Santa Cruz City Council
March 25, 2025

CITY COUNCIL AGENDA
Regular Meeting - March 25, 2025
1:30 P.M. CLOSED SESSION, ZOOM/COURTYARD CONFERENCE ROOM 2:30 P.M. ORAL COMMUNICATIONS, CONSENT, GENERAL BUSINESS AND PUBLIC

HEARINGS, ZOOM/COUNCIL CHAMBERS
The meeting may be viewed remotely, using any of the following sources:
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Correspondence to be included in the agenda packet must be received by 5:00 pm on Monday, March 24th
PLEASE NOTE:
 Council may take a break(s) as needed.
 Requests for extra speaking time on items other than Oral Communications must be made by 5:00 p.m. on Sunday, March 23rd by emailing the Mayor and the City Clerk.

Approval will be confirmed via email.
[email protected] [email protected]
March 25, 2025 City Council 2
The City of Santa Cruz does not discriminate against persons with disabilities. Out of consideration for people with chemical sensitivities we ask that you attend fragrance free. Upon request, the agenda can be provided in a format to accommodate special needs. Additionally, if you wish to attend this public meeting and will require assistance such as an interpreter for American Sign Language, Spanish, or other special equipment, please call the City Clerk’s Department at 420-5030 at least five days in advance so that we can arrange for such special assistance, or email [email protected]. The CalRelay system number: 1-800-735-2922.

Si desea asistir a esta reunión pública y necesita ayuda - como un intérprete de lenguaje de señas americano, español u otro equipo especial - favor de llamar al Departamento de la Secretaría de la Ciudad al 420-5030 al menos cinco días antes para que podamos coordinar dicha asistencia especial o envié un correo electrónico a [email protected]. El número del sistema Cal-Relay es: 1-800-735-2922.

Agenda and Agenda Packet Materials: The City Council agenda and the complete agenda packet containing public records, which are not exempt from disclosure pursuant to the California Public Records Act, are available for review on the City’s website:
www.cityofsantacruz.com/government/city-council-meetings and at the Office of the City Clerk located at 809 Center Street, Room 8, Santa Cruz, California, during normal business hours.

Agenda Materials Submitted after Publication of the Agenda Packet: Pursuant to Government Code §54957.5, public records related to an open session agenda item submitted after distribution of the agenda packet are available at the same time they are distributed or made available to the legislative body on the City’s website at: www.cityofsantacruz.com/government/city-councilmeetings and are also available for public inspection at the Office of the City Clerk, 809 Center Street Room 8, Santa Cruz, California, during normal business hours, and at the Council meeting.

Need more information? Contact the City Clerk’s office at 831-420-5030.

Closed Session
1:30 PM
Statements of Disqualification

1. Conference with Legal Counsel – Liability Claims (Government Code §54956.95)
1) Claimant: Staci Pagaling
2) Claimant: Francis David Magnuson
3) Claimant: John Clifford Edwards
Claim against the City of Santa Cruz

2. Real Property Negotiations (Government Code §54956.8) Property: Approximately 8.15 acres located on Mount Hermon Road in Scotts Valley, CA
APNs: 022-721-07, 022-721-08, 022-721-09
Owner: City of Santa Cruz
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and City of Scotts Valley Under Negotiation: Price, terms of payment, or both
March 25, 2025 City Council 3
Closed Session (continued)

3. Conference with Labor Negotiators (Government Code §54957.6) SEIU Temporary Employees
SEIU Service Employees
Mid Managers, OE3
Supervisors, OE3
Fire Management
Fire, IAFF
Police Management
Police Officers Association
Executives
City Negotiator - Sara De Leon
March 25, 2025 City Council 4
City Council
2:30 PM
Call to Order
Roll Call
Oral Communications Announcement – Members of the public may address Council on matters not on the agenda, but within the jurisdiction of the Council. 30 minutes is allocated for Oral Communications. No extra time for groups will be granted.

Oral Communications
Presentations

4. Mayoral Proclamation Declaring April as Arts and Culture Month

5. Mayoral Proclamation Declaring March as Procurement Month

6. Mayoral Proclamation Declaring March 30, 2025, as Eid al-Fitr Day The below item will be heard at or around 4:00 PM

7. Outgoing Delegation to Shingu
Presiding Officer's Announcements
Statements of Disqualification
Additions and Deletions
City Attorney Report on Closed Session
March 25, 2025 City Council 5
Council Meeting Calendar

8. The City Council will review the meeting calendar attached to the agenda and revise it as necessary.

Consent Agenda

9. Resolution Extending the Emergency Declarations in Connection with the 2022/2023 Winter Storms and 2023/2024 Winter Storms (CA/CM) LOCATION: Citywide
Resolution extending by sixty days the Local Emergency Declarations in connection with the 2022/2023 and 2023/2024 winter storms.

10. Minutes of the March 11, 2025 City Council Meeting (CC) LOCATION: None
Motion to approve as submitted.

11. Nomination for Reappointment of Carol Berg to the Housing Authority Board of Commissioners (CC)
LOCATION: Countywide
Motion to nominate Carol Berg for reappointment to the County Housing Authority Board of Commissioners with a term expiring on May 21, 2029.

12. Memorandum of Understanding between the City of Santa Cruz, Digital NEST, and Santa Cruz Works for the Implementation of a Tech Apprenticeship Workforce Development Program (EDH)
LOCATION: Citywide
Authorize the City Manager, or designee, to execute the Memorandum of Understanding between the City of Santa Cruz, Digital NEST and Santa Cruz Works for the implementation of a tech apprenticeship workforce development program with funding awarded from the Affordable Housing and Sustainable Communities Program.

March 25, 2025 City Council 6
Consent Agenda (continued)

13. Purchase Sale Agreement Between the City of Santa Cruz and the City of Scotts Valley for the City-owned Property Located at the Northwest Corner of Mount Hermon Road and Kings Village Road in the City of Scotts Valley, aka Skypark, APNs 022-721-07, 022-721-08, and 022-721- 09 (EDH)
Location: None
Motion to adopt a resolution authorizing and directing the City Manager, or designee, to execute a Purchase Sale Agreement, along with modifications of a non-substantive or conforming nature, between the City of Santa Cruz and the City of Scotts Valley for the City of Santa Cruz-owned property located at the Northwest Corner of Mount Hermon Road and Kings Village Road in the City of Scotts Valley, in a form to be approved by the City Attorney, and to take any further actions and execute any other related documents necessary to conclude the sale.

14. Second Supplement to the Amended and Restated Joint Exercise of Powers Agreement for the Santa Cruz Public Libraries Facilities Financing Authority (EDH/CM)
LOCATION: District 4
Motion to approve the Second Supplement to the Amended and Restated Joint Exercise of Powers Agreement (JPA) for the Santa Cruz Public Libraries Facilities Financing Authority (LFFA) and authorize the City Manager, or designee, to execute the supplement agreement and/or any associated documents.

15. Award Contracts for Aggregate Materials and Road Maintenance Materials (FN)
LOCATION: Citywide
Motion to award contracts for the citywide purchase of on-call Aggregate Materials and Road Maintenance Materials to Graniterock Company, Watsonville, California, Rapid Trans LLC., Oakland, California and Green Dream International, Erie, Pennsylvania in the amount not to exceed $2.3 million over five years and to authorize the City Manager to execute an agreement in a form approved by the City Attorney with Graniterock Company, Watsonville, California, Rapid Trans LLC., Oakland, California and Green Dream International, Erie, Pennsylvania.

March 25, 2025 City Council 7
Consent Agenda (continued)

16. Liability Claims Filed Against the City of Santa Cruz (FN) LOCATION: None
Motion to reject the liability claims of 1) Staci Pagaling, 2) Francis David Magnuson, and 3) John Clifford Edwards, based on staff recommendation.

17. Annual Housing Element and General Plan Progress Report (PL) LOCATION: Citywide
Motion to accept the 2024 General Plan and Housing Element Annual Progress Reports, and direct staff to submit the reports to the Governor’s Office of Planning and Research and the California Department of Housing and Community Development.

18. Museum of Natural History Building Permit and Application Fee Waivers (PR)
LOCATION: District 2
Motion to approve fee waivers related to application fees and building permits fees for the Museum of Natural History building improvement projects.

19. Downtown Intersection Improvements Plan Revisions, Environmental Determination: Statutory Exemption PRC 21080.25(b)(1-4) and Metro Transit Station Improvements Agreement (PW)
LOCATION: District 4
Motion to:
1) Approve the revised concept striping plan for the Downtown Intersection Improvements (c401903) project along Front Street between Laurel Street and Soquel Avenue;
2) Authorize the City Manager to enter into the Metro Transit Station Improvements Agreement with Metro and Downtown Santa Cruz Developer, LLC, including any amendments and related documents in accordance with the City building permit(s) in a form to be approved by City Attorney; and
3) Approve the CEQA Determination that the Downtown Intersection Plan improvements qualify for a Statutory Exemption under PRC 21080.25(b)(1-4).

March 25, 2025 City Council 8
Consent Agenda (continued)

20. Rail Trail Segments 8 and 9 Budget Adjustment (PW)
LOCATION: Districts 2 and 4
Motion to adopt a resolution amending the FY 2025 budget to appropriate funds in the amount of $750,000 from Measure D to the Monterey Bay Sanctuary Scenic Trail (Rail Trail) Segments 8 and 9 (c401804).

21. Award Contract for Bergkamp Patching Truck – Budget Adjustment (PW) LOCATION: Citywide
Motion to:
1) Award a contract for purchase of a Bergkamp FP5 Flameless Patcher from Bergkamp Pavement Management Solutions (Salina, KS) in the amount of $217,305; and
2) Adopt a resolution amending the FY 2025 budget to appropriate funds budgeted in Fund 101 in the amount of $17,305 to the Street Maintenance & Rehabilitation Fund, Fund 317.

22. City of Santa Cruz and Soquel Creek Water District Intertie Mutual Aid Agreement (WT)
LOCATION: Citywide
Motion to:
1) Authorize the City Manager to execute the agreement between the City of Santa Cruz and the Soquel Creek Water District, providing emergency water services between the two parties, upon the terms and conditions as set forth in the said agreement; and
2) Approve the CEQA Determination.

March 25, 2025 City Council 9
Consent Agenda (continued)

23. Modifications to City Council Forest Management Policies for Water Department Watershed Lands (WT)
LOCATION: Citywide
Motion to adopt a resolution repealing City Council Policy 11.3 - Timber Harvests in Watershed Area and Preservation of Old Growth Trees, and replacing with City Council Policy 11.3 – Forest Management of Water Department Watershed Lands, which includes a) additional old growth tree characteristics that will facilitate their protection and b) the ability to commercialize forest products in alignment with c) the requirement to reinvest revenue from such commercialization into other Water Department watershed restoration work.

End Consent Agenda
Public Hearing

24. 2nd Reading and Final Adoption of Ordinance No. 2025-06 Sidewalk Vending Administrative Amendments. Applicant: City of Santa Cruz.

CEQA: Exempt per 15061(b)(3). (PL)
LOCATION: Citywide
Motion to adopt Ordinance No. 2025-06 acknowledging the California Environmental Quality Act (CEQA) exemption and amending Santa Cruz Municipal Code (SCMC) Chapter 5.82 (“Sidewalk Vending”) to clarify the definition of an “Enforcement Official,” to specify the time period within which a vendor may receive citations before a permit may be revoked, to reduce the number of citations resulting in impoundment from four to three, to clarify and update restricted vending times and locations, and to provide clearer distinctions between roaming and stationary vending locations.

March 25, 2025 City Council 10
General Business

25. Resolution of Intention to Form an Enhanced Infrastructure Financing District (EIFD); Establish the Santa Cruz EIFD Public Finance Authority; and Appointment of Members from the City Council to the EIFD Public Finance Authority - Budget Adjustment (EDH)
LOCATION: Citywide
Motion to:
1) Adopt a resolution declaring intention to establish the Santa Cruz Enhanced Infrastructure Financing District (EIFD) and establishing the Santa Cruz EIFD Public Financing Authority (PFA);
2) Appoint three members of the City Council to the Public Financing Authority Board, and appoint one member of the City Council as alternate Board member;
3) Authorize the City Manager, or designee, to execute a contract amendment with Kosmont & Associates, Inc. dba, Kosmont Companies, in an amount not to exceed $53,154, with the total contract amount not to exceed $150,000, for supporting the implementation phase of the EIFD; and
4) Adopt a resolution amending the Fiscal Year 2025 budget to appropriate funds in the amount of $54,000 for the implementation phase of the EIFD.

26. Santa Cruz Community Farmers’ Market Interim Location and Initial Direction on Future Concept Plans for the Re-Use of the Existing Library Site – Budget Adjustment (EDH)
LOCATION: District 4
Motion to:
1) Adopt a resolution appropriating $250,000 from the Economic Development Trust Fund to fund site furnishings to activate Lot 16 for the Farmers’ Market and $150,000 from the Infill and Infrastructure Grant approved budget to fund needed site infrastructure; and 2) Select a preferred option for further development of the permanent site concept for re-use of the existing library site and provide further direction regarding density and height of housing, if applicable.

March 25, 2025 City Council 11
General Business (continued)

27. User Charges for Wastewater Services – Proposed Five-Year Increase (PW)
LOCATION: Citywide
Motion to:
1) Set a Public Hearing on the proposed increase of Wastewater User Rates for June 10, 2025;
2) Approve mailing of written notices to Wastewater user customers and property owners regarding the proposed increases and Public Hearing; and
3) Update the Wastewater capacity charges.

Adjournment
March 25, 2025 City Council 12

INFORMATION ITEMS PREVIOUSLY DISTRIBUTED TO CITY COUNCILMEMBERS ADDENDUM TO CITY COUNCIL AGENDA – MARCH 25, 2025

28. Library: Incident Report – Santa Cruz Public Library 1st & 2nd Quarter 2024-2025 - 2/19/25 (LBFYI 020)

29. Parks and Recreation Department: FY 2024 Parks and Recreation Draft Annual Report - 3/13/25 (PKFYI 082)

MAYOR'S PROCLAMATIONS
ADDENDUM TO CITY COUNCIL AGENDA – MARCH 25, 2025

30. Proclaiming March 6, 2025 as “Vinita Fernandes Hunger Fighter of the Year Day” and encouraging all citizens to join in honoring her as an inspiring example of an individual whose efforts are supporting the Second Harvest Food Bank’s mission, “to educate and involve individuals to end hunger and alleviate malnutrition in our communities,” and expressing heartfelt appreciation for her contributions on behalf of those in need.

31. Proclaiming March 6, 2025 as “Diana Valadez Hunger Fighter of the Year Day” and encouraging all citizens to join in honoring her as an inspiring example of an individual whose efforts are supporting the Second Harvest Food Bank’s mission, “to educate and involve individuals to end hunger and alleviate malnutrition in our communities,” and expressing heartfelt appreciation for her contributions on behalf of those in need.

32. Proclaiming the month of April 2025 as “Sexual Assault Awareness Month” and encouraging all residents to learn more about how to end sexual assault, sexual harassment, and violence against women in Santa Cruz through prevention, programs, and public policy.

33. Proclaiming March 14, 2025 as “Arbor Day” and encouraging all citizens to join in recognizing the important work and contributions of the Cabrillo College Horticulture Program and the City of Santa Cruz Parks and Recreation Department and urging students and citizens to plant trees to offset climate change and enhance our local environment and natural world for our present and future generations.

March 25, 2025 City Council 13
Advisory Body Appointments
The following positions are either currently vacant or the terms are due to expire. Council will make appointments at a future meeting.

Board of Building and Fire
Appeals
One opening – 4-year term, at-large
nomination.

County Housing Authority Board One opening – 4-year term, at-large nomination.

County Latino Affairs Commission One opening – 4-year term, at-large nomination.

Historic Preservation Commission Two openings – One 4-year term to be appointed by Vice Mayor Kalantari-Johnson,
and one 2-year term to be appointed by
Mayor Keeley.

Public Hearing
If, in the future, you wish to challenge in court any of the matters on this agenda for which a public hearing is to be conducted, you may be limited to raising only those issues which you (or someone else) raised orally at the public hearing or in written correspondence received by the City at or before the hearing.

Any person seeking to challenge a City Council decision made as a result of a proceeding in which, by law, a hearing is required to be given, evidence is required to be taken, and the discretion in the determination of facts is vested in the City Council, shall be required to commence that action either 60 days or 90 days following the date on which the decision becomes final as provided in Code of Civil Procedure Section 1094.6 Please refer to code of Civil Procedure 1094.6 to determine how to calculate when a decision becomes “final.” The 60-day rule applies to all public hearings conducted pursuant to the City’s Zoning Ordinance, Title 24, Santa Cruz Municipal Code. The 90-day rule applies to all other public hearings.

Meeting Type
Holiday
Jewish Holiday
Regular Meeting
Special Meeting (will be added as scheduled)
Study Session (will be added as scheduled)
Budget Hearing
DATE Location Meeting Type
April 12/13
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public May 26
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public May 28 Council Chambers Budget Hearing Study Session
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public June 19
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public July 4
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public September 1
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public September 22/23
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public October 1/2
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public November 11
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public November 27
November 28
Courtyard Conf. Room Closed Session - Closed to the Public Council Chambers Council Regular Meeting - Open to the Public December 14/15
December 25
City Council Meeting Calendar for 2025
December 9
City Hall Closure - Thanksgiving Day
City Hall Closure - Day After Thanksgiving Day
June 24
September 9
September 30
City Hall Closure - Juneteenth
Passover (City observed - sundown to sundown)
August 12
May 13
April 22
June 10
May 27
City Hall Closure - Labor Day
August 26
July 8 and 22 Meetings Cancelled
City Hall Closure - Independence Day
City Hall Closure - Memorial Day
December 23 Meeting Cancelled
City Hall Closure - Christmas Day
Rosh Hashanah (City observed - sundown to sundown)
October 14
October 28
City Hall Closure - Veteran's Day (observed)
Hanukkah (City observed - sundown to sundown)
Yom Kippur (City observed - sundown to sundown)
November 18

8.1 City Council

AGENDA REPORT
DATE: 03/03/2025
AGENDA OF: 03/25/2025
DEPARTMENT: City Attorney
SUBJECT: Resolution Extending the Emergency Declarations in Connection with the 2022/2023 Winter Storms and 2023/2024 Winter Storms (CA/CM) LOCATION: Citywide
RECOMMENDATION: Resolution extending by sixty days the Local Emergency Declarations in connection with the 2022/2023 and 2023/2024 winter storms.

BACKGROUND: On January 4, 2023, the City Manager declared the existence of a local emergency following storms in December 2022 and January 2023 (“2022/2023 Winter Storms”) that caused significant flooding, infrastructure damage, and other storm impacts, including downed trees and impacts to persons experiencing homelessness.

A year later, and while responses to the 2022/2023 Winter Storms remained ongoing, the City of Santa Cruz experienced another significant storm event that resulted in flooding and significant damage to City infrastructure (“2023/2024 Winter Storms”). The City Manager again declared the existence of a local emergency as a result of the 2023/2024 Winter Storms on February 6, 2024.

DISCUSSION: Government Code section 8630 authorizes a governing body of a city or an official designated by ordinance to proclaim the existence of a local emergency. Santa Cruz Municipal Code section 2.20.030 empowers the Director of Emergency Services to proclaim the existence or threatened existence of a local emergency when the City is affected or likely to be affected by a public calamity or disaster, subject to confirmation by the City Council at the “earliest practicable time.” During the existence of such emergency, the Director of Emergency Services is also authorized, pursuant to Section 2.20.040(1), to “[m]ake and issue rules and regulations on matters reasonably related to the protection of life and property as affected by such emergency,” also subject to confirmation by the City Council “at the earliest practicable time.”
In view of the facts and circumstances described above and damage caused by the 2022/2023 and 2023/2024 winter storms, the City Council ratified the City Manager’s January 4, 2023 emergency declaration by Resolution No. NS-30,085 at its January 10, 2023 regular meeting, and ratified the City Manager’s February 6, 2024 emergency declaration by Resolution No. NS30,286 at its February 13, 2024 regular meeting.

9.1 At its September 10, 2024 regular meeting the City Council received an update from the Director of Public Works on the City’s response to the 2022/2023 and 2023/2024 winter storms. The City’s emergency response and recovery efforts remain ongoing and are expected to continue into Summer 2025, and potentially Summer 2026.

The attached resolution, if adopted by the City Council, would extend the 2022/2023 Winter Storms emergency declaration and 2023/2024 Winter Storms emergency declaration by an additional 60 days, to May 25, 2025.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed Council action is not a “project” under CEQA. “Project” is defined by CEQA as:
“an activity which may cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment, and which is any of the following:
(a) An activity directly undertaken by any public agency. (b) An activity undertaken by a person which is supported, in whole or in part, through contracts, grants, subsidies, loans, or other forms of assistance from one or more public agencies. (c) An activity that involves the issuance to a person of a lease, permit, license, certificate, or other entitlement for use by one or more public agencies.” (Pub. Resources Code, § 21065.) The proposed resolution is not a “project” under CEQA because the resolution is primarily intended to help the City obtain reimbursement for actions already undertaken or underway, and therefore cannot by itself cause either a direct physical change in the environment, or a reasonably foreseeable indirect physical change in the environment. Nor does the resolution represent the type of “activity” described in subdivisions (a) through (c) above.

HEALTH IN ALL POLICIES (HiAP): This action is consistent with the three pillars of HiAP.

Specifically, the action has a nexus with public health in that the resolution is intended to help the City obtain reimbursement for recovery efforts along West Cliff Drive. Recovery efforts in this area will ensure accessible and safe biking, pedestrian, and recreational access for future public use and enjoyment.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: No

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: Actions taken by the City during a declared emergency are potentially recoverable from Cal OES (California Governor’s Office of Emergency Services) and FEMA (Federal Emergency Management Agency).

Prepared By:

Kaylen Anderson
Law Fellow
Submitted By:

Tony Condotti
City Attorney
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. RESOLUTION.DOCX

9.2 RESOLUTION NO. NS-30,XXX

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ EXTENDING THE LOCAL EMERGENCY DECLARATIONS IN CONNECTION WITH THE 2022/2023 WINTER STORMS AND 2023/2024 WINTER STORMS
WHEREAS, Government Code section 8630 authorizes the City Council or an official designated by ordinance to proclaim the existence of a local emergency; and WHEREAS, Santa Cruz Municipal Code section 2.20.030 empowers the City Manager, as the director of emergency services, to proclaim the existence or threatened existence of a local emergency when the City is affected or likely to be affected by a public calamity, subject to confirmation by the City Council at the earliest practicable time; and WHEREAS, on December 30 and 31st, 2022, the City of Santa Cruz experienced an atmospheric river storm rain event, followed by another powerful storm event on January 4 and 5th, 2023 (the “2022/2023 Winter Storms”). As a result of the 2022/2023 Winter Storms, flooding, debris from trees, and mud impacted the San Lorenzo River and adjacent areas, including the Tannery area, San Lorenzo Park, and the beach. The San Lorenzo River reached

22.1 feet. Rainfall amounts exceeded 7 inches in the mountains over a 24-hour period. The 2022/2023 Winter Storms resulted in flooding, downed trees, major infrastructure damage, and impacts to persons experiencing homelessness; and
WHEREAS, the County of Santa Cruz proclaimed the existence of a local emergency in the County on January 3, 2023 in response to the 2022/2023 Winter Storms; and WHEREAS, in light of the 2022/2023 Winter Storms and pursuant to his authority as Emergency Services Director, on January 4, 2023, the City Manager declared the existence of a local emergency (the “2022/2023 Emergency Proclamation”). At its January 10, 2023 meeting, the City Council adopted Resolution No. NS-30,085 declaring the existence of a State of Emergency in connection with the 2022/2023 Winter, confirming the 2022/2023 Emergency Proclamation; and
WHEREAS, the City Council has continued to review the need for the 2022/2023 Winter Storms emergency declaration and most recently adopted Resolution No. NS-30,428 at its January 28, 2025 regular meeting, further extending the declaration of emergency by 60 days; and
WHEREAS, a year after the 2022/2023 Winter Storms, on December 28 and 30th, 2023, the City of Santa Cruz experienced a large winter swell event involving significant rain and hazardous ocean conditions, causing an estimate of $2.5 million in damage along West Cliff Drive and the Santa Cruz Wharf, followed by atmospheric river storms throughout January and February 2024 (the “2023/2024 Winter Storms”). The 2023/2024 Winter Storms included significant rainfall on January 22, 2024 that contributed to flooding within the City of Santa Cruz and specifically to Cypress Point Apartments; and

9.3 RESOLUTION NO. NS-30,XXX
WHEREAS, on January 30, 2024, the County of Santa Cruz Board of Supervisors ratified Local Emergency for the December 2023 Coastal Storms, as proclaimed by the County Administrative Officer as the Director of Emergency Services on January 3, 2024; and WHEREAS, in light of the 2023/2024 Winter Storms and pursuant to his authority as Emergency Services Director, on February 6, 2024, the City Manager declared the existence of a local emergency (the “2023/2024 Emergency Proclamation”). At its February 13, 2024 meeting, the City Council adopted Resolution No. NS-30,286 declaring the existence of a State of Emergency in connection with the 2023/2024 Winter Storms, confirming the 2023/2024 Winter Storms Emergency Proclamation; and
WHEREAS, the City Council has continued to review the need for the 2023/2024 Winter Storms emergency declaration and most recently adopted Resolution No. NS-30,428 at its January 28, 2025 regular meeting, further extending the declaration of emergency by 60 days; and
WHEREAS, at its September 10, 2024 regular meeting the City Council received an update from the Director of Public Works on the City’s response to the 2022/2023 and 2023/2024 winter storms. The City’s emergency response and recovery efforts remain ongoing and are expected to continue into Summer 2025, and potentially Summer 2026.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Santa Cruz (City Council) as follows:

A. That the City Council hereby declares that the local emergency declaration adopted at its January 10, 2023 regular meeting by Resolution No. NS-30,085, and extended on January 24, 2023 by Resolution NS-30,095, on March 14, 2023 by Resolution NS-30,116, on May 9, 2023 by Resolution NS-30,145, on June 27, 2023 by Resolution NS-30,166, on August 22, 2023 by Resolution NS-30,187, on October 10, 2023 by Resolution NS30,208, on November 28, 2023 by Resolution NS-30,239, on January 23, 2024 by Resolution NS-30,274, on March 12, 2024 by Resolution NS-30,296, on April 30, 2024 by Resolution NS-30,315, on June 25, 2024 by Resolution NS-30,349, on August 13, 2024 by Resolution NS-30,362, on October 8, 2024 by Resolution NS-30,393, on December 10, 2024 by Resolution NS-30,414, and on January 28, 2025 by Resolution NS-30,428 shall be extended an additional sixty (60) days from its adoption pursuant to California Government Code Section 8630, et seq., by this Resolution; and B. That the City Council hereby declares that the local emergency declaration adopted at its February 13, 2024 regular meeting by Resolution NS-30,286, and extended on April 9, 2024 by Resolution NS-30,311, on April 30, 2024 by Resolution NS-30,315, on June 25, 2024 by Resolution NS-30,349, on August 13, 2024 by Resolution NS-30,362, on October 8, 2024 by Resolution NS-30,393, on December 10, 2024 by Resolution NS30,414, and on January 28, 2025 by Resolution NS-30,428 shall be extended an additional sixty (60) days from its adoption pursuant to California Government Code Section 8630, et seq., by this Resolution; and

9.4 RESOLUTION NO. NS-30,XXX
C. This Resolution shall remain in full force and effect and shall thereafter terminate on the sixtieth (60th) day after its adoption, unless earlier terminated or further extended by subsequent City Council action.

PASSED AND ADOPTED this 25th day of March 2025 by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: __________________________
Fred Keeley, Mayor
ATTEST: ___________________________
Bonnie Bush, City Clerk Administrator

9.5 MINUTES ARE UNOFFICIAL UNTIL APPROVED BY COUNCIL
City of Santa Cruz
809 Center Street
Santa Cruz, California 95060

MINUTES OF A CITY COUNCIL MEETING
March 11, 2025
10:30 AM
Mayor Keeley opened the City Council Closed Session at 10:32 a.m. in a public meeting via Zoom and in Council Chambers, for the purpose of announcing the agenda, and receiving public testimony.

Roll Call

Present: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

Absent: None.

Staff: City Manager M. Huffaker, City Attorney T. Condotti, Deputy City Clerk Administrator J. Wood, City Clerk Administrator B. Bush.

Statements of Disqualification – None.

Public Comment
Mayor Keeley opened the public comment period at 10:33 a.m. There were no speakers. Mayor Keeley closed the public comment period at 10:34 a.m., at which time the meeting was closed to the public and Council adjourned to the Courtyard Conference Room.

Closed Session

1. Conference with Legal Counsel - Existing Litigation (Government Code §54956.9(d)(1))
GVC St. George, LLC v. City of Santa Cruz
(United States District Court Case No.CV-07695-BLF)
Council received a status report, and took no reportable action.

10.1 March 11, 2025 CITY COUNCIL MINUTES 7844
Closed Session (continued)

2. Public Employee Performance Evaluation (Government Code §54957) City Attorney
Council took no reportable action.

10.2 March 11, 2025 CITY COUNCIL MINUTES 7845
City of Santa Cruz
809 Center Street
Santa Cruz, California 95060

MINUTES OF A CITY COUNCIL MEETING
March 11, 2025
11:15 AM
Call to Order – Mayor Keeley called the meeting to order at 11:17 a.m. in Council Chambers.

Roll Call

Present: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

Absent: None.

Staff: City Manager M. Huffaker, Assistant City Manager M. Templeton, City Attorney T. Condotti, Director of Public Works N. Nguyen, Chief of Police B. Escalante, Director of Planning and Community Development L.

