San Luis Obispo City Council
January 21, 2025

63 4388 Old Santa Fe Springs Road
San Luis Obispo, CA 93401
The address to which communications may be delivered may be changed from time to time by a notice given in accordance with this Section.

14.17 Representatives of the Parties
References in this Agreement to “City” shall mean the City Council, and all actions to be taken by City shall be taken by the City Council except as provided below. The City Council may delegate, in writing, authority to the City Manager, the Director of Utilities, and/or to other City officials, and may permit such officials, in turn, to delegate in writing some or all of such authority to subordinate officers. Franchisee may rely upon actions taken by such delegates if they are within the scope of the authority properly delegated to them.

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

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

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

14.20 References to Laws
All references in this Agreement to laws shall be understood to include such laws as they may be subsequently amended or recodified, unless otherwise specifically provided. This Agreement supersedes any and all Agreements for Solid Waste, Recyclable Materials, and/or Organic Materials Collection, Processing, and/or marketing heretofore entered into by the parties and the City.

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

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

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

14.24 Counterparts
This Agreement may be executed in counterparts, each of which hall be considered an original.

64 14.25 Use of "Will"
The use of the word "will" shall be construed as interchangeable with the word "shall".

14.26 Investigation
Franchisee has relied on its own investigations in deciding to enter into this Agreement and has not relied upon any representations of the City, its Council members, officers, directors, employees, or agents.

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

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

Title:

ATTEST:

By: ___________________________
Teresa Purrington, City Clerk
APPROVED TO FORM:

By: ___________________________
J. Christine Dietrick, City Attorney

66 Exhibit A
Annual Rate Adjustment Methodology
Section 1 Objectives
This Exhibit details the process by which Maximum Service Rates are adjusted annually to provide fair and adequate compensation to Franchisee for collection of solid waste and other services provided to Customers and the City per the Agreement. The annual rate adjustment methodology described herein fulfills key objectives established by the City and Franchisee, including rate stability, predictability, fairness, transparency, ease of administration, and costeffectiveness.

Section 2 Index-Based Rate Adjustments
Except in the case of a Cost-Based Rate Adjustment (see Section 3, below) Franchisee’s Maximum Service Rates shall be adjusted via the Index-Based Rate Adjustment methodology described in this section. The Index-Based Rate Adjustment methodology shall be used to adjust Maximum Service Rates effective each January 1 of 2026, 2027, 2028, and 2029 and any subsequent year during which a Cost-Based Rate Adjustment is not allowed or not requested by the City or the Franchisee.

In years during which Maximum Services Rates are to be adjusted pursuant to this Index-Based Rate Adjustment methodology, Franchisee shall submit a report to the City on or before September 1 detailing its calculations of IndexBased Rate Adjustment. City shall have the right to review Franchisee’s calculations of Index-Based Rate Adjustment for mathematical accuracy and adherence to the terms and conditions of this Exhibit. City shall prepare written findings regarding adjustments to the Franchisee’s calculations of Index-Based Rate Adjustment that are required for mathematical accuracy and adherence to the terms and conditions of this Exhibit on or before October 30.

Index-Based Rate Adjustments shall be prepared and calculated in accordance with the steps described below. All Index-Based percentages shall be rounded to the nearest hundredth of a percent, and all cost calculations shall be rounded to the nearest dollar.

A. Calculation of CPI Adjustment to Franchisee’s Collection Services and Post-Collection Services Franchisee’s prior year cost projections for Collection Services and Post-Collection Services shall be adjusted in accordance with the Consumer Price Index (CPI) for Garbage and Trash Collection, U.S. City average, Bureau of Labor Statistics Series I.D. CUUR0000SEHG02.

The CPI Adjustment shall be equal to the percentage change in the average 12-month CPI value ending June of the current year and compared to the average 12-month CPI value ending June of the prior year.

For example, the CPI used to set the 2026 rates shall be calculated as follows:
(Average CPI from July 1, 2024 to June 30, 2025) − (Average CPI from July 1, 2023 to June 30, 2024) Average CPI from July 1, 2023 to June 30, 2024
If the percentage change is below 2%, the applicable CPI Adjustment shall be 2%, with the difference in the amount below 2% being carried forward as a credit on the rates and applied to the subsequent year. If the percentage change is above 5%, the applicable CPI Adjustment shall be 5%, with the difference in the amount above 5% being carried forward and applied to the rates in subsequent years. Franchisee’s prior year cost projections for Collection Services and Post-Collection Services shall be escalated by the resultant CPI Adjustment, rounded to the nearest dollar.

Franchisee’s 2025 cost projection for Collection Services is $8,552,555 and Franchisee’s 2025 cost projection for Post-Collection Services is $4,602,096. For 2026, by way of example, if the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 5%, then Franchisee’s 2026 cost projection for Collection Services shall be $8,980,183 and

67 Franchisee’s 2026 cost projection for Post-Collection Services shall be $4,832,201. Likewise, if the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 2%, then Franchisee’s 2026 cost projection for Collection Services shall be $8,723,606 and Franchisee’s 2026 cost projection for Post-Collection Services shall be $4,694,138.

Example Calculation for application of amounts above cap on CPI increases applied to Collection Services component of CPI Adjustment (noting that cap on CPI increases also applies to Post-Collection Services):

Year 1
Collection Services: $8,552,555
12-month average CPI index increase: 6.00%
$8,552,555 x (1+5.00%*) = $8,980,183
*5% cap on CPI increases. 1% difference carried over to next year Year 2
Collection Services: $8,980,183
12-month average CPI index increase: 6.00%
$8,980,183 x (1+5.0%*) = $9,429,192
*5% cap on CPI increases. 1% difference carried over to next year Year 3
Collection Services: $9,429,192
12-month average CPI index increase: 3.00%
$9,429,192 x (1+5.0%*) = $9,900,651
*3.00% + 1.00% carried forward from Year 1 + 1.00% carried forward from Year 2 The above is also demonstrated in Table 1, below:

Table 1 – Example of CPI Cap and Carryforward
2025 2026 2027 2028
Collection Services $8,552,555 $8,980,183 $9,429,192 $9,900,651 12-Month Average CPI 6.00% 6.00% 3.00%
CPI Adjustment (5%
Cap) 5.00% 5.00% 5.00%

68 B. Calculation of Profit Allowance
The Index-Based Rate Adjustment methodology includes a component for Franchisee’s fair and reasonable Profit Allowance. Profit Allowance is used for the purposes of calculating Index-Based Rate Adjustments and does not constitute a guarantee of profit to the Franchisee.

Franchisee’s Profit Allowance for the purposes of Index-Based Rate Adjustments is calculated as a function of Franchisee’s current year cost projection for Collection Services. For 2025, Franchisee’s Profit Allowance is 9% of the cost projection for Collection Services and in 2026 and thereafter, Franchisee’s Profit Allowance shall be 10% of the cost projection for Collection Services.

Franchisee’s 2025 cost projection for Collection Services is $8,552,555; therefore, Franchisee’s Profit Allowance for 2025 is $8,552,555 times 9%, rounded to the nearest dollar, equaling $769,730. Using the first example from Section 2.A above, if Franchisee’s 2026 cost projection is $8,980,183 (corresponding to a 5% CPI Adjustment), Franchisee’s 2026 Profit Allowance for the purposes of calculating Index-Based Rate Adjustment shall be $898,018. Likewise, and using the second example from Section 2.A above, if Franchisee’s 2026 cost projection is $8,723,606 (corresponding to a 2% CPI Adjustment), Franchisee’s 2026 Profit Allowance for the purposes of calculating Index-Based Rate Adjustment shall be $872,361 .

C. Calculation of CPI Adjustment to AB 939 Fee
Franchisee pays the City an AB 939 Fee which in 2025 is $368,041. The AB 939 Fee shall be adjusted annually in accordance with the same CPI Adjustment calculation described in Section 2.A above, or as otherwise directed by the City.

Using the examples from Section 2.A, for 2026, if the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 5%, then the 2026 AB 939 Fee shall be $386,443. Likewise, if the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 2%, then the 2026 AB 939 Fee shall be $375,402. Alternatively, the City may direct Franchisee regarding the amount of AB 939 Fee payable to the City for the coming rate year (and shall provide that amount to the Franchisee prior to September 1 in an Index-Based Rate Adjustment year.

D. Calculation of Franchise Fee
Franchisee pays the City a Franchise Fee of 10% of Franchisee’s gross revenues received from Customers in the City. For the purposes of Index-Based Rate Adjustments, the Franchise Fee is calculated as 10% of Franchisee’s annual Total Cost Projection, per Section 2.F below, rounded to the nearest dollar. For 2025, Franchisee’s annual Total Cost Projection is $15,880,469 , yielding Franchise Fee component of $1,588,047 .

Actual Franchise Fee payments made by Franchisee to City shall be calculated as a function of Franchisee’s gross revenues received from Customers in the City and may differ from the amount used in calculating adjustments to the Maximum Service Rates.

E. Calculation of Annual Revenue Reconciliation
Starting with the 2027 Index-Based Rate Adjustment, the difference between the Franchisee’s annual Total Cost Projection and the Franchisee’s actual annual total billings to Customers in the City shall be included in the annual Index-Based Rate Adjustment as an Annual Revenue Reconciliation.

For example, for the 2027 Index-Based Rate Adjustment, the difference between Franchisee’s 2025 Total Cost Projection and Franchisee’s total 2025 billings to Customers in the City shall be included in the 2027 annual Total Cost Projection. By way of example, if Franchisee’s 2025 total billings to Customers in the City is a shortfall of 1% (-$158,805) then $158,805 will be added to Franchisee’s Total Cost Projection for 2027.

Conversely, if Franchisee’s 2025 total billings to Customers in the City is a surplus of 1% (+$158,805) then $158,805 will be subtracted from Franchisee’s Total Cost Projection for 2027.

Table 2, on the following page, provides an example of the case in which there is a 1% shortfall of billed revenues in 2025, which is added to the Total Cost Projection in 2027. The table shows a continuation of 1% shortfalls being added in 2028 and 2029 for example purposes only, and assumes the CPI adjustment to Collection Services, Post-Collection Services, and AB 939 Fee at the 5% cap. Table 2a on the following page,

69 provides an example of the case in which there is a 1% surplus of billed revenues in 2025, which is added to the Total Cost Projection in 2027. The table shows a continuation of 1% surpluses being added in 2028 and 2029 for example purposes only, and assumes the CPI adjustment to Collection Services, Post-Collection Services, and AB 939 Fee at the 5% cap.

Table 2 – Example Revenue Reconciliation of -1% Annually 2025 2026 2027 2028 2029
Collection Services $8,552,555 $8,980,183 $9,429,192 $9,900,651 $10,395,684 Profit Allowance 769,730 898,018 942,919 990,065 1,039,568 Post-Collection Services 4,602,096 4,832,201 5,073,811 5,327,501 5,593,876 AB 939 Fee 368,041 386,443 405,765 426,053 447,356
Franchise Fee 1,588,047 1,677,427 1,778,944 1,868,002 1,961,598 Revenue Reconciliation Example N/A N/A 158,805 167,743 177,894 Total Cost Projection 15,880,469 16,774,272 17,789,435 18,680,016 19,615,977 Indexed Rate Adjustment 5.63% 6.05% 5.01% 5.01%
Table 2a – Example Revenue Reconciliation of +1% Annually 2025 2026 2027 2028 2029
Collection Services $8,552,555 $8,980,183 $9,429,192 $9,900,651 $10,395,684 Profit Allowance 769,730 898,018 942,919 990,065 1,039,568 Post-Collection Services 4,602,096 4,832,201 5,073,811 5,327,501 5,593,876 AB 939 Fee 368,041 386,443 405,765 426,053 447,356
Franchise Fee 1,588,047 1,677,427 1,743,654 1,830,725 1,922,458 Revenue Reconciliation
Example N/A N/A -158,805 -167,743 -174,365
Total Cost Projection 15,880,469 16,774,272 17,436,536 18,307,254 19,224,577 Indexed Rate Adjustment 5.63% 3.95% 4.99% 5.01%
Significant, unexpected increases or decreases in revenue may be included or excluded from the Annual Revenue Reconciliation if deemed reasonable by the parties. As a one-time exercise, the Franchisee may request to review the entirety of its revenue earnings with the City as a check-in to evaluate alignment with its revenue forecast and conditions outlined in this exhibit. By no later than September 30, 2025, the Franchisee shall provide the City with documentation of actual to-date receipts or billings, accompanied by an analysis of all corresponding service trends. Upon receipt of these materials, the City and the Franchisee shall engage in a good-faith meet-and-confer process to discuss and determine an appropriate resolution, which may include a rate adjustment in January 2026 if necessary.

F. Calculation of Total Cost Projection
Franchisee’s annual Total Cost Projection shall be the sum of the resultant values from Section 2.A through

2.E above. For 2025, the Total Cost Projection is $15,880,469. Table 3 below demonstrates the 2026 Total Cost Projection if the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 5%. Table 4, on the following page, demonstrates the

70 2026 Total Cost Projection in the percentage change in the average 12-month CPI value ending June 2026 compared to the average 12-month CPI value ending June of 2025 is 2%.

Table 3 – 2026 Total Cost Projection at 5% CPI Value for 2026 2025 2026
Collection Services $8,552,555 $8,980,183
Profit Allowance 769,730 898,018
Post-Collection Services 4,602,096 4,832,201
AB 939 Fee 368,041 386,443
Franchise Fee 1,588,047 1,677,427
Total Cost Projection 15,880,469 16,774,272
Table 4 – 2026 Total Cost Projection at 2% CPI Value for 2026 2025 2026
Collection Services $8,552,555 $8,723,606
Profit Allowance 769,730 872,361
Post-Collection Services 4,602,096 4,694,138
AB 939 Fee 368,041 375,402
Franchise Fee 1,588,047 1,629,501
Total Cost Projection 15,880,469 16,295,007
G. Calculation of Annual Index-Based Rate Adjustments
The Index-Based Rate Adjustment shall be the calculated as function of the Franchisee’s forthcoming annual Total Cost Projection divided by the then current year Total Cost Projection, minus 100%, rounded to the nearest hundredth of a percent.

For example, taking the results shown in Table 3, on the prior page, the Index-Based Rate Adjustment for 2026 would be $16,774,272 , divided by $15,880,469, minus 100%, yielding a 5.63% adjustment to the Maximum Service Rates effective January 1, 2026. Using the results of Table 4, above as an example, the Index-Based Rate Adjustment for 2026 would be $16,295,007, divided by $15,880,469 , minus 100%, yielding a 2.61% adjustment to the Maximum Service Rates effective January 1, 2026.

This Index-Based Rate Adjustment calculation described herein shall repeat in 2027, 2028, and 2029, with the addition of the Annual Revenue Reconciliation amounts calculated pursuant to Section 2.E of this Exhibit.

Rate adjustments shall be effective on January 1st of each year (unless otherwise agreed to in writing by the parties) and any delay in rate change approval not caused by Franchisee will result in additional adjustments so that all required revenues are billed within the rate year. Any delay in rate change approval that is caused by Franchisee shall not result in additional adjustments corresponding with the delay in approval.

71 Section 3 Cost-Based Rate Adjustments
Franchisee or City shall have the right to request a Cost-Based Rate Adjustment effective January 1, 2030. Franchisee’s request for Cost-Based Rate Adjustment in 2030 shall be requested in writing on or before January 15, 2029 and City’s request for Cost-Based Rate Adjustment in 2030 shall be requested in writing on or before January 31, 2029. To the extent possible Any City request for Cost-Based Rate Adjustment shall be coordinated with the other agencies in San Luis Obispo County that follow the rate adjustment methodology described in this Exhibit, with all such agencies opting to request Cost-Based Rate Adjustment effective in the same rate year Upon request by either party for Cost-Based Rate Adjustment, Franchisee shall prepare and submit financial records and calculations to the City in accordance with this Section by April 30, 2029. City shall have the right to review Franchisee’s financial records related to the Cost-Based Rate Adjustment and calculations of Cost-Based Rate Adjustment for mathematical accuracy and adherence to the terms and conditions of this Section. City shall prepare written findings regarding adjustments to the Franchisee’s calculations of Cost-Based Rate Adjustment that are required for mathematical accuracy and adherence to the terms and conditions of this Exhibit on or before June 30, 2029. City shall make every effort to seek City Council authorization of Cost-Based Rate Adjustment prior to August 30, 2029. If neither party requests a Cost-Based Rate Adjustment in writing as specified above, then an Index-Based Rate Adjustment shall be applied for adjustments to Maximum Service Rates effective January 1, 2030 and subject to the terms and conditions of Section 2 of this Exhibit.

Franchise or City shall have the right to request subsequent Cost-Based Rate Adjustments no more frequently than every five (5) years following the prior Cost-Based Rate Adjustment. For example, if a Cost-Based Rate Adjustment is requested as stipulated in above in January, 2029 (and effective January 1, 2030) then the next Cost-Based Rate Adjustment may not be requested by either party until January, 2034 (for effectiveness in 2035). The schedule from the following paragraph would also apply: Franchisee would prepare and submit financial records and calculations by April 30, 2034, City would prepare written findings regarding adjustments to Franchisee’s calculations of Cost-Based Rate Adjustment that are required for mathematical accuracy and adherence to the terms and conditions of this Exhibit by June 30, 2034, and City would make every effort to seek City Council authorization of Cost-Based Rate Adjustment prior to August 30, 2034.

Notwithstanding the above, nothing shall prevent the parties from mutually agreeing to conduct Cost-Based Rate Adjustments in other years (i.e., years other than 2030 and 2035), provided that both parties agree in writing to waive the five (5) year limitation on Cost-Based Rate Adjustments expressed herein. If neither party requests Cost-Based Rate Adjustments in subsequent years pursuant to the five (5) year schedule described above, then Index-Based Rate Adjustments shall be applied for adjustments to Maximum Service Rates in such years, subject to the terms and conditions of Section 2 of this Exhibit.

Franchisee shall provide all financial information and supporting documentation required by this review in a format acceptable to City (or City’s designated consultant) in a timely manner. Franchisee shall not require City (or City’s designated consultant) to review any such documents at Franchisee’s worksite but shall instead allow for all required information and supporting documentation to be provided to City (or its designated consultant) via physical mail, email, or any other delivery method approved by City.

Cost-Based Rate Adjustments shall be prepared and calculated in accordance with the steps described below.

A. Projection of Collection Services and Post-Collection Service Costs Franchisee shall prepare financial records and calculations of Cost-Based Rate Adjustment using audited financial statements prepared in accordance with Generally Accepted Accounting Principles (GAAP) for Franchisee’s immediately preceding three (3) fiscal years. Such financial records and calculations shall include Franchisee’s projected costs for Collection Services and Post-Collection Services as well as Franchisee’s projected gross revenues at then-current Maximum Service Rates for the forthcoming year (e.g., 2030 at the earliest).

Franchisee shall promptly assemble, provide, and submit such information that is reasonably necessary to support the assumptions made by the Franchisee with regard to the assumptions underlying the forecast.

