Santa Cruz City Council
September 8, 2026

CITY COUNCIL AGENDA
Regular Meeting - September 8, 2026
Council Chambers
809 Center Street
Santa Cruz
2:00 P.M. CLOSED SESSION
2:15 P.M. ORAL COMMUNICATIONS, CONSENT, GENERAL BUSINESS AND PUBLIC

HEARINGS
Council meetings are hybrid, and may be viewed remotely, using any of the following sources:
 Click on Zoom link (no time delay): https://zoom.us/j/94684401344  Online at http://www.cityofsantacruz.com/government/city-council/council-meetings  Online at Watch – Community Television of Santa Cruz County  Comcast Channel 25
Or: Call any of the numbers below. If one is busy, try the next one.  1-833-548-0276 (Toll Free)
 1-833-548-0282 (Toll Free)
 1-877-853-5247 (Toll Free)
 1-669-900-9128
 Enter the meeting ID number: 946 8440 1344
 When prompted for a Participant ID, press #.
 Press *9 on your phone to “raise your hand” when the Mayor calls for public comment.  It will be your turn to speak when the Mayor calls on you. Press *6 to unmute yourself. The timer will then be set.

Correspondence to be included in the agenda packet must be received by 5:00 pm on Monday, September 7th
PLEASE NOTE:
 Council may take a break(s) as needed.
 Requests for extra speaking time on items other than Oral Communications must be made by 5:00 p.m. on Sunday, September 6th by emailing the Mayor and the City Clerk.

Approval will be confirmed via email.
[email protected] [email protected]
September 8, 2026 City Council 2
The City of Santa Cruz does not discriminate against persons with disabilities. Out of consideration for people with chemical sensitivities we ask that you attend fragrance free. Upon request, the agenda can be provided in a format to accommodate special needs. Additionally, if you wish to attend this public meeting and will require assistance such as an interpreter for American Sign Language, Spanish, or other special equipment, please call the City Clerk’s Department at 420-5030 at least five days in advance so that we can arrange for such special assistance, or email [email protected]. The Cal-Relay system number: 1-800-735-2922.

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

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

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

Need more information? Contact the City Clerk’s office at 831-420-5030. 2:00 PM
Statements of Disqualification
Public Comment on Closed Session Items
Closed Session

1. Real Property Negotiations (Government Code §54956.8) Property: 1020 Cedar Street
APN: 005-042-36 (portion of)
Owner: City of Santa Cruz
City Negotiator: Bonnie Lipscomb
Negotiating Parties: City of Santa Cruz and Joseph S. Ferrara dba Atlantis Fantasyworld
Under Negotiation: Price, terms of payment, or both
September 8, 2026 City Council 3
City Council
2:15 PM
Call to Order
Roll Call
Oral Communications - Members of the public may address Council on matters not on the agenda, but within the jurisdiction of the Council. 30 minutes is allocated for Oral Communications. No extra time for groups will be granted.

Presentations

2. Mayoral Proclamation Declaring September 2026 as Childhood Cancer Awareness Month

3. Community Gardens Update

4. National Emergency Preparedness Month
Presiding Officer's Announcements
Statements of Disqualification
Additions and Deletions
City Attorney Report on Closed Session
Council Meeting Calendar

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

September 8, 2026 City Council 4
Consent Agenda

6. Minutes of the August 25, 2026 City Council Meeting (CC) LOCATION: None
Motion to approve as submitted.

7. Santa Cruz County Civil Grand Jury Response (CM)
LOCATION: Citywide
Motion to authorize the Mayor to submit responses to the Santa Cruz Civil Grand Jury on behalf of the Santa Cruz City Council for the Walking in the County of Santa Cruz Grand Jury Report.

8. Sugar-Sweetened Beverage Tax Oversight Committee Bylaws (CM) LOCATION: Citywide
Motion to:
1) Approve the Sugar-Sweetened Beverage Tax Oversight Committee (SSBTOC) bylaws; and
2) Adopt a resolution exempting the SSBTOC from the City’s policy (Council Policy 5.1) that requires city residency for advisory body members, and allowing up to three non-City-residents who have experience in youth programs or early childhood development to serve on the SSBTOC.

September 8, 2026 City Council 5
Consent Agenda (continued)

9. Third Amendment to the Lease Agreement with Laughing Phoenix, Inc. dba the Great Rabbit, Atlas Services Corporation dba Atlas Geotechnical and Clever Collective for City-Owned Space at 915 Cedar Street (ED)
LOCATION: District 4
Motion to:
1) Approve and authorize the City Manager to execute a Third Amendment to the Lease Agreement with Laughing Phoenix, Inc. dba the Great Rabbit, Atlas Services Corporation dba Atlas Geotechnical and Clever Collective, in a form approved by the City Attorney, for the commercial space at 915 Cedar Street;
2) Authorize the City Manager to execute a Memorandum of Lease, in a form approved by the City Attorney, to be recorded in the Santa Cruz County Recorder’s Office; and
3) Adopt a finding of categorical exemption pursuant to the following CEQA guidelines: 14 CCR 15301 (Existing Facilities) and 14 CCR 15061(b)(3) (Common Sense Exemption).

10. Authorization to Exceed $100,000 for Legal Services with Burke, Williams, & Sorensen, LLP (HR)
LOCATION: Citywide
Motion authorizing the City Manager, or their designee, to execute agreements and approve payments exceeding $100,000 for legal services for Fiscal Year 2027.

11. Authorization to Exceed $100,000 for Investigation Services with Oppenheimer Investigations Group, LLP, Related to Respectful Workplace, Harassment, and Discrimination Complaints (HR) Location: Citywide
Motion authorizing the City Manager, or their designee, to execute agreements and approve payments exceeding $100,000 in the aggregate for third-party investigation services related to workplace harassment, discrimination, and respectful workplace complaints for Fiscal Year 2027.

September 8, 2026 City Council 6
Consent Agenda (continued)

12. Memorial Request Honoring Celia and Peter Scott (PR) LOCATION: District 5
Motion to approve the installation of a memorial plaque in Pogonip in honor of Celia and Peter Scott.

13. Wastewater Treatment Facility Sinkhole Emergency Repair (m409659) – Budget Adjustment (PW)
LOCATION: District 3
Motion to:
1) Ratify an emergency purchase order with Anderson Pacific Engineering (Santa Clara, CA) for repair of a sinkhole at the Wastewater Treatment Facility in the amount of $333,286; 2) Find the project categorically exempt under CEQA Guidelines 14 CCR Section 15269(b) (Emergency Projects); and
3) Adopt a resolution amending the FY 2027 budget and appropriating funds in the amount of $333,286 to fully fund the repairs.

14. Purchase of a Wachs Valve Truck (WT)
LOCATION: Citywide
Motion to purchase a Ford F-550 Wachs Valve Truck from Rush Truck Center (New Braunfels, TX) in the amount of $276,712.98 under the existing cooperative contract with Sourcewell.

End Consent Agenda
September 8, 2026 City Council 7
General Business

15. 2026 Water Department Long-Range Financial Plan, 2026 Water Rate Study, and Proposed Water Rate Schedule for Calendar Year 2027 – Calendar Year 2031 (CY 2027 – CY 2031) (WT)
LOCATION: Citywide
Motion to:
1) Adopt the 2026 Water Department Long-Range Financial Plan; 2) Receive the 2026 Water Rate Study dated August 18, 2026; 3) Accept the proposed schedule of water rate increases for CY 2027 – CY 2031 and the proposed CY 2027 – CY 2031 Drought Cost Recovery Fee schedule as set forth in the Rate Study, and direct staff to post the Rate Study as the basis for the proposed rates in connection with the Proposition 218 notice process, for the purposes of proceeding with the required public notice and protest period under Proposition 218; and 4) Authorize the Water Department to mail the Proposition 218- compliant public notice initiating the protest period and set the required public hearing for Tuesday November 17, 2026, after the hour of 10:00 a.m.

Adjournment
September 8, 2026 City Council 8

INFORMATION ITEMS PREVIOUSLY DISTRIBUTED TO CITY COUNCILMEMBERS ADDENDUM TO CITY COUNCIL AGENDA – SEPTEMBER 8, 2026

16. Economic Development Department: Second Amendment to License Agreement with Bogard Construction, Inc. for 125 Coral Street 8/21/26 (EDFYI 004)

MAYOR'S PROCLAMATIONS
ADDENDUM TO CITY COUNCIL AGENDA – SEPTEMBER 8, 2026

17. Proclaiming August 28, 2026 as “SUP Shack 15th Anniversary Day” and encouraging all citizens to join in celebrating fifteen years of community, adventure, outdoor recreation, and the success of a locally owned and women-owned small business that has enriched the Santa Cruz Harbor and our community.

18. Proclaiming August 25, 2026 as “Marine Safety Professionals Recognition Day” and encouraging all residents to recognize and thank the dedicated men and women who work tirelessly to keep our coastline safe.

Advisory Body Appointments
The following positions are either currently vacant or the terms are due to expire.

Council will make appointments at a future meeting.

Board of Building and Fire Appeals Two openings – at-large nominations County Library Advisory
Commission
One opening – at-large nomination
Downtown Commission Two openings – to be appointed by
Councilmembers Golder and O’Hara
Sister Cities Committee One opening – at-large nomination Transportation and Public Works
Commission
One opening – to be appointed by
Councilmember Trigueiro
September 8, 2026 City Council 9
Public Hearing
If, in the future, you wish to challenge in court any of the matters on this agenda for which a public hearing is to be conducted, you may be limited to raising only those issues which you (or someone else) raised orally at the public hearing or in written correspondence received by the City at or before the hearing.

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

Planting Seeds that Grow Beyond the
Gardens
California Volunteers - Parks and Recreation - Youth Fellowship Community Impact Summary | 2025–2026

3.1 • Trescony Garden
• Lighthouse Garden
• London Nelson Garden
• Riverside Garden
• Beach Flats Garden
• Poets Garden
Garden Locations

3.2 Parks and Recreation Youth
Fellow
“centers on food security,
sustainability, and community
engagement through hands-on work in
community gardens, partnering with
local organizations on food rescue and
zero-waste efforts, and supporting
water conservation, organic soil care,
and composting practices to
strengthen garden sustainability.”
About this Position
in line with Climate Action Plan (CAP) 2030

5. Eliminate food waste and
support local food sources

1. Equity in all policies

3. Efficient and low carbon
energy and water

4. Protect and enhance
natural resources and urban
parks

3.3 First Community Meetings
Unattended plots
Lack of rules enforcement
Challenges of growing in a
public space
General Feedback

3.4 SC High School Wood Shop & Big Creek Lumber Partnership “Garden Communication Boxes”
Access
Focus on bilingual, non-digital and verbal
outreach/communication
• Better understanding of literacy barriers
• Trust through culturally responsive
communication
Takeaway #1: Expand Outreach
to serve all constituents.

3.5 Takeaway #2: The Gardens are an Extension of Home
“We absolutely cherish the community garden and its utility for our family.” 40% have
rented a plot
for over 10
years
60%
experience a
lack of space
to grow at
home
90% spend 9+
months
regularly
tending their
plot

3.6 Waste Reduction Team
Community Bridges City Lifeguards
Homeless Garden Project
Takeaway #3: Endless Potential
• Local Partnerships Focused
on Climate Action, Community
Outreach and Education
Creating a Network of
Shared Stewardship
with a Common Goal

3.7 Join us, and learn the basics of regrowing
produce from kitchen "scraps"!
Introducing participants to scrappy urban
gardening practices, ideal for those with a
limited budget and/or outdoor space.

Plants will be sent home with participants!
Wednesday, May6th, 5-7 pm
@ TresconyGarden
End of TresconySt., 95060
Regrowing Your
Groceries:

Scrappy Gardening
Workshop
RSVP
here!
Ecology
Action

3.8 Webpage Link Trescony Garden
2 Active Sustainability Projects
6 Community Gatherings
6 gardeners off the waitlist

3.9 3.10
Webpage Link Lighthouse Garden
1 Active Sustainability Project
2 Community Gatherings
3 gardeners off the waitlist

3.11 Webpage Link London Nelson Garden
1 Active Sustainability Project
2 Community Gatherings
1 ongoing club

3.12 Webpage Link Riverside Garden 1 Active Sustainability Project 3 Community Gatherings
2 gardeners off the waitlist

3.13 Beach Flats and Poet's Gardens BF Webpage Link
Poet’s Webpage Link
1 Active Sustainability Project
2 ongoing clubs
7 Community Gatherings

3.14 Kids Garden Club

COMMUNITY BRIDGES

PUENTES DE LA COMUNIDAD

3.15 ~ Thank You ~

3.16 2026 City Council Meeting Calendar
September 11/12 - Rosh Hashanah (City observed - sundown to sundown) October 20/21 - Yom Kippur (City observed - sundown to sundown) September 22 - Regular Meeting
October 13 - Regular Meeting
October 27 - Regular Meeting
November 11 - City Hall Closure - Veteran's Day (observed) November 17 - Regular Meeting
November 26 - City Hall Closure - Thanksgiving Day
November 27 - City Hall Closure - Day After Thanksgiving Day December 4/5 - Hanukkah (City observed - sundown to sundown) December 8 - Regular Meeting
December 22 Meeting Cancelled
December 25

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

MINUTES OF A CITY COUNCIL MEETING
August 25, 2026
Closed Session
1:00 PM
Mayor Keeley opened the City Council Closed Session at 1:05 p.m. in a public meeting via Zoom and in Council Chambers, for the purpose of announcing the agenda, and receiving public testimony.

Roll Call

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

Absent: Councilmember O’Hara.

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

Statements of Disqualification – Councilmember Brunner announced she will be recusing herself from item 2 in an abundance of caution as it relates to her employment.

Public Comment on Closed Session Items
Mayor Keeley opened the public comment period at 1:06 p.m. There were no speakers. Mayor Keeley closed the public comment period at 1:06 p.m., at which time the meeting was closed to the public and Council adjourned to the Courtyard Conference Room.

6.1 August 25, 2026 CITY COUNCIL MINUTES 8336
Closed Session

1. Conference With Legal Counsel – Liability Claims (Government Code §54956.95) 1) Claimant: Phoebe Ann Kelley
2) Claimant: John Balquist as Trustee of the Anthony J. Koci Trust 3) Claimant: Mary Sierra
4) Claimant: Maria Gabriela Martin
5) Claimant: Marianne Roberts
Claims against the City of Santa Cruz
Council received a status report, took up under agenda item 8, and no reportable action was taken.

2. Real Property Negotiations (Government Code §54956.8) Property: 121 Soquel Avenue (Frazier Lewis Lane, portion) and 1316-1320 Pacific Avenue
APNs: 005-081-51, 005-081-20, and 005-081-21
Owner: City of Santa Cruz and Doghouse2, LLC
City Negotiator: Bonnie Lipscomb
Negotiating Parties: Bonnie Lipscomb and Danco Communities Under Negotiation: Price, terms of payment, or both
Councilmember Brunner recused herself from the discussion. Council received a status report from the City Negotiator, and no reportable action was taken.

6.2 August 25, 2026 CITY COUNCIL MINUTES 8337
City of Santa Cruz
809 Center Street
Santa Cruz, California 95060

MINUTES OF A CITY COUNCIL MEETING
August 25, 2026
1:30 PM
Call to Order – Mayor Keeley called the meeting to order at 1:43 p.m. in Council Chambers.

Roll Call

Present: Councilmembers Trigueiro, Brunner, Newsome, Golder, O’Hara (via Zoom, left at 3:34 p.m.); Vice Mayor Kalantari-Johnson; Mayor Keeley.

Absent: None.

Staff: City Manager M. Huffaker, City Attorney C. Bronson, Assistant City Manager M. Templeton (via Zoom), Deputy City Manager/Director of Economic Development B. Lipscomb, Director of Community Development L. Butler (via Zoom), Director of Finance E. Cabell (via Zoom), Chief of Fire R. Oatey, Director of Parks and Recreation T. Elliot, Director of Public Works N. Nguyen, Director of Water H. Luckenbach (via Zoom), Acting Wharf Supervisor K. Kvenild, Senior Parks Maintenance Worker J. Braga, Assistant Director of Public Works/City Engineer K. Crossley, Principal Transportation Planner C. Gallogly, Transportation Manager M. Starkey, Superintendent of Recreation T.

Hedden-Jones, Deputy City Clerk Administrator J. Wood, City Clerk Administrator B. Bush.

At this time Council heard items 3 and 4.

Oral Communications
At 1:59 p.m. Mayor Keeley opened Oral Communications for members of the public who wished to speak regarding items not listed on the City Council agenda.

James Ewing-Whitman spoke regarding the military’s use of lightning as a weapon and wi-fi frequency.

Unidentified person spoke regarding their vehicle being towed from a space they perceived to be designated for handicap parking.

6.3 August 25, 2026 CITY COUNCIL MINUTES 8338
Oral Communications (continued)
Unidentified person spoke regarding making Starbucks a drive thru.

Dana Wagner spoke regarding the Fiscal Year 2026 data of services provided by Meals on Wheels.

Unidentified person spoke regarding being new to Santa Cruz and thanked Council for restrooms near the beach and marine safety.

At 2:09 p.m. Mayor Keeley closed Oral Communications.

Presentations

3. Employee 30-Year Service Pin - Joel Braga
Acting Wharf Supervisor K. Kvenild spoke and presented a pin to Senior Parks Maintenance Worker J. Braga.

4. Mayoral Proclamation: Marine Safety Professionals Recognition Day Councilmember Golder read from a proclamation declaring August 25, 2026, as Marine Safety Professionals Recognition Day. Chief of Fire R. Oatey spoke.

At this time Council returned to hear Oral Communications and proceeded through the remaining agenda in order.

Presiding Officer's Announcements
Statements of Disqualification – None.

Additions and Deletions – None.

City Attorney Report on Closed Session – See page 8336 for the report.

Council Meeting Calendar

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

6.4 August 25, 2026 CITY COUNCIL MINUTES 8339
Consent Agenda
Councilmember Brunner made a comment on items 10 and 11.

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

Unidentified person made a comment on items 6, 9, and 10.

Unidentified person made a comment on item 10.

Mayor Keeley closed the public comment period.

MOTION: Councilmember Trigueiro moved, seconded by Councilmember Golder, to approve the Consent Agenda.

ACTION: The motion carried unanimously with the following vote.

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

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

6. Minutes of the August 11, 2026 City Council Meeting (CC) LOCATION: None
Motion carried to approve as submitted.

6.5 August 25, 2026 CITY COUNCIL MINUTES 8340
Consent Agenda (continued)

7. Fire Station 63 Butler Building Construction (FD)
LOCATION: District 6
Motion carried to:
 Adopt Resolution No. NS-30,690 approving the design, plans, and specifications for the Fire Station 63 Butler Building prepared by William C.

Kempf Architects;
 Adopt Resolution No. NS-30,691 amending the FY 2027 budget to transfer $111,771 from the Public Safety Impact Fee Fund 217 to the General Capital Investment Program Fund 311 to complete construction of a Butler Building at Fire Station 63 for the Santa Cruz Fire Department and appropriate funds to project c212306;
 Authorize the City to enter into a contract, in a form to be approved by the City Attorney, for approximately $177,001 with American Project Solutions for the construction of the Fire Station 63 Butler Building; and  Authorize the City Manager, or designee, to execute change orders within the approved project budget.

8. Liability Claims Filed Against the City of Santa Cruz (FN) Motion carried to reject the liability claims of 1) Phoebe Ann Kelley, 2) John Balquist as Trustee of the Anthony J. Koci Trust, 3) Mary Sierra, 4) Maria Gabriela Martin, and 5) Marianne Roberts, based on staff recommendation.

9. Resource Recovery Facility Caterpillar 826K Compactor Rebuild (PW) LOCATION: Citywide
Motion carried to enter into a contract in the amount of $488,854.35 with Peterson Tractor Company (San Leandro, CA) to rebuild the Caterpillar 826K compactor, the current landfill compactor tractor.

6.6 August 25, 2026 CITY COUNCIL MINUTES 8341
Consent Agenda (continued)

10. Safe Streets and Roads for All - Grant Application (PW) LOCATION: Citywide
Motion carried to:
 Apply for, and if awarded, accept and appropriate funds from the Federal Department of Transportation Safe Streets and Roads for All Fiscal Year 2026 funding program for the Improving Post-Crash Care Through EMS Innovation and Signal Preemption Project; and
 Find that the Council’s action is exempt from CEQA under CEQA’s Common Sense Exemption (14 CCR 15061(b)(3)).

11. HSIP 11 and 12 – Unsignalized Crossing Improvement Project (c402517 and c402610) (PW)
LOCATION: Districts 2, 3, 4, 5, and 6
Motion carried to:
 Adopt Resolution No. NS-30,692 to approve the plans and specifications for the HSIP 11 and 12 – Unsignalized Crossing Improvement Project pursuant to Government Code Section 830.6;
 Authorize staff to advertise for bids and award the contract. The City Manager is hereby authorized and directed to execute the contract in a form approved by the City Attorney, as authorized by Resolution No. NS27,563. The Director of Public Works or City Engineer is authorized to execute change orders within the approved project budget; and  Find the improvements categorically exempt from CEQA under CEQA Guidelines Section 15301 (Existing Facilities) and Section 15304 (Minor Alterations to Land).

End Consent Agenda

6.7 August 25, 2026 CITY COUNCIL MINUTES 8342
General Business

12. West Cliff Drive Path Realignment – Approve Plans and Specifications (m400819) (PW)
LOCATION: District 6
Assistant Director of Public Works/City Engineer K. Crossley gave a presentation and responded to Council questions.

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

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

Richard Lee
Mayor Keeley closed the public comment period.

MOTION: Vice Mayor Kalantari-Johnson moved, seconded by Councilmember Golder, to:
 Adopt Resolution No. NS-30,693 to approve the design, Plans and Specifications for the West Cliff Drive Path Realignment Project (m400819);  Authorize staff to advertise for bids and award the contract. The City Manager is hereby authorized and directed to execute the contract in a form approved by the City Attorney, and as authorized by Resolution No.

NS-27,563. The Director of Public Works is authorized to execute change orders within the approved project budget; and
 Adopt a CEQA finding of categorical exemption pursuant to CEQA Guidelines Section 15301 (Existing Facilities), Section 15302 (Replacement or Reconstruction), and Section 15304 (Minor Alterations to Land).

ACTION: The motion carried unanimously with the following vote.

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

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

6.8 August 25, 2026 CITY COUNCIL MINUTES 8343
General Business (continued)

13. Bay Drive Protected Bike Lanes and Pedestrian Path Project - Public Access Trail Easement Deed and Certificate of Acceptance (c402304) (PW) LOCATION: Districts 3, 4, 5, and 6
Principal Transportation Planner C. Gallogly gave a presentation and responded to Council questions.

Transportation Manager M. Starkey responded to Council questions.

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

Unidentified person
Unidentified person
Drew
Glenn Stewart
Mayor Keeley closed the public comment period.

MOTION: Vice Mayor Kalantari-Johnson moved, seconded by Councilmember Newsome, to:
 Adopt Resolution No. NS-30,694 to approve the design and plans for the Bay Street at Escalona Drive Pilot Plan, and direct staff to implement the approved pilot plan, which restricts through movements on Escalona Drive across Bay Street/Drive while maintaining the southbound left turn from Bay Street to eastbound Escalona Drive;
 Confirm design approach for the future Complete Streets project to use mountable medians on Bay Street at Toledo Street and Anita Street;  Adopt Resolution No. NS-30,695 accepting a permanent public access trail easement for public use from Santa Cruz City Schools over a portion of real property (APN 004-441-24) required for the construction of the Bay Drive Protected Bike Lanes and Pedestrian Path Project and authorizing and directing the City Manager to execute the corresponding deed and Certificate of Acceptance; and
 Direct staff to collect data from the last two years regarding Fire Department response on arterial and collector streets and provide the results to Council when staff returns with the Safety Action Plan.

6.9 August 25, 2026 CITY COUNCIL MINUTES 8344
General Business (continued)

13. Bay Drive Protected Bike Lanes and Pedestrian Path Project - Public Access Trail Easement Deed and Certificate of Acceptance (c402304) (PW) LOCATION:

Districts 3, 4, 5, and 6 (continued)
FRIENDLY AMENDMENT: Councilmember Newsome requested to add direction to staff as follows:
 Include the traffic and speed volumes on Escalona Drive in the pilot traffic study; and
 Explore the use of AB 43 and other traffic-calming measures to support speed limit reductions citywide, including at locations proximate to this project and along Escalona Drive.

Vice Mayor Kalantari-Johnson accepted.

ACTION: The motion carried unanimously with the following vote.

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

NOES: None.

ABSENT: None.

DISQUALIFIED: None.

At 3:26 p.m. Council took a break and returned at 3:48 p.m.

Presentation

14. Biarritz Adult and Youth Delegation Report Back
Superintendent of Recreation T. Hedden-Jones gave a presentation. Sister Cities Chair, Carola Barton, Biarritz Sister City Subcommittee Chair, Maggie Mathias, and a Biarritz Youth Delegate, spoke.

Adjournment – Councilmember Golder moved, seconded by Councilmember Brunner, to adjourn. By consensus City Council adjourned at 4:12 p.m.

6.10 August 25, 2026 CITY COUNCIL MINUTES 8345
Respectfully Submitted:

Julia Wood, Deputy City Clerk Administrator
Attest:

Bonnie Bush, City Clerk Administrator
Approved:

Fred Keeley, Mayor

6.11 City Council

AGENDA REPORT
DATE: 08/20/2026
AGENDA OF: 09/08/2026
DEPARTMENT: City Manager
SUBJECT: Santa Cruz County Civil Grand Jury Response (CM) LOCATION: Citywide
RECOMMENDATION: Motion to authorize the Mayor to submit responses to the Santa Cruz Civil Grand Jury on behalf of the Santa Cruz City Council for the Walking in the County of Santa Cruz Grand Jury Report.

BACKGROUND: The Grand Jury issued a report entitled Walking in the County of Santa Cruz is Not for the Faint of Heart: Can Vision Zero Help? that requires a response from the Santa Cruz City Council by September 23, 2026.

DISCUSSION: Staff gathered input from various City Departments in response to the Walking in the County of Santa Cruz is Not for the Faint of Heart: Can Vision Zero Help? Civil Grand Jury Report (Report). The proposed responses (attached) have been prepared for City Council review and consideration. As has been done in the past, staff recommend that the City Council authorize the Mayor to provide the required respond to the above mentioned Civil Grand Jury Report on the City Council’s behalf. Upon City Council approval, the responses will be submitted to the Civil Grand Jury by September 23, 2026.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed Council action is not a “project” under CEQA because approval of the City’s responses to Report will not cause a direct or indirect physical change to the environment. (Public Resources Code § 21065.)
HEALTH IN ALL POLICIES (HiAP): The City’s prioritization of the subject area addressed by the Grand Jury report is supportive of many current Collective of Results and Evidence-based Investments program goals pertaining to health and wellness, economic security and mobility, thriving families, community connectedness, healthy environments, a safe and just community, and stable, affordable housing and shelter. The City activities to address the Grant Jury’s subject area support the three pillars of HiAP, sustainability, equity and public health, as well as related community well-being outcome metrics adopted as part of the HiAP initiative.

7.1 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: None.

Prepared By:

Gina Liebig
Principal Management
Analyst
Submitted By:

Michelle Templeton
Assistant City Manager
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. WALKING IN THE COUNTY OF SANTA CRUZ GRAND JURY REPORT.PDF

2. PEDESTRIAN SAFETY 2026 REQUIRED RESPONSE SANTA CRUZ.PDF

7.2 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 1 of 16 Walking in the County of Santa Cruz is Not for the Faint of Heart Can Vision Zero Help?
Summary
Pedestrian fatalities and serious injuries are a persistent public safety issue in the County of Santa Cruz. While the County and its cities have adopted modern transportation policies and safety frameworks, pedestrian safety outcomes remain poor relative to other California counties.

The 2025-2026 Santa Cruz Civil Grand Jury finds that pedestrian safety deficiencies stem from lack of a comprehensive multi-disciplinary strategy to improve pedestrian safety. Implementing a Vision Zero Strategy i would benefit the Santa Cruz Community.

Vision Zero ii is an approach being adopted across the world. It is a commitment to reducing traffic fatalities and severe injuries to zero. The County of Santa Cruz, the City of Santa Cruz, and the City of Watsonville have committed to pursuing Vision Zero but have yet to adopt Vision Zero action plans. Implementing approved Vision Zero action plans will incentivize these communities to develop metrics and timelines to achieve the goal of zero pedestrians killed or seriously injured. It will also provide access to additional funding from the Department of Transportation iii The Santa Cruz Civil Grand Jury recommends that the County Board of Supervisors and the City Councils of Santa Cruz and Watsonville instruct the Community Traffic Safety Coalition to ensure current Vision Zero Action Plans are in place, including metrics with timelines to measure progress and achieve accountability against Vision Zero-defined goals.

7.3 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 2 of 16 Background
The U.S. is dangerous for pedestrians, and the County of Santa Cruz is no different.

People walk! They walk to run errands, travel from point A to point B, commute to work and for pleasure and exercise. Walking is beneficial to both individuals and communities. It promotes physical health and community cohesion, while reducing local vehicle traffic and pollution.
iv v Many residents depend on walking for daily
transportation. Despite this reliance, pedestrians remain among the most vulnerable road users, accounting for almost one-third of traffic deaths and serious injuries nationwide.

Nationwide, speed, location and alcohol are major risk factors for pedestrian accidents.

Sixty percent of pedestrian deaths occur on high-capacity urban roads with speed limits between 45-55mph. Many of these roads suffer from a design conflict between providing pedestrian access to destinations such as stores and restaurants and allowing high travel speeds that often prioritize vehicle movement.

Alcohol is also a major risk factor. For pedestrian traffic deaths nationally in 2022, about one of six (18%) drivers and one of three (30%) pedestrians were legally intoxicated. vi
Closer to home, Santa Cruz County is among the worst 20% of California counties for pedestrians killed and seriously injured (KSI) in traffic collisions. Although absolute KSI numbers show a downward trend, Santa Cruz County’s ranking compared to other California counties is consistently poor.

County of Santa Cruz and Cities of Santa Cruz and Watsonville Rankings for Pedestrians Killed or Seriously Injured (KSI)
As shown in Table 1, the County of Santa Cruz is among the highest 20% of the 58 California Counties for pedestrians killed or seriously injured, based on Office of Traffic Safety (OTS) rankings.
vii
Table 1- County of Santa Cruz Rank for Pedestrians Killed or Seriously Injured Year 2017 2018 2019 2020 2021 2022 2023
Rank 17 12* 31 11* 5* 5* 11*
# KSI 111 125 92 84 92 94 80
Table 1 shows the pedestrian safety ranking of the County of Santa Cruz from 2017 to 2023 compared to all 58 California Counties, based on OTS rankings. In five of the seven years reported, Santa Cruz is among the top 20% of California Counties for

7.4 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 3 of 16 pedestrians killed or seriously injured. Ranks for years in the top 20% are marked with an asterisk. The table also shows the absolute number of pedestrian KSI in each referenced year.

As shown in Tables 2 and 3, Watsonville and the City of Santa Cruz account for a significant number of pedestrian KSI and are correspondingly high in KSI ranking compared to other California cities of comparable size.

Table 2- City of Watsonville Rank for Pedestrians Killed or Seriously Injured Year 2017 2018 2019 2020 2021 2022 2023
Rank 15 5* 1* 6* 2* 3* 4*
# KSI 24 30 39 23 25 31 27
Table 2 shows the pedestrian safety ranking of the City of Watsonville from 2017 to 2023 compared to 103 California cities of comparable size, based on OTS rankings. In six of the seven years reported, Watsonville is among the top 10 California cities for pedestrians killed or seriously injured. Ranks for years in the top ten are marked with an asterisk. The table also shows the absolute number of pedestrian KSI in each referenced year.

Table 3- City of Santa Cruz Rank for Pedestrians Killed or Seriously Injured Year 2017 2018 2019 2020 2021 2022 2023
Rank 2* 2* 43 12 16 7* 29
# KSI 52 48 18 21 24 34 21
Table 3 shows the pedestrian safety ranking of the City of Santa Cruz from 2017 to 2023 compared to 103 California cities of comparable size, based on OTS rankings. In three of the seven years reported, Santa Cruz is among the top 10 California cities for pedestrians killed or seriously injured. Ranks for years in the top ten are marked with an asterisk. The table also shows the absolute number of pedestrian KSI in each referenced year.

The Vision Zero Approach to eliminating traffic-related deaths and injuries.

The County of Santa Cruz (County) and the cities of Santa Cruz and Watsonville have committed to a Vision Zero strategy under the auspices of the Community Traffic Safety Coalition (CTSC). However, none of the jurisdictions have developed Vision Zero action plans. Vision Zero is a comprehensive strategy for communities to eliminate traffic fatalities and severe injuries. It originated in Sweden and is gaining popularity across Europe and the US. The Vision Zero approach offers a new way of improving traffic and pedestrian safety.

Vision Zero is different from traditional approaches in that it recognizes that people

7.5 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 4 of 16 make mistakes. These inevitable human mistakes should not lead to severe injuries or fatalities. Vision Zero recognizes that a multidisciplinary approach is required to achieve the goal of zero traffic fatalities and serious injuries. It requires participating communities to develop an action plan with specific metrics and timelines to achieve the goal of zero traffic fatalities and serious injuries.

The CTSC Vision Zero Work Plan specifies these primary objectives:
• Safer Roads - Design roadway environments to mitigate human mistakes and reduce the chances of severe injury and death and facilitate safe travel for the most vulnerable road users: pedestrians and bicyclists. • Safer Speeds - Promote safer speeds on all roadways through a combination of roadway design, speed-limit setting, education and enforcement. • Safer People - Encourage safe, responsible behavior by road users and create conditions that prioritize their ability to reach their destination unharmed. • Safer Vehicles - Expand the availability of vehicle systems and features that help prevent crashes and minimize their impact on both vehicle occupants and nonoccupants. • Post-Crash Care - Enhance the survivability of crashes through expedient access to emergency and medical care. Generate greater awareness of crashes and the impact they have on communities.

Local communities will be eligible to apply for funding from the Department of Transportation once Vision Zero Plans are in place. These grants can provide additional resources to achieve traffic safety goals.

Scope
The Santa Cruz County Civil Grand Jury (Jury) investigation included the cities of Watsonville, and Santa Cruz, as well as unincorporated Santa Cruz County. Each of these jurisdictions has both a significant number of pedestrians killed or seriously injured (KSI) and has stated the goal of pursuing the Vision Zero strategy. Scotts Valley has agreed to pursue Vision Zero but already has very few traffic-related pedestrian KSI. For example, Scotts Valley was ranked 77th out of 103 comparable cities for pedestrian KSI in 2023. For the five-year period from 2019 through 2023 Scotts Valley had a total of five pedestrians killed or seriously injured. The city of Capitola has not yet decided to pursue a Vision Zero Strategy;
The Jury decided not to include the cities of Scotts Valley and Capitola in its report.

The Jury focused on understanding the current status and recommending improvements for three Vision Zero Objectives as they relate to pedestrian safety: Safer Roads, Safer Speeds and Safer People.

7.6 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 5 of 16 Methodology
The Jury researched information using online materials. It also conducted interviews with appropriate city and county community members to understand:
• How local traffic infrastructure is envisioned, designed, prioritized, funded, implemented and maintained
• How law enforcement approaches pedestrian safety
• What are the existing educational efforts for pedestrian safety Investigation
Safer Roads
New Infrastructure Successes and Snags
Public works officials in all jurisdictions within the County juggle sometimes overwhelming needs with limited funding. Historically severe 2017 and 2023 winter storms each caused over $100M of damage to roads in the overall County. The 2020 CZU fire also caused major road damage in Scotts Valley and unincorporated areas of the County. Road repairs are funded primarily from gasoline taxes, which have been decreasing with the adoption of electric vehicles and the increased fuel efficiency of gas-powered vehicles. In spite of having over 600 miles of roads to maintain overall, the County is “poor” in terms of gas tax revenue received from the state as our population is relatively small compared to other counties.

Despite these challenges, many recent pedestrian-friendly improvements have been completed and others are in progress. These improvements were funded primarily by grants from Measures D and SB1, funding measures approved in 2016 and 2017, respectively. Examples of recent improvements include: The Whale Bridge over Highway 1, pedestrian/bicycle friendly upgrades to Bay Avenue in the City of Santa Cruz, Green Valley Road in Watsonville and Soquel Drive in the unincorporated County.

The Rail Trail in the City of Santa Cruz provides a pedestrian-friendly alternative to some of the most dangerous roads for pedestrians. These benefits will increase as additional segments of the Rail Trail are constructed and further improvements are made along Bay Ave from High Street to West Cliff.

Most of these improvements help separate pedestrians and bicyclists from vehicular traffic to reduce the chance of collisions. Many also contribute to reducing vehicle speeds with the goal of reducing serious injuries when collisions do occur.

7.7 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 6 of 16 The nature of grant funding creates peculiar issues for pedestrian safety infrastructure.

Many grants require multi-modal improvements, including upgrades for vehicles, pedestrians, and bicycles. This provides opportunities to successfully deliver individual pedestrian improvements such as overcrossings, trail segments, or roadway modifications as part of a larger infrastructure package, but adjacent access routes or “last-mile” connections often leave “safety gaps”. These gaps can force pedestrians back into unsafe conditions immediately before or after safe pathways and lanes. The Highway 1 Whale Bridge is one such example. The Whale Bridge was funded via grants as part of the Highway 1 widening project and specifically designed for pedestrians, bicyclists, and emergency vehicles. Figure 1 shows that the bridge itself and the south side approach are pedestrian-friendly. However, upon exiting the north side of the bridge, pedestrians and cyclists encounter myriad busy driveways with cars entering and exiting various businesses and no sidewalks. Funding to fix this safety gap depends on working with local property owners to pay development fees or add sidewalks as part of future property development.

Figure 1- Overhead view of Highway 1 Whale Bridge. The 😀 emojis show the pedestrian-friendly path to and across the bridge. The 😱 emoji at center left shows where the path becomes dangerous due to multiple busy driveways and no sidewalks.

This “safety gap” is a relic of the funding process.

7.8 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 7 of 16 How can Vision Zero help improve new infrastructure?
Local public works departments currently adopt several Vision Zero tools. For example, Vision Zero requires infrastructure improvement decisions to be prioritized based on traffic accident data. It also requires community input to determine improvement priorities. Although not yet Vision Zero certified, several local Public Works Departments already employ these recommended practices to improve pedestrianfriendly infrastructure. Officials work hard to find creative ways to keep pedestrians safe. Watsonville, for example, is taking advantage of the existing path network joining their many sloughs to create pedestrian and bicycle-friendly paths.

What current infrastructure planning processes lack are metrics and timelines for reducing pedestrian KSI to zero. Becoming Vision Zero communities will require these metrics to ensure transparency and accountability. It will also make these communities eligible for additional grants to help fund infrastructure improvements via the Department of Transportation (DOT) Safe Streets and Roads for All (SS4A) Grant Program. viii
Sidewalk Maintenance
Sidewalks are a critical component of infrastructure for pedestrian safety. Where sidewalks do exist, issues such as cracked pavement, root uplift, and vegetation encroachment can create serious hazards. Under California law, responsibility for sidewalk maintenance rests with adjacent property owners.

Local jurisdictions lack active enforcement of sidewalk hazard violations. They rely on complaints from the public. Complaint forms are available online via the Santa Cruz County Regional Transportation Commission (SCCRTC),
ix City of Santa Cruz City
(CRSP) x and Watsonville Government xi websites. Although easy to find via web search, residents may not be aware of the complaint process. Increasing public awareness of the reporting process is recommended.

Once a complaint is received and verified, property owners are notified and given a timeframe to fix the violation. Sidewalk repair costs can be substantial. Trimming overgrown foliage is relatively inexpensive, but larger projects such as tree removal and sidewalk replacement can cost tens of thousands of dollars. The high cost of repairs may make neighbors reluctant to report sidewalk hazards so as not to impoverish their neighbor.

7.9 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 8 of 16 The Jury recommends that local jurisdictions find ways to help reduce the financial burden for homeowners. Some jurisdictions already waive permit fees, but more is needed. Watsonville, for example, offers a loan program to homeowners along with a list of approved contractors to perform sidewalk repairs.

Figures 2 and 3- Examples of Sidewalk Hazards

Figure 2- This sidewalk on John Street in
the City of Santa Cruz is cracked and
uplifted, causing a tripping hazard
Figure 3- This sidewalk on Fair Ave. in
the City of Santa Cruz is blocked by
overgrown foliage and a telephone
pole
Infrastructure Paint Maintenance
Crosswalks, “no parking” zones and other pedestrian safety-related infrastructure are often painted on roadways or curbs. Paint must be visible to be effective, but this is often not the case. Many paint markings are faded and difficult to see. Paint maintenance is funded from the constrained gas tax-based repair fund. Residents may report faded paint markings via the same complaint process used for sidewalk hazards.

As with sidewalk maintenance, the Jury recommends that more proactive efforts should be employed to improve awareness and ease of reporting.

7.10 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 9 of 16 Figures 4 and 5-Good and Bad Examples of Safety Paint Maintenance

Figure 4- Visible Crosswalk
at the intersection of Scotts
Valley Drive and Mt Hermon
Road in Scotts Valley
Figure 5-Faded Crosswalk on Woodrow
St in the City of Santa Cruz
Safer Speeds
Safe Systems Infrastructure Approach to Encouraging Safe Vehicle Speeds High vehicle speed is a major contributor to the overall KSI rate. High speeds reduce the amount of time drivers and pedestrians have to see each other and react to avoid a collision. Pedestrians are particularly vulnerable to high-speed collisions. A pedestrian is much more likely to be killed or seriously injured if hit by a vehicle traveling at high speed.

7.11 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 10 of 16 Vision Zero adopts the Department of Transportation (DOT) Safe Systems Approach to reducing vehicle speeds. Many drivers adjust their speed to what “feels” safe as opposed to the posted speed limit. A major component of the Safe Systems approach is to naturally slow drivers to the speed limit by making them perceive that higher speeds are unsafe, e.g., by narrowing roadways or adding speed bumps.

Local officials already adopt many Safe Systems approaches when designing road improvements. As shown in Figure 6, the Bay Ave upgrade in the City of Santa Cruz is a good example. The road has been narrowed and separate bicycle and pedestrian areas have been marked off. Once Vision Zero Action Plans are adopted, DOT Safe Systems funding becomes available to make additional improvements.

Figure 6- City of Santa Cruz Bay Ave Road Improvements
Figure 6- Photo of Bay Ave improvements in the City of Santa Cruz. The road has been narrowed to encourage slower vehicle speeds. Bicycles and pedestrians are separated from vehicles.

7.12 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 11 of 16 Enforcing Safe Speeds
Perhaps surprisingly, the CTSC vision does not emphasize enforcement of traffic laws regarding speeding, or speed-related violations (running stop signs, failure to yield), except by advocating installation of speed cameras at intersections near school zones and high accident intersections. Two factors inform this approach: limited enforcement resources and community equity concerns.

Limited Enforcement Resources
Watsonville has only one officer dedicated to traffic enforcement. The City of Santa Cruz has no dedicated traffic enforcement officers; enforcement efforts must be shared among all law enforcement efforts to control criminal activity, including Driving Under the Influence (DUI). Given these limited resources, the cities of Watsonville and Santa Cruz focus their traffic efforts on DUI enforcement.

To supplement speed-related enforcement efforts, local jurisdictions do employ electronic radar signs displaying driver speeds in areas where speeding is common.

This makes drivers aware of their speed and encourages them to slow down.

Community Equity Concerns for Traffic Law Enforcement
The Vision Zero strategy includes a focus on community equity so that all communities within a jurisdiction benefit equally from community policies. Traffic law enforcement, for example, frequently falls heaviest on low-income violators. Traffic fines are set by the state of California and are not adjusted for income. A $250 speeding ticket can be inconsequential for a wealthy speeder but devastating for a low-income person with the same offense. Given the current state fine structure, slowing vehicles via non-punitive measures improves community equity.

Speed Cameras
In spite of the CTSC advocacy for speed cameras, it should be noted that using cameras to enforce speed limits is currently illegal for most of California. However, recently passed Assembly Bill AB645 authorizes select cities to begin issuing speeding tickets via mail based on automated speed cameras. San Francisco, Oakland, Long Beach, Los Angeles and Glendale are the pilot cities for this effort. The pilot extends through 2032. Cameras are limited to problem areas in local communities only, not freeways. The law mandates a public information blitz at least 30 days before any camera is switched on. In addition to improving traffic speed enforcement, this law hopes to reduce inequities associated with traditional traffic stops.

7.13 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 12 of 16 Balancing Enforcement Priorities
Based on the 2023 OTS rankings, the number of speed-related traffic accidents (19) in the County of Santa Cruz is almost the same as the number of alcohol-impaired accidents (17). The Jury recommends local jurisdictions look more closely at the data breakdown for DUI versus speed-related accidents and adjust enforcement efforts accordingly. For example, the California State Highway Patrol (CHP) implements targeted speed enforcement on Highway 17 for limited durations. This could be considered for the County as well.

Safer People
Awareness and Prevention Efforts
Drivers, bicyclists and pedestrians must all behave responsibly to ensure traffic safety.

Good practices for pedestrians include staying alert while walking, avoiding cell phone use, using sidewalks, walking facing traffic if there are no sidewalks, crossing streets at marked crosswalks, and making eye contact with drivers. At night, good practice for pedestrians includes wearing light-colored or reflective clothing and carrying a flashlight.

Avoiding walking while intoxicated is especially important, since 30% of pedestrians killed in traffic accidents are intoxicated.

The CTSC, via the County Health Services Agency (HSA) supports public awareness and education efforts for traffic safety. Their website xii covers many of the traffic safety efforts discussed in this report but very little on how pedestrians can change their own behavior to reduce their chance of traffic injuries. Much of the website focuses on bicycle safety. Teaching bicycle riders how to safely operate their bicycles and e-bikes benefits pedestrians by reducing bicycle-pedestrian collisions, but more effort is needed to educate pedestrians on how to change their own behavior to walk safely.

Conclusion
The County of Santa Cruz remains among the top 20% of California Counties for pedestrians killed or seriously injured in traffic accidents. To reduce or eliminate pedestrian traffic deaths, the 2025-2026 Civil Grand Jury respectfully submits the following findings and recommendations.

7.14 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 13 of 16 Findings and Recommendations
Findings for the County of Santa Cruz Board of Supervisors F1 The County of Santa Cruz County has not implemented Vision Zero plans, possibly resulting in more pedestrian deaths and serious injuries than would have otherwise occurred.

F2 Public awareness of reporting procedures for sidewalk hazards and faded paint issues is lacking, resulting in dangerous conditions for pedestrians.

F3 The County of Santa Cruz does not take an active
role in identifying sidewalk hazards and faded safety paint, resulting in dangerous sidewalks and crosswalks.

F4 Because sidewalk repairs can be expensive, repairs may be delayed or hazards go unreported, resulting in dangerous sidewalks for pedestrians.

F5 Many pedestrians are unaware of how to walk safely, resulting in higher rates of pedestrians killed and seriously injured.

Recommendations for the County of Santa Cruz Board of Supervisors R1 The Grand Jury recommends that the County of Santa Cruz Board of Supervisors direct their Public Works Department to work with the Santa Cruz County Health Services Agency to develop and publish multi-disciplinary Vision Zero Action plans no later than June 1, 2027.

R2 The Grand Jury recommends that the Santa Cruz County Board of Supervisors direct the County Health Services Agency to provide more outreach to educate the public on how to report sidewalk hazards and faded paint by March 1, 2027.

R3 The Grand Jury recommends that the Santa Cruz County Board of Supervisors direct their County Public Works Department to develop a policy to actively identify sidewalk hazards and markings with faded paint and initiate the repair process by June 1, 2027.

R4 The Grand Jury recommends that the Santa Cruz County Board of Supervisors direct their Public Works Department to create and publish a policy to financially assist homeowners with sidewalk repairs by June 1, 2027.

R5 The Grand Jury recommends that the Santa Cruz County Board of Supervisors direct the County Health Services Agency to provide more public outreach to educate pedestrians on how to walk safely, including the hazards of walking while intoxicated, by March 1, 2027.

7.15 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 14 of 16 Required Responses
Respondent Findings Recommendations Respond Within/
Respond By
Board Of
Supervisors
F1, F2, F3, F4,
F5 R1, R2, R3, R4. R5 90 Days
Findings for the Watsonville City Council
F6 The City of Watsonville has not implemented Vision Zero plans, possibly resulting in more pedestrian deaths and serious injuries than would have otherwise occurred.

F7 Public awareness of reporting procedures for sidewalk hazards and faded paint issues is lacking, resulting in dangerous conditions for pedestrians.

F8 The City of Watsonville does not take an active role in identifying sidewalk hazards and faded safety paint, resulting in dangerous sidewalks and crosswalks.

F9 Law enforcement has prioritized enforcement of Driving Under the Influence laws over speeding violations, resulting in an imbalance that may lead to more pedestrian injuries and deaths.

