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02-20-2018 Agenda Packet
Tuesday, February 20, 2018 3:30 PM REGULAR MEETING Council Hearing Room 990 Palm Street San Luis Obispo Page 1 CALL TO ORDER: Mayor Heidi Harmon ROLL CALL: Council Members Aaron Gomez, Andy Pease, Dan Rivoire, Vice Mayor Carlyn Christianson and Mayor Heidi Harmon PUBLIC COMMENT ON CLOSED SESSION ITEMS CLOSED SESSION A. CONFERENCE WITH LABOR NEGOTIATORS Pursuant to Government Code § 54957.6 Agency Negotiators: Monica Irons, Nickole Sutter, Rick Bolanos, Derek Johnson, Christine Dietrick Represented Employee Organizations: International Association of Firefighters Local 3523 B. CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION Paragraph (1) of subdivision (d) of Government Code § 54956.9; Name of case: Erik Baskin, et al. v. City of San Luis Obispo; United States District Court, Central District of California Case No. 2:16-cv-08876-DSF-JPR ADJOURNED TO THE REGULAR MEETING OF FEBRUARY 20, 2018 TO BEGIN AT 4:00 PM IN THE COUNCIL CHAMBER Packet Pg 1 City Council/Public Financing Authority Governing Board Agenda February 20, 2018 Page 2 4:00 PM REGULAR MEETING Council Chamber 990 Palm Street CALL TO ORDER: Mayor Heidi Harmon ROLL CALL: Council Members Aaron Gomez, Andy Pease, Dan Rivoire, Vice Mayor Carlyn Christianson and Mayor Heidi Harmon PUBLIC COMMENT ON AGENDA ITEMS ONLY PUBLIC HEARING ITEMS AND BUSINESS ITEMS 1.2017-18 MID-YEAR BUDGET REVIEW (JOHNSON / BRADFORD / FERREIRA – 40 MINUTES) Recommendation: 1.Receive and discuss an update of changes in the financial position based on revised projections for all funds for the 2017-18 fiscal year; and 2.Receive an update on Status of Major City Goals and Other Important Objectives; and 3.Adopt a Resolution entitled “A Resolution of the City Council of the City of San Luis Obispo, California, approving changes to the 2017-18 Budget.” 2.PUBLIC HEARING - PARK VIEW RESIDENTIAL PARKING PERMIT DISTRICT EXPANSION (GRIGSBY / FUCHS – 15 MINUTES) Recommendation: Adopt a Resolution entitled “A Resolution of the City Council of the City Of San Luis Obispo, California, modifying the Residential Parking Permit District for the Park View Area of the city, establishing days and hours of operation of said District and time of renewal for a Parking Permit, and Rescinding Resolution No. 8529” expanding the existing Park View Residential Parking Permit District as shown in Exhibit A. Packet Pg 2 City Council/Public Financing Authority Governing Board Agenda February 20, 2018 Page 3 3.PUBLIC HEARING - REVIEW OF AN APPEAL (FILED BY OASIS ASSOCIATES ON BEHALF OF THE SCHOTTENSTEIN PROPERTY GROUP) OF THE ARCHITECTURAL REVIEW COMMISSION’S DECISION TO APPROVE A MASTER SIGN PROGRAM FOR THE MADONNA PLAZA SHOPPING CENTER, WITH A CATEGORICAL EXEMPTION FROM ENVIRONMENTAL REVIEW (CODRON / MORAIS – 45 MINUTES) Recommendation: Adopt a resolution entitled “A Resolution of the City Council of the City of San Luis Obispo, California, denying an appeal of the Architectural Review Commission decision to approve a Master Sign Program for Madonna Plaza as presented in the City Council agenda report and attachments dated February 20, 2018 (257 Madonna Road APPL-1310-2017)” with a categorical exemption from environmental review. ADJOURNED TO THE REGULAR MEETING OF FEBRUARY 20, 2018 TO BEGIN AT 6:00 PM IN THE COUNCIL CHAMBER Packet Pg 3 City Council/Public Financing Authority Governing Board Agenda February 20, 2018 Page 4 6:00 PM REGULAR MEETING Council Chamber 990 Palm Street CALL TO ORDER: Mayor Heidi Harmon ROLL CALL: Council Members Aaron Gomez, Andy Pease, Dan Rivoire, Vice Mayor Carlyn Christianson and Mayor Heidi Harmon PLEDGE OF ALLEGIANCE: Council Member Andy Pease CITY ATTORNEY REPORT ON CLOSED SESSION PRESENTATIONS 4.PROCLAMATION - LUKE FOX’S EXEMPLARY SERVICE (HARMON – 5 MINUTES) PUBLIC COMMENT PERIOD FOR ITEMS NOT ON THE AGENDA (not to exceed 15 minutes total) The Council welcomes your input. You may address the Council by completing a speaker sli p and giving it to the City Clerk prior to the meeting. At this time, you may address the Council on items that are not on the agenda. Time limit is three minutes. State law does not allow the Council to discuss or take action on issues not on the agenda, except that members of the Council or staff may briefly respond to statements made or questions posed by persons exercising their public testimony rights (gov. Code sec. 54954.2). Staff may be asked to follow up on such items CONSENT AGENDA Matters appearing on the Consent Calendar are expected to be non-controversial and will be acted upon at one time. A member of the public may request the Council to pull an item for discussion. Pulled items shall be heard at the close of the Consent Agenda unless a majority of the Council chooses another time. The public may comment on any and all items on the Consent Agenda within the three minute time limit. Packet Pg 4 City Council/Public Financing Authority Governing Board Agenda February 20, 2018 Page 5 5.WAIVE READING IN FULL OF ALL RESOLUTIONS AND ORDINANCES (GALLAGHER) Recommendation: Waive reading of all resolutions and ordinances as appropriate. 6.MINUTES OF OCTOBER 24, 2017, JANUARY 16, 2018 AND FEBRUARY 6, 2018 (GALLAGHER) Recommendation: Approve the Minutes of the City Council meetings of October 24, 2017, January 16, 2018 and February 6, 2018. 7.FY 2019 GRANT APPLICATION FOR OFFICE OF TRAFFIC SAFETY GRANT PROGRAM (CANTRELL / ELLSWORTH) Recommendation: 1.Authorize the Police Department to submit a grant application to the Office of Traffic Safety for a FY 2019 Selective Traffic Enforcement Program (STEP) not to exceed $100,000. 2.If the grant is awarded, authorize the Chief of Police to execute all grant related documents and authorize the Finance Director to make the necessary budget adjustments upon the award of the grant. 8.ORDINANCE ADOPTION - PROHIBITING THE USE OF CITY FUNDS FOR SPECIFIED PLASTIC BOTTLED BEVERAGES (BRADFORD / ERIKSSON) Recommendation: Adopt Ordinance 1644 (2018 Series) entitled “An Ordinance of the City Council of the City Of San Luis Obispo, California, adding Section 3.24.075(F) to the Municipal Code in compliance with recently adopted Chapter 8.07 regulating Single-Use Plastic Beverage Bottles And Single-Use Plastic Beverage Containers.” Packet Pg 5 City Council/Public Financing Authority Governing Board Agenda February 20, 2018 Page 6 9.WATER RESOURCE RECOVERY FACILITY PROJECT UPDATE AND PROGRAM MANAGEMENT SERVICES CONTRACT AMENDMENT (MATTINGLY / HIX) Recommendation: 1.Approve a contract amendment with Water Systems Consulting, Inc. for $1,124,453 for completion of Phase 3 Program Management Services for the Water Resource Recovery Facility Project, Spec. No. 91219; and 2.Approve transfer of $1,124,453 from the Sewer Fund working capital for the WRRF project to the project account. 10.ANNUAL REVIEW OF INVESTMENT POLICIES AND RECOMMENDATIONS AND AMENDMENT TO INVESTMENT OVERSIGHT COMMITTEE MEMBERSHIP (BRADFORD) Recommendation: 1.Approve changes to the investment manual in accordance with the annual Investment Oversight Committee recommendations; and 2.Approve amendment to the Investment Oversight Committee membership. 11.ANHOLM BIKEWAY PLAN (GRIGSBY / HUDSON) Recommendation: Adopt a resolution entitled “A Resolution of the City Council of the City of San Luis Obispo, California, adopting the modified Anholm Bikeway Plan.” CONTINUE TO NEXT PAGE Packet Pg 6 City Council/Public Financing Authority Governing Board Agenda February 20, 2018 Page 7 JOINT CITY COUNCIL AND PUBLIC FINANCING AUTHORITY AGENDA At this point in the meeting, the Public Financing Authority will convene in joint session with the City Council. PUBLIC HEARING ITEMS AND BUSINESS ITEMS 12.CITY APPROVING THE SALE OF THE LEASE REVENUE REFUNDING BONDS, SERIES 2018, EXECUTION OF BOND DOCUMENTS AND RELATED ACTIONS (BRADFORD – 15 MINUTES) Recommendation: Adopt a Resolution entitled “A Resolution of the City Council of the City of San Luis Obispo, California, authorizing the issuance, sale and delivery of San Luis Obispo Public Financing Authority Lease Revenue Refunding Bonds; the execution and delivery of a Continuing Disclosure Certificate, a Site Lease, a Facility Lease, and a Bond Purchase Agreement; the preparation and distribution of a preliminary and a final Official Statement relating to the aforesaid bonds; and certain other actions in connection with such transactions.” PUBLIC FINANCING AUTHORITY APPROVING THE SALE OF THE LEASE REVENUE REFUNDING BONDS, SERIES 2018, EXECUTION OF BOND DOCUMENTS AND RELATED ACTIONS Recommendation: Adopt a Resolution entitled “A Resolution of the Governing Board of the San Luis Obispo Public Financing Authority, California, authorizing the issuance, sale and delivery of San Luis Obispo Public Financing Authority Lease Revenue Refunding Bonds; the execution and delivery of a Trust Agreement, a Site Lease, a Facility Lease, and a Bond Purchase Agreement; the preparation and distribution of a preliminary and a final Official Statement relating to the aforesaid bonds; and certain other actions in connection with such transactions.” ADJOURNMENT OF THE JOINT CITY COUNCIL AND PUBLIC FINANCING AUTHORITY At this point in the meeting, the City Council will reconvene. Packet Pg 7 City Council/Public Financing Authority Governing Board Agenda February 20, 2018 Page 8 STUDY SESSION ITEMS 13.OVERVIEW OF PROPOSED DRAFT CANNABIS REGULATIONS (CODRON / COHEN / RUSSELL – 180 MINUTES) Recommendation: Receive a presentation, take public testimony, and provide the following direction to staff: 1.Prepare draft regulations based on direction provided by the City Council with input from the community and Planning Commission, and return to the Council on May 1, 2018, with the resolutions and ordinances necessary to adopt Cannabis Regulations; and 2.Return to the City Council on March 6, 2018, for approval of a Request for Proposals (RFP) to identify a consultant to process applications and establish a list of eligible cannabis business operators. COUNCIL LIAISON REPORTS AND COMMUNICATIONS (Not to exceed 15 minutes) Council Members report on conferences or other City activities. At this time, any Council Member or the City Manager may ask a question for clarification, make an announcement, or report briefly on his or her activities. In addition, subject to Council Policies and Procedures, they may provide a reference to staff or other resources for factual information, request staff to report back to the Council at a subsequent meeting concerning any matter, or take action to direct staff to place a matter of business on a future agenda. (Gov. Code Sec. 54954.2). ADJOURNMENT The next Regular City Council Meeting is scheduled for Tuesday, March 6, 2018 at 5:30 p.m. and 6:00 p.m., respectively, in the Council Hearing Room and Council Chamber, 990 Palm Street, San Luis Obispo, San Luis Obispo, California. Packet Pg 8 City Council/Public Financing Authority Governing Board Agenda February 20, 2018 Page 9 LISTENING ASSISTIVE DEVICES are available for the hearing impaired--please see City Clerk. The City of San Luis Obispo wishes to make all of its public meetings accessible to the public. Upon request, this agenda will be made available in appropriate alternative formats to persons with disabilities. Any person with a disability who requires a modification or accommodation in order to participate in a meeting should direct such request to the City Clerk’s Office at (805) 781-7100 at least 48 hours before the meeting, if possible. Telecommunications Device for the Deaf (805) 781-7107. City Council regular meetings are televised live on Charter Channel 20. Agenda related writings or documents provided to the City Council are available for public inspection in the City Clerk’s Office located at 990 Palm Street, San Luis Obispo, California during normal business hours, and on the City’s website www.slocity.org. Persons with questions concerning any agenda item may call the City Clerk’s Office at (805) 781-7100. Packet Pg 9 Page intentionally left blank. Packet Pg 10 Meeting Date: 2/20/2018 FROM: Derek Johnson, City Manager Xenia Bradford, Finance Director Alex Ferreira, Budget Manager Prepared By: Alex Ferreira, Budget Manager SUBJECT: 2017-18 MID-YEAR BUDGET REVIEW RECOMMENDATION 1. Receive and discuss an update of changes in the financial position (Attachment A, Sections A &B) based on revised projections for all funds for the 2017-18 fiscal year; and 2. Receive an update on Status of Major City Goals and Other Important Objectives (Attachment A, Section C); and 3. Approve Resolution (Attachment B) adopting changes to 2017-18 budget. REPORT IN BRIEF The purpose of the Mid Year Budget Review for 2017-2018 is to provide a comprehensive overview of the City’s fiscal condition and provide a status report on Major City Goals put forth in the 2017-2019 Financial Plan. Lastly, this report provides recommendations for the use of one - time funds in excess of reserve policy requirements. DISCUSSION The accompanying Mid-Year Budget Review for 2017-18 provides a comprehensive overview of the City’s fiscal condition at the mid-point of the fiscal year. The Transmittal Memorandum (starting on page A-1) sets forth a concise summary of key General Fund revenue and expenditure trends since adoption of the 2017-19 Financial Plan in June 2017. The report’s main focus is on the General Fund; however, updated information is provided for each fund. The report also includes a comprehensive status of Major City Goals, Capital Improvement Program (CIP) projects and Other Important Objectives. Background The City’s two-year Financial Plan provides for the submittal of a report on financial status to the Council every six months. For fiscal monitoring purposes, on-line access to up-to-date information is available to all departments. Additionally, focused reports are issued to the Council and staff on key revenues such as sales tax, transient occupancy tax and investments, as well as ad hoc reports as needed. However, the formal submittal of a review at the mid-point of the fiscal year provides an opportunity to take broader look at the City’s financial picture, including: Packet Pg 11 1 1. Updating beginning fund balance projections based on actual results for the prior fiscal year as confirmed in the audit and reported in the Comprehensive Annual Financial Report (CAFR). 2. Analyzing revenue trends since adoption of the Financial Plan and revising revenues and ending fund balance projections accordingly. 3. Identifying and presenting any areas of uncertainty or concern and recommending corrective action or additional funding if required. 4. Presenting the status of major City goals, CIP projects and other important objectives. Report Organization Section A: Transmittal Memorandum: Provides a narrative overview of the City’s fiscal environment. Provides an update to 2017-18 fund balance projections with previous fiscal year audited fund balance results and the most recent revenue and expenditures trends. Provides a summary of administrative and previously adopted by Council budget adjustments since the adoption of 2017-19 Financial Plan. This memorandum provides with Mid-Year recommended budget adjustments for Council approval and recommendations for the use of surplus fund balance. Section B: Financial Condition Summaries: Provides comprehensive presentations and updates of projected revenues and expenditures based on staff’s best and most prudent professional judgment. Updates beginning fund/working capital balances based on actual audited 2016-17 results and projected ending balances for 2017-18 based on changes from original budget estimates. Section C: Status of Goals and Objectives: Provides a report on Major City Goals, Other Council Objectives, and the status of major Capital Improvement Plan (CIP). Section D: Recent financial and revenue reports: Provides the most recent Quarterly Financial Report, Quarterly Sales Tax Newsletter and Monthly TOT Report. Summary of Mid-Year Budget Review Results This Mid-Year review shows that the City continued to experience slow economic growth for the past six months. Sales tax revenue which is the most volatile source of revenue for the General Fund because it closely correlated with economic fluctuations and which amounts to 36% of total General Fund revenues, showed a slowing down in growth. Due to prudent expenditure management in 2016-17, the City has one-time unallocated funds in the amount of $5.9 million; however, further draw on this fund balance is projected within this fiscal year due to revised projections of revenues and expenditures as discussed in this report. Unassigned fund balance for General fund including Local Revenue Measure sub-fund is projected at $5.5 million at the end of fiscal year 2017-18. There are no Local Revenue Measure funds not previously allocated available to be considered for allocation. The unassigned fund balance of $5.5 million, is partially recommended to fund public safety Capital Improvement Project on page A-11 in the amount of $1.3 million and the remainder in the amount of $4.2 million is recommended to be set aside for designation for future transfer into Packet Pg 12 1 section 115 Pension Trust Fund. The recommendation is based on the Council’s direction for the Fiscal Health Response Plan Budget Foundation from December 12, 2017. 2017-19 MCG ACTION HIGHLIGHTS TO DATE Housing 30% Complete Facilitate increased production of all housing types designed to be economically accessible to the area workforce and low and very low-income residents, through increased density and proximity to transportation corridors in alignment with the Climate Action Plan. In July 2017, the City updated the Accessory Dwelling Unit Ordinance. In response to the California Housing Legislation package that was approved in September 2017, staff is currently evaluating how compliance with SB 35 and AB 1505 can help the City achieve the Housing Element goals and policies. Staff recently confirmed that the City is not subject to SB 35 streamlining requirements because SLO is one of 13 jurisdictions in the State that is in compliance with its Regional Housing Needs Allocation (RHNA) responsibilities. In November 2017, the effort to update the RHNA for 2019 kicked off with SLOCOG. Also, The City began maintaining an Affordable Housing Interest list, so that interested individuals can receive notification as affordable for-sale and rental units become available in the City. In December 2017, the HRC reviewed and recommended CDBG and GIA funding. As of January 2018, the Affordable Housing Fund has a balance of approximately $1.75 million. Multi-Modal Transportation 50% Complete Prioritize implementation of the Bicycle Master Plan, pedestrian safety, and the Short-Range Transit Plan. In September 2016, the Council adopted the Short Range Transit Plan and service changes consistent with the plan will be implemented in summer 2017. The most significant and publicly visible of these changes include the purchase of three fully modernized transit vehicles aimed at enhancing the riding experience with new vehicle amenities. However, even more significant accomplishment for Transit this year is the execution on the majority of the operational changes recommended by the City’s adopted Short-Range Transit Plan (June 2017). These changes reorganize SLO Transit in a way that can be built upon for the next 10 to 15 years, creates a system that is much more resilient to system impacts (e.g. roadwork, surge ridership, etc.) and most importantly, increases the safety of the service that directly touches the lives our residents more than 1.1 Million times a year. Climate Action 20% Complete Implement Climate Action Plan, assess requirements to achieve a “net-zero carbon City” target, and implement cost-effective measures, including implementation of a Sustainability Coordinator and formation of a Green Team. In July 2017, the Special Projects Manager position took on the role and responsibilities of the Sustainability Coordinator. In November, the position was reclassified to a Sustainability Manager position after a staff transition. The purpose of the reclassification was to strategically station the position to maximize coordination and influence over key climate actions. The Packet Pg 13 1 recruitment was filled in February 2018 and the new Sustainability Manager will begin work in March 2018. In July 2017, the City “Green Team” was established with represen tatives from each City department. In October 2017, a Memorandum of Understanding between the City and the Climate Action Task Force (Task Force) was approved to establish the Task Force as the “Community Climate Action Coalition” to help achieve the objectives outlined in the Climate Action Major City Goal work program. Also in October, the City Council limited the use of single use plastic beverage straws citywide and other measures for city facilities and special events. In October, the City Council adopted Ordinance 1637 providing for an expedited and streamlined permitting process for electric vehicle charging stations. In November, the data collection for the update of the GHG emissions inventory was initiated. Finally, in December, the City Council directed staff to pursue a Community Choice Energy Program. City staff has initiated outreach to other jurisdictions in the County to support this effort. Fiscal Sustainability & Responsibility 25% Complete Continue to implement the City’s Fiscal Responsibility Philosophy with a focus on economic development and responsiveness, unfunded liabilities, and infrastructure financing. The City’s fiscal health has been evaluated through an extended to ten years long-term fiscal analysis for all major funds. A Fiscal Health Response Plan to address identified $8.9 million structural budget gap due to significant increases in pension costs to pay down unfunded liabilities has been developed and conceptually approved by Council. On December 12, 2017, Council set Fiscal Health Response Plan Budget Foundation, providing with general direction and components for how the reductions will be achieved over a three-year period starting with 2018-19 Supplemental budget through 2019-21 Financial Plan. On April 14, 2018, Fiscal Health Response Plan Strategic Budget Direction will be presented to Council providing with strategic direction for 2018-19 Supplemental Budget and setting strategic policy direction for 2019-21 Financial Plan Development. Capital Improvement Program has also been reviewed by staff over a 10-year period and initial findings were presented to Council on January 16, 2018. Staff presented the funding needs to maintain existing infrastructures, to fund major rehabilitation projects, and to fund new projects. Staff will return to Council on April 17, 2018 with recommendations for funding options, including financing options and revenue measure recommendations, and timeframe to complete the identified projects. The City continues to address closure of the Diablo Canyon and prepare for the impacts to the region due to significant loss of jobs and property tax value. California Public Utilities Commission rejected the PG&E settlement with the local governments based on an administrative judge ruling. The City is pursuing a legislative strategy to address the ruling and to advocate for legislative relief to the region. Packet Pg 14 1 2017-19 OTHER IMPORTANT OBJECTIVES (Objectives) ACTION HIGHLIGHTS TO DATE Downtown Vitality 25% Complete Continue to improve safety, infrastructure investment, and maintenance in the Downtown and support Downtown Association’s proposal to consider a Downtown improvement district. Maintenance work continues in the downtown core which includes tree maintenance, sidewalk scrubbing, and street sweeping. Replacement of the Marsh Street Bridge design work continues and is scheduled to start construction in Spring of 2019. The next Downtown Renewal Project located in the 800 block of Higuera Street is delayed and anticipated to start construction in Summer of 2018. Planning work for the Downtown Concept Plan and Mission Plaza Concept Plan is complete. Implementation of portions of the Mission Plaza Concept Plan will commence in the summer of 2018. The Community Action Team and Bicycle Patrols continue to maintain public safety by focusing efforts in addressing chronic offenders and evening patrols within the downtown. Continued coordination with the Downtown Association to educate the community on homelessness issues is underway. Police Department coordination with the County of San Luis Obispo to expanded mental Health Services is underway and implementation planned for 2018. CONCURRENCES The City leadership team concurs with the findings in this report. ENVIRONMENTAL REVIEW This is not a project under CEQA. FISCAL IMPACT The following budget adjustments are recommended for Council approval. Packet Pg 15 1 Table A Fiscal Year 2016-17 Mid-Year Adjustment Requests Department/ Fund Budget Action Adjustmen t Amount Council Action Requested General Fund Decrease in Revenue ($312,000) Approve decrease in revenue due to; sales tax decline of $607 thousand, offset by increase in property tax, property tax in lieu of VLF, and franchise fees of $195 thousand, $44 thousand, and $56 thousand, respectively. Fire Increase in Revenue $1,500,000 Approve increase to revenue due to recognition for Mutual Aid Reimbursement revenue. Fire Increase in Expenditure $1,200,000 Approve increase to expenditures due to recognized expenses for Mutual Aid Reimbursement. Development Services Change to Fund Balance ($382,000) Approve designation re-classification of fund balance to development services due to incorrect classification at 2016-17 fiscal year end close. . Total General Fund ($394,000) Law Enforcement Grants Fund Increase in Expenditure $90,000 Approve correction to original budget of $75 thousand and $15 thousand based on updated grant receipt information. Corresponding revenue was recognized with the original adopted budget less $8,500 adjustment shown below. Law Enforcement Grants Fund Increase in Revenue $8,500 Approve increase revenue due to updated information based on grant receipt. Total Law Enforcement Fund ($81,500) Water Increase in Revenue $400,000 Projections for water development impact fees which were budgeted conservatively, are being increased to reflect revenue received through December. This is a positive impact to fund balance. Sewer Increase in Revenue $129,000 The budget for sewer development impact fees is being increased to reflect revenue received as of December. This is a positive impact to fund balance. Parking Increase in Revenue $891,000 Approve increase to revenue due to rate increases implemented after budget adoption. This is a positive impact to fund balance. Public Works Increase in CIP Expenditure $1,288,000 Approve Farmers Market Security Bollards Capital Improvement Project detailed on page A-11 of the report. Packet Pg 16 1 ALTERNATIVES The Council may elect not to make adjustments to the revenue and expenditures operating budgets. This is not recommended as the proposed changes are reflective of the staff best professional review of revenue trends and recognition of expenditures for Mutual Aid as well as corrective action to Development Review Designation, which is recommended for compliance with Council fiscal policies. Council may elect not to appropriate $1.2 million for the Capital Improvement Program. The project detailed on page A-10 of the report and is recommended to be funded at this time to address public safety at the Farmer’s Market. Council may elect not to designate $4.3 million to fund Section 115 Trust. This action is not recommended per Council’s budget direction to address the ongoing structurally unbalanced budget through Fiscal Health Response Plan and Trust formation to address unfunded liability. Attachments: a - Council Reading File Mid-Year 2017-18 b - Resolution c - Summary of Budget Adjustments Packet Pg 17 1 RESOLUTION NO. (2018 Series) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, APPROVING CHANGES TO THE 2017-18 BUDGET WHEREAS, the City Council adopted the 2017-18 Financial Plan on June 20, 2017, which established comprehensive financial and policy guidelines for fiscal years 2017-18 and 2018-19; and WHEREAS, in accordance with the City’s Budget and Fiscal Policies, staff has completed a review of the city’s revenue and expenditure trends and has developed revised budget amounts which are explained and compiled in the Mid-Year Budget Review; and WHEREAS, the City Manager has recommended the approval of budget amendments summarized in Attachment C. and NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo that: a)The revised revenue and expenditure forecast amounts for the 2017-18 identified in the Mid-Year Budget Review presented on this date are hereby adopted as the revised budget for 2017-18. Upon motion of ________________, seconded by _________________, and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted on February 20th, 2018. _____________________________ Mayor Heidi Harmon ATTEST: ____________________________________ Carrie Gallagher City Clerk APPROVED AS TO FORM: Packet Pg 18 1 _____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ____________________________________ Carrie Gallagher City Clerk Packet Pg 19 1 ATTACHMENT C: BUDGET AMENDMENTS Fiscal Year 2016-17 Mid-Year Adjustment Requests Department/ Fund Budget Action Adjustment Amount Council Action Requested General Fund Decrease in Revenue ($312,000) Approve decrease in revenue due to; sales tax decline of $607 thousand, offset by increase in property tax, property tax in lieu of VLF, and franchise fees of $195 thousand, $44 thousand, and $56 thousand, respectively. Fire Increase in Revenue $1,500,000 Approve increase to revenue due to recognition for Mutual Aid Reimbursement revenue. Fire Increase in Expenditure $1,200,000 Approve increase to expenditures due to recognized expenses for Mutual Aid Reimbursement. Development Services Change to Fund Balance ($382,000) Approve designation re-classification of fund balance to development services due to incorrect classification at 2016-17 fiscal year end close. . Total General Fund ($394,000) Law Enforcement Grants Fund Increase in Expenditure $90,000 Approve correction to original budget of $75 thousand and $15 thousand based on updated grant receipt information. Corresponding revenue was recognized with the original adopted budget less $8,500 adjustment shown below. Law Enforcement Grants Fund Increase in Revenue $8,500 Approve increase revenue due to updated information based on grant receipt. Total Law Enforcement Fund ($81,500) Water Increase in Revenue $400,000 Projections for water development impact fees which were budgeted conservatively, are being increased to reflect revenue received through December. This is a positive impact to fund balance. Sewer Increase in Revenue $129,000 The budget for sewer development impact fees is being increased to reflect revenue received as of Packet Pg 20 1 December. This is a positive impact to fund balance. Parking Increase in Revenue $891,000 Approve increase to revenue due to rate increases implemented after budget adoption. This is a positive impact to fund balance. Public Works Increase in CIP Expenditure $1,288,000 Approve Farmers Market Security Bollards Capital Improvement Project detailed on page A- 11 of the report. Packet Pg 21 1 Page intentionally left blank. Packet Pg 22 1 Meeting Date: 2/20/2018 FROM: Daryl R. Grigsby, Public Works Director Prepared By: Alexander Fuchs, Parking Services Supervisor SUBJECT: PARK VIEW RESIDENTIAL PARKING PERMIT DISTRICT EXPANSION RECOMMENDATION Adopt a Resolution expanding the existing Park View Residential Parking Permit District as shown in Exhibit A. DISCUSSION Background In May 2016 the City received a request from a resident living on La Entrada Avenue to expand the existing Park View Residential Parking Permit District. The request was based on parking impacts caused by overflow of non-permitted guests of the adjacent Park View District as well as commuters parking throughout the week. The proposed expansion boundaries include one block of La Entrada Avenue bordered by Ramona Drive and Foothill Boulevard. Staff met with the requestor in July 2016 to discuss parking impacts and the proposed boundaries of the expansion area. In September 2016 staff provided the requestor informal survey materials including informal survey forms, a copy of the relevant ordinance sections, residential parking permit district informational pamphlet, and a map of the existing Park View District. The requestor was asked to distribute and collect informal survey forms from the households within the proposed expansion boundaries. Between late August 2016 and early October 2016, staff conducted on-street parking counts to determine the level of parking impact observed within the proposed expansion boundaries. Counts were taken on weekdays and weekends between 10 AM and 4 PM. The counts indicate that parking impacts vary significantly amongst the dates and times surveyed with the highest observed impacts on Saturday and Sunday afternoon. In August 2017 staff mailed formal survey forms to the households within the proposed expansion boundaries. These formal survey forms were to be completed and returned to the Parking Services officer using the provided return envelope. District Boundaries Staff agreed with the initial expansion boundaries that were proposed by the requestor so no changes to the proposed expansion boundaries were made. Figure 1 shows a map of the existing Park View District boundaries in grey and the proposed expansion area in blue. Packet Pg 23 2 Figure 1 – Park View Expansion Area Informal Surveys Staff provided the requestor informal survey forms to distribute to the households within the proposed expansion boundaries. Of the six households in the proposed expansion boundaries, two returned informal surveys to the Parking Services office both of which were in favor of the district expansion. With over 50% of the informal surveys returned in favor of the proposed district expansion, staff prepared and mailed formal surveys to the households. Formal Surveys In August 2017 staff mailed formal survey forms, copies of the relevant ordinances, a letter explaining the purpose of the survey forms, and a return envelope to the households within the proposed expansion boundaries. Completed formal survey forms returned to the Parking Services office by the September 30, 2017 deadline yielded the following results: Proposed Expansion Area 6 Households Surveyed 4 Surveys returned 3 In Favor (75%) 1 Not in favor Packet Pg 24 2 The City’s regulations require at least 60% of the returned formal surveys to be in favor of the expansion for the request to be forwarded to Council for consideration. With 75% of households in favor of the expansion, the 60% threshold has been met. The household not in favor of the expansion raised concerns about the enforcement hours, paying for a permit ($10 per permit), and the ability of the City to enforce the regulations. Recommendation Staff recommends that Council adopt a resolution (Attachment A) approving the request to expand the existing Park View District to include one block of La Entrada Avenue bordered by Ramona Drive and Foothill Boulevard. CONCURRENCES The proposed hours of 12 AM to 7 AM, daily for enforcement fall within the responsibility of the Police Department’s Student Nighttime Auxiliary Patrol (SNAP) program. The Police Department concurs that the SNAP program can accommodate the enforcement of the expanded boundaries of the Park View District. ENVIRONMENTAL REVIEW There is no environmental review required for this proposed district expansion. FISCAL IMPACT The fiscal impact for this proposed district expansion would be minimal given that the additional permits for the households and the installation of signs and sign posts is estimated to cost the City approximately $450. A portion of these costs will be offset by the $15 per permit annual fee associated with the residential parking permits. There is no formal budget for the creation or expansion of residential parking permit districts so, if approved, the funds would come from un- appropriated working capital. ALTERNATIVES 1. Do not enact an expansion of the existing Park View District at this time. Staff does not recommend this because there is sufficient support of more than 60% of the affected households in favor of a residential parking permit district. Attachments: a - Resolution Packet Pg 25 2 R ______ RESOLUTION NO. _____ (2018 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, MODIFYING THE RESIDENTIAL PARKING PERMIT DISTRICT FOR THE PARK VIEW AREA OF THE CITY, ESTABLISHING DAYS AND HOURS OF OPERATION OF SAID DISTRICT AND TIME OF RENEWAL FOR A PARKING PERMIT, AND RESCINDING RESOLUTION NO. 8529 WHEREAS, the City of San Luis Obispo received a request for the expansion of the Park View Residential Parking Permit District; and WHEREAS, the request was processed pursuant to Municipal Code Section 10.36.170 et seq. which requires a formal survey in which at least 60% of the households participating in the survey supported the district expansion before the request can be forwarded to Council for consideration; and WHEREAS, the residents living on the 10 block of La Entrada Avenue have petitioned to be included in the Park View Residential Parking Permit District; and WHEREAS, the Council of the City of San Luis Obispo has held a public hearing to consider the changes to the Park View Residential Parking Permit District and has determined that the expansion represents the desire of a majority of the households in the area and that a Residential Parking Permit District which limits parking in the area to bona fide residents is necessary to preserve the character and quality of life of the neighborhood for the residents of the district. NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Pursuant to Section 10.36.170 et. Seq. of the San Luis Obispo Municipal Code the residential parking permit district boundaries and hours are hereby established as shown on Exhibit A. SECTION 2. No vehicle other than vehicles providing services to the area or having a residential parking permit clearly displayed between the windshield and the rearview mirror shall park on any street within the area from 12:00 a.m. to 7:00 a.m., daily. SECTION 3. The Public Works Department shall be directed to post the district with signs that clearly indicate these restrictions. SECTION 4. The Parking Services Division shall issue residential parking permits on demand as permitted in Section 10.36.220 of the Municipal Code. Permits shall be issued for a year effective September 15th of each year. SECTION 5. Resolution Number 8529 (1996 Series) is hereby amended and superseded to the extent inconsistent herewith. Packet Pg 26 2 Resolution No. _____ (2018 Series) Page 2 R ______ Upon motion of _______________________, seconded by _______________________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _____________________ 2018. ____________________________________ Mayor Heidi Harmon ATTEST: ____________________________________ Carrie Gallagher City Clerk APPROVED AS TO FORM: _____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ____________________________________ Carrie Gallagher City Clerk Packet Pg 27 2 Resolution No. _____ (2018 Series) Page 3 R ______ Exhibit A Packet Pg 28 2 Meeting Date: 2/20/2018 FROM: Michael Codron, Community Development Director Prepared By: Kip Morais, Planning Technician SUBJECT: REVIEW OF AN APPEAL (FILED BY OASIS ASSOCIATES ON BEHALF OF THE SCHOTTENSTEIN PROPERTY GROUP) OF THE ARCHITECTURAL REVIEW COMMISSION’S DECISION TO APPROVE A MASTER SIGN PROGRAM FOR THE MADONNA PLAZA SHOPPING CENTER, WITH A CATEGORICAL EXEMPTION FROM ENVIRONMENTAL REVIEW RECOMMENDATION Adopt a resolution (Attachment A) denying the appeal and upholding the Architectural Review Commission’s approval of a Master Sign Program for Madonna Plaza Shopping Center with a categorical exemption from environmental review. BACKGROUND On August 21, 2017, the ARC approved plans for the redevelopment of a portion of the Madonna Plaza Shopping Center to construct a new commercial building to provide for three new tenant spaces located at 273 Madonna Road (formerly Sears). Condition No. 10 of Resolution ARC-1019-17 required that the applicant update the existing sign program for the shopping center that has been in effect since 2001 to address new tenant spaces (Attachment B). On October 25, 2017, the applicant applied for architectural review of a sign program (Attachment C) that included specifications for allowable wall signs for major and minor tenants, and an additional tower sign identifying the shopping center located along El Mercado. On December 18, 2017, the ARC reviewed the proposed sign program and adopted a resolution approving the sign program with modifications (Attachments D, E, F). On December 20, 2017, the applicant filed an appeal of ARC’s decision to approve the sign program (Attachment G). The appeal is focused on Condition #1 (a through d, and f), which limits maximum square footage, sign height, letter height, and specific major tenant signage for major tenant primary signs. The Council is being asked to review the ARC approved sign program, the applicant appeal, and provide a final determination on the proposed project. DISCUSSION The purpose of a sign program is to provide for a comprehensive program that effectively integrates signage into the project design. Sign programs are a requirement of large scale retail projects and are typically reviewed concurrently with the project architecture. An approved sign program supersedes Sign Regulation standards thereby providing more flexibility in regards to size, type, location and number. Packet Pg 29 3 Applicant Appeal The applicant has appealed Condition #1 (a through d, and f) of the ARC approval, and is arguing for approval of additional signage. Overall, staff supports the ARC’s conclusions, which increases the allowable sign area, letter height, and sign height over the previously approved sign program, but not to the extent requested by the appellant. Staff finds that the ARC struck a reasonable balance between compliance with the intent of the Sign Regulations and the legitimate business needs of the appellant. Table 1 shows a comparison between ARC’s approved condition and the applicant’s requests. Table 1: Condition 1 subheading Subject ARC Approved Maximums Applicant Requested Sign Program Maximums a. Total Sign Square Footage 150 s.f. 215 s.f. b. Maximum Sign Height 8 ft. 10 s.f. c. Maximum Letter Height (1 Row) 4 ft. 7 s.f. d. Maximum Letter Height (2 rows) 4 ft. combined Primary row 6 ft. Secondary 30 in. f. Mid-Tower Plaza Element (2 signs) 151 square feet 215 s.f. EVALUATION Table 2 provides a comparison of the 2001 sign program, the applicant’s requests as submitted to the ARC, the sign dimensions for SLO Promenade (the closest regional shopping center), and the ARC approved sign dimensions for reference. Table 2: 2001 Sign Program SLO Promenade Sign Program Applicant Proposed ARC Approved Dimensions Maximum Sign Height 5’1 8’ 10’ 8’ Maximum letter height 3’ 3’6” 7’ 4’2 Maximum area 100 s.f.1 120 - 200 s.f. 215 s.f. 150’3 Sign types wall signs wall signs wall signs wall signs 1 With the exception of Best Buy which had a maximum height of 9’6” and area of 147.25 s.f. 2 Maximum letter height approved for DSW is forty-eight inches (4-feet) 3Consistent with ARC’s approval of maximum area for DSW (151 s.f.), and maximum area grantable with exceptions to previous sign program (150 s.f.) Packet Pg 30 3 Condition #1a. Primary Wall Sign Square Footage The applicant is appealing the ARC’s decision to limit the maximum square footage of 150 square feet for major tenants’ primary wall signs. The ARC’s decision is consistent with the maximum sign area allowable with an exception under the 2001 sign program (150 s.f.). The applicant requested a maximum square footage of 215 square feet, which more than doubles the allowed maximum sign area under the 2001 sign program (100 s.f.) and is 115 square feet larger than the maximum square footage allowed for wall signs in the City of San Luis Obispo Sign Regulations 15.40.470.A(2). Condition #1b. Maximum Sign Height The applicant is appealing the ARC’s decision to limit the maximum sign height to 8 feet. The ARC’s approved maximum sign height is consistent with the maximum sign height of the neighboring SLO Promenade shopping center and is 3-feet larger than the maximum height allowed under the 2001 sign program (Table 2). Condition #1c. Maximum Letter Height (1 Row) The applicant is appealing the ARC’s decision to limit the maximum letter height of 4-feet for major tenants’ primary wall signs. This decision is consistent with the letter height approved for the last review of a major tenant’s wall sign within the shopping center, which limited the maximum letter height for Designer Shoe Warehouse (DSW) to forty-eight inches (4-feet). The requested letter height is one foot larger than that allowed under the 2001 sign program, and 6 inches larger than the maximum letter height allowed under the neighboring SLO Promenade Sign Program (Table 2). Condition #1d. Maximum Letter Height (2 Rows) The applicant is appealing the ARC’s decision to limit the maximum combined letter height of 4- feet for major tenants’ primary wall signs with two rows of letters. This limit would accommodate a 3-foot letter height (as per the 2001 sign program) with a one-foot tag (secondary) line. Condition #1f. Signage Allowed for Specific Major Tenant The applicant is appealing the ARC’s decision to limit the mid-plaza tower element (currently DSW) to a maximum combined signage of 151 square feet for the two wall signs on each of the primary tower faces. This is consistent with the DSW sign approval for maximum combined signage of 151 square feet approved by the ARC on August 21, 2017. ENVIRONMENTAL REVIEW The project is categorically exempt under Class 11, Accessory Structures; §15311 of the CEQA Guidelines, because the project consists of minor on premise signs accessory to existing commercial facilities that will not have a significant effect on the environment. Packet Pg 31 3 FISCAL IMPACT When the General Plan was prepared, it was accompanied by a fiscal impact analysis, which found that overall the General Plan was fiscally balanced. Accordingly, since the proposed project is consistent with the General Plan, it has a neutral fiscal impact. There is no fiscal impact associated with the approval of this project. ALTERNATIVES 1. Uphold the appeal. The Council can uphold the appeal and approve the project as proposed, based on findings of consistency with the City of San Luis Obispo Sign Regulations and applicable City Regulations and Policies. 2. Uphold the appeal in part, approving the project with modifications. The Council can approve the project with modifications as appropriate, based on findings of consistency with the City of San Luis Obispo Sign Regulations and applicable City Regulations and Policies. Attachments: a - Draft Resolution b - 2001 Sign Program c - Applicant Proposed Sign Program d - ARC Resolution e - ARC Staff Report f - ARC Hearing Minutes g - Applicant Appeal Packet Pg 32 3 R ______ RESOLUTION NO. _____ (2018 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, DENYING AN APPEAL OF THE ARCHITECTURAL REVIEW COMMISSION DECISION TO APPROVE A MASTER SIGN PROGRAM FOR MADONNA PLAZA AS PRESENTED IN THE CITY COUNCIL AGENDA REPORT AND ATTACHMENTS DATED FEBRUARY 20, 2018 (257 MADONNA ROAD APPL-1310-2017) WHEREAS, On October 16, 2017, the Architectural Review Commission of the City of San Luis Obispo adopted Resolution ARC-1019-2017 approving the redevelopment of a portion of the existing Madonna Plaza shopping center and requiring subsequent revision to the existing 2001 sign program; and WHEREAS, On December 18, 2017, the Architectural Review Commission of the City of San Luis Obispo adopted Resolution ARC-1025-2017, approving a master sign program for Madonna Plaza; and WHEREAS, On December 20, 2017, the applicant filed an appeal of ARC’s decision to approve the sign program. WHEREAS, On February 20, 2018, the City Council of the City of San Luis Obispo conducted a public hearing in the Council Chambers of City Hall, 990 Palm Street, San Luis Obispo, California, pursuant to a proceeding instituted under the appeal of the Architectural Review Commission’s decision (APPL-1310-2017), Schottenstein Property Group, applicant/appellant; and WHEREAS, the City Council of the City of San Luis Obispo has duly considered all evidence, including the testimony of the applicant, interested parties, and evaluation and recommendations by staff, presented at said hearing. WHEREAS, notices of said public hearings were made at the time and in the manner required by law; and NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. Findings. Based upon all the evidence, the City Council makes the following findings: 1. As conditioned, the proposed sign program maintains consistency with the Sign Regulations by providing signage that will be architecturally compatible with affected structures and the character of surrounding development, while providing for equity and effective communication for the businesses within the regional shopping center. Packet Pg 33 3 Resolution No. _____ (2018 Series) Page 2 R ______ 2. As conditioned, the proposed sign program is consistent with Community Design Guidelines Sections 6.6(B)(C)(F)(J) which states that the design of the signs should consider and complement the architecture of the buildings and the type of business activity conducted within. 3. The sign program is reasonably necessary to provide the regional commercial project with adequate identification, and does not, constitute needless redundancy or proliferation of signs. 4. As conditioned, restricting the additional square footage for the secondary sign of the tenant of Building K is appropriate, because the request for additional square footage would constitute a grant of special privilege inconsistent with the intent of the sign regulations. SECTION 2. Environmental Review. The project is categorically exempt under Class 11, Accessory Structures; §15311 of the CEQA Guidelines, because the project consists of minor on premise signs accessory to existing commercial facilities that will not have a significant effect on the environment. SECTION 3. Action. The City Council does hereby deny the appeal of the Architectural Review Commission’s decision (APPL-1310-2017). Upon motion of _______________________, seconded by _______________________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _____________________ 2018. ____________________________________ Mayor Heidi Harmon ATTEST: ____________________________________ Carrie Gallagher City Clerk Packet Pg 34 3 Resolution No. _____ (2018 Series) Page 3 R ______ APPROVED AS TO FORM: _____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ____________________________________ Carrie Gallagher City Clerk Packet Pg 35 3 04/28/2008 10:00 8059257158 SIGNCRAFT INC ESTEEM 630 Cypress Street Pismo Beach, California 93449 C%os) 773 ~ ,:'/01L/ !fob/;;c___ MADONNA PLAZA Master Building Sign Program (Site Signage under separate cover) City of San Luis Obispo December 21, 2001 Prepared by: Ill RRM DESIGN GROUP Snn Luis Obispo • Onkdnle • Henldsburg • Los A11gclcs PAGE Bl/15 Packet Pg 36 3 04/28/2008 10:00 8059257158 SIGNCRAFT INC Madonna Plaza MASTER BUILDING SIGN PROGRAM Table of Contents I. Introduction II. Tenant Signs • Sign Aj>proval Procedures • General Guidelines • Major Tenant Identification • Pad and Shop Building Tenant Identification III. Prohibited Signs IV. Definitions Exilibit.~ 1 -Site Key Plan 2-Typical Major Tenant Sign 3-Typical Pad and Shop Building Sign 4 -Channel Letter Section 5 -Shops M Building Signage RRM Design Group PAGE 02/15 Packet Pg 37 3 -., ___ / ) 04/28/2008 10:00 8059257158 I. Introduction SIGNCRAFT INC Madonna Ph.zn MASTER BU!I .. D!NG SIGN PROGRAM PAGE 03/16 The intent of the Madonna Plaza Master Building Sign Program is to provide the guidelines necessary to achieve a visually coordinated, balanced and attractive sign environment for the entire pmject, in accordance with the City of San Luis Obispo and its adopted sign requirements. Perfmmance of this sign criteria shall be strictly enforced by the City of San Luis Obispo. Any nonconforming or illegally installed signs shall be removed by the tenant or his sign contractor at their expense, upon demand by the City. All signs meeting the requirements of the Madonna Piaza Sign Program shall be administratively approved by the Planning Department. Any proposed tenant signs that do not conform to the criteria listed in the program for the spaces that they plan to occupy will require the review and approval of the Architectural Review Commission. RRM Design Group I Packet Pg 38 3 ) '---· 04/28/2008 10:00 8059257158 H. Tenant Signs 5IGNCRAFT INC Madonna Plaza MASTER BUILDING SIGN PROGRAM Sign Approval Procedures PAGE 04/16 I. All tenant storefront identification signs shall be subject to approval, in w1iting, from the owner. The tenant shall submit preliminary sign drawings to the owner for his review at the time of preliminary store design review. 2. The tenant shall submit to the owner, for written approval, three (3) eopies of the final scaled shop drawings of the proposed sign showing materials, colors, finishes and dimensions. Titese drawings shall indicate conformance with the sign critetia herein outlined and one copy shall be in full color. Send to: Madonna Plaza Management c/o Rossetti Company 130 I Chorro Street San Luis Obispo, CA 93401 Attn: Rod Tmjillo 3. The tenant shall submit drawings, approved and stamped by the m:vner (or owner's authorized representative), to the City of San Luis Obispo Planning Department for approval prior to obtaining a sign permit from the Building Department. 4. The tenant shall pay for all signs, their installation (including final connection, transf01mers and all other labor and materials) and maintenance. 5. The tenant shall obtain all necessary pennits. 6. Tenants unable to confom1 to sign criteria herein outlined in this document shall go back to the San Luis Obispo Architectural Review Commission for approval. General Guidelines !. All signs will be limited to tenant's trade name and logo. The use of brand names or brand name logos will not be allowed on the sign unless it is specifically included in the tenant's "Doing Business As". 2. Any tenant with registered trademarks or recognized logos shall be permitted to use them subject to approval by the City of San Luis Obispo Planning Department. The area of said ··--trademark or logo shall be calculated and included within the total sign area permitted for such tenant. RRM Dt:sign Group 2 Packet Pg 39 3 ·,. ___ . 04/28/2008 10:00 8059257158 SIGNCRAFT INC Mndonna Plaza MASTER BUILDING SIGN PROGRAM PAGE 05/16 3. All signs and sign structures, as well as the immediate premises sun·ounding them, shall be well maintained by the tenant andlnr Madonna Plaza Management. The illumination must be maintained from dusk to closure of business. Signs shall not be illuminated after J 0:00 p.m. or close of business, whichever is later. 