San Luis Obispo City Council
November 4, 2025

City Council
AGENDA

Tuesday, November 4, 2025, 5:30 p.m.

Council Chambers, 990 Palm Street, San Luis Obispo
Council meetings may be viewed remotely on Channel 20, the City’s YouTube Channel, and on the City’s website under the Public Meeting Agendas web page. Attendees of City Council or Advisory Body meetings are eligible to receive one hour of complimentary parking; restrictions apply, visit Parking for Public Meetings for more details.

INSTRUCTIONS FOR PUBLIC COMMENT:

Public Comment prior to the meeting (must be received 3 hours in advance of the meeting):

Mail - Delivered by the U.S. Postal Service. Address letters to the City Clerk's Office at 990 Palm Street, San Luis Obispo, California, 93401.

Email - Submit Public Comments via email to [email protected]. In the body of your email, please include the date of the meeting and the item number (if applicable). Emails will not be read aloud during the meeting.

Voicemail - Call (805) 781-7164 and leave a voicemail. Please state and spell your name, the agenda item number you are calling about, and leave your comment. Verbal comments must be limited to 3 minutes. Voicemails will not be played during the meeting. *All correspondence will be archived and distributed to councilmembers, however, submissions received after the deadline may not be processed until the following day.

Public Comment during the meeting:

Meetings are held in-person. To provide public comment during the meeting, you must be present at the meeting location.

Electronic Visual Aid Presentation. To conform with the City's Network Access and Use Policy, Chapter 1.3.8 of the Council Policies & Procedures Manual, members of the public who desire to utilize electronic visual aids to supplement their oral presentation must provide display-ready material to the City Clerk by 12:00 p.m. on the day of the meeting. Contact the City Clerk's Office at [email protected] or (805) 781-7114.

Pages

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

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

3. PRESENTATIONS

3.a SAN LUIS OBISPO COUNCIL OF GOVERNMENT 2027 REGIONAL

TRANSPORTATION PLAN PRESENTATION
The Council will received a presentation from San Luis Obispo Council of Government representatives regarding the 2027 Regional Transportation Plan and opportunities for Public Participation.

3.b CITY MANAGER REPORT
Receive a brief report from City Manager Whitney McDonald.

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

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

Recommendation:

To approve Consent Calendar Items 5a to 5e.

5.a WAIVE READING IN FULL OF ALL RESOLUTIONS AND

ORDINANCES
Recommendation:

Waive reading of all resolutions and ordinances as appropriate.

5.b MINUTES REVIEW - OCTOBER 21, 2025 COUNCIL MINUTES 9 Recommendation:

Approve the minutes of the City Council meeting held on October 21, 2025.

5.c APPROVE THE SCHEDULE OF CITY COUNCIL MEETINGS FOR
2026
19 Recommendation:

Adopt the proposed 2026 Regular City Council Meeting Schedule with meetings normally held on the first and third Tuesday of every month, with the following exceptions:

Reschedule the Regular City Council meeting of January 6, 2026 to January 13, 2026; and

1. Cancel the Regular City Council meetings of August 4, 2026 and December 15, 2026; and

2. Reschedule the Regular City Council meeting of November 3, 2026 to November 10, 2026.

3. 5.d AUTHORIZE CITY MANAGER TO EXECUTE AVILA RANCH

SETTLEMENT AGREEMENT
23 Recommendation:

Authorize City Manager to execute the draft Avila Ranch Settlement Agreement, including all attachments and associated agreements contained therein, and disperse escrow funds to resolve a 2022 dispute and protest regarding development impact fees and other project implementation items.

5.e AUTHORIZATION TO ENTER A LEASE AGREEMENT WITH JP
MORGAN CHASE FOR THE PURCHASE OF A TYPE 1 FIRE ENGINE
65 Recommendation:

Authorize the City Manager or designee, Finance Director or designee and City Attorney or designee to execute all related documents on behalf of the City to execute a three-year agreement with JP Morgan Chase Bank, N.A. with an interest rate not to exceed 5.00%, and purchase agreement with Pierce Manufacturing to accomplish the lease purchase of a Type 1 Fire Engine; and

1. Authorize a Budget Amendment Request (BAR) for $63,680.17 from Fire Impact Fee Revenue Fund to the project account number 2000554; and

2. Adopt a draft resolution entitled “a Resolution of the City Council of the City of San Luis Obispo, California, approving the lease purchase finance agreement of a fire engine through JP Morgan Chase Bank, N.A. and approving the final form of financing documents and official actions.”

3. 6. PUBLIC HEARING AND BUSINESS ITEMS

6.a FISCAL YEAR 2024-25 YEAR END BUDGET REPORT 91
Recommendation:

Receive and file the FY 2024-25 Year End Budget Report.

6.b PRADO INTERCHANGE AND BRIDGE VALUE ENGINEERING 209
Recommendation:

Receive an update on the Prado Road Interchange Project Value Analysis phase; and,

1. Direct staff to implement the Prado Road Interchange Project Value Analysis project changes that will reduce construction costs by approximately $8,000,000; and

2. Direct staff to implement the Prado Road Interchange Project travel lane reduction cost components that will reduce
construction costs by approximately $12,000,000; and

3. Direct staff to implement a shared use path along the south side of Prado Road through the Prado Road Interchange
Project and to Higuera Street.

4. 7. LIAISON REPORTS AND COMMUNICATIONS
Not to exceed 15 minutes. Council Members report on subcommittee assignments, listed below, and other City activities. At this time, any Council Member or the City Manager may ask a question for clarification, make an announcement, or report briefly on their activities. In addition, subject to Council Policies and Procedures, they may provide a reference to staff or other resources for factual information, request staff to report back to the Council at a subsequent meeting concerning any matter or take action to direct staff to place a matter of business on a future agenda. (Gov. Code Sec. 54954.2) Mayor
Stewart
Vice Mayor
Shoresman
Council Member
Boswell
Council Member
Francis
Council
Member Marx
SLO Council of
Governments
Zone 9 Advisory
Committee
Airport Land Use Nacimiento Water
Project
Air Pollution
Control District
Regional
Economic Action
Coalition
Downtown
Association
Board
SLO Climate
Coalition
Community
Action
Partnership
Integrated
Waste
Management
Authority
CA Men’s
Colony Advisory
Committee
Homeless
Services
Oversight
Committee
Local Agency
Formation
Commission
County Water
Resources
Advisory
Committee
Performing Arts
Center
Commission
CP Campus
Planning
Committee
SLO Regional
Transit Authority
Visit SLO
County Advisory
Committee
Central Coast
Clean Energy

8. ADJOURNMENT
The next Regular Meeting of the City Council will be held on November 18, 2025 at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo.

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

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

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

1 Council Minutes
October 21, 2025, 5:30 p.m.

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

Present:

Council Member Mike Boswell, Council Member Emily Francis, Council Member Jan Marx, Vice Mayor Michelle Shoresman, Mayor Erica A. Stewart
City Staff Present: City Manager Whitney McDonald, Christine Dietrick, City Attorney, Teresa Purrington, City Clerk
_____________________________________________________________________

1. CLOSED SESSION (4:30 PM TO 5:30 PM)

1.a CONFERENCE WITH LEGAL COUNSEL—EXISTING LITIGATION
City Attorney Christine Dietrick indicated that the Council met in Closed Session regarding existing litigation regard Elks Lodge City Claim No. 24- 017 and no reportable action was taken.

1.b CONFERENCE WITH LEGAL COUNSEL—ANTICIPATED LITIGATION City Attorney Christine Dietrick indicated that the Council met in Closed Session regarding anticipated litigation with the facts unknown to the potential opponent, one potential case. There was no reportable action taken.

1.c CONFERENCE WITH LEGAL COUNSEL—EXISTING LITIGATION
City Attorney Christine Dietrick indicated that the Council met in Closed Session regarding existing litigation with City of San Luis Obispo v.

Righetti NC, LLC, a Limited Liability Company; Righetti Ranch, LP, a Limited Partnership and Righetti NC, LLC, a Delaware limited liability company v. City of San Luis Obispo, two cases. There was no reportable action taken.

1.d ADJOURNMENT
The Closed Session was adjourned at 5:40 PM.

2 2. CALL TO ORDER
A Regular Meeting of the San Luis Obispo City Council was called to order on October 21, 2025 at 5:46 p.m. in the Council Chambers, 990 Palm Street, San Luis Obispo, by Mayor Stewart, with Vice Mayor Shoresman participating remotely.

3. PLEDGE OF ALLEGIANCE
Council Member Boswell led the Council in the Pledge of Allegiance.

4. PRESENTATIONS

4.a INDIGENOUS PEOPLES' DAY
Mayor Stewart presented a Proclamation declaring October 13, 2025 as Indigenous Peoples' Day to Mona Olivas Tucker, Tribal Chair of yak titʸu titʸu yak tiłhini Northern Chumash Tribe of San Luis Obispo County and Region.

4.b ARBOR DAY
Mayor Stewart presented a Proclamation declaring November 1, 2025 as Arbor Day to Walter Gault, City Arborist.

4.c CITY MANAGER REPORT
City Manager Whitney McDonald provided a report on upcoming projects.

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

Shawn
--End of Public Comment--

6. CONSENT AGENDA
Council Member Marx requested that Item 6g be pulled from the Consent Agenda.

Public Comment:

Jack Lahey – Item 6d and 6e
--End of Public Comment--
Motion By Council Member Marx
Second By Council Member Francis
To approve Consent Calendar Items 6a - 6f and 6h - 6j.

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

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

6.b MINUTES REVIEW - OCTOBER 7, 2025 COUNCIL MINUTES
Approve the minutes of the City Council meeting held on October 7, 2025.

6.c CONSIDERATION OF THE 2026-27 HUMAN SERVICES GRANT

FUNDING PRIORITIES AND INFORMATION
Approve the Human Services Grant funding priorities and information for the 2026-27 funding year.

6.d CONSIDERATION OF 2026-27 COMMUNITY DEVELOPMENT BLOCK

GRANT FUNDING PRIORITIES
Approve the Community Development Block Grant (CDBG) ranked funding priorities for the 2026-27 funding year.

6.e AWARD CONTRACT TO CIO SOLUTIONS FOR NETWORK

INFRASTRUCTURE EQUIPMENT

1. Authorize the City Manager to award a contract to CIO Solutions for the purchase of Juniper Network Switches and Firewalls (Project #2000604-02, Firewall Replacement and #2000604-04, Network Switching Infrastructure Project); and

2. Waive formal bids and authorize the use of NASPO Agreement Number AR3232 as allowed under 03.24.060E of the City of San Luis Obispo Municipal Code.

6.f REQUEST TO ADD PROPERTY AT 1110 BUCHON STREET TO THE MASTER LIST OF HISTORIC RESOURCES (HIST-0504-2025).

Adopt Resolution No. 11601 (2025 Series) entitled “A Resolution By The City Council Of The City Of San Luis Obispo, California, Adding The Property Located At 1110 Buchon Street To The Master List Of Historic Resources As The Hans Nissen And Lena Peterson Hansen House”.

4 6.h AUTHORIZATION TO ACCEPT FEDERAL EMERGENCY MANAGEMENT

AGENCYFIRE PREVENTION AND SAFETY GRANT

1. Authorize the Fire Department to accept the award from Federal Emergency Management Agency (FEMA) Fire Prevention and
Safety (FP&S) Grant in the amount of $60,240.00; and

2. Authorize the City Manager, or their designee, to execute the grant documents and approve the budget changes necessary to
appropriate the grant amount upon acceptance of the grant award.

6.i APPROVAL OF THE FINAL MAP FOR TRACT 3136, BULLOCK RANCH, 3580 BULLOCK LANE (FMAP-0168-2022)
Adopt Resolution No. 11602 (2025 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving the final map for Tract 3136, Bullock Ranch, and authorizing the Mayor to execute a Subdivision Agreement in a form subject to the approval of the City Attorney (3580 Bullock Lane, FMAP-0168-2022).”

6.j AUTHORIZATION TO ADVERTISE REQUEST FOR PROPOSALS (RFP)

FOR A DEFERRED COMPENSATION PLAN CONSULTANT AND
FIDUCIARY INVESTMENT ADVISOR; AUTHORIZATION TO ADVERTISE

A SUBSEQUENT RFP TO CONSOLIDATE RECORDKEEPING

SERVICES

1. Adopt Resolution No. 11603 (2025 Series) entitled “A Resolution of the City Council of the City of San Luis Obispo, California, Designating the City Manager as Plan Administrator for Deferred Compensation Plans”

2. Authorize the Director of Human Resources to advertise a Request for Proposals (RFP) for a Deferred Compensation Consultant;

3. Authorize the Director of Human Resources to advertise a RFP for a Deferred Compensation Recordkeeper, via the selected
Consultant; and

4. Authorize the City Manager to execute professional services agreements with the selected consultant and selected
recordkeeper.

6.g AWARD A CONSTRUCTION CONTRACT FOR THE GRAND AVENUE

SIGN & STRIPING MODIFICATIONS, SPECIFICATION NUMBER
2000615-01

5 Dana Ebe, Transportation Planner and Madeline Kacsinta, CIP Administrative Manager provided an in-depth staff report and responded to Council questions.

Public Comments:

None
---End of Public Comment---
Motion By Council Member Marx
Second By Mayor Stewart

1. Authorize the City Manager to award a construction contract to Toste Construction, Inc. in the amount of $228,890.00 for the Grand Ave Sign and Striping Modifications project, Specification Number 2000615-01, using remaining funds in the 2024 Roadway Sealing project account (2000615); and

2. Approve the plans and specifications for the Grand Avenue Sign and Striping Modifications Project, Specification Number 2000615- 01; and

3. Authorize the City Engineer to approve Contract Change Orders not to exceed a total construction contract value of $275,000, using remaining funds in the 2024 Roadway Sealing project account (2000615).

Ayes (3): Council Member Boswell, Council Member Marx, and Mayor Stewart
Noes (2): Council Member Francis, and Vice Mayor Shoresman CARRIED (3 to 2)

7. PUBLIC HEARING AND BUSINESS ITEMS

7.a AUTHORIZATION TO HIRE A CALPERS RETIRED ANNUITANT FOR A

TEMPORARY PERIOD DUE TO AN APPROVED LEAVE OF ABSENCE
Community Development Director Tway provided an in-depth staff report and responded to Council questions.

Public Comments:

None
---End of Public Comment---

6 Motion By Council Member Francis
Second By Council Member Marx
Adopt Resolution No. 11604 (2025 Series) entitled, A Resolution of the City Council of the City of San Luis Obispo, California, Appointing Donald Wright To Provide Specialized Building Plan Review Services During The Temporary Absence Of A Plans Examiner Pursuant To Government Code Section 21221(G).”
Ayes (5): Council Member Boswell, Council Member Francis, Council Member Marx, Vice Mayor Shoresman, and Mayor Stewart
CARRIED (5 to 0)

7.b RECEIVE A REPORT BY THE PUBLIC WORKS DEPARTMENT

CONFIRMING THE COST, WORK COMPLETED, PARCEL

DESCRIPTION, AND ASSESSMENT FOR CITY-COMPLETED

SIDEWALK IMPROVEMENTS REQUIRED BY A FORMAL NOTICE TO

CORRECT ISSUED TO PROPERTY OWNERS
Aaron Floyd, Interim Public Works Director and Greg Cruce, Deputy Director of Public Works provided an in-depth staff report and responded to Council questions.

Public Comments:

None
---End of Public Comment---
Motion By Council Member Marx
Second By Council Member Francis

1. Adopt Resolution No. 11605 (2025 Series) entitled "A Resolution of the City Council of the City of San Luis Obispo, California, confirming the Report on the Cost of Repairs and Assessing the Cost of Repairs against the property at 878 Islay for the Replacement of Deteriorated Frontage Improvements that were completed by the City as required by Formal Notices to Correct, Pursuant to San Luis Obispo Municipal Code 12.12.020"; and

2. Authorize staff to file a special assessment lien with the County Recorder’s Office in the event a property owner fails to pay the assessment within five (5) days of Council’s confirmation with an interest rate of 5% and

7 3. Authorize staff to negotiate alternative methods of collection, including collection of the assessment in installment payments on the tax roll pursuant to Streets and Highways Code §5628.1, if requested by the property owner within five (5) days of notice of Council’s confirmation.

Ayes (4): Council Member Boswell, Council Member Francis, Council Member Marx, and Vice Mayor Shoresman
Noes (1): Mayor Stewart
CARRIED (4 to 1)

7.c ANNUAL PUBLIC HEARING FOR THE TOURISM BUSINESS

IMPROVEMENT DISTRICT
Motion By Council Member Marx
Second By Council Member Boswell

1. Conduct a public hearing to receive testimony regarding the City Council’s intention to continue the San Luis Obispo Tourism Business Improvement District and determine whether a legally sufficient protest is made; and

2. Adopt Resolution No. 11606 (2025 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, declaring the basis for and the levy of the assessment for the San Luis Obispo Tourism Business Improvement District and affirming the establishment of the District.”
Ayes (5): Council Member Boswell, Council Member Francis, Council Member Marx, Vice Mayor Shoresman, and Mayor Stewart
CARRIED (5 to 0)

7.d REVIEW OF AN APPEAL OF THE PLANNING COMMISSION’S

DECISION TO REVOKE A USE PERMIT FOR OPERATION OF A
FRATERNITY ORGANIZATION AT 1236 MONTE VISTA PLACE (USE0332-2025, APPL-0665-2025) (90 MINUTES) Council Member(s) Francis and Boswell and Mayor Stewart noted their Ex Parte Communications regarding the project. Council Member(s) Marx and Vice Mayor Shoresman reported having no Ex Parte
Communications.

Rachel Cohen, Principal Planner and Mallory Patino, Assistant Planner provided an in-depth staff report and responded to Council questions.

8 Public Comments:

Chris Green - Appellant
Jack Werle - Appellant
Garrett Hegger - Appellant
Jesse Grothaus
Chris Nielsen
---End of Public Comment---
Motion By Council Member Marx
Second By Mayor Stewart
Adopt Resolution No. 11607 (2025 Series) entitled, “Resolution of the City Council of the City of San Luis Obispo, California, denying an appeal and conditionally revoking the Use Permit for a fraternity located at 1236 Monte Vista Place. The project is exempt from environmental review under Section 15061(b)(3) (Common Sense Exemption) of the California Environmental Quality Act (CEQA) Guidelines as amended at the City Council meeting. (See attached legislative draft of the Resolution.) Ayes (4): Council Member Boswell, Council Member Marx, Vice Mayor Shoresman, and Mayor Stewart
Noes (1): Council Member Francis
CARRIED (4 to 1)

7.e REVIEW OF AN AMENDMENT TO TITLE 17 OF THE CITY’S MUNICIPAL CODE (ZONING REGULATIONS) SECTION 17.02.020 TO INCLUDE AN

APPLICABILITY SUBSECTION AND TO EXEMPT CERTAIN PUBLIC

SAFETY FEATURES IN CITY PROJECTS FROM THE ZONING
REGULATIONS (30 MINUTES)
Community Development Director Tway and Principle Planner Rachel Cohen provided an in-depth staff report and responded to Council questions.

Public Comments:

Mary Jane Jodry
William Jodry
---End of Public Comment---
Motion By Council Member Francis
Second By Vice Mayor Shoresman

9 Introduce Ordinance No. 1750 (2025 Series) entitled “An Ordinance of the City Council of the City of San Luis Obispo, California, amending Title 17 of the City’s Municipal Code (Zoning Regulations) Section 17.02.020, “Purpose and Authority of the Zoning Regulations” to include an “applicability” subsection and to exempt certain public safety features in City projects from the Zoning Regulations.”
Ayes (5): Council Member Boswell, Council Member Francis, Council Member Marx, Vice Mayor Shoresman, and Mayor Stewart
CARRIED (5 to 0)

8. LIAISON REPORTS AND COMMUNICATIONS
Mayor Stewart
 Attended the Cal Cities Annual Conference in Long Beach.

Vice Mayor Shoresman
 Attended the Cal Cities Annual Conference in Long Beach.

Council Member Boswell
 Attended the Cal Cities Annual Conference in Long Beach.

Council Member Francis
 Attended the Cal Cities Annual Conference in Long Beach.  Attended the Main Street Conference in San Luis Obispo Council Member Marx
 Attended the Cal Cities Annual Conference in Long Beach.

9. ADJOURNMENT
The meeting was adjourned at 11:05 p.m. Council will hold a Special Meeting on October 28, 2025 at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo. The next Regular City Council Meeting is scheduled for November 4, 2025 at 5:30 p.m. in the Council Chambers at City Hall, 990 Palm Street, San Luis Obispo.

APPROVED BY COUNCIL: XX/XX/202X

Item 5c
Department: Administration
Cost Center: 1021
For Agenda of: 11/4/2025
Placement: Consent
Estimated Time: N/A
FROM: Greg Hermann, Deputy City Manager
Prepared By: Teresa Purrington, City Clerk
SUBJECT: APPROVE THE SCHEDULE OF CITY COUNCIL MEETINGS FOR 2026

RECOMMENDATION
Adopt the proposed 2026 Regular City Council Meeting Schedule with meetings normally held on the first and third Tuesday of every month, with the following exceptions:

1. Reschedule the Regular City Council meeting of January 6, 2026 to January 13, 2026; and

2. Cancel the Regular City Council meetings of August 4, 2026 and December 15, 2026; and

3. Reschedule the Regular City Council meeting of November 3, 2026 to November 10, 2026

POLICY CONTEXT
The City Council’s regular meetings are scheduled for the first and third Tuesday of every month pursuant to Section 1.1.1.2.1 of the Council Policies and Procedures. The recommended action follows previously established practices for canceling and rescheduling meetings.

DISCUSSION
The proposed 2026 meeting schedule is provided for consideration in Attachment A.

Summer and Winter Council Meeting Schedule
Since 1994, it has been the practice of the City Council to cancel a regular meeting in the months of August and December. This practice allows the Council an opportunity to plan vacations, reduce meeting absences and maximize public participation. Historically, the first meeting in August has been canceled and, when the second meeting in December falls close to the holidays, the second meeting in December has been canceled.

The draft schedule proposes to cancel the first meeting in August and the second meeting in December. In addition, due to the first meeting in January falling so close to the New Year’s Day holiday, staff is proposing to reschedule the January 6th regular meeting to January 13th.

Item 5c
Election Day
The November 2026 Election is on November 3, 2026, which would also be the first Regular City Council Meeting for November. Therefore, in accordance with past practice, staff is recommending that the first regular meeting in November be rescheduled to Tuesday November 10, 2026.

Public Engagement
This is an administrative item, so no outside public engagement was completed. Public comment can be provided to the City Council through written correspondence prior to the meeting and through public testimony at the meeting.

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

FISCAL IMPACT
Budgeted: N/A Budget Year: N/A
Funding Identified: N/A
Fiscal Analysis:

Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $N/A $ $ $
State
Federal
Total $ $ $ $
There are no fiscal impacts associated with approving the Council meeting dates for 2026 as all expenditures related to the meetings are accounted for in the annual budget appropriation.

ALTERNATIVES

1. Council could choose not to reschedule the first meeting in January.

2. Council could choose not to cancel the first meeting in August and the second meeting in December and may choose to cancel or reschedule other meeting dates.

ATTACHMENT
A - Draft 2026 City Council Meeting Calendar

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Re-scheduled Regular
January February March
Regular Meetings
Recommend Cancellation
Holidays
September
2026
October November
City Council Meeting Schedule
December
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Item 5d
Department: Community Development
Cost Center: 4003
For Agenda of: 11/4/2025
Placement: Consent
Estimated Time: N/A
FROM: Timmi Tway, Community Development Director
Prepared By: Callie Taylor, Senior Planner
SUBJECT: AUTHORIZE CITY MANAGER TO EXECUTE AVILA RANCH

SETTLEMENT AGREEMENT

RECOMMENDATION
Authorize City Manager to execute the draft Avila Ranch Settlement Agreement (Attachment A), including all attachments and associated agreements contained therein, and disperse escrow funds to resolve a 2022 dispute and protest regarding development impact fees and other project implementation items.

REPORT-IN-BRIEF
In 2022, a dispute arose between the City and the Avila Ranch developer over the interpretation of several items included in the project’s Development Agreement. Avila Ranch submitted numerous letters to the City in which they protested the payment of certain impact fees under the Development Agreement. On March 17, 2023, City Council met in closed session regarding the anticipated litigation. It was determined that the dispute would be best resolved through a negotiated settlement overseen by a neutral third party in mediation. City Council authorized staff to proceed with execution of a tolling agreement of statutes of limitations and authorized staff to participate in mediation in an attempt to resolve the dispute.

Between August 2023 and September 2025, City staff, legal counsel, and the Avila Ranch developer participated in many meetings, including several with a mediator, to work towards practical solutions to resolve the contested issues. Through mediation, the City and the developer came to agreement regarding the fees in question. A fiscal reconciliation was completed to evaluate all development impact fees that were being charged to the Avila Ranch project. This detailed permit by permit analysis was done to ensure accuracy of the permit charges and ensure consistency with the approved Development Agreement.

A draft Settlement Agreement (Attachment A) has been prepared to resolve the 2022 dispute. The agreement includes a list of action items for both parties, as well as disbursement of the disputed funds which are being held in an escrow account. The Settlement Agreement is being presented to City Council for authorization to execute the

Item 5d
agreement, including all attachments and associated agreements contained therein, and close the dispute.

POLICY CONTEXT
A Settlement Agreement is a formal action to resolve a legal dispute, and therefore, City Council authorization is required to execute a Settlement Agreement. This report is being presented to City Council with a request for Council to authorize the City Manager to execute the draft Avila Ranch Settlement Agreement and disperse escrow funds to resolve the 2022 dispute and protest regarding development impact fees and other project implementation items. Action items identified in the Settlement Agreement, including recordation of additional agreements, deeds, and notifications, would be completed upon City Council authorization to execute the Settlement Agreement.

Background
On September 19, 2017, the City Council approved the Avila Ranch Development Plan, Vesting Tentative Tract Map (VTTM) 3089, and Final EIR by Resolution No. 10832 (2017 Series), and a Development Agreement (DA) between the City and Avila Ranch, LLC by Ordinance No. 1639 (2017 Series). Article 5 of the Development Agreement sets forth various financial commitments of the City and Avila Ranch, including the payment of certain development impact fees by Avila Ranch to defray the costs of the project’s impacts on City infrastructure. The agreement was amended in April 2019 to address an update to the Los Osos Valley Road (LOVR) Interchange Transportation Impact Add-On Fee to reflect the land uses within the Avila Ranch project.

Per the Development Agreement, the project developer is required to pay the project’s fair share of costs to mitigate project impacts as identified in the EIR, Avila Ranch Development Plan, conditions of approval, or as otherwise specified in the Development Agreement. The Development Agreement is a contract and can alter and take precedent over any vested fees or expirations that are normally tied to a vested tentative map. The Development Agreement was negotiated as a method to extend the life of the Avila Ranch tentative map to provide a 20-year project build out, provided that there is a “true up” of fees at the time each final map phase is recorded. This provides the developer with the time needed to build out the project while also providing the City with the funds needed to provide services and infrastructure at the time of phased project build out. The Development Agreement stipulates that impact fees for the project shall be those in effect when each phase of the final map is recorded. The City may adjust the development impact fees not more than once a year with changes no greater than the inflation index identified upon imposition of the fee.

In 2022, a dispute arose between the City and the Avila Ranch developer over the interpretation of the project’s fees identified in the Development Agreement, as well as several other items related to project implementation. Avila Ranch submitted numerous letters to the City in which they protested the payment of certain development impact fees.

Under San Luis Obispo Municipal Code Section 4.56.060, a party may protest the imposition of impact fees by paying them under protest and providing a statement of reasons for the

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protest. Avila Ranch paid those fees under protest at the time of building permit issuance, while demanding a refund of portions of the impact fees paid. The developer asserted that building permits were being overcharged by approximately $19,000 per permit.

The 2022 dispute between the Avila Ranch developer and the City involved a number of project implementation issues, including the following six (6) primary items:
1) Interpretation of the Development Agreement, with respect to development impact fees and vesting rights,
2) Entitling condominium units in Phase 4 of Avila Ranch, 3) Reimbursements pursuant to the Private Infrastructure Reimbursement Agreement,
4) City acceptance of Basin A as a public improvement,
5) Implementation of the Down Payment Assistance Program with respect to Workforce Housing units, and
6) Distribution and location of “for-rent” affordable housing units in Phase 3.

On March 17, 2023, the City Council met in closed session regarding the anticipated litigation. Thereafter, the parties executed a tolling and escrow agreement to allow the parties to continue working through this dispute without Avila Ranch commencing litigation against the City. Because there are short timelines for Avila Ranch to file suit pursuant to applicable Government Code sections, the tolling agreement suspended those deadlines to give the parties an opportunity to attempt a resolution of the dispute without litigation. The tolling agreement allowed Avila Ranch to continue to develop Phase 1 of the project by paying the development impact fees under protest.

The tolling agreement also required that the City would escrow the disputed fee amount pending final resolution of the dispute. As conditioned by the tolling agreement, the City deposited the sum of $1,136,000 to the escrow account, which was funded from the respective development impact fee accounts for which the disputed fees were deposited.

This amount represented the contested impact fees (approximately $19,000 per permit) for the first 60 building permits that had been previously issued in Phase 1. Throughout the build out of the remaining dwelling units in Phase 1 in 2023 and 2024, Avila Ranch continued to deposit $19,000 per dwelling unit (the protested impact fee amount) into the escrow account, pending resolution of the dispute. The escrow account currently retains a total sum of $2,846,000 of disputed fees.

DISCUSSION
On August 10, 2023, August 24, 2023, and November 16, 2023, City staff, the Avila Ranch developer, and legal counsel for each party engaged in voluntary mediation sessions with a mediator. Further discussions continued between the City, the developer, and legal counsel for each party through September 2025. A draft Settlement Agreement (Attachment 1) has been prepared to memorialize all items agreed upon through those discussions and to resolve all claims relating to the dispute.

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The resolutions for each item addressed in the Settlement Agreement are consistent with the Avila Ranch Development Agreement and applicable law. Development impact fees for the project, which are specified in the Development Agreement, are not modified by the Settlement Agreement. The Settlement Agreement memorializes the agreement between the City and the Avila Ranch developer to clarify and properly implement the Development Agreement as it was originally intended.

