HomeMy WebLinkAboutItem 6e - Authorization to Create a new Capital Improvement Project and Appropriate Senate Bull 124 Funds for Open Loop Payment System Item 6e
Department: Public Works
Cost Center: 9501
For Agenda of: 11/18/2025
Placement: Consent
Estimated Time: N/A
FROM: Aaron Floyd, Interim Public Works Director
Prepared By: Alex Fuchs, Mobility Services Business Manager
SUBJECT: AUTHORIZATION TO CREATE A NEW CAPITAL IMPROVEMENT
PROJECT AND APPROPRIATE SENATE BILL (SB) 125 FUNDS FOR
THE OPEN-LOOP PAYMENT SYSTEM PROJECT
RECOMMENDATION
Adopt a Resolution of the City Council of the City of San Luis Obispo, California, to:
1. Approve the creation of a new Capital Improvement Project for the Open-Loop
Payment System (Project Number 2000406); and
2. Authorize the Finance Director to appropriate $271,000 in Senate Bill (SB) 125
grant funds to the Open-Loop Payment System Project Account (Project Number
2000406).
POLICY CONTEXT
On January 23, 2024, the San Luis Obispo City Council held a Study Session to review
the draft Transit Innovation Study. The Study Session included a review of 17
recommendations intended to enhance mobility, restore ridership, and improve
technology. The second highest ranked recommendation was to pursue implementation
of a new transit payment technology – an “open-loop payment system” in coordination
with San Luis Obispo Council of Governments (SLOCOG) and San Luis Obispo Regional
Transit Authority (RTA) (the “project”). Council directed staff to finalize the Transit
Innovation Study and to begin implementation. The recommendation in this report is
consistent with Council’s direction and the implementation of the Transit Innovation Study
recommendations.
Under Sections 6.2.2 and 6.2.3 of the City’s Financial Management Manual, creation of
a new Capital Improvement Project (CIP) and appropriation of new funding both require
City Council authorization. These provisions ensure all capital projects are formally
approved, budgeted, and tracked within the City’s CIP process. A new CIP project must
be authorized by Council when the project has not been previously ident ified in the
adopted Capital Improvement Plan or budget, or when it represents a new scope of work,
asset, or major infrastructure investment. Similarly, Council approval is required to
appropriate grant or external funds that were not previously budgeted.
Page 35 of 509
Item 6e
DISCUSSION
Background
An open-loop payment system allows riders to pay fares using contactless payment
options like chip-enabled bank cards, Google Pay, and Apple Pay through on-board
payment acceptance devices. This new payment option would be in addition to the
existing cash, digital pass, and physical pass on -board payment options. These devices
integrate with a transit fare processing software to calculate fares and allows users to
benefit from “fare capping” technology. Fare capping ensures riders never pay more than
a set maximum amount for fares over a given period (e.g. daily and monthly).
Additionally, this system makes travel across participating transit agencies faster and
more convenient while reducing barriers for occasional riders and visitors. Other
participating agencies along the central coast include RTA, Monterey-Salinas Transit, and
Santa Barbara Metropolitan Transit District. Once the system is live, a rider could travel
throughout these different transit systems using the same card without a need to buy
separate agency passes. For agencies, it simplifies fare collection and supports seamless
regional integration by enabling a consistent, easy-to-use payment experience.
Section 4.2 of the SLO Transit’s Transit Innovation Study recommends pursuing a
regionwide open-loop payment system in coordination with SLOCOG and RTA. SLOCOG
applied for and was approved to allocate Senate Bill (SB) 125 funding for the project’s
implementation. SB 125 is a state law that allocated a one-time infusion of about $5.1
billion for public transit in California. The funds are intended to help transit providers with
both operating costs and capital improvements, including vehicle purchases, zero -
emission transit equipment, deployment of new technologies, etc.
In January 2025, Council authorized execution of Cooperative Agreement No. SLO-SB
125 with SLOCOG to receive SB 125 funds and to appropriate these funds to related
projects. Because SLOCOG was the lead agency at that time, the open -loop payment
system was not included as a City project in the cooperative agreement, therefore Council
did not appropriate funding for this specific project as part of the 2025-27 Financial Plan.
