STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of May 10, 2022
TO: Mayor Bailey and Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Patrick Tang, City Attorney
Ben Fay, Special Counsel
SUBJECT: Public Hearing Regarding a Possible Charter City Measure Recommended Action
Staff recommends that the City Council hold the first of two required public hearings regarding a proposed charter for the City of Hercules, which if authorized by the Council, would be placed on the ballot for the November 8, 2022, general election.
Background
The City Council has engaged in a series of discussions at regularly agendized council meetings regarding two potential tax measures. The first would be a renewal of the existing Utility Users Tax (UUT), which if not renewed by an affirmative vote of a majority of voters, will expire January 1, 2025. The second would be an increase in the Real Property Transfer Tax (RPTT). Hercules is a general law city, and only charter cities can increase the RPTT beyond the statutorily mandated amount for general law cities. In order for the City to increase the RPTT, a ballot measure to become a charter city must be approved by the voters at a general election. Prior reports discussing the charter city/RPTT option are provided as attachments to this report.
The Council has directed that staff continue to explore both the UUT and Charter City/RPTT options for placement on the November 8, 2022 ballot. In order to place a charter city measure on the ballot, among other requirements two public hearings must be convened. This is the first of the required two public hearings.
Discussion
Cities in California are organized as either general law cities or charter cities. The City of Hercules is a general law city. Cities are general law cities by default but may go through a process to become charter cities. A general law city has the authority to exercise its police powers to act locally, but its acts must be consistent with all general laws adopted by the State Legislature. In contrast, a charter city may use its “home rule” authority to adopt local laws regarding “municipal affairs” that vary from, and even conflict with, general state laws. “Municipal affairs,” over which charter cities have independent authority and do not have to follow the general laws, include the structure of a city’s government, aspects of contracting, and municipal revenues. One charter city power in particular is the ability, with voter approval, to impose a higher Real Property Transfer Tax (“RPTT”) than that mandated by state law. An RPTT (also called a Documentary Transfer Tax) is a tax imposed on the transfer of real property in the City. The tax is collected by the county when a change of ownership is recorded, and the county remits the tax to the City. The tax is imposed as a percentage of the value of the real property being transferred. Under the Revenue and Taxation Code, the maximum rate at which a general law city can impose an RPTT is 0.055%; charter cities, however, are not so restricted, and many charter cities have adopted higher RPTTs under their charter authority. These include Alameda (1.2%), Albany (1.5%), Berkeley (1.5% to 2.5% depending on the value of the property), El Cerrito (1.2%), Emeryville (1.2%), Oakland ($1.5% to 2.5% depending on the value of the property), Piedmont (1.3%), Richmond (0.7%), and San Leandro (1.1%).
In 2014, the City of Emeryville adopted a charter, partly in order to increase its RPTT. In fact, it limited its charter authority to municipal revenues, specifically taxation and assessments, and the increase of the RPTT in particular. The City of Emeryville charter is being presented by staff as an example of a Bay Area city that has received voter approval to become a charter city.
If the decision is made to place a proposed charter on the ballot for the November 8, 2022 election, a separate measure would also be placed on the ballot that if approved by the voters would increase the RPTT by the amount specified by the City Council. The City could also consider combining the proposed charter and proposed increase in the RPTT into a single ballot measure.
Charter City Timeline
A city can only adopt a charter with the approval of a majority of the electorate. In order to put a proposed charter on the ballot, the City Council must first hold two public hearings on the proposed charter. There must be at least 30 days between the two public hearings, and at least one of the hearings must be held outside regular business hours. The Council cannot vote on whether to submit the charter to the voters until at least 21 days after the second hearing, and the decision to put the charter on the ballot must be made at least 88 days before the election.
Conclusion
Should the Council direct that staff continue to explore the charter city option, the second required public hearing would take place at the June 14th, 2022 Council meeting.
Attachment 1: City of Emeryville Charter Example
Attachment 2: Staff Report from March 8, 2022 Council meeting, with attachments 2