We open on the Santa Barbara Mayor, Gavin Channing, thanking our guys at the SBPD for keeping crime at an all time low. Shawn and Mayor Channing instantly hit it off, and he invites Shawn over for brunch at his beach house. Shawn and Gus show up the next day, but upon arrival they learn that Mayor Channing is dead, his body having just washed up on the shore.
Woody determines that it must have been a surfing accident, but Shawn remembers from the Surf Report he heard on the radio that there were no waves at the time of Gavin's death. Something isn't adding up. Shawn goes to confront Gavin's right hand man Straub at City Hall.
There, he also meets Gavin's de facto successor, Tom Swagerty, Head of the City Council. Swagerty is carrying an agenda for the next City Council meeting and Shawn sees that a proposal to lift developmental restrictions on the Santa Barbara wetlands is one of the issues to be voted on. Shawn knows that Gavin was an environmentalist and was going to vote "no" on this ban lift, so he decides to pay a visit to the company who has interest in the land should the development ban be lifted. Upon investigation, they discover that the real people behind the land development plan are from a company called "Argus Equities." Shawn remembers Swagerty wearing a shirt with an "Argus Equities" logo on the sleeve. He now thinks that it was Swagerty that had something to do with the mayor's death.
Shawn knows that the only way to get the real scoop on who killed Gavin is to run for mayor himself - because if Swagerty wins and it was he who killed Gavin after all, then as mayor he would do anything to stop any further investigation of Gavin's death. So Shawn announces his candidacy.
Woody later alerts Shawn that he found two gray hairs on Gavin's body that do not belong to him. Shawn knows that Swagerty has gray hair, so now he is extra certain he was the killer. Straub agrees with Shawn's theory and decides to help Shawn win the election against Swagerty.
Straub tells Shawn that he has everyman appeal and that he actually has a shot at winning. But he also adds that beating Swagerty may not be easy because of Swagerty's sad backstory - his fiancee Abby died tragically last year. Straub suggests that Shawn up his game by showing up to the upcoming Founder's Gala with his beautiful girlfriend. Gus tries to tell Straub that Shawn and Juliet are no longer together, but Shawn stops him, determined that he can convince Jules to play along for just for the night. Shawn also knows that the gala will be his opportunity to collect a hair sample from Swagerty in order to get a match on the hairs found on Gavin's body.
At the gala, Jules makes it clear that she is only there because of work. Shawn manages to impress Juliet at the gala and she almost falls for him again, but catches herself. She runs away and Shawn chases after her. He apologizes to her for lying to her about being psychic all these years. Juliet appreciates his apology, but can't forgive him unless him does one thing; She tells Shawn that the only way she can forgive him is if he tells Chief Vick the truth about not being a psychic. Shawn says he's can't do it; his work for the SBPD has saved so many lives. If he were to tell Chief Vick the truth, all of the good that he does would go away. Despite Shawn's plea, Juliet stays firm on her request. On his way out of the gala, Shawn is able to snag a grey hair from Swagerty's head to give to Woody to have tested. Woody tells Shawn and Gus that Swagerty's hair wasn't a match. Swagerty isn't their guy.
Before Shawn can bow out of the race for Mayor, Shawn gets a visit from Straub who tells him that he is actually leading in the polls. Shawn embraces his popularity with the people, but knows he needs to stay focused on solving the murder of former Mayor Channing. As a result, Shawn tells Gus to run smear ads against him so that he won't actually win the race for Mayor.
Shawn realizes there was another person involved with Gavin that had gray hair... his wife Renee. Shawn confronts Renee but quickly learns that she wasn't the culprit. So they head back to Gavin's beach house to investigate further. They realize that the killer must have had access to the house and that it could have been someone like a plumber or a gardener. They narrow it down to the plumber, who is coincidentally named Mike Plummer. They head to his place and discover he has been killed. Clearly he is not their guy. However, at Plummer's apartment, they find evidence that leads them to believe that Plummer was blackmailing Gavin because he found out Gavin was sleeping with Swagerty's fiancee Abby.
Shawn now knows what happened and decides to let the cat out of the bag publicly at the City Council meeting. In front of everyone, Shawn explains that Abby was killed accidentally in Gavin's beach house, but Gavin didn't murder her - she accidentally fell down the stairs after they had a fight. Gavin didn't know what to do so he called the person who puts out all his fires - Straub. Straub moved Abby's body so no one would find out about her affair with Gavin. And when Gavin didn't have any more money to pay off Plummer to keep him quiet, Gavin was put in a situation where he had to come clean about Abby's death. But Straub didn't want to go down with Gavin, so Straub killed Gavin and made it look like an accident by putting his body in a wet suit and dumping him into the ocean. Straub is now caught and Lassiter steps in to arrest him. Despite Juliet's distaste for Shawn pretending he is psychic to all of Santa Barbara, she appears impressed with Shawn's investigative work regardless.
The next day at the SBPD, Shawn is about to do exactly what Jules asked him to do in order for her to forgive him. He marches into Chief Vick's office, ready to admit the truth about not being psychic. Juliet sees what Shawn is about to do for her, and she has second thoughts. In that moment, she recognizes that Shawn loves her so much that he would be willing to give it all up to get her back. She thought Shawn didn't initially agree to telling the Chief because he was being selfish. It turns out it's quite the opposite. Just before Shawn is going to come clean, Juliet barges in, and covers for Shawn before he can admit the truth to the Chief. Shawn doesn't understand why Jules would stop him from doing the one thing she wanted him to do in order for her to forgive him. She explains why and forgives him for lying to her. And with that, Shawn thinks they are instantly back together. However, Jules stresses the fact that she needs to take it slow, even though she does want to get back together with Shawn eventually.