Agenda packet — San Luis Obispo City Council, January 13, 2026 (part 2 of 4)

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City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: January 13, 2026
TO: Mayor and Council
FROM: Aaron Floyd, Public Works and Utilities Director
Prepared By: Alex Fuchs, Mobility Services Business Manager VIA: Whitney McDonald, City Manager
SUBJECT: ITEM 6j - APPROVE A MEMORANDUM OF UNDERSTANDING WITH

SLOCOG AND WITH THE CITY OF SANTA MARIA FOR PILOT EXPRESS

TRANSIT SERVICES
Staff received the following questions, regarding the Memorandum of Understanding (MOU) with the San Luis Obispo Council of Governments (SLOCOG) and with the City of Santa Maria for the operation of Santa Maria Regional Transit’s (SMRT) pilot express transit services. The questions are below with staff’s response shown in italics:
1) On Agenda Packet page 161, Section 10, Bus Stops/Facility Sharing, of the draft MOU states that the City of San Luis Obispo is responsible for the installation, maintenance, and expenses for bus stop infrastructure located at the SLO Downtown Transit Center. However, the City of Santa Maria will be responsible for the cost of any increased maintenance to such bus stop facilities reasonably resulting from the pilot express program. Can you describe how increased maintenance as a result of the pilot might be identified?
The City’s transit operation and maintenance services contractor, Transdev, regularly monitors and reports bus stop and facility maintenance needs at the Downtown Transit Center. These reports document the nature of the issue, location, and the observed cause when known.

Maintenance work is typically performed by a separate contractor and billed to the City at established hourly rates. If maintenance needs are reasonably attributable to SMRT’s use of the Downtown Transit Center as part of the pilot express services, such as increased wear, damage, or cleaning requirements beyond normal operations pre-pilot program, those incremental costs would be identified and documented and the City of Santa Maria would be invoiced for the additional maintenance expenses associated with the pilot express service.

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Item 6j – Approve a MOU with SLOCOG and City of SM for Pilot Express Transit Services Page 2 The recently issued Request for Proposals (RFP) for transit operation and maintenance services would require the selected contractor to also perform these maintenance services. Once the new contract term begins, the selected contractor will identify and report maintenance needs, along with the labor time required to complete the work, so that the maintenance expenses attributable to the pilot express service can continue to be tracked and invoiced appropriately. 2) Does SMRT have the option of using the San Luis Obispo Regional Transit Authority (RTA) bus bays in front of the County government center? No, under the proposed MOU, SMRT would not have the option to use RTA’s bus bays for the pick-up or drop-off of passengers.

The MOU for the pilot services does not include RTA as a party, as there was mutual agreement that RTA involvement was not necessary for the pilot. However, RTA notified the City that RTA has informally agreed to allow SMRT limited use of bus bays for short-term layovers while awaiting departure of the return trip to Santa Maria. This layover use is conditional and must not interfere with RTA’s scheduled operations or normal use of the bus bays.
3) Does SMRT coordinate arrival times with the SLO Transit "pulse" schedule, especially routes to Cal Poly?
Yes, SMRT considered SLO Transit’s schedule when planning the arrival and departure times for the pilot express service. The service schedules are designed to complement one another and allow for timely transfers without disrupting either transit system.

SLO Transit operates a bidirectional routing structure with “A” Routes traveling clockwise and “B” Routes traveling counterclockwise. As a result, morning riders of the pilot express service traveling to the Cal Poly campus would likely transfer to either Route 3B or 4B while afternoon riders traveling from the Cal Poly campus would likely transfer from either Route 3A or 4A.

In the morning, Route 3B and 4B each provide two trips that depart shortly after SMRT’s service arrives at the Downtown Transit Center. Similarly, in the afternoon, Route 3A and 4A provide three and two trips, respectively, that arrive at the Downtown Transit Center shortly before SMRT’s scheduled departure. Routes 3B and 4B also provide afternoon trips that could be used to transfer between services, although travel times from Cal Poly campus to the Downtown Transit Center would be longer compared to the “A” Routes.

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Item 6j – Approve a MOU with SLOCOG and City of SM for Pilot Express Transit Services Page 3 In addition to the above questions, after the publication of the Council Agenda Packet, staff consulted with the City Attorney’s Office and determined that Section 7, Changes in Service Levels, of the Memorandum of Understanding (MOU) required further clarification. The clarification is intended to specify that Section 7 applies only to the services shown in Exhibit 1 to the MOU, and that changes to SLO Transit’s services schedules made by the City of San Luis Obispo require a ninety (90) days’ notice to the City Santa Maria but are not subject to the City Santa Maria’s approval.

A redlined version of Section 7 showing the revised language in red text is provided below.

Attachment A is a revised final draft of the MOU and replaces Attachment A included in the original Council Agenda Report. A copy of the updated MOU was provided to the City of Santa Maria on January 8, 2026.

7. CHANGES IN SERVICE LEVELS
A. Proposed changes to services (as shown in Exhibit 1) require ninety (90) days’ written notice from SAN LUIS OBISPO or SANTA MARIA and are subject to the mutual written approval of all parties; provided, however, proposed changes to service schedules that impact the Downtown SLO Transit Center, as shown in Figure 1 of Exhibit 1, by SAN LUIS OBISPO only require ninety (90) days’ notice to SANTA MARIA and are not subject to the approval of SANTA MARIA.

B. Major Service Changes, such as, establishing a new or eliminating a fixed route, realignment of more than 25% of the length of the route, adding or eliminating more than one (1) bus stops, moving a stop more than one quarter of a mile, or changing service span (as shown in Exhibit 1) that impacts the agencies existing transit service shall require an amendment to this AGREEMENT.

ATTACHMENT
A – Revised final draft MOU for Pilot Express Transit Services

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MEMORANDUM OF UNDERSTANDING (MOU) FOR PILOT SANTA MARIA TO SAN

LUIS OBISPO EXPRESS TRANSIT SERVICES
Between

SAN LUIS OBISPO COUNCIL OF GOVERNMENTS
1114 MARSH STREET
SAN LUIS OBISPO, CA 93401
And

CITY OF SAN LUIS OBISPO
990 PALM STREET
SAN LUIS OBISPO, CA 93401
And

SANTA MARIA REGIONAL TRANSIT
1303 FAIRWAY DRIVE
SANTA MARIA, CA 93455
THIS AGREEMENT is entered into this day of , by the San Luis Obispo Council of Governments, the Metropolitan Planning Organization (MPO) for the San Luis Obispo region pursuant to 23 USC M,L Section 134 of Title, (herein referred to as “SLOCOG”) and between the CITY OF SAN LUIS OBISPO, (herein referred to as “SAN LUIS OBISPO”) and the SANTA MARIA REGIONAL TRANSIT, (hereinafter referred to as “SANTA MARIA”), collectively referred to as “the parties”.

THIS AGREEMENT is made between SLOCOG, SAN LUIS OBISPO and SANTA MARIA for the dissemination of information and the coordination of a pilot express service and service planning efforts, fare structures, use of bus stops, and facilitation of transfers.

RECITALS:

WHEREAS, SAN LUIS OBISPO and SANTA MARIA provide general public transit in the counties of San Luis Obispo and Santa Barbara; and, WHEREAS, Santa Maria will begin to operate a pilot express transit route (SLO 210) beginning September 15, 2025, that will utilize SAN LUIS OBISPO right-of-way at (the Downtown Transit Center located on the 800 block of Osos Street); and,

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WHEREAS, to efficiently serve the travel demands of each county, each agency agrees to coordinate and cooperate in route planning, scheduling, and disseminating information; and
WHEREAS, SAN LUIS OBISPO and SANTA MARIA desire to enter into this memorandum of understanding for the provision of the pilot express fixed route service between San Luis Obispo and Santa Maria; and
WHEREAS, SLOCOG provides regional transportation planning and oversees Federal and State transportation funding within San Luis Obispo County and has agreed to facilitate communication and performance of this agreement between SAN LUIS OBISPO and SANTA MARIA.

NOW THEREFORE, “the parties” mutually agree as follows:

1. TERM OF AGREEMENT.

A. The term of this AGREEMENT shall be effective September 15, 2025, and will remain in effect for two (2) years or until terminated with or without cause or extended by either party by giving 90 days' written notice to the other party. Any party may terminate this AGREEMENT immediate “for cause” provided the terminating party notifies the other party of the basis for termination and provides the other party with ten (10) calendar days to cure.

2. HOLD HARMLESS AGREEMENTS.

A. In the performance of this AGREEMENT, SAN LUIS OBISPO shall jointly and severally indemnify, defend, and hold harmless SANTA MARIA, its officers, agents and employees against any and all suits, claims, demands, liabilities, losses, and damages, including reasonable attorneys’ fees and costs, arising from or connected with injury to persons or property, or any alleged injury, occurring during the performance of this AGREEMENT and resulting from the negligent or intentional acts or omissions of SAN LUIS OBISPO or its officers, employees or agents (Collectively “Claims”). SAN LUIS OBISPO shall, at its own expense, pay all legal costs, attorneys’ fees, and expenses arising from or related to such Claims, and shall satisfy and discharge any judgment rendered against SANTA MARIA or any of its officers, agents or employees arising from or related to such Claims.

B. In the performance of this AGREEMENT, SANTA MARIA shall jointly and severally indemnify, defend, and hold harmless SAN LUIS OBISPO, its officers, agents and employees against any and all suits,

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claims, demands, liabilities, losses, and damages, including reasonable attorneys’ fees and costs, arising from or connected with injury to persons or property, or any alleged injury, occurring during the performance of this AGREEMENT and resulting from the negligent or intentional acts or omissions of SANTA MARIA or its officers, employees or agents (Collectively “Claims”). SANTA MARIA shall, at its own expense, pay all legal costs, attorneys’ fees, and expenses arising from or related to such Claims, and shall satisfy and discharge any judgment rendered against SAN LUIS OBISPO, or any of its officers, agents or employees arising from or related to such Claims.

C. In performance of this Agreement, SANTA MARIA and SAN LUIS OBISPO shall jointly and severally indemnify, defend, and hold harmless SLOCOG, its officers, agents, and employees from and against any and all suits, claims, demands, liabilities, losses, and damages, including reasonable attorneys' fees and costs, arising from or connected with injury to persons or property, or any alleged injury, occurring during the performance of this AGREEMENT, and resulting from the negligent or intentional acts or omissions of SANTA MARIA, SAN LUIS OBISPO, or their respective officers, employees, or agents (Collectively “Claims”). Both SANTA MARIA and SAN LUIS OBISPO shall, at their own expense, pay all legal costs, attorneys' fees, and expenses arising from or related to such Claims, and shall satisfy and discharge any judgment rendered against SLOCOG or its officers, agents, or employees arising from or related to such Claims.

3. SEVERABILITY
A. Should it be determined by a court of competent jurisdiction that any term, section, or provision of this agreement is void, invalid or unenforceable, the other provisions of this agreement shall remain in full force and effect.

4. GOVERNING LAW
A. This agreement shall be governed by, construed, and enforced in accordance with the laws of the State of California.

5. SERVICE COORDINATION/DATA EXCHANGE
A. Each party shall inform the other of future plans for pilot and/or permanent new routes, schedules, and fares, exclusive of emergencies, within San Luis Obispo County. Any plans by SANTA

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MARIA for implementing new or pilot routes, not previously identified in Exhibit 1, must be pre-approved by SAN LUIS OBISPO and SLOCOG prior to implementation. SAN LUIS OBISPO and SLOCOG reserve the right to conduct an analysis of any proposed changes or addition of new routes, schedules and fares. If analysis determines that the contemplated change could adversely impact the SAN LUIS OBISPO’s or other transit services in San Luis Obispo County, SAN LUIS OBISPO and SLOCOG, individually, reserve the right to deny such change.

B. SANTA MARIA shall provide, on request by SAN LUIS OBISPO or SLOCOG, data that is readily available including boardings and alightings by stop and passenger load information for all inter-county services operated in between SANTA MARIA AND SAN LUIS OBISPO during the term of this AGREEMENT. Should a data request require extensive efforts, SANTA MARIA shall advise the requesting party of the expected costs; and, if the requesting party still desires the data, it shall so advise Santa Maria which shall provide the data and which may charge a fee to recover its actual costs.

6. SERVICE TO BE OPERATED.

A. SANTA MARIA’s proposed pilot service may not deviate from the agreed upon service route, fare levels, service times, service days, and designated bus stop(s) (as shown in EXHIBIT 1) without prior consent from SAN LUIS OBISPO and SLOCOG. Minor modifications to the service route, fare levels, service times, service days, and/or stop placement can be made without an amendment to this AGREEMENT if approved in writing by the authorized representatives of SAN LUIS OBISPO and SANTA MARIA.

8. PUBLIC INFORMATION Page 162 of 561
A. Each party shall cooperate, to the extent feasible, in providing the general public with specific transit information and in advertising of operations of SAN LUIS OBISPO and SANTA MARIA’S services, inpromoting the general use of public transit, and in providing participation and support in required public hearings.

9. REGIONAL PASS/FARES
A. SANTA MARIA agrees to participate in the San Luis Obispo County Regional Pass Program, which means that on the pilot express route operated between Santa Maria and San Luis Obispo, the Regional Day or Month Pass will be an accepted form of payment on the route.

SANTA MARIA will be paid the fare revenue for the San Luis Obispo County Regional Pass for riders of the pilot express route.

B. SANTA MARIA will conduct quarterly surveys or use other means agreed to by the parties to determine the ridership levels of customers using San Luis Obispo County regional passes on SANTA MARIA’s transit system. SANTA MARIA shall provide the quarterly survey results to SAN LUIS OBISPO and SLOCOG
C. SANTA MARIA shall retain all fares or other revenues collected on its pilot route with respect to that service for payments not made with the San Luis Obispo Regional Pass.

D. SANTA MARIA will provide access to the pilot express bus service, without charge, to SAN LUIS OBISPO staff for the purposes of checking/monitoring the bus service performance.

10. BUS STOPS/FACILITY SHARING
A. SAN LUIS OBISPO is responsible for the installation, maintenance, and expenses for bus stop infrastructure located at the SLO Downtown Transit Center. However, SANTA MARIA will be
responsible for the cost of any increased maintenance to such bus stop facilities reasonably resulting from the pilot express program.

B. Pilot express routes may utilize existing bus stop infrastructure for signage, provided such signage complies with all applicable SAN LUIS OBISPO Standard Specifications and Engineering Standards.

C. All signage for jointly used bus stops shall be subject to prior approval by SAN LUIS OBISPO before installation.

D. Each Party shall be solely responsible for any claims or damages arising from the installation of its own bus stop signs, posts, or poles.

E. SAN LUIS OBISPO shall provide access to restroom facilities for SANTA MARIA bus drivers at the City Hall Building facility located at 990 Palm Street.

F. All parties agree that SAN LUIS OBISPO vehicles have priority over pilot express transit service parking at the Downtown Transit Center and in no event shall pilot express transit vehicles block, delay, or idle in the street or otherwise contribute to congestion while waiting for access to the Downtown Transit Center.

11.EXHIBITS
A. All exhibits referenced in this AGREEMENT are hereby incorporated into the AGREEMENT as if set forth in full herein. In the event of any material discrepancy between the terms of any exhibit so incorporated Page 163 of 561 and the terms of this AGREEMENT, the terms of this AGREEMENT shall control.

12. NOTICES.

A. Any notice required to be given pursuant to the terms and provisions hereof shall be in writing, and shall be sent by certified or registered mail to:

SAN LUIS OBISPO:

Public Works and Utilities Director
City of San Luis Obispo
919 Palm Street,
San Luis Obispo, CA 93401
AND
City Clerk
City of San Luis Obispo
990 Palm Street,
San Luis Obispo, CA 93401
SANTA MARIA:

Transit Manager
City of Santa Maria
110 E Cook Street
Santa Maria, CA 93454
AND

SAN LUIS OBISPO COUNCIL OF GOVERNMENTS
Executive Director
City of San Luis Obispo
1114 Marsh Street
San Luis Obispo, CA 93401

13. ENTIRE AGREEMENT.

A. The terms and conditions set forth in this AGREEMENT, including exhibits referenced, constitute the complete and exclusive statement of the agreement between all of the parties with respect to the subject matter hereof, and there are no other representations, promises, warranties, covenants or undertakings with respect thereto and this agreement may not be contradicted by prior or contemporaneous agreements.

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IN WITNESS WHEREOF, this AGREEMENT has been executed by the parties hereto, upon the date first above written.

CITY OF SANTA MARIA CITY OF SAN LUIS OBISPO &
SLOCOG
ATTEST: ATTEST:

Mayor
City of Santa Maria
Erica A. Stewart, Mayor
City of San Luis Obispo
Name
City Clerk
Teresa Purrington
City Clerk

APPROVED AS TO FORM AND
LEGAL EFFECT:

Name
City Counsel
By:

City Attorney
Date:

By:

SLOCOG Legal Counsel
Date:

Name
City Counsel
By:

City Attorney
Date:

SLOCOG

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President
SLOCOG Board of Directors
Date:

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EXHIBIT 1

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Figure 1: Service Schedule – Weekdays Only
Santa Maria
Crossroads Ctr
(Depart)
Downtown
SLO Transit
Center
Santa Maria
Crossroads Ctr
(Arrive)
6:20 AM 7:20 AM 8:20 AM
6:45 AM 7:45 AM 8:45 AM
8:20 AM 9:20 AM 10:20 AM
8:45 AM 9:45 AM 10:45 AM
No Midday Service, See SLO RTA for travel options
3:00 PM 4:00 PM 5:00 PM
4:10 PM 5:10 PM 6:10 PM
5:00 PM 6:00 PM 7:00 PM

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Item 6j
Department: Public Works
Cost Center: 5201
For Agenda of: 1/13/2026
Placement: Consent
Estimated Time: N/A
FROM: Aaron Floyd, Public Works & Utilities Director
Prepared By: Alex Fuchs, Mobility Services Business Manager SUBJECT: APPROVE A MEMORANDUM OF UNDERSTANDING WITH SLOCOG

AND WITH THE CITY OF SANTA MARIA FOR PILOT EXPRESS TRANSIT

SERVICES

RECOMMENDATION
Authorize the Mayor to execute a Memorandum of Understanding (Attachment A) with the San Luis Obispo Council of Governments and with the City of Santa Maria for Pilot Express Transit Services.

REPORT-IN-BRIEF
In April 2024, the Santa Maria City Council approved elimination of funding to San Luis Obispo Regional Transit Authority (RTA) for their Route 10 service and approved Santa Maria Regional Transit (SMRT) to operate its own inter-regional commuter service, referred to in this report as ‘pilot express transit service’. In June 2025, the San Luis Obispo Council of Governments (SLOCOG) resumed discussions for the development and execution of a Memorandum of Understanding (MOU) between SLOCOG, the City, and Santa Maria for SMRT’s two-year pilot express transit service. The MOU establishes terms for service coordination, data and fare sharing, and use of facilities needed to operate the pilot express transit service. SMRT began operating the pilot express service on September 15, 2025, with close coordination and monitoring by the City. After conversations regarding logistical questions and a review by each agency’s legal counsel, a final draft MOU (Attachment A) with mutually agreed upon terms is ready for Council’s consideration.

POLICY CONTEXT
Task 5 of the Infrastructure and Sustainable Transportation Major City Goal of the 2025- 27 Financial Plan states that the City is to, “Support policies and programs aimed at expanding mass transportation and public transit.” (page 46).

Policy 3.1.1 – Transit Development – of the Circulation Element of the City’s General Plan, and incorporated by reference in the 2025 Short-Range Transit Plan, states that, “The City shall encourage transit accessibility, development, expansion, coordination,

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and marketing throughout San Luis Obispo County to serve a broad range of local and regional transportation needs.” (page 14).

Goal 2 of the San Luis Obispo Council of Government’s (SLOCOG) 2023 Regional Transportation Plan is to improve intermodal mobility and accessibility for all people.

Specifically, Policy Objective 2.5 which states, “Support cooperative planning activities leading to an integrated intermodal transportation system” (page 57). The 2023 Regional Transportation Plan also includes Strategy 8.2, which states, “Actively encourage modal shifts to reduce single occupant vehicles (SOVs) by expanding transportation options, including but not limited to, improvements for intercity rail, public transit, bicycling, Park & Ride lots, carpools, and vanpools.” (page 62).

DISCUSSION
Background
The City of Santa Maria (Santa Maria) has historically contributed funding from their Urbanized Area federal formula funds to support San Luis Obispo Regional Transit Authority’s (RTA) Route 10 service. RTA’s Route 10 provides service from San Luis Obispo to Santa Maria with stops in Pismo Beach, Arroyo Grande, and Nipomo. In 2021, Santa Maria and RTA’s respective boards agreed that an independent study was needed to guide future funding decisions following a one-time Coronavirus Aid, Relief, and Economic Security Act (CARES) contribution and a negotiated Fiscal Year (FY) 2023-24 allocation of approximately $255,100.

A third-party consultant study found that Santa Maria could provide comparable service at a lower cost, prompting Santa Maria to propose a more cost-effective model where it would expand its own service into San Luis Obispo County instead of subsidizing RTA’s service. On April 16, 2024, the Santa Maria City Council approved elimination of RTA’s Route 10 funding and approved Santa Maria Regional Transit (SMRT) to operate its own pilot express transit service. The intent of the pilot express transit service is to determine if there is a sustained need for direct service for daily commuters between Santa Maria and downtown San Luis Obispo beyond what is currently provided by RTA’s Route 10 service. Attachment B is the related Santa Maria staff report which includes a copy of the third-party consultant study.

Around the same time as the Santa Maria City Council decision, representatives from RTA, Santa Maria, SLOCOG, and the City of San Luis Obispo (City) met to discuss the need to create a Memorandum of Understanding (MOU). The purpose of the MOU is to coordinate services, data sharing, fare sharing, and use of facilities for SMRT to operate a pilot express transit service. Since Santa Maria does not own or have access to any bus stops or transit facilities in San Luis Obispo, they requested that the City allow SMRT to use the Downtown Transit Center, located on the 800 block of Osos Street, for passenger boarding and de-boarding.

In July 2024, discussions were put on hold as SMRT focused on its upcoming FTA triennial review as well as consolidation of services with the City of Guadalupe.

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Memorandum of Understanding
In June 2025, SLOCOG reached out to City staff about resuming discussions of an MOU between SLOCOG, the City, and Santa Maria for SMRT’s two-year pilot express transit service. SLOCOG provided a draft MOU for the City and Santa Maria staff to review and provide comment. On August 6, 2025, SLOCOG’s board approved execution of the MOU once terms are finalized and accepted by all parties (Attachment C).

SMRT began operating the pilot express service, designated as Route SLO 210, on September 15, 2025. The City approved initiation of the service with close coordination and monitoring to address any potential disruptions. Since service began, the only issue observed has been brief morning periods when all five bus bays are occupied. During these times, the SMRT bus either circulates the block or waits on Palm Street east of Osos Street until a bay becomes available. To date, this has not affected service delivery for either system.

On September 16, 2025, Santa Maria City Council approved execution of the MOU before it was approved as to legal form or presented for consideration by the San Luis Obispo City Council. After conversations regarding remaining logistical questions that are now addressed in the agreement and a review by each agency’s legal counsel, a final draft MOU with mutually agreed upon terms is now ready for Council’s consideration. Santa Maria staff is returning to their City Council on January 20, 2026, with a recommendation to approve execution of the revised MOU. Table 1 is a summary of the key MOU terms.

The pilot service provides direct express trips that are not currently available on RTA’s Route 10. Although Route 10 operates in the same regional corridor, with multiple stops in Santa Maria, Nipomo, Arroyo Grande, Pismo Beach, and San Luis Obispo. As a result, the pilot service is expected to attract a different group of riders. Route 10 offers only one northbound express trip in the morning and one southbound express trip in the evening, with departure times that differ from SMRT’s pilot express trips. In addition, the two services are operated and branded separately.

Table 1 - Key MOU Terms for the Pilot Express Transit Service Service Start Date September 15, 2025
Route Designation SLO 210 (identified in the Recital section) Service Period Two years, beginning on the service start date, unless terminated by either party or extended by mutual agreement
Changes to Service
Levels
Proposed changes to the pilot express service require ninety (90) days’ written notice from either party and are subject to the approval of all parties
Regional Pass Fare
Sharing
Santa Maria agrees to participate in the San Luis Obispo County Regional Pass Program, which means the Regional Day or Month Pass will be an accepted form of payment on the route

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Item 6j
Joint Use of Facilities
The City allows Santa Maria use of the Downtown Transit Center based on the service schedule included in the MOU for passenger boarding and de-boarding. SLO Transit vehicles have priority over Santa Maria’s use of the facility.

