City Council and Concurrent Authorities
January 27, 2026

ATTACHMENT B
182
70 YEARS OF ENGINEERING INNOVATION AND COMMUNITY IMPACT 3428 Brookside Road, Stockton, CA 95219 ■ t | 209.943.2021 f | 209.942.0214 ■ siegfried eng .com 24 CIVIL STRUCTURAL GEOTECH SURVEY LANDSCAPE OUTREACH
SECTION 4 | DETAILED WORK PLAN
Siegfried will schedule the meeting(s) and make all meeting arrangements; write, design, and issue meeting notices, in both English and Spanish, by first-class mail to stakeholders and by third-class mail to nearby residents; prepare agendas, sign-in sheets, comment sheets, signage, and other print materials; facilitate meeting proceedings; venue coordination, prepare exhibits and a PowerPoint presentation for each meeting to illustrate concepts and plan elements; provide refreshments; record public comments/assist with appropriate responses; provide a Spanish-Speaking translator; and prepare a detailed meeting report. Siegfried will administer Title VI compliance documentation at the public meeting. Following the meeting, Siegfried will shall develop a summary of the meeting which will include all feedback received and photographs of the meeting.

The first meeting should be scheduled after the 30% plans have been prepared.

TASK 4.1 | COORDINATION/MEETINGS
Siegfried will schedule and attend a design kick-off meeting and other subsequent meetings with the City (in-person
or virtual), as needed, to finalize the design. Siegfried will prepare and distribute the meeting agenda and minutes to all participants. Siegfried will attend a pre-construction meeting, a post construction meeting, and meet and assist staff during construction as required.

Siegfried will prepare and provide a comprehensive schedule to reflect the timeframe for each stage/task of the proposed scope of work, utilizing Microsoft Project. The project schedule shall show a base line, tasks, duration, milestones, assignments, critical paths, and other relevant data. The project schedule shall be maintained and updated monthly throughout the PS&E phase of the project.

TASK 5.1-5.2 | DESIGN SUPPORT DURING CONSTRUCTION
Siegfried will include bid support services that consist of assisting the City in responding to all Requests for Information (RFI) during the project advertisement phase. Siegfried will also include services for design support during construction. These services include responding to all RFI(s), submittal reviews and approval, altering project plans to address any changes needed, attendance of the pre-construction meeting, consultation with the construction contractor, and preparation of record drawings. Siegfried will prepare record drawings upon project completion. As-built record drawings shall reflect Change Orders, accommodations, and adjustments to improvements constructed. Prior to accepting the As-Built Plans, City staff will review the Record Drawings and electronic files to confirm that they reflect what has actually been constructed. Electronic files of the As- Built drawings (in standard PDF or TIF format at 300dpi resolutions settings) and CAD (DWG or DXF format) shall be provided in addition to the original As-Built mylars.

Siegfried assumes that the City will perform the construction management in-house which includes resident engineer and inspection duties.

TASK 6.1 | PRESERVING & PERPETUATING SURVEY MONUMENTS Siegfried will identify, list, tie out/perform construction staking of survey monuments, and show existing survey monuments on improvement plans. Siegfried will indicate on the plans and specifications that the Contractors surveyor shall file all pre-construction Corner Records or Records of Survey with San Joaquin County for monuments within the project limits and submit a copy to the City. The Corner Records shall show monuments within the area of construction reasonably subject to removal or disturbance not shown on a recent record document.

Siegfried will include language in the PS&E package to preserve all monumentation affected by the work being performed
in accordance with Section 8771 of the Professional Land Surveyors Act in the Business and Professionals Code of the State of California. Siegfried will sign the Acknowledgment of Monument Preservation form.

TASK 7.1 | PERFORMANCE OUTCOME
Siegfried will perform and provide to the City before and after construction pedestrian and bicycle counts in accordance with the Interim Count Methodology Guidance. Before construction counts shalt be conducted no more than 6 months before the construction phase begins, and after construction shall be conducted at least 6 months after project completion (before and after counts must be performed at the same location on the same days of the week, the same times of day, and the same week of the year, refer to the ATP Count Methodology Guidelines for count data collection methods and requirements). Siegfried will recommend the locations, dates, times, and counting periods during the design process and submit them to the City for acceptance. The counts will be provided at up to four (4) on three (3) weekdays from &am to 9am and 4pm to 6pm, and on one weekend day from 11am to 1pm.

EXHIBIT A

ATTACHMENT B
183
Siegfried TJKM PROJECT
TOTAL
Task 1 Background Research, Survey, Assessment

1.1 Background Research, Survey, Assessments $100,000 $5,000 $105,000

1.2 Utility Coordination $55,000 $55,000
Task 2 Plans Specifications and Estimates

2.1 30% PS&E $100,000 $30,000 $130,000

2.2 65% PS&E $110,000 $30,000 $140,000

2.3 90% PS&E $123,000 $35,000 $158,000

2.4 100% and Final PS&E $137,000 $22,000 $159,000

2.5 Quality Control $20,000 $5,000 $25,000
Task 3 Public Outreach and Meetings

3.1 Outreach Meetings and Plan $25,000 $25,000
Task 4 Coordination & Meetings

4.1 Meeetings and Management $15,000 $15,000
Task 5 Design Support During Construction

5.1 ESDC $65,000 $10,000 $75,000

5.2 As Built Drawings $3,000 $2,000 $5,000
Task 6 ROW and Preserving Survey Monuments

6.1 ROW and Preserving Survey Monuments $10,000 $10,000 Task 7 Performance Outcome

7.1 Performace Outcome $2,000 $16,000 $18,000
Total Cost $765,000 $155,000 $920,000
Paul J. Schneider, PE, QSD/QSP
President | Managing Principal
Proposed Fee for the Main and Market Complete Street Phase 1 Project (WT25043, ATPL-5008(212))

EXHIBIT B

ATTACHMENT B
184
Proposed Fee for the Main and Market Complete Street Phase 1 Project (WT25043, ATPL-5008(212)) Consultant:

Siegfried
Direct Labor
Job Title Name Hours Actual Hourly Rate Total
Managing Principal Paul Schneider 220 $104.00 $22,880.00 Principal QA/QC Adam Merrill 40 $98.50 $3,940.00
Principal Survey Kevin Genasci 140 $98.50 $13,790.00
Principal Landscape Thais Del Castillo 80 $98.50 $7,880.00 Principal Geotech Brad Quon 40 $98.50 $3,940.00
Design Principal Bob Norbutas 120 $75.00 $9,000.00
Senior Associate Nathan Berend 300 $79.33 $23,799.00
Associate Ryan Gleave 600 $67.31 $40,386.00
Associate Public Outreach Erin Cahoon 100 $60.00 $6,000.00 Project Engineer QA/QC John Fadden 220 $46.00 $10,120.00 Engineer II Lauren Sensibaugh 600 $45.00 $27,000.00
Engineer II Nick Chapman 180 $45.00 $8,100.00
Surveyor II Manny Debranca 60 $38.50 $2,310.00
Engineer I Cathy Katkanova 240 $36.00 $8,640.00
Landscape Architect II Regina Paredes 200 $28.50 $5,700.00 Technician III Anthony Linnerman 240 $34.50 $8,280.00
Senior Technician Greg Samoy 360 $40.86 $14,709.60
Technician II Datlon Reed 100 $25.25 $2,525.00
Party Chief Scott Soares 100 $84.00 $8,400.00
Labor Costs
a) Direct Labor Cost $227,399.60
b) Anticipated Salary Increases $0
c) Total Direct Labor Costs [(a)+(b)] $227,399.60
Fringe Benefits
d) Fringe Benefits Rate 51.52%
e) Total Fringe Benefits [(c) x (d)] $117,156.28
Indirect Costs
f) Overhead Rate 59.85%
h) General and Administrative Rate 54.30%
g) Overhead [(c)x(f)] $136,098.67
i) Gen & Admin [(c)x(h)] $123,477.98
j) Total Indirect Costs [(e)+(g)+(i)] $376,732.93
Fee (Profit)
q) Rate 12%
k) Total Fixed Profit $72,495.90
Other Direct Costs (ODC)
Description Unit(s) Unit Cost
Total
Mailers 10000.00 $1.000 $10,000.00
Mileage 495.43 $0.750 $371.57
Utility Locating 1.00 $35,000 $35,000.00
Legal $0 $0.00
AV Consultant $0 $0.00
Arborist $0 $0.00
Driller and Lab Testing 1.00 $25,000 $25,000.00
Rental Space 2 $1,500 $3,000.00
Salabar CM Peer Review 1 $0 $0.00
Aerial Mapping $0
l) Total Other Direct Costs $73,371.57
Subconsultants
TJKM
PMG
m) Total Subconsultants
Total Siegfried Cost $765,000.00
Total Project Cost $920,000.00
$170,000.00
$15,000.00
$155,000.00

EXHIBIT B

ATTACHMENT B
185
Proposed Fee for the Main and Market Complete Street Phase 1 Project (WT25043, ATPL-5008(212)) Sub-Consultant:

TJKM
Direct Labor
Job Title Name Hours Actual Hourly Rate
Total
Principal Ruta Jariwala 40 $104.70 $4,188.00
Project Manager Rutvij Patel 144 $88.24 $12,706.56
Traffic Operations PM Carlo Sanday 38 $90.00 $3,420.00
Task Lead Manuel Montero 112 $58.61 $6,564.32
Transportation Engineer Talha Majeed 156 $39.85 $6,216.60 Transportation Engineer Aayush Kalantri 100 $46.01 $4,601 Asst. Transportation Engineer Sanjith John 304 $37.36 $11,357 Labor Costs
a)Direct Labor Cost $49,053.92
b)Anticipated Salary Increases $0
c)Total Direct Labor Costs [(a)+(b)] $49,053.92
Fringe Benefits
d)Fringe Benefits Rate 53.02%
e)Total Fringe Benefits [(c) x (d)] $26,008.39
Indirect Costs
f)Overhead Rate 107.48%
h)General and Administrative Rate 0.00%
g)Overhead [(c)x(f)] $52,723.15
i)Gen & Admin [(c)x(h)] $0
j)Total Indirect Costs [(e)+(g)+(i)] $78,731.54
Fee (Profit)
q)Rate 10%
k)Total Fixed Profit $12,778.55
Other Direct Costs (ODC)
Description Unit(s) Unit Cost Total
l)Travel/Mileage Costs 622.86 $0.700 $436.00
m)Equipment Rental and Supplies (TOTAL) $0.00
n)Permit Fees (itemize), Plan sheets (ea.)(TOTAL) $0.00 o)Subconsultant Costs (TOTAL) $14,000.00
Traffic Counts 1 $14,000.00 $14,000.00
p)Total Other Direct Costs [(l)+(m)+(n)+(o)] $14,436.00 Total Cost $155,000.00

EXHIBIT B

ATTACHMENT B
186
Main and Market Complete Streets Phase 1
November 10, 2025
Classification/Subconsultant
Task 1.1 - Background Research
Task 1.2 Utility Coordination
Task 2.1 - 30% PS&E
Task 2.2 - 65% PS&E
Task 2.3 - 90% PS&E
Task 2.4 - 100% PS&E
Task 2.5 - Quality Control
Task 3.1 - Outreach
Task 4.1 - Meetings
Task 5.1 - ESDC
Task 5.2 - As Builts
Task 6.1 - ROW Cert and Mon
Preservation
Task 7.1 - Performance Outcome
Total Hours
Ho
urly Rate
Siegfried - Managing Principal 20 11 1 6 18 20 26 22 5 16 60 2 2 2 220 $309.45 $68,079.00 Sie
gfried - Associate 16 13 2 132 143 177 600 $200.28 $120,168.00 Sie
gfried - Project Engineer QA/QC 20 24 2 4 24 64 28 36 220 $136.87 $30,111.40 Sie
gfried - Engineer II 37.75 8 94 .75 173.5 197 164 8 117 800 $133.90 $107,120.00 Sie
gfried - Principal QA/QC 40 40 $293.09 $11,723.60Siegfried - Principal Geotech, Landscape, Survey 40 40 4 0 40 46 24 8 2 20 260 $293.09 $76,203.40 Sie
gfried - Senior Technician 9 8 24 1 75 134 10 360 $121.58 $43,768.80 Sie
gfried - Party Chief 80 4 8 9 2 $249.94 $22,994.48
Sie
gfried - Landscape Architect II 40 60 4 8 28 24 200 $8 4.80 $16,960.00 Sie
gfried - Engineer I 79 44 3 2 32 53 240 $107.12 $25,708.80 Sie
gfried - Senior Associate 16 16 2 9 32 32 34 21 8 37 70 2 3 300 $236.05 $70,815.00 Sie
gfried - Design Principal 40 40 3 2 8 120 $223.16 $26,779.20 Sie
gfried - Surveyor II 8 16 1 6 3 4 13 60 $114.56 $6,873.60 Sie
gfried - Technician III 48 48 4 8 16 80 240 $102.65 $24,636.00 Sie
gfried - Technician II 4 50 1 4 4 28 100 $7 5.13 $7,513.00 Sie
gfried - Associate Outreach 20 13 1 7 50 100 $178.53 $17,853.00 T
JK
M - Principal 2 8 8 8 7 4 2 1 40 $300.02 $12,000.80
T
JK
M - Project Manager 32 32 3 2 34 5 6 3 144 $252.85 $36,410.40 T
JK
M - Traffic Operations PM 8 8 8 4 4 6 38 $257.90 $9,800.20 T
JK
M - Task Lead 40 32 2 4 16 112 $167.95 $18,810.40
T
JK
M - Transportation Engineer 24 32 4 0 40 6 14 156 $114.19 $17,813.64 T
JK
M - Transportation Engineer 24 24 2 4 21 7 100 $131.84 $13,184.00 T
JK
M - Asst. Transportation Engineer 40 80 8 0 80 24 304 $107.06 $32,546.24 U
ti
lity Locator, Driller, Lab $35,000 $25,000 $1 4,000 74,000 $ $7 4,000.00 PMG $
15,000 15,000 $ $1 5,000.00
Total Hours 214 28 3 15 412 599 651 82 5 16 225 14 30 2 2592 Ca
tegory Total $104,983.69 $54,935.63 $129,971.62 $139,978.24 $157,952.64 $158,991.73 $24,902.75 $12,362.15 $14,949.30 $74,946.08 $4,996.62 $9,969.50 $17,933.02 $906,873 Rei
mbursables $16.32 $64.37 $28.38 $21.76 $47.36 $8.27 $97.25 $12,637.85 $50.70 $53.92 $3.38 $30.50 $66.98 Task Totals $105,000 $55,000 $130,000 $140,000 $158,000 $159,000 $25,000 $25,000 $15,000 $75,000 $5,000 $10,000 $18,000 Not-To-Exceed Fee $920,000

EXHIBIT B

ATTACHMENT B
187
ID Task Name Duration Start Finish Predecessors
1 Market and Main Complete Streets (WT25043 &
ATPL-5008(212)
667 days Tue 1/27/26 Wed 8/16/28
2 City Issues NTP 0 days Tue 1/27/26 Tue 1/27/26
3 Project Kickoff Meeting 2 days Tue 2/10/26 Wed 2/11/26 2FS+10 days 4 Background Research and Studies 40 days Wed 2/11/26 Wed 4/8/26 5 Initial Site Visit 0 days Wed 2/11/26 Wed 2/11/26 3
6 Review Prior Documentation 10 days Thu 2/12/26 Wed 2/25/26 3 7 Meet with Stockton Diamond Design Team 0 days Wed 2/25/26 Wed 2/25/26 6 8 Topographic and Boundary Survey 30 days Thu 2/26/26 Wed 4/8/26 6 9 Geotechnical Investigation 30 days Thu 2/26/26 Wed 4/8/26 6 10 Public Outreach 95 days Thu 2/12/26 Wed 6/24/26
11 Create Public Outreach Plan and
Stakeholder List
10 days Thu 2/12/26 Wed 2/25/26 3
12 City Review of Public Outreach Plan 5 days Thu 2/26/26 Wed 3/4/26 11 13 Send Meeting Notice #1 10 days Thu 3/26/26 Wed 4/8/26 12FS+15 days 14 Informational Meeting #1 0 days Wed 4/8/26 Wed 4/8/26 13 15 Send Meeting Notice #2 10 days Thu 6/11/26 Wed 6/24/26 14FS+45 days 16 Informational Meeting #2 0 days Wed 6/24/26 Wed 6/24/26 15 17 Project Plans, Estimate and Specifications 195 days Thu 2/26/26 Wed 11/25/26 18 30% PS&Es 45 days Thu 2/26/26 Wed 4/29/26
19 Prepare for 30% PS&Es 30 days Thu 2/26/26 Wed 4/8/26 6 20 Agency Review 15 days Thu 4/9/26 Wed 4/29/26 19
21 65% PS&Es 45 days Thu 4/30/26 Wed 7/1/26
22 Prepare for 60% PS&Es 30 days Thu 4/30/26 Wed 6/10/26 20 23 Agency Review 15 days Thu 6/11/26 Wed 7/1/26 22
24 Send Utility B Letters 0 days Wed 7/1/26 Wed 7/1/26 23 25 90% PS&Es 50 days Thu 6/18/26 Wed 8/26/26
26 Prepare for 90% PS&Es 35 days Thu 6/18/26 Wed 8/5/2623FS-10 days,20FS-10 days 27 Agency Review 15 days Thu 8/6/26 Wed 8/26/26 26
28 100% PS&Es 40 days Thu 8/13/26 Wed 10/7/26
29 Prepare for 100% PS&Es 25 days Thu 8/13/26 Wed 9/16/26 27FS-10 days 30 Agency Review 15 days Thu 9/17/26 Wed 10/7/26 29
31 Final PS&Es 35 days Thu 10/8/26 Wed 11/25/26
32 Prepare for Final PS&Es 20 days Thu 10/8/26 Wed 11/4/26 30 33 Agency Review 15 days Thu 11/5/26 Wed 11/25/26 32
34 Bidding and Award 90 days Thu 11/26/26 Wed 3/31/27
35 Bid Package Preparation 20 days Thu 11/26/26 Wed 12/23/26 33 36 Bidding 30 days Thu 12/24/26 Wed 2/3/27 35
37 Bid Opening 0 days Wed 2/3/27 Wed 2/3/27 36
38 Contract Negotiations and Council Approval 40 days Thu 2/4/27 Wed 3/31/27 37 39 Construction NTP 0 days Wed 3/31/27 Wed 3/31/27 38
40 Construction (Phased Approach) 667 days Tue 1/27/26 Wed 8/16/28 41 Phase 1 360 days Thu 4/1/27 Wed 8/16/28 39
42 Stockton Diamond Construction 405 days Tue 1/27/26 Mon 8/16/27 2 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aug 2026 2027 2028
Task
Critical Task
Milestone
Summary
Rolled Up Task
Rolled Up Critical Task
Rolled Up Milestone
Rolled Up Progress
Split
External Tasks
Project Summary
Group By Summary
Inactive Task
Inactive Milestone
Inactive Summary
Manual Task
Duration-only
Manual Summary Rollup
Manual Summary
Start-only
Finish-only
Progress
Deadline
Manual Progress

PROJECT SCHEDULE
Main a
nd Market Street Complete Streets Phase 1

STOCKTON, CALIFORNIA
Thu 11/20/25 1 of 1
Project: Market and Main Street Comp
Date
: Thu 11/20/25

EXHIBIT C

ATTACHMENT B
188
REV 2025-06-04
Insurance Requirements for Professional Services
(Main Street and Market Street Complete Streets Phase I, Project No. WT25043/State Project No. ATPL-5008(212)) Consult
ant shall procure and maintain for the duration of the contract insurance against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder by the Consultant, its agents, representatives, or employees.

MINIMUM SCOP

E AND LIMIT OF INSURANCE
Covera
ge shall be at least as broad as:

1. Comme
rcial General Liability (CGL): Insurance Services Office Form CG 00 01 covering CGL on an “occurrence” basis, including products and completed operations, property damage, bodily injury and personal & advertising injury with limits no less than $2,000,000 per occurrence. If a general aggregate limit applies, either the general aggregate limit shall apply separately to this project/location (ISO CG 25 03 or 25 04) or the general aggregate limit shall be twice the required occurrence limit.

2. Autom
obile Liability: Insurance Services Office Form Number CA 0001 covering, Code 1 (any auto), or if Consultant has no owned autos, Code 8 (hired) and 9 (non-owned), with limit no less than $1,000,000 per accident for bodily injury and property damage.

3. Workers’
Compensation insurance as required by the State of California, with Statutory Limits, and Employer’s Liability Insurance with limit of no less than $1,000,000 per accident for bodily injury or disease.

4. Profes
sional Liability (Errors and Omissions) Insurance appropriates to the Consultant’s profession, with limit no less than $5,000,000 per occurrence or claim, $5,000,000 aggregate.

If the
Consultant maintains broader coverage and/or higher limits than the minimums shown above, the City of Stockton requires and shall be entitled to the broader coverage and/or the higher limits maintained by the Consultant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City of Stockton.

Other In
surance Provisions
The ins
urance policies are to contain, or be endorsed to contain, the following provisions:

EXHIBIT D

ATTACHMENT B
189
REV 2025-06-04
Additional Insured Status
The City of Stockton, its officers, officials, employees, 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 the Consultant including materials, parts, or equipment furnished in connection with such work or operations. General liability coverage can be provided in the form of an endorsement to the 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). Additional insured Name of Organization shall read “City of Stockton, its officers, officials, employees, and volunteers.” Policy shall cover City of Stockton, its officers, officials, employees, and volunteers for all locations work is done under this contract.

Primary Coverage
For any claims related to this contract, the Consultant’s insurance coverage shall be primary and non-contributory and at least as broad as ISO CG 20 01 12 19 as respects the City of Stockton, its officers, officials, employees, and volunteers. Any insurance or self-insurance maintained by the City of Stockton, its officers, officials, employees, or volunteers shall be excess of the Consultant’s insurance and shall not contribute with it. This requirement shall also apply to any Excess or Umbrella liability policies. The City of Stockton does not accept endorsements limiting the Contractor’s insurance coverage to the sole negligence of the Named Insured.

Umbrella or Excess Policy
The Consultant may use Umbrella or Excess Policies to provide the liability limits as required in this agreement. The policies shall be provided on a true “following form” coverage basis, with coverage at least as broad as provided on the underlying Commercial General Liability insurance.

Notice of Cancellation
Each insurance policy required above shall provide that coverage shall not be canceled, except with notice to the City of Stockton.

Waiver of Subrogation
Consultant hereby grants to City of Stockton a waiver of any right to subrogation which any insurer of said Consultant may acquire against the City of Stockton by virtue of the payment of any loss under such insurance. Consultant agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation, but this provision applies regardless of whether or not the City of Stockton has received a waiver of subrogation endorsement from the insurer.

Self -Insured Retentions
Self-insured retentions must be declared to and approved by the City of Stockton. The City of Stockton may require the Consultant to purchase coverage with a lower retention or provide proof of ability to pay losses and related expenses within the

EXHIBIT D

ATTACHMENT B
190
REV 2025-06-04
retention. 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 of Stockton.

Acceptability of Insurers
Insurance is to be placed with insurers authorized to conduct business in the state with a current A.M. Best’s rating of no less than A:VII, unless otherwise acceptable to the City of Stockton.

Claims Made Policies ( Professional & Pollution only )
If any of the required policies provide claims-made coverage:

1. The Ret
roactive 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 work.

Verification of Coverage
Consultant shall furnish the City of Stockton with original certificates and amendatory endorsements or copies of the applicable policy language effecting coverage required by this clause All required documents are to be received and approved by the City of Stockton before work commences. How ever, failure to obtain the documents prior to the work beginning shall not waive the Consultant’s obligation to provide them. The City of Stockton reserves the right to require complete, certified copies of all required insurance policies, including endorsements, at any time.

Subcontractors
Consultant shall require and verify that all subcontractors maintain insurance meeting all the requirements stated herein, and Consultant shall ensure that City of Stockton is an additional insured on insurance required from subcontractors.

Duration of Coverage
CGL & Excess liability policies for any construction related work, including, but not limited to, maintenance, service, or repair work, shall continue coverage for a mi
nimum of 5 years for Completed Operations liability coverage. Such Insurance must be maintained and evidence of insurance must be provided for at least five (5) years after completion of the contract of work .

EXHIBIT D

ATTACHMENT B
191
REV 2025-06-04
Special Risks or Circumstances
City of Stockton reserves the right to modify these requirements, including limits, based on the nature of the risk, prior experience, insurer, coverage, or other special circumstances.

Certifi
cate Holder Address
The ad
dress for mailing certificates, endorsements and notices shall be:

City o
f Stockton
Its Officers, Officials, Employees, and Volunteers
425 N El Dorado Street
Stockton, CA 95202

EXHIBIT D

ATTACHMENT B
192
Local Assistance Procedures Manual Exhibit 10-R
A&E Boilerplate Agreement Language

May 2023
Exhibit “E”
State Funded Consultant Contract Provisions

MAIN STR

EET AND MARKET STREET COMPLETE STREETS PHASE I
City Project No. WT25043 / State Project No. ATPL-5008(212)

TABLE OF CONTENTS
Page
ARTICLE I INTRODUCTION .................................................................................................................. 3 ARTICLE II CONSULTANT’S REPORTS OR MEETINGS ..................................................................... 4 ARTICLE III STATEMENT OF WORK ................................................................................................... 4 ARTICLE IV PERFORMANCE PERIOD ................................................................................................ 5 ARTICLE V ALLOWABLE COSTS AND PAYMENTS ........................................................................... 5 ARTICLE VI TERMINATION ................................................................................................................ ..6 ARTICLE VII COST PRINCIPLES AND ADMINISTRATIVE REQUIREMENTS ................................... ..7 ARTICLE VIII RETENTION OF RECORD/AUDITS .............................................................................. . .7 ARTICLE IX AUDIT REVIEW PROCEDURES ..................................................................................... ..8 ARTICLE X SUBCONTRACTING ........................................................................................................ ..9 ARTICLE XI EQUIPMENT PURCHASE AND OTHER CAPITAL EXPENDITURES ............................. 10 ARTICLE XII STATE PREVAILING WAGE RATES ............................................................................. 11 ARTICLE XIII CONFLICT OF INTEREST ............................................................................................ 14 ARTICLE XIV REBATES, KICKBACKS OR OTHER UNLAWFUL CONSIDERATION ........................ 15

ARTICLE XV PROHIBITION OF EXPENDING LOCAL AGENCY, STATE, OR FEDERAL FUNDS FOR LOBBYING .......................................................................................................................................... 15 ARTICLE XVI NON-DISCRIMINATION CLAUSE AND STATEMENT OF COMPLIANCE ................... 15

ARTICLE X
VII DEBARMENT AND SUSPENSION CERTIFICATION .................................................. 17 ARTICLE XVIII NONE.......................................................................................................................... 17 ARTICLE XIX INSURANCE ................................................................................................................. 17 ARTICLE XX FUNDING REQUIREMENTS .......................................................................................... 17 ARTICLE XXI CHANGE IN TERMS ..................................................................................................... 17

ATTACHMENT B
193
Local Assistance Procedures Manual Exhibit 10-R
A&E Boilerplate Agreement Language

May 2023
ARTICLE XXII CONTINGENT FEE ...................................................................................................... 1 8 ARTICLE XXIII DISPUTES .................................................................................................................. 18 ARTICLE XXIV INSPECTION OF WORK ............................................................................................ 18 ARTICLE XXV SAFETY ...................................................................................................................... 18 ARTICLE XXVI OWNERSHIP OF DATA ............................................................................................. 19 ARTICLE XXVII CLAIMS FILED BY LOCAL AGENCY’s CONSTRUCTION CONTRACTOR .............. 19 ARTICLE XXVIII CONFIDENTIALITY OF DATA .................................................................................. 2 0 ARTICLE XXIX NATIONAL LABOR RELATIONS BOARD CERTIFICATION ..................................... 20 ARTICLE XXX EVALUATION OF CONSULTANT ............................................................................... 20 ARTICLE XXXI PROMPT PAYMENT .................................................................................................. 20 ARTICLE XXXII TITLE VI ASSURANCES ........................................................................................... 21 ARTICLE XXXIII NOTIFICATION ......................................................................................................... 21 ARTICLE XXXIV CONTRACT ............................................................................................................. 21 ARTICLE XXXV SIGNATURES ........................................................................................................... 21

ATTACHMENT B
194
Local Assistance Procedures Manual Exhibit 10-R
A&E Boilerplate Agreement Language

May 2023

ARTICLE I INTRODUCTION
A. This AGREEMENT is between the following named, hereinafter referred to as, CONSULTANT and the following named, hereinafter referred to as, LOCAL AGENCY:

The name of the “CONSULTANT” is as follows:

SIEGFRIED ENGINEERING, INC.

Incorporated in the State of California
The Project Manager for the “CONSULTANT” will be
PAUL SCHNEIDER ([email protected])
The name of the “LOCAL AGENCY” is as follows:

CITY OF STOCKTON PUBLIC WORKS
The Contract Administrator for LOCAL AGENCY will be IVAN REYNOSO.

B. The work to be performed under this AGREEMENT is described in Article III Statement of Work and t
he approved CONSULTANT’s Cost Proposal dated November 10, 2025. The approved CONSULTANT’s Cost Proposal is attached hereto as Exhibit B and incorporated by reference. If there is any conflict between the approved Cost Proposal and this AGREEMENT, this AGREEMENT shall take precedence.

C. CONSULTANT agrees to the fullest extent permitted by law, to indemnify, protect, defend, and hold har
mless LOCAL AGENCY, its officers, officials, agents, employees and volunteers from and agai
nst any and all claims, damages, demands, liability, costs, losses and expenses, including w
ithout limitation, court costs and reasonable attorneys’ and expert witness fees, arising out of any failure to comply with applicable law, any injury to or death of any person(s), damage to property, loss of use of property, economic loss or otherwise arising out of the performance of the work described herein, to the extent caused by a negligent act or negligent failure to act, errors, omissions, recklessness or willful misconduct incident to the performance of this AGREEMENT on
t
he part of CONSULTANT, except such loss or damage which was caused by the sole negligence, or willful misconduct of LOCAL AGENCY, as determined by a Court of competent jurisdiction. The provisions of this section shall survive termination or suspension of this AGREEMENT.

D. CONSULTANT in the performance of this AGREEMENT, shall act in an independent capacity. It is understood and agreed that CONSULTANT (including CONSULTANT's employees) is an independent contractor and that no relationship of employer-employee exists between the Parties hereto. CONSULTANT's assigned personnel shall not be entitled to any benefits payable to employees of City.

E. LOCAL AGENCY is not required to make any deductions or withholdings from the compensation pay
able to CONSULTANT under the provisions of the AGREEMENT and is not required to issue W-2 Forms for income and employment tax purposes for any of CONSULTANT's assigned per
sonnel. CONSULTANT, in the performance of its obligation hereunder, is only subject to the c
ontrol or direction of the LOCAL AGENCY as to the designation of tasks to be performed and the r
esults to be accomplished.

F. Any third-party person(s) employed by CONSULTANT shall be entirely and exclusively under the direction, supervision, and control of CONSULTANT. CONSULTANT hereby indemnifies and holds

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LOCAL AGENCY harmless from any and all claims that may be made against City based upon any contention by any third party that an employer-employee relationship exists by reason of this AGREEMENT.

G. Except as expressly authorized herein, CONSULTANT's obligations under this AGREEMENT are not assignable or transferable, and CONSULTANT shall not subcontract any work, without the prior written approval of the LOCAL AGENCY. However, claims for money due or which become due to CONSULTANT from City under this AGREEMENT may be assigned to a financial institution or to a trustee in bankruptcy, without such approval. Notice of any assignment or transfer whether voluntary or involuntary shall be furnished promptly to the LOCAL AGENCY.

H. CONSULTANT shall be as fully responsible to the LOCAL AGENCY for the negligent acts and omissions of its contractors and subcontractors or subconsultants, and of persons either directly or indirectly employed by them, in the same manner as persons directly employed by CONSULTANT.

I. No alteration or variation of the terms of this AGREEMENT shall be valid, unless made in writing and signed by the parties authorized to bind the parties; and no oral understanding or agreement not incorporated herein, shall be binding on any of the parties hereto.

J. The consideration to be paid to CONSULTANT as provided herein, shall be in compensation for all of CONSULTANT’s expenses incurred in the performance hereof, including travel and per diem, unless otherwise expressly so provided.

ARTIC
LE II CONSULTANT’S REPORTS OR MEETINGS
A. CONSULTANT shall submit progress reports at least once a month. The report should be sufficiently detailed for the LOCAL AGENCY’s Contract Administrator to determine, if CONSULTANT is performing to expectations, or is on schedule; to provide communication of interim findings, and to sufficiently address any difficulties or special problems encountered, so remedies can be developed.

B. CONSULTANT’s Project Manager shall meet with LOCAL AGENCY’s Contract Administrator, as needed, to discuss progress on the AGREEMENT.

ARTIC

LE III STATEMENT OF WORK
[Insert Appropriate Statement of work including a Description of the Deliverables in the following sections. If a section does not apply to the AGREEMENT, state “Not Applicable to this AGREEMENT.”] A. CONSULTANT Services
See Exhibit “A”, Scope of Services of the Professional Services Contract.

B. Right of Way
See Exhibit “A”, Scope of Services of the Professional Services Contract.

C. Surveys
See Exhibit “A”, Scope of Services of the Professional Services Contract.

D. Subsurface Investigations
See Exhibit “A”, Scope of Services of the Professional Services Contract.

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E. Local Agency Obligations
All data applicable to the project and in possession of LOCAL AGENCY, another agency, or government agency that are to be made available to CONSULTANT are referred to in the AG
REEMENT. Any other assistance or services to be furnished to CONSULTANT are to be stated clearly. See “Rights and Duties of City” of the Professional Services Contract.

F. Conferences, Site Visits, Inspection of Work
This AGREEMENT provides for conferences as needed, visits to the site, and inspection of the w
ork by representatives of the LOCAL AGENCY, State, and/or FHWA. Costs incurred by CONSULTANT for meetings, subsequent to the initial meeting shall be included in the fee.

G. Checking Shop Drawings
[For AGREEMENTs requiring the preparation of construction drawings, make provision for checking shop drawings. Payment for checking shop drawings by CONSULTANT may be included in the AGREEMENT fee, or provision may be made for separate payment.] H. CONSULTANT Services During Construction
The extent, if any of CONSULTANT’s services during the course of construction as material testing, c
onstruction surveys. etc., are specified in the AGREEMENT together with the method of payment for such services.

I. Documentation and Schedules
AGREEMENTs where appropriate, shall provide that CONSULTANT document the results of the w
ork to the satisfaction of LOCAL AGENCY, and if applicable, the State and FHWA. This may include preparation of progress and final reports, plans, specifications and estimates, or similar evidence of attainment of the AGREEMENT objectives.

J. Deliverables and Number of Copies
The number of copies or documents to be furnished, such as reports, brochures, sets of plans, specifications, or Right of Way parcel maps shall be specified. Provision may be made for payment for additional copies.

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RTICLE IV PERFORMANCE PERIOD
A. This AGREEMENT shall go into effect on JANUARY 13, 2026, contingent upon approval by LOCAL AGENCY, and CONSULTANT shall commence work after notification to proceed by LOCAL AGENCY’S Contract Administrator. The AGREEMENT shall end on DECEMBER 15, 2029, unless extended by AGREEMENT amendment.

B. CONSULTANT is advised that any recommendation for AGREEMENT award is not binding on L
OCAL AGENCY until the AGREEMENT is fully executed and approved by LOCAL AGENCY.

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RTICLE V ALLOWA BLE COSTS AND PAYMENTS
A. The method of payment for this AGREEMENT will be based on actual cost plus a fixed fee. LOCAL AGENCY will reimburse CONSULTANT for actual costs (including labor costs, employee benefits, travel, equipment rental costs, overhead and other direct costs) incurred by CONSULTANT i n
per
formance of the work. CONSULTANT will not be reimbursed for actual costs that exceed the es
timated wage rates, employee benefits, travel, equipment rental, overhead, and other estimated co
sts set forth in the approved CONSULTANT’S Cost Proposal, unless additional reimbursement is pr
ovided for by AGREEMENT amendment. In no event, will CONSULTANT be reimbursed for overhead costs at a rate that exceeds LOCAL AGENCY’s approved overhead rate set forth in the Cost Proposal. In the event, that LOCAL AGENCY determines that a change to the work from that specified in the Cost Proposal and AGREEMENT is required, the AGREEMENT time or actual costs reimbursable by LOCAL AGENCY shall be adjusted by AGREEMENT amendment to

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accommodate the changed work. The maximum total cost as specified in Paragraph “I” of this Article shall not be exceeded, unless authorized by AGREEMENT amendment.

B. The indirect cost rate established for this AGREEMENT is extended through the duration of this specific AGREEMENT. CONSULTANT’s agreement to the extension of the 1-year applicable period shall not be a condition or qualification to be considered for the work or AGREEMENT award.

C. In addition to the allowable incurred costs, LOCAL AGENCY will pay CONSULTANT a fixed fee of $920,000. The fixed fee is nonadjustable for the term of the AGREEMENT, except in the event of a significant change in the scope of work and such adjustment is made by AGREEMENT amendment.

D. Reimbursement for transportation and subsistence costs shall not exceed the rates specified in the approved Cost Proposal.

E. When milestone cost estimates are included in the approved Cost Proposal, CONSULTANT shall obtain prior written approval for a revised milestone cost estimate from the Contract Administrator before exceeding such cost estimate.

F. Progress payments will be made monthly in arrears based on services provided and allowable incurred costs. A pro rata portion of CONSULTANT’s fixed fee will be included in the monthly progress payments. If CONSULTANT fails to submit the required deliverable items according to the schedule set forth in Article III Statement of Work, LOCAL AGENCY shall have the right to delay payment or terminate this AGREEMENT.

G. No payment will be made prior to approval of any work, nor for any work performed prior to approval of this AGREEMENT.

H. CONSULTANT will be reimbursed promptly according to California Regulations upon receipt by LOCAL AGENCY’s Contract Administrator of itemized invoices in duplicate. Invoices shall be submitted no later than thirty (30) calendar days after the performance of work for which CONSULTANT is billing. Invoices shall detail the work performed on each milestone and each project as applicable. Invoices shall follow the format stipulated for the approved Cost Proposal and shall reference this AGREEMENT number and project title. Final invoice must contain the final cost and all credits due LOCAL AGENCY including any equipment purchased under the provisions of Article XI Equipment Purchase. The final invoice should be submitted within sixty (60) calendar days after completion of CONSULTANT’s work. Invoices shall be mailed to LOCAL AGENCY’s Contract Administrator at the following address:

CITY OF STOCKTON

PUBLIC WORKS DEPARTMENT
22 E. WEBER AVENUE, ROOM 301
STOCKTON, CA 95202
I. The total amount payable by LOCAL AGENCY including the fixed fee shall not exceed $920,000.

J. For personnel subject to prevailing wage rates as described in the California Labor Code, all salary increases, which are the direct result of changes in the prevailing wage rates are reimbursable.

ARTI

CLE VI TERMINATION
A. This AGREEMENT may be terminated by LOCAL AGENCY, (See Section 11 of the Professional Services Contract).

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B. LOCAL AGENCY may temporarily suspend this AGREEMENT, at no additional cost to LOCAL AGENCY, provided that CONSULTANT is given written notice (delivered by certified mail, return r
eceipt requested) of temporary suspension. If LOCAL AGENCY gives such notice of temporary suspension, CONSULTANT shall immediately suspend its activities under this AGREEMENT. A temporary suspension may be issued concurrent with the notice of termination.

C. Notwithstanding any provisions of this AGREEMENT, CONSULTANT shall not be relieved of liability to LOCAL AGENCY for damages sustained by City by virtue of any breach of this AGREEMENT by CONSULTANT, and City may withhold any payments due to CONSULTANT until such time as the exact amount of damages, if any, due City from CONSULTANT is determined.

D. In the event of termination, CONSULTANT shall be compensated as provided for in this AGREEMENT. Upon termination, LOCAL AGENCY shall be entitled to all work, including but not limited to, reports, investigations, appraisals, inventories, studies, analyses, drawings and data estimates performed to that date, whether completed or not.

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RTICLE VII COST PRINCIPLES AND ADMINISTRATIVE REQUIREMENTS A. The CONSULTANT agrees that 48 CFR 31, Contract Cost Principles and Procedures, shall be us
ed to determine the allowability of individual terms of cost.

B. The CONSULTANT also agrees to comply with Federal procedures in accordance with 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.

C. Any costs for which payment has been made to the CONSULTANT that are determined by subsequent audit to be unallowable under 48 CFR 31 or 2 CFR 200 are subject to repayment b y
t
he CONSULTANT to LOCAL AGENCY.

D. When a CONSULTANT or Subconsultant is a Non-Profit Organization or an Institution of Higher Education, the Cost Principles for Title 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards shall apply.

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RTICLE VIII RETENTION OF RECORD/AUDITS
For the purpose of determining compliance with Gov. Code § 8546.7, the CONSULTANT, Subconsultants, and LOCAL AGENCY shall maintain all books, documents, papers, accounting records, Independent CPA Audited Indirect Cost Rate workpapers, and other evidence pertaining to the performance of the AGREEMENT including, but not limited to, the costs of administering the AGREEMENT. All parties, including the CONSULTANT’s Independent CPA, shall make such workpapers and materials available at their respective offices at all reasonable times during the AGREEMENT period and for three (3) years from the date of final payment under the AGREEMENT and records for real property and equipment acquired with federal funds must be retained for three (3) years after final disposition. LOCAL AGENCY, Caltrans Auditor, FHWA, or any duly authorized representative of the Federal government having jurisdiction under Federal laws or regulations (including the basis of Federal funding in whole or in part) shall have access to any books, records, and documents of the CONSULTANT, Subconsultants, and the CONSULTANT’s Independent CPA, that are pertinent to the AGREEMENT for audits, examinations, workpaper review, excerpts, and transactions, and copies thereof shall be furnished if requested without limitation.

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ARTICLE IX AUDIT REVIEW PROCEDURES
A. Any dispute concerning a question of fact arising under an interim or post audit of this AGREEMENT that is not disposed of by AGREEMENT, shall be reviewed by LOCAL AGENCY’S Chief Financial Officer.

B. Not later than thirty (30) calendar days after issuance of the final audit report, CONSULTANT may request a review by LOCAL AGENCY’S Chief Financial Officer of unresolved audit issues. The request for review will be submitted in writing.

C. Neither the pendency of a dispute nor its consideration by LOCAL AGENCY will excuse CONSULTANT from full and timely performance, in accordance with the terms of this AGREEMENT.

D. CONSULTANT and subconsultant AGREEMENTs, including cost proposals and Indirect Cost Rates (ICR), may be subject to audits or reviews such as, but not limited to, an AGREEMENT audit, an incurred cost audit, an ICR Audit, or a CPA ICR audit work paper review. If selected for audit or review, the AGREEMENT, cost proposal and ICR and related work papers, if applicable, will be reviewed to verify compliance with 48 CFR 31 and other related laws and regulations. In the instances of a CPA ICR audit work paper review it is CONSULTANT’s responsibility to ensure federal, LOCAL AGENCY, or local government officials are allowed full access to the CPA’s work papers including making copies as necessary. The AGREEMENT, cost proposal, and ICR shall be adjusted by CONSULTANT and approved by LOCAL AGENCY Contract Administrator to conform to the audit or review recommendations. CONSULTANT agrees that individual terms of costs identified in the audit report shall be incorporated into the AGREEMENT by this reference if directed by LOCAL AGENCY at its sole discretion. Refusal by CONSULTANT to incorporate audit or review recommendations, or to ensure that the federal, LOCAL AGENCY or local governments have access to CPA work papers, will be considered a breach of AGREEMENT terms and cause for termination of the AGREEMENT and disallowance of prior reimbursed costs.

