.m. on November 1st. If Halloween falls on a Thursday, Friday, Saturday or Sunday, the safety enhancement zone period will be in effect from 12:01 a.m. on the Thursday falling on or preceding October 31st until seven a.m. on the Monday following October 31st and will also be in effect during the weekend immediately prior to Halloween from 12:01 a.m.

Friday to seven a.m. Monday.

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Ordinance No. 1732 (2024 Series) Page 4
O 1732
SECTION 4. All prior ordinances affecting the provisions herein are superseded to the extent inconsistent herewith but shall otherwise remain in full force and effect.

SECTION 5. Publication. A summary of this ordinance, together with the names of Council members voting for and against, shall be published at least five (5) days prior to its final passage, in The New Times, a newspaper published and circulated in this City.

This ordinance shall go into effect at the expiration of thirty (30) days after its final passage.

SECTION 6. Severability. If any provision of this Ordinance is held invalid by a court of competent jurisdiction, such provision shall be considered a separate, distinct, and independent provision and such holding shall not affect the validity and enforceability of the other provisions of this Ordinance.

INTRODUCED and ADOPTED on the 9
th day of January, 2024, by the Council of
the City of San Luis Obispo on the ____ day of ____, 2024, on the following vote:

AYES:

NOES:

ABSENT:
___________________________
Mayor Erica A. Stewart
ATTEST:
_______________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
________________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on _________________________. ___________________________
Teresa Purrington,
City Clerk

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Item 5d
Department: Administration
Cost Center: 1005
For Agenda of: 2/6/2024
Placement: Consent
Estimated Time: N/A
FROM: Greg Hermann, Deputy City Manager
Prepared By: Robert Hill, Sustainability & Natural Resources Official SUBJECT: GRANT AGREEMENT WITH FRIENDS OF LA LOMA ADOBE

RECOMMENDATION
Authorize the City Manager to execute a Grant Agreement with the Friends of La Loma Adobe in a final form satisfactory to the City Attorney and authorize the disbursement of funds in the amount of $100,000.

POLICY CONTEXT
In 1998, the City Council approved a Community Partnership and Foundation Policy that provided guidelines by which the City would support the activities of non-profit, public benefit organizations in the community. The City of San Luis Obispo currently has numerous community partnerships with organizations advancing the arts, culture, history, and the environment.

DISCUSSION
Background
La Loma Adobe is a two-story structure located at 1590 Lizzie Street. The exact date of original construction is unknown. It is the only two-story adobe in the City and one of only a few such adobes remaining in the State. Consequently, it has significant architectural and historical value.

The property was deeded to the City in 1995 by the Bowden family and the City purchased additional land to the east of the house which preserved the site and grounds associated with the adobe. The structure has been vacant for over fifty years. The first structural stabilization efforts were completed in 2011 and basic maintenance and security continues today, but these approaches are insufficient to preserve the adobe in the long term.

Over the past several years, through a partnership with the Friends of La Loma Adobe (FLLA) that is further described herein, significant efforts have been undertaken to reestablish the historic landscape and grounds, undertake community awareness and events, gain a keener understanding of the adobe and its historicism through a Historic

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Item 5d
Resources Evaluation (Applied Earthworks, 2021), and identification of rehabilitation measures for the adobe consistent with The Secretary of the Interior’s Standards for the Treatment of Historic Properties (National Park Service, 36 CFR 68, 1995) through a Historic Structures Report (Architectural Resources Group, 2023).

Grant Agreement
The draft Grant Agreement (Attachment A) provides for the disbursement of up to $100,000 to FLLA. In a manner consistent with the Historic Resources Evaluation and the Historic Structures Report, the scope of work is as follows:

Structural Stabilization.

Prepare an engineered design, analysis & construction documents for the structural stabilization and rehabilitation of the adobe. This includes evaluation of the structural systems in relation to Building Code requirements, basic loads from people and furniture in the building as well as seismic loads.

Historic Feature Treatment.

Produce design and construction documents for the treatment of the existing historic fabric and features of the building. This includes evaluation of each surface, interior and exterior including walls, ceilings, and floors for its ability to tell the story of the adobe and to accommodate future uses of the building.

Visitor Access.

Articulate the site and building design to provide visitor access.

Project Priorities.

Identify a priority list of elements of the project which responds to a logical sequence of construction and budget limitations.

Cost Estimate.

Calculate an estimate of the probable construction cost of the various elements or phases of construction.

It is important to note that the draft Grant Agreement also entails the City making best efforts to resolve a long-standing property boundary matter, which is seen as being critical to the successful stabilization and rehabilitation of the adobe.

The overarching goal of the draft Grant Agreement is to prepare the adobe for stabilization, rehabilitation, and adaptive re-use by preparing plan, specifications, and engineering suitable for an application for a building permit and environmental review.

These steps are also seen as key elements of successful proposals to major funders and grant-making entities; preliminary cost-estimating and a fundraising plan are also components of the draft Grant Agreement.

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Item 5d
Previous Council Action
In 2013, the City Council adopted the Reservoir Canyon Natural Reserve Conservation Plan, which included La Loma Adobe within the boundary of the Reserve due to the relationship between the structure and the surrounding landscape.

In 2017, the City Council approved a Memorandum of Understanding between the City and the Friends of La Loma Adobe (FLLA) that established a formal relationship and set forth a framework for partnering to further evaluate the historic significance of the adobe, identify an appropriate preservation strategy, and engage with the neighborhood and community.

The 2023-25 Financial Plan’s Major City Goal for Economic Resiliency, Cultural Vitality & Fiscal Sustainability specifically identified funding and support; see Strategic Approach #

1.4f.: “Continue to support preservation of the City’s adobes, including work on the La Loma Adobe through a phased approach intended to ensure that the structure is ready for active stabilization efforts by 2025.”
Public Engagement
The recommendations contained in this report are the result of the extensive community engagement process completed as part of the 2023-25 Financial Plan, including the Community Forum, Goal Setting Workshop, and Financial Plan review City Council hearings.

CONCURRENCE
The Community Development Department has provided their concurrence.

ENVIRONMENTAL REVIEW
The draft Grant Agreement does not constitute a Project, in and of itself, under the California Environmental Quality Act, Section 15378. However, the procurement of the Historic Resources Evaluation and Historic Structures Report, described above, are intended to help ensure that the physical project anticipated for review in the coming months, is consistent with the City’s Historic Preservation Ordinance, the guidelines set forth by the State Historic Preservation Office (SHPO), and the Secretary of the Interior’s Standards for the Treatment of Historic Properties.

FISCAL IMPACT
Budgeted: Yes Budget Year: 2023-24
Funding Identified: Yes

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Item 5d
Fiscal Analysis:

Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $100,000 $100,000 $0 N/A
State
Federal
Fees
Other:

Total $100,000 $100,000 $0 N/A
Funding in the amount of $100,000 was allocated to support key steps leading towards the rehabilitation of the La Loma Adobe in the 2023-25 Financial Plan. The draft Grant Agreement scope of work anticipates substantial in-kind matching funds through the preparation of the plan, specifications, and engineering (PS&E) for the next phase of structural stabilization on a pro-bono basis. The City’s funds would be used primarily for PS&E for the rehabilitation and adaptive re-use of the building.

ALTERNATIVES
Council may request changes to the draft Grant Agreement or decide not to approve the draft Grant Agreement. This action is not recommended by staff because the recommended action is consistent with prior Council direction contained in the 2023- 25 Financial Plan.

ATTACHMENTS
A - Draft Grant Agreement with the Friend of La Loma Adobe B - Memorandum of Understanding – City of San Luis Obispo and Friends of La Loma Adobe

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GRANT AGREEMENT

FRIENDS OF LA LOMA ADOBE
This agreement dated ___________________________ is between THE FRIENDS OF LA LOMA ADOBE, a California non-profit public benefit corporation (“FLLA”) and City of San Luis Obispo, a California Municipal Corporation and Charter City (“City”) (jointly referred to as the “Parties”) with reference to the following:

WHEREAS, FLLA has requested that City contribute to FLLA’s efforts to rehabilitate the La Loma Adobe (“Adobe”), located at 1590 Lizzie Street, San Luis Obispo, by providing financial support towards planning, design, specifications, and engineering for the stabilization and rehabilitation of the Adobe at this location, and
WHEREAS, the City and FLLA have an established Memorandum of Understanding (2017) that sets forth the relationship and mutual goals of both parties to rehabilitate the Adobe, thereby serving both a public and municipal purpose, and
WHEREAS, addressing the long-term protection and stewardship of the Adobe is among the City’s 2023-25 Major City Goals, and
WHEREAS, City has approved grant funding (the “Grant”) for the FLLA project in its 2023-25 Financial Plan pursuant to FLLA’s proposal, and
WHEREAS, City has determined that, ultimately, the Adobe and its surrounding grounds will serve a broad spectrum of citizens interested in historic preservation, education, open space protection, native and culturally appropriate landscape restoration, and passive recreational trail use, while also serving as a vital community gathering place, and WHEREAS, FLLA intends to prepare plans and specifications for the Adobe in a manner that is consistent with the Secretary of the Interior’s Standards for Rehabilitation, State of California Historic Preservation Office standards, the City’s Historic Preservation Ordinance and Historic Context Statement, as well as the Historic Resource Evaluation (Applied Earthworks, 2021), the Historic Structures Report (Architectural Resources Group, 2023) that have been prepared for the Adobe.

NOW, THEREFORE, CITY and FLLA for and in consideration of the mutual benefits, promises and agreements set forth herein, do agree as follows:

1. Planning for Rehabilitation of the Adobe
On or before June 30, 2025, FLLA shall complete plans, specifications, and engineering for 1.) the structural stabilization of the Adobe and, 2.) the rehabilitation of the Adobe in accordance with the selected period of significance identified in the Historic Resources Evaluation (2021) and the rehabilitation treatments identified in the Historic Structures Report (2023) and the proposal made by the firm Architectural Resources Group. The anticipated scope of work is attached herein as Exhibit A

2. Grant Amount and Allowed Expenses
City agrees to pay to FLLA grant funds in the sum of $100,000, to be used to complete planning for rehabilitation of the Adobe defined in Section 1. Funds will be allocated in two installments, as follows:

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a. Installment # 1 will be in the amount of $85,000 to be used for the plans, specifications, and engineering tasks described in Section 1, above, as well as associated engineering elements such as mechanical, electrical, plumbing, and any American Disability Act requirements.
b. Installment # 2 would be generated from a reserve of $15,000 held by the City to be utilized as necessary to resolve the property line dispute described in Section 6. If funds from the reserve remain after the dispute is resolved, then the City will grant the remaining reserve to FLLA for purposes entirely to support further efforts consistent with the purposes set forth in Section 1. Any such allocation to FLLA under Installment # 2 is also subject to the conditions stated in Section 10 (Periodic Reports and Financial Assurance).

Any amounts used by FLLA for purposes other than those stated in (a) and (b) above shall be reimbursed to the City, subject to the terms of Paragraph 3 below, and any funds not expended by FLLA by June 30, 2025, or as otherwise extended pursuant to Paragraph 9, shall be returned to the City.

3. Use at Other Sites
If FLLA determines that rehabilitation of Adobe at the site specified, above, is impractical or inadvisable for any reason, then FLLA may not use these funds for any other purpose without prior written approval of City.

4. Fundraising Plan
The City’s payment of grant funds is intended to promote the subsequent implementation of the physical rehabilitation of the Adobe. FLLA shall prepare, by June 30, 2025, a fundraising and / or business plan that provides evidence of sufficient capacity-building to manage the rehabilitation and identifies financial match prospects from donor groups that articulates a “best-guess” path to completing the rehabilitation of the Adobe.

5. Ownership of Assets
City is the owner of the property and building. FLLA will prepare, or direct the preparation of, stabilization and rehabilitation documents for the benefit and use of both the City and FLLA.

6. Property Line Dispute
City acknowledges that there currently exists a property line dispute between the City property at 1590 Lizzie Street and the adjacent property at 1580 Lizzie Street. As the property owner of the Adobe, the City is the only entity with proper legal standing to resolve the dispute. Resolution of the dispute is critical to the successful stabilization and rehabilitation of the Adobe, and City hereby commits to use its best efforts to resolve the dispute in a timely manner, at its sole cost and expense.

City and FLLA acknowledge that failure to resolve the dispute in a timely manner may impede FLLA’s ability to comply with the terms of this agreement, in which case City shall favorably consider an extension of the timelines set forth herein, pursuant to Section 9. Nothing in this Agreement shall be construed as an obligation to the City to resolve the dispute by any particular date.

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7. Permits
FLLA shall apply for and obtain all necessary building and other related permits to construct the stabilization and rehabilitation phases of the project in conformance with local, state, and federal laws. City shall waive all City building and other related permit and processing fees applicable to the project, unless timely building plan review necessitates City using an outside contractor; any external costs borne by City for building and other related permit processing shall be at FLLA’s expense. This agreement does not authorize any construction or otherwise alter or impact the exercise of the City’s independent regulatory and land use authority, to the extent applicable.

8. Funding Source Recognition
FLLA will ensure recognition of the roles of the City in providing funding through this Agreement.

The City shall be identified as a funding source in all applicable publications, press releases, and other promotional materials. In addition, FLLA will include a reference to the support provided herein in all publications made possible with funds made available under this Agreement.

9. Amendments
The City and FLLA may amend this Agreement at any time by mutual agreement provided that such amendments make specific reference to this Agreement, and are executed in writing, signed by a duly authorized representative of each organization, and approved by the City Council. Such amendments will not invalidate this Agreement, nor relieve or release the City or FLLA from its obligations under this Agreement, except as expressly provided in writing in any subsequent amendments.

10. Periodic Reports and Financial Assurance
The FLLA shall provide quarterly reports on both project progress and on the use of City funds.

These reports shall be due at the end of the first month after the end of the calendar quarter (i.e., January, April, July, and September). City reserves the right to request and receive copies of invoices, account statements, or audits of FLLA’s financial records pertinent to the Adobe.

11. Assignment
The FLLA will not assign or transfer any interest in this Agreement without the prior written consent of the City.

12. Conflict of Interest
No member of the City’s governing body and no other public official of such locality, who exercises any functions or responsibilities in connection with the planning or carrying out of the project, will have any personal financial interest, direct or indirect, in this agreement; and the FLLA will take appropriate steps to assure compliance.

FLLA agrees to abide by the provisions of 24 CFR 84.42 and 570.611, which includes maintaining a written code or standards of conduct that will govern the performance of its officers, employees or agents engaged in the award and administration of contracts supported by Federal funds.

13. Severability
If any provision of this Agreement is held invalid, the remainder of the Agreement will not be affected thereby and all other parts of this Agreement will nevertheless be in full force and effect.

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14. Entire Agreement
This Agreement constitutes the entire agreement between the City and the FLLA for the use of funds received under this Agreement and it supersedes all prior communications and proposals, whether electronic, oral, or written between the City and the FLLA with respect to this Agreement.

15. No Agency or Employment
The FLLA is solely responsible for all activities supported by the Grant. Nothing in this Agreement creates a partnership, agency, joint venture, employment, or any other type of relationship. The FLLA shall not represent itself as an agent of the City for any purpose, and has no authority to bind the City in any manner whatsoever. FLLA and all of its agents, representatives, or participants in any manner in the performance of its obligations and duties hereunder, shall be employees, independent contractors, or volunteers solely of FLLA. They shall not for any purpose be considered employees or agents of the City.

16. Termination
The City Council may terminate this agreement, after a public hearing and upon ten (10) days written notice to FLLA. Said termination shall be effective thirty (30) days after City mails notice of termination of agreement to FLLA. Any remaining funds and liabilities in excess of costs actually incurred as of the date of notice of termination pursuant to Section 3 above shall revert to City upon said termination.

17. Effect of Prior Agreement
The terms of the Memorandum of Understanding (MOU) executed between the Parties on May 24, 2017, including without limitation the terms of indemnification and insurance requirements, remain in full force and effect. To any extent the MOU is inconsistent with this Agreement, this Agreement prevails. A true and correct copy of the MOU is attached hereto as Exhibit B and incorporated herein.

18. Notice
For purposes of notice under this agreement, all notices shall be considered effective upon being sent by certified mail to the following addresses:

City:

City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Attn: City Manager
FLLA:

The Friends of La Loma Adobe
P.O. Box 13253
San Luis Obispo, CA 93406
Attn: President, Board of Directors

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CITY OF SAN LUIS OBISPO, A MUNICIPAL CORPORATION
By:

Derek Johnson, City Manager
APPROVED AS TO FORM:

By:

J. Christine Dietrick, City Attorney

THE FRIENDS OF LA LOMA ADOBE, A CALIFORNIA NON-PROFIT CORPORATION By:

Robert Jorgensen, President

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Exhibit A
La Loma Adobe
Scope of Work 2023 – 2025
The Friends of La Loma Adobe (FLLA) operates under a Memorandum of Understanding (MOU) with the City of San Luis Obispo who is the owner of the adobe and property. This MOU recognizes the importance of this historic and cultural resource and appreciates that FLLA has the interest and ability to cooperate on these goals. To further those goals, FLLA has commissioned an Historic Resource Evaluation, an Historic Structures Report, an archaeological study using remote-sensing technology and conducted many small repair and stabilization projects on the building.

As part of their biannual budget process, in 2023, the City Council allocated $100,000 toward the rehabilitation and adaptive reuse of the adobe. The intent of that allocation was to bring the adobe project to a “shovel-ready” condition. Presuming the City resolves the standing property-line dispute, FLLA intends to meet that goal by performing the following, listed in order of importance:

Structural Stabilization.

Historic Feature Treatment.

Visitor Access.

Articulate the site and building design to provide visitor access.

Project Priorities.

Identify a priority list of elements of the project which responds to a logical sequence of construction and budget limitations.

Cost Estimate.

Calculate an estimate of the probable construction cost of the various elements or phases of construction.

During this two-year process, FLLA intends to raise funds through donations and grants for the construction and it is likely that FLLA will return to the City Council for additional funds and fee waivers, as may be allowable.

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Exhibit B
La Loma Adobe
Copy of Memorandum of Understanding

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City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: February 6, 2024
TO: Mayor and Council
FROM: Greg Avakian, Parks & Recreation Director
VIA: Derek Johnson, City Manager
SUBJECT: ITEM 5E - AUTHORIZE AN AGREEMENT BETWEEN THE CITY OF SAN

LUIS OBISPO AND SLO MARTIN PROPERTIES, LLC FOR PARK

MAINTENANCE AND OUTDOOR DINING
Staff received the following questions regarding the proposed agreement with SLO Martin Properties, LLC for park maintenance and outdoor dining on City-owned property, located at 2163 Santa Barbara Street. The questions are below with the staff’s response shown in italics:
1) Is there a discrepancy between the MOU with the new property owner and the staff report? Staff report says 10-year agreement with 2-year extension is possible. But the actual draft agreement says: “The term of this agreement shall be for a period of fifteen (15) years from the date entered. The terms of the Agreement may be extended for a period of three to five years upon mutual agreement of the Parties.

The draft agreement contains the correct term period. The Council Agenda Report should have noted that the period provides for a total of fifteen (15) years, including an initial 10-year term with an extension of between 3-5 years possible. 2) Exhibit C, Scope of Work, includes the following section about Blow Pack Use, “Blow Pack Use: In the downtown area, blow packs may be used between 7:00 a.m. and 10:00 a.m. In the residential areas blow packs may be used between 8:00 a.m. and 5:00 p.m…”; by using the term “blow packs”, do we mean leaf blowers? If so, can we require the use of electric leaf blowers? Yes, “blow pack” is a reference to a leaf blower. The section within the agreement did not specify a requirement to utilize electric or battery-operated blow packs, nor was this discussed with SLO Martin Properties during the lease negotiation process. However, at Council's request, staff has discussed this request with SLO Martin Properties, and they have agreed to the requirement of battery-powered blow packs for the project. This modification will be incorporated into the landscape plan attached to the agreement prior to signature.

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Item 5e
Department: Parks and Recreation
Cost Center: 7002
For Agenda of: 2/6/2024
Placement: Consent
Estimated Time: N/A
FROM: Greg Avakian, Parks & Recreation Director
Prepared By: Devin Hyfield, Recreation Manager
Brendan Pringle, Business Analyst
SUBJECT: AUTHORIZE AN AGREEMENT BETWEEN THE CITY OF SAN LUIS

OBISPO AND SLO MARTIN PROPERTIES, LLC FOR PARK

MAINTENANCE AND OUTDOOR DINING

RECOMMENDATION
Authorize the City Manager to execute an agreement with SLO Martin Properties, LLC for park maintenance and outdoor dining on City-owned property, located at 2163 Santa Barbara Street.

POLICY CONTEXT
The Public Art Master Plan notes that the City’s public art collection will be maintained and preserved in accordance with Best Management practices for public art. Objective

2.3 likewise encourages staff to “Explore public-private sponsorships for maintenance through the establishment of a sponsorship program of individual art pieces”.

Additionally, the park maintenance requirements imposed by the proposed agreement with SLO Martin Properties, LLC are consistent with the City’s internal park maintenance standards.

DISCUSSION
Background
In October 2004, Council approved an agreement between the City and Village Host Pizza and Grill, SLO, LLC to maintain the park space located at 2163 Santa Barbara Street, formerly the Water Conservation Demonstration Garden (APN 003-748-035). The previous owner (Pizza Brokers, Inc.) built an outdoor dining area that extended onto City property and, in exchange, the owner was required to maintain the park space and the public art piece for a five-year period. Village Host Pizza and Grill inherited the conditions of the initial agreement with the City when it took over the business (from the previous owners, Pizza Brokers, Inc.) and completed any deficiencies left from the previous owners, including the installation of the public art piece, at an expense of $12,000. Since 2004, the park space and public art piece have been reasonably maintained to City standards and expectations.

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Item 5e
Village Host Pizza and Grill no longer owns the business at the location, and City staff have been working with the new owners, SLO Martin Properties, LLC, to continue the maintenance arrangement in exchange for their use of the City-owned park space. The property owner is currently in the process of retaining a new tenant for the building and active improvements are underway.

Proposed Agreement
SLO Martin Properties and City staff concur on a ten (10) year agreement with an optional two (2) year extension. Staff supports the longer-term agreement as there is sufficient language in the new agreement regarding performance expectations by SLO Martin Properties to maintain the area by prescribed standards and steps to rectify any deficiencies should they occur.

The proposed agreement will provide updated conditions for the maintenance of both the public art installation and park space adjacent to the business, in accordance with the Public Art Master Plan and ongoing park maintenance standards established by Public Works. Additionally, SLO Martin Properties is proposing a significant upgrade to the existing landscape, as outlined on the attached Landscape Plan (See Exhibit B of the proposed agreement.) This includes the removal of the turf and many existing plants (leaving the few healthy plants that remain); removal of existing wood borders and addition of new metal borders; decomposed granite; and the introduction of new droughttolerant landscaping. These proposed improvements have been reviewed and approved by the Parks Maintenance Supervisor. The draft agreement in Attachment A is still being finalized, but should Council authorize the City Manager to enter this agreement, it will be in substantially the same form as that in Attachment A.

Previous Council or Advisory Body Action
On June 3, 2003, Council approved an agreement with Pizza Brokers, Inc. for the donation of park improvements at 2163 Santa Barbara Street. On October 19, 2004, the City approved the initial agreement with Village Host Pizza & Grill SLO, LLC. On February 2, 2010, the City entered into an updated agreement with Village Host Pizza and Grill SLO, LLC for a 10-year period. The current agreement has expired, and ownership has changed.

Public Engagement
Public comment on the item can be provided to the City Council through written correspondence prior to the meeting and through public testimony at the meeting.

CONCURRENCE
The Public Works and Parks and Recreation Departments concur with the recommendation.

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Item 5e

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 Section 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 $N/A $N/A $N/A $N/A
State
Federal
Fees
Other:

Total $N/A $N/A $N/A $N/A
There is no fiscal impact directly associated with this item. The owners will continue to pay related utility costs and maintain the park space. Without this arrangement with SLO Martin Properties, the City could incur costs of $2,520 annually for maintenance, plus an estimated utility cost for irrigation and public art lighting of approximately $2,500/year.

ALTERNATIVES

1. Do not enter into the Agreement. The City would assume responsibility for the maintenance and utilities of the park space and public art piece at a time when there are no funds allocated in the Parks Maintenance budget for expansion. Another agreement would have to be developed regarding the outdoor dining area and could possibly result in fees charged to SLO Martin Properties for that portion on City property. If such an agreement is not reached, use of the area for outdoor dining by SLO Martin Properties could be precluded. The proposed agreement provides a mutually beneficial situation for both parties, with the City having the property space and public art maintained by the neighboring restaurant ownership and SLO Martin Properties able to offer outdoor seating as a benefit to its customers.

2. Modify the Terms of the Proposed Agreement. The new agreement strengthens the previous arrangement between the City and SLO Martin Properties as negotiated.

Council could choose to add modifications as deemed necessary.

ATTACHMENTS
A - Draft Park Maintenance and Outdoor Dining Agreement

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*Should there be any discrepancies between the legal description set forth in Exhibit A-1 and the premises depicted in Exhibit B, the latter shall govern as to the area maintained by Contractor under this agreement.

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

SLO Martin Properties, LLC
Attn: Tai Martin
P.O. Box 2359
Avila Beach, CA 93424

(Space Above For Recorder's Use)

AGREEMENT BETWEEN THE CITY OF SAN LUIS OBISPO AND

SLO MARTIN PROPERTIES, LLC FOR PARK MAINTENANCE AND OUTDOOR DINING This Agreement made and entered into on December __, 2023 (“Effective Date”) by and between the CITY of San Luis of San Luis Obispo (hereinafter, “CITY)” and SLO Martin Properties, LLC, (hereinafter, “CONTRACTOR” (collectively referred to as the “Parties”.)