4. All wall signs shall be constructed as one of the following sign types: A. Internally illuminated individual channel letters with acrylic plastic faces with a minimum thickness of 1/4". See Exhibit 4 for more information. Internal illumination is to be 60 mili-amp neon, installed and labeled in accordance with the "Nati.onal Board of Fire Underwriters Specifications." B. Internally illuminated sign 'cans' shall be permitted as secondary features and only in the event that they represent a company logo. C. Externally illuminated so that illumination is indirect and utilizes focused light fixtures that do not allow light or glare to shine above the horizontal plane of the top of the sign or onto any public right-ot:way or adjoining property. D. Background elements for signs, either through the use of color or material shall he permitted. The area of said background shall be calculated and included within the total sign area permitted for such sign. E. Individual backlit channel letters shall be permitted. F. Each tenant space shall include one of the approved pedestrian-oriented types of signs in their individual signage proposals: Awning (valence only), window, suspended and projecting signs, and low wall signs adjacent to an entry if a projecting sign is not used, as pedestrian scale signage options shall he permitted as secondary features and can have either. Refer to notes C, BB, LL, QQ, & RR of the definitions and to the city sign criteria for additional information on these elements. 5. Each sign shall be designed so that illumination does not exceed 100 luxes (l 0 candlepower) at a distance of 10 feet from the sign. Illumination must he of uniform intensity and weii maintained for all letters and/or symbols. Lighting for signs shall not create a hazardous glare for pedestrians or vehicles. 6. All signs and installation of signs shall conform to the appropriate building and electrical codes; P .K. housings shall he used on all channel letters. Letters shall have disconnecting switches, and bear the U.L. label. Each tenant shall be fully responsible for the operations of their sign contractor. RRM Oesigu Group 3 Packet Pg 40 3 04/28/2008 10:00 8059257158 SIGNCRAFT INC PAGE 06/16 7. 8. 9. 10. II. Madonna Plnzn MASTER BUILDING SIGN PROGRAM All conduits, raceway, transformers, junction boxes, openings in building surfaces, etc., shall be concealed. Exposed hardware shall be finished in a manner consistent with quality fabrication practices. All finished signs shall be pegged from the wall. It is the responsibility of the tenant's sign company to verify all conduit and transformer locations and service prior to fabrication. Then tenant shall supply electrical stubs at fascia for approved internally i!iuminated channelized letter signs. Electrical service to tenant signs shall extend to the house panel of each building. Upon notice by either the City of San Luis Obispo or Madonna Plaza Management, a tena11t shall be required to repair or refurbish any sign stmcture, acrylic plastic face and/or sign illumination within seven (7) days. In the event of a tenant vacancy, the tenant shall remove all wall signs. All holes left by the sign shall be repaired, patched, textured and painted to match exterior building color and texture. 12. No sign or sign structure shall be erected at any location where, by reason of this position, shape, size, or color, it may obstnrct or interfere with the view of any traffic control device or directional sign: Vehicle STOP signs shall be painted on pavement; stop pole signs and handicap-accessible parking signs shall be installed as per City of San Luis Obispo Public Works Department standards. 13. Banner signs are subject to Section IV.C of this Master Sign Program document. 14. All window signs may remain for a period no longer than thirty (30) days. Temporart signs shall be permitted to obscure no more than I 0% of each window area or 4 square feet per window, whichever is greater, consistent with section !5.40.040 0. of the City's sign regulations. 15. All signs existing on property as of the date of this Master Building Sign Program shall continue to be allowed as long as they reflect the actual tenant occupancy. 16. The City may require that a sign, that otherwise meets the sign criteria, go before the ARC if City Staff deems that its design raises significant aesthetic issues, or if a sign is clearly out of proportion with the wall of the particular tenant space that it is proposed on. RRM Design Group 4 Packet Pg 41 3 '-.._/ ,·~ I -....._ __ _ 04/28/2008 10:00 8059257158 SIGNCRAFT INC Madonna Plaza MASTER BU!t.D!NG SIGN PROGRAM Major Tenant Identification Permitted Signs and Requirements PAGE 07/16 ! . Each major tenant shall be allowed two (2) wall signs. See table below for specific sign requirements. 2. The primary wall sign shall be located over the front entrance and the secondary wall sign shall be located at the rear of the building. 3. Signs shall be centered top to bottom and end to end on tenant's storefront fascia whenever feasible. See Exhibit 2. 4. Signs shall not be less than (I) one foot from the edge of a tenant's storefi·ont fascia or any architectural feature. See Exhibit 2. 5. No more than two rows of letters are permitted, provided their maximum total height does not exceed the maximum sign height allowed. 6. ARC may approve a maximum sign area for primary wall signs of 150 square feet with the review of a specific sign proposal. 7. All sign dimensions and areas shall comply with the criteria in the sign program Major Tenant Primary Wall Sign Maximum Maximum Maximum Maximum Letter Height Sign Length Sign Height Sign Area Best Buy 32.5" 15"-6>; 9'~6'' 147.25 S.F. Ralph's 36" 20' -o·· 5'-0" roo.oo s.r. Mervyns 36" 20'-0" 5"-0" Joo_oo s.r. J>etco 36" 20' -0" 5'-0" !00.00 S.F. Sears 36)) 20'-0" 5' -0" 100.00 S.F. Major Tenant Secondary Wall Sign Mnximum Maximum Maximum Maximum Letter Height Sign Length Sign Height Sign Area Best Buy 24" I 8' -9" 2' -0" 37.50 S.F. Ralph's Rear 24n 20' -0" 2'-6" 50.00 S.F. Mervyns 24" 2o· -o·~ 2'-6~' so.oo s.r. J>etco 24,. 20' -0'' 2'-6" 50.00 S.F. Sears Rear 24" 20' -0" 2'-6u 50.00 S.F. RRM Uesign Group 5 Packet Pg 42 3 --.-~ --·-·- 04/28/2008 10:00 8059257158 SIGNCRAFT INC Madonna Plaza MASTER BUILDING SIGN PROGRAM Pad and Shop Building Tenant Identification Permitted Signs and Requirements PAGE 08/16 I. Each pad or shop tenant shall be allowed one wall sign per leased building face. No tenant shall have more than one wall sign on a single building face. 2. Pad or shop tenant wall signs shall have a maximum letter height of twenty-four (24) inches. No more than two tows of letters shall be permitted per sign. See Exhibit 3. 3. Pad or shop tenant wall signs shall have a maximum length of seventy (70) percent of the leasehold width. See Exhibit 3. 4. All sign dimensions and areas shall comply with the criteria in the sign program 5. Freeway-oriented signs for the shop buildings are prohibited. Pad and Shop Building Tenant SHOPS M: SEE EXHIBIT 5 Maximum Maximum Leiter Height Sign Length North Elevation Starbucks 18" 13'-0" Starbucks Window Sign 2'-Qu Blockbuster 12" 8' -5" Total East l!levntion Starbucks l2n 9'-9"' Supercuts 24" 12'-8" Total South Elevation Blockbuster 9" 6'-4" Supercuts 18" 9, -6" Total West Elevation Blockbuster 18n 10'-6" Total TOTAL TENANT SIGNAGE FOR SHOPS M: RRM Design Group 6 Maximum Sign Hcigltt 3~-1~' z· -o~~ 5'-5" 2' -4"' 2~ -0" 4•-t .. l ~-6" i ~ -6·' Wall Sign Maximum Sign A.-en 42.40 S.l'. 4.00 S.l'. 45.59 S.F. 91.99 S.F. 22.75 S.F. 25.33 S.F. 48.08 S.F. 25.86 S.F. 14.25 S.F. 40.11 S.F. 15.75 S.F. 15.7SS.F. 195.93 S.F. Packet Pg 43 3 ) "---' ·-· 04/28/2008 10:00 8059257158 SIGNCRAFT INC Madonna Plaza MASTER BUILDING SIGN PROGRAM SHOP A l\tfaximum Mnximum Letter Height Sign Length South Elevation 209 ' 12'-0" East Elevation 20" 12'-0" TOTAL TENANT SIGNAGE FOR SHOPS A SHOPSB Maximum Maxjrnum Letter Height Sign Length South Elevation Tenant I 24" 15'-0 .. Tenant2 24a 20'-0" TOTAL TENANT SIGNAGE FOR SHOPS B SHOPSK Maximum Maximum Letter Height Si!ln Length South Elevation Tenant I 24" 15'-0" Tenant! 24" 15'"-0" Tenant 2 24" 14 •• Q" Tenant 3 24" 14'-0" TOTAL TENANT SJGNAGE FOR SHOPS K SHOPSL Maximum Maximum Letter He!gbt Sign Length South Elevation Tenant I 24" 16'-0" Tenant 2 24" 20'-0" Tenant3 24" :t0'-0" Tenant 4 24'• 15'-0" Management 12'' 4'-0'' TOTAL TENANT SIGNAGE FOR SHOPS L RRM Design Group 7 Maximum Sign Height 1 '-8" l'-8" Maximmn Sign Heigllt 4'-0u 4-?.,._o, Maximum Sign Heiglrt 2'-6 2'-6n 2'-0" 2'-0n Maximum Sign Height 2'-0 2'-6" 2'-6" 2' -0" 2'-6n PAGE 09/16 Ma:dmum Sign Area 20.00 S.F. 20.00 S.F. 40.00 S.F. Maximum Sign Are• 60.00 S.F. 80.00 S.F. 140.00 S.F. Maximum Sign Area 37.50 S.F. 37.50 S.F. 28.00S.F. 28.00 S.F. 131.00 S.F. Maximum Sign Area 32.00 S.F. 50.00 S.F. 50.00 S.F. 30.00 S.F. 8.00 S.F. 170.00 S.F. Packet Pg 44 3 04/28/2008 10:00 8059257158 SIGNCRAFT INC SHOPSY North Elevation Tenant I Tenant 2 Tenant3 Total South Elevation Tenant I Tenant 2 Tenant 3 Total Madonna Plaza MASTER BUILDING SIGN PROGRAM Maximum Maximum Maximum Letter Height Sign Lengtlo Sign Height 24" 14'-09 ' 2~-6" 24" 14'-0" 2'-6n 24u 14'-0" 2'-6'~ 18" !0'-0n 1 ?-6"' 18" I 0' -0" 1. -6 1 ' 18" 10'-0" I '-6" TOTAL TENANT SIGN AGE FOR SHOPS Y RRM Design Gfoup 8 Maximum Sign Area 35.00 S.F. 35.00 S.F. 35.00 S.F. 105.00 S.F. 15.00 S.F. 15.00 S.F. 15.00 S.F. 45.00 S.F. 150.00 S.F. PAGE W/16 Packet Pg 45 3 04/28/2008 10:00 8059257158 SIGNCRAFT INC PAGE 11/15 Madonna Plaza MASTER BUILDING SIGN PROGRAM III. Prohibited Signs Tile followiug sigus are pmllibited sigus as stated ill Article III oftlte City of Sa11 Luis 0/Jispo Sign Regulations. Where a specific sign may be allowed subject to attaining a specific approval said sign shall still require tile express written approval oftlte landlord. A. Attention-getters -Pennants, streamers, spinners, helium balloons, inflatable signs, and other similar attention-getting devices, unless authorized in conjunction with a temporary use pennit or through architectural review; B. Backlit translucent awning signs; C. Banner signs are prohibited unless: I. Approved in conjunction with a temporary or intermittent use pem1it or special event permit; or 2. Approved with a sign permit as a temporary window sign, affixed on the inside of the window; or 3. Approved with a sign permit as a temporary s1g."1 pending manufacture and installation of an approved permanent sign; or 4. Approved by the Public Works Director over designated rights-of-way. D. Billboards; E. Highly reflective and fluorescent signs -Signs made wholly or partially of highly reflective material and fluorescent or day-glo painted signs; F. Off-premises signs, except open house real estate signs; G. Roof signs unless approved by the Architectural Review Commission; H. Search lights and beacons unless authorized by the City in conjunction with a temporary use pennit or special event; l. Signs in required setbacks, as specified by this chapter and the zoning regulations; J. Signs on utility poles or traffic control devices-Signs attached or placed adjacent to any utility pole, parking meter, traffic sign post, traffic signal or any other official traffic- control device in accordance with Sectio11 21464 of the Cal({omia Vehicle Code; RRM Design Group 9 Packet Pg 46 3 04/28/2008 10:00 8059257158 K. Signs on street trees; SIGNCRAFT INC Madonna Plaza MASTER BUILDING SIGN PROGRAM PAGE 12/15 L Signs that block ingress or egress-Any sign, except as may be required by other code or ordinance, placed or maintained so as to interfere with free ingress to or egress from any door, window or fire escape; M. Signs on or over public property -Private signs, other than permitted projecting signs, located on or extended over public property without a valid encroachment permit; N. Signs without permission -Signs erected without the permission of the owner, or his agent, of the property on which such signs are located; 0. Signs with inadequate clearance -Any sign that docs not conform to clearance requirements noted in Article V. Sign Standards, and with the following clearance requirements for communications lines, utility lines and power lines, or any further restrictions adopted by the California Public Utilities Commission: P. Simulated traffic signs -Any sign which simulates or imitates in size, color, lettering or design any traffic sign or signal, or which makes use of words, symbols or characters in such a manner to interfere with, mislead, or confuse pedestrian or vehicular traffic; Q. Temporary outdoor signs -Temporary signs visible from a public street attached to or placed on merchandise or materials stored or displayed outdoors, unless approved in conjunction with a temporary or intermittent use permit or special event permit; R. V signs (see definition) S. Vehicle signs (see definition) T. Other-Any sign not expressly allowed by this chapter. RRM Design Group 10 Packet Pg 47 3 04/28/2008 10:00 8059257158 IV. Definitions SIGNCRAFT INC Madonna Plaza MASTER BUILDING SIGN PROGRAM DefinitiOIIS as stated in Article X of tlte City of San Lui.~ Obispo Sign Regulations A. "ARC" means Architecntral Review Commission. PAGE 13/16 B. "Area of sign" means the number of square feet of the smallest rectangle within which a ~ign face can be enclosed. In determining the area of an individual sign that has more than one face, the greatest area of sign faces visible from any one point shall be used. The "total sign area" is the sum of all individual sign areas. C. "Awning sign" means any lettering or graphic painted on or othetwise applied to any part of any awning. D. "Banner" means a flexible sign typically supported at two or more pints and hung on a building or otherwise suspended down or across its face, or across a public right-of-way. E. "Biiiboard" means a sign stmcture, available for lease or rent, advertising an establishment, merchandise, service, or entertainment, which is not sold, produced, manufactured or furnished at the property on which said sign is located. F. "Building face" means the whole of a building visible in an elevation view, excluding sloped roof structures. "Tenant's building face" is that portion of the building face enclosing the area of the building occupied by the tenant. In multi-tenant buildings with interior tenant spaces, each tenant's building face shall be the proportionate share of the building face enclosing the area occupied by all tenants. · G. "Bulletin board" means a sign which accommodates changeable copy and which displays information on activities and events on the premises. H. "Directory sign" means a wall-mounted sign identifYing the location of occupants of a building or group of buildings which are divided into rooms, suites, or units used as separate offices, studios, or dwellings. I. "Fascia" means a flat horizontal hand on a building elevation, typically above the first story doors and windows. J. "Frontage" or "Lot frontage" means the horizontal distance along a lot line adjacent to a public street, or the side of a lot adjacent to a public street. R RM Design Group II Packet Pg 48 3 04/28/2008 10:00 8059257158 SIGNCRAFT INC PAGE 14/16 Madonna Plaza '~' MASTER BUILDING SIGN PROGRAM K. "Group quarters" means a residential facility in which resident~ to not occupy individual dwelling units, such as dormitories, fraternities, hostels, and residential care facilities. L. "Height of sign" means the vertical distance from ground level immediately below the sign to the top of the sign -including the aboveground support structure and any design elements. M. "Identification sign" means any sign identifying a residential development, a multi-family building, group quarters, school church, institution, or shopping center, and not advertising any product or service. N. "lllegal sign" means any sign which does not meet the requirements of this code and which has not received legal nonconforming status. 0. "Illumination". !. "Internally illuminated sign" means a sign that has characters, letters, figures, or any pmtion of the sign face or outline thereof illuminated from an interior light source. 2. "Externally illuminated sign" means a sing that is illuminated from an exterior artificial light source mounted on the sign, another structure, or the ground. 3. "Non-illuminated sign" means a sign with no internal or external mtificial light source and only incidentally illuminated by ambient light conditions. P. "Legal. nonconforming sign" means: !. A sign which was erected legally, but which does not comply wit the subsequently enacted sign restrictions and regulations. 2. A sign which does not conform to the sign code requirements, but for which an exception has been approved. Q. "Marquee sigu" means a sign placed on the face of a permanent roofed structure projecting over the building entrance, which is an integral part of the building (usually a theater or hotel) and is not a fascia extension oflhe roof or eve. R. "Monument sign" means a sign that is completely self-suppmting and has its base on the ground or is supported by posts. S. "Nonconforming sign". See "Illegal sign" and "Legal nonconfotming sign". T. "Nonresidential zone" means any zone olher than an R-1, R-2, R-3, or R-4 zone. RRM Design Group 12 Packet Pg 49 3 04/28/2008 10:00 8059257158 SIGNCRAFT INC PAGE 15/16 ' ' Madonna Plaza , / MASTER BUILDING SIGN PROGRAM U. "Off-premises sign" means any sign that directs attention to a business, service product, or entertainment not sold or offered or only incidentally sold or offered on the premises on which the sign is located. V. "Person" means any individual, partnership, corporation, association or government or any other legal entity. W. "Pole sign" means a freestanding sign, supported by one or more poles 8 feet or longer in length. X. "Political sign" means a sign intended to draw attention to or communicate a position on any issue, candidate, or measure in any national state, local or university campus election. Y. "Portable sign" means any sign designed to be moved easily and not petmanently affixed to the ground or to a structure or building, such as a sandwich board sign. Z. "Premises" means a building or unified complex ofbuiidings on one lot or on two or more contiguous lots under common ownership and/or with shared parking. AA. "Price sign" means a sign on the premises of a service station, which contains information on the cost and type or grade of motor fuel only. BB. "Projecting sign" means a sign which extends out from a building face or wall so that the sign face is perpendicular or at an angle to the building face or wall, not to exceed 24 square feet each. CC. "Public entrance" means a place of entry at a premises that is accessible by the general public. DD. "Roof sign" means any sign any part of which is on or over any portion of any root; eave, or parapet of a building or stntcture. EE. "Sandwich board sign" -sec Pottable sign. FF. "Shopping center" means five or more stores with a minimum area of 50,000 square feet, 300 feet of frontage and common off-street parking. GG. "Second story" means the highest point of the second floor of a building. RRM De>ign {',roup IJ Packet Pg 50 3 04/28/2008 10:00 8059257158 SIGNCRAFT INC PAGE 15/15 ' ' ' ' ' Madonna Plaza MASTER BUILDING SIGN PROGRAM HH. "Sign" means any visual device or representation designed or used for the purpose of communicating a message or identifying or attracting attention to a premises, product, service, person, organization, business or event, with our without the use of words, visible from outside the premises on which such device is located. II. "Subdivision identification sign" means a temporary sign identifying an approved residential or commercial subdivision and erected primarily for the purpose of advertising homes, lots or condominiums for sale. JJ. "Sign face" means the visible sign proper including all characters, symbols, and stmctural or nonstructurnl background (e.g. cabinet frame or painted border), but not including the base of a pole or monument sign. KIC "Sign area.'' See "Area of sign." LL. "Suspended sign" means a sign attached to and locate below any permanent eave, roof or canopy, not to exceed 6 square feet MM. "Temporary sign" means any sign that remains in use not more than 30 days or such other period specified by a use permit or architectural review condition of approvaL NN. "Traffic Directional sign" means a sign not exceeding 3 feet in height or 5 square feet in area that provides on-site guidance to pedestrian or vehicular traffic such as parking lot entrance and exit signs. 00. "V sign" means a sign consisting of 2 essentially equal faces, positioned at an angle less than 180 degrees. PP. "Vehicle sign" means a sign placed on a vehicle or trailer which is parked or located for the primary purpose of displaying said sign. Evidence of directional signage or parking of the vehicle or trailer within one mile of the premises being advertised creates a rebuttable presumption that the primary purpose of the sign is for display. (This does not include signs or lettering on buses, taxis, or work vehicles operating dming the normal course of business.) QQ. "Wall sign" means a single-faced sign painted on or attached to a building wall, no part of which extends out from or above a wall more than 6 inches. RR. "Window sign" means a sign painted on or attached to a window or displayed within a building but visible thmugh a window or similar opening for the primary purpose of exterior visibility. Pedestrian-oriented window signs shall not exceed 6 square feet. RRM Design G1-oup 14 Packet Pg 51 3 '-..,.,/ ~----- BIG5 SHOPS J 6'-6""' "' ~~ ~~ <l Z! ~~ ~! ~~ ~~ ~~ ~i ~i ! ,,1 <i N! <l ~i ~~ <I Z! \ JY " ~ ur rr~ j~·-Z! =~--r"r'f'qnp'"~"' ;:: 01 EL MERCADO l L 3'-<1' • 3'-<1' PRE-CAST CONCRETE = i N . <i · ~ rl':lf.lmt...................... 0.~l~X9!iRn............... ~ i 1: 'U1116"=r.o· C7Jt4"=1'-0" ~-/ 1--____ ..,....__.,...._ ___ "T___... _.._. __ "T.~ Packet Pg 52 3 a d 0::: ~ ::z: 0 a <( ::< SHOPS M • • PlANTER ISlAND McDONALD'S • • • j 0~ FOAM ~ ~ < z ~ ~ rJJ. ~ ~ ~ rJJ. .. ~ ~ ~ < z z 0 ~ Ill . 'cl)t,l?:~~:u:··············...... ~;~l~Y~!ism .............. . R'<!.!~,::.a.;,u• ·· I MONUMENT SIGN!GJ········· '"'"'~-·-·"~""''"''""--"""'"''"" J 7th2002 1001021 1 4 ~!!::!.~.!.~~::..:-~=-~~ ... ···················-·······································································································································································································································~! ................................................................... : Packet Pg 53 3 '-..._/ SEARS <J ' : il EX~ING PlANTER ~lAND EJISllNG BUSH~, TO BE TRIMMED DOWN TO 5'.()''-------lw NEWnAN'L"'"·-· ~ 0 >-0 ~ ..c. 0) :r: 23'·6"$ ~~ ~~ <i Zi ~~ ~! 00! ~! ~: ~! OOj <l Ni <·, ' ~~ ~: <i Zi Zi Oi ~~~~p -~.~ 1 t r "• =1 I . 10'-()' < ; A-I 2:o~!.Yoli9.0........... .... i __ ,. I (5, •. ,, ~; • · PO<\...................... N SIGNf-··• 1 "/ \<!J,,, .. , ··-------·----·---~~----L .... rn \ Ill ...................................................................................................... . RRM DESIO 'f\rlo:€1et ................... , 0 up .......................... . N GR ,,.,,,,,,,,,, .....•. :""~~:?;':r""'=".!: ................................ . Packet Pg 54 3 ·-----· :_'_r · r_··. · · 1 "-"';. ~--. ~-! ,MAooNN'~"'lEITE~RAISEDZ'OffSURFACE v K: r~:J PLAZA l 1 1 . ADONNA ·· ... PLAZA ~~ ~~ <! Z\ ~~ ~! II)! ~~ ~~ ~! II)! <! N! <! ~! ~~ <! ~I Oi =i (h!Y§?.I .. ~l~.Y9.1iRn.:.J:m;in~LM.9.9.9.o.Qg_ggg9................. (.2:)~9.~.\QJl~?.Y9.1i9n.:.fg.<;:jng.M.<;:.Q9.nQI.9:?...................... ~I Ill Vlf4'oi'-<J" ' '-./lf4'ol'-<J" ~~ ·~~,;;;.,u' I TOWER SIGNS![]] ....... .. '~"'""~';"!'.'::-<~'"':!:".~~"''-"'"''"'""""' June 7th 2002 1001021! 3 ····························································• Packet Pg 55 3 ~~~ ~n~! ""( til ~ RALPH'S I I [ms77%WW70~ SEARS SIGN INDEX -·. ~ .... ~ @ PYLON ::iiUN, .lm:c1 "- ® TOWER SIGN, SHEET 3 © MONUMENT SIGN, SHEET 4 @ MONUMENT SIGN, SHEET 5 ill Packet Pg 563 Master Sign Program for 201 to 283 Madonna Road San Luis Obispo, CA 93401 prepared on behalf of Schottenstein Property Group 4300 E. 5th Avenue Columbus, Ohio 43219 Updated December 2017 *DRAFT* October 2017 Packet Pg 57 3 Master Sign Program MADONNA PLAZA 201 to 283 Madonna Road San Luis Obispo, CA 93401 October 2017 (updated December 2017) A. INTRODUCTION The intent of the Madonna Plaza Master Sign Program is to provide the guidelines necessary to achieve a visually coordinated, balanced and attractive sign environment for the entire project, in accordance with the City of San Luis Obispo and its adopted sign requirements. This Master Sign Program is provided as an update of the previously approved program dated December 21, 2001. Performance of this sign criteria shall be rigorously enforced by the City of San Luis Obispo. Any nonconforming or illegally installed signs shall be removed by the tenant or his sign contract or at their expense, upon demand by the Landlord. Exceptions to these standards shall not be permitted without approval from the Landlord and will require approval of a modification to the sign program application by the City of San Luis Obispo. Accordingly, the Landlord will retain full rights of approval for any sign used at this location. No sign shall be installed without written Landlord approval and the required City of San Luis Obispo permits. In the event that tenant improvements or unforeseen leasing opportunities create a sign opportunity not covered in the existing sign program, the Landlord reserves the right to authorize signage that follows the guidelines set forth in this sign program. All signs meeting the requirements of the Madonna Plaza Sign Program shall be administratively approved by the Planning Department. B. LANDLORD/TENANT REQUIREMENTS 1. All tenant storefront identification signs shall be subject to Landlord’s written approval. The tenant shall submit preliminary sign drawings to the Landlord for review at the time of preliminary design review. 2. The tenant is required to submit one set of scaled sign shop drawings, showing materials, colors, finishes, dimensions. Drawings are to include scaled store front drawings illustrating the proposed sign design and all dimension as they relate to the store front elevation of the tenant’s premises. Sign drawings must also include a cross-section indicating construction, attachment methods, and illumination details. These drawings shall indicate conformance with this sign criteria. 3. The Landlord shall determine and approve the availability and position of a tenant name on any monument or identification signs. 4. Tenant shall pay for all signs, related materials and installation fees (including final inspection costs). 5. Tenant shall obtain all necessary permits from the City of San Luis Obispo. Landlord approval of signage will be provided to the City with applicable sign permit applications. Packet Pg 58 3 Madonna Plaza Master Sign Program Madonna Plaza SRT LP Oasis Associates, Inc. October 2017 2 of 8 6. The tenant shall be responsible for fulfillment of all requirements of this sign criteria. (Signs meeting the requirements of this sign program shall be administratively approved by the City Planning Department) 7. It is the responsibility of the Tenant's sign contractor to verify all conduit and transformer locations and service access prior to fabrication when electric signs are used. 8. Should a sign be removed, it is the tenant's responsibility to patch all holes, paint surface to match existing color, and restore surface to original condition. 9. All signs existing on property as of the date of this Master Building Sign Program shall continue to be allowed as long as they reflect the actual tenant occupancy. Landlord Contact Information Schottenstein Property Group Mark S. Ungar Executive Vice President, Leasing & Development 4300 E. 5th Avenue Columbus, Ohio 43219 Phone 614-449-4414 mark.ungar@spgroup.com C. ALLOWED SIGNS 1. All wall signs shall be constructed as one of the following sign types: A. LED Internally illuminated individual face lit aluminum channel letters with acrylic plastic faces with a minimum thickness of 1/4”. Internal illumination is to be 60 mili-amp neon, installed and labeled in accordance with the “National Board of Fire Underwriters Specifications.” B. Internally illuminated ‘can’ or cabinet signs shall be permitted as secondary features and only in the event that they represent a company logo. C. Externally illuminated so that illumination is indirect and utilizes focused light fixtures that do not allow light or glare to shine above the horizontal plane of the top of the sign or onto any public right-of-way or adjoining property. D. Background elements for signs, either through the use of color or material shall be permitted. The area of said background shall be calculated and included within the total sign area permitted for such sign. Background material shall be weather resistant building materials such as stucco, brick, masonry, laminate, or cladding that complements the building or tenant branding design. E. Individual backlit channel letters shall be permitted. 2. Pedestrian scale signage options shall be permitted as secondary features. Each tenant space may include one of the pedestrian-oriented signs in their individual signage proposals: Allowed signs are awning, window, suspended/hanging, or projecting signs. Sign sizes are to comply with the City’s Sign Regulations. A low wall sign is acceptable adjacent to an entry with a maximum size of 12 square feet. 3. Banner signs and other temporary signs are subject to the provisions of the City’s Sign Regulations. D. PROHIBITED SIGNS 1. Signs painted directly on building surface are prohibited. 2. Flashing, moving or audible sign are prohibited. 3. Other signs prohibited by the City’s Sign Regulations. Packet Pg 59 3 Madonna Plaza Master Sign Program Madonna Plaza SRT LP Oasis Associates, Inc. October 2017 3 of 8 E. GENERAL PERFORMANCE GUIDELINES 1. All signs will be limited to tenant’s trade name and logo. The use of brand names or brand name logos will not be allowed on the sign unless it is specifically included in the tenant’s “Doing Business As”. 2. Any tenant with registered trademarks or recognized logos shall be permitted to use them subject to approval by the City of San Luis Obispo Planning Department. The area of said trademark or logo shall be calculated and included within the total sign area permitted for such tenant. 3. All signs and sign structures, as well as the immediate premises surrounding them, shall be well maintained by the tenant. The illumination must be maintained from dusk to closure of business. Signs shall not be illuminated after 10:00 p.m. or close of business, whichever is later. 4. Each sign shall be designed so that illumination does not exceed 100 luxes (10 candlepower) at a distance of 10 feet from the sign. Illumination must be of uniform intensity and well maintained for all letters and/or symbols. Lighting for signs shall not create a hazardous glare for pedestrians or vehicles. F. GENERAL SIGN CONSTRUCTION GUIDELINES 1. All signs and their installation shall comply with all local building codes. Letters shall have disconnect switches and bear U.L. labels. 2. Each tenant shall be fully responsible for the operations of their sign contractor. The sign company is to be fully licensed with the City and State and shall have full Workman's Compensation and general liability insurance. 3. All conduits, raceway, transformers, junction boxes, penetrations, or openings in building surfaces shall be concealed. Exposed hardware shall be finished in a manner consistent with quality fabrication practices. All finished signs shall be pin-mounted with non-corrosive hardware 4. It is the responsibility of the tenant’s sign company to verify access to electrical stubs at fascia for approved internally illuminated channelized letter signs. Electrical service to tenant signs shall extend to the house panel of each building. In a turnkey construction, the landlord is responsible to provide the electrical J- Box. In a tenant remodel, the tenant is responsible for power and connections 5. Upon notice by either the City of San Luis Obispo or Madonna Plaza Management/Landlord, a tenant shall be required to repair or refurbish any sign structure, acrylic plastic face , and/or sign illumination within seven (7) days. 6. In the event of a tenant vacancy, the tenant shall remove all wall signs. All holes left by the sign shall be repaired, patched water tight, textured and painted to match exterior building color and texture. 7. In no case shall any manufacturer's label be visible from normal viewing angles. 8. Non-illuminated letters are to be fabricated from durable rust inhibiting materials, such as aluminum, bronze, high density urethane foam or acrylic, and shall not be made of wood, plywood or other substrates affected by the elements. 9. Finished surfaces of metal shall be free from oil canning and warping. All sign finish es shall be free from dust, orange peel, drips and runs and shall have uniform surface conforming to the highest standards of the industry G. MAJOR TENANT IDENTIFICATION Permitted Signs and Requirements 1. Tenants with a floor area greater than 10,000 SF are considered Major Tenants. See Site Signage Exhibit identify current major tenant buildings and tenant spaces. Packet Pg 60 3 Madonna Plaza Master Sign Program Madonna Plaza SRT LP Oasis Associates, Inc. October 2017 4 of 8 2.Each major tenant shall be allowed two (2) wall signs. See “Signage allowed for specific major tenant” section below for exceptions; see Exhibit A for signage locations. 3.The primary wall sign shall be located centered on the store front facade and the secondary wall sign shall be located at the rear of the building. (see Signage allowed for specific major tenant below for exceptions) 4.Store front signs shall be centered top to bottom and end to end on tenant’s storefront fascia. See Exhibit B. 5.Signs shall not be less than (1) one foot from the edge of a tenant’s storefront fascia or any architectural feature. See Exhibit - B. 6.No more than two rows of letters are permitted, provided their maximum square footage complies with the maximum total square footage allowed. 7.Sign materials, dimensions, and areas shall comply with the criteria in this sign program. Major Tenants (greater than 10,000 SF) Primary Wall Sign 1.Total sign square footage shall not exceed 215 square feet 2.Maximum sign height is 10 feet 3.Single Row of letters is not to exceed 7 feet in height. 4.Where two rows of letters are used, the primary row of letters not to exceed 6 feet 6 inches in height, with the secondary row of letters not to exceed 30 inches. Major Tenants (greater than 10,000 SF) Secondary Wall Sign 1.Total sign square footage shall not exceed 80 square feet 2.Maximum letter height is 36” Signage allowed for specific major tenant 1.The corner major tenants (Building A and L) are allowed two (2) secondary wall signs to provide signage facing both the public street (Madonna Road or El Mercado Road) and Highway 101. 2.The tenant space that includes the mid-plaza tower element (Building E and currently DSW) is allowed a wall sign on each of the two (2) primary tower faces, not to exceed a total signage of 215 SF. 3.The secondary signage for “Michaels”, as a future tenant of Building K, shall be permitted as depicted in the exhibit below. EXHIBIT G.3: Secondary Signage Design and Dimensions for “Michaels” Packet Pg 61 3 Madonna Plaza Master Sign Program Madonna Plaza SRT LP Oasis Associates, Inc. October 2017 5 of 8 H. MINOR SHOP TENANT IDENTIFICATION (10,000 SF OR LESS) Permitted Signs and Requirements 1. Minor shop tenant shall be allowed one wall sign per leased building face. No tenant shall have more than one wall sign on a single building face. Please see Exhibit A for signage locations. 2. Wall signs for minor shop tenant with up to 8,000 SF in lease space shall have a maximum letter height of twenty-four (24) inches. No more than two rows of letters shall be permitted per sign. 3. Wall signs for minor shop tenant with lease space greater than 8,000 SF shall have a maximum letter height of thirty-six (36) inches. No more than two rows of letters shall be permitted per sign. 4. Minor shop tenant wall signs shall have a maximum length of seventy (70) percent of the leasehold width up to the maximum sign length noted below, whichever is less. 5. All sign dimensions and areas shall comply with the criteria in the sign program 6. Freeway-oriented signs secondary signs for minor tenant shops are prohibited. Minor Shop Tenants Wall Sign Criteria Current # of tenants Maximum Letter Height Maximum Sign Length Maximum Sign Height Maximum Sign Area (SF) SHOP C 1 Primary Entrance 24” 12’-0” 2’-0” 24.0 SHOP D 1 Primary Entrance 24” 20’-0” 4’-0” 80.0 SHOPS G 4 Primary Entrance 24” 20’-0” 2’-6” 50.0 SHOPS M 3 Primary Entrance 24” 15’-0” 2’-6” 37.5 Secondary Sign 20” 10’-0” 1’-6” 15.0 SHOPS N 3 Primary Entrance 24” 20’-0” 2’-6” 50.0 Secondary Sign 20” 12’-0” 1’-8” 20.0 SHOPS P 2 Primary Entrance (10,000 SF tenant) 36” 20’-0” 4’-0” 80.0 Primary Entrance (minor tenant) 24” 20’-0” 2’-6” 50.0 Secondary Sign (All tenants) 20” 12’-0” 1’-8” 20.0 SHOPS Q 3 Primary Entrance 24” 20’-0” 4’-0” 80.0 Secondary Sign 20” 12’-0” 1’-8” 20.0 Packet Pg 62 3 Madonna Plaza Master Sign Program Madonna Plaza SRT LP Oasis Associates, Inc. October 2017 6 of 8 I. SHOPPING CENTER IDENTIFICATION SIGNAGE The existing monument signs (as approved by the 2001 sign program) are included to provide a comprehensive sign program reference. Monument Signs 1. Dual-sided monument signs are located at the Plaza entry points on Madonna Road (next to shops Q) and El Mercado Road (between shops N and P). 2. Moment signs dimensions are a height of 7’-6” and width of 8’-0”. 3. Tenant signage areas is 2’-6” SF with a height of 10” and width 3’-0”. 4. Tenant signage area is internally illuminated with plexiglass letters cut into plexiglass background or stencil cut aluminum face with push-thru acrylic letters. 5. Tenant sign backgrounds shall match existing sign backgrounds. Exhibit 1: Monument Sign Design Packet Pg 63 3 Madonna Plaza Master Sign Program Madonna Plaza SRT LP Oasis Associates, Inc. October 2017 7 of 8 Tower Signs 1. Tower signs identifying “Madonna Plaza” are located on each side of the visible face of the tower element of Building L and Building Q. 2. Gooseneck light fixtures provide external, downward facing lighting. 3. Maximum letter height is 18 inches. Exhibit 2: Tower Sign Design Packet Pg 64 3 Madonna Plaza Master Sign Program Madonna Plaza SRT LP Oasis Associates, Inc. October 2017 8 of 8 Pylon Signs 1. The Dual-sided pylon sign is located in parking lot, adjacent to Highway 101. 2. Pylon sign dimensions are a height of 26’ and a width of 11’-4” (excluding stone base). 3. The total signage area is 144 SF, and each tenant sign area 16 SF (2’ by 8’). 4. Tenant signage area is internally illuminated with plexiglass letters cut into plexiglass background or stencil cut aluminum face with push-thru acrylic letters. Exhibit 3: Pylon Sign Design Packet Pg 65 3 MADONNA PLAZA 201 to 283 MADONNA ROAD, SAN LUIS OBISPO, CA SITE SIGNAGE EXHIBIT 10/12/17 A TENANT PRIMARY SIGNAGE SECONDARY SIGNAGE MAJOR* MINOR LEGEND GENERAL SIGN LOCATION U. S H I G H W A Y 1 0 1 MADONNA ROADEL MERCADO MONUMENT SIGN #2 MONUMENT SIGN #1 “MADONNA PLAZA” TOWER SIGN PYLON SIGN *GREATER THAN 10,000 SF TENANT SPACE NOT TO SCALE A B D E F H J K LPNM Q “MADONNA PLAZA” TOWER SIGN G NOT A PART C Packet Pg 66 3 14-0549 R1 0611938AR17 271 MADONNA RD SAN LUIS OBISPO, CA 93405 IH 2017 JLP XXXXXX Sheet Client Sales Estimating Art Landlord Engineering Acct. Rep. Coordinator Designer Date 3201 Manor Way 214-902-2000 17319 San Pedro, Ste 200 210-349-3804 963 Baxter Avenue, Ste 200 502-479-3075 2584 Sand Hill Point Circle 863-420-1100 37 Waterfront Park Court 800-851-7062 P.O. Box 125 206 Doral Drive 361-563-5599 3220 Executive Ridge Drive, Ste 250 760-734-1708 Dallas, TX 75235 Fax 214-902-2044 San Antonio, TX 78232 Fax 210-349-8724 Louisville, KY 40204 Fax 502-412-0013 Davenport, FL 33837 Fax 863-424-1160 Dawsonville, GA 30534 Fax 210-349-8724 Portland, TX 78374 Fax 361-643-6533 Vista, CA 92081 Fax 760-734-3752 x of x LAURA BERJON HEATHER JOHNSON FRONT ELEVATION - EXHIBIT B.1 FRONT ELEVATION - EXHIBIT B.2 L H TENANT TENANT TAG LINE COMBINED SIGN SIZE: HEIGHT MULTIPLIED BY LENGTH NOT TO EXCEED 215 SQ.FT. SIGN SIZE: HEIGHT MULTIPLIED BY LENGTH NOT TO EXCEED 215 SQ.FT. H1 L L ONE ROW LETTERS SIGNAGE MUST BE A MINIMUM OF 12" AWAY FROM STOREFRONT FACADE EDGE OR ANY FACADE ARCHITECTURAL FEATURE. LETTER HEIGHT NOT TO EXCEED 7'-0" OVERALL HEIGHT NOT TO EXCEED 10'-0" SIGNAGE MUST BE CENTERED ON FACADE AREA. H2O.A.HTWO ROWS OF LETTERS 12" 12" 12" 12" 12" 12" 12" 12" SIGNAGE MUST BE A MINIMUM OF 12" AWAY FROM STOREFRONT FACADE EDGE OR ANY FACADE ARCHITECTURAL FEATURE. H1: NOT TO EXCEED 6'-6" H2: NOT TO EXCEED 2'-6" OVERALL HEIGHT NOT TO EXCEED 10'-0" SIGNAGE MUST BE CENTERED ON FACADE AREA. EXHIBIT B- Major Tenant Primary Sign MADONNA PLAZA Master Sign Program 2017 October Packet Pg 67 3 Packet Pg 68 3 Packet Pg 69 3 Packet Pg 70 3 ARCHITECTURAL REVIEW COMMISSION AGENDA REPORT SUBJECT: Review of a sign program for Madonna Plaza Shopping Center, with a categorical exemption from environmental review. PROJECT ADDRESS: 257 Madonna Road BY: Kip Morais, Planning Technician e-mail: kmorais@slocity.org VIA: Tyler Corey, Principal Planner FILE NUMBER: ARCH-1149-2017 FROM: Doug Davidson, Deputy Director RECOMMENDATION: Adopt the draft resolution approving the proposed Sign Program, based on findings, and subject to conditions of approval. SITE DATA Applicant Schottenstein Property Group Complete Date November 29, 2017 Zoning C-R General Plan General Retail Site Area Madonna Plaza Environmental Status Categorically exempt from environmental review under CEQA Guidelines Section 15311 (Accessory Structures) SUMMARY On August 21, 2017, the ARC approved plans for the redevelopment of a portion of the Madonna Plaza Shopping Center to construct a new commercial building to provide for three new tenant spaces located at 273 Madonna Road (formerly Sears). Condition No. 10 of Resolution ARC-1019- 17 required that the applicant develop a formal sign program and submit for architectural review. In response to this condition, the applicant is requesting ARC approval of a sign program for the Madonna Plaza Shopping Center. The proposed sign program includes specifications for allowable wall signs for major and minor tenants, and an additional tower sign identifying the shopping center located along El Mercado. The applicant is also requesting additional square footage for the secondary sign for the major tenant in building K (Michael’s). The sign program includes exceptions to the sign regulations for the maximum cumulative sign area per tenant space and the location of secondary wall signs on wall faces without public entrances. Meeting Date: December 18, 2017 Item Number: 4 KM Packet Pg 71 3 ARCH-1149-2017 (257 Madonna Road) Page 2 Staff is supportive of the proposed sign program, but recommends modifications to the sign program as discussed below (Section 3.0, Project Analysis). The most significant concerns with the sign program relate to the size of the primary signs proposed for major tenants, and the request for additional square footage for the secondary sign for the major tenant in Building K. Staff is also recommending minor modifications to the sign program to account for possible future tenant configurations. 1.0 COMMISSION’S PURVIEW The ARC’s role is to review the project in terms of its consistency with the Sign Regulations and the Community Design Guidelines applicable to signs. 2.0 PROJECT INFORMATION Site Information/Setting The project site consists of approximately 26.12 acres of developed land in the Retail Commercial (C-R) zone. The project site is currently developed as a shopping center with approximately 310,000 square feet of buildings divided among tenant spaces with parking and landscape improvements. The project site is bordered by, and takes access from, Madonna Road and El Mercado Road, and is adjacent to Highway 101. Project Description The project proposes a Sign Program for the Madonna Plaza Shopping Center site (Attachment 2, Reduced Project Plans). Including: a. Primary and secondary wall signs for major (>10,000 s.f.) and minor (<10,000 s.f.) tenants b. Specific major tenant signage c. Existing monument signs and pylon sign (no changes proposed) d. New and existing tower signs The sign program includes four wall sign styles for major and minor tenants; 1) LED Internally illuminated acrylic face lit channel letters, 2) Internally illuminated sign “cans” for logos only, 3) Externally illuminated signs and 4) individual backlit channel letters. Non-illuminated letters are to be fabricated from materials such as aluminum, bronze, high density urethane foam, and acrylic. Background material proposed include stucco, brick, masonry, laminate, or cladding the complements the building or tenant branding design. 3.0 PROJECT ANALYSIS The applicant has submitted a sign program as a part of the proposed project improvements. The sign program would replace the existing sign program for the center from 2001. The sign program proposes signage standards for major tenants and separate standards for minor tenants. Each tenant is allotted one primary and one secondary wall sign with the exception of the corner major tenants for Buildings A and L and the minor tenants in Buildings Q, P, and N. Primary wall signs are to be centered on the store front façade, while secondary wall signs are to be oriented towards the street or highway. The proposed sign standards, by building, are summarized in Table 1 along with a Packet Pg 72 3 ARCH-1149-2017 (257 Madonna Road) Page 3 comparison to the previous sign program and the sign dimensions for the closest regional shopping center, SLO Promenade. Table 1: Previous, Proposed, SLO Promenade, and Staff recommended Major Tenant Signage Major Tenants Primary Signage Previous Sign Program Proposed SLO Promenade Sign Program Staff Recommendation Maximum Sign Height 5’1 10’ 8’ 8’ Maximum letter height 3’ 7’ 3’6” 4’2 Maximum area 100 s.f.1 215 s.f. 120 - 200 s.f. 150’3 Sign types wall signs wall signs wall signs wall signs 1 With the exception of Best Buy which had a maximum height of 9’6” and area of 147.25 s.f. 2 Maximum letter height approved for DSW is forty-eight inches (4-feet) 3Based on ARC’s approval of maximum area for DSW (151 s.f.), and maximum area grantable with exceptions to previous sign program (150 s.f.) Major Tenants Secondary Signage Previous Sign Program Proposed SLO Promenade Sign Program Staff Recommendation Maximum Sign Height 2’6” Not given 6’4” 4’4 Maximum letter height 2' 3’ 3.5’ 3’ Maximum area 50 s.f. 80 s.f. 125 s.f. 80 s.f. Sign types wall signs wall signs wall signs wall signs 4This height represents a ratio based on the proposed max letter height plus an additional feature Minor Tenant Signage is as proposed on page 5 of Attachment 2 (Reduced Project Plans). Minor shop tenants are allowed one wall sign per lease building face. Freeway-oriented secondary signs for minor tenant shops are prohibited. The Sign Regulations indicate the intent and purpose of regulating signage is “to encourage the effective use of signs as a means of communication and to provide equality and equity among sign owners and those who wish to use signs.” Furthermore, the Sign Regulations indicate “signs must be architecturally compatible with affected structures and the character of surrounding development in order to maintain the overall quality of a neighborhood or commercial district.” Staff finds the proposed square footage and height of major tenants’ primary wall signs to be excessive considering the design and scale of the shopping center and approved façade improvements. The proposed signage would more than double the maximum allowed sign area (100 square feet) for primary wall signs in the previous sign program. The previous sign program Packet Pg 73 3 ARCH-1149-2017 (257 Madonna Road) Page 4 allowed the ARC to approve a maximum sign area of 150 square feet for specific proposals (Attachment 4: Previous Sign Program). In addition, the latest sign approved by the ARC for a major tenant within this shopping center (DSW) allowed a maximum square footage of 151 square feet and maximum letter height of forty-six inches (4 feet). Staff finds a maximum primary wall sign square footage of 150 square feet and the maximum letter height of 4 feet to be consistent with the most recent ARC approval for the shopping center and comparable to neighboring SLO Promenade (120-200 s.f.). Staff does support some increase in sign size from the original sign program based on the fact that Madonna Plaza is a regional center designed to provide retail to the community and the region as well as tourists and travelers, the fact that the ARC recently approved a 150 s.f. wall sign for DSW, and the fact that the neighboring SLO Promenade contains primary wall signs ranging in maximum area from 120 s.f. to 200 s.f. Staff recommends the following modifications to the proposed sign program to maintain consistency with the most recent ARC sign approvals and similar standards for SLO Promenade. Sign Program Modifications: Staff would like the ARC to consider the recommended modifications to maximum permitted signage for major tenants. Staff is recommending the following: size reductions to primary tenant wall signs, adding a maximum sign height to secondary wall signs, and limiting the mid-tower plaza element signage to the size approved for DSW by the ARC on August 21, 2017. Staff recommends the following modifications which are reflected in the conditions of approval (Condition 1): 1. Major Tenant Primary Wall Sign a. Total sign square footage shall not exceed 150 square feet b. Maximum sign height shall not exceed 8 feet c. Maximum letter height shall not exceed 4 feet d. Where two rows of letters are used the cumulative height shall not exceed 4 feet. 2. Major Tenants Secondary Wall Sign a. Maximum Sign Height is 4-feet 3. Signage allowed for specific major tenant a. The tenant space that includes the mid-plaza tower element (currently DSW) is allowed a wall sign on each of the two (2) primary tower faces, not to exceed a total signage of 151 square feet. 4. Translucent sign faces shall have a matte finish The applicant is requesting an additional 15 square feet for the secondary signage for the future tenant of Building K (Michael’s), bringing this sign to a total of 95 square feet. Staff finds that this request would be a grant of special privilege, and recommends that the sign program maintain the limit of 80 square feet for all major tenants’ secondary wall signs. Staff recommends Condition #2 which limits the maximum total sign square footage for major tenants’ secondary wall signs to 80 square feet. Staff also recognizes the fact that tenants may undergo changes in configuration including consolidation or partitions. In the event of new tenant configurations, staff recommends revising the sign program to include a statement defaulting to the city’s sign regulations for signs that may not align with the proposed configuration outlined in the sign program. Staff recommends Condition Packet Pg 74 3 ARCH-1149-2017 (257 Madonna Road) Page 5 #3 to include a statement describing the approval of signage for new tenant configurations inconsistent with the sign program provided that these signs are found to be consistent with the City of San Luis Obispo Sign Regulations. 4.0 ALTERNATIVES & RECOMMENDATION 4.1. Continue the project with direction to the applicant and staff on pertinent issues. 4.2. Deny the project based on findings of inconsistency with the Community Design Guidelines. 5.0 ATTACHMENTS 1. Draft Resolution 2. Sign Program 3. Tenant K Attachment 4. Previous sign program Packet Pg 75 3 Minutes ARCHITECTURAL REVIEW COMMISSION Monday, December 18, 2017 Regular Meeting of the Architectural Review Commission CALL TO ORDER A Regular Meeting of the Architectural Review Commission was called to order on Monday, December 18, 2017 at 5:00 p.m. in the Council Hearing Room, located at 990 Palm Street, San Luis Obispo, California, by Vice Chair Soll. ROLL CALL Present: Commissioners Amy Nemcik, Brian Rolph, Allen Root, Richard Beller, and Vice-Chair Angela Soll Absent: Commissioner Micah Smith and Chair Greg Wynn Staff: Doug Davidson, Deputy Director, Shawna Scott, Associate Planner, Emily Creel, Contract Planner, Kip Morais, Planning Technician and Jennifer Hooper, Recording Secretary. Other staff members presented reports or responded to questions as indicated in the minutes. PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA None. --End of Public Comment-- APPROVAL OF MINUTES 1. Minutes of the Architectural Review Commission Meetings of December 4, 2017. ACTION: MOTION BY COMMISSIONER ROOT SECOND BY COMMISSIONER ROLPH, CARRIED 5-0-2, to approve the minutes of the Architectural Review Commission meetings of December 4, 2017 as presented. Packet Pg 76 3 Minutes – Architectural Review Commission Meeting of December 18, 2017 Page 2 PUBLIC HEARINGS 2. 3897 South Higuera Street; Final review of the Public Art submittal for the Public Market at Bonetti Ranch project. Case #: ARCH-0941-2017; M-SP zone; John Belsher, PB Companies, applicant. Associate Planner Shawna Scott and Parks and Recreation Public Art Program Manager Melissa Mudgett presented the staff report with the use of a PowerPoint presentation and responded to Commissioner inquiries. Applicants Michael Reddell, Artist, and Peggy Sonoda, Project Assistant responded to commissioner inquires. Public Comments: Jamila Haseeb, Project Consultant. --End of Public Comment-- Commission discussion followed. ACTION: MOTION BY COMMISSIONER ROOT SECOND BY COMMISSIONER NEMCIK CARRIED 5-0-2 to adopt a Resolution entitled: A Resolution of the San Luis Obispo Architectural Review Commission finding that the proposed public art entitled “Obispo Town Musicians” meets the City’s Guidelines for public art in private development for the public market at Long Bonetti Ranch project, as represented in the staff report and attachments dated December 18, 2017, 3825 and 3897 South Higuera Street (ARCH-0941-2017) With the following amendments: Condition 4: Delete signage reference, add the following language: “could include raising sculpture and use of motion sensor lighting.” 3. 12165 and 12393 Los Osos Valley Road; Preliminary review of the Froom Ranch Specific Plan Design Guidelines Chapter and conceptual design review of the proposed Life Plan Community. Case #: SPEC-0143-2017, Madonna on LOVR Specific Plan Area 3; JM Development Group Inc., applicant Contract Planner Emily Creel presented the staff report with the use of a PowerPoint presentation and responded to Commissioner inquiries. Applicant Representatives Scott Martin and Pam Ricci presented with the use of PowerPoint and responded to commissioner inquires. Applicant Bob Richmond responded to Commissioner inquiries. Packet Pg 77 3 Minutes – Architectural Review Commission Meeting of December 18, 2017 Page 3 Public Comments: Ray Walters. Don and Gwen MacLane. Neil Havlik. --End of Public Comment-- Commission discussion followed. ACTION: Commissioners provided the following comments: 1. Mediterranean style architecture is appropriate for the Villaggio Life Plan Community. 