E. CONSULTANT’s Cost Proposal may be subject to a CPA ICR Audit Work Paper Review and/or audit by the Independent Office of Audits and Investigations (IOAI). IOAI, at its sole discretion, may review and/or audit and approve the CPA ICR documentation. The Cost Proposal shall be adjusted by the CONSULTANT and approved by the LOCAL AGENCY Contract Administrator to conform to the Work Paper Review recommendations included in the management letter or audit recommendations included in the audit report. Refusal by the CONSULTANT to incorporate the Work Paper Review recommendations included in the management letter or audit recommendations included in the audit report will be considered a breach of the AGREEMENT terms and cause for termination of the AGREEMENT and disallowance of prior reimbursed costs.

1. During IOAI’s review of the ICR audit work papers created by the CONSULTANT’s independent CPA, IOAI will work with the CPA and/or CONSULTANT toward a resolution of issues that arise during the review. Each party agrees to use its best efforts to resolve any audit disputes in a timely manner. If IOAI identifies significant issues during the review and is unable to issue a cognizant approval letter, LOCAL AGENCY will reimburse the CONSULTANT at an accepted ICR until a FAR (Federal Acquisition Regulation) compliant ICR (e.g. 48 CFR Part 31; GAGAS (Generally Accepted Auditing Standards); CAS (Cost Accounting Standards), if applicable; in accordance with procedures and guidelines of the American Association of State Highways and Transportation Officials (AASHTO) Audit Guide; and other applicable procedures and guidelines) is received and approved by IOAI.

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Accepted rates will be as follows:
a. If the proposed rate is less than one hundred fifty percent (150%) - the accepted rate r
eimbursed will be ninety percent (90%) of the proposed rate. b. If the proposed rate is between one hundred fifty percent (150%) and two hundred per
cent (200%) - the accepted rate will be eighty-five percent (85%) of the proposed r
ate.
c. If the proposed rate is greater than two hundred percent (200%) - the accepted rate will be s
eventy-five percent (75%) of the proposed rate.

2. If IOAI is unable to issue a cognizant letter per paragraph E.1. above, IOAI may require CONSULTANT to submit a revised independent CPA-audited ICR and audit report within three (3) months of the effective date of the management letter. IOAI will then have up to six (6) m
onths to review the CONSULTANT’s and/or the independent CPA’s revisions.

3. If the CONSULTANT fails to comply with the provisions of this paragraph E, or if IOAI is still unable to issue a cognizant approval letter after the revised independent CPA audited ICR is submitted, overhead cost reimbursement will be limited to the accepted ICR that was established upon initial rejection of the ICR and set forth in paragraph E.1. above for all rendered services. In this event, this accepted ICR will become the actual and final ICR for reimbursement purposes under this AGREEMENT.

4. CONSULTANT may submit to LOCAL AGENCY final invoice only when all of the following items hav
e occurred: (1) IOAI accepts or adjusts the original or revised independent CPA audited ICR; (2) all work under this AGREEMENT has been completed to the satisfaction of LOCAL AGENCY; and, (3) IOAI has issued its final ICR review letter. The CONSULTANT MUST SU
BMIT ITS FINAL INVOICE TO LOCAL AGENCY no later than sixty (60) calendar days after occurrence of the last of these items. The accepted ICR will apply to this AGREEMENT and all ot
her agreements executed between LOCAL AGENCY and the CONSULTANT, either as a p
rime or subconsultant, with the same fiscal period ICR.

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RTICLE X SUBCONTRACTING
A. Nothing contained in this AGREEMENT or otherwise, shall create any contractual relation between t
he LOCAL AGENCY and any Subconsultants, and no subagreement shall relieve the C
ONSULTANT of its responsibilities and obligations hereunder. The CONSULTANT agrees to be as fully responsible to the LOCAL AGENCY for the acts and omissions of its Subconsultants and of per
sons either directly or indirectly employed by any of them as it is for the acts and omissions of persons directly employed by the CONSULTANT. The CONSULTANT's obligation to pay its Subconsultants is an independent obligation from the LOCAL AGENCY's obligation to mak e
pay
ments to the CONSULTANT.

B. The CONSULTANT shall perform the work contemplated with resources available within its own or
ganization and no portion of the work shall be subcontracted without written authorization by the LO
CAL AGENCY Contract Administrator, except that which is expressly identified in the C
ONSULTANT’s approved Cost Proposal.

C. Any subagreement entered into as a result of this AGREEMENT, shall contain all the provisions stipulated in this entire AGREEMENT to be applicable to Subconsultants unless otherwise noted.

D. CONSULTANT shall pay its Subconsultants within Fifteen (15) calendar days from receipt of each payment made to the CONSULTANT by the LOCAL AGENCY.

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E. Any substitution of Subconsultants must be approved in writing by the LOCAL AGENCY Contract Administrator in advance of assigning work to a substitute Subconsultant.

F. Prompt Progress Payment
CONSULTANT or subconsultant shall pay to any subconsultant, not later than fifteen (15) days after receipt of each progress payment, unless otherwise agreed to in writing, the respective amounts allowed CONSULTANT on account of the work performed by the subconsultants, to the extent of each subconsultant’s interest therein. In the event that there is a good faith dispute over all or any portion of the amount due on a progress payment from CONSULTANT or subconsultant to a subconsultant, CONSULTANT or subconsultant may withhold no more than 150 percent of the disputed amount. Any violation of this requirement shall constitute a cause for disciplinary action and shall subject the licensee to a penalty, payable to the subconsultant, of 2 percent of the amount due per month for every month that payment is not made.

In any action for the collection of funds wrongfully withheld, the prevailing party shall be entitled to his or her attorney’s fees and costs. The sanctions authorized under this requirement shall be separate from, and in addition to, all other remedies, either civil, administrative, or criminal. This clause applies to both DBE and non-DBE subconsultants.

G. Prompt Payment of Withheld Funds to Subconsultants
The LOCAL AGENCY may hold retainage from CONSULTANT and shall make prompt and regular incremental acceptances of portions, as determined by the LOCAL AGENCY, of the contract work, and pay retainage to CONSULTANT based on these acceptances. The LOCAL AGENCY shall designate one of the methods below in the contract to ensure prompt and full payment of any retainage kept by CONSULTANT or subconsultant to a subconsultant.

The LOCAL AGENCY shall hold retainage from CONSULTANT and shall make prompt and regular incremental acceptances of portions, as determined by the LOCAL AGENCY of the contract work and pay retainage to CONSULTANT based on these acceptances. CONSULTANT or subconsultant shall return all monies withheld in retention from all subconsultants within 15 days after receiving payment for work satisfactorily completed and accepted including incremental acceptances of portions of the contract work by the LOCAL AGENCY. Any delay or postponement of payment may take place only for good cause and with the LOCAL AGENCY’s prior written approval. Any violation of these provisions shall subject the violating CONSULTANT or subconsultant to the penalties, sanctions, and other remedies specified in Section 3321 of the California Civil Code. This requirement shall not be construed to limit or impair any contractual, administrative or judicial remedies otherwise available to CONSULTANT or subconsultant in the event of a dispute involving late payment or nonpayment by CONSULTANT; deficient subconsultant performance and/or noncompliance by a subconsultant. This clause applies to both DBE and non- DBE subconsultants.

Any v
iolation of these provisions shall subject the violating CONSULTANT or subconsultant to the penalties, sanctions and other remedies specified therein. These requirements shall not be construed to limit or impair any contractual, administrative, or judicial remedies otherwise available to CONSULTANT or subconsultant in the event of a dispute involving late payment or nonpayment by CONSULTANT, deficient subcontract performance, or noncompliance by a subconsultant.

ARTI

CLE XI EQUIPMENT PURCHASE AND OTHER CAPITAL EXPENDITURES A. Prior authorization in writing by LOCAL AGENCY’s Contract Administrator shall be required before CONSULTANT enters into any unbudgeted purchase order, or subcontract exceeding five thousand dollars ($5,000) for supplies, equipment, or CONSULTANT services. CONSULTANT shall provide an evaluation of the necessity or desirability of incurring such costs.

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B. For purchase of any item, service, or consulting work not covered in CONSULTANT’s approved Cost Proposal and exceeding five thousand dollars ($5,000), with prior authorization by LOCAL AGENCY’s Contract Administrator, three competitive quotations must be submitted with the request, or the absence of proposal must be adequately justified.

C. Any equipment purchased with funds provided under the terms of this AGREEMENT is subject to the following:

1. CONSULTANT shall maintain an inventory of all nonexpendable property. Nonexpendable property is defined as having a useful life of at least two years and an acquisition cost of five thousand dollars ($5,000) or more. If the purchased equipment needs replacement and is sold or traded in, LOCAL AGENCY shall receive a proper refund or credit at the conclusion of the AGREEMENT, or if the AGREEMENT is terminated, CONSULTANT may either keep the equipment and credit LOCAL AGENCY in an amount equal to its fair market value, or sell such equipment at the best price obtainable at a public or private sale, in accordance with established LOCAL AGENCY procedures; and credit LOCAL AGENCY in an amount equal to the sales price. If CONSULTANT elects to keep the equipment, fair market value shall be determined at CONSULTANT’s expense, on the basis of a competent independent appraisal of such equipment. Appraisals shall be obtained from an appraiser mutually agreeable to by LOCAL AGENCY and CONSULTANT, if it is determined to sell the equipment, the terms and conditions of such sale must be approved in advance by LOCAL AGENCY.

2. Regulation 2 CFR 200 requires a credit to Federal funds when participating equipment with a fair market value greater than five thousand dollars ($5,000) is credited to the project

ARTICLE XII STATE PREVAILING WAGE RATES
A. No CONSULTANT or Subconsultant may be awarded an AGREEMENT containing public work elements unless registered with the Department of Industrial Relations (DIR) pursuant to Labor Code §1725.5. Registration with DIR must be maintained throughout the entire term of this AGREEMENT, including any subsequent amendments.

B. The CONSULTANT shall comply with all of the applicable provisions of the California Labor Code requiring the payment of prevailing wages. The General Prevailing Wage Rate Determinations applicable to work under this AGREEMENT are available and on file with the Department of Transportation's Regional/District Labor Compliance Officer (https://dot.ca.gov/programs/construction/labor-compliance). These wage rates are made a specific part of this AGREEMENT by reference pursuant to Labor Code §1773.2 and will be applicable to work performed at a construction project site. Prevailing wages will be applicable to all inspection work performed at LOCAL AGENCY construction sites, at LOCAL AGENCY facilities and at off-site locations that are set up by the construction contractor or one of its subcontractors solely and specifically to serve LOCAL AGENCY projects. Prevailing wage requirements do not apply to inspection work performed at the facilities of vendors and commercial materials suppliers that provide goods and services to the general public.

C. General Prevailing Wage Rate Determinations applicable to this project may also be obtained from the Department of Industrial Relations website at http://www.dir.ca.gov.

D. Payroll Records

1. Each CONSULTANT and Subconsultant shall keep accurate certified payroll records and supporting documents as mandated by Labor Code §1776 and as defined in 8 CCR §16000 showing the name, address, social security number, work classification, straight time and overtime hours worked each day and week, and the actual per diem wages paid to each journeyman, apprentice, worker, or other employee employed by the CONSULTANT or Subconsultant in connection with the public work. Each payroll record shall contain or be

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verified by a written declaration that it is made under penalty of perjury, stating both of the following:
a. The information contained in the payroll record is true and correct. b. The employer has complied with the requirements of Labor Code §1771, §1811, and §1815 for any work performed by his or her employees on the public works project.

2. The payroll records enumerated under paragraph (1) above shall be certified as correct by the CONSULTANT under penalty of perjury. The payroll records and all supporting documents shall be m
ade available for inspection and copying by LOCAL AGENCY representatives at all reasonable hours at the principal office of the CONSULTANT. The CONSULTANT shall provide c
opies of certified payrolls or permit inspection of its records as follows:
a. A certified copy of an employee's payroll record shall be made available for inspection or furnished to the employee or the employee's authorized representative on request. b. A certified copy of all payroll records enumerated in paragraph (1) above, shall be made available for inspection or furnished upon request to a representative of LOCAL A
GENCY, the Division of Labor Standards Enforcement and the Division of Apprenticeship Standards of the Department of Industrial Relations. Certified payrolls submitted to LOCAL AGENCY, the Division of Labor Standards Enforcement and the Div
ision of Apprenticeship Standards shall not be altered or obliterated by the CO
NSULTANT.
c. The public shall not be given access to certified payroll records by the CONSULTANT.

The CONSULTANT is required to forward any requests for certified payrolls to the LOCAL AGENCY Contract Administrator by both email and regular mail on the business day following receipt of the request.

3. Each CONSULTANT shall submit a certified copy of the records enumerated in paragraph (1) abov
e, to the entity that requested the records within ten (10) calendar days after receipt of a written request.

4. Any copy of records made available for inspection as copies and furnished upon request to the publ
ic or any public agency by LOCAL AGENCY shall be marked or obliterated in such a m
anner as to prevent disclosure of each individual's name, address, and social security number. The name and address of the CONSULTANT or Subconsultant performing the work shall not be marked or obliterated.

5. The CONSULTANT shall inform LOCAL AGENCY of the location of the records enumerated under pa
ragraph (1) above, including the street address, city and county, and shall, within five (5) working days, provide a notice of a change of location and address.

6. The CONSULTANT or Subconsultant shall have ten (10) calendar days in which to comply subsequent to receipt of written notice requesting the records enumerated in paragraph (1) above. In the event the CONSULTANT or Subconsultant fails to comply within the ten (10) day period, he or she shall, as a penalty to LOCAL AGENCY, forfeit one hundred dollars ($100) for each calendar day, or portion thereof, for each worker, until strict compliance is effectuated.

Such penalties shall be withheld by LOCAL AGENCY from payments then due. CONSULTANT is not subject to a penalty assessment pursuant to this section due to the failure of a Subconsultant to comply with this section.

E. When prevailing wage rates apply, the CONSULTANT is responsible for verifying compliance with c
ertified payroll requirements. Invoice payment will not be made until the invoice is approved by the L
OCAL AGENCY Contract Administrator.

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F. Penalty

1. The CONSULTANT and any of its Subconsultants shall comply with Labor Code §1774 and §1775. Pursuant to Labor Code §1775, the CONSULTANT and any Subconsultant shall forfeit to the LOCAL AGENCY a penalty of not more than two hundred dollars ($200) for each calendar day, or portion thereof, for each worker paid less than the prevailing rates as determined by the Director of DIR for the work or craft in which the worker is employed for any public work done under the AGREEMENT by the CONSULTANT or by its Subconsultant in violation of the requirements of the Labor Code and in particular, Labor Code §§1770 to 1780, inclusive.

2. The amount of this forfeiture shall be determined by the Labor Commissioner and shall be based on consideration of mistake, inadvertence, or neglect of the CONSULTANT or Subconsultant in failing to pay the correct rate of prevailing wages, or the previous record of the CONSULTANT or Subconsultant in meeting their respective prevailing wage obligations, or the willful failure by the CONSULTANT or Subconsultant to pay the correct rates of prevailing wages. A mistake, inadvertence, or neglect in failing to pay the correct rates of prevailing wages is not excusable if the CONSULTANT or Subconsultant had knowledge of the obligations under the Labor Code. The CONSULTANT is responsible for paying the appropriate rate, including any escalations that take place during the term of the AGREEMENT.

3. In addition to the penalty and pursuant to Labor Code §1775, the difference between the prevailing wage rates and the amount paid to each worker for each calendar day or portion thereof for which each worker was paid less than the prevailing wage rate shall be paid to each worker by the CONSULTANT or Subconsultant.

4. If a worker employed by a Subconsultant on a public works project is not paid the general prevailing per diem wages by the Subconsultant, the CONSULTANT of the project is not liable for the penalties described above unless the CONSULTANT had knowledge of that failure of the Subconsultant to pay the specified prevailing rate of wages to those workers or unless the CONSULTANT fails to comply with all of the following requirements:
a. The AGREEMENT executed between the CONSULTANT and the Subconsultant for the performance of work on public works projects shall include a copy of the requirements in Labor Code §§ 1771, 1775, 1776, 1777.5, 1813, and 1815. b. The CONSULTANT shall monitor the payment of the specified general prevailing rate of per diem wages by the Subconsultant to the employees by periodic review of the certified payroll records of the Subconsultant.
c. Upon becoming aware of the Subconsultant’s failure to pay the specified prevailing rate of wages to the Subconsultant’s workers, the CONSULTANT shall diligently take corrective action to halt or rectify the failure, including but not limited to, retaining sufficient funds due the Subconsultant for work performed on the public works project. d. Prior to making final payment to the Subconsultant for work performed on the public works project, the CONSULTANT shall obtain an affidavit signed under penalty of perjury from the Subconsultant that the Subconsultant had paid the specified general prevailing rate of per diem wages to the Subconsultant’s employees on the public works project and any amounts due pursuant to Labor Code §1813.

5. Pursuant to Labor Code §1775, LOCAL AGENCY shall notify the CONSULTANT on a public works project within fifteen (15) calendar days of receipt of a complaint that a Subconsultant has failed to pay workers the general prevailing rate of per diem wages.

6. If LOCAL AGENCY determines that employees of a Subconsultant were not paid the general

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prevailing rate of per diem wages and if LOCAL AGENCY did not retain sufficient money under the AGREEMENT to pay those employees the balance of wages owed under the general prevailing rate of per diem wages, the CONSULTANT shall withhold an amount of moneys due the Subconsultant sufficient to pay those employees the general prevailing rate of per diem wages if requested by LOCAL AGENCY.

G. Hours of Labor
Eight (8) hours labor constitutes a legal day's work. The CONSULTANT shall forfeit, as a penalty to the LOCAL AGENCY, twenty-five dollars ($25) for each worker employed in the execution of the AGREEMENT by the CONSULTANT or any of its Subconsultants for each calendar day during which such worker is required or permitted to work more than eight (8) hours in any one calendar day and forty (40) hours in any one calendar week in violation of the provisions of the Labor Code, and in particular §§1810 to 1815 thereof, inclusive, except that work performed by employees in excess of eight (8) hours per day, and forty (40) hours during any one week, shall be permitted upon compensation for all hours worked in excess of eight (8) hours per day and forty (40) hours in any week, at not less than one and one-half (1.5) times the basic rate of pay, as provided in §1815.

H. Employment of Apprentices

1. Where either the prime AGREEMENT or the subagreement exceeds thirty thousand dollars ($30,000), the CONSULTANT and any subconsultants under him or her shall comply with all applicable requirements of Labor Code §§ 1777.5, 1777.6 and 1777.7 in the employment of apprentices.

2. CONSULTANTs and subconsultants are required to comply with all Labor Code requirements regarding the employment of apprentices, including mandatory ratios of journey level to apprentice workers. Prior to commencement of work, CONSULTANT and subconsultants are advised to contact the DIR Division of Apprenticeship Standards website at https://www.dir.ca.gov/das/, for additional information regarding the employment of apprentices and for the specific journey-to- apprentice ratios for the AGREEMENT work. The CONSULTANT is responsible for all subconsultants’ compliance with these requirements.

Penalties are specified in Labor Code §1777.7.

ARTI

CLE XIII CONFLICT OF INTEREST
A. During the term of this AGREEMENT, the CONSULTANT shall disclose any financial, business, or other relationship with LOCAL AGENCY that may have an impact upon the outcome of this AGREEMENT or any ensuing LOCAL AGENCY construction project. The CONSULTANT shall also list current clients who may have a financial interest in the outcome of this AGREEMENT or any ensuing LOCAL AGENCY construction project which will follow.

B. CONSULTANT certifies that it has disclosed to LOCAL AGENCY any actual, apparent, or potential conflicts of interest that may exist relative to the services to be provided pursuant to this AGREEMENT. CONSULTANT agrees to advise LOCAL AGENCY of any actual, apparent or potential conflicts of interest that may develop subsequent to the date of execution of this AGREEMENT. CONSULTANT further agrees to complete any statements of economic interest if required by either LOCAL AGENCY ordinance or State law.

C. The CONSULTANT hereby certifies that it does not now have, nor shall it acquire any financial or business interest that would conflict with the performance of services under this AGREEMENT.

D. The CONSULTANT hereby certifies that the CONSULTANT or subconsultant and any firm affiliated with the CONSULTANT or subconsultant that bids on any construction contract or on any Agreement to provide construction inspection for any construction project resulting from this

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AGREEMENT, has established necessary controls to ensure a conflict of interest does not exist. An affiliated firm is one, which is subject to the control of the same persons, through joint ownership or otherwise.

ARTICLE XIV REBATES, KICKBACKS OR OTHER UNLAWFUL CONSIDERATION The CONSULTANT warrants that this AGREEMENT was not obtained or secured through rebates, kickbacks or other unlawful consideration either promised or paid to any LOCAL AGENCY employee.

For breach or violation of this warranty, LOCAL AGENCY shall have the right, in its discretion, to terminate this AGREEMENT without liability, to pay only for the value of the work actually performed, or to deduct from this AGREEMENT price or otherwise recover the full amount of such rebate, kickback or other unlawful consideration.

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RTICLE XV PROHIBITION OF EXPENDING LOCAL AGENCY, STATE, OR FEDERAL FUNDS

FOR LOBBYING
A. The CONSULTANT certifies, to the best of his or her knowledge and belief, that:

1. No State, Federal, or LOCAL AGENCY appropriated funds have been paid or will be paid, by or on behal
f of the CONSULTANT, to any person for influencing or attempting to influence an officer or employee of any local, State, or Federal agency, a Member of the State Legislature or United States Congress, an officer or employee of the Legislature or Congress, or any employee of a Member of the Legislature or Congress in connection with the awarding or making of this AGREEMENT, or with the extension, continuation, renewal, amendment, or modification of this AGREEMENT.

2. If any funds other than Federal appropriated funds have been paid or will be paid to any person for influencing or attempting to influence an officer or employee of any agency, a Member of Congress, an officer or employee of Congress, or an employee of a member of Congress i n
c
onnection with this AGREEMENT, the CONSULTANT shall complete and submit Standard Form-LLL, “Disclosure Form to Report Lobbying,” in accordance with its instructions.

B. This certification is a material representation of fact upon which reliance was placed when this transaction was made or entered into. Submission of this certification is a prerequisite for making or entering into this transaction imposed by 31 U.S.C. §1352. Any person who fails to file the require d
c
ertification shall be subject to a civil penalty of not less than ten thousand dollars ($10,000) and not more than one hundred thousand dollars ($100,000) for each such failure.

C. The CONSULTANT also agrees by signing this document that he or she shall require that the language of this certification be included in all lower tier sub agreements, which exceed one hundred thousand dollars ($100,000), and that all such subrecipients shall certify and disclos e
ac
cordingly.

A
RTICL

E XVI NON-DISCRIMINATION CLAUSE AND STATEMENT OF COMPLIANCE A. The CONSULTANT’s signature affixed herein and dated shall constitute a certification under penalty of perjury under the laws of the State of California that the CONSULTANT has, unless exempt, complied with the nondiscrimination program requirements of Gov. Code §12990 and 2 C
CR § 8103.

B. During the performance of this AGREEMENT, CONSULTANT and its subconsultants shall not deny the AGREEMENT’s benefits to any person on the basis of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, or military and

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veteran status, nor shall they unlawfully discriminate, harass, or allow harassment against any employee or applicant for employment because of race, religious creed, color, national origin, ancestry, physical disability, mental disability, medical condition, genetic information, marital status, sex, gender, gender identity, gender expression, age, sexual orientation, or military and veteran status. CONSULTANT and subconsultants shall insure that the evaluation and treatment of their employees and applicants for employment are free from such discrimination and harassment.

CO
NSULTANT and subconsultants shall comply with the provisions of the Fair Employment and Housing Act (Gov. Code §12990 et seq.), the applicable regulations promulgated there under (2 CCR §11000 et seq.), the provisions of Gov. Code §§11135-11139.5, and the regulations or standards adopted by LOCAL AGENCY to implement such article. The applicable regulations of the Fair Employment and Housing Commission implementing Gov. Code §12990 (a-f), set forth 2 CCR §§8100-8504, are incorporated into this AGREEMENT by reference and made a part hereof as if s
et forth in full.

C. CONSULTANT shall permit access by representatives of the Department of Fair Employment and H
ousing and the LOCAL AGENCY upon reasonable notice at any time during the normal business hours, but in no case less than twenty-four (24) hours’ notice, to such of its books, records, accounts, and all other sources of information and its facilities as said Department or LOCAL AGENCY shall require to ascertain compliance with this clause.

D. CONSULTANT and its subconsultants shall give written notice of their obligations under this clause to labor organizations with which they have a collective bargaining or other Agreement.

E. CONSULTANT shall include the nondiscrimination and compliance provisions of this clause in all s
ubcontracts to perform work under this AGREEMENT.

F. The CONSULTANT, with regard to the work performed under this AGREEMENT, shall act in ac
cordance with Title VI of the Civil Rights Act of 1964 (42 U.S.C. §2000d et seq.). Title VI provides that the recipients of federal assistance will implement and maintain a policy of nondiscrimination in which no person in the United States shall, on the basis of race, color, national origin, religion, sex, age, disability, be excluded from participation in, denied the benefits of or subject to discrimination under
any program or activity by the recipients of federal assistance or their assignees and s
uccessors in interest.

G. The CONSULTANT shall comply with regulations relative to non-discrimination in federally-assisted pr
ograms of the U.S. Department of Transportation (49 CFR 21 – Effectuation of Title VI of the Civil Rights Act of 1964). Specifically, the CONSULTANT shall not participate either directly or indirectly in the discrimination prohibited by 49 CFR §21.5, including employment practices and the selection and r
etention of Subconsultants.

H. CONSULTANT, subrecipient or subconsultant will never exclude any person from participation in, deny
any person the benefits of, or otherwise discriminate against anyone in connection with the aw
ard and performance of any contract covered by 49 CFR 26 on the basis of race, color, sex, or national origin. In administering the LOCAL AGENCY components of the DBE Program Plan, CONSULTANT, subrecipient or subconsultant will not, directly, or through contractual or other arrangements, use criteria or methods of administration that have the effect of defeating or substantially impairing accomplishment of the objectives of the DBE Program Plan with respect t o
i
ndividuals of a particular race, color, sex, or national origin.

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ARTI

CLE XVII DEBARMENT AND SUSPENSION CERTIFICATION
A. The CONSULTANT’s signature affixed herein shall constitute a certification under penalty of perjury under the laws of the State of California, that the CONSULTANT or any person associated therewith in the capacity of owner, partner, director, officer or manager:

1. Is not currently under suspension, debarment, voluntary exclusion, or determination of ineligibility by any federal agency;

2. Has not been suspended, debarred, voluntarily excluded, or determined ineligible by any federal agency within the past three (3) years;

3. Does not have a proposed debarment pending; and

4. Has not been indicted, convicted, or had a civil judgment rendered against it by a court of competent jurisdiction in any matter involving fraud or official misconduct within the past three (3) years.

B. Any exceptions to this certification must be disclosed to LOCAL AGENCY. Exceptions will not necessarily result in denial of recommendation for award but will be considered in determining responsibility. Disclosures must indicate the party to whom the exceptions apply, the initiating agency, and the dates of agency action.

C. Exceptions to the Federal Government excluded parties (https://sam.gov/content/home) maintained by the U.S. General Services Administration are to be determined by FHWA.

ARTI

CLE XIX INSURANCE
See Section 3 of the Professional Services Contract.

ARTI

CLE XX FUNDING REQUIREMENTS
A. It is mutually understood between the parties that this AGREEMENT may have been written before ascertaining the availability of funds or appropriation of funds, for the mutual benefit of both parties, in order to avoid program and fiscal delays that would occur if the AGREEMENT were executed after that determination was made.

B. This AGREEMENT is valid and enforceable only if sufficient funds are made available to LOCAL AGENCY for the purpose of this AGREEMENT. In addition, this AGREEMENT is subject to any additional restrictions, limitations, conditions, or any statute enacted by the Congress, State Legislature, or LOCAL AGENCY governing board that may affect the provisions, terms, or funding of this AGREEMENT in any manner.

C. It is mutually agreed that if sufficient funds are not appropriated, this AGREEMENT may be amended to reflect any reduction in funds.

D. LOCAL AGENCY has the option to terminate the AGREEMENT pursuant to Article VI Termination, or by mutual agreement to amend the AGREEMENT to reflect any reduction of funds.

ARTI

CLE XXI CHANGE IN TERMS
A. This AGREEMENT may be amended or modified only by mutual written agreement of the parties.

B. CONSULTANT shall only commence work covered by an amendment after the amendment is executed and notification to proceed has been provided by LOCAL AGENCY’s Contract Administrator.

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C. There shall be no change in CONSULTANT’s Project Manager or members of the project team, as l
isted in the approved Cost Proposal, which is a part of this AGREEMENT without prior written approval by LOCAL AGENCY’s Contract Administrator.

A

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

A

RTICLE XXIII DISPUTES
Prior to either party commencing any legal action under this AGREEMENT, the parties agree to try in good faith, to settle any dispute amicably between them. If a dispute has not been settled after forty-five (45) days of good-faith negotiations and as may be otherwise provided herein, then either party may commence legal action against the other.

A. Any dispute, other than audit, concerning a question of fact arising under this AGREEMENT that is not disposed of by agreement shall be decided by a committee consisting of LOCAL AGENCY’s Contract Administrator and Department Head or Designee, who may consider written or verbal information submitted by CONSULTANT.

B. N
ot later than thirty (30) calendar days after completion of all work under the AGREEMENT, CONSULTANT may request review by LOCAL AGENCY Governing Board of unresolved claims or disputes, other than audit. The request for review will be submitted in writing.

C. N
either the pendency of a dispute, nor its consideration by the committee will excuse CO
NSULTANT from full and timely performance in accordance with the terms of this AGREEMENT.

A

RTICLE XXIV INSPECTION OF WORK
CONSULTANT and any subconsultant shall permit LOCAL AGENCY, the State, and the FHWA if federal participating funds are used in this AGREEMENT; to review and inspect the project activities and files at all reasonable times during the performance period of this AGREEMENT.

A

RTICLE XXV SAFETY
A. CONSULTANT shall comply with OSHA regulations applicable to CONSULTANT regarding nec
essary safety equipment or procedures. CONSULTANT shall comply with safety instructions issued by LOCAL AGENCY Safety Officer and other LOCAL AGENCY representatives.

CONSULTANT personnel shall wear hard hats and safety vests at all times while working on th e
c
onstruction project site.

B. Pursuant to the authority contained in Vehicle Code §591, LOCAL AGENCY has determined t
hat such areas are within the limits of the project and are open to public traffic. CONSULTANT s
hall comply with all of the requirements set forth in Divisions 11, 12, 13, 14, and 15 of the Vehicle Code. CONSULTANT shall take all reasonably necessary precautions for safe operation of its vehicles and the protection of the traveling public from injury and damage from such vehicles.

C. Any subcontract entered into as a result of this contract, shall contain all of the provisions of this

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Article.

D. CONSULTANT must have a Division of Occupational Safety and Health (CAL-OSHA) permit(s), as outlined in Labor Code §6500 and §6705, prior to the initiation of any practices, work, method, operation, or process related to the construction or excavation of trenches which are five (5) feet or deeper.

ARTI

CLE XXVI OWNERSHIP OF DATA
A. It is mutually agreed that all materials prepared by CONSULTANT under this AGREEMENT shall become the property of City, and CONSULTANT shall have no property right therein whatsoever.

Immediately upon termination, City shall be entitled to, and CONSULTANT shall deliver to City, reports, investigations, appraisals, inventories, studies, analyses, drawings and data estimates performed to that date, whether completed or not, and other such materials as may have been prepared or accumulated to date by CONSULTANT in performing this AGREEMENT which is not CONSULTANT’s privileged information, as defined by law, or CONSULTANT’s personnel information, along with all other property belonging exclusively to City which is in CONSULTANT’s possession. Publication of the information derived from work performed or data obtained in connection with services rendered under this AGREEMENT must be approved in writing by City.

B. Additionally, it is agreed that the Parties intend this to be an AGREEMENT for services and each considers the products and results of the services to be rendered by CONSULTANT hereunder to be work made for hire. CONSULTANT acknowledges and agrees that the work (and all rights therein, including, without limitation, copyright) belongs to and shall be the sole and exclusive property of City without restriction or limitation upon its use or dissemination by City.

C. Nothing herein shall constitute or be construed to be any representation by CONSULTANT that the work product is suitable in any way for any other project except the one detailed in this Contract.

Any reuse by City for another project or project location shall be at City’s sole risk.

D. Applicable patent rights provisions regarding rights to inventions shall be included in the contracts as appropriate (48 CFR 27 Subpart 27.3 - Patent Rights under Government Contracts for federal- aid contracts).

E. LOCAL AGENCY may permit copyrighting reports or other agreement products. If copyrights are permitted; the AGREEMENT shall provide that the FHWA shall have the royalty-free nonexclusive and irrevocable right to reproduce, publish, or otherwise use; and to authorize others to use, the work for government purposes.

ARTI
CLE XXVII CLAIMS FILED BY LOCAL AGENCY’s CONSTRUCTION CONTRACTOR A. If claims are filed by LOCAL AGENCY’s construction contractor relating to work performed by CONSULTANT’s personnel, and additional information or assistance from CONSULTANT’s personnel is required in order to evaluate or defend against such claims; CONSULTANT agrees to make its personnel available for consultation with LOCAL AGENCY’S construction contract administration and legal staff and for testimony, if necessary, at depositions and at trial or arbitration proceedings.

B. CONSULTANT’s personnel that LOCAL AGENCY considers essential to assist in defending against construction contractor claims will be made available on reasonable notice from LOCAL AGENCY.

Consultation or testimony will be reimbursed at the same rates, including travel costs that are being paid for CONSULTANT’s personnel services under this AGREEMENT.

C. Services of CONSULTANT’s personnel in connection with LOCAL AGENCY’s construction contractor claims will be performed pursuant to a written contract amendment, if necessary,

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extending the termination date of this AGREEMENT in order to resolve the construction claims.

A

RTICLE XXVIII CONFIDENTIALITY OF DATA
A. All financial, statistical, personal, technical, or other data and information relative to LOCAL AGENCY’s operations, which are designated confidential by LOCAL AGENCY and made available t
o CONSULTANT in order to carry out this AGREEMENT, shall be protected by CONSULTANT f
rom unauthorized use and disclosure.

B. Permission to disclose information on one occasion, or public hearing held by LOCAL AGENCY r
elating to the AGREEMENT, shall not authorize CONSULTANT to further disclose such information, or disseminate the same on any other occasion.

C. CONSULTANT shall not comment publicly to the press or any other media regarding the AGREEMENT or LOCAL AGENCY’s actions on the same, except to LOCAL AGENCY’s staff, C
ONSULTANT’s own personnel involved in the performance of this AGREEMENT, at public hearings, or in response to questions from a Legislative committee.

D. CONSULTANT shall not issue any news release or public relations item of any nature, whatsoever, regarding work performed or to be performed under this AGREEMENT without prior review of the c
ontents thereof by LOCAL AGENCY, and receipt of LOCAL AGENCY’S written permission.

E. Any subcontract entered into as a result of this contract shall contain all of the provisions of this A
rticle.

F. All information related to the construction estimate is confidential and shall not be disclosed by CONSULTANT to any entity, other than LOCAL AGENCY, Caltrans, and/or FHWA. All of the materials prepared or assembled by CONSULTANT pursuant to performance of this Contract are confidential and CONSULTANT agrees that they shall not be made available to any individual or organization without the prior written approval of City or except by court order. If CONSULTANT or any
of its officers, employees, or subcontractors does voluntarily provide information in violation of this Contract, City has the right to reimbursement and indemnity from CONSULTANT for any damages caused by CONSULTANT releasing the information, including, but not limited to, City’s attorney’s fees and disbursements, including without limitation experts’ fees and disbursements.

A

RTICLE XXIX NATIONAL LABOR RELATIONS BOARD CERTIFICATION In accordance with Public Contract Code §10296, CONSULTANT hereby states under penalty of perjury that no more than one final unappealable finding of contempt of court by a federal court has been issued against CONSULTANT within the immediately preceding two-year period, because of CONSULTANT’s failure to comply with an order of a federal court that orders CONSULTANT to comply with an order of the National Labor Relations Board.

ARTICLE XXX EVALUATION OF CONSULTANT
CONSULTANT’s performance will be evaluated by LOCAL AGENCY. A copy of the evaluation will be sent to CONSULTANT for comments. The evaluation together with the comments shall be retained as part of the AGREEMENT record.

A

RTICLE XXXI PROMPT PA YMENT
A. PROMPT PAYMENT FROM LOCAL AGENCY TO CONSULTANT
The LOCAL AGENCY shall make all project progress payment within 30 days after receipt of an undisputed and properly submitted payment request from CONSULTANT on a professional service contract. If the LOCAL AGENCY fails to pay promptly, the LOCAL AGENCY shall pay interest to th e
C
ONSULTANT, which accrues at the rate of 10 percent per annum on the principal amount of a

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money judgment remaining unsatisfied and pro-rated as necessary. Upon receipt of the payment request, the LOCAL AGENCY shall act in accordance with both of the following:
(1) The LOCAL AGENCY shall review each payment request as soon as feasible after receipt to verify it is a proper payment request.
(2) The LOCAL AGENCY must return any payment request deemed improper by the LOCAL AGENCY to the CONSULTANT as soon as feasible, but not later than seven (7) days, after receipt. A request returned pursuant to this paragraph shall include documentation setting forth in writing the reasons why it is an improper payment request.

B. PROMPT PAYMENT CERTIFICATION
For projects awarded on or after September 1, 2023: the CONSULTANT must now submit Exhibit 9-P to the LOCAL AGENCY administering the contract by the 15th of the month following the month of any payment(s). If the CONSULTANT does not make any payments to subconsultants, supplier(s), and/or manufacturers they must report “no payments were made to subs this month” and write this visibly and legibly on Exhibit 9-P.

The LOCAL AGENCY must verify all Exhibit 9-P information, monitor compliance with prompt payment requirements for DBE and non-DBE firms, and address any shortfalls to the DBE commitment and prompt payment issues until the end of the project. The LOCAL AGENCY must email a copy of Exhibit 9-P to [email protected] before the end of the month after receiving the Exhibit 9-P from the CONSULTANT.

ARTICLE XXXII TITLE VI ASSURANCES
Refer
to the Professional Services Contract.

ARTI

CLE XXXIII NOTIFICATION
Refer
to the Professional Services Contract.

ARTICLE XXXIV CONTRACT
Refer
to the Professional Services Contract.

ARTI

CLE XXXV SIGNATURES
Refer
to the Professional Services Contract.

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Subject:

CITY OF STOCKTON, CALIFORNIA

CITY MANAGER ADMINISTRATIVE DIRECTIVE
Directive No. HR-15 Page No. 1 of 14
DISCRIMINATION AND Effective Date: Revised From:

HARASSMENT POLICY 7/27/09
5/1/2015 4/6/09
3/1/2010
(see below)
PER-015 (Sexual Harassment in the Workplace) revised from 10/21/94, 5/1/95, 1/1/98 PER-037 (Sexual Harassment Investigative Procedures) revised from 2/15/93 I. PURPOSE
The purpose of this policy is to reaffirm the City's commitment to demonstrating respect for all individuals by strictly prohibiting discrimination and harassment, including sexual harassment in the workplace. This policy defines prohibited behavior and conduct, and sets forth a procedure for reporting, investigating and resolving complaints of discrimination, harassment, in the workplace, including retaliation and hostile work environment.

II. POLICY
A. The City of Stockton prohibits any form of discrimination and/or harassment of any person based on race, religious creed, color, national origin, ancestry, military and veterans status, physical or mental disability, medical condition, genetic characteristics or information, denial of family and medical care leave, marital
status, sexual orientation, sex (including gender, gender identity, gender expression, transgender, pregnancy, childbirth and breastfeeding), political affiliation, age (40 and older), concerted labor activity, or any other category or attribute consistent with state or federal law.

All such discrimination and harassment is unlawful and shall not be tolerated. In addition, under the federal Affordable Care Act (ACA), the City of Stockton prohibits discrimination and/or harassment, or retaliation against an employee who obtains coverage, receives a tax credit or subsidy through the Health Care "Market Place" or "Exchange."
B. It is an unlawful employment practice to discriminate against or to harass an unpaid intern or volunteer on the basis of any legally protected classification unless an exception applies, such as a bona fide occupational qualification.

C. The City will neither tolerate nor condone discrimination and/or harassment of employees by managers, supervisors, co-workers, or non-employees with whom City employees have a business service, or professional relationship.

D. All City employees and non-employees share a responsibility to assist in

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City of Stockton
Legislation Text
File #: 25-1166, Version: 1

ADOPT RESOLUTION TO APPROPRIATE AND RATIFY EXPENDITURES RELATED TO STAFF RELOCATION FROM 400 EAST MAIN STREET

RECOMMENDATION
It is recommended that the City Council adopt a resolution to:

1. Accept $76,802 in remaining deposit funds from 400 E. Main lease and appropriate funding to the Public Works Facilities Crafts Maintenance Special Services Operating Account.

2. Appropriate funds in the amount of $223,698 from the Fiscal Year 2021-22 Discretionary Projects Contingency Funds to the Public Works Facilities Crafts Maintenance Special Services Operating Account.

3. Transfer funds in the amount of $141,437 from the Victory Park Pool, Project No. CR18020, to the Public Works Facilities Crafts Maintenance Special Services Operating Account.

4. Ratify expenses in the amount of $441,937 for all costs related to staff relocation from 400 East Main Street.

It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this resolution.

Summary
In 2015, the City began leasing office space at 400 East Main Street for use by various City departments and staff operations. Throughout the course of the lease, numerous lease amendments were executed to reduce the leased space required by the City and to update certain terms of the lease agreement. Per the terms of the most recent lease agreement, City staff were required to fully vacate the leased space from 400 East Main Street by the end of June 2025 for the 4th floor and by the end of July 2025 for the 3rd floor.

The departure of City staff from 400 East Main Street necessitated expenditures be made that included, but were not limited to, furniture disassembly at 400 East Main Street and reassembly at new staff locations, moving costs, and tenant restoration obligations.

It is recommended that Council adopt a resolution ratifying the expenditure of $441,937 for staff relocation from 400 East Main Street.

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DISCUSSION
Background
On February 25, 2015, the City executed a lease agreement with William J. Hoffman, duly appointed Receiver (Landlord), for a portion of the building located at 400 East Main Street. At the time, the leased premises included the entire 4th floor, a portion of the 3rd floor, a portion of the ground floor, a portion of the 7th floor, and seven suites. The original lease was for an eight-year term, with the option to extend the lease up to an additional four years (Attachment A - 2015 Lease Agreement).

On October 16, 2018, by Resolution No. 2018-10-16-1402, Council authorized the first amendment to the standard office lease for reduction of the leased premises (Attachment B - First Amendment Lease).

On February 7, 2023, by Resolution No. 2023-02-07-1211, Council authorized the second amendment, reducing the 7th floor space and extending the lease term for the 3rd and 4th floors through March 31, 2025, with an option to extend the lease term on a month-to-month basis to June 30, 2025 (Attachment C - Second Amendment Lease).

In late 2024, staff notified the Landlord of the City’s intent to exercise the month-to-month extension rights outlined in the second amendment, allowing staff to occupy the 3rd and 4th floors through June 2025. At the same time, staff began negotiations with the leasing agent, CBRE, regarding a third lease amendment that would allow staff to occupy 400 East Main Street beyond June 2025.