In May 2025, Council authorized execution of an amendment to the cooperative
agreement (Attachment A) with SLOCOG adding the project and programming amounts
to allow the city to be reimbursed for project costs to implement on the City’s transit
system. However, staff neglected at that time to recommend the creation of a project or
the appropriation of funds to the open-loop payment system project. These actions
require Council approval and are necessary to move the project forward.
Staff recommends adoption of a draft Resolution (Attachment B) authorizing the creation
of a new Capital Improvement Project (CIP) for the open -loop payment system project
and authorizing the Finance Director to appropriate $271,000 in Senate Bill (SB) 125
grant funds to the open-loop payment system project.
Page 36 of 509
Item 6e
Previous Council or Advisory Body Action
1. January 23, 2024 – Council held a Study Session on the draft Transit Innovation
Study report and directed staff to finalize the report and begin implementation.
2. December 11, 2024 – the Mass Transportation Committee voted in favor of
recommending that, for the 2025-27 budget cycle, Council focus on all the “High
Impact to Ridership” recommendations of the Transit Innovation Study which
includes pursuing an open loop payment system.
3. January 14, 2025 – Council adopted Resolution No. 11538 (2025 Series)
authorizing the Mayor to execute a cooperative agreement with SLOCOG for
Senate Bill 125 funds and the appropriation of funds to associated capital projects.
4. May 20, 2025 – Council adopted Resolution No. 11564 (2025 Series) authorizing
execution of agreements for the open-loop payment system project and authorized
execution of an amendment to the SB 125 Cooperative Agreement with SLOCOG
for reimbursement of open-loop payment system project costs.
Public Engagement
The Transit Innovation Study ranked pursuit of the open-loop payment system project, in
coordination with SLOCOG and RTA, as its second-highest priority recommendation. This
ranking was based on feedback from internal staff and external stakeholders, including
representatives from Cal Poly, Downtown SLO, the Chamber of Commerce, RTA,
SLOCOG, and members of the Mass Transportation and Active Transportation
Committees. The recommendations were presented to City Council and the public during
the January 23, 2024, Study Session where Council reaffirmed the project’s high priority.
If approved, the open loop devices will be installed in mid -December 2025 with a tentative
launch date by end of February 2026. Promotion of the new payment option, including
how to use it and the benefits of fare capping, will begin four weeks prior to launch.
Promotions will include outreach to community partners (e.g. HASLO, CAPSLO, THMA,
SLCUSD), flyers on buses, social media posts, a press release, updates to the SLO
Transit webpage, and printed handouts. Prom otions will be coordinated between City and
RTA staff to ensure consistent messaging.
CONCURRENCE
SLOCOG and RTA are partner agencies on this regionwide project and concur with the
recommended action.
ENVIRONMENTAL REVIEW
The recommended action is not considered a “Project” under California Environmental
Quality Act (CEQA) Guidelines Section 15378 , because it involves
administrative/technology implementation and does not have the potential for resulting in
either a direct or reasonably foreseeable indirect physical change in the environment.
FISCAL IMPACT
Budgeted: No Budget Year: 2025-26
Page 37 of 509
Item 6e
Funding Identified: Yes
Fiscal Analysis:
Funding
Sources
Total Budget
Available
Current Funding
Request (Account
2000406)
Remaining
Balance
Annual
Ongoing
Cost
General
Fund $ 0 $ 0 $ 0 $ 0
Transit Fund $ 0 $ 0 $ 0 $ 0
Senate Bill
125 Funds $ 271,000 $ 64,176 $ 206,824 $ 39,290
Total $ 271,000 $ 64,176 $ 206,824 $ 39,290
In May 2025, Council approved an amendment to the cooperative agreement with
SLOCOG for SB 125 grant funds to include the Open -Loop Payment System project.
However, Council was not requested at that time to authorize the creation of a City Capital
Improvement Project or to appropriate the SB 125 funds for this project. The funds remain
available to reimburse City-incurred project costs.