Resolution for the six (6) primary disputed items is reflected in the Settlement Agreement as follows:

Dispute Item #1: Interpretation of the Development Agreement, with respect to development impact fees and vesting rights
Central to the dispute between the City and Avila Ranch is the timing of the “imposition” of the impact fees. Avila Ranch paid all Phase 1 impact fees under protest at the time of building permit issuance, asserting the misapplication and/or miscalculation of certain impact fees to the project. While the parameters for fee imposition and escalation are identified in the Avila Ranch Development Agreement, it is a relatively complicated fee structure to track and implement, which led to some confusion and misapplication in the early stages of the project’s permit process.

Through mediation, a fee schedule for Phase 1 of Avila Ranch was developed to clearly define each fee described in the Development Agreement, as interpreted and agreed to by both parties. The fee schedule does not make any changes to the provisions of the Development Agreement, but ensures clarity in application. Impact fees for Police, Fire, Traffic (LOVR Base Fee, which is the Citywide Transportation Impact Fee for properties within the LOVR Sub Area, and LOVR Add On Fee), Water, and Wastewater are imposed on the project by the Development Agreement. Once the parties were in agreement to the applicable fees listed in the Phase 1 fee schedule, a thorough reconciliation analysis was prepared jointly by the City and the Avila Ranch developer to identify overpayment and underpayment of each building permit issued for Phase 1. Exhibit “1” of the Settlement Agreement is an “Impact Fee Summary” which summarizes this lot-by-lot fee reconciliation. The Impact Fee Summary details the required impact fee obligations, the impact fees paid by Avila Ranch, the credits issued by City, the reconciliation credits to be issued as part of this Settlement Agreement, and the final overpayment/underpayment amounts for Phase 1 permits. Tables 1 and 2 below summarize the results of the Impact Fee Summary.

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Table 1: Avila Ranch Developer Underpaid Impact Fees (Phase 1) Police $ 8,804.60
Table 2: Avila Ranch Developer Overpaid Impact Fees (Phase 1) Fire $ 93,887.06
Traffic LOVR Base Fee $ 803,454.21
Traffic LOVR Add On Fee $ 48,858.23
Water $ 171,888.01
Wastewater $ 159,633.77
The Avila Ranch developer is entitled to fee credits towards impact fees and/or reimbursements where they have installed certain infrastructure projects with citywide benefit or additional capacity. Several offsite transportation improvements have been constructed by the Avila Ranch developer and a parcel for a future fire station (to be constructed by Avila Ranch) has been dedicated to the City. In the early stages of issuance of the project permits, some of these impact fee credits to the developer were not yet available and, in some cases, available credit balances were not consistently applied to eligible building permits. The fee reconciliation developed through mediation accurately applies the project’s Fire and Traffic impact fee credits earned by the developer to eligible permits. The refund amounts that are owed to the Avila Ranch developer for Fire, Traffic LOVR Base Fee, and Traffic LOVR Add On Fee (identified on the tables above) are the result of the fee credits that are now available. This reconciliation is typical for Credit/ Reimbursement Agreements because actual construction costs are typically not known until the developer completes construction and provides the City with records of actual costs.

Per the Development Agreement, the City is permitted to escalate Avila Ranch impact fees, except the Water and Wastewater fees, once annually by the inflationary index in place at the time the final map for that phase records. The inflationary index in place at the time of the recordation of the Phase 1 Final Map is California Construction Cost Index (“CCCI”), as described in Section 4.56.040 of the City’s Municipal Code. With respect to Phase 1 only, the Development Agreement states that Water and Wastewater impact fees may be adjusted once annually by the Consumer Price Index (Los Angeles, All Urban Consumers, All Items) (“CPI”). The overpayment on the Water and Wastewater fees (identified on the tables above) is simply the difference between the fees escalated by CCCI percentage change and the fees escalated by CPI percentage change. Due to the incorrect escalation of Phase 1 Water and Wastewater fees by the City in the early stages of the project using CCCI rather than CPI, the City must refund the overpayment on Water and Wastewater fees in order to be compliant with terms of the Development Agreement.

The Settlement Agreement identifies disbursement of the escrow funds. The amount currently held in escrow is $2,846,000, which includes approximately $19,000 in impact fees which were paid under protest for each building permit in Phase 1. Concurrently with the execution of the Settlement Agreement, the parties will direct the escrow holder to

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immediately release a total sum of $1,577,083.32 to the City, and a total sum of $1,268,916.68 the Avila Ranch developer. Upon receipt of escrow funds, the City will deposit funds to the respective development impact fee accounts as identified by the reconciliation analysis.

It is worth noting that this disbursement of funds is not a negotiated amount, but rather, a precise accounting of the corrected fees and credits applied to the Phase 1 building permits at Avila Ranch, based on accurate implementation of the approved Development Agreement. The reconciliation of Avila Ranch fees and disbursement of escrow funds does not impact other City projects or programs. The disputed fees have been held in escrow and have not been applied to impact fee program fund balances that were otherwise appropriated or earmarked for other projects or programs.

The City and the developer are now in agreement on the basis for imposition and annual escalation of impact fees and credits for the remaining phases of the project. With respect to all future phases (i.e. Phases 2, 3, 4, and 5) of the project, each phase will vest consistent with impact fees in place at the time of recordation of the final map for that phase. Both parties acknowledge that Development Agreement Section 5.04.2(C) allowed for CPI increases on Water and Wastewater fees for Phase 1 only. All subsequent phases will be increased by the City’s current inflationary index, which is CCCI, as described in Section 4.56.040 of the Municipal Code. CCCI will be applied to all impact fees applicable to the project, including Water and Wastewater impact fees, for Phases 2 through 5 of Avila Ranch.

Dispute Item #2: Entitling condominium units in Phase 4 of Avila Ranch In 2022, the Avila Ranch developer asserted that the original project entitlements provided for the processing of a “condominium plan” with the Department of Real Estate without requiring additional subdivision of Phase 4 pursuant to the Subdivision Map Act. Through the mediation process, the developer acknowledged that the City’s Subdivision Ordinance requires approval of a subdivision map for condominium purposes in order to establish forsale condominiums in Phase 4.

The Settlement Agreement states that the Avila Ranch developer shall submit an application for a tentative map for the condominium subdivision of the six lots currently designated as Phase 4 of the project. This resolution is consistent with the City’s Subdivision Ordinance and the Subdivision Map Act. The developer’s entitlement application for a Phase 4 tentative map for condominium purposes was submitted in March 2025 and is currently being processed.

Dispute Item #3: Reimbursements pursuant to the Private Reimbursement Agreement On June 18, 2019, the City and Avila Ranch executed a Private Infrastructure Reimbursement Agreement to provide a mechanism by which Avila Ranch will be reimbursed for certain transportation improvements, constructed by Avila Ranch, which benefit properties in the City and County of San Luis Obispo, beyond that of the project’s

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proportionate share. Exhibit “A” to the Private Reimbursement Agreement identifies the properties which benefit from these transportation improvements and attributes a “proportionate share” of the actual costs of the improvements to each property. For benefitting properties within the City’s jurisdiction, the City will require payment of the prorated shares of the reimbursable costs as a condition of any discretionary entitlement or approval. For benefitting properties in the County’s jurisdiction, City will require benefitting properties to pay their prorated share of documented reimbursable costs as a condition of annexation.

As part of the 2022 dispute, the Avila Ranch developer cited concerns regarding payment of reimbursable costs as part of the East Airport Annexation. The East Airport Annexation was conditioned to pay the City a combined total of $1,000,000 as a Traffic Impact Fee Payment to fulfill the annexation property's participation in the City's citywide transportation impact fee program and/or other area transportation improvement reimbursement obligations as stipulated in the “Pre-Annexation Agreement” dated March 17, 2020. Payment of those funds was processed through Statewide Community Infrastructure Program (“SCIP”), which took several years to complete. The City is now in possession of the required $1,000,000 Traffic Impact Fee Payment provided as part of the East Airport Annexation.

The Avila Ranch Private Reimbursement Agreement estimates that properties within the East Airport Annexation area have a proportionate share of improvements installed by Avila Ranch in the amount of $478,491. As identified in the Settlement Agreement, $417,452 from the East Airport Traffic Impact Fee Payment will be reimbursed to Avila Ranch upon execution of the Settlement Agreement for improvements which are now complete and final cost documentation has been provided. In addition, $61,039 will be held by the City and reimbursed to Avila Ranch upon City approval of cost documentation for the South Higuera/Vachell intersection improvement which Avila Ranch is constructing.

The City will continue to track development applications for the benefiting properties and inform the owners of their obligation to provide reimbursement for the infrastructure work Avila Ranch has completed as allowed by applicable law. As part of the Settlement Agreement, the City agrees to record a Memorandum and Notice of Reimbursement Agreement against all benefitting properties, which is required by the terms of the original Reimbursement Agreement.

Dispute Item #4: Acceptance of Basin A as a public improvement Basin A is an approximately 2-acre bioretention basin located within Lot 30 of Phase 1 of Avila Ranch. Basin A is a deep basin (greater than 2-feet deep) providing flood control for Phases 1 through 5. Due to high ground water in the area, Basin A holds water year-round.

After construction of the basin, a dispute arose between the City and Avila Ranch over whether Basin A was constructed and is performing as designed and intended. Avila Ranch has asserted that Basin A was constructed as approved by the City and is performing as intended. The City has asserted that although Basin A may have been constructed as approved, it is not performing as expected in that it has standing water year-round. The City

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had concerns regarding the costs of long-term maintenance of this basin, and has therefore not accepted ownership of the improvement.

The City and the developer met with a panel of experts in 2023 and 2024 to provide background on the design, construction, and operation of Basin A. The panel of experts were gathered to answer extensive questions from the City to prove that the basin was constructed correctly and to look at potential options to determine how to proceed. The experts explained that groundwater can fluctuate over time, and it was determined that between the time of testing exploration in 2015 and construction of the basin in 2022, ground water in the area rose. Continued flow of groundwater into Basin A is coming from the storm drain lines and their adjacent sand backfill. It does not appear that groundwater is coming from the bottom of the basin. The project’s Final EIR and all relevant regulatory documents were analyzed, and it was found that nothing in those documents prohibit the basin as currently constructed. Two engineering consultants (RRM and Wallace Group) confirmed that the volume of water storage needed for the project is provided in Basin A.

An updated Stormwater Control Plan was provided. A maintenance plan and cost estimates were developed by consultants, including a cost comparison to that of a dry basin. A biological evaluation was provided, which states that the basin is a stormwater facility and not considered a jurisdictional wetland. Project engineers confirmed that all other basins and stormwater improvements within future phases of Avila Ranch are designed as shallow basins that will not hold water for longer than 24 hours.

In order to bring resolution to this dispute, the parties agree that the Avila Ranch developer will continue to own and maintain Basin A, at its expense, until the completion of construction of the for-sale single family units in Phase 1, 2, and 3. This is expected to be approximately a 5-year timeframe. Avila Ranch will secure its faithful performance of the obligations by providing a separate maintenance bond in the sum of $182,500, which is based upon the estimated annual cost of maintenance multiplied by 5 years.

Park A at Avila Ranch is co-located with Basin A on Lot 30 of Phase 1. Since the improvements are located on a single parcel, the City has not yet accepted Park A for ownership and maintenance. Upon execution of the Settlement Agreement, Park A will be separated from Basin A by deed, and the City will accept ownership and maintenance of Park A upon recordation of the deed. Construction of Park A has been completed with no outstanding issues. Staff recommends that the City Council authorize acceptance of Park A in conjunction with execution of the Settlement Agreement.

Upon completion of the single family homes Phases 1, 2, and 3, Avila Ranch and City staff will meet and confer regarding the acceptance of Basin A. Avila Ranch will provide documentation from a qualified biological consultant to confirm that there are no additional permits required for the maintenance or operation of Basin A from other regulatory agencies (e.g. Regional Water Quality Control Board, California Department of Fish and Wildlife, etc.).

Other requirements include confirmation of compliant fencing around Basin A, confirmation that the capacity of Basin A is equivalent to its design capacity and has not been materially reduced through means of siltation or sedimentation, and that construction of improvements and homes in Phases 1 through 3 have not materially contaminated Basin A. Avila Ranch

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will provide cost maintenance documentation to show that the annual scope of the maintenance activities performed by Avila Ranch for Basin A is similar to the City’s originally estimated scope and cost of annual maintenance for Basin A as detailed in the Community Facilities District budget. The City may request pond aeration be installed by Avila Ranch prior to acceptance, if deemed necessary. Provided that Basin A meets these criteria for acceptance, the City will accept Basin A in its entirety, take over the maintenance of the basin, and release the developer from the maintenance bond upon completion of Phases 1, 2, and 3 (anticipated to occur in 5 years). Said acceptance shall be in accordance with Municipal Code Section 16.20.230 without further conditions or discretionary approvals.

Dispute Item #5: Implementation of the Down Payment Assistance Program for the Workforce Housing units
As required by the Avila Ranch Development Agreement, the developer is required to provide an amount of 5% of the purchase price up to $20,000 as a "silent second" to the initial purchasers of the 25 units in the Workforce Housing Incentive Program. As part of the 2022 dispute, Avila Ranch asserted that requiring the developer to provide down payment assistance was inconsistent with lending practices and violated commercial lender rules and regulations.

In an effort to avoid conflict with commercial lending practice, Avila Ranch agrees to provide the required matching down payment assistance to a City fund, and the City will administer the down payment assistance program for the development. The workforce units are required to be occupied by an income-qualifying workforce housing household for a minimum of ten (10) years. If resold within this ten-year period, the units would need to be sold to another income qualifying workforce housing buyer and the 10-year deed restriction would reset to 10 more years with the new buyer of the home. The down payment assistance loan would be repaid upon sale of the unit or refinancing, and the proceeds would be placed in a revolving loan fund to assist future workforce, moderate-, or lower-income home buyers within the City.

Unlike a reduction in price that would be captured by a future seller at the end of the affordability term, this assistance would continue throughout the life of the funds to assist affordable home buyers within the City. This will establish a revolving loan fund of approximately $500,000 to be administered by the City of San Luis Obispo. The parties agree that once paid, this contribution by Avila Ranch constitutes compliance with the down payment assistance obligations under Exhibit G of the Development Agreement. The developer acknowledges that the down payment assistance funds will be subject to an interest-bearing promissory note, secured by a deed of trust in favor of the City. The City may utilize said recouped down payment assistance funds in conjunction with affordable housing assistance throughout the City of San Luis Obispo, consistent with the City’s Down Payment Assistance Program.

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Dispute Item #6: Distribution and location of “for-rent” affordable housing units in Phase 3 Exhibit “G” to the Development Agreement requires a total of 40 low- and moderate-income “for-rent” apartment units to be constructed in Phase 3 (the R-4 zoned portion of the project).

This was originally contemplated to be achieved by the developer’s dedication of a 1.2-acre parcel (Lot 300) to an affordable housing provider for the construction of 24 lower-income apartments, and by providing 8 low-income and 8 moderate-income apartments to be dispersed throughout the market rate for-rent apartments on Lot 301. With respect to the location of affordable units, the Avila Ranch developer asserted that the unit distribution of the 8 low-income and 8 moderate-income to be constructed Lot 301 was impractical and requested a modification of said distribution.

The City, the Avila Ranch developer, and the affordable housing provider (C&C Development) commenced discussions in 2022 regarding the construction and development of the affordable units. In 2023, Avila Ranch and C&C Development submitted a Phase 3 Development Review application which proposed increasing the number of affordable units on the project site through a density bonus to include an additional 19 affordable units. On January 23, 2024, in conjunction with the Phase 2/3 Final Map acceptance, the City Council reviewed a draft Phase 3 Affordable Housing Agreement which included transfer of the 8 moderate-income and 8 low-income units to the C&C Development affordable housing site in exchange for the addition of 19 affordable moderate-income density bonus units. On February 14, 2024, the Planning Commission approved a density bonus and site design for the Phase 3 (R-4 zone) multifamily sites. The Phase 3 Affordable Housing Agreement was recorded on April 1, 2025, to reflect this affordable housing distribution. Avila Ranch has dedicated the 1.2-acre parcel (Lot 300) to the affordable housing provider as required by the Development Agreement, who will construct a total of 32 low-income and 27 moderate-income for-rent affordable housing units.

In order to ensure that the affordable housing site is completed earlier in the project, as opposed to the last phase of the project, the Phase 3 Affordable Housing Agreement states that the City will not issue building permits for Avila Ranch’s 500th unit until the affordable housing provider begins construction on Lot 300. Construction of the affordable housing site shall be substantially completed prior to the issuance of a building permit for the 550th unit within Avila Ranch. If the affordable housing provider fails to construct the 32 low-income and 27 moderate-income for-rent affordable housing units, the obligation remains with the Avila Ranch developer to complete.

Previous Council or Advisory Body Action
The following City Council or Advisory Body actions have occurred relevant to the project:
 Vesting Tentative Tract Map (VTTM) Tract 3089, Avila Ranch Devlopment Plan, and the Final EIR were approved by the City Council on September 19, 2017, by Resolution No. 10832 (2017 Series).
 The Avila Ranch Development Agreement was adopted by the City Council on October 3, 2017, by Ordinance No. 1639 (2017 Series).
 Avila Ranch Community Facilities District (CFD) No. 2017-1 was created on

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November 21, 2017 by Ordinance No. 1642 (2017 Series), which levies a special tax within the CFD providing a funding source for maintenance and operation of facilities within the District.
 The final map for Tract 3089 Phase 1 was approved by City Council on December 4, 2018, by Resolution No. 10968 (2018 Series).
 The City Council adopted Resolution No. 11393 (2023 Series) for partial acceptance of public improvements and certification of completion of required private improvements for Tract 3089 Phase 1 on February 21, 2023.

Public Engagement
An extensive public review process was completed with the approval of the Tentative Map and Avila Ranch Development Plan, as well with the Draft and Final EIR. The current request for City Council authorization to execute the Avila Ranch Settlement Agreement has a “notify” level of public engagement, which has been accomplished through this agenda item and associated staff report.

CONCURRENCE
The Community Development Director, Public Works Director, Utilities Director, Parks and Recreation Director, and City Attorney concur with the recommended action.

ENVIRONMENTAL REVIEW
The California Environmental Quality Act (CEQA) does not apply to the recommended action in this report because the action does not constitute a “Project” under CEQA guidelines Section 15378. The Settlement Agreement does not change any aspect of the approved Avila Ranch project, nor does it introduce the potential for any new environmental impacts. Therefore, the proposed action does not require further analysis under CEQA.

FISCAL IMPACT
Budgeted: Yes Budget Year: Annually beginning 2025-26
Funding Identified: Yes
Fiscal Analysis:

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

Total $0 $0 $0 $0

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The distribution of funds identified by the Settlement Agreement represent a complete fee reconciliation which was done to ensure that fees were accurately charged in accordance with the Avila Ranch Development Agreement. The distribution acknowledges overpayments and underpayments made by the developer at the time of permit issuance and reconciles those errors and credits due by truing up the fees to reflect the corrected amounts. There is no financial obligation from the General Fund or any of the Impact Fee Funds because the established escrow account will be the funding source for the disbursement. The amount due to the developer relating to the Private Infrastructure Reimbursement Agreement will be funded from a separately established reimbursement pass-through fund, specifically used to hold amounts collected that must be turned over to the developer.

ALTERNATIVES

1. Council could direct staff to not execute the Settlement Agreement. This alternative is not recommended as it may lead to litigation. The attached Settlement Agreement represents a mutual understanding of a proper resolution for each of the items detailed in this report, and failure to enter into this agreement may leave legal action as the only course of action available to the Avila Ranch developer. It is likely that the City would still have to refund the fee amounts identified through reconciliation, while also incurring further legal defense costs.

2. Council could request modifications to the Settlement Agreement prior to authorization. This alternative is not recommended because it would further delay the negotiation process and distribution of the escrow funds. City staff, the developer, and the mediator negotiated the Settlement Agreement over several years of mediation in order to come to solutions that both parties could agree to.

The Settlement Agreement, as currently written, implements the Development Agreement as adopted without any amendments and correctly applies permit fees for all issued permits.

ATTACHMENTS
A – Avila Ranch Settlement Agreement

SETTLEMENT AGREEMENT AND MUTUAL RELEASE
(Avila Ranch)
This Settlement Agreement and Mutual Release (“Agreement”) is entered into as of Effective Date (defined herein) and is made by and between Avila Ranch Developers, Inc. (“ARD”), TH Avila Ranch, LLC, a California limited liability company (“THAR”), Trumark Construction Services, Inc., a California corporation (“TCS”), and the City of San Luis Obispo, a California charter city (the “City”). ARD and the City are hereinafter referred to individually as a “Party,” and collectively as the “Parties.”

RECITALS
WHEREAS, Avila Ranch is a 720-unit residential project, including 197 townhomes/duplexes and 125 apartments, and 15,000 square feet of neighborhood serving retail and office uses, being developed on a 150-acre site north of Buckley Road within the boundaries of the Airport Area Specific Plan (the “Project”); and
WHEREAS, on September 19, 2017, the San Luis Obispo City Council certified the Final Environmental Impact Report; approved the Avila Ranch Development Plan, Airport Area Specific Plan Amendment 1318-2015, General Plan Amendment 1319-2015, Vesting Tentative Tract Map 3089, Ordinance 1638 (2017 Series) approving a rezone of the Avila Ranch Property, and Ordinance 1639 (2017 Series) approving Development Agreement 2017-1 (“DA”) and formation of a Community Facilities District (collectively “Project Entitlements”); and WHEREAS, the Project Entitlements require, among other things, the developer to construct a designated number of Low-income for-rent apartment units in certain locations within Phase 3, the multi-family portion of the Project; provide for down payment assistance to certain Workforce housing units; and construct certain improvements, including but not limited to an approximately 2 acre bioretention basin commonly referred to as “Basin A” in Phase 1 of the Project.

WHEREAS, in conjunction with the Project Entitlements, the City and ARD entered into a number of reimbursement agreements wherein the developer would be reimbursed for certain public improvements benefiting properties beyond that of the Project, including but not limited to that certain “Infrastructure Reimbursement Agreement – Private (Avila Ranch Vesting Tentative Tract Map 3089)” dated June 18, 2019 (“Private Reimbursement Agreement”).

WHEREAS, the Project is being developed in phases, commencing with Phase 1, consisting of 179 single family units (“Phase 1”); Phase 2 consisting of 29 single family units (“Phase 2”); Phase 3 consisting of 125 apartment units and 92 single family units (“Phase 3”); Phase 4 consisting of 197 Townhomes/Duplexes (“Phase 4”); Phase 5 consisting of 101 single family units (“Phase 5”); and Phase 6 consisting of 15,000 sf of neighborhood commercial (“Phase 6”).

WHEREAS, in 2022, a dispute arose between the City and ARD over a number of issues, including but not limited to:
a. Interpretation of the DA, with respect Development Impact Fees, and the vesting rights of ARD (“Impact Fees”); and
b. Entitling Condominium Units in Phase 4 of Avila Ranch (“Phase 4 Townhomes”)
c. Reimbursements pursuant to the Private Reimbursement Agreement; and, d. Acceptance of Basin A as a public improvement.

WHEREAS, in addition to the above described “Disputes”, the City and ARD engaged in discussions regarding practical solutions to the following items:
a. Implementation of the Down Payment Assistance Program, with respect to WHIP units, as detailed in the DA (“DPAP”); and
b. Distribution and location of “For-Rent” Units (“Affordable Housing”) WHEREAS, with respect to Development Impact Fees, ARD submitted numerous letters to the City, in conjunction with ARD’s application for Phase 1 building permits, wherein ARD paid Impact Fees under protest, asserting the misapplication and/or miscalculation of certain Impact Fees to the Project; and
WHEREAS, with respect to the DPAP, ARD asserted that the language in Exhibit “G” to the DA requiring ARD to provide down payment assistance of up to $20,000.00 to the initial purchaser of a Workforce Housing Incentive Program (“WHIP”) unit was inconsistent with lending practices and violated commercial lender rules and regulations; and WHEREAS, with respect to location of Affordable Units, ARD asserted that the unit distribution was impractical and requested a modification of said distribution; and WHEREAS, with respect to the Phase 4 Townhomes, ARD asserted that the Project Entitlements provided for the processing of a “Condominium Plan” with the Department of Real Estate without requiring additional subdivision of Phase 4 pursuant to the Subdivision Map Act.

WHEREAS, with respect to the Private Reimbursement Agreement, ARD asserted that the City is obligated to reimburse ARD for certain improvements constructed by ARD when certain properties are annexed into the City, and ARD specifically demanded funds with respect to the annexation of the East Airport Business Park and, demanded that the City record notices of the Private Reimbursement Agreement against all properties subject to the Private Reimbursement Agreement; and
WHEREAS, with respect to Basin A, there is a dispute between the Parties over the construction and operation of Basin A; and

WHEREAS, the various disputes set forth in these recitals are referred to herein collectively as “the Dispute”; and
WHEREAS, in March 2023, in response to the above-described Dispute, the City and ARD entered into a Tolling and Escrow Agreement (“Tolling Agreement”) by which the Parties agreed that the City would continue to issue building permits and ARD would continue to develop the Project by paying the Development Impact Fees under protest, depositing an agreed upon sum, $19,000 per dwelling unit, which represents the protested Development Impact Fees on Phase 1 permits, into an escrow established with Old Republic Title Company (“ARD Escrow Funds ”) pending resolution of the Dispute; and
WHEREAS, as conditioned by the Tolling Agreement, the City deposited the sum of One Million One Hundred Thirty-Six Thousand and 00/100 Dollars ($1,136,000.00) with Old Republic Title Company (“City Escrow Funds”).

WHEREAS, ARD and the City have continued communication during the period following the execution of the Tolling and Escrow Agreement, and the Parties engaged in voluntary mediation sessions on August 10, 2023, August 24, 2023, and November 16, 2023, before mediator Bruce Edwards; and
WHEREAS, Section 8.06 of the DA provides in part that anticipated refinements of the Project may require appropriate clarifications and refinements to be made regarding the details of the performance of the City and ARD under the DA; and WHEREAS, the Parties now desire to memorialize the terms of their settlement by this Agreement and to resolve all claims which may exist between them arising out of and relating to the Dispute.

AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals, which are incorporated herein by reference, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed as follows:

1. Development Impact Fees. As described in the above recitals, ARD disputed the City’s interpretation of Sections 5.04.2 (b), (c) and (e) of the DA, and the calculation and application of Impact Fees to the Project.

Section 5.04.2 (b) of the DA, as amended by the April 16, 2019, Amendment No. 1 to Development Agreement, provides,
The Developer shall be required to pay all City-wide, and Project-specific development impact fees, excluding sewer and water impact fees addressed in section 5.04.2(c) immediately below, for the Project's fair share of the cost to mitigate Project impacts as identified in the Final Environmental Impact Report (FEIR), Specific Plan, conditions of approval or otherwise specified in the Development Agreement in effect when each final map is recorded in accordance with AB1600 analysis. City may adjust development impact fees not more than once a year with changes no

greater than the inflation index identified upon imposition of the fee. The Developer shall be required to pay the Los Osos Valley Road (LOVR) Interchange Impact Fees as revised generally consistent with the impact fee methodology set forth in the April 3, 2018 letter agreement between the City and Developer.

Section 5.04.2 (c) of the DA provides:

The Developer shall be required to pay sewer and water impact fees in accordance with the AB 1600 analysis in effect when each Final Map is recorded plus any adjustments based on CPI until issuance of each building permit. Subsequent payments shall be adjusted annually by the inflation index identified upon imposition of the fee as determined by the City.

Section 5.04.2 (e) of the DA Provides:

If the City amends any existing Development Impact Fee (DIF) program to include additional projects or costs for the benefit of the Project (either new projects or increased costs for projects included in the analysis supporting existing fees) for improvements necessary to satisfy Project requirements, Developer will be required to pay the amended fees. Credits applied towards infrastructure costs advanced by Developer shall apply when building permits are issued or fees are otherwise due and shall arise only from Developer-funded construction of infrastructure or community facilities included in the project list on which a particular fee was based.

Credits applied when building permits are issued or fees are otherwise due pursuant to this section shall be adjusted for inflation consistently with such adjustments of the fees against which credits are allowed.

With respect to the foregoing sections of the DA, the Parties agree to the following interpretation:
a. Development Impact Fees. The following line-item Impact Fees (collectively “Avila Ranch DIF”) are imposed on the Project by the DA, as amended by the First Amendment to the DA:
1) Police
2) Fire1
3) Traffic (LOVR Base Fee and LOVR add on Fee)
4) Water
5) Wastewater
b. Phase 1. With respect to the Phase 1 map, ARD vested in the value of the Avila Ranch DIF with the recordation of the Phase 1 Final Map on December 23, 2021.

The City is permitted to adjust Avila Ranch DIF, except the water and wastewater fees,

1 The City has confirmed that an interim fire station is to be constructed on Lot 197 of Avila Ranch Phase 1 and that ARD is entitled to a fee credit against the Fire Impact Fee.

once annually by the inflationary index in place at the time the Phase 1 Final Map records.

The Parties acknowledge that the inflationary index in place as of the recordation of the Phase 1 Final Map is California Construction Cost Index (“CCCI”), as described in Section

4.56.040 of the City’s Municipal Code. With respect to Phase 1 only, the water and wastewater Development Impact Fees may be adjusted once annually by the Consumer Price Index (Los Angeles, All Urban Consumers, All Items) (“CPI”). Consistent with the foregoing, attached hereto as Exhibit “1” is an “Impact Fee Summary,” which was prepared jointly by the Parties, following a reconciliation analysis of each building permit issued for Phase 1. The applicable fees that have been agreed to, and the Exhibit “1” Impact Fee Summary reconciliation is based on the Phase 1 Avila Ranch Fee Schedule, attached hereto as Exhibit “6”.
c. It is acknowledged that ARD paid $138,226.14 in LOVR TIF Add-on Fees to the City which City is unable to refund at this time. The City is no longer in possession of these fees, as they were required to be passed through to another developer pursuant to obligations of a separate reimbursement agreement that pre-dates any agreements between the City and ARD. The City will ensure that payment of these fees is reflected accordingly in the amount of LOVR Add-on TIF credits available to ARD for reimbursement of eligible expenses on future permits.
d. Future Phases. With respect to all future phases (i.e. Phases 2, 3, 4, 5 and 6) of the Project, each phase subsequent to the Phase 1 Final Map will vest in the published Avila Ranch DIF in place at the time of recordation of the particular final map.