Butler, Chief of Fire R. Oatey (via Zoom), Director of Economic Development and Housing B. Lipscomb (via Zoom), Director of Finance E. Cabell (via Zoom), Director of Information Technology K. Morgan (via Zoom), Director of Water H. Luckenbach (via Zoom), Senior Planner T.

Maier, Principal Transportation Planner C. Gallogly, Sustainability and Resiliency Officer T. Wise-West, Deputy City Clerk Administrator J.

Wood, City Clerk Administrator B. Bush.

At this time, Mayor Keeley rearranged the agenda to hear item 3.

Oral Communications Announcement - The Mayor provided a brief announcement about Oral Communications.

Oral Communications
At 11:24 a.m. Mayor Keeley opened Oral Communications for members of the public who wished to speak regarding items not listed on the City Council agenda.

Michael Spadafora spoke regarding the company contracted to complete the repairs on the Murray Street Bridge.

Unidentified person spoke regarding Trump’s presidency.

10.3 March 11, 2025 CITY COUNCIL MINUTES 7846
Oral Communications (continued)
Unidentified person spoke regarding the San Mateo County Sheriff’s Office and the Commission for the Prevention of Violence Against Women.

Gregg Cole spoke regarding Three Prince Surf Park, and provided Council with a draft resolution to provide access to the point of the cliff.

Javier Rivera, Katrina Tattenham, and Lauren Bogle spoke regarding Salsa by the Sea.

At 11:36 a.m. Mayor Keeley closed Oral Communications.

Presentations

3. Mayoral Proclamation Declaring April 2025 as Sexual Assault Awareness Month Councilmember O’Hara read from and presented a proclamation to members of the Commission for the Prevention of Violence Against Women declaring April 2025 as Sexual Assault Awareness Month.

Presiding Officer's Announcements
Statements of Disqualification – None.

Additions and Deletions – City Clerk Administrator B. Bush announced item 13 was removed from the agenda and would be continued to a future meeting. Mayor Keeley announced item 16 was continued to the meeting of March 25th.

City Attorney Report on Closed Session – See pages 7843—7844 for the report.

Council Meeting Calendar

4. The City Council reviewed and did not revise the meeting calendar attached to the agenda.

Consent Agenda
Councilmember Newsome made a comment on items 7 and 12.

Councilmember Brunner made a comment on item 8.

Councilmember Trigueiro made a comment on item 9 and 12.

Mayor Keeley made a comment on item 8.

10.4 March 11, 2025 CITY COUNCIL MINUTES 7847
Consent Agenda (continued)
Mayor Keeley opened the public comment period. The following people spoke:

Unidentified person made a comment on item 6.

Unidentified person made a comment on item 12.

Mayor Keeley closed the public comment period.

MOTION: Councilmember O’Hara moved, seconded by Councilmember Golder, to approve the Consent Agenda.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

5. Resolution Extending the Emergency Declaration in Connection with the December 2024 Municipal Wharf Emergency (CA/CM)
LOCATION: District 4
Resolution No. NS-30, 447 was adopted extending by sixty days the Local Emergency Declaration in connection with the December 2024 Municipal Wharf emergency.

6. Minutes of the February 25, 2025 City Council Meeting (CC) LOCATION: None
Motion carried to approve as submitted.

10.5 March 11, 2025 CITY COUNCIL MINUTES 7848
Consent Agenda (continued)

7. Award Contract for National Oceanic and Atmospheric Administration (NOAA) Grant Administration Services for Coastal Restoration Projects (CM) LOCATION: Districts 1, 2, and 4
Motion carried to:
 Award a contract for professional grant administrative services to support the coastal restoration projects funded by a NOAA Coastal Resilience Regional Challenge Grant (Grant) to The Ferguson Group (TFG) in the amount of $799,500, reject all other proposals; and
 Authorize the City Manager to execute a contract, in a form approved by the City Attorney, with TFG. The Purchasing Manager is authorized to execute change orders within the approved budget.

8. 2025 Legislative Program (CM)
LOCATION: Citywide
Motion carried to adopt the 2025 Legislative Program.

9. 2024 Citywide Sewer/Storm Drain Lining Project (c401511) – Notice of Completion (PW)
LOCATION: Citywide
Motion carried to accept the work of Insituform Technologies, LLC. (Chesterfield, MO) as completed per plans and specifications, authorize the filing of the Notice of Completion for the 2024 Citywide Sewer/Storm Drain Lining Project (c401511), and authorize the Public Works Director to sign the Notice of Completion as the Owner’s Authorized Agent.

10.6 March 11, 2025 CITY COUNCIL MINUTES 7849
Consent Agenda (continued)

10. City of Santa Cruz Resource Recovery Facility Appliance Recycler Services – Award of Contract (PW)
LOCATION: District 6
Motion carried to award the Appliance Recycler Services contract to Campos Bros. Recovery, Inc. (West Sacramento, CA). The City Manager is hereby authorized and directed to execute the contract in a form approved by the City Attorney, as authorized by Resolution No. NS-27,563. The Public Works Director is authorized to execute change orders within the approved project budget.

11. Active Transportation Plan (c402408) - Outreach Consulting Contract Amendment 1 (PW)
LOCATION: Citywide
Motion carried to approve Contract Amendment 1 with Ecology Action (Santa Cruz, CA) reducing the original contract to $53,186 for outreach consulting for the Active Transportation Plan Update and authorize the City Manager to execute the contract amendment in a form approved by the City Attorney. The Public Works Director is authorized to execute future contract amendments within the approved project budget.

12. Monterey Bay Sanctuary Scenic Trail (Rail Trail) Segment 7 Phase II Project (c401413) – Budget Adjustment (PW)
LOCATION: Districts 3 and 4
Resolution No. NS-30, 448 was adopted amending the FY 2025 budget to appropriate funds in the amount of $900,000 from Measure D to the Monterey Bay Sanctuary Scenic Trail (Rail Trail) Segment 7 Phase 2 (c401413).

13. Measure E Oversight Committee (PW)
LOCATION: Citywide
This item was removed from the agenda and was not discussed.

10.7 March 11, 2025 CITY COUNCIL MINUTES 7850
Consent Agenda (continued)

14. Resource Recovery Facility Enclosed Flare Installation Project (c402512) – Authorization to Ratify Purchase Order (PW)
LOCATION: District 6
Motion carried to ratify purchase order for the direct purchase of the enclosed flare, related equipment, shipping and startup with Perennial Energy LLC (West Plains, MO) at the Resource Recovery Facility in the amount of $1,023,314.01, in a form approved by the City Attorney. The Public Works Director is authorized to execute change orders within the approved project budget.

15. West Cliff Drive Bethany Curve Culvert Project (c402407) - Authorization to Ratify Purchase Order (PW)
LOCATION: District 6
Motion carried to ratify purchase order for additional work as outlined in the latest proposal from Pacific Crest Engineering (PCE) dated November 2024 for the West Cliff Drive Bethany Curve Culvert Project (c402407) and authorize the City Manager to execute the contract amendment in a form approved by the City Attorney. The Public Works Director is authorized to execute change orders within the approved project budget.

16. Modifications to City Council Forest Management Policies for Water Department Watershed Lands (WT)
LOCATION: Citywide
This item was continued to the meeting of March 25th and was not discussed.

End Consent Agenda

10.8 March 11, 2025 CITY COUNCIL MINUTES 7851
Consent Public Hearing
Councilmembers O’Hara and Trigueiro made a comment on item 17.

Mayor Keeley opened the public comment period. The following person spoke:

Unidentified person made a comment on items 17, 18, and 20.

Mayor Keeley closed the public comment period.

Mayor Keeley made a comment on item 20.

MOTION: Councilmember Golder moved, seconded by Vice Mayor KalantariJohnson, to approve the Consent Public Hearing Agenda.

ACTION: The motion carried with the following vote.

AYES: Councilmembers Trigueiro (with the exception of item 17), Brunner, Newsome, Golder, O’Hara (with the exception of item 17); Vice Mayor Kalantari-Johnson; Mayor Keeley.

NOES: Councilmembers Trigueiro (item 17), O’Hara (item 17).

ABSENT: None.

DISQUALIFIED: None.

17. 2nd Reading and Final Adoption of Ordinance No. 2025-03 Amending Santa Cruz Municipal Code Chapter 9.36 (“Noise”) and Chapter 9.40 (“Sound Amplifying Equipment”) and Adding Objective Standards to Both Chapters (CN) LOCATION: Citywide
Ordinance No. 2025-03 was adopted amending Santa Cruz Municipal Code Chapter 9.36 (“Noise”) and Chapter 9.40 (“Sound Amplifying Equipment”) and adding objective standards to both chapters.

10.9 March 11, 2025 CITY COUNCIL MINUTES 7852
Consent Public Hearings (continued)

18. 2nd Reading and Final Adoption of Ordinance No. 2025-04 Minor Modifications to the Previously-Adopted Amendments to Chapter 18.15 of the Municipal Code Requiring Additional Energy Standards for Alterations and Additions to Existing Single Family Homes (CM/PL)
LOCATION: Citywide
Ordinance No. 2025-04 was adopted making minor changes to the previouslyadopted Municipal Code Chapter 18.15 which adopted local amendments to Title 24, Part 6 of the California Code of Regulations (California Energy Code).

Council finds the amendments are consistent with the Negative Declaration approved for the City of Santa Cruz 2030 Climate Action Plan adopted by City Council on September 13, 2022. The ordinance is also exempt under exempt from CEQA under the general rule, 15061(b)(3) and per CEQA Guidelines Section 15308, Class 8, Actions by Regulatory Agencies for Protection of Natural Resources.

19. 2nd Reading and Final Adoption of Ordinance No. 2025-05 Childcare Impact Fee Updates (PL)
LOCATION: Citywide
Ordinance No. 2025-05 was adopted amending City of Santa Cruz Municipal Code Chapter 18.48 “Childcare Impact Fees,” modifying Section 18.48.050 Exemptions.

20. Sidewalk Vending Ordinance Administrative Amendments. Applicant: City of Santa Cruz. CEQA: Exempt per 15061(b)(3). (PL)
LOCATION: Citywide
Motion carried to introduce for publication Ordinance No. 2025-06 acknowledging the California Environmental Quality Act (CEQA) exemption and amending Santa Cruz Municipal Code (SCMC) Chapter 5.82 (“Sidewalk Vending”) to clarify the definition of an “Enforcement Official,” to specify the time period within which a vendor may receive citations before a permit may be revoked, to reduce the number of citations resulting in impoundment from four to three, to clarify and update restricted vending times and locations, and to provide clearer distinctions between roaming and stationary vending locations.

10.10 March 11, 2025 CITY COUNCIL MINUTES 7853
Public Hearings

21. Public Safety Impact Fee Nexus Study and Proposed Fees Update (FD/PD) LOCATION: Citywide
This item was continued to the April 22nd Council meeting and was not discussed.

22. 313 Swift Street (Application No. CP24-0104) – Assessor’s Parcel Number 003- 161-32 – Request for 1) Acknowledgement of the Environmental Determination and Adoption of a Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program (MMRP) Pursuant to Section 15074 of the California Environmental Quality Act (CEQA); and 2) Consideration of the Application for a Planned Development Permit, Coastal Permit, Design Permit, and Heritage Tree Removal Permit to Allow Construction of a New, Four-Story, Approximately 120,604 Square-Foot Multifamily Educator Workforce Housing Project Encompassing Approximately 100 Residential Units, Approximately 119 Parking Spaces, New Landscaping, and Associated Site Modifications, Including the Removal of Up to Six (6) Heritage Trees, on a Site Located in the P-F/CZO (Public Facilities/Coastal Zone Overlay) Zoning District, Based on the Findings and Conditions of Approval Listed In Exhibit “A.” (Environmental Review: Initial Study/Mitigated Negative Declaration). (Applicant/Filed: Santa Cruz City School District/June 27, 2024) (PL)
LOCATION: District 6
Senior Planner T. Maier gave a presentation and responded to Council questions.

Mayor Keeley opened the public comment period. The following people spoke.

Unidentified person
Kris Munro
Sam Rawlins
Kyle Kelley
Garrett
Jeanine Roth
Mayor Keeley closed the public comment period.

10.11 March 11, 2025 CITY COUNCIL MINUTES 7854
Public Hearings (continued)

22. 313 Swift Street (Application No. CP24-0104) (PL) LOCATION: District 6 (continued)
MOTION: Councilmember Golder moved, seconded by Vice Mayor Kalantari-Johnson, to adopt Resolution No. NS-30,449 acknowledging the environmental determination and adopting the Mitigated Negative Declaration and Mitigation Monitoring and Reporting Program (MMRP), and approving the Planned Development Permit, Coastal Permit, Design Permit, and Heritage Tree Removal Permit to allow construction of a new, four-story, approximately 120,604 square-foot multifamily educator workforce housing project encompassing approximately 100 residential units, approximately 119 parking spaces, new landscaping, and associated site modifications, including the removal of up to six (6) Heritage trees, on a site located in the P-F/CZ-O (Public Facilities/Coastal Zone Overlay) zone district, subject to the attached conditions of approval, with the following additional direction:
 Prior to occupancy of the Swift Street project, direct staff to return to Council with a modification to Municipal Code Chapter 10.46 that provides an exemption to the requirement for provision of METRO passes for school district projects that enter into a Transportation Demand Management agreement with the City.
 Temporary access to Derby Park shall remain open during project construction when feasible and safe.
 Coordinate with the Planning Department at the building permit stage to determine whether micro filters can be conveniently incorporated in the washing machine discharge design, taking into account space, maintenance, and other considerations.

Principal Transportation Planner C. Gallogly responded to Council questions.

Director of Planning and Community Development L. Butler responded to Council questions.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

10.12 March 11, 2025 CITY COUNCIL MINUTES 7855
General Business

23. 2025-2030 City of Santa Cruz Local Hazard Mitigation Plan and Climate Adaptation Plan (CM)
LOCATION: Citywide
Sustainability and Resiliency Officer T. Wise-West gave a presentation responded to Council questions.

Mayor Keeley opened the public comment period. The following person spoke.

Garrett
Mayor Keeley closed the public comment period.

MOTION: Councilmember O’Hara moved, seconded by Vice Mayor Kalantari-Johnson, to adopt Resolution No. NS-30,450 approving and adopting the 2025-2030 City of Santa Cruz Local Hazard Mitigation Plan and Climate Adaptation Plan and directing and authorizing the appropriate City representatives to transmit a certified copy of this resolution to the Federal Emergency Management Agency.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

10.13 March 11, 2025 CITY COUNCIL MINUTES 7856
General Business (continued)

24. Consideration of the Proposed 5-year Roadmap for West Cliff to Advance the Community’s 50-year Vision for West Cliff (CM/PW)
LOCATION: Districts 3 and 6
Assistant City Manager M. Templeton gave a presentation and responded to Council questions.

Mayor Keeley opened the public comment period. The following people spoke.

Unidentified person
Garrett
Mayor Keeley closed the public comment period.

MOTION: Councilmember Golder moved, seconded by Vice Mayor Kalantari-Johnson, to adopt the 5-year Roadmap for West Cliff.

Director of Public Works N. Nguyen responded to Council questions.

ACTION: The motion carried unanimously with the following vote.

AYES: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara; Vice Mayor Kalantari-Johnson; Mayor Keeley.

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

Adjournment – Councilmember Golder moved, seconded by Councilmember Newsome, to adjourn. By consensus City Council adjourned at 1:28 p.m.

10.14 March 11, 2025 CITY COUNCIL MINUTES 7857
Respectfully Submitted:

Julia Wood, Deputy City Clerk Administrator
Attest:

Bonnie Bush, City Clerk Administrator
Approved:

Fred Keeley, Mayor

10.15 City Council

AGENDA REPORT
DATE: 03/05/2025
AGENDA OF: 03/25/2025
DEPARTMENT: City Clerk
SUBJECT: Nomination for Reappointment of Carol Berg to the Housing Authority Board of Commissioners (CC)
LOCATION: Countywide
RECOMMENDATION: Motion to nominate Carol Berg for reappointment to the County Housing Authority Board of Commissioners with a term expiring on May 21, 2029.

BACKGROUND: The County's Housing Authority Board consists of seven members, including one commissioner nominated by the City Council to represent the City of Santa Cruz.

DISCUSSION: With Carol Berg’s Board term expiring on May 21, 2025, the City Council will provide a nomination to the Housing Authority Board of Commissioners to fill that seat. Ms.

Berg has expressed interest in reappointment and there are no other applicants. Based on her prior experience and service on the Housing Authority Board, it is therefore recommended that the City Council nominate Carol Berg for reappointment to the County Housing Authority Board of Commissioners with a term expiring on May 21, 2029. The Board of Supervisors will then make the appointment or reappointment.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: Not applicable. Does not require CEQA review as it does not meet the definition of a Project under CEQA as it does not have a potential for resulting in either a direct physical change in the environment or a reasonably foreseeable indirect physical change in the environment.

HEALTH IN ALL POLICIES (HiAP): While this does not apply since it is a County advisory board, the topics addressed by the Housing Authority align with the HiAP pillars of equity and public health.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: No

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: No impacts.

11.1 Prepared By:

Bonnie Bush
City Clerk
Submitted By:

Michelle Templeton
Assistant City Manager
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. HOUSING AUTHORITY LETTER OF RECOMMENDATION.PDF

11.2 11.3
City Council

AGENDA REPORT
DATE: 03/06/2025
AGENDA OF: 03/25/2025
DEPARTMENT: Economic Development and Housing
SUBJECT: Memorandum of Understanding between the City of Santa Cruz, Digital NEST, and Santa Cruz Works for the Implementation of a Tech Apprenticeship Workforce Development Program (EDH)
LOCATION: Citywide
RECOMMENDATION: Authorize the City Manager, or designee, to execute the Memorandum of Understanding between the City of Santa Cruz, Digital NEST and Santa Cruz Works for the implementation of a tech apprenticeship workforce development program with funding awarded from the Affordable Housing and Sustainable Communities Program.

BACKGROUND: The City of Santa Cruz (City) received a grant through the Affordable Housing and Sustainable Communities Program (AHSC) (Grant# 21-AHSC-16976) from the Department of Housing and Community Development and the Strategic Growth Council for the Pacific North Affordable Housing Mixed-Use project that includes a sub-award of $200,000 for workforce development. The City, Digital NEST, and Santa Cruz Works (SCW) developed a pilot Workforce Development Program (Program) that meets the AHSC funding guidelines and seeks to provide workforce development training and employment opportunities for underserved youth in the broader community.

Digital NEST is a 501(c)(3) non-profit organization dedicated to providing equal access to technology and resources to Latinx youth in underserved communities by creating sustainable and scalable technology learning centers that provide technical and soft skills, closing the digital divide to employment. Since 2014, Digital NEST has provided more than 4,200 underserved youth (ages 14-24) with free technical and professional training to develop their skills, resources, and network to build and launch successful careers in tech or tech-adjacent industries. Digital NEST’s mission is to transform lives and strengthen communities through technology and opportunity.

Digital NEST also has a history of success in job placement rates for trainees from disadvantaged communities, including placement in tech and tech-driven industries. By partnering with Digital Nest for the Workforce Development Program, the community will play a pivotal role in empowering the next generation of diverse tech talent. The investment directly supports underserved youth by providing the critical opportunity and support to work and thrive

12.1 in local Santa Cruz tech companies while ensuring that the talent needed to drive the community forward stays local.

SCW is a 501(c)(6) non-profit organization that nurtures the dynamic entrepreneurial ecosystem in the local Santa Cruz area, enhancing collaboration, spreading knowledge, and igniting innovation. SCW synergizes the efforts of businesses, educational entities, investors, and the wider community to foster a flourishing local environment. SCW is uniquely positioned to maximize the impact of the AHSC Workforce Development grant, benefiting both the organization and the broader Santa Cruz community. With a network of 11,000 entrepreneurs, job seekers, and businesses, SCW’s established platforms—such as its monthly job skills clinics, entrepreneurial inspiration events, and the highly popular Jobs section in its weekly newsletter— serve as vital resources for local workforce development.

By leveraging these platforms, SCW will effectively promote apprenticeship opportunities, connect Digital NEST graduates and other eligible applicants with over 400 local and regional tech companies, and facilitate the placement of up to 20 apprentices during the Program. This collaboration aligns with the City’s AHSC programmatic goal of supporting residents in disadvantaged geographical areas and creating a pipeline for well-trained talent into the local tech ecosystem. The resulting workforce development will strengthen the local economy, reduce barriers to employment, and foster long-term growth and innovation within the greater Santa Cruz community.

DISCUSSION: The City, Digital NEST and SCW will coordinate efforts to develop and deliver an apprenticeship program that places Digital NEST graduates and other eligible applicants into tech apprenticeships with participating tech companies in the Santa Cruz area. Digital NEST’s responsibilities include the training and support of participants in the Program. The training will consist of six or more months of free technical training in web and information technology, digital arts, marketing and project management, as well as the development of the professional skills needed to succeed in the workplace. Additionally, Digital NEST will conduct a check-in with graduates placed through the Program to provide support as needed.

SCW, the program administrator, will maintain a Program webpage on its website for potential applicants who meet the basic criteria for participation in the Program. SCW will outreach, vet and select participating tech companies into the Program. Participating tech companies will enter into an agreement with SCW outlining the participating companies’ roles and responsibilities during the six-month apprenticeship. SCW will match Digital NEST graduates with the participating tech companies and the tech company will receive up to $10,000 in matching funds for each selected apprentice. SCW will serve in the capacity of fiscal agent on behalf of the City in the distribution of matching funds to participating companies. Such funding shall be provided to SCW from the City through the AHSC grant program. The funding will be disbursed to SCW upon request along with a corresponding invoice to the City during the term of the Program, up to the maximum funding available to the Program, currently capped at $100,000, unless extended and increased through future funding commitments agreed to by all Parties.

The total Program budget for delivery is $225,000. Beyond initial Program costs, the Parties intend to contribute their “fair share” of resources to the Program. Resource contributions may include direct funding contributions, in-kind services, professional assessments and plans, and assistance acquiring outside funding, such as may include grants, assessments, donations, consultant fees, associated infrastructure investments, or other such funding not directly sourced

12.2 from an agency’s traditional budget. A basic assumption regarding the Program is that, through the contribution of sufficient grant funding to support the Program, the Parties will have sufficient financial resources to undertake the Program or will act to provide additional resources as the discretion of their governing bodies.

As currently awarded to the City through the AHSC program, the City shall make available $200,000 of AHSC funds and $25,000 of funds from the City’s Economic Development and Housing approved FY 2025 budget to the Program and Parties as follows:
• $75,000 shall be payable to Digital NEST for the performance and delivery of the Program components including technical training of Program participants prior to placement in an approved participating tech company;
• $50,000 shall be payable to SCW for the performance and delivery of the Program components as outlined above; and
• Up to $100,000 shall by payable to SCW to act as a fiscal agent on behalf of the City to award up to $10,000 to each participating tech company in the program hosting a Digital NEST graduate or other selected apprentice participant over the specified Program duration.

Initial invoices shall be submitted by Digital NEST and SCW to the City upon completion of Program development which must be agreed upon by all Parties.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed Ordinance is not a “project” under CEQA because no direct or indirect physical change to the environment is anticipated, nor does the Ordinance represent the type of activity described in Public Resources Code section 21065.

HEALTH IN ALL POLICIES (HiAP): The Workforce Development Program aligns directly with the City’s commitment to HiAP by providing equal access to technology and resources to young people in underserved communities. The Workforce Development Program will provide technical and soft skills for underserved youth in the broader community, thereby closing the digital divide to employment, leading to a more inclusive workforce and improving the quality of life for young people in our community. This contributes to economic growth and prosperity and also fosters health equity and sustainability among the broader community.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: No

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: No impact to the General Fund. $200,000 of the Program funding is available from the AHSC grant through the award granted to the Pacific Station North mixed-use affordable housing project. $25,000 for program administration is available through the FY 2025 Economic Development and Housing Department budget.

12.3 Prepared and Submitted By:

Bonnie Lipscomb
Director of Economic
Development and Housing
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. AHSC WORKFORCE DEVELOPMENT MOU DIGITAL NEST AND SANTA CRUZ WORKS.DOCX

12.4 City, Digital Nest and SCW MOU

MEMORANDUM OF UNDERSTANDING BETWEEN

DIGITAL NEST, SANTA CRUZ WORKS

AND THE CITY OF SANTA CRUZ
This Memorandum of Understanding, hereinafter referred to as “MOU,” is entered into on this _____ day of ________, 2025, by and between Digital NEST, Santa Cruz Works, hereinafter referred to as “SCW”, and the City of Santa Cruz, hereinafter referred to as “City,” collectively the “Parties,” who agree as follows:

RECITALS
Whereas, Digital NEST is a 501 c (3) non-profit organization dedicated to providing equal access to technology and resources to young people in underserved communities by creating sustainable and scalable technology learning centers for Latinx youth that provide technical and soft skills closing the digital divide to employment; and
Whereas, Digital NEST has a track record of success serving disadvantaged populations. Since 2014, Digital NEST has provided more than 3,8004,200 underserved youth (ages 14-24) with free technical and professional training so they have the skills, resources, and network to build and launch successful careers in tech or tech-adjacent industries; and Whereas, Digital NEST also has a history of success in job placement rates for trainees from disadvantaged communities, demonstrated by the more than 150 youth who have gained employment in tech and tech-driven industries or enrolled in college or professional training; and
Whereas, SCW is a 501 c (6) non-profit organization that nurtures the dynamic entrepreneurial ecosystem in the local Santa Cruz area, enhancing collaboration, spreading knowledge, and igniting innovation. SCW synergizes the efforts of businesses, educational entities, investors and the wider community to foster a flourishing local environment; and Whereas, SCW has direct connections to over 400 local and regional tech companies and is widely recognized as the leading tech organization for connecting, informing and providing a jobs clearinghouse for tech companies and tech employees seeking employment opportunities; and Whereas, The City has received a grant through the Affordable Housing and Sustainable Communities program (AHSC) (Grant# 21-AHSC-16976) from the Department of Housing and Community Development and the Strategic Growth Council that includes a sub-award of $200,000 for workforce development; and
Whereas, The City, Digital NEST and SCW desire to work collaboratively to develop and provide a new local workforce development program, hereafter referred to as the “Program”, utilizing the AHSC workforce development funding; and
Whereas, The Program will seek to place Digital NEST interns and other eligible applicants into six-month apprenticeships in participating Santa Cruz tech companies; and

12.5 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

City, Digital Nest and SCW MOU
Whereas, the purpose of this MOU is to acknowledge and memorialize the ongoing commitment of the Parties to implement the Program and to clarify and define the roles and responsibilities, funding commitments and obligations of each party to implement the Program; and Whereas, The City, Digital NEST and SCW jointly acknowledge the importance of their collaboration and leadership to ensure that the Program realizes its full potential and maximizes the long-term workforce development benefits for the greater downtown and entire Santa Cruz community.

AGREEMENT
I. PROGRAM SCOPE
It is expected that the City will be responsible for the disbursement of Program funding to the parties for the development, implementation and delivery of the Program. It is anticipated that the Parties will jointly develop the Program based on the framework provided below. The purpose of this MOU is to document the basic understandings of the Parties with regard to the Program and outline the next steps they will take to determine its delivery.

II. ROLES OF THE PARTIES
A. Joint Responsibilities
The Parties shall each assemble a "Program Team" of relevant staff and stakeholders who shall represent and advocate for each Party’s interest in the Program. The Program Team shall conduct or coordinate all necessary reviews and provide program assistance as necessary to complete the Program in a timely manner.

Each Party shall designate a single point of contact as primary "Program Officer" for the Party. Respective Program Officers shall be responsible for coordinating all internal coordination and decision-making approvals for their respective agency.

Each Program Officer shall be empowered by their respective legislative body or organizational authority to act on behalf of the Party and to make such decisions as have been delegated by the management of the Party. These decisions may include approvals of various documents, including solicitation or grant application documents and program design documents.

B. City Roles, Requirements and Responsibilities

1. Program Assumptions:

City has indicated a willingness to partner with the Digital NEST and SCW in the joint development of the Program, provided it will result in a Program that meets City's requirements (as stated elsewhere in this MOU, including this Section III.B and Section V) within its available budget. If a Project meeting these requirements cannot be implemented

12.6 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

City, Digital Nest and SCW MOU
within the agreed upon milestones as later defined in the attached Schedule of Performance attached as Exhibit A, all Parties may consider terminating this MOU for joint development of the Program.

The City wishes to facilitate the development of the Program to promote workforce development for residents living in disadvantaged census tracts in the downtown, Beach Flats and lower Ocean neighborhoods as well as in other disadvantaged census tracts in the greater Santa Cruz region. The City desires to facilitate the program development and delivery through a collaboration with Digital NEST and SCW. The City will take the lead in securing funding and all administerial functions related to the AHSC grant awarded to the City in order to make the grant and other program funding available to Digital NEST and SCW for Program development, implementation and delivery, as further specified below.

2. City Requirements:
a. Program Development:

City, Digital NEST and SCW will jointly coordinate efforts to develop and deliver an apprenticeship program that places Digital NEST interns and other eligible applicants into tech apprenticeships in participating tech companies in the Santa Cruz area. Digital NEST interns will have completed six or more months of the Digital NEST technical training program which consists of training in the areas of web and information technology, digital arts, marketing and project management as well as professional skills needed to succeed in the workplace. SCW will outreach, vet and select participating tech companies into the Program and match Digital NEST interns and other eligible applicants with pre-selected tech companies in the Santa Cruz area. Participating tech companies will enter into an agreement with SCW, the program administrator, outlining the participating companies’ roles and responsibilities during the six-month apprenticeship. Approved and selected companies who receive an apprentice during the program will receive up to $10,000 in matching funds for participation in the Program for each selected apprentice. SCW will serve in the capacity of Fiscal Agent on behalf of the City in the distribution of matching funds to participating companies. Such funding shall be provided to SCW from the City through the AHSC grant program.
b. Program Delivery:

City requires delivery of an operationally functional Program that meets its specifications, as stated above. For delivery of Program services, Digital NEST will receive $75,000 from the City. Funding received from the City will be used to train apprentices and provide staff support services in order to deliver 10-20 eligible Digital NEST interns for participation in the Program during the Program term as specified below.

