Santa Cruz City Council
February 10, 2026

Exhibit F
Municipal Wharf Sign Guidelines

1.01. Purpose.
a. These Guidelines are intended to provide Wharf Tenants with general criteria regarding appropriate business signage.
b. All advertising devices and signs shall comply with the regulations set forth at Santa Cruz Municipal Code (“SCMC”) Chapter 24.12 Part 4 entitled “Advertising Devices, Signs and Billboards” made part hereof by reference.
c. In the event of conflict or inconsistency between these Guidelines and SCMC Chapter 24 Part 4, SCMC Chapter 24.12 Part 4 shall prevail.

2.01. City Approval. AII exterior signs must be approved in writing by the City Wharf Staff Committee. Certain types and sizes of signs require zoning and building or electrical permits.

3.01. Sign Application Process.
a. Tenants shall submit an application for all new signage to the City’s Wharf Property Manager. The application shall consist of:
i. Dimensioned drawings of the sign;
ii. Type of material, color, lighting, and other sign characteristics; iii. Sketch or photograph showing proposed location with approximate dimensions to ground, roof, doors, and windows.
b. The Wharf Property Manager will forward the application to the City Staff Wharf Committee for review and action.
c. Upon City Staff Wharf Committee action, the Wharf Property Manager shall inform the Tenant of the decision. If the application is approved, the Tenant will be notified of any other City approvals required.

4.01. Sign Criteria.
a. Types. The following types of signs are appropriate for use on the Wharf:
i. Signs painted directly on buildings.
ii. Signs mounted directly on building walls.
iii. Individual letters and numerals mounted directly on building walls. iv. Neon signs.
v. Iconic signs.
vi. Window signs.

8.77

vii. Hanging Signs.
b. Size. Each Wharf business is allowed thirty (30) square feet of total sign area. The following configurations are acceptable:
i. One 6’x5’ sign;
ii. Three 2’x5’ signs;
iii. One 4’x5’ sign, one 2x2’ sign, and one 3’x2’ sign; iv. Other configurations as approved by City Staff Wharf Committee. c. Location.
i. Signs should normally be located at or near pedestrian eye level. ii. Signs shall not project above the roof line or project over the sidewalk unless there is an 8’ high clearance over the sidewalk.
iii. Neon signs are permitted on building exteriors and in windows. iv. Other types of signs positioned in windows are discouraged in order to allow views into and through business spaces.

5.01. Sign Design Considerations.
a. Given the nature of the Wharf and its environs, marine-oriented themes are most appropriate.
b. Signs Painted Directly on Buildings - This type of sign lends itself well to buildings on the Wharf and could develop an overall visual theme. The size of such signs is dependent on the section of the building where they are proposed. Large wall sections could appropriately contain larger signs.
c. Signs Mounted on Building Walls - Useful for locations where painting directly on building walls is not desirable. Carved wooden or composite material signs with a marine-related theme can work well. Wall-mounted signs are to be flush with the building surface.
d. Individual Letters Mounted on the Building - Letters should not exceed 12” in height and should not project more than 2” from the building wall. Plastic letters are not allowed, nor are self-illuminated letters. Letters in colors that appropriately contrast with the background are most effective.
e. Neon Signs - Neon signs provide light, color, and vibrancy, and are especially effective after dark. Neon signs are appropriate for display in windows, provided that they are in scale with the window size and do not completely obscure views through the window. Neon signs may also be mounted directly on the building wall to supplement a painted sign. Flashing or blinking neon signs are not permitted. f. Iconic Signs - Iconic signs are hanging or projecting signs which depict a physical object such as an anchor or a boat, as contrasted with signs which utilize lettering to convey the sign’s message. Iconic signs that are in scale with the structure and use of

8.78

the building are most effective. Iconic signs may not present obstructions to pedestrian traffic, and an 8’ overhead clearance is required for any iconic sign overhanging a pedestrian walkway.
g. Window Signs - Painted signs or decals on glass should be designed so that views into and through the business are maintained.
h. Hanging Signs - Small hanging signs beneath an overhang or canopy may be approved if they are incidental and purposeful (e.g., advertising an “Annual Sale”). i. Sign Lighting - Flood lighting of signs is allowed provided that lights are directed away from pedestrians.
j. Banners and Flags - Banners, flags and pennants may be used for specific and limited purposes, but when used to excess may actually detract from the desired result. These advertising devices must be approved on a case-by-case basis. k. Temporary Signs and Posters - These advertising devices are generally discouraged but may be used for no longer than fourteen days at a time with prior approval. They may not obstruct views into and through buildings.
l. Menus - Food establishments may display menus securely fixed to the wall or in an enclosed display case. A display case may be lighted.
m. Addresses - All businesses should display clearly legible address numbers. They may be incorporated into signage as appropriate.
n. Sandwich Board and Movable Freestanding Signs - Are not permitted.

EXHIBIT G
Insurance Requirements
Tenant shall procure and maintain for the duration of the Lease, insurance against claims for injuries to persons or damages to property which may arise from or in connection with Tenant’s

8.79

operation on, access to, and/or use of the Premises. The cost of such insurance shall be borne by Tenant.

A. Insurance Certificate Requirements.

Landlord 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 the Landlord, its officers, officials, employees, and volunteers as additional insureds, and • Coverages must be maintained during the Term of the Lease with the Landlord, unless a longer duration is required.

B. Minimum Scope and Limit of Insurance.

Tenant acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. If Tenant 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 Tenant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to Landlord.

Tenant 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 Tenant and its employees, agents, representatives, subtenants, assignees and concessionaires arising out of and in connection with Tenant's use or occupancy of the Premises; and, if applicable, liability for the sale and distribution of liquor and alcoholic beverages.

2. “All Risk” Property Insurance Coverage. Tenant shall, at Tenant's sole expense, obtain and keep in full force and effect an insurance policy covering all of Tenant'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. Tenant shall be solely responsible for any uninsured loss or damage caused to Tenant's personal property, trade fixtures, equipment and merchandise located in or upon the Premises for any reason.

3. Fire Insurance\Legal Liability Coverage. Tenant, at its sole cost, shall procure and maintain in full force and effect at all times during the Term of this Lease, fire and extended coverage insurance satisfactory to Landlord covering the Premises to keep all leased property or rented space, Tenant Improvements therein 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

8.80

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 Lease. “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 the Term of this Lease and shall contain an inflation endorsement if the Premises or Tenant 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. Tenant 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 Tenant Improvement. Such workers’ compensation insurance shall be in amounts at least equal to the maximum liability of Tenant, 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.

Tenant 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
Landlord, 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 Tenant, 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 Tenant’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).

PRIMARY COVERAGE
For any claims related to this Lease, Tenant’s insurance coverage will be primary and non-contributory as respects Landlord, its officers, officials, and employees. Any insurance or self-insurance maintained by Landlord, its officers, officials, and employees will be excess of Tenant’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 Landlord.

WAIVER OF SUBROGATION
Tenant hereby grants to Landlord a waiver of any right to subrogation, except as otherwise not applicable, which any insurer of said Tenant may acquire against Landlord by virtue of the payment of any loss, including attorney’s fees under such insurance. Tenant agrees to obtain any endorsement that may be necessary to effectuate this waiver of subrogation, but this provision applies regardless of whether or not Landlord has received a waiver of subrogation endorsement from the insurer.

8.81

EXCESS LIABILITY/UMBRELLA INSURANCE POLICIES
Tenant 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 Tenant’s primary and excess liability policies are exhausted.

SELF-INSURED RETENTIONS (SIR)
Self-insured retentions must be declared to and approved by Landlord. Landlord may require Tenant 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 Landlord.

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 Landlord.

VERIFICATION OF COVERAGE
Tenant will furnish Landlord 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 endorsements to be approved by the Landlord before the Lease begins. However, failure to obtain the required documents prior to the Lease beginning will not waive Tenant’s obligation to provide them. Landlord reserves the right to require complete, certified copies of all required insurance policies, including endorsements required by these specifications, at any time.

SUBCONTRACTORS
Tenant 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 Premises. Tenant shall require and verify that all contractors and subcontractors maintain insurance meeting all the requirements stated herein, and Tenant shall ensure that Landlord, 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
Landlord 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 Tenant.

8.82

EXHIBIT H
Description of Landlord and Tenant Work
Landlord Work
Not applicable
Tenant Work
Tenant shall:

1. Replace the roof with minimum 50 mil PVC and angled parapet flashing to match wall to adjacent Miramar site. Complete by March 15, 2027.

2. Replace flooring to Landlord’s approval prior to the end of the Initial Term, unless extended by Landlord.

3. Update electrical to current codes prior to the end of the Initial Term, unless extended by Landlord.

8.83 City of Santa Cruz

BUDGET ADJUSTMENT REQUEST
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 Clear Form
2026
02/10/2026
Adjustment to for increased base rent following the execution of new Municipal Wharf Lease at 41 Municipal Wharf. Increased gross sales may increase estimated rent collected in Fund 104 and the Capital Improvement Fund project w512501 shown below. 104-30-43-3211-46201 Rents - Real Property 19,480
319-51-81-9221-46306 w512501-666-1026-0 41 Municipal Wharf 1,970 21,450
319-51-81-9221-57290 w512501-100-2020-0 Other building costs 1,970 1,970
19,480
David
McCormic
Digitally signed by
David McCormic
Date: 2026.01.14
11:54:13 -08'00'
Kathryn
L. Mintz
Digitally signed by
Kathryn L. Mintz
Date: 2026.01.21
15:49:27 -08'00'
Digitally signed
by Emily Burton
Date: 2026.01.23
'10:44:38 -08'00
Elizabet
h Cabell
Digitally signed by
Elizabeth Cabell
Date: 2026.01.23
10:51:31 -08'00' 8.84
City Council

AGENDA REPORT
DATE: 01/21/2026
AGENDA OF: 02/10/2026
DEPARTMENT: Economic Development and Housing
SUBJECT: Amended and Restated Municipal Wharf Lease Agreement with Flotsam of California, Inc, dba Noland’s for City-owned Commercial Space at 47 Municipal Wharf (EDH)
Location: District 4
RECOMMENDATION: Motion to:
1) Approve and authorize the City Manager to execute the Amendment and Restated Municipal Wharf Lease Agreement with Flotsam of California, Inc., and any documents, amendments or extensions of a non-substantive nature, in a form approved by the City Attorney, for the commercial retail space located at 47 Municipal Wharf;
2) Adopt a resolution amending the Fiscal Year 2026 budget to appropriate revenue in the amount of $382.44 to the Municipal Wharf Fund (Fund 104); and 3) Adopt a California Environmental Quality Act (CEQA) finding of categorical exemption pursuant to 14 CCR 15301 (Existing Facilities) and 14 CCR 15061(b)(3) (Common Sense Exemption).

BACKGROUND: Flotsam of California, Inc. (Flotsam) has been a fixture on the Wharf for almost 65 years. Originally founded by Ward Noland Senior (c. 1962) as Flotsam at the present day location of Noland’s, the Noland family has operated retail shops on the Wharf and in Santa Cruz (Pacific Wave) for generations. Although names have changed over the years, Bruce Noland and his family continue to highlight iconic local merchandise as well as global brands at both Noland’s (47 Municipal Wharf) and Surf City (41 Municipal Wharf) on the Wharf.

At or about 1962, Flotsam on the Wharf first opened in a small retail space around the location of present-day Noland’s. On July 1, 1971 Flotsam entered into a Municipal Wharf Lease Agreement (Lessor Builder) to construct a new building at that premises, following widening of the Wharf for the building and the new Miramar building next door. Today, Noland’s, a retail clothing and gift shop, located at 47 Municipal Wharf is an approximately 1,968 square foot building. Over the years, through several amendments, the term was extended through February 1, 2017, at which time it was replaced with the City’s newest lease template and a new term was executed through February 1, 2022. The Lease converted to month-to-month term during the

9.1 COVID-19 pandemic. Where Flotsam has been in good standing and staff capacity required action on other urgent projects, emergencies, and the resolution of outstanding COVID-19 pandemic impacts to other City tenants, a new lease for Flotsam has been on hold until an updated wharf lease template was completed by the City Attorney in winter 2025.

The City and Mr. Noland, now wish to proceed with an Amended and Restated Municipal Wharf Lease Agreement for Noland’s based on the new template, and subject to the terms outlined below. If approved by City Council, concurrent with the new Municipal Wharf Lease Agreement for Surf City at 41 Municipal Wharf, the terms for both businesses would be aligned, allowing for continued operation of these historic local businesses for up to ten (10) years.

DISCUSSION: In addition to operating Noland’s (formerly, Flotsam), Flotsam also owns and operates Surf City, a retail gift store on the Wharf. Both businesses contribute positively to the overall Wharf experience, and Flotsam has proven to be a responsible tenant with a loyal following and robust sales. Both leases are now up for renewal or replacement, creating an ideal opportunity to align the terms and update conditions for both businesses.

Based on the Tenant’s long-standing operation of Noland’s, staff recommend that City Council approve the new lease concurrent with extension of the Surf City lease (separate agenda item), subject to the major terms outlined below:

Proposed Terms:

Commencement Date: March 1, 2026
Term of Lease: Five (5) years, plus one (1) five (5) year option to extend.

Rent: The greater of an annual minimum base rent of $58,541.28, or the sum of 8% of gross sales up to and including the Breakpoint, plus 6% of any amount over that Breakpoint.

Beginning on the Commencement Date, the Breakpoint will be 25% of the preceding year’s gross sales, subject to an annual adjustment based on the preceding year’s gross sales. The minimum base rent is subject to a 2% annual adjustment.

Capital Improvements: Flotsam will continue to make payments of 1% of gross sales to a capital improvement fund project.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed City Council action not a “Project” as that term is defined by CEQA. (Public Resources Code § 21065.)
To the extent it is deemed a CEQA “project”, the proposed Council action is exempt from CEQA under: (1) 14 CCR 15301 – Class 1 Categorical Exemption because the City Council action relates to the lease of an existing facility involving negligible or no expansion of existing or former use; and (2) 14 CCR 15061(b)(3) as an activity that, with certainty, does not have an effect on the environment.

HEALTH IN ALL POLICIES (HiAP): Promoting locally owned businesses helps support social and community bonds, improves community economic resilience, reduces commute times and pollution from owner operators, and generally aligns business activities with local culture

9.2 and initiatives. While these factors may not in themselves influence public health, they have been shown to have a positive impact on the social determinants of health and support the overall well-being in the community.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: Yes

2. This recommendation requires a budget adjustment: Yes

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: The minimum base rent of $4,878.44 per month is expected to yield annual revenues in the amount of $58,541.28. For the remainder of Fiscal Year 2026, the minimum revenue is expected to increase by at least $382.60. Should sales exceed the minimum base rent, the percentage rent would increase the revenue. Lease revenue from the commercial space is maintained in Municipal Wharf Fund (Fund 104) and helps support ongoing maintenance of the Wharf. Capital Improvement Fund contributions are collected in 47 Municipal Wharf (w511204) to support ongoing property improvement and capital needs related to and at the premises and/or to be expended on repairs or replacement of Wharf decking, substructure and pilings if 50% of tenant contributions remain unspent in any calendar year. The expected revenue for the project will not be adjusted at this time based on the terms and conditions in the new lease.

Prepared By:

Dave McCormic
Development Manager
Submitted By:

Bonnie Lipscomb
Deputy City Manager
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. WHARF LEASE AGREEMENT - NOLAND'S.PDF

2. BUDGET ADJUSTMENT.PDF

9.3

Rev. 12.15.2025

AMENDED AND RESTATED MUNICIPAL WHARF LEASE AGREEMENT
THIS MUNICIPAL WHARF LEASE AGREEMENT (the “Lease”) is entered into by and between the City of Santa Cruz, a municipal corporation (hereinafter “Landlord") and Flotsam of California, Inc., a California corporation (hereinafter “Tenant”). The effective date of this Lease shall be ______________ (“Effective Date”). Landlord and Tenant are sometimes hereinafter referred to individually as “Party” and collectively as “Parties”. Landlord and Tenant agree to all terms and conditions of this Lease as set forth herein.

RECITALS
A. Landlord and Tenant previously entered into a Lease dated February 1, 2017 (“Original Lease Agreement”) for the premises located on the Wharf at 47 Municipal Wharf, Santa Cruz, California 95060 (APN 007-341-06) in the City of Santa Cruz, County of Santa Cruz, State of California (the “Premises”); and
B. The Original Lease Agreement expired February 1, 2022 and Tenant has remained in possession of the Premises pursuant to Section 3.03(c) of the Original Lease Agreement, creating a tenancy from month-to-month; and
C. The Parties desire to extend the term and update the terms and conditions of the Original Lease Agreement by entering into this Amended and Restated Municipal Wharf Lease Agreement and agree to terminate, replace, and supersede the Original Lease Agreement in its entirety upon commencement of this Amended and Restated Municipal Wharf Lease Agreement.

ARTICLE 1 - BASIC LEASE PROVISIONS
The above stated Recitals are incorporated in this Lease. The following are basic terms applicable to this Lease. The Sections and Exhibits referenced below in parenthesis explain and define the basic terms specified below and are to be read in conjunction with basic terms herein:

1.01 Tenant Trade Name. “Noland’s” (Section 8.01).

1.02 Commencement Date. March 1, 2026 (“Commencement Date”) (Section 3.01).

1.03 Term. 5 years, as of the Commencement Date and terminating no later than 11:59 p.m. on February 28, 2031 (“Expiration Date”), unless sooner terminated or otherwise extended as permitted under this Lease (Article 3).

1.04 Premises Location and Leased Area. That certain designated area, located on the Wharf at 47 Municipal Wharf, Santa Cruz, California 95060 (APN 007-341-06) in the City of Santa Cruz, County of Santa Cruz, State of California and further depicted on Exhibit A and consisting of:
(a) Approximately ±1,968 square feet of space
(b) 0 parking spaces
(collectively the “Premises”).

The Premises is further described in Section 2.02 (Premises) of this Lease and depicted in Exhibit A (Premises) and Exhibit B (Floor Plan of Premises), both of which are attached hereto and incorporated herein.

9.4

Rev. 12.15.2025

1.05 Rent.
(a) Minimum Base Rent - $4,878.44 per month, subject to annual increase. (Article 4)
(b) Percentage Rent Rate - Eight percent (8%) of Gross Sales (Section

4.04) up to and including the Breakpoint (Section 4.01), plus, six percent (6%) of Gross Sales in excess of the specified Breakpoint, subject to increase (Article 4).

1.06 Use of Premises. Tenant shall use the Premises for operating and maintaining a retail shop with the sale of gifts and clothing (the “Permitted Use”) and for no other purposes without Landlord’s prior written consent. (Article 8).

1.07 Hours of Operation. Tenant’s hours of operation, unless otherwise agreed in writing by Landlord, shall be at least the following:

Summer (Memorial Day through Labor Day): 10:00 AM - 8:00 PM (daily) Winter: 11:00 AM – 5:00 PM (daily) (Section 8.04) (Operation of Business; Hours of Operation).

1.08 Security Deposit. $9,756.88 (Article 7).

1.09 Tenant’s Deadline to Complete Tenant’s Work. INTENTIONALLY OMITTED.

1.10 Guarantor of Lease. Bruce Noland

1.11 Tenant’s Address for Notices.

Noland’s
Bruce Noland
47 Municipal Wharf
Santa Cruz, CA 95060
Phone: 831-471-7873
Email: [email protected]

1.12 Landlord’s Address for Notices.

City of Santa Cruz
Attn: Dave McCormic
337 Locust Street
Santa Cruz, CA 95060
Phone: (831) 420-5156
Email: [email protected]

1.13 Landlord’s Address for Payment of Rent.

City of Santa Cruz
Finance Department
Attn - Revenue
1200 Pacific Ave, Suite 290
Santa Cruz, CA 95060

9.5

Rev. 12.15.2025
ARTICLE 2 - LEASE OF PREMISES

2.01 City of Santa Cruz as Landlord. Tenant acknowledges and understands that Landlord is a municipality consisting of numerous offices and departments. Whenever a provision contained in this Lease, or any extension, modification or amendment, requires the “written consent” of Landlord, such consent must be obtained from the then acting City Manager or authorized designee for the City of Santa Cruz (“City”). Tenant may not rely on any statement or representation by any other employee, agent or representative of Landlord in obtaining such consent and any such statement or representation other than the express written consent of the then acting City Manager or authorized designee shall be null and void and have no effect.

Nothing contained in this Section shall limit in any way the authority of any office, or department of the City of Santa Cruz from approving or withholding consent to any event or activity regulated by local law.

2.02 Premises. For and in consideration of the rents to be paid and promises and covenants to be performed by Tenant under this Lease, Landlord leases to Tenant, and Tenant leases from Landlord, in accordance with the terms and conditions set forth in this Lease, that certain designated area, (together with certain appurtenant rights and easements), described in Section 1.04 (Premises), as more particularly described and depicted in Exhibit A (collectively the “Premises”). A floor plan of the Premises is attached to this Lease as Exhibit B.

2.03 License Area of Adjacent Public Right of Way. INTENTIONALLY OMITTED.

2.04 Reservations of Leasehold Rights. This Lease is subject to any and all exceptions, easements, rights, rights-of-way, and other matters of record affecting the Premises, structures or other improvements on the Premises, and land of which the Premises are a part, and such other matters as are apparent from an inspection of the Premises (including, but not limited to, existing easements, servitudes and right-of-ways for roads, telephone, and electric power lines and facilities, pipelines, and other purposes whether recorded or not). This Lease confers no rights either with regard to the subsurface of the water or land below the ground level of the Premises or with regard to airspace above the roof of the Premises. Easements for light and air are not granted in this Lease. Tenant shall have no rights in, the Municipal Wharf of Santa Cruz (the “Wharf”), or the Wharf decking, pilings, substructure, and support elements underlying or surrounding the Premises.

Landlord reserves and shall at all times have the right to make inspections, alterations, repairs, improvements, and/or additions to the Premises and the Wharf and all associated structures, including, but not limited to, areas and structures under and/or affecting the Premises; and, to conduct or perform any obligations or duties assigned or assumed to be the responsibility under this Lease or applicable law. Landlord also reserves the right to construct other buildings or improvements on the Wharf and to make alterations or additions thereto. Landlord further reserves the right to enter and access the roof of any buildings and/or structures on and/or comprising the Premises, or to repair and maintain the roof, and to use any space within the walls, above the ceiling finish, beneath the floor surface, and under the Premises for purposes including, but not limited to, inspections, utility lines and conduits, and/or Wharf operation and maintenance.

Tenant hereby waives any claims for damage against Landlord (including, but not limited to, those arising from loss of business) by reason of Landlord’s entry onto the Wharf and/or removal of all of any portion of any structure or building on the Wharf for the purposes of making repairs, alterations, improvements and/or additions. Except as otherwise expressly provided herein, when exercising the rights reserved under this Section, Landlord shall not unreasonably disturb or interfere with Tenant’s quiet enjoyment of the Premises.

2.05 Condition of Premises. Tenant agrees to lease the Premises in their “AS IS, WHERE IS, IN ITS CURRENT CONDITION, WITH ALL FAULTS” condition, subject to all

9.6

Rev. 12.15.2025
applicable city, county, state or federal laws, ordinances, and/or regulations affecting the use of the Premises.

Tenant acknowledges that Tenant has determined by Tenant’s own independent investigation that the Premises are suitable for Tenant’s intended use.

Tenant is responsible for determining whether or not the building codes, zoning, applicable laws, permits, certifications, permissions, approvals, authorizations, and covenants and/or restrictions of record ("Applicable Requirements") are appropriate for Tenant's intended use, and acknowledges that past uses of the Premises may no longer be allowed. Correction of any item of non-compliance with any Applicable Requirements shall be the obligation of Tenant at Tenant's sole cost and expense. Any work required by Tenant to prepare the Premises for Tenant’s occupancy shall be paid for by Tenant and shall be subject to all of the terms and conditions set forth in this Lease.

Tenant acknowledges that: (a) Tenant has been advised by Landlord to satisfy itself with respect to the condition of the Premises (including, but not limited to, the electrical, security, environmental aspects, and compliance with Applicable Requirements, including, but not limited to, the Americans with Disabilities Act), and their suitability for Tenant’s intended use; (b) Tenant has made (and will make) such investigation as Tenant deems necessary and Tenant assumes all responsibility for the investigation related to Tenant’s occupancy and use of the Premises; (c) Tenant acknowledges that Tenant has determined by Tenant’s own independent investigation that the Premises are suitable for Tenant’s intended use; and (d) neither Landlord, nor Landlord’s employees, officers, officials, representatives, or agents have made any oral or written representations or warranties (express or implied) as to the condition of the Wharf or Premises or as to the present or future suitability of the Wharf or Premises for the conduct of Tenant's business or any purposes whatsoever.

Tenant Initials: ___________________

2.06 Wharf Closure. Tenant acknowledges and understands that the Wharf may be subject to closure (either full or partial) due to conditions, events, or other public health, welfare, and safety reasons in Landlord’s sole discretion, including, but not limited to, ocean conditions (including, but not limited to, high surf), waterfront and/or weather related conditions, as well as Force Majeure events (as defined in Section 20.06 (Force Majeure)) (collectively “Closure Conditions”). Tenant enters into this Lease with full knowledge of the existing conditions of the Wharf and Closure Conditions, and with the understanding that at any point during the Lease Term (as defined in Article 3), Landlord may close the Wharf and/or Premises to public and Tenant access and use (including, but not limited to Tenant’s access and/or use) due to Closure Conditions, without any liability to Tenant by virtue of such closure and/or related actions.

Notwithstanding the forgoing, Landlord reserves the right to establish policies for Tenant relief and compensation but in no event shall Landlord be obligated to do so. During any such period of Wharf closure where Tenant is completely unable to access and use the Premises, Tenant shall not be liable to Landlord for damages for failure to operate pursuant to Section 4.90 (Damages For Failure To Operate).

2.07 Relocation of Premises. Landlord shall have the right, at Landlord’s sole discretion, during the term of this Lease and any extensions thereof, to relocate Tenant to other premises (“New Premises”) on the Wharf comparable to the Premises in accordance with the following:
(a) For the purposes of this Section “comparable” shall mean New Premises of reasonably similar size to the Premises to the extent that such alternate property is available or made available within the timeline described in Section 2.08(b). In the event that the New Premises varies in square footage, Rent shall be adjusted by the same square footage rate.

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(b) Except in a case of an emergency, such as the destruction of the Premises, Landlord shall give Tenant at least one hundred eighty (180) days’ notice of Landlord’s intention to relocate the Premises (“Notice of Intent to Relocate”) and at least ninety (90) days’ notice (“Relocation Notice”) of the estimated date of relocation (“Relocation Date”), and the location of the New Premises. Tenant shall have ten (10) days following the date of the Relocation Notice to accept in writing regarding the relocation to the New Premises. In the event that Tenant fails to so accept the New Premises within such ten-day period, this Lease shall be terminated ninety (90) days following the date of the Relocation Notice to Tenant and Tenant shall have ninety (90) days following the date of the Relocation Notice to vacate and surrender the current Premises.

Should Tenant accept the New Premises within such ten-day period, Tenant shall have ninety (90) days following the date of the Relocation Notice to complete the move to the New Premises.

Landlord shall provide Tenant access to the New Premises for the purpose of planning and constructing any Tenant Improvements (as defined below in Article 9) effective as of the date of the Relocation Notice, and Tenant shall not be required to pay Minimum Base Rent or Percentage Rent for the New Premises prior to the earlier of (a) the Relocation Date or (b) the date Tenant has relocated to the New Premises.
(c) Landlord shall not require Tenant to relocate during the period between May 15 through September 15 of each calendar year, except in a case of an emergency.

(d) Tenant shall be responsible for vacating the current Premises and relocating all of Tenant’s trade fixtures, furniture, equipment, inventory, and other personal property (collectively “Personal Property”) to the New Premises no later than the Relocation Date. Tenant shall submit to Landlord within sixty (60) days of Landlord’s issuance of the Notice of Intent to Relocate a schedule itemizing Tenant’s anticipated costs to relocate Tenant’s Personal Property.

Landlord shall review said schedule and provide to Tenant a moving allowance (“Moving Allowance”), the amount of which shall be determined by Landlord at Landlord’s sole discretion.

Such Moving Allowance shall cover the reasonable cost of relocating Tenant’s Personal Property to the New Premises, said payment to be made to Tenant following Landlord’s receipt of correct invoices for the expenses actually incurred by Tenant (in form satisfactory to Landlord), provided Tenant submits such invoices within sixty (60) days after completion of Tenant’s move to the New Premises. Landlord shall reimburse Tenant the lesser of (a) the approved Moving Allowance or (b) Tenant’s actual relocation costs within thirty (30) days of Landlord’s receipt of Tenant’s correct and substantiated invoices, not to exceed the specified Moving Allowance. (e) Tenant shall be responsible for installing Tenant Improvements at the New Premises equal in quality and function to those at the Premises, subject to the terms, conditions, and requirements of Article 9 (Tenant Improvements, Alterations, and Additions). Tenant shall obtain Landlord’s prior written approval, which shall not be unreasonably withheld, for any proposed Tenant Improvements, subject to the terms and conditions of Article 9 (Tenant Improvements, Alterations, and Additions). Tenant shall submit to Landlord within sixty (60) days of Landlord’s issuance of the Notice of Intent to Relocate a schedule itemizing Tenant’s anticipated costs to install the Tenant Improvements. Landlord shall review said schedule and provide Tenant an improvement allowance (“New Premises Improvement Allowance”), the amount of which shall be determined by Landlord in Landlord’s sole discretion. Such New Premises Improvement Allowance shall cover the reasonable cost of the approved Tenant Improvements, including costs to demolish, remove, or alter existing Tenant Improvements at the New Premises, and any required permits, said payment to be made to Tenant upon receipt of correct invoices (in form satisfactory to Landlord) for expenses actually incurred by Tenant, provided Tenant submits such invoices within sixty (60) days after completion of the move.

Landlord shall reimburse Tenant the lesser of (a) the approved New Premises Allowance or (b) Tenant’s actual costs to install the subject improvements within thirty (30) days of Landlord’s receipt of Tenant’s correct and substantiated invoices, not to exceed the specified New Premises Allowance.

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(f) If Tenant does not accept Landlord’s determination of the Moving Allowance and/or the New Premises Improvement Allowance, Tenant shall rescind Tenant’s acceptance of the New Premises and shall vacate and surrender the Premises no later than ninety (90) days following the date of the Relocation Notice to Tenant.
(g) Tenant shall be solely responsible for applying for and obtaining all building, planning, development, zoning and other permits, licenses, authorizations, permissions, certifications, dispensations and approvals required by local, regional, state, and/or federal regulatory authorities related to the work and/or Tenant Improvements. (h) Tenant shall be responsible for the transfer of all Utilities and Services (as defined in Article 11 below) to the New Premises.
(i) Tenant shall be solely responsible for all other costs of remodeling, outfitting and furnishing the New Premises. At no time shall Landlord be obligated for other out-of-pocket expenses over and above the Moving Allowance and the New Premises Improvement Allowance or for downtime incurred by the Tenant or Tenant’s employees, representatives, and agents in the event of a relocation. Except as set forth in this Section 2.08 (Relocation of Premises), Tenant hereby releases, indemnifies, and holds harmless Landlord (and its officials, officers, directors, employees, agents, attorneys, volunteers, representatives, successors and assigns) from any and all losses, claims, injuries, damages, costs, expenses, fines, penalties, or other liability, of every kind and nature, including, but not limited to, consequential damages, whether to persons or property, no matter how caused, resulting from or in any manner related to or incidental to the relocation of the Premises pursuant to this Section 2.08 (Relocation of Premises), and Tenant expressly waives any right to claim that such relocation constitutes grounds for a claim of abatement of rent, constructive eviction, or for termination of the Lease. (j) Landlord shall transfer Tenant’s contributions to the Premises’ Capital Improvement Fund to the New Premises’ Capital Improvement Fund. (k) Effective as of the Relocation Date, and notwithstanding any adjustments allowed under the Lease, Tenant’s Minimum Base Rent at the New Premises shall be determined by multiplying the Premise’s annual square foot rent in effect on the Relocation Date by the square footage of the New Premises. Minimum Base Rent for the New Premises shall be calculated in accordance with Article 4 (Rent).
(l) Pursuant to Section 20.32 (Amendments to Lease), Landlord and Tenant shall execute an amendment to this Lease acknowledging the relocation of the Premises to the New Premises and the terms and conditions thereof. Upon the effective date of the amendment, the term “Premises” in this Lease shall refer to the New Premises. (m) Landlord may only relocate Tenant to other premises once during the Initial Term and once during the Extended Term (both as defined in Article 3 [Term] below), if any, of this Lease. Landlord may exercise its right to substitute the Premises pursuant to this Section

2.08 (Relocation of Premises) during any subsequent extension or renewal of the Term.

ARTICLE 3 - TERM

3.01 Commencement of Term. The initial term of this Lease (the “Initial Term”) shall commence on the date specified in Section 1.02 (Commencement Date) and shall continue until the date of termination specified in Section 1.03 (Term), unless terminated sooner in accordance with the terms and provisions of this Lease.

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3.02 Extension of Term.
(a) If Tenant fully and faithfully performs all of the terms and conditions of this Lease and is not in default at any time during the Term of this Lease, Tenant may request an extension to the Initial Term by giving written notice (“Extension Request”) to Landlord at least one hundred twenty (120) days but not more than one hundred eighty (180) days before the expiration of the Initial Term. Landlord shall have the sole option to extend the Initial Term of this Lease for one (1) additional five (5) year period (the “Extended Term”) immediately following the expiration of the Initial Term, upon the same terms and provisions contained in this Lease except for the amount of the Minimum Base Rent, and/or Percentage Rent, which shall be adjusted as provided in Article 4 (Rent). The Initial Term and Extended Term are collectively referred to herein as the “Term.”
(b) If Tenant has failed to cure a default in accordance with Article 15 (Default) of this Lease, at any time during the Initial Term of this Lease, Tenant’s request to extend the Term of this Lease shall be totally ineffective and this Lease shall expire at the end of the Initial Term, unless otherwise terminated earlier in accordance with this Lease. (c) Landlord may (in its sole and absolute discretion and without any obligation to do so) elect to accept the Extension Request notwithstanding the default of Tenant (which acceptance shall not waive or otherwise relieve Tenant of its obligations to promptly correct such default(s) and fully comply with all terms and conditions of this Lease). (d) Tenant’s failure to timely give the Extension Request to Landlord shall constitute an election by Tenant not to request an extension. In that event, Tenant’s right to request an extension of the Term shall automatically and immediately terminate without notice and this Lease shall expire at the end of the Initial Term. Tenant shall have no other rights to extend the Term. (e) Any extension granted to Tenant in this Lease is personal to the original Tenant and cannot be assigned or exercised by anyone other than said original Tenant without Landlord’s prior written consent, which may be given or withheld in Landlord’s sole and absolute discretion, and only while the original Tenant is in full possession of the Premises and, if requested by Landlord, with Tenant certifying that Tenant has no intention of thereafter assigning or subletting.

3.03 Expiration; Holding Over.
(a) The Term will expire at 11:59 p.m. (PST) on the Expiration Date specified in Section 1.03 (Term), unless sooner terminated or otherwise extended as permitted under this Lease.
(b) If Tenant should remain in possession of the Premises after the expiration or earlier termination of the Term of this Lease in the absence of a new lease agreement, or after Landlord has declared a forfeiture of this Lease as a result of Tenant’s default, then such holding over shall be construed as a tenancy from month-to-month, subject to all of the terms, conditions, provisions and obligations of this Lease at the time this Lease expires or upon Tenant’s default, as the case may be, except the Minimum Base Rent, and/or the Percentage Rent shall be one and one half (1 ½ ) times the amount of such rent in effect immediately prior to Tenant’s holdover. Unless Tenant obtains the express written consent of Landlord to holding over, Landlord does not waive its right to pursue any legal or equitable remedy against Tenant with regard to Tenant’s continued possession of the Premises after the expiration of the Term of this Lease. Under a month-tomonth tenancy, Tenant may terminate this Lease by providing Landlord with written notice at least thirty (30) days prior to the intended termination date. Tenant shall be responsible for paying Rent through the termination date even if moving out early. Landlord may terminate the tenancy by giving notice to Tenant as required by law.

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3.04 Surrender of Premises.
(a) Surrender. On the expiration or earlier termination of this Lease, Tenant shall, at Tenant’s sole expense:
(i) surrender and vacate the Premises (including, but not limited to all Tenant Improvements) to Landlord in a clean, safe, sanitized, and in good order and condition, except for ordinary wear and tear; and,
(ii) abate and remove all of Tenant’s Personal Property in compliance with Applicable Requirements; and repair all damage caused by such removal subject to the provisions of Section 9.04 (Trade Fixtures), Section 9.05 (Design Standards), Section 9.07 (Restoration), Section 9.08 (Ownership of Improvements), and this Section; and, (iii) restore the Premises to the condition existing as of the first day of the Term or better, without removing approved Tenant Improvements, alterations or additions, reasonable wear and tear excepted, unless Landlord expressly requested their removal at Tenant’s sole cost and expense; and,
(iv) render the Premises safe and free from debris and hazards, and without any reduction in value resulting from any conduct in violation of this Lease; and (v) surrender all keys to the Premises to Landlord.

Tenant’s abatement and removal of its Personal Property on the Premises pursuant to this section shall be in compliance with all applicable Laws, permits, certifications, approvals, permissions, and authorizations.
(b) Landlord’s Property. Landlord may remove, store, and dispose of any items Tenant does not remove from the Premises as permitted or required under this Lease. (c) No Implied Acceptance of Surrender. Landlord's acceptance of Tenant's surrender of the Premises will be valid and binding only if it is in a writing signed by Landlord, and no act by Landlord will be deemed to be Landlord's acceptance of Tenant's surrender. (d) Indemnity. Tenant shall reimburse Landlord and indemnify and hold harmless Landlord, and Landlord’s officers, officials, employees, and agents against any and all damages that Landlord incurs from Tenant’s delay in vacating and/or surrendering the Premises, removing and abating Tenant’s Personal Property, and/or restoring the Premises. This indemnification and hold harmless provision extends to any and all damages, costs, and expenses incurred by Landlord as a result of Tenant’s breach of the covenants contained herein with respect to the condition of the Premises at the expiration or earlier termination of this Lease as provided in this Lease.
(e) Survival of Surrender Obligations. Tenant's obligations under this Section will survive the expiration or termination of this Lease.

3.05 Quit Claim Deed. At any time after the expiration or earlier termination of this Lease, Tenant shall execute, acknowledge and deliver to Landlord, within fifteen (15) days after receipt of written demand therefore, a good and sufficient deed whereby all right, title and interest of Tenant in and to the Premises, Tenant Improvements and other improvements are quitclaimed to Landlord. Should Tenant fail or refuse to deliver the required deed to Landlord, Landlord shall have the right to prepare and record a notice reciting the failure of Tenant to execute, acknowledge, and deliver such deed. Said notice shall be conclusive evidence of the termination of this Lease and of all right of Tenant in and to the Premises, any Tenant Improvements and other improvements.

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ARTICLE 4 - RENT

4.01 Rent. Beginning with the Commencement Date, Tenant shall pay to Landlord the greater of: a minimum base rent (“Minimum Base Rent”) as described in Section 1.05 (Rent) per month; or a percentage rent (“Percentage Rent”) in a sum equal to eight percent (8%) of Gross Sales (as defined in Section 4.07 [Gross Sales] below) calculated quarterly, up to and including the Breakpoint (as defined below), plus six percent (6%) of Gross Sales in excess of the Breakpoint.

As used in this Lease, the term “Breakpoint” means a monetary amount equal to twenty-five percent (25%) of the annual Gross Sales for the specified calendar year. For the Commencement Date and continuing through December 31, 2026, the Breakpoint, shall be calculated by determining the average Gross Sales for calendar years 2023, 2024, and 2025, and multiplying such annual Gross Sales average by twenty-five percent (25%).

Calendar Year Gross Sales
2023 $1,278,883.40
2024 $1,251,328.09
2025 $1,002,658.90
Total $3,532,870.39
Average per year $1,177,623.46
Breakpoint $365,063.27
The foregoing Minimum Base Rent and Percentage Rent shall be subject to increase during the Term as provided in Section 4.05 (Adjustments to Minimum Base Rent).

In addition to the Minimum Base Rent and Percentage Rent specified above, Tenant shall pay to Landlord any additional rent (“Additional Rent”) as defined in Section 4.10 below. “Rent” as used in this Agreement shall mean the applicable Minimum Base Rent, Percentage Rent, and Additional Rent.

4.02 Commencement of Rent.
(a) Tenant’s obligation to pay the Minimum Base Rent or Percentage Rent under this Lease shall start on the Commencement Date of the Term as set forth in Section 1.02 (Commencement Date). The greater of the Minimum Base Rent or Percentage Rent specified in Section 4.01 (Rent), subject to adjustment as set forth in Section 4.05 (Adjustments to Minimum Base Rent). Rent shall be remitted to Landlord at the address set forth in Section

1.13 (Landlord’s Address for Payment of Rent) or at such other location as Landlord may notify Tenant in writing.
(b) In the event that Tenant’s obligation to pay rent does not commence on the first (1st) day of a calendar month, Tenant shall pay Rent for the fractional month on a per-diem basis (calculated on the basis of a thirty (30) day month) for the first month.

4.03 Rent Payment Procedure. Rent shall be paid in lawful money of the United States and remitted to Landlord at the address listed in Section 1.13 (Landlord’s Address for Payment of Rent) or at such other location as Landlord may notify Tenant in writing. Rent for the preceding month shall be due and payable in full by Tenant fifteen (15) days after the month ending. Rent paid after fifteen (15) days after the month ending will be considered late and subject to a late

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charge and interest as set forth below. Each rent payment shall be paid without deduction, offset, prior notice or demand.

4.04 Percentage Rent/Monthly Statements of Gross Sales. In accordance with the rent payment schedule set forth in Section 4.03 (Rent Payment Procedure), Tenant shall furnish to Landlord a written Statement of Gross Income and Percentage Rent (the “Monthly Statement”) (Exhibit D), certified by Tenant under penalty of perjury to be true and correct, showing the total Gross Income and Percentage Rent and other rent due based upon the preceding month. Said statement shall be in a form substantially similar to that as set forth in Exhibit D (Statement of Gross Income and Percentage Rent) (attached hereto and made part hereof), which is subject to modification by Landlord. In addition, Tenant shall provide Landlord with copies of all state sales tax reports at the same time as they are provided to the State Board of Equalization and upon request by Landlord. Tenant acknowledges that Rent paid without being accompanied by the Monthly Statement will be considered late payment of Rent.

4.05 Adjustments to Minimum Base Rent.
(a) Adjustments to Base Rent. Commencing on each anniversary of the Commencement Date of the Lease, the Minimum Base Rent shall increase by two percent (2%). In no event shall the Minimum Base Rent for any given year be less than the Minimum Base Rent established for the immediately preceding year.
(b) Adjustments to Breakpoint.
(1) Commencing on January 1, 2027 and continuing through the end of the Initial Term and any Extended Term, the Breakpoint used in the Percentage Rent calculation shall be adjusted on an annual basis to an amount equal to twenty-five percent (25%) of all Gross Sales for the immediately preceding year. Within sixty (60) days after the close of each calendar year, or as soon thereafter as reasonably practicable, Landlord shall notify Tenant in writing of the Breakpoint to be used in the Percentage Rent calculation for the ensuring year. (c) Upon adjustment of the Minimum Base Rent, as provided for above, Landlord shall notify Tenant in writing. Failure of Landlord to so notice Tenant shall not relieve Tenant of responsibility to pay any increase in Minimum Base Rent and/or Percentage Rent.

4.06 Late Charges and Interest on Unpaid Rent; Maximum Legal Interest; NonSufficient Funds. (a) Tenant acknowledges that late payment by Tenant to Landlord of Rent, and/or failure to submit when due Monthly Statements, California state, local and district sales and use returns, and/or other reports, records or documentation set forth herein, will cause Landlord to incur costs not contemplated by this Lease, the exact amount of such costs being extremely difficult and impracticable to fix. Such costs include, without limitation, processing and accounting charges, and late charges that may be imposed on Landlord by the terms of any encumbrance and/or note secured by any encumbrance covering the Premises.

(b) Therefore, if any installment of Rent due from Tenant, Monthly Statement, sales and use return, and/or report, record, or documentation referenced herein which is due from Tenant is not received by Landlord when due, Tenant shall pay to Landlord an additional sum of ten percent (10%) of the overdue Rent as a late charge, and interest at the rate of one and one half percent (1½%) per month, or the maximum rate of interest allowed by law (whichever is less), on the unpaid balance of said Rent or sum until paid (or until such outstanding Monthly Statement, report or record is received by Landlord). The Parties agree that said late charges and interest represents a fair and reasonable estimate of the costs that Landlord will incur by reason of late payment (and/or late submittal of required documentation) by Tenant. The acceptance by

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Landlord of any late charge shall not constitute a waiver of Tenant's default with respect to the overdue amount, nor prevent Landlord from exercising any of the other rights and remedies available to Landlord under this Lease or as provided by law. (c) Additionally, if a check is returned for non-sufficient funds (“NSF”), Tenant shall pay to Landlord a $25 NSF fee. If any payment is returned for NSF or because Tenant stops payment, then Landlord may, in writing, require Tenant to pay future Rent in cash.

4.07 Gross Sales. The term "Gross Sales" as used in this Lease means all gross receipts of every kind and nature from sales and services from all business conducted by Tenant on, in, at, about, or from the Premises, whether upon credit or for cash, in every department operating on, in, at, about, or from the Premises, whether operated by Tenant or by any subtenant, representative, agent, or concessionaire, excepting therefrom any rebates or refunds to customers and clients and the amount of all sales or excise tax receipts collected from customers and clients and paid by Tenant to any government agency. Sales upon credit shall be included in the Gross Sales for the period in which the merchandise is delivered or service rendered to the customer or client, regardless of when payment is made.

4.08 Books and Records.
(a) Tenant shall keep full, complete and proper books, records, and accounts of its operations and daily Gross Sales for a period of four (4) years. Landlord and its employees, representatives and agents shall have the right, with twenty-four (24) hours prior notice, and anytime during the regular business hours, to examine and copy all of the books, records, and accounts of Tenant, including, but not limited to, any sales tax reports pertaining to the business of Tenant conducted on, in, at, about, or from the Premises, for the purpose of investigating and verifying the accuracy of any Monthly Statement and/or of Gross Sales.

(b) If Tenant fails to furnish any Monthly Statement or annual balance sheet and profit and loss statement when due, Landlord shall have the right, after giving Tenant five (5) days' written notice, to engage an auditor to examine Tenant's books, records, and accounts and verify the amount of Tenant's Gross Sales. Such auditor’s verification will be binding on Tenant, and Tenant shall promptly pay the cost of the examination, plus any Rent shown to be due. (c) In addition to engaging an auditor as provided in subsection (b), Landlord may also, once in any calendar year, cause an audit of Tenant's business to be made by an accountant of Landlord's selection. Tenant shall furnish any requested information necessary for the audit within thirty (30) days, unless otherwise approved by Landlord in writing. If the audit discloses an understatement by Tenant of three percent (3%) or more in Gross Sales for the period of any report, then Tenant shall immediately pay to Landlord the cost of such audit, as well as the additional Rent payable by Tenant to Landlord, plus interest and late charges; otherwise, the cost of such audit shall be paid by Landlord.
(d) Tenant shall provide Landlord, annually within ninety (90) days after the close of the business fiscal year for income tax purposes, Tenant's current annual balance sheet and profit and loss statement for Tenant's business on, in, at, about, or from the Premises, either certified under penalty of perjury by Tenant to be true and correct or accompanied by a report of Tenant's certified public accountant (“CPA”). Any Guarantor of this Lease shall, upon request but not more frequently than annually, provide Landlord its current balance sheet, either certified under penalty of perjury by Guarantor to be true and correct or accompanied by a report of Guarantor's CPA. Any annual balance sheet or profit and loss statement submitted by Tenant or Guarantor shall be used by Landlord only to verify and audit compliance with this Lease, including, but not limited to, verifying and auditing Gross Sales records.

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(e) Landlord agrees to maintain all business information obtained through Monthly Statements and/or audits as confidential, to the extent legally permitted and allowed under the California Public Records Act, with the exception of information required to bring or defend legal actions.
(f) Tenant agrees to use a cash collection system acceptable to Landlord to record sales. Landlord may, at its option, require Tenant to institute changes in said cash collection system.

4.09 Damages For Failure To Operate. LANDLORD DESIRES TO HAVE TENANT KEEP THE PREMISES FULLY OPERATIONAL. TENANT ACKNOWLEDGES AND

UNDERSTANDS THAT ITS FAILURE TO KEEP ITS BUSINESS OPEN AND OPERATIONAL

DURING THE TIMES SET FORTH ELSEWHERE IN THIS LEASE WITHOUT THE PRIOR

WRITTEN CONSENT OF LANDLORD WILL CAUSE LANDLORD TO INCUR LOSSES NOT

CONTEMPLATED BY THIS LEASE, THE EXACT AMOUNT OF SUCH LOSSES BEING EXTREMELY DIFFICULT AND IMPRACTICABLE TO FIX. THEREFORE, (A) IF TENANT FAILS

TO OPEN AND CONTINUOUSLY OPERATE ITS BUSINESS TO THE PUBLIC ON THE

COMMENCEMENT DATE, OR (B) THEREAFTER, IF TENANT FAILS TO CONTINUOUSLY

OPERATE ITS BUSINESS IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THIS

LEASE OR VACATES OR ABANDONS THE PREMISES PRIOR TO THE EXPIRATION OF THE

INITIAL TERM, OR ANY EXTENDED TERM, LANDLORD SHALL HAVE THE RIGHT, AT ITS OPTION, TO COLLECT AS LIQUIDATED DAMAGES AN AMOUNT EQUAL TO $162.61.00 FOR

EACH DAY WHICH TENANT FAILS TO SO OPERATE IN ORDER TO COMPENSATE

LANDLORD FOR THE LOSS OF PERCENTAGE RENT AND CUSTOMER TRAFFIC, AND ANY OTHER LOSSES. LANDLORD AND TENANT AGREE THAT SAID CHARGE REPRESENTS A

FAIR AND REASONABLE ESTIMATE OF THE COSTS THAT LANDLORD WILL INCUR BY

REASON OF SUCH ACTION BY TENANT AND THAT LANDLORD MAY (AT ITS OPTION AND

WITHOUT ANY OBLIGATION TO DO SO) DEDUCT SAID CHARGE FROM THE SECURITY DEPOSIT. THIS LIQUIDATED DAMAGES PROVISION SHALL NOT IN ANY WAY AFFECT OR LIMIT LANDLORD’S RIGHTS OR REMEDIES RESULTING FROM TENANT’S BREACH OF ANY OBLIGATION UNDER THIS LEASE. BY EXECUTING THIS LEASE, TENANT

ACKNOWLEDGES THAT IT HAS READ AND UNDERSTOOD THE ABOVE PROVISION

COVERING LIQUIDATED DAMAGES, AND THAT TENANT HAD THE OPPORTUNITY TO

CONSULT WITH LEGAL COUNSEL WHO EXPLAINED THE CONSEQUENCES OF THIS LIQUIDATED DAMAGES PROVISION AT THE TIME THIS LEASE WAS EXECUTED.

TENANT’S PAYMENT OF THE AMOUNTS NOTED ABOVE AS LIQUIDATED DAMAGES

HEREUNDER IS NOT INTENDED AS A FORFEITURE OR PENALTY WITHIN THE MEANING OF CALIFORNIA CIVIL CODE SECTIONS 3275 OR 3369, BUT IS INTENDED TO CONSTITUTE LIQUIDATED DAMAGES TO LANDLORD PURSUANT TO CIVIL CODE SECTION 1671.

Tenant Initials: ___________________

4.10 Additional Rent. All amounts which Tenant is required to pay pursuant to this Lease (other than Minimum Base Rent or Percentage Rent), together with any fine, penalty, interest and costs which may be added for nonpayment or late payment thereof, shall constitute additional rent (hereinafter referred to as “Additional Rent”). Additional Rent shall include but not be limited to payment for Operating Expenses, as defined in Section 6.01 (Operating Expenses), and utility charges as provided in for in Section 11.02 (Jointly Metered Utilities). Unless this Lease provides otherwise, Tenant shall pay all Additional Rent as described in Section 4.03 (Rent Payment Procedure) or by the due date noted in the notice to submit payment (whichever is sooner). If Tenant fails to pay when due any Additional Rent due under this Lease, then Landlord shall have the right, but not the obligation, to pay the same and shall have all of the rights, powers and remedies with respect thereto as are provided in this Lease or by law in the case of nonpayment of Minimum Base Rent or Percentage Rent.

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4.11 Capital Improvement Contributions.
(a) Commencing with the Commencement Date and continuing throughout the Term of this Lease (including, but not limited to any Extended Term), Tenant shall fund a capital improvement reserve fund (the “Capital Improvement Fund”) in accordance with the provisions of this Section for the cost of Permitted Capital Improvements (as defined below). (b) Tenant and Landlord agree and acknowledge that the purpose of the Capital Improvement Fund shall be to provide funds for the costs and expenses of additions, replacements, renovations, and/or significant upgrades of or to the improvements on the Premises, including, but not limited to, building exteriors and major building systems (such as HVAC, mechanical, electrical, plumbing, vertical transportation, security, communications, Wharf substructure and pilings, structural elements, roof, etc.) that significantly increase the capacity, efficiency, useful life and/or or economy of operation of the improvements or their major systems, as determined by Landlord (the “Permitted Capital Improvements”). Landlord’s determination as to whether an addition, replacement, renovation or upgrade is necessary and constitutes a Permitted Capital Improvement shall be binding upon Tenant and shall conclusively establish whether amounts may be disbursed from the Capital Improvement Fund. (c) Commencing with the Minimum Base Rent first due after the Commencement Date, Tenant shall make monthly deposits to the Capital Improvement Fund in an amount equal to one percent (1%) of Tenant’s total Gross Sales (as defined above) for the previous month. All interest and earnings on the Capital Improvement Fund shall be added to the Capital Improvement Fund, but shall not be treated as a credit against the Capital Improvement Fund deposits required to be made by Tenant pursuant to this Section 4.10 (Capital Improvement Contributions).

