Morro Bay is moving forward with a $3.87 million agreement to purchase the Cayucos Sanitary District’s 40 percent stake in the jointly owned former wastewater treatment plant.
The property, located along Atascadero Road and the Embarcadero, has been jointly owned by the two agencies since 1953, when the original plant was constructed under a joint powers agreement to serve both communities. The facility was last upgraded in 1984 but is no longer in use after Morro Bay and Cayucos each built separate wastewater treatment systems.
Under the proposed purchase and sale agreement, Morro Bay would acquire full ownership of the roughly 19-acre site including the former plant, a former concrete plant, a portion of the Morro Dunes RV Park, and nearby coastal land. Currently, the city owns 60 percent of the land and 65 percent of the plant and pipeline infrastructure, while Cayucos holds the remaining shares.
During a March 24 Morro Bay City Council meeting, City Manager John Craig told the council that full ownership is necessary to move forward with the long-delayed demolition and decommissioning of the facility.
The agreement includes a 90-day escrow period during which the city will complete due diligence, including title review and environmental assessment.
The property is being purchased “as is, with all faults,” though the city will have the opportunity to evaluate potential contamination, and “in the event hazardous waste is found, the agreement provides an opportunity for both parties to terminate prior to the end of the due diligence period,” a March 19 Morro Bay staff report states.
Craig said that funding for the purchase will come from the city’s sewer fund, meaning it will be paid for by ratepayer dollars. Initially, the property will be classified as a sewer fund asset. However, once the plant is demolished and future uses are determined, the City Council could consider transferring the property to the general fund to support broader public or economic uses.
“The district and Morro Bay agreed to value the property based on the rezoned use consistent with the city’s waterfront master plan’s proposed zoning,” Cayucos Sanitary District General Manager David Athey said in a March 26 staff report. “The property appraisal valued the land at $9,670,000, of which the district’s 40 percent share would be approximately $3,867,800.”
Cayucos will no longer need to approve future actions on the site, allowing Morro Bay to meet the coastal development permit conditions tied to its water reclamation facility that began operations in 2023. The permit requires decommissioning and demolition of the former plant within one year, a step that has been delayed as long as Cayucos has maintained joint ownership.
“Approval of the agreement would allow the city to become the sole owner of the property, … and is expected to provide significant benefit to the city and its residents, including by simplifying the process for the demolition and decommissioning of the WWTP [wastewater treatment plant] and potential future reuse of the property for visitor-serving and coastal uses,” Morro Bay staff said in the March 19 report.
Future plans for the site will be shared through Morro Bay’s ongoing waterfront master plan update. The transaction is expected to close in late June 2026. ∆
This article appears in April 2-9, 2026.