On June 9, 2025, the third amendment to the standard office lease was executed, enabling the City to occupy the 3rd floor and to retain information technology equipment on the 4th floor through July 31, 2025 (Attachment D - Third Amendment Lease).

Present Situation
Due to the lease expiration on June 30, 2025, from the 4th floor and July 31, 2025, from the 3rd floor, Information Technology (IT), along with Administrative Services (ASD), Economic Development (EDD), Human Resources (HR), and Fire Administration were among the departments that needed to be moved out of 400 East Main Street. The New City Hall project has experienced significant design modifications resulting in construction delays; therefore, departments needed to be temporarily relocated to City Hall and the Municipal Utilities Department (MUD), Navy Drive facility.

In June 2025, Public Works (PW) and IT Departments worked with MUD to provide temporary workstation spaces to accommodate IT and Fire Administration at the Navy Dr. Wastewater Treatment facility. In July 2025, ASD, EDD, and HR began moving to City Hall. Due to time constraints, the most cost-effective and time-effective way to complete repairs to existing facilities and move departments prior to the lease expiration at 400 East Main Street, was for PW to utilize City staff and vendors.

By July 31, 2025, the 3rd and 4th floors were vacated in accordance with the Third Amendment Lease.

The mobilization efforts led by the PW and IT Departments to vacate the 3rd and 4th floors resulted in various expenditures. Such expenditures included cubicle dismantling and reassembling, hauling and dumping trash, acquiring and setting up network cabling, carpet and floor removal and City of Stockton Printed on 1/22/2026Page 2 of 3
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installation at City Hall, painting at City Hall basement, deep cleaning, hazardous material testing, re- keying facilities and offices, HVAC unit purchase and maintenance, installation of security system at Wells Fargo, electrical modifications for office spaces, and moving department items and furniture.

Services were contracted for moving out of the 400 East Main Street building. While moving out, the contractor damaged a waterline, causing water damage to the building. The damage was $96,552.57 and was deducted from the City’s security deposit. Risk Services is working through the subrogation process with the moving contractor to ensure the City receives reimbursement for the related costs.

It is recommended that Council adopt a resolution appropriating and transferring funds and ratifying the expenditure of $441,937 for staff relocation from 400 East Main Street.

FINANCIAL SUMMARY
With the appropriation of funds in the amount of $223,698 from the allocated Fiscal Year 2021-22 Discretionary Projects Contingency Funds, the appropriation of $76,802 from the 400 East Main Street lease deposit, and the transfer of funds in the amount of $141,437 from the Victory Park Pool, Project No. CR18020, to the Public Works Facilities Crafts Maintenance Special Services Operating Account, there will be sufficient budget to ratify the expenditure of staff relocation from 400 East Main Street.