In the event, Tenant separately funds Permitted Capital Improvements that may be reimbursed by the Capital Improvement Fund, Landlord at its sole discretion may reimburse Tenant for the real cost of improvements or authorize a credit towards the Capital Improvement Fund payments. Reimbursements shall not exceed available Capital Improvement Funds; credits towards payment to the Capital Improvement Fund shall be established in writing signed by both Parties and shall not reduce the payment amount to less than one-half percent (0.5%) of Tenant’s total Gross Sales for any month nor exceed a cumulative total amount of $99,999 without prior City Council approval. Except in the event of an emergency or other sole source procurement eligible case, Tenant shall comply with City procurement rules and regulations, including, but not limited to, seeking a minimum of three (3) bids or proposals, for any work above $10,000 seeking reimbursement.
(d) The Capital Improvement Fund shall be held in an account established and administered by Landlord into which deposits shall be made by Tenant pursuant to this Section

4.11 (Capital Improvement Contributions).
(e) Disbursements shall be made from the Capital Improvement Fund only for costs which have been approved by Landlord in writing and which satisfy the requirements of this Section 4.11 (Capital Improvement Contributions). For the purpose of obtaining Landlord’s prior written approval of any Capital Improvement Fund disbursements, Tenant shall submit to Landlord on an annual calendar year basis a capital expenditure plan (the “Capital Expenditure Plan”) for the upcoming year which details the amount and purpose of anticipated Capital Improvement Fund expenditures for which Tenant requests Landlord’s approval (which approval shall not be unreasonably withheld). Any anticipated expenditure set forth in such Capital Expenditure Plan that is approved in writing by Landlord as an acceptable Capital Improvement Fund disbursement shall be considered pre-approved by Landlord (but only up to the amount of

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such expenditure approved by Landlord and set forth in the annual Capital Expenditure Plan) for the duration of the upcoming year. Tenant shall have the right during the course of each year to submit to Landlord for Landlord’s approval revisions to the then current Capital Expenditure Plan in effect for such year, or individual expenditures not noted on the previously submitted Capital Expenditure Plan. Prior to the disbursement of any amounts from the Capital Improvement Fund, Tenant shall furnish to Landlord applicable invoices, evidence of payment and other back-up materials reasonably acceptable to Landlord, documenting and substantiating costs incurred and the use of amounts from the Capital Improvement Fund.
(f) Notwithstanding any provision contained in this Lease that may be construed to the contrary, the Capital Improvement Fund shall not be used to fund any portion of the cost of periodic, recurring or ordinary expenditures, repairs or replacements (excepting repairs or replacement of Wharf substructure and/or pilings) that keep the Premises or its major systems in an ordinarily efficient operating condition, but that do not significantly add to their value or appreciably prolong their useful life. Permitted Capital Improvements must constitute capital replacements, improvements or equipment under generally accepted accounting principles consistently applied. Permitted Capital Improvements shall not include costs for any necessary repairs to remedy any broken or damaged improvements (including, but not limited to, Tenant Improvements), all of which costs and expenses shall be borne solely by Tenant. All specific purposes and costs for which Tenant desires to utilize amounts from the Capital Improvement Fund shall be subject to Landlord’s prior written approval, which approval shall not be unreasonably withheld.
(g) Notwithstanding any provision contained in this Lease that may be construed to the contrary, Landlord may in its discretion utilize and expend fifty percent (50%) of any Capital Improvement Fund contributions of Tenant that remain unspent in any calendar year for repairs or replacement of Wharf decking, substructure and pilings related to or supporting the Premises.

ARTICLE 5 – TAXES; ASSESSMENTS; AND LICENSES

5.01 Tenant to Pay Personal Property and Possessory Interest Taxes. (a) Tenant shall be solely responsible for and promptly pay before delinquency during the Term of this Lease, without abatement, deduction, or offset, any and all real property, possessory interest, and personal property taxes, general and special assessments, and other charges and fees of any description (including, without limitation, any increase caused by a change in the tax rate or by a change in assessed valuation) attributable, levied or assessed by any governmental agency or entity on or against the Premises, the improvements located (or to be located) on the Premises (including, but not limited to any Tenant Improvements), personal property located on, at, about or in the Premises or improvements located or to be located thereon (including, but not limited to any Tenant Improvements), and the leasehold estate created by this Lease. Tenant shall also be responsible for all other operating costs associated with the Premises and/or Tenant’s use of and/or operations at the Premises (as further described in Article 6 below). (b) Landlord hereby gives notice to Tenant, pursuant to California Revenue and Tax Code Section 107.6 that this Lease may create a possessory interest that is the subject of property taxes levied on such interest, the payment of which taxes shall be the sole obligation of Tenant.

Tenant shall advise (in writing) any sublessee or third party using the Premises of the requirements of Section 107.6.
(c) Any payments under this Section shall not reduce or offset Rent payments.

Landlord has no liability for such payments. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments by delivering to Landlord the official and original receipt evidencing the payment of any taxes, fees, assessments, and other charges required under this Article 5; or Tenant shall retain at its sole cost and expense for the Term of

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this Lease, a tax service to notify Landlord whether the taxes, assessments, and other charges have been paid by Tenant as required under this Article 5. If Tenant fails to timely pay any taxes, fees, charges, or assessments, as provided herein, Landlord shall have the right (without notice to Tenant), but not the obligation, to pay such taxes, fees, charges, and/or assessments on behalf of Tenant. In that event, Tenant shall promptly on written demand of Landlord reimburse Landlord for the full amount paid by Landlord in paying or discharging that tax, assessment, fee or other charge, together with a twenty percent (20%) overhead administrative fee and interest thereon at the then-maximum legal rate from the date of payment by Landlord until the date of repayment by Tenant.

5.02 Tenant Indemnification of Landlord for Taxes. Tenant shall indemnify, defend and hold Landlord (and Landlord’s officers, officials, employees, representatives, and agents) and Landlord's property, including, but not limited to, the Wharf, the Premises and any improvements (including, but not limited to, any Tenant Improvements) now or subsequently located on the Premises, harmless from any liability, loss, cost, or damage resulting from any taxes, fees, assessments, or other charges required by this Article 5 to be paid by Tenant and from all interest, penalties, and other sums imposed thereon and from any sales or other proceedings to enforce collection of any such taxes, assessments, or other charges.

5.03 Parking and Business Improvement Area Zone and Charges. Tenant shall pay before delinquency all taxes, assessments, fees, and other charges that are attributable, levied, assessed, charged or imposed upon businesses within any Parking and Business Improvement Area Zones that include the Santa Cruz Municipal Wharf, which may be established by the City of Santa Cruz. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments.

5.04 Title 12 Santa Cruz Municipal Code - Local Improvements. Tenant shall pay before delinquency its proportionate share of all taxes, assessments, fees, and other charges that are attributable, levied, and/or assessed against the building(s), other improvements, and land of which the Premises are part by any improvement and/or maintenance district that includes the Santa Cruz Municipal Wharf, which may be created under Title 12 Santa Cruz Municipal Code - Local Improvements as amended (Chapter 12:32.420, Resolutions NS-2233, 20190, and 20424) or any revised or successor ordinances or resolutions applicable thereto. On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments.

5.05. City of Santa Cruz Business License. A city business license is required concurrent or prior to execution of this Lease. Tenant agrees to provide proof of a current City of Santa Cruz Business Tax Certificate. Tenant may contact the City’s Finance Department at 831- 420-5050 for more information.

ARTICLE 6 - OPERATING EXPENSES

6.01 Operating Expenses. In addition to the Minimum Base Rent and Percentage Rent specified above, Tenant shall pay as Additional Rent, a pro rata amount of certain expenses (the “Operating Expenses”) incurred by Landlord in the operation and maintenance of the Premises.

These common Operating Expenses include, without limitation, general maintenance and repair of the fabric portion of the awnings, general maintenance and repair of exterior siding, exterior painting, periodic cleaning of the roof, and certain maintenance, repairs and replacement of the heating, ventilation and air conditioning systems. Upon request, on or before September 30th of each year, Landlord shall provide Tenant with an annual statement or recapitulation of all charges allocated to Tenant as Operating Expenses and Landlord reserves the right to seek payment thereof with prior notice to Tenant, of not less than thirty (30) days, for Tenant’s payment of such expenses.

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6.02 Tenant’s Pro Rata Share. Tenant’s pro rata share of Operating Expenses shall be determined as follows:

(a) Exterior Siding: Tenant shall be responsible for a pro rata share of the cost of maintenance and repair of all exterior siding based on the ratio of the square footage of the Premises to the total square footage of the building in which the Premises are located. (b) Awnings: Tenant shall be responsible for a pro rata share of the cost of maintenance (including, but not limited to, cleaning) and repair of the fabric portion of all exterior awnings based on the ratio of the linear feet of the awnings benefiting the Premises to the total linear feet of all awnings.
(c) Roof: Tenant shall be responsible for a pro rata share of the cost of the cleaning of the roof based on the ratio of the square footage of the Premises to the total square footage of the building in which the Premises are located. Said periodic cleaning shall include, without limitation, the removal of bird debris and excrement at such times as the Landlord deems necessary.
(d) HVAC: In the event that Landlord contracts with a service company pursuant to Section 10.01 (Landlord’s Maintenance Obligations), Tenant shall be responsible for the cost of the maintenance, repairs and replacement of the heating, ventilation and air conditioning systems (“HVAC”) of the Premises.

ARTICLE 7 - SECURITY DEPOSIT

7.01 Amount of Deposit. Concurrently with the Effective Date of this Lease or within a timeline approved by Landlord, Tenant shall deposit with Landlord the sum set forth in Section

1.08 herein (the “Security Deposit”) or an amount equal to two (2) months of the Minimum Base Rent, whichever is greater. This Security Deposit shall be held by Landlord, as partial security for the full and faithful performance by Tenant of all the terms, covenants and conditions of this Lease to be performed by Tenant. Landlord may commingle the Security Deposit and shall not be required to keep it separate from its general funds. Tenant shall not be entitled to any interest on such deposit.

Landlord may adjust the Security Deposit amount annually to account for increases in Minimum Base Rent. Such additional Security Deposit amounts shall be due within a timeline approved by Landlord. The Security Deposit shall not exceed the equivalent of two (2) months of the Minimum Base Rent.

7.02 Use of Security Deposit. If Tenant fails to abide by any of the terms, covenants and/or conditions of this Lease, or otherwise defaults with respect to the provisions of this Lease, then Landlord, at its option (and without any obligation to do so), may use any amount of the Security Deposit to compensate Landlord for any loss or damage sustained or suffered due to such failure by Tenant. The entire Security Deposit, or any portion thereof, may be applied by Landlord for the payment of overdue Rent or other sums due and payable to Landlord by Tenant hereunder. Tenant shall, upon the written demand of Landlord, immediately remit to Landlord a sufficient amount to restore the Security Deposit to the original sum deposited or two (2) months of the Minimum Base Rent, whichever is greater. Failure to do so within five (5) days after such demand, or a timeline approved by Landlord, shall constitute a material breach of this Lease.

7.03 Return of Security Deposit. If Tenant fully performs all of its duties and obligations under this Lease, complies with all of the terms, covenants and conditions of this Lease, and promptly pays when due all of the Rent herein provided and all other sums payable by Tenant under this Lease, Landlord will return to Tenant the remaining portion of the Security Deposit

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within thirty (30) days after the expiration or earlier termination of this Lease, Tenant’s vacation of the Premises, and Landlord’s receipt of possession of the Premises in accordance with the provisions of this Lease.

7.04 Increase of Security Deposit. If Tenant shall default under this Lease more than two (2) times in any twelve (12) month period, irrespective of whether or not such default is cured, then the Security Deposit shall, within ten (10) days after demand by Landlord, be increased by Tenant to an amount equal to the greater of: (i) two (2) times the amount specified in Section 7.01 (Amount of Deposit) above; or (iii) as may be otherwise reasonably required by Landlord.

7.05 Transfer of Security Deposit. Landlord may deliver the Security Deposit to Landlord’s assignee or successor in interest in the Premises, in the event that Landlord’s interest is sold, conveyed, transferred or assigned, and upon delivery. Landlord shall be discharged from any further liability with respect to repayment of the Security Deposit to Tenant.

7.06 Waiver. Tenant waives the provisions of California Civil Code section 1950.7 and any Laws, or any successor statute, or any other law, which is contrary to the terms of this Article

7. ARTICLE 8 - USE

8.01 Use of Premises.
(a) Tenant shall use the Premises under the trade name, and solely for the use specified in Section 1.01 (Tenant Trade Name), Section 1.06 (Use of Premises) and Section 1.07 (Hours of Operation) herein, subject to the terms and conditions contained in this Article 8 and in compliance with all Applicable Requirements, and governing permits, approvals, authorizations, and Laws (which shall include all applicable city, county, state, or federal laws, ordinances, and/or regulations) now existing or which shall exist.
(b) Tenant shall use the Premises solely for the purposes of operating, maintaining and managing for profit as described in Section 1.06 (Use of Premises). Tenant’s business shall be established and conducted throughout the Term in a clean, safe, and lawful manner. Tenant shall not change the use of the Premises without first obtaining the written consent of Landlord (which consent may be delayed or withheld in Landlord’s sole and absolute discretion). Tenant shall use its best efforts to operate its business on the Wharf and use the Premises for purposes permitted by this Article 8 in a manner that will maximize Gross Sales. (c) Tenant’s branding and business concepts shall be distinct from other businesses on the Wharf and approved by the City of Santa Cruz’s Economic Development and Housing Director, or City’s designee.
(d) At City’s request, Tenant shall provide an anticipated annual percentage increase in growth of Gross Sales goal during the Term (including, without limitation, any Extended Term) to Landlord, and at a minimum, shall consider the following recommendations to attain the annual goals:

1. Clearly identify a target market

2. Mixed media advertising campaign

3. Develop online presence and/or virtual sales

4. Consider pricing changes

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5. Consult with Small Business Development Center

6. Explore options to enhance curb appeal and customer experience (e) In the event Tenant sales decrease more than twenty-five percent (25%) over the prior three (3) year average, Tenant and Landlord shall, within forty-five (45) days of Landlord’s request, develop an action plan incorporating the recommendations outlined in Section

8.01(d) to increase growth of Gross Sales. Such plan shall be subject to Landlord approval.

Tenant shall implement this pre-approved action plan within one hundred eighty (180) days or within a timeline approved in writing by Landlord.
(f) Tenant shall at no time allow slot machines or any other gaming machines or arcade amusement machines (including, without limitation pinball, video, and other games of amusement), to be used, operated or kept within the Premises without the prior written consent of Landlord. Tenant shall not commit or suffer to be committed any waste upon the Premises or any nuisance or other act or thing which may disturb the quiet enjoyment of any other tenants or their customers on the Wharf.

8.02 Compliance with Laws; Permits. From and after the Effective Date of this Lease and throughout the entire Term of this Lease and operation of Tenant’s business, Tenant shall, at Tenant's sole cost and expense, observe, comply with and conform to all Laws, permits, approvals, certifications, permissions, authorizations and requirements (including, without limitation, those requiring capital improvements to the Premises and/or improvements thereon) of all Governmental Bodies (which for purposes of this Lease shall include, without limitation, federal, state, county, and/or municipal) and any board of fire underwriters (or other similar body now or hereafter constituted), relating to the Premises and/or the improvements located (or to be located) thereon, any activities on, at or in connection with the Premises and/or the improvements located (or to be located) thereon, and any use and/or occupancy of the Premises and/or the improvements located (or to be located) thereon (and including, but not limit to, any particular use or occupancy by Tenant).

Any use permitted by this Lease, as well as any construction, improvement, addition, alteration, or modification of the Premises or improvements located (or to be located) thereon, must be independently consistent with, and not in violation of, the provisions of the City of Santa Cruz Charter and Municipal Code, Applicable Requirements and Laws. Tenant is advised and understands that in addition to this Lease, Tenant may need to obtain permits, licenses, authorizations, certifications, permissions, approvals, and/or other dispensations from the City of Santa Cruz and/or other Governmental Bodies prior to engaging in the permitted uses, performing any work, performing any Tenant Improvement, and/or engaging in any other construction, improvement or modification of the Premises or improvements located (or to be located) thereon.

From and after the Effective Date and throughout the Term of this Lease, Tenant shall be responsible for obtaining and maintaining, at its own cost and expense, any and all licenses, permits, certifications, permissions, approvals, and/or other governmental authorizations required for Tenant’s occupancy and use of the Premises, any portion of the Premises, and any improvements located (or to be located) thereon, in the manner contemplated under this Lease, including, without limitation, those necessary for the construction and operation of any Tenant Improvements, and all related uses. Tenant shall promptly take all actions necessary to comply with all Laws, licenses, permits, certifications, permissions, approvals, and authorizations regulating the occupancy and/or use by Tenant of the Premises and improvements located (or to be located) thereon.

8.03 Prohibited Uses; No Illegal Purposes or Nuisance. Tenant shall not use, or permit the Premises (or any part thereof or any improvement located or to be located thereon) to be used, for any purpose other than the purpose for which the Premises are hereby leased. No use

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shall be made or permitted to be made of the Premises or any improvement located (or to be located) thereon, nor acts done, which will increase the existing rate of insurance upon the Premises, or cause a cancellation of any insurance policy covering the Premises or any part thereof. Tenant shall not sell or permit to be kept, used, stored or sold in, on, at or about the Premises (or any improvement located or to be located thereon) any article which may be prohibited by any policy of fire, casualty or liability insurance obtained by Landlord. Tenant shall, at its sole cost and expense, comply with any and all requirements regarding the use of the Premises (and any improvement located or to be located thereon) by any company that issues a policy of fire, casualty or public liability insurance to Landlord. If Tenant's use of the Premises results in any rate increase for the Premises, Tenant shall pay as Additional Rent within ten (10) days written notice, a sum equal to the additional premium caused by such rate increase.

Tenant shall not use or permit the Premises (or any improvement located or to be located thereon) or any portion of the Premises to be improved, altered, constructed, developed, used, or occupied in any manner or for any purpose that is in any way prohibited or in violation of any applicable Law or permit. Furthermore, Tenant shall not cause, maintain, commit, or permit the Premises (or any improvement located or to be located thereon) or any adjoining or underlying portion of the Wharf to be used in any way that constitutes waste or a nuisance (as now or hereafter defined by any statutory or decisional law applicable to the Premises or any part of the Premises), or that unreasonably annoys, disturbs or interferes with owners and/or occupants of, or causes damage to the balance of the Wharf or neighboring premises, properties, or improvements.

Tenant shall not conduct any auctions, liquidation or bankruptcy sales, “fire” sales or sidewalk sales on, about or near the Premises without Landlord’s prior written consent.

8.04 Operation of Business; Hours of Operation. During the Term of this Lease, including, but not limited to, any and all extensions thereto, Tenant shall utilize all of its usable space within the Premises in the ordinary course of business. Tenant shall conduct its business in the Premises during the usual and customary days and hours for such type of business, as set forth in Section 1.06 (Use of Premises) and Section 1.07 (Hours of Operation). Unless otherwise agreed by Landlord in writing, Tenant’s hours of operation shall be as specified in Section 1.07 (Hours of Operation) and shall in no event be less than such hours of operation, except in an emergency or Force Majeure event, or otherwise approved in writing by Landlord.

Tenant shall notify Landlord prior to any temporary closure of the business exceeding two (2) days, or any modification of ongoing operating hours. In the event Tenant desires to close the business for five (5) consecutive days, Tenant shall make a written request to Landlord at least fourteen (14) days prior to the start of the business closure, or immediately in the event of an emergency. In no event, shall Tenant close the business for five (5) consecutive days or more without Landlord’s prior written approval. Notwithstanding any other terms of this Lease, Tenant’s closure of the business shall not constitute a waiver or modification of any Rent due.

In the event that Tenant intends to terminate this Lease for any reason, or abandon the Premises, prior to the expiration of the Term of this Lease without the prior written consent of Landlord, Tenant shall immediately notify Landlord in writing of its intention to terminate or abandon. Except for the expiration of the Term of this Lease, Tenant agrees to keep the Premises open for business during regular business hours for a period of ninety (90) days following notice of termination or abandonment. During this ninety (90) day period, Tenant shall keep the Premises adequately stocked with merchandise and maintain sufficient personnel in order to conduct its business in accordance with sound business practices.

8.05 Storage; Office Space. Tenant may warehouse, store and stock within the Premises only such goods, wares and merchandise as Tenant intends to offer for retail sale on

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or about the Premises. This shall not preclude occasional emergency transfers of merchandise to any other store belonging to Tenant, if any, which is not located on the Wharf. Tenant shall use for office, clerical or other non-selling purposes only such limited space in the Premises as is, from time to time, reasonably required for Tenant’s business operation on the Premises.

Tenant shall not conduct any auctions, liquidation or bankruptcy sales, “fire” sales or sidewalk sales on, about or near the Premises without Landlord’s prior written consent.

8.06 Cooperative Retail Management. INTENTIONALLY OMITTED.

8.07 Hazardous or Toxic Materials/Indemnification of Landlord. (a) Tenant shall, at its sole cost and expense, comply with all Laws concerning environmental conditions, emissions, pollutants and controls. Tenant warrants and agrees that it will not introduce, disturb, release, discharge, use, maintain, generate, store, treat or dispose of any Hazardous Material (as defined below) on, in, at, about, from, or under the Premises (or any improvements located or to be located thereon) in violation of any applicable environmental Laws (including, but not limited to, those laws described below). Tenant further warrants and agrees that Tenant shall not cause, store, use or permit any Hazardous Material, including without limitation, asbestos or polychlorinated biphenyls, to be brought upon, kept or used on, in, at, about, from, or under the Premises (or the improvements located or to be located thereon) by Tenant, its officers, directors, employees, representatives, agents, volunteers, contractors, subcontractors, suppliers, invitees, customers, or others acting on Tenant’s behalf or under Tenant’s authority or control, without the prior written consent of Landlord (which consent may be withheld or delayed in Landlord’s sole discretion).
(b) Tenant shall indemnify, defend (with counsel reasonably satisfactory to Landlord) and hold harmless Landlord (and its officials, officers, directors, employees, volunteers, agents, representatives, independent contractors, successors, and assigns) from and against (a) any costs, actions, lawsuits, judgments, penalties, fines, liability, loss, damages, or claims as related to a Hazardous Materials contamination of the Premises (or the improvements located or to be located thereon) caused by Tenant, its officers, directors, employees, representatives, agents, volunteers, contractors, subcontractors, suppliers, invitees, customers, or others acting on Tenant’s behalf or under Tenant’s authority or control; and (b) any and all claims, actions, lawsuits, judgments, damages, penalties, fines, costs, expenses (including, but not limited to, reasonable attorneys’ fees), liabilities and/or losses, including, without limitation, diminution in value of the Premises (or the improvements located or to be located thereon), damages for the loss or restriction on use of rentable or usable space or of any amenity of the Premises (or the improvements located or to be located thereon), damages arising from any adverse impact on marketing of space on the Wharf, and sums paid in settlement of claims, attorneys’ fees, consultant fees and expert fees which arise during or after the Term as a result of or as related to (i) the presence in, on, under, at or about the Premises (or the improvements located or to be located thereon), or discharge in, on, at, under or from the Premises (or the improvements located or to be located thereon), of any Hazardous Materials generated and/or brought on or about the Premises (or the improvements located or to be located thereon) by Tenant (or its officers, directors, employees, agents, or anyone acting within Tenant’s authority or control); and/or (ii) Tenant’s failure to comply with any applicable environmental Laws (including, without limitation, those laws described below) applicable to the Premises (and/or the improvements located or to be located thereon). Without limiting the foregoing, if the presence of any Hazardous Material on the Premises (or the improvements located or to be located thereon) caused or permitted by Tenant results in any contamination of the Premises (or the improvements located or to be located thereon), Tenant shall promptly take all actions at its sole cost and expense as are necessary to return the Premises (and the improvements located or to be located thereon) to the condition existing prior to the introduction of any such Hazardous Material to the Premises; provided that Landlord’s approval of such action(s) shall first be obtained, which approval shall not be

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unreasonably withheld so long as such action(s) would not potentially have any material adverse long-term or short-term effect on the Premises (or the improvements located or to be located thereon).
(c) As used herein, the term “Hazardous Material” means any hazardous or toxic substance, material or waste which is or becomes regulated by any local governmental authority, the State of California or the United States Government. The term “Hazardous Material” shall include without limitation, any material or substance which is: (i) defined as a “hazardous waste,” “extremely hazardous waste” or “restricted hazardous waste” under Sections 25115, 25117 or 25122.7, or listed pursuant to Section 25140, of the California Health and Safety Code, Division 20, Chapter 6.5 (Hazardous Waste Control); (ii) defined as a “hazardous material” under Section 25501 of the California Health and Safety Code, Division 20, Chapter 6.95 (Hazardous Materials Release Response Plans and Inventory); (iii) defined as a “hazardous substance” under Section 25281 of the California Health and Safety Code, Division 20, Chapter

6.7 (Underground Storage of Hazardous Substances); (iv) petroleum; (v) asbestos; (vi) listed under Article 9 or defined as hazardous or extremely hazardous pursuant to Article 11 of Title 22 of the California Administrative Code, Division 4, Chapter 20; (vii) designated as a “hazardous substance” pursuant to Section 311 of the Federal Water Pollution Control Act (33 U.S.C. § 1317); (viii) defined as a “hazardous waste” pursuant to Section 1004 of the Federal Resource Conservation and Recovery Act, 42 U.S.C. § 6901 et seq. (42 U.S.C. § 6903); or (ix) defined as a “hazardous substance” pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. § 9601 et seq. (42 U.S.C. § 9601), and any amendments or successor statutes thereto.

8.08 Compliance with Governmental Regulations. Tenant shall, at its sole cost and expense, comply with all of the requirements of all local, state, and federal authorities now in force, or which may hereafter be in force, pertaining to the Premises and the Wharf. With regard to the use of the Premises, Tenant shall faithfully observe all local ordinances and state and federal statutes now in force or which may hereafter be in force.

8.09 Americans with Disabilities Act. Throughout the Term of the Lease, Tenant acknowledges and expressly accepts full responsibility and shall incur all costs and expenses (whether structural or non-structural in nature) for compliance with the requirements of the Americans with Disabilities Act (ADA) and any other Law regarding the accessibility of the Premises (and the improvements located or to be located thereon) by disabled individuals. Tenant agrees to release, indemnify, defend and hold harmless Landlord (and its officials, officers, directors, employees, agents, representatives, volunteers, contractors, successors and assigns) from and against any claim, loss, expense or liability arising from or related to Tenant’s failure to fully comply with all such Laws and/or this Section 8.08 (Americans with Disabilities Act).

If the Premises requires modifications to comply with the ADA or any other local, state or federal law or regulation regarding the accessibility of the Premises by disabled individuals, Tenant shall be fully responsible for the cost thereof, provided however, that if expenditures are required during the last six (6) months of this Lease, or Extended Term, and the cost thereof exceeds six (6) months the Minimum Base Rent, Tenant may instead terminate this Lease unless Landlord notifies Tenant, in writing, within ten (10) days after receipt of Tenant’s termination notice that Landlord has elected to pay the difference between the actual cost thereof and the amount equal to six (6) months the Minimum Base Rent. If Tenant elects termination, Tenant shall immediately cease the use of the Premises and deliver to Landlord written notice specifying a termination date at least ninety (90) days thereafter. Such termination date shall, however, in no event be earlier than the last day that Tenant could legally utilize the Premises without commencing such modifications. Termination of this Lease does not relieve Tenant of any duty to assume legal responsibility as stated below for any third-party claims related to compliance with the ADA.

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8.10 CASp Inspection. Landlord states that the Premises has been inspected by a Certified Access Specialist (CASp). Accordingly, pursuant to California Civil Code Section 1938, Landlord states that to the best of Landlord’s knowledge, there have been no modifications or alterations completed or commenced between the date of the inspection and the date of this Lease which have impacted the Premises’ compliance with construction-related accessibility standards. Landlord agrees to provide to Tenant, at least forty-eight (48) hours prior to execution of this Lease, a copy of a report prepared by the CASp and the Tenant shall sign a document agreeing to keep the information in the report confidential, except as necessary for the Tenant to complete repairs and corrections of violations of any construction-related accessibility standards that the Tenant agrees to make to the Premises. If the report is not provided to the Tenant at least 48 hours prior to execution of this Lease, the Tenant shall have the right to rescind this Lease, based upon the information contained in the report, for seventy-two (72) hours after execution of this Lease.

8.11 Green Business Program.
(a) Landlord requires that all Wharf tenants become a certified Green Business through the City of Santa Cruz Green Business Program. Green Businesses reduce carbon dioxide generation, conserve energy by using fluorescent lighting and Energy Star rated equipment, conserve water through the use of low-flow toilets and water flow restrictors, conserve natural resources by promoting public transit, biking and walking, reduce waste by recycling and composting and using materials with recycled content, and use less toxic products, all of which provide a safer and healthier environment for employees and visitors to the Wharf. (b) Tenant shall contact the City of Santa Cruz Green Business Program and schedule and complete a free Green Business Program Audit within six (6) months of the Commencement Date.
(c) Upon receiving the results of the Green Business Program Audit, and at Tenant’s sole discretion, Tenant may proceed to become a certified Green Business. (d) As an incentive to Tenant to become a certified Green Business, and only after receiving Landlord’s express written approval, Tenant may utilize up to twenty-five (25%) percent of Tenant’s contributions to the Capital Improvement Fund for improvements to the Premises specifically listed on the Certified Green Business Program Checklist. (e) Upon receipt from Tenant of documented proof of Tenant’s payment of costs for eligible Green Business improvements, and Tenant’s certification as a Green Business Program, Landlord, at Landlord’s sole and absolute discretion, will reimbursement Tenant or defer collection of Tenant’s required monthly Capital Improvement Fund contributions until the total amount deferred equals the amount of Tenant’s Green Business improvement costs, at which time Tenant shall resume making monthly Capital Improvement Fund contributions.

8.12 Use of Sidewalk Area. Tenant shall not in any way encumber, obstruct or impede the sidewalks and any ramps that may be present in front of the Premises.

Tenant shall at all times keep and maintain said sidewalks in good condition and repair, free and clear of all obstacles, stands (including, but not limited to, any hostess or sales stands), dirt, mud, water, debris, rubbish, filth, and other encumbrances or obstructions, and safe and convenient for the use of the public, unless otherwise approved by the Landlord in writing.

ARTICLE 9 - IMPROVEMENTS, ALTERATIONS, AND ADDITIONS

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For the purpose of this Lease, “Tenant Improvements” shall mean any fixtures, furnishings, equipment, or modifications to the Premises installed or caused to be installed by Tenant or otherwise not present on the Premises prior to Tenant’s occupancy.

9.01 Tenant Improvements
Prior to the end of the Initial Term, and as a requirement to obtain Landlord’s approval of the Extended Term, Tenant shall make Tenant Improvements, as defined above, with Landlord’s prior written consent (which consent may be withheld or delayed in Landlord’s sole and absolute discretion) in an amount equal to at least $25,000. Tenant shall be required to construct Tenant Improvements at the Premises in accordance with the following:
(a) No later than thirty (30) days following the expiration of the Tenant Improvement Period, Tenant shall submit to Landlord an accounting of all expenses paid by Tenant for any Tenant Improvements at the Premises. Such accounting shall include copies of paid receipts, paid invoices, and other documentation as determined by Landlord to be sufficient to validate Tenant’s aggregate costs for the Tenant Improvements. (b) In the event that Tenant cannot document its expenditures for the Extended Term Tenant Improvements in the amount required herein, Tenant shall, immediately upon demand from Landlord, pay to Landlord any underage as determined by Landlord. (c) If Tenant desires to construct Tenant Improvements during the Initial Term of this Agreement, Tenant may do so provided that Tenant obtain Landlord’s prior written consent pursuant to Section 9.02 (Consent) of this Agreement.
(d) Tenant shall be solely responsible for applying for and obtaining all building, zoning or other permits required by local or state regulatory authorities related to any Tenant Improvements.

9.02 Consent. Tenant shall not make any improvements, alterations, additions, or repairs to the exterior of the Premises without Landlord’s prior written consent (which consent may be withheld or delayed in Landlord’s sole and absolute discretion). Tenant shall not make any improvements, alterations or additions to the interior of the Premises which cost in excess of fifteen thousand dollars ($15,000), or the equivalent current dollar value at Landlord’s sole discretion, at the time work is proposed, without Landlord’s prior written consent (which consent may be withheld or delayed in Landlord’s sole and absolute discretion). All improvements, alterations, additions, or repairs shall be in conformity with the laws, directives, rules, permits, or regulations of all applicable public and governmental agencies, as well as the terms and conditions of this Lease, including, but not limited to, the provisions of this Article 9. Any improvements, alterations, additions, or repairs shall be made at Tenant’s sole costs and expense. Landlord shall also own any improvements constructed by Tenant or Landlord on the Premises.

9.03 Notices; Liens. At least fifteen (15) days prior to commencing any work relating to any improvements, alterations, additions, or repairs approved by Landlord, Tenant shall notify Landlord and Wharf Supervisor in writing of the expected commencement date and completion date for the work. Landlord shall have the right thereafter to post and maintain on the Premises such notices (including, but not limited to, notices of Landlord’s non-responsibility) as Landlord deems necessary to protect Landlord and the Premises from mechanics’ liens, materialmen’s liens and/or any other liens or encumbrances. Tenant shall pay, when due, all claims for labor and materials furnished to or for Tenant for use in repairing or improving the Premises. Tenant shall not permit any mechanics’ or materialmen’s liens to be levied against the Premises arising

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out of work performed, materials furnished or obligations to have been performed on the Premises by or at the request of Tenant. Tenant hereby indemnifies and holds Landlord harmless against loss, damage, attorneys’ fees and all other expenses on account of claims of lien of laborers or materialmen or others for work performed or materials or supplies furnished to Tenant or persons claiming under it.

In the event of an emergency, Tenant may promptly commence repairs to the Premises, but shall provide written notice to Landlord as soon as practical.

At all times during the Term of this Lease, Tenant shall keep the Premises and all improvements now or hereafter located on the Premises (including, but not limited to, any Tenant Improvements) free and clear of all liens and claims of liens for labor, services, materials, supplies, and/or equipment performed on or furnished to the Premises. Tenant shall not suffer or permit any mechanics’ or materialmen’s lien, attachment, execution or similar liens or stop notices to attach to, or to be filed or levied against the Premises (including, but not limited to, the equipment or improvements located thereon) or against Landlord’s interest therein. Subject to the provisions of Section 9.03 (Contesting Liens) below, if any such liens, stop notices, or similar proceedings are filed or commenced, Tenant shall, within twenty (20) days after notice of the filing, cause the same to be discharged of record by payment, deposit, order of court or by bonding. Subject to the provisions of Section 9.03 (Contesting Liens) below, should Tenant fail to pay and discharge or cause the Premises (and improvements now or hereafter located on the Premises) to be released from any such lien or claim of lien within twenty (20) days after notice of the filing of such lien or claim, Landlord shall have, in addition to all other remedies provided under this Lease and/or applicable Law, the right (but not the obligation) to cause the same to be released by such means as Landlord shall deem proper (including, but not limited to, paying, adjusting, compromising, and/or discharging any such lien or claim on any terms and in any manner that Landlord may deem appropriate on behalf of the Tenant) and charge Tenant the costs incurred by Landlord as Additional Rent. In that event, Tenant shall, on or before the first day of the next calendar month following any such payment by Landlord, reimburse Landlord for the full amount paid by Landlord in paying, adjusting, compromising, and/or discharging that lien or claim of lien, including, but not limited to, any attorneys' fees or other costs expended by Landlord, together with interest at the then-maximum legal rate from the date of payment by Landlord to the date of repayment by Tenant.

Tenant shall indemnify, hold harmless, and defend (with counsel reasonably satisfactory to Landlord) Landlord (and Landlord’s officers, employees, representatives, and agents) from and against any and all liens and encumbrances arising out of any work performed or materials furnished by or at the direction of Tenant, as well as any loss, damage, attorneys’ fees and all other costs and expenses on account of claims of lien of laborers or materialmen or others for work performed or materials or supplies furnished to Tenant or persons claiming under Tenant.

Nothing in this Lease shall be deemed or construed in any way as giving Tenant any right, power or authority to contract for or permit, on Landlord’s behalf or as to Landlord’s interest, the rendering of any services or the furnishing of any materials.

9.04 Contesting Liens. If Tenant desires to contest any lien of the nature set forth above, it shall notify Landlord of its intention to do so within ten (10) days after the filing of such lien, and Tenant shall furnish the bond required in California Civil Code § 8424 (or any comparable statute hereafter enacted) or otherwise cause such lien to be removed within twenty (20) days after it has been recorded against the Premises. Within five (5) days after the final determination of the validity thereof, Tenant shall satisfy and discharge such lien and the amount owed to the extent held valid, and all penalties, interest and cost in connection therewith, as the case may be.

In the event of any such contest, Tenant shall indemnify, defend, and protect Landlord (and Landlord’s officers, employees, representatives, and agents) and the Premises (and improvements located or to be located thereon) against all loss, cost, expense and damage

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(including, but not limited to, attorney’s fees and costs) resulting therefrom. If Tenant fails to comply with foregoing provisions, Landlord may (but is not obligated to) do so on behalf of Tenant and charge the Tenant the costs incurred by Landlord as Additional Rent.

9.05 Trade Fixtures. Tenant may install trade fixtures, display items, machinery or other trade equipment in conformance with this Article 9 and all laws, ordinances, directives, rules, permits, or regulations of all applicable public and governmental agencies. With the exception of furniture, equipment and trade fixtures that may be removed by Tenant without causing damage to the Premises, all improvements, alterations, repairs, or additions shall become part of the realty and belong to Landlord at expiration or earlier termination of this Lease. Tenant shall not remove any trade fixtures, display items, machinery or other trade equipment from the Premises, without Landlord’s prior written consent, if the removal of any such item would cause damage to the Premises and, in the absence of Landlord’s written consent to removal, any such item shall be deemed a part of the realty and belong to Landlord at expiration or earlier termination of the Lease.

9.06 Design Standards.
(a) No structure or other improvement of any kind (including, but not limited to, any Tenant Improvements) shall be constructed on the Premises unless and until the construction documents (including, but not limited to, the plans, specifications, drawings, and related documents [collectively “Construction Documents”]) and proposed location of that structure and/or improvement have been approved in writing by Landlord. The Construction Documents prepared for the Tenant Improvements by Tenant shall comply with all applicable goals, policies, and guidelines contained in the 2024 Santa Cruz Wharf Master Plan and Engineering Report (as such may be amended), particularly the 2024 Santa Cruz Wharf Master Plan and Engineering Report Design Standards (the “Design Standards”), all of which are incorporated herein and made part hereof by reference. No structure or other improvement of any kind (including, but not limited to, the any Tenant Improvements) shall be constructed on the Premises that does not comply with the Construction Documents (including, but not limited to, the plans and specifications) approved in writing by Landlord. (b) After approval by Landlord of the Construction Documents pertaining to any Tenant Improvements, any substantial change in the Construction Documents must be approved in writing by Landlord. For purposes of this Section, "substantial change" means a change that (i) materially alters the exterior appearance of the subject Tenant Improvements, (ii) substantially alters the approved design intent, or a (iii) results in a decrease or increase in construction costs of $15,000 or more. Minor changes in work or materials not constituting a substantial change need not be approved by Landlord, but a copy of the altered plans and specifications reflecting those changes must be promptly given to Landlord. (c) Tenant shall accomplish any and all repair, construction, addition, improvement, and/or alteration in, on, at, about, from, or under the Premises expeditiously, diligently, and with due care.
(d) Contractor Requirements.
(1) All work required in the construction of any Tenant Improvements, including, but not limited to, any site preparation work, landscaping work, and/or utility installation work, as well as actual construction work on the Tenant Improvements, shall be performed only by competent contractors licensed and registered under the laws of the State of California and shall be performed in accordance with written contracts with those contractors. Each such contract shall comply with California prompt payment laws (including, but not limited to California Public Contract Code section 7201) and provide that the final payment under the contract due to

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the contractor shall be in an amount equaling at least five percent (5%) of the full amount payable under the contract and shall not be paid to contractor until whichever of the following last occurs:
(a) The expiration of thirty-five (35) days from the date of recording by Tenant of a Notice of Completion of the Tenant Improvements, Tenant agreeing to record that Notice of Completion promptly within the time specified by law for the recording of that notice; or (b) The settlement and discharge of all liens of record claimed by persons who supplied any labor and/or materials for the construction of the Tenant Improvements.
(2) If Tenant engages or uses an independent contractor for the subject work, Tenant shall furnish to Landlord for Landlord’s approval, a true and correct copy of Tenant’s proposed contract with the general contractor for the Tenant Improvements, along with evidence of the general contractor’s financial condition. The contract shall grant Tenant the right to assign and Landlord the right (but not the obligation) to assume Tenant’s obligations and rights under that contract if Tenant defaults (with such assignment becoming effective only upon and to the extent of Landlord’s acceptance of such assignment(s) in writing). Landlord may disapprove such contract by notice given within thirty (30) days following Landlord’s receipt of the copy of the proposed contract and evidence specified above. The notice shall specify the grounds for disapproval. Landlord shall not unreasonably disapprove and shall be considered to have approved in the absence of notice of disapproval given within thirty (30) days after Landlord receives the contract and evidence specified above.
(3) Prior to entering into a contract with Tenant for such work and/or services, each contractor engaged by Tenant to perform any work or services for construction of the authorized and approved Tenant Improvements that costs over $25,000, including, but not limited to, any construction, site preparation, utility installation, or landscaping services, shall furnish to Tenant, who shall promptly deliver copies of both of the following to Landlord:
(A) A faithful performance bond issued by a corporate
surety authorized to issue surety insurance in California, in an amount equal to one hundred percent (100%) of the contract price payable under the contract securing the faithful performance by the contractor of its contract with Tenant, and in form and content acceptable to Landlord; and (B) A labor and materials payment bond issued by a
corporate surety authorized to issue surety insurance in California, in an amount equal to one hundred percent (100%) of the contract price payable under the contract securing the payment of all claims for the performance of labor or services on, or the furnishing of materials for, the performance of the contract and in form and content acceptable to Landlord.

The labor and materials payment bond and faithful performance bond referenced above shall be issued by an insurance organization or surety (1) currently authorized by the Insurance Commissioner to transact business of insurance in the State of California; (2) listed as an acceptable surety in the latest revision of the Federal Register Circular 570; and (3) assigned a Policyholders’ Rating A- (or higher) and Financial Size Category Class VII (or larger) in accordance with the latest edition of Best’s Key Rating Guide: Property-Casualty. (e) Tenant shall take all reasonably necessary measures to minimize any damage, disruption or inconvenience caused by such work and make adequate provision for the safety and convenience of all persons affected thereby. Dust, noise and other effects of such work shall be controlled by Tenant using methods customarily utilized in order to control deleterious effects associated with construction.
(f) All improvements, alterations, additions, or repairs (including, but not limited to, any Tenant Improvements) shall be constructed and maintained in a good and workmanlike manner, in accordance with the generally accepted practices, and to the standards

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of, any engaged contractor’s profession, using only new materials of good quality and which are equal to or exceeding that of the original equipment or improvement, and in compliance with all Applicable Requirements, Laws, and permits, licenses, certifications, variances, authorizations, permissions, and other regulatory approvals, including but not limited to the City’s Coastal Development Permit conditions for the Wharf Maintenance Program (Th16a – Application Number: 3-18-1081).

(g) Tenant shall have the sole responsibility for obtaining all necessary permits, licenses, certifications, authorizations, and other approvals for the Tenant Improvements and shall make application for such permits, licenses, certifications, variances, authorizations, and other approvals directly to the person or governmental agency having jurisdiction. Tenant shall notify Landlord in writing at least thirty (30) days prior to submitting application(s) to any governmental regulatory agency for any development, construction or building permit or license pertaining to the Premises or the Tenant Improvements. Tenant shall provide Landlord with a copy of all application(s) within five (5) days of making said application(s), along with copies of all documentation (including, but not limited to, plans and specifications) submitted as part of the application(s). Tenant shall also provide Landlord, within ten (10) days of Tenant’s receipt, a copy of all permits, licenses, variances, certifications, authorizations, or other approvals subsequently issued.
(h) Tenant shall pay all Landlord’s costs incurred in connection with review and approval of any Tenant Improvement. Landlord shall bear no cost for their review or processing of any Tenant Improvement.
(i) All construction work shall comply with and conform to the City’s Construction Work Best Management Practices and Regulations, a copy of which is attached hereto as Exhibit E and incorporated herein.
(j) It shall be the obligation of Tenant (and any contractor and/or subcontractor under Tenant) to comply with and conform to all applicable State of California labor laws, rules and regulations (including, but not limited, prevailing wage laws and requirements as further detailed below), and the Parties agree that Tenant shall be liable for any violation thereof. (k) With respect to Tenant Improvements involving structural changes or expenditures in excess of $15,000, or equivalent current dollar value at Landlord’s sole discretion, at the time work is proposed, Tenant shall submit to Landlord evidence that Tenant has sufficient cash on-hand to build Tenant Improvements in accordance with the approved Construction Documents (defined above) and working drawings. (l) Tenant shall make, at its sole cost and expense, improvements, alterations, repairs, or additions in and to Tenant Improvements and structures on the Premises that may be required by any Applicable Requirement and/or Laws (including, but not limited to, the ADA) from time to time.
(m) The construction of any Tenant Improvements involving structural changes (if any are proposed by Tenant and allowed by Landlord) shall strictly conform to the requirements and terms of this provision.
(1) Tenant shall submit an executed construction contract or contracts, in a form and content reasonably acceptable to Landlord, with competent and financiallyresponsible contractors for construction in accordance with the Construction Documents and working drawings approved by Landlord.

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(2) Tenant will commence construction within sixty (60) days of approval by Landlord of the construction contract(s) and Tenant shall continuously and diligently pursue construction to completion by a date approved by the Landlord. Provided, however, the commencement and completion dates may be extended pursuant to subsection (m)(3) below. All construction will be substantially in accordance with the plans and specifications, including but not limited to the Construction Documents and working drawings, previously approved in writing by Landlord, subject to changes thereto as may be approved in writing by Landlord, in Landlord’s sole discretion. Said plans and specifications, and any approved changes thereto, are by this reference made a part of this Lease. In the event of any inconsistency between the Construction Documents (including, but not limited to, the plans and specifications) and the terms and conditions of this Lease, the terms and conditions of this Lease shall prevail. (3) The time(s) during which Tenant’s construction is delayed by Force Majeure Events (as defined in Section 20.06 [Force Majeure] below), shall be added to the times for the commencement and completion of the construction established above on a day-for-day basis. Any extension due to excused delay shall not commence until such time as Tenant notifies Landlord in writing of such delay.
(n) If requested by Landlord, Tenant shall furnish Landlord a completion bond as described below promptly following Landlord’s demand therefor. The bond shall be issued by a corporate surety authorized to issue surety insurance in California, in an amount equal to one hundred percent (100%) of the estimated costs of construction of the Tenant Improvements, securing completion of the proposed construction of the Tenant Improvements and in form and content acceptable to Landlord. Landlord may, but shall not unreasonably, disapprove the completion bond. The completion bond shall be deemed approved unless notice of disapproval is given within fifteen (15) working days after receipt of the proposed bond. (o) Tenant shall indemnify, defend (with counsel reasonably satisfactory to Landlord), and hold harmless Landlord its officials, officers, directors, employees, agents, representatives, contractors, volunteers, successors and assigns from and against any damage, claims, cost, expense or liability as a result of or as related to the Tenant Improvements, including, without limitation, any and all expenses such as consultant, architect, contractor fees and attorney’s fees related to reviewing and approving the Construction Documents (including, but not limited to, the plans) or removing any Tenant Improvements upon termination or expiration of this Lease. This Article 9 shall not expand or restrict the indemnity obligations of the Parties under Article 12 (Indemnification, Insurance) below.
(p) With the exception of furniture, equipment and trade fixtures that may be removed by Tenant as provided in Section 9.04 (Trade Fixtures) above, the Tenant Improvements shall be surrendered with and remain on the Premises upon expiration or earlier termination of this Lease, subject to Landlord’s right to require their removal by Tenant within sixty (60) days after the termination or expiration of this Lease. (q) Tenant shall, at the expiration or earlier termination of this Lease, remove the Tenant’s Personal Property and the trade fixtures that are removable as provided in Section 9.04 (Trade Fixtures), whether or not bolted or otherwise attached to the Premises, and shall repair all resultant damage or injury to the Premises. (r) Notwithstanding any other provision of this Lease that may be construed to the contrary, the Parties agree that upon expiration or earlier termination of this Lease, Landlord shall have no liability or obligation to pay compensation for any improvements made to the Premises.

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9.07 Signs and Advertising Matter.
(a) Tenant will not place, install, maintain or construct or allow any third party to place, install, maintain or construct any sign, banner, flag, awning or canopy, covering, or advertising matter on the roof, or on any exterior door, wall or windows of the Premises without Landlord’s prior written consent, which shall not be unreasonably withheld. Tenant further agrees to maintain such sign, awning, canopy, decoration, lettering, advertising matter or window coverings in good condition and repair at all times. Tenant shall not display or sell any merchandise or allow carts, portable signs, devices, vending machines or other objects to be stored or remain on the sidewalk or elsewhere outside of the defined exterior of the Premises without the prior written consent of Landlord.
(b) No advertising medium shall be used or allowed to be used by Tenant which can be heard or experienced outside the Premises, including without limitation, flashing lights, searchlights, loudspeakers, phonographs, radios or television. Except with Landlord’s prior written consent, Tenant shall not display, paint or place, or cause to be displayed, painted or placed, any handbills, bumper stickers or other advertising devices on any vehicle parked in the parking area of the Wharf, including, but not limited to, those belonging to Tenant, or to Tenant’s agent or any other person; nor shall Tenant distribute or cause to be distributed on the Wharf any handbills or other advertising devices.
(c) Tenant agrees, at Tenant’s sole cost and expense, to construct and install signs as may be required or allowed by Landlord in strict conformance with the Municipal Wharf Sign Guidelines (“Sign Guidelines”) attached hereto as Exhibit F and the Design Standards made part hereof by reference. Tenant’s signs shall not be installed without the written consent of Landlord. Tenant, at its sole cost and expense, shall obtain all necessary permits, licenses, variances, certifications, authorizations, and other approvals before installing, erecting or constructing any such sign. Signs shall be installed prior to the commencement of Tenant’s business and thereafter shall be maintained by Tenant at Tenant’s sole cost and expense. If Tenant fails to maintain any such sign(s), Landlord shall have the right (but not the obligation) to maintain any such sign(s) and Tenant shall reimburse Landlord for such cost, plus a twenty percent (20%) administrative overhead fee. If Tenant installs a sign without Landlord’s prior written consent, or said sign does not conform to Landlord’s Sign Guidelines, Landlord shall have the right, at its sole and absolute discretion, to remove and store Tenant’s sign at Tenant’s sole cost and expense. The removal and storage costs and expenses shall bear interest at the rate of one and one half percent (1 1/2%) per month until paid, or at the maximum rate allowed by law, whichever is less.
(d) Landlord reserves the right to revise the Sign Guidelines and the Design Standards for any reason, at any time, including without limitation changes in any governmental requirement or Landlord’s renovation of the Wharf. Within sixty (60) days of Landlord’s request, Tenant shall remove Tenant’s existing sign, patch and repair the underlying attachment surface, and install a new sign, at Tenant’s sole cost and expense, in accordance with Landlord’s then existing Sign Guidelines and Design Standards.

9.08 Restoration. Except as otherwise provided herein, upon expiration or earlier termination of this Lease, Tenant shall return the Premises to the same condition as existed at the date of execution of the Lease, except as the Premises were repaired, rebuilt, restored, altered, and/or added to as permitted or required by the provisions of this Lease, reasonable wear and tear excepted. Landlord, at Landlord’s sole discretion and authority, and upon receipt of written request from Tenant, may consider allowing any Tenant Improvements approved by Landlord under this Lease to remain. In addition, Landlord, at its election, may also require Tenant to remove, at Tenant’s sole cost and expense, any improvements, alterations or additions

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approved by Landlord in accordance with this Lease. Tenant shall repair, at its sole cost and expense, any damage resulting from the removal of any improvements, alterations, additions, equipment, machinery or trade fixtures.

9.09 Ownership of Improvements.
(a) Any improvements existing on the Premises at the Effective Date of this Lease and/or the Commencement Date shall remain Landlord’s property. Landlord shall also own any improvements constructed on the Premises by Tenant or Landlord. (b) Landlord owns the Wharf and the pilings, substructure, and decking under the Premises, as well as the Premises.
(c) Upon expiration or earlier termination of this Lease from any cause, all improvements on the Premises, including but not limited to any Tenant Improvements, Landlord elects to retain, shall automatically and without any act of Landlord, Tenant, or any third party, become Landlord’s property and Tenant, upon Landlord’s demand, shall execute a quit claim deed whereby all right, title and interest of Tenant in and to the Premises (including, but not limited to, the Tenant Improvements) is quitclaimed to Landlord. Said improvements on the Premises shall be free and clear of all liens and encumbrances upon expiration or earlier termination of this Lease.
(d) Subject to Landlord’s right to require removal of fixtures and improvements as provided in this Article 9, all permanent improvements and fixtures on the Premises at the expiration or earlier termination of this Lease shall, without compensation to Tenant, automatically and without any act of Tenant or any third party become Landlord's property. Tenant shall surrender the Premises and all improvements constructed thereon to Landlord at the expiration or earlier termination of this Lease, free and clear of all liens, encumbrances, and third party claims. Tenant shall indemnify, defend and hold harmless Landlord against all liability and loss arising from such liens, encumbrances, or claims and/or from Landlord’s exercise of the rights conferred by this Section. Tenant agrees to execute, acknowledge, and deliver to Landlord any instrument requested by Landlord as necessary in Landlord's opinion to perfect Landlord's right, title, and interest in and to the Premises and the permanent improvements and fixtures located thereon. Tenant may remove any movable personal property and equipment, provided such removal is consistent with Section 9.04 (Trade Fixtures) and Tenant shall repair any damage caused by such removal. Tenant shall not remove trade fixtures, display items, machinery or other trade equipment except as allowed pursuant to Section 9.04 (Trade Fixtures) above. Notwithstanding anything contained in this Lease that may be construed to the contrary, to the full extent permitted by law (including, but not limited to, California Public Resources Code Section 6312, or any successor statute), the Parties agree that upon expiration or earlier termination of this Lease, Landlord shall have no liability or obligation to pay compensation for any improvements made to the Premises.

ARTICLE 10 - MAINTENANCE AND REPAIRS

10.01 Landlord’s Maintenance Obligations.
(a) Landlord shall maintain in good condition and repair the foundations, roofs, the Wharf substructure and pilings, and exterior surfaces of exterior walls of the Premises (exclusive of doors, door frames, door checks, windows, window frames and store fronts); provided, however, if any repairs or replacements are necessitated by the acts, omissions, negligence, gross negligence or willful acts of Tenant (or its officers, directors, employees, representatives, agents, volunteers, contractors, subcontractors, suppliers, customers, invitees, or others acting on Tenant’s behalf or under Tenant’s authority or control), or trespassers, or by

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reason of Tenant’s failure to observe or perform its obligations and/or any provisions contained in this Lease or caused by alterations, additions or improvements made by Tenant or its directors, officers, employees, representatives, agents, contractors, subcontractors, laborers or materialmen, the cost and expense of such repairs and replacements shall be the sole obligation of Tenant.
(b) Landlord shall maintain and inspect all fire sprinkler systems on the Premises in accordance with the California Fire Code and Santa Cruz Municipal Code Chapter 19.05, and any other applicable state or local rules and regulations. Landlord shall comply with all requirements of the Landlord’s insurance underwriters and any other governmental authority having jurisdiction thereof, regarding the installation and periodic maintenance of fire suppression systems or apparatus on the Premises. All costs related to the maintenance and inspection of fire sprinkler systems on the Premises shall be considered Additional Rent and billed to Tenant. (c) Tenant shall be solely responsible for all repairs to and maintenance of the Premises and improvements constructed by Tenant (including, but not limited to, any Tenant Improvements) which are not expressly allocated to the Landlord under this Lease or by separate written Lease between the Landlord and Tenant.
(d) Tenant acknowledges and agrees that it shall be responsible for paying Landlord a pro rata share of Landlord’s Operating Expenses in maintaining the surfaces of the exterior walls and for periodic cleaning of awnings and of the roof of the building in which the Premises are located as set forth elsewhere in this Lease. Landlord agrees to exercise reasonable effort to obtain cleaning and maintenance services at a reasonable and market rate. (e) In its sole discretion, or in the event Tenant fails to maintain, repair, or replace any mechanical or electrical system (including, but not limited to, the HVAC systems) in accordance with Section 10.03 (Tenant’s Maintenance Obligations), Landlord may contract with a service company licensed and experienced in servicing the applicable systems and/or equipment and approved by Landlord for regular maintenance, repairs and replacement, if required, of the applicable systems and/or equipment serving the Premises. Tenant shall be responsible for the costs and expenses of such maintenance, repairs or replacement as set forth in this Lease.
(f) Unless Tenant notifies Landlord in writing of the need for repairs under this provision, Landlord shall not be liable to Tenant or others for its failure to make such repairs.

