Hercules City Council
July 12, 2022

Tuesday, July 12, 2022
6:00 PM
City of Hercules
111 Civic Drive
Hercules, CA 94547
City Council
Mayor Dion Bailey
Vice Mayor Alexander Walker-Griffin
Council Member Dan Romero
Council Member Chris Kelley
Council Member Tiffany Grimsley
Dante Hall, City Manager
Patrick Tang, City Attorney
Lauren Berges, City Clerk
Meeting Agenda
In-Person in Council Chambers or
Zoom ID: 830 4375 6249
Zoom Passcode: 482781
Zoom Phone Number: 1-669-900-6833
1 July 12, 2022City Council Meeting Agenda
See last pages of agenda for information regarding meeting procedures To view webcast of meetings, live or on demand, go to the City's website at www.ci.hercules.ca.us I. SPECIAL MEETING - CLOSED SESSION – 6:00 P.M. CALL TO ORDER - ROLL CALL II. PUBLIC COMMUNICATION - CLOSED SESSION ITEMS
III. CONVENE INTO CLOSED SESSION
The Hercules City Council will meet in Closed Session regarding the following:

1. 22-215
Conference With Legal Counsel - Existing Litigation (Government Code section 54956.9)
City of Long Beach, et al. versus Monsanto Company (class action)

2. 22-229 Conference With Legal Counsel - Existing Litigation (Government Code section 54956.9)
City of Pinole et al. v. PG&E (U.S. Bankruptcy Court, Northern District of California, Case No. 19-30088)
IV. REGULAR MEETING – 7:00 P.M. CALL TO ORDER - ROLL CALL V. REPORT ON ACTION TAKEN IN CLOSED SESSION
VI. PLEDGE OF ALLEGIANCE
VII. MOMENT OF SILENCE
VIII. INTRODUCTIONS/PRESENTATIONS/COMMISSION REPORTS
IX. AGENDA ADDITIONS/DELETIONS

2 July 12, 2022City Council Meeting Agenda
X. PUBLIC COMMUNICATIONS
This time is reserved for members of the public to address issues not included in the agenda. In accordance with the Brown Act, Council will refer to staff any matters brought before them at this time, and those matters may be placed on a future agenda.

In accordance with Executive Order N-25-20 and guidance from the California Department of Public Health on gatherings, remote public participation is allowed as follows:

The public may log into the Zoom meeting (refer to agenda cover for Zoom login information) and provide their public comment (3 minute time limit). If attending in-person, please fill out a speaker card and provide to the City Clerk.

When the public comment period is open for the item you wish to speak on, use the "raise hand" feature in Zoom (or press *9 if connecting via phone audio only) at the time the Mayor calls for public comment. Please wait your turn and once you are brought into the meeting, state your name and city of residence for the record.

For additional alternatives to providing public comments please refer to the Notice of Important Instructions on how to Participate and Watch the Hercules City Council Meeting on the last pages of the agenda.

All public comments are allowed up to 3 minutes to relay their message or concern. A limit of 30 minutes will be devoted to taking public comment at this point in the agenda. If any speakers remain at the conclusion of the initial 30 minute period, time will be reserved at the conclusion of the meeting to take the remaining comments.

XI. PUBLIC HEARINGS

1. 22-226
Resolution Calling an Election on November 8, 2022 for Voters to Consider a Ballot Measure to Extend the Existing Utility Users Tax at the Current Rate of 8%, submittal of the Ordinance to the Voters, and Requesting the County to Consolidate this Election with the Statewide General Election.

Agenda report 220706
Resolution 220706
Chapter 8 text ordinance revision (basic)(redline from prior clean copy)(C. Liu and B. Fay) - 220705 Attachments:

2. 22-227 Public Hearing to Consider a Resolution Calling an Election on November 8, 2022 for Voters to Consider a Ballot Measure to make Hercules a Charter City and Establish by Ordinance a Local Real Property Transfer Tax, submittal of the Measure to the Voters, and Requesting the County to Consolidate this Election with the Statewide General Election.