RTA’s participation in the MOU is not required as Santa Maria’s pilot express service will not use any RTA owned bus facilities. The MOU does require Santa Maria’s participation in SLOCOG’s Regional Pass Program, which covers fare sharing between all agencies in the region for passengers using either the Regional 1-Day or Regional Monthly Pass on the pilot express service.

SLOCOG is a participating agency in this MOU because SLOCOG is the regional transportation planning agency (RTPA) and the federally designated metropolitan planning organization (MPO). In that role, SLOCOG coordinates public transit services across the region including planning and policy setting, regional coordination, and performance monitoring. SLOCOG plays the oversight and evaluation role, making sure pilots align with regional transportation goals.

The MOU includes a data-sharing provision, including boardings and de-boardings by stop and passenger load information, for the purpose of helping to assess the demand for the pilot express service and its impacts on SLO Transit’s facilities and services. At this time, staff does not have an expectation that the new service will significantly increase ridership on SLO Transit’s routes. Santa Maria staff indicate that the pilot service primarily targets downtown employees and secondarily Cal Poly staff, faculty, and students. Cal Poly-affiliated riders would have to transfer to either SLO Transit’s Route 3 or 4 to complete their trips.

Preliminary data from SMRT show 57 passenger trips in September 2025 and 177 in October 2025. SMRT continues to market the service to downtown employees and anticipate that ridership will grow over the coming months. To date, the express service has not been associated with an increase ridership on SLO Tranist routes, suggesting that few, if any, riders are transferring to local services during these initial months of operation.

Previous Council or Advisory Body Action

1. September 10, 2025 – The Mass Transportation Committee, at a regularly schedule meeting, voted in-favor of recommending that the City Council authorize the Mayor to execute the MOU.

2. June 17, 2025 – Council adopted the 2025-27 Financial Plan including the Infrastructure and Sustainable Transportation Major City Goal.

Public Engagement
At the public meeting in December 2024, City of Santa Maria staff held an Unmet Transit Needs meeting to present potential route modification options to public, including a SMRT service from Santa Maria/Orcutt to SLO/Cal Poly. Public comment on this item can be provided to the City Council meeting through written correspondence prior to the meeting

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and through public testimony at the meeting.

CONCURRENCE
On August 6, 2025, SLOCOG’s Board approved execution of an MOU with the City of San Luis Obispo and with the City of Santa Maria for a new express fixed-route pilot service from Santa Maria to downtown San Luis Obispo. City of Santa Maria legal counsel reviewed the draft MOU and approved the form of the agreement. The City Attorney’s Office has reviewed and revised the draft MOU and approves the form of the agreement.

On September 10, 2025, the Mass Transportation Committee (MTC) considered a recommendation by staff to support the execution of the MOU. The MTC voted 5 to 0 infavor of recommending that the City Council authorize the Mayor to execute the MOU.

On September 16, 2025, Santa Maria City Council approved execution of the MOU; however, several revisions have been made to the MOU since then, so Santa Maria staff is returning to their City Council on January 20, 2026, with a recommendation to approve execution of the revised MOU (Attachment A).

The City’s transit operation and maintenance contractor, Transdev, reviewed the proposed route and schedule, including use of the Downtown Transit Center. Since the pilot express service began, Transdev has coordinated daily use of the Downtown Transit Center and monitors and reports any issues to staff. Additionally, the City’s agreement with Transdev does not change and does not need to be amended based on the pilot express service.

Prospective bidders for the transit operation and maintenance services Request for Proposals can identify any concerns and/or service implications in their respective proposals.

ENVIRONMENTAL REVIEW
Operation of the new pilot express service is statutorily exempt under California Public Resources Code Section 21080.25(b)(5), which exempts public projects for the institution or increase of bus service which will be exclusively provided by zero-emission vehicles on existing public right-of-way. Santa Maria has confirmed that the pilot express service will use zero-emission electric buses and, therefore, meets the requirements of the above statutory exemption section.

FISCAL IMPACT
Budgeted: N/A Budget Year: 2025-26
Funding Identified: N/A
Fiscal Analysis:

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Item 6j
Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $ 0 $ 0 $ 0 $ 0
Transit Fund $ 0 $ 0 $ 0 $ 0
State
Federal
Total $ 0 $ 0 $ 0 $ 0
There will be no fiscal impact to the City’s Transit Fund or the General Fund resulting from the recommended action in this report. Under the proposed MOU language, Santa Maria will retain all fares and other revenues collected for operation of the pilot express service. Additionally, the MOU states that any additional maintenance required to the City of San Luis Obispo stops by increased traffic from this pilot program will be Santa Maria’s responsibility.

If through the operation of the new pilot service, SLO Transit’s current or future planned service schedules are adversely impacted or an increase in maintenance needs is identified, then notice will be provided to the other parties that an amendment is required, per the agreement terms.

If, during the operation of or at the end of the two-year pilot service, Santa Maria notifies the other parties of their intent to make the service permanent, then a new MOU will need to be drafted and approved by each agency’s respective governing board prior to the service being made permanent.

ALTERNATIVES

1. Council could decide not to approve execution of the MOU with SLOCOG and the City of Santa Maria. Should Council pursue this option, inter-regional public transit will continue to rely on the San Luis Obispo Regional Transit Authority’s Route 10 service and limit opportunities to expand commuter-focused transportation options.

2. Council could decide to not approve the execution of the MOU and direct staff to negotiate terms of the agreement based on Council’s comments on this item. Should Council pursue this option, execution of the MOU may need to return to each agency’s respective board for approval depending on the extent of the negotiated revisions.

ATTACHMENTS
A - Final Draft MOU for Pilot Express Transit Service
B - April 16, 2024, City of Santa Maria Staff Report
C - August 6, 2025, SLOCOG Staff Report

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MEMORANDUM OF UNDERSTANDING (MOU) FOR PILOT SANTA MARIA TO SAN

LUIS OBISPO EXPRESS TRANSIT SERVICES
Between

SAN LUIS OBISPO COUNCIL OF GOVERNMENTS
1114 MARSH STREET
SAN LUIS OBISPO, CA 93401
And

CITY OF SAN LUIS OBISPO
990 PALM STREET
SAN LUIS OBISPO, CA 93401
And

RECITALS:

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NOW THEREFORE, “the parties” mutually agree as follows:

1. TERM OF AGREEMENT.

2. HOLD HARMLESS AGREEMENTS.

B. In the performance of this AGREEMENT, SANTA MARIA shall jointly and severally indemnify, defend, and hold harmless SAN LUIS OBISPO, its officers, agents and employees against any and all suits,

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4. GOVERNING LAW
A. This agreement shall be governed by, construed, and enforced in accordance with the laws of the State of California.

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6. SERVICE TO BE OPERATED.

8. PUBLIC INFORMATION
A. Each party shall cooperate, to the extent feasible, in providing the general public with specific transit information and in advertising of operations of SAN LUIS OBISPO and SANTA MARIA’S services, in

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promoting the general use of public transit, and in providing participation and support in required public hearings.

SANTA MARIA will be paid the fare revenue for the San Luis Obispo County Regional Pass for riders of the pilot express route.

D. SANTA MARIA will provide access to the pilot express bus service, without charge, to SAN LUIS OBISPO staff for the purposes of checking/monitoring the bus service performance.

B. Pilot express routes may utilize existing bus stop infrastructure for signage, provided such signage complies with all applicable SAN LUIS OBISPO Standard Specifications and Engineering Standards.

C. All signage for jointly used bus stops shall be subject to prior approval by SAN LUIS OBISPO before installation.

D. Each Party shall be solely responsible for any claims or damages arising from the installation of its own bus stop signs, posts, or poles.

E. SAN LUIS OBISPO shall provide access to restroom facilities for SANTA MARIA bus drivers at the City Hall Building facility located at 990 Palm Street.

11.EXHIBITS
A. All exhibits referenced in this AGREEMENT are hereby incorporated into the AGREEMENT as if set forth in full herein. In the event of any material discrepancy between the terms of any exhibit so incorporated and the terms of this AGREEMENT, the terms of this AGREEMENT shall control. Page 181 of 561

12. NOTICES.

A. Any notice required to be given pursuant to the terms and provisions hereof shall be in writing, and shall be sent by certified or registered mail to:

SAN LUIS OBISPO:

Public Works and Utilities Director
City of San Luis Obispo
919 Palm Street,
San Luis Obispo, CA 93401
AND
City Clerk
City of San Luis Obispo
990 Palm Street,
San Luis Obispo, CA 93401
SANTA MARIA:

Transit Manager
City of Santa Maria
110 E Cook Street
Santa Maria, CA 93454
AND

SAN LUIS OBISPO COUNCIL OF GOVERNMENTS
Executive Director
City of San Luis Obispo
1114 Marsh Street
San Luis Obispo, CA 93401

13. ENTIRE AGREEMENT.

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IN WITNESS WHEREOF, this AGREEMENT has been executed by the parties hereto, upon the date first above written.

CITY OF SANTA MARIA CITY OF SAN LUIS OBISPO &
SLOCOG
ATTEST: ATTEST:

Mayor
City of Santa Maria
Erica A. Stewart, Mayor
City of San Luis Obispo
Name
City Clerk
Teresa Purrington
City Clerk

APPROVED AS TO FORM AND
LEGAL EFFECT:

Name
City Counsel
By:

City Attorney
Date:

By:

SLOCOG Legal Counsel
Date:

Name
City Counsel
By:

City Attorney
Date:

SLOCOG

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President
SLOCOG Board of Directors
Date:

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EXHIBIT 1

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FOR THE COUNCIL MEETING OF APRIL 16, 2024

COUNCIL AGENDA REPORT
TO: City Council
FROM: Interim City Manager Alex Posada
BY: Director of Public Works Brett Fulgoni
SUBJECT: Federal Transit Administration 5307 Program of Projects for the Federal Fiscal Year 2024-027 Federal Transportation Improvement Program
Description:

The City Council will consider adopting the proposed projects selected to receive continual
5307 Call
funding
for Projects
for the
process,
Federal
to
Fiscal
support
Year
ongoing
2024-7,
transit
Federal
capital
Transit
and operations
Administration' s
costs
within the Santa Maria Urbanized Area.

Environmental Notice: The activity is not a " Project" as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060( c)( 3) no environmental review is required.

RECOMMENDATION:

Adopt a Resolution approving applications for Federal Transit Administration Section 5307 funds for Fiscal Year 2024-5, Fiscal Year 2025- 2026, and Fiscal Year 2026-7 for Santa Maria Urbanized Area.

BACKGROUND:

Each year the Federal Transit Administration ( FTA) distributes Section 5307 operating and capital assistance funds to Urbanized Areas (UZAs) to support their respective transit programs. The FTA 5307 funds are apportioned to the small UZAs on the basis of population and population density.

Santa Maria Regional Transit (SMRT), as the designated grantee of Section 5307 funds, conducts the project selection process for the Santa Maria Urbanized Area. The City of Santa Maria approves projects and then submits the projects to projects to Santa Barbara County Association of Governments ( SBCAG). SBCAG then includes the approved projects into the Federal Transportation Improvement Program.

The primary transit operator for the Santa Maria UZA is the City' sSanta Maria Regional Transit, but there are other operators.

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SBCAG staff has estimated available FTA 5307 apportionments for Fiscal Year ( FY) 24/5 to 26/7 for the 2024 cycle. The estimates are in the table below.

Urbanized Area FY 24/5 FY 25/6 FY 26/7 Totals
Lompoc 1, 763, 907 1, 763, 907 1, 763, 907 5, 297, 721
Santa Maria 4, 248, 541 4, 248, 541 4, 248, 541 12, 745, 623 Total 6, 012, 448 6, 012, 448 6, 012, 448 18, 037, 344
Note: Apportionments are based on Federal Fiscal Year 2023 Apportionments Apportionments exclude Small Transit Intensive Cites funding estimates* To select the projects that will receive funding, SBCAG is required by federal regulation to adopt procedures that will be used for the selection of projects for FTA 5307 funding.

The procedures require each designated grantee of the UZA to screen, score, and recommend to SBCAG which projects in their UZA should be funded for fiscal years 24/5 to 26/7.

After the initial screening and scoring by each designated grantee, the projects must be submitted to the SBCAG Board for approval.

DISCUSSION:

While SMRT is the primary transit operator and designated FTA grantee for the Santa Maria UZA, there are also three other transit operators, who provide some level of service to the Santa Maria UZA: Guadalupe Flyer, SBCAG' sClean Air Express, and San Luis Obispo County' sSan Luis Obispo Regional Transit Authority ( SLORTA). The Call for Projects process is open to considering funding these other transit operators as well.

Consideration of awarding Santa Maria UZA funds to these other operators is based on the scoring criteria which includes whether it is considered an " effective and cost- efficient use of public funds," amongst other criteria.

Two project applications were submitted in the Santa Maria UZA; one from SMRT and another from SLORTA.

1. Federal Transit Operating Assistance for SMRT: Program a total of $4,61, 000in FY' s24/5 to 26/7 in FTA Section 5307 urbanized area formula funds for transit capital, operating, maintenance, and expansion assistance.

2. Operating Assistance for SLORTA Route 10: Program a total of $ 255, 093 in FY 24/5 in FTA Section 5307 urbanized area formula funds for partial funding of SLORTA Route 10 fixed -route services.

Change from Status Quo
Historically, Santa Maria, as the designated recipient, contributed Santa Maria UZA allocated funding to support SLORTA' sRoute 10 service into Santa Maria from San Luis Obispo (SLO) County. However, Santa Maria has long disputed the appropriate level of 2

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financial contribution to SLORTA and that this matter should be studied rather than capitulating to the request.

After a very generous and negotiated contribution of Santa Maria UZA allocation of The Coronavirus Aid, Relief, and Economic Security ( CARES) Act ( 2020) funding in the amount of $ 1. 2 million and an additional one- time contribution of $ 255, 093 in FY 23/4 5307 funds to SLORTA back in 2021, a May 17, 2021, letter from the Executive Director of SLORTA ( Attachment A) acknowledges that an " independent study... will inform future negotiations on regional funding."
A codeveloped study, with SLORTA input ( Attachment B), by HDR Consulting, found that Santa Maria Regional Transit could offer comparable service far cheaper and in lieu of financial support to SLORTA. Santa Maria Transit staff have reached out to SLORTA to collaborate on an alternative "effective and cost- efficient use of public funds" transit model where SMRT operates increased service into SLO County in lieu of a subsidy to SLORTA.

Which notably has not restored pre -pandemic service levels due to ongoing challenges stemming from the pandemic, issues SMRT has long resolved. These negotiations have only recently begun ( March 2024), and the two organizations are still without the necessary agreement.

On the basis of the criteria for "effective and cost- efficient use of public funds," the lack of a mutually agreed upon agreement and the notably substantial amount of already contributed funds, Santa Maria staff are not recommending the award of Santa Maria UZA allocated 5307 funds be shared with SLORTA. Should an agreement be reached later, an amendment to the Call for Projects will be brought forward for consideration.

Notably, there is no obligation to do so, and SLORTA has been aware of this possibility since May 2021. It should also be noted that SLO County has its own independent sources
Route 10
of SLO County related UZA' s 5307 funding which would support SLORTA' s operational costs, including the marginal amount it takes to cross the river into Santa Maria, and which San Luis Obispo residents expect from SLORTA. Similarly, SMRT has regularly offered, relying on its own allocation of SM UZA funds, to support additional service into SLO County in lieu of the subsidy request from SLORTA. As previously noted, these negotiations have only recently begun, and the two organizations are still without the necessary agreement. Until such an agreement can be reached, at which time an amendment to the Call for Projects will be brought forward for consideration, it is the recommendation to not share SM UZA funds with SLO RTA on the basis herein outlined. This would be consistent with any other time Santa Maria allocates funding.

Alternative( s)
The City Council may alternatively decide to offer SLORTA some negotiated amount of Santa Maria UZA funding. However, this alternative is not recommended as it continues a precedent that supports a SLO County reliance on Santa Maria UZA funds to augment their budget while not producing an equally beneficial service for both San Luis Obispo and Santa Maria/ Santa Barbara County residents.
3

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Fiscal Considerations
The FTA required 5307 selection process is necessary for UZAs to have, in order for their projects to be recorded in the Federal Statewide Transportation Improvement Program and then be able to expend federal funds on their transit programs. Not adopting a 5307 projects list for the Santa Maria UZA would prevent SMRT from using this primary source of funding used to support Santa Maria' s, Orcutt' s, and Tanglewood' stransit services.

Impact to the Community
An ever- increasing population of the Santa Maria UZA community members are relying on the City' s SMRT public transit system to address their mobility needs. As of recent, ridership numbers have surpassed pre -pandemic levels. SMRT is continuing to invest in its transit services for the Santa Maria UZA, and beyond, by making intentional, deliberate, and cost- effective service improvements which focus on prioritizing Santa Maria UZA and Northern Santa Barabara resident needs. The adoption of the recommended FTA 5307 Call for Projects will ensure that SMRT can continue to deliver these vital services, while still buying out the team for a mutually beneficial agreement to be reached.

ATTACHMENTS
A. May 17, 2021, RTA Letter — Amended Application, Need for Study B. HRD Route 10 Operational Analysis Technical MEMO
4

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Attachment A
rta
179 Cross Street, Suite A
San Luis Obispo, CA 93401
805) 781- 4472 Fax ( 805) 781- 1291
www. slorta. og

REGIONAL TRANSIT AUTHORITY
May 17, 2021 SENT VIA EMAIL
Kevin McCune
Santa Maria Public Works Director
Re: Amended FTA Section 5307 Application for Santa Maria UZA Funds Dear Mr. McCune:

Per our recent discussions, the San Luis Obispo Regional Transit Authority ( RTA) accepts the City of Maria' srecommended programming of $255, 093 in Fiscal Year 2023-4 Federal Transit Administration Section 5307 funds for partial funding of RTA Route 10 fixed -route services that operate in the Santa Maria Urbanized Area. As agreed, we herein withdraw our request for FY21- 22 and FY22- 23 funding.

Please accept this letter as an amendment to tike RTA' sapplication that we submitted to the City on January 14, 2021.

We look forward to partnering with the City, the Santa Barbara County Association of Governments and the San Luis Obispo Council of Governments to jointly fund and conduct an independent study that will inform future negotiations on regional funding agreements for transit services that cross county lines.

Feel free to call or email me if you need additional information.

Sincerely,
RTA Executive Director
cc: Pete Rodgers, SLOCOG
Sarkes Khachek, SBCAG
The Regional Transit Authority is a Joint Powers Agency serving residents and visitors of:

Arroyo Grande Atascadero Grover Beach Morro Bay Paso Robles Pismo Beach San Luis Obispo and The County of San Luis Obispo

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Attachment B
Route 10 Operational Analysis Findings
Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan — Contract Amendment Memorandum
Date: Wednesday, July 12, 2023
Project: Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan — Contract Amendment
To: Gamaliel Anguiano, City of Santa Maria
From: Marie Lewis Adams, HDR
Subject: Route 10 Operational Analysis Findings
The San Luis Obispo Regional Transit Authority ( RTA) currently operates bus service between Santa Maria and San Luis Obispo designated as Route 10. The City of Santa Maria historically contributes a portion of its FTA 5307 funds to RTA, to support operation of the route, outside of a formal agreement with RTA. The City of Santa Maria, in partnership with RTA, the Santa Barbara County Association of Governments ( SBCAG), and the San Luis Obispo Council of Governments ( SLOCOG), wishes to assess the potential benefits and costs of alternative operating arrangements for Route 10 to achieve attractive, cost- effective service along this section of the US 101 corridor. This memo summarizes the findings of the analysis conducted.

Travel Demand

1. 1 Overall Travel Patterns
Travel demand between Santa Maria and Nipomo, the Five Cities, and San Luis Obispo was analyzed using Replica, a data platform that uses mobile location data to create a representative sample of daily
origin and destination patterns. Data from Replica captured travel demand for all modes of transportation between January and June of 2022.

Shown in Figure 1, weekday trips originating in Santa Maria peak during commute times at 7: OOAM and 3: OOPM, with the highest number of trips made from Santa Maria to the Five Cities. Travel between the Five Cities and Santa Maria is bidirectional during the peak periods. In contrast, trips from Santa Maria to San Luis Obispo peak in the morning, with a corresponding afternoon return peak, whereas trips to Nipomo show the opposite pattern. Weekday trips ending in Santa Maria ( Figure 3) were the highest from the Five Cities at 7: OOAM and 3: OOPM.

Travel demand on the weekends, shown in Figure 2 and Figure 4, presents a bell curve with the highest number of trips at midday. Overall, weekend travel was highest between Santa Maria and the Five Cities, followed by Nipomo and San Luis Obispo.

March 2024 1 Page 194 of 561 1
Route 10 Operational Analysis Findings
Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan Figure 4. Weekday northbound trips from Santa Figure 3. Weekend northbound trips from Santa Maria, Maria, all modes ( January — June 2022)
10, 000
8, 000
6, 000
U
cL 4, 000
2, 000
0 O0 O0 O0 O0 . O0 O0 O0 O0 O0 O0 O0
na. . A
A. c5. . r. X17. A . ^ p. r .

Time
tNipomo -- The Five Cities -- 0—San Luis Obispo
all modes ( January — June 2022)
10, 000
8, 000
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Time
tNipomo — 0—The Five Cities — 0—San Luis Obispo
Figure 1. Weekday southbound trips to Santa Maria, Figure 2. Weekend southbound trips to Santa Maria, all modes (January — June 2022)
10, 000
8, 000
6, 000
U
Q- 4, 000
2, 000
0 0 0 0 0 0 0 0 0 0 0
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Time
tNipomo The Five Cities San Luis Obispo
all modes (January — June 2022)
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March 2024 1 Page 195 of 561 2
Route 10 Operational Analysis Findings
Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan

1. 2 Route 10 Ridership Patterns
In fiscal year ( FY) 2018/019, prior to the Covid- 19 pandemic, annual ridership on the route totaled over 193, 000. Ridership in FY 2021/022 totaled over 112, 000, representing a decrease of over 40 percent. Notably, monthly ridership showed an increasing trend during the early months of 2022. With pandemic restrictions easing and workers returning to the office, local and national trends suggest that ridership will likely continue to increase in the near future. It is unclear, however, if or when ridership will return to pre -pandemic levels.

Route 10' s regular ( non -express) service pattern includes 22 stops in each direction. Three of those stops ( Government Center, Pismo Beach Premium Outlets, Santa Maria Transit Center) generate over 50 percent of total route boardings and alightings. When combined with the fourth highest -ridership stop, Tefft & Carillo in Nipomo, those four stops together account for approximately two-hirds of total activity along the route.

Route 10 ridership by time of day was compared with Replica data to assess differences in travel patterns between those riding transit and overall, non - mode -specific travel. Total Route 10 boardings between January and June 2022 are shown in the figures below. Boardings reflect commute - oriented travel demands on the weekdays and midday -focused travel demands on the weekend. This distribution closely reflects overall demand patterns, except for weekday northbound boardings, which show relatively higher trips in the morning peak and fewer in the afternoon compared to overall travel demand on the corridor, as shown in Figure 5. This more closely reflects the demand pattern for trips to San Luis Obispo suggests that the route is particularly well - suited to long distance commuters to downtown San Luis Obispo.

Northbound boardings are highest for the 7: 14AM departure on weekdays and the 12:4PM departure on weekends. Southbound boardings are highest for the 3:3PM departure on weekdays and the 1: 33PM departure on weekends. Weekday boarding activity is stronger in the AM peak northbound and the PM peak southbound, suggesting more passengers are heading northbound for work using Route 10.

Before the pandemic, RTA operated express patterns that served Cal Poly San Luis Obispo and made fewer intermediate stops. In 2019, the Cal Poly Library ranked 19th out of 30 stops by ridership, despite only being served by two round trip express runs per day. On a per trip basis, it ranked 9th. This suggests potential latent demand for additional trips to Cal Poly.

March 2024 1 Page 196 of 561 3
Route 10 Operational Analysis Findings
Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan — Contract Amendment Figure 5. Weekday northbound travel demand compared Figure 6. Weekend northbound travel demand compared to Route 10 boardings ( January — June 2022) to Route 10 boardings ( January — June 2022) 3000
N
2500
2000
0 1500
0 1000
m
500
0 . 111 1111111111111111 1 1111 i 1 1 .