Landlord shall be entitled to a reasonable period of time to effect such repairs upon receipt of said written notice from Tenant. Tenant expressly waives and agrees not to assert as an affirmative defense in any judicial proceeding or arbitration brought by Landlord against Tenant (1) the right to require Landlord to make repairs; (2) any right to make repairs at the expense of Landlord; (3) the right to reduce or offset rent as a consequence of the condition of the Premises or the improvements located thereon; (4) the benefits of California Civil Code Section 1932, 1941, and 1942, as amended from time to time, or any superseding statute, and of any other Law permitting Tenant to make repairs at Landlord's expense; and (5) any Law, judicial pronouncement, or common law principal similar thereto, which is now or hereinafter in effect or is otherwise inconsistent with the provisions of this Lease.

10.02 Landlord’s Right of Entry. Landlord, its agents, contractors, employees, representatives, contractors, and assigns may enter the Premises at all reasonable times to:
(a) Examine the Premises and improvements thereon;
(b) Perform any obligation of, or exercise any right or remedy of, Landlord under this Lease;

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(c) Make improvements, alterations, additions, or repairs to the Premises, or to other portions of the Wharf as Landlord deems necessary; (d) Perform work necessary to comply with laws, ordinances, rules or regulations of any public authority or any insurance underwriter;
(e) To post “for rent” or “for lease” signs or to show prospective tenants the Premises during the last six (6) months of the Term; and (f) Perform work that Landlord deems necessary to prevent waste or deterioration in connection with the Premises and/or the Wharf should Tenant fail to commence to make, and diligently pursue to completion, in a reasonable time, as defined by Landlord, Tenant’s required repairs after written demand therefore by Landlord. Landlord will give Tenant a minimum of twenty-four (24) hours advance notice of such entry when practical, except in the case of an emergency and/or in situations involving an immediate peril and/or hazard to the Wharf, when such entry shall be made summarily by Landlord. Landlord shall be the sole and exclusive judge as to what constitutes immediate peril and hazard to the Wharf.

Tenant hereby waives any claims for damage against Landlord arising from loss of business by reason of Landlord’s entry onto, use of, modification to, and/or removal of all or any portion of the Premises or any structure or building on the Wharf for the purpose of making improvements, alteration, additions and/or repairs to the Premises or to any other area.

Tenant shall furnish key(s) to Premises within ten (10) days of Landlord’s written request.

10.03 Tenant’s Maintenance Obligations.
(a) Except as provided elsewhere in this Lease or as expressly assigned to Landlord, Tenant, at its sole cost and expense, shall clean and maintain the Premises and any Improvements in good order, condition and repair and shall make all replacements necessary to keep all portions of the Premises and any Improvements (including inside and outside) in a safe, clean, neat, and sanitary condition, including, but not limited to, maintenance, repair, and replacement of interior plumbing and fixtures and HVAC systems. For the purposes of this Section, the term “Improvements” shall be inclusive of any such improvements on, in, at, about, from, or under the Premises, that are not otherwise the responsibility of the Landlord and those specified in Section 10.01(b). Without limiting the foregoing, Tenant’s maintenance obligations shall include, without limitation, the following:
(1) Cleaning the building sewer main and the sewer distribution system related to the Premises and Improvements located (or to be located) thereon with a rotorooter system as needed. (2) Maintaining, without limitation, all plumbing fixtures and the plumbing system in the Premises and Improvements located (or to be located) thereon. (3) Steam-cleaning or pressure washing the pedestrian sidewalk fronting the Premises on a quarterly basis or upon Landlord’s request. (4) Keeping and maintaining the sidewalk, ramp, and railings fronting the Premises in good condition and repair, free and clear of all obstacles, stands, dirt, mud, water, debris, rubbish, filth, and other encumbrances or obstructions, and safe and convenient for the use of the public.

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(5) Washing windows inside and out on a regular basis; maintaining flags, awnings and signs in a good condition; keeping lights operable; washing any fabric awnings regularly and repairing immediately if ripped or torn; removing graffiti immediately; cleaning and polishing regularly any brass or metallic hardware. (6) Handling, recycling and/or disposing of all waste on, in, at, about, from, or under the Premises consistent with City’s applicable rules and regulations. (7) In the event, Tenant chooses to paint the exterior of the Premises, Tenant shall endeavor to conduct all exterior painting activities during typically rain free months (April through September); and, Tenant shall thereafter be responsible for maintenance of any such painted surfaces, except if reverting to City specified color and motif, at Landlord’s sole discretion. Tenant shall address any paint issues, and repaint surfaces as needed, within ninety (90) days of any request by Landlord. Any painting of the building exterior shall require Landlord’s approval of color, material, and motif.
(b) All replacement equipment shall be of a quality, value and use equal to or exceeding that of the original equipment or Improvements. Should Tenant fail to promptly and diligently make these repairs and replacements or otherwise maintain and/or repair the Premises and Improvements located (or to be located) thereon for a period of three (3) days after delivery of a written demand by Landlord, Landlord shall have the right (but not the obligation) to make such repairs or replacements without liability to Tenant for any loss or damage that may occur to Tenant’s stock or business, and Tenant shall pay for all costs and expenses incurred by Landlord in making such repairs and/or replacements, together with interest thereon at the maximum rate permitted by law from the date of commencement of the work through the date of payment. Tenant shall, at its sole cost and expense, promptly and diligently repair any damage to the Premises, building(s) and/or Improvements located (or to be located) on the Premises, and/or the Wharf caused by Tenant, its officers, directors, employees, representatives, agents, volunteers, contractors, subcontractors, suppliers, customers, invitees, subtenants, assignees, concessionaires, or others acting on Tenant’s behalf or under Tenant’s authority or control, or caused by the installation or removal of Tenant’s personal property.

10.04 Windows. Tenant shall replace, at its expense, any and all damaged or broken glass and plate glass components on or about the Premises resulting from any cause whatsoever other than that proximately caused by the sole negligence or willful misconduct of Landlord.

Tenant shall have full responsibility, at its sole discretion, to either self-insure or obtain insurance policies covering damage or replacement of said glass and plate glass components. If Tenant elects not to obtain such insurance coverage, it does so at its sole risk.

10.05 Requirements of Governmental Bodies. At all times during the Term of this Lease, Tenant, at Tenant's sole cost and expense, shall do all of the following:
(a) Make all improvements, alterations, additions, and/or repairs to, on, in, at, about from, or under the Premises required by any Laws (including, but not limited to, ADA) now or hereafter in effect and applicable;
(b) Indemnify, defend and hold Landlord (and Landlord’s officers, officials, employees, representatives, and agents) and the property of Landlord, including, but not limited to the Premises, free and harmless from any and all liability, loss, cost, damages, fines, penalties, claims, and actions resulting from or related to the Tenant's failure to comply with and perform the requirements of this Section.

ARTICLE 11 – UTILITIES AND SERVICES

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11.01 Separate Charges. Tenant shall make all arrangements and be solely responsible for obtaining all gas, water, electricity, heat, fuel, communication service, refuse disposal, sewer, grease interceptor, maintenance, security services, and other utilities and services (collectively “Utilities and Services”) for the Premises and/or improvements located or to be located thereon (including, but not limited to any Tenant Improvements). Tenant shall promptly pay or cause to be paid before delinquency, and hold Landlord and Landlord's property, including, but not limited to, the Premises and improvements located or to be located thereon (including, but not limited to, any Tenant Improvements) free and harmless from, all charges, costs and expenses for the furnishing of all Utilities and Services to the Premises and/or improvements located or to be located thereon and for the removal of garbage, tallow, and rubbish from the Premises and/or improvements located or to be located thereon.

Tenant shall pay for all water, gas, heat, light, power, communication service and any other utilities metered or otherwise separately charged to the Premises.

11.02 Jointly Metered Utilities. Tenant shall pay, as Additional Rent, a pro rata share of any Utilities and Services which are jointly metered or charged. Tenant’s pro rata share of these charges and fees shall be based upon the ratio of the square footage of the Premises to the total square footage of the building or buildings serviced by such meter, plus any extraordinary uses by Tenant which may be reasonably ascertained by Landlord. Such charges will be paid as Rent to Landlord at the time of regular Rent payments.

In the event that any other premises shall be submetered or otherwise utilize utilities for which the Tenant is the primary account holder and responsible for payment, Tenant shall be entitled to recoup a pro rata shared of such charges and fees as can be reasonably assigned to the secondary user.

11.03 Interruption. Landlord shall not be liable for any failure or interruption of any Utilities and Services being furnished to the Premises, and no such failure or interruption shall entitle Tenant to terminate this Lease.

11.04 Electricity Use Included. INTENTIONALLY OMITTED.

11.05 No Offset. Any payments under this Section shall not reduce or offset Rent payments. Landlord has no liability for such payments.

ARTICLE 12 - INDEMNIFICATION AND INSURANCE

12.01 Indemnification. In addition to any other indemnity provided for in this Lease, and to the fullest extent permitted by law, Tenant agrees to indemnify, defend (with counsel reasonably satisfactory to Landlord), and hold harmless Landlord, its officials, officers, directors, employees, agents, attorneys, volunteers, representatives, successors and assigns (“Indemnified Parties”) from and against any and all claims, demands, obligations, damages, actions, causes of action, suits, losses, judgments, fines, penalties, liabilities, costs and expenses (including, without limitation, attorney’s fees, disbursements and court costs) for any injury or damage to person or property, or of any other kind or nature, that may arise from or in any manner relate to (directly or indirectly): (i) the rights and/or obligations of Tenant, its employees, and agents under this Lease, (ii) the acts or omissions or negligence or willful misconduct of Tenant or its officers, directors, employees, agents, representatives, invitees, customers, contractors, sublessees, suppliers, trespassers, or others acting on Tenant’s behalf or under Tenant’s authority or control as related to this Lease, (iii) the occupancy and/or use of the Premises, or improvements to the Premises (including, but not limited to any Tenant Improvements or personal property located therein) by Tenant, or its officers, directors, employees, agents, servants, representatives, volunteers, guests, invitees, customers, contractors, subcontractors, suppliers,

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laborers, materialmen, sublessees, or others acting on Tenant’s behalf or under Tenant’s authority or control (collectively “Tenant Agents” and individually “Tenant Agent”), (iv) any breach or default under this Lease by Tenant; and/or (v) any construction or other work undertaken by Tenant on the Premises (including any Tenant Improvements)(individually, each a “Claim” and, collectively, “Claims”).

Tenant’s obligations in this Section shall not extend to any Claim that is caused by the sole negligence or willful misconduct of Landlord or an Indemnified Party, subject to any immunities which may apply to Landlord with respect to such Claims. Tenant’s obligation to defend shall arise regardless of any claim or assertion that Landlord caused or contributed to the Claims. This Section and any other indemnification provided elsewhere in this Lease shall survive the termination of this Lease and shall survive for the entire time that any third party can make a Claim.

Tenant shall ensure that its contractors and subcontractors (e.g. those constructing any Tenant Improvements or performing any work on the Premises) also fully indemnify, defend and hold harmless the Indemnified Parties to the same extent that Tenant is required to indemnify, defend and hold harmless such Indemnified Parties.

12.02 Insurance Requirements. Upon execution of this Lease, and, in any event, before Tenant enters the Premises (or any portion thereof) or commences any work on or at the Premises, Tenant 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 G (Insurance Requirements) to protect against claims for injuries to persons or damages to the Premises and to loss or damage to Tenant’s trade fixtures, personal property, and improvements, which may arise from or in connection with the Tenant’s operation and use of the Premises. The cost of such insurance shall be borne by the Tenant.

12.03 Review of Coverage. Landlord may increase or decrease the amount of commercial general liability insurance required herein, based upon a general review by Landlord of the standard insurance requirements. Changes in insurance amounts shall occur not more frequently than once a year. Landlord will notify Tenant of any changes under this provision of this Lease. Landlord may also require Tenant’s contractor or subcontractor to obtain insurance sufficient in coverage, form, and amount to provide adequate protection for Landlord, Tenant, and/or those using the Premises.

12.04 Tenant’s Failure to Maintain Insurance.
(a) Tenant agrees that if Tenant does not procure, maintain and show evidence of any insurance policy required under this Lease or fails to pay any premiums when due, Landlord may, at its election (but without any obligation to do so), either terminate this Lease, require that the Premises be immediately closed for business pending reinstatement of insurance by Tenant, or obtain the necessary insurance and pay the premium, and the repayment thereof shall be deemed to be Additional Rent due by the Tenant and payable on the next date upon which a payment of rent is due.
(b) Landlord has the right at any time to demand a copy of a Certificate of Insurance from Tenant for the policies of insurance required herein and any other reasonable evidence proving compliance with these provisions. (including, but not limited to, complete, certified copies of all required insurance policies, including, but not limited to, endorsements). The failure to provide the Landlord with such evidence within five (5) calendar days of such demand shall constitute a material breach of this Lease.
(c) In the event that Tenant fails to maintain insurance coverages, as required in this Lease, and a loss or damage occurs that results in Landlord’s liability for copayments,

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deductibles, or other such charges to replace the loss under Landlord’s applicable insurance policy, Tenant agrees to reimburse the City for all such charges within ninety (90) days of the City’s notification to Tenant.

12.05 Waiver of Subrogation. Tenant for itself and on behalf of its insurers, hereby waives and releases the Landlord, and its officers, officials, directors, employees, agents, representatives, and volunteers (i.e. the additional insureds) from liability for injury to any person or damage to property that is caused by or results from any risk covered under any insurance policy required by this Agreement or any other valid and collectible insurance policy otherwise carried by Tenant. Tenant agrees to defend, indemnify and hold Landlord and its officers, officials, directors, employees, agents, representatives, and volunteers harmless from any and all such liability. Tenant shall obtain a waiver of any subrogation right that its insurers may acquire against any of the additional insureds by virtue of payment of any such loss covered by such insurance.

12.06 Waiver of Loss and Damage. Landlord shall not be liable for any damage to inventory or other property of Tenant, or others, located in, on, at, or about the Premises, nor for the loss of or damage to any property of Tenant or of others by theft or otherwise, which is not proximately caused by Landlord’s sole negligence or willful misconduct, and Tenant waives any claim against Landlord with respect to such property. Landlord shall not be liable to Tenant or Tenant’s officers, directors, employees, agents, representatives, volunteers, contractors, subcontractors, guests, invitees, or customers for any injury or damage to persons or property resulting from fire, explosion, falling plaster, steam, gas, electricity, water, rain or leaks from any part of the Premises or from the pipes, appliance or plumbing works or from the roof, street or subsurface or from any other places or by any other cause of whatsoever nature. Landlord shall not be liable to Tenant or Tenant’s officers, directors, employees, agents, representatives, volunteers, contractors, subcontractors, guests, invitees, or customers for any such damage caused by other tenants or persons in the Premises, occupants of adjacent property of the Wharf, or the public, or caused by operations in construction of any private, public or quasi-public work.

All property of Tenant kept or stored on the Premises shall be so kept or stored at the sole risk of Tenant, and Tenant shall hold Landlord harmless from any claims arising out of damage to the same, including, but not limited to, subrogation claims by Tenant’s insurance carriers, unless such damage shall be proximately caused by the willful act or sole negligence of Landlord.

12.07 Notice by Tenant. Tenant shall give prompt notice to Landlord in case of fire or accidents in or around the Premises or of any damage or defects in the Premises (or any improvements located thereon), or any fixtures or equipment therein.

ARTICLE 13 - PARKING

13.01 Employee Parking. Tenant understands and agrees that it will use good faith efforts to discourage Tenant’s employees from parking on the Wharf except by permit which may be issued by Landlord. Tenant and its employees shall park their vehicles only in those areas as may be designated for such purpose by Landlord. Tenant and its employees agree not to occupy parking places directly in front of Wharf businesses.

13.02 Customer Parking. Landlord shall have the right to adopt and implement such parking programs as may be necessary to alleviate parking problems during peak traffic periods, including, without limitation, requiring the use of off-site parking. Landlord reserves the right to change the entrances, exits, traffic lanes, and the boundaries and locations of the parking area.

Tenant shall be responsible for compliance with all parking rules and regulations as may be adopted and implemented by Landlord from time to time, including, without limitation, systems of validation, shuttle transportation or any other programs which may be deemed necessary or appropriate by Landlord to control, regulate or assist parking by customers of the Wharf.

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ARTICLE 14 – TRANSFER, ASSIGNMENT AND SUBLETTING

14.01 Transfers Prohibited. Tenant and its permitted successors and assigns shall not either voluntarily, or by operation of law, Transfer (as defined below) its interest in this Lease or in the Premises, or any portion thereof, without first providing written request to Landlord and obtaining Landlord’s prior written consent pursuant to Section 14.02(b) below (which consent may be withheld or delayed in Landlord’s sole discretion). As used in this Lease, the term “Transfer” means any attempt to sell, convey, assign, sublease, transfer, mortgage, pledge, grant, hypothecate or encumber this Lease or any interest in this Lease, or the Premises or any portion thereof or the buildings and improvements thereon, and any attempt to sublet, license or grant any concession to the Premises, in whole or in part, or allow any person other than Tenant’s employees, agents, customers, and invitees to occupy or use all or any portion of the Premises.

14.02 Landlord Consent; Tenant’s Request to Landlord.
(a) Any Transfer made in violation of this Article 14 is voidable, at Landlord’s election, and shall constitute a default subject to the cure right in Article 15 (Default). (b) For purposes of this Article 14, the consent to any Transfer must be obtained from the City Council, or any agent or representative authorized by said City Council to give said consent. Unless otherwise provided in writing by Landlord, approved transferees and assignees may not extend the Initial Term of this Lease (and any applicable Extended Term) by exercising any option(s) to extend or renew the Initial Term (or Extended Term, as applicable) of this Lease granted herein that have not already commenced at the time of said assignment, sublease or other Transfer.
(1) Notwithstanding anything to the contrary herein, Landlord reserves, at Landlord’s sole discretion, all authority to withhold, deny, approve, or otherwise require the modification of any proposed Transfer.
(c) Tenant shall comply with the following requirements for any Transfer. Tenant agrees that failure to satisfy these requirements are reasonable bases for Landlord to deny consent but is not exhaustive of the bases to deny consent:
(1) Tenant shall give Landlord at least thirty (30) days’ written notice of its proposed Transfer and provide appropriate documentation demonstrating, to Landlord’s satisfaction, the financial and operational responsibility and appropriateness of the proposed transferee. Tenant shall provide Landlord within five (5) days such other or additional information and/or documentation as may be reasonably requested by Landlord; and
(2) Tenant shall provide the terms and provisions of the proposed Transfer; and (3) The proposed assignee or transferee shall expressly assume all the terms, covenants, obligations, responsibilities, liabilities, duties, and conditions of this Lease.

14.03 Involuntary Assignment. No interest of Tenant (or Tenant’s shareholders as of the Effective Date) in this Lease, shall be assignable by operation of law including, without limitation, the Transfer of this Lease by testate or intestate succession, except to Tenant’s heirs at law in the first degree. Each of the following acts shall be considered an involuntary assignment:
(a) If Tenant is or becomes bankrupt or insolvent, makes an assignment for the benefit of creditors, or institutes a proceeding under the Bankruptcy Act in which Tenant is the bankrupt;

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or, if Tenant is a partnership or consists of more than one person or entity, if any partner of the partnership or other person or entity is or becomes bankrupt or insolvent, or makes an assignment for the benefit of creditors;
(b) If a writ of attachment or execution is levied on this Lease; (c) If, in any proceeding or action to which Tenant is a party, a receiver is appointed with authority to take possession of the Premises;
An involuntary Transfer shall constitute a default by Tenant and Landlord shall have the right to elect to terminate this Lease, in which case this Lease shall not be treated as an asset of Tenant.

If a writ of attachment or execution is levied on this Lease, Tenant shall have fifteen (15) days in which to cause the attachment or execution to be removed. If any involuntary proceeding in bankruptcy is brought against Tenant, or if a receiver is appointed, Tenant shall have thirty (30) days in which to have the involuntary proceeding dismissed or the receiver removed.

14.04 Consent Required. Tenant shall not, without Landlord’s prior written consent, Transfer any interest in this Lease or any right or privilege appurtenant hereto or permit use of the Premises by any person or persons other than Tenant, its employees, agents, invitees, and customers. It is agreed that Landlord will not be acting unreasonably in refusing to consent to a Transfer if, in Landlord’s opinion, (A) the quality of the operation of the proposed assignee or transferee is not equal to or better than that of the Tenant, (B) such assignee or transferee may adversely affect the business of the other tenants or the tenant mix in the Wharf or Landlord’s ability to obtain Rent, (C) such assignee or transferee does not have a positive net worth on the date of assignment, or (D) such assignee or transferee does not have a net worth on the date of assignment that is equal to or greater than Tenant and Guarantor’s combined net worth as of the Effective Date of this Lease. The term “net worth” shall mean the amount by which the total of all assets shall exceed the total of all liabilities as determined by an independent certified public accountant in accordance with generally accepted accounting principles.

14.05 Deemed Assignment. Any Transfer of this Lease from Tenant by merger, consolidation, liquidation or sale of a controlling interest of corporate stock shall constitute an assignment. All Transfers shall require Landlord’s prior written approval pursuant to this Article

14. 14.06 Unauthorized Assignment or Sublease. Any attempted Transfer without Landlord’s required consent shall be void. Any assignee, subtenant, transferee or other recipient of Tenant’s interest in this Lease is hereby notified that such Transfer is of no force or effect without Landlord’s prior written consent.

14.07 Expenses and Attorneys’ Fees. Tenant shall pay to Landlord, all of Landlord’s costs and expenses (including reasonable attorneys’ fees) incurred by Landlord in connection with reviewing, considering, or consenting to any proposed Transfer, regardless of whether such transfer is approved or consummated, or in connection with any other actions taken by Landlord pursuant to this Article 14.

14.08 Effect of Consent. Consent by Landlord to a Transfer shall not release Tenant from its primary liability under this Lease. Landlord’s consent to one Transfer or occupation by other parties shall not be deemed a consent to other or future assignments or use by other parties, or constitute a waiver of the requirements of this Article 14.

14.09 Surrender of Lease. The voluntary or other surrender or a cancellation of this Lease by Tenant shall not work a merger, and shall, at the election of Landlord, either terminate

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all or any existing subleases or sub-tenancies or may operate as an assignment to Landlord of any or all of such subleases or sub-tenancies. Landlord shall exercise its election within thirty (30) days of the event so requiring.

ARTICLE 15 - DEFAULT

15.01 Events of Default. The occurrence of any of the following shall constitute a material breach and an Event of Default of this Lease by Tenant:
(a) The failure of Tenant to pay or cause to be paid any Rent, monies or other charges due Landlord as set forth in this Lease on or before the due date for payment of any such amounts;
(b) The failure of Tenant to maintain all insurance coverage as set forth in Article 12 (Indemnification and Insurance);
(c) The abandonment of the Premises by Tenant, which shall mean failure to operate as set forth in this Lease for five (5) consecutive days, except by prior written notice by Tenant to Landlord at least fourteen (14) days in advance and with the written consent of Landlord; (d) Except as otherwise provided in this Lease, the failure of Tenant to do or cause to be done any act as set forth in this Lease, if the failure continues for fifteen days (15) consecutive days after notice has been given to Tenant. However, Tenant shall not be in default of this Lease if Tenant commences to cure the default within said fifteen (15) day period and diligently and in good faith continues to cure the default to the satisfaction of the Landlord; (e) Tenant causing, permitting or suffering, without the prior written consent of Landlord, any act when this Lease requires Landlord’s prior written consent or prohibits such act; or
(f) Any act of bankruptcy caused, suffered or permitted by Tenant. For the purposes of this Lease, “act of bankruptcy” shall include any of the following:
(i) Any general assignment or general arrangement for the benefit of creditors;
(ii) The filing of any petition by or against Tenant to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, unless such petition is filed against Tenant and the same is dismissed within sixty (60) days;
(iii) The appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets located in the Premises or of Tenant’s interest in this Lease.
(iv) The attachment, execution, or other judicial seizure of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease.
(g) Failure to abide by any Laws; or
(h) Failure to maintain the Premises in a clean, safe, and attractive condition, as described above; and, failure to promptly remedy any maintenance issues within sixty (60) days of notice from Landlord.

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15.02 Remedies. In the event of any breach or default by Tenant, Landlord may, at Landlord's option and in Landlord’s sole discretion, exercise any and all rights available to a landlord under the laws of the State of California (including, but not limited to, those rights and remedies set forth in California Civil Code Sections 1951.2, 1951.4, and 1951.8), including, without limitation, the right to do any of the following:
(a) Landlord may elect to continue this Lease in effect by not terminating Tenant’s right to possession of the Premises, in which case Landlord shall be entitled to enforce all Landlord’s rights and remedies under this Lease, including the right to cure the breach underlying the Event of Default for the account and at the expense of Tenant and Landlord shall recover all costs, including costs of settlements, court costs and attorney’s fees, administrative overhead fees of twenty percent (20%) together with interest thereon at the rate of the prime rate of interest per annum as quoted by the Bank of America from the date of such payment or performance by Landlord, that Landlord may incur in the course of curing Tenant’s breach; and Landlord may also recover all Rent specified in this Lease as it becomes due under this Lease, and seek any other damages proximately caused by Tenant’s failure to perform the obligations under this Lease;
(b) Landlord shall have the right to terminate this Lease and recover against Tenant:
(i) The worth at the time of award of the unpaid Rent which had been earned at the time of termination (plus applicable late charges and interest);
(ii) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the amount of such rental loss that Tenant proves could have been reasonably avoided (plus interest on the award at the maximum rate allowed by law);
(iii) The worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such rental loss for the same period that Tenant proves could be reasonably avoided, including, without limitation, interest on the excess at the rate set forth in Section 4.06 (Late Charge and Interest on Unpaid Rent); and
(iv) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform Tenant’s obligations under this Lease or which in the ordinary course of things would be likely to result therefrom.
(c) The “worth at the time of award” of the amounts referred to in the previous subparagraphs 15.02(b)(i), and (b)(ii) shall be computed by allowing interest at ten percent (10%) per annum. The worth at the time of award of the amount referred to in subparagraph 15.02(b)(iii) shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco at the time of award plus one percent (1%). (d) Efforts Landlord may make to mitigate the damages caused by Tenant’s breach of this Lease shall not constitute a waiver of Landlord’s right to recover damages against Tenant, nor shall anything contained in this Lease affect Landlord’s right to indemnification against

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Tenant for any liability arising prior to the termination of this Lease (including, but not limited to, for personal injuries and/or property damage), and Tenant agrees to indemnify and hold Landlord (and Landlord’s officers, employees, representatives, and agents) harmless from any injuries and damages, including, but not limited to, all reasonable attorney fees and costs incurred by Landlord in defending any action brought against Landlord for any recovery, and in enforcing the terms and provisions of this indemnification against Tenant.
(e) In addition to all other rights and/or remedies of Landlord at law, in equity, and/or under this Lease, the Landlord has the remedy described in California Civil Code Section 1951.4, as such may be amended (Landlord may continue Lease in effect after Tenant’s breach and abandonment and recover Rent as it becomes due, if Tenant has right to sublet or assign, subject only to reasonable limitations). Accordingly, the breach of this Lease by Tenant, or an abandonment of the Premises by Tenant, shall not constitute a termination of this Lease, nor of Tenant’s right of possession under this Lease, unless and until Landlord elects to so terminate this Lease, and until that time Landlord may (at Landlord’s option) continue this Lease in full force and effect and shall have the right to recover Rent and all other payments to be made by Tenant under this Lease as they become due; provided, that until Landlord elects to terminate this Lease and Tenant’s right of possession under this Lease, Tenant shall have the right to sublet the Premises or to assign interests in this Lease, or both, subject only to the written consent of Landlord, which consent shall not be unreasonably withheld or delayed. The Parties intend that this Section 15.02(e) satisfies the requirements of California Civil Code §1951.4 and that the Landlord has the remedy set forth in California Civil Code Civil Code §1951.4. (f) In the event Landlord terminates this Lease pursuant to this Section

15.02, and Tenant has made an advance payment of Rent as defined in California Civil Code §1951.7, and Tenant has requested in writing that Landlord notify it of any initial reletting of the Premises, then and only then must Landlord notify Tenant pursuant to California Civil Code §1951.7(c) that the Premises have been relet.
(g) As security for the performance by Tenant of all duties and obligations under the Lease, Tenant assigns to Landlord the right, power, and authority, during the continuance of this Lease, to collect the Rents, issues, and profits of the Premises, reserving to Tenant the right, prior to any breach or default by Tenant under this Lease, to collect and retain the rents, (solely in the case of a sublease previously approved by Landlord) issues, and profits, from the operation of Tenant’s approved business use, as they become due and payable, and so long as payments to Landlord are also kept current. Upon any breach or default, Landlord shall have the right at any time afterward, without notice except as provided for previously, either in person, by agent, or by a receiver to be appointed by a court, enter and take possession of the Premises and collect Rents, issues, and profits, including, but not limited to, those past due and unpaid, and apply the same, less costs and expenses of operation and collection, including, but not limited to, reasonable attorney fees, upon any secured indebtedness, and in an order as Landlord may determine.
(h) In the event that Landlord should take any act to maintain or preserve the Premises on Tenant’s behalf, or seek the appointment of a receiver to protect Landlord’s interests under this Lease, such acts shall not constitute a termination of Tenant’s right of possession unless Tenant receives written notice from Landlord regarding Landlord’s election to terminate. (i) Tenant acknowledges that Landlord has executed this Lease in reliance on the financial information furnished by Tenant to Landlord as to Tenant’s financial condition. If it is determined at any time subsequent to the date of this Lease that any of the financial information furnished by Tenant and relied upon by Landlord in executing this Lease is substantially untrue or inaccurate, Tenant shall be deemed to be in default under this Lease, which default shall not

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be subject to cure, and which shall entitle Landlord to exercise all rights and remedies reserved to Landlord under this Lease or otherwise available to Landlord at law. (j) Landlord may remove all Tenant’s property from the Premises, and such property may be stored by Landlord in a public warehouse or elsewhere at the sole cost and expense for the account of Tenant. If Landlord does not elect to store any or all of Tenant’s property left in the Premises, Landlord may consider such property to be abandoned by Tenant, and Landlord may thereupon dispose of such property in any manner deemed appropriate by Landlord. Any proceeds realized by Landlord on the disposal of any such property shall be applied first to offset all expenses of storage and sale, then credited against Tenant’s outstanding obligations to Landlord under this Lease, and any balance remaining after satisfaction of all obligations of Tenant under this Lease shall be delivered to Tenant.

15.03 Covenants and Conditions. All covenants made by Tenant hereby are conditions of this Lease; therefore, in the event of any default by Tenant in fulfilling any of the same, Landlord may at any time thereafter at its option declare a forfeiture of this Lease. Landlord shall not be obligated to perform any covenant made by Landlord under this Lease which accrues after the date of any default by Tenant hereunder.

15.04 Landlord’s Right to Perform. All terms, covenants and conditions of this Lease to be performed or observed by Tenant shall be performed or observed by Tenant at Tenant’s sole cost and expense, and without any reduction of Rent. If Tenant shall fail to pay any sum of money, or other Rent, required to be paid by it hereunder, or shall fail to perform any other term, covenant, or condition hereunder on its part to be performed, and such failure shall continue for ten (10) days after written notice thereof by Landlord, Landlord, without waiving or releasing Tenant from any obligation of Tenant hereunder, may, but shall not be obligated to, make any such payment or perform any such other term, covenant or condition on Tenant’s part to be performed. All sums so paid by Landlord and all necessary costs of such performance by Landlord plus an administrative overhead fee of twenty percent (20%), together with interest thereon at the rate of the prime rate of interest per annum as quoted by the Bank of America from the date of such payment or performance by Landlord, shall be paid (and Tenant covenants to make such payment) to Landlord on Landlord’s demand, and Landlord shall have (in addition to any other right or remedy of Landlord) the same rights and remedies in the event of nonpayment by Tenant as in the case of failure by Tenant in the payment of any Rent hereunder.

ARTICLE 16 - DAMAGE OR DESTRUCTION

16.01 Repair of Damage by Landlord. Tenant agrees to notify Landlord in writing promptly of any damage to the Premises resulting from fire, earthquake, or any other identifiable event of a sudden, unexpected, or unusual nature (“Casualty”). If the Premises are damaged by a Casualty or any adjacent or surrounding common areas providing access to the Premises are damaged by a Casualty, such as but not limited to a Wharf closure as provided in Section 2.06 (Wharf Closure), and such that the Premises are untenantable, or Tenant does not have reasonable access to the Premises, provided that the Casualty was not caused by the negligence, gross negligence or willful misconduct of any Tenant’s employee, contractor, invitee, guest, licensee, contractor or subtenant (“Tenant Party”), and if neither Landlord nor Tenant has elected to terminate this Lease under Section 16.03 (Landlord’s Option to Terminate or Repair) or Section

16.04 (Tenant’s Option to Terminate), Landlord will promptly and diligently restore such common areas, the Premises, and the Tenant Improvements originally constructed by Landlord to substantially the same condition as existed before the Casualty, or to a condition that satisfies required buildings codes and other laws, or to a condition that is desirable by Landlord in its sole discretion. In making these modifications, Landlord will not materially impair Tenant’s access to the Premises. Landlord’s obligation to restore is subject to reasonable delays for insurance adjustment and other matters beyond Landlord’s reasonable control and subject to the other

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clauses of this Article 16. If Tenant requests that Landlord modify the Tenant Improvements in connection with the rebuilding, Landlord may condition its consent to those modifications on:
(a) Tenant’s payment to Landlord before construction is begun of any sums in excess of the amount of insurance proceeds received by Landlord that are needed to complete the Tenant Improvements; and
(b) Confirmation by Landlord’s architect or contractor that the modifications will not increase the scope of work or the time necessary to complete the Tenant Improvements.

16.02 Repair Period Notice. Landlord will provide written notice to Tenant indicating the anticipated period for repairing the Casualty (“Repair Period Notice”), within the later of: (a) sixty (60) days after the date on which Landlord determines the full extent of the damage caused by the Casualty, or (b) thirty (30) days after Landlord has determined the extent of the insurance proceeds available to effectuate repairs. The Repair Period Notice will also state, if applicable, Landlord’s election either to repair or to terminate the Lease under Section 16.03 (Landlord’s Option to Terminate or Repair).

16.03 Landlord’s Option to Terminate or Repair. Landlord may elect either to terminate this Lease or to effectuate repairs if:
(a) The Repair Period Notice estimates that the period for repairing the Casualty exceeds one (1) year from the date of the commencement of the repair; (b) The estimated repair cost exceeds the available insurance proceeds, if any, for such repair (not including the deductible), plus any amount that Tenant is obligated to pay for, or elects to pay for such repair;
(c) The estimated repair cost of the Premises, even though covered by insurance, exceeds fifty percent (50%) of the full replacement cost of the Premises; or (d) The Premises cannot be restored except in a substantially different structural or architectural form than existed before the Casualty.

Landlord’s election will be stated in the Repair Period Notice.

16.04 Tenant’s Option to Terminate. If all or a substantial part of the Premises are rendered untenantable or inaccessible by damage to all or any part of the Premises from a Casualty, and Landlord does not elect to terminate as provided above, then Tenant may elect to terminate this Lease if the Repair Period Notice provided by Landlord indicates that the anticipated period for repairing the Casualty exceeds one (1) year from the date of commencement of the repairs. Tenant may elect to terminate this Lease by providing written notice (“Tenant’s Termination Notice”) to Landlord within thirty (30) days after receiving the Repair Period Notice from Landlord. If Tenant does not elect to terminate within this thirty-day (30-day) period, Tenant will be considered to have waived the option to terminate. Tenant will not have an option to terminate if Tenant is in default under this Lease and the Casualty was caused in part or in whole by the fault of any Tenant Party, including negligence, gross negligence or willful misconduct of any Tenant Party.

16.05 Rent Abatement Due to Casualty. Landlord and Tenant agree that, if the Casualty was not the result of the negligence, gross negligence, or willful misconduct of any Tenant Party, and provided that Tenant is not then in default under this Lease, Tenant will be provided with a proportionate abatement of Rent based on the Rentable Square Footage of the

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Premises rendered unusable (due to physical damage to the Premises or the unavailability of access to the Premises) and not used by Tenant. That proportional abatement, if any, will be provided during the period beginning on the later of: (a) the date of the Casualty, or (b) the date on which Tenant ceases to occupy the Premises and ending on the date of substantial completion of Landlord’s restoration obligations as provided in this Article 16. Subject to Section 16.04 (Tenant’s Option to Terminate), the Rent abatement provided in this Section16.05 is Tenant’s sole remedy due to the occurrence of the Casualty. Landlord will not be liable to Tenant or any other person or entity for any direct, indirect, or consequential damage (including but not limited to lost profits of Tenant or loss of or interference with Tenant’s business), whether or not caused by the negligence of Landlord or Landlord’s employees, contractors, licensees, or invitees, due to, arising out of, or as a result of the Casualty (including but not limited to the termination of the Lease in connection with the Casualty). Tenant agrees to maintain business interruption insurance in amounts and with coverage no less than that required by Exhibit G (Insurance Requirements) to provide coverage regarding such matters.

16.06 Damage Near End of Term. Notwithstanding any other provision of this Article 16, if the Premises is destroyed or damaged by a Casualty during the last eighteen (18) months of the Lease Term, Landlord has the option to terminate this Lease by giving written notice to Tenant consistent with the Repair Period Notice.

16.07 Effective Date of Termination and Rent Apportionment. If Landlord or Tenant elects to terminate this Lease under this Article 16 in connection with a Casualty, the termination will be effective thirty (30) days after delivery of notice of such election. Tenant must pay Rent, properly apportioned up to the date of the Casualty or Tenant’s cessation of revenue generating business activities from the Premises, whichever is later. After the effective date of the termination, Landlord and Tenant will be discharged of all future obligations under this Lease, except for those provisions that, by their terms, survive the expiration or earlier termination of this Lease.

16.08 Waiver of Statutory Provisions. The provisions of this Lease, including those in this Article 16, constitute an express agreement between Landlord and Tenant that applies in the event of any Casualty to the Premises. Landlord and Tenant, therefore, each fully waives the provisions of any statute or regulation, including California Civil Code §§1932(2) and 1933(4), or any successor statute, relating to any rights or obligations concerning a Casualty.

ARTICLE 17 - ESTOPPEL CERTIFICATES; ATTORNMENT

17.01 Tenant to Furnish Certificate. Tenant shall, within ten (10) business days of written notice from Landlord, execute and deliver to Landlord a written statement certifying that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modification. Tenant’s statement shall include other details requested by Landlord, such as the date to which Rent and other charges are paid and Tenant’s acknowledgement concerning any uncured defaults in Landlord’s obligations under this Lease and the nature of such defaults if they are claimed. Any such statement may be relied upon conclusively by any prospective purchaser or encumbrancer of the Premises. Tenant’s failure to deliver such statements within such time shall be conclusive upon Tenant that this Lease is in full force and effect, except as and to the extent any modification has been represented by Landlord, and that there are no uncured defaults in Landlord’s performance and that not more than one (1) month’s Minimum Base Rent has been paid in advance.

17.02 Attornment. If any proceedings are brought for foreclosure, or if the power of sale is exercised under any mortgage or deed of trust made by Landlord covering the Premises, Tenant shall attorn to the purchaser upon any such foreclosure or sale and recognize such purchaser as Landlord under this Lease.

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17.03 Additional Documents. Tenant, upon request of any party in interest, shall execute promptly such instruments and certificates necessary to carry out the intent of the foregoing Sections as shall be requested by Landlord.

ARTICLE 18 – OTHER MUNICIPAL RULES AND REGULATIONS

18.01 Rules and Regulations. Tenant acknowledges and understands that the Premises are located on property of Landlord, primarily devoted to commerce and navigation, namely the Municipal Wharf, which is under exclusive control of Landlord. By executing this Lease, Tenant agrees to abide by all Laws promulgated by the City Council of the City of Santa Cruz now existing or hereafter made for the government, management, maintenance, operation and/or improvement of the Wharf, including, without limitation, such directives as to the usage of the Wharf as may be determined or promulgated by the officials, officers or representatives of Landlord in their official or departmental capacity. Tenant further agrees that such Laws or conditions as may be imposed by Landlord through its City Council, administrative officers, department heads and/or duly authorized representatives, shall be subject to immediate compliance by Tenant without question or qualification as to the validity or reasonableness thereof.

18.02 Collective Wellbeing and Reputation. Tenant acknowledges and understands that maintaining the positive reputation of all businesses on the Municipal Wharf is essential to the success of the entire Wharf as a tourist destination and center of commerce. By executing this Lease, Tenant acknowledges their own duty to maintain a position reputation and favorable customer reviews during the Term of the Lease. Tenant shall endeavor to maintain favorable customer reviews across popular online review platforms, such as, but not exclusively, Yelp, Tripadvisor, Google, Zagat, Open Table, etc. For the purposes of this Section, favorable reviews shall be considered as an average of three and one half (3.5) stars or above, or other equivalent rating, across at least two (2) platforms with a minimum of fifty (50) reviews each. In the event that Tenant’s ratings drop below this threshold, Tenant shall develop and implement an action plan that identified and address issues that consistently and negatively impact reviews within forty-five (45) days of Landlord’s request. Landlord reserves the right to consider reviews in its decision to approve or deny any Extension Request, and shall provide Tenant a minimum of thirty days (30) days to contest any such decision on the premise of reviews.

18.03 Collective Responsibility for Wharf Safety and Experience. Tenant acknowledges that maintaining a safe and welcoming environment on the Wharf promotes the success of Tenant’s business and those of other Wharf tenants, as well as the sustainability of the Wharf itself. Tenant accepts its responsibility to comply with all Laws and permit conditions regarding the responsible sale of alcohol, including control of service, portion control, and the responsibilities of third-party liability, which are essential to protecting Tenant’s business, other tenants, the City, and visitors to the Wharf, if applicable.

In the event that Tenant is found to be in violation of alcohol laws or permit conditions, the City may require the Tenant to pay a fine of $1,000 per occurrence. This fine is cumulative and in addition to any other remedies the City or other public agency may take related to alcohol permit compliance.

18.04 Tenant Meeting Attendance. Tenant agrees to attend no fewer than fifty percent (50%) of Tenant coordination meetings held between the Landlord and Wharf tenants. Quarterly meetings are currently held between City staff and Wharf tenants to discuss issues and policies related to Wharf businesses, operations, and tenants. Tenant may designate an agent or employee to attend such meetings on behalf of Tenant.

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ARTICLE 19 – CONDEMNATION

19.01 Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively "Condemnation"), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than twenty-five percent (25%) of that portion of the Premises is taken by Condemnation, Tenant may, at Tenant’s option, to be exercised in writing within ten (10) days after Landlord shall have given Tenant written notice of such taking (or in the absence of such notice, within ten (10) days after the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority takes such possession. If Tenant does not terminate this Lease in accordance with the foregoing, this Lease shall remain in full force and effect as to the portion of the Premises remaining, except that the Minimum Base Rent shall be reduced in proportion to the reduction in utility of the Premises caused by such Condemnation. Except as provided herein, Landlord shall be entitled to receive all compensation and anything of value awarded, paid, or received in settlement or otherwise related to any Condemnation (“Award”) and Tenant irrevocably assigns and transfers to Landlord all rights to and interests in the Award, including, without limitation, any amount attributable to any excess of the market value of the Premises for the remainder of the Term over the present value as of the termination date of the Rent payable for the remainder of the Term (commonly referred to as the “bonus value” of the Lease). Notwithstanding the foregoing, Tenant shall have the right to make a separate claim in the Condemnation proceeding, as long as the Award payable to Landlord is not reduced thereby, for: (a) the taking of the unamortized or undepreciated value of any leasehold improvements owned by Tenant that Landlord has the right to remove at the end of the Term and that Tenant elects not to remove; (b) reasonable removal and relocation costs for any leasehold improvements that Tenant has the right to remove and elects to remove (if condemner approves of the removal); and (c) relocation costs under California Government Code section 7262, the claim for which Tenant may pursue by separate action independent of this Lease.

ARTICLE 20 - MISCELLANEOUS

20.01 Attorneys’ Fees. In the event of any legal action, arbitration or proceeding between the Parties, the prevailing Party shall be entitled to reasonable attorneys’ fees and expenses as awarded by the court, arbitrator or other person deciding the legal action, arbitration or proceeding as a part of the judgment or award resulting therefrom.

20.02 Sale or Lease of the Premises by Landlord. Notwithstanding any provisions of this Lease, Landlord may assign in whole or in part Landlord’s interest in this Lease and may sell all or part of Landlord’s leasehold interest in the real estate of which the Premises are a part. In the event of any sale or exchange of the Premises by Landlord and assignment by Landlord of this Lease, Landlord shall be entirely freed and relieved of all liability under all covenants and obligations contained in or derived from this Lease or arising out of any act, occurrence or omission relating to the Premises which occurs after the consummation of such sale, exchange or assignment.

20.03 Liability to Successors. The covenants and conditions herein contained shall, subject to the provisions as to assignment, apply to and bind the heirs, successors, executors, administrators and assigns of the Parties hereto who shall be jointly and severally liable for the covenants contained herein. This Lease shall be binding on and shall inure to the benefit of the heirs, executors, administrators, successors, and assigns of the Parties hereto, but nothing in this Section shall be construed as a consent by Landlord to any assignment of this Lease or any interest in this Lease by Tenant except as provided in Article 14 (Assignment and Subletting) of this Lease.

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20.04 Interpretation. Whenever the singular number is used in this Lease, the same shall include the plural. Reference to any gender shall include the masculine, feminine and neuter genders, and the word “person” shall include corporation, firm or association, when required by the content.

The headings or titles to the paragraphs of this Lease are for convenience only and do not in any way define, limit or construe the contents of such paragraphs.

This instrument contains all of the agreements and conditions made between the Parties with respect to the hiring of the Premises and may not be modified orally or in any manner except by a written instrument signed by all the Parties to this Lease.

The laws of the State of California shall govern the validity, performance and enforcement of this Lease. Any action or proceeding arising out of or relating to the Lease shall be brought in a state or federal court situated in the County of Santa Cruz, State of California. If any provision of this Agreement is determined to be void by any court of competent jurisdiction, such determination shall not affect any other provision of this Lease and such other provisions shall remain in full force and effect. If any provision of this Lease is capable of two constructions, one which would render the provision void and one which would render the provision valid, the provision shall be interpreted in the manner which would render it valid.

Except as may otherwise be expressly stated, each payment required to be made by Tenant shall be in addition to and not in substitution for other payments to be made by Tenant.

20.05 Time. Time is of the essence in this Lease.

20.06 Force Majeure. Any prevention, delay or stoppage due to strikes, lockouts, labor disputes, abnormal adverse weather conditions, acts of God, inability to obtain labor or materials or reasonable substitutes therefore, governmental restrictions, regulations or controls, enemy or hostile government action, civil commotion, fire or other casualty, and other causes beyond the reasonable control of and not caused by the fault or negligence of the Party obligated to perform, shall excuse the performance by such Party for a period equal to that resulting from such prevention, delay or stoppage. However, nothing contained in this Section shall excuse the prompt payment of Rent by Tenant as required by this Lease. Tenant's obligations to make payment for Rent and other charges pursuant to the terms of this Lease shall be excused or reduced only as elsewhere expressly and specifically provided in this Lease.

20.07 Notices. Any notice to be given by one Party to the other under this Lease or any options to be exercised under this Lease, shall be in writing. To the extent permitted by law, such notices shall be delivered via email to the addresses listed in Section 1.11 (Tenant’s Address for Notices) and Section 1.12 (Landlord’s Address for Notices).

If email is not permitted as sufficient written notice pursuant to California written law, the notice shall be delivered by: 1) personal delivery in writing to the address set forth in Section

1.11 (Tenant’s Address for Notices) and Section 1.12 (Landlord’s Address for Notices), in which case notice is effective upon delivery; 2) overnight courier (i.e. Federal Express) to the address set forth in Section 1.11 (Tenant’s Address for Notices) and Section 1.12 (Landlord’s Address for Notices) with postage and charges prepaid and return receipt requested, in which case notice is effective when delivered; 3) priority U.S. Mail to the address set forth in Section 1.11 (Tenant’s Address for Notices) and Section 1.12 (Landlord’s Address for Notices), in which case notice shall be deemed delivered on the second business day after the deposit thereof with the United States Postal Service; or 4) as otherwise required by law. Either Party may change its notification contact information set forth in Section 1.11 (Tenant’s Address for Notices), Section 1.12 (Landlord’s

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Address for Notices) and Section 1.13 (Landlord’s Address for Payment of Rent) by providing written notice of any such change in accordance with this paragraph.

Mailed notices shall be sent by United States Postal Service, certified or registered mail, postage prepaid, and shall be deemed to have been given on the date of posting in the United States Postal Service.

Either Party may, by proper written notice pursuant to this Lease, at any time designate a different address to which notices shall be sent.

20.08 Relationship of Parties. The relationship of the Parties hereto is that of Landlord and Tenant. Nothing in this Lease shall be construed to render Landlord in any way or for any purpose a partner, joint venturer, or associate in any relationship with Tenant other than that of Landlord and Tenant, nor shall this Lease be construed to authorize either to act as agent for the other.

20.09 Advertising and Promotion Fund. Landlord, upon acquiring approval from a majority of Wharf tenants and licensees, may establish a Wharf Marketing Association (“Association”) to market, advertise and promote the Municipal Wharf and its various businesses.

By executing this Lease, Tenant agrees to join the Association, if any, and to contribute funds to a Wharf Marketing and Promotion Fund (“Fund”) for the purpose of developing coordinated marketing plans which may include without limitation, media advertising, community-relations programs, special events and promotions of the Wharf and its businesses.

The Association members shall select a board of directors or other such advisory group as a majority of the members of the Association shall select which shall decide and approve all expenditures from the Fund. The activities of the Association shall be financed by the proceeds of the Fund and shall be based upon an annual budget based on an appropriate fiscal year.

If the Landlord elects to establish the Association, Landlord may impose a marketing fee on all members of the Association to implement the Fund. The marketing fee shall equal one-half percent (1/2%) of Gross Annual Sales as defined in this Lease. No such charge shall be imposed unless all members of the Association are similarly charged. This fee shall be in addition to any other Rent, payment or charge required under this Lease and shall be paid in monthly installments to the Landlord for remittance to the Association.

If a Business Improvement Area or Assessment District (as defined in the Santa Cruz Municipal Code) is established in the future which includes the Wharf and its tenants, the collection of marketing fees described above shall terminate if the assessments collected through said District equal or exceed the amounts collected by the Landlord for deposit into the Fund during the prior fiscal year.

20.10 Waiver. The waiver by Landlord of any breach of any provision, term, covenant or condition of this Lease shall not constitute a continuing waiver or a waiver of any subsequent breach by Tenant of either the same or a different provision, term, covenant, or condition of this Lease. The subsequent acceptance of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any provision, term, covenant or condition of this Lease, other than the failure of Tenant to pay the particular rental so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such rent. No provision, covenant, term or condition of this Lease shall be deemed to have been waived by Landlord, unless such waiver is in writing by Landlord.

20.11 Accord and Satisfaction. No payment by Tenant or receipt by Landlord of a lesser amount than the Rent herein stipulated shall be deemed to be other than on account of the

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earliest stipulated Rent, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as Rent be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such Rent or pursue any other remedy in this Lease provided.

20.12 Authority. If Tenant is a corporation or partnership, each individual executing this Lease on behalf of such entity represents or warrants that he or she is duly authorized to execute and deliver this Lease on behalf of such entity and that such entity shall be bound by all the terms and provisions hereof.

20.13 Joint and Several Liability. If more than one individual or entity comprises Tenant, the obligations and liabilities imposed on each individual or entity that comprises Tenant under this Lease will be joint and several.

20.14 Broker’s Commission. Each Party represents and warrants that there are no claims for brokerage commissions or finder’s fees arising from that Party’s activities in connection with this Lease, and each Party agrees to indemnify and hold the other Party harmless from all liability arising from any such claim.

20.15 Guaranty of Lease. This Lease shall not be effective until the Guarantor(s) named in Section 1.10 (Guaranty of Lease) has executed a written Guaranty in the form attached hereto as Exhibit C (Guaranty of Lease). If Section 1.11 (Guaranty of Lease) are blank or marked “Intentionally Omitted” then Tenant shall be solely responsible for all payments and performance required by this Lease.

20.16 Recycling Activities. Tenant agrees to participate, to the greatest extent possible, in all existing or future recycling activities initiated or arranged by Landlord with regard to the Wharf.

20.17 Assessment District Establishment. Tenant agrees not to unreasonably protest the establishment of an assessment district for purposes of parking, promotion, or maintenance.

20.18 MacBride Principles and the Peace Charter. The City Council of the City of Santa Cruz approved Resolution No. NS-19,378 on the 24th day of July 1990, endorsing the MacBride Principles and Peace Charter and encourages all companies doing business in Northern Ireland to abide by the MacBride Principles and Peace Charter.

20.19 Partial Invalidity; Severability. If any provision of this Lease is held by a court of competent jurisdiction to be invalid, void, or unenforceable, such determination shall not affect any other provision of this Lease and such remaining provisions of this Lease shall remain in full force and effect unimpaired by the holding.

20.20 Approval by City Council/City Attorney. This Agreement, and any amendment of its terms, except as under such authority delegated to the City Manager, or designee, is subject to the approval of the City Council of the City of Santa Cruz and the City Attorney, and shall not bind Landlord until such time as their approval and consent has been received in writing.

20.21 Subordination. This Lease is and shall be subordinate to any encumbrance now of record or recorded after the date of this Lease affecting the building, other improvements, and land of which the premises are a part.