RECITALS
WHEREAS, the CITY owns a parcel at 2163 Santa Barbara Street, San Luis Obispo, California, that serves as a gateway to the community, legally described in Exhibit A-1*, attached hereto and incorporated herein by reference (hereinafter referred to as “City Owned Park Space”); and WHEREAS, CONTRACTOR owns a parcel at 2138 Broad Street, San Luis Obispo, California, (hereinafter referred to as the “Contractor Property”), legally described in Exhibit A-2; and WHEREAS, CONTRACTOR has an outdoor patio area in which a portion was built on the CITYowned park space adjacent to CONTRACTOR’s property at 2138 Broad Street, and WHEREAS, CONTRACTOR’s predecessor in interest, Village Host Pizza & Grill, and CITY had a previous agreement to maintain the City Owned Park Space, that expired on February 9, 2020, and WHEREAS, CONTRACTOR’s predecessor in interest previously improved and maintained the CITYowned park space adjacent to CONTRACTOR’s property at 2138 Broad Street, via a property use agreement, which agreement provided for Village Host’s use of the outdoor dining area in consideration of Village Host’s performance of terms and provisions in that Agreement; and WHEREAS, CONTRACTOR’s business benefits from the outdoor patio space and public art piece located in the CITY-owned park space.

NOW, THEREFORE, in consideration of the mutual promises, agreements, covenants and conditions herein set forth, CITY and CONTRACTOR mutually agree, and covenant as follows:

1. TERM. The term of this agreement shall be for a period of fifteen (15) years from the date entered. The terms of the Agreement may be extended for a period of three to five years upon mutual agreement of the Parties.

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2. OPERATION AND MANGEMENT PLAN. In exchange for maintenance of the improvements made to the outdoor dining area partially located on City Owned Park Space and installation of the public art piece “The Dancers”, the CONTRACTOR shall be entitled to use the previously described space subject to the following conditions:

2.1 CONTRACTOR shall maintain the City Owned Park Space in accordance with the approved landscape plan, attached and incorporated herein by reference as Exhibit B, and the detailed description of work at Level 3 incorporated herein by reference as Exhibit C – SCOPE OF WORK AND SERVICE LEVEL, to the satisfaction of the CITY's Parks Maintenance Supervisor.

2.2 CONTRACTOR shall maintain the outdoor dining area, the City Owned Park Space, and the public art piece in a clean and safe manner at all times, and shall ensure proper functioning of the lighting on the public art piece.

2.3 Items used for dining outdoors may not be left outside overnight, except for tables, chairs and umbrellas in the outdoor dining area.

2.4 CONTRACTOR shall continue to pay all related utility costs toward maintenance of City Owned Park Space.

2.5 CONTRACTOR and their tenant shall comply at all times with the San Luis Obispo Municipal Code and with state regulations related to landscape irrigation. CONTRACTOR shall not use potable water to irrigate non-functional turf, as defined by California Water Code § 996 and pursuant to the State Water Resources Control Board’s emergency regulation OAL 2023- 0526-01 (June 5, 2023), a copy of which is attached as Exhibit E. CONTRACTOR acknowledges and agrees to comply with California Water Code § 10608.14 which will prohibit the use of potable water for irrigation of non-functional turf beginning January 1, 2027.

3. CITY OBLIGATIONS

3.1 CITY will periodically inspect the City Owned Park Space and public art piece to verify CONTRACTOR’s compliance with maintenance requirements.

3.2 CITY shall permit the CONTRACTOR to serve alcoholic beverages in the outdoor dining area, subject to approval from the Alcoholic Beverage Control Board.

4. FEES. In exchange for maintenance responsibilities undertaken by CONTRACTOR and the maintenance and upkeep of the required public art piece, no rent will be charged to CONTRACTOR for use by CONTRACTOR and its tenant of the outdoor dining area and the City Owned Park Space.

5. FAILURE TO PERFORM. In the event that the City Owned Park Space is not maintained by CONTRACTOR and/or its tenant to an acceptable level, the CITY will provide written notice to the CONTRACTOR of the corrective work required for compliance with this Agreement.

CONTRACTOR will have thirty (30) days from the date of receipt of the notice to remedy any deficiencies. If the CONTRACTOR fails to perform the requested work after thirty (30) days’ notice, CITY will obtain the services of a landscape contractor to restore the City Owned Park Space to the standards set forth in Paragraph 2.1 of this Agreement, at the sole expense of CONTRACTOR.

6. ALTERATIONS. CONTRACTOR is not authorized to make any other alterations to City Owned Park Space other than those outlined in this agreement without prior written authorization from the CITY Parks Maintenance Supervisor.

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7. INSURANCE & INDEMNIFICATION

7.1 Indemnification. To the fullest extent permitted by law (including, but not limited to California Civil Code Sections 2782 and 2782.8), CONTRACTOR shall defend, indemnify, and hold harmless the CITY, and its elected officials, officers, agents, employees and volunteers (herein for the purposes of this provision collectively referred to as “CITY INDEMNITEES”) from and against any and all causes of action, claims, liabilities, obligations, judgments, losses, costs, expenses or damages, including reasonable legal counsels’ fees and costs of litigation arising out of or in any way connected with CONTRACTOR’S or its tenant’s use of the City Owned Park Space, and CONTRACTOR’S performance or failure to perform its obligations under this Agreement, including the CITY INDEMNITEES’ active or passive negligence, except for such loss or damage arising from the sole negligence or misconduct of the CITY INDEMNITEES relating to CONTRACTOR’s use of the outdoor dining area and the City Owned Park Space under this AGREEMENT. In the event any CITY INDEMNITEE(S) is/are made a party to any action, lawsuit, or other adversarial proceeding arising from CONTRACTOR’S or its use of the CITY outdoor dining area and the City Owned Park Space encompassed by this agreement, CONTRACTOR’S performance of this Agreement, the CONTRACTOR shall have an immediate duty to defend the CITY INDEMNITEE(S) at CONTRACTOR’s cost, or at the CITY’s option, reimburse the CITY their costs of defense, including reasonable attorney’s fees, incurred in defense of such matters.

The CONTRACTOR’s obligation to indemnify, defend and hold harmless the CITY and/or CITY INDEMNITEES includes, but is not limited to, any liability or expense, including defense costs and legal fees, arising from the negligent acts or omissions, or willful misconduct of CONTRACTOR, or its tenant’s, officers, employees, agents, participants, representatives, or vendors.

7.2 Insurance. Without limiting CONTRACTOR’s indemnification of CITY , and prior to use of the City Owned Park Space, CONTRACTOR or its Tenant shall obtain, provide, and maintain at its own expense during the term of this Agreement, policies of insurance of the types and amounts set forth in this Section 7.2 and Exhibit D (attached hereto and incorporated herein by reference) and in a form that is satisfactory to CITY.

CONTRACTOR acknowledges that the insurance coverage and policy limits set forth in this Section 7.2 constitute the minimum amount of coverage required. Any insurance proceeds available to CONTRACTOR in excess of the limits and coverage identified in this Agreement and which is applicable to a given loss, claim or demand, will be equally available to CITY.

CITY reserves the right to require additional insurance coverage(s) not specified in this section, if, in the sole discretion of the CITY, such additional coverages are necessary to protect the CITY.

8. SAFETY. CONTRACTOR shall conform to the rules and regulations pertaining to safety established by OSHA and the California Division of Industrial Safety.

Whenever CONTRACTOR operations on the Contractor Property or the City Owned Park Space create a condition hazardous to the public or CITY employees, it shall, at its expense and without cost to the CITY, furnish, erect and maintain such fences, temporary railings, barricades, lights, signs and other devices and take such other protective measures as are necessary to prevent

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accidents or damage or injury to the public and employees.

9. PRESERVATION OF CITY PROPERTY. The CONTRACTOR shall provide and install suitable safeguards, approved by the CITY , to protect CITY property from injury or damage. If CITY property is injured or damaged resulting from the CONTRACTOR or its tenant operations, it shall be replaced or restored at the CONTRACTOR’S expense. The facilities shall be replaced or restored to a condition as good as when the CONTRACTOR began the work on the City Owned Park Space.

10. TERMINATION.

10.1 Either party may terminate the Agreement for convenience, provided two hundred seventy (270) days written notice is given to the non-terminating party. The Agreement may be terminated by either party for cause, provided that written notice has been given in the manner specified herein stating the reasons for the intended termination and providing the other party at least ten (10) days to cure any alleged breach. If the party receiving notice fails or refuses to cure the alleged breach within ten (10) days, or to make substantial progress toward cure to the satisfaction of the parting demanding cure, this Agreement may be terminated ten (10) days after receipt of the notice as specified herein. Nothing in this provision alters the procedure for termination of this Agreement because of CONTRACTOR’S failure to maintain, as set forth in Paragraph 5.

10.2 Notwithstanding any other provision of this Agreement, should CONTRACTOR cease operations at 2138 Broad Street, this Agreement will terminate. Any successor(s) in interest will be required to execute an agreement with the CITY for use of the outdoor patio space within sixty (60) days of commencing operations. This subparagraph is binding on successor(s) in interest during the Term of this agreement.

10.3 Should this Agreement be terminated, both Parties agree to execute a document indicating termination for recordation purposes.

11. AUTHORITY TO EXECUTE AGREEMENT. Both CITY and CONTRACTOR do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party.

12. COMPLIANCE WITH LAW. The CONTRACTOR shall keep him/her/itself informed of State and Federal laws and regulations which in any manner affect those employed by it or in any way affect the performance of its service pursuant to this Agreement. The Contractor shall at all times observe and comply with all such laws and regulations. The CITY, and its officers and employees, shall not be liable at law or in equity occasioned by failure of the Contractor to comply with this Section.

13. GOVERNING LAW. The CITY and CONTRACTOR understand and agree that the laws of the State of California shall govern the rights, obligations, duties, and liabilities of the parties to this Agreement and also govern the interpretation of this Agreement. Any litigation concerning this Agreement shall take place in San Luis Obispo County Superior Court, regardless of other courts with jurisdiction over the matter.

14. BUSINESS LICENSE AND TAX. The CONTRACTOR shall maintain a valid CITY of San Luis Obispo business license & tax certificate when applicable before execution of the contract. Additional information regarding the CITY’s business license and tax program may be obtained by calling

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(805) 781-7134. This Agreement creates an interest in real property that may be subject to a possessory interest tax. Contractor shall be responsible for any payment of any taxes due.

15. ASSIGNMENT. The CONTRACTOR shall not assign, transfer, convey or otherwise dispose of the contract, or its right, title or interest, or its power to execute such a contract to any individual or business entity of any kind without the previous written consent of the CITY. The CONTRACTOR shall have the right to assign its rights and obligations under this Agreement to a buyer of the Property subject to the CITY, CONTRACTOR and the buyer executing documentation affirming the continued obligations under the terms and conditions of this Agreement.

16. NON-DISCRIMINATION.

16.1 There shall be no discrimination against or segregation of any person or group of persons on account of race, religion, sex, sexual orientation, national origin or ancestry, age, physical, mental or economic status in the operation, lease, use, occupancy, tenure or enjoyment of the City Owned Park Space or the improvements thereon, or any part thereof, and permittee, or any person claiming under or through it, shall not establish or permit any such practice of discrimination or segregation with reference to the selection, location, number, use or occupancy of employees, contractors, subcontractors, laborers, or material men, tenants, lessees, subtenants, sublessees, invitees or vendees of the City Owned Park Space or the improvements thereon, or any part thereof.

16.2 CONTRACTOR shall not restrict access or use of the City Owned Park Space or the improvements thereon, or any portion thereof, on the basis of race, religion, sex, sexual orientation, national origin or ancestry, age, physical, mental, or economic status of any person.

17. COUNTERPARTS. This Agreement may be executed in counterparts, each of which shall be deemed to be an original in which counterparts shall together contain the signatures of all the parties hereto and shall constitute a single, binding, and complete Agreement for Park Maintenance and Dining.

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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written.

ATTEST: CITY OF SAN LUIS OBISPO, A Municipal Corporation By: By:

City Clerk City Manager
APPROVED AS TO FORM:

By:

Sadie Symens, Deputy City Attorney

State of California
County of
On before me,_____________________________________________, 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 ___________________________________ _ (Seal)

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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IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first above written.

CONTRACTOR
By: _____________________________
Tai Martin, CEO
SLO Martin Properties, LLC
State of California
County of
On before me,_____________________________________________, 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 ___________________________________ _ (Seal)
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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EXHIBIT A-2

LEGAL DESCRIPTION OF CONTRACTOR-OWNED PARCEL
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1 EXHIBIT C

SCOPE OF WORK

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Exhibit D

INSURANCE REQUIREMENTS
Without limiting Contractor’s indemnification of City, and prior to commencement of Lease, Contractor shall obtain, provide, and maintain at its own expense during the term of this Agreement, policies of insurance of the type and amounts described below and in a form satisfactory to the City.

General liability insurance. Contractor shall maintain commercial general liability insurance with coverage at least as broad as Insurance Services Office form CG 00 01, in an amount not less than $1,000,000 per occurrence, $2,000,000 general aggregate, for bodily injury, personal injury, and property damage. The policy must include contractual liability that has not been amended. Any endorsement restricting standard ISO “insured contract” language will not be accepted.

Workers’ compensation insurance. Contractor shall maintain Workers’ Compensation Insurance (Statutory Limits) and Employer’s Liability Insurance (with limits of at least $1,000,000). Contractor shall submit to City, along with the certificate of insurance, a Waiver of Subrogation endorsement in favor of City, its officers, agents, employees, and volunteers.

Property insurance. Upon commencement of construction of Contractor improvements and betterments, or installation of equipment, with approval of City, Contractor shall obtain and maintain insurance on Contractor’s improvements and betterments. Policy shall be provided for replacement value on an “all risk” basis. There shall be no coinsurance penalty provision in any such policy.

Commercial property insurance (if applicable)
Covering the leased premises, fixtures, equipment, building, all property situated in, on, or constituting a part of the premises and any improvements. Coverage shall be at least as broad as the Insurance Services Offices broad causes of loss form CP 10 20 and approved of in writing by City. Coverage shall be sufficient to insure 100% of the replacement value and there shall be no coinsurance provisions. The policy shall include an inflation guard endorsement, 100% rents coverage, contents coverage, coverage for personal property of others, ordinance or law and increased cost of construction coverage. City shall be included as an insured and as loss payee on any such insurance. City shall not be liable for any business income or other consequential loss sustained by Contractor. City shall not be liable for any loss of Contractor’s personal property even if such loss is caused by negligence of City, City’s employees, or agents.

Proof of insurance. Contractor shall provide certificates of insurance and required endorsements to City as evidence of the insurance coverage required herein. Insurance certificates and endorsements must be approved by City’s Risk Manager prior to commencement of performance. Current certification of insurance shall be kept on file with 1 Page 65 of 261
Exhibit D
City for the contract period and any additional length of time required thereafter. City reserves the right to require complete, certified copies of all required insurance policies, at any time.

Duration of coverage. Contractor shall procure and maintain for the contract period, and any additional length of time required thereafter, insurance against claims for injuries to persons or damages to property, or financial loss which may arise from or in connection with the performance of the Work hereunder by Contractor, their agents, representatives, employees, or subconsultants.

Primary/noncontributing. Coverage provided by Contractor shall be primary and any insurance or self-insurance procured or maintained by City shall not be required to contribute with it. The limits of insurance required herein may be satisfied by a combination of primary and umbrella or excess insurance. Any umbrella or excess insurance shall contain or be endorsed to contain a provision that such coverage shall also apply on a primary and non-contributory basis for the benefit of City before the City’s own insurance or self- insurance shall be called upon to protect it as a named insured.

City’s rights of enforcement. In the event any policy of insurance required under this Agreement does not comply with these specifications or is canceled and not replaced, City has the right but not the duty to obtain the insurance it deems necessary, and any premium paid by City will be promptly reimbursed by Contractor or City will withhold amounts sufficient to pay premium from Contractor payments. In the alternative, City may cancel this Agreement.

Acceptable insurers. All insurance policies shall be issued by an insurance company currently authorized by the Insurance Commissioner to transact business of insurance or is on the List of Approved Surplus Line Insurers in the State of California, with an assigned policyholders’ Rating of A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best’s Key Rating Guide, unless otherwise approved by the City’s Risk Manager.

Waiver of subrogation. All insurance coverage maintained or procured pursuant to this agreement shall be endorsed to waive subrogation against City, its elected or appointed officers, agents, officials, employees, and volunteers or shall specifically allow Contractor or others providing insurance evidence in compliance with these specifications to waive their right of recovery prior to a loss. Contractor hereby waives its own right of recovery against City and shall require similar written express waivers and insurance clauses from each of its subconsultants. Enforcement of contract provisions (non estoppel). Contractor acknowledges and agrees that any actual or alleged failure on the part of the City to inform Contractor of noncompliance with any requirement imposes no additional obligations on the City nor does it waive any rights hereunder.

Requirements not limiting. Requirements of specific coverage features or limits contained in this section are not intended as a limitation on coverage, limits or other requirements, or a waiver of any coverage normally provided by any insurance. Specific reference to a given 2 Page 66 of 261
Exhibit D
coverage feature is for purposes of clarification only as it pertains to a given issue and is not intended by any party or insured to be all inclusive, or to the exclusion of other coverage, or a waiver of any type. If the Contractor maintains higher limits than the minimums shown above, the City requires and shall be entitled to coverage for the higher limits maintained by the Contractor. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City.

Notice of cancellation. Contractor agrees to oblige its insurance agent or broker and insurers to provide the City with a thirty (30) day notice of cancellation (except for nonpayment for which a ten (10) day notice is required) or nonrenewal of coverage for each required coverage. If any of the Contractor’s insurers are unwilling to provide such notice, then Contractor shall have the responsibility of notifying the City immediately in the event of Contractor’s failure to renew any of the required insurance coverages or insurer’s cancellation or non-renewal.

Additional insured status. General liability, automobile liability, and umbrella/excess liability insurance policies shall provide or be endorsed to provide that City and its officers, officials, employees, agents, and volunteers shall be additional insureds under such policies. Prohibition of undisclosed coverage limitations. None of the coverages required herein will be in compliance with these requirements if they include any limiting endorsement of any kind that has not been first submitted to City and approved of in writing.

Separation of insureds. A severability of interests provision must apply for all additional insureds ensuring that Contractor’s insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the insurer’s limits of liability. The policy(ies) shall not contain any cross-liability exclusions.

Pass-through clause. Contractor agrees to ensure that its subconsultants, subcontractors, and any other party who is brought onto or involved in the project/service by Contractor (hereinafter collectively “subcontractor”), provide the same minimum insurance coverage and endorsements required of Contractor. Contractor agrees to monitor and review all such coverage and assumes all responsibility for ensuring that such coverage is provided in conformity with the requirements of this section. However, in the event Contractor’s subcontractor cannot comply with this requirement, which proof must be submitted to the City, Contractor shall be required to ensure that its subcontractor provide and maintain insurance coverage and endorsements sufficient to
the specific risk of exposure involved with subcontractor’s scope of work and services, with limits less than required of the Contractor, but in all other terms consistent with the Contractor’s requirements under this agreement. This provision does not relieve the Contractor of its contractual obligations under the agreement and/or limit its liability to the amount of insurance coverage provided by its subcontractors. This provision is intended solely to provide Contractor with the ability to utilize a subcontractor who may be otherwise qualified to perform the work or services but may not carry the same insurance limits as required of the Contractor under this agreement given the limited scope of work or services provided by the subcontractor. Contractor agrees that upon request, all agreements with subcontractors, and 3 Page 67 of 261
Exhibit D
others engaged in the project, will be
submitted to City for review.

City’s right to revise specifications. The City reserves the right at any time during the term of the contract to change the amounts and types of insurance required by giving the Contractor ninety (90) days advance written notice of such change. If such change results in substantial additional cost to the Contractor, the City and Contractor may renegotiate Contractor’s compensation.

Self-insured retentions. Any self-insured retentions must be declared to and approved by City. City reserves the right to require that self-insured retentions be eliminated, lowered, or replaced by a deductible, or require proof of ability to pay losses and related investigations, claim administration, and defense expenses within the retention through confirmation from the underwriter.

Timely notice of claims. Contractor shall give City prompt and timely notice of claims made or suits instituted that arise out of or result from Contractor’s performance under this Agreement, and that involve or may involve coverage under any of the required liability policies.

Additional insurance. Contractor shall also procure and maintain, at its own cost and expense, any additional kinds of insurance, which in its own judgment may be necessary for its proper protection. Contractor’s personal property, fixtures, equipment, inventory, and vehicles are not insured by City against loss or damage due to fire, theft, vandalism, rain, water, criminal or negligent acts of others, or any other cause.

Verification of Coverage. Contractor shall furnish the City with a certificate of insurance showing maintenance of the required insurance coverage, as well as endorsements effecting general liability coverage.. All endorsements are to be received and approved by the City before work commences. 4 Page 68 of 261
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Item 5f
Department: Administration
Cost Center: 1005
For Agenda of: 2/6/2024
Placement: Consent
Estimated Time: N/A
FROM: Greg Hermann, Deputy City Manager
Prepared By: Robert Hill, Sustainability & Natural Resources Official SUBJECT: AMENDED AND RESTATED EXCLUSIVE NEGOTIATING AGREEMENT

WITH SMART SHARE HOUSING SOLUTIONS

RECOMMENDATION
Approve the draft Amended and Restated Exclusive Negotiating Agreement with Smart Share Housing Solutions, in a final form satisfactory to the City Attorney.

POLICY CONTEXT
The City’s Financial Management Manual (Section 475 -C) allows exclusive negotiations for long term leases of City property, as well as provisions for leases to non-profit organizations, where there is a clear link between the proposal and accomplishment of significant City goals, plans or policies and where the proposal has a clear and measurable community benefit.

The proposed project entails rehabilitation and adaptive re-use of the City-owned Rosa Butron Adobe together with installation of a “tiny home” village that will provide affordable housing units. Staff considers the activities described for The Waterman Village to be in the public interest in accordance with the City's historic preservation goals, the Conservation and Open Space Element of the General Plan that provides policy regarding adaptive re-use of the City’s historic structures, with the Downtown Concept Plan, and with the Housing Element of the General Plan.

Accordingly, the proposed project appears to meet the basic policy framework and parameters for entering into an Exclusive Negotiating Agreement (ENA) in accordance with the Financial Management Manual.

DISCUSSION
Background – Property History
The City of San Luis Obispo has owned the Rosa Butron Adobe located at 466 Dana Street since 1989. The City Council adopted a Resolution of Acceptance at that time and agreed to acquire the property as a life estate gift from Ms. Mary Gail Black for site stewardship, restoration, and public uses. It is understood that the donor’s intent was for the City to hold ownership and take care of the property over the long-term, including both the residence and the grounds.

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Item 5f
The Rosa Butron Adobe is listed as a historic residence on the City’s Master List of Historical Resources. Only the front room of the existing structure is the circa. 1845 historic adobe itself, while a subsequent veranda that was added around 1865 is also considered to be a contributing component of the structure’s historicism.

The house is currently vacant, although the City does provide basic maintenance and upkeep to the house and grounds. It is important to note that the Rosa Butron Adobe needs extensive refurbishment, restoration, or rehabilitation prior to it being suitable for occupancy. City resources to maintain and restore its suite of adobe properties are limited and this effort is part of a larger movement towards seeking community partners to help activate these valuable historic resources.

Previous Council Action
Following City Council’s direction, staff issued a Request for Interest (RFI) document seeking community partners to help the City rehabilitate and re-use the Rosa Butron Adobe. The RFI was issued on March 6, 2020, to known interested parties, broadly to non-profit hubs such as The San Luis Obispo County Community Foundation and SPOKES: Resources for Non -Profits, and to local affordable housing organizations including the Housing Authority and People’s Self-Help Housing.

As a result of the RFI process, on September 7, 2021, the City Council approved an Exclusive Negotiating Agreement with Smart Share Housing Solutions and the Peace Project (operating under fiscal sponsorship from Ecologistics, Inc.) that set forth a vision for a shared project known as the Waterman Peace Village, as well as identification of tasks, milestones, and responsibilities agreed upon by both groups.

On November 29, 2022, however, the City’s staff issued a written notice of termination to the Peace Project based on the mutual understanding that the Peace Project would not be able to meet its fundraising milestones and continue to move forward with its portion of the shared project contemplated by the ENA.

Amended and Restated Exclusive Negotiating Agreement
The “Waterman Village” project, as now currently envisioned, entails rehabilitation and adaptive re-use of the adobe structure and installation of tiny housing units, together with related on-site and off-site (if any) improvements on or appurtenant to the property, to be completed entirely by Smart Share. The art studio proposed by the Peace Project is no longer a part of the proposed site development. The key highlights of the ENA remain as follows:

1. Two-year term for exclusive negotiations.

2. Maintenance of non-profit status at all times.

3. Fundraising plan submittal and proof of financial ability to complete the project.

4. Lease negotiation and execution can begin upon satisfactory due diligence, including zoning and / or General Plan requirements, submittal of satisfactory design and construction schedule, and evidence of available funds.

5. Anticipated lease terms include a 55-year term and rent of $1 per year.

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Item 5f

6. Standard review and approval process, including public hearings with the Cultural Heritage Committee and other applicable City bodies, as well completion of the environmental review process prior to any construction.

In addition, the draft Amended and Restated ENA allows for Smart Share Housing to have site access necessary to show the property and structure to prospective donors and funders, as well as to place their Demonstration Cottage in the parking area to the side of the adobe to show the exterior appearance and interior accommodations of a “tiny home”. These provisions are subject to revocable right-of-entry and encroachment permits from the City.

Public Engagement
The RFI that first set forth this process was published on the City’s website, together with a notification item, and was broadly distributed. The existing ENA was approved at a duly noticed City Council meeting in September 2021, and any member of the public may provide comments on the Amended and Restated ENA that is the subject of this report at or before the meeting.

It is important to note that this item requests the City Council’s review and consideration of the Amended and Restated ENA only; any subsequent lease agreement and project that may arise from these negotiations are subject to additional, future public review processes.

CONCURRENCE
The City’s Community Development Department concurs with the recommendation from both a housing and historic preservation perspective.

ENVIRONMENTAL REVIEW
Entering into the Amended and Restated ENA is not a Project, in and of itself, in accordance with the California Environmental Quality Act (CEQA). However, any future activities that meet the definition of a “Project” under CEQA Guidelines will be subject to the environmental review process.

FISCAL IMPACT
Budgeted: No Budget Year: 2023-25
Funding Identified: No

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Item 5f
Fiscal Analysis:

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

Total N/A N/A N/A N/A
The recommended action does not entail any direct expenditures. Modest staff time to complete review of the tasks identified in the Amended and Restated ENA and attend to the agreement and partnership is supported within the operating budgets of the City Administration and IT and Community Development Departments.

