San Luis Obispo City Council
June 2, 2026

submitted, the maximum length of the proposal may be expanded proportionately by the number of alternatives submitted.

CONTRACT AWARD AND EXECUTION

10. Proposal Retention and Award. The City reserves the right to retain all proposals for a period of 60 days for examination and comparison. The City also reserves the right to waive non substantial irregularities in any proposal, to reject any or all proposals, to reject or delete one part of a proposal and accept the other, except to the extent that proposals are qualified by specific limitations. See the "Special Terms and Conditions" in Section C of these specifications for proposal evaluation and contract award criteria.

11. Competency and Responsibility of Consultant. The City reserves full discretion to determine the competence and responsibility, professionally and/or financially, of Consultants. Consultants will provide, in a timely manner, all information that the City deems necessary to make such a decision.

12. Contract Requirement. The Consultant to whom award is made (Consultant) shall execute a written contract with the City within ten (10) calendar days after notice of the award has been sent by mail to it at the address given in its proposal. The contract shall be made in the form adopted by the City and incorporated in these specifications.

13. Insurance Requirements. The Consultant shall provide proof of insurance in the form, coverages and amounts specified in Section F of these specifications within 10 (ten) calendar days after notice of contract award as a precondition to contract execution.

14. Business License & Tax. The Consultant must have a valid City of San Luis Obispo business license and tax certificate before execution of the contract. Additional information regarding the City's business license and tax program may be obtained by calling (805) 781-7134.

15. Failure to Accept Contract. The following will occur if the Consultant to whom the award is made (Consultant) fails to enter into the contract: the award will be annulled; any bid security will be forfeited in accordance with the special terms and conditions if a Consultant's bond or security is required; and an award may be made to the next highest ranked Consultant with whom a responsible compensation is negotiated, who shall fulfill every stipulation as if it were the party to whom the first award was made.

C. PROPOSAL CONTENT AND SELECTION PROCESS

PROPOSAL CONTENT

1. Submittal Forms
a. Acknowledgement
b. Insurance Certificate
c. References
d. Statement of Past Disqualifications

2. Qualifications
a. Experience of your firm in performing similar services b. Experience of the staff to be assigned to the project in performing similar services c. Redundancy in the company of staff experienced in this type of work d. Resumes of the individuals who would be assigned to this project, including any known sub-consultants e. Statement and explanation of any instances where your firm has been removed from a project or disqualified from proposing on a project
f. Standard hourly billing rates for consultant and sub-consultant staff g. Detailed list of standard services available directly from the company

3. Work Program
a. Description of your approach to completing the work
b. Services or data anticipated to be provided by the City c. Any other information that would assist us in making this contract award decision

4. Proposal Length and Copies
a. Proposals should be the minimum length to provide the required information. Charts and other short form approaches to conveying information are encouraged.
b. 3 copies of the proposal must be submitted.
c. 1 PDF format electronic copy must be submitted.

PROPOSAL EVALUATION AND CONSULTANT SELECTION
Proposals will be evaluated by a review committee and contract award process as follows:

1. Written Proposal Review/Finalist Candidate Selection Proposals will be reviewed by a selection committee and ranked in accordance with the responsiveness, qualifications and understanding of the Consultant relative to these specification requirements. A group of finalist (short list) may be selected for follow-up requests for information or interviews before a final ranking is determined.

Contract award will be based on a combination of factors that represent the best overall value for completing the work scope as determined by the City. The proposals will be ranked based upon:
- Responsiveness and understanding of the project, 40%
- Previous project experience, 20%
- Proposed timeframe and schedule, 20%
- Proposed project cost, 20%

2. Proposal Review and Award Schedule
The following is an outline of the anticipated schedule for proposal review and contract award:

Issue RFP.................................................................... 5/21/26 Receive proposals ...................................................6/17/2026 Complete proposal evaluation................................... 7/1/2026 Award contract........................................................... 7/8/2026 Execute contract.......................................................... 7/15/26

D. FORM OF AGREEMENT

AGREEMENT
THIS AGREEMENT is made and entered into in the City of San Luis Obispo on _____________ by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, hereinafter referred to as City, and [CONSULTANT’S NAME IN CAPITAL LETTERS], hereinafter referred to as Consultant.

W I T N E S S E T H
WHEREAS, on [DATE], requested proposals for South Broad Complete Street Planning and Demonstration Project per Specification No. 2001070.

WHEREAS, pursuant to said request, Consultant submitted a proposal that was accepted by City for said services.

NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the parties hereto agree as follows:

DELETE UNNECESSARY SECTIONS

1. Contract Term. The term of this agreement shall be from the date this Agreement is made and entered, as first written above, until the completion of services identified in this agreement.

2. Work Delays. Should the Consultant be obstructed or delayed in the work required to be done hereunder by changes in the work or by any default, act, or omission of the City, or by strikes, fire, earthquake, or any other Act of God, or by the inability to obtain materials, equipment, or labor due to federal government restrictions arising out of defense or war programs, then the time of completion may, at the City's sole option, be extended for such periods as may be agreed upon by the City and the Consultant. In the event that there is insufficient time to grant such extensions prior to the completion date of the contract, the City may, at the time of acceptance of the work, waive liquidated damages that may have accrued for failure to complete on time, due to any of the above, after hearing evidence as to the reasons for such delay, and making a finding as to the causes of same.

3. Termination for Cause. If, during the term of the contract, the City determines that the Consultant is not faithfully abiding by any term or condition contained herein, the City may notify the Consultant in writing of such defect or failure to perform. This notice must give the Consultant a 10 (ten) calendar day notice of time thereafter in which to perform said work or cure the deficiency.

If the Consultant has not performed the work or cured the deficiency within the ten days specified in the notice, such shall constitute a breach of the contract and the City may terminate the contract immediately by written notice to the Consultant to said effect. Thereafter, neither party shall have any further duties, obligations, responsibilities, or rights under the contract except, however, any and all obligations of the Consultant's surety shall remain in full force and effect, and shall not be extinguished, reduced, or in any manner waived by the termination thereof.

In said event, the Consultant shall be entitled to the reasonable value of its services performed from the beginning date in which the breach occurs up to the day it received the City's Notice of Termination, minus any offset from such payment representing the City's damages from such breach. "Reasonable value" includes fees or charges for goods or services as of the last milestone or task satisfactorily delivered or completed by the Consultant as may be set forth in the Agreement payment schedule; compensation for any other work, services or goods performed or provided by the Consultant shall be based solely on the City's assessment of the value of the work-in-progress in completing the overall workscope.

The City reserves the right to delay any such payment until completion or confirmed abandonment of the project, as may be determined in the City's sole discretion, so as to permit a full and complete accounting of costs. In no event, however, shall the Consultant be entitled to receive in excess of the compensation quoted in its proposal.

4. Termination for Convenience. The City also reserves the right to terminate the contract for convenience, providing a 30 (thirty) calendar day notice, at any time upon a determination by the Director that termination of the contract is in the best interest of the City. Upon termination notice from the City, Consultant must, unless otherwise directed, cease work and follow the City’s directions as to work in progress and finished goods. For termination of any services pursuant to this Agreement, the City’s liability will be the lesser of a reasonable price for the services rendered prior to termination.

5. Ability to Perform. The Consultant warrants that it possesses, or has arranged through subcontracts, all capital and other equipment, labor, materials, and licenses necessary to carry out and complete the work hereunder in compliance with any and all applicable federal, state, county, city, and special district laws, ordinances, and regulations.

6. Sub-contract Provisions. No portion of the work pertinent to this contract shall be subcontracted without written authorization by the City, except that which is expressly identified in the Consultant’s proposal. Any substitution of sub-consultants must be approved in writing by the City. For any sub-contract for services in excess of $25,000, the subcontract shall contain all provisions of this agreement.

7. Contract Assignment. The Consultant shall not assign, transfer, convey or otherwise dispose of the contract, or its right, title or interest, or its power to execute such a contract to any individual or business entity of any kind without the previous written consent of the City.

8. Inspection. The Consultant shall furnish City with every reasonable opportunity for City to ascertain that the services of the Consultant are being performed in accordance with the requirements and intentions of this contract. All work done and all materials furnished, if any, shall be subject to the City's inspection and approval. The inspection of such work shall not relieve Consultant of any of its obligations to fulfill its contract requirements.

9. Record Retention and Audit. For the purpose of determining compliance with various laws and regulations as well as performance of the contract, the Consultant and sub-consultants shall maintain all books, documents, papers, accounting records and other evidence pertaining to the performance of the contract, including but not limited to the cost of administering the contract. Materials shall be made available at their respective offices at all reasonable times during the contract period and for three years from the date of final payment under the contract. Authorized representatives of the City shall have the option of inspecting and/or auditing all records. For Federally funded projects, access to records shall also include authorized representatives of the State and Federal government. Copies shall be furnished if requested.

10. Conflict of Interest. The Consultant shall disclose any financial, business, or other relationship with the City that may have an impact upon the outcome of this contract, or any ensuing City construction project. The Consultant shall also list current clients who may have a financial interest in the outcome of this contract, or any ensuing City construction project which will follow. The Consultant staff shall provide a Conflict of Interest Statement where determined necessary by the City.

The Consultant covenants that it presently has no interest, and shall not acquire any interest—direct, indirect or otherwise—that would conflict in any manner or degree with the performance of the work hereunder. The Consultant further covenants that, in the performance of this work, no sub-consultant or person having such an interest shall be employed. The Consultant certifies that no one who has or will have any financial interest in performing this work is an officer or employee of the City. It is hereby expressly agreed that, in the performance of the work hereunder, the Consultant shall at all times be deemed an independent Consultant and not an agent or employee of the City.

11. Rebates, Kickbacks or Other Unlawful Consideration. The Consultant warrants that this contract was not obtained or secured through rebates, kickbacks or other unlawful consideration, either promised or paid to any City employee. For breach or violation of the warranty, the City shall have the right in its discretion; to terminate the contract without liability; to pay only for the value of the work actually performed; to deduct from the contract price; or otherwise recover the full amount of such rebate, kickback or other unlawful consideration.

12. Covenant Against Contingent Fees. The Consultant warrants by execution of this contract that no person or selling agency has been employed, or retained, to solicit or secure this contract upon an agreement or understanding, for a commission, percentage, brokerage, or contingent fee, excepting bona fide employees or bona fide established commercial or selling agencies maintained by the Consultant for the purpose of securing business. For breach or violation of this warranty, the City has the right to annul this contract without liability; pay only for the value of the work actually performed, or in its discretion, to deduct from the contract price or consideration, or otherwise recover the full amount of such commission, percentage, brokerage, or contingent fee.

13. Compliance with Laws and Wage Rates. The Consultant shall keep itself fully informed of and shall observe and comply with all applicable state and federal laws and county and City of San Luis Obispo ordinances, regulations and adopted codes during its performance of the work. This includes compliance with prevailing wage rates and their payment in accordance with California Labor Code. For purposed of this paragraph, “construction” includes work performed during the design and preconstruction phases of construction, including but not limited to, inspection and land surveying work.

14. Payment of Taxes. The contract prices shall include full compensation for all taxes that the Consultant is required to pay within the scope of Consultant’s performance of the contracted services.

15. Permits, Licenses and Filing Fees. The Consultant shall procure all permits and licenses, pay all charges and fees, and file all notices as they pertain to the completion of the Consultant’s work. The City will pay all application fees for permits required for the completion of the project including building and regulatory permit application fees. Consultant will provide a 10 day notice for the City to issue a check.

16. Safety Provisions. The Consultant shall conform to the rules and regulations pertaining to safety established by OSHA and the California Division of Industrial Safety.

17. Public and Employee Safety. Whenever the Consultant's operations create a condition hazardous to the public or City employees, it shall, at its expense and without cost to the City, furnish, erect and maintain such fences, temporary railings, barricades, lights, signs and other devices and take such other protective measures as are necessary to prevent accidents or damage or injury to the public and employees.

18. Preservation of City Property. The Consultant shall provide and install suitable safeguards, approved by the City, to protect City property from injury or damage. If City property is injured or damaged resulting from the Consultant's operations, it shall be replaced or restored at the Consultant's expense. The facilities shall be replaced or restored to a condition as good as when the Consultant began work.

19. Immigration Act of 1986. The Consultant warrants on behalf of itself and all sub-consultants engaged for the performance of this work that only persons authorized to work in the United States pursuant to the Immigration Reform and Control Act of 1986 and other applicable laws shall be employed in the performance of the work hereunder.

20. Consultant Non-Discrimination. In the award of subcontracts or in performance of this work, the Consultant agrees that it will not engage in, nor permit such sub-consultants as it may employ, to engage in discrimination in employment of persons on any basis prohibited by State or Federal law.

21. Accuracy of Specifications. The specifications for this project are believed by the City to be accurate and to contain no affirmative misrepresentation or any concealment of fact. Consultants are cautioned to undertake an independent analysis of any test results in the specifications, as City does not guaranty the accuracy of its interpretation of test results contained in the specifications package. In preparing its proposal, the Consultant and all sub-consultants named in its proposal shall bear sole responsibility for proposal preparation errors resulting from any misstatements or omissions in the specifications that could easily have been ascertained by examining either the project site or accurate test data in the City's possession. Although the effect of ambiguities or defects in the specifications will be as determined by law, any patent ambiguity or defect shall give rise to a duty of Consultant to inquire prior to proposal submittal. Failure to so inquire shall cause any such ambiguity or defect to be construed against the Consultant. An ambiguity or defect shall be considered patent if it is of such a nature that the Consultant, assuming reasonable skill, ability and diligence on its part, knew or should have known of the existence of the ambiguity or defect. Furthermore,

failure of the Consultant or sub-consultants to notify City in writing of specification defects or ambiguities prior to proposal submittal shall waive any right to assert said defects or ambiguities subsequent to submittal of the proposal.

To the extent that these specifications constitute performance specifications, the City shall not be liable for costs incurred by the successful Consultant to achieve the project’s objective or standard beyond the amounts provided therefor in the proposal.

In the event that, after awarding the contract, any dispute arises as a result of any actual or alleged ambiguity or defect in the specifications, or any other matter whatsoever, Consultant shall immediately notify the City in writing, and the Consultant and all sub-consultants shall continue to perform, irrespective of whether or not the ambiguity or defect is major, material, minor or trivial, and irrespective of whether or not a change order, time extension, or additional compensation has been granted by City. Failure to provide the hereinbefore described written notice within one (1) working day of Consultant's becoming aware of the facts giving rise to the dispute shall constitute a waiver of the right to assert the causative role of the defect or ambiguity in the plans or specifications concerning the dispute.

22. Hold Harmless and Indemnification.
(a) Non-design, non-construction Professional Services: To the fullest extent permitted by law (including, but not limited to California Civil Code Sections 2782 and 2782.8), Consultant shall indemnify, defend, and hold harmless the City, and its elected officials, officers, employees, volunteers, and agents (“City Indemnitees”), from and against any and all causes of action, claims, liabilities, obligations, judgments, or damages, including reasonable legal counsels’ fees and costs of litigation (“claims”), arising out of the Consultant’s performance or Consultant’s failure to perform its obligations under this Agreement or out of the operations conducted by Consultant, including the City’s active or passive negligence, except for such loss or damage arising from the sole negligence or willful misconduct of the City. In the event the City Indemnitees are made a party to any action, lawsuit, or other adversarial proceeding arising from Consultant’s performance of this Agreement, the Consultant shall provide a defense to the City Indemnitees or at the City’s option, reimburse the City Indemnitees their costs of defense, including reasonable legal fees, incurred in defense of such claims. (b) Non-design, construction Professional Services: To the extent the Scope of Services involve a “construction contract” as that phrase is used in Civil Code Section 2783, this paragraph shall apply in place of paragraph A. To the fullest extent permitted by law (including, but not limited to California Civil Code Sections 2782 and 2782.8), Consultant shall indemnify, defend, and hold harmless the City, and its elected officials, officers, employees, volunteers, and agents (“City Indemnitees”), from and against any and all causes of action, claims, liabilities, obligations, judgments, or damages, including reasonable legal counsels’ fees and costs of litigation (“claims”), arising out of the Consultant’s performance or Consultant’s failure to perform its obligations under this Agreement or out of the operations conducted by Consultant, except for such loss or damage arising from the active negligence, sole negligence or willful misconduct of the City. In the event the City Indemnitees are made a party to any action, lawsuit, or other adversarial proceeding arising from Consultant’s performance of this Agreement, the Consultant shall provide a defense to the City Indemnitees or at the City’s option, reimburse the City Indemnitees their costs of defense, including reasonable legal fees, incurred in defense of such claims. (c) Design Professional Services: In the event Consultant is a “design professional”, and the Scope of Services require Consultant to provide “design professional services” as those phrases are used in Civil Code Section 2782.8, this paragraph shall apply in place of paragraphs A or B. To the fullest extent permitted by law (including, but not limited to California Civil Code Sections 2782 and 2782.8) Consultant shall indemnify, defend and hold harmless the City and its elected officials, officers, employees, volunteers and agents (“City Indemnitees”), from and against all claims, damages, injuries, losses, and expenses including costs, attorney fees, expert consultant and expert witness fees arising out of, pertaining to or relating to, the negligence, recklessness or willful misconduct of Consultant, except to the extent caused by the sole negligence, active negligence or willful misconduct of the City. Negligence, recklessness or willful misconduct of any subcontractor employed by Consultant shall be conclusively deemed to be the negligence, recklessness or willful misconduct of Consultant unless adequately corrected by Consultant. In the event the City Indemnitees are made a party to any action, lawsuit, or

other adversarial proceeding arising from Consultant’s performance of this Agreement, the Consultant shall provide a defense to the City Indemnitees or at the City’s option, reimburse the City Indemnitees their costs of defense, including reasonable legal fees, incurred in defense of such claims. In no event shall the cost to defend charged to Consultant under this paragraph exceed Consultant’s proportionate percentage of fault. However, notwithstanding the previous sentence, in the event one or more defendants is unable to pay its share of defense costs due to bankruptcy or dissolution of the business, Consultant shall meet and confer with other parties regarding unpaid defense costs.

(d) The review, acceptance or approval of the Consultant’s work or work product by any indemnified party shall not affect, relieve or reduce the Consultant’s indemnification or defense obligations. This Section survives completion of the services or the termination of this contract. The provisions of this Section are not limited by and do not affect the provisions of this contract relating to insurance. Contractor’s indemnification obligations under this section extend to any claims arising out of or related to the negligence, recklessness, or willful misconduct of any sub-consultants/ subcontractors.

23. Non-Exclusive Contract. The City reserves the right to contract for the services listed in this proposal from other consultants during the contract term.

24. Standards. Documents shall conform to City Standards and City furnished templates shall be used.

25. Consultant Endorsement. Technical reports, plans and specifications shall be stamped and signed by the Consultant where required.

26. Required Deliverable Products and Revisions. The Consultant will be required to provide documents addressing all elements of the workscope. Plans shall be prepared using City’s standardized title blocks and coversheets. Draft plans may be submitted for review using either the full 24x36, 22x34, or a reduced 11x17 format. Consultant shall ensure that drawings and notes are clearly legible if using the reduced format. Specifications and bid documents shall conform to standard City formats unless authorized. The City’s current Standard Specifications and Engineering Standards must be incorporated where applicable.

City staff will review any documents or materials provided by the Consultant and, where necessary, the Consultant will respond to staff comments and make such changes as deemed appropriate. Submittals shall include the previous marked up submittal (returned to the Consultant) to assist in the second review. Changes shall be made as requested or a notation made as to why the change is not appropriate. 2 copies of the draft preliminary reports, technical studies and 50% plans and estimate 1 copy of the final preliminary reports, technical studies plus markups 3 copies of the 90% plans, specifications and estimate plus 50% markups 1 copy of the 100% plans, specifications and estimate plus 90% markups 1 copy of the final plans, specifications and estimates plus 100% markups 1 copy of the final record drawings after construction
Draft reports and plan submittals shall be submitted as paper copies.

Final documents shall be submitted as camera-ready original, unbound, each page printed on only one side, including any original graphics in place and scaled to size, ready for reproduction AND one electronic copy submitted in Adobe Acrobat format including all original stamps and signatures.

In the event the City will be compiling the final specifications, incorporating the Consultant’s work, the final specifications will also be required to be submitted in Microsoft Word format.

In the event the City will be completing the Record Drawings, the final plans will also be required to be submitted in AutoCAD.

27. Ownership of Materials. Upon completion of all work under this contract, ownership and title to all reports, documents, plans (including PDFs and AutoCAD files), specifications, and estimates produced as part of this contract will automatically be vested in the city and no further agreement will be necessary to transfer

ownership to the City. The Consultant shall furnish the City all necessary copies of data needed to complete the review and approval process.

It is understood and agreed that all calculations, drawings and specifications, whether in hard copy or machine readable form, are intended for one-time use in the construction of the project for which this contract has been entered into.

The Consultant is not liable for claims, liabilities, or losses arising out of, or connected with the modification, or misuse by the City of the machine-readable information and data provided by the Consultant under this agreement. Further, the Consultant is not liable for claims, liabilities, or losses arising out of, or connected with any use by City of the project documentation on other projects, except such use as may be authorized in writing by the Consultant.

28. Release of Reports and Information. Any reports, information, data, or other material given to, prepared by or assembled by the Consultant as part of the work or services under these specifications shall be the property of City and shall not be made available to any individual or organization by the Consultant without the prior written approval of the City.

The Consultant shall not issue any news release or public relations item of any nature, whatsoever, regarding work performed or to be performed under this contract without prior review of the contents thereof by the City and receipt of the City’s written permission.

29. Copies of Reports and Information. If the City requests additional copies of reports, drawings, specifications, or any other material in addition to what the Consultant is required to furnish in limited quantities as part of the work or services under these specifications, the Consultant shall provide such additional copies as are requested, and City shall compensate the Consultant for the costs of duplicating of such copies at the Consultant's direct expense.

30. Attendance at Meetings and Hearings. As part of the workscope and included in the contract price is attendance by the Consultant at up to 1 public meeting to present and discuss its findings and recommendations. Consultant shall attend as many "working" meetings with staff as necessary in performing workscope tasks.

31. Requests for Review. The Consultant shall respond to all requests for submittal review or contractor RFI’s within two weeks of receipt of the information from the City.

32. Project Proposal Submittal. Upon completion of the project scoping meeting, the Consultant shall submit a proposed workscope, compensation and schedule within 10 working days. The cost proposal shall include all costs including miscellaneous direct cost items.

33. Consultant Invoices. The Consultant shall deliver a monthly invoice to the City, itemized by project work phase or, in the case of on-call contracts, by project title. Invoice must include a breakdown of hours billed and miscellaneous charges and any sub-consultant invoices, similarly broken down, as supporting detail. For purposes of City fiscal year auditing, invoices for work through June 30th of any year must be delivered to the City by the second full week of July. If the June invoice is not received, the consult must combine work completed in June and July into one July invoice for payment.

34. Payment. For providing services as specified in this Agreement, City will pay and Consultant shall receive therefore compensation in a total sum not to exceed the individual agreed upon project fee. Should the Consultant’s designs, drawings or specifications contain errors or deficiencies, the Consultant shall be required to correct them at no increase in cost to the City.

For on-call services, the City will pay and the Consultant shall receive compensation as agreed to on a project by project basis.

The Consultant shall be reimbursed for hours worked at the hourly rates set forth in Consultant’s proposal attached to this agreement. Hourly rates include direct salary costs, employee benefits, overhead and fee. In addition, the Consultant shall be reimbursed for direct costs other than salary and vehicle cost that have been

identified and are attached to this agreement. The Consultant’s personnel shall be reimbursed for per diem expenses at a rate not to exceed that currently authorized for State employees under State Department of Personnel Administration rules.

35. Payment Terms. The City's payment terms are 30 days from the receipt and approval by the City of an original invoice and acceptance by the City of the materials, supplies, equipment or services provided by the Consultant (Net 30).

36. Resolution of Disputes. Any dispute, other than audit, concerning a question of fact arising under this contract that is not disposed of by agreement shall be decided by a committee consisting of the City’s Project Manager and the City Director of Public Works, who may consider written or verbal information submitted by the Consultant. Not later than thirty days after completion of all deliverables necessary to complete the plans, specifications and estimate, the Consultant may request review by the City Council of unresolved claims or disputes, other than audit, in accordance with Chapter 1.20 Appeals Procedure of the Municipal Code.

Any dispute concerning a question of fact arising under an audit of this contract that is not disposed of by agreement, shall be reviewed by the City’s Finance Director. Not later than 30 days after issuance of the final audit report, the Consultant may request a review by the City’s Chief Fiscal Officer of unresolved audit issues. The request for review must be submitted in writing.

Neither the pendency of a dispute, nor its consideration by the City will excuse the consultant from full and timely performance in accordance with the terms of this contract.

37. Agreement Parties.

City: Bryan Wheeler
City of San Luis Obispo
919 Palm Street
San Luis Obispo, CA 93401
Consultant:

All written notices to the parties hereto shall be sent by United States mail, postage prepaid by registered or certified mail addressed as shown above.

38. Incorporation by Reference. City Request for Proposals, Specification No. 2001070 and Consultant's proposal dated XXXX, 2025 is attached to and made a part of this Agreement. Should there be any conflict between terms set forth in the City Request for Proposals Specification No. 2001070 and Consultant’s proposal dated XXXX, 2025, the terms in this agreement and City Request for Proposals Specification No. 2001070 will govern.

39. Amendments. Any amendment, modification or variation from the terms of this Agreement shall be in writing and shall be effective only upon approval by the City Engineer.

40. Working Out of Scope. If, at any time during the project, the consultant is directed to do work by persons other than the City Project Manager and the Consultant believes that the work is outside of the scope of the original contract, the Consultant shall inform the Project Manager immediately. If the Project Manager and Consultant both agree that the work is outside of the project scope and is necessary to the successful completion of the project, then a fee will be established for such work based on Consultant's hourly billing rates or a lump sum price agreed upon between the City and the Consultant. Any extra work performed by Consultant without prior written approval from the City Project Manager shall be at Consultant's own expense.

41. Complete Agreement. This written agreement, including all writings specifically incorporated herein by reference, shall constitute the complete agreement between the parties hereto. No oral agreement, understanding or representation not reduced to writing and specifically incorporated herein shall be of any force or effect, nor shall any such oral agreement, understanding or representation be binding upon the parties hereto. For and in consideration of the payments and agreements hereinbefore mentioned to be

made and performed by City, Consultant agrees with City to do everything required by this Agreement, the said specification and incorporated documents.

42. Governing Law. Any action arising out of this Agreement shall be brought in the Superior Court of San Luis Obispo County, California, regardless of where else venue may lie. The validity, interpretation, construction and performance of this Agreement, and all acts and transactions pursuant hereto and the rights and obligations of the Parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of California, without giving effect to principles of conflicts of law.

43. Authority to Execute Agreement. Both City and Consultant do covenant that each individual executing this agreement on behalf of each party is a person duly authorized and empowered to execute Agreements for such party.

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

CITY OF SAN LUIS OBISPO: CONSULTANT:
___________________________________
Name of Company
___________________________________
Whitney McDonald, City Manager By:

Name of CAO/President
Its: CAO/President
APPROVED AS TO FORM:
___________________________________
Christine Dietrick, City Attorney
(2nd signature required if Corporation):
________________________________
By:

Name of Corporate Officer
Its: ____________________

E. PROPOSAL SUBMITTAL FORMS
(Note: These forms are available in Word format – Request via email)

ACKNOWLEDGEMENT
The undersigned declares that she or he:
 Has carefully examined Specification No. 2001070
 Is thoroughly familiar with its content
 Is authorized to represent the proposing firm; and
 Agrees to perform the work as set forth in the specification and this proposal.

Firm Name and Address:

Contact Name:

Email: Fax: Phone:

Signature of Authorized Representative: Date:

INSURANCE CERTIFICATE
Insurance Company’s A.M. Best Rating
Certificate of insurance attached

REFERENCES
Number of years engaged in providing the services included within the scope of the specifications under the present business name: _________
Provide a short description of the last three contracts performed by your firm that demonstrate your ability to provide the services included with the scope of the specifications. Attach additional detailed information in your proposal.

The City reserves the right to contact each of the references listed for additional information regarding your firm's qualifications.