Such subordination is effective without any further act of Tenant. Tenant shall from time to time, on request from Landlord, execute and deliver any documents or instruments that may be required by a lender to effectuate any subordination. If Tenant fails to execute and deliver any

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such documents or instruments, Tenant irrevocably constitutes and appoints Landlord as Tenant’s special attorney in fact to execute and deliver any such documents or instruments.

20.22 Permits and Approvals. Tenant is responsible for obtaining all applicable and required government permits or approvals. Approval by Landlord of any action requiring approval does not constitute approval by the City of Santa Cruz of any required permits or applications, and in no way limits the discretion of the City of Santa Cruz in the permit, regulatory, and approval process. Landlord and Tenant will render to each other reasonable assistance in obtaining necessary City of Santa Cruz and other governmental permits or approvals. Any consent or approval of the City of Santa Cruz for any permit, application, or regulatory matter does not constitute consent or approval by the Landlord under the terms of this Lease.

20.23 Prevailing Wage. It shall be the obligation of Tenant and/or any contractor or subcontractor under Tenant to comply with and conform to all State of California labor laws, rules and regulations and the Parties agree that the Landlord shall not be liable for any violation thereof.

To the extent that the construction of any Tenant Improvements or any other work performed pursuant to this Lease may be considered a “public work” (construction, alteration, demolition, or repair work) under and pursuant to the California Labor Code (see California Labor Code Sections 1720 et seq. and Title 8, California Code of Regulations, Chapter 8, Subchapter 3, commencing with Section 16000) and subject to labor compliance monitoring and enforcement by the Department of Industrial Relations, Tenant (and its contractor(s) and subcontractor(s) performing the work) shall conform to any and all prevailing wage requirements applicable to the work on the Premises under this Lease. Tenant (and its contractors and subcontractors) shall adhere to the prevailing wage determinations made by the Director of Industrial Relations pursuant to California Labor Code Part 7, Chapter 1, Article 2, applicable to the Tenant Improvements and associated work. All workers employed in the execution of a public works contract (as such term is defined California Labor Code Section 1720 et seq. and Section 1782(d)(1)) must be paid not less than the specified prevailing wage rates for the type of work performed. (Reference: California Labor Code Sections 1720, 1774 and 1782). Tenant shall ensure that its contractors and subcontractors also comply with and adhere to this prevailing wage provision. Tenant shall be responsible for any failure of Tenant’s contractors and/or subcontractors to comply with applicable prevailing wage and public works laws. If the Tenant is unsure whether the subject work is a “public work” as defined in the California Labor Code, it may wish to seek a timely determination from the California Department of Industrial Relations (“DIR”) or an appropriate court. Only the DIR and courts of competent jurisdiction have jurisdiction to issue legally binding determinations that a particular project is or is not a public work.

To the extent applicable to this Lease, Tenant agrees to be bound by the state prevailing wage requirements, including, but not limited to, the following:
a. If a worker is paid less than the applicable prevailing wage rate owed for a calendar day (or any portion thereof), Tenant shall pay the worker the difference between the prevailing wage rate and the amount actually paid for each calendar day (or portion thereof) for which the worker(s) was paid less than the prevailing wage rate, as specified in California Labor Code section 1775;
b. Tenant shall maintain and make available payroll and worker records in accordance with California Labor Code sections 1776 and 1812; c. If Tenant employs (and/or is legally required to employ) apprentices in performing any work and/or services on the Premises under this Lease, Tenant shall ensure compliance with California Labor Code section 1777.5;
d. Tenant is aware of the limitations imposed on overtime work by California Labor Code sections 1810 et seq. and shall be responsible for any penalties levied in accordance with California Labor Code section 1813 for failing to pay required overtime wages;

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e. Tenant shall post a copy of the applicable wage rates at each jobsite at a location readily available to its workers.
f. Any failure of Tenant and/or its subconsultant to comply with the above requirements relating to a public work project shall constitute a breach of this Lease that excuses the Landlord’s performance of this Lease at the Landlord’s sole and absolute option and shall be at the sole risk of Tenant. Tenant on behalf of itself and any subconsultant, agree to indemnify, defend and hold harmless the Landlord and its officials, officers, employees, and agents from and against any and all claims, liabilities, losses, costs, expenses, attorney’s fees, damages, expenses, fines, financial consequences, interest, and penalties, of any kind or nature, arising from or relating to any failure (or alleged failure) of Tenant and any subconsultant to pay prevailing wages or to otherwise comply with the requirements of prevailing wage law relating to a public work.
g. Tenant acknowledges that it and/or any subconsultant may not engage in the performance of any contract for public work unless currently registered with the DIR and qualified to perform public work pursuant to California Labor Code section 1725.5 [with limited exceptions from this requirement for bid purposes only under California Labor Code section 1771.1(a)].

20.24 Limitation of Liability; Waiver of Consequential Damages; No Liability for Damages.
(a) The obligations of Landlord under this Lease shall not constitute personal obligations of Landlord or its City Council members, officials, directors, officers, employees, representatives, agents, or volunteers, and Tenant shall not seek recourse against Landlord’s City Council members, officials, directors, officers, employees, representatives, agents, or volunteers, or any of their personal assets for such satisfaction. (b) In no event shall Landlord (or its City Council members, officials, officers, directors, employees, agents, representatives, or volunteers) be liable to Tenant for penalties or liquidated damages, or for special, indirect, consequential, or incidental losses or damages including, but not limited to, lost profits, loss or interruption of business, lost or damaged data, loss of use of facility or equipment, or the failure or increased expense of operations, regardless of whether any such losses or damages are characterized as arising from breach of contract, breach of warranty, tort, strict liability, or otherwise, even if Landlord is advised of the possibility of such losses or damages, or if such losses or damages are foreseeable. (c) Tenant acknowledges that Landlord would not enter into this Lease if it were to be liable for damages (including, but not limited to, actual damages, economic damages, consequential damages, lost profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use) under, or relating to, this Lease or any of the matters referred to in this Lease. Accordingly, Tenant covenants and agrees on behalf of itself and its successors and assigns, not to sue Landlord (either in its capacity as landlord in this Lease or in its capacity as the City of Santa Cruz) or Landlord’s City Council members, officials, officers, directors, employees, agents, representatives, or volunteers for damages (including, but not limited to, actual damages, economic damages, consequential damages, lost profits, loss of rents or other revenues, loss of business opportunity, loss of goodwill or loss of use) or monetary relief for any breach of this Lease by Landlord or for any dispute, controversy, or issue between Landlord and Tenant arising out of or connected with this Lease or any of the matters referred to in this Lease (including, without limitation, any and all Wharf closures, Landlord obligations, and/or any and all plans, permits, licenses, regulatory approvals, California Environmental Quality Act (“CEQA”) documents, Transfers and/or any future amendments or enactments thereto), the Parties agreeing that declaratory relief, injunctive relief, mandate and specific performance shall be Tenant’s sole and exclusive judicial remedies.

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20.25 Offer. Preparation of this Lease by either Party or their agent and submission of same to the other Party shall not be deemed an offer to lease to the other Party. This Lease is not intended to be binding until executed and delivered by all Parties hereto.

20.26 Compliance with City Departmental Rules and Regulations. Tenant agrees to comply with all rules and regulations imposed by the City's Fire, Police, Planning, Water, Public Works, Building, Finance, Economic Development and Housing and Sanitations departments and divisions, and any other departments and divisions in existence now or at any time in the future.

20.27 Retention of Discretion. By its execution of this Lease, Landlord is not committing itself or agreeing to undertake any activity requiring the subsequent exercise of discretion by the City of Santa Cruz, or any department thereof, including but not limited to the approval of any Tenant Improvements, any CEQA documents, any development proposal or land use regulation governing the Premises, or any other approval. Tenant understands and agrees that Landlord in its capacity as the City of Santa Cruz reserves the right to exercise its discretion as to all matters which it is, by law, entitled or required to exercise its discretion, including, but not limited to, the consideration of Tenant Improvements, any CEQA documents, a final development or project, any and all plans, permits, licenses or regulatory approvals, and/or any other acts or activities requiring the subsequent independent exercise of discretion by the City of Santa Cruz or any agency or department thereof. Nothing in this Lease shall obligate the Landlord in its capacity as the City of Santa Cruz to exercise its discretion in any particular manner, and notwithstanding any provision of this Lease to the contrary any exercise of discretion required by law or permitted by this Lease shall not be deemed to constitute a breach of Landlord’s duties under this Lease.

20.28 Cumulative Remedies. The various rights, options, elections, powers and remedies contained in this Lease shall be construed as cumulative, and no one of them shall be exclusive of any of the others or of any other legal or equitable remedy which either party might otherwise have in the event of a breach or default in the terms of this Lease. The exercise of one right or remedy by such Party shall not impair its right to any other right or remedy until all obligations imposed on the other party have been fully performed.

20.29 Counterparts. This Lease may be executed in several counterparts and all such executed counterparts together shall constitute one agreement binding on all of the Parties. A scanned, electronic, facsimile or other copy of a Party’s signature shall be accepted and valid as an original.

20.30 Entire Agreement. This Lease and the attached Exhibits contain all of the agreements and conditions made between the Parties with respect to the hiring and leasing of the Premises and the subject matter of this Lease and supersede all prior agreements or understandings between the Parties related thereto. Any agreements or representations respecting the Premises, their leasing to Tenant by Landlord, or any other matter discussed in this Lease not expressly set forth in this instrument are null and void. This Lease may not be modified or amended orally or in any manner except as provided in Section 20.32 (Amendments to Lease) below.

20.31 Construction of Agreement. Each Party acknowledges that it has reviewed this Lease and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting Party shall not apply in the interpretation or construction of this Lease.

20.32 Amendments to Lease. This Lease may not be amended in any respect except by way of a written instrument which expressly references and identifies this particular Lease, which expressly states that its purpose is to amend this particular Lease, and which is duly executed by the Parties.

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20.33 Warranty of Authority. The signatories to this Lease warrant and represent that each is authorized to execute this Lease and that their respective signatures serve to legally obligate their respective representatives, agents, successors and assigns to comply with the provisions of this Lease.

SIGNATURE PAGE FOLLOWS

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The Parties have executed this Lease as of the Effective Date.

LANDLORD
City of Santa Cruz
A California municipal corporation
By: ________________________________ Date: _____________________ Matt Huffaker
Its: City Manager
TENANT
By: _____________________________ Date: _____________________ Bruce Noland
By: _____________________________ Date: _____________________

APPROVED AS TO FORM:
_____________________________ Date:

Stephanie Duck
Office of the City Attorney
Signature Requirements for Business Entity:
a. Corporation – 2 officer signatures required (one from each group, unless person signing holds officer positions in both Group 1 and 2):

Group 1: Chief Executive Officer, Chairman of the Board, President, or Vice President Group 2: Secretary, Assistant Secretary, Chief Financial Officer, Treasurer, Assistant Treasurer b. Partnership - Signature of General Partner, or signature of partner who is authorized to execute documents per the Certificate of Partnership. If authorized partner is a corporation, follow Corporation signature requirement. c. LLC- For a member-managed LLC, signature of any member. For a manager-managed LLC, signature of the manager. If the LLC has corporate officer designations, follow Corporation signature requirement.

February 3, 2026

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Exhibit A
Location of Premises on Santa Cruz Municipal Wharf

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Exhibit B
Floor Plan of Premises
Not available

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Exhibit C
Guaranty of Lease

1. In consideration of the execution of the attached Lease dated ______________, by and between City of Santa Cruz, a municipal corporation (“Landlord”) and Flotsam of California, Inc., a California corporation, (“Tenant”) for the premises known as 47 Municipal Wharf in Santa Cruz, California, the undersigned Guarantor(s) hereby unconditionally and irrevocably guarantee(s) to Landlord, its successors and assigns, the prompt payment by Tenant of the rent and all other sums required under the Lease, and the faithful performance by Tenant of all the terms, covenants, and conditions contained in the Lease. The lease is incorporated herein by reference.

2. This Guaranty shall not be affected by any deviation from or alteration of the terms, covenants, or conditions of the Lease or by any permitted assignment or subletting of all or any part of the interest of Tenant in the Lease. This Guaranty shall not be released, extinguished, modified, or in any way affected by failure on the part of Landlord to enforce any or all of its rights or remedies whether pursuant to the terms of the Lease or at law or in equity.

3. This Guaranty is a continuing one and shall terminate only on payment by Tenant of all the rent and other sums required under the Lease and on performance by Tenant of all duties and obligations contained in the Lease.

4. The undersigned waives notice: (a) of any default by Tenant (i) in payment by Tenant of any of the rent or other sums hereby guaranteed and (ii) in performance by Tenant of the terms, covenants, and conditions of the Lease, and (b) of acceptance by Landlord of this Guaranty. Landlord agrees to give written notice to the undersigned prior to commencing legal action against the Tenant or against the undersigned.

5. The undersigned consents that Landlord may from time to time extend the time for performance or otherwise modify, alter, or change the Lease and any or all of its provisions and may extend the time for payment of the rent and all other sums hereby guaranteed and may receive and accept notes, checks, and other instruments for the payment of money made by Tenant and extensions and renewals thereon without in any way releasing or discharging the undersigned from its obligations under this Guaranty. Notice of presentment of any such note or notes and/or notice of default in the payment thereof at maturity and/or protest or notice of protest thereof is expressly waived.

6. The undersigned further consents and agrees that Landlord shall not be required, in order to enforce this Guaranty, to first institute suit or exhaust its legal remedies against Tenant. This Guaranty of Lease shall not be extinguished as a result of any bankruptcy proceeding.

7. This Guaranty may be immediately enforced against the undersigned (jointly and/or severally if more than one guarantor) on any default by Tenant, and the insolvency of Tenant shall be deemed a default.

8. In the event any action should be commenced by Landlord against the undersigned to enforce any of the terms or conditions of this Guaranty, Landlord shall be entitled to recover from the undersigned hereunder in any action in which it shall prevail, reasonable attorneys’ fees and expenses.

9. If there is more than one Guarantor, the obligations and liabilities imposed on each individual that serves as a Guarantor under this Guaranty will be joint and several.

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10. This Guaranty shall inure to the benefit of Landlord, its successors and assigns, and shall bind the successors and assigns of the undersigned.

11. The unenforceability, invalidity, or illegality of any provision(s) of this Guaranty shall not render the other provisions unenforceable, invalid, or illegal.

12. The undersigned Guarantor(s) acknowledge(s) that he/she has/have reviewed this Guaranty and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Guaranty.

13. The undersigned Guarantor(s) acknowledge(s) giving mature and careful thought to this Guaranty and has the legal capacity and standing to enter into this Guaranty. The undersigned Guarantor(s) acknowledges understanding the meaning and legal consequences of this Guaranty.

14. This Guaranty may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the undersigned has executed this Guaranty this ______ day of _____________, 20__.

Guarantor:
______________________
Bruce Noland, individually and as
owner and manager of Flotsam of California dba as Noland’s

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CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC
State of California)
County of Santa Cruz)
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 paragraph is true and correct.

WITNESS my hand and official seal.
(This area for official notary seal)
Signature ______________________________
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.

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Exhibit D
Statement of Gross Income and Rent
(form of begins next page)

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IN ACCOUNT WITH

CITY OF SANTA CRUZ
1200 PACIFIC AVENUE, SUITE 290
SANTA CRUZ, CALIFORNIA 95060
Noland’s
47 Municipal Wharf
Santa Cruz, CA 95060
This completed and signed form, together with the accompanying payment, must be received by the City no later than close of business on the fifteenth day of the month following the month for which you are reporting sales. Do not modify this form.

MONTHLYLY STATEMENT OF GROSS INCOME, RENT, AND

CAPITAL IMPROVEMENT CONTRIBUTIONS
FOR MONTH ENDING _________________ 20___

1. Gross quarterly income (all sales and business transactions): ..................................... $ ___________

2. Cash or credit refunds made upon sales from premises: ..................................................... $ ___________

3. The amount of any city, county, state or federal sales, luxury or excise taxes on sales from the premises where such taxes are both added to the selling price and paid to the taxing authorities by Tenant: ................................................................................. $ ___________

4. Total adjustments (Line 2 plus Line 3): ................................................................................ $ ___________

5. Adjusted gross income (Line 1 minus Line 4): ..................................................................... $ ___________

6. Percentage Rent:

Breakpoint: $365,063.27
a. Up to and including Breakpoint: $___________ x 8%: ................................................. $ ___________ b. Over Breakpoint: $___________ x 6%: ........................................................................ $ ___________

7. Percentage Rent (Line 6a plus 6b): ..................................................................................... $ ___________

8. Current minimum monthly rent: ............................................................................. $ _4,878.44__

9. RENT DUE (the greater of Line 7 or Line 8): ....................................................................... $ ___________

10. CAPITAL IMPROVEMENT CONTRIBUTION (1.0% of Line 5): ........................................... $ ___________

11. LATE FEE (10% of Line 9 plus Line 10 if paid after the due date): ...................................... $ ___________

12. INTEREST ON UNPAID RENT (1.5% monthly interest on Line 9 plus Line 10 if paid after the due date): ....................................................................................................................... $ ___________

13. CREDIT/TRUE UP (amount of any prior rent over/underpayments)*: .................................. $ ___________

14. TOTAL REMITTANCE (Sum of Line 9-13): .......................................................................... $ ___________

*Description of Credit/True Up
I hereby certify that “Gross Monthly Income” reported herein is equal to total gross sales which have been or will be reported on the State, Federal and District Sales and Use Tax Return submitted to the State Board of Equalization for the period ending _________________.
______________________________________________________
Signature of Tenant or Tenant’s Principal Agent
Executed at Santa Cruz, California on ______________________, 20_____ w511204
Capital Improvements

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Exhibit E
Construction Work Best Management Practices and Regulations (attached)

9.65 CONSTRUCTION WORK
Best Management Practices
Chapter 4 of the Best Management Practices Manual for the City’s Storm Water Management Program
Planning Department
Public Works Department
809 Center Street, Santa Cruz, CA 95060
Revised: June 2014
Published: March 2007
Authorized by Municipal Code Chapter 16.19

9.66 ii

TABLE OF CONTENTS

1. PLANNING CONSTRUCTION PROJECTS ................................................................................................ 1

1.1. Site Planning to Minimize Project Impacts .............................................................................................. 1

1.2. Erosion Control Plan Requirements ......................................................................................................... 2

2. EROSION AND SEDIMENT CONTROL REQUIREMENTS..................................................................... 3

2.1. Erosion Control ........................................................................................................................................ 3

2.2. Sediment Control...................................................................................................................................... 4

3. SITE HOUSEKEEPING REQUIREMENTS ................................................................................................. 5

3.1. Equipment and Vehicle Maintenance and Cleaning ................................................................................ 5

3.2. Material Storage and Soil Stockpiles ....................................................................................................... 5

3.3. Dewatering Operations ............................................................................................................................. 6

3.4. Waste Management: Building Materials, Demolition Waste, and Vegetation ........................................ 6

3.5. Portable Toilet Facilities .......................................................................................................................... 7

3.6. Site Cleanup ............................................................................................................................................. 8

4. PAINTING AND MASONRY WORK .......................................................................................................... 8

4.1. Painting..................................................................................................................................................... 8

4.2. Masonry and Concrete Work ................................................................................................................... 9

5. SIDEWALK AND ROADWORK ............................................................................................................... 10

6. References & Credits .................................................................................................................................... 10

7. Contact .......................................................................................................................................................... 10

9.67 1
In the City of Santa Cruz, water in the streets, gutters, and storm drains flows to local creeks, the San Lorenzo River, or Monterey Bay without any treatment. Construction sites have the potential to generate wastewater and runoff that carry sediment, debris, paint, concrete, and other harmful pollutants. Thus, in order to reduce the amount of pollutants reaching the storm drain system and local waterways, the City developed “Best Management Practices (BMPs)” for construction work. All types of construction projects, whether large or small projects, must abide by these BMPs. Construction work includes, but is not limited to, clearing, grading, excavation, stockpiling, building, masonry and concrete work, and roadwork. These BMPs apply to commercial, retail, industrial, and residential projects, and to both new construction sites and remodeling projects.

1. PLANNING CONSTRUCTION PROJECTS

1.1. Site Planning to Minimize Project Impacts
Coordinating BMP implementation and construction activities is critical in preventing erosion and sediment loss. The site planning measures below shall be incorporated in project grading and erosion control plans to reduce the potential for soil erosion and storm water impacts:
 Site development shall closely match the existing
topography and soil in order to minimize the
potential for erosion. Minimize disturbed area and
protect natural features including soil, trees and
shrubs.
 Protect trees subject to the Heritage Tree
Ordinance and other trees designated for protection
by a development proposal through the use of
fencing, tree armoring, barricades or other
appropriate methods during the construction phases.
 Clearly mark the proposed limits of land
disturbance prior to commencing topsoil or
vegetation removal to ensure that only the required
land is cleared. Delineate clearing limits,
easements, setbacks, sensitive or critical areas,
trees, drainage courses, and buffer zones prior to
construction to prevent excessive or unnecessary
disturbances and exposure.
 Do not remove existing trees or tree stands located
on a site for which a discretionary permit is
required until such a permit is approved by the
Planning Department.
 Conduct grading operations in phases in order to
reduce the amount of disturbed areas and exposed
soil at any one time. Unless specifically approved
on the project’s Erosion Control Plan, no clearing,
excavation, or grading shall be conducted during rainy weather. All rainy season grading must be in accordance with Section 18.45.040 of Title 18 of the City’s Municipal Code. An exception may be granted by the Building Official for minor soil disturbance that does not present a hazard.  Plan to route construction traffic over areas that must be disturbed for other construction activities in order to reduce the amount of area that must be cleared.

HEADS UP!
SOIL DISTURBANCE OVER 1 ACRE
If your project will disturb one acre or more of soil
(or is less than one acre but part of a larger
development), you must file a Notice of Intent (NOI)
with the State Water Resource Control Board
(SWRCB) to obtain coverage under the General
Permit for Discharges of Storm Water Associated
with Construction Activity (Construction General
Permit) prior to commencing work.

As part of the submittal to the SWRCB, a Storm
Water Pollution Prevention Plan (SWPPP) must be
prepared for the proposed project by a Qualified
SWPPP Developer (QSD).When receiving coverage
under the Construction General Permit, the project
will be assigned a Waste Discharger Identification
(WDID) from the SWRCB. The City of Santa Cruz
will not issue a Building permit for the project
unless it has received a WDID. For more
information on the Construction General Permit,
visit
http://www.waterboards.ca.gov/water_issue
s/programs/stormwater/construction.shtml

9.68 2

1.2.Erosion Control Plan Requirements
Site grading and construction activities shall be implemented in accordance with an approved erosion control plan. Before designing an Erosion Control Plan, gather project background information, including soil type, drainage, topography, and surrounding site conditions. This information will help determine appropriate Construction BMPs. Erosion Control Plans shall be submitted with all building permit applications involving ground disturbance and shall include at a minimum:
 Site topography
 Nearby watercourses within 200 feet of the project area  Proposed grading contours
 Locations of existing utilities, including sewer, storm drain, curb and gutter, as applicable  Location of proposed erosion control measures and installation details (see section 2.1 for requirements)
 Location of proposed sediment control measures and installation details (see section 2.2 for requirements)
 Location of proposed construction waste control measures (see section 3.4 for requirements)  Stockpile and equipment staging areas
 Total area of disturbance (in acres)
 List of other required permits associated with the grading activity, such as State Construction General Permit, U.S. Army Corps of Engineers 404 permit, State Water Board 401 Water Quality Certification, California Department of Fish and Wildlife 1600 Agreement, as applicable. .

Figure 1: Example Erosion Control Plan

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2. EROSION AND SEDIMENT CONTROL REQUIREMENTS
Erosion and sediment control BMPs shall be in place and implemented, as appropriate, prior to commencing grading or vegetation removal. These measures shall be maintained on all disturbed areas in order to minimize the release of sediment in a site’s storm water discharge.

2.1. Erosion Control
Any project that involves ground disturbance shall include the following minimum erosion control measures on the erosion control plan. Note erosion control measures on the plan and provide installation details.
 Protect and preserve topsoil to minimize erosion and retain infiltration capacity.
 Minimize land disturbance such as cuts and fills. Stabilize slopes and all disturbed areas as soon as grading is finished or cut-and-fills are made.
 Cover bare soils and slopes as soon as possible. Use one or more of the following to reduce the erosion potential from bare, exposed, or disturbed soil: rolled erosion control products (e.g. filter fabric, erosion control blankets, geotextiles), hydraulic mulch or hydroseeding, straw or wood mulch, seeding,
vegetation planting, or other appropriate cover material.  Do not use seeding or loose mulch on slopes greater than 3:1 (H:V) without additional erosion protection such as geotextiles or hydroseeding. If vegetative cover is used, establish a uniform vegetative cover with a minimum of 70 percent coverage.  Protect vegetated buffer zones and riparian corridors by using silt fences, that are properly staked in (on flat land or moderate slopes), or use other appropriate sediment controls.  Properly install and maintain all on-site erosion control measures and structural devices, both temporary and
permanent. Promptly repair or reinstall any erosion control measures and structural devices that were damaged during construction and maintain them so that they do not become nuisances with stagnant water, odors, insect breeding, heavy algae growth, debris, and/or safety hazards.
 A qualified person should conduct inspections of all on-site BMPs during each rainstorm, if possible, and after a storm is over to ensure that the BMPs are functioning properly. For sites greater than one-acre, on-site inspections are required in accordance with the State Water Quality Control Board
Construction Activities Storm Water General Permit.

Figure 2: Types of Erosion
Figure 3: Protect Vegetated Buffers &
Riparian Corridors

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2.2. Sediment Control
Any project that involves ground disturbance shall include the following minimum sediment control measures on the erosion control plan. Note sediment control measures on the plan and provide installation details. Installation standard details can be downloaded from the California Department of Transportation (Caltrans) website at http://www.dot.ca.gov/hq/construc/stormwater/details.htm or on the California Stormwater Quality Association (CASQA) website.  Perimeter control. Use one or more sediment control measures, such as fiber rolls and silt fences, to prevent sediment from leaving the site during the winter season. The measure(s) used will depend upon site conditions and topography.

Fiber rolls can be used around the perimeter of the soil disturbance area on flat sites to prevent or limit
sediment from leaving the site. In urban areas or sites directly adjacent to streets, place fiber rolls at the back of the curb or sidewalk. Fiber rolls are also appropriate in combination with erosion control cover on slopes to
shorten slope length and spread runoff as sheet flow.

Silt fences can be used for perimeter control and/or as interior controls down-slope of disturbed areas on sites where slopes do not exceed 4:1 (H:V). Silt fences are
not appropriate in concentrated runoff flow areas, in
areas where flooding is a concern, or along slopes.

Silt fences must be properly staked in to be effective. Install silt fences so that the drainage around each fence does not create erosion and rills down-slope of the fence. Turn the ends of the silt fence uphill to prevent storm water from flowing around the fence. If not installed at the same elevation throughout, silt fences will create erosion.
 Storm Drain Inlet Protection. Projects that include storm drain inlets or projects that drain into storm drains shall include measures on the Erosion Control Plan to protect the inlets so silt and other pollutants do not enter the storm drain system. Effective methods to protect storm drain inlets include rock/sand bag barriers, fiber rolls, heavy rubber mats to cover and seal the inlet, and geotextile blankets inserted into the catch basin.

Do not use sand bags or straw wattles around storm drain inlets exposed to vehicular traffic in streets or parking lots.

Train employees and contractors to not drive over or park on sand bags, fiber rolls or berms protecting storm drain inlets. If protective barriers are broken or damaged, cleanup and remove any particles entering the storm drain inlet, and replace them immediately.  Stabilized construction access/exit. All projects that include ground disturbance must include a stabilized construction access/exit, unless construction vehicles and equipment will remain on paved surfaces at all times during construction. Show the location of the stabilized construction access/exit on the Figure 6: Stabilized construction access Erosion Control Plan as well as construction details and notes.

Figure 4: Perimeter silt fence
Figure 5: Storm drain inlet
protection

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 Sediment Control on Slopes. Additional measures will be required to reduce runoff velocity and to trap sediments on slopes.

The following measures may be applied individually or in combination: erosion control blankets, fiber rolls, terracing, check dams and energy dissipaters, and/or diversion structures to reduce runoff velocity and trap sediments.
 Long-term sediment control. Measures are required to ensure that erosion and sedimentation do not become an issue once the project is completed. The following measures can be effective for long term sediment control once the plantings and roots have grown to sufficient size:
o Seeding slopes by hydro-seeding or with seeded blankets; preferably using native seeds
o Landscaping with plant species that grow rapidly and have root systems that are effective at “holding” soil

3. SITE HOUSEKEEPING REQUIREMENTS
Include the following housekeeping practices on the Erosion Control Plan as applicable. Implement during construction in order to minimize the potential for storm water impacts.

3.1. Equipment and Vehicle Maintenance and Cleaning
 Inspect equipment and vehicles frequently and repair any leaks as soon as possible. Contain and clean up leaks, spills, and drips of hazardous materials and chemicals as quickly as possible to minimize run-off or soak in. This includes fuel and motor oil, hydraulic fluid, and glycol based anti-freeze from vehicles. Use dry cleanup methods if possible. Perform major maintenance and repairs off-site.  Remove encountered abandoned fuel/oil tanks (and their contents) in a manner consistent with methodology approved by both the City and the Santa Cruz County Environmental Health Department.  If repair or refueling of vehicles and equipment must be done on-site, use a designated location away from storm drain inlets, water bodies, and other sensitive areas.  If equipment is washed on-site, wash water may not be discharged to the storm drain system. If possible, wash vehicles at an appropriate off-site facility.  Recycle used motor oil, other vehicle fluids, and vehicle parts whenever possible.

3.2. Material Storage and Soil Stockpiles
 Locate material and soil stockpiles away from gutters, storm drain inlets, and water bodies. In addition, keep stockpiles away from steep slopes and unstable soil in order to minimize the chance of an accidental release to the environment. Stockpiles may never be stored on a street or in an alley unless specifically approved by the Public Works Department.
 Store materials, including stockpiles and excavation spoils, under cover and protected from wind, rain, and runoff. Cover piles of soil, construction materials and wastes with plastic sheeting or tarps.

Figure 7: Fiber roll installation

9.72 6
 During the rainy season, after October 1st or sooner if rain is forecast, implement control measures for the items listed below if stored outside in order to prevent sediment, litter, and other pollutants from leaving the site and/or being discharged into the storm drain system. o Material stockpiles
o Soil stockpiles
o Excavation spoils
o Construction materials
 Store open bags of particulate, granular, or powder materials (such as plaster or concrete) indoors if possible. If stored outside, they must be covered or closed, and during the rainy season they must be kept within secondary containment.
 Store paints, chemicals, solvents, and other hazardous materials inside or within a shed with double containment.
 Keep dumpster lids closed and secured. For dumpsters or bins that don’t have a lid, cover them with plastic sheeting or a tarp during rainy or windy weather.

3.3.Dewatering Operations
Proper procedures must be followed before starting construction and during construction to manage the discharge of groundwater or storm water accumulated in construction site excavations or other non-storm water discharges.
 When it is expected that water encountered during site construction will need to be discharged offsite, make
arrangements ahead of time to properly manage and
dispose of this water. Identify the location of
dewatering activities and the nearest sanitary sewer
connection where the water will be discharged on the
Erosion Control Plan.
 Direct groundwater or storm water that must be
pumped out of an excavation to a settling tank to
allow sediments to settle out of the water.
 Retain water from fire sprinkler system dewatering
onsite for landscape irrigation or direct it towards the sanitary sewer.
 Apply for a wastewater discharge permit from the City’s Wastewater Treatment Facility before connecting to the sanitary sewer. Contact an Environmental Compliance Inspector, at 420-6050 to request a permit.

3.4.Waste Management: Building Materials, Demolition Waste, and Vegetation  Onsite storage of construction materials. Store wastes in containers or a dumpster whenever possible.

Cover piles of uncontained wastes and wastes stored in open containers during windy conditions and prior to significant forecasted rain (0.25 inches in a 24-hour period). Do not hose dumpsters out on the construction site.

Use construction products made from or packaged in polystyrene/plastic foam in a manner preventing the polystyrene/plastic foam from being released into the environment.

HEADS UP!

DEWATERING OPERATIONS
Water from fire sprinkler and excavation
dewatering that cannot be managed onsite
shall be directed towards the sanitary
sewer. A permit must be obtained from
the City’s Wastewater Treatment Facility
before connecting to the sanitary sewer.

9.73 7
 Building materials and demolition waste. All residential and nonresidential construction projects must comply with the mandatory 50% recycle rate for all construction and demolition waste, per City’s Construction Waste Management Plan (CWMP). If contractors, and/or subcontractors haul their own material as part of the scope of work, they shall not be excluded from complying with the CWMP.

All contractors, and/or subcontractors shall provide the City of Santa Cruz with all required documentation of weight and waste diversion data for the materials hauled. Contact the Green Building coordinator at 420-5120 for more information.

Never leave or abandon materials or excavation spoils at a project site. At the end of a construction project, collect all unused or waste materials and dispose of properly. Do not leave discarded building materials, demolition wastes and waste vegetation in a street, gully, or waterway.  Construction and demolition waste recycling. Recyclable waste includes broken concrete, green waste, lumber and wood, scrap metal and appliances. Call the City’s Customer Service Division, at telephone (831) 420-5220, for information about what may be recycled and to make arrangements to have recycling bins or dumpsters brought to the work site.

Construction projects at commercial or industrial sites must obtain any detached roll-off boxes, dumpsters, debris-boxes or other containers for collection of waste materials (to be disposed of or recycled) from the City’s Sanitation Services at (831) 420-5220. A private hauling service may be used only if all roll-off boxes or containers are left attached to the service’s vehicle the entire time the box is at the site.

There are reduced rates available for certain waste materials separated according to type. These waste types are: 1) green waste, lumber and wood; 2) mixed construction and demolition debris; 3) dirt; and 4) broken brick, asphalt, and concrete. When calling Customer Service, please ask about the “Other Materials” box rates and tonnage fees for separated materials. The same tonnage fees are also available at the landfill for self-hauled separated loads.
 Waste vegetation. Dispose of waste vegetation and unpainted or untreated lumber through the City’s GreenCycle! program.

The program accepts many types of vegetation including brush, plants, branches, untreated boards, and tree trunks (not exceeding 24 inches in diameter and four feet in length).

Vegetation may be dropped off at the City’s Resource Recovery Facility or placed in a City GreenCycle! container for pickup by the City. For more details, call the City’s Customer Service Division at (831) 420-5220.

Never dump or leave soil, mulch, vegetation, and other
landscape products into the street, gutter, or storm drain system.  Hazardous materials. Asbestos and other debris containing hazardous materials must be disposed of as hazardous waste. For more information about hazardous waste disposal, please contact the County Environmental Health Department at (831) 454-2022.

3.5. Portable Toilet Facilities
All sanitary wastes shall be collected and managed through the use of portable toilet facilities, serviced with disposal in the sanitary sewer system, or permanent toilet facilities plumbed to the sanitary sewer.  If portable toilets are used, ensure that the leasing company properly maintains the toilets and promptly makes repairs as needed. Conduct visual inspections for leaks.

9.74 8
 Place portable toilets on a level surface and at a safe distance away from paved areas and, to the extent practical, storm drain inlets. Secure them to prevent blowing over.  Provide secondary containment for portable toilets located within 20 feet of a stream, storm drain, or street.
 During pump-out, take appropriate measures to avoid spillage. If spillage occurs it shall be cleaned up immediately.

3.6. Site Cleanup
 When cleaning up, sweep whenever possible. Litter and debris must be picked up and disposed of properly.
 Road or sidewalk work. In the roadway or on the
sidewalk, material stockpiles must be removed and
cleaned up by the end of each day.
 Landscaping work. Sweep up soil and other landscape
products that remain on pavement, such as the sidewalk, driveway, or street by the end of each day.
 Sediment Control Devices. Sweep and remove any solid
waste that accumulates at erosion and sediment control
devices as soon as possible.

4. PAINTING AND MASONRY WORK

4.1. Painting
 Paint, paint thinner, and rinse water containing either of these may never be discharged into the storm drain system.
 When there is a risk of a spill reaching storm drains, protect nearby storm drain inlets prior to starting painting.
 Clean up spills immediately.
 When work is conducted on a bridge, take precautions to prevent runoff from reaching the water body beneath the bridge.  When cleaning brushes and rollers after painting, brush out excess paint onto newspaper or cardboard. Never clean or rinse paintbrushes, rollers, and containers into a street gutter or storm drain inlet.

If using latex paints, the brush or roller can be rinsed in a sink that is plumbed to the sanitary sewer. If using oil-based paints, the brush or roller needs to be cleaned with paint thinner. Do not discharge paint thinners to the sanitary sewer. Paint thinner must be disposed of as hazardous waste.
 Drain leftover paint in the roller pan back into the paint can. If using paint hoses and guns, spray out the paint residue into the paint can.

HEADS UP!

SITE CLEANUP
Do not clean the street, sidewalk, or
other paved areas by washing or by
directing sediment, concrete, asphalt, or
other particles into the storm drain
system. If using water, direct it to a
landscaped or grassy area large enough
to absorb all the water.

Figure 8: Do not let paint, paint thinner,
or water containing either flow to the
gutter or storm drain system

9.75 9
 Leftover water-based (latex) paint should be
recycled, returned to the supplier or donated to
someone who will use it. Dried latex paint and empty
paint cans may be disposed of in the garbage.
 Leftover oil-based paint may be recycled or disposed
of as hazardous waste. For more information about
hazardous waste disposal, please contact the County
Environmental Health Department at (831) 454-2022.
 Non-hazardous paint chips and dust from dry
stripping and sand blasting may be swept up or
collected in plastic drop cloths and disposed of as
trash. Residue from chemical paint stripping and chips
and dust from marine paints or paints containing lead
or tributyl tin must be disposed of as a hazardous
waste.
 If grinding or blasting is used to remove old paint,
protect nearby storm drain inlets with some type of a
protective cover such as a heavy rubber mat. Paint
dust, particles, and other debris must be completely
cleaned up, preferably by sweeping, after the job is
done.

4.2. Masonry and Concrete Work
 Concrete, cement, and masonry products may never be discharged into the storm drain system.

Concrete, cement, and masonry mixing containers may not be washed or rinsed into the street or storm drain system. If a concrete transit mixer is used, a suitable washout box, excavation or self-washing mixer able to contain the waste material shall be provided on-site.  Do not mix fresh concrete or cement mortar in a gutter, over a storm drain inlet, or immediately adjacent to a water body.
 During tile or concrete cutting, ensure that the slurry water does not run off into the street or storm drain system. Also, dried slurry must be cleaned up and properly disposed so that it will not be carried into the storm drain system by wind, traffic, or rain.
 Store materials under cover and protected from wind, rain, and runoff.  Small amounts of excess concrete, grout, and mortar may be disposed of in the trash.  Wash out from concrete mixers may never be disposed of in the street or storm drain system. If possible, pump the washout back into the mixer for reuse.

HEADS UP!

BUILDING EXTERIOR CLEANING
When using high-pressure water to strip
or clean building exteriors prior to
painting, cover or berm nearby storm
drain inlets to prevent discharge into the
storm drain system. The wastewater must
be collected and discharged to the
sanitary sewer if the paint does not
contain lead (usually buildings painted
after 1978) or mercury. If paint
containing lead or mercury was used,
contact an Environmental Compliance
Inspector, at (831) 420-6050, for
information about the appropriate
discharge or disposal options prior to
commencing the work.

9.76 10

5. SIDEWALK AND ROADWORK
 Protect nearby storm drain inlets (preferably with heavy rubber mats) and adjacent water bodies prior to breaking up asphalt or concrete.
 If it rains unexpectedly, take appropriate action to prevent pollution of storm water runoff (e.g., divert runoff around work areas, cover materials).
 Saw-cut slurry. The discharge of saw-cut slurry to the storm drain system is prohibited. Take measures to contain the slurry and, if necessary, protect nearby catch basins or gutters. If slurry enters the storm drain system, remove material immediately.

Dried saw cut slurry must be cleaned up and properly disposed so that it will not be carried into the storm drain system by wind, traffic, or rainfall.
 Oil sealants. Cover and seal nearby storm drain inlets and manholes before applying seal coat, slurry seal, etc. Leave covers in place until the oil sealant is dry or the end of the day.  Park paving machines over drip pans or absorbent materials if they have a drip or leak.  Waste and material management. After breaking up old pavement, sweep up materials and recycle as much material as possible. Properly dispose of non-recyclable materials.

Never wash sweepings from exposed aggregate concrete into a street or a storm drain inlet. Collect and return to aggregate base stockpile or dispose of in the trash.

Remove and clean up material stockpiles (i.e. asphalt and sand) by the end of each week or, if during the rainy season, the end of the day. Stockpiles must be removed by the end of each day if they are located in a public right-of-way.

6. References & Credits
Erosion and sediment control illustrations from: U.S. Environmental Protection Agency (EPA), National Pollutant Discharge Elimination System (NPDES), “Developing Your Stormwater Pollution Prevention Plan: A Guide for Construction Sites”, available online at http://water.epa.gov/polwaste/npdes/stormwater/Stormwater-Pollution-Prevention-Plans-for-ConstructionActivities.cfm

7. Contact
For more information, please call the City of Santa Cruz:

Public Works Department: 420-5160
Environmental Compliance Inspector: 420-6050
Planning Department: Building Inspection Services at 420-5120 Planning Department: Green Building at 420-5120
Figure 9: Do not discharge saw cut slurry
to the gutter or storm drain system

9.77

Rev. 12.15.2025
Exhibit F
Municipal Wharf Sign Guidelines

1.01. Purpose.
a. These Guidelines are intended to provide Wharf Tenants with general criteria regarding appropriate business signage.
b. All advertising devices and signs shall comply with the regulations set forth at Santa Cruz Municipal Code (“SCMC”) Chapter 24.12 Part 4 entitled “Advertising Devices, Signs and Billboards” made part hereof by reference.
c. In the event of conflict or inconsistency between these Guidelines and SCMC Chapter 24 Part 4, SCMC Chapter 24.12 Part 4 shall prevail.

2.01. City Approval. AII exterior signs must be approved in writing by the City Wharf Staff Committee. Certain types and sizes of signs require zoning and building or electrical permits.

3.01. Sign Application Process.
a. Tenants shall submit an application for all new signage to the City’s Wharf Property Manager. The application shall consist of:
i. Dimensioned drawings of the sign;
ii. Type of material, color, lighting, and other sign characteristics; iii. Sketch or photograph showing proposed location with approximate dimensions to ground, roof, doors, and windows.
b. The Wharf Property Manager will forward the application to the City Staff Wharf Committee for review and action.
c. Upon City Staff Wharf Committee action, the Wharf Property Manager shall inform the Tenant of the decision. If the application is approved, the Tenant will be notified of any other City approvals required.

4.01. Sign Criteria.
a. Types. The following types of signs are appropriate for use on the Wharf:
i. Signs painted directly on buildings.
ii. Signs mounted directly on building walls.
iii. Individual letters and numerals mounted directly on building walls. iv. Neon signs.
v. Iconic signs.
vi. Window signs.

9.78

Rev. 12.15.2025
vii. Hanging Signs.
b. Size. Each Wharf business is allowed thirty (30) square feet of total sign area. The following configurations are acceptable:
i. One 6’x5’ sign;
ii. Three 2’x5’ signs;
iii. One 4’x5’ sign, one 2x2’ sign, and one 3’x2’ sign; iv. Other configurations as approved by City Staff Wharf Committee. c. Location.
i. Signs should normally be located at or near pedestrian eye level. ii. Signs shall not project above the roof line or project over the sidewalk unless there is an 8’ high clearance over the sidewalk.
iii. Neon signs are permitted on building exteriors and in windows. iv. Other types of signs positioned in windows are discouraged in order to allow views into and through business spaces.

5.01. Sign Design Considerations.
a. Given the nature of the Wharf and its environs, marine-oriented themes are most appropriate.
b. Signs Painted Directly on Buildings - This type of sign lends itself well to buildings on the Wharf and could develop an overall visual theme. The size of such signs is dependent on the section of the building where they are proposed. Large wall sections could appropriately contain larger signs.
c. Signs Mounted on Building Walls - Useful for locations where painting directly on building walls is not desirable. Carved wooden or composite material signs with a marine-related theme can work well. Wall-mounted signs are to be flush with the building surface.
d. Individual Letters Mounted on the Building - Letters should not exceed 12” in height and should not project more than 2” from the building wall. Plastic letters are not allowed, nor are self-illuminated letters. Letters in colors that appropriately contrast with the background are most effective.
e. Neon Signs - Neon signs provide light, color, and vibrancy, and are especially effective after dark. Neon signs are appropriate for display in windows, provided that they are in scale with the window size and do not completely obscure views through the window. Neon signs may also be mounted directly on the building wall to supplement a painted sign. Flashing or blinking neon signs are not permitted. f. Iconic Signs - Iconic signs are hanging or projecting signs which depict a physical object such as an anchor or a boat, as contrasted with signs which utilize lettering to convey the sign’s message. Iconic signs that are in scale with the structure and use of

9.79

Rev. 12.15.2025
the building are most effective. Iconic signs may not present obstructions to pedestrian traffic, and an 8’ overhead clearance is required for any iconic sign overhanging a pedestrian walkway.
g. Window Signs - Painted signs or decals on glass should be designed so that views into and through the business are maintained.
h. Hanging Signs - Small hanging signs beneath an overhang or canopy may be approved if they are incidental and purposeful (e.g., advertising an “Annual Sale”). i. Sign Lighting - Flood lighting of signs is allowed provided that lights are directed away from pedestrians.
j. Banners and Flags - Banners, flags and pennants may be used for specific and limited purposes, but when used to excess may actually detract from the desired result. These advertising devices must be approved on a case-by-case basis. k. Temporary Signs and Posters - These advertising devices are generally discouraged but may be used for no longer than fourteen days at a time with prior approval. They may not obstruct views into and through buildings.
l. Menus - Food establishments may display menus securely fixed to the wall or in an enclosed display case. A display case may be lighted.
m. Addresses - All businesses should display clearly legible address numbers. They may be incorporated into signage as appropriate.
n. Sandwich Board and Movable Freestanding Signs - Are not permitted.

9.80

Rev. 12.15.2025

EXHIBIT G
Insurance Requirements
Tenant shall procure and maintain for the duration of the Lease, insurance against claims for injuries to persons or damages to property which may arise from or in connection with Tenant’s operation on, access to, and/or use of the Premises. The cost of such insurance shall be borne by Tenant.

A. Insurance Certificate Requirements.

Landlord 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 the Landlord, its officers, officials, employees, and volunteers as additional insureds, and • Coverages must be maintained during the Term of the Lease with the Landlord, unless a longer duration is required.

B. Minimum Scope and Limit of Insurance.

Tenant acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. If Tenant 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 Tenant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to Landlord.

Tenant 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 Tenant and its employees, agents, representatives, subtenants, assignees and concessionaires arising out of and in connection with Tenant's use or occupancy of the Premises; and, if applicable, liability for the sale and distribution of liquor and alcoholic beverages.

2. “All Risk” Property Insurance Coverage. Tenant shall, at Tenant's sole expense, obtain and keep in full force and effect an insurance policy covering all of Tenant'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. Tenant shall be solely responsible for any uninsured loss or damage caused to Tenant's personal property, trade fixtures, equipment and merchandise located in or upon the Premises for any reason.

3. Fire Insurance\Legal Liability Coverage. Tenant, at its sole cost, shall procure and maintain in full force and effect at all times during the Term of this Lease, fire and extended coverage insurance satisfactory to Landlord covering the Premises to keep all leased property or rented

9.81

Rev. 12.15.2025
space, Tenant Improvements therein 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 Lease. “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 the Term of this Lease and shall contain an inflation endorsement if the Premises or Tenant 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. Tenant 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 Tenant Improvement. Such workers’ compensation insurance shall be in amounts at least equal to the maximum liability of Tenant, 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.

Tenant 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
Landlord, 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 Tenant, 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 Tenant’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).

PRIMARY COVERAGE
For any claims related to this Lease, Tenant’s insurance coverage will be primary and non-contributory as respects Landlord, its officers, officials, and employees. Any insurance or self-insurance maintained by Landlord, its officers, officials, and employees will be excess of Tenant’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 Landlord.

WAIVER OF SUBROGATION
Tenant hereby grants to Landlord a waiver of any right to subrogation, except as otherwise not applicable, which any insurer of said Tenant may acquire against Landlord by virtue

9.82

Rev. 12.15.2025
of the payment of any loss, including attorney’s fees under such insurance. Tenant agrees to obtain any endorsement that may be necessary to effectuate this waiver of subrogation, but this provision applies regardless of whether or not Landlord has received a waiver of subrogation endorsement from the insurer.

EXCESS LIABILITY/UMBRELLA INSURANCE POLICIES
Tenant 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 Tenant’s primary and excess liability policies are exhausted.

SELF-INSURED RETENTIONS (SIR)
Self-insured retentions must be declared to and approved by Landlord. Landlord may require Tenant 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 Landlord.

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 Landlord.

VERIFICATION OF COVERAGE
Tenant will furnish Landlord 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 endorsements to be approved by the Landlord before the Lease begins. However, failure to obtain the required documents prior to the Lease beginning will not waive Tenant’s obligation to provide them. Landlord reserves the right to require complete, certified copies of all required insurance policies, including endorsements required by these specifications, at any time.

SUBCONTRACTORS
Tenant 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 Premises. Tenant shall require and verify that all contractors and subcontractors maintain insurance meeting all the requirements stated herein, and Tenant shall ensure that Landlord, 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
Landlord 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 Tenant.

9.83 City of Santa Cruz

BUDGET ADJUSTMENT REQUEST
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REQUESTED BY DEPARTMENT HEAD

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 Clear Form
2026
02/10/2026
Adjustment for increased base rent following the execution of Amended and Restated Municipal Wharf Lease at 47 Municipal Wharf.

Increased gross sales may increase estimated rent collected in Fund 104 shown below. 104-30-43-3211-46201 Rents - Real Property 383
383
0 383
David
McCormic
Digitally signed by
David McCormic
Date: 2026.01.14
12:28:30 -08'00'
Kathryn
L. Mintz
Digitally signed by
Kathryn L. Mintz
Date: 2026.01.21
16:03:20 -08'00'
Digitally signed
by Emily Burton
Date: 2026.01.23
'10:46:36 -08'00
Elizabet
h Cabell
Digitally signed by
Elizabeth Cabell
Date: 2026.01.23
10:52:08 -08'00' 9.84
City Council

AGENDA REPORT
DATE: 01/21/2026
AGENDA OF: 02/10/2026
DEPARTMENT: Finance
SUBJECT: Liability Claims Filed Against the City of Santa Cruz (FN) RECOMMENDATION: Motion to reject the liability claims of 1) Michael Andrew Collins, 2) Brendan W. Daly, 3) Linda Ann Waskiewicz; and to return as late claim of 4) Vahid Ebrahimi, based on staff recommendation.

BACKGROUND: N/A
DISCUSSION: Claims to be rejected:

1. Claimant: Michael Andrew Collins
Date of occurrence: 12/25/2025
Date of claim:1/5/2026
Amount of claim: $1,099.00
Claimant seeks reimbursement for damages to his cellphone.

Self-Represented

2. Claimant: Brendan W. Daly
Date of occurrence:12/24/2025
Date of claim:1/5/2026
Amount of claim: $5,026.36
Claimant seeks reimbursement for damage to his vehicle.

Self-Represented

3. Claimant: Linda Ann Waskiewicz
Date of occurrence: 7/10/2025
Date of claim:1/5/2026
Amount of claim: Unlimited

10.1 Claimant seeks reimbursement for damages resulting from an alleged trip and fall on uneven pavement.

Represented by Legal Counsel
II. Claim to be returned as late:

1. Claimant: Vahid Ebrahimi
Date of occurrence: 3/18/2025
Date of claim: 1/6/2026
Amount of claim: $25.000.00
Claimant seeks reimbursement for towing fees.

Self-Represented
CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: N/A HEALTH IN ALL POLICIES (HiAP): N/A
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 fiscal impact.

Prepared By:

Ross Brandon
Risk & Safety Manager
Submitted By:

Elizabeth Cabell
Finance Director
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

None.

10.2 City Council

AGENDA REPORT
DATE: 01/22/2026
AGENDA OF: 02/10/2026
DEPARTMENT: Finance/Human Resources
SUBJECT: FY 2026 Budget Adjustments and Information on City’s Financial Status – Budget Adjustment (FN/HR)
Location: Citywide
RECOMMENDATION: Motion to:
1) Adopt a resolution amending the Fiscal Year (FY) 2026 budget appropriation of expenditures to all funds as listed in Exhibit A, in the amount of $24,669,730, including an increase of $2,735,762 to the General Fund, and a total decrease in revenues as listed in Exhibit A in the amount of $26,432,222 to all funds, including a reduction of $124,666 to the General Fund; 2) Authorize the City Manager to allocate budgetary changes within the applicable funds and departments; and
3) Adopt a resolution amending the personnel complement for the City Manager’s Office, Economic Development and Housing, Human Resources, Information Technology, Library, Parks and Recreation, Public Works, and Water Departments.

BACKGROUND: On June 10, 2025, the City Council passed Resolution No. NS-30,515, which adopted a budget for FY 2026. The purpose of this agenda item is to provide a mid-year update on the City’s financial standing and to make adjustments to the FY 2026 budget.

In the normal course of the budget year, adjustments need to be made for administrative corrections and/or cleanup. New information regarding revenues and unanticipated needs have resulted in a request for budget adjustments and additional appropriations.

The close of the previous fiscal year has been completed and half of the current fiscal year has passed, which means there is helpful information to provide the Council regarding the City’s current financial status.

The FY 2025 Comprehensive Annual Report was published at the end of December 2025 and was received by City Council on January 27, 2026. The full report can be found on the City’s Financial Reports website at:
https://www.santacruzca.gov/files/assets/city/v/1/fn/documents/financialreports/acfr/2025_santa-cruz-city-of_acfr_final.pdf.

11.1 DISCUSSION: A comprehensive list of all the proposed FY 2026 budget adjustments are listed in Exhibit A. Any position changes approved by the Council will not be implemented until the required meet and confer process is completed in accordance with City obligations under the Meyers-Milias-Brown Act. The requested budget adjustments are grouped by category and a brief description of the changes and their purpose precedes the listing of the adjustments.