Advancing affordable and workforce housing through collaboration with local non-profit partners, as well as continuing to support the preservation of the City’s adobes, are both strategies that are included in the Major City Goals for the 2023-25 Financial Plan. Smart Share has not yet completed cost estimating for the project, anticipated as a future step by the ENA, and it is therefore unknown as this time the amount of affordable housing funds that may be requested. Any allocation of City affordable housing funds would happen through the customary process and be evaluated based on established funding criteria (see City Council Resolution No. 9263 (2001 Series)).

ALTERNATIVES
The City Council may request changes or may decide not to approve the Amended and Restated Exclusive Negotiating Agreement with Smart Share Housing Solutions. This action is not recommended by staff because the proposed action is administrative and in furtherance of prior Council direction.

ATTACHMENTS
A - Draft Amended and Restated Exclusive Negotiating Agreement with Smart Share Housing Solutions.

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AMENDED AND RESTATED

EXCLUSIVE NEGOTIATING AGREEMENT
This Amended and Restated Exclusive Negotiating Agreement (“Agreement”) is entered into on _____________________________ (the “Effective Date”), by and between the City of San Luis Obispo, a California charter municipal corporation ("the City'') and Smart Share Housing Solutions, Inc., a California non-profit organization (“Smart Share”). City and Smart Share shall be jointly referred to as the “Parties”.

RECITALS
WHEREAS, the City is the legal owner of the property located at 466 Dana Street in San Luis Obispo, California (the “Property”) commonly known as the Rosa Butron de Canet Adobe; and WHEREAS, the City received the Property as a life estate gift from Mary Gail Black in 1989 and desires to preserve and maintain the historic adobe structure, trees, and grounds that comprise the Property, as well as public recreational uses, all in keeping with the donative intent of the gift; and WHEREAS, in March 2020, pursuant to City Council direction, the City issued a Request for Information (“RFI”) soliciting community partners that may be interested in working with the City towards restoration, adaptive reuse, and long-term stewardship of the City’s Rosa Butron de Canet Adobe. Further, it was anticipated at this time that the chosen community partner(s) would enter into a negotiation period with the City, and if all parties choose to move forward following the negotiation period, the Parties would enter into a long-term lease agreement for use of the site; and WHEREAS, the City received meritorious responses to the RFI from both the Peace Project and Smart Share Housing Solutions. On September 7, 2021, the City Council approved, and on October 4, 2021, the City, the Peace Project, and Smart Share entered into an Exclusive Negotiating Agreement that set forth a vision for a shared project known as the Waterman Village, as well as identification of tasks, milestones, and responsibilities agreed upon by both groups; and
WHEREAS, on November 29, 2022, the City issued a written notice of termination to the Peace Project based on the mutual understanding that the Peace Project would not be able to meet its fundraising milestones and continue to move forward with the shared project contemplated by the ENA; and WHEREAS, the Waterman Village project, as now currently described, entails rehabilitation and adaptive re-use of the adobe structure and installation of tiny housing units, together with related on-site and off-site (if any) improvements on or appurtenant to the Property, to be completed entirely by Smart Share; and WHEREAS, the Parties recognize that the exact site plan, improvements, and location of improvements that can be accommodated by the Property cannot be determined at this time, and understand that the Property has certain zoning requirements, regulations, and development restrictions including permissible uses, maintenance of trees, street setbacks, creek protection, and other provisions that affect the net buildable and usable land; and
WHEREAS, the City’s Financial Management Manual allows exclusive negotiations for long term lease of City property when the there is a clear link between the proposal and accomplishment of significant City goals, plans or policies; and
WHEREAS, the City considers the restoration, adaptive reuse, and long-term stewardship of the Property to be in the public interest and in accordance with the City's goals and policies.

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Amended and Restated Exclusive Negotiating Agreement
City of San Luis Obispo and Smart Share Housing Solutions, Inc

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NOW, THEREFORE, in consideration of the mutual covenants, conditions, promises and agreements herein set forth, the parties agree as follows:

AGREEMENT

1. RECITALS. The above Recitals are true and are incorporated herein by reference.

2. TERM. This Agreement shall commence upon the Effective Date and shall continue in effect for a period of two (2) years (the “Term”), unless sooner terminated as provided herein. The Parties may extend the Term of this Agreement in writing upon mutual consent.

3. PURPOSE. The purpose of this Agreement is to enable the Parties to explore the feasibility of designing, permitting, constructing, and financing the Waterman Village on the Property.

4. CITY’S OBLIGATIONS. The City shall, during the Term of this Agreement:
a. Exclusivity. Negotiate exclusively with Smart Share as the future tenant of the Property.
b. Project Entitlements and Permitting Requirements. The City will work with Smart Share to review zoning and General Plan requirements and any other applicable local, state, or federal regulations. The intent of this portion of the Agreement is for the Parties to reach an understanding of the legally permissible uses and restrictions on the Property; however, the City legally cannot, and therefore does not, contractually agree as to how it will exercise its legislative authority to administer the General Plan and its zoning and land use authority.
c. Environmental Review. The City will act as Lead Agency pursuant to the requirements of the California Environmental Quality Act. If any project-specific environmental documentation is necessary in order for the City to conduct its environmental review, such documentation shall be at Smart Share’s sole cost and expense.
d. Site Access. City shall provide Smart Share with access to the site and the adobe structure, subject to a separate right-of-entry agreement, in order for Smart Share to provide tours and site visits with prospective donors and funders, as well as for access by Smart Share’s design and engineering professionals. Smart Share may also place its Demonstration Cottage (“Demo Cottage”) upon the property in the existing side parking area, subject to a separate encroachment permit, to facilitate Smart Share showing prospective donors the general exterior size and interior accommodations of one of the proposed Waterman Village homes, as well as to facilitate site tours with donors and act as a base for planning activities of technical team members, only. Under no circumstances, however, shall Smart Share hook up the Demo Cottage to any onsite utilities or allow for any residential use of any kind, nor shall this provision be construed as constituting a tenancy. City reserves the right to require that Smart Share remove the Demo Cottage from the premises with 45-day notice or in accordance with otherwise applicable requirements of the encroachment permit.

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5. SMART SHARE OBLIGATIONS. Smart Share shall, during the term of this Agreement:
a. Non-Profit Status. Be a California non-profit corporation in good standing and be exempt from state and federal income taxes under section 501 (c) (3) of the Internal Revenue Code.
b. Proof of Financial Ability. Provide to the City's reasonable satisfaction that it has the financial ability to design, construct and operate the Waterman Village on the Property.

At a minimum, Smart Share shall provide:
i. Preliminary Cost Estimates. Provide the City with preliminary capital development cost estimates (including but not limited to planning, design, engineering and construction) and two (2) year operating cost estimates, within one year from the effective date of this agreement. This shall include estimates for Adobe rehabilitation, initial site infrastructure and public neighborhood park feature installation, as well as installation of the tiny housing units. Cost estimates will be updated as design progresses, at least every 6 months. Smart Share will include the payment of prevailing wages in estimates for construction.
ii. Fundraising Plans. Provide the City with fundraising and / or financing plans with milestones that are acceptable to, and approved by, the City Manager, whose approval shall not be unreasonably withheld, delayed or conditioned, within one year of the effective date of this agreement. This shall include the Adobe rehabilitation, initial site infrastructure and public neighborhood park feature installation, as well as installation of the homes tiny housing unit component of the project.

Fundraising milestones shall, at a minimum, prior to commencement of lease negotiations, demonstrate to the City Finance Director’s reasonable satisfaction that Smart Share has available at least 50% of all the funds necessary to design and construct the project. “Funds necessary” may include cash on hand, donor pledges or evidence of financing.
iii. Annual Financials. By January 31 of each calendar year, Smart Share shall s provide the City with a current financial statement, copy of most recent filed state and federal tax returns, and copies of current bank statements, to demonstrate fundraising results for the Waterman Village. iv. Formal Development Application. Finalize and submit a formal development application for the Waterman Village to the City. v. Compensation for City Review Costs. Discuss and finalize how City processing and review costs will be funded. Notwithstanding, parties will agree to seek cost estimates prior to entering into lease. c. Environmental Review Information. Provide the City promptly with all information necessary to conduct any subsequent environmental review of the Waterman Village that may be necessary. This information includes, but is not limited to, square footage of structures; square footage of various uses such as public or common areas, storage, studio, and other accessory structures, and any other information deemed necessary by City to conduct its evaluation and inform its environmental determination.

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6. TERMINATION. Either the City or Smart Share may terminate this Agreement with or without cause and without liability to the other party at any time by providing forty-five (45) days’ written notice to the other party.

7. CONDITIONS PRECEDENT TO LEASE NEGOTIATION AND EXECUTION. All of the following conditions must be met as conditions precedent prior to lease execution for the Property:
a. Lease negotiation:
i. Project Due Diligence. The Parties have reviewed zoning and General Plan requirements and any other applicable local, state, or federal regulations and agree with the likely conditions and requirements that will be necessary to carry out the project.
ii. Availability of Funds for Design, Construction, and Operation. Prior to execution of the lease, Smart Share has demonstrated to the City Manager’s reasonable satisfaction that they have met all applicable financial milestones in the fundraising and financing plan approved by the City Manager. iii. Obligations Met. Both City and Smart Share have met all of their respective obligations under the Agreement, and agree that the Waterman Village appears economically feasible, physically possible, and legally permissible. b. Non-Profit Status. Smart Share shall maintain non-profit and tax-exempt status under applicable state and federal law.
c. Design and Construction Schedule. Prior to lease execution, Smart Share shall provide, to the City’s Community Development Director’s reasonable satisfaction, a design and construction schedule, demonstrating, at a minimum, the Waterman Village will be constructed and completed within 7 years of the execution of the long-term lease.

8. GENERAL LEASE TERMS. As the Parties enter into the exclusive negotiations, the Parties desire that the lease include the following general provisions; provided, the actual language of each provision is subject to further negotiation, and most material terms and provisions of the lease have not yet been discussed. The City shall not lease the land for minimal rent unless the lease is completely acceptable to the City and approved by the City Attorney. The following provisions serve as guidelines of the Parties’ general intent but nothing in this paragraph shall be interpreted as an agreement or offer to lease upon the terms, provisions or language set forth below.
a. Smart Share shall commence construction of the Waterman Village no later than one (1) year after the execution of the lease agreement and shall complete construction of the Waterman Village within seven (7) years after execution of lease. Smart Share shall not commence construction of the Waterman Village unless and until they have demonstrated, to the City’s Finance Manager’s reasonable satisfaction prior to expiration of the year within which Smart Share is to commence construction, that they have all of the funds necessary to design and construct, at a minimum, the adobe rehabilitation, tiny home installation, site infrastructure and public park feature construction, as well as operate for at least two (2) years after completion of construction, plus a 15% contingency, available in cash or approved financing (the “Required Funds”).

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If Smart Share does not timely demonstrate that they have the Required Funds, or if Smart Share fails to timely begin or timely complete construction of the project, Smart Share shall be in substantial default, and the lease shall automatically terminate unless City agrees otherwise in writing.

The Waterman Village shall be deemed complete only upon issuance of a Certificate(s) of Occupancy.
b. Minimum 55-year term with the right of first refusal for additional lease years provided that Smart Share are in good standing at the time of the renewal. c. Rent of $1.00 per year provided Smart Share:
i. Is a California non-profit corporation in good standing; and ii. Are a federal and state income tax exempt 501 (c)(3) entity; and use the Property solely as described herein, consistent with the RFI and other related City approved community uses.
iii. Smart Share’s failure to maintain their non-profit corporate status in good standing or its tax-exempt status under applicable state and federal law or to use the Property for any purpose other than as approved and related City approved community uses during the term or any extended term of the lease, shall be a material breach of the lease. In the event any such breach occurs, City may, at its option, either terminate the lease or raise the rent to fair market rates for neighboring commercial uses.
d. Smart Share shall design, construct, operate and maintain the Waterman Village and all street frontage and landscaping, utility extensions and connections, and other improvements, based on agreed upon and approved plans and specifications, at its sole cost and expense without any assistance from the City, unless otherwise agreed to by the City.
e. Smart Share agrees and understands that the City’s Cultural Heritage Committee shall have the opportunity to review the Waterman Village project in order to ensure consistency with the City’s Historic Preservation Guidelines and any other applicable guidance or regulations, including the Secretary of the Interior’s Standards for Historic Preservation.
f. Smart Share shall be responsible for meeting or mitigating all conditions, impacts, mitigations and requirements identified in the environmental review and entitlement processes for issues associated with Smart Share’s operation of the Waterman Village on the Property, at Smart Share’s sole cost and expense. Some cost sharing between the City and Smart Share may be possible, i.e., tree maintenance, hardscape improvements, historic structure repair and infrastructure costs, where they support public access and purpose.
g. Smart Share shall take all reasonable efforts to preserve, protect, and maintain the heritage trees and grounds of the Property in accordance with a Tree Preservation and Protection Plan agreed to by the Parties.

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h. If Smart Share is not in material compliance with the Lease or ceases to be financially solvent and to maintain the Property in a commercially reasonable manner, the lease shall contain provisions for the City to declare a default of the Lease, for Smart Share to effect a reasonable cure of the default(s), and for the City to terminate the Lease if the default(s) are not cured pursuant to the terms and conditions of the Lease, and for the Remainder Property to revert to the City.
i. Prevailing wages shall be paid by Smart Share for construction of the Waterman Village and related improvements where applicable.
j. Payment of possessory interest and other taxes, as may be required, will be paid by Smart Share.
k. Other long-term landlord protection ground lease provisions, such as City standard insurance requirements, indemnity provisions, attorneys’ fees, prohibitions against nuisance, waste, and requiring maintenance will be at Smart Share’s expense. l. The City will not subordinate its interest in the Property to any financing.

10. AMENDMENT. This Agreement may be extended, amended, or modified with the mutual consent of the parties. Any such extension, amendment or modification from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Council.

11. COMPLETE AGREEMENT. This written Agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties.

No oral agreement, understanding or representation not reduced to writing and specifically incorporated herein shall be of any force or effect, nor shall any such oral agreement, understanding or representation be binding upon the parties.

12. NOTICE. All notices to the parties shall be in writing and shall be sent by United States mail, postage prepaid by registered or certified mail addressed as follows:

13. AUTHORITY TO EXECUTE AGREEMENT. Both City and Smart Share warrant and represent that each individual executing the Agreement on behalf of each party is a person duly authorized and empowered to execute agreements for such party.

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IN WITNESS WHEREOF, the parties execute this Agreement on the day and year first above written.

CITY OF SAN LUIS OBISPO
_____________________________________
Mayor Erica A. Stewart
ATTEST:
______________________________________
Teresa Purrington, City Clerk
Approved:
______________________________________
Derek Johnson, City Manager
Approved to as form:
_______________________________________
J. Christine Dietrick, City Attorney
SMART SHARE HOUSING SOLUTIONS, a California non-profit corporation ________________________________________
Joanna Balsamo-Lilien, Chair, Board of Directors

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City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: February 5, 2024
TO: Mayor and Council
FROM: Matt Horn, Public Works Director
VIA: Derek Johnson, City Manager
ATTACH: ATP Active Project Description, Broad Street Background, Resource Estimates
SUBJECT: ITEM 6A – FISCAL YEAR 2023-24 MID-YEAR BUDGET REVIEW Numerous agenda correspondence has been submitted by community members advocating for the City to advance efforts to implement transportation improvements along the South Broad Street corridor as envisioned in the 2014 South Broad Street Area Plan and 2021 Active Transportation Plan (ATP). The response below provides information on what transportation safety/active transportation improvement projects are already in progress, what resources are currently available, and what additional resources would be required to accelerate work on a new project for South Broad Street. 1) What active transportation/transportation safety projects have been recently completed or are in progress?
The following notable active transportation projects have been recently completed or are in progress as City-led capital improvement projects:

1. 2022 Downtown Paving Project – Complete
a. Downtown Marsh and Higuera Street Bikeway Improvements b. Oceanaire and Cerro Romauldo Neighborhood Greenways
c. Ramona Drive and Patricia Safe Route to School Traffic Calming

2. Over 100 ADA Curb Ramps Complete or In-Construction in 2022-24

3. 2023 Pedestrian Crossing Improvements & Johnson Road Diet - Complete

4. North Chorro Greenway Project – In Construction

5. 2023 Arterials Paving – In Construction
a. Santa Barbara Street Bikeway Improvements
b. Monterey Street Pedestrian/Bike Crossing Enhancements c. Santa Barbara/High Street Pedestrian Crossing Enhancements d. Orcutt Road Bikeway Enhancements

6. Monterey/Santa Rosa Intersection Crossing Improvements – Complete

7. 2024 Roadway Sealing Project – In Design
a. Grand Avenue Complete Street

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Item 6a - Broad Street Corridor Page 2
b. Toro Street Neighborhood Greenway
c. Portions of Mill Street Neighborhood Greenway
d. Johnson Avenue Permanent Road Diet

8. South/King Signalized Crossing Project – In Design

9. Higuera Complete Street Project – In Design

10.Foothill Complete Street Project – In Planning/Early Design

11.Railroad Safety Trail Extension (Tiburon to Orcutt) – In Design

12.California/Foothill Rail Crossing Improvements – In Design

13.California/Taft Roundabout – In Design

14.Prado Creek Bridge & Higuera/Prado Protected Intersection – In Design

15.Prado Interchange (Sidewalks and Protected Bike Lanes) – In Design The projects noted above represent over $30 million in investment in ATP Implementation. Attachment A provides key graphics and information related to the community’s request.

In addition, the following active transportation projects have been recently completed or are in progress as requirements of private development projects:

1. San Luis Ranch Development - Complete
a. Madonna Road Shared-Use Path
b. Los Osos Valley Road/Froom Ranch Way Protected Intersection c. Madonna Road/Dalidio Drive Protected Intersection
d. Dalidio Drive and Froom Ranch Way Shared-Use Paths

2. Avila Ranch Development – Partially Complete
a. Buckley Road Extension Bikeways – Complete
b. Vachell Lane, Earthwood, and Venture Drive Bike Lanes – Complete c. Tank Farm Creek Shared-Use Path – Partially Completed d. Buckley Road East of Vachell Bike Lanes & Shared-Use Path – In Design

3. Froom Ranch Development – In Design
a. Los Osos Valley Road Protected Bike Lanes
b. Los Osos Valley Road/Auto Park Protected Intersection

4. 600 Tank Farm, 650 Tank Farm, 660 Tank Farm Developments – In Design a. Protected bike lanes and sidewalks on Tank Farm Road b. Intersection Improvements at Tank Farm/Santa Fe
c. 65% Design for Tank Farm Road Shared-Use Path Extension With the addition of these improvements, a little over 50% of the City’s Active Transportation Plan Tier 1 (highest priority) network would be complete.

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Item 6a - Broad Street Corridor Page 3
Broad Street from South Street to the southern City limits is identified as a Tier 1 Bicycle and Pedestrian Corridor in the Active Transportation Plan and it should be noted that Broad Street between Sweeney Street and Tank Farm Road is scheduled for repaving in 2026-27 and/or 2028-2029 depending on available funding. Typically, measures would be taken to improve pedestrian and bicycle improvements as part of the repaving work. If the Council wants to implement temporary measures as part of the 2027 paving program,
While the repaving project would provide ATP benefits, the totality of improvements conceptually laid out in the South Broad Street Corridor Plan are beyond the scope of paving maintenance and are expected to cost between $12- $15 million. Please note that these improvements are yet to be completely scoped and project delivery costs have yet to be developed. The anticipated improvements to Broad Street include roadway medians, streetlights, traffic signals, and street trees on Broad Street from Upham to Orcutt Road.

If Council wishes to fund additional improvements on Broad Street at this time, and with the addition of new resources discussed further below, staff believes that planning, public outreach, and design work would take approximately 3 years.

Council could also direct staff to include some modest improvements with the paving program with permanent solutions such as signals, medians, lighting, and other identified improvements being integrated into longer-term capital planning and grant applications.
2) Are current resources sufficient to initiate work on a new transportation improvement project for South Broad Street?
Currently, the Transportation Planning and Engineering Program is operating at full capacity, with nearly $30 million in active Capital Improvement Plan projects in some phase of design or construction, in addition to ongoing responsibilities to maintain essential services and programs, including development review, construction traffic control review, and traffic safety/vision zero program administration. While the Program is currently fully staffed, due to previous staffing vacancies, promotions, and departures over the past several years, the Program has not been able to move projects forward as quickly as anticipated on several prominent ATP projects, including the Foothill Complete Street and Railroad Safety Trail Extension (Tiburon to Orcutt) projects.

At this time, there are insufficient staffing and funding resources available or programmed to advance work on any substantial new project assignments, including the South Broad Street Corridor, without deferring/canceling work on other projects. That is not recommended, as most of the current resource-intensive projects are already in construction or funded through outside grants, where delays would risk forfeiture or the return of significant funding amounts.

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Item 6a - Broad Street Corridor Page 4
3) What additional resources would be required to advance work on a new project for South Broad Street?
If the Council is interested in allocating new resources to advance work on a new project for the South Broad Street Corridor at this time, additional staffing and funding resources would be required. In order to take on this new project while maintaining progress on existing essential services and priority capital projects, the following additional resources would be needed:
• Staffing – Two new full-time staffing positions would be recommended: one transportation planner-engineer (ideally mid-to-senior experience level), and one capital improvement project engineer, focusing on transportation project delivery.
o Additional Operating Cost: $400,000 through FY25 + additional funding in future fiscal years
• Capital Project Funding – Approximately $400,000 would be needed to advance consultant services for focused planning, environmental review, engineering design, and community outreach efforts for a South Broad Street Corridor project in order to advance concepts to a sufficient level to inform requests for final design and construction funding within the nearterm horizon (2-5 years). These efforts would also provide sufficient details to support competitive pursuits of outside grant funding for construction. o Additional Capital Cost: $400,000
In total, approximately $800,000 would be required to advance these efforts at this time. Construction costs for permanent improvements are currently estimated at $12-15 million.

It should be noted that the hiring process for the City will take approximately four months to complete and the time necessary to onboard and train a new staff member takes one to two years depending on the experience of the staff hired. It also should be noted that the City has been successful in hiring entry-level staff in the engineering and transportation discipline area, but more experienced professionals are in high demand.

Lastly, it should be noted that the City’s Transportation Manager is unable to have direct involvement and oversight over a potential South Broad Street Corridor project, due to a conflict of interest. This fact highlights the need for additional outside resources to provide adequate oversight to support such a project. If Council is inclined to support the addition of this project, staff recommends reducing the amount of funds appropriated into the Infrastructure Investment Fund.

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Item 6a - Broad Street Corridor Page 5
4) What actions are recommended if Council wishes to move forward with Broad Street ATP implementations outside the two-year financial plan budgeting process.

Council has been provided with cost, timing, and information concerning other projects to assist with Council’s determination whether to move forward with ATP implementations on Broad Street. Due to the need to hire and onboard staff, Council could align funding needs with timing and when better information will be available as follows:

A. Appropriate $400k from the Infrastructure Investment Fund to support staffing needs for the Broad Street ATP with the Mid-Year Budget and approval of this funding for carryover through FY 2023-24 and into FY 2024-25.

B. Direct staff to return with a project plan for Broad Street ATP Improvements with Budget Supplement.

C. Direct staff to return with a funding request for consultant services to support Broad Street ATP Implementation work efforts as part of the Budget Supplement.

D. Direct staff to return with necessary Capital Improvement Plan revisions to fund this need and other infrastructure needs as well as inflationary trends as part of the Budget Supplement.

E. Direct staff to align future Broad Street Paving with Broad Street ATP Implementation work.

Based on known information, this process could take approximately 5 to 6 years to implement ATP improvements on Broad Street when taking into account the need to hire staff, and complete planning and public outreach, design, and construction. A more comprehensive project plan will be provided at Budget Supplement if Council supports the above recommendations.

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1 ATP Projects in Progress
• >$30 million in ATP projects in progress• Notable projects:

1. Higuera Complete Street2. Foothill Complete Street3. 2023 & 2024 Paving Projects4. South/King Signalized Crossing5. California/Foothill Crossing Safety Improvements

6. California/Taft Roundabout7. RRST Extension (Orcutt Area)8. Prado/Higuera Protected Intersection9. LOVR Bikeways (Private Development) ATP Tier 1 Network
Highlighted Links = Projects complete, in design or construction

ATTACHMENT A
1

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2 South Broad Street Corridor
What improvements are envisioned?
• Landscaped
medians
• Signalized
intersections
• Protected bike lanes• Sidewalk widening• Street Trees• Streetlighting• $15M+ to Implement

ATTACHMENT A
2

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3 Resources required to initiate work on South Broad Street Corridor • Transportation and CIP Engineering Divisions at full capacity• Several ATP projects already delayed due to staffing limitations (Foothill Complete Street, RRST Extension in Orcutt Area) • Current projects cannot be deferred without risking millions in grant funding
• Needs for planning/environmental/50% design ≈ $800,000 • Staffing: 2 Engineers ($400,000)• Consultant Services: ($400,000)

ATTACHMENT A
3

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City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: February 6, 2024
TO: Mayor and Council
FROM: Emily Jackson, Finance Director
VIA: Derek Johnson, City Manager
SUBJECT: ITEM 6A - FISCAL YEAR 2023-24 MID-YEAR BUDGET REVIEW &

RESOLUTION TO AMEND THE BUDGET
Staff received several questions from Council in advance of the 2023-24 Mid-Year Budget Review. The questions are below with staff’s response shown in italics:
1) The City’s portion of Bradley Burns sales and use tax revenue from July – September 2023 decreased by -0.3% year over year, while total sales & use tax plus Local Revenue Measure (LRM) G-20 revenues increased by +1.7% during the same period. Why are the growth rates for these two revenue streams different?
The growth rates are different because Bradley Burns is a “Sales and Use Tax” and LRM is a “Transaction and Use Tax” and they are applied in different ways.

Under the Bradley-Burns Uniform Local Sales and Use Tax Law, cities receive revenue equal to 1.0% of all purchases where the sale was negotiated, or the order was taken within city limits. The City’s LRM generates revenue (1.5%) from transactions where the goods are delivered or placed into use within city limits.

The difference between where the sale was negotiated, or the order was taken and where the goods are delivered or placed into use is subtle but impactful.

Particularly for sales of big-ticket items like automobiles or online purchases where the City may receive revenue from only one tax. The quarterly growth rates can vary based on the types of sales that occurred during the quarter. Based on the make-up of the City of San Luis Obispo, our LRM is very successful when it comes to Business & Industry and General Consumer Goods.