Recommendations for the Watsonville City Council
R6 The Grand Jury recommends that the Watsonville City Council direct their Public Works and Police Departments to work with the County Health Services Agency to develop and publish multi-disciplinary Vision Zero Action plans no later than June 1, 2027.

R7 The Grand Jury recommends that the Watsonville City Council direct their Public Works Department to provide more outreach to educate the public on how to report sidewalk hazards and faded paint by March 1, 2027.

R8 The Grand Jury recommends the Watsonville City Council direct their Public Works Department to enact a policy to annually review and identify sidewalk hazards and markings with faded paint and initiate the repair process by June 1, 2027.

R9 The Grand Jury recommends the Watsonville City Council direct the Chief of Police to annually review Office of Traffic Safety pedestrian Killed and Seriously Injured data to ensure enforcement priorities are balanced based on the Vision Zero Plan. The annual review should be published and updated each year beginning June 1, 2027.

Required Responses

7.16 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 15 of 16 Respondent Findings Recommendations Respond Within/
Respond By
Watsonville City
Council F6, F7, F8, F9 R6, R7, R8, R9 90 Days
Findings for the Santa Cruz City Council
F10 The City of Santa Cruz has not implemented Vision Zero plans, possibly resulting in more pedestrian deaths and serious injuries than would have otherwise occurred.

F11 Public awareness of reporting procedures for sidewalk hazards and faded paint issues is lacking, resulting in dangerous conditions for pedestrians.

F12 The City of Santa Cruz does not take an active role in identifying sidewalk hazards and faded safety paint, resulting in dangerous sidewalks and crosswalks.

F13 Because sidewalk repairs can be expensive, repairs may be delayed or hazards go unreported, resulting in dangerous sidewalks for pedestrians.

F14 Law enforcement has prioritized enforcement of Driving Under the Influence laws over speeding violations, resulting in an imbalance that may lead to more pedestrian injuries and deaths.

Recommendations for the Santa Cruz City Council
R10 The Grand Jury recommends that the Santa Cruz City Council direct their Public Works and Police Departments to work with the Santa Cruz County Health Services Agency to develop and publish multi-disciplinary Vision Zero Action plans no later than June 1, 2027.

R11 The Grand Jury recommends that the Santa Cruz City Council direct their Public Works Dept. to provide more outreach to educate the public on how to report sidewalk hazards and faded paint by March 1, 2027.

R12 The Grand Jury recommends the Santa Cruz City Council direct their Public Works Department to develop a policy to actively identify sidewalk hazards and faded paint and initiate the repair process by June 1, 2027.

R13 The Grand Jury recommends the Santa Cruz City Council direct their Public Works Department to create and publish a policy to financially assist homeowners with sidewalk repairs by June 1, 2027.

R14 The Grand Jury recommends the Santa Cruz City Council direct the Chief of Police to annually review Office of Traffic Safety pedestrian Killed and Seriously Injured data to ensure enforcement priorities are balanced based on the Vision Zero Plan. The annual review should be published and updated each year beginning June 1, 2027.

7.17 Walking in the County of Santa Cruz is Not for the Faint of Heart Page 16 of 16 Required Responses
Respondent Findings Recommendations
Respond
Within/
Respond By
Santa Cruz City
Council
F10, F11, F12,
F13, F14
R10, R11, R12,
R13, R14 90 Days
End notes
i. CTSC Vision Zero Work Plan, Fiscal Year 2024-2026
ii. Vision Zero Network, June, 2026
iii. United States Department of Transportation Safe Streets and Roads for All Program, June 2026
iv. Xuemei Zhu, Zhipeng Lu, Chia-Yuan Yu, Chanam Lee, George Mann, Walkable Communities: Impacts on residents’ physical and social health, July 2013 v. Arup, Cities Alive: Towards a Walking World , June, 2016 vi. CDC Website for Pedestrian Safety, October 29th, 2024 vii. California Office of Traffic Safety, June 2026
viii.United States Department of Transportation Safe Streets and Roads for all (SS4A) Grant program June, 2026
ix. Santa Cruz County Regional Transportation Commission Hazard Reports, June, 2026
x. City of Santa Cruz Community Request for Service Portal (CRSP), June, 2026 xi. City of Watsonville “See-Click-Fix" Website, June, 2026 xii. Santa Cruz County Health Services Agency Website, June, 2026

7.18  Page 1 of 15
The 2025-2026 Santa Cruz County Civil Grand Jury
Requires the
Santa Cruz City Council
to Respond by
23 Sept 2026
to the Findings and Recommendations listed below
which were assigned to them in the report titled
Walking in the County of Santa Cruz is Not for the
Faint of Heart
Can Vision Zero Help?
Required Responses apply to elected officials, elected agencies or department heads, elected boards, councils, and committees. The respondent is required to respond and to make the response available to the public under California Penal Code (PC) §933(c). A required response will be considered compliant under PC §933.05 if it contains an appropriate comment on all findings and recommendations which were assigned to you in this report.

Invited Responses are encouraged but are not required by the California Penal Code.

Please follow the instructions below when preparing your response.

7.19

Instructions for Respondents
Your assigned Findings and Recommendations are listed on the following pages with check boxes and an expandable space for summaries, timeframes, and explanations.

Please follow these instructions, which paraphrase PC §933.05:

1. For the Findings, mark one of the following responses with an “X” and provide the required additional information:
a. AGREE with the Finding, or
b. PARTIALLY DISAGREE with the Finding – specify the portion of the Finding that is disputed and include an explanation of the reasons why, or c. DISAGREE with the Finding – provide an explanation of the reasons why.

2. For the Recommendations, mark one of the following actions with an “X” and provide the required additional information:
a. HAS BEEN IMPLEMENTED – provide a summary of the action taken, or b. HAS NOT YET BEEN IMPLEMENTED BUT WILL BE IN THE FUTURE – provide a timeframe or expected date for completion, or c. REQUIRES FURTHER ANALYSIS – provide an explanation, scope, and parameters of an analysis to be completed within six months, or d. WILL NOT BE IMPLEMENTED – provide an explanation of why it is not warranted or not reasonable.

3. Please confirm the date on which the assigned responses were approved during an official meeting:

We approved these responses in a regular public meeting as shown
in our minutes dated ________________.

4. Please attach a PDF version of your completed responses to an email sent to:

The Honorable Judge: Katherine Hansen [email protected] and
The Santa Cruz County Grand Jury: [email protected] If you have questions about this response form, please contact the Grand Jury by calling (831) 454-2099 or by sending an email to [email protected].

7.20

FINDINGS:

F10 The City of Santa Cruz has not implemented Vision Zero plans, possibly resulting in more pedestrian deaths and serious injuries than would have otherwise occurred. _____ AGREE
_____ PARTIALLY DISAGREE
___x__ DISAGREE
Response explanation (required for a response other than Agree):

The City of Santa Cruz has demonstrated a long-standing commitment to improving roadway safety through policy adoption, planning, and strategic investment in transportation infrastructure.

On February 28, 2017, the City of Santa Cruz adopted the first Active Transportation Plan (ATP) in Santa Cruz County, establishing a prioritized list of bike and pedestrian programs and projects. On August 27, 2019, the City Council adopted a Vision Zero Resolution, establishing a commitment to eliminating traffic fatalities and serious injuries while creating a safer transportation system for all roadway users. On May 25, 2021, the City Council adopted the City's Local Roadway Safety Plan (LRSP) which provides a framework for identifying, analyzing, and prioritizing roadway safety improvements.

The City of Santa Cruz is currently developing the Safety Action Plan (SAP), with City Council adoption anticipated in October 2026. The SAP will replace the existing LRSP and will be fully compliant with the Safe Streets and Roads for All (SS4A) program guidelines, featuring amendments based on a review conducted two years ago. A High Injury Network (HIN) was established in the LRSP and is actively being updated as part of the new SAP.

The City actively pursues state, regional, and federal grant opportunities to implement systemwide safety improvements. Staff consistently applies for Highway Safety Improvement Program (HSIP) funding and aligns transportation planning with SS4A guidelines. These efforts have successfully secured funding for projects that improve

7.21

safety for pedestrians, bicyclists, transit users, and motorists throughout the community.

Recent safety improvement projects include:
• Advanced Dilemma Zone Detection and Retroreflective Backplates - $1,257,600 Upgrades to traffic signals with advanced dilemma zone detection technology and retroreflective signal backplates to reduce intersection collisions and improve signal visibility.
• Non-Signalized Crossing Improvement Project - HSIP Cycle 10 - $247,100 Installation of rectangular rapid flashing beacons (RRFBs), enhanced signage, pavement striping, and ADA-compliant curb ramps at non-signalized pedestrian crossings.
• Non-Signalized Crossing Improvement Project - HSIP Cycle 11 - $249,120 Additional RRFBs, signage, striping, and curb ramps improvements at non-signalized crossings.
• Citywide Intersection Daylighting – HSIP Cycle 12 - $1,932,300 (Funded and Underway)
Daylighting and pedestrian visibility improvements at 88 intersections citywide to improve sight distance and reduce conflicts between motorists and pedestrians. • Non-Signalized Crossing Improvement Project - HSIP Cycle 12 - $349,110 (Funded and Underway)
Installation of RRFBs, signage, striping, and curb ramps at additional pedestrian crossings.
• Water Street Protected Bike Lanes - HSIP Cycle 12 - $342,900 (Funded and Underway)
Construction of separated bicycle lanes on Water Street between North Branciforte Avenue and Poplar Avenue to improve bicyclist safety and connectivity. • Bay Corridor Affordable Housing and Sustainable Communities (AHSC), Transportation Development Act (TDA), Regional Surface Transportation Program Exchange (RSTPx) - $4,959,000
Installation of separated bicycle lanes, transit boarding islands, pedestrian intersection improvements, and roadway rehabilitation.
• Front Street Improvements (Water Street to Laurel Street) Construction of dedicated transit lanes and upgraded traffic signals to reduce turning conflicts and improve pedestrian safety.
• Laurel Street Improvements (Front Street to California Street) Installation of enhanced bicycle facilities, including separated bike lanes, intersection

7.22

daylighting, pedestrian crossing improvements, and roadway rehabilitation. Bicycle and pedestrian improvements are funded through the Transportation Development Act (TDA) funds, while pavement improvements are funded through Gas Tax and Road Maintenance and Rehabilitation Account (RMRA) revenues.

Collectively, these initiatives demonstrate the City's continued commitment to implementing evidence-based safety improvements, leveraging external grant funding, and advancing the goals of Vision Zero by creating a safer, more accessible transportation network for all users.

F11 Public awareness of reporting procedures for sidewalk hazards and faded paint issues is lacking, resulting in dangerous conditions for pedestrians. _____ AGREE
__x___ PARTIALLY DISAGREE
_____ DISAGREE
Response explanation (required for a response other than Agree):

The City of Santa Cruz maintains the Community Request for Service Portal (CRSP), which allows residents to report bicycle and pedestrian hazards, including sidewalk damage, faded pavement markings, signage issues and other maintenance concerns.

Reports submitted through the portal are routed to the appropriate City department for review, response, and when appropriate, corrective action.

In addition, the Santa Cruz County Regional Transportation Commission (RTC) maintains an online Hazard Report that enables the public to report roadway hazards throughout the Santa Cruz County. Hazard Reports located within the City of Santa Cruz are forwarded to City staff for review and response.

While these reporting tools are well established and available to the public, the City recognizes there are opportunities to increase public awareness and encourage greater utilization of these resources. Staff will continue to explore outreach strategies to educate residents on how to identify and report bicycle and pedestrian hazards, supporting timely maintenance responses and advancing the City's Vision Zero and roadway safety goals.

7.23

F12 The City of Santa Cruz does not take an active
role in identifying sidewalk hazards and faded safety paint, resulting in dangerous sidewalks and crosswalks.
_____ AGREE
__x___ PARTIALLY DISAGREE
_____ DISAGREE
Response explanation (required for a response other than Agree):

The City’s current process for addressing sidewalk hazards is complaint-driven. Staff reviews reports submitted by community members and responds by evaluating the reporting condition and scheduling repairs or other corrective actions, as appropriate.

The City also maintains an annual pavement striping program to ensure crosswalks and roadway markings remain visible and effective. Crosswalks and other pavement markings are routinely refreshed based on maintenance schedules, roadway conditions, and operational needs. In addition, staff monitors reports through the Community Request for Service Portal (CRSP) and the Santa Cruz County Regional Transportation Commission’s Hazard Report system. Reports related to faded striping or other roadway marking concerns are reviewed and addressed as appropriate.

New pavement striping is also incorporated into all roadway paving and resurfacing projects, ensuring that traffic markings are restored or upgraded as part of the City’s ongoing infrastructure improvement program.

7.24

F13 Because sidewalk repairs can be expensive, repairs may be delayed or hazards go unreported, resulting in dangerous sidewalks for pedestrians. _____ AGREE
__x___ PARTIALLY DISAGREE
_____ DISAGREE
Response explanation (required for a response other than Agree):

The City of Santa Cruz has an established process for responding to reported sidewalk hazards. When a report is received, staff conducts a field inspection to verify the condition and assess the appropriate corrective action. If the sidewalk is determined to be the responsibility of the adjacent property owner, the City notifies the owner of the identified hazard, the required repairs, and the timeline for completing the work. Staff monitors compliance and follows up as needed. If the required repairs are not completed within the prescribed timeframe, the City may complete the work and recover the associated costs by billing the property owner, consistent with City policy.

The City's sidewalk maintenance program is primarily complaint-driven, relying on reports from community members to identify potential hazards. While residents may choose not to report sidewalk issues for a variety of reasons, including uncertainty about responsibility or concerns regarding repair costs, the City investigates and responds to every complaint it receives. Staff also continues to identify opportunities to increase public awareness of the available reporting tools and the City's sidewalk repair process to encourage timely reporting of hazards.

7.25

F14 Law enforcement has prioritized enforcement of Driving Under the Influence laws over speeding violations, resulting in an imbalance that may lead to more pedestrian injuries and deaths.
_____ AGREE
_____ PARTIALLY DISAGREE
__X___ DISAGREE
Response explanation (required for a response other than Agree):

The Santa Cruz Police Department (SCPD) appreciates the Santa Cruz Civil Grand Jury’s thorough review of pedestrian safety in the 2025-2026 report "Walking in the County of Santa Cruz is Not for the Faint of Heart: Can Vision Zero Help?" We share the community’s commitment to reducing pedestrian injuries and fatalities and support the Vision Zero framework.

SCPD does not prioritize Driving Under the Influence (DUI) enforcement over speeding enforcement in a manner that creates an imbalance harmful to pedestrian safety. Both impaired driving and speeding are significant risk factors for pedestrian collisions, as noted in the report. Our enforcement strategy is driven by data, available resources, legal requirements, and officer capabilities.

SCPD maintains a Traffic Unit with two motor officers who are radar- or lidar-certified and two nighttime DUI officers. At least one officer certified in radar or lidar is assigned to traffic-violation duties during daytime hours each day of the week. Speeding citations, through the use of radar and/or lidar equipment under CVC 22350, require certified operators and current speed surveys (completed by the City of Santa Cruz Public Works Department) on the specific roadways where speeding enforcement is being conducted, while any sworn officer can address DUI violations under CVC 23152(a-g).

From 2017 to 2026 year-to-date, SCPD has issued 1,327 speeding tickets and 2,479 DUI citations, reflecting substantial speeding enforcement despite specialized staffing constraints. It is worth noting that DUI arrests significantly reduce traffic-related accidents by immediately removing intoxicated drivers from the roads, preventing potential crashes in the short term. Over time, the heightened risk of arrest, fines, license suspension, and legal consequences also creates a strong general deterrent effect, lowering overall rates of impaired driving.

7.26

SCPD is committed to data-informed strategies, targeted enforcement in high-risk areas, collaboration on infrastructure improvements, and broader Vision Zero steps to advance pedestrian safety throughout Santa Cruz. We welcome ongoing partnerships with City, county, and community stakeholders to achieve measurable reductions in traffic crashes that result in injuries and fatalities.

RECOMMENDATIONS:

R10 The Grand Jury recommends that the Santa Cruz City Council direct their Public Works and Police Departments to work with the Santa Cruz County Health Services Agency to develop and publish multi-disciplinary Vision Zero Action plans no later than June 1, 2027. (Response to F10)
_____ HAS BEEN IMPLEMENTED – summarize what has been done _____ HAS NOT YET BEEN IMPLEMENTED BUT WILL BE IN THE FUTURE - summarize what will be done and the timeframe
_____ REQUIRES FURTHER ANALYSIS – explain the scope and timeframe (not to exceed six months)
__x___ WILL NOT BE IMPLEMENTED – explain why
Required response explanation, summary, and timeframe:

On August 27, 2019, the City Council adopted a Vision Zero Resolution, establishing a commitment to eliminating traffic fatalities and serious injuries while creating a safer transportation system for all roadway users. On May 25, 2021, the City Council adopted the City's Local Roadway Safety Plan (LRSP) which provides a framework for identifying, analyzing, and prioritizing roadway safety improvements.

The City of Santa Cruz is currently updating the LRSP through development of a new Safety Action Plan (SAP), with City Council adoption anticipated in October 2026. The SAP incorporates current best practices based on the Safe Systems Approach and satisfies the planning requirements of the Federal Safe Streets and Roads for All (SS4A) program. Development of the SAP has included a multidisciplinary team of City departments and partner agencies, including the Santa Cruz Police Department and the Santa Cruz County Health Services Agency.

In addition to the safety specific planning, the City of Santa Cruz was the first jurisdiction in the County and one of the first in the state to adopt an Active Transportation Plan (ATP) in February 2017. The 2017 ATP was used to secure over $68 million in outside grant funding to construct bike and pedestrian improvements citywide and fund

7.27

education and encouragement programs at local schools and in the community. An update to the ATP was adopted in April 2026. The 2026 ATP builds on the success of the 2017 ATP and uses a Vision Zero and Safe Systems framework.

The SAP and ATP are guiding documents for prioritizing projects, ensuring that roadway safety is a cornerstone of all projects. Because the City has already undertaken this planning effort and is in the process of adopting an updated SS4Acompliant SAP, this recommendation has effectively been addressed through existing and ongoing initiatives. Accordingly, no additional action is proposed beyond completion and adoption of the SAP.

R11 The Grand Jury recommends that the Santa Cruz City Council direct their Public Works Dept. to provide more outreach to educate the public on how to report sidewalk hazards and faded paint by March 1, 2027. (Response to F11) ___x__ HAS BEEN IMPLEMENTED – summarize what has been done _____ HAS NOT YET BEEN IMPLEMENTED BUT WILL BE IN THE FUTURE - summarize what will be done and the timeframe
____ REQUIRES FURTHER ANALYSIS – explain the scope and timeframe (not to exceed six months)
_____ WILL NOT BE IMPLEMENTED – explain why
Required response explanation, summary, and timeframe:

City teams consistently promote the Community Request for Service Portal (CRSP).

The City of Santa Cruz includes information on CRSP in every City Manager’s Update Newsletter, through the City website homepage, and via “link in bio” links on City social media channels. City teams will engage with Santa Cruz County Regional Transportation Commission (SCCRTC) to explore options to promote their online Hazard Report.

7.28

R12 The Grand Jury recommends the Santa Cruz City Council direct their Public Works Department to develop a policy to actively identify sidewalk hazards and faded paint and initiate the repair process by June 1, 2027. (Response to F12) _____ HAS BEEN IMPLEMENTED – summarize what has been done _____ HAS NOT YET BEEN IMPLEMENTED BUT WILL BE IN THE FUTURE - summarize what will be done and the timeframe
_____ REQUIRES FURTHER ANALYSIS – explain the scope and timeframe (not to exceed six months)
__x___ WILL NOT BE IMPLEMENTED – explain why
Required response explanation, summary, and timeframe:

The City of Santa Cruz maintains an inventory of missing sidewalks and curb ramps throughout the City. The City’s Active Transportation Plan (ATP) identifies and prioritizes sidewalk segments for future construction, with priority given to locations within one-quarter mile of schools, parks and other equity destinations. The ATP also includes recommendations to standardize pedestrian crossing treatments to improve safety and accessibility for people walking and bicycling.

The ATP serves as the City’s guiding document for pursuing grant funding and implementing transportation improvements where sidewalks, curb ramps, and pedestrian facilities are eligible project components. Key policies identified in the ATP include:
• Upgrading all curb ramps, sidewalks, and driveway approaches to meet Americans with Disabilities Act (ADA) standards over time, with priority given to locations within 0.1 miles of schools and equity destinations.
• Prioritizing pavement rehabilitation and maintenance projects that implement ATP projects, incorporate Complete Streets Elements, or close gaps in the sidewalk and curb ramps network.
• Evaluating opportunities to strengthen existing policies related to property owner responsibility for sidewalk maintenance when properties are sold.

7.29

• Exploring development of a “Sidewalk Upon Sale” ordinance, similar to the City’s Sewer Lateral Ordinance, that would require sidewalk repairs or installation at the time of property transfer or alternatively allow payment of an in-lieu fee to support a dedicated sidewalk fund.
• Exploring financing strategies to accelerate sidewalk improvements, including potential funding measures and financial assistance programs to reduce the burden on low- and moderate-income property owners.

Under California Streets and Highways Code Section 5610, adjacent property owners are responsible maintaining sidewalks bordering their property. The City does not assume responsibility for routine sidewalk maintenance beyond what is required by law and available funding. While the City continues to pursue grant funding and implement sidewalk improvements through capital projects and ATP priorities, it would not undertake the ongoing maintenance responsibilities assigned to private property owners under state law.

7.30

R13 The Grand Jury recommends the Santa Cruz City Council direct their Public Works Department to create and publish a policy to financially assist homeowners with sidewalk repairs by June 1, 2027. (Response to F13)
_____ HAS BEEN IMPLEMENTED – summarize what has been done _____ HAS NOT YET BEEN IMPLEMENTED BUT WILL BE IN THE FUTURE - summarize what will be done and the timeframe
_____ REQUIRES FURTHER ANALYSIS – explain the scope and timeframe (not to exceed six months)
___x__ WILL NOT BE IMPLEMENTED – explain why
Required response explanation, summary, and timeframe:

The City of Santa Cruz will continue to pursue and evaluate funding opportunities to support citywide sidewalk improvements. At this time, no dedicated funding has been identified in the City’s adopted budget to comprehensively address this issue. Various options for citywide sidewalk improvements will be presented to the Transportation and Public Works Commission for review within six months. Some of the potential options to explore (also included in R12 above):
• Upgrading all curb ramps, sidewalks, and driveway approaches to meet Americans with Disabilities Act (ADA) standards over time, with priority given to locations within 0.1 miles of schools and equity destinations.
• Prioritizing pavement rehabilitation and maintenance projects that implement the City’s Active Transportation Plan (ATP) projects, incorporate Complete Streets Elements, or close gaps in the sidewalk and curb ramps network. • Evaluating opportunities to strengthen existing policies related to property owner responsibility for sidewalk maintenance when properties are sold. • Exploring development of a “Sidewalk Upon Sale” ordinance, similar to the City’s Sewer Lateral Ordinance, that would require sidewalk repairs or installation at the time of property transfer or alternatively allow payment of an in-lieu fee to support a dedicated sidewalk fund.

7.31

• Exploring financing strategies to accelerate sidewalk improvements, including potential funding measures and financial assistance programs to reduce the burden on low- and moderate-income property owners.

R14 The Grand Jury recommends the Santa Cruz City Council direct the Chief of Police to annually review Office of Traffic Safety pedestrian Killed and Seriously Injured data to ensure enforcement priorities are balanced based on the Vision Zero Plan. The annual review should be published and updated each year beginning June 1, 2027. (Response to F14)
_____ HAS BEEN IMPLEMENTED – summarize what has been done _____ HAS NOT YET BEEN IMPLEMENTED BUT WILL BE IN THE FUTURE - summarize what will be done and the timeframe
_____ REQUIRES FURTHER ANALYSIS – explain the scope and timeframe (not to exceed six months)
___X__ WILL NOT BE IMPLEMENTED – explain why
Required response explanation, summary, and timeframe:

The Santa Cruz Police Department (SCPD) appreciates the Civil Grand Jury’s focus on pedestrian safety in the report “Walking in the County of Santa Cruz is Not for the Faint of Heart” and continues to be committed to Vision Zero principles as part of the Community Traffic Safety Coalition.

While we support data-driven enforcement and collaboration to reduce pedestrian injuries and fatalities, SCPD will not implement a separate annual review and publication of the Office of Traffic Safety (OTS) Pedestrian Killed and Seriously Injured data. OTS data is typically lagged by a couple of years—the most recent comprehensive figures available are from 2023, making a standalone annual city-level publication less timely and actionable than current practices.

SCPD already provides up-to-date collision and enforcement data directly to OTS on a quarterly basis, which directly informs the statewide reports referenced by the Grand Jury. We have consistently been awarded annual OTS STEP grants to fund targeted enforcement of speeding, distracted driving, DUI, and pedestrian and bicycle safety.

7.32

The SCPD also operates a crossing guard program for all elementary schools within the City of Santa Cruz and manages an OTS Pedestrian and Bicycle Safety grant that supports in-classroom and community education programs for at-risk populations, including students from elementary through high school.

These ongoing grant-funded efforts already ensure balanced, multi-faceted enforcement and education priorities aligned with Vision Zero objectives. It is important to recognize that the City of Santa Cruz cannot enforce its way to zero pedestrian fatalities and serious injuries.

As the report itself notes, pedestrian behaviors—such as alcohol and drug impairmentcontribute significantly to incidents and play a major role alongside enforcement.

Broader factors, including post-COVID effects, rising rates of distracted driving, seasonal fluctuations in tourism and UCSC student/visitor traffic, ongoing road construction, and Santa Cruz’s unique geography, also influence trends.

Our community’s strong walking and biking culture results in more pedestrians than in many comparable cities, while the mix of urban streets, state highways, and multi-use roads creates more conflict points. SCPD will continue to collaborate with City Public Works, the CTSC, and community partners on integrated strategies that encompass enforcement, education, and infrastructure modifications to improve safety for all road users.

7.33 City Council

AGENDA REPORT
DATE: 08/20/2026
AGENDA OF: 09/08/2026
DEPARTMENT: City Manager
SUBJECT: Sugar-Sweetened Beverage Tax Oversight Committee Bylaws (CM) LOCATION: Citywide
RECOMMENDATION: Motion to:
1) Approve the Sugar-Sweetened Beverage Tax Oversight Committee (SSBTOC) bylaws; and 2) Adopt a resolution exempting the SSBTOC from the City’s policy (Council Policy 5.1) that requires city residency for advisory body members, and allowing up to three non-City-residents who have experience in youth programs or early childhood development to serve on the SSBTOC.

BACKGROUND: At the November 5, 2024 election, a majority of voters approved Measure Z, which established the Santa Cruz Sugar-Sweetened Beverage Distribution Tax and amended the Municipal Code to add a tax of two cents per fluid once on the wholesale distribution of sugar sweetened beverages. Per Measure Z, the City has established the Sugar-Sweetened Beverage Tax Oversight Committee (SSBTOC) which is comprised of seven members including: one member of the Parks and Recreation Commission, one City Councilmember, and five at-large community members all ratified at the 02/10/2026 City Council meeting. The at-large members are comprised of community members representing categories that include healthcare, dental, and/or wellness professional(s); representative(s) from the education industry; and representative(s) from youth organization(s). (See Santa Cruz Municipal Code (SCMC) §

3.38.015.)
DISCUSSION: At the March 26, 2026 SSBTOC meeting, a draft of the bylaws was reviewed with the committee. The SSBTOC made a motion to bring the draft bylaws back to the August 13, 2026 meeting for final adoption, allowing staff and the City Attorney's Office time to review the draft bylaws and the committee's suggestions and prepare any necessary revisions. The bylaws were approved by the SSBTOC on August 13, 2026.

The bylaws approved by the SSBTOC would allow for up to three non-City-resident SSBTOC members, provided that the non-City-resident committee members have experience in youth programs or early childhood development. (Proposed By-Laws, Article IV, Section 2, p. 6.)

8.1 City Council Policy 5.1 generally requires individuals serving on City advisory bodies to be City residents, “[u]nless specifically exempted (or otherwise specified) by statute, charter, enabling ordinance or resolution”. (Council Policy 5.1.)
The SSBTOC’s enabling ordinance is neutral as to whether non-City-residents may serve on the SSBTOC. (See SCMC 3.38.015.) Given that the proposed SSBTOC by-laws allow for nonresidents to serve on the SSBTOC, staff has prepared a proposed resolution exempting the SSBTOC from the City’s default rule that those eligible to serve on City advisory bodies must be City residents.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed Council action is not a “project” under CEQA because no direct or indirect physical change to the environment is anticipated. (Public Resources Code § 21065; see also 14 CCR § 15378(b) (2) and (5).)
HEALTH IN ALL POLICIES (HiAP): HiAP is a collaborative framework designed to improve population health by integrating health considerations into decision-making processes across sectors and policy areas. HiAP is built on three core pillars: equity, public health, and sustainability. Its primary goal is to ensure that policymakers fully consider the health, equity, and sustainability impacts of various policy options during development. The proposed action aligns with HiAP principles by promoting public health and equity, resulting in local investments such as safe and accessible parks, open spaces, and public facilities, as well as new or expanded programs for residents of all ages. Measure Z reinforces commitment to a healthier community.

FISCAL IMPACT:

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

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: None.

Prepared By:

Gina Liebig
Principal Management
Analyst
Submitted By:

Michelle Templeton
Assistant City Manager
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. SUGAR-SWEETENED BEVERAGE TAX OVERSIGHT COMMITTEE BYLAWS.DOCX

2. RESOLUTION.DOCX

8.2 RESOLUTION NO. NS-XX,XXX

RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CRUZ EXEMPTING

THE SUGAR-SWEETENED BEVERAGE TAX OVERSIGHT COMMITTEE FROM THE CITY RESIDENCY REQUIREMENT FOR UP TO THREE QUALIFIED NON-CITYRESIDENT MEMBERS WHEREAS, at the November 5, 2024 election, a majority of voters approved Measure Z, which established the Santa Cruz Sugar-Sweetened Beverage Distribution Tax and amended the Municipal Code to add a tax of two cents per fluid ounce on the wholesale distribution of sugarsweetened beverages.

WHEREAS, pursuant to Measure Z, the City established the Sugar-Sweetened Beverage Tax Oversight Committee (SSBTOC), which is composed of seven members: one member of the Parks and Recreation Commission, one City Councilmember, and five at-large community members.

WHEREAS, City Council Policy 5.1 generally requires individuals serving on City advisory bodies to be City residents, “[u]nless specifically exempted (or otherwise specified) by statute, charter, enabling ordinance, or resolution.”
WHEREAS, the SSBTOC’s enabling ordinance (SCMC § 3.38.015) is neutral as to whether non-City-residents may serve on the SSBTOC.

WHEREAS, the Council desires to allow up to three non-City-residents to serve on the SSBTOC, provided that each non-City resident member has experience in youth programs or early childhood development.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Santa Cruz as follows:
(1) Up to three non-City-residents may serve on the SSBTOC at the same time, provided that each non-City-resident member has experience in youth programs or early childhood development.
(2) Pursuant to Council Policy 5.1, the SSBTOC is exempt from the City’s general City residency requirement for Council advisory committee members, only to the extent necessary to allow the non-City-resident membership authorized in Section 1.

8.3 RESOLUTION NO. NS-XX,XXX
PASSED AND ADOPTED this 8th day of September, 2026 by the following vote:

AYES:

NOES:

ABSENT:

DISQUALIFIED:

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

8.4 BYLAWS
of the
Sugar-Sweetened Beverage Tax
Oversight Committee
City of Santa Cruz, California
Under authority of applicable statutes of the State of California, and the City Charter of the City of Santa Cruz, California, for the purpose of establishing rules and regulations governing the organization and procedures of the Sugar-Sweetened Beverage Tax Oversight Committee of the City of Santa Cruz, CA
Approved by City Council
Date TBD

8.5 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Table of Contents
ARTICLE I – NAME AND/OR AUTHORITY.................................................................................................5 ARTICLE II – PURPOSE ..................................................................................................................................5 ARTICLE III – DUTIES AND RESPONSIBILITIES.......................................................................................5 ARTICLE IV – MEMBERSHIP ........................................................................................................................6 Section 1. Membership...................................................................................................................................6 Section 2. Qualifications ................................................................................................................................6 Section 3. Application for Membership..........................................................................................................6 Section 4. Method of Appointment ................................................................................................................6 Section 5. Good Standing and Reporting of Absences...................................................................................6 Section 6. Termination ...................................................................................................................................7 Section 7. Ex-Officio Membership “Optional” ..............................................................................................7 ARTICLE V – TERM OF OFFICE ...................................................................................................................7 Section 1. Term...............................................................................................................................................7 Section 2. Membership Year ..........................................................................................................................7 Section 3. Length of Term..............................................................................................................................7 Section 4. Dual Service ..................................................................................................................................7 ARTICLE VI – OFFICERS AND ELECTIONS...............................................................................................7 Section 1. Officers ..........................................................................................................................................7 Section 2. Election of Officers........................................................................................................................7 Section 3. Term of Office...............................................................................................................................8 Section 4. Nominations ..................................................................................................................................8 Section 5. Voting............................................................................................................................................8 Section 6. Vacancy of an Officer....................................................................................................................8 Section 7. Removal of Elected Officers .........................................................................................................8 Section 8. Duties of the Chair.........................................................................................................................8 Section 9. Duties of the Vice Chair ................................................................................................................9 Section 10. Duties of the Acting Chair...........................................................................................................9 ARTICLE VII – STAFF SUPPORT..................................................................................................................9 Section 1. Staff ...............................................................................................................................................9 Section 2. Staff Relationship to the Advisory Body.......................................................................................9 ARTICLE VIII – MEETINGS .........................................................................................................................10 Section 1. Time and Location of Meetings...................................................................................................10 Section 2. Cancellation.................................................................................................................................10 Section 3. Special Meetings..........................................................................................................................10

8.6 ARTICLE IX – CONDUCT OF MEETINGS..................................................................................................10 Section 1. Compliance with the Brown Act and Council Policies ...............................................................10 Section 2. General Conduct of Meetings......................................................................................................10 Section 3. How Items Are Placed on the Agenda.........................................................................................10 Section 4. Quorum........................................................................................................................................11 Section 5. Absence of a Quorum..................................................................................................................11 Section 6. Agenda.........................................................................................................................................11 Section 7. Order of Business ........................................................................................................................11 ARTICLE X – MOTIONS ...............................................................................................................................11 Section 1. Call for Motion ............................................................................................................................11 Section 2. Seconding a Motion.....................................................................................................................11 Section 3. Lack of a Second .........................................................................................................................11 Section 4. Discussion/Debate.......................................................................................................................11 Section 5. Time Limits on Discussion/Debate..............................................................................................11 Section 6. Amending a Motion.....................................................................................................................12 Section 7. Withdrawing a Motion.................................................................................................................12 Section 8. Motion to Table ...........................................................................................................................12 Section 9. Results of Voting.........................................................................................................................12 ARTICLE XI – VOTING.................................................................................................................................12 Section 1. Statements of Disqualification.....................................................................................................12 Section 2. Voice Vote...................................................................................................................................13 Section 3. Roll Call Vote..............................................................................................................................13 Section 4. Sealed Ballot Votes .....................................................................................................................13 Section 5. Adoption of..................................................................................................................................13 Section 6. Tie Votes .....................................................................................................................................13 ARTICLE XII – REPORTS .............................................................................................................................13 Section 1. Agenda Reports to Advisory Body..............................................................................................13 Section 2. Committee Reports......................................................................................................................14 ARTICLE XIII – RECORD KEEPING ...........................................................................................................14 Section 1. Maintenance of Records ..............................................................................................................14 Section 2. Action Agenda.............................................................................................................................14 Section 3. Minutes ........................................................................................................................................14 Section 4. Electronic Recording of Meetings...............................................................................................14 ARTICLE XIV – COMMITTEES...................................................................................................................15 Section 1. Ad Hoc Committees ....................................................................................................................15 Section 2. Standing Committees...................................................................................................................15 Section 3. Staff Support to Committees .......................................................................................................15 Section 4. Appointments ..............................................................................................................................15

8.7 Section 5. Committee Meetings....................................................................................................................15 ARTICLE XV – AMENDMENTS..................................................................................................................16 ARTICLE XVI – ADOPTION OF BYLAWS ................................................................................................16

8.8 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 5 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws ARTICLE I – NAME AND/OR AUTHORITY
The Name of this organization shall be the Sugar-Sweetened Beverage Tax Oversight Committee of the City of Santa Cruz, California; hereinafter referred to as the SSBTOC, Committee or the Advisory Body. The Committee is established pursuant to Santa Cruz Municipal Code (“SCMC”) Chapter 3.38, which codifies the Sugar-Sweetened Beverage Distribution Tax (“SSB tax”). These Bylaws supplement, and are intended to be consistent with, City Council policies and the City’s Advisory Body Handbook. Where conflicts arise, the SCMC, City Council policies, and Advisory Body Handbook shall control.

ARTICLE II – PURPOSE
Santa Cruz Municipal Code Chapter 3.38 imposes a general excise tax of two cents ($0.02) per fluid ounce on the distribution of Sugar-Sweetened Beverage Products and established the Sugar-Sweetened Beverage Tax Oversight Committee. The Sugar-Sweetened Beverage Tax Oversight Committee was established to make recommendations on the use of future revenues related to Measure Z (Sugar-Sweetened Beverage Tax) monies.

These funds are unrestricted general revenue and are expected to lead to decreased consumption of sugary beverages in the City of Santa Cruz by funding programs, projects, and initiatives that promote and enhance community health and wellness and sustain vital City services.

The Committee is an advisory body established to act as the Community Oversight Panel referenced in SCMC section 3.38.015. The Committee’s role is limited to review, evaluation, and recommendations to the City Council as described in these Bylaws and applicable law. The Committee acknowledges that the tax revenues are used for “community health and wellness and general revenue purposes consistent with SCMC Chapter 3.38,” and the Committee’s work shall be carried out consistent with that framework.

ARTICLE III – DUTIES AND RESPONSIBILITIES
Consistent with SCMC section 3.38.015 and City Council direction, the Sugar-Sweetened Beverage Tax Oversight Committee shall have the ability, as vested by the City Council, and be required to:
 Review information provided by City staff regarding the revenues and expenditures of the SSB tax;
 Act in an advisory capacity to the City Council in all matters pertaining to the SSB tax;  Prepare an annual report and recommendations to the City Council;  Receive complaints pertaining to the SSB tax;
 Review and make recommendations to the City Council pertaining to how SSB tax revenues are spent;
 Review, monitor, track data, and make long-range recommendations concerning SSB tax revenue expenditures;
 Receive public comments, questions, and concerns related to the SSB tax and transmit such

8.9 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 6 input to the City Council, as appropriate; and
 Perform other duties from time to time as may be prescribed by the City Council.

ARTICLE IV – MEMBERSHIP
Section 1. Membership
The Sugar-Sweetened Beverage Tax Oversight Committee shall consist of seven (7) Committee members, hereinafter referred to as members.

Membership, term of office, and procedures for removal of members and the filling of vacancies shall be as established by ordinance, resolution, or other action of the City Council.

Section 2. Qualifications
Committee members shall be residents of the City of Santa Cruz with the exception of a maximum of three (3) members who may be non-residents of the City provided that: (1) the nonresident committee members have experience in youth programs or early childhood development, and (2) the Council approves, via resolution, of non-residents serving on the Committee, consistent with Council Policy 5.1.

Section 3. Application for Membership
Prospective members for at-large seats shall file an application in the office of the City Clerk.

Members serving under any designated seat shall be confirmed by motion of the City Council of the City of Santa Cruz prior to commencing their term of service.

Section 4. Method of Appointment
A total of five (5) Committee members shall be recommended by the City Manager’s Office and ratified by the City Council, and shall, to the greatest extent possible, be comprised of community members representing categories that include: healthcare, dental, and/or wellness professional(s); representative(s) from the education industry; and representative(s) from youth organizations(s). In addition, the City’s Parks and Recreation Commission shall select one (1) Committee member, and the City Council shall select one (1) Councilmember to be a part of the Committee.

Section 5. Good Standing and Reporting of Absences
Councilmembers shall receive annual attendance reports prepared in the City Clerk's Department.

Absences will be identified as "with notification" or "without notification." An absence is considered as "with notification" if the member notifies the chairperson or the staff prior to the meeting. If there has been no prior notification, the absence is considered "without notification." It is important to notify staff of any absences for the purpose of determining a quorum. Advisory body members are expected to attend meetings regularly.

Each member of the Committee is allowed one absence per calendar year, except for meetings missed while conducting the Sugar-Sweetened Beverage Oversight Tax Committee business.

It is the responsibility of staff of an advisory body to bring serious attendance issues to the attention of the Mayor or City Clerk prior to reaching the limit, if possible. If either through study of the annual attendance report or through other channels, the Mayor learns that a member has more than

8.10 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 7 the allowable number of absences, the Mayor may notify the member or chairperson, that action may be initiated by Council to remove the member from the advisory body. The Mayor may choose to postpone or withhold notification to Council in unusual circumstances: for example, if the member is actively performing work for the advisory body outside of the regular meetings or is involved in subcommittee work.

Section 6. Termination
Consistent with Council Policy 5.1, the Council has reserved the right to remove any member of board, commission or committee at any time.

Section 7. Ex-Officio Membership “Optional”
The Sugar-Sweetened Beverage Tax Oversight Committee may find that, because of the complexity of its work, it is desirable to add member(s) at-large to the Advisory Body to serve as non-voting ex-officio members to lend other opinions or expertise to the work of the Advisory Body. The City Council will authorize the Chair of the Advisory Body to nominate member(s)-atlarge for Council approval to be non-voting ex-officio members for a determined period of time.

ARTICLE V – TERM OF OFFICE
Section 1. Term
Term of office for each member shall be four (4) years. A member may be appointed to complete an unexpired term. A member may continue to serve until their successor has been appointed.

Section 2. Membership Year
A membership year shall be from February 1st to January 31st of each year.

Section 3. Length of Term
A member shall not serve more than two (2) consecutive full four-year (4) terms. Upon completion of a member's second consecutive term, that member will be ineligible for reappointment for a period of two years. Members who have six years or less at the time their term expires are eligible for reappointment.

Section 4. Dual Service
Except as required by the Santa Cruz Municipal Code (i.e., the member from the City’s Parks & Recreation Committee) or as permitted under Council Policy 5.1 (including representative appointments and service on a task force/committee with a sunset clause of less than 13 months), members shall not serve simultaneously on more than one City advisory body.

ARTICLE VI – OFFICERS AND ELECTIONS
Section 1. Officers
Officers of the Advisory Body shall consist of a Chair and Vice Chair.

Section 2. Election of Officers
As soon as it is practicable following the first day of January of every year, there shall be elected

8.11 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 8 from among the membership of the Advisory Body a Chair and Vice Chair.

Section 3. Term of Office
The term of office for the Chair and Vice Chair is one calendar year. Officers may not serve in the same position for more than two consecutive years.

Section 4. Nominations
The Chair will open the floor to nominations. Any member may nominate a candidate from the membership for the position of Chair or Vice Chair; nominations need not be seconded.

A member may withdraw their name if placed in nomination, announcing that, if elected, s/he would not be able to serve; but s/he shall not withdraw in favor of another member. Once the nominations are complete, the Chair will ask for a motion to close the nominations; a second of, and vote on, the motion is required.

The Chair then declares that it has been moved and seconded that the nominations be closed, and the members proceed to the election.

Section 5. Voting
Voting may be by voice vote or by roll call vote.

The candidate who receives a majority of the votes is then declared to be legally elected to fill the office of Chair and will immediately chair the remainder of the meeting.

The same procedure is followed for the election of Vice Chair.

Section 6. Vacancy of an Officer
Should a vacancy occur, for any reason, in the office of Chair or Vice Chair prior to the next annual election, a special election shall be held to fill the vacant office from among the membership. That member shall serve until a new appointment has been made.

Section 7. Removal of Elected Officers
The Chair or Vice Chair may be removed by a majority vote of the full Advisory Body at a regularly scheduled meeting of the Advisory Body, when all appointed members are present, or at a special meeting convened for that purpose at which a quorum is present. Any officer removed ceases to hold the office once the vote has been tallied and announced. If the Chair is removed, the Vice Chair shall become the new Chair. An election for the Vice Chair shall then be agendized for the next meeting.

Section 8. Duties of the Chair
The Chair shall preside at all regular meetings and may call special meetings. The Chair shall decide upon all points of order and procedure during the meeting; their decision shall be final unless overruled by a vote of the Advisory Body, in compliance with Article IX, Section 2, “General Conduct of Meetings.” The Chair may not make motions but may second motions on the floor. The Chair acts as primary contact for staff and shall represent the Advisory Body before City Council whenever the Advisory Body or Council considers it necessary. The Chair and staff shall jointly set the meeting agenda.

8.12 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 9 Section 9. Duties of the Vice Chair
The Vice Chair shall assume all duties of the Chair in the absence or disability of the Chair.

Section 10. Duties of the Acting Chair
In case of absence of both the Chair and the Vice Chair from any meeting, an Acting Chair shall be elected from among the members present, to serve only during the absence of the Chair and Vice Chair.

ARTICLE VII – STAFF SUPPORT
Section 1. Staff
Staff support and assistance is provided, but advisory bodies do not have supervisory authority over City employees. While they may work closely with advisory bodies, staff members remain responsible to their immediate supervisors and ultimately to the City Manager and Council.

The City Manager, or their designee, shall act as Liaison on behalf of the City and shall designate a Committee Clerk to assist and support the Advisory Body. Staff shall attend all regular and special Advisory Body meetings.

The Liaison shall:
 work closely with the Chair between meetings to identify and schedule agenda topics;  be responsible for coordination of reports, studies, and recommendations as are necessary to assist the Advisory Body in the conduct of its business;  enlist the assistance of other departments as required;  make recommendations, prepare reports and proposals to the Advisory Body;  represent the Advisory Body at meetings, presentations, and other public functions as requested; and
 oversee administrative tasks.

The Committee Clerk shall:
 ensure compliance with all Brown Act postings and noticing requirements;  record minutes of the meetings in accordance with the guidelines established in the “Preparation of Minutes” section of the City Councilmembers' Handbook;  maintain proper records and files pertaining to Advisory Body business;  receive and record all exhibits, petitions, documents, or other materials presented to the Advisory Body in support of, or in opposition to, any question before the Advisory Body; sign all notices prepared in connection with Advisory Body business;  attest to all records of actions, transmittals, and referrals as may be necessary or required by law.

Section 2. Staff Relationship to the Advisory Body
Given limited staff resources, the Chair or individual members shall not make separate requests of staff without approval of the Advisory Body. If a member has a research or report request, it shall be brought to the Advisory Body for discussion, consideration, and recommendation prior to making the request of staff. If not approved by the Advisory Body, the individual member shall be responsible for their own research or report.

The Liaison and the Chair shall jointly set the meeting agenda. The Committee Clerk shall schedule

8.13 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 10 appeals and public hearings according to legal requirements.

ARTICLE VIII – MEETINGS
Section 1. Time and Location of Meetings
The Advisory Body will hold its regular meeting on the Fourth Thursday of January, March, August and October which shall begin at 6:00 PM in the Council Chambers and will adjourn no later than 8:00 PM, unless the Chair, with concurrence of the Advisory Body, extends the time of adjournment.

If the scheduled date for a regular meeting falls on a holiday, such meeting shall be rescheduled in accordance with Council policy.

Section 2. Cancellation
If a majority of the membership deems it necessary or desirable, a scheduled regular meeting may be cancelled or rescheduled upon giving notice, unless a public hearing has previously been noticed.

Section 3. Special Meetings
The Chair of the Advisory Body, staff, or a majority of the membership of the Advisory Body may call a special meeting. Notice of such meeting shall state the purpose or the business to be transacted during such special meeting. No other business may be transacted at such special meeting other than as stated in the notice. General Oral Communications are not required at special meetings as long as a statement appears on the agenda identifying that there will be no Oral Communications, but that members of the public will have the opportunity to address the Advisory Body on item(s) listed on the agenda.

ARTICLE IX – CONDUCT OF MEETINGS
Section 1. Compliance with the Brown Act and Council Policies All regular, special, and adjourned meetings of the Advisory Body shall be open meetings to which the public and the press shall be admitted in compliance with the Brown Act. Meetings will be held at City facilities which are accessible to persons with disabilities.

Section 2. General Conduct of Meetings
Points of order and conduct, including those not addressed by these Bylaws, shall be settled by the Chair, unless overruled by a majority vote of the Advisory Body. Points of order and conduct shall comply with the Brown Act, these Bylaws, and the City Councilmembers’ Handbook. The Chair will consult with staff as necessary. Unresolved issues shall be referred to the City Attorney and continued to a future meeting.