Mid-Year Revenue Corrections
The corrections to revenues total a decrease in the amount of $26,432,222, which include, but are not limited to, the following highlights:

Item Amount
Increase to anticipated General Fund revenues from permit fees received in the Planning and Community Development Department
563,316
Movement of Sugar-Sweetened Beverage Tax budget from
the General Fund to the newly-created Sugar-Sweetened
Beverage Fund
(1,000,000) – General Fund
1,000,000 – Sugar-Sweetened
Beverage Fund
Movement of funding from the old, pre-construction project for Murray Street Bridge in the Gas Tax Fund to the General Capital Improvement Program (CIP) Fund for the
construction phase project
(3,245,000) – Gas Tax Fund
3,245,000 – General Capital
Improvement Fund
Removing the transfer to the General CIP Fund from the
Parking Fund because the Cedar Cathcart Parking Structure project will exist in the Parking Fund. Note that bond
proceeds funding this project are not budgeted as revenue, in accordance with standard accounting practices.
(21,600,000)
Reduction of budgeted grant revenues for the Water
Department’s CIP projects to align with amounts contained in grant agreements
(14,767,733)
Mid-Year Expenditure Corrections
Expenditure adjustments total an increase of $26,669,730 which include, but are not limited to, the following highlights:

Item Amount
Increases to salary and retirement contribution budgets in alignment with Council-approved, Memorandum of
Understanding with the City’s bargaining units
1,159,609 – General Fund
2,366,314 – Citywide
Reduction of expenditure budget in the Gas Tax Fund related to the Murray Street Bridge project movement described
above
(5,000,000) – Gas Tax Fund
5,000,000 – General CIP Fund
Reduction of expenditure budget in the General CIP Fund due to the movement of the Parking Structure at Cedar and Cathcart into the Parking Fund
(21,600,000) – General CIP
Fund
21,600,000 – Parking Fund
Increase to the Water Department’s Loan Principal payment budget
6,400,000
Increases to the budgets for two Wastewater Treatment
Facility projects, City WWTF Headworks Replacement and
WWTF- Electrical System
7,000,000

11.2 Carbon Fund Adjustments
The listing of adjustments to the FY 2026 adopted budget includes the FY 2026 Carbon Fund Awards. Annually, departments submit project proposals that would enhance the City’s ability to invest in carbon-reducing projects that align with the goals of the Climate Action Plan and that use funds from the Carbon Fund. These projects are evaluated by the Sustainability Team, a cross-sector group of employees representing all City departments. This fiscal year, the Carbon Fund awarded a total of $165,300 toward carbon-reducing projects. The recipients of this year’s awards were Parks and Recreation Department, Wharf Fund, Public Works Department, Refuse Fund, Gas Tax Fund, and the City Manager’s Office.

Personnel Complement and Classification and Compensation Plan Amendments Several amendments to the Personnel Complement and Classification and Compensation Plan for City Manager’s Office and the Economic Development and Housing, Human Resources, Information Tehnology, Library, Parks and Recreation, Public Works, and Water Departments are outlined as part of FY 2025 mid-year changes. Changes include new positions that directly benefit the organization’s operational efficacy by recruiting now as opposed to July through September 2026. For the General Fund departments, there is a total of 9.5 FTE positions being added. Additionally, position deletions include removal of vacant positions for which work is no longer required.

Mid-Year Position Additions

1. CITY MANAGER’S OFFICE
Project Manager II 1.0 FTE Addition
The Project Manager II (Energy Manager) position will provide the technical and strategic leadership needed to manage escalating energy costs while advancing climate goals. This role will focus on cost containment and cost avoidance through energy efficiency, rate optimization, load shifting, battery storage, and renewable energy investments with strong returns on investment. The position will also develop long term energy strategies, leverage grants, rebates, and incentive programs, and pursue public private partnerships to fund energy and resilience infrastructure.

This role directly supports the City’s Fiscal Sustainability and Natural and Built Infrastructure strategic priorities by reducing departmental operating costs particularly within Public Works and Water, the City’s largest energy users, ensuring reliable and resilient energy for essential services, addressing deferred infrastructure needs, and positioning the City to meet regulatory requirements in the most cost-effective manner.

Overall, the position is expected to generate measurable operating cost reductions, mitigate future budget risk, and accelerate progress toward adopted climate targets.

Program Analyst 1.0 FTE Position Addition
The City Manager’s Office has experienced increasing demand for higher level analytical and programmatic support to manage complex, cross departmental special projects that can be sensitive or confidential in nature. These projects require independent judgment, policy interpretation, and coordination across departments and external partners. The position also supports City Councilmembers and City Council initiatives.

In addition to advanced analytical and project management responsibilities, the position will provide leadership and/or direction to subordinate staff, including interns and

11.3 administrative support staff, to ensure timely, accurate, and coordinated delivery of work.

This role will serve as a trusted resource to executive leadership, enabling effective implementation of City Council priorities and initiatives while maintaining strict confidentiality.

Administrative Assistant III 1.0 FTE Position Deletion
The Administrative Assistant III position is proposed for deletion as the administrative and clerical work previously assigned to this role is no longer required due to changes in operational needs. The work associated with this position has been reduced and eliminated and is not being reassigned to other positions. This action reflects an organizational and operational decision and does not result in the displacement of any employee.

2. ECONOMIC DEVELOPMENT AND HOUSING
Deputy Director of Economic Development 1.0 FTE Position Addition A Deputy Director for Economic Development is proposed to align the Department’s structure with its placement within the City Manager’s Office. The Department Director position has been elevated to a Deputy City Manager II, who serves as the department head, necessitating deputy director level support for day-to-day operations.

The Deputy Director will manage four divisions (Business Services, Asset Management, Development, and Public Art) and support complex grants, policy implementation, and interdepartmental coordination, ensuring continuity and effective department operations.

Redevelopment Director 1.0 FTE Position Deletion
The vacant Redevelopment Director position is proposed for deletion as its functions will be absorbed into the reorganized department structure under the Deputy City Manager II and Deputy Director.

3. HUMAN RESOURCES (HR)
Human Resources Analyst 1.0 FTE Position Addition
The Human Resources Labor Relations Division plays a critical role in supporting timely, well informed, and well documented employment decisions across the organization. The Division is responsible for complex and time sensitive work including grievances, disciplinary actions, appeals, meet and confer activities, investigations, and advisory support to departments and executive leadership. With the current staffing level of two positions, the Division’s capacity is limited relative to the volume and complexity of work required to meet the City’s standards for consistency, documentation, and defensibility.

The addition of an HR Analyst will expand the Division’s analytical capacity to support research, documentation, trend analysis, and case coordination, allowing labor and employee relations matters to be addressed efficiently and consistently. This position supports the City Council’s Thriving Organization focus area by strengthening internal systems, improving decision quality and timeliness, reducing organizational risk, and ensuring leaders and departments receive the support needed to manage employee relations effectively.

11.4 Human Resources Technician 1.0 FTE Position Addition The addition of an HR Technician assigned to the HRIS Division will strengthen the City’s ability to triage requests, resolve routine system issues, and connect employees, departments, and HR staff to the appropriate resources. This centralized support will improve response times, enhance customer service, and allow HR analysts and managers to focus on higher level work related to system governance, data integrity, and implementation stabilization. This position supports the City Council’s Thriving Organization focus area by improving internal service delivery, strengthening operational systems, and ensuring employees and managers receive reliable and timely support during and after the Workday implementation.

4. INFORMATION TECHNOLOGY (IT)
Administrative Assistant III 1.0 FTE Position Deletion
The Administrative Assistant III position is proposed for deletion as the administrative and clerical work previously assigned to this role is no longer required due to changes in operational needs. The work associated with this position has been reduced and eliminated and is not being reassigned to other positions. This action reflects an organizational and operational decision and does not result in the displacement of any employee.

5. LIBRARY
Library Assistant II 1.4 FTE Position Addition
This section is an administrative correction given a discrepancy in total positions on record in the City’s financial system.

Librarian I/II 1.0 FTE Position Addition
The transition from Library Information Specialist to Librarian I/II is important for reaching the library’s strategic goals and for supporting operations. The Librarian classification leverages the expertise necessary to deliver the full range of professional duties and responsibilities, which include the capacity to design, deliver, evaluate, and improve programs and services. The position encompasses leadership functions, such as the ability to supervise staff, act as a site manager in the absence of other management, represent the library effectively with partner organizations, and serve as a project manager.

Library Information Specialist 1.0 FTE Position Deletion The Library Information Specialist position is proposed for deletion as the Library’s operational needs now require a professional, management level position with the authority, discretion, and confidentiality necessary to support supervisory, project leadership, and site management functions; the paraprofessional duties previously associated with this position are no longer required and are not being reassigned.

6. PARKS AND RECREATION
Administrative Assistant II 0.5 FTE Position Addition
Improved staffing would enhance timely processing of public counter inquiries, community garden waitlists, activity guides, sidewalk vending permits, tree permit applications, and registrations for classes, youth programs, and adult sports, which

11.5 collectively generate approximately 1.2 million dollars in annual revenue. The team also manages picnic and beach reservations generating approximately 400 thousand dollars in revenue, verifies youth scholarship applications, and performs daily financial and data entry transactions including invoices, instructor payments, reimbursements, credit card processing, and purchase orders.

Administrative Assistant II staff also support the Urban Forester in processing routine and emergency tree permits that are critical to public safety and manage a significant volume of revenue transactions. Building adequate capacity ensures staff are properly trained and able to work at a pace that supports accuracy, accountability, and quality service delivery.

Administrative Assistant III 0.5 FTE Position Deletion
The Administrative Assistant III position is proposed for deletion as the administrative and clerical work previously assigned to this role is no longer required due to changes in operational needs. The work associated with this position has been reduced or eliminated and is not being reassigned to other positions. This action reflects an organizational and operational decision and does not result in the displacement of any employee.

Facility Attendant 1.0 FTE Position Deletion
The Facility Attendant position is proposed for deletion as the administrative and clerical work previously assigned to this role is no longer required due to changes in operational needs. The work associated with this position has been reduced or eliminated and is not being reassigned to other positions. This action reflects an organizational and operational decision and does not result in the displacement of any employee.

Parks Maintenance Worker 1.0 FTE Position Addition
The Parks and Recreation Department manages approximately 1,315 acres of open space and nearly 35 miles of trails, providing critical recreational, ecological, and public safety benefits to the community. Current staffing levels, consisting of only three full-time employees, limit the Department’s ability to consistently address routine maintenance, wildfire resilience, habitat preservation, regulatory compliance, and public safety needs across these assets. The addition of a full-time Parks Maintenance Worker, funded through Measure Q, will address these operational gaps by increasing capacity for vegetation management, trail maintenance, habitat restoration, and wildfire risk reduction in the wildland urban interface. This position will improve service levels, maintenance frequency, and public access to open spaces while supporting regulatory compliance related to sensitive habitats and endangered species. The position directly enhances public safety, protects critical natural infrastructure, and ensures effective stewardship of City open spaces without impacting the General Fund
Recreation Specialist 3.5 FTE Position Addition
The proposed Recreation Specialist positions support the Parks and Recreation Department’s transition to a modernized classification structure that aligns with current service delivery needs, operational practices, and established career pathways. In addition to providing front line recreation services, these positions include lead responsibilities, such as coordinating day to day program activities, providing guidance to part time and seasonal staff, and supporting consistent service delivery across facilities and programs.

11.6 The Recreation Specialist roles expand capacity for program delivery, facility and event support, reservations, customer service, and financial processing, while improving efficiency, accountability, and service quality. These positions support departmental performance measures by enhancing program implementation and responsiveness to community needs and align with City and Human Resources goals for classification consistency and workforce development. Where applicable, the deletion of legacy classifications is contingent upon successful internal recruitment into the Recreation Specialist positions, ensuring continuity of operations and appropriate staffing levels.

7. PUBLIC WORKS
Administrative Assistant III 1.0 FTE Position Addition
The Administrative Assistant III will assist in preparing the departmental budget and controlling expenditures, coordinate the processing of purchasing and procurement documents, support reporting requirements, assist with recruitments and personnel processes, and provide clerical and administrative support across divisions. This position will help ensure accurate, timely administrative processing while allowing technical and field staff to remain focused on core infrastructure, maintenance, and service delivery functions.

Management Analyst 1.0 FTE Position Addition
Parking, Wastewater, and Refuse will contribute to the funding of this position. The proposed Management Analyst in the Public Works Administration Division will support Wastewater debt financing, project reimbursement tracking, Parking revenue programs, and safety program coordination across Public Works divisions, with a particular focus on the Enterprise divisions. While a limited General Fund contribution is required, the position is also expected to charge time to eligible capital projects and, where appropriate, grant-funded activities to offset a portion of the labor cost.

8. WATER
Administrative Services Supervisor 1.0 FTE Position Addition and 1.0 FTE The current administrative structure lacks sufficient supervisory capacity to consistently meet evolving operational needs, ensure continuity of service, and support effective cross training and succession planning. Establishing this position will provide centralized supervision of administrative staff, strengthen coordination of high level operational processes, and formalize cross training and professional development within the administrative services career ladder.

This role will improve efficiency, consistency, and service delivery across the Department while supporting strong fiscal management and overall organizational performance, consistent with the City Council’s Thriving Organization focus area.

Administrative Assistant III 1.0 Position Deletion
The Administrative Assistant III position is proposed for deletion as the administrative and clerical work previously assigned to this role is no longer required due to changes in operational needs. The work associated with this position has been reduced or eliminated

11.7 and is not being reassigned to other positions. This action reflects an organizational and operational decision and does not result in the displacement of any employee.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The annual midyear budget adjustment is not a “project” as that term is defined by the California Environmental Quality Act (See Public Resources Code § 21065 and CEQA Guidelines section 15378(b).)
Individual projects listed in the FY 2026 midyear budget adjustment have performed a CEQA analysis and determination already or will require their own CEQA analysis and determination as they move forward.

HEALTH IN ALL POLICIES (HiAP): The cumulative effect of these budget and personnel adjustments supports the Health in All Policies (HiAPs) Workplan by supporting the Collective of Results and Evidence-based (CORE) community impacts of increased economic vitality; higher levels of self-sufficiency; increased social, economic, and occupational mobility; connection to others; climate change resiliency; a safe, affordable, and accessible transportation system, and neighborhoods and communities are safe.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: Yes

2. This recommendation requires a budget adjustment: Yes

3. The recommendation creates an on-going expenditure commitment: Yes FISCAL IMPACT DESCRIPTION: The General Fund’s revenues and expenditures are impacted, as are the following funds in the following ways:

Revenues Expenditures
General Fund (Fund 101) (124,666) 2,735,762
Code Enforcement/Civil Penalties (Fund 103) - 2,537
Wharf Fund (Fund 104) 9,700 55,508
Green Building Educational Resource (Fund
108) - 24,086
Sugar-Sweetened Beverage Tax (Fund 112) 1,000,000 -
City Public Trust Fund (Fund 130) - 10,069
Carbon Reduction Fund (Fund 133) - 78,000
Cannabis Children’s Fund (Fund 134) (118,205) -
Economic Development Trust (Fund 136) (20,394) 103,457
Contributions and Donations – Parks &
Recreation (Fund 162) 20,000 20,000
Childcare Impact Fee (Fund 218) - 220,718
Gasoline Tax (Fund 221) (3,383,007) (4,437,299)
2016 Transportation Measure D (Fund 224) - 1,555
Traffic Impact Fee- Citywide Fund (Fund
226) - 52,974
Clean River, Beaches, & Ocean Tax Fund
(Fund 235) - 756,069

11.8 Southwest Quadrant – Parks & Rec Fee
(Fund 242) - 170,000
Parks & Recreation Tax Combined Fund
(Fund 249) - 41,647
Affordable Housing Trust Fund (Fund 279) 227,000 85,377 SA (H) LMIH-Merged 2-1-12 (Fund 281) (60,679) (21,843)
Transportation Development Account (Fund
291) 92,737 92,737
Technology Surcharge Fee (Fund 295) 114,321 131,121
General Capital Improvement Projects (Fund
311) (10,787,566) (16,381,544)
CIP- Public Art (Fund 313)
- 70,404
CIP- Street Maintenance & Rehabilitation
(Fund 317) 186,204 851,569
General Fund CIP Reserve (Fund 350) - 392,644
Lease Revenue Bonds (Fund 413) (4,688) -
Water (Fund 711) (14,767,733) 7,207,169
Wastewater (Fund 721) - 9,007,497
Refuse (Fund 731) 66,243 1,110,422
Parking (Fund 741) - 22,662,956
Storm Water (Fund 751) - 21,781
Storm Water Overlay (Fund 752) - 1,506
Equipment Operations (Fund 811) - 25,547
Workers’ Compensation Insurance (Fund
841) (1,316,650) 7,568
Liability Insurance (Fund 842) 2,435,161 10,291
Group Health Insurance (Fund 843)
- 5,512
Library Joint Powers Authority (Fund 951) - (446,067)
TOTAL (26,432,222) 24,669,730
With the exception of the Water Department, the position changes listed in the amendments to the personnel complement are not accompanied by a budget adjustment. This is because the respective departments’ current personnel budget can accommodate the additional costs.

Prepared By:

Emily Burton
Finance Manager
Sara De Leon
Human Resources Director
Submitted By:

Elizabeth Cabell
Finance Director
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. RESOLUTION APPROPRIATING FUNDS AND AMENDING THE FY 2026 BUDGET.DOC

2. EXHIBIT A—FY 2026 BUDGET ADJUSTMENTS.PDF

3. RESOLUTION AMENDING PERSONNEL COMPLEMENT FOR VARIOUS DEPARTMENTS.DOC

11.9 RESOLUTION NO. NS-XX,XXX

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ APPROPRIATING FUNDS AND AMENDING THE FY 2026 BUDGET
WHEREAS, it is recommended that the adjustment set forth in Exhibit A be made to the present budget appropriations.

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

The Budget of the City of Santa Cruz, adopted by Resolution No. NS-30,515, be amended and set forth in Exhibit A.

The City Manager is authorized to allocate within the applicable funds and the appropriate accounting classifications and to approve related applicable transfer in/out between funds.

PASSED AND ADOPTED this 10th day of February, 2026, by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

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

11.10 FY 2026 Midyear Budget Adjustment
Capital Investment Program
Economic Development and Housing

1. Amend the budget for the Downtown Library to add support from the Childcare Impact Fee Fund and Reducing Parking Fund Bond Financing since that will be budgeted in the Public Works project, Parking Structure- Cedar and Cathcart, c402609 (adjustment # 16).

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 218-00-00-0000-59103 Transfer to General CIP Fund 220,718 Revenue 311-00-00-0000-49188
c512002-970-0-0
From Childcare Impact Fee Fund
Downtown Library Mixed Use Project
220,718
Expenditure 311-51-80-9990-57390
c512002-100-2020-0
Other Infrastructure
Downtown Library Mixed Use Project
220,718
Revenue 311-00-00-0000-49113
c512002-911-0-0
From Parking Fund
Downtown Library Mixed Use Project
(21,600,000)
Expenditure 311-51-80-9990-57390
c512002-100-2020-0
Other Infrastructure
Downtown Library Mixed Use Project
(21,600,000)

2. Increase the transfer from the City Public Trust to completely fund the acquisition costs of 333 Locust in FY 2023. Prior to this adjustment, $59,207 remains in the acquisition budget Council approved on 4/20/2023.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 311-00-0-0000-49108
c512301-914-0-0
From City Public Trust
Kunitz House Acquisition
10,069
Expenditure 130-00-00-0000-59103 To General Capital Improvement Fund 10,069 Parks and Recreation

3. Following a successful community meeting on the Depot Park – Phase II Bike Park project (c302237), the department is requesting to add equal revenue and expenditure budget ($170,000) utilizing Southwest Quimby funds. This will modify the project scope and accelerate project work in FY 2026.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 311-00-00-0000-49155
c302237-937-0-0
From Southwest Quadrant - P & R Fee
Fund
Depot Park - Phase II
170,000
Expenditure 242-00-00-0000-59103 To General Capital Improvement Fund 170,000

11.11 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 311-30-41-9110-57312
c302237-100-2020-0
Park improvements
Depot Park - Phase II
170,000

4. Adjust the project revenue and expenditure budgets to cover additional project costs following the completion of the Lower Delaveaga Septic System replacement project (c302516). Parks and Recreation Facilities Tax will be used to resource these costs.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 311-00-00-0000-49109
c302516-908-0-0
From Parks & Rec Facilities Tax
Lower DeLaveaga Septic System
Replac.
41,647
Expenditure 249-00-00-0000-59103 To General Capital Improvement Fund 41,647 Expenditure 311-30-41-9110-57312
c302516-100-2020-0
Park improvements
Lower DeLaveaga Septic System
Replac.
(7,209)

5. Movement of remaining budget from one project (Sgt. Derby Park Playground Renovation, c302404) to cover budget overrun in another project (Harvey West Park Ballfield Upgrades, c302507).

Account Type GL Account Account Description
Adjustment
Amount
Revenue 311-00-00-0000-49109
c302404-908-0-0
From Parks & Rec Facilities Tax
Sgt. Derby Park Playground
Renovation
(5,627)
Revenue 311-00-00-0000-49109
c302507-908-0-0
From Parks & Rec Facilities Tax
Harvey West Park Ballfield Upgrades
5,627
Expenditure 311-30-41-9110-57312
c302404-100-2020-0
Park improvements
Sgt. Derby Park Playground
Renovation
(5,627)
Expenditure 311-30-41-9110-57312
c302507-100-2020-0
Park improvements
Harvey West Park Ballfield Upgrades
5,627
Public Works

6. The Murray Street Bridge project was moved from Gas Tax (Fund 221) to General CIP (Fund 311) at the beginning of FY 2026. This adjustment will complete the transfer of funds from the old pre-construction project (c409321) to the construction phase project (c402519).

11.12 Account Type GL Account Account Description
Adjustment
Amount
Revenue 221-40-62-9370-43150
c409321-100-1000-0
Federal capital grants and
contributions
Murray St. Bridge Seismic Retrofits
(3,045,000)
Revenue 221-40-62-9370-43250
c409321-200-2005-0007
State capital grants and
contributions
Murray St. Bridge Seismic Retrofits
(200,000)
Revenue 311-40-62-9370-43155
c402519-111-1076-0
Federal capital grants and
contributions
Murray Street Bridge- Construction
Phase
3,045,000
Revenue 311-40-62-9370-43250
c402519-200-2005-0007
State capital grants and
contributions
Murray Street Bridge- Construction
Phase
200,000
Revenue 311-00-00-0000-49130
c402519-935-0-0
From Gas Tax Fund
Murray Street Bridge-Construction
Phase
700,000
Expenditure 221-00-00-0000-59103 To General Capital Improvement Fund
700,000
Expenditure 221-40-62-9370-57310
c409321-100-2020-0
Bridges
Murray St. Bridge Seismic Retrofits
(5,000,000)
Expenditure 311-40-62-9370-57310
c402519-100-2020-0
Bridges
Murray Street Bridge- Construction
Phase
5,000,000

7. The project scope of the Downtown Intersection Improvements project (c401903) is being reduced. Revenues and expenses need to be adjusted to reflect the updated current scope of work and additional Traffic Impact Fee funding needs to be added to the project since Gas Tax cannot cover project costs.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 311-00-00-0000-49124
c401903-925-0-0
From Traffic Impact Fee - City wide
fund
Downtown Intersection
Improvements
50,000
Expenditure 311-40-64-9320-57304
c401903-100-2020-0
Street systems
Downtown Intersection
Improvements
(4,173,350)
Expenditure 226-00-00-0000-59103 To General Capital Improvement Fund
50,000

8. Adjust unanticipated funding for the Monterey Bay Sanctuary Scenic Trail -Segment 8 & 9 project (c401804).

11.13 Account Type GL Account Account Description
Adjustment
Amount
Revenue 311-40-64-9330-43357
c401804-149-5013-0
Local capital grants-SCCRTC
MB Sanctuary Scenic Trail -Segment
8 & 9
2,000,000
Revenue 311-40-64-9330-43252
c401804-113-4000-0
State capital grants-RSTPX Funds
MB Sanctuary Scenic Trail -Segment
8 & 9
2,000,000
Expenditure 311-40-64-9330-57307
c401804-100-2020-0
Pedestrian/bike systems
MB Sanctuary Scenic Trail -Segment
8 & 9
4,000,000

9. In FY 2025, more revenue was received than the budgeted expenditures. This adjustment will match current budget for FY 2026 from the previous fiscal year revenue received for Citywide Energy Efficiency Projects (c402510).

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 311-40-00-9410-57390 c402510-
100-2020-0
Other infrastructure
Citywide Energy Efficiency Projects
8,297

10. Anticipated RSTPX funds were inadvertently left off the FY 2026 requested budget for the West Cliff Drive Bethany Curve Culvert project (c402407). This RSTPX funding was identified as the local match for the FHWA grant.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 311-40-62-9330-43252
c402407-113-4000-0
State capital grants-RSTPX Funds
West Cliff Drive Bethany Curve
Culvert
1,500,000

11. A contribution from Soquel Creek Water District for the Pure Water Soquel project was received in early FY 2026. It was receipted to the City Arterial & Collector Street Recon/Overlay project (m400809), however, a new project was created for the purpose of these funds, Laurel Street Surface Seal and Striping (c402613). Staff sought bids in 2024. All bids were over the engineer’s estimate so bids were rejected. Transportation Development Act funds will be used to help fund the new project. Additional funding will be identified and budgeted through City Council action in the first quarter of 2026, to reduce the burden on Measure H (Fund 317).

Account Type GL Account Account Description
Adjustment
Amount
Revenue 221-00-00-0000-49186
m400819-967-0-0
From Transportation Development
Account
(153,007)

11.14 West Cliff Drive Multi-Use
Maintenance
Revenue 317-40-64-0000-43390
c402613-499-1069-0
Other local revenue: Pure Water
Soquel
Laurel Street Surface Seal and
Striping
209,635
Revenue 317-00-00-0000-49186
c402613-967-0-0
From Transportation Development
Account
Laurel Street Surface Seal and
Striping
427,956
Revenue 317-00-00-0000-49185
c402613-968-0-0
From Road Maintenance Rehab
Account
Laurel Street Surface Seal and
Striping
423,613
Expenditure 221-40-64-9330-57304
m400819-100-2020-0
Street systems
West Cliff Drive Multi-Use
Maintenance
(153,007)
Expenditure 317-40-64-9311-57304
c400809-100-2020-0
Street systems
City Arterial & Collector Street
Recon/Overlay
(209,635)
Expenditure 317-40-64-9311-57304
c402613-967-0-0
Street systems
Laurel Street Surface Seal and
Striping
1,061,204

12. The RSTPX grant funding was budgeted in City Arterial & Collector Street Recon/Overlay (c400809). This funding belongs in Bay Dr Protected Bike Lanes and Pedestrian Improvements (c402304).

Account Type GL Account Account Description
Adjustment
Amount
Revenue 317-40-64-9311-43252
c400809-400-2000-4047
State capital grants-RSTPX Funds
City Arterial & Collector Street
Recon/Overlay
(875,000)
Revenue 311-40-64-9330-43252
c402304-400-2000-4047
State capital grants-RSTPX Funds
Bay Dr Protected Bike Lanes and
Ped
875,000
Expenditure 317-40-64-9311-57304
c400809-100-2020-0
Street systems
City Arterial & Collector Street
Recon/Overlay
(875,000)
Expenditure 317-40-64-9311-43252
c402304-100-2020-0
Pedestrian/bike systems
Bay Dr Protected Bike Lanes and
Ped
875,000

13. Increase the FY 2026 labor budget for the City WWTF Headworks Replacement (c402204) project. Additional expenses are being added as well to support a late FY 2026 change order to support invoices in FY 2027.

11.15 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 721-40-65-7203-57301
c402204-100-2010-0
Sewer systems
City WWTF Headworks
Replacement
250,000
Expenditure 721-40-62-7252-57301
c402204-100-2020-0
Sewer systems
City WWTF Headworks
Replacement
3,250,000

14. Increase the FY 2026 labor budget for the WWTF-Electrical System (c401405) project.

Additional expenses are being added as well to support a late FY 2026 change order to support invoices in FY 2027.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 721-40-65-7203-57301
c401405-100-2010-0
Sewer systems
WWTF-Electrical System
250,000
Expenditure 721-40-62-7252-57301
c401405-100-2020-0
Sewer systems
WWTF-Electrical System
3,250,000

15. Augmenting the new FY 2026 budget for the Parking Structure - Cedar and Cathcart (c402609) to reflect the Parking Bond and loan proceeds.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 741-40-64-7452-57390
c402609-100-2020-0
Other infrastructure
Parking Structure - Cedar and
Cathcart
21,600,000

16. Measure E (Fund 235) funds are needed in the new Storm Drain Infrastructure Master Plan project (c402612) to develop an up-to-date storm drain master plan, asset management plan, watershed management plan, and other needs analysis on the capacity, condition, deficiencies, and projected needs for operations, maintenance, and capital projects.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 235-40-60-4235-57311
c402612-100-2020-0
235-40-60-4235-57311
Storm Drain Infrastructure Master
Plan
750,000

17. The winter 2025/2026 storms caused a complete failure of the storm drainpipe between junction box L7-CA403 and catch basin L7-CA415 on High Street near Westlake Elementary School. Repairs will be completed by mid-January 2026, however, funds for

11.16 this emergency were not anticipated and will need to be appropriated in the emergency project established for this repair work (t402601).

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 751-40-62-7553-57311
t402601-100-2020-0
Flood control and storm drainage
facility
Emergency Storm Drain Repair
(High Street)
20,275

18. Transfer of funds from City Hall Space Renovation (c402605) interior improvements to City Hall Campus EV Charging Infrastructure (c402606) due to a sooner than anticipated project start date.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 311-00-00-0000-49101
c402605-912-0-0
Transfer from General Fund
City Hall Space Renovation
(150,000)
Revenue 311-00-00-0000-49101
c402606-912-0-0
Transfer from General Fund
City Hall Campus Lot 13 EV Charging
150,000
Expenditure 311-40-00-9410-57290
c402605-100-2020-0
Other building costs
City Hall Space Renovation
(150,00)
Expenditure 311-40-00-9410-57390
c402606-100-2020-0
Infrastructure
City Hall Campus Lot 13 EV Charging
150,000
Water

19. The following is the annual net zero impact transfer of funds within Water’s CIP between various projects as needed. Appropriations for projects that have been completed, closed, or placed on hold are reduced and appropriations for active projects are increased which results in a reduction of overall appropriations needed in the next fiscal year.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 711-70-91-7152-57302
c700025-100-2020-0
Water systems
GHWTP Facilities Improvement
Project
4,528,744
Expenditure 711-70-91-7152-57302
c701501-100-2020-0
Water systems
GHWTP CC Tanks Replacement
1,500,000
Expenditure 711-70-91-7153-57302
c701505-100-2020-0
Water systems
University Tank 4
Rehab/Replacement
1,100,000
Expenditure 711-70-91-7153-57302
c701603-100-2020-0
Water systems
Meter Replacement
(140,000)
Expenditure 711-70-91-7153-57302 Water systems (1,150,000)

11.17 Account Type GL Account Account Description
Adjustment
Amount
c701606-100-2020-0 NCD I/O Replacement Project
Expenditure 711-70-91-7159-57302
c701901-100-2020-0
Water systems
Water Program Administration
475,000
Expenditure 711-70-91-7153-57302
c702002-100-2020-0
Water systems
Brackney Landslide Area Pipeline
Risk Reduction
(5,100,000)
Expenditure 711-70-91-7159-57302
c702003-100-2020-0
Water systems
Water Program Management
Reserve
(3,820,000)
Expenditure 711-70-91-7153-57302
c702101-100-2020-0
Water systems
Beltz 8&12 Design with Beltz 12
Upgrades
530,000
Expenditure 711-70-91-7153-57302
c702105-100-2020-0
Water systems
Newell Crk. Pipeline Felton/Graham
Hill
2,000,000
Expenditure 711-70-91-7152-57302
c702201-100-2020-0
Water systems
GHWTP SCADA Radio System
Replacement
37,000
Expenditure 711-70-91-7151-57302
c702205-100-2020-0
Water systems
Intertie 1 - Santa Cruz-Scotts Valley
240,000
Expenditure 711-70-91-7159-57302
c702401-100-2020-0
Water systems
Trailers at BSR
56,000
Expenditure 711-70-91-7159-57302
c702402-100-2020-0
Water systems
Maintenance Workshop at BSR
84,000
Expenditure 711-70-95-7153-57302
c702501-100-2020-0
Water systems
Tait Wells Rehabilitation
(44,493)
Expenditure 711-70-91-7152-57302
c702502-100-2020-0
Water systems
Beltz WTP Filter Replacement
(1,346,251)
Expenditure 711-70-91-7153-57302
c702503-100-2020-0
Water systems
Beltz 8 Upgrades for Aquifer StrgRecvry
450,000
Expenditure 711-70-91-7153-57302
c702601-100-2020-0
Water systems
Beltz 9 Upgrades for Aquifer StrgRecvry
450,000
Expenditure 711-70-91-7153-57302
c702603-100-2020-0
Water systems
Pasatiempo Tanks Replacement
Project
150,000

20. The estimated grant revenue for the following projects need corrections to match the actual grant funding agreements.

Account Type GL Account Account Description
Adjustment
Amount

11.18 Revenue 711-70-91-7153-43310
c701705-127-5025
Local operating grants and
contributions
Water Supply Augmentation
(2,375,000)
Revenue 711-70-91-7153-43350
c701705-149-5025
Local capital grants and
contributions
Water Supply Augmentation
645,763
Revenue 711-70-91-7153-43193
c702002-702-2270
FEMA – HMGP
Brackney Landslide Area Pipeline
Risk Reduction
(8,022,260)
Revenue 711-70-91-7153-43310
c702101-127-5025
Local operating grants and
contributions
Beltz 8&12 Design with Beltz 12
Upgrades
(330,000)
Revenue 711-70-91-7153-43350
c702101-149-5025
Local capital grants and
contributions
Beltz 8&12 Design with Beltz 12
Upgrades
36,645
Revenue 711-70-91-7153-43310
c702205-127-5025
Local operating grants and
contributions
Intertie 1 - Santa Cruz-Scotts Valley
(10,759,353)
Revenue 711-70-91-7153-43350
c702205-149-5025
Local capital grants and
contributions
Intertie 1 - Santa Cruz-Scotts Valley
6,036,472
City Manager’s Office

21. Transfer funds from the Carbon Fund (fund 135) to the General Fund (fund 101), the Refuse Fund (fund 731), the Wharf Fund (fund 104), and the Gas Tax Fund (fund 221) to provide a revenue source for carbon-reducing projects that align with the City’s Climate Action Plan. The City’s Sustainability Team conducted a multi-meeting project proposal and prioritization process to recommend the projects below for funding.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 731-00-00-0000-49167
g401902-999-0-0
From Carbon Reduction Fund
Expand Zero-Waste Party Kit via “CA
Green Business Network/CA EPA
grant”
3,000
Expenditure 731-40-63-7306-52151
g401902-100-2020-0
Program services
CA Green Business Network/CA EPA
grant
3,000
Revenue 731-00-00-0000-49167
p402602-999-0-0
From Carbon Reduction Fund
Enhance Food Scrap Drop-off
program
5,000
Expenditure 731-40-63-7305-52153
p402602-100-2020-0
Program services - grants
Enhance Food Scrap Drop-off
program
5,000
Expenditure 133-00-00-0000-59111 To Refuse Fund 8,000

11.19 Account Type GL Account Account Description
Adjustment
Amount
Revenue 104-00-00-0000-49167
p302601-999-0-0
From Carbon Reduction Fund
Refillable Wharf Water Bottle
Stations
9,700
Expenditure 104-30-43-3211-52199
p302601-100-2020-0
Other Professional & Technical
Services
Refillable Wharf Water Bottle
Stations
9,700
Expenditure 133-00-00-0000-59124 To Municipal Wharf Fund 9,700 Revenue 221-00-00-0000-49167
m409308-999-0-0
From Carbon Reduction Fund
Bicycle Parking Program –
Maintenance
15,000
Expenditure 221-40-64-4227-54307
m409308-100-2020-0
Maintenance - pedestrian/bike
systems
Bicycle Parking Program –
Maintenance
15,000
Expenditure 133-00-00-0000-59107 To Gas Tax Fund 15,000 Revenue 101-00-00-0000-49167
P102503-999-0-0
Low Income Elec. Leaf Blower and
Battery
12,000
Expenditure 101-10-03-1217-52199
p102503-100-2020-0
Other Professional & Technical
Services
Low Income Elec. Leaf Blower and
Battery
12,000
Revenue 101-00-00-0000-49167
p302602-999-0-0
From Carbon Reduction Fund
University Terrace Park Trees
10,000
Expenditure 101-30-41-3105-53120
p302602-100-2020-0
Landscaping maintenance materials
University Terrace Park Trees
10,000
Revenue 101-00-00-0000-49167
p402603-999-0-0
From Carbon Reduction Fund
Converting Lighting at Union St. HQ
9,990
Expenditure 101-40-66-4110-54315
p402603-100-2020-0
Maintenance - building remodeling
Converting Lighting at Union St. HQ
9,990
Revenue 101-00-00-0000-49167
p402604-999-0-0
From Carbon Reduction Fund
EV Subpanel for City Hall Annex
10,000
Expenditure 101-40-66-4111-52246
p402604-100-2020-0
Building and facility o & m - outside
EV Subpanel for City Hall Annex
10,000
Revenue 101-00-00-0000-49167
p102601-999-0-0
From Carbon Reduction Fund
E-Gen Sustainability & Resiliency
Wkshps
5,310
Expenditure 101-10-03-1217-52199
p102601-100-2020-0
Other professional & technical
services
E-Gen Sustainability & Resiliency
Wkshps
5,310
Revenue 101-00-00-0000-49167
p402605-999-0-0
From Carbon Reduction Fund
E-Bikes for Encampment Monitoring
10,000

11.20 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-40-66-6105-54490
p402605-100-2020-0
Other machinery and equip- noncapital
E-Bikes for Encampment Monitoring
10,000
Expenditure 133-00-00-0000-59101 To General Fund 45,300 Citywide / Non-Departmental

22. Move budget for Sugar-Sweetened Beverage tax (Measure Z) from the General Fund to the special revenue fund, Fund 112, created for this tax collection after the adoption of the FY 2026 budget.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-00-00-0000-41995 Other tax- Measure Z 2025 (1,000,000) Revenue 112-00-00-0000-41995 Other tax- Measure Z 2025 1,000,000

23. Adjust the Cannabis Children’s Fund budget to match 20% of the audited FY 2025 receipts for cannabis sales tax, which was $1,326,814.88. The FY 2026 budget for this item was $370,705, whereas 20% of the revenue received was $254,499.40.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 134-00-00-0000-49191 Intraentity fund transfer in (118,205) Expenditure 101-00-00-0000-59191 Intraentity fund transfer out (118,205)

24. Adjust full-time salary and retirement contribution budgets to account for the Counciladopted memorandum of understandings with the City’s bargaining groups.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-01-01-1110-51110 Regular full time 910
Expenditure 101-10-03-1210-51110 Regular full time 27,673 Expenditure 101-10-03-1211-51110 Regular full time 910
Expenditure 101-10-03-1214-51110 Regular full time 7,837 Expenditure 101-10-03-1217-51110 Regular full time 4,168 Expenditure 101-10-03-1218-51110 Regular full time 11,072 Expenditure 101-10-03-6105-51110 Regular full time 4,120 Expenditure 101-10-16-6105-51110 Regular full time 5,231 Expenditure 101-12-00-1230-51110 Regular full time 21,918

11.21 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-14-11-1241-51110 Regular full time 58,212 Expenditure 101-15-10-1251-51110 Regular full time 63,811 Expenditure 101-20-20-2101-51110 Regular full time 18,362 Expenditure 101-20-21-2102-51110 Regular full time 20,831 Expenditure 101-20-22-2103-51110 Regular full time 74,163 Expenditure 101-20-22-2104-51110 Regular full time 1,565 Expenditure 101-20-22-2106-51110 Regular full time 7,306 Expenditure 101-20-22-6105-51110 Regular full time 3,972 Expenditure 101-20-23-2107-51110 Regular full time 14,244 Expenditure 101-21-30-2201-51110 Regular full time 13,656 Expenditure 101-21-31-2202-51110 Regular full time 172,810 Expenditure 101-21-32-2203-51110 Regular full time 9,804 Expenditure 101-30-40-3101-51110 Regular full time 21,176 Expenditure 101-30-41-3105-51110 Regular full time 3,291 Expenditure 101-30-41-3106-51110 Regular full time 18,738 Expenditure 101-30-41-3107-51110 Regular full time 18,795 Expenditure 101-30-41-3114-51110 Regular full time 680
Expenditure 101-30-41-3120-51110 Regular full time 11,280 Expenditure 101-30-42-3201-51110 Regular full time 1,690 Expenditure 101-30-42-3205-51110 Regular full time 3,403 Expenditure 101-30-42-3208-51110 Regular full time 1,070 Expenditure 101-30-42-3213-51110 Regular full time 5,612 Expenditure 101-30-43-3202-51110 Regular full time 1,363 Expenditure 101-30-43-3206-51110 Regular full time 1,300 Expenditure 101-30-43-3207-51110 Regular full time 2,192 Expenditure 101-30-43-3212-51110 Regular full time 5,273 Expenditure 101-30-45-3131-51110 Regular full time 14,271 Expenditure 101-40-60-4101-51110 Regular full time 1,178 Expenditure 101-40-61-4103-51110 Regular full time 1,859 Expenditure 101-40-61-4210-51110 Regular full time 18,539 Expenditure 101-40-62-4102-51110 Regular full time 22,928 Expenditure 101-40-64-4220-51110 Regular full time 12,501 Expenditure 101-40-64-4221-51110 Regular full time 18,446

11.22 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-40-64-4229-51110 Regular full time 6,789 Expenditure 101-40-66-4110-51110 Regular full time 7,997 Expenditure 101-40-66-4111-51110 Regular full time 2,434 Expenditure 101-40-66-6105-51110 Regular full time 7,733 Expenditure 101-50-70-1301-51110 Regular full time 17,310 Expenditure 101-50-71-1302-51110 Regular full time 19,088 Expenditure 101-50-72-1303-51110 Regular full time 8,924 Expenditure 101-50-74-2301-51110 Regular full time 19,091 Expenditure 101-50-75-2302-51110 Regular full time 7,541 Expenditure 101-50-75-2304-51110 Regular full time 6,077 Expenditure 101-51-80-5401-51110 Regular full time 50,179 Expenditure 103-50-75-2302-51110 Regular full time 7,541 Expenditure 104-21-31-2204-51110 Regular full time 6,612 Expenditure 104-30-43-3211-51110 Regular full time 23,772 Expenditure 104-40-64-4226-51110 Regular full time 4,743 Expenditure 108-50-74-2301-51110 Regular full time 19,091 Expenditure 221-40-61-4224-51110 Regular full time 565
Expenditure 224-40-62-4214-51110 Regular full time 1,251 Expenditure 226-40-62-4228-51110 Regular full time 404
Expenditure 226-40-64-4228-51110 Regular full time 1,988 Expenditure 235-40-60-4235-51110 Regular full time 4,847 Expenditure 711-70-90-7101-51110 Regular full time 20,158 Expenditure 711-70-91-7102-51110 Regular full time 60,959 Expenditure 711-70-92-7103-51110 Regular full time 33,949 Expenditure 711-70-92-7113-51110 Regular full time 10,056 Expenditure 711-70-93-7104-51110 Regular full time 5,326 Expenditure 711-70-94-7105-51110 Regular full time 14,417 Expenditure 711-70-95-7106-51110 Regular full time 60,186 Expenditure 711-70-95-7110-51110 Regular full time 5,771 Expenditure 711-70-96-7107-51110 Regular full time 18,756 Expenditure 711-70-97-7108-51110 Regular full time 49,113 Expenditure 711-70-98-7109-51110 Regular full time 13,243 Expenditure 721-40-61-7202-51110 Regular full time 41,434

11.23 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 721-40-65-7203-51110 Regular full time 98,606 Expenditure 721-40-65-7204-51110 Regular full time 4,500 Expenditure 721-40-65-7205-51110 Regular full time 8,606 Expenditure 721-40-65-7208-51110 Regular full time 12,184 Expenditure 731-40-63-7302-51110 Regular full time 58,160 Expenditure 731-40-63-7303-51110 Regular full time 55,762 Expenditure 731-40-63-7304-51110 Regular full time 24,357 Expenditure 731-40-63-7305-51110 Regular full time 26,961 Expenditure 731-40-63-7306-51110 Regular full time 8,919 Expenditure 731-40-63-7307-51110 Regular full time 10,814 Expenditure 741-40-64-7401-51110 Regular full time 43,252 Expenditure 751-40-60-7501-51110 Regular full time 1,210 Expenditure 752-40-60-7501-51110 Regular full time 1,210 Expenditure 811-40-61-7831-51110 Regular full time 20,174 Expenditure 841-12-07-7820-51110 Regular full time 6,056 Expenditure 842-14-18-7821-51110 Regular full time 8,230 Expenditure 843-12-07-7823-51110 Regular full time 4,418 Expenditure 951-36-51-3601-51110 Regular full time 158,054 Expenditure 101-01-01-1110-51201 Retirement contribution 244 Expenditure 101-10-03-1210-51201 Retirement contribution 6,716 Expenditure 101-10-03-1211-51201 Retirement contribution 244 Expenditure 101-10-03-1214-51201 Retirement contribution 1,978 Expenditure 101-10-03-1217-51201 Retirement contribution 1,014 Expenditure 101-10-03-1218-51201 Retirement contribution 2,694 Expenditure 101-10-03-6105-51201 Retirement contribution 1,002 Expenditure 101-10-16-6105-51201 Retirement contribution 1,273 Expenditure 101-12-00-1230-51201 Retirement contribution 5,469 Expenditure 101-14-11-1241-51201 Retirement contribution 14,626 Expenditure 101-15-10-1251-51201 Retirement contribution 15,784 Expenditure 101-20-20-2101-51201 Retirement contribution 5,388 Expenditure 101-20-21-2102-51201 Retirement contribution 8,277 Expenditure 101-20-22-2103-51201 Retirement contribution 33,045 Expenditure 101-20-22-2104-51201 Retirement contribution 697

11.24 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-20-22-2106-51201 Retirement contribution 3,256 Expenditure 101-20-22-6105-51201 Retirement contribution 1,770 Expenditure 101-20-23-2107-51201 Retirement contribution 3,755 Expenditure 101-21-30-2201-51201 Retirement contribution 3,361 Expenditure 101-21-31-2202-51201 Retirement contribution 79,786 Expenditure 101-21-32-2203-51201 Retirement contribution 551 Expenditure 101-30-40-3101-51201 Retirement contribution 5,276 Expenditure 101-30-41-3105-51201 Retirement contribution 841 Expenditure 101-30-41-3106-51201 Retirement contribution 5,027 Expenditure 101-30-41-3107-51201 Retirement contribution 5,043 Expenditure 101-30-41-3114-51201 Retirement contribution 182 Expenditure 101-30-41-3120-51201 Retirement contribution 3,026 Expenditure 101-30-42-3201-51201 Retirement contribution 453 Expenditure 101-30-42-3205-51201 Retirement contribution 913 Expenditure 101-30-42-3208-51201 Retirement contribution 287 Expenditure 101-30-42-3213-51201 Retirement contribution 1,506 Expenditure 101-30-43-3202-51201 Retirement contribution 366 Expenditure 101-30-43-3206-51201 Retirement contribution 349 Expenditure 101-30-43-3207-51201 Retirement contribution 588 Expenditure 101-30-43-3212-51201 Retirement contribution 1,415 Expenditure 101-30-45-3131-51201 Retirement contribution 3,761 Expenditure 101-40-60-4101-51201 Retirement contribution 304 Expenditure 101-40-61-4103-51201 Retirement contribution 461 Expenditure 101-40-61-4210-51201 Retirement contribution 4,974 Expenditure 101-40-62-4102-51201 Retirement contribution 5,781 Expenditure 101-40-64-4220-51201 Retirement contribution 3,147 Expenditure 101-40-64-4221-51201 Retirement contribution 4,868 Expenditure 101-40-64-4229-51201 Retirement contribution 1,821 Expenditure 101-40-66-4110-51201 Retirement contribution 2,121 Expenditure 101-40-66-4111-51201 Retirement contribution 653 Expenditure 101-40-66-6105-51201 Retirement contribution 2,075 Expenditure 101-50-70-1301-51201 Retirement contribution 4,380 Expenditure 101-50-71-1302-51201 Retirement contribution 4,644

11.25 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-50-72-1303-51201 Retirement contribution 2,171 Expenditure 101-50-74-2301-51201 Retirement contribution 4,995 Expenditure 101-50-75-2302-51201 Retirement contribution 1,996 Expenditure 101-50-75-2304-51201 Retirement contribution 1,603 Expenditure 101-51-80-5401-51201 Retirement contribution 12,328 Expenditure 103-50-75-2302-51201 Retirement contribution 1,996 Expenditure 104-21-31-2204-51201 Retirement contribution 3,053 Expenditure 104-30-43-3211-51201 Retirement contribution 6,367 Expenditure 104-40-64-4226-51201 Retirement contribution 1,261 Expenditure 108-50-74-2301-51201 Retirement contribution 4,995 Expenditure 221-40-61-4224-51201 Retirement contribution 143 Expenditure 224-40-62-4214-51201 Retirement contribution 304 Expenditure 226-40-62-4228-51201 Retirement contribution 98 Expenditure 226-40-64-4228-51201 Retirement contribution 484 Expenditure 235-40-60-4235-51201 Retirement contribution 1,222 Expenditure 313-51-81-9920-51201 Retirement contribution - Expenditure 711-70-90-7101-51201 Retirement contribution 4,986 Expenditure 711-70-91-7102-51201 Retirement contribution 15,341 Expenditure 711-70-92-7103-51201 Retirement contribution 8,947 Expenditure 711-70-92-7113-51201 Retirement contribution 2,698 Expenditure 711-70-93-7104-51201 Retirement contribution 1,300 Expenditure 711-70-94-7105-51201 Retirement contribution 3,722 Expenditure 711-70-95-7106-51201 Retirement contribution 15,983 Expenditure 711-70-95-7110-51201 Retirement contribution 1,404 Expenditure 711-70-96-7107-51201 Retirement contribution 4,952 Expenditure 711-70-97-7108-51201 Retirement contribution 13,092 Expenditure 711-70-98-7109-51201 Retirement contribution 3,553 Expenditure 721-40-61-7202-51201 Retirement contribution 10,951 Expenditure 721-40-65-7203-51201 Retirement contribution 25,968 Expenditure 721-40-65-7204-51201 Retirement contribution 1,192 Expenditure 721-40-65-7205-51201 Retirement contribution 2,265 Expenditure 721-40-65-7208-51201 Retirement contribution 3,225 Expenditure 731-40-63-7302-51201 Retirement contribution 15,466

11.26 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 731-40-63-7303-51201 Retirement contribution 14,638 Expenditure 731-40-63-7304-51201 Retirement contribution 6,535 Expenditure 731-40-63-7305-51201 Retirement contribution 7,234 Expenditure 731-40-63-7306-51201 Retirement contribution 2,340 Expenditure 731-40-63-7307-51201 Retirement contribution 2,901 Expenditure 741-40-64-7401-51201 Retirement contribution 11,409 Expenditure 751-40-60-7501-51201 Retirement contribution 296 Expenditure 752-40-60-7501-51201 Retirement contribution 296 Expenditure 811-40-61-7831-51201 Retirement contribution 5,373 Expenditure 841-12-07-7820-51201 Retirement contribution 1,512 Expenditure 842-14-18-7821-51201 Retirement contribution 2,061 Expenditure 843-12-07-7823-51201 Retirement contribution 1,094 Expenditure 951-36-51-3601-51201 Retirement contribution 40,394

25. Move funds set aside for the NATE subscription costs to individual General Fund departments to cover the FY 2026 contract cost for the City’s newly-adopted Enterprise Resource Programs.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-00-00-0000-49180 From General Fund CIP Reserve Fund 392,644 Expenditure 350-00-00-0000-59101 To General Fund 392,644 Expenditure 101-10-03-1210-53122 Subscription costs 25,029 Expenditure 101-12-00-1230-53122 Subscription costs 10,950 Expenditure 101-14-11-1241-53122 Subscription costs 25,811 Expenditure 101-15-10-1251-53122 Subscription costs 20,336 Expenditure 101-20-20-2101-53122 Subscription costs 84,473 Expenditure 101-21-30-2201-53122 Subscription costs 56,315 Expenditure 101-30-40-3101-53122 Subscription costs 68,830 Expenditure 101-40-60-4101-53122 Subscription costs 58,662 Expenditure 101-50-70-1301-53122 Subscription costs 25,812 Expenditure 101-51-80-5401-53122 Subscription costs 16,425

26. Increase revenue to match the cost allocation for the liability fund.

11.27 Account Type GL Account Account Description
Adjustment
Amount
Revenue 842-14-18-7821-44842 Liability insurance charges 2,435,161

27. Workers’ compensation charges were missed in activity 1251. This adjustment adds the calculated amount for activity 1251 and realigns the revenue account for workers’ compensation to match the total budgeted expenditures.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 841-12-07-7820-44841 Workers' compensation charges (1,316,650) Expenditure 101-15-10-1251-51240 Workers' compensation 196,427

28. The Library and the Water Department contribute to rent for the Union/Locust facility.

This adjustment realigns their budgeted amounts to match the payment schedule for FY 2026.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 413-00-00-0000-46240 Rents - Union Locust Building (4,688) Expenditure 711-70-90-7101-52262 Facility rentals-internal (1,876) Expenditure 951-36-51-3601-52261 Equipment, building and land rentals (41,764)

29. These adjustments account for the new debt obligations that were not budgeted in time for the FY 2026 budget adoption. The funds will be used for debt service payments.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-00-00-8210-58240 Loan Interest 600,000
Expenditure 101-40-66-4111-58140 Loan principal 104,000 Expenditure 101-40-66-4111-58240 Loan Interest 132,452
Expenditure 101-00-00-8110-58140 Loan Principal 181,958 Expenditure 101-00-00-8210-58240 Loan Interest 57,555
Expenditure 721-40-00-7242-58140 Loan Principal 467,468 Expenditure 721-40-00-7242-58240 Loan Interest 1,137,585 Expenditure 721-40-00-7242-58910 Fiscal Agent’s Fees 39,000 Expenditure 741-40-64-7401-58210 Bond Interest 1,008,295

11.28 Economic Development and Housing

30. Interfund labor was budgeted twice, in 51911 and 51910 for IIG project management and administration. This adjustment is to correct that double-counting.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-51-80-5401-51910 Intrafund labor – credit 75,000

31. To fund Public Works' labor for assisting the downtown Farmers' Market set up and breakdown of events.

32. To budget the ED Trust Fund Labor Charges in the project o512601 and the General Ledger. This is for 50% of position 783-002 based on Budgetary Salary Projections dated 4/7/2025.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 136-51-80-5590-52121
o512601-100-2010-0
Interfund labor - charge 83,457
Expenditure 101-51-80-5401-51911 Interfund labor - credit (83,457)

33. Adjusting the Vacant Storefront Activation project budget revenue carryforward.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 136-51-80-5590-46201
p512104-665-1026-0
Rents - real property
Vacant Storefront Activation
(20,394)

34. This budget adjustment brings the LHTF 2020 Grant into alignment with its obligations in each category. The AHTF match obligation for the LHTF funding is fully met with this increase to h512404. Lastly, this includes additional funding for legal consultation on affordable housing topics.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 279-51-81-5201-46306 Contributions – businesses 227,000 Expenditure 279-51-81-5201-56960
h512204-100-2020-357
Loans and grants
Local Housing Trust Fund - LHTF 2020
(173,114)
Account Type GL Account Account Description
Adjustment
Amount
Expenditure 136-51-80-5590-52151
p512510-100-2010-0
Program services
Farmers’ Market
20,000

11.29 Expenditure 279-51-81-5201-52199
h512204-100-2020-0
Other professional & technical services
Local Housing Trust Fund - LHTF 2020
50,000
Expenditure 279-51-81-5201-52121
h512204-100-2010-0
Interfund labor – charge
Local Housing Trust Fund - LHTF 2020
123,114
Expenditure 279-51-81-5201-52132 Legal services – outside 20,000 Expenditure 279-51-81-5201-56960
h512404-100-2020-0
Loans and grants
Library Affordable Housing Project
65,377

35. Adjust the estimated rental revenue for the Kron House and the project carryforward budget for the Colligan Theater.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 281-51-81-5579-46201 Rents - real property (36,872) Revenue 281-51-81-5579-46201
p511802-522-1026-0
Rents - real property
Colligan Theater
(23,807)
Expenditure 281-51-81-5579-54290
p511802-100-2020-0
Maintenance-Other Building Expenses
Colligan Theater
(21,843)

36. To amend the budget for public art staffing charges eliminating the budget from the former project and budgeting the interfund labor charges to equal interfund labor credits budgeted in the General Fund.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 313-51-81-9920-51110
a510901-100-2010-0
Regular full time
Public Art Program Administration
(49,595)
Expenditure 313-51-81-9920-52121
o512602-100-2010-0
Interfund labor - charge
Staff Labor Chargeback
119,999
Finance

37. Move Transportation Development Act budget for Community Bridges and the Volunteer Center to Department 14, Finance: currently budgeted in Department 40, Public Works. The City acts as a pass-through agent for these funds and was made aware of the funding amounts in July, 2025, after the FY 2026 budget was adopted.