For delivery of Program services, upon execution of MOU by all parties and approval by HCD of program scope, SCW will receive $50,000 from the City to fund the administration and program operations of the Program including the outreach, vetting and selection of the

12.7 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

City, Digital Nest and SCW MOU
participating tech companies. SCW will maintain a Program webpage on its website for potential applicants who meet the basic criteria for participation in the Program and will be responsible for vetting and selecting program participants and placing program participants/apprentices received from Digital NEST and selected through the Program’s application process into participating tech companies during the duration of the program.

SCW will receive a maximum of $10,000 to be awarded to participating tech companies as a grant match for each apprentice placed in the Program. Such funding will be disbursed to SCW upon request along with a corresponding invoice to the City during the term of the Program up to the maximum funding available to the Program, currently capped at $100,000, unless extended and increased through future funding commitments agreed to by all Parties.

3. City Responsibilities:
a. City Shall:

1. Collaborate in the development of an outreach process in coordination with Digital NEST and SCW to meet the needs of the City for equitable and accessible public participation, consensus building and community support;

2. Administer all AHSC grant reporting and AHSC grant
reimbursement responsibilities;

3. Disburse, in a timely manner, all invoices for payment submitted from Digital NEST and SCW pursuant to the
Program guidelines;

4. Make available public facilities free of charge for outreach, meetings, and the community engagement process, as
needed.

C. Digital NEST Roles, Requirements and Responsibilities

1. Program Assumptions:

Digital NEST has indicated a willingness to partner with the City and SCW in the joint development of the Program, provided it will result in a Program that meets Digital NEST's requirements (as stated elsewhere in this MOU, including this Section III.B and Section V) within its available budget. If a Project meeting these requirements cannot be implemented within the agreed upon milestones as later defined in the attached Schedule of Performance attached as Exhibit A, all Parties may consider terminating this MOU for joint development of the Program.

2. Digital NEST Requirements:
a. Program Development:

12.8 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

City, Digital Nest and SCW MOU
Digital NEST, City and SCW will jointly coordinate efforts to develop and deliver an program that places Digital NEST graduates and other eligible applicants into tech apprenticeships in participating tech companies in the Santa Cruz area. Digital NEST graduates will have completed at least six months of the Digital NEST technical training internship program. Digital NEST will be responsible for providing free technical training which include the following training areas: web and information technology training, digital arts training, marketing training, project management training and general employment support services for trainees in the Digital NEST program. Digital NESTs responsibilities include the training and support of participants in the Program. Digital NEST will also conduct a check-in with apprentices placed through the program to provide support as needed.
b. Program Delivery:

Digital NEST will provide targeted outreach to local residents (ages 14-24) to participate in the Program who live in disadvantaged census tracts in Santa Cruz County, including the nearby census tracts to the awarded AHSC grant project that include the Beach Flats and Lower Ocean neighborhoods in the City of Santa Cruz.

Digital NEST will provide paid internships through Digital NEST’s in-house digital media production company, to help trainees acquire professional skills and develop a portfolio while providing web, video, and graphic design services for local businesses.

Digital NEST will support trainees and selected participants into the Program as they interview for and engage in apprenticeships with Santa Cruz tech companies.

D. Santa Cruz Works Roles, Requirements and Responsibilities

1. Program Assumptions:

SCW has indicated a willingness to partner with the City and Digital NEST in the joint development of the Program, provided it will result in a Program that meets SCW’s requirements (as stated elsewhere in this MOU, including this Section III.B and Section V) within its available budget. If a Project meeting these requirements cannot be implemented within the agreed upon milestones as later defined in the attached Schedule of Performance attached as Exhibit A, all Parties may consider terminating this MOU for joint development of the Program.

2. Santa Cruz Works Requirements:
a. Program Development:

SCW, City and Digital NEST will jointly coordinate efforts to develop and deliver an apprenticeship program that places Digital NEST interns and other eligible applicants into tech apprenticeships in participating tech companies in the Santa Cruz area. Digital NEST

12.9 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

City, Digital Nest and SCW MOU
graduates will have completed at least six months of the Digital NEST technical internship training program. Digital NEST will be responsible for providing free technical training which includes the following training areas: web and information technology training, digital arts training, marketing training, project management training and general employment support services for trainees in the Digital NEST training program. Digital NEST’s responsibilities include the training and support of participants in the Program.

Digital NEST will also conduct a check-in with apprentices placed through the Program to provide support as needed.

SCW will be responsible for the administration of the Program and the interface between Digital NEST graduates selected for participation in the Program and other eligible participants selected through the SCW application process and the participating tech companies in the Program. City, SCW and Digital NEST will work collaboratively to develop the application materials and information provided to applicants that will be available on the SCW website.
b. Program Delivery:

SCW will outreach, vet and select participating tech companies into the Program and match Digital NEST interns and other eligible applicants with pre-selected tech companies in the Santa Cruz area. Participating tech companies will enter into an agreement with SCW, the program administrator, outlining the participating companies’ roles and responsibilities during the six-month apprenticeship. Approved and selected companies who receive an apprentice during the program will receive up to $10,000 in matching funds from SCW for participation in the Program for each selected apprentice.

III. TERM
This MOU shall be effective as of ______________ and expire December 31, 2026, unless extended by all mutual written agreement of the Parties.

This MOU may be terminated upon a 60-day written notice by any party to the others if adequate future grant funding cannot be procured for the Program; or by mutual consent of all Parties.

Except as otherwise expressly provided in this MOU, if the performance of any act required by this MOU to be performed by either party is prevented or delayed by reason of any act of God, earthquake, natural disaster, flood, strike, lockout, labor dispute, inability to secure materials or reasonable substitutes therefore, restrictive governmental laws or regulations, unusually severe weather substantially differing from what normally would have been expected (based on historic weather data), or any other cause (except financial inability) beyond the reasonable control of and not caused by the fault or negligence of the Party required to perform the act, the time for performance of the act will be extended for a period equivalent to the period of delay and performance of the act during the period of delay will be excused.

12.10 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

City, Digital Nest and SCW MOU
IV. FINANCIAL CONSIDERATIONS
Beyond the initial Program costs of $225,000, the Parties intend to contribute their “fair share” of resources to the Project. Resource contributions may include direct funding contributions, real property, in-kind services, professional assessments and plans, and assistance acquiring outside funding, such as may include grants, assessments, tax credits, donations, consultant fees, associated infrastructure investments, debt financing, or other such funding not directly sourced from an agency’s traditional budget. A basic assumption regarding the Program is that, through the contribution of sufficient grant funding to support the Program, the Parties will have sufficient financial resources to undertake the Program or will act to provide additional resources as the discretion of their governing bodies. As currently awarded to the City through the AHSC program, the City shall make available $200,000 of AHSC funds and $25,000 of funds from the City’s Economic Development approved FY 25 budget to the Program and Parties as follows:
 $75,000 payable to Digital NEST for the performance and delivery of the Program components outlined in IIB(2)b and IIC(2)a-b.
 $50,000 payable to SCW for the performance and delivery of the Program components outlined in IIB(2)b and IID(2)a-b.
 Up to $100,000 payable to SCW to act as a fiscal agent on behalf of the City to award up to $10,000 to each participating tech company in the program hosting a Digital NEST graduate or other selected particant as an apprentice over the specified program duration.

Payment for above services performed shall be compensated in accordance with the terms and amounts specified above. Payment for above services will constitute full and complete compensation for all obligations assumed by Parties under this MOU, unless otherwise agreed to in writing by all Parties and codified through an amendment to the MOU.

Initial invoices shall be submitted by Digital NEST and SCW to the City upon completion of program development. Such completion of program development shall be agreed by all parties. Initial invoices shall not exceed program delivery services for a twelve-month period. All other invoices, including invoices for matching grants for tech company participation shall be submitted and paid on a monthly basis unless otherwise specified in the fee schedule.

All invoices shall contain the following affidavit signed by the submitting Party:
"I hereby certify [or as principal of organization] that the charge of (Insert invoice amount) as summarized above and shown in detail on the attachments is a fair and reasonable use of public funds, is in accordance with the terms of MOU dated (Insert Agreement Date), and has not been previously paid."

12.11 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

City, Digital Nest and SCW MOU
This MOU is contingent upon the appropriation of sufficient funding by the City for the services covered by this MOU. If funding is reduced or deleted by the City for the services covered by this MOU, the City has the option without penalty or liability to either terminate this MOU or to offer an amendment to this MOU indicating the reduced amount.

INCLUDE INVOICE SUBMITTAL PROCEDURES AND PAYMENT PROCESS At key milestones identified in the Schedule of Performance, Attached as Exhibit A (determine if we want to include a Performance Schedule), the Parties shall determine whether Program financing is adequate and whether additional financing can be committed or secured by the Parties. Failure to meet or satisfy a Program financing milestone shall provide the Parties grounds for termination upon due notice The City, Digital NEST and SCW may, separately or jointly, apply for future available grant funding for the various components of the Program and for continuation of the Program beyond the initial term. The Parties agree to collaborate on the submittal and support of future grant applications. If submitted future grant applications are unsuccessful, and if no other funding source is identified by the Parties to continue the Program, the Parties may proceed to terminate the MOU pursuant to Section IV above.

In the event, that this MOU is cancelled by any Party, each Party shall remain responsible for the cost of all services and materials, contracted for, committed to, or agreed to by said Party as of the cancellation of this MOU. This clause shall be deemed to relate to all agreements contemplated and entered into related to this MOU. This clause shall survive the termination of this MOU and shall stand until such time that it is determined in writing and to the satisfaction of both Parties, that all outstanding expenses, liens, or litigation related to the project have been resolved
In no event, shall any Party be responsible for the costs assigned to our incurred by the other Party, its contractors, or third parties, without prior written consent of an authorized signatory from all Parties.

V. NOTICES
All notices under this MOU shall be deemed duly given upon delivery, if delivered by hand; or three (3) days after posting, if sent by registered mail, receipt requested; to a party hereto at the address hereunder set forth or to such other address as a party may designate by notice pursuant hereto.

CITY
City of Santa Cruz
Economic Development Department
337 Locust Street Santa Cruz, CA 95060
Attention: Director

12.12 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

City, Digital Nest and SCW MOU

DIGITAL NEST
349 Main Street, Suite 202
Watsonville, CA 95076
(Attention: Jacob Martinez)

SANTA CRUZ WORKS
101 Cooper Street
Santa Cruz, CA 95060
Attention: Doug Erickson
VI. AUTHORITY TO CONTRACT
Each party has full power and authority to enter into and perform this MOU and the person signing this MOU on behalf of each party has been properly authorized and empowered to enter into this MOU. Each party further acknowledges that it has read this MOU, understands it and agrees to be bound by it.

VII. INDEMNITY
The City agrees to protect and does hereby agree to indemnify, defend and hold Digital NEST and SCW harmless from all demands, liability, claims, actions and damages to any person or property, costs and expenses (including, but not limited to, reasonable attorneys’ fees) arising out of or connected with the performance by Digital NEST and SCW of its obligations under this Agreement.

Digital NEST agrees to protect and does hereby agree to indemnify, defend, and hold City and SCW harmless from all demands, liability, claims, actions, and damages to any person or property, costs and expenses (including, but not limited to, reasonable attorneys’ fees) arising out of or connected with the performance by City or SCW of its obligations under this Agreement.

SCW agrees to protect and does hereby agree to indemnify, defend, and hold City and Digital NEST harmless from all demands, liability, claims, actions, and damages to any person or property, costs and expenses (including, but not limited to, reasonable attorneys’ fees) arising out of or connected with the performance by City or Digital NEST of its obligations under this Agreement.

12.13 City of Santa Cruz, Digital Nest and SCW
MOU for Workforce Development

IN WITNESS WHEREOF, the Parties have executed this Agreement as of the latest date written below.

DIGITAL NEST
By Date _______________________
Jacob Martinez, Chief Executive Officer

SANTA CRUZ WORKS
By _________________________________Date ________________________ Doug Erickson, Executive Director

CITY OF SANTA CRUZ
By Date _________________________
Matt Huffaker, City Manager
Approved as to Form:

Date ______
Tony Condotti, City Attorney

12.14 City Council

AGENDA REPORT
DATE: 03/06/2025
AGENDA OF: 03/25/2025
DEPARTMENT: Economic Development and Housing
SUBJECT: Purchase Sale Agreement Between the City of Santa Cruz and the City of Scotts Valley for the City-owned Property Located at the Northwest Corner of Mount Hermon Road and Kings Village Road in the City of Scotts Valley, aka Skypark, APNs 022-721-07, 022-721-08, and 022-721-09 (EDH)
Location: None
RECOMMENDATION: Motion to adopt a resolution authorizing and directing the City Manager, or designee, to execute a Purchase Sale Agreement, along with modifications of a nonsubstantive or conforming nature, between the City of Santa Cruz and the City of Scotts Valley for the City of Santa Cruz-owned property located at the Northwest Corner of Mount Hermon Road and Kings Village Road in the City of Scotts Valley, in a form to be approved by the City Attorney, and to take any further actions and execute any other related documents necessary to conclude the sale.

BACKGROUND: The City of Santa Cruz (City) owns approximately 8.15 acres in the City of Scotts Valley located at the northwest corner of Mount Hermon Road and Kings Village Road (APNs 022-721-07, 022-721-08, and 022-721-09). The three contiguous parcels constitute the remaining vacant land of the former Skypark Airport which ceased operations in 1982. In the late 1980’s, the property was declared as surplus, and a portion of the property was sold by the City for a private residential development. For a period of twenty years, the remaining property was subject to an Owner Participation Agreement (OPA) with the Redevelopment Agency of the City of Scotts Valley, which contained an option for purchase by the Redevelopment Agency of the City of Scotts Valley. With the termination statewide of redevelopment, it was no longer possible to execute an annual extension of the purchase option with the Redevelopment Agency and the agreement expired.

Since 2013, the City has entered into a Purchase Sale Agreement (PSA) on three separate occasions, the most recent of which was terminated prior to close of escrow in mid-2019. Each PSA was entered into between the City and a development entity interested in pursuing the development of the proposed Scotts Valley Town Center Project. Each prior sale was terminated during the escrow period based on project financing feasibility.

13.1 Since 2019, the City has negotiated with the City of Scotts Valley regarding the sale of the three contiguous City-owned parcels. Throughout 2024, under direction from the City Council, staff has obtained an updated appraisal for the property and negotiated terms for the sale of the property to the City of Scotts Valley.

The site and surrounding area are subject to known underground and surface contamination related to its historic use as an airport and related to the proximity of the site to a solvent release from the nearby Scotts Valley Dry Cleaners. The surface contamination was recently remediated subject to an agreement between the City of Scotts Valley and the City of Santa Cruz, and funded by the City of Scotts Valley as a credit against the future purchase price of the property.

Soil contamination consisting of arsenic, lead and TPH- diesel was fully delineated and excavated for off-site disposal.

The site will be sold with a land use covenant along with a soil vapor management plan for any future development. The City is currently seeking a case closure letter from Santa Cruz County Environmental Health as it pertains to the surface contamination. The purchase price reflects the assessed value of the property with an acknowledgment of the land use covenant for future use as well as a credit against the purchase price for the remediation of the surface contamination.

DISCUSSION: On April 30, 2024, City Council approved a PSA for the sale of the Skypark property to the City of Scotts Valley.

The specific terms of the PSA beyond standard sale provisions were as follows:

Buyer: City of Scotts Valley
Purchase Price: $7,750,000, AS-IS Sale
Remediation Credit: Up to $275,000 credit against purchase price (based on actual remediation costs incurred)
Deposit: $100,000 within 3 days of effective date, nonrefundable following feasibility period
Down Payment: On or before Closing, Buyer shall deposit a down payment in the amount of $1,000,000
Feasibility: 30 days from effective date
Close of Escrow: 90 days from expiration of feasibility period Financing: Seller financing 4.5% per annum on balance of purchase price, promissory note secured by a Deed of Trust. Note shall be due and payable upon sale of property or uncured Default under the loan agreement, based on the following options (determined prior to close of escrow):
(i) 15-Year Amortization Payment Option: Borrower shall make annual payments of principal and interest based on a fifteen (15) year amortization schedule with a final balloon payment on the date that is eight (8) years from the Close of Escrow. (ii) 8-Year Amortization Payment Option: Borrower shall make annual payments of principal and interest in the amount for a period of eight (8) years.

After City Council approved the PSA, the City of Scotts Valley waited for the award of a federal earmark to provide partial funding for the purchase before moving forward in executing the agreement. Once the federal earmark was awarded, the City of Scotts Valley chose to go forward

13.2 with the financing option (i) above with the fifteen-year amortization of the financed amount, paid over eight (8) years time with a balloon payment in the last year. The Purchase Sale Agreement Lease Exhibit is attached.

California budgeting regulations place restrictions on a jurisdiction’s General Fund obligations in a given fiscal year. For the purchase and sale of the property to go forward, the nature of the financing switched to a lease agreement instead of a promissory note. In this arrangement, the City will sell the property to Scotts Valley who will then lease it to the City. The City of Santa Cruz will in turn sublease the property back to the City of Scotts Valley. The lease term will be eight (8) years following the close of escrow on the property. The City of Scotts Valley will make lease payments to the City of Santa Cruz over this time. The lease payments will be the equivalent to the payments calculated for the prior debt financing. The City of Scotts Valley has the option to prepay lease payments in full at any time during the term, which would terminate the lease agreement.

Staff recommends that the City Council adopt a resolution authorizing and directing the City Manager, or designee, to execute the Purchase Sale Agreement between the City of Santa Cruz and the City of Scotts Valley with any directed modifications thereof, for the City-owned property located in the City of Scotts Valley, in a form to be approved by the City Attorney, and to take any further actions and execute any other related documents necessary to conclude the sale.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed Council action to approve the sale of property is not a “project” under CEQA because it does not have the potential to cause a physical change in the environment directly or indirectly.

The companion lease agreement for the sale does not specify or define a specific use of the property.

HEALTH IN ALL POLICIES (HiAP): HiAP is a collaborative approach to improving the health of all people by incorporating health considerations into decision-making across sectors and policy areas. HiAP is based on 3 pillars: equity, public health, and sustainability. The goal of HiAP is to ensure that all decision-makers are informed about the health, equity, and sustainability impacts of various policy options during the policy development process. The sale of the Skypark property will facilitate development of more housing opportunities in Santa Cruz County. City Council has directed that the proceed of the sale of the Skypark property be used to fund the Downtown Library & Affordable Housing Project, (DLAHP). The DHLAP supports the pillar of equity by providing a destination public facility, childcare, a commercial facility, and affordable residential rental units on a site in the City’s downtown urban core. This project is located in an area that has been improved with sidewalks and street trees near public transportation, commercial goods and services, and recreational opportunities.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: No

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: Per City Council direction at the meeting of April 30, 2024, proceeds from the sale of the Skypark property, including any and all deposits resulting from the sale of City-owned property would be deposited into the City’s Public Trust Fund and

13.3 appropriated for the Downtown Library project c512601. There is no negative fiscal impact to approving and executing the proposed PSA. Should the City of Scotts Valley terminate the PSA during the escrow period, but beyond the 30-day feasibility, the City would retain the $100,000 deposit. The current negotiated PSA provides the City with a $1,000,000 deposit at the close of escrow. Over the eight (8) years of the lease term, $6,650,000, less the credit for the surface remediation estimated with a capped limit of $275,000, will be repaid. If the City of Scotts Valley maintains the lease arrangement for the full eight (8) year term, the interest earnings will total approximately $1,952,000. As it is likely that the close of escrow will happen in FY 2026, FY 2026 budgets for the City Public Trust Fund and project c512601 will reflect the anticipated proceeds from the execution of this agreement.

Prepared and Submitted By:

Bonnie Lipscomb
Director of Economic
Development and Housing
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. RESOLUTION.DOCX

2. SKYPARK PURCHASE AND SALE AGREEMENT.DOCX

3. SKYPARK PURCHASE SALE AGREEMENT LEASE EXHIBIT.DOCX

13.4 RESOLUTION NO. NS-30,XXX

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ

AUTHORIZING AND DIRECTING THE CITY MANAGER TO EXECUTE A PURCHASE

SALE AGREEMENT BETWEEN THE CITY OF SANTA CRUZ AND THE CITY OF

SCOTTS VALLEY FOR THE SURPLUS CITY-OWNED PROPERTY LOCATED AT THE

NORTHWEST CORNER OF MOUNT HERMON ROAD AND KINGS VILLAGE ROAD IN THE CITY OF SCOTTS VALLEY, APNS 022-721-07, 022-721-08, AND 022-721-09 WHEREAS, the City of Santa Cruz (“City”) owns certain real property located at the Northwest Corner of Mount Hermon Road and Kings Village Road in the City of Scotts Valley, APNs 022-721-07, 022-721-08, and 022-721-09; and
WHEREAS, the property has been previously declared by the City Council to be surplus property and offered for lease or sale to entities listed in Government Code Section 54222; and WHEREAS, The City of Scotts Valley has offered to purchase the property AS-IS for the appraised value subject to certain negotiated terms; and WHEREAS, any and all monies collected under the proposed Purchase Sale Agreement shall be deposited into the City Public Trust Fund and appropriated for the Downtown Library project; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Santa Cruz that the City Manager, or designee, is authorized and directed to execute a Purchase Sale Agreement between the City of Santa Cruz and the City of Scotts Valley for the City-owned property located at the Northwest Corner of Mount Hermon Road and Kings Village Road in the City of Scotts Valley, along with modifications of a non-substantive or conforming nature, in a form to be approved by the City Attorney, and to take any further actions and execute any other related documents necessary to conclude the sale.

PASSED AND ADOPTED this 25th day of March, 2025 by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

APPROVED: ______________________________
Fred Keeley, Mayor
ATTEST: _________________________________
Bonnie Bush, City Clerk Administrator

13.5 82811.00004\43430907.1

PURCHASE AND SALE AGREEMENT AND JOINT ESCROW INSTRUCTIONS

THIS PURCHASE AND SALE AGREEMENT AND JOINT ESCROW
INSTRUCTIONS (this “Agreement”) is made and entered into as of ______________, 2025 for reference purposes only, by and between the City of Santa Cruz, a California municipal corporation (“Seller”), and the City of Scotts Valley, a California municipal corporation (“Buyer”). The date upon which both Buyer and Seller have executed this Agreement and delivered the same to one another, shall hereinafter be referred to as the “Effective Date”.

IN CONSIDERATION of the respective agreements hereinafter set forth, Seller and Buyer hereby agree as follows:

1. Purchase and Sale of Property. Seller hereby agrees to sell “AS-IS” and convey to Buyer, and Buyer hereby agrees to purchase from Seller, subject to the terms and conditions set forth herein, the following (collectively, the “Property”):
(a) That certain real property located at the northwest corner of Mount Hermon Road and Kings Village Road in the City of Scotts Valley, County of Santa Cruz, California, commonly referred to as Assessor's Parcel Numbers 022-721-07, 022-721-08, and 022-721-09, all as more fully described in Exhibit A (the “Land”), together with all rights, privileges, easements or appurtenances to or affecting the Land (collectively, the “Appurtenances”). (b) Vacant Property. The Land is vacant and does not contain any personal property.

2. Purchase Price.
(a) The purchase price for the Property (“Purchase Price”) shall be Seven Million Seven Hundred Fifty Thousand Dollars ($7,750,000.00). (b) The Purchase Price shall be paid as follows:
(i) Within three (3) days following the Effective Date, Seller and Buyer shall open an escrow in connection herewith (“Escrow”) at First American Title, 4450 Capitola Road #103, Capitola, CA 95010, Attn: Joyce Avila (“Escrow Holder”), and Buyer shall deposit into Escrow the amount of One Hundred Thousand Dollars ($100,000.00) (“Deposit”) in cash or other immediately available funds.
(ii) The Deposit shall be held by Escrow Holder in an interest-bearing account for the benefit of Buyer in accordance with this Agreement. Notwithstanding anything herein to the contrary, One Hundred Dollars ($100.00) of the Deposit (the “Independent Consideration”) shall not be refundable to Buyer, but shall represent consideration for this Agreement and shall be paid to Seller. The Independent Consideration shall be paid to Seller within three (3) days of the Effective Date. The Independent Consideration shall serve as consideration for the granting of the time periods herein contained for Buyer to exercise Buyer's right to satisfy all of Buyer's conditions herein contained.

13.6 82811.00004\43430907.1
2 (iii) The Deposit (less the Independent Consideration) are referred to herein from time to time as the “Earnest Money.” The Earnest Money shall be held by Escrow Holder in an interest-bearing account for the benefit of Buyer in accordance with this Agreement. (iv) If the Closing (as defined herein) as contemplated hereunder should occur, then the Earnest Money will be paid by the Escrow Holder to Seller at the Closing, and the Earnest Money and any interest accrued thereon will be credited against the Purchase Price payable by Buyer to Seller at the Closing.
(v) If this Agreement is not terminated prior to the expiration of the Feasibility Period (as defined herein), the Earnest Money and any interest accrued thereon shall be nonrefundable to Buyer, except that if this Agreement is terminated prior to the Closing due to Seller's default or the failure of any of the Conditions Precedent (as defined herein) or as expressly set forth herein, then the Earnest Money together with any interest accrued thereon shall be returned to Buyer. The Earnest Money together with all interest accrued thereon shall be applied to the Purchase Price at the Closing.
(vi) On or before the Closing, if this Agreement has not been earlier terminated, Buyer shall deposit into Escrow cash or other immediately available funds in the amount of One Million Dollars ($1,000,000.00) (the “Down Payment”), which shall be payable to Seller at the Closing.
(vii) After Closing, Buyer shall pay the remainder of the Purchase Price, or Six Million Six Hundred Fifty Thousand Dollars and Zero Cents ($6,650,000.00) (also referred to as the "Financed Rental Payments"), in accordance with the schedule of requirements payments in an appropriate financing agreement. The financing agreement may be in a form substantially similar to the Lease-Leaseback Agreement between Buyer and Seller attached hereto as Exhibit F and incorporated herein by reference (the “Lease-Leaseback Agreement”), with the following terms:
(1) A term of eight (8) years from Close of Escrow;
(2) Total rental payments for the Financed Rental Payments, plus interest, in accordance with a schedule of payments to be set forth in the Lease-Leaseback Agreement.
(c) Buyer and Seller agree to the following regarding environmental remediation on the Property:
(i) The Purchase Price reflects Seller’s agreement to a reduction in price from the appraised value of the Property in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00). In consideration of this price reduction, Buyer agrees that Seller shall have no further responsibility for the cost of a vapor barrier and any other cost relating to remediation of underground contamination, including but not limited to all remediation of groundwater contamination (collectively, “Underground Contamination”). Buyer shall be solely and exclusively responsible for any and all costs of Underground Contamination, and shall comply with all legal requirements arising from or related to the underground contamination.

13.7 82811.00004\43430907.1
3 (ii) Buyer and Seller agree that the Property required surface-level environmental remediation that included: limited non-hazardous soil removal, off hauling and import of clean, quarry sourced fill (“Surface Remediation”). Prior to this Agreement, Buyer and Seller entered into an Agreement for Payment of Surface Remediation Between City of Scotts Valley and City of Santa Cruz, dated on or about September 20, 2023, as amended by the Parties (“Joint Surface Remediation Agreement”), for the purpose of jointly conducting the Surface Remediation and are currently awaiting a closure order from the County of Santa Cruz. Seller agrees to reduce the Financed Rental Payments based on Surface Remediation costs that are actually incurred and paid by Buyer pursuant to the Joint Surface Remediation Agreement, subject to Seller’s review and approval of such Surface Remediation cost documentation, provided that the total reduction of the Financed Rental Payments shall not exceed Two Hundred Seventy Five Thousand Dollars ($275,000.00). If the estimated costs for Surface Remediation exceeds this amount, then Seller’s written consent to any additional costs shall be a condition precedent to Closing for the benefit of Seller as set forth in Section 6 below.

3. Title to the Property. At the Closing, Seller shall cause to be conveyed to Buyer fee simple title to the Property by duly executed and acknowledged grant deed substantially in the form attached hereto as Exhibit B and incorporated herein by this reference (the “Deed”) as well as a duly executed Bill of Sale for the Personal Property, if any. As used in this Agreement, Closing (the “Closing”) shall be deemed to occur upon the recording of the Deed. Evidence of delivery of fee simple title shall be the issuance by Escrow Holder to Buyer of an ALTA standard coverage owner's policy of title insurance in the amount of the Purchase Price, insuring fee simple title to the Property in Buyer, subject only to such exceptions as Buyer shall have approved as provided below (the “Title Policy”). The Title Policy shall provide full coverage against mechanics' and materialmen's liens and shall contain such special endorsements as Buyer may reasonably require, including, without limitation, any endorsements required as a condition to Buyer's approval of any title exceptions (the “Endorsements”). Within five (5) business days following the opening of Escrow, Seller shall order the issuance of a preliminary title report with respect to the Property, together with copies of all underlying documents referenced therein and a map containing a plotting of all easements capable of being plotted (collectively, the “Preliminary Report”), to be prepared by the Escrow Holder and delivered to Buyer. No later than thirty (30) business days after receipt of the Preliminary Report, Buyer shall give written notice to Seller of any items contained in the Preliminary Report which Buyer disapproves (“Buyer's Disapproval Notice”). Failure of Buyer to notify Seller of Buyer's disapproval of all or any item on the Preliminary Report shall be deemed to be an approval by Buyer of such item(s). In any event, Seller covenants to remove as exceptions to title prior to the Closing, any mortgages, deeds of trust, and other monetary encumbrances (collectively, “Disapproved Liens”) shown on the Preliminary Report except for real property taxes not delinquent. Seller shall notify Buyer no later than five (5) business days after receipt of Buyer's Disapproval Notice whether it elects to remove such other items disapproved by Buyer. If by the expiration of the Feasibility Period, there remain exceptions to title which have not been modified to the satisfaction of Buyer and/or removed prior to the Closing Date, then Buyer may elect to do either of the following by the expiration of the Feasibility Period: (i) accept such exceptions and proceed to take title to the Real Property subject to such exception(s); or (ii) this Agreement may be terminated in accordance with Section 4(b).