O° O° O° O° .O° O° o° O° O° .O° O° O°
Time
20000
15000 cu
10000 p
5000 m
0 O
800 20000
600 15000
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ca
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I I II I d ii i i .
5000
O° .O° O° O° O° O° .O° O° O° O° O° .O°
Time
Boardings • Travel Demand Boardings • Travel Demand
Overall
Demand
Figure 7. Weekday southbound travel demand compared Figure 8. Weekend southbound travel demand to Route 10 boardings ( January — June 2022) compared to Route 10 boardings ( January — June 2022) 3000
2500
E 2000
1500
O 1000
m
500
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Demand
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Boardings • Travel Demand Boardings • Travel Demand
Overall
Demand
March 2024 1 Page 197 of 561 4
Route 10 Operational Analysis Findings
Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan Comparison with Potential SMRT Operation
This section provides a theoretical comparison of differences if the city of Santa Maria, which manages contract -operated Santa Maria Regional Transit ( SMRT) service, were to operate the route with no changes to its current service pattern. This comparison is provided for informational purposes only.

2. 1 Operational Impacts of Zero -Emissions Technology
Route 10 currently operates at one -hour headways using three diesel internal combustion engine (ICE) buses operating up to five round trips per day with 31 - minute layovers at the Santa Maria Transit Center. SMRT is in the process of transitioning from diesel ICE buses to battery electric buses ( BEBs) to comply with the California Air Resources Board' s (CARB) Innovative Clean Transit rule. RTA will also transition to zero -emissions technology to comply with CARB regulations, but on a different timeline than SMRT. Route 10 was analyzed to determine what changes to the operating pattern, if any, would be needed to deliver the same service with BEBs. BEBs have shorter range capabilities than ICEs, which is an issue when operating a
longer -distance route. BEB ranges will likely continue to increase in future as the technology progresses.

The estimated daily energy need per vehicle for five round trips on Route 10 is 836 kilowatt- hours kWh), well above the end -of -life battery capacity of 281 kWh for SMRT' sBEBs ( end -of -life battery storage reflects a conservative estimate of battery capacity). If a 300 -kW charger were available during layovers at the Santa Maria Transit Center, charging for at least 28 minutes between trips could provide enough energy for this route to operate. Therefore, it would be feasible to operate the service with no increase in the number of buses required if the necessary charging infrastructure is available at the Transit Center. Currently, SMRT is in the early stages of studying the possibility of installing charging equipment at the Transit Center. While this analysis provides an estimate of the requirements to operate BEBs on Route 10, ICE vehicles or a combination of BEB and ICE vehicles may be utilized during the transition phase.

2. Deadhead Requirements
RTA currently operates Route 10 with buses stored overnight and services at its facility at 253 Elks Lane in San Luis Obispo, just over 2 miles from Government Center, the northern terminus of Route

10. SMRT' s bus facility is located at 1303 Fairway Drive in Santa Maria, approximately 4 miles from the Santa Maria Transit Center, the southern terminus of Route 10. However, existing operational patterns require RTA to deadhead multiple trips to and from Santa Maria. Under the current schedule, two of three buses must first deadhead to the Santa Maria Transit Center in the morning to start their runs, and all three must deadhead back to San Luis Obispo at the end of the day — over 30 miles each way. Since two of the three buses both begin and end revenue service in Santa Maria, deadhead miles could be substantially reduced if more vehicles started and ended their operation in Santa Maria.

2. 3 Subsidy Comparison
Table 1 shows the estimated operating costs, fare revenue, and subsidy under existing RTA operation and potential SMRT operation, using information provided by RTA and SMRT. Operating costs per hour were derived from the 2021 National Transit Database. While average fares are slightly lower, March 2024 1 Page 198 of 561 5
Route 10 Operational Analysis Findings
Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan SMRT' slower hourly operating cost results in a reduction in total subsidy by over $ 710, 00 and a

6. 33 reduction in operating subsidy per passenger. This comparison does not consider any cost implications of responsibility for associated paratransit service.

Table 1. Annual Subsidy Comparison by Operator
Annual revenue hours* 9,07 0
Approximate annual ridership 113, 000 0
Cost per hour 133. 35 58. 34 75. 01
Total annual cost 1, 320, 000 580, 00 740, 00
Average Fare 1. 79 1. 52 0. 27
Total Fare Revenue 202, 000 171, 000 31, 000
Total Subsidy 1,20, 000 410, 00 710, 00
Subsidy per passenger 9.4 3. 61 6. 33
Assumes operation of August 2022 schedule over 255 weekdays, 52 Saturdays and 56 Sundays or holidays.

2. A Start -Up Costs for BEB Operation
Route 10 requires three buses in daily service, and one additional spare bus will be required to maintain adequate spare ratio. To operate with only three buses using battery technology, installation of a charger at the Santa Maria Transit Center would also be required. Table 2 shows the estimated start- up costs associated with operation of Route 10 using BEBs, based on unit costs derived from the Santa Maria ZEB Feasibility Study completed in 2022. The total estimated start- up cost for either agency to operate Route 10 service with BEBs is approximately $ 4. 6 million. Like the operating comparison above, this estimate does not consider any start- up costs associated with the potential need to operate paratransit service along the corridor.

Table 2. Estimated Start -Up Capital Costs
Item Unit Quantity Unit Cost Cost ( 2021$)
Battery Electric Buses
Charger
Charger installation
Supporting infrastructure
Total
Ea 4 940, 00 1 $ 3, 760, 000
kW 300 1,90 $ 357, 000
kW 300 1, 000 $ 300, 00
kW 300 $ 520 $ 156, 000
4! 573, 000
An important note is that the above Estimated Start -Up Costs are based on the most extreme, and least likely, hypothetical scenario of SMRT taking over the operations of Route 10. However, the start- upcosts would be lower if operation of the Route 10 where shared between the two agencies, as illustrated by Shared Operation alternatives presented later in this report.

Route 10 Observations
Routing and Operations. The current Route 10 route structure combines elements of local and express service. Notably, just four stops make up nearly two thirds of boardings. In addition, RTA operates an overlay express service during peak hours that makes fewer intermediate stops. The express service was suspended during the pandemic, and restoration was requested during the FY23 and FY24 SLOCOG unmet transit needs cycles. RTA has now restored one express round trip from March 2024 1 Page 199 of 561 6
Route 10 Operational Analysis Findings
Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan Santa Maria to Cal Poly. Scheduled travel times between Santa Maria and Government Center are approximately 15 minutes shorter, representing a 20 percent travel time savings while still serving nearly 70 percent of current riders ( as of FY 2021/ 2022) with the six stops identified on the online schedule. Anecdotal information from Santa Maria riders and transit service providers suggests there is latent demand for more direct service between Santa Maria and San Luis Obispo.

Demand Patterns. As noted in Section 1.2, boarding patterns show substantial ridership in the morning commute period northbound to San Luis Obispo, but the earliest arrival time in at Government Center is currently 7: 28 AM. Demand for earlier weekday service was also identified in rider surveys for the 2017 Santa Maria -San Luis Obispo Transportation Connectivity Study. Providing earlier service would likely capture commuters with earlier start times. This represents a potential partnership opportunity with SMRT, since SMRT buses could begin service earlier without having to deadhead from San Luis Obispo.

In contrast to demonstrated ridership demand for commute trips to San Luis Obispo, there is significant travel demand between Santa Maria and the Five Cities and Nipomo that is not reflected to the same degree in Route 10 ridership. Better understanding of demand patterns between the Five Cities Area and Santa Maria could provide insight into potential opportunities for better first/ last mile connectivity, particularly to/ from the Pismo Beach Premium Outlets location. Given the close proximity of Nipomo to Santa Maria, express -type service may not provide convenient connections between these cities, and there may be an opportunity for a more local -type service if an appropriate interagency agreement could be developed.

Transfers. The Santa Maria Transit Center is the primary Route 10 boarding location in the City of Santa Maria, and also serves as a transfer hub for SMRT routes. However, current schedules do not allow convenient connections between Route 10 and SMRT routes. Route 10 buses are scheduled to arrive and depart consistently at the same time each hour, whereas most SMRT routes operate on a 45 -minute headway, meaning that ideal connections are possible at most once every 3 hours. One SMRT route ( Route 2) operates on a primarily hourly schedule but arrives 10 minutes after Route 10 departs the transit center and departs 13 minutes before Route 10 arrives. Assuming no changes to these basic schedules, differences in headways limit the ability to make consistent connections. There may be opportunities to modify RTA or SMRT schedules to provide timed transfers to or from Route 10 at select points in the day. Surveys of Route 10 riders could help pinpoint the SMRT routes that these riders most frequently connect to, and these routes could be prioritized for connections.

Fare Payment. As a
regional route, transfers are an important way to extend the reach of service, and the 2017 Route 10 on -board survey found that nearly a quarter of riders made a transfer on their trip.

Riders going between both transit systems to reach their final destination must pay full fare on both systems and navigate using two fare payment applications or physical passes. An inter -agency fare agreement would help reduce cost burdens for disadvantaged riders and could promote ridership on both RTA and SMRT Routes. If SMRT were to assume or supplement even just part of the operation of Route 10, an inter -agency agreement would still be recommended to preserve transfers to RTA, SLO Transit, and SoCo Transit routes that are currently available with RTA passes. Use of common fare media or purchasing systems could also help improve convenience, such as a single app which could be used to purchase fares for multiple agencies.

March 2024 1 Page 200 of 561 7
Route 10 Operational Analysis Findings
Santa Maria Regional Transit Zero Emission Bus Fleet Rollout Plan Findings and Recommendations
While the subsidy comparison indicates that SMRT could operate Route 10 more cost effectively than RTA, the majority of the route is in RTA' s service area, and there are key connections to SoCo Transit and SLO Transit for which RTA has existing transfer agreements. Operational savings for the route would need to be balanced against upfront capital costs and the need to assume complementary paratransit service ( unless the route is classified as a commuter bus, per FTA guidelines). In particular, SMRT would need to expand its fleet, whereas RTA is already in possession of buses for existing operations. In the long term, either agency would incur costs related to transition to zero -emission buses, and charging infrastructure would be needed to support operations with BEBs. As the agencies transition, a BEB charging agreement should be considered to facilitate efficient BEB operations across the region.

The City of Santa Maria has been providing a portion of its FTA 5307 funds to RTA to support the operating costs of Route 10 since the mid -1990s, outside of a formal or defined method, and there is a need to consider the most efficient use of public funds. Given that the analysis conducted indicates that SMRT can provide service with lower operating cost, and there are other potential operating efficiencies of buses beginning in Santa Maria, it is recommended that the two agencies discuss ways to maximize limited funding resources to address rider needs.

Assuming RTA intends to continue operating Route 10 in its current configuration, there may be a partnership opportunity for SMRT to operate supplemental express overlay service. This would allow for service expansion using SMRT' sdrivers and would support earlier service northbound without buses needing to deadhead from San Luis Obispo. There are a number of different ways this could be structured, and continued discussions would need to take place on fare payment, schedules, and transfers; any service arrangement should be delivered in a way prioritizes simplicity for riders. Per California Transportation Development Act regulations, any extension of service into a neighboring service area requires the approval of the affected transit district. This would apply to both SMRT extending into RTA' sservice area as well as RTA' s extension into Santa Maria as part of Route 10.

As a
regional route, connecting services are important for customers to make complete trips and will only become more important if operations are streamlined. With buses operating only once an hour, timed transfers at major hubs like the Santa Maria Transit Center are crucial to making convenient connections, but current SMRT and RTA schedules do not allow for timed transfers. Another factor complicating passenger transfers between operators is the need to pay a second fare, which adds cost and complexity. RTA already allows transfers to SLO Transit and SoCo Transit with its passes.

A similar agreement with SMRT would improve customer convenience for connections between Route 10 and SMRT' slocal routes.

March 2024 1 Page 201 of 561 8
RESOLUTION NO.

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA MARIA,

CALIFORNIA, APPROVING APPLICATIONS FOR FEDERAL TRANSIT
ADMINISTRATION SECTION 5307 FUNDS FOR FISCAL YEAR 2024-5, FISCAL YEAR 2025- 2026, AND FISCAL YEAR 2026-7 FOR SANTA MARIA URBANIZED AREA
WHEREAS, the City of Santa Maria desires to apply for Federal Transit Administration ( FTA) Section 5307 capital and operating assistance funds; and WHEREAS, the City of Santa Maria provides fixed route and Americans with Disabilities Act (ADA) transit services to the Santa Maria Urbanized Area ( UZA) as Santa Maria Regional Transit ( SMRT); and
WHEREAS, SMRT is the Santa Barbara County Association of Governments' SBCAG) designated grantee of FTA Section 5307 funds; and WHEREAS, SBCAG has established a competitive process for the granting of FTA Section 5307 funds; and
WHEREAS, SBCAG has designated SMRT to administer the competitive process for the Santa Maria UZA; and
WHEREAS, SBCAG publicly advertised for FTA Section 5307 funding applications; and
WHEREAS, the City of Santa Maria application for local capital and operating assistance received the highest score and ranked first in the Santa Maria UZA; and WHEREAS, there are sufficient FTA Section 5307 funds in the Santa Maria UZA to award funding requests from the City of Santa Maria
NOW, THEREFORE, IT IS HEREBY RESOLVED by the City Council of the City of Santa Maria, California, as follows:

1. The City of Santa Maria' s SMRT Local Capital and Operating Assistance application for FTA Section 5307 funds in the Santa Maria UZA are each recommended for approval and funding by SBCAG Board of Directors.

PASSED AND ADOPTED at a
regular meeting of the City Council of the City of
Santa Maria held this 16th day of April 2024.

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Mayor
ATTEST:

Chief Deputy City Clerk
APPROVED AS TO FORM:

Risk Manager
City Attorney
APPROVED AS TO CONTENT:

Department Director
Interim City Manager

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FOR THE COUNCIL MEETING OF APRIL 16, 2024

COUNCIL AGENDA REPORT
TO: City Council
FROM: Interim City Manager Alex Posada
BY: Director of Public Works Brett Fulgoni
SUBJECT: Santa Maria Regional Transit Fiscal Year 2023-4 Low Carbon Operations Program Grant Application, Solar Array Electric Vehicle Charger
Description:

The City Council will consider authorizing the Transit Program' srecommended Fiscal Year 2023-4 Low Carbon Operations Program grant application for the amount of 213, 970to be used for the purchase of two off -grid solar array electric vehicle chargers, off the California Department of Goods & Services contract, to support the Transit Program' sfleet electrification efforts.

RECOMMENDATION:

Adopt a Resolution authorizing the execution of the Certifications and Assurances and authorized agent forms for the Low Carbon Transit Operations Program, approve the grant application and receipt of Fiscal Year 2023-4 Low Carbon Operations Program grant funding for $ 213, 970for the purchase of two Solar Array Electric Vehicle Chargers, designate representatives to act on City Council' s behalf, and amend the Transit Program' sCapital Maintenance Equipment Project Budget to reflect this project.

BACKGROUND:

The Low Carbon Transit Operations Program ( LCTOP) was created by the State of California to provide operating and capital assistance for transit agencies to reduce their greenhouse gas emissions and improve mobility. Approved LCTOP projects include the support of new or expanded bus or rail services, expansion of intermodal transit facilities, and may include equipment acquisition, fueling, maintenance, and other costs to operate those services or facilities, as long as the project supports reducing greenhouse gas emissions. For service areas that include disadvantaged communities ( DAC), at least 50 percent of the total funds received shall be expended on projects that will benefit DAC.

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SAN LUIS OBISPO COUNCIL OF GOVERNMENTS

STAFF REPORT
MEETING DATE: AUGUST 6, 2025 ITEM C-10
SUBJECT:

STAFF CONTACT:

MOU between SLOCOG, City of San Luis Obispo and City of Santa Maria Ivana Rodriguez

SUMMARY
The City of Santa Maria’s public transit system, Santa Maria Regional Transit (SMRT) will be operating a new express fixed-route pilot service from Santa Maria to San Luis Obispo beginning as early as September 2025. Coordination between SLOCOG, San Luis Obispo, Santa Maria, and SLO RTA has been ongoing to mutually agree on the logistics of this pilot service. This staff report presents a Memorandum of Understanding (MOU) for SLOCOG, the City of San Luis Obispo, and the City of Santa Maria to establish mutually agreeable terms for the operation of inter-county services.

RECOMMENDATIONS
Staff: Execute the Memorandum of Understanding between SLOCOG, the City of San Luis Obispo and the City of Santa Maria once finalized by each agency’s legal team.

TTAC: Support staff recommendation
CTAC: Support staff recommendation

DISCUSSION
Beginning as early as September 2025, Santa Maria Regional Transit (SMRT) will begin operating a new express fixed-route pilot service from Santa Maria to San Luis Obispo. The pilot route will be in operation for two years. The direct service route will depart from the Santa Maria Crossroads Shopping Center and travel directly to the Downtown Transit Center in San Luis Obispo. The service will operate on weekdays only during peak commute times in the morning and afternoon.

A Memorandum of Understanding (MOU) has been established to formalize each agency's role, responsibilities, data sharing protocols, and communication methods during the pilot phase. This MOU is currently being reviewed by agency’s legal team and will be released as a draft in the addendum for the SLOCOG Board Meeting packet. As part of this MOU, SMRT will participate in the Regional Pass Program, allowing passengers to use their existing regional passes on the new pilot route. RTA, which administers the program, will compensate SMRT for accepted regional passes. Should SMRT decide to make this route permanent after the pilot, a new MOU will be drafted to outline additional roles and responsibilities for transit operators within San Luis Obispo County. SMRT will provide monthly performance reports including on-time performance, ridership by stop, and customer feedback data to SLOCOG and San Luis Obispo Transit.

The pilot service will help commuters traveling from Santa Maria to San Luis Obispo. This service is seen as providing an alternative transit service that is not entirely duplicative of RTA’s Route 10 because there are no stops in-between the origin and end destination. Riders who will benefit the most are those traveling between Santa Maria and San Luis Obispo during the morning and evening on weekdays. Additional transit service between the two cities can help reduce congestion if more people are able to commute via transit and not single occupancy vehicle. Because it is a direct service, the travel time associated with this pilot route is much more competitive with driving. SLOCOG staff is supportive of enhanced transit service between these key destinations.

C-10-1 Page 205 of 561
C-10-2
 The MOU will be provided in the
Addendum that will be distributed on
August 1, 2025.

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City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: January 13, 2026
TO: Mayor and Council
FROM: Emily Jackson, Director of Finance
Prepared By: Debbie Malicoat, Deputy Director of Finance/City Controller VIA: Whitney McDonald, City Manager
SUBJECT: ITEM 7a - FY 2024-25 ACCEPTANCE OF THE ANNUAL

COMPREHENSIVE FINANCIAL REPORT, FEDERAL SINGLE AUDIT

REPORT AND TRANSPORTATION DEVELOPMENT ACT REPORT FOR
FISCAL YEAR 2024-25.

Staff received the following questions regarding the Fiscal Year 2024-25 Annual Comprehensive Financial Report (ACFR). The questions are below with staff’s response shown in italics:
1) On page 215 of the report, there is a table showing Risk Management in two places…restricted and committed? Why are there line items for this in two places for different amounts? (See below.)

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Acceptance of the Annual Comprehensive Financial Report, Federal Single Audit Report and Transportation Development Act Report for Fiscal Year 2024-25 Page 2 The amount that is restricted for Risk Management represents City funds held in trust accounts by the City’s third-party administrators in their role managing liability and workers' compensation claims. The amount that is committed represents that portion of the General Fund that has been set aside in the Insurance Fund for the City’s self-insured retention for liability and workers' compensation claims. Both amounts are intended to provide for risk management activities, however the committed balance is held directly in the City’s primary bank account/investments and the restricted amount is held in separate accounts that the third-party administrators manage.
2) In the same table, can you explain what the Economic Development Tenant Improvement is ($608k)?
Funding for tenant improvements was assigned via Resolution No. 11203, using funding that arose from passage of Local Revenue Measure in November 2020.

Originally intended to be used for tenant improvements in the downtown area, this money has since been used to fund Economic Development initiatives like the Buy Local Bonus program. The balance at June 30, 2025, of $608,000 is expected to be drawn down entirely in the 2025-27 Financial Plan.
3) Also, noted is Storm-Related Reimbursements ($909,090). Is this reimbursements from FEMA? If so, why is this number different than the $1.02m noted on page 240 of the packet (in the ACFR)?
The $909,090 represents FEMA reimbursements received during Fiscal Year 2024-25 that staff intends to utilize for continued storm related projects and repairs.

The $1.02 million includes additional reimbursements received in the prior fiscal year that were not assigned for this purpose and contributed to unassigned fund balance in the prior fiscal year.
4) On page 464 of the packet, the Single Audit Report talks about the Payroll Module Implementation, the issues noted with its set up, and the work being done to correct the issues. It states that we are working with a contractor to correct the issues. It states that testing of a new, corrected system was occurring in June and fully implemented in October. Does this mean that the payroll issue has been corrected to date, so there are no longer issues related to this finding? In other words, in next year’s audit, this issue will no longer be one?
Staff believe that this finding has now been resolved by implementation of the configuration changes that took place in October 2025 and, therefore, this finding should no longer appear next year.

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Acceptance of the Annual Comprehensive Financial Report, Federal Single Audit Report and Transportation Development Act Report for Fiscal Year 2024-25 Page 3 5) The table on page 11 (215 of 525) of the 7.A. Annual Financial Report shows $2M for the Section 115 Trust. Is the City allocating that funding to the trust?
The City Council adopted a work task related to establishment of a Section 115 Trust under the Fiscal Sustainability Major City Goal in the 2019-21 Financial Plan.

The trust was established in early 2023 and prior to its establishment, $2 million was assigned in the General Fund to be deposited to the Trust upon its establishment. The City has not made an initial contribution to the Trust, and deposit into the trust is pending further discussion with the City Council. The $2 million remains assigned for this purpose, pending Council direction.

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Item 7a
Department: Finance
Cost Center: Accounting
For Agenda of: 1/16/2026
Placement: Business
Estimated Time: 30 minutes
FROM: Emily Jackson, Finance Director
Prepared By: Debbie Malicoat, Deputy Finance Director
Tavy Garcia, Senior Accountant
SUBJECT: ACCEPTANCE OF THE ANNUAL COMPREHENSIVE FINANCIAL

REPORT, FEDERAL SINGLE AUDIT REPORT AND TRANSPORTATION
DEVELOPMENT ACT REPORT FOR FISCAL YEAR 2024-25

RECOMMENDATION
Review and accept the Annual Comprehensive Financial Report, the Federal Single Audit Report and Transportation Development Act Report for Fiscal Year 2024-25.

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

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

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

DISCUSSION
The accompanying Annual Comprehensive Financial Report (ACFR) has been prepared as required by the City’s Charter and applicable State laws regarding financial reporting for municipalities. The ACFR provides a final and audited representation of the City’s financial

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Item 7a
condition across all funds for the fiscal year that ended June 30, 2025. The ACFR was published on the City’s website on December 18, 2025, and is included as Attachment A to this report.

In accordance with the City Charter1, the City’s financial statements have been audited by independent certified public accountants from Badawi & Associates. The objective of the financial audit is to provide users of the financial reports with reasonable assurance from an independent source that the financial reports are reliable and represent a fair assessment of the City’s financial condition. The auditor issued the financial statements with an unmodified opinion which means that they are presented fairly and in conformity with generally accepted accounting principles (see pages 29-32 of the ACFR- Independent Auditors’ report).

The independent auditors also reviewed the City’s Federal Single Audit Report and Transportation Development Act (TDA) annual report for the Fiscal Year. Results and findings are discussed further below.

Financial Results Highlighted in the ACFR
Within the ACFR, the Transmittal Memorandum and Management’s Discussion and Analysis (MD&A) summarize the City’s fiscal performance and provide an analysis by management of the influencing factors. They also provide information on the City’s fiscal policies, practices, and financial results. Key variances from projected ending balances for 2024-25 are highlighted in the Transmittal Memorandum. Both sections allow the reader to gain insight into the City’s fiscal year experiences that lead to the audited financials and provide context to the statements that follow.

Financial results for fiscal year 2024-25 were generally positive, although there has been a flattening of sales tax revenues, a decline in development-related revenue, and continued increases in costs. General Fund revenues came in under budget by $814,190, expenditures came in under budget by $7.0 million, and net other sources and uses, which reflect transfers between the General Fund and other Funds, ended up using $258,770 less than anticipated. The result was an ending fund balance of $51.8 million, which was $6.5 million above budget estimates. As the chart below outlines, most of the ending balance is committed or assigned for future spending or reserve requirements, and not available for spending in conformance with GASB 54 (ACFR page 53).

1 Section 810. Independent Audits.

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

Restricted and special assessment district funds shall be segregated in the audit report.

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The unassigned balance of $3.5 million represents the amount available for additional spending and will be considered with the Mid-Year Budget Review on February 17, 2026.