Upon submission of such information, the City holds the ability to make appropriate changes for nonallowable costs, large unsupported variances in cost projections including but limited to corporate

72 transactions and allocations, large variances in inter-company and related party transactions and allocations, unjustifiable variances in any cost category, non-conformance with agreed upon depreciation terms, non-conformance agreed upon profit allowances, and other customary and reasonable adjustments as detailed in the Agreement. Cost projections for Collection Services and Post-Collection Services prepared by Franchisee must be justifiable, supportable with financial information, and provide accountability for all expenditures. In preparing such cost projections, Franchisee shall assemble and submit its forecasts of:
a. Revenues at current Maximum Service Rates for the then-current year, including delineation of revenues by sector (single-family residential vs. commercial and multi-family) and with details of the number of subscribers by type within each sector. b. Projected costs of Collection Services for the then-current year and the forthcoming year, with comparison to and explanation of any variances to actual costs for Collection Services in the prior three (3) fiscal years. Costs for Collection Services include labor, corporate overhead, depreciation (with rolling stock at 10-year depreciation lifespan), and general and administrative costs and shall be delineated as per the primary cost categories included in Franchisee’s Audited Financial Statements. Franchisee must provide documentation of, and explanation for, material variances in any cost category. Projected costs for the forthcoming year shall be based on Franchisee’s actual costs per Audited Financial Statements and escalated by the CPI Adjustment described in Section 2.A of this Exhibit, with the exception that Franchisee may adjust projections to account for other documentable changes in costs. Corporate overhead costs shall be limited to be less than 4% of Franchisee’s Total Cost Projection for the forthcoming year and Franchisee must provide documentation and justification for any amounts of Corporate Overhead above 3% of Franchisee’s Total Cost Projection for the forthcoming year. City retains the right to make appropriate adjustments to cost projections to cost categories for which Franchisee does not or cannot provide adequate documentation and explanation of material variances compared to prior years.
c. Projected costs of Post-Collection Services for the then-current year and the forthcoming year, with comparison to and explanation of any variances to actual costs for Collection Services in the prior three (3) fiscal years. Costs for Post-Collection Services include landfill disposal, organics processing, recyclables processing and marketing, related-party transportation, and related-party rent and shall be delineated as per the primary cost categories included in Franchisee’s Audited Financial Statements. Franchisee must provide documentation of, and explanation for, material variances in any cost category. Projected costs for the forthcoming year shall be based on Franchisee’s actual costs per Audited Financial Statements and escalated by the CPI Adjustment described in Section 2.A of this Exhibit, with the exception that Franchisee may adjust projections to account for other documentable changes in costs. City retains the right to make appropriate adjustments to cost projections to cost categories for which Franchisee does not or cannot provide adequate documentation and explanation of material variances compared to prior years. d. Franchisee shall not include any non-allowable costs in its cost projections for Collection Services or Post-Collection Services. Non-allowable costs include but are not limited to:
i. Entertainment and non-work related travel expenses, unless authorized in advance by City.
ii. Advertising for services not within the scope of this Agreement or outside of the service area of the City of San Luis Obispo.
iii. Fines or penalties of any nature.
iv. Liquidated damages assessed under this Agreement.
v. Federal or State income taxes.
vi. Profit sharing payments not related to an IRS approved pension program.

73 vii. Charitable or political donations.
viii. Attorneys’ fees and other expenses incurred by Franchisee in any court proceeding in which City and Franchisee are adverse parties, unless Franchisee is the prevailing party in said proceedings.
ix. Attorneys’ fees and other expenses incurred by Franchisee in any court proceeding in which Franchisee’s own negligence, violation of law or regulation, or other wrongdoing, is in issue and occasions part of the attorneys’ fees and expenses claimed, provided, however, such attorneys’ fees will be allowed to the extent Franchisee can demonstrate they were reasonable and necessary and a cost of doing business, and were not the result of any intentional or willful misconduct by Franchisee or its employees; and attorneys’ fees and expenses incurred by Franchisee in a court proceeding in which the legal theory or statute providing a basis of liability against Franchisee also provides for separate strict liability for City arising from the action of its citizens or ratepayers (such as in a CERCLA lawsuit).
x. Payments to related party entities for products or services (other than lease expense, calculated as provided below), in excess of the fair market value for those products or services. For purposes of this Agreement, related party expenses are those resulting from transactions between Franchisee and another company (companies) that has (have) common ownership or management control.
e. Franchisee’s audited financialstatements, and any other documentation as deemed necessary by the City, will be reviewed to determine Franchisee’s cost projections for each of the foregoing categories during the year involved. City will use the financial statements to determine that costs have actually been incurred and have been assigned to the appropriate category. f. City may adjust the actual costs in two ways: (1) to exclude any non-allowable costs, set out below, and (2) to exclude and/or reduce any costs that were actually incurred but which are not reasonable and necessary in keeping with industry standard best practices.

B. Calculation of Profit Allowance
Franchisee’s Profit Allowance shall be 10% of the cost projection for Collection Services, rounded to the nearest dollar.

C. Calculation of CPI Adjustment to AB 939 Fee
Calculation of AB 939 Fee shall be calculated in accordance with Section 2.C, above, for the applicable year as appropriate.

D. Calculation of Franchise Fee
Calculation of Franchise Fee shall be calculated in accordance with Section 2.D, above, for the applicable year as appropriate.

E. Calculation of Annual Revenue Reconciliation
Calculation of Annual Revenue Reconciliation shall be calculated in accordance with Section 2.E, above, for the applicable year as appropriate.

F. Calculation of Total Cost Projection
Calculation of Total Cost Projection shall be calculated in accordance with Section 2.F, above, for the applicable year as appropriate.

G. Calculation of Cost-Based Rate Adjustment
The Cost-Based Rate Adjustment shall be the calculated as function of the Franchisee’s forthcoming annual Total Cost Projection divided by the then current year Total Cost Projection, minus 100%, rounded to the nearest hundredth of a percent. This is the same calculation described in Section 2.G, above. The resultant

74 percentage shall be applied to the then-current Maximum Service Rates and be effective January 1 of the forthcoming year.

Rate adjustments shall be effective on January 1st of each year (unless otherwise agreed to in writing by the parties) and any delay in rate change approval not caused by Franchisee will result in additional adjustments so that all required revenues are billed within the rate year. Any delay in rate change approval that is caused by Franchisee shall not result in additional adjustments corresponding with the delay in approval.

Section 4 Annual Audited Financial Statements
Franchisee shall annually prepare Audited Financial Statements in accordance with Generally Accepted Accounting Principles (GAAP) for its operations in the San Luis Obispo County region. Franchisee shall provide City with copies of the annual Audited Financial Statements upon request and with any Cost-Based Rate Adjustment submittal.

Section 5 Extraordinary Adjustments
Except as provided herein, Franchisee may not request adjustments to Maximum Service Rates in years during which Index-Based Rate Adjustments are scheduled to be applied and must follow the timeline described in Section 3.

Notwithstanding the above, Franchisee may request extraordinary adjustments to Maximum Service Rates due to changes in law affecting collection operations, including for compliance with the California Air Resource Board’s (CARBS’s) Advanced Clean Fleet (ACF) electrification mandate. The City may, but is not obligated to, consider requests for extraordinary adjustment to Maximum Service Rates due to changes in law affecting Post-Collection Services. Requests for extraordinary changes in Maximum Service Rates are subject to good faith negotiations between City and Franchisee.

In the event of any Change in Scope or Change in Law (each as described below) that results in an material increase or decrease in Franchisee’s costs or revenues, in the event of an Extraordinary Cost Increase (as defined below), or in the event of any Change in Fees (as described below), an appropriate adjustment will be made to the Maximum Service Rates in order to compensate, to the maximum extent possible, for such increase or decrease in costs, revenues or Fees, commencing from the Effective Date(s) such increase or decrease first occurs. Any adjustment to Maximum Service Rates due to a Change in Scope, a Change in Law or an Extraordinary Cost Increase shall be in the reasonable discretion of the City.

A. “Change in Scope” shall mean any change in the services provided by the Franchisee under the Agreement whether proposed by the Franchisee or by the City.

B. “Change in Law” shall mean the enactment, adoption, promulgation, issuance, modification or written change in any law, regulation, order or judgment of any governmental body that affects the Franchisee’s performance of services under the Agreement including, without limitation, the issuance of final regulations under existing laws.

C. “Change in Fees” shall mean any change in franchise fees, vehicle impact fees and other fees charged to the Franchisee by the City connection with the services provided by the Franchisee under the Agreement the cancellation of any existing fees, and the adoption of any new fees.

D. “Extraordinary Cost Increase” shall mean a substantial increase in the Franchisee’s operating or capital costs or expenses that is outside of the Franchisee’s control but not due to a Change in Scope or Change in Law.

E. “Effective Date” shall mean the date in which the Franchisee notifies the City of the reasons for the cost estimate associated with a Change in Law, Change in Fees, and/or Extraordinary Cost Increase or when the Franchisee begins incurring costs for the Change in Law, Change in Fees, or Extraordinary Cost Increase, whichever is later.

In the case of a Change in Scope, a Change in Law or an Extraordinary Cost Increase, the Franchisee shall provide the City with projected operational, cost and revenue data reflecting the entire financial effect of such Change. The City reserves the right to require that the Franchisee supply any additional operational, cost and revenue data, or any other information it may reasonably need, to ascertain the appropriate financial impact of the Change and any necessary adjustment to Maximum Service resulting from such Change.

Extraordinary adjustments to Maximum Service Rates for a qualifying Change in Scope or Change in Law, for a

75 Change in Fees, or for an Extraordinary Cost Increase shall take effect as of the beginning of the next year and will include all impacts of the extraordinary adjustment from the Effective Date of the impact; provided, however, that, in the case of any Change in Fees charged by the City, the extraordinary adjustment shall take effect as of the Effective Date of such Change in Fees. The underlying service, cost, revenue or Fee changes supporting any rate adjustment under this Section 5 will be added to the appropriate category under Sections 2 and 3 above for purposes of future cost projections.

REPORT
City of San Luis Obispo and Participating Agencies
Submitted electronically on October 22, 2020
Submitted electronically: November 1, 2024
New Solid Waste Rate Adjustment
Methodology and 2025 Rates

1512 Eureka Road, Suite 220, Roseville, CA 95661 | p 916.782.7821 | f 916.782.7824 | www.r3cgi.com November 1, 2024
Ms. Meg Buckingham
Solid Waste and Recycling Coordinator
Public Utilities
879 Morro, San Luis Obispo, CA 93401
submitted via email: [email protected]
SUBJECT: New Solid Waste Rate Adjustment Methodology and 2025 Rates Dear Ms. Buckingham and Participating Agencies,
R3 Consulting Group, Inc. (R3) was engaged by the City of San Luis Obispo (City) to provide solid waste consulting services via two engagements supporting the City’s negotiations of a new solid waste services agreement with Waste Connections, the solid waste hauler. R3 was originally engaged by the City to work in collaboration with Los Osos Community Services District and Waste Connections to update the methodology for annual adjustments to the solid waste rates charged by Waste Connections. The key objectives for updating the rate adjustment methodology were to enhance rate stability, predictability, fairness, transparency, ease of administration, and costeffectiveness.

As that engagement proceeded, eight other agencies in San Luis Obispo County (the City of Arroyo Grande, the City of Grover Beach, the City of Pismo Beach, Avila Beach Community Services District, Cambria Community Services District, Cayucos Sanitary District, Nipomo Community Services District, and Oceano Community Services District – altogether “Participating Agencies” or “Agencies”) were included as stakeholder participants in the development of new rate adjustment methodology. With the inclusion of these additional Agencies, objectives for the engagement were updated to include regional scale applicability of the new rate adjustment methodology. R3 was then engaged by the City to review Waste Connections’ rate adjustment requests for the 2025 rate year on behalf of all ten Agencies with the objective of determining 2025 solid waste rates that would an appropriate starting point for a new rate adjustment methodology starting in 2026.

The City of San Luis Obispo served as the lead contracting agency for both engagements, providing primary oversight and direction of R3’s work. Input and feedback were also sought from the other nine Agencies, and the results reflect their stakeholder input. Ultimately, the outcomes of both engagements are the conclusion of good faith contract negotiations between the City and Waste Connections. In summary, the City and Waste Connections have tentatively agreed to updated terms and conditions for annual rate adjustment which fulfill key objectives while also securing enhanced services that will protect low income households, prevent illegal dumping, and clean solid waste collection containers. The new rate adjustment methodology and enhanced services also resulted in updated adjustments to solid waste rates for 2025.

The City intends to recommend a new agreement with Waste Connections to the City Council that will include the new rate adjustment methodology and enhanced services along with the 2025 adjustments to solid waste rates. In keeping with the objective for the results to be applicable on a regional scale, Waste Connections is willing to offer the new rate adjustment methodology and

1512 Eureka Road, Suite 220, Roseville, CA 95661 | p 916.782.7821 | f 916.782.7824 | www.r3cgi.com select enhanced services to the other nine Agencies at the updated 2025 adjustments to solid waste rates.

R3 would like to recognize that this has been a significant undertaking, and we’d like to thank the City of San Luis Obispo, Waste Connections, Los Osos Community Services District, and Participating Agencies for your involvement in providing feedback during this process. In closing, R3 recommends City and stakeholder consideration of the revised 2025 rates and the new rate adjustment methodology as a means of achieving shared rate fairness, stability, and predictability objectives. Here’s what Waste Connections has shared regarding the outcomes:
“San Luis Garbage (SLG) had the opportunity to negotiate with the City of San Luis Obispo on the re-write of the 1994 rate-making manual. The goal of this endeavor was to simplify and streamline the rate-making process for all parties and provide an improved model going forward for potential refuse collection rate changes. The process included a considerable amount of discussion and analysis and although arduous at times, SLG feels the negotiations were performed in good faith, were collaborative in nature and carried out with mutual respect. In addition to updating the rate-making methodology, both parties took the opportunity to establish some new service enhancements that will discourage illegal dumping, provide cart cleaning exchanges, and offer rate relief for low-income customers. SLG believes the outcome of the negotiation has provided a much-improved rate-review process for the City of San Luis Obispo and other cities currently under the old rate-making methodology which will ultimately allow for an easier path to fair and reasonable rates for all customers.” * * * * * * *
We appreciate the opportunity to be of service to the City and would like to thank the City and the Participating Agencies for their involvement and feedback. We would also like to recognize Waste Connections staff for being communicative and responsive to requests for information during the process.

Sincerely,
Garth Schultz | Principal
R3 Consulting Group, Inc.
510.292.0853 | [email protected]

TABLE OF CONTENTS
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates TOC

1. Executive Summary
page 1

2. Background
page 4

3. New Solid Waste Rate Adjustment
Methodology and 2025 Rates
page 10
Attachments
1 Summary of Original 2025 Base Year Rate Adjustments
2 Revised 2025 Rate Adjustments
3 CPI-U for Garbage and Trash
4 Example Rate Calculations for 2026 through 2029

1. EXECUTIVE SUMMARY
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 1 of 19 New Rate Adjustment Methodology
The City of San Luis Obispo, in its capacity as the lead agency on the solid waste rate adjustment methodology update process, and in partnership with Los Osos Community Services District and Waste Connections, completed negotiations and arrived at tentative agreement with Waste Connections regarding the terms and conditions of a new methodology. The outcome was the result of extensive good faith negotiations between the City and Waste Connections, with due consideration to input provided by other public agency stakeholders.

Pending City Council approvals, the new methodology will replace the 1994 Rate Setting Process and Methodology Manual for Integrated Solid Waste Management Rates (1994 Rate Manual) and will regulate annual rate adjustments for the City’s solid waste rates starting in 2026.

The new methodology fulfills key objectives established by the City and Waste Connections, including rate stability, predictability, fairness, transparency, ease of administration, and cost-effectiveness.

Additionally, in response to requests by other Agencies that contract with Waste Connections in San Luis Obispo County, the new methodology can be applied on a regional-scale and is available as recommended alternative to the 1994 Rate Adjustment Manual for those Agencies.

The key features of the new methodology include:

CPI Adjustments: Starting in 2026, rate adjustments will be based on the Garbage and Trash CPI, with a floor of 2% and a cap of 5%. Amounts under 2% or over 5% will carry forward. The CPI adjustment will apply to Waste Connections’ collection and post-collection cost centers.

Revenue Balancing Mechanism: Starting in 2027, adjustments to rates will account for shortfalls or surpluses in Waste Connections’ actual revenues compared to projected revenues from prior years. For example, if Waste Connections’ 2025 revenues exceed projections, the amount of surplus revenues will be credited to the rates in 2027 (and vice versa), achieving fairness in compensation and rates for the company and for ratepayers. Such adjustments would take place annually and will be independent of the CPI cap and floor noted above (there is no cap on these amounts).

Less Frequent Cost-Based Adjustments: Currently, solid waste rates are adjusted based on the 1994 Rate Adjustment Manual every three years on Waste Connections’ costs. Via the new methodology, cost-based adjustments would occur a maximum of every five years, and only if requested by Waste Connections or the City. The first opportunity for a cost-based adjustment will be for the 2030 rate year. If neither Waste Connections nor the City request a cost-based adjustment, then the CPI adjustment approach will be applied. Cost-based adjustments will be based on Waste Connections’ consolidated audited financial statements for the region.

Timeframes for cost-based adjustment application and review process will be ample, such that the City will have sufficient time for review and approval processes and such that the potential for delay in implementation is minimized. These timeframes will be delineated in the forthcoming amendment to the agreement with Waste Connections.

Updated Depreciation Lifespan for Trucks: The 1994 Rate Manual set a 7-year depreciation schedule for solid waste collection trucks. Modern solid waste collection trucks have a 10-year lifespan, and the depreciation schedule was adjusted accordingly.

Updated Profit Allowance: The 2025 rate adjustment will include a 9% profit allowance of projected collection costs and in 2026 and thereafter the profit allowance will be 10%. The updated profit allowance is in-keeping with industry standard ranges for solid waste services. For

Executive Summary
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 2 of 19 context, the 2025 profit allowance is approximately 5% of revenues and we estimate that the 2026 profit allowance will be approximately 5.5% of revenues. Profit will not be allowed on postcollection costs.

Removed Limitation on Corporate Overhead: The 1994 Rate Manual placed a limitation on corporate overhead costs. Today, corporate overhead costs fund legal, tax, payroll, human resources, engineering, compliance, IT, training and recruiting programs. The City and Waste Connections agreed to remove the prior limitation in order to fund these services. In the nearterm, compensation to Waste Connections for corporate overhead will be limited by the CPI adjustment noted above. Cost-based adjustments to corporate overhead are possible in 2030, and will be subject to review, justification, and potential limitation at that time.

Extraordinary Adjustments: The California Air Resources Board (CARB) Advanced Clean Fleets (ACF) regulation is requiring all solid waste collection trucks to have zero emissions by 2042. This includes a phased in plan to get the percentage of the fleet to be zero emission vehicle (ZEV) with 10% by 2030, 25% by 2033, 50% by 2036,75% by 2039 and 100% by 2042.

During CPI Adjustment years, Waste Connections may request extraordinary rate adjustments due to changes in law affecting collection operations, including for compliance with CARB’s ACF zero emission mandate (which may necessitate change to depreciation schedules). The City may, but is not obligated to, consider requests for extraordinary rate adjustments due to changes in law affecting post-collection operations. Requests for extraordinary change are subject to good faith negotiations between City and Waste Connections.