Attachment A - 2015 Lease Agreement
Attachment B - First Amendment Lease
Attachment C - Second Amendment Lease
Attachment D - Third Amendment Lease
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400 EAST MAIN STREET OFFICE LEASE BETWEENWILLIAM J. HOFFMAN, As Receiver (“Landlord”)andTHE CITY OF STOCKTON, a municipal corporation (“Tenant”) 231
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400 EAST MAIN STREET OFFICE LEASE TENANT: THE CITY OF STOCKTON TABLE OF CONTENTS TERM RENT SIGNAGE SERVICES, FACILITIES AND MAINTENANCE ACCEPTANCE OF PREMISES ALTERATIONS AND REPAIRS PREMISES ASSIGNMENT AND SUBLETTING LIABILITY AND INDEMNIFICATION INSURANCE DAMAGE OR DESTRUCTION DEFAULTS AND REMEDIES EMINENT DOMAIN SUBORDINATION SURRENDER OF PREMISES; REMOVAL OF PROPERTY MISCELLANEOUS EXHIBITS: A Floor Plan of Premises B Real Property Description C Rules and Regulations D Estoppel Certificate E Depiction of Building Standard Signage 232
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STANDARD OFFICE LEASE This Lease is made as of February 25, 2015, between WILLIAM J. HOFFMAN, duly appointed Receiver (“Landlord”), and THE CITY OF STOCKTON, a municipal corporation (“Tenant”), who agree as follows: LEASE OF PREMISESPursuant to that certain Judgment of Possession issued on May 31, 2012 by the Superior Court of the State of California—County of San Joaquin in Case No. 39-2012-00280741-CU-UD-STK (the “Judgment of Possession”) and Notice of Delivery of Notice of Possession of Real Property dated June 21, 2012 and delivered in connection with the Judgment of Possession, Main Street Stockton LLC, a Delaware limited liability company (“Main Street Stockton”), obtained possession of the Building (as hereinafter defined).As a result thereof, Main Street Stockton, as landlord, and Tenant, as tenant, entered into that certain 400 East Main Street Office Lease for a portion of the Building (the “Prior Lease”), which Prior Lease (i) has expired by its terms, and (ii) is being replaced in its entirety by this Lease.Pursuant to that certain Order Appointing Receiver and Temporary Restraining Order dated January 27, 2015 entered in Case No. 39-2015-00320553-CU-CO-STK in the Superior Court of the State of California for the County of San Joaquin (the “Order Appointing Receiver”). Landlord was appointed receiver for the Building and granted the authority to enter into and perform as landlord under all leases for the Building. As a result thereof, and in accordance therewith, Landlord and Tenant now wish to enter into this Lease. Pursuant to the terms hereof, Landlord leases to Tenant and Tenant leases from Landlord, upon the provisions and conditions set forth herein, those certain premises (“Premises”) described in the Basic Lease Provisions and designated in Exhibit “A” attached hereto, which Premises are located in that certain building located at 400 East Main Street, Stockton, California, which building includes a two-level subterranean parking garage located directly beneath the Building (the “Parking Garage”) (such building and the Parking Garage, collectively, the “Building”), and situated upon that certain real property as more particularly described on Exhibit “B” (the “Real Property”). The Real Property, the Building, and the Common Facilities (as defined below) are referred to collectively herein as the “Project.”BASIC LEASE PROVISIONSThe following are the Basic Lease Provisions of this Lease. Other Sections of this Lease explain and define the Basic Lease Provisions in more detail and are to be read in conjunction herewith. In the event of any conflict between the Basic Lease Provisions and the other Sections of this Lease, the other Sections of this Lease shall control. 1. BUILDING ADDRESS: 400 East Main Street, Stockton, California 95202. 233
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2. PREMISES:a. The entire fourth floor, a portion of the third floor, a portion of the ground floor and a portion of the seventh floor of the Building b. Suites 102, 119, 124, 310, 400, 701 and 760c. Rentable area of the portion of the Premises described in Item 2.a. and b. above that is for Tenant’s use: approximately 80,320 rentable square feet d. Use of the Common Facilities (as hereinafter defined) e. Tenant’s rights to the Parking Garage (as hereinafter defined) 3. TERM: Eight (8) years and one (1) month, plus any partial calendar month following the Commencement Date if the Commencement Date does not occur on the first day of a calendar month. As used herein “Term” means the term of this Lease as the same may be extended pursuant to the provisions of this Lease. 4. COMMENCEMENT DATE: February 25, 2015, which is the Effective Date (as such term is defined in that certain First Amended Plan for the Adjustment of Debts of City of Stockton, California, as modified (August 8, 2014) for Case No. 2012-32118 in the United States Bankruptcy Court, Eastern District of California, Sacramento Division, and reflected in that certain Notice of Effective Date to be filed in connection therewith subsequent to the date hereof).5. BASIC RENTAL:YearMonthlyPaymentsGross Annual Rent1 $77,329 $ 927,943 2 $77,427 $ 929,128 3 $77,528 $ 930,330 4 $77,629 $ 931,551 5 $104,091 $1,249,098 6 $104,196 $1,250,355 7 $104,303 $1,251,632 8 $104,411 $1,252,927 9 $124,932 $1,499,187 10 $125,043 $1,500,522 11 $142,153 $1,705,842 12 $142,268 $1,707,217 6. OPERATING EXPENSES: Included within Basic Monthly Rent. 7. SECURITY DEPOSIT: $209,314.788. ADDRESSES:Landlord: Tenant:William J. Hoffman THE CITY OF STOCKTON 234
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Trigild9339 Genesee AvenueSuite 130 San Diego, CA 92121 with a copy to: 425 N. El Dorado Street Second Floor Stockton, CA 95202 Attn: City Manager with a copy to: ASSURED GUARANTY 31 West 52nd Street New York, NY 10019 Attn: Terence L. Workman CBRE | Asset Services 1776 W. March Lane, Suite 170 Stockton, CA 95207 Attn: Rick Goucher SIDLEY AUSTIN LLP 555 West Fifth Street, Suite 4000 Los Angeles, CA 90013 Attn: Jeffrey E. Bjork ORRICK, HERRINGTON & SUTCLIFFE, LLP The Orrick Building 405 Howard Street San Francisco, CA 94105 Attn: John Knox 9. PERMITTED USES: General office use, use as permit and service centers for Tenant’s customers, operation of an information technology center, siting of the chambers of the Stockton City Council (the “City Council”) in Suite 124, and all related uses thereto, subject to existing zoning restrictions and the terms hereof, including, but not limited to, those set forth in Article 7 (the “Permitted Uses”). 10. PARKING: As part of Tenant’s consideration under this Lease, Tenant shall be entitled to one hundred thirty (130) parking spaces located in the Parking Garage during the Term of this Lease (the “Tenant’s Spaces”), of which one hundred (100) of the Tenant’s Spaces shall be unreserved parking spaces and thirty (30) of the Tenant’s Spaces shall be reserved parking spaces (such Tenant’s Spaces, the “Reserved Spaces”). The Reserved Spaces shall be located within that portion of the Parking Garage depicted on Exhibit “E”attached hereto and made a part hereof; provided, however, that Landlord shall have the right to temporarily relocate such Reserved Spaces for purposes of maintaining, repairing, restoring, altering or improving the Parking Garage and maintaining the safety of the Parking Garage and/or the Project. Landlord reserves the right to separately charge Tenant’s guests and visitors for parking; provided, however, that Tenant’s visitors shall be permitted to use, at no additional charge, any of the Tenant’s Spaces that are not being used by Tenant at the time such visitor wishes to park at the Building, as determined by Landlord (or any agent or employee thereof) in its reasonable discretion.11. TYPE/NATURE OF TENANT’S BUSINESS: Government offices, permit and service centers for Tenant customers, and technology center and the operation of services consistent with or necessary to the operation thereof, including the operation, facilitation and hosting of City Council meetings within the City Council Chambers (as hereinafter defined) 235
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ARTICLE 1 TERM1.1 Commencement Date. The Term shall commence on February 25, 2015, the “Commencement Date”.1.2 Extension Options. Tenant shall have the option (each, an “Extension Option”) to extend the term of the Lease for four consecutive one-year terms (each, an “Extension Term”)upon prior written notice (“Tenant’s Election Notice”) to Landlord no later than ninety (90) days prior to the expiration of the then current Term of the Lease; provided, however, that at the time Tenant gives Tenant’s Election Notice to Landlord, and for the remainder of the then existing Term of the Lease, there is (i) no event of default by Tenant under the Lease and (ii) Tenant has not entered into a Transfer as to the Premises that are subject to such extension, whether or not consented to by Landlord. During any such Extension Term, the provisions of the Lease, as it may be amended in writing executed by each party to the Lease prior to the date of the commencement of such Extension Term, shall continue in full force and effect, except that Tenant shall accept the Premises in their then “AS-IS” condition, and there shall be no abatement of Rent, nor shall there be credit or allowance given to Tenant for improvements to the Premises solely as the result of Tenant exercising either Extension Term. The Basic Monthly Rent for each Extension Term shall be in the amount set forth in Item 5 of the Basic Lease Provisions. Landlord and Tenant understand and agree that Tenant’s delivery of Tenant’s Election Notice shall bind Tenant to the applicable Extension Term. In no event shall Tenant have the right to exercise any Extension Option unless it has properly exercised the applicable prior Extension Option.ARTICLE 2 RENT2.1 Basic Monthly Rent. Tenant shall pay to Landlord, without prior notice or demand, without offset or deduction, and in addition to all other amounts payable by Tenant hereunder, annual rent, in equal monthly installments, in the amount set forth in Item 5 of the Basic Lease Provisions (“Basic Monthly Rent”), provided that monthly Landlord shall provide an invoice of any and all expenses (other than Basic Monthly Rent) that may be due and payable by Tenant hereunder, including without limitation any interest on past due rent or Late Fees (defined below), if any (the “Rent Expenses”). Notwithstanding the foregoing, in no event shall any failure by Landlord to provide such an invoice excuse Tenant’s failure to pay Basic Monthly Rent as and when due. The Basic Monthly Rent and all other amounts payable hereunder shall be paid to Landlord in advance on the first day of each month during the Term, without deduction, offset or abatement, in lawful money of the United States of America at the office of Landlord in the Building, or to such place as Landlord may designate in writing. Basic Monthly Rent and any other Rent (as defined in Section 2.5) due under this Lease for any period during the Term, which is for less than one (1) month, shall be a prorated 236
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portion of the monthly amount due, based upon the actual number of days in that particular month.Landlord shall have the right to accept all Rent and other payments, whether full or partial, and to negotiate checks in payment thereof without any waiver of rights, irrespective of any conditions to the contrary sought to be imposed by Tenant. Rent shall be deemed paid to Landlord when received by Landlord, or its designee, at Landlord’s address, or at such other address as Landlord shall have designated. 2.2 Interest on Past Due Rent. Basic Monthly Rent and any other Rent not paid when due shall bear interest from the date due until the date paid at the Federal Reserve Board Discount Rate, as of such due date, plus three percent (3%) per annum (“Interest Rate”). The payment of such interest shall not excuse or cure any default or modify any obligations of Tenant under this Lease. Notwithstanding the foregoing, the Interest Rate shall not accrue on Rent Expenses unless any payment thereof is not received by Landlord within five (5) days of Tenant’s receipt of an email therefor pursuant to Section 2.1.2.3 Late Fee. Tenant acknowledges that the late payment by Tenant to Landlord of Rent will cause Landlord to incur costs not contemplated by this Lease, the exact amount of which will be difficult to ascertain. Such costs may include, without limitation, administrative costs, processing and accounting charges, and late charges which may be imposed on Landlord. Accordingly, if any installment of Rent shall not be received by Landlord within five (5) days after the date that such amount is due and payable, then Tenant shall pay to Landlord, in addition to the interest provided above in Section 2.2, a late fee in the amount of five percent (5%) of the amount of such Rent (“Late Fee”). The parties agree that such Late Fee represents a fair and reasonable estimate of the costs Landlord will incur by reason of the late payment by Tenant. Acceptance of such Late Fee by Landlord shall not constitute a waiver of Tenant’s default with respect to such overdue amount, nor prevent Landlord from exercising any of its rights or remedies hereunder. Any such Late Fee shall be due and payable by Tenant within five (5) business days after delivery of Landlord’s written notice thereof to Tenant and, if not paid when due, shall be added to the next installment of Basic Monthly Rent due and payable hereunder.The parties agree that it would be impracticable and extremely difficult to fix Landlord’s actual damages in such event. The interest provided for in Section 2.2 and the Late Fee are separate and cumulative and are in addition to and shall not diminish or represent a substitute for any or all of Landlord’s rights or remedies under any other provision of this Lease. If a Late Fee is payable hereunder, whether or not collected, for any three (3) installments of Basic Monthly Rent during any twelve (12) month period, then all further Basic Monthly Rent shall, at Landlord’s sole option, automatically become due and payable quarterly in advance, rather than monthly, notwithstanding any provision of this Lease to the contrary. If any interest or late fees shall be due from Tenant hereunder, then upon receipt of any funds from Tenant, Landlord shall credit and apply such funds first to such interest or late fees, and then to any other monetary obligations of Tenant under this Lease, all in Landlord’s sole and absolute discretion.2.4 Security Deposit. Tenant deposited with Main Street Stockton the sum of $111,668.20 (the “Prior Security Deposit”) as the security deposit under the terms of the Prior Lease, which Prior Security Deposit has been delivered to Wells Fargo Bank, National Association (the “Trustee”). Concurrently with Tenant’s execution of this Lease, (i) Landlord shall obtain from Trustee the Prior Security Deposit, which Tenant agrees is hereby delivered to Landlord as a partial Security Deposit under this Lease, and (ii) Tenant shall deliver to Landlord 237
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the additional sum of $97,646.58 for the remainder of the Security Deposit, which amount represents the difference between the amount of the Prior Security Deposit and the total amount specified in Item 7 of the Basic Lease Provisions (“Security Deposit”). The Security Deposit shall be held by Landlord as security for the faithful performance by Tenant of all terms covenants and conditions of this Lease by Tenant. Tenant agrees that Landlord may apply the Security Deposit to remedy any failure by Tenant to repair or maintain the Premises, to perform any other obligations hereunder, and for past due Rent and future Rent damages that Landlord may recover under the Civil Code of California and any other Regulations now or hereafter in effect. If Tenant has kept and performed all terms, covenants and conditions of this Lease during the Term, Landlord shall, upon the expiration or termination hereof, promptly return any unapplied portion of the Security Deposit to Tenant, or the last permitted assignee of Tenant’s interest hereunder. Should Landlord use or apply any portion of the Security Deposit pursuant to the foregoing, Tenant shall replenish the Security Deposit to the amount required under the Lease within ten (10) business days after receipt of written notice from Landlord. Landlord shall not be required to keep the Security Deposit separate from its general funds, and Tenant shall not be entitled to interest on any Security Deposit. Tenant hereby waives any and all rights under and benefits of Section 1950.7 of the Civil Code of California and any similar Regulation (defined below) now or hereafter in effect. 2.5 Rent. As used herein, “Additional Rent” means all amounts required to be paid by Tenant under this Lease other than Basic Monthly Rent, and “Rent” means, collectively, Basic Monthly Rent and Additional Rent. Notwithstanding anything to the contrary contained herein, all Rent to be paid by Tenant to Landlord shall be delivered to Landlord at the notice address for CBRE set forth in Section 8 of the Basic Lease Provisions, until such time as Landlord may notify Tenant, in accordance with the terms of Section 18.13 hereof, that Landlord wishes for Tenant to deliver any and all Rent to another address. ARTICLE 3 SIGNAGE3.1 Tenant’s Right to Exterior Building Signs. As long as Tenant continues to lease and occupy the entirety of the Premises during the Term, Tenant shall have the exclusive right (a) to display its name on two (2) separate “eyebrow” signs (one above each of the two (2) separate retail entrances to the Premises) (each , a “Tenant’s Eyebrow Sign”, and, collectively “Tenant’s Eyebrow Signs”) and (b) to place white, vinyl tinting, at a size no greater than three (3) feet in height and three (3) feet in length on each of the two (2) separate retail entrances to the Premises, both of which are located on South Sutter Street, all as more specifically set forth herein (collectively, “Tenant’s Door Signage”, and, together with Tenant’s Eyebrow Signs, collectively, “Tenant’s Signs”). Tenant shall be permitted to install one of Tenant’s Eyebrow Signs (i) above the retail entrance to the Premises located on South Sutter Street, which Tenant’s Eyebrow Sign shall read “City of Stockton Permit Center”, and (ii) above the other retail entrance to the Premises located on South Sutter Street, which Tenant’s Eyebrow Sign shall reach “City of Stockton Revenue Center.” Tenant’s name depicted on each Tenant’s Eyebrow Sign shall be constructed using the Building standard raised chrome block lettering, in a size equal to the “eyebrow” sign located at the Building’s north entrance, which is depicted on Exhibit “F” attached hereto and made a part hereof (the “Existing Signage”). In addition to the foregoing, Tenant’s Signs must satisfy each of the following requirements:
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(a) Comply with all applicable governmental laws, statutes, regulations, rules, codes and ordinances;(b) Comply with the provisions of this Lease;(c) Have been approved in advance by all appropriate governmental agencies;(d) Have been approved in advance by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed); and(e) Comply with all instruments recorded or unrecorded against the Project.Tenant shall not have any right to maintain an “eyebrow” sign on any other part of the Building other than as specifically set forth herein.3.2 Tenant’s Installation of Signs. Installation of Tenant’s Signs shall be in accordance with the procedures and requirements of Article 6 below, except to the extent in conflict with Article 3. Tenant shall, at its sole cost and expense, install Tenant’s Signs. Such costs and expenses include, but are not limited, to the follows:(a) Costs of Tenant’s Signs;(b) Costs of obtaining permits and approvals;(c) Costs of installing, maintaining, repairing and replacing Tenant’s Signs;(d) Costs associated with the removal of Tenant’s Signs, repair of any damage caused by such removal, and restoration of the sites of Tenant’s Signs on the Building to the condition in which those portions of the Building existed before the installation of Tenant’s Signs excluding ordinary wear and tear and damage due to casualty.3.3 Removal, Repair and Restoration. On the sooner of (i) the failure of Tenant to lease the entire Premises, (ii) the failure of Tenant to occupy the entire Premises, (iii) the expiration or sooner termination, in accordance with the terms hereof, of the Lease, or (iv) at any time prior to the occurrence of an event described in clauses (i) through (iii), at Tenant’s election, Tenant shall remove, at its sole cost and expense, each of Tenant’s Signs, repair any damage caused by such removal and restore those parts of the Building on which Tenant’s Signs were located to the condition that existed before the installation of Tenant’s Signs, ordinary wear and tear and damage due to casualty excepted. Such removal, repair and restoration shall be in accordance with the procedures and requirements of Article 6 above, except to the extent in conflict with this Article 3.3.4 Maintenance of Tenant’s Signs. Tenant, at its sole cost and expense, shall at all times during the Term maintain Tenant’s Signs in working order and first class condition. 3.5 Prohibited Signage and Other Items. Tenant shall not, without the prior written consent of Landlord, place, construct or maintain any sign, advertisement, awning, banner or other decoration on or visible from, or otherwise use, the exterior of the Premises (including, but not limited to, the outer surfaces of the exterior walls and doors of the Premises, the roof of the Building, the Common Facilities, and the public areas of the Project), and in no event shall any sign or other decoration visible from the exterior of the Premises, including, but not limited to, 239
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any of Tenant’s Signs, be illuminated. Tenant shall pay the cost of any such sign approved by Landlord together with the costs of installation thereof.3.6 Building Directory Signage. Landlord will provide standard lettering identifying Tenant for the building directories as Landlord, in its sole discretion, may determine. Landlord shall have the sole right to determine and change from time to time the type of such directory(ies) and such sign and the contents thereof including, but not limited to, size of letters, style, color and placement. Any changes to the directory signage shall be at Tenant’s expense. 3.7 Rights Personal to Tenant. Tenant’s signage rights set forth in this Article 3,including, but not limited to, Tenant’s right to Tenant’s Signs, are personal to The City of Stockton, as the original “Tenant” under this Lease, and such rights are not transferrable, and shall not be transferred, to a transferee in connection with any Transfer or to anyone else without Landlord’s prior written consent, which may be withheld in Landlord’s sole discretion.ARTICLE 4 SERVICES, FACILITIES AND MAINTENANCE4.1 Landlord’s Provision of Services.(a) Landlord shall furnish to the Premises heating, ventilation and air conditioning (collectively, “HVAC”) (excluding HVAC services supplied in connection with Tenant’s HVAC Chillers (as hereinafter defined)), telecommunications service, water for reasonable and normal drinking, lavatory, and emergency sprinkler use and replacement light bulbs and/or fluorescent tubes and ballasts for standard overhead fixtures for reasonable and normal office and technology use as of the Commencement Date of this Lease. Landlord shall furnish such services to the Premises between the hours of approximately 7:00 a.m. and 6:00 p.m., Mondays through Fridays, except those holidays designated yearly by Landlord.Notwithstanding the foregoing, Landlord shall furnish to the Premises HVAC services, to the extent required for Tenant’s HVAC Chillers (collectively, the “Chiller Services”), and electricity twenty-four (24) hours per day, seven (7) days per week, and three hundred sixty-five (365) days per year. All services described in this Section 4.1(a) shall be provided subject to Building-wide shutdown for routine maintenance or due to force majeure (as defined in Section 18.5). Upon Tenant’s written request, Landlord shall provide additional HVAC or any of the other utilities or services referred to above (other than Chiller Services and electricity) at Tenant’s request to Landlord. Tenant shall pay to Landlord an amount reasonably determined by Landlord from time to time for such additional services (other than Chiller Services and electricity). Tenant shall keep and cause to be kept closed all window coverings when necessary because of the sun’s position, and Tenant also shall at all times cooperate fully with Landlord and abide by all the regulations and requirements which Landlord may prescribe for the proper functioning and protection of the HVAC system. Notwithstanding anything to the contrary contained herein, Tenant shall provide any and all telecommunications cabling for the Premises necessary for Tenant to use the Premises in accordance with the Permitted Uses set forth in Section 9 of the Basic Lease Provisions; in no event, shall Landlord be responsible for providing such services to the Premises. 240
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(b) Tenant shall provide customary and routine cleaning and janitorial service, at Tenant’s sole cost and expense, and without any Rent abatement, offset, rebate or any credit of any kind against Rent, for all portions of the Premises for which Tenant has exclusive use, which Landlord and Tenant agree includes all portions of the Premises comprising office space, and specifically excluding public restrooms and any elevator landings, located on the first (1st), third (3rd) and seventh (7th) floors and all portions of the Premises, inclusive of office space and restrooms, but excluding elevator landings, located on the fourth (4) floor (collectively, the “Exclusive Premises”), and Landlord shall have no obligation to provide janitorial service for the Exclusive Premises at any time during the Term of this Lease. Notwithstanding anything to the contrary contained herein, the indemnification provisions of Section 9.1 below shall apply in the event Landlord suffers any loss, liability, claim, damage or expense arising out of or resulting from Tenant’s provision (or lack thereof) of its own janitorial services as permitted under this clause (b). Landlord shall provide routine cleaning and janitorial service for all portions of the Premises that are not part of the Exclusive Premises; provided, that such portions of the Premises are used exclusively as offices and for the Permitted Uses and are kept reasonably in order by Tenant with reasonable wear and tear excepted. All janitorial services, whether provided by Landlord or Tenant shall be consistent with janitorial services provided at comparable buildings in the Stockton, California area. Notwithstanding the first (1st) sentence of this subsection (b) to the contrary, if a Transfer (as hereinafter defined) is made in accordance with Article VIIIhereof, with respect to all or a portion of the Premises, within thirty (30) days after such Transfer, the assuming or subletting party may elect, upon written notice to Landlord, to cause Landlord to provide customary and routine cleaning and janitorial services for so much of the Premises, inclusive of the Exclusive Premises, as has been assumed or sublet by such party in accordance herewith. (c) Landlord shall replace building standard lighting in the Premises, as required, without charge to Tenant. 4.2 [Intentionally Omitted.]4.3 Interruption of Standard Services. Landlord shall not be in default hereunder or liable for any damages directly or indirectly resulting from the inadequacy, defect or failure in the supply of any service described in Section 4.1 caused by (i) the installation or repair of any equipment in connection with the furnishing of utilities or services, (ii) acts of God or the elements, labor disturbances of any character, any other accidents or any other conditions beyond the reasonable control of Landlord, or by the making of repairs or improvements to the Premises or the Project, or (iii) the limitation, curtailment, rationing or restriction imposed by any governmental agency or service or utility supplier on use of water or electricity, gas or any other form of energy or any other service or utility whatsoever serving the Premises or the Project. Furthermore, Landlord shall be entitled, without any obligation or compensation to Tenant, to cooperate voluntarily in a reasonable manner with the efforts of national, state or local governmental agencies or service or utility suppliers in reducing the consumption of energy or other resources; if Landlord shall so cooperate, Tenant shall also reasonably cooperate therewith. Notwithstanding the foregoing, after the tenth (10th) consecutive day of a failure to supply any of the services described in Section 4.1, to the extent within Landlord’s reasonable control, Tenant shall be entitled to an abatement of Basic Monthly Rent beginning from the first day of such failure, until such time as such utilities are restored. If such utilities cannot be restored within forty-five (45) days, to the extent within Landlord’s control, Tenant may terminate this Lease by fifteen (15) days prior written notice to Landlord; provided, however, if Tenant does not elect to 241
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terminate this Lease it shall be entitled to abate Basic Monthly Rental until such time as such utilities are restored, commencing on the tenth (10th) consecutive day of such failure to supply services. 4.4 Common Facilities. The term “Common Facilities” as used in this Lease means all areas and facilities within the exterior boundaries of the Project which are provided and designated from time to time by Landlord for the general use and convenience of Tenant and some or all other tenants of the Project and their respective employees, invitees or other visitors.Tenant, its employees and invitees shall have the nonexclusive right to use the Common Facilities along with others entitled to use same, subject to Landlord’s rights and duties as hereinafter set forth and subject to the other provisions of this Lease. Without Tenant’s consent and without liability to Tenant, and provided that Landlord uses reasonable efforts to minimize any resultant interference with Tenant’s use of and access to the Premises, Landlord may do the following:(a) Establish and enforce reasonable rules and regulations concerning the maintenance, management, use and operation of the Common Facilities; (b) Close off any of the Common Facilities to whatever extent required in the reasonable opinion of Landlord and its counsel to prevent a dedication of any of the Common Facilities or the accrual of any rights by any person or the public to the Common Facilities; provided, that in no event shall Tenant’s access to the Premises be completely or unreasonably restricted; (c) Close any of the Common Facilities for maintenance, repair, alteration or improvement purposes; (d) Select, appoint and/or contract with any person for the purpose of operating and maintaining the Common Facilities; and (e) Change the size, use, shape or nature of any of the Common Facilities. 4.5 Parking. Tenant shall have the non-exclusive right, so long as this Lease remains in full force and effect, and subject to applicable rules and regulations promulgated by Landlord from time to time, to use the number of reserved and unreserved parking spaces specified in the Basic Lease Provisions in the Parking Garage, upon such terms and conditions as may be specified in the Basic Lease Provisions. Landlord shall have certain rights and authority relating to the use and control of the Parking Garage, including, without limitation, the right to rearrange or relocate the parking spaces and improvements in the Parking Garage, to close all or any portion of the Parking Garage for the purpose of maintaining, repairing, restoring, altering or improving same, and to do and perform such other acts in, to and with respect to the Parking Garage at the sole discretion of Landlord; provided that, if Landlord closes all or any portion of the Parking Garage or relocates Tenant’s parking spaces, Landlord will use reasonable efforts to provide to Tenant alternate parking arrangements within a reasonable distance of the Parking Garage; provided, that such alternate parking arrangements must be within the Project. Tenant may not sell, assign or transfer its parking rights under this Lease, except pursuant to a Transfer (as defined in Section 8.1) consented to by Landlord or a Permitted Transfer (as defined in Section 8.3); provided, however, that Tenant may rent any or all of Tenant’s Spaces to any employees, consultants, advisors, vendors and subcontractors of Tenant working in the Building.Tenant and its invitees, visitors and customers shall also have the right to use in common with 242
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other tenants of the Building and their invitees, visitors and customers and the general public any portions of the Parking Garage designated for public use, subject to the rates, rules and regulations, and any other charges, fees and taxes to be collected by Landlord, for such Parking Garage. Landlord reserves the right to establish and alter, from time to time, all such rates, rules and regulations. Tenant acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty as to the suitability of the Parking Garage or as to the availability of parking spaces in the Parking Garage for the conduct of Tenant’s business except as set forth in the Basic Lease Provisions and in this Lease. Tenant hereby acknowledges and agrees that Tenant shall be solely responsible for the enforcement of its right to use the Reserved Spaces within the specified location in the Parking Garage, and Landlord shall not have any obligation or liability to Tenant therefor; provided, however, that Tenant hereby agrees to notify any employees or contractors that may be operating any Building security system of any enforcement action proposed to be taken by Tenant at least one (1) hour prior to Tenant taking such enforcement action and shall provide such employees and/or contractors with a summary of the enforcement action proposed to be taken. Landlord may, but is not required, to reasonably assist Tenant in the enforcement of its right to the Reserved Spaces if Tenant complies with the notice requirements contained in the immediately preceding sentence, requests such assistance and provides Landlord with the information necessary to permit Landlord or any employees or contractors that may be operating any Building security system to provide such assistance. 4.6 Excess Utilities. Tenant shall not, without the prior written consent of Landlord, use in the Premises any apparatus, device, machine or equipment using excess water; nor shall Tenant connect any apparatus or device to sources of water except through existing water pipes in the Premises. If Tenant shall require excess water or any other resource (except for electricity and bandwidth for telecommunications) in excess of that customarily supplied for use of similar premises as general office space, service centers, and technology space, Tenant shall first request the consent of Landlord and obtain, at Tenant’s sole cost and expense, any additional consent required from governmental authorities. In the event that (i) Landlord gives its consent or (ii) Landlord determines, in Landlord’s sole judgment, that Tenant’s use of Premises has resulted in Tenant consuming excess water or any other resource (except for electricity and bandwidth for telecommunications) and, in either case any such additional governmental consent is obtained, then Landlord may cause a separate metering device to be installed in the Premises so as to measure the amount of the resource consumed within the Premises. The cost of any such separate metering device including, but not limited to, the cost of installation, maintenance and repair thereof shall be paid by Tenant. Tenant shall promptly pay the cost of all excess resources consumed within the Premises, together with any additional administrative expense incurred by Landlord in connection therewith. Notwithstanding anything to the contrary contained herein, in no event shall Landlord be required to provide bandwith services to the Premises, and all such services shall be provided by Tenant (or Tenant shall arrange for the provision of such services), at Tenant’s sole cost and expense. 4.7 Payment as Additional Rent. Any sums payable under this Article 4 shall be considered Additional Rent and may be added to any installment of Rent thereafter becoming due, and Landlord shall have the same remedies for a default in payment of such sums as for a default in the payment of any other Rent. 4.8 Landlord to Maintain. Subject to the provisions of Sections 6.3 and 4.9 and Article 12, Landlord shall maintain in reasonably good order and condition the Common Facilities, Parking Garage, the foundation and structural portions of the Building (including, 243
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without limitation, the structural soundness of the roof (structure and membrane), foundations, the exterior walls of the Building, and load bearing walls), and the Building systems providing the services and utilities to be furnished by Landlord pursuant to Section 4.1 above (including, without limitation, the Building HVAC, all wiring, plumbing, other conduits and utility lines and pipes).4.9 Tenant to Maintain. Notwithstanding anything to the contrary contained herein, Tenant shall be required to maintain and, if necessary or desirable, repair, at its sole cost and expense, with contractors approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed) each of the Tenant’s HVAC chillers installed by Tenant (regardless of whether such chillers were installed prior or subsequent to the date hereof), which are used solely for the purpose of cooling all or any part of the technology or communications equipment on the Premises (collectively, the “Tenant’s HVAC Chillers”). In connection with Tenant’s maintenance or repair of the Tenant’s HVAC Chillers, Tenant shall be permitted access to Tenant’s HVAC Chillers upon twenty-four (24) hours prior written notice to Landlord, and, notwithstanding the foregoing, Landlord hereby agrees to use commercially reasonable efforts to provide Tenant same-day access to Tenant’s HVAC Chillers for the purpose of maintaining or repairing same, if Tenant’s request for such access is received by Landlord between the hours of approximately 7:00 a.m. and 6:00 p.m., Monday through Friday, excluding Landlord designated holidays; provided, however, that in the event of an emergency, access will be provided at other times as soon as practicable at Tenant’s cost. 4.10 Building Security; Premises Security. Tenant shall (or shall cause a third party to) provide, maintain and operate, at Tenant’s sole cost and expense, a security system or service, which shall function as the primary security for the Premises at any time during which a Permitted City Council Meeting (as hereinafter defined) is to take place within the City Council Chambers (“Tenant’s Security”). All employees and contractors operating Tenant’s Security shall coordinate with Landlord and any employees and contractors operating any Building security system to ensure that Tenant’s Security does not interfere with, or unduly burden, the operation of any Building security system. If the security provided for the Building needs to be increased or additional Building security costs are incurred by Landlord as a result of any Permitted City Council Meeting occurring on Premises, or for any other reason in connection with Tenant’s use of Suite 124 as the City Council Chambers, then Tenant shall be responsible for, and shall promptly reimburse Landlord for, any such increased costs. Notwithstanding the foregoing, Tenant shall remain responsible for any costs for which Tenant is required to reimburse Landlord under the terms hereof in connection with Landlord’s maintenance and provision of any Building security. In addition to the foregoing, Tenant shall be permitted, at its sole discretion, cost and expense, to maintain and operate an additional security system or service within the Premises (including, but not limited to, placing additional security personnel within the Premises), which may, upon Tenant’s election, function as the primary security for the Premises (the “Optional Primary Security”). Upon such an election by Tenant, employees and contractors operating such Optional Primary Security for the Premises shall coordinate with Landlord and any employees and contractors operating any Building security system to ensure that (i) such Optional Primary Security does not interfere with, or unduly burden, the operation of any Building security system, and (ii), to the extent such Optional Primary Security (or any portion thereof) is in the form of an electronic security system rather than additional security personnel, Landlord (or Landlord’s property manager) has reasonable access to such Optional Primary Security (or applicable portion thereof), to ensure such Optional Primary Security (or 244
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applicable portion thereof) does not unduly burden or interfere with any other tenant’s use and occupancy of the Building. ARTICLE 5 ACCEPTANCE OF PREMISESTenant acknowledges that neither Landlord nor any agent of Landlord has made any representations or warranties with respect to the suitability or fitness of the Premises for the conduct of Tenant’s business or for any other purpose. The taking of possession or use of the Premises by Tenant shall conclusively establish that the Premises and the Building were at such time ready for occupancy and in conformity with the provisions of this Lease in all respects. Nothing contained in this Article shall affect the commencement of the Term or the obligation of Tenant to pay any Rent due under this Lease. ARTICLE 6 ALTERATIONS AND REPAIRS6.1 Alterations; Initial Improvements. Subject to Section 6.4, Tenant shall be permitted to make alterations, improvements or additions to the Premises commencing as of the Effective Date for the initial build-out of the Premises (the “Initial Improvements”). Landlord shall have the right to approve all plans and specifications for the proposed Initial Improvements, which approval shall not be unreasonably withheld, conditioned or delayed. If Landlord does not approve of or provide comments to plans and specifications within fourteen (14) business days of Tenant's submission of the same to Landlord, then the plans and specifications shall be deemed approved. For all alterations, improvements and additions other than the Initial Improvements, Tenant shall not, without the prior written consent of Landlord, make any alterations, improvements or additions to the Premises or the Project or any part thereof. All alterations, improvements or additions, made to the Premises shall become Landlord’s property and remain upon the Premises at the termination or expiration of the Lease (excepting only Tenant’s moveable office furniture, technology equipment (including, without limitation, the Tenant’s HVAC Chillers, subject to Section 16.1), trade fixtures and office and professional equipment); provided, however, that Landlord shall have the right to require Tenant to remove such alterations, improvements or additions made by Tenant after the date of this Lease at Tenant’s cost upon the termination or expiration of this Lease, and the repair of any damage caused to the Premises, the Building or any other portion of the Project as a result of any such removal shall be paid for by Tenant. All alterations, improvements and additions shall be made in compliance with all applicable Regulations (defined below) and in a good and first-class workmanlike manner using new materials, which shall be at least equal in quality to the original installations. Any contractor selected to make such alterations, additions or improvements must (a) be bondable and licensed in the State of California; (b) be approved in advance, in writing, by Landlord; and (c) provide insurance coverage acceptable to Landlord naming Landlord, Landlord’s asset manager, and Landlord’s property manager as additional named insureds. Except with respect to the Initial Improvements, at Landlord’s option, any alterations, additions or improvements desired by Tenant shall be made by Landlord (or its contractors) for Tenant’s account, and Tenant shall pay the cost thereof to Landlord prior to Landlord’s contracting for such work; provided, however, that the bid obtained by Landlord shall not exceed the lowest bona fide bid, from a contractor reasonably satisfactory to Landlord, theretofore obtained by 245
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Tenant and communicated in writing to Landlord. Upon completion of any alterations, additions or improvements, Tenant shall furnish to Landlord a set of “as built” plans and specifications therefor, in both electronic (CAD) and print formats, and, within ten (10) days after such completion, Tenant shall cause an appropriate notice of completion to be recorded in the Official Records of San Joaquin County, California. Upon request, Landlord will advise Tenant of Landlord’s approved contractor(s). After the date of execution of this Lease, if Tenant makes any alterations or improvements to the Premises, Tenant shall pay a construction administration fee, if any, owed to Landlord’s property manager pursuant to the then existing management agreement between Landlord and Landlord’s property manager. Notwithstanding the foregoing, Landlord’s prior consent shall not be required for any alterations that (i) are reasonably estimated to cost less than Ten Thousand Dollars ($10,000); (ii) are not visible from outside the Premises; (iii) do not affect the structural portions of the Buildings; and (iv) comply with all Regulations. 6.2 Indemnity. Tenant indemnifies, defends, protects and holds Landlord and the other Landlord Parties (as defined in Section 9.1) harmless from all costs, damages, liens for labor, services and materials relating to work performed by Tenant or its agents, whether prior to or following the Commencement Date, and shall defend and hold Landlord and the other Landlord Parties harmless from all costs, damages, liens and expenses (including attorney’s fees and court costs) related thereto.6.3 Tenant. Except as set forth in Section 4.8 and Article 12 below, Tenant shall, at all times during the Term and, at Tenant’s sole cost and expense, keep the Premises and every part thereof in good order, condition and repair, reasonable wear and tear excepted. All repairs performed by Tenant shall be of quality or class at least equal to the original mode of construction of the Building. Tenant hereby waives any and all rights under and benefits of subsection 1 of Section 1932, and Sections 1941 and 1942, of the Civil Code of California and any similar Regulation (defined below) now or hereafter in effect. It is hereby understood and agreed that Landlord has no obligation to alter, remodel, improve, repair, decorate or paint the Premises or any part thereof, except as specified in Section 4.8 and Article 12 below, and that no representations relating to the condition of the Premises or any portion of the Project, including, but not limited to the Building, have been made by Landlord (or any employee or agent thereof) to Tenant, except as may be expressly set forth in this Lease. If, at any time, Tenant fails to make any repair required to the Premises, then Landlord shall have the right, if it so elects, to make such repair and to immediately charge the costs of the same, together with a five percent (5%) overhead and administrative cost, to Tenant as Additional Rent. 6.4 Cafeteria. Tenant shall be responsible for constructing and paying for all alterations, improvements and additions at the Premises; provided, however, that Landlord shall be responsible for delivering the first floor former cafeteria space identical on the Floor Plan in shell condition at Landlord’s expense. Landlord shall apply for a demolition permit from the City of Stockton covering the first floor former cafeteria space (the “Demolition Permit”) no later than ten (10) days after the Effective Date. Landlord shall then have sixty (60) days after the date upon which the Demolition Permit is issued to Landlord within which to deliver the first floor former cafeteria space in shell condition, which shall include removing and disposing of all interior finishes and removing the raised floor; provided, however and notwithstanding anything to the contrary contained herein, in no event shall Landlord be required to deliver the first floor former cafeteria space in shell condition prior to March 5, 2015. 246
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6.5 Liens. Tenant shall keep the Project free from any liens arising out of any work performed, material furnished or obligations incurred by Tenant. In the event that Tenant shall not, within ten (10) days following the imposition of any such lien, cause the same to be released of record by payment or posting of a proper bond or other security reasonably acceptable to Landlord, Landlord shall have, in addition to all other remedies provided herein and at law or in equity, the right, but no obligation, to cause same to be released by such means as it shall deem proper including, but not limited to, payment (from the Security Deposit or otherwise) of the claim giving rise to such lien. All such sums paid by Landlord and all expenses incurred by it in connection therewith shall be considered Additional Rent and shall be payable to it by Tenant on demand with interest at the Interest Rate (as defined in Section 2.2). Landlord may require, at Landlord’s sole option, that Tenant cause to be provided to Landlord, at Tenant’s sole cost and expense, a performance and labor and materials payment bond acceptable to Landlord with respect to any improvements, additions or alterations to the Premises. Landlord shall have the right at all times to post and keep posted on the Premises any notices permitted or required by applicable Regulation (defined below), or which Landlord shall deem proper, for the protection of Landlord, the Project and any other party having an interest therein from mechanics’ and materialmen’s liens, and Tenant shall give Landlord at least five (5) business days’ prior written notice of commencement of any work on the Premises. ARTICLE 7 PREMISES7.1 [Intentionally Omitted].7.2 Permitted Use. Tenant shall use and occupy the Premises only for the Permitted Uses set forth in the Basic Lease Provisions and in accordance with the terms of this Section 7.2.(a) Tenant shall be permitted to use all or part of the Premises for general office use, use as permit and service centers for Tenant’s customers, or operation of an information technology center. Should Tenant wish to use a portion of the Premises as the location of the City Council chambers, then Tenant must locate the City Council chambers within that portion of the Premises commonly known as Suite 124 (in such capacity, the “City Council Chambers”); provided, that Tenant’s right to locate the City Council chambers within Suite 124 is conditioned upon all regularly scheduled City Council meetings, open to the general public, not beginning, or being scheduled to begin, prior to 6:30 P.M. on any given day (such meeting, a “Regularly Scheduled City Council Meeting”), and Tenant delivering to Landlord’s property manager written notice of the date and time of each Regularly Scheduled City Council Meeting to be held within the City Council Chambers, which written notice shall be provided to Landlord’s property manager no later than the earliest date upon which Tenant is required to provide such notice to the general public under all applicable laws, rules and regulations. The start-time restriction set forth in the immediately preceding sentence shall only apply to Regularly Scheduled City Council Meetings, and, as such, such restriction shall not apply to meetings held in the City Council Chambers (i) that are not Regularly Scheduled City Council Meetings, open to the general public, or (ii) emergency City Council meetings that are called and held pursuant to Section D.4(a) and (b) of the Council Policy ((i) and (ii), together with the Regularly Scheduled City Council Meetings, collectively, the “Permitted Meetings”). Consistent with the foregoing, Tenant’s right to use Suite 124 for the City Council Chambers is conditioned upon Tenant delivering to Landlord, prior to any use of Suite 124 therefor, a copy of Policy No. 247
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100-3, Rules For Conduct of City Council Meetings, in the Stockton Council Policy Manual, modified to reflect that all Regularly Scheduled City Council Meetings shall begin (and shall be scheduled to begin) no earlier than 6:30 P.M. on any given day. In no event shall Tenant be permitted to use any other portion of the Premises (other than Suite 124) as the location of the City Council Chambers or, except as set forth in clause (c) below, for any business related thereto.(b) If Tenant chooses to locate the City Council Chambers within Suite 124 and, in connection therewith, complies with the conditions precedent thereto set forth in clause (a) above, then Landlord and Tenant agree that the general public shall have access to the City Council Chambers via the first (1st) floor Building lobby, and any person (including any member of the general public) that may be attending a Permitted Meeting within the City Council Chambers, or that otherwise visits the Building for purposes of conducting business within Tenant’s offices located within the Premises, shall have access to the restrooms located within the Common Facilities on the first floor of the Building lobby. (c) Notwithstanding the foregoing, if at any time or from time to time, attendance at any Permitted Meeting being held in the City Council Chambers exceeds the maximum capacity legally and comfortably permitted within Suite 124, then Tenant shall use other portions of the Premises located on the first floor of the Building to provide additional capacity for such meeting, such that all overflow seating (or standing only area) required for any such meeting shall be located in such other portions of the Premises, and Tenant’s Security and any Building security shall be clearly instructed to direct, and shall direct, all persons attending such meeting that cannot be accommodated within the City Council Chambers, to those other portions of the Premises that Tenant has designated for overflow capacity in accordance with the terms of this clause (c). In no event shall any additional capacity or overflow area be provided or located within any portion of the Building lobby or any other portion of the Building, except for the first floor of the Premises. (d) If an Event of Default by Tenant occurs under this Section 7.2, then, in addition to all other rights and remedies provided to Landlord under Article 13 hereof, Landlord may terminate Tenant’s right to use Suite 124 as the City Council Chambers until such time as Tenant cures such violation (and Landlord agrees to accept such cure) and obtains written confirmation from Landlord that Tenant is, once again, permitted to use Suite 124 as the City Council Chambers in accordance with the terms hereof. Notwithstanding the foregoing, if an Event of Default by Tenant occurs under this Section 7.2more than two (2) times in any calendar year, then, in addition to all other rights and remedies provided to Landlord under Article 13 hereof, Landlord may terminate Tenant’s right to use Suite 124 as the City Council Chambers for the remainder of the Lease Term, in which case, this Section 7.2 shall be of no further force or effect.7.3 Conduct of Business.(a) Tenant shall not do or permit anything to be done in or about the Project which will, in any way, obstruct or interfere with the rights of other tenants or occupants of the Building, or injure or annoy them, or allow the Premises or the Project to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain, or permit any nuisance or waste in, on, or about the Project. 248
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(b) Tenant shall not use the Premises or permit anything to be done in or about the Premises or the Project which shall: (i) conflict with any law, statute, ordinance, or governmental rule or regulation now in force or that may hereafter be enacted or promulgated (including without limitation the Americans with Disabilities Act, as the same may be amended from time to time), the requirements of the Certificate of Occupancy for the Building or with the requirements of any covenant, condition or restriction affecting the Project (collectively, “Regulations,” and individually, a “Regulation”); or (ii) except as a result of a Permitted Use, increase the rate for any fire insurance in effect for the Building or cause a cancellation of such insurance or otherwise negatively affect said insurance in any manner. Tenant shall, at its sole cost and expense, promptly comply with all Regulations in force or which may hereafter be in force, and with the requirements of any fire insurance underwriters or other similar body affecting the use and occupancy of the Premises; provided, that in no event shall Tenant be required to make any (x) structural improvements or capital expenditures, including, but not limited to, capital improvements, capital repairs, capital equipment, and capital tools, or (y) rental payments or other related expenses incurred in connection with leasing equipment ordinarily considered to be of capital nature to the Premises; provided, however, that the foregoing provision shall be subject in all respects to any and all indemnification obligations of Tenant set forth herein. 7.4 [Intentionally Omitted].7.5 Load and Equipment Limits. Tenant shall not place a load upon any floor of the Premises which exceeds the load per square foot which such floor was designed to carry, as determined by Landlord or Landlord’s structural engineer, but in no event greater than that allowed under the current applicable building code. The cost of any such determination made by Landlord’s structural engineer shall be paid for by Tenant upon demand. Tenant shall not install business machines or mechanical equipment which cause noise or vibration to such a degree as to be objectionable to Landlord or other Building tenants. Notwithstanding the foregoing, Tenant represents and warrants that Tenant has been in possession of the Premises prior to the execution of this Lease, and any and all improvements existing at the Premises, and equipment located at the Premises, is permitted and not in violation of this Lease. Additionally, as of the Commencement Date and for the duration of this Lease, any action taken by Tenant to maintain, supplement, improve or replace such improvements or equipment, as permitted under this Lease, will not be deemed to violate this Section 7.6.7.6 Notice. Tenant shall give Landlord prompt notice of any damage to or defective condition in any part or appurtenance of the Building’s mechanical, electrical, plumbing, HVAC or other systems serving, located in, or passing through the Premises. 7.7 Personal Property Taxes. Tenant shall pay before delinquency all taxes, assessments, license fees, and other charges that are levied and assessed against Tenant’s trade fixtures and other personal property installed or located in or on the Premises, and that become payable during the Term (the “Personal Property Taxes”). On demand by Landlord, Tenant shall furnish Landlord with satisfactory evidence of these payments. If any taxes on Tenant’s personal property are levied against Landlord or Landlord’s property, or if the assessed value of the Building and other improvements in which the Premises are located is increased by the inclusion of a value placed on Tenant’s personal property or leasehold improvements, as determined by Landlord, and if Landlord pays the taxes on any of these items or the taxes based on the increased assessment of these items, Tenant, on demand, shall immediately reimburse Landlord 249
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for the sum of the taxes levied against Landlord, or the proportion of the taxes resulting from the increase in Landlord’s assessment. Landlord shall have the right to pay (and Tenant shall have the obligation to reimburse Landlord for) any and all Personal Property Taxes regardless of the validity of the levy. 7.8 Real Estate Taxes. To the extent Real Estate Taxes (as hereinafter defined) are levied or assessed against the Project, Landlord shall pay before delinquency all such Real Estate Taxes; provided, however that Landlord shall have the right to undertake an action or proceeding against the applicable collecting authority seeking an abatement of Real Estate Taxes or a reduction in the valuation of the Project (or any portion thereof) and/or contest the applicability of any Real Estate Taxes. In any instance where any such permitted action or proceeding is being undertaken by Landlord, Tenant shall cooperate reasonably with Landlord, and execute any and all documents reasonably required in connection therewith. Landlord shall be entitled to any refund of Real Estate Taxes received by Tenant or Landlord, whether or not such refund was a result of actions or proceedings instituted by Landlord. As used herein the term “Real Estate Taxes” means any form of assessment, levy, charge, tax, or imposition imposed by any authority having the direct power to tax, including any city, county, state or federal government, or any school, agricultural, lighting, drainage or other improvement or special assessment district thereof, or any other governmental charge, general and special, ordinary and extraordinary, foreseen and unforeseen, which may be assessed against any legal or equitable interest of Landlord in the Project, but specifically excluding any and all Personal Property Taxes. 7.9 Possessory Tax. Notwithstanding anything to the contrary contained herein, Tenant shall pay, before delinquency, all possessory interest or use taxes, assessments, or fees levied or assessed upon the Premises, or any portion thereof. ARTICLE 8 ASSIGNMENT AND SUBLETTING8.1 Transfer. Tenant shall not cause or permit any of the following without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed (any of the following, a “Transfer”): (a) assign, mortgage, pledge, encumber or otherwise transfer, voluntarily, by operation of law, or otherwise, any interest in this Lease, the term or estate hereby granted, or any interest hereunder; (b) permit the Premises or any part thereof to be utilized by anyone other than Tenant (whether as concessionaire, franchisee, licensee, permittee or otherwise); or (c) except as hereinafter provided, sublet or offer or advertise for subletting the Premises or any part thereof. Tenant shall not permit any transferee to further assign, sublease, hypothecate, encumber or otherwise transfer any such interest, without obtaining Landlord’s prior written consent. In determining whether to grant consent to a Transfer, Landlord may consider various factors including, without limitation, the following:(w) business criteria relating to the proposed transferee’s background, experience, reputation, general operating ability and ability to perform Lease obligations, and potential for succeeding in its business, (x) financial criteria relating to the proposed transferee’s financial responsibility, credit rating and capitalization, (y) the identity and personal characteristics of the proposed transferee and its invitees and guests, and (z) the nature of the proposed use and business of the proposed transferee and its effect on the tenant mix of the Building. Without limiting the generality of the foregoing, Landlord hereby reserves the right to reasonably condition consent to any Transfer upon Landlord’s determination that (i) the proposed transferee is at least as 250
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financially and morally responsible as Tenant then is, or was upon the execution hereof, whichever is greater, and (ii) the proposed transferee shall use the Premises in compliance with all applicable Regulations. Notwithstanding any provision in this Lease to the contrary, but subject to Landlord’s agreement not to unreasonably withhold consent as set forth in the first sentence of this Section 8.1, Tenant shall not enter into any proposed Transfer (1) with a prospective tenant that is negotiating directly with Landlord to lease space in the Building, (2) at a time when Landlord is offering space for lease in the Building of similar size and for a similar term as that space being offered by Tenant for sublease or assignment within the Building, or (3) that would result in (A) detraction from the first-class character or image of the Building or diminution in the value thereof, (B) the Premises being occupied by more than one (1) tenant, or (C) a breach by Landlord of any then-existing exclusive right in favor of any other tenant of the Building, any loan obligation or agreement, any covenants, conditions and restrictions of record, or any insurance policy. Any Transfer entered into without Landlord’s consent, shall be voidable and, at Landlord’s election, shall constitute a default under this Lease. All Transfers are subject to Section 11.1.8.2 Notice and Procedure. If at any time or from time to time during the Term, Tenant desires to enter into a Transfer, then at least thirty (30) days, but not more than one hundred twenty (120) days, prior to the date when Tenant desires the Transfer to be effective (the “Transfer Date”), Tenant shall give Landlord a notice (the “Notice”) which shall set forth the name, address and business of the proposed assignee or sublessee, information concerning the character of the proposed assignee or sublessee (including financial statements, business, credit and personal references and history), a detailed description of the space proposed to be assigned or sublet, which must be a single, self-contained unit (the “Space”), any rights of the proposed assignee or sublessee to use Tenant’s improvements, the intended Transfer Date, and the fixed rent and/or other consideration and all other material terms and conditions of the proposed Transfer, all in such detail as Landlord may reasonably require. If Landlord reasonably requests reasonable additional detail, the Notice shall not be deemed to have been received until Landlord receives such reasonably requested reasonable additional detail. Landlord shall have the option, exercisable by giving notice to Tenant at any time within thirty (30) days after Landlord’s receipt of the Notice (the “Option Period”) (a) in the case of an assignment or sublease, to terminate this Lease as to the Space as of the Transfer Date, in which event Tenant shall be relieved of all further obligations hereunder as to the Space; or (b) in the case of a sublease, to sublease the Space from Tenant upon the terms and conditions set forth in the Notice, except that the rent shall be the lower of the per square foot Rent described in Articles 2 and 3 payable under this Lease for the Space, or that part of the rent and other consideration set forth in the Notice which is applicable to the Space. If Landlord exercises its option to sublet the Space, then Tenant shall sublet the Space to Landlord upon the terms and conditions set forth in clause (b) above; provided: (i) Landlord shall at all times under such sublease have the right and option further to sublet the Space without obtaining Tenant’s consent or sharing any of the economic consideration received by Landlord; (ii) the provisions of Section 7.2 shall not be applicable thereto; (iii) Landlord and its subtenants shall have the right to use in common with Tenant all lavatories, corridors and lobbies which are within the Premises and the use of which is reasonably required for the use of the Space; (iv) Tenant shall have no right of set-off or abatement or any other right to assert a default hereunder by reason of any default by Landlord under such sublease; and (v) Landlord’s liability under such sublease shall not be deemed assumed or taken subject to by any successor to Landlord’s interest under this Lease. Should Landlord fail to exercise either option within the Option Period, such failure shall not constitute Landlord’s consent to the Transfer. Notwithstanding anything herein to the contrary, the 251
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foregoing Landlord recapture right shall not apply to any proposed sublease of a portion of the Premises for a term of one (1) year or less. If Landlord elects not to exercise either option, then Tenant shall be free to enter into the Transfer subject to the following conditions: (a) The Transfer shall be on the same terms set forth in the Notice given to Landlord;(b) No Transfer shall be valid and no assignee or sublessee shall take possession of the Space until Landlord has consented in writing to the Transfer and an executed counterpart of the assignment or sublease has been delivered to Landlord; (c) In no event shall any assignee or sublessee (with the exception of Landlord should Landlord elect to sublet the Space pursuant to subsection (b) above) have a right to further assign or sublet the Space; (d) The Transfer shall not result in more than two portions of the Premises being sublet at any one time during the Term by more than two different sublessees; (e) If the Lease shall be assigned, or the Premises shall be sublet, Landlord may collect Rent directly from any such assignee or sublessee, as the case may be, in the event of default by Tenant; and (f) Fifty percent (50%) of any sums or other economic consideration received by Tenant as a result of any Transfer, whether denominated rent or otherwise, which exceed, in the aggregate, the total sums which Tenant is obligated to pay Landlord under this Lease (prorated as to any sublease to reflect obligations allocable to that portion of the Premises subject to such sublease) shall be payable to Landlord as Additional Rent under this Lease, without affecting or reducing any other obligation of Tenant hereunder. Amounts payable under this Section by Tenant to Landlord shall be based on figures net of any costs incurred by Tenant in connection with the transaction in question. The provisions of this Section shall apply regardless of whether the Transfer is made in compliance with the provisions of this Lease. Any payments made to Landlord pursuant to this Section shall not cure any default under this Lease arising from any Transfer. Tenant shall not artificially structure any Transfer in order to reduce the amount payable to Landlord under this Section, nor shall Tenant take any other steps for the purpose of circumventing its obligation to pay amounts to Landlord under this Section; in the event that Tenant does same, Tenant shall be in default of this Lease and the amount payable to Landlord under this Section shall be the amount that would have been payable to Landlord had same not occurred plus a late fee on such amount (as described in Section 2.3). Tenant shall deliver to Landlord a statement within thirty (30) days after the end of each calendar year in which any part of the Term occurs specifying as to such calendar year, and within thirty (30) days after the expiration or earlier termination of the Term, specifying with respect to the elapsed portion of the calendar year in which such expiration or termination occurs, each Transfer in effect during the period covered by such statement and the date of its execution and delivery, the number of square feet of the rentable area demised thereby, and the term thereof; and a computation in reasonable detail showing: (i) the amounts (if any) paid and payable by Tenant to Landlord pursuant to this Article 8 with respect to any Transfer for the period covered by such statement, and (ii) the amounts (if any) paid and payable by Tenant to Landlord pursuant to this Article 8 with respect to any payments received from a sublessee or assignee during such period but which relate to an earlier period. 252
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8.3 Permitted Transfer. Notwithstanding anything to the contrary contained herein, Tenant shall have the right, without obtaining Landlord’s prior written consent, but subject to the terms hereof, to do any of the following (each, a “Permitted Transfer”) (i) transfer to a Permitted Transferee any interest in this Lease, the term or estate hereby granted, or any interest hereunder or (ii) sublet the Premises or any part thereof to a Permitted Transferee. For the purposes hereof, a “Permitted Transferee” means an entity that (a) controls, is controlled by, or is under common control with Tenant, (b) results from the transfer of all or substantially all of Tenant’s assets or stock, or (c) results from the merger or consolidation of Tenant with another entity. If Tenant desires to enter into a Permitted Transfer, Tenant shall, as a condition to the effectiveness of such Permitted Transfer hereunder, at least thirty (30) days prior to the date when Tenant desires the Permitted Transfer to be effective, provide Landlord with written notice of such Permitted Transfer, together with detailed evidence of the financial condition of the Permitted Transferee, the proposed form of sublease or assignment and such other information as Landlord, in the exercise of its business judgment, shall request. As used in this Section, “control” means ownership of voting securities sufficient to elect a majority of the board of directors of a corporation, or analogous ownership interests of non-corporate entities.8.4 Continuing Liability of Tenant. Regardless of Landlord’s consent to a Transfer or Tenant entering into a Permitted Transfer, no subletting, assignment or other transfer shall release Tenant’s obligation or alter the primary liability of Tenant to pay Rent and to perform all other obligations to be performed by Tenant hereunder. The acceptance of Rent by Landlord from any other person shall not be deemed to be a waiver by Landlord of any provision hereof.Consent to one Transfer shall not be deemed consent to any subsequent Transfer. If any assignee of Tenant or any successor of Tenant defaults in the performance of any of the terms hereof, Landlord may proceed directly against Tenant without the necessity of exhausting remedies against such assignee or successor. In no event shall Landlord’s enforcement of any provision of this Lease against any assignee be deemed a waiver of Landlord’s right to enforce any term of this Lease against Tenant or any other person. Landlord may consent to subsequent Transfers or amendments or modifications to this Lease with assignees of Tenant, without notifying Tenant, any successor of Tenant, or any guarantor under this Lease, and without obtaining its or their consent thereto, and such action shall not relieve Tenant of its liability under this Lease. 8.5 Bankruptcy Case. Tenant filed a petition for chapter 9 relief on June 28, 2012, which case is pending in the United States Bankruptcy Court for the Eastern District of California (the “Bankruptcy Court”) under Case No. 12-32118 (the “Bankruptcy Case”). Tenant hereby represents and warrants that it has received any Bankruptcy Court approval legally required to enter into this Lease and to honor all of its obligations hereunder. 8.6 Subsequent Bankruptcy Case. In the event that the Bankruptcy Case is dismissed, and Tenant subsequently files another petition for chapter 9 relief (initiating the “Subsequent Bankruptcy Case”) and an order for relief is entered in the Subsequent Bankruptcy Case, Section 365 of the Bankruptcy Code shall apply to the Lease. In addition to the requirements of Section 365 of the Bankruptcy Code, if Tenant proposes to assume and assign this Lease pursuant to Section 365 to any person or entity who has made or accepted a bona fide offer to accept an assignment of the Lease on terms acceptable to Tenant, then notice of the proposed assignment setting forth (a) the name and address of the proposed assignee, (b) all of the terms and conditions of the offer and proposed assignment, and (c) the adequate assurance to be furnished by the proposed assignee of its future performance under the Lease, shall be given to Landlord by Tenant no later than twenty (20) days after Tenant has made or received such offer, but in no 253
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event later than ten (10) days prior to the date on which Tenant applies to a court of competent jurisdiction for authority and approval to enter into the proposed assignment. Landlord shall have the prior right and option, to be exercised by notice to Tenant given at any time prior to the date on which the court order authorizing such assignment becomes final and non-appealable, to receive an assignment of this Lease upon the same terms and conditions, and for the same consideration, if any, as the proposed assignee, less any brokerage commissions which may otherwise be payable out of the consideration to be paid by the proposed assignee for the assignment of this Lease. If this Lease is assigned in a Subsequent Bankruptcy Case pursuant to the provisions of the Bankruptcy Code, Landlord (i) may require from the assignee a deposit or other security for the performance of its obligations under this Lease in an amount substantially the same as would have been required by Landlord upon the initial leasing to a tenant similar to the assignee; and (ii) shall receive, as Additional Rent, the sums and economic consideration described in this Article 8. Any person or entity to which this Lease is assigned, pursuant to Section 365 of the Bankruptcy Code, shall be deemed, without further act or documentation, to have assumed all of the Tenant’s obligations arising under this Lease on and after the date of such assignment. Any such assignee shall, upon demand, execute and deliver to Landlord an instrument confirming such assumption. No provision of this Lease shall be deemed a waiver of Landlord’s rights or remedies under the Bankruptcy Code to oppose any assumption and/or assignment of this Lease, to require a timely performance of Tenant’s obligations under this Lease, or to regain possession of the Premises if this Lease has neither been assumed nor rejected within sixty (60) days after the date of the order for relief or within such additional time as a court of competent jurisdiction may have fixed. Notwithstanding anything in this Lease to the contrary, all amounts payable by Tenant to or on behalf of Landlord under this Lease, whether or not expressly denominated as Rent, shall constitute rent for the purposes of Section 502(b)(6) of the Bankruptcy Code.8.7 Fees to Landlord. Tenant shall pay to Landlord a fee of $1,000 plus Landlord’s costs and expenses (including, but not limited to, reasonable attorneys’, accountants’, architects’, engineers’ and consultants’ fees in an amount not to exceed $2,000) incurred in connection with the processing and documentation of any Transfer (whether or not the Transfer is approved by Landlord or actually occurs) or any Permitted Transfer. ARTICLE 9 LIABILITY AND INDEMNIFICATION9.1 Tenant’s Waiver of Claims and Indemnity. Tenant, to the extent permitted by applicable Regulation, waives all claims for loss, theft or damage to property and for injuries to persons, including death, in, upon or about the Premises or the Project, from any cause whatsoever except loss, damage or injury caused by the gross negligence or willful misconduct of Landlord and, without limiting the generality of the foregoing, whether caused by water leakage of any character from the roof, walls, basement or any other portion of the Premises or the Project, or by gas, fire, oil or electricity, or by any interruption of utilities or services, or by any tenant, occupant or other person, or by any other cause whatsoever in, on or about the Premises or the Project. Notwithstanding any contrary provision in this Lease, neither Landlord, nor its members, officers, agents, managers, contractors, servants, employees or invitees (collectively, with Landlord, the “Landlord Parties”) shall in any event be liable for consequential damages hereunder. Tenant indemnifies, defends, protects and holds Landlord and the other Landlord Parties harmless from and against any loss, liability, claim, damage or 254
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expense (including attorneys’ fees and court costs) arising out of or resulting from Tenant’s use or occupancy of the Premises, the Building, the Common Facilities or any other area within the Project (including, but not limited to, any additional expense that may be incurred by Landlord in connection with Tenant’s use of Suite 124 as the City Council Chambers, which expense Landlord would not otherwise have incurred if Suite 124 was used solely for general office purposes between the hours of approximately 7:00 a.m. and 6:00 p.m.), including, but not limited to, if caused by, or resulting from, any act or omission of any agent, employee or third-party contractor of Tenant, whether prior to, or following, the Lease Commencement Date, other than that caused by the gross negligence or willful misconduct of Landlord, its partners, agents, servants or employees. If any action or proceeding is brought against Landlord or any other Landlord Party by reason of any such matter, Tenant shall, upon Landlord’s request, defend same at Tenant’s expense by counsel selected by Tenant that is reasonably satisfactory to Landlord. The provisions of this Section 9.1 shall survive the expiration or termination of this Lease. 9.2 Negligence of Third Parties. Neither Landlord nor any other Landlord Party shall be liable to Tenant for any damage by or from any act of negligence of any tenant or other occupant of the Project, except as set forth in Section 9.3. Tenant agrees to pay for all damage to the Premises or the Project, as well as all damage to tenants or occupants thereof caused by Tenant’s misuse, overuse, overloading or neglect of the Premises or the Project, the apparatus, improvements or appurtenances thereof, or caused by any licensee, contractor, agent, guest, invitee or employee of Tenant. 9.3 Landlord Indemnity. Landlord shall indemnify, protect, defend and hold harmless Tenant and its agents, from and against any and all claims, liabilities, losses, costs, damages, injuries or expenses, including reasonable attorneys’ fees, arising out of or relating to gross negligence or willful misconduct of Landlord or Landlord’s agents, employees or invitees.ARTICLE 10 INSURANCE10.1 Insurance to be Carried by Tenant. Tenant shall during the Term, at its sole cost and expense, obtain and maintain the following types of insurance:(a) A policy or policies of property insurance in the name of Tenant covering Tenant’s leasehold improvements and any property of Tenant located on, or used in connection with, the Premises, including, but not limited to, furniture, additions and fixtures, and providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, theft, terrorism, special extended peril (all risk) and sprinkler leakage, in an amount equal to at least one hundred percent (100%) of the replacement cost thereof from time to time (including, without limitation, cost of debris removal), with an agreed amount endorsement, and providing protection against loss of income and extra expense; (b) Commercial general liability insurance with a combined single limit of Two Million Dollars ($2,000,000) per occurrence in the name of Tenant (naming Landlord as an additional insured thereunder, and, if requested by Landlord, naming any manager of any of the Premises or the Project, and any mortgagee, trust deed holder, ground lessor or secured party with an interest in this Lease, or any portion of the Project, as additional insureds thereunder); such policy shall specifically include, without limitation, personal injury, broad form property 255
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damage, and contractual liability coverage, the last of which shall cover the insuring provisions of this Lease and the performance by Tenant of the indemnity agreements in Article 9 above; such policy shall contain cross-liability endorsements and shall provide coverage on an occurrence basis; the amount of such insurance required hereunder shall be subject to adjustment from time to time as reasonably requested by Landlord; (c) Worker’s Compensation insurance coverage as required by applicable Regulation, together with employer’s liability insurance coverage; (d) Business Interruption insurance in such amounts as will reimburse Tenant for direct or indirect loss of earnings attributable to all perils commonly insured against by prudent tenants (in the reasonable judgment of Landlord or its lenders (“Landlord’s Lenders”) or attributable to prevention of access to the Premises or to the Building as a result of such perils; and(e) Any other form or forms of insurance as Landlord or Landlord’s Lenders may reasonably require from time to time in form, in amounts and for insurance risks against which a prudent tenant would protect itself (in the reasonable judgment of Landlord or Landlord’s Lenders) , provided that if Tenant elects to insure under a Joint Powers Agreement as permitted by this Section 10.1 such other forms of insurance as may become required pursuant to this Section 10.1(e) shall only be required if provided for under the Joint Powers Agreement. Each policy evidencing insurance required to be carried by Tenant pursuant to this Article shall contain a provision showing Landlord, Landlord’s Lenders and Landlord’s property manager, and any other parties in interest as designated by Landlord, as additional named insureds. Notwithstanding anything in this Article 10 to the contrary, at the inception of this Lease and for the duration of this Lease if so elected by Tenant, Tenant shall be permitted to maintain, in lieu of any insurance required hereunder, self-insurance or other insurance coverage programs including without limitation an insurance pooling arrangement or Joint Powers Agreement; provided, however, that (a) Tenant shall be required to maintain commercial general liability insurance as required under Sections 10.1(b) and 10.2 in the amount of any self-insured retention or deductible provided for under the Joint Powers Agreement; and (b) the right to self-insure shall not be granted to any assignee of Tenant. 10.2 Policy Forms and Delivery. Unless otherwise maintained by Tenant as permitted under Section 10.1, all policies shall be taken out from insurers licensed in California, acceptable to Landlord and in form satisfactory to Landlord. All policies must be issued by insurers with a policy holder rating of “A-VIII” or better and a financial rating of “X” in the most recent version of Best’s Key Rating Guide. Without limiting the generality of the foregoing, any deductible amounts under said policies shall be subject to Landlord’s approval. Tenant agrees that certificates of such insurance shall be delivered to Landlord as soon as practicable after the placing of the required insurance, but in no event later than thirty (30) days prior to the date Tenant takes possession of the Premises. All policies shall require at least ten (10) days prior written notice to Landlord, and to any other additional insureds thereunder, by the insurer prior to termination, cancellation or material change in such insurance. Tenant shall, at least thirty (30) days prior to the expiration of any of such policies, furnish Landlord with a renewal or binder therefor. Tenant may carry insurance under a so-called “blanket” policy, provided that such policy provides that the amount of insurance required hereunder shall not be prejudiced by 256
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other losses covered thereby, and as otherwise approved by Landlord. All insurance policies carried by Tenant shall be primary with respect to, and non-contributory with, any other insurance available to Landlord. Such policies shall provide that the interests of Landlord and any other additional insureds designated by Landlord shall not be invalidated due to any breach or violation of any warranties, representations or declarations contained in such policies or the applications therefor. Upon failure of Tenant to procure, maintain and place such insurance and pay all premiums and charges therefor, Landlord may, but shall not be obligated to, purchase such insurance, and in such event, Tenant shall pay all premiums and charges therefor to Landlord as Additional Rent within five (5) days after demand. 10.3 Use of Proceeds. In the event of damage or destruction to the leasehold improvements in the Premises covered by insurance required to be taken out by Tenant pursuant to this Article, Tenant shall use the proceeds of such insurance for the purposes of repairing or restoring such leasehold improvements. In the event of damage or destruction of the Building entitling Landlord or Tenant to terminate this Lease pursuant to Article 12 hereof, if the Premises have also been damaged, Tenant will pay to Landlord that portion of its insurance proceeds relating to the leasehold improvements in the Premises that were paid for by Landlord. 10.4 Landlord’s Insurance. During the Term, Landlord shall keep and maintain property insurance for the Project in such amounts, and with such coverages, and Landlord may keep and maintain such other insurance (including, but not limited to, earthquake insurance), as Landlord may reasonably determine or as any of Landlord’s Lenders may require. Tenant acknowledges that it shall not be a named insured in such policies and that it has no right to receive any proceeds from any such insurance policies carried by Landlord. Notwithstanding any contrary provision herein, Landlord shall not be required to carry insurance covering the property described in Subsection 10.1(a) above or covering flood or earthquake. 10.5 Waiver of Subrogation; Indemnities. Landlord and Tenant waive their respective right of recovery against the other and their respective managers, officers, directors, partners, agents and employees to the extent damage or liability is insured against under a policy or policies of insurance required to be carried hereunder, whether or not such damage or liability may be attributable to the negligence or act of either party or its respective agents, invitees, contractors, servants or employees. Such waiver by each party shall be effective for the benefit of the other party notwithstanding any failure by the waiving party to carry the insurance required by the provisions of this Lease. Each insurance policy required to be carried by either Landlord or Tenant shall include such a waiver of the insurer’s rights of subrogation. Where liability or damage to the Premises is insured against under both the policy or policies of insurance carried by Landlord and the policy or policies of insurance carried by Tenant, to the extent that insurance proceeds are available from the policy or policies of insurance carried by the party bearing the responsibility to indemnify with respect to such liability or damage, such waiver shall not limit, restrict or alter any indemnity made by Landlord or Tenant hereunder and the insurance proceeds available from the policy or policies of insurance carried by the party bearing responsibility to indemnify with respect to such liability or damage shall be applied to the liability or the repair of such damage prior to the application of the insurance proceeds available from the policy or policies of insurance carried by the other party. 10.6 Premium Increases. Tenant shall pay any increases in insurance premiums relating to property in the Project (whether such insurance is maintained by Landlord or Tenant) 257
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to the extent that any such increase is specified by the insurance carrier as being caused by Tenant’s acts or omissions or use or occupancy of the Premises. 10.7 Landlord’s Insurance.(a) Liability Insurance. During the Term of this Lease, Landlord shall, at Landlord’s sole cost and expense obtain and keep in full force and effect comprehensive general liability insurance insuring Landlord against any and all liability arising out of its control of the Project. Said insurance shall be in an aggregate coverage amount equal to Two Million Dollars ($2,000,000), with excess general liability insurance coverage of Twenty Five Million Dollars ($25,000,000). Any insurance policies hereunder may be “blanket policies.” (b) Property Insurance. During the Term of this Lease, Landlord shall obtain and keep in force during the Term a policy or policies of insurance covering loss or damage to the Building and the Project exclusive of the cost of excavations, foundations and footings, in the amount of Forty-Three Million Dollars ($43,000,000), or such lesser amount deemed sufficient by Landlord to protect its interest in the Project, providing protection against all perils included within the classification of fire, extended coverage, vandalism, malicious mischief, plate glass (subject to the perils of the basic policy), sprinkler leakage, earthquake caused sprinkler leakage, and such other perils as Landlord deems advisable or may be required by a lender having a lien on the Building. ARTICLE 11 TRANSFER OF LANDLORD’S INTEREST11.1 Transfer Rights. In the event of a transfer of all or any portion of Landlord’s interest in this Lease or the Project, other than a transfer for security purposes only, Landlord shall, upon consummation of such transfer, be released from any liability relating to obligations or covenants thereafter to be performed or observed under this Lease, and, in such event, Tenant agrees to look solely to Landlord’s successor in interest with respect to any such liability.Landlord may transfer or credit any security deposit or prepaid Rent to Landlord’s successor in interest, and upon such transfer or credit Landlord shall be discharged from any further liability therefor, provided that Landlord’s successor-in-interest expressly acknowledges the rights of Tenant, as tenant, under this Lease. 11.2 Tenant Cooperation. If Landlord transfers the Project to a governmental or non-profit entity that is able to utilize tax-exempt financing to purchase the Project, then Tenant covenants and agrees to reasonably cooperate, at no cost or expense to Tenant, with Landlord and the prospective purchaser in order to facilitate the issuance of tax exempt debt. Any right of the Tenant to transfer or sublease all or any portion of the Premises pursuant to Article 8 is subject to this covenant, and if the Tenant has entered into a sublease that, in the reasonable discretion of a prospective purchaser, precludes the use of tax exempt financing, then Tenant shall use commercially reasonable efforts, at no cost or expense to Tenant, to terminate or amend any such sublease arrangement to help facilitate the issuance of such tax exempt debt. 258
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ARTICLE 12 DAMAGE OR DESTRUCTION12.1 Repair or Termination.(a) If the Premises are damaged by fire or other casualty of the type insured by Landlord, then the damage shall be repaired by Landlord, provided such repairs can reasonably be made within one hundred twenty (120) days after the commencement of repairs without the payment of overtime or other premiums and that the insurance proceeds are sufficient to pay the costs of such repairs. Landlord shall give written notice to Tenant within thirty (30) days after the occurrence of the damage if Landlord concludes the damage can be so repaired. Until such repairs are completed, Basic Monthly Rent shall be abated in proportion to the part of the Premises which is unusable by Tenant in the conduct of its business (but there shall be no abatement of Rent by reason of any portion of the Premises being unusable for a period of fifteen (15) days or less). If the damage is due to the negligence or willful misconduct of Tenant or its employees, then there shall be no abatement of Rent. Except for such rental abatement, Tenant shall have no claim against Landlord with respect to any such damage or repairs. If Landlord is required or elects to restore the Premises, then Landlord shall not be required to restore alterations made by Tenant, Tenant’s improvements, trade fixtures or personal property, including but not limited to any paneling, decorations, railings, floor coverings, alterations, additions or fixtures installed on the Premises by or at the expense of Tenant, such items being the sole responsibility of Tenant to restore, and any damage caused by the negligence or willful misconduct of Tenant or any of its agents, contractors, employees, invitees or guests shall be promptly repaired by Tenant, at its sole cost and expense, to the reasonable satisfaction of Landlord.(b) Landlord shall not be liable for any failure to make any such repairs if such failure is caused by accidents, strikes, lockouts or other conditions beyond the reasonable control of Landlord.(c) If such repairs cannot reasonably be made within such one hundred twenty (120) days with or without the payment of overtime or other premiums, or if such repairs will cost more than the available insurance proceeds, then Landlord may, at its option, make such repairs within a reasonable time, and, in such event, this Lease shall continue in effect and the Basic Monthly Rent shall be abated in the manner provided above. Landlord’s election to make such repairs must be evidenced by written notice to Tenant advising Tenant within forty five (45) days after the occurrence of the damage whether or not Landlord will make such repairs. If Landlord does not so elect to make such repairs then Landlord may, by written notice to Tenant given within sixty (60) days after the occurrence of the damage, terminate this Lease as of the date of the occurrence of such damage and Landlord shall refund to Tenant any Rent previously paid for any period of time subsequent to such termination. (d) With respect to any damage and repairs, Tenant waives the provisions of Section 1932(2) and 1933(4) of the Civil Code of California or any successor statute thereto or similar statute hereinafter enacted. (e) All proceeds of any insurance maintained by Tenant or Landlord upon the Premises (including insurance on Tenant improvements) shall be used to pay for the repairs to 259
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the property covered by said insurance, to the extent that repairs are made pursuant to this Article. (f) Landlord shall not have any obligation whatsoever to repair, reconstruct, or restore the Premises or any portion of the Building when the damage occurs during the last eighteen (18) months of the Term. 12.2 Loss of Enjoyment. No damages, compensation or claim shall be payable by Landlord to Tenant for any inconvenience, loss of business or annoyance of Tenant arising from any repair or restoration of any portion of the Premises or the Project, including, but not limited to, the Building or the Common Facilities, performed by Landlord or its agents. Landlord shall use good faith efforts to effect such repair or restoration promptly and in such manner as not unreasonably to interfere with Tenant’s use and occupancy of the Premises. 12.3 Automatic Termination. A total destruction of the Building shall automatically terminate this Lease as of the date of such total destruction. ARTICLE 13 DEFAULTS AND REMEDIES13.1 Events of Default. The occurrence of any of the following shall constitute a default and breach of this Lease by Tenant: (a) Any failure by Tenant to pay any Rent, as and when due, where such failure continues for three (3) days after written notice thereof by Landlord to Tenant; (b) The abandonment of the Premises, or any significant portion thereof, by Tenant;(c) The appointment of a receiver to take possession of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease, where possession is not restored to Tenant within forty-five (45) days; the attachment, execution or other judicial seizure of substantially all of Tenant’s assets located at the Premises or of Tenant’s interest in this Lease, where such seizure is not discharged within forty-five (45) days; (d) Any failure by Tenant to observe or perform any of its obligations under that certain Real Property Option Agreement and Joint Escrow Instructions of even date herewith entered into by and between Four Hundred Main Street LLC and Tenant;(e) If any mechanics’ lien is filed or recorded against the Project or the Premises, and such lien results from the actions or omissions of Tenant or any subtenant (or any contractor, consultant, agent, employee, or invitee of Tenant or any subtenant), and Tenant fails either to (i) cause any such mechanics’ lien to be released within ten (10) business days after the date the same comes to the attention of Tenant or to (ii) post a bond or other security agreement in the amount of such mechanics’ lien, in the event Tenant elects, in its sole discretion, to dispute same; (f) At Landlord’s sole option, Tenant’s failure to observe or perform according to the provisions of Article 10 (excluding any provision regarding payment of Rent, 260
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which shall be governed by Subsection (a) above), Article 15, Section 18.11, or Section 7.2 hereof within (10) days after demand from Landlord; and (g) Any failure by Tenant to observe and perform any other provision of this Lease (other than the provisions described in (a) through (f) of this Section 13.1) or the Rules and Regulations attached hereto as Exhibit “C”, where such failure continues for thirty (30) days after written notice thereof by Landlord to Tenant; provided, however, that in the event that any such cure cannot reasonably be completed within such thirty (30) day period, and provided further that Tenant has commenced and is diligently pursuing such cure, Tenant shall have an additional period of thirty (30) days to complete such cure. The notices referred to in Subsections (a) and (g) above, shall be in lieu of, and not in addition to, any notice required under Section 1161, et seq. of the California Code of Civil Procedure or any successor statute thereto or similar statute hereinafter enacted 13.2 Landlord’s Remedies.(a) In the event of any default by Tenant, as defined herein, in addition to any other remedies available to Landlord at law or in equity, Landlord shall have the immediate option to (but shall not be obligated to) terminate this Lease and all rights of Tenant hereunder by giving Tenant written notice of such election to terminate; provided, that Tenant has been afforded all applicable notice and cure periods permitted under this Lease. In the event that Landlord shall elect to so terminate this Lease, then Landlord may recover from Tenant all of the following, to the extent permitted by applicable Regulations: (i) The worth at the time of award of any unpaid Rent which had been earned at the time of such termination; plus (ii) The worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds that portion of rental loss which Tenant proves could have been reasonably avoided; plus (iii) The worth at the time of award of the amount by which the unpaid Rent for the balance of the Term after the time of award exceeds the amount of such rental loss which Tenant proves reasonably could be avoided; plus (iv) Any other amount necessary to compensate Landlord for all the detriment proximately caused by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including, but not limited to, unamortized brokerage commissions, tenant improvement expenses and advertising expenses incurred by Landlord (in each case regarding both this Lease and any new lease with any new tenant regarding the Premises), any expenses of remodeling the Premises and the cost of restoring said Premises to the condition required under this Lease; plus (v) At Landlord’s election, such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by applicable Regulations. For purposes of Subsection 13.2(a), the “time of award” means the date upon which the judgment in any action brought by Landlord against Tenant by reason of such default is entered or such earlier date as the court may determine. As used in (i) and (ii) above, the “worth at the time of award” shall be computed by allowing interest at the maximum interest rate allowed by 261
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applicable Regulation. As used in (iii) above, the “worth at the time of award” shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank at San Francisco at the time of award, plus one (1) percentage point. Tenant agrees that such charges shall be recoverable by Landlord under California Code of Civil Procedure Section 1174(b) or any similar, successor or related Regulation. Further, Tenant hereby waives the provisions of California Code of Civil Procedure Section 1174(c) and California Civil Code Section 1951.7 or any other similar, successor or related Regulation providing for Tenant’s right to satisfy any judgment in order to prevent a forfeiture of this Lease or requiring Landlord to deliver written notice to Tenant of any reletting of the Premises. Notwithstanding anything to the contrary contained herein, including, but not limited to, anything contained in clause (ii) or (iii) above, Landlord hereby acknowledges that Tenant is a municipality, and, as a result thereof, certain Landlord remedies set forth in this Section 13.2(a)may not be enforceable under applicable Regulations, including, but not limited to, under Article XVI, Section 18(a) of the California Constitution. Notwithstanding the foregoing, however, Tenant hereby acknowledges and agrees that, in accordance with the terms hereof, Landlord shall be entitled to receive all remedies under this Lease to the fullest extent permitted by applicable Regulations. This Section 13.2(a) is subject to the express condition that at no time shall Tenant be required to pay to Landlord any amount under the terms hereof that could subject Landlord to either civil or criminal liability as a result of such amount being in excess of the amount permitted by applicable Regulations. If by the terms of this Section 13.2(a), Tenant is at any time required or obligated to make a payment to Landlord in excess of the amount permitted by applicable Regulations, then such remedies expressly permitted hereunder shall be deemed amended to the extent required by applicable Regulations.(b) In the event of any such default by Tenant, Landlord shall also have the right, with or without terminating this Lease, to reenter the Premises to remove all persons and property from the Premises. Such property may be removed and stored in a public warehouse or elsewhere at the cost of and for the account of Tenant, and such property shall be released only upon Tenant’s payment of such charges, together with all sums due and owing under this Lease. If Tenant does not reclaim such property within the period permitted by applicable Regulation, Landlord may sell such property in accordance with applicable Regulation and apply the proceeds of such sale to any sums due and owing hereunder, or retain said property, granting Tenant credit against sums due and owing hereunder for the reasonable value of such property. (c) In the event of the abandonment of the Premises by Tenant or in the event of any default by Tenant, if Landlord does not elect to terminate this Lease as provided in this Section and, until Landlord does elect to terminate this Lease, this Lease shall continue in full force and effect, and Landlord may, from time to time, without terminating this Lease, enforce all of its rights and remedies under this Lease. Specifically, Landlord has the remedy described in California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has the right to sublet or assign, subject only to reasonable limitations). (d) Landlord shall not, by any reentry or other act, be deemed to have accepted any surrender by Tenant of the Premises or Tenant’s interest therein, or be deemed to have terminated this Lease or Tenant’s right to possession of the Premises, unless Landlord shall have notified Tenant in writing that it has so elected to terminate this Lease. 262
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(e) Landlord may suspend or discontinue all or any of the services specified in Article 4 during the continuance of any default of the Lease; and no such suspension or discontinuance will be deemed or construed to be an eviction, constructive or actual, or an ejection of Tenant. (f) If Landlord reenters the Premises, Tenant shall have no claims for damages that may be caused by Landlord’s reentering or removing and storing the property of Tenant, and indemnifies, defends, protects and holds Landlord harmless from all losses, costs, expenses (including attorney’s fees and court costs) or damages occasioned by Landlord. No such entry shall be considered or deemed to be a forcible entry by Landlord. (g) All rights, options, and remedies of Landlord contained in this Lease shall be construed and held to be cumulative, and no one of them shall be exclusive of the other, and Landlord shall have the right to pursue any one or all of such remedies or any other remedy or relief which may be provided by applicable Regulations, whether or not stated in this Lease. The exercise of any one or more of such rights or remedies shall not impair Landlord’s right to exercise any other right or remedy including, without limitation, any and all rights and remedies of Landlord under California Civil Code Section 1951.8, California Code of Civil Procedure Section 1161 et seq., or any similar, successor or related Regulation. (h) Nothing in this Section 13.2, and no termination pursuant to any other provision of this Lease, shall be deemed to affect Landlord’s right to indemnification for liability or liabilities arising prior to the termination of this Lease under the indemnification clause or clauses contained in this Lease. (i) Tenant hereby irrevocably authorizes and directs any sublessee, upon receipt of a written notice from Landlord stating that Tenant is in default hereunder, to pay to Landlord directly the rent and income due and to become due under such sublease. Tenant agrees that such sublessee shall have the right to rely upon any such statement and request by Landlord, and that such sublessee shall pay rent and income to Landlord without any obligation or right to inquire as to whether such default exists and notwithstanding any notice or claim from Tenant to the contrary. Tenant shall have no right or claim against such sublessee or Landlord for any such rent or income so paid by such sublessee to Landlord. Landlord shall not, by reason of any direct collection of rent or income from a sublessee, be deemed liable to such sublessee for any failure of Tenant to perform and comply with any of Tenant’s obligations under such sublease.(j) To the extent permitted by applicable Regulation, Tenant hereby waives all provisions of, or protection under, any Regulations of the State of California or other applicable jurisdiction to the extent same are inconsistent and in conflict with specific terms and provisions hereof. 13.3 Landlord’s Event of Default.(a) Unless a shorter period of time is specified by which Landlord is required to perform an obligation under this Lease, Landlord shall not be deemed to be in default under this Lease unless and until it has failed to perform any of its obligations hereunder within thirty (30) days after written notice by Tenant to Landlord specifying the manner in which Landlord has failed to perform such obligation; provided, however, that if the nature of Landlord’s obligation is such that more than thirty (30) days are reasonably required for its performance, 263
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then Landlord shall not be deemed to be in default if it shall commence such performance within such thirty (30) day period and thereafter diligently prosecute the same to completion. In the event of a default by Landlord hereunder, the extent of Landlord’s liability shall be strictly limited to and shall not extend beyond Landlord’s interest in the Building. (b) If Landlord fails to cure a default within the time period described in this Lease, and if such default renders all or any part of the Premises untenantable or unusable for Tenant’s ordinary business, Tenant shall have the option to cure the default, in addition to any other remedies permitted by applicable Regulations. Should Tenant elect to cure the default, all reasonable costs associated with such cure, including reasonable attorneys’ fees (if any), shall be reimbursed by Landlord to Tenant following receipt of Tenant’s invoice for said costs. If Landlord’s default hereunder prevents Tenant’s use of the Premises in accordance with the Permitted Uses set forth in Section 10 of the Basic Lease Provisions, there shall be an abatement of Basic Monthly Rent for the period of such non-use. (c) Notwithstanding anything to the contrary provided in this Lease, and subject to the terms of the Order Appointing Receiver, it is specifically understood and agreed, such agreement being a primary consideration for the execution of this Lease by Landlord, that (a) there shall be absolutely no personal liability on the part of Landlord or any other Landlord Party (as hereinafter defined) to Tenant with respect to any of the terms, covenants and conditions of this Lease, (b) Tenant waives all claims, demands and causes of action (collectively, the “Claims”) against Landlord and the other Landlord Parties in the event of any breach by Landlord of any of the terms, covenants and conditions of this Lease to be performed by Landlord, other than Claims against Landlord based on Landlord’s gross negligence or willful misconduct, and (c) Tenant shall look solely to the Premises, and any other portion of the Property, as such terms is defined in the Order Appointing Receiver, for the satisfaction of each and every remedy of Tenant in the event of any breach by Landlord of any of the terms, covenants and conditions of this Lease to be performed by Landlord, or any other matter in connection with this Lease or the Premises, such exculpation of liability to be absolute and without any exception whatsoever. ARTICLE 14 EMINENT DOMAINIf (i) twenty five percent (25%) or more of the rentable space in the Building or Parking Garage, or (ii) after restoration, such portion of the Premises as in Tenant’s reasonable judgment makes the balance of the Premises untenantable or otherwise unsuitable for Tenant’s use and requirements, shall be lawfully taken or condemned or conveyed under threat of such taking or condemnation, for any public or quasi-public use or purpose (such taking, condemnation or conveyance being referred to herein as a “Taking”), then either party hereto may immediately terminate this Lease by serving written notice upon the other party hereto within thirty (30) days thereafter. If twenty five percent (25%) or more of the Project excluding the Premises shall be taken or appropriated under the power of eminent domain or conveyed in lieu thereof, Landlord may so terminate this Lease by serving written notice upon the other party hereto within thirty (30) days thereafter. Tenant shall not be required to assign to Landlord any portion of an award/settlement made by reason of such Taking to Tenant. If a material part of the Building is condemned or taken or if a substantial alteration or reconstruction of the Building shall, in Landlord’s opinion, be necessary or desirable as a result of such Taking, Landlord may terminate 264
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this Lease by written notice to Tenant within thirty (30) days after the date of the Taking. If a part of the Premises shall be so taken, appropriated or conveyed and neither party hereto shall elect to so terminate this Lease, (a) Basic Monthly Rent payable hereunder shall be abated in the proportion that the rentable area of the portion of the Premises so taken, appropriated or conveyed bears to the rentable area of the entire Premises, and (b) if the Premises shall have been damaged as a consequence of such partial taking, appropriation or conveyance, Landlord shall, to the extent of any severance damages received by Landlord, restore the Premises continuing under this Lease; however, Landlord shall not be required to repair or restore any damage to the property of Tenant or to make any repairs to or restoration of any alterations, additions, fixtures or improvements installed on the Premises by or at the expense of Tenant, and Tenant shall pay any amount in excess of such severance damages required to complete such repairs or restoration. Notwithstanding anything to the contrary contained in this Section, if the temporary use or occupancy of any part of the Premises shall be taken or appropriated under the power of eminent domain or conveyed in lieu thereof during the Term, this Lease shall be and remain unaffected by such taking, appropriation or conveyance and Tenant shall continue to pay in full all Rent payable hereunder by Tenant during the Term; in the event of any such temporary taking, appropriation or conveyance, Tenant shall be entitled to receive a separate award (not reducing Landlord’s award) as compensation for loss of the use or occupancy of the Premises during the Term. To the extent that it is inconsistent with the above, each party waives the provisions of California Code of Civil Procedure Section 1265.130 allowing either party to petition the superior court to terminate the Lease in the event of a partial taking of the Premises. ARTICLE 15 SUBORDINATIONWithout the necessity of any additional document being executed by Tenant for the purpose of effecting a subordination, this Lease is subject and subordinate to all declarations of restrictions, ground leases, deeds of trust or other security interests of any kind now or hereafter encumbering or affecting the Project or any portion thereof; subject, however, to the qualification that so long as Tenant is not in default under this Lease, its peaceful use and occupancy of the Premises under this Lease shall not be impaired, restricted or terminated by any such mortgagee, beneficiary, secured party or ground lessor whose interest arises after the date hereof. Notwithstanding the foregoing, Landlord shall have the right to subordinate or cause to be subordinated any such ground leases, deeds of trust or other security interests to this Lease.In the event of foreclosure or exercise of any power of sale under any deed of trust superior to this Lease, Tenant, upon demand, shall attorn to the purchaser at any foreclosure sale or sale pursuant to the exercise of any power of sale, in which event this Lease shall not terminate and Tenant shall automatically be and become the tenant of the purchaser; provided, however, no landlord or purchaser at any foreclosure sale or sale pursuant to the exercise of any power of sale, or any successor thereto shall be liable for any act or omission of any prior landlord (including Landlord) or be subject to any offsets, counterclaims, or defenses which Tenant might have against any prior landlord (including Landlord), or be bound by any Rent which Tenant might have paid in advance to any prior landlord (including Landlord) for a period in excess of one month or by any Security Deposit or other prepaid charge which Tenant might have paid in advance to any prior landlord (including Landlord), or be bound by an agreement or modification of this Lease made after Tenant has written notice of the interest of such party, without the prior written consent of such party, or be obligated to repair the Premises in the event of total or substantial damage beyond that which can reasonably be accomplished from the net proceeds of 265
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insurance made available to such landlord. Tenant covenants and agrees to execute and deliver, not less than ten (10) business days after demand by Landlord or any lienholder or successor in interest, and in a commercially reasonable form requested thereby, any commercially reasonable additional documents evidencing the priority or subordination of this Lease and the attornment of Tenant with respect to any such ground leases, deeds of trust or other security interests; provided, that such entities agree to the non-disturbance of Tenant’s rights as tenant under this Lease if Tenant is not in default hereunder. Tenant hereby irrevocably appoints Landlord as attorney-in-fact of Tenant to execute, deliver and record any such documents in the name and on behalf of Tenant if Tenant fails to do same pursuant to the foregoing. Upon request by Tenant, Landlord shall exercise commercially reasonable efforts to obtain execution by Landlord’s Lenders of a Subordination, Non-Disturbance and Attornment Agreement. Moreover, if, in connection with the obtainment of financing for the Project or any portion thereof, a prospective lender requests reasonable modifications hereto as a condition to the furnishing of such financing, Tenant shall not unreasonably withhold or delay its consent thereto, provided such modifications do not increase the obligations of Tenant hereunder or adversely affect Tenant’s rights hereunder. ARTICLE 16 SURRENDER OF PREMISES; REMOVAL OF PROPERTY16.1 Tenant’s Removal of Property. Upon the expiration or termination of the Term of this Lease, Tenant shall quit and surrender possession of the Premises, and all repairs, changes, alterations, additions and improvements thereto, to Landlord in as good order, condition and repair as the same are now or hereafter may be improved by Landlord or Tenant, reasonable wear and tear and repairs which are Landlord’s obligation excepted, and in a reasonable state of cleanliness. In such event, Tenant shall, without expense to Landlord, remove from the Premises all debris, rubbish, furniture, equipment, business and trade fixtures, free-standing cabinet work, moveable partitions and other articles of personal property owned by Tenant or installed or placed by Tenant at its expense in the Premises and all similar articles of any other persons claiming under Tenant, including, but not limited to, any and all telecommunications or other cabling equipment, but excluding the two 8” pipes running from the Premises to the Building roof. Unless otherwise requested to do so by Landlord, however, Tenant shall not remove any additions or improvements to the Premises, such as carpet, interior partition walls and doors, “built-ins”, shelves, built-in fixtures or other similar items, it being understood and agreed that such items are and shall remain the property of Landlord. Tenant shall also repair, at its expense, all damage to the Premises resulting from such removal; provided, however, that Landlord also may elect, in its sole discretion, and at Tenant’s sole cost and expense, to repair all or any amount of damage anywhere in or on the Project caused by such removal of any property, reasonable wear and tear accepted. Notwithstanding the foregoing, if Tenant elects to remove its HVAC Chillers located on the roof of the Building, Landlord shall obtain from Landlord’s property manager a third party estimate for the repair of the damage likely to be caused by such removal (the “Damage Repair”), and the amount of such estimate shall be deposited in immediately available funds (the “Deposit”) with Landlord or its property manager before such HVAC Chillers may be removed by Tenant. Within three Business Days following the completion of the Damage Repair to the reasonable satisfaction of Landlord, and delivery of an unconditional lien release to Landlord (if the Damage Repair is undertaken by non-Tenant contractors), Landlord shall return the Deposit to Tenant. Tenant shall, upon the expiration or sooner termination of the Term hereof, deliver to Landlord all keys to all doors in, upon and 266
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about the Premises including, but not limited to, all keys to any vault or safe to remain on the Premises. 16.2 Abandoned Property. Whenever Landlord shall reenter the Premises as provided in this Lease, any property of Tenant not removed by Tenant upon the expiration of the Term of this Lease or within ten (10) business days after a termination by reason of Tenant’s default, as provided in this Lease, shall be considered abandoned, and Landlord may remove any or all such items and dispose of same in any manner or store the same in a public warehouse or elsewhere for the account and at the expense and risk of Tenant. ARTICLE 17 HAZARDOUS MATERIALS; EXCESSIVE BURDEN; WASTETenant shall not cause or permit any nuisance in or about the Premises or the Project, nor shall Tenant cause or permit any Hazardous Materials (as hereinafter defined) to be brought to the Premises or the Project or used, handled, stored, released or disposed of in, under or about the Premises, Building or any other portion of the Project except for ordinary and general office and technology supplies typically used in the ordinary course of business within office buildings and technology centers and in full compliance with all applicable Regulations. Tenant shall not conduct business or other activity in or about the Premises of such a nature as to place an unreasonable or excessive burden upon the Common Facilities. Tenant shall not commit or suffer the commission of any waste in or about the Premises or the Project. As used in this Lease, the term “Hazardous Materials” means and includes any hazardous or toxic materials, substances or wastes as now or hereafter designated under any Regulation, including, without limitation, asbestos, petroleum, petroleum hydrocarbons and petroleum based products, urea formaldehyde and other chlorofluorocarbons. Tenant indemnifies, defends, protects and holds Landlord and the other Landlord Parties harmless from all costs, damages, liens and expenses (including attorney’s fees and court costs) related to Tenant’s breach of any provision of this Article 17. ARTICLE 18 MISCELLANEOUS18.1 Landlord’s Inspection and Maintenance. Tenant shall permit Landlord and its agents at all reasonable times to enter the Premises for the purpose of inspecting the same and/or for the purpose of protecting the interest therein of Landlord, and to take all required materials and equipment into the Premises and perform all required work therein; provided, that Landlord uses commercially reasonably efforts to avoid interfering with Tenant’s business operations.Notwithstanding the foregoing sentence, except in the case of an emergency, Landlord must provide twenty-four (24) hours prior written notice to Tenant of its intent to enter the Premises and must permit a representative of Tenant to be present at all times if Tenant so desires; provided, however, that, if no Tenant representative is available within seventy-two (72) hours of Landlord’s prior written notice, Landlord shall nonetheless be entitled to proceed. 18.2 Exhibition of Premises. Tenant shall permit Landlord and its agents to enter and pass through the Premises at all reasonable hours to: (a) Post notices of nonresponsibility; and 267
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(b) Exhibit the Premises to holders of encumbrances and to prospective purchasers, mortgagees or lessees of the Building. Notwithstanding the foregoing, at all times Landlord shall use commercially reasonable efforts not to (i) interfere with Tenant’s business operations at the Premises, or (ii) upon thirty (30) days prior written notice to Landlord, enter (except in the case of an emergency) into specifically identified locations within the Premises, such as storage areas, filing cabinets, or other storage locations, which locations contain confidential information that Tenant is not permitted by applicable law to allow unauthorized persons access to, such locations to be identified in writing by Tenant in its reasonable discretion in accordance with the terms hereof; provided, however, that Landlord shall, at all times during the Term of this Lease, have all access to the Premises as may be necessary or reasonably desirable to Landlord to permit Landlord to fulfill its obligations under this Lease. If during the last month of the Term, Tenant shall have removed substantially all of Tenant’s property and personnel from the Premises, Landlord may enter the Premises and repair, alter and redecorate the same, without abatement of Rent and without liability to Tenant, and such acts shall have no effect on this Lease. 18.3 Rights Reserved by Landlord. Landlord reserves the following rights, exercisable without liability to Tenant for (a) damage or injury to property, person or business, (b) causing an actual or constructive eviction from the Premises, or (c) disturbing Tenant’s use or possession of the Premises: (a) To name the Project and to change the name or street address of the Project;(b) To install and maintain all signs on the exterior and interior of the Project; (c) To have pass keys to the Premises and all doors within the Premises, excluding Tenant’s vaults and safes and any rooms housing servers and any rooms containing sensitive and confidential materials (collectively, the “Confidential Areas”), as determined by Tenant in its reasonable discretion, and Landlord shall have the right to use any and all means which Landlord may deem necessary or proper to open said doors in an emergency in order to obtain entry to any portion of the Premises, and any entry to the Premises or portions thereof obtained by Landlord by any of such means or otherwise shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction, actual or constructive, of Tenant from the Premises or any portion thereof; (d) To enter the Premises for the purpose of making inspections, repairs, alterations, additions or improvements to the Premises or the Project and to take all steps as may be necessary or desirable for the safety, protection, maintenance or preservation of the Premises or the Project or Landlord’s interest therein, or as may be necessary or desirable for the operation or improvement of the Project or in order to comply with applicable Regulations; and (e) To change the arrangement and/or location of entrances or passageways, doors and doorways, and corridors, elevators, stairs, toilets or other public parts of the Building, provided that such changes do not unreasonably interfere with the suitability of the Premises for Tenant’s use. Tenant hereby waives any claim for damages for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, 268
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and any other loss occasioned thereby, except to the extent caused by Landlord’s gross negligence or willful misconduct. Notwithstanding anything to the contrary contained in this Section 18.3, except in the case of an emergency, Landlord will not have, and will not be granted, access to any of the Confidential Areas without (i) obtaining Tenant’s prior written consent to such access and (ii) permitting a representative of Tenant to be present at all times during such access. 18.4 Quiet Enjoyment. Tenant, upon paying the Rent and performing all of its obligations under this Lease, shall peaceably and quietly enjoy the Premises, subject to the terms of this Lease and to any mortgage, lease, or other agreement to which this Lease may be subordinate.18.5 Force Majeure. Any prevention, delay or stoppage of work to be performed by Landlord or Tenant which is due to strikes, labor disputes, inability to obtain labor, materials, equipment or reasonable substitutes therefor, acts of God, governmental restrictions or regulations or controls, judicial orders, enemy or hostile government actions, civil commotion, fire or other casualty, or other causes beyond the reasonable control of the party obligated to perform hereunder, shall excuse performance of the work by that party for a period equal to the duration of that prevention, delay or stoppage. Nothing in this Section, however, shall excuse or delay Tenant’s obligation to pay Rent or other charges under this Lease. 18.6 Counterparts. This Lease may be executed in multiple counterparts, all of which shall constitute one and the same Lease. 18.7 No Option. The submission of this Lease to Tenant shall be for examination purposes only, and does not and shall not constitute a reservation of or option for Tenant to lease, or otherwise create any interest of Tenant in the Premises or any other premises within the Project. Execution of this Lease by Tenant and its return to Landlord shall not be binding on Landlord notwithstanding any time interval, until Landlord has, in fact, signed and delivered this Lease to Tenant. 18.8 Further Assurances. The parties agree to promptly sign all documents reasonably requested to give effect to the provisions of this Lease. 18.9 Mortgagee Protection. Tenant agrees to send by (i) United States certified or registered mail, return receipt requested, postage prepaid, or (ii) any nationally recognized courier service (such as FedEx), for next-day delivery, to be confirmed in writing by such courier or other method prescribed by Landlord, to any first deed of trust beneficiary of Landlord whose address has been furnished to Tenant, a copy of any notice of default served by Tenant on Landlord. Notwithstanding the provisions of Section 13.3, if Landlord fails to cure such default within the time provided for in this Lease, such beneficiary shall have an additional thirty (30) days to cure such default; provided that if such default cannot reasonably be cured within that thirty (30) day period, then such beneficiary shall have such additional time to cure the default as is reasonably necessary under the circumstances. 18.10 Attorneys’ Fees. If either party incurs any expense, including reasonable attorney’s fees, in connection with any action instituted by either party by reason of any dispute under this Lease or any default or alleged default of the other party, the party prevailing in such action shall be entitled to recover its reasonable expenses from the other party. The term 269
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“prevailing party” means the party obtaining substantially the relief sought, whether by compromise, settlement or judgment. 18.11 Tenant’s Certificates. Within ten (10) days after any written request which either party may make from time to time, such requested party (the “Requested Party”) shall execute and deliver to the other party (the “Requesting Party”) a certificate (the “Certificate”)substantially in the form attached hereto as Exhibit “D” and hereby made a part hereof. Any failure by the Requested Party to so execute and deliver the Certificate shall, at the Requesting Party’s election, constitute a certification by the Requested Party that the statements which may be included in the Certificate (as same may have been so amended or supplemented) are true and correct, except as the Requesting Party shall otherwise indicate. Landlord and Tenant intend that the Certificate may be relied upon by either party’s Lenders, and any prospective lender, purchaser, subtenant or assignee. 18.12 Holding Over.(a) If Tenant, with Landlord’s written consent, remains in possession of all or any portion of the Premises after the expiration or sooner termination of the Term, such holding over shall be deemed to constitute a tenancy from month to month only, upon such terms and conditions hereof as existed at the expiration or termination of the Term; provided, however, during such holding over, Basic Monthly Rent shall be the Basic Monthly Rent in effect immediately prior to such expiration or termination or such other amount mutually agreed upon between Tenant and Landlord, and any and all options and rights of first refusal or other preferential rights of Tenant shall be deemed to have lapsed and to be of no further force or effect. Landlord may terminate such tenancy from month to month by giving Tenant at least thirty (30) days written notice thereof at any time. Acceptance by Landlord of any Rent after such expiration or termination shall not be deemed to constitute Landlord’s consent to such holding over. (b) If Tenant, without Landlord’s express, written consent, remains in possession of all or any portion of the Premises after the expiration or sooner termination of the Term, then, in addition to all other rights and remedies available to Landlord under other provisions of this Lease or at law or in equity, Tenant shall be treated as a Tenant at sufferance only, upon the terms and conditions set forth in this Lease so far as applicable, but at a Basic Monthly Rent equal to the greater of (i) one hundred fifty percent (150%) of the Basic Monthly Rent applicable to the Premises immediately prior to the date of such expiration or earlier termination; or (ii) one hundred and fifty percent (150%) of the prevailing market rate for buildings of similar quality and use in the same geographic area as the Premises (as reasonably determined by Landlord) for the Premises in effect on the date of such expiration or earlier termination. Acceptance by Landlord of any Rent after such expiration or termination shall not constitute a consent to a hold over hereunder or result in an extension of this Lease. Any and all options and rights of first refusal or other preferential rights of Tenant shall be deemed to have lapsed and to be of no further force or effect. Tenant shall pay an entire month’s Rent, with Basic Monthly Rent calculated in accordance with this Section 18.12.(c) If, for any reason, Tenant fails to surrender the Premises on the expiration or earlier termination of this Lease (including upon the expiration of any subsequent month-to-month tenancy consented to by Landlord pursuant to Section 18.12(a) above), then, in addition to, and by no means in lieu of, the other provisions of this Section 18.12, all other rights and remedies granted to Landlord under the provisions of this Lease, Tenant shall indemnify, protect, 270
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defend (by counsel approved in writing by Landlord) and hold Landlord harmless from and against any and all claims, judgments, suits, causes of action, damages, losses, liabilities and expenses (including attorneys’ fees, court costs and any and all consequential damages awarded as a result thereof) resulting from such failure to surrender, including, without limitation, any claim made by any succeeding tenant based thereon, and Tenant hereby acknowledges and agrees that if Tenant holds over without Landlord’s consent, Tenant shall be liable to Landlord for any net loss, liability or expense, that Landlord may suffer as a result, including lost rent (net of expenses). Landlord shall, in addition, continue to have all remedies for holdover as may be available to Landlord under other provisions of this Lease or at law or in equity. The foregoing indemnity shall survive the expiration or earlier termination of this Lease. 18.13 Notices. All notices, which Landlord or Tenant may be required or may desire to serve on the other shall be in writing and shall be served by personal delivery, by mailing the same by registered or certified mail, return receipt requested, postage prepaid, or sent by a nationally recognized courier service (such as Fed Ex) for next-day delivery, to be confirmed in writing by such courier, addressed as set forth in the Basic Lease Provisions or addressed to such other address or addresses as either Landlord or Tenant may from time to time designate to the other in writing in accordance with this Article. Notices, demands and other communications given in the foregoing manner shall be deemed given when actually received or refused by the party to whom sent, unless mailed, in which event same shall be deemed given on the day of actual delivery as shown by the addressee’s registered or certified mail receipt or at the expiration of the third (3rd) business day after the date of mailing, whichever first occurs. Notwithstanding anything to the contrary contained herein, but by no means limiting the foregoing, until such time as Landlord may otherwise notify Tenant in writing in accordance with the terms hereof, all communications to be delivered by Tenant to Landlord shall be delivered to Landlord at both of Landlord’s addresses for notices set forth in Section 8 of the Basic Lease Provisions, and no notice shall be deemed received by Landlord until such notice has been received by Landlord at both such addresses.18.14 Rules and Regulations. Tenant agrees to abide by and comply with the Rules and Regulations delivered to Tenant by Landlord from time to time. Landlord shall not be liable to Tenant for any violation of such Rules and Regulations by any other tenant. In the event of any inconsistencies between this Lease and the Rules and Regulations, the language of this Lease shall prevail. Landlord shall have the right, from time to time, to amend and modify the Rules and Regulations. Landlord shall have no liability for its failure to enforce the Rules and Regulations against any other lessee in the Building. 18.15 Governing Laws. This Lease shall be governed by and construed in accordance with the laws of the State of California. 18.16 Headings and Titles. The marginal titles to the Articles of this Lease are inserted for convenience of reference only and shall have no effect upon the construction or interpretation of any part hereof. 18.17 Heirs and Assigns. Subject to the limitations on assignment, subletting and transfers, this Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective heirs, executors, administrators, successors and assigns. 18.18 Time of Essence. Time is of the essence with respect to the performance of every provision of this Lease. 271
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18.19 Severability. If any condition or provision of this Lease shall be held invalid or unenforceable to any extent under any applicable Regulations or by any court of competent jurisdiction, then the remainder of this Lease shall not be affected thereby, and each condition and provision of this Lease shall be valid and enforceable to the fullest extent permitted by applicable Regulation. 18.20 Authority. Each individual executing this Lease on behalf of a party hereto represents and warrants that she or he is duly authorized to execute and deliver this Lease on behalf of such party and that this Lease is binding upon such party in accordance with its terms. 18.21 Rentable Square Feet. All references to “rentable square feet” in this Lease refer to rentable square feet measured in accordance with ANSI/BOMA Z65.3 2009. 18.22 No Light, Air or View Easement. Any diminution or shutting off of light, air or view by any structure which may be erected on lands adjacent to the Project (whether or not by Landlord) shall not in any way affect this Lease or impose any liability on Landlord and shall not entitle Tenant to any reduction of Rent. 18.23 Entire Agreement. This Lease, along with any Exhibits affixed hereto, constitutes the entire and exclusive agreement between Landlord and Tenant relative to the Premises. This Lease may not be changed, modified, abandoned or discharged, in whole or in part, nor any of its provisions waived, except by a written instrument which is executed by both parties hereto. 18.24 Recording. Neither this Lease, nor any memorandum hereof shall be recorded without Landlord’s prior written consent. 18.25 Joint and Several Liability. If Tenant is comprised of more than one person or entity, then the obligations hereunder imposed upon such persons and entities shall be joint and several.18.26 Confidentiality. Tenant acknowledges and agrees that the terms of this Lease are confidential and constitute proprietary information of Landlord. Disclosure of the terms hereof may adversely affect the ability of Landlord to negotiate other leases and impair Landlord’s relationship with other tenants. Accordingly, Tenant agrees, except as may be required by any laws of the State of California applicable to Tenant or leases made and to be performed in the State of California, that it, and its partners, members, officers, directors, employees, agents and attorneys, shall not intentionally and voluntarily disclose the terms and conditions of this Lease to any newspaper or other publication or any other tenant or apparent prospective tenant of the Project or any real estate agent (other than the broker(s) identified in the Basic Lease Provisions), either directly or indirectly, without the prior written consent of Landlord; provided, however, Tenant may disclose the terms to prospective subtenants or assignees under this Lease, to any other public entity or public official to which Tenant is required to disclose the terms of this Lease as a result of Tenant being a public entity, and to its attorneys and accountants, in each case, on a “need-to-know” basis, provided all of the same are instructed as to the confidentiality hereof.18.27 No Representations or Warranties. Neither Landlord nor Landlord’s agents or attorneys have made any representations or warranties with respect to the Premises, the Building, the Real Property, the Common Facilities or this Lease, except as expressly set forth herein, and no rights, easements or licenses are or shall be acquired by Tenant by implication or otherwise. 272
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18.28 Exculpation. In no event shall any Landlord Party be liable for the performance of Landlord’s obligations under this Lease. Tenant shall look solely to Landlord to enforce Landlord’s obligations hereunder and shall not seek any damages against any Landlord Party.The liability of Landlord for Landlord’s obligations under this Lease shall not exceed and shall be limited to Landlord’s interest in the Building, and Tenant shall not look to any other property or assets of Landlord or any other Landlord Party in seeking either to enforce Landlord’s obligations under this Lease or to satisfy a judgment for Landlord’s failure to perform such obligations. 18.29 Consents. Tenant hereby waives any monetary claim against Landlord which it may have based upon any assertion that Landlord has unreasonably withheld or unreasonably delayed any requested consent, and Tenant agrees that its sole remedy shall be an action or proceeding to enforce any such provision or for specific performance, injunction or declaratory judgment. In the event of such a determination, the requested consent shall be deemed to have been granted; however, Landlord shall have no liability to Tenant for its refusal to give such consent. The sole remedy for Landlord’s unreasonably withholding or delaying of consent shall be as provided in this Section. 18.30 Waiver. The failure of Landlord to exercise its rights in connection with any breach or violation of any term, covenant, or condition herein contained, shall not be deemed to be a waiver of such term, covenant or condition or any subsequent breach of the same or any other term, covenant or condition herein contained. The subsequent acceptances of Rent hereunder by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant of any term, covenant or condition of this Lease other than the failure of Tenant to pay the particular Rent so accepted, regardless of Landlord’s knowledge of such preceding breach at the time of acceptance of such Rent. Waiver by Landlord of any term, covenant or condition contained in this Lease may only be made by a written document signed by Landlord. 18.31 No Merger. The voluntary or other surrender of this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and shall, at the option of Landlord, terminate any and all existing subleases or subtenancies, or operate as an assignment to Landlord of any or all of such subleases or subtenancies. No act or omission of Landlord or any representative thereof shall be deemed to constitute acceptance of any surrender, and no surrender shall be deemed to have occurred, unless in a writing executed by Landlord and approved in writing by any of Landlord’s Lenders, should such approval be required under the terms of any loan agreement, mortgage or deed of trust, as the case may be. 18.32 Form of Payment; Business Days. Rent and all other sums payable under this Lease must be paid in lawful money of the United States of America. As used in this Lease, “business day” means any day excluding (a) Saturday, (b) Sunday, (c) any day which is a legal holiday under the laws of the State of California, and (d) any day on which banking institutions located in such state are generally not open for the conduct of regular business. 18.33 Cumulative Remedies. None of Landlord’s rights or remedies hereunder shall be deemed to be exclusive, but shall, wherever possible, be cumulative with all other rights and remedies hereunder and at law and in equity. 18.34 Mutual Covenants. Each provision of this Lease performable by Tenant shall be deemed to be both a covenant of Tenant and a condition to Landlord’s performance hereunder. 273
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18.35 Relationship. Nothing contained in this Lease shall be construed to create the relationship of principal and agent, partnership, joint venture or any other relationship between the parties hereto, other than the relationship of landlord and tenant. 18.36 Modification. This Lease may not be modified except by a written document executed by the parties hereto. 18.37 Representations and Warranties. Neither Landlord nor any broker, agent or representative thereof has made any warranty or representation with respect to the tenant mix of the Building, the identity of prospective or other tenants of the Building, or otherwise except as explicitly set forth herein. 18.38 Construction. The language in all parts of this Lease shall be in all cases construed simply according to its fair meaning, and not strictly for or against Landlord or Tenant. The principal of construction against draftsmen shall have no application in the interpretation of this Lease. Any reference to any Section herein shall be deemed to include all subsections thereof unless otherwise specified or reasonably required from the context. Any reference to “days” or “months” herein shall refer to calendar days or months, respectively, unless specifically provided to the contrary. The terms “herein”, “hereunder” and “hereof” as used in this Lease mean “in this Lease”, “under this Lease” and “of this Lease”, respectively, except as otherwise specifically set forth in this Lease. 18.39 Exhibits. Any and all exhibits and addenda referred to in this Lease are incorporated herein by reference as though fully set forth herein. 18.40 Other Agreements. Tenant hereby warrants and represents that neither its execution of nor performance under this Lease shall cause Tenant to be in violation of any agreement, instrument, contract or Regulation by which Tenant is bound. Tenant agrees to indemnify Landlord against any loss, cost, damage or liability including, without limitation, reasonable attorneys’ fees arising out of Tenant’s breach of this warranty and representation. 18.41 Discrimination. Tenant covenants by and for itself, its successors and assigns, and all persons claiming under or through them, and this Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons, on account of sex, marital status, age, race, color, religion, creed, national origin or ancestry, in the leasing, subleasing, renting, transferring, use, occupancy, tenure or enjoyment of the Premises herein leased, nor shall Tenant itself, or any person claiming under or through it, establish or permit such practice or practices of discrimination or segregation with reference to the selection, location, number, use or occupancy of tenants, lessees, sublessees, subtenants or vendees in the Premises. [SIGNATURES CONTINUE ON NEXT PAGE] 274
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EXHIBIT “C” RULES AND REGULATIONS ALL REFERENCES IN THESE RULES AND REGULATIONS SHALL REFER TO LANDLORD AND TENANT UNDER THIS LEASE.1. Sidewalks, halls, passageways, exits, entrances, elevators, escalators and stairways shall not be obstructed by Tenant or used by Tenant for any purpose other than for ingress to and egress. The halls, passageways, exits, entrances, elevators, escalators and stairways may, at times, be made available for the use of the general public in connection with Tenant’s use of the Premises; however, Landlord shall retain the right to control and prevent access thereto by all persons whose presence, in the reasonable judgment of Landlord, shall be prejudicial to the safety, character, reputation or interests of the Building and its tenants and occupants, subject to applicable Regulations. Neither Tenant nor any of Tenant’s employees shall go upon the roof of the Building, without the prior consent of Landlord or its designate, unless such access is needed for repairs or maintenance otherwise permitted under the Lease. 2. No curtains, blinds, shades or screens shall be attached to or hung in, or used in connection with any window of the Premises (other than Landlord’s standard window covering) without Landlord’s prior consent. All electric ceiling fixtures hung in offices or spaces along the perimeter of the Building must be fluorescent, of a quality, type, design and bulb color approved by Landlord. Neither the interior nor exterior of any windows shall be coated or otherwise sunscreened without Landlord’s prior consent. Notwithstanding the foregoing, any and all lighting fixtures and window dressings that exist at the Premises as of the Commencement Date shall be deemed consented to and approved by Landlord. 3. No signs, pictures, placard, advertisement, notice, lettering, direction or handbill shall be exhibited, distributed, painted, installed, displayed, inscribed, placed or affixed by Tenant on any part of the exterior of the Premises or the interior of the Premises which is visible from the exterior of the Premises, the Building or the Project without the prior consent of Landlord. In the event of the violation of the foregoing by Tenant, Landlord may remove same without any liability, and may charge the expense incurred in such removal to Tenant. Interior signs on doors shall be inscribed, painted or affixed for Tenant by the Landlord at Tenant’s expense, and shall be of a size, color and style acceptable to Landlord. Nothing may be placed on the exterior of corridor walls or corridor doors other than Landlord’s building standard sign on the corridor door, applied and installed by Landlord. 4. The Building directory will be provided exclusively for the display of the name and location of tenants of the Building (including Tenant) and Landlord reserves the right to exclude any other names therefrom. In the event Landlord consents to an assignment or sublease, such consent shall also be deemed approval to indicate such assignee or subtenant on the Building directory.5. Tenant shall not drill into, or in any way deface any part of the Premises; provided, that art and other decorations common to first class office buildings and technology centers may be affixed to the interior walls of the Premises by Tenant, subject to all other terms of the Lease. No boring, cutting or stringing of wires or laying of linoleum or other similar floor coverings shall be permitted, except with the prior consent of Landlord. 288