2. Draft Froom Ranch Specific Plan Design Guidelines should incorporate the following: a. Illustrations of view sheds and site plan sections/elevation renderings with special attention to the 150-foot elevation line on the hills. b. Discussion of honesty and integrity of building materials. c. Show plans for garages at the rear of villas; show where cars would go; supportive of the concept of a non-car centric design and careful garage design. d. Throughout Chapter 4, use the term “guideline(s)” consistently rather than “guidance.” e. Clarify intention behind lot sizes within Table 2: Residential Development Standards for the Froom Ranch Specific Plan; suggestion that additional detail could be helpful. f. Design Guideline 4.1 add: “Provide design guideline for high quality development that is attractive and distinctive but also respects the site’s natural features.” g. Design Guideline 4.2.1: Specifically, identify distinct natural features and key views of the site to preserve/retain. h. Design Guideline 4.2.2: Add diagram/graphics including average natural grade, how to measure average natural grade, how to determine upper story setbacks; graphically show the size of terraces, possibly including min/max cut and fill slopes; show 10% and 20% slopes; dig into grading principles. i. Section 4.3 General Architectural Design Guidance: add design guidelines for wind protection (building placement, larger courtyards). j. Add Landscape Design Guidelines (soil types, slopes, plants); be receptive to landscape; identify fencing types (wildlife passage). k. Discussion regarding the need for an actionable alternative (as requested by the City Council) that would locate all development below the 150 -foot elevation and commented that it would be helpful to see both alternatives at the same level of detail to be able to compare them equally. l. Chair summary: i. Show viewshed lines from the street ii. Emphasize truth in materials iii. Address parking. Where are the cars going? iv. Use guidelines, not guidance v. Consider a wind study to reduce cold vi. Development over 150 feet and realignment of Froom Creek may be hard sells Packet Pg 78 3 Minutes – Architectural Review Commission Meeting of December 18, 2017 Page 4 vii. These are good first steps Architectural Review Commission takes Recess at 6:52 - 6:58 p.m. 4. 257 Madonna Road; Review of new sign program for the Madonna Plaza shopping center. Case #: ARCH-1149-2017; C-R zone; Schottenstein Property Group, applicant. (Kip Morais) Planning Technician Kip Morais presented the staff report with the use of a PowerPoint presentation and responded to Commissioner inquiries. Applicants Emily Ewer and Carol Florence presented with the use of PowerPoint and responded to commissioner inquires. Public Comments: None. --End of Public Comment-- Commission discussion followed. ACTION: MOTION BY COMMISSIONER ROLPH, SECOND BY COMMISSIONER BELLER, CARRIED 3-2-2 (COMMISSIONER ROOT AND NEMCIK NO) to adopt a Resolution entitled: A Resolution of the San Luis Obispo Architectural Review Commission approving a master sign program for the Madonna Plaza Shopping Center with a categorical exemption from environmental review, as represented in the staff report and attachments dated December 18, 2017 (257 Madonna Road ARCH-1149-2017). COMMENT AND DISCUSSION Deputy Director Davidson provided a brief agenda forecast. ADJOURNMENT The meeting was adjourned at 7:54 p.m. The next Regular meeting of the Architectural Review Commission is scheduled for Monday, January 29, 2018 at 5:00 p.m., in the Council Hearing Room, 990 Palm Street, San Luis Obispo, California. APPROVED BY THE ARCHITECTURAL REVIEW COMMISSION: 01/18/2018 Packet Pg 79 3 Madonna Plaza Master Sign Program Appeal Madonna Plaza SRT LP Oasis Associates, Inc. January 2018 1 of 1 Basis of Appeal – Master Sign Program MADONNA PLAZA SHOPPING CENTER 273 Madonna Road City of San Luis Obispo, CA 93401 ARCH-1149-2017 January 2018 On behalf of Madonna Plaza SRT, LLC, the following represents the basis for the appeal to the City Council of the Architectural Review Commission’s (ARC) action (December 18, 2017) for the updated Master Sign Program for the Madonna Plaza Shopping Center located at the northwest corner of Madonna Road and El Mercado Road. We are requesting the City Council to approve the appeal and specifically the following: • Removal of Conditions of Approval #1 a. - d. and f. 1. Prior to building permit issuance, the applicant shall submit a final sign program consistent with ARC direction and conditions of approval to be submitted to the Community Development Department to the satisfaction of the Community Development Director. The sign program shall incorporate the following modifications. Major Tenant Primary Wall Sign a. Total sign square footage shall not exceed 150 square feet b. Maximum sign height shall not exceed 8-feet c. Maximum letter height shall not exceed 4-feet d. Where two rows of letters are use, the cumulative height shall not exceed 4-feet. Major Tenants Secondary Wall Sign e. Maximum sign height is 4-feet Signage allowed for specific major tenant f. The tenant space that include the mid-plaza tower element (currently DSW) is allowed a wall sign on each of the two (2) primary tower faces, not to exceed a total signage of 151 square feet. • Approve the updated Master Sign Program (attached). The sign program has been updated, with track changes, to reflect the non-contested ARC conditions of approval. Additionally, the Sign Program has also been updated to remove letter height requirements for the major tenant primary signs. As discussed in our presentation to ARC, due to the proportional scaling required for “letter” only signage (which is currently a predominate branding trend), the ARC approved 4-foot maximum letter height severely limits the overall sign size for the proposed incoming tenants. Per the ARC approved 4-foot letter height maximum, the tenant signs for major/anchor stores in a regional shopping center would be less than 75 SF. This signage size creates an infeasible business situation for retail tenants that require visibility and identification from public street to be successful. While letter height is commonly included in Master Sign Programs, it is not explicitly required by the Zoning Regulations, Sign Regulations, or Community Design Guidelines. The drafted Sign Program does continue to control the signage maximum square footage. This provides the greatest flexibility for tenants and branding trends while maintaining consistent controls of the Plaza’s major tenant’s primary signage. Attachments: Revised Master Sign Program – Madonna Plaza (track changed), January 2018 c: Schottenstein Property Group 16-0028 Packet Pg 80 3 Packet Pg 81 3 Packet Pg 82 3 San Luis Obispo Page 1 Tuesday, October 24, 2017 Special Meeting of the City Council CALL TO ORDER A Special Meeting of the San Luis Obispo City Council was called to order on Tuesday, October 24, 2017 at 4:30 p.m. in the Council Hearing Room, located at 990 Palm Street, San Luis Obispo, California, by Mayor Harmon. ROLL CALL Council Members Present: Council Members Carlyn Christianson, Aaron Gomez, Andy Pease, Vice Mayor Dan Rivoire, and Mayor Heidi Harmon. Council Members Absent: None City Staff Present: Derek Johnson, City Manager; Christine Dietrick, City Attorney; and Carrie Gallagher, City Clerk; were present at Roll Call. Other staff members presented reports or responded to questions as indicated in the minutes. PUBLIC COMMENT ON CLOSED SESSION ITEMS None. ---End of Public Comment--- CLOSED SESSION A. CONFERENCE WITH LABOR NEGOTIATORS Pursuant to Government Code § 54957.6 Agency Negotiators: Monica Irons, Nickole Sutter, Rick Bolanos, Derek Johnson, Christine Dietrick Represented Employee Organizations: International Association of Firefighters Local 3523 B. CONFERENCE WITH LEGAL COUNSEL—EXISTING LITIGATION Paragraph (1) of subdivision (d) of Government Code § 54956.9; Name of case: Preserve the SLO Life-Buckley Road, Los Verdes Park Unit One Homeowners’ Association, Inc., Packet Pg 83 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 2 and Los Verdes Park (Unit 2) Homeowners’ Association, Inc. vs. City of San Luis Obispo, City Council of the City of San Luis Obispo, and Does 1 through 15; Avila Ranch, LLC, Andrew Mangano, and Does 16 through 30; San Luis Obispo County Superior Court Case No.17CV-0573 RECESSED AT 5:20 P.M. TO THE SPECIAL MEETING OF OCTOBER 24, 2017, 2017 TO BEGIN AT 6:00 P.M. Packet Pg 84 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 3 CALL TO ORDER A Special Meeting of the San Luis Obispo City Council was called to order on Tuesday, October 24, 2017 at 6:00 p.m. in the Council Chamber, located at 990 Palm Street, San Luis Obispo, California, by Mayor Harmon. ROLL CALL Council Members Present: Council Members Carlyn Christianson, Aaron Gomez, Andy Pease, Vice Mayor Dan Rivoire, and Mayor Heidi Harmon. Council Members Absent: None City Staff Present: Derek Johnson, City Manager; Christine Dietrick, City Attorney; and Carrie Gallagher, City Clerk; were present at Roll Call. Other staff members presented reports or responded to questions as indicated in the minutes. PLEDGE OF ALLEGIANCE Council Member Gomez led the Pledge of Allegiance. CITY ATTORNEY REPORT ON CLOSED SESSION City Attorney Dietrick stated that there was no reportable action for Closed Session Item A. City Attorney Dietrick reported the following acti on for Item B, ACTION: MOTION BY COUNCIL MEMBER CHRISTIANSON, SECOND BY COUNCIL MEMBER PEASE, CARRIED 5-0 to: authorize defense of litigation contingent upon proper service on the city and; authorize city manager and city attorney to execute necessary documents to facilitate the legal defense and reimbursement obligations of the developer. PRESENTATIONS 1. PROCLAMATION - ARBOR DAY Mayor Harmon presented a Proclamation to Ron Combs, City Arborist, proclaiming November 4, 2017 as “Arbor Day” in the City of San Luis Obispo. APPOINTMENTS 2. APPOINTMENTS TO THE PARKS AND RECREATION COMMISSION (PRC) City Clerk Gallagher presented the contents of the report. Packet Pg 85 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 4 Public Comments: None ---End of Public Comments--- ACTION: MOTION BY COUNCIL MEMBER CHRISTIANSON, SECOND BY VICE MAYOR RIVOIRE, CARRIED 5-0 to: 1. Confirm the appointment of Robert “Bob” Spector to the Parks and Recreation Commission to complete an unexpired term through March 31, 2021; and 2. Confirm the appointment of Kari Applegate to the Parks and Recreation Commission to complete an unexpired term through March 31, 2019. PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA Jackie Snider Danilu Ramirez Michelle Fletcher Sonya Eschenburg Don Hedrick ---End of Public Comment--- CONSENT AGENDA ACTION: MOTION BY COUNCIL MEMBER CHRISTIANSON, SECOND BY VICE MAYOR RIVOIRE, CARRIED 5-0 to approve Consent Calendar Items 3 thru 6. 3. WAIVE READING IN FULL OF ALL RESOLUTIONS AND ORDINANCES CARRIED 5-0, to waive reading of all resolutions and ordinances as appropriate. 4. EL CAPITAN BRIDGE CARRIED 5-0, to: 1. Authorize the Mayor to execute Easement Agreements between the City and the owners of Lot 7 of Tract 2294 (the Ackermans) and Lot 15 of Tract 2372 (Stonecreek HOA) in a form approved by the City Attorney; and 2. Authorize the inclusion of the El Capitan Bridge as a City asset, City maintenance responsibility, and prioritize the repair or replacement within the City’s 2017 -19 Bridge Maintenance Capital Improvement Plan Project upon Easement Agreement execution; and 3. Accelerate Bridge Maintenance Funds from Fiscal Year 2018-19 to 2017-18 to support this immediate need. Packet Pg 86 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 5 5. HUMAN RESOURCES AND FINANCE DEPARTMENTS OFFICE RECONFIGURATION, SPECIFICATION No. 91525 CARRIED 5-0, to: 1. Award a contract to BC Construction & Electric in the amount of $124,552 for the “Human Resources and Finance Departments Office Reconfiguration, Specification No. 91525”; and 2. Approve the transfer of $11,962.46 from the General Capital Outlay Completed Projects Account balance and $1,130.54 from the Major Facilities Replacement Completed Projects Account balance, for a total of $13,093.00 to the project construction phase. 6. MITIGATED NEGATIVE DECLARATION OF ENVIRONMENTAL IMPACTS FOR THE LAGUNA LAKE DREDGING AND SEDIMENT MANAGEMENT PROJECT (CONTINUED FROM THE OCTOBER 17, 2017 COUNCIL MEETING) CARRIED 5-0, to adopt Resolution No. 10842 (2017 Series) entitled “A Resolution of the City Council of the City of San Luis Obispo, California, adopting a Mitigated Negative Declaration for the Laguna Lake Dredging and Sediment Management Project.” Public Comments: Don Hedrick ---End of Public Comment--- PUBLIC HEARING ITEMS AND BUSINESS ITEMS 7. PUBLIC HEARING - LUNETA DRIVE CONNECTION GENERAL PLAN AMENDMENT City Manager Johnson recused himself from the discussion, noting he resides in the affected neighborhood, he departed the dais at 6:29 p.m. Community Development Director Michael Codron was seated at the dais as Acting City Manager. Public Works Director Grigsby, Transportation Manager Hudson, and Transportation Planner/Engineer Rice provided an in-depth staff report with the use of a Power Point and responded to Council questions. Public Comments: Tess Matthews Don Hedrick Sheri Mortola Betty Dehaan Mark Swack John Snetsinger Jonathan Reich Bob Mourenza Roberto Monge Packet Pg 87 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 6 Mila Vujovich – La Barre Ed Benson Al Lipper David Hafemeister Aurora Lipper Paul Allen Robert Shanbrom Patrick O’Sullivan Kit Gould ---End of Public Comment--- ACTION: MOTION BY VICE MAYOR RIVOIRE, SECOND BY COUNCIL MEMBER GOMEZ, CARRIED 5-0 to: Adopt Resolution No. 10843 (2017 Series) entitled “A Resolution of the City Council of the City of San Luis Obispo, California, to approve an amendment to the Circulation Element of the General Plan with an addendum to the 2014 LUCE update Environmental Review Report” to amend the Circulation Element of the General Plan eliminating the Luneta Drive connection and approve the proposed addendum to the Land Use Circulation Element Update Environmental Impact Report. City Manager Johnson returned to the dais at 7:42 p.m. RECESS Council recessed at 7:45 p.m. and reconvened at 7:55 p.m., with all Council Members present. 8. PUBLIC HEARING - FORMATION FOR THE AVILA RANCH COMMUNITY FACILITIES DISTRICT City Manager Johnson, Economic Development Manager Johnson and EPS Consultant Walter Kieser provided an in-depth staff report and responded to Council questions. Public Comments: Mila Vujovich-La Barre ---End of Public Comment--- ACTION: MOTION BY COUNCIL MEMBER CHRISTIANSON, SECOND BY COUNCIL MEMBER PEASE, CARRIED 5-0 to: 1. Advance the formation of the Avila Ranch Community Facilities District (CFD) by adopting Resolution No. 10844 (2017 Series) As amended: entitled “A Resolution of the City Council of the City of San Luis Obispo, California, establishing Avila Ranch Community Facilities District No. 2017-1 pursuant to the Mello-Roos Community Facilities Act of 1982 and, in its capacity as legislative body of such district, submitting the levy of a special tax and the establishment of an appropriations limit to the electors of Packet Pg 88 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 7 the district to include additional language to end of Section 17 (Environmental Determination) of the Council Resolution to incorporate these additional findings as follows: “The City Council further finds on a wholly independent basis that the formation and implementation of a CFD for the Avila Ranch project is categorically exempt from CEQA pursuant to CEQA Guidelines Section 15306 (Information Collection) and that the action otherwise qualifies for a “general rule” exemption pursuant to Section 15061(b)(3), which covers activities “where it can be seen with certainty that there is no possibility that the activity in question may have a significant effect on the environment.” The proposed action is intended to implement aspects of that project by establishing a funding mechanism through the formation of a CFD. This action does not change any aspect of the approved Avila Ranch project, nor does it introduce the potential for any new environmental impacts. Under Section 15306, the Secretary for the California Natural Resources Agency has concluded that “basic data collection, research…and resource evaluation activities which do not result in a serious or major disturbance to an environmental resource” are exempt from CEQA. Further, it exempts actions that are “…for information gathering purposes, or as part of a study leading to an action which a public agency has not yet approved, adopted, or funded.” The formation of a CFD qualifies with respect to these criteria. Therefore, the proposed action is categorically exempt from further analysis under CEQA.” and adopting an addendum to the final environmental impact report for the Avila Ranch Development,” as amended to include language in Section C to read as follows: “A Notice of Determination (NOD) pursuant to CEQA Guidelines Section 15075 was filed on September 20, 2017, following project approval. This began a 30-day period during which any potential court challenges to the project could have been filed. On October 19, 2017, an action challenging the validity of the EIR was filed in the Superior Court, County of San Luis Obispo, as Case No. 17CV-0573. Pursuant to CEQA Guidelines Section 15231(a), the EIR is conclusively presumed to comply with CEQA for purposes of use until the EIR is finally adjudicated in a legal proceeding not to comply with the requirements of CEQA. No such determination has been made; and 2. Set the date for the required (landowner) election for October 26, 2017. 9. PUBLIC HEARING - ORDINANCE INTRODUCTION - REVIEW OF BEVERAGE STRAWS UPON REQUEST City Manager Johnson and Sustainability Coordinator Carloni provided an in-depth staff report and responded to Council questions. Public Comments: Don Hendrick Cory Jones Janine Rands Mila Vujovich – La Barre Mary Ciesinski ---End of Public Comment--- Packet Pg 89 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 8 ACTION: MOTION BY VICE MAYOR RIVOIRE, SECOND BY COUNCIL MEMBER GOMEZ, CARRIED 5-0 to: Introduce Ordinance No. 1640 (2017 Series) entitled “An Ordinance of the City Council of the City of San Luis Obispo, California, adding Chapter 8.09 to the San Luis Obispo Municipal Code regulating single-use beverage straws.” 10. PUBLIC HEARING - ORDINANCE INTRODUCTION - REGULATING THE SALE AND DISTRIBUTION OF SINGLE-USE PLASTIC BOTTLES AND ESTABLISHING REGULATIONS TO INCREASE AVAILABILITY OF WATER BOTTLE FILLING STATIONS City Manager Johnson and Sustainability Coordinator Carloni provided an in-depth staff report with the use of a Power Point presentation and responded to Council questions. Public Comments: Cory Jones Don Hedrick Amy Sinsheiner Justin Bradshaw Mary Ciesinski Barry Rands Mila Vujovich – La Barre Janine Rands ---End of Public Comment--- ACTION: MOTION BY COUNCIL MEMBER GOMEZ, SECOND BY COUNCIL MEMBER CHRISTIANSON, CARRIED 5-0 to: Introduce Ordinance No. 1641 (2017 Series) entitled “An Ordinance of the City Council of the City of San Luis Obispo, California, adding Chapter 8.07 to the San Luis Obispo Municipal Code regulating single-use plastic beverage bottles on city property less than 21 ounces in size,” and establishing regulations to increase the availability of water bottle filling stations in the City amended to include within section 17.07.020, In the event that containers greater than 21 ounces in size are utilized, single-use containers (e.g. single-use plastic cups) may not be used in the serving of beverages. The use of reusable containers is required. Packet Pg 90 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 9 11. CLIMATE ACTION TASK FORCE MEMORANDUM OF UNDERSTANDING AND ASSIGNMENT OF COUNCIL MEMBER LIAISON TO THE TASK FORCE City Manager Johnson and Sustainability Coordinator Carloni provided an in-depth staff report with the use of a Power Point presentation and responded to Council questions. Public Comments: Don Hedrick Justin Bradshaw Eric Veium ---End of Public Comment--- ACTION: MOTION BY VICE MAYOR RIVOIRE, SECOND BY COUNCIL MEMBER PEASE, CARRIED 5-0 to: 1. Approve the Memorandum of Understanding between the City of San Luis Obispo and the Climate Action Task Force (Task Force) establishing the Task Force as the “Community Climate Action Coalition” that would help achieve the Climate Action objectives of the Climate Action Major City Goal work program as amended to be included in the first paragraph as follows: fiscally sponsored by The Community Foundation San Luis Obispo County and; to add the Community Foundation as signatory to the MOU; and 2. Designate Council Member Gomez to serve as Task Force Council liaison and Mayor Harmon to serve as backup. 12. CONSIDER ACTIONS RELATED TO THE ANIMAL SERVICES SHELTER AGREEMENT City Manager Johnson provided an in-depth staff report with the use of a Power Point presentation and responded to Council questions. Public Comments: None ---End of Public Comment--- ACTION: MOTION BY VICE MAYOR RIVOIRE, SECOND BY COUNCIL MEMBER CHRISTIANSON, CARRIED 5-0 to: Receive a report on the regional effort to build an animal services shelter and consider actions related to the potential withdrawal of other participating cities from the joint agreement to finance and construct a replacement animal services shelter. Packet Pg 91 6 San Luis Obispo City Council Minutes of October 24, 2017 Page 10 COUNCIL COMMUNICATIONS AND LIAISON REPORTS Mayor Harmon reported having attended a Chamber Net Zero Workshop, an SCLC meeting, the Economic Vision Cannabis Regulation Open House, and stated that she is a member of the Men’s Colony Citizens Advisory Committee and recently viewed a presentation on prison gangs. ADJOURNMENT The meeting was adjourned at 10:44 p.m. Adjourn to a Regular City Council Meeting to be held on Tuesday, November 7, 2017 at 4:00 p.m., and 6:00 p.m., in the Council Hearing Room and Council Chamber, 990 Palm Street, San Luis Obispo, California. __________________________ Carrie Gallagher City Clerk APPROVED BY COUNCIL: XX/XX/2018 Packet Pg 92 6 San Luis Obispo Page 1 Tuesday, January 16, 2018 Regular Meeting of the City Council CALL TO ORDER A Regular Meeting of the San Luis Obispo City Council was called to order on Tuesday, January 16, 2018 at 5:30 p.m. in the Council Hearing Room, located at 990 Palm Street, San Luis Obispo, California, by Mayor Harmon. ROLL CALL Council Members Present: Council Members Aaron Gomez, Andy Pease, Dan Rivoire, Vice Mayor Carlyn Christianson, and Mayor Heidi Harmon. Council Members Absent: None City Staff Present: Derek Johnson, City Manager; Christine Dietrick, City Attorney; and Carrie Gallagher, City Clerk; were present at Roll Call. Other staff members presented reports or responded to questions as indicated in the minutes. PUBLIC COMMENT ON CLOSED SESSION ITEMS None. ---End of Public Comment--- CLOSED SESSION A. PUBLIC EMPLOYEE PERFORMANCE EVALUATION Pursuant to Government Code § 54957(b)(1) Title: City Manager ADJOURNED AT 5:50 PM TO THE REGULAR MEETING OF JANUARY 16, 2018 TO BEGIN AT 6:00 PM IN THE COUNCIL CHAMBER Packet Pg 93 6 San Luis Obispo City Council Minutes of January 16, 2018 Page 2 CALL TO ORDER A Regular Meeting of the San Luis Obispo City Council was called to order on Tuesday, January 16, 2018 at 6:00 p.m. in the Council Chamber, located at 990 Palm Street, San Luis Obispo, California, by Mayor Harmon. ROLL CALL Council Members Present: Council Members Aaron Gomez, Andy Pease, Dan Rivoire, Vice Mayor Carlyn Christianson, and Mayor Heidi Harmon. Council Members Absent: None City Staff Present: Derek Johnson, City Manager; Christine Dietrick, City Attorney; Greg Hermann, Interim Deputy City Manager; and Carrie Gallagher, City Clerk; were present at Roll Call. Other staff members presented reports or responded to questions as indicated in the minutes. PLEDGE OF ALLEGIANCE Council Member Rivoire led the Pledge of Allegiance. CITY ATTORNEY REPORT ON CLOSED SESSION City Attorney Dietrick stated that there was no reportable action for Closed Session Item A. PRESENTATIONS 1. PRESENTATION - SB1 (ROAD REPAIR AND ACCOUNTABILITY ACT OF 2017) Pete Rodgers, Deputy Director of San Luis Obispo Council of Governments made presentation regarding SB1 – Road Repair and Accountability Act of 2017. PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA Luke Dunn ---End of Public Comment--- CONSENT AGENDA ACTION: MOTION BY VICE MAYOR CHRISTIANSON, SECOND BY COUNCIL MEMBER GOMEZ, CARRIED 5-0 to approve Consent Calendar Items 2 thru 8. Packet Pg 94 6 San Luis Obispo City Council Minutes of January 16, 2018 Page 3 2. WAIVE READING IN FULL OF ALL RESOLUTIONS AND ORDINANCES CARRIED 5-0, to waive reading of all resolutions and ordinances as appropriate. 3. MINUTES OF JANUARY 5, 2018 CARRIED 5-0, to approve the minutes of the City Council special meeting of January 5, 2018. 4. OPEN SPACE MAINTENANCE PLAN PROGRESS REPORT CARRIED 5-0, to receive and file the Parks and Recreation Department’s Open Space Maintenance Plan 2017 Progress Report and the Open Space Kiosk Panels. 5. 2017 ANNUAL PROGRESS REPORT FOR THE 2020 PARKS AND RECREATION STRATEGIC PLAN CARRIED 5-0, to receive and file the 2017 Annual Progress Report for the 2020 Parks and Recreation Strategic Plan. 6. MEMORANDUM OF AGREEMENT FOR CREATION OF A GROUNDWATER SUSTAINABILITY PLAN CARRIED 5-0, to authorize the Mayor to sign the Memorandum of Agreement Regarding Preparation of a Groundwater Sustainability Plan for the San Luis Obispo Valley Groundwater Basin. 7. TRANSIT ASSET MANAGEMENT (TAM) PLAN CARRIED 5-0, to approve submittal of The City of San Luis Obispo’s TAM Plan and Goal to the Federal Transit Administration (FTA). 8. ROAD REPAIR AND ACCOUNTABILITY ACT OF 2017, SENATE BILL 1 (SB1) STATE OF GOOD REPAIR GRANT APPLICATION(S) CARRIED 5-0, to: 1. Adopt Resolution No. 10857 (2018 Series) entitled “A Resolution of the City Council of the City of San Luis Obispo, California, authorizing the execution of the certifications and assurances for the California State of Good Repair Program” authorizing the City Manager, or his designee, to execute and file grant applications with the State of California to receive SB1 grant funds for transit projects and to execute any related grant applications, certifications, assurances, forms, agreements, and associated documents on behalf of the City on an ongoing basis; and 2. Approve a budget amendment to reflect received grant funds, if awarded; and 3. Approve the appropriation of grant money for the procurement of City-approved Transit CIP projects. Packet Pg 95 6 San Luis Obispo City Council Minutes of January 16, 2018 Page 4 PUBLIC HEARING ITEMS AND BUSINESS ITEMS 9. PUBLIC HEARING - PILOT PROGRAM FOR WINTER OPEN SPACE HOURS OF USE (CONTINUED FROM OCTOBER 24, 2017) City Manager Johnson introduced the item and Natural Resources Manager Hill provided an in-depth staff report with the use of a Power Point presentation and responded to Council questions. Public Comments: Phil Ashley Jeff Jantos Bob Mourenza Julie Nanninga Tim Wilkinson Dianna Beck Jackie Snider Robert Wilkens Mike Bennett, Bike SLO County Thomas Shumard Gary Felsman Garrett Otto Lisa Hall Eric Langlais Connor Culhane, Central Coast Concerned Mountain Bikers Michelle Fletcher Danilu Ramirez Doug Tait, Motorcoast Audubon Society Kathleen O’Neill Allan Cooper Lynne Slivovsley Kathryn Hicks Mary Ciesinski, ECOSLO Lydia Mourenza John Ashbaugh Valene Trenev Cheryl McLean Wendy Lucas Rich Graziano & Amy West Genevieve Gech Adolf Czech Richard Krejsa Bill Waycott Jim Aaron F Mila Vujovich– La Barre ---End of Public Comment--- Packet Pg 96 6 San Luis Obispo City Council Minutes of January 16, 2018 Page 5 ACTION: MOTION BY COUNCIL MEMBER GOMEZ, SECOND BY COUNCIL MEMBER RIVOIRE, CARRIED 3-2 (CHRISTIANSON NO, PEASE NO) to: 1. Pursuant to prior Council direction, receive a staff presentation on a proposed two-year pilot program to extend the hours of use of the Cerro San Luis Natural Reserve when daylight savings time is not in effect; and 2. Adopt Resolution No. 10858 (2018 Series) entitled “A Resolution of the City Council of the City of San Luis Obispo, California, adopting a Mitigated Negative De claration for a pilot program for winter open space hours of use.” RECESS Council recessed at 8:40 p.m. and reconvened at 8:52 p.m., with all Council Members present. 10. ACCEPTANCE OF THE COMPREHENSIVE ANNUAL FINANCIAL REPORT, SINGLE AUDIT REPORT, AND ANNUAL AUDIT OF TRANSPORTATION DEVELOPMENT ACT FUNDS FOR 2016-17 Finance Director Bradford and Accounting Manager Pardo provided an in-depth staff report and responded to Council questions. Public Comments: None ---End of Public Comment--- ACTION: MOTION BY COUNCIL MEMBER PEASE, SECOND BY COUNCIL MEMBER RIVOIRE, CARRIED 5-0 to accept the Comprehensive Annual Financial Report, Single Audit Report, and annual audit of the Transportation Development Act Funds for Fiscal Year 2016-17. 11. REVIEW OF THE 10-YEAR CAPITAL IMPROVEMENT PLAN (CIP) AND POTENTIAL FUNDING OPTIONS Public Works Director Grigsby and Finance Director Bradford provided an in-depth staff report with the use of a Power Point presentation and responded to Council questions. Public Comments: None ---End of Public Comment--- Packet Pg 97 6 San Luis Obispo City Council Minutes of January 16, 2018 Page 6 By concensus, Council received a presentation on the 10-Year CIP, including potential funding options, and directed staff to: 1. Continue to refine project list 2. Focus on rightsizing projects and funding strategy 3. Project prioritization should focus on implementing high impact projects 4. Align delivery timeframe with funding constraints 5. Common interest to implement projects beyond maintenance of existing assets 6. Provide additional information regarding future funding strategies for enhancement of existing assets and new projects COUNCIL COMMUNICATIONS AND LIAISON REPORTS Council Member Pease reported on attending a working day at City Farm, she noted volunteer and joint work effort along with Pacific Beach HS, she encouraged residents to see what the program is all about. Mayor Harmon, noted attending a Common Ground Advisory Task Force Meeting held in joint efforts with the San Luis Coastal Unified School District; she reported on the most recent Mayor’s Advisory Body Quarterly Meeting noting important efforts on the part of all City Advisory Bodies; she added her attendance at the Cal Poly Weekend Hot House Hackathon. Council Member Rivoire reported that he will be speaking at an upcoming City-County Library presentation regarding sexual harassment and men’s role in the dialogue Council Member Pease noted that the annual Advisory Body recruitment period is currently underway and that applications are due this coming Friday. ADJOURNMENT The meeting was adjourned at 10:20 p.m. The next Regular City Council Meeting is scheduled for Tuesday, February 6, 2018 at 6:00 p.m., respectively, in the Council Chamber, 990 Palm Street, San Luis Obispo, San Luis Obispo, California. __________________________ Carrie Gallagher City Clerk APPROVED BY COUNCIL: XX/XX/2018 Packet Pg 98 6 Tuesday, February 6, 2018 Regular Meeting of the City Council CALL TO ORDER A Regular Meeting of the San Luis Obispo City Council was called to order on Tuesday, February 6, 2018 at 3:30 p.m. in the Council Hearing Room, located at 990 Palm Street, San Luis Obispo, California, by Mayor Harmon. ROLL CALL Council Members Present: Council Members Aaron Gomez, Andy Pease, Dan Rivoire, and Mayor Heidi Harmon. Council Members Absent: Vice Mayor Carlyn Christianson City Staff Present: Derek Johnson, City Manager; Christine Dietrick, City Attorney; Greg Hermann, Interim Deputy City Manager; and Teresa Purrington, Acting City Clerk were present at Roll Call. Other staff members presented reports or responded to questions as indicated in the minutes. PUBLIC COMMENT ON CLOSED SESSION ITEMS None. ---End of Public Comment--- CLOSED SESSION A. CONFERENCE WITH LEGAL COUNSEL – EXISTING LITIGATION Paragraph (1) of subdivision (d) of Government Code § 54956.9; Name of case: Application of Pacific Gas and Electric Company for Approval of the Retirement of Diablo Canyon Power Plant, Implementation of the Joint Proposal, And Recovery of Associated Costs Through Proposed Ratemaking Mechanisms (U39E) A: 16-08-006 RECESSED AT 3:55 P.M. TO THE REGULAR MEETING OF TUESDAY, FEBRUARY 6, 2017 TO BEGIN AT 4:00 P.M. Packet Pg 99 6 San Luis Obispo City Council Minutes of February 6, 2017 Page 2 CALL TO ORDER A Regular Meeting of the San Luis Obispo City Council was called to order on Tuesday, February 6, 2018 at 4:00 p.m. in the Council Chamber, located at 990 Palm Street, San Luis Obispo, California, by Mayor Harmon. ROLL CALL Council Members Present: Council Members Dan Rivoire, Aaron Gomez, Andy Pease, and Mayor Heidi Harmon. Council Members Absent: Vice Mayor Carlyn Christianson City Staff Present: Derek Johnson, City Manager; Christine Dietrick, Cit y Attorney; Greg Hermann, Interim Deputy City Manager; Teresa Purrington, Acting City Clerk were present at Roll Call. Other staff members presented reports or responded to questions as indicated in the minutes. PUBLIC HEARING ITEMS AND BUSINESS ITEMS 1. PUBLIC HEARING - REQUEST FROM THE HOUSING AUTHORITY OF THE CITY OF SAN LUIS OBISPO REGARDING ISSUANCE OF A TAX-EXEMPT LOAN TO DEVELOP 36 AFFORDABLE HOUSING UNITS AT 3175 VIOLET STREET Community Development Deputy Director Fowler and Planning Technician Vereschagin provided an in-depth staff report and responded to Council questions. Public Comments: Scott Smith ---End of Public Comment--- ACTION: MOTION BY COUNCIL MEMBER PEASE, SECOND BY COUNCIL MEMBER GOMEZ, CARRIED 4-0-1 to: Adopt Resolution No. 10859 (2018 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving the incurring of a tax -exempt obligation by the Housing Authority of the City of San Luis Obispo for the purpose of providing financing for the construction of Courtyard at the Meadows,” to develop 36 affordable housing units at 3175 Violet Street. Packet Pg 100 6 San Luis Obispo City Council Minutes of February 6, 2017 Page 3 2. PUBLIC HEARING - ORDINANCE INTRODUCTION - REGULATING THE USE OF CITY FUNDS FOR SPECIFIED PLASTIC BOTTLED BEVERAGES, IN COMPLIANCE WITH RECENTLY ADOPTED ORDINANCE NUMBER 1641 (2017 SERIES) Finance Director Bradford and Purchasing Analyst Eriksson provided an in-depth staff report and responded to Council questions. Public Comments: None ---End of Public Comment--- ACTION: MOTION BY COUNCIL MEMBER GOMEZ, SECOND BY COUNCIL MEMBER PEASE, CARRIED 4-0-1 to introduce Ordinance No. 1644 (2018 Series) entitled “An Ordinance of the City Council of the City of San Luis Obispo, California, adding section 3.24.075(f) to the Municipal Code in compliance with recently adopted chapter 8.07 regulating single-use plastic beverage bottles.” With the following change: F. It is the policy of the City of San Luis Obispo that City funds shall not be used to purchase single-use plastic bottled beverages of less than 21 ounces or single-use plastic drink containers, as provided in Chapter 8.07 of this Code. 3. WATER AND WASTEWATER RATE SETTING METHODOLOGY Utilities Director Mattingly, Utilities Project Manager Metz and Koorn, HDR Engineering provided an in-depth staff report and responded to Council questions. Public Comments: None ---End of Public Comment--- By consensus, Council directed staff to proceed with the next steps of the rate setting process based on the methodology presented. RECESSED TO THE REGULAR MEETING OF TUESDAY, FEBRUARY 6, 2017 TO BEGIN AT 6:00 P.M. Packet Pg 101 6 San Luis Obispo City Council Minutes of February 6, 2017 Page 4 CALL TO ORDER A Regular Meeting of the San Luis Obispo City Council was called to order on Tuesday, February 6, 2018 at 6:00 p.m. in the Council Chamber, located at 990 Palm Street, San Luis Obispo, California, by Mayor Harmon. ROLL CALL Council Members Present: Council Members Dan Rivoire, Aaron Gomez, Andy Pease, and Mayor Heidi Harmon. Council Members Absent: Vice Mayor Carlyn Christianson City Staff Present: Derek Johnson, City Manager; Christine Dietrick, City Attorney; Greg Hermann, Interim Deputy City Manager; Teresa Purrington, Acting City Clerk; were present at Roll Call. Other staff members presented reports or responded to questions as indicated in the minutes. PLEDGE OF ALLEGIANCE Council Member Andy Pease led the Pledge of Allegiance. CITY ATTORNEY REPORT ON CLOSED SESSION City Attorney Dietrick stated that there was no reportable action for Closed Session Item A. PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA Allan Cooper Adam Stowe Peggy Koteen ---End of Public Comment--- CONSENT AGENDA ACTION: MOTION BY COUNCIL MEMBER GOMEZ, SECOND BY COUNCIL MEMBER RIVOIRE, CARRIED 4-0-1 to approve Consent Calendar Items 4 thru 10. 4. WAIVE READING IN FULL OF ALL RESOLUTIONS AND ORDINANCES CARRIED 4-0-1, to waive reading of all resolutions and ordinances as appropriate. 5. MINUTES OF THE CITY COUNCIL MEETINGS OF JANUARY 9, 2018 Packet Pg 102 6 San Luis Obispo City Council Minutes of February 6, 2017 Page 5 CARRIED 4-0-1, to approve the minutes of January 9, 2018. 6. AFFORDABLE HOUSING FUND ALLOCATION FOR COURTYARD AT THE MEADOWS ($630,000) Public Comments: Elaine Archer ---End of Public Comments--- CARRIED 4-0-1, to adopt Resolution No. 10860 (2018 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving affordable housing fund award to the Housing Authority of San Luis Obispo and San Luis Obispo Nonprofit Housing Corporation for Courtyard at the Meadows in the amount of $630,000,” to assist with construction costs for a 36-unit affordable housing project at 3175 Violet Street. 7. MODIFICATIONS TO PROJECT MITIGATION MEASURES AND CONDITIONS OF APPROVAL ASSOCIATED WITH FINAL MAP #3063-PHASE 1 (RIGHETTI RANCH – ORCUTT AREA SPECIFIC PLAN [OASP]) TO ALLOW INFRASTRUCTURE, BUILDING PERMIT ISSUANCE AND OCCUPANCY PERMIT PHASING, INCLUDING CONSIDERATION OF CALIFORNIA ENVIRONMENTAL QUALITY ACT (CEQA) FINDINGS AND CONSISTENCY DETERMINATIONS REGARDING THE PREVIOUSLY APPROVED MITIGATED NEGATIVE DECLARATION (2015) AND OASP FINAL EIR (2010) (MOD #1220- 2017; 3987 ORCUTT ROAD) Public Comments: Allan Cooper Kathy Borland Steve Delmartini ---End of Public Comments--- CARRIED 4-0-1, to adopt Resolution No. 10861 (2018 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, approving amendments to mitigation measures and conditions of approval for an approved subdivision (mod-1220- 2017; tract #3063 a.k.a. “Righetti Ranch”; 3987 Orcutt Road). 8. AMENDMENTS TO THE BICYCLE ADVISORY COMMITTEE BYLAWS AND ADOPTING A REVISED ADVISORY BODY HANDBOOK Public Comments: David Figueroa Lea Brooks Jamie Woolf Packet Pg 103 6 San Luis Obispo City Council Minutes of February 6, 2017 Page 6 ---End of Public Comments--- CARRIED 4-0-1 to adopt Resolution No. 10862 (2018 Series) entitled, “A Resolution of the City Council of the City of San Luis Obispo, California, amending the Bylaws of the Bicycle Advisory Committee to include pedestrian transportation, changing the committee name to the Active Transportation Committee, and adopting a revised Advisory Body Handbook.” 9. AUTHORIZE FUNDS FROM THE LAW ENFORCEMENT GRANT FUND/TRAFFIC IMPOUND ACCOUNT TO PURCHASE EQUIPMENT RELATED TO TRAFFIC SAFETY CARRIED 4-0-1 to appropriate $13,800 from available fund balance in the Law Enforcement Grant Fund/Traffic Impound Account to purchase a portable Traffic Collision/Crime Scene Reconstruction System 10. MULTI-JURISDICTIONAL HAZARD MITIGATION GRANT PROGRAM CARRIED 4-0-1 to: 1. Authorize Fire Department to participate in a grant application process from the Federal Emergency Management Agency (FEMA) for funding to develop a multi-jurisdictional Local Hazard Mitigation Plan (LHMP) through a fund match by the City not to exceed $7,500; and 2. Authorize City Manager to execute documents necessary to appropriate the grant funds upon notification that the grant has been awarded. PUBLIC HEARING ITEMS AND BUSINESS ITEMS 11. 2016 TRAFFIC SAFETY REPORT Transportation Manager Hudson and Transportation Engineer Crisp provided an in-depth staff report and responded to Council questions. Public Comments: Jeff Brubaker ---End of Public Comment--- ACTION: MOTION BY COUNCIL MEMBER RIVOIRE, SECOND BY COUNCIL MEMBER PEASE, CARRIED 4-0-1 to: Receive the 2016 Traffic Safety Report and approve the recommended traffic safety measures. 12. PUBLIC HEARING - BROAD STREET BICYCLE BOULEVARD (ANHOLM BIKEWAY) PLAN Transportation Manager Jake Hudson and Transportation Engineer Luke Schwartz provided Packet Pg 104 6 San Luis Obispo City Council Minutes of February 6, 2017 Page 7 an in-depth staff report and responded to Council questions. Public Comments: Wesley Bisheff Payton Shoresman Milo Skapinsky Donette Dunaway David Hofemeister Michael Borger Tim Wilkinson Jeff Brubaker Jesse Englert Chris Murphy Laura Slaughter Corliss Campbell Steven Ford Kate Murray Jan Smith Joe Thompson Michael Velasquez Shannon Klisch Crissa Hewitt Tom Disanto Arielle Ellis RECESS Council recessed at 8:14 p.m. and reconvened at 8:27 p.m., with all Council Members present. Dave Romero Richard Schmidt Anne Hodges Bob Shambron Paul Allen Dana Justesen Trexler Myron Amerine Lea Brooks John Ashbaugh David Glidden Kathy Borland Cheryl McLean Mila Vujovich LaBarre Gina Hafemeister Allan Cooper Mike Bennett Keith Gurney Jeffery Speck Niels Grether Packet Pg 105 6 San Luis Obispo City Council Minutes of February 6, 2017 Page 8 Kim Bisheff Jonathan Roberts John Valpey John Clements James Lopes Chenin Otto Garrett Otto Chuck Slem Barry Rands Derek Sen ---End of Public Comment--- ACTION: MOTION BY COUNCIL MEMBER PEASE, SECOND BY COUNCIL MEMBER RIVOIRE, CARRIED 4-0-1 to conceptually adopt a modified Anholm Bike Way plan and proceed with Phase 1 as presented, phase 2 with traffic calming, signage and crosswalks along Broad and Chorro, in lieu of a cycle track and parking removal as shown in the hybrid example presented at the meeting, and phase 3 with reconsideration of protected lanes, traditional bike boulevard on Broad Street, and other traffic calming measures at that time. Also, direct staff to initiate the process for establishing a parking district, if desired by the neighborhood. COUNCIL COMMUNICATIONS AND LIAISON REPORTS Council Member Pease reported on attending Channel Counties League of California Cities quarterly dinner in Thousand Oaks. Mayor Harmon, noted attending a SCLC, and APCD meetings, Top 20 UNDER 40, Diablo Canyon tour, ASI at Cal Poly, and spoke at Chinese New Year and AACP meetings. ADJOURNMENT The meeting was adjourned at 11:03 p.m. The next Regular City Council Meeting is scheduled for Tuesday, February 20, 2018 at 3:30 p.m., 4:00 p.m., and 6:00 p.m., in the Council Hearing Room and Council Chamber, 990 Palm Street, San Luis Obispo, California. __________________________ Teresa Purrington Acting City Clerk APPROVED BY COUNCIL: XX/XX/2018 Packet Pg 106 6 Meeting Date: 2/20/2018 FROM: Deanna Cantrell, Police Chief Prepared By: Melissa Ellsworth, Senior Administrative Analyst SUBJECT: FY 2019 GRANT APPLICATION FOR OFFICE OF TRAFFIC SAFETY GRANT PROGRAM RECOMMENDATION 1. Authorize the Police Department to submit a grant application to the Office of Traffic Safety for a FY 2019 Selective Traffic Enforcement Program (STEP) not to exceed $100,000. 2. If the grant is awarded, authorize the Chief of Police to execute all grant related documents and authorize the Finance Director to make the necessary budget adjustments upon the award of the grant. DISCUSSION The California Office of Traffic Safety (OTS) provides grant funding to agencies annually. Programs are aimed at preventing deaths and injuries on our roadways through special enforcement and public awareness efforts. Grant funding will help the City’s ongoing effort to improve traffic safety and quality of life. The department has been awarded funding from the Office of Traffic Safety for well over 17 years. Grant funding has enabled the Department to conduct numerous operations specifically focused on alcohol or drug impaired drivers. Funding is essential to continue this type of enforcement on an annual basis. The OTS grant allows the Department the opportunity to utilize officers on the streets to address the enforcement of traffic laws that contribute to injury and non-injury collisions. This grant will allow the San Luis Obispo Police department to be more visible on the streets thereby enforcing more violations and in turn reducing the number of injury traffic collisions in our city. The grant application was due on January 30, 2018. Due to staff and grant timing, the application has already been submitted online. If Council denies this request, the application can be withdrawn. The department will be requesting funding for the following: overtime to fund department participation in DUI checkpoints, saturation patrols, traffic safety presentations, motorcycle safety enforcement, pedestrian and bicycle enforcement, and distracted driving enforcement operations. CONCURRENCES The City’s Finance Director concurs with this request. ENVIRONMENTAL REVIEW No environmental review necessary for this request. Packet Pg 107 7 FISCAL IMPACT City matching funds are not required by the grant. Although grant funding is already secured for FY 2017-18; funding in subsequent years is requested through the grant application process on an annual basis. ALTERNATIVE Council may direct staff to withdraw the application. Staff does not recommend this alternative as funding will aid in the City’s ongoing effort to improve traffic safety and quality of life. The grant objectives are aimed at preventing deaths and injuries on our roadways through special enforcement and public awareness efforts. Packet Pg 108 7 Meeting Date: 2/20/2018 FROM: Xenia Bradford, Finance Director Prepared By: Kristin Eriksson, Purchasing Analyst SUBJECT: ADOPTION OF AN ORDINANCE PROHIBITING THE USE OF CITY FUNDS FOR PURCHASE OF SPECIFIED SINGLE-USE PLASTIC BOTTLES AND SINGLE-USE PLASTIC BEVERAGE CONTAINERS RECOMMENDATION Adopt Ordinance 1644 (2018 Series) (Attachment A) adding Section 3.24.075(F) to the San Luis Obispo Municipal Code to prohibit the use of City funds to purchase single-use plastic beverage bottles less than 21 ounces in size or single-use plastic beverage containers. DISCUSSION On February 6, 2018 the City Council voted 4:0 to introduce Ordinance 1644 to prohibit the use of City funds to purchase single-use plastic beverage bottles, less than 21 ounces in size, or single-use plastic beverage containers. The ordinance was introduced in compliance with previously adopted Ordinance 1641 (Attachment B), which mandated that the City’s purchasing policies be modified in this manner. Ordinance 1644 is now ready for adoption (See Attachment A). ALTERNATIVES 1. Continue the proposed ordinance. The City Council may continue action, if more information is needed. This is not recommended as the provisions of Ordinance 1641 become effective on March 1, 2018 and require that the City’s purchasing policy be changed in conformity with those provisions. Direction should be given to staff regarding additional information needed to make a decision. 