The unassigned balance is about $600,000 lower than discussed in the preliminary Fiscal Year 2024-25 End Report due to the $594,469 that appears in the Restricted category. These amounts represent accounts for workers’ compensation and liability claims that are held in trust by the City’s insurance third party administrators. There is no net impact to total fund balance, but there is an impact to unassigned fund balance because these are restricted for risk management activities.

Capital Outlay Fund
The Capital Outlay Fund meets the definition of a major fund2 and is displayed separately on the financial statements. This is due, in large part, to the current unexpended balance of $32.7 million in the fund. Major capital projects are planned, but have been delayed, resulting in the fund balance. Staff expects to be able to significantly spend down this balance with upcoming capital investments including, but not limited to the Righetti Community Park, Police and Fire building improvements, fleet electrification, Higuera complete street and other paving projects.

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

2 Major funds in governmental accounting are significant individual governmental or enterprise funds with revenues, expenditures, assets, or liabilities that meet specific threshold criteria (10% of their fund type and 5% of all combined governmental/enterprise funds). The General Fund is always considered a major fund.

General Fund 2024-25
Final Budget
2024-25
Actual
Positive (Negative)
Variance
Revenues $ 127,728,819 $ 126,914,629 $ (814,190)
Expenditures 99,228,674 92,208,464 7,020,210
Other sources (uses) (28,487,384) (28,228,613) 258,771
Beginning fund balance 45,329,766 45,329,766 -
Ending fund balance $ 45,342,527 $ 51,807,318 $ 6,464,791 Nonspendable - 5,533,017 5,533,017
Restricted - 594,469 594,469
Committed - 19,892,934 19,892,934
Assigned - 22,317,944 22,317,944
Unassigned - 3,468,954 3,468,954
Total ending fund balance $ 45,342,527 $ 51,807,318 $ 6,464,791 General Fund Budget - Actual Comparison

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The primary sources of revenue for the Water, Sewer, and Parking Funds are fees for sales and services. In the Transit Fund, Federal and State grants represent most of the annual revenue. All four funds experienced an increase in net position for the year, as reflected in the table below (ACFR page 51).

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

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

Financial Reports. This section includes the City’s primary financial statements in five major parts:

1. Auditors’ opinion regarding the financial statements.

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

3. The basic financial statements presenting the government-wide year-end results combining the activities of the major funds (General, Capital Outlay and all four Enterprise Funds) into governmental and business-type categories; the fund financial statements; and the notes to the financial statements.
2024-25 2023-24
Revenues:

Program Revenues:

Charges for services $ 67,751,096 $ 65,364,673
Operating grants and contributions 12,767,465 6,762,934 Investment earnings 8,639,215 8,566,073
Miscellaneous and other -
Total revenues $ 89,157,776 $ 80,693,680
Program Expenses:

Public utilities $ 44,884,602 $ 48,497,795
Transportation 14,975,809 14,315,288
Total expenses $ 59,860,411 $ 62,813,083
Increase (decrease) in net position before transfers 29,297,365 17,880,597 Transfers (3,214,820) (2,636,032)
Change in net position $ 26,082,545 $ 15,244,565
Net position - beginning of year 275,530,186 260,285,621 Prior year restatement (91,366)
Net position - end of year $ 301,521,365 $ 275,530,186
Summary of Changes in Net Position
Business-Type Activities

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

5. Other supplemental schedules and financial statements providing financial information for each of the City’s non-major governmental and agency funds. This includes a financial schedule presenting Local Revenue Measure revenues and uses in 2024-25.

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

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

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

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

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

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

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

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

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

The certificate for 2023-24 is included in the ACFR document and staff will submit the 2024- 25 ACFR for the award program.

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

There are two findings and no questioned costs. The City’s responses to the auditor’s findings are incorporated into the Single Audit Report (Attachment B). The auditor’s comments generally reflect the difficulties encountered when implementing the City’s Enterprise Resource Planning/Human Capital Management (ERP/HCM) cloud-based Oracle system and both are continuations from the prior year. The City is currently at some stage of resolution on these issues, utilizing an Oracle consultant for the necessary reconfigurations. With the implementation of updated payroll configuration in October

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2025, staff believe that these findings are now resolved and are working with the City’s auditors to confirm. Again, these are areas of improvement and neither of them put the City’s revenues in jeopardy or question the appropriate accounting of expenditures.

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

1. The development and construction of local streets and roads, including pedestrian and bicycle facilities. Since these funds are legally restricted, the City has a special revenue fund created to account for this portion of TDA revenues.

The City received $66,918 in TDA funding during the 2024-25 fiscal year and $90,000 was spent on pedestrian facility improvements, due to unspent prior year allocations that carried forward. There still remains $10,050 at year end, from unspent prior year allocations.

2. The Transit Fund is an enterprise fund to account for the revenues received pursuant to the TDA, the Federal Transit Authority (FTA) and revenues from transit operations. These revenues are allocated under specific statutes and are legally restricted to pay for transit operations, the development of public transportation systems and transportation planning. The Transit Fund received $2,576,381 in TDA operating grants during the fiscal year. Of these funds, $1,592,240 was also unspent at fiscal year-end due to Federal funding received for Transit and will be available for future use.

In addition, this report demonstrates the City’s compliance with applicable TDA regulations pertaining to acceptable fare revenue ratios. For the fiscal year ended in 2025, the City was required to maintain a fare revenue ratio of 20%, and the actual ratio was 228% due to a change in calculation allowing the inclusion of federal grant funds as local funds for the purpose of computing fare revenue ratios. This mandate is discussed further in Note 7 of the report.

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

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

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Item 7a

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

Funding
Sources
Total Budget
Available
Current
Funding
Request
Remaining
Balance
Annual
Ongoing
Cost
General Fund $75,000 $66,491 $8,509 $0
State
Federal
Fees
Other:

Total $75,000 $66,491 $8,509 $0
The City budgets the cost for the auditing firm annually. The cost is appropriated with the annual budget approval. The current fiscal year contains a budget of $75,000 for the previous fiscal year audit. Actual costs are anticipated to be $66,491 in accordance with the City’s contract with the auditing firm.

ALTERNATIVES
The City Council could decide to revise or not accept the Annual Comprehensive Financial Report for fiscal year 2024-25. The report has been prepared in conformance with a variety of accounting and other reporting requirements and represents the professional evaluation and analysis by the City’s independent auditors. The auditors have rendered an unqualified opinion which means that the reports are presented fairly and in conformity with generally accepted accounting principles.

ATTACHMENTS
A - Annual Comprehensive Financial Report for Fiscal Year 2024-25 B - Single Audit Reports for Fiscal Year 2024-25
C - Transportation Development Act Report for Fiscal Year 2024-25

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ANNUAL COMPREHENSIVE FINANCIAL REPORT
Fiscal Year Ended June 30, 2025
ERICA A. STEWART, MAYOR

EMILY FRANCIS, VICE MAYOR

MIKE BOSWELL, COUNCIL MEMBER

MICHELLE SHORESMAN, COUNCIL MEMBER

JAN MARX, COUNCIL MEMBER
Whitney McDonald, CITY MANAGER
Prepared by the Department of Finance
Emily Jackson, Finance Director
Debbie Malicoat, Deputy Finance Director/Controller
Tavy Garcia, Senior Accountant
Courtney Miles, Accountant
Liliana Vasilev Q, Financial Specialist
City of San Luis Obispo, California
www.slocity.org

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City of San Luis Obispo, California
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2025
Table of Contents
Page
Introductory Section
Transmittal Memorandum...........................................................................................................................................................1-20 Report Purpose and Organization................................................................................................................................................. 2 Profile of the City of San Luis Obispo ......................................................................................................................................... 4 Factors Affecting Financial Condition and Major Initiatives....................................................................................................... 6 Financial Condition Overview ................................................................................................................................................... 11 Relevant Financial Policies........................................................................................................................................................ 14 Award for Excellence in Financial Reporting ............................................................................................................................ 19 Acknowledgments...................................................................................................................................................................... 20 Directory of Officials and Advisory Bodies................................................................................................................................... 21 City Council ............................................................................................................................................................................... 21 Advisory Bodies......................................................................................................................................................................... 21 Appointed Officials and Department Heads............................................................................................................................... 21 Mission Statement.......................................................................................................................................................................... 22 Organizational Values.................................................................................................................................................................... 23 Organization of the City of San Luis Obispo ................................................................................................................................. 25 GFOA Certificate .......................................................................................................................................................................... 26 Financial Section
Independent Auditors’ Report...................................................................................................................................................29-32 Management’s Discussion and Analysis...................................................................................................................................33-59 Overview of the Financial Statements........................................................................................................................................ 33 Financial Highlights................................................................................................................................................................... 36 Government-Wide Financial Analysis....................................................................................................................................... 40 Financial Analysis of Governmental Funds............................................................................................................................... 44 Financial Analysis of Enterprise Funds...................................................................................................................................... 46 Combined Program Expense and Revenue for Business-Type Activities.................................................................................. 50 General Fund Budgetary Highlights........................................................................................................................................... 52 Capital Asset and Debt Administration...................................................................................................................................... 54 Economic Factors and Next Year’s Budget and Rates............................................................................................................... 56 Requests for Additional Information.......................................................................................................................................... 59

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City of San Luis Obispo, California
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2025
Table of Contents Page 2
Page
Basic Financial Statements
Government-wide Financial Statements:

Statement of Net Position ....................................................................................................................................................... 65 Statement of Activities............................................................................................................................................................ 66 Fund Financial Statements:

Balance Sheet – Governmental Funds .................................................................................................................................... 69 Reconciliation of the Governmental Funds Balance Sheet to the Government-wide Statement of Net Position ...................................................................................................................... 70 Statement of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds........................................................................................................................................................... 71 Reconciliation of the Governmental Funds Statement of Revenues, Expenditures and Changes in Fund Balance to the Government-wide Statement of Activities .................................................................................................. 73 Statement of Fund Net Position Business-Type Activities –Enterprise Funds..................................................................77-78 Statement of Revenues, Expenses and Changes in Fund Net Position Business-Type Activities – Enterprise Funds.................................................................................................................................................................. 79 Statement of Cash Flows Business-Type Activities –Enterprise Funds............................................................................80-81 Statement of Fiduciary Net Position - Fiduciary Funds.......................................................................................................... 85 Statement of Changes in Fiduciary Net Position - Fiduciary Funds....................................................................................... 86 Notes to the Basic Financial Statements..............................................................................................................................89-134 Required Supplementary Information Section
Budgetary Comparison Schedule – General Fund.............................................................................................................137-140 Schedule of the Changes in the Net Pension Liability and Related Ratios – Miscellaneous Agent Multiple – Employer Plan .......................................................................................................................................... 141 Schedule of the Pension Plan Contributions – Miscellaneous Agent Multiple – Employer Plan............................................. 142 Schedule of the City’s Proportionate Share of the Net Pension Liability – SafetyCost-Sharing Plan..................................... 143 Schedule of the City’s Pension Contributions – Safety Cost-Sharing Plan.............................................................................. 144 Schedule of the Changes in the Net OPEB Liability and Related Ratios................................................................................. 145 Schedule of Employer OPEB Contributions............................................................................................................................ 146 Notes to Required Supplementary Information........................................................................................................................ 147

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City of San Luis Obispo, California
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2025
Table of Contents Page 3
Page
Other Supplementary Information and Combining and Individual Fund Statements and Schedules Local Transaction Tax Measure Funding Schedule ..........................................................................................................151-155 Nonmajor Governmental Funds........................................................................................................................................157-161 Combing Balance Sheet – Nonmajor Governmental Funds..............................................................................................162-170 Combining Statement of Revenues, Expenditures and Changes in Fund Balance - Nonmajor Governmental Funds..................................................................................................................................171-179 Schedule of Revenues, Expenditures and Changes in Fund Balances – Budget and Actual:

Downtown Business Improvement District Fund................................................................................................................. 180 Transportation Development Act (TDA) Fund..................................................................................................................... 181 Tourism Business Improvement District Fund ..................................................................................................................... 182 Gas Tax Fund........................................................................................................................................................................ 183 Community Development Block Grant (CDBG) Fund......................................................................................................... 184 Law Enforcement Grants Fund............................................................................................................................................. 185 Public Art Contributions Fund.............................................................................................................................................. 186 Avila Ranch CFD ................................................................................................................................................................. 187 SB1 Road Repair Fund ......................................................................................................................................................... 188 SB1186 ASP Certify............................................................................................................................................................. 189 Affordable Housing BEGIN Loan Fund............................................................................................................................... 190 Avila Ranch DPA Fund ........................................................................................................................................................ 191 Opioid Settlement Fund ........................................................................................................................................................ 192 Asset Forfeiture Available Fund ........................................................................................................................................... 193 SLR PAYGO City Share ...................................................................................................................................................... 194 Code Enforcement Abatement Fund..................................................................................................................................... 195 Police Evidence Available Fund ........................................................................................................................................... 196 Debt Service Fund ................................................................................................................................................................ 197 Custodial Funds........................................................................................................................................................................ 199 Combining Statement of Fiduciary Net Position –Custodial Funds..............................................................................200-202 Combining Statement of Changes in Fiduciary Net Position –Fiduciary Funds...........................................................203-205 Statistical Section
Statistical Section – Overview (Unaudited) ............................................................................................................................. 209 Financial Trends:

Net Position by Component – Last Ten Fiscal Years ........................................................................................................... 210 Changes in Net Position – Last Ten Fiscal Years ..........................................................................................................211-212

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City of San Luis Obispo, California
Annual Comprehensive Financial Report
Fiscal Year Ended June 30, 2025
Table of Contents Page 4
Page
Governmental Activities Tax and Franchise Revenues by Source – Last Ten Fiscal Years................................................. 213 Fund Balances, Governmental Funds – Last Ten Fiscal Years......................................................................................214-215 Revenues, Expenditures and Changes in Fund Balances of Governmental Funds Last Ten Fiscal Years.................................................................................................................................................216-218 General Fund Operating Expenditure Trends by Type – Last TenFiscal Years................................................................... 219 Statistical Section (Continued)
Revenue Capacity:

Assessed and Estimated Actual Value of Taxable Property – Last TenFiscal Years........................................................... 220 Property Tax Rates – Last Ten Fiscal Years......................................................................................................................... 221 Principal Property Taxpayers – Current Year and NineYears Ago...................................................................................... 222 Secured Property Tax Roll Levies and Collections – Last TenFiscal Years ........................................................................ 223 Schedule of Taxable Sales and Permits by Category – Last TenCalendar Years................................................................. 224 Historical Sales and Use Tax Rates....................................................................................................................................... 225 Schedule of Business Tax Certificates Issued....................................................................................................................... 226 Debt Capacity:

Per Capital Outstanding Debt by Type – Last Ten Fiscal Years........................................................................................... 227 Ratio of Net General Bonded Debt to Assessed Value and Net Bonded Debt per Capital Last Ten Fiscal Years........................................................................................................................................................ 228 Direct and Overlapping Long-Term Debt – Fiscal Year Ended June 30, 2023 .................................................................... 229 Computation of Legal Debt Margins – Last Ten Fiscal Years.............................................................................................. 230 Revenue Bond Coverage:

Water Fund – Last Ten Fiscal Years..................................................................................................................................... 231 Parking Fund – Last Ten Fiscal Years.................................................................................................................................. 232 Demographic and Economic Information:

Demographic and Economic Statistics – Last Ten Fiscal Years........................................................................................... 233 Principal Employers – Current Year and Nine Years Ago ................................................................................................... 234 Regular Authorized Positions – Last Ten Fiscal Years......................................................................................................... 235 Operating Information:

Operating Indicators and Capital Asset Statistics by Function – Last Ten Fiscal Years................................................236-239 Water System Statistical Data............................................................................................................................................... 240 Water and Sewer Rates – Last Ten Fiscal Years ...........................................................................................................241-242 Water System Ten Largest Users – Fiscal Year Ended June 30, 2023 ................................................................................. 243

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INTRODUCTORY SECTION

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City of San Luis Obispo, Finance and Information Technology, 990 Palm Street, San Luis Obispo, CA, 93401-3249, 805.781.7130, slocity.org
Date December 16, 2025
TO: The Honorable Mayor and Members of the City Council and Citizens of the City of San Luis Obispo
FROM: Whitney McDonald, City Manager
Emily Jackson, Finance Director
SUBJECT: TRANSMITTAL MEMORANDUM FOR ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR FISCAL YEAR 2024-25
We are pleased to submit the City of San Luis Obispo’s 2024-25 Annual Comprehensive Financial Report (ACFR). Section 810 of the City’s Charter requires that an audit of the City’s financial records be conducted each year by an independent certified public accountant. Such an audit has been performed and this report is being published as part of the requirement for the fiscal year that ended June 30, 2025, within applicable timelines.

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

To provide a reasonable basis for making these representations, management of the City has established a comprehensive internal control and review framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient and reliable information for the preparation of the City’s financial statements in conformity with U.S. Generally Accepted Accounting Principles (GAAP). Because the cost of internal controls should not outweigh their benefits, the City’s comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. However, internal controls are critically reviewed by the auditors annually and Finance staff throughout the year to assure compliance with applicable Governmental Accounting Standards Board (GASB) rules and best practices in government accounting. Additionally, the City’s governing body receives reports on a 1

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quarterly basis and additional reports in accordance with State requirements are posted online on the City’s website at www.slocity.org.

REPORT PURPOSE AND ORGANIZATION
Audited Financial Statements
The City’s financial statements were audited by Badawi and Associates, a firm of licensed certified public accountants currently under contract with the City. The goal of the independent audit was to provide reasonable assurance that the financial statements of the City for the fiscal year ended June 30, 2025, are free of material misstatement. The independent audit involved examining on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the overall accounting principles used and significant estimates1
made by management; and evaluating the overall financial statement presentation.

The independent auditor concluded that the City’s financial statements present fairly2, in all material respects, the respective financial position of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City as of June 30, 2025. They also fairly represent the respective changes in financial position, and, where applicable, cash flows in accordance with accounting principles generally accepted in the United States of America. The independent auditors’ report is presented as the first component of the financial section of this report beginning on page 29. “Single Audit” for Federal Grant Programs. The independent audit of the financial statements of the City was part of a broader, federally mandated “Single Audit” designed to meet the special needs of Federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited government’s internal controls3 and compliance with legal requirements, with special emphasis on the administration of Federal awards (such as Transit funding). This audit has been completed and will be filed and distributed to appropriate agencies to meet Federal requirements and deadlines. 1 Significant estimates included in the financial statements are made in conformity with GAAP. 2 The Term “present fairly” means that the financial statements give a reasonable view of the financial results, financial position, and cash-flow of the reporting entity.
3 Internal controls are systematic measures instituted by an organization to conduct its business in an orderly and efficient manner; safeguard its assets and resources; deter and detect errors, fraud, and theft; ensure accuracy and completeness of its accounting data; produce reliable and timely financial and management information; and ensure adherence to its policies and plans. 2

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GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analysis (MD&A). This letter of transmittal is designed to complement the MD&A and should be read in conjunction with it. The City’s MD&A can be found immediately following the report of the independent auditors beginning on page 33.

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

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

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

SECTION THREE - The Statistical section includes selected unaudited financial and demographic information generally presented on a multi-year basis. This information includes financial trends, revenue trends, debt capacity, demographics, and economic and operating information. This section also contains important information for the benefit of the required bond disclosures and rating agencies.

As required by GAAP, these financial statements present the City (the primary government) and its component units (entities for which the government is financially accountable).

Blended component units (although legally separate entities) are in substance part of the government's operations, and so data from these units are combined with data of the primary government. The City has three component units, the San Luis Obispo Capital Improvement Board and the San Luis Obispo Public Financing Authority, both of which provide financing for the construction and acquisition of City facilities, and the San Luis Obispo Parking Authority, which manages and enforces the City’s parking regulations in compliance with State laws. The Board/Authority is comprised solely of members of the City Council.

Activities of the Board/Authority are accounted for in the applicable City governmental or enterprise funds.
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PROFILE OF THE CITY OF SAN LUIS OBISPO
With a population of about 48,700, the City is located eight miles from the Pacific Ocean and is midway between San Francisco and Los Angeles at the junction of Highway 101 and scenic Highway 1. The City serves as the commercial, governmental, and cultural hub of San Luis Obispo County. San Luis Obispo is the county seat, a number of Federal and State regional offices and facilities are located within the City, and California Polytechnic State University and Cuesta College campuses are adjacent to and nearby the City. The City’s ideal weather and natural beauty provide numerous opportunities for outdoor recreation at nearby City and State parks, lakes, beaches, and open space areas.

As one of California’s oldest communities, the historical roots of San Luis Obispo run deep, anchored by the enduring presence of Indigenous Peoples dating back at least 15,000 years ago in the Diablo Canyon region. These first peoples hunted and shore-picked shellfish. The Yak titʸu titʸu Yak tiłhini Northern Chumash Tribe, who have called the region home for over 10,000 years, have been integral in the historical development of the City. By 1504, coastal land exploration took place by Spanish vessels, which carried members of the Filipino community. Spanish invasion and colonization in 1769 led to the establishment of Missions throughout California. The San Luis Obispo de Tolosa Mission was founded in 1772, the fifth mission in the California chain of 21 missions, around which the City of San Luis Obispo developed. It was first incorporated in 1856 as a General Law City and became a Charter City in 1876. As a Charter City, San Luis Obispo has more local authority than cities that incorporate under the general laws of the State of California. The Charter is the City’s governing document, and any changes must be approved by the voters. The City’s Charter has been amended several times since its adoption, most recently in August 2011.

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

City Services
The City provides a wide range of municipal services, including police and fire protection, water and sewer utilities, street and parks maintenance, public transportation, parking, parks and recreation, planning, building and safety, and other general government services. 4

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Financial data for all funds through which services are provided by the City have been included in this report.

Several municipal services are provided through other governmental agencies or private utility companies, including:

Service Agency
Health and Social Services County of San Luis Obispo
Courts State of California
Elementary and Secondary Schools San Luis Coastal Unified School District Community College San Luis Obispo County Community College District
Solid Waste Collection and Disposal San Luis Garbage Company Gas, Electric and Telephone Private Utility Companies
The City is also a member of a Joint Powers Authority called Central Coast Community Energy (3CE) which sources clean and renewable electricity at competitive prices for the community and is delivered through the grid by Pacific Gas & Electric (PG&E). 3CE follows a Community Choice Aggregator or “CCA” model, which is a community-focused, “not-forprofit” model that allows for greater commitment to clean and renewable energy while supporting community reinvestment for affordable and fair rates and equitable access to cleanenergy resources. It is locally controlled and governed by board members who represent the communities served by 3CE. Becoming a member of 3CE was an integral part of the City’s fiscal year 2019-20 Major City Goal for Climate Action. For more information visit:
www.3cenergy.org
Budgetary Policy and Control
Though the City adopts a two-year Financial Plan, annual budgets are legally appropriated by the City Council by resolution and are prepared for each fund in accordance with its basis of accounting. As provided under the City Charter, the City Manager is responsible for preparing the budget and for its implementation after adoption. Financial reports are presented to the City Council and posted online on a quarterly basis. At mid-year, staff prepares a more indepth status report for the City Council for the first six months of the fiscal year in addition to any fund balance information and long-term forecast based on the audited annual comprehensive financial report.

Since the City uses a two-year Financial Plan, operating appropriations not expended during the first year may be carried forward into the second year for specific purposes with the approval of the City Manager. When applicable, these amounts are shown as assigned for 5

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

The City Council has the legal authority to amend the budget at any time during the fiscal year. The City Manager has the authority to make administrative adjustments to the appropriated budget if those changes will have neither a significant policy impact nor affect budgeted year-end fund balances. Legal budgetary control, meaning the level at which management cannot overspend the budget without the City Council’s approval, is at the Fund level. The City's budgetary policies are more fully described in Note 1 of the financial statements.

Expenditure and budgeting details are maintained by the City for each fund and department by program area at the line-item level. Budgetary control is exercised through a computerized Enterprise Resource Planning (ERP) system, which interfaces with the City's general ledger.

The system maintains an ongoing record of budget balances and any authorized adjustments throughout the year based on actual expenditures and purchase order obligations. Open purchase orders at year-end are reported as assigned fund balance. The ERP system also maintains the City’s list of capital assets.

It is the City's policy to maintain an operating reserve in the General Fund of at least 20% of operating expenditures which is reflected in the committed fund balance. The City maintains a similar policy for working capital balances in the water, sewer, and parking enterprise funds.