Section 3. How Items Are Placed on the Agenda
A request to have an item placed for consideration on a future agenda may be made by staff, any Advisory Body member or a member of the public. The Chair and staff will consider the validity (within the approved scope of work) and urgency of the request and determine when and if that item should be placed on an Advisory Body agenda. Issues can be referred to an advisory body by the City Council and may have time-sensitive deadlines. The items must comply with the procedures in Article XII, Section 1, “Agenda Reports to Advisory Body.”

8.14 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 11 Section 4. Quorum
A quorum of the Sugar-Sweetened Beverage Tax Oversight Committee shall consist of four (4) whether or not there are vacancies on the Advisory Body.

Section 5. Absence of a Quorum
In the absence of a quorum at any meeting, such meeting shall be adjourned to the next regular meeting date by the Chair, Vice Chair, or staff.

A meeting may be declared adjourned for lack of a quorum after a 15-minute period has elapsed from the scheduled time of the start of the meeting. A meeting may also be declared adjourned in advance, if absence notifications received by staff provided for lack of a quorum. Adjournment may be declared by any member or staff.

Section 6. Agenda
The Chair and staff shall jointly set the meeting agenda and its format shall conform to the template set by Council Policy.

Section 7. Order of Business
The Chair or a majority vote of the Advisory Body may change the order of business.

ARTICLE X – MOTIONS
Section 1. Call for Motion
Upon conclusion of preliminary discussion, any member other than the Chair may place a motion on the floor. The motion shall contain the proposed action.

Section 2. Seconding a Motion
The Chair shall receive all motions and shall call for a second to each motion. The Chair may second a motion.

Section 3. Lack of a Second
If, after a reasonable time, no second has been made, the motion shall be declared dead for lack of a second, and the Chair shall state this. This shall not be considered an action of the Advisory Body and shall not be included in the minutes.

Section 4. Discussion/Debate
After a motion has been made and seconded, the Chair shall call for a discussion of the question.

All discussion shall be limited to the motion on the floor. At the close of the discussion, the Chair shall put the matter to a vote.

Section 5. Time Limits on Discussion/Debate
The Chair may, at their discretion, limit debate of any motion; except that each member shall have the opportunity to speak.

8.15 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 12 Section 6. Amending a Motion
A motion to amend may be made by any member to revise a motion on the floor; but it cannot be a freestanding motion on its own, nor can it substitute for a main motion. The motion to amend must be voted upon, unless the maker and the second accept it as a friendly amendment, and, if it passes, it then becomes part of the main motion.

Section 7. Withdrawing a Motion
Any motion may be withdrawn by the maker and the second and shall not be included in the meeting minutes.

Section 8. Motion to Table
A motion to table may be made to suspend consideration of an item that appears on a meeting agenda for reasons of urgency or to end an unproductive discussion. A motion to table is not in order when another member has the floor. A motion to table requires a second, is not debatable, is not amendable, requires a majority vote for passage, and, if adopted, cannot be reconsidered at the meeting at which it is adopted. Members will refrain from using a motion to table as a means of capriciously limiting debate among members, to suppress a minority of the Advisory Body, or to avoid public input on an agenda item under consideration by the Advisory Body.

Section 9. Results of Voting
The Chair shall state the results of each vote, e.g., “The motion passes by a vote of five to two.” ARTICLE XI – VOTING
Section 1. Statements of Disqualification
Section 607 of the City Charter states that “...All members present at any meeting must vote unless disqualified, in which case the disqualification shall be publicly declared and a record thereof made.” No member may abstain from voting on any item, except on the approval of the minutes, when that member was absent.

The City of Santa Cruz has adopted a Conflict-of-Interest Code, and Section 8 of that Code states that “no person shall make or participate in a governmental decision which s/he knows or has reason to know will have a reasonably foreseeable material financial effect distinguishable from its effect on the public generally.”
Any member who has a disqualifying interest on a particular matter shall do all of the following:
1) Publicly identify the financial interest that gives rise to the conflict of interest or potential conflict of interest in detail sufficient to be understood by the public, except that disclosure of the exact street address of a residence is not required; 2) Recuse themselves from discussing and voting on the matter, or otherwise acting in violation of government code Section 87100;
3) Leave the room until after the discussion, vote, and any other disposition of the matter is concluded unless the matter has been placed on the portion of the agenda reserved for uncontested matters;

8.16 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 13 4) Notwithstanding paragraph 3, a public official may speak on the issue during the time that the general public speaks on the issue.

Any question regarding conflicts of interest shall be referred to the City Attorney.

Section 2. Voice Vote
All questions shall be resolved by voice vote unless a roll call vote is requested, per Section 3 below. Each member shall vote “Aye” or “No” and the vote shall be so entered into the minutes, noting the vote of each member. A member may state the reasons for their vote, which reasons shall also be entered into the minutes of the meeting. All members including the Chair shall vote on all matters, except where they have a disqualifying interest.

Section 3. Roll Call Vote
Any member may request a roll call vote, either before or immediately after a voice vote. A roll call vote shall be taken without further discussion. The Advisory Body staff shall call the roll and each member shall state their vote for the record.

Section 4. Sealed Ballot Votes
No Advisory Body shall take a sealed ballot vote in open session.

Section 5. Adoption of
Adoption of a motion shall be made by a simple majority of the members present, except as otherwise provided. The Chair shall restate the vote for the record, e.g., “The motion is approved by a vote of five to two.”
Section 6. Tie Votes
Tie votes will be resolved as follows:

Statement of Disqualification: A tie vote resulting from a Statement of Disqualification of one or more members, with no members absent and no vacancies on the Advisory Body, shall constitute a defeat of the motion.

Absence: A tie vote during the absence of one or more members, or when there is a vacancy on the Advisory Body, shall cause the item to be automatically continued to the next meeting; except that, as to matters on which action must be taken on a date prior to the next meeting, a tie vote shall constitute a denial of the requested action.

Successive Tie Vote: A tie vote at the next meeting on a matter that has been continued as a result of a tie vote shall constitute a denial of the appeal or defeat of the motion.

ARTICLE XII – REPORTS
Section 1. Agenda Reports to Advisory Body
All agenda items require a written report. Written reports serve as the analysis, detail, history, and justification for each agenda item. Reports shall include recommendation(s) and background. If a report is initiated by an Advisory Body member, a draft of that report shall be provided to staff for formatting at least 10 business days prior to the meeting. Staff shall then format reports to be

8.17 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 14 consistent with content, style, and formatting of City Council agenda reports. Items initiated by a committee shall be processed in the same manner. Draft reports not submitted in a timely manner shall be placed on a future agenda.

Section 2. Committee Reports
Committee reports may be verbal or written and may be accompanied by written documentation.

Section 3. Preparation of Advisory Body-Generated City Council Agenda Reports All resolutions and recommendations adopted by the Advisory Body and addressed to the City Council shall be delivered to the Mayor as soon as possible. If the action requests City Council action, the item shall be placed on a future City Council agenda. Agenda reports to the City Council from the Advisory Body shall be written reports consistent with content, style, and formatting of City Council agenda reports.

Additionally, the agenda report shall include a section called analysis, which includes the pros, cons, and foreseeable consequences of the recommendation(s). In the event that staff and the Advisory Body disagree, an analysis of both recommendations shall be included.

ARTICLE XIII – RECORD KEEPING
Section 1. Maintenance of Records
All records shall be maintained according to the City of Santa Cruz Records Retention Schedule.

Section 2. Action Agenda
Action agendas are required for standing Advisory Bodies. An action agenda is an unofficial record of the meeting and shall consist of attendance; meeting start and adjourn times, and a brief description of actions taken. The action agenda shall be made available online within four working days of the meeting.

Section 3. Minutes
Action-only minutes will be produced for all Advisory Body meetings in the same format as that used for City Council meetings as referenced in Council Policy 5.14. Minutes, when approved by the advisory body, are the official record of the meeting and shall consist of attendance, meeting start and adjourn times, a brief description of actions taken, the motion maker and seconder of the motion; and an actual tally of the votes for all actions taken. Advisory Body members who want a particular comment included in the minutes must state “for the record” before making such comment. Minutes shall be reviewed, corrected as appropriate, and or amended and approved by the Advisory Body at a subsequent meeting. Approved minutes are a permanent document and shall be maintained in hard copy in perpetuity in addition to in electronic version.

Subcommittee reports presented orally in a meeting shall be summarized in the minutes.

Section 4. Electronic Recording of Meetings
Proceedings for all standing Brown-Act Advisory Body meetings shall be digitally recorded.

Recordings shall be made available on the City’s website for at least one year pursuant to Council Policy 5.14 and the City of Santa Cruz Records Retention Schedule.

8.18 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 15 As appropriate and/or when requested by the Advisory Body or City Council, a meeting of the Advisory Body may be video recorded or televised.

Members of the public have the right to make recordings of a meeting without disrupting the proceedings under any circumstances.

ARTICLE XIV – COMMITTEES
Section 1. Ad Hoc Committees
Ad hoc committees are established by an Advisory Body to gather information or deliberate on issues deemed necessary to carrying out the functions and purpose of the Advisory Body. Ad hoc committees generally serve only a limited or single purpose, are not perpetual, and are dissolved once their specific task is completed. An ad hoc committee shall be less than six months in term and shall have fewer members than a simple majority of the membership of the appointing Advisory Body. Ad hoc committees shall bring back information to the Advisory Body in either oral or written form.

Following ad hoc committee input, the Advisory Body shall then discuss, deliberate, and make recommendations on the designated issue, thereby providing the public with the opportunity to participate in the decision-making process. This shall take place in the presence of a quorum of the Advisory Body at a properly noticed public meeting.

Ad hoc committees shall not be subject to the Brown Act. City staff shall not be required to be present at ad hoc committee meetings. All ad hoc committees shall provide a final report to the Advisory Body in lieu of minutes.

Section 2. Standing Committees
Standing committees are bodies established to gather information or deliberate on issues deemed necessary to carrying out the functions and purpose of the Advisory Body. Standing committees are ongoing in nature and are created to deal with issues and make decisions on behalf of the Advisory Body. The public has a right to participate in this process. Standing committees are subject to the Brown Act and staff will provide only such support as to ensure such compliance.

Section 3. Staff Support to Committees
City staff shall normally not be required to attend or provide support for standing or ad hoc committee meetings, unless directed by the department head. All ad hoc committees shall provide a final report to the Advisory Body in lieu of minutes. All standing committees shall provide reports, no less than quarterly, to the Advisory Body.

Section 4. Appointments
The Chair of the Advisory Body may designate or solicit participation for standing and ad hoc committees, unless overruled by a majority vote of the Advisory Body.

Section 5. Committee Meetings
All standing or ad hoc committee meetings shall be held upon call of the Committee Chair.

8.19 Sugar-Sweetened Beverage Tax Oversight Committee Bylaws Page 16 ARTICLE XV – AMENDMENTS
A majority of the full membership of the Advisory Body may amend these bylaws, subject to the approval of the City Council.

ARTICLE XVI – ADOPTION OF BYLAWS
Immediately upon favorable vote of not less than four (4) of the full membership of the SugarSweetened Beverage Tax Oversight Committee of the City of Santa Cruz and approval of the City Council, these Bylaws shall be in full force and effect. Any and all previously adopted bylaws are hereby superseded.

These Bylaws shall not be considered or construed as superseding any ordinance or directive of the City Council of the City of Santa Cruz, nor shall they preclude the preparation and adoption of further procedural manuals and policies by which the Advisory Body may direct its activities.

If any provision of these Bylaws conflicts with the City Charter, the City’s Municipal Code, City Council resolutions or policies, or applicable law, those higher authorities shall control, and these Bylaws shall be interpreted to be consistent with those authorities.

Attest: __________
Michelle Templeton, Secretary to the Committee Date

8.20 City Council

AGENDA REPORT
DATE: 08/18/2026
AGENDA OF: 09/08/2026
DEPARTMENT: Economic Development
SUBJECT: Third Amendment to the Lease Agreement with Laughing Phoenix, Inc. dba the Great Rabbit, Atlas Services Corporation dba Atlas Geotechnical and Clever Collective for City-Owned Space at 915 Cedar Street (ED) LOCATION: District 4
RECOMMENDATION: Motion to:
1) Approve and authorize the City Manager to execute a Third Amendment to the Lease Agreement with Laughing Phoenix, Inc. dba the Great Rabbit, Atlas Services Corporation dba Atlas Geotechnical and Clever Collective, in a form approved by the City Attorney, for the commercial space at 915 Cedar Street;
2) Authorize the City Manager to execute a Memorandum of Lease, in a form approved by the City Attorney, to be recorded in the Santa Cruz County Recorder’s Office; and 3) Adopt a finding of categorical exemption pursuant to the following CEQA guidelines: 14 CCR 15301 (Existing Facilities) and 14 CCR 15061(b)(3) (Common Sense Exemption).

BACKGROUND: On or about September 15, 2023, the City entered into a one (1) year lease agreement with Laughing Phoenix, Inc. dba the Great Rabbit, Atlas Services Corporation dba Atlas Geotechnical and Clever Collective (Tenant) for the operation of offices and related storage at 915 Cedar Street, Santa Cruz, CA 95060. Since the original Lease Agreement expiration in 2024, staff executed annual administrative amendments to extend the term of the lease agreement on a year-to-year basis and revise the Tenant’s assigned parking space, all in forms approved by the City Attorney. The Tenant is in good standing and desires to extend the term for one additional year.

DISCUSSION: Staff recommends approving the Third Amendment to extend the term to September 15, 2027, and adjusting the rent, as described in the original lease, by the Consumer Price Index (CPI). With the most recent published CPI, the monthly rent will increase from $2,090.90 to $2,170.35.

9.1 CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The proposed City Council action does not meet the definition of “project” under CEQA, as codified in Public Resources Code Section 21065.

To the extent any of the proposed City Council actions are deemed a project, they are 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 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: No

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: Lease revenue from the commercial space is deposited into the General Fund (Fund 101). With the annual rent adjustment, the estimated rent revenue collected will be $26,044.20.

Prepared By:

Jennifer Shelton
Development Manager
Submitted By:

Bonnie Lipscomb
Deputy City Manager
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. THIRD AMENDMENT - 915 CEDAR.PDF

9.2 THIRD AMENDMENT TO LEASE AGREEMENT
This Third Amendment (“Third Amendment”) to the September 15, 2023 Lease Agreement (“Lease Agreement”) is entered into on _____________, by and between the City of Santa Cruz (“Landlord”) and The Laughing Phoenix, Inc. dba The Great Rabbit, Atlas Services Corporation dba Atlas Geotechnical, and Clever Collective, Inc. (“Tenant”) (each is referred to individually as a “Party” and collectively, as the “Parties”).

RECITALS
A. On or about September 15, 2023, Landlord and Tenant entered into a one (1) year Lease Agreement for the premises located at 915 Cedar Street, Santa Cruz, CA 95060 (“Premises”).

B. Said Lease Agreement allows the Landlord the option to extend the term of the Lease Agreement annually for up to four (4) additional one-year (1) terms and is subject to an adjustment of rent at the commencement of the second year of the term and each year thereafter including all extensions thereto.

C. On July 29, 2024, Landlord and Tenant entered into the First Amendment to the Lease Agreement to extend the term for an additional one (1) year term, through September 15, 2025, adjust the rent, and amend Section 11.08 “Tenant’s Failure to Maintain Insurance” (“First Amendment”).

D. On August 27, 2025, Landlord and Tenant entered into the Second Amendment to the Lease Agreement to extend the term for an additional one (1) year term, through September 15, 2026, adjust the rent, and modify the terms and conditions of the one parking space (“Second Amendment”).

E. Landlord and Tenant now wish to further amend the Lease Agreement to extend the term for an additional one (1) year term, through September 15, 2027, and adjust the rent, as set forth below.

IT IS MUTUALLY AGREED THAT THE LEASE AGREEMENT BETWEEN THE CITY OF SANA CRUZ AND THE LAUGHING PHOENIX, INC. DBA THE GREAT RABBIT, ATLAS SERVICES CORPORATION DBA ATLAS GEOTECHNICAL, AND CLEVER COLLECTIVE, INC., DATED SEPTEMBER 15, 2023, AS AMENDED BY THE FIRST AND SECOND AMENDMENT, IS HEREBY AMENDED AS FOLLOWS:

The Parties agree to incorporate the above Recitals and agree to the following:

1. Section 1.03 of the Lease Agreement is amended such that the termination date of the Lease Agreement is September 15, 2027, unless otherwise extended as provided in the Lease Agreement (Section 3.01).

2. Section 1.08 of the Lease Agreement is amended and replaced with the following adjusted rent:

Monthly Rate. $2,170.35 calculated as follows: 1,000 SF x $2.17035 = $2,170.35.

Payable on Commencement of Term.

3. Section 3.01 of the Lease Agreement is amended such that the Term of the Lease Agreement is hereby extended for an additional one (1) year, through September 15, 2027, and shall include up to one (1) additional one-year (1) option to extend the Lease Agreement, through September 15, 2028, under the terms described in Section 3.01 and subject to the City’s sole discretion.

9.3 2

4. The Parties agree to execute and record a short form Memorandum of the Lease in the form attached hereto as Attachment 1.

5. 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 Agreement will be joint and several.

6. Except as amended by this Third Amendment, all other applicable terms and conditions of the original Lease Agreement and all other prior amendments shall remain in full force and effect. The terms of this Third Amendment shall control if any conflict exists.

7. Each Party acknowledges that it has reviewed this Third Amendment 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 Third Amendment.

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

9. The Parties may execute this Third Amendment in two or more counterparts, which shall, in the aggregate, be deemed an original but all of which, together, shall constitute one and the same instrument. A scanned, electronic, facsimile or other copy of a Party’s signature shall be accepted and valid as an original.

10. The signatories to this Third Amendment warrant and represent that each is authorized to execute this Third Amendment and that their respective signatures serve to legally obligate their respective representatives, agents, successors and assigns to comply with the provisions of this Third Amendment.
[SIGNATURES ON FOLLOWING PAGE]

9.4 3
IN WITNESS WHEREOF, the Parties have executed this Third Amendment to the Lease Agreement as of the dates set forth below.

Dated: _________________________
Dated: _________________________
Dated: _________________________
Dated: _________________________
APPROVED AS TO FORM:
_______________________________
Claire Jackson, Office of the City Attorney
TENANT: The Laughing Phoenix Inc. dba The
Great Rabbit
______________________________________
By: Lisa Benson, President
______________________________________
By: Matthew D. Steele, Secretary
TENANT: Atlas Services Corporation dba Atlas
Geotechnical
______________________________________
By: Doug Schwarm, President and Secretary
TENANT: Clever Collective, Inc.
______________________________________
By: Margaret Rosas, President and Secretary
LANDLORD: City Of Santa Cruz
______________________________________
By: Matt Huffaker, City Manager
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. 08/07/2026

9.5 4
ATTACHMENT 1

RECORDING REQUESTED BY )

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

MEMORANDUM OF LEASE
This Memorandum of Lease ("Memorandum") is hereby entered into as of ____________, 2026, by and between the City of Santa Cruz, a California municipal corporation and charter city, ("Landlord"), and The Laughing Phoenix, Inc. dba The Great Rabbit, Atlas Services Corporation dba Atlas Geotechnical, and Clever Collective, Inc. (“Tenant”).

RECITALS
A. Landlord and Tenant have entered into that certain Lease Agreement (the "Lease Agreement") dated on or about September 15, 2023 for the premises located at 915 Cedar Street, Santa Cruz, CA 95060 (“Premises”). A copy of the Lease Agreement is available for public inspection at Landlord's office at 337 Locust Street, Santa Cruz, California. The Lease Agreement is for a term of one (1) year, terminating on September 15, 2024, with the option to extend the term of the Lease Agreement annually for up to four (4) additional one-year (1) terms.

B. On July 19, 2024, the Parties entered into the First Amendment to the Lease Agreement to extend the term for an additional one (1) year term, through September 15, 2025, adjust the rent, and amend insurance requirements of the Lease Agreement.

C. On August 27, 2025, the Parties entered into the Second Amendment to the Lease Agreement to extend the term for an additional one (1) year term, through September 15, 2026, adjust the rent, and modify the terms and conditions of the one parking space.

D. On ____________, 2026, the Parties entered into a Third Amendment to the Lease Agreement to extend the term for an additional one (1) year term, through September 15, 2027, adjust the rent, and require a memorandum of lease.

E. Pursuant to Government Code section 37393, this Memorandum shall be executed and recorded in the Official Records of Santa Cruz County, California.

NOW, THEREFORE, the Parties hereto certify as follows:

Landlord, pursuant to the Lease Agreement and amendments thereto, hereby leases the Premises to the Tenant upon the terms and conditions provided for therein. The Lease Agreement imposes certain obligations, requirements on the Tenant, and limitations on the use of the Premises. This Memorandum is not a complete summary of the Lease Agreement, and shall not be used to interpret the provisions of the Lease Agreement. [Signatures to appear on the following page.]

9.6 5
IN WITNESS WHEREOF, the parties hereto have caused this Memorandum to be executed by their lawfully authorized representatives.

Dated: _________________________
Dated: _________________________
Dated: _________________________
Dated: _________________________
APPROVED AS TO FORM:
_______________________________
Claire Jackson, Office of the City Attorney
TENANT: The Laughing Phoenix Inc. dba The
Great Rabbit
______________________________________
By: Lisa Benson, President
______________________________________
By: Matthew D. Steele, Secretary
TENANT: Atlas Services Corporation dba Atlas
Geotechnical
______________________________________
By: Doug Schwarm, President and Secretary
TENANT: Clever Collective, Inc.
______________________________________
By: Margaret Rosas, President and Secretary
LANDLORD: City Of Santa Cruz, a municipal
corporation and charter city
______________________________________
By: Matt Huffaker, City Manager
08/07/2026

9.7 6

CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC
State of California )
County of _____________)
On ______________________ before me, , Notary
Public, personally appeared __________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

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

9.8 7

CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC
State of California )
County of _____________)
On ______________________ before me, , Notary
Public, personally appeared __________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

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

9.9 8

CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC
State of California )
County of _____________)
On ______________________ before me, , Notary
Public, personally appeared __________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

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

9.10 9

CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC
State of California )
County of _____________)
On ______________________ before me, , Notary
Public, personally appeared __________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

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

9.11 10

CERTIFICATE OF ACKNOWLEDGMENT OF NOTARY PUBLIC
State of California )
County of _____________)
On ______________________ before me, , Notary
Public, personally appeared __________________________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

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

WITNESS my hand and official seal.

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

9.12 City Council

AGENDA REPORT
DATE: 08/20/2026
AGENDA OF: 09/08/2026
DEPARTMENT: Human Resources
SUBJECT: Authorization to Exceed $100,000 for Legal Services with Burke, Williams & Sorensen, LLP (HR)
LOCATION: Citywide
RECOMMENDATION: Motion authorizing the City Manager, or their designee, to execute agreements and approve payments exceeding $100,000 for legal services for Fiscal Year 2027.

BACKGROUND: The City of Santa Cruz contracts with specialized labor counsel to provide legal support and negotiation assistance during labor relations activities. These services are essential to ensuring that the City maintains compliance with state and federal labor laws, negotiates in good faith as required under the Meyers-Milias-Brown Act (MMBA), and achieves labor agreements that are fiscally responsible and operationally sound.

As required under Santa Cruz Municipal Code Section 3.08, expenditures exceeding $100,000 in a fiscal year must be approved by City Council.

DISCUSSION: The City has upcoming labor negotiations that will fall within FY 2027; the City’s bargaining unit contract with the Police Management Association expires on March 12, 2027. These negotiations will require considerable staff time and legal support to ensure that contract terms reflect both the City’s operational needs and its commitment to equity, fiscal sustainability, and workforce wellbeing.

Labor attorney services include:
 Strategic planning and consultation
 Proposal development and review
 Direct negotiation and mediation support
 Interpretation of complex labor laws and legal trends  Representation in any potential disputes, grievances, or impasse processes Given the scope and volume of labor negotiations, mediation support, and need for labor attorney services, the Human Resources Department anticipates to exceed the $100,000 expenditure limit and estimates in FY 2027 to spend $175,000.

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

HEALTH IN ALL POLICIES (HiAP): The City of Santa Cruz has adopted a Health in All Policies framework that calls for policy decisions to be made with an understanding of how they impact community and employee health outcomes. Labor agreements are a critical component of this approach. Thoughtful and collaborative negotiations can:
 Improve workforce stability and morale, reducing turnover and absenteeism  Promote safe and healthy working conditions
 Advance equity by addressing compensation gaps and career access for underserved groups
 Ensure continued delivery of essential services that contribute to public health, such as emergency response, sanitation, and infrastructure maintenance Retaining legal expertise to support these goals directly aligns with the City’s commitment to centering equity, sustainability, and public health in all decision-making.

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: Funds are available in the department operating budget in FY 2027. As required under Santa Cruz Municipal Code Section 3.08, expenditures exceeding $100,000 in a fiscal year must be approved by City Council.

Prepared and Submitted By:

Sara De Leon
HR Director
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. BURKE, WILLIAMS, AND SORENSEN PUBLIC SERVICE AGREEMENT.PDF

10.2 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

Professional Services Agreement With

BURKE, WILLIAMS & SORENSEN, LLP
For LABOR AND EMPLOYMENT MATTERS RELATED TO CALIFORNIA LABOR LAW THIS AGREEMENT for professional services is made by and between the City of Santa Cruz (“City”) and Burke, Williams & Sorensen, LLP (“Consultant”) (each is referred to individually as a “Party” and collectively, as the “Parties”) as of January 1, 2024 (the “Effective Date”).

NOW, THEREFORE, in consideration of each other’s mutual promises, the Parties hereto agree as follows:

SECTION 1: SCOPE OF WORK
Consultant will furnish services as defined and described in the Scope of Work, attached hereto as Exhibit A and incorporated herein.

SECTION 2: RESPONSIBILITIES OF CONSULTANT
All work performed by Consultant, or under Consultant’s direction, shall be rendered in accordance with the generally accepted practices, and to the standards of, Consultant's profession. Consultant represents and agrees that Consultant: (i) is fully experienced and properly qualified to perform the work and services provided for herein, (ii) has the financial capability required for the performance of the work and services, and (iii) is properly equipped and organized to perform the work and services in a competent, timely, and proper manner, in accordance with the requirements of this Agreement.

Consultant shall not undertake any work beyond the Scope of Work set forth in Exhibit A unless such additional work is approved in advance and in writing by City. The cost of such additional work shall be reimbursed to Consultant by City on the same basis as provided for in Section 4.

If, in performing the work, it is necessary to conduct field operations, security and safety of the job site will be the Consultant's responsibility excluding, the security and safety of any facility of City within the job site which is not under the Consultant's control.

Consultant shall meet with Sara De Leon, Director of the Human Resources Department, hereinafter called "Director", or other designated and authorized City personnel, or third parties as necessary, on all matters connected with carrying out of Consultant’s services described in Exhibit A. Such meetings shall be held at the request of either Party. Review and City approval of completed work shall be obtained monthly, or at other intervals as may be mutually agreed upon during the course of this Agreement. Review, approval, or acceptance of Consultant’s work by City or others shall not relieve Consultant from responsibility for errors and omissions in Consultant’s work.

SECTION 3: RESPONSIBILITIES OF THE CITY
City shall make available to Consultant all necessary data and information in the City's possession and shall actively assist Consultant in obtaining such information from other agencies and individuals as needed. Consultant is entitled to reasonably rely upon the accuracy and completeness of such data and information, and Consultant shall provide City prompt written notice of any known defects in such data and information.

SECTION 4: FEES AND PAYMENT
For services actually performed, the City will compensate Consultant at the rates set forth in the Fee Schedule detailed in Exhibit B and in accordance with the terms set forth therein. Payment for Consultant's services in carrying out the entire Scope of Work shall be made within the budget limit, or limits shown, upon Exhibit B. Such payment shall be Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.3 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

considered the full compensation for all personnel, materials, supplies, and equipment used by Consultant in the Scope of Work.

Consultant agrees that the payments to Consultant specified in this Section 4 will constitute full and complete compensation for all obligations assumed by Consultant under this Agreement. Where conflicts regarding compensation may occur, the provisions of this section apply.

Monthly invoices shall detail the time worked by each employee on each task and a description of each tasks and include any reimbursable costs for which billing is made. Unless otherwise specified in the fee schedule, payments shall be made monthly by the City within 30 days based on itemized invoices from the Consultant which list the actual costs and reimbursable expenses.

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

SECTION 5: REIMBURSEMENT FOR EXPENSES

1. Travel Expenses. The City shall not be responsible for any travel, meal, or lodging reimbursements to Consultant and/or Consultant’s employees.

2. Other Expenses. City will not reimburse Consultant for any ordinary overhead or other expenses without prior authorization from the City.

SECTION 6: CHANGES IN WORK
City may negotiate changes in the Scope of Work. No changes in the Scope of Work shall be made without the written approval of City and Consultant. Any change requiring compensation in excess of the sum specified in Exhibit B shall be approved in advance in writing by the City. Only City’s authorized representative(s) is authorized to approve changes to this Agreement on behalf of City.

SECTION 7: TERM AND SCHEDULE
The term of this Agreement shall be on the effective date of this Agreement and terminating on June 30, 2026 At the option of the City, this Agreement may be renewed annually under the same contractual terms and conditions by letter agreement.

SECTION 8: TERMINATION
The Parties may terminate the Agreement for any reason by providing written notice to Consultant not less than 10 calendar days prior to an effective termination date. Consultant may withdraw at any time as permitted under the Rules of Professional Conduct of the State Bar of California.

Upon notice of termination by either the City or Consultant, the Consultant will immediately act to not incur any additional obligations, costs or expenses, except as may be reasonably necessary to terminate its activities. The City’s only obligation to the Consultant will be just and equitable payment for services authorized by, and received to the satisfaction of, the City up to and including the effective date of termination less any amounts withheld. All finished or unfinished work or documents procured or produced under the Agreement will become property of the City upon the termination date.

Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.4 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

SECTION 9: INSURANCE
Prior to the beginning of and throughout the duration of the Agreement, Consultant will maintain and comply with the Insurance Requirements as set forth in Exhibit C. Consultant will insure the City against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder. The insurance coverages required shall not in any way limit the liability of the Consultant.

SECTION 10: INDEMNIFICATION
Consultant agrees, to the fullest extent permitted by law, to indemnify, defend, and hold harmless the City, its officials, officers, employees, agents, and volunteers (collectively, “Indemnitees”) from and against any and all liability, claim, action, loss, injury, damage, judgment, or expense, including attorneys’ fees and costs (“Losses”) caused by or resulting from the negligence, recklessness, or willful misconduct of Consultant, Consultant’s officers, employees, agents, or subcontractors in any way related to this Agreement. Consultant’s duty to indemnify and hold harmless Indemnitees shall not apply to the extent such Losses are caused by the sole or active negligence or willful misconduct of Indemnitees. Consultant’s obligation to defend shall arise regardless of any claim or assertion that Indemnitees caused or contributed to the Losses.

SECTION 11: EQUAL EMPLOYMENT OPPORTUNITY/NON-DISCRIMINATION POLICIES City’s policies promote a working environment free from abusive conduct, discrimination, harassment, and retaliation; and require equal opportunity in employment for all regardless of race, religious creed (including religious dress and grooming practices), color, national origin (including language use restrictions), ancestry, religion, disability (mental and physical), medical condition, sex, gender (including gender identity and gender expression), physical characteristics, marital status, age, sexual orientation, genetic information (including family health history and genetic test results), organizational affiliation, and military or veteran status, or any other consideration made unlawful by local, State or Federal law. City requires Consultant to comply with all applicable Federal and State and local equal employment opportunity laws and regulations, and Consultant is responsible for ensuring that effective policies and procedures concerning the prevention of abusive conduct, discrimination, harassment, and retaliation exist in Consultant’s business organization. The City’s current Equal Employment Opportunity and Non-Discrimination policies to which this Section applies may be viewed at http://www.codepublishing.com/CA/SantaCruz/?SantaCruz09/SantaCruz0983.html and http://www.cityofsantacruz.com/home/showdocument?id=59192.

SECTION 12: AMENDMENTS
This Agreement may not be amended in any respect except by way of a written instrument which expressly references and identifies this particular Agreement, which expressly states that its purpose is to amend this particular Agreement, and which is duly executed by the City and Consultant. Consultant acknowledges that no such amendment shall be effective until approved and authorized by the City’s authorized representative. No representative of the City is authorized to obligate the City to pay the cost or value of services beyond the scope of services set forth in Exhibit A.

Such authority is retained solely by the City Manager, Director, or their designee. Unless expressly authorized by the City Manager or Director, Consultant’s compensation shall be limited to that set forth in Exhibit B, Fee Schedule.

SECTION 13: MISCELLANEOUS PROVISIONS

1. Project Manager/Key Staff. Director reserves the right to evaluate and confer with Consultant regarding key staff assigned by Consultant to perform the work under this Agreement. Consultant shall replace the key staff upon Director’s request due to Director’s concern about their performance. Otherwise, no change in assignment by the Consultant may occur without prior written approval of the City.

Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.5 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

2. Consultant Services Only. Consultant is employed to render professional services only and any payments made to Consultant are compensation solely for such professional services.

3. Independent Contractor. In the performance of this Agreement, it is expressly understood that Consultant, including each of Consultant’s employees, agents, subcontractors or others under Consultant’s supervision or control, is an independent contractor solely responsible for its own acts and omissions, and shall not be considered an employee of the City for any purpose. Consultant agrees to indemnify, defend and hold harmless the City, its officials, officers, employees, and agents against any claim or liability, including attorneys’ fees and costs, arising in any manner related to this Agreement that an employee, agent or others under Consultant’s supervision or control was misclassified.

In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of City, Consultant shall indemnify, defend, and hold harmless City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of City.

4. Intentionally omitted.

5. Subcontractors. Consultant shall obtain prior approval of the City prior to subcontracting of any work pursuant to this Agreement. If at any time, the City determines any subcontractor is incompetent or unqualified, Consultant will be notified and will be expected to immediately cancel the subcontract. Consultant shall require and verify that all subcontractors maintain insurance meeting all of the requirements stated herein, including naming the City of Santa Cruz, its officers, officials, employees, agents, and volunteers as additional insureds. Any modification to the insurance requirements for subcontractors must be agreed to by the City in writing.

6. Assignment. This Agreement shall not be assigned without first obtaining the express written consent of the Director or after approval of the City Council. Neither party may assign this Agreement unless this Agreement is amended in accordance with its terms.

7. Conflicts of Interest. Nothing contained herein shall be construed to relieve Consultant of their obligations under the Rules of Professional Conduct. Consultant agrees to comply with conflict of interest laws in performing the work and services under this Agreement. Consultant covenants (on behalf of Consultant and Consultant’s employees, agents, representatives, and subcontractors) that there is no direct or indirect interest, financial or otherwise, which would conflict in any manner or degree with the performance of services required under this Agreement. Consultant acknowledges and agrees to comply with applicable provisions of conflict of interest law and regulations, including the CA Political Reform Act, Sections 1090 and 87100 of the Government Code, and the City’s conflict of interest code. Consultant will immediately advise City if Consultant learns of a conflicting financial interest of Consultant during the term of this Agreement.

8. City Property. The work, or any portion, of Consultant in performing this Agreement shall become the property of City. The Consultant may be permitted to retain copies of such work for information and reference in connection only with the provision of services for the City. All materials and work product, whether finished or unfinished, shall be delivered to City upon completion of contract services or termination of this Agreement for any reason.

Consultant acknowledges and agrees that the work product shall be considered a work made for hire within the meaning of the patent and copyright laws of the United States; and Consultant agrees that all copyrights which arise from creation of project-related documents and materials pursuant to this Agreement shall be vested in the City and Consultant waives and relinquishes all claims to copyright or other intellectual property rights in favor of City. Any Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.6 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

work product related to this Agreement shall be confidential, not to be used by the Consultant on other projects or disclosed to any third party, except by agreement in writing by the City, or except as otherwise provided herein.

9. Intentionally omitted.

10. Confidentiality.
a. Consultant acknowledges that Consultant’s relationship with City and its agents and employees, officers and/or representatives is subject to the attorney-client privilege and that any information acquired during the term of this Agreement from or through City is confidential and privileged. Unless authorized by the City, Consultant warrants that Consultant shall not disclose or use in any manner whatsoever any of the information from City’s officers, employees, and agents in any matter. Investigations and other work are performed at the direction of the City or City Attorney are deemed to be confidential and privileged attorney-work product. Any investigative materials, notes, audio or video recordings, documents, or reports created in the course of work performed under this Agreement are also confidential and privileged under the attorney work-product doctrine to the fullest extent permitted by law. b. Consultant shall not acquire any ownership interest in data and information (“City Data”) received by Consultant from City, which shall remain the property of the City. Certain information may be considered confidential (“Confidential Information”). Confidential Information shall mean all information or proprietary materials (in every form and media) not generally known to the public and which has been or is hereafter disclosed or made available directly or indirectly to Consultant through any means of communication, either verbally or in writing even if it has not been designated in writing as “Confidential” to Consultant in connection with this Agreement. Unless otherwise required by law, Consultant shall not, without City’s written permission, use or disclose City Data and/or Confidential Information other than in the performance of the obligations under this Agreement. As between Consultant and City, all City Confidential Information shall remain the property of the City. Consultant shall not acquire ownership interest in the City’s Confidential Information.
c. Consultant shall be responsible for ensuring and maintaining the security and confidentiality of City Data and Confidential Information, protect against any anticipated threats or hazards to the security or integrity of City Data and Confidential Information, protect against unauthorized access to or use of City Data and Confidential Information that could result in substantial harm or inconvenience to City or any end users; and ensure the proper return and/or disposal of City Data and Confidential Information upon termination of this Agreement with notice to the City.
d. Consultant shall take appropriate action to address any incident of unauthorized access to City Data and Confidential Information, including addressing and/or remedying the issue that resulted in such unauthorized access, notifying City as soon as possible of any incident of unauthorized access to City Data and Confidential Information, or any other breach in Consultant’s security that materially affects City or end users; and be responsible for ensuring compliance by its officers, employees, agents, and subcontractors with the confidentiality provisions hereof. Should confidential and/or legally protected City Data be divulged to unauthorized third parties, Consultant shall comply with all applicable federal and state laws and regulations, including but not limited to California Civil Code sections 1798.29 and 1798.82 at Consultant’s sole expense. Consultant shall not charge City for any expenses associated with Consultant’s compliance with these obligations.
e. Consultant shall defend, indemnify and hold harmless City, its officials, officers, employees and agents against any claim, liability, loss, injury or damage (including attorneys’ fee and costs) arising out of, or in connection with, the unauthorized use, access, and/or disclosure of City Data and/or Confidential Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.7 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

Information by Consultant and/or its agents, employees or subcontractors, excepting only loss, injury or damage caused by the sole negligence or willful misconduct of the City. This provision shall survive the termination or expiration of this Agreement.

11. Consultant's Records. Consultant shall maintain accurate accounting records and other written documentation pertaining to the costs incurred relating to this Agreement for examination and audit by the City, State, or federal government, as applicable, in compliance with Gov. Code §8546.7 for a contract in excess of $10,000, or in compliance with other applicable federal laws (e.g. 48 CFR 31) or regulations for a period of at least three (3) years from the date of the final City payment for Consultant's services, or date of the termination of this Agreement, whichever is later. If Consultant engages a subcontractor to perform work related to this Agreement with a cost of $10,000 or more over a 12-month period, such subcontract shall contain these same requirements. This provision shall survive the termination of this Agreement.

12. California Public Records Act. City is a public agency subject to the disclosure requirements of the California Public Records Act (“CPRA”). If Consultant’s proprietary information is contained in documents or information submitted to City, and Consultant claims that such information falls within one or more CPRA exemptions, Consultant must clearly mark such information “Confidential and Proprietary,” and identify the specific lines containing the information. In the event of a request for such information, City will make best efforts to provide notice to Consultant prior to such disclosure. If Consultant contends that any documents are exempt from the CPRA and wishes to prevent disclosure, it is required to obtain a protective order, injunctive relief, or other appropriate remedy from a court of law in Santa Cruz County before the City is required to respond to the CPRA request. If Consultant fails to obtain such remedy within the time the City is required to respond to the CPRA request, City may disclose the requested information without any liability. Consultant further agrees that it shall defend, indemnify and hold City harmless against any claim, action or litigation (including but not limited to all judgments, costs, and attorney’s fees) that may result from denial by City of a CPRA request for information arising from any representation, or any action (or inaction), by the Consultant.

13. Compliance with Laws. All activities of Consultant, its employees, subcontractors and/or agents will be carried out in compliance with all applicable federal, state, and local laws and regulations. Consultant further agrees to comply with the covenant of good faith and fair dealing and other provisions of Santa Cruz Municipal Ordinance chapter 3.09, or otherwise Consultant may be subject to penalties including being declared an irresponsible contractor.

14. Licensure. Consultant agrees that Consultant, its subcontractors and/or agents (if any) has/have complied with all applicable federal, state, and local licensing requirements and agrees to provide proof of a current City of Santa Cruz Business Tax Certificate if:
• Consultant, its subcontractor(s) and agent(s) or its business is/are located in the City of Santa Cruz; • Will perform actual work in the City of Santa Cruz for 6 or more days annually; or • Will use company vehicles to deliver within the City of Santa Cruz for 6 or more days annually.

For additional information and licensing requirements, view the City’s Business Licenses and Permits webpage or call the Revenue and Taxation division at 831/420-5070.

15. Intentionally omitted.

16. Intentionally omitted.

17. Intentionally omitted.

18. Dispute Resolution. The Parties agree to attempt in good faith to resolve through negotiation any dispute, claim or controversy arising out of or relating to this Agreement. Either party may initiate negotiations by providing Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.8 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

written notice in letter form to the other party, setting forth the subject of the dispute and the relief requested.

Promptly upon such notification, the Parties shall meet at a mutually agreeable time and place in order to exchange relevant information and perspective, and to attempt to resolve the dispute. In the event that no resolution is achieved, and if, but only if, the parties mutually agree, then prior to pursuing formal legal action, the parties shall make a good faith effort to resolve the dispute by non-binding mediation or negotiations between representatives with decision-making power, who, to the extent possible, shall not have had substantive involvement in the matters of the dispute.

19. Force Majeure. Neither party hereto shall be considered in default in the performance of its obligation hereunder to the extent that the performance of any such obligation is prevented or delayed by an act of God, natural disaster, pandemic, acts of terrorism, war, a strike, lockout or other labor difficulty, or other peril, which is beyond the reasonable control of the affected party and without the negligence of the respective Parties. Each party hereto shall give notice promptly to the other of the nature and extent of any Force Majeure claimed to delay, hinder or prevent performance of the services under this Agreement. Each Party will, however, make all reasonable efforts to remove or eliminate such a cause of delay or default and will, upon the cessation of the cause, diligently pursue performance of its obligations in this Agreement. In the event either party is prevented or delayed in the performance of its respective obligation by reason of such Force Majeure, the only remedy is that there may be an equitable adjustment of the schedule based on City’s sole discretion.

20. Complete Agreement. This Agreement, along with any attachments, is the full and complete integration of the Parties’ agreement with respect to the matters addressed herein, and that this Agreement supersedes any previous written or oral agreements between the Parties with respect to the matters addressed herein. Unless otherwise stated, to the extent there is any conflict between this Agreement and any other agreement (written or oral), the terms of this Agreement shall control.

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

22. Waiver. Waiver by any party of any portion of this Agreement shall not constitute a waiver of the same or any other portion hereof.

23. Governing Law. This Agreement shall be governed by and interpreted in accordance with California law.

24. Contract Interpretation. Each party acknowledges that it has reviewed this Agreement 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 Agreement.

25. Intentionally omitted.

26. Notices. If either party shall desire or is required to give notice to the other such notice shall be given in writing, via email, and concurrently delivered by: (a) personal delivery, in which case notice is effective upon delivery; (b) overnight courier (i.e., Federal Express) with charges prepaid or charged to the sender’s account, in which case notice is effective when delivered; (c) priority U.S. Mail, in which case notice shall be deemed delivered on the second business day after the deposit thereof with the U.S. Postal Service. Notices shall be addressed to recipient as follows:

To CITY:

Human Resources Department
Sara De Leon
809 Center Street, Room 6
To CONSULTANT:

Burke, Williams & Sorensen, LLP
Timothy L. Davis
60 S. Market Street
Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.9 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

[email protected] San Jose CA 95113
[email protected]
Changes to the above information shall be given to the other party in writing ten (10) business days before the change is effective.

27. Counterparts. The Parties may execute this Agreement in two or more counterparts, which shall, in the aggregate, be deemed an original but all of which, together, shall constitute one and the same instrument. A scanned, electronic, facsimile or other copy of a party’s signature shall be accepted and valid as an original.

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

The Parties execute this Agreement as of the date first above written.

Approved As To Form:

By: _____________________________
Office of the City Attorney

CITY OF SANTA CRUZ
By: _____________________________
Matt Huffaker
City Manager
CONSULTANT : BURKE, WILLIAMS & SORENSEN, LLP
By: _____________________________
Timothy L. Davis, Partner
Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.10 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

EXHIBIT A: SCOPE OF WORK
The Consultant shall provide services requested by the City including legal representation in the following:

1. Administrative hearings, arbitrations, court proceedings, consultation, and negotiation services as designated by the City representative; and

2. The Consultant shall act as spokesperson for negotiations; provide legal advice on potential unfair labor practices and related matters; implement impasse procedures; convert tentative agreements to written documents for bargaining unit and City Council-approval processes; revise MOUs upon completion of negotiations; represent the City in mediation, fact-finding, and/or arbitration; and provide advice and assistance for successful unilateral adoptions; and

3. The Consultant also provides advisory and representation services in all areas of employee relations (e.g. representing the City in legal claims from employees).

4. The Consultant provides consultation services related to California Labor Law as designated by the City representative.

5. For all services, the Consultant takes reasonable steps to keep the City informed of progress and to respond to the City’s inquiries.

Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.11 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

EXHIBIT B: FEE SCHEDULE
Effective January 1, 2024, please be advised that Burke’s Billing Attorney rates for Labor and Employment matters are as follows:

Partners with 25 years or more of experience $385 per hour Partners with less than 25 years of experience $360 per hour Senior Associates $320 per hour
Associates $305 per hour
Paralegals $180 per hour
Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.12 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

EXHIBIT C: INSURANCE REQUIREMENTS
Consultant shall procure and maintain insurance against claims for injuries to persons or damages to property and otherwise which may arise from or in connection with the performance of the work under this Agreement and the results of that work by Consultant, its agents, representatives, employees, or subcontractors.

A. CERTIFICATE REQUIREMENTS
The City 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 City, its officers, officials, employees, and volunteers as additional insureds, and
• Coverages must be maintained during the term of the Agreement with the City, unless a longer duration is required as specified below.

B. MINIMUM SCOPE AND LIMITS OF INSURANCE
Consultant acknowledges that the insurance coverage and policy limits set forth in this section constitute the minimum amount of coverage required. If Consultant maintains broader insurance coverage and/or higher limits than the minimums shown below, the City of Santa Cruz requires and shall be entitled to the broader insurance coverage and/or higher limits maintained by Consultant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City of Santa Cruz.

Coverage will be at least as broad as:
• COMMERCIAL GENERAL LIABILITY (CGL): $1,000,000 PER OCCURRENCE; $2,000,000 AGGREGATE Proof of coverage for $1 Million per occurrence and $2 Million in the aggregate including products and completed operations, property damage, bodily injury, personal and advertising injury will be provided on Insurance Services Office (ISO) Form CG 00 01 covering CGL. • PROFESSIONAL LIABILITY (ERRORS AND OMISSIONS): $2,000,000 PER OCCURRENCE OR CLAIM, $2,000,000 AGGREGATE.

Consultant will maintain insurance appropriate to Consultant’s profession; with limit no less than $2,000,000 per occurrence or claim, $2,000,000 aggregate. Insurance must be maintained, and evidence of insurance must be provided for at least five (5) years after date of completion of the services under this Agreement. If coverage is canceled or non-renewed and not replaced with another claims-made policy form with a Retroactive Date prior to the contract effective date or start of work date, Consultant must purchase “extended reporting” coverage for a minimum of five (5) years after completion of the contract of work.
• AUTOMOBILE LIABILITY:

Proof of coverage for $1,000,000 provided on ISO Form Number CA 00 01 covering any auto (Code 1), or if Consultant has no owned autos, hired, (Code 8) and non-owned autos (Code 9), per accident for bodily injury and property damage.
• WORKERS’ COMPENSATION AS REQUIRED BY THE STATE OF CALIFORNIA, WITH STATUTORY LIMITS, AND EMPLOYER’S LIABILITY INSURANCE: $1,000,000 per accident for bodily injury or disease.

Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.13 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

The Worker’s Compensation policy must be endorsed with a waiver of subrogation in favor of the City for all work performed by the Consultant and its employees.