6. No bicycles, vehicles, birds or animals of any kind shall be brought into or kept in or about the Premises or the Building, and no cooking shall be done or permitted by Tenant on the Premises, except that the preparation of coffee, tea, hot chocolate and similar items for Tenant and Tenant’s employees shall be permitted; provided, however, that the power required shall not exceed that amount which can be provided by a 30 amp circuit. Tenant shall not cause or permit the continued occurrence of any unusual or objectionable odors to be produced or to permeate the Premises or the Building. 7. The Premises shall not be used for manufacturing or for the storage of merchandise except as such storage may be incidental to the use of the Premises for general office purposes. Tenant shall not occupy or permit any portion of the Premises to be occupied as an office for a public stenographer or typist or for the manufacture or sale of liquor, narcotics, or tobacco in any form, or as a medical office unless expressly permitted in Tenant’s Lease, or as a barber or manicure shop, or as an employment bureau, or as a travel agency. Tenant shall not sell or permit the sale of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise in or on the Premises. Tenant shall not engage or pay any employees in the Premises except those actually working for Tenant in the Premises nor shall Tenant advertise for laborers giving an address at the Premises. The Premises shall not be used for lodging or sleeping or for any immoral or illegal purposes. 8. Tenant shall not make or permit to be made, any unseemly noises which disturb other occupants of the Building, whether by the use of any musical instrument, radio, television, phonograph, screening room, loud, unusual or disruptive noise, or in any other way.9. Tenant shall not use, keep or permit to be used any foul or noxious gas or substance in, on or about the Premises. If Tenant is permitted to use the Premises as a dental office, however, then Tenant may use and keep oxygen, nitrous oxide, propane, butane, ethanol, methanol, isopropyl alcohol, acrylic monomers and acetone. 10. Neither Tenant nor any of Tenant’s employees shall, at any time, bring or keep within the Premises or the Building any flammable, combustible or explosive fluids, chemical substances, or materials, except as may be expressly permitted in Article 17 hereof. Electric spaceheaters shall not be used at any time by Tenant. 11. No new or additional locks or bolts of any kind shall be placed upon any of the doors by Tenant, nor shall any changes be made in existing locks or the mechanism thereof without immediately providing Landlord with keys and other access information. Notwithstanding the foregoing, if any areas of the Premises are separately secured and contain information Tenant is legally required to keep confidential, Tenant shall not be required to provide keys to Landlord, provided that Landlord has the access rights thereto provided in Section 18.1. Tenant must, upon the termination of its tenancy, give, return, and restore to Landlord all keys of stores, offices, vaults, and toilet rooms, either furnished to, or otherwise procured by Tenant, and in the event at any time of any loss of keys so furnished, Tenant shall pay to Landlord the cost of replacing the same or of changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such changes. 12. Furniture, freight, pictures, equipment, safes, bulky matter or supplies of any description shall be moved in or out of the Building only, after Landlord (or its designate) has been furnished with prior notice and given its approval and only during such hours and in such manner as may be prescribed by Landlord from time to time. The scheduling and manner of 289

Tenant’s move-ins and move-outs shall be subject to the discretion and approval of Landlord, and said move-ins and move-outs shall only take place after 6:00 P.M. on weekdays, on weekends, or such other times as Landlord may designate. In the event Tenant’s movers damage the elevator or any other part of the Project, Tenant shall immediately pay to Landlord the amount required to repair said damage. The moving of safes or other fixtures or bulky or heavy matter of any kind must be done under the supervision of Landlord (or its designate), and the person employed by Tenant for such work must be acceptable to Landlord, but such persons shall not be deemed to be agents or servants of Landlord (or its designate), and Tenant shall be responsible for all acts of such persons. Landlord reserves the right to inspect all safes, freight or other bulky or heavy articles to be brought into the Building and to exclude from the Building all safes, freight or other bulky or heavy articles which violate any of these Rules or Regulations or the Lease of which these Rules and Regulations are a part. Landlord reserves the right to determine the location and position of all safes, freight, furniture or bulky or heavy matter brought onto the Premises, which must be placed upon supports approved by Landlord to distribute the weight. 13. No furniture shall be placed in front of the Building or in any lobby or corridor, without Landlord’s prior written consent. Landlord shall have the right to remove all non-permitted furniture, without notice to Tenant, and at the expense of Tenant. 14. Landlord shall have the right to prohibit any advertising by Tenant which, in Landlord’s opinion, tends to impair the reputation of the Building or the Project or the desirability thereof as an office building project and, upon written notice from Landlord, Tenant shall immediately refrain from or discontinue such advertising, unless such advertising is required by the Regulations. 15. Landlord reserves the right to exclude from the Building between the hours of 6:30 P.M. and 6:30 A.M., Monday through Friday, and at all hours on Saturday, Sunday, state and federal holidays, all persons who are not authorized by Tenant. Tenant shall be responsible for all persons for whom it causes to be present in the Building and shall be liable to Landlord for all acts of such persons. In the case of invasion, riot, public excitement, act of God, or other circumstance rendering such action advisable in Landlord’s opinion, Landlord reserves the right to prevent access of all persons (including Tenant) to the Building during the continuance of the same by such actions as Landlord may deem appropriate, including the closing and locking of doors, to the extent permitted under applicable Regulations. 16. Any persons employed by Tenant to do any work in or about the Premises shall, while in the Building and outside of the Premises, be subject to and under the control and discretion of Landlord’s designate (i.e., the superintendent or manager of the Building) but shall not be deemed to be an agent or servant of said superintendent or the Landlord, and Tenant shall be responsible for all acts of such persons. 17. Tenant shall cooperate in keeping closed all doors opening onto public corridors, except when in use for ingress and egress. Tenant shall cooperate in keeping closed all doors leading to equipment and utility rooms. Tenant shall see that its doors are closed and securely locked before leaving the Project. Notwithstanding the foregoing, the location of all office equipment of any electrical nature that is within the Premises as of the Commencement Date shall be deemed to be approved by Landlord. 290