Increase the expenditure budget to correspond with the funding amounts.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 291-40-00-6301-43210 State operating grants and contributions (1,200,000) Revenue 291-14-00-6301-43210 State operating grants and contributions 1,292,737

11.30 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 291-40-00-6301-56960 Loans and grants (1,200,000) Expenditure 291-14-00-6301-56960 Loans and grants 1,292,737 Information Technology

38. Move funds to cover a computer equipment purchase for an Archiver.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-15-10-1251-54204 Software purchases (8,000) Expenditure 101-15-10-1251-57409 Computer equipment 8,000

39. Increase revenue to cover yearly Tyler EPL SaaS fees.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 295-50-00-0000-44160 Technology fee surcharge 60,721 Revenue 295-21-00-0000-44160 Technology fee surcharge 1,600 Revenue 295-70-00-0000-44160 Technology fee surcharge 2,000 Expenditure 295-00-00-0000-57901 Software 131,121
Library

40. City ERP replacement costs were budgeted in two different places. This adjustment reduces the City ERP replacement costs from Financial Services – Outside and realigns the corresponding revenue account to match.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-35-00-0000-44610 Library JPA service fees 53,197 Expenditure 951-36-51-3601-52135 Financial services – outside (559,581)

41. The Library purchases their own liability insurance and is not part of the liability fund’s cost allocation. This adjustment removes their budgeted amount from that allocation.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 951-36-51-3601-52932 Liability insurance/surety bonds-internal (43,170)

11.31 Parks and Recreation

42. Three positions in the London Nelson Activity, 3212, were incorrectly budgeted in the “regular part time” GL when these positions should have been in “regular full time.” Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-30-43-3212-51111 Regular part time (204,733) Expenditure 101-30-43-3212-51110 Regular full time 204,733

43. Move funds within the Parks and Recreation pool activity (3208) to increase the temporary budget for programming purposes.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-30-42-3208-54990 Miscellaneous supplies and services (35,000) Expenditure 101-30-42-3208-52199 Other professional & technical services (10,000) Expenditure 101-30-42-3208-52246 Building and facility o & m - outside (5,000) Expenditure 101-30-42-3208-51122 Temporary 50,000

44. Correction to add revenue and expenditure budget for two projects that will receive anticipated FY 2026 Parks and Recreation donation activity.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 162-30-40-3101-46302
p302401-127-5010-0
Donations - parks and recreation
Sister Cities - Parks & Rec Donations
15,000
Revenue 162-30-40-3912-46302
p302404-127-5010-0
Donations - parks and recreation
Memorial Benches - Parks & Rec
Donations
5,000
Expenditure 162-30-40-3101-54990
p302401-100-2020-0
Miscellaneous supplies and services
Sister Cities - Parks & Rec Donations
15,000
Expenditure 162-30-40-3912-54990
p302404-100-2020-0
Miscellaneous supplies and services
Memorial Benches - Parks & Rec
Donations
5,000

45. Correction to add revenue and expenditure budget for the Ocean Villa Cleanups project (o300801) that will receive anticipated FY 2026 Parks and Recreation revenue and expenditure activity.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-30-41-0000-44310
o300801-107-5025-0
Other parks and rec service charges
Ocean Villa Cleanups
1,000

11.32 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-30-41-3120-54990
o300801-100-2020-0
Miscellaneous supplies and services
Ocean Villa Cleanups
1,000

46. Correction to add revenue budget for the Sgt. Derby Skatepark Addition project (g302501) that will receive anticipated FY 2026 Parks and Recreation revenue.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-30-41-3106-43310
g302501-505-5010-0
Local operating grants and contributions
Sgt. Derby Skatepark Addition
4,425
Planning and Community Development

47. Increase Planning department revenues based on received and anticipated funds for the remainder of the fiscal year and decrease some revenue lines based on forecasted decreased revenues.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-50-71-1302-44131 Conditional fence permit 5,000 Revenue 101-50-71-1302-44147 Design Permit Fees 300,000 Revenue 101-50-71-1302-44149 Subdivision fees - planning 17,000 Revenue 101-50-71-1302-44170 Commercial Demolition Permit 3,000 Revenue 101-50-71-1302-44164 Final Map Amendment Fee 3,316 Revenue 101-50-74-2301-42216 Construction permits - roofing 30,000 Revenue 101-50-71-1302-44147 Design permit fees 200,000 Revenue 101-50-74-2301-42214 Construction Permits – cement/demo (20,000) Revenue 101-50-74-2301-44135 Document Handling (30,000) Revenue 101-50-75-2302-45123 Code Enforcement fines/Citations 5,000 Revenue 295-50-00-0000-44160 Technology Surcharge 50,000

48. Move funds within the Planning department budget to cover anticipated discretionary spending for the remainder of the fiscal year.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-50-70-1301-52972 Printing and binding-outside (7,000) Expenditure 101-50-70-1301-52240 Office equipment operation/maint 7,000 Expenditure 101-50-70-1301-53101 Postage charges (1,000)

11.33 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 101-50-70-1301-53102 Office supplies 1,000
Expenditure 101-50-70-1301-54202 Equipment purchases - non capital (2,000) Expenditure 101-50-70-1301-54401 Office furniture/equipment - non capital 2,000 Expenditure 101-50-74-2301-52199 Other professional & technical services (5,000) Expenditure 101-50-74-2301-54203 Computer equipment - non-capital 5,000 Expenditure 101-50-75-2302-52302 Travel & meetings 5,000 Expenditure 101-50-75-2302-53101 Postage charges 1,000
Expenditure 101-50-75-2302-53106 Books and periodicals 1,000 Expenditure 103-50-75-2302-52302 Travel and meetings (3,000) Expenditure 103-50-75-2302-52304 Training (2,000)
Expenditure 103-50-75-2302-52199 Other professional & technical services (2,000) Public Works

49. An emergency refuse truck is needed for Resource Recovery Collection operations. A front loader truck is available in early 2026 at a discounted rate. Approval for the truck will be sent for City Council approval in February 2026.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 731-40-63-7302-57402 Vehicle equipment 700,000

50. The Wastewater Engineering division will be working with a UCSC Intern for a temporary Engineering Technician (999-135) assignment. Temporary funds were not originally budgeted in the FY 2026 adopted budget.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 721-40-62-7209-51122 Temporary 40,000

51. The Wastewater Division will be hiring a temporary Administrative Assistant II (999-058) while recruitment is completed for the regular vacancy in the second half of FY 2026.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 721-40-65-7203-51122 Temporary 70,000

11.34 52. Unanticipated funding from local businesses for the installation of bicycle parking in the public right-of-way.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-40-64-4220-46306
m402601-520-8000-0
Contributions - businesses
Bicycle Parking Maintenance
15,000
Expenditure 101-40-64-4220-54390
m402601-100-2020-0
Maintenance - other infrastructure
Bicycle Parking Maintenance
15,000

53. Labor and supply costs to maintain the Pure Water Soquel infrastructure in the Wastewater Treatment Facility were unknown during the FY 2026 budget request period.

This adjustment will augment the WWTF Pure Water Soquel Maintenance project (p402601) to track associated costs.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 721-40-65-7203-51910
p402601-100-2010-0
Intrafund labor – credit
WWTF Pure Water Soquel
Maintenance
4,000
Expenditure 721-40-65-7203-54317
p402601-100-2020-0
Maintenance - Pure Water Soquel
WWTF Pure Water Soquel
Maintenance
2,000

54. A FY 2026 budget entry error occurred. The Refuse Fund needs to be corrected for the full cost share allocation to the Customer Service program.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 731-40-63-7301-52107 Administrative services-other - internal
150,395

55. The amount budgeted for Land Lease did not account for the annual 3% increase. At the same time, the corresponding revenue account was over-budgeted. This adjustment realigns both accounts.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-00-00-0000-46262 Rents - Wastewater land lease (39,668) Revenue 101-00-00-0000-46263 Rents - Refuse land lease (18,479) Expenditure 721-40-65-7203-52263 Land lease – internal 38,513 Expenditure 731-40-63-7303-52263 Land lease – internal 17,940

11.35 56. Adjusting accepted MBARD grant funding revenue of specified amounts for the purchase of an electric refuse hauler and electric dump truck that was inadvertently attributed to the wrong project/vehicle. This also appropriates funds for the deficit in the purchase of the electric dump truck that this correction caused. There is no change to the total grant award.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-40-61-4210-43210
g402204-216-2271-0156
State operating grants and
contributions
Electric St. Maint. Dump Truck
Veh#504
(58,243)
Revenue 731-40-63-7305-43210
g402203-216-2271-0156
State operating grants and
contributions
Electric Refuse Hauler Vehicle
58,243
Expenditure 101-40-61-4210-54311
m400028-100-2020-0
Flood control and storm drain
maintenance
Minor Storm Drain Maintenance
(66,236)
Expenditure 101-40-61-4210-57402
g402204-100-2020-0
Vehicle equipment
Electric St. Maint. Dump Truck
Veh#504
66,236

57. Moving funds for vehicle leases costs on the pool van and small wheel loader that were not fully accounted for in FY26 budget.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 811-40-61-7836-57402 Vehicle equipment (51,660) Expenditure 811-40-61-7836-52268 Vehicle lease – outside 51,660 Water

58. Merchant Bank Fees are anticipated to exceed the budgeted amount for FY 2026. The Water Department will need to increase this account by $270,000 to cover these costs.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 711-70-92-7103-52150 Merchant bank fees 270,000

59. In FY 2025, lower-than-projected expenditures and a healthy Rate Stabilization Fund balance enabled a $6.4 million payment toward the Department’s Line of Credit with Wells Fargo Bank. This principal reduction aligns with the Water Department’s LongRange Financial Plan.

11.36 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 711-70-00-7140-58140 Loan principal 6,400,000

60. Two additional and unanticipated projects need to be budgeted for FY 2026. The first is the Water Department’s share of $59,000 to the Project Labor Agreement research in partnership with the Public Works Department, the City Manager’s Office and the Water Department. The second project is the repair to the sewer line at 212 Locust Street which the Water Department shares with Library Administration. The amount represents Water’s share of the estimated repairs.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 711-70-90-7101-52199 Other professional & technical services
59,000
Expenditure 711-70-90-7101-52246 Building and facility o & m - outside 50,000

61. Costs related to the NATE Subscription Year 2 were fully budgeted in the Customer Services activity, 7103. The Workday component is being re-programmed to the Admin activity, 7101.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 711-70-92-7103-53122 Software licenses (55,798) Expenditure 711-70-90-7101-53122 Software licenses 55,798

62. The amount budgeted for Land Lease did not account for the annual 3% increase. At the same time, the corresponding revenue account was over-budgeted. This adjustment realigns both accounts.

Account Type GL Account Account Description
Adjustment
Amount
Revenue 101-00-00-0000-46261 Rents - Water land lease (45,158) Expenditure 711-70-90-7101-52263 Land lease – internal 43,842

63. Adjust the Water salary and benefit budgets to account for position changes presented in the personnel complement for the midyear of FY 2026.

Account Type GL Account Account Description
Adjustment
Amount
Expenditure 711-70-90-7101-51110 Regular full time 13,525 Expenditure 711-70-90-7101-51201 Retirement contribution 2,489

11.37 Account Type GL Account Account Description
Adjustment
Amount
Expenditure 711-70-90-7101-51210 Group health insurance 211 Expenditure 711-70-90-7101-51221 Disability insurance 321 Expenditure 711-70-90-7101-51214 Medicare insurance 192 Expenditure 711-70-90-7101-51240 Worker’s compensation 1,553

11.38 RESOLUTION NO. NS-XX,XXX

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ AMENDING

THE PERSONNEL COMPLEMENT AND CLASSIFICATION AND COMPENSATION PLAN FOR THE CITY MANAGER’S OFFICE, ECONOMIC DEVELOPMENT AND

HOUSING, HUMAN RESOURCES, INFORMATION TECHNOLOGY, LIBRARY, PARKS

AND RECREATION, PUBLIC WORKS, AND WATER DEPARTMENTS
WHEREAS, staff has recommended certain modifications to the Personnel Complement and Classification and Compensation Plan.

That effective February 10, 2026, the City of Santa Cruz Personnel Complement and effective the Classification and Compensation Plan be modified to:

Activity Classification No. and
Title
Salary

CITY MANAGER'S OFFICE
Add Position: 1217
7203
7101
852- Project Manager II

1.0 FTE
Add Position: 1211
1110
849- Program Analyst II

1.0 FTE
Delete Position 1211
1110
107- Administrative
Assistant III

1.0 FTE

ECONOMIC

DEVELOPMENT AND

HOUSING
Add Position and
Classification and
Compensation Plan Update :
5401 842- Deputy Director of
Economic Development
and Housing

1.0 FTE
$12,717-$16, 392
Delete Position: 5401 815- Redevelopment
Director 1.0 FTE

HUMAN RESOURCES
Add Position: 1230 721- Human Resources
Analyst II

1.0 FTE
Add Position: 1230 169- Human Resources
Technician

1.0 FTE

INFORMATION

TECHNOLOGY
Delete Position: 1251 107- Administrative
Assistant III

1.0 FTE

11.39 RESOLUTION NO. NS-XX,XXX

LIBRARY
Add Position: ERP System
Correction
3601 283-Library Assistant II

1.4 FTE
Add Position: 3601 742, 750 – Librarian I/II

1.0 FTE
Delete Position: 3601 285 – Library Information
Specialist

1.0 FTE

PARKS AND RECREATION
Add Position: 3101 106 – Administrative
Assistant II

0.5 FTE
Delete Position: 3212 140- Facility Attendant

1.0 FTE
Add Position: 3120 167- Parks Maintenance
Worker 1.0 FTE
Add Positions: (Three 1.0 and
one 0.5 FTE)
3213
(2.0)
3212
(1.5)
197- Recreation Specialist

3.5 FTE
Delete Position: 3101 107 – Administrative
Assistant III

0.5 FTE

PUBLIC WORKS
Add Position: 4101 107 – Administrative
Assistant III

1.0 FTE
Add Position: 4101 702 – Management Analyst

1.0 FTE
WATER
Add Position: 7101 316 – Administrative
Service Supervisor

1.0 FTE
Delete Position: 7101 107 – Administrative
Assistant III

1.0 FTE

11.40 RESOLUTION NO. NS-XX,XXX
PASSED AND ADOPTED this 10th day of February, 2026 by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

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

11.41 City Council

AGENDA REPORT
DATE: 01/22/2026
AGENDA OF: 02/10/2026
DEPARTMENT: Human Resources
SUBJECT: 2025-2028 City of Santa Cruz Supervisors Operating Engineers, Local 3 Agreement for Successor Memorandum of Understanding (HR) LOCATION: Citywide
RECOMMENDATION: Motion to adopt a resolution adopting the 2025-2028 Successor Memorandum of Understanding between the City of Santa Cruz and the Supervisors Operating Engineers, Local 3, effective December 6, 2025 through December 8, 2028.

BACKGROUND: Having met and conferred in good faith in accordance with the MeyersMilias-Brown Act, the City and Supervisors Operating Engineers, Local 3 (OE3) have reached a Total Tentative Agreement and on January 13, 2026, City Council adopted the Total Tentative Agreement between the City of Santa Cruz and OE3.

DISCUSSION: As directed by Council on January 13th, 2026, staff presents this item to Council for adoption of the successor MOU for OE3 in its entirety.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: Not applicable.

HEALTH IN ALL POLICIES (HiAP): Approval of the successor agreements for supervisors OE3 addresses the public health pillar of HiAP by supporting operational continuity, ensuring stable leadership in managing essential City services and programs that directly affect community well-being.

FISCAL IMPACT:

1. The recommendation in this report impacts the General Fund: Yes

2. This recommendation requires a budget adjustment: Yes

3. The recommendation creates an on-going expenditure commitment: Yes FISCAL IMPACT DESCRIPTION: Additional appropriations to account for the cost of these compensation and benefit changes will be brought comprehensively to City Council in the FY 2026 midyear budget adjustment in February, 2026 and as part of FY 2027 budget.

12.1 Prepared and Submitted By:

Sara De Leon
HR Director
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. SUPERVISOR MOU- CLEAN.PDF

2. SUPERVISOR MOU- TRACK CHANGES.PDF

3. SUPERVISORS OE3 RESOLUTION.DOCX

4. SUPERVISOR TENTATIVE AGREEMENT SECTION 13.14 BILINGUAL PAY.PDF

5. SUPERVISOR TENTATIVE AGREEMENT SECTION 23.00 DISCIPLINARY APPEALS PROCEDURE.PDF

6. SUPERVISOR TENTATIVE AGREEMENT SECTION 12.01 LUNCH PERIOD.PDF

7. SUPERVISOR TENTATIVE AGREEMENT SECTION 17.02.03 FAMILY LEAVE.PDF

8. SUPERVISOR TENTATIVE AGREEMENT SECTION 17.02.01 MEDICAL OR PERSONAL LEAVE.PDF

9. SUPERVISORS TOTAL TENTATIVE AGREEMENT.PDF

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MEMORANDUM OF UNDERSTANDING

CITY OF SANTA CRUZ AND

SUPERVISORY EMPLOYEES OF THE CITY OF SANTA CRUZ
OPERATING ENGINEERS, LOCAL #3
December 6, 2025 to December 8, 2028

12.3 2

MEMORANDUM OF UNDERSTANDING

CITY OF SANTA CRUZ AND

SUPERVISORY EMPLOYEES OF THE CITY OF SANTA CRUZ
OPERATING ENGINEERS, LOCAL #3
December 6, 2025 to December 8, 2028

TABLE OF CONTENTS
SECTION 1.00 - PREAMBLE .......................................................................................................................... 8 SECTION 2.00 - TERM .................................................................................................................................... 8 SECTION 3.00 - NO ABROGATION OF RIGHTS ......................................................................................... 8 SECTION 4.00 - PAST PRACTICES, FULL UNDERSTANDING, MODIFICATIONS AND WAIVER .... 9 SECTION 5.00 - RECOGNITION .................................................................................................................... 9 SECTION 6.00 - EMPLOYEE RIGHTS ........................................................................................................... 9 SECTION 7.00 - UNION/CITY COOPERATION ........................................................................................... 9

7.01 Membership List ............................................................................................................................. 10 SECTION 8.00 - JOB ACTIONS .................................................................................................................... 10 SECTION 9.00 - NO DISCRIMINATION/RESPECTFUL WORKPLACE CONDUCT .............................. 10 SECTION 10.00 - UNION SECURITY AND UNION RIGHTS ................................................................... 10

10.01 Memorandum of Understanding ................................................................................................ 10

10.01.01 Distribution ........................................................................................................................ 10

10.02 Union Notification ..................................................................................................................... 10

10.03 Bulletin Boards and Department Mail ....................................................................................... 10

10.04 Payroll Deductions ..................................................................................................................... 11

10.04.01 Payroll Deductions ............................................................................................................ 11

10.04.02 Union’s Certification ......................................................................................................... 11

10.04.03 Indemnification .................................................................................................................. 11

10.05 Time Off for Union Officials ..................................................................................................... 12

10.05.01 Meet and Confer or Consult Sessions ................................................................................ 12

10.05.02 Union Stewards ................................................................................................................. 12

10.06 Organization Security ............................................................................................................ 12

10.07 Access to City Facilities ............................................................................................................. 13

10.08 Area Meetings ............................................................................................................................ 13

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SECTION 11.00 - PERSONNEL ACTIONS .................................................................................................. 13

11.01 Personnel Files ........................................................................................................................... 13

11.02 Performance Evaluations............................................................................................................ 13

11.02.01 Late Evaluations ................................................................................................................ 14

11.03 Probation .................................................................................................................................... 14

11.03.01 Probationary Period ........................................................................................................... 14

11.03.02 Objective of Probationary Period ...................................................................................... 14

11.03.03 Rejection of Probationary Employee ................................................................................. 14

11.03.04 Extension of Probation ...................................................................................................... 14 SECTION 12.00 - WORK ASSIGNMENTS .................................................................................................. 15

12.01 Work Shifts ................................................................................................................................ 15

12.01.01 Voluntary Time Off ........................................................................................................... 15

12.02 Seniority ..................................................................................................................................... 15

12.03 Lunch Period .............................................................................................................................. 15

12.04 Rest Periods ................................................................................................................................ 16

12.05 Clean Up Times .......................................................................................................................... 16

12.06 Emergency Meals ....................................................................................................................... 16

12.07 Light Duty Assignments ............................................................................................................ 16 SECTION 13.00 - PAY RATES AND PRACTICES ...................................................................................... 16

13.01 Salary Steps ................................................................................................................................ 17

13.02 Salary Rates Upon Appointment ................................................................................................ 17

13.03 Advancement Within the Range ................................................................................................ 17

13.04 Retirement .................................................................................................................................. 18

13.04.01 Employees Hired on or Before May 11, 2012 (Tier I) ...................................................... 18

13.04.02 Employees Hired On or After May 12, 2012 (Tier II) ...................................................... 19

13.04.03 Employees Hired On or After January 1, 2013 (Tier III) .................................................. 19

13.04.04 Retirement, All Employees................................................................................................ 20

13.04.05 Sick Leave Conversion ...................................................................................................... 20

13.05 Longevity ................................................................................................................................... 20

13.06 Working Out of Classification Pay Differential ......................................................................... 21

13.07 Shift Differential ........................................................................................................................ 21

13.07.01 Weekends .......................................................................................................................... 22

13.07.02 Water Plant Lone Operator ................................................................................................ 22

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13.07.03 Wastewater Plant Lone Operator ....................................................................................... 22

13.08 Overtime ..................................................................................................................................... 23

13.09 Call-Back .................................................................................................................................... 23

13.09.01 Callback by Phone or Computer ........................................................................................ 23

13.09.02 Callback to Worksite ......................................................................................................... 24

13.10 Duty Assignment ........................................................................................................................ 24

13.10.01 Definition ......................................................................................................................... 24

13.10.02 Assignment ........................................................................................................................ 24

13.10.03 Compensation .................................................................................................................... 25

13.11 Senior Wastewater Plant Operators On-Call Assignment .............................................................. 25

13.11.01 Definition ........................................................................................................................... 25

13.11.02 Assignment ........................................................................................................................ 26

13.11.03 Compensation .................................................................................................................... 26

13.12 Uniform Allowance .................................................................................................................... 27

13.13 Tuition Reimbursement .............................................................................................................. 27

13.14 Bilingual Pay .............................................................................................................................. 27

13.15 Licenses ...................................................................................................................................... 28

13.17 Confined Space Entry Premium Pay .......................................................................................... 29

13.18 Planning Department Certification Compensation Incentive Pay .................................................. 30

13.19 Hazardous Material Pay ............................................................................................................. 31

13.20 Scuba Pay ................................................................................................................................... 31

13.21 Compaction ................................................................................................................................ 31

13.22 Compensation Study .................................................................................................................. 32 SECTION 14.00 - HOLIDAYS ....................................................................................................................... 32

14.01 Fixed Holidays ........................................................................................................................... 32

14.02 Floating Holidays ....................................................................................................................... 33

14.03 Holiday Work ............................................................................................................................. 33

14.04 Holiday on Regular Day Off ...................................................................................................... 33

14.05 Holidays During Vacation .......................................................................................................... 33

14.06 Annual Holiday Credit to Vacation ............................................................................................ 33

14.07 Eligibility.................................................................................................................................... 34 SECTION 15.00 - VACATION....................................................................................................................... 34

15.01 Accrual ....................................................................................................................................... 34

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15.02 Scheduling of Vacation .............................................................................................................. 34

15.03 Illness During Vacation .............................................................................................................. 34

15.04 Vacation Accrual Maximum ...................................................................................................... 34

15.05 Special Recruitment Circumstances ........................................................................................... 35 SECTION 16.00 - SICK LEAVE .................................................................................................................... 35

16.01 Definition ................................................................................................................................... 35

16.02 Accrual and Use ......................................................................................................................... 35

16.02.01 Family Sick Leave ............................................................................................................. 35

16.03 Limitations ................................................................................................................................. 36

16.04 Sick Leave Incentive Program ................................................................................................... 36

16.05 Personal Business Leave ............................................................................................................ 36 SECTION 17.00 - LEAVES OF ABSENCE ................................................................................................... 37

17.01 Paid Leaves of Absence ............................................................................................................. 37

17.01.01 Bereavement Leave .......................................................................................................... 37

17.01.02 Jury Duty ........................................................................................................................... 37

17.01.03 Absence for Examination ................................................................................................. 37

17.01.04 Blood Donations ................................................................................................................ 38

17.01.05 Military Duty ..................................................................................................................... 38

17.01.06 Workers’ Compensation .................................................................................................... 38

17.01.07 Paid Birth/Adoptive Leave ................................................................................................ 38

17.02 Unpaid Leaves of Absence ......................................................................................................... 39

17.02.01 Leave without Pay ............................................................................................................ 39

17.02.02 Pregnancy Disability Leave ............................................................................................... 39

17.02.03 Family Leave ..................................................................................................................... 39

17.03 Continuation of Insurance Benefits During Unpaid Leaves of Absence ................................... 41

17.03.02 Medical Leave .................................................................................................................. 41

17.03.03 Family Leave ..................................................................................................................... 42 SECTION 18.00 – BENEFITS ........................................................................................................................ 42

18.01 Medical Benefits ........................................................................................................................ 42

18.02 Dental Insurance ......................................................................................................................... 43

18.03 Vision Insurance ......................................................................................................................... 44

18.04 Long-Term Disability ................................................................................................................. 44

18.05 Part-Time Employees ................................................................................................................. 44

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18.06 Retiree Health Program .............................................................................................................. 44

18.07 Life Insurance ............................................................................................................................. 45

18.08 Principal Domestic Partners ....................................................................................................... 45

18.09 State Disability Insurance........................................................................................................... 45 SECTION 19.00 - SAFETY ............................................................................................................................ 45

19.01 Intent .......................................................................................................................................... 45

19.02 Safety Committee ....................................................................................................................... 45

19.03 Safety Boots ............................................................................................................................... 45 SECTION 20.00 - SUPERVISORY TRAINING ............................................................................................ 46 SECTION 21.00 - REDUCTION IN FORCE ................................................................................................. 46

21.01 Lay-Offs ..................................................................................................................................... 46

21.02 Bumping ..................................................................................................................................... 46

21.03 Notification ................................................................................................................................ 47

21.04 Reassignment ............................................................................................................................. 47

21.05 Reinstatement ............................................................................................................................. 47

21.06 Continuation of Insurance Benefits ............................................................................................ 48

21.07 Retirement in Lieu of Layoff ..................................................................................................... 48

21.08 Improper Layoff ......................................................................................................................... 48

21.09 Transition Training ..................................................................................................................... 48 SECTION 22.00 - EMPLOYEE GRIEVANCE PROCEDURE ..................................................................... 48

22.01 Purpose ....................................................................................................................................... 48

22.02 Definition ................................................................................................................................... 48

22.03 Limitations ................................................................................................................................. 48

22.04 Procedures .................................................................................................................................. 49 SECTION 23.00 - DISCIPLINARY APPEALS PROCEDURE ..................................................................... 51

23.01 Definition ................................................................................................................................... 51

23.02 Pre-Action Procedure ................................................................................................................. 51

23.03 Post-Action Appeal .................................................................................................................... 52 SECTION 24.00 - WRITTEN REPRIMANDS ............................................................................................... 53 SECTION 25.00 - AUTHORIZED AGENTS ................................................................................................. 53 SECTION 26.00 - RENEGOTIATIONS ......................................................................................................... 53 SECTION 27.00 –MISCELLANEOUS .......................................................................................................... 54

27.01 Automatic Deposit - New Hires ................................................................................................. 54

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27.02 Holiday Closure ........................................................................................................................ 54 SECTION 28.00 - SEVERABILITY ............................................................................................................... 54 EXHIBIT A: SUPERVISORY CLASSIFICATIONS .................................................................................... 56 EXHIBIT B: CLASSIFICATIONS REQUIRING SAFETY BOOTS ........................................................... 57 EXHIBIT C: Council Policy 25.2 Discrimination, Harassment, Retaliation, and Respectful Workplace Conduct Policy ................................................................................................................................................. 58 EXHIBIT D: Administrative Procedure Order II-1A Discrimination/Harassment/Retaliation ..................... 62 Policy Implementation and Complaint Procedure ........................................................................................... 62 EXHIBIT E: Administrative Procedure Order II-1B Respectful Workplace Conduct .................................... 66

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MEMORANDUM OF UNDERSTANDING

CITY OF SANTA CRUZ

AND SUPERVISORY EMPLOYEES OF THE CITY OF SANTA
OPERATING ENGINEERS, LOCAL #3
December 6, 2025, to December 8, 2028
SECTION 1.00 - PREAMBLE
This Memorandum of Understanding is entered into by the City of Santa Cruz (hereinafter referred to as the City) and the City of Santa Cruz Supervisory Employees, represented by Operating Engineers, Local #3 (hereinafter referred to as the Union), and, upon ratification by the Union membership and a determination is made by the City Council, is binding under Section 3505.1 of the Government Code.

The City, the Union, and all employees recognize their respective obligations to provide services of the highest quality and efficiency. To this end, the City and the Union and all employees affirm their commitment to harmonious labor-management relations.

SECTION 2.00 - TERM
This Memorandum of Understanding shall be effective on December 6, 2025, and shall expire on December 8, 2028.

Unless otherwise stated herein, all payroll related changes identified in this tentative agreement will commence with the pay period beginning December 6, 2025, or the pay period when Council approves the successor MOU in open session, whichever is later.

SECTION 3.00 - NO ABROGATION OF RIGHTS
The parties acknowledge that City responsibilities and rights as indicated in the City Personnel Rules and Regulations and all applicable State or Municipal laws are neither abrogated nor made subject to the meet and confer process by adoption of this Memorandum of Understanding.

It is agreed that, except as specifically delegated, granted or modified by this Memorandum of Understanding, all of the rights, power, and authority, the City had prior to the signing of this Memorandum of Understanding are retained by the City and remain the exclusive right of the City without limitation. Furthermore, these retained rights are not subject to any grievance or impasse procedure.

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SECTION 4.00 - PAST PRACTICES, FULL UNDERSTANDING,

MODIFICATIONS AND WAIVER
The Memorandum of Understanding and any other written rules or regulations in effect on the first day of this agreement sets forth the full and entire understanding of the parties regarding the matters set forth herein, and any other prior or existing understanding or agreements by the parties, whether formal or informal, regarding any such matters are hereby superseded or terminated in their entirety.

Except as specifically provided herein, it is agreed and understood that each party hereto voluntarily and unqualifiedly waives its right, and agrees that the other shall not be required to negotiate with respect to any subject or matter covered herein or with respect to any other matters within the scope of negotiations, during the term of this Memorandum of Understanding.

Any agreement, alteration, understanding, variation, waiver, or modification of any of the terms or provisions contained herein shall not in any manner be binding upon the parties hereto, unless made and executed in writing by the parties hereto, and if required, approved and implemented by the City Council.

The waiver of any breach, term or condition of the Memorandum of Understanding by either party shall not constitute a precedent in the future enforcement of all its terms and provisions.

SECTION 5.00 - RECOGNITION
Pursuant to the Meyer-Milias-Brown Act and the City's Personnel Rules and Regulations, the City has certified the Union as the recognized employee organization of the representation unit consisting of all full-time and part-time regular employees except those limited by State or Municipal Codes, Resolutions or directives in the classifications specifically listed in Exhibit A attached hereto. This unit shall be titled the Supervisory Unit.

SECTION 6.00 - EMPLOYEE RIGHTS
The Union and the City acknowledge that, although the Union is the recognized unit including those classes specifically listed in Exhibit A, the rights of employees under this Memorandum of Understanding, State law, City Rules and Regulations and the City Charter are neither abrogated nor diminished by the adoption of this Memorandum of Understanding.

SECTION 7.00 - UNION/CITY COOPERATION
The Union recognizes that, in consideration of commitments made by the City to provide effective and efficient service to the citizens of Santa Cruz, there is an obligation upon unit employees to directly be involved with and support efforts to improve the methods and production of the various departments. Toward this goal, both the City and the Union agree to work cooperatively towards achieving a high level of effectiveness and efficiency.

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7.01 MEMBERSHIP LIST
The City agrees to supply the Union quarterly with an alphabetical list of names and classification of bargaining unit members. The City will provide a quarterly list of members who separate service from the City and all new hires.

SECTION 8.00 - JOB ACTIONS
The Union agrees not to permit, authorize or in any other manner allow its members to strike, slowdown, sit-in or engage in any work stoppage or other legal or illegal work or job action.

SECTION 9.00 - NO DISCRIMINATION/RESPECTFUL WORKPLACE

CONDUCT
The Union and the City agree to adhere to the City Council policies of equal employment opportunity, harassment prevention, and respectful workplace conduct as listed in Exhibits C, D, and E as well as applicable Federal and State discrimination laws.

SECTION 10.00 - UNION SECURITY AND UNION RIGHTS

10.01 MEMORANDUM OF UNDERSTANDING

10.01.01 Distribution
The City will make copies of this Memorandum of Understanding available to all members in electronic format. When a person is hired in any classification covered by this Memorandum of Understanding, the City shall notify the person that the Union is the recognized employee organization and provide a link to this Memorandum of Understanding.

10.02 UNION NOTIFICATION
Except in cases of bona fide emergencies, the Union shall be given seven (7) work days advance written notification of any ordinance, rule, resolution, or regulation directly relating to matters within the scope of representation proposed to be adopted by the City Council or City Administration and shall be given the opportunity to meet with the City representative prior to its adoption.

10.03 BULLETIN BOARDS AND DEPARTMENT MAIL
The Union shall have reasonable access to bulletin boards and departmental mail for the purpose of Union communications provided such use does not interfere with the needs of the department and material posted is not derogatory to the City, employees of the City or other employee organizations. The City shall allow the Union to utilize City e-mail consistent with applicable City policy. A copy of all posted material shall be provided to the Human Resources Division.

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10.04 PAYROLL DEDUCTIONS

10.04.01 Payroll Deductions
The City shall deduct Union membership dues and any other mutually agreed-upon payroll deduction, to the extent permitted by law, from the monthly pay of each member employee.

The Union will provide the City with information regarding the amount of dues deductions and the list of Union member employees who have affirmatively consented to or authorized dues deductions.

The City shall remit the deducted dues and any other mutually agreed payroll deduction, to the extent permitted by law, to the Union as soon as possible after the deduction.

The City agrees to direct each member employee to the Union with regard to any questions or concerns related to membership dues or any other mutually agreed payroll deduction, to the extent permitted by law.

The Union is responsible for providing the City with timely information regarding changes to member employees’ dues and any other lawful union-related payroll deduction.

10.04.02 Union’s Certification
The City shall make payroll deductions in reliance on the Union’s certification certifying that the Union has and will maintain an authorization, signed by each member employee who affirmatively consents to pay Union membership dues. Similarly, The City shall only cancel or modify any membership dues or any other mutually agreed payroll deduction, to the extent permitted by law, for any member employees in reliance on the information provided by the Union.

The City shall not request the Union to provide a copy of any member employees’ authorization unless a dispute arises about the existence or terms of the authorization.

10.04.03 Indemnification
The Union shall indemnify, defend, protect and hold harmless the City and its elected and appointed officials, officers, employees, officers and agents (collectively hereafter the “Indemnitees”) from and against any and all claims, liabilities, losses, damages, fines, penalties, claims, demands, suits, actions, causes of action, judgments, costs and expenses (including, but not limited to, reasonable attorneys’ fees and court costs) arising from the application of any provisions under Section 10.03, including, but not limited to, any claims made by any member employees for the membership dues deductions the City made in reliance on the Union’s certification, and any claims made by any member employees for any deduction cancellation or modification the City made in reliance on the information provided

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by the Union, provided that the City promptly notify the Union of any such matter for which it is seeking indemnification after the City has knowledge of the occurrence of such matter.

In the event any such action or proceeding is brought against the City by reason of any such claim, the Union, upon notice from the City, covenants to defend such action or proceeding by counsel reasonably satisfactory to the City. Further, the Union agrees to indemnify and hold harmless the Indemnitees for any loss or damage arising from the Union’s actions or inactions under Section 10.03. However, the Union shall have the exclusive right to direct counsel, control the defense of any action or proceeding, and determine whether any such action or proceeding shall or shall not be compromised, resisted, defended, tried or appealed on the premise and condition that the Union shall fully compensate for any monetary loss to the City based on the Union’s determination, if any.

10.05 TIME OFF FOR UNION OFFICIALS

10.05.01 Meet and Confer or Consult Sessions
Up to four (4) Union members shall be allowed a reasonable amount of paid release time off for meet and confer, or meet and consult, sessions scheduled with the City Council’s designated representative, providing there is no disruption of work in the employee’s division.

In advance of the meeting, the Union shall notify the Human Resources Division of the specific members who will be in attendance. Such Union members shall obtain permission through management channels before leaving their work or work locations.

Ground Rules for negotiating successor agreements shall specify the number of Union members allowed for the meet and confer sessions scheduled with the City Council’s representatives.

10.05.02 Union Stewards
The Union shall be authorized to designate four (4) employees within the unit as stewards.

Stewards shall be allowed a reasonable amount of paid release time for the purpose of representing an employee in the filing or processing of an identified grievance. Stewards must first obtain permission through appropriate management channels before leaving their work or work location of such purposes and release time shall only be granted as long as there is no disruption of work in the employee’s division. This provision shall be limited to periods of regular working hours. It is agreed the City shall not pay stewards for time spent in handling grievances when they are not regularly scheduled to work.

10.06 Organization Security
The City and the Union shall conduct an election to determine if the membership wishes to implement an organizational security agreement for maintenance of membership. The specific terms of the maintenance of membership requirements will be subject to agreement by the City and Union prior to the election.

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10.07 ACCESS TO CITY FACILITIES
With the approval of the site administrator, the Union’s representative may meet with members on City facilities during the non-working hours of the employees involved. The nonworking hours restriction does not apply to the handling of grievances. A reasonable effort will be made to accommodate the Union representative.

10.08 AREA MEETINGS
The City shall provide employees two (2) hours of release time per each Union general membership meeting. The two (2) hours includes travel time to and from the meeting and shall not have an adverse impact on City operations. The purpose of area meetings shall be to nominate and elect officers and shop stewards and to provide a forum for Union communications. There shall be a maximum of three (3) area meetings annually. Union representatives shall have access to City facilities during work hours to conduct such area meetings with employees. The Union shall notify the Chief People Officer (Human Resources Director) at least ten (10) workdays in advance of the date, time, and location of each area meeting. No more than two (2) Union officials shall be provided release time to conduct these meetings.

SECTION 11.00 - PERSONNEL ACTIONS

11.01 PERSONNEL FILES
There shall be only one official personnel file which shall be maintained in the City’s Human Resources Division. Employees shall have the right to review their personnel file or authorize, in writing, review by their representative. No adverse material will be placed in an employee's personnel file without prior notice and a copy given to the employee. Employees may cause to be placed in their personnel files responses to adverse material inserted therein.

11.02 PERFORMANCE EVALUATIONS
It is compulsory that all regular employees receive an annual written performance evaluation from their supervisors. Employees will be evaluated at the completion of their third and sixth month of service. For all original and re-hire appointments, employees will receive an informal evaluation at their third month of service and a formal written evaluation at six and twelve months of service. Thereafter, all regular employees will be evaluated on their merit review date.

Evaluations are intended to be a summary of the employee’s performance over the course of the evaluation period. Evaluations are also to be used as a tool to motivate the employee to work at their highest capacity and to communicate and document the employee’s level of performance. To this end, the supervisor and the employee will meet and discuss work responsibilities, job standards and objectives, review progress and plan for the employee’s future development prior to the evaluation being placed in the employee’s personnel file.

Supervisors will make every effort to address performance issues in a timely manner

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throughout the evaluation period and provide appropriate feedback to employees on an ongoing basis.

Any additions, corrections, deletions or changes on the original evaluation form require initialing by both the maker of the amendment and the employee to indicate that the changes have been discussed and understood. No evaluation shall be made on hearsay statements.

Employees may also choose to discuss performance evaluations with their department heads and/or the Chief People Officer (Human Resources Director) and formally enter a response to the evaluation in their personnel file. Disputes regarding performance reviews shall not be subject to the grievance process.

11.02.01 Late Evaluations
Failure of the supervisor to present the employee with the evaluation within ninety (90) calendar days of the due date, unless extension is mutually agreed upon in writing, shall result in a recommendation of step advancement in conjunction with Section 13.03. However, as soon as possible thereafter, the supervisor shall conduct a performance evaluation in accordance with Section 11.02

11.03 PROBATION

11.03.01 Probationary Period
All original, promotional and re-hire appointments shall be subject to a probationary period of twelve (12) months. Successful completion of the six-month evaluation of an original and rehire appointment qualify for a merit increase. Promotional appointments shall be subject to a probationary period of six (6) months at which they qualify for a merit increase. Any time spent by an employee on paid or unpaid leave exceeding five (5) consecutive workdays shall not be counted as qualifying service toward completion of the probationary period.

11.03.02 Objective of Probationary Period
The probationary period shall be regarded as part of the selection process and shall be utilized for training the new employee on work assignments and standards and observing and evaluating the employee’s performance.

11.03.03 Rejection of Probationary Employee
During the probationary period, an employee may be rejected at any time by the appointing authority without the right of appeal. Notification of rejection shall be served to the probationary employee in writing.

Any promoted employee who is rejected during the probationary period shall be reinstated to the position from which promotion occurred; unless the rejection is due to discharge in which case no reinstatement shall occur.

11.03.04 Extension of Probation
All efforts will be made to sufficiently evaluate the probationary employee during the

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assigned period. An extension of the probationary period may, however, be recommended by the appointing authority and approved by the Chief People Officer (Human Resources Director) when good cause exists. Such extensions shall be for a specific period of time not to exceed six (6) months for original and re-hire appointments, and not to exceed three (3) months for promotional appointments. The employee shall be informed in writing of the reasons for the period of the extension at least seven (7) calendar days prior to the scheduled end of the probationary period.

SECTION 12.00 - WORK ASSIGNMENTS

12.01 WORK SHIFTS
A standard work period for full-time employees is eighty (80) hours per pay period with two (2) or more consecutive days off per week. In accordance with the Fair Labor Standards Act (FLSA) the City shall designate a standard forty (40) hour work week for each pay period week. Alternative work schedules (other than an eight-hour, five day per week schedule) may be established by the City.

Employees shall be assigned regularly scheduled starting and quitting times. A shift is defined as regularly set starting and quitting times. Affected employees and the Union will be notified five (5) working days in advance of changes in schedules. The City acknowledges that there may be benefits both to the employer and employee in the application of job sharing or alternative work hours for employees. The City agrees to consider alternative schedules in consultation with interested employees provided that such arrangements shall be made in the best interests of the employing department and by mutual agreement between the employee and the City. This shall not preclude the City from effecting schedule changes due to emergencies and overtime.

12.01.01 Voluntary Time Off
Requests for Voluntary Time Off shall be made and granted in accordance with A.P.O. II- #42. If requested, reasons for denial will be in writing.

12.02 SENIORITY
Subject to a bona fide operational emergency, seniority from the date of promotion or hire into a supervisory position shall be the criterion used to determine eligibility for time off, vacations, floating holidays, compensatory time off, and shift selection. Seniority shall not be the basis for rotational lead assignments or working-out-of class assignments.

12.03 LUNCH PERIOD
All full-time employees shall be entitled to and expected to take an uninterrupted, unpaid lunch period of a minimum of thirty (30) minutes at or about the mid-point of their workday.

A few classifications have requirements to stay on site during their lunch period and will receive normal pay during this time. These include the Chief Ranger assigned to the Water Recreation Facility when open to the public, Senior Wastewater Operator III/IV, and the

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Wastewater Treatment Operations Supervisor. Supervisors may occasionally approve flexible scheduling of lunch periods for individual employees. Regular schedules that do not provide the required lunch period at or about the mid-point of the workday will not be allowed.

12.04 REST PERIODS
Employees shall be allowed a fifteen (15) minute rest period during each four (4) hours of regular work. Departments may make reasonable rules concerning the scheduling of same.

Rest periods not taken shall be waived. Rest periods cannot be taken at the beginning or end of a shift or combined with a meal period unless approved. This is not effective in periods of a bona fide emergency nature. Rest periods shall be considered work time.

12.05 CLEAN UP TIMES
Employees who work with hazardous, contaminated and/or poisonous materials shall be allowed 10 minutes, or more if approved by the supervisor, prior to their lunch period and before the end of their workday to clean up.

12.06 EMERGENCY MEALS
The purpose of emergency meals is to provide meals when an employee is unable to leave the work site. The City shall provide meals for employees assigned to work emergency or unscheduled overtime when an employee works four or more hours continuous to their regular work shift. Thereafter, an additional meal will be provided for every four-hour period.

Location of meal sites shall be pursuant to administrative directive. The maximum emergency meal allowance will be twenty-five dollars ($25.00).

12.07 LIGHT DUTY ASSIGNMENTS
If an employee’s medical condition temporarily precludes the performance of their normal duties and management determines modified work is available and necessary to be performed, they may, with medical authorization from the employee’s personal physician, be temporarily assigned to such work for a period not to exceed six months unless an extension is approved by the Human Resources Director or their designee. No change in base pay will result from this temporary assignment.

SECTION 13.00 - PAY RATES AND PRACTICES
Effective the pay period that begins on December 6, 2025, the salary for all bargaining unit members shall be increased by three percent ( 3.0%).

Effective the pay period that begins on November 21, 2026, the salary for all bargaining unit members shall be increased by three percent (3.0%).

Effective the pay period that begins on December 7, 2027, the salary for all bargaining unit members shall be increased by four percent (4.0%).

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13.01 SALARY STEPS
Each classification in the bargaining unit shall be assigned a salary range that increases by 5% between steps.

The City will eliminate Salary Steps A, B & C effective November 12, 2022. Those affected employees will move to Step D.

13.02 SALARY RATES UPON APPOINTMENT
New employees shall be hired at the first step of the classification’s salary range; unless a higher starting step is recommended by the appointing authority based on the employee’s advance qualifications for the position and such recommendation is approved by the Human Resources Director or their designee.

Promoted employees shall be appointed to the first step in the salary range for the new classification. However, if such employee is already being paid at a rate equal to or higher than the first step of the higher range, they shall be placed at the next higher step in the new range to provide the employee an increase of at least two and one-half percent (2.5%).

13.03 ADVANCEMENT WITHIN THE RANGE
A. Advancement within a classification’s salary range shall normally be granted on the employee’s scheduled merit review date. Such advancements shall be based solely on meritorious job performance as documented by a satisfactory performance evaluation submitted by the department head and approved by the Chief People Officer (Human Resources Director).

B. All new and promoted employees shall be granted their first merit increase upon successful completion of the probationary period (see “Probation”).

The employee shall then be eligible for subsequent merit increases after each full-year on paid status, continuing until the top of the salary range is attained.

C. Merit increases shall be from one pay step to the next higher pay step.

Increases of greater than one step may, however, be recommended by the department head when exceptional performance has been demonstrated by the employee. Increases of greater than one step must be approved by the Chief People Officer (Human Resources Director).

D. A merit increase may be denied by the department head when an employee’s job performance falls below the acceptable work standards for the duties assigned. The department head may, in such a case, recommend that the employee’s work performance be reviewed again at a specific time before the next review date. If a merit increase is granted at that time, the employee’s original review date shall change and they shall be eligible for the next merit

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increase after one year on paid status from the new review date.

E. An employee’s scheduled merit review date shall be adjusted for any time spent by the employee on paid or unpaid status.

F. When an employee’s position is reclassified to a classification with a higher salary range, the employee’s pay shall be set at the beginning salary of the range or be placed at a salary in the new range that provides the employee a salary increase of at least five percent (5%). This increase shall have no effect on the employee’s original merit review date.

13.04 RETIREMENT

13.04.01 Employees Hired on or Before May 11, 2012 (Tier I) This section 13.04.01 shall apply to employees hired on or before May 11, 2012 who are contributing members of CalPERS.

A. Final Compensation Based on the Single Highest Year
For purposes of determining a retirement benefit, final compensation for employees covered by this section 13.04.01 shall be based on the single highest year.

B. 2.0% @ 55 Pension Formula
The 2.0% @ 55 pension formula shall be available to all employees covered by this section 13.04.01 who are contributing members of CalPERS.

Additionally, the City provides the Pre-Retirement Optional Settlement 2W Death Benefit to employees covered by this section 13.04.01.

C. Required Employee Contribution
Members covered by this section 13.04.01 will contribute the employee contribution amount established by CalPERS for the 2.0% @ 55 pension formula. The required contribution amount was seven (7.0%) as of the date of this MOU.

D. Additional Required Employee Contribution
In addition to the required employee contribution, starting with the pay period containing August 17, 2013 members covered by this section 13.04.01 will contribute an additional four percent (4.0%) (total of eleven percent (11%) as of the date of this MOU).

Effective the pay period that begins on November 21, 2026, employees covered by this section shall have their payment of the employer’s retirement share reduced by 1.0% (total 10.0%) on a pre-tax basis.

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13.04.02 Employees Hired On or After May 12, 2012 (Tier II) This section 13.04.02 shall apply to employees hired after May 12, 2012 but on or before January 1, 2013 who are contributing members of CalPERS.

A. Final Compensation Based on Three Year Average
For purposes of determining a retirement benefit, final compensation for employees covered by this section 13.04.02 shall be based on the employee’s highest three-year average.

B. 2.0% @ 60 Pension Formula
The 2.0% @ 60 pension formula shall be available to all employees covered by this section 13.04.02 who are contributing members of CalPERS.

Additionally, the City provides the Pre-Retirement Optional Settlement 2W Death Benefit to employees covered by this section 13.04.02.

C. Required Employee Contribution
Members covered by this section 13.04.02 will contribute the employee contribution amount established by CalPERS for the 2.0% @ 60 pension formula. The required contribution amount was seven percent (7.0%) as of the date of this MOU.

D. Additional Required Employee Contribution
In addition to the required employee contribution, starting with the pay period containing August 17, 2013 members covered by this section 13.04.02 will contribute an additional four percent (4.0%) (total of eleven percent (11%) as of the date of this MOU).

Effective the pay period that begins on November 21, 2026, employees covered by this section shall have their payment of the employer’s retirement share reduced by 1.0% (total 10.0%) on a pre-tax basis.

13.04.03 Employees Hired On or After January 1, 2013 (Tier III) This section 13.04.03 shall apply to employees hired on or after January 1, 2013 who are contributing members of CalPERS.

A. Final Compensation Based on Three Year Average
For purposes of determining a retirement benefit, final compensation for employees covered by this section 13.04.03 shall be based on the employee’s highest three year average.

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B. 2.0% @ 62 Pension Formula
The 2.0% @ 62 pension formula shall be available to all employees covered by this section 13.04.03 who are contributing new members of CalPERS.

Additionally, the City provides the Pre-Retirement Optional Settlement 2W Death Benefit to employees covered by this section 13.04.03. Employees covered by this section 13.04.03 who are classic members as defined by CalPERS may be eligible for a different pension formula.

C. Required Employee Contribution
Members covered by this section 13.04.03 will contribute the employee contribution amount established by CalPERS for their pension formula. The required contribution amount for the 2.0% @ 62 was seven and one quarter percent 7.25% as of the date of this MOU. In the event employee contribution rates are adjusted by CalPERS during the term of this MOU, the employee contribution will be recalculated based upon the updated required employee contribution rate established by CalPERS.

D. Additional Required Employee Contribution
In addition to the required employee contribution, starting with the pay period containing August 17, 2013 members covered by this section 13.04.03 will contribute an additional 4.0% (total of eleven and one quarter percent 11.25% as of the date of this MOU).

Effective the pay period that begins on November 21, 2026, employees covered by this section shall have their payment of the employer’s retirement share reduced by 1.0% (total 10.25%) on a pre-tax basis.

13.04.04 Retirement, All Employees
The City will maintain the IRS 414(h)(2) provision allowing employees to defer State and Federal income taxes on their CalPERS contributions.

13.04.05 Sick Leave Conversion
The City will provide the sick leave conversion benefit in accordance with Government Code Section 20965 at the rate of 0.004 years of service credit for each unused day of sick leave upon retirement.

13.05 LONGEVITY
Upon completion of ten (10) years of continuous regular service employees shall receive a two and one-half percent (2.5%) longevity pay increase. Upon completion of fifteen (15)

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years of continuous regular service employees shall receive an additional two percent (2%) longevity pay increase. Longevity is calculated from the date of hire into a regular status position or a fully benefited special status position.

Effective November 21, 2026, upon completion of twenty (20) years of continuous regular service employees shall receive an additional two percent (%0 longevity pay increase.

Longevity is calculated from the date of hire into a regular status position or fully benefited special status position.

It is understood that longevity pay is considered “additional compensation” for purposes of PERS and tax computations.

13.06 WORKING OUT OF CLASSIFICATION PAY DIFFERENTIAL
The term “working out of classification” is defined as a management authorized full-time assignment on a temporary basis of an employee in a lower classification to a budgeted higher classification. Assignments will be made by the Department Head or City Manager to qualified employees assuming a significant number of duties of the higher classified position.

Employees must work a minimum of one (1), eight (8) hour day to qualify for out-ofclassification pay.

The employee so assigned shall be entitled to receive a minimum of five percent (5%) above the employee’s current base rate of pay for another supervisory position.

Best efforts will be made to equally offer working out of classification opportunities to all qualified staff on a rotating basis. When a particular employee has worked out of classification for more than 90 consecutive workdays in a position that is vacant, including vacancies resulting from an employee’s long-term leave, and the assignment exceeds 90 consecutive workdays, an additional five percent (5%) will be added to the above pay for the duration of the assignment.