C. OTHER INSURANCE PROVISIONS
The insurance policies are to comply with the following provisions:
• ADDITIONAL INSURED STATUS
The City, 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 Consultant 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 Consultant’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).
o PRIMARY COVERAGE
For any claims related to this Agreement, Consultant’s and all subcontractor’s insurance coverage will be primary and non-contributory as respects the City, its officers, officials, employees, agents, and volunteers. Any insurance or self-insurance maintained by the City, its officers, officials, employees, agents, or volunteers will be excess of Consultant’s and all subcontractor’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 the City.
• WAIVER OF SUBROGATION
Consultant hereby grants to the City a waiver of any right to subrogation, except as otherwise not applicable, which any insurer of said Consultant may acquire against the City by virtue of the payment of any loss, including attorney’s fees under such insurance. Consultant agrees to obtain any endorsement that may be necessary to effectuate this waiver of subrogation, but this provision applies regardless of whether or not the City has received a waiver of subrogation endorsement from the insurer. • EXCESS LIABILITY/UMBRELLA INSURANCE POLICIES
Consultant 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 the Consultant’s primary and excess liability policies are exhausted. • SELF-INSURED RETENTIONS (SIR)
Self-insured retentions must be declared to and approved by the City. City may require Consultant 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 City.
• 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 the City.

Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.14 City of Santa Cruz Professional Services Agreement for Labor and Employment Matters

• CLAIMS MADE POLICIES
If any of the required policies provide coverage on a claims-made basis:

1. The Retroactive Date must be shown and must be before the date of the contract or the beginning of contract work.

2. Insurance must be maintained, and evidence of insurance must be provided for at least five (5) years after completion of the contract of work.

3. If coverage is canceled or non-renewed, and not replaced with another claims-made policy form with a Retroactive Date prior to the contract effective date, the Consultant must purchase “extended reporting” coverage for a minimum of five (5) years after completion of contract work. • VERIFICATION OF COVERAGE
Consultant will furnish the City 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 policy (and CPL, automobile and any Excess Liability/Umbrella policies, as applicable) listing all policy endorsements to be approved by the City before work commences. However, failure to obtain the required documents prior to the work beginning will not waive the Consultant’s obligation to provide them. The City reserves the right to require complete, certified copies of all required insurance policies, including endorsements required by these specifications, at any time.

D. SUBCONTRACTORS
Consultant shall include their subcontractor(s) as additional insured(s) under the policies or shall furnish separate certificates and endorsements for each contractor and subcontractor. Consultant shall require and verify that all contractors and subcontractors maintain insurance meeting all the requirements stated herein, and Consultant shall ensure that City, its officers, officials, employees, agents, and volunteers are named as additional insureds on insurance required from its contractor(s) and subcontractor(s).

E. SPECIAL RISKS/CIRCUMSTANCES
City 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 Consultant.

Docusign Envelope ID: D92EC2D2-769A-452E-91DB-3FDA740F6A57

10.15 City Council

AGENDA REPORT
DATE: 08/20/2026
AGENDA OF: 09/08/2026
DEPARTMENT: Human Resources
SUBJECT: Authorization to Exceed $100,000 for Investigation Services with Oppenheimer Investigations Group, LLP, Related to Respectful Workplace, Harassment, and Discrimination Complaints (HR) Location: Citywide
RECOMMENDATION: Motion authorizing the City Manager, or their designee, to execute agreements and approve payments exceeding $100,000 in the aggregate for third-party investigation services related to workplace harassment, discrimination, and respectful workplace complaints for Fiscal Year 2027.

BACKGROUND: The City of Santa Cruz is committed to providing a safe, inclusive, and respectful workplace for all employees as outlined in City Administrative Procedure Order II-1a and II-1B. To fulfill this commitment, the City responds promptly and thoroughly to complaints involving alleged violations of anti-harassment, anti-discrimination, and respectful workplace policies.

The Human Resources Department routinely engages third-party investigators to conduct impartial investigations, particularly when internal review may present actual or perceived conflicts of interest or when the scope and complexity of allegations require external expertise.

DISCUSSION: Third-party investigations should be conducted independently, thoroughly, and often on expedited timelines. The Human Resources Department is seeking Council authorization to exceed the $100,000 spending threshold for these critical services during the current fiscal year with Oppenheimer Investigations Group, LLP. The Human Resources Department expects to spend $125,000 for FY 2027. The HR Department plans to make this request annually whether it is expected to exceed expenses over $100,000 or not to ensure timely progress toward investigation completion. Note that transitioning to a new provider midinvestigation or during periods of high-case volume could delay resolution and undermine trust in the process.

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

11.1 HEALTH IN ALL POLICIES (HiAP): The City of Santa Cruz is guided by its Health in All Policies (HiAP) approach, which prioritizes the integration of health, equity, and sustainability into decision-making processes across all departments. Ensuring a workplace free from harassment and discrimination is central to this approach.

Workplace harassment, discrimination, and unresolved interpersonal conflict negatively impact employee mental health, productivity, retention, and sense of safety - especially for individuals from historically marginalized communities. By proactively addressing such issues through professional investigation services, the City:
 Advances equity and inclusion as a determinant of workforce well-being.  Prevents harm to employee mental and emotional health.  Upholds a systems-level commitment to eliminating disparities.  Fosters a culture of accountability, respect, and trust, consistent with HiAP.

This investment in responsive and impartial investigations directly supports the City’s goal to embed equity and health into organizational practices and reinforces the workplace as a key site for health promotion.

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: Funds are available in the department operating budget in FY 2027. As required under Santa Cruz Municipal Code Section 3.08, expenditures exceeding $100,000 in a fiscal year must be approved by City Council.

Prepared and Submitted By:

Sara De Leon
HR Director
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

None.

11.2 City Council

AGENDA REPORT
DATE: 08/20/2026
AGENDA OF: 09/08/2026
DEPARTMENT: Parks and Recreation
SUBJECT: Memorial Request Honoring Celia and Peter Scott (PR) LOCATION: District 5
RECOMMENDATION: Motion to approve the installation of a memorial plaque in Pogonip in honor of Celia and Peter Scott.

BACKGROUND: In May 2026, Debbie Bulger, on behalf of the family of Celia and Peter Scott and fellow Santa Cruz community members, submitted a letter (attached) to the Parks and Recreation Commission and the City Council requesting the installation of a memorial plaque honoring Celia and Peter Scott at or near the entrance to Pogonip onSpring Street.

The City of Santa Cruz’s City Council Policy 24.1 (attached), otherwise known by its policy title “Naming of City Parks, Facilities, and Facility Amenities”, establishes criteria and procedures for the Parks and Recreation Department, the Parks and Recreation Commission, and the City Council to consider naming rights and/or memorials for various City park facilities and assets. In accordance with the Policy, Ms. Bulger wrote to the Director with a formal request for consideration. The request was then presented to the Parks and Recreation Commission for a recommendation.

City Council Policy 24.1 includes the following language relevant to this specific request:
“This policy intends to address the following naming situations…

3.) Honoring individuals or organizations in recognition of their significant contributions to the community.

The criteria for naming rights will include the following:

1. The person or organization has a longstanding affiliation with the City

2. The name provides a sense of place, reflecting the geographic location, community, neighborhood or street where the park, facility or amenity is located

3. The name recognizes the historical significance of the area or reflects unique characteristics of the site

4. The names of persons, organizations, corporations, foundations or families will be considered when they have made a significant contribution to the City by:
a. Enhancing the quality of life and well-being of the City

12.1 b. Contributing to the historical or cultural preservation of the City c. Contributing toward the acquisition, development or conveyance of land or building
d. Making exemplary or meritorious contributions to the City

5. If named in memorial, the individual must be deceased at least one (1) year, have been a resident of Santa Cruz, and/or have made a significant contribution to the community in terms of improvement of quality of life.”
DISCUSSION: Celia and Peter Scott worked for over 50 years to preserve the natural environment and open spaces of Santa Cruz. In 1979, Celia and Peter collected signatures to qualify for the Santa Cruz Greenbelt Initiative (Measure O) which provided interim protection for the Santa Cruz Greenbelt including Pogonip.

From 1984-88 Celia served on the 20-member Pogonip Citizens Advisory Committee, appointed by the Henry Cowell Foundation to explore options for the 614-acre property that later became a central part of the Santa Cruz Greenbelt.

In 1990, Celia and Peter founded “Friends of the Pogonip” and began leading monthly walks on the property, an activity that continued for many years. Peter served as one of nine members of the City’s Pogonip Task Force which produced the planning document for this important open space.

Celia was elected to City Council in 1994 and served as Mayor from 1997-98. Prior to being on City Council, Celia was a member of the City Planning Commission.

It is the perspective of Parks and Recreation Department staff that this request for a memorial to Celia and Peter Scott specifically meets the following criteria outlined in City Council Policy

24.1:

1. The person or organization has a longstanding affiliation with the City

4. The names of persons, organizations, corporations, foundations or families will be considered when they have made a significant contribution to the City by:
a. Enhancing the quality of life and well-being of the City c. Contributing toward the acquisition, development or conveyance of land or building
d. Making exemplary or meritorious contributions to the City Parks and Recreation Department staff recommend approval of a memorial plaque honoring the Scott’s legacy to be located in Pogonip at the Spring St./Spring Trail trailhead. In June 2026, the Parks and Recreation Commission voted to approve the request and recommend its approval to the City Council.

If approved, the plaque will be coordinated by the Parks Open Space division, community member Debbie Bulger, and the Scott family. The memorial plaque will be funded by the family.

The landscape bed will be maintained by the Parks Open Space division.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: Staff has determined that the proposed Council action is not a “project” under CEQA because the plaque will be placed on an existing structure and will not cause a direct or indirect physical

12.2 change to the environment. (Public Resources Code § 21065.) Additionally, the Common Sense Exemption (CEQA Guidelines Section 15061(b)(3)) applies.

The proposed action involves the placement of a minor memorial plaque on an existing entrance sign at the Spring St. trailhead in Pogonip. This administrative and minor physical action will not result in any significant adverse impacts on land, air, water, minerals, flora, fauna, ambient noise, or objects of historic or aesthetic significance. It can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.

Furthermore, none of the exceptions to categorical exemptions outlined in CEQA Guidelines Section 15300.2 apply to this project.

HEALTH IN ALL POLICIES (HiAP): The Parks and Recreation Department’s mission is to “provide quality public spaces and experiences that build a healthy community, foster equity, and better the environment.” The three pillars of the department’s mission – health, equity, and environment – are consistent with Health in All Policies values and goals. The department’s mission is reflected through stewardship of Pogonip and the proposal to add a memorial plaque in honor of Celia and Peter Scott also aligns with the goals and values of conservation, environmental protection, and sustainability.

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: None. The memorial plaque will be privately funded by the family.

Prepared and Submitted By:

Tony Elliot
Director of Parks and
Recreation
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. COUNCIL POLICY 24.1.PDF

2. SCOTT MEMORIAL LETTER.PDF

12.3 COUNCIL POLICY 24.1

POLICY TITLE NAMING OF CITY PARKS, FACILITIES AND FACILITY

AMENITIES
POLICY STATEMENT:

This policy intends to address the following naming situations:

1. The opening or reopening of parks, facilities, and facility amenities

2. Providing recognition of financial contributions

3. Honoring individuals or organizations in recognition of their significant contributions to the community.

The criteria for naming rights will include the following:

1. The person or organization has a longstanding affiliation with the City

2. The name provides a sense of place, reflecting the geographic location, community, neighborhood or street where the park, facility or amenity is located

3. The name recognizes the historical significance of the area or reflects unique characteristics of the site

4. The names of persons, organizations, corporations, foundations or families will be considered when they have made a significant contribution to the City by:
a. Enhancing the quality of life and well-being of the City b. Contributing to the historical or cultural preservation of the City c. Contributing toward the acquisition, development or conveyance of land or building
d. Making exemplary or meritorious contributions to the City

5. If named in memorial, the individual must be deceased at least one (1) year, have been a resident of Santa Cruz, and/or have made a significant contribution to the community in terms of improvement of quality of life.

Names will not be chosen that:

1. Cause confusion due to duplication or names sounding similar to existing locations within the City of Santa Cruz

2. Are the name of companies whose business is substantially derived from the sale of alcohol, tobacco, firearms and/or pornography

3. Are discriminatory or derogatory considering race, gender, creed, religious or political affiliation, or other similar factors.

Where the name of an individual is recommended, consent shall be obtained from the individual or their next of kin prior to the City Council’s public consideration.

12.4 COUNCIL POLICY 24.1
Where the naming opportunity is the result of a financial contribution, the following factors must be considered:

1. The significance of the contribution made, relative to the construction and/or operating costs of the parks, facilities, and amenities within those facilities

2. The cost of establishing the naming option (costs to be determined by the responsible Department on an individual basis).

The duration of naming rights of parks, facilities, and amenities within those facilities shall be decided or negotiated on a case-by-case basis. Naming rights of parks, facilities, and amenities may be renewed by mutual agreement between the parties.

Existing names will not be changed without consideration of the historical significance of the existing name, the impact on the individual or organization previously named, the cost and impact of changing existing signs, rebuilding community recognition and updating records (i.e. letterhead, databases, and promotional materials).

Each application will be considered on a case-by-case basis. Applicant(s) shall submit a written request for naming rights to the corresponding Department Director, with justification to aid in considering the proposal. The proposed name shall be placed on the appropriate Commission agenda (if required), allowing appropriate time for review by the Commission, and to publicize and receive input from the public at the Commission meeting. The Commission’s recommendation will be forwarded to the City Council for determination of the official name.

AUTHORIZATION: Council Policy Manual Update of November 17, 1998 Revised by motion May 23, 2006
M:\AGENDA\VIEW\POLICY\REVISED\24-01.DOC

12.5 May 20, 2026
To: Parks & Rec Commission
Mayor and City Council Members
Dear Commissioners and City Councilmembers,
Celia and Peter Scott worked for over 50 years to preserve the natural beauty and open spaces of Santa Cruz.

Santa Cruz residents who joined with Celia and Peter Scott in Friends of the Pogonip and numerous other conservation organizations in Santa Cruz, Celia’s sons, Anthony and Roland Vonder Muhil, and on behalf of the thousands of Santa Cruz residents who voted for Celia for Councilmember and Mayor request that a plaque honoring Celia and Peter Scott (tentative wording below) be placed on or near the educational kiosk in Pogonip.

Enjoy your visit to the Pogonip.

The work to preserve this special place for future generations was led by citizen advocates and activists Celia Scott, environmental attorney, City Council member, former mayor and Peter Scott, UCSC physics professor.

The Pogonip was perhaps the Scotts’ favorite Park. In 1979 both worked diligently to collect signatures to qualify the Santa Cruz Greenbelt Initiative (Measure O) which provided interim protection for the Santa Cruz Greenbelt including Pogonip. From 1984-88 Celia served on the 20-member Pogonip Citizens Advisory Committee, appointed by the Cowell Foundation to explore options for the 614-acre property that later became the gem of the Santa Cruz Greenbelt.

In 1990 Celia and Peter founded Friends of the Pogonip and began leading monthly walks on the property, an activity that continued for many years. Peter served as one of nine members of the City’s Pogonip Task Force which produced the planning document for this important open space.

Celia was elected to City Council in 1994 and served as Mayor from 1997-98. Prior to being on City Council, Celia was a member of the Planning Commission.

Celia and Peter began working to save the Santa Cruz natural environment in the 1960s. One of their earliest efforts was as members of a group called the Coast Coalition which worked tirelessly to prevent a four-lane freeway from bisecting Santa Cruz linking Highway 17 and Highway 1 on the North Coast. This highway would have destroyed homes and the neighborhood along Cleveland Avenue on Santa Cruz’s westside. “I first met Celia when she was working on Proposition 20 in 1972, which established the Coastal Commission,” said former secretary of the California Natural Resources Agency and current state Senator John Laird, in an email. “And for the next 50 years, I cannot recall a major environmental issue in Santa Cruz that she was not involved in. She will be missed.” Peter came to UCSC in 1966 to teach physics. Interestingly as a seven-year-old he traveled to Santa Cruz alone on the train from San Francisco to visit family. Together the Scotts worked to

12.6 preserve the Santa Cruz North Coast, the Pogonip, Gray Whale Ranch, Moore Creek Uplands, Bonny Doon Ecological Reserve, Cotoni Coast Dairies, and Lighthouse Field. Peter wrote many articles for the Sierra Club newsletter, The Ventana, explaining and advocating for environmental issues and served on both the Chapter and Group Executive Committees.

Some of the environmental tragedies that were prevented in part by Celia and Peter’s advocacy include
• Establishment of a 2200-lot subdivision on the 950-acre Pio Scaroni Ranch on the North Coast,
• Development of 10,000 houses on what is now Wilder Ranch State Park, • Building dozens of luxury houses on what is now Moore Creek Preserve, • Bisecting residential areas on the Westside of Santa Cruz with a freeway, • Paving over Lighthouse Field for a Convention Center and Shopping Center, • Construction of a nuclear power plant just north of Davenport, • Siting of an oil tanker facility at Moss Landing to service the PG&E power plant (in an effort led by Sierra Club),
• Clearcutting of Gray Whale Ranch, now part of Wilder Ranch State Park.

Celia’s work as an environmental attorney contributed to many of the legal documents which made these conservation achievements possible.

Conservation Organizations shepherded by Celia and Peter Scott include:
• Friends of the Pogonip
• Save the Coast
• The Environmental Council of Santa Cruz County
• Friends of the Great Meadow
• Friends of the North Coast
• Save the Gray Whale Parklands
Respectfully submitted,
• California Native Plant Society, Santa Cruz County Chapter, signed by Laurie Kiguchi, President
• Santa Cruz Group of the Sierra Club, signed by Mike Guth, Chair • Katherine Beiers, former Mayor of Santa Cruz
• Center for Biological Diversity, signed by Jonathan Evans, Senior Attorney, Environmental Health Legal Director
• Debbie Bulger, local author and former editor of The Ventana, Sierra Club newsletter

12.7 City Council

AGENDA REPORT
DATE: 08/20/2026
AGENDA OF: 09/08/2026
DEPARTMENT: Public Works
SUBJECT: Wastewater Treatment Facility Sinkhole Emergency Repair (m409659) – Budget Adjustment (PW)
LOCATION: District 3
RECOMMENDATION: Motion to:
1) Ratify an emergency purchase order with Anderson Pacific Engineering (Santa Clara, CA) for repair of a sinkhole at the Wastewater Treatment Facility in the amount of $333,286; 2) Find the project categorically exempt under CEQA Guidelines 14 CCR Section 15269(b) (Emergency Projects); and
3) Adopt a resolution amending the FY 2027 budget and appropriating funds in the amount of $333,286 to fully fund the repairs.

BACKGROUND: On May 1, 2026, a sinkhole was discovered at the City of Santa Cruz (City) Wastewater Treatment Facility (WWTF). The sinkhole threatened the stability of onsite utilities and nearby infrastructure including onsite plant process lines, sludge lines, a 21kV electrical duct bank and the thickener structure.

To avoid the risk of critical failure of the WWTF, staff initiated an emergency repair immediately through a single source procurement method. Section 3.08.150 of Municipal Code allows the Purchasing Manager to award a contract without competition when there is only one source for the required service, and Section 3.08.160 authorizes emergency procurements, with competition as is practicable under the circumstances, when there is a threat to public health, safety, or welfare. Anderson Pacific Engineering (Santa Clara, CA) was able to mobilize equipment and personnel on May 1, 2026 with less than one hour notice to immediately support emergency repairs and stabilization efforts. The Purchasing Manager authorized the City’s retention of Anderson Pacific Engineering to repair the sinkhole for this emergency project.

DISCUSSION: The repairs involved removing the overhanging asphalt, excavating loose material that had collapsed into the sinkhole, supporting existing utilities, and replacing approximately 35 linear feet of failed reinforced concrete pipe with PVC pipe. The sinkhole was

13.1 then backfilled to City standards and the area was repaved. Work was completed on June 26, 2026.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The City’s action was exempt from CEQA review under CEQA Guidelines Section 15269(b), which applies to “Emergency repairs to publicly or privately owned service facilities necessary to maintain service essential to the public health, safety or welfare. Emergency repairs include those that require a reasonable amount of planning to address an anticipated emergency.” HEALTH IN ALL POLICIES (HiAP): This project promotes the following Health in All Policies Conditions: Health and Wellness and Healthy Environments. The City’s WWTF safeguards public health and environmental health by conveying and treating wastewater for ocean discharge in compliance with all regulatory standards and by augmenting water supply by providing a source for recycled water.

FISCAL IMPACT:

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

2. This recommendation requires a budget adjustment: Yes

3. The recommendation creates an on-going expenditure commitment: No FISCAL IMPACT DESCRIPTION: Funds are available in the Wastewater Enterprise Fund (Fund 721), however, a budget adjustment is needed to appropriate funds into the WWTF Equipment Replacement project (m409659) to fund the unanticipated emergency repair work.

There is no impact to the General Fund.

Prepared By:

Scott Glucs, P.E.

Acting Senior Engineer
Submitted By:

Nathan Nguyen, P.E.

Director of Public Works
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. BUDGET ADJUSTMENT.PDF

13.2 City of Santa Cruz

BUDGET ADJUSTMENT REQUEST
$GPLQLVWUDWLYH$SSURYDO
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ACCOUNT 352-(&71$0(
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ACCOUNT 352-(&71$0(
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25EXPENDITURE ACCOUNT TITLE
NET: $

REQUESTED BY DEPARTMENT HEAD

APPROVAL

BUDGET/ACCOUNTING
5(9,(:('

FINANCE DIRECTOR

APPROVAL

CITYMANAGER

APPROVAL
5HVR

352-(&7
352-(&7
$02817
$02817
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TOTAL EXPENDITURE

TOTALREVENUE
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 Clear Form
2027
08/11/2026
On May 1, 2026, a sinkhole was discovered at the City's Wastewater Treatment Facility. The sinkhole threatened the stability of onsite utilities and nearby infrastructure including onsite plant process lines, sludge lines, a 21kV electrical duct bank and the DAFT structure. The total project was $333,285.86. A budget adjustment is needed to appropriate funds to this project as the sinkhole was unanticipated and an emergency. County of Santa Cruz pays 8/17 of CIP costs accrued from the project based on wastewater treatment facility capacity dedicated to County.
721-40-62-7252-43350 m409659-475-4060-0060 WWTF Equipment Replacement 156,840 Local capital grants and contributions
156,840
721-40-62-7252-57301 m409659-100-2020-0 WWTF Equipment Replacement 333,286 Sewer systems
333,286
-176,446
Christin
a Alberti
Digitally signed by
Christina Alberti
Date: 2026.08.11
12:33:44 -07'00'
Nathan N.

Nguyen
Digitally signed by
Nathan N. Nguyen
Date: 2026.08.13
09:45:18 -07'00'
Emily
Burton
Digitally signed
by Emily Burton
Date: 2026.08.21
12:14:28 -07'00'
Elizabet
h Cabell
Digitally signed by
Elizabeth Cabell
Date: 2026.08.25
09:09:12 -07'00' 13.3
City Council

AGENDA REPORT
DATE: 08/20/2026
AGENDA OF: 09/08/2026
DEPARTMENT: Water
SUBJECT: Purchase of a Wachs Valve Truck (WT)
LOCATION: Citywide
RECOMMENDATION: Motion to purchase a Ford F-550 Wachs Valve Truck from Rush Truck Center (New Braunfels, TX) in the amount of $276,712.98 under the existing cooperative contract with Sourcewell.

BACKGROUND: The Water Department's distribution system includes thousands of isolation valves that are critical for safely isolating sections of the water system during emergency repairs, planned maintenance, and capital improvement projects. These valves must be exercised and maintained on a routine basis to ensure they remain operational and can be relied upon when needed.

Currently, Water Distribution staff perform valve maintenance using manual methods and an aging trailer-mounted valve maintenance unit. The existing equipment is labor-intensive, requires additional time to tow and position, and does not provide the efficiency, safety, or data collection capabilities of modern valve maintenance equipment. As valves age, corrosion, mineral buildup, sediment accumulation, and infrequent operation can make them increasingly difficult to operate, requiring significant physical effort and increasing the potential for employee injuries or damage to critical water system assets.

DISCUSSION: Staff recommend the purchase of a truck-mounted valve maintenance unit to replace the existing 2009 trailer-mounted system. The new truck-mounted design improves accessibility, maneuverability, and operational efficiency by eliminating the need to tow and position a trailer, allowing crews to respond more quickly to both routine maintenance and emergency repairs. The unit includes a powered valve turning system that safely delivers controlled, high torque - reducing manual labor, improving employee safety, and minimizing the risk of damage to valves and related components.

In addition to valve exercising, the unit features an integrated vacuum system for removing debris and sediment from valve cans and a hydraulic system capable of powering a variety of field tools, increasing the vehicle's versatility while reducing the need for additional equipment.

The system also records valve maintenance data, including operating torque, valve position, and maintenance history, enabling proactive asset management, improving emergency response,

14.1 reducing service interruptions, and enhancing the long-term reliability of the City's water distribution system.

Section 3.08.170 of the Municipal Code authorizes the City to procure equipment through cooperative purchasing agreements when it is in the City’s best interest. Staff proposes purchasing the Ford F-550 Wachs Valve Truck through a competitively awarded Sourcewell cooperative purchasing contract, which is available to more than 50,000 public agencies nationwide. Utilizing this contract allows the City to benefit from nationally negotiated pricing, favorable terms, and significant time savings by avoiding a separate competitive bid, making it the most cost-effective and efficient method for acquiring the needed equipment.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The purchase of equipment for routine operations and maintenance activities will not cause physical change in the environment directly or indirectly and is therefore not a “project” under CEQA. (Pub. Resources Code, § 21065; 14 CCR § 15378(b).)
HEALTH IN ALL POLICIES (HiAP): This project advances the City’s HiAP goal of Healthy Environments: Natural and Built Infrastructure by maintaining stormwater inlets, sewer lines, and catch basins, ensuring proper drainage and reducing infrastructure strain.

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: There is no impact to the General Fund as a result of this action. Funds for the purchase of this Ford F-550 Wachs Valve Truck were included in the FY 2027 Adopted Budget and are available in the Water Operations Fund (Fund 711).

Prepared By:

Evanda Wilkinson
Management Analyst
Submitted By:

Heidi Luckenbach
Water Director
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. QUOTE.PDF

2. COOPERATIVE PURCHASING AGREEMENT.PDF

14.2 Date Prepared: 7/13/2026
Vendor Phone:

Participating Agency:

Agency Phone:
$ 69,435.00

1.50% $ (1,041.53)
$ 68,393.48
$ -
$ 183,368.52
$ -
$ -
$ -
$ -
$ 24,578.48
$ 325.00
$ 47.50
$ 276,712.98
1 $ 276,712.98
Expected Floorplan Expense:

Freight to End User:

State Applicable Sales Tax:
(830) 302-5219
Participating Agency #:

Agency Contact:

Product Dscription:

OEM Chassis MSRP:

Unit Price before Upfit
Additonal Incentives/Credits:

Government Grant/Assistance:

Sourcewell Contract Number: 032824-RTG
Remit P.O.s To: [email protected]
Extended Warranty:

Colton Kruse
Upfit:

Ford F-550 Valve Turner Body
E.H. Wachs Valve Turner with Options
Sourcewell Discount:

Hugo Rivera (831) 212-3747
26502 City of Santa Cruz, CA
Vendor: Rush Truck Center
Contact for Vendor:

Doc/Admin Fee:

Quote Valid for 30 Days
Total Participating Agency CAPEX:

Quantity Ordered:

State Applicable Fees:

Sales Price Per Unit:

14.3 032824-RTG
Rev. 3/2022 1
Solicitation Number: RFP #032824

CONTRACT
This Contract is between Sourcewell, 202 12th Street Northeast, P.O. Box 219, Staples, MN 56479 (Sourcewell) and Rush Truck Centers of Texas, L.P., 555 IH-35 South Ste. 500, New Braunfels, TX 78130 (Supplier).

Sourcewell is a State of Minnesota local government unit and service cooperative created under the laws of the State of Minnesota (Minnesota Statutes Section 123A.21) that offers cooperative procurement solutions to government entities. Participation is open to eligible federal, state/province, and municipal governmental entities, higher education, K-12 education, nonprofit, tribal government, and other public entities located in the United States and Canada.

Sourcewell issued a public solicitation for Class 4-8 Chassis and Cabs with Related Equipment, Accessories, and Services from which Supplier was awarded a contract.

Supplier desires to contract with Sourcewell to provide equipment, products, or services to Sourcewell and the entities located in the United States that access Sourcewell’s cooperative purchasing contracts (Participating Entities).

1. TERM OF CONTRACT
A. EFFECTIVE DATE. This Contract is effective upon the date of the final signature below.

EXPIRATION DATE AND EXTENSION. This Contract expires July 9, 2028, unless it is cancelled sooner pursuant to Article 22. This Contract allows up to three additional one-year extensions upon the request of Sourcewell and written agreement by Supplier. Sourcewell retains the right to consider additional extensions beyond seven years as required under exceptional circumstances.

B. SURVIVAL OF TERMS. Notwithstanding any expiration or termination of this Contract, all payment obligations incurred prior to expiration or termination will survive, as will the following: Articles 11 through 14 survive the expiration or cancellation of this Contract. All other rights will cease upon expiration or termination of this Contract. 




 


 


 

14.4 032824-RTG
Rev. 3/2022 2

2. EQUIPMENT, PRODUCTS, OR SERVICES
A. EQUIPMENT, PRODUCTS, OR SERVICES. Supplier will provide the Equipment, Products, or Services as stated in its Proposal submitted under the Solicitation Number listed above.

Supplier’s Equipment, Products, or Services Proposal (Proposal) is attached and incorporated into this Contract.

All Equipment and Products provided under this Contract must be new and the current model.

Supplier may offer close-out or refurbished Equipment or Products if they are clearly indicated in Supplier’s product and pricing list. Unless agreed to by the Participating Entities in advance, Equipment or Products must be delivered as operational to the Participating Entity’s site.

This Contract offers an indefinite quantity of sales, and while substantial volume is anticipated, sales and sales volume are not guaranteed.

B. WARRANTY. Supplier warrants that all Equipment, Products, and Services furnished are free from liens and encumbrances, subject to the Notice of Security Interest attached hereto as Exhibit A for Participating Entities with deferred payment terms. Any warranties on any Equipment and Products sold by Rush are limited only to any printed warranty provided by the applicable manufacturer of the Equipment or Product. Supplier agrees to assist the Participating Entity in reaching a resolution in any dispute over warranty terms with the manufacturer. Supplier warrants that all services performed by Supplier for a Participating Entity, including repair, maintenance, and installation services (“Services”), will be performed in a good and workmanlike manner in accordance with industry standards (“Services Warranty”).

The Services Warranty is valid for a period of ninety (90) days from the date the Service is completed.

C. DEALERS, DISTRIBUTORS, AND/OR RESELLERS. Equipment, Products and Services will be offered for sale to Participating Entities through Supplier and its affiliates as stated in Supplier’s Proposal. Upon Contract execution and throughout the Contract term, Supplier must provide to Sourcewell a current means to validate or authenticate Supplier’s authorized dealers, distributors, or resellers relative to the Equipment, Products, and Services offered under this Contract, which will be incorporated into this Contract by reference. It is the Supplier’s responsibility to ensure Sourcewell receives the most current information.

3. PRICING
All Equipment, Products, or Services under this Contract will be priced at or below the price stated in Supplier’s Proposal.

When providing pricing quotes to Participating Entities, all pricing quoted must reflect a Participating Entity’s total cost of acquisition. This means that the quoted cost is for delivered 




 


 


 

14.5 032824-RTG
Rev. 3/2022 3
Equipment, Products, and Services that are operational for their intended purpose, and includes all costs to the Participating Entity’s requested delivery location.

Regardless of the payment method chosen by the Participating Entity, the total cost associated with any purchase option of the Equipment, Products, or Services must always be disclosed in the pricing quote to the applicable Participating Entity at the time of purchase.

A. SHIPPING AND SHIPPING COSTS. All delivered Equipment and Products must be properly packaged. Damaged Equipment and Products may be rejected. If the damage is not readily apparent at the time of delivery, Supplier must permit the Equipment and Products to be returned within a reasonable time at no cost to Sourcewell or its Participating Entities.

Participating Entities reserve the right to inspect the Equipment and Products at a reasonable time after delivery where circumstances or conditions prevent effective inspection of the Equipment and Products at the time of delivery. In the event of the delivery of nonconforming Equipment and Products, the Participating Entity will notify the Supplier as soon as possible and the Supplier will replace nonconforming Equipment and Products with conforming Equipment and Products that are acceptable to the Participating Entity.

Supplier must arrange for and pay for the return shipment on Equipment and Products that arrive in a defective or inoperable condition.

Sourcewell may declare the Supplier in breach of this Contract if the Supplier intentionally delivers substandard or inferior Equipment or Products.

B. SALES TAX. Each Participating Entity is responsible for supplying the Supplier with valid taxexemption certification(s). When ordering, a Participating Entity must indicate if it is a taxexempt entity.

C. HOT LIST PRICING. At any time during this Contract, Supplier may offer a specific selection of Equipment, Products, or Services at discounts greater than those listed in the Contract.

When Supplier determines it will offer Hot List Pricing, it must be submitted electronically to Sourcewell in a line-item format. Equipment, Products, or Services may be added or removed from the Hot List at any time through a Sourcewell Price and Product Change Form as defined in Article 4 below.

Hot List program and pricing may also be used to discount and liquidate close-out and discontinued Equipment and Products as long as those close-out and discontinued items are clearly identified as such. Current ordering process and administrative fees apply. Hot List Pricing must be published and made available to all Participating Entities. 




 


 


 

14.6 032824-RTG
Rev. 3/2022 4

4. PRODUCT AND PRICING CHANGE REQUESTS
Supplier may request Equipment, Product, or Service changes, additions, or deletions at any time. All requests must be made in writing by submitting a signed Sourcewell Price and Product Change Request Form to the assigned Sourcewell Supplier Development Administrator. This approved form is available from the assigned Sourcewell Supplier Development Administrator.

At a minimum, the request must:
x Identify the applicable Sourcewell contract number;
x Clearly specify the requested change;
x Provide sufficient detail to justify the requested change; x Individually list all Equipment, Products, or Services affected by the requested change, along with the requested change (e.g., addition, deletion, price change); and x Include a complete restatement of pricing documentation in Microsoft Excel with the effective date of the modified pricing, or product addition or deletion. The new pricing restatement must include all Equipment, Products, and Services offered, even for those items where pricing remains unchanged.

A fully executed Sourcewell Price and Product Change Request Form will become an amendment to this Contract and will be incorporated by reference.

5. PARTICIPATION, CONTRACT ACCESS, AND PARTICIPATING ENTITY REQUIREMENTS

A. PARTICIPATION. Sourcewell’s cooperative contracts are available and open to public and nonprofit entities across the United States and Canada; such as federal, state/province, municipal, K-12 and higher education, tribal government, and other public entities.

The benefits of this Contract should be available to all Participating Entities located in the United States that can legally access the Equipment, Products, or Services under this Contract.

A Participating Entity’s authority to access this Contract is determined through its cooperative purchasing, interlocal, or joint powers laws. Any entity accessing benefits of this Contract will be considered a Service Member of Sourcewell during such time of access. Supplier understands that a Participating Entity’s use of this Contract is at the Participating Entity’s sole convenience and Participating Entities reserve the right to obtain like Equipment, Products, or Services from any other source.

Supplier is responsible for familiarizing its sales and service forces with Sourcewell contract use eligibility requirements and documentation and will encourage potential participating entities to join Sourcewell. Sourcewell reserves the right to add and remove Participating Entities to its roster during the term of this Contract.





 


 


 

14.7 032824-RTG
Rev. 3/2022 5
B. PUBLIC FACILITIES. Supplier’s employees may be required to perform work at governmentowned facilities, including schools. Supplier’s employees and agents must conduct themselves in a professional manner while on the premises, and in accordance with Participating Entity policies and procedures, and all applicable laws.

6. PARTICIPATING ENTITY USE AND PURCHASING
A. ORDERS AND PAYMENT. To access the contracted Equipment, Products, or Services under this Contract, a Participating Entity must clearly indicate to Supplier that it intends to access this Contract; however, order flow and procedure will be developed jointly between Sourcewell and Supplier. Typically, a Participating Entity will issue an order directly to Supplier or its authorized subsidiary, distributor, dealer, or reseller. If a Participating Entity issues a purchase order, it may use its own forms, but the purchase order should clearly note the applicable Sourcewell contract number. All Participating Entity orders under this Contract must be issued prior to expiration or cancellation of this Contract; however, Supplier performance, Participating Entity payment obligations, and any applicable warranty periods or other Supplier or Participating Entity obligations may extend beyond the term of this Contract.

Supplier’s acceptable forms of payment are included in its attached Proposal. Participating Entities will be solely responsible for payment and Sourcewell will have no liability for any unpaid invoice of any Participating Entity.

B. ADDITIONAL TERMS AND CONDITIONS/PARTICIPATING ADDENDUM. Additional terms and conditions to a purchase order, or other required transaction documentation, may be negotiated between a Participating Entity and Supplier, such as job or industry-specific requirements, legal requirements (e.g., affirmative action or immigration status requirements), or specific local policy requirements. Some Participating Entities may require the use of a Participating Addendum, the terms of which will be negotiated directly between the Participating Entity and the Supplier or its authorized dealers, distributors, or resellers, as applicable. Any negotiated additional terms and conditions must never be less favorable to the Participating Entity than what is contained in this Contract.

C. SPECIALIZED SERVICE REQUIREMENTS. In the event that the Participating Entity requires service or specialized performance requirements not addressed in this Contract (such as ecommerce specifications, specialized delivery requirements, or other specifications and requirements), the Participating Entity and the Supplier may enter into a separate, standalone agreement, apart from this Contract. Sourcewell, including its agents and employees, will not be made a party to a claim for breach of such agreement.

D. TERMINATION OF ORDERS. Participating Entities may terminate an order, in whole or in part, immediately upon notice to Supplier in the event of any of the following events:





 


 


 

14.8 032824-RTG
Rev. 3/2022 6

1. The Participating Entity fails to receive funding or appropriation from its governing body at levels sufficient to pay for the equipment, products, or services to be purchased; or

2. Federal, state, or provincial laws or regulations prohibit the purchase or change the Participating Entity’s requirements.

E. GOVERNING LAW AND VENUE. The governing law and venue for any action related to a Participating Entity’s order will be determined by the Participating Entity making the purchase.

7. CUSTOMER SERVICE
A. PRIMARY ACCOUNT REPRESENTATIVE. Supplier will assign an Account Representative to Sourcewell for this Contract and must provide prompt notice to Sourcewell if that person is changed. The Account Representative will be responsible for:

x Maintenance and management of this Contract;
x Timely response to all Sourcewell and Participating Entity inquiries; and x Business reviews to Sourcewell and Participating Entities, if applicable.

B. BUSINESS REVIEWS. Supplier must perform a minimum of one business review with Sourcewell per contract year. The business review will cover sales to Participating Entities, pricing and contract terms, administrative fees, sales data reports, performance issues, supply issues, customer issues, and any other necessary information.

8. REPORT ON CONTRACT SALES ACTIVITY AND ADMINISTRATIVE FEE PAYMENT A. CONTRACT SALES ACTIVITY REPORT. Each calendar quarter, Supplier must provide a contract sales activity report (Report) to the Sourcewell Supplier Development Administrator assigned to this Contract. Reports are due no later than 45 days after the end of each calendar quarter. A Report must be provided regardless of the number or amount of sales during that quarter (i.e., if there are no sales, Supplier must submit a report indicating no sales were made).

The Report must contain the following fields:
x Participating Entity Name (e.g., City of Staples Highway Department); x Participating Entity Physical Street Address;
x Participating Entity City;
x Participating Entity State/Province;
x Participating Entity Zip/Postal Code;
x Participating Entity Contact Name;
x Participating Entity Contact Email Address;
x Participating Entity Contact Telephone Number;





 


 


 

14.9 032824-RTG
Rev. 3/2022 7
x Sourcewell Assigned Entity/Participating Entity Number; x Item Purchased Description;
x Item Purchased Price;
x Sourcewell Administrative Fee Applied; and
x Date Purchase was invoiced/sale was recognized as revenue by Supplier.

B. ADMINISTRATIVE FEE. In consideration for the support and services provided by Sourcewell, the Supplier will pay an administrative fee to Sourcewell on all Equipment, Products, and Services provided to Participating Entities. The Administrative Fee must be included in, and not added to, the pricing. Supplier may not charge Participating Entities more than the contracted price to offset the Administrative Fee.

The Supplier will submit payment to Sourcewell for the percentage of administrative fee stated in the Proposal multiplied by the total sales of all Equipment, Products, and Services purchased by Participating Entities under this Contract during each calendar quarter. Payments should note the Supplier’s name and Sourcewell-assigned contract number in the memo; and must be mailed to the address above “Attn: Accounts Receivable” or remitted electronically to Sourcewell’s banking institution per Sourcewell’s Finance department instructions. Payments must be received no later than 45 calendar days after the end of each calendar quarter.

Supplier agrees to cooperate with Sourcewell in auditing transactions under this Contract to ensure that the administrative fee is paid on all items purchased under this Contract.

In the event the Supplier is delinquent in any undisputed administrative fees, Sourcewell reserves the right to cancel this Contract and reject any proposal submitted by the Supplier in any subsequent solicitation. In the event this Contract is cancelled by either party prior to the Contract’s expiration date, the administrative fee payment will be due no more than 30 days from the cancellation date.

9. AUTHORIZED REPRESENTATIVE
Sourcewell's Authorized Representative is its Chief Procurement Officer.

Supplier’s Authorized Representative is the person named in the Supplier’s Proposal. If Supplier’s Authorized Representative changes at any time during this Contract, Supplier must promptly notify Sourcewell in writing.

10. AUDIT, ASSIGNMENT, AMENDMENTS, WAIVER, AND CONTRACT COMPLETE A. AUDIT. Pursuant to Minnesota Statutes Section 16C.05, subdivision 5, the books, records, documents, and accounting procedures and practices relevant to this Contract are subject to examination by Sourcewell or the Minnesota State Auditor for a minimum of six years from the 




 


 


 

14.10 032824-RTG
Rev. 3/2022 8
end of this Contract. This clause extends to Participating Entities as it relates to business conducted by that Participating Entity under this Contract.

B. ASSIGNMENT. Neither party may assign or otherwise transfer its rights or obligations under this Contract without the prior written consent of the other party and a fully executed assignment agreement. Such consent will not be unreasonably withheld. Any prohibited assignment will be invalid.

C. AMENDMENTS. Any amendment to this Contract must be in writing and will not be effective until it has been duly executed by the parties.

D. WAIVER. Failure by either party to take action or assert any right under this Contract will not be deemed a waiver of such right in the event of the continuation or repetition of the circumstances giving rise to such right. Any such waiver must be in writing and signed by the parties.

E. CONTRACT COMPLETE. This Contract represents the complete agreement between the parties. No other understanding regarding this Contract, whether written or oral, may be used to bind either party. For any conflict between the attached Proposal and the terms set out in Articles 1-22 of this Contract, the terms of Articles 1-22 will govern.

F. RELATIONSHIP OF THE PARTIES. The relationship of the parties is one of independent contractors, each free to exercise judgment and discretion with regard to the conduct of their respective businesses. This Contract does not create a partnership, joint venture, or any other relationship such as master-servant, or principal-agent.

11. INDEMNITY AND HOLD HARMLESS

Supplier must indemnify, defend, save, and hold Sourcewell and its Participating Entities, including their agents and employees, harmless from any claims or causes of action, including attorneys’ fees incurred by Sourcewell or its Participating Entities, brought or alleged by unaffiliated third parties arising out of any negligent act or omission in the performance of this Contract by the Supplier or its agents or employees; this indemnification includes injury or death to person(s) or property alleged to have been caused by the negligent act or omission of Supplier relating to the Equipment, Products, or Services provided by Supplier under this Contract. Sourcewell’s responsibility will be governed by the State of Minnesota’s Tort Liability Act (Minnesota Statutes Chapter 466) and other applicable law.

12. GOVERNMENT DATA PRACTICES
Supplier and Sourcewell must comply with the Minnesota Government Data Practices Act, Minnesota Statutes Chapter 13, as it applies to all data provided by or provided to Sourcewell 




 


 


 

14.11 032824-RTG
Rev. 3/2022 9
under this Contract and as it applies to all data created, collected, received, maintained, or disseminated by the Supplier under this Contract.

13. INTELLECTUAL PROPERTY, PUBLICITY, MARKETING, AND ENDORSEMENT A. INTELLECTUAL PROPERTY

1. Grant of License. During the term of this Contract:
a. Sourcewell grants to Supplier a royalty-free, worldwide, non-exclusive right and license to use the trademark(s) provided to Supplier by Sourcewell in advertising and promotional materials for the purpose of marketing Sourcewell’s relationship with Supplier.
b. Supplier grants to Sourcewell a royalty-free, worldwide, non-exclusive right and license to use Supplier’s trademarks in advertising and promotional materials for the purpose of marketing Supplier’s relationship with Sourcewell.

2. Limited Right of Sublicense. The right and license granted herein includes a limited right of each party to grant sublicenses to their respective subsidiaries, distributors, dealers, resellers, marketing representatives, and agents (collectively “Permitted Sublicensees”) in advertising and promotional materials for the purpose of marketing the Parties’ relationship to Participating Entities. Any sublicense granted will be subject to the terms and conditions of this Article. Each party will be responsible for any breach of this Article by any of their respective sublicensees.

3. Use; Quality Control.
a. Neither party may alter the other party’s trademarks from the form provided and must comply with removal requests as to specific uses of its trademarks or logos.
b. Each party agrees to use, and to cause its Permitted Sublicensees to use, the other party’s trademarks only in good faith and in a dignified manner consistent with such party’s use of the trademarks. Upon written notice to the breaching party, the breaching party has 30 days of the date of the written notice to cure the breach or the license will be terminated.

4. Termination. Upon the termination of this Contract for any reason, each party, including Permitted Sublicensees, will have 30 days to remove all Trademarks from signage, websites, and the like bearing the other party’s name or logo (excepting Sourcewell’s pre-printed catalog of suppliers which may be used until the next printing). Supplier must return all marketing and promotional materials, including signage, provided by Sourcewell, or dispose of it according to Sourcewell’s written directions.

B. PUBLICITY. Any publicity regarding the subject matter of this Contract must not be released without prior written approval from the Authorized Representatives. Publicity includes notices, informational pamphlets, press releases, research, reports, signs, and similar public notices prepared by or for the Supplier individually or jointly with others, or any subcontractors, with respect to the program, publications, or services provided resulting from this Contract. 




 


 


 

14.12 032824-RTG
Rev. 3/2022 10
C. MARKETING. Any direct advertising, marketing, or offers with Participating Entities must be approved by Sourcewell. Send all approval requests to the Sourcewell Supplier Development Administrator assigned to this Contract.

D. ENDORSEMENT. The Supplier must not claim that Sourcewell endorses its Equipment, Products, or Services.

14. GOVERNING LAW, JURISDICTION, AND VENUE
The substantive and procedural laws of the State of Minnesota will govern this Contract. Venue for all legal proceedings arising out of this Contract, or its breach, must be in the appropriate state court in Todd County, Minnesota or federal court in Fergus Falls, Minnesota.

15. FORCE MAJEURE
Neither party to this Contract will be held responsible for delay or default caused by acts of God or other conditions that are beyond that party’s reasonable control. A party defaulting under this provision must provide the other party prompt written notice of the default.

16. SEVERABILITY
If any provision of this Contract is found by a court of competent jurisdiction to be illegal, unenforceable, or void then both parties will be relieved from all obligations arising from that provision. If the remainder of this Contract is capable of being performed, it will not be affected by such determination or finding and must be fully performed.

17. PERFORMANCE, DEFAULT, AND REMEDIES
A. PERFORMANCE. During the term of this Contract, the parties will monitor performance and address unresolved contract issues as follows:

1. Notification. The parties must promptly notify each other of any known dispute and work in good faith to resolve such dispute within a reasonable period of time. If necessary, Sourcewell and the Supplier will jointly develop a short briefing document that describes the issue(s), relevant impact, and positions of both parties.

2. Escalation. If parties are unable to resolve the issue in a timely manner, as specified above, either Sourcewell or Supplier may escalate the resolution of the issue to a higher level of management. The Supplier will have 30 calendar days to cure an outstanding issue.

3. Performance while Dispute is Pending. Notwithstanding the existence of a dispute, the Supplier must continue without delay to carry out all of its responsibilities under the Contract that are not affected by the dispute. If the Supplier fails to continue without delay to perform its responsibilities under the Contract, in the accomplishment of all undisputed 




 


 


 

14.13 032824-RTG
Rev. 3/2022 11
work, the Supplier will bear any additional costs incurred by Sourcewell and/or its Participating Entities as a result of such failure to proceed.

B. DEFAULT AND REMEDIES. Either of the following constitutes cause to declare this Contract, or any Participating Entity order under this Contract, in default:

1. Nonperformance of contractual requirements, or

2. A material breach of any term or condition of this Contract.

The party claiming default must provide written notice of the default, with 30 calendar days to cure the default. Time allowed for cure will not diminish or eliminate any liability for liquidated or other damages. If the default remains after the opportunity for cure, the non-defaulting party may:
x Exercise any remedy provided by law or equity, or
x Terminate the Contract or any portion thereof, including any orders issued against the Contract.