Reference No. 1
Customer Name
Contact Individual
Telephone & Email
Street Address
City, State, Zip Code
Date of Services
Contract Amount
Description of Services
Project Outcome
Reference No. 2
Customer Name
Contact Individual
Telephone & Email
Street Address
City, State, Zip Code
Date of Services
Contract Amount
Description of Services
Project Outcome

Reference No. 3
Customer Name
Contact Individual
Telephone & Email
Street Address
City, State, Zip Code
Date of Services
Contract Amount
Description of Services
Project Outcome

STATEMENT OF PAST CONTRACT DISQUALIFICATIONS
The Consultant shall state whether it or any of its officers or employees who have a proprietary interest in it, has ever been disqualified, removed, or otherwise prevented from bidding on, or completing a federal, state, or local government project because of the violation of law, a safety regulation, or for any other reason, including but not limited to financial difficulties, project delays, or disputes regarding work or product quality, and if so to explain the circumstances.

Do you have any disqualification as described in the above paragraph to declare? Yes No If yes, explain the circumstances.

Executed on ______________________at _______________________________________ under penalty of perjury of the laws of the State of California, that the foregoing is true and correct. ______________________________________
Signature of Authorized Consultant Representative

E. INSURANCE REQUIREMENTS: Consultant Services
The Consultant shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder by the Consultant, its agents, representatives, employees or sub-consultants.

Minimum Scope of Insurance. Coverage shall be at least as broad as:

1. Insurance Services Office Commercial General Liability coverage (occurrence form CG 20 10 Prior to 1993 or CG 20 10 07 04 with CG 20 37 10 01 or the exact equivalent as determined by the City).

2. Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile Liability, code 1 (any auto).

3. Workers' Compensation insurance as required by the State of California and Employer's Liability Insurance.

4. Errors and Omissions Liability insurance as appropriate to the consultant's profession.

Minimum Limits of Insurance. Consultant shall maintain limits no less than:

1. General Liability: $1,000,000 per occurrence for bodily injury, personal injury and property damage. If Commercial General Liability or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to this project/location or the general aggregate limit shall be twice the required occurrence limit.

2. Automobile Liability: $1,000,000 per accident for bodily injury and property damage.

3. Employer's Liability: $1,000,000 per accident for bodily injury or disease.

4. Errors and Omissions Liability: $1,000,000 per occurrence.

Deductibles and Self-Insured Retentions. Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either: the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, officials, employees and volunteers; or the Consultant shall procure a bond guaranteeing payment of losses and related investigations, claim administration and defense expenses.

Other Insurance Provisions. The general liability and automobile liability policies are to contain, or be endorsed to contain, the following provisions:

1. The City, its officers, officials, employees, agents and volunteers are to be covered as insureds as respects:
liability arising out of activities performed by or on behalf of the Consultant; products and completed operations of the Consultant; premises owned, occupied or used by the Consultant; or automobiles owned, leased, hired or borrowed by the Consultant. The coverage shall contain no special limitations on the scope of protection afforded to the City, its officers, official, employees, agents or volunteers.

2. For any claims related to this project, the Consultant's insurance coverage shall be primary insurance as respects the City, its officers, officials, employees, agents and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees, agents or volunteers shall be excess of the Consultant's insurance and shall not contribute with it.

3. The Consultant's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability.

4. Each insurance policy required by this clause shall be endorsed to state that coverage shall not be suspended, voided, canceled by either party, reduced in coverage or in limits except after thirty (30) days prior written notice by certified mail, return receipt requested, has been given to the City. The Consultant agrees to notify the City in the event that the policy is suspended, voided or reduced in coverage or limits. A minimum of 30 days prior written notice by certified mail, return receipt requested, will be provided.

Acceptability of Insurers. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A:VII.

Verification of Coverage. Consultant shall furnish the City with a certificate of insurance showing maintenance of the required insurance coverage. Original endorsements effecting general liability and automobile liability coverage required by this clause must also be provided. The endorsements are to be signed by a person authorized by that insurer to bind coverage on its behalf. All endorsements are to be received and approved by the City before work commences.

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1. Federal Award No. 2. Effective Date
See No. 16 Below

3. Assistance
Listings No.

20.939

4. Award To
City of San Luis Obispo
990 Palm Street
San Luis Obispo, CA 93401
Unique Entity Id.: VCUGK243NQ71
TIN No.: 95-6000781

5. Sponsoring Office
U.S. Department of Transportation
Federal Highway Administration
Office of Safety
1200 New Jersey Avenue, SE
HSSA-1, Mail Drop E71-117
Washington, DC 20590

6. Period of Performance
June 1, 2025 – May 31, 2030

7. Total Amount
Federal Share:

Recipient Share:

Other Federal Funds:

Other Funds:

Total:
$400,000
$100,000
$0
$0
$500,000

8. Type of Agreement
Grant

9. Authority
Section 24112 of the Infrastructure Investment
and Jobs Act (IIJA, Pub. L. 117–58, November
15, 2021)

10. Procurement Request No.
[insert PR Number]

11. Federal Funds Obligated
Base Phase (Pre-NEPA): $120,000

12. Submit Payment Requests To
See Article 5.

14. Description of the Project
The City of San Luis Obispo Planning & Demonstration Project will better inform future roadway design decisions along the South Broad Street Corridor and other high-speed arterial streets with more focused analysis and a demonstration project to test the effectiveness of roadway safety strategies.

This Base Phase (Pre-NEPA) of the phased grant agreement encompasses all supplemental planning activities, preliminary design of the demonstration project, and NEPA coordination.

13. Accounting and Appropriations Data
[insert Data]
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RECIPIENT

15. Signature of Person Authorized to Sign
___________________________________
Signature Date
Name: Whitney McDonald
Title: City Manager

FEDERAL HIGHWAY ADMINISTRATION

16. Signature of Agreement Officer
______________________________________
Signature Date
Name:

Title: Agreement Officer
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U.S. DEPARTMENT OF TRANSPORTATION

GRANT AGREEMENT UNDER THE
FISCAL YEAR 2024 SAFE STREETS AND ROADS FOR ALL GRANT PROGRAM This agreement is between the United States Department of Transportation’s (the “USDOT”) Federal Highway Administration (the “FHWA”) and the City of San Luis Obispo (the “Recipient”).

This agreement reflects the selection of the Recipient to receive a Safe Streets and Roads for All (“SS4A”) Grant for the City of San Luis Obispo Planning & Demonstration Project.

The parties therefore agree to the following:

ARTICLE 1

GENERAL TERMS AND CONDITIONS

1.1 General Terms and Conditions.
(a) In this agreement, “General Terms and Conditions” means the content of the document titled “General Terms and Conditions Under the Fiscal Year 2024 Safe Streets and Roads for All (“SS4A”) Grant Program,”, which is available at https://www.transportation.gov/grants/ss4a/grant-agreements under “Fiscal Year 2024.” Articles 7–30 are in the General Terms and Conditions. The General Terms and Conditions are part of this agreement.
(b) The Recipient acknowledges that it has knowledge of the General Terms and Conditions. Recipient also states that it is required to comply with all applicable Federal laws and regulations including, but not limited to, the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR part 200); National Environmental Policy Act (NEPA) (42 U.S.C. § 4321 et seq.); and Build America, Buy America Act (IIJA, div. G §§ 70901-27). (c) The Recipient acknowledges that the General Terms and Conditions impose obligations on the Recipient and that the Recipient’s non-compliance with the General Terms and Conditions may result in remedial action, termination of the SS4A Grant, disallowing costs incurred for the Project, requiring the Recipient to refund to the FHWA the SS4A Grant, and reporting the non-compliance in the Federal-governmentwide integrity and performance system.

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ARTICLE 2

APPLICATION, PROJECT, AND AWARD

2.1 Application.

Application Title: City of San Luis Obispo Planning & Demonstration Project Application Date: 05/16/2024

2.2 Award Amount.

SS4A Grant Amount: $400,000

2.3 Federal Obligation Information.

Federal Obligation Type: Multiple
Obligation Condition Table
Phase the Project Allocation of the
SS4A Grant
Obligation Condition
Base Phase: PreNEPA $120,000
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Obligation Condition Table
Phase the Project Allocation of the
SS4A Grant
Obligation Condition
Option Phase 1: Final
Design
$32,000 The Recipient shall not expend any funds
(Federal or non-Federal) for, seek reimbursement
of eligible costs, or otherwise begin any part of
the final design and construction of an
Implementation Project unless and until:
(1) The requirements of the National
Environmental Policy Act (42 U.S.C. § 4321
et seq.) (“NEPA”), Section 106 of the
National Historic Preservation Act (16 U.S.C.
§ 470f) (“NHPA”), and any other applicable
environmental laws and regulations have been
met; and
(2) FHWA, or a State with applicable NEPA
Assignment authority, has approved the
NEPA document for the Project and provided
the Recipient with a written notice that the
environmental review process is complete;
and
(3) FHWA has obligated additional funds for this
phase and notified the Recipient in writing
that the Recipient may proceed to the next
activity after NEPA approval, and the
Recipient has acknowledged receipt in writing
of FHWA’s notification. Recipient shall not
proceed with any such activities until (2) and
(3) as described in this section are met. Costs
that are incurred before (2) and (3) as
described in this section are met are not
allowable costs under this agreement.

Extent of activities that are permissible before
NEPA is complete are those activities constituting
“preliminary design” as specified in FHWA Order
6640.1A.

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Obligation Condition Table
Phase the Project Allocation of the
SS4A Grant
Obligation Condition
Option Phase 2:

Construction
$248,000 The Recipient shall not expend any funds
(Federal or non-Federal) for, seek reimbursement
of eligible costs, or otherwise begin any part of
the construction or final design and construction
of an Implementation Project unless and until:
(1) The requirements of the National
Environmental Policy Act (42 U.S.C. § 4321 et
seq.) (“NEPA”), Section 106 of the National
Historic Preservation Act (16 U.S.C. § 470f)
(“NHPA”), and any other applicable
environmental laws and regulations have been
met; and
(2) FHWA, or a State with applicable NEPA
Assignment authority, has approved the
NEPA document for the Project and provided
the Recipient with a written notice that the
environmental review process is complete;
and
(3) FHWA has obligated additional funds for this
phase and notified the Recipient in writing
that the Recipient may proceed to the next
activity after NEPA approval, and the
Recipient has acknowledged receipt in writing
of FHWA’s notification. Recipient shall not
proceed with any such activities until (2) and
(3) as described in this section are met. Costs
that are incurred before (2) and (3) as
described in this section are met are not
allowable costs under this agreement.

Extent of activities that are permissible before
NEPA is complete are those activities
constituting “preliminary design” as specified
in FHWA Order 6640.1A.

2.4 Budget Period.

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Option Phase 1 (Final Design) Budget Period: April 30, 2027 – December 1, 2027 Option Phase 2 (Construction) Budget Period: December 1, 2027 – June 1, 2030

2.5 Grant Designation.

Designation: Planning and Demonstration
ARTICLE 3

SUMMARY PROJECT INFORMATION

3.1 Summary of Project’s Statement of Work.

Planning and Demonstration Narrative:

Recently, the City has seen a dramatic increase in traffic collision fatalities, disproportionally impacting walkers and bikers along roadways, including the South Broad Street Corridor. The City of San Luis Obispo Planning & Demonstration Project will supplement the work already done on the City’s inprogress Vision Zero Plan. This project aims to better inform future roadway design decisions along the South Broad Street Corridor and other high-speed arterial streets, with more focused analysis of the safety issues and community concerns, as well as a demonstration project to test the effectiveness of roadway safety strategies to protect all road users. As part of its supplemental planning, the City will conduct a comprehensive safety assessment, including a detailed analysis of the collision history; a roadway safety audit; expanded data collection; and stakeholder engagement. The demonstration project will use “quick build” materials such as striping and flex posts to test roadway safety strategies identified through public outreach including (1) enhanced bicycle lanes, (2) corner bulb-outs, (3) temporary medians or left-turn provisions and/or prohibitions to control access, (4) road diet elements, and (5) speed feedback signs. Enhanced bike lane and road diet elements will not reduce lane/vehicle capacity. Findings from the planning and demonstration activities will be summarized in a publicly available report and incorporated into the Vision Zero Action Plan.

The project will be completed in three phases.

Base Phase: Pre-NEPA: This phase will include a comprehensive safety assessment (which will involve a detailed analysis of the collision history, a roadway safety audit, expanded data collection, and stakeholder engagement), the preliminary design of the demonstration project, and NEPA activities.

Option Phase 1: Final Design, Right-of-Way, and Utility Relocation: This phase will advance the preliminary design identified in the Base Phase to a final design level. The demonstration project will remain within the City-owned right-of-way and avoid utility relocation. Additionally, this phase will include any necessary pre-installation ‘before’ data collection for monitoring and evaluation of the demonstration project.

Option Phase 2: Construction: This phase will include all construction activities, post-installation ‘after data collection for monitoring and evaluation, and the preparation of summary report documentation for the demonstration project.

3.2 Project’s Estimated Schedule.

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Demonstration Activity Schedule
Milestone Schedule Date
Planned NEPA Completion Date: April 30, 2027
Planned Construction Substantial
Completion and Open to Public Use Date:

January 1, 2029
Planned SS4A Final Report Date: June 1, 2030
Supplemental Planning Schedule
Milestone Schedule Date
Planned Final Plan Publicly Available
Date:

April 30, 2027
Planned SS4A Final Report Date: June 1, 2030

3.3 Project’s Estimated Costs.
(a) Eligible Project Costs
Eligible Project Costs
SS4A Grant Amount: $400,000
Other Federal Funds: $0
State Funds: $0
Local Funds: $100,000
In-Kind Match: $0
Other Funds: $0
Total Eligible Project Cost: $500,000
(b) Cost Classification Table – For Planning and Demonstration Grants with demonstration activities and Implementation Grants Only
Cost Classification Total Costs
Non-SS4A
Previously
Incurred
Costs
Eligible
Costs
Architectural and engineering fees $210,000 $0 $210,000 Construction $290,000 $0 $290,000
Project Total $500,000 $0 $500,000
(c) Indirect Costs
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Indirect costs are allowable under this Agreement in accordance with 2 CFR part 200 and the Recipient’s approved Budget Application. In the event the Recipient’s indirect cost rate changes, the Recipient will notify FHWA of the planned adjustment and provide supporting documentation for such adjustment. This Indirect Cost provision does not operate to waive the limitations on Federal funding provided in this document. The Recipient’s indirect costs are allowable only insofar as they do not cause the Recipient to exceed the total obligated funding.

ARTICLE 4

CONTACT INFORMATION

4.1 Recipient Contact(s).

Dana Ebe
Transportation Planner/Engineer
City of San Luis Obispo
919 Palm Street
San Luis Obispo, CA 93401
(805)781-7310
[email protected]
Bryan Wheeler
Transportation Planner/Engineer
City of San Luis Obispo
919 Palm Street
San Luis Obispo, CA 93401
(805)781-7178
[email protected]

4.2 Recipient Key Personnel.

Name Title or Position
Dana Ebe Transportation Planner/Engineer
Bryan Wheeler Transportation Planner/Engineer
Adam Fukushima Active Transportation Manager

4.3 USDOT Project Contact(s).

Safe Streets and Roads for All Program Manager
Federal Highway Administration
Office of Safety
HSSA-1, Mail Stop: E71-117
1200 New Jersey Avenue, S.E.

Washington, DC 20590
202-366-2822
[email protected]
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and
Agreement Officer (AO)
Federal Highway Administration
Office of Acquisition and Grants Management
HCFA-42, Mail Stop E62-310
1200 New Jersey Avenue, S.E.

Washington, DC 20590
202-493-2402
[email protected]
and
Division Administrator – California
Agreement Officer’s Representative (AOR)
650 Capitol Mall, Ste. 4-100
Sacramento, CA 95814
(916) 498-5001
[email protected]
and
Maria Bhatti
California Division Office Lead Point of Contact
Safety Program Manager
650 Capitol Mall, Ste. 4-100
Sacramento, CA 95814
916-498-5002
[email protected]
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ARTICLE 5

USDOT ADMINISTRATIVE INFORMATION

5.1 Office for Subaward and Contract Authorization.

USDOT Office for Subaward and Contract Authorization: FHWA Office of Acquisition and Grants Management

SUBAWARDS AND CONTRACTS APPROVAL
Note: See 2 CFR § 200.331, Subrecipient and contractor determinations, for definitions of subrecipient (who is awarded a subaward) versus contractor (who is awarded a contract).

Note: Recipients with a procurement system deemed approved and accepted by the Government or by the Agreement Officer (the “AO”) are exempt from the requirements of this clause. See 2 CFR 200.317 through 200.327. Note: This clause is only applicable to grants that do not include construction.

In accordance with 2 CFR 200.308(f)(6), the recipient or subrecipient shall obtain prior written approval from the USDOT agreement officer for the subaward, if the subaward activities were not proposed in the application or approved in the Federal award. This provision is in accordance with 2 CFR 200.308 (f) (6) and does not apply to procurement transactions for goods and services. Approval will be issued through written notification from the AO or a formal amendment to the Agreement.

The following subawards and contracts are currently approved under the Agreement by the AO. This list does not include supplies, material, equipment, or general support services which are exempt from the pre-approval requirements of this clause.

5.2 Reimbursement Requests
(a) The Recipient may request reimbursement of costs incurred within the budget period of this agreement if those costs do not exceed the amount of funds obligated and are allowable under the applicable cost provisions of 2 C.F.R. Part 200, Subpart E. The Recipient shall not request reimbursement more frequently than monthly.
(b) The Recipient shall use the DELPHI iSupplier System to submit requests for reimbursement to the payment office. When requesting reimbursement of costs incurred or credit for cost share incurred, the Recipient shall electronically submit supporting cost detail with the SF-270 (Request for Advance or Reimbursement) or SF-271 (Outlay Report and Request for Reimbursement for Construction Programs) to clearly document all costs incurred.
(c) The Recipient’s supporting cost detail shall include a detailed breakout of all costs incurred, including direct labor, indirect costs, other direct costs, travel, etc., and the Recipient shall identify the Federal share and the Recipient’s share of costs. If the Recipient does not provide sufficient detail in a request for reimbursement, the Agreement Officer’s Representative (the “AOR”) may withhold processing that request until the Recipient provides sufficient detail. (d) The USDOT shall not reimburse costs unless the AOR reviews and approves the costs to ensure that progress on this agreement is sufficient to substantiate payment.

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(e) In the rare instance the Recipient is unable to receive electronic funds transfers (EFT), payment by EFT would impose a hardship on the Recipient because of their inability to manage an account at a financial institution, and/or the Recipient is unable to use the DELPHI iSupplier System to submit their requests for disbursement, the FHWA may waive the requirement that the Recipient use the DELPHI iSupplier System. The Recipient shall contact the Division Office Lead Point of Contact for instructions on and requirements related to pursuing a waiver. (f) The requirements set forth in these terms and conditions supersede previous financial invoicing requirements for Recipients.

ARTICLE 6

SPECIAL GRANT TERMS

6.1 SS4A funds must be expended within five years after the grant agreement is executed and DOT obligates the funds, which is the budget period end date in section 10.3 of the Terms and Conditions and section 2.4 in this agreement.

6.2 The Recipient demonstrates compliance with civil rights obligations and nondiscrimination laws, including Titles VI of the Civil Rights Act of 1964, the Americans with Disabilities Act (ADA), and Section 504 of the Rehabilitation Act, and accompanying regulations. Recipients of Federal transportation funding will also be required to comply fully with regulations and guidance for the ADA, Title VI of the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, and all other civil rights requirements.

6.3 SS4A Funds will be allocated to the Recipient and made available to the Recipient in accordance with FHWA procedures.

6.4 The Recipient of a Planning and Demonstration Grant acknowledges that the Supplemental Action Plan will be made publicly available and agrees that it will publish the final Supplemental Action Plan on a publicly available website.

6.5 The Recipient of a Planning and Demonstration Grant that involves a demonstration activity agrees to provide an assessment of each demonstration activity and update the existing Action Plan, which will incorporate the information gathered in the Action Plan’s list of projects or strategies and/or inform another part of the existing Action Plan. The Recipient also agrees that demonstration activities are temporary in nature and must be removed and/or ended following the conclusion of the project if the assessment of the demonstration activities does not affirm that the activities provide safety benefits.

6.6 The Recipient acknowledges that it is required to conduct certain environmental analyses and to prepare and submit to FHWA, or State with applicable NEPA Assignment authority, documents required under NEPA, and other applicable environmental statutes and regulations before the Government will obligate funds for Option Phase 1 under this agreement and provide the Recipient with a written notice to proceed with Option Phase 1.

6.7 The Government’s execution of this agreement does not in any way constitute pre-approval or waiver of any of the regulations imposed upon Recipient under the applicable Federal rules, regulations and laws regarding SS4A projects undertaken in accordance with the terms and Docusign Envelope ID: B015A33E-0B4A-8C6B-81CE-4402CF990AFC

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conditions of this agreement. The Recipient shall comply with all applicable Federal requirements before incurring any costs under this agreement.

6.8 There are no other special grant requirements.

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ATTACHMENT A

PERFORMANCE MEASUREMENT INFORMATION
Study Area: Supplemental planning activities will occur on the South Broad Street Corridor from High Street to City Limits (near Farmhouse Lane). The demonstration project is a focused section between South Street and Orcutt Road.

Baseline Measurement Date: January 1, 2028
Baseline Report Date: March 1, 2028
Table 1: Performance Measure Table
Measure Category and Description
Measurement
Frequency and
Reporting
Deadline
Safety Performance
[for Implementation Grants
and Planning and
Demonstration Grants with
demonstration activities]
Fatalities: Total annual fatalities in the
project location(s)
Annually and
within 120 days
after the end of the
period of
performance
Safety Performance
[for Implementation Grants
and Planning and
Demonstration Grants with
demonstration activities]
Serious Injuries: Total annual serious
injuries in the project location(s) [if
available]
Annually and
within 120 days
after the end of the
period of
performance
Safety Performance
[for Implementation Grants
and Planning and
Demonstration Grants with
demonstration activities]
Crashes by Road User Category: Total
annual crashes in the project location(s)
broken out by types of roadway users
involved (e.g., pedestrians, bicyclists,
motorcyclist, passenger vehicle occupant,
commercial vehicle occupant)
Annually and
within 120 days
after the end of the
period of
performance
Costs
[for all Grants]
Project Costs: Quantification of the cost
of each eligible project carried out using
the grant
Within 120 days
after the end of the
period of
performance
Outcomes and Benefits
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Measure Category and Description
Measurement
Frequency and
Reporting
Deadline
[for Implementation Grants
and Planning and
Demonstration Grants with
demonstration activities]
Quantitative Project Benefits:

Quantification of evidence-based projects
or strategies implemented (e.g., miles of
sidewalks installed, number of pedestrian
crossings upgraded, etc.)
Within 120 days
after the end of the
period of
performance
Outcomes and Benefits
[for Implementation Grants
and Planning and
Demonstration Grants with
demonstration activities]
Qualitative Project Benefits: Qualitative
description of evidence-based projects or
strategies implemented (e.g., narrative
descriptions, testimonials, high-quality
before and after photos, etc.)
Within 120 days
after the end of the
period of
performance
Outcomes and Benefits
[for Implementation Grants
and Planning and
Demonstration Grants with
demonstration activities]
Project Location(s): GIS/geo coordinate
information identifying specific project
location(s)
Within 120 days
after the end of the
period of
performance
Lessons Learned and
Recommendations
[for all Grants]
Lessons Learned and Recommendations:

Description of lessons learned and any
recommendations relating to future
projects or strategies to prevent death and
serious injury on roads and streets.

Within 120 days
after the end of the
period of
performance
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ATTACHMENT B

CHANGES FROM APPLICATION
Describe all material differences between the scope, schedule, and budget described in the application and the scope, schedule, and budget described in Article 3. The purpose of Attachment B is to clearly and accurately document any differences in scope, schedule, and budget to establish the parties’ knowledge and acceptance of those differences. See Article 11 for the Statement of Work, Schedule, and Budget Changes. If there are no changes, please insert “N/A” after “Scope,” “Schedule,” or “Budget.” If there are changes to the budget, please complete the table below. Otherwise, leave the table below blank.

Scope: N/A
Schedule: The grant agreement extends the timeline outlined in the grant application to allow adequate time for administering a phased grant agreement for the supplemental planning and demonstration project. This encompasses NEPA coordination, as well as project monitoring, evaluation, reporting, and closeout, all while ensuring compliance with the required 60-month performance period.

Budget: Although the total budget for planning and demonstration activities remains unchanged between the grant application and the grant agreement, the grant agreement (as shown on the revised SF424A) reallocates some of the budget categories to cover the engineering costs associated with NEPA, preliminary design and final design.

The table below provides a summary comparison of the project budget.

Fund Source
Application Section 3.3
$ % $ %
Previously Incurred Costs
(Non-Eligible Project Costs)
Federal Funds $0 - $0 -
Non-Federal Funds $0 - $0 -
Total Previously Incurred Costs $0 - $0 -
Future Eligible Project Costs
SS4AFunds $400,000 80% $400,000 80%
Other Federal Funds $0 - $0 -
Non-Federal Funds $100,000 20% $100,000 20%
Total Future Eligible Project
Costs $500,000 100% $500,000 100%
Total Project Costs $500,000 100% $500,000 100%
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ATTACHMENT C
[RESERVED]
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ATTACHMENT D
[RESERVED]
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ATTACHMENT E

LABOR AND WORKFORCE

1. Efforts to Support Good-Paying Jobs and Strong Labor Standards The Recipient states that rows marked with “X” in the following table align with the application:

The Recipient or a project partner promotes robust job creation by supporting good-paying jobs directly related to the project with free and fair choice to join a union. (Describe robust job creation and identify the good-paying jobs in the supporting narrative below.)
The Recipient or a project partner will invest in high-quality workforce training programs such as registered apprenticeship programs to recruit, train, and retain skilled workers, and implement policies such as targeted hiring preferences. (Describe the training programs in the supporting narrative below.) The Recipient or a project partner will partner with high-quality workforce development programs with supportive services to help train, place, and retain workers in good-paying jobs or registered apprenticeships including through the use of local and economic hiring preferences, linkage agreements with workforce programs, and proactive plans to prevent harassment. (Describe the supportive services provided to trainees and employees, preferences, and policies in the supporting narrative below.)
The Recipient or a project partner will partner and engage with local unions or other worker-based organizations in the development and lifecycle of the project, including through evidence of project labor agreements and/or community benefit agreements. (Describe the partnership or engagement with unions and/or other worker-based organizations and agreements in the supporting narrative below.)
The Recipient or a project partner will partner with communities or community groups to develop workforce strategies. (Describe the partnership and workforce strategies in the supporting narrative below.) The Recipient or a project partner has taken other actions related to the Project to create good-paying jobs with the free and fair choice to join a union and incorporate strong labor standards. (Describe those actions in the supporting narrative below.)
X
The Recipient or a project partner has not yet taken actions related to the Project to create good-paying jobs with the free and fair choice to join a union and incorporate strong labor standards but, before beginning construction of the Project, will take relevant actions described in schedule B. (Identify the relevant actions from schedule B in the supporting narrative below.) The Recipient or a project partner has not taken actions related to the Project to improve good-paying jobs and strong labor standards and will not take those actions under this award.

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2. Supporting Narrative.

The San Luis Obispo City Council has adopted a Community Workforce Agreement with the TriCounties Building and Construction Trades Council to include several large-scale Capital Improvement Projects as key to employing local, union jobs. The City continues to employ even more community members on the City’s largest projects that have historically been constructed by non-local contractors using non-local workers.California prevailing wage requirements.

The South Broad Street project is smaller in scope than traditionally included in the Community Workforce Agreement, but the City would consider its inclusion upon adoption of this agreement.

ATTACHMENT F

CRITICAL SECURITY INFRASTRUCTURE AND RESILIENCE

1. Efforts to strengthen the Security and Resilience of Critical Infrastructure against both Physical and Cyber Threats.

The Recipient states that rows marked with “X” in the following table are accurate:

X The Recipient demonstrates, prior to the signing of this agreement, effort to consider and address physical and cyber security risks relevant to the transportation mode and type and scale of the activities.

The Recipient appropriately considered and addressed physical and cyber security and resilience in the planning, design and oversight of the project, as determined by the Department and the Department of Homeland Security.