In the event Buyer elects to terminate this Agreement pursuant to this Section 3, neither party shall have any further obligations to the other hereunder (except under provisions of this Agreement which specifically state that they survive termination).

13.8 82811.00004\43430907.1
4 4. Feasibility.
(a) From and after the Effective Date until the Closing or earlier termination of this Agreement, Seller shall afford authorized representatives of Buyer access to the Property, upon reasonable prior notice to Seller, and so long as such access does not unreasonably interfere with the conduct of business on or use of the Property, for purposes of conducting such physical inspections and investigations of the Property as Buyer deems necessary (the “Inspections”).

Seller's representative shall be present with Buyer or Buyer's representative for any access to the Property. The Inspections and investigations may include, without limitation, (i) a review of existing zoning, entitlement, planning or similar issues applicable to the Property; (ii) a review of the physical condition of the Property and the systems serving the Property; (iii) a review of the environmental condition of the Property, including a Phase I environmental site assessment and any proposal regarding a Phase II environmental site assessment. Buyer agrees not to conduct or cause to be conducted a Phase II environmental site assessment without the prior written consent of Seller. Buyer's Inspections and investigations shall be governed by Section 14. (b) As used herein, the term (“Feasibility Period”) shall refer to a period of time to expire at 5:00 p.m., California time, on the thirtieth (30th) calendar day following the Effective Date; provided, however, that if the 30th day is a Saturday, Sunday or holiday on which banking institutions are closed in the State of California, then the Feasibility Period shall expire on the following business day. Buyer may elect, by written notice to Seller at any time prior to the expiration of the Feasibility Period, to terminate this Agreement, which election shall be in Buyer's sole and absolute discretion. If Buyer desires to terminate this Agreement pursuant to this Section 4(b) then before the expiration of the Feasibility Period, Buyer shall deliver written notice to Seller of Buyer's election to terminate (the “Buyer's Notice to Terminate”). If Buyer desires to proceed with the purchase of the Property subject to the remaining conditions set forth in this Agreement, then on or before the expiration of the Feasibility Period, Buyer shall deliver written notice to Seller of such election to proceed (the “Buyer's Notice to Proceed”), electing to waive Buyer's right of termination pursuant to this Section 4(b) and proceed with the Closing subject to the remaining conditions set forth in this Agreement. If Buyer fails to deliver either Buyer's Notice to Terminate or Buyer's Notice to Proceed to Seller prior to the expiration of the Feasibility Period, then Buyer shall be deemed to have elected to proceed with this Agreement and the Closing. In the event of the termination of this Agreement pursuant to this Section 4(b), neither party shall have any further obligations to the other hereunder (except under provisions of this Agreement which specifically state that they survive termination). (c) In the event Buyer elects to terminate this Agreement pursuant to Section 4(b), or if Closing does not occur for any reason, Buyer shall return all Seller's Deliveries to Seller. Buyer further agrees that prior to Closing, Buyer shall provide Seller with copies of all studies, reports, appraisals and other materials commissioned by or prepared for Buyer relating to or regarding the Property (“Buyer's Reports”), at no cost to Seller.

5. Seller's Deliveries. Within five (5) business days following the Effective Date, Seller shall deliver to Buyer, whether electronically or otherwise, the materials described on Exhibit E, which shall contain copies of documents in Seller's possession or control, or to which Seller has access (collectively, the “Seller's Deliveries”). Seller makes no representation whatsoever about the content, accuracy, completeness or value of any of Seller's Deliveries. All

13.9 82811.00004\43430907.1
5 Seller's Deliveries will be provided to Buyer without warranty from Seller regarding the accuracy or completeness of the information contained therein, and such documents may or may not be assignable to Buyer. The delivery of such reports and studies shall be subject to the proprietary rights of any engineer or other consultant preparing the same and any limitations on use imposed by them. Buyer assumes all risk of reviewing and understanding any and all information contained in Seller's Deliveries. Seller shall deliver a Natural Hazards Disclosure Report with Seller's Deliveries.

6. Conditions to Seller's Obligations. Seller's obligations hereunder, including, but not limited to, its obligation to consummate the purchase transaction provided for herein, are subject to the satisfaction of each of the following conditions, each of which is for the sole benefit of Seller and may be waived by Seller in writing in Seller’s sole and absolute discretion:
(a) Buyer shall not be in default under this Agreement. (b) Each representation and warranty made in this Agreement by Buyer shall be true and correct in all material respects at the time as of which the same is made and as of the Close of Escrow.
(c) Seller agrees to credit Buyer’s share of the cost of Surface Remediation to Buyer as required under Section 2(c)(ii) of this Agreement, unless Seller and Buyer mutually agree to an alternative cost sharing arrangement.
(d) Buyer and Seller agree to execute an appropriate financing instrument providing for a lease-leaseback transaction, pursuant to which Buyer shall lease the Property to Seller, and Seller shall lease the Property back to Buyer with Buyer paying the remaining balance of the Purchase Price under the lease arrangement, as set forth in Section 2(b)(vii) of this Agreement. A memorandum of lease in the form attached hereto as Exhibit G, or other evidence of the financing acceptable to Seller, shall be recorded in the official records of Santa Cruz County. (e) Escrow Holder shall be unconditionally committed to issue a Title Policy to Seller upon the Closing in the form and with such exceptions and endorsements as have been approved, or are deemed approved, by Seller.
(f) Buyer shall have delivered a Certificate of Acceptance or documented authorization to execute the Certificate of Acceptance. (g) Buyer shall have complied with all of Buyer’s duties and obligations contained in this Agreement and all of Buyer's representations and warranties contained in or made pursuant to this Agreement shall have been true and correct when made and shall be true and correct as of the Closing Date.
(h) Buyer’s written consent that Seller may satisfy its obligations under the Joint Surface Remediation Agreement based on the costs Seller approves under Section 2(c)(ii) of this Agreement.
(i) Buyer’s written consent to record against the Property any covenant or deed restriction for purposes of complying with the California Surplus Land Act (Gov. Code § 54220

13.10 82811.00004\43430907.1
6 et seq.), and Buyer’s execution and delivery of the covenant or deed restriction to Escrow Holder prior to Closing.
(j) Seller waives the right of Termination Without Cause provided for in Section 8(f).

7. Conditions Precedent to Closing. The following are conditions precedent to Buyer's obligation to purchase the Property (the “Conditions Precedent”). The Conditions Precedent are intended solely for the benefit of Buyer and may be waived only by Buyer in writing in Buyer’s sole and absolute discretion. In the event any Condition Precedent is not satisfied, Buyer may, in its sole and absolute discretion, terminate this Agreement, subject to the provisions of Section 8.
(a) Buyer's inspection, review and approval, within the Feasibility Period, of all of the following:
(i) The physical characteristics and condition of the Property (including without limitation the condition of the soils); and
(ii) Seller's Deliveries.
(b) Escrow Holder shall be unconditionally committed to issue the Title Policy to Buyer upon the Closing in the form and with such exceptions and endorsements as have been approved, or are deemed approved, by Buyer as provided in Section 3 above. (c) Seller shall have complied with all of Seller's duties and obligations contained in this Agreement and all of Seller's representations and warranties contained in or made pursuant to this Agreement shall have been true and correct when made and shall be true and correct as of the Closing Date.
(d) Buyer waives the right of Termination Without Cause provided for in Section 8(f).
(e) The governing body for each Party shall have approved an appropriate financing agreement to provide for the payments required by Section 2(b)(vii) of this Agreement. (f) The memorandum reflecting the Lease-Leaseback Agreement is recorded against the Property in the official records of Santa Cruz County.

8. Default; Remedies; Termination.
(a) Default by Seller; Remedies. In the event any of the specific representations or warranties of Seller contained in this Agreement proves to be untrue in any material respect, or if Seller refuses to perform its obligations at Closing after Buyer tenders its performance of its obligations or to materially comply with any of the provisions hereof at or prior to Closing, then, at Buyer's option, Buyer may elect to: (a) terminate this Agreement, receive a refund of the Deposit and Down Payment, to the extent paid by Buyer, and payment for the remediation costs approved pursuant to Section 2(c)(ii), above, as liquidated damages (collectively, “Buyer’s Liquidated

13.11 82811.00004\43430907.1
7 Damages”), in which case the Escrow Holder shall release the Deposit within five (5) business days of written receipt of a written request from Buyer (with a copy going to Seller), and the Parties shall have no further liability to each other, or (b) proceed with the equitable remedies available to Buyer. If Buyer elects to receive Buyer’s Liquidated Damages, and Seller has withdrawn the Deposit from Escrow, Seller shall fund the withdrawn amounts to Escrow within three (3) business days of notice from Escrow Holder. Buyer's remedies for Seller’s default shall be limited to the election of remedies as set forth in this Section 8.
(b) Default by Buyer; Remedies. If the sale of the Property pursuant to this Agreement is not consummated solely because of a default under this Agreement on the part of Buyer, Seller shall have the right to terminate this Agreement and receive the Deposit, and all Buyer's reports, as liquidated damages (collectively, Seller’s Liquidated Damages”). (c) LIQUIDATED DAMAGES. THE PARTIES HAVE AGREED THAT

THEIR ACTUAL DAMAGES, IN THE EVENT OF A DEFAULT BY THE OTHER PARTY, WOULD BE EXTREMELY DIFFICULT OR IMPRACTICABLE TO DETERMINE.

THEREFORE, BY PLACING THEIR INITIALS BELOW, THE PARTIES ACKNOWLEDGE THAT BUYER’S LIQUIDATED DAMAGES AND SELLER’S LIQUIDATED DAMAGES, AS

DEFINED, HAVE BEEN DETERMINED AFTER NEGOTIATION AS THE PARTIES'

REASONABLE ESTIMATE OF THEIR RESPECTIVE DAMAGES AND SHALL

CONSTITUTE THE SOLE AND EXCLUSIVE REMEDY AGAINST THE OTHER PARTY,

AT LAW OR IN EQUITY, IN THE EVENT OF A DEFAULT UNDER THIS AGREEMENT (EXCEPT IN THE INSTANCE OF BUYER ELECTING TO PURSUE SPECIFIC PERFORMANCE); PROVIDED, HOWEVER, THIS LIQUIDATED DAMAGES CLAUSE DOES NOT APPLY TO CLAIMS UNDER SUBDIVISION (G), BELOW. UPON THE

OCCURRENCE OF ANY SUCH DEFAULT BY BUYER, BUYER SHALL DELIVER WITHIN TWO (2) BUSINESS DAYS OF SELLER'S REQUEST ALL BUYER'S REPORTS AND APPROPRIATE DOCUMENTS ASSIGNING SAME TO SELLER. EACH PARTY HEREBY

WAIVES ANY AND ALL BENEFITS IT MAY HAVE UNDER CALIFORNIA CIVIL CODE SECTION 3389. FURTHERMORE, THE PAYMENT AND RETENTION OF THE DEPOSIT

AS LIQUIDATED DAMAGES IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 AND 3369, BUT

IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES PURSUANT TO CALIFORNIA CIVIL CODE SECTIONS 1671, 1676 AND 1677.
(d) THE PARTIES HEREBY ACKNOWLEDGE THEY HAVE READ AND
ARE FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542 ("SECTION 1542"), WHICH IS SET FORTH BELOW
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH

THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS

FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF

KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR"

13.12 82811.00004\43430907.1
8 (e) BY INITIALING BELOW, THE PARTIES HEREBY WAIVE THE PROVISIONS OF SECTION 1542 IN CONNECTION WITH THE WAIVERS SET FORTH IN THIS SECTION 8, AND AGREE TO THE LIQUIDATED DAMAGES AS STATED HEREIN.

INITIALS: Seller _________ Buyer __________
(f) Within ninety (90) days of the Effective Date, either Party shall have the right to terminate this Agreement, without cause (“Termination Without Cause”), if any legal proceeding is commenced by a third party, or a governmental entity (except one of the Parties) provides either Party with a notice of violation or issues a similar finding, that alleges a violation of any law, regulation, or ordinance regarding this Agreement and the contemplated conveyance of the Property. The Termination Without Cause shall be effective upon written notice from the Party terminating the Agreement to the other Party and Escrow Holder. Within ten (10) days of the written notice under this paragraph, Escrow Holder shall refund to Buyer the Deposit and Down Payment that has been paid to Escrow. Additionally, upon such termination, the Parties shall be obligated under the Joint Surface Remediation Agreement. The Party exercising the right to Termination Without Cause shall pay all costs owed to Escrow Holder. Except as otherwise expressly stated herein, upon a Termination Without Cause, the Parties shall have no further obligations towards each other under this Agreement.
(g) Remedies Under the Lease-Leaseback Agreement. This Agreement does not set forth or limit the remedies under the Lease-Leaseback Agreement.

9. Escrow; Closing, Prorations.
(a) Upon mutual execution of this Agreement, the parties hereto shall deposit an executed counterpart of this Agreement with Escrow Holder and this Agreement shall serve as instructions to Escrow Holder for consummation of the purchase contemplated hereby. Seller and Buyer shall execute such supplemental Escrow instructions as may be appropriate to enable Escrow Holder to comply with the terms of this Agreement, provided such supplemental Escrow instructions are not in conflict with this Agreement as it may be amended in writing from time to time. In the event of any conflict between the provisions of this Agreement and any supplementary Escrow instructions signed by Buyer and Seller, the terms of this Agreement shall control. (b) The Closing shall take place (the “Closing Date”) on or before the date that is ninety (90) days following the expiration of the Feasibility Period or as may be extended as provided below.
(c) At or before the Closing, Seller shall deliver to Escrow Holder or Buyer the following:
(i) the duly executed and acknowledged Grant Deed for the Property and the duly executed Bill of Sale;
(ii) a duly executed affidavit that Seller is not a “foreign person” within the meaning of Section 1445(f)(3) of the Internal Revenue Code of 1986 in the form attached as Exhibit D and incorporated herein by this reference together with a duly executed non-foreign

13.13 82811.00004\43430907.1
9 person affidavit and evidence that Seller is exempt from the withholding obligations imposed by California Revenue and Taxation Code Sections 18805, 18815, and 26131; (iii) evidence reasonably acceptable to Escrow Holder that the documents delivered by Seller have been duly authorized and executed on behalf of Seller and constitute valid and binding obligations of Seller.
(iv) any other documents which the Escrow Holder may reasonably require from Seller in order to close Escrow which do not increase Seller's liability or obligations hereunder;
(v) a closing statement in form and content satisfactory to Buyer and Seller (the “Closing Statement”) duly executed by Seller; and (vi) any other instruments, records or correspondence called for hereunder which have not previously been delivered.
(d) At or before the Closing, Buyer shall deliver to Escrow Holder or Seller the following:
(i) the Closing Statement, duly executed by Buyer;
(ii) the balance owed for the Purchase Price, less the Financed Rental Payments; and
(iii) evidence reasonably acceptable to Escrow Holder that the documents delivered by Buyer have been duly authorized and executed on behalf of Buyer and constitute valid and binding obligations of Buyer.
(e) Seller and Buyer shall each deposit such other instruments as are reasonably required by Escrow Holder or otherwise required to close the Escrow and consummate the purchase of the Property in accordance with the terms hereof, including but not limited to: the Lease-Leaseback Agreement, and a Certificate of Acceptance executed by the duly authorized representative of the City Council for the City of Scotts Valley. (f) The following are to be paid by Buyer or Seller or apportioned as of the Closing Date, as follows:
(i) General real property taxes for the year in which Closing occurs together with assessments, property operating expenses, utilities and other recurring costs relating to the Property shall be apportioned as of the Closing Date on the basis of a thirty (30)-day month. (ii) Costs and expenses of Escrow incurred in this transaction shall be paid as follows:
(1) Seller and Buyer shall each pay one-half (1/2) shall pay all sales, use and documentary transfer taxes;

13.14 82811.00004\43430907.1
10 (2) Seller shall pay the cost for a standard Title Policy and any extended coverage if desired;
(3) Buyer shall pay the cost for a standard Title Policy and any extended coverage if desired;
(4) Seller and Buyer shall each pay one-half (1/2) of the Escrow fees, recording fees and related expenses;
(5) Seller and Buyer shall each pay one-half (1/2) of any city or county transfer taxes due;
(6) all other costs of escrow shall be paid equally by Buyer and Seller.
(iii) The provisions of this Subparagraph (g) shall survive the Closing.

10. Representations, Warranties and Covenants of Seller. As of the date hereof and again as of Closing, Seller represent and warrants to Buyer as follows:
(a) This Agreement and all documents executed by Seller which are to be delivered to Buyer at the Closing are and at the time of Closing will be duly authorized, executed and delivered by Seller, are and at the time of Closing will be legal, valid and binding obligations of Seller enforceable against Seller in accordance with their respective terms. Seller agrees to exercise reasonable and good faith efforts to obtain all necessary authorizations, approvals and consents to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.
(b) No Action. No attachments, execution proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings are pending against Seller, nor are any such proceedings contemplated by Seller. (c) No Representations as to Property. There are no representations, agreements, arrangements, or circumstances, oral or written, between the parties relating to the subject matter contained in this Agreement that are not fully expressed in the Agreement, and Seller has not made and does not make any representation or warranty concerning any matter or thing affecting or relating to the Property, including but not limited to its fitness for a particular use, its physical condition or any other matter.
(d) Seller’s Obligations for Cost of Surface Remediation. During the Escrow Period, Seller will cooperate with Buyer in preparing for an updated estimate for the cost of the Surface Remediation, and that Seller agrees to the provisions of Section 2(c)(ii) of this Agreement regarding a reduction of the Financed Rental Payments.
(e) Sale “AS-IS”. Except for Seller's express representations and warranties set forth in Section 10 herein, Buyer elects to purchase the Property “AS IS, WHERE IS, IN ITS CURRENT CONDITION, WITH ALL FAULTS” without any covenant, representation or warranty of any kind or nature whatsoever, express or implied. Buyer acknowledges that it

13.15 82811.00004\43430907.1
11 assumes all responsibility for Buyer's independent investigation of the Property in making its decision to purchase the Property, including but not limited to its use, development potential and suitability for Buyer's intended use, including (without limitation) the following: the feasibility of developing the Property for the purposes intended by Buyer and the conditions of approval for any subdivision map; the size and dimensions of the Property; the availability, cost and adequacy of water, sewerage and any utilities serving or required to serve the Property; the presence and adequacy of current or required infrastructure or other improvements on, near or affecting the Property; any surface, soil, subsoil, fill or other physical conditions of or affecting the Property, such as climate, geological, drainage, air, water or mineral conditions; the condition of title to the Property; the existence of governmental laws, statutes, rules, regulations, ordinances, limitations, restrictions or requirements concerning the use, density, location or suitability of the Property for any existing or proposed development thereof including but not limited to zoning, building, subdivision, environmental or other such regulations; the necessity or availability of any general or specific plan amendments, rezoning, zoning variances, conditional use permits, building permits, environmental impact reports, parcel or subdivision maps and public reports, requirements of any improvement agreements; requirements of the California Subdivision Map Act, and any other governmental permits, approvals or acts (collectively “Permits”); the necessity or existence of any dedications, taxes, fees, charges, costs or assessments which may be imposed in connection with any governmental regulations or the obtaining of any required Permits; the presence of endangered plant or animal species upon the Property; and all of the matters concerning the condition, use, development or sale of the Property. Buyer acknowledges that Seller and Seller’s employees, officers, officials, representatives, or agents have not at any time made any oral or written representations or warranties (express or implied) relating to the Property, as set forth in Section 10(c). Seller will not be liable for any loss, damage, injury or claim to any person or property arising from or caused by the use or development of the Property by Buyer.

Except with respect to a default by Seller hereunder (including a breach of Seller's warranties and representations), Buyer at the Close of Escrow expressly waives its rights granted under California Civil Code Section 1542, which provides as follows:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS

WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO

EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING

THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST

HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT
WITH THE DEBTOR.”
Buyer's Initials: ________ Seller's Initials: ________.

11. Representations, Warranties and Covenants of Buyer. Buyer hereby represents and warrants to Seller as follows:
(a) This Agreement and all documents executed by Buyer which are to be delivered to Seller at the Closing are and at the time of Closing will be duly authorized, executed and delivered by Buyer, are and at the time of Closing will be legal, valid and binding obligations of Buyer enforceable against Buyer in accordance with their respective terms, and do not and at the time of Closing will not violate any provision of any agreement or judicial order to which

13.16 82811.00004\43430907.1
12 Buyer is subject. Buyer agrees to exercise reasonable and good faith efforts to obtain all necessary authorizations, approvals and consents to the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby.
(b) Buyer warrants that Buyer is a sophisticated owner and buyer of real property, familiar and experienced with requirements for the development of real property. Buyer has examined the Property or will have done so by Closing, is or will be familiar with its physical condition, and accepts the Property in an “AS-IS” condition. (c) Buyer has conducted or will conduct an independent investigation with respect to zoning and subdivision laws, ordinances, resolutions, and regulations of all governmental authorities having jurisdiction over the Property, and the use, disposition and improvement of the Property and is, or at Closing will be, satisfied with the results of such investigation.
(d) The Property is being sold “AS-IS” and with all faults. Buyer acknowledges and agrees that the Purchase Price reflects Seller’s agreement to a price reduction in the amount of Two Hundred Fifty Thousand Dollars ($250,000.00) from the appraised value of the Property for the cost of remediation set forth in Section 2(c)(i) of this Agreement. (e) Buyer acknowledges and agrees that the Surface Remediation has been completed and that Seller’s financial responsibility for the Surface Remediation shall not exceed the amount set forth in Section 2(c)(ii), which shall only be satisfied as a reduction of the Financed Rental Payments in accordance with the Lease-Leaseback Agreement and as set forth in Exhibit C thereto.
(f) Buyer acknowledges and agrees that the Property will be subject to a deed restriction imposed by the County of Santa Cruz, or other responsible government agency, as a result of environmental contamination of the Property, including but not limited to the Surface Remediation, and that Buyer will take all necessary steps to comply with any requirement for a deed restriction imposed by the County of Santa Cruz or other responsible government agency with jurisdiction over any environmental remediation required at the Property. This obligation shall survive the expiration of this Agreement.
(g) If Buyer seeks to perform any additional remediation work on the Property prior to Close of Escrow, Buyer shall request Seller’s written consent. Buyer shall make any such request in writing, and allow Seller at least ten (10) days to respond to the request. Seller shall have the sole and absolute discretion to approve or deny the request.

12. Environmental Matters/Release. As used in this Agreement, “Hazardous Materials” includes petroleum, asbestos, radioactive materials or substances defined as '“hazardous substances,” “hazardous materials” or “toxic substances” (or words of similar import) in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act (49 U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act (42 U.S.C.

Section 6901, et seq.), and under the applicable laws of California. Buyer must rely on its own investigation and not on any representation by Seller regarding Hazardous Materials. Buyer shall

13.17 82811.00004\43430907.1
13 rely solely upon its own investigation and inspection of the Property and the improvements thereon and upon the aid and advice of Buyer's independent expert(s) in purchasing the Property, and shall take title to the Property without any warranty, express or implied, by Seller or any employee or agent of Seller. Seller makes no representations regarding Hazardous Materials in, on or under the Property. Seller's knowledge and disclosures regarding Hazardous Materials are limited to the contents of Seller's Deliveries.

Accordingly, Buyer hereby expressly waives and relinquishes any and all rights and remedies Buyer may now or hereafter have against Seller, whether known or unknown, with respect to any past present, or future presence of Hazardous Materials on, under or about the Property or with respect to any past, present or future violations of any rules, regulations or laws, now or hereinafter enacted, regulating or governing use, handling, storage or disposable of Hazardous Materials, including, without limitation (i) any and all remedies Buyer may now or hereafter have under the Comprehensive Environmental Response Compensation and Liability Act of 1980 (“CERCLA”), as amended, and any similar law, rule or regulation, (ii) any and all rights Buyer may now or hereafter have against Seller under the Carpenter-Presley-Tanner Hazardous Substance Account Act (California Health and Safety Code, Section 25300 et seq.), as amended and any similar law, rule or regulation, and (iii) any and all claims, whether known or unknown, now or hereafter existing, with respect to the Property under Section 107 of CERCLA (42 U.S. C.A. § 9607).

BUYER HEREBY ACKNOWLEDGES THAT IT HAS READ AND IS
FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542 (“SECTION 1542”), WHICH IS SET FORTH BELOW
“A GENERAL RELEASE DOES NOT EXTEND TO

CLAIMS WHICH THE CREDITOR DOES NOT

KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT

THE TIME OF EXECUTING THE RELEASE, WHICH

IF KNOWN BY HIM MUST HAVE MATERIALLY

AFFECTED HIS SETTLEMENT WITH THE
DEBTOR”

BY INITIALING BELOW, BUYER HEREBY WAIVES THE
PROVISIONS OF SECTION 1542 SOLELY IN CONNECTION WITH

THE MATTERS WHICH ARE THE SUBJECT OF THE FOREGOING
WAIVERS AND RELEASES.
_______________
(Buyer's Initials)

13. Continuation and Survival. All representations, warranties and covenants by the respective parties contained herein or made in writing pursuant to this Agreement are intended to and shall be deemed made as of the date of this Agreement or such writing and again at the Closing, shall be deemed to be material, and unless expressly provided to the contrary shall survive the execution and delivery of this Agreement, the Deed and the Closing.

13.18 82811.00004\43430907.1
14 14. Indemnity.

Buyer agrees to indemnify, defend, and hold harmless the Seller, its officials, officers, and employees from, all claims, demands, suits, actions, damages, obligations, liabilities, losses, costs and expenses, including but not limited to attorneys' fees and court costs, in any way related to this Agreement, including those which arise as a result of the Inspections and any remediation work performed on the Property by Buyer, its agents, employees, contractors, or subcontractors; provided, however, that Buyer will not be obligated to indemnify Seller with respect to its own negligence. The foregoing indemnity shall survive termination of this Agreement. Buyer shall not suffer or permit any mechanic's or materialmen's or other lien to stand against the Property in connection with any labor, materials or services furnished or claimed to have been furnished by or on behalf of Buyer in connection with or as a result of any Inspections.

If any such lien shall be filed against the Property, Buyer shall cause such lien to be discharged or bonded within thirty (30) days after such filing. Following any Inspections Buyer shall restore the Property to substantially its physical condition as existed prior to such inspection (except for any changes to the Property caused by Seller, or its agents or employees). Prior to any entry on the Property, Buyer or its consultant shall at its sole cost obtain a policy of liability insurance with a combined single limit in an amount not less than Two Million Dollars ($2,000,000); Seller shall be named an additional insured on said policy; and Buyer or its consultants shall furnish to Seller a certificate of insurance confirming such coverage.

15. Condemnation.
(a) In the event a governmental entity commences eminent domain proceedings to take any portion of the Property after the date hereof and prior to the Closing, then Buyer shall have the option to terminate this Agreement by written notice to Seller within ten (10) business days after Buyer first learns of such commencement. In the event of any such termination, the Earnest Money, together with all interest, shall be returned to Buyer. Buyer and Seller shall each be liable for one-half of any escrow fees or charges, and neither party shall have any further liability or obligation under this Agreement.
(b) In the event a governmental entity commences eminent domain proceedings to take any part of the Property after the date hereof and prior to the Closing and this Agreement is not terminated pursuant to Section 15(a), then the Closing shall occur as scheduled notwithstanding such proceeding; provided, however, that Seller's interest in all awards arising out of such proceedings (except for any award attributable to the loss of Seller's business or income, Seller's personal property, or the property of any tenant of the Property) shall be assigned to Buyer as of the Closing or credited to Buyer if previously received by Seller. Seller's obligations pursuant to this Section 15(b) shall survive the Closing.

16. Possession. Possession of the Property shall be delivered to Buyer on the Closing Date free of any occupant or property not being conveyed to Buyer as provided hereunder.

17. Seller's Cooperation with Buyer. At no cost to Seller, Seller shall cooperate and do all acts as may be reasonably required or requested by Buyer, at no additional cost to Seller, with regard to the fulfillment of any Condition Precedent. Seller hereby authorizes Buyer and its agents to make all inquiries with and applications to any third party, including any governmental

13.19 82811.00004\43430907.1
15 authority, as Buyer may reasonably require to complete its due diligence and satisfy the Conditions Precedent.

18. Brokers and Finders. Neither party has had any contact or dealings regarding the Property, or any communication in connection with the subject matter of this transaction, through any real estate broker or other person who can claim a right to a commission or finder's fee in connection with the sale contemplated herein. In the event that any such broker or finder claims a commission or finder's fee based upon any contact, dealings or communication, the party through whom the broker or finder makes its claim shall be responsible for said commission or fee and all costs and expenses (including, without limitation, reasonable attorneys' fees) incurred by the other party in defending against the same. The party through whom any such other broker or finder makes a claim shall hold harmless, indemnify and defend the other party hereto, its successors and assigns, agents, employees, officers and directors, and the Property from and against any and all obligations, liabilities, claims, demands, liens, encumbrances and losses (including, without limitation, attorneys' fees), arising out of, based on, or incurred as a result of such claim. The provisions of this Section 18 shall survive the Closing or termination of this Agreement.

19. Legal Fees. In the event legal action is commenced to enforce or interpret any of the terms or provisions of this Agreement, the prevailing party in such action shall be entitled to an award of reasonable attorney's fees and costs incurred in connection with the prosecution or defense of said action.