Thereafter, the City may adjust the fees once annually based upon the inflationary index established by ordinance and in place at the time of adjustment. The Parties acknowledge that the current inflationary index is the CCCI, as described in Section 4.56.040 of the Municipal Code.
e. Amendment to Existing Fees. Prior to implementing any amendments provided for in Section 5.04.2 (e) with respect to the Project and imposing such increased costs on the Project, the City shall give ARD advance written notice of the same, as required by the Mitigation Fee Act, and ARD may submit a letter to the City Clerk requesting special notice of any such fee increase pursuant to the Mitigation Fee Act.

2. Down Payment Assistance Program.

Exhibit “G” to the DA provides:

Down Payment Assistance Program. Avila Ranch agrees to provide a matching down payment assistance (DPA) of five percent of the purchase price up to $20,000 as a "silent second" on the initial sale of the 25 Workforce homes. These units would have to be occupied by an income qualifying Workforce Housing household for a minimum of ten (10) years; if resold within this ten-year period, the units would need to be sold to another income qualifying Workforce Housing buyer and the 10-year deed

restriction would reset to 10 more years with the new buyer of the home.

The DPA loan would be repaid upon sale of the unit or refinancing, and the proceeds would be placed in a revolving loan fund to assist future workforce, moderate, or lower income home buyers in Avila Ranch. Unlike a reduction in price that would be captured by a future seller at the end of the affordability term, this assistance would continue throughout the life of the funds to assist buyers in the development. · The intent is that these funds will be used in conjunction with the initial 25 Workforce units, but these funds could be used for any income qualifying household who purchases a home in Avila Ranch after the initial ten-year workforce affordability period. This will establish a revolving loan fund of approximately $500,000 to be administered by the City of San Luis Obispo.

The Parties acknowledge the potential for the above provision to be in conflict with commercial lending practices and/or otherwise violate commercial lender rules and regulations imposed on ARD. In an effort to avoid conflict with commercial lending practice and/or violations of the commercial lender rules and regulations imposed on ARD; and, maintain the intent of the above provision, the Parties agree that the DPAP may be implemented as follows:

Prior to the initial Closing of each WHIP Unit, ARD agrees to contribute a sum equal to five (5%) percent of the purchase price of the Workforce home, not to exceed $20,000 to the City’s Down Payment Assistance Program Fund (“DPA Funds”). The parties agree that once paid, this contribution by ARD constitutes compliance with ARD’s down payment assistance obligations under Exhibit G of the Development Agreement.

ARD may alternatively make a lump-sum contribution of $500,000 to City for all covered WHIP Units to satisfy ARD’s down payment assistance obligations under Exhibit G of the Development Agreement. The City agrees to utilize said DPA Funds to assist the buyer of such WHIP unit with the purchase of that WHIP unit, including but not limited to, contributing said funds to buyer’s down payment as a loan consistent with the City's DPA program. ARD acknowledges that the DPA Funds will be subject to an interest-bearing promissory note, secured by a deed of trust in favor of the City and when said DPA Funds are recouped by the City, in keeping with the terms of the Development Agreement, City will utilize these recouped DPA Funds to assist any income qualifying household who purchases a home in Avila Ranch. Notwithstanding the foregoing, City may utilize said recouped DPA Funds in City’s discretion in conjunction with affordable housing assistance throughout the City of San Luis Obispo.

The Parties further agree that the foregoing language will be incorporated, as appropriate, in each Affordable Housing Agreement associated with a phase of the Project, where applicable.

3. Affordable Units.

Exhibit “G” to the DA contemplates 32 low-income and 8 moderate-income “For Rent” apartment units to be constructed in Phase 3 (the R-4 portion of the Project). The DA requires the developer to dedicate a 1.2 acre parcel, described as Lot 300 of the Vesting Tentative Tract

Map, to an affordable housing provider, for the construction of 24 lower-income apartments. The DA also indicates that 8 low-income and 8 moderate-income apartments will be provided on Lot 301 of the Vesting Tentative Tract Map. Finally, Exhibit “G” to the DA provides, “. . . should an affordable housing provider fail to construct the units, the obligation to provide for the 24 deedrestricted low­ income affordable housing units on the lot remains with Avila Ranch to complete.” The Parties acknowledge that certain lots within Phase 1 are currently burdened by the Affordable Housing Agreement that requires ARD to dedicate Lot 188 of the Phase 1 Final Map (formerly Lot 300) to an affordable housing provider for construction of 24 low-income housing units.

Subsequent to the recordation of the Phase 1 Final Map, including the recordation of the Phase 1 Affordable Housing Agreement, ARD, the City and C & C Development (an affordable housing provider) commenced discussions regarding the construction and development of the Affordable Units. The Parties, including C & C Development, have discussed the best configuration of location for the Affordable Units and received approval from the Planning Commission on February 14, 2024, on the recommendations from the Architectural Review Commission (“ARC”), and after the January 23, 2024 City Council review of the draft Phase 3 Affordable Housing Agreement which included transfer of the 8 moderate-income and 8 lowincome units and addition of 19 affordable moderate-income Density Bonus units.

With the approval of the Phase 2 & 3 Final Map, including the Phase 3 Affordable Housing Agreement, and both documents having been recorded on April 1, 2025 as Document Numbers 2025008789 and 2025008792, respectively, ARD has dedicated Lot 186, rather than Lot 188, to an Affordable Housing Provider (C&C Development); and, relocated the 8 moderate-income and 8 low-income apartments from Lot 188 (formerly Lot 301) to Lot 186 to be constructed by the Affordable Housing Provider in conjunction with the 24 low income units, and 19 moderate-income Density Bonus units approved by Planning Commission on February 14, 2024. Moreover, the Phase 3 Affordable Housing Agreement contains the following provisions to ensure that these Affordable Units are constructed:

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

In consideration of the foregoing, concurrently with the execution of this Agreement, the Parties shall execute and cause to be recorded an amendment to the Phase 1 Affordable Housing Agreement, in substantially the form attached hereto as Exhibit “2”, to change the lot to be dedicated by ARD from Lot 188 to 186, and to set the maximum rents that may be charged for the low-income units on Lot 186. ARD’s obligations regarding construction of the low-income units shall be fully satisfied upon dedication of Lot 186 to an affordable housing provider and as specified by the construction timing requirements detailed above and as memorialized in the Phase 3 Affordable Housing Agreement, provided the amendment to the Affordable Housing Agreement is recorded prior to such dedication.

4. Processing of Phase 4 Subdivision. ARD shall, at such time as it deems appropriate, submit an application for a tentative map for the condominium subdivision of the six lots currently designated as Phase 4 of the Project. Upon receipt of the tentative map application and development review application, City shall process the tentative map concurrently with the development review application through City’s ARC and planning commission as required by the City’s Subdivisions Ordinance (Municipal Code Chapter 16), but no hearing before City’s city council shall be required. Notwithstanding the foregoing, the City has agreed to charge ARD the cost of processing at the parcel map rate and not the tentative map rate. Nothing in this paragraph shall be deemed to entitle ARD to any increase in unit count over the 197 units previously approved for Phase 4. Nothing in this paragraph shall prevent City from applying to the Phase 4 subdivision standards contained in uniform building, construction, fire or other uniform codes, or standards and specifications for public improvements, all as the same may be adopted or amended from time to time by City, provided that the provisions of any such uniform codes or standards and specification are in effect on a City-wide basis.

5. Private Reimbursement Agreement.

The Parties acknowledge that the “Infrastructure Reimbursement Agreement Private” dated June 18, 2019, (“Private Reimbursement Agreement”) provides a mechanism by which ARD will be reimbursed for certain traffic improvements, constructed by ARD, which benefit properties in the City and County of San Luis Obispo, beyond that of the Project’s proportionate share. Exhibit “A” to the Private Reimbursement Agreement identifies the properties which benefit from these traffic improvements (“Benefitted Properties”) and attributes a “proportionate share” of the actual costs of said improvements exceeding the prorate share attributable to the Project, to each property (“Reimbursable Costs”). Additionally, the Agreement provides an estimated dollar amount attributable to each Benefitted Property based upon the budget established in 2019.

Pursuant to the Private Reimbursement Agreement, the City agreed, for Benefitted Properties in its jurisdiction, to “require payment of the prorated shares of the Reimbursable Costs as a condition of any discretionary entitlement or approval, including Architectural Review Committee (whether administrative, quasi-judicial, or legislative) . . . and payment shall be required prior to the issuance of building permits. For [Benefitted] properties in the County’s jurisdiction, City will require Benefitted Properties to pay their prorated share of documented Reimbursable Costs as a condition of annexation.”

a. Morabito Property. Included among the Benefitted Properties identified in Exhibit “A” to the Private Reimbursement Agreement is the “Morabito Business Park” (sometimes referred to herein simply as “Morabito”). The City acknowledges that the annexation of the East Airport Commerce Park (which includes Morabito) is conditioned upon the East Airport Commerce Park Association (33 parcels, including Morabito) and Senn-Glick (3 parcels) paying the City a combined total of $1,000,000.00 (“East Airport Annexation Traffic Impact Fee Payment”) to fulfill the Annexation Property's participation in the City's Citywide Transportation Impact Fee program (TIF) and/or other area transportation improvement reimbursement obligations as stipulated in the “Pre-Annexation Agreement” dated March 17, 2020. Exhibit “A” to the Private Reimbursement Agreement estimates that Morabito’s proportionate share to be $478,491.00 (“Morabito’s Estimated Share”).

The City acknowledges that it has received Morabito’s Estimated Share in the East Airport Annexation Traffic Impact Fee Payment, and upon final execution of this Agreement, City will reimburse ARD as provided in subparagraph “b” below from the East Airport Traffic Impact Fee Payment.

The Parties acknowledge that $417,452 is eligible for reimbursement immediately, and $61,039 will be held by the City and reimbursed to ARD upon City approval of cost documentation for the S. Higuera/Vachell Intersection. As identified in the PreAnnexation Agreement, the City will continue to collect additional reimbursement fees, where required, from future development that occurs within this area that proposes additional building area and/or intensity beyond what was approved in previous entitlements and reflected in the Pre-Annexation Agreement and as consistent with otherwise applicable law.
b. Cost Increases. The City acknowledges that ARD’s cost of construction of certain public improvements identified in the Private Reimbursement Agreement, exceeded the estimated amount. Final Reimbursable Costs shall be updated according to the change order terms of the Private Reimbursement Agreement. Exhibit “A” of the Private Reimbursement Agreement (Reimbursement Costs and Allocation to Benefitted Properties) shall be updated upon completion and approval of the change order, per the terms of the Private Reimbursement Agreement, which shall govern only those fees applicable to any property subject to the fee that receives development entitlements in excess of those previously approved and reflected in the Pre-Annexation Agreement after the relevant update to the extent allowed by applicable law. Notwithstanding the foregoing, the Parties acknowledge that modifications to the Reimbursement Agreement are necessary to account for cost increases in order for Developer to be properly reimbursed; ; and, it will be the responsibility of Developer to request such modification and pay the appropriate City fees in place at the time of such request. c. Notice of Agreement. The City staff confirmed that they are continuing to track development applications in their system which triggers them to inform owners of Benefitted Properties of their obligation for a fair share contribution to the reimbursement

for the work ARD has completed. City also agrees to record a Memorandum and Notice of Reimbursement Agreement against all Benefitted Properties. Within thirty (30) calendar days after the Effective Date, City shall record with the San Luis Obispo County Recorder’s Office a Memorandum of Reimbursement Agreement, in substantially the form attached hereto as Exhibit “3”. Upon recordation, City shall provide a conformed copy of the Memorandum to ARD.

6. Basin A.

Basin A, is an approximately 2 acre bioretention basin located within Lot 30 of Phase 1 of Avila Ranch. Lot 30 includes other improvements required as a condition of development of the Project, including but not limited to Park A, an improved pedestrian pathway, a portion of the community-wide bike path, and a small bioretention basin located along Vachell Lane. All that portion of Lot 30, which is otherwise not Basin A, is collectively referred to as Park A. See Exhibit “4” illustrating Park A and Basin A.

A dispute arose between the City and ARD over whether Basin A was constructed and performing as designed and intended. ARD has asserted that Basin A was constructed as approved by the City and performing as intended. The City has asserted that although Basin A may have been constructed as approved, it is not performing as expected in that it is retaining a significant amount of water year round.

In order to bring resolution to the above described dispute, the Parties agree as follows:
a. Within 30 days of the Effective Date, ARD will prepare a legal description and Grant Deed for Park A. Upon recordation of a Grant Deed to separate Park A from Basin A, City will accept ownership and maintenance of Park A. Except as set forth in the next sentence, ARD agrees that the City will be in sole control of the irrigation controller relating to Basin A and Park A; and, ARD will not access or otherwise modify the irrigation control system without the express written consent of the City. Any repairs or work to the irrigation system within the Basin A parcel shall be performed by ARD at its sole expense, subject to authorization and access to the irrigation controller by the City. b. Except as expressly provided in subparagraph (a) above, in consideration of the foregoing, ARD will continue to own and maintain Basin A, at its expense, until the “Close Out” of the for-sale single family units in Phase 1, 2, & 3 (i.e. the closing of the final single family dwelling units in Phase 1, 2, & 3).
c. As additional consideration and to secure its faithful performance of the obligations set forth in the foregoing subsections (a) and (b), ARD will provide a separate maintenance bond in the sum of $182,500.00 which is based upon the City’s estimated annual cost of maintenance multiplied by 5 years, which is ARD’s estimated build out period of Phases 1, 2, & 3.

d. Not later than one year prior to the estimated Close Out, ARD agrees to brief the City on the maintenance activities, including cost thereof, employed by ARD in the maintenance of Basin A.
e. Upon the Close Out, ARD will notify the City of the same and make demand upon the City to immediately accept Basin A, in its entirety. Thereafter, ARD and City will meet and confer to establish that Basin A, is substantially in the same condition that it was in at the time this Agreement was executed, notwithstanding normal wear and tear; that ARD provides documentation from Althouse & Meade, or another qualified consultant approved by City, that there are no additional permits required for the maintenance or operation of Basin A from other regulatory agencies (e.g. Regional Water Quality Control Board, California Department of Fish and Wildlife, etc.); that the fence around Basin A is in compliance with the City’s municipal code and Building Code; that the capacity of Basin A is equivalent to its design capacity and has not been materially reduced through means of siltation, sedimentation, erosion, or other means; that construction of improvements and homes in Phases 1, 2, and 3 have not materially contaminated Basin A resulting from nonstormwater discharges to the storm drainage system that is tributary to Basin A, and that the annual scope of the maintenance activities, and the annual cost associated with such activities, performed by ARD for Basin A from the Effective Date until the Close Out is similar to the City’s originally estimated scope and cost of annual maintenance for Basin A as detailed in the CFD budget. Notwithstanding the foregoing, if at the time Close Out and upon City’s demand for pond aeration, the matter shall be tendered to a mutually agreed upon and qualified engineer to make the determination that the functionality of Basin A will be substantially improved by pond aeration. Upon such determination, ARD agrees to install such equipment, at ARD’s sole expense. f. Provided that upon the delivery of the demand noted in subsection (e), Basin A meets the criteria for acceptance listed in subsection (e), excepting normal wear and tear and vegetative growth, ARD will deed to the City the balance of Lot 30, which constitutes Basin A and City will otherwise accept Basin A in its entirety, take over the maintenance thereof, at the City’s expense as paid for by and through Community Facilities District No. 2017-1; and release ARD from the above referenced maintenance bond. Said acceptance shall be in accordance with Section 16.20.230 of the San Luis Obispo Municipal Code without further conditions or discretionary approvals.

7. Mutual Escrow Instructions for the Release of Funds.

Pursuant to the Tolling Agreement, the City issued ARD, from and after the effective date of the Tolling Agreement, a total of 90 building permits. Said permits were issued under protest by ARD as to the amount of the development impact fees being charged. In consideration of the issuance of said permits, ARD deposited into the Escrow Account the sum of $19,000.00 per building permit, representing the amount paid under protest . From the effective date of the Tolling Agreement, ARD deposited the total sum of $1,710,000.00 into the Escrow Account (“ARD Escrow Funds”).

Additionally, pursuant to the Tolling Agreement, City deposited the sum of $1,136,000.00 into the Escrow Account (“City Escrow Funds”).

As of the Effective Date of this Agreement, the Escrow Account retains a total sum of $2,846,000.00.

The Parties have jointly prepared the Impact Fee Summary, attached hereto as Exhibit 1 which details the Required Impact Fee Obligations, the Impact Fees Paid by ARD, the Credits Issued by City, the Reconciliation Credits to be Issued as part of this settlement agreement, and the final Overpayment/ Underpayment amounts. This summary reflects the reconciliation analysis which was completed jointly by the Parties for each building permit issued for Phase 1. Tables 1 and 2 below summarize the results of the Impact Fee Summary.

Tabel 1: ARD Underpaid Impact Fees
The amounts detailed in the below table correspond to the total amount underpaid by ARD with respect to the building permits obtained in Phase 1 for each line itemed Impact Fee.

Police $ 8,804.60
Fire $ 0
LOVR Base Fee $ 0
LOVR Add On Fee $ 0
Water $ 0
Wastewater $ 0
Table 2: ARD Overpaid Impact Fees
The amounts detailed in the below table correspond to the total amount overpaid by ARD with respect to the building permits obtained in Phase 1 for each line itemed Impact Fee.

Police $ 0
Fire $ 93,887.06
LOVR Base Fee $ 803,454.21
LOVR Add On Fee $ $48,858.23
Water $ 171,888.01
Wastewater $ 159,633.77
Concurrently with the execution of this Agreement, the Parties will execute the Mutual Escrow Instructions attached hereto as Exhibit “5”. Said Mutual Escrow Instructions direct the Escrow Holder to immediately release the following sums to each Party. a. To the City, the total sum of $1,577,083.32, less any costs of escrow attributable to the City.
b. To ARD, the total sum of $1,268,916.68, less any costs of escrow attributable to ARD.

Upon release of the above funds, the Escrow Holder is instructed to close the Escrow.

The Parties shall further jointly direct the Escrow Agent to terminate the Escrow account established pursuant to the Tolling and Escrow Agreement and to submit a final bill for escrow agent services to the Parties, which bill shall be shared equally by the Parties.

8. Release by the City. The City hereby and forever releases ARD, and its respective insurers, attorneys, successors, assigns, heirs, transferees, agents, principals, officers, directors, employees, shareholders, members, co-venturers, partners, affiliates, subsidiaries, and representatives from any and all claims, demands, damages, debts, liabilities, accounts, obligations, costs, expenses, liens, and judgments of every kind and nature, whether known or unknown, suspected or unsuspected, relating to or otherwise arising out of the Dispute.

9. Release by ARD. ARD hereby and forever releases the City, and its respective insurers, attorneys, successors, assigns, heirs, transferees, agents, principals, elected officials, officers, directors, employees, and representatives from any and all claims, demands, damages, debts, liabilities, accounts, obligations, costs, expenses, liens, and judgments of every kind and nature, whether known or unknown, suspected or unsuspected, relating to or otherwise arising out of the Dispute.

10. Waiver of Civil Code Section 1542. It is understood and agreed that this is a full and final release applying to all known, unknown, anticipated and unanticipated injuries, losses, expenses and damages arising out of or in relation to the Dispute and is intended to be as broad as possible as to any and all claims that the City may have against ARD relating to the Dispute and any and all claims ARD may have against the City relating to the Dispute, whether specifically set forth herein. The Parties understand California Civil Code Section 1542 provides as follows:

Section 1542. General Release- Claims Extinguished.

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

The Parties expressly waive the provisions of Section 1542, and the Parties acknowledge and agree that waiver of the provisions of Section 1542 has been separately bargained for.

11. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective grantees, transferees, successors, assigns, employees, and agents of each Party to this Agreement to the extent permitted by law.

12. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.

13. Severability. The provisions of this Agreement are severable, and if any one or more provisions may be determined judicially unenforceable, in whole or in part, the remaining provisions and any partially unenforceable provisions, to the extent enforceable, shall nevertheless be binding upon and enforceable against the Parties hereto to the extent they may reasonably be enforced apart from that which is invalidated.

14. Attorney’s Fees and Costs. Each Party shall bear its own attorney’s fees and costs arising from the Dispute. If any claim, controversy, or action arises out of or relates to this Agreement following the Effective Date, the prevailing party in such action shall be entitled to recover reasonable attorneys’ fees, costs, and expenses in addition to all other appropriate relief.

15. Controlling Law and Venue. This Agreement shall be governed and construed in accordance with the laws of the State of California. Venue for any action commenced regarding the terms, interpretation, or enforcement of this Agreement shall be in the Superior Court for the County of San Luis Obispo, California.

16. No Amendment. This Agreement may not be altered, amended, modified, or otherwise changed in any respect, except by a writing signed by all Parties to this Agreement.

17. Authorizations. The undersigned, by their signatures, represent and warrant that they are authorized agents of their respective entities and are authorized to execute this Agreement. All Parties represent and warrant that no portion of any claim which they have or might have arising out of the matters referred to herein, nor any portion of any recovery or settlement to which they might be entitled, has been assigned or transferred to any other person, firm or corporation not a party to this Agreement, in any manner, including by way of subrogation or operation of law or otherwise. In the event that any claim, demand, or suit should be made or instituted against any Party because of any such purported assignment, subrogation, or transfer, each Party agrees to defend, indemnify and hold harmless the other Party against such claim, demand or suit, and to pay and satisfy any such claim, including necessary expenses of investigation, actual attorneys’ fees and costs.

18. No Admission of Liability. It is expressly understood and agreed that this Agreement is being made solely for the purpose of avoiding the expense and inconvenience of potential litigation and it is not to be construed as an admission on the part of any Party or of any unlawful or wrongful conduct, or of any liability to any other Party as alleged in the Dispute or otherwise, all of which is expressly denied.

19. Integrated Agreement. This Agreement contains the entire Agreement and understanding between and among the Parties concerning the subject matter of this Agreement and supersedes and replaces all prior negotiations, proposed agreements and agreements, written or oral concerning the subject matter of this Agreement. All Parties acknowledge that no other Party nor any agent or attorney of such Party has made any promise, representation or warranty, express or implied, which is not contained in this Agreement, to induce any other Party into executing this Agreement. All Parties herein further acknowledge that they are not executing

this Agreement in reliance on any promise, representation or warranty not contained in this Agreement.

20. Effective Date. The Effective Date of this Agreement is the last date set forth opposite the signatures of the Parties at the end of this Agreement.

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the Effective Date.

AVILA RANCH DEVELOPERS, INC.

By: _________________________________
Joshua Peterson, President
Dated: _____________, 2025

APPROVED AS TO FORM
By: ________________________________
Michael Slater, General Counsel
Avila Ranch Developers, Inc.

CITY OF SAN LUIS OBISPO
By: _________________________________
Whitney McDonald, City Manager
Dated: _____________, 2025

APPROVED AS TO FORM
By: ________________________________
J. Christine Dietrick, City Attorney

TH AVILA RANCH, LLC,
a California limited liability company
By: __________________________
Joshua E. Peterson,
Authorized Agent
Dated ________________, 2025

TRUMARK CONSTRUCTION SERVICES,
INC.,
a California corporation
By: __________________________
Joshua E. Peterson
Authorized Agent
Dated: ____________________, 2025

Exhibit “1”
Impact Fee Summary
Fire Police TIF LOVR Base TIF LOVR Add-on Water Wastewater Total Required Impact Fees Due - Phase 1 $ 121,780.74 $ 142,969.80 $ 1,885,814.26 $ 461,677.18 $ 2,215,158.81 $ 2,058,750.02 Actual Fees Paid $ (93,887.06) $ (134,165.20) $ (803,454.21) $ (187,084.37) $ (2,387,046.82) $ (2,218,383.79) Actual Credits Issued $ (27,494.38) $ - $ (246,598.30) $ (64,434.28) $ - $ - Reconciliation Credits to be Issued $ (94,286.36) $ - $ (1,639,215.96) $ (259,016.76) $ - $ - (Overpayment)/ Underpayment $ (93,887.06) $ 8,804.60 $ (803,454.21) $ (48,858.23) $ (171,888.01) $ (159,633.77) Refund ARD ARD Pay to City Refund ARD Refund ARD Refund ARD Refund ARD Fire Police TIF LOVR Base TIF LOVR Add-on Water Wastewater Total Credits Used After Reconciliation $ (121,780.74) $ - $ (1,885,814.26) $ (323,451.04) $ - $ - Total Fees Paid After Reconciliation $ - $ (142,969.80) $ - $ (138,226.14) $ (2,215,158.81) $ (2,058,750.02) Total After Reconciliation $ (121,780.74) $ (142,969.80) $ (1,885,814.26) $ (461,677.18) $ (2,215,158.81) $ (2,058,750.02)

IMPACT FEE SUMMARY

RECONCILIATION SUMMARY

Exhibit “2”
Amendment to Phase 1 Affordable Housing Agreement

RECORDING REQUESTED BY AND WHEN
RECORDED MAIL TO:

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

FIRST AMENDMENT TO

AFFORDABLE HOUSING AGREEMENT AND DECLARATION OF RESTRICTIVE COVENANTS (For-Sale Moderate-Income Units, WHIP Units, and Land Dedication for Phase 1 of Avila Ranch) This First Amendment To Affordable Housing Agreement and Declaration of Restrictive Covenants (For-Sale Moderate-Income Units, WHIP Units, and Land Dedication for Phase 1 of Avila Ranch) (this “First Amendment”) is made and entered into as of __________, 2025, (the “Effective Date”) by and between Avila Ranch Developers, Inc., a California corporation (“ARD”) and Yellowfin Holdings, LP, a California limited partnership and, CJ Holdings, LP, a California limited partnership (collectively “Adjoining Landowners”) and the City of San Luis Obispo, a California charter city and municipal corporation (“City”).

ARD, Adjoining Landowners and City are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”

RECITALS
A. The Parties have entered into that certain Affordable Housing Agreement and Declaration of Restrictive Covenants (For-Sale Moderate-Income Units, WHIP Units, and Land Dedication for Phase 1 of Avila Ranch) recorded on December 23, 2021 in San Luis Obispo County Records as Document No. 2021083395 which in part required the Adjoining Landowners to dedicate Lot 188 of the Phase 1 Final Map (“Lot 188”) to an Affordable Housing Provider for the development of 24 Low-Income Units; and, if the Affordable Housing Provider did not complete said Low-Income Units by the fourth (4th) development phase of the Project (as defined in the Original Agreement) the obligation to complete the Low-Income Units remained with ARD to complete (“Original Agreement”).

B. Subsequent to the Original Agreement, ARD and the City entered into discussions with C & C Development, an affordable housing provider for the construction of the 24 Low-Income Units, ARD’s eight (8) Low-Income and eight (8) Moderate-Income Units together with an additional 19 Low-Income Units pursuant to a Density Bonus (collectively “Affordable Rental Units”), all on Lot 186 of the Phase 1 Final Map (“Lot 186”).

C. Thereafter, ARD conveyed Lot 186 to Avila Ranch, LP, an affiliated entity of C & C Development for the construction of the Affordable Rental Units.

D. On January 23, 2024, the San Luis Obispo City Council approved Final Tract Map No. 3089 Phases 2 & 3, together with the “Avila Ranch Phase 3 Affordable Housing Agreement and Declaration of Restrictive Covenants (For-Sale Moderate-Income Units, WHIP Units, and R-4 For-Rent Affordable Units)” (“Phase 3 Affordable Housing Agreement”) which acknowledged the construction of Affordable Rental Units on Lot 186 and established a new timeframe within which the Affordable Rental Units were to be constructed.

E. On April 1, 2025, the Phase 3 Affordable Housing Agreement was recorded, in part, against Lot 186, burdening Lot 186 with the obligation to construct, develop and manage the Affordable Rental Units.

F. ARD and City desire to amend the Original Agreement to reflect the transfer of the eight (8) Low-Income and eight (8) Moderate-Income Units from Lot 188 to Lot 186, as detailed in the Phase 3 Affordable Housing Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals, the promises and covenants of the Parties in this First Amendment, and other good and valuable consideration, the receipt and sufficiency of which the Parties acknowledge, the Parties agree as follows:

AGREEMENT

1. Article 5 of the Original Agreement, entitled “Dedication of Real Property for Low Income Housing” is deleted in its entirety and with the deletion of Article 5 the Original Agreement no longer imposes any burden on Lot 188 and shall have no force and effect as to Lot 188. Article 5 of the Original Development agreement has been superseded by requirements identified in the Phase 3 Affordable Housing Agreement.

2. Recordation. This First Amendment shall be recorded against the real property described in Exhibit “A” attached hereto and shall run with the land.

3. Capitalization. If a capitalized term used herein is not otherwise defined in this First Amendment, it shall have the same meaning as given to it in the Original Agreement.

4. Conflict. In the event of conflict between this First Amendment and the Original Agreement, the terms of this First Amendment shall prevail.

5. Counterparts. This First Amendment may be executed in two or more fully or partially executed counterparts, each of which will be deemed an original binding the signer thereof against the other signing parties, but all counterparts together will constitute one and the same instrument.

Signatures to this First Amendment and any notice given hereunder, transmitted by telecopy or electronic mail shall be valid and effective to bind the party so signing. Each party agrees to promptly deliver an executed original of this First Amendment with its actual signature to the other party, but a failure to do so shall not affect the enforceability of this First Amendment, it being expressly agreed that each party to

this First Amendment shall be bound by its own telecopied or e-mailed signature and shall accept the telecopied or e-mailed signature of the other party to this First Amendment.

6. Effect. Except as expressly modified by this First Amendment, the Original Agreement remains in full force and effect as originally written. From and after the execution of this First Amendment, all references in the Original Agreement to the “Agreement” shall be deemed as references to the Original Agreement as modified by this First Amendment.

IN WITNESS WHEREOF, the Parties have executed this First Amendment as to the date first written above.