New Service Enhancements
During negotiations, the City and Waste Connections also took the opportunity to establish new service enhancements that will discourage illegal dumping, provide cart cleaning exchanges, and offer rate relief for low-income customers. The below service enhancements are available to the other Agencies that approve the new rate adjustment methodology in association with adjusted 2025 solid waste rates:

Customer Assistance Program: 20% low-income discount provided to residential customers using 32-gallon cart service, using existing jurisdictional practices on low-income relief for their offered utility type services with evidence of qualifying financial hardship.

Free Bulky Waste Collections: Collection of a bulky waste item twice annually from residential accounts at no separate cost, via clean-up week or voucher program depending on existing program.

Annual Cart Exchange: Once annual exchange of a residential solid waste, recycling, or organics cart per customer account.
2025 Rate Adjustments
As a result of the above, Waste Connections’ 2025 rate adjustment request was revised from a 9.29% increase to a 9.89% increase in solid waste rates, effective January 1, 2025 (and prior to other rate structure adjustments that the City and Waste Connections may enact). When the new rate methodology changes and service enhancements are equally applied to the other regional Agencies, the results are as shown in Table 1 on the following page. Additional details are included in Section 3 of this report.

Executive Summary
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 3 of 19 Table 1: 2025 Rate Adjustments
Agency Original Revised
City of San Luis Obispo 9.29% 9.89%
City of Arroyo Grande 3.97% 4.92%
Los Osos CSD 12.47% 13.18%
City of Pismo Beach 3.97% 4.82%
Cambria CSD 12.78% 12.59%
City of Grover Beach 3.97% 5.02%
Nipomo CSD 3.23% 5.04%
Oceano CSD 3.76% 4.98%
Cayucos SD 12.47% 14.32%
Avila Beach CSD 3.97% 4.60%

2. BACKGROUND
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 4 of 19 1994 Rate Manual
The 1994 Rate Manual is a 120-page document that provides step-by-step directives regarding annual adjustments to solid waste rates in the City. Though the 1994 Rate Manual specifically references the City of San Luis Obispo, other agencies in San Luis Obispo County (including the nine Agencies referenced in this report) also follow the 1994 Rate Manual for annual adjustments to solid waste rates.

The 1994 Rate Manual established a three-year cycle for adjustments to solid waste rates. The first year of each three-year cycle (called a “base year”) adjusted rates based on the documented costs of providing solid waste services. In the second and third years, solid waste rates were adjusted in accordance with external indicators, such as the Consumer Price Index (CPI).

While the 1994 Rate Manual was an appropriate approach to annually adjusting solid waste rates at the time, changing regulatory conditions and modern best practices in solid waste rate setting indicate that the prior approach has outlived its usefulness. In particular, cost-based adjustments on a fixed three-year cycle are no longer the industry norm. Most solid waste rate adjustment methodologies in California today either do not include regular cost-based adjustments or do so less frequently. When allowed, cost-based adjustments are typically the result of extraordinary changes in cost due to factors like changes in law or other uncontrollable factors (such as China’s National Sword Policy in 2017 and the COVID pandemic in 2020). Additionally, step-by-step instructions and timelines in the 1994 Rate Manual are outdated and do not contemplate current approaches to public noticing, public hearings, and review timelines for authorizing rate adjustments.

RFQ for New Rate Adjustment Methodology
Recognizing the limitations of the 1994 Rate Manual, the City and Los Osos Community Services District issued a request for quotes (RFQ) in early 2024 seeking a consultant to develop a new rate adjustment methodology. Pursuant to the RFQ process, R3 was awarded an agreement to provide support in developing a new rate adjustment methodology.

Rate Adjustment History
Rate adjustments experienced by the City and participating Agencies have varied significantly in the prior ten years from 2015 through 2014, as shown in Table 2, on the following page. As shown in the table, rate adjustments by agency have varied from 0% (most Agencies in 2015) to over 20% (most Agencies in 2022).

There are important reasons for these variances, primarily related to the unfunded State mandates of SB 1383 (Short-lived Climate Pollutants Act) which required all agencies in California to implement programs to recover and recycle organic waste to reduce methane emissions from landfills. While rate adjustments were necessary to fund the required SB 1383 programs, the combination of new costs with the three-year cost-based adjustment approach in the 1994 Rate Manual resulted in rate adjustment spikes in 2016, 2019, and 2022. Overall, across the Agencies, the average annual rate adjustment from 2015 through 2024 has been 6.76%.

One important objective of the new rate adjustment methodology is to minimize the recurrence of such spikes by reducing the frequency of cost-based rate adjustments. From R3’s experience implanting new rate methodologies with other clients, the result has been stable and predictable annual rate adjustments.

Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 5 of 19 Table 2: 2015 – 2024 Rate Adjustments by Agency
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024

0.00% 5.25% 1.00% 1.60% 13.70% 1.70% 0.70% 17.75% 9.10% 3.00%

0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00%

2.00% 10.37% 1.00% 1.60% 25.74% 1.70% 0.70% 41.87% 7.70% 2.70%

0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00%

1.92% 9.93% 1.00% 1.60% 25.32% 1.70% 0.70% 41.50% 9.10% 3.00%

0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00%

0.00% 0.00% 1.00% 1.60% 15.08% 1.70% 0.70% 21.27% 9.10% 3.00%

0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 21.03% 9.10% 3.00%

2.00% 27.39% 1.00% 1.60% 26.43% 1.70% 0.70% 43.30% 9.10% 3.00%

0.00% 3.25% 1.00% 1.60% 10.06% 1.70% 0.70% 22.19% 9.10% 3.00% Financial Statement History
There are three Waste Connections business units serving the ten participating Agencies (San Luis Garbage, Mission Country Disposal, and South County Sanitary Service). Each business unit prepares annual audited financial statements which are used as the basis for base year rate applications to the Agencies. R3 analyzed Waste Connections’ audited financial statements for the six years from 2018 through 2023 to evaluate profit achievement, with the results summarized in Table 3, below. Table 3 also includes estimated profit achievement in 2024 (still underway) and for 2025 (prior to 2025 rate adjustments).

Table 3: 2018 – 2023 Profit Achievement

Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 6 of 19 As shown in Table 3, in total across all three business units, Waste Connections operated without any net income between 2018 and 2021, with net positive profitability being achieved in 2022 and 2023. Profit achievement varied by business unit, with South County Sanitary Service consistently experiencing greater profit achievement and Mission Country Disposal consistently experiencing lesser or no profit achievement. This is one of the key reasons that rate adjustments for the Agencies served by Mission Country Disposal (Cambria Community Services District, Cayucos Sanitary District, and Los Osos Community Services District) were higher than the other Agencies in 2019 and 2022.

Table 3 also shows that projected profit achievement in 2024 will be lower than 2023, which is primarily the result of Waste Connections incurring increased landfill disposal costs (provided by a related party) and increased organics processing costs (provided by a non-affiliated third party processor). Projected profit achievement for 2025 – which, importantly, is prior to 2025 adjustments to solid waste rates – demonstrates no net profit for San Luis Garbage and Mission County Disposal and low net income for South County Sanitary Service. Overall, without adjustments to rates, Waste Connections service to the Agencies in 2025 will not yield net income.

It should be noted that Waste Connections allocates costs between business units based on allocation metrics that include vehicle operating hours, number of solid waste containers, and number of customer accounts. While such metrics are useful means of allocating costs, they do not necessarily represent the exact cost of providing service within a given business unit.

Rate Comparison
R3 compared current 2024 solid waste rates for the Agencies to rates in other jurisdictions in San Luis Obispo County, Santa Barbara County, and Monterey County. The results are shown in Table 4, below and on the following page, and are organized in ascending order by 32-gallon monthly rate (common residential subscription level).

Table 4: Regional Comparison of Monthly Rates
Agency 20 Gallon 32 Gallon 64 Gallon 96 Gallon 2 Cubic
Yards
Oceano CSD N/A $20.37 $29.31 $57.39 $128.75
San Luis Obispo $14.74 $23.53 $47.06 $70.59 $185.21
Pismo Beach N/A $23.76 $47.56 $71.33 $166.02
Grover Beach N/A $24.23 $32.74 $41.23 $147.95
Arroyo Grande N/A $27.33 $35.52 $43.73 $167.65
Nipomo CSD N/A $27.57 $39.52 $51.81 $136.62
Avila Beach CSD N/A $28.31 $46.78 $65.24 $177.68
Santa Barbara County Zone 4 Lompoc N/A $31.41 $36.13 $40.70 $179.98 Cayucos SD N/A $32.60 $38.52 $44.48 $184.32
Santa Barbara County Zone 5 N/A $33.03 $37.84 $42.46 $192.87 City of Atascadero N/A $33.67 $52.80 $66.35 $172.24
San Miguel N/A $34.13 $53.80 $72.88 $124.12
Santa Barbara County Zone 4 Santa Ynez N/A $34.33 $42.62 $50.77 $254.11 City of Morro Bay $22.21 $35.54 $71.07 $106.63 $265.30
Solvang N/A $36.28 $45.20 $54.69 $256.55

Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 7 of 19 Agency 20 Gallon 32 Gallon 64 Gallon 96 Gallon 2 Cubic
Yards
Goleta N/A $37.39 $41.88 $48.35 $240.10
Templeton N/A $38.73 $54.63 $60.41 $149.58
Los Osos CSD $27.74 $39.45 $60.57 $64.96 $228.72
Buellton N/A $40.51 $48.40 $56.38 $281.13
Cambria CSD N/A $41.52 $83.03 $124.55 $201.94
King City $32.43 $42.83 $53.68 $63.52 $288.00
Santa Barbara County Zone 2 N/A $43.25 $54.66 $65.92 $259.61 City of Paso Robles $38.15 $43.32 $57.42 $63.59 $188.36 Santa Barbara County Zone 3 N/A $45.22 $51.52 $57.75 $215.72 MRWMD $38.28 $46.54 $72.92 $91.20 $277.20
City of Santa Barbara N/A $48.26 $59.82 $71.38 $277.66
WM Area (Formerly Mid-State) N/A $48.72 $71.31 $93.84 $214.46 Santa Barbara County Zone 1 N/A $56.60 $62.86 $69.25 $256.74 Santa Maria N/A N/A $38.74 $47.87 $166.72
Table 4 demonstrates that solid waste rates for the City and other Participating Agencies compare favorably to others in the region. Charts 1 through 4, below and on the following pages, show the information from Table 4 in graphical format.

Chart 1: Regional Comparison of Monthly 32-gallon Cart Rates Chart 1, which is organized in ascending order of 32-gallon monthly rate, demonstrates that the rates for 32-gallon monthly service (the most subscribed residential service level) for all Participating Agencies $0
$10
$20
$30
$40
$50
$60

Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 8 of 19 other than Cambria Community Services District, Cayucos Sanitary District, and Los Osos Community Services District are the lowest in the region. Chart 2 shows how 64-gallon monthly rates compare.

Chart 2: Regional Comparison of Monthly 64-gallon Cart Rates Chart 3: Regional Comparison of Monthly 96-gallon Cart Rates $0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$0
$20
$40
$60
$80
$100
$120
$140

Background
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 9 of 19 Charts 3 and 4 keep the same ordering as Charts 1 and 2 and show how large residential 96-gallon service and commercial two (2) cubic yard bin service compare with the region. Overall, while exceptions exist, rates for solid waste service for the City and the Participating Agencies are among the lowest in the region, including San Luis Obispo County, Santa Barbara County, and Monterey County.

Chart 4: Regional Comparison of Monthly 2 Cubic Yard Rates $0
$50
$100
$150
$200
$250
$300
$350

3. NEW RATE ADJUSTMENT METHODOLOGY
AND 2025 RATES
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 10 of 19 2025 Base Year Rate Adjustments
Waste Connections submitted base year rate applications to the Agencies for rates effective January 1, 2025.1 Those rate applications were prepared in accordance with the 1994 Rate Manual, with modification for an effectiveness date of January 1, 2025, instead of the October 1, 2024 date that otherwise would have been the effective date given strict adherence to the 1994 Rate Manual. In simple terms, the applications project future 2025 costs for providing solid waste services based on the actual costs of providing services as follows:

Actual results for the most recently completed year (2023), which are based on the audited financial statements.

Projected results for the current year (2024), which are to be based on year-to-date information available at the time the application is submitted.

Projected results for the next year (2025).

Adjustments to solid waste rates are then calculated based on the projected 2025 revenue requirement, which is the sum of:

Allowed costs.

Allowable operating profit.

Pass through costs.

In reviewing the 2025 base year rate applications for the Agencies, R3:

Checked calculations for mathematical accuracy and consistency.

Tied projected costs back to the 2023 audited financial statements.

Evaluated the root causes of extraordinary changes in cost for landfilling and organics processing.

Reviewed 2024 revenues year to date to determine accuracy of projected revenues at current rates for 2025.

Proposed adjustments to solid waste collection vehicle depreciation lifetimes.

A summary of Waste Connections’ original 2025 base year rate adjustments per the applications submitted to the Agencies is included as Attachment 1.

It should be noted that Waste Connections’ base year rate applications are made at the business unit level (San Luis Garbage, Mission Country Disposal, and South County Sanitary Service) with no allocation of projected costs to individual Agencies served by those business units. Rather, the base year rate adjustment applications use total costs and revenues for those business units to calculate rate adjustments for the individual Agencies. For the purposes of our analysis, and as documented in Attachment 1, R3 allocated projected expenses by agency in accordance with proportion of revenues – this allocation approach is what the base year rate application achieve in practice, and the result is an exact match to the rate adjustment calculations included in the base year rate applications for each agency.
1 Authorization of the January 1, 2025 rate adjustments are expected to occur after that date. Waste Connections will prorate adjustment amounts on customer bills to account for the timing difference.

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 11 of 19 R3 thoroughly reviewed the figures included in the 2025 rate adjustment calculations, as well as supporting documentation requested of Waste Connections during the review process and found that Waste Connections’ rate applications were accurate and in accordance with the 1994 Rate Manual. The rate adjustments shown in Table 5 on the following page are the correct rate adjustments per the 1994 Rate Manual and are the default rate adjustments effective January 1, 2025, if the City and the Participating Agencies do not move forward with revisions to the 2025 rates in accordance with the new rate adjustment methodology.

Table 5: 2025 Rate Adjustments Per 1994 Rate Manual
Agency January 1, 2025, Default
Rate Adjustment
City of San Luis Obispo 9.29%
City of Arroyo Grande 3.97%
Los Osos CSD 12.47%
City of Pismo Beach 3.97%
Cambria CSD 12.78%
City of Grover Beach 3.97%
Nipomo CSD 3.23%
Oceano CSD 3.97%
Cayucos SD 12.47%
Avila Beach CSD 3.97%
Revisions for New Rate Adjustment Methodology
In negotiating the terms and conditions of a new rate adjustment methodology starting in 2026, the City and Waste Connections made the following revisions to the 2025 base year rate adjustments:

Updated Depreciation Lifespan for Trucks
The 1994 Rate Manual set a 7-year depreciation schedule for solid waste collection trucks. Modern solid waste collection trucks have a 10-year lifespan, and the depreciation schedule was adjusted by Waste Connections accordingly. Table 6, on the following page, shows the dollar magnitude of this change and the effect on the 2025 rate adjustment, with the effect being a reduction in the rate adjustment calculation ranging from 1.33% to 1.62%, depending on agency. Differences in effect by agency are the result of business unit allocations described earlier in this report.

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 12 of 19 Table 6: Change in Depreciation Lifespan
Original
Depreciation
$1,338,367 $376,989 $295,515 $131,502 $398,063 $316,350 $236,919 $225,376 $114,616 $26,441 Revised
Depreciation
1,125,720 317,545 248,918 110,766 336,460 267,393 200,254 190,498 96,879 22,349 Change in
Calculations
(212,647) (59,444) (46,597) (20,735) (61,603) (48,957) (36,665) (34,878) (17,737) (4,092) Effect on
Rate
Adjustment
-1.47% -1.62% -1.62% -1.62% -1.33% -1.33% -1.33% -1.33% -1.33% -1.33% Removed Limitation on Corporate Overhead
The 1994 Rate Manual placed a limitation on corporate overhead costs. Today, corporate overhead costs fund legal, tax, payroll, human resources, engineering, compliance, IT, training and recruiting programs.

The City and Waste Connections agreed to remove the prior limitation in order to fund these services.

Table 7, below, shows the effect of removing the prior limitation on corporate overhead. Differences in effect by agency are the result of different original proportionate amounts of corporate overhead between Agencies. In the near-term, compensation to Waste Connections for corporate overhead will be limited by the CPI adjustment noted above. Cost-based adjustments to corporate overhead are possible in 2030, and will be subject to review, justification, and potential limitation at that time.

Table 7: Change in Corporate Overhead
Original
Corporate
Overhead
$246,296 $46,213 $36,226 $16,120 $93,625 $74,406 $55,724 $53,009 $26,958 $6,219 Revised
Corporate
Overhead
430,378 80,753 63,301 28,168 163,600 130,017 97,371 92,627 47,106 10,867 Change in
Calculations 184,082 34,540 27,075 12,048 69,975 55,611 41,648 39,619 20,148 4,648 Effect on Rate
Adjustment 1.28% 0.94% 0.94% 0.94% 1.51% 1.51% 1.51% 1.51% 1.51% 1.51%

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 13 of 19 50% Cost Share for Regional Service Enhancements
Waste Connections is offering new service enhancement to the benefit of the City and the Agencies including:

Collection of a bulky waste item twice annually from residential accounts at no cost, via clean-up week or voucher program depending on existing program.

Once annual exchange of a residential solid waste, recycling, or organics cart per customer account.

Waste Connections has estimated the annual cost of offering these service regionally and is proposing recovery of 50% of the projected costs via the 2025 rate adjustment. The City and Waste Connections have tentatively agreed to this cost sharing as part of the new agreement and for inclusion in the 2025 rates. Waste Connections is proposing the low income discount customer assistance program without a change in rate adjustment.

Table 8, below, shows the effect of including the 50% cost sharing for these two service enhancements into the 2025 rate adjustment. Cost allocations are by percentage of accounts by agency, which is the reason for differences in the effect of rate adjustment by agency.

Table 8: 50% Cost Share for Service Enhancements
New Annual
Cart Exchange $26,376 $9,889 $7,223 $3,623 $11,445 $7,566 $8,179 $7,987 $3,681 $320 Bulky Clean-up
Enhancements 21,091 7,908 5,776 2,897 9,152 6,050 6,540 6,386 2,944 256 Change in
Calculations 47,467 17,797 12,999 6,520 20,597 13,616 14,719 14,373 6,625 576 Effect on Rate
Adjustment 0.33% 0.48% 0.45% 0.51% 0.45% 0.37% 0.54% 0.55% 0.50% 0.19% Corrections to AB 939 Fees
Agency fees, which include AB 939 Fees and Franchise Fees, are included as estimates in rate adjustment applications. Because the rate applications are at the company business unit level, and not at the individual agency level, AB 939 fees in the application are allocated to the Agencies in proportion to revenues. However, only the City of San Luis Obispo and Cayucos Sanitary District receive AB 939 Fees – therefore this was corrected in the revised 2025 rate adjustments as shown in Table 9, on the following page. Note that the values for the City of San Luis Obispo also include a correction to Franchise Fee revenues.2
2 Specifically, to remove the 1994 Rate Manual’s approach to “grossing up” the calculated rate adjustment to account for the Franchise Fee by including the projected Franchise Fee payment amounts in the rate adjustment calculation itself. This approach is also recommended for the other Agencies starting with the 2026 rate adjustment.