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X The Recipient complies with 2 CFR 200.216 and the prohibition on certain telecommunications and video surveillance services or equipment.

2. Supporting Narrative.

The project shall include all required Federal Contract language relevant to CFP 200.216 in both the design RFP and the construction project special provisions.

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ATTACHMENT G
[RESERVED]
Docusign Envelope ID: B015A33E-0B4A-8C6B-81CE-4402CF990AFC

City of San Luis Obispo
April 15, 2026
U.S. Department of Transportation
Office of Infrastructure Deployment
1200 New Jersey Ave, SE
Washington, DC 20590
Federal Highway Administration, CA Division
Mike Shami, PE, MP
650 Capitol Mall, Ste. 4-100
Sacramento, CA 95817
Re: Terms of Acceptance City of San Luis Obispo South Broad Street Corridor Planning and Demonstration Project Grant Fiscal Year 2025 Safe Streets and Roads for All (SS4A) General Terms and Condition
To Whom it May Concern:

This letter is submitted as a supplement to the City of San Luis Obispo’s (the “City’s”) acceptance of the above-referenced grant.

On September 9, 2024, your agency provisionally awarded the City of San Luis Obispo (“City”) $400,000.00 under the Fiscal Year 2024 Safe Streets and Roads for All (SS4A) Grant. The original grant agreement was executed by the City and then later updated by DOT with additional terms that incorporated by reference the current SS4A FY2025 general terms and conditions.

Certain proposed certification language contained in federal grant applications and/or the general terms and conditions for federal grants, which are incorporated by reference into the terms and conditions of the grants, have now been determined to be unlawful, and therefore unenforceable, by various courts.1 The City of San Luis Obispo therefore presumes that grant acceptance is not conditioned on acceptance of terms adjudicated to be unlawful. Those terms include:
1 City and County of San Francisco, et al., v. Trump, et al. (N.D. Cal) Case No. 25-cv-01350-WHO; King County, et al. v. Scott Turner, et al. (W.D. Wa.) Case No. 2:25-cv-814-BJR; County of Santa Clara, et al. v. Noem, et al. (N.D. Cal.) Case No. 25-cv-08330-WHO.

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City of San Luis Obispo, Title, Subtitle
Section 27.2 – Federal Law and Public Policy Requirements – of the current version of the SS4A FY2025 general terms and conditions:
(a) The Recipient shall ensure that Federal funding is expended in full accordance with the United States Constitution, Federal law, and statutory and public policy requirements: including but not limited to, those protecting free speech, religious liberty, public welfare, the environment, and prohibiting discrimination.
(b) Pursuant to Executive Order 14173, Ending Illegal Discrimination And Restoring Merit Based Opportunity, the Recipient agrees that its compliance in all respects with all applicable Federal anti-discrimination laws is material to the government’s payment decisions for purposes of section 3729(b)(4) of title 31, United States Code.
(c) Pursuant to Executive Order 14173, Ending Illegal Discrimination And Restoring Merit Based Opportunity, by entering into this agreement, the Recipient certifies that it does not operate any programs promoting diversity, equity, and inclusion (DEI) initiatives that violate any applicable Federal anti-discrimination law.
(d) The failure of this agreement to expressly identify Federal law applicable to the Recipient or activities under this agreement does not make that law inapplicable.

The City expressly does not contractually agree to be subject to any provisions determined to be unconstitutional, unlawful and/or unenforceable by any court of competent jurisdiction and accepts this grant on the express understanding that each of the above terms and conditions that the courts have determined to be unlawful and unenforceable are not a part of and are excluded from the City’s acceptance of this grant, specifically including sections 27.2 (a) through (d) of the SS4A FY 2025 general terms and conditions and those terms referenced above.

The City greatly appreciates the grant of these funds which will be used to update and improve safety on the City’s major traffic thoroughfare of South Broad Street. The City looks forward to the opportunity to partner with the federal government in a shared effort to serve the public interest.

Sincerely,
J. Christine Dietrick
City Attorney
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Item 5k
Department: Community Development
Cost Center: 4006
For Agenda of: 6/2/2026
Placement: Consent
Estimated Time: N/A
FROM: Timmi Tway, Community Development Director
Prepared By: David Amini, Senior Planner; Ethan Estrada, Assistant Planner SUBJECT: SECOND READING OF ORDINANCE NO. 1757 (2026 SERIES) AMENDING TITLES 5, 16, AND 17 OF THE MUNICIPAL CODE

REGARDING ACCESSORY DWELLING UNITS, JUNIOR ACCESSORY

DWELLING UNITS, URBAN LOT SPLITS, MOBILE HOMES, AND OTHER

CLARIFICATIONS AND CHANGES TO REGULATIONS

RECOMMENDATION
Adopt Ordinance No. 1757 (2026 Series) entitled, “An Ordinance of the City Council of the City of San Luis Obispo, California, amending Title 16 (Subdivision Regulations), Title 17 (Zoning Regulations), and Title 5 (Licenses, Permits, and Regulations) of the Municipal Code Regarding Accessory Dwelling Units, Junior Accessory Dwelling Units, Urban Lot Splits, Mobile Homes, and Other Clarifications and Changes to Regulations Associated with Housing, with an Exemption from Environmental Review (CEQA) (CODE-0149- 2026)”.

POLICY CONTEXT
HE Policy 2.4: Encourage housing production for all financial strata of the City’s population, as allocated in the Regional Housing Needs Allocation, for the 6th cycle planning period. The number of units per income category are: extremely low and very low income, 825 units; low income, 520 units; moderate income, 604 units; and above moderate income, 1,405 units.

HE Policy 8.1: Encourage housing development that meets a variety of special needs, including large families, single parents, disabled persons, the elderly, students, veterans, farmworkers, the homeless, or those seeking congregate care, group housing, singleroom occupancy, or cohousing accommodations, utilizing universal design.

HE Policy 6.8: To help meet the 6th cycle RHNA production targets, the City will support residential infill development and promote higher residential density where appropriate.

Item 5k

DISCUSSION
Background
In 2025, several bills implementing changes to state law regarding accessory dwelling units (ADUs), junior accessory dwelling units (JADUs), and urban lot splits went into effect, with the continued intention of streamlining and incentivizing housing production statewide. Some of these changes, in turn, require modifications to the City’s Municipal Code to maintain compliance with state law. The City of San Luis Obispo is designated as a Prohousing city by the California Department of Housing and Community Development (HCD). This designation is assigned to cities that implement local policies beyond what is provided by the state that seek to remove barriers to new housing development. This designation allows the City to receive priority processing and additional points when applying for state funding programs. Therefore, staff continue to reevaluate the City’s Municipal Code and its review processes for improvements to continue facilitating housing development beyond the changes required by new legislation. This process is further aided by public feedback received throughout the past year, which contributed to some of the proposed amendments.

Lastly, City staff have continued to evaluate the efficacy of existing standards and procedures instituted through the Municipal Code. Based on staff and community feedback, this update contains several miscellaneous amendments to the Municipal Code to clarify City standards and procedures. The changes to the code include the following:
 Clean-up of ADU code items relating to heights, setbacks, procedural requirements, lot coverage, and definitions for state law compliance.  Update to Mobile Home Park Rent Stabilization Ordinance to remove long-term lease exemption for state law compliance.
 Clarifying fractional density requirements for density bonus project calculations.  Update of minor urban lot split regulations to comply with state law regarding properties in historic districts and/or containing historic structures.  Minor revisions to language in the Homestay regulations, clarifying that failure to submit required information annually constitutes grounds for revocation of permit.  Revisions to Accessory Structure regulations to clarify definitions and achieve compliance with ADU requirements.
 Addition of language to the Driveway Standards for driveway approach sight triangles for consistency with the Engineering Standards.

Previous Council or Advisory Body Action
On April 8, 2026 (Agenda Packet), the Planning Commission, on a 6-0 vote (Tolle absent) adopted a Resolution which recommended that City Council introduce and adopt an Ordinance amending Title 16 (Subdivision Regulations), Title 17 (Zoning Regulations), and Title 5 (Permits, Licenses, and Regulations) of the Municipal Code regarding accessory dwelling units, junior accessory dwelling units, urban lot splits, mobile homes,

Item 5k
and other clarifications and changes to regulations associated with housing, with an Item 7a exemption from environmental review (CEQA).

On May 5, 2026 (Agenda Packet), the City Council voted 5-0 to introduce the ordinance to amend Titles 16, 17, and 5.1If adopted by Council as recommended by staff, the ordinance will go into effect on July 2, 2026.

Public Engagement
Public notice was provided for the Planning Commission meeting (April 8, 2026). Notice of the May 5, 2026, City Council public hearing was published in The New Times, and hearing agendas for meetings were posted at City Hall, consistent with adopted notification procedures. The changes were discussed at the Developers Roundtable meeting on May 7, 2026.

CONCURRENCE
Planning, Building, and Engineering Division staff from the Community Development Department, as well as the City Attorney’s Office, have reviewed the proposed changes to Titles 16, 17, and 5 and provided feedback that has been incorporated into the proposed amendments.

ENVIRONMENTAL REVIEW
The proposed code amendments to Title 16, Title 17, and Title 5 of the Municipal Code have been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City. Specifically, the proposed amendments have been determined to be exempt from further environmental review pursuant to CEQA Guidelines Section 15061(b)(3), the “Common Sense” exemption, because the activity is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment, and it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.

Individual discretionary developments will still be required to conduct environmental analyses as appropriate. The proposed code amendments pertaining to ADUs and JADUs are also exempt under Public Resourced Code Section 21080.17 that applies to local ordinances implementing state regulations related to accessory dwelling units.

FISCAL IMPACT
Budgeted: Yes Budget Year: 2026-27
Funding Identified: N/A

1 At the May 5, 2026 meeting, a majority of the Council requested clarification from the City Attorney’s Office regarding the legal and practical ability of applying the updates to the Mobile Home Park Rent Stabilization Ordinance retroactively. The City Attorney’s Office will provide a confidential memorandum for the Council’s consideration addressing these questions. Nothing contained therein impacts the enforceability of the recommended action.

Item 5k
Fiscal Analysis:

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

Total $0 $0 $0 $0
The Municipal Code changes implemented by this ordinance would not have a direct fiscal impact on the City.

ALTERNATIVES

1. Continue the second reading and adoption of the ordinance. An action continuing consideration of the proposed ordinance should include direction for staff on pertinent issues that should be further studied or analyzed for future Council consideration.

2. Do not adopt the introduced ordinance. Not approving the amendments would result in the City’s Municipal Code not being consistent with state law. Denying the proposed amendments would also not address the potential barriers to housing production that have been identified within the City’s Municipal Code.

3. Modify the proposed amendments in the introduced ordinance. Any modifications to the proposed amendments in the introduced ordinance would need to be sent back to the Planning Commission for approval, then re-introduced at City Council, followed by a second reading before implementation. This would create significant delays in implementing the proposed updates to Titles 5, 16, and 17, several of which are necessary to maintain compliance with state law requirements.

ATTACHMENTS
A - Ordinance No. 1757 (2026 Series) adopting amendments to Titles 16, 17, and 5

O ______
ORDINANCE NO. _____ (2026 SERIES)

AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AMENDING TITLE 16 (SUBDIVSION REGULATIONS), TITLE 17 (ZONING REGULATIONS), AND TITLE 5 (LICENSES, PERMITS AND

REGULATIONS) OF THE MUNICIPAL CODE REGARDING ACCESSORY

DWELLING UNITS, JUNIOR ACCESSORY DWELLING UNITS, URBAN LOT

SPLITS, MOBILE HOMES, AND OTHER CLARIFICATIONS AND CHANGES TO

REGULATIONS ASSOCIATED WITH HOUSING, WITH AN EXEMPTION FROM ENVIRONMENTAL REVIEW (CEQA) (CODE-0149-2026)
WHEREAS, on August 31, 2020, Governor Newsom approved AB 2782 implementing numerous changes to the Mobilehome Residency Law, primarily repealing an exemption from rent control measures for long-term mobile home leases; and WHEREAS, on October 10, 2025, Governor Newsom approved AB 1061 to allow minor urban lot splits on properties located in a historic district; and WHEREAS, the City of San Luis Obispo desires to update Title 16 (Subdivision Regulations) and Title 5 (Licenses, Permits, and Regulations) so that they may be consistent with current state law; and
WHEREAS, a number of changes have been identified in order to clarify or change processes related to housing development to more efficiently implement policies and programs of the City of San Luis Obispo’s General Plan that are implemented through Title 17 (Zoning Regulations) and align with state housing law; and WHEREAS, the Planning Commission of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California on April 8, 2026, for the purpose of recommending various amendments to Title 16, Title 17, and Title 5 of the Municipal Code to ensure consistency with state law, as well as to clarify City standards and procedures; and
WHEREAS, the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California on May 5, 2026, for the purpose of introducing various amendments to Title 16, Title 17, and Title 5 of the Municipal Code regarding accessory dwelling units, junior accessory dwelling units, urban lot splits, mobile homes, and other clarifications and changes to regulations associated with housing; and
WHEREAS, notice of said public hearing were made at the time and in the manner required by the law; and
NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows:

Ordinance No. 1757 (2026 Series) Page 2
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SECTION 1. Findings. Based upon all evidence, and as recommended by the Planning Commission, the City Council makes the following findings:

1. The proposed amendments to Titles 16, 17, and 5 will not cause significant health, safety, or welfare concerns since the amendments are consistent with the General Plan and directly implement City goals and polices.

2. The proposed amendments to Title 17 are consistent with the 6th Cycle Housing Element in promoting Goal 5 (Housing Variety) and Goal 6 (Housing Production).

3. The proposed amendments to Titles 16, 17, and 5 are consistent with state law.

SECTION 2. Environmental Determination. The proposed code amendments to Title 16, Title 17, and Title 5 of the Municipal Code have been assessed in accordance with the authority and criteria contained in the California Environmental Quality Act (CEQA), the State CEQA Guidelines, and the environmental regulations of the City.

Specifically, the proposed amendments have been determined to be exempt from further environmental review pursuant to CEQA Guidelines Section 15061(b)(3), the “Common Sense” exemption, because the activity is covered by the general rule that CEQA applies only to projects which have the potential for causing a significant effect on the environment, and it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment. Individual discretionary developments will still be required to conduct environmental analyses as appropriate. The proposed code amendments pertaining to ADUs and JADUs are also exempt under Public Resourced Code Section 21080.17 that applies to local ordinances implementing state regulations related to accessory dwelling units.

SECTION 3. Title 5 LICENSES, PERMITS, AND REGULATIONS: Section

5.44.030 Exemptions is hereby amended as follows:

5.44.030 Exemptions.

The provisions of this chapter shall not apply to the following tenancies in mobile home parks:

A. Mobile home park spaces rented for nonresidential uses; B. Mobile home parks managed or operated by the United States Government, the state of California, or the county of San Luis Obispo; C. Tenancies which do not exceed an occupancy of twenty days and which do not contemplate an occupancy of more than twenty days;
D. Tenancies for which any federal or state law or regulation specifically prohibits rent regulation;

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E. Tenancies covered by leases or contracts which provide for a tenancy of more than a year, but only for the duration of such lease or contract. Upon the expiration of or other termination of any such lease or contract, this chapter shall immediately be applicable to the tenancy. No rent increases other than that allowed under the provisions of the lease shall be allowed during the duration of such a lease or contract.

F. E. Spaces in a mobile home park which sells lots for factory-built or manufactured housing, or which provides condominium ownership of such lots, but only when the dwelling unit and the underlying interest in the space it is located upon are in the same ownership. (Ord. 1228 § 1, 1992; Ord. 1117, 1988)
SECTION 4. Title 5 LICENSES, PERMITS, AND REGULATIONS: Section

5.44.040 Mobile home park owner exemptions under Section 5.44.030(F) is hereby repealed.

SECTION 5. Title 16 SUBDIVISION REGULATIONS: Section 16.15.020 Qualifying requirements is hereby amended as follows:

16.15.020 Qualifying requirements.

Minor and major urban lot splits must meet all of the following requirements, unless otherwise stated in this chapter, in order to be an eligible urban lot split under their respective government code sections. It shall be the responsibility of the applicant to demonstrate to the satisfaction of the director that each of these requirements is satisfied. The applicant and/or owner of the property shall provide a sworn statement, in a form approved by the director, attesting to all facts necessary to establish that each requirement is met.

A. Maximum Number of Dwellings.

1. A minor urban lot split shall not result in more than two dwelling units of any kind on the resulting parcels. As described by California Government Code Section 66411.7(j), the two-unit limitation applies to any combination of primary dwelling units, ADUs, or JADUs.

2. A major urban lot split shall contain at least one dwelling unit on each resulting parcel (see California Government Code Section 66499.41(e)). A maximum of ten dwelling units may be developed on the parcel to be subdivided. As described by California Government Code Section 66499.41(g), the city may deny an application which proposes accessory dwelling units and/or junior accessory dwelling units on the resulting parcel(s).

B. Hazardous and Protected Areas.

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1. A minor urban lot split shall not be located on any site identified in California Government Code Section 65913.4(a)(6)(B) through 65913.4(a)(6)(K), inclusive, unless the development satisfies the requirements specified therein. Such sites include, but are not limited to, prime farmland, wetlands, very high fire hazard severity zones, special flood hazard areas, regulatory floodways, and lands identified for conservation or habitat preservation as specifically defined in California Government Code Section 65913.4.

2. A major urban lot split shall not be located on any site identified in California Government Code Section 66499.41(a)(9)(A) through 66499.41(a)(9)(J), inclusive, unless the development satisfies the requirements specified therein. Such sites include, but are not limited to, prime farmland, wetlands, very high fire hazard severity zones, special flood hazard areas, regulatory floodways, and lands identified for conservation or habitat preservation.

C. Historic Properties. A minor urban lot split shall not be located within a historic district or on property included on the State Historic Resources Inventory, as defined in Section 5020.1 of the California Public Resources Code, or within a site that is designated or listed as a historic resource pursuant to the city’s historic preservation ordinance.

D. Demolition or Alteration of Housing. A minor urban lot split shall not require the demolition or alteration of the types of housing identified in California Government Code Section 66411.7(a)(3)(D) and (F). A major urban lot split shall not require the demolition or alteration of the types of housing identified in California Government Code Section 66499.41(a)(8).

E. Subsequent Urban Lot Splits. In the case of an urban lot split, the lot proposed to be subdivided shall not have been established through a prior urban lot split.

F. Adjacent Urban Lot Splits. In the case of a minor urban lot split, the lot proposed to be subdivided (“subject lot”) shall not be adjacent to any lot that was established through a minor urban lot split by the owner of the subject lot or by any person acting in concert with the owner of the subject lot.

G. Subdivision Map Act. An urban lot split must conform to all applicable objective requirements of the Subdivision Map Act, including implementing requirements in this code, except as otherwise provided in this chapter.

Notwithstanding the foregoing, no dedication of rights-of-way or construction of off-site improvements is required solely for a minor urban lot split. H. Lot Requirements and Limits.

1. A minor urban lot split application may subdivide an existing lot to create no more than two new lots of approximately equal lot area; provided, that one lot shall not be smaller than forty percent of the lot area of the

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original lot proposed for subdivision. Both newly created lots must each be no smaller than one thousand two hundred square feet.

2. A major urban lot split may subdivide an existing lot to create no more than ten new lots, with each lot being no smaller than six hundred square feet. If the property subject to a major urban lot split is zoned for singlefamily use, each lot shall be no smaller than one thousand two hundred square feet. The average total area of floorspace for the proposed dwelling units to be located on lots created via a major urban lot split shall not exceed one thousand seven hundred fifty net habitable square feet, as defined by California Government Code Section 66499.41.

I. Easements. The owner must enter into an easement agreement with each utility/public service provider to establish necessary easements that are sufficient for the provision of public services and facilities to each of the resulting lots.

1. Each easement must be shown on the tentative parcel map and the final parcel map.

2. Copies of the unrecorded easement agreements must be submitted with the application. The easement agreements must be recorded against the property prior to or concurrent with final parcel map approval.

J. Required Affidavit. The applicant for a final parcel map for a minor urban lot split must sign an affidavit provided by the city stating that the applicant intends to occupy one of the dwelling units on one of the resulting lots as the applicant’s principal residence for a minimum of three years from the date of approval of the minor urban lot split, or in the case of a vacant property a minimum of three years from the date of issuance of occupancy certification of any new residential dwellings on either of the resulting lots.

K. Rental Term. Rental of any unit created pursuant to this section shall be for a term longer than thirty days.

L. Housing Unit Specifications. Housing units on a major urban lot split shall be one of the housing unit types identified in California Government Code Section 66499.41(a)(4).

M. Housing Element. The proposed housing development associated with a major urban lot split shall meet one of the following, as applicable:

1. If the parcel is identified in the city’s housing element for the current planning period, the housing development will result in at least as many units as projected for that parcel. Additionally, if the parcel is identified to accommodate any portion of the city’s share of the regional housing need for low- or very-low-income households, the development will result in at least as many low- or very-low-income units as projected in the housing

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element and shall be subject to a recorded affordability restriction of at least forty-five years.

2. If the parcel is not identified in the city’s housing element for the current planning period, the development will result in at least sixty-six percent of the maximum allowable residential density or sixty-six percent of the applicable residential density specified in California Government Code Section 65583.2(c)(3)(B), whichever is greater.

N. Water and Sewer Requirement. All parcels created through a major urban lot split shall be served by a public water system and municipal sewer system.

O. Separately Alienable. A major urban lot split shall not result in any existing dwelling unit being alienable separate from the title to any other existing dwelling unit on the lot.

P. Floor Area Ratio. For major urban lot splits, a floor area ratio standard not less than 1.0 shall apply for housing development projects consisting of three to seven units, inclusive, and a floor area ratio standard not less than 1.25 shall apply for housing development projects consisting of eight to ten units, inclusive. (Ord. 1743 § 5, 2025; Ord. 1729 § 4 (Exh. A), 2023)
SECTION 6. Title 17 ZONING REGULATIONS: Section 17.10.020 Use regulations by zone is hereby amended as follows:

17.10.020 Use Regulations by zone.

Table 2-1: Uses Allowed by Zone
Key:

A = Allowed; MUP = Minor Use Permit approval required; CUP = Conditional Use Permit approval required
M/A = Minor Use Permit approval required on ground floor along street frontage, allowed on second floor or above
Land Use
Permit Requirement by Zoning District
Specific Use
Regulations
AG C/OS R-1 R-2 R-3 R-4 PF O C-N C-C C-R C-D C-T C-S M BP

COMMERCIAL
Retail Sales See Secs.

17.26.030(A),

17.30.030(A),

17.32.030,

17.34.030(A)

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Table 2-1: Uses Allowed by Zone
Key:

A = Allowed; MUP = Minor Use Permit approval required; CUP = Conditional Use Permit approval required
M/A = Minor Use Permit approval required on ground floor along street frontage, allowed on second floor or above
Land Use
Permit Requirement by Zoning District
Specific Use
Regulations
AG C/OS R-1 R-2 R-3 R-4 PF O C-N C-C C-R C-D C-T C-S M BP and

17.36.030(A)
Building Materials and
Services—Indoor

A A A A A
Building Materials and
Services—Outdoor

MUP A MUP A A
Extended Hour Retail MUP MUP MUP MUP MUP MUP MUP MUP
General Retail MUP A A A MUP MUP
Large-Scale Retail CUP CUP CUP
SECTION 7. Title 17 ZONING REGULATIONS: Section 17.26.030 Additional regulations is hereby amended as follows:

17.26.030 Additional regulations.

A. Maximum Retail Sales Building Size in the C-N Zone. A retail sales use in the C-N zone shall not exceed a gross floor area of two thousand square feet for each establishment, or a combined floor area of fifteen thousand square feet for all retail sales establishments within a shopping center, unless an approved minor use permit finds the use is consistent with applicable policies of the General Plan Land Use Element and is compatible with surrounding uses. A general retail sales use that does not exceed the floor area thresholds above is allowed and does not require a minor use permit.

Exceptions to the floor area limitations above require minor use permit approval to ensure consistency with policies of the General Plan Land Use Element and compatibility with surrounding uses.

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B. Food and Beverage Sales in the C-N Zone.

1. General Markets and Convenience Stores. General markets and convenience stores with a gross floor area under three thousand square feet are allowed by right. Such uses with a gross floor area exceeding three thousand square feet may be approved by a minor use permit.

2. Liquor Stores. Liquor stores shall be limited to three thousand square feet of gross floor area, subject to a minor use permit.

C. Number of Parking Spaces Required in the C-N Zone. See Section

17.72.030(C) (Minimum Number of Spaces Required in the C-N Zone). (Ord. 1705 § 14, 2021; Ord. 1650 § 3 (Exh. B), 2018)
SECTION 8. Title 17 ZONING REGULATIONS: Section 17.70.010 Accessory structures is hereby amended as follows:

17.70.010 Accessory structures.

A. Purpose.

1. Regulations on accessory structures are established to provide a distinction between nonhabitable accessory structures (e.g., garage, storage shed, shop building) and accessory living spaces (e.g., accessory dwelling unit secondary dwelling units, guest quarters, office, pool house, etc.).

These regulations establish standards which prevent the conversion of accessory structures into unpermitted living space to ensure that such structures are not used as separate dwelling units.

2. Unpermitted conversion of accessory structures is detrimental to the public health, safety, and welfare of the community. B. Applicability.

1. Application. This section shall apply to:
a. New Structures. All new structures, as defined in the building code, located on the same site as the primary structure or use to which it is accessory, including, but not limited to, garages, carports, portecocheres, sheds, workshops, gazebos, greenhouses, cabanas, trellises, play structures, aviaries, covered patios, etc. b. Decks and Patios. Decks and patios that are 30 inches above the ground elevation, excluding aboveground pools.

2. Exclusion. This section shall not apply to legally established dwellings, accessory dwelling units as defined in Section 17.156.004 (A Definitions), and guest quarters as defined in Section 17.158.018 (G Definitions).

Accessory structures that include habitable space, as defined by the

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California Building Code, shall be regulated by Section 17.86.020 (Accessory Dwelling Units and Guest Quarters). C. Development Standards.

1. General Development Standards. Accessory structures shall conform to all applicable zoning regulations such as height, yards, parking, building coverage, setbacks (unless otherwise allowed, see Section

17.70.170(C)), etc.

2. Incidental Use. The use of an accessory structure is incidental, and subordinate to the use of the principal structure, or to the principal land use of the site.

3. Form. Accessory structures may consist of detached structures or additions to primary structures.

4. No Bathing Facilities. No bathing facilities (e.g., shower, bathtub) may be installed. Plans submitted for a building permit may not include spaces within a bathroom designed for the later addition of bathing facilities.

5. Limit on Total Number in Residential Zones. In residential zones, no more than three accessory structures shall be permitted per lot, only one of which may include a habitable accessory structure such as an accessory dwelling unit or guest quarters. This limit does not apply to accessory and junior accessory dwelling units. D. Process Requirements.

1. Building Permit. Development of an accessory structure shall require approval of a building permit from the city’s building division.

2. Design Review. Plans submitted for a building permit shall be reviewed for consistency with the city’s community design guidelines and general development requirements of the zoning regulations.

3. Owners Agreement with the City. Prior to the issuance of construction permits, a covenant agreement shall be recorded that discloses the structure’s approved floor plan and status as an “accessory structure” which cannot contain living space, including bathing facilities or a kitchen. This agreement shall be recorded in the office of the county recorder to provide constructive notice to all future owners of the property.

The covenant agreement also may contain authorization for annual inspections, and to allow the city upon reasonable time and notice to inspect the premises for compliance with the agreement and to verify continued compliance with requirements of this section and Health and Safety Codes. (Ord. 1650 § 3 (Exh. B), 2018)
SECTION 9. Title 17 ZONING REGULATIONS: Section 17.70.070 Fences, walls, and hedges is hereby amended as follows:

17.70.070 Fences, walls, and hedges.

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A. Purpose. The purpose of these regulations is to achieve a balance between concerns for privacy and public concerns for enhancement of the community appearance, visual image of the streetscape, overall character of neighborhoods, and to ensure the provision of adequate light, air, and public safety.