18. INSURANCE

A. REQUIREMENTS. At its own expense, Supplier must maintain insurance policy(ies) in effect at all times during the performance of this Contract with insurance company(ies) licensed or authorized to do business in the State of Minnesota having an “AM BEST” rating of A- or better, with coverage and limits of insurance not less than the following:

1. Workers’ Compensation and Employer’s Liability.

Workers’ Compensation: As required by any applicable law or regulation.

Employer's Liability Insurance: must be provided in amounts not less than listed below:

Minimum limits:
$500,000 each accident for bodily injury by accident
$500,000 policy limit for bodily injury by disease
$500,000 each employee for bodily injury by disease

2. Commercial General Liability Insurance. Supplier will maintain insurance covering its operations, with coverage on an occurrence basis, and must be subject to terms no less broad than the Insurance Services Office (“ISO”) Commercial General Liability Form CG0001 (2001 or newer edition), or equivalent. At a minimum, coverage must include liability arising from premises, operations, bodily injury and property damage, independent contractors, products-completed operations including construction defect, contractual liability, blanket contractual liability, and personal injury and advertising injury. All required limits, terms and conditions of coverage must be maintained during the term of this Contract.

Minimum Limits:





 


 


 

14.14 032824-RTG
Rev. 3/2022 12
$1,000,000 each occurrence Bodily Injury and Property Damage $1,000,000 Personal and Advertising Injury
$2,000,000 aggregate for products liability-completed operations $2,000,000 general aggregate

3. Commercial Automobile Liability Insurance. During the term of this Contract, Supplier will maintain insurance covering all owned, hired, and non-owned automobiles in limits of liability not less than indicated below. The coverage must be subject to terms no less broad than ISO Business Auto Coverage Form CA 0001 (2010 edition or newer), or equivalent.

Minimum Limits:
$1,000,000 each accident, combined single limit

4. Umbrella Insurance. During the term of this Contract, Supplier will maintain umbrella coverage over Employer’s Liability, Commercial General Liability, and Commercial Automobile.

Minimum Limits:
$2,000,000
Failure of Supplier to maintain the required insurance will constitute a material breach entitling Sourcewell to immediately terminate this Contract for default.

B. CERTIFICATES OF INSURANCE. Prior to commencing under this Contract, Supplier must furnish to Sourcewell a certificate of insurance, as evidence of the insurance required under this Contract. Prior to expiration of the policy(ies), renewal certificates must be mailed to Sourcewell, 202 12th Street Northeast, P.O. Box 219, Staples, MN 56479 or sent to the Sourcewell Supplier Development Administrator assigned to this Contract. The certificates must be signed by a person authorized by the insurer(s) to bind coverage on their behalf.

Failure to request certificates of insurance by Sourcewell, or failure of Supplier to provide certificates of insurance, in no way limits or relieves Supplier of its duties and responsibilities in this Contract.

C. ADDITIONAL INSURED ENDORSEMENT AND PRIMARY AND NON-CONTRIBUTORY INSURANCE CLAUSE. Supplier agrees to list Sourcewell and its Participating Entities, including their officers, agents, and employees, as an additional insured under the Supplier’s commercial general liability insurance policy with respect to liability arising out of activities, “operations,” or “work” performed by or on behalf of Supplier, and products and completed operations of Supplier. The policy provision(s) or endorsement(s) must further provide that coverage is primary and not excess over or contributory with any other valid, applicable, and collectible insurance or self-insurance in force for the additional insureds. 




 


 


 

14.15 032824-RTG
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D. WAIVER OF SUBROGATION. Supplier waives and must require (by endorsement or otherwise) all its insurers to waive subrogation rights against Sourcewell and other additional insureds for losses paid under the insurance policies required by this Contract or other insurance applicable to the Supplier or its subcontractors. The waiver must apply to all deductibles and/or self-insured retentions applicable to the required or any other insurance maintained by the Supplier or its subcontractors. Where permitted by law, Supplier must require similar written express waivers of subrogation and insurance clauses from each of its subcontractors.

E. UMBRELLA/EXCESS LIABILITY/SELF-INSURED RETENTION. The limits required by this Contract can be met by either providing a primary policy or in combination with umbrella/excess liability policy(ies), or self-insured retention.

19. COMPLIANCE
A. LAWS AND REGULATIONS. All Equipment, Products, or Services provided under this Contract must comply fully with applicable federal laws and regulations, and with the laws in the states and provinces in which the Equipment, Products, or Services are sold.

B. LICENSES. Supplier must maintain a valid and current status on all required federal, state/provincial, and local licenses, bonds, and permits required for the operation of the business that the Supplier conducts with Sourcewell and Participating Entities.

20. BANKRUPTCY, DEBARMENT, OR SUSPENSION CERTIFICATION
Supplier certifies and warrants that it is not in bankruptcy or that it has previously disclosed in writing certain information to Sourcewell related to bankruptcy actions. If at any time during this Contract Supplier declares bankruptcy, Supplier must immediately notify Sourcewell in writing.

Supplier certifies and warrants that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from programs operated by the State of Minnesota; the United States federal government or the Canadian government, as applicable; or any Participating Entity. Supplier certifies and warrants that neither it nor its principals have been convicted of a criminal offense related to the subject matter of this Contract. Supplier further warrants that it will provide immediate written notice to Sourcewell if this certification changes at any time.

21. PROVISIONS FOR NON-UNITED STATES FEDERAL ENTITY PROCUREMENTS UNDER

UNITED STATES FEDERAL AWARDS OR OTHER AWARDS
Participating Entities that use United States federal grant or FEMA funds to purchase goods or services from this Contract may be subject to additional requirements including the 




 


 


 

14.16 032824-RTG
Rev. 3/2022 14
procurement standards of the Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards, 2 C.F.R. § 200. Participating Entities may have additional requirements based on specific funding source terms or conditions. Within this Article, all references to “federal” should be interpreted to mean the United States federal government.

The following list only applies when a Participating Entity accesses Supplier’s Equipment, Products, or Services with United States federal funds.

A. EQUAL EMPLOYMENT OPPORTUNITY. Except as otherwise provided under 41 C.F.R. § 60, all contracts that meet the definition of “federally assisted construction contract” in 41 C.F.R. § 60-

1.3 must include the equal opportunity clause provided under 41 C.F.R. §60-1.4(b), in accordance with Executive Order 11246, “Equal Employment Opportunity” (30 FR 12319, 12935, 3 C.F.R. §, 1964-1965 Comp., p. 339), as amended by Executive Order 11375, “Amending Executive Order 11246 Relating to Equal Employment Opportunity,” and implementing regulations at 41 C.F.R. § 60, “Office of Federal Contract Compliance Programs, Equal Employment Opportunity, Department of Labor.” The equal opportunity clause is incorporated herein by reference.

B. DAVIS-BACON ACT, AS AMENDED (40 U.S.C. § 3141-3148). When required by federal program legislation, all prime construction contracts in excess of $2,000 awarded by nonfederal entities must include a provision for compliance with the Davis-Bacon Act (40 U.S.C. § 3141-3144, and 3146-3148) as supplemented by Department of Labor regulations (29 C.F.R. § 5, “Labor Standards Provisions Applicable to Contracts Covering Federally Financed and Assisted Construction”). In accordance with the statute, contractors must be required to pay wages to laborers and mechanics at a rate not less than the prevailing wages specified in a wage determination made by the Secretary of Labor. In addition, contractors must be required to pay wages not less than once a week. The non-federal entity must place a copy of the current prevailing wage determination issued by the Department of Labor in each solicitation. The decision to award a contract or subcontract must be conditioned upon the acceptance of the wage determination. The non-federal entity must report all suspected or reported violations to the federal awarding agency. The contracts must also include a provision for compliance with the Copeland “Anti-Kickback” Act (40 U.S.C. § 3145), as supplemented by Department of Labor regulations (29 C.F.R. § 3, “Contractors and Subcontractors on Public Building or Public Work Financed in Whole or in Part by Loans or Grants from the United States”). The Act provides that each contractor or subrecipient must be prohibited from inducing, by any means, any person employed in the construction, completion, or repair of public work, to give up any part of the compensation to which he or she is otherwise entitled. The non-federal entity must report all suspected or reported violations to the federal awarding agency. Supplier must be in compliance with all applicable Davis-Bacon Act provisions.

C. CONTRACT WORK HOURS AND SAFETY STANDARDS ACT (40 U.S.C. § 3701-3708). Where applicable, all contracts awarded by the non-federal entity in excess of $100,000 that involve the employment of mechanics or laborers must include a provision for compliance with 40 U.S.C. §§ 3702 and 3704, as supplemented by Department of Labor regulations (29 C.F.R. § 5). 




 


 


 

14.17 032824-RTG
Rev. 3/2022 15
Under 40 U.S.C. § 3702 of the Act, each contractor must be required to compute the wages of every mechanic and laborer on the basis of a standard work week of 40 hours. Work in excess of the standard work week is permissible provided that the worker is compensated at a rate of not less than one and a half times the basic rate of pay for all hours worked in excess of 40 hours in the work week. The requirements of 40 U.S.C. § 3704 are applicable to construction work and provide that no laborer or mechanic must be required to work in surroundings or under working conditions which are unsanitary, hazardous or dangerous. These requirements do not apply to the purchases of supplies or materials or articles ordinarily available on the open market, or contracts for transportation or transmission of intelligence. This provision is hereby incorporated by reference into this Contract. Supplier certifies that during the term of an award for all contracts by Sourcewell resulting from this procurement process, Supplier must comply with applicable requirements as referenced above.

D. RIGHTS TO INVENTIONS MADE UNDER A CONTRACT OR AGREEMENT. If the federal award meets the definition of “funding agreement” under 37 C.F.R. § 401.2(a) and the recipient or subrecipient wishes to enter into a contract with a small business firm or nonprofit organization regarding the substitution of parties, assignment or performance of experimental, developmental, or research work under that “funding agreement,” the recipient or subrecipient must comply with the requirements of 37 C.F.R. § 401, “Rights to Inventions Made by Nonprofit Organizations and Small Business Firms Under Government Grants, Contracts and Cooperative Agreements,” and any implementing regulations issued by the awarding agency. Supplier certifies that during the term of an award for all contracts by Sourcewell resulting from this procurement process, Supplier must comply with applicable requirements as referenced above.

E. CLEAN AIR ACT (42 U.S.C. § 7401-7671Q.) AND THE FEDERAL WATER POLLUTION CONTROL ACT (33 U.S.C. § 1251-1387). Contracts and subgrants of amounts in excess of $150,000 require the non-federal award to agree to comply with all applicable standards, orders or regulations issued pursuant to the Clean Air Act (42 U.S.C. § 7401- 7671q) and the Federal Water Pollution Control Act as amended (33 U.S.C. § 1251- 1387). Violations must be reported to the Federal awarding agency and the Regional Office of the Environmental Protection Agency (EPA).

Supplier certifies that during the term of this Contract will comply with applicable requirements as referenced above.

F. DEBARMENT AND SUSPENSION (EXECUTIVE ORDERS 12549 AND 12689). A contract award (see 2 C.F.R. § 180.220) must not be made to parties listed on the government wide exclusions in the System for Award Management (SAM), in accordance with the OMB guidelines at 2 C.F.R. §180 that implement Executive Orders 12549 (3 C.F.R. § 1986 Comp., p. 189) and 12689 (3 C.F.R. § 1989 Comp., p. 235), “Debarment and Suspension.” SAM Exclusions contains the names of parties debarred, suspended, or otherwise excluded by agencies, as well as parties declared ineligible under statutory or regulatory authority other than Executive Order 12549. Supplier certifies that neither it nor its principals are presently debarred, suspended, proposed for debarment, declared ineligible, or voluntarily excluded from participation by any federal department or agency.





 


 


 

14.18 032824-RTG
Rev. 3/2022 16
G. BYRD ANTI-LOBBYING AMENDMENT, AS AMENDED (31 U.S.C. § 1352). Suppliers must file any required certifications. Suppliers must not have used federal appropriated funds to pay any person or organization for influencing or attempting to influence an officer or employee of any agency, a member of Congress, officer or employee of Congress, or an employee of a member of Congress in connection with obtaining any federal contract, grant, or any other award covered by 31 U.S.C. § 1352. Suppliers must disclose any lobbying with non-federal funds that takes place in connection with obtaining any federal award. Such disclosures are forwarded from tier to tier up to the non-federal award. Suppliers must file all certifications and disclosures required by, and otherwise comply with, the Byrd Anti-Lobbying Amendment (31 U.S.C. § 1352).

H. RECORD RETENTION REQUIREMENTS. To the extent applicable, Supplier must comply with the record retention requirements detailed in 2 C.F.R. § 200.333. The Supplier further certifies that it will retain all records as required by 2 C.F.R. § 200.333 for a period of 3 years after grantees or subgrantees submit final expenditure reports or quarterly or annual financial reports, as applicable, and all other pending matters are closed.

I. ENERGY POLICY AND CONSERVATION ACT COMPLIANCE. To the extent applicable, Supplier must comply with the mandatory standards and policies relating to energy efficiency which are contained in the state energy conservation plan issued in compliance with the Energy Policy and Conservation Act.

J. BUY AMERICAN PROVISIONS COMPLIANCE. To the extent applicable, Supplier must comply with all applicable provisions of the Buy American Act. Purchases made in accordance with the Buy American Act must follow the applicable procurement rules calling for free and open competition.

K. ACCESS TO RECORDS (2 C.F.R. § 200.336). Supplier agrees that duly authorized representatives of a federal agency must have access to any books, documents, papers and records of Supplier that are directly pertinent to Supplier’s discharge of its obligations under this Contract for the purpose of making audits, examinations, excerpts, and transcriptions. The right also includes timely and reasonable access to Supplier’s personnel for the purpose of interview and discussion relating to such documents.

L. PROCUREMENT OF RECOVERED MATERIALS (2 C.F.R. § 200.322). A non-federal entity that is a state agency or agency of a political subdivision of a state and its contractors must comply with Section 6002 of the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act. The requirements of Section 6002 include procuring only items designated in guidelines of the Environmental Protection Agency (EPA) at 40 C.F.R. § 247 that contain the highest percentage of recovered materials practicable, consistent with maintaining a satisfactory level of competition, where the purchase price of the item exceeds $10,000 or the value of the quantity acquired during the preceding fiscal year exceeded $10,000; procuring 




 


 


 

14.19 032824-RTG
Rev. 3/2022 17
solid waste management services in a manner that maximizes energy and resource recovery; and establishing an affirmative procurement program for procurement of recovered materials identified in the EPA guidelines.

M. FEDERAL SEAL(S), LOGOS, AND FLAGS. The Supplier cannot use the seal(s), logos, crests, or reproductions of flags or likenesses of Federal agency officials without specific pre-approval.

N. NO OBLIGATION BY FEDERAL GOVERNMENT. The U.S. federal government is not a party to this Contract or any purchase by a Participating Entity and is not subject to any obligations or liabilities to the Participating Entity, Supplier, or any other party pertaining to any matter resulting from the Contract or any purchase by an authorized user.

O. PROGRAM FRAUD AND FALSE OR FRAUDULENT STATEMENTS OR RELATED ACTS. The Contractor acknowledges that 31 U.S.C. 38 (Administrative Remedies for False Claims and Statements) applies to the Supplier’s actions pertaining to this Contract or any purchase by a Participating Entity.

P. FEDERAL DEBT. The Supplier certifies that it is non-delinquent in its repayment of any federal debt. Examples of relevant debt include delinquent payroll and other taxes, audit disallowance, and benefit overpayments.

Q. CONFLICTS OF INTEREST. The Supplier must notify the U.S. Office of General Services, Sourcewell, and Participating Entity as soon as possible if this Contract or any aspect related to the anticipated work under this Contract raises an actual or potential conflict of interest (as described in 2 C.F.R. Part 200). The Supplier must explain the actual or potential conflict in writing in sufficient detail so that the U.S. Office of General Services, Sourcewell, and Participating Entity are able to assess the actual or potential conflict; and provide any additional information as necessary or requested.

R. U.S. EXECUTIVE ORDER 13224. The Supplier, and its subcontractors, must comply with U.S.

Executive Order 13224 and U.S. Laws that prohibit transactions with and provision of resources and support to individuals and organizations associated with terrorism.

S. PROHIBITION ON CERTAIN TELECOMMUNICATIONS AND VIDEO SURVEILLANCE SERVICES OR EQUIPMENT. To the extent applicable, Supplier certifies that during the term of this Contract it will comply with applicable requirements of 2 C.F.R. § 200.216.

T. DOMESTIC PREFERENCES FOR PROCUREMENTS. To the extent applicable, Supplier certifies that during the term of this Contract will comply with applicable requirements of 2 C.F.R. § 200.322.





 


 


 

14.20 032824-RTG
Rev. 3/2022 18

22. CANCELLATION
Sourcewell or Supplier may cancel this Contract at any time, with or without cause, upon 60 days’ written notice to the other party. However, Sourcewell may cancel this Contract immediately upon discovery of a material defect in any certification made in Supplier’s Proposal. Cancellation of this Contract does not relieve either party of financial, product, or service obligations incurred or accrued prior to cancellation.

Sourcewell Rush Truck Centers of Texas, L.P.

By: __________________________ By: __________________________ Jeremy Schwartz Michael Lyons
Title: Chief Procurement Officer Title: Associate General Counsel Date: ________________________ Date: ________________________ 




 


 


 

 






 







14.21 032824-RTG
Rev. 3/2022 19
Exhibit A
Notice of Security Interest





 


 


 

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Bid Number: RFP 032824 Vendor Name: Rush Enterprises





 


 


 

14.30 Table 16: Category 2 - Depth and Breadth of Offered Equipment Products and Services Indicate below if the listed types or classes of equipment, products, and services are offered within your proposal. Provide additional comments in the text box provided, as necessary.

Proposers seeking an award in Category 2, as defined herein, must include at least one solution offered within the scope of Category 2 for electric propulsion systems only. See RFP Section II. B. 1 for details.

We will not be submitting for Table 16: Category 2 - Depth and Breadth of Offered Equipment Products and Services Line
Item Category or Type Offered * Comments
80 Battery Electric Vehicle (BEV)
Class 4 Chassis
Yes
No
Rush Truck Centers is not offering an OEM that has a BEV vehicle for the class 4 space. 81 Battery Electric Vehicle (BEV)
Class 5 Chassis
Yes
No
Isuzu is looking to offer a BEV class 5 unit towards the end of 2024/beginning of 2025. Although pricing isn t currently available, once made available to Rush Truck Centers, we intend to work with Sourcwell to have this model added to the contract.
82 Battery Electric Vehicle (BEV)
Class 6 Chassis
Yes
No
Rush Truck Centers is not offering an OEM that has a BEV vehicle for the class 6 space on. 83 Battery Electric Vehicle (BEV)
Class 7 Chassis
Yes
No
Rush Truck Centers is not offering an OEM that has a BEV vehicle for the class 7 space. 84 Battery Electric Vehicle (BEV)
Class 8 Chassis
Yes
No
Rush Truck Centers is not offering an OEM that has a BEV vehicle for the class 8 space. 85 Related equipment, accessories, parts, upfitting,
services, used chassis and Class 3 chassis
Yes
No
Rush Truck Centers is offering the Ford E-Transit line which we are offering on this proposal.

Exceptions to Terms, Conditions, or Specifications Form Only those Proposer Exceptions to Terms, Conditions, or Specifications that have been accepted by Sourcewell have been incorporated into the contract text.

Documents
Ensure your submission document(s) conforms to the following:

1. Documents in PDF format are preferred. Documents in Word, Excel, or compatible formats may also be provided.

2. Documents should NOT have a security password, as Sourcewell may not be able to open the file. It is your sole responsibility to ensure that the uploaded document(s) are not either defective, corrupted or blank and that the documents can be opened and viewed by Sourcewell.

3. Sourcewell may reject any response where any document(s) cannot be opened and viewed by Sourcewell.

4. If you need to upload more than one (1) document for a single item, you should combine the documents into one zipped file. If the zipped file contains more than one (1) document, ensure each document is named, in relation to the submission format item responding to. For example, if responding to the Marketing Plan category save the document as "Marketing Plan." Pricing - MSRP Pricing.zip - Thursday March 28, 2024 13:53:27 Financial Strength and Stability - 2023 10-K Final.pdf - Tuesday March 26, 2024 10:49:33 Marketing Plan/Samples (optional)
WMBE/MBE/SBE or Related Certificates (optional)
Warranty Information - Exhibit C - Rush Limited Warranty.pdf - Thursday March 28, 2024 12:41:37 Standard Transaction Document Samples - Sourcewell Docs Example.pdf - Thursday March 28, 2024 14:24:57 Requested Exceptions - RFP_033824_Class_4-8_Chassis_&_Cabs_Contract_Template_Rush revisions.docx - Tuesday March 26, 2024 11:39:46 Upload Additional Document - Additional Documents.zip - Thursday March 28, 2024 12:40:50 Bid Number: RFP 032824 Vendor Name: Rush Enterprises





 


 


 

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14.33 City Council

AGENDA REPORT
DATE: 08/24/2026
AGENDA OF: 09/08/2026
DEPARTMENT: Water
SUBJECT: 2026 Water Department Long-Range Financial Plan, 2026 Water Rate Study, and Proposed Water Rate Schedule for Calendar Year 2027 – Calendar Year 2031 (CY 2027 – CY 2031) (WT)
LOCATION: Citywide
RECOMMENDATION: Motion to:
1) Adopt the 2026 Water Department Long-Range Financial Plan; 2) Receive the 2026 Water Rate Study dated August 18, 2026; 3) Accept the proposed schedule of water rate increases for CY 2027 – CY 2031 and the proposed CY 2027 – CY 2031 Drought Cost Recovery Fee schedule as set forth in the Rate Study, and direct staff to post the Rate Study as the basis for the proposed rates in connection with the Proposition 218 notice process, for the purposes of proceeding with the required public notice and protest period under Proposition 218; and
4) Authorize the Water Department to mail the Proposition 218-compliant public notice initiating the protest period and set the required public hearing for Tuesday November 17, 2026, after the hour of 10:00 a.m.

BACKGROUND: The Water Department continues to make significant investments in water system facilities, infrastructure, and supplies to maintain reliable service, protect public health and safety, and respond to increasingly extreme weather conditions. As an enterprise utility funded through customer rates and charges, the Department must ensure that revenues remain sufficient to support both ongoing operations and long-term investment in the water system.

Periodic cost-of-service analyses and corresponding rate adjustments are therefore an essential part of sound financial planning and responsible utility management.

Beginning in early 2025, Water Department staff, the Santa Cruz Water Commission, and the City’s consultants—Bartle Wells Associates (“BWA”), Public Financial Management (“PFM”), and M. Cubed—worked together to update the Department’s 2021 Long-Range Financial Plan (“LRFP”), prepare the Water Rate Study for the CY 2027–CY 2031 rate period (“Rate Study”), which includes a cost of service analysis (“COSA”), and evaluate customer affordability. The

15.1 last cost of service analysis and rate study was performed in 2021 and resulted in a five-year rate structure from FY 2022 through FY 2026.

The 2026 LRFP integrates long-range projections of operating and capital costs with financial policies and metrics. These projections establish the annual revenue requirements for the fiveyear rate period. The COSA contained in the Rate Study then allocates those costs among customer classes based on the cost of providing service, providing the foundation for development of the proposed water rates.

Following Council authorization, the City will provide the notice required by Proposition 218 describing the proposed rates and charges, the basis for their calculation, and the date, time, and location of the public hearing. Written Proposition 218 protests may be submitted through the close of the public hearing. As discussed below, the City also intends to use the separate writtenobjection procedure authorized by Government Code section 53759.1.

Water Commission Review and Policy Direction
The proposed financial plan and rates are the culmination of an iterative process involving Water Department staff, the City’s consultants, and the Water Commission. Throughout development of the LRFP, Rate Study, and affordability analysis, staff presented information to the Commission for review and discussion. The Commission’s ad hoc committee provided an additional forum for detailed consideration of the assumptions, analyses, and policy choices underlying the proposed rates.

The Commission’s review focused on several overarching objectives and priorities: aligning rates and financial policies with industry standards and cost-of-service principles; providing sufficient revenues to support planned infrastructure investment; improving the predictability of Department revenues; preserving affordability and conservation incentives; simplifying the rate structure; and maintaining the Department’s long-term financial resilience.

These policy objectives influenced specific elements of the proposed rate structure. The proposed rates increase the proportion of revenue recovered through fixed charges to improve revenue stability while retaining a predominantly volumetric rate structure and strong conservation price signals. The proposed structure also simplifies customer bills by consolidating existing volumetric charges (consumption, rate stabilization, and infrastructure investment) and uses industry-standard meter capacity relationships in determining fixed charges. The Commission’s review also emphasized affordability and the need to balance the Department’s financial requirements with impacts on customers.

The Commission’s input continued through review of the proposed drought cost-recovery mechanism. In response to Commission direction, the proposed drought rate structure was changed from fixed monthly drought charges based on meter size to volumetric drought surcharges based on actual water use. This approach maintains a conservation signal during water shortages while providing a mechanism for recovering the volumetric revenue requirement identified through the COSA when mandatory reductions in water use are in place.

At its August 24, 2026 meeting, the Water Commission unanimously recommended the proposed water rate structure and rate changes for use in the Proposition 218 public notification process.

The Commission’s action reflects its consideration of the proposed rates as well as the financial planning, cost-of-service, affordability, and policy analyses supporting them.

15.2 DISCUSSION:

Long-Range Financial Plan and Revenue Requirements
The 2026 LRFP provides the financial framework for determining the revenues necessary to operate the water system, undertake planned capital improvements, and maintain the Department’s financial strength. The plan was updated concurrently with the rate study so that the proposed rates are directly connected to the Department’s long-term operating and capital requirements.

The principal driver of the Department’s increasing revenue requirements is the need to renew aging water infrastructure and facilities. The Department has embarked on a multi-decade infrastructure investment program estimated at approximately $1 billion over the next 15 years.

Major near-term investments include the Graham Hill Water Treatment Plant Facilities Improvement Project, replacement of the Newell Creek Pipeline, and preparation for the Beltz Water Treatment Plant Project and water supply augmentation projects.

The Department intends to use a combination of rate revenues and long-term financing to fund these investments. Approximately $213 million of the five-year capital program is anticipated to be debt-financed through low-interest State Revolving Fund and federal Water Infrastructure Finance and Innovation Act financing. Using long-term financing for long-lived infrastructure distributes the costs across present and future customers who will benefit from those investments and reduces the immediate impact on current customer bills. Annual debt service is projected to increase as this financing is put in place, reaching approximately $21.7 million by FY 2031.

Operating costs are also increasing. The financial analysis assumes ongoing increases in costs for electricity, treatment chemicals, insurance, and citywide shared services and forecasts an average annual operating cost inflation of approximately five percent. At the same time, actual water sales revenues have consistently fallen below forecast in recent years due to factors including wet weather, changes in demand, and successful conservation efforts. Because the current rate structure recovers approximately 90 percent of revenues through volumetric charges, changes in water demand can have a significant effect on Department revenues even though most water system costs do not vary directly with water use.

The LRFP addresses these financial risks through a combination of revenue planning, financing strategies, and financial policies. It reaffirms a 1.5-times debt service coverage ratio, maintains prudent operating reserves, revises the Emergency Reserve to be indexed to the operating budget, and establishes an Equipment Replacement Fund. These policies are intended to maintain liquidity and creditworthiness, support access to low-interest financing, and provide sufficient financial capacity to carry out the Department’s capital program.

The resulting annual revenue requirements represent the amount of revenue the Department must collect to fund projected operating expenses, capital investment, debt service, and other financial requirements during the rate period.

TABLE 1 —REVENUE REQUIREMENTS, 2027 – 2031

15.3 Cost-of-Service Analysis and Proposed Rate Structure The COSA translates the annual revenue requirements identified through the LRFP into rates that recover the cost of providing service from the appropriate customer classes. BWA completed the analysis using the Base-Extra Capacity methodology described in the American Water Works Association M1 Manual. System costs were separated into functional components and allocated based on how different customer classes use and place demands on the water system.

It is important to distinguish between the annual increase in the Department’s overall revenue requirement and changes in individual rates or customer bills. Revenue requirement increases describe the total amount of additional revenue the water system needs to collect. The COSA determines how that revenue requirement is allocated among customer classes based on the costs associated with serving each class. As a result, changes in rates and bills will vary depending on customer class, meter size, water use, and other characteristics.

The proposed rate structure reflects both the results of the COSA and the policy objectives considered through the Water Commission process. A key change is an increase in the portion of revenues recovered through fixed charges, from approximately 10 percent under the existing structure to an average of approximately 20 percent across customer classes. This change is intended to improve revenue stability while continuing to recover the majority of revenues through volumetric charges and thereby maintaining a strong conservation incentive. A higher fixed-revenue alternative was considered but not recommended because of its potential impact on low-volume customers and conservation price signals.

The proposed fixed charges also use standard AWWA Meter Equivalent Units to recognize the greater potential capacity demands associated with larger meters. In addition, the existing Quantity Charge, Infrastructure Reinvestment Fee, and Rate Stabilization Fee would be consolidated into a single volumetric charge, simplifying the rate structure and customer bills.

Landscape irrigation accounts would move from the existing three-tier structure to two tiers because historical demand data show that the third tier is rarely used.

The proposed fixed monthly charges and volumetric rates resulting from the COSA are shown in Table 2.

15.4 TABLE 2 — PROPOSED VOLUMETRIC MONTHLY WATER FEES BY CUSTOMER CLASS AND APPLICABLE TIER, CY 2027–CY 2031
Note that the values in the July 1 2026, column reflect the combined total of the Quantity Charge, Infrastructure Reinvestment Fee, and Rate Stabilization Fee (RSF) in order to provide a direct comparison against the proposed consolidated volumetric rate.

15.5 TABLE 3 — PROPOSED FIXED WATER RATES BY CUSTOMER METER SIZE, CY 2027–CY 2031
Drought Surcharges
The Rate Study also updates the Department’s mechanism for recovering costs during declared water shortages. A substantial share of the Department’s operating costs are fixed and do not decline proportionately when water consumption decreases. During severe droughts or other water shortages, mandatory conservation can substantially reduce billed water use and associated revenues while the Department continues to incur the costs necessary to operate and maintain the water system.

In response to discussions with the Water Commission, the proposed framework uses temporary volumetric drought surcharges rather than fixed drought charges based on meter size. The surcharges would be additive to the regular volumetric rates and would apply proportionately to the amount of water consumed. Because the surcharge is applied as a uniform percentage of each customer's existing volumetric rate, it preserves the proportional cost recovery established by the COSA. This approach provides additional revenue needed to maintain the Department’s financial and operational stability during periods of mandatory conservation while preserving a price signal to conserve water.

15.6 The temporary drought surcharges would apply across customer classes only during Councildeclared water shortage stages and would terminate when the applicable declaration ends. The proposed surcharge rates derived through the COSA are shown below.

TABLE 4 — PROPOSED TEMPORARY DROUGHT SURCHARGES BY DECLARED

WATER SHORTAGE STAGE AND, AS APPLICABLE, CUSTOMER CLASS For example, under a Stage 2 water shortage, which carries a 23 percent drought surcharge, a Tier 1 residential customer paying the proposed Tier 1 volumetric rate of $15.96 per CCF would pay: $15.96 + ($15.96 x 0.23) = $19.63 per CCF.
2026 Affordability Study
The Department engaged M.Cubed to perform a comprehensive Water Service Affordability Study (“Affordability Study”) (available online at www.santacruzca.gov/water-rates) to evaluate the impact of the proposed rate adjustments. The Affordability Study evaluated household water costs for essential indoor use relative to household income across income brackets, customer classes, census block groups, and Disadvantaged Communities (“DACs”) using industrystandard metrics. Data for regional income growth projections are from the California Department of Finance, and the report defines efficient use as 35 gallons per person per day.

A key finding from the Affordability Study is that, under the proposed rate structure, essential indoor water use would remain as affordable as before. The recommended rate design maintains a lower tier 1 rate for usage up to 5 CCF to ensure that basic health and safety needs are protected. According to the Affordability Study, a 5 CCF allocation covers the essential indoor water needs of more than 90% of residential households across the service area.

The Affordability Study also demonstrates that by 2031, average water costs are projected to be

1.7% of net disposable income (as compared to 1.6% in 2021, when M.Cubed last performed a water affordability assessment). Additionally, the percentage of households located in census blocks classified as having moderate-high to high financial burden is projected to be 18%, in comparison to 24% in 2021. The Department’s Utility Customer Assistance Program (“UCAP”) was established to provide direct support to that population. Modeling completed by M.Cubed shows that the UCAP reduces the water bill for qualifying DAC households by approximately 31%. The Department adjusts the UCAP benefit annually, alongside each rate increase, to ensure that a 25% bill discount is maintained, thus protecting vulnerable families from the full impact of the rate changes.

Proposition 218 Notification and Next Steps
Together, the LRFP, Rate Study, and Water Commission review provide the financial, analytical, and policy basis for the rates proposed for the CY 2027–CY 2031 period. The LRFP determines the Department’s annual revenue needs, while the Rate Study contains the COSA that allocates the costs of providing service among customer classes and derives the proposed fixed charges, volumetric rates, and temporary drought surcharges proposed for each class.

15.7 The action before the City Council at this stage does not constitute final adoption of the proposed water rates. Rather, it authorizes staff to initiate the Proposition 218 notification process using the proposed rates and charges developed through this process.

The City also intends to use the administrative exhaustion procedure authorized by Government Code section 53759.1. In addition to the Proposition 218 protest process, the notice will establish a deadline of no less than 45 days after notice is provided for submission of written legal objections specifying the grounds for alleged noncompliance. The City will post the Rate Study as the written basis for the proposed rates, and provide a description of the objection process in the Proposition 218 notice. Staff will consider and respond in writing to timely objections before the close of the public hearing, and the objections and responses will be presented to the Council for consideration. Failure to timely raise an objection may bar a subsequent legal challenge on grounds that were not timely raised.

Following Council authorization, the City will mail the required Proposition 218 notice describing the proposed rates and charges, the basis for their calculation, and the procedures for submitting written protests. The notice will also describe the separate written-objection procedure under Government Code section 53759.1, and the City will post the Rate Study as the written basis for the proposed rates and charges. The Council will conduct the noticed public hearing on November 17, 2026, receive the results of the Proposition 218 protest process, consider any timely written objections and staff responses, and then consider whether to adopt the proposed rates and charges. If adopted, the first proposed rates and charges would take effect January 1, 2027.

CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) DETERMINATION: The recommended action would adopt the Long-Range Financial Plan and authorize the City to begin the Proposition 218 notice process. It would not adopt the proposed water rates or authorize construction of any specific capital project. Because these actions are governmental fiscal and administrative activities that do not commit the City to a project that may cause a physical change in the environment, they are not a “project” under CEQA. (14 C.C.R. § 15378(b)(4).) HEALTH IN ALL POLICIES (HiAP): The recommended action supports the equity and health pillars of the City of Santa Cruz’s HiAP initiative by supporting the Water Department’s work in providing responsible financial stewardship, ensuring long-term fiscal health of the utility while maintaining affordability to customers. Reliable access to safe drinking water is essential to public health, and maintaining adequate revenue supports the Department’s ability to operate and maintain existing facilities, replace aging infrastructure, and make planned investments needed to continue providing dependable water service. The proposed rate structure also reflects consideration of customer affordability, including the impact of essential indoor water use on lower-income households and the continued availability of customer assistance programs.

FISCAL IMPACT:

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

2. This recommendation requires a budget adjustment: No

3. The recommendation creates an on-going expenditure commitment: No

15.8 FISCAL IMPACT DESCRIPTION: The proposed rates are designed to fully fund the operating and capital needs of the Water Enterprise Fund and to equitably allocate costs across all customer classes. There is no impact to the General Fund. If the proposed rate schedule is authorized by City Council following completion of the Proposition 218 public notification process, updated revenue projections will be incorporated into the Water Department’s FY 2028 Operating Budget and CIP.

Prepared By:

Nicholas Kurns
Assistant Finance Director -
Water Department
Submitted By:

Heidi Luckenbach
Water Director
Approved By:

Matt Huffaker
City Manager
ATTACHMENTS:

1. SUMMARY OF FINANCIAL PLANNING AND WATER RATE DEVELOPMENT PROCESS.PDF

2. 2026 WATER RATE STUDY.PDF

3. 2026 LONG RANGE FINANCIAL PLAN.PDF

4. WATER DEPARTMENT PROP 218 – 2026.PDF

15.9 Summary of Financial Planning and Water Rate Development Process Santa Cruz Water Department
September 2026
The process to develop an updated long-range financial plan and set of water rates for the 2027 – 2031 rate period has been collaborative from the inception. City staff, consultants, and Water Commissioners have worked together throughout the last fifteen months to carefully consider the policy questions, revenue requirements, and cost of service analyses at the heart of this work.

The timeline below summarizes the activities:

August 4, 2025: The Water Commission created and appointed members to the Ad Hoc Financial Planning Committee (comprised of three Commissioners and one public member) to work with Department staff on developing revenue requirements, financial metrics, and long-range planning scenarios
September 9, 2025: City Council approved the professional services agreement with Bartle Wells Associates (BWA) to perform the Cost of Service Analysis and water rate study.

October 22, 2025: The Ad Hoc Financial Planning Committee held Meeting #1 to confirm the committee’s purpose, review Department financial metrics and pro-forma functionality, and establish the rate study work plan.

November 19, 2025: The Ad Hoc Financial Planning Committee held Meeting #2 with BWA to review current financial policies, receive a Proposition 218 primer, and evaluate debt service coverage target, cash reserve targets, and pricing objectives.

December 17, 2025: The Ad Hoc Financial Planning Committee held Meeting #3 with PFM, Public Financial Management, the Water Department’s financial advisor, to evaluate credit rating implications, review the 15-year Capital Investment Program (CIP), and refine reserve policy scenarios.

January 21, 2026: The Ad Hoc Financial Planning Committee held Meeting #4 to define O&M, operations and maintenance, and CIP revenue requirements, evaluate funding model scenarios, and kick off the Cost of Service Analysis work with BWA.

February 18, 2026: The Ad Hoc Financial Planning Committee held Meeting #5 to review methods for revenue stability, analyze tradeoffs between fixed and variable cost recovery, evaluate volumetric tier segmentations, and review demand projections.

15.10 March 18, 2026: The Ad Hoc Financial Planning Committee held Meeting #6 to confirm financial targets for the model, evaluate bill impact analyses across customer classes, and review tiered rate structures under Proposition 218 legal standards.

April 2, 2026: The Ad Hoc Financial Planning Committee held Meeting #7 with M.Cubed, the Water Department’s economist, to review customer class bill impacts, evaluate policy considerations, and refine preferred rate structure scenarios.

April 6, 2026: The Water Commission received an informational briefing on the rate-setting process, reviewing rate structure options, tier designs, and revenue stability considerations.

April 15, 2026: The Ad Hoc Financial Planning Committee held Meeting #8 to finalize consensus on the draft rate schedule, confirm policy recommendations regarding financial plan and rate structure, and review Utility Customer Assistance Program (UCAP) bill impacts.

May 4, 2026: The Water Commission received a comprehensive update on the six-month term of the Ad Hoc Financial Planning Committee, and reviewed the proposed 20/80 fixed-to-variable revenue framework.

June 1, 2026: The Water Commission received a presentation from staff, BWA, and M.Cubed on the Water Rate Study Update and proposed rate design alternatives, including the consolidation of volumetric rate components and the shift to standard AWWA meter capacity ratios.

August 3, 2026: The Water Commission received and reviewed the integrated 2026 Long-Range Financial Plan, 2026 Water Rate Study, and 2026 Affordability Assessment, providing final feedback on the proposed rate schedules.

August 24, 2026: The Water Commission took action to recommend the 2026 Long-Range Financial Plan, 2026 Water Rate Study and proposed 2027 – 2031 water rate schedule to City Council for authorization of the Proposition 218 public noticing process at the September 8, 2026, City Council meeting.

15.11 15.12
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15.13 August 18, 2026
Heidi Luckenbach, Water Director
City of Santa Cruz Water Department
212 Locust Street
Santa Cruz, CA 95060
Re: Cost of Service Water Rate Study
Bartle Wells Associates is pleased to submit the attached Cost of Service Water Rate Study. The study develops long-term financial projections for the Santa Cruz Water Department’s cost of providing water service and calculates proposed rates designed to proportionally recover those costs. The recommended rates are intended to meet the Santa Cruz Water Department’s funding needs, comply with legal requirements, and recover costs equitably from all customers.

Over the five-year planning period, the proposed rates incorporate modifications to the existing rate structure, which are designed to improve ratepayer equity, and align the rates with current demand levels and the projected cost of providing service.

We enjoyed working on this project and appreciate the assistance and input received from Santa Cruz Water Department staff throughout the rate study. Final recommendations were developed with input from the Santa Cruz Water Department’s project team, the Water Commission, the City Attorney’s Office, and the City’s outside legal counsel, Colantuono, Highsmith & Whatley.

Please contact us at any time if you have questions about the recommendations in this report or other matters related to water rates and finances.

Sincerely,

BARTLE WELLS ASSOCIATES

Erik Helgeson, MBA
Principal/President
2625 Alcatraz Ave, #602
Berkeley, CA 94705
Tel 510 653 3399
www.bartlewells.com

15.14 This page intentionally left blank.

15.15 TABLE OF CONTENTS
1 Executive Summary ................................................................................................ 1

1.1 Introduction ..................................................................................................................... 1

1.2 Financial Challenges......................................................................................................... 1

1.3 Water Rate Recommendations........................................................................................ 3 2 Background, Objectives, and Legal Requirements................................................... 1

2.1 Background ..................................................................................................................... 1

2.2 Rate Study Objectives...................................................................................................... 2

2.3 Rate-Study Process .......................................................................................................... 2

2.4 Constitutional Requirements for Rates........................................................................... 3

2.4.1 Article 13D, Section 6....................................................................................................... 3

2.5 Article 10, Section 2 ......................................................................................................... 4

2.6 Statute of Limitations....................................................................................................... 4

2.7 Exhaustion of Administrative Remedies.......................................................................... 4 3 Water Demand and Customer Characteristics......................................................... 5

3.1 Metered Water Demand Projection................................................................................ 5

3.2 Water and Private Fire Services....................................................................................... 5

3.2.1 Water Meter Equivalent Units......................................................................................... 6

3.2.2 Fire Service Equivalent Units ........................................................................................... 6

3.3 Meter Cost Units.............................................................................................................. 7 4 Financial Plan and Revenue Requirement............................................................... 8

4.1 Water Financial Overview................................................................................................ 8

4.2 Rate Increase Drivers....................................................................................................... 8

4.3 Financial Plan Assumptions ........................................................................................... 10

4.4 Cash Flow Projections and Recommended Rate Revenue Increases............................ 11 5 Cost of Service Analysis ........................................................................................14

5.1 Extra Capacity Components........................................................................................... 17

5.2 Offsetting Revenue and Expense Allocation Components............................................ 22

5.3 Allocations Between Fixed Capacity and Variable Water Usage Functions.................. 23

5.4 Functional Cost Allocation ............................................................................................. 24

5.5 Allocation to Fixed Cost Functional Components.......................................................... 24

5.6 Fixed Cost Functional Component Unit Costs ............................................................... 26

5.7 Function Allocation to Volumetric Cost Components................................................... 27

5.8 Volumetric Unit Costs by Function ................................................................................ 30 6 Water Rate Derivation..........................................................................................31

15.16 Table of Contents
City of Santa Cruz Water Rate Study

6.1 Rate Structure Recommendations................................................................................. 31

6.2 Potable Unit Cost........................................................................................................... 32

6.3 Residential Rate Derivation ........................................................................................... 33

6.4 Commercial Rate Derivation.......................................................................................... 34

6.5 UCSC Rate Derivation..................................................................................................... 35

6.6 Landscape Irrigation Rate Derivation ............................................................................ 36

6.7 North Coast Agricultural Water Rate Derivation........................................................... 37

6.8 Elevation Surcharge ....................................................................................................... 38

6.9 Monthly Fixed Charge Derivations................................................................................. 39

6.10 Proposed Water Rates................................................................................................... 42 7 Drought Surcharges..............................................................................................44 8 Water Rate Bill Impacts........................................................................................46 9 Conclusion............................................................................................................46 Projected Water Demand ....................................................................................................... 47 Projected Potable Water Demand by Tier.............................................................................. 48 Appendix A – Projected Demand Characteristics
Appendix B – Projected Revenues and Expenses
Appendix C – Capital
Appendix D – Functional Allocations
Appendix E – Elevation Surcharge Costs
Appendix F – Drought Surcharge Derivation
Tables and Figures
List of Figures
Figure 1: Average Water Demand by Month for FY 2023-2025 (CCF)............................................ 1 Figure 2: Cost-of-Service Rate Study Process................................................................................. 2 Figure 3: Projected 5-Year Water Capital Investment Program..................................................... 9 Figure 4: Projected Revenues and Expenses ($ Millions) ............................................................. 13 Figure 5: Cost of Service Analysis Process.................................................................................... 17 Figure 6: Projected Monthly Demand by Extra Capacity Components (CCF)............................... 19 Figure 7: Extra Capacity Component Annual Capacity and Demand (CCF).................................. 20 Figure 8: Residential Tier Demand by Extra Capacity Component............................................... 21 Figure 9: Extra Capacity Component by Residential Tier (CCF).................................................... 21 Figure 10: Single Family Residential Bill Impacts.......................................................................... 46

15.17 Table of Contents
City of Santa Cruz Water Rate Study
List of Tables
Table 1: Existing and Proposed Volumetric Water Rates Per CCF.................................................. 5 Table 2: Existing and Proposed Fixed Monthly Rates..................................................................... 6 Table 3: Projected Annual Water Demand by Customer Class (CCF)............................................. 5 Table 4: Count of Services by Meter Size........................................................................................ 5 Table 5: Water Meter Equivalent Units.......................................................................................... 6 Table 6: Fire Service Equivalent Units............................................................................................. 7 Table 7: Water Meter Cost Units.................................................................................................... 7 Table 8: Detailed Water Financial Projections.............................................................................. 12 Table 9: Summary of Functional Cost Components ..................................................................... 16 Table 10: Extra Capacity Component Demand (CCF) ................................................................... 19 Table 11: Allocation Categories and Amounts for Functional Allocation..................................... 23 Table 12: Allocation to Fixed Cost Functional Components......................................................... 26 Table 13: Fixed Allocation Units.................................................................................................... 27 Table 14: Fixed Annual Unit Costs by Functional Component...................................................... 27 Table 15: Cost Allocation to Volumetric Extra Capacity Functions .............................................. 28 Table 16: Cost Allocation to Volumetric Demand Functions and Non-Functional Allocation...... 29 Table 17: Volumetric Allocation Units (FY 2027).......................................................................... 30 Table 18: Volumetric Unit Costs by Function ............................................................................... 30 Table 19: Potable Water Unit Cost by Extra Capacity Component .............................................. 32 Table 20: Residential Rate Revenue Requirements...................................................................... 34 Table 21: Residential Tiered Unit Rates........................................................................................ 34 Table 22: Commercial Rate Revenue Requirements.................................................................... 35 Table 23: Commercial Tiered Unit Rates...................................................................................... 35 Table 24: UCSC Rate Revenue Requirements............................................................................... 36 Table 25: UCSC Tiered Unit Rates................................................................................................. 36 Table 26: Landscape Irrigation Tiered Rate Revenue Requirements ........................................... 37 Table 27: Landscape Irrigation Tier Unit Rates............................................................................. 37 Table 28: Raw Water Rate Derivation .......................................................................................... 38 Table 29: Elevation Surcharge Rate Derivation ............................................................................ 38 Table 30: Elevation Surcharge Rate Schedule .............................................................................. 39 Table 31: Monthly Ready-to-Serve Charge Derivation................................................................. 40 Table 32: Monthly Private Fire Service Charge Derivation........................................................... 41 Table 33: Existing and Proposed Volumetric Water Rates........................................................... 42 Table 34: Existing and Proposed Fixed Monthly Service Charges................................................ 43 Table 35: Proposed Drought Surcharges...................................................................................... 44 Table 36: January 1, 2027, Tier 1 Residential Drought Surcharge Example ................................. 45

15.18 15.19
Executive Summary ES-1
City of Santa Cruz Water Rate Study
1 EXECUTIVE SUMMARY

1.1 Introduction
The Santa Cruz Water Department (SCWD) is a financially self-supporting enterprise of the City of Santa Cruz (City) that relies on revenues from water rates, fees, and charges (collectively referred to as “rate” or “rates” herein) to fund the cost of providing water service. As such, the SCWD’s rates need to be set at adequate levels to: (a) fund the cost of operating and maintaining the water system, (b) fund necessary capital improvements to keep the SCWD’s infrastructure in good operating condition, (c) protect and maintain the SCWD's local water supply sources, including Loch Lomond Reservoir, the San Lorenzo River, North Coast streams, and the Beltz Groundwater System, and (d) meet its annual debt service requirements.