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 14 of 19 Table 9: Corrections to AB 939 Fees
Original
Agency Fees $362,140 $5,226 $4,097 $1,823 $- $- $- $- $- $- Revised
Agency Fees 439,411 - - 12,754 - - - - - -
Change in
Calculations 77,2713
(5,226) (4,097) 10,931 - - - - - -
Effect on Rate
Adjustment
Updated Profit Allowance
The 1994 Rate Manual, along with the Agencies agreements with Waste Connections, limits allowable profit based on an “operating ratio” of 92% or 93% of allowable collection expenses (not including postcollection disposal, processing or recycling expenses nor agency fees) depending on the agency. A 93% operating ratio is the equivalent of a 7.53% profit margin, and a 92% operating ratio is the equivalent of an 8.7% profit margin.

A key negotiation point between the City and Waste Connections was a change to the profit allowance.

Ultimately, after much discussion and negotiation, the City and Waste Connections agreed that the 2025 rate adjustment will include a 9% profit allowance of projected allowable collection costs and in 2026 and thereafter the profit allowance will be 10%. The updated profit allowance is in-keeping with industry standards for solid waste services.

For context, the 2025 profit allowance is approximately 5% of revenues and we estimate that the 2026 profit allowance will be approximately 5.5% of revenues. Table 10, on the following page, shows the effect of changing the profit allowance to 9% of collection costs for all Agencies for the 2025 rate adjustments. Differences in the effect on rate adjustment are due to differences in existing profit allowances by agency, as well as differences in the depreciation, corporate overhead and new service enhancements shown in earlier tables.
3 Includes adjustment to Franchise Fee to remove “grossing up” method from City’s 2025 rate adjustment calculations.

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 15 of 19 Table 10: 9% Profit Allowance on Allowable Collection Costs Original Profit
Allowance $641,302 $188,392 $170,609 $65,715 $227,094 $180,477 $135,161 $111,295 $65,388 $15,085 Revised Profit
Allowance 768,515 224,623 175,993 78,382 237,649 188,618 141,665 134,797 68,490 15,714 Change in
Calculations 127,213 36,231 5,384 12,667 10,555 8,141 6,504 23,502 3,102 629 Effect on Rate
Adjustment
Total Revisions for New Rate Adjustment Methodology
Taken altogether, the revisions to the 2025 rate adjustment result in small increases to the original 2025 rate adjustment calculations. These are shown in Table 11, on the following page, and are also shown in Attachment 2.

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 16 of 19 Table 11: Overall Revisions to 2025 Rate Adjustments
Original 2025
Revenue
Calculation
$15,640,734 $4,089,595 $3,228,699 $1,426,540 $4,786,646 $3,804,059 $2,848,911 $2,692,832 $1,378,241 $317,951 Change in
Depreciation (212,647) (59,444) (46,597) (20,735) (61,603) (48,957) (36,665) (34,878) (17,737) (4,092) Change in
Corporate
Overhead
184,082 34,540 27,075 12,048 69,975 55,611 41,648 39,619 20,148 4,648 Enhanced
Services 47,467 17,797 12,999 6,520 20,597 13,616 14,719 14,373 6,625 576 Updated Profit
Allowance 127,213 36,231 5,384 12,667 10,555 8,141 6,504 23,502 3,102 629 Corrections to
AB 939 Fees 77,271 (5,226) (4,097) 10,931 - - - - - -
Revised 2025
Revenue
Calculation
15,864,119 4,113,493 3,223,463 1,447,971 4,826,170 3,832,470 2,875,118 2,735,447 1,390,379 319,712 Revenues at
Current Rates 14,435,726 3,677,194 2,882,493 1,282,686 4,621,616 3,672,906 2,750,690 2,616,676 1,330,724 306,989 Shortfall (1,428,393) (436,299) (340,970) (165,285) (204,554) (159,564) (124,428) (118,771) (59,655) (12,724) Revised 2025
Rate
Adjustment4

9.89% 13.18% 12.59% 14.32% 4.92% 4.82% 5.02% 5.04% 4.98% 4.60% Proportionality in Cost of Service
R3 analyzed the 2025 rate adjustments for adequacy with respect to the cost-of-service requirements of Proposition 218. Because the base year rate adjustment methodology is based on the documented cost of provided solid waste services as expressed in Waste Connections’ audited financial statements, we find that the current and proposed solid waste service rates will generate revenues sufficient to cover the cost-of-providing service plus a reasonable profit allowance commensurate with normal expectations in the solid waste industry.

R3 also analyzed the proposed solid waste service rates for adequacy with respect to proportionate allocation of costs among solid waste service customers. R3 found that the current (and thus also 4 Rate adjustments shown include grossing up for franchise fees per 1994 Rate Manual methodology, except for San Luis Obispo.

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 17 of 19 proposed) solid waste rate structure proportionately allocates costs to service types and container sizes based on the relative differences in cost associated with the types of services provided to customers.

For example, for customers subscribing to 60- or 90-gallon cart solid waste service, the per-gallon cost-ofservice for those subscribed to the larger container size (90-gallons) is proportionately less than those subscribed to the smaller container size (60-gallons). This is because solid waste service is comprised of both fixed and variable costs, with the fixed cost portion being for the cost of collection (labor, fuel, capital equipment, and other shared costs) as well as the costs related to post-collection disposal, processing, recycling and composting. Thus, the cost-of-service for the larger container size (90-gallons) has a lesser proportion of fixed costs to variable costs compared to the smaller (60-gallon) container size.

Factors Affecting 2025 Rate Adjustments
Overall, for the Agencies and the three Waste Connections business units, the 2025 rate adjustments reflect an 8.12% increase in revenues to meet increased costs and revised profit allowances. The largest contributors to the overall increase are:

Increases in organics processing costs – Third-party costs for the organic waste postcollection processing facility operated by the company formerly named Hitachi Zosen INOVA, and which are not within Waste Connections’ control, have doubled since 2022. The change in cost is the result of changes in facility capital and operating costs.

Increases in landfill disposal costs – Related party costs for landfill waste disposal at Cold Canyon have remained flat since 2016. The 2025 rate adjustment reflects a market adjustment to these costs, from a per ton tipping fee of $41 per ton (in place since 2016) to a per ton tipping fee of $70. Waste Connections provided market comparison demonstrating the applicability of the $70 per ton market tipping fee.

Other factors play minor roles in the 2025 rate adjustment:

Collection costs including labor, vehicles, operating expenses and overhead – These costs are increasing in proportion to the Consumer Price Index and are projected to increase by 3.20% in 2024 and 4.21% for 2025.

Agency fees – These costs are mostly proportionate to changes in rates and are projected to increase by 2.22% in 2024 and 3.30% in 2025.

Overall, collection services comprise the single largest component overall rate funded expenses, at 56% of total rate revenues. Post-collection services are the next largest component of rate funding, at 29% of total rate revenues. Agency fees comprise 10% of rate revenues and profit allowance comprises 5% of rate revenues. This is demonstrated in Chart 5, on the following page.

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 18 of 19 Chart 5: Summary Components of 2025 Rate Revenues
New Rate Adjustment Methodology
The City and Waste Connections negotiated a new methodology for adjusting rates starting in 2026, which are summarized below. R3 is preparing an exhibit to the City’s new agreement with Waste Connections that will further detail the terms and conditions of the new methodology in accordance with the following points, which have been tentatively agreed to by the parties. The exhibit will be finalized and ready for distribution to the Agencies on or around November 18, 2024. It is recommended that the Agencies bring forward the exhibit as an amendment to their agreements with Waste Connections when considering the 2025 rate adjustments, which is anticipated to occur in January 2025.

The features of the new methodology include:

CPI Adjustments: Starting in 2026, rate adjustments will be based on the Garbage and Trash CPI, with a floor of 2% and a cap of 5%. Amounts under 2% or over 5% will carry forward. The CPI adjustment will apply to Waste Connections’ collection and post-collection cost centers. The proposed CPI is the Consumer Price Index for all Urban Consumers for Garbage and Trash in the United States, all City average. Details and prior results for this CPI are included in Attachment 3.

This is the same CPI used by Waste Connections in preparing its 2025 base year application.

Updated Profit Allowance: As stated previously, the 2025 rate adjustment includes a 9% profit allowance of projected collection costs. The City and Waste Connections have tentatively agreed that, in 2026 and thereafter, the profit allowance will be 10% of collection costs.

Revenue Balancing Mechanism: Starting in 2027, adjustments to rates will account for shortfalls or surpluses in Waste Connections’ actual revenues compared to projected revenues from prior years. For example, if Waste Connections’ 2025 revenues exceed projections, the amount of surplus revenues will be credited to the rates in 2027 (and vice versa), achieving fairness in compensation and rates for the company and for ratepayers. Such adjustments would take place annually and will be independent of the CPI cap and floor noted above.

Less Frequent Cost-Based Adjustments: Currently, solid waste rates are adjusted based on the 1994 Rate Manual every three years on Waste Connections’ costs. Via the new methodology, Collection
Services
56%
PostCollection
Services
29%
Agency Fees
10%
Profit
Allowance
5%

New Rate Adjustment Methodology and 2025 Rates
City of San Luis Obispo | New Solid Waste Rate Adjustment Methodology and 2025 Rates 19 of 19 cost-based adjustments would occur a maximum of every five years, and only if requested by Waste Connections or the City. The first opportunity for a cost-based adjustment will be for the 2030 rate year. If neither Waste Connections nor the City request a cost-based adjustment, then the CPI adjustment approach will be applied. Cost-based adjustments will be based on Waste Connections’ consolidated audited financial statements for the region. Timeframes for cost-based adjustment application and review process will be ample, such that the City will have sufficient time for review and approval processes and such that the potential for delay in implementation is minimized.

Extraordinary Adjustments: The California Air Resources Board (CARB) Advanced Clean Fleets (ACF) regulation is requiring all solid waste collection trucks to be zero emissions in 2042.

This includes a phased in plan to get the percentage of the fleet to be zero emission vehicle (ZEV) with 10% by 2030, 25% by 2033, 50% by 2036,75% by 2039 and100% by 2042. During CPI Adjustment years, Waste Connections may request extraordinary rate adjustments due to changes in law affecting collection operations, including for compliance with CARB’s ACF zero emission mandate (which may necessitate change to depreciation schedules). The City may, but is not obligated to, consider requests for extraordinary rate adjustments due to changes in law affective post-collection operations. Requests for extraordinary change are subject to good faith meet and confer negotiations between City and Waste Connections.

Example Calculations for 2026 through 2029
R3 has prepared example calculations of projected rate adjustments for 2026 through 2029 based on the tentatively agreed to terms and conditions outlined above (including adjustment to 10% profit allowance on collection services starting in 2026). Table 12, below, demonstrates this example for the City of San Luis Obispo, and Attachment 4 provides examples for all Agencies. Note that the example in Table 12 and Attachment 4 includes the following assumptions:

CPI at the 5% cap (note that CPI below the 5% cap will result in lower rate adjustments) Revenue reconciliation at 1% below annual rate revenue projections (note that amounts above rate revenue projections will offset rate adjustments, not add to them).

Discontinuance of the prior Franchise Fee grossing method on rate adjustment for all Agencies starting in 2026.

Table 12: Example Calculation of New Rate Methodology for the City of San Luis Obispo 2025 2026 2027 2028 2029
Collection Services $8,539,055 $8,966,008 $9,414,308 $9,885,024 $10,379,275 Profit Allowance 768,515 896,601 941,431 988,502 1,037,927 Post-Collection Services 4,602,096 4,832,201 5,073,811 5,327,501 5,593,876 Franchise Fee 1,586,412 1,675,695 1,777,106 1,866,072 1,959,572 AB 939 Fee 368,041 386,443 405,765 426,053 447,356
Revenue Reconciliation Example N/A N/A 158,641 167,569 177,711 Total Revenues 15,864,119 16,756,947 17,771,062 18,660,722 19,595,717 Indexed Rate Adjustment 5.63% 6.05% 5.01% 5.01%

Series Id: Series Title: Area:

Item: Base Period: Years: Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec HALF1 HALF2 2014 422.440 422.483 423.413 425.393 425.242 425.930 426.562 426.771 427.327 427.995 427.808 428.187 2015 427.734 429.248 429.235 429.807 431.234 430.813 431.229 432.967 433.843 434.829 436.428 436.996 2016 437.205 438.296 437.699 437.676 438.317 437.858 438.607 439.358 439.707 440.311 443.343 444.745 2017 446.266 447.699 446.987 447.129 447.272 448.046 448.328 448.717 449.008 452.196 453.820 453.596 2018 453.354 454.915 455.230 458.722 462.887 465.041 465.579 470.457 471.026 472.535 486.650 485.935 458.358 475.364 2019 475.687 477.474 478.569 479.449 480.865 480.984 482.138 483.987 484.346 486.133 486.485 486.708 478.838 484.966 2020 491.003 494.429 495.288 494.432 494.946 496.679 498.564 500.882 501.756 503.315 504.970 508.190 494.463 502.946 2021 512.722 517.270 518.505 518.579 516.440 517.202 521.185 524.408 529.934 530.114 529.053 532.538 516.786 527.872 2022 533.078 538.313 540.719 542.564 544.546 547.554 548.187 548.706 558.254 561.090 563.816 565.185 541.129 557.540 2023 570.412 575.697 576.773 580.124 587.431 589.812 596.167 597.347 596.997 597.569 601.631 602.164 580.042 598.646 2024 606.773 610.551 610.015 611.073 609.538 611.946 614.089 615.880 609.983 U.S. city average
Garbage and trash collection DECEMBER 1983=100
2014 to 2024 Consumer Price Index for All Urban Consumers (CPI-U) Original Data Value CUUR0000SEHG02 Not Seasonally Adjusted Garbage and trash collection in U.S. city average, all
b t ll dj t d

Notice of Public Hearing Regarding
Proposed Solid Waste Rate Adjustment
Residential, Multi-Family, and Commercial Property Owners and Tenants - Customers:

This notice is intended to inform you that the City of San Luis Obispo (the “City”) will hold a public hearing regarding rate adjustments (the “Proposed Rate Adjustment”) proposed by San Luis Garbage Company (the “Garbage Company”) for properties and customers receiving solid waste, recycling, and organics services within the City. The Proposed Rate Adjustment will be considered by the San Luis Obispo City Council at the date, time, and location specified below. Consistent with the requirements of Proposition 218, this notice also provides you with the following information:
● The Amount of the Proposed Rate Adjustment;
● The Effective Date of the Rate Adjustment;
● The Date, Time, and Place of the Public Hearing;
● The Majority Protest Procedures;
● The Reason for the Proposed Rate Adjustment; and
● The Basis for the Proposed Rate Adjustment.

NOTICE OF PUBLIC HEARING
The Public Hearing for the Proposed Rate Adjustment within the City limits will be held on:

Date: March 18, 2025 Time: 5:30 p.m.

Place: San Luis Obispo City Hall, 990 Palm Street, San Luis Obispo, CA At the Public Hearing, the City Council will consider all public comment in support of and in opposition to the Proposed Rate Adjustment and whether or not a Majority Protest exists pursuant to the California Constitution (as described below).

If approved, the Proposed 2025 Rate Adjustment would become effective on March 19, 2025, and annual adjustments would be effective each January 1 of 2026, 2027, 2028 and 2029.

Reason For and Basis of the Proposed Rate Adjustments
The Proposed Rate Adjustment for 2025 is based on the Garbage Company’s documented cost of providing solid waste services and is a 7.98% increase above current solid waste rates. This cost-based adjustment is necessary for the Garbage Company to continue to provide safe, environmentally sound and reliable solid waste removal, transportation and disposal services to the residents and businesses of the City. The adjustments are requested due to:
• Increases in organics processing costs – Third-party costs for the organic waste post-collection processing facility operated by Kanadevia Inova Anaerobic Digestion Facility, formerly Hitachi Zosen INOVA, have doubled since 2022. The change in cost is the result of changes in facility capital and operating costs.

• Increases in landfill disposal costs – Related party costs charged to the customer for landfill waste disposal at Cold Canyon Landfill have remained the same since 2016. The 2025 rate adjustment reflects a market adjustment to these costs, from a per ton tipping fee of $41 per ton (in place since 2016) to a per ton tipping fee of $70. The Garbage Company provided market comparison demonstrating the applicability of the $70 per ton market tipping fee. • Collection costs including labor, vehicles, operating expenses and overhead – These costs are increasing by 4.22% in 2025.
• Adjustments necessary for moving to a new methodology for annual rate adjustments that provides for increased rate stability, predictability, fairness, transparency, ease of administration, and costeffectiveness. These include updated depreciation lifespans for solid waste collection vehicles, change to the limitation on corporate overhead costs for legal, tax, payroll, human resources, engineering, compliance, IT, training and recruiting programs, and updated profit allowance (to 9% of projected collection service costs in 2025, approximately 5% of overall costs) in-keeping with industry standards.
• Adjustments for new service enhancements, including the ability for residents to exchange a collection cart once annually at no additional cost, a few no cost bulky/large item collections, and a Customer Assistance Program providing a 20% low-income discount provided to residential customers using 20, 32, or 64-gallon cart service (using existing City practices to determine eligibility).

Beginning March 19, 2025, commercial customers enrolled in recycling bin service collection once and twice a week will begin paying for the service at 25% of the correlating trash bin service level rate.

The Proposed Rate Adjustments for 2025 applicable to residential solid waste customers are shown in the table below.

Garbage
Container Size 2024 Change in Monthly Rate 2025
20-gallon $14.74 $1.18 $15.92
32-gallon $23.53 $1.88 $25.41
64-gallon $47.05 $3.75 $50.80
96-gallon $70.60 $5.63 $76.23
In addition, commencing each January 1 of 2026, 2027, 2028 and 2029 solid waste rates will be adjusted based on the following:
• Annual change in the Bureau of Labor Statistics’ Consumer Price Index (CPI) for Garbage and Trash Collection in the U.S all city average, with a minimum 2% adjustment and a maximum 5% adjustment.

Amounts below the minimum or above the maximum will carry forward to the following year. • Calculation of a 10% profit allowance on projected collection service costs (increased from 9% in 2025, and approximately 5.5% of overall costs) to the Garbage Company starting in 2026 (estimated at an additional 0.67% to 0.69% adjustment in 2026).

• Addition of a revenue balancing mechanism starting in 2027, wherein actual revenues from solid waste rates over or under projections carry forward as additions to, or offsets against, the annual CPI adjustment.
• The rate adjustment for January 1, 2026, is not expected to exceed 8% and rate adjustments for January 1, 2027, 2028 and 2029 are not expected to exceed 7%.

The Proposed Rate Adjustments have been independently reviewed for consistency with the City of San Luis Obispo Rate Setting Process and Methodology Manual for Integrated Solid Waste Management dated June 1994 and in accordance with the provisions of the City’s Franchise Agreement with the Garbage Company, as amended, governing solid waste service within the boundaries of the City. The Proposed Rate Adjustments contemplate implementation of a new methodology for annual rate adjustments which is described in the New Solid Waste Rate Adjustment Methodology and 2025 Rates report authored by independent reviewer, R3 Consulting Group, Inc. The consultant’s report and the complete set of proposed 2025 solid waste rates is available at the City Clerk’s office located at 990 Palm Street, San Luis Obispo, California. The complete set of proposed 2025 rates is also available online at sanluisgarbage.com.