The Fleet Replacement Fund reserve policy is $500,000 and the Information Technology (IT) Replacement Fund reserve policy is $400,000 which have also been met for the year. With the 2021-22 fiscal year, the City also adopted a capital reserve in its Capital Outlay Fund of 20% of budgeted capital investments from the Local Revenue Measure for the fiscal year.

This reserve is adjusted with each budget adoption, funded from the local transactions tax, and is reflected in the Capital Outlay Fund.

FACTORS AFFECTING FINANCIAL CONDITION AND MAJOR INITIATIVES The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City operated in fiscal year 2024-25.

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Building on Current Efforts to Move into the Future
The City Council adopted its two-year Financial Plan for 2025-27 in June 2025, amidst a time of transition with revenue growth that is slowing, lingering inflationary pressures, and growing uncertainly resulting from a rapid shift in national economic policy via tariffs, and potential significant state and federal budget cuts. Despite this, the Financial Plan continues progress on long standing Major City Goals, and aligns with the community’s values of responsibility, equity, and sustainability. The City continues to monitor economic trends, revenue performance, and workload demands and has activated a Fiscal Health Contingency Plan to increase flexibility to address forecasted deficits of $3.0 million in fiscal year 2027- 28 and $1.9 million in fiscal year 2028-29, driven largely by the requirement to bring a fifth fire station online to serve new development in the southern portion of the city.

The four Major City Goals guide continuation of workplans initiated over the last several years. Years ago, Major City Goals were focused on specific programs and projects, but the consistency of higher-level Major City Goals in recent years has supported a long-term focus on initiatives that bring about sustained systemic change. As such, the Major City Goals drive the City’s strategic direction while maintaining the established core services the community expects and to which the community is accustomed. For additional information on the City’s strategic initiatives go to 2025-27 Financial Plan.

Economic Resiliency, Cultural Vitality and Fiscal Sustainability In collaboration with local partners, implement initiatives that reinforce a thriving and sustainable local economy, support a diverse, inclusive, and vibrant community, preserve arts and culture, and ensure fiscally responsible and sustainable city operations.

Housing and Homelessness
Support the expansion of housing options for all, and continue to facilitate the production of housing, including the necessary supporting infrastructure, with an emphasis on affordable and workforce housing as well as accessibly connected development. Collaborate with local non-profit partners, nongovernmental agencies, the county, the state, and federal governments to advocate for increased funding and implementation of comprehensive and effective strategies to prevent and reduce homelessness.

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Diversity, Equity, Inclusion (DEI)
Further our commitment to making San Luis Obispo a welcoming and inclusive city for all by continuing to incorporate diversity, equity, and inclusion into all programs and policies and advancing the recommendations of the DEI Task Force.

Climate Action, Open Space, and Sustainable Transportation Proactively address the climate crisis and increase resiliency through the implementation of the Climate Action Plan. Use resources to reduce greenhouse gas emissions and reach carbon neutrality by 2035, with a focus on the preservation and enhancement of convenient and equitable alternative and sustainable transportation, the preservation of open space, and equitable access to parks and open space.

Significant Storms in January and March 2023
In January and March 2023, the City and region experienced severe winter storms that resulted in two separate major disaster declarations at the Federal and State level, as well as emergency proclamations at the local level. The City qualified for and is seeking reimbursement from Federal and State resources for eligible costs related to the storms. The Federal Emergency Management Agency (FEMA) reimbursement process continues to move slowly, but as of the end of the fiscal year, the City had received $1.02 million in reimbursement and FEMA had obligated an additional $920 thousand in project costs to the City. The City has submitted all storm projects to FEMA and continues to respond to requests for information.

Overall Financial Condition
The following factors played into the City’s financial condition at the end of the 2024-25 fiscal year:

1. Flattening sales tax revenues, including Local Revenue Measure (LRM) receipts, which were previously expected to grow more significantly but are now trending below what was forecasted last year by approximately $2.4 million annually.

2. Declining development-related revenue. As noted in prior budget reports, due to a slowing of development activity, the City is seeing a decrease in development services revenue of approximately $600,000 in fiscal year 2024-25 and is forecasting a continuation of this decrease into the two years of the 2025-27 Financial Plan.

3. Rising personnel and project delivery costs. Increases in the cost of construction materials, insurance, utilities, and employee compensation to recruit and retain a talented workforce.
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4. Ongoing inflationary pressures continue to influence consumer behavior, project costs, labor market dynamics, as well as the local economy.

5. Favorable Interest Earnings Fair Value Adjustment. The Fair Value (FV) adjustment is essentially an accounting practice that reassesses the value of the City’s investments when there is a difference between the fair market value and the value recorded on the City’s books. Interest earnings and FV adjustments have been volatile the past few years and higher investment income driven largely by market interest rates is not expected to persist.

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

PG&E continues to operate the plant and is funding plant improvements with a federal grant that will not generate unitary tax on the portion of plant valuation that is federally funded.

This loss of unitary tax does not have a large direct impact to the City, however, it will have a significant impact for the local school district and other government agencies that could impact the local economic environment. This situation will be closely monitored by City staff.

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

Key Revenue Sources. As the commercial, governmental, and cultural hub of San Luis Obispo County, the City is fortunate to attract a diverse array of strong revenue sources. The top three revenue sources are Sales & Use Tax, Property Tax, and Transient Occupancy Tax (TOT). The 2020 voter-approved local transaction tax of one-and-a-half cent (Local Revenue 9

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Measure) went into effect in April 2021 to provide for a variety of City services including infrastructure. This Local Revenue Measure has become the largest single tax revenue source to the City, growing to over $30 million per year.

Long-Term Financial Planning. The City engages in several activities focused on long-term financial planning to gauge and adjust to current economic conditions and trends. Various scenarios are developed considering a multitude of information and resources. This effort was very rigorous in fiscal year 2024-25 due to the uncertainties surrounding the economic environment, increasing demand for City services, and ongoing storm-related project costs.

With adoption of the 2025-27 Financial Plan, the City Council adopted a set of Budget Balancing Strategies to guide staff in developing balanced budgets both in times of financial difficulty and growth.

Long-Term Fiscal Forecast. Before the two-year Financial Plan and budget process begins, the City Council reviews long-term fiscal forecasts for the General and the Enterprise Funds to help set the stage for sustainable decision-making. The purpose of the forecast is to consider long-term fiscal health and to identify the funds’ ability, on an order of magnitude basis, to maintain current services and existing assets and look at the opportunity to fund new initiatives. As reported to the City Council, the General Fund forecast indicates a structural deficit of $3 million for fiscal year 2027-28. The City is taking action to identify targeted reductions to close the forecasted deficit but continues to preserve service levels and remain nimble in the face of economic change and uncertainty, all while upholding the City’s values and strategic commitments.

CalPERS and the City’s Unfunded Liability. To address its unfunded pension liabilities, the City Council adopted a Fiscal Health Response Plan (FHRP), which outlines a strategy to pay down the pension liability over a 20-year period – shortening the duration of required payments and saving an estimated $19 million. A key component of the FHRP is making Additional Discretionary Payments (ADPs) to CalPERS. To date, the City has made $22.3 million in ADPs to reduce its pension liability.

In March 2023, the City utilized an independent actuarial consulting firm to review its progress on reducing its unfunded pension liabilities. The review confirmed that the City’s ADPs had improved the plans’ funded status and that the City was taking appropriate steps to address its pension debt. It was recommended that the City continue required payments and ADPs. The City Council therefore adopted fiscal policies to prioritize APDs of at least the first $2 million of unassigned fund balance annually.
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FINANCIAL CONDITION OVERVIEW
Despite the background of economic uncertainty the City ended the 2024-25 fiscal year in a better fiscal position than originally anticipated. General Fund revenues exceeded budgetary estimates by less than 1% and expenditures were 7% under budget. On June 30, 2025, the total General Fund balance was $51.8 million; an increase of $6.5 million over fiscal year 2024-25, despite the ongoing storm related costs. Enterprise Funds similarly experienced increases in net position. Overall, the City’s total net position increased by $60 million from the prior year.

The table below shows the General Fund levels of fund balance in accordance with GASB 54 and the City’s policy pertaining to fund balance assignments. Fund Balance & Reserve Policy
Continue to Focus on Sustainability and Long-term Fiscal Health General Fund - Fund Balance as of June 30, 2025
Nonspendable: $ 5,533,017
Restricted:

Risk Management $ 594,469
$ 594,469
Committed:

General government programs $ 848,111
Risk management 4,437,620
Contingency fund 14,607,203
$ 19,892,934
Assigned:

CalPERS pension payment $ 2,000,000
Solid Waste AB939 270,825
Establishment of Section 115 Trust 2,000,000
Revenue stabilization 2,000,000
Development services 145,136
SLO Repertory Theater Grant 6,700,000
Economic Development Tenant Improvement 608,000
Storm Related Costs 5,125,068
Storm Related Reimbursements 909,090
Subsequent year expenditures 2,559,825
$ 22,317,944
Unassigned: $ 3,468,954
Total Fund Balance $ 51,807,318
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With its Major City Goal for Economic Recovery, Resiliency & Fiscal Sustainability, the City continues its commitment to long-term fiscal health. The goal program aims to, in collaboration with local partners, continue to assist with economic recovery for all from the pandemic and sustain a thriving local economy by supporting local businesses, arts and culture, and downtown vitality. It commits to practicing fiscal responsibility, paying down unfunded pension liabilities, and investing in critical infrastructure.

Revenue Base Growth. The pandemic and the economic recovery that followed led to drastic shifts in consumer spending and markets that provided strong tailwinds to the City’s revenue growth. Social distancing led consumers to spend more on goods from hobby supplies to luxury items, boosting sales tax revenue. Supply chain disruptions drove up new and used car prices, providing additional benefit to sales tax. As pandemic restrictions eased, local trips were favored over international travel and San Luis Obispo’s convenient location between the San Francisco Bay Area and the Los Angeles Metropolitan Area made it a popular destination, benefiting transient occupancy tax.

This rapid revenue growth, which began in the 2020-21 fiscal year, has begun to slow. Several years of rapid inflation have impacted household finances. Interest rates remain elevated, providing a dampening effect on car sales and building activity. After years of quick growth, the City’s revenue streams are at very high levels and drivers for near-term growth are difficult to identify.

Staff now expect that cyclical revenue streams like sales tax will grow at below inflationary rates, making cost of living adjustments for employees and inflationary increases in other spending difficult to fund. Property tax, once a slow grower, has become a leading source of growth for the General Fund.

Containment of Operating Costs. The City’s efforts to control costs are ongoing while also addressing the need to remain an attractive employer and provide the services the community expects. The City has an extensive policy framework that allows immediate and nimble action to address adverse changes in economic and fiscal condition and will continue to activate these policies as needed. The City’s implementation of a 2nd and 3rd tier retirement benefit program continues to change the City’s annual retirement contributions as 72% of the City’s workforce is now enrolled in those retirement plan tiers. These actions have been instrumental in helping the City contain current costs and long-term liabilities related to retirement benefit programs; furthermore, two of the City’s bargaining units as well as the Management & Confidential group pay additional contributions toward the City’s pension obligation. 12

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Infrastructure and Facilities Maintenance. As a growing city, San Luis Obispo has seen capital expenditures grow steadily over the past decade. The need to maintain, repair or replace its current infrastructure is met with the need to build amenities for the community at large and the City’s Local Revenue Measure plays a vital part in providing funding for these needs. The City has allocated approximately 75% of the revenue in any given year for infrastructure improvements and enhancements, which the Public Works and Utilities departments work to deliver within an overall plan that has increased in project number, scope, and complexity. For a list of projects delivered in fiscal year 2024-25 see page 53 in the Management Discussion and Analysis.

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

Ongoing Commitment to Local Transaction Tax Measure Priorities (Local Revenue Measure)
The City remains committed to the priorities for the use of the local transaction tax measure as identified by the community. They include public safety, youth and senior services, code enforcement, economic development, neighborhood street paving, open space preservation, traffic congestion relief and flood protection. The following table summarizes how the local transaction tax measure funds were used during fiscal year 2024-25.

Total uses of the funding during fiscal year 2024-25 amounted to $31.9 million, with an additional $8.3 million encumbered through purchase orders or contracts; the remaining balances of these resources are designated for future year expenditures. A more detailed schedule of local transaction tax measure sources and uses is provided in the Other Supplementary Information section of this report beginning on page 151. 13

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RELEVANT FINANCIAL POLICIES
The City of San Luis Obispo has adopted a comprehensive set of budget and financial policies to provide guidance for all fiscal matters and resource allocations. The policies are reviewed, amended, and updated with each Financial Plan adoption and as needed throughout the year.

The policies cover virtually every aspect of financial management but several of these policies are particularly relevant to the understanding of the City’s financial performance in fiscal year 2024-25. As noted previously, the Council adopted a new set of Budget Balancing Strategies with adoption of the 2025-27 Financial Plan in June 2025. That document is intended to provide guidance to staff in developing a balanced budget both in times of financial difficulty and growth, and demonstrates staff and the City Council’s commitment to ongoing assessment of policy and procedure guidance to ensure an appropriate framework to meet the needs of the organization.

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

Revenues:

Sales and use tax - Measure G add-on tax 30,926,285 $
Total Revenues 30,926,285 $
Uses:

Operating Programs $ 11,018,737
Capital Projects 20,836,263
Total Uses 31,855,000 $
Changes in Fund Balance $ (928,715)
Prior Sales Tax Measure Balance $ 1,776,826
Net Available for future year appropriations 848,111 $
Local Sales Tax Measure Revenue & uses Summary
FY 2024-25
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Information on the City’s outstanding debt issues and other long-term liabilities is provided in Note 7 in the notes to the financial statements.

In February 2025, Fitch Ratings, a nationally recognized statistical rating organization, reviewed the City’s financials, its fiscal outlook, and the current rating. On February 3, 2025, Fitch Ratings subsequently concluded that there should be no change to the existing rating at AA+ with a stable rating outlook. Fitch Ratings’ long term credit ratings are assigned on an alphabetic scale from AAA to D. The City’s AA+ bond rating means that the City’s investment grade is “quality.” Specifically, current lease revenue bonds (LRBs) issued by the San Luis Obispo Public Financing Authority remain at an 'AA’ rating and the LRBs issued by the City of San Luis Obispo Capital Improvement Board at an 'AA' rating. In addition, in April 2023, Standard & Poor’s Global Ratings upgraded the City’s Water Revenue bonds from ‘AA- ’ to ‘AA.’ At this time, the City of San Luis Obispo has no general obligation debt.

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

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

The policies also require the Fleet Management and Information Technology (IT) 15

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Replacement Funds to provide for the timely replacement of vehicles and equipment as well as IT equipment and software and a reserve is retained in these funds to safeguard against unforeseen and unfunded issues. All reserve policies continue to be met as of fiscal year 2024- 25, reflecting replenishment of the General Fund reserve that was used in responding to the 2023 winter storms.

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

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

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

Pension and Other Post-Employment Benefits
The City contributes to the California Public Employees’ Retirement System (CalPERS), an agent multiple-employer public employee defined benefit pension plan. CalPERS provides retirement and disability benefits, annual cost-of-living adjustments and death benefits to plan members and beneficiaries. CalPERS acts as a common investment and administrative agent for participating public entities within the State of California. Benefit provision and all other requirements are established by State statute and City ordinance. The amount of the City’s required annual contribution is determined actuarially and is reported to the City via the Annual Valuation Reports provided by CalPERS for each retirement plan.

It is the policy of the City to fully fund the annual contribution to ensure that the plan will fully meet its obligation to retired employees on a timely basis. Prepaying the City’s unfunded 16

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liability will also reduce overall annual cost depending on whether approved actuarial assumptions are realized and are not adjusted by the CalPERS Board.

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

The City has also established a Section 115 Trust fund with the California Employer’s Pension Prefunding Trust (CEPPT) and had planned to make its first contribution of $2.4 million using unassigned fund balance at the end of fiscal year 2022-23. Instead, the unassigned fund balance was allocated to infrastructure projects which had increased in cost due to inflationary factors. Deferral of contributions to the Section 115 Trust continue in the current fiscal year.

Despite not having contributed funding to the Section 115 Trust, the City has made $22.3 million in Additional Discretionary Payments to date.

All employees currently pay the full employee contribution. Total contribution rates as a percent of salary, including any additional percentages agreed upon are listed in the table below:
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Other Post-Employment Benefits (OPEB). The City’s primary OPEB cost obligation is for retiree health benefits under its election to participate in the CalPERS Health Benefit Program under the “unequal contribution option.”
When the City joined the CalPERS health plan in 1993, it immediately experienced an increase in the plan choices available along with a significant reduction in rates. Due to CalPERS purchasing power, the City continues to experience competitive health care rates.

However, as a condition of joining the CalPERS health program, the City agreed to contribute the minimum monthly amount required by law towards retiree health care coverage for both active and retired employees. This allows retired employees to purchase health insurance at the same rate offered to active employees.

Additionally, the City had established certain post-retirement health care benefits available to executive management employees appointed prior to August 2000. There is only one employee remaining who receives one-half of the retiree health insurance premiums paid by the City through the City's group health plan. This provision ceases upon the death of the retired employee. These OPEB benefits were financed on a pay-as-you-go basis in the past. 18

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As directed by Council in May 2008, the City began fully pre-funding the OPEB obligation via an irrevocable trust in fiscal year 2008-09.

Additional information on the City’s retirement and post-employment benefits can be found in Note 9 in the notes to the financial statements.

GASB Pronouncements for fiscal year 2024-25
GASB Statement No. 102 – Certain Risk Disclosures – The primary objective of this Statement is to provide users of government financial statements with essential information about risks related to a government’s vulnerabilities due to certain concentrations or constraints. The City has implemented this statement in the current fiscal year .

AWARD FOR EXCELLENCE IN FINANCIAL REPORTING
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of San Luis Obispo for its annual comprehensive financial report for the fiscal year ended June 30, 2024.

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

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

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

Value of Program Participation. There are benefits to participating in these programs beyond simply receiving recognition for the City’s efforts. For example, by striving to meet program standards and goals, the City produces better reports. Additionally, as part of the review process, comments for improvement from other municipal finance professionals who review the reports from a “fresh” perspective are received. Staff believes that this results in 19

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continuous improvements in reporting the City’s financial results to elected officials, staff, and other interested parties such as bondholders, credit agencies, and the public at-large.

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

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

Whitney McDonald, City Manager
Emily Jackson, Finance Director
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DIRECTORY OF OFFICIALS AND ADVISORY BODIES

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

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

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

SAN LUIS OBISPO STYLE
Quality with Vision WHO ARE WE?
People Serving People
 A team that puts high value on each citizen itserves.  Providers of programs that meet basic service needs of each citizen.  Enhancers of the quality of life for the community as a whole.

WHAT DO WE STAND FOR?
Quality in all Endeavors – Pride in Results
 Service to the community – the best – at all times.
 Respect – for each other and for those we serve.
 Value – ensuring delivery of service with value for cost.  Community involvement – the opportunity to participate in attaining the goals of the City.

WHERE ARE WE GOING?
Into the Future with a Design
 Planning and managing for levels of service consistent with the needs of the citizens.  Offering skills development and organizational direction for employees in order to improve the delivery of municipal services.
 Developing sources of funding and establishing a sound financial management program which will result in fiscal independence and flexibility in the delivery of City services.  Providing the residents of the City with accurate and timely information on issues which affect them, and encouraging the full utilization of City services.
 Promoting the City as a regional trade, recreational and tourist center and improving the quality of life for residents and visitor.
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ORGANIZATIONAL VALUES
We, as an organization, embrace opportunities to improve our services and the quality and effectiveness of our relationships with the community and our teams. The following values guide and inspire our efforts.

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

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

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

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

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

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

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

Innovation and Flexibility
We are open to change and willing to try new ways to fulfill the organization’s vision, mission, and goals more effectively.
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Employee Development and Recognition
We encourage and support each employee to improve relevant job skills and celebrate personal and team accomplishments.

Stewardship and Ethics
We promote public trust by using City resources wisely, and through consistent fulfillment of these values. 24

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

RESIDENTS

ADVISORY
BODIES
CITY

MANAGER

MAYOR &

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

ATTORNEY
Police Fire
Finance Community
Development
Administration
Dept Reporting to the Assistant City Manager
Utilities
Human
Resources
Parks &
Recreation
Public
Works
Community Services
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Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of San Luis Obispo
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2024
Executive Director/CEO
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FINANCIAL SECTION
27

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INDEPENDENT AUDITOR’S REPORT
To the Honorable Mayor and Members of the City Council
of the City of San Luis Obispo
San Luis Obispo, California
Report on the Audit of the Financial Statements
Opinions
We have audited the accompanying financial statements of the governmental activities, the businesstype activities, each major fund, and the aggregate remaining fund information of the City of San Luis Obispo, California (City) as of and for the year ended June 30, 2025, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the accompanying financial statements present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2025, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

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

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

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

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

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

In performing an audit in accordance with GAAS, we:
 Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.
 Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.
 Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.
 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

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

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, pension plan and OPEB plan information on pages 33-59 and 137-147 be presented to supplement the basic financial statements. 30

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

Page 3 ends

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

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

The local sales tax measure funding schedule, the combining and individual nonmajor fund financial statements and budgetary comparison schedules on pages 151-205 are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the local sales tax measure funding schedule, the combining and individual nonmajor fund financial statements and budgetary comparison schedules are fairly stated in all material respects in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the other information included in the annual comprehensive financial report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor's report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. 31

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

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Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 16, 2025, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Badawi & Associates, CPAs
Emeryville, California
December 16, 2025
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Management’s Discussion and Analysis
Overview of the Financial Statements
The discussion and incorporated analysis in this document are intended to serve as an introduction to the City’s basic financial statements, which include the following components: (1) governmentwide financial statements, (2) fund financial statements and (3) notes to financial statements. This report also contains required supplementary information (RSI) as well as other supplemental financial information.

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

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

Over time, increases or decreases in net financial position may serve as a useful indicator of whether the financial position of the City is improving or declining. In conformance with GASB 68, the Statement of Net Position reported for fiscal year 2024-25 considers the City’s long-term pension liabilities, effectively decreasing the City’s net financial position.

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

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

The governmental activities include: (1) public safety, (2) transportation, (3) leisure, cultural and social services, (4) community development and (5) general government support services such as legal services, elections, human resources, risk management, finance, and information technology. 33

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Management’s Discussion and Analysis
The business-type activities of the City include: (1) water, (2) sewer, (3) parking operations and the (4) transit program.

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

The San Luis Obispo Capital Improvement Board, the San Luis Obispo Public Financing Authority and the San Luis Obispo Parking Authority are reported as blended component units in these statements. All provide financing for the construction and acquisition of City facilities and consist of members of the City Council. Activities of these units are accounted for in the applicable City governmental funds. Separate financial statements are not prepared for the San Luis Obispo Capital Improvement Board, San Luis Obispo Public Financing Authority, or San Luis Obispo Parking Authority. The City has no component units that require discrete presentation in accordance with Governmental Accounting Standards Board (GASB) standards.

Pension Obligation. Pursuant to GASB Statement No. 68 (GASB 68), Accounting and Financial Reporting for Pensions, the City reports on the unfunded pension liability on the full accrual basis of accounting in the government-wide financial statements. The reports also include disclosure requirements and supplementary schedules as required by GASB 68. The measurement date for fiscal year 2024-25 pension liabilities is as of the fiscal year ended June 30, 2024. This date lags by a year, reflecting the time it takes for the pension system to prepare reports, which is common for all member agencies, and was used so that these financial statements could be issued in an expedient manner. Activity (i.e., contributions made by the City) occurring during fiscal year 2024-25 are reported as deferred outflows of resources in accordance with GASB Statement No.

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

Governmental Funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near34

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Management’s Discussion and Analysis
term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information reflects financial resources available in the near future to finance the City’s programs.

Because the focus of governmental funds is narrower than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements.

By doing so, readers may better understand the long-term impact of the government’s near-term financial decisions. Both the governmental funds balance sheet and the governmental funds statement of revenues, expenditures and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities.

The City maintains several individual governmental funds organized according to their purpose (general, special revenue, debt services, and capital projects). Information is presented in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances. The General Fund and Capital Outlay Fund are both considered major funds1
. Data from the non-major governmental funds are combined into one aggregated presentation. Individual fund data for each of the non-major governmental funds is provided in the form of combining statements in the supplementary information section in this report.

Of the major funds, the City adopts an annual appropriated budget for the General Fund. A budgetary comparison statement has been provided as required supplementary information to demonstrate compliance with the budget. Budgetary information for non-major governmental funds with annual budgets has been provided with the fund financial statements in the supplementary information section in this report.