B. Application. These regulations apply to any type of visible or tangible obstruction that has the effect of forming a physical or visual barrier between properties or between property lines and the public right-of-way, including but not limited to: any type of artificially constructed barriers of wood, metal, or concrete posts connected by boards, rails, panels, wire or mesh, and any type of natural growth such as hedges and screen plantings.

C. Standards for Fences Located within Required Setbacks. Fences, walls or hedges may be placed within required setbacks, provided they do not exceed maximum height limitations and comply with the following standards:

1. Fence Height within Front Setback. The maximum height of a fence, wall, or hedge shall not exceed six feet; except within any front setback, the maximum fence, wall, or hedge height shall be as shown in Figure 3-4:

Fence, Wall, and Hedge Height in Front Setbacks. See also Section

17.70.210 (Vision Clearance Triangle at Intersections).

Figure 3-4. Fence, Wall, and Hedge Maximum Height in Front Setbacks

2. Corner Lots Fence Height within Street Side Setbacks. On corner lots, the maximum height of a fence, wall, or hedge shall not exceed six feet; except within any street side setback, the maximum fence, wall, or hedge height shall be as shown in Figure 3-5: Fence, Wall, and Hedge Height in Street Side Setbacks (Corner Lots). See also Section 17.70.210 (Vision Clearance Triangle at Intersections).

Figure 3-5. Fence, Wall, and Hedge Maximum Height in Street Side

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Setbacks (Corner Lots)

3. Driveway Gates. In the R-1 zone, gates across driveways shall be set back a minimum of ten feet behind the property line. In all other zones, gates across driveways shall allow for adequate space to queue vehicles entering the property consistent with Section 12.38.040 (Parking and driveway standards).

4. Interior Side and Rear Setback Height. The maximum height of a fence, wall, or hedge in any interior side or rear setback shall be six feet.

5. Arbors, Trellises, and Ornamental Features.
a. General. Arbors, trellises, and other similar ornamental features are allowed within a required setback subject to the same height limits that apply to fences, walls, and hedges, except as provided in subsection (C)(5)(b) of this section.
b. Street Side and Front Setback. Up to one arbor, trellis, or other similar ornamental feature per street frontage is allowed with a maximum height of nine feet, and an area of not more than forty square feet as measured by the perimeter formed by the vertical projection to the ground of the outermost elements of the feature, and no horizontal dimension shall exceed eight feet in length. Any portion of such a feature wider than eighteen inches and that exceeds the usual fence height requirements of this section shall be of an open design such that a person standing on the adjacent public right-of-way can see completely through at least fifty percent of the structure to the depth of the required street yard (see Figure 3-6: Arbors in Front and Street Side Setbacks). Such features within required setbacks shall not be connected to another structure or building. For the purposes of this section, the term “connected” shall include structures that are rigidly joined by structural components. Such features within required setbacks shall not be constructed of heavy materials such as masonry or metal. Such features within required setbacks comply with Section

17.70.210 (Vision Clearance Triangle at Intersections). Figure 3-6. Arbors in Front and Street Side Setbacks

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6. Pilasters. Decorative pilasters, statuary, flower pots, and similar ornamental elements attached to or incorporated into the design of conforming fences or walls may exceed the required height limit up to 18 inches, provided that the decorative element is not wider than eighteen inches and that such elements are used to define a gateway or other entryway or are otherwise at least four feet apart.

D. Standards for Fences Located Outside of Required Setback Areas.

Fences, walls, and arbors may be placed outside required setbacks, provided:

1. The maximum fence, wall, arbor or hedge height is eight feet.

2. Where the fence, wall, or arbor is connected to and a part of a building, it may be any height allowed in the underlying zone.

E. Fence Height with Difference in Grade. Fence height is measured from the adjacent grade along the lower side of the wall, fence, or hedge, directly at the base of the wall or fence.

F. Measurement of Height Where Fences or Walls Are Located on Retaining Walls.

1. Where fences or walls are located on retaining walls, the height of the retaining wall shall be considered as part of the overall height of the fence or wall. Walls or fences must have a minimum spacing of five feet between each other to be considered separate structures for purposes of measuring overall height.

2. Where fences are located on a berm or mound, the height of the fence shall include the berm or mound directly beneath the fence and above natural grade in the overall height measurement.

3. Where fences are located on retaining walls within interior side or rear setbacks, fences shall not exceed six feet as measured from the uphill side if erected or replaced on top of the retaining walls, and the combined fence and retaining wall height shall not exceed nine feet from the lower side, provided no modification of grade has occurred from the original subdivision improvements and/or design approvals. A building permit is

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required for the combined fence and retaining wall height that exceeds six feet. If there is evidence that a modification to the grade has occurred from the original subdivision/design approvals, the height must be authorized through a fence height exception pursuant to Chapter 17.108 (Director’s Action). For retaining walls in hillside areas, see also Section

17.70.090(C)(3) (Retaining Walls).

G. Intersection and Driveway Visibility. Notwithstanding other provisions of this section, fences, walls, and hedges shall comply with Section 17.70.210 (Vision Clearance Triangle at Intersections and Driveways).

H. Director’s Action. The director, through a director’s action, may grant exceptions to standards of this section as set forth in Chapter 17.108 (Director’s Action) when there is no practical way to comply with the provisions and no other feasible alternatives will result in better implementation of other zoning regulations or general plan policies while allowing reasonable use of sites.

Circumstances where a director’s action may be approved include, but are not limited to, issues related to topography and privacy. (Ord. 1705 §§ 17, 22, 2021; Ord. 1650 § 3 (Exh. B), 2018)
SECTION 10. Title 17 ZONING REGULATIONS: Section 17.70.090 Hillside development standards is hereby amended as follows:

17.70.090 Hillside development standards. A.

Purpose and Application.

1. Purpose. The purpose of this section is to implement goals of the Conservation and Open Space and Land Use Elements of the General Plan:
a. To protect and preserve scenic hillside areas and natural features such as the volcanic morros, ridge lines, plant communities, rock outcroppings and steep slope areas that function as landscape backdrops for the community;
b. To avoid encroachment into sensitive habitats or unique resources as defined in the Conservation and Open Space Element;
c. To protect the health, safety and welfare of community residents by directing development away from areas with hazards such as landslides, wildland fires, flooding and erosion; and
d. To protect the city’s scenic setting.

2. Application. The provisions of this section shall apply to all lots and sites that have an average cross slope of sixteen percent or more (see Section 17.70.090(B): Average Slope Calculation). The director may require a survey and slope analysis to determine whether the provisions of this section apply to a specific property or development. Notwithstanding the requirements of this section, a lot created pursuant to the Subdivision Map

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Act and Title 16 (Subdivisions) of the San Luis Obispo Municipal Code prior to the effective date of this division may be developed with a single unit structure in compliance with other applicable requirements of these zoning regulations.

B. Average Cross-Slope Calculation. Average cross-slope is the ratio, expressed as a percentage of the difference in elevation to the horizontal distance between two points on the perimeter of the area for which slope is being determined. The line along which the slope is measured shall run essentially perpendicular to the contours.

1. Where a site does not slope uniformly, average cross-slope is to be determined by proportional weighting of the cross-slopes of uniformly sloping subareas, as determined by the director.

2. Cross-slope determinations shall be based on the existing topography of the net site area after subtracting the area for any future on-site grading necessary to accommodate proposed right-of-way
improvements and other on-site improvements.

3. Cross-slope shall be calculated only for the net area as defined in Section 17.70.110 (Lot Area).

C. Hillside Development Standards.

1. General Site Planning Standards. To assist in maintaining a natural appearance for hillsides and ridgelines, each structure shall be located in the most accessible, least visually prominent, most geologically stable portion or portions of the site, at the lowest feasible elevation, and shall, at a minimum, meet the following requirements:
a. See Section 17.70.040(A)(2) (Maximum Development Density— Sloped Sites) for maximum density in hillside areas.
b. See Section 17.70.090(B) (Building Height on Slopes with Sixteen Percent Grade or Greater) for maximum height in hillside areas.

2. Site Access and Driveways. Each driveway shall not have a grade steeper than five percent within ten feet of a garage or carport entry.

Driveway finished grade shall not exceed an average of fifteen percent, or twenty percent at any point.

3. Retaining Walls. Retaining walls that are twenty feet in length shall be limited to six feet in height (above ground/visible portion). Retaining walls longer than twenty feet shall be limited to four feet in height (above ground/visible portion). A minimum five-foot horizontal separation is required between retaining walls. For exceptions, see subsection D of this section.

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4. Downhill Building Walls. No single building wall on the downhill side of a house shall exceed fifteen feet in height above grade. Additional building height on a downhill side is allowed in fifteen-foot increments, where each increment is stepped-back from the lower wall a minimum of ten feet.

5. Height of Lowest Floor Level, Decks, and Support Structures. See Figure 3-9: Height Limit for Lowest Floor, Decks, and Support Structures. a. Lowest Floor Level. The vertical distance between the lowest point where the foundation meets grade and the lowest floor line of the structure shall not exceed six feet.
b. Decks. No portion of the walking surface of a deck with visible underpinnings shall exceed a height of six feet above grade. c. Support Structures. Support structures (e.g., columns, pilings, etc.) below the lowest floor on the downhill side of a house shall be enclosed unless visible structural members are an integral feature of the architectural design. Support structure wall surfaces shall not exceed six feet in height.

Figure 3-9. Height Limit for Lowest Floor, Decks, and Support Structures

6. Exterior Wall Surfaces.
a. Single-story and small-scale elements, setbacks, overhangs, roof pitches, and/or other means of horizontal and vertical articulation shall be used to create shade and shadow and break up otherwise massive forms to minimize the apparent size of exterior wall surfaces visible from public rights-of-way.
b. Large flat building planes are prohibited; the spatial arrangement of the building, including roof overhangs, shall be used to achieve alternating

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light and dark building surfaces that will blend with similar contrasts found in the surrounding natural vegetation.

7. Mechanical Equipment. Mechanical equipment may be placed on rooftops or below a deck only if the equipment is not visible from the public right-of-way or adjacent properties, except for solar collectors that are compatible with the roof line and architecturally integrated with the structure.

8. Fencing. Hillside area perimeter fencing that is visible from off-site vantages, except on side and rear yards that are directly adjacent to living areas on adjacent lots, shall be of a semitransparent, rather than solid, design.

Semitransparent material includes, but is not limited to, wrought iron, split rail, and four-inch square welded wire. In side and rear yards between living areas on adjacent lots, solid, opaque fencing is allowed. However, the preference is for a more naturalistic approach to screening in the side yards, with semi-transparent fencing combined with landscaping, or landscaping alone.

D. Director’s Action. The director may grant exceptions to standards of this section as set forth in Chapter 17.108 (Director’s Action), subject the following additional findings:

1. Intent. The director, through a director’s action, may act to approve an exception to the hillside requirements of this section only where the applicant can provide clear and substantiated evidence that there is no practical way to comply with the provisions and that no other feasible alternatives will result in better implementation of other zoning regulations or general plan policies while allowing reasonable use of sites subject to hillside regulations.

2. Application Type. A hillside regulation less than required by this section may be approved by city action on a plan for public facilities approved by the council or on a specific plan, development plan under planned development zoning, land division, use permit, or architectural review. Where one of these types of applications is not otherwise required for the proposed feature, an exception request shall be in the form of a director’s action.

3. Findings. Each director’s action to grant an exception to a required hillside regulation shall be subject to each of the following findings, regardless of the type of project application under which the request is considered:
a. The proposed alternative complies with and furthers the intent of this section; and
b. The proposed alternative provides a design solution that is equivalent to or better than the standards prescribed in this section for quality, effectiveness, durability, and safety; and

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c. The location and design of the feature receiving the exception will minimize impacts to scenic resources and will not hinder opportunities for wildlife habitation, rest, and movement; and
d. The exception will not prevent the implementation of city-adopted plans, nor increase the adverse environmental effects of implementing such plans; and
e. There are circumstances applying to the site, such as size, shape, or topography, which do not apply generally to land in the vicinity with the same zoning, that would deprive the property of privileges enjoyed by other property in the vicinity with the same zoning; and f. The exception will not constitute a grant of special privilege—an entitlement inconsistent with the limitations upon other properties in the vicinity with the same zoning; and
g. The exception will not be detrimental to the public welfare or injurious to other property in the area of the project; and h. Site development cannot be feasibly accomplished with a redesign of the project or redesign of the project would deny the property owner reasonable use of the property. “Reasonable use of the property” in the case of new development may include less development than indicated by zoning. In the case of additional development on an already developed site, “reasonable development” may mean no additional development considering site constraints and the existing development’s scale, design, or density. E. Process Requirements.

1. Minor Development Review. Except as provided in state law, hillside Hillside development shall require approval of minor development review from the city’s planning division.

2. Design Review. Except as provided in state law, plans Plans submitted for hillside development shall be reviewed for consistency with the city’s community design guidelines, this section, and general development standards of the zoning regulations. (Ord. 1705 § 17, 2021; Ord. 1650 § 3 (Exh. B), 2018)
SECTION 11. Title 17 ZONING REGULATIONS: Section 17.70.120 Lot coverage is hereby amended as follows:

17.70.120 Lot coverage.

A. Purpose and Application. As defined in Chapter 17.158 (General Definitions), lot coverage is the ratio of the total area of a lot covered by the footprint of all structures to the net lot area, typically expressed as a percentage of the total lot area, including all buildings, decks, balconies, porches, accessory structures and accessory dwellings, and similar architectural features. Maximum coverage shall

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be as provided in the specific property development standards for the various zones in Chapters 17.12 through 17.60, inclusive.

Figure 3-11. Lot Coverage
B. Excluded from Lot Coverage. The following structures shall be excluded from the lot coverage calculation:

1. Uncovered decks, porches, landings, balconies, and stairways that are thirty inches or less in height, as measured from the adjacent existing grade.

Figure 3-12. Decks Excluded from Coverage

2. Roof eaves which project thirty inches or less from the structure are not included in the determination of coverage.

3. Swimming pools and hot tubs that are not enclosed in roofed structures or decks.

4. One small, nonhabitable accessory structure under one hundred twenty square feet and under seven feet high. Any additional structures above quantity of one shall be included in lot coverage.

5. The first Up to eight hundred square feet of an accessory dwelling unit lot coverage. Any additional square footage of an accessory dwelling unit lot coverage shall be subject to applicable requirements included in lot

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coverage. (Ord. 1705 §§ 17, 23, 2021; Ord. 1677 § 2, 2020; Ord. 1657 § 9, 2019; Ord. 1650 § 3 (Exh. B), 2018)
SECTION 12. Title 17 ZONING REGULATIONS: Section 17.70.170 Setbacks is hereby amended as follows:

17.70.170 Setbacks.

A. Purpose. This section establishes standards for the measurement of setbacks and required setback areas. These provisions, in conjunction with other applicable provisions of the zoning regulations, are intended to help determine the pattern of building masses and open areas within neighborhoods. They also provide separation between combustible materials in neighboring buildings. Setback areas are further intended to help provide landscape beauty, air circulation, views, and exposure to sunlight for both natural illumination and use of solar energy.

B. Measurement of Setbacks.

1. General. All setback distances shall be measured at right angles from the designated property line to the building or structure, and the setback line shall be drawn parallel to and at the specified distance from the corresponding front, side, or rear property line. Exception: Where the front property line is located beyond the curb (i.e., within a street or common driveway), the front setback is defined as the minimum distance between a structure and the edge of curb.

2. Building Height and Setbacks. The height of a building in relation to setback standards is the vertical distance from the ground to the top of the roof, measured at a point that is a specific distance (the setback distance) from the property line. Height measurements shall be based on the existing topography of the site before grading for proposed on-site improvements.

Where building height is linked to a minimum setback, that setback shall apply to the building incrementally and shall not require a clear-to-sky setback for the entire building. Rather, the setback requirements allow the building to be stepped back incrementally consistent with the required setback distance based on building height.

3. Sloped Lots. For sloped lots, the measurement shall be made as a straight, horizontal line from the property line to the edge of the structure, not up or down the hill slope.

4. Flag Lots. For flag lots, the pole portion of the parcel shall not be used for defining setback lines.

C. Allowed Projections into Required Setback Areas. The following features are allowed projections into required setback areas:

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1. Utility Structures. Adequately screened components of public utility systems may be located within front and street side setbacks when approved by director’s action.

2. Fences, Walls, and Hedges. Fences, walls, and hedges may occupy setbacks to the extent provided in Section 17.70.070 (Fences, Walls, and Hedges). Vegetation may also be controlled by the California Solar Shade Control Act.

3. Arbors and Trellises. Arbors and trellises may occupy setbacks subject to the extent provided in Section 17.70.070 (Fences, Walls, and Hedges). Arbors and trellises shall not be connected to or supported by a building, nor be designed to support loads other than vines or similar plantings. They are not considered structures for zoning purposes and shall not be used as patio covers.

4. Signs. Signs in conformance with the sign regulations codified in Chapter 15.40 (Sign Regulations) may occupy setbacks to the extent provided in that chapter.

5. Architectural Features. The following and similar architectural features may extend into a required setback:
a. Cornices, canopies, eaves, buttresses, chimneys, solar collectors, shading louvers, reflectors, water heater enclosures, and bay or other projecting windows that do not include usable floor space may extend no more than thirty inches into a required setback (see Figure 3-13:

Architectural Feature Projections into Required Setbacks).

Figure 3-13. Architectural Feature Projections into Required Setbacks
b. Uncovered balconies, uncovered porches, and decks over thirty inches in height may extend into the required setback not more than

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four feet or one-half the required setback distance, whichever is less.

Fire escapes, exit stairs, or other required exits may be required to meet greater setbacks to comply with building code requirements. c. Planters and similar features (e.g., patios and decks) less than thirty inches in height may be located within the required setbacks.

6. Mechanical Equipment. Mechanical equipment shall comply with required setbacks, with the following exceptions:
a. Ground-mounted heating and air conditioning equipment, and tankless water heaters shall be set back not less than thirty inches from the side and rear property lines and shall comply with Chapter 9.12 (Noise Control).
b. Mechanical equipment serving swimming pools, spas, and water features shall be set back not less than three feet from a side or rear property line. All such equipment shall be acoustically shielded to comply with Chapter 9.12 (Noise Control).

7. Trash Enclosures. Enclosures that have been approved in conjunction with Development Review or a discretionary review process may be located within a required side or rear setback, provided no part of the enclosure is less than three feet from any right-of-way or adopted setback line.

8. Vehicle Parking. Vehicle parking in front yard areas (as defined in Section 17.158.016: F Definitions) of residential properties shall conform to Section 17.76.040 (Front Yard Parking). No person shall stop, park, or leave standing any vehicle, whether attended or unattended, within any front or street side setback or upon any unpaved surface as defined in this section and Section 12.38.040 (Parking and Driveway Standards).

9. Unenclosed Parking Spaces in Side and Rear Setbacks. Unenclosed parking spaces and parking aisles may be located within side and rear setbacks. For residential properties, parking spaces may not be located within the front yard area unless consistent with Section 17.76.040 (Front Yard Parking).

10. Enclosed and Unenclosed Parking Spaces in Front and Street Side Setback Prohibited. In no case shall an enclosed parking space or required parking space from which vehicles exit directly onto the street be located less than twenty feet from the street right-of-way or property line, except as provided in subsection D (Exceptions to Setback Requirements) of this section, or as provided in Section 17.76.040(D) (Single Car Garages and Single Car Parking). In no case shall a parking space encroach on a public sidewalk.

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11. Landscaping in Setbacks. Required setbacks with city-required landscape plans and stormwater facilities shall be landscaped and maintained in compliance with approved plans.

12. Second Story Setback in R-1 Zone. Up to fifty percent of the upper story side wall may align with the lower floor wall, provided such alignment occurs within the rear half of the structure (see Figure 3-14: Second Story Setback Allowed Projection).

Figure 3-14. Second Story Setback Allowed Projection
D. Exceptions to Setback Requirements.

1. Exceptions Entitled to Property Due to Physical Circumstances. a. Front and/or Street Side Setback Averaging in Developed Areas.

Where these zoning regulations require front and/or street side setbacks and where buildings have been erected on at least one-half of the lots in a block as of the effective date of the regulations codified in this section, the minimum required front and/or street side setback shall be the average of the front and/or street side (as applicable) setback of the developed lots, but in no case less than ten feet nor more than would otherwise be required. Averaging does not apply to enclosed parking structures.
b. Reduced Front or Street Side Setback for New Structure Providing Additional Creek Setback. Where a new structure provides a rear or side creek setback larger than required by these Zoning Regulations, the required front and/or street side setback, respectively, shall be reduced by one foot for each one foot of additional creek setback, so long as the front and street side setback is at least one-half that required by the zone in which the property is located. Refer to the front and street side setback standards for each zone in Chapters 17.12 through 17.60, inclusive.

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c. Setbacks Adjacent to an Alley. The standards required for interior side and rear setbacks shall apply along alleys. However, zero setback is allowed for required surface parking spaces.
d. Rear Setback on Through Lots. On through lots, the minimum rear setback shall be the equivalent to the minimum required front setback.

2. Discretionary Exceptions. Discretionary exceptions to setback requirements shall require a director’s action and meet the findings required for a director’s action (Chapter 17.108), as well as any findings indicated below for an individual exception.
a. Reduced Front and Street Side Setbacks. Upon approval of a director’s action, or in conjunction with tandem parking approval, the director may allow front and/or street side setbacks to be reduced to zero for unenclosed parking spaces. Front and street side setbacks may be reduced to ten feet for structures, including side-loaded carports and garages. However, no driveway shall be less than 18 feet six inches deep, as measured from the sidewalk to face of a garage, or where no sidewalk exists, the outer edge of the street, to accommodate a parked car in the driveway without overhanging onto the public rightof-way.
b. Variable Front Setbacks in Subdivisions. In new residential subdivisions, the review authority may approve variable front setbacks, to be noted on the approved map, provided the average of the front setbacks on a block is at least fifteen feet and no front setback is less than ten feet. Garages or carports that back directly onto the public right-of-way shall maintain a minimum setback of at least eighteen feet six inches, as measured from the sidewalk or where no sidewalk exists, as measured from the outer edge of the public right-of-way, to accommodate a parked car in the driveway without overhanging onto the public right-of-way.
c. Variable Side and Rear Setbacks in New Subdivisions. In new residential subdivisions, the review authority may approve exceptions to the side and rear setback standards, with the exceptions to be noted on the map, provided a separation of at least ten feet between buildings on adjacent lots will be maintained and an acceptable level of solar exposure will be guaranteed by alternative setback requirements or private easements to ensure the development will comply with solar access standards of General Plan Conservation and Open Space Element Policy 4.5.1.
d. Other Setback Variations in Previously Subdivided Areas. Upon approval of a director’s action, the director may allow side and rear setbacks to be reduced to zero under either of the following circumstances:

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i.When there exists recorded agreement, to the satisfaction of the city attorney, running with the land to maintain at least ten feet of separation between buildings on adjacent parcels and the development will comply with solar access standards of General Plan Conservation and Open Space Element Policy 4.5.1; or ii. When the reduction is for either a minor addition to an existing legal structure that is nonconforming with regard to side and rear setback requirements or for a detached single-story accessory structure; provided, that all such minor additions and new accessory structures shall comply with applicable provisions of Title 15, Building and Construction (see also Chapter 17.92, Nonconforming Structures) and the director makes the following findings:
(a) In the case of a minor addition, that the minor addition is a logical extension of the existing nonconforming structure; (b) In the case of a detached single-story accessory structure (either new or replacing a previously approved nonconforming structure), that the accessory structure is consistent with the traditional development pattern of the neighborhood and will have a greater front and/or street side setback than the main structure; (c) That adjacent affected properties will not be deprived of reasonable solar exposure, and the development will comply with solar access standards of General Plan Conservation and Open Space Element Policy 4.5.1;
(d) That no useful purpose would be realized by requiring the full setback;
(e) That no significant fire protection, emergency access, privacy, or security impacts are likely from the addition; and (f) That it is impractical to obtain a ten-foot separation easement in compliance with subsection (D)(2)(d)(ii)(a) of this subsection.
e. Side and Rear Setback Building Height Exceptions. Upon approval of a director’s action, the director may allow exceptions to the side and rear setback standards provided in Article 2 for each zone. Such exceptions may be granted in any of the following and similar circumstances, but in no case shall exceptions be granted for less than the minimum setback required:
i. When the property that will be shaded by the excepted development will not be developed or will not be deprived of reasonable solar exposure, considering its topography and zoning;

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ii. When the exception is of a minor nature, involving an insignificant portion of total available solar exposure; iii. When the properties at issue are within an area where use of solar energy is generally infeasible because of landform shading; iv. When adequate recorded agreement running with the land exists to protect established solar collectors and probable collector locations;
v. When the property to be shaded is a street;
vi. Where no significant fire protection, emergency access, privacy or security impacts are likely to result from the exception. vii. The development will comply with solar access standards of General Plan Conservation and Open Space Element Policy

4.5.1. Any other exception to the height limits requires approval of a variance as provided in Chapter 17.114 (Variances). For height limits of signs, see Chapter

15.40, Sign Regulations. (Ord. 1705 §§ 17, 27, 28, 2021; Ord. 1657 § 10, 2019; Ord. 1650 § 3 (Exh. B), 2018)
SECTION 13. Title 17 ZONING REGULATIONS: Section 17.70.210 Vision clearance triangle at intersections is hereby amended as follows:

17.70.210 Vision clearance triangle at intersections and driveways.

A. Intersection Visibility. At roadway intersections not controlled by a stop sign or traffic signal, no plant, structure, or other solid object over three feet high that would obstruct visibility may be located within the area indicated in Figure 3-15:

Intersection Visibility. At controlled intersections, the director shall determine visibility requirements for proper sight distance.

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Figure 3-15. Intersection Visibility
B. Driveway Visibility. At driveway approaches, no plant, structure, or other solid object over three feet high that would obstruct visibility may be located within the area indicated in Figure 3-16: Driveway Visibility.

Figure 3-16. Driveway Visibility
(Ord. 1705 § 17, 2021; Ord. 1650 § 3 (Exh. B), 2018)
SECTION 14. Title 17 ZONING REGULATIONS: Section 17.86.020 Accessory dwelling units, and junior accessory dwelling units, and guest quarters is hereby amended as follows:

17.86.020 Accessory dwelling units, and junior accessory dwelling units, and guest quarters.

A. Purpose and Applicability. The purpose of this chapter is to prescribe development and site regulations that apply, except where specifically stated, to

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accessory dwelling units, junior accessory dwelling units, and guest quarters, as defined in Chapter 17.156 (Land Use Definitions).

B. Accessory Dwelling Units. The provisions in this subsection shall apply to accessory dwelling units as defined in Chapter 17.156 (Land Use Definitions) and where allowed in compliance with Chapter 17.10 (Use Regulations).

1. Purpose. The purpose of this chapter is to provide for the creation of accessory dwelling units in a manner that is consistent with requirements identified in Chapter 13 of Division 1 of Title 7 of the California Government Code, as amended from time to time.

Implementation of this section is meant to expand housing opportunities by increasing the number of smaller units available within existing neighborhoods.

2. General Requirements.
a. Application. Where this section does not contain a particular type of standard or procedure, conventional zoning standards and procedures shall apply.
b. No Subdivision of Property. Except as provided in state law, no subdivision of property shall be allowed where an accessory dwelling unit has been established and the resulting subdivision does not maintain the primary residence on the same lot as the accessory dwelling unit(s).
c. Sale of Property. This section shall apply to new owners of property where an accessory dwelling unit has been established. All conditions of director’s action (if applicable), restrictive covenants and other contractual agreements with the city shall apply to the property and the new owners, except as allowed or prohibited by state law. d. Applicability of Building Codes. Accessory dwelling units shall conform to all applicable building and construction codes.

3. Specific Requirements and Standards.
a. Zones Where Allowed. An accessory dwelling unit, as defined in Chapter 17.156 (Land Use Definitions), can be created in the AG, C/OS, C-N, C-C, C-R, C-D, C-T, C-S, M, R-1, R-2, R-3, R-4, or O (Office) zone on lots with an existing or proposed residential structure. b. Size of Accessory Dwelling Unit. Except as provided in state law, the gross floor area of an accessory dwelling unit shall be no less than one hundred fifty square feet and shall not exceed eight hundred fifty square feet for a studio or one-bedroom unit, or one thousand square feet for a unit containing two or more bedrooms.