How Do I Protest the Proposed Rate Adjustments?
Pursuant to Section 6 of Article XIII D of the California Constitution, the following persons may submit a written protest against the Proposed Rate Adjustments to the City Clerk before the close of the Public Hearing referenced above.
 An owner(s) of property (parcel(s)) receiving solid waste, recycling, and organics services within the City limits. If the person(s) signing the protest, as an owner, is not shown on the last equalized assessment roll as the owner of the parcel(s) then the protest must contain or be accompanied by written evidence that such person signing the protest is the owner of the parcel(s) receiving services; or
 A tenant(s) whose name appears on the Garbage Company’s records as the customer of record for the corresponding parcel receiving solid waste, recycling, and organicsservices within the City limits (tenantcustomer).

A valid written protest must contain a statement that you protest the Proposed Rate Adjustments, the address or Assessor’s Parcel Number (APN) of the parcel or parcels which receive solid waste, recycling, and organics services, and a signature by either the owner or the tenant-customer of the parcel or parcels. One written protest per parcel shall be counted in calculating a majority protest to the Proposed Rate Adjustments subject to the requirements of Section 6 of Article XIII D of the California Constitution. Written protests will not be accepted by e-mail or by facsimile. Verbal protests will not be counted in determining the existence of a majority protest. To be counted, a protest must be received in writing by the City Clerk before the close of the Public Hearing referenced above.

Written protests regarding the solid waste rate Adjustment may be mailed to:

City of San Luis Obispo
Attn: City Clerk
990 Palm Street
San Luis Obispo, CA 93401-3249

Written protests may also be personally delivered to the City Clerk at San Luis Obispo City Hall located at 990 Palm Street, San Luis Obispo, California, 93401.

If valid written protests are presented by a majority of owners and/or tenants-customers of parcels receiving solid waste, recycling, and organics services within the City limits, then the City will not adjust the rates for the services.

Questions can also be directed to San Luis Garbage by calling (805) 543-0875.

An informational session has been coordinated to allow the opportunity for the public to learn and ask questions about the proposed rate adjustment on a date prior to the public hearing.

Informational Session
Date: February 26, 2025
Time: Doors open at 5:00 p.m., brief presentation at 5:30 p.m.

Location: Ludwick Community Center
864 Santa Rosa Street
San Luis Obispo, CA 93401
SAN LUIS GARBAGE COMPANY, INC.

RATE ADJUSTMENT EFFECTIVE MARCH 19, 2025

CITY OF SAN LUIS OBISPO

SINGLE-FAMILY AND MULTI-FAMILY RESIDENTIAL CART
Residential customers must use containers provided by San Luis Garbage. The bundled residential cart rate includes weekly pickup of one trash cart (black or gray lid), one organics cart (green lid), and one recycling cart (blue lid), at no extra cost.

RESIDENTIAL CART SERVICE
Pickup
Per
Week
Monthly Rate
Effective
01/01/2024

PROPOSED

7.98%
RATE

ADJUSTMENT

MONTHLY
RATE

EFFECTIVE
3/19/2025
19 Gallon Cart Set 1 $14.74 1.18 15.92
32 Gallon Cart Set 1 $23.53 1.88 25.41
64 Gallon Cart Set 1 $47.05 3.75 50.80
PARA UNA VERSIÓN EN ESPAÑOL DE ESTE “AVISO DE AUDENCIA PÚBLICA SOBRE LOS AUMENTOR PROPUESTOS DE LA TASA DE RESIDUOS SÓLIDOS”, UTILICE EL SIGUIENTE ENLACE AL SITIO WEB:
www.sanluisgarbage.com/news
Si tiene preguntas o consultas adicionales, no dude en comunicarse con la compañía de basura al (805) 543-0875 y uno de nuestros representantes de servicio al cliente podrá ayudarlo.

96 Gallon Cart Set 1 $70.60 5.63 76.23
32 Gallon Additional Trash Cart 1 $21.45 1.71 23.16
64 Gallon Additional Trash Cart 1 $42.93 3.43 46.36
96 Gallon Additional Trash Cart 1 $64.36 5.14 69.50
32/64/96 Additional Recycle Cart 1 $4.93 0.39 5.32
32/96 Additional Organics Cart 1 $9.16 0.73 9.89
DESIGNED MANUAL SERVICE (determined by city staff)
19 Gallon Cart Set 1 $23.93 1.91 25.84
32 Gallon Cart Set 1 $38.29 3.06 41.35
64 Gallon Cart Set 1 $76.63 6.12 82.75
96 Gallon Cart Set 1 $114.89 9.17 124.06
LATE MAKEUP COLLECTIONS WITH TRASH TRUCK (Phone call required) TRIP CHARGE, plus additional charge below for any
extra carts or equivalent volume (gallons). $23.74 1.89 25.63 - Additional charge per 32 gallon cart. $11.77 0.94 12.71 EXTRA COLLECTIONS WITH PICKUP OR FLATBED TRUCK (Phone call required) TRIP CHARGE, plus applicable amount below: $35.59 2.84 38.43 - Contamination Fee (Equivalent to a trash cart dump) $0.00 12.71 12.71 - Per trash cart or equivalent volume (over 6 cans) $11.77 0.94 12.71 - Per recycle cart or equivalent volume (over 6 cans) $5.88 0.47 6.35 - Per bulky/large item or white goods/large appliance
(after no cost collections are used - see notes section for details) $44.48 3.55 48.03
- Per piece of small size furniture/appliance (after no cost collections are used - see notes section for details) $26.30 2.10 28.40 - Per mattress with boxspring. $26.30 2.10 28.40
RESIDENTIAL - OTHER CHARGES:

TAX LIEN CERT. MAIL FEE $5.36 0.43 5.79
SPECIAL TRIP FEE $71.20 5.68 76.88
LOOSE CARDBOARD $12.63 1.01 13.64
RESTART FEE-RESIDENTIAL $35.59 2.84 38.43
VACANT RATE $12.10 0.97 13.07
SERVICE AWAY FROM THE CURB $16.04 1.28 17.32
CART REPLACMENT (One provided annually at no
cost) $34.07 2.72 36.79
USED OIL COLLECTION - no charge (Call for details and pick up information).

MULTI-FAMILY RESIDENTIAL BIN (5 UNITS OR MORE)

MULTI-FAMILY TRASH BIN SERVICE
(Cubic Yards)
Pickup
Per
Week
Monthly Rate
Effective
01/01/2024

PROPOSED

7.98%
RATE

ADJUSTMENT

MONTHLY
RATE

EFFECTIVE
3/19/2025
1 Yard Trash Bin 1 $170.30 13.59 183.89
1 Yard Trash Bin 2 $248.03 19.79 267.82
1 Yard Trash Bin 3 $325.64 25.99 351.63
1 Yard Trash Bin 4 $403.32 32.18 435.50
1 Yard Trash Bin 5 $481.05 38.39 519.44
1 Yard Trash Bin 6 $558.64 44.58 603.22
1 Yard Trash Bin 7 $502.44 40.09 542.53

1.5 Yard Trash Bin 1 $197.18 15.73 212.91

1.5 Yard Trash Bin 2 $304.72 24.32 329.04

1.5 Yard Trash Bin 3 $412.30 32.90 445.20

1.5 Yard Trash Bin 4 $519.81 41.48 561.29

1.5 Yard Trash Bin 5 $627.36 50.06 677.42

1.5 Yard Trash Bin 6 $734.88 58.64 793.52

1.5 Yard Trash Bin 7 $842.41 67.22 909.63
2 Yard Trash Bin 1 $224.06 17.88 241.94
2 Yard Trash Bin 2 $358.50 28.61 387.11
2 Yard Trash Bin 3 $492.92 39.34 532.26
2 Yard Trash Bin 4 $627.35 50.06 677.41
2 Yard Trash Bin 5 $761.78 60.79 822.57
2 Yard Trash Bin 6 $896.21 71.52 967.73
2 Yard Trash Bin 7 $1,030.60 82.24 1,112.84
3 Yard Trash Bin 1 $277.79 22.17 299.96
3 Yard Trash Bin 2 $466.06 37.19 503.25
3 Yard Trash Bin 3 $654.26 52.21 706.47
3 Yard Trash Bin 4 $842.50 67.23 909.73
3 Yard Trash Bin 5 $1,030.65 82.25 1,112.90
3 Yard Trash Bin 6 $1,218.91 97.27 1,316.18
3 Yard Trash Bin 7 $1,407.13 112.29 1,519.42
4 Yard Trash Bin 1 $331.61 26.46 358.07
4 Yard Trash Bin 2 $576.56 46.01 622.57

4 Yard Trash Bin 3 $821.60 65.56 887.16
4 Yard Trash Bin 4 $1,066.61 85.12 1,151.73
4 Yard Trash Bin 5 $1,311.55 104.66 1,416.21
4 Yard Trash Bin 6 $1,556.59 124.22 1,680.81
4 Yard Trash Bin 7 $1,801.65 143.77 1,945.42
6 Yard Trash Bin 1 $439.12 35.04 474.16
6 Yard Trash Bin 2 $794.65 63.41 858.06
6 Yard Trash Bin 3 $1,150.20 91.79 1,241.99
6 Yard Trash Bin 4 $1,505.73 120.16 1,625.89
6 Yard Trash Bin 5 $1,861.29 148.53 2,009.82
6 Yard Trash Bin 6 $2,286.55 182.47 2,469.02
6 Yard Trash Bin 7 $2,596.25 207.18 2,803.43
8 Yard Trash Bin 1 $534.94 42.69 577.63
8 Yard Trash Bin 2 $992.34 79.19 1,071.53
8 Yard Trash Bin 3 $1,450.54 115.75 1,566.29
8 Yard Trash Bin 4 $1,909.22 152.36 2,061.58
8 Yard Trash Bin 5 $2,368.06 188.97 2,557.03
8 Yard Trash Bin 6 $2,915.92 232.69 3,148.61
8 Yard Trash Bin 7 $4,871.03 388.71 5,259.74

MULTI-FAMILY RECYCLING BIN

SERVICE
(Cubic Yards)
Pickup
Per
Week
Monthly Rate
Effective
01/01/2024

PROPOSED

7.98%
RATE

ADJUSTMENT

MONTHLY RATE

EFFECTIVE
03/19/2025
1 Yard Recycle Bin 1 $0.00 45.97 45.97
1 Yard Recycle Bin 2 $0.00 66.96 66.96
1 Yard Recycle Bin 3 $81.41 6.50 87.91
1 Yard Recycle Bin 4 $100.83 8.05 108.88
1 Yard Recycle Bin 5 $120.26 9.60 129.86
1 Yard Recycle Bin 6 $139.66 11.14 150.80
1 Yard Recycle Bin 7 $125.61 10.02 135.63

1.5 Yard Recycle Bin 1 $0.00 53.23 53.23

1.5 Yard Recycle Bin 2 $0.00 82.26 82.26

1.5 Yard Recycle Bin 3 $103.08 8.23 111.31

1.5 Yard Recycle Bin 4 $129.95 10.37 140.32

1.5 Yard Recycle Bin 5 $156.84 12.52 169.36

1.5 Yard Recycle Bin 6 $183.72 14.66 198.38

1.5 Yard Recycle Bin 7 $210.60 16.81 227.41
2 Yard Recycle Bin 1 $0.00 60.49 60.49
2 Yard Recycle Bin 2 $0.00 96.78 96.78
2 Yard Recycle Bin 3 $123.23 9.83 133.06
2 Yard Recycle Bin 4 $156.84 12.52 169.36
2 Yard Recycle Bin 5 $190.45 15.20 205.65
2 Yard Recycle Bin 6 $224.05 17.88 241.93
2 Yard Recycle Bin 7 $257.65 20.56 278.21
3 Yard Recycle Bin 1 $0.00 74.99 74.99
3 Yard Recycle Bin 2 $0.00 125.81 125.81
3 Yard Recycle Bin 3 $163.57 13.05 176.62
3 Yard Recycle Bin 4 $210.63 16.81 227.44
3 Yard Recycle Bin 5 $257.66 20.56 278.22
3 Yard Recycle Bin 6 $304.73 24.32 329.05
3 Yard Recycle Bin 7 $351.78 28.07 379.85
4 Yard Recycle Bin 1 $0.00 89.52 89.52
4 Yard Recycle Bin 2 $0.00 155.64 155.64
4 Yard Recycle Bin 3 $205.40 16.39 221.79
4 Yard Recycle Bin 4 $266.65 21.28 287.93
4 Yard Recycle Bin 5 $327.89 26.17 354.06
4 Yard Recycle Bin 6 $389.15 31.05 420.20
4 Yard Recycle Bin 7 $450.41 35.94 486.35
6 Yard Recycle Bin 1 $0.00 118.54 118.54
6 Yard Recycle Bin 2 $0.00 214.52 214.52
6 Yard Recycle Bin 3 $287.55 22.95 310.50
6 Yard Recycle Bin 4 $376.43 30.04 406.47
6 Yard Recycle Bin 5 $465.32 37.13 502.45
6 Yard Recycle Bin 6 $571.64 45.62 617.26
6 Yard Recycle Bin 7 $649.06 51.79 700.85
8 Yard Recycle Bin 1 $0.00 144.41 144.41
8 Yard Recycle Bin 2 $0.00 267.88 267.88
8 Yard Recycle Bin 3 $362.64 28.94 391.58
8 Yard Recycle Bin 4 $477.31 38.09 515.40
8 Yard Recycle Bin 5 $592.02 47.24 639.26
8 Yard Recycle Bin 6 $728.98 58.17 787.15
8 Yard Recycle Bin 7 $1,217.76 97.18 1,314.94

ADDITIONAL INFORMATION - RESIDENTIAL CUSTOMERS

1. For Temporary Bins or Rolloff Box services, please call the office for current rates.

2. Polystyrene (Styrofoam, Plastic #6) and soft plastics (plastic bags/films) are not accepted in the mixed recycling program and must be disposed as trash. Mixed recycle in plastic bags will be tagged for contamination.

3. Trash, Recycle, and organics carts should be placed next to one another for collection.

4. BULKY/LARGE ITEM COLLECTION:
- Single-Family customers may schedule one (1) large/bulky item collection throughout the year at no additional charge and schedule one (1) large/bulky item pickup during each Clean Up Week at no additional charge. Additional pickups scheduled during Clean Up Week will be charged at a discounted rate. - Multi-Family customers may schedule up to four (4) large/bulky item collections throughout the year at no additional charge and schedule up to four (4) large/bulky item pickups during each Clean Up Week at no additional charge.

Additional pickups scheduled during Clean Up Week will be charged at a discounted rate. *Clean Up Week is held two times per year in the spring and fall.

5. Low-income residential customers may be eligible for a 20% discount off of the garbage rate. To check eligibility, visit slocity.org/recycle or call the City of San Luis Obispo at (805) 781-7215.

6. Late Fees are imposed for residential customers over 30 days delinquent. The fee is 1.5% per month of the outstanding charge, with a minimum fee of $5.00. No prior notice is required, as this late fee policy is stated at the bottom of every bill.

7. Any additional recycling services are charged at a 75% discount of the garbage rate for the equivalent container size and frequency.

8. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees, which are separately noted on the billings.

9. It is encouraged to bag your trash in the garbage container, but do not bag your recyclables or organic materials in their respective carts. Keep items loose.

COMMERCIAL
Commercial customers must use trash carts from San Luis Garbage. The bundled commercial cart rate includes weekly pickup of one trash cart (black or gray lid), one organics cart (green lid), and one recycling cart (blue lid), including the same level of service at no additional charge. Additional recycling or organic cart pickups are available at a 75% discount off the trash cart rate for the specified service level.

COMMERCIAL CART SERVICE Pickups Per
Week
Monthly Rates
Effective
01/01/2024

PROPOSED

7.98%
RATE

ADJUSTMENT

MONTHLY
RATE

EFFECTIVE
3/19/2025
One 32 Gallon Trash Cart 1 $41.85 3.34 45.19
One 32 Gallon Trash Cart 2 $65.68 5.24 70.92
One 32 Gallon Trash Cart 3 $89.65 7.15 96.80
One 32 Gallon Trash Cart 4 $113.50 9.06 122.56

One 32 Gallon Trash Cart 5 $137.37 10.96 148.33
One 32 Gallon Trash Cart 6 $161.29 12.87 174.16
One 32 Gallon Trash Cart 7 $185.12 14.77 199.89
Two 32 Gallon Trash Carts 1 $53.78 4.29 58.07
Two 32 Gallon Trash Carts 2 $83.69 6.68 90.37
Two 32 Gallon Trash Carts 3 $113.54 9.06 122.60
Two 32 Gallon Trash Carts 4 $143.40 11.44 154.84
Two 32 Gallon Trash Carts 5 $173.34 13.83 187.17
Two 32 Gallon Trash Carts 6 $203.19 16.21 219.40
Two 32 Gallon Trash Carts 7 $233.05 18.60 251.65
Three 32 Gallon Trash Carts 1 $65.72 5.24 70.96
Three 32 Gallon Trash Carts 2 $101.66 8.11 109.77
Three 32 Gallon Trash Carts 3 $137.46 10.97 148.43
Three 32 Gallon Trash Carts 4 $173.41 13.84 187.25
Three 32 Gallon Trash Carts 5 $209.20 16.69 225.89
Three 32 Gallon Trash Carts 6 $245.06 19.56 264.62
Three 32 Gallon Trash Carts 7 $280.96 22.42 303.38
Four 32 Gallon Trash Carts 1 $77.70 6.20 83.90
Four 32 Gallon Trash Carts 2 $119.55 9.54 129.09
Four 32 Gallon Trash Carts 3 $161.34 12.87 174.21
Four 32 Gallon Trash Carts 4 $203.20 16.22 219.42
Four 32 Gallon Trash Carts 5 $245.03 19.55 264.58
Four 32 Gallon Trash Carts 6 $286.90 22.89 309.79
Four 32 Gallon Trash Carts 7 $328.66 26.23 354.89
Five 32 Gallon Trash Carts 1 $89.68 7.16 96.84
Five 32 Gallon Trash Carts 2 $137.44 10.97 148.41
Five 32 Gallon Trash Carts 3 $185.25 14.78 200.03
Five 32 Gallon Trash Carts 4 $233.03 18.60 251.63
Five 32 Gallon Trash Carts 5 $280.90 22.42 303.32
Five 32 Gallon Trash Carts 6 $328.63 26.22 354.85
Five 32 Gallon Trash Carts 7 $376.42 30.04 406.46
Six 32 Gallon Trash Carts 1 $101.66 8.11 109.77
Six 32 Gallon Trash Carts 2 $155.37 12.40 167.77
Six 32 Gallon Trash Carts 3 $209.11 16.69 225.80
Six 32 Gallon Trash Carts 4 $262.92 20.98 283.90
Six 32 Gallon Trash Carts 5 $316.63 25.27 341.90