2. Not adopt the proposed ordinance. The City Council may not adopt the proposed ordinance although adopted Ordinance 1641 requires that the City’s purchasing policy be changed in conformity with its provisions. Attachments: a - Draft Ordinance 1644_2nd Hearing b - Ordinance No. 1641 - signed Packet Pg 109 8 O 1644 ORDINANCE NO. 1644 (2018 SERIES) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, ADDING SECTION 3.24.075(F) TO THE MUNICIPAL CODE IN COMPLIANCE WITH RECENTLY ADOPTED CHAPTER 8.07 REGULATING SINGLE-USE PLASTIC BEVERAGE BOTTLES AND SINGLE-USE PLASTIC BEVERAGE CONTAINERS WHEREAS, the City of San Luis Obispo (“City”) has the police power to protect the health, safety and welfare of the community, including the ability to protect and enhance the natural environment; and WHEREAS, regulating the use of plastic beverage bottles will help to minimize waste associated with plastic bottle usage and help to maximize the operating life of landfills; and WHEREAS, the City Council of the City of San Luis Obispo conducted a study session in the Council Chamber of City Hall, 990 Palm Street, San Luis Obispo, California, on January 3, 2017, and directed staff to develop regulations to restrict the sale/distribution of plastic beverage bottles on City property and increase the availability of water bottle filling stations in the City; and WHEREAS, on November 7, 2017, the City Council of the City of San Luis Obispo adopted Ordinance Number 1641 (2017 Series) to add Chapter 8.07 of the Municipal Code, establishing, in part, regulations to restrict the sale/distribution of plastic beverage bottles on City property; and WHEREAS, Ordinance Number 1641 (2017 Series) mandates the City to amend its purchasing policies to be consistent with the City’s regulations on single use plastic bottles. NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. Recitals. The above recitals are true and correct and incorporated herein by this reference as the findings of the City Council. SECTION 2. Action. Section 3.24.075 of the San Luis Obispo Municipal Code is hereby amended to read as follows: 3.24.75 Environmentally Preferred Purchases. A. It is the intent of the city Council that the City of San Luis Obispo take a leadership role not only in recycling its waste products but also in the purchase of recycled products for use in the delivery of city services. It is the purpose of this section to provide direction to the city administrative officer in the procurement and use of recycled products. For the purpose of this section, recycled materials are defined as any materials (e.g., glass, paper, plastic, etc.) that are separated by type, reprocessed by industrial methods, and used as raw materials for the manufacture of new products. Packet Pg 110 8 Ordinance No. 1644 (2018 Series) Page 2 O 1644 B. It is the policy of the City of San Luis Obispo to purchase and use recycled products whenever possible to the extent that such use does not negatively impact health, safety, or operational efficiency. C. It is the policy of the City of San Luis Obispo to encourage the purchase of products which can be recycled or reused. D. The City will purchase and use recycled paper for masthead stationery, envelopes and printing purposes. In addition, recycled paper shall be purchased and used in all copy machines which will accept it. City staff will encourage the copier industry to develop high- speed copiers which will accept recycled paper. E. City departments shall examine their purchasing specifications and, where feasible, purchase equipment, supplies, and services that result in less harm to the natural environment. This involves the purchase of equipment, supplies, and services in a manner that uses less harmful materials, employs recycled or recovered materials (where appropriate and available), and utilizes techniques intended to result in less impact on the environment than other available methods. F. It is the policy of the City of San Luis Obispo that City funds shall not be used to purchase single-use plastic bottled beverages of less than 21 ounces or single-use plastic drink containers or single-use plastic beverage containers, as provided in Chapter 8.07 of this Code. FG A ten percent preference, not to exceed one thousand dollars per contract, may be given to recycled products. The fitness and quality of the recycled product must be at least equal to unrecycled products as determined by the city. The preference percentage shall be based on the lowest bid or price quoted by the supplier or suppliers offering nonrecycled products. GH Price preferences may be offered in excess of the ten percent ceiling established in this section, if it can be shown that purchase of a recycled product or material will result in greater long-term savings to the city. Award of a bid in excess of the ceiling, however, requires the approval of the city administrative officer or city Council as established in the city’s purchasing manual. SECTION 3. A summary of this ordinance, together with the names of Council members voting for and against, shall be published at least five (5) days prior to its final passage, in The Tribune, a newspaper published and circulated in this City. This ordinance shall go into effect at the expiration of thirty (30) days after its final passage. A copy of the full text of this Ordinance shall be on file in the Office of the City Clerk on and after the date following introduction and passage to print and shall be available to any member of the public. Packet Pg 111 8 Ordinance No. 1644 (2018 Series) Page 3 O 1644 INTRODUCED on the 2nd day of February, 2018, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the 20th day of February, 2018, on the following vote: AYES: NOES: ABSENT: ____________________________________ Mayor Heidi Harmon ATTEST: ____________________________________ Carrie Gallagher City Clerk APPROVED AS TO FORM: _____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ______________________________ Carrie Gallagher City Clerk Packet Pg 112 8 Packet Pg 113 8 Packet Pg 114 8 Packet Pg 115 8 Packet Pg 116 8 Packet Pg 117 8 Packet Pg 118 8 Meeting Date: 2/20/2018 FROM: Carrie Mattingly, Director of Utilities Prepared By: David Hix, Deputy Director Utilities – Wastewater SUBJECT: WATER RESOURCE RECOVERY FACILITY PROJECT UPDATE AND PROGRAM MANAGEMENT SERVICES CONTRACT AMENDMENT RECOMMENDATIONS 1. Approve a contract amendment with Water Systems Consulting, Inc. for $1,124,453 for completion of Phase 3 Program Management Services for the Water Resource Recovery Facility Project, Spec. No. 91219; and 2. Approve transfer of $1,124,453 from the Sewer Fund working capital for the WRRF project to the project account. DISCUSSION WRRF Project Update The WRRF project is in the final design phase with the recent completion of sixty percent project design as a major project milestone. Completion of construction documents and bidding is scheduled for September 2018 with construction beginning the end of the calendar year. The WRRF project will deliver the key project drivers of regulatory compliance, replacing aging infrastructure, providing needed capacity for the future, maximizing recycled water production, and community resource center. The WRRF project changed considerably in early 2017 after comprehensive analysis determined that Membrane Bioreactor (MBR) technology offered considerable benefits from the conventional denitrification technology originally envisioned for the WRRF. MBR technology will produce a higher water quality, maximize recycled water production, and position the City for potable reuse. This major change and other conditions described later in this report have added additional time and cost to the project scope and schedule. Contract Amendment While best aligning with the City’s long-range goals related to water resiliency, recycled water, and environmental stewardship, the change to the MBR process have resulted in schedule Packet Pg 119 9 impacts. In addition, a variety of conditions were identified that required additional studies to provide more information to progress with design. These studies revealed important issues that required further analysis and changes to the Program Manager’s existing scope of work to keep the project moving forward. The necessary changes listed below have resulted in significant cost and schedule impacts: • MBR procurement to ensure the most efficient MBR system with the best warranty for the City. • Additional value engineering that has resulted in the reduction of the size of some processes, and efficiencies and optimization in others. • Flood studies that have provided enhanced analysis to inform the protection of the WRRF, the City’s Corporation Yard, and future and existing infrastructure in the Prado Road area. • Additional inflow and infiltration studies to ultimately reduce process replacement. • Additional analysis of cooling wetlands process. This study determined that regulatory constraints make this alternative infeasible. The extended schedule will require additional funding for the WRRF project program to complete the final design phase. These costs include ongoing program management, engineering support, permitting, funding support, and public and stakeholder engagement. This request is for the out-of-scope items and to complete program management for the final design which is critical to keeping the design phase on schedule. Staff has thoroughly reviewed the contract amendment (Attachment A) and believes the request to be accurate, appropriate, and fair. Program management services have been essential to the success of this highly complicated project. Water Systems Consulting Inc. (WSC) has been a valued partner in this project. Design services for the project have also been impacted by the schedule and out-of-scope items outlined above. The City is anticipating a contract amendment request to be submitted by the project designer CH2M. Staff will again thoroughly review the request and discuss and negotiate with the designer before seeking Council consideration. Project Costs and Funding On January 26, 2018, the City received written assurance that it will receive a low interest loan for up to $140 million in project costs from the State Revolving Fund (SRF) (Attachment B). This low interest loan will allow the City to save millions of dollars in interest. An SRF loan is based on the State’s General Obligation Bond and charged at 50% of the current rate. Based on the written confirmation, City and State legal staff will soon begin consultation on the draft agreements. Final loan documents will be presented later this year for Council consideration. The current bidding and building climate in California has seen a rapid escalation of construction Packet Pg 120 9 WRRF Project Phases Phase Schedule Status Phase 1 - Project Planning January 2014 – June 2015 Complete Phase 2 - Preliminary Design July 2015 – August 2016 Complete Phase 3 - Final Design October 2017 – December 2018 Ongoing Phase 4 – Construction December 2018 – January 2022 Phase 5 - Close Out November 2021 – February 2022 costs statewide. The most recent cost document presented a low-medium-high range of estimated project construction costs with the high range exceeding the sewer fund’s financial capacity. The WRRF Project team continues to analyze the project and will modify the bidding documents to offer flexibility at the time of award to stay within budget. This will include a separate bid item for the Water Resource Center (WRC) to allow the required improvements to move forward and the City to determine if project funding can support the building. This approach allows competitive bidding for two distinctly different projects and may offer savings. If the WRC cannot be a part of the project, the building will be placed in the Capital Improvement Plan (CIP) for construction at a later date. Grants, partnerships and other funding mechanisms are being actively pursued for a variety of processes and improvements at the WRRF and the surrounding area. These include flooding, recycled water, energy, inflow and infiltration reduction, and transportation. Staff has identified a goal of fifteen million dollars in grants, loan forgiveness, and partnerships to help offset the cost of the project. Project Phases, Schedule, and Next Steps This calendar year will see the completion of project final design phase and the beginning of the construction phase for the project. Several key project objectives are on-track for this year and are summarized on the project milestone schedule below. Several key items that will be coming to Council for funding consideration include program management for phase 4 and 5 and engineering support for the project. Other activities for 2018 and 2019 include the revision and negotiation of the WRRF’s National Pollutant Discharge Elimination System permit (NPDES) permit and Time Schedule Order (TSO). Packet Pg 121 9 Packet Pg 122 9 FISCAL IMPACT This amendment to WSC’s phase 2 and 3 program management contract will cost $1,124,453. The Sewer Fund has sufficient unreserved working capital for this expenditure. On June 30, 2017, the City’s comprehensive annual financial report showed an unreserved working capital of $27,656,818. Original WSC Contract for Phase 2 and 3 $2,311,000 Amendment for Phase 3 $1,124,453 Total WSC Contract for Phase 2 and 3 $3,435,453 Industry average for total program related services for a project such as the WRRF are 6% of the entire project cost. Total project costs for the WRRF are estimated to be $120-$140 million, which places WSC’s anticipated total program management contract for Phases 1 through 5 within an acceptable range. Total costs for the project will continue to be refined as the design nears completion. ALTERNATIVE Elect not to approve the contract amendment. The City Council may elect not to approve the contract amendment at this time. Council may select this alternative if it believes that program management may be accomplished in a different manner. Staff does not recommend this alternative due to complicated nature of the project, the expense of bringing on a different program manager mid-project, and the lack of in-house expertise and resources. Attachments: a - WSC Contract Amendment b - Funding Letter from State Water Resources Control Board Packet Pg 123 9 AMENDMENT TO AGREEMENT NO. 2 THIS AMENDMENT TO AGREEMENT is made and entered in the City of San Luis Obispo on ______________________, by and between the CITY OF SAN LUIS OBISPO, a municipal corporation, herein after referred to as City, and Water Systems Consulting Inc, hereinafter referred to as Contractor. WITNESSETH: WHEREAS, on November January 29, 2014 the City entered into an Agreement with Program Manager Services for the Water Resources Recovery Facility per Specification No. 91 219; and WHEREAS, the City desires to amend the scope of services to extend Program Management Services for Phase 3 of the Water Resources Recovery Facility Project and the Contractor has submitted a proposal for this purpose that is acceptable to the City. NOW THEREFORE, in consideration of their mutual promises, obligations and covenants hereinafter contained, the parties hereto agree as follows: 1. The scope of services and related compensation is hereby amended as set forth in Exhibit A attached hereto. a. Program Management Services per proposal dated December 26, 2017, at a cost not to exceed $1,124,453.00 2. All other terms and conditions of the Agreement remain in full force and effect. IN WITNESS WHEREOF, the parties hereto have caused this instrument to be executed the day and year first written above. ATTEST: CITY OF SAN LUIS OBISPO ____________________________________ By: ____________________________________ City Clerk Mayor Heidi Harmon APPROVED AS TO FORM: CONTRACTOR _____________________________________ By: ____________________________________ City Attorney Packet Pg 124 9 Packet Pg 125 9 Packet Pg 126 9 Meeting Date: 2/20/2018 FROM: Xenia Bradford, Finance Director SUBJECT: ANNUAL REVIEW OF INVESTMENT POLICIES AND RECOMMENDATIONS AND AMENDMENT TO INVESTMENT OVERSIGHT COMMITTEE MEMBERSHIP RECOMMENDATION 1. Approve changes to the investment manual in accordance with the annual Investment Oversight Committee recommendations; and 2. Approve amendment to the Investment Oversight Committee membership. DISCUSSION The City Council delegated the power to manage the City’s investment portfolio to the City Treasurer. City Council also approves the Investment Management Plan that guides the City Treasurer through policies in administering investments. An Investment Oversight Committee meets quarterly and advises the City Treasurer on compliance with investment policies. The Investment Oversight Committee is also delegated responsibility to annually review investment policies and make recommendations. Proposed changes to investment policies. The City contracts with Public Financial Management, Inc. (PFM) to manage the City’s investment portfolio. PFM presents quarterly investment results for the Investment Oversight Committee approval that the investment activities are in compliance with the City’s policy requirements. In accordance with the City’s investment policy, the Investment Oversight Committee met on November 6, 2017 and reviewed the investment policies. Three changes were proposed to increase flexibility of investment mechanisms. The proposed changes meet all government code requirements outlined in the City’s Investment Management Manual. The Investment Oversight Committee recommends three changes to the City’s investment policies, as follows: 1. Medium Term Notes: Change this requirement such that all medium-term notes are rated in a rating category of “A” or its equivalent or better by one or more Nationally Recognized Statistical Rating Organizations (NRSRO). Currently the City policy requires rating by two NRSROs. The Investment Oversight Committee reviewed the risk factors versus estimated increase in earnings and voted unanimously to recommend this change. 2. Negotiable Certificates of Deposit: Change this credit rating requirement from “AA” to “A” or “A-1” or its equivalent or better by one or more NRSROs. The Policy currently requires negotiable CDs to be rated in a rating category of “AA” or its equivalent or better by one or more NRSROs. The Investment Oversight Committee reviewed the risk Packet Pg 127 10 factors versus estimated increase in earnings and voted unanimously to recommend this change. 3. Asset Backed Securities: Recommend that the City consider authorizing a 15% allocation to ABS. Currently the City’s policy does not allow investments in asset backed securities. The Investment Oversight Committee reviewed the risk factors versus estimated increases in earnings and voted unanimously to recommend this change. Even though the precise impact to investment income is unknown, the recommended policy changes will allow the portfolio manager to access a larger opportunity set of investments, which is expected to positively impact the rate of return as described in Attachment-A. Investment Oversight Committee Membership. The Investment Oversight Committee is an oversight committee formed by Council that holds public meetings quarterly and advises the City Treasurer. The purpose of the Inves tment Oversight Committee is to review investment policies and practices, as well as portfolio performance. Currently the Investment Oversight Committee voting members consist of one Council member, City Manager, Assistant City Manager, Finance Director, Accounting Manager/Controller and one appointed member of the public. Due to re-organization of the Finance Department, the recommendation is to replace the Assistant City Manager member of the committee with the Budget Manager. The Accounting Manager/Controller and the Budget Manager assist the Finance Director in Treasury Management and provide cash analysis and quarterly earnings reports analysis. The proposed change in membership increases finance oversight of the investments, while maintaining diversity of oversight from Council, City Administration and the public. CONCURRENCES The Investment Oversight Committee concurs with the proposed changes to the City’s investment policies. City Administration concurs with proposed recommendation to amend the Investment Oversight Committee membership. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA Guidelines Sec. 15278. FISCAL IMPACT There are no budgetary impacts with the proposed changes. However, the proposed changes to the City’s investment policies is expected to yield increases in investment income by providing Packet Pg 128 10 the investments manager with more flexibility and variety of investment instruments ALTERNATIVES 1. Council can elect not to approve the proposed changes the City’s investment policies or approve any of the proposed three recommendations to investment policies independent of each other. This is not recommended based on the consultant’s analysis of the City’s investment policies and Investment Oversight Committee concurrence. 2. Council may also elect not to approve the change to Investment Oversight Committee membership, in which case Interim Deputy City Manager will fill the Assistant City Manager Position voting member seat on the committee at this time. Attachments: a - PFM Recommendations Memorandum b - IOC DRAFT Meeting Minutes (11.06.17) c- Investment Managment Plan Packet Pg 129 10 December 19, 2017 Memorandum To: Xenia Bradford, Director/Treasurer Rico Pardo, Controller City of San Luis Obispo From: Monique Spyke, Managing Director Izac Chyou, Senior Managing Consultant Brandon Rake, Analyst PFM Asset Management LLC Re: Investment Management Plan and Investment Policy Review We have completed our annual review of the City’s Investment Policy (the Policy). The Policy is in compliance with all applicable California Government Code (“Code”) statutes regulating the investment of public funds. We are recommending the following changes to the Policy: allow purchases of all corporate notes rated “A” or better by one or more national recognized rating agency (NRSRO), loosen the credit quality requirement of negotiable certificates of deposit (“negotiable CDs”), and add asset-backed securities to the City’s list of Authorized Investments. This memorandum explains our recommended revisions to the Policy. We have also attached a marked-up version of the Policy illustrating these recommendations. Recommendations V. Investment Vehicles. (9) Medium Term Notes The Policy currently requires medium term notes to be rated in a rating category of “A” or its equivalent or better by two or more NRSROs and “AA” for financial issuers. We recommend the City change this requirement such that all medium term notes are rated in a rating category of “A” or its equivalent or better by one or more NRSROs. In doing so, we will increase the investable opportunity set to allow for investments in split-rated issues from corporations such as Bank of America, Citi Group, Goldman Sachs, Morgan Stanley, Coca-Cola, and AT&T which are rated in a rating category of “A” or its equivalent or better by one NRSRO while another NRSRO rates the issues in the “BBB” category or is not rated (see Exhibit A). As of December 31, 2016, four of the top five most prolific issuers of debt in the 1-5 U.S. Corporate Index were split rated issuers rated “A” or better by only one NRSRO. “A” rated financial issuers make up 23% of the index, while only less than 10% are “AA” rated. In aggregate, “A” rated issuers Packet Pg 130 10 make up ~44% of the entire universe. Accessing this market gives the portfolio manager access to a market of more liquid issuers. Furthermore, from 1970-2015, on average, 86.6% of “A” rated corporate issuers remained “A” rated, 2.6% were upgraded to “Aa”, 5.4% were downgraded to “Baa”, and 0.1% defaulted within a year (see Exhibit B). PFM looks to invest in those split rated issuers who currently have strong or improving credit fundamentals and a positive macroeconomic backdrop. Exhibit A A-Rated Representative Issuer List Source: BofA Merrill Lynch 1-5 Year U.S. Corporate Index, as of 12/31/2016. Exhibit B Average One-Year Letter Rating Migration Rates, 1970-2015 Source: Moody’s Annual Default Study: Corporate Default and Recovery Rates, 1970-2015. 2 Packet Pg 131 10 (14) Negotiable Certificates of Deposit The Policy currently requires negotiable CDs to be rated in a rating category of “AA” or its equivalent or better by one or more NRSROs. We recommend the City change this credit rating requirement from “AA” to “A” or “A-1” or its equivalent or better by one or more NRSROs. Major rating agencies have reduced the credit ratings of major financial institutions (see exhibit A), which are the primary issuers of negotiable CDs. This change was due to modifications in the ratings criteria used by rating agencies rather than the financial health of negotiable CD issuers, which has actually improved over the past few years. Therefore, there are almost no AAA-rated corporate issuers remaining and there are very few AA-rated issuers. A-rated issuers make up around 44% of the 1-5 year Corporate Index (see exhibit C). This rating requirement change in the Policy would allow the portfolio manager to access a larger opportunity set, further diversify the City’s portfolio, add incremental yield (40-50 basis points over 2-year U.S. Treasuries), and potentially increase risk adjusted returns. Furthermore, “A” rated negotiable CDs are considered safer than “A” rated corporate notes since negotiable CDs are higher on the capital spectrum. We believe that PFM’s credit process allows the City to safely utilize “A” rated negotiable CDs. Exhibit C Source: BofA Merrill Lynch 1-5 Year U.S. Corporate Index by face value, as of 12/31/2016. 3 Packet Pg 132 10 It is important to note that our ratings criteria recommendation does not represent a change in our stringent credit quality philosophy, rather it is a recognition of the realities of the marketplace and will provide enhanced flexibility for the City, allowing the portfolio to be optimally diversified and to capitalize on market opportunities without adding undue risk. Additionally, the issuer limits of 5% help mitigate credit risk even further. PFM’s credit process ensures that all issuers are thoroughly reviewed and evaluated before purchase. Portfolio managers and traders are only permitted to purchase securities from companies where PFM has exercised its due diligence and analysis. For a company to be added to a portfolio, the company must be reviewed and vetted by PFM’s internal Credit Committee. PFM’s Credit Committee is made up of our Chief Credit Officer, Chief Investment Officer, and senior portfolio managers and traders. All corporate research is completed by investment personnel with direct involvement in PFM’s investment process. Furthermore, since business and economic conditions can change dramatically, corporate exposure must be constantly monitored. An active approach to investing in corporate securities and negotiable CDs is essential. PFM performs regular reviews to ensure each issuer continues to meet our credit standards. In addition, we follow news about economic, industry and issuer conditions. PFM has developed a process to detect changes in the financial condition or business outlook of a company. PFM monitors the trading of securities related to a company, including stock prices, credit spreads, and credit default swap levels. We have also developed the means to monitor any changes in the credit rating of an issuer as they are announced. Company quarterly and annual reports are reviewed and analyzed, as are industry trends. In addition, PFM uses its own proprietary research, coupled with credit agency reports and research reports from major Wall Street firms to gain other perspectives. If the outlook for a company deteriorates, PFM may remove that issuer from investment. If the deterioration is significant enough, PFM may recommend that the holdings of the company are sold. V. Investment Vehicles. (12) Asset-Backed Securities An asset-backed security (ABS) is a security in which its income payments and value is derived from and collateralized or “backed” by a specified pool of underlying assets such as receivables. Investors of these securities receive the principal and interest payments of the underlying loans allowing diversification of their portfolios away from traditional government and corporate debt. PFM currently finds value in AAA-rated ABS backed by high-quality auto loans, industrial recievables and credit card receivables. These ABS maintain credit ratings that are higher than those of bonds issued by the U.S. Treasury and federal agencies while providing higher yields. 4 Packet Pg 133 10 Utilizing high-quality asset-backed securities in a fixed-income portfolio can improve diversification and offer potential return enhancement. Asset backed securities are a good diversifier to corporate exposure. Accordingly, we recommend that the City consider authorizing a 15% allocation to ABS. This allocation to ABS is more conservative than the Code’s maximum allocation limit of 20%. Furthermore, we recommend a maximum allocation per issuer of 2.5% as an additional required level of diversification. The minimum credit requirements and maturity limit will be consistent with Code. At the time of purchase, asset-backed securities must be issued by an issuer rated in a rating category of “A” or its equivalent or better for the issuer’s debt as provided by an NRSRO and rated in a rating category of “AAA” or its equivalent or better by an NRSRO. As you can see from the table below, ABS have a lower effective duration than not only corporates, but also treasuries and agencies of similar maturities. A lower duration means it has a lower sensitivity to changes in interest rates. Lastly, the yield and total return for ABS have been favorable. 1-5 Year Index Returns Source: BofA Merrill Lynch 1-5 Year Indices. Returns greater than a year are annualized. We also want to make the City aware of a statewide and national change impacting the investment of public funds announced over the last 12 months; this is outlined below: •SB 974, which took effect on January 1, 2017, modifies Code Sections 53601 et seq., to clarify that the Code’s rating requirements specify the minimum credit rating category required at purchase, without regard to +, - or 1,2,3 modifiers. This revision does not change 5 Packet Pg 134 10 the minimum rating allowed by Code, but simply makes explicit the common interpretation of the Code’s rating requirements. We would be happy to discuss any questions regarding our recommended changes to the Policy. 6 Packet Pg 135 10 Minutes Investment Oversight Committee Monday, November 6, 2017 Regular Meeting of the Investment Oversight Committee CALL TO ORDER A Regular meeting of the Investment Oversight Committee was called to order on Monday, November 6, 2017, at 1:30 p.m. in the Council Hearing Room at 990 Palm Street, San Luis Obispo, California, by Chair Johnson. ROLL CALL Present: Committee Members Steve Barasch, Derek Johnson, Rico Pardo, Chair Xenia Bradford, and Greg Hermann Absent: Committee Member Heidi Harmon Others Present: Al Eschenbach, Independent Auditor and ex-officio member, Izac Chyou, PFM Asset Management LLC (City’s Investment Advisor); Brandon Rake, Analyst for PFM Asset Management LLC; Kelly Medina, Finance Administrative Assistant & Recording Secretary PUBLIC COMMENT ON ITEMS NOT ON THE AGENDA Leslie Halls ---End of Public Comment--- 1. OATH OF OFFICE OF NEW COMMITTEE MEMBER (HERMANN) City Clerk Gallagher administered the Oath of Office to Committee member Hermann prior to the Investment Oversight Committee meeting. 2. REVIEW OF INVESTMENT OVERSIGHT COMMITTEE MEETING MINUTES OF AUGUST 17, 2017 ACTION: MOTION BY COMMITTEE MEMBER JOHNSON, SECOND BY COMMITTEE MEMBER PARDO, CARRIED 5-0 (COMMITTEE MEMBER HARMON ABSENT, COMMITTEE MEMBERS BARASCH & HERMANN ABSTAINED) to approve the Investment Oversight Committee Meeting minutes of August 17, 2017. Per the record, Committee Member Barasch requests Mayor Harmon be up to date on review of meeting minutes from which she was absent. Packet Pg 136 10 City of San Luis Obispo, Title, Subtitle Minutes - Investment Oversight Committee Minutes of November 6, 2017 Page 2 Per City Charter: Section 505. Voting. The ayes and noes shall be taken upon the passage of all ordinances and resolutions and entered upon the journal of the proceedings of the Council. Upon the request of any member, the ayes and noes shall be taken and recorded on any vote. All members, when present, must vote, except in the case of a recusal due to a conflict of interest. Failure or refusal to vote shall be construed as an affirmative vote. Packet Pg 137 10 City of San Luis Obispo, Title, Subtitle Minutes - Investment Oversight Committee Minutes of November 6, 2017 Page 3 3. PRESENTATION OF THE QUARTERLY INVESTMENT REPORT ON PORTFOLIO PERFORMANCE City Investment Advisor Izac Chyou reviewed the contents of the report and summarized the portfolio’s performance. Public Comment: None. ---End of Public Comment--- ACTION: MOTION BY COMMITTEE MEMBER JOHNSON, SECOND BY COMMITTEE MEMBER BARASCH, CARRIED 5-0, (COMMITTEE MEMBER HARMON ABSENT) to accept the Quarterly Investment Report for the period ending September 30, 2017 is in compliance with the City’s Investment Policy. 4. REVIEW INVESTMENT POLICIES AND PRACTICES, FOLLOW-UP ITEM FROM AUGUST 17, 2017 City Investment Advisory Izac Chyou presented. Committee questions followed. Public Comment: None. ---End of Public Comment--- ACTION: MOTION BY COMMITTEE MEMBER JOHNSON, SECOND BY COMMITTEE MEMBER HERMANN, CARRIED 5-0, (COMMITTEE MEMBER HARMON ABSENT) to accept and present to the City Council the proposed investment policy recommendations and make changes to recommended policies as presented by PFM. 5. ANNUAL REVIEW OF THE ALLOCATION OF CASH PORTFOLIO City Investment Advisory Izac Chyou presented the Cash Flow Analysis. Committee questioned followed. Public Comment: Leslie Halls Packet Pg 138 10 City of San Luis Obispo, Title, Subtitle Minutes - Investment Oversight Committee Minutes of November 6, 2017 Page 4 ---End of Public Comment--- ACTION: MOTION BY CHAIR BRADFORD, SECOND BY COMMITTEE MEMBER JOHNSON, CARRIED 5-0 (COMMITTEE MEMBER HARMON ABSENT AND COMMITTEE MEMBER BARASCH ABSTAINED), to make a recommendation to increase the portfolio managed by PFM from current City managed portfolio of 31% to 25% of total. 6. ITEMS TO BE ADDRESSED AT A FUTURE MEETING Continue Cash Flow Analysis Discussion 7. DISCUSSION OF INVESTMENT OVERSIGHT COMMITTEE CALENDAR The next committee meeting is scheduled for February 15, 2018. ADJOURNMENT The meeting was adjourned at 2:36 pm. APPROVED BY INVESTMENT OVERSIGHT COMMITTEE: XX/XX/2017 Packet Pg 139 10 INVESTMENT MANAGEMENT PLAN June 2015 Packet Pg 140 10 INVESTMENT MANAGEMENT PLAN Katie Lichtig, City Manager Prepared by the Department of Finance & Information Technology Wayne Padilla, Finance Director/City Treasurer Packet Pg 141 10 INVESTMENT MANAGEMENT PLAN Table of Contents Introduction Purpose .................................................................................................................................................... 1 Primary Investment Objective ................................................................................................................ 1 Scope of Investment Management Plan ................................................................................................. 3 Use of State Guidelines .......................................................................................................................... 3 Preparation and Administration of the Plan ........................................................................................... 4 Investment Authority and Responsibilities Authorized Investment Officers ............................................................................................................. 5 Internal Controls ..................................................................................................................................... 5 Investment Management Resources ....................................................................................................... 5 Evaluation of Investment Officer Actions .............................................................................................. 6 Responsibilities of an Investment Advisor ............................................................................................. 7 Capital Preservation and Risk Overview ................................................................................................................................................. 9 Portfolio Diversification Practices .......................................................................................................... 9 Eligible Financial Institutions Portfolio Diversification and Credit-Worthiness Standards ................................................................. 10 Certification and Reporting Requirements ........................................................................................... 10 Individual Placement of Investments ................................................................................................... 10 Individual Placement of Deposits ......................................................................................................... 11 Investment Vehicles State of California Limitations ............................................................................................................. 12 Suitable and Authorized Investments………………………………………………………………12 City Policies .......................................................................................................................................... 15 Authorized Investment Summary ......................................................................................................... 16 Investment Maturity ........................................................................................................................................ 17 Socially Responsible Investing ........................................................................................................................ 18 Cash Management Practices ........................................................................................................................... 19 Evaluation of Investment Performance ......................................................................................................... 20 Investment Reporting ...................................................................................................................................... 21 Investment Management Plan Review ........................................................................................................... 23 Appendix Investment Policy ................................................................................................................................. 25 Glossary ................................................................................................................................................ 27 Resolution No. 8477 Appointing the Director of Finance as City Treasurer ........................................... Resolution No. 8523 Approving the Investment Management Plan ....................................................... Packet Pg 142 10 I. INTRODUCTION 1 PURPOSE The purpose of the investment management plan is to establish strategies, practices and procedures to be used in administering the City's portfolio in accordance with the City's Statement of Investment Policy. Included in the Appendix is a copy of the City's most recently adopted Investment Policy. PRIMARY INVESTMENT OBJECTIVE The City's primary investment objective is to achieve a reasonable rate of return on public funds while minimizing the potential for capital losses arising from market changes or issuer default. Although the generation of revenues through interest earnings on investments is an appropriate City goal, the primary consideration in the investment of City funds is capital preservation in the overall portfolio. As such, the City's yield objective is to achieve a reasonable rate of return on City investments rather than the maximum generation of income, which could expose the City to unacceptable levels of risk. In determining individual investment placements, the following factors shall be considered in priority order: 1. Safety 2. Liquidity 3. Yield. Safety. Safety of principal is the foremost objective of the investment program. Investments shall be undertaken in a manner that seeks to ensure the preservation of capital in the overall portfolio. To attain this objective, the City will diversify its investments so that the impact of potential losses from any one type of security or from any one individual issuer will be minimized. The objective is to mitigate credit risk and interest rate risk summarized as follows: Credit Risk. Credit risk is the risk that a security or a portfolio will lose some or all of its value due to a real or perceived change in the ability of the issuer to repay its debt. The City shall mitigate credit risk by adopting the following strategies: 1. Limiting investments to the safest types of securities. 2. Pre-qualifying the financial institutions, broker/dealers, intermediaries and advisors with which the City will do business. If the City has an investment advisor, the investment advisor may use its own list of authorized broker/dealers to conduct transactions on behalf of the City. 3. It is the intent of the City to diversify the investments within the portfolio to avoid incurring unreasonable risks inherent in over-investing in specific instruments, individual financial institutions or maturities. The asset allocation in the portfolio should, however, be flexible depending upon the outlook for the economy, the securities market, and the City’s anticipated cash flow needs. Packet Pg 143 10 I. INTRODUCTION 2 4. No more than 5% of the total portfolio may be invested in securities of any single issuer, other than the US Government, its agencies and instrumentalities approved local agency investment pools, LAIF, money market funds, and the City’s main financial institution. 5. The City may elect to sell a security prior to its maturity and record a capital gain or loss in order to improve the quality, liquidity or yield of the portfolio in response to market conditions or the City’s risk preferences. 6. If securities owned by the City are downgraded by either Moody’s or S&P to a level below the quality required by this Investment Management Plan, it shall be the City’s policy to review the credit situation and make a determination as to whether to sell or retain such securities in the portfolio. a. If a security is downgraded below the level required by this policy, the City Treasurer determine whether to sell or hold the security based on its current maturity, the economic outlook for the issuer, and other relevant factors. b. If a decision is made to retain a downgraded security in the portfolio, it will be monitored and reported monthly to the City Council. Interest Rate Risk. Interest rate risk is the risk that the portfolio will decline in value (or will not optimize its value) due to changes in the general level of interest rates. The City recognizes that, over time, longer-term portfolios achieve higher returns. On the other hand, longer-term portfolios have higher volatility of return. The City will mitigate interest rate risk by providing adequate liquidity for short-term cash needs, and by making some longer-term investments only with funds that are not needed for current cash flow purposes. The City further recognizes that certain types of securities, including variable rate securities, securities with principal pay downs prior to maturity, and securities with embedded options, will affect the market risk profile of the portfolio differently in different interest rate environments. The City, therefore, adopts the following strategies to control and mitigate its exposure to interest rate risk: 1. The maximum stated final maturity of individual securities in the portfolio shall be five years, except that up to 10% of the portfolio can be invested in Treasury and GSE securities maturing over 5 years. . 2. The City shall maintain a minimum of three months of budgeted operating expenditures in short term investments. The level of operating expenses shall be measured once per year and shall be based on the most recently adopted budget. 3. The duration of that part of the portfolio that is not needed for liquidity purposes shall typically be approximately equal to the duration of an index of US Treasury and Federal Agency Securities with maturities which meet the Authority’s needs for cash flow and level of risk tolerance (the Benchmark Index) plus or minus 10%. Packet Pg 144 10 I. INTRODUCTION 3 Liquidity. The investment portfolio shall remain sufficiently liquid to meet all operating requirements that may be reasonably anticipated. This is accomplished by structuring the portfolio so that securities mature concurrent with cash needs to meet anticipated demands (static liquidity). Alternatively, a portion of the portfolio may be placed in money market mutual funds or local government investment pools which offer same-day liquidity for short-term funds. Furthermore, since all possible cash demands cannot be anticipated, the portfolio should consist largely of securities with active secondary or resale markets (dynamic liquidity). Yield: Return on Investments. The City’s investment portfolio shall be designed with the objective of attaining a market benchmark rate of return throughout budgetary and economic cycles, commensurate with the City’s investment risk constraints and the cash flow characteristics of the portfolio. Return on investment is of least importance compared to the safety and liquidity objectives described above. The core of investments is limited to relatively low risk securities in anticipation of earning a reasonable return relative to the risk being assumed. SCOPE OF INVESTMENT MANAGEMENT PLAN Included in the scope of the City's investment management plan are the following major guidelines and practices to be used in achieving the City's primary investment objective: 1. Investment authority and responsibilities 2. Capital preservation and risk 3. Eligible financial institutions 4. Allowable investment vehicles 5. Investment maturity 6. Cash management 7. Evaluation of investment performance 8. Investment reporting 9. Investment management plan review 10. Socially responsible investment guidelines These guidelines apply to all cash-related assets included within the scope of the City's audited financial statements and held either directly by the City or held and invested by trustees or fiscal agents. The only exception is funds invested in the City's deferred compensation plan, which are controlled by federal law, specific provisions of the City's adopted plan and individual employee decisions. USE OF STATE GUIDELINES The California Government Code (including sections 16429.1, 16481.2, 53600-53609, 53630- 53634, 53635, 53635.2, 53635.3, 53635.8, 53637-53638 and 53684) regulates public agency investment and investment reporting practices. It is the policy of the City of San Luis Obispo to use the State's provisions for local government investments in developing and implementing the City's investment policies and practices. Packet Pg 145 10 I. INTRODUCTION 4 PREPARATION AND ADMINISTRATION OF THE PLAN As set forth in the Statement of Investment Policy, the City Treasurer is responsible for developing and monitoring the Investment Management Plan. As recommended by Government Code Section and 53646, the Council will review the Investment Policy annually. The Council will review the Investment Management Plan at a public meeting when changes in strategies, practices or procedures are proposed. In the interim, the City Treasurer is responsible for keeping the Investment Management Plan up-to-date to reflect changes in legislation, organizational structure, and other policies and administrative procedures approved by the Council. Packet Pg 146 10 II. INVESTMENT AUTHORITY AND RESPONSIBILITIES 5 AUTHORIZED INVESTMENT OFFICERS Authority to manage the investment portfolio is granted to the Director of Finance & Information Technology (Director/City Treasurer) pursuant to Resolution No. 8477. Responsibility for the day- to-day operation of the investment program may be delegated to the Finance Operations Manager, who is responsible for carrying-out established written procedures and internal controls for the operation of the investment program consistent with this plan. These procedures should include references to: safekeeping, delivery vs payment, investment accounting, repurchase agreements, wire transfer agreements, collateral/depository agreements and banking services contracts. Transactions Directed by City Staff. No person may engage in an investment transaction except as provided under the terms of this plan and the procedures established by the Director/City Treasurer. Although the Director/City Treasurer may delegate these duties to another official in the Department of Finance & Information Technology, every investment transaction must be reviewed and approved by the Director/City Treasurer. Additionally, the Director/City Treasurer shall be responsible for all transactions undertaken and shall establish a system of controls to regulate the activities of subordinate officials. Transaction Directed by an Investment Advisor. The City may engage the services of an external investment adviser to assist in the management of the City’s investment portfolio in a manner consistent with the City’s objectives. The external investment adviser may be granted discretion to purchase and sell investment securities in accordance with the City’s Investment Policy and this Investment Management Plan. The investment adviser must be registered under the Investment Advisers Act of 1940. (The investment advisor shall be required to provide a certification that it has read and understands the applicable sections of the California Government Code relating to municipal investments, this Investment Management Plan and the City’s Investment Policy). INTERNAL CONTROLS The Director/City Treasurer is responsible for ensuring compliance with the City's Investment Policy as well as for establishing systems of internal control designed to prevent losses due to fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by City officers and employees. Additionally, the Director/City Treasurer is responsible for the physical security of City investments and shall use custodial safekeeping for negotiable and bearer instruments whenever possible. INVESTMENT MANAGEMENT RESOURCES The concept of reasonable assurance recognizes that the: 1. Cost of a control procedure should not exceed the benefits likely to be derived. 2. Valuation of costs and benefits requires estimates and judgments by management. Accordingly, the Director/City Treasurer shall establish a process for annual independent review by an external auditor to assure compliance with policies and procedures. Packet Pg 147 10 II. INVESTMENT AUTHORITY AND RESPONSIBILITIES 6 Internal controls shall address the following points: 1. Separating transaction authority from accounting and record keeping. By separating the person who authorizes or performs the transaction from the people who record or otherwise account for the transaction, a separation of duties is achieved. 2. Custodial safekeeping. Securities purchased from any bank or dealer including appropriate collateral (as defined by State Law) shall be placed with an independent third party for custodial safekeeping as evidenced by safekeeping receipts in the City of San Luis Obispo’s name. 3. Avoiding physical delivery securities. Book entry securities are much easier to transfer and account for since actual delivery of a document never takes place. Delivered securities must be properly safeguarded against loss or destruction. The potential for fraud and loss increases with physically delivered securities. 4. Delivery versus payment. All trades where applicable will be executed by delivery vs payment (DVP). This ensures that securities are deposited in the eligible financial institution before the release of funds. Securities will be held by a third party custodian as evidenced by safekeeping receipts. 5. Clearly delegating authority to subordinate staff members. Subordinate staff members must have a clear understanding of their authority and responsibilities to avoid improper actions. Clear delegation of authority also preserves the internal control structure that is contingent on the various staff positions and their respective responsibilities. 6. Confirming telephone transactions for investments and wire transfers in writing. Due to the potential for error and improprieties arising from telephone transactions, all telephone transactions should be supported by written communications and approved by the appropriate person. Written communications may be via fax if on letterhead or e-mail and the safekeeping institution has a list of authorized signatures. 7. Developing wire transfer agreements with the lead bank or third party custodian. This agreement should outline the various controls, security provisions, and delineate responsibilities of each party making and receiving wire transfers. EVALUATION OF INVESTMENT OFFICER ACTIONS The standard of prudence to be applied by the Director of Finance/City Treasurer shall be the "prudent investor" standard, as defined under Government Code Section 53600.3 which states: When investing, reinvesting, purchasing, acquiring, exchanging, selling, or managing public funds, a trustee shall act with care, skill, prudence, and diligence under the circumstances then prevailing, including, but not limited to, the general economic conditions and the anticipated needs of the agency, that a prudent person acting in a like capacity and familiarity with those matters would use in the conduct of funds of a like character and with like aims, to safeguard the principal and maintain the liquidity needs of the Agency. Within the limitations of this section and considering individual investments as part of an overall strategy, investments may be acquired as authorized by law. Packet Pg 148 10 II. INVESTMENT AUTHORITY AND RESPONSIBILITIES 7 Investment officers acting in accordance with written procedures and this Investment Management Plan, and exercising due diligence shall be relieved of personal responsibility for an individual security's credit risk or market price changes, provided deviations from expectations are reported in a timely fashion and the liquidity and the sale of securities are carried out in accordance with the terms of this plan. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with the proper execution and management of the investment program, or that could impair their ability to make impartial decisions. Employees and investment officials shall disclose any material interests in financial institutions with which they conduct business. They shall further disclose any personal financial/investment positions that could be related to the performance of the investment portfolio. Employees and officers shall refrain from undertaking personal investment transactions with the same individual with whom business is conducted on behalf of the City. In accordance with Government Code Section 53607, the Treasurer shall prepare a report of monthly investment transactions for the City Council’s review. In addition, the City Council shall determine each year whether the delegation of investment authority to the Treasurer shall be renewed. RESPONSIBILITIES OF AN INVESTMENT ADVISOR When the services of an investment advisor are contracted for by the City, the responsibilities and obligations of the investment advisor shall be identified within the terms of the contract and shall, at a minimum, include the following: 1. Investment Advisor will provide investment research and supervision of the managed assets and conduct a continuous program of investment, evaluation and, when appropriate, sale and reinvestment of the managed assets. 2. Investment Advisor shall continuously monitor investment opportunities and evaluate investments of the managed assets. Investment Advisor shall furnish City with statistical information and reports with respect to investments of the managed assets. 3. Investment Advisor shall place all orders for the purchase, sale, or exchange of portfolio securities for City's account with brokers or dealers recommended by Investment Advisor and/or City, and to that end Investment Advisor is authorized as agent of City to give instructions to the custodian designated by City (the “Custodian’) as to deliveries of securities and payments of cash for the account of City. 4. In connection with the selection of such brokers and dealers and the placing of such orders, Investment Advisor is directed to seek for City the most favorable execution and price, the determination of which may take into account, subject to any applicable laws, rules and regulations, whether statistical, research and other information or services have been or will be furnished to Investment Advisor by such brokers and dealers. 5. Investment Advisor shall not take possession of or act as custodian for the cash, securities or other assets of City and shall have no responsibility in connection therewith. Packet Pg 149 10 II. INVESTMENT AUTHORITY AND RESPONSIBILITIES 8 6. Authorized investments shall include only those investments which are currently authorized by the state investment statutes, and City’s investment policy, and as supplemented by such other written instructions as may from time to time be provided by City to Investment Advisor. 7. Investment Advisor shall be entitled to rely upon City's written advice with respect to anticipated drawdowns of managed assets. 8. Investment Advisor will observe the instructions of City with respect to broker/dealers who are approved to execute transactions involving the managed assets and in the absence of such instructions will engage broker/dealers who Investment Advisor reasonably believes to be reputable, qualified and financially sound. Packet Pg 150 10 III. CAPITAL PRESERVATION AND RISK 9 OVERVIEW Some level of risk is inherent in any investment transaction. Losses may be incurred due to issuer default, market price changes or technical cash flow complications such as investments in non- marketable certificates of deposit. Diversification of the City's portfolio by institution, investment vehicle and maturity term is the primary tool available to the City in minimizing investment risk and capital losses by safeguarding the overall portfolio from any individual loss. PORTFOLIO DIVERSIFICATION PRACTICES The following sections summarize the City's major portfolio diversification practices and guidelines in determining: 1. Eligible financial institutions 2. Investment vehicles 3. Investment maturity Portfolio limitations included in these guidelines are to be based on the portfolio composition and Investment Management Plan policies in effect at the time of placement; the actual composition of the City's investments may vary over time from plan limitations due to overall portfolio changes from when the individual placement was made as well as changes in the City's Investment Management Plan. Credit criteria listed in these guidelines refer to the credit rating at the time the security is purchased. If an investment’s credit rating falls below the minimum rating required at the time of purchase, the Finance Director/City Treasurer will consult with the Investment Advisor and perform a timely review to decide whether to sell or hold the investment. Packet Pg 151 10 IV. ELIGIBLE FINANCIAL INSTITUTIONS 10 PORTFOLIO DIVERSIFICATION AND CREDIT-WORTHINESS STANDARDS The following general criteria relating to portfolio diversification and credit-worthiness will be used in selecting depositories and broker/dealers (financial institutions) in the placement of City investments: 1. The financial capacity and credit-worthiness of the financial institution shall be considered before the placement of City investments. 2. Current financial statements shall be maintained for each institution in which or through which cash is invested. 3. No more than 5% of the City's portfolio (exclusive of the US Government, its agencies and instrumentalities approved local agency investment pools and money market funds government agency issues, or LAIF and money market funds, and the City’s main financial institution) shall be placed with any financial institution. 4. No more than 25% of the City's portfolio shall be invested in collateralized certificates of deposit issued by savings and loan institutions. 5. Certificates of deposit placed by the City shall not constitute more than 15% of the total assets of the institution; and the institution must have total assets in excess of $200 million. CERTIFICATION AND REPORTING REQUIREMENTS Unless the City has engaged an investment advisor, the City shall establish a list of qualified securities dealers based on a certification submitted by all financial institutions with which the City has an investment relationship. The certification shall state that the institution has reviewed the City's Investment Management Plan and that it will: 1. Exercise due diligence in monitoring the activities of its officers and employees engaged in transactions with the City. 2. Ensure that all of its officers and employees offering investments to the City are trained in the precautions appropriate to public sector investments. 3. Submit audited financial statements prepared by an independent certified public accountant to the City on an annual basis within 180 days after the end of the institution's fiscal year. INDIVIDUAL PLACEMENT OF INVESTMENTS A list will be maintained of financial institutions and depositories authorized to provide investment services. In addition, a list will be maintained of approved security broker/dealers selected by creditworthiness (e.g., a minimum capital requirement of $10,000,000 and at least five years of operation). These may include "primary" dealers or regional dealers that qualify under Securities and Exchange Commission (SEC) Rule 15C3-1 (uniform net capital rule). All financial institutions and broker/dealers who desire to become qualified for investment transactions must supply the following as appropriate: Packet Pg 152 10 IV. ELIGIBLE FINANCIAL INSTITUTIONS 11 1. Audited financial statements demonstrating compliance with state and federal capital adequacy guidelines 2. Proof of National Association of Securities Dealers (NASD) certification (not applicable to Certificate of Deposit counterparties) 3. Proof of state registration 4. Certification of having read and understood and agreeing to comply with the applicable sections of the California Government Code and the City’s Investment Policy and that all securities recommended shall be suitable for the City of San Luis Obispo. The investment advisor (or City staff if applicable) will strive to obtain competitive bids from at least three brokers or financial institutions on all purchases and sales of investment instruments whenever possible. INDIVIDUAL PLACEMENT OF DEPOSITS Individual placement of collateralized certificates of deposit with eligible financial institutions shall be based on the following practices and procedures: 1. Deposits shall only be placed with financial institutions maintaining offices within the City of San Luis Obispo. 