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

The only type of proprietary funds the City maintains is enterprise funds. The Water, Sewer, Parking, and Transit Funds are presented as business-type activities in the government-wide financial statements. The City considers all four of its enterprise funds to be major funds. 1 See Note 1 Summary of Significant Accounting Polices for a detailed explanation of fund types including major funds.
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Management’s Discussion and Analysis
Fiduciary Funds. Custodial funds are the only type of fiduciary funds maintained by the City.

These are used to account for resources held for the benefit of parties outside the primary government. Fiduciary funds are not reflected in the government-wide financial statements because the resources of those funds are not available to support the City’s own programs. An example of a custodial fund may include donations provided to the City to be utilized for specific purposes (i.e. open space, environmental mitigation funds, etc.) as well as other funds held in trust of another entity to be utilized for a specific purpose. A specific example is the Hazardous Materials Task Force Fund, created to provide special fire services around the county, which is funded by multiple county and city agencies.

The accounting used for fiduciary funds is much like that used for proprietary funds. The Custodial Funds are presented with the fund financial statements in the supplementary information section.

Notes to the Financial Statements. The notes provide additional information that is essential to the reader for a full understanding of the data provided in the government-wide and fund financial statements.

Other Information. In addition to the basic financial statements and accompanying notes, this report also presents required supplementary information including budgetary comparison schedules, reporting of the local transaction tax measure (Measure G and G-20) and more detailed information concerning the City’s net pension liability, schedule of contributions to the pension plan and progress in funding its obligation to provide other post-employment benefits (OPEB).

Statistical Information. The statistical section presents detailed information as a context for understanding what the information in the financial statements, notes disclosures, and required supplementary information indicates about the City’s overall financial health. This information has been adjusted over time to also serve as required bond disclosure information.

Financial Highlights
The following information provides a narrative overview and analysis of the financial activities of the City of San Luis Obispo (City) for the fiscal year that ended June 30, 2025. It should be read in conjunction with the transmittal memorandum, the basic financial statements, and the accompanying notes.

In fiscal year 2024-25 the City Manager activated the Fiscal Health Contingency Plan (FHCP) in April 2025 in order to address the economic uncertainty and forecasted future budget deficits. Due to its activation towards the end of the fiscal year, the FHCP did not contribute significantly toward 36

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expenditure savings at year end, but did help to preserve some flexibility to address the forecasted deficits. Total revenue for the General Fund finished approximately $1.0 million below budget due to lower sales tax receipts, a decline in fee revenues, and delays in reimbursement for the winter storms that occurred during 2023. While some individual revenue streams underperformed, the broader categories of tax revenue, user fees, and general government revenue all exceeded budget.

Winter Storm update
In January and March 2023, the city and region experienced severe winter storms that resulted in two separate emergency declarations at the Federal and State level, as well as emergency proclamations at the local level. The City is eligible for reimbursement for a majority of the storm related costs through the Federal Emergency Management Agency (FEMA) and the California Disaster Assistance Act (CDAA). Although, all storm related expenditures have been submitted for reimbursement as of fiscal year 2024-25, the 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. Based upon staff delivery capacity and FEMA reimbursement timeframes, staff continues to prioritize storm damage projects founded upon the need to mitigate previously completed projects, protect existing infrastructure, and/or represent projects that must be completed. As of the end of fiscal year 2024-25, the City had received $1.02 million in storm project reimbursement and another $920,000 in project expenses had been obligated by FEMA for reimbursement not yet provided to the City.

Compensated Absences The City implemented the GASB 100 pronouncement during fiscal year 2023-24, a year earlier than required. The aim of the new guidance was to more accurately portray the liability associated with employee leave balances by taking into account the likelihood that these leave balances will be used or converted to cash for employees. For fiscal year 2024-25, this results in an increase to overall leave liability of $179,000.

Housing Loans and Fee Deferrals The City administers an extensive housing program for workforce and low-income housing. Through the program, the City has extended loans and impact fee deferrals to low-income housing developers such as the Housing Authority of San Luis Obispo, Transitions Mental Health, and People’s Self-Help Housing (to name a few). The loans are longterm in nature, include a modest interest rate, and will become due in future years. The loans are disclosed in the City’s financial statements under the respective governmental funds as loans receivable and restricted within fund balance. The loans are reflected in the financial statements net of an allowance for any that are forgivable at the end of the term if certain affordability provisions are maintained. Detailed information can be found in Note 4 – Loans Receivables. 37

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Fair Value Adjustments The City follows the practice of pooling cash and investments for all funds under its direct daily control. Interest earned on pooled cash and investments is allocated quarterly to the various funds based on the respective funds’ average quarterly cash balance.

Investments are stated at fair value, based on quoted market prices in accordance with GASB standards and are adjusted to reflect any unrealized gains and losses resulting from the fair value adjustment annually. The City’s investments and effects of the fair value adjustment are reflected in the Financial Statements under “Use of money and property” in all funds based on the City’s mentioned practices. More information on the City’s investments can be found in Note 2 – Cash & Investments.

The following outlines financial highlights for the year which are detailed in the table on page 9 of the Management Discussion and Analysis.
 Per the Statement of Net Position, total City-wide assets increased by approximately $75 million to $1,020 million representing an increase of 8%. The assets and deferred outflows of resources of the City exceeded liabilities and deferred inflows at June 30, 2025 by $585 million (net position). Cash and investment and receivable balances remained consistent with the prior year ending at $251 million and $54.2 million citywide, respectively. Capital assets increased from $591 million to $649 million as a result of major investments in large projects including construction on the new Cultural Arts District Parking Structure, upgrades to the Water Resource Recovery Facility, and the purchase of 6 new transit buses. Meanwhile, overall liabilities increased slightly from $436.9 million to $445 million due to increases to long-term debt offset by decreases to OPEB and pension liabilities.  The City’s net pension liability, comprised of a one agent multiple-employer plan for its miscellaneous employees and one cost-sharing multiple-employer plan for its safety employees amounted to $178 million by the end of fiscal year 2024-25. The City’s Miscellaneous plan decreased by $989,000 to end the year at $93.8 million. Meanwhile, the City’s Safety plan also decreased by $2.1 million to end the year at $84.2 million. Together this represents an overall decrease of 1.7% for overall net pension liability year over year.  In governmental activities, cash and investments increased by $20.4 million to $124.7 million due to delays in design and construction of capital projects as well as grant reimbursements for expenditures incurred in prior years. Meanwhile, prepaid items, representing cash outflows occurring in the current year for next year’s expenditures, increased from $182,000 to $712,520 due to prepaid health insurance premiums of $684,000 recorded at June 30, 2025.

Receivables from various sources increase by just over $4.4 million to $40.9 million due to the timing of certain receivables owed to the City as of June 30, 2025 including outstanding receivables from the San Luis Obispo County of Governments for $1.6 million, the County of 38

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San Luis Obispo for $1.4 million, the State Department of Water and Resources for $480,000, and Cal Fire SLO for $450,000.
 In business-type activities, total assets increased from $557 million to 595 million. This was mainly attributable to increases in construction in progress and depreciable capitalized assets in fiscal year 2024-25.
 The City’s governmental funds reported combined ending fund balances of $148.6 million as of June 30, 2025 representing a 21% increase from the prior year. Approximately $44.2 million of this total is either nonspendable or restricted for transportation projects or specific programs such as affordable housing, parkland development, public art, tourism, public safety, or infrastructure improvement programs. Another $20.4 million is committed for purposes such as general government programs, risk management, general contingency reserves, and public safety programs. Committed fund balances represent the amount of money that is subject to constraints imposed by the City Council. It takes formal action by the City Council to utilize these funds for their specific purposes.

A further $80.6 million is assigned for total governmental funds and intended to be used for specific purposes discussed in more detail later, and unspent appropriations that have been rolled over into the 2025-26 fiscal year in accordance with the City’s budget policies. Assigned fund balances represent the amount of money that the City Council or management has identified for specific future purposes, but do not meet the criteria to be restricted or committed.

Any appropriation of these amounts would require City Council approval. The remaining $3.4 million remains unassigned for governmental funds as of June 30, 2025.  The total General Fund balance increased by 14% from $45.3 million to $51.8 million. After taking into account non-spendable amounts of $5.5 million, committed funds of $19.9 million including the current operating reserve, assigned fund balance of $22.3 million, and $3.4 million remains as unassigned balance on June 30, 2025, for the General Fund.

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Management’s Discussion and Analysis
Government-wide Overall Financial Analysis
Statement of Net Position Net position may serve over time as useful indicator of a government’s financial position.

The following is the condensed statement of net position for the fiscal years ended June 30, 2024 and 2025.

For the fiscal year ending on June 30, 2025, the City’s combined total assets and deferred outflows of resources were greater than its liabilities and deferred inflows of resources by $585.3 million.

The largest portion of the City’s net position reflects its investment in capital assets in the amount of $441.7 million (e.g., land, buildings, infrastructure, machinery, and equipment), less any related outstanding debt used to acquire those assets. The City uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the City’s investment in its capital assets is reported net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities.

Approximately $45.4 million of the City’s net position is subject to restrictions imposed by external parties and its use is determined by those restrictions and contractual obligations. The governmental and business-type activities each contributed $34.0 million and $26.0 million respectively to the combined net position increase of $60.0 million resulting in a total net position of $585.3 million on June 30, 2025.
2024-25 2023-24 2024-25 2023-24 2024-25 2023-24
Current and other assets 167,584,241 $ 141,746,727 $ 203,574,019 $ 210,942,153 $ 371,158,260 $ 352,688,880 $ Capital assets 256,946,258 245,583,137 391,653,070 345,734,319 648,599,328 591,317,456 Total assets 424,530,499 387,329,864 595,227,089 556,676,472 1,019,757,588 944,006,336 Total Deferred
Outflows of Resources 45,607,769 55,962,004 8,340,424 9,049,028 53,948,193 65,011,032 Current liabilities 15,809,183 15,670,923 26,800,043 25,540,111 42,609,226 41,211,034 Noncurrent liabilities 163,680,034 168,325,263 238,744,246 227,365,761 402,424,280 395,691,024 Total liabilities 179,489,217 183,996,186 265,544,289 252,905,872 445,033,506 436,902,058 Total Deferred
Inflows of Resources 6,869,661 9,499,175 36,501,859 37,289,442 43,371,520 46,788,617 Net position:

Net investment in
capital assets 241,392,407 228,447,288 200,340,066 183,458,877 441,732,473 411,906,165 Restricted 38,939,635 36,650,877 6,470,313 10,976,119 45,409,948 47,626,996 Unrestricted 3,447,348 (15,301,658) 94,710,986 81,095,190 98,158,334 65,793,532 Total Net Position 283,779,390 $ 249,796,507 $ 301,521,365 $ 275,530,186 $ 585,300,755 $ 525,326,693 $

CONDENSED STATEMENT OF NET POSITION
Governmental Activities Business-Type Activities Total
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Information about changes in net position for fiscal years 2024-25 and 2023-24 is summarized below. Reasons for the changes are discussed in the following sections for governmental activities and business-type activities.

Governmental Activities
The City’s net position in Governmental activities increased by $34 million to $283.8 million on June 30, 2025 which is similar to FY 2023-24 in which it increased by $30.7 million. Most sources of taxes remained consistent with the prior year, increasing just $261,000 versus the prior year as a result of macroeconomic conditions that have slowed revenue growth. However, despite this slowing of revenues, they still covered the overall program expenses which came in at $114.6 million representing a $2.1 million decrease over the prior year. The main reasons for this in part were the deliberate reductions in spending in response to changes in forecasted revenue trends that prompted the activation of the Fiscal Health Contingency Plan (FHCP) in April 2025 and salary savings due to vacancies, though the activation of the FHCP occurred late into the fiscal year and had minimal impact.
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Management’s Discussion and Analysis
Governmental Revenues. Revenues are divided into charges for services and general revenues including applicable taxes as listed in the table below. General revenues are used to pay costs of providing program services such as public safety, parks and open space, streetlights and traffic signals, recreation opportunities, as well as economic development, and environmental sustainability. Charges for services are revenues directly related to service activity while operating and capital grants and contributions, and related investment earnings are a mechanism of cost recovery.

As mentioned previously, total governmental revenues were consistent with the prior year, increasing by just $261,000 and reflecting an overall slowing of recent revenue growth. Almost all sources of tax revenues such as sales taxes, property taxes, and TOT were within 7% of prior year totals with the exception of Utility User taxes which exceeded year over year amounts by 19% or $1.2 million. This is mainly due to the volatility in this revenue stream that is based on both market price and consumer utilization of utilities. Overall, these increases outpaced the decrease in operating grant revenue which was higher in the prior year versus historic trends due to the timing of awarded funding including American Rescue Plan Act (ARPA) funding received in the prior year as well as funding for several affordable housing projects, and several community development block grants received from the US Department of Housing and Urban Development.

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Top Governmental Activity Revenue Sources. As shown in the chart below, the City’s top five tax revenues accounted for 67% or $97.3 million of total revenues, with service charges accounting for another 14% or $20.1 million and remaining revenue including grant revenue, investment income, and other miscellaneous revenues accounted for 19% or $27.7 million. Despite economic volatility, most of the City’s main revenue sources performed well and above initial expectations.

The following chart compares program fee revenues and expenses which is useful when reviewing the costs of various governmental activities:
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Management’s Discussion and Analysis
Financial Analysis of Governmental Funds
The focus of the City’s governmental funds is on near-term inflows, outflows and balances of spendable resources. Such information is useful in assessing the City’s financing requirements and meeting finance-related legal requirements. In particular, unassigned fund balance serves as a useful measure of a government’s net resources available for spending at the end of the fiscal year.

Major Governmental Funds. In fiscal year 2024-25 the City maintained two major governmental funds: the General Fund and the Capital Outlay Fund. The City’s General Fund is the principal operating fund and reports all revenue and expenditures not required to be in a separate fund, including Local Revenue Measure funding. It finances the day-to-day activities of the City. The Capital Outlay Fund is used to account for the acquisition or construction of major capital facilities.

Changes in both are highlighted in the Financial Highlights section below.

Non-Major Governmental Funds. The City has numerous non-major governmental funds including the Debt Service Fund and various Special Revenue Funds or Capital Projects Funds.

These funds are presented in the basic financial statements in the aggregate. A significant number of these funds represent activity for capital projects. On June 30, 2025, these funds had an aggregate fund balance of $64.1 million. Of this total, $38.6 million is restricted or committed for payment of debt service or specific governmental programs such as transportation, affordable housing, and impact fee or parkland development programs.

Governmental Fund Highlights
As of June 30, 2025, the City’s governmental funds reported combined ending balances of $148.6 million or an increase of 21% compared to the prior fiscal year. This was largely driven by stability in tax revenue streams, despite slowing growth trends and macroeconomic conditions, as well as very favorable investment income. This was further supported by department expenditures which 44

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all finished the year under budget as well as staffing vacancies that occurred throughout the year.

The total fund balance of the governmental funds consists of the following:
o Non-spendable fund balance represents prepaid items or items that by their nature are not in a spendable form. $5,533,017 was held in non-spendable at fiscal yearend in the General Fund including an interfund loan between the General Fund and the Parking Fund in the amount of $4.7 million to finance the purchase of property located at 1166 Higuera Street and prepaid insurance premiums. o Restricted fund balance of $38.7 million, including $10.4 million for affordable housing programs, $7.9 million for transportation related projects, $1.6 million for tourism programs, and $1.6 million for public art programs. These restricted fund balances were held entirely within non-major governmental funds. o Committed fund balance amounted to $20.4 million accounting for the City’s reserve funds as prescribed by its Fund Balance and Reserve policies with $19.9 million held by the General fund and $509,000 held by non-major governmental funds.
o Assigned fund balance of $80.6 million includes the amounts to be used for specific purposes of the City but do not meet the criteria to be classified as restricted or committed. Funds in this category include funds to be used for Development Services, purchase orders and encumbrances that have been rolled over into fiscal year 2025-26 in accordance with the City’s budget policies, an additional discretionary payment to CalPERS, the section 115 Trust Fund, and solid waste funds collected through AB939. The City also established a Revenue Stabilization Reserve in fiscal year 2021-22 of $2 million to help insulate or smooth out budget impacts from large fluctuations in tax revenue. The largest portion of the assigned fund balance, approximately $59.9 million represents outstanding encumbrances and capital projects at year end to be carried forward into the next fiscal year. o Unassigned fund balance at year end was $3.4 million for the General fund and ($46,000) for the non-major governmental funds. The City’s capital outlay fund did not have any unassigned amounts at June 30, 2025. The use of the unassigned fund balance will be prioritized based on City Council direction and City policy.

More information about the aggregated non-major funds can be found in the combining and individual fund statements and schedules immediately following the required supplementary information.
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Management’s Discussion and Analysis
Financial Analysis of Enterprise Funds
The City’s business-type activities are financed through rates for services and should be selfsufficient in covering their expenses with their sales and services revenue. Also called proprietary funds, the City has four such entities: Water, Sewer, Parking, and Transit.

Water Fund
The City’s Water Fund is a business-type activity and is funded predominately through rates to provide service. The City treats and delivers water to the public from three surface reservoirs as well as recycled water for landscape irrigation. The water service is provided to all property owners in the City including parks and sports fields.

The net position of the Water Fund rose by over $8.8 million during fiscal year 2024-25 ending the year at $118.8 million, an increase of 8% over the prior year. Supporting the upward trend were operating revenues that came in $3 million higher and represent an increase of 9% over the 2024-25 2023-24 2024-25 2023-24 2024-25 2023-24 2024-25 2023-24 Operating revenues 34,356,427 $ 31,394,962 $ 24,096,372 $ 23,302,912 $ 8,307,559 $ 9,663,683 $ 990,738 $ 1,003,116 $ Operating expenses 27,485,998 25,043,587 14,252,243 17,754,034 6,373,905 6,615,881 6,358,316 5,352,380 Operating income (loss) $ 6,870,429 $ 6,351,375 $ 9,844,129 $ 5,548,878 $ 1,933,654 $ 3,047,802 $ (5,367,578) $ (4,349,264) Nonoperating revenues $ 3,395,754 $ 2,122,301 $ 1,175,449 $ (1,549,560) $ 232,820 $ 1,237,070 $ 6,499,829 $ 5,471,995 Capital Contributions - (1,387,992) (1,075,110) (1,451,616) (1,192,689) (375,212) (368,233) 4,712,879 - Changes in net position $ 8,878,191 $ 7,398,566 $ 9,567,962 $ 2,806,629 $ 1,791,262 $ 3,916,639 $ 5,845,130 $ 1,122,731 Net position - beginning of year 109,961,981 $ $ 102,563,415 $ 122,333,448 $ 119,526,819 $ 34,133,265 $ 30,216,626 $ 9,101,492 $ 7,978,761 Prior year restatement (5,032) (5,561) (80,773) -
Net position - end of year $ 118,835,140 $ 109,961,981 $ 131,895,849 $ 122,333,448 $ 35,843,754 $ 34,133,265 $ 14,946,622 $ 9,101,492 Summary of Revenues, Expenses, and Changes in Enterprise Fund Net Position Water Sewer Parking Transit
2024-25 2023-24
Operating revenues 34,356,427 $ 31,394,962 $
Operating expenses 27,485,998 25,043,587
Operating income (loss) $ 6,870,429 $ 6,351,375
erating revenues (expenses) 3,395,754 $ 2,122,301 $
Contributions - Transfers out (1,387,992) (1,075,110)
Changes in net position $ 8,878,191 $ 7,398,566
Net position - beginning of year $ 109,961,981 $ 102,563,415 Prior year restatement (5,032)
Net position - end of year $ 118,835,140 $ 109,961,981
Water Fund
Summary of Revenues, Expenses, and Changes in
Enterprise Fund Net Position
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prior year. This was mainly due to the increases in demand as well as increases in Council adopted water rates for fiscal year 2024-25. Meanwhile, impact fee revenues and other operating revenues deviated little from the prior year amounts coming in at $4.8 million and $227,000 respectively.

Non-operating revenues, however, increased significantly more than the prior year, and amounted to $3.4 million. This represents an increase of $1.3 million or 60% and was mainly the result of a $762,000 increase in grant revenue over the prior year primarily from Proposition 1 and CalOES programs. In addition, the Fund benefited from more favorable investment income which came in $693,000 higher in fiscal year 2024-25. The increases in revenue outpaced the $2.4 million increase in year over year operating expenses which are comprised of salaries and benefits, supplies and maintenance, contract services, administration, and depreciation. Of these, contract services was the main driver in the overall increase in operating expenses and included the City’s contribution to repairing the Nacimiento reservoir because of the 2023 winter storms.

Sewer Fund
The City’s Sewer Fund is also a business-type activity that funds, operates, and maintains the City’s sanitary sewer system and the Water Resource Recovery Facility (WRRF). An efficient sanitary sewer system that collects and treats wastewater provides a foundation for public health and community well-being. Rates and charges are the primary source of revenue for this fund.

The Sewer Fund’s net position rose by $9.6 million, ending fiscal year 2024-25 at $131.9 million, an increase of 8% over the prior fiscal year. By comparison, the previous year’s change in net position was just $2.8 million. The overall increase was driven by the net effect of a $4.3 million more favorable operating income and positive net nonoperating revenues and expenses. Within 2024-25 2023-24
Operating revenues 24,096,372 $ $ 23,302,912
Operating expenses 14,252,243 17,754,034
Operating income (loss) $ 9,844,129 $ 5,548,878
Nonoperating revenues (expenses) 1,175,449 $ $ (1,549,560) Capital Contributions - Transfers out (1,451,616) (1,192,689) Changes in net position $ 9,567,962 $ 2,806,629
Net position - beginning of year 122,333,448 $ $ 119,526,819 Prior year restatement (5,561)
Net position - end of year $ 131,895,849 $ 122,333,448
Summary of Revenues, Expenses, and Changes in
Enterprise Fund Net Position
Sewer Fund
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operating revenues, modest growth in charges for sales and services, up $1 million, or 5%, was partly offset by minor decreases in total impact fee revenues. Other sources of operating income remained consistent with the prior fiscal year.

Operating expenses were significantly lower in fiscal year 2024-25, decreasing by $3.5 million or 20% compared to the prior year. The primary driver of this reduction was lower contract services costs, while other major expense categories remained relatively stable. Contract services totaled $1.8 million in fiscal year 2024-25, compared to $4.7 million in the prior year, making them the main contributor to the more favorable operating income. This decrease was largely due to the timing of costs associated with major construction projects, including upgrades to the WRRF.

Nonoperating revenues were also positive due to stronger investment earnings and significantly lower interest expense, $2.5 million in fiscal year 2024-25, down from $5.1 million in the prior year. The reduction in interest expense resulted from the City having recorded capitalized interest in the prior year related to the 2018 Clean Water State Revolving Fund loan used for the construction of the WRRF.

Parking Fund
The Parking Services program operates and maintains the City’s surface parking lots, on-street metered spaces, parking structures, residential permit parking districts, and timed parking areas throughout the city with a focus on the downtown area and residential neighborhoods.

Parking Fund operating revenues decreased from $9.7 million in the prior year to $8.3 million in fiscal year 2024-25 as a result of several factors including: reduced parking rates, unexpected failures in parking structure technology systems that affected revenue collection in the first half of the year, and a decrease in citation revenue due to issues with the previous citation management vendor.
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Operating expenses were consistent with the prior year coming in at $6.4 million compared with $6.6 million in fiscal year 2023-24. This small decrease was driven by salary savings due to several vacancies throughout the year as well as some savings in consulting services due to operational adjustments, and efficiencies gained with digital communication and permit management.

Nonoperating revenues were down year over year and came in at $232,800 as the result of a correction to lease revenue accounting and less investment related earnings realized as a result of cash needed to fund ongoing investment in capital projects such as the new Cultural Arts District parking structure. As a result, the Parking Fund’s net position increased by 5% or $1.7 million to end the fiscal year at $35.8 million.

Transit Fund
SLO Transit provides 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 fiscal year 2024-25, six new buses were added to the fleet and are expected to enter service by Spring 2026.

During fiscal year 2024-25 the Transit Fund’s net position increased from $9.1 million to $14.9 million. While the Fund’s operating performance was consistent with the previous year, the increase in overall fund balance was due to the timing of federal grant revenues recognized to fund the replacement of diesel-powered buses with zero-emission models and to fund the expansion buses needed to implement service enhancements identified as the highest priority recommendation of the recent Transit Innovation Study. Grant revenue also included part of $12.1 2024-25 2023-24
Operating revenues 8,307,559 $ 9,663,683 $
Operating expenses 6,373,905 6,615,881
Operating income (loss) $ 1,933,654 $ 3,047,802
erating revenues (expenses) $ 232,820 $ 1,237,070
Contributions - Transfers out (375,212) (368,233)
Changes in net position $ 1,791,262 $ 3,916,639
Net position - beginning of year $ 34,133,265 $ 30,216,626 Prior year restatement (80,773)
Net position - end of year $ 35,843,754 $ 34,133,265
Summary of Revenues, Expenses, and Changes in
Enterprise Fund Net Position
Parking Fund
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million awarded via the American Rescue Plan Act (ARPA) and allocated in fiscal years 2022-23 through 2024-25.