All initial working out of class assignments will be submitted as determined by the HR Director or their designee.

In accordance with the Public Employees Pension Reform Act (PEPRA), working out of classification pay is not pensionable compensation for employees who are “New Members” of CalPERS, as defined by California Government Code Section 7522.04(f).

13.07 SHIFT DIFFERENTIAL
Any employee who is required and authorized by management to work, and actually works, a regularly scheduled shift at least one hour or more of which fall between the hours of 6:00 p.m. and 6:00 a.m. shall be paid a shift differential of ninety cents ($.90) per hour or five percent (5%), whichever is greater, for each hour worked within the shift differential period of 6:00 p.m. and 6:00 a.m.

Shift differential shall not apply to:

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a. Paid leave hours, including vacation, sick leave, holidays, and other paid leaves provided in Section 17.01.
b. Hours that are worked between 6:00pm and 6:00am as a result of call-back, duty assignment, or overtime.

13.07.01 Weekends
Part-time and Regular employees assigned to 24-hour operations and required and authorized by management to work a regularly scheduled shift with at least one hour or more that falls between 6:00 p.m. Friday and 6:00 a.m. Monday shall be paid a shift differential of ten percent (10%) the employee’s regular rate of pay for each hour worked within the shift differential period of 6:00p.m. Friday and 6:00a.m. Monday. Work on a Fixed Holiday, as outlined in Section 14.01, results in hours being banked. This provision applies to the following classifications: Senior Wastewater Plant Operator III/IV, Water Treatment Supervisor IV/V, and wastewater Treatment Operations Supervisor.

Weekend differential shall not apply to:

A. Paid leave hours, including vacation, sick leave, holidays and other paid leaves, provided in Section 17.00 – Leaves of Absence.

B. Hours that are worked between 6:00p.m. and 6:00a.m. as a result of call-back, duty assignment, or overtime.

13.07.02 Water Plant Lone Operator
The Water Treatment Supervisor IV/Water Treatment Supervisor V – Chief Plant Operator assigned to the Water Treatment Facility will receive four dollars ($4.00) per hour additional shift differential subject to meeting all the conditions listed below:

A. Fully qualified to operate the Graham Hill Treatment plant without direct supervision as determined by the Superintendent of Water Treatment and Production.

B. Works at least six hours without any other qualified Treatment Operators present.

If the above conditions are met, then the shift differential will be paid for all hours actually performing the duties as the “stand-alone” Treatment Operator.

13.07.03 Wastewater Plant Lone Operator
A Senior Plant Operator assigned to the Wastewater Treatment Facility will receive four dollars ($4.00) per hour additional shift differential subject to meeting all the conditions listed below:

A. State Water Resources Control Board Grade 3 Wastewater Plant Operator Certification.

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B. Fully qualified to work at the City of Santa Cruz Wastewater Treatment Plant as the Lone Operator.

C. Works at least four (4) hours alone as the only operator (except for callback responses).

If the above conditions are met, then the shift differential will be paid for all hours worked on assigned “lone operator” shift.

13.08 OVERTIME
The Union understands that from time to time employees may be directed to work overtime hours. To the extent possible, employees will be given advance notification. An employee may be excused from overtime work for legitimate reasons.

Overtime shall be defined as all management authorized hours in a paid status in excess of forty (40) hours per week, which are contiguous with the employee’s regular work schedule, excluding voluntary training. Overtime shall be computed at the rate of one and one-half (1- 1/2) times the base hourly rate or may be converted to compensatory time off at the rate of one and one-half (1-1/2) times the hours worked.

Compensatory time off shall not be allowed to accumulate beyond one hundred and sixty (160) hours at any given time. Any accrued and unused compensatory time earned during the calendar year will be paid out on the last pay date in December each year and employees will not be permitted to carry over unused compensatory hours at the conclusion of the calendar year.

Employees with accrued compensatory time off may choose from the following options:

 To use such time within a reasonable period in the same calendar year as it was earned after making the request, unless such time off will unduly disrupt the operations of the department.
 To roll over any accrued and unused compensatory time earned during the calendar year into a City-sponsored deferred compensation plan anytime during the calendar year.  To cash out all or part of the accrued and unused compensatory time anytime during the calendar year.
 Any remaining balance will be either rolled over to deferred comp or paid out as described above on the last payday in December.

13.09 CALL-BACK
Call-back work is defined as work required by management of an employee who, following completion of the employee’s workday or work week and departure from the employee’s work site, is unexpectedly ordered to report back to duty to perform necessary work.

13.09.01 Callback by Phone or Computer

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If the employee is able to respond by phone or computer and is not required to report to the worksite, then:

A. For the first response of the day, a minimum of thirty (30) minutes (0.5 hours) of overtime will be paid for actual overtime worked of less than thirty (30) minutes.

Thereafter, a minimum of fifteen (15) minutes (0.25 hours) of overtime will be paid for actual overtime worked of less than fifteen (15) minutes.

B. An additional minimum will not be paid if an employee is required to respond to additional call(s) and the time and duration of the response is within the previous minimum.

13.09.02 Callback to Worksite
A. All call-back hours shall be paid at the overtime rate. A minimum of two (2) hours of overtime compensation shall be paid for all call-back periods of less than two (2) hours.

B. Hours worked shall include reasonable travel time to work. Return travel time shall not be included within time worked.

C. If an employee who was called back to work and has completed their assignment and left work is again called back to work, they will not receive another minimum if the time of return is within the previous call-back minimum.

D. Employees who are required to respond to the worksite will be provided mileage compensation, at the federal rate, for the use of their personal vehicles.

13.10 DUTY ASSIGNMENT

13.10.01 Definition
Duty assignment is defined as an assignment to an on-call status for a specified period of time.

While on duty assignment, an employee must remain available to be contacted by phone or pager and be able to report to work within a thirty (30) minute period. Duty assignment shall not be considered “hours worked” pursuant to the Fair Labor Standards Act.

13.10.02 Assignment
Duty personnel shall be assigned on a weekly rotational basis from an established list consisting of, but not limited to, qualified volunteers. A voluntary rotation process will be the preferred method of duty assignment selection; however, the City may require duty assignment if there are insufficient qualified volunteers. Prior to making mandatory assignments, the City will notify the Union. Only “qualified” employees may be appointed to

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duty assignment lists, as determined by the appropriate department head(s). Such qualifications will be based on the nature and requirements of the tasks performed while on duty assignment. With the concurrence of the duty supervisor, duty assignments may be substituted by other personnel on an approved list, provided employees have at least one week between duty assignments.

13.10.03 Compensation
A. Weekdays
Duty personnel shall receive one and one-half (1.5) hours of their base hourly salary for a sixteen (16) hour assignment.

B. Weekends
Duty personnel shall receive two (2) hours of their base hourly salary for a twentyfour hour (24) assignment.

C. Holidays (City Designated Eight (8) Hour Holidays)
Duty personnel shall receive eight (8) hours of their base hourly salary for a twentyfour (24) hour assignment.

D. Holidays (City Designated Four (4) Hour Holidays)
Duty personnel shall receive four (4) hours of their base hourly salary for a twenty (20) hour assignment.

E. All duty hours actually worked outside the employee’s regularly scheduled shift shall be compensated at the overtime rate. A minimum of two (2) hours of overtime will be paid for callouts of less than two (2) hours. An additional minimum will not be paid if an employee is required to perform an additional duty call and the time of return is within the previous duty call minimum.

If the assigned duty person or crew member assisting the duty person is required to respond to a call that required them to work more than twelve (12) hours within a twenty-four (24) hour period, and any portion of those twelve (12) hours is after midnight, the employee shall be entitled to an eight (8) hour rest period prior to returning to work.

If any portion of the rest period occurs during the employee’s regular schedule, the employee shall receive regular paid compensation for that time.

F. An employee shall have the option of receiving compensatory time off for the duty assignment compensation and hours worked.

13.11 SENIOR WASTEWATER PLANT OPERATORS ON-CALL ASSIGNMENT

13.11.01 Definition

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“On-call” assignment is defined as an assignment to an on-call status for a specified period of time. While in an on-call status, an employee must: (1) remain available to be contacted by phone or pager; (2) be able to respond to a plant situation via a City-provided computer and modem; and, (3) be able to, if necessary, report to work within a sixty (60) minute period of being contacted. On-call assignment shall not be considered “hours worked” pursuant to the Fair Labor Standards Act.

13.11.02 Assignment
On-call personnel shall be assigned on a weekly rotational basis from an established list consisting of, but not limited to, qualified volunteers. A voluntary rotation process will be the preferred method of on-call assignment selection; however, the City may require an oncall assignment if there are insufficient qualified volunteers. Prior to making mandatory assignments, the City will notify the affected employees and the Union at least ten (10) days in advance. Only “qualified” employees may be appointed to on-call assignment lists, as determined by the appropriate department head. Such qualifications will be based on the nature and requirements of the tasks performed while on-call. With the concurrence of the Plant Superintendent or designee, on-call assignments may be substituted by other personnel on an approved list.

13.11.03 Compensation
A. Regular Days
On-call personnel shall receive three-quarters (0.75) of an hour of their base hourly salary for each eight (8) hour on-call assignment or portion thereof.

B. City Designated Eight (8) Hour Holidays
For on-call assignment that falls on a City designated eight (8) hour holiday, on-call personnel shall receive one and one-half (1.5) hours of their base hourly salary for each eight (8) hour on-call assignment or portion thereof.

C. On-Call Hours Worked
All on-call hours actually worked outside the employee’s regularly scheduled shift shall be rounded to the nearest fifteen (l5) minute increment and compensated at the overtime rate.

If the on-call employee is able to respond by phone or computer and is not required to report to the plant, then:

1. for the first response of the day, a minimum of thirty minutes (0.5 hours) of overtime will be paid for actual overtime worked of less than thirty (30) minutes. Thereafter, a minimum of fifteen minutes (0.25 hours) of overtime will be paid for actual overtime worked of less than fifteen (15) minutes.

2. an additional minimum will not be paid if an employee is required to respond to additional call(s) and the time and duration of the response is within the previous minimum.

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If the on-call employee is required to respond by reporting to the Wastewater Treatment Plant (a callout), then:

1. a minimum of two (2) hours of overtime will be paid for callouts of less than two (2) hours.

2. an additional minimum will not be paid if an employee is required to perform an additional callout and the time of return to the plant is within the previous callout minimum.

3. employees who are on-call and required to respond to the Wastewater Treatment Plant will be provided mileage compensation, at the federal rate, for the use of their personal vehicles during on call periods.

If the on-call employee is required to respond to the Wastewater Treatment Plant and the callout requires them to work more than twelve (12) hours within a twenty-four (24) hour period, and any portion of those twelve (12) hours is after midnight, the employee shall be entitled to an eight (8) hour rest period prior to returning to work.

However, this does not preclude the employee from being on-call during this eight (8) hour rest period, or preclude them from being called out during this period. If any portion of the rest period occurs during the employee’s regular schedule, the employee shall receive regular paid compensation for that time.

D. An employee shall have the option of receiving compensatory time off for the on- call assignment compensation and hours worked

13.12 UNIFORM ALLOWANCE
The City shall provide required uniforms at its expense.

13.13 TUITION REIMBURSEMENT
The City shall reimburse each employee up to five hundred dollars ($500) per fiscal year (pro-rated for part-time employees) for tuition, books, and course-related expenses after successful completion of courses which are pertinent to their positions with the City.

For a course to be considered “pertinent” it must be an academic or vocational course taken for credit from an accredited college, university, or adult education department, and such course must:

A. Improve knowledge and skills for the present position or for positions of higher classification within the City, or
B. Prepare for anticipated technological changes occurring in the employee's career field.

13.14 BILINGUAL PAY
The City shall provide payment of an additional $60 per pay period to an eligible employee when the City certifies an employee as qualified and the position requires the use of bilingual language skills.

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For purposes of this section, the City certifies an employee as qualified when the City confirms that an employee has the necessary bilingual language proficiency, which may be established through an examination or process, including but not limited to, passing a language proficiency examination, interviewing with a language panel, or certification or possession of credential(s) by a language services company or institution.

13.15 LICENSES
Employees whose job description requires a Class A or B driver’s license shall receive fifty dollars ($50) per pay period provided they possess and maintain said required license in the performance of their job duties.

Classifications that no longer receive A/B license premium pay are: Water Distribution Crew Leader III/IV, Water Distribution Supervisor IV, and Water Distribution Supervisor V – Chief Distribution Operator.

13.16 OVERPAYMENTS AND REPAYMENT OF FUNDS
The City will not attempt to recover overpayments made to employees as a result of an error made by the City which are over twelve (12) months old.

A. Overpayment
If an overpayment or unauthorized payment has been made to a City employee, the City shall notify the employee in writing and supply the employee with the documentation used to determine the overpayment.

If the employee contends that any portion or the entire amount is not owed, they may request a meeting with the City to attempt to resolve the disagreement. The employee may have a representative attend such meeting(s) with them.

B. Repayment of Funds
An employee will pay no penalties, fees or interest as a result of the overpayment when the City and employee mutually agree upon how the repayment will be made. The employee shall have the right to select one of the following options for repayment:

1. Lump sum payment with the date mutually established by the employee and the City (lump sum payments must be made if the total amount due is five percent (5%) or less than the employee’s biweekly gross salary).

2. Biweekly installment payments through payroll deduction (installment payments must be a minimum of ten dollars ($10) and repayment must be completed within twenty-six (26) pay periods).

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3. Any other repayment arrangement mutually agreed upon between the City and the employee.

The final agreement on the repayment will be committed to writing (including the lump sum payment date, or the biweekly amount and the beginning and ending date of the installment plan identified).

C. Referral to Collections
The City may refer an employee to a collection agency or seek payment only when the employee, after being duly notified of the overpayment and having had the opportunity to review the relevant documentation, refuses to agree to a repayment of the amount owed. The employee will be notified of the referral and the City reserves all its rights to seek repayment and pursue all remedies under law including interest as it would for any other debtor.

13.17 CONFINED SPACE ENTRY PREMIUM PAY
This Premium Pay is paid for positions which involve toxic or hazardous conditions.

After receiving appropriate training provided by the City, all employees whose job description provides that they can perform confined space duties shall receive compensation of time and one half (1½) of their base hourly rate of pay for all hours worked while performing confined space duties. The hourly rate of pay for performing a confined space entry while on Overtime (MOU Section 13.08), Callback (MOU Section 13.09), Duty Assignment hours actually worked (MOU Section 13.10.03(E)), or Senior Wastewater Plant Operators On-Call Assignment/Compensation/On-Call Hours Worked (MOU Section 13.11.03(C)) will be calculated as time and one half (1½) the underlying overtime rate (two and one quarter {2¼} of the base hourly straight-time rate).

Hours worked performing confined space entry under this section is calculated as follows, using the times entered on the Confined Space Entry Permit:
 The calculated time begins when the first participant physically enters the confined space and ends when the last participant leaves the confined space, as recorded on the “Confined Space Entry Permit” (if all employees should leave the confined space at any time, the calculated time will cease until such time as a participant may re-enter the confined space). o The individual time segments will be added together to determine the total duration of the confined space entry event.

Example:
0900 Pre entry checklist complete.
0915 A enters confined space. B and C are attending. Clock starts. 0923 A exits confined space. Clock stops. Segment elapsed time = 8 minutes. 0932 A and B enter confined space. C is attending. Clock starts again.

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0945 B exits space. Clock continues to run since A remains in the confined space. 0956 A exits confined space. Clock stops. Segment elapsed time = 24 minutes. This Confined Space Entry Event is now over.

Total time = 32 minutes.

All participants in the event (A, B, and C) will enter the same cumulative total of thirty-two (32) minutes on their time sheets.

13.18 PLANNING DEPARTMENT CERTIFICATION COMPENSATION INCENTIVE PAY “Certification Compensation Incentive” (CCI) is a management-authorized remuneration for obtaining and maintaining recognized professional certification for Inspection Services Employees.

Professional certification shall be from a State or nationally recognized agency, assuring certification promotes a higher level of competency which benefits the life, health and safety of the community. CCI will be made to qualified employees when evidence of recognized professional certification is approved by the Chief Building Official and Department Director.

A. Upon receipt of employee provided certification, approval of professional certification will be verified by the department;

1. Professional certification shall be from a recognized state or nationally recognized agency acceptable to the City of Santa Cruz, such as International Code Council (ICC), International Association of Plumbing and Mechanical Officials (IAPMO), Council of American Building Officials (CABO) and California Division of the State Architect.

2. Professional certification shall be part of a core responsibility of the employee.

3. Professional certification shall be in distinct areas of expertise and shall not be duplicative.

Therefore, only one certification per professional category is acceptable.

4. Professional certification shall be maintained active and in good standing. The certification holder shall meet the ongoing maintenance requirements of the approved issuing agency.

This means renewing applicable certifications every three (3) years by completing the required number of CEUs based upon the number and/or type of certifications as prescribed by the approved issuing agency.

5. Certification costs will be reimbursed with this program. It should be noted that this reimbursement is more generous than current MOU guidelines where reimbursement is provided for required certification only.

6. As this is a voluntary program, paid release time will not be provided; approval of employee requests for personal paid time off during working hours will not be unreasonably denied.

B. CCI will be calculated as follows;

1. An increase of two percent (2%), of the employee’s base salary, will be applied for each approved professional certification.

2. A maximum number of professional certifications will be accepted as outlined in this section per job title, provided the base certification(s) requirement is met; a. Building Inspector and Assistant Plans Examiner are eligible for up to five (5) paid certifications, after one (1) residential base certification (Building Inspector or Building Plans Examiner) is obtained.

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b. Senior Building Inspector and Senior Plans Examiner are eligible for up to five (5) paid certifications, after one (1) combination residential and commercial base certification (Building Inspector or Building Plans Examiner) is obtained. c. Supervising Building Inspector and Supervising Plans Examiner are eligible for up to four (4) paid certifications, after two (2) combination residential and commercial base certifications (Building Inspector or Building Plans Examiner, plus either Mechanical, Electrical or Plumbing) are obtained.

C. Upon department approval and in in accordance with Administrative Procedure Order (APO) II17 (Personnel Action Form), a completed and approved PAF is required before any change to an employee’s status and/or pay rate.

D. The department will verify maintenance of certification annually.

E. Lapse of Certification/Current Employees

1. If certification, as part of this premium pay program lapses, the premium pay will be discontinued in the pay period in which the certification lapsed or became inactive.

2. To clarify, for existing employees as of the effective date of this policy, because this is a voluntary program, current employees in the eligible classifications will not be required to obtain certifications which are eligible for premium pay, similar to anyone in the classification. They will be encouraged to do so via this incentivized premium pay program.

13.19 HAZARDOUS MATERIAL PAY
The City will provide a fifty ($50.00) per month premium pay for all employees who may be exposed to dangerous chemicals and/or biohazardous materials as indicated in the job classification description. The list of qualifying classifications will be confirmed at a subsequent meeting.

13.20 SCUBA PAY
Employees who perform scuba diving duties shall receive double time their hourly rate of pay while diving. After the first hour, payments shall be based on quarter-hour increments.

13.21 COMPACTION
The City agrees to meet and confer with the union quarterly with a pledge of preventing and addressing compaction between a supervisor and the position they supervise. The Parties will meet at least quarterly to resolve compaction and implement all applicable changes by the second full pay period of July annually. All changes, including implementation timing, must be made upon mutual agreement of the Parties.

Salary compaction is defined as any percentage less than ten percent (10%) between top step salary of the supervisory and the top step salary of the classification it primarily supervises. A list of supervisor positions and the associated positions they supervise will be discussed at the meeting.

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13.22 COMPENSATION STUDY
The Parties agree to meet and confer over the implementation of the Koff and Associates 2021 Compensation Study with the goal of raising total compensation of any classification below market median to ten-percent (10%) of the total compensation market median subject to Council approval.

All changes must be made upon mutual agreement of the Parties.

SECTION 14.00 - HOLIDAYS
Part-time employees shall receive the following holiday benefits on a prorated basis, given the ratio of their budgeted work schedule to full time.

All employees will accrue paid holiday time the pay period before the pay period with the holiday.

The accrual will be in the amount listed for the holidays listed in Section 14.01 (Fixed Holidays) of this MOU. Employees must be in paid status for at least fifty percent (50%) of the pay period to accrue paid holiday time.

Employees are required to use holiday leave on holidays they do not work, even if they are on leave or are sick. The use of vacation, compensatory time, excess holiday, or other leave time on holidays is only allowed to make up the difference between the hours of holiday granted and the amount of hours the employee is scheduled to work.

Employees are not allowed to use unpaid closure time on holidays during the City’s holiday closure.

14.01 FIXED HOLIDAYS
Employees within the unit shall have the following specific holidays with pay:

Twelve (12) 8-Hour Holidays
New Year’s Day
Martin Luther King’s Birthday
Presidents’ Day
César Chavez Day
Memorial Day
Independence Day
Juneteenth
Labor Day
Veterans’ Day
Thanksgiving Day
Friday after Thanksgiving
Christmas Day
Four (4) Hour Holidays
The last four (4) hours of the work shift are Holiday hours for Christmas Eve.

The last four (4) hours of the work shift are Holiday hours for New Year’s Eve.

Except as provided for on Christmas Eve and New Year’s Eve, when a holiday falls

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on Sunday, the following Monday shall be observed. When a holiday falls on Saturday, the proceeding Friday shall be observed.

14.02 FLOATING HOLIDAYS
In addition to the above fixed holidays, employees shall accrue up to twenty-four (24) hours of floating holidays per fiscal year.

Floating Holiday accrual shall be on a monthly basis. Full-time employees shall accrue floating holiday at the rate of two (2) hours per month. Part-time employees shall accrue floating holiday on a pro-rated basis, given the ratio of their budgeted work schedule to full time (e.g. all employees working in a twenty (20) hour/week position shall receive one (1) hour of floating holiday each month). Accumulation of Floating Holidays shall not exceed twenty-four (24) hours.

Floating holidays may only be taken with prior approval. Upon separation, employees shall receive the value of their unused accrued Floating Holidays.

14.03 HOLIDAY WORK
Due to the public service nature of City departments, some positions are required to work holidays on either a regularly assigned or emergency basis. The purpose of this article is to provide extra compensation to employees who are directed to work on any of the fixed holidays shown above.

This section applies to employees normally required to work on a fixed holiday (excluding observed holidays) based on a regular shift or rotating schedule, and to employees not normally required to work on a holiday, but who are directed to do so due to an operational need.

All of the above identified employees shall be compensated at the overtime rate of pay for all hours actually worked on the holiday. In addition, the employee shall receive their holiday pay or equivalent holiday time off at a later date, at the option of the employee.

14.04 HOLIDAY ON REGULAR DAY OFF
An employee whose regular day off falls on a fixed holiday shall receive equivalent holiday time off at a later date.

14.05 HOLIDAYS DURING VACATION
Fixed holidays which occur while an employee is on paid vacation leave shall be charged to holiday hours and not the employee's vacation balances.

14.06 ANNUAL HOLIDAY CREDIT TO VACATION
Any fixed holiday hours not taken prior to the end of the fiscal year may be credited to the employee’s vacation balance (not to exceed the maximum accrual) on the last pay date in June each year.

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14.07 ELIGIBILITY
To qualify for holiday or floating holiday pay, an employee must be on paid status on their last scheduled work day before the holiday and their first scheduled work day after the holiday.

SECTION 15.00 - VACATION

15.01 ACCRUAL
Vacation accrual will be on a monthly basis beginning at date of hire. Employees within the probationary period may use accrued paid vacation upon approval of the department head; such time will not be counted as qualifying service toward completion of the probationary period.

An employee must be in paid status for at least fifty percent (50%) of a pay period to earn their vacation accrual. Annual vacation accrual shall be based on continuous regular service, as follows:

Up to five (5) years: 80 hours
Six (6) to ten (10) years: 120 hours
Eleven (11) or more years: 160 hours, plus 8 hours for each year of service after 10 years to a maximum of 200 hours

15.02 SCHEDULING OF VACATION
Whenever appropriate, vacation scheduling shall be done within the time frame established by the division. Vacation may only be taken with twenty-four (24) hours prior notification and approval of the supervisor. A reasonable effort will be made to accommodate the employee.

Vacation periods of qualified employees shall be set with regard to the wishes and seniority of the employee, consistent with the efficient operation of the various City departments and divisions. Any disputes shall be resolved by the department head.

15.03 ILLNESS DURING VACATION
An employee who becomes ill or is hospitalized while on vacation and provides a written statement from a licensed medical practitioner to this effect shall have the period of illness charged against sick leave and not vacation leave.

15.04 VACATION ACCRUAL MAXIMUM
Vacation accumulation may not exceed three (3) times the annual rate of accrual without prior written authorization for a specified amount of hours and a specified amount of time from the

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Department Head and the Chief People Officer (Human Resources Director), through August 18, 2023, at which time the maximum rate of accrual will revert to two (2) times the annual rate of accrual. Employees will receive at least thirty (30) days’ notice prior to exceeding their maximum accrual rate.

15.05 SPECIAL RECRUITMENT CIRCUMSTANCES
To facilitate the recruitment process of Supervisory Classifications, the City Manager and the Chief People Officer (Human Resources Director) may, at their discretion, set a higher Vacation Accrual Rate than specified in Section 15.01 and/or grant an advance Vacation Bank. Such rate shall not exceed the Vacation Accrual Rate or Maximum Accrual Amount that would apply if the applicant’s prior years of service were credited as City service.

SECTION 16.00 - SICK LEAVE

16.01 DEFINITION
The purpose of this article is to provide paid leave time to be used by employees in the event of their need for preventive healthcare, care of an existing health condition, as victims of domestic violence, sexual assault or stalking, and for the necessity of designated family members for the reasons specified below in Section 16.02.01-Family Sick Leave.

Employees may also use up to forty (40) hours of their paid sick leave per fiscal year as specified in Section 17.01.01-Bereavement Leave.

16.02 ACCRUAL AND USE
An employee must be on paid status for at least fifty percent (50%) of the working hours of a pay period to earn sick leave credit for that pay period.

Full-time employees shall accrue sick leave at the rate of three and sixty-nine one-hundredths (3.69) hours per pay period.

Part-time employees shall accrue sick leave on a pro-rated basis, given the ratio of their budgeted work schedule to full-time (e.g., all employees working in a twenty (20) hour/week position shall receive four (4) hours of sick leave each month).

When accrued sick leave must be used, an employee will notify their immediate supervisor of the need to use leave and its probable duration, if known, within one (1) hour after the regular scheduled starting time. If the employee’s need to use sick leave is unforeseeable, the employee must provide notice to the employee’s supervisor as soon as practicable. When the employee’s need to use sick leave is foreseeable, the employee must provide reasonable advance notice. However, the department head may grant an exception to this policy when it is determined that the employee's failure to notify was due to extreme circumstances beyond the control of the employee.

16.02.01 Family Sick Leave

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Up to forty-eight (48) hours of accrued sick leave per fiscal year may be used when the employee’s personal attendance is required to care for a family member for preventive care, care of an existing health condition, or if they are a victim of domestic violence, sexual assault or stalking. For the purposes of this provision, family is defined as a spouse, child, parent, sibling, registered principal domestic partner, step-parent, grandparent, grandchild, or other close relation residing in the employee's household. This forty-eight hour (48) limitation may be extended by the Chief People Officer (Human Resources Director) with good cause.

16.03 LIMITATIONS
A department head may require an employee to submit verification of an illness or injury from a licensed medical practitioner prior to any use of sick leave being authorized.

In cases of chronic absenteeism or medical work restrictions, the Chief People Officer (Human Resources Director) may have an employee examined by a City selected physician.

The City shall pay the cost of any such medical exam.

16.04 SICK LEAVE INCENTIVE PROGRAM
On the last payday in December each year, employees who have accumulated more than four hundred (400) hours of sick leave will “bank” all hours in excess of four hundred (400).

Banked hours may not later be converted to cash or vacation and will be used as sick leave only when all other sick leave is exhausted. The City will notify employees at least two (2) weeks before banking excess hours of sick leave.

Employees may instead choose to convert sick leave hours in excess of four hundred (400) to vacation hours at the rate of thirty-three percent (33%) of their current base rate of pay (not to exceed the Vacation Accrual Maximum set out in Section 15.04-Vacation Accrual Maximum).

Employees who have more than four hundred (400) hours of unbanked sick leave at the time of separation from the City will receive a cash payoff of all hours over four hundred (400) hours at the rate of thirty-three percent (33%) of their current base rate of pay if they have made an irrevocable election to do so by December 1st of the prior calendar year. The employee’s irrevocable election must designate the amount of their accrued sick leave earned each pay period in excess of four hundred (400) hours that they wish to have be subject to the irrevocable election for cash payoff at the time of separation.

Elections will not carry over from one calendar year to the next calendar year. Employees who do not make an irrevocable election by December 1st as described above will be deemed to have elected not to participate and will have all sick leave hours accrued in excess of four hundred (400) in the following calendar year “banked” and will be prohibited from receiving a cash payoff at the time of separation.

16.05 PERSONAL BUSINESS LEAVE
Employees may use up to twenty-four (24) hours per fiscal year of their accrued sick leave for the purpose of personal business. The scheduling and use of such leave is subject to the

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approval of the supervisor and shall only be authorized for non-recreational, business-related activities.

SECTION 17.00 - LEAVES OF ABSENCE
All leaves provided in this article shall be granted to full-time employees at the rates described. Parttime employees shall receive paid leaves of absence on a pro-rated basis, given the ratio of their budgeted work schedule to full time.

17.01 PAID LEAVES OF ABSENCE

17.01.01 Bereavement Leave
The purpose of this section is to provide paid leave for employees when they are bereaved at the death of a family member and this loss has had a temporary effect on the employee’s ability to continue daily work performance.

A leave of absence with pay of up to forty (40) hours per incident may be granted an employee by the department head in the event of a death in the employee’s family which shall, for the purpose of this article, include spouse, parent, child, grandparent, sibling, parent-in-law, registered principal domestic partner, grandchild of the employee or spouse, sibling-in-law, child-in-law, grandparent-in-law, or a close relation residing in the employee’s household. In rare cases when the individual has no other legalrelationship other than a foster or step parent, the Chief People Officer (Human Resources Director) or City Manager has the discretion to approve that leave upon application.

An additional forty (40) hours of leave chargeable to accrued sick leave, may be taken by an employee who needs additional time off in connection with a death in the family (as defined in this article).

17.01.02 Jury Duty
An employee required to report for jury duty or to answer a subpoena as a witness in their capacity as a City employee, shall be granted a leave of absence with pay for actual time spent in court and in related travel, not to exceed the number of hours in the employee’s normal workday and work week. Employees assigned to swing, graveyard, or other non- standard shifts shall receive equivalent time off when performing jury duty on their scheduled work day on the day the jury duty is performed. An employee must notify their supervisor of the expected duration of the absence and must present to the department head official documents supporting such duty. An employee shall reimburse the City for any jury services or witness fees received except mileage or subsistence allowance. This section shall not apply to grand jury service.

17.01.03 Absence for Examination
An employee shall be granted paid release time to participate in any part of an examination

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process for promotion or transfer within the City workforce that is scheduled during the employee’s regular hours of work. The employee shall notify their immediate supervisor twenty-four (24) hours in advance of such an absence.

17.01.04 Blood Donations
An employee may be granted paid release time of up to a maximum of one (1) hour for donating blood during regularly scheduled hours of work. The length of such leave must be approved by the supervisor and is dependent upon the nature and scheduling of the work performed and the travel distance required.

17.01.05 Military Duty
An employee who is a member of the National Guard or any reserve component of the armed services of the U.S. shall be granted up to thirty (30) days per fiscal year of paid leave for any reserve training or active duty scheduled during the employee's regular work hours. The employee must give their supervisor forty-eight (48) hours advance notification of the need for such leave and must present a copy of the “notice” for such duty. All other military leaves shall be granted pursuant to relevant State and Federal statutes.

Employees who exhaust the paid leave benefits described above may take unpaid leave pursuant to Section 17.02.01 and are not required to use vacation or other similar leave.

17.01.06 Workers’ Compensation
An employee who is entitled to continued temporary disability payments may use accumulated paid leave to supplement such payments to an amount equal to their net salary.

After depletion of any accrued paid leaves, the employee shall be eligible for benefits only in the amounts prescribed by the workers’ compensation laws.

The Union and the City recognize that work-related injuries/illnesses can often be prevented.

Work-related injuries or illnesses shall be an ongoing agenda item for City-wide Safety Committee. Proactive measures may be recommended by the Committee. The Committee will also make recommendations on appropriate way(s) of reviewing workers’ compensation claims.

Supervisory employees may donate vacation leave to other Supervisory employees who have exhausted all paid leave balances.

17.01.07 Paid Birth/Adoptive Leave
An employee is entitled to forty (40) hours leave with pay at or about the time of the birth of the employee’s child or at the time of adopting a child. This is prorated for part-time employees. The paid leave shall be within two (2) months of the birth or adoption.

This leave will be considered a part of the time allotted to family leave as authorized in Section

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39 17.02 UNPAID LEAVES OF ABSENCE

17.02.01 Leave without Pay
Leave of absence without pay may be granted to an employee in a case of extended illness or disability, personal emergency, or other situations when such absence would not be contrary to the best interest of the City. Such unpaid leave will only be granted after an employee has depleted all appropriate paid leaves.

The HR Director or their designee may grant a leave of absence of up to thirty (30) consecutive calendar days; additional leave may only be granted by the HR Director or their designee with their discretion. No vacation, holidays, sick leave, or any other paid benefit shall be accrued or earned during such leave. All requests for unpaid leaves of absence must be made in writing and include specific begin and end dates for the leave. Denials of unpaid leaves of absence shall be given in writing and contain the reason therefore.

17.02.02 Pregnancy Disability Leave
An employee may take a leave of absence of up to four (4) months in length for the purpose of pregnancy disability leave. The employee must provide adequate medical certification regarding any work restrictions that may exist prior to or after the birth.

Requests for pregnancy disability leave must be made in writing to the department head at least thirty (30) days in advance of the anticipated starting date. Such requests must include specific begin and end dates for the leave. Starting dates should be as accurate as possible barring any unforeseen medical issues related to the pregnancy or earlier or later birth than anticipated. Any requests for extension of pregnancy disability leave must be made in writing to the department head at least ten (10) calendar days prior to the scheduled end of the existing leave.

The employee may elect to use any accrued sick leave and vacation either before or after an approved pregnancy disability leave, within the use limitation of those leave provisions. No combination of pregnancy disability leave, family leave, sick leave, or vacation may exceed one (1) year total or seven (7) months post-partum.

Any additional post-partum leave, not to exceed one (1) year total, may be approved by the City Manager or his designee after consideration of the nature of the request and the operational needs of the department.

Upon return to work, the employee shall be assigned to the same classification but not necessarily to the same department.

17.02.03 Family Leave
In accordance with the Federal Family and Medical Leave Act and the California Family Rights Act, the City will grant job protected unpaid family and medical leave to eligible

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employees for up to twelve (12) weeks, (continuous or cumulative), per rolling twelve (12) month period measured backward, for any one or more of the following reasons:

A. The birth of a child and in order to care for such child or the placement of a child with the employee for adoption or foster care, including the child of the employee’s domestic partner (leave for this reason must be taken within the twelve (12) month period following the child's birth or placement with the employee).

In any case in which both parents are employed by the City of Santa Cruz and are entitled to leave, the aggregate number of workweeks of leave to which both may be entitled is limited to twenty-four (24) workweeks during any twelve (12) month period if leave is taken for the birth or placement for adoption or foster care of the employees’ child or child of the employee’s domestic partner.

B. In order to care for a spouse, domestic partner, child, parent, parent-in-law, grandparent, grandchild, or sibling of the employee who has a serious health condition.

C. The employee’s own serious health condition that makes the employee unable to perform the functions of their position.

D. Military family leave, which includes:

1. “Qualifying Exigency Leave” may be taken if the employee’s spouse, son, daughter, or parent is on covered active duty or called to covered active duty status in the Regular Armed Forces during deployment to a foreign country or in the National Guard and Reserves during deployment to a foreign country under a call or order in support of a contingency operation; qualifying exigencies may include short-notice deployment, attending certain military events, arranging for alternative childcare and school activities, addressing certain financial and legal arrangements, attending certain counseling sessions, rest and recuperations, and attending post-deployment reintegration briefings.

2. “Military Caregiver Leave” of up to twenty-six (26) workweeks in a twelve (12) month period may be taken by an eligible employee who is the spouse, son, daughter, parent, or next of kin of a “covered servicemember”, in order to care for the covered servicemember with a serious illness or injury incurred or aggravated in the line of duty while on active military duty. a. In any case in which both parents are employed by the City of Santa Cruz and are entitled to leave to care for a covered servicemember, the aggregate number of workweeks of leave to which both may be entitled is limited to twenty-six (26) workweeks during any twelve (12) month period.

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Conditions covering the leave shall include the following:

A. “Eligible employee” means having been employed by the City for twelve (12) months and having worked for at least one thousand two hundred fifty (1,250) hours during the twelve (12) month period immediately preceding the commencement of the leave;
B. Medical verification is required for the employee or their ill family member for the medical leave period;
C. Employees are required to give at least thirty (30) days written notice in the event of a foreseeable leave. In unexpected or unforeseeable situations, an employee should provide as much written notice as is practicable.

D. Employees are required to use accrued vacation as a part of the family leave period. Use of sick leave is not required, but may be used pursuant to the applicable provisions of the Memorandum of Understanding.

E. Employees retain “employee” status while on family care leave. The leave does not constitute a break in service for purpose of longevity, and/or seniority.

Upon return to work, employees will be reinstated to an equivalent position with equivalent pay and benefits.

F. Any request for additional leave may be made pursuant to Section 17.02.01.

Requests for leave time using multiple time off provisions may not exceed the total amount allowed pursuant to Section 17.02.01.

G. Any other conditions or interpretations of this leave shall be based upon the Federal Family and Medical Leave Act and the California Family Rights Act.

17.03 CONTINUATION OF INSURANCE BENEFITS DURING UNPAID LEAVES OF ABSENCE City-sponsored insurance benefits may be continued during unpaid leaves of absence under the following conditions:

17.03.01 Personal Leave
The City shall continue to pay benefit premiums during a personal leave of less than thirty (30) calendar days.

For leaves of more than thirty (30) calendar days, employees may continue premium payments at their own cost, in accordance with appropriate PERS medical plan provisions.

17.03.02 Medical Leave

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The City shall continue to pay benefit premiums during the entire length of a medical leave of absence including pregnancy disability leave.

17.03.03 Family Leave
Benefit premiums shall be made in accordance with the Federal Family and Medical Leave Act and the California Family Rights Act. Under the current law, the City will continue to maintain coverage under the same conditions as coverage would have been provided if the employee had been continuously employed during the leave period.

SECTION 18.00 – BENEFITS

18.01 MEDICAL BENEFITS
A. City Cafeteria Plan Contributions
The City will provide medical insurance through the California Public Employees’ Retirement System (CalPERS). The City will contribute a monthly amount to CalPERS pursuant to Government Code Section 22892 of the Public Employees Medical and Hospital Care Act (PEMHCA).

In accordance with IRS Code Section 125, the City will provide a Flexible Benefits Plan (“Cafeteria Plan”) to all eligible employees. If an employee elects to participate in a CalPERS medical plan, the maximum monthly City Contribution*, including the PERS required minimum, shall equal 90% of the cost of the highest medical premium between the Blue Shield Access+ HMO and PERS Choice PPO plans and employees will contribute the remaining premium balance, based upon the plan level in which they are enrolled (i.e., employee only, employee plus one, or employee plus family).

Employees shall pay their contribution on a pre-tax basis. In no event will the maximum monthly City contribution exceed the premium for the plan in which the employee is enrolled.

Each member participating in a medical plan will make an additional $35.00 contribution per pay period towards the cost of health care benefits. This pre-tax contribution is made during pay periods where employee deductions for health care benefits are taken (24 pay periods).
*Note: The monthly contribution is based on the CalPERS regional pricing for the Bay Area/Sacramento area, Region 1 ). In the event an active employee relocates to another regional area, or a newly hired employee resides in another regional area, it is the City's intent to provide a contribution based on the Bay Area/Sacramento area CalPERS regional pricing (Region 1 Area regional pricing) with the understanding that in no event 4925-7149-4790 v1 will the maximum monthly City contribution exceed the premium for the plan in which the employee is enrolled.

B. Optional Benefits
Through the Cafeteria Plan, employees may enroll in the following optional benefits

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and elect to pay premiums on a pre-tax basis:

1. Medical Reimbursement Account (MRA)

2. Dependent Care Reimbursement Account (DCAP)

3. Cancer and Critical Illness Protection Insurance
Employees may also enroll in the following optional benefits and elect to pay premiums on a post-tax basis:

1. Accident Protection Insurance

2. Additional Life Insurance

3. Long Term Care Insurance
C. Medical Waiver
Employees may elect to waive City medical coverage and receive a cash benefit. In order to receive the medical waiver benefit, the employee must provide proof to the City of other current medical coverage. Full-time employees who waive medical coverage are eligible to receive two hundred dollars ($200.00) per month; part-time employees shall receive a prorated amount, based upon their full time equivalency (FTE). The medical waiver amount may be applied toward the purchase of any pretax or post-tax optional benefits, or paid as a taxable cash benefit.

Employees receiving the medical waiver benefit must notify the Human Resources Division if they cease to be covered by any other medical plan, thereby making them ineligible for the medical waiver benefit.

D. Medical Plan Changes
The City will continue to research alternatives to the CalPERS medical plan. The intent of researching alternatives is to provide equal medical coverage in a more cost effective manner.

If the City discontinues CalPERS medical coverage, to the extent possible, the City will provide similar coverage. In the event of a change in medical plan coverage, the City will provide the Union sixty (60) days’ notice, prior to the required notice to CalPERS, and the opportunity to discuss any such change and meet and confer regarding the impact of any changes.

Any change from the CalPERS medical plan during this contract term will only be made by mutual agreement.

18.02 DENTAL INSURANCE
The City shall provide a dental plan for employees and their eligible dependents with maximum benefit of three thousand dollars ($3,000.00) per covered individual per calendar year.

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18.03 VISION INSURANCE
The City shall provide a vision plan for employees and their eligible dependents.

A. Coverage will include an annual eye examination. Contacts, lenses or frames will be covered annually.

B. The maximum monthly premiums contribution by the City is as follows:

Employee Only: $10.64
Employee + Family: $18.74

18.04 LONG-TERM DISABILITY
The City shall contribute the full cost of the City-sponsored long-term disability program for employees working thirty (30) or more hours per week, with a maximum benefit of seven thousand five hundred dollars ($7,500) per month.

18.05 PART-TIME EMPLOYEES
The City shall pay a pro-rated share of medical, dental, vision, and life insurance premiums for part-time employees. The City’s pro-rated share of the premiums shall be based upon the proportion of the part-time employee’s hours in relation to the premium paid for a full time equivalency (FTE)* (e.g., a twenty four (24) hour per week position is six tenths (.6) FTE; an employee in a six tenths (.6) FTE position will receive sixty percent (60%) of the premium paid by the City for a full time employee). Part-time employees shall pay the balance of the premiums on a pre-tax basis unless the employee elects to pay the balance on a post-tax basis. *Full time equivalency, or FTE, is the ratio of an employee’s budgeted work schedule to fulltime work.

18.06 RETIREE HEALTH PROGRAM
A. Retiree Medical Plan
Covered employees who retire under the provisions of the City's contract with CalPERS, are currently eligible to continue CalPERS medical coverage. The City will contribute a monthly amount to CalPERS pursuant to Government Code Section 22892 of the Public Employees Medical and Hospital Care Act (PEMHCA), currently one hundred fifty one dollars $151 per month as of the signing of this MOU.

B. Retiree Medical Incentive
Employees who receive a regular service retirement from CalPERS and have at the time of retirement at least ten (10) years of continued service with the City and are at least fifty-five (55) years of age, will receive a retiree medical incentive in the amount of one hundred dollars ($100.00) per month. This incentive will be paid during any

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period the retiree maintains CalPERS medical coverage and until such time as the retiree is eligible for Medicare or other Federal or State health programs, solely on account of age. If coverage is dropped and subsequently re-started it is the retiree’s responsibility to give the City written notice; payment of the incentive will be restarted beginning with the month in which the City receives written notice; if notice is received in a month after which coverage is re-started there will be no retroactive payment of the incentive for that/those month(s).

18.07 LIFE INSURANCE
The City shall provide a twenty-five thousand dollar ($25,000) term life insurance policy for employees.

18.08 PRINCIPAL DOMESTIC PARTNERS
The City will provide medical, dental and vision benefits to employees with Principal Domestic Partners equivalent to those provided to an employee’s Spouse. Employees may enroll their eligible Principal Domestic Partners and the eligible dependents of their Principal domestic Partners subject to the eligibility requirements established by either CalPERS or the City and subject to the tax regulations of the State of California and the Internal Revenue Service of the United States Government.

18.09 STATE DISABILITY INSURANCE
Effective the pay period inclusive of December 6, 2025, or when Council approves the successor MOU in open session, whichever is later, the City will provide to represented employees CA SDI and STD Plan Option #9 (30 day EP to dovetail with LTD 90 day EP, 24- hour coverage). To cover the cost of SDI benefits, employees shall contribute 1% of their base salary through payroll deductions.

SECTION 19.00 - SAFETY

19.01 INTENT
The City intends to meet its obligation under the California Occupational Safety and Health Act and shall adopt and use safeguards, devices, and practices reasonably adequate to render such employment safe.

The Union will cooperate with the City by requiring employees under its control to work safely and, further, the Union recognizes its obligation to support the City's effort to prevent injuries.

19.02 SAFETY COMMITTEE
At least two supervisory employees shall be members of the Safety Committee. The Committee will establish a work program to carry out its functions.

19.03 SAFETY BOOTS

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The City shall provide safety boots/shoes on an annual basis for the Classifications as determined by management or as shown on Exhibit B. The City may establish administrative procedures for the selection and purchase of such boots/shoes. All eligible employees will be required to wear safety boots/shoes while on duty unless granted a medical exemption. Safety boots/shoes shall not be worn for non-work related purposes.

SECTION 20.00 - SUPERVISORY TRAINING
The City is committed to training members of this unit in supervisory skills and practices and will continue to allow paid release time to attend such programs. A list of available in-house training classes will be distributed through appropriate channels. Supervisory employees accept the responsibility to apply the knowledge from this training in the performance of their jobs.

The Union and the City recognize the unique concerns of Supervisory employees and their specific job-related training needs. The City agrees to work closely with the Union to see such training is provided according to the needs of the Supervisory Unit. Supervisory unit employees are encouraged to attend the “Introduction to Leadership” course once, along with two (2) qualifying courses from the Employee and Leadership Development Program on a yearly basis.

SECTION 21.00 - REDUCTION IN FORCE

21.01 LAY-OFFS
The City reserves the right to reduce its workforce by laying off employees for reasons of economy or changes in departmental operations. The order of lay-offs shall be governed by seniority in service. Reinstatement shall be in the reverse order of lay-offs. Seniority shall be calculated on hours in paid status, exclusive of overtime, from the most recent date of hire.

When one or more employees assigned to the same classification within a department are to be laid off, the order of lay-off shall be as follows:

1. Probationary

2. Regular

21.02 BUMPING
Bumping is defined as the movement from a current classification to the same, related (classification revision or title change) or previously held lower classification. Employees may exercise bumping privileges to a lower classification provided they meet the minimum qualifications of the lower classification. Bumping privileges may only be exercised within the assigned department except that employees with at least seven years continuous regular employment may bump between departments.

A related classification in this section refers only to classifications that have been revised or re-titled.

Seniority shall be based on total hours worked, exclusive of overtime, since the last date of hire into a regular or temporary City position, provided, however, that the hours in a

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temporary position must be in a classification within the Supervisory bargaining unit.

The least senior employee (in the classification of the position being eliminated/bumped to) in the laid off employee’s department is the person who will be bumped in the event there is no vacant position available. If there is no less senior employee in the Department in the classification of the position being eliminated/bumped to, the least senior employee in the classification of the position being eliminated/bumped to in any City Department shall be bumped provided the laid off employee has the right to bump across Departments.

Full-time employees have the right to bump the least senior full-time employee. However, if there is no less senior full-time employee, the full-time employee being laid off has the right to bump a less senior part-time employee in the position that is closest to the full time.

Part-time employees have the right to bump the least senior part-time employee in the classification of the position being eliminated/bumped to. However, if there is no less senior part-time employee, a part-time employee may bump the least senior full-time employee within the laid-off employee’s assigned department; such bumping from part-time to full-time is limited to positions within the same department and is only available to part-time employees who previously held a full-time position.

21.03 NOTIFICATION
Employees to be laid off shall be given not less than fifteen (15) working day's written notice prior to the reduction in force. The Union will be notified concurrently and will be provided with the City staff report to the Council recommending the layoff as soon as it is available.

Upon, request, the Union will be afforded the opportunity to discuss the lay-offs with the City at which time it can provide the City with other alternative cost saving measures to be considered as an alternative to the layoff. Employees not given at least fifteen (15) working days’ notice of layoff shall be given a day’s pay for each day less than fifteen (15) working days’ notice.

21.04 REASSIGNMENT
The Human Resources Division shall work with laid off employees to identify all available City positions for which the employee may be qualified either through bumping or transfer.

Whenever possible, employees to be laid off will be offered regular, casual, or temporary employment for which they are qualified. An employee shall notify the City of their decision within seven (7) working days following receipt of the offer of employment. The City’s obligation to offer regular employment shall cease when an employee has refused three such offers.

21.05 REINSTATEMENT
Should the position from which an employee was laid off be reestablished within 18 months and the workforce is increased as a result, the employee shall be eligible for reinstatement.

The employee must notify the Human Resources Division of their current address. Every

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effort shall be made to notify the affected individual of any reinstatement opportunity.

21.06 CONTINUATION OF INSURANCE BENEFITS
An employee separated from City service as a result of this article shall have their health benefits paid by the City at the same level while employed for a period not to exceed sixty (60) days from the date of separation.

21.07 RETIREMENT IN LIEU OF LAYOFF
An employee may elect to accept retirement in lieu of layoff, voluntary demotion, or reduction in assigned hours. An employee shall, within ten (10) workdays prior to the effective date of the proposed layoff, complete and submit a form provided by the City for this purpose. An employee who retires in lieu of layoff shall have their name placed on the reemployment list.

21.08 IMPROPER LAYOFF
An employee who is improperly laid off as a result of a misapplication of the layoff procedure shall be reemployed upon discovery of the error and shall be reimbursed for all loss of salary and benefits, provided that discovery occurs within ninety (90) days of layoff.

21.09 TRANSITION TRAINING
The City shall provide, at no expense to the employee to be laid off, a minimum of twelve (12) hours of training to help employee’s transition to other employment. Such training shall occur prior to layoff. Employees shall receive their regular pay while attending this training.

The training may include, but not be limited to:

1. Résumé Writing

2. Methods of Job Searching

3. Interviewing

4. Coping with Stress

5. Unemployment Insurance Benefit
SECTION 22.00 - EMPLOYEE GRIEVANCE PROCEDURE

22.01 PURPOSE
To assure prompt and fair treatment of employee grievances related to employment. Any employee covered by this Memorandum of Understanding may file a grievance.

22.02 DEFINITION
A grievance is defined as an alleged violation, misinterpretation or misapplication of the provisions of this Memorandum of Understanding or the City’s Personnel Rules and Regulations; except disciplinary action as defined in Section 24.01.

22.03 LIMITATIONS

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A. A grievant may be represented by any representative of his or her choosing in preparing and presenting a grievance.

B. No reprisal shall result against any employee who presents a grievance under this procedure.

C. Time limits may be extended by written mutual agreement of the parties.

D. A grievance shall be considered settled in favor of the other party if, at any step, a decision is not rendered or appealed within the specified time limit.

E. Only upon mutual agreement between the parties, may Step I of the grievance procedure be waived.

F. A grievant and representative will be allowed reasonable time during work hours to meet regarding any grievance as provided in this article without loss of pay as long as there is no disruption of work. It is understood that the grievant and representative shall: (1) provide their supervisor(s) with advance notice and request for such time; (2) that such request will not be arbitrarily denied; (3) that such time shall be charged on the grievant’s/representative’s time card to the designated program code, if applicable; (4) this provision shall be limited to periods of regular working hours and be excepted from any other time including but not limited to overtime.

G. The Union and the City each shall have a mutual obligation upon demand to disclose to the other any fact or information relevant to the grievance and known to the party.

22.04 PROCEDURES
Step I:

The grievant will first attempt to resolve the grievance through informal discussions with successive levels of supervision beginning with their immediate supervisor through their highest management-level supervisor, exclusive of the department head. Those discussions must be initiated within ten (10) workdays of when the employee knew or reasonably should have known of the incident upon which the grievance is based. Every attempt will be made by the parties to settle the issue at this level.

Step II:

If the grievance is not resolved through the informal discussions, the employee or their representative may, within ten (10) workdays after the informal meeting, submit a written grievance to their department head. When the union representative files a Step II grievance, the grievance will not be processed by the City until such time as the grievant signs the grievance.

The written appeal must contain in clear, factual and concise language:

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1. A brief statement as to the date of the occurrence on which the grievance is based and the facts as the grievant sees them.

2. The rule, regulation, or act on which the grievance is based.

3. The action the grievant believes will resolve the grievance.

4. Signature of the employee.

The department head shall hold a conference with the grievant within ten (10) workdays following receipt of the formal grievance. They shall prepare a written response within five (5) working days after the conference. Copies shall go to the parties involved including the employee’s representative and the Human Resources Division.

Step III:

If the grievance is not resolved, the grievant may, within five (5) workdays following receipt of the department head’s response, appeal to the City Manager or their representative, stating in writing the basis for the appeal. The grievance may also be appealed if the department head fails to respond within fifteen (15) workdays after submission of the formal grievance.

The City Manager or their representative shall set a hearing within ten (10) workdays of receiving the appeal. The grievant, their representative and other parties summoned by the City Manager or representative shall attend the hearing and present testimony or evidence concerning the grievance. The parties may bring a reasonable number of witnesses to the hearing.

The City Manager or their representative shall render a written decision to all parties directly involved within fifteen (15) workdays following the hearing.

Step IV:

If the grievance is not resolved to the satisfaction of the grievant at the conclusion of Step III, the grievant may appeal the decision of the City Manager to a neutral arbitrator, provided they so inform the City in writing within ten (10) working days following receipt of the City Manager’s decision.

Within ten (10) working days from the date of receipt of the appeal, the parties may mutually agree on a neutral party from an independent source to serve as an arbitrator. In the event the parties fail to agree on the neutral party, they shall immediately thereafter jointly request the California State Mediation and Conciliation Service to submit to them a list of five (5) persons qualified and available to act as arbitrator.

If such a list is requested from the State Mediation and Conciliation Service, the parties within five (5) working days of receipt of the list, shall mutually agree upon the person on the list who shall be the arbitrator. If one person is not mutually agreed upon, the parties shall within five (5) days after receipt of the list of names alternately strike two (2) names from such list with the last remaining name to be the person serving as arbitrator. The party having first

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choice to strike a name from the list shall be determined by lot.