CITY:

CITY OF SAN LUIS OBISPO,
a California charter city and municipal corporation
By: ____________________________
Timothea Tway,
Community Development Director

APPROVED AS TO FORM AND LEGAL EFFECT
By: ________________________________
J. Christine Dietrick, City Attorney
ARD:

AVILA RANCH DEVELOPERS, INC.,
a California corporation
By: ______________________________
Joshua E. Peterson, President
ADJOINING LANDOWNERS:

Yellowfin Holdings, LP,
a California limited partnership
By: Spyglass Real Estate, Inc., a California
corporation,
Its General Partner
By: _________________________
Joshua Peterson, President

CJ HOLDINGS, LP,
a California limited partnership
By: Spyglass Real Estate, Inc., a California
corporation,
Its General Partner
By: _________________________
Joshua Peterson, President

EXHIBIT “A”

LEGAL DESCRIPTION OF THE PROPERTY
Adjoining Landowners’ Property:

Lot 327 of Final Map 3089 Phases 2 & 3 as said map was filed and recorded April 1, 2025, in Book 43 of Maps at pages 49 through 61, inclusive, in the office of the San Luis Obispo Recorder.

Exhibit “3”
Memorandum of Infrastructure Reimbursement Agreement
Prepared by, recording requested by and
return to:

Name:

Company:

Address:

City:

State: Zip:

Phone:

Fax: ------------Above this Line for Official Use Only------------

MEMORANDUM AND NOTICE OF AGREEMENT
This Memorandum and Notice of Agreement (“Memorandum”) is provided by City of San Luis Obispo (“City”) pursuant to that certain “Infrastructure Reimbursement Agreement Private”, dated July 18th, 2019, entered into between the City and Avila Ranch, LLC, in which the City agreed to collect reimbursement fees from certain properties benefitted by certain oversized traffic improvements constructed by the developer of Avila Ranch in accordance with the City’s approvals permitting the development of Avila Ranch, including, but not limited to the Avila Ranch Development Agreement and Vesting Tentative Tract Map 3089 (“Private Reimbursement Agreement”). The Private Reimbursement Agreement was subsequently assigned and assumed by Avila Ranch Developers, Inc., (“ARD”) the developer of Avila Ranch.

The Private Reimbursement Agreement was entered into in accordance with Government Code section 66485 and 16.20.110 of the City’s Municipal Code. Exhibit “1” attached hereto, is Exhibit “A” to the Private Reimbursement Agreement and identifies those properties benefitted by the transportation improvements constructed by ARD (“Benefitted Properties”). The amounts set forth in Exhibit “1” are subject to change. This Memorandum and Notice does not constitute a lien on the referenced properties.

The Private Reimbursement Agreement terminates on the date which is fifteen (15) years from the date of termination of the Avila Ranch Development Agreement or until all Reimbursable Costs have been fully reimbursed to Developer, whichever is sooner.

For additional information or to obtain a copy of the Private Reimbursement Agreement, please contact City of San Luis Obispo, Community Services Group – Infrastructure Finance at (805) 781-7100.

CITY OF SAN LUIS OBISPO
By: __________________________
Timothea Tway, Director of Community
Development

A Notary Public or other officer completing this certificate verifies only the identity of the individual who signed the document, to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA

COUNTY OF SAN LUIS OBISPO
On ___________, 2025, before me, ______________________________________, Notary Public in and for said State, personally appeared ______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official Seal.

Signature ___________________________ (Seal Above)

Exhibit “1”
Reimbursement Costs and Allocation to Benefited Properties Owner Extension
Earthwood Extension
Suburban
East of
Earthwood
Horizon
Extension
South Higuera/
Vachell
Buckley Road
Extension Extension
Earthwood Extension
Suburban
East of
Earthwood
Horizon
Extension
South Higuera/
Vachell
Buckley Road
Extension
Total
Assessment
Avila Ranch Avila Ranch LLC, Avila Family Trust 75.00% 34.70% 75.00% 50.00% 25.00% 351,980 $ 156,150 $ 575,084 $ 174,641 $ 1,315,885 $ 2,573,741 $ Froom Ranch Madonna 18.00% 947,437 $ 947,437 $ Existing Regional Traffic 21.20% - $ - $ - $ - $ 1,115,871 $ 1,115,871 $ 053-141-13 1.70% - $ - $ - $ - $ 89,418 $ 89,418 $ 053-161-20 1.72% - $ - $ - $ - $ 90,697 $ 90,697 $ 053-258-042 Ernie Ball Trust, Steve Dorsi Trustee 25.00% 0.00% 117,327 $ - $ - $ - $ - $ 117,327 $ 053-258-027 Pat and Janet Stone 6.65% 0.00% - $ 29,919 $ - $ - $ - $ 29,919 $ 053-258-025 JCC Suburban LLC 21.64% 0.00% - $ 97,371 $ - $ - $ - $ 97,371 $ 053-258-024 JCC Suburban LLC 14.63% 0.00% - $ 65,849 $ - $ - $ - $ 65,849 $ 053-258-018 Wallace Trust, John Wallace, Trustee 1.90% 2.12% 0.00% - $ 8,548 $ 16,271 $ - $ - $ 24,820 $ 053-258-023 Wallace Trust, John Wallace, Trustee 4.57% 5.11% 0.00% - $ 20,570 $ 39,153 $ - $ - $ 59,722 $ 053-258-017 Richard Ferris Trust 5.22% 5.84% 0.00% - $ 23,508 $ 44,746 $ - $ - $ 68,254 $ 053-258-014 Holdgrafer and Associates 5.34% 5.97% 0.00% - $ 24,042 $ 45,763 $ - $ - $ 69,805 $ 053-258-015 Holdgrafer and Associates 5.34% 5.97% 0.00% - $ 24,042 $ 45,763 $ - $ - $ 69,805 $ 053-258-007 Robert J Miller Trust 0.00% - $ - $ - $ - $ - $ - $ 053-258-005 Robert J Miller Trust 0.00% - $ - $ - $ - $ - $ - $ 053-258-004 Kaiser Sand and Gravel Company 0.00% - $ - $ - $ - $ - $ - $ 053-258-009 Robert J Miller Trust 0.00% - $ - $ - $ - $ - $ - $ Multiple Morabito Business Park (Remaining) 17.48% 7.93% - $ - $ - $ 61,039 $ 417,453 $ 478,491 $ 053-259-001 Sport Warehouse Properties, LLC 5.46% 4.34% - $ - $ - $ 19,085 $ 228,538 $ 247,623 $ 053-259-002 Melton/Johnson Properties, LLC 9.59% 5.04% - $ - $ - $ 33,497 $ 265,494 $ 298,991 $ 076-071-016 (North) Caltrans (w/Annexation or EIR, Net of Octagon Barn) 13.00% 11.94% - $ - $ - $ 45,391 $ 628,671 $ 674,062 $ 076-071-016 (South) Caltrans (w/Annexation or EIR, Net of Flood Plain ) 4.47% 3.12% - $ - $ - $ 15,630 $ 164,076 $ 179,706 $ Total Allocations 100.00% 100.00% 100.00% 100.00% 100.00% 469,307 $ 450,000 $ 766,779 $ 349,281 $ 5,263,541 $ 7,298,909 $ Total Cost 469,307 $ 450,000 $ 766,779 $ 349,281 $ 5,263,541 $ 117,327 $ 293,850 $ 191,695 $ 174,641 $ 2,831,785 $ 3,609,298 $ Avila Ranch Fair Share 351,980 $ 156,150 $ 575,084 $ 174,641 $ 1,315,885 $ Existing Regional Traffic Share 1,115,871 $ Reimbursement Agreement Total 117,327 $ 293,850 $ 191,695 $ 174,641 $ 2,831,785 $ Share of Improvements Cost Allocations

Exhibit “4”
Illustration Depicting Park A and Basin A

Exhibit “5”
Mutual Escrow Instructions
September __ 2025
Sent via U.S. Mail and Email: [email protected] Joseph C. Megown
Construction Disbursing Manager
Westport Branch
Old Republic Title
11960 Westline Ind. Dr., Suite 232
St. Louis, MO 63146
Re: Mutual Escrow Instructions
Dear Mr. Megown,
Reference is made to that certain Tolling and Escrow Agreement dated March 28, 2023, as amended, between Avila Ranch Developers, Inc, (“ARD”) and the City of San Luis Obispo (“City”) wherein ARD and City acknowledged a dispute arising out of the development of the Avila Ranch project, which included a dispute over certain fees and reimbursements paid by ARD or owed to ARD (“Tolling Agreement”).

Pursuant to the terms of Tolling Agreement, the City and ARD agreed to stay litigation to allow the parties to mutually resolve these disputes, including, but not limited to establishing an escrow with Old Republic Title Company (“Escrow Holder”) wherein ARD would deposit the sum of $19,000 per dwelling unit developed (“ARD Escrow Funds”); and the City deposited the sum of One Million One Hundred Thirty-Six Thousand and 00/100 Dollars ($1,136,000.00) with Old Republic Title Company (“City Escrow Funds”).

ARD and the City are advised that Escrow Holder is currently holding the sum of $2,846,000.00 representing the sum of ARD Escrow Funds and City Escrow Funds as detailed in Exhibit “A” attached hereto (“Escrowed Funds”).

ARD and City have entered that certain Settlement Agreement, wherein ARD and City have reached agreement on the issues in dispute, including, but not limited to the distribution of the Escrow Funds.

This letter (this “Escrow Letter”) shall constitute the mutual escrow instructions of ARD and City, to be followed by Escrow Holder and our request that Escrow Holder distribute the Escrowed Funds as provide herein.

MUTUAL INSTRUCTIONS

1. Distribution of Escrowed Funds. Pursuant to the terms and conditions of the Settlement Agreement, Escrow Holder is hereby instructed to distribute the Escrowed Funds to ARD and City in the amounts set forth in Exhibit “B”.
a) Funds distributed to ARD shall be made by wire pursuant to separate wire instructions provided by ARD to Escrow Holder (“ARD Distribution”).

b) Funds distributed to City shall be made by wire transfer pursuant to separate wire instructions provided by City to Escrow Holder (“City Distribution”). c) ARD and City shall equally share in any fees charged by the Escrow Agent for the administration of this Escrow and Escrow Holder is instructed to deduct each Party’sshare of the Escrow Fees from each Party’s respective Distribution. d) The Distributions shall occur no later than 2:00 p.m. Pacific Time on _____________, 2025.

2. Close of Escrow. Upon the Distribution of the Escrowed Funds according to these Mutual Escrow Instructions, Escrow Holder is instructed to Close Escrow.

3. Notice. Any notice to be given hereunder to either Party shall be in writing and shall be given either by personal delivery, telecopier transmission, or by registered or certified mail, with return receipt requested, postage prepaid and addressed as follows:

To ARD:

Avila Ranch Developers
2505 Alluvial Avenue
Clovis, CA 93611
Attention: Michael Slater
To City:

City Attorney’s Office
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Attn: Christine Dietrick
Should you have any questions regarding the foregoing, please do not hesitate to contact the undersigned. Thank you for your assistance.

AVILA RANCH DEVELOPERS, INC.
a California corporation
By: _________________________________
Joshua Peterson, President
Dated: _____________, 2025

CITY OF SAN LUIS OBISPO
a California charter city
By: _______________________________
Whitney McDonald, City Manager
Dated: _____________, 2025

APPROVED AS TO FORM
By: _______________________________
J. Christine Dietrick, City Attorney

TH AVILA RANCH, LLC,
a California limited liability company
By: __________________________
Joshua E. Peterson,
Authorized Agent
Dated ________________, 2025

TRUMARK CONSTRUCTION SERVICES, INC.
a California corporation
By: __________________________
Joshua E. Peterson
Authorized Agent
Dated: ____________________, 2025
ACKNOWLEDGED AND AGREED TO THIS ________ DAY OF ________________, 2025, AS TO PROVISIONS RELATING TO ESCROW HOLDER:

Old Republic Title Company
By:

Joseph C. Megown
Construction Disbursing Manager, Westport Branch
cc: Jessica Moreno, Old Republic Title Company
David Fleishman, Richards Watson Gershon
Timmi Tway, Director of Community Development, City of San Luis Obispo Callie Taylor, Senior Planner, City of San Luis Obispo
Michael P. Slater, Vice President Land Use, Trumark Homes Dan Garson, Director of Land Development, Trumark Homes

Exhibit “A”
Escrowed Funds

Exhibit “B”
Distribution of Escrowed Funds
Initial Deposit from City $ 1,136,000.00
Subsequent Deposits ($19k/ permit) $ 1,710,000.00
TOTAL ESCROW DEPOSITS $ 2,846,000.00
Fire Refund $ (93,887.06)
Police Underpayment $ 8,804.60
TIF LOVR Base Refund $ (803,454.21)
TIF LOVR Add-on Refund $ (48,858.23)
Water Refund $ (171,888.01)
Wastewater Refund $ (159,633.77)
ARD DUE FROM ESCROW $ (1,268,916.68)
CITY DUE FROM ESCROW $ (1,577,083.32)
Escrow Ending Balance $ -

ESCROW DESPOSITS & DISTRIBUTION

ARD DISTRIBUTION

CITY DITSTRIBUTION

Exhibit “6”
Avila Ranch Phase 1 Impact Fee Schedule

Item 5e
Department: 8
Cost Center: 8506
For Agenda of: 11/4/2025
Placement: Consent
Estimated Time: N/A
FROM: Todd Tuggle, Fire Chief
Prepared By: Nicole Vert, Business Analyst
SUBJECT: AUTHORIZATION TO ENTER A LEASE AGREEMENT WITH JP MORGAN CHASE FOR THE PURCHASE OF A TYPE 1 FIRE ENGINE

RECOMMENDATION

1. Authorize the City Manager or designee, Finance Director or designee and City Attorney or designee to execute all related documents on behalf of the City to execute a three-year agreement with JP Morgan Chase Bank, N.A. with an interest rate not to exceed 5.00%, and purchase agreement with Pierce Manufacturing to accomplish the lease purchase of a Type 1 Fire Engine; and

2. Authorize a Budget Amendment Request (BAR) for $63,680.17 from Fire Impact Fee Revenue Fund to the project account number 2000554; and

3. Adopt a draft resolution entitled “a Resolution of the City Council of the City of San Luis Obispo, California, approving the lease purchase finance agreement of a fire engine through JP Morgan Chase Bank, N.A. and approving the final form of financing documents and official actions.” (Attachment A)

POLICY CONTEXT
The recommended actions are consistent with the City’s Capital Financing and Debt Management Policy Section 10 which states that the City’s debt management practices are “fiscally prudent, consistent with State and Federal law, and reflective of the most opportune financing strategies to deliver on the needs and goals of the community and the City organization.” In accordance with this policy, debt should be incurred for onetime capital expenditures and not ongoing operations.

DISCUSSION
Background
Emergency vehicles are a vital part of the service delivery for the City of San Luis Obispo Fire Department. The Type-1 fire engine is a critical piece of equipment for rapid response to all emergencies. A fire engine pumper (“fire engine”) has a standard lifespan of 10,000 hours and is staffed with emergency response personnel, tools, and equipment to provide all-hazards emergency services. The City currently has four “first-out” fire apparatus, stationed at each of the four stations around the City, and two reserve apparatus utilized

Item 5e
when the four “first-out” are out of service for planned or unplanned maintenance.

Through the utilization of an internal apparatus committee, staff developed fire engine specifications that were used to build the pricing for the purchase of Engine 5.

The specifications considered the community’s unique features and sought the best overall fire engine to complement the existing apparatus fleet. The specifications also align with the most recently purchased fire engine, Engine 4, with minor modifications based on experience and evolving emission standards. The new fire apparatus provides the same capabilities as previous engines but with improved safety, efficiency, reliability, and environmental requirements.

This engine is an expansion to the Fire Department fleet and is being procured for the planned Station 5. While the build of the new station is over 2 years away, the lead time for a new engine from order date to delivery is currently 45-51 months, necessitating placing the order now. Fire apparatus are outfitted with equipment necessary to serve the calls being responded to, from medical equipment such as cardiac monitors to chainsaws and hoses for fire emergencies. Historically, new engines are largely outfitted with equipment from the apparatus it is replacing. This engine will require the purchase of new equipment as it is not a replacement. The estimated cost of the new equipment is $250,000, inclusive of inflationary adjustments to ensure the budget is sufficient. The equipment purchases are not part of the lease financing described below.

Lease Purchase Recommendation
Council authorized the issuance of a purchase order on April 15, 2025 for the sole source purchase of a Pierce Enforcer Type 1 Engine Fire Apparatus. At the time of approval, staff was working through the process of finding the most favorable terms of a lease with external lenders but had not finalized any agreements.

The City has strategically used lease options as a way of reducing significant variations in the costs of replacing vehicles or other specialty equipment. A lease-purchase agreement is a debt financing method that allows for payment over a set term with the ability to use the apparatus immediately. Under the lease-purchase agreement, the City makes regular payments that include both principal and interest and spreads the cost across several fiscal years and at the end of the term ownership of the apparatus transfers to the City. The City facilitates the lease process by coordinating with the selected financing institution to finalize the terms, prepare the necessary documentation, and obtain required approvals. Once authorized by Council, staff executes the lease agreement, coordinates vendor payments, and ensures compliance with budget and procurement requirements throughout the term of the lease.

The City utilizes an established master lease agreement with JPMorgan Chase bank from 2018 that was approved by Council on August 21, 2018, when it approved the purchase and lease agreement for an engine in line with the City’s procurement policy that requires Council approval of purchases over $200,000. This master lease establishes the overall terms and conditions under which the City may lease-purchase equipment over time. The add-on schedule creates new repayment schedule specific to the current needs of the

Item 5e
City but the rate methodology and legal provisions remain consistent. Creating an addon to this master lease streamlines the process and allows the City to finance additional as needed equipment under the terms and conditions of the existing lease without negotiating a new agreement each time and the add-on agreement does not supersede the original 2018 agreement. If the City were to pursue a new standalone lease, the terms would not differ or improve from those terms already established under the existing master lease.

Due to the high cost of the fire engine, staff proposes debt financing the vehicle. The proposed annual lease payments are within the budgeted amounts in the financial plan, discussed in more detail in the ‘Fiscal Impact’ section of this report.

Previous Council or Advisory Body Action
On August 21, 2018 Council approved the purchase and lease agreement (Attachment B) for a Pierce Arrow PUC Type 1 Fire Engine.

On April 15, 2025 Council authorized the issuance of a purchase order for a sole source purchase of a Type I Fire Engine.

Public Engagement
This item is a consent item for the November 4, 2025, City Council meeting and will follow all required postings and notifications. The public will have an opportunity to comment on this item at or before the meeting.

CONCURRENCE
The Finance Department concurs with the Fire Department’s recommendation to finance the apparatus purchase with JP Morgan Chase Bank.

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

FISCAL IMPACT
Budgeted: Yes Budget Year: 2025-26
Funding Identified: Yes

Item 5e
Fiscal Analysis:

Funding Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $0 $0 $0 $
State
Federal
Fees (Fire Impact
Fees)
$63,680.17 $63,680.17 $0
Other: Capital
Outlay
$1,500,000 $1,061,810.92 $438,189.08
Total $1,563,680.17 $1,125,491.09 $438,189.08 $
Funding for the purchase of Engine 5 was initially programmed into the Capital Improvement Plan (CIP) beginning with adoption of the FY 2024-25 Budget Supplement, and additional funding is included in the CIP through FY 2029-30, as shown in the table below. In addition, there is an available balance of $63,680.17 in the Fire Impact Fee Fund, which is eligible for use to purchase fire apparatus to support new development.

Given that the development of Fire Station 5 and associated equipment and apparatus is required in order to support new development in the southern portion of the city, use of the impact fee funds is appropriate for this purchase. A total of $1,563,680.17 is available to support the purchase of Engine 5.

Capital Improvement Plan- Project No. 2000554
FY 2024-25 $150,000
FY 2025-26 $300,000
FY 2026-27 $300,000
FY 2027-28 $300,000
FY 2028-29 $300,000
FY 2029-30 $150,000
Subtotal $1,500,000
Fire Impact Fee Fund $63,680.17
Total Funding Available $1,563,680.17
The new engine will require outfitting with new equipment including but not limited to cardiac monitor, hoses and fittings, extrication equipment and other items necessary for a front-line apparatus. The total cost of the engine including the equipment and debt service is $1,375,491.10. That cost is made up from the price of the engine, the debt service cost of $57,052.09 and the equipment cost of $250,000. The equipment is not included in the lease and will be purchased with the remaining funding available in the project budget after the purchase of the Engine and associated interest costs, upon delivery of the engine.

Item 5e
The original quote for the engine was $1,244,287.76. A lease agreement means JP Morgan Chase will pay South Coast the full amount of the engine upon order and the City will make payments to JP Morgan Chase to repay the lease. This full payment to South Coast results in a price discount of $161,700, for a final quote on the engine of $1,068,439.01 (Attachment C).

Staff collaborated with JP Morgan Chase to establish lease terms that best meet the City’s needs (Attachment D). The amortization schedule below outlines the repayment of the financing through JP Morgan Chase. The agreement provides an estimate of an interest rate at 4.615%1; the final rate will be locked in upon Council’s approval of the financing and includes an advance payment of $259,742. This includes the $63,680.17 from the Fire Development Impact Fee Fund and $196,061.83 from the approved Capital Improvement Project budget. The remaining balance of $808,697.00 will be repaid over three years, in equal quarterly payments of $78,704.46. The total interest paid will be $57,052.09 for a total lease cost of $1,125,491.09. The total debt service cost of the engine is $1,125,491.09, which is $118,796.67 below the original cost of the engine’s original quote of $1,244,287.76.
.

1 Staff is requesting authority from Council to execute the lease purchase agreement up to an interest rate of 5.00%, due to the fact that the rate will not be locked in until after Council’s approval of this item.

Item 5e
Based on the available funding and the anticipated debt service amounts included in the amortization schedule, there is sufficient funding in each year of the CIP and Fire Impact Fee Fund to support the upfront payment of $259,742 and quarterly debt service payments each year. Based on the amortization schedule above, it is expected that $420,570.74 will remain to support outfitting of Engine 5 with new equipment upon delivery of the engine after the lease agreement is complete, which is currently estimated to cost $250,000. Although sufficient budget is available for the engine purchase using the Fire Impact Fee Revenue Fund to support the engine purchase will allow for remaining budget to be returned to the Capital Impact Fee Fund. This approach provides greater flexibility for other capital needs and helps relieve budgetary pressure on future CIP allocations.

Total Funding Available $1,563,680.17
Debt Service Costs $1,125,491.09
Equipment $250,000.00
Remaining Funding $170,570.74

ALTERNATIVES
Council could decide not to approve the debt financing of the fire engine. This would cause delays of other projects as budget would be pulled from other areas to cover the entire cost up front.

Item 5e
Council could request alternative payment plans. The recommended amortization schedule, which includes an upfront payment of $259,742 and a three-year repayment term, maximizes funds currently available to make annual payments, while also minimizing interest costs to the City.

ATTACHMENTS
A- Draft Resolution Approving the Lease Purchase Financing Proposal B- 2018 Fire Engine Lease Agreement
C- Pierce Quote for Fire Engine
D- Add-on to Master Lease Agreement

R ______
RESOLUTION NO. _____ (2025 SERIES)

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

OBISPO, CALIFORNIA, APPROVING THE LEASE PURCHASE OF A
FIRE ENGINE FROM JPMORGAN CHASE BANK, N.A. AND

APPROVING THE FINAL FORM OF FINANCING DOCUMENTS AND

OFFICIAL ACTIONS
WHEREAS, the City of San Luis Obispo provides fire protection services, which includes equipment that must be replaced from time to time.

WHEREAS, pursuant to applicable law, the City of San Luis Obispo may acquire and encumber real and personal property, including, without limitation, rights and interest in property, leases and easements necessary to the functions or operations of the City.

WHEREAS, the City Council has considered a Lease Purchase Financing Proposal offered by JPMorgan Chase Bank, N.A. and desires to authorize the execution of the lease in the amount of $1,068,439.00.

WHEREAS, the final form of the legal documentation relating to the financing has been prepared and the City Council wishes at this time to approve the final financing plan and the final form of such legal documentation.

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

SECTION 1. The City Council hereby approves the Add-on Lease Agreement relating to the financing of a fire engine, between the City and JPMorgan Chase Bank, N.A. in the form attached hereto as Attachment D, along with any changes therein or additions thereto deemed advisable by a the City Manager or Finance Director as an Authorized Officer; an Authorized Officer is hereby authorized and directed to attest, the final form of the Add-on Lease Agreement
SECTION 2. The Mayor, the City Manager, the Director of Finance, the City Clerk, Finance Director and City Manager are each authorized and directed in the name and on behalf of the City to make any and all assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they or any of them deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved under this Resolution. Whenever in this Resolution any officer of the City authorized to execute or countersign any document or take action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable.

Resolution No. _____ (2025 Series) Page 2
R ______
Upon motion of Council Member ___________, seconded by Council Member ___________, and on the following roll call vote:

AYES:

NOES:

ABSENT:

The foregoing resolution was adopted this _____ day of _______________ 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

Item 12
J.P.Morgan
JPMorgan Chase Bank, N.A.

Submission to
City of San Luis Obispo
Bid for Tax-Exempt Bank Qualified Lease Purchase
Financing For Acquisition of a Fire Truck
July 17, 2018
J. P. Morgan Equipment Finance Contact:

Rebecca Lowe, Executive Director
Senior Territory Manager
JPMorgan Chase Bank, N.A.
560 Mission St., FL 04, San Francisco, CA 94105
Telephone: 925-212-1065
[email protected]
JPMorgan Chase Bank, N.A. Contact:

Lou Mastro, Executive Director
Relationship Executive
JPMorgan Chase Bank, N.A.
3 Park Plaza Floor 09-STE 900, Irvine CA 92614
Telephone: 949-833-4746
lou. [email protected]
Packet Pg. 426
mailto:rebecca.a.lowe@jp
morgan.com

City of San Luis Obispo
Tax-Exempt Bank Qualified Municipal Lease Purchase
Summary of Terms and Conditions
July 17, 2018
Item 12
J.P. Morgan is pleased to submit the following equipment financing proposal. This document is for discussion purposes only and is contingent upon the Lessee's compliance with the requirements of the Internal Revenue Code of 1986 ("Code"), as amended, and all applicable state laws related to Lessee's ability to enter into a tax-exempt lease-purchase financing for the intended purposes. The final terms and conditions are subject to credit approval and may be different from the terms and conditions outlined below.

TRANSACTION SUMMARY
Lessee:

Lessor:

Transaction:

Use of Proceeds:

Financing Amount:

Bank Qualified:

Commencement Date:

TRANSACTION DETAILS
Financing Term:

Payment / Frequency:

Interest Rate:

Adjustment to Rate:

City of San Luis Obispo
JPMorgan Chase Bank, N.A. or any affiliate of JPMorgan Chase Bank, N.A., its successors and/or assigns ("JPMorgan Chase" /"Lessor"/ or "Bank").

Fixed-rate, fully amortizing, tax-exempt lease-purchase agreement ("Agreement").

To finance a Fire Truck, the legal title of which will vest with Lessee during the term of the Agreement. All equipment proposed for financing will be subject to final review and acceptance by Lessor prior to closing.

Estimated to be $673,096 (Additional Financing Amount shall be available upon mutual consent of Lessee and Lessor)
This proposal assumes that Lessee will not issue more than $10 million in taxexempt obligations this calendar year and that the Lessee will designate this lease as a "qualified" tax-exempt obligation.

Anticipated to be on or around August 15, 2018 or a mutually agreed upon date.

A) Five (5) Years
B) Seven (7) Years
C) Ten (10) Years
Equal quarterly payments of principal and interest in arrears, commencing August 15, 2018, which allows for the equipment to be delivered. Please see sample amortization schedules attached.

A) 3.185%
B) 3.199%
C) 3.272%
The Interest Rate and Payment will be subject to the index below based upon the then current 3-year Interest Rate Swap (mid) ("Index Rate") for Option A, the then current 4-year Interest Rate SWAP (mid) ("Index Rate") for Option B, and the then current 5-year Interest Rate SWAP (mid) ("Index Rate") for Option C as published in Bloomberg, which was 2.875%, 2.885% 8:

J.P.Morgan
Packet Pg. Page 76 of 365 428
Prepayment:

Disbursement of
Proceeds:

Security:

Appropriation:

OTHER TERMS
Documentation:

Conditions
Precedent:

Item 12

2.885% as of July 17, 2018. The Interest Rate will be the applicable Swap Rate multiplied by the Bank's Tax Exempt Factor of 79.00% plus a Spread, as outlined below. For every change (increase or decrease) in the Index Rate a corresponding adjustment will be made to the Interest Rate to maintain Lessor's economics. The final Interest Rate and Payment will be agreed to 3 days prior to closing.

Option A
Interest Rate= (Index Rate x 79.00%) + spread
3-Year Swap= (2.875% x 79.00%) + 0.9138% = 3.185%
Option B
Interest Rate= (Index Rate x 79.00%) + spread
4-Year Swap= (2.885% x 79.00%) + 0.9199% = 3.199%
Option C
Interest Rate= (Index Rate x 79.00%) + spread
5-Year Swap= (2.885% x 79.00%) + 0.9929% = 3.272%
Upon request, if the City would like to secure the Interest Rate, a Rate Lock transaction is available and can be discussed.

Lessor reserves the right to adjust the pricing proposed in order to maintain Lessor's anticipated economic return as a result of material adverse change.

The Financing may be prepaid without penalty, in whole but not in part, prior to maturity, on any payment date after the initial 12 months from Commencement, subject to 30 days prior written notice. If Lessee prepays the financing prior to the 12th month from Commencement, the payment may be subject to a fixed rate / "make whole" break funding charge.

The transaction will fund via an initial escrow deposit, to a mutually agreeable escrow agent, equal to the full Financing Amount. Disbursements will be made to vendors or as reimbursements to Lessee (in compliance with Treasury Reg. 1.150-2) as funds are required.

Lessee will grant Lessor a first priority security interest in the financed equipment. UCC I and UCCII filings will be completed as applicable.

This Agreement shall be subject to appropriation. The Agreement will require appropriation for payment for any and all equipment on a lease schedule. Appropriation for partial payment or for select assets within a schedule will not be permitted.

The terms of this financing will be evidenced by agreements, instruments and documents ("Lease Documents") usual and customary for a Tax-Exempt Lease Purchase. The Lease Documents must be acceptable to Lessor and its counsel.

Lessee shall be responsible for its own expenses related to review of the lease documents and delivery of opinion of counsel.