18. Canvassing, soliciting and peddling in the Building are prohibited and Tenant shall cooperate to prevent the same. 19. All office equipment of any electrical nature shall be placed by Tenant in the Premises in settings and locations approved by Landlord, to absorb or prevent any vibration, noise and annoyance. 20. No air conditioning unit or other similar apparatus shall be installed or used by Tenant without Landlord’s prior consent. Tenant shall cooperate with Landlord in obtaining maximum effectiveness of the HVAC system by closing blinds when the sun’s rays fall directly on windows. Tenant shall not obstruct, alter, or in any way impair the efficient operation of the HVAC system. 21. Tenant shall faithfully observe and comply with the terms of any and all covenants, conditions and restrictions recorded against the Project (i) prior to the Commencement Date and (ii) subsequent to the Commencement Date; provided, that such compliance shall only be required of Tenant (a) after such time as Tenant has been provided with written notice and a copy of such covenants, conditions and restrictions and (b) if compliance does not interfere with Tenant’s Permitted Uses and is not required by applicable Regulations. 22. Restrooms and other water fixtures shall not be used for any purpose other than that which the same are intended, and any damage resulting to the same from misuse on the part of Tenant or Tenant’s employees shall be paid for by Tenant. Tenant shall be responsible for causing all water faucets, water apparatus and utilities, including, but not limited to all electricity, gas and air, to be shut off before Tenant or Tenant’s employees leave the Premises each day and Tenant shall be liable for any waste or damage sustained by other tenants or occupants of the Building or Landlord as a result of Tenant’s failure to perform said duty. 23. In the event that Building or the Premises is or later becomes equipped with an electronic access control device, Tenant shall pay to Landlord the actual cost of each identification key or card issued to Tenant as a deposit against the return of the identification key or card to Landlord. 24. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or indifference in the preservation of good order and cleanliness. Landlord shall not be responsible to Tenant for any loss of property on the Premises, however occurring, or for any damage done to the effects of Tenant by the janitor or another employee or any other person. Except as otherwise provided in the Lease or any Exhibit thereto, janitor service shall include ordinary dusting and cleaning by the janitor or any assigned to such work and shall not include shampooing of carpets or rugs or moving of furniture or other special services. Janitor service will not be furnished on nights when rooms are occupied after 10:00 p.m. Window cleaning shall be done only by Landlord. 25. Tenant shall not permit any of its principals, employees, agents, contractors or invitees to smoke at any time in the Building. 26. Except as otherwise provided in the Lease, all parking ramps and areas plus other public areas forming a part of the Project shall be under the sole and absolute control of Landlord with the exclusive right to regulate and control these areas; provided, that such regulation and control shall not limit any of Tenant’s rights expressly granted under this Lease beyond any 291

limitation that may otherwise be set forth herein. Tenant agrees to conform to any additional rules and regulations that may be established by Landlord for these areas from time to time. 27. Employees of Landlord or Landlord’s agents shall not be obligated to perform any work or do anything outside of their regular duties unless under special instructions from Landlord.28. In the event of any conflict between these Rules and Regulations and the Lease, the Lease shall prevail. 292
Exhibit D 42893660v.16
EXHIBIT “D” ESTOPPEL CERTIFICATE [SEE ATTACHED]
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ESTOPPEL CERTIFICATEThe undersigned [[**Insert Requested Party Information (the “RequestedParty”)**]], hereby certifies to [[**Insert Requesting Party Information (the RequestingParty”)**]], that: 1. The City of Stockton, a municipal corporation (“Tenant”), is the lessee of certain space in that certain office building located at 400 East Main Street, Stockton, California 95202 (the “Building”), containing approximately ________ rentable square feet on the first, third, fourth and seventh floors thereof (the “Premises”), under a lease dated ___________________, 201__ (the “Lease”) entered into between Tenant and _____________________, as Receiver (“Landlord”). 2. The Lease is presently in full force and effect. [[**The Requested Party**]] has performed and complied with all obligations of the Requested Party through the date hereof, and there exists no default by the [[**Requested Party**]] except .3. The Lease, in the form of Exhibit A attached hereto, constitutes the entire agreement between Landlord and Tenant and there has been no amendment, modification or supplement, written or oral, to the Lease except as included in Exhibit A. Tenant does not have any options to purchase the Premises. 4. Tenant is in full and complete possession and occupancy of the Premises, has accepted the Premises, including any work to date of Landlord performed thereon pursuant to the terms and provisions of the Lease, and Tenant is paying rent under the Lease. Landlord has performed all of its obligations under the Lease for the current term with respect to tenant improvements. 5. The term of the Lease commenced on June 1, 2014 and will end on ________________________, with two options to extend the Lease for successive periods of two years each. The monthly rental is currently $_______ per rentable square foot per month.6. The monthly rental for fiscal year _____ - _____ (July 1 – June 30) is _____________________________ Dollars ($__________) and is due on the ____ day of each month. All additional rent and any other charges payable under the Lease have been paid for the current periods. No rent has been paid more the thirty (30) days in advance. Tenant is not in arrears of any monthly base rent or additional rent. 7. As of the date of this certificate, [[**the Requesting Party**]] is not in default under the Lease.8. The amount of the security deposit paid under the terms of the Lease is Two Hundred Nine Thousand Three Hundred Fourteen and 78/100 Dollars ($209,314.78). 9. The Tenant has not entered into any sublease, assignment, pledge, mortgage, transfer or otherwise conveyed all or any portion of its interest in the Lease or the Premises except as follows: _________________________________. 294

10. Landlord has not made any loans or advanced funds to Tenant.11. All guarantors of the Lease are identified as: ________________________________N/A__________________________________________.12. Attached is a true and correct copy of the Lease together with all amendments, modifications or renewals. 13. All exhibits attached hereto are by this reference incorporated fully herein.The terms “this certificate” shall be considered to include all such exhibits. The undersigned makes this statement for Landlord’s benefit and protection with the understanding that Landlord and its lender, if any, intend to rely upon this statement. This certificate may be relied upon by Landlord, Landlord’s lender and their respective successors and assigns, and this certificate shall be binding upon Tenant, any guarantor of Tenant and each of their respective successors and assigns.[Signatures continue on next page] 295

EXECUTED: _________ __, 20__ [[**Requesting Party**]]:By: Name: Title:
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EXHIBIT “E” LOCATION OF RESERVED SPACES [SEE ATTACHED]
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EXHIBIT “F” DEPICTION OF BUILDING STANDARD SIGNAGE [SEE ATTACHED] 300
Exhibit F Signage will be the building standard raised chrome block lettering in a size to match existing building signage at the north entrance to the Building reading “Four Hundred”. Photo included below.

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Resolution No.

STOCKTON CITY COUNCIL

RESOLUTION APPROPRIATING AND TRANSFERRING FUNDS AND RATIFYING EXPENDITURES RELATED TO STAFF RELOCATION FROM 400 EAST MAIN STREET

On February 25, 2015, the City executed a lease agreement with William J.

Hoffman, duly appointed Receiver (Landlord), for a portion of the building located at 400 East Main Street; and

On October 16, 2018, by Resolution No. 2018-10-16-1402, Council authorized the first amendment to the standard office lease for reduction of the leased premises; and

On February 7, 2023, by Resolution No. 2023-02-07-1211, Council authorized the second amendment, reducing the 7th floor space and extending the lease term for the 3rd and 4th floors through March 31, 2025, with an option to extend the lease term on a month- to-month basis to June 30, 2025; and

On June 9, 2025, the third amendment to the standard office lease was executed, enabling the City to occupy the 3 rd floor and to retain information t echnology equipment on the 4th floor through July 31, 2025; and

The departure of City staff from 400 East Main Street necessitated expenditures be made that included, but were not limited to, furniture disassembly at 400 East Main Street and reassembly at new staff locations, moving costs, and tenant restoration obligations; now, therefore,

BE IT RESOLVED BY THE CITY CO UNCIL OF THE CITY OF STOCKTON, AS FOLLOWS:

1. The City Council approves the appropriation of funds in the amount of $76,802 from the 400 East Main Street lease deposit to the Public Works Facilities Crafts Maintenance Special Services Operating Account.

2. The City Council approves the appropriation of funds in the amount of $223,698 from the Fiscal Year 2021-22 Discretionary Projects Contingency Funds to the Public Works Facilities Crafts Maintenance Special Services Operating Account.

3. The City Council approves the transfer of funds in the amount of $141,437 from the Victory Park Pool, Project No. CR18020, to the Public Works Facilities Crafts Maintenance Special Services Operating Account.

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4. The City Council approves and ratifies the expenses in the amoun t of $441,937 for all costs related to staff relocation from 400 East Main Street.

5. The City Manager is hereby authorized to take whatever actions are necessary and appropriate to carry out the purpose and intent of this Resolution.

PASSED, APPROVED, and ADOPTED January 27, 2026 .

CHRISTINA FUGAZI
Mayor of the City of Stockton
ATTEST:

KATHERINE ROLAND, CMC, CPMC
City Clerk of the City of Stockton
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City of Stockton
Legislation Text
File #: 25-1410, Version: 1

ADOPT A RESOLUTION TO AUTHORIZE A PUBLIC HEARING TO CONSIDER ADJUSTMENTS

TO STORMWATER RATES AND CHARGES AND AUTHORIZING AND DIRECTING THE CITY

MANAGER TO MAIL THE REQUIRED PUBLIC HEARING NOTICE

RECOMMENDATION
It is recommended that the City Council adopt a resolution to:

1. Authorize a public hearing to be held on March 31, 2026, to consider adjustments to the City’s stormwater rates and charges; and

2. Authorize and direct the City Manager to mail a notice of the public hearing to all City of Stockton Stormwater Utility customers and the record owners of property upon which the rates and charges are proposed. The public hearing shall be held at least 45 days after the notice of the public hearing has been mailed.

It is also recommended that the City Manager be authorized to take appropriate and necessary actions to carry out the purpose and intent of this resolution.

Summary
The Municipal Utilities Department (MUD) includes the Water, Wastewater, and Stormwater utilities that are supported by user fees and regulated for the protection of public health and the environment.

The Stormwater Utility operates 77 pump stations, over 600 miles of pipeline, and 22,500 drain inlets that move stormwater from streets to local basins and waterways. Regular maintenance prevents flooding, and the utility also manages compliance with the National Pollutant Elimination System storm-sewer permit, including monitoring and public outreach to protect Delta water quality.

The proposed actions would implement the Council Water Committee’s recommendation to begin the notice and public hearing process required under Article XIII D of the California Constitution (Proposition 218) for consideration of the proposed stormwater rates and charges. These actions will notify stormwater customers and affected property owners of the proposed rates and explain how to submit written protests before the close of the public hearing.

DISCUSSION
Background
The Stormwater Utility was first established in 1991 in response to the Porter Cologne Clean Water Act (CWA). The CWA governs water quality regulation in California and was established to protect the beneficial uses of water and water quality including surface water bodies, groundwater, and City of Stockton Printed on 1/22/2026Page 1 of 4
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File #: 25-1410, Version: 1
wetlands.

The stormwater rate structure is based on the estimated impervious area of a property such as roofs, pavement, and other hard surfaces. It is measured using Equivalent Residential Units (ERUs). Under this system, all residential dwelling units, including single-family homes, multi-family units, and apartments, are each assessed as one ERU and charged a flat fee. Non-residential customers are charged based on the total number of ERUs assigned to their parcel.

The MUD Stormwater Utility was established in 1992 as a separate enterprise fund. Prior to this, the stormwater program functioned under the Wastewater Utility. With the establishment of discharge requirements for stormwater, program management responsibilities and expenditures grew significantly, which created a need for a separate fund and rate. The stormwater service fee was approved by Council Resolution No. 91-0866 and implemented a $2.10 per month fee starting January 1992 for all residential dwelling units. The original stormwater fee of $2.10 was designed to fund the operation, maintenance, and administration of the utility’s FY 1991-92 appropriations.

In 1996, California voters approved Proposition 218, which requires local agencies to follow strict public process to adjust property-related fees like water, sewer, and stormwater utility rates. In 2011, the most recent attempt to adjust stormwater fees was not approved by Stockton property owners.

Present Situation
The Stormwater Utility has expanded extensively since the approval of the stormwater fee in 1992.

The stormwater rate set more than 30 years ago is insufficient to fund the maintenance and project improvements necessary to sustain an aging system and meet State and Federal regulatory compliance requirements.

The 2023 Stormwater Master Plan (SWMP) was adopted by Council in March 2023. The SWMP updated the 2008 Conceptual Storm Drain Master Plan in accordance with the Envision Stockton 2040 General Plan Update. The SWMP included an updated stormwater infrastructure assessment, development of a computer model of the City's stormwater system, assessment of system deficiencies for existing and buildout conditions based on the 2040 General Plan Update and development of a Stormwater Capital Improvement Plan (CIP) with cost estimates. The model identified areas of concern and outlined 12 CIP projects ranging in cost from $4.5 million to $75 million , which formed the basis for the advancement of the Stormwater Rate Study.

On August 22, 2023, the City Council adopted Resolution 2023-08-22-1214 authorizing a professional services contract with HDR Engineering, Inc. (HDR) to evaluate Stormwater Utility’s revenue requirements, prepare a cost-of-service analysis, and design rates that are proportionately distributed among the customer classes and customers within each class. Customer classes include residential (including single family), multi-family, apartments, commercial, institutional, and industrial.

To determine the appropriate level of revenue for the utility, HDR completed the Draft Stormwater Rate Study (Attachment A) to evaluate potential adjustments to stormwater rates between FY 2024- 25 and FY 2028-29. Three analyses were used to address the adequacy and equity of the proposed utility rates including:

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· The revenue requirement analysis, which compares the revenues to the expenses of the utility to determine the overall rate adjustment required and establish the cost basis of the rates. · The cost-of-service analysis, which allocates the revenue requirement of the utility to the various customer classes of service in a proportional manner. · The rate design analysis, which considers both the level and structure of the rate design to collect the necessary amount of revenue as outlined in the prior two analyses.

The proposed stormwater rates were developed based on a detailed analysis to comply with Proposition 218. Under this law, stormwater rates cannot exceed the cost of providing the service.

The proposed rates are based on the rate study, are consistent with the City’s goals, cost-based, and equitably distributed among all customer types.

On November 13, 2025, the Draft Stormwater Rate Study and proposed rate adjustments were presented to the Council Water Committee. The Council Water Committee approved forwarding the proposed stormwater rate adjustments to the City Council for consideration.

If adopted by the City Council, the proposed resolution will authorize a public hearing to consider the proposed stormwater rates and charges. A public hearing notice will be mailed to all Stockton Stormwater Utility customers, and to the record owners of property upon which the proposed rates and charges are recommended. Although both billed customers and property owners will receive notice, only one protest per parcel will be counted.

At the close of the public hearing on March 31, 2026, the City Council will review all written protests.

If fifty percent plus one or more protest, the rate adjustment cannot proceed. If fewer than fifty percent plus one customers or property owners submit valid protests, the City Council may proceed with Proposition 218 process. The City would mail ballots to all affected customers, who can vote to approve or reject the proposed rate adjustments. At the public hearing on June 9, 2026, if most of returned ballots support the proposed stormwater rate adjustments, the City Council may formally adopt them.

The proposed stormwater rates and charges for each customer class and the effective dates are shown in the residential and non-residential tables below:

Residential Charges (Per
Dwelling Unit)
FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Present
Rates
Proposed
Rates
Proposed
Rates
Proposed
Rates
Proposed
Rates
Proposed
Rates
Single-Family & Condo
(City)
$2.10 $3.85 $5.60 $6.85 $7.85 $8.10
Multi-Family (City) $2.10 $3.85 $5.60 $6.85 $7.85 $8.10 Multi-Family (Non-City) $2.10 $3.85 $5.60 $6.85 $7.85 $8.10 Apartments (City) $2.10 $3.85 $5.60 $6.85 $7.85 $8.10
Apartments (Non-City) $2.10 $3.85 $5.60 $6.85 $7.85 $8.10 City of Stockton Printed on 1/22/2026Page 3 of 4
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Non-Residential Charges
(Per Dwelling Unit)
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029
Present
Rates
Proposed
Rates
Proposed
Rates
Proposed
Rates
Proposed
Rates
Proposed
Rates
Commercial (90% Density
Factor)
$2.10 $3.85 $5.60 $6.85 $7.85 $8.10
Institutional (62% Density
Factor)
$2.10 $3.85 $5.60 $6.85 $7.85 $8.10
Industrial (79% Density
Factor)
$2.10 $3.85 $5.60 $6.85 $7.85 $8.10
Along with mailing the official public hearing notice, the public outreach team will take several steps to actively inform and engage the community. Staff will host a community meeting-held no sooner than 45 days after the notice is mailed-to walk community members through the proposed stormwater rate adjustments.

The meeting will be recorded and posted on the City’s website for anyone who cannot attend. In addition, the team will launch an online open house in January 2026, available 24/7, where community members can learn more about Stockton’s stormwater system and easily reach the team through a dedicated phone line, email, and Ask Stockton. These efforts will help ensure residents have multiple convenient ways to get information and ask questions.

FINANCIAL SUMMARY
There are sufficient funds available in the Stormwater Utility Outreach Division accounts for postage, special services and reprographics (6517-000-630006-620-000-00-65-000-000, 6517-000-630007- 620-000-00-65-000-000, 6517-000-630010-620-000-00-65-000-000) for the related printing and postage fees to mail the notice and ballots for the public hearings.

The existing stormwater rate set in 1992 no longer reflects inflation or the increasing costs of providing all services. The funding shortfall will completely deplete the Stormwater Utility’s reserves to levels that will soon fall below policy requirements and threaten its ability to meet ongoing operations and maintenance needs. If stormwater rates are not adjusted, the City will eventually have to seek other funding sources to support the stormwater program and provide the necessary services to protect the public, property and the environment.

This action has no impact on the General Fund or any other unrestricted funds.

Attachment A - Draft Stormwater Rate Study Report
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City of Stockton
Municipal Utilities Department
Comprehensive Sto rmwater
Rate Study
December 2025
Draft Report

ATTACHMENT A
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December 4, 2025
Mr. Je
ff Marasovich
Deputy Director of Stormwater Operations
City of Stockton Municipal Utilities Department
2500 Navy Drive
Stockton, CA 95206
Subj
ect: Stormwater Draft Rate Study Report
De
ar Mr. Marasovich:

HDR E
ngineering, Inc. (HDR) is pleased to present to the City of Stockton Municipal Utilities Department (Department) the draft report for the comprehensive stormwater rate study (Study).

The Department’s comprehensive Study was developed to provide cost-based stormwater rates that generate sufficient revenue to fund the operation and maintenance and capital needs of the stormwater utility. More specifically, the Study was designed to develop proportional rates for the Department’s customers. This report outlines the overall approach used to achieve these objectives, along with our findings, conclusions, and recommendations.

Th
e costs associated with providing stormwater services to the Department ’s customers has been developed based on Department specific information and costs and is included within the development of the proposed stormwater rates. The S tudy was developed utilizing industry recognized generally accepted rate setting principles and methodologies , which were then tailored to the Department’ s specific stormwater system and customer characteristics . This report provides the basis for developing and implementing stormwater rates which are cost - based, proportional, and defensible for the Department’s customers. The development of the proposed rates is based on the assumptions and data provided at the time of the Study. Should these change, the proposed rates should be reviewed to determine if adjustments should be made to reflect the cost basis and proportionality of the adopted rates.

We
appreciate the assistance provided by the Department’s project team in the development of the Study. More importantly, HDR appreciates the opportunity to provide these technical and professional services to the City of Stockton Municipal Utilities Department.

Si
ncerely yours,
HDR Engineering, Inc.

Shawn Koorn
Associate Vice President

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Ex
ecutive Summary
Introduction ........................................................................................................................ 1 Overview of the Stormwater Utility ..................................................................................... 1 Overview of the Rate Study Process .................................................................................... 1 Key Stormwater Rate Study Results ..................................................................................... 2 Summary of the Stormwater Revenue Requirement Analysis .............................................. 3 Summary of the Stormwater Cost of Service Analysis .......................................................... 6 Summary of the Stormwater Rate Design ............................................................................ 6 Summary of the Stormwater Rate Study ............................................................................. 8 1 Introduction and Overview 9

1.1 Introduction .............................................................................................................. 9 Overview of the Stormwater Utility ..................................................................................... 9

1.2 Goals and Objectives ................................................................................................ 9

1.3 Overview of the Rate Study Process ........................................................................ 10

1.4 Organization of the Study ....................................................................................... 11 2 Overview of Rate Setting Principles 12

2.1 Introduction ............................................................................................................ 12

2.2 Generally Accepted Rate Setting Principles ............................................................. 12

2.3 Determining the Revenue Requirement .................................................................. 12

2.4 Analyzing Cost of Service ........................................................................................ 13

2.5 Designing Utility Rates ............................................................................................ 14

2.6 Economic Theory and Rate Setting .......................................................................... 14 3 Stormwater Revenue Requirement 15

3.1 Introduction ............................................................................................................ 15

3.2 Determining the Revenue Requirement .................................................................. 15

3.2.1 Establishing a Time Frame and Approach ................................................... 15

3.2.2 Projecting Rate and Other Miscellaneous Revenues .................................. 16

3.2.3 Projecting Operation and Maintenance Expenses ...................................... 17

3.2.4 Projecting Capital Funding Needs............................................................... 18

3.2.5 Projection of Debt Service.......................................................................... 20

3.2.6 Reserve Funding ........................................................................................ 20 Table of Contents

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3.2.7 Summary of the Stormwater Revenue Requirement .................................. 20

3.3 Consultant’s Conclusions ........................................................................................ 22 4 Stormwater Cost of Service 23

4.1 Introduction ............................................................................................................ 23

4.1.1 Objectives of a Cost of Service Analysis ...................................................... 23

4.2 General Cost of Service Procedures ........................................................................ 23

4.3 Summary of the Stormwater Cost of Service Analysis ............................................. 23

4.4 Consultant’s Conclusions and Recommendations ................................................... 24 5 Stormwater Rate Design Analysis 25

5.1 Introduction ............................................................................................................ 25

5.2 Rate Design Criteria and Considerations ................................................................. 25

5.3 Development of Cost-Based Stormwater Rates ....................................................... 25

5.4 Overview of the Present and Proposed Stormwater Rates ...................................... 26

5.5 Summary of the Stormwater Rate Study ................................................................. 27 Technical Appendix – Stormwater 28

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Executive Summary

Introduction
HDR Engineering, Inc. (HDR) was retained by the City of Stockton Municipal Utilities Department (Department) to conduct a comprehensive stormwater rate study (Study). The main objectives of the Study were to:

Develop a projection of stormwater revenues to support the Department’s operating and capital costs
Proportionately distribute the costs of providing stormwater service to the customers receiving service
Propose cost-based and proportional stormwater rates for a multi-year time period that are in compliance with Proposition 218 requirements
The Department owns, operates, and maintains the stormwater system, which provides service to customers within the City of Stockton and the surrounding area. The costs associated with providing stormwater service to the Department’s customers have been based on the information developed and provided by the Department and are the basis for the proposed rates.

Overview of the Stormwater Utility
The Department’s stormwater system protects people, property, and waterways by reducing flood risk, and preventing pollutants from flowing into local rivers, creeks, sloughs, and the Delta.

The Department’s stormwater utility is an enterprise fund and as such is funded primarily through charges (i.e., rates) to the Department’s approximately 243,000 customers benefiting from stormwater services. The stormwater rate is intended to fund the operation, maintenance, and improvements to over 600 miles of pipelines, over 23,000 catch basins (storm drains), 77 pump stations and 19 detention basins. As noted, the funding is provided primarily through the monthly stormwater rate which was implemented in 1992 and has not been adjusted since that time.

Since the implementation of the stormwater rate, the City has grown, as have the Department’s responsibilities, maintenance of aging infrastructure to provide service, as well as changes in the National Pollutant Discharge Elimination System requirements the Department must meet.

As a result of inflationary increases in operating expenses, stricter state and federal regulations, and aging infrastructure, the current stormwater rate, and revenue it generates, is no longer sufficient to support the stormwater utility. Absent additional funding, the Department will not be able to maintain the existing infrastructure or make necessary improvements to aging and failing infrastructure. This will result in the deferral of infrastructure improvements and maintenance, increased risk of flooding and pollution in local waterways. The purpose of this study is to develop the projection of rate revenue needs and the projection of cost -based and proportional rates for the Department’s stormwater customers.

Overview of the Rate Study Process
A comprehensive rate study uses three interrelated analyses to address the adequacy and proportionality of a utility’s rates. These three analyses are a revenue requirement analysis, a

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cost of service analysis, and a rate design analysis. These three analyses are illustrated below in Figure ES – 1.

Figure ES – 1
Overview of the Comprehensive Stormwater Rate Analyses
Th
e above framework was utilized in the development of the Study for reviewing and evaluating the Department’s stormwater rates.

Key Stormwater Rate Study Results
The Study technical analysis was developed based on the historical and projected operating and maintenance (O&M) and capital costs necessary to provide storm water services to the Department’s customers. The stormwater analysis resulted in the following findings, conclusions, and recommendations.
 A revenue requirement analysis was developed for the projected time period of FY 2025 through FY 2034 for the stormwater utility
 The Department’s projected year end FY 2025 and adopted FY 2026 stormwater utility budgets were used as the starting point of the Study
 Operation and maintenance (O&M) expenses are projected to increase at inflationary levels with no assumed changes to levels of service or anticipated extraordinary expenses  One Equivalent Residential Unit (ERU) is equal to 2,347 sq. ft. of impervious area as established by the Department
 A cost of service analysis was developed to review the existing rates and to proportionately distribute the revenue requirement to the total billed ERUs  The results of the cost of service analysis provided the unit costs on a per ERU basis (i.e., cost basis) which were used to establish the proposed stormwater rates  The Study has developed proposed rates for the FY 2027 – FY 2031 time period Revenue Requirement Analysis
Cost of Service Analysis
Rate Design Analysis
Compares the revenues to the expenses
to determine the overall revenue
adjustment required
Distributes the revenue requirement to
the customer classes of service in a
proportional manner
Considers both the revenue
requirement and cost of service
analyses to develop the proposed rates

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 The proposed stormwater revenue adjustments increase the monthly bill from the current rate of $2.10 to a proposed rate of $8.10 by FY 2031

Summary of the Stormwater Revenue Requirement Analysis
The Department’s stormwater utility revenue requirement analysis is the first analytical step in the comprehensive rate study process. The revenue requirement analysis determines the adequacy of the current stormwater rates to fund current and future costs related to both O&M and capital needs. From this comparison, a determination can be made as to the overall level of stormwater rate revenue adjustments needed to provide adequate and prudent funding for the stormwater utility.

For the Study, the revenue requirement was developed for the projected year end FY 2025 and budgeted FY 2026 expenses and a projected time period of FY 2027 – FY 20 34. As a practical matter, a multi-year time frame is recommended to identify major expenses that may be on the horizon. By anticipating future financial requirements, the Department may begin planning for these changes sooner, thereby minimizing short -term rate impacts and overall long -term rates.

While a long-term time period (i.e., 10-years) was developed, the focus of the Study was on the next five-year rate setting period of FY 2027– FY 2031.

The revenue requirement analysis was developed using the “cash basis” approach. The cash basis approach is an industry standard approach and the typical approach used by municipal utilities to set their revenue requirement . Under this approach, the revenues of the utility must be sufficient to recover all cash needs, including O&M expenses, transfer payments, annual debt service payments, and capital projects funded through rates (rate funded capital) . The primary financial inputs in the development of the revenue requirement were the Department ’s budget and financial documents, historical billed customer data, and the Department’s stormwater capital improvement plan. Budgeted O&M expenses were projected using inflationary factors for the Department’s various expenses over the projected time period. These inflationary factors were based on historical Department specific increases in costs and planned changes based on City of Stockton planning and financial projection studies and analyses.

The proper and adequate funding of capital projects is important to help minimize rate increases over time. General financial guidelines state that, at a minimum, a utility should fund an amount equal to, or greater than , the annual depreciation expense through rate revenues. The annual depreciation expense reflects the current investment in plant facilities in service being depreciated or “losing” their useful life. This portion of plant investment needs to be replaced to maintain the existing level of infrastructure (and service levels). However, it must be kept in mind that simply funding an amount equal to the annual depreciation expense will not be sufficient to fund the replacement of an exi sting or depreciated facility. Therefore, consideration should be given to funding within rates an amount greater than the annual depreciation expense for renewal and replacement capital improvement needs.

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As a part of th e Study, the Department made a concerted effort to increase the overall level of “pay-as-you-go” (rate) funding as part of the Department’s capital improvement plan to maintain and improve the stormwater system (e.g., renewal and replacement needs) . Provided below in Table ES – 1 is a summary of the capital funding plan. This shows the annual level of capital projects identified by the Department through recent planning studies, the other funding sources (available reserves), and the amount of rate funded capital over the five-year rate setting period.

A more detailed discussion of the capital funding plan is included in Section 3.2.4 of this report.

Table ES – 1
Summary of the Stormwater Capital Funding Plan ($000)
FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Total Capital
Improvement Projects $1,300 $2,650 $6,625 $10,192 $12,740 $13,250 Less: Other Funding 1,300 1,700 0 167 0 0
Total Rate Funded
Capital $0 $950 $6,625 $10,025 $12,740 $13,250

As a point of reference, the Department’s annual depreciation expense is approximately $ 1.7 million (FY 20 22-2023). The Study has placed the Department’s rate funding for capital improvements at $ 950,000 in FY 202 7 and increases annually over the Study t ime period to prudently fund the identified capital improvement projects. In developing this funding plan, HDR and the Department have attempted to minimize rate impacts while funding the necessary capital improvement plan projects of the stormwater system . HDR has worked with the Department’s financial staff to develop the proposed capital funding plan. It is important to note that HDR is not acting in a municipal advisory role to the Department in the development of the capital funding plan.

Given a projection of O&M and capital expenses, a summary of the stormwater revenue requirement analysis was developed. Provided below in Table ES – 2 is a summary of the revenue requirement analysis for the Department’s stormwater utility.

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Table ES – 2
Summary of the Stormwater Revenue Requirement Analysis ($000) FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Revenues
Rate Revenues $6,097 $6,128 $6,158 $6,189 $6,220 $6,251 Other Revenues 948 895 920 935 976 1,027 Total Revenues $7,045 $7,023 $7,078 $7,125 $7,196 $7,278 Expenses
O&M Expenses $9,197 $10,149 $10,516 $10,897 $11,291 $11,700 Rate Funded Capital 0 950 6,625 10,025 12,740 13,250
Net Annual Debt Service 0 0 0 0 0 0
To / (From) Reserves (2,152) 1,022 195 206 202 198 Total Expenses $7,045 $12,121 $17,335 $21,129 $24,233 $25,148 Bal./(Def.) of Funds $0 ($5,098) ($10,257) ($14,004) ($17,037) ($17,870) A
s can be seen, the revenue requirement has summed the O&M expenses, rate funded capital, net debt service , and reserve funding. The total revenue requirement is then compared to the total sources of funds , which include the rate revenues, at present rate levels, and other miscellaneous revenues. Note revenues assume annual customer growth of 0.5% which increases revenues when calculated at present rates. From this comparison , a balance or deficiency of funds in each year can be determined. This balance or deficiency of funds is then compared to the current level of rate revenues to determine the level of adjustment needed to meet the revenue requirement. It is important to note that the “Bal. / (Def.) of Funds” row is cumulative.

That is, any adjustments in the initial years will reduce the deficiency in later years. Over the rate setting time period, the total deficiency of rate revenue is approximately $17.9 million by FY 2031 absent proposed revenue (rate) increases.

B
ased on the revenue requirement analysis developed herein, HDR has concluded that the Department will need to adjust the level of stormwater revenues received over the next five fiscal years (FY 2027 – FY 2031). HDR has reached this conclusion for the following reasons:
 Adjustments are necessary to fund the Department’s annual system renewal and replacement and system improvement needs
 Adjustments are necessary to maintain prudent funding of annual inflationary increases to O&M expenses in order to maintain stormwater services for the Department’s customers
 The proposed adjustments maintain the Department’s strong financial health and provide long-term, sustainable funding levels for the Department to maintain the stormwater system
In reaching this conclusion, HDR would recommend that the Department adopt the proposed revenue adjustments for FY 2027 through FY 2031 to provide sufficient funding for the O&M and capital improvement needs over the Study time period . A more detailed discussion of the development of the revenue requirement is provided in Section 3 of this report.

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Summary of the Stormwater Cost of Service Analysis
A cost of service analysis determines the proportional distribution of the revenue requirement to the total billed ERUs to establish the proposed stormwater rates. The objective of the cost of service analysis is different from determining the revenue requirement. Whereas the revenue requirement analysis determines the utility’s overall revenue needs, the cost of service analysis determines the proportional distribution of the revenue requirement to establish proposed rates for the proposed time period. In this case, the revenue requirement for FY 2027, the first year of the proposed rate transition plan, was used for establishing the cost of service analysis.

The cost of service analysis is based on generally accepted industry standard approaches. The Department charges customers on an equivalent unit basis and each customer type, residential and non-residential, has a specific number of equivalent residential units (ERUs), which is defined by the Department as 2,347 sq. ft. of impervious surface area. Residential customers are charged one ERU per residence, while non-residential customer charges are based on the density of development factor. The density development factor is a percentage applied to the gross parcel area to determine a customer’s number of ERUs. The density factor for a Commercial customer is 90%, Institutional is 62% and Industrial is 79%. Given this, the cost of service analysis is simplified in that the total costs are divided through by the number of total system ERUs to determine the rate per ERU. Table ES – 3 provides the summary of the cost per ERU as calculated in the Study.

Table ES – 3
Summary of the Stormwater Cost of Service Analysis
Total
Costs [1]
Total
ERUs [2]
Cost per
ERU ($/month)]
$11,226,171 243,168 $3.85
[1] Based on the FY 2027 total revenue requirement less miscellaneous revenues, which is the costs to be recovered through rates
[2] Reflects the number of billed ERUs as provided by the Department for FY 2027

The results of the cost of service analysis, on a per E RU basis, provide the starting point for the proposed rates. Given the requirement s of California Constitution Article XIII D, Section 6 (commonly referred to as Proposition 218), the results of the stormwater cost of service analysis are used to establish the proposed rates. A detailed discussion of the development of the cost of service analysis is provided in Section 4 of the report.

Summary of the Stormwater Rate Design
The final step of the comprehensive rate study process is the design of the proposed stormwater rates to collect the desired levels of revenue, based on the results of the revenue requirement

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and cost of service analys es. The revenue requirement analysis provided a set of recommendations related to annual revenue adjustments, while the cost of service results provide the basis for the development of proportional rates on a per E RU basis for the Department’s customers.

T
he Department currently has a monthly flat rate that applies to all customers on a per ERU basis.

For the City, the basis for one ERU for the residential class of service is 2,347 sq. ft of impervious surface area . Residential customers include Single -Family, Condominiums, Multi- Family and Apartments and are all charged one ERU. A non-residential customer is classified as Commercial, Institutional, or In dustrial. Each of the non -residential customers’ monthly bill s are calculated using the same method, but each class is adjusted by the density of development factor depending on the customer class . As stated previously, the density of development factor is a percentage applied to the gross parcel area used to determine a customer’s number of ERUs to reflect the customer type and impact to the stormwater system . The density of development factor for a Commercial customer is 90%, Institutional is 62%, and Industrial is 79%. These factors are used to determine the Commercial, Institutional, or Industrial customer ERUs, which are then multiplied by the rate per ERU for the total monthly non-residential charge for a given parcel.

G
iven the result s of the revenue requirement , which provided the total revenue needs for the stormwater utility, the cost of service analysis provided the basis for the charge per ERU. Given this, the proposed stormwater rates that have been developed are cost-based and proportional for the Department ’s customers. N ote the structure of the proposed stormwater rate is maintained and only the level of the rate has been adjusted to meet the revenue requirement of the Department’s stormwater utility. Furthermore, the rate for FY 2027 is based on the unit costs developed in the cost of service. The proposed stormwater rate, thereafter (FY 2028 – FY 2031), is increased by the annual revenue requirement adjustment.

P
rovided in Table ES – 4 is a summary of the current and proposed stormwater rates for the Department’s stormwater utility.

Table ES – 4
Summary of the Present and Proposed Stormwater Rates
Present
Rates FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
$/ERU
Rate Per Equivalent Unit $2.10 $3.85 $5.60 $6.85 $7.85 $8.10 A
s shown above, the stormwater rate is proposed to increase over the five-year period to $8.10, or an average of $1.20 per year per month over the five -year period. The development of the stormwater rate design is outlined in detail in Section 5 of the report.

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Summary of the Stormwater Rate Study
The Study has been developed to reflect industry standard approaches and the Department ’s specific system and customer characteristics. The proposed rates are based on the data and assumptions provided during the development of the Study. Should those assumptions change, the proposed rates should be reviewed to determine if changes are necessary.

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1 Introduction and Overview

1.1 Introduction
HDR was retained by the City of Stockton Municipal Utilities Department (Department) to conduct a comprehensive stormwater rate study (Study). The objective of the S tudy was to review the Department’s operating and capital costs to develop a financial plan for the stormwater utility on a standalone basis a s well as cost-based rates that comply with the requirements of Proposition 218. The Study reviewed the adequacy of the existing stormwater rates and provides the framework, cost basis, and proportionality for the proposed stormwater rates.

The Department owns and operates the stormwater system in Stockton, California. The costs , both operating and capital, associated with providing stormwater services to customers have been developed based on financial and operating data provided by the Department and were included within the development of the Study.

Overview of the Stormwater Utility
The Department’s stormwater system protects people, property, and waterways by reducing flood risk, and preventing pollutants from flowing into local rivers, creeks, sloughs, and the Delta.

The Department’s stormwater utility is an enterprise fund and as such is funded primarily through charges (i.e., rates) to the Department’s approximately 243,000 customers benefiting from stormwater services. The stormwater rate is intended to fund the operation, maintenance, and improvements to over 600 miles of pipelin es, over 23,000 catch basins (storm drains), 77 pump stations and 19 detention basins. As noted, the funding is provided primarily through the monthly stormwater rate which was implemented in 1992 and has not been adjusted since that time.

Since the implementation of the stormwater rate, the City has grown, as have the Department’s responsibilities, maintenance of aging infrastructure to provide service, as well as changes in the National Pollutant Discharge Elimination System requirements the Department must meet.

As a result of inflationary increases in operating expenses, stricter state and federal regulations, and aging infrastructure, the current stormwater rate, and revenue it generates, is no longer sufficient to support the stormwater utility. Absent additional funding, the Department will not be able to maintain the existing infrastructure or make necessary improvements to aging and failing infrastructure. This will result in the deferral of infrastructure improvements and maintenance, increased risk of flooding and pollution in local waterways. The purpose of this study is to develop the projection of rate revenue needs and the projection of cost -based and proportional rates for the Department’s stormwater customers.

1.2 Goals and Objectives
The Department had a number of key objectives in developing the stormwater rate study. These key objectives provided a framework for policy decisions in the analyses that followed. The key objectives were:

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 Develop the S tudy in a manner that is consistent with generally accepted industry standard principles and methodologies
 In financial planning and establishing the Department’s rates, review and utilize best industry practices, while recognizing and acknowledging the specific and unique characteristics of the Department’s stormwater system and customers  Review the Department’s rates utilizing generally accepted rate making (cost of service) methodologies to determine the adequacy of the utility rates  Meet the Department’s financial planning criteria and goals, such as adequate funding of capital infrastructure replacement and maintenance of adequate and prudent reserve levels
 Develop a financial plan which supports the stormwater utility’s funding requirements, while attempting to minimize overall impacts to rates
 Provide rates designed to meet the intent and requirements of California Constitution Article XIII D, Section 6 (commonly referred to as Proposition 218)

1.3 Overview of the Rate Study Process
Rates must be set at a level where a utility’s annual O&M and capital expenses are met with the annual revenues received from customers. This is an important point, as failure to achieve this objective may lead to insufficient funds to maintain system integrity. To evaluate the adequacy of the existing stormwater rates, a comprehensive rate study is performed. A comprehensive rate study consists of three interrelated analyses. Figure 1 – 1 provides an overview of these analyses.

Figure 1 – 1
Overview of the Comprehensive Stormwater Rate Analyses
T
he above framework for reviewing and evaluating rates was utilized for the development of the Study. As noted, the stormwater utility was reviewed on a stand-alone basis – that is, no funding from other Department or City funds was assumed – to determine the level of adequate funding needs from the utility’s rate revenues.

Revenue Requirement Analysis
Cost of Service Analysis
Rate Design Analysis
Compares the revenues to the expenses
to determine the overall rate adjustment
required
Distributes the revenue requirement to
the identified customer classes of service
in a proportional manner
Considers both the revenue
requirement and cost of service
analyses to develop the proposed rates

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1.4 Organization of the Study
This report is organized in a sequential manner that first provides an overview of utility rate setting principles, followed by sections that detail the specific steps used to review and develop the Department’s proposed stormwater rates. The following sections comprise the Department’s stormwater rate study report:

Section 2 – Overview of Rate Setting Principles
Section 3 – Stormwater Revenue Requirement Analysis
Section 4 – Stormwater Cost of Service Analysis
Section 5 – Stormwater Rate Design Analysis
Technical Appendices are attached at the end of this report, which detail the technical analyses that were undertaken in the preparation of the Study.

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2 Overview of Rate Setting Principles

2.1 Introduction
This section of the report provides background information about the stormwater rate setting process, including descriptions of generally accepted principles, types of utilities and methods of determining the revenue requirement, cost of service, and rate design analyses. This information is useful for gaining a better understanding of the details presented in Sections 3 through 5 of this report.

2.2 Generally Accepted Rate Setting Principles
As a practical matter, all utilities should consider setting their rates around some generally accepted or global principles and guidelines. Utility rates must be cost-based, proportional, and set at a level that meets the utility’s full revenue requirement. As a result of setting proportional, cost-based rates, and in addition to the prior noted goals, utility rates should also be:
 Easy to understand and administer
 Designed to conform to “generally accepted” rate setting techniques  Established at a level that is stable from year-to-year from a customer’s perspective

2.3 Determining the Revenue Requirement
Most public utilities use the cash basis1 approach for establishing their revenue requirement and setting rates. This approach conforms to most public utility budgetary requirements and the calculation is straightforward and easy to understand. A public utility totals its cash expenditures for a period of time to determine its required revenues for that time period. The revenue requirement for a public utility is usually comprised of the following costs or expenses:

Total Operating Expenses: This includes a utility’s o peration and maintenance (O&M) expenses, plus applicable taxes or transfer payments . O&M expenses include the materials, electricity, labor, supplies, etc., needed to keep the utility functioning.