2. Unless collateralized by eligible securities as provided in Sections 53651 and 53652 of the Government Code, the maximum amount of Certificates of Deposit to be placed with any single institution is the amount up to the Federal Deposit Insurance Corporation (FDIC) limit. 3. Reasonable efforts will be made to place deposits of less than the FDIC limit with each eligible institution. Any deposits in excess of this amount shall be awarded based on competitive bids. Documentation relating to rate quotes shall be maintained by Finance for six months. 4. Within the context of the City's policies regarding competitive bidding and portfolio limitations, deposits shall be distributed as evenly as possible between financial institutions. Packet Pg 153 10 V. INVESTMENT VEHICLES 12 STATE OF CALIFORNIA LIMITATIONS As provided in the applicable sections of the Government Code, the State of California limits the investment vehicles available to local agencies. SUITABLE AND AUTHORIZED INVESTMENTS City funds may be invested in the following subject to the following restrictions: 1. No more than 5% of the total portfolio may be invested in securities of any single issuer, other than the US Government, its agencies and instrumentalities, approved local agency investment pools, LAIF, money market funds, and the City’s main financial institution. 2. The maximum stated final maturity of individual securities in the portfolio shall be five years, except that up to 10% of the portfolio can be invested in Treasury, municipal, and GSE securities maturing over 5 years. 3. The City shall maintain a minimum of three months of budgeted operating expenditures in short term investments. The level of operating expenses shall be measured once per year and shall be based on the most recently adopted budget. 4. The duration of that part of the portfolio that is not needed for liquidity purposes shall typically be approximately equal to the duration of an index of US Treasury and Federal Agency Securities with maturities which meet the Authority’s needs for cash flow and level of risk tolerance (the Benchmark Index) plus or minus 10%. 5. Treasury Obligations: Treasury bills, Treasury notes, Treasury bonds and Treasury STRIPS with maturities not exceeding five years from the date of purchase. 6. Federal Agency or Government Sponsored Enterprise (GSE) Securities: Federal agency or United States government-sponsored enterprise obligations, participations, or other instruments, including those issued by or fully guaranteed as to principal and interest by federal agencies or United States government-sponsored enterprises with maturities not exceeding five years from the date of purchase. 7. Municipal Securities: include obligations of the City, the State of California, any of the other 49 states, and any local agency within the State of California, provided that the securities are rated “A” or higher by at least one nationally recognized statistical rating organization. No more than 30% of the portfolio may be invested in these securities and no more than 5% of the portfolio may be invested in any issuer. 8. Commercial Paper: With “prime” quality of the highest ranking or of the highest letter and number rating as provided for by a NRSRO. The entity that issues the commercial paper must meet all of the following conditions in either paragraph a or paragraph b: a) The entity meets the following criteria: (i) is organized and operating in the United States as a general corporation, (ii) has total assets in excess of five hundred million dollars ($500,000,000), and (iii) has debt other than commercial paper, if any, that is rated “A” or higher by a NRSRO. Packet Pg 154 10 V. INVESTMENT VEHICLES 13 b) The entity meets the following criteria: (i) is organized within the United States as a special purpose corporation, trust, or limited liability company, (ii) has program-wide credit enhancements including, but not limited to, over collateralization, letters of credit, or surety bond, and (iii) has commercial paper that is rated “A-1” or higher, or the equivalent, by a NRSRO. Eligible commercial paper will have a maximum maturity of 270 days or less. No more than 40% of the City’s portfolio may be invested in commercial paper. The City may purchase no more than 10% of the outstanding commercial paper of any single issuer. 9. Medium Term Notes: Issued by corporations organized and operating in the U.S. or by depository institutions licensed by the U.S. or any state and operating within the U.S., except financial institutions shall not be considered. At the time of purchase, the notes must mature within five years and must be rated in the “A” category or better by two or more nationally recognized statistical-rating organizations (NRSRO). If the notes are issued by a financial institution they must be rated in the “AA” category or better by one or more NRSRO. At the time of purchase, no more than 30% of the City’s portfolio may be invested in medium term notes and no more than 5% of the City’s portfolio may be invested in any one issuer. 10. Bankers’ Acceptances: Not exceeding 180 days to maturity. At the time of purchase, no more than 40% of the City’s surplus funds may be invested in bankers’ acceptances and no more than 5% of the City’s surplus funds may be invested in bankers’ acceptances from any one bank. 11. Repurchase Agreements: With a term of the agreement not exceeding one year, collateralized by U.S. Treasury and agency securities listed in items 1 and 2 above. The value of the collateral underlying the agreement shall be 102%. The market value of the collateral shall be marked-to-the-market at least weekly based on the bid price and adjustments made when the value falls below 102%. Collateral shall be held in the City’s custodial bank as safekeeping agent. Repurchase Agreements shall be entered into only with dealers who have executed a Master Repurchase Agreement with the City and who are recognized as Primary Dealers with the Market Reports Division of the Federal Reserve Bank of New York. There are no limitations on the amount that can be invested in repurchase agreements. No more than 25% of the portfolio can be invested with any one financial institution. 12. Local Agency Investment Fund (LAIF): A local government investment pool established by the State Treasurer of California for the benefit of California local agencies. City funds can be invested in LAIF up to the maximum permitted by State Law. 13. Negotiable Certificates of Deposit: Issued by a nationally or state-chartered bank, a savings association or a federal association (as defined by Section 5102 of the Financial Code), a state or federal credit union, or by a federally or state-licensed branch of a foreign bank. At the time of purchase, the maturity of the certificate may not exceed five years, must be rated at least “AA” or “A-1” by one or more NRSRO, no more than 30% of the City’s surplus funds may be invested in certificates of deposit and no more than 5% of the City’s surplus funds may be invested in certificates from any one bank. Packet Pg 155 10 V. INVESTMENT VEHICLES 14 14. Collateralized Bank Deposits: Shall be evaluated in term of Federal Deposit Insurance Corporation (FDIC) coverage. For deposits in excess of the FDIC insured limit, approved collateral at the percentage above market value as specified by California Government Code, Sections 53651 et seq. and Sections 53652 et seq. shall be required. No more than 25% of the portfolio can be placed with any one financial institution. This limit may be exceeded if necessary to allow the City to meet its short term operational needs. 15. Money Market Mutual Funds: Shall be registered under the Investment Company Act of 1940. To be eligible for investment pursuant to this subdivision, these companies will either: (i) attain the highest ranking letter or numerical rating provided by at least two NRSROs or (ii) have retained an investment advisor registered or exempt from registration with the Securities and Exchange Commission with not less than five years of experience managing money market mutual funds and with assets under management in excess of $500,000,000. At the time of purchase, no more than 20% of the City’s surplus funds may be invested in money market mutual funds and no more than 10% of the City’s surplus funds may be invested in any one fund. 16. Local Government Investment Pools: Shares of beneficial interest issued by a joint powers authority (Local Government Investment Pools) organized pursuant to Government Code Section 6509.7 that invests in the securities and obligations authorized in subdivisions (a) to (o) of California Government Code Section 53601, inclusive. Each share will represent an equal proportional interest in the underlying pool of securities owned by the joint powers authority. The Pool will be rated in a rating category “AAA” or its equivalent by a NRSRO. To be eligible under this section, the shares will maintain a stable net asset value (NAV) and the joint powers authority issuing the shares will have retained an investment adviser that meets all of the following criteria: a) The adviser is registered or exempt from registration with the Securities and Exchange Commission. b) The adviser has not less than five years of experience investing in the securities and obligations authorized in subdivisions (a) to (o) Government Code Section 53601, inclusive. c) The adviser has assets under management in excess of five hundred million dollars ($500,000,000). 17. Investments in Community Banks Provided that the requirements of these guidelines and California Code sections 53630-53653 are adhered to, funds may be invested in community banks within the San Luis Obispo County service area under the following criteria: a) The bank must be based and have its headquarters in San Luis Obispo County, with at least one branch within the City of San Luis Obispo. b) As indicated by Government Code Section 53635.2 the bank must receive an overall rating of not less than “satisfactory” from the appropriate federal supervisory agency for meeting Packet Pg 156 10 V. INVESTMENT VEHICLES 15 the criteria specified in Section 2906 of Title 12 of the U.S. Code (Community Reinvestment Act of 1977). c) The bank must provide certification and supporting information that indicates at least 25% in loans is invested within the City of San Luis Obispo. d) To ensure the City obtains a competitive rate for investments in the program, any potential investment or proposal must enjoy a rate of return equal to or greater than the Local Agency Investment Fund (LAIF) average quarterly rate existing at the time of the investment; e) Participating banks shall make a presentation to the City of San Luis Obispo Investment Oversight Committee about their community involvement at least once per year. f) Upon the Investment Oversight Committee’s review of community involvement, the existing investment will be evaluated for renewal by City finance staff. CITY POLICIES Debt Funds. Reserve funds from the proceeds of debt issues shall be invested by the Director/City Treasurer in accordance with bond covenants. Deferred Compensation. These policies do not apply to deferred compensation plans. Individual investment policies are adopted by each deferred compensation plan and approved independently by Council. Further, individual investments are directed solely by the employee. Prohibited Investment Vehicles and Practices 1. State law notwithstanding, any investments not specifically described herein are prohibited, including, but not limited to, mutual funds (other than money market funds as described above in No. 10), unregulated and/or unrated investment pools or trusts, collateralized mortgage obligations and futures and options. 2. In accordance with Government Code Section 53601.6, investment in inverse floaters, range notes or mortgage derived interest-only strips is prohibited. 3. Investment in any security that could result in a zero interest accrual if held to maturity is prohibited. 4. Trading securities for the sole purpose of speculating on the future direction of interest rates is prohibited. 5. Purchasing or selling securities on margin is prohibited. 6. The use of reverse repurchase agreements, securities lending or any other form of borrowing or leverage is prohibited without Council approval. 7. The City is allowed to invest in mortgage pass-through and asset-backed securities, provided that such securities have a maximum stated final maturity of five years and are rated AA by Standard & Poor’s or Aa by Moody’s; and that purchase of such securities does not exceed 20% of the portfolio. However, given the “melt-down” in these types of securities in 2007 – even when rated “AAA/Aaa” by NRSRO’s – the City will not invest in these securities. Packet Pg 157 10 V. INVESTMENT VEHICLES 16 AUTHORIZED INVESTMENTS SUMMARY Investment Type Government Code Maximum Maturity Maximum % of Portfolio Quality Requirements San Luis Obispo Maximum Maturity Maximum % of Portfolio Quality Requirements 1. Treasury Obligations 5 Years None None 5 Yearsa None None 2. GSE Securities 5 Years None None 5 Yearsa None None 3. Municipal Securitiesb 5 years None None 5 yearsa 30% per type; 5% per issuer “A” or better 4. Commercial Paper 270 Days 25% per type; none per issuer A-1/P-1/F-1; Long-term “A” 270 Days 25% per type; 10% per issuer A-1/P-1/F-1; Long-term “A” 5. Medium Term Notes 5 Years 30% per type; none per issuer “A” 5 Years 30% per type; 5% per issuer “A” or better “AA” or better for financial issuers 6. Bankers’ Acceptances 180 Days 40% per type; 30% per issuer None 180 Days 40% per type; 5% per issuer None 7. Repurchase Agreement 1 Year None None 1 Year None per type; 5% per counterparty Primary Dealers/ Collateralization requirements 8. LAIF N/A None None N/A Limit per Gov’t Code None 9. Negotiable CDs 5 Years 30% per type; none per issuer None 5 Years 30% per type; 5% per issuer “AA” or “A-1” 10. Collateralized Bank Deposits 5 Years None None 5 Years Non per type; 25% per institution None 11. Money Market Mutual Funds N/A 20% per type; 10% per issuer Highest rating of at least two NRSRO N/A 20% per type; 10% per issuer Highest rating of at least two NRSRO 12. Local Government Investment Pools (LGIPs) N/A N/A Advisor requirements N/A N/A Advisor requirements/“AAA” a. Up to 10% of the portfolio can be invested in Treasury and GSE securities maturing over 5 years. This includes municipal obligations. b. Includes State Obligations, City of San Luis Obispo obligations and California Local Agency obligations Packet Pg 158 10 VI. INVESTMENT MATURITY 17 In addition to the risks associated with the credit-worthiness of the financial institution and the security of the investment vehicle, the maturity period of investments is also a significant consideration in the management of the City's portfolio. In order to minimize the impact of market risk, it is intended that all investments will be held until maturity. In implementing this policy, the following guidelines will be used: 1. Projected cash flow requirements are the primary factor to be used in determining investment maturity terms. 2. After cash flow needs have been met, investments may be structured in longer-term securities within a disciplined investment program and process that is based on long-term expectations and is not speculative. 3. Investments may be sold before maturity for cash flow purposes or to rebalance the risk profile of the portfolio. 4. Council approval to make investments with terms in excess of 5 years is required at least three months prior to the initial investment. Packet Pg 159 10 VII. SOCIALLY RESPONSIBLE INVESTING 18 City funds should be guided by the following provisions when investing in securities of non- governmental entities: 1. Priority shall be given to investments in entities that support community well-being through safe and environmentally sound practices and fair labor practices. 2. Priority shall be given to investments in entities that promote equality of rights regardless of race, religion, color, ancestry, age, national origin, gender, marital status, sexual orientation, disability or place of birth. 3. Priority shall be given to investments in entities that promote community economic development. In addition, the direct investment of City funds is restricted as follows: 1. No investments are to be made in tobacco, electronic cigarette, or tobacco-related products. 2. No investments are to be made to support the direct production or drilling of fossil fuels. The City Treasurer shall periodically verify compliance with the guidelines either through direct contact with the company or with its Investors Responsibility Center. Packet Pg 160 10 VIII. CASH MANAGEMENT PRACTICES 19 To achieve a reasonable return on public funds, the following cash management practices will be followed: 1. Maintain maximum investment of all City funds not required to meet immediate cash flow needs while maintaining adequate compensating balances as required under the City’s banking services agreement. 2. Pool resources available for investment from all City-administered funds, with interest earnings allocated to each of the funds in accordance with generally accepted accounting principles. 3. Maximize the City’s cash flow through the immediate deposit of all cash receipts, use of direct deposits and wire transfers when available, and appropriate timing of payments to vendors. 4. Maximize the cash flow information available by using only one operating bank account. Packet Pg 161 10 IX. EVALUATION OF INVESTMENT PERFORMANCE 20 As indicated in the Introduction section of this document, it is the City’s primary investment objective to achieve a reasonable rate of return on public funds while minimizing risks and preserving capital. In evaluating the performance of the City’s overall portfolio in achieving this objective, it is expected that yields on City investments will regularly meet or exceed the average return on three month U. S. Treasury Bills. It is also expected that the portfolio managed by the investment advisor will meet or exceed the BofA Merrill Lynch 0-to-5 year U.S. Treasury Bond Index. Packet Pg 162 10 X. INVESTMENT REPORTING 21 Consistent with the guidance provided by California Government Code Section 53646 and the City’s practice of reviewing the Financial Policies each year, the Finance Director/City Treasurer may submit the Investment Policy to the Council for consideration at a public meeting. This statement will generally be reviewed by the Council in conjunction with the Financial Plan review and approval process. In accordance with this Statement of Investment Policy, the City Treasurer is responsible for developing and maintaining this Investment Management Plan. Though optional, pursuant to California Government Code Section 53646 (b)(1), the Finance Director/City Treasurer will provide the Council and Investment Oversight Committee with a quarterly investment report providing the following information for each investment or security: 1. Issuer (financial institution) 2. Type of investment 3. Amount paid for the investment 4. The par amount of the investment, if applicable 5. Certificate or other reference number if applicable 6. Percentage yield on an annualized basis 7. Purchase date 8. Maturity date for each investment and the weighted average maturity of all the investments within the portfolio 9. Current book value 10. Current market value 11. Total cost and market value, including source of this valuation, of the City's portfolio 12. A description of the compliance with the Statement of Investment Policy 13. Information demonstrating that the City's expenditure requirements can be met in the following six months 14. Other information regarding the City's portfolio as appropriate The Investment Report shall include all investments as of the end of the quarter from all funds held in the City's portfolio, including funds held and invested by trustees exclusive of deferred compensation plan funds; and shall be issued within 30 days after the end of the quarterly reporting period. Packet Pg 163 10 X. INVESTMENT REPORTING 22 1. Within 60 days from the start of each fiscal year, the City Treasurer shall provide the Investment Oversight Committee (IOC) with the value that represents the City’s minimum liquidity requirement which is equal to 3 months of operating costs based on the most recently adopted annual budget. Any adjustments to this amount which the Treasurer feels are required to meet cash demands from time to time shall be identified by the Treasurer at each meeting of the IOC as these amounts become known. 2. At the regularly scheduled IOC meeting which next follows the end of a fiscal year, the Treasurer shall file a report which identifies how the invested balances were adjusted to accommodate the City’s liquidity requirement and the extent to which investment maturity limits were adjusted to follow the City’s benchmark duration value. Packet Pg 164 10 XI. INVESTMENT MANAGEMENT PLAN REVIEW 23 The Director/City Treasurer shall review the City's Statement of Investment Policy and Investment Management Plan on an ongoing basis to ensure its continued value in administering the City's portfolio. Additionally, the City shall maintain an Investment Oversight Committee whose membership shall consist of the City Administrative Officer, Assistant City Administrative Officer, Director/City Treasurer, Finance Operations Manager, the City's Independent Certified Public Accountant and a member of the public at large. The Investment Oversight Committee is responsible for: 1. Reviewing the City's portfolio at least quarterly to determine compliance with the Investment Management Plan; and 2. Reviewing and making recommendations as appropriate regarding the City's investment policies and practices at least annually. It is important to note the distinction between the committee's oversight responsibility in ensuring compliance with the policies and overall framework established in this plan, and the responsibility of the Director/City Treasurer in managing the City's investment portfolio in accordance with this plan. This distinction between management and oversight is especially important to make as it applies to the role of the City's independent auditors on this committee. The committee's oversight function is consistent with the scope of the auditor's engagement duties, which includes reviewing for compliance with City financial policies and procedures, and for making recommendations for improvements in the City's fiscal operations. However, in this oversight context, the auditors retain their independence from responsibility for managing any aspects of the City's operations; this responsibility lies solely with the City's elected leadership and staff. Packet Pg 165 10 APPENDIX Packet Pg 166 10 APPENDIX 25 INVESTMENT POLICY A. Responsibility. Investments and cash management is the responsibility of the City Treasurer or designee. It is the City’s policy to appoint the Director of Finance & Information Technology as the City’s Treasurer. B. Investment Objective. The City's primary investment objective is to achieve a reasonable rate of return while minimizing the potential for capital losses arising from market changes or issuer default. Accordingly, the following factors will be considered in priority order in determining individual investment placements: 1. Safety 2. Liquidity 3. Yield C. Tax and Revenue Anticipation Notes: Not for Investment Purposes. There is an appropriate role for tax and revenue anticipation notes (TRANS) in meeting legitimate short-term cash needs within the fiscal year. However, many agencies issue TRANS as a routine business practice, not solely for cash flow purposes, but to capitalize on the favorable difference between the interest cost of issuing TRANS as a tax-preferred security and the interest yields on them if re-invested at full market rates. As part of its cash flow management and investment strategy, the City will only issue TRANS or other forms of short-term debt if necessary to meet demonstrated cash flow needs; TRANS or any other form of short- term debt financing will not be issued for investment purposes. As long as the City maintains its current policy of maintaining fund/working capital balances that are 25% of operating expenditures as reflected in the most recently adopted budget, it is unlikely that the City would need to issue TRANS for cash flow purposes except in very unusual circumstances. D. Selecting Maturity Dates. The City will strive to keep all idle cash balances fully invested through daily projections of cash flow requirements. To avoid forced liquidations and losses of investment earnings, cash flow and future requirements will be the primary consideration when selecting maturities. E. Diversification. As the market and the City's investment portfolio change, care will be taken to maintain a healthy balance of investment types and maturities. F. Authorized Investments. The City will invest only in those instruments authorized by the California Government Code. The City will not invest in stock, will not speculate and will not deal in futures or options. The investment market is highly volatile and continually offers new and creative opportunities for enhancing interest earnings. Accordingly, the City will thoroughly investigate any new investment vehicles before committing City funds to them. G. Authorized Institutions. Current financial statements will be maintained for each institution in which cash is invested. Investments will be limited to 20% of the total net worth of any institution and may be reduced further or refused altogether if an institution's financial situation becomes unhealthy. Packet Pg 167 10 APPENDIX 26 H. Consolidated Portfolio. In order to maximize yields from its overall portfolio, the City will consolidate cash balances from all funds for investment purposes, and will allocate investment earnings to each fund in accordance with generally accepted accounting principles. I. Safekeeping. Ownership of the City's investment securities will be protected through third-party custodial safekeeping. J. Investment Management Plan. The City Treasurer will develop and maintain an Investment Management Plan that addresses the City's administration of its portfolio, including investment strategies, practices and procedures. K. Investment Oversight Committee. As set forth in the Investment Management Plan, this committee is responsible for reviewing the City’s portfolio on an ongoing basis to determine compliance with the City’s investment policies and for making recommendations regarding investment management practices. Members include the City Administrative Officer, Assistant CAO, Director of Finance/City Treasurer, Revenue Manager and the City’s independent auditor. L. Reporting. The City Treasurer will develop and maintain a comprehensive, well- documented investment reporting system, which will comply with Government Code Section 53646. This reporting system will provide the Council and the Investment Oversight Committee with appropriate investment performance information. M. If the City has an investment advisor, the investment advisor may use its own list of authorized broker/dealers to conduct transactions on behalf of the City. N. Socially Responsible Investing. The City should prioritize investments that support community well-being and equal rights. The City will not invest in entities involved to the tobacco industry, nor in direct producers and drillers of fossil fuels. Packet Pg 168 10 APPENDIX 27 Glossary Bankers’ Acceptances are short-term credit arrangements to enable businesses to obtain funds to finance commercial transactions. They are time drafts drawn on a bank by an exporter or importer to obtain funds to pay for specific merchandise. By its acceptance, the bank becomes primarily liable for the payment of the draft at maturity. An acceptance is a high-grade negotiable instrument. Benchmark is a market index used as a comparative basis for measuring the performance of an investment portfolio. A performance benchmark should represent a close correlation to investment guidelines, risk tolerance and duration of the actual portfolio's investments. Bond is a financial obligation for which the issuer promises to pay the bondholder (the purchaser or owner of the bond) a specified stream of future cash flows, including periodic interest payments and a principal repayment. Broker-Dealer is a person or a firm who can act as a broker or a dealer depending on the transaction. A broker brings buyers and sellers together for a commission. They do not take a position. A dealer acts as a principal in all transactions, buying and selling for his own account. Certificates of Deposit 1. Negotiable Certificates of Deposit are large-denomination CDs. They are issued at face value and typically pay interest at maturity, if maturing in less than 12 months. CDs that mature beyond this range pay interest semi-annually. Negotiable CDs are issued by U.S. banks (domestic CDs), U.S. branches of foreign banks (Yankee CDs), and thrifts. There is an active secondary market for negotiable domestic and Yankee CDs. However, the negotiable thrift CD secondary market is limited. Yields on CDs exceed those on U.S. treasuries and agencies of similar maturities. This higher yield compensates the investor for accepting the risk of reduced liquidity and the risk that the issuing bank might fail. State law does not require the collateralization of negotiable CDs. 2. Non-negotiable Certificates of Deposit are time deposits with financial institutions that earn interest at a specified rate for a specified term. Liquidation of the CD prior to maturity incurs a penalty. There is no secondary market for those instruments, therefore, they are not liquid. They are classified as public deposits and financial institutions are required to collateralize them. Collateral may be waived for the portion of the deposits that are covered by FDIC insurance. Collateral refers to securities, evidence of deposits, or other property that a borrower pledges to secure repayment of a loan. It also refers to securities pledged by a bank to secure deposits. In California, repurchase agreements, reverse repurchase agreements, and public deposits must be collateralized. Commercial Paper is a short-term, unsecured, promissory note issued by a corporation to raise working capital. Packet Pg 169 10 APPENDIX 28 Corporate Note is a debt instrument issued by a corporation with a maturity of greater than one year and less than ten years. Delivery Versus Payment (“DVP”) is a settlement procedure in which securities are delivered versus payment of cash, but only after cash has been received. Most security transactions, including those through the Fed Securities Wire system and Depository Trust Company (“DTC”), are done DVP as a protection for both the buyer and seller of securities. Depository Trust Company (“DTC”) is a firm through which members can use a computer to arrange for securities to be delivered to other members without physical delivery of certificates. A member of the Federal Reserve System and owned mostly by the New York Stock Exchange, the Depository Trust Company uses computerized debit and credit entries. Most corporate securities, commercial paper, CDs, and BAs clear through DTC. Federal Agency Obligations are issued by U.S. Government Agencies or Government Sponsored Enterprises (“GSE”). Although they were created or sponsored by the U.S. Government, most Agencies and GSEs are not guaranteed by the United States Government. Examples of these securities are notes, bonds, bills and discount notes issued by Fannie Mae (“FNMA”), Freddie Mac (“FHLMC”), the Federal Home Loan Bank system (“FHLB”), and Federal Farm Credit Bank (“FFCB”). The Agency market is a very large and liquid market, with billions traded every day. Investment Advisor is a company that provides professional advice managing portfolios, investment recommendations and/or research in exchange for a management fee. Issuer means any corporation, governmental unit, or financial institution that borrows money through the sale of securities. Liquidity refers to the ease and speed with which an asset can be converted into cash without loss of value. In the money market, a security is said to be liquid if the difference between the bid and asked prices is narrow and reasonably sized trades can be done at those quotes. Local Agency Investment Fund (“LAIF”) is a special fund in the State Treasury that local agencies may use to deposit funds for investment. There is no minimum investment period and the minimum transaction is $5,000, in multiples of $1,000 above that, with a maximum of $50 million for any California public Agency. It offers high liquidity because deposits can be converted to cash in twenty-four hours and no interest is lost. All interest is distributed to those agencies participating on a proportionate share determined by the amounts deposited and the length of time they are deposited. Interest is paid quarterly via direct deposit to the Agency’s LAIF account. The State keeps an amount for reasonable costs of making the investments, not to exceed one-quarter of one percent of the earnings. Market Value is the price at which a security is trading and could presumably be purchased or sold. Maturity is the date upon which the principal or stated value of an investment becomes due and payable. Packet Pg 170 10 APPENDIX 29 Medium-Term Notes are debt obligations issued by corporations and banks, usually in the form of unsecured promissory notes. These are negotiable instruments that can be bought and sold in a large and active secondary market. For the purposes of California Government Code, the phrase “Medium-Term” refers to a maximum remaining maturity of five years or less. They can be issued with fixed or floating-rate coupons, and with or without early call features, although the vast majority are fixed-rate and non-callable. Corporate notes have greater risk than Treasuries or Agencies because they rely on the ability of the issuer to make payment of principal and interest. Money Market Fund is a type of safe investment comprising a variety of short-term securities with high quality and high liquidity. The fund provides interest to shareholders and must strive to maintain a stable net asset value (“NAV”) of $1 per share. NRSRO is a “Nationally Recognized Statistical Rating Organization.” A designated rating organization that the SEC has deemed a strong national presence in the U.S. NRSROs provide credit ratings on corporate and bank debt issues. Only ratings of a NRSRO may be used for the regulatory purposes of rating. Includes Moody’s, S&P, Fitch, and Duff & Phelps among others. Principal describes the original cost of a security. It represents the amount of capital or money that the investor pays for the investment. Repurchase Agreements are short-term investment transactions. Banks buy temporarily idle funds from a customer by selling him U.S. Government or other securities with a contractual agreement to repurchase the same securities on a future date at an agreed upon interest rate. Repurchase Agreements are typically for one to ten days in maturity. The customer receives interest from the bank. The interest rate reflects both the prevailing demand for Federal Funds and the maturity of the Repo. Repurchase Agreements must be collateralized. Supranational entities are formed by two or more central governments with the purpose of promoting economic development for the member countries. Supranational institutions finance their activities by issuing debt, such as supranational bonds. Examples of supranational institutions include the European Investment Bank and the World Bank. Similarly to the government bonds, the bonds issued by these institutions are considered direct obligations of the issuing nations and have a high credit rating. U.S. Treasury Issues are direct obligations of the United States Government. They are highly liquid and are considered the safest investment security. U.S. Treasury issues include: 1. Treasury Bills which are non-interest-bearing discount securities issued by the U.S. Treasury to finance the national debt. Bills are currently issued in one, three, six, and twelve month maturities. 2. Treasury Notes that have original maturities of one to ten years. 3. Treasury Bonds that have original maturities of greater than 10 years. Yield to Maturity is the rate of income return on an investment, minus any premium above par or plus any discount with the adjustment spread over the period from the date of the purchase to the date of maturity of the bond Packet Pg 171 10 Page intentionally left blank. Packet Pg 172 10 Meeting Date: 2/20/2018 FROM: Daryl Grigsby, Public Works Director Prepared By: Jake Hudson, Transportation Manager SUBJECT: ANHOLM BIKEWAY PLAN RECOMMENDATION Adopt a resolution approving the modified Anholm Bikeway Plan. DISCUSSION At its February 6th meeting the City Council conceptually approved a modified version of the Preferred Alternative of the Anholm Bikeway Plan which included the following: Phase I 1. Bicycle/Pedestrian crossing at Foothill & Ferrini (Pedestrian Hybrid Signal); 2. Class I path between Foothill & Ramona; 3. Removal of on-street parking on north side of Ramona and installation of two-way Class IV protected bikeway (Cycle Track); and 4. Initiation of a residential parking district. Phase II 1. Class III shared street with traffic calming on Broad, Mission, & Chorro, between Ramona & Lincoln; 2. Streetscape & lighting improvements with public art at Chorro & Hwy 101 undercrossing; 3. Extension of buffered bike lanes on Chorro from Lincoln to Palm; 4. Class III shared street on Chorro from Palm to Monterey; and 5. Performance monitoring report to Council at 12 and 24 months after implementation. Phase III 1. Reconsideration of protected bike lanes, traditional bike boulevard on Broad Street, & other traffic calming measures based on Phase II performance monitoring; and 2. Incremental installation of ancillary spot improvements such as sidewalks, curb ramps, and additional street lighting. Staff has revised the Anholm Bikeway Plan document per the direction given by the City Council (Attachment A) and is recommending final adoption of the plan by resolution (Attachment B). As the plan is implemented, construction documents will be brought back before the Active Transportation Committee and City Council for review. Packet Pg 173 11 ENVIRONMENTAL REVIEW The Anholm Bike Plan is categorially exempt from CEQA under Class 1, Existing Facilities; Section 15301 and Class 4, Minor Alterations to Land, because the project would be constructed on existing city streets within the public right of way. FISCAL IMPACT The fiscal impact associated with the plan conceptually approved by the Council is identical to the that of the “Preferred Alternative” presented in the February 6th staff report (Attachment C). ALTERNATIVE The Council may direct staff to make additional changes to the plan and return to Council. Attachments: a - Council Reading File - Anholm Bikeway Plan b - Council Resolution Adopting the Anholm Bikeway Plan c - Broad Street Bike Boulevard February 6, 2018 Staff Report Packet Pg 174 11 R ______ RESOLUTION NO. XXXXX___ (2018 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, ADOPTING THE MODIFIED ANHOLM BIKEWAY PLAN WHEREAS, the Bicycle Transportation Plan and the Land Use and Circulation Elements to the General Plan support reducing use of single-occupant motor vehicles by supporting alternatives, such as walking and bicycling; and WHEREAS, the Circulation Element to the General Plan has modal split objectives of 20 percent for bicycles and 18 percent for walking, carpools, and other forms of transportation; and WHEREAS, the proposed Anholm Bikeway Plan calls for implementation of bicycle facilities that have been shown in other communities to provide substantial benefits to bicycle safety and increase bicycle mode share; and WHEREAS, the City has identified Multi-Modal Transportation as a Major City Goal, with the purpose of prioritizing implementation of the Bicycle Transportation Plan, pedestrian safety, and the Short-Range Transit Plan; and WHEREAS, the Bicycle Transportation Plan recommends development of a low-impact route for bicyclists and pedestrians connecting the downtown core to Foothill Boulevard as a “first priority” project; and WHEREAS, the City has adopted a Vision Zero policy to eliminate all fatal traffic deaths and severe injuries by 2030, with a focus on improving pedestrian and bicyclist safety; and WHEREAS, the City coordinated with neighbors and other community members on outreach and public input through community meetings and other methods; and WHEREAS, on January 18, 2018 the Bicycle Advisory Committee reviewed the Anholm Bikeway Plan at a public hearing and provided recommendations to the City Council. WHEREAS, on February 6, 2018 the City Council reviewed the draft Anholm Bikeway Plan and conceptually approved the plan with phase 1 as presented, a modified phase 2 with traffic calming signage and crosswalks along Broad & Chorro, in lieu of a cycle track and parking removal, with performance monitoring reports at 12 and 24 months, and a modified phase 3 with reconsideration of protected lanes, traditional bike boulevard on Broad Street, and other traffic calming measures at that time (Exhibit A). WHEREAS, staff has revised the draft Anholm Bikeway Plan consistent with Council’s approval and the City Council finds that the revised Anholm Bikeway Plan is consistent with the Council’s conceptual approval. Packet Pg 175 11 Resolution No. _____ (2018 Series) Page 2 NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo that SECTION 1. Findings. This Council, after consideration of the Anholm Bikeway Plan as recommended by the Bicycle Advisory Committee, staff recommendations, public testimony, and reports thereof, makes the following findings: 1. The Anholm Bikeway Plan is consistent with the City’s General Plan and Bicycle Transportation Plan. 2. The Anholm Bikeway Plan will develop low-stress, protected bicycle facilities, which have been a well-documented strategy to make bicycling safer, more accessible, and attractive as a transportation option for users of all ages and ability levels. 3. The Anholm Bikeway Plan will further the City goals to increase bicycle and walking mode share. 4. The Anholm Bikeway Plan will provide improved infrastructure for walking and bicycling, improving the viability of active transportation modes connecting the downtown with the Anholm Neighborhood in addition to schools and neighborhood north of Foothill Boulevard. SECTION 2. Environmental Review. Per Section 15304 of the State California Environmental Quality Act (CEQA) Guidelines, the project is categorically exempt from CEQA under Class 1, Existing Facilities; Section 15301 and Class 4, Minor Alterations to Land, because the project would be constructed on existing city streets within the public right of way. The project will be constructed in an area that has no value as habitat for biological resources and would not be located in agricultural areas. The proposed street lights would be located in an urban area and would not significantly increase light or glare beyond existing conditions. The project has no potentially significant traffic impacts. The project is consistent with General Plan policies that promote an integrated system of bikeways, walkways, and traffic calming measures that promote a safe, multimodal transportation network. SECTION 3. Approval. The Anholm Bikeway Plan dated February 20, 2018, attached hereto as Exhibit A, is hereby adopted: Upon motion of _______________________, seconded by _______________________, and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this _____ day of _____________________ 2018. ____________________________________ Mayor Heidi Harmon Packet Pg 176 11 Resolution No. _____ (2018 Series) Page 3 ATTEST: ____________________________________ Carrie Gallagher City Clerk APPROVED AS TO FORM: _____________________________________ J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ____________________________________ Carrie Gallagher City Clerk Packet Pg 177 11 Resolution No. _____ (2018 Series) Page 4 EXHIBIT A: ANHOLM BIKEWAY PLAN EXECUTIVE SUMMARY Packet Pg 17811 Resolution No. _____ (2018 Series) Page 5 EXHIBIT A: ANHOLM BIKEWAY PLAN EXECUTIVE SUMMARY Install safety lighting, streetscape, & public art enhancements to improve environment at Chorro/Highway 101 undercrossing Packet Pg 17911 Resolution No. _____ (2018 Series) Page 6 Packet Pg 18011 Resolution No. _____ (2018 Series) Page 7 Packet Pg 18111 Meeting Date: 2/6/2018 FROM: Daryl R. Grigsby, Director of Public Works Prepared By: Jake Hudson, Transportation Manager Luke Schwartz, Transportation Planner-Engineer SUBJECT: BROAD STREET BICYCLE BOULEVARD (ANHOLM BIKEWAY) PLAN RECOMMENDATION As recommended by the Bicyc le Advisory Committee, adopt a resolution approving the Anholm Bikeway Plan Preferred Alternative, as defined in Attachment B. REPORT-IN-BRIEF P lanning efforts for the Broad Street Bicycle Boulevard project have progressed with the goal of developing a safe, low-stress priority route for bicyclists and pedestrians connecting the City’s Downtown Core to Foothill Boulevard. The corridor also serves as a key safe route to school corridor for Pacheco and Bishop’s Peak elementary schools. The intent of this effort is to provide a route that is attractive to not only experienced cyclists, but users of all ages and ability levels. Based on a two-year process of community engagement and extensive technical analysis, staff has developed final recommendations for the plan. As directed by the City Council at its August 15, 2017 Study Session, two distinct alternatives have been developed for the most challenging portion of this route–the segment between Lincoln Street and Foothill Boulevard. Each of the two proposed alternatives include unique benefits and trade-offs, and varying levels of support and opposition from the community. At its August 15, 2017 Study Session, Council directed staff to develop a primary alternative that provided additional separation for bicyclists by looking at partial on-street parking space removal. This primary alternative—referred to as the Preferred Alternative—includes installation of protected/buffered bike lanes along the majority of the route connecting Downtown and Foothill Boulevard, with the tradeoff of removal of 73 on-street parking spaces. The Lincoln Street Alternative, a secondary option presented for consideration at the request of the Council, includes a shared route with pavement markings, route signage and minor traffic calming to convey the bikeway route. Minimal parking loss is required for the Lincoln Alternative, with the tradeoff of a less desirable route with lower potential to attract new cyclists and increase bicycle mode share. The Bicycle Advisory Committee reviewed the Anholm Bikeway Plan alternatives on January 18, 2018 and has recommended the Preferred Alternative to the City Council for approval. Council will receive full presentation of each plan along with the pros and cons of each alternative. Council is asked to consider the technical analysis presented in each plan, and community input for each alternative, and adopt a final plan to carry forward into design and implementation. This project supports several key City programs and policies, including t he Packet Pg. 299 12 Packet Pg 182 1111 Packet Pg 182 Multimodal Transportation Major City Goal, the General Plan objective to achieve 20 percent bicycle mode share citywide, Climate Action Plan recommendation to increase bicycle use for transportation, and Vision Zero initiative to eliminate traffic-related deaths and severe injuries for all the city’s road users by 2030. DISCUSSION Background The Broad Street Bicycle Boulevard has been a component of the City’s Bicycle Transportation plans since 2007, with the goal of providing a low-stress, priority route for bicyclists and pedestrians connecting the Downtown Core to Foothill Boulevard. For bicyclists, a “low-stress” route minimizes stressful factors such as difficult terrain, gaps in connectivity, and most importantly, perceived safety concerns about conflicts with high-speed/volume motor vehicle traffic. Simply put, a low-stress route is a connection that is attractive to users of all ages and ability levels, from families with young children to less-experienced adult cyclists who may be intimidated sharing the street with vehicular traffic under current conditions. Additionally, the proposed multimodal corridor serves a dual purpose as a safe routes to school connection for Pacheco and Bishop’s Peak elementary schools. This project is established as a “first priority” bike project in the 2013 Bicycle Transportation Plan and supports several City programs and policies, including the Multimodal Transportation Major City Goal, the General Plan objective to achieve 20 percent bicycle mode share citywide, Climate Action Plan, and Vision Zero initiative to eliminate traffic-related deaths and severe injuries for all the city’s road users by 2030. Development of this plan began approximately two years ago as part of the 2015 -17 Financial Plan, and progress has accelerated after adoption of the 2017-19 Financial Plan when the Broad Street Boulevard project was identified as one of the top priorities in Multimodal Major City Goal. Over this time, numerous iterations of plan concepts evolved and were focused into a series of alternatives through several public workshops, community design charrettes, online forums, and community surveys. Through this public feedback, four themes emerged which were reflected in the various alternatives. Those four themes, in no particular order, are: 1.The desire for physical separation from motor vehicle traffic—protected lanes; 2.The desire to have the improvements follow the route most cyclists are currently using , avoiding difficult topography and circuitous routing (i.e. follow existing Desire Lines1); 3.The request to not disrupt or substantially change vehicle flows; and 4.The wish to avoid removal of on-street parking. In August of 2017, Staff presented preliminary design options to the Bicycle Advisory Committee (BAC) and City Council to receive direction o n narrowing the range of options and focusing further plan development on one or two alternatives to be brought back before the BAC and City Council for final action. Council directed staff to continue development of an 1 In transportation planning, desire lines refer to paths created by pedestrians or bicyclists to follow the shortest or most easily navigated route between origin and destination—often as a shortcut to a more circuitous, or inefficient designated route. An example would be a dirt footpath worn across a field, created over time by pedestrians or bicyclists, bypassing a more circuitous paved trail in lieu of a shorter path. Packet Pg. 300 12 Packet Pg 183 1111 Packet Pg 183 alternative that included protected bike lanes in exchange for on-street parking on one-side of the street , with a more in-depth analysis of the associated on-street parking loss. Council also directed staff to continue development of a secondary alternative following Lincoln Street, which required minimal parking loss. Staff has completed this work and is now prepared for Council consideration of final adoption. Although this planning effort continues to be called the “Broad Street Bicycle Boulevard Plan”, City staff is recommending that the actual plan document be titled “Anholm Bikeway Plan” because neither option is technically a bicycle boulevard , nor is it established exclusively on Broad Street. “Anholm Bikeway Plan” is a working title and will be used herein to refer to the project; however, staff welcomes any recommendations of alternative titles to the plan. Other common terms used to describe streets that are intended to provide equal priority for bikes, pedestrians, transit , automobiles and neighborhood livability are sometimes call “neighborhood greenways”. Whatever the term that is being used, the intent is to promote all modes and provide equal access and use. The Plan Consistent with Council direction, two alternative plans are being presented for the Northern Segment of the proposed corridor (Lincoln Street to Foothill Boulevard). These alternatives are: 1.Preferred Alternative (Protected Bike Lanes) – Converts one side of on-street parking to protected or buffered bike lanes, with a route alignme nt following Chorro, Mission, Broad, and Ramona. 