Usual and customary conditions to issuance of the financing including acceptable legal documentation which will include an opinion of counsel that the financing is valid, binding and enforceable. Additionally, documentation will provide that interest earned by the Lessor in this transaction will be excluded from gross income for federal tax purposes.

J.P.Morgan
Packet Pg. Page 77 of 365 429
Representations
and Warranties:

Maintenance &
Insurance:

Waiver of Jury Trial:

Anti-Corruption Laws
and Sanctions:

Waiver of Immunity:

Governing Law:

Proposal Expiration:

Confidentiality
Statement:

Item 12
Usual representations and warranties for like situated Lessees and the Facility's type and tenor, including, without limitation, absence of material adverse change, absence of material litigation, absence of default or potential default and continued accuracy of representations.

Representations and warranties relating to Absence of Sovereign Immunity (or waiver of sovereign immunity, if applicable) will also be required for all governmental entities.

All maintenance and insurance are the responsibility of Lessee. Lessee shall bear all risk of loss or damage of the Equipment and will be responsible for keeping the Equipment insured with companies satisfactory to Lessor.

Lessor, its parent and/or affiliates, its successors and assigns must be named as loss payee and additional insured as applicable, on all insurance policies.

Evidence of such insurance must be satisfactory to Lessor.

The Lessee hereby consents to the adjudication of any and all claims pursuant to Judicial Reference as provided in California Code of Civil Procedure Section 638, and the judicial referee shall be empowered to hear and determine any and all issues in such Reference whether fact or law.

The documentation shall contain representations and warranties that the Lessee has implemented and maintains in effect policies and procedures designed to ensure compliance by the Lessee, its subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Lessee, its subsidiaries and their respective officers and employees and to the knowledge of the Lessee, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Lessee, any subsidiary or any of their respective directors, officers or employees, or (b) to the knowledge of the Lessee, any agent of the Lessee or any subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or credit facility, use of proceeds or other transaction contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions.

Lessee hereby expressly and irrevocably waives any immunity (including sovereign, crown or similar immunity) and any defenses based thereon from any suit, action or proceeding or from any legal process in any forum with respect to Lease.

All aspects of the credit(s) being discussed including this Term Sheet and any Lease Documents would be governed by the laws of the State of California.

This proposal will expire if acceptance does not occur by July 31, 2018 (unless extended in writing by Lessor).

J.P. Morgan confirms that it will not use confidential information obtained from you by virtue of the potential transaction contemplated by this proposal or our other relationships with you in connection with the performance by J.P. Morgan of such services for other companies. You also acknowledge that J.P. Morgan will not use in connection with the potential transaction contemplated by this preliminary proposal, or furnish to you, confidential information obtained from other companies.

J.P.Morgan
Packet Pg. Page 78 of 365 430
Item 12
Municipal Advisor Disclosures and Disclaimers: The Lessee acknowledges and agrees that (i) the transaction contemplated herein is an arm's length commercial transaction between the Lessee and the Bank, (ii) in connection with such transaction, the Bank is acting solely as a principal and not as an advisor including, without limitation, a "Municipal Advisor" as such term is defined in Section 15B of the Securities and Exchange Act of 1934, as amended, and the related final rules (the "Municipal Advisor Rules"), agent or a fiduciary of the Lessee, (iii) the Bank is relying on the Bank exemption in the Municipal Advisor Rules, (iv) the Bank has not provided any advice or assumed any advisory or fiduciary responsibility in favor of the Lessee with respect to the transaction contemplated hereby and the discussions, undertakings and procedures leading thereto (whether or not the Bank, or any affiliate of the Bank, has provided other services or advised, or is currently providing other services or advising the Lessee on other matters), (v) the Bank has financial and other interests that differ from those of the Borrower, and (vi) the Lessee has consulted with its own financial, legal, accounting, tax, and other advisors, as applicable, to the extent it deemed appropriate.

Please feel free to contact me at (925) 212-1065 if you have any questions, or would like to discuss this proposal in greater detail. Upon receipt of the accepted proposal, we will promptly begin the approval process so that we may be in a position to finalize this transaction with you. Thank you for allowing us to be of service!
Yours sincerely,
Executive Director Executive Director
City of San Luis Obispo
Accepted Date: ____________ _
By:---------------
Title: ________________ _
Option: ________________ _

SAMPLE AMORTIZATIONS TABLES
Option A - 60-month
J.P.Morgan
Packet Pg. Page 79 of 365 431
Date
8/15/2018
11/15/2018
2/15/2019
5/15/2019
8/15/2019
11/15/2019
2/15/2020
5/15/2020
8/15/2020
11/15/2020
2/15/2021
5/15/2021
8/15/2021
11/15/2021
2/15/2022
5/15/2022
8/15/2022
11/15/2022
2/15/2023
5/15/2023
8/15/2023
Total
Item 12
Loa n Amortization
Average rate ..................................................... 3.185% starting debt
balance takedowns service interest
- 673,095.08 - -
673,095.08 - 36,539.14 5,359.52
641,915.46 - 36,539.14 5,111.25
610,487.57 - 36,539.14 4,861.01
578,809.44 - 36,539.14 4,608.77
546,879.07 - 36,539.14 4,354.52
514,694.46 - 36,539.14 4,098.25
482,253.58 - 36,539.14 3,839.94
449,554.38 - 36,539.14 3,579.58
416,594.82 - 36,539.14 3,317.14
383,372.82 - 36,539.14 3,052.61
349,886.29 - 36,539.14 2,785.97
316,133.12 - 36,539.14 2,517.21
282,111.19 - 36,539.14 2,246.31
247,818.36 - 36,539.14 1,973.25
213,252.47 - 36,539.14 1,698.02
178,411.36 - 36,539.14 1,420.60
143,292.82 - 36,539.14 1,140.97
107,894.65 - 36,539.14 859.11
72,214.62 - 36,539.14 575.01
36,250.49 - 36,539.14 288.64
730,782.77 57,687.69
Option B - 84-month
Loa n Amortization
ending
principal balance
- 673,095.08
31,179.62 641,915.46
31,427.89 610,487.57
31,678.13 578,809.44
31,930.37 546,879.07
32,184.61 514,694.46
32,440.88 482,253.58
32,699.19 449,554.38
32,959.56 416,594.82
33,222.00 383,372.82
33,486.53 349,886.29
33,753.17 316,133.12
34,021.93 282,111.19
34,292.83 247,818.36
34,565.88 213,252.47
34,841.12 178,411.36
35,118.54 143,292.82
35,398.17 107,894.65
35,680.03 72,214.62
35,964.13 36,250.49
36,250.49 -
673,095.08
J.P.Morgan
Packet Pg. Page 80 of 365 432
Date
8/15/2018
11/15/2018
2/15/2019
5/15/2019
8/15/2019
11/15/2019
2/15/2020
5/15/2020
8/15/2020
11/15/2020
2/15/2021
5/15/2021
8/15/2021
11/15/2021
2/15/2022
5/15/2022
8/15/2022
11/15/2022
2/15/2023
5/15/2023
8/15/2023
11/15/2023
2/15/2024
5/15/2024
8/15/2024
11/15/2024
2/15/2025
5/15/2025
8/15/2025
Total
Item 12
Average rate ..................................................... 3.199% starting debt ending
balance takedowns service interest principal balance
- 673,095.08 - - - 673,095.08
673,095.08 - 26,926.62 5,383.08 21,543.54 651,551.54
651,551.54 - 26,926.62 5,210.78 21,715.83 629,835.71
629,835.71 - 26,926.62 5,037.11 21,889.51 607,946.20
607,946.20 - 26,926.62 4,862.05 22,064.57 585,881.63
585,881.63 - 26,926.62 4,685.59 22,241.03 563,640.60
563,640.60 - 26,926.62 4,507.72 22,418.90 541,221.70
541,221.70 - 26,926.62 4,328.42 22,598.20 518,623.50
518,623.50 - 26,926.62 4,147.69 22,778.93 495,844.57
495,844.57 - 26,926.62 3,965.52 22,961.10 472,883.47
472,883.47 - 26,926.62 3,781.89 23,144.73 449,738.74
449,738.74 - 26,926.62 3,596.79 23,329.83 426,408.91
426,408.91 - 26,926.62 3,410.21 23,516.41 402,892.50
402,892.50 - 26,926.62 3,222.13 23,704.49 379,188.01
379,188.01 - 26,926.62 3,032.56 23,894.06 355,293.95
355,293.95 - 26,926.62 2,841.46 24,085.15 331,208.79
331,208.79 - 26,926.62 2,648.84 24,277.78 306,931.02
306,931.02 - 26,926.62 2,454.68 24,471.94 282,459.08
282,459.08 - 26,926.62 2,258.97 24,667.65 257,791.43
257,791.43 - 26,926.62 2,061.69 24,864.93 232,926.50
232,926.50 - 26,926.62 1,862.83 25,063.79 207,862.71
207,862.71 - 26,926.62 1,662.38 25,264.24 182,598.47
182,598.47 - 26,926.62 1,460.33 25,466.29 157,132.19
157,132.19 - 26,926.62 1,256.66 25,669.95 131,462.23
131,462.23 - 26,926.62 1,051.37 25,875.25 105,586.98
105,586.98 - 26,926.62 844.43 26,082.19 79,504.80
79,504.80 - 26,926.62 635.84 26,290.78 53,214.02
53,214.02 - 26,926.62 425.58 26,501.04 26,712.98
26,712.98 - 26,926.62 213.64 26,712.98 -
753,945.30 80,850.22 673,095.08
Option C - 120-month
Loan Amortiza tion
Average rate ..................................................... 3.272% J.P.Morgan
Packet Pg. Page 81 of 365 433
starting debt
Date balance takedowns service
8/15/2018 - 673,095.08 -
11/15/2018 673,095.08 - 19,798.32
2/15/2019 658,802.68 - 19,798.32
5/15/2019 644,393.36 - 19,798.32
8/15/2019 629,866.17 - 19,798.32
11/15/2019 615,220.16 - 19,798.32
2/15/2020 600,454.34 - 19,798.32
5/15/2020 585,567.73 - 19,798.32
8/15/2020 570,559.35 - 19,798.32
11/15/2020 555,428.21 - 19,798.32
2/15/2021 540,173.29 - 19,798.32
5/15/2021 524,793.58 - 19,798.32
8/15/2021 509,288.07 - 19,798.32
11/15/2021 493,655.73 - 19,798.32
2/15/2022 477,895.51 - 19,798.32
5/15/2022 462,006.38 - 19,798.32
8/15/2022 445,987.27 - 19,798.32
11/15/2022 429,837.12 - 19,798.32
2/15/2023 413,554.87 - 19,798.32
5/15/2023 397,139.43 - 19,798.32
8/15/2023 380,589.71 - 19,798.32
11/15/2023 363,904.62 - 19,798.32
2/15/2024 347,083.04 - 19,798.32
5/15/2024 330,123.86 - 19,798.32
8/15/2024 313,025.95 - 19,798.32
11/15/2024 295,788.18 - 19,798.32
2/15/2025 278,409.41 - 19,798.32
5/15/2025 260,888.48 - 19,798.32
8/15/2025 243,224.23 - 19,798.32
11/15/2025 225,415.49 - 19,798.32
2/15/2026 207,461.07 - 19,798.32
5/15/2026 189,359.78 - 19,798.32
8/15/2026 171,110.42 - 19,798.32
11/15/2026 152,711.79 - 19,798.32
2/15/2027 134,162.66 - 19,798.32
5/15/2027 115,461.79 - 19,798.32
8/15/2027 96,607.95 - 19,798.32
11/15/2027 77,599.88 - 19,798.32
2/15/2028 58,436.33 - 19,798.32
5/15/2028 39,116.03 - 19,798.32
8/15/2028 19,637.68 - 19,798.32
Total 791,932.64
interest
-
5,505.91
5,389.00
5,271.13
5,152.30
5,032.49
4,911.71
4,789.94
4,667.17
4,543.40
4,418.61
4,292.81
4,165.97
4,038.10
3,909.18
3,779.21
3,648.17
3,516.06
3,382.87
3,248.60
3,113.22
2,976.74
2,839.14
2,700.41
2,560.55
2,419.54
2,277.39
2,134.07
1,989.57
1,843.90
1,697.03
1,548.96
1,399.68
1,249.18
1,097.45
944.48
790.25
634.77
478.01
319.97
160.64
118,837.56
Item 12
ending
principal balance
- 673,095.08
14,292.40 658,802.68
14,409.32 644,393.36
14,527.18 629,866.17
14,646.02 615,220.16
14,765.82 600,454.34
14,886.61 585,567.73
15,008.38 570,559.35
15,131.15 555,428.21
15,254.92 540,173.29
15,379.70 524,793.58
15,505.51 509,288.07
15,632.34 493,655.73
15,760.22 477,895.51
15,889.14 462,006.38
16,019.11 445,987.27
16,150.14 429,837.12
16,282.25 413,554.87
16,415.44 397,139.43
16,549.72 380,589.71
16,685.10 363,904.62
16,821.58 347,083.04
16,959.18 330,123.86
17,097.91 313,025.95
17,237.77 295,788.18
17,378.77 278,409.41
17,520.93 260,888.48
17,664.25 243,224.23
17,808.74 225,415.49
17,954.42 207,461.07
18,101.29 189,359.78
18,249.35 171,110.42
18,398.63 152,711.79
18,549.14 134,162.66
18,700.87 115,461.79
18,853.84 96,607.95
19,008.06 77,599.88
19,163.55 58,436.33
19,320.31 39,116.03
19,478.35 19,637.68
19,637.68 -
673,095.08
J.P.Morgan
Packet Pg. Page 82 of 365 434
Extension
One ( 1 )
$ 1,144,163.00
100% Prepayment Discount $ (161,700.00)
APPARATUS COST $ 982,463.00
Sales Tax @ 8.750% $ 85,965.51
Performance Bond $ -
Consortium Fee Not Applicable $ -
California Tire Fee $ 10.50
$ 1,068,439.01
Less 100% pre-payment at Contract Signing $ 1,068,439.01 BALANCE DUE AT DELIVERY $0.00
require no money down and no payments for one (1) year if desired.

Discount for the 100% pre-payment option includes discounts for the chassis, interest, aerial (if applicable), and flooring charges.

Any item added after this option is elected will come at additional cost and will be added to the final invoice.
b) If your department signs up for a lease-purchase with Pierce Financial Solutions. This would *
*
a) If your department makes a 100% cash pre-payment at contract signing. $ 85,965.51
Not Required $ -
$ 10.50
TOTAL PREPAY PURCHASE PRICE $ 1,068,439.01
$ 1,068,439.01
$0.00
100% PRE-PAYMENT DISCOUNT SHOWN ABOVE IS AVAILABLE IN TWO WAYS:
$ -
$ 982,463.00
San Luis Obispo City
100% Pre-Payment Option
January 16, 2025
If a 100% pre-payment were made at contract signing, the following discount would be applied to the final invoice:

Each
Enforcer Type-1 Pierce Ultimate
Configuration Engine Fire Apparatus
$ 1,144,163.00
$ (161,700.00)

The proposal for fire apparatus conforms with all Federal Department of Transportation (DOT) rules and regulations in effect at the time of bid, and with all National Fire Protection Association (NFPA) guidelines for Automotive Fire Apparatus as published at time of bid, except as modified by customer specifications Any increased costs incurred by the first party because of future changes in or additoinas to said DOT or NFPA standards will be passed along to the customer as an addition to the price set forth above. Unless accepted within 30 days from the specified date, the right is reserved to withdraw this proposition.

Respectfully Submitted,
South Coast Fire Equipment, Inc.

Sales Representative
I, _Daniel Clancy /s/ - Purchasing Analyst - City of San Luis Obispo, authorized representative of the City agrees to purchase the proposed product(s) and agree to the terms and conditions of this proposal and the specifications hereto attached.

Signature:____________________________________
Title:_______________ Date:____________________
The Seller will document any such updated price for the customer's approval before proceeding and provide an option to cancel the order without charge if the updated price is not accepted.

Bryden Newell
Force Majeure - South Coast Fire Equipment shall not be responsible nor deemed to be in default on accountof delays in performance due to causes which are beyond the seller's and manufacturer's control and make the seller's performance impracticable, including but not limited to wars, insurrections, strikes, riots, fires, storms, floods, other acts of nature, explosions, earthquakes, accidents, any act of government, delays in transportation, inability to obtain necessary labor supplies or manufacturing facilities, allocation regulations or orders affecting materials, equipment, facilities or completed products, failure to obtain any required license or certificates, acts of God or the public enemy or terrorisim, failure of transportation, epidemics, quarantine restrictions, failure of vendors (due to causes similiar to those within the scope of the clause) to perform their contracts or labor troubles causing cessation, slowdow, or interruption of work.

Cancellation/Termination. In the event this Agreement is cancelled or terminated by a party before completion, South Coast Fire Equipment (SCFE) may charge a cancellation fee. The following charge schedule based on costs incurred may be applied: (a) 10% of the Purchase Price after order is accepted and entered by Manufacturer; (b) 20% of the Purchase Price after completion of approval drawings, and; (c) 30% of the Purchase Price upon any material requisition. The cancellation fee will increase accordingly as costs are incurred as the order progresses through engineering and into manufacturing. SCFE endeavors to mitigate any such costs through the sale of such Product to another purchaser; however Customer shall remain liable for the difference between the Purchase Price and, if applicable, the sale price obtained by SCFE upon sale of the Product to another purchaser, plus any costs incurred by SCFE to conduct any such sale.

Due to global supply chain constraints, any delivery date contained herein is a good faith estimate as of the date of this order/contract, and merely an approximation based on current information. Delivery updates will be made available, and a final firm delivery date will be provided as soon as possible.

Persistent Inflationary Environment: If the Producer Price Index of Components for Manufacturing (www.bls.gov Series ID: WPUID6112) ("PPI") has increased at a compounded annual growth rate of 5.0% or more between the month Pierce accepts the order (Order Month") and a month 14 months prior to the then predicted Ready For Pickup date ("Evalution Month"), then pricing may be updated in an amount equal to the increase in PPI over 5.0% for each year or fractional year between the Order Month and the Evaluation Month.

City of San Luis Obispo
Add-on to Master Lease Agreement dated August 31, 2018
Financing For Pierce Enforcer Pumper
September 26, 2025
J. P. Morgan Equipment Finance Contact:

Rebecca Lowe, Executive Director
Senior Territory Manager
JPMorgan Chase Bank, N.A.
1390 S Main Street, Fl 2
Walnut Creek, CA 94596
Telephone: 925-212-1065
[email protected]
JPMorgan Chase Bank, N.A. Contact:

Sean Hennessy, Executive Director
Relationship Executive
JPMorgan Chase Bank, N.A.
300 S. Grand Avenue, Fl 3
Los Angeles, CA 90071
Telephone: 213-621-8187
[email protected]

September 26, 2025
Emily Jackson
Finance Director
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Dear Emily:

J.P. Morgan Chase Equipment Finance is pleased to propose to the City of San Luis Obispo an equipment financing to support the City’s purchase of one (1) Pierce fire truck in an amount up to $1.068439.01, subject to the following terms and conditions described herein (the “Term Sheet”). The terms and conditions are based on the City’s selection of a 3yr financing term with an advance payment of $259,742. The final interest rate will be determined based on the interest rate formula detailed in the Term Sheet.

The proposed terms are submitted to you in our capacity as a Lessor in an arm’s length commercial transaction. J.P. Morgan is acting solely as a principal and not as a “Municipal Advisor” as defined in Section 15B of the Securities and Exchange Act of 1934, as amended, and the related final rules (the "Municipal Advisor Rules") or any other agent or fiduciary capacity. JPMorgan is providing this information to you in reliance on the Bank exemption in the Municipal Advisor Rules and is not recommending that you take action or refrain from taking action or providing any advice. See “Municipal Advisor Disclosures and Disclaimers” in the Summary of Terms for further information relating to same.

Should you have any questions about any aspect of this Term Sheet, please do not hesitate to contact me at (925) 212-1065. Thank you and we look forward to continuing to work with the City of San Luis Obispo and your financing team.

Yours sincerely,
Rebecca Lowe
Rebecca Lowe
Executive Director
Equipment Finance
1390 S Main St, Floor 02
Walnut Creek, CA 94596
Email – [email protected]
Rebecca Lowe
Executive Director
Sean Hennessy
Executive Director

City of San Luis Obispo
Tax-Exempt Municipal Lease Purchase
Summary of Terms and Conditions
September 26, 2025
J.P. Morgan is pleased to submit the following equipment financing Term Sheet. This document is for discussion purposes only and is contingent upon the Lessee’s compliance with the requirements of the Internal Revenue Code of 1986 (“Code”), as amended, and all applicable state laws related to Lessee’s ability to enter into a tax-exempt lease-purchase financing for the intended purposes.

TRANSACTION SUMMARY
Lessee: City of San Luis Obispo
Lessor: JPMorgan Chase Bank, N.A. or any affiliate of JPMorgan Chase Bank, N.A., its successors and/or assigns (“JPMorgan Chase”/“Lessor”/ or “Bank”).

Transaction: Fixed-rate, fully amortizing, tax-exempt lease-purchase agreement (“Agreement”).

Use of Proceeds: To finance one (1) Pierce Enforcer Type 1 Fire Engine, the legal title of which will vest with Lessee during the term of the Agreement. All equipment proposed for financing will be subject to final review and acceptance by Lessor prior to closing.

Financing Amount: $1,068,439.01
Bank Qualified: This Term Sheet assumes that Lessee will issue less than $10 million in taxexempt obligations this calendar year and that the Lessee will designate this lease as a “bank qualified” tax-exempt obligation.

Commencement Date: Anticipated to be on or around October 30, 2025 or a mutually agreed upon date.

TRANSACTION DETAILS
Financing Term: Three (3) Years
Payment / Frequency: Equal quarterly payments of principal and interest after an advance payment of ($259,742), commencing October 30, 2025. (see sample amortization schedule attached)
Interest Rate: 4.615%
Adjustment to Rate: The Interest Rate and Payments will be subject to the index Formula below based upon the then current 2-year SOFR Swap Rate (“Index Rate”), which was 3.435% as of September 26, 2025. The Interest Rate will be the Index Rate multiplied by the Bank’s Tax Exempt Factor of 79% plus a Spread, as outlined below. For every change (increase or decrease) in the Index Rate a corresponding adjustment will be made to the Interest Rate to maintain Lessor’s economics. The final Interest Rate and Payment will be locked upon Council approval.

Interest Rate = (Index Rate x 79%) + spread
2-Year Swap = (3.435% x 79%) + 1.9014% = 4.615%
Lessor reserves the right to adjust the pricing proposed in order to maintain Lessor’s anticipated economic return as a result of material adverse change.

Prepayment: The Financing may be prepaid in whole but not in part, prior to maturity, on any payment date after the initial 12 months from Commencement, subject to 30 days prior written notice. Prepayment may be subject to a fixed rate / “make whole” break funding charge.

Disbursement of
Proceeds:

The transaction will fund upon delivery of an acceptable performance bond in which JPMorgan Chase has been added as “additional insured” under the Obligee Rider.

Security: Lessee will grant Lessor a first priority security interest in the financed equipment. UCC I and UCCII filings will be completed as applicable, as well as Lessor shall be named as lienholder in all titled vehicles.

Appropriation: This Agreement shall be subject to appropriation. The Agreement will require appropriation for payment for any and all equipment on a lease schedule.

OTHER TERMS
Documentation: The terms of this financing will be evidenced by agreements, instruments and documents (“Lease Documents”) usual and customary for a Tax-Exempt Lease Purchase. The Lease Documents must be acceptable to Lessor and its counsel. Existing Master Lease documents dated August 31, 2018 shall be used for this financing. In addition, Lessee shall provide written confirmation that Lessor has been added, as Additional Obligee, to the Lessee’s performance bond. Performance bond provider shall be mutually agreeable to Lessee and Lessor.

Lessee shall be responsible for its own expenses related to review of the lease documents and delivery of opinion of counsel.

Conditions
Precedent:

Usual and customary conditions to issuance of the financing including acceptable legal documentation which will include an opinion of counsel that the financing is valid, binding and enforceable. Additionally, documentation will provide that interest earned by the Lessor in this transaction will be excluded from gross income for federal tax purposes.

Representations
and Warranties:

Usual representations and warranties for like situated Lessees and the Facility’s type and tenor, including, without limitation, absence of material adverse change, absence of material litigation, absence of default or potential default and continued accuracy of representations.

Representations and warranties relating to Absence of Sovereign Immunity (or waiver of sovereign immunity, if applicable) will also be required for all governmental entities.

Maintenance &
Insurance:

All maintenance and insurance are the responsibility of Lessee. Lessee shall bear all risk of loss or damage of the Equipment and will be responsible for keeping the Equipment insured with companies satisfactory to Lessor.

Lessor, its parent and/or affiliates, its successors and assigns must be named

as loss payee and additional insured as applicable, on all insurance policies.

Evidence of such insurance must be satisfactory to Lessor.

Waiver of Jury Trial: The Lessee hereby consents to the adjudication of any and all claims pursuant to Judicial Reference as provided in California Code of Civil Procedure Section 638, and the judicial referee shall be empowered to hear and determine any and all issues in such Reference whether fact or law.

Anti-Corruption Laws
and Sanctions:

The documentation shall contain representations and warranties that the Lessee has implemented and maintains in effect policies and procedures designed to ensure compliance by the Lessee, its subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and the Lessee, its subsidiaries and their respective officers and employees and to the knowledge of the Lessee, its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (a) the Lessee, any subsidiary or any of their respective directors, officers or employees, or (b) to the knowledge of the Lessee, any agent of the Lessee or any subsidiary that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Borrowing or credit facility, use of proceeds or other transaction contemplated by this Agreement will violate any Anti-Corruption Law or applicable Sanctions.

Waiver of Immunity: Lessee hereby expressly and irrevocably waives any immunity (including sovereign, crown or similar immunity) and any defenses based thereon from any suit, action or proceeding or from any legal process in any forum with respect to Lease.

Governing Law: All aspects of the credit(s) being discussed including this Term Sheet and any Lease Documents would be governed by the laws of the State of California.

Term Sheet Expiration: This Term Sheet will expire if acceptance does not occur by October 9, 2025 (unless extended in writing by Lessor).

Please feel free to contact me at (925) 212-1065 if you have any questions, or would like to discuss this Term Sheet in greater detail. Upon receipt of the accepted Term Sheet, we will promptly begin the documentation process in anticipation of the City’s Council meeting on October 21, 2025.

Thank you for allowing us to be of service!
Yours sincerely,
Rebecca Lowe Sean Hennessy
Executive Director Executive Director
City of San Luis Obispo
Accepted Date: _____________________________
By: ________________________________________
Title: ______________________________________

SAMPLE AMORTIZATIONS TABLE
3 Year – advance payment
Loan Amortization
Rate.....................................................4.615% starting debt ending
Date balance takedowns service interest principal balance 10/30/2025 - 1,068,439.00 259,742.00 - 259,742.00 808,697.00 1/30/2026 808,697.00 - 78,704.46 9,330.34 69,374.12 739,322.88 4/30/2026 739,322.88 - 78,704.46 8,529.94 70,174.52 669,148.35 7/30/2026 669,148.35 - 78,704.46 7,720.30 70,984.16 598,164.19 10/30/2026 598,164.19 - 78,704.46 6,901.32 71,803.14 526,361.05 1/30/2027 526,361.05 - 78,704.46 6,072.89 72,631.57 453,729.48 4/30/2027 453,729.48 - 78,704.46 5,234.90 73,469.56 380,259.92 7/30/2027 380,259.92 - 78,704.46 4,387.25 74,317.21 305,942.70 10/30/2027 305,942.70 - 78,704.46 3,529.81 75,174.65 230,768.05 1/30/2028 230,768.05 - 78,704.46 2,662.49 76,041.98 154,726.08 4/30/2028 154,726.08 - 78,704.46 1,785.15 76,919.31 77,806.77 7/30/2028 77,806.77 - 78,704.46 897.70 77,806.77 -
Total 1,125,491.09 57,052.09 1,068,439.00

City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: November 4, 2025
TO: Mayor and Council
FROM: Greg Hermann, Deputy City Manager
VIA: Whitney McDonald, City Manager
SUBJECT: ITEM #6A – FISCAL YEAR 2024-25 YEAR END BUDGET REPORT Below is initial information in response to the funding request received from the San Luis Obispo Museum of Art (SLOMA) on October 30, 2025:

The purpose of this Council Agenda Correspondence is to provide additional context and background to the letter correspondence and proposal received from the San Luis Obispo Museum of Art (SLOMA) on October 30, 2025, requesting that the City Council consider funding in the total amount of $2.5 million towards a new, expanded museum space in downtown San Luis Obispo.

Background and Summary of Request
As Council is aware, the City of San Luis Obispo enjoys a long-standing public / private partnership with the SLOMA that stretches back over 60 years, including through the lease of City property at the location of the existing museum at 1010 Broad Street tangent to Mission Plaza in 1967. This relationship has supported a wide variety of activities and initiatives during this time in support of the visual arts, including the establishment of a formal Community Partnership Agreement with SLOMA beginning in 2021 in furtherance of the City’s Public Art Program.

Over the past five years, SLOMA has built a strong staff and Board of Directors, increased museum offerings and patrons of the museum, and re-invigorated its long-standing goal of assembling a contemporary museum space of sufficient size and building characteristics to meet its growing needs. A study commissioned by SLOMA to help them better understand their space and building needs was prepared by the firm Lord Cultural Resources (2023), which identified that demand exists for increased museum offerings, and that a sufficiently sized new museum could attract as many as 110,000 visitors per year. Importantly, this study also found that construction of a new museum at the existing location that would meet this need is cost prohibitive.

ITEM 6A – FISCAL YEAR 2024-25 YEAR END BUDGET REPORT Page 2 SLOMA’s Proposal for Supporting the Future San Luis Obispo Museum of Art: A New Home in the Heart of Downtown submitted to Council on October 30, 2025, describes SLOMA’s plans to expand from the 1010 Broad Street location by bringing together three existing storefront properties on Higuera Street between Chorro and Garden, while also maintaining and featuring connectivity to the creek walk, Mission Plaza, and the Cultural Arts District. The three properties together would form a 24,000-square-foot museum facility with multiple galleries, a museum café and store, a blend of indoor and outdoor space, and downstairs offices supportive of SLOMA’s operations and storage needs. The 1010 Broad Street property would be used for expanded arts educations programming, which is consistent with the existing lease agreement with the City. At present, staff have facilitated and participated in SLOMA and the existing property owner’s formal preapplication with the Community Development Department, including a site walk and meeting, to provide early input and feedback related to planning, building, and other pertinent development review items related to the proposed project.