The arbitrator shall have no authority to add to, detract from, alter, amend or modify any provision of this Agreement, or impose on any party hereto a limitation or obligation not explicitly provided for in this Agreement, or to alter any wage rate or wage structure. The decision of the arbitrator shall be rendered after the evidence and arguments are presented to them by the parties in the presence of each other and in post hearing briefs if necessary. The decision of the arbitrator shall be final and binding upon the parties.

The arbitrator is requested to expedite the decision as the parties normally expect a decision to be issued within fifteen (15) days after the conclusion of the hearing.

The arbitrator’s expenses, if any, shall be borne equally by the parties. Each party shall bear the cost of its own representation.

SECTION 23.00 - DISCIPLINARY APPEALS PROCEDURE

23.01 DEFINITION
For the purposes of this article, disciplinary action shall mean suspension, demotion, disciplinary reduction in salary or discharge.

The appeal procedure described herein shall apply to cases of disciplinary action affecting regular employees. It shall not be applicable to probationary employees. Employees have the right to representation at any or all stages of the appeal process.

23.02 PRE-ACTION PROCEDURE
Step I:

Prior to imposing disciplinary action, the supervisor shall first provide the employee a preliminary written notice of the proposed action stating the effective date and the specific grounds and particular facts upon which the action will be taken. The employee shall have access to any known written materials, reports, or documents upon which the action is based.

The employee shall have the right to respond to the charges within five (5) workdays from receipt of the notice either orally, in writing, or both to the department head. If the department head is personally involved in the initial investigation and notice process, the City Manager or Human Resources Director shall appoint a designee to hear the employee’s response.

The employee may request an extension of the time to respond for justifiable reasons. Failure to respond with the time specified will result in the employee’s waiver of their procedural rights and final action will be taken.

Step II:

Following a review of a proposed disciplinary action, the department head, within five (5) workdays of receiving the employee’s response, shall render a written decision and send it by registered mail or personal delivery to the employee. A copy shall also be mailed to the employee’s representative. The written decision will include the effective date of the

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disciplinary action.

The employee has the right, within five (5) workdays after receiving the decision, to file a request for appeal with the City Manager, or designee, unless good cause for the failure is shown. The appeal shall be a written statement, signed by the appellant, explaining the matter appealed from, stating the action desired by the appellant, with their reasons therefore, and stating that the preaction procedures have been exhausted.

23.03 POST-ACTION APPEAL
Step III:

If the employee files a timely appeal, the City Manager shall, within ten (10) workdays after receiving the appeal, designate a hearing officer who shall schedule a hearing not less than ten (10) workdays from the date the appeal was received.

The hearing officer may conduct such independent investigation of the matter as they deem necessary to evaluate claims raised by the employee during the hearing. However, the hearing officer shall not initiate an investigation or introduce new factual findings that were not previously disclosed to the employee as part of the basis for their discipline, unless those facts were introduced by the employee during the hearing. In such cases, the hearing officer may include those facts solely to supplement the findings related to the employee’s claims. The appellant shall be given the opportunity to answer or present evidence in opposition to the findings of this independent investigation.

The appellant shall appear personally at the scheduled hearing unless physically unable to do so. The appellant or their representative may produce relevant oral or documentary evidence at the hearing.

Within fifteen (15) workdays following the hearing, the hearing officer shall render a written decision to all parties involved. The hearing officer has the authority to affirm, repeal or modify the disciplinary action.

For discipline equivalent to the severity of suspension of three (3) days or less, there shall be no appeal beyond Step III and the City Manager’s decision shall be final.

Step IV:

If the appeal is not resolved (except as exempted above) to the satisfaction of the appellant at the conclusion of Step III, the employee may appeal the decision of the City Manager to a neutral arbitrator, provided it so informs the City Manager in writing within ten (10) working days following receipt of the City Manager’s decision.

Within ten (10) working days from the date of receipt of the appeal, the parties may mutually agree on a neutral party from an independent source to serve as an arbitrator. In the event the parties fail to agree on the neutral party, they shall immediately thereafter jointly request the California State Mediation and Conciliation Service to submit to them a list of five (5) persons qualified and available to act as arbitrator.

If such a list is requested from the State Mediation and Conciliation Service, the parties within ten (10) working days of receipt of the list, shall mutually agree upon the person on the list

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who shall be the arbitrator. If one person is not mutually agreed upon, the parties shall within ten (10) days after receipt of the list of names alternately strike two (2) names from such list with the last remaining name to be the person serving as arbitrator. The party having first choice to strike a name from the list shall be determined by lot.

The arbitrator shall have no authority to add to, detract from, alter, amend, or modify any provision of this agreement, or impose on any party hereto a limitation or obligation not explicitly provided for in this agreement, or to alter any wage rate or wage structure. The decision of the arbitrator shall be rendered after the evidence and arguments are presented to them by the parties in the presence of each other and in post hearing briefs, if necessary. The decision of the arbitrator shall be final and binding upon the parties.

The arbitrator is requested to expedite the decision as the parties normally expect a decision to be issued within fifteen (15) working days after the conclusion of the hearing.

The arbitrator’s expenses shall be borne equally by the parties. Each party shall bear the cost of its own representation.

SECTION 24.00 - WRITTEN REPRIMANDS
A written reprimand may be issued by an employee’s supervisor if an employee has violated a City rule, provision of the M.O.U., or if their performance is in need of improvement. Written reprimands shall be placed in the employee’s personnel file. An employee shall have the right to prepare a written response to the reprimand and have said response placed in their personnel file. An employee may appeal the supervisor’s decision to issue a written reprimand to their department head by filing an appeal to the department head within five (5) working days of receipt of the reprimand. The department head’s decision regarding the written reprimand shall be final.

SECTION 25.00 - AUTHORIZED AGENTS
For the purposes of administering the terms and provisions of this Memorandum of Understanding:

A. The City’s principal authorized agent is the Chief People Officer (Human Resources Director), or their duly authorized agent (address 809 Center Street, Room 6, Santa Cruz, California 95060), except where a particular management representative is specially designated in connection with the performance of a specified function or obligation set forth herein.

B. The Union’s principal authorized agent is the Field Representative of Operating Engineers’, Local 3 or their duly authorized representative.

SECTION 26.00 - RENEGOTIATIONS
If a party desires to negotiate a successor MOU, then the party shall serve upon the other party, no more than 150 calendar days prior to the expiration date of the M.O.U., its written request to begin negotiations.

Negotiations shall begin within thirty (30) days from the date of receipts of such notice or one hundred

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twenty (120) days prior to the expiration date of the current M.O.U., whichever is sooner.

SECTION 27.00 –MISCELLANEOUS

27.01 AUTOMATIC DEPOSIT - NEW HIRES
Newly hired City employees shall be required to receive their paycheck through automatic deposit. Newly hired means only those employees hired from external hiring list, and does not include promotional hires from current City employees. The City will create an appeal process for those who do not use financial institutions.

27.02 HOLIDAY CLOSURE
If the City decides to close around the Christmas and New Years’ holidays, the following will apply:

Employee participation in the closure program is voluntary. During the closure, employees may use accrued vacation, compensatory time off, floating holidays, or excess holiday time.

Employees may also request leave without pay during this year-end closure which will result in budget savings. To encourage the use of leave without pay, seniority, benefit and leave accruals will not be impacted if leave without pay is taken during the year-end closure period. (Note: Unpaid leave is not credited towards PERS retirement.) The City will allow leave without pay hours to be deducted over the same number of pay periods as the number of workdays the City was closed.

If there are employees who do not wish to take either paid or unpaid leave time during the closure period the City will make a reasonable effort to accommodate their request to work during the closure by finding appropriate assignments and/or work space.

SECTION 28.00 - SEVERABILITY
Should any of the provisions herein contained be rendered or declared invalid by reason of any State or Federal legislation or court action, such invalidations shall not invalidate the remaining portions of this Memorandum of Understanding which shall remain in full force and effect, insofar as such remaining portions are severable.

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SUPERVISORY UNIT CITY OF SANTA CRUZ

OF THE CITY OF SANTA CRUZ
Michael Moore Date Sara De Leon, Lead Negotiator Date
Daniel Lawson- Thomas Date Timothy L. Davis, Labor Counsel Date

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EXHIBIT A: SUPERVISORY CLASSIFICATIONS

INSERT CURRENT VERSION IN PDF

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EXHIBIT B: CLASSIFICATIONS REQUIRING SAFETY BOOTS
Chief Ranger
Field Supervisor
Garage Service Supervisor
Homelessness Services Supervisor
Lead Equipment Mechanic
Parks Field Crew Leader
Resource Recovery Supervisor
Senior Electrician
Service Field Crew Leader
Water Distribution Crew Leader III/IV
Water Distribution Supervisor IV/V
Water Facilities Field Supervisor
Water Meter Supervisor
Water Treatment Supervisor IV/V
Wharf Construction Crew Leader
Wharf Supervisor

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EXHIBIT C: COUNCIL POLICY 25.2 DISCRIMINATION, HARASSMENT,

RETALIATION, AND RESPECTFUL WORKPLACE CONDUCT POLICY

INSERT CURRENT VERSION IN PDF

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EXHIBIT D: ADMINISTRATIVE PROCEDURE ORDER II-1A

DISCRIMINATION/HARASSMENT/RETALIATION

POLICY IMPLEMENTATION AND COMPLAINT PROCEDURE

INSERT CURRENT VERSION IN PDF

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EXHIBIT E: ADMINISTRATIVE PROCEDURE ORDER II-1B

RESPECTFUL WORKPLACE CONDUCT

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12.77 MEMORANDUM OF UNDERSTANDING

CITY OF SANTA CRUZ AND

SUPERVISORY EMPLOYEES OF THE CITY OF SANTA CRUZ
OPERATING ENGINEERS, LOCAL #3
November 12, 2022December 6, 2025 to December 85, 20285

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MEMORANDUM OF UNDERSTANDING

CITY OF SANTA CRUZ AND

SUPERVISORY EMPLOYEES OF THE CITY OF SANTA CRUZ
OPERATING ENGINEERS, LOCAL #3
November 12, 2022December 6, 2025 to December 85, 20285

TABLE OF CONTENTS

TABLE OF CONTENTS
SECTION 1.00 - PREAMBLE ...................................................................................................................... 108 SECTION 2.00 - TERM ................................................................................................................................ 108 SECTION 3.00 - NO ABROGATION OF RIGHTS ...................................................................................... 108 SECTION 4.00 - PAST PRACTICES, FULL UNDERSTANDING, MODIFICATIONS AND WAIVER 119 SECTION 5.00 - RECOGNITION ................................................................................................................ 119 SECTION 6.00 - EMPLOYEE RIGHTS ....................................................................................................... 119 SECTION 7.00 - UNION/CITY COOPERATION ....................................................................................... 119

7.01 Membership List ......................................................................................................................... 1210 SECTION 8.00 - JOB ACTIONS ................................................................................................................ 1210 SECTION 9.00 - NO DISCRIMINATION/RESPECTFUL WORKPLACE CONDUCT .......................... 1210 SECTION 10.00 - UNION SECURITY AND UNION RIGHTS ............................................................... 1210

10.01 Memorandum of Understanding ............................................................................................ 1210

10.01.01 Distribution .................................................................................................................... 1210

10.02 Union Notification .................................................................................................................. 1210

10.03 Bulletin Boards and Department Mail .................................................................................... 1210

10.04 Payroll Deductions ................................................................................................................. 1311

10.04.01 Payroll Deductions ........................................................................................................ 1311

10.04.02 Union’s Certification ..................................................................................................... 1311

10.04.03 Indemnification .............................................................................................................. 1311

10.05 Time Off for Union Officials ................................................................................................. 1412

10.05.01 Meet and Confer or Consult Sessions ............................................................................ 1412

10.05.02 Union Stewards.............................................................................................................. 1412

10.06 Organization Security ........................................................................................................ 1412

10.07 Access to City Facilities ......................................................................................................... 1513

10.08 Area Meetings ........................................................................................................................ 1513

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SECTION 11.00 - PERSONNEL ACTIONS .............................................................................................. 1513

11.01 Personnel Files ....................................................................................................................... 1513

11.02 Performance Evaluations ........................................................................................................ 1513

11.02.01 Late Evaluations ............................................................................................................ 1614

11.03 Probation ................................................................................................................................ 1614

11.03.01 Probationary Period ....................................................................................................... 1614

11.03.02 Objective of Probationary Period .................................................................................. 1614

11.03.03 Rejection of Probationary Employee ............................................................................. 1614

11.03.04 Extension of Probation .................................................................................................. 1715 SECTION 12.00 - WORK ASSIGNMENTS ..............................................................................................1715

12.01 Work Shifts ............................................................................................................................ 1715

12.01.01 Voluntary Time Off ....................................................................................................... 1715

12.02 Seniority ................................................................................................................................. 1715

12.03 Lunch Period .......................................................................................................................... 1715

12.04 Rest Periods ............................................................................................................................ 1816

12.05 Clean Up Times ...................................................................................................................... 1816

12.06 Emergency Meals ................................................................................................................... 1816

12.07 Light Duty Assignments ......................................................................................................... 1816 SECTION 13.00 - PAY RATES AND PRACTICES .................................................................................. 1816

13.01 Salary Steps ............................................................................................................................ 1917

13.02 Salary Rates Upon Appointment ............................................................................................ 1917

13.03 Advancement Within the Range ............................................................................................. 1917

13.04 Retirement .............................................................................................................................. 2018

13.04.01 Employees Hired on or Before May 11, 2012 (Tier I) .................................................. 2018

13.04.02 Employees Hired On or After May 12, 2012 (Tier II)................................................... 2119

13.04.03 Employees Hired On or After January 1, 2013 (Tier III) .............................................. 2219

13.04.04 Retirement, All Employees ............................................................................................ 2220

13.04.05 Sick Leave Conversion .................................................................................................. 2320

13.05 Longevity ............................................................................................................................... 2321

13.06 Working Out of Classification Pay Differential ..................................................................... 2321

13.07 Shift Differential .................................................................................................................... 2421

13.07.01 Weekends ......................................................................................................................2422

13.07.02 Water Plant Lone Operator ............................................................................................ 2422

13.07.03 Wastewater Plant Lone Operator ................................................................................... 2522

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13.08 Overtime ................................................................................................................................. 2523

13.09 Call-Back ................................................................................................................................ 2623

13.09.01 Callback by Phone or Computer .................................................................................... 2624

13.09.02 Callback to Worksite ..................................................................................................... 2624

13.10 Duty Assignment .................................................................................................................... 2724

13.10.01 Definition ..................................................................................................................... 2724

13.10.02 Assignment ....................................................................................................................2724

13.10.03 Compensation ................................................................................................................ 2725

13.11 Senior Wastewater Plant Operators On-Call Assignment .......................................................... 2826

13.11.01 Definition ....................................................................................................................... 2826

13.11.02 Assignment ....................................................................................................................2826

13.11.03 Compensation ................................................................................................................ 2826

13.12 Uniform Allowance ................................................................................................................ 3027

13.13 Tuition Reimbursement .......................................................................................................... 3027

13.14 Bilingual Pay .......................................................................................................................... 3028

13.15 Licenses .................................................................................................................................. 3028

13.17 Confined Space Entry Premium Pay ...................................................................................... 3129

13.18 Planning Department Certification Compensation Incentive Pay .............................................. 3230

13.19 Hazardous Material Pay ......................................................................................................... 3331

13.20 Scuba Pay ............................................................................................................................... 3431

13.21 Compaction ............................................................................................................................ 3431

13.22 Compensation Study .............................................................................................................. 3432 SECTION 14.00 - HOLIDAYS ................................................................................................................... 3432

14.01 Fixed Holidays ....................................................................................................................... 3532

14.02 Floating Holidays ................................................................................................................... 3533

14.03 Holiday Work ......................................................................................................................... 3533

14.04 Holiday on Regular Day Off .................................................................................................. 3633

14.05 Holidays During Vacation ......................................................................................................3633

14.06 Annual Holiday Credit to Vacation ........................................................................................ 3633

14.07 Eligibility ................................................................................................................................ 3634 SECTION 15.00 - VACATION ................................................................................................................... 3634

15.01 Accrual ................................................................................................................................... 3634

15.02 Scheduling of Vacation .......................................................................................................... 3734

15.03 Illness During Vacation .......................................................................................................... 3734

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15.04 Vacation Accrual Maximum .................................................................................................. 3735

15.05 Special Recruitment Circumstances ....................................................................................... 3735 SECTION 16.00 - SICK LEAVE ................................................................................................................ 3735

16.01 Definition ............................................................................................................................... 3735

16.02 Accrual and Use ..................................................................................................................... 3835

16.02.01 Family Sick Leave ......................................................................................................... 3836

16.03 Limitations ............................................................................................................................. 3836

16.04 Sick Leave Incentive Program ............................................................................................... 3836

16.05 Personal Business Leave ........................................................................................................ 3937 SECTION 17.00 - LEAVES OF ABSENCE ............................................................................................... 3937

17.01 Paid Leaves of Absence ......................................................................................................... 3937

17.01.01 Bereavement Leave ...................................................................................................... 3937

17.01.02 Jury Duty ....................................................................................................................... 4037

17.01.03 Absence for Examination ............................................................................................. 4038

17.01.04 Blood Donations ............................................................................................................ 4038

17.01.05 Military Duty .................................................................................................................4038

17.01.06 Workers’ Compensation ................................................................................................ 4138

17.01.07 Paid Birth/Adoptive Leave ............................................................................................ 4138

17.02 Unpaid Leaves of Absence ..................................................................................................... 4139

17.02.01 Leave without Pay ........................................................................................................ 4139

17.02.02 Pregnancy Disability Leave ........................................................................................... 4239

17.02.03 Family Leave ................................................................................................................. 4240

17.03 Continuation of Insurance Benefits During Unpaid Leaves of Absence ................................ 4441

17.03.02 Medical Leave .............................................................................................................. 4442

17.03.03 Family Leave ................................................................................................................. 4442 SECTION 18.00 – BENEFITS .................................................................................................................... 4542

18.01 Medical Benefits .................................................................................................................... 4542

18.02 Dental Insurance ..................................................................................................................... 4644

18.03 Vision Insurance ..................................................................................................................... 4644

18.04 Long-Term Disability ............................................................................................................. 4744

18.05 Part-Time Employees ............................................................................................................. 4744

18.06 Retiree Health Program .......................................................................................................... 4744

18.07 Life Insurance ......................................................................................................................... 4845

18.08 Principal Domestic Partners ...................................................................................................4845

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18.09 State Disability Insurance ....................................................................................................... 4845 SECTION 19.00 - SAFETY ........................................................................................................................ 4845

19.01 Intent ...................................................................................................................................... 4845

19.02 Safety Committee ................................................................................................................... 4846

19.03 Safety Boots ........................................................................................................................... 4846 SECTION 20.00 - SUPERVISORY TRAINING ........................................................................................ 4946 SECTION 21.00 - REDUCTION IN FORCE ............................................................................................. 4946

21.01 Lay-Offs ................................................................................................................................. 4946

21.02 Bumping ................................................................................................................................. 4946

21.03 Notification............................................................................................................................. 5047

21.04 Reassignment ......................................................................................................................... 5047

21.05 Reinstatement ......................................................................................................................... 5048

21.06 Continuation of Insurance Benefits ........................................................................................ 5048

21.07 Retirement in Lieu of Layoff.................................................................................................. 5148

21.08 Improper Layoff ..................................................................................................................... 5148

21.09 Transition Training ................................................................................................................. 5148 SECTION 22.00 - EMPLOYEE GRIEVANCE PROCEDURE ................................................................. 5149

22.01 Purpose ................................................................................................................................... 5149

22.02 Definition ............................................................................................................................... 5149

22.03 Limitations ............................................................................................................................. 5249

22.04 Procedures .............................................................................................................................. 5249 SECTION 23.00 - DISCIPLINARY APPEALS PROCEDURE ................................................................. 5451

23.01 Definition ............................................................................................................................... 5451

23.02 Pre-Action Procedure ............................................................................................................. 5451

23.03 Post-Action Appeal ................................................................................................................ 5552 SECTION 24.00 - WRITTEN REPRIMANDS ........................................................................................... 5653 SECTION 25.00 - AUTHORIZED AGENTS .............................................................................................5653 SECTION 26.00 - RENEGOTIATIONS ..................................................................................................... 5754 SECTION 27.00 –MISCELLANEOUS ....................................................................................................... 5754

27.01 Automatic Deposit - New Hires ............................................................................................. 5754

27.02 Holiday Closure ..................................................................................................................... 5754 SECTION 28.00 - SEVERABILITY ........................................................................................................... 5755 EXHIBIT A: SUPERVISORY CLASSIFICATIONS ................................................................................ 5957 EXHIBIT B: CLASSIFICATIONS REQUIRING SAFETY BOOTS ....................................................... 6058

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EXHIBIT C: Council Policy 25.2 Discrimination, Harassment, Retaliation, and Respectful Workplace Conduct Policy ........................................................................................................................................................... 6159 EXHIBIT D: Administrative Procedure Order II-1A Discrimination/Harassment/Retaliation ................. 6563 Policy Implementation and Complaint Procedure ....................................................................................... 6563 EXHIBIT E: Administrative Procedure Order II-1B Respectful Workplace Conduct ................................ 7067 No table of contents entries found.

SECTION TITLE PA GE
SECTION 1.00 PREAMBLE ..................................................................................................................................... 4 SECTION 2.00 TERM ............................................................................................................................................... 4 SECTION 3.00 NO ABROGATION OF RIGHTS .................................................................................................... 4 SECTION 4.00 PAST PRACTICES, FULL UNDERSTANDING, MODIFICATIONS AND WAIVER ............... 4 SECTION 5.00 RECOGNITION ............................................................................................................................... 5 SECTION 6.00 EMPLOYEE RIGHTS ............................................................................................................. 5 SECTION 7.00 UNION/CITY COOPERATION ...................................................................................................... 5

7.01 MEMBERSHIP LIST ....................................................................................................... 5 SECTION 8.00 JOB ACTIONS ................................................................................................................................. 5 SECTION 9.00 NO DISCRIMINATION/RESPECTFUL WORKPLACE CONDUCT ........................................... 6 SECTION 10.00 UNION SECURITY AND UNION RIGHTS ................................................................................ 6

10.01 MEMORANDUM OF UNDERSTANDING ................................................................... 6

10.02 UNION NOTIFICATION ............................................................................... 6

10.03 BULLETIN BOARDS AND DEPARTMENT MAIL ............................................ 6

10.04 PAYROLL DEDUCTIONS .............................................................................................. 6

10.05 TIME OFF FOR UNION OFFICIALS ............................................................................. 8

10.06 ORGANIZATIONAL SECURITY................................................................................... 8

10.07 ACCESS TO CITY FACILITIES ..................................................................................... 8

10.08 AREA MEETINGS ........................................................................................................... 8 SECTION 11.00 PERSONNEL ACTIONS ........................................................................................................ 9

11.01 PERSONNEL FILES ........................................................................................................ 9

11.02 PERFORMANCE EVALUATIONS ................................................................................ 9

11.03 PROBATION .......................................................................................................................................................... 10 SECTION 12.00 WORK ASSIGNMENTS .............................................................................................................. 10

12.01 WORK SHIFTS .............................................................................................................. 10

12.02 SENIORITY ................................................................................................................... 11

12.03 LUNCH PERIOD ........................................................................................................... 11

12.04 REST PERIODS ............................................................................................................. 11

12.05 CLEAN UP TIMES ........................................................................................................11

12.06 EMERGENCY MEAL ................................................................................................. 11

12.07 LIGHT DUTY ASSIGNMENTS ................................................................................. 12 SECTION 13.00 PAY RATES AND PRACTICES ................................................................................................. 12

13.01 SALARY STEPS ............................................................................................................ 12

13.02 SALARY RATES UPON APPOINTMENT .................................................................. 12

13.03 ADVANCEMENT WITHIN THE RANGE ................................................................... 13

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13.04 RETIREMENT ............................................................................................................... 13

13.05 LONGEVITY .................... .............................................................................................16

13.06 WORKING OUT OF CLASSIFICATION PAY DIFFERENTIAL ............................... 16

13.07 SHIFT DIFFERENTIAL ................................................................................................ 16

13.08 OVERTIME .................................................................................................................... 17

13.09 CALL BACK ..................... .............................................................................................18

13.10 DUTY ASSIGNMENT ................. ..................................................................................19

13.11 SENIOR WASTEWATER PLANT OPERATORS ON-CALL ASSIGNMENT .......... 20

13.12 UNIFORM ALLOWANCE ............................................................................................ 22

13.13 TUITION REIMBURSEMENT ..................................................................................... 22

13.14 BILINGUAL PAY .......................................................................................................... 22

13.15 LICENSES ...................................................................................................................... 22

13.16 OVERPAYMENTS AND REPAYMENT OF FUNDS ................................................. 22

13.17 CONFINED SPACE ENTRY PREMIUM PAY………………………………………..23

13.18 PLANNING DEPARTMENT
CERTIFICATION COMPENSATION INCENTIVE PAY…………………………….24

13.19 HAZARDOUS MATERIAL PAY ......................................................................... 26

13.20 SCUBA PAY ....................................................................................................... 26

13.21 COMPACTION .................................................................................................... 26

13.22 COMPENSATION STUDY .................................................................................. 26 SECTION 14.00 HOLIDAYS .................................................................................................................................. 27

14.01 FIXED HOLIDAYS ................................................................................................ 27

14.02 FLOATING HOLIDAYS ............................................................................................... 27

14.03 HOLIDAY WORK ......................................................................................................... 27

14.04 HOLIDAY ON REGULAR DAY OFF .......................................................................... 28

14.05 HOLIDAYS DURING VACATION ................................................................................ 28

14.06 ANNUAL HOLIDAY CREDIT TO VACATION ......................................................... 28

14.07 ELIGIBILITY ................................................................................................................. 28 SECTION 15.00 VACATION ........................................................................................................... 28

15.01 ACCRUAL ..................................................................................................................... 28

15.02 SCHEDULING OF VACATION ................................................................................... 29

15.03 ILLNESS DURING VACATION .................................................................................. 29

15.04 VACATION ACCRUAL MAXIMUM .......................................................................... 29

15.05 SPECIAL RECRUITMENT CIRCUMSTANCES ......................................................... 29 SECTION 16.00 SICK LEAVE ................................................................................................................................ 29

16.01 DEFINITION ....................................................................................................... 29

16.02 ACCRUAL AND USE ................................................................................................... 30

16.03 LIMITATIONS ............................................................................................................... 30

16.04 SICK LEAVE INCENTIVE PROGRAM ....................................................................... 30

16.05 PERSONAL BUSINESS LEAVE .................................................................................. 31 SECTION 17.00 LEAVES OF ABSENCE .............................................................................................................. 31

17.01 PAID LEAVES OF ABSENCE ...................................................................................... 31

17.02 UNPAID LEAVES OF ABSENCES .............................................................................. 33

17.03 CONTINUATION OF INSURANCE BENEFITS
DURING UNPAID LEAVES OF ABSENCE ................................................................ 36 SECTION 18.00 BENEFITS .................................................................................................................................... 36

18.01 MEDICAL BENEFITS ......................................................................................... 36

18.02 DENTAL INSURANCE ................................................................................................. 38

18.03 VISION INSURANCE ................................................................................................... 38

18.04 LONG TERM DISABILITY .......................................................................................... 38

18.05 PART-TIME EMPLOYEES ........................................................................................... 38

18.06 RETIREE HEALTH PROGRAM .......................................................................... 39

18.07 LIFE INSURANCE ........................................................................................................ 39

18.08 PRINCIPAL DOMESTIC PARTNERS ......................................................................... 39

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SECTION 19.00 SAFETY ................................................................................................................................. 39

19.01 INTENT .............................................................................................................. 39

19.02 SAFETY COMMITTEE ................................................................................................. 40

19.03 SAFETY BOOTS ........................................................................................................... 40 SECTION 20.00 SUPERVISORY TRAINING ....................................................................................................... 40 SECTION 21.00 REDUCTION IN FORCE ............................................................................................................. 40

21.01 LAY-OFFS .......................................................................................................... 40

21.02 BUMPING ...................................................................................................................... 40

21.03 NOTIFICATION ............................................................................................................ 41

21.04 REASSIGNMENT .......................................................................................................... 41

21.05 REINSTATEMENT ........................................................................................................ 42

21.06 CONTINUATION OF INSURANCE BENEFITS ................................................... 42

21.07 RETIREMENT IN LIEU OF LAYOFF .......................................................................... 42

21.08 IMPROPER LAYOFF .................................................................................................... 42

21.09 TRANSITION TRAINING ............................................................................................ 42 SECTION 22.00 EMPLOYEE GRIEVANCE PROCEDURE ................................................................................. 42

22.01 PURPOSE ............................................................................................................ 42

22.02 DEFINITION .................................................................................................................. 42

22.03 LIMITATIONS ............................................................................................................... 43

22.04 PROCEDURES ............................................................................................................... 43 SECTION 23.00 DISCIPLINARY APPEALS PROCDDURE ................................................................................ 45

23.01 DEFINITION ....................................................................................................... 45

23.02 PRE-ACTION PROCEDURE ........................................................................................ 45

23.03 POST-ACTION APPEAL .............................................................................................. 46 SECTION 24.00 WRITTEN REPRIMANDS .......................................................................................................... 47 SECTION 25.00 AUTHORIZED AGENTS ............................................................................................................ 47 SECTION 26.00 RENEGOTIATIONS ..................................................................................................................... 47 SECTION 27.00 MISCELLANEOUS ...................................................................................................................... 48

27.01 AUTOMATIC DEPOSIT – NEW HIRES ............................................................. 48

27.02 HOLIDAY CLOSURE ............................................................................................ 48 SECTION 28.00 SEVERABILITY .......................................................................................................................... 48

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EXHIBIT A SUPERVISORY CLASSIFICATIONS ………………………………………………………….

EXHIBIT B CLASSIFICATIONS REQUIRING SAFETY BOOTS …………………………………...…… EXHIBIT C Council Policy 25.2 Discrimination, Harassment, Retaliation, and Respectful Workplace Conduct Policy…………………………………….…………...………… EXHIBIT D Administrative Procedure Order II-1A Discrimination/Harassment/Retaliation Policy Implementation and Complaint Procedure……………………………………………..… EXHIBIT E Administrative Procedure Order II-1B Respectful Workplace Conduct………………….…………..

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MEMORANDUM OF UNDERSTANDING

CITY OF SANTA CRUZ

AND SUPERVISORY EMPLOYEES OF THE CITY OF SANTA
OPERATING ENGINEERS, LOCAL #3
November 12, 2022December 6, 2025, to December 85, 20285 SECTION 1.00 - PREAMBLE
This Memorandum of Understanding is entered into by the City of Santa Cruz (hereinafter referred to as the City) and the City of Santa Cruz Supervisory Employees, represented by Operating Engineers, Local #3 (hereinafter referred to as the Union), and, upon ratification by the Union membership and a determination is made by the City Council, is binding under Section 3505.1 of the Government Code.

The City, the Union, and all employees recognize their respective obligations to provide services of the highest quality and efficiency. To this end, the City and the Union and all employees affirm their commitment to harmonious labor-management relations.

SECTION 2.00 - TERM
This Memorandum of Understanding shall be effective on November 12, 2022December 6, 2025, and shall expire on December 85, 20285.

Unless otherwise stated herein, all payroll related changes identified in this tentative agreement will commence with the pay period beginning November 12, 2022December 6, 2025, or the pay period when Council approves the successor MOU in open session, whichever is later.

SECTION 3.00 - NO ABROGATION OF RIGHTS
The parties acknowledge that City responsibilities and rights as indicated in the City Personnel Rules and Regulations and all applicable State or Municipal laws are neither abrogated nor made subject to the meet and confer process by adoption of this Memorandum of Understanding.

It is agreed that, except as specifically delegated, granted or modified by this Memorandum of Understanding, all of the rights, power, and authority, the City had prior to the signing of this Memorandum of Understanding are retained by the City and remain the exclusive right of the City without limitation. Furthermore, these retained rights are not subject to any grievance or impasse procedure.

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SECTION 4.00 - PAST PRACTICES, FULL UNDERSTANDING,

MODIFICATIONS AND WAIVER
The Memorandum of Understanding and any other written rules or regulations in effect on the first day of this agreement sets forth the full and entire understanding of the parties regarding the matters set forth herein, and any other prior or existing understanding or agreements by the parties, whether formal or informal, regarding any such matters are hereby superseded or terminated in their entirety.

Except as specifically provided herein, it is agreed and understood that each party hereto voluntarily and unqualifiedly waives its right, and agrees that the other shall not be required to negotiate with respect to any subject or matter covered herein or with respect to any other matters within the scope of negotiations, during the term of this Memorandum of Understanding.

Any agreement, alteration, understanding, variation, waiver, or modification of any of the terms or provisions contained herein shall not in any manner be binding upon the parties hereto, unless made and executed in writing by the parties hereto, and if required, approved and implemented by the City Council.

The waiver of any breach, term or condition of the Memorandum of Understanding by either party shall not constitute a precedent in the future enforcement of all its terms and provisions.

SECTION 5.00 - RECOGNITION
Pursuant to the Meyer-Milias-Brown Act and the City's Personnel Rules and Regulations, the City has certified the Union as the recognized employee organization of the representation unit consisting of all full-time and part-time regular employees except those limited by State or Municipal Codes, Resolutions or directives in the classifications specifically listed in Exhibit A attached hereto. This unit shall be titled the Supervisory Unit.

SECTION 6.00 - EMPLOYEE RIGHTS
The Union and the City acknowledge that, although the Union is the recognized unit including those classes specifically listed in Exhibit A, the rights of employees under this Memorandum of Understanding, State law, City Rules and Regulations and the City Charter are neither abrogated nor diminished by the adoption of this Memorandum of Understanding.

SECTION 7.00 - UNION/CITY COOPERATION
The Union recognizes that, in consideration of commitments made by the City to provide effective and efficient service to the citizens of Santa Cruz, there is an obligation upon unit employees to directly be involved with and support efforts to improve the methods and production of the various departments. Toward this goal, both the City and the Union agree to work cooperatively towards achieving a high level of effectiveness and efficiency.

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7.01 MEMBERSHIP LIST
The City agrees to supply the Union quarterly with an alphabetical list of names and classification of bargaining unit members. The City will provide a quarterly list of members who separate service from the City and all new hires.

SECTION 8.00 - JOB ACTIONS
The Union agrees not to permit, authorize or in any other manner allow its members to strike, slowdown, sit-in or engage in any work stoppage or other legal or illegal work or job action.

SECTION 9.00 - NO DISCRIMINATION/RESPECTFUL WORKPLACE

CONDUCT
The Union and the City agree to adhere to the City Council policies of equal employment opportunity, harassment prevention, and respectful workplace conduct as listed in Exhibits C, D, and E as well as applicable Federal and State discrimination laws.

SECTION 10.00 - UNION SECURITY AND UNION RIGHTS

10.01 MEMORANDUM OF UNDERSTANDING

10.01.01 Distribution
The City will make copies of this Memorandum of Understanding available to all members in electronic format. When a person is hired in any classification covered by this Memorandum of Understanding, the City shall notify the person that the Union is the recognized employee organization and provide a link to this Memorandum of Understanding.

10.02 UNION NOTIFICATION
Except in cases of bona fide emergencies, the Union shall be given seven (7) work days advance written notification of any ordinance, rule, resolution, or regulation directly relating to matters within the scope of representation proposed to be adopted by the City Council or City Administration and shall be given the opportunity to meet with the City representative prior to its adoption.

10.03 BULLETIN BOARDS AND DEPARTMENT MAIL
The Union shall have reasonable access to bulletin boards and departmental mail for the purpose of Union communications provided such use does not interfere with the needs of the department and material posted is not derogatory to the City, employees of the City or other employee organizations. The City shall allow the Union to utilize City e-mail consistent with applicable City policy. A copy of all posted material shall be provided to the Human

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Resources Division.

10.04 PAYROLL DEDUCTIONS

10.04.01 Payroll Deductions
The City shall deduct Union membership dues and any other mutually agreed-upon payroll deduction, to the extent permitted by law, from the monthly pay of each member employee.

The Union will provide the City with information regarding the amount of dues deductions and the list of Union member employees who have affirmatively consented to or authorized dues deductions.

The City shall remit the deducted dues and any other mutually agreed payroll deduction, to the extent permitted by law, to the Union as soon as possible after the deduction.

The City agrees to direct each member employee to the Union with regard to any questions or concerns related to membership dues or any other mutually agreed payroll deduction, to the extent permitted by law.

The Union is responsible for providing the City with timely information regarding changes to member employees’ dues and any other lawful union-related payroll deduction.

10.04.02 Union’s Certification
The City shall make payroll deductions in reliance on the Union’s certification certifying that the Union has and will maintain an authorization, signed by each member employee who affirmatively consents to pay Union membership dues. Similarly, The City shall only cancel or modify any membership dues or any other mutually agreed payroll deduction, to the extent permitted by law, for any member employees in reliance on the information provided by the Union.

The City shall not request the Union to provide a copy of any member employees’ authorization unless a dispute arises about the existence or terms of the authorization.

10.04.03 Indemnification
The Union shall indemnify, defend, protect and hold harmless the City and its elected and appointed officials, officers, employees, officers and agents (collectively hereafter the “Indemnitees”) from and against any and all claims, liabilities, losses, damages, fines, penalties, claims, demands, suits, actions, causes of action, judgments, costs and expenses (including, but not limited to, reasonable attorneys’ fees and court costs) arising from the application of any provisions under Section 10.03, including, but not limited to, any claims made by any member employees for the membership dues deductions the City made in

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reliance on the Union’s certification, and any claims made by any member employees for any deduction cancellation or modification the City made in reliance on the information provided by the Union, provided that the City promptly notify the Union of any such matter for which it is seeking indemnification after the City has knowledge of the occurrence of such matter.

In the event any such action or proceeding is brought against the City by reason of any such claim, the Union, upon notice from the City, covenants to defend such action or proceeding by counsel reasonably satisfactory to the City. Further, the Union agrees to indemnify and hold harmless the Indemnitees for any loss or damage arising from the Union’s actions or inactions under Section 10.03. However, the Union shall have the exclusive right to direct counsel, control the defense of any action or proceeding, and determine whether any such action or proceeding shall or shall not be compromised, resisted, defended, tried or appealed on the premise and condition that the Union shall fully compensate for any monetary loss to the City based on the Union’s determination, if any.

10.05 TIME OFF FOR UNION OFFICIALS

10.05.01 Meet and Confer or Consult Sessions
Up to four (4) Union members shall be allowed a reasonable amount of paid release time off for meet and confer, or meet and consult, sessions scheduled with the City Council’s designated representative, providing there is no disruption of work in the employee’s division.

In advance of the meeting, the Union shall notify the Human Resources Division of the specific members who will be in attendance. Such Union members shall obtain permission through management channels before leaving their work or work locations.

Ground Rules for negotiating successor agreements shall specify the number of Union members allowed for the meet and confer sessions scheduled with the City Council’s representatives.

10.05.02 Union Stewards
The Union shall be authorized to designate four (4) employees within the unit as stewards.

Stewards shall be allowed a reasonable amount of paid release time for the purpose of representing an employee in the filing or processing of an identified grievance. Stewards must first obtain permission through appropriate management channels before leaving their work or work location of such purposes and release time shall only be granted as long as there is no disruption of work in the employee’s division. This provision shall be limited to periods of regular working hours. It is agreed the City shall not pay stewards for time spent in handling grievances when they are not regularly scheduled to work.

10.06 Organization Security
The City and the Union shall conduct an election to determine if the membership wishes to implement an organizational security agreement for maintenance of membership. The

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specific terms of the maintenance of membership requirements will be subject to agreement by the City and Union prior to the election.

10.07 ACCESS TO CITY FACILITIES
With the approval of the site administrator, the Union’s representative may meet with members on City facilities during the non-working hours of the employees involved. The nonworking hours restriction does not apply to the handling of grievances. A reasonable effort will be made to accommodate the Union representative.

10.08 AREA MEETINGS
The City shall provide employees two (2) hours of release time per each Union general membership meeting. The two (2) hours includes travel time to and from the meeting and shall not have an adverse impact on City operations. The purpose of area meetings shall be to nominate and elect officers and shop stewards and to provide a forum for Union communications. There shall be a maximum of three (3) area meetings annually. Union representatives shall have access to City facilities during work hours to conduct such area meetings with employees. The Union shall notify the Chief People Officer (Human Resources Director) at least ten (10) workdays in advance of the date, time, and location of each area meeting. No more than two (2) Union officials shall be provided release time to conduct these meetings.

SECTION 11.00 - PERSONNEL ACTIONS

11.01 PERSONNEL FILES
There shall be only one official personnel file which shall be maintained in the City’s Human Resources Division. Employees shall have the right to review their personnel file or authorize, in writing, review by their representative. No adverse material will be placed in an employee's personnel file without prior notice and a copy given to the employee. Employees may cause to be placed in their personnel files responses to adverse material inserted therein.

11.02 PERFORMANCE EVALUATIONS
It is compulsory that all regular employees receive an annual written performance evaluation from their supervisors. Employees will be evaluated at the completion of their third and sixth month of service. For all original and re-hire appointments, employees will receive an informal evaluation at their third month of service and a formal written evaluation at six and twelve months of service. Thereafter, all regular employees will be evaluated on their merit review date.

Evaluations are intended to be a summary of the employee’s performance over the course of the evaluation period. Evaluations are also to be used as a tool to motivate the employee to work at their highest capacity and to communicate and document the employee’s level of

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performance. To this end, the supervisor and the employee will meet and discuss work responsibilities, job standards and objectives, review progress and plan for the employee’s future development prior to the evaluation being placed in the employee’s personnel file.

Supervisors will make every effort to address performance issues in a timely manner throughout the evaluation period and provide appropriate feedback to employees on an ongoing basis.

Any additions, corrections, deletions or changes on the original evaluation form require initialing by both the maker of the amendment and the employee to indicate that the changes have been discussed and understood. No evaluation shall be made on hearsay statements.

Employees may also choose to discuss performance evaluations with their department heads and/or the Chief People Officer (Human Resources Director) and formally enter a response to the evaluation in their personnel file. Disputes regarding performance reviews shall not be subject to the grievance process.

11.02.01 Late Evaluations
Failure of the supervisor to present the employee with the evaluation within ninety (90) calendar days of the due date, unless extension is mutually agreed upon in writing, shall result in a recommendation of step advancement in conjunction with Section 13.03. However, as soon as possible thereafter, the supervisor shall conduct a performance evaluation in accordance with Section 11.02

11.03 PROBATION

11.03.01 Probationary Period
All original, promotional and re-hire appointments shall be subject to a probationary period of six twelve (126) months. Successful completion of the six-month evaluation of an original and rehire appointment qualify for a merit increase. Promotional appointments shall be subject to a probationary period of six (6) months at which they qualify for a merit increase.

Any time spent by an employee on paid or unpaid status or paid leave exceeding five (5) consecutive workdays shall not be counted as qualifying service toward completion of the probationary period.

11.03.02 Objective of Probationary Period
The probationary period shall be regarded as part of the selection process and shall be utilized for training the new employee on work assignments and standards and observing and evaluating the employee’s performance.

11.03.03 Rejection of Probationary Employee
During the probationary period, an employee may be rejected at any time by the appointing authority without the right of appeal. Notification of rejection shall be served to the probationary employee in writing.

Any promoted employee who is rejected during the probationary period shall be reinstated to

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the position from which promotion occurred; unless the rejection is due to discharge in which case no reinstatement shall occur.

11.03.04 Extension of Probation
All efforts will be made to sufficiently evaluate the probationary employee during the assigned period. An extension of the probationary period may, however, be recommended by the appointing authority and approved by the Chief People Officer (Human Resources Director) when good cause exists. Such extensions shall be for a specific period of time not to exceed six (6) months for original and re-hire appointments, and not to exceed three (3) months for promotional appointments. The employee shall be informed in writing of the reasons for the period of the extension at least seven (7) calendar days prior to the scheduled end of the probationary period.

SECTION 12.00 - WORK ASSIGNMENTS

12.01 WORK SHIFTS
A standard work period for full-time employees is eighty (80) hours per pay period with two (2) or more consecutive days off per week. In accordance with the Fair Labor Standards Act (FLSA) the City shall designate a standard forty (40) hour work week for each pay period week. Alternative work schedules (other than an eight-hour, five day per week schedule) may be established by the City.

Employees shall be assigned regularly scheduled starting and quitting times. A shift is defined as regularly set starting and quitting times. Affected employees and the Union will be notified five (5) working days in advance of changes in schedules. The City acknowledges that there may be benefits both to the employer and employee in the application of job sharing or alternative work hours for employees. The City agrees to consider alternative schedules in consultation with interested employees provided that such arrangements shall be made in the best interests of the employing department and by mutual agreement between the employee and the City. This shall not preclude the City from effecting schedule changes due to emergencies and overtime.

12.01.01 Voluntary Time Off
Requests for Voluntary Time Off shall be made and granted in accordance with A.P.O. II- #42. If requested, reasons for denial will be in writing.

12.02 SENIORITY
Subject to a bona fide operational emergency, seniority from the date of promotion or hire into a supervisory position shall be the criterion used to determine eligibility for time off, vacations, floating holidays, compensatory time off, and shift selection. Seniority shall not be the basis for rotational lead assignments or working-out-of class assignments.

12.03 LUNCH PERIOD

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All full-time employees shall be entitled to and expected to take an uninterrupted, unpaid lunch period of a minimum of thirty (30) minutes at or about the mid-point of their workday.

A few classifications have requirements to stay on site during their lunch period and will receive normal pay during this time. These include with the exception of the Chief Ranger assigned to the Water Recreation Facility when open to the public, Senior Wastewater Operator III/IV, and the Wastewater Treatment Operations Supervisor. Supervisors may occasionally approve flexible scheduling of lunch periods for individual employees. Regular schedules that do not provide the required lunch period at or about the mid-point of the workday will not be allowed.

12.04 REST PERIODS
Employees shall be allowed a fifteen (15) minute rest period during each four (4) hours of regular work. Departments may make reasonable rules concerning the scheduling of same.

Rest periods not taken shall be waivved. Rest periods cannot be taken at the beginning or end of a shift or combined with a meal period unless approved. This is not effective in periods of a bona fide emergency nature. Rest periods shall be considered work time.

12.05 CLEAN UP TIMES
Employees who work with hazardous, contaminated and/or poisonous materials shall be allowed 10 minutes, or more if approved by the supervisor, prior to their lunch period and before the end of their workday to clean up.

12.06 EMERGENCY MEALS
The purpose of emergency meals is to provide meals when an employee is unable to leave the work site. The City shall provide meals for employees assigned to work emergency or unscheduled overtime when an employee works four or more hours continuous to their regular work shift. Thereafter, an additional meal will be provided for every four-hour period.

Location of meal sites shall be pursuant to administrative directive. The maximum emergency meal allowance will be twenty-five dollars ($25.00).

12.07 LIGHT DUTY ASSIGNMENTS
If an employee’s medical condition temporarily precludes the performance of their normal duties and management determines modified work is available and necessary to be performed, they may, with medical authorization from the employee’s personal physician, be temporarily assigned to such work for a period not to exceed six months unless an extension is approved by the Appointing AuthorityHuman Resources Director or their designee. No change in base pay will result from this temporary assignment.

SECTION 13.00 - PAY RATES AND PRACTICES
Effective the pay period that begins on November 12, 2022December 6, 2025, the salary for all bargaining unit members shall be increased by four three percent (4 3.0%).

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Effective the pay period that begins on November 215, 20263, the salary for all bargaining unit members shall be increased by two three percent (32.0%).

Effective the pay period that begins on December 7, 20274, the salary for all bargaining unit members shall be increased by three four percent (43.0%).

Effective November 25, 2023, a new top step equivalent to 5% will be added to the salary schedule.

Employees who have been in the top step for more than one year will move to the new top step effective November 25, 2023. All other employees will move to the top step on their anniversary date.

13.01 SALARY STEPS
Each classification in the bargaining unit shall be assigned a salary range that increases by 5% between steps.

The City will eliminate Salary Steps A, B & C effective November 12, 2022. Those affected employees will move to Step D.

13.02 SALARY RATES UPON APPOINTMENT
New employees shall be hired at the first step of the classification’s salary range; unless a higher starting step is recommended by the appointing authority based on the employee’s advance qualifications for the position and such recommendation is approved by the Chief People Officer (Human Resources Director)Human Resources Director or their designee. for steps D-H and the City Manager for Steps I-K.

Promoted employees shall be appointed to the first step in the salary range for the new classification. However, if such employee is already being paid at a rate equal to or higher than the first step of the higher range, they shall be placed at the next higher step in the new range to provide the employee an increase of at least two and one-half percent (2.5%).

13.03 ADVANCEMENT WITHIN THE RANGE
A. Advancement within a classification’s salary range shall normally be granted on the employee’s scheduled merit review date. Such advancements shall be based solely on meritorious job performance as documented by a satisfactory performance evaluation submitted by the department head and approved by the Chief People Officer (Human Resources Director).

B. All new and promoted employees shall be granted their first merit increase upon successful completion of the probationary period (see “Probation”).

The employee shall then be eligible for subsequent merit increases after each full-year on paid status, continuing until the top of the salary range is attained.

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C. Merit increases shall be from one pay step to the next higher pay step.

Increases of greater than one step may, however, be recommended by the department head when exceptional performance has been demonstrated by the employee. Increases of greater than one step must be approved by the Chief People Officer (Human Resources Director).

D. A merit increase may be denied by the department head when an employee’s job performance falls below the acceptable work standards for the duties assigned. The department head may, in such a case, recommend that the employee’s work performance be reviewed again at a specific time before the next review date. If a merit increase is granted at that time, the employee’s original review date shall change and they shall be eligible for the next merit increase after one year on paid status from the new review date.

E. An employee’s scheduled merit review date shall be adjusted for any time spent by the employee on paid or unpaid status.

F. When an employee’s position is reclassified to a classification with a higher salary range, the employee’s pay shall be set at the beginning salary of the range or be placed at a salary in the new range that provides the employee a salary increase of at least five percent (5%). This increase shall have no effect on the employee’s original merit review date.

13.04 RETIREMENT

13.04.01 Employees Hired on or Before May 11, 2012 (Tier I) This section 13.04.01 shall apply to employees hired on or before May 11, 2012 who are contributing members of CalPERS.

A. Final Compensation Based on the Single Highest Year
For purposes of determining a retirement benefit, final compensation for employees covered by this section 13.04.01 shall be based on the single highest year.

B. 2.0% @ 55 Pension Formula
The 2.0% @ 55 pension formula shall be available to all employees covered by this section 13.04.01 who are contributing members of CalPERS.

Additionally, the City provides the Pre-Retirement Optional Settlement 2W Death Benefit to employees covered by this section 13.04.01.

C. Required Employee Contribution
Members covered by this section 13.04.01 will contribute the employee contribution amount established by CalPERS for the 2.0% @ 55 pension formula. The required contribution amount was seven (7.0%) as of the date of

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this MOU.

D. Additional Required Employee Contribution
In addition to the required employee contribution, starting with the pay period containing August 17, 2013 members covered by this section 13.04.01 will contribute an additional four percent (4.0%) (total of eleven percent (11%) as of the date of this MOU).

Effective the pay period that begins on November 21, 2026, employees covered by this section shall have their payment of the employer’s retirement share reduced by 1.0% (total 10.0%) on a pre-tax basis.

13.04.02 Employees Hired On or After May 12, 2012 (Tier II) This section 13.04.02 shall apply to employees hired after May 12, 2012 but on or before January 1, 2013 who are contributing members of CalPERS.

A. Final Compensation Based on Three Year Average
For purposes of determining a retirement benefit, final compensation for employees covered by this section 13.04.02 shall be based on the employee’s highest three-year average.

B. 2.0% @ 60 Pension Formula
The 2.0% @ 60 pension formula shall be available to all employees covered by this section 13.04.02 who are contributing members of CalPERS.

Additionally, the City provides the Pre-Retirement Optional Settlement 2W Death Benefit to employees covered by this section 13.04.02.

C. Required Employee Contribution
Members covered by this section 13.04.02 will contribute the employee contribution amount established by CalPERS for the 2.0% @ 60 pension formula. The required contribution amount was seven percent (7.0%) as of the date of this MOU.

D. Additional Required Employee Contribution
In addition to the required employee contribution, starting with the pay period containing August 17, 2013 members covered by this section 13.04.02 will contribute an additional four percent (4.0%) (total of eleven percent (11%) as of the date of this MOU).

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Effective the pay period that begins on November 21, 2026, employees covered by this section shall have their payment of the employer’s retirement share reduced by 1.0% (total 10.0%) on a pre-tax basis.

13.04.03 Employees Hired On or After January 1, 2013 (Tier III) This section 13.04.03 shall apply to employees hired on or after January 1, 2013 who are contributing members of CalPERS.

A. Final Compensation Based on Three Year Average
For purposes of determining a retirement benefit, final compensation for employees covered by this section 13.04.03 shall be based on the employee’s highest three year average.

B. 2.0% @ 62 Pension Formula
The 2.0% @ 62 pension formula shall be available to all employees covered by this section 13.04.03 who are contributing new members of CalPERS.

Additionally, the City provides the Pre-Retirement Optional Settlement 2W Death Benefit to employees covered by this section 13.04.03. Employees covered by this section 13.04.03 who are classic members as defined by CalPERS may be eligible for a different pension formula.

C. Required Employee Contribution
Members covered by this section 13.04.03 will contribute the employee contribution amount established by CalPERS for their pension formula. The required contribution amount for the 2.0% @ 62 was seven and one quarter percent 7.25% as of the date of this MOU. In the event employee contribution rates are adjusted by CalPERS during the term of this MOU, the employee contribution will be recalculated based upon the updated required employee contribution rate established by CalPERS.

D. Additional Required Employee Contribution
In addition to the required employee contribution, starting with the pay period containing August 17, 2013 members covered by this section 13.04.03 will contribute an additional 4.0% (total of eleven and one quarter percent 11.25% as of the date of this MOU).

Effective the pay period that begins on November 21, 2026, employees covered by this section shall have their payment of the employer’s retirement share reduced by 1.0% (total 10.25%) on a pre-tax basis.

13.04.04 Retirement, All Employees
The City will maintain the IRS 414(h)(2) provision allowing employees to defer State and

12.100
23 Federal income taxes on their CalPERS contributions.

13.04.05 Sick Leave Conversion
The City will provide the sick leave conversion benefit in accordance with Government Code Section 20965 at the rate of 0.004 years of service credit for each unused day of sick leave upon retirement.

13.05 LONGEVITY
Upon completion of ten (10) years of continuous regular service employees shall receive a two and one-half percent (2.5%) longevity pay increase. Upon completion of fifteen (15) years of continuous regular service employees shall receive an additional two percent (2%) longevity pay increase. Longevity is calculated from the date of hire into a regular status position or a fully benefited special status position.

Effective November 21, 2026, upon completion of twenty (20) years of continuous regular service employees shall receive an additional two percent (%0 longevity pay increase.