20. Publicity and Confidentiality. Buyer acknowledges that Seller is a public entity and that this Agreement shall be a matter of public record and available to the public under the Public Records Act. Notwithstanding the foregoing, Buyer agrees to not make any public announcements regarding the Property prior to Closing.

21. Miscellaneous.
(a) Notices. Any notice, consent or approval required or permitted to be given under this Agreement shall be in writing and shall be deemed to have been given upon (i) hand delivery, (ii) one business day after being deposited with Federal Express or another reliable overnight courier service for next day delivery, or (iii) two business days after being deposited in the United States mail, registered or certified mail, postage prepaid, return receipt required, and addressed as follows (or such other address as either party may from time to time specify in writing to the other in accordance herewith):

If to Seller: City of Santa Cruz
337 Locust Street
Santa Cruz, CA 95060
Attn: Bonnie Lipscomb
Email: [email protected]
With a copy to: Office of the City Attorney
333 Church Street
Santa Cruz, CA 95060
Email: [email protected]

13.20 82811.00004\43430907.1
16 If to Buyer: City of Scotts Valley
1 Civic Center Drive
Scotts Valley, CA 95066
Attn: Mali LaGoe
Email [email protected]
With a copy to: City of Scotts Valley
1 Civic Center Drive
Scotts Valley, CA 95066
Attn: Kirsten Powell, City Attorney
Email [email protected]
To Escrow Holder: First American Title
Attn: Joyce Avila
4450 Capitola Road #103
Capitola, CA 95010, Attn: Joyce Avila
Phone:(831) 464-6444
Email: [email protected]
(b) Successors and Assigns. Buyer shall have the right to assign this Agreement to any entity controlling, controlled by or under common control with Buyer without Seller's consent or approval, and otherwise Buyer shall have the right to assign this Agreement to any entity subject to Seller's prior approval, which approval shall not be unreasonably withheld, conditioned or delayed. Any such assignee shall assume all obligations of Buyer hereunder; however, Buyer shall remain liable for all obligations hereunder. Seller shall have the right to assign this Agreement. Except as otherwise permitted by this paragraph, neither this Agreement nor the rights of either party hereunder may be assigned by either party. This Agreement shall be binding upon, and inure to the benefit of, the parties hereto and their respective successors, heirs, administrators and assigns.
(c) Amendments. This Agreement may be amended or modified only by a written instrument executed by Seller and Buyer.
(d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California.
(e) Construction. Headings at the beginning of each Section and subparagraph are solely for the convenience of the parties and are not a part of the Agreement. This Agreement shall not be construed as if it had been prepared by one of the parties, but rather as if both parties had prepared the same. Unless otherwise indicated, all references to Sections and subparagraphs are to this Agreement. All exhibits referred to in this Agreement are attached and incorporated by this reference.

13.21 82811.00004\43430907.1
17 (f) No Joint Venture. This Agreement shall not create a partnership or joint venture relationship between Buyer and Seller.
(g) Merger of Prior Agreements. This Agreement and the exhibits attached hereto constitute the entire agreement between the parties and supersede all prior agreements and understandings between the parties relating to the subject matter hereof, including without limitation, any letters of intent previously executed or submitted by either or both of the parties hereto, which shall be of no further force or effect upon execution of this Agreement. (h) Time of the Essence. Time is of the essence of this Agreement. As used in this Agreement, a “business day” shall mean a day which is not a Saturday, Sunday or recognized federal or state holiday. If the last date for performance by either party under this Agreement occurs on a day which is not a business day, than the last date for such performance shall be extended to the next occurring business day.
(i) Severability. If any provision of this Agreement, or the application thereof to any person, place, or circumstance, shall be held by a court of competent jurisdiction to be invalid, unenforceable or void, the remainder of this Agreement and such provisions as applied to other persons, places and circumstances shall remain in full force and effect. (j) Further Assurances. Each of the parties shall execute and deliver any and all additional papers, documents and other assurances and shall do any and all acts and things reasonably necessary in connection with the performance of their obligations hereunder and to carry out the intent of the parties.
(k) Exhibits. All exhibits attached hereto and referred to herein are incorporated herein as though set forth at length.
(l) Captions. The captions appearing at the commencement of the sections and paragraphs hereof are descriptive only and for convenience in reference. Should there be any conflict between any such caption and the section at the head of which it appears, the section and paragraph and not such caption shall control and govern in the construction of this Agreement. (m) No Obligation To Third Parties. Execution and delivery of this Agreement shall not be deemed to confer any rights upon, directly, indirectly or by way of subrogation, nor obligate either of the parties hereto to, any person or entity other than each other. (n) Waiver. The waiver by any party to this Agreement of the breach of any provision of this Agreement shall not be deemed a continuing waiver or a waiver of any subsequent breach, whether of the same or another provision of this Agreement. (o) Interpretation. This Agreement has been negotiated at arm's length and between persons (or their representatives) sophisticated and knowledgeable in the matters dealt with in this Agreement. Accordingly, any rule of law (including California Civil Code § 1654 and any successor statute) or legal decision that would require interpretation of any ambiguities against the party that has drafted it is not applicable and is waived. The provisions of this Agreement shall be interpreted in a reasonable manner to effect the purpose of the parties and this Agreement.

13.22 82811.00004\43430907.1
18 (p) Counterparts/Facsimile/.PDF Signatures. This Agreement may be executed in counterparts and when so executed by the Parties, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument that shall be binding upon the Parties, notwithstanding that the Parties may not be signatories to the same counterpart or counterparts. The Parties may integrate their respective counterparts by attaching the signature pages of each separate counterpart to a single counterpart. In order to expedite the transaction contemplated herein, facsimile or .pdf signatures may be used in place of original signatures on this Agreement. Seller and Buyer intend to be bound by the signatures on the facsimile or .pdf document, are aware that the other party will rely on the facsimile or .pdf signatures, and hereby waive any defenses to the enforcement of the terms of this Agreement based on the form of signature.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date written below.

SELLER:

City of Santa Cruz. a California municipal
corporation
By: ______________________________________
Name: Matt Huffaker
Its: City Manager
Date: ____________________________________
Approved as to Form
__________________________________
Tony Condotti, City Attorney
Date:_________________________________

13.23 82811.00004\43430907.1
19 BUYER:

City of Scotts Valley, a California municipal
corporation
By:_______________________________________
Name: Mali LaGoe
Its: City Manager
Date: ____________________________________
Approved as to Form
City Attorney:_________________________
Date:_________________________________

13.24 82811.00004\43430907.1
Exhibit A-1

EXHIBIT A

LEGAL DESCRIPTION

13.25 82811.00004\43430907.1
Exhibit B-1

EXHIBIT B

FORM OF DEED

RECORDING REQUESTED BY AND

WHEN RECORDED MAIL TO, AND
MAIL TAX STATEMENTS TO:
[buyer address or attorney]
__________________________________________________________________________ A.P.N.: _________________________ (Space Above Line for Recorder's Use Only)

EXEMPT FROM RECORDING FEES AND TRANSFER TAX
GOV. CODE § 27383; R&T CODE § 11922

GRANT DEED
FOR VALUE RECEIVED, _______________________________________ (“Grantor”), grants to ____________________________ (“Grantee”), all that certain real property situated in the County of ________________, State of California, described on Schedule 1 attached hereto and by this reference incorporated herein (the “Property”).

IN WITNESS WHEREOF, Grantor has executed this Grant Deed as of ________________, 20__.

GRANTOR:
__________________________________________
By:_______________________________________
Name: ___________________________________
Its: ______________________________________

13.26 82811.00004\43430907.1
Exhibit B-2
A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

STATE OF CALIFORNIA )
)
COUNTY OF ________________ )
On ___________________, before me, _____________________________, a Notary Public, personally appeared _____________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

Signature _____________________________ (Seal)

13.27 82811.00004\43430907.1
Exhibit C-1

EXHIBIT C

PERSONAL PROPERTY

13.28 82811.00004\43430907.1
Exhibit D-1

EXHIBIT D

TRANSFEROR'S CERTIFICATION OF NON-FOREIGN STATUS
This form is provided so that the Buyer and/or Seller in this transaction can certify compliance with the Foreign Investment in Real Property Tax Act to the Escrow Agent and/or Buyer. Buyer (“Transferee”) must retain a copy of this document until after the fifth taxable year following the transfer.

Section 1445 of the Internal Revenue Code of 1986, as amended (“Code”) provides that a transferee of a U.S. real property interest must withhold tax if the transferor is a foreign person.

For U.S. tax purposes (including section 1445), the owner of a disregarded entity (which has legal title to a U.S. real property interest under local law) will be the transferor of the property and not the disregarded entity. To inform Transferee that withholding of tax is not required upon the disposition of a U.S. real property interest, the undersigned hereby certifies the following on behalf of _________________________________ (“Transferor”):

1. The Transferor is not a foreign corporation, foreign partnership, foreign trust, foreign estate or foreign person (as those terms are defined in the Code and the Income Tax Regulations promulgated thereunder).

2. The Transferor is not a disregarded entity as defined in Income Tax Regulation Section 1.1445-2(b)(2)(iii).

3. The Transferor's U.S. employer or tax identification number is ______________.

4. The Transferor's office address is
The Transferor understands that this Certification may be disclosed to the Internal Revenue Service by the Transferee and that any false statement contained herein could be punished by fine, imprisonment, or both.

Under penalties of perjury I declare that I have examined this Certification and to the best of my knowledge and belief it is true, correct and complete, and I further declare that I have authority to sign this document on behalf of the Transferor.

Date:______________, 20__ TRANSFEROR:
__________________________________________
By:_______________________________________
Name: ___________________________________
Its: ______________________________________

13.29 82811.00004\43430907.1
Exhibit E-1

EXHIBIT E

SELLER DELIVERIES
Natural Hazards Disclosure Report

13.30 82811.00004\43430907.1
Exhibit F-1

EXHIBIT F

LEASE-LEASEBACK AGREEMENT

TO BE ADDED

13.31 82811.00004\43430907.1
Exhibit G-1

EXHIBIT G

FORM OF MEMORANDUM OF LEASE

RECORDING REQUESTED BY )
AND WHEN RECORDED MAIL TO: )
)
City of Santa Cruz )
337 Locust Street )
Santa Cruz, California 95060 )
Attn: Economic Development Director )
)
Exempt from Recording Fees Pursuant to Government Code Section 27383

MEMORANDUM OF LEASE-LEASEBACK AGREEMENT
This Memorandum of Lease-Leaseback Agreement (“Memorandum”) is hereby entered into as of _____________, 20__ by and between the City of Santa Cruz, a California municipal corporation and charter city, (“Santa Cruz”), and the City of Scotts Valley, a California municipal corporation (“Scotts Valley”).

RECITALS
A. Santa Cruz and Scotts Valley have entered into that certain Lease-Leaseback Agreement (the “Lease Agreement”) dated concurrently herewith for that certain parcel of real property which is legally described in Exhibit A attached hereto and incorporated herein by reference (the “Property”). A copy of the Lease Agreement is available for public inspection at Landlord’s office at 337 Locust Street, Santa Cruz, California. The term of the Lease Agreement is eight (8) years, the Commencement Date of [________, 2025].

B. The Lease Agreement provides that a short form memorandum of the Lease Agreement shall be executed and recorded in the Official Records of Santa Cruz County, California.

NOW, THEREFORE, the parties hereto certify as follows:

Scotts Valley, pursuant to the Lease Agreement, hereby leases the Property to Santa Cruz, and Santa Cruz leases the Property back to Scotts Valley upon the terms and conditions provided for therein. This Memorandum is not a complete summary of the Lease Agreement, and shall not be used to interpret the provisions of the Lease Agreement. [Signatures to appear on the following page.]

13.32 82811.00004\43430907.1
Exhibit G-2
CITY OF SANTA CRUZ, a California
municipal corporation and charter city
By
Name: Matt Huffaker
Title: City Manager
ATTEST:

By:

City Clerk
APPROVED AS TO FORM:

By:

Tony Condotti, City Attorney
CITY OF SCOTTS VALLEY, a
California municipal corporation
By
Name:

Title:

ATTEST:

By:

City Clerk
APPROVED AS TO FORM:

By:

Kirsten Powell, City Attorney

13.33 82811.00004\43430907.1
Exhibit G-3

EXHIBIT A

LEGAL DESCRIPTION OF THE PROPERTY

13.34 82811.00004\43430907.1
Exhibit G-4

ACKNOWLEDGEMENTS
State of California
County of ________________
On ______________________ before me, ________________________________, notary public, personally appeared ________________________________________ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

Signature ____________________________ (Seal)
* * * * *

ACKNOWLEDGEMENTS
State of California
County of ________________
On ______________________ before me, ________________________________, notary public, personally appeared ________________________________________ who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

Signature ____________________________ (Seal)
A notary public or other officer completing this
certificate verifies only the identity of the
individual who signed the document to which this
certificate is attached, and not the truthfulness,
accuracy, or validity of that document.

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

13.35 82811.00004\43429188.1
______________________________________________________________________________ ______________________________________________________________________________

LEASE-LEASEBACK AGREEMENT
Dated as of [________], 2025
by and between the

CITY OF SANTA CRUZ,
as Lessor
and the

CITY OF SCOTTS VALLEY,
as Lessee
Relating to
$________________
Skypark Lease Acquisition
______________________________________________________________________________ ______________________________________________________________________________

13.36 82811.00004\43429188.1

TABLE OF CONTENTS
Page
-iARTICLE I

DEFINITIONS AND EXHIBITS
Section 1.1. Definitions ........................................................................................................1 Section 1.2. Exhibits.............................................................................................................2

ARTICLE II

REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of Scotts Valley..........................3 Section 2.2. Representations, Covenants and Warranties of Santa Cruz..............................4

ARTICLE III
[RESERVED]

ARTICLE IV
LEASE; TERM OF THIS LEASE AGREEMENT; RENTAL PAYMENTS
Section 4.1. Lease by Santa Cruz and Lease-Back to Scotts Valley. ...................................6 Section 4.2. Term of Lease Agreement ................................................................................6 Section 4.3. Lease Payments; Security Deposit....................................................................6 Section 4.4. Mandatory Prepayment.....................................................................................8 Section 4.5. Optional Prepayment ........................................................................................8 Section 4.6. Quiet Enjoyment...............................................................................................8 Section 4.7. Title...................................................................................................................8 Section 4.8. Miscellaneous Rent...........................................................................................9

ARTICLE V
MAINTENANCE; TAXES; INSURANCE; USE LIMITATIONS; AND OTHER MATTERS Section 5.1. Maintenance, Utilities, Taxes and Assessments...............................................9 Section 5.2. Modification of Leased Premises ...................................................................10 Section 5.3. Public Liability and Property Damage Insurance...........................................10 Section 5.4. Casualty Insurance..........................................................................................11 Section 5.5. Rental Interruption Insurance .........................................................................11 Section 5.6. Recordation Hereof; Title Insurance ..............................................................11 Section 5.7. Net Proceeds of Insurance; Form of Policies; Advances................................12 Section 5.8. Installation of Personal Property ....................................................................12 Section 5.9. Liens ...............................................................................................................12 Section 5.10. Workers’ Compensation .................................................................................13

ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN; USE OF NET PROCEEDS Section 6.1. Eminent Domain.............................................................................................13 Section 6.2. Application of Net Proceeds...........................................................................13 Section 6.3. Abatement of Lease Payments in the Event of Damage or Destruction.........14

13.37 82811.00004\43429188.1

TABLE OF CONTENTS
(continued)
Page
-iiARTICLE VII
DISCLAIMER OF WARRANTIES; ACCESS
Section 7.1. Disclaimer of Warranties................................................................................15 Section 7.2. Rights of Access .............................................................................................15 Section 7.3. Release and Indemnification Covenants.........................................................15

ARTICLE VIII

ASSIGNMENT, SUBLEASING AND AMENDMENT
Section 8.1. Assignment by Santa Cruz..............................................................................15 Section 8.2. Assignment and Subleasing by Scotts Valley ................................................15 Section 8.3. Amendment Hereof ........................................................................................16

ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
Section 9.1. Events of Default Defined ..............................................................................16 Section 9.2. Remedies on Default.......................................................................................16 Section 9.3. No Remedy Exclusive ....................................................................................18 Section 9.4. Agreement to Pay Attorneys’ Fees and Expenses ..........................................18 Section 9.5. No Additional Waiver Implied by One Waiver..............................................18

ARTICLE X

MISCELLANEOUS
Section 10.1. Notices ............................................................................................................18 Section 10.2. Binding Effect.................................................................................................19 Section 10.3. Severability.....................................................................................................19 Section 10.4. Net-net-net Lease............................................................................................19 Section 10.5. Further Assurances and Corrective Instruments.............................................19 Section 10.6. Execution in Counterparts ..............................................................................19 Section 10.7. Applicable Law...............................................................................................19 Section 10.8. Authorized Representatives............................................................................19 Section 10.9. Captions ..........................................................................................................19 EXHIBIT A – DESCRIPTION OF THE LEASED PREMISES ..............................................A-1 EXHIBIT B – SCHEDULE OF LEASE PAYMENTS.............................................................B-1

13.38 82811.00004\43429188.1

LEASE-LEASEBACK AGREEMENT
THIS LEASE-LEASEBACK AGREEMENT ( “Lease Agreement”), dated as of [April 1], 2025, is by and between the CITY OF SANTA CRUZ, a municipal corporation organized and existing under the laws of the State of California (“Lessor” or “Santa Cruz”), and the CITY OF SCOTTS VALLEY, a municipal corporation organized and existing under the laws of the State of California (“Lessee” or “Scotts Valley”). Lessor and Lessee may also be referred to collectively, as the “parties”.

WI T N E S S E T H :

WHEREAS, Scotts Valley intends to purchase that certain real property located at the northwest corner of Mount Hermon Road and Kings Village Road in the City of Scotts Valley, County of Santa Cruz, California, commonly referred to as Assessor's Parcel Numbers 022-721- 07, 022-721-08, and 022-721-09, all as more fully described in Exhibit A hereto, together with all rights, privileges, easements or appurtenances to or affecting such parcels (together, the “Leased Premises”);
WHEREAS, as part of the Purchase and Sale Agreement dated ____________ (the "Purchase and Sale Agreement"), Scotts Valley agreed to: 1) pay a portion of the purchase price and, in connection with the delivery of the grant deed, 2) lease the Leased Premises to Santa Cruz, 3) lease the Leased Premises back from Santa Cruz, and 4) Scotts Valley will pay the remainder of the purchase price owed to Santa Cruz pursuant to this Lease Agreement; and NOW, THEREFORE, for and in consideration of the premises and the material covenants hereinafter contained, the parties hereto hereby formally covenant, agree and bind themselves as follows:

ARTICLE I

DEFINITIONS AND EXHIBITS
Section 1.1. Definitions. The terms heretofore defined in this Lease Agreement and the following terms defined in this Section 1.1 shall, for all purposes of this Lease Agreement, have the respective meanings herein specified.
“Applicable Environmental Laws” means and shall include, but shall not be limited to, the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 USC Sections 9601 et seq.; the Resource Conservation and Recovery Act (“RCRA”), 42 USC Sections 6901 et seq.; the Federal Water Pollution Control Act, 33 USC Sections 1251 et seq.; the Clean Air Act, 42 USC Sections 7401 et seq.; the California Hazardous Waste Control Law (“HWCL”), California Health & Safety Code Sections 25100 et seq.; the Hazardous Substance Account Act (“HSAA”), California Health & Safety Code Sections 25300 et seq.; the PorterCologne Water Quality Control Act (the “Porter-Cologne Act”), California Water Code Sections 1300 et seq.; the Air Resources Act, California Health & Safety Code Sections 3900 et seq.; the Safe Drinking Water & Toxic Enforcement Act, California Health & Safety Code Sections 25249.5 et seq.; and the regulations under each thereof; and any other local, state, and/or federal laws or regulations, whether currently in existence or hereafter enacted, that govern:

13.39 82811.00004\43429188.1
2 (a) the existence, cleanup, and/or remedy of contamination on property; (b) the protection of the environment from spilled, deposited, or otherwise emplaced contamination;
(c) the control of hazardous wastes; or
(d) the use, generation, transport, treatment, removal, or recovery of Hazardous Substances, including building materials.
“Event of Default” means any of the events of default defined as such in Section 9.1 hereof. “Facilities” means all of the buildings, improvements and facilities at any time situated on the Site and described in Exhibit A attached hereto and by this reference incorporated herein. “Fiscal Year” means the twelve-month period beginning on July 1 of any year and ending on June 30 of the next succeeding year, or any other twelve-month period established by Scotts Valley as its fiscal year pursuant to written notice filed with Santa Cruz. “Hazardous Substance” means any substance, pollutant or contamination included in such (or any similar) term under any federal, state or local statute, law, ordinance, code or regulation now in effect or hereafter enacted or amended, including but not limited to fireworks. “Lease Payment Date” means as follows: (ii) for the first lease year, the earlier of April 1, 2026 or the first anniversary of date on which the grant deed conveying the Property to Scotts Valley was recorded; (ii) for each subsequent year, April 1 of the calendar year. “Lease Payments” means the amounts payable by Scotts Valley pursuant to Section 4.3(a) hereof, including any prepayment thereof pursuant hereto and including any amounts payable upon a delinquency in the payment thereof. The Lease Payments represent the amount of the Financed Rental Payments required under the Purchase and Sale Agreement. “Leased Premises” means, collectively, the Site and the Facilities, if any. “Miscellaneous Rent” means the amounts of additional rental which are payable by Scotts Valley pursuant to Section 4.8.
“Permitted Encumbrances” means, as of any time, (a) liens for general ad valorem taxes and assessments, if any, not then delinquent, or which Scotts Valley may permit to remain unpaid pursuant to Article V; (b) this Lease Agreement and any other agreement or other document contemplated hereunder to be recorded against the Leased Premises including any amendment to this Lease Agreement pursuant to Section 8.3(e) hereof; (c) any right or claim of any mechanic, laborer, materialman, supplier or vendor not filed or perfected in the manner prescribed by law; and (d) easements, rights of way, mineral rights, drilling rights and other rights, reservations, covenants, conditions or restrictions which exist pursuant to the policy of title insurance obtained pursuant to Section 5.6 and which Scotts Valley certifies in writing will not materially impair the use of the Leased Premises for their intended purposes.

13.40 82811.00004\43429188.1
3 “Site” means all of the land described in Exhibit A attached hereto and by this reference incorporated herein.
“Term” means the time during which this Lease Agreement is in effect, as provided in Section 4.2 hereof.

Section 1.2. Exhibits. The following exhibits are attached to, and by this reference made a part of, this Lease Agreement.

Exhibit A: Description of the Leased Premises.

Exhibit B: Schedule of Lease Payments.

ARTICLE II

REPRESENTATIONS, COVENANTS AND WARRANTIES
Section 2.1. Representations, Covenants and Warranties of Scotts Valley. Scotts Valley makes the following covenants, representations, and warranties to Santa Cruz as of the date of the execution and delivery of this Lease Agreement:
(a) Due Organization and Existence. Scotts Valley is a municipal corporation duly organized and validly existing under the laws of the State, has full legal right, power and authority under the laws of the State to enter into this Lease Agreement and to carry out and consummate all transactions contemplated hereby and thereby, and by proper action Scotts Valley has duly authorized the execution and delivery of this Lease Agreement.
(b) Due Execution. The representatives of Scotts Valley executing this Lease Agreement have been fully authorized to execute the same pursuant to a resolution duly adopted by the City Council of Scotts Valley.
(c) Valid, Binding and Enforceable Obligations. This Lease Agreement has been duly authorized, executed, and delivered by Scotts Valley and constitutes the legal, valid, and binding agreement of Scotts Valley enforceable against Scotts Valley in accordance with the terms hereof.
(d) No Conflicts. The execution and delivery of this Lease Agreement, the consummation of the transactions herein contemplated, and the fulfillment of or compliance with the terms and conditions hereof do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which Scotts Valley is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge, or encumbrance of any nature whatsoever upon any of the property or assets of Scotts Valley, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the

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4 consummation of the transactions contemplated by this Lease Agreement or the financial condition, assets, properties or operations of Scotts Valley. (e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of Scotts Valley or of the voters of Scotts Valley, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease Agreement, or the consummation of any transaction herein contemplated, except as have been obtained or made and as are in full force and effect. (f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of Scotts Valley after reasonable investigation, threatened against or affecting Scotts Valley or the assets, properties or operations of Scotts Valley which, if determined adversely to Scotts Valley or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease Agreement, or upon the financial condition, assets, properties or operations of Scotts Valley, and Scotts Valley is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the financial conditions, assets, properties or operations of Scotts Valley. (g) Status of Leased Premises. The acquisition, construction, and equipping of the Facilities, if any, have been completed in accordance with all requirements of Scotts Valley, and any Facilities are fully functional, operational, and in sound condition, excepting only reasonable wear and tear. No event which constitutes, or which with the passage of time if not cured would constitute, an Event of Default has occurred and is continuing.
(h) No Condemnation. Scotts Valley hereby covenants and agrees, to the extent it may lawfully do so, that the Lessee will not exercise the power of condemnation with respect to the Leased Premises. Scotts Valley further covenants and agrees, to the extent it may lawfully do so, that if for any reason the foregoing covenant is determined to be unenforceable or if Scotts Valley should fail or refuse to abide by such covenant and condemns the Leased Premises, the appraised value of the Leased Premises shall not be less than the sum of the remaining Lease Payments due hereunder. (i) Hazardous Substances. The Property is free of all Hazardous Substances, and Scotts Valley is in full compliance with all Applicable Environmental Laws. Scotts Valley will comply with all Applicable Environmental Laws with respect to the Leased Premises and will not use, store, generate, treat, transport, or dispose of any Hazardous Substance thereon or in a manner that would cause any Hazardous Substance to flow, migrate, leak, leach, or otherwise come to rest on, under, or in the Leased Premises. (j) Fireworks. While prohibited by definition as a Hazardous Substance, Scotts Valley may be permitted to use fireworks on the Leased Premises if Scotts Valley hereby

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5 agrees that it shall not allow fireworks to flow, migrate, leak, leach or come to rest on, under, or in the Leased Premises. Scotts Valley shall defend, indemnify, and hold harmless Santa Cruz for any and all claims, damages, and costs arising from or relating to fireworks on the Property in accordance with Section 7.3 of this Lease Agreement. (k) Essentiality. The Leased Premises constitutes property that is essential to carrying out the governmental functions of Scotts Valley.

Section 2.2. Representations, Covenants and Warranties of Santa Cruz. Santa Cruz makes the following covenants, representations, and warranties to Scotts Valley as of the date of the execution and delivery of this Lease Agreement:
(a) Due Organization and Existence. Santa Cruz is a municipal corporation duly organized and existing under and by virtue of the laws of the State; has power to enter into this Lease Agreement; is possessed of full power to own and hold, improve and equip real and personal property, and to lease and lease back the same; and has duly authorized the execution and delivery of this Lease Agreement and such Lease Agreement constitutes the legal, valid and binding agreements of Santa Cruz, enforceable against Santa Cruz in accordance with their respective terms.
(b) Due Execution. The representative of Santa Cruz executing this Lease Agreement is fully authorized to execute the same pursuant to official action taken by the governing body of Santa Cruz.
(c) Valid Binding and Enforceable Obligations. This Lease Agreement has been duly authorized, executed, and delivered by Santa Cruz and constitutes the legal, valid, and binding agreement of Santa Cruz, enforceable against Santa Cruz in accordance its terms.
(d) No Conflicts. The execution and delivery of this Lease Agreement, the consummation of the transactions herein contemplated and the fulfillment of or compliance with the terms and conditions hereof, do not and will not conflict with or constitute a violation or breach of or default (with due notice or the passage of time or both) under any applicable law or administrative rule or regulation, or any applicable court or administrative decree or order, or any indenture, mortgage, deed of trust, lease, contract or other agreement or instrument to which Santa Cruz is a party or by which it or its properties are otherwise subject or bound, or result in the creation or imposition of any prohibited lien, charge or encumbrance of any nature whatsoever upon any of the property or assets of Santa Cruz, which conflict, violation, breach, default, lien, charge or encumbrance would have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the financial condition, assets, properties or operations of Santa Cruz.
(e) Consents and Approvals. No consent or approval of any trustee or holder of any indebtedness of Santa Cruz, and no consent, permission, authorization, order or license of, or filing or registration with, any governmental authority is necessary in connection with the execution and delivery of this Lease Agreement, or the consummation

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6 of any transaction herein or therein contemplated, except as have been obtained or made and as are in full force and effect.
(f) No Litigation. There is no action, suit, proceeding, inquiry or investigation before or by any court or federal, state, municipal or other governmental authority pending or, to the knowledge of Santa Cruz after reasonable investigation, threatened against or affecting Santa Cruz or the assets, properties or operations of Santa Cruz which, if determined adversely to Santa Cruz or its interests, would have a material and adverse effect upon the consummation of the transactions contemplated by or the validity of this Lease Agreement, or upon the financial condition, assets, properties or operations of Santa Cruz, and Santa Cruz is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal or other governmental authority, which default might have consequences that would materially and adversely affect the consummation of the transactions contemplated by this Lease Agreement or the financial conditions, assets, properties or operations of Santa Cruz.