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i. The director may authorize an exception to the square footage standards to allow an accessory dwelling unit up to one thousand two hundred square feet through the director’s action process. In the R-1 zone, this exception can only be approved on lots that are at least twelve thousand square feet in area. In all other zones, exceptions shall be based on compatibility with the development pattern of the neighborhood.
c. Accessory Dwelling Unit Setbacks. Except as provided in state law, the following minimum setbacks from side and rear lot lines shall apply to accessory dwelling units:
i.Four feet for a detached accessory dwelling unit that is no taller than sixteen feet on a lot with an existing or proposed single-family or multifamily dwelling unit.
ii. Four feet for a detached accessory dwelling unit that is no taller than eighteen feet on a lot with an existing or proposed multifamily, multistory dwelling unit.
iii. Four feet for an accessory dwelling unit that is attached to a primary dwelling that is no taller than twenty-five feet. iv. No setback shall be required for an existing permitted structure that is converted to an accessory dwelling unit, or for an accessory dwelling unit that is constructed in replacement of an existing permitted structure, provided it is in the same location and has the same dimensions including height.
d. Additional Height Allowance. Except as provided in state law, accessory dwelling units are subject to the maximum height limits provided by the underlying zone. Except as allowed in subsection (c) of this section, accessory dwelling units shall be consistent with the setback requirements provided by the underlying zone.
e. c. Other Design Standards. Except as provided in state law or otherwise stated in this section, accessory Accessory dwelling units shall conform to all applicable development standards of the underlying zone, including but not limited to height, setback area, parking, and building coverage, unless otherwise stated in this section or prohibited by state law.
i.No passageway, defined as a pathway that is unobstructed clear to the sky and extends from a street to one entrance of the accessory dwelling unit, shall be required in conjunction with the construction of an accessory dwelling unit.
ii. No setback shall be required for an existing permitted structure that is converted to an accessory dwelling unit, or for an

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accessory dwelling unit that is constructed in replacement of an existing permitted structure, provided it is in the same location and has the same dimensions including height.
iii. A setback of no more than four feet from the side and rear lot lines is required for an accessory dwelling unit, for walls up to sixteen feet in height.
iv. Accessory dwelling units that include the creation of new square footage shall be limited to sixteen feet in height. Up to one hundred fifty square feet of new square footage may be exempted from this requirement in connection to a conversion of existing upper floor square footage, but only as needed to accommodate ingress and egress.
(a) In order to provide additional design options for accessory dwelling units, units that include the creation of new square footage can be constructed up to twenty-five feet in height if consistent with the setback standards provided in Article 2 of this title (Zones, Allowable Uses and Development and Design Standards).
ii. v. The minimum required setback for any balcony or terrace above the first floor shall be increased to ten feet from the adjacent property line(s). Upper-level private or common open space areas provided as accessory to an accessory dwelling unit shall not exceed an aggregate area of fifty square feet. Roof decks or rooftop open spaces are prohibited.
iii. vi. Exceptions to these design standards can be approved by the director, through director’s action, subject to required findings (Section 17.108.040).
f. d. Fire Sprinklers. Accessory dwelling units shall not be required to provide fire sprinklers if fire sprinklers are not required for the primary residence. The construction of an accessory dwelling unit shall not require fire sprinklers to be installed in the existing primary dwelling. g. e. Parking Requirements. No additional parking spaces shall be required for an accessory dwelling unit. If a garage or carport is converted or removed to accommodate an accessory dwelling unit, replacement parking is not required.
h. f. Historic Resources. Accessory dwelling units on listed historic properties and in historic districts shall be consistent with the historic preservation ordinance, including historic preservation guidelines and Secretary of the Interior standards for the treatment of historic properties.

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i. g. Utility Connection Fees. Where an accessory dwelling unit is created within an existing structure (primary or accessory), no new utility connection or payment of impact fees shall be required. For all other accessory dwelling units, a new utility connection for the accessory dwelling unit and payment of impact fees may be required if the accessory dwelling unit is seven hundred fifty square feet or more.

New accessory dwelling units located in sewer capacity constrained areas are subject to Section 13.08.396 (Wastewater flow offset). j. h. Additional Accessory Dwelling Unit Configurations. Accessory dwelling units that are consistent with Government Code Section 66323 shall receive ministerial approval. Building permit applications to create accessory dwelling units consistent with Government Code Section 66323 shall clearly be labeled as such (e.g., “ADU-66323”).

4. Procedural Requirements. An accessory dwelling unit that meets the standards contained in this section shall be subject to ministerial review (building permit) and approval without discretionary review (i.e., use permit, architectural review, etc.) or public hearing.
a. Within sixty days of receiving a complete application, the city shall approve any such application which complies with all applicable requirements and development standards identified in this chapter or deny any such application that does not. If the proposed accessory dwelling unit(s) does not comply with the requirements and standards identified in this chapter, the applicant shall receive a full set of comments with a list of items that are defective or deficient and a description of how the application can be remedied by said applicant.

When an accessory dwelling unit is proposed within a new residential structure, this sixty-day requirement shall only apply once all other aspects of the permit are approved.
b. Building permit applications for accessory dwelling units on lots containing an existing primary dwelling or dwellings shall not include other changes or improvements to the property unless those improvements are required to facilitate the creation of the accessory dwelling unit.
c. Building permit applications that propose the expansion/alteration of an existing single-family or multifamily dwelling, or the conversion of existing space within a single-family or multifamily dwelling, for the purpose of creating an accessory dwelling unit or junior accessory dwelling unit are permissible under this chapter. Said expansion or alteration to an existing single-family or multifamily dwelling shall be consistent with the city’s objective design standards and any applicable zoning regulations. The number of ADUs within the existing or proposed converted space of a multifamily dwelling shall not exceed twenty-five percent of the existing number of multifamily units. The

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provisions of this section do not apply to new construction multifamily dwellings.

5. No Short-Term Rental. An accessory dwelling unit cannot be rented for a period of less than thirty days. Homestay use of an accessory dwelling unit is prohibited.

6. Violations. Violation of any of the provisions of this chapter shall be subject to basic code enforcement action as provided in Title 1.

C. Junior Accessory Dwelling Units. The provisions in this subsection shall apply to junior accessory dwelling units as defined in Chapter 17.156 (Land Use Definitions) and where allowed in compliance with Chapter 17.10 (Use Regulations).

1. Purpose. The purpose of this chapter is to provide for the creation of junior accessory dwelling units in a manner that is consistent with requirements identified in Chapter 13 of Division 1 of Title 7 of the California Government Code, as amended from time to time.

Implementation of this section is meant to expand housing opportunities by increasing the number of smaller units available within existing neighborhoods.

2. General Requirements.
a. Application. Where this section does not contain a particular type of standard or procedure, conventional zoning standards and procedures shall apply.
b. Areas Where Junior Accessory Dwelling Units Are Allowed. Upon meeting the requirements of this section, junior accessory dwelling units may be established in any zone where the use of the property is a single-unit dwelling, either existing or proposed.
c. Sale of Property. A junior accessory dwelling unit shall not be sold independently of the primary dwelling on the parcel.
d. Location. A junior accessory dwelling unit must be created within the walls of a proposed or existing primary dwelling.
i.Conversion of an existing garage into a junior accessory dwelling unit shall only be permitted if replacement parking is provided consistent with Sections 17.70.170 (Setbacks) and 17.76.040 (Front yard parking). No setback exception shall be approved to accommodate replacement parking.
e. Size of Junior Accessory Dwelling Unit. The gross floor area of a junior accessory dwelling unit shall not exceed five hundred square feet.

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f. Limitation on Number. Only one junior accessory dwelling unit may be located on any lot zoned for single-family residences with existing or proposed single-family residence(s). A junior accessory dwelling unit may be located on the same lot as an accessory dwelling unit under one of the following circumstances:
i.The accessory dwelling unit was constructed at the same time as the single-family residence.
ii. The accessory dwelling unit was created through the conversion of existing space within a single-family residence or accessory structure.
iii. The accessory dwelling unit, either new or existing, is a detached unit, and the detached accessory dwelling unit is no larger than eight hundred square feet, no taller than sixteen feet in height and has setbacks of no less than four feet from side and rear lot lines.
g. Applicability of Building Codes. Junior accessory dwelling units shall conform to all applicable building and construction codes.

3. Performance Standards and Compatibility.
a. Design Standards. Junior accessory dwelling units shall conform to all applicable development standards of the underlying zone, including but not limited to height, setback area, parking, and building coverage and shall be subject to the provisions below. A junior accessory dwelling unit that conforms to this section shall not be considered a dwelling unit for the purpose of calculating density.
i.A separate exterior entry shall be provided to serve a junior accessory dwelling unit.
ii. A separate entrance from the main entrance to the primary structure, with an interior entry to the main living area, shall be provided if the junior accessory dwelling unit does not include a separate bathroom.
iii. At a minimum, junior accessory dwelling units shall include an efficiency kitchen, which shall contain a cooking facility, food preparation counter, and storage cabinets.
iv. Junior accessory dwelling units shall not be required to provide fire sprinklers if fire sprinklers are not required for the primary residence. The construction of a junior accessory dwelling unit shall not require fire sprinklers to be installed in the existing primary dwelling.

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v. No additional parking spaces shall be required for a junior accessory dwelling unit.
b. Utility Connection Fees. Where a junior accessory dwelling unit is created no new utility connection or payment of impact fees shall be required.
c. Fire and Life Protection. For purposes of any fire or life protection ordinance or regulation, a junior accessory dwelling unit shall not be considered a separate or new dwelling unit.

4. Procedural Requirements. A junior accessory dwelling unit that meets the standards contained in this section shall be subject to ministerial review (building permit) and approval without discretionary review (i.e., use permit, architectural review, etc.) or public hearing. a. Within sixty days of receiving a complete application, the city shall approve any such application which complies with all applicable requirements of this section.
b. Building permit applications for junior accessory dwelling units on lots containing an existing single-family residence shall not include other changes or improvements to the property unless those improvements are required to facilitate the creation of the junior accessory dwelling unit.

5. Owner Occupancy. Except as provided by state law, the owner of the property shall occupy either the primary residence or the junior accessory dwelling unit.

6. Covenant Agreement. Except as provided by state law, prior to the issuance of building permits for a junior accessory dwelling unit, a covenant agreement shall be recorded which discloses the structure’s approved floor plan and status as a “junior accessory dwelling unit” and agreeing that the owner of the property will occupy either the primary residence or the junior accessory dwelling unit. This agreement shall be recorded in the office of the county recorder to provide constructive notice to all future owners of the property.

7. No Short-Term Rental. A junior accessory dwelling unit cannot be rented for a period of less than thirty days. Homestay use of a junior accessory dwelling unit is prohibited.

8. Violations. Violation of any of the provisions set forth in this chapter shall be subject to code enforcement action as provided in Title 1. D. Guest Quarters.

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1. Purpose and Intent. The purpose of this section is to establish regulations for the development of guest quarters as an approved accessory use to a primary residential unit in accordance with Section

17.70.010 (Accessory structures).

2. Applicability. This section does not apply to legally established dwellings or accessory dwelling units, or accessory structures, which are separately defined in Chapter 17.158 (General Definitions).

3. General Requirements. Guest quarters shall conform to all applicable zoning regulations such as height, yards, parking, building coverage, etc., and shall be subject to the following provisions:
a. Accessory to Primary Residence. Guest quarters may only be used in conjunction with a primary residence that contains a kitchen and may consist of detached structures or additions to primary structures. Only one guest quarters may be permitted per property.
b. Size. Guest quarters shall be no larger than four hundred fifty square feet.
c. Density and Development Standards. Guest quarters shall be consistent with density provisions and development standards of the underlying zone. For the purposes of calculating density in multi-unit residential zones, guest quarters will be considered an additional bedroom, accessory to the primary unit. The structure may not exceed four hundred fifty square feet and shall remain in an open floor plan (studio configuration).
d. Zones in Which Guest Quarters May Be Allowed. Upon meeting the requirements in this section, guest quarters may be established in the following zones: R-1, R-2, R-3, R-4, and O, when the primary use on the site is a single-unit residential dwelling.
e. Areas Prohibited. Guest quarters shall not be established in any condominium or planned development project unless specifically addressed in the planned development ordinance as adopted or amended, or any mobile home subdivision or trailer park. Guest quarters shall not be allowed on lots with an existing accessory dwelling unit.
f. Owner Occupancy. The property must be occupied by the property owner as the owner’s primary place of residence. If a property can no longer be occupied as the owner’s primary place of residence, the guest quarters may continue to be used as habitable space (e.g., office, pool house, art studio) but can no longer be used as overnight sleeping quarters.

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g. No Separate Rental. Guest quarters may not be rented separately from the primary dwelling unit.
h. No Kitchen Facilities. No facilities meeting the definition of a “kitchen” as defined in Chapter 17.158 (General Definitions) may be installed and plumbing shall be provided for bathroom use only. No plumbing may be provided to “wet bars,” dishwashers, or any features that could be used for a kitchen. Plans approved for construction of guest quarters shall not include countertops or plumbing designed for subsequent installation of sinks, dishwashers, garbage disposals, or any other features consistent with the definition of a “kitchen.”

4. Procedural Requirements. Prior to filing building plans with the city building division, the following shall be met:
a. Design Review. All requests shall be reviewed for consistency with the city’s community design guidelines and this section. All new development projects within historic districts or within properties that contain designated historic structures shall be referred to the cultural heritage committee to be reviewed for consistency with Secretary of the Interior standards for treatment of a historic property. b. Owner’s Agreement with the City. Prior to the issuance of construction permits, a covenant agreement shall be recorded that discloses the structure’s approved floor plan and status as “guest quarters,” which cannot be used as an independent dwelling unit, and may only be used in conjunction with the primary residence that contains a kitchen. This agreement shall be recorded in the office of the county recorder to provide constructive notice to all future owners of the property. The covenant agreement also may contain authorization for annual inspections, and to allow the city upon reasonable time and notice to inspect the premises for compliance with the agreement and to verify continued compliance with requirements of this section and health and safety codes. If a property can no longer be occupied as the owner’s primary place of residence, the guest quarters may continue to be used as habitable space (e.g., office, pool house, art studio) but shall no longer be used as overnight sleeping quarters. c. Conversion of Guest Quarters to an Accessory Dwelling Unit. A legally established guest quarters may either be retained in its configuration or be converted to an accessory dwelling unit in compliance with the provisions of this chapter. (Ord. 1743 § 13, 2025; Ord. 1705 § 44, 2021)
SECTION 15. Title 17 ZONING REGULATIONS: Section 17.86.160 Homestay rentals is hereby amended as follows:

17.86.160 Homestay rentals.

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A. Purpose and Intent. The purpose of this section is to allow owneroccupied homestay rentals as defined in Chapter 17.156 (Land Use Definitions) and where permitted in Chapter 17.10 (Use Regulations) with reasonable standards to preserve neighborhood character and quality of life.

B. Permit Required. The conduct of a homestay rental requires the approval of a homestay permit by the director, who may establish additional conditions to further the intent of this section. If anyone informs the community development department of a reasonable objection concerning the proposed homestay within the public notification period, the director may schedule a hearing for the application pursuant to the requirements of a minor use permit. C. Application Requirements.

1. Operators of homestays in all zones are required to obtain a homestay permit and a business license.

2. The operator of the homestay shall pay transient occupancy tax and tourism business improvement district tax as required by the municipal code.

3. The operator of the homestay shall annually provide verification of primary residence through the homeowner’s property tax exemption or other appropriate documentation.

4. The operator of the homestay shall provide the name and contact information of a responsible party in the application if the owner-occupier anticipates he or she may not be on the premises at all times during the homestay rental.

D. Performance Standards.

1. Homestays shall comply with the property development and performance standards set forth in Articles 2 (Zones, Allowable Uses, and
Development and Design Standards) and 3 (Regulations and Standards Applicable to All Zones) of this title.

2. All building and fire code regulations shall be met.

3. The number of overnight guests shall be limited to four adults.

Bedrooms shall meet the minimum size requirements as defined in the building code.

4. At all times when a homestay rental is occurring, the owner or responsible party shall be within a fifteen-minute drive of the property.

The owner or responsible party shall be available via telephone twentyfour hours a day, seven days a week, to respond to complaints regarding the homestay. Contact information for the owner and

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responsible party shall be provided to homestay guests, adjacent neighbors and stated on the application.

5. Upon sale or transfer of the home for which a homestay permit has been granted, a new homestay application shall be required within sixty days of the transfer. Failure to submit a new application as required within sixty days shall result in the termination of the existing allowed use.

6. The homestay shall be limited to only the owner-occupied dwelling unit on the property. Homestays shall not be permitted within recreational vehicles or within accessory dwelling units.

7. Any advertisements for the homestay shall include the business license number. On-site advertising of the homestay is prohibited. E.

Revocation of a Permit.

1. Violation of these requirements and standards shall constitute grounds for revocation of the homestay permit. Failure to comply with ongoing operation requirements and annual verification processes shall render the homestay permit expired.

2. At any time, the permit can be referred to an administrative review hearing if determined by the director upon receipt of substantiated written complaints from any resident, code enforcement officer, or police department officer, which includes information and/or evidence supporting a conclusion that a violation of the permit, or of city ordinances or regulations applicable to the property or operation of the homestay, has occurred. At the time of the permit review, to ensure compliance with applicable laws and conditions of permit, conditions of approval may be added, deleted or modified, or the permit may be revoked. (Ord. 1705 § 50, 2021; Ord. 1650 § 3 (Exh. B), 2018)
SECTION 16. Title 17 ZONING REGULATIONS: Section 17.92.020 Limits on reconstruction - Exceptions is hereby amended as follows:

17.92.020 Limits on reconstruction - Exceptions.

A. A nonconforming structure that is involuntarily damaged to an extent of seventy-five percent or more of its replacement cost immediately prior to such damage, as determined by the chief building official, may be restored only if made to conform.

B. Notwithstanding subsection A of this section, nonconforming residences in the R-1, R-2, R-3, R-4, O, C-N, C-C, C-R, C-T, C-D, and C/OS zones that have been involuntarily damaged to an extent of seventy-five percent or more of their replacement value cost immediately prior to such damage, as determined by the chief building official, may be rebuilt at the same density and up to the same size under the following circumstances:

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1. All construction must conform to current building codes, zoning regulations, and design guidelines, except that the previously existing number of dwelling units and size of buildings will be allowed.

2. A building permit for the replacement structure(s) must be obtained within three years of the date of the damage or destruction.

3. Exceptions to the above provisions may be granted by the director for historic structures designated as such in any list or plan element adopted by the city, or for buildings that are over fifty years old where the existing building and any proposed additions or modifications are consistent with the historic preservation guidelines and community design guidelines, as determined by the director.

4. Notwithstanding the above provisions, application for replacement structures of the same density and size may be denied if the director makes one of the following findings:
a. The reconstruction, restoration, or rebuilding will be detrimental or injurious to the health, safety, or general welfare of persons living or working in the neighborhood.
b. The reconstruction, restoration, or rebuilding will be detrimental or injurious to property and improvements in the neighborhood. c. There no longer exists a zone in which the existing nonconforming use is permitted.

C. Changes to interior partitions or other nonstructural improvements and repairs may be made to a nonconforming building. However, demolition, as defined in Section 17.158.012 (D Definitions), and reconstruction shall be permitted only if the structure is made to conform.

D. The value of additions allowed pursuant to subsections (F)(1) and (F)(2) of this section shall be excluded from calculation of replacement cost of the nonconforming structure.

E. Decisions of the chief building official regarding replacement cost may be appealed to the council.

F. Additions to nonconforming structures that further the intent of this chapter may be permitted through a director’s action, subject to a finding of consistency with the intent of this chapter as follows:

1. Additions conform to current building codes, zoning regulations, and design guidelines, where the addition and associated modifications do not result in demolition of the existing structure, as defined in Section

17.158.012 (D Definitions).

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2. The director may allow certain setbacks to be reduced to zero in some instances for minor additions to existing legal nonconforming structures (see Section 17.70.170(D)(2)(d)). (Ord. 1705 § 54, 2021; Ord. 1657 § 20,
2019; Ord. 1650 § 3 (Exh. B), 2018)
G. Additions to nonconforming structures that conform to current building codes, zoning regulations, and design guidelines for the purpose of creating an accessory dwelling unit may be permitted ministerially.

SECTION 17. Title 17 ZONING REGULATIONS: Section 17.140.040 Standard incentives for housing projects is hereby amended as follows:

17.140.040 Standard incentives for housing projects.

A. This section shall apply only to housing projects consisting of five or more dwelling units, including mixed-use developments. Per state law, projects that provide affordable housing are allowed up to a fifty percent density bonus based on the tables outlined below for the respective affordability levels. In addition, the director may approve a density bonus in excess of fifty percent at the request of the developer, as well as other concessions and incentives outlined in Section

17.140.070.

B. Density bonus calculations that use fractional density (see Section 17.70.040) shall apply fractional density consistently for both the market rate and affordable units within a project. The application of fractional density shall only be utilized in favor of producing the maximum number of affordable housing units.

B. C. All density calculations resulting in fractional units shall be rounded up to the next whole number.

C. D. For the purpose of this section, “total units” or “total dwelling density units” does not include units added by a density bonus awarded pursuant to this section or any local law granting a greater density bonus.

D. E. Ten Percent Low-Income Dedication. When a developer agrees to construct at least ten percent of the total units of a housing development for persons or families of lower income, the director shall grant the developer, upon the developer’s request, a density bonus; the density bonus shall be calculated as follows:

Table 8-3: Density Bonus for Percentage of LowIncome Dedicated Units Percentage Low-Income
Units
Percentage Density
Bonus
10 20
11 21.5

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12 23
Table 8-3: Density Bonus for Percentage of LowIncome Dedicated Units Percentage Low-Income
Units
Percentage Density
Bonus
13 24.5
14 26
15 27.5
16 29
17 30.5
18 32
19 33.5
20 35
21 38.75
22 42.5
23 46.25
24 50
E. F. Five Percent Very Low-Income Dedication. When a developer agrees to construct at least five percent of the total units of a housing development for very low-income households, the director shall grant the developer, upon the developer’s request, a density bonus; the density bonus shall be calculated as follows:

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F.

Table 8-4: Density Bonus for Percentage of Very LowIncome Dedicated Units Percentage Very LowIncome Units Percentage Density Bonus 5 20
6 22.5
7 25
8 27.5
9 30
10 32.5
11 35
12 38.75
13 42.5
14 46.25
15 50
G. G. Twenty Percent Senior Citizen Housing Development Dedication. When a developer agrees to construct a senior citizen housing development, or mobile home park that limits residency based on age requirements for housing for older persons, the director shall grant the developer, upon the developer’s request, a density bonus; the density bonus shall be twenty percent of the number of senior housing units.

H. H. Ten Percent Common Interest Development for Moderate-Income Dedication. If a developer agrees to construct at least ten percent of the total dwelling units in a common interest development for persons or families of moderate income, provided that all units in the development are offered to the public for purchase, the director shall grant the developer, upon the developer’s request, a density bonus; the density bonus shall be calculated as follows:

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Table 8-5: Density Bonus for Percentage of ModerateIncome Dedicated Units Percentage ModerateIncome Units Percentage Density Bonus 10 5
11 6
12 7
13 8
14 9
15 10
16 11
17 12
18 13
19 14
20 15
Table 8-5: Density Bonus for Percentage of ModerateIncome Dedicated Units Percentage ModerateIncome Units Percentage Density Bonus 21 16
22 17
23 18
24 19
25 20

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26 21
27 22
28 23
29 24
30 25
31 26
32 27
33 28
34 29
Table 8-5: Density Bonus for Percentage of ModerateIncome Dedicated Units Percentage ModerateIncome Units Percentage Density Bonus 35 30
36 31
37 32
38 33
39 34
40 35
41 38.75
42 42.5
43 46.25
44 50

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I. I. Land Donation Dedication. If a developer for a tentative subdivision map, parcel map, or other residential development approval donates land to the city for affordable housing in accordance with this chapter and the provisions set forth in Government Code Sections 65915 through 65918, the applicant shall be entitled to a fifteen percent increase above the otherwise maximum allowable residential density for the entire development. The director shall grant the applicant, upon the applicant’s request, a density bonus; the density bonus shall be calculated as follows:

Table 8-6: Density Bonus for Land Donation
Dedication for Affordable Housing
Percentage Very LowIncome Units Percentage Density
Bonus
10 15
11 16
12 17
13 18
14 19
15 20
16 21
17 22
18 23
19 24
20 25
21 26
22 27
23 28
Table 8-6: Density Bonus for Land Donation
Dedication for Affordable Housing

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Percentage Very LowIncome Units Percentage Density
Bonus
24 29
25 30
26 31
27 32
28 33
29 34
30 35
J. J. Housing for Transitional Foster Youth, Disabled Veterans, and Homeless Persons. If a developer agrees to construct as least ten percent of the total dwelling units in a housing development for transitional foster youth, as defined in Education Code Section 66025.9, or for disabled veterans, as defined in
Government Code Section 18451, or for homeless persons, as defined in the Federal McKinney-Vento Homeless Assistance Act, the director shall grant the developer, upon the developer’s request, a density bonus of twenty percent. The units shall be subject to a recorded affordability restriction of fifty-five years and shall be provided at the same affordability level as very low-income units.

K. K. An applicant may elect to accept a lesser percentage of density bonus.

L. L. Parking Requirements.

1. Upon the request of the developer, parking ratios of a development meeting the criteria of this section, inclusive of handicapped and guest parking, shall be as follows:
a. Studio to one bedroom: one on-site parking space per unit. b. Two to three bedrooms: two on-site parking spaces per unit. c. Four or more bedrooms: two and one-half parking spaces per unit. d. Senior housing: 0.5 spaces per bedroom.

2. Housing developments occupied exclusively by extremely low, very low, or low income households, as defined by the state, may provide one car and one bicycle space per dwelling unit.

3. If the total number of parking spaces required for a development is other than a whole number, the number shall be rounded up to the next whole number.

Ordinance No. 1757 (2026 Series) Page 46
O 1757

4. For purposes of this section, a development may provide on-site parking through tandem or uncovered parking, but not through on-street parking.

5. An applicant may request additional parking incentives or concessions beyond those provided in this section. (Ord. 1719 § 3, 2022; Ord. 1705
§§ 80—83, 2021; Ord. 1657 § 22, 2019; Ord. 1650 § 3 (Exh. B), 2018) SECTION 18. Title 17 ZONING REGULATIONS: Section 17.156.004 A definitions is hereby amended as follows:

17.156.004 A definitions.

Accessory Dwelling Unit (ADU). An attached or detached dwelling unit that is no more than one thousand two hundred square feet in size, provides complete independent living facilities for one or more persons, and is located on a lot with a proposed or existing primary residence. An ADU includes permanent provisions for living, sleeping, eating, cooking and sanitation on the same lot as a single-family or multifamily structure is or will be situated. An ADU may be structured as one efficiency unit, as defined in Health and Safety Code Section 17958.1, and/or a manufactured home, as defined in Health and Safety Code Section 18007, among other formats. An ADU is considered “attached” to a primary dwelling (existing or proposed) when the ADU structurally abuts and connects to a primary dwelling unit, sharing at least one wall with the unit to which it is attached. An ADU is considered “detached” when it does not share a common wall with a primary dwelling. A detached ADU can stand alone or be attached to other accessory structures or ADUs.

Accessory Use. See “Use, Accessory.”
Adult Entertainment Businesses. See Section 17.86.030 (Adult Business Uses).

Agricultural Accessory Structure. Incidental and accessory structures and uses located on the same site with a permitted agricultural use including farm offices, barns, stables, coops, tank houses, storage tanks, wind machines, windmills, silos and other farm outbuildings, private garages and carports, storehouses, garden structures, produce stands, greenhouses, recreation rooms, private swimming pools, and tennis courts for the use of the persons residing on the site.

Airport. An area approved by the Federal Aviation Administration (FAA) for the take-off and landing of aircraft, which may include appurtenant areas for airport buildings, aircraft operations, and related facilities, aprons and taxiways, control towers, hangars, safety lights, navigation, and air traffic control facilities and structures. These may also include facilities for aircraft manufacturing, maintenance, repair, and reconditioning.