SLOMA’s proposal indicates that the total project is estimated at $20 million, to be raised and implemented in two phases. SLOMA has requested that the City Council consider total funding of $2.5 million, of which $500,000 would be used for the first phase to immediately furnish and activate the new museum space, while the remaining $2 million would be used towards the eventual purchase of the property at a later time. SLOMA indicates that the City’s participation would bring the total funds raised to over $11 million towards the overall capital campaign.

Staff Analysis
Staff concurs that the project has significant alignment with the City’s existing Major City Goals, the City’s Economic Development Strategic Plan, and other pertinent vision documents and studies, as highlighted in SLOMA’s proposal1. Notably, the proposal also utilizes the Arts and Economic Prosperity 6 model for estimating economic activity associated with a museum of this size and the anticipated number of visitors and patrons, concluding that SLOMA’s operation of the proposed facility would contribute nearly $5 million annually to the local economy and $3 million in direct audience spending. The proposed project represents another key Downtown investment, in addition to the Cultural Arts District Parking Garage, new SLO REP Theatre, and the Mission Plaza Enhancement Project, that will help to ensure the Downtown’s vibrancy into the future. In this regard, the proposal is also consistent with the San Luis Obispo Downtown Concept Plan (2017) goals for Strong Identity (“Foster an economically and culturally diverse

1 The project described in the proposal aligns with the following goals, plans, and documents:
a. Major City Goals – Cultural Vitality, Economic Resilience, and Fiscal Sustainability; Diversity, Equity, and Inclusion; Climate Action
b. Economic Development Strategic Plan – Placemaking & Promotion c. Downtown SLO Development Report, Resonance Consultancy (2021) d. Arts and Economic Prosperity 5 (2015) and Economic Impact of the Arts & Culture Sector (2025)
e. The Rise of the Experiential Economy, Cushman & Wakefield (2025)

ITEM 6A – FISCAL YEAR 2024-25 YEAR END BUDGET REPORT Page 3 downtown…”) and for Art, Culture, and History (“Expand cultural, historical, and artistic opportunities…”), as well as policies found within the Land Use Element of the General Plan (2014) including policy 4.1 (“Downtown is the community’s urban center serving as the cultural, social, entertainment, and political center of the City… The City wants its urban core to be economically healthy and realizes that private and public investments in the Downtown support each other”) and policy 4.3 )“Cultural facilities, such as museums and galleries should be Downtown.”).

The Fiscal Year 2024-25 Year End Report indicates that the City concluded the last budget year with approximately $4.1 million in unassigned fund balance, based on unaudited financials. This amount assumes that the City will make an Additional Discretionary Payment (ADP) to CalPERS to help address the City’s unfunded pension liability in the amount of $2 million. Consistent with the City’s most recent ADP, the City Council may wish to increase the ADP to approximately $2.9 million to account for increases in staffing costs since the ADP was originally established in Fiscal Year 2018- 19, in which case the $4.1 million in available fund balance would drop to $3.2 million.

Staff is recommending that appropriations from the available fund balance be made in February 2026 when the FY 2025-26 Second Quarter Budget Report is presented and the final audit has been completed.

As part of adoption of the Financial Plan every two years, the City Council reviews and adopts the City’s fiscal policies for the Financial Plan period. Section 8 of the City’s Fiscal Policies- CalPERS & Unfunded Liabilities sets the following prioritization of unassigned General Fund balance:
a. Additional discretionary payments to CalPERS
b. Infrastructure investments
c. Emerging Health and Safety needs of the community
The Council ultimately, however, has full discretion to allocate funding as it deems appropriate.

Council may choose to direct staff to facilitate all or a portion of SLOMA’s proposal for funding, in which case it is recommended that available one-time year end funds accrued from FY 2024-25 be assigned from General Fund balance for this purpose. Staff would then work with SLOMA to develop a Grant Agreement that includes the following terms, as well as any other key items or considerations that Council might direct:
a. Milestones for submittal and City approval of a fundraising plan demonstrating project feasibility, project schedule, obtaining all required building permits and planning entitlements based on project phasing,
b. requirements for allowable uses and timing of City funds, c. forecasted operating budgets demonstrating a sustainable business model, d. identification of additional public benefits,
e. appropriate funding security terms for the project should the property no longer be used for the purposes intended at some time in the future,

ITEM 6A – FISCAL YEAR 2024-25 YEAR END BUDGET REPORT Page 4 f. consider provisions related to the currently leased space to ensure consistency with the vision for the Cultural Arts District.

Staff would return to Council with the draft Grant Agreement and any other pertinent project details at a future City Council meeting. As mentioned above, appropriations from fund balance are recommended to occur as part of the Second Quarter Budget Report to be presented in February 2026, after the audit has been completed. Additionally, negotiation and development of a Grant Agreement would take time; therefore, it is recommended that, if directed by Council, the Grant Agreement and appropriation from available fund balance be considered as part of the Second Quarter Budget Report in February 2026. SLOMA has indicated that Council direction to staff to negotiate a Grant Agreement to provide funding will satisfy the requirements of challenge grant ending this calendar year.

ITEM 6A – FISCAL YEAR 2024-25 YEAR END BUDGET REPORT Page 5 Staff also received the following questions regarding agenda correspondence for this item. The questions are below with staff’s responses shown in italics:
1) Please provide a short summary of all the funds we provide to SLOMA annually, including how that has changed over time. Also, have we made any one-time donations to them for specific projects over the past 2-3 financial plans?
The City entered into partnership agreements with SLOMA to support larger scale public art projects beginning with the 2021-23 Financial Plan. The City is currently in the third, two-year partnership agreement which has allowed for both permanent and temporary public art projects throughout the City. The initial partnership agreement from 2021-2023 provided an annual $60,000 administrative fee to procure and manage installations related to the Orcutt Roundabout sculpture, large scale mural on the back of the Fremont Theater, and two temporary sculpture showcases on the Mission Plaza Lawn. The 2023-2025 and the current 2025-2027 partnership agreements increased the annual SLOMA administrative fee to $100,000 for procurement and management for key City funded public art projects such as the Garden Street Alley, three different rotating sculptures at the Mission Plaza lawn, the scheduled “Shift” roundabout sculpture on Froom Ranch Road, and future sculpture art for the upcoming Righetti Community Park. 2) What is the City’s annual contribution to the Performing Arts Center? The current amounts budgeted in the 2025-27 Financial Plan for the City’s contribution to the Performing Arts Centers is $351,191 in FY 25-26 and $359,971 in FY 26-27.

City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: November 4, 2025
TO: Mayor and Council
FROM: Emily Jackson, Director of Finance
Prepared By: Riley Kuhn, Principal Budget Analyst
VIA: Whitney McDonald, City Manager
SUBJECT: ITEM #6A - FISCAL YEAR 2024-25 YEAR END BUDGET REPORT Staff received the following questions regarding the Fiscal Year 2024-25 Year End Budget Report. The questions are below with staff’s response shown in italics:
1) On page 101, the report references a reduction in business tax at least partially to a local tax paying business being bought by a tax exempt entity.

Can you provide more detail on this and also what the lasting impacts are predicted to be?
As a general rule, businesses operating in the City are subject to the local business tax equal to 0.05% of gross receipts attributable to business conducted within the City. Not for profit entities such as 501(c)(3) organizations are exempt from this tax. While acquisitions by exempt entities are rare, several large taxpaying businesses were acquired in recent years, reducing the level of business tax collections for the foreseeable future.
2) Page 122/123 describes our Insurance Fund balance and policy. It appears we have a policy to maintain a fund balance of 150% of our 75% confidence level, but we are not currently at that level. Do we intend to meet our policy level in the future? What happens if we do not meet our own policy level? In the last two fiscal years, the City has opted to increase its self-insurance levels, which can result in higher actuarial recommendations for reserves. A one-time transfer to achieve a higher fund balance has not yet been made. However, in recent years, the Insurance Fund has spent well below its operating budget, including savings of $1.3M in FY 2024-25, and these unspent amounts remain in the Fund to address future expenses. Staff is currently working to develop a multiyear plan to fund the Insurance Fund at the policy-required level. Not meeting the funding level required by policy could negatively impact the City’s ability to pay insurance and claim related expenses.

6.A. FY 2024-25 YEAR END BUDGET REPORT Page 2
3) Can you explain in a little more detail how Governmental Standards Accounting Board (GASB) 87 changed our reporting of lease revenue? What is meant by “the City must recognize the value of lease payments over the full term of the lease rather than only when payments are received”? Can you give some examples of where we have leases this applies to? GASB 87 applies to all leases that the City holds, including but not limited to: the Garden Street lease to support construction of Hotel Cerro on land formerly used as a surface parking lot, the lease for commercial retail space located in the Marsh Street Parking Structure, leases for use of City utility poles for communications equipment, and leases for use of City property for cellular communications sites.

Under GASB 87 the City must recognize income evenly over the life of a lease rather than recording the cash payments as called for in the lease agreement. This applies to a lease in the Parking Fund which calls for annual increases over the 99 year term. For accounting purposes, the total contract value is amortized over the remainder of the lease. Currently, this amortized amount is greater than cash received but as cash payments increase, it will be less than the higher cash payment.
4) On page 138, it shows that our Water Fund “Other Revenue” far exceeds what was anticipated for the year, and it give some explanation as to why (investment income, some grants, etc.). If that level of revenue is not expected to continue and therefore cannot justify rate decreases, what happens to that one-time revenue? Do we save it in a reserves in case of future deficit years?
Investment income came in higher than expected because of strong market performance. Grant revenue was also higher since several projects received reimbursement this year instead of last year. These are one-time revenues and will stay in the Water Fund’s reserves. Keeping these funds in reserve helps maintain a strong financial position, provides protection against future shortfalls, and may help limit the need for larger rate adjustments in future years. 5) Do we have any performance measures for our solid waste and recycling program? I see a couple for water and sewer, but none for that program.

Staff currently tracks the total number of illegal dumping incidents, compliance with State laws such as AB 341, AB 1826, and SB 1383 (including organics procurement target compliance), outreach metrics, overall waste diversion for franchised residential and commercial waste, and contamination levels in City facility containers. However, these indicators are used for internal monitoring purposes and have not been formally adopted by the City Council as performance metrics.

6.A. FY 2024-25 YEAR END BUDGET REPORT Page 3
6) On page 155, I think there is a typo-- there is a number $967,3363? This number represents salary savings within the Emergency Response division of the Fire Department and should read $967,363. This has been corrected in the document posted to the City’s budget webpage.
7) With regard to impacts of federal shut down and grants:
a. On page 195 of the packet, there is a -$742 in the FY 2025-26 “other federal grants” column. What does that mean?
This negative revenue represents an accounting adjustment to an ongoing Transit grant and has no operational impact. It is expected that this adjustment will be offset with revenue collections in the remainder of the year.
b. What is the status of our federal broadband funding? Is that in jeopardy?
Staff have been communicating with the California Public Utility Commission (CPUC). While there is some concern about the Federal government potentially pulling back broadband funding, staff have not seen serious efforts to do so. The CPUC’s guidance is to continue moving projects forward. As a result, Information Technology and Public Works staff are completing their review of the construction plans for the City’s grant funded broadband project, and plan to bring those plans to the City Council for authorization to advertise the project at the December 2, 2025 City Council Meeting. Other agencies currently under construction on their projects are experiencing delays in reimbursements due to the ongoing federal government shutdown, but staff expects these issues to be resolved once the Federal government reopens.
8) On page 190, there is reference to a deferred work plan item to consider a charter amendment to enable alternative capital project delivery methods.

Do we have an estimated timeframe for that item? 2027-29? 2029-31? This workplan item is likely recommended to be deferred to the 2029-31 Financial Plan. Alternative delivery methods are primarily intended to benefit large scale vertical construction of capital improvement projects such as the Public Safety Center and a long-term permanent Fire Station 5. The Entitlement and Design efforts for the Public Safety Center are expected to be re-initiated within that Financial Plan period.

Item 6a
Department: Finance
Cost Center: 2002
For Agenda of: 11/4/2025
Placement: Business
Estimated Time: 90 Minutes
FROM: Emily Jackson, Finance Director
Prepared By: Riley Kuhn, Principal Budget Analyst
SUBJECT: FISCAL YEAR 2024-25 YEAR END BUDGET REPORT

RECOMMENDATION
Receive and file the FY 2024-25 Year End Budget Report.

POLICY CONTEXT
The City’s Budget Policies require that the City Council review the City’s budget and financial condition through periodic reports. This year end report satisfies the requirement for the fourth of four quarterly budget updates to Council under Financial Management Manual Section 560.

DISCUSSION
Background
The Fiscal Year 2024-25 Year End Budget Report (Attachment A), Major City Goal Summary (Attachment B), and Federal Funding Summary (Attachment C) are attached to this Council Agenda Report. A brief summary of each attachment includes:

Attachment A: FY 2024-25 Year End Budget Report. This report is based on unaudited financial information that is presented to Council as a good faith effort to timely communicate year-end results. Because the audit is ongoing, these results are highly preliminary and subject to change.

The General Fund realized savings of $5.4M from its operating expenditures budget, primarily driven by staffing savings from vacancies. Revenue came in $1.0M below budget driven by under-realization of reimbursement revenue from Winter 2023 storms.

While certain individual line items including sales tax and development fees also underperformed budget, all major categories including tax revenue and user fees exceeded budget.

All other funds finished the year in good standing and within their operating budget appropriations.

Item 6a
Attachment B: Major City Goals Summary. This attachment provides an update on the status of all Major City Goal tasks within the 2023-25 Financial Plan. Of the 145 tasks expected to be completed during the Financial Plan, 129 or 89% were either completed or ongoing. The report includes a brief summary of how each task was completed, or a longer description of the reason for any delay.

Attachment C: Federal Funding Summary. This report was prepared in response to the shutdown of the Federal Government on October 1, 2025 and details the City’s exposure to federal funding.

Previous Council or Advisory Body Action
The FY 2024-25 budget was adopted by Council on June 4th, 2024. Mid-year changes were approved by Council on February 18, 2025. The Revenue Enhancement Oversight Commission has concurred with all budgeted uses of Local Revenue Measure funds.

Public Engagement
Public comment on this item can be provided to the City Council through written correspondence prior to the meeting and through public testimony at the meeting. The FY 2024-25 Year End Budget Report will also be posted to the City’s website for public review.

CONCURRENCE
All departments were involved in the preparation of the year-end budget report.

Department Heads and Fiscal Officers were given ample time to review their results and collaborate with the Finance Department to complete their sections and review the report as a whole.

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

FISCAL IMPACT
Budgeted: N/A Budget Year: 2024-25
Funding Identified: N/A

Item 6a
Fiscal Analysis:

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

Total $0 $0 $0 $0
This budget report provides important information on current revenue and expenditures trends to keep the Council and community informed about the City’s financial standing and program efforts.

There is no fiscal impact associated with the recommendation to receive and file the budget report.

ALTERNATIVES
The City Council could choose to make appropriations of unassigned fund balance.

As noted in the report, the FY 2024-25 annual audit is still underway and the information included in this report (including the amount of unassigned fund balance available) is preliminary and subject to change. Should Council pursue this option, staff will make a good faith effort to estimate fund balance available prior to the completion of the audit, however, any appropriation in excess of actual fund balance available would reduce operating reserves below policy levels.

ATTACHMENTS
A - Fiscal Year 2024-25 Year End Budget Report
B - Major City Goals Summary
C - Federal Funding Summary

Fourth Quarter Financial Report (Year-End)
Fiscal Year 2024-25
Introduction
The fourth quarter (Year-End Report) provides an overview of the City’s financial position and results as of and for the year ended June 30, 2025. This report includes the General Fund, the Special Revenue Funds, and the City’s four enterprise funds. These results are shared on a preliminary basis in the interest of transparency. All figures are subject to change until the audit is complete and the FY 2024-25 Annual Comprehensive Financial Report is published in late 2025.

Table of contents
General Fund Overview….…………………………………………………………………………..2
General Fund Expenditures ………………………………………………………………………..4 General Fund Revenue ……………………………………………………………………………….5
Storm Update……………………………………………………………………………………………. 9
Department Summaries and Updates…………………………………………………….…12 Capital Improvement Program Update……………………………………………………. 71

General Fund Overview
The General Fund finished the year with operating expenditures $5.4M or 5% favorable to budget driven largely by staffing vacancies. The remainder of the savings came from Contract Services and Other Operating Expenditures. The City Manager activated the Fiscal Health Contingency Plan in April 2025 in order to address economic uncertainty and an identified future budget deficit. Due to its activation late in the fiscal year, the FHCP did not contribute significantly toward the expenditure savings at year end, but did help to preserve some flexibility to address the forecasted deficit in future years.

Total revenue finished $1.0M below budget driven by lower sales tax receipts, a decline in development fee revenue, and delays in reimbursement for Winter 2023 storms. Of the $8.7M budgeted for storm reimbursement, just $0.9M was received. While some individual line items underperformed, the broader categories of tax revenue, user fees, and general government revenue all exceeded budget.

General Fund Summary
Unfavorable Revenue Variance ($1,026,950)
Operating Budget Savings 5,431,097
Net variance to budget $4,404,147
As shown in the table below, this net favorable variance of $4.4M represents a narrowing of the gap between budget and actuals relative to prior years. In other words, Fiscal Year 2024-25 ended with less year-end savings than prior years.

The variance shown above represents the difference between budgeted and actual revenue and expenditures. This is not the same as the fund balance available for appropriation at year-end, which is $10.9M $11.6M
$10.0M
$8.9M
$4.4M
($5M)
$0M
$5M
$10M
$15M
FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25
Year-end Variance Trends
Revenue Expenditures

based on the long-term forecast for the General Fund and includes certain unbudgeted assumptions including salary savings due to vacancies and changes in reserved, committed, and assigned fund balances.

In order to present these preliminary results on a timely basis, this report was drafted concurrently with the annual audit and as a result, all numbers presented here are subject to change.

The table below represents a preliminary estimate of the fund balance available and will be updated with audited results which will be used as the basis for Staff’s appropriation recommendations as a part of the FY 2025-26 Second Quarter Budget Report in February 2026.

Fund Balance (in millions)
Beginning Balance $43.1
+Revenue 126.7
-Expenditures 122.4
Ending Balance 47.4
-Committed & Assigned 28.7
-Reserved 14.6
Unassigned Fund Balance $4.1
Assigned fund balance includes $2.0M to fund the annual Additional Discretionary Payment (ADP) to CalPERS. Based on Council Guidance from development of the 2025-27 Financial Plan, the recommended ADP will be inflated in line with staffing costs and is expected to be approximately $2.9M. This recommendation to appropriate approximately $0.9M from the unassigned fund balance to increase the ADP to approximately $2.9M, and other appropriation recommendations, will be made as part of the FY 2025-26 Second Quarter Budget Report.

Staff recommendations will be consistent with Section 8 of the City’s Budget Policies in the 2025-27 Financial Plan, which calls for prioritization of additional discretionary payments to CalPERS, infrastructure investments, and addressing emerging health and safety needs of the community.

The City’s policy related to budget carryover for operating programs specifies that operating program appropriations not spent during the first year of a Financial Plan may be carried over for specific purposes, to the second year. As FY 2024-25 was the second year of the 2023-25 Financial Plan, no budget carryover was approved by the City Manager.

A detailed analysis of expenditures and revenue follows, and additional information can be found in each department’s writeup.

General Fund Expenditures
The General Fund finished the year with roughly 5% of its operating budget unspent, with savings in Staffing (4%), Contract Services (15%) and Other Operating Expenditures (8%). These results are in line with historical trends and were driven in part by deliberate reductions in spending in response to changes in revenue trends.

General Fund Expenditures by Type
Unspent budgets were primarily driven by staffing vacancies. There is a difference in methodology between budgets, which departments are accountable to, and the Long-Term Forecast for the General Fund, which is used to determine if the budget is balanced. The General Fund budget assumes 100% staffing for all positions with no vacancies, and the long-term forecast assumes 4% or $2.5M in staffing savings for vacancies. Net of assumed vacancy, the Fund realized $0.6M in true savings, detailed in the table below.

Contract Services contributed an additional $1.7M in savings, primarily from the Community Development Department which intentionally reduced spending in response to slowing development activity and collection of associated user fee revenues.

Other Operating Expenditures were $0.7M below budget with contributions from all departments, the largest of which came from Public Works due to favorable weather conditions reducing the cost of water and sewer services for the City’s parks.
` FY 2023-24 FY 2024-25 FY 2025-26
Actual Budget Actual Funds
Available % Budget
Staffing 68,748,977 $ 78,514,398 $ 75,489,526 $ 3,024,872 $ 4% 78,804,551 $ Contract Services 10,721,258 11,529,330 9,839,883 1,689,448 15% 11,995,946 Other Operating Expenditures 7,674,086 8,971,435 8,254,657 716,778 8% 9,158,906 Total 87,144,321 $ 99,015,163 $ 93,584,065 $ 5,431,097 $ 5% 99,959,403 $ Staffing Savings
Total Savings 3,024,872 $
(Vacancy Assumption) (2,460,959)
Net Savings 563,912 $

General Fund Expenditures by Department
All departments finished the year under budget. For detailed analysis and commentary on individual departments’ results, please refer to the ‘Department Summaries and Updates’ section.

General Fund Revenue
The table below provides an overview of actual General Fund revenue compared to budget for the last fiscal year, prior year actuals, and current year budgets.

FY 2023-24 FY 2024-25 FY 2025-26
Actual Budget Actual Funds Available % Budget
Admin & IT 10,767,663 11,591,856 10,859,649 732,208 6% 11,752,023 City Attorney 1,472,411 1,758,600 1,651,262 107,337 6% 1,863,615 CDD 7,157,271 9,328,340 7,862,336 1,466,003 16% 9,059,766 CSG Admin 829,900 688,761 554,193 134,569 20% 614,367
Finance 2,275,677 2,785,589 2,681,624 103,965 4% 2,850,096 Fire 15,960,639 18,950,508 18,785,025 165,483 1% 18,108,272 Human Resources 2,179,463 2,395,349 2,080,416 314,933 13% 2,061,730 Non-Departmental 403,850 1,097,273 349,186 748,087 68% 2,399,772 Parks & Recreation 5,414,249 6,183,784 5,997,819 185,965 3% 6,231,512 Police 23,233,179 24,787,837 24,657,118 130,719 1% 25,600,253 Public Works 17,038,967 19,041,802 17,707,935 1,333,867 7% 19,022,753 Utilities 411,052 405,464 397,502 7,962 2% 395,243
Total 87,144,321 $ 99,015,163 $ 93,584,065 $ 5,431,098 $ 5% 99,959,403 $ FY 2023-24 FY 2024-25 FY 2025-26
General Fund Actual Budget Actual Variance % Budget
Tax & Franchise Revenue
Sales Tax 53,404,212 $ 56,383,599 $ 54,357,111 $ (2,026,488) $ -4% 55,470,441 $ Property Tax 23,723,431 23,446,385 24,923,847 1,477,461 6% 25,944,966 Transient Occupancy Tax 11,063,012 10,586,256 11,417,888 831,632 8% 11,099,705 Utility User Tax 6,301,505 6,622,639 7,501,436 878,797 13% 6,605,306 Business Tax 2,942,923 3,317,338 3,138,271 (179,067) -5% 3,230,170 Franchise Fees 2,366,286 2,091,800 2,622,351 530,551 25% 2,242,429 Cannabis Tax 1,116,495 1,100,000 814,502 (285,498) -26% 1,000,000 Subtotal 100,917,864 103,548,018 104,775,406 1,227,388 1% 105,593,017 User Fees
Development Review 6,276,972 6,585,331 5,697,332 (887,999) -13% 4,606,812 Parks & Recreation 2,415,605 2,082,847 2,643,907 561,060 27% 2,280,283 Fire 2,267,237 2,882,464 3,331,998 449,534 16% 1,759,183 Police 1,022,145 844,790 834,584 (10,206) -1% 690,200
Business Licenses 703,544 700,600 792,548 91,948 13% 632,470 Subtotal 12,685,503 13,096,032 13,300,370 204,338 2% 9,968,947 General Government 6,235,698 2,326,768 7,691,002 5,364,234 231% 1,669,077 2023 Storm Reimbursement 8,732,000 909,090 (7,822,910) -90% - Total Revenue 119,839,064 $ 127,702,817 $ 126,675,868 $ (1,026,950) $ -1% 117,231,041 $

Sales and Use Tax Revenue (Including Local Revenue Measure): This cyclical revenue stream was expected to rebound after several years of tepid growth. Shortly after supplemental budget adoption for FY 2024-25, these expectations were revised downwards and staff signaled in the Q1 Budget Report that sales tax revenue was expected to underperform. In February 2025, the City’s sales tax consultants projected that this line item would miss budget by $2.7M. While the FY 2024-25 result is lower than budget, it is also not as low as previously feared, and, at +1.7% higher than the prior year, indicates that the local economy is still growing on a nominal basis. This compares favorably to the broader Central Coast which grew by +1.5% year over year and the state which contracted by -0.1%.

The table below visualizes recent sales tax trends and the FY 2025-26 budget:

This highly cyclical revenue stream remains under pressure from macroeconomic conditions and even the modest growth forecasted in the 2025-27 Financial Plan may prove elusive. The FY 2025-26 budget assumes year over year growth of +2.1%, well below the inflationary rate and in line with recent trends.

However, the City’s consultants have advised that consumer discretionary spending is under pressure and the City’s sales tax revenue may underperform expectations by up to $1.3M in FY 2025-26 which would indicate year over year decline of $0.2M or -0.3%.

Property Tax: This revenue stream is relatively stable year over year due to Prop 13 which limits assessment increases on existing homes to 2% each year. In FY 2024-25, this revenue stream grew at +5.1% year over year driven by existing homes with artificially low assessed values being sold and reassessed at market value. Home prices in San Luis Obispo continued to increase during the fiscal year despite persistently elevated mortgage rates.

This revenue stream is typically forecasted based on conservative estimates from the County Assessor’s Office, leading to large favorable variances at year-end. In the 2025-27 Financial Plan, staff made modest $51.6M $52.9M $53.4M $54.4M $55.5M
$0.0M
$10.0M
$20.0M
$30.0M
$40.0M
$50.0M
$60.0M
FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26B Sales Tax Trend

adjustments to this budget in an effort to more accurately forecast revenue and expect a smaller favorable variance from a FY 2025-26 budget that assumes +4.1% year over year growth.

Transient Occupancy Tax (TOT): TOT exceeded budget by $0.8M and delivered +3.2% year-over-year growth. Staff attribute this growth to new hotel properties that added supply to the market that were met with strong consumer demand. Key performance indicators such as Occupancy and Revenue per Available Room saw modest increases, and Average Daily Rates remained essentially flat. TOT has been conservatively forecasted for FY 2025-26.

Utility User Tax (UUT): UUT revenue exceeded budget by $0.9M and increased by 19% year-over-year.

This revenue stream is based on both market price and consumer utilization of utilities and, as such, can be highly volatile. This revenue stream is once again conservatively forecasted for FY 2025-26.

Business Tax: This revenue stream finished under budget due to acquisitions of taxpaying businesses by tax exempt entities. Current budgets have been adjusted downwards to reflect recent collections trends and budget attainment at this lower level is expected in FY 2025-26.

Cannabis Tax: Cannabis Tax revenue missed budget by $0.3M or 26%. This revenue stream has declined for two years in a row after reaching its peak in FY 2022-23. The legal cannabis industry in California has struggled in recent years, prompting the State to pass AB 564 to reduce excise taxes.

Franchise Fees: Similar to UUT, Franchise Fees are assessed against utilities companies and exceeded an intentionally conservative budget by $0.5M or 25%.

General Government: This line item includes all of the City’s non-departmental, non-tax revenues including investment income, rent, grants, and other miscellaneous revenue. The most notable variance in general government revenue was investment income which exceeded budget by $4.7M. The City generally invests its cash in safe and highly liquid short duration credit securities which have benefited from exceptionally high yields in recent years.

The table below details the trend in investment income received over the last five years, broken down by Cash Income received from investments and Fair Market Value (FMV) adjustments which represent the fluctuations in value that fixed income investments experience when market interest rates change.

Assuming the City does not sell its investments prior to maturity, FMV Adjustments are non-cash in nature, but are treated as a reduction to revenue and fund balance for accounting purposes.

In Fiscal Year 2020-21, investment income was minimal as monetary policy actions by the Federal Reserve held interest rates near zero to stimulate the economy after the COVID pandemic. In FY 2021-22, interest rates rose in response to rapid inflation. This led to an increase in cash income received as newly purchased investments paid higher rates of interest, however, the market value of the City’s portfolio decreased by $1.7M as its average interest rate was well below the market rate leading to a net loss of $1.0M in FY 2021-22. Market interest rates fell in FY 2023-24 as the Federal Reserve was widely expected to cut rates to avoid sending the economy into recession and, in FY 2024-25 the Federal Reserve did reduce its benchmark rate and the market rate decreased further. As interest rates decreased, the average interest rate of the City’s portfolio became higher than the market rate and positive FMV adjustments were recorded. This trend accelerated in FY 2024-25.

Throughout this period the City has maintained a conservative forecast for investment income of approximately $0.5M annually. Market interest rates have been volatile in recent years. Should rates increase in the future, the City could realize negative investment income once again. If interest rates continue to fall as expected, investment income will exceed a conservative FY 2025-26 budget but this variance is expected to shrink as the City reinvests proceeds from maturing securities at lower yields.

User Fees: This broad category of fees for service finished in line with expectations, exceeding budget by just $0.2M or 2%. Development Review revenue underperformed by $0.9M driven by a slowdown in building activity locally that mirrors national trends. This was offset by outperformance from Parks & Recreation and Fire which each exceeded their projections by approximately $0.5M. Detailed writeups for the individual fees can be found within the writeup of the relevant department.