ARTICLE III
[RESERVED]

ARTICLE IV
LEASE; TERM OF THIS LEASE AGREEMENT;

RENTAL PAYMENTS
Section 4.1. Lease by Santa Cruz and Lease-Back to Scotts Valley. (a) Lease by Santa Cruz. Scotts Valley hereby takes possession of the Leased Premises on the date Scotts Valley and Santa Cruz close escrow on the Leased Premises under the Purchase and Sale Agreement (“Closing Date”). For good and valuable consideration, Scotts Valley hereby leases to Santa Cruz, the Leased Premises for the Term of this Lease Agreement. (b) Lease Back to Scotts Valley. Santa Cruz hereby leases the Leased Premises to Scotts Valley, and Scotts Valley hereby leases the Leased Premises from Santa Cruz, upon the terms and conditions set forth in this Lease Agreement.
(c) The leasing by Santa Cruz to Scotts Valley of the Leased Premises under the terms of this Lease Agreement shall not effect or result in a merger of Scotts Valley’s leasehold estate pursuant to this Lease Agreement nor its fee estate; and Santa Cruz shall continue to have and hold a leasehold estate in said Leased Premises pursuant to this Lease Agreement throughout the Term of this Lease Agreement. As to said Leased Premises, for the avoidance of doubt, the lease-back shall be deemed and constitute a sublease, with Santa Cruz as the Sublessor and Scotts Valley as the Sublessee. This Lease Agreement governs the lease and sublease arrangement.

Section 4.2. Term of Lease Agreement. The Term of this Lease Agreement shall commence on the Closing Date and shall end, and this Lease Agreement shall terminate, on the date that is eight (8) years from the Closing Date (the "Termination Date"), unless such term is extended as hereinafter provided or unless Lease Payments have been paid or prepaid in full. If

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7 on the Termination Date, the Lease Payments payable hereunder shall have been abated, then the Term of this Lease Agreement shall be extended until the earlier of ten (10) years from the Termination Date or the date on which all remaining Lease Payments are fully paid; for clarification, this provision for an extension only applies in circumstances requiring an abatement of rent as set forth in Article VI, and does not authorize an extension of the Term for failure to make Lease Payments that are not abated. The provisions of this Section 4.2 are subject to the provisions relating to the addition and/or substitution of property, the provisions relating to the release of property, and the provisions of relating to the taking in eminent domain of the Leased Premises or any portion thereof.

Section 4.3. Lease Payments; Security Deposit.
(a) Obligation to Pay. In consideration of the lease and lease-back by Santa Cruz of the Leased Premises, and subject to the provisions of Section 6.1 and Section 6.2 hereof, Scotts Valley agrees to pay to Santa Cruz, its successors and assigns, as rental for the use and occupancy of the Leased Premises during each Fiscal Year, the Lease Payments (denominated into components of principal and interest) for the Leased Premises in the respective amounts specified in Exhibit B hereto and incorporated herein. The annual Lease Payments shall commence in 2026 and be due and payable on the anniversary of the Closing Date. The Lease Payments coming due and payable in any Fiscal Year shall be for the use of the Leased Premises for such Fiscal Year. (b) Effect of Prepayment. In the event that Scotts Valley prepays all remaining Lease Payments in full pursuant to Section 4.5 hereof, Scotts Valley’s obligations under this Lease Agreement shall thereupon cease and terminate, and this Lease Agreement shall terminate, including, but not limited to, Scotts Valley’s obligation to pay Lease Payments under this Section

4.3 . At such time of prepayment of all Lease Payments, Santa Cruz shall no longer have any interest in the Leased Premises. In the event that Scotts Valley prepays the remaining Lease Payments in part but not in whole pursuant to Section 4.5 hereof, Santa Cruz shall provide, or cause to be provided, to Scotts Valley a revised schedule of Lease Payments due after such partial prepayment which schedule shall represent an adjustment to the schedule of Lease Payments set forth in Exhibit B hereto after taking into account said partial prepayment. (c) Rate on Overdue Payments. In the event Scotts Valley should fail to make any of the payments required in this Section 4.3, the payment in default shall continue as an obligation of Scotts Valley until the amount in default shall have been fully paid, and Scotts Valley agrees to pay the same with interest thereon, to the extent permitted by law, from the date of default to the date of payment at the rate per annum equal to ten percent (10%). (d) Fair Rental Value. The Lease Payments and Miscellaneous Rent (described in Section 4.8 below) coming due and payable hereunder in each Fiscal Year shall constitute the total rental for the Leased Premises for each Fiscal Year and shall be paid by Scotts Valley in each Fiscal Year for and in consideration of the right of the use and occupancy of, and the continued quiet use and enjoyment of, the Leased Premises during such Fiscal Year. The parties hereto have agreed and determined that the net present value of such Lease Payments and the annual payment of Miscellaneous Rent for the Leased Premises do not exceed the fair rental value of the Leased Premises. In making such determination, consideration has been given to the obligations of the parties under this Lease Agreement, the replacement value of the Leased Premises, the uses and

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8 purposes which may be served by the Leased Premises, and the benefits therefrom which will accrue to Scotts Valley and the general public.
(e) Source of Payments; Budget and Appropriation. The Lease Payments shall be payable from any source of available funds of Scotts Valley, subject to the provisions of Section

6.1 and Section 6.2 hereof. Scotts Valley covenants to take such action as may be necessary to include all Lease Payments and Miscellaneous Rent due in a Fiscal Year hereunder in each of its budgets for such Fiscal Year during the Term of this Lease Agreement and to make the necessary annual appropriations for all such Lease Payments and Miscellaneous Rent. The covenants on the part of Scotts Valley herein contained shall be deemed to be and shall be construed to be ministerial duties imposed by law and it shall be the duty of each and every public official of Scotts Valley to take such action and do such things as are required by law in the performance of the official duty of such officials to enable Scotts Valley to carry out and perform the covenants and agreements in this Lease Agreement agreed to be carried out and performed by Scotts Valley.

Scotts Valley and Santa Cruz understand and intend that the obligation of Scotts Valley to pay Lease Payments, Miscellaneous Rent, and other payments hereunder constitutes a current expense of Scotts Valley and shall not in any way be construed to be a debt of Scotts Valley in contravention of any applicable constitutional or statutory limitation or requirement concerning the creation of indebtedness by Scotts Valley, nor shall anything contained herein constitute a pledge of the general tax revenues, funds or moneys of Scotts Valley. Lease Payments and Miscellaneous Rent due hereunder shall be payable only from current funds which are budgeted and appropriated, or otherwise legally available, for the purpose of paying Lease Payments, Miscellaneous Rent, or other payments due hereunder as consideration for use of the Leased Premises during the Fiscal Year for which such funds were budgeted and appropriated or otherwise made legally available for such purpose. This Lease Agreement shall not create an immediate indebtedness for any aggregate payments in future years which may become due hereunder. Scotts Valley has not pledged the full faith and credit of Scotts Valley, the State, or any agency or department thereof to the payment of the Lease Payments or any other payments due hereunder. (f) Security Deposit. Notwithstanding any other provision of this Lease Agreement, Scotts Valley may, on any date, secure the payment of the Lease Payments in whole or in part by depositing with a third party escrow or trustee an amount of cash which, together with other available amounts, is either (i) sufficient to pay such Lease Payments, including the principal and interest components thereof, in accordance with the Lease Payment schedule set forth in Exhibit B hereto, or (ii) invested in whole or in part in noncallable Federal Securities in such amount as will, in the opinion of an Independent Accountant, together with interest to accrue thereon and together with any cash which is so deposited, be fully sufficient to pay such Lease Payments when due hereunder, as Scotts Valley shall instruct at the time of said deposit. Said security deposit shall be deemed to be and shall constitute a special fund for the payment of Lease Payments in accordance with the provisions of this Lease Agreement.

Section 4.4. Mandatory Prepayment. Scotts Valley shall be obligated to prepay the Lease Payments, in whole or in part, on any date from and to the extent of any Net Proceeds of an insurance award or condemnation award with respect to the Leased Premises theretofore deposited in the Insurance and Condemnation Fund for such purpose pursuant to Section 6.2 hereof. Scotts Valley and Santa Cruz hereby agree that such Net Proceeds, to the extent remaining after payment

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9 of any delinquent Lease Payments, if any, shall be credited towards Scotts Valley’s obligations under this Section.

Section 4.5. Optional Prepayment. Scotts Valley shall have the option to prepay the principal components of the Lease Payments in whole, or in part, on any date by paying a prepayment price equal to the aggregate principal components of the Lease Payments to be prepaid, together with accrued interest to the prepayment date, without premium or penalty. Scotts Valley shall give Santa Cruz written notice of its intention to exercise its option not less than fifteen (15) days in advance of the date of exercise.

Section 4.6. Quiet Enjoyment. During the Term of this Lease Agreement, Santa Cruz shall provide Scotts Valley with quiet use and enjoyment of the Leased Premises, and Scotts Valley shall, during such Term, peaceably and quietly have and hold and enjoy the Leased Premises without suit, trouble, or hindrance from Santa Cruz, except as expressly set forth in this Lease Agreement. Santa Cruz may exercise an option, at the request of Scotts Valley and at Scotts Valley’s cost, to join in any legal action in which Scotts Valley asserts its right to such possession and enjoyment of the Leased Premises, to the extent Santa Cruz may lawfully do so.

Notwithstanding the foregoing, Santa Cruz shall have the right to inspect the Leased Premises as provided in Section 7.2 hereof to determine compliance with this Lease Agreement or investigate a claim of default.

Section 4.7. Title. During the Term of this Lease Agreement, Santa Cruz shall hold a leasehold in the Leased Premises, and in any and all additions which comprise fixtures, repairs, replacements or modifications to the Leased Premises, except for those fixtures, repairs, replacements or modifications which are added to the Leased Premises by Scotts Valley or its assignees, permittees, sublessees or independent contractors at its own expense and which may be removed without damaging the Leased Premises and except for any items added to the Leased Premises by Scotts Valley pursuant to this Lease Agreement. All right, title and interest of Santa Cruz in and to the Leased Premises shall be transferred to and vested in Scotts Valley if: (a) Scotts Valley pays all of the Lease Payments and Miscellaneous Rent during the Term of this Lease Agreement as the same become due and payable, or if Scotts Valley posts a security deposit for payment of the Lease Payments pursuant to Section 4.3 hereof or prepays the Lease Payments pursuant to Section 4.5 hereof, and (b) Scotts Valley has paid in full all of the Miscellaneous Rent coming due and payable as of the date of such prepayment; and provided in any event that no Event of Default shall have occurred and be continuing. Santa Cruz agrees to take any and all steps and execute and record any and all documents reasonably required by Scotts Valley to consummate any such transfer of title.

Section 4.8. Miscellaneous Rent. In addition to the Lease Payments, Scotts Valley shall pay when due the following items of Miscellaneous Rent:
(a) all fees and expenses incurred by Santa Cruz in connection with or by reason of its leasehold estate in the Leased Premises as and when the same become due and payable;
(b) the reasonable fees and expenses of such accountants, consultants, attorneys and other experts as may be engaged by Santa Cruz to prepare audits, financial statements,

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10 reports, opinions or provide such other services required to enforce this Lease Agreement; and
(c) the reasonable out of pocket expenses of Santa Cruz incurred by Santa Cruz in connection with any litigation which may at any time be instituted involving this Lease Agreement, or any of the other documents contemplated herein, or otherwise incurred in connection with this Lease Agreement.

ARTICLE V
MAINTENANCE; TAXES; INSURANCE; USE
LIMITATIONS; AND OTHER MATTERS
Section 5.1. Maintenance, Utilities, Taxes and Assessments. Throughout the Term of this Lease Agreement, as part of the consideration for the rental of the Leased Premises, all improvement, repair, and maintenance of the Leased Premises shall be the responsibility of Scotts Valley and Scotts Valley shall pay for or otherwise arrange for the payment of all utility services supplied to the Leased Premises which may include, without limitation, janitor service, security, power, gas, telephone, light, heating, water and all other utility services, and shall pay for or otherwise arrange for the payment of the cost of the repair and replacement of the Leased Premises resulting from ordinary wear and tear or want of care on the part of Scotts Valley or any assignee or sublessee thereof. Scotts Valley waives the benefits of subsections 1 and 2 of Section 1932 and subsection 4 of Section 1933 of the California Civil Code, but such waiver shall not limit any of the rights of Scotts Valley under the terms of this Lease Agreement.

Scotts Valley shall also pay or cause to be paid all taxes and assessments of any type or nature, if any, charged to Santa Cruz or Scotts Valley affecting the Leased Premises or the respective interests or estates therein; provided that with respect to special assessments or other governmental charges that may lawfully be paid in installments over a period of years, Scotts Valley shall be obligated to pay only such installments as are required to be paid during the Term of this Lease Agreement, including any Term extensions, if any, as and when the same become due.

Scotts Valley may, at Scotts Valley’s expense and in its name, in good faith contest any such taxes, assessments, utility and other charges and, in the event of any such contest, may permit the taxes, assessments or other charges so contested to remain unpaid during the period of such contest and any appeal therefrom unless Santa Cruz shall notify Scotts Valley that, in the opinion of independent counsel, by nonpayment of any such items, the interest of Santa Cruz in the Leased Premises will be materially endangered or the Leased Premises or any part thereof will be subject to loss or forfeiture, in which event Scotts Valley shall promptly pay such taxes, assessments or charges or provide Santa Cruz with full security against any loss which may result from nonpayment, in a form satisfactory to Santa Cruz.

Section 5.2. Modification of Leased Premises. Scotts Valley shall, at its own expense, have the right to make additions, modifications, and improvements to the Leased Premises. All

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11 additions, modifications, and improvements to the Leased Premises shall thereafter comprise part of the Leased Premises and be subject to the provisions of this Lease Agreement. Such additions, modifications, and improvements must be consistent with the Lease, shall not render the property unusable or result in an abatement of Lease Payments or cause the Leased Premises to be used for purposes other than those authorized under the provisions of local, State and federal law; and the Leased Premises, upon completion of such additions, modifications, and improvements, shall be of a value which is not substantially less than the value of the Leased Premises immediately prior to the making of such additions, modifications, and improvements. Scotts Valley will not permit any mechanic’s or other lien to be established or remain against the Leased Premises for labor or materials furnished in connection with any remodeling, additions, modifications, improvements, repairs, renewals or replacements made by Scotts Valley pursuant to this Section 5.2; provided that if any such lien is established and Scotts Valley shall first notify or cause to be notified Santa Cruz of Scotts Valley’s intention to do so, Scotts Valley may in good faith contest any lien filed or established against the Leased Premises, and in such event may permit the items so contested to remain undischarged and unsatisfied during the period of such contest and any appeal therefrom and shall provide Santa Cruz with full security against any loss or forfeiture which might arise from the nonpayment of any such item, in a form satisfactory to Santa Cruz. Santa Cruz will cooperate fully in any such contest, upon the request and at the expense of Scotts Valley.

Section 5.3. Insurance Requirements. Upon execution of this Lease, and, in any event, before Scotts Valley enters the Leased Premises (or any portion thereof) or commences any work on or at the Leased Premises, Scotts Valley shall, at its sole cost and expense, procure and maintain in full force and effect for the duration of this Lease, insurance as required by Exhibit C to protect against claims for injuries to persons or damages to the Leased Premises and to loss or damage to Scotts Valley’s trade fixtures, personal property, and improvements, which may arise from or are in connection with the Scotts Valley’s occupation or use of the Leased Premises. The cost of such insurance shall be borne by the Scotts Valley.

Section 5.4. Tenant’s Failure To Maintain Insurance. In the event that Scotts Valley fails to maintain insurance coverages, as required in this Lease, and a loss or damage occurs that results in Santa Cruz’s liability for copayments, deductibles, or other such charges to replace the loss under Santa Cruz’s applicable insurance policy, Scotts Valley agrees to reimburse Santa Cruz for all such charges, including the deductible amount within thirty (30) days of Santa Cruz’s notification to Scotts Valley.

Section 5.5 Recordation Hereof; Title Insurance. On or before the Closing Date, Scotts Valley shall, at its expense, (a) cause this Lease Agreement, or a memorandum hereof, in a form and substance approved by the respective counsel for Santa Cruz and Scotts Valley, to be recorded in the office of the Santa Cruz County Recorder; and (b) obtain a CLTA policy of title insurance insuring Santa Cruz’s leasehold estate and Scotts Valley’s sub-leasehold estate hereunder, subject only to Permitted Encumbrances, in an amount at least equal to the aggregate principal amount of the total sum of Lease Payments.

Section 5.6 Net Proceeds of Insurance; Form of Policies; Advances. (a) Each policy of insurance maintained pursuant to Sections 5.3 shall name Santa Cruz as loss payee so as to provide that all proceeds thereunder shall be payable to Santa Cruz; provided, however, Scotts Valley shall have the rights set forth in Section 6.2. Santa Cruz and Scotts Valley shall be named insureds of

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12 the policy. Scotts Valley shall pay or cause to be paid when due the premiums for all insurance policies required by this Lease Agreement.
(b) In the event that any insurance maintained pursuant to Section 5.3 shall be provided in the form of self-insurance, Scotts Valley shall file with Santa Cruz annually, within ninety (90) days following the close of each Fiscal Year, a statement of the risk manager of Scotts Valley or an independent insurance adviser engaged by Scotts Valley identifying the extent of such selfinsurance and stating the determination that Scotts Valley maintains sufficient reserves with respect thereto.
(c) If Scotts Valley shall fail to perform any of its obligations under this Article V, Santa Cruz may, but shall not be obligated to, take such action as may be necessary to cure such failure, including the advancement of money, and Scotts Valley shall be obligated to repay all such related costs and advances to Santa Cruz as soon as possible, with interest at the rate of 10% per annum from the date the costs or advances were incurred to the date of repayment. (d) Scotts Valley shall annually (by June 30 of each fiscal year) certify in writing to Santa Cruz that all insurance policies required to be maintained under this Lease Agreement are in full force and effect.

Section 5.7 Installation of Personal Property. Scotts Valley may, at any time and from time to time, in its sole discretion and at its own expense, install or permit to be installed items of equipment or other personal property in or upon any portion of the Leased Premises. All such items shall remain the sole property of Scotts Valley, in which Santa Cruz shall have no interest, and may be modified or removed by Scotts Valley at any time provided that Scotts Valley shall repair and restore any and all damage to the Leased Premises resulting from the installation, modification, or removal of any such items. Nothing in this Lease Agreement shall prevent Scotts Valley from purchasing or leasing items to be installed pursuant to this Section 5.8 under a lease or conditional sale agreement, or subject to a vendor’s lien or security agreement, as security for the unpaid portion of the purchase price thereof, provided that no such lien or security interest shall attach to any part of the Leased Premises.

Section 5.8 Liens. Neither Scotts Valley nor Santa Cruz shall, directly or indirectly, create, incur, assume or suffer to exist any mortgage, pledge, lien, charge, encumbrance or claim on or with respect to any portion of the Leased Premises, other than the respective rights of Santa Cruz and Scotts Valley as provided herein and other than Permitted Encumbrances. Except as expressly provided in this Article V, Scotts Valley and Santa Cruz shall promptly, at their own expense, take such action as may be necessary to duly discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim, for which it is responsible, if the same shall arise at any time. Any party that breaches this Section 5.9 shall reimburse the non-breaching party for any expense incurred by the non-breaching party in order to discharge or remove any such mortgage, pledge, lien, charge, encumbrance or claim caused by the party in breach.

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13 ARTICLE VI
DAMAGE, DESTRUCTION AND EMINENT DOMAIN;

USE OF NET PROCEEDS
Section 6.1. Eminent Domain. If all of the Leased Premises shall be taken permanently under the power of eminent domain or sold to a government threatening to exercise the power of eminent domain, the Term of this Lease Agreement shall cease as of the day possession shall be so taken. If less than all of the Leased Premises shall be taken permanently, or if all of the Leased Premises or any part thereof shall be taken temporarily under the power of eminent domain, (a) this Lease Agreement shall continue in full force and effect and shall not be terminated by virtue of such taking and the parties waive the benefit of any law to the contrary, and (b) there shall be a partial abatement of Lease Payments in an amount to be agreed upon by Scotts Valley and Santa Cruz such that the resulting Lease Payments for the Leased Premises, represent fair consideration for the use and occupancy of the remaining usable portion of the Leased Premises.

Section 6.2. Application of Net Proceeds.
(a) Deposit in Insurance and Condemnation Fund. Net Proceeds of any insurance required by Section 5.3 hereof and the proceeds of the title insurance required by Section 5.5 hereof or eminent domain proceeds, shall be deposited in a separate account by Scotts Valley, called the “Insurance and Condemnation Fund” promptly upon receipt thereof. (b) Disbursement for Replacement or Repair of the Leased Premises. Upon receipt of the certification described in paragraph (1) below and the requisition described in paragraph (2) below, Scotts Valley may disburse moneys in the Insurance and Condemnation Fund to the person, firm, or corporation named in a requisition.
(1) Certification. An Authorized Representative of Scotts Valley must provide to Santa Cruz a certificate stating that:
(i) Sufficiency of Net Proceeds. The Net Proceeds available for such purpose, together with any other funds supplied by Scotts Valley for such purpose, are sufficient to repair or replace the Leased Premises to a use which will have an annual fair rental value not less than the maximum annual Lease Payments and Miscellaneous Rent through the term of the Lease Agreement (assuming that the Miscellaneous Rent due in the future will equal the Miscellaneous Rent paid prior to such date) due hereunder, and
(ii) Timely Completion. In the event that damage, destruction, title defect or taking results in an abatement of Lease Payments, such replacement or repair can be fully completed within a period not in excess of the period in which rental interruption insurance proceeds as described in Section 5.3 hereof, together with other legally available funds, will be available to pay in full all Lease Payments coming due during such period.
(2) Requisition. An Authorized Representative of Scotts Valley must state with respect to each payment to be made (i) the requisition number, (ii) the name and address

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14 of the person, firm, or corporation to whom payment is due, (iii) the amount to be paid, and (iv) that each obligation mentioned therein has been properly incurred, is a proper charge against the Insurance and Condemnation Fund, has not been the basis of any previous withdrawal, and specifying in reasonable detail the nature of the obligation. (c) Disbursement for Prepayment. If an Authorized Representative of Scotts Valley notifies Santa Cruz in writing of Scotts Valley’s determination that the certification provided in Section 6.1(b)(1) hereof cannot be made or replacement or repair of any portion of the Leased Premises is not economically feasible or in the best interest of Scotts Valley to repair or replace the Leased Premises, then Scotts Valley shall deposit with Santa Cruz an amount which when combined with the Net Proceeds will prepay enough Lease Payments and result in a corresponding prepayment of such that the fair rental value of the remaining portion of the Leased Premises is sufficient to provide for payment of the Lease Payments remaining under the Lease Agreement.

Section 6.3. Abatement of Lease Payments in the Event of Damage or Destruction. The Lease Payments allocable to the Leased Premises shall be abated during any period in which by reason of damage or destruction (other than by eminent domain which is hereinbefore provided for) there is substantial interference with the use and occupancy of the Leased Premises or any portion thereof. The amounts of the Lease Payments under such circumstances may not be less than the amounts of the unpaid Lease Payments, unless such unpaid amounts are determined to be greater than the fair rental value of the portions of the Leased Premises not damaged or destroyed, based upon the opinion of an MAI appraiser with expertise in valuing such properties or other appropriate method of valuation, in which event the Lease Payments shall be abated such that they represent said fair rental value. Such abatement shall continue for the period commencing with such damage or destruction and ending with the substantial completion of the work of repair or reconstruction. In the event of any such damage or destruction, this Lease Agreement shall continue in full force and effect and Santa Cruz waives any right to terminate this Lease Agreement by virtue of any such damage and destruction. Notwithstanding the foregoing, there may be no abatement of Lease Payments to the extent that the proceeds of rental interruption insurance are available to pay Lease Payments.

ARTICLE VII
DISCLAIMER OF WARRANTIES; ACCESS
Section 7.1. Disclaimer of Warranties. Santa Cruz makes no warranty or representation, either express or implied, as to the value, design, condition, merchantability or fitness for any particular purpose or fitness for the use contemplated by Scotts Valley of the Leased Premises, or any other representation or warranty with respect to the Leased Premises. In no event shall Santa Cruz and its assigns be liable for incidental, indirect, special or consequential damages in connection with or arising out of this Lease Agreement for the existence, furnishing, functioning or Scotts Valley’s use of the Leased Premises.

Section 7.2. Rights of Access. Scotts Valley agrees that Santa Cruz and any Authorized Representative of Santa Cruz, and Santa Cruz’s successors or assigns, shall have the right at all reasonable times to enter upon and to examine and inspect the Leased Premises. Scotts Valley further agrees that Santa Cruz, any Authorized Representative of Santa Cruz, and Santa Cruz’s

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15 successors or assigns shall have such rights of access to the Leased Premises as may be reasonably necessary to cause the proper maintenance of the Leased Premises in the event of failure by Scotts Valley to perform its obligations hereunder.

Section 7.3. Release and Indemnification Covenants. Scotts Valley shall and hereby agrees to indemnify and save Santa Cruz and its officials, officers, employees, agents, successors and assigns, harmless from and against all claims, liabilities, losses and damages, including legal fees and expenses, arising out of: (a) the use, maintenance, condition or management of the Leased Premises, or from any work or thing done on the Leased Premises by Scotts Valley; (b) any breach or default on the part of Scotts Valley in the performance of any of its obligations under this Lease Agreement; (c) any act or negligence of Scotts Valley or of any of its agents, contractors, servants, employees, licensees, invitees, or trespassers with respect to the Leased Premises; (d) the use, presence, storage, disposal of any Hazardous Substances, on or about the Leased Premises; (e) any claim alleging violation of any Applicable Environmental Laws by Scotts Valley, or the authorization of payment of the costs thereof; and (f) any act or negligence of any sublessee of Scotts Valley with respect to the Leased Premises.

ARTICLE VIII

ASSIGNMENT, SUBLEASING AND AMENDMENT
Section 8.1. Assignment by Santa Cruz. Santa Cruz’s rights under this Lease Agreement (other than Sections 7.3 and 9.4 hereof), including the right to receive and enforce payment of the Lease Payments to be made by Scotts Valley under this Lease Agreement, shall not be assigned to any other party without the prior written consent of Scotts Valley.

Section 8.2. Assignment and Subleasing by Scotts Valley. This Lease Agreement may not be assigned by Scotts Valley. Scotts Valley may sublease the Leased Premises or any portion thereof, but only with the written consent of Santa Cruz and subject to all of the following conditions:
(a) this Lease Agreement and the obligation of Scotts Valley to make Lease Payments hereunder shall remain obligations of Scotts Valley; (b) Scotts Valley shall, within thirty (30) days after the delivery thereof, furnish or cause to be furnished to Santa Cruz a true and complete copy of such sublease; (c) no such sublease by Scotts Valley shall cause the Leased Premises to be used for a purpose other than as may be authorized under the provisions of the laws of the State; and
(d) Santa Cruz shall respond to Scotts Valley’s request for a sublease within 30 days of the request and such response shall be limited to a determination of whether or not the proposed use is contrary to State or Federal law, or if the sublease would violate this Lease Agreement.

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16 Section 8.3. Amendment Hereof. Santa Cruz and Scotts Valley may at any time amend or modify any of the provisions of this Lease Agreement with a written amendment signed by the parties hereto.

ARTICLE IX
EVENTS OF DEFAULT; REMEDIES
Section 9.1. Events of Default Defined. The following shall be “Events of Default” under this Lease Agreement:
(a) Failure by Scotts Valley to pay any Lease Payment required to be paid hereunder at the time specified herein.
(b) Failure by Scotts Valley to make any Miscellaneous Rent payment required hereunder and the continuation of such failure for a period of thirty (30) days. (c) Failure by Scotts Valley to observe and perform any material covenant, condition or agreement on its part to be observed or performed, other than as referred to in the preceding clauses (a) or (b), for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to Scotts Valley by Santa Cruz; provided, however, that if in the reasonable opinion of Scotts Valley the failure stated in the notice can be corrected, but not within such sixty (60) day period, such failure shall not constitute an Event of Default if Scotts Valley shall commence to cure such failure within such sixty (60) day period and thereafter diligently and in good faith shall cure such failure in a reasonable period of time. (d) The filing by Scotts Valley of a voluntary petition in bankruptcy, or failure by Scotts Valley promptly to lift any execution, garnishment or attachment, or adjudication of Scotts Valley as a bankrupt, or assignment by Scotts Valley for the benefit of creditors, or the entry by Scotts Valley into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to Scotts Valley in any proceedings instituted under the provisions of applicable federal bankruptcy law, or under any similar acts which may hereafter be enacted.