Six 32 Gallon Trash Carts 6 $370.42 29.56 399.98
Six 32 Gallon Trash Carts 7 $424.17 33.85 458.02
One 64 Gallon Trash Cart 1 $53.78 4.29 58.07
One 64 Gallon Trash Cart 2 $83.69 6.68 90.37
One 64 Gallon Trash Cart 3 $113.54 9.06 122.60
One 64 Gallon Trash Cart 4 $143.40 11.44 154.84
One 64 Gallon Trash Cart 5 $173.34 13.83 187.17
One 64 Gallon Trash Cart 6 $203.19 16.21 219.40
One 64 Gallon Trash Cart 7 $233.05 18.60 251.65
One 96 Gallon Trash Cart 1 $74.59 5.95 80.54
One 96 Gallon Trash Cart 2 $119.42 9.53 128.95
One 96 Gallon Trash Cart 3 $164.24 13.11 177.35
One 96 Gallon Trash Cart 4 $209.03 16.68 225.71
One 96 Gallon Trash Cart 5 $253.92 20.26 274.18
One 96 Gallon Trash Cart 6 $298.67 23.83 322.50
One 96 Gallon Trash Cart 7 $343.52 27.41 370.93
Two 96 Gallon Trash Carts 1 $122.25 9.76 132.01
Two 96 Gallon Trash Carts 2 $187.91 15.00 202.91
Two 96 Gallon Trash Carts 3 $253.65 20.24 273.89
Two 96 Gallon Trash Carts 4 $319.33 25.48 344.81
Two 96 Gallon Trash Carts 5 $385.08 30.73 415.81
Two 96 Gallon Trash Carts 6 $450.73 35.97 486.70
Two 96 Gallon Trash Carts 7 $516.56 41.22 557.78
Three 96 Gallon Trash Carts 1 $169.91 13.56 183.47
Three 96 Gallon Trash Carts 2 $256.52 20.47 276.99
Three 96 Gallon Trash Carts 3 $343.17 27.38 370.55
Three 96 Gallon Trash Carts 4 $429.79 34.30 464.09
Three 96 Gallon Trash Carts 5 $516.45 41.21 557.66
Three 96 Gallon Trash Carts 6 $603.03 48.12 651.15
Three 96 Gallon Trash Carts 7 $689.68 55.04 744.72
Four 96 Gallon Trash Carts 1 $217.55 17.36 234.91
Four 96 Gallon Trash Carts 2 $325.10 25.94 351.04
Four 96 Gallon Trash Carts 3 $433.63 34.60 468.23
Four 96 Gallon Trash Carts 4 $540.18 43.11 583.29
Four 96 Gallon Trash Carts 5 $647.76 51.69 699.45
Four 96 Gallon Trash Carts 6 $755.24 60.27 815.51

Four 96 Gallon Trash Carts 7 $862.87 68.86 931.73
Five 96 Gallon Trash Carts 1 $265.21 21.16 286.37
Five 96 Gallon Trash Carts 2 $393.76 31.42 425.18
Five 96 Gallon Trash Carts 3 $522.15 41.67 563.82
Five 96 Gallon Trash Carts 4 $650.62 51.92 702.54
Five 96 Gallon Trash Carts 5 $779.06 62.17 841.23
Five 96 Gallon Trash Carts 6 $907.53 72.42 979.95
Five 96 Gallon Trash Carts 7 $1,073.98 85.70 1,159.68
Six 96 Gallon Trash Carts 1 $312.90 24.97 337.87
Six 96 Gallon Trash Carts 2 $462.28 36.89 499.17
Six 96 Gallon Trash Carts 3 $611.67 48.81 660.48
Seven 96 Gallon Trash Carts 1 $360.54 28.77 389.31
Eight 96 Gallon Trash Carts 1 $408.22 32.58 440.80
Eight 96 Gallon Trash Carts 7 $1,555.51 124.13 1,679.64 LATE MAKEUP COLLECTIONS WITH GARBAGE TRUCK (Phone call required) TRIP CHARGE, plus additional charge below for any
extra carts or equivalent volume (gallons). $23.95 1.91 $25.86 - Additional charge per 32 gallon cart. $12.83 1.02 $13.85

COMMERCIAL TRASH BIN SERVICE
(Cubic Yards)
Pickups Per
Week
Monthly Rates
Effective
01/01/2024

PROPOSED

7.98%
RATE

ADJUSTMENT

MONTHLY
RATE

EFFECTIVE
3/19/2025
1 Yard Trash Bin 1 $149.37 11.92 161.29
1 Yard Trash Bin 2 $209.11 16.69 225.80
1 Yard Trash Bin 3 $268.89 21.46 290.35
1 Yard Trash Bin 4 $328.63 26.22 354.85
1 Yard Trash Bin 5 $388.36 30.99 419.35
1 Yard Trash Bin 6 $448.14 35.76 483.90
1 Yard Trash Bin 7 $507.90 40.53 548.43

1.5 Yard Trash Bin 1 $167.31 13.35 180.66

1.5 Yard Trash Bin 2 $244.95 19.55 264.50

1.5 Yard Trash Bin 3 $322.61 25.74 348.35

1.5 Yard Trash Bin 4 $400.31 31.94 432.25

1.5 Yard Trash Bin 5 $477.96 38.14 516.10

1.5 Yard Trash Bin 6 $555.67 44.34 600.01

1.5 Yard Trash Bin 7 $633.35 50.54 683.89
2 Yard Trash Bin 1 $185.21 14.78 199.99
2 Yard Trash Bin 2 $277.83 22.17 300.00
2 Yard Trash Bin 3 $370.51 29.57 400.08
2 Yard Trash Bin 4 $463.09 36.95 500.04
2 Yard Trash Bin 5 $555.72 44.35 600.07
2 Yard Trash Bin 6 $648.34 51.74 700.08
2 Yard Trash Bin 7 $740.94 59.13 800.07
3 Yard Trash Bin 1 $221.08 17.64 238.72
3 Yard Trash Bin 2 $349.50 27.89 377.39
3 Yard Trash Bin 3 $477.96 38.14 516.10
3 Yard Trash Bin 4 $606.45 48.39 654.84
3 Yard Trash Bin 5 $734.88 58.64 793.52
3 Yard Trash Bin 6 $863.37 68.90 932.27
3 Yard Trash Bin 7 $991.87 79.15 1,071.02
4 Yard Trash Bin 1 $256.87 20.50 277.37
4 Yard Trash Bin 2 $424.21 33.85 458.06
4 Yard Trash Bin 3 $591.47 47.20 638.67
4 Yard Trash Bin 4 $758.81 60.55 819.36
4 Yard Trash Bin 5 $926.08 73.90 999.98
4 Yard Trash Bin 6 $1,093.37 87.25 1,180.62
4 Yard Trash Bin 7 $1,260.72 100.61 1,361.33
6 Yard Trash Bin 1 $328.57 26.22 354.79
6 Yard Trash Bin 2 $564.60 45.06 609.66
6 Yard Trash Bin 3 $800.67 63.89 864.56
6 Yard Trash Bin 4 $1,036.72 82.73 1,119.45
6 Yard Trash Bin 5 $1,272.76 101.57 1,374.33
6 Yard Trash Bin 6 $1,508.79 120.40 1,629.19
6 Yard Trash Bin 7 $1,744.87 139.24 1,884.11
8 Yard Trash Bin 1 $400.27 31.94 432.21
8 Yard Trash Bin 2 $704.97 56.26 761.23
8 Yard Trash Bin 3 $1,009.74 80.58 1,090.32
8 Yard Trash Bin 4 $1,314.53 104.90 1,419.43
8 Yard Trash Bin 5 $1,619.29 129.22 1,748.51
8 Yard Trash Bin 6 $1,923.98 153.53 2,077.51

8 Yard Trash Bin 7 $3,273.69 261.24 3,534.93
Sunday Trash Service* $104.59 8.35 112.94

COMMERCIAL RECYCLING BIN

SERVICE
(Cubic Yards)
Pickups Per
Week
Monthly Rates
Effective
01/01/2024

PROPOSED

7.98%
RATE

ADJUSTMENT

MONTHLY
RATE

EFFECTIVE
3/19/2025
1 Yard Recycle Bin 1 $0.00 40.32 40.32
1 Yard Recycle Bin 2 $0.00 56.45 56.45
1 Yard Recycle Bin 3 $67.23 5.36 72.59
1 Yard Recycle Bin 4 $82.44 6.58 89.02
1 Yard Recycle Bin 5 $97.06 7.75 104.81
1 Yard Recycle Bin 6 $112.07 8.94 121.01
1 Yard Recycle Bin 7 $126.95 10.13 137.08

1.5 Yard Recycle Bin 1 $0.00 45.17 45.17

1.5 Yard Recycle Bin 2 $0.00 66.13 66.13

1.5 Yard Recycle Bin 3 $80.66 6.44 87.10

1.5 Yard Recycle Bin 4 $100.05 7.98 108.03

1.5 Yard Recycle Bin 5 $119.47 9.53 129.00

1.5 Yard Recycle Bin 6 $138.89 11.08 149.97

1.5 Yard Recycle Bin 7 $158.34 12.64 170.98
2 Yard Recycle Bin 1 $0.00 50.00 50.00
2 Yard Recycle Bin 2 $0.00 75.00 75.00
2 Yard Recycle Bin 3 $92.62 7.39 100.01
2 Yard Recycle Bin 4 $115.77 9.24 125.01
2 Yard Recycle Bin 5 $138.90 11.08 149.98
2 Yard Recycle Bin 6 $162.11 12.94 175.05
2 Yard Recycle Bin 7 $185.24 14.78 200.02
3 Yard Recycle Bin 1 $0.00 59.68 59.68
3 Yard Recycle Bin 2 $0.00 94.35 94.35
3 Yard Recycle Bin 3 $119.47 9.53 129.00
3 Yard Recycle Bin 4 $151.66 12.10 163.76
3 Yard Recycle Bin 5 $183.73 14.66 198.39
3 Yard Recycle Bin 6 $215.86 17.23 233.09
3 Yard Recycle Bin 7 $315.16 25.15 340.31
4 Yard Recycle Bin 1 $0.00 69.34 69.34

4 Yard Recycle Bin 2 $0.00 114.52 114.52
4 Yard Recycle Bin 3 $147.92 11.80 159.72
4 Yard Recycle Bin 4 $189.70 15.14 204.84
4 Yard Recycle Bin 5 $231.55 18.48 250.03
4 Yard Recycle Bin 6 $273.40 21.82 295.22
4 Yard Recycle Bin 7 $315.16 25.15 340.31
6 Yard Recycle Bin 1 $0.00 88.70 88.70
6 Yard Recycle Bin 2 $0.00 152.42 152.42
6 Yard Recycle Bin 3 $200.20 15.98 216.18
6 Yard Recycle Bin 4 $259.20 20.68 279.88
6 Yard Recycle Bin 5 $318.23 25.39 343.62
6 Yard Recycle Bin 6 $377.18 30.10 407.28
6 Yard Recycle Bin 7 $436.22 34.81 471.03
8 Yard Recycle Bin 1 $0.00 108.05 108.05
8 Yard Recycle Bin 2 $0.00 190.31 190.31
8 Yard Recycle Bin 3 $239.72 19.13 258.85
8 Yard Recycle Bin 4 $312.07 24.90 336.97
8 Yard Recycle Bin 5 $384.42 30.68 415.10
8 Yard Recycle Bin 6 $467.36 37.30 504.66
8 Yard Recycle Bin 7 $541.33 43.20 584.53
The rates shown include the monthly container rental fee and are the same for bins and garwoods, when volume is identical. (Garwoods are types of containers)

UNSCHEDULED EXTRA COLLECTIONS FOR COMMERCIAL AND MULTI-FAMILY CUSTOMERS 1 CUBIC YARD Per Lift $68.75 5.49 74.24

1.5 CUBIC YARD Per Lift $76.24 6.08 82.32
2 CUBIC YARDS Per Lift $89.66 7.15 96.81
3 CUBIC YARDS Per Lift $110.53 8.82 119.35
4 CUBIC YARDS Per Lift $131.44 10.49 141.93
Rates for all commercial customers for unscheduled extra collections of recycling or organics can be provided at a 75% discount from the trash service rates for the specified level of service required.

COMMERCIAL - OTHER CHARGES:

LOOSE CARDBOARD Per Yard $12.72 1.02 13.74
LOOSE YARDAGE (SOLID WASTE) Per Yard $50.78 4.05 54.83
RENTAL Per Month $59.81 4.77 64.58
TEMPORARY RENTAL CHARGE Per Day $2.00 0.16 2.16
TAX LIEN CERT. MAIL FEE Per Mailing $5.40 0.43 5.83
LOCK CHARGE-FRONT Per Month $112.18 8.95 121.13
LOCK CHARGE-REAR Per Month $96.74 7.72 104.46

STAND BY TIME Per Minute $1.67 0.13 1.80
CART OR BIN REPLACMENT Per Unit $34.07 2.72 36.79
COMPACTORS Per Ton $73.80 5.89 79.69
EXTRA COLLECTIONS WITH PICKUP OR FLATBED TRUCK (Phone call required) TRIP CHARGE, plus applicable amount below: $35.90 2.86 38.76 - Contamination fee per trash cart or equivalent
volume (per cubic yard above) $0.00 13.85 13.85
- Per trash cart or equivalent volume (over 6 cans) $12.83 1.02 13.85 - Per recycle cart or equivalent volume (over 6 cans) $5.94 0.47 6.41 - Per bulky/large item or white goods/large appliance $26.38 2.11 28.49 - Per piece of small size furniture/appliance $26.38 2.11 28.49 - Per mattress with boxspring. $26.38 2.11 28.49
Commercial Maintenance Fee - per trip $35.90 2.86 38.76

ADDITIONAL INFORMATION - COMMERCIAL CUSTOMERS

1. Polystyrene (Styrofoam, Plastic #6) is no longer collected for recycling and should be thrown away as trash.

2. Organics is recycled in a special green waste wheeler and is picked up once a week at no additional charge.

3. All commercial customers are eligible for one standard recycling cart and one organics cart at no additional charge. Commercial customers can choose from a 32, a 64, or a 96 gallon blue cart for commingled recycling.

4. Recycling and organics containers should be placed near/next to the garbage container for collection.

5. White office paper can be commingled with the other recyclables in the blue container.

6. Shredded paper can be placed in a knotted, clear bag and put in the recycling container (no other plastic bags are permitted).

7. Customers requesting Temporary Bins or Rolloff boxes service can call the office for current rates.

8. The fee schedule above only includes the Garbage Company rates and does not include IWMA fees, which are separately noted on the billings.

9. It is encouraged to bag your trash in the garbage container, but do not bag your recyclables or organic materials in their respective containers. Keep items loose.

10. Late Fees are imposed for commercial customers over 30 days delinquent. The fee is 1.5% per month of the outstanding charge, with a minimum fee of $5.00. No prior notice is required, as this late fee policy is stated at the bottom of every bill.

City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: January 16, 2025
TO: Mayor and Council
FROM: Timmi Tway, Community Development Director
Prepared by: Ivana Gomez, Cannabis Business Coordinator VIA: Whitney McDonald, City Manager
SUBJECT: ITEM 6C - REVIEW OF AN APPEAL OF THE PLANNING COMMISSION'S

DECISION TO APPROVE A CONDITIONAL USE PERMIT TO ESTABLISH A CANNABIS RETAIL STOREFRONT, EMBARC SLO, AT 2400 BROAD STREET (USE-0266-2024, APPL-0608-2024)
This Staff Correspondence is to communicate that the applicant for the Conditional Use Permit to establish a cannabis retail storefront at 2400 Broad Street, which is the subject of the appeal hearing scheduled for January 21, submitted written correspondence on January 14, 2025, to request a continuance of the appeal hearing originally scheduled for January 21, 2025. The applicant has cited medical reasons for their inability to attend the hearing as scheduled. Initial notification of the scheduled hearing was provided to the applicant on October 7, 2024.

City staff has communicated this request to the appellant, who has acknowledged the applicant's situation and agreed to continue the appeal hearing to a future date.

Therefore, staff recommends that the City Council continue the item to a date uncertain.

Staff will work with all parties involved to determine a suitable date and will coordinate with the City Clerk's office to reschedule the hearing accordingly. Given the Council’s impacted schedule, the hearing is anticipated to be rescheduled in the summer of 2025.

Item 6c
Department: Community Development
Cost Center: 4001
For Agenda of: 1/21/2025
Placement: Public Hearing
Estimated Time: 60 minutes
FROM: Timmi Tway, Community Development Director
Prepared By: Ivana Gomez, Cannabis Business Coordinator SUBJECT: REVIEW OF AN APPEAL OF THE PLANNING COMMISSION'S

DECISION TO APPROVE A CONDITIONAL USE PERMIT TO ESTABLISH A CANNABIS RETAIL STOREFRONT, EMBARC SLO, AT 2400 BROAD STREET (USE-0266-2024, APPL-0608-2024).

RECOMMENDATION
At the request of the Applicant, and with agreement from the Appellant, continue this item to a date uncertain. The item will be re-noticed when a new hearing date is determined.

POLICY CONTEXT
Consistent with Chapter 1.20 and Chapter 17.126 of the City of San Luis Obispo Municipal Code (“SLOMC”), the appellant has submitted an appeal of the Planning Commission’s decision, which is subject to review by the City Council. The City Council may review all aspects of the decision, not just the issues raised in the appeal, and can approve or deny the appeal, or impose new conditions on the approval, if deemed necessary. However, any changes or conditions must be based on the adopted Municipal Code or other applicable laws.

REPORT-IN-BRIEF
The City of San Luis Obispo currently hosts two commercial cannabis operations, both retail storefronts. Per SLOMC § 17.86.080(E)(10)(b)(ii), retail storefronts are limited to three citywide. During the most recent application period (July 1, 2023 – August 15, 2023), the City received two applications for the remaining retail storefront permit slot. These applications were scored based on the City’s Cannabis Business Operator Permit Scoring Guidelines and the merit criteria adopted by the City Council.

On February 23, 2024, following a competitive application process to obtain a Commercial Cannabis Operator Permit (“Operator Permit”) to establish a cannabis retail storefront, Embarc SLO (“Applicant”) was granted a “contingent” Operator Permit, which is subject to successful background screening of all owners, principals, and property owners as well as the City Police Department’s approval of the applicant’s proposed Security Plan.

Embarc SLO was granted a final Operator Permit by the Director of Community Development on September 17, 2024, following successful background screening. *At the request of the Applicant, and with
agreement from the Appellant, this item is
being pulled from the agenda and continued
to a date uncertain and will be re-noticed
when a new hearing date is determined.

Item 6c
2 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

In addition, an applicant that is granted an Operator Permit must also apply for and receive a Conditional Use Permit (“CUP”) to establish a cannabis retail storefront. On May 15, 2024, Embarc SLO applied for a CUP (USE-0266-2024) to establish a cannabis retail storefront at 2400 Broad Street. As a cannabis retail storefront, Embarc SLO would sell cannabis goods to the public on site. The City Planning Commission held a public hearing on September 11, 2024, to review the applicant’s request for a CUP. Upon consideration of all evidence, including the application, staff’s evaluation and recommendation, and public testimony, the Planning Commission conditionally approved the project, subject to modified findings and conditions of approval.

On September 23, 2024, Jeffrey D. Pyle (“Appellant”) filed a timely appeal (APPL-0608- 2024) of the Planning Commission’s approval (Attachment B). The appellant identified several appeal issues, including the project’s consistency with the City’s adopted Zoning Regulations and potential impacts related to neighborhood compatibility, which are discussed in this report.