Where approved, an airport may also include aircraft sales and dealerships, car rental establishments, gift shops, hotels and motels, personal services, restaurants and bars, tobacco and newsstands, and other similar commercial uses serving the air-traveling public and airport employees.

Ordinance No. 1757 (2026 Series) Page 47
O 1757
Animal Care, Sales and Services.

Animal Boarding/Kennels. The commercial provision of shelter and care for dogs, cats, other household animals, and horses (where allowed), including activities associated with such shelter and care (e.g., feeding, exercising, grooming, and incidental medical care) of four or more dogs four months of age or older, or four or more cats, except for dogs or cats in pet shops.

Animal Grooming. The commercial provision of bathing and trimming services for dogs, cats, and other household animals permitted by the municipal code.

Overnight boarding is not included with this use (see “Animal Boarding/Kennels”).

Animal Retail Sales. The retail sales of household animals within an entirely enclosed building. These uses include grooming, if incidental to the retail use, but specifically excludes boarding of animals other than those for sale (see “Animal Boarding/Kennels”).

Veterinary Services, Large Animal. Veterinary services for livestock, farm animals, and other large animals. This classification allows twenty-four-hour accommodation of animals receiving medical services.

Veterinary Services, Small Animal. Veterinary services for household pets. This classification allows twenty-four-hour accommodation of animals receiving medical services, but does not include kenneling of animals not receiving medical services (see “Animal Boarding/Kennels”).

Animal Husbandry and Grazing. Raising and breeding of animals or production of animal products. Typical uses include grazing, ranching, dairy farming, poultry farming, beekeeping, and enclosed fisheries, but excludes slaughterhouses and feedlot operations. Does not include animal sales, boarding, and grooming (see “Animal Care, Sales and Services”).

Auto Repair. See “Vehicle Repair and Service.”
Auto Sales and Rental. See “Vehicle Repair and Service.” (Ord. 1705 § 91, 2021; Ord. 1679 § 4, 2020; Ord. 1650 § 3 (Exh. B), 2018)
SECTION 19. A summary of this ordinance, together with the names of Council members voting for and against, shall be published at least five (5) days prior to its final passage, in The New Times, a newspaper published and circulated in this City. This ordinance shall go into effect at the expiration of thirty (30) days after its final passage.

INTRODUCED on the 5th day of May, 2026, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the _____ day of ______, 2026, on the following vote:

AYES:

NOES:

ABSENT:

Ordinance No. 1757 (2026 Series) Page 48
O 1757
___________________________
Mayor Erica A. Stewart
ATTEST:
_______________________
Teresa Purrington
City Clerk
APPROVED AS TO FORM:
_______________________
J. Christine Dietrick
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ___________________________
Teresa Purrington
City Clerk

City of San Luis Obispo, Council Memorandum
City of San Luis Obispo
Council Agenda Correspondence
DATE: June 2, 2026
TO: Mayor and Council
FROM: Emily Jackson, Finance Director
Prepared By: Madeline Kascinta, Assistant Director of Public Works, and Greg Hermann, Deputy City Manager
VIA: Whitney McDonald, City Manager
SUBJECT: ITEM #6a – ADOPTION OF THE FY 2026-27 BUDGET SUPPLEMENT Staff received the following question regarding the FY 2026-27 Budget Supplement. The question is below with staff’s response shown in italics:

What is the long-term plan for funding of Big Belly Waste and Recycling Stations? The City is currently implementing the replacement of standard waste receptacles in the Downtown area with Big Belly waste and recycling stations. The Downtown installation is approximately 50% complete, with a total of 154 planned locations throughout the Downtown core.

The adopted 2025-27 Financial Plan includes ongoing funding to support this implementation. Funding allocated for the Downtown Big Belly program includes $85,000 in FY 2026-27, followed by $90,000 annually in FY 2027-28, FY 2028-29, and FY 2029- 30 to continue replacing and expanding stations in Downtown locations.

In addition to the Downtown program, the Financial Plan includes $175,000 in FY 2027- 28 to expand Big Belly stations into City Park locations.

At this time, the City does not have a formal replacement program established for existing Big Belly stations. Based on manufacturer information and industry experience, Big Belly stations typically have an expected service life of approximately 10 to 12 years and include a five-year manufacturer warranty. As the City's inventory of stations ages, staff anticipates evaluating long-term replacement needs and incorporating lifecycle replacement planning into future financial planning efforts.

San Luis Obispo Museum of Art Phase 1 Grant Update
Staff also received the attached “Phase 1 Project Update - San Luis Obispo Museum of Art Expansion Campaign” document (Attachment A) in advance of the June 2, 2026 City Council meeting.

Insert Report Title Page 2
The Phase 1 Project Update provides a summary of activity to date since the City Council’s approval of a Grant Agreement with the San Luis Obispo Museum of Art (SLOMA) on February 17, 2026, by Resolution No. 11632 (2026 Series). In summary, the Phase 1 Project Update highlights the status of project permitting and entitlements, public engagement and outreach, and fundraising, all with an eye towards a grand opening in July 2027.

The Grant Agreement approved in February includes a suite of conditions that must be met before SLOMA is eligible for disbursement of grant funds, as well as consideration of additional funding towards Phase 2 of SLOMA’s capital campaign, which entails the eventual purchase of the building. The Phase 1 Project Update documents how SLOMA is meeting each of the required conditions; notably, SLOMA has secured 100% of construction funds, as well as City project entitlements and permitting.

Staff have carefully reviewed and concur with the Phase 1 Project Update from SLOMA.

As noted in the Council Agenda Report, no budget recommendation is being made at this time; however, staff anticipate reviewing the availability of funds for Phase 2 with the Year-End Budget Review for FY 2025–26.

ATTACHMENT
A - Phase 1 Project Update - San Luis Obispo Museum of Art Expansion Campaign

PHASE I PROJECT UPDATE

SAN LUIS OBISPO MUSEUM OF ART

EXPANSION CAMPAIGN

INDEX
Executive Summary
Next Steps: City Phase II Support
Grant Agreement Conditions Update
§3.a: Non-Profit Status
§3.b: Phase I Fundraising Status
§3.c: Entitlements & Permits
§3.d: Construction Timeline
§3.d: Construction Budget
§3.d: Fundraising Plan
§3.d: Fundraising Plan: Naming Opportunities
§3.d: Fundraising Plan: Public Phase Rollout
§3.d: Comprehensive Communication & Marketing Timeline
§3.d: Fundraising Plan: Phase II Giving Pyramid
§3.e: Forecasted Operating Budget For The New Museum
§3.f: Additional Public Benefits
Supplemental 1: Property Map
Supplemental 2: Property Report
Supplemental 3: Sneak Peek at SLOMA’s Opening Exhibitions Supplemental 4: Sneak Peek at SLOMA’s Future Programming Pg 3
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Pg 24
Pg 25

EXECUTIVE SUMMARY
In accordance with the Grant Agreement between the City of San Luis Obispo and the San Luis Obispo Museum of Art (SLOMA), I am pleased to submit this Phase I Project Update for your review.

We are truly grateful for the City’s investment in this project and in the broader cultural life of our community. It is exciting to be able to share progress with you and to reflect on what it means when a city chooses to invest in arts and culture as a vital part of its identity and future. As SLO Mayor Erica Stewart shared in an April 10 interview with KSBY, the Museum’s new space “expands that experiential moment that [...] creates economic activity and that is a full cycle as to enjoying the city as a whole.”
Thank you for your continued partnership and support. We are honored to be part of this shared effort to enhance the vibrancy of San Luis Obispo.

PHASE I MILESTONES
• Permits & Entitlements: We have secured all primary entitlements and interior demolition permits for Phase I and interior demolition began on April 20. At the May 27, 2026 Administrative Hearing, SLOMA received approval for all construction entitlements; because SLOMA has already submitted all construction plans, we anticipate receiving the final permits imminently. We remain on schedule for a grand opening in July 2027. We would like to extend our thanks to the City’s incredible staff for their thoughtful collaboration throughout the permit and entitlements process. • Downtown Integration: In partnership with Downtown SLO, we have established a recurring meeting series with local business owners. These sessions ensure our neighbors are apprised of construction progress and provide a platform for collaborative community input. Business owners also receive bi-monthly email updates on the construction project. • Public Rollout & Engagement: Following our 2025 proposal to the City Council, we soft launched our public campaign in November. A more robust public fundraising phase will roll out this summer Rendering of the future Trust Automation Gallery (combined 782 & 786 Higuera Street storefronts), with over 4,000 sq. ft.of open gallery space

with the 1-year countdown to our new space on Higuera. Our presence on Higuera Street is already felt through eye-catching vinyl installations that promote our Summer 2027 opening, driving significant traffic to our project website.
• Strategic Marketing & Outreach: The SLOMA Marketing Committee, comprised of local industry experts and Board members, has finalized a comprehensive communications timeline. We are securing promotional and programmatic partnerships throughout the county to maintain the visibility of the arts during our transition via pop-up activations and “off-site” programming.

Fundraising Status
The Council’s vote to support Phase I of our project has served as a powerful catalyst for communitywide philanthropy. Thanks in large part to your transformational support, we are happy to report that we successfully met the $2M Forbes Challenge!
I especially want to call your particular attention to our fundraising success so far. To date, we have enlisted 32 major donors, and that support is growing weekly. Our donor base is both broad and diverse, spanning the private sector, local foundations, and hundreds of individual supporters. • Total Confirmed Phase I Major Donors: 32
• Total Raised To-Date for Phase I (Pledges & Gifts): $8,555,700 • Progress Toward Phase I Construction Goal: 100%
Fundraising Plan
SLOMA’s Board of Directors, staff, and advisory committees have worked together to create a comprehensive fundraising plan to get this project to the finish line. The plan focuses on establishing diverse income streams including corporate philanthropy, foundation grants, individual capital gifts, and a public naming campaign. A full timeline and breakdown by category is included in the Support Materials.

Sustainable Growth & Budget Forecast
Our 3-year forecasted operating budget is informed by a rigorous feasibility study conducted by Lord Cultural Resources, validated by local expert data and reviewed by SLOMA’s Finance Committee.

Our projections indicate significant untapped potential for earned revenue through expanded retail operations, event rentals, and strategic program partnerships. This model ensures SLOMA’s longterm financial sustainability and reduces reliance on singular funding streams.

Additional Public Benefits & the San Luis Creek Walk
We are actively co-developing ideas for environmentally-friendly artistic installations along the San Luis Creek Walk with countywide cultural partners. Our goal is to create a seamless visual and pedestrian link between our two campuses. Proposed enhancements include wayfinding signage,

artistic lighting, and permanent installations designed to increase safety and pedestrian engagement in the downtown corridor.

As we look toward the realization of SLOMA’s Expansion Project, Phase II is centered on securing the Museum’s long-term stability and impact. This phase includes an $8 million goal to complete the property purchase and an additional $2 million to establish an operational endowment that will sustain programming, exhibitions, and community access for years to come. To date, we have raised $3.4 million toward our Phase II goal, a strong indication of the community’s confidence in this vision.

This final phase is about more than completing a capital project. It is about ensuring that the expanded SLOMA can thrive as a dynamic, accessible, and resilient cultural institution serving the Central Coast well into the future.

As the Expansion Project continues to advance, we will keep you informed with regular updates on our progress and milestones.

Thank you for your continued partnership and for sharing in the vision of making San Luis Obispo a premier cultural destination.

Leann Standish
SLOMA Executive Director

6 NEXT STEPS: CITY PHASE II SUPPORT
Per the terms of the Grant Agreement, the City of San Luis Obispo has the opportunity to further invest in SLOMA’s long-term sustainability and public impact through a $2 million Phase II grant.

Securing permanent ownership of this space will ensure the Museum’s continued ability to serve residents and visitors alike with free and accessible contemporary art programming, educational initiatives, and community-driven cultural experiences.

Importantly, Phase II funding would be dedicated solely to the acquisition of the property and would not be used to support SLOMA’s separate endowment campaign.

This investment represents a strategic opportunity to solidify a lasting cultural asset in the heart of downtown: a community resource that contributes to economic vitality, activates the corridor, and reinforces San Luis Obispo’s identity as a vibrant arts destination. Thank you for your transformational support for Phase I and your consideration of further support in Phase II.

SUPPORT MATERIALS
7 Page 271 of 486

GRANT AGREEMENT CONDITIONS UPDATE
According to Section 3 of the Grant Agreement dated February 23, 2026, SLOMA shall satisfy the following required conditions prior to any disbursement of Grant Funds by CITY. a. Maintain its 501(c)(3) non-profit status.
b. Shall secure all other grant funds, donations, pledges, or financing necessary to complete Phase 1 of the New Museum, inclusive of the amount of Grant Funds provided by the CITY pursuant to this Grant Agreement, and shall first utilize (or provide for first utilizing) all other grant funds, donations, or financing then available (collectively “Other Available Funding”) for the New Museum prior to any request for reimbursement from CITY. However, SLOMA’s initial reimbursement request for Grant Funds may be made prior to complete exhaustion of Other Available Funding, as necessary, to ensure continued availability of funding to complete the New Museum. c. Secure all necessary project entitlements and building permit(s) for Phase 1 of the New Museum that may be applicable as further described in Paragraph 6 [of the Grant Agreement].
d. Submit for CITY review and approval a fundraising plan demonstrating project feasibility, including cost estimating and project schedule. e. Submit for CITY review and approval forecasted budgets for the first three years of operating the New Museum demonstrating a fiscally sustainable business model. f. Identify additional public benefits associated with the New Museum that can reasonably be facilitated and implemented, such as public art in the creek walk area or similar.

Further information about these conditions are included in the following pages.

§3.a: NON-PROFIT STATUS
SLOMA has maintained our 501(c)(3) non-profit status since our founding in 1966. Below is a copy of our IRS determination Letter, originally filed as the San Luis Obispo Art Association, as well as an acknowledgment of our name change to the San Luis Obispo Museum of Art in 2011.

§3.a: NON-PROFIT STATUS (cont’d)

§3.b: PHASE I FUNDRAISING STATUS
Thanks in large part to the enthusiasm garnered by the City’s Phase I support last year, we currently have confirmed 32 major donors for Phase I, for a total of $8,555,700 in donations and pledges since August 2026 bringing us to 100% of our Phase I construction goal and 95% of our overall Phase 1 goal (excluding a $1M contingency and transition expanses). The remaining 5% of the overall Phase I goal and contingency will be the focus of our Phase I Closeout with a public naming opportunity campaign, detailed further in the following pages, to ensure enduring public commitment and participation.

Of the $8.5M pledged, we have 85% cash in-hand empowering us to confidently fund our construction spending while we continue to fundraise for Phase II. FUNDRAISING SUMMARY

§3.c: ENTITLEMENTS & PERMITS
We have secured all primary entitlements and interior demolition permits for Phase I. The proposed façade improvements were approved by the City’s Cultural Heritage Committee on April 27, 2026.

Interior demolition began on April 20 and renovations are slated to begin soon pending a final permit from the City of San Luis Obispo, which is expected to be received in early June. Overall, we remain on schedule for a grand opening in July 2027.

To draw additional community attention to the project’s progress while screening the visual disruption of construction, we have installed colorful vinyl window coverings along the Higuera Street storefronts, including the facade of the former Creeky Tiki space (shown below).

Install in
Action!
SLOMA’s Higuera Street vinyl signage was a true
community collaboration with design, fabrication,
and installation all completed by partners based in
the City of San Luis Obispo.

Vinyl Panel Designs: Matchfire
Top Vinyl (782 Higuera): Fabrication & Installation by
The Sign Place.

Left Vinyl (778 & 786 Higuera): Fabrication by Cal
Poly’s University Graphic Systems. Installation by
SLOMA’s Preparator Alonso Castañeda and Curatorial
Assistant Mac Wilkinson (pictured here). 12 Page 276 of 486 §3.d: CONSTRUCTION TIMELINE
While ambitious, the campaign timeline is grounded in careful planning, early momentum, and demonstrated fundraising capacity. Clear benchmarks, phased goals, and disciplined budget oversight position SLOMA’s campaign for success and reinforce confidence among stakeholders and prospective donors.

SLOMA maintains weekly meetings with project partners and contractors to keep the project on time and on budget. A construction timeline is included below and shows that we remain on schedule for a July 2027 opening on Higuera.
13 Page 277 of 486
§3.d: CONSTRUCTION BUDGET
Below is a contemporary Phase I Budget and Construction Budget provided by project partner NK Builders, Inc. of San Luis Obispo.
14 $7.3M

§3.d: FUNDRAISING PLAN
When a city invests in its downtown, it does more than support a single project—it affirms a shared vision for community life, economic vitality, and cultural identity. Public investment signals that the spaces where people gather, learn, and connect matter, and that they are worthy of collective stewardship. It reflects not only the priorities of today’s residents, but also a commitment to future generations who will shape the character of San Luis Obispo. In this way, the City serves as both a present-day partner and a long-term steward of a vibrant, accessible, and inclusive downtown.

SLOMA launched this ambitious expansion through private philanthropic support to build momentum, demonstrate community demand, and validate the strength of the vision. As we enter Phase II, an early leadership investment from the City can play a similarly catalytic role. Much like the successful Phase I matching grant, a City commitment at this stage will strengthen donor confidence, inspire broader participation, and reinforce that this museum is a shared community asset.

Timing is especially critical because the pre-opening phase represents the project’s greatest opportunity for philanthropic momentum and leverage. Early leadership support will help SLOMA complete the campaign from a position of strength, maximize the impact of public and private investment, and ensure the expanded museum opens with a stable foundation focused on long-term community impact and sustainability.

§3.d: FUNDRAISING PLAN: NAMING OPPORTUNITIES
SLOMA has established a detailed Naming Opportunities plan, included across campaign materials and on the project webpage. This plan invites additional community buy-in with meaningful, visible acknowledgment of donor contributions at all levels. (See below.) Below, you’ll see that several Naming Opportunities have already been reserved; additional reservations are currently under consideration by major donors as reflected in our Fundraising Plan gift pyramid.

Entry-level naming opportunities will be rolled out as part of our public phase starting this summer (more on that next!).
16 BUILDING A LEGACY

NAMING OPPORTUNITIES

GIFT NAMING OPPORTUNITIES
$4 Million Trust Automation Gallery (reserved)
$3 Million Education Center (1010 Broad Street)
$2 Million
Mission View Terrace
──────────────────────────────
Art Gallery Terrace
──────────────────────────────
Forbes Gallery (reserved)
──────────────────────────────
The Harold J. Miossi Network (reserved)
$1 Million
Gallery 2
──────────────────────────────
Front Lobby
──────────────────────────────
Creekside Deck
──────────────────────────────
Barbara Renshaw Museum Shop (reserved)
$750,000 Gallery 3
$500,000
Lightwell Gallery
──────────────────────────────
Cafe
──────────────────────────────
Grand Hall
──────────────────────────────
Art Lift Elevator
──────────────────────────────
Coat Check
──────────────────────────────
Art Storage
$250,000
Catering Kitchen
──────────────────────────────
Workshop
──────────────────────────────
Director's Office (reserved) ────────────────────────────── Front Desk (reserved)
──────────────────────────────
Passenger Elevator (reserved)
$100,000
Staff Offices (4 Available)
──────────────────────────────
Meeting Room
──────────────────────────────
Gallery Benches (3 available; 7 reserved)
$50,000 Creekside Patio Benches (3 available; 7 reserved) $25,000 Native Garden Planters (4 available)
GIFT NAMING OPPORTUNITIES – Endowed Positions
$5 Million Endowed Position: Executive Director
$3 Million Endowed Position: Chief Curator

§3.d: FUNDRAISING PLAN: PUBLIC PHASE ROLLOUT
While the campaign has been publicly announced, the active “Public Phase” of the fundraising campaign will roll out this summer to coincide with the start of construction and the 12-month countdown of our grand opening on Higuera.

In addition to targeted marketing initiatives (detailed next in our Comprehensive Communication & Marketing Timeline), we will also launch a public naming campaign targeting entry- and mid-level donors. Naming opportunities include our creekside patio benches, native garden beds, and our fun creekside deck railing as a creative spin on the typical “bricks” recognition often employed by capital campaigns.

The creekside railings represent a centerpiece of our Phase I closeout, designed as an accessible and visible way for the community to participate and take ownership in the project. We will launch the public phase in summer 2026, aligning with the 12-month countdown to opening. With 95% of Phase I complete, this final public naming campaign will carry us confidently across the finish line.

Sneak Peak at our Patron Posts: The creekside deck railings, nicknamed our “Patron Posts,” consist of 155 arched perimeter markers along the deck’s creekside edge. The flat top face of the post will be adorned with a plaque with the donor’s name and serve as an enduring testament to our community’s support. We can’t wait to see visitors walking along the deck, searching for their names and showing their friends and family how they helped make this community dream a reality!

DONOR NAME HERE
front view top view
17 Page 281 of 486
§3.d: COMPREHENSIVE COMMUNICATION & MARKETING TIMELINE
SLOMA’s Marketing Committee is led by regional industry professionals including Lea Brandy (Matchfire), Lynne Biddinger (Unlock-Potential), and Missy Reitner-Cameron (The Bunker). Together with SLOMA’s staff, they have created a robust Communications Plan that will support the campaign’s public phase. Launching in Summer 2026, this 12-month effort will build awareness and drive participation through a mix of initiatives including cross-sector partnerships, pop-up programming throughout SLO County, paid and grassroots marketing efforts, and consistent project updates across SLOMA’s digital and print channels, all leading up to the opening of SLOMA’s new home on Higuera Street.

Identified communication channels include:

OUTLET AUDIENCE REACH
SLOMA social media
(@SLOMuseumofArt) 11,000+ followers
SLOMA E-news
subscribers 4,800 subscribers
New Times (media
partner)
100,000 readers (print
+ digital)
SLO Tribune 17,000 daily readers
KSBY (media partner)
230,000 households
in KSBY’s service
area covering San
Luis Obispo & Santa
Barbara Counties
VisitSLO.com and @
ShareSLO
43,000 social media
followers
Open Studios Art Tour
Guide
Printed and digital
guide with SLO County
Arts, distributed
county-wide Sept-Oct
Radio LAZER
40+ Spanish-language
radio stations across
20+ major markets in
California and Nevada
LA Times (purchased
digital ads)
500,000 online
subscribers
Hyperallergic
Prominent online
arts magazine with
over 500,000 unique
monthly visitors

§3.d: FUNDRAISING PLAN: PHASE II GIVING PYRAMID
SLOMA’s campaign fundraising plan is a strategic, multi-phased approach to securing the resources needed to successfully complete both phases of our expansion project. By leveraging a balanced mix of public investment, private philanthropy, and grassroots support, the plan advances key capital priorities while building broad community ownership in SLOMA’s future. The overview below introduces the core components guiding this effort, with additional detail provided in the sections that follow.

SLOMA’s staff have created a comprehensive Giving Pyramid to illustrate the breakdown of the campaign’s giving levels and the number of identified donor prospects at each level. As previously noted, we already have a substantial number of donors that have pledged their future support, as well as many campaign prospects in the donation pipeline.

Based on active conversations with major donors, we currently have 12 qualified prospects qualified for a Phase II gift over $500,000.

§3.e: FORECASTED OPERATING BUDGET FOR THE NEW MUSEUM
Our forecasted operating budget for the new museum is informed by our comprehensive feasibility study by Lord Cultural Resources, as well as valuable input from local experts and business owners.

Based on this research, our projections indicate untapped potential for earned revenue, particularly through retail sales, event rentals, and program partnerships. By diversifying our revenue, we will create a diversified and sustainable operating model.
20 Our new home in the heart of downtown San Luis Obispo will create exciting new opportunities for earned revenue to support SLOMA’s long-term sustainability. Expanded revenue streams will include venue rentals — imagine getting married in an art museum! — exhibition touring fees, and the return of paid programs like our beloved summer art camps for kids.

Accessibility will remain central to SLOMA’s mission. Free community programs — including our popular Second Saturdays family art days, rotating mural program, First Fridays after-hours receptions, and free school tours — will continue to be a cornerstone of our community engagement efforts, ensuring that the arts remain welcoming and accessible to all.

§3.f: ADDITIONAL PUBLIC BENEFITS
SLOMA staff are in active conversations with cultural partners across the county to co-develop environmentally-friendly artistic installations along the San Luis Creek walk. Our goal is not only to visually connect our two campuses, but also to activate the creek corridor and Mission Plaza as a vibrant, sustainable, and engaging public space through thoughtfully integrated art and lighting that encourages increased pedestrian use and enhances the natural environment in a responsible manner.

Proposed public benefits include wayfinding signage, painted and installed artistic elements, and enhanced lighting. These features may also connect with other cultural installations throughout the City and County of San Luis Obispo, helping to extend the artistic experience beyond our campus and positioning the creek as a unifying thread across a broader cultural network.

Potential partners currently in discussion include Sensorio in Paso Robles, along with additional artists in active conversation with SLOMA’s Chief Curator. 1010
BROAD
778

HIGUERA

SUPPLEMENTAL 1: PROPERTY MAP

SUPPLEMENTAL 2: PROPERTY REPORT
San Luis Obispo County Data as of: 04/01/2026
Number of Properties: 4
Five Line Report
1 Owner Name: NF Davis Drier & Elevator Inc Year Built / Eff: 1925 / Site Address: 1035 Chorro St, San Luis Obispo, CA 93401 Living Area: 10,607 Mailing Address: Po Box 425, Firebaugh, CA 93622 Lot Area / Acres: 6,511 / 0.15 APN: 002-423-045 Land Use: Retail Trade Bedrooms:

Sale / Rec Date: 04/18/2018 / 04/27/2018 Sale Price / Type: $11,473,500 / Full Val... Baths (F / H): 7 / 2 Owner Name: NF Davis Drier & Elevator Inc Year Built / Eff:

Site Address: 778 Higuera St, San Luis Obispo, CA 93401 Living Area: 0 Mailing Address: Po Box 425, Firebaugh, CA 93622 Lot Area / Acres: 3,000 / 0.07 APN: 002-423-046 Land Use: Commercial Lot Bedrooms:

Sale / Rec Date: 04/18/2018 / 04/27/2018 Sale Price / Type: $11,473,500 / Full Val... Baths (F / H):
3 Owner Name: NF Davis Drier & Elevator Inc Year Built / Eff: 1991 / Site Address: 778 Higuera St #B, San Luis Obispo, CA 93401 Living Area: 15,456 Mailing Address: Po Box 425, Firebaugh, CA 93622 Lot Area / Acres: 11,761 / 0.27 APN: 002-423-049 Land Use: Retail Trade Bedrooms:

Sale / Rec Date: 04/18/2018 / 04/27/2018 Sale Price / Type: $11,473,500 / Full Val... Baths (F / H): 2 / 4 Owner Name: NF Davis Drier & Elevator Inc Year Built / Eff: 1900 / Site Address: 782 Higuera St, San Luis Obispo, CA 93401 Living Area: 4,219 Mailing Address: Po Box 425, Firebaugh, CA 93622 Lot Area / Acres: 10,250 / 0.24 APN: 002-423-047 Land Use: Retail Trade Bedrooms:

Sale / Rec Date: 04/18/2018 / 04/27/2018 Sale Price / Type: $11,473,500 / Full Val... Baths (F / H):
© 2026 First American Financial Corporation and/or its affiliates. All rights reserved. NYSE: FAF PAGE 1 OF 1

SUPPLEMENTAL 3: SNEAK PEEK AT SLOMA’S OPENING EXHIBITIONS Yvette Mayorga
Trust Automation Gallery
Saodat Ismaïlova
Forbes Gallery
Gallery Two
Carol Paquet
Dalton Jamieson
Gallery Three
Michael Porten
Art Atrium
Our inaugural exhibitions in SLOMA’s new downtown San Luis Obispo home will mark a transformative moment for both our museum and the community we serve. Opening in July 2027, the exhibitions will reflect our expanded curatorial capacity with ambitious, museum-quality presentations while remaining deeply committed to uplifting the extraordinary artistic talent of the Central Coast and beyond. Our new space on Higuera Street will allow us to present larger-scale exhibitions, immersive installations, and dynamic public programming that were previously beyond our reach.

According to projections from the 2023 feasibility study conducted by Lord Cultural Resources, we anticipate welcoming more than 100,000 visitors in our first year in the new facility, dramatically expanding our impact as a cultural destination and creating new opportunities for artists, audiences, and community connection.