The SCWD has provided proactive financial stewardship by raising annual rates to keep revenues in line with the cost of providing water service and maintaining the system. Those rate increases have enabled the SCWD to maintain its financial health. However, the SCWD continues to proactively plan for a number of manageable financial challenges, discussed below, which drive the need for future rate revenue increases.

In 2025, the SCWD retained Bartle Wells Associates (BWA) to develop updated financial projections, and a cost-of-service based water rate study. Final recommendations incorporate input from SCWD staff and the Water Commission. The City Attorney’s Office and the City’s outside legal counsel, Colantuono, Highsmith & Whatley, provided guidance for compliance with the substantive provisions of Proposition 218 and other relevant regulations. The proposed rates are designed to fund the operating and capital needs of the SCWD’s water system, while proportionally and equitably recovering costs from all customers.

1.2 Financial Challenges
The SCWD maintains reserve funds but is experiencing increased financial pressures that will require immediate and long-term rate increases. These pressures include a significant capital investment program, rising operating costs, revenue volatility, and the need to maintain long-term revenue stability. These pressures are discussed below:
• Capital Investment Program: The SCWD takes a proactive approach to maintaining its water system, which requires continuous repair, replacement, and improvement projects. Beginning in 2014, the SCWD embarked on a sustained, multi-decade reinvestment in its water system.

This represents one of the most significant capital programs in the SCWD's history. The 2016 Cost of Service Analysis was foundational in planning and funding this effort, establishing the first series of rate increases needed to support major infrastructure investments over the long term.

15.20 Executive Summary ES-2
City of Santa Cruz Water Rate Study
The SCWD's 5-year Water Capital Investment Program (CIP) totals approximately $287.1 million through FY 2031. Of this amount, approximately $213.0 million is expected to be debt funded, with the remainder funded on a pay-as-you-go (PAYGO) basis. Key projects include the Newell Creek Pipeline Replacement (NCP) and the Facilities Improvement Project (FIP) at the Graham Hill Water Treatment Plant (GHWTP). The FIP represents an investment of approximately $180 million, which is anticipated to be financed through a combination of WIFIA and low-interest SRF loans. Future improvements to the Beltz Groundwater System are also planned beyond the current study period. Over a 15-year period, the SCWD's capital commitments represent a cumulative investment of approximately $1 billion, resulting in a generational reinvestment in the reliability, safety, and long-term water supply of the Santa Cruz water system.
• Debt Service: Projected debt service is expected to reach approximately $21.7 million annually by FY 2031, driven by new debt issuances estimated to be $213.0 million. The SCWD’s policy is to maintain a minimum debt service coverage ratio of 1.5x annual debt service. This ratio is a financial metric that helps ensure the SCWD can meet its debt obligations and continue accessing favorable financing terms to support the water system’s long-term reliability. The SCWD’s existing debt covenants require that the SCWD maintain a debt service coverage of at least 1.2x annual debt service. The proposed rate increases are designed to ensure the SCWD maintains sufficient revenues to meet its debt service coverage obligations throughout the five-year study period.
• Ongoing Cost Inflation: In addition to the rate increases needed to fund capital projects, the cost to operate the water system increases every year. Annual rate increases are needed to keep revenues aligned with rising costs and prevent rates from falling below the cost of providing service. Some costs that have been increasing faster than general inflation include electricity, treatment chemicals, insurance, and citywide shared-services allocations. The SCWD’s financial projections assume average annual operating cost inflation of 5.0% per year over the five-year study period.
• Lower-Than-Projected Water Revenues: Over the past five years, water sales revenues have been below projected levels due to a combination of factors including the impacts of COVID19, wetter-than-normal weather conditions, and the continued effectiveness of customer conservation efforts. While conservation is a positive outcome for the SCWD’s water supply, the SCWD’s current rate structure recovers about 90% of rate revenue from volumetric rate components. Reduced water use directly reduces rate revenues, creating budget shortfalls relative to projections. The proposed rates will improve revenue stability by increasing the share of revenue recovered through fixed charges.

15.21 Executive Summary ES-3
City of Santa Cruz Water Rate Study
Updated financial projections indicate the need for water rate revenuesto increase over the next five years, the period covered by this rate study. The proposed rates also incorporate modifications to the SCWD’s water rate structure, designed to align rates with the current cost of providing service. Due to these modifications, impacts on customer water bills will vary based on customer class, water meter size, and water use when the proposed rates are implemented.

1.3 Water Rate Recommendations
The proposed water rates incorporate structural modifications designed to better align rates with the current projected cost of service, customer demand patterns, and industry-standard rate methodology. These modifications are intended to ensure equitable and proportional cost recovery, support revenue stability and sufficiency, and enable the SCWD to meet its financial obligations over the study period. Rate structure and customer class recommendations are described as follows:
• Increase Fixed Revenue Recovery: The proposed fixed, monthly, readiness-to-serve charges recover about 20% of the projected rate revenue, an increase from the 10% of rate revenue collected from the current readiness-to-serve charges. Fixed revenue recovery will remain below typical industry practice, where fixed-charge recovery is between 30% and 50%. This change will result in higher fixed monthly charges and lower volumetric rates compared with the existing structure. The change reflects the current cost of service and improves revenue stability.
• Fixed Revenue Recovery Based on Meter Capacity: The additional revenue recovered from fixed charges reflects system capacity costs, which are allocated to customers based on meter size using AWWA meter equivalent units reflecting flow capacity. Because larger meters represent greater potential demand on system capacity, customers with larger meters will see a proportionally greater increase in fixed charges than those with smaller meter sizes. This approach is consistent with industry-standard rate-setting practices. • Consolidation of Volumetric Rate Components: The proposed rates consolidate three separate volumetric charges (the Quantity Charge, the Infrastructure Reinvestment Fee (IRF), and the Rate Stabilization Fee (RSF)) into a single unified volumetric rate. The IRF has historically provided dedicated funding for capital projects, while the RSF has supported the SCWD’s Rate Stabilization Reserves, which helps mitigate revenue volatility from year to year.

Consolidating these components into a single rate does not eliminate their underlying purposes. The SCWD will continue to fund capital investment and maintain reserve targets through its internal budgeting and reserve policies, even though these will no longer appear as separate charges on customer bills. This approach is consistent with industry-standard ratesetting practices and results in a simpler, easy-to-understand bill, while continuing to be based on the cost-of-service.
• Two Landscape Irrigation Tiers: The proposed landscape irrigation rate structure is reduced from three tiers to two tiers to align with the results of the cost-of-service analysis and current customer demand patterns. Customer usage data shows that landscape irrigation customers

15.22 Executive Summary ES-4
City of Santa Cruz Water Rate Study
predominantly adhere to their individual water budget allocations, especially during summer irrigation months, resulting in very little usage in the third tier. • Volumetric Drought Surcharges: The proposed rates introduce volumetric drought surcharges, calculated as a percentage of the SCWD’s regular volumetric water rates and levied in addition to those rates during a declared water shortage. A surcharge percentage is identified for each drought stage in the SCWD’s 2025 Urban Water Management Plan (UWMP). This approach represents a shift from fixed monthly drought surcharges based on meter size to volumetric drought surcharges. Customers who reduce demand in accordance with the conservation target at a given drought stage will see their total bill remain almost unchanged.

The proposed rates for each customer class are presented in the following tables. The rates are designed to recover the required rate revenue identified in this study and reflect the cost of service, including the changes described above. Proposed rates will take effect on January 1 of each year beginning January 1, 2027, with the final proposed rate adjustment taking effect January 1, 2031.

The following table shows the existing and proposed volumetric rates. Due to the fixed, readiness-toserve charges recovering a greater share of total rate revenue, the readiness-to-serve charges will increase, and volumetric rates will decrease on January 1, 2027. The separate Quantity Charge, Infrastructure Reinvestment Fee, and Rate Stabilization Fee will also be combined into a single unified volumetric rate. The effect on individual customer bills will vary by customer class, meter size, and water use.

15.23 Executive Summary ES-5
City of Santa Cruz Water Rate Study
Table 1: Existing and Proposed Volumetric Water Rates Per CCF Volumetric Rates
Jul. 1,
2026
Jan. 1,
2027
Jan. 1,
2028
Jan. 1,
2029
Jan. 1,
2030
Jan. 1,
2031
($ per CCF) 1 Existing Proposed Proposed Proposed Proposed Proposed Residential 2
Tier 1 (0-5 CCF) $16.07 $15.96 $17.88 $20.03 $21.83 $23.79 Tier 2 (6-9 CCF) $23.00 $19.69 $22.05 $24.70 $26.92 $29.34 Tier 3 (>9 CCF) $29.98 $26.91 $30.14 $33.76 $36.79 $40.11 Commercial
Commercial 3 $18.60 $18.45 $20.66 $23.14 $25.22 $27.49
UCSC $19.67 $18.50 $20.72 $23.21 $25.30 $27.57
Landscape Irrigation
Tier 1 (≤100% of budget) $32.74 $23.90 $26.77 $29.98 $32.68 $35.63 Tier 2 (101% - 150%) $45.17 $32.43 $36.32 $40.68 $44.34 $48.33 Tier 3 (151% & above)5
$57.10 Proposed Tier 2 rate applies to all use >100% of budget North Coast Agriculture
Maintain Reliability $11.00 $6.13 $6.87 $7.69 $8.38 $9.14 Decrease Reliability $5.50 N/A N/A N/A N/A N/A
Elevation Surcharges6
Jul. 1,
2026
Jan. 1,
2027
Jan. 1,
2028
Jan. 1,
2029
Jan. 1,
2030
Jan. 1,
2031
($ per CCF) 1 Existing Proposed Proposed Proposed Proposed Proposed Lift Station Zone 1 $0.32 $0.36 $0.37 $0.39 $0.41 $0.43 Lift Station Zone 2 $0.61 $0.84 $0.88 $0.93 $0.97 $1.02 Lift Station Zone 3 $1.10 $1.35 $1.41 $1.49 $1.56 $1.64 1 CCF = 100 Cubic Feet or approximately 748 gallons.
2 Per dwelling unit, includes single-family and multi-family. 3 Includes industrial, golf, bulk, fire service leaks, and temporary. 4 Tiers based on percent of water budget for each customer. 5 Tiers 2 and 3 will be combined if the proposed rates are adopted. 6 As applicable

15.24 Executive Summary ES-6
City of Santa Cruz Water Rate Study
The following table shows the existing and proposed fixed rates. As a result of the cost-of-service analysis, the fixed rates now recover some system capacity costs based on the capacity of the meter size, resulting in larger meters having increased readiness-to-serve charges. The proposed monthly fixed charges include capacity costs related to each meter size. Because larger meters represent significantly greater potential demand on the system, fixed charges for larger meter sizes increase more substantially than for smaller, more common sizes. Monthly fire service charges were adjusted to reflect the current cost of service.

Table 2: Existing and Proposed Fixed Monthly Rates
Monthly Fixed Charges
Jul. 1,
2026
Jan. 1,
2027
Jan. 1,
2028
Jan. 1,
2029
Jan. 1,
2030
Jan. 1,
2031
Meter Size Existing Proposed Proposed Proposed Proposed Proposed Monthly Meter Ready-to-Serve Charge ($/water meter/month) 5/8" $19.13 32.27 36.15 40.48 44.13 48.10
3/4" 19.48 44.30 49.61 55.57 60.57 66.02
1" 20.49 68.79 77.05 86.29 94.06 102.53
1 1/2" 21.86 128.48 143.90 161.16 175.67 191.48
2" 25.56 202.85 227.19 254.46 277.36 302.32
3" 53.00 458.85 513.91 575.58 627.38 683.84
4" 63.15 796.46 892.03 999.07 1,088.99 1,187.00
6" 86.84 1,603.52 1,795.94 2,011.45 2,192.48 2,389.80
8" 113.91 3,376.34 3,781.50 4,235.28 4,616.45 5,031.93
10" 144.39 5,037.77 5,642.30 6,319.38 6,888.12 7,508.06 Monthly Fire Service Ready-to-Serve Charge ($/fire meter/month) 5/8" N/A N/A N/A N/A N/A N/A
3/4" 3.67 9.27 10.38 11.62 12.67 13.81
1" 3.92 9.39 10.51 11.77 12.83 13.99
1 1/2" 4.87 9.82 10.99 12.31 13.42 14.63
2" 6.53 10.56 11.83 13.25 14.44 15.74
3" 8.97 13.22 14.81 16.59 18.08 19.71
4" 22.49 17.82 19.95 22.35 24.36 26.55
6" 58.83 34.30 38.42 43.03 46.90 51.13
8" 121.90 62.74 70.27 78.71 85.79 93.51
10" 215.74 105.52 118.18 132.37 144.28 157.26

15.25 Background, Objectives & Legal Requirements 1
City of Santa Cruz Water Rate Study
2 BACKGROUND, OBJECTIVES, AND LEGAL REQUIREMENTS

2.1 Background
The SCWD has provided safe and reliable drinking water since 1890. The SCWD serves approximately 100,000 people located in the City of Santa Cruz, the communities of Live Oak and North Coast, and parts of Capitola. Customers include homes, businesses, schools, and essential public services. The SCWD’s water system includes more than 300 miles of pipelines, pumps, tanks, and one reservoir supporting daily operations and long-term reliability.

The SCWD is entirely dependent on local water and does not receive water from outside Santa Cruz County. Approximately 95% of supply comes from local surface water sources, including the San Lorenzo River, Loch Lomond Reservoir, and North Coast sources (Liddell Spring, Laguna Creek, and Majors Creek), with the remaining 5% supplied by the Beltz Groundwater System drawn from the Santa Cruz Mid-County Groundwater Basin. Loch Lomond Reservoir, the SCWD’s only raw water reservoir, holds approximately 2.8 billion gallons when full, which is roughly a one-year supply for SCWD customers. All surface water is treated at the Graham Hill Water Treatment Plant, with the remainder produced by the Beltz groundwater treatment plants.

The SCWD’s water demands follow a seasonal pattern, with higher usage during warmer months largely due to landscape irrigation. These increased peak demands require the SCWD to maintain additional infrastructure, including larger storage tanks, pumps, and pipelines. SCWD’s water rates are designed to proportionally recover the cost of maintaining and operating peak infrastructure. The following figure shows the SCWD’s average monthly water demand from FY 2023 to FY 2025.

Figure 1: Average Water Demand by Month for FY 2023-2025 (CCF) The SCWD operates as a self-supporting enterprise fund, relying on user rates, fees, and charges for service. Since the enterprise is funded by its customers, the SCWD must establish rates adequate to fund the cost of providing water services, including the costs for ongoing operations, debt service, and the capital improvements needed to keep the SCWD’s aging water infrastructure in a safe and reliable condition.
100,000
200,000
300,000
Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun

15.26 15.27
Background, Objectives & Legal Requirements 3
City of Santa Cruz Water Rate Study
3) Rate Revenue Requirements: Develop financial projections to evaluate annual revenue requirements from rates and the overall level of rate increases needed to fund the SCWD's 5-year Capital Investment Program, projected debt service obligations, operating cost inflation, and prudent reserve targets necessary to support long-term financial stability; and 4) Cost Allocation: Group the SCWD’s costs in terms of the function they serve as a basis to proportionally allocate the revenue requirement from rates; and 5) Rate Design: Develop rate structures that proportionately recover costs between customer classes (i.e., residential and commercial), as well as from customers within their designated customer class; and
6) Prop 218 Process: Ensure compliance with the substantive and procedural requirements of Proposition 218.

2.4 Constitutional Requirements for Rates
The water rates proposed in this report are designed to comply with key articles of the California Constitution, Article 13D, as explained below.

2.4.1 Article 13D, Section 6
Proposition 218 was adopted by California voters in 1996 and added Articles 13C and 13D to the California Constitution. Article 13D, Section 6 governs property-related charges, which the California Supreme Court has ruled includes rates imposed for water delivered through pipes connected to property. Article 13D, Section 6 establishes both a) procedural requirements for imposing or increasing property-related charges, and b) substantive requirements for those charges. Article 13D requires voter approval for new or increased property-related charges but exempts rates for water, wastewater, and garbage service from this voting requirement if rates are adopted after a noticed protest hearing and meet the substantive requirements. This report recommends water rates designed to comply with the substantive requirements of Proposition 218.

The substantive requirements of Article 13D, Section 6 require property-related charges, such as the SCWD’s water rates, to meet the following conditions:
1) Revenues derived from the fee or charge shall not exceed the costs required to provide the property-related service.
2) Revenues derived from the fee or charge shall not be used for any purpose other than that for which the fee or charge was imposed.
3) The amount of a fee or charge imposed upon any parcel or person as an incident of property ownership shall not exceed the proportional cost of the service attributable to the parcel. 4) No fee or charge may be imposed for a service unless that service is actually used by, or immediately available to the property in question.

15.28 Background, Objectives & Legal Requirements 4
City of Santa Cruz Water Rate Study
5) No fee or charge may be imposed for general governmental services, such as police or fire services, where the service is available to the public at large in substantially the same manner as it is to property owners.

2.5 Article 10, Section 2
The SCWD’s water rates are structured to promote the efficient and beneficial use of water, consistent with California’s constitutional mandate to prevent waste and unreasonable use. Tiered volumetric rates, with breakpoints that reflect varying levels of water use, are a key tool for achieving this goal. By charging more for higher levels of use, the SCWD’s rate structure encourages conservation by ensuring that customers who place greater demands on the water system pay the higher proportionate share of costs associated with serving those demands.

Article 10, Section 2 of the California Constitution states that:

It is hereby declared that because of the conditions prevailing in this State the general welfare requires that the water resources of the State be put to beneficial use to the fullest extent of which they are capable, and that the waste or unreasonable use or unreasonable method of use of water be prevented, and that the conservation of such waters is to be exercised with a view to the reasonable and beneficial use thereof in the interest of the people and for the public welfare.

2.6 Statute of Limitations
Pursuant to California Government Code 53759, there is a 120-day statute of limitations for challenging any new, increased, or extended fees. This statute of limitations applies to the water rates proposed in this rate study and included in the Proposition 218 Notice.

2.7 Exhaustion of Administrative Remedies
Pursuant to California Government Code 53759.1, the SCWD has elected to impose an exhaustion of administrative remedies requirement for any person seeking to pursue judicial action or proceeding alleging noncompliance with Article 13D of the California Constitution for any new, increased, or extended fee. Additional details on the exhaustion of administrative remedies requirement are included in SCWD’s Proposition 218 Notice to customers.

15.29 Water Demand and Customer Characteristics 5
City of Santa Cruz Water Rate Study
3 WATER DEMAND AND CUSTOMER CHARACTERISTICS

3.1 Metered Water Demand Projection
A three-year average of monthly water demand data from FY 2023 through FY 2025 was used as the basis for projecting customer demands in each customer class and rate tier. The three-year average was used to smooth year-to-year variability in demand and reflect current conservation demand patterns, as customers have become increasingly aware of the need to conserve water and as water has become more costly. The following table shows the projected annual water demand by customer class.

Table 3: Projected Annual Water Demand by Customer Class (CCF) Customer Class Demand (CCF) Demand (%)
Residential 1,888,299 63.96%
Commercial 780,972 26.45%
UCSC 211,959 7.18%
Landscape Irrigation 67,980 2.30%
North Coast Agriculture 3,319 0.11%
Total 2,952,529 100%

3.2 Water and Private Fire Services
Each connection to the SCWD’s water system (homes, business, etc.) allowing a property to receive water or private fire service from SCWD is considered one customer, or service. The following table shows the water and fire service connections by meter and service size.

Table 4: Count of Services by Meter Size
Water Meter/ Fire
Service Size
Water
Services
Fire
Services
Total
Services
5/8" 21,510 - 21,510
3/4" 850 7 857
1" 1,342 3 1,345

1.5" 461 2 463
2" 366 2,576 2,942
3" 45 3 48
4" 16 382 398
6" 13 252 265
8" 4 68 72
10" 2 10 12
Total 24,609 3,303 27,912

15.30 Water Demand and Customer Characteristics 6
City of Santa Cruz Water Rate Study

3.2.1 Water Meter Equivalent Units
A significant portion of the costs incurred to operate the water system are fixed (maintaining pipes, treatment facilities, staff, etc.). Some of the fixed costs, such as customer service costs, are reasonably recovered on a per-customer basis. However, other costs depend on how much capacity SCWD must reserve for each customer. The size of a customer’s meter reflects the portion of the water system’s capacity needed to service the customer, as a larger meter allows the customer to draw more water over a given period of time.

Fixed charges recovering capacity costs for each meter size are based on the capacity of each meter size relative to the capacity of the smallest meter size in the SCWD’s system. In this study, the relative capacity of a meter size, referred to as a meter equivalent ratio (MEU), is calculated by dividing the maximum safe flow in gallons per minute (GPM) of a given meter size by the maximum safe flow GPM of a 5/8" meter. For example, a 5/8” meter has a maximum safe flow of 20 GPM, and a 1” meter has a maximum safe flow of 50 GPM; therefore, the meter equivalent ratio of a 1” meter is 2.5 MEUs. The sum of all MEUs reflects the total capacity demand on the SCWD’s system.

The following table contains the number of water services at each meter size and calculations of meter equivalent units. Total meter equivalent units for each meter size are derived by multiplying the meter equivalent units by the number of services.

Table 5: Water Meter Equivalent Units
Meter Size
Water
Services
Maximum Safe
Capacity (GPM)
Meter
Equivalent Units
Total Meter
Equivalent Units
5/8" 21,510 20 1.00 21,510
3/4" 850 30 1.50 1,275
1" 1,342 50 2.50 3,355

1.5" 461 100 5.00 2,305
2" 366 160 8.00 2,928
3" 45 350 17.50 788
4" 16 630 31.50 504
6" 13 1,300 65.00 845
8" 4 2,800 140.00 560
10" 2 4,200 210.00 420
Total 24,609 34,490

3.2.2 Fire Service Equivalent Units
Similar to water meter equivalent units, private fire services are also converted to fire service equivalent units (FEU) based on fire service flow capacities. The fire service equivalent units are determined using the Hazen-Williams equation for flow through pressure conduits equivalent to a 2” fire service (the most common fire service size). The fire service equivalent units are

15.31 Water Demand and Customer Characteristics 7
City of Santa Cruz Water Rate Study
calculated by multiplying the diameter of the fire service (divided by 2”) raised to the power of

2.63. Table 6: Fire Service Equivalent Units
Fire
Service Size
Fire
Services
Fire
Equivalent Units
Total Fire
Equivalent Units
3/4" 7 0.08 0.5
1" 3 0.16 0.5

1.5" 2 0.47 0.9
2" 2,576 1.00 2,576.0
3" 3 2.90 8.7
4" 382 6.19 2,364.7
6" 252 17.98 4,531.4
8" 68 38.32 2,605.7
10" 10 68.91 689.1
Total 3,303 12,778

3.3 Meter Cost Units
Meter Cost Unit (MCU) ratios are used to reflect the costs associated with servicing, maintaining, and purchasing meters of varied sizes and are not a measure of equivalent capacity like MEUs and FEUs. Fire services have small meters to indicate if there is water flowing through the fire service line while not impeding flow. The fire meter sizes, not the fire service sizes, are used to calculate MCUs. The MCU ratios used in this study are summarized in the following table.

Table 7: Water Meter Cost Units
Meter Size
Water
Services
Fire
Services
Meter Cost
Units
Water Meter
Cost Units
Fire Meter
Cost Units
Total Meter
Cost Units
5/8" 21,510 3,283 1.00 21,510 3,283 24,793
3/4" 850 18 1.10 935 20 955
1" 1,342 1 1.40 1,879 1 1,880

1.5" 461 - 1.80 830 - 830
2" 366 - 2.90 1,061 - 1,061
3" 45 - 11.00 495 - 495
4" 16 - 14.00 224 - 224
6" 13 - 21.00 273 - 273
8" 4 - 29.00 116 - 116
10" 2 1 38.00 76 38 114
Total 24,609 3,303 27,399 3,342 30,741

15.32 Financial Plan and Revenue Requirement 8
City of Santa Cruz Water Rate Study
4 FINANCIAL PLAN AND REVENUE REQUIREMENT

4.1 Water Financial Overview
The City of Santa Cruz Water Department operates as a self-supporting enterprise fund that relies primarily on revenues from water rates to fund the cost of providing service. Water rate revenues account for the majority of the projected total annual revenue, with the remaining revenues coming from interest earnings, system development charges (SDCs) from new or upsized connections, and other miscellaneous revenues. As such, water rates must be set at adequate levels to fund the costs of operating and maintaining the water system, meet debt obligations and financial metrics, and fund necessary capital improvements to keep the water system in good operating condition.

Working closely with SCWD staff, BWA developed long-term cash-flow projections to determine the water utility’s annual revenue requirements and to project required water rate revenue increases. The financial projections incorporate the latest information available from the SCWD’s budget, annual reports, capital spending projections, and metered water demand data as well as a number of reasonable assumptions developed with input from the SCWD.

4.2 Rate Increase Drivers
The SCWD is facing a number of manageable financial challenges that will drive the need for rate increases in upcoming years. Key drivers of future rate increases are summarized below.

Capital Investment Program
The SCWD’s water system requires substantial ongoing investment to maintain safe and dependable service and ensure reliable water supplies in the future. As part of a broader, multidecade capital commitment of $1 billion spanning 15 years, the SCWD’s current 5-year Water CIP totals approximately $287.1 million through FY 2031. Key projects include the Facilities Improvement Project (FIP) and the Newell Creek Pipeline replacement (NCP). The FIP involves improvements to the Graham Hill Water Treatment Plant; a $180 million investment anticipated to be financed through a combination of WIFIA and low-interest SRF loans. Approximately $213.0 million of the CIP is anticipated to be debt funded, with the remaining amount funded on a payas-you-go (PAYGO) basis. Projected capital spending is shown in the following figure and in detail in Appendix C.

15.33 15.34
Financial Plan and Revenue Requirement 10
City of Santa Cruz Water Rate Study
long-term water supply goals, it also creates revenue variability under a rate structure that currently recovers about 90% of rate revenue through volumetric charges. A large share of the SCWD’s ongoing costs, including staffing, debt service, and infrastructure maintenance, do not vary with demand and are considered fixed costs. Due to the large amount of fixed costs, the SCWD’s expenses are mostly unchanged when water demands decline, creating a revenue deficit.

The proposed rate structure addresses this by increasing the share of revenue recovered through fixed charges, improving revenue stability going forward.

4.3 Financial Plan Assumptions
Financial plan assumptions are based on input from SCWD staff, historical escalations, and conservative projections for future escalations to reasonably ensure that the rates adopted by the SCWD will provide sufficient revenues to meet its revenue requirements.

REVENUE ASSUMPTIONS
 Proposed rates are projected to be effective January 1, 2027, for the next five years, with rate adjustments planned to become effective on January 1 of each of the following years through FY 2031.
 Projected water rate revenues are based on the three-year average volume of water sales from FY 2023 through FY 2025 and recommended water rates derived in this study. Water demand is projected to remain stable over the study period, as water conservation efforts and water use efficiency have offset modest population growth within the SCWD’s substantially built-out service area.
 System Development Charges (SDCs) are one-time fees charged to new or upsized connections to recover the cost of capacity-related infrastructure. SDCs are projected at approximately $1 million annually over the study period, based on recent collection trends.

SDC revenues offset a portion of capital costs but are not included in the water revenue requirement. SDC revenues are projected conservatively low because they are variable, susceptible to economic downturns, and not used for operating costs. After the rate study, the SCWD will be performing a capacity charge study to update its System Development Charges.
 Interest earnings are projected based on the annual beginning fund balance multiplied by the projected interest rate. The interest rate projections are based on recent and anticipated interest rates.

15.35 Financial Plan and Revenue Requirement 11
City of Santa Cruz Water Rate Study

EXPENSE ASSUMPTIONS
 Operating and maintenance expenses are based on the SCWD’s most recent adopted budget for FY 2027 and are projected to increase at an average annual inflation rate of 5.0% per year over the five-year study period.
 Capital investment assumptions are based on the SCWD’s 5-year Water Capital Investment Program, which totals approximately $287.1 million through FY 2031. Approximately $213.0 million is anticipated to be debt funded, with the remaining amount funded on a pay-as-yougo (PAYGO) basis. A key project driving capital expenditures and future debt service is the Graham Hill Water Treatment Plant upgrade, anticipated to be financed through a combination of WIFIA and low-interest SRF loans, and an additional debt issuance projected in FY 2030.
 Debt service projections are based on outstanding debt schedules and projected issuance of new debt to fund a portion of the SCWD’s Water Capital Investment Program.

4.4 Cash Flow Projections and Recommended Rate Revenue Increases Long-term cash flow projections were developed based on the key financial drivers and the assumptions described in Sections 4.2 and 4.3. The projections were used to determine the water utility’s annual revenue requirements over the five-year study period. Detailed financial projections, metered water demand data, capital funding projections, and other financial assumptions developed with input from SCWD staff are shown in Appendices A and B. Without rate increases, SCWD’s projected revenues would be insufficient to cover rising operating costs, debt service obligations, and planned capital investments.

The proposed rate increases are designed to fund the SCWD’s cost of providing service, maintain balanced budgets, meet the SCWD’s 1.5x debt service coverage requirement, and maintain reserve fund balances at or above minimum targets throughout the study period. The projections indicate the need for rate revenue increases in each of the next five fiscal years, beginning January 1, 2027. Bill impacts will vary by customer class, meter size, and water use, reflecting the updated cost of service analysis and the proposed modifications to the rate structure.

Detailed, long-term, cash-flow projections described above are shown in the following table.

15.36 Financial Plan and Revenue Requirement 12
City of Santa Cruz Water Rate Study
Table 8: Detailed Water Financial Projections
Projected Long Range Financial Plan
REVENUES FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Projected Projected Projected Projected Projected
Revenues from Rates and Charges
Rate Revenue $62,582,177 $68,854,152 $77,116,650 $85,251,129 $92,923,731 System Development Charges $1,300,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 Other Revenue $3,714,933 $3,790,777 $3,896,613 $4,016,572 $4,185,666 TOTAL REVENUES $67,597,110 $73,644,929 $82,013,263 $90,267,701 $98,109,398 EXPENSES FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Projected Projected Projected Projected Projected
Operating Expenses
Administration $10,362,035 $10,880,137 $11,424,144 $11,995,351 $12,595,118 Engineering $4,988,705 $5,238,140 $5,500,047 $5,775,050 $6,063,802 Customer Services $3,820,756 $4,011,794 $4,212,383 $4,423,003 $4,644,153 Customer Assistance $395,934 $415,731 $436,517 $458,343 $481,260 Resources $3,246,452 $3,408,775 $3,579,213 $3,758,174 $3,946,083 Production $10,979,720 $11,528,706 $12,105,142 $12,710,399 $13,345,919 Quality $2,726,894 $2,863,239 $3,006,401 $3,156,721 $3,314,557 Distribution $6,582,216 $6,911,327 $7,256,893 $7,619,738 $8,000,725 Recreation $1,703,649 $1,788,831 $1,878,273 $1,972,187 $2,070,796 Operations $732,865 $769,508 $807,984 $848,383 $890,802 Meter Operations $1,419,057 $1,490,010 $1,564,510 $1,642,736 $1,724,873 Subtotal Operating Expenses $46,958,283 $49,306,198 $51,771,507 $54,360,083 $57,078,087 Non-Operating Expenses
Existing Debt Service $12,155,531 $13,470,781 $16,093,928 $17,186,675 $18,252,070 New Debt Service $0 $0 $0 $1,708,251 $3,416,501
Paygo Funded Capital $13,192,999 $13,193,255 $15,706,261 $14,335,222 $17,711,634 Subtotal Non-Operating Expense $25,348,530 $26,664,036 $31,800,189 $33,230,148 $39,380,205 TOTAL EXPENSES $72,306,814 $75,970,233 $83,571,696 $87,590,230 $96,458,292 NET CASH CHANGE ($4,709,704) ($2,325,304) ($1,558,433) $2,677,471 $1,651,106 RESERVE BALANCES FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Projected Projected Projected Projected Projected
Total Reserve Balances
Beginning Balance $49,470,291 $44,760,587 $42,435,283 $40,876,850 $43,554,321 Ending Balance $44,760,587 $42,435,283 $40,876,850 $43,554,321 $45,205,427 Target Reserve Fund Balances
Operations and Maintenance $11,578,755 $12,157,693 $12,765,577 $13,403,856 $14,074,049 Rate Stabilization $10,000,000 $10,000,000 $10,000,000 $10,000,000 $10,000,000 90-Day Operating $11,578,755 $12,157,693 $12,765,577 $13,403,856 $14,074,049 Emergency $4,695,828 $4,930,620 $5,177,151 $5,436,008 $5,707,809 Total Reserve Target $37,853,338 $39,246,005 $40,708,305 $42,243,720 $43,855,906

15.37 15.38
Cost of Service Analysis 14
City of Santa Cruz Water Rate Study
5 COST OF SERVICE ANALYSIS
The American Water Works Association (AWWA) is the largest association of water professionals in the world. AWWA publishes the M1 Manual, titled "Principles of Water Rates, Fees, and Charges," which is widely recognized as the preeminent resource for setting water rates. The manual is consistently revised by leading professionals in the industry to incorporate the latest industry’s best practices and meet regulatory requirements.

The AWWA M1 Manual outlines two methods for deriving water rates, the base-extra capacity method, and the commodity demand method. Both methods recognize that the cost of serving a customer depends not only on the total volume of water used, but also on peak-demand requirements.

Similar to the previous cost of service study, the proposed rates presented within this rate study are developed using a base-extra capacity method. The base-extra capacity method was chosen because it ensures that customers with higher levels of water use, who place more demand on the water system, pay a proportionate share of the costs associated with providing that additional capacity. It also encourages conservation by ensuring that those who use more water pay for the additional infrastructure, maintenance, and other costs required to meet their annual needs over the long term. By allocating the incremental costs of providing extra-capacity in the system to those customers whose use necessitates it, the base-extra capacity method ensures that rates for average and below-average users do not include costs for capital investments and water supplies that they do not require. This method also provides an incentive for customers to conserve water, as they can reduce their bills by reducing their usage, while ensuring that the water system can continue to provide reliable service to all customers.

In using the base-extra capacity method, costs are typically separated into four components: (1) Base (average demand), (2) Extra Capacity (peak demand), (3) Customer (fixed costs), and (4) Fire. As noted in the AWWA M1 Manual, in detailed rate studies such as this one, some of these elements may be broken down further into two or more components.

In this study, Extra Capacity was split into four components: (1) Base (demand up to minimum month demand, distinct from the base-extra component reflecting average demand noted immediately above), (2) Base to Average (minimum month to average month demand), (3) Average to Peak (average month to the peak demand threshold), and (4) Peak (demand greater than the peak demand threshold). The threshold for Peak demand for each customer class is calculated by multiplying the average month demand for that class by the system peaking factor.

The system peaking factor is calculated by dividing the whole system’s maximum month demand by the system’s average month demand. These Extra Capacity subcomponents are used to proportionally allocate the incremental costs of providing extra capacity in the system equitably

15.39 Cost of Service Analysis 15
City of Santa Cruz Water Rate Study
to those users who benefit from that capacity and whose use necessitates it. This cost allocation method ensures that customers with higher peak demands pay for their proportional cost of maintaining and operating the infrastructure sized to meet their demands. This is described in more detail in Section 5.1.

Based on SCWD's expenditures and system characteristics, the Customer component was separated into three components: (1) Customer, recovered on a per service connection basis regardless of meter size or water use; (2) Capacity, recovered per Meter Equivalent Unit (MEU), which reflects the relative flow capacity of each meter size compared to the baseline 5/8-inch meter; and (3) Meter Cost, recovered per Meter Cost Unit (MCU), which reflects the relative cost to service and maintain meters of different sizes. This separation of the Customer component better allocates costs that vary based on capacity needs, as defined by the size of the meter, from those that should be equally shared by each customer account. A MEU is a ratio of any given meter size relative to the baseline 5/8-inch meter, developed by comparing the potential flow capacity of each meter size with the baseline, as described in Section 3.2.

In this study, the Fire component reflects the incremental portion of system capacity necessary to serve private fire services, which provide specific properties with firefighting capacity above and beyond general firefighting infrastructure. These costs are recovered on a per fire service equivalent basis (FEU). A FEU is a ratio of any given fire service size relative to the common 2” fire service, developed by comparing the potential flow capacity of fire service with the baseline, as described in Section 3.2.2. The study does not separately identify or allocate the cost to provide general public fire protection capacity because providing such capacity is a baseline requirement no different from the environmental, water quality, or public safety regulations that apply regardless of which customers benefit most directly. Just as a water utility cannot choose to ignore drinking water standards, it cannot design and maintain a system that ignores the fire flow requirements imposed by the Fire Code and other applicable law (See Fire Code, § 507.).

That capacity is therefore properly treated as a shared cost for all customers.

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City of Santa Cruz Water Rate Study
Table 9: Summary of Functional Cost Components
Cost
Category
Functional
Component Allocation Basis Description
Base All Raw Water Raw water demand All raw water demand All Potable Water Potable water demand All potable water demand Extra
Capacity Base
Potable demand up to
minimum month
Incremental capacity up to the minimum
month level of use
Base-to-Average
Minimum month to
average month demand
Incremental capacity between minimum
and average use
Average-to-Peak Average month to the
peak threshold
Incremental capacity between average use
and peak threshold
Peak Demand above the peak
threshold
Peak demand threshold = average demand
x system peaking factor (system peaking
factor = max month demand ÷ average
month demand)
Customer Customer Number of services Recovered per service, regardless of meter size or use
Capacity Meter Equivalent Units
(MEU) Recovered per MEU, based on meter size
Meter Meter Cost Units (MCU) Recovered per MCU, based on relevant meter servicing cost
Fire Fire Fire Equivalent Units
(FEU)
FEU is based on the ratio of a fire service
flow’s capacity to a 2” fire service’s capacity
The tiered volumetric rates are structured to reflect the cost differences associated with serving customers at varying levels of use within a given class. The tiered rates are designed to have the rate in each tier reflect the extra capacity costs associated with the actual water demand in each tier. The tier break points used in this study are based on customer water demand data. This approach ensures that each tier break reflects a meaningful cost-of-service distinction rather than an arbitrary division of use, consistent with the requirements of Proposition 218.

The proposed rates are developed based on a detailed cost allocation that reflects the SCWD's costs of providing service, based on analysis of operations, water system design, and input from SCWD staff.

The following chart shows the general process for deriving water rates that reflect SCWD's cost of service to each customer class and volumetric tier.

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City of Santa Cruz Water Rate Study
Figure 5: Cost of Service Analysis Process

5.1 Extra Capacity Components
Extra Capacity Components are used to proportionally allocate the incremental costs of providing extra capacity in the system to serve those customers who utilize the extra capacity. Each Extra Capacity Component reflects a layer of capacity utilization. This cost allocation method ensures that customers with higher peak demands pay the proportional cost of maintaining and operating the infrastructure sized to meet their demands. Said differently, this method ensures that rates for users with average and below-average water use do not include costs for capital investments and system capacity that are not necessitated by their level of use.

Expenses are grouped into categories that represent different types of costs incurred in providing water service (e.g. Potable Water, Production, Distribution, Administration, etc.).

Allocation
Categories
Each allocation category is subsequently allocated into functional components that reflect different aspects of City water service in order to identify the percentage of City costs related to each function (e.g. Base, Base-to-Average, Average-to-Peak, Peak, Customer, Capacity, Meter Cost, Fire).

Functional
Allocation
The percentage of costs related to each function is then multiplied by the City's projected water rate revenue requirement to determine the amount of revenues that need to be recovered from each functional component.

Functional
Revenue
Requirements
The revenue requirement for each functional component is divided by the number of applicable units related to the function to develop a unit cost (e.g. the revenue requirement for the capacity functional component is divided by number of meter equivalent units to derive the unit cost).

Unit Cost
Unit costs are then applied to the projected demand characteristics of each customer class to determine a total cost to be recovered from each type of fixed and volumetric charge per customer class.

The total costs allocated to each rate component are then divided by the total number of billable units (e.g. meter equivalents, water sales) to determine fixed and volumetric water rates.

Rate Derivation

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City of Santa Cruz Water Rate Study
In order to proportionally allocate costs and derive unit rates for each Extra Capacity Component, the volume of projected water demand in each Extra Capacity Component needs to be identified.

This is accomplished by applying the following definitions to the projected water usage for each customer class in each month.

Extra Capacity Component Definitions
Base is the volume of water delivered in the lowest demand (minimum) month of the year. It reflects the minimum level of demand the SCWD can expect to serve continuously and forms the foundation upon which all other demand components are built. This component reflects the portion of system capacity required to serve customers with base demands.

Base to Average is the volume of water delivered above the minimum month threshold up to the average monthly demand. This component captures the capacity below the system average and reflects the portion of system capacity required to serve customers with less than average demands.

Average to Peak is the projected volume of water delivered above the average monthly demand up to the Peak threshold. The Peak threshold is calculated by multiplying the average monthly demand for a customer class by the system peaking factor. As its name suggests, the system peaking factor is based on systemwide consumption, and it is calculated by dividing the projected maximum month demand of the water system by the projected average monthly demand of the water system. The Peak threshold captures how each class proportionately contributes to overall system peaking: the demand of customer classes with relatively stable consumption over the course of the year (i.e., residential) stays below the Peak threshold, while those whose consumption is relatively volatile (i.e., landscape irrigation) exceed the Peak threshold in their high demand months (See Appendix A). This component reflects the portion of system capacity required to serve customers with greater than average demands.

Peak is the projected volume of water delivered in the maximum month above the Peak threshold. This component reflects the portion of system capacity required to serve customers with peak demands.

Applying the Extra Capacity Component definitions to the projected demand for each customer class in each month results in a total volume in each Extra Capacity Component by month. The following figure shows the projected monthly water demand by Extra Capacity Component, illustrating how demand is distributed across Extra Capacity Components throughout the year.

15.43 15.44

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Cost of Service Analysis 22
City of Santa Cruz Water Rate Study

5.2 Offsetting Revenue and Expense Allocation Components The first step in the cost-of-service analysis is to develop allocation components where revenues and expenses related to the same purpose are grouped together. BWA worked with SCWD staff to analyze SCWD’s budget on a line-by-line basis and to assign each expenditure and revenue to the appropriate allocation component. The following contains descriptions of the allocation components and an explanation of how they are allocated to functional components:
• General expenses and revenues are not tied to a specific function, such as Customer, Capacity, or All Potable Demand, but are more reasonably recovered based on result of the amounts directly tied to functions.
• Administration expenses and revenues are related to citywide overhead costs and SCWD’s own administrative functions. These amounts are allocated based on meter capacity and total water demand.
• Customer Services costs are related to the SCWD’s billing and customer service activities. The magnitude of the cost is driven by the number of services, not water use or system capacity.

Customer Services costs are allocated on a per-service basis, regardless of the size of the meter serving a property or actual water use.
• Meter Operations expenses are related to servicing, maintenance, and replacement of meters. These costs are recovered through Meter Cost Unit (MCU) allocations reflecting the relative cost of service for meters of different sizes, as described in Section 3.2.2. • Production expenses are related to the raw water system and water treatment operations.

Raw Water operation costs are recovered on a per unit, volumetric basis while potable operating costs are allocated to Extra Capacity Components based on peak month demands. • Distribution expenses are related to maintaining and operating the SCWD’s potable water distribution system. These costs are recovered through Extra Capacity Components based on peak month use.
• All Volume expenses are costs that are recovered across all units of water sold, both potable and raw water. These costs benefit all customers regardless of customer class. • Potable Water costs are specifically related to the delivery of potable water, such as the cost of chemicals, and are recovered per unit of potable water sold. • Engineering, Pay-As-You-Go (PAYGO), Existing Debt, and New Debt expenses are related to water system infrastructure and are allocated based on the depreciated replacement value of the water system’s assets. The allocation of assets is shown in Appendix A.

The following table shows the five-year projected expenses and offsetting revenues for FY 2027 in each allocation category. The five-year average amounts are used to determine the total functional allocation amount and then identify each function’s portion, or percentage share, of that amount. The percentage share of each function will then be applied to the existing rate revenue requirement to identify the revenue requirement for each function. This approach

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City of Santa Cruz Water Rate Study
ensures the cost-of-service analysis remains revenue-neutral relative to existing rates. The proposed rate increases are calculated separately in Section 4.4 and are applied to the cost-ofservice rates in the rate derivation in Section 6.

The allocation amount for each allocation category is the net of expenses less offsetting revenues. Offsetting revenues consist of interest revenue, special read fees, system development fees, and other non-rate revenues that offset specific allocation categories. Detailed line-item revenues and expenses are shown in Appendix B and functional allocations are shown in Appendix D.

Table 11: Allocation Categories and Amounts for Functional Allocation

5.3 Allocations Between Fixed Capacity and Variable Water Usage Functions Water utilities have employed a wide range of approaches or perspectives for allocating and recovering their costs for providing service, often through a combination of fixed and variable charges. The percentage of revenues derived from the fixed and variable charges should be proportional to each system’s expenditures and must not exceed the cost of providing service.

Projected 5-Yr. Avg. Amount
Allocation Category Allocation Basis
Allocation
Expenses
Offsetting
Revenues
Allocation
Amount
General Non-Functional $437,557 $1,215,198 -$777,641
Administration Capacity & All Demand $12,261,265 $0 $12,261,265 Customer Services Customer Service $4,222,418 $2,334,391 $1,888,026 Meters Meters $1,568,237 $0 $1,568,237
Production Potable Peak + Raw $8,782,129 $0 $8,782,129
Distribution Potable Peak $7,274,180 $0 $7,274,180
All Volume All Demand $8,122,790 $371,322 $7,751,467
Potable Water Potable Demand $3,713,107 $0 $3,713,107
Engineering Infrastructure $5,513,149 $0 $5,513,149
Paygo Infrastructure $14,827,874 $1,060,000 $13,767,874 Existing Debt Infrastructure $15,431,797 $0 $15,431,797 New Debt Infrastructure $1,024,950 $0 $1,024,950
Functional Allocation (5-yr. Avg. $) $83,179,453 $4,980,912 $78,198,541 Functional Allocation %
Functional Allocation of Existing Rate Revenue Requirement Functional Allocation %
Rate Revenue Requirement at Existing Rates $61,013,326

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City of Santa Cruz Water Rate Study
Many of SCWD’s costs are fixed costs that do not vary by the volume of water delivered, such as staff costs and the costs for maintaining infrastructure. Some of these costs are related to the number of customers, but the majority of the fixed costs are related to the total capacity of the water system. Fixed costs related to system capacity can reasonably be apportioned by meter size or water use. For example, the fixed cost of salaries related to water production can reasonably be recovered from usage-based charges, since these costs are incurred to meet customer demand. Alternatively, these costs can reasonably be recovered from a fixed charge based on meter size, which reflects the customer’s proportional share of water production capacity. Likewise, debt service payments may be fixed annual costs, but it is reasonable to recover some of these costs from usage-based rates as the costs are incurred to fund infrastructure that will improve the water delivery system. While there is no single correct approach, BWA believes that costs should be allocated within a reasonable range that reflects both a) underlying cost causation, to the extent such causation can reasonably be determined or estimated, and b) the policy preferences of the agency in cases where a range of reasonable approaches can be justified.

5.4 Functional Cost Allocation
The next step in the cost-of-service analysis is to allocate the net expenses (expenses less offsetting revenues) in each allocation category to SCWD’s functions. Each function uniquely drives system costs and is most reasonably recovered by a specific allocation unit. An example of this is costs allocated to the customer function are most reasonably recovered on a per customer basis. Just as there is no single correct approach for fixed and variable cost allocation, there is no single correct approach for functional cost allocation. Functional cost allocations should be within a reasonable range that reflects the considerations described in the previous section. This process is intended to proportionately allocate costs to each functional component to determine the revenue requirement for each function. The allocations to each function were based on input from SCWD staff and BWA analysis of customer and metered water demand data. A description of the allocations for each allocation category is included in Section 5.2. Supporting calculations for the allocations are included in Appendix D.

SCWD’s costs are allocated to ten functional components, each recovered through either a fixed or variable rate structure. The four fixed cost functions: Customer, Capacity, Meter, and Fire, recover costs through fixed charges. The six variable cost functions: Base, Base-to-Average, Average-to-Peak, Peak, All Potable and All Raw are recovered through volumetric rates.

5.5 Allocation to Fixed Cost Functional Components
The following section describes the functions where the revenue requirement is recovered from fixed units.

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City of Santa Cruz Water Rate Study
Fixed Cost Functions
• Customer function costs are related to the number of services and are reasonably recovered on a per service basisregardless of meter size or water use. This function includes both water and private fire services since both are billed a flat customer charge unrelated to meter size. • Capacity function costs are related to the size of the SCWD’s water system and are reasonably recovered per meter equivalent unit (MEU). MEU ratios are based on standard AWWA capacity guidelines reflecting the maximum safe flow of each meter size relative to the baseline 5/8-inch meter, as described in Section 3.2. This function benefits all water services. • Meter function costs are related to the cost of servicing, maintaining, and replacing meters of different sizes and are reasonably recovered per Meter Cost Unit (MCU). MCU ratios are specific to SCWD’s meter inventory and operations and are periodically verified with SCWD operations staff, as described in Section 3.2.2. This function benefits all water services. • Fire function costs reflect the portion of the SCWD’s water system benefiting private fire services and are reasonably recovered per fire service equivalent unit (FEU). This function benefits only private fire services.