Pursuant to SLOMC § 9.10.070(D), the Operator Permit (though “final” upon successful background screening) remains inactive until the operator obtains a valid use permit pursuant to Chapter 17.86, all other applicable City permits and state licenses and begins continuously operating the commercial cannabis activity. If the City Council adopts the Draft Resolution denying the appeal and upholding the Planning Commission’s decision to approve the CUP, the applicant will be eligible to obtain a Type 10 storefront retailer license from the California Department of Cannabis Control (“DCC”).

The recommendation presented in this report is to adopt a Draft Resolution denying the appeal and upholding the Planning Commission’s decision to approve the CUP to establish a cannabis retail storefront at 2400 Broad Street (Attachment A).

DISCUSSION
Background
On May 15, 2018, the City Council adopted Ordinance No. 1647 (2018 Series), amending the Municipal Code to establish regulations for commercial cannabis activity, including adoption of Chapter 9.10 (Cannabis Regulations) and Section § 17.86.080 (Cannabis Zoning Regulations), formerly Chapter 17.99.

On September 18, 2018, the City Council adopted Ordinance No. 1653 (2018 Series), amending the City’s Zoning Regulations and Zoning Map to designate seven areas of the City as Cannabis Business Overlay Zones (“CBZ Overlay Zones”) where cannabis businesses may be located. Then, on May 16, 2023, the City Council adopted Ordinance No. 1727 (2023 Series), amending the Zoning Map to expand the CBZ Overlay to include recently annexed areas of the City, including the Fiero Lane-Clarion Court and East Airport Areas12.

1 City of San Luis Obispo Zoning Map
2 The term “CBZ Overlay” is also referred to as “CAN Overlay” in SLOMC § 17.86.080(E)(5)(b).

Both terms are interchangeable and refer to the same zoning designation.

Item 6c
3 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

CBZ Overlay Zones are indicated on the City’s Zoning Map and establish locations in the City where cannabis businesses may operate. Areas where CBZ Overlay Zones have been established include the following:
1) Mid-Higuera Overlay Area,
2) South Broad Overlay Area (see Figure 1),
3) Duncan McMillan Overlay Area,
4) Sacramento Industrial Overlay Area,
5) Higuera Commerce Park Overlay Area,
6) Margarita Overlay Area,
7) Airport Overlay Area,
8) East Airport Area, and
9) Fiero Lane – Clarion Court Overlay Area.

Figure 1: City of SLO Zoning Map and Legend – South Broad CBZ Overlay as Adopted by Ordinance No. 1727 (2023 Series).

Allowed uses are further controlled by zoning and required buffers within adopted overlay zones. Table 2-1 (Uses Allowed by Zone) within SLOMC Section § 17.10.020 shows the permit requirements per zoning district (see Figure 2). Retail storefronts are permitted in Retail Commercial (C-R) and Service Commercial (C-S) Zones located in CBZ Overlay Zones with approval of a CUP.

Item 6c
4 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Within CBZ Overlay Zones, cannabis retail storefronts must be located at least one thousand (1,000) feet from preschools, elementary schools, junior high schools, high schools, and public parks or playgrounds, six hundred (600) feet from licensed daycare centers, and three hundred (300) feet from residentially zoned areas (SLOMC §

17.86.080). Cannabis retail storefronts are also required to be located at least one thousand (1,000) feet from other cannabis retail storefronts. Youth centers do not require a buffer.

Figure 2: Table 2-1 (Uses Allowed by Zone)
Commercial Cannabis Operator Permit Qualification
In addition to land use compatibility and compliance with adopted Zoning Regulations, cannabis businesses are evaluated for consistency with the City’s Cannabis Regulations (SLOMC Chapter 9.10). Pursuant to Chapter 9.10, all commercial cannabis activity requires qualification through the Commercial Cannabis Operator Permit selection process, a Use Permit, and a state license for a specific location.

The City of San Luis Obispo currently hosts two commercial cannabis operations - Megan’s Organic Market (280 Higuera St) and SLOCAL Roots (3535 S Higuera St) - both of which are retail storefronts. Per SLOMC § 17.86.080(E)(10)(b)(ii), retail storefronts are limited to three citywide. During the most recent application period (July 1, 2023 - August 15, 2023), the City received two competitive applications for the remaining retail storefront permit slot. These applications were scored based on the City’s Cannabis Business Operator Permit Scoring Guidelines and the merit criteria adopted by the City Council3.

3 Cannabis Business Operator Permit Scoring Guidelines

Item 6c
5 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

On February 23, 2024, following this evaluation process, the applicant was granted a contingent Operator Permit, subject to the successful background screening of all owners, principals, and property owners as well as the City Police Department’s approval of the proposed Security Plan. Embarc SLO was granted a final Operator Permit by the Director of Community Development on September 17, 2024, following successful background screening.

Previous Council or Advisory Body Action
On May 15, 2024, Embarc SLO applied for a CUP (USE-0266-2024) to establish a cannabis retail storefront at 2400 Broad Street, as provided by SLOMC §§ 17.10.020(A) and 17.86.080(E)(1)(a).

On September 11, 2024, the Planning Commission reviewed the applicant’s request for a CUP to establish a retail storefront4. After considering all evidence, including the application, staff’s evaluation and recommendation, and public testimony5, the Planning Commission conditionally approved the project, subject to modified findings and conditions of approval, including a requirement to provide a total of four vehicle parking spaces instead of the required two. On a vote of 6-0-1 (6 in favor, 0 opposed, 1 absent), the Planning Commission found the CUP application consistent with the General Plan and Zoning Regulations6. Pursuant to SLOMC § 9.10.070(D), an Operator Permit (though “final” upon successful background screening) remains inactive until the operator obtains a valid use permit pursuant to Chapter 17.86, all other applicable City permits, and state licenses and begins continuously operating the commercial cannabis activity. If the City Council adopts the Draft Resolution denying the appeal and upholding the Planning Commission’s decision to approve the CUP, the applicant is eligible to obtain a Type 10 storefront retailer license from the California Department of Cannabis Control (“DCC”).

Project Description
The project is located in a Retail Commercial Zone with Special Focus Overlay (C-R-SF), as well as within the South Broad CBZ Overlay Zone. The building is located on an approximately 8,000 square foot parcel on the intersection of Broad Street and Woodbridge Street.

As shown in the Project Plans (Attachment C), the applicant has proposed to convert an existing vacant retail building (formerly Hanger Clinic) into a cannabis retail storefront business with:
 2,480 total square feet of commercial building space;  1,028 square feet of retail space;
 397 square feet of secure storage space;
 331 square feet of employee break room space;
 113 square feet of office space;

4 09/11/2024 PC Staff Report
5 Agenda Correspondence for the September 11, 2024, Planning Commission Hearing. 6 PC Resolution No. PC-1090-2024

Item 6c
6 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.  A contact free screening lobby with polycarbonate windows and electronic access control;
 A covered and gated loading/unloading area with an electronic swinging gate;  A customer parking area with eight vehicle parking spaces (including an ADA space) and four bicycle parking spaces, and;
 Hours of operations from 7:00AM to 9:00PM Monday through Sunday; Deliveries of inventory from 9:00AM to 5:00PM Monday through Friday, by appointment only.

Figure 3: Embarc SLO Front Elevation as Proposed in Application (Broad Street).

Public Engagement
Planning Commission Hearing
Prior to the Planning Commission hearing held on September 27, 2024, to review the applicant’s (Embarc SLO) application for a CUP to establish a retail storefront at 2400 Broad, the project was noticed in compliance with the City’s notification requirements for public hearings. Newspaper legal advertisements were posted in The Tribune at least ten (10) days prior to the hearing. Additionally, postcards were sent to both owners and occupants of properties within 300 feet of the project site at least ten (10) days prior to the hearing.

City Council Hearing
Prior to the City Council hearing scheduled for January 21, 2025, to review an appeal of the Planning Commission’s decision on September 11, 2024, to approve a CUP to establish a retail storefront at 2400 Broad, the project was noticed in compliance with the City’s notification requirements for public hearings. Newspaper legal advertisements were

Item 6c
7 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined. posted in The Tribune at least ten (10) days prior to the hearing and postcards were sent to both owners and occupants of properties within 300 feet of the project site at least ten (10) days prior to the hearing.

APPEAL
On September 23, 2024, Jeffrey D. Pyle filed a timely appeal (APPL-0608-2024) of the Planning Commission’s decision to approve the project, stating concerns regarding the project’s consistency with Zoning Regulations and potential impacts related to neighborhood compatibility. The Appeal Form and Statement (Attachment B) present several issues, which are summarized and discussed below.

Appeal Issue No. 1
“The cannabis dispensary will be located less than 150 feet from residential homes which can be expected to house small children, thus potentially limiting children’s safe use of their own front yard to play. The property corner of the closest historic residence is a mere 65 feet from the proposed dispensary.”
Staff Response
The City’s Zoning Regulations require commercial cannabis facilities to be located in areas demarcated with CBZ Overlay Zoning and as allowed in the underlying zone for each commercial cannabis activity (SLOMC § 17.86.080(E)(5)(b), SLOMC § 17.10.020 Table 2-1). Additionally, within CBZ Overlay Zones, cannabis retail storefronts are required to be at least 300 feet away from residentially zoned areas. The project site is located in the South Broad CBZ Overlay in the Retail Commercial Zone with Special Focus Overlay (C-R-SF).

1. Residentially Zoned Areas Within the CBZ Overlay Zone.

As described in the “Background” section, the purpose of Ordinance No. 1653 (2018 Series) and Ordinance No. 1727 (2023 Series) is to establish locations in the City where cannabis businesses may be allowed. As adopted, the Zoning Map and regulations do not require a buffer from all residential uses. Rather, cannabis retail storefronts require a buffer of 300 feet from residentially zoned properties within the CBZ Overlay Zones. The nearest residentially zoned property within the South Broad CBZ Overlay Zone is the Medium-High Density Residential (R-3) Zone which begins at the cul-de-sac of Francis Avenue and extends to Orcutt Road. The nearest point of the property line of this R-3 zoned area is located at least 700 feet from the nearest point of the property line of the project, consistent with the City Zoning Map (see Figure 4).

Item 6c
8 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Figure 4: Zoning Map Image Showing Distance from Project Site (highlighted) to Nearest Residentially Zoned Area (R-3-S-PD) within the South Broad CBZ Overlay Zone.

Staff recognize and acknowledge that SLOMC § 17.86.080(E)(4)(e) as currently written does not explicitly specify that the buffer from residentially zoned areas is specific to residentially zoned areas that are within the CBZ Overlay Zones. However, the 05/01/2018 Council Agenda Report to establish the City’s Cannabis Regulations, including the adoption of specific buffer requirements, clearly states that the legislative intent of the residential zone buffer was to apply the buffer within a CBZ Overlay Zone only. Page 4 of the report states, “Where buffers extend into an overlay zone area, there is typically another barrier such as a major roadway, the railroad tracks, topographical changes, or other features that provide the same effect as a buffer. As a result, buffers are only intended to be evaluated as part of a land use application when there is an activity within an overlay zone that requires a buffer.” This is further stated in the 09/04/2018

Item 6c
9 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Council Agenda Report to establish the CBZ Overlay Zones. Page 3 of the report states, “While there is no buffer from residential uses in state law, the City has established a 300- foot buffer between residentially zoned land and retail stores. However, this buffer only applies from residential zoning that occurs within that same overlay zone. There are two locations where this occurs, one is in the Broad Street Corridor CBZ, and the other is in the Airport Area CBZ.”
While state law does not require buffers from residential zones, the City has established a 300-foot buffer from residentially zoned properties, if any, that are within the applicable CBZ Overlay Zone to promote compatibility with surrounding uses. The Council Agenda Reports from May 1, 2018, and September 4, 2018, clarify that this approach accounts for local conditions, including barriers such as major roadways and railroads. Applying the residential buffer outside the CBZ Overlay Zones would be inconsistent with the legislative intent outlined in these reports, the established zoning framework, and historical application thereof.

2. Residential Uses Within the CBZ Overlay Zone.

It is important to note the distinction between a property that is zoned for residential use and one that is used for residential purposes. While residential zoning is regulated by the City’s Zoning Map, residential use pertains to how a property is utilized, regardless of its zoning designation. The City’s zoning regulations require a buffer only from residentially zoned area within the CBZ Overlay Zones, not from properties with a residential use.

This approach ensures that zoning regulations focus on maintaining compatibility within areas specifically designated for residential living, while allowing flexibility for mixed-use or commercially zoned properties.

There are properties within the South Broad CBZ Overlay Zone with residential uses located approximately 65 feet from the project site as stated in the appeal (see Figure 5).

These residential uses are associated with properties zoned for commercial or other nonresidential purposes, as defined by the City’s Zoning Map. Specifically, the nearby residential uses are zoned Service Commercial (C-S) and Retail Commercial (C-R). The zoning code does not establish buffer requirements from residential uses, regardless of whether they are within or outside of the CBZ because the intent of the buffer requirement is to protect residentially zoned neighborhoods from potential land use conflicts.

Item 6c
10 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Figure 5: Zoning Map Image Showing Distance from Project Site to Nearest Residential Use (Zoned Service Commercial with Special Focus Overlay (C-S-SF)) within the South Broad CBZ Overlay Zone.

3. Residentially Zoned Areas Outside of the CBZ Overlay Zone The nearest residentially zoned property outside of the South Broad CBZ Overlay Zone is located roughly 100 feet away at 2413 Broad Street in the Medium-Density Residential (R-2) Zone and situated across Broad Street from the proposed project site (see Figure 6). This property is separated from the project by Broad Street, a major arterial roadway, which provides a significant physical and visual buffer. Again, the Zoning Map and regulations do not establish a buffer requirement for properties in residential zones outside of the CBZ Overlay Zone, as the intent of the zoning regulations is to ensure compatibility within designated cannabis zones. The separation provided by Broad Street further mitigates any potential concerns, as it minimizes the interaction between the proposed cannabis retail use and the residentially zoned property.

Item 6c
11 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Figure 6: Zoning Map Image Showing Distance from Project Site (highlighted) to Nearest Residentially Zoned Area (R-2) Outside of the South Broad CBZ Overlay Zone.

4. Historic Properties
Additionally, the City does not establish a buffer requirement from commercial cannabis activity to historic properties. The Planning Commission evaluated the project on September 11, 2024, and found it to be consistent with the purpose, intent, and provisions of the City’s Zoning Regulations, including the CBZ Overlay Zones adopted by Ordinance 1727.

Appeal Issue No. 2
“Businesses that necessitate armed security guards are not compatible neighbors to residential homes.”

Item 6c
12 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Staff Response
As discussed in the Planning Commission hearing, the applicant has proposed a Security Plan that meets the City Police Department’s requirements for commercial cannabis activity. SLOMC § 9.10.250(B) states that all commercial cannabis activity must have a Security Plan approved by the Chief of Police, or designee, prior to issuance of a Commercial Cannabis Operator Permit. Additionally, SLOMC § 17.86.080(E)(4)(b)(i) requires applicants for a Use Permit to conduct commercial cannabis activity to submit a Security Plan to the approval of the Chief of Police, including but not limited to on-site security measures both physical and operational. The Security Plan was reviewed and approved by the City Police Department during the evaluation of the Operator Permit application, as well as during the evaluation of the Conditional Use Permit application.

The plan includes on-site security guards, controlled access to the retail area, a secured delivery bay, and real-time accessible video cameras for the City Police Department.

Appeal Issue No. 3
“Children and families regularly use the Bike Boulevard and new pedestrian signal at Broad & Woodbridge to access Meadow Park, churches, schools, grocery stores and other amenities. The Bike Boulevard and pedestrian signal is valuable infrastructure that makes the Woodbridge neighborhood an attractive place to live and raise a family.” Staff Response
There is no buffer requirement for cannabis retail storefronts from City-designated Bike Boulevards, common bike paths, or from pedestrian signals such as the HAWK signal at the corner of Woodbridge Street and Broad Street. The appellant stated in their appeal that it is reasonable to expect an increase in residents using the pedestrian signal with the development of new townhomes in the South Broad Street area. The HAWK signal at the corner of Broad Street and Woodbridge Street is intended to allow pedestrians and bicyclists cross Broad Street more safely. The establishment of a cannabis retail storefront would necessitate tenant improvements only and would not interfere with the intended use of the HAWK signal at any point. The HAWK signal would provide residents access to the project site and continue to be a resource for residents to safely access other facilities in the City.

Appeal Issue No. 4
“Although some surrounding properties are zoned commercial, it does not change the reality that an increasing number of families will be living within 300 feet from this cannabis dispensary for decades to come.”
Staff Response
As stated in staff’s response to Appeal Issue No. 1, the City does not require a buffer from residential homes. Rather, cannabis retail storefronts require a buffer of 300 feet from residentially zoned areas within the CBZ Overlay Zones. The nearest residentially zoned area within the South Broad CBZ Overlay Zone is the Medium-High Density Residential (R-3) Zone which extends from Francis Ave to Orcutt Road and is located at least 700 feet from the property line of the project. Additionally, the City does not require a cannabis retail storefront to be located at a particular distance from commercially zoned areas including Retail Commercial (C-R) Zones, Service Commercial (C-S) Zones, and

Item 6c
13 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Neighborhood Commercial (C-N) Zones. Table 2-1 (Uses Allowed by Zone) of the City Zoning Regulations establishes the permit requirements by zoning district. Specifically, cannabis retail storefronts are permitted in the C-R and C-S Zones with approval of a CUP.

Appeal Issue No. 5
“Approving a cannabis dispensary at this location will permanently change the character of this historic neighborhood.”
Staff Response
There are three historic properties on Woodbridge Street that the City recognizes as residences that contribute to the historical character of the City7. As mentioned in staff’s response to Appeal Issue No. 1, the City’s adopted Zoning Regulations and Zoning Map do not establish a buffer requirement for cannabis retail storefronts from historic properties or districts. The appellant has stated in their appeal that approval of the project would potentially render these historic properties no longer desirable for residential purposes and alter the historic character, however, the appellant has provided no evidence or factual basis to support the claim that the establishment of a cannabis retail storefront would render the surrounding properties undesirable for residential use or impact the historic significance of these three historic properties. Additionally, the building proposed for the project is not a historic property, so the establishment of the business and related tenant improvements will not directly affect the character of any historic structure.

Appeal Issue No. 6
“The stated purpose of the SLO Municipal Code is to “minimize the potential impacts on people.”
The appellant included reference to SLOMC Section § 17.86.080(A) which states, “The purpose of this section is to protect the public health, safety, and welfare, enact strong and effective regulatory and enforcement controls in compliance with state of California law, protect neighborhood character, and minimize potential for negative impacts on people, communities, and the environment within the city of San Luis Obispo by establishing land use requirements and development standards for cannabis activities.” Staff Response
SLOMC § 17.86.080 establishes land use requirements and development standards for cannabis activities to protect public health, safety, and welfare, comply with state law, preserve neighborhood character, and minimize negative impacts within the City of San Luis Obispo.