The reason the City sometimes combines them is to try and show overall growth in sales and transactions, despite where the sales are coming from or going to.

However, the Bradley Burns tax is the best to use when comparing to State and County growth rates.

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2023-24 Mid-Year Budget Agenda Correspondence Page 2
To learn more about the nuances of Sales, Use, and Transaction tax collection, see the Local Government Guide to California Sales, Use and Transaction Tax published by the HdL Companies (the City’s sales tax consultant). The table below illustrates the third quarter growth for calendar year 2023 (July-September 2023) by region and type of tax.

Revenue Region/Type Growth
a. State of California (Bradley Burns) -1.5%
b. County of SLO (Bradley Burns) 0.0%
c. City of SLO Sales Tax (Bradley Burns) -0.3%
d. City of SLO Transaction Tax (LRM) +3.2%
e. City of SLO Total Sales, Use & Transaction Tax (c & d) +1.7% 2) Along the lines of Sales Tax, on Budget Report page 3, it shows that Sales Tax revenue from Building and Construction was -7.7%. Do we know why that was?
Although the City has not met with HdL to discuss its City-specific Q3 results, the State was down in this category also (-2.6%) and there are some notable trends.

One of the main reasons being that high interest rates and low affordability lead to less home sales and housing stock turnover. Less turnover can be correlated to less remodels and home improvement projects. Additionally, workforce and labor availability are a huge challenge for contractors. The threat of another El Niño wet winter also seemed to have impacted people’s decision to start construction projects last fall.

Here is an excerpt from the HdL’s latest California Consensus Forecast (December 2023) which projects an overall 0.8% decline in this category for 2023/24:

Cement and asphalt batch plant activity appears to be growing because of heightened infrastructure work around the state in addition to delayed repair projects related to last year’s storms.

Roofing supply houses and roofing contractors also saw large sales increases this fall. Lumber prices have plateaued, but most other commodity rates are still increasing. Big-box home improvement centers are drawing fewer customers as shoppers forego appliances and other big-ticket outlays. Recent mortgage interest rate declines did little to benefit new development but with rates expected to move toward their new base by the middle of 2024, new home and commercial development are expected to accelerate, sparking gradual growth in overall sales that stabilizes in fiscal year 2026-27.

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2023-24 Mid-Year Budget Agenda Correspondence Page 3
3) Budget Report page 7 references that the future CalPERS unfunded liability payments were increased significantly to reflect the Foster and Foster assessment for May 2023. How significant was the variance? Can you provide the original vs. updated assumptions?
The table below shows the original unfunded liability assumptions (all funds combined) for the original fiscal forecast as presented in the 2023-25 Financial Plan (line 1) and the new forecast included in the mid-year budget (line 2). The variance reaches over $3 million by 2026-27. These numbers are dependent on the actual annual rate of return that CalPERS achieves (goal is 6.8%). Forecasting for unfunded liability will continue to be adjusted based on the performance of CalPERS investments. The City’s one-time additional discretionary payments (ADP) do help in the long run and the impacts of these payments are not forecasted at this time in the five-year forecast.
(in thousands) 2024-25 2025-26 2026-27 2027-28
1 Original Unfunded Liability Forecast $ 13,409 $ 13,140 $ 12,940 $ 12,560 2 Updated Unfunded Liability Forecast* $ 14,242 $ 15,062 $ 16,074 $ 16,881 3 Variance (or increase) $ 833 $ 1,922 $ 3,134 $ 4,321
*The forecast included on Budget Report Page 10 – Table 8 (within line 25 - Staffing) 4) Budget report page 4 of the packet references the Development Services Designation Fund. Why was this fund removed with the 23-25 financial plan and this policy taken out of use?
Since the time that the Development Services Designation was established in 2015, the way permit fee revenue was budgeted has been more predictable with the end of the Great Recession. The Community Development Department added significant resources, and the new policy language was developed to ensure the cost of contracting out work was commensurate with forecasted revenue. The current Building Permit Plan Check services policy reads “City of San Luis Obispo offers building permit plan check services through consultants at a set price, not to exceed 65% of the City’s fee for the service. Building Permit Plan Check Services are offered by the City on a 100% cost-recovery basis, and the service is provided after the fee is paid in full.”
Both policies were included in the 2021-23 Financial Plan. Staff recommended removing the development services designation policy because it was duplicative with the new budgeting policy. Additionally, for the last several years, the department has not over-realized revenue and the policy did not adequately address what would happen in that circumstance.

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2023-24 Mid-Year Budget Agenda Correspondence Page 4
5) Budget report page 5 points out that, at mid-year, we are 56% spent compared to budget. Do we anticipate this being a problem for the second half of the year?
No, this is not a problem because this 56% includes purchase orders that were set up in the beginning of the year in addition to any annual payments that were made in the first half of the year. For example, the City’s CalPERs unfunded liability payment is paid in full in July which saves the City over $300,000/year as opposed to if it were paid monthly. It is expected that the overall percentage spent would be higher than 50% as of December 31, 2023.
6) Budget Report page 13 describes the recommended line items for use with the $8.3 million unassigned fund balance. Separate from the $220,000 recommended to purchase the David statue and to support other local arts projects around the city, can you please summarize the funding currently budgeted in 2023-24 to support public art projects and contracts with SLOMA or other groups? What funding is set aside in 2024-25 for the same purposes?
In addition to the proposed $120,000 to purchase the “David” sculpture and $100,000 to enhance additional public art projects in support of the community, the 2023-25 Financial Plan has allocated the following funds in support of the Public Art Program:

FY 2023-24:
a) $30,000 for Annual Asset Maintenance
b) $175,000 for Small Public Art Projects
c) $20,000 for Utility Box Beautification program
d) $100,000 for Roundabout Public Art Projects
FY 2024-25:
a) $30,000 for Annual Asset Maintenance
b) $150,000 for Small Public Art Projects
c) $20,000 for Utility Box Beautification program
d) $100,000 for Roundabout Public Art Projects
These funds contribute to the capital funds carried over which will support the deliverables outlined in the SLOMA partnership agreement (including their annual management fee), annual asset maintenance needs, and other public art installations.

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2023-24 Mid-Year Budget Agenda Correspondence Page 5
7) On Budget Report page 31 of the packet, can you please explain the increase in projections for line 4 of Table 30? Why does the projection go up by $70K in 2024-25 and then back down the following year?
The long-term parking revenue line includes programs like 10-hour meter permits, merchant validations, structure prox cards, and reserved parking for construction vehicles. The variety of programs results in fluctuations in revenue based on individual commute patterns, construction downtown, and businesses’ subsidization of their employees’ parking. Long-term parking revenue is forecasted using an average of the prior three years to account for individual program revenue variances. The 2024-25 budget was updated; however, the outer years of the forecast were not, thus explaining the decline. Staff will be adjusting the forecast for this as part of a more comprehensive forecast update for the 2024-25 Supplemental Budget.
8) On Budget Report page 52, we see department updates for Code Enforcement. Can you please provide more detail on what the proposed changes mean for the Code Enforcement Division and their work on safe housing?
The department hired a Safe Housing Specialist in November 2023, and we have been working with them to develop enforcement and outreach strategies that are aligned with Council’s feedback from the October Study Session. This includes focused efforts in reaching tenants and working with tenant rights groups and student groups. We have participated in various events such as the Cal Poly offcampus housing fair, a Cal Poly hackathon that focused on safe housing, and invited members of SLO Rent Coalition to meet with staff for a brainstorming session. We have also launched a couple of educational outreach campaigns.

These campaigns were conducted on large rental complexes when we were made aware of a code violation. We notified all tenants of the complexes of the unique violation in a neighboring unit, informed them of the process to report any violations they may be aware of, and provided our tenant rights pamphlet. The Code Enforcement Tech I position was just filled in the middle of January, and our new employee is still in training.
9) Regarding the Police Department performance measures on Budget Report page 68 (screenshot below): are these grant-funded enforcement efforts? Is the reason so few enforcement efforts have occurred a result of low staffing levels?

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2023-24 Mid-Year Budget Agenda Correspondence Page 6
These columns are low due to the timing of the grant period (October 1 – Sep 30). 35 Targeted enforcements at mid-year appears low, however the grant period only started on October 1st and additional grant operations will occur in 2024. This is typical, as most of the grant activities are planned in the subsequent year of the grant due to fall events such as Halloween, holidays etc. Additionally, the City just completed a DUI checkpoint this last weekend, after this document was completed and not during the mid-year reporting time period.
10) On Page 108 of the packet, the following statement is included:

What is the cause is of the rate increases and why is it going to be 25% for CCA customers?
In addition, why is Unreserved Working Capital projected to go up for another year and then down after that?
Electricity Rate Increases
There were a number of items that were considered in the January 2024 electric service rate increase. These are summarized in the image provided by PG&E highlighting the rate change drivers:

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2023-24 Mid-Year Budget Agenda Correspondence Page 7
The major drivers were wildfire mitigation and catastrophic events (WMCE) infrastructure and inflation. These costs, and other ancillary drivers, are outlined in a lengthy General Rate Case and a webinar conducted by PGE. What we have recently seen is PG&E proposing rate increases that impact the City first, with some of these costs passed along to the CCA, such as the distribution costs associated with vegetation management.

Water Unreserved Working Capital
The unreserved working capital goes up in 2025-26 because of forecasted debt financing. The unreserved working capital goes down in 2026-27 because of infrastructure costs corresponding to capital expenditures associated with that debt.

The 2025-26 forecast for unreserved working capital includes anticipated debt financing for the 30-inch Waterline Replacement on Santa Rosa from Stenner Creek to Highland. This assumes a project cost and financing of about $8.2 million. Staff reflected the inflow of cash occurring all in 2025-26, but the project expenses occurring in 2025-26 and 2026-27."

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Item 6a
Department: Finance
Cost Center: 2002
For Agenda of: 2/6/2024
Placement: Business
Estimated Time: 90 minutes
FROM: Emily Jackson, Finance Director
Prepared By: Natalie Harnett, Policy and Project Manager Riley Kuhn, Principal Budget Analyst
SUBJECT: FISCAL YEAR 2023-24 MID-YEAR BUDGET REVIEW

RECOMMENDATION

1. Receive and discuss the Mid-Year Budget report based on revised projections for all major funds at the mid-point of the 2023-24 fiscal year; and

2. Adopt a Draft Resolution entitled, “A Resolution of the Council of the City of San Luis Obispo, California, approving amendments to the adopted 2023-24 Budget Appropriations” and approve the allocations as stated in the Mid-Year Budget Report.

POLICY CONTEXT
The City’s budget policies require that the City Council review the City’s budget and financial condition at least every six months. Section 804 of the Municipal Code, at any meeting after the adoption of the budget, the Council may amend or supplement the budget by motion adopted by a majority vote of the Council.

The mid-year review is part of the ongoing quarterly reporting process and fulfills that purpose. The review allows the Council to adjust revenue and expenditure assumptions should the need arise. The accompanying Mid-Year Budget report for 2023-24 provides a comprehensive overview of the City’s financial condition half-way through the fiscal year and summarizes current financial trends since the adoption of the 2023-25 Financial Plan in June 2023.

DISCUSSION
Mid-Year Report Organization
The report’s focus is on the General Fund and each of the City’s enterprise funds. The mid-year budget report also provides an update on departmental performance measures, work programs, the Capital Improvement Plan, and Major City Goals. The report (included as Attachment A) includes the following sections:

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Item 6a
Section A – General Fund Summary: This section provides a narrative overview of the City’s current General Fund financial condition and current revenue and expenditure trends as of December 31, 2023. In summary, some revenues are exceeding projections and some have been adjusted upward accordingly. Expenditures are on track with where they should be at this point in the year at both the department and category levels. The revised five-year forecast and narrative about the changes in assumptions is also included. Based on the current assumptions, there are imbalances in the outer years of the forecast. Staff is working on a more comprehensive revision to the forecast which will be presented with the 2024-25 Supplemental Budget. The report also provides a storm expenditure update, consistent with prior budget updates.

Section B –Mid-Year Recommendations: This section outlines the proposed mid-year expenditure budget changes as well as allocations of the FY 2022-23 unassigned fund balance. The budget changes address mission critical needs and no new programs or services are being recommended. The recommendations also include an additional discretionary payment (ADP) to CalPERs.

Section C – Enterprise Fund Summary: This section provides a narrative update of the City’s enterprise funds’ financial conditions, including any recommended budget changes.

Year-to-date expenditures and revenues are on track for all funds. Revised long-term forecasts are included.

Section D – Department Performance Measures and Work Program Updates: This section provides an evaluation on the performance measures and an update on core objectives of each operating program. All the 74 total operating programs manage workload within budget and meet core objectives.

Section E – Capital Improvement Plan (CIP) Update: This section provides an update on active and ongoing CIP projects.

Section F – Major City Goal Update: This section provides an update on Major City Goal tasks that were either scheduled for completion in the first two quarters of fiscal year 2023-24 or are listed as “ongoing”. Several tasks were delayed, but most were completed or are scheduled to be completed before year end.

Appendix A – Detailed Financials: This section provides a closer look at year-to-date actuals for the major funds and the recommended revenue budget adjustments.

Preferential Parking District Program
On July 11, 2023, Council approved the temporary deferral of the Preferential Parking District Program with a plan that staff come back to Council in the Spring of 2024 with a public engagement and outreach plan and study session, with the goal to adopt a revised program by Fall 2024. Staffing resources within the Parking Program have been strained due to the increased priority and condensed schedule of the Parking Rate Study occurring in the Winter/Spring of 2024, as well as the current vacancy of the Parking Program Manager, and a planned leave of the Mobility Services Deputy Director. In light of that, staff recommend shifting this study session to late 2024 or early in 2025 with implementation of changes to happen in mid-2025.

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Item 6a
Public Engagement
Public comment on the item can be provided to the City Council through written correspondence prior to the meeting and through public testimony at the meeting. The Mid-Year Report will also be posted on the City’s website for public review.

CONCURRENCE
The City’s internal Financial Plan Steering Committee has met on multiple occasions and concurs with the recommendations included in this report.

The City’s Revenue Enhancement Oversight Committee (REOC) met on January 25, 2024 to review the proposed uses of Local Revenue Measure (LRM) funding. The REOC supports the proposed budget allocations as they are in line with the LRM priorities.

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

FISCAL IMPACT
Budgeted: Yes Budget Year: 2023-24
Funding Identified: Yes
Table 1: FY 2023-24 Mid-Year Revenue Budget Changes
Fund Initial Budget Revised Budget Variance
101-General Fund $80,967,960 $83,508,771 $2,540,810
601-Water Fund $28,225,893 $28,643,350 $417,457
602-Sewer Fund $52,589,691 $47,536,432 $(5,053,260)
611-Parking Fund $57,203,324 $56,700,994 $(502,330)
Grand Total $218,986,869 $216,389,546 $(2,597,323)
Table 2: FY 2023-24 Mid-Year Expenditure Budget Appropriations (One-time) General Fund $ 6,471,095
Local Revenue Measure $ 3,872,937
Capital Reserve $ 1,860,000
IT Replacement Fund $ 33,200
Parking Fund $ 287,336
Sewer Fund $ 89,550
Water Fund $ 404,968
Transit Fund $ (90,178)1
Completed Projects Reallocation or Transfers2 $ 680,000

1 Negative value indicating this is an appropriation of budget back to fund balance. 2 This is not a new appropriation, rather a reallocation of funds. See Attachment A – Section B for detail.

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Item 6a
Total All Funds $ 12,928,908
Table 3: Recommended FY 2023-24 Cal PERS ADP3
Fund ADP Amount
General Fund $ 2,000,000
Water $ 164,840
Sewer $ 169,419
Parking $ 61,003
Transit $ 12,555
Whale Rock $ 21,417
TBID $ 7,976
Total All Funds $ 2,437,211

ALTERNATIVES
The Council could direct staff to not implement the proposed budget change recommendations. Should the adjustments not be approved, the budget will remain unchanged at the adopted budget levels. Staff does not recommend an unchanged budget due changing needs of the community and the City organization.

ATTACHMENTS
A - FY 2023-24 Mid-Year Budget Report
B - Draft Resolution approving an amendment to the 2023-24 Budget Allocation

3 Payment to be made in April 2024

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Mid-Year Budget Review
FISCAL YEAR 2023-24
The City’s Budget and Fiscal Policies (Financial Plan Purpose and Organization, G – Mid-Year Budget Reviews) call for a formal financial status report to the City Council based on the first six months of each fiscal year. The Mid-Year Budget Review fulfills this requirement and allows the Council to take a broader look at the City’s financial picture and progress on Major City Goals or strategic initiatives shortly after the mid-point of the fiscal year. This report focuses on the current fiscal year and provides an analysis of adopted budget revenue and expenditure appropriations. It also outlines the achievements and the potential challenges for each department and the City organization as a whole and provides an update on adopted Major City Goals. Based on the review and accompanying analysis, the City remains financially sound with most revenues tracking ahead of budget and operating program expenditures remaining within budgeted allocations.

Table of Contents
Section A: GENERAL FUND SUMMARY ......................................................................................................... 2 A1. Revenue .......................................................................................................................................... 2 A2. Expenditures................................................................................................................................... 5 Revised General Fund Long Term Forecast........................................................................................... 7 Section B: Mid-Year Expenditure Budget Changes..................................................................................... 11 Section C. Enterprise Funds ........................................................................................................................ 19 C1: WATER FUND .................................................................................................................................... 19 C2: SEWER FUND..................................................................................................................................... 24 C3: PARKING FUND ................................................................................................................................. 28 C4: TRANSIT FUND .................................................................................................................................. 32 Section D: Department Performance Measure and Work Program Updates ............................................35 Section E: CIP Update.................................................................................................................................. 78 Section F: Major City Goal Update.............................................................................................................. 80 Appendix A – Detailed Financials ................................................................................................................ 89 Budget Report Pg. 1

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General Fund Summary
Section A: GENERAL FUND SUMMARY
A1. Revenue
The table below shows the updated revenue forecast for the General Fund (all revenue consolidated).

Detailed year-to-date actuals and mid-year changes by revenue type can be found in Appendix A.

Table 1 - General Fund Revenue
Sales Tax revenue is on track with its budget for the year; however only reflects five months of revenue and excludes the “clean-up” payment for Q4 (calendar year) which can impact the overall numbers. The state as a whole experienced a decline of 1.5% in year over year sales tax in the first quarter. The County of San Luis Obispo outperformed the State and was flat and the City of San Luis Obispo outperformed all other cities in the county. Combined sales tax revenue from Bradley Burns and the Local Revenue Measure was up 1.7% from the same quarter last year. These trends are encouraging and can be partially attributed to new auto dealers and growth in the restaurants and hotels category.

As we look towards Q4 data, anecdotally, local businesses have shared that they were very busy over the holiday shopping period. Even as inflation and high interest rates have squeezed budgets, a record 200 million shoppers turned out nationally between Black Friday and Cyber Monday, according to the National General Fund Revenue FY 2022-23 Budget Actuals % Received Midyear Revised Budget
Total Midyear
Changes
1 Tax and Franchise Revenue $ 102,133,765 $ 100,527,765 $ 44,010,515 44% 102,210,442 $ $ 1,682,677 2 Sales Tax (Bradley Burns) 21,865,468 22,578,995 8,994,782 40% 22,578,995 - 3 Local Revenue Measure G20* 30,508,731 30,262,098 12,409,186 41% 30,262,098 - 4 Safety Prop 172 544,521 498,988 264,510 53% 550,000 51,012 5 Property Tax 22,216,031 21,999,786 9,799,735 45% 22,863,770 863,985 6 Transient Occupancy Tax 11,037,037 10,704,000 4,910,337 46% 10,704,000 - 7 Utility User Tax 6,904,194 5,710,320 2,334,838 41% 6,332,000 621,680 8 Business Tax 3,281,010 3,252,293 2,976,154 92% 3,252,293 - 9 Franchise Fees 2,349,603 1,854,000 680,073 37% 2,000,000 146,000 10 Gas Tax* 1,239,701 1,389,292 700,591 50% 1,389,292 - 11 Gas Tax (SB1)* 1,059,724 1,177,994 483,061 41% 1,177,994 - 12 Cannabis Tax 1,127,744 1,100,000 457,248 42% 1,100,000 - -
13 Service Fees and Other Revenue $ 15,356,185 $ 13,269,580 $ 8,433,108 64% 14,127,713 $ $ 858,134 14 Development Review 6,424,716 6,275,536 3,165,789 50% 6,275,536 - 15 Fire 1,612,981 1,577,836 695,328 44% 1,647,854 70,018 16 Parks & Recreation 1,813,831 2,021,599 981,734 49% 2,025,958 4,359 17 Police 763,511 689,420 381,581 55% 745,003 55,583
18 Business Licenses (Incl Cannabis 669,968 666,600 673,764 101% 694,774 28,174 19 Other Revenue 2,662,834 1,032,771 1,293,649 125% 1,732,771 700,000 20 Grants & Subventions 1,408,344 1,005,817 1,241,264 123% 1,005,817 - 21 Grand Total $ 117,489,950 $ 113,797,345 $ 52,443,623 46% 116,338,155 $ $ 2,540,810 FY 2023-24
How to read the budget tables in this report
Budget: Adopted budget plus any encumbrances from prior year(s) or approved budget adjustments made throughout the year.

Actual: Actual expenditures plus any encumbrances or obligated funds as of December 31, 2023.

Budget Report Pg. 2

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General Fund Summary
Retail Federation. This, in combination with a so far mild winter season, should help keep sales tax revenue stable through the beginning of 2024.

Table 2- Year-over-year Sales Tax Revenue (Bradley Burns) for Calendar Year Q3 (July-Sept) Table 3 - Year-over-year Sales Tax Revenue (Local Revenue Measure G-20) for Calendar Year Q3 (July-Sept) Property Tax forecasts have been increased by about $800,000 to reflect the latest forecast (October 2023) from the County Assessor’s Office.

Transient Occupancy Tax (TOT) revenue hit a record high in FY 2022-23; however, we have seen the monthly amounts in FY 2023-24 average about 3% lower than last year. Staff anticipated this cooling and expects this trend to continue through the rest of the year. Despite being lower than last year, the revenue is still on track to meet budget projections.

Utility Users Tax (UUT) revenue budget was increased to a conservative projection based on year-to-date revenue trends and last years’ receipts. Over the last several years, this revenue has been volatile. Last year, the City hit record high UUT revenues largely due to rate increases across all utilities. Electricity, water, sewer, and telecommunications revenue is tracking almost the same as or slightly higher than last year; however, UUT revenue from natural gas is down about 15% because of fluctuation in rates based on Budget Report Pg. 3

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General Fund Summary
supply and demand. Given the relatively mild winter and lower rates, this trend is projected to continue through the remainder of the fiscal year.

Franchise Fee revenue budget was increased to a conservative projection based on year-to-date trends and last years’ receipts. Like UUT revenue, franchise fee revenue was particularly high last fiscal year because the franchise agreements are based on the utility providers’ gross receipts, which spiked in FY 2022-23 due to rate increases. Trends are showing that this is slowing down, particularly in the natural gas sector which explain a lower budget than last year.

Business Tax should all be collected at this point, but there are several delinquent businesses that once remitted should bring the actuals up to the budgeted amount. 430 businesses will be sent a second citation that costs $200. The citations will be sent out January 24th. If still unpaid, a third citation of $500 will be sent out in the middle of February.

Cannabis Tax revenue is on track with projections.

Gas Tax and SB1 are on track with projections.

Fees for Service have been marginally adjusted to account for actual year-to-date revenue or trends identified over the last six months. Despite some decreased revenue projections for certain fees, a projected increase in other free revenue results in a net neutral impact on the general fund. Specific revenue budget changes can be found in Appendix A.

Other Revenue The major adjustment in “other revenue” is a true-up in the city’s projected interest earnings or Fair Market Value (FMV) adjustments based on the year-to-date actuals. Interest earnings and FMV adjustments swing between fiscal years based on the market and are difficult to forecast because investment returns are impacted by market, bond, and other geo-economic factors. The revenue budget is being increased conservatively to reflect the current interest rate environment.

Grants and Subventions are at 123% received because of unbudgeted Mutual Aid Reimbursements that the City receives for sending resources to help other agencies. This revenue helps offset unbudgeted expenditures associated with providing mutual aid to other agencies (staffing, overtime, fuel, etc.) Development Services Designation
In 2014, the City Council adopted Resolution No. 10539 forming the Development Services Designation Fund. It authorized the City Manager to approve the appropriation and carryover of up to 75 percent of the over-realized development services revenue to cover the additional funds needed for development projects. This policy can be found in the 2021-23 Financial Plan Development Services Revenue policy (Policy D of the Financial Reporting and Budget Administration section).

While the Designation policy was removed with adoption of the 2023-25 Financial Plan, there was a fund balance of $464,136 at the end of FY 2022-23. The intended purpose of those funds is the timely processing of development permit applications. In September 2023, a City Manager Report authorized $250,000 of the Designation Fund's remaining balance to be transferred to the Community Development Department budget, with $200,000 to Engineering (4004) and $50,000 to Planning (4003) for consultant services. At the beginning of the fiscal year, staffing was challenging in both Planning and Engineering Development resulting in the contracting of consultants to manage and keep up with workload demands.