2023 Winter Storms Update
As noted in prior budget reports, the winter storms in January and March 2023 caused significant damage to City infrastructure and resulted in emergency declarations at the Federal and State level, in addition to the Emergency Services Director’s local emergency proclamation. The City Council authorized use of up to $9 million from the City’s operating reserve in FY 2022-23 and FY 2023-24 to address unbudgeted storm costs, and with adoption of the 2023-25 Financial Plan, the City Council also allocated $2.75 million in the CIP to fund projects to repair storm damages and mitigate against future damage. An additional $2.1 million was allocated to storm damage repair with adoption of the FY 2024-25 Budget Supplement. The Federal and State declarations enable the City to seek reimbursement for certain storm related costs. The maximum reimbursement for eligible costs is 93.75% (75% from the Federal Emergency Management Agency (FEMA) and 18.75% from the California Office of Emergency Services (CalOES), meaning that the City will pay a minimum of 6.25% for certain storm related costs.

The FEMA reimbursement process continues to move slowly due to turnover in the FEMA Program Delivery Managers assigned to assist local agencies in submitting projects for reimbursement and a lack of clarity about the information required in order to submit projects. At the Federal level, there is increasing conversation about the current administration’s plans to shift the burden of disaster relief and recovery onto states. While some communities are already experiencing this, it is not currently expected that this shift will put the City’s projects in danger, as the 2023 Winter Storms occurred nearly three years ago.

To address some of the delays in obtaining reimbursement, City staff met with Congressman Carbajal’s Office in May 2025 to seek assistance in navigating FEMA’s processes. Since that time, the City has been able to make some good progress on getting projects obligated for reimbursement. As of the writing of this report, the City has received just under $1 million in reimbursement, with another $1 million obligated. The table below provides a high-level summary of the status of the project costs that have been submitted to FEMA:

Storm Project Reimbursement Status
Status Amount # of Projects Notes
Obligated for
reimbursement
$1.94M 19 The City has received $962,213 of this amount.

Pending final FEMA
review
$6.74M 5 Includes San Luis Drive project ($5.36M) and
Citywide Debris Removal project ($1.34M), which
both require Congressional review prior to formal
obligation.

FEMA review
ongoing
$8.86M 15 Three of these projects including two at Stenner Creek and one at Old Garden Creek total $4.75M
are planned future projects and may be canceled
if FEMA does not approve reimbursement.

Determined
ineligible
$18.01M 10 Staff have formally appealed three of the projects determined to be ineligible (a total of $7.03M of
the total amount determined ineligible). Staff are
sending all appeals to Congressman Carbajal’s
office for awareness and follow-up with FEMA.

Despite the current Federal shutdown, staff continues to receive and respond to requests for information (RFIs) from FEMA related to the City’s projects. While FEMA has not provided a formal communication to the City about the impact of the Federal shutdown, it is expected that further reimbursement will be delayed due to a lack of funding in the Disaster Relief Fund. In addition, two of the City’s most costly projects (the San Luis Drive project and the Citywide Debris Removal project) are awaiting Congressional review prior to formal obligation, due to the total cost of each being in excess of $1 million. Congressional review of these projects will be delayed due to Congress not being in session.

Based upon staff delivery capacity and FEMA reimbursement timeframes, staff continues to work on the highest priority storm damage projects. The projects that are shown in the table below represent the highest priority projects for delivery at this time based upon the need to mitigate previously completed projects, protect existing infrastructure, and/or represent projects that must be completed. The Elks Lane Projects are included in this list due to an existing easement agreement.

Storm Projects

Administration & IT
Administration & IT
A Year in Review
The Office of the City Manager conƟnued to provide informaƟon and recommendaƟons to the City ama Council, implemented Council policies and programs and managed the day-to-day operaƟons of the City.

The City CommunicaƟons Program worked to support City departments and the City Council in communicaƟng effecƟvely with the community during FY 2024-25. The Economic Development and Tourism Program was a major contributor to The Economic Resiliency, Cultural Vitality & Fiscal Sustainability Major City Goal. The team piloted the Business Navigator program to provide support to people looking to start or expand businesses and supported cultural vitality and placemaking. The Office of Sustainability and Natural Resources team worked in close collaboraƟon with Ranger Service to implement the Righeƫ Hill Open Space ConservaƟon Plan (2023). The Office of Diversity, Equity, and Inclusion office completed the Community Belonging Series which provided opportuniƟes throughout the city to hear from diverse speakers on topics of access and inclusion. Network Services Staff conƟnued to advance the City’s Broadband Plan, securing $4.8 million in Last Mile FFA Grant Funding, and the InformaƟon Services team, comprised of Geographic InformaƟon Systems (GIS) and enterprise applicaƟon support, completed a major project to streamline the way overƟme calculaƟon is handled in the Oracle system, simplifying the process to complete the City’s payroll, in collaboraƟon with Finance and Human Resources staff.

The AdministraƟon and IT Department ended the year with overall savings of 6% ($732,208). The majority of savings ($481,161) was in salaries and benefits due to the number vacancies and posiƟons held vacant during the year. Other savings included contract services at $154,030 and other operaƟng expenditures at $97,016.

Variance Analysis
Staffing: The AdministraƟon and IT Department ended the year with 7% ($481,161) in salary savings represenƟng the majority of departmental savings. The savings are aƩributed to various vacancies throughout the year including the City Manager, ExecuƟve AdministraƟve Assistant, DEI Manager and AdministraƟve Specialist, Economic Development & Tourism Manager, InformaƟon Services System ApplicaƟon Specialists supporƟng Oracle and GIS applicaƟons, and Deputy City Clerk. Several of these posiƟons were also held vacant to provide opƟons for future budget balancing work. To ensure conƟnuity on key projects and services, $85,000 in salary savings was uƟlized for contract support for the City’s Oracle system. AddiƟonal savings are Ɵed to changes in benefit elecƟons.

Contract Services: The contract services budget supported delivering on the objecƟves and commitments outlined in the Major City Goals and work programs. This included the Buy Local Bonus and Restaurant FY 2023-24 FY 2024-25 FY 2025-26
Admin & IT Actual Budget Actual Funds
Available % Budget
Staffing 6,038,015 $ 6,839,367 $ 6,358,206 $ 481,161 $ 7% 6,591,776 $ Contract Services 3,682,510 3,672,746 3,518,715 154,030 4% 4,000,403 Other Operating Expenditures 1,047,253 1,079,743 982,728 97,016 9% 1,159,845 Total 10,767,778 $ 11,591,856 $ 10,859,649 $ 732,208 $ 6% 11,752,023 $

Administration & IT
programs, Childcare grants, Downtown acƟvaƟons, DEI High Impact grants, Human Services grants, IT infrastructure maintenance and more. Contract services were under budget by 4% ($154,030). There was $32,000 in savings due to some program delays resulƟng from the vacancy in the Economic Development and Tourism Manager posiƟon. The Office of Sustainability and Natural Resources had savings of approximately $22,800; this was due to the year-end close out of the Buildings Upgrade Prize funds ($10,300) and purchase orders with vendors and community partners coming in less than anƟcipated ($12,500). Savings from the City Clerk’s Office of $20,000 were due to delays in regular maintenance and updates to the Council Hearing Room and Chambers audio/video equipment. There was $15,000 in savings in the Office of DEI, which is budgeted annually to support the biannual Community Academy or another community engagement program in alternaƟng years. When the program was made ongoing in 2023, the intent was to alternate the Community Academy with a new “Candidate EducaƟon Offering” developed as part of the City’s 2024 CVRA seƩlement. Due to elecƟon Ɵming, the first Candidate EducaƟon Offering will occur in November 2025 (FY 2025-26). Beginning in spring 2026, it will alternate with the Community Academy in future years.

Other OperaƟng Expenditures: The majority of savings in other operaƟng expenditures was in professional development and training ($48,000). This was the result of the number of posiƟons that became vacant, the number of posiƟons held vacant and implementaƟon of the Travel Chill in April 2025.

The majority of professional development occurs during the last quarter of the fiscal year coinciding with the acƟvaƟon of the travel chill resulƟng in a larger amount of savings.

The compleƟon of InformaƟon Technology Capital Improvement Projects, including replacement of Uninterrupted Power Supply (UPS), ECC Computers, and CAD Servers and Storage reduced the need for annual maintenance of those systems and the corresponding operaƟng expenditures for a one-Ɵme savings of approximately $25,000.

Administration & IT
Performance Measures
AdministraƟon & IT Performance Measures
Objective Measure 2024-25
Target
2024-25
Actual
Provides City-wide communications to
the community.

Strategic Goal: Citywide
Communications
Open City Hall Participant Satisfaction Rating 92% 92%
# of Pageviews for City News Pages 150,000 54,829
# of news e-mail subscribers 6,000 11,375
Provides reliable IT resources to the
organization and community.

Strategic Goal: Information Technology
Maintain City Network Reliability Uptime Status 99.9% 99.9% Data backed up in Terabytes 173 147
Number of GIS layers maintained 920 920
Economic Stability
Strategic Goal: Economic Recovery and
Stability
Contacts with businesses regarding starting,
expanding, and/or staying in the city 75 128
One-time funds used for direct aid to local businesses
and non-profits $175,000 $170,000
Supports our commitment to
sustainability and provides open space
resources to the community.

Strategic Goal: Climate Action, Open
Space, and Sustainable Transportation
# of Green Team Meetings 10 10
# of Open Space Conservation Plans that will guide
the long-term protection and stewardship of natural
resource values while guiding appropriate use
1 0
Strengthens the City’s commitment to
advancing Diversity Equity and Inclusion
Strategic Goal: DEI
# of City-wide DEI Trainings Offered 6 1
# of DEI Newsletters for Staff 6 6
Funds for High-Impact DEI Grants Awarded $150,000 $150,000 # of Pageviews for City News Pages
Staff discovered in FY 2024-25 that Google changed how they track this metric resulƟng in fewer views than expected. According to reports, Google now automaƟcally filters out bot traffic, which provides the city with a much more accurate count of human pageviews, but also significantly reduces the total number of pageviews. During FY 2024-25, many other websites have reported a similar decline in pageviews. Staff will consider adjusƟng its targets or removing this metric altogether in the coming years due to inconsistent methods used by Google AnalyƟcs.

Data backed up in Terabytes
Staff deployed a new Body worn Camera plaƞorm for the Police Department, which stores data in the cloud rather than on servers hosted and maintained by the city. The new plaƞorm also handles backups for data. Due to this operaƟonal shiŌ, as well as the clean-up of aged records per the City’s Record RetenƟon Schedule, the city has reduced the total amount of data that it stores and backs up. Staff are

Administration & IT
seeing an increase in digital evidence and general document storage that will likely increase this number in future years.

One-Ɵme funds used for direct aid to local businesses and non-profits This year, $125,000 was spent on the Buy Local Bonus program, $20,000 was spent on SLO Restaurant Month, and $25,000 for childcare expansion grants through CAPSLO. AddiƟonal funding to economic development partnerships and business support services includes $210,000 to Downtown SLO, $50,000 to REACH, $30,000 in annual services with the Cal Poly Center for InnovaƟon and Entrepreneurship (CIE), $2,500 to Score, and $2,500 to SoŌec which totals to $465,000 when considering support for economic development partners.
# of Open Space ConservaƟon Plans
Office of Sustainability & Natural Resources program staff did not complete a new open space conservaƟon plan document in FY 2024-25; rather, focus was on implementaƟon of the Righeƫ Hill Open Space ConservaƟon Plan that was adopted by City Council during FY 2023-24. See further discussion below. # of City-wide Trainings Offered
The Office of DEI had reduced capacity to complete workshops this year due to vacancies in the AdministraƟve Specialist and DEI Manager roles. The Office of DEI was able to complete one internal workshop and eight Community Belonging Series events for the community. Staff anƟcipate being able to provide six City-wide workshops to staff in FY 2025-26.

Accomplishments & Challenges
Office of the City Manager:

This year, staff completed the design and installaƟon of a Chinatown historic informaƟonal panel honoring the contribuƟons of the Chinese community and submiƩed more than 25 legislaƟve advocacy leƩers on behalf of the city. In collaboraƟon with Finance, Office of the City Manager staff coordinated the 2026 Community Forum, which achieved record aƩendance and informed development of the 2025–27 Financial Plan.

Because the local news media market is small, one of the City’s communicaƟons strategies is providing informaƟon directly to community members through social media and e-noƟficaƟons. During FY 2024-25, the City’s CommunicaƟons Team conƟnued to regularly share engaging and Ɵmely content with the community. The city also consolidated its mass email lists and consistently promoted e-noƟficaƟons and social media pages to community members. As a result, the City’s Instagram account successfully reached more than 18,000 followers and the City’s e-mail list nearly doubled, reaching more than 11,000 subscribers this fiscal year. These channels of communicaƟon offer direct, personalized communicaƟon, offer wide reach and are cost-effecƟve. They also help the city build relaƟonships with community members and provide measurable results.

Office of City Clerk:

The City Clerk’s Office successfully transiƟoned all the Advisory Bodies into Escribe, providing the public with a single locaƟon to find all City Council and Advisory Body Agenda Packets and videos. The office also supported a new Council Member and onboarded a new Deputy City Clerk.

Administration & IT
Office of Economic Development & Tourism:

The Economic Development program was a major contributor to the Economic Resiliency, Cultural Vitality & Fiscal Sustainability Major City Goal and implemented several tasks from the Economic Development Strategic Plan. The addiƟonal program funding allocated through the Major City Goal supported programs contributed to sense of place including the Downtown acƟvaƟons for the holidays, promoƟonal campaigns to drive business like the return of the Buy Local Bonus program and the new SLO Restaurant Month.

Funding also supported grants to support the establishment or expansion of childcare businesses, acquisiƟon of data for the employment and economic scorecard and other smaller iniƟaƟves.

FY 2024-25 was the second year of implementaƟon for the 5-year Economic Development Strategic Plan, and one highlight was the development and piloƟng of a formal business retenƟon and expansion (BRE) program called “SLO Grown Business Support.” As part of the program, the Economic Development Analyst serves as the “business navigator” to provide guidance and support to people looking to start or expand a business, with a focus on creaƟng and providing start-up checklists for the 17 most common business types. Mapping the permiƫng process for these 17 business types represented a significant liŌ for this project.

AddiƟonally, the Community PromoƟons program though the PromoƟonal CoordinaƟng CommiƩee (PCC), and tourism markeƟng through the Tourism Business Improvement District (TBID) conƟnued to drive significant economic impact to SLO. Through the PCC, the city awarded $100,000 in grant funding to local non-profit organizaƟons through the Cultural Arts & Community PromoƟons (CACP) grant program.

AddiƟonally, the PCC also brought back the ARTober campaign honoring NaƟonal Arts & HumaniƟes month in October for the second year. Tourism in the City remained strong, resulƟng in $11.4 million in transient occupancy tax (TOT) revenue. This contributed to the General Fund and outperformed the budget by 7.9%. Tourism promoƟon conƟnued to be led by the City’s TBID through Visit San Luis Obispo.

More details are in the TBID secƟon of this report.

Challenges ahead for the Economic Development & Tourism program include macroeconomic factors and concerns regarding tariffs, inflaƟon, interest rates, and economic uncertainty that affect local businesses, industries, and workers. ConƟnuing to invest in supporƟng businesses and keeping our community a vibrant, safe, and clean place to live, work, invest, and visit will conƟnue to be a focus for the ED&T in the year ahead in partnership with local stakeholders and organizaƟons.

Office of Sustainability and Natural Resources:

Office of Sustainability & Natural Resources staff worked in close collaboraƟon with Ranger Service to implement the Righeƫ Hill Open Space ConservaƟon Plan (2023) with the installaƟon of new sustainable trail segments for both hiking and biking uses, as well as all standard open space ameniƟes including two informaƟonal and educaƟonal kiosks, trails signs, bike parking, muƩ-miƩs and trash service, and a viewing plaƞorm. This effort culminated with a ribbon-cuƫng ceremony with the City Council, staff, and numerous community members and community groups that took place in early summer 2025.

The current federal regulatory and policy environment and cessaƟon of most federal funding, rebate, or incenƟve opportuniƟes introduces uncertainty as to achieving the City’s community and municipal climate goals. Staff look forward to a Study Session with the City Council in early 2026 to discuss the Climate AcƟon Plan update and opportuniƟes to navigate this challenge.

Administration & IT
Office of Diversity, Equity, and Inclusion:

The Office of Diversity, Equity, and Inclusion welcomed and successfully onboarded a new AdministraƟve Specialist and DEI Manager. The office is now fully staffed and advancing the tasks outlined in the DEI Strategic Plan and Major City Goal. This year, the office completed the Community Belonging Series which provided opportuniƟes throughout the city to hear from diverse speakers on topics of access and inclusion.

The office also finalized the City’s Title VI Plan in partnership with Public Works, strengthening compliance and access. In addiƟon, staff secured two professional expert contracts to develop four DEI workshops for staff, expanding internal development and knowledge sharing.

InformaƟon Technology:

Staff advanced the City’s Broadband Plan, securing $4.8 million in Last Mile FFA Grant Funding from the California Public UƟliƟes Commission to support infrastructure buildout. Final plans are being reviewed to be brought to the City Council for approval to adverƟse for bids, and the project is on track to complete Phase 1 of the Broadband Plan by compleƟng the Last Mile FFA build by November 2026.

The InformaƟon Services team, comprised of Geographic InformaƟon Systems (GIS) and enterprise applicaƟon support, have provided mapping and geospaƟal analysis for a number of criƟcal City projects, including the City’s St. FraƩy’s Day operaƟons, the Fire Hazard Severity Zone (FHSZ) update, and the City’s response to the Grand Jury report “Round & Round with Town & Gown.” The InformaƟon Services team also completed a major project to streamline the way overƟme calculaƟon is handled in the Oracle system, simplifying the process to complete the City’s payroll, in collaboraƟon with Finance and Human Resources staff.

InformaƟon Technology staff will need to conƟnue to look for innovaƟve ways to support the City’s InformaƟon Technology needs, given current budget constraints. AddiƟonal broadband network expansion will be challenging as the City has relied on grant funding for this work, and future grant funds may be more difficult to obtain under the current Federal administraƟon’s approach to broadband grants.

Administration & IT
Administration & IT - TBID
A Year in Review
Tourism in the city of San Luis Obispo stayed strong with a record-breaking $11.4 million in Transient Occupancy Tax (TOT) revenue collected, outperforming the budget by 7.9%. San Luis Obispo saw five $1 million revenue-collecƟon months in July, August, April, May and June. This year’s increase in revenue exceeded forecasts and San Luis Obispo also saw modest increases in key performance indicators, such as Occupancy and Revenue Per Available Room, while Average Daily Rate remained essenƟally flat. This means that the increase in revenue is coming from hotels selling more rooms, indicaƟng that demand is strong, but also that compeƟƟon is high and that is keeping room rates flat. Occupancy increased 2.9% compared to last fiscal year, with an average occupancy rate of 70%. This growth reflects a conƟnued recovery in overnight travel, with the average occupancy rate now approaching the pre-pandemic level of just below 71% seen in FY 2018-19.

Variance Analysis
Staffing – The program ended the year with 14% savings due to a temporary vacancy following the resignaƟon and hiring for the role of Economic Development and Tourism Manager.

Other OperaƟng Expenditures – The 92% variance is mainly due to TBID not fully expending its undesignated funds ($191,162 remaining for the year, comprising 96% of the remaining funds for Other OperaƟng Expenditures). The program also had a small amount of savings in other tourism program expenses, primarily memberships/cerƟficaƟons and publicaƟons and subscripƟons. The undesignated funding was intended to allow flexibility for responding to changes in the market or the staffing plan, but it was not needed. In accordance with the City’s Municipal Code, 12.42.080 any funds remaining at the end of any TBID term may be used in subsequent years, therefore unspent funds from FY 2024-25 are added to the undesignated fund balance available to TBID, which is now more than $1.6 million.

Accomplishments & Challenges
The Average Daily Rate (ADR) in San Luis Obispo was $177, nearly flat compared to the prior year, but sƟll $24 higher than the pre- pandemic year of FY 2018-19 for comparison. However, the current ADR is below the peak of $195 achieved in FY 2021-22. Another indicator used by the TBID to gauge impact is RevPAR, defined as Revenue Per Available Room. In FY 2024-25 the annual average RevPAR was up 2.9% from the prior year at the rate of $125.31 on average.

In spring 2025, the City received a report from Tourism Economics on the economic impact of tourism in the community which found that in 2024, San Luis Obispo welcomed approximately 1.5 million visitors, ` FY 2023-24 FY 2024-25 FY 2025-26
TBID Actual Budget Actual Funds
Available % Budget
Staffing 260,092 $ 280,579 $ 241,390 $ 39,189 $ 14% 262,464 $ Contract Services 1,869,690 1,917,153 1,871,886 45,266 2% 1,977,377 Other Operating Expenditures 20,130 216,624 16,266 200,358 92% 42,772 Transfers Out 43,611 44,914 $ 44,914 $ - 0% 44,399
Total 2,193,523 $ 2,459,269 $ 2,174,457 $ 284,813 $ 12% 2,327,012 $

Administration & IT
including 1 million overnight visitors- an increase of 1% from 2023. In total, the direct visitor spending impact of $455 million generated a total economic impact of $648 million in the regional economy (including indirect and induced impacts) and sustained approximately 4,700 total jobs (including indirect and induced jobs).

The Tourism Business Improvement District (TBID) known as ‘Visit San Luis Obispo’ (Visit SLO) conƟnued to lead tourism work on behalf of the City. In January 2025, the TBID Board adopted a 5-year Strategic Plan to provide a clear and unified framework for the Board’s prioriƟes and decision-making. The plan outlines the TBID’s key roles in stewarding the Visit San Luis Obispo brand, represenƟng its lodging partners and driving overnight visitaƟon through targeted markeƟng strategies, strategic partnerships and desƟnaƟon advocacy.

In the end of FY 2024-25, Visit SLO marked a major milestone by evolving its core brand message with the development and launch of the SLO Life Coach campaign. This creaƟve plaƞorm builds on the success of the established brand line, “Live the SLO Life,” which has served as a powerful anchor for the desƟnaƟon’s messaging over the past few years. The SLO Life Coach campaign marked a significant investment in creaƟve storytelling and brand amplificaƟon. It introduced a fresh, personified expression of the Visit San Luis Obispo brand—embodied by a charismaƟc, laidback and wiƩy character who shares “SLO Life Tips” with charm and a touch of bold energy. Performance metrics from the first few months of the new campaign show that it is performing strongly.

In addiƟon, Visit SLO conƟnued to drive midweek travel by transiƟoning its MidWeekend campaign previously driven by offseason promoƟons to an evergreen, “always-on” campaign. Visit SLO also conƟnued its strategic partnerships with Cal Poly, Kind Traveler, ECOSLO (in support of the Keys for Trees program), and the Gala Pride and Diversity Center.

On the supply side, one contribuƟng factor is that in spring 2025 a dual-branded property opened in the San Luis Ranch Development that increased the number of available rooms in the city by 8%. AddiƟonal new hotels have opened in neighboring communiƟes, with more slated to open in the years to come, parƟcularly in North County, which will further increase supply and potenƟally keep room rates down.

On the demand side, the travel industry is experiencing macroeconomic headwinds as travelers are adjusƟng their travel plans in response to economic uncertainty/inflaƟon and geopoliƟcal tensions.

Travelers are looking to stay closer to home and are looking for value, parƟcularly those at lower income levels.

With increased supply and indicators of potenƟally soŌening demand, Visit SLO’s strong performance in FY 2024-25 can be interpreted as a win. The TBID, however, conƟnues to remain vigilant and will conƟnue to guide Visit SLO’s growing success, driving overnight stays and increasing economic impact for the community.

CSG Administration
Community Services Group AdministraƟon
A Year in Review
Community Services Group (CSG) AdministraƟon includes the Assistant City Manager, a half-Ɵme AdministraƟve Assistant, and the Financial Analyst for Infrastructure Finance, and provides oversight of the various CSG departments including Public Works, Community Development, UƟliƟes, and Parks & RecreaƟon. As part of the 2025-27 Financial Plan, CSG AdministraƟon was integrated as a program within the AdministraƟon & InformaƟon Technology Department. Since CSG AdministraƟon was budgeted as a department in the FY 2024-25 budget, it is presented on a standalone basis here.

Variance Analysis
Staffing savings were generated as a result of the former Assistant City Manager being promoted to the City Manager role, leaving the posiƟon vacant for three months. AŌer a successful recruitment, the posiƟon was filled and staffing savings are not expected to persist.

Contract Services was overspent by $324 or 1% as a result of an invoice from the City’s user fee consultant to aƩend a City Council hearing. The user fee study was budgeted for and primarily occurred in FY 2023- 24, and this addiƟonal charge was not budgeted for. No ongoing variance is expected in this line item.

Other OperaƟng Expenditures generated savings of $7,714 or 64% driven by vacancies which impacted the expenditure of non-staffing accounts. EducaƟon & Training, Trips & MeeƟngs, Employee RecogniƟon, and Office Supplies budgets were minimally uƟlized. Staff will evaluate the appropriate level of funding for this program and adjust as needed in future budgets.

FY 2023-24 FY 2024-25 FY 2025-26
CSG Admin Actual Budget Actual Funds
Available % Budget
Staffing 692,323 $ 637,968 $ 510,789 $ 127,179 $ 20% 551,990 $ Contract Services 127,900 38,794 39,118 (324) -1% 50,353 Other Operating Expenditures 181,838 12,000 4,286 7,714 64% 12,025 Total 1,002,060 $ 688,761 $ 554,193 $ 134,569 $ 20% 614,367 $

City Attorney
City AƩorney
A Year in Review
During FY 2024-25, a staff member on extended leave of absence, a recurring posiƟon vacancy, and a limited number of supplemental hours worked generated a large amount of salary savings even aŌer using a substanƟal porƟon of the accumulated funds to hire a full-Ɵme contract Deputy City AƩorney. In a year of high impact staffing fluctuaƟons, the department was sƟll able to support the pre-liƟgaƟon seƩlement of a California Voter Rights Act demand; assist with various personnel maƩers; resolve or tender several high-dollar, Ɵme-intensive claims and liƟgaƟon; support a significant receivership acƟon; and advise on many other important issues, agreements, and development and CIP projects.

Variance Analysis
Staffing accounts were under budget due to the regular Assistant City AƩorney being out on family leave for six months of the fiscal year; the department’s second legal assistant posiƟon being vacant for a total of eight months following two different resignaƟons; and the supplemental Assistant City AƩorney working less than 600 hours when the posiƟon was budgeted for 1,248 annually. Knowing the regular Assistant City AƩorney would be out of office for the second half of the year, staff proposed and gained City Manager approval to hire a full-Ɵme contract Deputy City AƩorney. That contract employee started work at the beginning of November, but even aŌer covering eight months of their salary and benefits, and in June moving $35,000 of salary savings to legal services to fund an outside counsel contract, the department’s Staffing budget ended the year 7% under budget.

The variables that combined to create these savings are expected to be a one-Ɵme occurrence. The regular Assistant City AƩorney has returned from leave, and the second legal assistant posiƟon is currently filled with a qualified staff member predicted to be with the City long-term. Also, the Deputy City AƩorney contract term conƟnues through November 2026 and that contract is expected to be supported by any budget surplus that accumulates.

Performance Measures
Objective Measure 2024-25
Target
2024-25
Actual
Efficient and Transparent
Administrative Appeals Program
Administrative Citation Appeals Received by the City 120 117 Appeals closed without need of a hearing 25 54
City assisted corrections to defective appeals to allow access to hearing 15 30
City facilitated hearings on the record without need for personal appearance by Appellant 30 37
# of hearing days scheduled 18 19
FY 2023-24 FY 2024-25 FY 2025-26
City Attorney Actual Budget Actual Funds
Available % Budget
Staffing 1,232,227 $ 1,451,228 $ 1,351,385 $ 99,843 $ 7% 1,518,977 $ Contract Services 204,219 272,521 265,465 7,056 3% 295,153 Other Operating Expenditures 35,965 34,851 34,412 438 1% 49,485 Total 1,472,411 $ 1,758,600 $ 1,651,262 $ 107,337 $ 6% 1,863,615 $

City Attorney
Legal Training & Compliance # of Council, Staff, and Advisory Body legal trainings, legal updates, and compliance advisory sessions 12 18
Municipal Claims, Litigation &
Prosecution Management
Percentage of Claims Resulting in Litigation <5% 7.8%
Liability Claims Against the City Reviewed/Managed 70 77 Number of multi-count complaints filed for
misdemeanor municipal code violations 45 39
A higher-than-expected number of appeals were closed without need of a hearing due to the large number of potenƟal appellants who failed to correct a deficiency in their appeal aŌer being noƟfied by staff, along with another dozen appeals for which the underlying citaƟon was voided by the City. The similarly higher than expected rate of City assisted correcƟons coincided with the implementaƟon of a fee for hearing officer review. In general, in FY 2024-25 there were more rejecƟons due to the change in process (adding the appeal fee) with many people choosing to pay their fee and proceed to hearing.

Six claims received in FY 2024-25 have gone to liƟgaƟon, which drove a higher-than-expected liƟgaƟon percentage. One of the six claims was a $5,000 property damage claim that seƩled shortly aŌer being filed but the plainƟff would not seƩle during the claim stage; two are vexaƟous, unfounded allegaƟons of misconduct by City staff; another is a cross-compliant by a developer blaming the City for damages it caused to a hillside above its property; one is from a bicyclist injured in a crash whose claim was rejected since he was riding on Highway 1 outside of City limits but the City was named as a defendant regardless; and the last is another bicyclist injured in a crash, this one on California Blvd., due to an alleged defect in the asphalt that the City believes can be safely traversed when used with due care.

The 39 mulƟ-count complaints filed for misdemeanor municipal code violaƟons contained a combined 394 citaƟons.

Accomplishments & Challenges
While the department did have to manage numerous Ɵme-intensive, persistent maƩers, such as the repeated aƩempts of a construcƟon company to file unƟmely damages claims stemming from its contract for a Public Works project, staff sƟll had many successes this year, including:
 Support for the pre-liƟgaƟon seƩlement of a California Voter Rights Act demand that will transiƟon the City to a new method of voƟng called Citywide Single Vote, instead of implemenƟng by-district City Council elecƟons.
 Streamlining the misdemeanor complaint process, with staff gaining direct, electronic access to Police-issued citaƟons and developing a new method of aƩorney review compliant with new State rules for race-blind charging.
 Increased coordinaƟon among City staff and community partners at the County for misdemeanor arraignments resulƟng in more defendants appearing and being connected to services.  Advising on or conducƟng invesƟgaƟon into mulƟple complex personnel maƩers.  Advising City code enforcement staff on the 1150 Laurel code violaƟons and noƟce to vacate.  Working with outside counsel to tender mulƟple complex, potenƟally high-dollar liƟgaƟons to the insurance providers for construcƟon contractors.
 Receiving payment for reimbursement of City staff Ɵme related to the Siever receivership (48/46 Prado Road commercial property with decades of hoarded vehicles and other debris).