Section 9.2. Remedies on Default. Whenever any Event of Default referred to in Section

9.1 above shall have happened and be continuing, it shall be lawful for Santa Cruz to exercise any and all remedies available pursuant to law or granted pursuant to this Lease Agreement; provided, however, that there shall be no right under any circumstances to accelerate the Lease Payments or otherwise declare any Lease Payments not then due or in default to be immediately due and payable or to terminate this Lease Agreement or to cause the leasehold interest of Santa Cruz or the subleasehold interest of Scotts Valley in the Site to be sold, assigned, or otherwise alienated. Each and every covenant hereof to be kept and performed by Scotts Valley is expressly made a condition and upon the breach thereof Santa Cruz may exercise any and all rights of entry and re-entry upon the Leased Premises. Santa Cruz shall have the right, but not the obligation, to re-enter the premises and exercise all rights and privileges under the sub-leasehold interests of Scotts Valley, including the right to re-let or sub-let the Leased Premises. In the event of such default and

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17 notwithstanding any re-entry by Santa Cruz, Scotts Valley shall, as herein expressly provided, continue to remain liable for the payment of the Lease Payments and/or damages for breach of this Lease Agreement and the performance of all conditions herein contained, and in any event such rent and damages shall be payable to Santa Cruz at the time and in the manner as herein provided, to wit:
(a) Scotts Valley agrees to and shall remain liable for the payment of all Lease Payments and the performance of all conditions herein contained and shall reimburse Santa Cruz for any deficiency arising out of the re-leasing of the Leased Premises, or, in the event Santa Cruz is unable to relet the Leased Premises, then for the full amount of all Lease Payments to the end of the Term of this Lease Agreement, but said Lease Payments and/or deficiency shall be payable only at the same time and in the same manner as hereinabove provided for the payment of Lease Payments hereunder, notwithstanding such entry or re-entry by Santa Cruz or any suit in unlawful detainer, or otherwise, brought by Santa Cruz for the purpose of effecting such re-entry or obtaining possession of the Leased Premises or the exercise of any other remedy by Santa Cruz. Notwithstanding anything to the contrary herein, and without limitation of any other remedies, Scotts Valley further agrees that it shall be subject to a writ of mandate proceeding filed by Santa Cruz to compel Scotts Valley to make Lease Payments required hereunder, and that no other optional remedies provided for herein would be adequate remedies at law to recover unpaid Lease Payments.
(b) Scotts Valley hereby irrevocably appoints Santa Cruz as the agent and attorney-in-fact of Scotts Valley to enter upon and re-lease the Leased Premises in the event of default by Scotts Valley in the performance of any covenants herein contained to be performed by Scotts Valley and to remove all personal property whatsoever situated upon the Leased Premises to place such property in storage or other suitable place in the County of Santa Cruz, for the account of and at the expense of Scotts Valley, and Scotts Valley hereby exempts and agrees to save harmless Santa Cruz from any costs, loss or damage whatsoever arising or occasioned by any such entry upon and re-leasing of the Leased Premises and the removal and storage of such property by Santa Cruz or its duly authorized agents in accordance with the provisions herein contained. (c) Scotts Valley hereby waives any and all claims for damages caused or which may be caused by Santa Cruz in re-entering and taking possession of the Leased Premises as herein provided and all claims for damages that may result from the destruction of or injury to the Leased Premises and all claims for damages to or loss of any property belonging to Scotts Valley that may be in or upon the Leased Premises. (d) Scotts Valley agrees that the terms of this Lease Agreement constitute full and sufficient notice of the right of Santa Cruz to re-lease the Leased Premises in the event of such re-entry without effecting a surrender of this Lease Agreement, and further agrees that no acts of Santa Cruz in effecting such releasing shall constitute a surrender or termination of this Lease Agreement irrespective of the term for which such re-leasing is made or the terms and conditions of such re-leasing, or otherwise.

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18 (e) Scotts Valley further waives the right to any rental, whether existing at the time of such re-entry or acquired thereafter, obtained by Santa Cruz in excess of the Lease Payments and hereby conveys and releases such excess to Santa Cruz as compensation to Santa Cruz for its services in re-leasing the Leased Premises.

Section 9.3. No Remedy Exclusive. No remedy herein conferred upon or reserved to Santa Cruz is intended to be exclusive and every such remedy shall be cumulative and shall, except as herein expressly provided to the contrary, be in addition to every other remedy given under this Lease Agreement or now or hereafter existing at law or in equity. No delay or omission to exercise any right or power accruing upon any default shall impair any such right or power or shall be construed to be a waiver thereof, but any such right and power may be exercised from time to time and as often as may be deemed expedient. In order to entitle Santa Cruz to exercise any remedy reserved to it in this Article IX it shall not be necessary to give any notice, other than such notice as may be required in this Article IX or by law.

Section 9.4. Agreement to Pay Attorneys’ Fees and Expenses. In the event either party to this Lease Agreement should default under any of the provisions hereof and the non-defaulting party should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party herein contained, the defaulting party agrees that it will on demand therefor pay to the non-defaulting party the reasonable fees of such attorneys and such other expenses so incurred by the non-defaulting party.

Section 9.5. No Additional Waiver Implied by One Waiver. In the event any agreement contained in this Lease Agreement should be breached by either party and thereafter waived by the other party, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder.

ARTICLE X

MISCELLANEOUS
Section 10.1. Notices. All written notices to be given under this Lease Agreement shall be given by first class mail, personal delivery, overnight mail or email pdf. to the party entitled thereto at its address set forth below, or at such address as the party may provide to the other party in writing from time to time. Notice shall be effective either (a) upon transmission by facsimile transmission or other form of telecommunication; (b) 48 hours after deposit in the United States mail, postage prepaid; or (c) otherwise, upon actual receipt. Santa Cruz or Scotts Valley may, by written notice to the other parties, from time to time modify the address or number to which communications are to be given hereunder.

If to Santa Cruz: City of Santa Cruz
337 Locust Street
Santa Cruz, CA 95060
Attn: Bonnie Lipscomb
Email: [email protected]

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19 With a copy to: Office of the City Attorney
333 Church Street
Santa Cruz, CA 95060
Email: tcondotti@ abc-law.com
Attention: City Attorney
If to Scotts Valley: City of Scotts Valley
1 Civic Center Drive
Scotts Valley, CA 95066
Email: [email protected]
Attention: City Manager
If to Scotts Valley: City of Scotts Valley
1 Civic Center Drive
Scotts Valley, CA 95066
Email: [email protected]
Attention: City Attorney
Section 10.2. Binding Effect. This Lease Agreement shall inure to the benefit of and shall be binding upon Santa Cruz and Scotts Valley and their respective successors and assigns.

Section 10.3. Severability. In the event any provision of this Lease Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof.

Section 10.4. Net-net-net Lease. This Lease Agreement shall be deemed and construed to be a “net-net-net lease” and Scotts Valley hereby agrees that the Lease Payments shall be an absolute net return to Santa Cruz, free and clear of any expenses, charges or set-offs whatsoever.

Section 10.5. Further Assurances and Corrective Instruments. Santa Cruz and Scotts Valley agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description of the Leased Premises hereby leased or intended so to be or for carrying out the expressed intention of this Lease Agreement.

Section 10.6. Execution in Counterparts. This Lease Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument.

Section 10.7. Applicable Law; Venue. This Lease Agreement shall be governed by and construed in accordance with the laws of the State. Any action to enforce this Lease Agreement shall be brought in the Superior Court for the County of Santa Cruz or the federal district with jurisdiction over the County of Santa Cruz.

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20 Section 10.8. Authorized Representatives. Whenever under the provisions of this Lease Agreement the approval of Santa Cruz or Scotts Valley is required, or Santa Cruz or Scotts Valley is required to take some action at the request of the other, such approval or such request shall be given for Santa Cruz by an Authorized Representative of Santa Cruz and for Scotts Valley by an Authorized Representative of Scotts Valley, and any party hereto shall be authorized to rely upon any such approval or request.

Section 10.9. Captions. The captions or headings in this Lease Agreement are for convenience only and in no way define, limit or describe the scope or intent of any provisions or Section of this Lease Agreement.
(Signature page follows)

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S-1
IN WITNESS WHEREOF, Santa Cruz has caused this Lease Agreement to be executed in its corporate name by its duly authorized officers; and Scotts Valley has caused this Lease Agreement to be executed in its name by its duly authorized officers, as of the date first above written.

CITY OF SANTA CRUZ
By________________________________
Matt Huffaker, City Manager
ATTEST:
______________________________
City Clerk
APPROVED AS TO FORM:

By:

Tony Condotti, City Attorney

CITY OF SCOTTS VALLEY
By_________________________________
Mayor
ATTEST:
______________________________
Cathie Simonovich, City Clerk
APPROVED AS TO FORM:

By:

Kirsten Powell, City Attorney

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A

EXHIBIT A

DESCRIPTION OF THE LEASED PREMISES

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B

EXHIBIT B

SCHEDULE OF LEASE PAYMENTS
Scotts Valley shall make lease payments for a period of eight (8) years based on the following Schedule of Payments. This Schedule of Payments is based on the following:
 Financing lease payments for a total amount of Six Million Six Hundred Fifty Thousand Dollars and Zero Cents ($6,650,000.00), based on a fifteen-year amortization schedule, and subject to the reduction in price for Surface Remediation in accordance with the Purchase Sale Agreement ($269,163.00).
 Annual payments equal to Five Hundred Ninety Four Thousand One Hundred Forty Four Dollars and Zero Cents ($594,144.00) for a period of eight (8) years, comprising of interest and principal as set forth in the table below.  Beginning in 2026, the annual Lease Payments for each Lease Year are due on the anniversary of the Closing Date.
 For Lease Year 8, Scotts Valley shall make a final balloon payment in the amount of Four Million Ninety Five Thousand Two Hundred Fifty Seven Dollars and Zero Cents ($4,095,257.00), which is comprised of: (i) an annual Lease Payment of $594,144.00 (which includes annual principal of $417,793), plus (ii) all remaining deferred principal in the amount of Three Million Five Hundred One Thousand One Hundred Thirteen Dollars and Zero Cents ($3,501,113.00).

Source: https://www.free-online-calculator-use.com/balloon-loan-payment-calculator.html

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B

EXHIBIT C

INSURANCE REQUIREMENTS
Scotts Valley shall procure and maintain for the duration of the Agreement, insurance against claims for injuries to persons or damages to property which may arise from or in connection with Scotts Valley’s operation on, access to, and/or use of the Property. The cost of such insurance shall be borne by Scotts Valley.

A. Insurance Certificate Requirements.

Santa Cruz will be issued a Certificate of Insurance (a Memorandum of Understanding will not be accepted) with the following minimum requirements:
 Certificate(s) will show current policy number(s) and effective dates,  Coverage and policy limits will meet, or exceed, requirements below,  The Certificate Holder will be City of Santa Cruz, Risk Management, 1200 Pacific Ave., Suite 290, Santa Cruz, CA 95060,
 Certificate will be signed by an authorized representative,  An endorsement, if required below, will be provided to show Santa Cruz, its officers, officials, employees, and volunteers as additional insureds, and  Coverages must be maintained during the term of the Agreement with Santa Cruz, unless a longer duration is required.

B. Minimum Scope and Limit of Insurance.

Scotts Valley acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. If Scotts Valley maintains broader insurance coverage and/or higher limits than the minimums shown below, Landlord shall be entitled to the broader insurance coverage and/or higher limits maintained by Scotts Valley. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to Landlord.

Scotts Valley shall maintain limits no less than the following:

1. Commercial General Liability (CGL): $2,000,000.00 per occurrence; $2,000,000 in the aggregate, including products and completed operations, property damage, bodily injury and personal & advertising injury insuring against all liability of Scotts Valley and its employees, agents, representatives, subtenants, assignees and concessionaires arising out of and in connection with Scotts Valley's use or occupancy of the Premises.

2. “All Risk” Property Insurance Coverage. Scotts Valley shall, at Scotts Valley's sole expense, obtain and keep in full force and effect an insurance policy covering all of Scotts Valley's personal property, trade fixtures, equipment and merchandise located in or upon the Premises in an amount sufficient to cover not less than one hundred percent (100%) of the replacement value thereof, providing protection against any peril included within including sprinkler damage, vandalism and malicious mischief endorsements ordinarily included in extended coverage casualty insurance policies. Scotts Valley shall be solely responsible for

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B
any uninsured loss or damage caused to Scotts Valley's personal property, trade fixtures, equipment and merchandise located in or upon the Premises for any reason.

3. Fire Insurance\Legal Liability Coverage. Scotts Valley, at its sole cost, shall procure and maintain in full force and effect at all times during the Term of this Agreement, fire and extended coverage insurance satisfactory to Landlord covering the Leased Premises to keep all leased property, Scotts Valley improvements therein (if any) in an amount not less than one hundred percent (100%) of the full replacement cost against loss or destruction by fire and all perils, including vandalism, malicious mischief, special extended perils (“special form”). The property insurance is to be endorsed to include Legal Liability Coverage (ISO Form CP 00 40 04 02 or equivalent) with a limit equal to the replacement cost of the leased property. Landlord shall be named as an additional insured and loss payee on the policies. Any loss payable under any policy described in this section shall be paid by the insurance company to Landlord or as otherwise agreed by the Parties to be used to fund the repair or replacement of the damaged Premises or improvement pursuant to this Agreement. “Full replacement cost,” as used in this section, shall mean the actual cost of replacement for the building and other improvements on the Premises, as determined from time to time.

4. Business Interruption Insurance. Policy with adequate limits to cover a period of twenty four (24) months from the date of the interruption and shall contain an inflation endorsement if the Leased Premises or Scotts Valley improvements are destroyed or rendered inaccessible by a risk insured against by a policy of standard fire and extended coverage insurance, with vandalism and malicious mischief endorsements. Insurance proceeds thereunder shall be payable to Landlord for loss of rents.

5. Workers’ Compensation and Employer’s Liability Insurance. Scotts Valley shall obtain policies as required by applicable law against liability arising on account of injuries or death to workers or employees on the Premises or any improvement of Scotts Valley. Such workers’ compensation insurance shall be in amounts at least equal to the maximum liability of Scotts Valley, its agents, and contractors under the Workers’ Compensation Insurance and Safety Act of the State of California and the Federal Longshore and Harbor Workers’ Compensation Act, as applicable. Scotts Valley shall also maintain Employer’s Liability insurance with limits no less than One Million Dollars ($1,000,000) per accident for bodily injury or disease, $1,000,000 disease – policy limit, $1,000,000 disease – each employee. Such insurance shall include a waiver of subrogation in favor of Landlord.

C. Other Insurance Provisions.

ADDITIONAL INSURED STATUS
Santa Cruz, its officers, officials, employees, agents, and volunteers are to be covered as additional insureds on the CGL policy with respect to liability arising out of work or operations performed by or on behalf of Scotts Valley, including materials, parts, or equipment furnished in connection with such work or operations, products and completed operations. General liability coverage will be provided in the form of an endorsement to Scotts Valley’s insurance at least as broad as ISO Form CG 20 10 11 85, or if not available, through the addition of both CG 20 10, CG 20 26, CG 20 33, or CG 20 38; and CG 20 37 (if a later edition is used).

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B

PRIMARY COVERAGE
For any claims related to this Agreement, Scotts Valley’s insurance coverage will be primary and non-contributory as respects Santa Cruz, its officers, officials, and employees.

Any insurance or self-insurance maintained by Santa Cruz, its officers, officials, and employees will be excess of Scotts Valley’s insurance and will not contribute with it.

NOTICE OF CANCELLATION
Each insurance policy required above shall state that the coverage shall not be canceled, except with notice to Santa Cruz

WAIVER OF SUBROGATION
Scotts Valley hereby grants to Santa Cruz a waiver of any right to subrogation, except as otherwise not applicable, which any insurer of said Scotts Valley may acquire against Santa Cruz by virtue of the payment of any loss, including attorney’s fees under such insurance.

Scotts Valley agrees to obtain any endorsement that may be necessary to effectuate this waiver of subrogation, but this provision applies regardless of whether or not Santa Cruz has received a waiver of subrogation endorsement from the insurer.

EXCESS LIABILITY/UMBRELLA INSURANCE POLICIES
Scotts Valley may use excess liability/umbrella policies to meet the required liability limits on the condition that they provide all of the insurance coverages required herein, including, but not limited to, primary and non-contributory, additional insured, Self-Insured Retentions (SIRs), indemnity, and defense requirements. The excess liability/umbrella insurance policies shall be provided on a true “following form” or broader coverage basis, with coverage at least as broad as provided on the underlying CGL insurance. No insurance policies maintained by the additional insureds, whether primary or excess, and which also apply to a loss covered hereunder, shall be called upon to contribute to a loss until Scotts Valley’s primary and excess liability policies are exhausted.

SELF-INSURED RETENTIONS (SIR)
Self-insured retentions must be declared to and approved by Santa Cruz. Santa Cruz may require Scotts Valley to purchase coverage with a lower retention or provide proof of ability to pay losses and related expenses. The policy language shall provide, or be endorsed to provide, that the self-insured retention may be satisfied by either the named insured or Santa Cruz.

ACCEPTABILITY OF INSURERS
Insurance is to be placed with insurers with a current A.M. Best’s rating of no less than A:

VII, unless otherwise acceptable to Santa Cruz.

VERIFICATION OF COVERAGE
Scotts Valley will furnish Santa Cruz with original Certificates of Insurance including all required amendatory endorsements (or copies of the applicable policy language effecting coverage required by this clause) and a copy of the Declarations and Endorsement Page of the CGL, and any Excess Liability/Umbrella policies, as applicable, listing all policy

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B
endorsements to be approved by Santa Cruz before work commences. However, failure to obtain the required documents prior to the work beginning will not waive Scotts Valley’s obligation to provide them. Santa Cruz reserves the right to require complete, certified copies of all required insurance policies, including endorsements required by these specifications, at any time.

SUBCONTRACTORS
Scotts Valley shall include their subcontractor(s) as additional insured(s) under the policies or shall furnish separate certificates and endorsements for each contractor and subcontractor for any work related to the leased premises. Scotts Valley shall require and verify that all contractors and subcontractors maintain insurance meeting all the requirements stated herein, and Scotts Valley shall ensure that Santa Cruz, its officers, officials, employees, agents, and volunteers are named as additional insureds on insurance required from its contractor(s) and subcontractor(s).

SPECIAL RISKS/CIRCUMSTANCES
Santa Cruz reserves the right to modify these requirements, including limits, based on the nature of the risk, prior experience, insurer, coverage, or other special circumstances and provide notice to Scotts Valley.

13.65 City Council

AGENDA REPORT
DATE: 03/06/2025
AGENDA OF: 03/25/2025
DEPARTMENT: Economic Development and Housing/City Manager SUBJECT: Second Supplement to the Amended and Restated Joint Exercise of Powers Agreement for the Santa Cruz Public Libraries Facilities Financing Authority (EDH/CM)
LOCATION: District 4
RECOMMENDATION: Motion to approve the Second Supplement to the Amended and Restated Joint Exercise of Powers Agreement (JPA) for the Santa Cruz Public Libraries Facilities Financing Authority (LFFA) and authorize the City Manager, or designee, to execute the supplement agreement and/or any associated documents.

BACKGROUND: In 2016, the Santa Cruz Public Libraries Facilities Financing Authority (LFFA) formed a Community Facilities District (CFD) to finance new construction, modernization, upgrades, and repairs of local libraries in Santa Cruz, Aptos, Live Oak, Scotts Valley, Boulder Creek, Capitola, Felton, and La Selva Beach. On June 7, 2016, Santa Cruz County voters approved Measure S, which authorized the LFFA to issue up to $67,000,000 in bonds and levy a special tax annually on parcels within the CFD to pay debt service on the bonds and directly pay the costs of the authorized library projects. Pursuant to the LFFA Amended and Restated Joint Exercise of Powers Agreement (attached), the City of Santa Cruz (City) would receive $25 million in Measure S funding for the three library branches (Garfield, Branciforte, and Downtown) within the City’s jurisdiction.

Beginning with the first levy in Fiscal Year 2016–17, Measure S revenues exceeded estimated amounts because of several factors. First, the actual tax generated exceeded the initial projection, which included auditing the number of units for multifamily property. In addition, the pricing and costs of the first bond issuance in June 2017 were lower than anticipated. On June 7, 2018, the LFFA Board formed an ad-hoc subcommittee comprised of Capitola and County representatives to evaluate Measure S revenues and possible disbursement strategies. Based on the subcommittee’s work, an additional $15.5 million, or 25%, in Measure S funding (a combination of additional bond proceeds and annual taxes) could be distributed to the jurisdictions over a period of time.

On August 30, 2018, the LFFA Board unanimously recommended approval of the First Supplement to the JPA Agreement (attached) that distributes the additional revenues based on the original formula from the existing JPA Agreement. Specifically, the proposed amendment

14.1 updated the maximum funding amounts to be distributed to each jurisdiction based on a revenue increase of 25%. That increase resulted in Santa Cruz receiving an additional $6,250,000 in library funding for a total of $31,250,000. The distribution percentages remained the same. The first Supplement was approved by City Council on September 11, 2018, and executed with the jurisdictions on September 25, 2018.

During the February 6, 2025, board meeting, the LFFA Board directed county staff and bond council to review the available capacity of the Measure S special tax collection. This review, with the distribution percentages remaining the same along with an updated member allocation, was to be brought back to the LFFA Board for consideration. For the same reasons as described above; a Second Supplement Agreement (attached) to the JPA Agreement was drafted following the February 6th, 2025 LFFA Board meeting and county staff review.

DISCUSSION: On February 24, 2025, the LFFA Board unanimously recommended approval of the Second Supplement to the JPA Agreement (attached) based on the staff recommendation and due to the Measure S revenues exceeding estimates. This will allow for a new maximum distribution to be allocated by the same percentage as described in the first supplement and increase each jurisdiction’s capacity. This would increase the allocation to the City of Santa Cruz from $31,250,000 by $12,096,000 for a new total of $43,346,000. This will provide additional bonding capacity as the CFD prepares to issue the 3rd series of special tax bonds being considered for the City of Santa Cruz’s Downtown Library project as part of the Downtown Library Affordable Housing project (“DLAHP or Project”). The City of Santa Cruz has already completed projects at Garfield and Branciforte Branches. The additional bonding capacity will be reviewed by the LFFA Board following execution of the Second Supplement agreement to determine the total that can be supported for the 3rd Series of Bonds issuance.

Following the 3rd Series of Bonds and prior to the new allocation consideration, the members would have received the following amounts:

Member Allocation
Received to
Date
Proposed 3rd
Series
Balance
to be
Funded
Total
Allocation
County of Santa Cruz 41.94% $32,500,00 $0.0 $0.0 $32,500,000 City of Scotts Valley 4.84% $3,574,536 $0.0 $175,464 $3,750,000 City of Capitola 12.90% $10,000,000 $0.0 $0.0 $10,000,000 City of Santa Cruz 40.32% $18,359,769 $12,890,231 $0.0 $31,250,000 Total 100.00% $64,434,305 $12,890,231 $175,464 $77,500,000 Due to additional funding capacity being available, the LFFA Board approved the total allocation among members to be increased by $30 million, as follows:

Member Allocation
Original
Allocation
Increase Revised
Allocation
County of Santa Cruz 41.94% $32,500,000 $12,582,000 $45,082,000 City of Scotts Valley 4.84% $3,750,000 $1,452,000 $5,202,000 City of Capitola 12.90% $10,000,000 $3,870,000 $13,870,000 City of Santa Cruz 40.32% $31,250,000 $12,096,000 $43,346,000 Total 100.00% $77,500,000 $30,000.000 $107,500,000

14.2 As with the original allocation, the total can be funded with a combination of bond proceeds and special taxes collected. This Second Supplement agreement must be approved by each JPA member agency (Capitola, Santa Cruz, Scotts Valley, and Santa Cruz County). The LFFA Board will consider a resolution onthe final bond capacity as previously described based on this new member allocation. The analysis of debt service coverage for the 3rd series of bonds from bond council is expected to follow the Second Supplement agreement execution and presented at a future LFFA Board meeting. Debt service coverage for the 3rd series of bonds will only obligate payment from the City of Santa Cruz’s share of special tax collection, while the other member jurisdictions will continue to receive the increase annual distribution of special taxes collected.

Additionally, the City Manager has requested the other jurisdiction members consider utilizing all or a portion of their new surplus allocation to support the City of Santa Cruz in leveraging 100% of its new surplus allocation for the 3rd series bond issuance. (see the attachment entitled LFFA.JPA Debt Service Coverage Request Letter). Due to the debt service coverage requirement of 1.10x revenue for all debt service, the City of Santa Cruz would only be able to leverage a portion of its share of annual special tax surplus revenues. Leveraging 100% of the City’s share requires some members to acknowledge a reduction in their ability to leverage all or a portion of their own share of surplus for bond issuance in the future. This is due to the fixed amount of bonding capacity (see the attachment entitled Memo re Bonding Capacity dated March 6th, 2025). The City of Santa Cruz is requesting that members assist by allowing the new surplus allocations to be pledged to provide debt service coverage for the upcoming series of bonds for the DLAHP. As stated above, a resolution will be presented to the LFFA Board for consideration at an upcoming meeting to act on the final bond capacity and debt service coverage pledge.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: On June 26, 2012, the Santa Cruz City Council certified the CEQA Environmental Impact Report for the City’s General Plan 2030 (“General Plan EIR”). On November 14, 2017, the Council certified a supplemental CEQA Environmental Impact Report for amendments to the Downtown Plan (“Downtown Specific Plan EIR”) to address additional environmental impacts specific to downtown development. Following these certifications, on March 16, 2023, the City of Santa Cruz filed a CEQA Notice of Exemption (“NOE”) for the Downtown Library and Affordable Housing Project (“DLAHP or Project”) with both the Clerk of the Board for Santa Cruz County and the Office of Planning and Research. This NOE affirmed that the Project is exempt from further environmental review under CEQA.

The City’s approval of the Second Supplement of the Santa Cruz Libraries JPA/ LFFA (“activity”) does not constitute a CEQA “Project” with the meaning of Section 15378 of the State of California Environmental Quality Act (“CEQA”) Guidelines. The activity has no potential to result in physical change to the environment, directly or indirectly, as it pertains to solely to the approval of the Second Supplement agreement without authorizing any specific development or ground-disturbing activities.

Additionally, based on the March 14, 2023, DLAHP entitlements approval of the City Council, even if this activity is a CEQA “Project,” the activity is statutorily exempt under Public Resources Code Section 21083.3 and CEQA Guidelines Section 15183, based upon the same findings that the overall Project is consistent with the City’s General Plan and Downtown Plan, and certified Environmental Impact Reports (“EIRs”). Similarly, also based on the March 14, 2023, approvals, the Project is categorically exempt under CEQA Guidelines Sections 15305

14.3 (Class 5 – Minor Alterations in Land Use Limitations), 15312 (Class 12 – Surplus Government Property), and 15332 (Class 32 – In-fill Development Projects). These prior findings established that the Project site meets all in-fill exemption criteria, being under five acres, surrounded by urban uses, and the Project involves only minor alterations with no expansion of current use.

Since the approval of the Second Supplement agreement is merely implementing the prior approvals, and these activities are consistent with the prior approvals, these further activities are also categorically exempt from CEQA review.

HEALTH IN ALL POLICIES (HiAP): HiAP is a collaborative approach to improving the health of all people by incorporating health considerations into decision-making across sectors and policy areas. HiAP is based on 3 pillars: equity, public health, and sustainability. The goal of HiAP is to ensure that all decision-makers are informed about the health, equity, and sustainability impacts of various policy options during the policy development process. The approval of the Second Supplement to the JPA Agreement further supports the funding of the DLAHP. The DLAHP supports the pillar of equity by providing a destination public facility, childcare, commercial facility, and affordable residential rental units on a site in the City’s downtown urban core, in an area that is improved with sidewalks and street trees near public transportation, commercial goods and services, and recreational areas.

With the Project located downtown, it encourages a sustainable and healthy lifestyle by allowing residents to walk, cycle, and ride transit to the job center and commercial uses in the downtown vicinity. By providing 123 (100% affordable) rental apartments, this will not only help the City with a more sustainable supply of rental housing but will also help create a more inclusive equitable community. Additionally, the new Downtown Library will provide the community with a modern, accessible library built with sustainable design and operations centrally located for residents and visitors in Santa Cruz.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: No

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: This action would increase the allocation related to the Santa Cruz Public Libraries JPA/LFFA to the City of Santa Cruz from $31,250,000 by $12,096,000 for a new total of $43,346,000. This will provide additional bonding capacity as the CFD prepares to issue the 3rd series of special tax bonds being considered for the City of Santa Cruz’s Downtown Library project as part of the Downtown Library Affordable Housing project.

Prepared By:

Brian W. Borguno
Development Manager
Submitted By:

Bonnie Lipscomb
Director of Economic
Development and Housing
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. 2014 SANTA CRUZ LFFA JPA EXECUTED.PDF

2. 2018 SANTA CRUZ LIBRARIES LFFA JPA FIRST SUPPLEMENT AGREEMENT.PDF

3. 2025 SANTA CRUZ LIBRARIES LFFA JPA SECOND SUPPLEMENT AGREEMENT.PDF

4. SANTA CRUZ LIBRARIES 2.24.25 LFFA BOARD MEETNG AGENDA PACKET.PDF

5. LFFA JPA DEBT SERVICE COVERAGE REQUEST LETTER .PDF

6. MEMO RE BOND CAPACITY DATED MARCH 6TH, 2025

14.4 14.5

14.6 14.7

14.8 14.9

14.10 14.11

14.12 14.13

14.14 14.15

14.16 14.17

14.18 14.19

14.20 14.21

14.22 -1-

SANTA CRUZ LIBRARIES FACILITIES FINANCING AUTHORITY

SECOND SUPPLEMENT TO

AMENDED AND RESTATED

JOINT EXERCISE OF POWERS AGREEMENT
This SECOND SUPPLEMENT TO AMENDED AND RESTATED JOINT EXERCISE OF POWERS AGREEMENT (this "Second Supplement"), dated ___________, 2025, is entered into by and among the CITY OF SANTA CRUZ, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, the CITY OF SCOTTS VALLEY, a general law city and municipal corporation duly organized and existing under the laws of the State of California, the CITY OF CAPITOLA, a general law city and municipal corporation duly organized and existing under the laws of the State of California, and the COUNTY OF SANTA CRUZ, a California county duly organized and existing under the laws of the State of California.

B A C K G R O U N D:
1 The Cities and the County previously entered into an Amended and Restated Joint Exercise of Powers Agreement dated February 28, 2017 (the “Original Agreement”), which governs the joint powers authority known as the Santa Cruz Libraries Facilities Financing Authority (the “Authority”), whose members are the Cities and the County, for the purpose of financing the acquisition, construction and improvement of public library facilities (the ''Public Library Improvements") through the formation of a community facilities district under the MelloRoos Community Facilities Act of 1982, constituting Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, commencing with Section 53311 of said Code (the “Mello-Roos Act") and the authorization and issuance of bonds under the Mello-Roos Act.

2. The Cities and the County previously amended the Original Agreement to modify certain terms regarding the distribution of Special Taxes and Net Bond Proceeds through the execution of a First Supplement to Amended and Restated Joint Exercise of Powers Agreement dated September 25, 2018 (the “First Supplement” and, together with the Original Agreement, the “First Amended Agreement”).

3. The Cities and the County desire to further amend the First Amended Agreement to further modify certain terms regarding the distribution of Special Taxes and Net Bond Proceeds, as set forth in this Second Supplement.

4. This Second Supplement is entered into in accordance with Section 14 of the First Amended Agreement. Capitalized terms used but not defined in this Second Supplement have the meanings set forth in the First Amended Agreement.