2.Lincoln Street Alternative (Minimal Parking Loss) – Retains a shared street configuration where bicyclists and drivers share travel lanes, with a route alignment following Lincoln, Mission, Broad and Ramona. Two stand-alone Anholm Bikeway Plan documents have been prepared—one for the Preferred Alternative, and one for the Lincoln Street Alternative. These documents, which include detailed project descriptions, conceptual design drawings, analysis of benefits and trade-offs, proposed costs and implementation strategies, are provided for review as Attachment B and Attachment E. Each Northern Segment alternative, as well as recommendations for the Southern Segment (Downtown to Lincoln Street) are summarized below. Northern Segment – Preferred Alternative (Protected Bike Lanes) The Preferred Alternative is described in detail in Attachment B. The Preferred Alternative, as requested by the City Council for further refinement and study during the August 2017 Counc il Study Session, proposes conversion of one side of on-street parking to dedicated protected/buffered bike lanes along Chorro Street, Broad Street and Ramona Drive. The proposed corridor includes a two-way protected bikeway on the west side of Chorro (Lincoln to Mission), shared mixed-flow lanes along the low-traffic portion of Mission (Chorro to Broad), a southbound buffered/protected bike lane and northbound shared lane on Broad (Mission to Ramona), a two-way protected bikeway on the north side of Ramona (Broad to Safe Routes to School Path), and construction of the planned Safe Routes to School Bicycle/Pedestrian Path connecting Ramona to the planned bicycle/pedestrian crossing at the Packet Pg. 301 12 Packet Pg 184 1111 Packet Pg 184 Foothill/Ferrini intersection. Enhanced route signage and pavement markings are proposed throughout the corridor for wayfinding purposes and to increase the visibility of the corridor as a priority multimodal route. The Preferred Alternative makes over 80 percent of the 1.3 -mile trip between Downtown and Foothill Boulevard possible via physically protected or buffered bike lanes—the type of facilities that are attractive to cyclists of all ages and ability levels. For this reason, this alternative is expected to have the greatest potential to increase bicycle mode share. The primary tradeoff with this alternative is the loss of 73 on-street parking spaces along the route, which is the chief shared concern of neighborhood residents. To better understand the potential effects of this parking loss on the neighborhood, parking data was collected throughout the vicinity of the proposed bikeway during fall of 2017. Findings of the parking study are summarized in Table 1. Table 1: Peak Period On-Street Parking Conditions with and without Project It should be noted that this parking analysis does not reflect the recently approved, but not yet occupied, multifamily residential developments at 22 Chorro and 41 Palomar. As approved, these projects were found to include on-site parking consistent with City requirements, including an allowed parking reduction for mixed-use development and for incorporating auto trip reduction measures, such as increased bicycle parking and other amenities to encourage use of alternative transportation modes. The proposed implementation and monitoring pla n for the Anholm Bikeway strategically delays removal of street parking fronting residential properties along Broad and Chorro Streets until a later project phase to allow for monitoring of parking conditions after occupancy of these development projects. As discussed further below, formation of a residential permit parking district would be an appropriate strategy to address concerns of potential parking spillover from these developments into nearby neighborhood streets— particularly considering that multifamily residential properties are not eligible to receive permits for street parking within parking districts. With the reduction in on-street parking supply associated with the proposed bikeway project , street parking is anticipated to be scarce during peak periods along certain segments of Chorro, Broad and Ramona. For segments where peak parking demand nears or exceeds available supply, there is generally available street parking within one-to-two blocks (about a 1- to 3- minute walk). Some residents who favor parking on street out of convenience may simply park in their garage or driveway more frequently if parking on street becomes difficult to find. (Informal observations during parking data collection found that 30 -40 percent of residential driveways were vacant along Chorro and Broad Streets during peak periods). Other residents living in homes with high auto ownership and/or with limited off-street garage/driveway parking Packet Pg. 302 12 Packet Pg 185 1111 Packet Pg 185 will likely continue to rely on street parking and may need to walk 1 -2 blocks at times of peak demand to find available parking nearby. It’s important to acknowledge that under either circumstance, some residents consider the lack of readily-available on-street parking fronting their home as an unacceptable hardship in exchange for improved bicycle facilities. While there are no adopted plans or policies that obligate the City to provide street parking for private vehicles, staff is sensitive to the concerns of the neighborhood and have outlined the following po tential strategies in the Anholm Bikeway Plan to address parking concerns: •Residential Parking District – If the Council moves forward with the Preferred Alternative, it is recommended that the City initiate the process to form a parking district (s) in the Anholm neighborhood. Actual boundaries of the district will be determined as part of this process and will require a 60% vote of support from households and Council Approval. There is a limit of two permits per residents at a cost of $15 per permit. The initial $15 permit fee for all is proposed to be funded by the project at no cost to the neighborhood, any subsequent permit fees would be subject to the standard provisions of the parking residential parking district program. •Accessible On-Street Parking – The plan retains on-street parking on at least one side of the street for the length of the route. On a case-by-case basis, residents can request installation of designated ADA accessible on-street parking stalls along segments of the proposed bike route where parking remova l is proposed. •Phasing/Monitoring Strategies – The project is proposed to be constructed in three phases with a one-year monitoring period and a subsequent performance report that will be presented to Council. The phasing plan allows for parking removal t o occur incrementally and provides time for initiation a parking district prior to removal of street parking along Broad and Chorro, if supported by residents. In addition, t he initial installation of protected bike lanes will be made with temporary device s that could easily be modified/removed and parking restored if the Council Directed staff to do so. Lastly, the phased approach allows for monitoring and adjustments to project designs and the possibility of spillover parking from the 71 Palomar and 22 Chorro projects. Although the Anholm Bikeway Plan is primarily a bicycle project, several other features are proposed along the Northern Segment to improve safety and mobility for pedestrians, including: •Installation of speed cushions along Broad between M ission and Ramona to calm traffic and reduce auto speeds to a level conducive to a walkable, bikeable environment. •Construction of a raised intersection at Broad/Murray to calm traffic and improve the intersection crossing environment for pedestrians and bicycles. •Installation of additional street lighting along the proposed bikeway route. •Construction of corner bulbouts at Broad/Ramona/Meinecke, new sidewalks along west side of Broad, installation of accessible curb ramps and higher -visibility crosswalk markings at several intersections to improve pedestrian accessibility and safety along the proposed route. The primary elements of the Preferred Alternative are illustrated in Figure 1. Packet Pg. 303 12 Packet Pg 186 1111 Packet Pg 186 Figure 1: Northern Segment Summary Map – Preferred Alternative (Protected Bike Lanes) Packet Pg. 30412Packet Pg 1871111Packet Pg 187 Northern Segment – Lincoln Street Alternative (Minimal Parking Loss) The Lincoln Street Alternative is described in detail in Attachment E. The Lincoln Street Alternative was requested by the City Council for consideration as a secondary option if the parking loss proposed in the Preferred Alternative is determined to be too impactful to the neighborhood. This alternative retains a shared street environment throughout the Northern Segment, where bicyclists and motorists share travel lanes , albeit with the addition of guide signage, bikeway pavement markings and minor traffic calming measures. The proposed route alignment follows Lincoln Street (Chorro to Mission), Mission (Lincoln to Broad), Broad (Mission to Ramona), Ramona (Broad to Safe Routes to School Path), and construction of the planned Safe Routes to School Bicycle/Pedestrian Path connecting Ramona to the planned bicycle/pedestrian crossing at the Foothill/Ferrini intersection. This alternative requires elimination of less than 10 on-street parking spaces—strictly at corners where bulbouts are proposed to improve pedestrian crossings, and on Ramona at the entry to the planned Safe Routes to School Path. While the Lincoln Alternative requires minimal loss of on-street parking, it has the tradeoff of having less potential to increase bicycle mode share. Lincoln Street is already a superior cycling environment over Chorro & Broad Street ; however, only 12 percent of the approximately 300 daily cyclists that travel between Downtown and Foothill currently choose Lincoln over Broad & Chorro Streets—mainly due to the route being longer and more circuitous. Pedestrians and bicyclists using the streets for transportation as opposed to leisure will most commonly choose the shortest and most int uitive path over a path with an improved environment, even when the distance or time difference is minor. In addition to this, the Broad Street and Ramona Drive portions of the proposed bikeway route will continue to carry traffic volumes that exceed the t hreshold s generally recommended for shared bicycle streets. Implementation of additional traffic calming will provide some benefits to cycling along these streets, but the frequent conflicts with passing autos will likely continue to deter many less experienced riders. The Lincoln Street Alternative includes the same pedestrian improvements for the Northern Segment as the Preferred Alternative, which are listed in the previous section of this report. The primary elements of the Lincoln Street Alternative are illustrated in Figure 2. Packet Pg. 305 12 Packet Pg 188 1111 Packet Pg 188 Figure 2: Northern Segment Summary Map – Lincoln St. Alternative (Minimal Parking Loss) Packet Pg. 30612Packet Pg 1891111Packet Pg 189 Southern Segment One set of recommendations is proposed for the Southern Segment of the Anholm Bikeway Plan, extending from Downtown (Monterey Street) to Lincoln Street. The plan recommendations for this segment are summarized as follows: •Install safety lighting and streetscape enhancements at Highway 101/Chorro Street undercrossing. Staff will explore opportunities through grants and other City programs to include community artwork and/or other aesthetic features to enhance this location as a key gateway to the downtown. •Extend existing buffered bike lanes on Chorro between Lincoln and Palm, and add physical separation within buffers to create protected bike lanes. •Provide enhanced pavement markings and route signage on Chorro between Palm and Monterey to convey the priority bikeway link into Downtown. •Construct corner bulbouts at Chorro/Walnut to shorter pedestrian crossing exposure. •Install accessible curb ramps and enhanced crossing markings for bicycles and pedestrians at the Chorro/Peach and Chorro/Walnut intersections. Potential Highway 101/Broad Street Ramp Closure In the 2013 Bicycle Transportation Plan, the Broad Street Bicyc le Boulevard identifies a potential future grade-separated bicycle/pedestrian crossing of Highway 101 at Broad Street . This project has been considered as part of this planning process however the scope of the project is significant and requires the ultimate closure of the Broad Street 101 on- and off-ramps by Caltrans. Recent studies of the potential closure of the Broad Street ramps by both the City and Caltrans, including consideration for closure of the southbound ramps only, have concluded that closure of the ramps is not feasible at this time without significant, and costly improvements to the adjacent Highway 101/Santa Rosa Street (Highway 1) interchange. A separate project would need to be created to consider the system implications of such a closure that is beyond the scope of the bicycle boulevard project. In addition to the high-cost improvements required simply to facilitate closure of the ramps, construction of the grade-separated pedestrian/bicycle crossing would involve substantial costs and fu nding challenges on its own. For these reasons, these improvement s are not included as part of the Anholm Bikeway Plan at this time; however, staff will continue to work with Caltrans to pursue closure of the ramps and will reevaluate the potential for a pedestrian/bicycle crossing at this location in future years if closure of the ramps becomes feasible. Making the recommended improvements along Chorro south of Lincoln Street improves the bicycle separation objectives of bike plan without significant operation impacts or capital cost outlay. Community Input To supplement the input already received at previous community meetings and via the project’s web forum, staff conducted additional informal surveys of residents to gauge support for the two proposed project alternatives for the Northern Segment . An online survey was made available for citywide participation via the project webpage, while a mail-in survey was distributed to approximately 1,200 residents in the Broad and Chorro neighborhood. In total, 697 survey responses have been received as of January 16, 2018. The results of this survey are summarized below. Packet Pg. 307 12 Packet Pg 190 1111 Packet Pg 190 As shown in the survey results, there is a clear differentiation of the support for either alternative between the community-wide sample and residents of the Anholm neighborhood. This would be expected as it mirrors concerns of the residents regarding potential parking removal. Where survey participants selected “Other” as a preferred option, comments generally supported no change at all, many citing the limited benefit of the Lincoln alternative, or prioritization of other improvements in the city over this project. All comments received during the community survey process are included as a Council Reading File in Attachment G. Implementation Strategy The proposed implementation strategy is similar for either alternative and includes the two elements of the recently adopted Safe Routes to School (SRTS) plan for Bishop’s Peak and Pacheco Elementary Schools: the bike and pedestrian crossing at Foothill/Ferrini and the Class I Path between Foothill & Ramona. Proposed project phasing is summarized as follows: Phase I (2018-19) 1.Right of Way Acquisition from Church of Latter Day Saints Property 2.Processing of Residential Parking District 3.Construction of Bicycle & Pedestrian Crossing at Foothill & Ferrini 4.Construction of SRTS Class I Path between Foothill & Ramona 5.Installation of Measures along Ramona (Depending on Adopted Plan) - 12 Month Performance Monitoring and Status Report to Council - Continued coordination with Caltrans on Highway 1 & 101 Improvements & Following Broad Ramp Closure. Packet Pg. 308 12 Packet Pg 191 1111 Packet Pg 191 Phase II (2019-20) 1.Installation of Temporary Measures South of Ramona (Depending on Adopted Plan) 2.Installation of Lighting and Streetscape Enhancements at Chorro & 101 Undercrossing. - 12 Month Performance Monitoring and Status Report to Council - Continued coordination with Caltrans on Hwy 1 & 101 Improvements & Following Broad Ramp Closure. Phase III (2020 & Beyond) 1.Incremental conversion of Temporary Measures to Permanent installations 2.Installation of ancillary spot improvements, such as raised intersection at Broad/Murray, installation of sidewalks along west side of Broad, curb ramps and additional street lights. - Continued coordination with Caltrans on Hwy 1 & 101 Improvements & Following Broad Ramp Closure. CONCURRENCES The Bicycle Advisory Committee reviewed the Anholm Bikeway Plan alternatives on January 18, 2018, and recommended approval of the Preferred Alternative to the City Council. Due to the limited time between the Bicycle Advisory Committee Meeting and City Council Meeting, draft minutes will be provided as part of Council Correspondence. ENVIRONMENTAL REVIEW The findings of the CEQA environmental analysis conducted for each project alternative is included as Attachment C and Attachment F. Per Section 15304 of the State California Environmental Quality Act (CEQA) Guidelines , the project is categorically exempt from CEQA under Class 1, Existing Facilities; Section 15301 and Class 4, Minor Alterations to Land, because the project would be constructed on existing city streets within the public right of way. The project will be constructed in an area that has no value as habitat for biological resources and would not be located in agricultural areas. The proposed street lights would be located in an urban area and would not significantly increase light or glare beyond existing conditions. The project has been reviewed by the City Public Works Department (Transportation Division) and Community Development Department, and no significant traffic impacts were identified, based on the description and location of the project. The project is consistent with General Plan policies that promote an integrated system of bikeways, walkways, and traffic calming measures that promote a safe, multimodal transportation network. FISCAL IMPACT Staff is proposing to implement elements of the Bishop’s Peak and Pacheco Safe Routes to School Plan in conjunction with the Broad Street Bicycle Boulevard (Anholm Bikeway) Plan— both projects are included in the adopted FY2017-19 Financial Plan. There is currently $610,000 approved through FY2018/19 in the FY2017-19 Financial Plan for project implementation. At Packet Pg. 309 12 Packet Pg 192 11 11 Packet Pg 192 the time the current financial plan was adopted, the scope was yet to be de fined and the cost estimates were speculative for the Broad Street Bicycle Boulevard (Anholm Bikeway) Plan. For example, a final plan had yet to be adopted and potential costs could range significantly, depending on the type of features to be approved. The cost for Phase I of the Anholm Bikeway (Preferred Alternative) improvements is estimated at $900,000, leaving a budget shortfall of $290,000 for Phase I. To address this shortfall, staff will be requesting $290,000 as part of the FY2017-19 Budget Supplement through SB-1 State funding. Phase II of Anholm Bikeway Plan implementation is included in the five -year Capital Improvement Program (CIP), with $270,000 identified for FY2019/20. Again, at the time the current Financial Plan was adopted, the scope of these improvements was yet to be defined. Under the recommended plan, the estimated cost for Phase II implementation is $475,000. Staff will be requesting these funds as part of the FY2019-21 Financial Plan. Due to the incremental nature of Phase III imple mentation, it’s anticipated that these improvements can be scaled and phased in as future budgets permit. Broad Street Bicycle Boulevard (Anholm Bikeway Plan) improvements are under consideration for inclusion in the Citywide Transportation Impact Fee Program update, which is expected to be finalized in 2018 and could provide additional funding opportunities. In addition, staff will pursue any available grant funding for unfunded portions of the project. ALTERNATIVES 1.Council could adopt a resolution ado pting the Anholm Bikeway plan under a hybrid of features from the Preferred Alternative (protected bike lanes) and the Lincoln Alternative (shared streets). An example hybrid plan could include the Preferred Alternative’s protected lanes on Chorro & Ramona, with the Lincoln Alternative’s class III shared lanes, traffic calming, and no parking removal on Broad where parking is most limited. This example is a supportable alternative by staff. 2.Council could adopt a resolution adopting the Anholm Bikeway Plan under the Lincoln Street Alternative, as defined in Attachment E. Staff does not recommend this alternative because this option is expected to have limited effect on achieving the bicycle mode share goals, as adopted in the City General Plan. 3.Council could either defer adoption of any plan to some future point uncertain or decide to adopt no plan and direct staff to return with an amendment to the Bicycle Transportation plan removing the planned facility augmentation. Packet Pg. 310 12 Packet Pg 193 11 11 Packet Pg 193 Page intentionally left blank. Packet Pg 194 11 Meeting Date: 2/20/2018 FROM: Xenia Bradford, Finance Director Prepared by: PFM Consulting Xenia Bradford, Finance Director CITY COUNCIL SUBJECT: CITY APPROVING THE SALE OF THE LEASE REVENUE REFUNDING BONDS, SERIES 2018, EXECUTION OF BOND DOCUMENTS AND RELATED ACTIONS RECOMMENDATION Adopt a Resolution entitled “A Resolution of the City Council of the City of San Luis Obispo, California, authorizing the issuance, sale and delivery of San Luis Obispo Public Financing Authority Lease Revenue Refunding Bonds; the execution and delivery of a Continuing Disclosure Certificate, a Site Lease, a Facility Lease, and a Bond Purchase Agreement; the preparation and distribution of a preliminary and a final Official Statement relating to the aforesaid bonds; and certain other actions in connection with such transactions.” (Attachment A) PUBLIC FINANCING AUTHORITY SUBJECT: PUBLIC FINANCING AUTHORITY APPROVING THE SALE OF THE LEASE REVENUE REFUNDING BONDS, SERIES 2018, EXECUTION OF BOND DOCUMENTS AND RELATED ACTIONS. RECOMMENDATION Adopt a Resolution entitled “A Resolution of the Governing Board of the San Luis Obispo Public Financing Authority, California, authorizing the issuance, sale and delivery of San Luis Obispo Public Financing Authority Lease Revenue Refunding Bonds; the execution and delivery of a Trust Agreement, a Site Lease, a Facility Lease, and a Bond Purchase Agreement; the preparation and distribution of a preliminary and a final Official Statement relating to the aforesaid bonds; and certain other actions in connection with such transactions.” (Attachment B) DISCUSSION The City of San Luis Obispo previously issued a series of bonds in 2005, 2006 and 2009 in order to fund various City infrastructure (the “Prior Bonds”). The amounts and purpose of each bond issuance is summarized in the table below: Packet Pg 195 12 Series Outstanding Par Call Date Purpose 2005 $3,510,000 Callable Refund Series 1996 bonds, which funded the fire station headquarters building 2006 $12,455,000 Callable 919 Palm Street Public Street Parking and City Office Project 2009 $6,280,000 6/1/2018 Public Safety Communications and Emergency Operations Center Project Total $22,245,000 In order to take advantage of favorable debt service rates, City staff is recommending that new bonds be issued (2018 Bonds) to refund the Prior Bonds. Total savings is estimated to be approximately $3,380,000 over the term of the new bonds based on current market conditions. The 2018 Bonds will be lease revenue bonds issued by the San Luis Obispo Public Financing Authority (the “PFA”). As required by law, the City will lease to the PFA the City administrative offices and parking facility at 919 Palm Street, which currently secure the 2006 Bonds. The PFA will then lease the property back to the City in exchange for rental payments which are estimated in the fiscal section below. The City’s rental payments will be assigned to the trustee of the 2018 Bonds and will be used to make the bond payments. This legal structure is the same as that of the Prior Bonds, but with the PFA serving in the role held by the Capital Improvement Board on the Prior Bonds. The proposed Resolution will authorize staff to proceed with the transaction provided it meets certain parameters. The paramount (or price of the lease revenue bond at the time of sale) will not exceed $22,000,000, aggregate net present value (NPV) savings will be at least 3% of the refunded principal, consistent with a common industry benchmark, and underwriter’s discount (otherwise may be described as fee) will not exceed 0.4% of the par amount of the bonds. All other cost of issuance are dependent on the scope of work whereas the underwriter’s discount payable to underwriter is based on actual paramount at time of sale. If staff in unable to meet these parameters, then further authorization by the Council will be required. The Resolution also approves the following transaction documents which are substantially in final forms: • Continuing Disclosure Certificate (Attachment C & F): Designates the City’s obligations to disclose financial information to bond investors • Site Lease (Attachment I & L): Leases certain property from the City to the PFA • Facility Lease (Attachment D & G): Leases the properties from the PFA back to the City • Preliminary Official Statement (Attachment E & H): Primary disclosure document used to market the 2018 Bonds to investors • Bond Purchase Agreement (Attachment K) – Details terms of the transaction between the City, PFA, and underwriter The financing team will be composed of City staff and several consulting firms and banking institutions whose specialize in this type of finance. PFM Financial Advisors LLC (PFM) will serve as municipal advisor. Raymond James & Associates, Inc. will serve as underwriter. Orrick, Herrington & Sutcliffe LLP will serve as bond and disclosure counsel. U.S. Bank is the trustee on the Prior Bonds and will continue to serve as trustee. Standard & Poor’s (S&P) will provide a Packet Pg 196 12 bond rating. The City may also engage a financial printer, escrow agent, escrow verification agent, escrow bidding agent, title insurance provider, and other providers as needed. Upon Council’s approval, staff and the financing team will proceed to execute a bond transaction that meets the parameters defined in the Resolution. The savings parameter is set conservatively in order to allow for flexibility but also require NPV savings to meet industry best practice standards of a minimum of 3% of refunded principal. All savings figures take into account underwriting fees and other costs of issuance. The table below shows good faith estimates provided by PFM of key statistics related to the 2018 Bonds based on current market conditions, though it is important to note that conditions could change prior to bond pricing. Value Estimate Notes Par Amount $18,145,000 - True Interest Cost 3.20% Measure of overall interest rate NPV Savings $2,570,000 (11.54%) - Finance Charges (transaction costs) $323,000 Underwriter’s discount plus costs of issuance Total Proceeds $22,900,000 Price paid for bonds less underwriter’s discount Total Payments $24,450,000 Total debt service The financing process is expected to be completed in April. The City and finance team will meet with S&P in late February or early March. Pricing will then occur in mid -March and closing will occur in early April. In addition to achieving debt service savings, the transaction will enable the City to unencumber certain leased assets that are currently pledged to the Prior Bonds, since the paramount (or price) of the 2018 Bonds will be significantly lower than that of the Prior Bonds. In particular, the City will seek to release the police facilities at 1042 Walnut Street and the fire department headquarters from the pledge associated with the refunding. This will provide the City greater flexibility for future financings related to its long-term capital plans. CONCURRENCES The City Administration department concurs with the recommendation. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA Guidelines sec. 15278. FISCAL IMPACT The 2018 Bonds will result in annual debt service savings for the City. Cash flow savings are estimated to be approximately $3,380,000 over the term of the 2018 Bonds based on current market conditions. The table below shows annual cash flow savings. NPV savings are estimated Packet Pg 197 12 at $2,570,000, which is 11.54% of the refunded principal. The refunding will not alter the overall structure of debt repayment. The annual budgetary savings for the General Fund by fiscal year are shown in the “Net Difference” column, which reflects the difference between currently budgeted and projected payments to repay the debt and the estimated payments due based on expected savings of 11.54%. If the market conditions change between now and the estimated time of transaction in April, the net difference could increase or decrease. Existing Debt Service Projected Debt Service1 Difference Less Current Reserve Releases/Interest Earnings2 Net Difference 6/30/2018 2,443,410 2,419,036 (24,374) 24,374 0 6/30/2019 2,435,138 2,014,656 (420,481) 356,670 (63,811) 6/30/2020 1,892,888 1,475,656 (417,231) 76,116 (341,115) 6/30/2021 1,891,483 1,466,056 (425,426) 76,116 (349,310) 6/30/2022 1,887,260 1,465,456 (421,804) 76,116 (345,687) 6/30/2023 1,886,258 1,463,456 (422,801) 76,116 (346,685) 6/30/2024 1,887,863 1,470,056 (417,806) 76,116 (341,690) 6/30/2025 1,886,169 1,464,856 (421,312) 76,116 (345,196) 6/30/2026 2,006,749 1,468,256 (538,492) 664,116 125,624 6/30/2027 1,418,861 1,124,856 (294,005) 51,583 (242,422) 6/30/2028 1,414,268 1,118,456 (295,811) 51,583 (244,228) 6/30/2029 1,417,083 1,126,056 (291,026) 51,583 (239,443) 6/30/2030 1,417,564 1,122,056 (295,507) 51,583 (243,925) 6/30/2031 1,415,833 1,121,856 (293,976) 51,583 (242,393) 6/30/2032 1,416,433 1,119,406 (297,026) 51,583 (245,443) 6/30/2033 1,413,830 1,121,206 (292,624) 51,583 (241,041) 6/30/2034 1,473,720 1,112,106 (361,614) 114,820 (246,793) 6/30/2035 1,407,418 1,111,169 (296,249) 50,839 (245,410) 6/30/2036 1,411,823 1,114,294 (297,529) 1,055,397 757,868 6/30/2037 407,963 286,325 (121,638) 4,799 (116,839) 6/30/2038 408,125 287,875 (120,250) 5,787 (114,464) 6/30/2039 407,138 289,100 (118,038) 411,925 293,887 Savings 3,506,505 (3,378,516) NPV Savings (2,565,963) 1. Includes debt service already paid in FY2018 and cash contributions for budgeted debt service 2. Shows existing debt service reserves that would be released over time if no refunding takes place and interest earnings from existing reserves; years with reserve releases are highlighted in gray ALTERNATIVES The City could choose not to proceed with the refunding at this time. It is not possible to predict whether market conditions would be more or less favorable in the future. However, it is important to note that available savings will diminish over time unless interest rates decline because all of the Prior Bonds are currently callable. Packet Pg 198 12 Attachments: a - City Resolution b - Authority Resolution c - Council Reading File - Continuing Disclosure Certificate d - Council Reading File - Facility Lease e - Council Reading File - Preliminary Official Statement f - Council Reading File - Redline Continuing Disclosure Certificate g - Council Reading File - Redline Facility Lease h - Council Reading File - Redline Preliminary Official Statement i - Council Reading File - Redline Site Lease j - Council Reading File - Redline Trust Agreement k - Council Reading File - San Luis Obispo 2018 LRRBs BPA l - Council Reading File - Site Lease City of San Luis Obispo 2018 LRRB m - Council Reading File - Trust Agreement City of San Luis Obispo 2018 LRRB Packet Pg 199 12 R ______ RESOLUTION NO. ___ (2018 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF SAN LUIS OBISPO PUBLIC FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS; THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE CERTIFICATE, A SITE LEASE, A FACILITY LEASE, AND A BOND PURCHASE AGREEMENT; THE PREPARATION AND DISTRIBUTION OF A PRELIMINARY AND A FINAL OFFICIAL STATEMENT RELATING TO THE AFORESAID BONDS; AND CERTAIN OTHER ACTIONS IN CONNECTION WITH SUCH TRANSACTIONS WHEREAS, the City of San Luis Obispo (the “City”) previously entered into a lease agreement (the “1996 Lease”) with the City of San Luis Obispo Capital Improvement Board (the “Board”) for the purpose of financing the acquisition and construction of various properties to be used for municipal purposes of the City; WHEREAS, the Board previously issued its 1996 Lease Revenue Bonds (County of San Luis Obispo, California) in the aggregate principal amount of $7,100,000 (the “1996 Bonds”) pursuant to an Indenture of Trust dated as of June 1, 1996, by and between the Board and First Trust of California, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2005 Lease”) with the Board for the purpose of refinancing the 1996 Lease and to allow for the defeasance and refunding of the outstanding 1996 Bonds; WHEREAS, the Board previously further issued its 2005 Refunding Lease Revenue Bonds in the aggregate principal amount of $6,550,000 (the “2005 Bonds”) pursuant to an Indenture of Trust dated as of May 1, 2005, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2006 Lease”) with the Board for the purpose of financing the acquisition and construction of facilities located in the City to be used for public parking and City administrative office purposes; WHEREAS, the Board previously further issued its 2006 Lease Revenue Bonds (919 Palm Street Public Parking and City Office Project) in the aggregate principal amount of $16,160,000 (the “2006 Bonds”) pursuant to an Indenture of Trust dated as of April 1, 2006, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2009 Lease” and, collectively with the 2005 Lease and the 2006 Lease, the “Prior Leases”) with the Board for the purpose of financing the acquisition and construction of facilities located in the Packet Pg 200 12 Resolution No. _____ (2018 Series) Page 2 R ______ City to be used for a public safety dispatch center and Fire Department storage facility, and improvements to the City’s radio system for public safety communications purposes; WHEREAS, the Board previously further issued its 2009 Lease Revenue Bonds (Public Safety Communications and Emergency Operations Center Project) (Bank Qualified) in the aggregate principal amount of $10,705,000 (the “2009 Bonds” and, collectively with the 2005 Bonds and the 2006 Bonds, the “Prior Bonds”) pursuant to an Indenture of Trust dated as of March 1, 2009, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City proposes to refinance the Prior Leases to allow for the defeasance and refunding of the Prior Bonds; WHEREAS, the San Luis Obispo Public Financing Authority (the “Authority”) was formed on September 8, 2014 by the City and the Parking Authority of the City of San Luis Obispo for the purpose, among others, of assisting the City in connection with refinancing any outstanding obligations; WHEREAS, in order to assist in refinancing the Prior Leases to defease and refund the Prior Bonds, it is proposed that the City lease certain of its real property, selected from a list including Fire Station No. 1, located at 2160 Santa Barbara, San Luis Obispo, and improvements thereon; the City Administrative Offices and Parking Structure, located at 919 Palm Street, San Luis Obispo; and improvements thereon; City Hall, located at 990 Palm Street, San Luis Obispo, and improvements thereon; and the Police Main Building, Storage Building and Vehicle Storage Garage, located at 1042 Walnut Street, San Luis Obispo, and improvements thereon (the properties so selected, collectively, the “Leased Property”) to the Authority pursuant to a Site Lease (the “Site Lease”) and lease the Leased Property back from the Authority pursuant to a Facility Lease (the “Facility Lease”); WHEREAS, it is further proposed that the Authority issue its San Luis Obispo Public Financing Authority Lease Revenue Refunding Bonds, Series 2018 in the aggregate principal amount of not to exceed $22,000,000 (the “Bonds”), pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Government Code”), for the purpose of making a payment to the City pursuant to the Site Lease t o refinance the Prior Leases and defease and refund the Prior Bonds, fund a debt service reserve account, if deemed necessary, and pay costs of issuance associated with the Bonds; WHEREAS, it is further proposed that the Authority issue the Bonds pursuant to a trust agreement dated as of April 1, 2018 (the “Trust Agreement”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”); WHEREAS, the City, the Authority and Raymond James & Associates, Inc. (the “Underwriter”), as purchaser of the Bonds, will enter into a Bond Purchase Agreement (the “Bond Purchase Agreement”); WHEREAS, the City has prepared an official statement relating to the Bonds (the “Official Statement”) in preliminary form for use in connection with the marketing of the Bonds to potential purchasers and for use in final form for distribution to the actual purchasers thereof; Packet Pg 201 12 Resolution No. _____ (2018 Series) Page 3 R ______ WHEREAS, the City Council now wishes to further authorize the execution and delivery of a continuing disclosure certificate (the “Continuing Disclosure Certificate”) by the City to assist the Underwriter in satisfying their obligations under Rule 15c2-12 of the Securities Exchange Act of 1934; WHEREAS, in compliance with Government Code Section 5852.1, the City Council has obtained from PFM Financial Advisors LLC, as municipal advisor, the certain required good faith estimates, and such estimates have been disclosed at this meeting; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of San Luis Obispo as follows: SECTION 1. The foregoing recitals are true and correct and the City Council hereby so finds and determines. SECTION 2. In accordance with Section 6586 of the Government Code, the City Council hereby finds and determines that the proposed financing of said proposed public capital improvements will have one or more of the following public benefits to the citizens of the City, and that such benefits will be significant: (a) demonstrable savings in effective interest rate, bond preparation, bond underwriting or bond issuance costs; and (b) significant reductions in effective user charges levied by the City. Accordingly, the City Council hereby approves the refinancing of the Prior Leases to allow for the defeasance and refunding of the Prior Bonds proposed to be accomplished with the proceeds of the Bonds. SECTION 3. The City Council hereby approves the issuance of the Bonds by the Authority in an aggregate principal amount not to exceed $22,000,000 to refinance the Prior Leases and defease and refund the Prior Bonds, including funding a debt service reserve account if deemed necessary and paying costs of issuance and related fees and expenses; provided, however that such Bonds shall be sold on or before May 31, 2018, and shall mature no later than June 1, 2039. The Finance Director of the City is hereby directed to perform the duties imposed upon her by the provisions of the financing documents, including the Trust Agreement, the Site Lease and the Facility Lease, and is hereby authorized to act as treasurer of the Authority and to hold the funds and accounts in trust as a fiduciary for the owners of the Bonds as set forth in said documents. SECTION 4. The Site Lease, in substantially the form submitted to this meeting, is hereby approved. The City Manager or Finance Director of the City, or the designee of such officer (each, an “Authorized Officer”), each acting alone, is hereby authorized and directed, for and on behalf of the City, to execute and deliver the Site Lease in substantially said form, with such changes therein as any Authorized Officer, with the advice of the City Attorney and the City’s bond counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Packet Pg 202 12 Resolution No. _____ (2018 Series) Page 4 R ______ SECTION 5. The Facility Lease, in substantially the form submitted to this meeting, is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the City, to execute and deliver the Facility Lease in substantially said form, with such changes therein as any Authorized Officer, with the advice of the City Attorney and the City’s bond counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 6. The Continuing Disclosure Certificate presented at this meeting is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the City to execute and deliver the Continuing Disclosure Certificate in substantially the form presented at this meeting, with such changes therein as the officer executing the same may, with the advice of the City Attorney and the City’s bond counsel, require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 7. The Bond Purchase Agreement, in substantially the form submitted to this meeting, is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the City, to execute and deliver the Bond Purchase Agreement in substantially said form, with such changes therein as any Authorized Officer, with t he advice of the City Attorney and the City’s bond counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, that the net present value of the debt service savings with respect to the Bonds shall be at least 3.00% of the aggregate principal amount of the Prior Bonds being redeemed and the Underwriter’s discount shall not exceed 0.4% of the aggregate principal amount of the Bonds (exclusive of original issue discount). SECTION 8. The preliminary form of the Official Statement to be used in connection with the offer and sale of the Bonds is hereby adopted and approved, and any Authorized Officer, each acting alone, is hereby authorized to execute and deliver a certificate deeming the preliminary form of the Official Statement (including, if applicable, as modified by any amendment or supplement thereto) “final” within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 and to execute and deliver the same in final form, for and on behalf of the Authority, with such changes therein as the officer executing the same, with the advice of the City Attorney, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 9. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents, written requests, certificates, and representations, including, without limitation, redemption or defeasance notices, escrow agreements, credit documents, signature certificates, no-litigation certificates, tax certificates, letters of representation relating to book-entry registration and certificates concerning the contents of the Official Statement distributed in connection with the sale of the Bonds, which they may deem necessary or advisable in order to consummate the issuance, sale and delivery of the Bonds or related documents and otherwise to effectuate the purposes of this resolution. Packet Pg 203 12 Resolution No. _____ (2018 Series) Page 5 R ______ SECTION 10. This resolution shall take effect immediately. Upon motion of Council Member _______________, seconded by Council Member ______________ and on the following roll call vote: AYES: Council Members NOES: Council Members ABSENT: Council Members The foregoing resolution was adopted this 20th day of February, 2018: Mayor Heidi Harmon ATTEST: Carrie Gallagher City Clerk APPROVED AS TO FORM: J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ____________________________________ Carrie Gallagher City Clerk Packet Pg 204 12 R ______ RESOLUTION NO. _____ 2018 SERIES A RESOLUTION OF THE GOVERNING BOARD OF THE SAN LUIS OBISPO PUBLIC FINANCING AUTHORITY, CALIFORNIA, AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF SAN LUIS OBISPO PUBLIC FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS; THE EXECUTION AND DELIVERY OF A TRUST AGREEMENT, A SITE LEASE, A FACILITY LEASE, AND A BOND PURCHASE AGREEMENT; THE PREPARATION AND DISTRIBUTION OF A PRELIMINARY AND A FINAL OFFICIAL STATEMENT RELATING TO THE AFORESAID BONDS; AND CERTAIN OTHER ACTIONS IN CONNECTION WITH SUCH TRANSACTIONS WHEREAS, the City of San Luis Obispo (the “City”) previously entered into a lease agreement (the “1996 Lease”) with the City of San Luis Obispo Capital Improvement Board (the “Board”) for the purpose of financing the acquisition and construction of various properties to be used for municipal purposes of the City; WHEREAS, the Board previously issued its 1996 Lease Revenue Bonds (County of San Luis Obispo, California) in the aggregate principal amount of $7,100,000 (the “1996 Bonds”) pursuant to an Indenture of Trust dated as of June 1, 1996, by and between the Board and First Trust of California, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2005 Lease”) with the Board for the purpose of refinancing the 1996 Lease and to allow for the defeasance and refunding of the outstanding 1996 Bonds; WHEREAS, the Board previously further issued its 2005 Refunding Lease Revenue Bonds in the aggregate principal amount of $6,550,000 (the “2005 Bonds”) pursuant to an Indenture of Trust dated as of May 1, 2005, by and between the Board and U.S. Bank Na tional Association, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2006 Lease”) with the Board for the purpose of financing the acquisition and construction of facilities located in the City to be used for public parking and City administrative office purposes; WHEREAS, the Board previously further issued its 2006 Lease Revenue Bonds (919 Palm Street Public Parking and City Office Project) in the aggregate principal amount of $16,160,000 (the “2006 Bonds”) pursuant to an Indenture of Trust dated as of April 1, 2006, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2009 Lease” and, collectively with the 2005 Lease and the 2006 Lease, the “Prior Leases”) with the Board for the purpose of financing the acquisition and construction of facilities located in the City to be used for a public safety dispatch center and Fire Department storage facility, and improvements to the City’s radio system for public safety communications purposes; Packet Pg 205 12 Resolution No. _____ (2018 Series) Page 2 R ______ WHEREAS, the Board previously further issued its 2009 Lease Revenue Bonds (Public Safety Communications and Emergency Operations Center Project) (Bank Qualified) in the aggregate principal amount of $10,705,000 (the “2009 Bonds” and, collectively with the 2005 Bonds and the 2006 Bonds, the “Prior Bonds”) pursuant to an Indenture of Trust dated as of March 1, 2009, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City proposes to refinance the Prior Leases to allow for the defeasance and refunding of the Prior Bonds; WHEREAS, the San Luis Obispo Public Financing Authority (the “Authority”) was formed on September 8, 2014 by the City and the Parking Authority of the City of San Luis Obispo for the purpose, among others, of assisting the City in connection with refinancing any outstanding obligations; WHEREAS, in order to assist in refinancing the Prior Leases to defease and refund the Prior Bonds, it is proposed that the City lease certain of its real property, selected from a list including Fire Station No. 1, located at 2160 Santa Barbara, San Luis Obispo, and improvements thereon; the City Administrative Offices and Parking Structure, located at 919 Palm Street, San Luis Obispo; and improvements thereon; City Hall, located at 990 Palm Street, San Luis Obispo, and improvements thereon; and the Police Main Building, Storage Building and Vehicle Storage Garage, located at 1042 Walnut Street, San Luis Obispo, and improvements thereon (the properties so selected, collectively, the “Leased Property”) to the Authority pursuant to a Site Lease (the “Site Lease”) and lease th e Leased Property back from the Authority pursuant to a Facility Lease (the “Facility Lease”); WHEREAS, it is further proposed that the Authority issue its San Luis Obispo Public Financing Authority Lease Revenue Refunding Bonds, Series 2018 in the aggregate principal amount of not to exceed $22,000,000 (the “Bonds”), pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code, for the purpose of making a payment to the City pursuant to the Site Lease to refinance the Prior Leases and defease and refund the Prior Bonds, fund a debt service reserve account if deemed necessary and pay costs of issuance associated with the Bonds; WHEREAS, it is further proposed that the Authority issue the Bonds pursuant to a trust agreement dated as of April 1, 2018 (the “Trust Agreement”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”); WHEREAS, the City, the Authority and Raymond James & Associates, Inc. (the “Underwriter”), as purchaser of the Bonds, will enter into a Bond Purchase Agreement (the “Bond Purchase Agreement”); WHEREAS, it is in the public interest, convenience and welfare and for the common benefit of the inhabitants of the City that the City enter into this financing with the Authori ty to refinance the Prior Leases and defease and refund the Prior Bonds; Packet Pg 206 12 Resolution No. _____ (2018 Series) Page 3 R ______ WHEREAS, the Authority has prepared an official statement relating to the Bonds (the “Official Statement”) in preliminary form for use in connection with the marketing of the Bonds to potential purchasers and for use in final form for distribution to the actual purchasers thereof; NOW, THEREFORE, BE IT RESOLVED by the Governing Board of the San Luis Obispo Public Financing Authority as follows: SECTION 1. The foregoing recitals are true and correct and the Governing Board hereby so finds and determines. SECTION 2. The Governing Board hereby approves the issuance of the Bonds by the Authority in an aggregate principal amount not to exceed $22,000,000 to refinance the Prior Leases and defease and refund the Prior Bonds, including funding a debt service reserve account if deemed necessary and paying costs of issuance and related fees and expenses; provided, however, that such Bonds shall be sold on or before May 31, 2018, and shall mature no later than June 1, 2039. The Treasurer of the Authority (“Treasurer”) is hereby directed to perform the duties imposed upon her by the provisions of the financing documents, including the Trust Agreement, the Site Lease and the Facility Lease. SECTION 3. The Trust Agreement, in substantially the form submitted to this meeting, is hereby approved. The Executive Director or Treasurer of the Authority, or the designee of such officer (each, an “Authorized Officer”), each acting alone, is hereby authorized and directed, for and on behalf of the Authority, to execute and deliver the Trust Agreement in substantially said form, with such changes therein as any Authorized Officer, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 4. The Site Lease, in substantially the form submitted to this meeting, is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the Authority, to execute and deliver the Site Lease in substantially said form, with such changes therein as any Authorized Officer, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 5. The Facility Lease, in substantially the form submitted to this meeting, is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the Authority, to execute and deliver the Facility Lease in substant ially said form, with such changes therein as any Authorized Officer, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 6. The Bond Purchase Agreement, in substantially the form submitted to this meeting, is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the Authority, to execute and deliver the Bond Purchase Agreement in substantially said form, with such changes therein as any Authorized Officer, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, that the net present value of the debt Packet Pg 207 12 Resolution No. _____ (2018 Series) Page 4 R ______ service savings with respect to the Bonds shall be at least 3.00% of the aggregate principal amount of the Prior Bonds being redeemed and the Underwriter’s discount shall not exceed 0.4% of the aggregate principal amount of the Bonds (exclusive of original issue discount). SECTION 7. The preliminary form of the Official Statement to be used in connection with the offer and sale of the Bonds is hereby adopted and approved, and any Authorized Officer, each acting alone, is hereby authorized to execute and deliver a cert ificate deeming the preliminary form of the Official Statement (including, if applicable, as modified by any amendment or supplement thereto) “final” within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 and to execute and deliver the same in final form, for and on behalf of the Authority, with such changes therein as the officer executing the same, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 8. The Bonds shall be executed by the manual or facsimile signature of the Treasurer of the Authority and attested by the manual or facsimile signature of the Secretary of the Authority, in accordance with the Trust Agreement. The Bonds, when so executed, shall be delivered to the Trustee for authentication by the Trustee. The Trustee is hereby requested and directed to authenticate the Bonds by executing the Trustee’s Certificate of Authentication appearing thereon, and to deliver the Bonds, when duly executed and authenticated, to the initial purchaser thereof in accordance with written instructions executed on behalf of the Authority by an Authorized Officer, which instructions the Authorized Officers are hereby authorized and directed, for and on behalf of the Authority, to execute and deliver to the Trustee. Said instructions shall provide for the delivery of the Bonds to the initial purchaser thereof upon payment of the purchase price thereof. SECTION 9. The Authority hereby designates the firm of Orrick, Herrington & Sutcliffe LLP to serve as bond counsel and disclosure counsel, and the firm of PFM Financial Advisors LLC to serve as municipal advisor, each in connection with the issuance, sale and delivery of the Bonds. SECTION 10. The officers of the Authority are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents, written requests, certificates, and representations, including, without limitation, redemption or defeasance notices, escrow agreements, credit documents, signature certificates, no-litigation certificates, tax certificates, letters of representation relating to book-entry registration and certificates concerning the contents of the Official Statement distributed in connection with the sale of the Bonds, which they may deem necessary or advisable in order to consummate the issuance, sale and delivery of the Bonds or related documents and otherwise to effectuate the purposes of this resolution. Packet Pg 208 12 Resolution No. _____ (2018 Series) Page 5 R ______ SECTION 11. This resolution shall take effect immediately. Upon motion of Authority Member _______________, seconded by Authority Member ______________ and on the following roll call vote: AYES: Authority Members NOES: Authority Members ABSENT: Authority Members The foregoing resolution was adopted this 20th day of February, 2018: Chair Heidi Harmon [SEAL] ATTEST: Carrie Gallagher, CMC Secretary APPROVED AS TO FORM: J. Christine Dietrick Authority Counsel Packet Pg 209 12 SECRETARY’S CERTIFICATE I, the undersigned, duly appointed and qualified Secretary of the San Luis Obispo Public Financing Authority (the “Authority”), certify that attached is a full, true and correct copy of Authority Resolution No. _____, adopted February 20, 2018, during a meeting of the governing board of the Authority. Such meeting was duly and legally held at the regular meeting place of the Authority. All of the members of said governing board had due notice of such meeting and a majority thereof was present at such meeting. I have carefully compared the same with the original minutes of said meeting on file and of record in my office, and the foregoing is a full, true and correct copy of such resolution adopted at said meeting and entered in said minutes. Said resolution has not been amended, modified or rescinded since the date of its adoption, and the same is now in full force and effect. Dated: Secretary Packet Pg 210 12 Meeting Date: 2/20/2018 FROM: Michael Codron, Community Development Director Prepared By: Michael Codron, Community Development Director Rachel Cohen, Associate Planner Anne Russell, Interim Assistant City Attorney SUBJECT: OVERVIEW OF PROPOSED DRAFT CANNABIS REGULATIONS RECOMMENDATION Receive a presentation, take public testimony, and provide the following direction to staff: 1. Prepare draft regulations based on direction provided by the City Council with input from the community and Planning Commission, and return to the Council on May 1, 2018, with the resolutions and ordinances necessary to adopt Cannabis Regulations; and 2. Return to the City Council on March 6, 2018, for approval of a Request for Proposals (RFP) to identify a consultant to process applications and establish a list of eligible cannabis business operators. REPORT-IN-BRIEF On March 14, 2017, the City Council adopted Ordinance No. 1633 (Attachment A), reaffirming that all commercial cannabis activity is currently illegal in the City of San Luis Obispo . At the same time, Council directed staff to engage with the community and return with recommendations regarding the regulation of cannabis business activity within the City. Proposition 64 was overwhelmingly supported by City voters (15,447 total yes votes or 67.52% of the ballots cast), however, there are many policy questions and regulatory details that must be determined before cannabis business activity can be permitted. The purpose of this agenda report is to highlight those policy issues and provide the City Council with an opportunity to chart a course forward that is acceptable to the City Council and community. Staff has followed the City’s Public Engagement and Notification Manual and used a “Consult” level of public engagement to gain feedback on proposed regulations. Staff performed outreach with individuals and community groups to develop an outline of proposed regulations, allowing members of the public to better evaluate a possible framework for a regulated cannabis marketplace in the City. An overview of a proposed regulatory framework was published on the City’s website and presented in different forums for feedback to inform further refinement prior to presentation of fully drafted regulations for Council consideration. Based on initial Council direction and subsequent public outreach, staff’s currently contemplated approach to draft regulations envisions a market with specific limits imposed, including a limit of three storefronts for commercial cannabis sales, a limit of 70,000 square feet of canopy for indoor cultivation, no outdoor commercial cultivation, manufacturing limited to non-volatile processes, buffers from schools and residential neighborhoods, and a vetting process for business Packet Pg 211 13 operators among other limitations and criteria. That approach is reflected in the published outline presentation. A set of questions is posed to determine the scope of regulations that the City Council is comfortable moving forward with. With direction from the City Council, staff will move forward and publish comprehensive draft regulations for presentation to the community and the Planning Commission before returning the City Council for potential adoption of regulations on May 1, 2018. DISCUSSION Background The San Luis Obispo City Council last discussed Cannabis Regulations on March 14, 2017. At that time, Proposition 64 (the Adult Use of Marijuana Act) had been approved by California voters and state regulators were in the process of developing plans to implement a regulated cannabis market. Since that time, the State has established new regulatory agencies and SB 94, the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), was approved by the legislature. MAUCRSA is the operational law that consolidates all of California’s cannabis-related statutes and is the basis for regulations still under development by three State licensing entities. 