Susan O’Malley
Art Terrace
LOCAL ARTIST!
LOCAL ARTIST!

SUPPLEMENTAL 4: SNEAK PEEK AT SLOMA’S FUTURE PROGRAMMING SLOMA’s expansion will dramatically broaden opportunities for creative learning and community engagement for both youth and adults. With dedicated classroom and program space at the reimagined Education Center at 1010 Broad, SLOMA plans to launch its first K-12 art camps since 2019 beginning in March 2027, alongside expanded after school programs, hands-on workshops, artist talks, and lifelong learning opportunities.

We will also continue to offer our popular free community programs including school tours, Second Saturdays family art-making events, and First Fridays after-hours receptions and activations for adults. Across both campuses, the expanded Museum will create more accessible pathways for people of all ages to explore creativity, build connections, and engage with the arts year-round.

Item 6a
Department: Finance
Cost Center: 2002
For Agenda of: 6/2/2026
Placement: Business
Estimated Time: 120 minutes
FROM: Whitney McDonald, City Manager
Prepared By: Emily Jackson, Finance Director and Riley Kuhn, Principal Budget Analyst SUBJECT: ADOPTION OF THE FY 2026-27 BUDGET SUPPLEMENT

RECOMMENDATION

1. Adopt a Draft Resolution entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving the Fiscal Year 2026-27 Budget” (Attachment A) and approve the allocations as stated in the Budget Supplement document (Attachment B); and

2. Confirm or modify cost recovery goals (Attachment C) to be used in the FY 2026-27 user fee study; and

3. Receive a status update on the San Luis Obispo Museum of Art’s (SLOMA) progress related to the City’s Phase 1 grant.

POLICY CONTEXT
Pursuant to Sections 802 and 804 of the City Charter, the City Council must adopt the FY 2026-27 budget by June 30, 2026, in order for the appropriations to be in place when the next fiscal year begins. This action is accomplished by resolution, which is provided as Attachment A to this report.

Pursuant to Section 2 – User Fee Cost Recovery Goals – within the City’s Budget Policies (Attachment C), fees are reviewed and updated on an ongoing basis to ensure that they keep pace with changes in the cost-of-living as well as changes in methods or levels of service delivery.

The SLOMA Downtown expansion project has significant alignment with numerous City of San Luis Obispo plans and policies. These include the City’s existing Major City Goals, Economic Development Strategic Plan, Downtown Concept Plan, and General Plan Land Use Element.

DISCUSSION
Background
The City utilizes a two year Financial Plan and is currently under the 2025-27 Financial Plan. The Financial Plan includes one year of adopted budget and a forecast of the

Item 6a
second year which must be formally adopted as the budget supplement. This report provides an outline of the contents of the FY 2026-27 Budget Supplement, which is included as Attachment B.

Overview
The FY 2026-27 Budget Supplement includes balanced budgets for the General Fund, the four Enterprise Funds, the Special Revenue Funds, and all other budgeted funds. It also includes information on departmental performance measures, Major City Goals, and the Capital Improvement Plan. The budget document, included as Attachment B, includes the following sections:
 City Manager Message: In this section, the City Manager provides a high level overview of the City’s accomplishments in the current year and a look forward at the next fiscal year.
 Changes Since Financial Plan: This section includes the recommended budget reductions presented to the City Council in the March 3rd Supplemental Budget Preview, as well as a number of recommended additions to the budget, also referred to as Significant Operating Budget Changes.
 Consolidated Financials: This section provides a high level overview of Citywide revenue and spending.
 General Fund Overview: The General Fund is funded primarily by taxpayers and provides services and infrastructure for broad public benefit. This section provides a detailed analysis of the Fund’s budget, including a long-term forecast.  Special Revenue and Other Funds: Community Facilities Districts, Business Improvement Districts, Internal Service Funds, and other funds are included in this section.
 Local Revenue Measure: This section provides information on how funds generated by the Local Revenue Measure are used to fund critical City projects and operations.
 Debt Service: Information on all of the City’s outstanding borrowings is included here.
 Capital Improvement Plan: The capital projects being funded in the next fiscal year are included here, as is a discussion of major ongoing projects and recommended changes to the Capital Improvement Plan compared to the Plan presented in the 2025-27 Financial Plan.
 Major City Goals: Staff provide an update on Major City Goal tasks, including recommended modifications to tasks and timelines.

Item 6a
 Department Summaries: Each department shares an update on its programs, provides updated performance measures to quantify departmental operations, and describes changes to departmental budgets.
 Appropriation Limit: The City’s appropriation limit is based on the Gann Spending Limit Initiative, a State constitutional amendment. This section includes a calculation to validate that the budget is within constitutional limits.

Other Items:

In addition to consideration and adoption of the FY 2026-27 Budget, staff is recommending consideration of two policy or grant-related items that implicate City resources. Specifically, staff requests (1) review and confirmation of the current cost recovery goals that are incorporated into the 2025-27 Financial Plan and will guide development of a future user fee study in Fiscal Year 2026-27, and (2) receipt of a brief status report on the SLOMA Phase 1 Grant agreement.

User Fee Cost Recovery Goals: The City’s fiscal policies are presented to the City Council for review with each Financial Plan to determine whether updates are needed.

Revisions typically aim to ensure consistency across policies, reflect current practices, and maintain an efficient and effective administrative system. The Fiscal Policies were last reviewed and approved on June 17, 2025, with adoption of the 2025-27 Financial Plan, which included substantive updates to Fiscal Policy 2 – User Fee Cost Recovery Goals. These changes aligned the policy with the FY 2024-25 User Fee Schedule adopted on July 2, 2024, including updating the frequency of user fee studies from every five years to every three years, allowing market rate analysis for certain fees, and revising cost recovery levels (see July 2, 2024 City Council meeting minutes).

Consistent with the updated policy, staff will conduct the next user fee study in FY 2026-27 and present recommended fee changes to the City Council in Spring 2027, with new fees effective July 1, 2027. Before beginning this study, staff is requesting the City Council’s review of the cost recovery policy as part of the FY 2026-27 Budget Supplement. This will allow Council to give direction on any desired changes to cost recovery levels, which can then be incorporated into the study. The current policy, adopted with the 2025-27 Financial Plan, is included as Attachment C.

SLOMA Grant Update
SLOMA is continuing progress on their Downtown expansion project. Staff have also been continuing to meet with SLOMA to evaluate progress related to the City’s Phase 1 grant. Based on the updates provided, SLOMA will soon complete the requirements of this grant, which include securing all funds for Phase 1 of the project, receiving all necessary project entitlements, completing a fundraising plan for the full project, completing a 3-year budget forecast and identification of additional public benefits. Staff expect to receive a report formally documenting this progress shortly. As stated in the February 17th 2026, Council Agenda Report for the Phase 1 grant, upon completion of these requirements, staff would return to Council at the next regularly scheduled budget

Item 6a
update to consider options and recommendations for additional funding for Phase 2 (to support purchase of the expansion property). Staff have not included recommended Phase 2 funding as part of the FY 2026-27 Budget Supplement due to the timing of completion of the Phase 1 grant requirements and a lack of available funding. Staff anticipate reviewing availability of funds for Phase 2 with the Year End Budget Review for FY 2025-26. Consideration of funding would be subject to the actual availability of funds at that time, which could preliminarily include additional FEMA reimbursements or other over-realized revenue.

Previous Council or Advisory Body Action
Council heard a preview of the Supplemental Budget on March 3, 2026.

Public Engagement
Public comment on this item can be provided to the City Council through written correspondence prior to the meeting and through public testimony at the meeting. This report and attachments were published May 20, 2026, approximately two weeks prior to the hearing, to provide additional time for public review.

CONCURRENCE
All departments participated in development of the budget and concur with the recommendations. The Revenue Enhancement Oversight Commission concurs with the recommended use of Local Revenue Measure funds.

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

FISCAL IMPACT
Budgeted: Yes Budget Year: 2026-27
Funding Identified: Yes
Fiscal Analysis:

As outlined in the budget document, the recommendation is to appropriate a budget of $224,742,744 across all funds. All fund budgets are balanced and maintain adequate reserves as called for by policy, except as noted in the report.

The recommendation to confirm or modify the cost recovery goals included in Attachment C has implications for the long-term outlook for the City. The current long-term forecasts assume no change to cost recovery; increasing or decreasing recovery targets will inrease or decrease revenue.

The recommendation to receive a status update on the SLOMA grant has no fiscal impact.

Item 6a

ALTERNATIVES
Council could direct staff to make specific modifications to the proposed budget.

Should Council pursue this option, the Council would need to provide specific direction to staff to incorporate changes into the adopted budget document.

Council could continue the budget hearing for further discussion. Should Council pursue this option, staff will return to Council on June 16th for a continued hearing on the budget.

Council could direct staff to make modifications to Major City Goal work programs.

Should Council pursue this option, discussion could be continued to June 16th, to a different future meeting, or to the FY 2025-26 Year End Budget Report.

Council could direct staff to make modifications to the User Fee Cost Recovery Goals. Should Council pursue this option, changes will be incorporated into the cost recovery goals and be applied to the development of the user fee study that will commence in Fiscal Year 2026-27, with a goal of adoption of revised user fees prior to July 1, 2027.

ATTACHMENTS
A - Draft Resolution Approving the FY 2026-27 Budget
B - FY 2026-27 Budget Supplement
C - Fiscal Policy- User Fee Cost Recovery Goals

R _____
RESOLUTION NO. ______ (2026 SERIES)

A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, ADOPTING THE FISCAL YEAR 2026-27
BUDGET
WHEREAS, pursuant to Section 804 of the City Charter, the City Council must adopt the FY 2026-27 Budget by June 30, 2026 for the appropriations to be in place when the next fiscal year begins on July 1, 2026; and
WHEREAS, pursuant to Section 803 of the City Charter, the City Council shall hold a public hearing on the proposed budget and this hearing was held during the June 2, 2026 City Council meeting; and
WHEREAS, California voters approved the Gann Spending-Limitation Initiative on November 6, 1979 and Proposition 111 on June 5, 1990, which establish and define annual appropriation limits on state and local government agencies; and WHEREAS, the California Government Code requires that the governing body of each local agency establish its appropriations limit and annual factors by resolution; and NOW, THEREFORE, BE IT RESOLVED, by the Council of the City of San Luis Obispo as follows:

SECTION 1. The Fiscal Year 2026-27 budget is hereby approved and that the budget for the fiscal year beginning July 1, 2026 and ending June 30, 2027 is hereby appropriated as presented in the FY 2026-27 Supplemental Budget.

SECTION 2. The City Manager is hereby delegated authority to approve budget adjustments, including non-substantive format and typographical changes found within the FY 2026-27 Budget, consistent with the adopted budget policies to maintain budgetary flexibility and balances for the organization.

SECTION 3. The City’s appropriation limit and annual adjustment factors for Fiscal Year 2026-27 are adopted as follows:

Upon motion of _________, seconded by ________, and on the following roll call vote:

AYES:

Appropriations Limit 2025-26 $102,632,964
Cost of Living Increase 1.05%
Population Factor: City Population Growth 1.01%
Compounded Percentage Factor (multiplicative not additive) 1.06% Appropriations Limit 2026-27 $108,396,106

Resolution No. ____ (2026 Series) Page 2
R ____
NOES:

ABSENT:

The foregoing resolution was adopted this ___ day of June 2026. ______________________________
Mayor Erica A. Stewart
ATTEST:

Teresa Purrington,
City Clerk
APPROVED:

J. Christine Dietrick,
City Attorney
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, on ______________________. ________________________________
Teresa Purrington,
City Clerk

FY 2026-27 Recommended Budget Page 299 of 486
202 -2 Financial Plan

BUDGET SUPPLEMENT
ERICA A. STEWART, MAYOR
, VICE MAYOR

JAN MARX, COUNCIL MEMBER
, COUNCIL MEMBER
, CITY MANAGER
2

Table of Contents
4 18
Section 1: Introduction
City Manager Message
Section 2: Changes from Financial Plan Adoption
Section 3: Consolidated Financials
Section 4: General Fund Overview
Section 5: Special Revenue and Other Funds 32
Section 6: Local Revenue Measure
Section 7: Debt Service 45
Section 8: Capital Improvement Plan 48
Section 9: Major City Goals 75
Section 10: Department Updates
Admin/IT
City Attorney
Community Development
Finance
Fire
Human Resources
Parks & Recreation
Police
Public Works & Utilities
105
Section 11: Appropriation Limit
22 39
86 90
93 96
99 102
139
110
112
10 3

Honorable Mayor, Members of the City Council, and Residents of San Luis Obispo:

I am pleased to present the FY 2026-27 Budget Supplement. This budget reflects our organization’s long-standing commitment to fiscal responsibility, strategic investment, and high-quality public service. It also incorporatesthe realities identified in the comprehensive budget update delivered to the City Council on March 3, 2026, including evolving economic conditions, federal policy uncertainty, and a slowing pace of revenue growth. This budget recommends expenditure reductions which were carefully evaluated to minimize community impacts. Despite fiscal constraints, we expect to be able to maintain our long-term focus on initiatives that align with City Council’s Major City Goals and improve the quality of life in our community.

Fiscal Year 2025-26 In Review
Development of the 2025-27 Financial Plan and FY 2025-26 Budget represented a shift from prior years where the City experienced significant economic and revenue growth in the wake of Local Revenue Measure (LRM) passage in November 2020 and recovery from COVID-19. When building the budget last year, the long-term forecast projected a General Fund deficit of $2.5 million in FY 2025‐26 due to a cooling economy, slowed revenue growth and increasing costs. With that dampening forecast looming, the City Council approved a number of recommended actions to bring the budget into balance for FY 2025-26.

These included constraining non-staffing budget growth to FY 2024-25 levels, reallocating $1M of LRM dollars from the Capital Improvement Plan to support the operating budget, increasing the staffing savings assumption in the General fund from 3% to 4%, and significantly decreasing recommended Significant Operating Budget Changes (SOBCs) compared to prior years. In total, these actions balanced the budget for FY 2025-26. While these steps have tightened the operating budget, we are encouraged by FY 2025- 26 results through the third quarter, which are generally positive. That being said, we do expect that the amount of unassigned fund balance experienced at the end of the year will be lower than it has historically been. In the recent past, the City has seen large, unassigned fund balances, which have been used to increase payments to CalPERS and make strategic long-term investments in the community. Smaller balances will limit our investment opportunities.

While the adopted 2025-27 Financial Plan presents a balanced budget for these two fiscal years after implementing the budget balancing strategies describe above, the five-year financial forecast indicated a projected deficit beginning in the next financial plan, largely due to the need to open an additional fire station combined with slower economic growth projections. With this forecast in mind, the Fiscal Health Contingency Plan was activated in April 2025, establishing hiring and travel chills to ensure careful and controlled spending while departments undertook a close review of their budgets with the goal of recommending expenditure reductions in March 2026. Employing these short‐term strategies right-sized the immediate budget pressures and also provided sufficient breathing room to allow the City to develop thoughtful long‐term solutions that restore structural balance, while still preserving our ability to make progress on the Council’s adopted Major City Goals and maintain the essential services residents rely on every day.
4

Despite budgetary constraints, we have maintained our commitment to deliver high-quality services to the community and make progress on a number of important initiatives and projects in the current year.

Highlights are included below:

Capital Projects & Infrastructure
• Completed the Water Resource Recovery Facility (WRRF) upgrade, the City’s largest capital improvement project to date, upgrading water treatment processes to modern standards and improving water quality released into San Luis Obispo Creek. • Completed construction of the Cultural Arts District Parking Structure, providing additional parking for downtown employees and visitors while supporting the City’s growing Cultural Arts District.
• Initiated the Righetti Community Park project, which will add nearly 11.25 acres of new park amenities including pickleball courts, bike facilities, walking paths, event space, playgrounds, and recreational areas.
• Completed paving and multimodal improvements on the eastern portion of Tank Farm Road, while advancing several alternative transportation projects including the upcoming Higuera Complete Streets Project.
• Advanced design on the Prado Bridge Widening and Prado Road/Highway 101 interchange projects.
• Completed the Mid-Higuera Bypass project in partnership with San Luis Obispo County and the California Department of Water Resources, increasing flood capacity, reducing flood risk, replacing the Bianchi Lane bridge, and improving creek habitat.
• Made substantial progress on the Mission Plaza Enhancements Project, including opening new public restrooms and development of a kiosk café operated by a local business. • Restored all fixed-route transit services to pre-pandemic levels while advancing toward zeroemission operations through deployment of electric buses, charging infrastructure, and new rider technologies.
• Completed the Laguna Lake Bike Park through a unique partnership between Parks & Recreation staff and community volunteers, providing amenities for riders of all skill levels. • Completed multiple public art projects, including updated utility box installations, the Newport Community Mural, and new sculpture installations in partnership with SLOMA. • Cont inued work to secure FEMA and CalOES reimbursement for 2023 Winter Storm response costs, with $1.9 million received and an additional $6.71 million pending Congressional review. 5

Programs, Operations & Community Initiatives
• Developed and delivered a public information campaign to educate voters on the City’s new Citywide Single Vote election system ahead of the November 2026 election. • Launched the “SLO Grown Business Support” program, a free service helping businesses navigate City processes and access resources.
• Hosted three Belonging Project events to foster inclusion, broaden understanding, and strengthen community connection.
• Completed the biennial Community Academy program, with more than 30 residents graduating after learning about City operations, services, and decision-making. • Adopted the new State Fire Hazard Severity Zone maps and developed educational materials to assist residents with home hardening and fire safety standards. • Obtained recognition by the State of California as a “Clean California Community” for efforts to reduce litter, improve public spaces, and foster community pride. • Engaged in state legislative advocacy, submitting more than 35 letters on bills impacting City operations, seeing some smaller but meaningful wins such as the muralist licensing exemption (SB 456).
• Began preparing implementation of major new state mandates, including updated public meeting requirements under SB 707 and new labor related contracting notice rules under AB 339. • Ensured significant reductions in illegal neighborhood parties during St. Patrick’s Day weekend, including complete elimination of illegal street parties, in partnership with Cal Poly. • Reconfigured the Oracle Enterprise Resource Planning (ERP) system to improve organizational efficiency and accuracy.
• Reorganized the Public Works and Utilities departments to improve customer service, operational efficiency, and internal coordination.

Housing & Homelessness
• Continued significant progress toward achieving State Regional Housing Needs Allocation (RHNA) goals, with housing projects advancing at all income levels and 3,190 housing units permitted since 2019.
• Supported the development of the County’s Welcome Home Village, which will provide 14 interim supportive housing units beginning this summer and 40 permanent supportive housing units beginning this fall within city limits.
• Helped deliver and open the Maxine Lewis Grove Apartments at 732 Orcutt Street, providing 39 permanent supportive housing units.
6

• The City and its partners are advancing an additional 357 affordable housing units over the next five years, including 75 permanent supportive housing units. • Proactively worked with internal teams and community partners to close and remediate 258 encampments over the past calendar year, removing more than 44 tons of trash and debris. • The Community Action Team (CAT) and Mobile Crisis Unit (MCU) made 740 unique contacts with individuals experiencing homelessness, including 162 mental health and substance abuse referrals, 111 housing referrals, 49 transports to services, and reunification of 26 individuals with family or support agencies. Through a partnership with the County Behavioral Health Department, Licensed Psychiatric Technicians embedded within CAT and MCU now provide crisis intervention, outreach, engagement, and connections to treatment and support services.

These accomplishments reflect our commitment to achieve the Council’s Major City Goals and complete other important initiatives.

Development of the FY 2026-27 Budget
Development of the FY 2026-27 budget reflected a continuation of the approach used to develop the 2025-27 Financial Plan. Despite better-than-expected revenue performance through the first half of FY 2025-26, staff is closely tracking changes in federal policy and ongoing geopolitical tensions which could impact consumer spending. The long-term forecast for the General Fund has been updated and key assumptions are noted in Section 4 (General Fund Summary) of this document.

Due to the forecasted structural deficit beginning in Fiscal Year 2027-28, in the Fall of 2025, all departments participated in a budget balancing exercise and identified lists of reduction options equivalent to 5% and 8% of their operating budgets. These targets were higher than what was expected to be necessary to address the structural deficit in order to ensure that a sufficient range of options would be developed at one time, minimizing disruption and anxiety for the organization. As result of the budget balancing exercise, staff is recommending $1,663,973 in ongoing expenditure reductions. Of that amount, $576,379 is recommended to be reallocated to public safety overtime, which has been historically underfunded, for a net reduction to the General Fund of $1,087,594. The recommended expenditure reductions represent significant effort by staff and deliberation by the Leadership Team to identify a means for reducing expenditures while minimizing impacts to the community and to staff. Consistent with Council’s adopted Budget Balancing Strategies, recommendations do not reflect across the board reductions. While all departments participated in the exercise and reductions are recommended in each department, there is variability in the amounts and types of reductions between departments based on the anticipated service level impacts, ability to address critical items including core services and Major City Goal work programs, and consideration of the existing constraints within departmental budgets.

In addition to the expenditure reductions previewed on March 3, 2026, all departments were asked to craft FY 2026-27 budgets that kept non-staffing expenditures flat with the current year. The impacts of not adjusting base budgets were untenable in some instances due to cost increases experienced for services that are outside of the City’s control. As a result, staff adjusted recommended expenditure 7

appropriations to account for specific increases. This exercise constrained non-staffing expenditure growth far more in comparison to the past approach of making inflationary adjustments to most expenditures.

The actions taken to reduce expenditures and constrain expenditure growth generated sufficient savings to enable investment towards key initiatives planned for FY 2026-27. For the General Fund, recommended Significant Operating Budget Changes (SOBCs) include piloting a statistically valid community survey, completing a comprehensive user fee study, reclassifying a position in the Fire Department to better support fire vehicle maintenance needs, increasing costs to support various Police system and software needs, mediation services, vehicle telematics and electrical panel inspections. Each of these investments, including additional investments in the City’s Enterprise Funds to deliver key water and wastewater capital projects are discussed in more detail in this document. The total amount recommended for General Fund SOBCs in FY 2026-27 is $297,323- a notable decrease from prior years (ranging from $485,057 in FY 2024-25 to $1,233,124 in FY 2023-24).

Opportunities and Cautious Outlook
San Luis Obispo continues to benefit from a strong local economy, and a disciplined financial framework that prioritizes long-term stability. The City’s early actions over the last two years of cost-containment measures, targeted service realignments, and ongoing revenue monitoring, have positioned us to navigate the economic shifts that may be coming.

Core revenues remain generally stable. Property tax continues to show resilience even as the real estate market moderates, and transient occupancy tax continues to outperform budget. While sales tax growth has slowed compared to the first few years following the passage of the Local Revenue Measure and post-pandemic surges, it remains positive overall, supported by the community’s diverse economic base and steady tourism activity. These trends support our ability to maintain existing services, advance City Council priorities, and invest in infrastructure that residents rely on every day.

Despite these strengths, the March 2026 budget update underscored several important risks. Federal policy changes under consideration, particularly those affecting interest rates, and infrastructure funding, could affect local economic performance and the City’s budget over the coming years. Further global tensions and conflicts in the middle east and elsewhere are increasing economic pressures here at home.

Taken together, their potential impacts warrant caution.

We are also mindful that the growth of our community will necessitate further investment in core programs to ensure that our service levels are not compromised. As noted in the 2025-27 Financial Plan, our obligation to bring a fifth fire station online in the next financial plan period will require an investment of approximately $2 million on an annual basis. In addition to community growth, we need to carefully monitor cost escalation in employee wages and benefits, construction materials, and energy-- areas where inflation has moderated but not fully stabilized. It is also worth noting that our operating reserve is currently below Council-adopted policy levels. As a result, we will need to balance future investment in services or facilities with the need to bring the reserve to policy levels to mitigate against economic risk. 8

These pressures, combined with slowing revenue growth, mean we must remain disciplined in managing spending while prioritizing investments that have long-term community benefit.

I am grateful to the City Council for its leadership and for the thoughtful consideration of staff’s recommendations. In addition, I want to recognize the dedication of our employees who have continued to deliver the City’s services despite the economic uncertainty and ongoing efforts to work towards structural budget balance. I am heartened by our organization’s commitment to delivering high quality services and the engagement of our community as we work to shape a sustainable future for San Luis Obispo.

With gratitude,
Whitney McDonald
City Manager
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Changes from Financial Plan

2. Changes from Financial Plan
Budget Balancing Exercise
Following adoption of the 2025-2027 Financial Plan in June 2025, staff began a budget balancing exercise to develop a plan to address the identified budget deficit. A key part of that plan was operating expenditure reductions. Consistent with the City Council adopted Budget Balancing Strategies, all departments participated in the reduction exercise. Departments were asked to prepare two sets of departmental budget reduction options, equal to 5% and 8% of their respective ongoing operating budget. These targets were higher than what was expected to be necessary to address the structural deficit. This provided staff with flexibility to respond to changes in economic circumstances and to ensure that a sufficient range of options would be developed at one time, to minimize disruption and anxiety for the organization. The Leadership Team carefully reviewed proposed reductions over several days to ensure that the final recommendations would generate sufficient savings while minimizing impacts to the community and the organization.

As a result of the budget balancing exercise, staff is recommending $1,663,973 in ongoing expenditure reductions beginning in FY 2026-27. Of that amount, $576,379 is recommended to be re-allocated to public safety overtime, for a net reduction in spending of $1,087,594. Consistent with Council’s adopted Budget Balancing Strategies, recommendations do not reflect across the board reductions. While all departments participated in the exercise and reductions are recommended in each department, there is variability in the amounts and types of reductions between departments based on the anticipated service level impacts, ability to address critical items including core services and Major City Goal work programs, and consideration of the existing constraints within departmental budgets.

The recommended reductions by department, including the relative size of the reduction as a percentage of current year budgets, and the proposed Full Time Equivalent (FTE) personnel reductions are detailed below. No layoffs are recommended as all reduced positions are vacant.

2.1 Budget Balancing Summary
Department
FY 2025-26
Adopted Budget Reductions % of Budget FTE Reduction
Administration/IT $ 10,983,688 $ 175,700 1.60% 0.50
City Attorney 1,657,575 60,853 3.67% (0.15)
Community Development 7,973,537 170,125 2.13% -
Finance 2,770,356 29,935 1.08% -
Fire 18,214,320 453,246 2.49% 3.00
Human Resources 2,037,833 48,200 2.37% -
Police 25,564,923 123,133 0.48% 1.00
Parks & Recreation 6,141,965 90,042 1.47% -
Public Works 17,428,593 506,240 2.90% -
Utilities 1,381,664 6,500 0.47% -
Total $ 1,663,973 4.35
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Changes from Financial Plan
The recommended expenditure reductions were previewed with the City Council on March 3, 2026, and remain unchanged. Additional detail on the budget reductions, can be found in the tables below:

2.2 Department Detail
Administration & IT
Category Net Reduction Description
Staffing $ 40,697
Eliminate one 0.50 Regular Half-Time FTE Administrative Assistant position in the City Clerk's office. This position, approved by Council during FY 2021-22 to support hybrid public meetings, has remained vacant since its approval and the transition to hybrid meetings in July 2026 will be managed with existing resources.

Contract Services 46,760
Includes reductions to contract grant writing support that has historically not been fully utilized due to the level of staff involvement in the grant process, a shift in funding for some promotional activities from the General Fund to the Tourism Business Improvement District for services provided that are primarily to drive visitation, and the elimination of a tertiary IT ring-down system between fire stations that is not needed due to the reliability of the primary and secondary systems.

Travel & Training 11,500
Includes reductions from Network Services for an informational subscription, Community Services Group Administration for trips and meetings and Economic Development and DEI programs for community outreach and partnerships to align budgets with planned expenditures.

Misc Operating 76,743
The department plans to realize $50,000 in savings by modifying the leases for tower space on Tassajara Peak. The leased tower space provides a redundant microwave link between facilities within City Limits and water facilities outside the City. The City will continue a partnership to co-locate radio facilities with the County to meet the City's needs for tower space, which eliminates the need for the City's current lease with a private corporation. Other significant reductions are also within the Network Services budget and are primarily driven by reductions in software licenses to align with actual utilization. Smaller reductions include aligning actual expenses and budget for the Community Academy and a modest reduction in materials and supplies for Sustainability and Natural Resources.