Finance
Finance Department
A Year in Review
Fiscal Year 2024-25 was a year full of accomplishments for the department. During the year, the Finance Department led and supported several iniƟaƟves to improve transparency and enhance operaƟons for the benefit of the organizaƟon and community. Highlights include improvements to the business license renewal program, citywide payroll trainings, and ongoing work to receive reimbursement for winter 2023 storm damages. The Infrastructure Financing Program was temporarily reassigned to the department during FY 2024-25, which provided the opportunity to focus on training and report development to support the ongoing fee program administraƟon.

Variance Analysis
The department finished the year with savings of approximately $104k or 4% of its operaƟng budget. 98% of the savings were delivered from staffing budgets due to vacancies in the Financial Analyst posiƟon in the Revenue Division and the Finance Specialist in the AccounƟng Division. The Financial Analyst posiƟon was vacant for two months and was filled with an internal hire and the Finance Specialist took roughly eight months to fill.

Overages in Other OperaƟng Expenditures were driven by credit card processing fees which have increased 20% per year over the last two years as a growing share of fees and taxes are now paid by credit card. This line item exceeded budget by approximately $40k. As the department became aware of this looming overage, other expenditures were reduced or avoided if possible, including savings of more than $20k in EducaƟon & Training, Trips & MeeƟngs, and Memberships & CerƟficaƟons, as these are the most discreƟonary budget lines for the department. Finance staff uƟlized free or low-cost webinars in place of aƩending conferences and events.

The primary driver of savings in Contract Services was that no new specialized consulƟng engagements were funded during the fiscal year as there was no idenƟfied need. The Finance AdministraƟon division budgets approximately $20k per year for ad-hoc consulƟng; recent engagements have included debt financing support and pension actuarial analysis. These savings are not expected to persist unless other funding sources for needed consulƟng work are idenƟfied.

FY 2023-24 FY 2024-25 FY 2025-26
Finance Actual Budget Actual Funds
Available % Budget
Staffing 1,780,850 $ 2,210,387 $ 2,108,755 $ 101,632 $ 5% 2,221,065 $ Contract Services 468,417 431,791 412,098 19,693 5% 497,506 Other Operating Expenditures 26,410 143,410 160,771 (17,360) -12% 131,525 Total 2,275,677 $ 2,785,589 $ 2,681,624 $ 103,965 $ 4% 2,850,096 $

Finance
Performance Measures
Objective Measure 2024-25
Target
2024-25
Actual
Enables & enhances transparency,
accountability & integrity
# of calendar days following year-end until ACFR is issued 170 177 # of audits/reviews conducted / # of additional agreed
upon procedure audits performed 2/2 2/2
Protects & prudently manages its
financial resources
# of funds within fund balance requirements / total funds with fund balance requirements 8/8 8/8
Net direct debt per capita (General Fund) $42 $35
Twelve-month total rate of return / City portfolio 3% 6.02% The department is pleased to report that four out of five targets were met or exceeded during the fiscal year, including a twelve-month total return on the City’s investment porƞolio that more than doubled the target thanks to strong market condiƟons.

The Annual Comprehensive Financial Report (ACFR) was published within 177 days of year-end, slightly behind the target of 170 days but within the statutory limit of 180 days. The department changed its target from 180 to 170 with the 2023-25 Financial Plan, but due to Ɵming of receipts, auditor dependencies, and the high standards to which the City's ACFR is prepared, staff find the 180 day statutory Ɵmeline sufficiently challenging to meet and intend to revise the target going forward.

The net direct debt per capita for the General Fund was $35, beƩer than the target of $42, largely due to repayment of a fire truck lease and energy conservaƟon loan. Targets were set based on prior year actuals and did not include these payoffs.

Accomplishments & Challenges
The department is proud to have delivered several significant accomplishments. In the later half of FY 2024-25, the revenue division focused heavily on enhancing the City’s outreach efforts to increase compliance with business license requirements. While the FY 2025-26 renewal cycle is not yet complete, the work effort has been successful, as the division has sent a first citaƟon to only 538 businesses, compared to 767 businesses who were cited in the prior cycle. The payroll team led an iniƟaƟve to provide various trainings to departments Citywide, including training for all new hires before their first Ɵmecard is due, in an effort to improve compliance and reduce errors in Ɵmecards for hourly employees. The procurement division completed all applicaƟons to the Federal Emergency Management Agency (FEMA) for reimbursement of damages incurred in the Winter 2023 Storm events, and is in the midst of appealing FEMA’s determinaƟon that some projects are ineligible for reimbursement. To date, nearly $1 million has been received in reimbursement and an addiƟonal $1 million has been obligated for reimbursement by FEMA. As of the wriƟng of this report, an addiƟonal $6.74 million in projects is pending final review by FEMA. In the later part of FY 2023-24, the department stepped in to lead the User and Regulatory Fee Study to compleƟon, culminaƟng with the successful adopƟon of a new Comprehensive Fee Schedule early in FY 2024-25. Leading up to Council’s adopƟon of the fee schedule and in the months following, the department led efforts to communicate fee changes to customers and other key stakeholders. The budget division helped City leadership navigate flaƩening revenue and a looming deficit and deliver a financial plan that preserves service levels. This slowdown in revenue growth is expected to persist to some degree, and the Finance department looks forward to helping guide the City through measures to address the anƟcipated future budget deficit.

Human Resources
Human Resources
A Year in Review
The Human Resources Department (HR) conƟnued to support the organizaƟon while also striving to establish staffing stability within the department. With so many employees new to their roles, the department provided an array of learning and development opportuniƟes for employees across the organizaƟon as well as performance management and coaching support. The department successfully negoƟated a Ɵmely mulƟ-year successor resoluƟon with the City’s largest bargaining unit, implemented various process improvements, provided support for complex personnel issues, and completed a recruitment process for a new City Manager and Assistant City Manager.

Variance Analysis
Staffing was under budget due to four department posiƟons that remained vacant for an average of four months each, due to internal promoƟons as well as other transiƟons. This savings is not expected to persist, as the department is fully staffed as of early October 2025.

Contract Services was under budget primarily due to unspent one-Ɵme carryover budget that was intended for consultant support for policy and training related work. These tasks ended up being completed with temporary and contract staff that was paid for using salary savings from unanƟcipated vacancies as described above.

Other OperaƟng Expenditures were under budget due to several factors. Approximately half of the savings were due to the cost for department’s leased office space being overbudgeted. This has been corrected in the current year’s budget. Recruitment acƟvity was lower than the prior three years, which were excepƟonally high recruitment years. When the Fiscal Health ConƟngency Plan was implemented in April 2025, it further slowed recruitment acƟvity and associated expenses. While vacancy rates are difficult to predict, several years of trend data were analyzed to budget for the 2025-27 Financial Plan. The learning and development program pursued more City-led rather than consultant-led training and other lower cost alternaƟves. The program will conƟnue to pursue opƟons for delivering high value professional development opportuniƟes at a reduced cost. Due to transiƟons and acƟvaƟon of the Fiscal Health ConƟngency Plan, Human Resources staff aƩended fewer professional conferences overall.

All of these savings are expected to be one-Ɵme in nature. For the 2025-27 financial plan, adjustments have been made to address line items that may have been previously overbudgeted. Although some contracted expenses will increase, reducƟons were made elsewhere to constrain growth moving into FY 2025-26.

FY 2023-24 FY 2024-25 FY 2025-26
Human Resources Actual Budget Actual Funds
Available % Budget
Staffing 1,321,146 $ 1,628,410 $ 1,492,891 $ 135,519 $ 8% 1,592,978 $ Contract Services 797,660 190,251 133,293 56,958 30% 159,034 Other Operating Expenditures 60,657 576,688 454,232 122,456 21% 309,718 Total 2,179,463 $ 2,395,349 $ 2,080,416 $ 314,933 $ 13% 2,061,730 $

Human Resources
Performance Measures
Human Resources Performance Measures
Objective Measure 2024-25
Target
2024-25
Actual
Integrated HR Services Average Days between injury and Workers’ Compensation claim filed. 3 4
Integrated HR Services Achieved lower severity of Workers’ Compensation claims than the risk pool Yes Yes
Integrated HR Services Annual liability claims payment under the Self-Insured Retention amount Yes Yes
Employee Development & Growth Percentage of On-Time Employee Performance Evaluations 98% 97% Employee Development & Growth Percentage of Internal Promotions 35% 45% Employee Development & Growth Training Sessions Coordinated 20 26 Engaged and Aware Culture Number of Policies Communicated 90 100 Engaged and Aware Culture Informational Sessions Coordinated 130 150 The 2024-25 targets for Ɵmely workers’ compensaƟon claims and on-Ɵme performance evaluaƟons were narrowly missed, with an average of 4 days to file claims (target 3) and 97% of evaluaƟons completed on Ɵme (target 98%). These minor delays were largely due to new supervisors adjusƟng to their roles, which affected documentaƟon submission and evaluaƟon compleƟon. To address this, HR provided departmentspecific trainings, conducted performance management sessions for supervisors, and conƟnued monthly reminders to support Ɵmely submission of evaluaƟons.

Accomplishments & Challenges
Accomplishments
Benefits: Staff collaborated with the Police Department to implement annual wellness checks. The goal of this new program is to provide proacƟve mental health support.

Recruitment, ClassificaƟon and CompensaƟon: A total of 116 recruitments were completed, of which 85 were for regular posiƟons, 4 for limited-term contract posiƟons, and 27 for temporary posiƟons. Four of the recruitments were for Police and Fire department promoƟons, which are more robust processes. The average Ɵme to hire for regular posiƟons was 88 days. Staff completed assessment centers to support the selecƟon of a new City Manager and Assistant City Manager.

Labor RelaƟons: For the first Ɵme in 25 years, the City and its largest bargaining group, the San Luis Obispo City Employees’ AssociaƟon (SLOCEA), reached a successor MOU before the current one expired. The City also provided educaƟonal sessions for unrepresented managers and confidenƟal employees and renewed their ResoluƟons. These agreements are in place through June 30, 2028. MulƟ-year agreements are in place through June 30, 2027 with the Police Officers’ AssociaƟon, Police Staff Officers’ AssociaƟon, and the InternaƟonal AssociaƟon of Firefighters Local 3523.

Learning and Development: The City provided a comprehensive training program that included professional development, supervisor coaching, and compliance training, highlighted by two robust performance management sessions for supervisors. In addiƟon, four Day of Welcome events were offered for new hires.

Human Resources
Risk Management and Wellness: The California Joint Powers Insurance Authority awarded the City a Liability Risk Management Award in recogniƟon of its success in managing claim costs. In May 2025, the City implemented an enhanced process to improve the recovery of costs resulƟng from third-party damage to City property. Because the program was live for just six weeks in FY 2024-25, the revenue impact was minimal. However, year to date cost recovery as of the Ɵme of report draŌing was +65% higher than the same period in the prior year.

AdministraƟve IniƟaƟves: City employee personnel files were transiƟoned from paper to a secure virtual storage system. Following an extensive pilot program, the City also adopted a formal Telework Policy.

Challenges
Department Staffing: Vacant posiƟons and departmental transiƟons due to promoƟons conƟnue to force HR staff to shiŌ prioriƟes and adapt to changing circumstances.

Complex Personnel MaƩers: The department conƟnues to experience a noƟceable increase in the number of complex personnel maƩers, including extended leaves of absence, disability accommodaƟons, and performance management/invesƟgaƟon oversight.

Citywide Leadership Development: In FY 2024-25, the City onboarded 35 new supervisors, represenƟng approximately 30% of the supervisory posiƟons across the organizaƟon, creaƟng an opportunity to strengthen leadership across departments. These newly appointed leaders received targeted support through structured training, mentorship, and coaching, equipping them to manage their teams effecƟvely and align their efforts with organizaƟonal goals.

Insurance Fund
Insurance Fund
A Year in Review
The City is a member of the California Joint Powers Insurance Authority (CJPIA) which provides coverage for general liability and workers’ compensaƟon through pooling of losses among its members and coordinates oversight and management of claims administraƟon. The City is a member of the excess program for both liability and workers’ compensaƟon, with a $500,000 self-insured retenƟon level for each. EffecƟve July 1, 2025, the liability program has a $1,000,000 self-insured retenƟon. Claims are managed by third party administrators, Carl Warren for Liability and Athens for Workers’ CompensaƟon.

The City strives to maintain a reserve sufficient to guard against unpredictable and substanƟal claims. The reserve amount is determined based on annual actuarial report informaƟon. In addiƟon to the CJPIA member contribuƟons for liability and workers’ compensaƟon, the Fund also covers premiums for ancillary insurances such as property, crime, polluƟon, volunteers, and special events.

Variance Analysis – Insurance Fund Expenditures
The Workers’ CompensaƟon insurance account came in under budget, primarily because claim expenses were originally projected over the full life of each claim rather than being allocated to the current fiscal year. This created one-Ɵme savings, which has been adjusted in future budgets to more accurately reflect annual claim costs.

City records show the Liability insurance account as over budget. However, the external trust account from which claim expenses are paid by the City’s third-party administrator had a remaining balance of $278,848 at year end. These funds will be used to pay claims expenses into FY 2025-26.

The Other insurance account was over budget due to larger-than-anƟcipated increases in premiums, parƟcularly for property coverage. Given the ongoing volaƟlity in the insurance market, these higher costs are expected to conƟnue and the budget has been adjusted accordingly for future years.

Insurance Fund Balance
The table below details how the Insurance Fund Balance compares to the policy level:

Fund Balance $4,437,620
Policy Level $7,455,000
Variance ($3,017,380)
` FY 2023-24 FY 2024-25 FY 2025-26
Insurance Fund Actual Budget Actual Funds
Available % Budget
Workers' Compensation 1,605,230 $ 2,610,281 $ 1,094,776 $ 1,515,505 $ 58% 2,069,183 $ Liability 2, 2,333,686 502,805 2,435,666 (101,980) -4% 2,547,586 Other 646,521 781,152 869,361 (88,209) -11% 910,389
Total 4,754,556 $ 5,725,119 $ 4,399,803 $ 1,325,316 $ 23% 5,527,158 $

Insurance Fund
The policy level is calculated based on an actuarial analysis provided by the City’s consultants. The consultants calculate the 75% confidence level, or $5.0M, and the City’s policy is to hold fund balance equal to 150% of the 75% confidence level, or $7.5M.

The Fund balance above includes the savings from the FY 2024-25 budget and will benefit from any expenditures savings in future years.

Performance Measures
Objective Measure 2024-25
Target
2024-25
Actual
Integrated HR Services Annual liability claims payment under the Self-Insured Retention amount Yes Yes
Accomplishments & Challenges
Accomplishments
During FY 2024-25, the City achieved several notable accomplishments in managing its insurance programs. Membership in the Workers’ CompensaƟon excess program has proven effecƟve in containing overall costs, resulƟng in lower annual contribuƟons to the CJPIA pool. AddiƟonally, volunteer insurance premiums were reduced through accurate reporƟng of the number of volunteers parƟcipaƟng in City programs, ensuring that costs more closely reflect actual exposure.

Challenges
The City faces ongoing challenges in managing insurance costs. Year-over-year changes in premiums remain difficult to predict, though several years of trend data were carefully analyzed in preparing the 2025–27 Financial Plan. Furthermore, the actuarial study prepared by Milliman (an independent actuarial) in November 2024 recommends higher reserves than the City has currently set aside, which could present future challenges in covering claim expenses.

Community Development Department
Community Development Department
A Year in Review
The Community Development Department (CDD) completed all of the workplan items outlined in the City’s two-year financial plan for FY 2024-25. While large-scale development and housing producƟon conƟnued, overall development acƟvity declined compared to prior years. This trend, reflected in permiƫng and inspecƟon volumes, aligns with naƟonal condiƟons influenced by high interest rates and construcƟon costs, as well as the compleƟon of several local major housing tracts in the previous fiscal year, resulƟng in fewer projects in FY 2024-25.

Variance Analysis
Community Development Department OperaƟng Expenditures
The Department ended FY 2024-25 under budget by 16%, primarily due to unspent contract services funds. Revenues did not materialize as originally anƟcipated, prompƟng the Director to limit discreƟonary spending. Internal department projects were paused or delayed, including the iniƟaƟve to digiƟze historical plans, reducing the need for consultant support. More plan reviews were completed in-house, and permit acƟvity declined. AddiƟonal details on contract services are provided below.

Staffing
Staffing expenditures came in 7% under budget, consistent with the prior year. While staffing levels stabilized at the beginning of the year, the department experienced mulƟple employee leaves and conƟnued recruitment challenges. The Engineering Division has faced persistent staffing shortages over the past three years. To maintain conƟnuity of operaƟons, the Engineering Division relied on contract and temporary staff for part of the fiscal year. A posiƟve development was the successful hiring of a Supervising Civil Engineer, who will provide leadership and support to the division. The Deputy Director/Building Official posiƟon in the Building and Safety Division became vacant during the year. A consultant was retained to fulfill the duƟes of a Building Official, with oversight provided by the Community Development Director and supervisory staff. The Planning Division achieved greater stability through the hiring of three interns and permanent staff. The Division is currently focused on onboarding and training new staff.

Contract Services
Contract Services expenditures came in 41% under budget. Savings were generated due to departmentspecific contracts that were paused or not iniƟated, and subsequently closed out, based on the Director’s aim to limit spending to align with the slowing pace of development in the community. An addiƟonal $390,000 was unspent from the Plans Check account, which is used to hire consultants for FY 2023-24 FY 2024-25 FY 2025-26
CDD Actual Budget Actual Funds
Available % Budget
Staffing 5,642,668 $ 6,789,924 $ 6,313,612 $ 476,313 $ 7% 6,429,444 $ Contract Services 1,332,766 2,277,570 1,351,638 925,932 41% 2,395,627 Other Operating Expenditures 181,838 260,845 197,086 63,759 24% 234,695 Total 7,157,271 $ 9,328,340 $ 7,862,336 $ 1,466,003 $ 16% 9,059,766 $

Community Development Department
development reviews. Staff were directed to complete more work in-house to reduce costs, as permit acƟvity declined and revenues were expected to fall short of projecƟons. Plans Check budgets were reduced in line with revenue in the FY 2025-26 budget, and savings are expected to decrease.

Other OperaƟng Expenditures
Other OperaƟng Expenditures came in 24% under budget due largely to a spending pause set by the Community Development Director, which restricted all divisions to essenƟal purchases only. An addiƟonal $32,000 in savings was achieved following the implementaƟon of the Fiscal Health ConƟngency Plan in April 2025, which suspended non-essenƟal travel and training acƟviƟes.

Fee Revenue
Development Services Revenue
As noted in the above secƟon, in FY 2024–25, development fees generated nearly $5.7 million, 13% below projecƟons. This was primarily due to a decrease in the number of building permits and plan reviews. This drop stemmed from economic uncertainty, inflaƟon, and the compleƟon of major projects in the prior year, which reduced the volume of new projects for FY 2024-25 and subsequent fiscal years. The department lowered its revenue forecast for FY 2025-26 by 30% to align with current trends (and will be monitored closely throughout the current year). Despite the slowdown in building permit applicaƟons, Planning and Zoning applicaƟons exceeded targets, and encroachment permits remained steady, indicaƟng ongoing interest in development.

Based on these year-end results, staff now expect to exceed the reduced revenue budget in FY 2025-26.

Performance Measures
Objective Measure 2024-25
Target
2024-25
Actual
Affordable housing production
Strategic Goal: Housing
Number of affordable housing units secured through
entitlements or construction 50 216
Provide Excellent Customer
Service
Strategic Goal: Other
Department Objective
Customer survey response positivity rate 85% 93%
FY 2023-24 FY 2024-25 FY 2025-26
Development Review Actual Budget Actual Variance % Budget Planning & Zoning Fee 527,041 $ 642,177 $ 686,430 $ 44,253 $ 7% 589,625 $ Development Review Fees 309,447 406,358 289,843 (116,515) -29% 251,100 Encroachment Permits 367,913 340,659 449,257 108,598 32% 410,105 Infrastructure Plan Check & Inspection 808,190 1,019,227 683,441 (335,786) -33% 473,252 Engineering Development Review Fees 102,449 168,061 130,429 (37,632) -22% 115,951 Building Permits 2,787,384 2,689,953 1,804,309 (885,644) -33% 1,909,327 Code Enforcement Fines 27,844 79,617 30,436 (49,181) -62% 33,352 Plan Check Fees 1,239,026 1,239,279 1,049,305 (189,974) -15% 824,100 Early Residential Development Fees 104,800 - - - 0% -
Building Inspection Fees - - 572,035 572,035 0% -
Industrial User Permits 2,879 - 1,846 1,846 0% -
Total Revenue 6,276,972 $ 6,585,331 $ 5,697,332 $ (887,999) $ -13% 4,606,812 $

Community Development Department
Ensure a Safe Community
Strategic Goal: Housing
Percent of Code Enforcement cases investigated ontime: First Tier - 24 Hours, Second Tier - 2 Days, and Third Tier - 3-5 Days
85% 60%
Development Review activities
Strategic Goal: Other
Department Objectives
Percent of time that the Department met or
exceeded the established timelines for development
review (such as review of entitlement applications)
75% 84%
Building Permit Review
activities
Strategic Goal: Economic
Stability
Percent of building permit reviews completed within
established cycle times (all departments) 85% 59%
The Department met three of five performance targets in FY 2024-25. The performance of each target is explained further below.
 Affordable Housing Units Secured: A total of 216 affordable units were secured, exceeding the target of 50. This reflects the effecƟveness of recent pro-housing policies and supports progress toward the City’s Regional Housing Needs Assessment (RHNA) goals. Below is a table of the City’s RHNA progress as of the end of FY2024-25.

Income Level
6th Cycle
RHNA
AllocaƟon
Building PermiƩed Units Issued by Affordability
Total
Units by
Income
Level
Total
Units
Remaining
by Income
Level
(% of County Median
Income) Year 1
(2019)
Year 2
(2020)
Year 3
(2021)
Year 4
(2022)
Year 5
(2023)
Years 6 –
10 (2024 -
2028)
Extremely
Low
Deed
Restricted 0 0 14 36 0 123 173
500
NonDeed
Restricted
825 0 0 0 0 0 0 0
Very Low
Deed
Restricted 0 14 42 14 22 60 152
NonDeed
Restricted
0 0 0 0 0 0 0
Low
Deed
Restricted
520
6 0 36 21 5 15 83
214 NonDeed
Restricted
0 30 46 50 0 97 223
Moderate
Deed
Restricted
603
8 5 9 2 4 13 41
519 NonDeed
Restricted
0 0 0 0 43 0 43

Community Development Department
Above
Moderate 1,406 523 416 472 439 293 190 2,333 0
Total
Units 3,354 537 465 619 562 367 442 2,992
Total Remaining for RHNA
Period: 1,233
 Customer SaƟsfacƟon: SaƟsfacƟon levels remain high. The department conƟnues to improve transparency and efficiency through expanded online services and real-Ɵme performance dashboards that track permit Ɵmelines, code enforcement, and customer service metrics.  Code Enforcement Response Time: The department fell below its response Ɵme goal of 85%. A total of 1,426 requests were received in FY 2025, which is a 26% increase from the prior year and a 232% increase since FY 2022. This significant rise in request volume, combined with the division retaining exisƟng staffing levels over that same Ɵme period, has required prioriƟzaƟon of cases based on urgency. Priority 1 requests are generally in response to criƟcal building failures such as a vehicle collision or structure fire. These requests come directly from Police Dispatch and receive an immediate on-call or next day response from Building InspecƟon or Code Enforcement personnel. Given the high priority of these calls, communicaƟon protocols are set to always meet the expected response Ɵme. Response rate for Priority 2 requests were 49%, Priority 3 request were 60% and response rate for Priority 4 requests were 61%. The lower rate for Priority 1 requests may be lower due to the requirements of gaining interior access to verify complaints.  Development Review AcƟviƟes: The department exceeded its target by meeƟng development review cycle Ɵmes 84% of the Ɵme, surpassing the 75% goal despite an increase in complex and resource intensive applicaƟons.
 Building Permit Review Cycle Time: The target was not met; however, performance improved by 9% compared to the prior year. The department is analyzing review Ɵmelines across mulƟple departments involved in permit review to idenƟfy potenƟal process boƩlenecks. In the meanƟme, acƟons taken include enhanced staff training on required Ɵmeframes and increased oversight, parƟcularly for housing-related permits.

Accomplishments & Challenges
The Community Development Department achieved several key milestones that strengthened internal operaƟons and advanced citywide iniƟaƟves. The department expanded the use of digital tools to streamline development reviews, and improved interdepartmental coordinaƟon to support complex projects. The Planning Division advanced major development projects and iniƟaƟves including updaƟng the Margarita Area and Airport Area Specific Plans to facilitate addiƟonal housing capacity and iniƟaƟng the Broadstone Village and San Luis Ranch Lot 7 projects, two large infill housing development projects.

Housing and Homelessness Response remained a priority, as staff facilitated the approval of more than 500 affordable units that are currently in the pipeline. Notable affordable housing projects that were iniƟated included the Waterman Village and Calle Joaquin Homekey. The City permiƩed an expansion of CAPSLO’s 40 Prado safe parking program from seven to twelve spaces and a new rotaƟng overnight safe

Community Development Department
parking pilot program for twelve addiƟonal spaces at five host site locaƟons. Regular encampment clean ups occurred through coordinaƟon of homelessness response field team representaƟves, implementaƟon of the CAMP standards and responding to ASK SLO requests. ParƟcipaƟon in the NaƟonal League of CiƟes Healthy Housing InnovaƟon Cohort elevated the City’s visibility in addressing housing equity and resilience. The Building and Safety Division processed thousands of building permits and worked closely with the development community to bring projects to compleƟon. The building inspecƟon team inspected and issued CerƟficates of Occupancy for several key projects including the Anderson Hotel, Springhill Suites and Residence Inn in San Luis Ranch, and Tiburon Place. The Code Enforcement team processed a record number of invesƟgaƟon requests and facilitated several large-scale invesƟgaƟons including extensive work related to 1150 Laurel Lane to aƩempt to bring a dangerous building into compliance.

Staff improvements across most divisions contributed to greater operaƟonal stability. The department filled long-standing vacancies and advanced succession planning efforts. However, the departure of the Chief Building Official created a gap in the Building & Safety Division, requiring interim adjustments to maintain conƟnuity.

The department conƟnued to navigate fiscal constraints, including a mid-year revenue shorƞall and rising operaƟonal costs. These pressures required reprioriƟzaƟon of work programs and limited the ability to fund consultant support for plan review and technical services. AddiƟonally, increased demand for code enforcement and administraƟve support presented a challenge for the department, however, the department was able to quickly pivot to address emerging issues such as 1150 Laurel Lane, and Fraternity zoning compliance issues.

To meet the challenges, the department remained agile, adjusƟng work programs, reallocaƟng resources, and maintaining transparency through regular updates to city leadership, its public-facing website, and performance dashboards. These efforts reflect the department’s commitment to conƟnuous improvement, community responsiveness, and alignment with City goals. Looking ahead, the department is well-posiƟoned to build on this progress through stabilized staffing, enhanced interdepartmental collaboraƟon, and robust community partnerships.

Public Works
Public Works
A Year in Review
The Public Works Department closed the fiscal year under budget, achieving approximately 7% in expenditure savings while successfully delivering core services to the community and meeƟng FY 2024– 25 workplan goals.

Ask SLO, the City’s resident response plaƞorm, conƟnues to be a well-used resource for community members. As part of the 2025–27 Financial Plan, Council approved the addiƟon of a Heavy Equipment Mechanic, which is expected to reduce reliance on contracted services beginning in FY 2025–26. In the year ahead, the Maintenance Division will conƟnue seeking creaƟve strategies to control costs while maintaining service levels.

The CIP Engineering and TransportaƟon Planning & Engineering programs filled several long-term vacancies (Supervising Civil Engineer, ConstrucƟon Engineering Manager, and TransportaƟon PlannerEngineer) with highly qualified staff. Turnover among Capital Project Managers remains a concern; however, adopƟon of the Capital Improvement Plan in June 2025 has helped balance workloads across the CIP Engineering Team, enabling staff to focus efforts more effecƟvely.

The Parking Services program has conƟnued its commitment to improving the customer experience while building operaƟonal efficiencies. Public outreach remains a priority to ensure that the community is informed about changes and has opportuniƟes to provide feedback.

SLO Transit conƟnues to provide reliable transit service for more than 660,000 passenger trips across eight fixed routes, one tripper service, and one trolley service, supported by a fleet of 19 vehicles. In FY 2024- 25, six new buses were added to the fleet and are expected to enter service by Spring 2026. SLO Transit also advanced iniƟaƟves to increase ridership, including streamlining discount program applicaƟons, parƟcipaƟng in community events, and extending the academic service schedule through June.

Variance Analysis
General Fund Expenditures
Staffing: Staffing ended the year 7% under budget as full-Ɵme posiƟon vacancies resulted in salary savings in many programs, including Public Works AdministraƟon, Parks Maintenance, FaciliƟes Maintenance, Fleet Maintenance, Streets & Sidewalk Maintenance, CIP Engineering and TransportaƟon Planning & Engineering. Temporary (supplemental) posiƟon vacancies likewise added to these savings. Staff sought out contracted services through funds available in Other Contract Services to support programs during staffing vacancies.
` FY 2023-24 FY 2024-25 FY 2025-26
Public Works Actual Budget Actual Funds
Available % Budget
Staffing 10,632,237 $ 12,113,200 $ 11,218,075 $ 895,125 $ 7% 12,143,529 $ Contract Services 2,465,258 2,606,070 2,468,516 137,554 5% 2,574,965 Other Operating Expenditures 3,941,471 4,322,533 4,021,344 301,188 7% 4,304,258 Total 17,038,967 $ 19,041,802 $ 17,707,935 $ 1,333,867 $ 7% 19,022,753 $