This section of the Zoning Regulations requires commercial cannabis operators to obtain both a Commercial Cannabis Operator Permit from the City pursuant to Chapter 9.10 (Cannabis Regulations) and a CUP from the City pursuant to this section to conduct commercial cannabis activity at a specific location. The applicant has obtained both a

7 City of San Luis Obispo Historic Properties Lists

Item 6c
14 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Commercial Cannabis Operator Permit and a CUP to establish a cannabis retail storefront in accordance with the City’s adopted regulations. Additionally, the project location is within a CBZ Overlay Zone designated for commercial cannabis activity and is within a Retail Commercial (C-R) Zone, which permits cannabis retail storefronts. Based on this evaluation, the project satisfies the land use and development standards for commercial cannabis activity set forth in the Zoning Regulations.

SLOMC § 17.86.080 also outlines the operational limitations on commercial cannabis activity, including hours of operation, development standards, and application requirements. The applicant submitted a Use Permit application that is consistent with the provisions of the City Municipal Code, as well as an Operations Plan as required by SLOMC § 17.86.080(E)(4)(b), that has satisfied the requirements of this section. The Planning Commission evaluated the project on September 11, 2024, and found it to be consistent with the purpose, intent, and provisions of the City’s Zoning Regulations, as conditioned.

Appeal Issue No. 7
“We believe it to be the duty of the City of San Luis Obispo to reject the proposed cannabis dispensary based on the above information, even if our below interpretation of the Municipal Code is mistaken. However, we believe that the following evidence will show that the proposed dispensary is in violation of City code, and we ask you to carefully consider the following points. Potential Code Violations: The SLO Municipal Code prohibits cannabis dispensaries from existing within 300 feet of properties zoned residential. By our measurements, the City’s own Municipal code would be broken by locating a cannabis dispensary at the proposed location.” The appellant included reference to SLOMC § 17.86.080(E)(4)(e) which states, “Applications for retail storefronts shall include a vicinity map showing at least one thousand feet of surrounding area and the distances to the following uses: any preschool, elementary school, junior high school, high school, public park or playground, six hundred feet from any licensed daycare center, and three hundred feet from a residentially zoned area. Youth centers do not require a buffer. Distance shall be measured from the nearest point of the property line of the site that contains the commercial cannabis activity to the nearest point of the property line of the enumerated use using a direct straight-line measurement.”
The appellant has also referred to “an unnamed, publicly accessible park located on Emily Street for “The Village at Broad Street” approximately 500 feet from the project site.

Staff Response

1. Residentially Zoned Areas.

The City’s Zoning Map establishes the CBZ Overlay Zones where commercial cannabis activity may be allowed and includes a “300’ Buffer Area of Residential Zones within the South Broad CBZ.” The only residentially zoned properties within the CBZ Overlay are the Medium-High Density Residential (R-3) zoned properties between Broad Street and the Southern Pacific Railroad extending from Francis Avenue to Orcutt Road. As

Item 6c
15 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined. described in Appeal Issues No. 1 and 4, these properties are located at least 700 feet from the project site.

2. Public Parks and Playgrounds
The City’s Zoning Regulations require cannabis retail storefronts to be located at least 1,000 feet from public parks and playgrounds within CBZ Overlay Zones. The City’s adopted General Plan establishes the City’s public parks and playgrounds which are further categorized as Community Parks, Mini Parks, and Neighborhood Parks.

Community Parks in the vicinity include Meadow Park (2333 Meadow St) and Sinsheimer Park (2755 Augusta St). Mini Parks include Stoneridge Park (535 Bluerock Dr), and Neighborhood Parks include Johnson Park (2875 Augusta). Additionally, under the definitions set forth in SLOMC Chapter 17.158 (General Definitions), which applies to general (non-land use) terms used in Title 17 (Zoning Regulations), Section 17.158.036 defines a 'public place' as land or buildings owned by the city or others that are accessible to the general public. The referenced play structure is intended to be used by residents of the Village at Broad housing and is not considered to be a public park or playground under the City’s General Plan and does not meet the definition of a public place per the Municipal Code. Public parks or playgrounds in the South Broad Area include Sinsheimer Park, Johnson Park, Meadow Park and Stoneridge Park, which are all located outside of the CBZ Overlay Zone as well as at least 1,000 feet away from the project site (see Figure 7).

Figure 7: Zoning Map Image Showing Nearby Public Parks Outside of the South Broad CBZ, at least a 1,000-foot Distance from Project Site.

Item 6c
16 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Pursuant to SLOMC § 17.86.080(E)(4)(e), the applicant submitted a vicinity map showing that the project site is adequate distance from schools, public parks and playgrounds, licensed daycare centers, and residentially zoned areas within the CBZ Overlay Zone. (Attachment D). The project was reviewed by the Planning Division during the Departmental Review process and was verified to be in compliance with adopted Zoning Regulations.

Appeal Issue No. 8
“Consider how the approval of this cannabis dispensary aligns with the City’s Mission and Planning Documents.”
The appellant included reference to Section § 1.5 of the South Broad Street Area Plan8 which states, “The South Broad Street Area Plan implements the goals of the General Plan and community for this part of the City. It creates a long-range vision for the planning area and establishes standards that implement the vision. The vision for the South Broad Street area, based on extensive citizen input, is a safe, attractive, economically vital, and enjoyable neighborhood with a mix of complementary land use.” The appellant included reference to the City of San Luis Obispo Housing Element 2020- 20289 Mission Statement which states, “Our mission is to identify and serve the needs of all people in a positive and courteous manner and to help ensure that San Luis Obispo remains a healthy, safe, attractive and enjoyable place to live, work or visit. We help plan the City's form and character, support community values, preserve the environment, promote the wise use of resources and protect public health and safety.” Lastly, the appellant included reference to the City of San Luis Obispo Mission Statement located on the City website10 which states, “Who are We? People Serving People: a team that puts high value on each citizen it serves.”
Staff Response
The proposed cannabis dispensary project aligns with the goals outlined in the South Broad Street Area Plan and the City’s Mission and Planning Documents by contributing to a safe, attractive, and economically viable neighborhood with complementary land use.

Although this is a change in use rather than a redevelopment, the project includes several design and operational improvements that support neighborhood safety.

The project proposes a controlled access area for product intake, an electronic swinging door to limit entry, and improvements to the building's exterior with fresh paint, updated trim, and new signage. Furthermore, the project supports economic vitality by establishing a regulated business that contributes to the local economy and provides services aligned with community demand.

8 South Broad Street Area Plan
9 City of San Luis Obispo Housing Element 2020-2028
10 City of San Luis Obispo Mission Statement

Item 6c
17 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

In addition, the City Council has previously considered relevant policies outlined in the City’s Planning Documents, and found the adopted regulations, including the CBZ Overlay Zones, to be consistent with the General Plan in 2018 at their time of adoption.

Summary
The appeal does not provide sufficient grounds to overturn the Planning Commission’s approval of the cannabis dispensary. The project complies with all relevant Zoning Regulations, including required buffers from residential zones, public parks, and schools, as verified through detailed review by City staff. Concerns about proximity to residential properties and potential neighborhood impacts are addressed through compliance with City-adopted buffers and security standards, including an approved Security Plan by the City Police Department. The project fulfills the standards of the Cannabis Business Zone (CBZ) Overlay, meeting City requirements for location, safety, and design as part of the South Broad Street Area Plan.

CONCURRENCE
The project has been reviewed by the Building Division, Engineering Division, Planning Division, Utilities Department, and Fire Department. As noted above, the Security Plan was reviewed and approved by the City Police Department. Any conditions of approval or informational notes from these departments and divisions have been included in the Planning Commission Resolution related to the project. The Planning Commission adopted PC Resolution No. PC-1090-2024 approving the Conditional Use Permit to establish the project.

ENVIRONMENTAL REVIEW
The project is categorically exempt from the preparation of environmental documentation under the California Environmental Quality Act (CEQA) pursuant to CEQA Guidelines Section § 15301 (Existing Facilities). The project is consistent with General Plan policies for the land use designation and is consistent with the applicable zoning designation and regulations. The project consists of the operation of existing, private structures that involves negligible expansion of use beyond existing and historical uses as an orthotic and prosthetic sales facility (Hanger Clinic), as described in CEQA Guidelines Section § 15301 (Existing Facilities). The project site is not on a list of hazardous waste sites and does not contain a significant historical resource. The property is less than one acre in size and is surrounded by urban uses that have no value as habitat for endangered, rare or threatened species as the site is located on an existing developed property and is almost entirely paved. The site is served by required utilities and public services.

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

Item 6c
18 *At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Fiscal Analysis:

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

Total $ $ $ $
The processing of the appeal does not have a fiscal impact on the City, as the appellant has paid the required fee. The City factors anticipated Cannabis Operator Permit fee revenue into its annual budget. If the Conditional Use Permit is approved, the establishment of Embarc SLO is expected to generate additional permit fee revenue, as well as increased tax revenue from its operations.

ALTERNATIVES

1. Continue consideration of the application to a future date. The City Council may continue its review of the project if additional time or information is needed to make a decision. If additional information is needed, direction should be provided to staff regarding what additional information is requested so that it can be presented at a subsequent hearing.

2. Deny the project. The City Council may uphold the appeal and adopt a resolution denying the project, based on findings of inconsistency with the California State Law, the City’s General Plan, Zoning Regulations, or other policy documents. Should Council elect to pursue this alternative, staff would need specific direction on the nature of findings to support the denial.

ATTACHMENTS
A - Draft Resolution denying the appeal and upholding the Planning Commission’s decision to approve the Conditional Use Permit to establish the third retail storefront (USE-0266-2024, APPL-0608-2024)
B - Appeal Form and Statement (APPL-0608-2024)
C - Project Plans (USE-0266-2024)
D - Vicinity Map (USE-0266-2024)

R ______
*At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

RESOLUTION NO. _____ (2025 SERIES)

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

OBISPO, CALIFORNIA, DENYING AN APPEAL AND UPHOLDING THE PLANNING COMMISSION’S DECISION TO APPROVE A CONDITIONAL

USE PERMIT TO ESTABLISH A CANNABIS RETAIL STOREFRONT AT 2400 BROAD STREET. THE PROJECT IS EXEMPT FROM
ENVIRONMENTAL REVIEW UNDER SECTION § 15301 (EXISTING

FACILITIES) OF THE CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) GUIDELINES AS REPRESENTED IN THE COUNCIL AGENDA
REPORT AND ATTACHMENTS DATED JANUARY 21, 2025 (USE-0266- 2024, APPL-0608-2024)
WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California on September 11, 2024, for the review of a Conditional Use Permit application to establish a cannabis retail storefront at 2400 Broad Street, pursuant to a proceeding instituted under USE-0266-2024; Embarc SLO, applicant; and WHEREAS, the Planning Commission of the City of San Luis Obispo granted a Conditional Use Permit (see Resolution No. PC-1090-24), after considering all evidence, including the testimony of interested parties and the evaluation and recommendations provided by staff, presented at said hearing; and
WHEREAS, Jeffrey D. Pyle filed a timely appeal of the Planning Commission’s decision to approve the Conditional Use Permit USE-0266-2024 on September 23, 2024 (APPL-0608-2024); and
WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, on January 21, 2025, for the purpose of considering the appeal of the Planning Commission’s decision to approve the Conditional Use Permit USE-0266-2024 (APPL-0608-2024), and has duly considered all evidence, including the record of the Planning Commission hearing; testimony of the applicant, appellant, and general public; and evaluation and recommendations by staff presented at said hearing; and
WHEREAS, notices of said public hearings were made at the time and in the manner required by law; and
NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of San Luis Obispo as follows:

R _______
*At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

SECTION 1. Findings. The City Council hereby denies the appeal and grants final approval for the project (USE-0266-2024, APPL-0608-2024), based on the following findings:

1. The project complies with the applicable provisions of the San Luis Obispo Municipal Code (SLOMC), specifically Chapter 9.10 (Cannabis Regulations) and Section § 17.86.080 (Zoning Regulations for Cannabis Activities).The applicant has been granted a Commercial Cannabis Operator Permit to conduct commercial cannabis activity, and upon approval of a Conditional Use Permit, will be eligible to obtain a Type 10 storefront retailer license from the California Department of Cannabis Control (DCC). The project, as proposed, meets all operational requirements set forth in Chapter 9.10, including reporting, inspection, and security measures, and the applicant is required to maintain ongoing compliance with these regulations. The proposed location is within a zone designated for cannabis retail storefront use, and the project complies with all applicable development standards including adherence to an Operations Plan, Security Plan, Waste Management Plan, and Odor, Noise and Light Management Plan.

2. The proposed use is consistent with the intent and requirements of the Cannabis Business Zone (CBZ) Overlay. This CBZ Overlay establishes specific land use controls to ensure cannabis businesses are appropriately sited and compatible with surrounding uses. The project complies with the Zoning Regulations, as cannabis retail storefronts are permitted within the Retail Commercial (C-R) Zone within the CBZ Overlay, subject to the approval of a Conditional Use Permit. The project also meets the required buffer distances from sensitive land uses within CBZ Overlay Zones, including schools, public parks, licensed childcare centers, and residentially zoned areas, thereby satisfying the location criteria established in the CBZ Overlay.

3. The project is consistent with buffer requirements from sensitive uses because it is more than 300 feet away from residentially zoned areas within the CBZ Overlay Zone, consistent with the legislative intent of the May 1, 2018, and September 4, 2018, Council Agenda Reports which clarify that buffers are intended to address sensitive uses within CBZ Overlay Zones, taking into account local barriers such as major roadways or railroads.

4. The proposed use is consistent with the General Retail (G-R) designation as described in the General Plan Land Use Element. The General Retail designation is intended to accommodate businesses providing goods and services to meet the needs of city residents and nearby county communities. A cannabis retail storefront operates similarly to other retail establishments, engaging in direct sales of goods to consumers, which aligns with the permitted uses in the General Retail zone.

5. The project is consistent with the goals of the Broad Street Area Special Focus Planning area because it will contribute to the visual improvement and economic revitalization of the surrounding area.

R _______
*At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

6. The site is adequate for the project in terms of size, configuration, topography, location, and other applicable features, and has appropriate access to public streets with adequate capacity to accommodate the quantity and type of traffic expected to be generated by the use.

7. The project will not be detrimental to the health, safety and welfare of persons living or working at the site or in the vicinity because the cannabis retail storefront does not present a potential threat to the surrounding property and buildings. This project is subject to the Use Permit requirements, City regulations, and California Building Code requirements designed to address health, safety, and welfare concerns.

8. The applicant prepared a Security Plan that addresses both state-wide regulations of the Department of Cannabis Control and concerns of the City Police Department.

9. The cannabis retail storefront, as proposed, will comply with all the requirements of the State and City for the dispensing of cannabis, including dual licensure and participation in an authorized track and trace program.

SECTION 2. Environmental Determination. The project is categorically exempt from the preparation of environmental documentation under the California Environmental Quality Act (CEQA). The project is consistent with General Plan policies for the land use designation and is consistent with the applicable zoning designation and regulations, as described in more detail in Section 1 above. The project consists of the operation of existing, private structures that involve negligible expansion of use beyond existing and historical uses, as described in CEQA Guidelines § 15301 (Existing Facilities).

Additionally, the project site is not on a list of hazardous waste sites and does not contain a significant historical resource. The property is less than one acre in size and is surrounded by urban uses that have no value as habitat for endangered, rare, or threatened species as the site is located on an existing developed property. The site is served by required utilities and public services.

SECTION 3. Action. The City Council hereby denies the appeal and grants final approval to the project (USE-0266-2024, APPL-0608-20247) with incorporation of the following conditions:

1. The proposed use shall operate consistent with the project description and other supporting documentation submitted with this application unless otherwise conditioned herein, including, but not limited to the Operations Plan; Chapter 9.10 of the Municipal Code; and Section § 17.86.080 of the Municipal Code. This Use Permit shall be reviewed by the Community Development Director if any reasonable written complaint is received from any citizen or from the Police Department or upon receipt of evidence that the use is not in compliance with conditions of approval or the Municipal Code. The Community Development Director may refer the complaint to the Planning Commission at his/her

R _______
*At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined. discretion and conditions of approval may be added, deleted, or modified or the Use Permit may be revoked to ensure on-going compatibility between uses on the project site and other nearby uses.

2. The applicant shall obtain and maintain a Commercial Cannabis Operator Permit from the City and any appropriate state licenses.

3. The applicant shall pay all applicable current and future state and local taxes and all applicable commercial cannabis fees and related penalties established by City Council, including but not limited to applications, administrative review, inspections, etc.

4. All owners, principals, property owners and employees must undergo background checks and be vetted in accordance with state law and local cannabis regulations. No employee with a disqualifying criminal record, as defined by state law, shall be employed at the cannabis retail storefront.

5. Minors under the age of 18 are prohibited from entering the cannabis retail storefront. Individuals aged 18 to 20 with a valid medical cannabis identification card, in compliance with California state law, may enter the premises, while all other persons under 21 without a valid medical ID are prohibited, even if accompanied by a parent or guardian.

6. Outdoor storage of cannabis or cannabis products is prohibited.

7. The operator shall implement and maintain a ventilation and filtration system to prevent odors from escaping the premises. Odors must not be detectable outside the building or in adjacent properties.

8. Any parking lot lighting installed on the site by the applicant shall be night sky compliant. The Community Development Director may modify this requirement upon a determination that such lighting would not be conductive to the safety of the public or would not meet the requirements of the California Building Code, while maintaining consistency with the intent of the City’s Lighting and Night Sky Ordinance.

9. All business operations, including deliveries and waste collection, shall adhere to the City’s noise control regulations. Noise levels must be minimized to avoid disturbance to nearby residential and commercial areas.

10. The operator shall ensure full compliance with the most recent editions of the ADA Standards for Accessible Design and the California Building Code (CBC), implementing all required accessibility and safety measures in the design and operation of the cannabis retail storefront.

R _______
*At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

11. The operator shall obtain a building permit from the City prior to commencing any physical work on the premises, ensuring that all construction activities are reviewed and approved in accordance with City regulations.

12. Prior to the issuance of a building permit, the applicant shall record a Community Benefits Agreement, reflecting the community and environmental commitments from the Commercial Cannabis Operator Permit application, which were evaluated in the scoring process, in a form approved by the City Attorney.

13. The operator shall provide a total of four bicycle parking spaces designated to the project location.

R _______
*At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

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

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

AYES:

NOES:

ABSENT:

The foregoing resolution was passed and adopted this ________ day of _________ 2025. __________________________
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

R _______
*At the request of the Applicant, and with agreement from the Appellant, this item is being pulled from the agenda and continued to a date uncertain and will be re-noticed when a new hearing date is determined.

Embarc San Luis Obispo
2400 Broad St, San Luis Obispo, CA 93401
Sensitive Use Map - Daycares
High Street Early Head Start Childcare
~3,200 feet
Lile Sprouts Infant & Toddler Center
~3,400 feet

Embarc San Luis Obispo
2400 Broad St, San Luis Obispo, CA 93401
Sensitive Use Map - Parks & Playgrounds
South Hills Open Space
~1,800 feet
Sinsheimer Park
~1,350 feet
Meadow Park
~1,150 feet

Embarc San Luis Obispo
2400 Broad St, San Luis Obispo, CA 93401
Sensitive Use Map - Residential
~635 feet

Embarc San Luis Obispo
2400 Broad St, San Luis Obispo, CA 93401
Sensitive Use Map - Schools
Hawthorne Elementary School
~1,700 feet
Sinsheimer Elementary School
~2,800 feet