As the remaining balance of the designation fund continues to support these efforts through the remainder of the Financial Plan, no revenue will be added to the Development Services Designation. A Budget Report Pg. 4

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General Fund Summary
balance of $214,136 remains in the assigned designation account for use on the intended purpose; however, once drawn down, the account will be eliminated. Based on the FY 2022-23 audited financials and usage during the current fiscal year, the following table shows the current balance of the development services designation:

Table 4- Development Services Designation
Development Services Designation
23-24 Beginning Balance $ 464,136
Engineering Development Consultants ($200,000)
Planning Consultants ($50,000)
Current Balance $ 214,136
A2. Expenditures
Table 5- General Fund Operating Expenditures by Department Table 6 - General Fund Operating Expenditures by Type
General Fund Expenditures by
Department
FY 2022-23
Actual Budget Year-to-date Actual % Expended
1 Internal Services 17,815,915 19,996,243 10,558,314 53% 2 Admin/IT 11,500,788 12,184,186 6,782,052 56%
3 City Attorney 1,424,496 1,668,051 972,240 58%
4 Finance 2,378,451 2,485,965 1,345,715 54%
5 Human Resources 2,126,740 2,233,158 1,239,827 56%
6 Non-Dept/Support Services 385,440 1,424,883 218,480 15% 7 Community Services 30,207,250 33,727,885 18,495,344 55% 8 CSG Admin 703,556 830,784 498,044 60%
9 Community Development Departm 7,439,031 8,807,387 4,510,454 51% 10 Parks & Recreation 5,092,322 5,706,488 2,761,044 48% 11 Public Works 16,710,736 17,918,390 10,458,882 58%
12 Utilities 261,605 464,836 266,919 57%
13 Public Safety 36,827,297 37,571,537 22,327,530 59%
14 Police 21,430,400 22,278,369 13,262,834 60%
15 Fire 15,396,897 15,293,168 9,064,696 59%
16 Total $ 84,850,462 $ 91,295,664 $ 51,381,188 56%
FY 2023-24
General Fund Expenditures by
Department
FY 2022-23
Actual Budget Year-to-date Actual % Expended
1 Salaries 42,285,999 46,490,831 21,187,413 46%
2 Retirement/Benefits 9,340,941 11,508,563 5,438,573 47% 3 Contract Services 11,641,737 13,581,934 9,190,424 68% 4 Other Operating Expenditures 4,618,922 5,317,520 3,077,836 58% 5 PERS Unfunded Liability 13,916,694 11,132,870 10,998,102 99% 6 Utilities 3,046,170 3,263,947 1,488,839 46%
7 Total $ 84,850,462 $ 91,295,664 $ 51,381,188 56%
Budget Report Pg. 5

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General Fund Summary
At Mid-Year, departmental budgets should typically be about 50% expended, though this can vary for departments that budget for significant non-salary expenditures that do not always follow even expenditure patterns throughout the year such as fiscal year contracts that cover a full year that are entered into in early July. Overall, the General Fund is on track with its expenditure budgets at both the department and the category level.

Storm Update
As noted in prior budget reports, the winter storms in January and March 2023 caused significant damage to City infrastructure and resulted in emergency declarations at the Federal and State level, in addition to the Emergency Services Director’ s local emergency proclamation. The City Council authorized use of up to $9 million from the City’s operating reserve in FY 2022-23 and FY 2023-24 to address unbudgeted storm costs and with adoption of the 20-23-25 Financial Plan, the City Council also approved allocation of $2.75 million in the CIP to fund projects to repair storm damages and mitigate against future damage. The Federal and State declarations enable the City eligible to seek reimbursement for certain storm related costs. The maximum reimbursement for eligible costs is 93.75% (75% from FEMA and 18.75% from CalOES), meaning that the City will pay a minimum of 6.25% for certain storm related costs. The FEMA reimbursement process has moved slowly, due to turnover in the FEMA Program Delivery Managers assigned to assist local agencies in submitting projects for reimbursement and a lack of clarity about the information required in order to submit projects. Based upon information provided by EY (the consultant hired to provide disaster recovery technical assistance), staff expects that reimbursement will be received approximately 12 months following formal submittal of projects to FEMA. The timing of reimbursement is being closely tracked as the City’s ability to pay back the operating reserve and fund future stormrelated projects is dependent on receiving reimbursement for incurred storm costs.

The City has expended approximately $10.34 million on storm response to date, including debris removal, emergency protective measures, and projects to make permanent repairs to damaged facilities. As noted in prior updates, storm related costs continue to shift as projects are scoped and designed. Currently, the total storm costs are estimated at $35.6 million, consistent with what was reported in the First Quarter Financial Report. Total costs reflect efforts to not only repair storm damage, but to mitigate against future damage brought on by a potential El Niño year or subsequent storm events. In order to move quickly to address storm damages, staff is using streamlined procurement processes, including the authorization of construction contracts and change orders by the City Manager where necessary and allowable to expedite work in order to protect community health and safety. Staff recently completed the project to repair and stabilize the creek bank at San Luis Drive—one of the highest priorities and most costly projects related to the storms. Staff continue to work to prioritize the repairs and identify which projects will be eligible for the highest reimbursement.

Inflation
In recent years, the City (as well as most other local agencies) has grappled with the effects of inflation, particularly as it pertains to construction bid prices. The Consumer Price Index (CPI) serves as a key indicator, and a striking comparison between the 2019 CPI at 2.3 percent and the 2023 CPI at 5.8 percent highlights the significant increase in costs. The City Council is acutely aware that City staff is diligently navigating economic uncertainties and contending with substantial cost escalation. This escalation has had a profound impact on the overall expenses associated with maintaining existing levels of service.

Furthermore, the surge in construction prices has posed challenges to the City's ability to fund both ongoing projects and incorporate new initiatives into the Capital Improvement Plan. The table below illustrating comparable bid prices in 2019 versus 2023, along with the corresponding escalation, Budget Report Pg. 6

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Mid-Year Expenditure Budget Changes
underscores the tangible impact of inflation on the construction landscape within the city. This awareness emphasizes the need for strategic planning and resource allocation to address these economic challenges effectively.

Table 7 - Impacts of Inflation
Cost in 2019 Cost in 2023 Increase Variance %
Dozen Eggs1 $1.54 $2.51 $0.97 +63.3%
Silt Removal (CY) $94.74 $116.00 $21.26 +22%
Hot mix2 (AC ) per TON $114.75 $161 $46.25 +40%
PCC3 Sidewalk (SF) $19.00 $30.00 $11.00 +58%
Adjust Utility Collars to grade (EACH) $1,900 $2,965.00 $1,065.00 +56% The Council and staff will need to be cautious and focused on core commitments towards the City’s capital program. Any new projects or shifting of capital costs to the General Fund may have a significant impact on the delivery of planned improvements. Staff are recommending allocating unassigned fund balance Infrastructure Investment Fund to help the City bridge funding gaps for some major projects coming down the line.

A3.

Revised General Fund Long Term Forecast
The long-term forecast is an essential planning tool for the City and its ongoing service delivery. While the City adopts a two-year Financial Plan that must be balanced, the outer years of the forecast are presented to show the City’s financial condition and availability of resources into the future. The forecast is updated every six months which gives staff the opportunity to alert Council of looming imbalances and strategize proper actions to be taken.

Assumptions and Changes to Forecast
To avoid an overhaul of the budget, staff have updated only items that need to be adjusted based on significant new information or variances. In this case, the revenue forecasts associated with property tax, utility user tax, and franchise fees have been adjusted upward to reflect the new base projected for this year. On the expenditure side, the only change was to the future CalPERS unfunded liability payments, which needed to be increased significantly based on the Foster and Foster assessment from 2023 (presented to Council in May 2023). Overall, these changes nearly net out to zero in the short-term, but in the outer years of the forecast, there are some structural imbalances.

Looking Forward
Although there are imbalances in this forecast version, staff anticipate that the City’s number one source of revenue, sales and use tax will need to be increased at the time of the FY 2024-25 Budget Supplement which should alleviate those imbalances and create a surplus in the outer years. Sales and use tax will need to be carefully evaluated and will consider Q2 results which will be released around March 2024. 1 https://fred.stlouisfed.org/series/APU0000708111 2 Hot Mix Asphalt (AC) is used on large-scale paving projects like roads and surface parking lots. 3 Portland Cement Concrete (PCC) is primarily used throughout the City for sidewalk, curb ramp, and driveway replacements.

Budget Report Pg. 7

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Mid-Year Expenditure Budget Changes
Approximately 50% of the City’s budget is funded by sales and use tax, one of the more volatile revenue streams. This is good in good times and can cause shortfalls during periods of economic downturns. As part of the 2023-25 Financial Plan, Council established a “revenue stabilization reserve” of $2 million which will help provide a glidepath in the short term.

Additionally, staffing budgets will be updated to reflect any negotiated changes that happened between April 2023 and April 2024 in addition to changes in employees and their associated benefits. Because the City prepares a two-year budget, departments should have considered the impacts of inflation and contractual increases on non-salary expenditures in the FY 2023-24 adopted budget. Minor adjustments are permitted if they are within a certain parameter and are generally required to be offset elsewhere in the budget.

In preparation for the 2023-24 Budget Supplement and the 2025-27 Financial Plan, there are a number of other considerations that staff is planning to factor into the updated long-term forecast:
• Labor Pressure Like many other public agencies, the City is seeing increased pressure related to employee compensation, due to inflation and an increased cost of living. Per the City Council’s adopted labor relations philosophy, the City is to consider financial sustainability, community acceptability, relevant labor market data, and internal relationships in evaluating competitive compensation. Despite the fact that the City does not have any control overcompensation in comparator agencies, the reality is that market data significantly influences the compensation provided by the City.

• Development and Population Growth Current and planned development activity is adding residential units, which will expand the city’s population. To support our growing community, the City needs to expand infrastructure and amenities (such as park space). While there are near-term costs associated with the development of this infrastructure, the City will also need to factor in costs to maintain this infrastructure and amenities into the future. This type of work is currently performed by a combination of City staff and contract services, and investments in both will need to be made in order to maintain new assets to current standards. • Development and Operations of Fire Station 5 As a part of the development agreement for the Avila Ranch Development, the builder is required to mitigate the increased demand on fire protection services. The City is currently in discussions with the builder to determine the best path forward relative to both a temporary solution and then development of a permanent fire station at full buildout of Avila Ranch. While a Mello-Roos property-based charge is assessed for parcels in the Avila Ranch Community Facilities District will cover a portion of the ongoing costs to support expanded fire service, the General Fund will be impacted by both development and ongoing operations of a fifth fire station. Fire staff is currently working to forecast ongoing operating expenditures associated with staffing a fifth fire station. • General CIP Imbalances In addition to the challenges highlighted earlier in the report, it is crucial to emphasize the impact of inflation on all Capital Improvement Projects (CIP) undertaken by the City. Inflation has significantly increased construction costs across the board, which makes it difficult to maintain a balanced CIP. Inflationary pressures are expected to continue into the 2025- Budget Report Pg. 8

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27 Financial Plan, where currently programmed funding for future projects likely will not be sufficient.

A prime illustration of this inflationary pressure is evident in the case of Righetti Park, a longstanding project initially projected at approximately $6 million. Current estimates place project costs at $20.5 million. This glaring disparity underscores the urgency to re-assess cost estimates comprehensively. The City must acknowledge the substantial impact of inflation and its implications on the financial landscape. The City Manager quoted economists at the outset of significant inflation noting that it would have an impact on capacity and expectations and noted “Inflation, the insidious thief of dreams”.

In light of these challenges, a strategic re-prioritization of projects is imperative. This involves not only acknowledging the current financial constraints induced by inflation but also formulating realistic and adaptive strategies to navigate these challenges successfully. Only through a proactive and comprehensive reassessment can the City make informed decisions that ensure the sustained progress of crucial infrastructure projects. A revised forecast will be presented to the City Council during the Supplemental Budget Process.

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Table 8 - General Fund Five-Year Forecast
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Section B: Mid-Year Expenditure Budget Changes
The mid-year budget is an opportunity to make mission critical adjustments throughout the year. It is also an opportunity to evaluate any unassigned fund balance from the prior year as confirmed through the annual audit. Unassigned fund balance from the prior year is considered “one-time” in nature and should only be used to fund items as outlined in Section 8 of the City’s Fiscal Policies:

1. The City sets the following prioritization of unassigned General Fund balance:
a. Additional discretionary payments to CalPERS
b. Infrastructure investments
c. Emerging Health and Safety needs of the community
Strategic Recommendation of One-time Fund Balance
In line with the above policy and as planned in the adopted 2023-25 Financial Plan, staff recommend making a $2.4 million investment (across all funds) for an additional payment to CalPERS. Given that CalPERS rates of return fell short in FY 2022-23, staff recommends that Infrastructure should be the priority for the remaining unassigned fund balance for two main reasons:

1. The cost of projects is going up drastically and by getting funding into the community now, it is a better return on investment than waiting to do projects later at a much higher cost.

2. By allocating funding into the City’s Infrastructure Investment Fund, it keeps these funds liquid in case of an emergency while the reserve is being utilized for emergency storm work.

The following table summarizes the one-time budget recommendations for FY 2023-24 by funding source.

Additional detail about each funding source and the available balances is found in the corresponding subsections. Enterprise fund budget recommendations can be found within Section C of this report.

Table 9 - Budget Recommendations by Funding Source (See Section C for Enterprise Funds) Sub Section Funding Source Amount
A General Fund 2022-23 Unassigned Fund Balance4 $ 6,471,095 B Local Revenue Measure 2022-23 Unassigned Fund Balance $ 3,872,937 C Capital Reserve $ 1,860,000
D Completed Projects Balance or Reallocation of Project Budgets $ 680,000 E IT Replacement Fund $ 33,200
Total Budget Changes $ 12,917,232
4 Includes $2 million CalPERS Additional Discretionary payment which is listed as “assigned” for that purpose in the audited financials. In addition to the recommendation to appropriate $6,296,095 of unassigned fund balance, staff also recommend a planned investment of $3,804,358 with the remaining General Fund Unassigned Fund Balance.

Formal Council action on this item would take place with a future budget cycle (see subsection A for detail).

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A. General Fund Unassigned Fund Balance
The General Fund ended FY 2022-23 with a significant one-time unassigned fund balance of approximately $8.3 million largely due to major tax revenues exceeding projections, high interest earnings, and expenditure savings associated with the activation of the Fiscal Health Contingency Plan in response to the 2023 winter storms. Additionally, FY 2022-23 was the second year of the 2021-23 Financial Plan which means unspent funds are not eligible for carryover.

Table 10 - General Fund Balance per Audited Financials
CalPERS Additional Discretionary Payment (ADP) – With the 2018-19 Budget Adoption, Council adopted the “Fiscal Health Response Plan” to help balance the long-term forecast and begin an ambitious schedule to pay down pension obligations over 20 years instead of 30 years. As shown in the table above, the City has been planning to use $2,000,000 of its General Fund year end fund balance to make and additional CalPERS downpayment. This additional payment is consistent with the City’s adopted strategy to pay down its pension liabilities and is also in line with feedback provided by an independent actuary in May 2023 who noted that the City’s approach to making additional payments has made an impact to the funded status of the pension plan, despite significant market losses experienced by CalPERS in recent years. The table below shows the breakdown of the recommended appropriation for FY 2023-24 from all funds. If approved, this additional payment will be made in spring of 2024.

Table 11 - Recommended FY 2023-24 CalPERS ADP
Fund ADP Amount
General Fund $ 2,000,000
Water $ 164,840
Sewer $ 169,419
Parking $ 61,003
Transit $ 12,555
Whale Rock $ 21,417
TBID $ 7,976
Total All Funds $ 2,437,211
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Table 12 - Unassigned General Fund Balance Recommendations Line Funding Source/ (Use) Amount
1 General Fund Unassigned Fund Balance (after CalPERS ADP) $8,275,453 2 Fire - Additional Fuel Budget - The fire department’s fuel budget is underfunded for projected use in FY 2023-24 based on year-to-date trends and last year’s spending. Staff is requesting $30,000 increase in budget to address the increased costs. In FY 2022-23 fuel consumption was $96,086. The budget for FY 2023-24 is $70,000. The department has already used over 75% of the appropriated budget. Oil and waste disposal is also budgeted from this account and have driven costs up as well.
(30,000)
3 Mobility Services Salary Restructure – This is an administrative adjustment to realign the Mobility Services Salary costs to be distributed based on the percentage of work for each fund. This request is for the Active Transportation portion of the Deputy Director of Mobility Services, Mobility Services Business Manager and an Administrative III. This distribution will be included in the base budget of the 2024-25 Supplemental Budget and ongoing forecast. (46,095)
4 Public Art Contribution – This one-time additional contribution to Public Art will fund the purchase of the “David” sculpture currently showcased in the Mission Plaza lawn ($120,000) which will be relocated to one of the City’s parks. An additional $100,000 will be earmarked to help support the local art community with a variety of art projects around the City.
(220,000)
5 Repayment of IIF for 1166 Higuera – As detailed in R-11459, $4.8 million of the Infrastructure Investment Fund (IIF) was appropriated to purchase 1166 Higuera Street and will be reimbursed via a 30-year interfund loan with the Parking Fund.

To ensure that the IIF has sufficient funding for upcoming projects (Prado Creek Bridge, Righetti Park, etc.), staff recommend using one-time balance to repay the IIF and will use Parking Fund debt proceeds to help offset CIP needs over the next 30 years. To keep the General Fund reserve at a 14% funded level, the remaining balance of 1166 Higuera ($845,000) will be transferred in FY 2024-25 or when the City receives storm reimbursements (see Line 10).
(4,000,000)
6 Allocation to Insurance Fund for Appropriation – One-time funding is necessary for various legal support related matters. Because the exact amount and timing of payments are unknown, staff recommend allocating this amount directly to (and subsequently appropriation from) the Insurance Fund. Any unused amount will therefore remain in the insurance fund for the intended purpose. Because these costs are often unanticipated, staff are working on a policy recommendation which will be presented with the 2024-25 budget to help support and smooth these costs over the years.
(175,000)
7 Total Recommendations for FY 2023-24 Budget Appropriations (lines 2-6) $(4,471,095) 8 Remaining Balance at FY 2023-24 Year End $ 3,804,358
9 Planned Investments for FY 2024-25
10 Investment into Infrastructure Investment Fund – As explained in Section A, the cost of building and maintaining infrastructure is rapidly increasing and there is a fundamental imbalance between the City’s infrastructure needs and available resources. Staff recommend allocating the remaining one-time general fund balance to the IIF to help cover the cost of planned projects specifically related to (3,804,358)
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Line Funding Source/ (Use) Amount
investments in the Cultural Arts District and for projects related to growth and development, such as parks. This recommendation is to earmark the remaining unassigned fund balance for use in 2024-25 or whatever year the City can secure reimbursement of costs related to the 2023 winter storms. The advantage of this is that it keeps the reserve at a 14% funded rate. Staff will continue to provide updates to Council and will make a recommendation for appropriation with a future budget cycle.
11 Total current and future budget recommendations of FY 2022-23 Unassigned Balance (Line 7 + Line 10) $(8,275,453)
12 Remaining 2022-23 Unassigned Fund Balance $ 0
B. Local Revenue Measure 2022-23 Unassigned Fund Balance The Local Revenue Measure (LRM) Fund is used to track revenue and expenditures related to Local Revenue Measure G‐20. It helps protect and maintain services and public infrastructure identified by the community such as community safety, creek protection, addressing homelessness, keeping public areas safe and clean, retaining local businesses, youth/senior services, streets, open space/natural areas and other vital services and facilities.

As outlined in the ACFR, the LRM has an unassigned fund balance of about $3.8 million. This fund balance reflects revenues exceeding expenditures in FY 2022-23.

Table 13 - Local Revenue Measure FY 2022-23 Fund Balance Budget Report Pg. 14

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Table 14 - Unassigned Local Revenue Measure Fund Balance Recommendations Line Funding Source/(Use) Amount
1 Local Revenue Measure Unassigned Fund Balance $3,872,937 2 Arterials 2023 - Additional Asphalt Repairs on Johnson - This budget recommendation is necessary for additional asphalt repairs on Johnson Road, involving supplemental base repairs and crack sealing. These repairs are crucial in preparing Johnson Road for the upcoming 2024 paving project. The proposed work extends the repair limits from Laurel to Orcutt. Allocating funds for these additional repairs is essential to ensure the structural integrity of the road and optimize the success of the impending paving initiative. Construction March 2024 (300,000)
3 Arterials 2023 - Morro Street Sidewalk - This budget request is specifically directed towards the Morro Street Sidewalk project, aiming to extend the design of the newly constructed sidewalk near the New Anderson Hotel to the corner of Morro/Higuera. The proposed undertaking involves the removal and replacement of the existing sidewalk on approximately half a block on Higuera to align with the recently installed section fronting the hotel. The requested funds will enable the City to maintain visual continuity and enhance pedestrian infrastructure in this vital area. It is intended that this sidewalk replacement work would occur prior to paving Morro Street with the 2023 Arterials Project. Construction February/March 2024
(200,000)
4 Arterials 2023 - Palm Street Paving - This budget recommendation is for the Palm Street paving bid alternate initially proposed in conjunction with the 2023 Arterials project, awarded to Souza Construction in May 2023. Additional funds are now sought to facilitate the implementation of this bid alternate. Should the requested funds be transferred, the contractor will proceed with the necessary work, focusing on paving over the concrete street segment located off Palm Street near Santa Rosa Street and various sidewalk improvements. Construction February/March 2024
(915,000)
5 Augusta / Smith CMP Replacement- This budget recommendation is for financial support to address a critical CMP storm drainpipe failure at the intersection of Augusta and Smith Streets, a consequence of a recent storm event. The proposed project entails the removal and replacement of approximately 425 linear feet of 18" CMP (Corrugated Metal Pipe) and the installation of three catch basins.

Timely approval of this budget will facilitate the necessary repairs to mitigate potential risks and ensure the infrastructure's resilience. Design January 2024 (750,000)
6 Fire Marshal Vehicle (Electric)5 - The truck assigned to the Fire Marshal was originally projected for replacement in 2024 in the 2021-2023 Financial Plan and according to the city’s fleet replacement policy, it is past due for replacement.

Because of the reshuffling of CIP in the 2023-25 Financial Plan, replacement of this vehicle was pushed out, but it is starting to have costly repair issues. This is also a good opportunity to replace the vehicle with an electric vehicle which are now in stock and eligible for various rebate programs.
(70,000)
7 Police Radio Encryption - The Police Department is seeking the necessary funding to update its police radios with both multi-key encryption and Wi-Fi licensing to minimize the burden on IT staff and make the transition to digital encryption (91,000)
5 This vehicle is eligible for a 15% rebate which will bring the net cost to approximately $60,000. It is necessary to budget for the entire cost of the vehicle; however, the rebate will later be collected as revenue.

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Line Funding Source/(Use) Amount
manageable and useful for our personnel. The police radio is a critical piece of safety equipment for police officers and dispatchers, and being able to communicate with other local agencies is a necessity to ensure public safety in San Luis Obispo.
8 Righetti Park Investment - This budget recommendation is to secure additional funding for Righetti Park, specifically in support of the linear park, pocket park, and community parks, which are currently at 50% design completion. Ongoing discussions are in progress to determine which segment of the project the City aims to construct first, as recent estimates have exceeded initial expectations.

The additional funding sought is intended to support the development of one of the smaller parks or a section of the community park, allowing for phased implementation while ensuring that the project remains on track. (304,637)
9 Storm Response - This budget recommendation is to secure funding for city-wide storm response mitigation planting, encompassing the replacement of trees and vegetation removed during emergency storm repairs. Additionally, funds are sought for an unforeseen project at 152 Cuesta, addressing wall repair resulting from storm damage. The City is actively pursuing supplementary funds and FEMA reimbursement to support these initiatives. 152 Cuesta has already been completed (Dec 2023), Mitigation Planting design 2024 - Planting late 2024 - 5 years of monitoring following planting.
(600,000)
10 Streets R&R - Higuera Street Crack Sealing - This budget recommendation is for imperative crack sealing on Higuera Street, spanning from Marsh to LOVR, in preparation for the scheduled Higuera Complete Streets project in Fall 2024. The Complete Streets project involves slurry seal application, and by conducting crack sealing six months in advance, we aim to optimize the effectiveness of the overall pavement maintenance. Allocating funds for this preparatory crack sealing initiative is crucial to enhance the longevity and resilience of Higuera Street.

Construction March 2024
(250,000)
11 Streets R&R - Paving Sacramento Drive - This funding recommendation is for urgent bike lane paving along Sacramento Drive from Industrial to Via Esteban.

The current pavement conditions, characterized by cracking and poor quality, pose significant challenges for cyclists. Allocating funds for this project will not only enhance the safety and accessibility of the bike lane but also contribute to the overall well-being of cyclists utilizing this route. Draft design and bid early 2024
(220,000)
12 Truck 1 Refurbishment - Truck 1, a 100’ heavy-duty tractor-drawn Aerial Apparatus, provides essential access to buildings in the City beyond the reach of ground ladders, typically above 30 feet. Truck 1 is a 2010 Pierce that is rapidly deteriorating and not likely to reach the scheduled replacement in FY 2029-30.

This refurbishment request is to replace drive-train components prior to catastrophic failure. Extending the life of Truck 1 will allow the department to replace it at the end of its expected lifespan and account for extended production delays due to supply chain shortages.
(172,300)
13 Remaining Balance $ 0
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Mid-Year Expenditure Budget Changes
C. Capital Reserve
The City maintains a committed reserve of 20% of the capital improvement plan budget from the Local Revenue Measure (LRM) for the purpose of offsetting unanticipated cost increases, unforeseen conditions, and urgent unanticipated projects to provide continued investment in infrastructure maintenance and enhancement. Use of funds from the Capital Projects Reserve Fund can be made upon Council approval as necessary during any fiscal year. The reserve is planned to be replenished to the 20% level with the supplemental budget.

The recommended use of the reserve is in response to the Righetti hillside slope failure that occurred in January 2023, prompting a need for initial repair by the developer. Responsibility is currently under dispute, but the City intends to execute emergency mitigation work in early 2024 to address risk to below properties. The City is actively investigating and exploring potential cost recovery options, possibly through litigation with the developer. This budget request provides funding to do the work now, with reimbursement sought later.

After this budget recommendation, the reserve will be about 38% funded which will allow for additional emergent needs through the remainder of the fiscal year. Public Works staff are aware of several projects that will require additional funding however the timing and amount of funding is still unknown at this time. One of these projects includes the remodel of the City-County Library restrooms which are necessary to bring it up to ADA compliance.

Table 15 - Recommended Use of Capital Reserve
Capital Reserve Balance as of January 2024 $ 3,370,000
Righetti Hillside $ (1,860,000)
Remaining Balance $ 1,510,000
D. Completed Projects Balance or Reallocation of Project Budget When projects are completed under budget, the balance goes into a “completed projects” account which is eligible for reallocation by the City Manager. This is often a great way to help bridge gaps between projects that need marginal additional funding. Approval by the Council is required for all transfers from the completed projects account for any new projects as well as for any existing project when the transfer amount exceeds the City Manager’s purchasing authority. Additionally, listed below are some transfers out of projects that have identified excess budget available for reallocation that have not yet been transferred into the completed projects account.