Operating revenue was consistent with the prior year totaling $991,000 and within $12,000 of the prior year. Operating expenses were $1 million more than the prior year primarily as a result of increases in contract services as well as increases in fuel, and electricity used for the expanding electric bus fleet. Favorable investment earnings of $494,000 also boosted the performance of the Fund and contributed to the ending net position of $14.9 million.

Combined Program Expenses and Revenue: Business-Type Activities. In fiscal year 2024-25, the combined total revenues for business-type activities increased from $80.7 million to $89.2 million led by increases in service charges for fiscal year 2024-25 that were up by nearly $2.4 million from the prior year and making up $67.8 million of total revenues. This increase was primarily driven by increases in the Water and Sewer Funds which saw increases of $3 million and $793,000 respectively. Similar to the prior year, all enterprise funds experienced strong investment income totaling $8.3 million and a favorable fair value adjustment at the end of fiscal year 2024-25 totaling $1.7 million. Furthermore, overall grant revenues for business-type activities was significantly higher in fiscal year 2024-25 versus the prior year, up from $6.8 million to $12.8 million. These factors contributed to all enterprise fund program revenues exceeding program expenditures.
2024-25 2023-24
Operating revenues 990,738 $ $ 1,003,116
Operating expenses 6,358,316 5,352,380
Operating income (loss) $ (5,367,578) $ (4,349,264)
erating revenues (expenses) 10,465,066 $ $ 5,471,995
Contributions - Transfers out 747,642 -
Changes in net position $ 5,845,130 $ 1,122,731
Net position - beginning of year $ 9,101,492 $ 7,978,761 Net position - end of year $ 14,946,622 $ 9,101,492
Transit Fund
Summary of Revenues, Expenses, and Changes in
Enterprise Fund Net Position
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Management’s Discussion and Analysis
As seen below, program revenue exceeded program expenses for all of the City’s Enterprise Funds with the Water and Sewer Funds performing the strongest. This was largely driven by investment earnings, which remained strong during the fiscal year. These earnings are unpredictable and outside of the City’s control and should not be relied upon as an ongoing source of funding for the programs.
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Management’s Discussion and Analysis
General Fund Budgetary Highlights
A detailed budgetary comparison schedule for the year ended June 30, 2025, is presented as required supplementary information following the notes to the financial statements. The final budget amounts include changes that were approved by the City Council through June 30, 2025.

The following summarizes the original General Fund budget compared with the adjusted final budget for fiscal year 2024-25. The adjusted final budget includes Council approved adjustments as well as administrative budget adjustments in accordance with the City’s adopted fiscal policies and procedures.

As discussed below, differences between the original budget and the final amended budget reflect the following key changes:
 Revenue budgets were increased by $9 million from $118.6 million to $127.7 million and reflect the addition of FEMA reimbursements which were initially forecasted but not budgeted.
 Overall expenditure budgets were also increased by approximately $5.4 million for the General Fund due to carryover of funding for contracts and commitments from the prior fiscal year. Significant differences between the original and final expenditure budgets include increases in anticipated Public Safety and General Government programs.  Net Other sources (uses) are comprised of transfers in or out and were originally budgeted at $22.6 million and revised to $28.5 million in the final budget. Transfers may be used to provide resources from the General Fund to other funds such as the Capital Outlay Fund or other non-major governmental funds.

General Fund 2024-25
Original Budget
2024-25
Final Budget
Positive (Negative)
Variance
Revenues 118,611,840 $ 127,728,819 $ 9,116,979 $
Expenditures 93,826,330 99,228,674 $ (5,402,344)
Other sources (uses) (22,612,412) (28,487,384) $ (5,874,972) Beginning fund balance 45,329,766 45,329,766 $ -
Ending fund balance $ 47,502,864 $ 45,342,527 $ (2,160,337) General Fund Budgetary Highlights
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Management’s Discussion and Analysis
The following table compares the actual results for revenues, expenditures, and fund balance with the final budget for the General Fund. As the table shows, revenues were within $814,000 of their budget amounts. While there was some variability between budgeted revenue streams and actual results for the fiscal year 2024-25, overall tax revenues were within 1% of budget and user fees were within 2%, transient occupancy tax of 8%. Furthermore, favorable investment earnings counter balanced the shortcomings with budgeted 2023 storm reimbursements as the City received just $909,090 versus $8.7 million.
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Management’s Discussion and Analysis
Detail for the Local Revenue Measure
The City’s Local Revenue Measure (one and a half percent transaction tax) is a component of the General Fund. The activities reflected in the Financial Statements of this report are provided for information regarding the use of the Measure’s revenue according to the community’s priorities and the recommendation of the Revenue Enhancement Oversight Commission, a City Council advisory body, overseeing the allocations. For fiscal year 2024-25, the following revenues and expenditures were recorded:

Capital Assets and Debt Administration
Capital Assets. Capital assets, including infrastructure, are those assets that are used in the performance of the City’s functions. As of June 30, 2025, the City’s investment in capital assets for its governmental and business type activities increased to $648.6 million (net of accumulated depreciation). The investment in capital assets includes things such as open space, park improvements, buildings and associated improvements, vehicles and equipment, streets, bikeways, water, wastewater, and storm drain systems.

Revenues
Local Transaction and Use Tax 30,926,285 $
$ 30,926,285
Expenditure Allocations by Priority
Address Homelessness 907,987 $
Community Safety and Emergency Preparedness 6,625,118
Creek and Flood Protection 1,718,128
Economic Development and Business Retention 200,000
Open Space/Natural Areas Preservation and Maintenance 1,555,889 Other Services and Projects 3,342,390
Protect Financial Stability 1,178,100
Safe and Clean Public Areas 1,889,662
Street Maintenance and Transportation (incl bike and ped improvements) 9,150,627 Youth/Senior Services and Recreation Facilities 5,287,099 $ 31,855,000
Net Change in Fund Balance (928,715) $
Fund Balance Beginning of Year 1,776,826
Fund Balance End of Year 848,111 $
For the Fiscal Year Ended June 30, 2025
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Management’s Discussion and Analysis
Major capital asset2
expenditures during the fiscal year included the following:
 $25.6 million for continued work on the Cultural Arts District Parking Structure  $9.7 million for continued work on the Water Resource Recovery Facility upgrade projects  $6.1 million for purchase of 6 new electric buses
 $5.8 million for continued work on the Mid-Higuera Bypass  $3.1 million for continued work on the Johnson Waterline Replacement project  $2.8 million for roadway sealing throughout the City
 $1.8 million for the completion of the Laguna Lake Dog Park  $1.7 million for new water distribution meters and boxes  $1.6 million for continued work on the Sierra Way Sewer Replacement project  Long-Term Debt. As of June 30, 2025, the City’s long-term debt increased by $11.1 million to $224.9 million outstanding. The modest increase reflects additional draw downs on the 2018 Clean Water State Revolving Fund loan used to finance improvements at the Water Resource Recovery Facility, offset by routine principal payments on other outstanding debt. In addition, the City recognized a total of $75,000 in subscription-based IT arrangements (SBITAs) in accordance with the implementation of GASB 96 and $276,000 in leases in accordance with GASB 87.

The California Government Code provides for a limit on debt secured by real property of 3.75% based on market value. The City’s debt management policy, however, sets a lower debt limit of 2% of assessed valuation. As of June 30, 2025, 2% of the assessed valuation was $260 million3 .
2 Additional information on the City’s capital assets can be found in Note 5 on page 103 to the basic financial statements.
3 Based on the San Luis Obispo County Assessor’s 2024-25 Annual Valuation report 55

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Management’s Discussion and Analysis
As of June 30, 2025, the City did not have any general obligation debt subject to the limit.

Additional information about the City’s long-term debt can be found in Note 7 to the basic financial statements.

Economic Factors and Next Year’s Budget and Rates
The City’s 2025-27 Financial Plan reflects the current economic realities, and significant input from the community, advisory bodies, and the City Council. The two-year budget reflects a time of transition with revenue growth projected to slow amidst rising costs of goods and services.

There is also growing uncertainty resulting from a rapid shift in national economic policy via tariffs, and potential significant state and federal budget cuts.

In recent years, the City experienced strong revenue growth in recent years due to post-COVID economic recovery, voter approval of the Local Revenue Measure (LRM) in 2020, and a surge in development activity. These factors boosted sales tax, transient occupancy tax (TOT), and development-related revenues, allowing the City to fund capital projects and expand services.

However, this growth has slowed significantly. Inflation and high interest rates have cooled consumer spending and reduced development activity. As a result, the City now faces:
 Flattening sales tax revenues – including LRM receipts trending at least $2.4 million below last year’s forecast
 Falling development revenues – down about $600,000 in fiscal year 2024-25, which is expected to persist in future years due to a decrease in the high volume of development activity compared to prior years
 Rising costs -- for personnel, construction materials, insurance, utilities, and labor  Ongoing inflationary pressures – affecting spending and project costs To manage these challenges, the City activated its Fiscal Health Contingency Plan (FHCP) in April of 2025, instituting a hiring and travel chill to control expenditures while maintaining flexibility to address a structural deficit projected in fiscal year 2025-26 as well a future budget years.

Although the two-year Financial Plan is balanced, long term projections show structural deficits to continue with a $3 million deficit in fiscal year 2027-28 and $2 million in fiscal year 2028-29 primarily due to the cost of opening a fifth fire station and continued slow revenue growth.

The City adopted the fiscal year 2025-27 Financial Plan in June of 2025 which included a budget of approximately $217.6 million for fiscal year 2025-26. The new plan will guide the City through June 2027 and focuses on key priorities identified through community engagement, such as addressing homelessness, housing insecurity, public safety, sustainable transportation, and climate action.
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Management’s Discussion and Analysis
Water Rates. The Council adopted 5.5% increases to the current rates each fiscal year on July 1, 2025, and on July 1, 2026. These changes are driven primarily by the rising costs of operating and maintaining the City’s water system, as well as critical capital improvement projects. These updates also reflect regulatory compliance expenses, including ongoing water quality and environmental standards, and inflationary impacts that have raised the cost of essential supplies and services. Additionally, the water rate adjustments help fund ongoing improvements to the water treatment system, the implementation of Advanced Metering Infrastructure (AMI), and projects to maintain reliable, resilient service for the community’s current and future needs.

Sewer Rates. The Council adopted 6.5% increases to the current rates each fiscal year on July 1, 2025, and on July 1, 2026. These changes are needed to address growing costs of operations and maintenance, capital renewal, and stringent environmental regulations. These rates support the City’s efforts to meet evolving regulatory requirements, maintain critical infrastructure, and replace aging facilities to ensure the continued safe and reliable treatment of wastewater. The adjustments are essential to fund key upgrades, while also reducing reliance on debt for future infrastructure needs.

The City adopts its water and sewer rates with the two-year Financial Plan and in accordance with Proposition 218 requirements.
57

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Management’s Discussion and Analysis
2025-27 Water Rates
2025-27 Sewer Rates
58

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Management’s Discussion and Analysis
Parking Rates. Parking rate studies are typically conducted every two to five years to evaluate parking operations and to address changing needs in the community. Following community response to the rate increases that went into effect in July of 2023, the City began working closely with a consultant in January of 2024 on a Parking Rate Study. The rate study recommended parking rates and policy changes based on updated revenue forecast modeling and extensive community feedback. This effort culminated in May 2024 with the City Council approving changes to make parking more affordable for locals and visitors alike, while still enabling the Parking Fund to remain financially sustainable. This included a 33% decrease in parking structure rates, 25%-31% decreases for on-street parking rates, and a 47% decrease in monthly parking structure permit rates.

On-street downtown core parking time limits were also increased from 2 hours to 3 hours and there was a 50% reduction in parking validation costs for businesses. The rate and policy changes went into effect in July 2024. No future rate changes are planned at this time.

Requests for Additional Information
This financial report is designed to provide a general overview of the City’s finances for all those interested. The City also prepares a Popular Annual Financial Report that can be found on the City’s website under the Finance Department’s online documents. Questions concerning any of the information provided in this report should be addressed to the Department of Finance, 990 Palm Street, San Luis Obispo, CA 93401.
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BASIC FINANCIAL STATEMENTS
61

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City of San Luis Obispo, California
Government-Wide Financial Statements
For the Fiscal Year Ended June 30, 2025
The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, in a manner similar to a private-sector business.

The statement of net position presents information on all the City’s assets and deferred outflows, as well as liabilities and deferred inflows, with the difference reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City is improving or deteriorating.

The statement of activities presents information showing how the City’s net position changed during the current fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, all the current fiscal year’s revenues and expenses are considered regardless of when cash is received or paid (e.g., earned but unused vacation leave or uncollected taxes).

Government-wide financial statements distinguish City governmental activities that are principally supported by taxes and intergovernmental revenues from other business-type activities that are intended to recover all or a significant portion of their costs through user fees and charges. Governmental activities include public safety, transportation, community development, leisure, cultural and social services, and general government. Businesstype activities include water, wastewater, parking, and transit. 63

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Governmental
Activities
Business-Type
Activities Total
Assets
Current assets:

Cash and investments $ 126,788,389 124,667,748 $ 251,456,137 $ Taxes receivable 12,887,286 - 12,887,286
Accounts receivable 5,517,510 14,320,683 19,838,193
Accrued interest receivable 4,751,965 1,447,357 6,199,322 Internal balances 4,845,000 (4,845,000) -
Prepaid items and other assets 712,520 - 712,520
Lease receivables 110,528 122,794 233,322
Total current assets 153,492,557 137,834,223 291,326,780 Noncurrent assets:

Cash and investments held by fiscal agent 594,469 22,180,922 22,775,391 Investment in joint venture - 3,990,064 3,990,064
Lease receivables 741,527 37,293,723 38,035,250
Loans receivable 2,275,087 12,755,688 15,030,775
Nondepreciable capital assets 57,133,759 231,759,572 288,893,331 Depreciable capital assets (net of accumulated
depreciation) 199,812,499 159,893,498 359,705,997
Total noncurrent assets 271,037,942 457,392,866 713,400,033 Total assets 424,530,499 595,227,089 1,004,726,813
Deferred Outflows of Resources
Other post-employment benefits related 1,656,166 840,675 2,496,841 Pension related 7,368,672 43,788,115 51,156,787
Unamortized loss on refunding of debt 163,488 131,077 294,565 Total deferred outflows of resources 45,607,769 8,340,424 53,948,193 Liabilities
Current liabilities:

Accounts payable 6,153,646 7,264,713 13,418,359
Accrued salaries 2,140,573 425,323 2,565,896
Unearned revenue 2,838,476 10,058,588 12,897,064
Interest payable 68,632 1,495,526 1,564,158
Other liabilities 103 - 103
Compensated absence - due within one year 3,269,019 612,256 3,881,275 Long-term debt - due within one year 1,338,734 6,943,637 8,282,371 Total current liabilities 15,809,183 26,800,043 42,609,226 Noncurrent liabilities:

Compensated absence - due in more than on year 1,401,008 262,395 1,663,403 Long-term debt - due in more than one year 206,681,366 14,378,605 221,059,971 Net OPEB liability 923,913 781,794 1,705,707
Net pension liability 31 146,976,508 ,018,691 177,995,199 Total noncurrent liabilities 238,744,246 163,680,034 402,424,280 Total liabilities 265,544,289 179,489,217 445,033,506
Deferred Inflows of Resources
Other post-employment benefits related 1,757,000 757,748 2,514,748 Pension related 4,357,953 - 4,357,953
Lease related 754,708 35,744,111 36,498,819
Total deferred inflows of resources 6,869,661 36,501,859 43,371,520 Net Position
Net investment in capital assets 241,392,407 200,340,066 441,732,473 Restricted
Debt service - 4,956,584 4,956,584
Risk management 594,469 - 594,469
Transportation projects 7,885,873 1,513,729 9,399,602
Affordable housing programs 10,394,877 - 10,394,877
Impact fee programs 14,891,812 - 14,891,812
Parkland development programs 599,240 - 599,240
Public art programs 1,557,871 - 1,557,871
Tourism programs 1,631,304 - 1,631,304
Public safety programs 671,669 - 671,669
Claims 712,520 - 712,520
Unrestricted 3,447,348 94,710,986 83,127,559
Total net position $ 283,779,390 $ 301,521,365 $ 570,269,980 City of San Luis Obispo, California
Statement of Net Position
June 30, 2025
The accompanying notes are an integral part of these financial statements. 65

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City of San Luis Obispo, California
Statement of Activities
For the Fiscal Year Ended June 30, 2025
Functions/Programs Expenses
Charges for
Services
Operating
Grants and
Contributions
Capital Grants
and
Contributions
Governmental
Activities
Business-type
Activities Total
Governmental activities:

Public safety $ 4,272,202 47,552,699 $ 850,914 $ - $ (42,429,583) $ $ - $ (42,429,583) Transportation 12,159,073 438,239 2,824,709 4,900,942 (3,995,183) - (3,995,183) Leisure, culture and social services 13,669,496 5,298,964 103,402 - (8,267,130) - (8,267,130) Community development 9,135,208 16,190,977 205,922 - (6,849,847) - (6,849,847) General government 930,439 20,980,453 2,378,189 685,867 (16,985,958) - (16,985,958) Interest on long-term debt - 569,642 - (569,642) - - (569,642) Total governmental activities 114,551,739 20,075,052 6,363,136 5,586,809 (82,526,742) - (82,526,742) Business-type activities:

Water 34,356,427 28,092,545 1,514,125 - - 7,778,007 7,778,007 Sewer 24,096,372 16,792,057 530,085 - - 7,834,400 7,834,400Parking 8,617,493 8,307,559 5,000 - - (304,934) (304,934) Transit 6,358,316 990,738 6,005,376 4,712,879 - 5,350,677 5,350,677 Total business-type activities 59,860,411 67,751,096 8,054,586 4,712,879 - 20,658,150 20,658,150 Total primary government $ 174,412,150 $ 87,826,148 $ 14,417,722 $ 10,299,688 (82,526,742) 20,658,150 (61,868,592) General revenues and transfers:

General sales and use taxes 22,911,086 - 22,911,086
Transaction and use tax - Local Revenue Measure 30,926,285 - 30,926,285 Property tax (including real property transfer tax) 17,240,694 - 17,240,694Transient occupancy tax (TOT) 11,417,888 - 11,417,888 Utility users tax 7,501,436 - 7,501,436
Property tax-in-lieu of vehicle license fees 7,273,431 - 7,273,431 Franchise taxes 2,622,351 - 2,622,351
Business tax 3,138,272 - 3,138,272
Cannabis Tax 814,502 - 814,502
Other taxes 1,025,936 - 1,025,936
Total taxes 104,871,881 - 104,871,881
Unrestricted investment earnings 6,691,998 8,639,215 15,331,213Other revenue 1,439,962 - 1,439,962 Transfers 3,214,820 (3,214,820) -
Total general revenues and transfers 116,218,661 5,424,395 121,643,056 Change in net position 33,691,919 26,082,545 59,774,464 Net position, beginning of year 249,796,507 275,530,186 525,326,693Restatements 290,964 (91,366) 199,598 Net position, beginning of year, as restated 250,087,471 275,438,820 525,526,291 Net position, end of year $ 283,779,390 $ 301,521,365 $ 585,300,755 Program Revenues
Net Revenues (Expenses) and
Changes in Net Position
The accompanying notes are an integral part of these financial statements. 66

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City of San Luis Obispo, California
Governmental Funds Financial Statements
For the Fiscal Year Ended June 30, 2025
Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as on balances of spendable resources available at the end of the fiscal year. Such information reflects financial resources available in the near future to finance the City’s programs.

Major governmental funds are defined generally as having significant activities or balances in the current year. The funds described below were determined to be Major Governmental Funds by the City for the current fiscal year.

Individual nonmajor funds may be found in the Supplementary section.

General Fund
The General Fund is used for all the general revenues of the City not specifically levied or collected for other City funds, and the related expenditures. The major revenue sources for this Fund are property taxes, sales taxes, franchise fees, business licenses, unrestricted revenues from the state, fines and forfeitures and interest income.

Expenditures are made for community development, public safety, public works, and other services.

Capital Outlay Fund
This fund was established to account for all of the City’s construction projects and capital purchases in excess of $25,000 with the exception of those funded through non-major capital project funds and Enterprise Funds. Financing is provided primarily through transfers in from the General Fund, and from State and Federal Grants. 67

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General
Capital Outlay
Fund
Other
Governmental
Funds
Total
Governmental
Funds
Assets
Cash and investment $ 36,237,450 $ 34,180,695 $ 54,249,603 $ 124,667,748 Taxes receivable 12,653,169 - 234,117 12,887,286
Accounts receivable 3,125,189 2,022,667 312,969 5,460,825 Other receivables 56,685 - - 56,685
Due from other funds 43,089 - 67,478 110,567
Accrued interest receivable 521,124 - 4,230,841 4,751,965 Prepaid items 688,017 - - 688,017
Cash and investments held by fiscal agent 594,469 - - 594,469 Advances to other funds 4,845,000 - - 4,845,000
Loans receivable 261,715 - 12,493,973 12,755,688
Lease receivable 852,055 - - 852,055
Total assets $ 59,877,962 $ 36,203,362 $ 71,588,981 $ 167,670,305 Liabilities, Deferred Inflows of Resources
and Fund Balance
Liabilities:

Accounts payable $ 2,229,479 $ 3,490,304 $ 433,863 $ 6,153,646 Accrued liabilities 2,134,384 - 6,189 2,140,573
Due to other funds - - 110,567 110,567
Unearned revenue 2,479,303 - 359,173 2,838,476
Other liabilities 103 - - 103
Total liabilities 6,843,269 3,490,304 909,792 11,243,365 Deferred Inflows of Resources:

Lease related 754,708 - - 754,708
Unavailable revenue 472,667 - 6,564,666 7,037,333
Total deferred inflows of resources 1,227,375 - 6,564,666 7,792,041 Fund balance:

Nonspendable 5,533,017 - - 5,533,017
Restricted for:

Risk management 594,469 - - 594,469
Transportation projects - - 7,885,873 7,885,873
Affordable housing programs - - 10,394,877 10,394,877
Impact fee programs - - 14,891,812 14,891,812
Parkland development programs - - 599,240 599,240
Public art programs - - 1,557,871 1,557,871
Tourism programs - - 1,631,304 1,631,304
Public safety program - - 671,669 671,669
Infrastructure improvement - - 491,596 491,596
Committed to:

General government programs 848,111 - - 848,111
Risk management 4,437,620 - - 4,437,620
Contingency fund 14,607,203 - - 14,607,203
Public safety program - - 508,976 508,976
Assigned to:

CalPERS pension payment 2,000,000 - - 2,000,000
Solid Waste AB939 270,825 - - 270,825
Establishment of Section 115 Trust 2,000,000 - - 2,000,000 Revenue stabilization 2,000,000 - - 2,000,000
Development services 145,136 - - 145,136
SLO Repertory Theater Grant 6,700,000 - - 6,700,000
608,000 - - 608,000
Storm Related costs 5,125,068 - - 5,125,068
Storm Related Reimbursements 909,090 - - 909,090
Contingency fund - - 900,000 900,000
Subsequent year expenditures 2,559,825 32,713,058 24,626,846 59,899,729 Unassigned 3,468,954 - (45,541) 3,423,413
Total fund balance 51,807,318 32,713,058 64,114,523 148,634,899 Total liabilities, deferred inflows of resources
and fund balance $ 59,877,962 $ 36,203,362 $ 71,588,981 $ 167,670,305 City of San Luis Obispo, California
Balance Sheet
Governmental Funds
June 30, 2025
Tenant Improvement program/Economic
The accompanying notes are an integral part of these financial statements. 69

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Total fund balance - governmental funds $ 148,634,899
Capital assets at estimated historical cost $ 395,590,521 Accumulated depreciation (138,644,263)
256,946,258
7,037,333
1,656,166
24,503
Lease revenue bonds $ 15,366,185
Lease liabilities 276,445
SBITA liabilities 74,709
Compensated absences 4,670,027
Accrued interest payable 68,632
(20,455,998)
Net pension liability is not a current financial obligation and, therefore, is not reported in the governmental funds. (146,976,508)
Net OPEB liability is not a current financial obligation and, therefore, is not reported in the governmental funds. (923,913)
(1,757,000)
(4,357,953)
Total net position - governmental activities $ 283,779,390 Long-term liabilities, including related interest payable, are not due and payable in the current period and therefore are not reported in the funds.