The following table shows a breakdown of the water utility’s allocation to fixed cost functions as described in Section 5.2.

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City of Santa Cruz Water Rate Study
Table 12: Allocation to Fixed Cost Functional Components A description of the allocations for each allocation category is included in Section 5.2. Supporting calculations for the allocations are included in Appendix D. The Functional Allocation dollars are calculated by taking the sum of the products of the allocation percentages in each functional component multiplied by the allocation amounts. The Functional Allocation percentage is calculated by dividing the Functional Allocation dollars for each functional component by the total Functional Allocation dollars. The Functional Allocation percentage for each functional component is then multiplied by the total revenue requirement. The revenue requirement was identified in Section 4.4.

5.6 Fixed Cost Functional Component Unit Costs
The following table describes the allocation units used to derive the unit cost by functional component. Fixed allocation units are services and MEUs shown in Section 3.2.

Projected 5-Yr. Avg. Amount
Allocation Category Allocation Basis
Allocation
Amount Customer Capacity Meter Fire
General Non-Functional -$777,641
Administration Capacity & All Demand $12,261,265 50.00% Customer Services Customer Service $1,888,026 100.00%
Meters Meters $1,568,237 100.00%
Production Potable Peak + Raw $8,782,129
Distribution Potable Peak $7,274,180
All Volume All Demand $7,751,467
Potable Water Potable Demand $3,713,107
Engineering Infrastructure $5,513,149 0.01% 15.30% 1.15% 0.73% Paygo Infrastructure $13,767,874 0.01% 15.30% 1.15% 0.73% Existing Debt Infrastructure $15,431,797 0.01% 15.30% 1.15% 0.73% New Debt Infrastructure $1,024,950 0.01% 15.30% 1.15% 0.73% Functional Allocation (5-yr. Avg. $) $78,198,541 $1,893,051 $11,597,854 $1,979,604 $259,375 Functional Allocation % 2.40% 14.69% 2.51% 0.33%
Functional Allocation of Existing Rate Revenue Requirement Functional Allocation % 2.40% 14.69% 2.51% 0.33%
Rate Revenue Requirement at Existing Rates $61,013,326 $1,462,483 $8,959,963 $1,529,350 $200,381

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City of Santa Cruz Water Rate Study
Table 13: Fixed Allocation Units
Functional
Component Allocation Units
Allocation
Units
Unit of
Measure Description
Customer
Number of Services
Connections 27,912 #
Total number of active SCWD service
connections
Water
Capacity
Meter Equivalent
Units
34,490 MEU
Total AWWA standard meter equivalent
units for active SCWD water customers
Meter Meter Cost Units 30,741 MCU
Total SCWD-specific meter cost units
reflecting the relative cost to service meters
of each size
Fire Fire Equivalent Units 12,778 FEU
Total AWWA standard fire service
equivalent units for active SCWD water
customers
The following table shows the allocation units and total revenue requirement by functional component. The allocation units used for each functional component are the units related to the service provided by the functional component. The revenue requirement divided by the allocation units for each functional component provides each functional component’s unit rate.

Table 14: Fixed Annual Unit Costs by Functional Component Allocation Units Customer Capacity Meter Fire
Allocation Unit of Measure # MEU MCU FEU
Allocation Units 27,912 34,490 30,741 12,778
Revenue Requirement $1,462,483 $8,959,963 $1,529,350 $200,381 Annual Unit Cost $52.40 $259.79 $49.75 $15.68

5.7 Function Allocation to Volumetric Cost Components
The following section describes the functional components where the revenue requirement is recovered from variable CCF units(100 cubic feet or 748 gallons). The definitions of the functional components are as follows:
• Base, Base-to-Average, Average-to-Peak, and Peak functions reflect the Extra Capacity Components described in Section 5.1 and are allocated costs related to potable water system capacity sized to meet peak demands. Costs are allocated to the Extra Capacity Components based on the portion of use in each component during the maximum month reflecting the maximum utilization of capacity.
• Raw Water Demand function is allocated costs related to the North Coast Agriculture customer’s portion of raw water costs and excludes costs related to providing treated water.

Raw water costs are recovered per unit of water demand because the raw water system is generally not sized to meet peak demand.

15.52 Cost of Service Analysis 28
City of Santa Cruz Water Rate Study
• Potable Water Demand function is allocated costs related to the potable customer classes’ portion of raw water costs and potable costs most reasonably recovered on a per unit basis such as the cost of chemicals.
• As All Other function is allocated costs that are related to supporting the water system as a whole and do not drive specific functional costs. The costs are allocated based on the proportional allocation of functional costs.

The following table shows a breakdown of the water utility’s allocation to variable cost functional components as described in Section 5.2.

Table 15: Cost Allocation to Volumetric Extra Capacity Functions Projected 5-Yr. Avg. Amount
Allocation Category Allocation Basis
Allocation
Amount Base
Base to
Average
Average to
Peak Peak
General Non-Functional -$777,641
Administration Capacity & All Demand $12,261,265
Customer Services Customer Service $1,888,026
Meters Meters $1,568,237
Production Potable Peak + Raw $8,782,129 46.35% 12.70% 8.72% 3.14% Distribution Potable Peak $7,274,180 65.36% 17.91% 12.30% 4.43% All Volume All Demand $7,751,467
Potable Water Potable Demand $3,713,107
Engineering Infrastructure $5,513,149 44.12% 12.09% 8.31% 2.99% Paygo Infrastructure $13,767,874 44.12% 12.09% 8.31% 2.99% Existing Debt Infrastructure $15,431,797 44.12% 12.09% 8.31% 2.99% New Debt Infrastructure $1,024,950 44.12% 12.09% 8.31% 2.99% Functional Allocation (5-yr. Avg. $) $78,198,541 $24,593,555 $6,738,167 $4,628,994 $1,668,574 Functional Allocation % 31.14% 8.53% 5.86% 2.11%
Functional Allocation of Existing Rate Revenue Requirement Functional Allocation % 31.14% 8.53% 5.86% 2.11%
Rate Revenue Requirement at Existing Rates $61,013,326 $18,999,837 $5,205,595 $3,576,146 $1,289,062

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City of Santa Cruz Water Rate Study
Table 16: Cost Allocation to Volumetric Demand Functions and Non-Functional Allocation A description of the allocations for each allocation category is included in Section 5.2. Supporting calculations for the allocations are included in Appendix D. The functional allocation dollars are calculated by taking the sum of the products of the allocation percentages in each function multiplied by the allocation amounts. The functional allocation percentage is calculated by dividing the functional allocation dollars for each function by the total functional allocation dollars. The functional allocation percentage for each functional component is then multiplied by the revenue requirement. The revenue requirement was identified in Section 4.4.

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City of Santa Cruz Water Rate Study

5.8 Volumetric Unit Costs by Function
The following table describes the volumetric units used to derive the unit cost by function.

Table 17: Volumetric Allocation Units (FY 2027)
Functional
Component
Allocation
Units (CCF) Description
Base 2,314,956 Projected minimum month water units sold by SCWD Base to Average 424,839 Projected minimum to average month water units sold by SCWD Average to Peak 165,498 Projected average month to peak water units sold by SCWD Peak 43,917 Projected above-peak water units sold by SCWD Potable Demand 2,949,210 Projected potable water units sold by SCWD Raw Demand 3,319 Projected raw water units sold by SCWD The following table shows the allocation units and total revenue requirement by function. The allocation units used for each function are the units related to the service provided by the function. The revenue requirement divided by the allocation units for each function provide each function’s unit cost.

Table 18: Volumetric Unit Costs by Function
Functional Component
Revenue
Requirement ($)
Allocation
Units (CCF)
Unit
Cost ($/CCF)
Base $18,999,837 2,314,956 $8.21
Base-to-Average $5,205,595 424,839 $12.25
Average-to-Peak $3,576,146 165,498 $21.61
Peak $1,289,062 43,917 $29.35
Potable Demand $19,771,485 2,949,210 $6.70
Raw Demand $19,024 3,319 $5.73

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City of Santa Cruz Water Rate Study

6 WATER RATE DERIVATION

6.1 Rate Structure Recommendations
The proposed rates incorporate some modifications to the SCWD’s water rate structure designed to align rates with the current cost of providing service and reflect policy input provided by SCWD staff. Due to these modifications, impacts on water bills will vary based on customer class and water use when the proposed rates are implemented.

The proposed water rate structure remains relatively consistent with the SCWD’s existing rate structure but incorporates the following modifications:
• Increase Fixed Revenue Recovery: The proposed fixed monthly service charges recover an average of 20% of projected rate revenue across all customers while the current fixed monthly service charges recover only an average of 10% of projected revenue across all customers. Fixed revenue recovery will remain below typical industry practice, where fixedcharge recovery is typically between 30% and 50%. This change reflects the current cost-ofservice and improves revenue stability. This change will result in higher fixed monthly charges and lower volumetric rates compared to the existing structure. • Fixed Revenue Recovery Based on Meter Capacity: The additional revenue recovered from fixed charges reflects system capacity costs, which are allocated to customers based on meter size using AWWA-standard meter equivalent units. Because larger meters represent greater potential demand on system capacity, customers with larger meters will see a proportionally greater increase in fixed charges than those with smaller meter sizes. This approach is consistent with industry-standard rate-setting practices. • Consolidation of Volumetric Rate Components: The proposed rates consolidate three separate volumetric charges (the Quantity Charge, the Infrastructure Reinvestment Fee (IRF), and the Rate Stabilization Fee (RSF)) into a single unified volumetric rate. The IRF has historically provided dedicated funding for capital projects, while the RSF supported the SCWD’s Rate Stabilization Reserves, which helps mitigate revenue volatility from year to year.

Consolidating these components into a single rate does not eliminate their underlying purposes. The SCWD will continue to fund capital investment and maintain reserve targets through its internal budgeting and reserve policies, even though these will no longer appear as separate charges on customer bills. This approach is consistent with industry-standard rate-setting practices and results in a simpler, easy-to-understand bill, while continuing to recover the full cost of providing service in a proportional and equitable manner consistent with the cost-of-service analysis.
• Moving from Three to Two Landscape Irrigation Tiers: The proposed landscape irrigation rate structure is reduced from three tiers to two tiers to align with the results of the cost-of15.56 Water Rate Derivation 32
City of Santa Cruz Water Rate Study

service analysis and current customer demands. Customer usage data shows that landscape irrigation customers predominantly adhere to their individual water budget allocations, especially during summer irrigation months, resulting in very little usage in the third tier. • Volumetric Drought Surcharges: The proposed rates introduce volumetric drought surcharges, calculated as a percentage of the SCWD’s regular volumetric water rates and levied in addition to those rates during a declared water shortage. A surcharge percentage is identified for each drought stage in the SCWD’s 2025 Urban Water Management Plan (UWMP). This approach represents a shift from fixed monthly drought surcharges based on meter size to volumetric drought surcharges. Customers who reduce demand in accordance with the conservation target at a given drought stage will see their total bill remain almost unchanged.

6.2 Potable Unit Cost
Potable volumetric rates are determined by the amount of each class’s projected demand by the Extra Capacity Component. The total unit cost for each Extra Capacity Component is the sum of the potable water unit rate, which applies to every unit of potable water, and the Extra Capacity Component unit rate. The unit rates in the table below are used to calculate all the potable rates in the following sections.

Table 19: Potable Water Unit Cost by Extra Capacity Component This study calculates the revenue requirement from volumetric rates for each class in the same way: It multiplies the unit rates in Table 19 by that class’s projected share of consumption in each Extra Capacity Component. After applying this uniform method to distribute costs among classes, however, the study takes two different approaches to allocate those costs among customers within each class. It applies tiered rates for residential and landscape irrigation customers, but it recommends uniform rates for commercial customers and UCSC.

This reflects different consumption patterns within each class, and thus the ability or inability to capture proportionate costs of service through tiered rates. When all customers within a class have relatively uniform needs and consumption patterns (as is the case for residential and landscape irrigation), the utility can calculate logical uniform tiers where increasing consumption Total Demand Category
Unit Cost
All Potable
Water Base
Base to
Average
Average to
Peak Peak
Allocation Unit of Measure CCF CCF CCF CCF CCF
Allocation Units 2,949,210 2,314,956 424,839 165,498 43,917 Revenue Requirement $19,771,485 $18,999,837 $5,205,595 $3,576,146 $1,289,062 Unit Cost ($/CCF) $6.70 $8.21 $12.25 $21.61 $29.35
Potable Water Unit Cost ($/CCF) $6.70 $6.70 $6.70 $6.70 Total Demand Category Unit Cost ($/CCF) $14.91 $18.96 $28.31 $36.06

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City of Santa Cruz Water Rate Study

requires it to provide proportionately higher capacity, and thus to incur proportionately higher costs. However, when consumption is relatively varied within a class (as is the case for commercial customers and UCSC), it is difficult to pinpoint uniform breakpoints more precise than those already provided by the Extra Capacity Components at the system and inter-class levels.

6.3 Residential Rate Derivation
The recommended residential rate structure consists of three tiers. The amount of water allocated to each tier is applied to each monthly billing period. The tier breaks reflect reasonable increments of water demand within each tier given a number of factors, including the functional cost allocation and type of use.
• Tier 1: 0 to 5 CCF – The Tier 1 breakpoint reflects indoor, domestic use and consists almost entirely of Base water. Based on the American Community Survey, 75% of households in Santa Cruz County have three or fewer members and the average household has 2.51 members. Indoor use in Santa Cruz is estimated to be 44 gallons per day. 5 CCF reflects a household size between 2 and 3 people.
• Tier 2: >5 to 9 CCF – 90% of residential water bills do not exceed the Tier 2 breakpoint which is set to reflect average use per bill in the maximum use month. The majority of use in Tier 2 is Base to Average.
• Tier 3: >9 CCF – Tier 3 captures the top 10% of residential water bills and reflects use in excess of the average use per bill in the maximum use month. The majority of use in Tier 2 is Average to Peak.

These tier breaks facilitate the proportional allocation of costs within the residential customer class and reflect current consumption patterns. Rates and tier breakpoints are applied to each dwelling unit, to both single-family and multi-family residential customers.

Residential Rate Revenue Requirement
The revenue requirement for each tier is calculated by multiplying the Extra Capacity Component unit cost, found in Table 19, by the projected tier use in each Extra Capacity Component, shown in the table below and Appendix A (i.e., Extra Capacity Component Unit Cost x Projected Units of Demand = Revenue Requirement). The total revenue requirement for each of these tiers is the sum of the revenue requirements for each Extra Capacity Component.

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Table 20: Residential Rate Revenue Requirements
Residential Rates
The rate per CCF for each residential tier is calculated by dividing the total revenue requirement from the prior table by the projected demand for each residential tier from the previous table.

Table 21: Residential Tiered Unit Rates

6.4 Commercial Rate Derivation
Unlike residential customers who are billed based on inclining block tiers, commercial customers are billed a single uniform volumetric rate. Commercial customers in SCWD's service area place varied demands on the water system depending on the nature of their operations. A uniform rate is appropriate for this class because it reflects the class's cost-of-service and can be reasonably applied to all customers in this class.

Commercial Rate Revenue Requirement
The revenue requirement for the commercial class is calculated by multiplying the Extra Capacity Component total unit cost, found in Table 19, by the projected commercial class use in each Extra Residential COS Rate
Derivation Base
Base to
Average
Average to
Peak Peak Total
Unit Cost ($/CCF) $14.91 $18.96 $28.31 $36.06
Portion of Demand by Tier (%)
Tier 1 99.9% 0.1% 0.0% 0.0% 100.0%
Tier 2 31.5% 60.8% 7.7% 0.0% 100.0%
Tier 3 6.4% 24.6% 69.0% 0.0% 100.0%
Projected Units of Demand by Tier (CCF)
Tier 1 1,528,109 1,638 - - 1,529,747
Tier 2 78,637 151,594 19,214 - 249,445
Tier 3 6,990 26,848 75,269 - 109,107
Revenue Requirement by Tier ($)
Tier 1 $22,786,279 $31,052 $0 $0 $22,817,331
Tier 2 $1,172,590 $2,873,781 $544,004 $0 $4,590,375
Tier 3 $104,231 $508,963 $2,131,032 $0 $2,744,226
Residential Tier Rate
Derivation
Revenue
Requirement
Projected
Demand COS Rates
$ CCF $ per CCF
Tier 1 $22,817,331 1,529,747 $14.92
Tier 2 $4,590,375 249,445 $18.40
Tier 3 $2,744,226 109,107 $25.15

15.59 Water Rate Derivation 35
City of Santa Cruz Water Rate Study

Capacity Component, shown in the table below and Appendix A (i.e., Extra Capacity Component Unit Cost × Projected Units of Demand = Revenue Requirement). The total revenue requirement is the sum of the revenue requirements for each Extra Capacity Component.

Table 22: Commercial Rate Revenue Requirements
Commercial Volumetric Rates
The rate per CCF for the commercial customer class is calculated by dividing the total revenue requirement from the prior table by the projected demand for the commercial class from the previous table.

Table 23: Commercial Tiered Unit Rates

6.5 UCSC Rate Derivation
The University of California, Santa Cruz (UCSC) is billed a single uniform volumetric rate. UCSC is a large institutional customer that places unique demands on the SCWD's water system. A uniform rate is appropriate for this class as the cost-of-service analysis does not identify meaningful cost distinctions between levels of use that would justify a tiered rate structure.

UCSC Rate Revenue Requirement
The revenue requirement for UCSC is calculated by multiplying the Extra Capacity Component total unit cost, found in Table 19, by the projected UCSC class use in each Extra Capacity Component, shown in the table below and Appendix A (i.e., Extra Component Unit Cost × Projected Units of Demand = Revenue Requirement). The total revenue requirement is the sum of the revenue requirements for each Extra Capacity Component.

Commercial COS Rate
Derivation Base
Base to
Average
Average to
Peak Peak Total
Unit Cost ($/CCF) $14.91 $18.96 $28.31 $36.06
Projected Units of Demand by Tier (CCF)
All Water Demand 555,816 146,882 55,236 23,039 780,972
Revenue Requirement by Tier ($)
All Water Demand $8,288,007 $2,784,446 $1,563,852 $830,683 $13,466,989 Commercial COS Rate
Derivation
Revenue
Requirement
Projected
Demand COS Rate
$ CCF $ per CCF
All Water Demand $13,466,989 780,972 $17.24

15.60 Water Rate Derivation 36
City of Santa Cruz Water Rate Study

Table 24: UCSC Rate Revenue Requirements
UCSC Volumetric Rates
The unit rate for UCSC is calculated by dividing the total revenue requirement from the prior table by the projected demand for the UCSC tier from the previous table.

Table 25: UCSC Tiered Unit Rates

6.6 Landscape Irrigation Rate Derivation
The recommended landscape irrigation rate structure consists of two tiers based on each customer's individual water budget allocation. Water budgets are set to reflect efficient irrigation of a customer’s irrigable area throughout the year. A two-tier budget-based rate structure reflects the cost associated with serving customers at varying levels of use relative to their individual water budgets.
• Tier 1: At or below 100% of water budget — Tier 1 captures use at or below each customer's water budget allocation, reflecting efficient irrigation use. The majority of Tier 1 demand is Base to Average. 92.5% of landscape irrigation demand is projected to occur in Tier 1.
• Tier 2: Above 100% of water budget — Tier 2 captures use above each customer's water budget allocation, reflecting inefficient irrigation use. The majority of Tier 2 demand is Peak.

Landscape Irrigation Tiered Rate Revenue Requirement
The revenue requirement for an Extra Component is calculated by multiplying the Extra Capacity Component total unit cost, found in Table 19, by the projected tier use in each Extra Capacity UCSC COS Rate Derivation Base
Base to
Average
Average to
Peak Peak Total
Unit Cost ($/CCF) $14.91 $18.96 $28.31 $36.06
Projected Units of Demand by Tier (CCF)
All Water Demand 132,924 64,112 9,264 5,659 211,959
Revenue Requirement by Tier ($)
All Water Demand $1,982,086 $1,215,375 $262,293 $204,037 $3,663,791 UCSC Tier Rate Derivation
Revenue
Requirement
Projected
Demand COS Rate
$ CCF $ per CCF
All Water Demand $3,663,791 211,959 $17.29

15.61 Water Rate Derivation 37
City of Santa Cruz Water Rate Study

Component, shown in the table below and Appendix A, (i.e., Extra Capacity Component Unit Cost x Projected Units of Demand = Revenue Requirement). The total revenue requirement for each of these tiers is the sum of the revenue requirements for each Extra Capacity Component.

Table 26: Landscape Irrigation Tiered Rate Revenue Requirements Landscape Irrigation Tiered Volumetric Rates
The unit rate for each landscape irrigation tier is calculated by dividing the total revenue requirement from the prior table by the projected demand for each landscape irrigation tier from the previous table.

Table 27: Landscape Irrigation Tier Unit Rates

6.7 North Coast Agricultural Water Rate Derivation
The recommended North Coast Agricultural rate is calculated by dividing the raw water revenue requirement by the projected North Coast Agricultural water demand. Raw water costs exclude treatment and potable distribution costs and are recovered on a per unit, volumetric basis, as the raw water system is not sized to meet peak demand in the same manner as the potable water system.

Landscape Irrigation COS
Rate Derivation Base
Base to
Average
Average to
Peak Peak Total
Projected Demand (CCF) 12,480 33,766 6,515 15,220 67,980 Unit Cost ($/CCF) $14.91 $18.96 $28.31 $36.06
Portion of Demand by Tier (%)
Tier 1 19.8% 51.4% 9.8% 19.1% 100.0%
Tier 2 1.2% 29.0% 6.8% 63.0% 100.0%
Projected Units of Demand by Tier (CCF)
Tier 1 12,416 32,279 6,169 11,990 62,854
Tier 2 64 1,487 347 3,229 5,126
Revenue Requirement by Tier ($)
Tier 1 $185,145 $611,913 $174,647 $432,324 $1,404,029
Tier 2 $949 $28,183 $9,815 $116,438 $155,385
Landscape Irrigation Tier
Rate Derivation
Revenue
Requirement
Projected
Demand COS Rate
$ CCF $ per CCF
Tier 1 $1,404,029 62,854 $22.34
Tier 2 $155,385 5,126 $30.31

15.62 Water Rate Derivation 38
City of Santa Cruz Water Rate Study

North Coast Agricultural Rate Derivation
The recommended raw water rate for North Coast Agricultural customers is calculated by dividing the total raw water system revenue requirement by the projected raw water demand. The North Coast Agriculture rate excludes treatment and distribution costs, reflecting that North Coast Agriculture customers receive raw (non-potable) water service.

Table 28: Raw Water Rate Derivation
Raw Water COS Rate
Derivation
Total Revenue
Requirement
Projected
Demand (CCF)
COS Rate
($/CCF)
All Water Demand $19,024 3,319 $5.73

6.8 Elevation Surcharge
The SCWD applies elevation surcharges to customers served by pump stations, which require additional electricity to pump water to higher elevations. These surcharges recover the incremental cost of electricity for pumping water to customers in elevation zones and are applied in addition to the standard volumetric rate per CCF of water used.

The elevation surcharge for each zone is calculated by dividing the total electricity costs attributable to each elevation zone by the projected volume of water pumped in each zone. This results in a rate that proportionally recovers the additional cost of serving customers at higher elevations. Higher zones incur greater pumping costs due to the additional energy required to deliver water against a greater elevation head, resulting in higher surcharges for customers in those zones. SCWD's service area includes three elevation zones. The elevation surcharge derivation is shown in detail in Appendix D, and the proposed elevation surcharges by zone are shown in the table below.

Table 29: Elevation Surcharge Rate Derivation
Electricity charges are not projected to increase at the same rate as the overall rate revenue increases but rather based on projected inflation because these costs reflect the cost of electricity and not the overall cost of service. As shown in the table below, the Jan. 1, 2027, rate Elevation Zone
FY 24-25 CCF
Pumped
Electricity
Cost
Unit Cost per
Zone
($ per CCF)
Total Unit
Cost ($ per
CCF)
Elevation Zone 1 684,269 $231,935.65 $0.34 $0.34
Elevation Zone 2 276,258 $127,698.19 $0.46 $0.80
Elevation Zone 3 181,698 $87,606.24 $0.48 $1.28

15.63 Water Rate Derivation 39
City of Santa Cruz Water Rate Study

for each elevation zone is escalated annually by the projected inflation rate to determine the surcharge for each subsequent year of the study period.

Table 30: Elevation Surcharge Rate Schedule

6.9 Monthly Fixed Charge Derivations
Proposed fixed charges are designed to recover the capacity and per customer costs to serve each active service connection. Fixed charges are assessed monthly and consist of three functional cost components: Customer, Capacity (MEU), and Meter Cost (MCU), as described in Section 5.5. Unit costs for each component were calculated in Section 5.6.

Monthly Ready-to-Serve Charge
The monthly water service charge applies to all active water service connections. It recovers the Customer function revenue requirement on a per meter basis, the Capacity function revenue requirement on a per MEU basis, and the Meter Cost function revenue requirement on a per MCU basis. The Customer unit cost is the same for all meter sizes. The unit costs per MEU and per MCU vary by meter size based on meter capacity ratios and meter cost ratios respectively, as described in Section 3.2.

Elevation Zone
COS Rate
($ per CCF) Jan. 1, 2027 Jan. 1, 2028 Jan. 1, 2029 Jan. 1, 2030 Jan. 1, 2031 Projected Inflation 5.0% 5.0% 5.0% 5.0% 5.0%
Elevation Zone 1 $0.34 $0.36 $0.37 $0.39 $0.41 $0.43
Elevation Zone 2 $0.80 $0.84 $0.88 $0.93 $0.97 $1.02
Elevation Zone 3 $1.28 $1.35 $1.41 $1.49 $1.56 $1.64

15.64 Water Rate Derivation 40
City of Santa Cruz Water Rate Study

Table 31: Monthly Ready-to-Serve Charge Derivation
Allocation Units Customer Capacity Meter
Unit of Measure # MEU MCU
Allocation Units 27,912 34,490 30,741
Revenue Requirement $1,462,483 $8,959,963 $1,529,350
Unit Cost $52.40 $259.79 $49.75
Ready-to-Serve Charge
Derivation
Customer
Component
Meter
Equivalent
Units
Capacity
Component
Meter Cost
Units
Meter Cost
Component
Annual
Fixed COS
Charges
Monthly
Fixed COS
Charges
Meter Size $ MEU $ MCU $ $ $
5/8" 52.40 1.00 259.79 1.00 49.75 361.93 30.16
3/4" 52.40 1.50 389.68 1.10 54.72 496.80 41.40
1" 52.40 2.50 649.47 1.40 69.65 771.52 64.29

1.5" 52.40 5.00 1,298.94 1.80 89.55 1,440.89 120.07
2" 52.40 8.00 2,078.31 2.90 144.27 2,274.97 189.58
3" 52.40 17.50 4,546.29 11.00 547.24 5,145.93 428.83
4" 52.40 31.50 8,183.33 14.00 696.49 8,932.21 744.35
6" 52.40 65.00 16,886.23 21.00 1,044.73 17,983.36 1,498.61 8" 52.40 140.00 36,370.34 29.00 1,442.73 37,865.46 3,155.46 10" 52.40 210.00 54,555.51 38.00 1,890.47 56,498.37 4,708.20

15.65 Water Rate Derivation 41
City of Santa Cruz Water Rate Study

Monthly Private Fire Service Charge
The monthly fire service charge applies to active private fire service connections. This charge recovers customer and meter costs on a per service basis and the cost of private fire capacity on a per FEU basis. Unit costs were calculated in Section 5.6. Meter costs are recovered on a per service basis and not on a MCU because private fire services have “tattle” meters that are only intended to indicate flow but not measure it precisely. Fire meters are typically smaller than the service line and do not impede the flow.

Table 32: Monthly Private Fire Service Charge Derivation Per Fire Service Revenue Requirement Customer Meter Total Unit Cost $52.40 $49.75
Fire Units 3,303.00 3,342.20
Per Fire Service Revenue Requirement $173,065 $166,272 $339,337 Allocation Units Per Fire Service Fire
Unit of Measure # FEU
Allocation Units 3,303 12,778
Revenue Requirement $339,337 $200,381
Unit Cost $102.74 $15.68
Ready-to-Serve Charge Derivation
Customer
Component
Fire
Equivalent
Units
Capacity
Component
Annual
Fixed COS
Charges
Monthly
Fixed COS
Charges
Meter Size $ MEU $ $ $
3/4" 102.74 0.08 1.19 103.92 8.66
1" 102.74 0.16 2.53 105.27 8.77

1.5" 102.74 0.47 7.36 110.09 9.17
2" 102.74 1.00 15.68 118.42 9.87
3" 102.74 2.90 45.55 148.29 12.36
4" 102.74 6.19 97.08 199.81 16.65
6" 102.74 17.98 281.99 384.73 32.06
8" 102.74 38.32 600.93 703.67 58.64
10" 102.74 68.91 1,080.69 1,183.42 98.62

15.66 Water Rate Derivation 42
City of Santa Cruz Water Rate Study

6.10 Proposed Water Rates
The proposed rates shown in the following tables reflect the application of the recommended

7.0 percent revenue increase, for the first year, to the recalculated cost-of-service rates and are proposed for implementation beginning January 1, 2027. The cost-of-service analysis resulted in a greater portion of revenue being recovered from the fixed charges, causing volumetric charges on January 1, 2027, to be lower while fixed charges increased.

Table 33: Existing and Proposed Volumetric Water Rates
Volumetric Rates
Jul. 1,
2026 COS Rates
Jan. 1,
2027
Jan. 1,
2028
Jan. 1,
2029
Jan. 1,
2030
Jan. 1,
2031
($ per CCF) 1 Existing Proposed Proposed Proposed Proposed Proposed Residential 2
Tier 1 (0-5 CCF) $16.07 $14.92 $15.96 $17.88 $20.03 $21.83 $23.79 Tier 2 (6-9 CCF) $23.00 $18.40 $19.69 $22.05 $24.70 $26.92 $29.34 Tier 3 (>9 CCF) $29.98 $25.15 $26.91 $30.14 $33.76 $36.79 $40.11 Commercial
Commercial 3 $18.60 $17.24 $18.45 $20.66 $23.14 $25.22 $27.49 UCSC $19.67 $17.29 $18.50 $20.72 $23.21 $25.30 $27.57
Landscape Irrigation
Tier 1 (≤100% of budget) $32.74 $22.34 $23.90 $26.77 $29.98 $32.68 $35.63 Tier 2 (101% - 150%) $45.17 $30.31 $32.43 $36.32 $40.68 $44.34 $48.33 Tier 3 (151% & above)5
$57.10 $30.31 Proposed Tier 2 rate applies to all use >100% of budget North Coast Agriculture
Maintain Reliability $11.00 $5.73 $6.13 $6.87 $7.69 $8.38 $9.14 Decrease Reliability $5.50 N/A N/A N/A N/A N/A
Elevation Surcharges6
Jul. 1,
2026 COS Rates
Jan. 1,
2027
Jan. 1,
2028
Jan. 1,
2029
Jan. 1,
2030
Jan. 1,
2031
($ per CCF) 1 Existing Existing Proposed Proposed Proposed Proposed Proposed Lift Station Zone 1 $0.32 $0.34 $0.36 $0.37 $0.39 $0.41 $0.43 Lift Station Zone 2 $0.61 $0.80 $0.84 $0.88 $0.93 $0.97 $1.02 Lift Station Zone 3 $1.10 $1.28 $1.35 $1.41 $1.49 $1.56 $1.64 1 CCF = 100 Cubic Feet or approximately 748 gallons.
2 Per dwelling unit, includes single-family and multi-family. 3 Includes industrial, golf, bulk, fire service leaks, and temporary. 4 Tiers based on percent of water budget for each customer. 5 Tiers 2 and 3 will be combined if the proposed rates are adopted. 6 As applicable

15.67 15.68
Drought Surcharge 44
City of Santa Cruz Water Rate Study
7 DROUGHT SURCHARGES
The SCWD is proposing to authorize a series of drought surcharges that could be implemented to support financial stability and help ensure adequate funding for water utility operations during periods of water shortage and reduced water sales. As proposed, these surcharges would be temporary, calculated as a percentage of the SCWD’s regular volumetric water rates, and levied in addition to those rates during a declared water shortage. The proposed surcharges correspond with the Water Shortage Response Stages identified in the SCWD’s 2025 Urban Water Management Plan (UWMP).

Drought surcharges are designed to enable the SCWD to recover the volumetric revenue requirement identified in Section 5.7. The surcharges will help SCWD remain financially stable during periods of water shortage and reduced water sales. As described in this report, the SCWD’s rate structure reflects the proportional cost-of-service. The surcharges, applied as a percentage to each existing volumetric rate, maintain the proportional cost recovery. Customers who reduce demand in accordance with the conservation target at a given drought stage will have their total bill remain almost unchanged. The surcharges can be phased out as water use gradually rebounds after a shortage has ended.

Financial impacts during water shortages and periods of reduced water sales can include:
• A loss of volumetric water rate revenue due to a reduction in the volume of water sales. • Reduced variable expenses due to reduced volumes of water production and treatment, such as reduced costs for electricity and treatment chemicals.

The derivation of the drought surcharges is shown in Appendix F. The following table shows the proposed drought surcharge at each Water Shortage Response Stage.

Table 35: Proposed Drought Surcharges
During a declared Water Shortage Response Stage, a customer’s volumetric rate is calculated by adding the applicable drought surcharge to their existing volumetric rate, as follows:

Volumetric Rate + (Volumetric Rate x Drought Surcharge Percentage) = Total Volumetric Rate During Declared Water Shortage
Baseline Stage 1 Stage 2 Stage 3 Stage 4 Stage 5
Target Water Use Reduction 0% 10% 20% 30% 40% 50%
Proposed Drought Surcharge 10.0% 23.0% 40.0% 63.0% 94.0% Drought Surcharge Derivation by Drought Stage

15.69 Drought Surcharge 45
City of Santa Cruz Water Rate Study
For example, under a Stage 2 water shortage, which carries a 23 percent drought surcharge, a Tier 1 residential customer paying the proposed Tier 1 volumetric rate of $15.96 per CCF would pay:
$15.96 + ($15.96 x 0.23) = $19.63 per CCF
The total volumetric rate paid by customers at each Water Shortage Response Stage, inclusive of the applicable drought surcharge, is summarized in the table below.

Table 36: January 1, 2027, Tier 1 Residential Drought Surcharge Example Drought Stage Surcharge % Total Rate Factor
Jan. 1, 2027
Tier 1 Rate
Total Volumetric Rate
w/ Surcharge per CCF
Stage 1 10% 110% $15.96 $17.56
Stage 2 23% 123% $15.96 $19.63
Stage 3 40% 140% $15.96 $22.34
Stage 4 63% 163% $15.96 $26.01
Stage 5 94% 194% $15.96 $30.96

15.70 Bill Impacts and Conclusion 46
City of Santa Cruz Water Rate Study
8 WATER RATE BILL IMPACTS
The following table shows the impacts of the proposed water rates on a range of single-family customers with different levels of consumption. The cost-of-service analysis resulted in more fixed cost recovery and less volumetric cost recovery. This caused fixed charges to increase while some volumetric rates were reduced.

Figure 10: Single Family Residential Bill Impacts
9 CONCLUSION
This 2026 Cost of Service Study evaluates the SCWD’s projected financial needs and allocates the cost of providing water service in a manner that is proportional, equitable, and consistent. Based on updated financial projections, capital improvement funding requirements, and a comprehensive costof-service analysis, the SCWD requires annual water rate revenue adjustments beginning in 2027 to maintain long-term financial stability and continue providing safe and reliable water service.

15.71 Appendix A – Projected Demand Characteristics
47 City of Santa Cruz Water Rate Study
APPENDIX A – Projected Demand Characteristics
Projected Water Demand
Projected Demand (CCF) Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total Potable Customer Classes
Residential 178,790 179,730 176,287 165,915 163,325 144,337 134,478 139,839 135,470 139,524 156,020 174,585 1,888,299 Commercial 85,220 86,953 84,575 72,989 64,981 52,144 46,318 48,973 49,289 53,644 61,943 73,942 780,972 UCSC 18,119 16,686 15,662 18,224 24,078 17,141 11,077 15,666 16,675 15,812 18,952 23,867 211,959 Landscape Irrigation 9,347 10,819 11,257 9,272 8,430 4,007 2,230 1,429 1,040 1,130 2,419 6,600 67,980 Total Potable 291,475 294,188 287,781 266,400 260,815 217,630 194,103 205,906 202,474 210,111 239,334 278,994 2,949,210 Non-Potable Customer Class
North Coast Agriculture 267 258 341 338 625 273 300 245 115 172 188 197 3,319 Total Non-Potable 267 258 341 338 625 273 300 245 115 172 188 197 3,319 Total Water Sales 291,743 294,446 288,122 266,738 261,440 217,903 194,403 206,151 202,590 210,282 239,522 279,191 2,952,529 Potable Water Amount
Average 245,768
Max Month 294,188
Peak Ratio 1.197
Residential Level Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total Total 178,790 179,730 176,287 165,915 163,325 144,337 134,478 139,839 135,470 139,524 156,020 174,585 1,888,299 Base 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 1,613,736 Base to Average 157,358 22,880 22,880 22,880 22,880 22,880 9,859 0 5,361 992 5,046 21,542 22,880 180,080 Average to Peak 188,361 21,431 22,372 18,929 8,557 5,967 0 0 0 0 0 0 17,227 94,483 Peak 0 0 0 0 0 0 0 0 0 0 0 0 0
Commercial Level Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total Total 85,220 86,953 84,575 72,989 64,981 52,144 46,318 48,973 49,289 53,644 61,943 73,942 780,972 Base 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 555,816 Base to Average 65,081 18,763 18,763 18,763 18,763 18,663 5,826 0 2,655 2,971 7,326 15,625 18,763 146,882 Average to Peak 77,903 12,822 12,822 12,822 7,908 0 0 0 0 0 0 0 8,861 55,236 Peak 7,317 9,050 6,672 0 0 0 0 0 0 0 0 0 23,039
UCSC Level Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total Total 18,119 16,686 15,662 18,224 24,078 17,141 11,077 15,666 16,675 15,812 18,952 23,867 211,959 Base 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 132,924 Base to Average 17,663 6,586 5,609 4,585 6,586 6,586 6,064 0 4,589 5,598 4,735 6,586 6,586 64,112 Average to Peak 21,143 455 0 0 560 3,480 0 0 0 0 0 1,288 3,480 9,264 Peak 0 0 0 0 2,935 0 0 0 0 0 0 2,724 5,659
Landscape Irrigation Level Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total Total 9,347 10,819 11,257 9,272 8,430 4,007 2,230 1,429 1,040 1,130 2,419 6,600 67,980 Base 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 12,480 Base to Average 5,665 4,625 4,625 4,625 4,625 4,625 2,967 1,190 389 0 90 1,379 4,625 33,766 Average to Peak 6,781 1,116 1,116 1,116 1,116 1,116 0 0 0 0 0 0 935 6,515 Peak 2,566 4,038 4,476 2,491 1,649 0 0 0 0 0 0 0 15,220 Potable Total Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total Base 192,913 192,913 192,913 192,913 192,913 192,913 192,913 192,913 192,913 192,913 192,913 192,913 2,314,956 Base to Average 52,855 51,877 50,853 52,855 52,755 24,717 1,190 12,993 9,561 17,198 45,132 52,855 424,839 Average to Peak 35,825 36,310 32,867 18,142 10,563 0 0 0 0 0 1,288 30,502 165,498 Peak 9,883 13,088 11,147 2,491 4,584 0 0 0 0 0 0 2,724 43,917 Total 291,475 294,188 287,781 266,400 260,815 217,630 194,103 205,906 202,474 210,111 239,334 278,994 2,949,210

15.72 Appendix A – Projected Demand Characteristics
48 City of Santa Cruz Water Rate Study
Projected Potable Water Demand by Tier
Residential Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Tier 1 134,788 134,559 133,490 130,956 130,675 123,032 116,934 120,590 118,551 121,280 129,168 135,725 1,529,747 81.0% Tier 2 25,949 29,250 28,180 24,319 23,109 16,515 13,300 14,633 13,182 14,274 20,028 26,707 249,445 13.2% Tier 3 18,053 15,921 14,618 10,640 9,541 4,790 4,244 4,615 3,737 3,970 6,824 12,153 109,107 5.8% Total 178,790 179,730 176,287 165,915 163,325 144,337 134,478 139,839 135,470 139,524 156,020 174,585 1,888,299 100.0% Base-Extra
Categories Level Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 134,478 1,613,736 85.5% Base to Avg. 157,358 22,880 22,880 22,880 22,880 22,880 9,859 0 5,361 992 5,046 21,542 22,880 180,080 9.5% Avg. to Peak 188,361 21,431 22,372 18,929 8,557 5,967 0 0 0 0 0 0 17,227 94,483 5.0% Peak 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0%
Total 178,790 179,730 176,287 165,915 163,325 144,337 134,478 139,839 135,470 139,524 156,020 174,585 1,888,299 100.0% Tier 1 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 134,478 134,478 133,490 130,956 130,675 123,032 116,934 120,590 118,551 121,280 129,168 134,478 1,528,109 99.9% Base to Avg. 310 81 0 0 0 0 0 0 0 0 0 1,247 1,638 0.1%
Avg. to Peak 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0%
Peak 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0%
Total 134,788 134,559 133,490 130,956 130,675 123,032 116,934 120,590 118,551 121,280 129,168 135,725 1,529,747 100.0% Tier 2 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 0 0 988 3,522 3,803 11,446 13,300 13,888 13,182 13,198 5,310 0 78,637 31.5% Base to Avg. 22,570 22,799 22,880 20,797 19,306 5,069 0 745 0 1,076 14,718 21,634 151,594 60.8% Avg. to Peak 3,378 6,451 4,311 0 0 0 0 0 0 0 0 5,074 19,214 7.7% Peak 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0%
Total 25,949 29,250 28,180 24,319 23,109 16,515 13,300 14,633 13,182 14,274 20,028 26,707 249,445 100.0% Tier 3 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 0 0 0 0 0 0 4,244 0 2,746 0 0 0 6,990 6.4%
Base to Avg. 0 0 0 2,084 3,574 4,790 0 4,615 992 3,970 6,824 0 26,848 24.6% Avg. to Peak 18,053 15,921 14,618 8,557 5,967 0 0 0 0 0 0 12,153 75,269 69.0% Peak 0 0 0 0 0 0 0 0 0 0 0 0 0 0.0%
Total 18,053 15,921 14,618 10,640 9,541 4,790 4,244 4,615 3,737 3,970 6,824 12,153 109,107 100.0%

15.73 Appendix A – Projected Demand Characteristics
49 City of Santa Cruz Water Rate Study
Commercial Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Tier 1 85,220 86,953 84,575 72,989 64,981 52,144 46,318 48,973 49,289 53,644 61,943 73,942 780,972 100.0%

0.0%

0.0%
Total 85,220 86,953 84,575 72,989 64,981 52,144 46,318 48,973 49,289 53,644 61,943 73,942 780,972 100.0% Base-Extra
Categories Level Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 555,816 29.4% Base to Avg. 65,081 18,763 18,763 18,763 18,763 18,663 5,826 0 2,655 2,971 7,326 15,625 18,763 146,882 7.8% Avg. to Peak 77,903 12,822 12,822 12,822 7,908 0 0 0 0 0 0 0 8,861 55,236 2.9% Peak 7,317 9,050 6,672 0 0 0 0 0 0 0 0 0 23,039 1.2%
Total 85,220 86,953 84,575 72,989 64,981 52,144 46,318 48,973 49,289 53,644 61,943 73,942 780,972 41.4% Tier 1 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 46,318 555,816 71.2% Base to Avg. 18,763 18,763 18,763 18,763 18,663 5,826 0 2,655 2,971 7,326 15,625 18,763 146,882 18.8% Avg. to Peak 12,822 12,822 12,822 7,908 0 0 0 0 0 0 0 8,861 55,236 7.1% Peak 7,317 9,050 6,672 0 0 0 0 0 0 0 0 0 23,039 2.9%
Total 85,220 86,953 84,575 72,989 64,981 52,144 46,318 48,973 49,289 53,644 61,943 73,942 780,972 100.0% UCSC Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Tier 1 18,119 16,686 15,662 18,224 24,078 17,141 11,077 15,666 16,675 15,812 18,952 23,867 211,959 100.0%

0.0%

0.0%
Total 18,119 16,686 15,662 18,224 24,078 17,141 11,077 15,666 16,675 15,812 18,952 23,867 211,959 100.0% Base-Extra
Categories Level Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 132,924 7.0% Base to Avg. 17,663 6,586 5,609 4,585 6,586 6,586 6,064 0 4,589 5,598 4,735 6,586 6,586 64,112 3.4% Avg. to Peak 21,143 455 0 0 560 3,480 0 0 0 0 0 1,288 3,480 9,264 0.5% Peak 0 0 0 0 2,935 0 0 0 0 0 0 2,724 5,659 0.3%
Total 18,119 16,686 15,662 18,224 24,078 17,141 11,077 15,666 16,675 15,812 18,952 23,867 211,959 11.2% Tier 1 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 11,077 132,924 62.7% Base to Avg. 6,586 5,609 4,585 6,586 6,586 6,064 0 4,589 5,598 4,735 6,586 6,586 64,112 30.2% Avg. to Peak 455 0 0 560 3,480 0 0 0 0 0 1,288 3,480 9,264 4.4% Peak 0 0 0 0 2,935 0 0 0 0 0 0 2,724 5,659 2.7%
Total 18,119 16,686 15,662 18,224 24,078 17,141 11,077 15,666 16,675 15,812 18,952 23,867 211,959 100.0%

15.74 Appendix A – Projected Demand Characteristics
50 City of Santa Cruz Water Rate Study
Landscape Irrigation Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Tier 1 8,988 10,289 10,599 8,535 7,485 3,367 1,707 1,192 976 1,105 2,358 6,253 62,854 92.5% Tier 2 359 531 658 736 946 640 523 237 64 25 61 347 5,126 7.5% Total 9,347 10,819 11,257 9,272 8,430 4,007 2,230 1,429 1,040 1,130 2,419 6,600 67,980 100.0% Base-Extra Categories Level Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 12,480 0.7% Base to Avg. 5,665 4,625 4,625 4,625 4,625 4,625 2,967 1,190 389 0 90 1,379 4,625 33,766 1.8% Avg. to Peak 6,781 1,116 1,116 1,116 1,116 1,116 0 0 0 0 0 0 935 6,515 0.3% Peak 2,566 4,038 4,476 2,491 1,649 0 0 0 0 0 0 0 15,220 0.8% Total 9,347 10,819 11,257 9,272 8,430 4,007 2,230 1,429 1,040 1,130 2,419 6,600 67,980 3.6% Tier 1 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 1,040 1,040 1,040 1,040 1,040 1,040 1,040 1,040 976 1,040 1,040 1,040 12,416 19.8% Base to Avg. 4,625 4,625 4,625 4,625 4,625 2,327 667 152 0 65 1,318 4,625 32,279 51.4% Avg. to Peak 1,116 1,116 1,116 1,116 1,116 0 0 0 0 0 0 588 6,169 9.8% Peak 2,207 3,508 3,818 1,754 704 0 0 0 0 0 0 0 11,990 19.1% Total 8,988 10,289 10,599 8,535 7,485 3,367 1,707 1,192 976 1,105 2,358 6,253 62,854 100.0% Tier 2 Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Total % Total Base 0 0 0 0 0 0 0 0 64 0 0 0 64 1.2%
Base to Avg. 0 0 0 0 0 640 523 237 0 25 61 0 1,487 29.0% Avg. to Peak 0 0 0 0 0 0 0 0 0 0 0 347 347 6.8%
Peak 359 531 658 736 946 0 0 0 0 0 0 0 3,229 63.0%
Total 359 531 658 736 946 640 523 237 64 25 61 347 5,126 100.0%