Total Capital Expenses: Capital expenses are calculated by adding debt service payments (principal and interest) to capital replacements financed with rate revenues. In lieu of including capital replacements financed with rate revenues, a utility can include annual depreciation expense to stabilize the annual revenue requirement.

1 “Cash basis” as used in the context of rate setting is not the same as the terminology used for accounting purposes and the recognition of revenues and expenses. As used for rate setting, “cash basis” refers to the specific cost components to be included within the revenue requirement analysis.

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Under the cash basis approach, the sum of the total O&M expenses plus the total capital expenses equals the utility’s total revenue requirement during any selected period of time (historical or projected).

Note that the two portions of the capital expen se component (debt service and rate funded capital) are necessary under the cash basis approach as utilities generally cannot finance all of their capital facilities with long-term debt. At the same time, it is often difficult to pay for capital expenditures on a “pay -as-you-go” basis given that some capital projects may have significant rate impacts on a utility, even when financed with long-term debt. Many utilities have found that a combination of pay -as-you-go funding and long -term financing will often lead to the minimization of rate increases over time.

While public utilities typically use the cash basis approach to establish their revenue requirement, an exception can occur if a public utility provides service to a large wholesale or co ntract customer. In this situation, a public utility may use the utility basis approach (see Table 2 – 1) regarding earning a reasonable return on its investment.

Table 2 – 1
Cash Basis versus Utility Basis Comparison
Cash Basis Utility Basis (Accrual)
+ O&M Expenses + O&M Expenses
+ Taxes / Transfer Payments + Taxes/Transfer Payments
+ Capital Improv. Funded From Rates
(≥ Depreciation Expense) + Depreciation Expense
+ Debt Service (Principal + Interest) + Return on Investment = Total Revenue Requirement = Total Revenue Requirement

2.4 Analyzing Cost of Service
After the total revenue requirement is determined, it is proportionately distributed to the users of the service (i.e., customer classes/rate schedules) . The distribution of costs , as analyzed through a cost of service analysis , reflects the cost relationships for providing stormwater services. A cost of service analysis results in the following three analytical steps:

1. Costs are functionalized or grouped into the different cost categories related to providing service. For a stormwater utility, this typically includes collection and pumping. This step is largely accomplished by the utility’s accounting system (chart of accounts).

2. The functionalized costs are then allocated to specific cost components. Allocation refers to the arrangement of the functionali zed data into the appropriate cost component (s).

For example, stormwater costs are typically allocated as volume and customer -related costs.

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3. Once the costs are allocated to the appropriate cost component(s), each cost component is then proportionally distributed to each customer class of service ( e.g., residential , commercial, industrial). The distribution is based on each customer class’s relative or proportional contribution to the cost component . For example, customer -related costs are distributed to each class of service based on the total number of custo mers in each class of service. Once costs are distributed, the total amount of revenues needed from each customer class of service, to achieve cost-based rates, can be determined.

N
ote that the cost of service approach can vary from utility to utility. Typically, the approach will be based on the current, or proposed, rate structure. For example, an equivalent billing unit approach infers the proportionality between customers based on the definition of the equivalent billing unit and the cost of service analysis c an be simplified by dividing the total costs by the number of equivalent billing units the system serves. As a result, each cost of service analysis is specifically developed based on the unique characteristics, billing approach, customer base, and rate structure of the specific utility.

2.5 Designing Utility Rates
Rates that meet the utility’s objectives are designed based on the results of the revenue requirement and cost of service analys es. This approach results in rates that are strictly cost- based. While rate -setting can consider factors such as ability to pay, continuity of past rate philosophy, economic development, ease of administration, and customer understanding , such factors are incidental to cost -based, proportional rates . T he proposed rates must take into consideration each customer class’s proportionate share of costs distributed through the cost of service analysis to meet the requirements of the California Constitution.

2.6 Economic Theory and Rate Setting
One of the major justifications for a comprehensive rate study is founded in economic theory. Economic theory suggests that the price of a commodity must roughly equal its cost if parity among customers is to be maintained. This statement’s implications on utility rate designs are significant. When costing and pricing techniques are refined, consumers have a more accurate
understanding of the cost to provide stormwater service. “Economic theory suggests
that the price of a
commodity must roughly
equal its cost if parity
among customers is to be
maintained.”

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3 Stormwater Revenue Requirement

3.1 Introduction
This section of the report details the development of the revenue requirement analysis for the Department’s Study. The revenue requirement analysis is the first analytical step in the comprehensive rate study process. From this analysis , a determination can be made as to the overall level of rate revenue adjustments needed to provide adequate and prudent funding for both O&M and capital needs of the utility. The primary objective of the Study was to develop cost-based and proportional rates that comply with the California Constitution.

3.2 Determining the Revenue Requirement
In developing the Department’s stormwater revenue requirement for the Study period, the objective is that the utility must financially “stand on its own” and be properly funded. That is, no rate revenues are transferred from other Department or City funds to support the stormwater utility. As a result, the revenue requirement analysis assumes the full and proper funding needed to operate and maintain the stormwater system on a financially sound and prudent basis over the Study time period.

3.2.1 Establishing a Time Frame and Approach
To begin calculating the revenue requirement for the Department’s stormwater utility, a time frame was established for the analysis (i.e., the Study period). The Study period was defined as the projected year end FY 20 25 and adopted FY 2026 budgets plus an 8-year review period (FY 2027 – FY 2034). This time period was determined to be an appropriate amount of time for the revenue requirement analysis to evaluate the data and information and establish proposed rates for the next five fiscal years . The revenue requirement was proj ected over a multi -year period based on assumed escalation factors as well as historical figures and anticipated projections .

Reviewing a multi-year time period is recommended to identify major expenses that may be on the horizon. By anticipating future financial requirements, the Department can begin planning for these changes sooner, thereby minimizing short -term rate impacts and overall long -term rates.

The second step in determining the revenue requirement was to determine t he basis for accumulating costs. As discussed in Section 2 of the report, the revenue requirement analysis was developed using the cash basis approach. The cash basis approach is the typical methodology utilized by municipal utilities to set their revenue requirement. This is also the methodology that the Department has historically used to establish its stormwater revenue requirement. Table 3 – 1 provides a summary of the cash basis approach and the cost components used to develop the Department’s stormwater revenue requirement.

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Table 3 – 1
Overview of the Department’s Cash Basis Revenue Requirement + Stormwater Operation and Maintenance Expenses
+ Transfers
+ Rate Funded Capital
+ Debt Service (Principal + Interest) – Existing and Future ± Reserve Funding________________________________
= Total Stormwater Revenue Requirement
− Miscellaneous Revenues__________________________
= Net Revenue Requirement (Balance Required from Rates) G
iven a time period around which to develop the revenue requirement and a method to accumulate the costs , the focus shifts to the development and projection of the revenues and expenses of the Department’s stormwater utility.

T
he primary financial inputs in the development of the revenue requirement were the Department’s projected year end FY 20 25 and adopted FY 2026 budget documents , recent customer billing data, historical financial reports, and the Department’s capital improvement plan (CIP). Presented below is a detailed discussion of the steps and key assumptions contained in the development of the projections of the Department’s stormwater revenue requirement analysis.

3.2.2 Projecting Rate and Other Miscellaneous Revenues
The first step in developing a projection of the stormwater rate revenues, at present rate levels, was to determine the projected billing units for each customer group. The billing units for each customer group were based on recent customer billing data to determine the current customer billing characteristics . These billing units were then multiplied by the applicable current stormwater rates. This method of
independently calculating revenues
links the projected revenues used
within the analysis to the projected
billing units. It also helps to confirm
that the billing units used within the
Study are reasonable for purposes of
projecting future rev enues,
distributing costs and ultimately,
establishing the proposed rates. The
rate revenues are also shown in
Exhibit 3 under “Rate Revenues” for
FY 2025.

Based on the Department’s adopted stormwater rate schedule, the majority of the rate revenues are derived from non-residential customers. In total, and a t currently adopted rate levels, the Residential $2,509
Non-Residential
$3,558
FY 2025 Rate Revenues ($000s)

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Department’s stormwater system is projected to receive approximately $ 6.1 million in rate revenue in FY 20 26. Based on current City planning documents, the Study has assumed a conservative level of customer account growth of 0.5% / year. By FY 20 34, the rate revenues - assuming no rate adjustments - are projected to be approximately $ 6.3 million. The detailed calculation of the revenues at present rates is included in Exhibit 5 of the Technical Appendix.

In addition to rate revenues, the Department also receives other miscellaneous revenues. These are revenues related to interest income, storm drain administration fees, agency reimbursements, etc. In total, the Department is projected to average approximately $991,000 annually in miscellaneous revenues over the projected time period.

On a combined basis, taking into account rate revenues and miscellaneous revenues, the Department’s stormwater utility has total projected revenues of approximately $7.0 million in FY 2026, increasing to approximately $7.4 million by FY 2034 as a result of the estimated growth as noted above. The assumptions used for projecting growth and increases in miscellaneous revenues can be found in Exhibit 2 of the Technical Appendix. Furthermore, the projection of rate and miscellaneous revenues can be found in Exhibit 3 of the Technical Appendix.

3.2.3 Projecting Operation and Maintenance Expenses
Operation and maintenance (O&M) expenses are incurred by the Department to maintain the stormwater system at a consistent service level . The starting point of the projection of O&M expenses was the Department’s projected year end FY 202 5 and adopted FY 2026 budgets.

Budgeted O&M expenses were projected over the S tudy time period based on his torical inflationary factors. These factors took into consideration the Department’s historical and projected cost increases. The factors ranged from 2. 8% to 25.0% annually for the various types of expenses (e.g., labor , benefits, materials & supplies). Several specific costs were adj usted based on known increases and were provided by the Department and City staff. These were items related to CalPERS and other benefit related costs. In total, O&M expenses were projected to increase at an average annual inflation rate of approximately 6.4% over the Study time period.

As a note, this is consistent with annual changes in stormwater O&M costs over the past several years. The total operation and maintenance expenses for the stormwater utility are budgeted to be approximately $ 9.2 million in FY 20 26. Over the five-year rate setting period, total O&M expenses are projected to increase to approximately $11.7 million by FY 2031. A summary of the O&M expenses is shown as a line item in Table 3 – 3 and Exhibit 3 of the Technical Appendix.

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3.2.4 Projecting Capital Funding Needs
A key component in the development of the stormwater revenue requirement is to properly and adequately fund capital improvement needs in the near and long term. One of the major issues facing utilities across the U.S. is the amount of deferred capital projects and funding pressure from regulatory-related improvements. The proper and adequate funding of capital projects is an important issue for all stormwater utilities and is not just a local issue or concern of the Department. To accomplish this, the Department recently completed a master plan for the stormwater system, which resulted in the identification of a c apital improvement plan (CIP) to address both the short and long-term capital needs of the stormwater utility. The Department’s CIP outlines the infrastructure improvements necessary to provide stormwater service to existing and future stormwater customers.

In general, there are three types of capital projects that the Department may need to fund. These include the following types:

Renewal and replacement projects
Growth/capacity expansion projects
Regulatory-related projects

A renewal and replacement project is essentially a project to maintain the existing system that is in place today. E xisting facilities become worn out, obsolete, etc. T he Department should continuously be making investments to maintain the integrity of the facilities with renewal and replacement projects to ensure continued, uninterrupted stormwater service. Growth or capacity expansion projects are related to providing service to new customers. This may be through expansion of the existing system or construction of new facilities to provide service to customers within the Department’s service area. Additionally, certain projects may be a function of a regulatory requirement in which the Federal or State government mandates the need for an improvement to the system to meet regulatory standards. Understanding these different types of capital projects is important because it may help to explain why costs are increasing and as a result, the cost drivers for any needed rate adjustment.

The way in which projects are funded may vary by the type of capital project. For example, renewal and replacement projects should be funded through annual rates on a “pay-as-you-go basis”. In contrast to this, growth or capacity expansion projects may be funded through the collection of connection fees (i.e., growth -related charges) in which new development pays a proportional share of the cost of improvements required as a result of their connection (impact).

Finally, regulatory projects may be funded by a variety of different means, which may include one or more sources such as rates, long-term debt, grants, etc.

While the above discussion appears to neatly divide capital projects into three clearly defined categories, the reality of working with specific capita l projects may be more complex. For example, a pump may be replaced, but while being replaced, it is upsized to accommodate the need for greater capacity. There are many projects that share these “joint” characteristics. At the same time, projects may not be “replacement” related, but rather “improvement” related.

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The Department recently completed a master planning process for the stormwater system, which identified priority projects. Important to note is that the Study includes only Priority 1 projects during the five-year rate setting period. Note that the master plan identified additional priority projects that the Department will need to complete outside the Study review period. Provided below in Table 3 – 2 is a summary of the stormwater capital funding analysis for the rate setting period.

Table 3 – 2
Summary of the Stormwater Capital Improvements ($000)
FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Capital Improvement Projects $1,300 $2,480 $2,328 $1,035 $736 $299 Master Plan Projects 0 0 4,206 9,156 9,431 12,552
Future Unidentified Capital Improv. 0 0 0 0 0 0
Transfer to Capital Reserve 0 170 92 0 2,573 400 Total Capital Improvement Projects $1,300 $2,650 $6,625 $10,192 $12,740 $13,250 Less: Other Funding Sources
Operating Fund - Stormwater $0 $0 $0 $0 $0 $0
Capital Fund - Stormwater 0 0 0 167 0 0
State Grants 1,300 1,700 0 0 0 0
New Public Works Trust Fund Loans 0 0 0 0 0 0
New Revenue Bonds 0 0 0 0 0 0 Total Other Funding Sources $1,300 $1,700 $0 $167 $0 $0 Rate Funded Capital $0 $950 $6,625 $10,025 $12,740 $13,250

As shown in Table 3 – 2, the funding of capital is provided through annual rate levels (“Rate Funded Capital”), state grants, and available reserves. In this way, no long-term debt is issued to fund the CIP during the Study rate setting period and the CIP is funded on a pay -as-you-go approach.

While the total amount of a project may vary from year to year, the stormwater capital funding plan has attempted to provide a consistent funding source for the replacement of deteriorating system assets. In this case, the stormwater utility’s rates will fund an amount of $950,000 in FY 2027. Given the identified capital needs for the stormwater system , the Department is committed to making an effort to increase this funding component to maintain the stormwater infrastructure and replacement needs . As such, the rate funded ca pital is projected to increase annually to $13.3 million by FY 2031. Note in some years rate funded capital exceeds total capital improvements. In those years funds are transferred to reserves to fund projects in subsequent years. To establish a prudent level of annual replacement funding through rates, HDR worked with Department staff to develop a funding plan for the CIP . In developing this financial plan, HDR and the Department have attempted to minimize rate impacts while funding the planned capital projects of the Department.

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3.2.5 Projection of Debt Service
The Department currently has no outstanding long -term debt issuances related to the stormwater utility. As noted previously, no new additional debt has been assumed during the Study rate setting period.

It is important to note that HDR is not advising the Department on the terms of any long-term debt issuances but rather identifying the overall funding needs. As noted previously , HDR is not acting in a municipal advisor role to the Department for the issuance of any long-term borrowing.

3.2.6 Reserve Funding
The final component of the revenue requirement analysis is reserve funding. This can be described as additional transfers of revenue to reserve funds to maintain prudent ending fund balances or for future funding of specific or unanticipated projects. Additionally, the balance of funds after the expenses are paid is transferred to the operating fund to maintain minimum fund balances. The Department has a reserve policy in place to maintain six months of operating expenses in reserves , which is equal to approximately $ 4.5 million for FY 2 026. The Study was developed to meet this target minimum over the review period (FY 2027 – FY 2031). During the Study time period, reserve levels are used to smooth out the rate adjustments as needed in some years and transferred in others if available to continue to maintain prudent ending reserve balances.

3.2.7 Summary of the Stormwater Revenue Requirement
Given the above projections of revenues and expenses, a summary of the stormwater revenue requirement analysis can be developed. In developing the revenue requirement analysis, consideration was given to the financial planning considerations of the Department. In particular, emphasis was placed on attempting to minimize rates yet still having adequate funds to support the operational activities and funding of capital projects throughout the Study time pe riod.

Presented below in Table 3 – 3 is a summary of the Department’s projected stormwater revenue requirement. Detailed exhibits of this analysis can be found in the Technical Appendix (Exhibits 1 – 5).

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Table 3 – 3
Summary of the Stormwater Revenue Requirement Analysis ($000) FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Revenues
Rate Revenues $6,097 $6,128 $6,158 $6,189 $6,220 $6,251 Other Revenues 948 895 920 935 976 1,027
Total Revenues $7,045 $7,023 $7,078 $7,125 $7,196 $7,278 Expenses
O&M Expenses $9,197 $10,149 $10,516 $10,897 $11,291 $11,700 Rate Funded Capital 0 950 6,625 10,025 12,740 13,250 Net Annual Debt Service 0 0 0 0 0 0
To / (From) Reserves (2,152) 1,022 195 206 202 198 Total Expenses $7,045 $12,121 $17,335 $21,129 $24,233 $25,148 Bal./(Def.) of Funds $0 ($5,098) ($10,257) ($14,004) ($17,037) ($17,870)

As can be seen, the revenue requirement has summed the O&M, annual rate funded capital, net annual debt service, and reserve funding components. The total revenue requirement is then compared to the total revenues, which include both rate revenues – at current rate levels – and other revenues. Note, revenues are increasing based on the assumed growth in customers which increases revenues when calculated at present rate levels.

From this comparison , a balance or deficiency of funds in each year can be determi ned. This balance or deficiency of funds is then compared to the projected revenues from current rates to determine the level of rate adjustment needed to meet the revenue requirement. It is important to note that the “Bal. / (Def.) of Funds” row is cumulative. That is, adjustments in the initial years will reduce the deficiency in later years.

The revenue requirement in Table 3 – 3 ha s been developed to meet the financial planning objectives of the Department . More specifically, and as an enterprise fund, the Department needs to adequately and prudently fund its stormwater operating and capital needs, for this study only Priority 1 projects were included . The proposed revenue adjustments are a function of assumed inflation over the time period , coupled with the need to increase capital improvement funding from rates (renewal and replacement funding) , as well as maintaining prudent financial metrics (e.g., minimum reserve levels).

Over the five -year rate setting period, a nnual deficiencies range from $ 5.1 million to $17.9 million. Over the Study time period, the total deficiency in revenues is approximately $64.3 million absent rate revenue increases. The overall revenue adjustment reflects the revenues needed for the system as a whole. The more detailed revenue requirement analysis is included in Exhibit 3 of the Technical Appendix.

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3.3 Consultant’s Conclusions
Based on the revenue requirement analysis developed herein, HDR recommends that the Department increase stormwater revenues over the next five -year period (FY 2027 – FY 2031).

HDR has reached this conclusion for the following reasons:

Revenue adjustments are necessary to fund the Department’s capital improvement needs, which have been outlined by a system review and planning process Revenue adjustments are necessar y to reflect current an d ongoing annual inflationary costs related to the O&M expenses of the stormwater utility The proposed revenue adjustments provide an approach for the Department to provide long-term, sustainable funding levels for the stormwater utility In reaching this conclusion, HDR would recommend that the Department adopt the proposed revenue adjustments in order to provide sufficient funding for annual O&M and capital improvement projects over the next five-year period.

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4 Stormwater Cost of Service

4.1 Introduction
In the previous section, the revenue requirement analysis focused on the total sources and applications of the revenues required to adequately fund the Department’s stormwater utility O&M and capital expenses . This section will provide an overview of the cost of service analysis developed for the Department’s stormwater utility.

The stormwater cost of service analysis is concerned with the proportional distribution of the total revenue requirement on a per equivalent residential unit (ERU). This provided the cost basis and proportionality for the rate on a per ERU basis. The previously developed revenue requirement was utilized in the development of the cost of service analysis. It should be noted that given the use of an ERU to apply the stormwater rates, the cost of service analysis is simplified.

4.1.1 Objectives of a Cost of Service Analysis
The primary objective of a cost of service analysis is the proportional manner in which to collect the revenue requirement from the Department ’s stormwater customers on an ERU basis. As noted, the cost of service analysis is simplified for the stormwater utility given the use of an established ERU that is applied to all customers based on the impervious square footage of each customer in relation to the square footage identified by the Department as 2,347 sq. ft. per ERU.

This results in the development of proposed stormwater rates that properly reflect the costs incurred by the Department and impacts customers place on the stormwater system.

4.2 General Cost of Service Procedures
In order to determine the proportional cost to serve each customer on the Department’ s stormwater system, a cost of service analysis is conducted. For the Department’s cost of service analysis, the process was abbreviated as the total costs are shared by customers based on the total number of ERUs. The stormwater cost of service analysis consisted of dividing the total revenue requirement by the total number of billed ERUs given the establishment of an ERU by the Department.

4.3 Summary of the Stormwater Cost of Service Analysis
In summary, the cost of service analysis began by taking the FY 202 7 revenue requirement and total billed ERUs. Then, the unit cost per ERU was calculated by dividing the total revenue requirement by the total billed ERUs. Provided in Table 4 – 1 is a summary of the distribution of the revenue requirement to the equivalent residential units.

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Table 4 – 1
Summary of the FY 2027 Stormwater Cost of Service Analysis

FY 2027
Current Rate
Revenues
FY 2027
Revenue
Requirement
$
Difference
All Customers $6,127,822 $11,226,171 $5,098,348

Equivalent Residential Units 243,168 243,168
$/ERU/Month $2.10 $3.85 $1.75

The results of the cost of service analysis indicate the need to increase the rate per ERU in FY 2027 to reflect the costs of providing stormwater service on a per ERU basis. The development of the stormwater cost per ERU is provided in Exhibits 6 through 13 of the Stormwater Technical Appendix.

4.4 Consultant’s Conclusions and Recommendations
The results of the cost of service analysis reflect the results of the revenue requirement and indicate the need for an increase in the stormwater rate per ERU. Given this, HDR recommends the Department adjust the stormwater rate to reflect the results of the cost of service analysis on a per ERU basis.

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5 Stormwater Rate Design Analysis

5.1 Introduction
The final step of the Department ’s comprehensive stormwater rate study is the design of rates to collect the appropriate level of revenues based on the results of the revenue requirement and cost of service analyses. In reviewing the Department’s rates, consideration is given to the level of the rates and the structure of the rates as developed in the prior two analyses.

5.2 Rate Design Criteria and Considerations
Rates must be set in accordance with Proposition 218, and in a manner that proportionally allocates the utility’s cost of service to each parcel through their respective rates. A utility may consider additional criteria, provided they do not result in rates that are not based on the proportional cost of service. Some of these rate design criteria are listed below:

Rates which are easy to understand from the customer’s perspective Rates which are easy for the utility to administer
Consideration of the customer’s ability to pay
Continuity, over time, of the rate making philosophy
Policy considerations (encourage efficient use, economic development, etc.) Provide revenue stability from month to month and year to year Promote efficient allocation of the resource
Non-discriminatory (cost-based)
Compliant with State law
The Department may consider various cost-based rate structures that have incidental benefits of sending proper price signals as to what their usage or volumetric contributions are costing. This goal may be approached through rate level and structure, provided the resulting rates reflect the proportional cost of service . When developing the proposed rate designs, all the above -listed criteria can be taken into consideration. However, it should be noted that it is difficult, if not impossible, to design a rat e that meets all the goa ls and objectives listed above. For example, designing a rate that is cost -based may not reflect the customer’s ability to pay. In designing rates, there are always trade-offs between these goals and objectives.

5.3 Development of Cost-Based Stormwater Rates
Calculating cost-based and proportional rates is of paramount importance in developing the proposed stormwater rates. While always a key consideration in developing rates, meeting the legal requirements and documenting the steps taken to meet said requirements has been in the forefront with the recent legal challenges in the State of California on utility rates. Given this, the Department’s proposed stormwater rates have been developed to meet the legal requirements of California Constitution Article XIII D, Section 6 (Article XIII D). A key component of Article XIII D is the development of rates which reflect the cost of providing service and are proportiona tely distributed between the customer classes of service and the customers within each class . HDR would point out that there is no single methodology for equitably assigning costs to the customer

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classes of service. Article XIII D is not prescriptive and does not provide a specific methodology for establishing rates. Given that, HDR developed the Department’s proposed stormwater rates based on generally accepted rate setting methodologies to meet the requirements of Article XIII D.

HDR is of the opinion that the proposed rates meet the legal requirements of Article XIII D . HDR reaches this conclusion based upon the following:

The revenue derived from stormwater rates do es not exceed the funds required to provide the property related service (i.e. , stormwater service). The proposed rates are designed to collect the overall revenue requirement of the Department’s stormwater system.

The revenues derived from stormwater rates shall not be used for any purpose other than that for which the fee or charge is imposed. The revenues derived from the Department’s stormwater rates are used exclusively to operate , maintain and fund the Department’s stormwater system.

The amount of a fee or charge imposed upon a parcel or person as an incident of property ownership shall not exceed the proportional costs of the service attributable to the parcel. Section 4 of th e S tudy focused exclusively on the issue of proportional assignment of costs on an equivalent unit basis. The proposed rates have appropriately distributed costs on a per ERU basis to reflect the costs of providing stormwater services (i.e., the benefits they receive from and burdens they place on the system) based on the square footage of impervious area of a given parcel. Utilizing ERUs establishes the proportionality expected under Proposition 218 by developing an equivalent unit that is applied to all customers, which reflects the manner in which these costs are incurred by the Department and the impacts stormwater customers place on the system.

5.4 Overview of the Present and Proposed Stormwater
Rates
The Department currently has a single monthly flat rate for all customers on a per ERU basis. For the City, the basis for one ERU for the residential class of service is 2,347 sq. ft of impervious surface area. Residential customers include Single -Family, Condominiums, Multi- Family and Apartments. A non-residential customer is classified as Commercial, Industrial, or Institutional.

Each of the non-residential customers’ monthly bills are calculated using the same method, but each class is adjusted by the density of development factor depending on the customer class. As stated previously, the density of development factor is a percentage applied to the gross parcel area used to determine a customer’s number of ERUs. The density of development factor for a Commercial customer is 90%, Institutional is 62%, and Industrial is 79% based on the Department’s approach. These factors are used to determine the Commercial, Industrial, or Institutional customer ERUs, which are then multiplied by the rate per ERU for the total monthly non-residential charge for a given parcel.

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Given the results of the revenue requirement and cost of service analyses, a proposed stormwater rate has been developed that reflects the proportional distribution of the costs of providing stormwater service to the Department’s customers on a per ERU basis. It is important to note that the structure, based on an ERU, of the proposed stormwater rate is recommended to be maintained at this time. Therefore, only the level of the rate has been adjusted to meet the revenue requirement of the Department’s stormwater utility. Furthermore, the rate for FY 2027 is based on the unit cost developed in the cost of service analysis. The proposed stormwater rate, thereafter, is increased by the annual revenue requirement adjustment to recover the revenues to support the identified O&M and capital expenses in each year.

Provided in Table 5 – 1 is a summary of the current and proposed stormwater rates for the Department’s stormwater utility.

Table 5 – 1
Summary of the Present and Proposed Stormwater Rates
Present
Rates FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
$/ERU
Rate Per Equivalent Unit $2.10 $3.85 $5.60 $6.85 $7.85 $8.10

5.5 Summary of the Stormwater Rate Study
This completes the analysis for the Department’s stormwater utility . This Study has provided a comprehensive review and development of proposed stormwater rates. Based on the Department’s system and customer characteristics, the proposed stormwater rates appropriately reflect the cost to provide service and are proportionally distributed to the total billed ERUs. Full and complete technical appendices of the development of the comprehensive stormwater rate study and the proposed revenue adjustments can be found in the Technical Appendix of this report.

The Study was developed based on existing operating expenses and the adopted capital plan, along with assumptions of cost escalation and customer growth as examples. Should the assumptions or data change, the Study should be revisited and updated to reflect these changes to maintain cost-based and proportional stormwater rates.

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Technical Appendix – Stormwater

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FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 Revenues
Total Rate Revenues $6,067,001 $6,097,336 $6,127,822 $6,158,462 $6,189,254 $6,220,200 $6,251,301 $6,282,558 $6,313,970 Total Miscellaneous Revenue 922,274 947,597 894,867 919,738 935,267 975,846 1,026,866 1,048,340 1,085,150 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Revenues $6,989,275 $7,044,932 $7,022,689 $7,078,200 $7,124,521 $7,196,046 $7,278,167 $7,330,898 $7,399,120 Expenses
Total O & M Expense $7,532,340 $9,196,577 $10,149,202 $10,515,797 $10,897,478 $11,290,642 $11,700,101 $12,126,676 $12,571,237 Total Taxes and Transfers 0 0 0 0 0 0 0 0 0
Net CIP From Rates 0 0 950,000 6,625,000 10,025,000 12,740,000 13,250,000 13,725,000 14,190,000 Net Debt Service 0 0 0 0 0 0 0 0 0
General Fund Back Payment 0 0 0 0 0 0 0 0 0
---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Application of Funds $7,532,340 $9,196,577 $11,099,202 $17,140,797 $20,922,478 $24,030,642 $24,950,101 $25,851,676 $26,761,237 Total Reserve Funding ($543,065) ($2,151,645) $1,021,836 $194,690 $206,130 $202,481 $198,282 $190,295 $196,070 Total Revenue Requirement $6,989,275 $7,044,932 $12,121,038 $17,335,487 $21,128,608 $24,233,123 $25,148,383 $26,041,971 $26,957,306 Bal. /(Def.) of Funds $0 $0 ($5,098,348) ($10,257,287) ($14,004,087) ($17,037,076) ($17,870,216) ($18,711,073) ($19,558,186) Debt Service Coverage Ratio (all debt, including taxes and transfers) Before Rate Adjustment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 After Proposed Rate Adjustment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 Ending Fund Balance $8,387,043 $4,088,902 $5,280,976 $5,567,168 $5,606,565 $8,381,954 $8,980,051 $9,170,346 $7,647,127 Exhibit 1
Summary of the Revenue Requirement
Stormwater Rate Study
City of Stockton

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City of Stockton
Stormwater Rate Study
Escalation Factors
Exhibit 2
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Revenues
Customer Growth 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% 0.5% Miscellaneous Revenues 1.0% 1.0% 1.0% 1.0% 1.0% 1.5% 1.5% 1.5% 1.5% 1.5% Expenses
Labor Budget Budget 22.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Provided by Budget Office Benefits - Medical Budget Budget 22.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Provided by Budget Office Benefits - Retirement Budget Budget 25.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% 6.0% Provided by Budget Office Benefits - Other Budget Budget 22.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Provided by Budget Office Materials & Supplies Budget Budget 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% 3.2% Equipment Budget Budget 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% 4.0% Miscellaneous Budget Budget 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% 2.8% Utilities Budget Budget 4.0% 4.0% 4.0% 3.5% 3.5% 3.5% 3.5% 3.5% CIP Budget 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Insurance Budget Budget 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% 9.0% Provided by Budget Office Interest 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3% 2.3%
New Debt Service Assumptions
Revenue Bond
Term in Years 30 30 30 30 30 30 30 30 30 30
Rate 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0% 5.0%
Notes

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City of Stockton
Stormwater Rate Study Page 1 of 7
Revenue Requirement Analysis
Exhibit 3
Proj Yr End Budget
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Revenues
Rate Revenues
Residential $2,508,761 $2,521,305 $2,533,911 $2,546,581 $2,559,314 $2,572,110 $2,584,971 $2,597,896 $2,610,885 $2,623,939 Customer Growth Non-Residential 3,558,240 3,576,031 3,593,911 3,611,881 3,629,940 3,648,090 3,666,330 3,684,662 3,703,085 3,721,601 Customer Growth ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Rate Revenues Total Rate Revenues $6,067,001 $6,097,336 $6,127,822 $6,158,462 $6,189,254 $6,220,200 $6,251,301 $6,282,558 $6,313,970 $6,345,540 Miscellaneous Revenue
Interest Income $175,000 $168,277 $107,754 $124,754 $132,333 $160,868 $199,663 $208,730 $232,945 $180,632 Calculated on Reserves Commercial Fse Inspct FeeCommercial Fse Inspct Fee 60,000 70,000 70,700 71,407 72,121 73,203 74,301 75,415 76,547 77,695 Miscellaneous Revenues Construction InspectionsConstruction Inspections 90,000 100,000 101,000 102,010 103,030 104,576 106,144 107,736 109,352 110,993 Miscellaneous Revenues Sw Qualty Cntrl Crit PlanSw Qualty Cntrl Crit Plan 19,719 20,000 20,200 20,402 20,606 20,915 21,229 21,547 21,870 22,199 Miscellaneous Revenues Admin Fee Storm DrainsAdmin Fee Storm Drains 110,569 117,176 118,348 119,531 120,727 122,537 124,376 126,241 128,135 130,057 Miscellaneous Revenues Agency ReimbursementsAgency Reimbursements 360,800 371,444 375,158 378,910 382,699 388,440 394,266 400,180 406,183 412,276 Miscellaneous Revenues Fines & Penalties 106,186 100,700 101,707 102,724 103,751 105,308 106,887 108,491 110,118 111,770 Miscellaneous Revenues -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Total Miscellaneous RevenueTotal Miscellaneous Revenue $922,274 $947,597 $894,867 $919,738 $935,267 $975,846 $1,026,866 $1,048,340 $1,085,150 $1,045,620 Total Revenues $6,989,275 $7,044,932 $7,022,689 $7,078,200 $7,124,521 $7,196,046 $7,278,167 $7,330,898 $7,399,120 $7,391,160 Notes
Projected

ATTACHMENT A
385
City of Stockton
Stormwater Rate Study Page 2 of 7
Revenue Requirement Analysis
Exhibit 3
Proj Yr End Budget
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Notes Projected
Expenses
Utility Billing
Utility BillingSalaries - RegularSalaries - Regular $145,591 $150,288 $183,351 $188,852 $194,517 $200,353 $206,364 $212,554 $218,931 $225,499 Labor Utility BillingSalaries - Part Time/TempSalaries - Part Time/Temp 5,930 6,230 7,601 7,829 8,063 8,305 8,555 8,811 9,076 9,348 Labor Utility BillingRegular OvertimeRegular Overtime 2,539 5,740 7,003 7,213 7,429 7,652 7,882 8,118 8,362 8,613 Labor Utility BillingHoliday PayHoliday Pay 738 0 0 0 0 0 0 0 0 0 Labor Utility BillingVacation Sell BackVacation Sell Back 360 304 371 382 393 405 417 430 443 456 Benefits - Other Utility BillingEmployee Separation PayEmployee Separation Pay 2,181 2,250 2,745 2,827 2,912 3,000 3,090 3,182 3,278 3,376 Benefits - Other Utility BillingAdditional PayAdditional Pay 723 134 163 168 173 179 184 190 195 201 Benefits - Other Utility BillingRetirementRetirement 42,226 46,691 58,364 61,866 65,578 69,512 73,683 78,104 82,790 87,758 Benefits - Retirement Utility BillingDeferred CompensationDeferred Compensation 988 0 0 0 0 0 0 0 0 0 Benefits - Other Utility BillingMedicare Medicare 2,595 2,352 2,869 2,956 3,044 3,136 3,230 3,326 3,426 3,529 Benefits - Medical Utility BillingHealth/Dental/VisionHealth/Dental/Vision 42,294 34,216 41,744 42,996 44,286 45,614 46,983 48,392 49,844 51,339 Benefits - Medical Utility BillingL/T Disability InsuranceL/T Disability Insurance 1,059 945 1,153 1,187 1,223 1,260 1,298 1,337 1,377 1,418 Benefits - Other Utility BillingLife InsuranceLife Insurance 158 130 159 163 168 173 179 184 189 195 Benefits - Other Utility BillingWorkers CompensationWorkers Compensation 5,387 4,619 5,635 5,804 5,978 6,158 6,342 6,533 6,729 6,931 Benefits - Other Utility BillingUnemployment InsuranceUnemployment Insurance 184 161 196 202 208 215 221 228 235 242 Benefits - Other Utility BillingCell Phone AllowanceCell Phone Allowance 248 135 165 170 175 180 185 191 197 203 Benefits - Other Utility BillingInsurance PremiumsInsurance Premiums 15,008 20,954 22,840 24,895 27,136 29,578 32,240 35,142 38,305 41,752 Insurance Utility BillingComputer/Tech/Oper SupportComputer/Tech/Oper Support 20,200 19,775 20,408 21,061 21,735 22,430 23,148 23,889 24,653 25,442 Materials & Supplies Utility BillingContractual EmployeesContractual Employees 6,717 7,070 7,296 7,530 7,771 8,019 8,276 8,541 8,814 9,096 Materials & Supplies Utility BillingComputer Programming ServicesComputer Programming Services 1,224 1,288 1,329 1,372 1,416 1,461 1,508 1,556 1,606 1,657 Materials & Supplies Utility BillingOther ServicesOther Services 132,411 139,380 143,840 148,443 153,193 158,095 163,154 168,375 173,763 179,324 Materials & Supplies Utility BillingDuplication/Copy CostsDuplication/Copy Costs 2,216 2,333 2,408 2,485 2,564 2,646 2,731 2,818 2,909 3,002 Materials & Supplies Utility BillingPublicity & AdvertisingPublicity & Advertising 120 126 130 134 138 143 147 152 157 162 Materials & Supplies Utility BillingPrinting & MappingPrinting & Mapping 16,015 16,858 17,397 17,954 18,529 19,122 19,734 20,365 21,017 21,689 Materials & Supplies Utility BillingPostage/Mailing ServicesPostage/Mailing Services 77,852 81,949 84,571 87,278 90,071 92,953 95,927 98,997 102,165 105,434 Materials & Supplies Utility BillingMaint & Repair ServicesMaint & Repair Services 1,074 1,130 1,166 1,203 1,242 1,282 1,323 1,365 1,409 1,454 Materials & Supplies Utility BillingPool Vehicle RentalPool Vehicle Rental 106 112 116 119 123 127 131 135 140 144 Materials & Supplies Utility BillingProcessing FeesProcessing Fees 13,876 14,606 15,073 15,556 16,054 16,567 17,097 17,645 18,209 18,792 Materials & Supplies Utility BillingCollection CostsCollection Costs 15,352 16,160 16,677 17,211 17,762 18,330 18,916 19,522 20,146 20,791 Materials & Supplies Utility BillingTelephone Telephone 159 167 172 178 184 189 195 202 208 215 Materials & Supplies Utility BillingMaterials and SuppliesMaterials and Supplies 960 1,044 1,077 1,111 1,147 1,184 1,222 1,261 1,301 1,343 Materials & Supplies Utility BillingComputer SoftwareComputer Software 1,207 1,435 1,481 1,528 1,577 1,628 1,680 1,734 1,789 1,846 Materials & Supplies Utility BillingFuels - Gasoline and PropaneFuels - Gasoline and Propane 909 957 988 1,019 1,052 1,086 1,120 1,156 1,193 1,231 Materials & Supplies Utility BillingTraining ServicesTraining Services 2,303 2,424 2,502 2,582 2,664 2,749 2,837 2,928 3,022 3,119 Materials & Supplies Utility BillingMeetings and TravelMeetings and Travel 312 328 338 349 361 372 384 396 409 422 Materials & Supplies Utility BillingMembershipsMemberships 118 124 128 132 136 141 145 150 155 160 Materials & Supplies Utility BillingCar Mileage ReimbursementCar Mileage Reimbursement 76 80 98 101 104 107 110 113 117 120 Benefits - Other Utility BillingSettlement PaymentsSettlement Payments 11,742 4,283 4,403 4,526 4,653 4,783 4,917 5,055 5,196 5,342 Miscellaneous Utility BillingTRAVEL TRAVEL 0 0 0 0 0 0 0 0 0 0 Miscellaneous Utility BillingComputer/Programming SvcsComputer/Programming Svcs 7,600 4,750 4,883 5,020 5,160 5,305 5,453 5,606 5,763 5,924 Miscellaneous ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Total Utility Billing $580,758 $591,528 $660,840 $684,402 $708,919 $734,438 $761,008 $788,682 $817,515 $847,567 Total Utility Billing ExpensesTotal Utility Billing Expenses $580,758 $591,528 $660,840 $684,402 $708,919 $734,438 $761,008 $788,682 $817,515 $847,567