Table on next page
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Table 16 - Recommended Use of Completed Projects Balances (Capital Outlay Fund and Capital Outlay LRM) Funding Source/(Use) Amount
Completed Projects Balance $167,000
Transfers from: $513,000
Railroad Safety Trail Taft to Pepper 113,000
Bridge Maintenance 150,000
CDBG Project 87,000
ATP 30,000
California/Foothill 75,000
Annual Striping and Signage 25,000
Sidewalk Maintenance Project 33,000
Transfers to: $(680,000)
Pismo / Johnson Funding to address increased wall height (200,000) Streets R&R - Striping on Orcutt Road (100,000)
Arterials 2023 - Bike Path Repair adjacent to Cerro San Luis - (30,000) North Chorro Greenway (350,000)
Remaining Balance $ 0
E. IT Replacement Fund
The IT Replacement Fund is funded based on annual allocations through the Capital Improvement Planning process as well as through the collection of IT surcharges. The IT surcharge is collected on Community Development Department fees and is intended to help offset the cost the City’s permitting program, EnerGov. Back-end configuration changes need to be made to the program in order for it to support the new fee structure that will go into effect on July 1, 2024. The remaining fund balance is necessary to help smooth the cost of uneven IT replacement costs over the next five years.

Table 17 - Recommended Use of IT Replacement Fund Balance IT Replacement Fund Balance $ 908,000
EnerGov Upgrades $ (33,200)
Remaining Fund Balance $ 874,800
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Enterprise Funds – Water Fund
Section C. Enterprise Funds
The City’s financial structure is separated into governmental funds and business activities or Enterprise funds. Business activities are distinguished from governmental funds by their similarity to private sector enterprises and are predominantly financed through user service charges. The City has four unique funds that fall into this category:

C1: WATER FUND
Revenue
Water sales are trending on track with revenue projections and revenues in prior fiscal years. At the time of writing this report, revenues only reflect four months (or 33%) of water sales because of the timing of billings. Water sales, base charges, sales to Cal Poly, and other miscellaneous utilities set up fees comprise over 90% of anticipated revenues.

Table 18 - Water Fund Revenue
Overall City water demand has remained relatively consistent over the past five years, with minor variations year-to-year. 2023-24 water use is on track with forecasted demands. A dry winter may result in slightly higher than anticipated revenues, while a wet winter may result in slightly lower than forecasted revenues. Figure 1 plots the City’s water demand and population growth from fiscal years 2000 through 2024. Increased water conservation efforts by the Department and the community have offset water demand generated by population growth.

Revenue Type
2022-23
Actual Budget YTD Actuals %
Received
Midyear
Revised
Budget
Total
Midyear
Changes
1 Service Charges and Base Fees 23,407,610 26,146,099 10,473,895 40% 26,146,099 - 2 Cal Poly Capacity & Resilience 233,025 251,072 233,025 93% 251,072 - 3 Investment and Property Revenue 567,540 50,000 256,337 513% 50,000 - 4 COVID Rate Relief Program (Contra-account)* (53,940) - (84,946) - - 5 Long Term Debt Proceeds 122,214 872,574 - 0% 750,360 (122,214) 6 State Grants 371,201 697,500 218,982 31% 1,237,171 539,671 7 Other Grants/Subventions 53,940 - 96,759 - -
8 Other Revenue 517,680 208,647 292,032 140% 208,647 -
9 Transfers in (Impact Fees) 3,614,800 - 111,897 - -
10 Total $ 28,834,071 $ 28,225,893 $ 11,597,982 41% $ 28,643,350 $ 417,457 FY 2023-24
Water Sewer Parking Transit
Figure 1 Water Demand Fiscal Years 2000-2024
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Enterprise Funds – Water Fund
Other major sources of forecasted revenue in the Water Fund include $657,171 received through the Cal OES Hazard Mitigation Grant Program for the Public Safety Power Shutoff project and $580,000 for Round 3 of the Proposition 1 Groundwater Grant Program. Additionally, staff are anticipating about $750,000 in loan proceeds from I-Bank for the Water Treatment Plant Energy Efficiency project. This project is complete, but payment is being retained until the performance period for the project is met by the contractor. The Water Fund has only partially received these funds because they are contingent on project timelines and corresponding disbursements. The Water Fund remains on track to meet revenue targets and short-term operational, capital expenditure, and reserve needs.

Operating Expenses
Costs related to chemicals, electricity, and capital project delivery continue to increase. Industry-specific increases have exceeded general inflation and are not anticipated to normalize this fiscal year. Chemical and electricity are about 20% of the annual operating budget. Actual electricity expenses are trending lower in quarters 1 and 2 because of increased use of water from the Whale Rock Reservoir (see Figure 1), which costs less to pump water from. The change in source water strategy is largely due to damage to the Nacimiento pipeline caused by the 2023 winter storms. Staff has been notified that electricity will increase an additional 14% for bundled customers and 25% for Community Choice Aggregation (CCA) customers beginning January 2024. Staff anticipate that this will be partially offset by the newly implemented Tesla Backup Battery which is calculated to reduce electricity costs by approximately $15,000 per month. The anticipated electricity savings resulting from the use of this battery are not fully realized in YTD expenditures since electricity rates from October-May are lower than peak pricing from June-September.

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Enterprise Funds – Water Fund
Table 19 - Water Fund Operating Expenditures
Mid-Year Budget Changes
There are three mid-year budget amendments being recommended as outlined below. These recommendations can be absorbed within the Water Fund’s working capital. All budget amendments address safety, regulatory, or other issues otherwise necessary to the provisions of water services.

Table 20 - Water Fund Mid-Year Operating Budget Requests Budget Request Description Current Amount
Budgeted
Amount
Recommended New Total
1 Refund to the General Fund for Fire Hydrant
Expenses
$0.00 $92,218 $92,218
2 Water Treatment Plant Ozone Containment
Repairs $0.00 $180,000 $180,000
3 Arc Flash Survey for the Water Treatment Plant
and Water Distribution $0.00 $132,750 $132,750
4 TOTAL $0.00 $404,968 $404,968
In September of 2020, the Governor signed Senate Bill No. 1386 which specified that hydrants are part of the system of public improvements included in the definition of “water” for purposes of the Proposition 218 Omnibus Implementation Act. The bill specified that the fees or charges for property-related water service imposed or increased, as specified, may include the costs to construct, maintain, repair, or replace hydrants as needed. During the period in which SB 1386 went into effect, all Fire hydrant related costs had been paid by the General Fund. This action is to document the amount of costs that are now having to be paid back to the General Fund by the Water Fund as a “true up” action. This is a one-time request, as hydrant related costs will be funded by the Water Fund moving forward.

The Water Treatment Plant Ozone repair budget change is a one-time request that will address minor modifications to meet required permit compliance for the water treatment plant.

Lastly, the Arc Flash Survey is a one-time request for Water Treatment and Water Distribution programs.

This budget change will allow for a third-party contractor to conduct an arc-flash survey designed to reduce the potential for injury to staff who are maintaining or operating equipment associated with water and wastewater treatment.

Water Fund Operating
Expenditures FY 2022-23 Actual Budget Year-to-date Actual % Expended 1 Salaries $ 3,385,240 $ 3,887,239 $ 1,682,108 43.3%
2 Retirement/Benefits $ 840,370 $ 936,831 $ 447,637 47.8% 3 Contract Services $ 9,793,078 $ 1,067,009 $ 911,800 85.5% 4 Other Operating Expenditures $ 1,154,345 $ 13,005,131 $ 9,709,026 74.7% 5 PERS Unfunded Liability $ 843,537 $ 678,507 $ 668,626 98.5% 6 Transfers Out $ 2,311,753 $ 2,826,143 $ 1,413,072 50.0% 7 Utilities $ 657,418 $ 1,033,720 $ 362,888 35.1%
8 Total $ 18,985,741 $ 23,434,580 $ 15,195,157 64.8%
FY 2023-24
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Enterprise Funds – Water Fund
The Water Fund Long Term Forecast
Industry specific cost increases remain high in chemicals, electricity, and capital expenses. As staff learn more about our assets through the Infrastructure Renewal Strategy and the Strategic Asset Management Plan, this may shift prioritization of capital projects and forecasted expenses.

Capital expenses continue to exceed projected estimates. The drivers of increased capital expenses vary from increased base material costs to ongoing supply chain issues. The California Construction Cost Index reflects a 9.5% increase from November 2022 to November 2023.

Specific costs, like electricity and construction, are impacting the Utilities Department’s budget in outsized ways, but general inflation still impacts costs as whole. The Municipal Cost Index (MCI), an index designed to reflect the effects of inflation on providing municipal services, peaked at a 6.27% monthly increase in January 2023. For comparison, the year-over-year percent changes for MCI as of September for the last seven years can be found in the Sewer Fund write up below.

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Table 21 - Water Fund Five Year Forecast
in thousands
(A)
Actual
2022-23
(B)
Budget
2023-24
(C)
Mid Year
Revised
2023-24
(D)
Forecast
2024-25
(E)
Projected
2025-26
(F)
Projected
2026-27
(G)
Projected
2027-28
Revenue
Charges for Service
1 46102-Development Review Fees $ 37 $ 26 $ 26 $ 26 $ 26 $ 26 $ 26 2 46701- Sales to Cal Poly $ 1,195 $ 1,119 $ 1,119 $ 1,184 $ 1,340 $ 1,458 $ 1,558 3 46702- Water Sales $ 15,260 $ 17,717 $ 17,717 $ 19,045 $ 20,474 $ 21,395 $ 22,358 4 46703- Utilities Base Charges $ 5,910 $ 6,243 $ 6,243 $ 6,712 $ 7,215 $ 7,540 $ 7,879 5 46704- Reclaimed Water Sales $ 1,042 $ 1,080 $ 1,080 $ 1,161 $ 1,248 $ 1,304 $ 1,363 6 46708 - Utilities Setup Fees $ 180 $ 60 $ 60 $ 60 $ 60 $ 60 $ 60 7 46709- Other Utilities Charges $ (0) $ 1 $ 1 $ 1 $ 1 $ 1 $ 1 8 46711- Water Distribution $ - $ - $ - $ - $ - $ - $ - 9 46712- Low Income Subsidy $ (16) $ (100) $ (100) $ (100) $ (100) $ (100) $ (100) 10 46713- Cal Poly Capacity & Resilience $ 233 $ 251 $ 251 $ 263 $ 288 $ 299 $ 310 11 Total Charges for Service $ 23,841 $ 26,397 $ 26,397 $ 28,352 $ 30,552 $ 31,983 $ 33,455 12 Total Other Revenue1 $ 1,770 $ 1,829 $ 2,246 $ 3,719 $ 11,370 $ 202 $202 13 Total Impact Fees $ 3,649 $ 1,810 $ 1,810 $ 800 $ 800 $ 800 $800 14 Total Revenue $ 29,260 $ 30,036 $ 30,453 $ 32,872 $ 42,722 $ 32,985 $ 34,457 Expenditures
15 Total Salaries and Benefits $ 5,069 $ 5,503 $ 5,503 $ 5,747 $ 5,945 $ 6,158 $ 6,365 16 Total Contract Services $ 9,835 $ 12,421 $ 12,553 $ 12,721 $ 13,009 $ 13,354 $ 13,755 17 Total Other Operating Expenditures $ 1,782 $ 2,685 $ 2,685 $ 2,753 $ 2,868 $ 2,954 $ 3,043 18 Total Capital Asset Expense Expenditu $ 2,653 $ 28,551 $ 28,823 $ 4,319 $ 11,979 $ 5,826 $ 5,975 19 Total Debt Services Expenditures $ 2,301 $ 1,870 $ 1,870 $ 1,869 $ 1,866 $ 2,391 $ 2,390 20 Total General Expenditures $ 2,312 $ 2,826 $ 2,826 $ 3,250 $ 3,738 $ 3,924 $ 4,121 Total Expenditures $ 23,952 $ 53,856 $ 54,261 $ 30,659 $ 39,404 $ 34,608 $ 35,649 21 CalPERS Additional Discretionary Payment $ - $ 679 $ 679 $ 706 $ 165 $ 165 $ 165 22 Total Expenditures (After CalPERS ADP) $ 23,952 $ 54,535 $ 54,940 $ 31,365 $ 39,569 $ 34,773 $35,814 23 Working Capital - Beginning $ 34,725 $ 40,033 $ 40,033 $ 15,547 $ 17,053 $ 20,205 $ 18,418 24 Change in Financial Position $ 5,308 $ (24,499) $ (24,486) $ 1,506 $ 3,152 $ (1,788) $ (1,357) 25 Working Capital - Year End $ 40,033 $ 15,534 $ 15,547 $ 17,053 $ 20,205 $ 18,418 $ 17,060 26 Operating Reserve (20%) $ 4,260 $ 5,061 $ 5,088 $ 5,268 $ 5,485 $ 5,756 $ 5,935 27 Rate Stabilization (10%) $ 2,237 $ 2,508 $ 2,508 $ 2,694 $ 2,903 $ 3,039 $ 3,179 28 Other Reserves (115 Pension Trust Fund) $ 176 $ 176 $ 176 $ 176 $ 176 $ 176 $ 176 29 Unreserved Working Capital Year End $ 33,361 $ 7,789 $ 7,776 $ 8,915 $ 11,642 $ 9,446 $ 7,771 1 Includes Loan Proceeds for Santa Rosa Project and Grant Funding in FY2025-26 2 Includes Project Carryover from 2-3 years prior in FY2023-24 Current Financial Plan 23-25
Budget Report Pg. 23

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Enterprise Funds – Sewer Fund
C2: SEWER FUND
Revenue
Sewer sales are trending on track with revenue projections and revenues in prior fiscal years. At the time of writing this report, revenues only reflect three months (or 33%) of sewer sales because of billing timing.

Sewer service charges, base charges, sales to Cal Poly, and other miscellaneous utilities set up fees comprise about 95% of anticipated revenues.

Table 22 - Sewer Fund Revenue
The City’s Sewer Service Charges and Base Fees continue to trend consistently with previous years. While the sewer rates were increased by 4% on July 1, 2023 (Resolution 11428), this was largely offset by a reduction in the default sewer cap from 5 to 46 and an extremely wet winter in 2023, which deflates the sewer cap. Because the Utilities Department cannot meter sewer use, the sewer cap enables the calculation of the maximum units that an account can be billed by averaging water use during winter months when irrigation demand is lower.

Other major sources of revenue in the Sewer Fund include $1,368,927 through the Cal OES Hazard Mitigation Grant Programs and $131,453 through the Proposition 1 Integrated Regional Water Management Implementation Grant. Both grants contribute to flood control/protection and resiliency elements of the Water Resource Recovery Facility upgrade. Additionally, staff are anticipating the remainder of the loan proceeds for the WRRF upgrade to be realized in 2023-24 and 2024-25. These revenues have only been partially realized because they are contingent on project timelines and corresponding disbursements. The fund remains on track to meet revenue targets and short-term operational, capital expenditure, and reserve needs.

Operating Expenses
Costs related to chemicals, electricity, and capital project delivery continue to increase. Industry-specific increases have exceeded general inflation and are not anticipated to normalize this fiscal year. Chemical and electricity are about 17% of the annual operating budget. Actual electricity expenses are trending lower in quarter 1 and 2 due to delays in the WRRF upgrade, which will shift expenses from chemicals to electricity. Consequently, chemical costs may trend higher and electricity costs may trend lower than 6 The sewer cap provides the maximum number of units that a residential customer is charged for sewer usage on their monthly bill. By reducing the default sewer cap from 5 to 4, ratepayers with new accounts that do not have an established sewer cap are only charged a maximum of 4 units on their sewer bill. The sewer cap is used because staff are unable to meter sewer use.

Revenue Type
2022-23
Actual Budget YTD Actuals %
Received
Midyear
Revised
Budget
Total
Midyear
Changes
1 Service Charges and Base Fees 19,593,710 19,324,641 7,105,284 37% 19,324,641 - 2 Cal Poly Capacity & Resilience 243,568 472,534 - 0% 472,534 - 3 Other Revenue 523,148 224,000 276,029 123% 224,000 -
4 State Grants 1,275,831 1,386,153 700,075 51% 1,500,380 114,227 5 Investment and Property Revenue 680,086 50,000 380,056 760% 50,000 - 6 Long Term Debt Proceeds 21,384,848 31,132,364 13,368,259 43% 25,964,877 (5,167,487) 7 Transfer in (Impact Fees) 1,968,592 - 61,170 - -
8 Total $ 45,669,785 $ 52,589,691 $ 21,890,873 42% $ 47,536,432 $ (5,053,260) FY 2023-24
Budget Report Pg. 24

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Enterprise Funds: Sewer Fund
anticipated. Staff has been notified that electricity will increase an additional 18% for bundled customers and 24% for Community Choice Aggregation (CCA) customers beginning January 2024. The increases in costs will be brought to Council in February of 2024.

Table 23 - Sewer Fund Operating Expenditures
Mid-Year Budget Changes
There are three mid-year budget amendments being recommended as outlined below. These recommendations can be absorbed within the Sewer Fund’s working capital. All budget amendments address safety, regulatory, or other issues otherwise necessary to the provisions of sewer services.

Table 24 - Sewer Fund Mid-Year Operating Budget Requests Budget Request
Current
Amount
Budgeted
Amount
Recommended New Total
1 Sewer Inflow and Infiltration Reduction $0.00 $50,000 $50,000 2 Arc Flash Survey for Wastewater Collections $0.00 $39,550 $39,550 3 TOTAL $0.00 $89,550 $89,550
The Sewer Inflow and Infiltration reduction budget change is a one-time request that will contribute to a project budget that includes sewer lateral rebates, engineering reports, construction plans for point repairs, construction management services, sewer manhole re-coatings, sewer flow monitoring studies, field testing of wastewater piping infrastructure, etc.

The Arc Flash Survey is a one-time request for Wastewater Collections programs. This budget change will allow for a third-party contractor to conduct an arc-flash survey designed to reduce the potential for injury to staff who are maintaining or operating equipment associated with water and wastewater treatment.

The Sewer Fund Long Term Forecast
Industry specific cost increases remain high in chemicals, electricity, and capital expenses. As staff learn more about our assets through the Strategic Asset Management Plan and other studies, this may shift prioritization of capital projects and forecasted expenses.

Chemicals have somewhat stabilized but remain high in cost relative to a few years ago. Electricity continues to increase at an above-inflation rate. Staff have been notified that electricity will increase an additional 14% for bundled customers and 25% for Community Choice Aggregation (CCA) customers Sewer Fund Operating
Expenditures FY 2022-23 Actual Budget Year-to-date Actual % Expended 1 Salaries $ 3,291,795 $ 3,889,630 $ 1,702,353 43.8%
2 Retirement/Benefits $ 801,764 $ 909,393 $ 439,624 48.3% 3 Contract Services $ 921,169 $ 1,251,733 $ 1,285,240 102.7% 4 Other Operating Expenditures $ 1,539,529 $ 1,595,059 $ 912,542 57.2% 5 PERS Unfunded Liability $ 872,861 $ 692,112 $ 682,034 98.5% 6 Transfers Out $ 2,573,783 $ 3,104,155 $ 1,552,078 50.0% 7 Utilities $ 773,208 $ 1,062,892 $ 447,813 42.1%
8 Total $ 10,774,110 $ 12,504,974 $ 7,021,683 56.2%
FY 2023-24
Budget Report Pg. 25

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Enterprise Funds: Sewer Fund
beginning January 2024. These estimates reflect a system-wide impact and do not delineate between customer categories or rate types.

Capital expenses continue to exceed project estimates. The drivers of increased capital expenses vary from increased base material costs to ongoing supply chain issues. The California Construction Cost Index reflects a 9.5% increase from November 2022 to November 2023.

Table 25 - Municipal Cost Index % Change
Calendar
Year
MCI YoY % Change (September)
2023 1.42%
2022 9.14%
2021 10.80%
2020 1.04%
2019 0.55%
2018 3.24%
2017 3.41%
While the MCI has leveled in 2023, the anomalous and large increases in 2021 and 2022 are still impacting the cost of providing sewer services.

Budget Report Pg. 26

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Enterprise Funds: Sewer Fund
(A)
Actual
2022-23
(B)
Budget
2023-24
(C)
Mid Year
Revised
2023-24
(D)
Forecast
2024-25
(E)
Projected
2025-26
(F)
Projected
2026-27
(G)
Projected
2027-28
Revenue
Charges for Service
1 46101-Planning and Zoning Fee $ - $ - $ - $ - $ - $ - $ - 2 46102-Development Review Fees $ 38 $ 26 $ 26 $ 26 $ 26 $ 26 $ 26 3 46104- Sewer Wye $ 8 - $ $ - $ - $ - $ - $ -
4 46701- Sales to Cal Poly $ 1,106 $ 1,013 $ 1,013 $ 1,008 $ 991 $ 984 $ 960 5 46703- Utilities Base Charges $ 5,143 $ 5,008 $ 5,008 $ 5,209 $ 5,417 $ 5,634 $ 5,831 6 46705- Sewer Service Charges $ 13,345 $ 13,304 $ 13,304 $ 13,836 $ 14,389 $ 14,965 $ 15,489 7 46708 - Utilities Setup Fees $ 187 $ 60 $ 60 $ 60 $ 60 $ 60 $ 60 8 46709- Other Utilities Charges $ (0) $ 1 $ 1 $ 1 $ 1 $ 1 $ 1 9 46711- Water Distribution $ - $ - $ - $ - $ - $ - $ - 10 46713- Cal Poly Capacity & Resilience $ 244 $ 473 $ 473 $ 473 $ 473 $ 473 $ 473 11 Total Charges for Service $ 20,071 $ 19,884 $ 19,884 $ 20,612 $ 21,357 $ 22,142 $ 22,839 12 Total Other Revenue $ 23,634 $ 32,793 $ 27,652 $ 15,187 $ 187 $ 187 $ 187 13 Total Impact Fees $ 1,981 $ 1,225 $ 1,225 $ 600 $ 600 $ 600 $ 600 Total Revenue $ 45,686 $ 53,901 $ 48,761 $ 36,399 $ 22,144 $ 22,929 $ 23,626 Expenditures
14 Salaries and Benefits $ 4,966 $ 5,491 $ 5,491 $ 5,727 $ 5,903 $ 6,085 $ 6,273 15 Contract Services Expenditures $ 1,785 $ 2,439 $ 2,478 $ 2,356 $ 2,443 $ 2,516 $ 2,592 16 Other Operating Expenditures $ 1,444 $ 1,471 $ 1,471 $ 1,494 $ 1,552 $ 1,599 $ 1,647 17 Capital Asset Expenditures $ 31,789 $ 58,427 $ 58,477 $ 3,631 $ 8,090 $ 1,689 $ 10,761 18 Debt Service Expenditures $ 1,376 $ 1,382 $ 1,382 $ 7,006 $ 7,099 $ 7,090 $ 7,088 19 General Government $ 2,575 $ 3,104 $ 3,104 $ 3,570 $ 4,105 $ 4,311 $ 4,526 $ - $ - $ - $ - $ - $ - $ -
Total Expenditures $ 43,935 $ 72,314 $ 72,404 $ 23,784 $ 29,192 $ 23,290 $ 32,887 20 CalPERS Additional Discretionary Payment $ - $ 692 $ 692 $ 721 $ 169 $ 169 $ 169 21 Total Expenditures (After CalPERS ADP) $ 43,935 $ 73,006 $ 73,096 $ 24,504 $ 29,362 $ 23,460 $ 33,056 $ - $ - $ - $ - $ - $ - $ -
22 Working Capital - Beginning $ 47,774 $ 49,526 $ 49,526 $ 25,191 $ 37,085 $ 29,868 $ 29,336 23 Change in Financial Position $ 1,751 $ (19,105) $ (24,335) $ 11,894 $ (7,218) $ (531) $ (9,430) 24 Working Capital - Year End $ 49,526 $ 30,421 $ 25,191 $ 37,085 $ 29,868 $ 29,336 $ 19,906 25 Operating Reserve (20%) $ 2,429 $ 2,777 $ 2,785 $ 4,031 $ 4,221 $ 4,320 $ 4,425 26 Rate Stabilization (5%) $ 980 $ 966 $ 966 $ 1,003 $ 1,040 $ 1,079 $ 1,114 27 115 Pension Trust Fund $ 180 $ 180 $ 180 $ 180 $ 180 $ 180 $ 180 28 Other Reserves (i.e. SRF Loan) $ 2,953 $ 5,907 $ 5,907 $ 5,907 $ 5,907 $ 5,907 $ 5,907 Unreserved Working Capital Year End $ 42,983 $ 20,590 $ 15,352 $ 25,965 $ 18,520 $ 17,850 $ 8,280 Financial Plan 23-25
Table 26 - Sewer Fund Five Year Forecast
Budget Report Pg. 27

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Enterprise Funds: Parking
C3: PARKING FUND
Revenue
Revenue from parking meters is tracking high with 57% of budgeted revenue received so far. Council recently approved the purchase of a property for immediate use as a public parking lot located at 1166 Higuera and staff anticipates a minor increase in revenue this fiscal year as a result. Revenue from parking structures is tracking low but this is likely due to the 842 Palm Street parking structure being converted to a gateless operating system beginning July 2023. Revenue from 842 Palm is being combined with on-street revenue since the rollout of the gateless parking system. Staff is working with the gateless payment equipment contractor to correct the issue.

Council also approved changes to the parking structure operations on November 7, 2023, including reestablishing the 1st hour free program and offering free parking on Sundays effective December 2023.

Staff has adjusted the revenue forecast to account for these program changes. Revenue from parking fines is also tracking high and has been adjusted based on the first five months of actuals. Even with relaxed enforcement during the holiday period, enforcement activities will remain steady for the remainder of the fiscal year and revenue projections should be adjusted accordingly.

Other Revenue, which includes lease revenue and City employee parking revenue, has been adjusted to account for the City’s implementation of a Governmental Accounting Standards Board (GASB) statement relating to fiduciary activities. The exact amount is unknown at this time but is estimated to be $150,000 based on past actuals.

Table 27 - Parking Fund Revenue
Operating Expenditures
Salaries and benefits are on track but will likely see savings as the Parking Manager position vacated at the beginning of December 2023 and is anticipated to be filled by March 2024. Other Contract Services expenditures are tracking high because of multiple open purchase orders for service contracts. Utilities services are tracking slightly low; however, no changes are recommended as part of Mid-Year Review.

Other Operating Expenditures, which include print and reproduction costs, maintenance supplies and equipment, and safety-related purchases, is tracking high even when adjusted for one-time annual purchases. Staff multiplies monitoring the needs of these operating line items for the remainder of the fiscal year and will make the appropriate adjustments at year-end.