Total $ 175,700
City Attorney's Office
Category Net Reduction Description
Staffing $ 32,003
A 0.60 Temporary Part-Time FTE Assistant City Attorney position will be replaced with a 0.75 Regular Part-Time FTE Deputy City Attorney position for a net cost savings.

Contract Services 26,000
Elimination of a $20,000 budget for a software that has yet to be implemented and $6,000 for code enforcement matters that can be handled by in-house staff with the increase from 0.60 FTE Assistant City Attorney to 0.75 FTE Deputy City Attorney.

Travel & Training - All travel and training budgets will be maintained.

Misc Operating 2,850 Modest reduction to a contract with the City's attorneys used for various personnel investigations.

Total $ 60,853
11

Changes from Financial Plan
Community Development Department
Category Net Reduction Description
Staffing $ 58,450
Formalize the temporary underfill of the Senior Civil Engineer position with an Engineer I-III position and adjustments made to the paid advisory body members budget based on historical usage.

Contract Services 101,350 Primarily driven by reductions to consulting budgets that are typically used to meet unanticipated needs in the Planning, Engineering, and Building divisions.

Travel & Training 4,825 Reduction to budgets in the Planning and Building divisions typically used to attend conferences.

Misc Operating 5,500 Various reductions to miscellaneous accounts including office supplies, postage, and data processing based on historical usage.

Total $ 170,125
Finance Department
Category Net Reduction Description
Staffing $ - No staffing changes are recommended.

Contract Services 24,335
Roughly half of this reduction is driven by a renegotiated contract for the budget software tool. These savings were generated by a reduction in licenses from unlimited to one per department and with the elimination of several underutilized modules. Additional savings came from various line items including areas where staff could reduce dependency on consultants and minor savings in areas where spending is budgeted annually but not needed every year.

Travel & Training 1,500 Reduction of roughly half of the travel budgets for Finance Administration, Accounting, and Revenue divisions.

Misc Operating 4,100
Includes the elimination of professional photography for annual reports as well as the elimination of print and reproduction budgets. Also includes a significant reduction to memberships and certifications.

Total $ 29,935
Fire Department
Category Net Reduction Description
Staffing $ 453,246
Elimination of 3.00 Regular Full-Time FTE overhire Firefighter positions. While only two Firefighter vacancies exist currently, it is anticipated that at least one Firefighter will qualify for a promotion to Fire Engineer and all three overhire positions will be vacant. The funding from this reduction will be repurposed to help address underbudgeted overtime within the Fire Department, and no net reduction will be realized.

Contract Services - No reductions to Contract Services are recommended.

Travel & Training - No reductions to Travel & Training are recommended.

Misc Operating - No other reductions are recommended.

Total $ 453,246
12

Changes from Financial Plan
Human Resources Department
Category Net Reduction Description
Staffing $ - No Staffing changes are recommended.

Contract Services 46,200
Includes elimination of a redundant 401(a) third party administrator contract, nonrenewal of a software contract that is not meeting its intended purpose, reduction in budget for consultant support of position re-classifications and re-organizations, and a reduction in the department’s budget for preventative mental health services for public safety employees, with the City’s joint powers authority agreeing to cover the cost, maintaining current service levels.

Travel & Training - No reductions to Travel & Training are recommended.

Misc Operating 2,000 Reduction to budget for Public Safety Dispatcher testing software used in the recruitment and selection process based on recent utilization rates.

Total $ 48,200
Police Department
Category Net Reduction Description
Staffing $ 123,133
Elimination of the 1.00 FTE Regular Full-Time Data Analyst position which has been vacant for more than two years. The funding from this reduction will be repurposed to address underbudgeted overtime in the department and no net reduction will be realized.

Contract Services - No reductions to Contract Services are recommended.

Travel & Training - No reductions to Travel & Training are recommended.

Misc Operating - No other reductions are recommended.

Total $ 123,133
Parks & Recreation Department
Category Net Reduction Description
Staffing $ 28,609
Reduction to temporary staffing levels for the Facilities division. Includes a 20% reduction to the budget for Mission Plaza driven by improved logistics of setup and takedown of dining tables and chairs and locking up equipment for cost savings.

Contract Services 12,963
Includes elimination of funding for Strategic Plan Implementation and certain contract classes with very low utilization. Also includes reductions in funding for open space cleanups based on recent historical costs and funding for live music at special events.

Travel & Training 10,200
Includes a reduction to the Ranger Service division budget, aligning funding with the anticipated need for commercial driver’s license (Class A) training, as well as roughly one third of the Parks & Recreation Administration, Community Services, and Aquatics programs' Education & Training budgets.

Misc Operating 38,270
Includes 23 individual line item reductions largely in areas where actual spending has typically been lower than budget or are anticipated to decrease in the future.

Reductions are concentracted in the Jack House, Parks Rangers, and Volunteer Coordinator programs.

Total $ 90,042
13

Changes from Financial Plan
FY 2026-27 Significant Operating Budget Changes (SOBCs) The Supplemental Budget presents an opportunity for departments to adjust their budgets within the limits set forth by the Financial Plan, using expected savings in certain line items to offset increases elsewhere. After the budget reduction exercise, General Fund departments were left with little to no savings to absorb cost increases. In order to minimize the budgetary impact of inflationary cost increases, departments were required to justify each and every requested cost increase rather than applying inflators to certain budget line items.

The annual budget is also the appropriate time for departments to request additional funding for new services, supplies, positions, and programs. Staff carefully evaluate these requests based on determined need, alignment with City Council and community priorities, and available funding. Following is a summary of recommended budget changes to address increases to existing costs, as well as recommended Significant Operating Budget Changes (SOBCs) to add new resources, by fund.

Inflationary adjustments and other cost increases
The inflationary adjustments recommended by staff for non-staffing expenditures are detailed in the table below, organized by fund and department:

Public Works Department
Category Net Reduction Description
Staffing $ 83,981
Elimination of funding for the vacant temporary Engineering Consultant and Landscape Maintenance Contractor positions previously held by retired annuitants, which the City no longer employs.

Contract Services 238,550
Budgets for numerous contracts will be reduced in line with actual spending or in certain cases eliminated. Reductions include outsourced fleet repairs, document shredding, locksmiths, gutter cleaning, electricians, encampent cleanups, and certain landscaping contracts. Eliminations include funding for the porta-potty previously placed directly outside of City Hall.

Travel & Training 9,945
Includes reductions in the Parks Maintenance, Swim Center Maintenance, Urban Forest Services, Facilities Maintenance, Transportation Planning and Engineering, and Fleet divisions.

Misc Operating 173,764
Includes some reductions based on recently observed trends including utilities and chemicals purchases. Also includes elimination of contingencies within certain operating budgets.

Total $ 506,240
Utilities Department (General Fund)
Category Net Reduction Description
Staffing - No staffing changes are recommended.

Contract Services 6,000
Savings were realized through contract renegotiation for a critical stormwater software.

Travel & Training - No Travel & Training changes are recommended.

Misc Operating 500 Office supplies budget will be reduce in line with historical utilization.

Total $ 6,500
14

Changes from Financial Plan

2.3 Inflationary Increases
The process of requesting all cost increases is new to the City. In the past, departments were allowed to apply inflationary adjustments to broad categories of expenditures, or allowed to increase all line items below certain thresholds. By undertaking a close review of each cost increase, this more analytical process saved the General Fund roughly $150,000 as compared to simply applying a three percent increase to all non-staffing budgets. Commentary below describes the recommended cost increases by fund:

General Fund: Cost increases for the General Fund are broad based in nature. Examples include contracts renewed at higher rates, like the Fire Department’s contract with PulsePoint to provide live tracking of incident response to the community, as well as adjustments driven by increased activity, like the cost to print and mail a growing number of reports and notices.

Water Fund: Budget increases for the Water Fund are primarily attributable to source of supply, or the City’s cost to procure water. Increased capital costs at the Whale Rock Reservoir are the most significant driver of this increase.

Sewer Fund: The contract for biosolids hauling at the Water Resource Recovery Facility was recently advertised and the lowest qualified proposal was higher than the last contract. This cost increase also reflects contractual fuel surcharges based on rising diesel costs.

Parking Fund: Staff recommend increasing the Parking Fund’s budget for credit card processing fees to accommodate increased revenue from the new Cultural Arts Parking District Structure.

Transit Fund: Recommended increases for the fund include inflationary adjustments for the price of diesel fuel as well as the cost of increased mileage from implementation of the Short-Range Transit Plan and a new contract for transit services including drivers, dispatch, maintenance, and operations.

Fund & Department
General Fund
Administration & IT $ 53,100
Community Development 4,667
Finance 9,127
Fire 43,612
HR 5,000
Police 111,812
Public Works 117,000
General Fund Total $ 344,318
Water Fund $ 655,269
Sewer Fund $ 192,500
Parking Fund $ 80,867
Transit Fund $ 258,612
15

Changes from Financial Plan
New Funding Recommendations
Requests for new funding were carefully scrutinized based on available funding both in the next fiscal year and in the long term. The following table details the recommended budget changes by fund and department and includes a summary of one-time vs ongoing funding:

2.4 New Initiatives
The total costs described above indicates the net cost, or the cost after offsets. Offsets include existing budget for similar services, or unrelated operating expenditures that will be eliminated.

Not Recommended: In light of available funding, not all items requested by departments were included in staff’s recommendation. The following table highlights the Police Department’s request for a 1.00 FTE dispatcher position which staff do not recommend in the FY 2026-27 budget, though the position will be revisited in the next budget year as it was identified as a current need in the Department’s recent staffing study presented to Council on January 14, 2025:

Department Description Duration Net Cost FTE
General Fund
Administration & IT Pilot - Statistically Valid Community Survey One-time $ 40,000 0.00 Finance User Fee Study One-time 60,000 0.00
Fire Mechanic Helper Reclass Ongoing 12,578 0.00
Police Cellebrite Software Upgrade Ongoing 9,745 0.00
Police Mediation Services Ongoing 30,000 0.00
Police Body Worn and In Car Camera Software Ongoing 95,000 0.00 Public Works Vehicle Telematics Ongoing 38,000 0.00
Public Works Electrical Panel Inspections Ongoing 12,000 0.00 General Fund Total $ 297,323
One-time 100,000 0.00
Ongoing 197,323 0.00
Water Fund
Vehicle Telematics Ongoing $ 10,000 -
Water Treatment Plant Coverage One-time 148,500 -
Utilities Special Projects Manager Ongoing - 0.50
Water Fund Total $ 158,500
One-time 148,500 0.00
Ongoing 10,000 0.50
Sewer Fund
Vehicle Telematics Ongoing $ - 8,000
Utilities Special Projects Manager Ongoing - 0.50
Sewer Fund Total $ 8,000
One-time - 0.00
Ongoing 8,000 0.50
Parking Fund
Parking Compliance Officer Conversion Ongoing $ 14,731 (0.50) Parking Fund Total $ 14,731
One-time - 0.00
Ongoing 14,731 -0.50
16

Changes from Financial Plan

2.5 Not Recommended
Department Description Duration Net Cost FTE
General Fund
Police Dispatcher Ongoing $ 118,877 1.00
General Fund Total $ 118,877 1.00
Ongoing 118,877 1.00
One-time - 0.00
17

Consolidated Financials – All Major Funds Combined

3. Consolidated Financials – Major Funds Combined
The City uses separate funds to finance its operations. There are five major funds: the General Fund and four enterprise funds- the Water Fund, Sewer Fund, Parking Fund, and Transit Fund. The General Fund is the main operating fund for general government operations (public safety, parks and recreation, public works, community development and general government services) and is primarily funded through various tax revenues and user fees that are intended to recover the cost of providing specific services that provide an individual benefit. Enterprise funds are used to account for services that run more like a business, and are supported by rates and charges paid by the users of those services.

The five major funds are consolidated here and reported on in detail individually throughout the FY 2026- 27 Budget Supplement. Detailed information on the General Fund can be found in the General Fund Summary. More information on the Water and Sewer Funds can be found in the Utilities Department Summary. The Public Works Department Summary contains additional information on the Parking and Transit funds.

Revenues and Expenditures

3.1 Consolidated Revenue
The Citywide budget for FY 2026-27 represents a return to growth for nearly all revenue categories. FY 2024-25 included revenue from long-term financings in the Sewer and Parking funds as well as significant non-recurring revenue streams in the General Fund including grants and elevated funding from investments and mutual aid that led to a decline in revenue for FY 2025-26. Growth in FY 2026-27 is a result of typical economic expansion and inflation.

Actuals Budget Supplement
Citywide FY 2024-25 FY 2025-26 FY 2026-27
Tax & Franchise Revenue $ 104,775,406 $ 105,593,017 $ 109,279,584 Fee & Other Revenue
General Fund 21,988,161 11,638,024 12,530,712
Water Fund 36,128,340 34,409,452 32,178,522
Sewer Fund 25,023,194 21,768,825 23,320,050
Parking Fund 10,783,966 9,575,956 10,444,030
Transit Fund 12,203,451 12,028,459 14,463,072
Other Funds 11,116,639 10,627,752 10,939,802
Total Revenue $ 222,019,157 $ 205,641,485 $ 213,155,771 YoY Change 9% -7% 4%
18

Consolidated Financials – All Major Funds Combined

3.2 Consolidated Expenditures by Fund:

Despite increased revenue in FY 2026-27, Citywide expenditures are projected to continue to decline from their peak in FY 2024-25. This is driven largely by completion of major multi-year projects in the Sewer and Parking funds and a one-time storm project in FY 2025-26 in the Water Fund. Declines in the General Fund are attributable to one-time expenditures of unassigned fund balance in FY 2024-25 and FY 2025-26 that may repeat but will not be budgeted for until they occur.

3.3 Consolidated Expenditures by Category:

Staffing expenditures grew rapidly in FY 2025-26 due to a higher than typical $5.1 million Additional Discretionary Payment to CalPERS as directed by Council with the FY 2025-26 Second Quarter Budget Report. The budget in FY 2026-27 is lower than typical due to the inclusion in the budget of an assumption that 3% of staffing budgets will go unspent due to vacancies. This assumption has always been included in the General Fund long-term forecast and is incorporated into the budget for FY 2026-27 for consistency.

Other Operating Expenditures are projected to decrease in FY 2026-27 due to the above-mentioned storm damage project in the Water Fund, which was paid consistent with the City’s operating agreement with the County, as well as the assumption that all balances on open purchase orders will be spent in FY 2025-

26. Capital Expenditures are projected to increase due to a one-time payment of $5.1 million from the General Fund to close out the Winter 2023 Emergency Storm Recovery project. The Enterprise Funds are forecasted to continue their decline in capital expenditures in line with major project completion, most notably the Cultural Arts District Parking Structure and the Water Resource Recovery Facility.

Debt Service is projected to remain steady as legacy issuances are repaid and no new debts are budgeted for in FY 2026-27.

Actuals Budget Supplement
Citywide FY 2024-25 FY 2025-26 FY 2026-27
General Fund $123,412,930 $127,344,360 $126,252,275
Water Fund 34,079,992 40,025,258 34,609,926
Sewer Fund 33,602,345 29,034,524 28,169,737
Parking Fund 36,093,130 11,514,112 10,300,258
Transit Fund 12,171,832 9,615,713 14,461,345
Other Funds 7,974,311 9,817,626 10,949,203
Total $247,334,538 $227,351,592 $224,742,744
YoY Change 7% -8% -1%
Actuals Budget Supplement
Citywide FY 2024-25 FY 2025-26 FY 2026-27
Staffing $ 90,056,786 $ 98,067,114 $ 99,049,994
Other Operating Expenditures 60,137,192 66,827,199 59,950,340 Capital Expenditures 82,374,507 47,124,561 50,726,749
Debt Service 14,766,053 15,332,717 15,015,661
Total $ 247,334,538 $ 227,351,592 $ 224,742,744
YoY Change 7% -8% -1%
19

Consolidated Financials – All Major Funds Combined

3.4 Consolidated Sources and Uses:

This table includes all budgeted City funds and is intended to provide insights into the total consolidated Citywide budget and how use of fund balance impacts budgets.

Use of fund balance in the table above indicates when expenditures are paid for with fund balance rather than current year revenues. This is typical for multi-year projects where money is borrowed or otherwise set aside at the beginning of a project and spent down throughout project completion. For example, the Parking Fund borrowed money in FY 2023-24 which fell to fund balance at year end and was used over the next two years to pay for construction of the Cultural Arts District Parking Structure.

Fund balance is also used to pay for the typical year-to-year carryover of encumbrances for multi-year contract services engagements.

Actuals Budget Supplement
Citywide FY 2024-25 FY 2025-26 FY 2026-27
Financing Sources
Tax & Franchise Revenue $ 104,775,406 $ 105,593,017 $ 109,279,584 Fee & Other Revenue
General Fund 21,988,161 11,638,024 12,530,712
Water Fund 36,128,340 34,409,452 32,178,522
Sewer Fund 25,023,194 21,768,825 23,320,050
Parking Fund 10,783,966 9,575,956 10,444,030
Transit Fund 12,203,451 12,028,459 14,463,072
Other Funds 11,116,639 10,627,752 10,939,802
Use of Fund Balance 25,315,381 21,710,107 11,586,972
Total Sources $ 247,334,538 $ 227,351,592 $ 224,742,744 Financing Uses by Function
General Fund $ 123,412,930 $ 127,344,360 $ 126,252,275
Water Fund 34,079,992 40,025,258 34,609,926
Sewer Fund 33,602,345 29,034,524 28,169,737
Parking Fund 36,093,130 11,514,112 10,300,258
Transit Fund 12,171,832 9,615,713 14,461,345
Other Funds 7,974,311 9,817,626 10,949,203
Total Uses by Function $ 247,334,538 $ 227,351,592 $ 224,742,744 Financing Uses by Type
Staffing $ 90,056,786 $ 98,067,114 $ 99,049,994
Other Operating Expenditures 60,137,192 66,827,199 59,950,340 Capital Expenditures 82,374,507 47,124,561 50,726,749
Debt Service 14,766,053 15,332,717 15,015,661
Total Uses by Type $ 247,334,538 $ 227,351,592 $ 224,742,744 20

Consolidated Financials – All Major Funds Combined

3.5 Operating Reserves
Operating reserves are funds set aside to continue to fund operations in the event of an emergency causing the City to exceed its expenditures budget or in the event revenues are not realized as forecasted. The City Council’s adopted reserve policies call for each major fund to maintain a reserve equivalent to 20% of the fund’s operating budget.

The table below details operating reserves for the General Fund and four enterprise funds:

Operating reserve levels are set at the beginning of the year based on the initial budget. As such, the General Fund is at its 20% policy reserve level for the current year and falls to 17% in FY 2026-27 as the Fund does not currently have a reserve against the annual Unfunded Accrued Liability payments for its CalPERS pension. Restoring the reserve to 20% funded will be a priority for allocation of future unassigned fund balance and/or allocation of future reimbursements from the Federal Emergency Management Agency (FEMA) for unanticipated costs incurred related to the 2023 Winter Storms.

All other major funds are at their policy reserve levels.

Actuals Budget Supplement
Operating Reserve FY 2024-25 FY 2025-26 FY 2026-27
General Fund 14,607,203 14,974,278 15,438,344
% of Operating Budget 20% 20% 17%
Water Fund 5,545,556 6,391,710 5,767,977
% of Operating Budget 20% 20% 20%
Sewer Fund 4,145,169 4,251,397 4,227,872
% of Operating Budget 20% 20% 20%
Parking Fund 1,557,229 1,529,383 1,598,678
% of Operating Budget 20% 20% 20%
Transit Fund 1,026,210 1,198,438 1,474,016
% of Operating Budget 20% 20% 20%
21

General Fund

4. General Fund Summary
The City has nine departments that provide a full suite of municipal services to the community, plus two branches within the Public Works and Utilities Department. E i ght of th e de partments ar e bu dgeted entirely in the General Fund, and certain programs in the Public Works and Utilities Department are also budgeted in the General Fund. Other programs in Public Works and Utilities including Parking, Transit, Water and Sewer are budgeted in Enterprise Funds which are presented in Section 10:

Department Summaries.

Revenue
The 2025-27 Financial Plan was developed immediately before changes in Federal trade policy led to concerns about economic growth. During development of the FY 2026-27 budget, uncertainty remains elevated due to geopolitical tensions.

Despite this, FY 2025-26 revenue performance has held steady. Cyclical revenue streams like Transient Occupancy Tax have grown more quickly than expected and, for the General Fund as a whole, revenue reductions from the Financial Plan are not necessary. Discussion on specific changes can be found below, and more detailed explanations on forecasting methodology can be found in the 2025-27 Financial Plan.

4.1 General Fund Revenue
Actuals Budget Supplement
General Fund FY 2024-25 FY 2025-26 FY 2026-27
Tax & Franchise Revenue
Sales Tax $ 54,357,111 $ 55,470,441 $ 56,580,171
Property Tax 24,923,847 25,944,966 27,112,490
Transient Occupancy Tax 11,417,888 11,099,705 11,495,652 Utility User Tax 7,501,436 6,605,306 7,399,048
Business Tax 3,138,271 3,230,170 3,262,472
Franchise Fees 2,622,351 2,242,429 2,664,697
Cannabis Tax 814,502 1,000,000 765,054
Total Tax & Franchise Revenue 104,775,406 105,593,017 109,279,584 YoY Change 4% 1% 3%
User Fees
Development Review 5,697,332 4,606,812 5,674,691
Parks & Recreation 2,643,907 2,280,283 2,320,590
Fire 3,331,998 1,759,183 1,744,354
Police 834,584 690,200 690,200
Business Licenses 792,548 632,470 569,125
Total User Fees 13,300,370 9,968,947 10,998,960
YoY Change 5% -25% 10%
General Government 7,778,702 1,669,077 1,531,752
2023 Storm Reimbursement 909,090 - -
Total Revenue $ 126,763,568 $ 117,231,041 $ 121,810,296 YoY Change 6% -8% 4%
22

General Fund
Sales Tax (including Local Revenue Measure): Immediately after development of the Financial Plan, the City’s sales tax consultant (HdL) advised that drastic changes in Federal trade policy would present risk of up to $1.3 million to the sales tax forecast for FY 2025-26. Since then, actual impacts have been less severe than expected and the current forecast is $0.5 million lower than the Financial Plan.

Property Tax: With the 2025-27 Financial Plan, staff revised forecasting methodology based on historically observed trends rather than relying on the County Assessor’s forecasts, which have proved conservative in recent years. While this does increase risk to revenue attainment, actual results have trended in line with staff projections.

Transient Occupancy Tax (TOT): This revenue stream was adjusted modestly upwards based on continued growth in local tourism and new hotels opening in the City.

Utility User Tax (UUT): Historically, UUT revenue has been highly volatile and sensitive to the market cost of commodities, including natural gas. Staff revised UUT forecast upwards based on recent trends. Staff note that despite increases in commodity costs globally due to the war in Iran, domestic natural gas prices are well below prior year levels and household energy costs should not be expected to rise.

Business Tax: This revenue stream is budgeted to increase from FY 2024-25 actuals at inflationary rates.

Staff also made minor downwards adjustments to account for the acquisition of taxpaying businesses by exempt organizations.

Franchise Fees: Franchise Fees have been adjusted modestly upwards based on recent trends. Changes to solid waste collection fees were the primary driver of this increase.

Cannabis Tax: This revenue stream declined sharply in FY 2024-25 and has continued to decline in the current year. Staff adjusted the budget downwards from Financial Plan levels with the assumption that revenue grows from last twelve month actuals at inflationary rates.

Development Review Fees: 2025-27 Financial Plan development coincided with the two lowest revenue quarters for this revenue stream in recent history. Revenues inflected in the Third Quarter of FY 2024-25, immediately after Financial Plan development, and staff expect to exceed budget by more than $1 million in the current year. The FY 2026-27 budget for these fees was increased accordingly, however, this revenue remains highly volatile. If revenues exceed budget in FY 2026-27, the Community Development Department will likely need to increase expenditures to meet demand through future budget amendment requests.

Other User Fee Revenue: User fees have trended above budget during FY 2025-26, largely attributable to non-recurring revenues. Parks and Recreation fees have benefited from a revised Kinder Gap Care agreement that staff do not believe will be continued in the next fiscal year. Police and Fire revenue typically includes grants and mutual aid that is not budgeted until received, making revenue forecasts appear more conservative than they are. Fee revenue budgets other than Development Review were not adjusted from the Financial Plan.

General Government: This line item is primarily non-recurring in nature and includes grants, which generally incur unbudgeted expenditures, and investment income, which is inherently unreliable as an ongoing funding source. Budgets are set conservatively to avoid structural deficit creation. 23

General Fund
Storm Reimbursement: This line item accounts for the potential receipt of reimbursement from the Federal Emergency Management Agency (FEMA) and California Office of Emergency Services (CalOES) for the unbudgeted costs that the City has incurred over the last several years, due to the 2023 Winter Storm events. The timing and amount of reimbursement is uncertain and outside of the City’s control, so the budget does not rely on reimbursement to fund operations in the current year or FY 2026-27.

Expenditures
Inflation has created cost pressures throughout the budget, and the cost to attract and retain a skilled workforce continues to increase. The budget is an important tool to control costs, and the current budget was developed with careful scrutiny of every cost increase.

The most salient risk to the expenditure budget is the cost of energy. At the time of budget development, gasoline prices in California are 28% higher than a year ago and diesel costs are up 51% year over year.

Staff expect that this will flow through to other costs, including contract services, construction, and materials. If these prices remain elevated, additional funding may be necessary to deliver existing service levels and planned projects.

4.2 General Fund Expenditures by Type
The table below details operating expenditures for the General Fund by type. The information in the table below reflects the initial budget for FY 2025-26 in order to exclude the current year budget carried over from prior years due to encumbrances. This provides a clearer view of trends in the budget.

Staffing is projected to grow less than 2% year over year. These projections include an assumed savings from vacant positions equal to 3% of staffing budgets, excluding pension debt payments. A vacancy assumption was previously factored into the long-term forecast, which is used to determine that the budget is balanced; however, the FY 2026-27 budget has built the salary savings assumption into the budget directly for clarity purposes. If actual savings from vacancies are less than 3%, the fund will exceed its staffing budget.

Other operating expenditures are projected to decline by 3%. This is largely a result of the budget balancing exercise but also reflects the expiration of one-time funding in FY 2025-26 and cost control efforts in development of the FY 2026-27 budget. Operating budgets will have less flexibility going forward and significant unexpected expenditures may require reallocation from other planned expenditures or appropriation of reserves.

Actuals Budget Supplement
General Fund FY 2024-25 FY 2025-26 FY 2026-27
Staffing $ 75,489,526 $ 78,762,988 $ 80,187,906
YoY Change 10% 4% 2%
Other Operating Expenditures 18,291,470 18,493,193 17,908,102 YoY Change -1% 1% -3%
Total $ 93,780,996 $ 97,256,180 $ 98,096,008
YoY Change 8% 4% 1%
24

General Fund

4.3 General Fund Expenditures by Department
The table below includes the General Fund portion of operating budgets of all departments, ordered by FY 2026-27 funding:

Notably, the non-departmental budget is negative due to the inclusion of the vacancy assumption.

Additional information on departmental budgets can be found in Section 9: Department Summaries.

Interfund Transfers
In order to align the costs and benefits of various City expenditures and support the goals and policies of the City Council, transfers are made between funds. The following table shows the various funds making transfers to the General Fund. Additional detail on each transfer can be found below:

Actuals Budget Supplement
Department FY 2024-25 FY 2025-26 FY 2026-27
Police $ 24,657,118 $ 25,598,563 $ 26,884,201
Fire 18,787,150 18,062,912 18,769,292
Public Works 16,581,895 17,428,593 17,922,061
Administration & IT 11,565,191 11,319,639 11,633,200
CDD 7,864,816 8,374,657 8,667,656
Parks & Rec 6,014,160 6,222,696 6,519,221
Finance 2,686,591 2,770,356 3,018,159
HR 2,085,986 2,037,833 2,117,437
City Attorney 1,652,744 1,657,575 1,972,567
Utilities 1,534,804 1,381,663 1,526,352
Non-Departmental 350,542 2,401,694 (934,139)
Total $ 93,780,996 $ 97,256,180 $ 98,096,008
YoY Change 8% 4% 1%
25