Deferred inflow of resources, pension related, are not current assets or resources; and they are not due in the current period and therefore are not reported in the governmental funds.

Deferred inflow of resources, OPEB related, are not current assets or resources; and they are not due in the current period and therefore are not reported in the governmental funds.

City of San Luis Obispo, California
Reconciliation of the Governmental Funds Balance Sheet
to the Government-wide Statement of Net Position
June 30, 2025
Capital assets used in governmental activities are not financial resources and therefore are not reported in the funds.

Other long-term assets are not available to pay for current period expenditures and therefore are not reported in the governmental funds.

Deferred outflows of resources, pension related, are not current asset or resources; and they are not due in the current period and therefore are not reported in the governmental funds.

Deferred outflows of resources, OPEB related, are not current asset or resources; and they are not due in the current period and therefore are not reported in the governmental funds.

Deferred amounts related to the refunding of long-term debt were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet.

Unavailable revenue recorded in the fund financial statements resulting from activities in which revenues were earned but funds were not available are reclassified as revenues in the Government-Wide Financial Statements.
43,788,115
163,488
The accompanying notes are an integral part of these financial statements. 70

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General
Capital Outlay
Fund
Other
Governmental
Funds
Total
Governmental
Funds
Revenues:
$ 22,911,086 $ - $ - $ 22,911,086
30,926,285 - - 30,926,285
17,242,485 - 539,453 17,781,938
11,417,888 - - 11,417,888
7,501,436 - - 7,501,436
7,196,670 - - 7,196,670
2,622,351 - - 2,622,351
3,138,272 - - 3,138,272
814,502 - - 814,502
484,692 - - 484,692
340,172 - - 340,172
4,892,409 - 1,371,611 6,264,020
4,686,036 5,705,815 3,498,471 13,890,322
12,530,009 - 5,800,980 18,330,989
210,336 3,949 758,651 972,936
Total revenues 126,914,629 5,709,764 11,969,166 144,593,559 Expenditures:

Current:

General government 17,533,059 79,705 - 17,612,764
Public safety 43,444,267 69,859 463,337 43,977,463
Transportation 5,837,166 2,419,954 566,788 8,823,908
Leisure, cultural and social services 11,913,798 859,882 - 12,773,680 Community development 13,097,593 - 2,485,698 15,583,291 Debt service:

Principal 360,260 - 1,098,975 1,459,235
Interest and fiscal charges 22,321 - 634,814 657,135
Capital outlay:

Public safety - 483,540 - 483,540
Transportation - 11,562,043 1,977,423 13,539,466
Leisure, cultural and social services - 2,151,507 2,481,703 4,633,210 Community development - 120,721 990,520 1,111,241
General government - 1,034,588 615,364 1,649,952
Total expenditures 92,208,464 18,781,799 11,314,622 122,304,885 Revenues over (under) expenditures 34,706,165 (13,072,035) 654,544 22,288,674 (Continued)
City of San Luis Obispo, California
Statements of Revenues, Expenditures, and
Changes in Fund Balances
Governmental Funds
For the Fiscal Year Ended June 30, 2025
Sales and use tax - general
Transaction and use tax - Local
Revenue Measure
Property tax (including real property
transfer tax)
Transient occupancy tax
Utility users tax
Property tax in lieu of VLF
Franchise taxes
Business tax
Cannabis Tax
Miscellaneous
Real property transfer tax
Fines, forfeitures and penalties
Use of money and property
Subventions and grants
Charges for services
The accompanying notes are an integral part of these financial statements. 71

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General
Capital Outlay
Fund
Other
Governmental
Funds
Total
Governmental
Funds
Other Financing Sources (Uses):

Transfers in $ 5,829,430 $ 24,043,451 $ 10,359,699 $ 40,232,580 Transfers out (34,058,043) - (2,959,717) (37,017,760)
Total other financing sources (uses) (28,228,613) 24,043,451 7,399,982 3,214,820 Net change in fund balance 6,477,552 10,971,416 8,054,526 25,503,494 Fund balance, beginning of year 45,329,766 21,741,642 55,769,033 122,840,441 Restatements - - 290,964 290,964
Fund balance, beginning of year, as restated 45,329,766 21,741,642 56,059,997 123,131,405 Fund balance, end of year $ 51,807,318 $ 32,713,058 $ 64,114,523 $ 148,634,899 City of San Luis Obispo, California
Statements of Revenues, Expenditures, and
Changes in Fund Balances
Governmental Funds
For the Fiscal Year Ended June 30, 2025
The accompanying notes are an integral part of these financial statements. 72

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Total net change in fund balance - governmental funds $ 25,503,494 Expenditures for capital outlay - governmental funds $ 19,653,776 Depreciation expense (8,253,546)
11,400,230
loss on disposal of capital asset (37,109)
Repayments of long-term debt are recognized as expenditures in the governmental funds. In the government-wide statements, repayments of long-term liabilities are reported as reductions of liabilities. Expenditures for repayment of the principal portion of long-term debt were: 1,498,337 The issuance of long-term debt provides current financial resources to governmental funds.

This transaction, however, has no effect on net position. Proceeds from the issuance of bonds was:
(11,678)
Bond premiums are reported in the governmental funds when the bonds are issued, and are capitalized and amortized in the statement of net position. The amount of bond premiums capitalized during the current period was: 95,339
it is due. In the statement of activities, interest expense is recognized as the interest accrues, regardless of when it is due. The difference between interest expense paid and interest accrued was: 4,073
Changes in actuarially determined claim liabilities for uninsured claims do not provide current financial resources and are not reported in the governmental funds. (133,858) governmental funds. In the statement of activities, compensated absences are measured by the amounts earned. The difference between compensated absences paid and compensated absences earned was: (220,079)
435,040
19,723,915
1,975,082
Pension expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds (25,830,941) OPEB expenses reported in the statement of activities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds (709,926) Total change in net position - governmental activities $ 33,691,919 Current year employer pension contributions are recorded as expenditures in the governmental funds, however, these amounts are reported as a deferred outflow of resources in the Government-Wide Statement of Net Position Current year employer OPEB contributions are recorded as expenditures in the governmental funds, however, these amounts are reported as a deferred outflow of resources in the Government-Wide Statement of Net Position Compensated absences are measured by the amounts paid during the period in the Capital outlay net of depreciation expense and disposal.

Interest on long-term debt is recognized as an expenditure in the governmental funds when Reconciliation of the Statement of Revenues,
Expenditures and Changes in Fund Balances of
Governmental Funds to the Statement of Activities
For the Fiscal Year Ended June 30, 2025
Deferred amounts related to the refunding of long-term debt were not current financial resources. Therefore, they were not reported in the Governmental Funds Balance Sheet.

This amount is to be amortized over the life of the long-term debt. This amount is the current year net amortization expense.

Revenues that are not considered to be available are reported as unavailable revenues in the governmental funds, however, these amounts are recognized in the Government-Wide Statement of Activities. This amount represents the change in unavailable revenues.

City of San Luis Obispo, California
The accompanying notes are an integral part of these financial statements. 73

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City of San Luis Obispo, California
Proprietary Funds Financial Statements
For the Fiscal Year Ended June 30, 2025
Proprietary funds account for City operations financed and operated in a manner like a private business enterprise.

The intent of the City is that the cost of providing goods and services be financed primarily through user charges.

Proprietary funds are generally used to account for services for which the City charges customers; either outside customers or internal units/divisions of the City. Proprietary funds provide the same type of information as shown in the government-wide financial statements, only in more detail. The only type of proprietary fund the City maintains is enterprise funds. The Water, Sewer, Parking, and Transit Funds are presented as business-type activities in the government-wide financial statements. The City considers all four of its enterprise funds to be major funds.

Water Fund
This fund accounts for the provision of water services to the residents of the City as well as some customers in the County. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, capital improvements and debt service.

Sewer Fund
This accounts for the provision of wastewater collection and treatment services to the residents of the City as well as some customers in the County. All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, capital improvements and debt service.

Parking Fund
This fund accounts for activities related to the implementation of the Access and Parking Management Plan, including the operation of municipal parking lots, parking structures, parking meters and residential parking districts.

All activities necessary to provide such services are accounted for in this fund, including, but not limited to, administration, operations, maintenance, capital improvements and debt service.

Transit Fund
This fund accounts for the operation and maintenance of the City's transit system. Although user fees are not the primary funding source for the operation of the system, the State of California and the Federal government, which provide the major funding sources for the system, require that local transit systems be accounted for on an enterprise fund basis.
75

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Water Sewer Parking Transit Totals
Assets
Current assets:

Cash and investment $ 43,651,887 $ 71,130,287 $ 4,397,096 $ 7,609,119 $ 126,788,389 Accounts receivable 4,574,393 3,137,051 212,271 6,396,968 14,320,683 Lease Receivables - - 122,794 - 122,794
Accrued interest receivable 485,064 519,881 395,727 46,685 1,447,357 Total current assets 48,711,344 74,787,219 5,127,888 14,052,772 142,679,223 Noncurrent assets:
- 278 22,180,644 - 22,180,922
Investment in joint venture 3,990,064 - - - 3,990,064
Loan Receivables 1,476,342 798,745 - - 2,275,087
Lease Receivables - - 37,293,723 - 37,293,723
Capital assets:

Land 945,926 2,176,114 10,692,838 - 13,814,878
Infrastructure 123,669,277 104,623,921 29,448,102 110,972 257,852,272 Buildings and improvements 19,233,993 5,162,135 1,300,234 5,212,278 30,908,640 Equipment 7,675,457 7,686,278 2,247,057 13,205,125 30,813,917 Construction in progress 16,245,185 151,606,202 43,903,407 6,189,900 217,944,694 Total capital assets 167,769,838 271,254,650 87,591,638 24,718,275 551,334,401 Less accumulated depreciation (72,789,556) (58,626,291) (16,980,102) (11,285,382) (159,681,331) Capital assets, net of
accumulated depreciation 94,980,282 212,628,359 70,611,536 13,432,893 391,653,070 Total noncurrent assets 100,446,688 213,427,382 130,085,903 13,432,893 457,392,866 Total assets 149,158,032 288,214,601 135,213,791 27,485,665 600,072,089 Deferred Outflows of Resources
Pension related 3,255,407 3,123,943 799,925 189,397 7,368,672 349,848 374,145 93,119 23,563 840,675
26,458 6,739 97,880 - 131,077
3,631,713 3,504,827 990,924 212,960 8,340,424
(Continued)
City of San Luis Obispo
Statement of Net Position
Business-Type Activities - Enterprise Funds
June 30, 2025
Total deferred outflow of
resources
Cash and investments held by
fiscal agent
Other post-employment benefits
related
Unamortized loss on refunding of
debt
Enterprise Funds
The accompanying notes are an integral part of these financial statements. 77

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Water Sewer Parking Transit Totals
Liabilities
Current liabilities:

Accounts payable $ 352,945 $ 1,917,054 $ 3,215,340 $ 1,779,374 $ 7,264,713 Accrued liabilities 170,096 153,050 67,362 34,815 425,323 Compensated absences 299,517 222,227 61,173 29,339 612,256 Unearned revenue - - - 10,058,588 10,058,588
Interest payable 52,888 1,196,800 245,838 - 1,495,526
Current portion of long-term debt 1,178,367 4,413,319 1,351,951 - 6,943,637 Total current liabilities 2,053,813 7,902,450 4,941,664 11,902,116 26,800,043 Noncurrent liabilities:

Compensated absences 128,365 95,239 26,217 12,574 262,395 Advances from other funds - - 4,845,000 - 4,845,000
Lease revenue bonds 7,823,297 243,030 49,083,650 - 57,149,977 Installment sale agreement - 1,770,696 - - 1,770,696
State loan/note payable 9,551,515 136,002,520 2,206,658 - 147,760,693 Net pension liability 13,703,752 13,150,349 3,367,315 797,275 31,018,691 369,792 338,045 52,002 21,955 781,794
Total noncurrent liabilities 31,576,721 151,599,879 59,580,842 831,804 243,589,246 Total liabilities 33,630,534 159,502,329 64,522,506 12,733,920 270,389,289 Deferred Inflows of Resources
324,071 321,250 94,344 18,083 757,748
Lease related - - 35,744,111 - 35,744,111
324,071 321,250 35,838,455 18,083 36,501,859
Net Position
Net investment in capital assets 76,453,561 70,205,811 40,247,801 13,432,893 200,340,066 Restricted:

Debt service - 4,956,584 - - 4,956,584
Transportation projects - - - 1,513,729 1,513,729
Unrestricted 42,381,579 56,733,454 (4,404,047) - 94,710,986 Total net position $ 118,835,140 $ 131,895,849 $ 35,843,754 $ 14,946,622 $ 301,521,365 Other post-employment benefits
related
Total deferred inflow of
resources
City of San Luis Obispo
Statement of Net Position
Business-Type Activities - Enterprise Funds
June 30, 2025
Enterprise Funds
Net other post-employment benefits
liability
The accompanying notes are an integral part of these financial statements. 78

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Water Sewer Parking Transit Total
Operating revenues:

Charges for sales and service $ 29,285,188 $ 21,326,853 $ 7,060,852 $ 984,855 $ 58,657,748 Impact fees 4,843,919 2,729,023 - - 7,572,942
Fines and forfeitures - - 1,113,016 - 1,113,016
Other revenues 227,320 40,496 133,691 5,883 407,390
Total operating revenues 34,356,427 24,096,372 8,307,559 990,738 67,751,096 Operating expenses:

Salaries and benefits 5,411,641 5,504,571 1,979,310 419,464 13,314,986 Supplies and maintenance 1,938,251 2,512,434 926,862 506,595 5,884,142 Contract services 15,207,402 1,759,643 1,478,877 4,496,486 22,942,408 General government 1,559,425 1,838,634 1,256,841 460,609 5,115,509 Depreciation 3,369,279 2,636,961 732,015 475,162 7,213,417 Total operating expenses 27,485,998 14,252,243 6,373,905 6,358,316 54,470,462 Operating income (loss) 6,870,429 9,844,129 1,933,654 (5,367,578) 13,280,634 Nonoperating revenues (expenses)
Use of money and property 2,488,176 3,185,178 2,471,408 494,453 8,639,215 Grants 1,514,125 530,085 5,000 6,005,376 8,054,586
Interest expense and fiscal charges (606,547) (2,539,814) (2,243,588) - (5,389,949) Total nonoperating revenues
(expenses) 3,395,754 1,175,449 232,820 6,499,829 11,303,852 Income (loss) before transfers
and capital contributions 10,266,183 11,019,578 2,166,474 1,132,251 24,584,486 Capital Contributions 4,712,879 4,712,879
Transfers out (1,387,992) (1,451,616) (375,212) - (3,214,820) Total transfers and capital contribution (1,387,992) (1,451,616) (375,212) 4,712,879 1,498,059 Change in net position 8,878,191 9,567,962 1,791,262 5,845,130 26,082,545 Net position, beginning of year 109,961,981 122,333,448 34,133,265 9,101,492 275,530,186 Restatements (5,032) (5,561) (80,773) - (91,366)
Net position, beginning of year,
as restated 109,956,949 122,327,887 34,052,492 9,101,492 275,438,820 Net position, end of year $118,835,140 $ 131,895,849 $ 35,843,754 $ 14,946,622 $301,521,365 Enterprise Funds
City of San Luis Obispo, California
Statement of Revenues, Expenses, and Changes in Fund Net Assets Business-Type Activities - Enterprise Funds
For the Fiscal Year Ended June 30, 2025
The accompanying notes are an integral part of these financial statements. 79

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Water Sewer Parking Transit Total
Cash flows from operating activities:

Cash received from customers 34,287,980 $ $ 24,145,044 $ 8,187,898 $ 990,738 $ 67,611,660 (18,318,092) (6,097,402) (1,455,882) (3,863,241) (29,734,617) (1,559,425) (1,838,634) (1,256,841) (460,609) (5,115,509) (5,493,340) (5,563,157) (2,093,780) (392,618) (13,542,895) Net cash provided by (used in)
operating activities 8,917,123 10,645,851 3,381,395 (3,725,730) 19,218,639 Operating grants received 1,514,125 530,085 5,000 3,597,791 5,647,001 Transfers to other funds (1,387,992) (1,451,616) (375,212) - (3,214,820) 126,133 (921,531) (370,212) 3,597,791 2,432,181
Cash flows from capital and related
financing activities:
(6,715,303) (13,648,663) (26,453,490) (6,314,708) (53,132,164) Capital grants received - - - 4,712,879 4,712,879
SBITA payment paid (12,835) (12,835) - - (25,670)
Principal paid on debt financing (1,155,874) (4,286,106) (1,248,785) - (6,690,765) Interest paid on debt financing (718,329) (2,397,661) (2,499,597) - (5,615,587) Proceeds from issuance of debt - 19,479,561 - - 19,479,561 Net cash used in capital and
related financing activities (8,602,341) (865,704) (30,201,872) (1,601,829) (41,271,746) Cash flows from investing activities:

Use of money and property 3,076,074 1,880,880 2,332,201 488,348 7,777,503 Net cash provided by
investing activities 1,880,880 3,076,074 2,332,201 488,348 7,777,503 11,934,690 2,321,795 (24,858,488) (1,241,420) (11,843,423) 41,330,092 59,195,875 51,436,228 8,850,539 160,812,734
$ 43,651,887 $ 71,130,565 $ 26,577,740 $ 7,609,119 $ 148,969,311 (Continued)
City of San Luis Obispo, California
Statement of Cash Flows
Business-Type Activities - Enterprise Funds
For the Fiscal Year Ended June 30, 2025
Cash payments to suppliers for goods
and services
Cash payments to General Fund for
interfund services
Cash payments to employees for
services
Acquisition and construction of
capital assets
Cash flows from noncapital
financing activities:

Net change in cash and cash
equivalents
Cash and cash equivalents,
beginning of year
Cash and cash equivalents, end of
year
Net cash provided by (used in)
noncapital financing activities
Enterprise Funds
The accompanying notes are an integral part of these financial statements. 80

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City of San Luis Obispo, California
Statement of Cash Flows
Business-Type Activities - Enterprise Funds
For the Fiscal Year Ended June 30, 2025

Page 2 ends

Water Sewer Parking Transit Total
Operating income (loss) 6,870,429 $ 9,844,129 $ 1,933,654 $ (5,367,578) $ 13,280,634 $ Depreciation 3,369,279 2,636,961 732,015 475,162 7,213,417 Accounts receivable (68,447) 48,672 (119,661) - (139,436) Accounts payable (1,172,439) (1,825,325) 949,857 1,139,840 (908,067) 2,657 (10,921) 15,695 814 8,245
111,313 132,214 (66,315) 37,875 215,087
(195,669) (179,879) (63,850) (11,843) (451,241)
Net cash provided by (used in)
operating activities 8,917,123 $ 10,645,851 $ 3,381,395 $ (3,725,730) $ 19,218,639 $ Reconciliation of cash and investments to the balance sheet:

Cash and cash equivalents 43,651,887 $ 71,130,287 $ 4,397,096 $ 7,609,119 $ 126,788,389 $ - 278 22,180,644 - 22,180,922
Total cash and investments $ 43,651,887 $ 71,130,565 $ 26,577,740 $ 7,609,119 $ 148,969,311 Noncash investing, capital, and financing activities:

None
Enterprise Funds
Deferred OPEB and net OPEB
liability
Cash and investments held by fiscal
agent
Reconciliation of operating income
(loss) to net cash provided by (used
in) operating activities:

Adjustments to reconcile operating
income (loss) to net cash provided by
(used in) operating activities:

Change in assets, deferred outflows
of resources, liabilities, and deferred
inflows of resources:

Accrued salaries and
compensated absences
Deferred pensions and net
pension liability
The accompanying notes are an integral part of these financial statements. 81

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City of San Luis Obispo, California
Fiduciary Funds Financial Statements
For the Fiscal Year Ended June 30, 2025
Custodial funds are the only type of fiduciary funds maintained by the City. These are used to account for resources held for the benefit of parties outside the primary government. Fiduciary funds are not reflected in the governmentwide financial statements because the resources of those funds are not available to support the City’s own programs.

An example of a custodial fund may include donations provided to the City to be utilized for specific purposes as well as other funds held in trust of another entity to be utilized for a specific purpose. A specific example is the Hazardous Materials Task Force Fund, created to provide special fire services around the County, which is funded by multiple county and city agencies. The accounting used for fiduciary funds is much like that used for proprietary funds. The Custodial Funds are presented with the fund financial statements in the supplementary information section.
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Custodial Funds
Assets
Current assets:

Cash and investment $ 37,857,521
Accounts receivable 436,957
Accrued interest receivable 38,700
Capital assets, net of accumulated depreciation 687,561 Total assets 39,020,739
Liabilities
Accounts payable 244,834
Compensated absence 48,661
Accrued Salaries 18,397
Other liabilities 10,713
Total liabilities 322,605

NET POSITION
Restricted for
Individuals, organizations, and other governments 38,698,134 Total Net Position $ 38,698,134
City of San Luis Obispo, California
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2025
The accompanying notes are an integral part of these financial statements. 85

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Custodial Funds
ADDITIONS:

Charges for services $ 1,310,027
Other revenue 4,416,911
Use of money and property 925,053
Total additions 6,651,991
DEDUCTIONS:

Administration expenses 1,607,113
Contractual services 1,713,973
Materials and supplies 184,997
Use of developer deposits 742,929
Depreciation 63,283
Total deductions 4,312,295
Change in net position 2,339,696
NET POSITION:

Beginning of year 36,487,382
Restatements (128,944)
Beginning of year, as restated 36,358,438
End of year $ 38,698,134
City of San Luis Obispo, California
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
For the year ended June 30, 2025
The accompanying notes are an integral part of these financial statements. 86

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City of San Luis Obispo, California
Notes to the Financial Statements
June 30, 2025
Page

Note 1: Summary of Significant Accounting Policies 1
Description of the Reporting Entity 1
Government-wide and Fund Financial Statements 1
Measurement Focus, Basis of Accounting and Basis of Presentation 1 Assets, Liabilities, and Net Position or Fund Balance 3 Reconciliation of Government-wide and Fund Financial Statements 6 Budgets and Budgetary Accounting 6
Fair Value Measurements 8
Note 2: Cash and Investments 8
Funds with Fiscal Agent 8
Investments 9
Note 3: Property Taxes 13
Note 4: Loans Receivable 14
Note 5: Capital Assets 14
Note 6: Leases 16
Note 7: Long Term Debt 18
Summary of Long-Term Debt 18
Governmental Activities Summary: 19
Revenue Bonds 19
Subscription Based Information Technology Arrangements 21 Business-Type Activities Summary: 22
Revenue Bonds 22
Loans 23
Installment Sale Agreements 24
Special Assessment Debt Without City Commitment 24
Note 8: Pension Plans 25
Agent-Multiple Employer Plan 25
General Information about the Pension Plan 25
Net Pension Liability 26
Changes in the Net Pension Liability 28
Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions 29 Cost-Sharing Employer Plan 29
General Information about the Pension Plan 29
Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions 31 87

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City of San Luis Obispo, California
Notes to the Financial Statements
Table of Contents
June 30, 2025

Page 2 ends

Page
Payable to the Pension Plan 33
Note 9: Other Post-Employment Benefits (OPEB) 34
General Information about OPEB 34
Net OPEB Liability 35
Changes in the Net OPEB Liability 36
OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB 37 Payable to the OPEB Plan 38
Note 10: Deferred Compensation Plan 38
Note 11: Interfund Transactions 39
Note 12: Joint Ventures, Jointly Governed Organizations and Operating Agreements 40 Whale Rock Commission 40
San Luis Obispo Regional Transit Authority 41
San Luis Obispo Council of Governments 41
Nacimiento Water Supply Project 41
Note 13: Risk Management 42
California Joint Powers Insurance Authority 42
Self-Insurance Programs of the Authority 43
Adequacy of Protection 43
Self-Insurance 43
Note 14: Commitments and Contingencies 44
Litigation 44
Grant Awards 44
Note 14: Commitments and Contingencies (Continued) 45
Regional Transit Authority Pension Expense 45
Note 15: Construction and Other Significant Commitments 45 Note 16: Fund Balance Deficiency 45
Note 17: New Accounting Standards 45
Accounting Standards Adopted 45
Note 18: Prior Period Adjustments 46
88

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San Luis Obispo City CouncilJanuary 13, 2026

San Luis Obispo City Council
January 13, 2026