15.75 Appendix B – Projected Revenues and Expenses 51
City of Santa Cruz Water Rate Study
APPENDIX B – Projected Revenues and Expenses
Escalation Factors FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Inflation 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Interest 2.00% 1.00% 1.00% 1.00% 1.00% 1.00%
Revenue Category Escalation FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Estimated Budgeted Projected Projected Projected Projected Rate Revenue
Water Sales Calculated
Service Charges Calculated
Water Rate Revenue $56,883,144 $62,582,177 $68,854,152 $77,116,650 $85,251,129 $92,923,731 System Development Charges Paygo Non-inflated $4,037,682 $1,300,000 $1,000,000 $1,000,000 $1,000,000 $1,000,000 Other Revenue
Elevation Surcharge All Volume Inflation $320,000 $336,000 $352,800 $370,440 $388,962 $408,410 Bulk Water Sales General Inflation $10,000 $10,500 $11,025 $11,576 $12,155 $12,763 Licenses And Permits General Non-inflated $14,998 $10,000 $10,000 $10,000 $10,000 $10,000 Grants Paygo Non-inflated $0 $0 $0 $0 $0 $0
Charges For Services General Non-inflated $388,781 $291,400 $291,400 $291,400 $291,400 $291,400 Work Order Charges Customer Services Inflation $1,360,760 $2,112,330 $2,217,947 $2,328,844 $2,445,286 $2,567,550 Miscellaneous Revenues General Non-inflated $280,600 $80,000 $80,000 $80,000 $80,000 $80,000 Loch Lomond Fees and Sales General Non-inflated $426,917 $380,000 $380,000 $380,000 $380,000 $380,000 Transfers General Non-inflated $600,000 $0 $0 $0 $0 $0
Interest Revenue General Calculated $1,691,977 $494,703 $447,606 $424,353 $408,769 $435,543 __________ __________ __________ __________ __________ __________ Total Revenue $66,014,859 $67,597,110 $73,644,929 $82,013,263 $90,267,701 $98,109,398 Expenses Category Escalation FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Estimated Budgeted Projected Projected Projected Projected Administration Administration Inflation $9,753,481 $10,362,035 $10,880,137 $11,424,144 $11,995,351 $12,595,118 Engineering Engineering Inflation $3,788,843 $4,988,705 $5,238,140 $5,500,047 $5,775,050 $6,063,802 Customer Services Customer Services Inflation $3,717,524 $3,820,756 $4,011,794 $4,212,383 $4,423,003 $4,644,153 Customer Assistance General Inflation $539,205 $395,934 $415,731 $436,517 $458,343 $481,260 Resources All Volume Inflation $2,930,062 $3,246,452 $3,408,775 $3,579,213 $3,758,174 $3,946,083 Production Production Inflation $6,910,470 $7,946,720 $8,344,056 $8,761,259 $9,199,322 $9,659,288 Electricity All Volume Inflation $2,409,146 $2,400,000 $2,520,000 $2,646,000 $2,778,300 $2,917,215 Chemicals Potable Water Inflation $575,000 $633,000 $664,650 $697,883 $732,777 $769,415 Quality Potable Water Inflation $2,567,802 $2,726,894 $2,863,239 $3,006,401 $3,156,721 $3,314,557 Distribution Distribution Inflation $6,481,393 $6,582,216 $6,911,327 $7,256,893 $7,619,738 $8,000,725 Recreation All Volume Inflation $1,249,918 $1,703,649 $1,788,831 $1,878,273 $1,972,187 $2,070,796 Operations Administration Inflation $657,521 $732,865 $769,508 $807,984 $848,383 $890,802 Meter Operations Meters Inflation $883,528 $1,419,057 $1,490,010 $1,564,510 $1,642,736 $1,724,873 __________ __________ __________ __________ __________ __________ Total Operating Expenses $42,463,893 $46,958,283 $49,306,198 $51,771,507 $54,360,083 $57,078,087 Existing Debt Category Escalation FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Estimated Budgeted Projected Projected Projected Projected Series 2014 Existing Debt Non-inflated $703,338 $703,638 $703,488 $702,888 $706,169 $703,131 Ibank Existing Debt Non-inflated $1,366,204 $1,363,905 $1,361,532 $1,359,082 $1,356,552 $1,353,940 Series 2019 Existing Debt Non-inflated $1,375,250 $1,379,000 $1,376,500 $1,378,000 $1,378,250 $1,377,250 Line of Credit Existing Debt Non-inflated $7,190,176 $790,176 $0 $0 $0 $0 SRF NCD I/O Existing Debt Non-inflated $3,814,469 $3,814,222 $3,813,971 $3,813,716 $3,813,458 $3,813,197 SRF Tanks Existing Debt Non-inflated $1,727,200 $1,734,842 $1,734,842 $1,734,842 $1,734,842 $1,734,842 SRF NCP Existing Debt Non-inflated $235,500 $593,000 $1,270,000 $1,451,000 $1,635,500 $1,940,000 WIFIA (1) Existing Debt Non-inflated $1,223,130 $1,776,748 $3,210,448 $5,654,401 $6,561,904 $6,561,904 WIFIA (2) Existing Debt Non-inflated $0 $0 $0 $0 $0 $767,806 __________ __________ __________ __________ __________ __________ Total Existing Debt $17,635,267 $12,155,531 $13,470,781 $16,093,928 $17,186,675 $18,252,070

15.76 Appendix B – Projected Revenues and Expenses 52
City of Santa Cruz Water Rate Study
Capital Funding FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 Budgeted Projected Projected Projected Projected
Total CIP Expense $42,048,740 $52,197,098 $54,095,328 $67,438,123 $71,357,435 CIP Funding Sources
Grant Funding $0 $0 $0 $0 $0
WIFIA/SRF Funding $28,855,741 $39,003,843 $38,389,067 $30,102,901 $24,645,801 Bond Funding $0 $0 $0 $23,000,000 $29,000,000
Cash Funding $13,192,999 $13,193,255 $15,706,261 $14,335,222 $17,711,634

15.77 Appendix C - Capital 53
City of Santa Cruz Water Rate Study
APPENDIX C – Capital
CIP (Current Dollars) FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 c700025 - Graham Hill WTP Facility Improvement Plan (WIFIA Loan) $15,039,004 $17,041,615 $16,558,913 $16,118,147 $15,335,201 c700025 - Graham Hill WTP Facility Improvement Plan (SRF loan) $3,407,942 $17,737,192 $17,234,787 $4,851,312 $0 c700025 Graham Hill WTP Facility Improvements Project (PayGo) $0 $0 $0 $11,924,718 $15,961,128 c701501 - Graham Hill WTP Concrete Tanks (PayGo) $59,667 $59,667 $0 $0 $0 c701505 - University Tank No. 4 Rehab/Replacement (Pay Go) $650,852 $0 $0 $0 $0 c701505 - University Tank No. 4 Rehab/Replacement (WIFIA Loan) $677,417 $0 $0 $0 $0 c701606 - Newell Creek Dam Inlet/Outlet Replacement (PayGo) $402,495 $173,495 $131,151 $0 c701609 - ASR Planning $266,220 $155,550 $89,250 $22,950 $0 c701609/10 - ASR (WIFIA) $255,780 $149,450 $85,750 $22,050 $0 c701705 - Water Supply Augmentation (WIFIA) $2,573,297 $2,860,725 $3,734,679 $9,071,115 $9,310,600 c701705 - Water Supply Augmentation (PayGo) $2,678,330 $2,977,489 $3,887,115 $9,441,364 c701705 - Water Supply Augmentation (SRF) $9,690,625
c701806 - Riverbank Filtration Study $- $- $- $-
c701901 - HDR Program Management Contract $2,157,010 $2,067,587 $1,438,643 $1,252,357 $1,295,821 c701903 - Tait Diversion Rehab/Replacement Project $0 $41,367 $243,586 $427,242 $453,545 c701906 - Felton Diversion
c702002 - Brackney Landslide Area Pipeline Risk Reduction (PayGo) $633,222 $1,701,444 c702002 - Brackney Landslide Area Pipeline Risk Reduction (TBD) $638,736 c702101 - Beltz 8&12 Design and 12 Construction (PayGo) $110,989 $19,600 $19,600 c702101 - Beltz 8&12 Design and 12 Construction (WIFIA) $115,519 $20,400 $20,400 C702503 Beltz 8 Upgrades for ASR (PayGO) $2,111,624 $142,392 $41,922 $41,922 C702503 Beltz 8 Upgrades for ASR (WIFIA) $2,028,815 $136,808 $40,278 $40,278 C70xxxx-Beltx 9 Upgrades for ASR (PayGo) $366,811 $1,100,823 $743,414 $0 C70xxxx-Beltx 9 Upgrades for ASR (WIFIA) $352,427 $1,057,653 $714,260 $0 c702105 - Newell Creek Pipeline Felton/Graham Hill $4,405,540 c702105 - Newell Creek Pipeline Felton/Graham Hill (PayGo) $132,408 $40,628 $40,628 $20,914 c702205 - Intertie 1 - Santa Cruz-Scotts Valley $121,675 $30,099 $15,050 c702305 - Beltz WTP Upgrades $611,155 $1,480,727 $1,563,227 $7,157,152 $7,005,126 c702305 - Beltz WTP Upgrades (Funding TBD) $6,730,416
c702901 - Coast Pump Station Rehab/Replacement $536,808 $557,690 $619,813 $696,017 c702901 - Coast Pump Station Rehab/Replacement (TBD)
c702801 - Newell Creek Pipeline Felton/Loch Lomond $0 $0 $0 $949,306 c702801 - Newell Creek Pipeline Felton/Loch Lomond (TBD) c702603 - Pasatiempo Tanks Replacement $279,778 $468,849 $2,841,763 $1,435,632 c702303 - North Coast System Phase 4 & 5 $500,000 $0 $0 $0 c702602 - Photovoltaic Systems Improvements $70,000
c700002 - Main Replacements - Engineering $2,000,000 $2,000,000 $2,000,000 $2,000,000 $2,000,000 c700003 - Main Replacements - Outside Agency $50,000 $50,000 $50,000 $50,000 $50,000 c700004 - Main Replacements - Customer Initiated $50,000 $50,000 $50,000 $50,000 $50,000 c701507 - Mains Replacements- Distribution Section $750,000 $750,000 $750,000 $750,000 $750,000 c701907 - Facility & Infrastructure Improvements $420,000 $420,000 $420,000 $420,000 $420,000 e702301 - DR 4683 Felton Diversion Pipeline $36,394 $36,394 $0 $0 $0 c702202 - CMMS Software Replacement - Water Share $0 $0 $190,000 $0 $0 Ongoing Capital
Total CIP (Current Dollars) $42,048,740 $52,197,098 $54,095,328 $67,438,123 $71,357,435

15.78 Appendix D – Functional Allocations 54
City of Santa Cruz Water Rate Study
APPENDIX D – Functional Allocations
Assets for Infrastructure Allocation Categorization
Total
Replacement
Cost Customer Capacity Meter Cost
All Raw
Water
All Potable
Water Base
Base to
Average
Average to
Peak Peak Fire
Functional
Allocation
Total
As All
Other
General General $28,698,098 50.00% 0.06% 49.94% 100.00% Treatment Treated Water $166,870,413 65.36% 17.91% 12.30% 4.43% 100.00% Treated Water Transmission Treated Water $31,200,602 65.36% 17.91% 12.30% 4.43% 100.00% Treated Water Distribution Treated Water $491,676,912 65.36% 17.91% 12.30% 4.43% 100.00% Fire Laterals Fire $7,997,194 100.00% 100.00%
Treated Water Storage Treated Water $44,872,975 65.36% 17.91% 12.30% 4.43% 100.00% Treated Water Elevation Pumping Treated Water $9,294,850 65.36% 17.91% 12.30% 4.43% 100.00% Raw Water Transmission Raw Water $149,922,450 50.00% 0.06% 49.94% 100.00% Raw Water Pumping Raw Water $11,577,493 50.00% 0.06% 49.94% 100.00% Raw Water Storage Raw Water $146,939,405 50.00% 0.06% 49.94% 100.00% Meters Meters $12,683,526 100.00% 100.00%
Customer Service Customer Service $154,926 100.00% 100.00% Functional Allocation ($) $154,926 $168,568,723 $12,683,526 $189,511 $168,379,213 $486,204,577 $133,210,825 $91,513,329 $32,987,023 $7,997,194 $1,101,888,845 Functional Allocation (%) 0.01% 15.30% 1.15% 0.02% 15.28% 44.12% 12.09% 8.31% 2.99% 0.73% Production Allocation
Total Replacement
Cost
Total
Replacement
Cost
All Raw
Water
All Potable
Water Base
Base to
Average
Average to
Peak Peak
Treated Water $751,912,946 70.91% 65.36% 17.91% 12.30% 4.43% Raw Water $308,439,348 29.09% 0.11% 99.89%
Functional Allocation Amounts (%) $1,060,352,294 0.03% 29.06% 46.35% 12.70% 8.72% 3.14% Allocation Basis Notes Customer Capacity Meter Cost Fire Raw
Water
Potable
Water Base
Base to
Average
Average
to Peak Peak As All Other
General 100.00%
Customer Services 100.00%
Meters 100.00%
All Demand 0.11% 99.89%
Potable Demand 100.00%
Potable Peak 65.36% 17.91% 12.30% 4.43%
Infrastructure 0.01% 15.30% 1.15% 0.73% 0.02% 15.28% 44.12% 12.09% 8.31% 2.99% Potable Peak + Raw 0.03% 29.06% 46.35% 12.70% 8.72% 3.14% Used for allocating costs that benefit both
treated and raw water operations. Allocation
is based on portion of raw and treatments
assets where the treated portion is allocated as
Potable Peak allocations and the raw portion is
allocated as All Demand.

Used for allocating meter related costs.

Used for allocating customer service related
costs.

Used for allocating non-functional costs.

Used for allocating per volumetric unit costs
benefitting all demand such as raw water
system costs.

Used for allocating per volumetric unit costs
benefitting only potable water.

Used for allocating treated water system costs
serving peak capacity. Allocation amounts
reflect maximum month use in each Base-Extra
Category.

Used for allocating Infrastructure related costs
based on the replacement cost of system
assets.

15.79 Appendix E – Elevation Surcharge Costs 55
City of Santa Cruz Water Rate Study
APPENDIX E – Elevation Surcharge Costs
Pump Station
Lift
Order
TOTAL
FY 24-25 CCF
pumped
Total KW
Hrs
kW hrs
per Unit
Cost per
Unit
Pumped Total Cost
Suction
PSI
Discharge
PSI Added PSI
Cost per PSI
per CCF
Total
Cost
Carbonera PS 1 141,685.83 132,505.00 0.94 0.43 $60,687 73.00 162.00 89.00 $0.00 $0.43 Pasatiempo PS 1 88,409.09 Unmetered 0.77 $67,882 13.00 179.00 166.00 $0.00 Kite Hill HYDRO 2 2,923.80 2,924.00 1.00 0.46 $1,339 8.00 56.00 48.00 $0.01 $0.46 Rolling Woods PS 2 33,057.49 26,904.00 0.81 0.37 $12,322 42.00 122.00 80.00 $0.00 $0.37 SC Gardens PS 1 72,532.09 94,400.00 1.30 0.60 $43,235 34.00 143.00 109.00 $0.01 $0.60 University #2 PS 1 381,641.71 131,291.00 0.34 0.16 $60,131 14.00 92.00 78.00 $0.00 $0.16 Springtree Hydro 2 0.00 10,428.00 0.00 0.00 $0 64.00 88.00 24.00 $0.00 $0.00 University #4 PS 2 240,276.74 248,989.00 1.04 0.47 $114,037 10.00 148.00 138.00 $0.00 $0.47 University #6 PS 3 181,697.86 191,280.00 1.05 0.48 $87,606 7.00 107.00 100.00 $0.00 $0.48 Total for Pasatiempo PS Cost Calculation 642.00 $2.97
Weighted AVG= $0.005
Note 1: 1 Unit =748 gallons
Note 2: Cost per kWh averaged across entire utility all pumping electric use, so includes TOU and benefit of solar ($0.458/kWh)

15.80 Appendix F – Drought Surcharge Derivation 56
City of Santa Cruz Water Rate Study
APPENDIX F – Drought Surcharge Derivation
The drought surcharge is derived by first identifying the volumetric rate revenue requirement at each Water Shortage Response Stage. The volumetric revenue requirement is equal to the baseline volumetric revenue requirement, reduced to reflect the reduction in marginal costs associated with producing less water. Next, the volumetric rate revenue from existing rates in each Water Shortage Response Stage is projected. Then, amount of revenue needed from the drought surcharges is calculated by subtracting the volumetric rate revenue from existing rates from the volumetric revenue requirement. This additional revenue needed from the drought surcharge is then divided by the projected volumetric revenue at existing rates under the applicable drought stage to calculate the drought surcharge percentage. To streamline the surcharge application and ensure the surcharge does not exceed the cost of service, the drought surcharge at each stage is the lowest calculated surcharge rounded to the nearest whole percentage. Finally, the drought surcharges are calculated by multiplying the drought surcharge percentage by each volumetric rate. Customers will pay the existing volumetric rates and the drought surcharge that corresponds with each Water Shortage Response Stage.

15.81 15.82

15.83 2026 Long-Range Financial Plan 2
Table of Contents
PART 1 – BACKGROUND AND CONTEXT
• Executive Summary and Background
• Water Department Strategic Priorities
• History of Financial Planning and Rate Setting
• Recent Financial Challenges
PART 2 – THE FINANCIAL PLANNING PROCESS
• Water Commission, Water Commission Ad Hoc, Consultant Support • Financial Objectives, Policies, Metrics and Targets
PART 3 – FINANCIAL STRATEGY
• Recommendations
• Financial Risk Management - Reserves
PART 4 – RATE SETTING
• Funding Strategy
• Capital Funding
• Cost of Service Analysis
• Rate Design
• Affordability
PART 5 – LOOKING AHEAD, IMPLEMENTATION, MONITORING, UPDATES

15.84 2026 Long-Range Financial Plan 3
PART 1 – BACKGROUND AND CONTEXT
Executive Summary and Background
The City of Santa Cruz Water Department (Department) provides safe, reliable drinking water to nearly 100,000 people in the City of Santa Cruz (City) and parts of Capitola and unincorporated parts of the county, while managing a complex system of watersheds, reservoirs, treatment facilities, wells, pump stations, pipelines, and storage reservoirs.

Maintaining this critical infrastructure requires long-term financial planning that balances today's operational needs with investments that will serve future generations.

Fundamental to this responsibility is providing the necessary financial resources to operate the water utility and fund system infrastructure. The Department generates revenue primarily through water rates charged designed according to the requirements of Proposition 218 and applicable case law.

Rate setting is governed by the strict legal framework established under the California Constitution, principally Article 13D, Section 6 (enacted by voters as Proposition 218). Proposition 218 requires that property-related fees and charges, including water rates, do not exceed the proportional cost of providing service to each parcel. This means that every dollar collected from water rates must have a direct nexus to the actual cost of operating, maintaining, and upgrading the physical infrastructure of the water system. To ensure compliance with these substantive requirements, the Department bases its financial modeling on rigorous cost of service methodologies that distribute the Department’s operating and capital requirements proportionally across all customer classes.

Long-Range financial planning and the rate setting process is a multi-step, integrated process driven by a continuous feedback loop as shown on the following page. The model uses technical inputs that project what the Department requires over a multi-year horizon:
the baseline operating budget and the 15-year Capital Investment Program. The operational and infrastructure needs are then paired with formal financial policy targets to establish gross annual net revenue requirements over a five-year planning horizon.

Figure 1
Financial Planning Model

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Prepared in conjunction with the 2026 Cost of Service Analysis (COSA), the Long-Range Financial Plan (LRFP) provides the financial framework and goals needed to operate, maintain, rehabilitate, and improve the water system while ensuring rates remain equitable, legally compliant, and sufficient to support the Department's mission. Together, these two documents answer two fundamental questions:
• How much revenue is required to provide reliable water service – both operationally and through capital investment?
• How should those costs be allocated among customers in a fair and equitable manner?
The need for an updated financial plan is driven by several significant changes affecting the utility. Since the previous rate study, the Department has experienced prolonged revenue shortfalls resulting from lower-than-projected water demand, while operating costs for electricity, treatment chemicals, labor, insurance, and regulatory compliance have increased substantially. At the same time, the Department is entering a period of unprecedented capital investment to renew aging infrastructure, improve system resilience, meet increasingly stringent drinking water regulations, and implement projects identified through the City's long-term water supply planning efforts. These investments include the reconstruction and modernization of the Graham Hill Water Treatment Plant and other critical facilities that will ensure reliable and adequate water service for decades to come.

The LRFP responds to these challenges by strengthening the Department's financial foundation. The plan reaffirms the financial policies adopted in previous studies while updating revenue assumptions, refining reserve policies, and modernizing the rate structure to improve revenue stability and reduce financial risk. It establishes measurable financial performance targets that support prudent fiscal management, maintain adequate liquidity, preserve strong borrowing capacity, and position the Department to finance major infrastructure investments at the lowest practical cost.

The accompanying COSA, prepared by Bartle Wells Associates, allocates the Department's revenue requirements among customer classes using the principles contained in the American Water Works Association (AWWA) M1 Manual and in accordance with the requirements of Proposition 218 and subsequent case law. The study recommends several rate design refinements, including increasing the proportion of fixed revenue from 10 percent to 20 percent, consolidating three separate volumetric charges into a single consumption charge to simplify bills, updating meter capacity ratios to current AWWA standards, and refining the landscape irrigation rate structure. These changes improve revenue stability while continuing to promote efficient water use and ensuring that rates remain proportional to the cost of providing service.

Affordability was a central consideration throughout the planning process. The Department retained M.Cubed to conduct an independent affordability analysis, building upon nearly a decade of work evaluating water affordability in Santa Cruz. The analysis concludes that the proposed rate structure continues to protect essential indoor water use for single and multifamily residences through the existing tiered rate design. More than 90 percent of residential customers use four hundred cubic feet (4 CCF) of water or less each month, and average residential water bills are projected to remain below commonly referenced affordability

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benchmarks. The Department will continue to support lower-income households through its Utility Customer Assistance Program (UCAP), which is recalibrated with each rate adjustment to preserve meaningful customer assistance.

The recommendations contained in this LRFP reflect extensive collaboration among Department staff, Bartle Wells Associates, M.Cubed, the Water Commission Financial Planning Ad Hoc Committee, and the full Water Commission. The resulting plan balances financial sustainability, affordability, conservation, regulatory compliance, and long-term stewardship of the City's water system.

The 2026 Long-Range Financial Plan is intended to be a living document that guides the Department's financial management and policy decisions over the coming years. Progress toward the plan's financial objectives will be monitored through regular financial reporting and updates to key performance metrics. As operating conditions, customer demand, and infrastructure needs evolve, the Department will continue to refine its financial strategies to ensure it remains capable of providing safe, reliable, and affordable drinking water while responsibly investing in the infrastructure, at the lowest cost, required to serve the community now and into the future.

Water Department Strategic Priorities
The Department embarked on a review process and updated the strategic priorities into three main areas:
• Water System Reliability - Provide a high quality, reliable and resilient water supply now and for the future by investing in and maintaining effective infrastructure that meets the unique challenges presented by climate change. • Organizational Health - Support and sustain an innovative organization that lives by its values, leads by example, delivers valued benefits for its customers and is regarded as an employer of choice.
• Financial Security - Judiciously manage customer revenue and other financial resources for operating, maintaining and upgrading the water system today and in preparation for the future.

The financial policy objectives in this Long-Range Financial Plan described further below support the Department’s Strategic Priorities by providing a stable financial foundation for reliable water service, responsible stewardship, and long-term sustainability. Policies that promote revenue stability and sound financial management ensure the Department can operate, maintain, and invest in critical infrastructure. Policies that encourage conservation and equitable cost recovery support the efficient use of water while ensuring rates are fair and legally defensible. Together, these objectives help the Department maintain a reliable water system, support strong and effective organization, and responsibly manage customer resources for the benefit of current and future generations.

History of Financial Planning and Rate Setting
The Department has a long history of prudent financial planning through comprehensive cost-of-service studies, long-range financial planning, thoughtful rate setting, and the development of financial policies that support the utility's long-term sustainability. These

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to support day-to-day operations and the implementation of the Capital Investment Program.

Capital Investment Program (CIP) - The Department has taken a proactive approach to maintaining the water system, which requires continuous repair, replacement, and improvement projects. This sustained, multi-decade reinvestment in its water system represents one of the most significant capital programs in the Water Department’s history.

The Department's 5-year Water CIP totals approximately $287.1 million beginning in 2027 through FY 2031. Of this amount, approximately $206 million is expected to be debt financed, with the remainder funded on a pay-as-you-go (PAYGO) or cash basis. Key projects include the Newell Creek Pipeline Replacement (NCP) and the Facilities Improvement Project (FIP) at the Graham Hill Water Treatment Plant (GHWTP). Over a 15- year period the Department's capital commitments represent a cumulative investment of approximately $1 billion, resulting in a generational reinvestment in the reliability, safety, and long-term water supply of the Santa Cruz water system.

Debt Service - Projected debt service is expected to reach approximately $21.7 million annually by FY 2031, driven by new debt issuances estimated to be $13 million. The proposed rate increases are designed to ensure the Department maintains sufficient revenues to meet its debt service coverage obligations throughout the five-year study period.

Ongoing Cost Inflation - The Department continues to face rising operating costs, requiring periodic rate adjustments to keep revenues aligned with the cost of providing safe and reliable water service. Several key cost drivers - including electricity, treatment chemicals, insurance, and citywide shared services allocations - have increased at rates well above general inflation in recent years. In developing the long-range financial plan, the Department assumed average annual cost increases of approximately 5% for both services and supplies and for salaries and benefits to reflect these ongoing pressures. Combined with lower-thananticipated revenues, these increasing costs prompted the Department to accelerate the implementation of the next rate period by six months, transitioning to a January 1 implementation cycle. This change improves the Department's financial position sooner and better aligns revenues with operating costs and planned capital investments.

Lower-Than-Projected Water Revenues - One of the most significant changes implemented in the 2016 Cost of Service Analysis was a shift in the Department's revenue recovery from approximately 36% fixed and 64% volumetric charges to 10% fixed and 90% volumetric charges. This change was intended to encourage water conservation by allowing customers to realize the full financial benefit of reducing water use. While successful in promoting water use efficiency, the highly volumetric rate structure also made Department revenues much more sensitive to fluctuations in water sales. Over the past several years, a combination of COVID-19, wetter-than-normal weather, and continued customer conservation efforts resulted in water sales that were consistently below projections. As a result, between FY 2018 and FY 2025, the Department experienced a cumulative revenue shortfall of approximately $48.7 million compared to the 2016 financial projections. The Department maintained financial stability by reprioritizing the timing of capital projects and carefully managing operating expenditures. To reduce revenue volatility going forward, the proposed rate structure increases the proportion of revenue recovered through fixed

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charges while continuing to encourage efficient water use. FY 2026 revenues are projected to be more closely aligned with budgeted expectations.

Figure 2
COSA Projected Water Rate Revenue versus Actuals
PART 2 – THE FINANCIAL PLANNING PROCESS
A LRFP establishes financial policies, revenue requirements, funding strategy, and performance metrics and targets that support sound fiscal management, promote long-term sustainability, maintain strong credit quality, and provide transparent and predictable decision-making. It evaluates projected operating costs, capital investment needs, available funding sources, debt capacity, reserve requirements, and revenue projections to determine the financial resources necessary to provide safe, reliable, and affordable water service. It serves as the foundation upon which the Department's cost-of-service analysis and ratesetting process are built.

Water Commission, Water Commission Ad Hoc Committee, Consultant Support To ensure that the LRFP is built upon sound policy directives, the Water Commission formed a Financial Planning Ad Hoc Committee to allow more in depth discussions, perspectives, guidance and recommendations. The committee consisted of three Water Commissioners and a former Water Commissioner. The Ad Hoc Committee helped refine policy considerations, served as a sound board for different rate scenarios and provided feedback regarding affordability impacts on customer classes.

Over the course of six months, the group met numerous times, with the Department’s rate consultant, Bartle Wells Associates, and the Department Resource Economist, David Mitchell of M.Cubed. The Ad Hoc Committee supported the staff recommendation to base future revenue projections on actual sales data rather than historical targets. Based on this guidance, the 2026 COSA model established an updated demand baseline of 2.95 million CCF (CCF = one hundred cubic feet) annually (based on the FY 2023 – FY 2025 average),

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Financial Risk Management – Reserves
The Department recommends maintaining all existing reserve funds, updating the Department’s Financial Reserve Policy (Council Policy 34.4) and redefining reserve funding mechanisms. Reserves include Operating Days Cash, Rate Stabilization, Emergency, and Equipment.

Operating Days Cash Reserve
The Department recommends maintaining the existing Financial Reserve policy (Council Policy 34.4) target of 180 days cash on hand, split evenly between the Water Operations Fund (90 days) and the 90-Day Operating Fund. Maintaining this formal policy target preserves the prudent level of liquidity in the operating budget while avoiding locking up cash that may be more effectively utilized as Pay-Go for the capital program.

During the 2026 Rate Study, the Department evaluated increasing the formal policy target from 180 days to 250 days cash. However, setting aside additional cash in a restricted fund would limit cash needed for near-term capital costs. Reaffirming the 180 days policy target maintains fiscal discipline and supports our credit rating without placing unnecessary cash restrictions in place.

Rate Stabilization Reserve
The Department recommends maintaining the Rate Stabilization Reserve at $10 million until the revised rate structure has demonstrated sustained financial performance over multiple years. This reserve provides protection against the uncertainty associated with revenue projections, changing customer demand, hydrologic variability, and cost escalation during the implementation of the new financial plan. The Department considers the rate structure successful when annual revenues consistently meet projections, operating and capital expenditures remain within forecasted ranges, financial metrics such as debt service coverage and reserve targets are achieved, and the utility can reliably fund planned capital investments without relying on the reserve. At that point, the appropriate funding level for the Rate Stabilization Reserve can be re-evaluated through future updates to the LongRange Financial Plan.

In the case that revenue stability is maintained, because water sales remain at or above the projections used in the COSA and all other financial metrics are being met, then the Department may do the following:
• Reduce the balance of short-term debt, or
• direct additional funds to “pay-as-you-go” capital expenditures, reducing the need to issue debt, or
• additional planned rate increases may be adjusted to the level needed to fund the capital program and operations and produce required revenues without any excess.

The amount of annual contained in the Rate Stabilization Reserve can be used in calculating the Department’s annual Debt Service Coverage Ratio. The need for the level of Rate Stabilization Reserve will be reviewed periodically in the Department’s Quarterly Report agendized for the Water Commission.

Emergency Reserve

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The Emergency Reserve is intended to provide immediately available funding to respond to unforeseen events that threaten the safe and reliable operation of the water system, including natural disasters, infrastructure failures, regulatory actions, or other emergencies requiring unplanned expenditures. Maintaining an adequately funded Emergency Reserve strengthens the Department's financial resilience, reduces the need for short-term borrowing, and ensures the utility can continue providing essential drinking water service while recovering from unexpected events.

Since its establishment, the Emergency Reserve has remained at its original funding level of $3.1 million. Because the potential financial impact of an emergency increases as the utility grows and operating costs rise, the Department recommends indexing the reserve annually to 10 percent of the operating budget, excluding debt service. This approach allows the reserve to grow proportionally with the size and complexity of the utility and maintains its purchasing power over time. For FY 2027, the recommended target is $4.7 million. The LongRange Financial Plan phases in this increased funding level over the rate period, with the reserve reaching its target by FY 2028.

Equipment Reserve
This reserve was established in FY 2017 and is dedicated to fund planned replacement of vehicles and heavy equipment that have reached the end of their useful lives and operate as a sinking fund. This fund is utilized to cover vehicle and equipment replacement while smoothing cash flows in the five-year plan and to minimize annual pressure on rates.

Since its establishment, the Equipment Replacement Fund has not had a dedicated revenue source and had been funded, when available, with year-end operating fund balances after all financial performance targets have been achieved. The Department recommends continuing this approach while reaffirming this process. The target balance for this fund is $1 million, however, will be achieved only if all other financial metrics are met any given year.

Equipment reserve funds will be transferred back to the operating budget when a large equipment or vehicle purchase is approved through the budget process. Not unlike the Rate Stabilization Fund or the 90 Days Cash fund, sequestering funds for these specific purposes ensures that when they are needed, they with be available to the Department.

Drought Cost Recovery Surcharge
Created in 2014, the Water Department created a Drought Cost Recovery Fee (DCRF) to be applied as a fixed charge in the case of a drought emergency. In 2026, this fee based on meter size is being replaced with a volumetric drought surcharge. The Drought Cost Recovery Surcharge are temporary water charges applied to the monthly water usage charge and implemented during periods of drought or other water supply emergencies when customers are asked or required to reduce water use. Because a significant portion of the Department's costs are fixed and do not decline when water sales decrease, curtailment during emergencies can substantially reduce revenue while operating expenses remain largely unchanged. DCRFs are designed to recover these unavoidable costs, maintain the Department's financial stability, and ensure it can continue to operate, maintain critical infrastructure, and provide reliable drinking water service throughout the emergency. Once the emergency has ended and water demand returns to normal, the temporary fees are removed.

The use of Drought Cost Recovery Rates, as well as Excessive Use Penalty Fees, are also described in the 2025 Urban Water Management Plan. While often used at the same time,

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Excessive Use Penalty Fees are applied to a customer’s bill when the billing system detects that usage in a month exceeds the customer allocation.

A Stage 3 Drought Cost Recovery Fee was levied in Santa Cruz from October 1, 2014, through June 30, 2016, Levying drought charges is explicitly linked to action taken by the Santa Cruz City Council to declare a drought and establish a curtailment stage in advance of each drought year’s dry season (May through October).

PART 4 – RATE SETTING
Funding Strategy
The 2026 Water Rate Study establishes a five-year financial projection to ensure that the Water Department can meet escalating operating and capital requirements through FY 2031.

The Department expedited this planning period by six months to recover from rate revenue shortfalls over multiple years. The rate implementation timing is being advanced to January 1st. The model assumes an annual inflation rate of 5 percent for operations and maintenance; a projection based on actual experience over recent years in which costs for electricity, treatment chemicals and insurance have exceeded economy-wide inflation measures.

Another key projection within the financial plan is the estimated water sales demand. The model assumes demand will mirror the 3-year average for the period FY 2023 through FY 2025, which equates to approximately 2.95 million CCF per year.

The Department continues to utilize debt in a strategic manner to protect the department’s credit rating and maintain access to low-interest funding. Over the next five years, the Department’s Capital Investment Program totals $287M, which is the initial phase of $1 billion 15-year infrastructure investment program. To pay for these projects, the plan balances debt funding rates. Approximately $206M will be debt-funded through low-interest WIFIA and State Revolving Fund (SRF) loans that the Department has secured. The remaining balance will be covered on a pay-as-you-go (Pay-Go) basis. Department also reaffirms its historical debt financing policy requiring long-term debt issuances to be a minimum of $15 million to optimize issuance costs. The intent of this plan is to maintain a level of annual debt service that the Department can afford, that meets legal bond covenants and meets the 1.5x debt service coverage policy target.

System Development Charges (SDCs) are projected at $1M annually to offset capital costs and are excluded from the rate revenue requirement. In the summer of 2026, the Department will initiate a comprehensive SDC study to update these capacity fees, define system capacity building, identify specific CIP projects to be funded, update relevant sections of the municipal code, and establish a spending and revenue plan that is fully compliant with current state law.

The model demonstrates that Department’s existing rate structure will generate rate revenue shortages and reduce reserves to below policy levels, without rate increases. To prevent this and provide a functional pathway to the critical investments needed in our infrastructure at Graham Hill Water Treatment Plant and elsewhere in the system, the model outlines a schedule of rate revenue increases beginning on January 1, 2027. Cash flow projections show that the revenue increases will simultaneously fund operations and cash-funded

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capital, as well as build net revenues and unrestricted cash reserves to a level that positions the Department to seek future financing on favorable terms.

Capital Funding
A reliable water system depends on consistent investment in infrastructure. One of the Department's strategic priorities - Water System Reliability - is to provide a high-quality, reliable, and resilient water supply by investing in and maintaining infrastructure that meets today's operational needs while preparing for the challenges of climate change, changing regulations, and future community needs. The Long-Range Financial Plan provides the financial framework necessary to make these investments in a responsible and sustainable manner.

The Department is undertaking an approximately 15-year capital improvement program to rehabilitate aging infrastructure, improve operational reliability, increase system resilience, and maintain compliance with increasingly stringent drinking water regulations. Planned investments include renewal and replacement of aging pipelines, reservoirs, pump stations, and treatment facilities, modernization of the Graham Hill Water Treatment Plant, water supply reliability and augmentation as well as climate adaptation projects, regulatory compliance improvements, and other critical infrastructure needed to provide safe and reliable drinking water.

Given the magnitude of these investments, no single funding source is appropriate. The Department's capital funding strategy combines annual rate revenues, pay-as-you-go capital funding, reserves, grants and other outside funding when available, and long-term debt for major infrastructure with long service lives. This balanced approach promotes intergenerational equity by matching the cost of long-lived assets with the customers who will benefit from them over time, while minimizing borrowing costs and maintaining affordable rates.

The Long-Range Financial Plan establishes the financial policies and performance metrics necessary to support this investment strategy. Revenue stability, reserve funding, debt service coverage, and liquidity targets are intended to preserve the Department's financial strength, maintain access to capital markets, and position the utility to finance critical infrastructure at favorable borrowing costs. By maintaining a strong financial foundation, the Department can continue investing in its water system while providing reliable service, protecting public health, and stewarding customer resources.

Cost of Service Analysis
While the LRFP determines the total revenue the Department must collect to operate, maintain, and invest in the water system over the planning horizon, the COSA determines how that revenue requirement should be fairly and equitably allocated among customer classes and rate components. Following the principles of the American Water Works Association (AWWA) M1 Manual and the requirements of California Proposition 218, the analysis identifies the cost of providing water service to each customer class and develops rates that are proportional to the cost of serving those customers. The result is a rate structure that is legally defensible, financially sufficient, transparent, and consistent with the Department's operational, conservation, affordability, and equity objectives.

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The Water Department engaged Bartle Wells Associates to perform the COSA. In full compliance with Proposition 218 and current case law, the proposed water rate schedule for the period of January 1, 2027, through January 1, 2031are projected to be sufficient to pay for daily operations and reinvestment into the physical assets of the water system including the replacement and upgrade of the Graham Hill Water Treatment Plant which was originally built in 1965.

Cost of Service Analysis Methodology & Functional Cost Allocation

As part of the 2026 Cost of Service study, the total revenue requirements are translated into equitable and legally compliant rates following the AWWA M1 Manual. Department operating, administrative and capital costs are grouped into functional categories according to the Base-Extra Capacity method. This method involves defining the Extra Capacity category using four sub-components (Base, Base-to-Average, Average-to-Peak, and Peak), which effectively isolate the peak capacity requirements, ensuring that customers who generate higher peak demands pay their proportional share of the infrastructure capacity built to accommodate that demand. This allocation ensures that every dollar collected correlates to the actual cost of providing service to each parcel, fulfilling the substantive proportionality requirement of Prop 218.

Rate Design
The proposed rates include rate structure changes that are built upon the functional cost allocation. The purposes of the rate design change include improving revenue stability, improving water bill transparency, and updating demand assumptions to align with current demand patterns across customer classes. As mentioned above, fixed monthly service charge recovery target is increasing from 10% to 20% systemwide to improve revenue stability and bring the Department closer to the industry average, which is greater than 30%.

Fixed charges recover the costs related to system capacity costs which are allocated by meter size or meter equivalent units (MEUs); larger meters with higher potential system demand cover a proportionate share of the readiness-to-serve costs.

The study updates how capacity is measured relative to a standard 5/8-inch home service using AWWA standards to ensure that capacity costs are shared fairly. Because larger meters allow water to flow through at significantly higher volumes, their fixed capacity charges are increasing to reflect the larger potential demand they place on the system.

Customers with larger meters will see a greater portion of their bill shift into the fixed monthly charge. Customers with smaller residential meters will experience a much smaller change.

There are also rate structure changes to volumetric rates. The proposed rate schedule consolidates three previously separate charges (quantity charge, infrastructure reinvestment fee, and rate stabilization fee) into a single volumetric charge. The result of this change should be improved customer bill simplification while preserving capital and reserve funding.

In addition, the Landscape Irrigation class tiers are being reduced from three budget-based tiers to two to reflect the actual consumption in this class.

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Affordability
The Department retained M.Cubed to conduct an independent water affordability analysis as part of the 2026 Long-Range Financial Plan and Cost of Service Analysis. M.Cubed has supported the City of Santa Cruz on water affordability issues for nearly a decade, including the 2016 affordability analysis prepared in conjunction with the City's rate study, a 2020 water and sewer affordability assessment, the 2021 Santa Cruz Integrated Regional Water Management Region Water & Sewer Service Affordability Assessment prepared for the Regional Water Management Foundation, and a 2022 update evaluating projected water and sewer rate increases through 2026. Building on this body of work, the 2026 analysis evaluates the affordability impacts of the proposed rates using current demographic, income, and water use data.

A key finding of the analysis is that the Department's tiered rate structure continues to protect customers using water for essential indoor needs. More than 90 percent of residential customers use 4 CCF or less per month, with most of that consumption billed at the Tier 1 rate. As a result, average residential water bills in 2031 are projected to represent approximately 1.7 percent of net disposable household income. This remains below the U.S.

Environmental Protection Agency's commonly referenced affordability benchmark, which considers drinking water costs exceeding approximately 2 to 2.5 percent of household income to represent a high financial burden. The analysis estimates that approximately 9 percent of households will experience a high affordability burden in 2031, a notable improvement from the estimated 17 percent reported in the 2021 assessment.

The City's Utility Customer Assistance Program (UCAP) remains a key component of the Department's affordability strategy. The program provides bill assistance to qualifying customers and serves as an important safety net for lower-income households and disadvantaged communities. M.Cubed's analysis indicates that UCAP reduces water bills for participating households in disadvantaged communities by approximately 31 percent. To preserve the program's effectiveness over time, the Department recalibrates the UCAP benefit as rates are adjusted, maintaining an approximate 25 percent bill discount. This approach helps ensure that vulnerable customers continue to receive meaningful assistance while allowing the Department to recover the revenues necessary to operate, maintain, and reinvest in the water system.

PART 5 – LOOKING AHEAD, IMPLEMENTATION, MONITORING, UPDATES The policy direction, financial metrics and targets outlined in this Long-Range Financial Plan are integrated into the Department’s ongoing operations and annual budget development.

The Department regularly tracks and reports performance against the financial targets by way of the Quarterly Financial Reports.

The LRFP is designed to be utilized as an ongoing guide for Water Department financial planning and management over the upcoming five- to ten-year period. Staff will maintain the underlying financial planning and rate models that form the analytical basis of the LRFP as new information is available. The financial model is a critical tool, which the Department will continue to utilize to support financial decision making. In 2031, the Department will conduct

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a new Cost-of-Service Analysis and prepare a full update to the LFRP to guide the subsequent five year period.

As of this writing, the City is scheduled to replace Eden, it’s legacy financial and billing system of over twenty years, with Workday for financials and SpryPoint for utility billing, in October 2026. The Workday enterprise resource planning software has been configured to support the Water Departments implementation of this financial plan. The City will transition to Workdays modernized chart of accounts, which will support tracking fund balances, ensuring that reserve policies can be managed in alignment with this report. SpryPoint will support the Department’s updated rate structure, which we anticipate will result in simpler water bills. Department staff are working to ensure a smooth cutover of systems ahead of the January 1, 2027 implementation date of the new rates.

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GLOSSARY
AB 2257 – CA AB 2257 establishes an administrative exhaustion procedure for local water and sewer utilities. It requires ratepayers to submit written objections before filing lawsuits, limits court reviews to the official agency record, and helps public agencies prevent unexpected Proposition 218 rate challenges.

Capital Investment Plan – A multi-year plan that lists the rehabilitation, replacement, major maintenance, and new water system facilities and systems that are needed to maintain reliable and high-quality water service or meet regulatory requirements.

CCF (One Hundred cubic feet of water) – 748 gallons of water is equal to 1 ccf. A CCF is the unit used by the Santa Cruz Water Department as the basis for charges to customers based on water use.

Cost of Service Analysis (COSA) - A Cost of Service Analysis for California utilities is a detailed study to figure out the total revenue a utility needs (revenue requirements), how to split those costs among customer groups (cost allocation), and how to set fair rates (rate design) that is compliant with all applicable laws.

Days Cash – A measure of liquidity, ensuring ability to operate through emergencies.

Debt service coverage ratio (DSCR) – A financial ratio that measures the ability of an organization to pay current debt obligations and support borrowing capacity and credit quality by comparing its net operating income with its total debt service obligations. DSCR is defined as net operating income divided by total debt service. The ratio states net operating income as multiple debt obligations due within one year, including interest, principal and sinking fund obligations.

Drought Surcharge - A temporary charge that a water utility may impose during or after a drought to recover revenues and costs that are not collected through normal water sales. An alternative mechanism used are Emergency, or E, rates. These rates are developed to replace the rate structure during a declared emergency as opposed to adding a charge, or fee.

Emergency Reserve – A reserve fund specifically designed to provide resources to address the consequences of natural disasters on water system facilities or resources or a catastrophic failure of a water system facility, reducing operational and financial risk.

Equipment Reserve – Supports ability to replace equipment when needed, smoothing replacement costs and reducing funding spikes.

Pay-as-you-Go – Using cash balances to fund capital projects, limiting reliance on debt and avoiding interest costs.

Pro forma (financial statement) - A pro forma financial statement is a forecast of the utility’s revenues and expenditures based on certain assumptions and projections;

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Operating Days Cash Reserve– A reserve created to help ensure the utility’s ability to meet operating expenses, provide financial stability, and resilience and support establishing and maintaining a good credit rating.

Operating Budget – The portion of the Department’s overall budget that pays for ongoing operations of the utility, including the costs related to personnel, materials and services such as water treatment chemicals, energy resources, and non-capital improvement project professional and technical services.

Pay-as-you-go Capital Funding – paying for capital improvement projects using current year or accumulated rate revenues, available cash, rather than the use of short or long term debt.

Proposition 218 – CA Prop. 218 is a 1996 California Constitutional Amendment that established the “cost of-service” requirements for utility rates as well as certain noticing and public review process requirements related to water rate increases.

Rate structure design – Characteristics of water rates that provides for revenue produced by fixed and variable charges, the use of different tiers for different amounts of water use, etc.

Rate Stabilization Reserve – A financial reserve specifically intended to buffer against revenue variability and demand uncertainty resulting from weather conditions, such as a cool wet spring that results in less water than projected being used for outdoor irrigation.

State Revolving Fund (SRF) - The California State Revolving Fund (SRF) is a source of lowinterest financing for investments in infrastructure. The California State Water Resources Control Board (SWRCB), under the federal Safe Drinking Water ACT, combines federal and State funds in the form of Drinking Water State Revolving Fund (DWSRF) program.

Water Infrastructure Finance and Innovation Act (WIFIA) - The WIFIA program is a federal credit program administered by the U.S. Environmental Protection Agency (EPA) that provides low-interest, long-term loans for regional water, wastewater, and stormwater infrastructure projects. It functions like a specialized federal bank to help local communities lower borrowing costs and reduce financial strain on ratepayers.

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APPENDICES
References
1) American Water Works Association (AWWA). Principles of Water Rates, Fees, and Charges: Manual of Water Supply Practices M1 (7th ed.). Denver, CO: American Water Works Association.
2) City of Santa Cruz. Council Policy 34.4: Water Department Financial Reserve Policy https://www.santacruzca.gov/files/assets/city/v/1/cc/documents/councilpolicy-manual/general-government/3404-rev.pdf * to be revised post rate adoption on 11/17/26
Attachments
1) City of Santa Cruz Water Department Debt Management Policy, Administrative Policy Order I-89
2) Pro Forma for FY 2027-2031
3) CIP for FY 2027-2031
4) Water Rate Tables for FY 2027-2031
5) Drought Surcharge (by drought stage)

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City of Santa Cruz I-89
Administrative Procedure Order
Section I, #89 (Effective March 2017)
TO: Department Heads
SUBJECT: DEBT MANAGEMENT POLICY

PURPOSE
To establish policies for the issuance and administration of City debt.

POLICY
This Debt Management Policy establishes objectives, parameters, and guidelines for responsibly issuing and administering the City’s debt. Prudent management of the City’s debt program is necessary to achieve cost-effective access to the capital markets and demonstrates a commitment to long-term financial planning.

SCOPE
These policies establish the restrictions within which the City of Santa Cruz and the City of Santa Cruz Public Financing Authority, on behalf of the City, may issue debt. Additionally, these policies apply to debt issued by the City on behalf of assessment, community facilities, or other special districts, as well as conduit debt.

DEBT MANAGEMENT OBJECTIVES
This policy sets forth key objectives for the City in issuing and administering the City’s debt, which are to:
 Maintain the City’s sound financial position.
 Minimize debt service and issuance costs.
 Maintain access to cost-effective borrowing.
 Achieve and maintain highest reasonable credit rating.  Ensure full and timely repayment of debt.
 Maintain full and complete financial disclosure and reporting.  Ensure compliance with State and Federal laws and regulations.

GOVERNING AUTHORITY AND RESPONSIBILITY
A. Legal Authority: The City’s debt portfolio for all City funds shall be administered in conformance with all applicable Federal, State, and other legal requirements, including the City Charter. The City will comply with applicable law as it pertains to the maximum term

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Administrative Procedure Order I-89
Section I, 89 (Effective March 2017)