A G R E E M E N T:

For and in consideration of the premises and the material covenants hereinafter contained, the Parties hereto hereby formally covenant, agree and bind themselves as follows:

14.23 -2-
SECTION 1. Amendment of First Amended Agreement. The First Amended Agreement is hereby amended as follows:
(a) Section 2(b)(ii). Paragraph of (b)(ii) of Section 2 of the First Amended Agreement is hereby deleted and amended in its entirety by the following:
(ii) Maximum Distributions to Parties. The Facilities Authority shall distribute the Special Taxes and Net Bond Proceeds to each of the Parties in the maximum amounts specified below using the percentages specified below (adjusted for rounding) in order to undertake and complete the construction of the Public Library Improvements:

Member Maximum Amount Percentage
City of Capitola $13,870,000 12.90%
City of Santa Cruz $43,346,000 40.32%
City of Scotts Valley $5,202,000 4.84%
County of Santa Cruz $45,082,000 41.94%
Total $107,500,000 100.00%
The distribution of Special Taxes and Net Bond Proceeds among the Parties shall be governed by the Bond Expenditure Plan as adopted and amended by the unanimous affirmative vote of all of the Directors under Section 2(b)(i). Changes to the maximum amounts shown in the table above shall require an amendment to this Agreement executed by all of the Members, in accordance with the further requirements set forth in Section 14, and shall be subject to the requirements of the Mello-Roos Act and the Joint Powers Act.
(b) Section 2(b)(iii). Paragraph of (b)(iii) of Section 2 of the First Amended Agreement is hereby deleted and amended in its entirety by the following:
(iii) Distribution of Special Tax Proceeds. Prior to issuance of Bonds, any net Special Tax collected in excess of amounts needed to administer the CFD shall be distributed twice annually in January and June, or as soon as practical upon receipt (but in no event less than twice annually), to each of the Parties in the percentages shown above.

After the issuance of Bonds, any net Special Tax collected in excess of amounts needed to pay each Party’s allocable share of debt service on Bonds and to administer the Bonds and the CFD shall be distributed annually on September 2 to each of the Parties in accordance with the Bond Expenditure Plan.

When the total of net Special Taxes and Net Bond Proceeds distributed to the Parties equals the maximum amounts specified in Section 2 (ii) and a total of $107,500,000, further distribution of net Special Taxes to each of the Parties shall be made in accordance with the Bond Expenditure Plan subject to the unanimous affirmative vote of all of the Directors.

Each of the Parties shall deposit or cause to be deposited all Special Tax proceeds it receives into a separate account to track revenues, expenses and fund balance, which will also be subject to an independent audit every year during the term of this Agreement.

14.24 -3-
Each of the Parties shall spend all Special Tax proceeds in accordance with the JCFA, and will be required to execute and deliver certifications and make representations and covenants regarding the administration and expenditure of net Special Taxes, as may be required by bond counsel in order to ensure compliance with applicable provisions of Mello-Roos Act.

SECTION 2. Authority. This Second Supplement is being executed pursuant to and in accordance with Section 14 of the First Amended Agreement.

SECTION 3. First Amended Agreement Continues in Effect. Except as amended and supplemented by this Second Supplement, the First Amended Agreement shall remain in full force and effect.

SECTION 4. Effective Date. This Second Supplement shall become effective upon the date hereof.

Approved As To Form:

Jones Hall, A Professional Law Corporation
Date:

14.25 -4-
IN WITNESS WHEREOF, the Parties hereto have caused this Second Supplement to be executed and attested by their proper officers thereunto duly authorized, and their official seals to be hereto affixed, as of the day and year first above written.

CITY OF SANTA CRUZ
By:

Attest:

CITY OF SCOTTS VALLEY
By:

Attest:

CITY OF CAPITOLA
By:

Attest:

COUNTY OF SANTA CRUZ
By:

Attest:

14.26 LIBRARIES FACILITIES FINANCING AUTHORITY (LFFA)
On Monday February 24, 2025 at 3:00 PM
All LFFA Board Meetings are held in-person and open to the public. Members of the public may also view the meetings via the alternative methods provided below as a courtesy. Please note that if the Zoom or YouTube connection malfunctions for any reason, and no Board Members are attending via teleconference, the meeting will continue in-person without remote access.

Public Viewing:

The meeting will be broadcast through the Santa Cruz Libraries YouTube channel https://www.youtube.com/user/SantaCruzPL which you can access through the Santa Cruz Libraries website by scrolling to the bottom of the page and clicking on the YouTube icon. The meetings will be recorded and posted for viewing after the meetings on the Santa Cruz Public Libraries website.

Public Participation:

Members of the public may provide public comments to the Board in-person during the meeting for any item on the agenda or within the subject matter jurisdiction of the Board. Any public comment for a specific item on the agenda must be received prior to the close of the public comment period for that item.

Any person who is not able to attend in-person may submit a written comment as indicated below.

Submitted written public comments will be included as part of the record of the meeting, either in Written Correspondence or in the Minutes, depending on when received by staff. Please be aware that the Board will not accept comments via Zoom nor read aloud written comments during the meeting.

How to comment on agenda items via email before the meeting begins:

Members of the public may provide public comment by sending an email to the Library Board Clerk at [email protected].
- Identify the agenda item number in the subject line of the email. - Emailed comments should be a maximum of 500 words, which corresponds to approximately 3 minutes of speaking time.
- All correspondences and written comments received prior to 12:00 p.m. on the Wednesday preceding a Board Meeting will be distributed to Board members to review prior to the meeting with the published Agenda packet. Written comments submitted after the Agenda and packet have been published will be distributed as Additional Materials at the commencement of the meeting.

Need more information? Contact clerk’s office at 831-427-7700 ext. 7618.

14.27 SANTA CRUZ LIBRARIES FACILITIES FINANCING AUTHORITY (LFFA)

BOARD MEETING AGENDA

SPECIAL MEETING
MONDAY FEBRUARY 24, 2025
3:00 P.M.

In-Person Location:

County Building
Fifth Floor Redwood Room (conference room)
701 Ocean Street, Santa Cruz, CA 95060
PLEASE NOTE:

The Santa Cruz City-County Library System does not discriminate against persons with disabilities.

Out of consideration for people with chemical sensitivities, we ask that you attend fragrance free. Upon request, the agenda can be provided in a format to accommodate special needs. Additionally, if you wish to attend this public meeting and will require assistance such as an interpreter for American Sign Language, Spanish, or other special equipment please call the Library Administration Office at (831) 427-7706 at least five days in advance so that we can arrange for such special assistance, or email [email protected].

Agenda and Agenda Packet Materials: The LFFA agendas and the complete agenda packet containing public records, which are not exempt from disclosure pursuant to the California Public Records Act, are available for review on the website: www.santacruzpl.org and at Library Headquarters, located at 117 Union Street, Santa Cruz, California, during normal business hours.

Agenda Materials Submitted after Publication of the Agenda Packet: Pursuant to Government Code §54957.5, public records related to an open session agenda item submitted after distribution of the agenda packet are available at the time they are distributed or made available to the legislative body on the website at: www.santacruzpl.org and are also available for public inspection at Library Headquarters, 117 Union Street Santa Cruz, California, during normal business hours, and at the LFFA meeting.

Need more information? Contact clerk’s office at 831-427-7700 ext. 7618.

Chair Matt Huffaker
Vice Chair Mali LaGoe
Board Member Nicole Coburn
Board Member Jamie Goldstein

14.28 1. CALL TO ORDER / ROLL CALL
Board Members Matt Huffaker, Mali LaGoe, Jamie Goldstein and Nicole Coburn

2. PUBLIC COMMENT

3. GENERAL BUSINESS
Member Allocations
Staff Recommendation: Approve a Second Supplement to Amended and Restated Joint Exercise of Powers Agreement increasing the maximum distribution to the parties by $30,000,000, in the same percentage as the existing distribution.

4. SCHEDULED UPCOMING MEETINGS
May 1, 2025 Scotts Valley Branch Library Anticipated Upcoming Agenda Items 9:00 am 251 Kings Village Road,
Scotts Valley, CA 95066
• Quarterly Reports

5. ADJOURNMENT
Adjourned to a Regular Meeting of the Libraries Facilities Financing Authority (LFFA) to be held on Thursday May 1, 2025 at 9:00 a.m. at the Scotts Valley Branch Library, 251 Kings Village Road, Scotts Valley, CA 95066
The Santa Cruz City-County Library System does not discriminate against persons with disabilities. Out of consideration for people with chemical sensitivities, we ask that you attend fragrance free. Upon request, the agenda can be provided in a format to accommodate special needs. Additionally, if you wish to attend this public meeting and will require assistance such as an interpreter for American Sign Language, Spanish, or other special equipment please call the Library Administration Office at (831)427-7706 at least five days in advance so that we can arrange for such special assistance, or email [email protected] Any member of the community may address the Board during this Public Comment period on any matter included on today’s agenda or on any topic not on todays’ agenda but within the subject matter jurisdiction of the Board. Please note, however, that for non-agendized items, the Board is not able to undertake extended discussion or take any action today without notice. Such items may be referred to staff for appropriate action, such as individual follow-up or placement on a future agenda. If you intend to address a subject or item that is on the Agenda, please hold your comments until that item is before the Board so that we may properly address all comments on that subject at the same time. In general, 3 minutes will be permitted per speaker during Public Comment; A MAXIMUM of 30 MINUTES is set aside for Public Comment at this time.

14.29 STAFF REPORT
AGENDA: February 24, 2025
TO: Libraries Facilities Financing Authority Board
FROM: Edith Driscoll, Treasurer
RE: Member Allocations

RECOMMENDATION
Approve a Second Supplement to Amended and Restated Joint Exercise of Powers Agreement increasing the maximum distribution to the parties by $30,000,000, in the same percentage as the existing distribution.

DISCUSSION
The Santa Cruz Libraries Facilities Financing Authority Community Facilities District (CFD), was formed for the purpose of levying a special tax to fund Library Facilities of each of the members.

The CFD began levying the special tax in 2016-17.

Pursuant to the Amended and Restated Joint Exercise of Powers Agreement (“JPA”) the allocation of funding among members is $77,500,000. Each member receives their share of annual net special tax revenues as a funding source after the allocation of a prorata share of debt service relative to the bond proceeds that were raised for each member. After the 3rd series of special tax bonds being considered for the City of Santa Cruz’s downtown library project, the members will have received:

Member Allocation
Received to
Date
Proposed 3rd
Series
Balance to
be Funded
Total
Allocation
County of Santa Cruz 41.94% $32,500,000 $ - $ - $32,500,000 City of Scotts Valley 4.84 3,574,536 - 175,464 3,750,000 City of Capitola 12.90 10,000,000 - - 10,000,000
City of Santa Cruz 40.32 18,359,769 12,890,231 - 31,250,000 Total 100.00% $64,434,305 $12,890,231 $175,464 $77,500,000 The Authority’s municipal advisor has prepared a projection of special taxes to remain after the issuance of the 3rd series of special tax bonds.

To summarize, the projections show an approximate $28 million in available special tax over 21 years after the 3rd series of bonds debt service is paid, or approximately $1.3 million annually. If the cap on the total allocation is increased, this annual special tax can be distributed to members to use for pay-go capital projects.

Chair Matt Huffaker
Vice Chair Mali LaGoe
Board Member Nicole Coburn
Board Member Jamie Goldstein

14.30 After the issuance of the 3rd series of bonds, approximately $14 million will remain of the original bond authorization. Based on today’s interest rates, the remaining time available to collect the special taxes and the required debt service coverage, the CFD could raise a maximum of $11 million. After paying debt service on this additional series of bonds (assuming the maximum issuance), there would be $440,000 in remaining annual surplus to distribute to members for paygo projects.

Due to funding available, staff recommends that the total allocation among members be increased by $30 million, in the same percentages as the existing allocation. The allocation proposed is as follows:

Member Allocation
Original
Allocation
Increase Revised
Allocation
County of Santa Cruz 41.94% $32,500,000 $12,582,000 $45,082,000 City of Scotts Valley 4.84 3,750,000 1,452,000 5,202,000 City of Capitola 12.90 10,000,000 3,870,000 13,870,000
City of Santa Cruz 40.32 31,250,000 12,096,000 43,346,000 Total 100.00% $77,500,000 $30,000,000 $107,500,000
These modifications to the distribution table require an amendment to the existing Joint Exercise of Powers Agreement, which must be approved by the Capitola, Santa Cruz and Scotts Valley City Councils, and the Santa Cruz County Board of Supervisors. Accordingly, staff worked with bond counsel to prepare the attached Second Supplement to the Amended and Restated Joint Exercise of Powers Agreement, which provides that special tax revenues and net bond proceeds are to be distributed to the jurisdictions in the modified maximum amounts specified above using the percentages specified above below.

As with the original allocation, the total can be funded with a combination of bond proceeds and special taxes. An updated Bond Expenditure Plan (referenced in the Second Supplement) that includes issuance of additional bonds for the City of Santa Cruz as a result of the revised allocation is attached.

Attachments:

Second Supplement to Amended and Restated Joint Exercise of Powers Agreement

14.31 -1-

SANTA CRUZ LIBRARIES FACILITIES FINANCING AUTHORITY

SECOND SUPPLEMENT TO

AMENDED AND RESTATED

JOINT EXERCISE OF POWERS AGREEMENT
This SECOND SUPPLEMENT TO AMENDED AND RESTATED JOINT EXERCISE OF POWERS AGREEMENT (this "Second Supplement"), dated ___________, 2025, is entered into by and among the CITY OF SANTA CRUZ, a charter city and municipal corporation duly organized and existing under the Constitution and laws of the State of California, the CITY OF SCOTTS VALLEY, a general law city and municipal corporation duly organized and existing under the laws of the State of California, the CITY OF CAPITOLA, a general law city and municipal corporation duly organized and existing under the laws of the State of California, and the COUNTY OF SANTA CRUZ, a California county duly organized and existing under the laws of the State of California.

B A C K G R O U N D:
1 The Cities and the County previously entered into an Amended and Restated Joint Exercise of Powers Agreement dated February 28, 2017 (the “Original Agreement”), which governs the joint powers authority known as the Santa Cruz Libraries Facilities Financing Authority (the “Authority”), whose members are the Cities and the County, for the purpose of financing the acquisition, construction and improvement of public library facilities (the ''Public Library Improvements") through the formation of a community facilities district under the MelloRoos Community Facilities Act of 1982, constituting Chapter 2.5 of Part 1 of Division 2 of Title 5 of the Government Code of the State of California, commencing with Section 53311 of said Code (the “Mello-Roos Act") and the authorization and issuance of bonds under the Mello-Roos Act.

2. The Cities and the County previously amended the Original Agreement to modify certain terms regarding the distribution of Special Taxes and Net Bond Proceeds through the execution of a First Supplement to Amended and Restated Joint Exercise of Powers Agreement dated September 25, 2018 (the “First Supplement” and, together with the Original Agreement, the “First Amended Agreement”).

3. The Cities and the County desire to further amend the First Amended Agreement to further modify certain terms regarding the distribution of Special Taxes and Net Bond Proceeds, as set forth in this Second Supplement.

4. This Second Supplement is entered into in accordance with Section 14 of the First Amended Agreement. Capitalized terms used but not defined in this Second Supplement have the meanings set forth in the First Amended Agreement.

A G R E E M E N T:

For and in consideration of the premises and the material covenants hereinafter contained, the Parties hereto hereby formally covenant, agree and bind themselves as follows:

14.32 -2-
SECTION 1. Amendment of First Amended Agreement. The First Amended Agreement is hereby amended as follows:
(a) Section 2(b)(ii). Paragraph of (b)(ii) of Section 2 of the First Amended Agreement is hereby deleted and amended in its entirety by the following:
(ii) Maximum Distributions to Parties. The Facilities Authority shall distribute the Special Taxes and Net Bond Proceeds to each of the Parties in the maximum amounts specified below using the percentages specified below (adjusted for rounding) in order to undertake and complete the construction of the Public Library Improvements:

Member Maximum Amount Percentage
City of Capitola $13,870,000 12.90%
City of Santa Cruz $43,346,000 40.32%
City of Scotts Valley $5,202,000 4.84%
County of Santa Cruz $45,082,000 41.94%
Total $107,500,000 100.00%
The distribution of Special Taxes and Net Bond Proceeds among the Parties shall be governed by the Bond Expenditure Plan as adopted and amended by the unanimous affirmative vote of all of the Directors under Section 2(b)(i). Changes to the maximum amounts shown in the table above shall require an amendment to this Agreement executed by all of the Members, in accordance with the further requirements set forth in Section 14, and shall be subject to the requirements of the Mello-Roos Act and the Joint Powers Act.
(b) Section 2(b)(iii). Paragraph of (b)(iii) of Section 2 of the First Amended Agreement is hereby deleted and amended in its entirety by the following:
(iii) Distribution of Special Tax Proceeds. Prior to issuance of Bonds, any net Special Tax collected in excess of amounts needed to administer the CFD shall be distributed twice annually in January and June, or as soon as practical upon receipt (but in no event less than twice annually), to each of the Parties in the percentages shown above.

After the issuance of Bonds, any net Special Tax collected in excess of amounts needed to pay each Party’s allocable share of debt service on Bonds and to administer the Bonds and the CFD shall be distributed annually on September 2 to each of the Parties in accordance with the Bond Expenditure Plan.

When the total of net Special Taxes and Net Bond Proceeds distributed to the Parties equals the maximum amounts specified in Section 2 (ii) and a total of $107,500,000, further distribution of net Special Taxes to each of the Parties shall be made in accordance with the Bond Expenditure Plan subject to the unanimous affirmative vote of all of the Directors.

Each of the Parties shall deposit or cause to be deposited all Special Tax proceeds it receives into a separate account to track revenues, expenses and fund balance, which will also be subject to an independent audit every year during the term of this Agreement.

14.33 -3-
Each of the Parties shall spend all Special Tax proceeds in accordance with the JCFA, and will be required to execute and deliver certifications and make representations and covenants regarding the administration and expenditure of net Special Taxes, as may be required by bond counsel in order to ensure compliance with applicable provisions of Mello-Roos Act.

SECTION 2. Authority. This Second Supplement is being executed pursuant to and in accordance with Section 14 of the First Amended Agreement.

SECTION 3. First Amended Agreement Continues in Effect. Except as amended and supplemented by this Second Supplement, the First Amended Agreement shall remain in full force and effect.

SECTION 4. Effective Date. This Second Supplement shall become effective upon the date hereof.

Approved As To Form:

Jones Hall, A Professional Law Corporation
Date:

14.34 -4-
IN WITNESS WHEREOF, the Parties hereto have caused this Second Supplement to be executed and attested by their proper officers thereunto duly authorized, and their official seals to be hereto affixed, as of the day and year first above written.

CITY OF SANTA CRUZ
By:

Attest:

CITY OF SCOTTS VALLEY
By:

Attest:

CITY OF CAPITOLA
By:

Attest:

COUNTY OF SANTA CRUZ
By:

Attest:

14.35 FY 25 Special Tax Surplus Before
Net Tax Distribution Increased
FY After Admin 2017 & 2020 Bonds 2025 Bonds to Date* Allocation County Capitola Scotts Valley Gross Share 2025 Debt Service Net Share

41.94% 12.90% 4.84% 40.32%
2025 4,400,804 (2,215,031) (267,000) (1,622,832) 295,941 124,118 38,176 14,324 119,323 (92,000) 27,323 2026 4,400,804 (2,220,281) (894,000) ‐  1,286,523 539,568 165,961 62,268 518,726 (331,000) 187,726 2027 4,400,804 (2,217,531) (898,000) ‐  1,285,273 539,043 165,800 62,207 518,222 (330,000) 188,222 2028 4,400,804 (2,217,031) (896,000) ‐  1,287,773 540,092 166,123 62,328 519,230 (328,000) 191,230 2029 4,400,804 (2,215,181) (898,000) ‐  1,287,623 540,029 166,103 62,321 519,169 (325,000) 194,169 2030 4,400,804 (2,215,831) (894,000) ‐  1,290,973 541,434 166,535 62,483 520,520 (328,000) 192,520 2031 4,400,804 (2,220,431) (894,000) ‐  1,286,373 539,505 165,942 62,260 518,665 (320,000) 198,665 2032 4,400,804 (2,217,081) (898,000) ‐  1,285,723 539,232 165,858 62,229 518,403 (322,000) 196,403 2033 4,400,804 (2,219,681) (896,000) ‐  1,285,123 538,980 165,781 62,200 518,161 (318,000) 200,161 2034 4,400,804 (2,216,231) (898,000) ‐  1,286,573 539,589 165,968 62,270 518,746 (320,000) 198,746 2035 4,400,804 (2,215,863) (894,000) ‐ 1,290,941 541,421 166,531 62,482 520,508 (315,000) 205,508 2036 4,400,804 (2,218,413) (894,000) ‐  1,288,391 540,351 166,202 62,358 519,479 (316,000) 203,479 2037 4,400,804 (2,213,669) (897,000) ‐  1,290,135 541,083 166,427 62,443 520,182 (316,000) 204,182 2038 4,400,804 (2,220,688) (894,000) ‐  1,286,116 539,397 165,909 62,248 518,562 (310,000) 208,562 2039 4,400,804 (2,216,075) (895,000) ‐  1,289,729 540,912 166,375 62,423 520,019 (310,000) 210,019 2040 4,400,804 (2,215,113) (894,000) ‐  1,291,691 541,735 166,628 62,518 520,810 (308,000) 212,810 2041 4,400,804 (2,216,631) (893,000) ‐  1,291,173 541,518 166,561 62,493 520,601 (304,000) 216,601 2042 4,400,804 (2,215,213) (897,000) ‐  1,288,591 540,435 166,228 62,368 519,560 (304,000) 215,560 2043 4,400,804 (2,217,094) (894,000) ‐  1,289,710 540,904 166,373 62,422 520,011 (299,000) 221,011 2044 4,400,804 (2,212,100) (895,000) ‐ 1,293,704 542,579 166,888 62,615 521,621 (299,000) 222,621 2045 4,400,804 (2,214,250) (894,000) ‐ 1,292,554 542,097 166,739 62,560 521,158 (299,000) 222,158 2046 4,400,804 (999,375) (2,028,000) ‐ 1,373,429 576,016 177,172 66,474 553,767 (328,000) 225,767 *Includes $175,464 to SV
Santa Cruz Libraries Facilities Financing Authority
Bond Expenditure Plan ‐ 2025 Amendment
Share of Surplus
Debt Service After $77.5M Allocation Santa Cruz
2 2025 S. Harrell

14.36 City of Santa Cruz
City Manager’s Office
809 Center Street
Santa Cruz, CA 95060
DATE: March 13, 2025
TO: Libraries Facilities Financing Authority Board Members:

Mali Lagoe, Scotts Valley, LFFA Vice Chair
Nicole Coburn, Santa Cruz County, LFFA Board Member
Jamie Goldstein, Capitola, LFFA Board Member
FROM: Matt Huffaker, City of Santa Cruz, LFFA Board Chair RE: Request for JPA/LFFA Members Debt Service Coverage to Support Santa Cruz Bonding Capacity Dear LFFA Board Members,
At an upcoming Board meeting, the Board will be presented with a resolution to approve an increased bonding amount under the Second Supplement amendment of the JPA. This amendment increases members’ share of the surplus special tax after debt service payments. The City of Santa Cruz is interested in leveraging 100% of its new surplus allocation for bond issuance.

This will allow for maximum proceeds to be received to support the Downtown Library Affordable Housing Project (DLAHP), expected to begin construction this coming May or June. The DLAHP includes affordable housing, childcare, commercial/retail, and a new Downtown Library, serving as the Main Branch for our countywide system. The DLAHP will be the last library project to be completed in response to the Library Facilities Master Plan and the voter approved Measure S funds to support Library Projects.

Due to the debt service coverage requirement of 1.10x revenue for all debt service, the City of Santa Cruz would only be able to leverage a portion of its share of annual special tax surplus revenues.

Leveraging 100% of the City’s share requires some members to acknowledge a reduction in their ability to leverage all or a portion of their own share of surplus for bond issuance in the future. This is due to the fixed amount of bonding capacity (see attached Bonding Capacity Memo dated 3/6/2025). The City of Santa Cruz is requesting that members assist by allowing the new surplus allocations to be pledged to debt service coverage for the upcoming series of bonds for the DLAHP.

A Debt Service Pledge would only impact an individual member’s annual net tax revenue distribution amounts if there was a decrease in revenues collected from the parcel tax. A decrease in revenues could only occur if the number of parcels decreased in the County or a significant number of defaults were to occur. Both scenarios are very unlikely.

This Debt Service Pledge can be made up of a percentage of the new special tax surplus allocation or pledged in its entirety and would not have any bearing on members receiving their full annual payments of surplus special tax collected. As stated above, it could limit the available capacity for

14.37 City of Santa Cruz
City Manager’s Office
809 Center Street
Santa Cruz, CA 95060
members to issue bonds in the future if any member were contemplating a bond issuance at a later time.

As we continue our commitment to serving our community and realizing the goal from the Library Facilities Master Plan to modernize the entire Santa Cruz Public Libraries System, we kindly seek your support in providing debt service coverage for the City of Santa Cruz to bond for our full member allocation. The Downtown Library Branch serves a critical role as a hub for the broader Public Library system and programs. This assistance will play a vital role in ensuring completion of the final Library project; a new, modernized, sustainable Downtown Branch Library.

As stated above, a resolution will be presented for your consideration at an upcoming meeting in the near future. In the meantime, please consider asking your respective Council/Board for its blessing if you deem it necessary.

Sincerely,
–––––––––––––––––––––––––––––––––––––––––––––––
Matt Huffaker
City Manager/LFFA Board Chair
City of Santa Cruz | City Manager's Office
809 Center Street, Santa Cruz, CA 95060

14.38 13891 Newport Avenue, Suite 145, Tustin, California 92780 Tel: 714.939.1464
March 6, 2025
To: Edith Driscoll
Treasurer-Controller, Santa Cruz Libraries Facilities Financing Authority From: Suzanne Harrell
Re: Increased Tax Allocation Among Members and Bonding Capacity _____________________________________________________________________ At its upcoming April 3 meeting, the Board will be presented with a resolution to approve an increased bonding amount relating to the amendment of the JPA which increases members’ share of the surplus special tax after payment of debt service.

The City of Santa Cruz (CSC) has expressed interest in leveraging 100% of their new increased surplus allocation (Surplus) for this bond issuance. As we discussed, because of the debt service coverage requirement of 1.10x revenue to all debt service, CSC would in the normal course only be able to leverage a portion of the CSC share of their annual Surplus. The amount they could leverage on a standalone basis would provide net bond proceeds of approximately $4.44 million. They have asked for an analysis showing the impact on other members’ bonding capacity if other members would allow them to use their share to leverage 100% of the CSC Surplus. 100% leverage of the CSC share would raise a net $7.15 million. Since new debt service would be structured to never exceed the estimated CSC share of the Surplus, in theory, no members’ share of the Surplus would be impacted, and each member would still receive annual distribution equal to their allocable share of the Surplus.

The caveat to this is that if there were a catastrophic event that significantly impacted the number of units subject to the special tax, total annual tax revenue would decline and Surplus would decrease. Since the new debt service is a fixed amount, it could be greater than the CSC share of the reduced Surplus, and since debt service has to be paid before Surplus can be distributed, other members’ share of Surplus would be affected in this instance. However, the amounts calculated for this issue are based on the FY 2024-25 tax levy, with no estimate for new units. Any new units added in future years could potentially offset some or all of any loss of a future year catastrophe.

Leveraging 100% of the CSC share requires some members to acknowledge a reduction in their ability to leverage all or a portion of their own share of Surplus in the future. This is because there is a fixed amount of bonding capacity using the overall 1.10x coverage of revenue to total debt service.

14.39

March 6, 2025
The following table shows the impact on members’ bonding capacity of different options.

The figures represent net proceeds of the bonds, not the actual par amount.

Another item to note is that due to the lower amount of CSC Surplus available for the September 2025 debt service on the new bonds, there will be a small amount of capitalized interest required for the new bonds in order to leverage 100% of the CSC share. This has less impact on net proceeds than moving the first debt service payment to March 2026.

The attached table is an example of cashflow among members if 100% of CSC share is leveraged. In the table, I use the title 2025A Bonds for the debt service for 2025 Bonds issued for the existing remaining CSC allocation (under the $77.5M limit) and 2025B Bonds for the debt service for 2025 Bonds issued for the CSC Surplus.

Please let me know if you have any questions or would like to see other options. I am also providing this memo to the City of Santa Cruz staff at their request.

CSC County Capitola Scotts Valley Total
Original Prorata Bonding Capacity 4,614,000 4,435,000 1,419,000 11,000,000 532,000 100% CSC Leverage
Allocate Prorata to Other Members 7,150,000
Remaining Bonding Capacity 2,706,000 832,000 312,000 3,850,000 Increase/(Reduction) (1,908,000) 2,715,000 (587,000) (220,000) - Allocate First to Capitola and then Prorata 7,150,000
Remaining Bonding Capacity 3,452,000 - 398,000 3,850,000 Increase/(Reduction) (1,162,000) 2,715,000 (1,419,000) (134,000) - Allocate First to Capitola and then County 7,150,000
Remaining Bonding Capacity 3,318,000 - 532,000 3,850,000 Increase/(Reduction) (1,296,000) 2,715,000 (1,419,000) - - Allocate First to Capitola and then SV 7,150,000
Remaining Bonding Capacity 3,850,000 - - 3,850,000
Increase/(Reduction) (764,000) 2,715,000 (1,419,000) (532,000) - Partial CSC Leverage Using Capitola Only
Allocate Only to Capitola 5,854,000
Remaining Bonding Capacity 4,614,000 - 532,000 5,146,000 Increase/(Reduction) - 1,419,000 (1,419,000) - -

14.40