Revenue Type
2022-23
Actual Budget YTD Actuals % Received
Midyear
Revised
Budget
Total
Midyear
Changes
1 Parking Meters 2,574,431 4,876,000 2,928,306 63% 4,876,000 - 2 Parking Structures 1,224,458 3,242,100 1,049,572 34% 2,316,100 (926,000) 3 Parking Fines 1,369,398 852,100 778,332 95% 1,050,010 197,910 4 Federal Stimulus Grants 700,000 - - - -
5 Long Term Parking 700,873 695,300 344,816 55% 695,300 - 6 Other Revenue 1,396,024 537,824 493,053 92% 763,584 225,760 7 Total $ 7,965,184 $ 10,203,324 $ 5,594,079 55% $ 9,700,994 $ (502,330) FY 2023-24
Budget Report Pg. 28

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Enterprise Funds: Parking
The Parking Fund is already overbudget for credit card merchant fees. This is due to the conversion of the 842 Palm Street parking structure to a gateless operation, continued mobile app adoption, and upgrade of coin-only single space meters to credit card capable meters. The upgrade to credit card capable meters was necessary to implement previously approved rate increases effective July 1, 2023. The requested budget adjustment for this item is outlined in the next section.

Table 28 - Parking Fund Expenditures
Mid-Year Budget Changes
Staff requests two SOBCs for the Parking Fund as outlined below. The revised budget forecast for the Parking Fund projects revenues that are sufficient to cover operating costs and debt service, including the recommended budget changes below, without significantly impacting working capital.

Table 29 - Parking Fund Mid-Year Operating Budget Requests Budget Request Current Amount
Budgeted
Additional Amount
Recommended New Total

1. Mobility Services Position Allocation True-up $1,922,9477 $102,336 $2,025,283

2. Credit Card Merchant Fees $205,590 $185,000 $390,590 Total $2,128,537 $287,336 $2,415,873

1. Increase Salaries and Benefits by $102,336 to account for the reallocation of positions within the new Mobility Services Division
As part of the multi-phased Mobility Services Division reorganization effort, the position allocations need to be trued up for the following positions: 1) Deputy Director of Mobility Services, 2) Mobility Services Business Manager, 3) Administrative Assistant III.

Deputy Director of Mobility Services – Currently 100% in Transit Fund; Is being allocated as follows:
• 60% Parking/20% Transit/20% General Fund (Active Transportation) Mobility Services Business Manager – Currently 100% in Transit Fund; Is being allocated as follows:
7 Entire Parking Fund staffing budget.

Parking Fund Operating
Expenditures FY 2022-23 Actual Budget Year-to-date Actual % Expended 1 Salaries $ 1,165,576 $ 1,405,279 $ 646,846 46.0%
2 Retirement/Benefits $ 249,000 $ 321,392 $ 148,353 46.2% 3 Contract Services $ 906,613 $ 969,370 $ 838,827 86.5% 4 Other Operating Expenditures $ 530,578 $ 392,450 $ 432,136 110.1% 5 PERS Unfunded Liability $ 275,476 $ 196,276 $ 177,823 90.6% 6 Transfers Out $ 1,263,622 $ 1,387,281 $ 693,641 50.0% 7 Utilities $ 202,684 $ 264,172 $ 105,795 40.0%
8 Total $ 4,593,549 $ 4,936,220 $ 3,043,420 61.7%
FY 2023-24
Budget Report Pg. 29

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Enterprise Funds: Parking
• 20% Parking/75% Transit/5% General Fund (Active Transportation) Administrative Assistant III – Currently 100% in Parking; Is being allocated as follows:
• 50% Parking/50% Transit

2. Increase Credit Card Merchant Fees by $185,000
The shift to credit card and digital payment options has increased dramatically as the City has modernized its Parking program infrastructure. The credit card merchant fee budget was not adjusted when 842 Palm went gateless or when coin only meters were replaced with credit card capable meters. Mobile application (app) adoption has also increased as parkers can now pay for parking in 842 Palm via the apps. Prior to July 2023, mobile apps were only available for use on-street. The City is currently undergoing a Parking Rate Study that will analyze options to better account for credit card processing costs.

Long Term Forecast
Significant changes have occurred to the Parking Fund’s Long-Term Forecast since the adoption of the 2023-25 Financial Plan. In November 2023, Council approved parking relief scenarios including reinstating the 1st hour free program in the parking structures, establishing free parking on Sundays in the parking structures, and deferring a previously approved on-street rate increase scheduled for July 2025. Impacts of the program changes will be analyzed, along with other revenue scenarios, with the completion of a parking rate study. Recommendations from the study will be presented at Supplement including possible recommendations to stabilize the long-term health of the Fund.

Staff also presented to Council in November other revenue line-item adjustments based on analysis of current year actuals. Overall, the changes resulted in a $336,200 reduction in revenue for this fiscal year.

Staff will continue to monitor the approved changes and adjust out-year forecasts as necessary at Supplement.

In November 2023, Council also approved the purchase of a property for interim use as a public parking lot which has revenue and expenditure implications for the Parking Fund. Staff anticipates receiving $60,800 annually in revenue from operation of the lot and expending $139,500 in annual loan interest repayments for the first three years which will increase to $243,400 annually thereafter. The property will require a one-time investment of an estimated $125,000 this fiscal year before the lot can be put into operation. The one-time costs are included in the loan repayment term.

Since the adoption of the 2023-25 Financial Plan, the has City issued bonds for the Cultural Arts District Parking Structure (CAD-PS) debt financing. The final interest rate on bond repayment came in lower than budgeted which resulted in savings of $1 million for the first full repayment year. The annual debt repayment was budgeted at $3.8 million which is now $1.6 million in fiscal year 2023-24 with full payments of $2.8 million beginning in fiscal year 2024-25.

Additionally, the revised forecast includes adjustments to future capital expenditures to better align with the City’s ability to deliver parking structure maintenance projects. In 2018, a Capital Asset Management Plan was completed and provided a 10-year maintenance plan for the structures. The plan needs an update to reflect specific projects completed since 2018 and to ensure estimated costs reflect current market conditions. Associated costs to implement the recommended projects in the plan will be reprogrammed into the forecast once the update is complete. The long-term forecast also includes the Budget Report Pg. 30

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Enterprise Funds: Parking
requested budget changes to increase staffing for the Mobility Services restructuring and to increase the credit card merchant fees. The Mid-Year Budget review for the Parking Fund forecasts a stable fund with sufficient revenue to cover anticipated operating costs and debt service.

Table 30 - Parking Fund Five Year Forecast
(A)
Actual
2022-23
(B)
Budget
2023-24
(C)
Mid Year
Revised
2023-24
(D)
Forecast
2024-25
(E)
Projected
2025-26
(F)
Projected
2026-27
(G)
Projected
2027-28
Revenue
1 Charges for Service
2 46401/46402 - Parking Meters 2,574,431 4,876,000 4,876,000 4,936,800 4,936,800 4,936,800 4,936,800 3 46403 - Parking Structures 1,224,458 3,242,100 2,316,100 1,805,400 3,388,400 3,840,653 3,852,272 4 46404 - Long Term Parking 700,873 695,300 695,300 766,300 720,800 727,500 738,200 5 46405 - Parking In-Lieu 23,824 23,824 23,824 23,824 23,824 23,824 23,824 6 46406 - City Employee Parking 82,705 - 89,760 89,760 89,760 89,760 89,760 7 44204 - Other Rent & Lease Revenu 698,623 456,300 474,200 475,500 479,600 483,900 504,400 8 Total Charges for Service 5,304,913 9,293,524 8,475,184 8,097,584 9,639,184 10,102,437 10,145,256 9 Total Citations and Fines 1,369,078 852,100 1,050,010 1,050,010 1,160,622 1,160,622 1,160,622 10 Total Other Revenue 1,291,192 57,700 175,800 76,800 30,000 34,000 40,000 11 Total Revenue without Debt Financing 7,965,184 10,203,324 9,700,994 9,224,394 10,829,806 11,297,059 11,345,878 12 Proceeds from Debt Financing - 46,315,169 47,000,000 - - - - 13 TOTAL REVENUE 7,965,184 56,518,493 56,700,994 9,224,394 10,829,806 11,297,059 11,345,878 14 EXPENDITURES
15 Operations
16 Total Salaries and Benefits 1,690,052 1,922,947 2,016,191 2,105,636 2,174,313 2,247,398 2,319,373 17 Total Contract Services 794,078 895,746 794,078 607,661 625,891 644,668 664,008 18 Total Other Operating Expenditures 769,146 703,126 465,236 694,888 720,073 741,675 763,926 19 Total Operating Expenditures 3,253,276 3,521,819 3,275,505 3,408,185 3,520,277 3,633,741 3,747,307 20 Total Capital Asset Expenditures 1,936,247 48,594,961 59,498,290 1,382,467 1,631,665 1,702,292 1,107,612 21 Total Debt Service Expenditures 819,618 4,195,421 2,508,307 3,827,322 3,832,523 3,847,476 3,843,068 22 Total Transfers to / from Other Funds 1,263,622 1,387,281 1,387,281 1,421,842 1,478,433 1,537,771 1,599,991 23 TOTAL EXPENDITURES 7,272,763 57,699,482 66,669,383 10,039,817 10,462,898 10,721,280 10,297,978 24 CalPERS Payment (ADP) 61,003 61,003 61,003 61,003 61,003 61,003 25 Total Expenditures (After CalPERS ADP 7,272,763 57,760,485 66,730,386 10,100,820 10,523,901 10,782,283 10,358,981 26 Working Capital - Beginning 13,129,008 13,821,428 13,821,428 3,853,039 3,037,616 3,404,524 3,980,304 27 Change in Financial Position 692,421 (1,180,989) (9,968,389) (815,423) 366,908 575,779 1,047,901 28 Working Capital - Year End 13,821,428 12,640,439 3,853,039 3,037,616 3,404,524 3,980,304 5,028,204 29 Operating Reserve (20%) 814,579 1,543,448 1,156,762 1,447,101 1,470,560 1,496,243 1,518,075 30 115 Pension Trust Fund - 61,446 61,446 61,446 61,446 61,446 61,446 31 Unreserved Working Capital Year End 13,006,849 11,035,545 2,634,830 1,529,069 1,872,518 2,422,614 3,448,684 2023-25 Financial Plan
Budget Report Pg. 31

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Enterprise Funds: Transit
C4: TRANSIT FUND
Revenue
The City secured $12.4 million in American Rescue Plan Act (ARPA) funding for operational costs for the Transit Fund. The $12.4 million was divided equally across three fiscal years beginning in FY 2022-23.

Reimbursement from the ARPA funding for operating costs incurred this fiscal year has not occurred, so it is not reflected in the table below. Reimbursement in federal funds expended on capital projects has occurred but was booked into Other Revenue / Interest, hence the significant difference between budget and actuals.

State revenue is on track as budgeted since disbursement of funds occurs quarterly. Bus fare, which constitutes fares paid on bus, pass purchases, and revenue from the City’s agreement with Cal Poly, is tracking slightly above budgeted amounts. This is because Cal Poly’s agreement is billed and paid at the beginning of each quarter. Other Revenue / Interest is tracking high even when adjusted for the incorrectly programmed federal funds because interest on investment accrued so far is higher than anticipated.

Table 31 - Transit Fund Revenue
Operating Expenditures
Salaries expenditures are tracking high because the interim Transit Manager stayed on this fiscal year to help onboard the new Mobility Services Business Manager. Contract Services expenditures are tracking high because of open purchase orders for transit operations and maintenance services, as well as the fuel services contract. Maintenance costs this fiscal year are higher than anticipated due to the aging fleet operated by SLO Transit. Over half of the active fleet is at or beyond the 12-year useful lifespan standard used by the federal government. Fuel costs are also higher than anticipated due to a continuing volatile global market, increase in diesel taxes, and restoration of services which occurred in October 2023. Funds were transferred from another operating line item to cover increased maintenance and fuel costs. The transfer is cost neutral and does not affect staffing line items.

Revenue Type
2022-23
Actual Budget YTD Actuals %
Received
Midyear
Revised
Budget
Total
Midyear
Changes
1 Federal 4,083,165 7,571,830 631,726 8% 7,571,830 -
2 Local (Bus Fare) 806,521 990,000 477,543 48% 990,000 - 3 Other Revenue/ Interest Revenue 446,998 13,579 59,918 441% 13,579 - 4 State 379,078 3,179,564 1,549,497 49% 3,179,564 -
7 Total $ 5,715,762 $ 11,754,973 $ 2,718,684 23% $ 11,754,973 $ - FY 2023-24
Budget Report Pg. 32

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Enterprise Funds: Transit
Table 32 - Transit Fund Operating Expenditures
Mid-Year Budget Changes
Transit is requesting an update to staffing costs as part of the new Mobility Services Division reorganization. Transit will split direct costs of the new Mobility Services Deputy Director and Mobility Services Business Manager positions as well as costs for an existing Administrative Assistant position. At budget adoption, the Transit Fund budgeted 100% for both the Mobility Services Deputy Director and Mobility Services Business Manager positions but will realize a savings of an estimated $148,431 this fiscal year by allocating positions across the three programs. See the Parking Fund Summary, Section 5 above, for more information.

Transit is also requesting a transfer of funds of $58,253 from Other Contract Services to temporary salaries to cover staffing costs for the interim Transit Manager. The interim Transit Manager was not anticipated to continue working through this fiscal year but stayed on to help on board the new Mobility Services Business Manager.

Table 33 - Transit Fund Budget Requests
Budget Request Current Amount
Budgeted
Amount
Requested New Total
Regular Salaries and Benefits $456,758 -$148,431 $308,327 Temporary Salaries $1,000 $58,253 $59,253
TOTAL $457,758 -$90,178* $367,580
*Negative value indicating this is an appropriation of budget back to fund balance.

Long Term Forecast
The Transit program was approved to extend the existing transit operations and maintenance services agreement with Transdev for an additional two years and to include hiring incentives for drivers. Staff is in negotiations and will have an amendment to the Transdev agreement executed early 2024. Annual contract cost increases will be included in the fund forecast for Supplement. The City’s two-year agreement with Cal Poly for transit services expires at the end of this fiscal year. Staff will begin negotiations in the new calendar year with an expectation of executing an agreement in Spring 2024.

In July 2023, staff received approval to issue a purchase order for six additional battery electric buses (BEBs). The buses have an anticipated delivery date of Spring 2025 and an in-service date of fall 2025. The two BEBs currently operated by the City will be monitored to determine electrical charging needs and associated costs so that utility services expenses can be adjusted accordingly.

Transit Fund Operating
Expenditures FY 2022-23 Actual Budget Year-to-date Actual % Expended 1 Salaries $ 142,243 $ 337,815 $ 173,342 51.3%
2 Retirement/Benefits $ 18,121 $ 74,554 $ 41,448 55.6%
3 Contract Services $ 2,986,398 $ 4,487,341 $ 3,337,230 74.4% 4 Other Operating Expenditures $ 397,917 $ 410,200 $ 349,227 85.1% 5 PERS Unfunded Liability $ 35,615 $ 45,388 $ 44,728 98.5% 6 Transfers Out $ 365,544 $ 463,491 $ 231,746 50.0%
7 Total $ 3,945,838 $ 5,818,789 $ 4,177,720 71.8%
FY 2023-24
Budget Report Pg. 33

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Enterprise Funds: Transit
The Transit program also finalized the Transit Innovation Study in January 2024 and will submit Capital Improvement Plan (CIP) project requests at Supplement to implement specific recommendations.

Table 34 - Transit Fund Five Year Forecast
(A)
Actual
2022-23
(B)
Budget
2023-24
(C)
Mid Year
Revised
2023-24
(D)
Forecast
2024-25
(E)
Projected
2025-26
(F)
Projected
2026-27
(G)
Projected
2027-28

REVENUE
1 Charges for Service
2 46601 - Bus Fare 206,521 240,000 240,000 250,000 260,000 260,000 260,000 3 46602 - Cal Poly Transit Agreement 600,000 750,000 750,000 750,000 772,500 795,675 819,545 4 Total Charges for Service $806,521 $990,000 $990,000 $1,000,000 $1,032,500 $1,055,675 $1,079,545 5 Other Revenue
6 44101 - Interest on Investment 117,310 13,579 13,579 13,851 32,815 27,131 43,472 7 44107 - Investment FMV (17,944) - - -
8 44310 - Miscellaneous Revenue 3,449 - - - - - -
9 45208 - TDA Revenue (60,272) 2,727,295 2,727,295 2,809,114 2,893,387 2,980,189 3,069,594 10 45209 - STA Revenue 430,628 443,547 443,547 456,853 470,559 484,676 499,216 11 45215 - State of Good Repair (SGR) 8,722 - - -
12 45211 - Other State Grants - 8,722 8,722 8,722 8,722 8,722 8,722 13 45216 - Low Carbon Operation Revenue 344,183 - - -
14 45302 - FTA 5307 (Capital) 1,339,692 3,471,830 3,471,830 3,575,985 3,647,505 3,720,455 3,794,864 15 45303 - FTA 5307 (Preventative Maint.) - - - - 210,765 214,980 219,280 16 45304 - FTA 5307 (Operating) 2,743,473 - - - 1,694,054 1,727,935 1,762,494 17 45305 - Other Federal Grants - 4,100,000 4,100,000 4,100,000 - - - 18 Total Other Revenue 4,909,241 10,764,973 10,764,973 10,964,525 8,957,807 9,164,087 9,397,641 19 Total Revenue $5,715,762 $11,754,973 $11,754,973 $11,964,525 $9,990,307 $10,219,762 $10,477,187 20 EXPENDITURES
21 Total Salaries and Benefits $195,979 $457,758 $367,579 $326,312 $333,901 $340,348 $346,830 22 Contract Services
23 61011 - Maintenance 348,373 255,000 255,000 265,000 283,550 303,399 324,636 24 61013 - Other Contract Services 229,164 963,803 905,550 1,011,993 1,062,592 1,115,722 1,171,508 25 61016 - Purchased Transportation 2,387,952 3,078,597 3,078,597 3,693,446 3,863,962 3,979,881 4,099,277 26 62504 - Fuel 365,359 350,000 350,000 385,000 385,000 385,000 385,000 27 Total Contract Services 3,330,848 4,647,400 4,589,147 5,355,439 5,595,104 5,784,001 5,980,422 28 Total Other Operating Expenditures 31,425 125,713 125,713 124,513 124,513 128,248 132,095 29 Total Capital Asset Expenditures 2,430,996 5,300,669 5,300,669 3,794,674 4,260,629 232,295 4,152,812 30 Total Transfers to / from Other Funds 365,544 463,491 463,491 477,396 491,718 506,469 521,663 31 Total Expenditures 6,354,792 10,995,030 10,846,599 10,078,333 10,805,865 6,991,361 11,133,821 32 CalPERS ADP 12,555 12,555 12,555 12,555 12,555 12,555 12,555 33 Total Expenditures (After CalPERS ADP) 6,367,347 11,007,585 10,859,154 10,090,888 10,818,420 7,003,916 11,146,376 34 Working Capital - Beginning 2,875,428 2,236,399 2,236,399 3,144,773 5,030,965 4,215,407 7,443,808 35 Change in Financial Position (639,030) 759,943 908,374 1,886,192 (815,558) 3,228,401 (656,635) 36 Working Capital - Year End 2,236,399 2,996,342 3,144,773 5,030,965 4,215,407 7,443,808 6,787,173 37 Operating Reserve (20%) 711,650 1,046,174 1,016,488 1,161,253 1,210,704 1,250,519 1,291,869 38 Unreserved Working Capital Year End 2,948,049 4,042,516 4,161,260 6,192,218 5,426,110 8,694,327 8,079,043 2023-25 Financial Plan
Budget Report Pg. 34

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Department Updates
Section D: Department Performance Measure and
Work Program Updates
Budget Report Pg. 35

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Department Updates – Administration and IT
Administration & IT Department
Performance Measure Update

Objective Measure 2022-23
Actual
2023-24
Target
2023-24
Mid-Year
Provide City-wide
communications to the
community.

Strategic Goal: Citywide
Communications
Open City Hall Participant Satisfaction
Rating 94% 93% 92%
# of Pageviews for City News Pages 300,000 350,000 60,2158 # of news email subscribers 3,400 4,500 3,438
Provides reliable IT resources
to the organization and
community.

Strategic Goal: Information
Technology
Maintain City Network Reliability Uptime
Status 99.9% 99.9% 99.9%
Data backed-up in Terabytes9 173 173 173
Number of GIS layers maintained 915 920 920
Economic Stability
Strategic Goal: Economic
Recovery and Stability
Contacts with businesses regarding
starting, expanding, and/or staying in
the City
99 75 48
One-time funds used for direct aid to
local businesses and non-profits $495,00010 $175,000 $350,00011 Supports our commitment to
sustainability and provides
open space resources to the
community.

Strategic Goal: Climate Action,
Open Space, and Sustainable
Transportation
# of Green Team Meetings 10 10 5
# of Open Space Conservation Plans that
will guide the long-term protection and
stewardship of natural resource values
while guiding appropriate public use
1 1 1
Strengthens the City’s
commitment to advancing
Diversity, Equity and Inclusion
Strategic Goal: DEI
# of City-wide DEI Trainings Offered 3 10 312
# of DEI Newsletters for Staff 1 6 3
Funds for High-Impact DEI Grants
Awarded $300,00013 $150,000 $150,000
8 Last year, we released more high-profile news than we have this year. However, a review of previous years shows that this year’s actual pageviews is on par or even higher than similar years when we’ve released more typical news.
9 Data previously measured in gigabytes; 1 terabyte (TB) equals 1,000 gigabytes (GB). 10 Includes one-time DEI Business Grants which expanded direct aid administered to the community. 11 Includes $225,000 for Buy Local Bonus, $25,000 for Childcare Grants and $100,000 for PCC grants. 12 Although fewer trainings have occurred, the trainings offered have allowed for larger numbers of staff to attend totaling 52 this year with more planned in 2024.
13 FY 2022-23 High Impact Grants include $150,000 from the missed grant cycle in FY 2021-22.

Budget Report Pg. 36

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Department Updates – Administration and IT
Work Program Evaluations
City Administration
The first half of the fiscal year was a busy one for the Communications Program. The team sent out more than 280 news bulletins (e-notifications) and saw an increased number of people who participated on Open City Hall during this period. The number of visitors who participated in 11 surveys on Open City Hall has been steadily increasing. The surveys had 3,769 visitors and 2,483 responses for a 66% response rate. The survey with the highest response rate was the Park Local Program survey (of the 1,173 visitors to that survey, 88% responded). While the overall satisfaction rating of Open City Hall has declined slightly from 93% to 92%, analysis determined this was mostly dissatisfaction with the new demographic questions and with parking services/rates rather than the survey tool itself. The Communications Program also provided additional support to the Parking Services team during this time period due to the increased need for communications around parking changes and rates. The Communications Program will continue to support Parking Services and the Mobility Services Division of Public Works over the next six months by supervising a contract for an in-house Communications Coordinator. The Communications Program will also work with the Office of Sustainability and Natural Resources on a Sustainable SLO campaign and with the Office of Diversity Equity and Inclusion to begin implementing the proposed DEI Strategic Plan, pending adoption by City Council.

The City’s legislative Program advocated for the City’s interest on multiple items including support for ACA 1, which if approved could help the City fund affordable housing. Staff presented the full 2023 State Legislative Summary to Council on January 9, 2023. Several grants have recently been awarded to the City and over the next six months staff will be working with the City’s contracted grant writer on a training to further educate staff on the grant application and support process. Staff are also preparing for the 2024 Community Academy which is planned to start in April 2024 with the application period opening in late January.

Cultural Activities
The City continues to support the City-County Library and the Performing Arts Center (PAC). The City provides an annual contribution to the operating costs and funds various capital improvements for the library. The City is also a partner with Cal Poly and the Foundation for the Performing Arts (FPAC) in the operation of the Performing Arts Center. Operations are overseen by the Performing Arts Commission, with the Mayor and the City Manager serving as the City's representatives. Administration staff and the rest of the PAC partners are working on updating the operating agreement to reflect current operations and respond to anticipated industry practices & local market conditions.

Economic Development
The Economic Development & Tourism program is a major contributor to the Economic Resiliency, Cultural Vitality & Fiscal Sustainability Major City Goal. Currently all tasks and goals are ahead of or on schedule unless otherwise noted. The department reorganization is progressing as planned. The key programs including the Downtown activation programs, development of the new ARTober program, the expansion of the Buy Local Bonus and Eat Local Bonus programs, and additional childcare grants are all proceeding as anticipated.

Diversity, Equity, and Inclusion (DEI)
The Office of Diversity, Equity, and Inclusion (DEI) leads the implementation of DEI initiatives in collaboration with various City departments. For the last couple of months, the Office of DEI has been diligently working in developing the City’s first DEI Strategic Plan, which included a robust community engagement process from September to November consisting of a community wide vision survey, Budget Report Pg. 37

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Department Updates – Administration and IT
workshops in English and Spanish, and one-on-one interviews with community leaders. The Office of DEI is scheduled to present to Council the complete strategic plan on February 20, 2024. Likewise, the Office of DEI moved forward the HRC recommendations on the 2023-2024 DEI High Impact Grant Program and received City Council approval for a total of eight (8) non-profit organizations to advance DEI initiatives in the community. Internally, the Office of DEI is in the process of rolling out a new DEI Leadership Training for all staff with an accompanying DEI Language & Resource Guide, and the DEI Employee Committee continues to be more involved in community activities and to address internal departmental projects and activities.

Sustainability & Natural Resources
The Office of Sustainability & Natural Resources leads the implementation of open space conservation and planning, climate action, creeks and watershed protection, and community partnerships. Since the beginning of the fiscal year, key activities have included continued open space protection efforts including the completion of a suite of open space easements for the Froom Ranch Specific Plan area, the adoption of a revised approach for new buildings decarbonization and a key study session on options for addressing existing buildings, the award of the $400,000 Buildings UP prize through the federal Department of Energy, the inclusion of the City of San Luis Obispo by the Carbon Disclosure Project as an “A-List City”, continued implementation of recovery actions following last winter’s storm damage to local creeks and tributaries and last fall’s Lizzie Fire, and ongoing support, partnership, and work towards updates of agreements with numerous community partners.