As part of this regionwide effort, the City’s estimated cost to implement and operate the
system over the initial five-year period is $271,000. The initial project cost is $64,176 for
hardware, installation, and configuration of the payment devices and tra nsit payment
technology. On-going costs are estimated to be $39,290 annually for warranty, support,
and transactional fees. The City will be responsible for ongoing operations, maintenance,
and hardware/software upgrades after the initial five-year period.
ALTERNATIVES
Council could decide not to authorize the appropriation of SB 125 funds to the
open-loop payment system project. Should Council pursue this option, the City will be
unable to move forward with implementation of the open -loop payment system project
and SLO Transit will not be able to offer contactless payment as an on -board payment
option or fare capping technology to its riders.
ATTACHMENTS
A - Amendment No. 1 to SB 125 Cooperative Agreement
B - Draft Resolution authorizing the open-loop payment system project creation and fund
appropriation
Page 38 of 509
SLOCOG SB 125 Subrecipient Cooperative Agreement page 1
San Luis Obispo Council of Governments
Agreement No. SLO-SB 125-01
TRANSIT AND INTERCITY RAIL CAPITAL PROGRAM (TIRCP) AND
ZERO-EMISSION TRANSIT CAPITAL PROGRAM (ZETCP)
SUBRECIPIENT COOPERATIVE AGREEMENT
Amendment No. 1 to Agreement No. SLO-SB 125-01
THIS AGREEMENT, ENTERED INTO ON THE DATE BELOW STATED is between the San Luis Obispo
Council of Governments, referred to herein as "SLOCOG", and the CITY OF SAN LUIS OBISPO, a
municipal corporation and political subdivision of the State of California, referred to herein as the “CITY”.
RECITALS
WHEREAS, on December 5, 2023, the SLOCOG Board approved programming for the CITY for transit
capital projects and authorized the Executive Director to submit the program of projects to CalSTA and
adjust programming as needed and to return them to the Board for en dorsement; and,
WHEREAS, SLOCOG and the CITY are authorized, pursuant to requirements of Assembly Bill 102
(2023) and SB 125 (2023), to enter into a Cooperative Agreement for high-priority transit capital projects
consistent with the uses allowed in Cycle 6 of the TIRCP, zero-emission transit vehicles and supporting
infrastructure, transit operating expenses that prevent service cuts, and other projects subject to compliance
and requirements set forth in the SB 125 program guidelines; and,
WHEREAS, SLOCOG and the CITY entered into Agreement No. SLO-SB 125-01 (“Agreement”) on
January 17, 2025; and,
WHEREAS, SLOCOG was designated as the project sponsor for use of Transit and Intercity Rail Capital
Program (“TIRCP”) funds to implement and support the San Luis Obispo Region Cal-ITP Implementation
Project (“Project”); and,
NOW THEREFORE, the parties mutually agree as follows:
1) Table 1 of that Agreement No. SLO-SB 125-01 is hereby amended by adding project “City of SLO-
5” (Cal-ITP Implementation Project – SLO Transit), with programming amounts of $271,000 for the
Project as identified in Exhibit 1 (attached hereto and incorporated herein by this reference).
2) That SLOCOG, as grantor of these funds, be recognized in all promotions of the Project in the
Amendment. CITY shall include the recognition of SLOCOG in all project branding, signage, press
releases, and other marketing materials related to the Project.
3) That all other terms and conditions of the original Agreement No. SLO -SB 125-01 shall remain in
full force and effect unless otherwise amended per agreement.