Agenda report charter city RPTT 220705
RESOLUTION charter City RPTT 220705

CITY OF HERCULES DRAFT CHARTER
EXHIBIT B - Ordinance RPTT 220706
Staff Report charter city public hearing 220614
Attach 1 - May 10 2022 Staff Report with Attachments
Attachments:

3 July 12, 2022City Council Meeting Agenda

3. 22-219 Mandatory Garbage/Solid Waste Disposal - Delinquent Accounts Recommendation: Conduct a Public Hearing and upon conclusion, consider adopting a Resolution confirming the report of delinquent accounts and placing liens on said properties and special assessments upon property taxes pursuant to City of Hercules Municipal Code Section 5-2.01 to 5-2.16, Mandatory Garbage/Solid Waste Disposal.

Staff Report - Garbage Liens
Attach 1 - Resolution - Liens
Attach 2 - Delinquent Accounts Rpt. 062022
Attachments:

XII. CONSENT CALENDAR

1. 22-228 Minutes
Recommendation: Approve the Regular Meeting Minutes of June 28, 2022.

Meeting Minutes June 28, 2022Attachments:

2. 22-220 Agreement with M-Group for Planning Services
Recommendation: Adopt a resolution authorizing the City Manager to execute an agreement with Metropolitan Planning Group dba M-Group in the not-to-exceed amount of $106,000 for planning services.

M-Group Contract 062822 - Staff Report
Attach 1 - M-Group Contract Resolution
Attach 2 - M-Group Agreement, Scope and Fee 062822
Attachments:

3. 22-221 Ordinance to amending the Hercules Municipal Code, adding Title 10 Chapter 2 Article 9 Urban Lot Split and Title 13 Chapter 36-36 Two Unit Development
Recommendation: Adopt Ordinance No. 540 amending the Hercules Municipal Code, Land Use and Zoning Code sections to establish regulations for subdivision and two-unit developments to comply with SB 9.

SB 9 - CC Staff Report - 2022-07-12
Attachment 1 - SB 9 - Ordinance No. 540
Attachment 2 - Signed PC Reso 22-07 - SB 9 Ordinance
Attachments:

4 July 12, 2022City Council Meeting Agenda

4. 22-222 Extension of Professional Services Agreement with Doherty Law Group for Legislative Advocacy Services.

Recommendation: Staff recommends that the City Council adopt a Resolution to extend the Doherty Law Group agreement from April 2022 to June 2022 for an additional cost of $18,000.

Doherty Amendment 6 SR 07122022
Attach 1 - Resolution Doherty 6th Amendment
Attach 2 - Original Contract and Amendment Nos. 1, 2, 3, 4, and 5 Attach 3 - Amendment No. 6
Attachments:

5. 22-224 Update on the Sanitary Sewer Disposal System to be installed by the Developer for the Willow Avenue Self-Storage Project
Recommendation: Receive a status update on the public sanitary sewer disposal system to be installed in Willow Avenue by Hercules Self-Storage Management, the Developer for the Self-Storage Project at 1444 Willow Avenue.

Staff Report - Willow Self Storage Sanitary Sewer Disposal System Attach 1 - Staff Report - Willow Self Storage Sanitary Sewer Disposal System Attachments:

XIII. DISCUSSION AND/OR ACTION ITEMS

1. 22-223 Receive the Finance Commission's Annual Report on Measure B and C for Fiscal Year Ending June 30, 2021
Recommendation: Receive and file the Finance Commission's annual report on Measure B and C.

SR - Measure B and C Annual Report from FC_07122022
Attach 1 - Measure B and Measure C Report 2021 (Final)
Attachments:

XIV. PUBLIC COMMUNICATIONS
This time is reserved for members of the public who were unavailable to attend the Public Communications period during Section X of the meeting, or were unable to speak due to lack of time. The public speaker requirements specified in Section X of this Agenda apply to this Section.

XV. CITY COUNCIL/CITY MANAGER/CITY ATTORNEY ANNOUNCEMENTS,

COMMITTEE, SUB-COMMITTEE AND INTERGOVERNMENTAL COMMITTEE REPORTS

AND FUTURE AGENDA ITEMS
This is the time for brief announcements on issues of interest to the community. In accordance with the provisions of the Brown Act, matters which do not appear on this agenda but require City Council discussion may be either (a) referred to staff or other resources for factual information or (b) placed on a future meeting agenda.

5 July 12, 2022City Council Meeting Agenda
XVI. ADJOURNMENT
The next Regular Meeting of the City Council will be held on Tuesday, July 26, 2022 at 7:00p.m. in the Council Chambers.