ATTACHMENT A
386
City of Stockton
Stormwater Rate Study Page 3 of 7
Revenue Requirement Analysis
Exhibit 3
Proj Yr End Budget
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Notes Projected
Administration
AdministrationEmployee ServicesEmployee Services
AdministrationSalaries - RegularSalaries - Regular $545,995 $621,200 $757,864 $780,600 $804,018 $828,138 $852,983 $878,572 $904,929 $932,077 Labor AdministrationSalaries - Part Time/TempSalaries - Part Time/Temp 1,445 0 0 0 0 0 0 0 0 0 Labor AdministrationRegular OvertimeRegular Overtime 8,629 18,280 22,302 22,971 23,660 24,370 25,101 25,854 26,629 27,428 Labor AdministrationHoliday PayHoliday Pay 4,917 3,500 4,270 4,398 4,530 4,666 4,806 4,950 5,099 5,252 Benefits - Other AdministrationVacation Sell BackVacation Sell Back 1,701 2,345 2,861 2,947 3,035 3,126 3,220 3,317 3,416 3,519 Benefits - Other AdministrationEmployee Separation PayEmployee Separation Pay 6,899 9,175 11,194 11,529 11,875 12,231 12,598 12,976 13,366 13,767 Labor AdministrationAdditional PayAdditional Pay 520 296 361 372 383 395 406 419 431 444 Labor AdministrationRetirementRetirement 126,544 192,180 240,225 254,639 269,917 286,112 303,279 321,475 340,764 361,210 Benefits - Retirement AdministrationDeferred CompensationDeferred Compensation 13,086 14,107 17,211 17,727 18,259 18,806 19,371 19,952 20,550 21,167 Benefits - Other AdministrationMedicareMedicare 6,444 8,209 10,015 10,315 10,625 10,944 11,272 11,610 11,958 12,317 Benefits - Medical AdministrationMedicare/Social SecurityMedicare/Social Security 0 1,184 1,444 1,488 1,532 1,578 1,626 1,675 1,725 1,777 Benefits - Medical AdministrationHealth/Dental/VisionHealth/Dental/Vision 64,096 102,157 124,632 128,370 132,222 136,188 140,274 144,482 148,817 153,281 Benefits - Medical AdministrationL/T Disability InsuranceL/T Disability Insurance 2,072 3,921 4,784 4,927 5,075 5,227 5,384 5,546 5,712 5,883 Benefits - Other AdministrationLife InsuranceLife Insurance 344 421 514 529 545 561 578 595 613 632 Benefits - Other AdministrationWorkers CompensationWorkers Compensation 13,013 14,262 17,400 17,922 18,459 19,013 19,583 20,171 20,776 21,399 Benefits - Other AdministrationUnemployment InsuranceUnemployment Insurance 554 648 791 814 839 864 890 916 944 972 Benefits - Other AdministrationCell Phone AllowanceCell Phone Allowance 3,244 1,932 2,357 2,428 2,501 2,576 2,653 2,732 2,814 2,899 Benefits - Other AdministrationSettlement PaymentsSettlement Payments 9,720 8,003 9,764 10,057 10,358 10,669 10,989 11,319 11,658 12,008 Benefits - Other -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- AdministrationTotal Employee ServicesTotal Employee Services $809,223 $1,001,820 $1,227,986 $1,272,032 $1,317,832 $1,365,465 $1,415,012 $1,466,561 $1,520,202 $1,576,031 AdministrationOther ServicesOther Services
AdministrationMaintenance & Repair ServicesMaintenance & Repair Services $1,130 $2,175 $2,654 $2,733 $2,815 $2,900 $2,987 $3,076 $3,168 $3,263 Labor AdministrationDuplication/Copy CostsDuplication/Copy Costs 1,535 3,035 3,120 3,207 3,297 3,389 3,484 3,582 3,682 3,785 Miscellaneous AdministrationInsurance PremiumsInsurance Premiums 44,626 84,793 92,424 100,743 109,809 119,692 130,465 142,206 155,005 168,955 Insurance AdministrationAutomotive Equipment RentalAutomotive Equipment Rental 1,169 17,157 17,706 18,273 18,857 19,461 20,084 20,726 21,389 22,074 Materials & Supplies AdministrationComputer/Tech/Operation SupportComputer/Tech/Operation Support 21,876 10,153 12,387 12,758 13,141 13,535 13,941 14,360 14,790 15,234 Labor AdministrationTelephone RentalTelephone Rental 5,953 8,302 8,568 8,842 9,125 9,417 9,718 10,029 10,350 10,681 Materials & Supplies AdministrationRadio Equipment RentalRadio Equipment Rental 183 200 206 213 220 227 234 242 249 257 Materials & Supplies AdministrationEquipment Repairs/MaintEquipment Repairs/Maint 0 240 248 256 264 272 281 290 299 309 Materials & Supplies AdministrationTelecommunicationsTelecommunications 0 150 156 162 169 175 181 187 194 200 Utilities AdministrationOther RentalsOther Rentals 711,217 711,126 733,882 757,366 781,602 806,613 832,425 859,062 886,552 914,922 Materials & Supplies AdministrationProcessing FeesProcessing Fees 1,015 7,175 7,405 7,642 7,886 8,138 8,399 8,668 8,945 9,231 Materials & Supplies AdministrationTesting & Analysis ServicesTesting & Analysis Services 21 547 565 583 601 620 640 661 682 704 Materials & Supplies AdministrationUniform/Laundry ServicesUniform/Laundry Services 2,584 4,584 4,731 4,882 5,038 5,200 5,366 5,538 5,715 5,898 Materials & Supplies AdministrationPublicity & AdvertisingPublicity & Advertising 2,500 4,565 4,693 4,824 4,959 5,098 5,241 5,388 5,539 5,694 Miscellaneous AdministrationPostage/Mailing ServicesPostage/Mailing Services 101 315,022 60,000 61,920 63,901 65,946 68,057 70,234 72,482 74,801 Materials & Supplies AdministrationReprographicsReprographics 0 30 31 32 33 34 35 36 37 39 Materials & Supplies AdministrationLegal ServicesLegal Services 7,880 10,700 13,054 13,446 13,849 14,264 14,692 15,133 15,587 16,055 Labor AdministrationProfessional & Special ServicesProfessional & Special Services 459,480 515,718 629,176 648,051 667,493 687,518 708,143 729,387 751,269 773,807 Labor AdministrationTravel Travel 0 150 155 160 165 170 176 181 187 193 Materials & Supplies -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- AdministrationTotal Other Services Total Other Services $1,261,270 $1,695,822 $1,591,159 $1,646,092 $1,703,225 $1,762,670 $1,824,548 $1,888,986 $1,956,123 $2,026,103

ATTACHMENT A
387
City of Stockton
Stormwater Rate Study Page 4 of 7
Revenue Requirement Analysis
Exhibit 3
Proj Yr End Budget
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Notes Projected
Materials & Supplies
AdministrationMaterials & SuppliesMaterials & Supplies $11,995 $11,160 $11,517 $11,886 $12,266 $12,659 $13,064 $13,482 $13,913 $14,358 Materials & Supplies AdministrationComputer SoftwareComputer Software 65,000 40,035 41,316 42,638 44,003 45,411 46,864 48,364 49,911 51,508 Materials & Supplies AdministrationSubscription - PeriodicalSubscription - Periodical 250 500 516 533 550 567 585 604 623 643 Materials & Supplies AdministrationWater Water 0 0 0 0 0 0 0 0 0 0 Materials & Supplies AdministrationTelephoneTelephone 3,404 4,407 4,548 4,694 4,844 4,999 5,159 5,324 5,494 5,670 Materials & Supplies AdministrationTechnology and CommunicationsTechnology and Communications 0 0 0 0 0 0 0 0 0 0 Materials & Supplies AdministrationFuels - Gas/Oil/PropaneFuels - Gas/Oil/Propane 200 1,264 1,315 1,367 1,422 1,472 1,523 1,576 1,632 1,689 Utilities AdministrationFuel Fuel 3,200 4,293 4,464 4,643 4,829 4,998 5,173 5,354 5,541 5,735 Utilities AdministrationLibrary MaterialsLibrary Materials 250 500 516 533 550 567 585 604 623 643 Materials & Supplies -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- AdministrationTotal Materials & SuppliesTotal Materials & Supplies $84,299 $62,159 $64,192 $66,293 $68,462 $70,672 $72,953 $75,307 $77,738 $80,247 AdministrationOther ExpensesOther Expenses
AdministrationTraining Training $8,700 $11,920 $12,254 $12,597 $12,950 $13,312 $13,685 $14,068 $14,462 $14,867 Miscellaneous AdministrationMeeting & TravelMeeting & Travel 500 535 550 565 581 597 614 631 649 667 Miscellaneous AdministrationMembershipsMemberships 234 59 61 62 64 66 68 70 72 74 Miscellaneous AdministrationIndirect Cost AllocationIndirect Cost Allocation 171,547 171,547 177,037 182,702 188,548 194,582 200,808 207,234 213,866 220,709 Materials & Supplies AdministrationNon-Capital AssetsNon-Capital Assets 5,000 5,000 5,140 5,284 5,432 5,584 5,740 5,901 6,066 6,236 Miscellaneous -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- AdministrationTotal Other ExpensesTotal Other Expenses $185,981 $189,061 $195,041 $201,210 $207,575 $214,141 $220,915 $227,904 $235,115 $242,553 Total Administration ExpensesTotal Administration Expenses $2,340,773 $2,948,862 $3,078,378 $3,185,627 $3,297,094 $3,412,948 $3,533,428 $3,658,759 $3,789,177 $3,924,934 Storm Pump Stations
Storm Pump StationsEmployee ServicesEmployee Services
Storm Pump StationsSalaries - RegularSalaries - Regular $1,113,405 $1,622,157 $1,979,032 $2,038,402 $2,099,555 $2,162,541 $2,227,417 $2,294,240 $2,363,067 $2,433,959 Labor Storm Pump StationsSalaries - Part Time/TempSalaries - Part Time/Temp 4,589 4,900 5,978 6,157 6,342 6,532 6,728 6,930 7,138 7,352 Labor Storm Pump StationsRegular OvertimeRegular Overtime 59,551 60,410 73,700 75,911 78,189 80,534 82,950 85,439 88,002 90,642 Labor Storm Pump StationsStand By TimeStand By Time 48,386 69,900 85,278 87,836 90,471 93,186 95,981 98,861 101,826 104,881 Labor Storm Pump StationsHoliday PayHoliday Pay 5,807 5,981 7,297 7,516 7,741 7,973 8,213 8,459 8,713 8,974 Labor Storm Pump StationsEmployee Separation PayEmployee Separation Pay 3,077 5,614 6,849 7,055 7,266 7,484 7,709 7,940 8,178 8,424 Labor Storm Pump StationsSeparation PaySeparation Pay 9,799 16,991 20,729 21,351 21,991 22,651 23,331 24,031 24,752 25,494 Labor Storm Pump StationsAdditional PayAdditional Pay 8,681 7,014 8,557 8,814 9,078 9,351 9,631 9,920 10,218 10,524 Labor Storm Pump StationsRetirementRetirement 276,248 506,180 632,725 670,689 710,930 753,586 798,801 846,729 897,533 951,384 Benefits - Retirement Storm Pump StationsRetirement ExpenseRetirement Expense 2,226 2,000 2,440 2,513 2,589 2,666 2,746 2,829 2,913 3,001 Benefits - Other Storm Pump StationsDeferred CompensationDeferred Compensation 42,545 62,996 76,855 79,161 81,536 83,982 86,501 89,096 91,769 94,522 Benefits - Other Storm Pump StationsMedicareMedicare 14,408 24,449 29,828 30,723 31,644 32,594 33,571 34,579 35,616 36,684 Benefits - Medical Storm Pump StationsMedicare/Social SecurityMedicare/Social Security 0 312 381 392 404 416 428 441 455 468 Benefits - Medical Storm Pump StationsHealth/Dental/VisionHealth/Dental/Vision 216,544 295,859 360,948 371,776 382,930 394,418 406,250 418,438 430,991 443,920 Benefits - Medical Storm Pump StationsL/T Disability InsuranceL/T Disability Insurance 3,362 7,481 9,127 9,401 9,683 9,973 10,272 10,580 10,898 11,225 Benefits - Other Storm Pump StationsLife InsuranceLife Insurance 831 1,269 1,548 1,595 1,642 1,692 1,742 1,795 1,849 1,904 Benefits - Other Storm Pump StationsWorkers CompensationWorkers Compensation 66,618 91,681 111,851 115,206 118,663 122,222 125,889 129,666 133,556 137,562 Benefits - Other Storm Pump StationsRecruitment IncentiveRecruitment Incentive 185 0 0 0 0 0 0 0 0 0 Benefits - Other Storm Pump StationsUnemployment InsuranceUnemployment Insurance 1,251 1,703 2,078 2,140 2,204 2,270 2,338 2,409 2,481 2,555 Benefits - Other Storm Pump StationsCell Phone AllowanceCell Phone Allowance 3,682 3,561 4,344 4,475 4,609 4,747 4,890 5,036 5,187 5,343 Benefits - Other Storm Pump StationsAllowancesAllowances 97 90 110 113 116 120 124 127 131 135 Benefits - Other Storm Pump StationsVacation Sell BackVacation Sell Back 1,523 1,953 2,383 2,454 2,528 2,604 2,682 2,762 2,845 2,930 Benefits - Other Storm Pump StationsSettlement PaymentsSettlement Payments 46,071 49,652 60,575 62,393 64,264 66,192 68,178 70,224 72,330 74,500 Benefits - OtherStorm Pump Stations -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Storm Pump StationsTotal Employee ServicesTotal Employee Services $1,928,886 $2,842,153 $3,482,612 $3,606,072 $3,734,375 $3,867,734 $4,006,374 $4,150,529 $4,300,447 $4,456,386

ATTACHMENT A
388
City of Stockton
Stormwater Rate Study Page 5 of 7
Revenue Requirement Analysis
Exhibit 3
Proj Yr End Budget
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Notes Projected
Other Services
Storm Pump StationsElectricityElectricity $600,000 $650,000 $676,000 $703,040 $731,162 $756,752 $783,239 $810,652 $839,025 $868,391 Utilities Storm Pump StationsGasGas 40,000 45,000 46,800 48,672 50,619 52,391 54,224 56,122 58,086 60,119 Utilities Storm Pump StationsSanitary SewerSanitary Sewer 2,500 2,500 2,600 2,704 2,812 2,911 3,012 3,118 3,227 3,340 Utilities Storm Pump StationsWaterWater 40,000 42,000 43,680 45,427 47,244 48,898 50,609 52,381 54,214 56,111 Utilities Storm Pump StationsTelephoneTelephone 23,304 28,055 29,177 30,344 31,558 32,663 33,806 34,989 36,214 37,481 Utilities Storm Pump StationsStorm WaterStorm Water 100 0 0 0 0 0 0 0 0 0 Utilities Storm Pump StationsMaintenance & Repair ServicesMaintenance & Repair Services 316,389 400,270 413,079 426,297 439,939 454,017 468,545 483,539 499,012 514,980 Materials & Supplies Storm Pump StationsEquipment Repairs/Maint.Equipment Repairs/Maint. 2,300 2,500 2,600 2,704 2,812 2,925 3,042 3,163 3,290 3,421 Equipment Storm Pump StationsSecurity and Alarm ServicesSecurity and Alarm Services 116,766 104,480 107,823 111,274 114,834 118,509 122,301 126,215 130,254 134,422 Materials & Supplies Storm Pump StationsTesting and Analysis ServicesTesting and Analysis Services 502 400 413 426 440 454 468 483 499 515 Materials & Supplies Storm Pump StationsInsurance PremiumsInsurance Premiums 99,167 223,690 243,822 265,766 289,685 315,757 344,175 375,151 408,914 445,716 Insurance Storm Pump StationsAutomotive Equipment RentalAutomotive Equipment Rental 19,173 13,504 13,936 14,382 14,842 15,317 15,807 16,313 16,835 17,374 Materials & Supplies Storm Pump StationsTelephone RentalTelephone Rental 47,725 41,116 42,432 43,790 45,191 46,637 48,129 49,669 51,259 52,899 Materials & Supplies Storm Pump StationsRadio Equipment RentalRadio Equipment Rental 1,528 2,439 2,517 2,598 2,681 2,766 2,855 2,946 3,041 3,138 Materials & Supplies Storm Pump StationsOther RentalsOther Rentals 6,000 3,000 3,096 3,195 3,297 3,403 3,512 3,624 3,740 3,860 Materials & Supplies Storm Pump StationsDuplication/Copy CostsDuplication/Copy Costs 1,117 1,495 1,543 1,592 1,643 1,696 1,750 1,806 1,864 1,923 Materials & Supplies Storm Pump StationsPublicity & AdvertisingPublicity & Advertising 14,128 12,040 12,425 12,823 13,233 13,657 14,094 14,545 15,010 15,490 Materials & Supplies Storm Pump StationsPrinting & MappingPrinting & Mapping 500 250 258 266 275 284 293 302 312 322 Materials & Supplies Storm Pump StationsPrintingPrinting 0 38,500 39,732 41,003 42,316 43,670 45,067 46,509 47,997 49,533 Materials & Supplies Storm Pump StationsPostage/Mailing ServicesPostage/Mailing Services 43,256 2,590 2,673 2,758 2,847 2,938 3,032 3,129 3,229 3,332 Materials & Supplies Storm Pump StationsUniform/Laundry ServicesUniform/Laundry Services 14,373 20,270 20,919 21,588 22,279 22,992 23,728 24,487 25,270 26,079 Materials & Supplies Storm Pump StationsLaboratory ServicesLaboratory Services 45,947 13,500 13,932 14,378 14,838 15,313 15,803 16,308 16,830 17,369 Materials & Supplies Storm Pump StationsTechnology and CommunicationsTechnology and Communications 1,039 1,137 1,173 1,211 1,250 1,290 1,331 1,374 1,417 1,463 Materials & Supplies Storm Pump StationsTraining ServicesTraining Services 18,752 24,316 25,094 25,897 26,726 27,581 28,464 29,374 30,314 31,285 Materials & Supplies Storm Pump StationsProcessing FeesProcessing Fees 155,762 176,217 181,151 186,223 191,438 196,798 202,308 207,973 213,796 219,782 Miscellaneous Storm Pump StationsComputer/Tech/Operations SupportComputer/Tech/Operations Support 24,168 31,527 38,463 39,617 40,805 42,029 43,290 44,589 45,927 47,305 Labor Storm Pump StationsMembershipsMemberships 1,940 3,267 3,372 3,479 3,591 3,706 3,824 3,947 4,073 4,203 Materials & Supplies Storm Pump StationsProfessional & Special ServicesProfessional & Special Services 122,684 91,430 93,990 96,622 99,327 102,108 104,967 107,906 110,928 114,034 Miscellaneous Storm Pump StationsOther ServicesOther Services 100,000 175,000 179,900 184,937 190,115 195,439 200,911 206,536 212,319 218,264 MiscellaneousStorm Pump Stations -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Storm Pump StationsTotal Other Services Total Other Services $1,859,120 $2,150,493 $2,242,600 $2,333,014 $2,427,798 $2,522,897 $2,622,586 $2,727,151 $2,836,897 $2,952,153 Storm Pump Stations
Materials & Supplies
Storm Pump StationsMaterials & SuppliesMaterials & Supplies $87,960 $103,530 $106,843 $110,262 $113,790 $117,432 $121,189 $125,067 $129,070 $133,200 Materials & Supplies Storm Pump StationsComputer SoftwareComputer Software 66,791 51,685 53,339 55,046 56,807 58,625 60,501 62,437 64,435 66,497 Materials & Supplies Storm Pump StationsNon-Capital AssetsNon-Capital Assets 46,138 137,520 141,921 146,462 151,149 155,986 160,977 166,128 171,445 176,931 Materials & Supplies Storm Pump StationsBuilding & StructuresBuilding & Structures 80,000 75,000 77,400 79,877 82,433 85,071 87,793 90,602 93,502 96,494 Materials & Supplies Storm Pump StationsCommunity/ProgramCommunity/Program 1,000 2,500 2,580 2,663 2,748 2,836 2,926 3,020 3,117 3,216 Materials & Supplies Storm Pump StationsVehicle AcquisitionVehicle Acquisition 264,317 55,050 56,812 58,630 60,506 62,442 64,440 66,502 68,630 70,826 Materials & Supplies Storm Pump StationsEquipment AcquisitionEquipment Acquisition 245,007 226,250 233,490 240,962 248,672 256,630 264,842 273,317 282,063 291,089 Materials & Supplies Storm Pump StationsSubscriptionsSubscriptions 464 55 57 59 60 62 64 66 69 71 Materials & Supplies Storm Pump StationsChemicalsChemicals 3,871 5,000 5,160 5,325 5,496 5,671 5,853 6,040 6,233 6,433 Materials & Supplies Storm Pump StationsLibrary MaterialsLibrary Materials 2,872 2,055 2,121 2,189 2,259 2,331 2,406 2,483 2,562 2,644 Materials & Supplies Storm Pump StationsFuels - Gas/Oil/PropaneFuels - Gas/Oil/Propane 14,000 1,182 1,220 1,259 1,299 1,341 1,384 1,428 1,474 1,521 Materials & Supplies Storm Pump StationsTechnology CapitalTechnology Capital 8,953 2,850 2,941 3,035 3,132 3,233 3,336 3,443 3,553 3,667 Materials & SuppliesStorm Pump Stations -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Storm Pump StationsTotal Materials & SuppliesTotal Materials & Supplies $821,373 $662,677 $683,883 $705,767 $728,351 $751,659 $775,712 $800,535 $826,152 $852,589

ATTACHMENT A
389
City of Stockton
Stormwater Rate Study Page 6 of 7
Revenue Requirement Analysis
Exhibit 3
Proj Yr End Budget
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Notes Projected
Other Expenses
Storm Pump StationsTrainingTraining $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Miscellaneous Storm Pump StationsMeetings & TravelMeetings & Travel 1,430 865 889 914 940 966 993 1,021 1,049 1,079 MiscellaneousStorm Pump Stations -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Storm Pump StationsTotal Other ExpensesTotal Other Expenses $1,430 $865 $889 $914 $940 $966 $993 $1,021 $1,049 $1,079 Storm Pump Stations
Storm Pump StationsTotal Storm Pump Stations ExpensesTotal Storm Pump Stations Expenses $4,610,809 $5,656,188 $6,409,984 $6,645,768 $6,891,464 $7,143,256 $7,405,665 $7,679,235 $7,964,544 $8,262,206 CIP Related MUD Staff Cost $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Total O&M Expenses $7,532,340 $9,196,577 $10,149,202 $10,515,797 $10,897,478 $11,290,642 $11,700,101 $12,126,676 $12,571,237 $13,034,707

22.09% 10.36% 3.61% 3.63% 3.61% 3.63% 3.65% 3.67% 3.69% Taxes & Transfers
Taxes & Transfers $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Taxes Taxes & TransfersTotal Taxes Taxes & Transfers $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Rate Funded Capital $0 $0 $950,000 $6,625,000 $10,025,000 $12,740,000 $13,250,000 $13,725,000 $14,190,000 $14,300,000 FY 2022 Depr. Exp. $1,684,553 Debt Service
New Revenue Bonds New Revenue Bonds $0 $0 $0 $0 $0 $0 $0 $0 $0 $260,206 Calculated --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Debt Service $0 $0 $0 $0 $0 $0 $0 $0 $0 $260,206
Less: Debt Service FundingLess: Debt Service Funding
Reserve Funding $0 $0 $0 $0 $0 $0 $0 $0 $0 $0
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Net Debt Service $0 $0 $0 $0 $0 $0 $0 $0 $0 $260,206
General Fund Back Payment $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Debt Schedule Reserve Funding
To / (From) Operating Reserve [441]To / (From) Operating Reserve [441] ($543,065) ($2,151,645) $1,021,836 $194,690 $206,130 $202,481 $198,282 $190,295 $196,070 $206,268 To / (From) Capital ReserveTo / (From) Capital Reserve 0 0 0 0 0 0 0 0 0 0 --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Reserve Funding Total Reserve Funding ($543,065) ($2,151,645) $1,021,836 $194,690 $206,130 $202,481 $198,282 $190,295 $196,070 $206,268 Total Revenue Requirement $6,989,275 $7,044,932 $12,121,038 $17,335,487 $21,128,608 $24,233,123 $25,148,383 $26,041,971 $26,957,306 $27,801,181 Bal. /(Def.) of Funds $0 $0 ($5,098,348) ($10,257,287) ($14,004,087) ($17,037,076) ($17,870,216) ($18,711,073) ($19,558,186) ($20,410,021)

ATTACHMENT A
390
City of Stockton
Stormwater Rate Study Page 7 of 7
Revenue Requirement Analysis
Exhibit 3
Proj Yr End Budget
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Notes Projected
Debt Service Coverage Ratio (all debt, including taxes and transfers) Before Rate Adjustment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 After Proposed Rate Adjustment 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 56.75 Reserve Funds
Total Beginning Balance $8,930,108 $6,240,547 $4,088,902 $5,280,976 $5,567,168 $5,606,565 $8,381,954 $8,980,051 $9,170,346 $7,647,127 Operating Reserve Fund - Stormwater (441)
Beginning Reserve Fund Balance $5,140,108 $6,240,547 $4,088,902 $5,110,738 $5,305,428 $5,511,558 $5,714,039 $5,912,321 $6,102,616 $6,298,686 Plus: To Reserve Fund 0 0 1,021,836 194,690 206,130 202,481 198,282 190,295 196,070 206,268 Less: Uses of Funds (543,065) (2,151,645) 0 0 0 0 0 0 0 0 Ending Fund Balance $4,597,043 $4,088,902 $5,110,738 $5,305,428 $5,511,558 $5,714,039 $5,912,321 $6,102,616 $6,298,686 $6,504,954 Target: 180 days of O&M $3,714,579 $4,535,298 $5,005,086 $5,185,872 $5,374,099 $5,567,988 $5,769,913 $5,980,279 $6,199,514 $6,428,075 Capital Reserve Fund
Beginning Reserve Fund Balance $3,790,000 $0 $0 $170,239 $261,740 $95,007 $2,667,915 $3,067,730 $3,067,730 $1,348,442 Plus: To Reserve Fund 0 0 170,239 91,501 0 2,572,908 399,815 0 0 0 Less: Uses of Funds 0 0 0 0 (166,733) 0 0 0 (1,719,288) (206,567) Ending Fund Balance $3,790,000 $0 $170,239 $261,740 $95,007 $2,667,915 $3,067,730 $3,067,730 $1,348,442 $1,141,875 Total Ending Balance $8,387,043 $4,088,902 $5,280,976 $5,567,168 $5,606,565 $8,381,954 $8,980,051 $9,170,346 $7,647,127 $7,646,828 Target O&M Fund Balance $3,714,579 $4,535,298 $5,005,086 $5,185,872 $5,374,099 $5,567,988 $5,769,913 $5,980,279 $6,199,514 $6,428,075 180 days of O&M Target Bal. / (Def.) $4,672,464 ($446,397) $275,891 $381,295 $232,466 $2,813,966 $3,210,138 $3,190,067 $1,447,613 $1,218,754

ATTACHMENT A
391
City of Stockton
Stormwater Rate Study
Capital Improvement Plan
Exhibit 4
FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 FY 2030 FY 2031 FY 2032 FY 2033 FY 2034 Notes CIP Projects
Alexandria and 14-Mile Slough Storm Drain Pump Station $0 $0 $0 $273,182 $0 $0 $0 $0 $0 $0 Swenson Park and Five Mile (Bonniebrook) Storm PS Improv 0 0 0 819,545 0 0 0 0 0 0 Storm Drain System Emergency 0 0 265,225 273,182 281,377 289,819 298,513 307,468 316,693 326,193 West Lane and Calaveras South Storm Pump Station Improvements 0 0 0 819,545 562,754 0 0 0 0 0 Buena Vista & Smith Canal Pump Station Discharge Pipe Rehab 0 0 0 0 0 446,321 0 0 0 0 Storm Pump Station Transfer Switch 0 0 265,225 0 0 0 0 0 0 0 Rose Street Assessment and Repair 0 0 106,090 0 0 0 0 0 0 0 Total MUD Staff Cost 0 0 143,222 142,055 191,336 0 0 0 0 0 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Total CIP Projects $0 $0 $779,762 $2,327,509 $1,035,468 $736,139 $298,513 $307,468 $316,693 $326,193 CIP Projects - State Funded
Stockton Channel Water Quailty Improvements $0 $1,300,000 $1,700,000 $0 $0 $0 $0 $0 $0 $0 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Total CIP Projects - State Funded $0 $1,300,000 $1,700,000 $0 $0 $0 $0 $0 $0 $0 Master Plan CIP Projects
HWY 4 and San Joaquin $0 $0 $0 $0 $0 $0 $7,433,790 $7,656,804 $7,886,508 $8,123,103 1st Priority Bonnie Brook 0 0 0 4,205,990 4,332,170 4,462,135 0 0 0 0 1st Priority Boggs Tract 0 0 0 0 4,824,095 4,968,818 5,117,882 5,271,419 0 0 1st Priority Walker Turnpike Alt 1 0 0 0 0 0 0 0 0 11,706,088 12,057,271 1st Priority -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- Total Master Plan CIP Projects $0 $0 $0 $4,205,990 $9,156,265 $9,430,953 $12,551,672 $12,928,223 $19,592,596 $20,180,374 Future Unidentified Capital Projects $0 $0 $0 $0 $0 $0 $0 $489,309 $0 $0 Transfer to Capital Reserve $0 $0 $170,239 $91,501 $0 $2,572,908 $399,815 $0 $0 $0 Total Capital Improvement Projects $0 $1,300,000 $2,650,000 $6,625,000 $10,191,733 $12,740,000 $13,250,000 $13,725,000 $19,909,288 $20,506,567 Less: Other Funding Sources
Operating Reserve Fund - Stormwater (441) $0 $0 $0 $0 $0 $0 $0 $0 $0 $0 Input Capital Reserve Fund 0 0 0 0 166,733 0 0 0 1,719,288 206,567 Input State Grants 0 1,300,000 1,700,000 0 0 0 0 0 0 0 Linked New Public Works Trust Fund Loans 0 0 0 0 0 0 0 0 0 0 Input New Revenue Bonds 0 0 0 0 0 0 0 0 4,000,000 6,000,000 Calculated --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- Total Less: Other Funding Sources $0 $1,300,000 $1,700,000 $0 $166,733 $0 $0 $0 $5,719,288 $6,206,567 Rate Funded Capital $0 $0 $950,000 $6,625,000 $10,025,000 $12,740,000 $13,250,000 $13,725,000 $14,190,000 $14,300,000

ATTACHMENT A
392
City of Stockton
Stormwater Rate Study Page 1 of 2
Revenue at Present Rates
Exhibit 5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Residential
$ / ERU
All Categories $2.10 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $2,508,761 Total Residential $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $2,508,761 Non-Residential
$ / ERU
All Categories $2.10 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- -------------- $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $3,558,240 Total Non-Residential $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $296,520 $3,558,240

ATTACHMENT A
393
City of Stockton
Stormwater Rate Study Page 2 of 2
Revenue at Present Rates
Exhibit 5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Total
Summary
ERUs
Residential 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 99,554 Non-Residential 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 141,200 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ 240,754 240,754 240,754 240,754 240,754 240,754 240,754 240,754 240,754 240,754 240,754 240,754 240,754 Revenue
Residential $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $209,063 $2,508,761 Non-Residential 296,520 296,520 296,520 296,520 296,520 296,520 296,520 296,520 296,520 296,520 296,520 296,520 3,558,240 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ --------------- $505,583 $505,583 $505,583 $505,583 $505,583 $505,583 $505,583 $505,583 $505,583 $505,583 $505,583 $505,583 $6,067,001 FY 2025 Year End Projection $6,025,345
Difference $41,656
Percent 0.7%
FY 2026 Budget $6,082,390
Difference ($15,389)
Percent -0.3%
Notes

ATTACHMENT A
394
City of Stockton
Stormwater Rate Study
Cost of Service Summary
Exhibit 6
Total
Revenues at Present Rates $6,127,822
Distributed Revenue Requirement $11,226,171
--------------
Balance/(Deficiency) of Funds ($5,098,348)

ATTACHMENT A
395
City of Stockton
Stormwater Rate Study
Average Unit Costs
Exhibit 7
Total
Total Costs - $ / ERU / Month $3.85
Current Rates $ / Month $2.10
Base Data:

Total Billed ERUs 243,168

ATTACHMENT A
396
City of Stockton
Stormwater Rate Study
Rate Summary
Exhibit 8
Present
Rates FY 2027 FY 2028 FY 2029 FY 2030 FY 2031
Monthly Rate (per ERU) $2.10 $3.85 $5.60 $6.85 $7.85 $8.10 Proposed

ATTACHMENT A
397
Resolution No.

STOCKTON CITY COUNCIL

ADOPT A RESOLUTION AUTHORIZING A PUBLIC HEARING TO CONSIDER ADJUSTMENTS IN THE CITY’S STORMWATER RATES AND CHARGES AND

AUTHORIZING AND DIRECTING THE CITY MANAGER TO MAIL A NOTICE OF THE

PUBLIC HEARING TO CONSIDER THE PROPOSED ADJUSTMENTS

The Stormwater Utility was first established in 1991 in response to the Porter Cologne Clean Water Act (CWA). The CWA governs water quality regulation in California and was established to protect the beneficial uses of water and water quality - including surface water bodies, groundwater, and wetlands; and

Implemented in 1992 , t he original stormwater fee of $2.10 per month for all residential dwelling units, was intended to fund the first annual budget of the Stormwater fund’s operations for FY 1991-92; and

The requirements of the Stormwater Utility has expanded extensively since the approval of the stormwater fee . The stormwater rate set more than 30 years ago is insufficient to fund the maintenance necessary to sustain an aging system and meet State and Federal regulatory requirements; and

On August 22, 2023 , by Resolution 2023-08-22-1214, the City Council approved a professional services contract with HDR Engineering, Inc., to evaluate the Stormwater Utility’s revenue requirements, prepare a cost -of-service analysis, and design rates that proportionately allocate the costs of providing stormwater service among all customer classes and customers within each class; and

The Stormwater Ra te Study used three analyses to address the adequacy and equity of the stormwater utility rates. Based on the analyses, the Municipal Utility Department’s (MUD) proposed stormwater rates have been developed to meet the legal requirements of the California Constitution Article XIII D, Section 6 (Proposition 218 ).

Stormwater rates may not exceed the cost of providing stormwater service. The proposed stormwater rates reflect rate study findings, meet the City’s goals and objectives, is cost- based and proportionally distributed among all the customer classes; and

On November 13, 2025, staff presented the Draft Stormwater Rate Study (Attachment A) and proposed rate adjustments to the Council Water Committee . The Council Water Committee approved forwarding the proposed stormwater rate adjustments to City Council for consideration and to proceed with the Proposition 218 notice and public hearing process; and

Staff will provide multiple convenient ways to get inf ormation and ask questions, including hosting a community meeting to explain the proposed stormwater rate adjustments, and providing a 24/7 online open house webpage with information about 398
Stockton’s stormwater system and links to contact the team by phone , email, or Ask Stockton; now, therefore,

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF STOCKTON, AS FOLLOWS:

1. The City Council authorizes the public hearing to be held March 31, 2026, to consider the proposed stormwater rates and charges. The public hearing shall be held at least 45 days after the notice of the public hearing has been mailed.

2. The City Manager is authorized and directed to mail a notice of a public hearing to consider the adoption of proposed increases to the City's stormwater rates and charges. The notice shall be mailed to all City of Stockton stormwater utility customers and the record owners of property upon which the proposed stormwater rates and charges are proposed. The notice shall include the proposed stormwater rates and charges, the reasons for the proposed adjustments to the stormwater rates and how the stormwater rates and charges were calculated, and the date, time and location of the Public hearing to consider the proposed stormwater rates and charges.

3. The City Manager is hereby authorized to take whatever actions are necessary and appropriate to carry out the purpose and intent of this Resolution.

PASSED, APPROVED, and ADOPTED January 27, 2026 .

CHRISTINA FUGAZI
Mayor of the City of Stockton
ATTEST:

KATHERINE ROLAND, CMC, CPMC
City Clerk of the City of Stockton

399

CITY COUNCIL

STORMWATER RATE STUDY RECOMMENDATIONS
January 27, 2026
Agenda Item 16.1
400
Stormwater System Overview
23,200 Catch Basins
(also known as storm
drains)
Large network of storm drains, pipes, pump stations and stormwater holding ponds that collect and move stormwater from properties into local waterways like rivers, creeks, sloughs and the Delta to avoid flood damage, nuisance flooding, and reduce pollution entering local waterways.
~100 Discharge Outlets
620 Miles of Pipeline
77 Pump Stations
2 243,000 Customers 19 Detention Basins
401
Challenges to be Addressed
3 ❖ As an enterprise utility, stormwater utility must be self-supporting ❖ Current rate of $2.10/month (~$25/year for a single-family home) established 33 years ago, has never increased
❖ Since 1992 NPDES requirements and the City have grown ❖ Revenues do not adequately fund the cost to provide reliable service
▪ Stormwater utility faces $2.7M deficit over the next two fiscal years combined and estimated to begin fiscal year 2027-28 with a ~$5M deficit for operations and maintenance alone
❖ Aging stormwater infrastructure at risk for failures
❖ Stormwater master plan was completed to identify projects to alleviate flooding and support system improvements
402
Aging Infrastructure
4 403
Aging Infrastructure
5 404
Infrastructure Impacts
6 405
Infrastructure Impacts
7 406
Purpose of the Rate Study
❖ Determine adequate level of rate revenue to operate and maintain the City’s stormwater utility operating and capital needs ❖ Develop cost-based and proportional stormwater rates to meet intent and requirements of Proposition 218
▪ Prop. 218 is a voter-approved California constitutional amendment that limits how property-related fees and charges can be created or increased ▪ Two step process to implement stormwater rates
❖ Developed using generally accepted methodologies tailored to the City’s system and customer characteristics
❖ Reflect prudent financial planning criteria
❖ Rate study results provide the foundation for cost-based and proportional proposedrates
8 407
Rate Design
Design rates for each class of service to reflect the prior two analyses, along with rate design goals and objectives
Cost of Service
Proportionally distribute the revenue requirement
between the customer classes of service
Revenue Requirement
Compares the revenue of the utility to the expenses to
evaluate the level of overall rate revenues
9 Developing Cost-Based Rates
408
Revenue Requirement Summary ($000’s)
13 409
Stormwater Rate Structure
❖Cost of service provides the basis to meet Proposition 218 requirements
❖Average unit costs provide basis for proposed rate per ERU ▪ Single family residential is equal to one ERU
▪ Multi-family and apartments are charged one ERU for each dwelling unit ▪ Non-residential are based on a density factor to calculate ERUs FY
2025-26
FY
2026-27
FY
2027-28
FY
2028-29
FY
2029-30
FY
2030-31
Average Residential Customer Bill $2.10 $3.85 $5.60 $6.85 $7.85 $8.10 11 410
Monthly Stormwater Bill Comparison
18 411
Impacts of Insufficient Revenues
13 ❖ Backlog of deferred maintenance
❖ Past and future deferral of critical infrastructure improvements ❖ Increased risk of flood damage to properties and nuisance flooding
❖ Risk of increased pollution in local waterways
❖ Risk of regulatory fines for violations due to infrastructure failures
412
❖Upon City Council acceptance of the Study
▪ Set public protest hearing and send customer notification outlining proposed rates
❖ Review and count protests
❖ Council may not forward with proposed rates if majority protest (>50%) ❖If no majority protest
▪ Send ballot to customers and set ballot hearing at Council direction
❖If majority (>50%) of ballots received are in favor, Council may approve the Study and implement proposed rates
14 Proposition 218 Process
413
15 Outreach/Communication Efforts
❖ Online open house
❖ Community meeting
❖ Business/Civic group presentations
❖ Meetings with Commercial/Industrial properties
❖ Mailings
▪ Protest notice
▪ “Gap mailer” (between protest hearing & ballot mailing) ▪ Ballot package (ballot and ballot information guide)
❖ Social media
❖ Traditional media
414
16 RECOMMENDED ACTION
Adopt a resolution to authorize:
❖ A public hearing to be held on March 31, 2026 to consider necessary adjustments to the City’s stormwater rates
❖ The City Manager to mail a notice of the future public hearing to all City stormwater utility customers and the record property owners, upon which the stormwater rates are proposed for imposition
❖ The public hearing shall be held not less than 45 days after the notice has been mailed
❖ The City Manager to take actions necessary to carry out the purpose and intent of the Resolution
415
City of Stockton
Legislation Text
File #: 25-1429, Version: 1
MEASURE W CITIZENS’ OVERSIGHT COMMITTEE ADOPTED ANNUAL REPORT OF REVENUES AND EXPENDITURES FOR FISCAL YEAR 2023-24

RECOMMENDATION
This item is an informational item submitting the Measure W Citizens’ Oversight Committee Report for Fiscal Year 2023-24 to the City Council.

Summary
Stockton’s voters approved Measure W on November 2, 2004, and the City Council subsequently adopted program guidelines to implement the measure. The guidelines require an audit performed by an independent certified public accountant, and the establishment of a citizen’s oversight committee to ensure proper use of the revenues. The Measure W Citizens’ Oversight Committee has the responsibility to determine whether expenditures were made consistent with the program guidelines. Furthermore, the Committee is required to provide an annual report to the City Council.

The attached Measure W Annual Report for Fiscal Year (FY) 2023-24 (Attachment A) is presented to the City Council in compliance with the program guidelines.

DISCUSSION
Background
On August 3, 2004, the City Council adopted a resolution which called for an election to consider enactment of The Stockton Safe Neighborhood Gang and Drug Prevention, Police/Fire Measure, also known as Measure W. The voters approved the measure on November 2, 2004. Measure W enabled the collection of a one-quarter percent sales tax specifically for police and fire services. The ordinance guidelines call for the creation and operation of a citizens’ oversight committee to ensure funds collected would be deposited and expended according to the intent of the measure. After the passage of the measure, the Council adopted guidelines for the functioning of the oversight committee and appointed members to the committee.

Present Situation
The Measure W Citizens’ Oversight Committee met regularly during the past year to review and discuss the Measure W revenues and expenditures, to receive programmatic updates from the Police and Fire Departments, to approve the annual audits by the independent certified public accountant, and to review the Annual Report. The financial information included in the Annual Report is based on the annual audit. City staff presented the FY 2023-24 audited Schedule of Revenues, Expenditures, and Change in Fund Balance to the City’s Audit Committee on September 22, 2025, and the City City of Stockton Printed on 1/22/2026Page 1 of 2
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File #: 25-1429, Version: 1
Council on September 23, 2025, and the Measure W Citizens’ Oversight Committee on December 10, 2025.

A draft FY 2023-24 Annual Report was presented to the Oversight Committee on December 10, 2025. The Oversight Committee approved the Measure W FY 2023-24 Annual Report for presentation to the City Council and the public.

The FY 2023-24 Annual Report (Attachment A) describes the receipt and expenditure of Measure W funds as well as compliance with requirements in the ordinance, policy, and program guidelines.

Under the current program guidelines, revenues collected from Measure W sales tax are split between Police (50%) and Fire (50%).

FY 2023-24 tax revenues totaled $15.8 million, a 4% decrease compared to prior year.

The Measure W expenditure budget for FY 2023-24 was approximately $15.7 million. Of this total allocation, almost $15.5 million was expended during the year, resulting in an increase to the ending available fund balance. Police and Fire salaries and benefits comprised 85% of the Measure W spending with Measure W covering the cost of 24 sworn positions in the Police Department and 27 firefighters in the Fire Department. Of the remaining expenditures, radio and automotive services accounted for 8%, purchase of fire apparatus and facility improvements were 1%, general liability insurance was 4% and tax collection/ audit expenses were 1%.

The Measure W fund balance as of June 30, 2024, was approximately $13.2 million, which is 83% of the FY 2024-25 budgeted revenue of $16 million. This fund balance is more than sufficient to meet the 25% program guideline reserve target. The fund balance is a reserve to ensure that the City can maintain the Measure W-funded police and fire positions during economic fluctuations.

FINANCIAL SUMMARY
There is no financial impact from the presentation of this report.

Attachment A - Measure W Annual Report for FY 2023-24
City of Stockton Printed on 1/22/2026Page 2 of 2
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MEASURE W

PUBLIC SAFETY
Citizens’ Oversight
Committee Annual Report
Fiscal Year 2023-24
INSIDE THIS REPORT:

COMMITTEE MEMBERS

MESSAGE FROM THE COMMITTEE

FIRE DEPARTMENT MESSAGE

POLICE DEPARTMENT MESSAGE

PROGRAM INFORMATION

INDEPEDNENT AUDIT
City of Stockton
Measure W
Police & Fire Protection
Services
Attachment A
418
City of Stockton
FY 2023-24 Measure W Annual Report
What is Measure W? A 1/4 cent sales and transaction tax approved by Stockton citizens in
November 2004 to fund public safety
services.

The Measure W Ordinance called for a
Citizens' Oversight Committee to ensure
the use of measure W tax proceeds are
consistent with the intent of voters.

Committee Members
Stefanie M Alfaro
Lanphuong Nguyen
Rena M Rodgers
Matthew N Amen
Gregory E Bahr
Margarita A. Reyes

MESSAGE FROM THE COMMITTEE
The Measure W Citizens’ Oversight Committee is pleased to present the annual report for Fiscal Year (FY) 2023-24. The Committee has reviewed the revenue and expenditure reports to ensure that the use of these revenues complies with the objectives originally approved by voters in 2004, and confirms the stewardship over the tax proceeds is in accordance with the ordinance and guidelines.

The Measure W program guidelines approved by City Council also call for an independent audit by a Certified Public Accounting firm. A “clean report” was issued for the fiscal year ending June 30, 2024, stating that the financial schedules for Measure W present fairly the revenues and expenditures.

Measure W provides funding for public safety positions and related operating costs over and above what could be afforded by the City’s normal tax funding sources. These additional sales tax dollars are split evenly between the Police and Fire Departments. Both the Police and Fire Departments have reported to the Committee that the need for Measure W revenues is critical and the services are extremely valuable to the public.

The Committee reports that the Fund has accumulated the reserve recommended in the guidelines which will insulate the services should revenues falter for a short period of time. Even though revenues exceeded budget, the importance of having a strong reserve cannot be overemphasized.

At the end of this 20th year for Measure W, the committee is pleased with the results and would like to extend our appreciation to all stakeholders for their extraordinary support.