Docusign Envelope ID: 0E2F71F5-17B7-4FCA-BFDD-746055A3C9BC
Page 39 of 509
SLOCOG SB 125 Subrecipient Cooperative Agreement page 2
SIGNATURES:
CITY OF SAN LUIS OBISPO SAN LUIS OBISPO
COUNCIL OF GOVERNMENTS
By: ________________________________ By: ___________________________________
Erica A. Stewart, Mayor Peter Rodgers, Executive Director
Date: _______________ Date: _______________
ATTEST:
By: ____________________________________
Teresa Purrington, City Clerk
APPROVED AS TO FORM AND LEGAL EFFECT:
By: ____________________________________ By: _________________________________
Christine Dietrick, City Attorney Jenna Morton, SLOCOG Counsel
Date: _______________ Date: _______________
Docusign Envelope ID: 0E2F71F5-17B7-4FCA-BFDD-746055A3C9BC
5/21/2025 | 11:29 AM PDT
5/21/2025 | 11:33 AM PDT
5/21/2025 | 11:37 AM PDT
5/21/2025 | 12:57 PM PDT
Page 40 of 509
SLOCOG SB 125 Subrecipient Cooperative Agreement page 3
EXHIBIT 1
CITY PROJECTS
for
Amendment No. 1 Agreement No. SLO-SB 125-01
SLOCOG# Project Name TIRCP ZETCP FY
City of SLO-5
Cal-ITP
Implementation
Project – SLO Transit
$271,000 - 2024/25
Docusign Envelope ID: 0E2F71F5-17B7-4FCA-BFDD-746055A3C9BC
Page 41 of 509
Page 42 of 509
R ______
RESOLUTION NO. _____ (2025 SERIES)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS
OBISPO, CALIFORNIA, APPROVING THE CREATION OF A NEW
CAPITAL IMPROVEMENT PROJECT FOR THE OPEN-LOOP PAYMENT
SYSTEM AND AUTHORIZING THE FINANCE DIRECTOR TO
APPROPRIATE $271,000 IN SENATE BILL 125 GRANT FUNDS TO THE
OPEN-LOOP PAYMENT SYSTEM PROJECT ACCOUNT
WHEREAS, On January 23, 2024, the City Council of the City of San Luis Obispo
held a Study Session at a regularly scheduled public meeting to review the draft Transit
Innovation Study and provided direction to staff to finalize the study and to begin
implementation; and
WHEREAS, The second highest ranked recommendation of the Transit Innovation
Study was to purse implementation of open loop payment system in coordination with
San Luis Obispo Council of Governments (SLOCOG) and San Luis Obispo Regional
Transit Authority (RTA); and
WHEREAS, On January 15, 2025, Council adopted Resolution No. 11538 (2025
Series) authorizing the Mayor to execute a cooperative agreement with SLOCOG for
Senate Bill (SB) 125 funds and the appropriation of funds to associated capital projects;
and
WHEREAS, On May 20, 2025, Council authorized execution of agreements for the
open-loop payment system project and an amendment to the cooperative agreement with
SLOCOG to allow reimbursement of City-incurred project costs; however, staff neglected
at that time to recommend the creation of a project or the appropriation of funds to the
open-loop payment system project; and
WHEREAS, The creation of new Capital Improvement Project and the
appropriation of SB 125 funds to the open-loop payment system project require Council
approval and are necessary to move the project forward.
NOW, THEREFORE, BE IT RESOLVED that the Council of the City of San Luis
Obispo does hereby authorize the creation of a new Capital Improvement Project and the
appropriation of SB 125 funds to the open-loop payment system project as follows:
SECTION 1. Environmental Review. The recommended action is not considered
a “Project” under California Environmental Quality Act (CEQA) Guidelines Section 15378,
because it involves administrative/technology implementation and does not have the
potential for resulting in either a direct or reasonably foreseeable indirect physical change
in the environment.
SECTION 2. Approval. The City Council of the City of San Luis Obispo does
hereby:
Page 43 of 509
Resolution No. _____ (2025 Series) Page 2
R ______
1. Approve the creation of a new Capital Improvement Project, Number
2000406, for the Open-Loop Payment System; and
2. Authorize the Finance Director to appropriate $271,000 in Senate Bill (SB)
125 funds to the Open-Loop Payment System Project Account.
Upon motion of Council Member ___________, seconded by Council Member
___________, and on the following roll call vote:
AYES:
NOES:
ABSENT:
The foregoing resolution was adopted this 18th day of November 2025.
___________________________
Mayor Erica A. Stewart
ATTEST:
______________________
Teresa Purrington
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, on ______________________.
___________________________
Teresa Purrington
City Clerk
Page 44 of 509