Community Promotion
The Community Promotion work program, directed by the Promotional Coordinating Committee (PCC) is directly tied into the work of the Office of Economic Development & Tourism and has implemented several programs to enhance the quality of life for residents and the experience for visitors in our community. Key program highlights include the community promotions grant programs (Cultural GIA and Cultural Arts & Community Promotions) which awarded $100,000 total to 23 local nonprofit organizations for programs and activities in FY24, the continued development and implementation of the Neighborhood campaign including maps and promotional resources to support the economic vitality of business areas downtown and beyond, the oversight of the Support Local campaign including the Buy Local Bonus and Eat Local Bonus promotions, and the continued promotions of the arts including the completion of the Art Starts With campaign and the development of ARTober and Piano in the Plaza.

Tourism Business Improvement District (TBID) Program
The TBID, through Visit San Luis Obispo continues to promote travel to and within San Luis Obispo including the implementation of the comprehensive Tourism Marketing and Business Plan resulting in overnight stays in the city. The TBID is actively implementing a robust paid, owned and earned program inviting visitors to the city mostly from drive markets statewide as well as fly-markets. While visitation to the city has begun to slow somewhat when compared to the banner year in FY23 resulting in a minor dip in occupancy and TOT, the City did maintain the collection of $1 million in Transient Occupancy Tax each month during the first quarter of the year. A key program highlight to-date the fiscal year is the launch of the redesigned VisitSLO.com – the site was a year in development. The TBID is anticipating a typical slowdown in the shoulder season and will bring back the Mid-Weekend Spring Promotion in February – March 2024 to offset those impacts.

Downtown Business Improvement District (BID) Program
The Downtown BID provides the resources to Downtown SLO to provide ongoing activation and placemaking activities in the Downtown including Farmers’ Market, Concerts in the Plaza and the Budget Report Pg. 38

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Department Updates – Administration and IT
Holiday Parade. In additional to the traditional activities the City has also partnered with the BID to activate store fronts, add additional ambassadors and provide additional activations. City staff have also worked closely with DSLO in the selection and onboarding of the new CEO.

City Clerk
The City Clerk’s office has been active throughout the first half of 23-24 on the implementation of hybrid meetings for City Council and transitioning Advisory Bodies into our agenda management system Escribe. Ten of the sixteen Advisory Bodies are now using Escribe to produce their agenda packets.

Since July 1st, the department has received and processed 171 public records requests which is consistent with past request rates and for other benchmark cities. The Clerk’s office prepared agendas for 16 City Council meetings, processed 176 Council Agenda Reports and prepared a total of 19 agendas and packets for the Planning Commission, Architectural Review Commission, Cultural Heritage Committee, Human Relations Committee, and Tree Committee.

IT - Network Services
This Fall, collaboration with Cal Poly concluded in the successful completion of the KVEC Radio Tower construction project. Enhancements and expansions were made to the site, greatly amplifying radio coverage capabilities.

The Control Systems Administrators continued their role in partnering with Utilities for the construction of a new lift station at Calle Joaquin. Their responsibilities encompassed overseeing the design, installation, and commissioning of SCADA systems, ensuring seamless operations at the facility.

Throughout the past six months, the IT Help Desk managed and resolved a total of 1,591 support tickets.

These tickets encompassed a wide spectrum of support activities, including hardware and software installations, computer upgrades, and troubleshooting tasks.

IT - Information Services
During the recent Lizzie Fire emergency management and recovery efforts, the GIS Team played a pivotal role by collecting data, including fire perimeter details and impacted properties. This contribution significantly supported the recovery process.

In addition, the GIS Team marked Geography Awareness Week and GIS Day on November 15th, 2023, commemorating these occasions with various activities.

Simultaneously, the Oracle Team is actively engaged in crafting a comprehensive program calendar for 2024. This calendar will highlight key milestones for the upcoming year and incorporate the prioritization framework developed earlier this Fall.

Budget Report Pg. 39

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Department Updates – City Attorney
City Attorney
Performance Measure Update
Objective Measure 2022-23
Actual
2023-24
Target
2023-24
Mid-Year14
Timely and Responsive
legal advice and support
Strategic Goal:

Department Objectives
Administrative Citation Appeals
Received by the City 110 120 56
Appeals closed without need of a
hearing15 23 25 21
City assisted corrections to defective
appeals to allow access to hearing 6 15 9
City facilitated hearings on the record
without need for personal
appearance by Appellant
35 30 14
# of hearing days scheduled16 1817 12 6
Legal Training &
Compliance
Strategic Goal:

Department Objectives
# of Council, Staff, and Advisory Body
legal trainings, legal updates, and
compliance advisory sessions
818 12 3
Municipal Claims,
Litigation & Prosecution
Management
Strategic Goal:

Department Objectives
Percentage of Claims Resulting in
Litigation 7.8%19 <5% 3.6%
Liability Claims Against the City
Reviewed/Managed 77 70 28
Number of multi-count complaints filed
for misdemeanor municipal code
violations20
- 35 20
14 Projected actual as of 12/31/23. 15 Closed in some way that did not include a decision being issued (e.g., withdrawn by appellant, untimely filed, voided by the issuing department)
16 If more than one hearing officer convened hearings on the same day, those are counted separately. 17 A hearing officer’s preference for less appeals heard on a single day led to more overall hearing days needing to be scheduled.
18 Onboarding of multiple staff members and an extended leave of absence made it difficult to prioritize time for the preparation of training materials.
19 Of the six claims that went to litigation, one is a private matter in which the City was named due to plaintiff’s misunderstanding of HASLO and was dismissed; for two, the City is indemnified under terms of either an event permit or a construction contract; the others are a personnel matter, a trip and fall at a City park, and an allegation that code enforcement action reduced the sale price of a homeowner’s property, which the City assesses as meritless.
20 New measure being tracked due to rise of volume and importance to the community.

Budget Report Pg. 40

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Department Updates – City Attorney
Work Program Evaluations
City Attorney
Legal Advice and Assistance. This has been a claims-and-litigation-intensive year to date, with litigation defense, settlement negotiations, and discovery related activities consuming significant resources and demanding coordination and contributions from interdepartmental staff and leadership throughout the organization. The highest resource demand cases have been: the Langley federal court matter, alleging misapplication of evolving laws surrounding occupation and storage of property in public spaces by unhoused individuals; the Wichman matter, a meritless, but persistent, federal court action by the relatives of Eddie Giron, arising out of his suicide following his murder of SLOPD Officer Luca Benedetti in the course of an investigation into a series of thefts by Mr. Giron; two related state and federal court Orcutt actions, alleging misconduct by a City-employee witness and City investigators arising out of the investigation and arrest of the plaintiff for allegedly making racist threats against real property managers and real estate agents (the underlying criminal case was ultimately dismissed by the DA and the City prevailed at both trial and appellate courts in both the state and federal courts and is seeking to recover fees in the state court action); the Littlejohn matter alleging violations of civil rights and diminished property value related to a City code enforcement inspection; several personal injury or wrongful death cases arising out of trip and falls or traffic collisions occurring on City streets and sidewalks; several property damage claims arising from flood damages to private properties; a California Voting Rights Act demand that the City transition to district-based elections and related settlement negotiations; a receivership action filed to remediate serious health and safety concerns on a private property located at 48 Prado Road; a code enforcement action and related administrative appeals and a writ filed by the owner of 4080 Horizon related to violations of creek regulations; several personnel and labor negotiations and grievance matters; and evaluation of a successful legal challenge to the City of Berkeley’s electric building regulations and responsive actions to suspend and amend City ordinances, pending resolution of litigation against Berkeley.

Additionally, City Attorney staff has provided legal support to staff on various Capital Improvement, real property, community partnership and development review matters, including: mediation of development agreement disputes arising out of the San Luis Ranch and Avila Ranch project approval implementations; negotiations regarding the implementation of the 600 Tank Farm project and the Tank Farm Roundabout improvements; objections to the City’s application of housing and ADU laws, including SB 9, Housing Accountability Act and Density Bonus Law amendments; updates to various affordable housing agreements; negotiation of Mid-Higuera Bypass easements and Froom Ranch easements necessary for annexation; assistance with negotiation of Acquisition Agreements with East Airport Annexation Area, necessary for participation in the SCIP funding program; acquisition of 1106 Walnut and 1166 Higuera properties for City use; legal advice related to Welcome Home Village, HomeKey, and City safe parking projects; Surplus Land Act compliance issues; and non-profit partner agreements, including SLOMA, SLO Rep, HASLO, TMHA, People’s Self Help Housing, and the Downtown Association.

In the coming months staff will be working to defend and/or resolve outstanding claims and litigation matters, provide legal support to collaborative regional solutions to homelessness, provide training to staff on emerging and evolving development, public safety, public contracting, tax-and-fee, and housing laws, conclude code enforcement matters affecting public and environmental safety and neighborhood wellness, conclude outstanding personnel matters, update City contract templates, and provide legal support for and conclude right of way acquisitions necessary to implement important public and private development projects.

Budget Report Pg. 41

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Department Updates – City Attorney
Administrative. During the first half of the fiscal year, the City Attorney’s Office has worked to fill vacancies in support positions created by two resignations near the start of the year. The Legal Assistant I recruitment was a success, and the new staff member in that position is learning quickly and contributing to important projects, like the complete overhaul of the department’s task management system (an effort conceived and led by our other legal assistant who has only been in position since April). The first Paralegal recruitment did not result in a hire, so the second attempt is being held open longer than usual (opened just before Thanksgiving and will close near the end of January) to maximize the potential for a positive outcome. During this transition period, remaining staff have redistributed the workload and continue to complete their support of discovery and claim responses, coordination of the administrative citation appeal and criminal misdemeanor complaint processes, support of the attorneys and Human Resources staff in multiple personnel matters, and allocation of review and production of records for requests under the California Public Records Act. The Paralegal vacancy has had the biggest impact on review and production of records since being lead on those duties are a large part of that position’s assignments. However, our newest staff members (both legal assistants) have taken on two of the most voluminous requests (one with an initial batch of over 600,000 potentially responsive records, now down to 11,000 after months of work, and the other with an initial batch of 180,000 items) freeing up other staff members to focus on other voluminous and time intensive requests.

The biggest administrative projects planned in the department for the second half of the year are the review of approximately 140 boxes of paper records being held in storage (to scan documents for retention or request destruction for documents overdue for processing) and coordination with criminal justice and social services partners on the processing of misdemeanor citations. Since the Police Department hired a team of Community Service Officers to patrol downtown, the number of citations issued for violation of the municipal code has doubled. These citations are issued to address criminal misdemeanor activities impacting the experience and perception of safety in the downtown but can also be a tool for City Attorney’s Office staff, in collaboration with community partners, to connect more effectively those in need with supportive and rehabilitative services. Along with working to make the misdemeanor complaint process more effective and efficient, staff will also be moving it from a largely paper-based process to a digital one, an effort begun earlier in the year, but requiring correction of technical issues and further coordination and refinement of processes for receiving citations from Police Records and for filing complaints with the court.

Budget Report Pg. 42

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Department Updates - Finance Department
Finance Department
Performance Measure Update
Objective Measure 2022-23
Actual
2023-24
Target
2023-24
Mid-Year
Enables & enhances transparency,
accountability & integrity.

Strategic Goal: Fiscal Policies
# of calendar days
following year-end until
ACFR is issued
168 170 170
# of audits/reviews
conducted/ # of
additional agreed upon
procedure audits
performed
2/2 2/2 2/2
Protects & prudently manages its
financial resources.

Strategic Goal: Fiscal Policies
# of funds within fund
balance requirements/
total funds with fund
balance requirements
8/8 8/8 8/8
Net annual direct debt
per capita (General
Fund21)
$395 $395 $395
Twelve-month total rate
of return/City portfolio22 0.76% 3% 3%
Work Program Evaluations
Finance Administration
Finance Administration oversees the management and administration of the City's finance operations.

The Division includes the Finance Director, a half-time Administrative Assistant (supplemental through the end of FY 2023-24), and a half-time Financial Analyst/Oracle Subject Matter Expert (currently vacant). On September 13, 2023, the City officially closed on a lease revenue bond financing for the Cultural Arts District Parking Structure; the closing was the culmination of many months' worth of work by staff within the Finance Department as well as staff from other departments. In addition, the Department continues to have a significant workload associated with recovery from the severe winter 21 The California Government Code provides for a legal debt limit of 3.75% of assessed valuation. The City’s debt management policy, however, sets a more restrictive debt limit of 2% of valuation. This equates to a legal debt limit per capita of $8,500 and a City policy per capita limit of $4,500. The City remains well below its per capita limit.
22 Based on the June 2023 Investment Report. The City aims for a long-term rate of return of 3%, but market vola�lity can cause swings from year to year. The 0-5 Treasury Index measured a twelve-month rate of return of 0.42%; therefore, the City’s por�olio performed slightly beter than the index in FY 2022-23. As a government en�ty, the City’s primary investment objec�ve is to achieve a reasonable rate of return on public funds rather than the maximum genera�on of income, which could expose the City to unacceptable levels of risk.

Budget Report Pg. 43

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Department Updates - Finance Department
storms in January and March 2023, which have resulted in an estimated $35 million of unanticipated costs to the City, related to emergency protective measures, debris clean up, and work to permanently repair damages to the public right of way and City infrastructure. Both the lease revenue bond financing and work with FEMA to seek reimbursement for unanticipated storm costs has taken attention away from continuous process improvements, but the Department has remained on track in addressing core services and objectives. In FY 2022-23, the Department kicked off an organizational assessment to determine the most appropriate organizational structure for the Department, given current needs. The assessment is also intended to provide greater flexibility in the assignment of work, as well as opportunities for staff development. The assessment is close to wrapping up and has resulted in the reclassification of positions as noted below, to enable the Department to better support the needs of the City organization. The department currently has a half-time Financial Analyst for Oracle support.

This position does not provide sufficient capacity to make timely progress in addressing the configuration changes needed to achieve desired compliance or system enhancement requests. These activities will continue to be delayed, particularly as the position is now vacant and recruitment of a half-time resource with the necessary skills and knowledge is unlikely in the current job market.

Budget
The Budget division coordinates and oversees of the City's annual budget, quarterly financial reports, and two-year financial plan development. The budget division has remained nimble over the last several years of economic volatility with careful budget management and fiscal forecasting. The City Council adopted the 2023-25 Financial Plan in June 2023. In mid-September, the Principal Budget Analyst moved into a new position in City Administration but has continued to support the Finance Department on critical budget related tasks. A new Principal Budget Analyst joined the team in midJanuary and is getting up to speed.

Revenue Management
The Revenue Management division oversees the collection and accurate recording of the City’s fee and tax revenues. As part of the broader organizational assessment, the division recently reclassified one of its Accounting Assistant positions to a Finance Cashier which will be primarily focused on receiving payments, responding to customer inquiries, and assisting other departments will billing. This new position was filled in January. The second Accounting Assistant is planned to be reclassified to a Financial Specialist which will have responsibility for more advanced customer inquiries, monitoring the many functions of the Revenue Management division to ensure that things are being done both in a timely and accurate manner and assist the Financial Analyst with long-term projects that will improve the division. The division has not had consistent and complete staffing for a year and once the team is fully staffed, it will focus its efforts on business license and tax certificate enforcement. This includes enforcement of unregistered short-term rentals.

Purchasing
The Purchasing division coordinates the City’s competitive bidding and contract routing procedures and in the first half of FY 2023-24 has posted 21 formal requests for proposals and routed 139 contracts.

The division reviews and audits all City purchase orders and contracts for policy compliance and has processed 1,824 purchase orders in the first half of FY 2023-24. In addition to day-to-day duties, the division is also responsible for leading documentation efforts related to unbudgeted costs incurred due to the 2023 January and March storms. The storms caused significant damage to City infrastructure, resulting in an estimated $35 million of costs. The Financial Analyst in Purchasing is currently working with a disaster recovery consultant that is providing technical assistance and has broken the damages into 67 projects to be submitted to FEMA and CalOES for review and consideration of reimbursement (due to Federal and State emergency declarations, the City may be able to secure reimbursement for a maximum of 93.75% of eligible expenses). As of the end of 2023, the City has submitted 14 projects Budget Report Pg. 44

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Department Updates - Finance Department
for review by FEMA and expects to have an additional five projects submitted in January. Significant delays have occurred due to a lack of clarity from FEMA about the information required and FEMA Program Delivery Manager (PDMG) turnover, and we expect these challenges to continue. The division is also continuing to work with FEMA to obtain reimbursement for COVID-19 expenditures and has submitted $646,830 in costs associated with the pandemic response. The Financial Specialist position was filled in December 2023 after having been vacant since January, and this additional capacity will enable the division to do more analysis on purchasing and procurement to enable the City to achieve maximum value for its purchases.

Accounting
The Accounting division has completed the preparation of the audited financial statements for FY 2022- 23 and has, again, submitted the report to GFOA for the Excellence in Financial Reporting Award. The payroll function issued all W2s and year-end tax reports timely. Other accounting activities include the preparation of the annual Cost Allocation Plan and supporting departments in processing vendor payments. The division also assisted with the issuance of the CADPS bonds and associated implications on the City’s financial statements and has been continuing to support storm project accounting. As part of the broader organizational assessment, the Accounting Manager/Controller position was reclassified to Deputy Director of Finance/Controller, as it was determined that the position was performing duties similar to those performed by other Deputy Director level classifications in the City organization.

Support Services & Non-Departmental Expenses
Support Services and Non-departmental divisions are in place to help effectively budget and account for Citywide costs not associated with a specific operating program or project. Both elements are generally on track in the current year, but the Non-Departmental Expenses budget will be adjusted to account for an increase in credit card merchant fees. The program budget is primarily made up of contingency budget that is only activated when a department is faced with salary cost increases due to bargaining unit results, minimum wage increases, or unexpected vacation buyouts that cannot be absorbed within the department's appropriated budget. The contingency amount is determined based on Council's approved parameter amounts.

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Department Updates – Human Resources
Human Resources Department
Performance Measure Update

Objective Measure 2022-23
Actual
2023-24
Target
2023-24
Mid-Year
Integrated HR
Services
(Strategic Goal)
Average days between injury and
Workers’ Compensation claim filed. 4 3 4
Achieved lower severity of Workers’
Compensation claims than the risk pool Yes Yes Yes
Annual liability claims payment under
the Self-Insured Retention amount. No Yes Yes
Employee
Development &
Growth
(Strategic Goal)
Percentage of On-Time Employee
Performance Evaluations 92% 95% 98%
Percentage of Internal Promotions 35% 40% 45%
Training Sessions Coordinated 15 20 8
Engaged and
Aware Culture
(Strategic Goal)
Number of Policies Communicated 80 75 88
Informational Sessions Coordinated 266 200 123
Work Program Evaluations
Human Resources Administration
Human Resources plays a pivotable role providing comprehensive organizational support in various domains, including benefits administration, risk management, compensation, recruitment, labor relations, performance management, training and development, and legal compliance. While continuing to meet the needs of the organization, the Human Resources team has experienced instability in staffing levels within the department. All employees within the department have been in their role for 2.5 years or less and the HR Manager position remains vacant despite multiple recruitment attempts. Additionally, one HR Specialist position is vacant following an internal promotion.

The department continues to experience a noticeable increase in the volume of recruitments, labor issues, and performance management issues. This is in part due to the increased number of positions added over the last two years, the impact of the Great Reshuffle, the dynamic and changing workforce, and other external factors. Additionally, there is an increased level of requests for classification review, leaves of absence, disability accommodation, and benefits changes.

In the last six months, three notable achievements standout: (1) the successful negotiation of a successor Memorandum of Understanding with the Firefighters Union, (2) hiring or promoting 70 Budget Report Pg. 46

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Department Updates – Human Resources
employees, representing approximately 15% of the organization, and (3) several enhancements made to employee benefit offerings and to the open enrollment process.

To adapt to these evolving conditions, the department has had to make strategic decisions, including temporarily slowing down process improvements. This intentional shift in focus allows the team to channel efforts towards sustaining and maintaining a foundational level of service while ensuring strict adherence to legal compliance standards. This approach enables the department to effectively navigate the increased workload and challenges associated with the changing organizational landscape.

Complicating matters further, new legislative mandates effective January 1, 2024, have necessitated updates to policies and system configurations, compounding the department’s existing workload.

Despite these challenges, the Department continues to partner with the Centre for Organization Effectiveness to provide professional development opportunities for employees and supervisors across the organization and implement enhancements based on the 2023 Employee Engagement Survey.

Additionally, staff continues to promote enhancement of the Oracle Human Capital Management system.

Wellness
The Wellness program supplements the Risk Management program by providing employees tools and education to improve their physical and emotional well-being, thus enhancing employee productivity and performance. Mental health services through The Counseling Team International (TCTI) are being offered to public safety employees, geared toward the unique challenges of their profession. The City’s SLO Healthy and Smart (SLO HAS) Committee has hosted gatherings for City employees to network and share ideas. They will continue to work on advancing the healthy and smart culture across the organization. The functional mobility program at the Fire and Police Departments continues to promote safety and targets a reduction in workplace injuries. The Employee Assistance Program (EAP) through Aetna Resources for Living continues to be available to all employees. Voluntary programs like Yoga and Chair Massages have been put on hold due to instructor availability.

Insurance Fund
The Insurance Fund is a sub-fund of the General Fund that is used to pay insurance-related expenses and maintain reserves for current claims, potential settlements, and insurance premiums. Within the Fund is an account for paying claim expenses up to the Self-Insured Retention (SIR) limits of $500,000 each for liability and workers’ compensation. The shift to the SIR model for workers’ compensation happened on July 1, 2023, reducing up front premium costs. The number and severity of claims appear lower than prior years, but it is too early to tell the overall trend as claim costs develop over time. The City also began using a new third-party administrator, Athens, in January 2023 and that has been a smooth transition. At mid-year, 3% of the SIR account for workers’ compensation has been expended, indicating far lower than anticipated costs for this point in the year. However, this is a phenomenon of being in the first six months of the program and only reflects the costs of new claims since July 1, 2023.

Costs for these claims will develop over time. For liability, 54% of the SIR account has been expended, indicating that costs are as predicted for this point in the year. Remaining funds are expected to be adequate to cover expenses through the remainder of the fiscal year for both workers’ compensation and liability. The minimum budgeted fund balance was established to withstand fluctuations in expenses and reflects a 75% confidence level based on trends over the previous five years. To predict Budget Report Pg. 47

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Department Updates – Human Resources
future increases, staff tracks market trends and conditions that affect insurance rates and periodically performs root cause analyses to identify ways to reduce injuries and accidents. Staff regularly reviews contracts to ensure City partners and vendors maintain adequate insurance coverage that extends to the City.

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Department Updates - CSG
Community Services Group (CSG)
Community Development • Parks & Recreation • Public Works • Utilities The Community Services Group is comprised of the City’s four public-facing, service departments. The Community Services Group Administration team did not have official performance measured identified as a part of the Financial Plan 21-23 but will identify and outline those as a part of the next Financial Plan.

Work Program Evaluations
Community Services Group Administration
The CSG Administration team provides oversight and support on the production of core services, advancement of Major City Goals and objectives, identification of new departmental efficiencies, communication with the public, policy research, and City staffing transitions. The CSG Admin team consists of the Assistant City Manager, Business Services and Administrative Manager, Infrastructure Investment Financial Analyst and full-time Administrative Assistant; with oversight of the Analysts in the CSG Departments. The first two quarters, the CSG Team focused on supporting the transitions of the retirements of the Community Development Director and Assistant City Manager, including the creation of onboarding materials and preparation for the new incumbents. The new CSG Analyst Team has focused on budgetary support as Fiscal Officers for their respective departments, including facilitating training for new employees on Budget and Oracle 101 and the creation of a Budget 102. In addition, analysts for CSG consistently report updated department budget information to managers and supervisors to reference and assist in tracking their budgets. CSG Admin implemented a centralized resident engagement platform, AskSLO, in Fall 2022, and has been consistently working on refinements, improvements and feedback gathered from staff and the community to make the tool more user efficient and friendly. Policy work has focused on the Shopping Cart Ordinance implementation, including coordination of proactive and reactive shopping cart retrieval and business plan submittal review and most recently enforcement. Additionally in the last two quarters, CSG Admin has partnered in supporting Parking, particularly in project managing the acquisition of the 1166 Higuera Street property. Lastly, CSG has been and continues to be focused on the 5-year Citywide User and Impact Fee Study in data gathering, applying updated methodology and analysis to ensure the capture of cost of services. CSG Admin has managed and guided significant efforts focused on partnerships and project management to support critical programs within CSG Departments, recruitments, and creating new processes to collaborate across CSG departments.

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Department Updates – Community Development
Community Development Department
Performance Measure Update
Objective Measure 2022-23
Actual
2023-24
Target
2023-24
MidYear
Affordable housing
production
Strategic Goal:

Housing
Number of affordable housing units
secured through entitlements or
construction
147 50 123
Provide Excellent Customer
Service
Strategic Goal:

Other Department
Objectives
Customer survey response positivity
rate
79% 85% 85%
Ensure a Safe Community
Strategic Goal:

Housing
Percent of Code Enforcement cases
investigated on time: First Tier - 24
Hours, Second
Tier - 2 Days, and Third Tier - 3-5 Days
79% 85% 53%24
Development Review
activities
Strategic Goal:

Other Department
Objectives
The target goal of meeting cycle
times 75% of the time reflects an
increase in more complex and
resource-intensive development
review activities.
75% 75% 78%
Building Permit Review
activities
Strategic Goal:

Economic Stability
Percent of building permit reviews
completed within established cycle
times
NA 85% 59%25
Work Program Evaluations
Community Development Administration
The Administration team continues to provide process management and support for all the divisions within the Community Development Department. The division also supports the Department’s advisory bodies and Major City Goal work programs. Administration provides internal customer service by 23 CDD anticipates that 60 affordable housing units will be secured through approved entitlements in January 2024 as part of the Avila Ranch Sendero Apartments project. 24 Code Enforcement saw an increase in investigation requests and was not fully staffed to handle the increase in demands. The percentage of cases investigated on time is expected to increase due to new hires, and Code Enforcement should be fully staffed by January of 2024. 25 This is a new measure for Building & Safety. Building and Safety is still developing metrics to establish cycle times within an automated process. On average, customers experienced a one-day delay in permit processing during the first two quarters.

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San Luis Obispo City CouncilFebruary 6, 2024

San Luis Obispo City Council
February 6, 2024