1. Bureau of Cannabis Control – licenses all activities associated with the testing, distribution, and sale of cannabis products to the end user. 2. California Department of Public Health, Manufactured Cannabis Safety Branch – licenses all activities associated with the manufacture of cannabis into various concentrates, edibles, supplements, or any other product whether intended for the wholesale market or the end user. 3. California Department of Food and Agriculture – licenses all cultivator activities under the CalCannabis program. Attachments B through F to this report include the latest information from these agencies regarding the permitting process. At the March 2017 meeting, the Council acted to confirm long standing City policy to prohibit all cannabis related business activity in the City and provided staff with the following direction: 1. Monitor developments in other jurisdictions 2. Monitor development at the Federal level 3. Engage the community regarding various land use and taxation alternatives that may be appropriate 4. Return to the City Council with a recommendation Packet Pg 212 13 Local Agency Responsibilities (Dual Licensing) Presently, Ordinance 1633 prohibits all cannabis related business activity in the City of San Luis Obispo. Prior to issuing a license, state regulators must contact the local jurisdiction where a business intends to operate to ensure the business is allowed under local rules. If Ordinance 1633 is not replaced by new regulations, all cannabis-related business activity, including deliveries, will continue to be illegal under both state and local law in the City of San Luis Obispo, even if the business has a state license to operate in other jurisdictions. Process to Develop Draft Regulations and Public Engagement The City Council has directed staff to engage the community regarding various land use and taxation alternatives that may be appropriate. Staff has engaged the community in a consultative manner, seeking input from community members through a variety of channels and outreach methods. Per the City’s Public Engagement and Notification Manual, a “Consult” level of public engagement was implemented. Central to the effort has been the Cit y’s website, which has been updated with information throughout the process. The City has also used its Open City Hall platform to deliver important information about the proposed regulations and gain direct community feedback. The following is the list of engagement activities conducted by staff during the outreach process. • Zoning Regulations Public Workshop – June 2017 • POSAFY Consultation – June 2017 • Chamber of Commerce, Legislative Action Committee –September 2017 • Downtown SLO Board, Issues Committee – September 2017 • Open City Hall – October 13, 2017 • Public Open House, Panel Discussion – October 23, 2017 • Publication of Draft Regulations – January 11, 2018 • Open City Hall – January 11, 2018 • City Council Policy Level Discussion – February 20, 2018 For more information, community members can visit the web site at the following address: http://www.slocity.org/government/department-directory/community-development/cannabis In addition, comments may be provided via Open City Hall until February 19, 2018. https://www.peakdemocracy.com/portals/189/Issue_5827 Overview of Draft Regulations City staff is in the process of drafting cannabis regulations under two Municipal Code Chapters. The first set of regulations would be found in San Luis Obispo Municipal Code (SLOMC) Chapter 9 and are focused on public health and safety standards that would be enforced by the Police Department. The second set of regulations would be located in SLOMC Chapter 17 (Zoning Regulations) and are focused on business activity and land use. Business activities would be regulated through Cannabis Activity Permits and land use regulations would be enforced via performance standards set forth in the regulations themselves and/or conditional use Packet Pg 213 13 permits linked to the Cannabis Activity Permit. Legal operation of a cannabis business would require alignment of a permitted business operator and a physical location zoned for such uses. While these areas of expertise will be required to implement an effective regulatory program, the exact method for enforcing and regulating the program will be developed based on adopted regulations and in consultation with other agencies in the region that will likely have similar needs. Overall, the draft regulations are intended to protect public health, safety, and welfare – and support the local cannabis economy – by permitting and regulating a wide range of cannabis uses, summarized as follows: 1. Allows for access to medical and recreational marijuana in the City, with storefront and delivery options 2. Prohibits events and onsite consumption 3. Requires vendors to be certified and ranked prior to applying for a permit 4. Includes requirements for energy and water efficiency, and limits total amount of cultivation, to ensure consistency with City climate action goals 5. Limits manufacturing uses to non-volatile processes only 6. Limits cultivation to indoors only, and total amount of cultivation allowed to 70,000 square feet of total canopy coverage within an indoor area, cumulatively (includes total canopy of either horizontal or vertical growing situations) 7. Establishes buffers from cannabis businesses of 200 feet from residential zones, and 600 feet from schools 8. Requires retail storefronts to be located at least 1,000 ft. apart 9. Provides for full cost recovery of city expenses related to all cannabis business monitoring, enforcement and administration 1. Definitions The following definitions describe the different cannabis business activities that are proposed for regulation within the City of San Luis Obispo. 1. Specialty cultivator – indoor only grows under 5,000 s.f. of canopy, includes processing. 2. Small cultivator – indoor only grows under 10,000 s.f. of canopy, includes processing 3. Nursery – indoor only propagation under 10,000 s.f. of canopy 4. Manufacturer I – non-volatile processing of cannabis into any other product 5. Testing – lab testing is required by the State prior to distribution to a retailer 6. Retailer – includes storefront and delivery 7. Distributor – retailers must purchase from licensed distributors 8. Microbusiness – allows a single business to integrate cultivation (10,000 s.f. of canopy max.), manufacturing, distribution and retail sales 2. State License Categories – Difference Between Medical and Adult Use Each of the three licensing agencies have published guidelines for licensing. All licenses except testing labs will have two categories, M (Medi cinal) or A (Adult-Use). Business to business Packet Pg 214 13 activity is only allowed between businesses in the same category (e.g. a manufacturer with an M license can only purchase raw material from a cultivator or distributor with an M license). However, the minimum product labeling standards are the same, and retailers may hold both M and A licenses. As a result, there is no need for the City to distinguish between medical and adult use in its regulations, unless it intends to prohibit adult use business activity. 3. Allowed Uses by Zone Zoning District Cannabis Activity Permits Available Area or Use Restrictions Buffers Service Commercial (CS), Manufacturing (M), Business Park (BP) Specialty Cultivator, Small Cultivator, Nursery, Manufacturing I, Distributor, Testing, Retailer (delivery), Microbusiness 10,000 square feet canopy maximum for individual cultivators, 70,000 square feet canopy maximum citywide 200 feet from premises to residence located R-1, R-2, R- 3, or R-4 zones, and 600 feet to any day- care, pre-school, elementary, middle, or secondary school Retail Commercial (CR), Tourist Commercial (CT), Community Commercial (CC) Retailer (storefront), Microbusiness 3 retail storefronts maximum, citywide Retail storefronts must be separated by a distance of 1,000 feet Office (O) Testing None None No cannabis business activity permits are recommended for the City’s downtown core (Downtown Commercial (CD) zone). This recommendation follows public input, input from Downtown SLO, and the recommendations of the City’s Police Department. Special Provisions for Microbusinesses State regulations limit vertical integration of license types with the exception of “microbusinesses,” a license type created to support the cottage/craft cannabis industry. Similar to microbrewers, cannabis microbusinesses are limited in size, but are allowed (actually required) to conduct business in a minimum of three of the following four license areas: cultivation, manufacturing, retail, distributor. The City’s draft regulations support microbusinesses in several zoning districts, however, staff is proposing limitations based on the location of the business. Specifically, a microbusiness located in a commercial district (CR, CT, CC) would have to have a storefront and at least 50% of the gross revenue of the business would have to come from retail sales. A microbusiness located in a services and manufacturing area (CS, M, BP), could also have a storefront but 50% of the gross revenue of the business would have to come from non-storefront activities such as cultivation, manufacturing, distribution, or delivery services. Packet Pg 215 13 This is very similar to the type of limitation that the City has established for warehouse stores. For example, Tennis Warehouse has a small retail store that allows for direct sale to customers, while online sales account for the majority of revenue generated onsite. 4. Buffers and Downtown Expansion Buffers Staff has produced maps to allow the community and decision-makers to see how buffers limit potential locations for cannabis businesses. Maps were prepared that show buffers of 600 feet and 1000 feet for educational uses, including pre-schools. Maps have also been prepared showing buffers of 200 feet and 300 feet from R-1, R-2, R-3 and R-4 zoned land. (The maps are available on the website and attached as a Council Reading File because they are too large to print as attachments.) The State recommends 300-foot buffers from residential neighborhoods, and the Police Department concurs with this recommendation. However, the Council and community should review the difference between the 200-foot and 300-foot buffer maps. The 300-foot buffer map eliminates many properties from potential cannabis business use, which could drive speculation and inflate the price of real estate for properties outside of the buffer area. The 200-foot buffer provides a more even distribution of properties across the City that would be zoned appropriately for what would be a limited number of storefronts. In short, the City Council should consider whether a 300-foot buffer is necessary given the proposed limitation of retail storefronts to three. Staff is seeking Council direction on the appropriate balance between the value of greater residential buffers and the potential economic consequences of restrictions that may constrain permissible business locations in a manner that leads to unintended property speculation and price spiking. Downtown Expansion The Community Development Department has in its work program a project to look at the expansion of the Downtown Commercial zone north of Santa Rosa and up Monterey Street. Based on the buffer maps, this is an area that could potentially support cannabis business activity, including the potential for a retail storefront. However, if storefronts are not allowed downtown, and downtown expands, this could create a non-conforming use. This issue was identified as a concern by the Police Department, which is recommending that storefronts be prohibited from downtown because downtown is already impacted by a higher rate of calls for service than other parts of the City, complicating law enforcement activities. 5. Public Health and Safety Standards Standards related to the following issue areas are recommended to be included in SLOMC Chapter 9, which likely will be enforced primarily by the Police Department. Packet Pg 216 13 1. Prohibition of outdoor commercial cultivation 2. Prohibition of outdoor cultivation of more than 6 plants per residential parcel for personal adult or medicinal use-regardless of number or residents, and regardless of number of residences per parcel. All other cultivation would have to be done indoors. 3. Personal outdoor cultivation accessibility, visibility and setback requirements 4. Prohibition of: a. On-site consumption b. Consumption in public c. Consumption in or about other (non-cannabis) businesses open to the public d. More than six plants per residence, indoors and out, cumulatively e. No cultivation on a parcel that does not have a private residence that is used for dwelling purposes f. Cultivation of live plants, indoor or out, if doing so creates a public or private nuisance from odors, noise, light or other causes g. Sale or gift or consumption of alcohol in or about premises conducting a commercial cannabis activity There are two additional areas for the City Council and community to consider relative to its health and safety standards. The first relates to the concentration of THC (the psychoactive component of the cannabis plant) in products that are manufactured or sold in the City. The second issue relates to access to medical cannabis by persons under 21 years of age, which is primarily a consideration because of the large number of college-age residents living in the City and on campus. Concentrates The extraction of cannabinoids from the cannabis plant into concentrates that are high in THC is an area of concern for law enforcement and public health, both in terms of the hazardous processes associated with concentrate production and the extreme potency of the resulting product. Concentrated forms of cannabis have been documented public safety issues in other states that already have active adult use programs. THC limits are regulated by the State. Concentrates, commonly known as “shatter, wax, crumble, budder, and oil” are used for various purposes (e.g. they can be used directly or can be infused into a cannabis product such as a brownie). Edibles, such as brownies, have a maximum dose of 10 milligrams of THC per serving, and 100 milligrams of THC per package (the strength of the product must be clearly labeled per the State regulations). Other products, including those that can be smoked, dabbed, or vaped (three common methods of consumption), have a maximum concentration of 1,000 milligrams per package (adult-use), and 2,000 milligrams per package (medicinal). The sale of concentrates for smoking, dabbing, or vaping at such high concentrations of THC is an area that the City could choose to regulate. Medicinal Use by Adults Under 21 and Minors Although adult use of cannabis is now legal in California for adults 21 years of age and older, adults under 21 and minors (with parent/guardian approval) can only use cannabis with a doctor’s recommendation. The City of San Luis Obispo could choose to prohibit its storefront Packet Pg 217 13 retailers from selling to any person under 21 years of age. While this would limit access for adults and minors who would otherwise be allowed to have access with a doctor’s recommendation, it may also have the benefit of limiting access for recreational use by adults under 21 years of age. The City could still allow delivery of medicinal cannabis to patients under 21 within the City limits. This is a trade-off that the City Council may wish to consider given the large number of college students under 21 that live in San Luis Obispo and on the Cal Poly campus. 6. Application Requirements Applications for “Cannabis Business Activity Permits” will have minimum information requirements to ensure that any decision to permit a cannabis business is based on a complete understanding of the scope of the business and how well it complies with City standards. The following list is considered the minimum amount of information that would-be part of a complete application. 1) Site plan, floor plans, and a general description of the nature, square-footage, parking and type of cannabis activity(ies) being requested. 2) An operations plan including: a) On-site security measures both physical and operational and, if applicable, security measures for the delivery of cannabis associated with the commercial cannabis business; b) Customer eligibility and age verification procedures; c) Odor management plan; d) Proposed signage: i) Must comply with City’s Sign Regulations for size, area and type of sign, no exceptions allowed. ii) Internal illumination of signs is prohibited. iii) No portion of the cannabis plant may be used in any sign visible from the public right-of-way. iv) No cannabis products may be displayed in store windows and visible from the public right-of-way. v) Provide sign size, height, colors, and design of any proposed signage at the site. e) Employee safety and training plan; f) Cash management and City tax and fee payment plan; g) A statement on neighborhood compatibility and a plan for addressing potential compatibility issues; h) Energy efficiency plan; i) Water efficiency plans; and j) Waste management plan. k) Vicinity map showing distances to the following uses: any day-care, pre-school, elementary school, junior high school, or high school; and, any residentially zoned area. 3) Proof of ownership or lease agreement with landowner’s consent; 4) A list of all other uses on the property; Packet Pg 218 13 5) City of San Luis Obispo Certificate of Eligibility to Conduct Cannabis Business Activities 7. Legal and Financial Regulation Considerations While marijuana businesses and activities have been decriminaliz ed and expressly authorized under state law, such businesses and activities remain in conflict with federal law. Since the passage of the Controlled Substances Act (CSA) in 1970, Congress has generally prohibited the cultivation, distribution, and possession of marijuana. Beginning in 2009, the Obama administration and the U.S. Attorney General’s Office began to address the emerging trend of state laws authorizing certain medical and recreational cannabis activities via the issuance of federal prosecutorial guidance memoranda designed to address the conflict between state and federal law. That guidance culminated in the 2013 issuance of a Department of Justice memorandum to all United States Attorneys (federal prosecutors responsible for federal controlled substances prosecutions) known as the “Cole Memo” (https://www.justice.gov/iso/opa/resources/3052013829132756857467.pdf). While the memo did not change federal law, combined with other Obama administration internal enforcement guidelines, it did de-prioritize enforcement of federal marijuana prohibitions against individuals and businesses complying with state laws regarding marijuana, which provided a level of assurance that federal enforcement and prosecution resources would not be directed against individuals and businesses operating lawfully within the parameters established in their states. The emerging industry and state and local regulatory authorities have relied on that guidance and federal enforcement approach in their approach to the establishment, licensing, permitting and taxation of state authorized marijuana activities. In January of this year, Attorney General Jeff Sessions issued a new guidance memo to all United States Attorneys superseding and rescinding the Cole memo. In issuing the memo, Attorney General Session stated “Therefore, today's memo on federal marijuana enforcement simply directs all U.S. Attorneys to use previously established prosecutorial principles that provide them all the necessary tools to disrupt criminal organizations, tackle the growing drug crisis, and thwart violent crime across our country." It is too early to know what the practical impact of the Sessions memo will be from a federal enforcement standpoint. Analysis to date has ranged from conclusions that there will be little or no change in federal enforcement approach in California to speculation that the memo may be an indicator that the Trump administration and Sessions intend to escalate enforcement through increased arrests, prosecutions, and asset forfeitures related to marijuana businesses. Regardless of speculation as to future federal action, the Cole Memo was generally regarded as establishing useful and reliable guidance on a consistent nationwide federal policy, while the new Sessions Memo, returns to a less predictable environment where there is a potential for each U.S. Attorney to have an individualized prosecutorial approach. San Luis Obispo County is under the federal jurisdiction of the Central District, which includes Los Angeles, Riverside, San Bernadino, Ventura, Santa Barbara, and San Luis Obispo. Nearly concurrent with the release of the memo, Sessions appointed a new interim U.S. Attorney for the Central District, Nicola Hanna. Hanna has not made any clear public statements on the intended Packet Pg 219 13 approach to enforcement in this District and given the interim nature of the appointment, it is not likely we will have any clear direction or commitment in the immediate future. Banking Issues Banking issues arising from the conflicts between state and federal law have been an ongoing area of concern, the prosecutorial approach to which had also been previously addressed via a follow up 2014 Cole memo (the 2014 Department of Justice (DOJ) Financial Crimes memo). Shortly following the 2014 Cole memo, and heavily relying on its guidance, The Department of the Treasury Financial Crimes Enforcement Network (“FinCEN”) issued “guidance to clarify Bank Secrecy Act (“BSA”) expectations for financial institutions seeking to provide services to marijuana-related businesses.” https://www.fincen.gov/resources/statutes- regulations/guidance/bsa-expectations-regarding-marijuana-related-businesses. FinCEN issued its guidance “…in light of recent state initiatives to legalize certain marijuana-related activity and related guidance by the U.S. Department of Justice (“DOJ”) concerning marijuana-related enforcement priorities. This FinCEN guidance clarifies how financial institutions can provide services to marijuana-related businesses consistent with their BSA obligations, and aligns the information provided by financial institutions in BSA reports with federal and state law enforcement priorities.” The stated purpose of the FinCEN guidance was to “…enhance the availability of financial services for, and the financial transparency of, marijuana-related businesses.” The FinCEN guidance has not yet been rescinded, but its utility has been called into questions because of the its relationship to and reliance on the Cole Financial Crimes Memo, which the Sessions memo also rescinded. The Department of Treasury is currently looking at their guidance in the wake of Sessions memo. If FinCEN withdraws that guidance, it is unclear how bank regulators will respond and what effect that will have in California’s emerging market. This month, Treasurer John Chiang announced that his office (along with the California State Attorney General’s office) would undertake a two-part feasibility study around forming a state- backed bank to serve California cannabis businesses. However, there are significant hurdles to any state backed approach, discussed more extensively in Chiang’s report http://www.treasurer.ca.gov/cbwg/resources/reports/110717-cannabis-report.pdf. Thus, it remains fairly clear is that continued state and federal conflicts of law will continue to yield an industry that involves significant cash transactions and creates difficulties for local jurisdictions from both a public safety and financial transactions standpoint. The City will need to continue to closely monitor this evolving area and will need to work closely with industry applicants to ensure that any potential operational issues arising from these cash intensive issues are fully addressed via robust operational plans that demonstrate strict adherence to state law and federal guidance on these issues. Policy Considerations The City Council has many policy considerations to make as it contemplates allowing for a regulated cannabis market to be established in the City of San Luis Obispo. The following discussion looks at the issue through the perspective of social, economic, and environmental Packet Pg 220 13 considerations to evaluate the “triple bottom line1” associated with the decisions in front of the Council. Additional public engagement, and discussion and direction by decision-makers, will continue to inform staff’s recommendations as this process moves forward. 1. Social Considerations The social issues that surround the legal cannabis market relate to citizens’ desire to obtain and use legal cannabis under Proposition 64 and SB 94. There is a strong desire for access in a legal and controlled manner. This is evidenced by the passage of Proposition 64 in California, public sentiment (64% of Americans support legalization according to a 2017 Gallup Poll), and decisions being made at the State level across the Country (Vermont being the most recent, and several other states including Arizona, Arkansas, Connecticut, Delaware, and Florida are moving towards legalization under state laws). There are no doubt negative social impacts and aspects of legalization, similar to those associated with alcohol use. However, these must be considered in light of the alternative, which is ongoing participation in an unregulated local market. This report cannot weigh all of the negative impacts that the unregulated local market for cannabis has produced and compare those with the impacts that we expect to come out of the regulated market (which will certainly increase the use of cannabis across the City). However, because the decision in front of the City Council is a local decision about if and how to regulate cannabis in the City of San Luis Obispo, there are some important considerations to be made in the areas of public safety, public health, personal responsibility and access to medicine that should be thought through and discussed prior to a decision being made. Public Health and Safety The public safety impacts include: • Instances of public intoxication; • Instances of driving under the influence; • Instances of crime and theft associated with managing large amounts of cash; • Emergency medical incidents and emergency room visits resulting from consumption or misuse; • Instances of mental health and other health problems experienced by cann abis users, particularly with high concentration products; and • Potential for increased fires or other emergencies from processing and/or consumption. Staff believes that - while legalization may mitigate some of the crime and calls for emergency response currently associated with the illegal cannabis market - legalization will still increase the 1 The phrase “the triple bottom line” was first coined in 1994 by John Elkington, the founder of a British consultancy called SustainAbility. His argument was that companies should be preparing three different (and quite separate) bottom lines. The triple bottom line thus consists of three Ps: profit, people and planet. It aims to measure the financial, social and environmental performance of the corporation over a period of time. More recently public agencies have begun to use the triple bottom line as a way of better understanding all of the ramifications of the policy choices available. Packet Pg 221 13 usage of cannabis resulting in increased public safety impacts. Personal Responsibility and the Role of Government Concerns about public health and public safety are countered with arguments about personal responsibility and the negative impacts that the “war on drugs” has had in communities across the United States. In the course of conducting public outreach, staff received feedback that many people in our community feel that the classification of cannabis as a Schedule I drug with no beneficial medical use is inappropriate in the face of individuals’ experiences with the use of cannabinoids for pain management and a variety of other conditions. Access With the approval of SB94 (the so-called “trailer bill”), California has consolidated its regulations with respect to recreational and medicinal use of cannabis and decriminalized most cannabis activities under state law. However, local control provisions in the law allow communities to decide for themselves if they want to allow specific uses within their jurisdictions. Retailers in the State have the option of selling recreational only, medicinal only, or both, depending on their individual business plans and local regulations. The effect of SB94 is to increase access to cannabis for all residents of the state, whether for recreational or medicinal purposes. If the City of San Luis Obispo chooses to restrict retail sales locally, residents who wish to consume cannabis products will need to travel to a location where they can legally purchase from a licensed retailer (currently the closest locations for adult use are in Los Angeles, and multiple delivery services exist in SLO County for medicinal) or continue to procure cannabis outside of the regulated marketplace. There are many options whereby the City could focus on enhanced access to adult use and medicinal cannabis for residents, rather than move forward with a more comprehensive set of regulations for a variety of business types as discussed in this report. 2. Economic Considerations If the City Council is interested in moving forward with regulating commercial cannabis business activity in the City, then it should consider how to support local business success in this new market. Like many industries in the area, the local cannabis industry will be challenged by the geographic isolation of the Central Coast, the cost of housing, the relatively small labor pool, supply chain concerns, and other factors that can make it difficult to establish a professionally managed and legally compliant local cannabis business market. By many accounts, the cannabis industry has the potential to grow significantly in the years to come. Growth in the supplement and health-care market for non-psychoactive cannabis concentrates in particular could be substantial if the health benefits are proven. Proposition 64 makes specific allocations of funding for research on efficacy. For instance, $2 million in annual funding is directed to the University of California San Diego Center for Medical Cannabis Research to study the risks and benefits of medical cannabis. Once reliable studies on the use of cannabinoids are published, there is the potential that beneficial uses will be identified that could Packet Pg 222 13 become more mainstream and support industry growth. There is also a chance that studies will more clearly identify substantial health risks associated with cannabis use, leading to tighter regulation at the state or Federal level - so there is a measure of risk associated with investment and entry into the cannabis industry. Creating A Sustainable Local Market If the City Council is interested in creating a sustainable local market, it should consider permitting a variety of uses that would help establish and support the local supply chain. Manufacturers who have an idea for a product need access to a reliable supply of raw materials to effectively plan and implement a product launch and to be positioned to accommodate the evolution of this emerging market. Manufacturers who need plant material to create concentrates – whether for use in hand creams, edibles, or pet care products – want a predictable supply that they can tap into to support their processes. All business to business transactions in the regulated cannabis marketplace occur through the use of licensed distributors, and all raw materials must go through appropriate testing. As a result, it is recommended that the City Council allow for permitting of distribution and testing businesses, if it wants to allow cultivation and manufacturing locally. If the City Council chooses only to allow retailers, then local retailers would have to rely on distributors and testing facilities outside of the City (and potentially outside of the County depending on what uses other jurisdictions in SLO County allow) to acquire their products for sale. Real Property Use and Impacts to Adjacent Businesses/Properties Cannabis business activity is still prohibited under Federal law. As a result, use of real property may be constrained if the property has been used to secure a mortgage that is Federally insured. This also limits the ability of cannabis businesses to engage in credit card transactions, and means that most business activity in this industry is done on a cash basis. In practice, this means that businesses are more likely to be established on discrete properties where the land and improvements can be purchased outright, rather than within a suite or on a property with an existing building to be leased or built to suit. In addition, the impacts on adjacent businesses – whether real or perceived –mean that property owners and leasing agents may simply prefer not to allow cannabis uses to locate within a commercial center because of co-tenancy concerns. Co-tenancy refers to the beneficial relationship between businesses next to one another or within the same shopping center. In some cases, major anchors in shopping centers negotiate lease restrictions that prohibit certain uses from being established adjacent to the anchor. As a result, the Council should keep in mind that many of the properties identified as possible locations for future cannabis business activity will not actually be made available for this purpose. These are private market driven decisions and there is no ready means by which the City can access comprehensive and reliable data that would permit reliable analysis of practically available locations for cannabis businesses within the City. Packet Pg 223 13 3. Environmental Considerations The third factor to consider in a “triple bottom line” evaluation of possible cannabis regulations are the environmental concerns. Overall, cultivation is the most resource intensive activity associated with the cannabis market. City staff is recommending significant limits on cultivation (70,000 square feet of canopy coverage, with no single grow larger than 10,000 square feet) of canopy for the following reasons. 1. The City of San Luis Obispo is an urban area and does not have sufficient acreage with Agricultural zoning to allow for outdoor cultivation; and 2. The City is committed to maintaining a compact urban form and rezoning areas for agricultural use, or allowing cultivation of cannabis in open space areas, is not recommended for a variety of reasons, including potential conflicts with the City’s Housing Major City Goal; and 3. Indoor cultivation is potentially a very lucrative use of land within the City’s Services and Manufacturing and Business Park areas. Other communities have experienced major fluctuations in real estate prices due to speculation about future regulations. Limiting the amount of floor area that can be used for cultivation will help to ensure that our local real estate market doesn’t experience a major spike in values that could disrupt existing business operations; and 4. Indoor cultivation is very energy intensive. As a result, staff is recommending limits on the total amount of canopy area for cultivation and requiring energy efficiency plans to achieve Zero Net Energy usage by 2020 in order to support consistency with the City’s climate action goals. There is no magic to the 70,000 square-foot canopy limitation. The limit is recommended solely to achieve the purposes described above. A limit of 50,000 square feet of building floor area was initially proposed and presented to the public during workshops and other forums. However, the limit was expanded in consideration of an additional use – nurseries – and the limit was switched from building floor area to canopy, which allows cultivators to be more efficient with building floor area by growing vertically. Water As with other water-using industries, a proposed cannabis manufacturing and/or cultivating business will be required to submit a water efficiency plan for approval. The plan will provide information about the business’s planned management practices and the water conservation/efficiency measures it will deploy. The water used to support cannabis businesses will be made available, as it is for any other user connected to the water system, in compliance with the City’s municipal code. Packet Pg 224 13 Wastewater A cannabis business will be treated as any other industrial user connected to the City’s wastewater conveyance system in compliance with the City’s municipal code. A cannabis manufacturer or cultivator will be required to apply for, receive, and maintain an Industrial User Permit to operate whether or not it is a zero-discharge facility (zero-discharge facility means that no process water gets put down the drain; it is all recycled). If the process discharges to the wastewater conveyance system, depending on the fertilizers or other chemicals used, metering, secondary containment, and pretreatment may be required before discharge. Energy Use Another area for consideration is the amount of energy that commercial cannabis operations use. This issue is primarily related to cultivation, which requires a significant amount of lighting to maximize the grow cycle and produce a sufficient amount of cannabis for the business to be economically sustainable. The City has the ability to require that this energy use be offset, either in total or in part. The required offset could be required to be achieved through on-site generation (e.g. solar panels), or via the purchase of Renewable Energy Credits through a company such as Terrapass, Direct Energy, or 3Degrees. Zero Net Energy will be required for all single-family residential construction beginning in 2020, however, the standards for commercial are not expected to be implemented in California until 2030. Staff recommends that the Council require all cannabis businesses to submit energy conservation plans as part of a complete application for a cannabis business activity permit. For cultivators, staff recommends that businesses be required to achieve zero net energy through on-site generation by 2020. Questions for Council Consideration/Direction The following questions are organized in a logical progression and are intended to help individual City Council Members develop their positions. The Council’s collective response to these questions will guide staff as it continues to work on the precise language of the proposed regulations. If Council Members find that additional information is needed to answer any of the questions below, please follow up with staff so that additional analysis or documentation can be provided in advance of the study session. • Does the City Council want to allow access to commercial cannabis by City residents? • If yes, would the Council want to limit access to medicinal only, or medicinal and adult use? • If either, does the Council want to allow storefront sales in the City, or delivery only? • If delivery only, does the Council want the delivery business to be located in the City, or only allow deliveries from outside of the City? • Does the City Council want to prohibit persons under 21 on the premises of a cannabis business, with the result that persons 18-21 years old will only be able to get medicinal cannabis by delivery? • If the City Council wants to allow retail sales either via storefront or delivery by businesses located within the City, does the City Council support other types of cannabis businesses inside the City, or retail only? Packet Pg 225 13 • If the City Council is interested in allowing other types of businesses, does the City Council support allowing a range of license types (cultivation, manufacturing, distribution, microbusiness, testing) to support a local supply chain, and craft producers? • If the City Council is interested in allowing cannabis business activity in the City, is a 200-foot buffer from residential areas sufficient, or should the City stick with the State recommended 300-foot buffer from residential areas (buffer maps to be provided)? • If the City Council is interested in allowing retail sales and manufacturing of cannabis products within the City, does it want to prohibit certain types of concentrates (shatter, wax, hash, etc.) that are typically smoked, vaped, or dabbed? • If the City Council wants to allow indoor cultivation in the City, does it want to require these businesses to achieve Zero Net Energy compliance upon establishment of the business, by a date certain, or require other energy efficiency compliance methods such as purchasing green energy offsets? • Does the City Council support the concept of using a third-party consultant to develop and implement standards for qualifying and ranking future cannabis business operators? Next Steps Based on the City Council’s direction, staff will move forward with the preparation of the appropriate resolutions and ordinances for consideration by the Planning Commission. The Planning Commission will be asked to review the specific provisions of the Cannabis Regulations that relate to land use (i.e. zoning related issues). Staff plans to return to the City Council on May 1, 2018, for consideration of regulations for adoption. CONCURRENCES A steering committee of City staff members including the Community Development Director, City Attorney, Police Chief, Fire Chief, and Finance Director was convened to guide the process of developing regulations for consideration by the City Council. In addition, the Utilities Department reviewed the water, wastewater, and energy sections of this report and concurs with the recommendation. The Police Department does not concur with the concept of a 200-foot buffer from residential neighborhoods and is recommending that the City Council adopt a 300-foot buffer. The Police Department concurs with the recommendation not to allow retail storefronts in the Downtown Commercial zone. ENVIRONMENTAL REVIEW SB 94 amends the Business and Professions Code to exempt from CEQA review the adoption of an ordinance, rule, or regulation by a local jurisdiction requiring discretionary review and approval of permits and licenses for commercial cannabis activity (until July 1, 2019). Depending on the nature of the activity for which an application is received, individual project Packet Pg 226 13 level environmental review may be required. FISCAL IMPACT This Council Agenda item addresses regulations separately from fiscal impact. Fiscal impacts will be addressed through financial analysis, the budget process, and revenue actions to recoup directs costs through fees. The policy discussion is independent of the fiscal impacts considerations. Ultimately, if the City moves forward with regulations, it should establish fees and licenses that allow it to recover 100% of the allowable costs associated with regulation. These are the costs that can be quantified based on the amount of staff time in various departments to administer and license the cannabis industry. Community Development, Attorney’s Office, Administration, Police, Fire, Utilities, and Finance will experience costs associated with regulation and staff will be developing a fee structure based on approved regulations to recover the allowable costs. The Council may give staff policy direction to pursue additional revenues associated with a tax on cannabis business activity, but that question will be considered separately from the regulations. In addition, cities that choose to regulate cannabis business activity rather than prohibit such activities are eligible for grant funding from the state. There may be additional indirect costs due to cannabis activities such as public safety activities not covered by the fees. These indirect costs may be present regardless of the Council direction on regulations due to passage of Proposition 64. The issues around taxation and the ability of cannabis business activity to drive the collection of new General Fund revenues are important considerations for the City’s fiscal health and are part of Fiscal Health Response strategy. Once the City Council has decided how it wants to proceed with respect to regulations, the City’s Finance Department will take the lead in evaluating fiscal impacts and recommending a cost recovery and taxation approach. ALTERNATIVES Various alternatives are available to the City Council for moving forward with cannabis regulations depending on how the majority of the City Council answers the key policy questions outlined in this report. If the City Council chooses not to make any determinations on February 20, the following alternatives are available for consideration. 1. Continue Consideration of Regulations to a Future Date. The City Council could decide not to provide City staff with direction on cannabis regulations at this time. If this alternative is taken, the Council should provide direction to staff regarding additional information needed to answer the core policy questions presented. 2. Direct Staff Not to Move Forward with Changes to Ordinance No. 1633. The City Council could decide to direct its staff to focus on other priorities and not pursue changes to the current ordinance that prohibits all commercial cannabis business activity within City limits. Packet Pg 227 13 Attachments: a - O-1633 Ordinance Prohibiting All Commercial Cannabis Activity In City b - Overview of Bureau of Cannabis Control Licensing Regulations c - CalCannabis Cultivation FAQ d - State Licensing Authorities Brochure e - Cultivation Licensing Presentation f - Manufacturing Licensing Presentation g - Council Reading File - Cannabis Planning Survey (Open City Hall 1) h - Council Reading File - Residential Buffers i - Council Reading File - School Buffers j - Council Reading File - Combined Buffers Packet Pg 228 13 ORDINANCE NO. 1633 (2017 SERIES) AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, CODIFYING AND REAFFIRMING CURRENT CITY LAW, POLICY AND PRACTICE BY EXPRESSLY PROHIBITING ALL COMMERCIAL AND INDUSTRIAL RECREATIONAL AND MEDICAL MARIJUANA USES, ACTIVITIES AND OPERATIONS AND LIMITING OUTDOOR CULTIVATION OF MEDICAL AND RECREATIONAL MARIJUANA WITHIN THE CITY WHEREAS, in 1996, California voters approved Proposition 215, entitled "The Compassionate Use Act of 1996", providing a defense to state criminal prosecution for specified medical marijuana use, and the Medical Marijuana Program Act established a voluntary participation, State -authorized medical marijuana identification card and registry database for verification of qualified patients and their primary caregivers; and WHEREAS, in 2015, the State Legislature approved the Medical Marijuana Regulation and Safety Act ("MMRSA"), which created an extensive statewide regulatory and licensing system for the cultivation, manufacture, testing, dispensing, distribution and transport of medical marijuana. MMRSA exempted from its regulatory and licensing system, certain medical marijuana cultivation by individual qualified patients and primary caregivers with no more than five qualified patients. In 2016, the State Legislature updated MMRSA by approving AB 21 and SB 837 to address issues not previously addressed in prior legislation and changed the name of MMRSA to the Medical Cannabis Regulation and Safety Act (MCRSA); and WHEREAS, under MCRSA, the State will not issue licenses to operators in jurisdictions that prohibit medical marijuana uses and activities, either expressly or under principles of permissive zoning; and WHEREAS, the City historically has relied on permissive zoning principles to decline permitting of marijuana businesses and uses within the City, and reaffirmed that position by adoption of Resolution 10683 on January 14, 2016; and WHEREAS, on November 8, 2016, California voters passed Proposition 64, entitled "The Control, Regulate, and Tax Adult Use of Marijuana Act" ("AUMA"). AUMA legalized under California law non-medicinal/recreational marijuana use for those 21 years of age and over, and created a comprehensive regulatory, licensing and tax system for the non-medical marijuana industry, including 19 different types of licenses for cultivation, manufacturing, testing, retailer, distributor and microbusiness; and WHEREAS, AUMA allows local governments to ban recreational marijuana businesses entirely, or regulate such businesses, and to reasonably regulate cultivation through zoning and other public health and safety laws, including prohibiting outdoor cultivation outright, but AUMA does require local governments to allow limited indoor cultivation in private residences; and 01633 Packet Pg 229 13 Ordinance No. 1633 (2017 Series) Page 2 WHEREAS, despite the changes in California law, the Federal Controlled Substances Act still makes it illegal under federal law for any person to cultivate, manufacture, distribute or dispense, or possess with intent to manufacture, distribute or dispense, marijuana, and the future of federal government enforcement actions under a new Presidential administration is uncertain in states that have legalized the recreational use of marijuana; and WHEREAS, it will take a substantial amount of time: to conduct public outreach regarding the direction the City should take regarding both medical and recreational marijuana businesses; to draft comprehensive zoning and other regulations relating to commercial recreational and/or medical marijuana activities within the City; to determine whether to pursue certain taxes related to commercial recreational marijuana; and to analyze the potential impacts and health and safety issues relating to such businesses, including, but not limited to, environmental, water, indoor electrical fire hazards, mold, odors and criminal activity; and WHEREAS, AUMA does not contain the protective language relating to permissive zoning that MCRSA does, and, in the absence of an express ordinance either prohibiting or regulating non-medical marijuana business or activities, the City could become subject to State licensing of marijuana businesses and activities within its jurisdiction and/or may not be able preclude the State from issuing licenses to marijuana businesses anywhere in the City; and WHEREAS, it is unclear to the full extent to which AUMA and MCRSA may conflict, how state regulatory provisions ultimately may reconcile the two licensing structures, and whether the provisions of AUMA will control over MCRSA; and WHEREAS, the City has had odor complaints relating to outdoor cultivation of marijuana, resulting in the addition of Chapter 8.22 to the Municipal Code, prohibiting persistent offensive odors from emanating across property or parcel lines; and WHEREAS, the City currently prohibits smoking and controls secondhand smoke, including marijuana smoke and vapors, in public and other places under Chapter 8.16, of its Municipal Code; and WHEREAS, the City Council wishes to preserve its ability to continue its current licensing, permitting, regulation and enforcement practices regarding marijuana uses within its boundaries in order to receive and consider council direction and public outreach to define the appropriate nature and scope of regulations. NOW, THEREFORE, BE IT ORDAINED by the Council of the City of San Luis Obispo as follows: SECTION 1. The foregoing recitals are adopted by the City Council as findings in support of the Ordinance. SECTION 2. This Ordinance constitutes an exercise of the City's police powers under the California Constitution and codifies existing law, policy and practice in the City of San Luis Obispo prohibiting marijuana uses and activities. 01633 Packet Pg 230 13 Ordinance No. 1633 (2017 Series) Page 3 SECTION 3. Chapter 9.10 is added to the San Luis Obispo Municipal Code, to read as follows: Chapter 9.10 MARIJUANA REGULATION 9.07.010 Purpose and Intent A. The purpose and intent of this chapter is to maintain the status quo while the city conducts public outreach by limiting the outdoor cultivation, and prohibiting manufacturing, processing, laboratory testing, labeling, storing and wholesale and retail distribution and sale of recreational and medical marijuana to protect the health, safety and welfare of the city consistent with state law. B. This chapter is not intended to, nor shall it be construed as, prohibiting or interfering with any right, defense or immunity afforded to qualified patients or their caregivers relating to medical marijuana under the Compassionate Use Act of 1996, the Medical Marijuana Program Act, the Medical Cannabis Regulatory and Safety Act and other applicable California law. C. This chapter is not intended to, and shall not be construed as, prohibiting or interfering with any right, defense or immunity of any individual relating to the recreational use or possession or indoor cultivation of marijuana as permitted by the Control, Regulation and Tax Adult Use of Marijuana Act; provided, nothing in this subsection is to be construed to permit actions violating or not permitted by other provisions of the Municipal Code, including, but not limited to, Chapter 5.01 Business License Program, Chapter 8.16 Smoking Prohibited and Secondhand Smoke Control, Chapter 8.22 Offensive Odors and Chapter 17.22 Use Regulations. 9.10.020 Limitation of Outdoor Cultivation of Marijuana No person shall cultivate, plant, grow, maintain or store more than six marijuana plants outdoors in any location within the City, whether or not located in a greenhouse or other structure designed or used for such activities. 9.10.030 Prohibition of Marijuana -Related Businesses A. Except as otherwise specifically required by California law, any and all commercial or industrial recreational and medical marijuana/cannabis-related uses, activities, businesses, or operations, are prohibited and unlawful within the City of San Luis Obispo. B. This prohibition applies to both for profit and nonprofit commercial and industrial uses, activities, businesses, operations, even if a State license under the Control, Regulate and Tax Adult Use of Marijuana Act or the Medical Cannabis Regulation and Safety Act is not required. C. This prohibition includes, but is not limited to, commercial and/or industrial: cultivation (both indoor and outdoor); manufacturing; processing; laboratory testing; 01633 Packet Pg 231 13 Ordinance No. 1633 (2017 Series) Page 4 wholesale or retail distribution, delivery and sale; labeling; storage; or permitting of smoking/vaporizing/ingesting on any business premises, of marijuana/cannabis, marijuana/cannabis products and all marijuana/cannabis derivatives for any purpose. 9.10.40 Violation and Penalties A. Misdemeanor. Any violation of the provisions of this chapter shall be a misdemeanor; provided, that where the city attorney determines that such action would be in the interest of justice, he/she may specify in the accusatory pleading that the offense shall be an infraction. B. Infraction Violation. Where the city attorney determines that, in the interest of justice, a violation of this chapter is an infraction, such infraction is punishable by a fine not exceeding one hundred dollars for a first violation, a fine not exceeding two hundred dollars for a second violation of the same provision within one year, and a fine not exceeding five hundred dollars for each additional infraction violation of the same provision within one year. C. The fine amounts set forth above may be modified, from time to time, by city council resolution. In no event shall such fine amounts exceed the amounts authorized by state law. D. Each person committing, causing, or maintaining a violation of this chapter or failing to comply with the requirements set forth herein shall be deemed guilty of a separate offense for each and every day during any portion of which any violation of any provision of this chapter is committed, continued, maintained, or permitted by such person and shall be punishable accordingly. E. The violation of any provision of this chapter shall be and is hereby declared to be a public nuisance and contrary to the public interest. Any public nuisance under this chapter may, at the city's discretion, be abated by the city by civil process by means of a restraining order, preliminary or permanent injunction or in any manner provided by law for the abatement of such nuisance. The city shall also be entitled to recover its full reasonable costs of abatement. The prevailing party in any proceeding associated with the abatement of a public nuisance shall be entitled to recovery of attorneys' fees incurred in any such proceeding if the city has elected at the initiation of that individual action or proceeding to seek recovery of its own attorneys' fees. F. In lieu of issuing a criminal citation, the city may issue an administrative citation to any person responsible for committing, causing or maintaining a violation of this chapter. Nothing in this section shall preclude the city from also issuing a citation upon the occurrence of the same offense on a separate day. G. The remedies set forth in this chapter are cumulative and additional to any and all other legal remedies available whether set forth elsewhere in the San Luis Obispo Municipal Code, or in state or federal laws, regulations, or case law 01633 Packet Pg 232 13 Ordinance No. 1633 (2017 Series) Page 5 SECTION 4 The adoption of this Ordinance maintains the status quo and does not make any change in the current or historic law, policy or practice of the City, and the whole of such action is not an activity which may cause direct or reasonably foreseeable indirect physical change in the environment under Public Resources Code Section 21065 or California Environmental Quality Act ("CEQA") Guidelines Section 15378 (a) and, therefore, is exempt from, and not a project subject to, environmental review. Even if the adoption of this Ordinance codifying existing law is determined to constitute approval of a project under CEQA, and even if the project is not subject to any statutory or categorical exceptions, as a matter of common sense, it can be seen with certainty that there is no possibility that the activity in question, the adoption of the Ordinance codifying existing law, may have a significant effect on the environment under CEQA guidelines section 15061 (b) (3). SECTION 5. This Ordinance shall not be interpreted in any manner to conflict with controlling provisions of state or federal law, including, without limitation, the Constitution of the State of California. If any section, subsection or clause of this ordinance shall be deemed to be unconstitutional or otherwise invalid, the validity of the remaining sections, subsections and clauses shall not be affected thereby. SECTION 6. A summary of this ordinance, together with the names of Council members voting for and against, shall be published at least five (5) days prior to its final passage, in The Tribune, a newspaper published and circulated in this City. This ordinance shall go into effect at the expiration of thirty (30) days after its final passage. INTRODUCED on the 14th day of March 2017, AND FINALLY ADOPTED by the Council of the City of San Luis Obispo on the 4th day of April 2017, on the following roll call vote: AYES: Council Members Christianson, Gomez and Pease, Vice Mayor Rivoire and Mayor Harmon NOES: None ABSENT: None ATTEST: Zez4a Z Y Carrie Gallagher City Clerk 01633 Packet Pg 233 13 Ordinance No. 1633 (2017 Series) Page 6 APPROVED AS TO FORM: f, j J. Christine Dietrick 4 City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this day ofA.tL , 2017. Carrie Gallagher City Clerk 01633 Packet Pg 234 13 O F CANNABIS CON'TROL CALIFORNIA Emergency Regulations for Commercial Cannabis Distributors, Retailers, Microbusinesses, Temporary Cannabis Events, and Testing Laboratories. LORI AJAX BUREAU OF CANNABIS CONTROL Packet Pg 235 13 MAUCRSA The Medicinal and Adult-Use Cannabis Regulation and Safety Act •A single regulatory system for commercial cannabis activity in California •Requires all persons engaged in commercial cannabis activity to be licensed •Allows local jurisdictions to control what activities are permitted in their jurisdiction •Places the protection of the public as the highest priority Packet Pg 236 13 BUREAU O f CANNAB ,IS CON 'TROL CALIFORNIA ' / cdfa CALIFORN I A DEPAR T MENT O F FOOD & AGR I C U LTURE Administrative Structure of MAUCRSA • Lead Agency • Cultivators • Manufacturers • Distributors • Track and Trace System • Retailers • Microbusinesses • Testing Laboratories • Temporary Cannabis Events Packet Pg 237 13 Commercial Cannabis Activity Includes the cultivation, possession, manufacture, distribution, processing, storing, laboratory testing, packaging, labeling, transportation, delivery, or sale of cannabis and cannabis products Does not include personal use cultivation that is done at a private residence in accordance with Health and Safety Code sections 11362.1 and 11362.2, or by a patient or primary caregiver pursuant to Health and Safety Code section 11362.77 Beginning January 1, 2018 all commercial cannabis activity shall be conducted between licensees Packet Pg 238 13 Who needs to be licensed? All businesses conducting commercial cannabis activity A separate license is required for each location (premises) where the business engages in commercial cannabis activity How many licenses can they have? The Bureau does not have any caps on the number of licenses a person may obtain However, caps may be set by a local jurisdiction Are there any restrictions on the type of license they can have? A person that holds a testing laboratory license is prohibited from licensure for any other activity, except testing A testing laboratory is also prohibited from employing an individual who is also employed by any other licensee except for another testing laboratory licensee Packet Pg 239 13 Licenses TEMPORARY LICENSE •Valid 120 days •Submitted through the Bureau’s online licensing system or paper application •Must have a copy of a license, permit, or other authorization from the local jurisdiction Annual License Requirements: ANNUAL LICENSE •Valid 1 year •Submitted through the Bureau’s online licensing system or paper application •Must not violate the local jurisdiction’s regulations and ordinances • Information on: the business, individual owners, financial interest holders, the premises, and the business operating procedures Packet Pg 240 13 Temporary License Application Requirements • Owner applicant • Legal business name • FEIN • Business entity • Primary contact • Owner information • Attestation Required Information • Evidence of legal right to occupy • Premises diagram • Copy of valid license, permit, or other authorization by local jurisdiction Required documents • May not be effective prior to 1/1/18 • May be extended: • For 90 days • With submittal of annual application Valid for 120 days Packet Pg 241 13 BUREAU O F CANNABIS CONTROL CA I< JI On li ne Licensing About Us Licensee Information Consume r Information Media Room Sea rc h I ' Bureau of Cannabis Control Launches Online Licensing Application System -Posted 12/8/ 17 Approval of Emergency Regulations Including Final Text -Posted 12/8/17 Bureau of Cannabis Control Disciplinary Guidelines November 2017 -Posted 11 /16 /17 Bureau Emergency Medicinal and Adult-Use Regulation Fact Sheet -Posted 11 /16/17 Welcome to the Bureau of Cannabis Control Packet Pg 242 13 BUREAU OF CANNABIS CONTROL CA If Home oi App ly iLogin oi oi oi Reg i ster License Search File a Compl aint Packet Pg 243 13 License Categories: M (Medicinal) or A (Adult-Use) •Distributor (Type 11) •Distributor Transport Only (Type 13) •Retailer (Type 10) •Non-Storefront Retailer (Type 9) •Microbusiness (Type 12) •Testing Laboratory (Type 8, no M or A designation) •Cannabis Event Organizer (Type 14) •Temporary Cannabis Event Packet Pg 244 13 Compliance with Local Jurisdiction When a license, permit, or other authorization issued by the local jurisdiction is submitted with the application to demonstrate compliance with local ordinances and regulations: • Bureau contacts the local jurisdiction • No response within 10 calendar days = Bureau considers the authorization valid Packet Pg 245 13 Compliance with Local Jurisdiction When a license, permit, or other authorization issued by the local jurisdiction is NOT submitted with the application to demonstrate compliance with local ordinances and regulations: Bureau notifies the local jurisdiction No response within 60 business days = Bureau presumes compliance Response from local jurisdiction after 60 business days that applicant is not compliant= Bureau does not presume compliance and may commence disciplinary action Packet Pg 246 13 Key Requirements Premises: •Each premises requires a license •Only one licensee may occupy a premises. ◦ Exception – a licensee holding both an A-License and M-License for the same commercial cannabis activity (e.g., retail sale) may have the same premises for both types. •Should not be located within 600 feet of a school (grades K-12, day care, or youth center) unless permitted by the local jurisdiction or state. •A premises diagram is required with the application •The landowner of the land upon which a premises is located must provide approval for the cannabis activity to be conducted Bond: •Each licensee must have a $5,000 surety bond payable to the State of California to cover the cost of destruction of cannabis goods Track and Trace •All licensees must enter certain events into the track and trace system so that cannabis is tracked throughout the supply chain Packet Pg 247 13 Key Requirements Owner Means: 1. A person with an aggregate interest of 20% or more 2. The CEO of a nonprofit or other entity 3. A member of the board of directors of a nonprofit 4. An individual who will be participating in the direction, control, or management of the business. This includes: • A general partner of a cannabis business that is organized as a partnership • A non-member manager or managing member of a limited liability company of a cannabis business organized as a limited liability company • An officer or director of a cannabis business that is organized as a corporation • All applicants must have at least one member that meets the definition of owner. • All owners must submit fingerprints to the Department of Justice • Persons with a financial interest in the cannabis business must be disclosed on the application Packet Pg 248 13 General Application Requirements (Not inclusive) Business Information • Name, DBA, all fictitious business names • Contact information • Business Organizational Structure and formation documents • Financial information • Seller’s permit number • Labor peace agreement • Operating Procedures • Bond Individual Owner Premises Information Information • Physical address • Identifying information • Verification that the • Percentage of ownership premises is not within a • Government-issued ID 600-foot radius of a school • Fingerprints • Premises Diagram • Criminal history and • Evidence of the legal right evidence of rehabilitation to occupy the premises Packet Pg 249 13 Financial Interest What is a financial interest: • Investment into a commercial cannabis business • Loan provided to a commercial cannabis business • Any other equity interest in a commercial cannabis business Information required of those with a financial interest, but not owners: • Name • Birthdate • Government issued identification type and number Who is not required to be listed on the application: • A bank or financial institution providing a loan • Those with a diversified mutual fund, blind trust, or similar instrument • Those with a security interest, lien, or encumbrance on property that will be used by the business • Those with shares of stock that are less than 5% of the total shares in a publicly traded company Packet Pg 250 13 DISTRIBUTOR Activities: Distributor •Transporting cannabis goods •Arranging for laboratory testing •Conducting quality assurance review of cannabis goods to ensure they comply with all packaging and labeling requirements •Storage of cannabis goods Distributor Transport Only •Transports cannabis goods between licensed cultivators, manufacturers, and distributors •Does not transport cannabis goods to retailer except for immature live plants and seeds being transported from a licensed nursery Key Requirements: •CDTFA seller’s permit •Transport vehicles must have an alarm system •Medicinal and adult-use cannabis goods may be transported together if they are clearly identified •Must generate a shipping manifest prior to transporting Packet Pg 251 13 Vehicle Requirements Personnel Requirements Manned motor vehicle Motor carrier permit if transporting for hire Proof of ownership or valid lease Year, make, model, license plate number, and VIN Proof of insurance No person under 21 in the transport vehicle or trailer Only a licensee or employee shall be in a transport vehicle Packet Pg 252 13 Retailer Activities: Retailer (Type 10) •Sells cannabis goods to customers •May deliver cannabis goods to customers Non-Storefront Retailer (Type 9) •Sells and delivers cannabis goods to customers from a licensed premises that is not open to the public Requirements: •A licensee with an A-license and an M-license may have the same premises for both types •Sells and deliveries may only occur between 6:00 a.m. and 10:00 p.m. Pacific Time •All cannabis goods must be placed in an opaque exit package prior to leaving the premises •Deliveries may be made only by employees of the retailer •Deliveries must be to a physical address •Delivery vehicle may not contain more than $3,000 of cannabis goods at any time •The retailer must be able to immediately locate all delivery vehicles Packet Pg 253 13 Retailer-Packaging and Labeling Retailer cannot package or label cannabis goods ◦ Exception: any dried flower held in inventory by a retailer at the time of licensure that is not packaged may be packaged by the retailer into individual packages for sale beginning January 1, 2018 and before July 1, 2018. Retailer cannot accept, possess, or sell cannabis goods if they are not packaged as they will be sold at final sale Purchased cannabis goods cannot leave the premises unless in an opaque exit package Packet Pg 254 13 Microbusiness Activities: Requirements: •Cultivation less than 10,000 •Must engage in at least 3 of the 4 square feet activities •Manufacturing (non-volatile •Must indicate which activities on the extraction, infusion, packaging, application and supply the appropriate and/or labeling) information for those activities •Distribution •Must comply with all requirements for •Retail each activity the licensee engages in Packet Pg 255 13 Temporary Cannabis Event Activities: •Temporary event up to 4 days •Allows onsite sale and consumption of cannabis goods Requirements: •The organizer of the event must first obtain a cannabis event organizer license •Sales of cannabis goods must be performed by a retailer or microbusiness approved to engage in retail •Access to the area(s) where sales and/or consumption occurs is restricted to persons 21 years of age or older •Consumption of alcohol or tobacco is not allowed on the premises •Onsite consumption of cannabis goods must be done in accordance with the local jurisdiction’s requirements •Security must be present at the event Packet Pg 256 13 Testing Laboratories Activities: •Collects samples of each cannabis goods batch from the distributor’s premises •Tests cannabis goods in accordance with the Act and regulations for: •Cannabinoids •Foreign material •Heavy metals •Microbial impurities •Mycotoxins •Moisture content and water activity •Residual pesticides •Residual solvents and processing chemicals •Terpenoids •Homogeneity Requirements: •ISO/IEC 17025 accreditation •Must develop and implement a chain of custody protocol to document the transportation, handling, storage, and destruction of samples •Must generate a certificate of analysis for each primary sample the lab analyzes •Any cannabis or cannabis product sold to, or purchased by, a customer, must meet testing requirements Packet Pg 257 13 Bureau Licensing Fees •Cover the cost of administering the Bureau’s commercial cannabis program •Application fees -Paid when the application is submitted •License fees -Paid when the application is approved •Amount of license fee -Scaled based on the maximum dollar value of the licensee’s operation Packet Pg 258 13 BUREAU ·. g~:~AaiS CALIFORNIA ROL For Questions and Additional Information Contact: www.bcc.ca.gov bcc@dca.ca.gov Phone Number: 1-833-768-5880 Cannabis Portal: https://cannabis.ca.gov Social Media: https://www.facebook.com/BCCinfo.dca https://twitter.com/BCCinfo_dca https://www.instagram.com/bureauofcannabiscontrol Packet Pg 259 13 Q. A. Q. A. When can I apply for a state cannabis cultivation license? Applications will be available for all California state cannabis cultivation licenses—both medicinal and adult-use (recreational)—on January 1, 2018. How are you developing the cannabis cultivation licensing regulations? The California Department of Food and Agriculture (CDFA) is required to follow the statutory requirements found in the California Administrative Procedure Act. CDFA works with stakeholders, the public, and licensing authorities to develop the standards and regulations necessary to successfully implement a statewide cannabis cultivation regulatory structure in California. CDFA intends to use the emergency rulemaking process in 2017 for developing the state’s combined medicinal and adult-use cannabis cultivation licensing regulations. For a detailed description of this process, visit the California Office of Administrative Law (OAL) at oal.ca.gov; click on the “Rulemaking Process” link. How do I apply for a cannabis cultivation license? The California Department of Food and Agriculture (CDFA) is not issuing any cultivation licenses until January 1, 2018. However, in preparation for state licensure, CDFA recommends staying up to date on city and/or county government requirements for local cannabis cultivation licenses and permits. How can I receive updates on the status of California’s cultivation licensing regulations? The California Department of Food and Agriculture (CDFA) regularly posts information on its CalCannabis Cultivation Licensing website and via these three social media channels: Facebook, Instagram, and Twitter. Email alerts are another way to get information. For links to these resources, please go to: calcannabis.cdfa.ca.gov Q. A. Q. A. Medicinal and Adult-Use (Recreational) Cannabis Cultivation Licensing Frequently Asked Questions Packet Pg 260 13 What types of cannabis cultivation licenses will be offered in California? The California Department of Food and Agriculture (CDFA) will issue 17 types of cannabis cultivation licenses: Q. A. Specialty Cottage Outdoor An outdoor cultivation site with up to 25 mature plants Specialty Cottage Indoor An indoor cultivation site with up to 500 square feet or less of total canopy Specialty Cottage Mixed-Light A mixed-light cultivation site with 2,500 square feet or less of total canopy Specialty Outdoor An outdoor cultivation site with 5,000 square feet or less of total canopy—or up to 50 mature plants on noncontiguous plots Specialty Indoor An indoor cultivation site of between 501 and 5,000 square feet of total canopy Specialty Mixed-Light A mixed-light cultivation site of between 2,501 and 5,000 square feet of total canopy Small Outdoor An outdoor cultivation site of between 5,001 and 10,000 square feet of total canopy Small Indoor An indoor cultivation site of between 5,001 and 10,000 square feet of total canopy Small Mixed-Light A mixed-light cultivation site of between 5,001 and 10,000 square feet of total canopy Medium Outdoor An outdoor cultivation site of between 10,001 square feet and 1 acre of total canopy Medium Indoor An indoor cultivation site of between 10,001 and 22,000 square feet of total canopy Medium Mixed-Light A mixed-light cultivation site of between 10,001 and 22,000 square feet of total canopy Nursery Cultivation of cannabis solely as a nursery (examples of typical nursery activities include cloning and seed propagation) Processor A cultivation site that conducts only trimming, drying, curing, grading, or packaging of cannabis and nonmanufactured cannabis products Large Outdoor Note: CDFA will not issue any Large Outdoor licenses prior to January 1, 2023 For outdoor cultivation that uses no artificial lighting for more than 1 acre of total canopy size on one premises Large Indoor Note: CDFA will not issue any Large Indoor licenses prior to January 1, 2023 For indoor cultivation that exclusively uses artificial lighting for more than 22,000 square feet of total canopy size on one premises Large Mixed-Light Note: CDFA will not issue any Large Mixed-Light licenses prior to January 1, 2023 For cultivation using a combination of natural and supplemental artificial lighting at a maximum threshold (which will be determined by the licensing authority) for more than 22,000 square feet of total canopy size on one premises Packet Pg 261 13 Q. A. Q. A. Q. A. Q. A. What is the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA)? On June 27, 2017, California Governor Jerry Brown signed the cannabis trailer bill (also known as California Senate Bill 94), which effectively merged two existing bills—the Medical Cannabis Regulation and Safety Act (MCRSA) and the Adult Use of Marijuana Act (AUMA)—into one streamlined bill: the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). Having one comprehensive state law will provide for a more unified regulatory process governing both medicinal and adult-use cannabis. You can read the full text of MAUCRSA on the CalCannabis Cultivation Licensing website at: calcannabis.cdfa.ca.gov How long will a license last before it must be renewed? All commercial cannabis cultivation licenses will be valid for one year; a license must be renewed to continue commercial cannabis cultivation. What is the cannabis track-and-trace system? How will it work? The California Department of Food and Agriculture (CDFA) is developing a track- and-trace system for both medicinal and adult-use (recreational) cannabis that all commercial cannabis licensees in California will be required to use. This system will record the movement of cannabis and cannabis products through the supply chain—from cultivation to sale—which will help ensure that if a public safety concern arises, the source will be identifiable. The track-and-trace system also will help prevent black-market cannabis products from entering the regulated market, and likewise help prevent regulated cannabis products from being diverted into the black market. In June 2017, CDFA selected Franwell Inc. as the state’s cannabis track-and-trace vendor. Will there be different rules for how medicinal and adult-use (recreational) cannabis may be grown in California? The California Department of Food and Agriculture (CDFA) is still developing regulations, but the cultivation requirements are expected to be the same for growing medicinal and adult-use cannabis. However, cannabis products sold to the public must be clearly differentiated as either medicinal or adult-use (recreational) products. Is cannabis considered an agricultural crop in California? California defines medicinal and adult-use (recreational) cannabis as an agricultural product. However, this identification as an agricultural product is limited to the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA). Q. A. Packet Pg 262 13 Q. A. Q. A. How can I contact CalCannabis Cultivation Licensing? Visit the CalCannabis website at calcannabis.cdfa.ca.gov; call (916) 263-0801, Monday through Friday, 8am to 5pm; or send an email to calcannabis@cdfa.ca.gov. Which department should I contact to learn about other— noncultivation—types of state cannabis licenses? The Bureau of Cannabis Control (also known as the bureau) is within the California Department of Consumer Affairs and will issue licenses for distribution, dispensaries, microbusinesses, and testing laboratories. Visit the bureau’s website at bcc.ca.gov or call (800) 952-5210, Monday through Friday, 8am to 5pm. The Manufactured Cannabis Safety Branch (MCSB) is within the California Department of Public Health and will issue licenses for manufacturing (such as edibles and topical products). Visit the MCSB website at cdph.ca.gov/Programs/CEH/DFDCS/Pages/MCSB.aspx or call (916) 440-7861, Monday through Friday, 8am to 5pm. All three of California’s cannabis licensing authorities also can be reached via the California Cannabis Portal at: cannabis.ca.gov Packet Pg 263 13 CalCannabis Cultivation Licensing, a division of the California Department of Food and Agriculture (CDFA), is accepting applications for state medicinal and adult- use (recreational) cannabis cultivation licenses as of January 1, 2018. The Three Licensing Authorities Who Does What This graphic illustrates the movement of cannabis and cannabis products through the three state agencies responsible for regulating cannabis. BUREAU OF CANNABIS CONTROL Housed within the Department of Consumer Affairs, the bureau licenses testing labs, distributors, retailers, and microbusinesses. 1-800-952-5210 bcc@dca.ca.gov bcc.ca.gov Bureau CALCANNABIS CULTIVATION LICENSING Housed within the Department of Food and Agriculture, CalCannabis licenses cannabis cultivators and manages a track-and-trace system. 1-833-CALGROW (225-4769) calcannabis@cdfa.ca.gov calcannabis.cdfa.ca.gov CalCannabis MANUFACTURED CANNABIS SAFETY BRANCH Housed within the Department of Public Health, MCSB licenses manufacturers of cannabis products, such as edibles and topical products. 1-855-421-7887 mcsb@cdph.ca.gov cdph.ca.gov/mcsb MCSB CULTIVATION CalCannabis MANUFACTURING MCSB DISTRIBUTION Bureau TESTING Bureau RETAIL Bureau MICROBUSINESS BureauDistribution PhaseRegulating ProgramPacket Pg 264 13 In spring 2017, the Department of Food and Agriculture’s CalCannabis Cultivation Licensing division, the Department of Consumer Affairs’ Bureau of Cannabis Control, and the Department of Public Health’s Manufactured Cannabis Safety Branch released draft regulations for the Medical Cannabis Regulation and Safety Act of 2015. These licensing authorities held several public hearings to accept oral and written comments regarding the draft regulations. The licensing authorities had planned to move forward with a separate draft regulatory package for implementation of Proposition 64: The Adult Use of Cannabis Act of 2016. However, in June 2017, the Legislature passed and the Governor signed into law the Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA), which creates one regulatory system for both medicinal and adult-use (recreational) cannabis. As a result, the three cannabis licensing authorities withdrew the proposed medical cannabis regulations and adopted emergency regulations based on the new law for the commercial medicinal and adult-use (recreational) cannabis industries. The Medicinal and Adult-Use Cannabis Regulation and Safety Act (MAUCRSA) For more information on cannabis cultivation licensing: calcannabis.cdfa.ca.gov For details on other types of state cannabis licensing: cannabis.ca.gov Packet Pg 265 13 Richard Parrott, Director CalCannabis Cultivation Licensing Division California Department of Food and Agriculture Cannabis Cultivation License Application Overview Packet Pg 266 13 Topics to Cover •Who does what? •Quick overview of laws and regulations •Cannabis cultivation application guide A-Z Packet Pg 267 13 Who Does What? California Department of Food and Agriculture (CDFA): CalCannabis Cultivation Licensing (CalCannabis) California Department of Public Health (CDPH): Manufactured Cannabis Safety Branch (MCSB) California Department of Consumer Affairs (DCA): Bureau of Cannabis Control (Bureau) Packet Pg 268 13 Collaborative Effort Packet Pg 269 13 California Cannabis Laws Trailer Bill (Senate Bill 94) combined two acts: 1) Medical Cannabis Regulation and Safety Act (MCRSA) 2) Proposition 64 (Adult Use of Marijuana Act) And established one new act: Medicinal and Adult-Use of Cannabis Regulation and Safety Act (MAUCRSA) Packet Pg 270 13 Regulations Apr 2017 Issued proposed medical regulations Jun 2017 MAUCRSA was adopted Oct 2017 Withdrew proposed medical regulations based on the repeal of MCRSA Jun -Nov 2017 Analyzed the proposed medical regulations to see what could be recycled; reviewed input from stakeholders on the proposed medical regulations; and drafted language for the emergency regulations Nov 16, 2017 Released emergency regulations Nov 17, 2017 Regulations posted by the Office of Administrative Law (OAL) Nov 27, 2017 Submitted emergency regulations to OAL Packet Pg 271 13 Emergency Regulations: Articles •Definitions •Application •Licensing •Site Specific Requirements •Records & Track and Trace •Inspections •Enforcement Packet Pg 272 13 Key Definitions •Canopy •Indoor •Outdoor •Mixed-Light Packet Pg 273 13 License Categories Category Outdoor Indoor Mixed-Light Specialty Cottage Up to 25 mature plants Up to 500 sq ft Up to 2,500 sq ft Specialty Up to 5,000 sq ft or up to 50 mature plants Up to 5,000 sq ft Up to 5,000 sq ft Small 5,001-10,000 sq ft 5,001-10,000 sq ft 5,001-10,000 sq ft Medium (limited) 10,001 sq ft to 1 acre 10,001 -22,000 sq ft 10,001 -22,000 sq ft Large (not issued until 2023) Greater than 1 acre Greater than 22,000 sq ft Greater than 22,000 sq ft Nursery No size limit defined in statute (no canopy) Processor Conducts only trimming, drying, curing,grading, or packaging of cannabis and nonmanufactured cannabis products Packet Pg 274 13 Temporary Licenses •Legislative effort to bring existing industry into a regulatory structure •Must have local license, permit, or other authorization •Good for 120 days •May be extended for additional 90-day periods; requires the submission of a complete annual application •FREE!!!!!! •Sunsets January 1, 2019 Packet Pg 275 13 Annual License: Local Authorization •Applicant may–but does not have to–provide local license, permit, or other written documentation •Regardless, CDFA will notify the local jurisdiction to determine whether applicant is in compliance with all local laws and ordinances Packet Pg 276 13 Annual License Application Fees Specialty Cottage Outdoor $135 Specialty Outdoor $270 Small Outdoor $535 Medium Outdoor $1,555 Specialty Cottage Indoor $205 Specialty Indoor $2,170 Small Indoor $3,935 Medium Indoor $8,655 Specialty Cottage Mixed-Light Tier 1 $340 Specialty Mixed-Light Tier 1 $655 Small Mixed-Light Tier 1 $1,310 Medium Mixed-Light Tier 1 $2,885 Specialty Cottage Mixed-Light Tier 2 $580 Specialty Mixed-Light Tier 2 $1,125 Small Mixed-Light Tier 2 $2,250 Medium Mixed-Light Tier 2 $4,945 Nursery $520 Processor $1,040 Packet Pg 277 13 Annual License Fees Specialty Cottage Outdoor $1,205 Specialty Outdoor $2,410 Small Outdoor $4,820 Medium Outdoor $13,990 Specialty Cottage Indoor $1,830 Specialty Indoor $19,540 Small Indoor $35,410 Medium Indoor $77,905 Specialty Cottage Mixed-Light Tier 1 $3,035 Specialty Mixed-Light Tier 1 $5,900 Small Mixed-Light Tier 1 $11,800 Medium Mixed-Light Tier 1 $25,970 Specialty Cottage Mixed-Light Tier 2 $5,200 Specialty Mixed-Light Tier 2 $10,120 Small Mixed-Light Tier 2 $20,235 Medium Mixed-Light Tier 2 $44,517 Nursery $4,685 Processor $9,370 Packet Pg 278 13 Application Requirements A-Z a)Business name b)License type (such as Small Outdoor) and whether it is for A (adult use) or M (medicinal) c)A list of any other valid state-issued cannabis licenses d)Physical address e)Mailing address Packet Pg 279 13 Application Requirements A-Z f) Determine the Designated Responsible Party and provide required information (name, title, address, phone, email, and a copy of your government-issued ID) •Must be an owner •Legal authority to bind applicant entity •Primary contact for the application Packet Pg 280 13 Application Requirements A-Z g) List of all owners An owner is: A person with an aggregate ownership of 20 percent or more A CEO of a nonprofit or other entity A member of a nonprofit’s board of directors An individual participating in the direction, control, or management of the commercial cannabis business, including any of the following: 1.a partner of a commercial cannabis business organized as a partnership; 2.a member of a limited liability company of a commercial cannabis business organized as a limited-liability company; 3.an officer or director of a commercial cannabis business organized as a corporation. Packet Pg 281 13 Application Requirements A-Z g)Continued -owner requirements: •Personal information •Date ownership interest was acquired •A list of valid licenses where applicant is listed as an owner or financial-interest holder •Detailed description of criminal convictions, if applicable •Copy of “Live Scan” fingerprints h) A list of Financial-Interest Holders: Any individual or business that holds a financial interest, but is not qualified as an owner as indicated in the previous section Packet Pg 282 13 Application Requirements A-Z i)Copies of documents filed with the California Secretary of State Applicants will need to contact the Secretary of State’s office to find out which required documents are required for their business structure. Packet Pg 283 13 Application Requirements A-Z j)Valid seller’s permit number from the California Department of Tax and Fee Administration (CDTFA) -or evidence that you do not need one. Applicants will need to contact CDTFA to determine what is required for their business type. k)If an applicant is a cannabis cooperative business entity, provide a list of all licensed members. Packet Pg 284 13 Application Requirements A-Z l) Legal Right to Occupy: •If the applicant is the owner of the property, provide a copy of the title or deed to the property. •If the applicant is not the owner of the property, provide the following: 1.a document from the property owner (or property owner’s agent) where the commercial cannabis activity will occur that states the applicant has the right to occupy the property and acknowledges that the applicant may use the property for commercial cannabis cultivation; 2.the property owner’s mailing address and phone number; and 3.a copy of the lease or rental agreement, or other contractual documentation. Packet Pg 285 13 Application Requirements A-Z m) Evidence of a surety bond* for no less than $5,000, payable to the California Department of Food and Agriculture (or CDFA). *Must be issued by a corporate surety that is licensed to transact business in California. n)Evidence of enrollment—or that enrollment is not necessary— with the applicable regional or state water board for water-quality protection. Applicants will need to work with the Water Board to determine what documentation is appropriate for their licensed premises. Packet Pg 286 13 Application Requirements A-Z o) Evidence that the applicant has conducted a hazardous- materials record search of the EnviroStor database for the proposed premises. If hazardous sites were encountered, the applicant shall provide documentation of protocols implemented to protect employee health and safety. Packet Pg 287 13 Application Requirements A-Z p)Evidence of exemption from, or compliance with, Division 13 of the Public Resources Code: California Environmental Quality Act (CEQA). The evidence provided shall be one of the following: 1.a copy of the applicant’s license, permit, or other authorization from the local jurisdiction if the local jurisdiction has adopted an ordinance, rule, or regulation that requires discretionary review and approval of the applicant’s license, permits or other authorization. 2.a copy of the Notice of Determination or Notice of Exemption and a copy of the CEQA document, or reference to where it can be located online; or 3.if an applicant does not have the evidence specified in subsections (1.) or (2.) of this section, or if the local jurisdiction did not prepare a CEQA document, the applicant will be responsible for preparing an environmental document that is in compliance with CEQA and can be approved or certified by CDFA. Packet Pg 288 13 Application Requirements A-Z q) For indoor and mixed-light license types, identify all power sources for cultivation activities, including but not limited to: illumination, heating, cooling, and ventilation r) A property diagram s) A proposed cultivation plan: •Detailed premises diagram •Pe st -management plan •Cannabis waste-management plan •Lighting diagram (indoor and mixed-light license types) Packet Pg 289 13 Application Requirements A-Z t) Identification of all of the water sources used for cultivation activities and the applicable supplemental information for each source: 1.a retail water supplier 2.a goundwater well 3.a rainwater-catchment system 4.a diversion from a surface water body or an underground stream flowing in a known and definite channel Packet Pg 290 13 Application Requirements A-Z u)A copy of any final lake or streambed alteration agreement issued by the California Department of Fish and Wildlife (CDFW), pursuant to Sections 1602 and 1617 of the Fish and Game Code, or written verification from CDFW that a lake -and streambed-alteration agreement is not required. v)An attestation that the proposed location is at least a 600-foot radius from sensitive sites. w) If the applicant has 20 or more employees on the payroll at any time, the applicant must attest that the entity will enter into, (or has already entered into) and will abide by the terms of a labor peace agreement. Packet Pg 291 13 Application Requirements A-Z x) The applicant must attest that the entity is an "agricultural employer," as defined by the Alatorre-Zenovich-Dunlap -Berman Agricultural Labor Relations Act of 1975; Part 3.5 (commencing with Section 1140) Div. 2 Labor Code. y)If the applicant entity is applying for an indoor license type, the applicant must attest that the local fire department has been notified of the cultivation site. z) The limited waiver of sovereign immunity: •Any applicant who is within the scope of sovereign immunity—that may be asserted by a federally recognizable tribe or other sovereign entity— shall waive any sovereign immunity defense. The applicant will have to provide documentation that establishes that the applicant has the lawful authority to enter into the waiver described above. Packet Pg 292 13 Site Requirements •No alcohol or tobacco sales allowed on premises Packet Pg 293 13 Application Options •Online Application •Paper Application For information regarding the application process, please visit calcannabis.cdfa.ca.gov Packet Pg 294 13 Contact Us! Visit our website and join our email list: calcannabis.cdfa.ca.gov 1-833-CAL-GROW calcannabis@cdfa.ca.gov Facebook.com/CACultivationLicensing Instagram.com/calcannabis.cdfa Twitter.com/cal_cannabis Packet Pg 295 13 California Department of Public Health Manufactured Cannabis Safety Branch Manufactured Cannabis Training California Department of Public Health Manufactured Cannabis Safety Branch Understanding Regulations and State Licensing Today’s Informational Session •State Laws & Regulations •State Cannabis Licensing Authorities •Regulations for Cannabis Manufacturing •Temporary License Application Process •Annual License Application Process •After You’re Licensed •Q&A California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 1 Packet Pg 296 13 California Department of Public Health Manufactured Cannabis Safety Branch State Cannabis Offices Bureau of Cannabis Control (Bureau) Retailers Distributors Testing Labs Microbusinesses California Department of Public Health Manufactured Cannabis Safety Branch CA Department of Food & Agriculture CalCannabis Cultivation Licensing Cultivators Track-and-Trace CA Department of Public Health Manufactured Cannabis Safety Branch (MCSB) Manufacturers State Cannabis Law 1996 Compassionate Use Act Proposition 215 2015 Medical Cannabis Regulation & Safety Act (MCRSA) AB 266, AB 243, SB 643 2016 Adult Use of Marijuana Act (AUMA) Proposition 64 2017 Medicinal and Adult-Use Cannabis Regulation & Safety Act (MAUCRSA) SB 94, AB 133 California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 2 Packet Pg 297 13 California Department of Public Health Manufactured Cannabis Safety Branch Principles of MAUCRSA Public Health & Consumer Safety Neither Food Nor Drug Vertical Integration Dual Licensing Structure California Department of Public Health Manufactured Cannabis Safety Branch Dual Licensing Structure Local Authorization Must comply with local ordinances Local cannabis ordinances and permitting State Licensing All cannabis businesses must be licensed State cannabis licensing authorities California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 3 Packet Pg 298 13 California Department of Public Health Manufactured Cannabis Safety Branch State Regulations •Emergency Regulations –Released by each state licensing authority –Outline requirements for specific aspects of commercial cannabis market •Permanent Regulations –Rulemaking process –Early 2018 California Department of Public Health Manufactured Cannabis Safety Branch California Track-and-Trace California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 4 Packet Pg 299 13 California Department of Public Health Manufactured Cannabis Safety Branch WHAT MANUFACTURERS NEED TO KNOW MCSB EMERGENCY REGULATIONS California Department of Public Health Role: Protect public health by promoting product and workplace safety Manufactured Cannabis Safety Branch •Regulations •Licensing •Compliance California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 5 Packet Pg 300 13 California Department of Public Health Manufactured Cannabis Safety Branch Cannabis Manufacturing Extraction –separating cannabinoids from cannabis plant material Infusion –using plant material or concentrates to create a cannabis product Packaging and Labeling - putting finished cannabis products into a container and/or marking them for sale California Department of Public Health Manufactured Cannabis Safety Branch License Categories and Types License Categories: M (Medicinal) or A (Adult-use) License Types: •Extraction: Volatile SolventsType 7 •Extraction: Non-volatile Solvents, Mechanical MethodsType 6 •InfusionsType N •Packaging & Labeling OnlyType P California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 6 Packet Pg 301 13 California Department of Public Health Manufactured Cannabis Safety Branch Operational Requirements •Good Manufacturing Practices –Clean, sanitary work environment –Control of hazards •Cannabis Product Safety –Free of contaminants –Uniform THC levels •Chemical Extraction Safety –Must adhere to local fire code and restrictions California Department of Public Health Manufactured Cannabis Safety Branch Cannabis Product Standards •Product Restrictions –Prohibited Additives –Prohibited Products –Ingredients vs. Final Products –Product Shapes •Requirements for Edibles: Servings California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 7 Packet Pg 302 13 California Department of Public Health Manufactured Cannabis Safety Branch THC Limits Edibles •10 milligrams per serving •100 milligrams per package Other Products •1000 milligrams per package (adult-use) •2000 milligrams per package (medicinal) California Department of Public Health Manufactured Cannabis Safety Branch Packaging Cannot resemble traditional food packaging Opaque packaging (Edibles) Must be packaged before release to distributor Must be tamper evident and child resistant Must be re-sealable, if there are multiple servings California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 8 Packet Pg 303 13 California Department of Public Health Manufactured Cannabis Safety Branch Labeling Primary Panel •Includes product identity, THC content, universal symbol Informational Panel: •Includes list of ingredients, warning statement, UID May not refer to product as candy Cannot be attractive to children California Department of Public Health Manufactured Cannabis Safety Branch State Licensing Begins January 1, 2018 Temporary Licenses •Valid 120 days •May be extended for 90 day periods •Submit via email or mail •Need explicit local authorization Annual Licenses •Valid 1 year •Online application process •Must be “in compliance” with local jurisdiction California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 9 Packet Pg 304 13 California Department of Public Health Manufactured Cannabis Safety Branch APPLICATION REQUIREMENTS AND PROCEDURES TEMPORARY LICENSE Temporary License Application •One page form •Available on MCSB website •Submit via email or mail with local authorization California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 10 Packet Pg 305 13 California Department of Public Health Manufactured Cannabis Safety Branch Local Authorization What is a local jurisdiction? Temporary License Requirement: •Local authorization to operate a cannabis business •Examples: Cannabis business permit, letter of acknowledgement, etc. California Department of Public Health Manufactured Cannabis Safety Branch How We Process Temporary Applications Check for Completeness Contact Local Jurisdiction (10 Days) Issue Temporary License California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 11 Packet Pg 306 13 California Department of Public Health Manufactured Cannabis Safety Branch Temporary Licenses •Temporary Licenses are valid for 120 days •Once you have your temporary license: –Do business only with other licensees –Apply for your annual license California Department of Public Health Manufactured Cannabis Safety Branch APPLICATION REQUIREMENTS AND PROCEDURES ANNUAL LICENSE Licensing Informational Sessions –Fall 2017 12 Packet Pg 307 13 California Department of Public Health Manufactured Cannabis Safety Branch Annual License Requirements •Requirements of Operating a Business in CA –CA Business Registration –CA Seller’s Permit –Federal Employer ID Number (FEIN) –Compliance with city or county ordinances •Owners and Financial Interest Holders California Department of Public Health Manufactured Cannabis Safety Branch Annual License Requirements •Who is an Owner? –At least 20% ownership –CEO, Nonprofit Board of Directors, Partners, LLC Members, Corporation Officers/Directors –Anyone involved in the direction, control or management of the company •Who is a Financial Interest Holder? –Less than 20% ownership –Not involved in day-to-day business operation California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 13 Packet Pg 308 13 California Department of Public Health Manufactured Cannabis Safety Branch Annual License Application •Online Application System –Manufactured Cannabis Licensing System (MCLS) –Launches mid-December 2017 –Access through MCSB website –Submit your application, update your information, make a payment •Resources and Guides Coming Soon California Department of Public Health Manufactured Cannabis Safety Branch CDPH Application Portal California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 14 Packet Pg 309 13 California Department of Public Health Manufactured Cannabis Safety Branch Manufactured Cannabis Licensing System (MCLS) California Department of Public Health Manufactured Cannabis Safety Branch Individual Profile All Owners must complete an Individual Profile •Live Scan •Criminal Disclosure Individual Profile Number –Keep this number California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 15 Packet Pg 310 13 California Department of Public Health Manufactured Cannabis Safety Branch Business Information •Information about the Business •Contact Information •Other Licenses (Voluntary Survey) California Department of Public Health Manufactured Cannabis Safety Branch Business Information •Add Owners to Your Business Profile –Use Individual Profile Number •List Financial Interest Holders California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 16 Packet Pg 311 13 California Department of Public Health Manufactured Cannabis Safety Branch Premises Information •What is a Premises? –Where cannabis manufacturing will occur •Physical Address •Priority Review •Operations –Gross Annual Revenue –Manufacturing Activities –Local Authorization California Department of Public Health Manufactured Cannabis Safety Branch License Information Documents: •Local Authorization •Property Owner Authorization •Diagram of the Premises •Closed-Loop System Certification •Surety Bond •List of Cannabis Products Descriptions or SOPs: •Waste Disposal •Inventory Control •Quality Control •Transportation •Security California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 17 Packet Pg 312 13 California Department of Public Health Manufactured Cannabis Safety Branch Annual License Application California Department of Public Health Manufactured Cannabis Safety Branch Application & Licensing Fees Application Fee –Paid when application is submitted License Fee –Paid when application is approved –Seven scaled tiers –Based on gross annual revenue of the licensed premises California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 18 Packet Pg 313 13 California Department of Public Health Manufactured Cannabis Safety Branch Making a Payment •Include Payment Instructions Form •Payment Forms Accepted –Application Fee: Cashier’s Check, Money Order or Credit Card –Make Payments to “California Department of Public Health” –License Fee: Credit Card, E-Check, Cash •Cash Location –Sacramento (Opening Soon) California Department of Public Health Manufactured Cannabis Safety Branch How We Process Annual Applications Check for Completeness Contact Local Jurisdiction (10 or 60 Days) Review of Operational Activities Annual License Approved License Fee Paid Annual License Issued California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 19 Packet Pg 314 13 California Department of Public Health Manufactured Cannabis Safety Branch AFTER YOU RECEIVE YOUR LICENSE ANNUAL LICENSE Next Steps •After you apply for your annual license: –Sign Up for Track-and-Trace Webinar •Tracking Movement of Cannabis Products –Temporary License –Sales Invoice –Annual License –Track-and-Trace •Compliance Through Education California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 20 Packet Pg 315 13 California Department of Public Health Manufactured Cannabis Safety Branch Transition Period (Jan 1 –July 1, 2018) License Designations: •A- and M-License overlap (until July 1, 2018) Existing manufactured products: •Secondary packaging: Child-resistant •Add: Government warning statement, amount of THC/CBD per serving and per package All products manufactured on/after January 1, 2018 must meet THC limits and product restrictions California Department of Public Health Manufactured Cannabis Safety Branch Resources Manufactured Cannabis Safety Branch (MCSB) www.cdph.ca.gov/mcsb mcsb@cdph.ca.gov Cannabis Portal www.cannabis.ca.gov Cannabizfile www.sos.ca.gov California Department of Tax & Fee Administration (CDTFA) www.cdtfa.ca.gov www.cdtfa.gov/industry/cannabis.html California Department of Public Health Manufactured Cannabis Safety Branch Licensing Informational Sessions –Fall 2017 21 Packet Pg 316 13 California Department of Public Health Manufactured Cannabis Safety Branch Thank You California Department of Public Health Manufactured Cannabis Safety Branch www.cdph.ca.gov/mcsb mcsb@cdph.ca.gov Cannabis Portal www.cannabis.ca.gov Licensing Informational Sessions –Fall 2017 22 Packet Pg 317 13 Page intentionally left blank. 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