Agendas are posted in accordance with Government Code Section 54954.2(a) or Section 54956.

Members of the public can view electronic agendas and staff reports by accessing the City website at www.ci.hercules.ca.us and can receive e-mail notification of agenda and staff report postings by signing up to receive an enotice from the City’s homepage. Agendas and staff reports may also be obtained by contacting the Administrative Services Department at (510) 799-8215 (Posted: July 7, 2022)

6 July 12, 2022City Council Meeting Agenda

INSTRUCTIONS ON HOW TO PARTICIPATE AND WATCH THE HERCULES CITY COUNCIL AND PLANNING

COMMISSION HYBRID MEETINGS
Attend in Person: Hercules City Council Chambers – 111 Civic Drive, Hercules, CA 94547 Attend via Zoom Teleconference: Details provided below and zoom webinar login, passcode and phone numbers provided on the agenda cover.

Please note: Updated COVID-19 safety protocols will be posted outside the City Council Chambers. Please review this information before entering the Council Chambers.

How to Submit Public Comments
In Person: Attend meeting at the Hercules City Council Chambers, fill out a public speaker card located on the side table and submit it to the City Clerk.

Via Zoom: Members of the public may submit a live remote public comment via Zoom video conferencing.

Download the Zoom mobile app from the Apple Appstore or Google Play. If you are using a desktop computer, you can test your connection to Zoom by clicking here or go to: https://www.zoom.us/join. Zoom also allows you to join by phone at +1-669-900-6833 or +1-929-205-6099 or +1-253-215-8782. • Speakers will be asked to provide their name and city of residence, although providing this information is not required for participation.
• Each speaker will be allowed up to 3 minutes to speak and provide comment. A limit of 30 minutes will be devoted to taking public comment during the first public comment period on the agenda. If any speaker comments have not been accommodated prior to the initial 30 minute period, time will be reserved at the conclusion of the meeting for the remaining public comments. • Speakers will be muted until their opportunity to provide public comment.

When the Mayor opens the comment period for the item you wish to speak on, please use the “raise hand” feature (or press *9 if connecting via telephone) which will alert staff that you have a comment to provide and press *6 to unmute.

Written Comments Submitted Electronically: All comments received before 3:00 p.m. the day of the meeting will be provided to the City Council prior to the meeting and posted to the City’s agenda website and located by clicking on the “meeting details” tab. Written comments received after 3:00 p.m. will be provided to City Council and posted to the agenda website the following day. Written comments will not be read aloud during the meeting. Email comments to [email protected]. Please indicate which item on the agenda you are commenting on in the subject line of your email.

Written comments submitted in person or via mail: Additional ways to provide your public comment is to either drop off your comment in person to the front desk receptionist located in the City Hall lobby or to mail your comment to City of Hercules, ATTN: City Clerk – Public Comment (Meeting Date), 111 Civic Drive, Hercules, CA 94547 in time to reach the City Clerk no later than 3:00 p.m. on the day of the meeting or you can submit your comment by telephone by calling (510) 799-8215 no later than 3:00 p.m. on the meeting date.

If you need assistance with public comment, please contact: Lauren Berges, City Clerk at [email protected] or by calling (510) 799-8215.

All public comments will become part of the official meeting record. The City cannot guarantee that its network and/or the website will not be uninterrupted. To ensure that the City Council receives your written comments, you are strongly encouraged to submit your comments in writing in advance of the meeting by 3:00 p.m. on the day of the Council or Commission meeting.

7 July 12, 2022City Council Meeting Agenda

OTHER WAYS TO WATCH THE MEETING
Live on Channel 28: City Council meetings will replay the following Thursday at 7:00 p.m. and Saturday at 1:00 p.m.

Planning Commission meetings will replay the following Wednesday at 7:00 p.m. and Saturday at 9:00 a.m.

Video Streamed Live on the City’s Website:

To view City Council and Planning Commission meeting videos online go to: Hercules Meeting Videos.

Instructions to view Live or On-Demand Videos from the City’s website:

1. Go to: Hercules Meeting Videos or https://hercules.legistar.com/calendar.aspx.

2. Locate the desired meeting and date.

3. Click the associated “Video” link (Video status is as follows):

Video = Video is available for on demand viewing.

In Progress = Video is available for viewing during live recording.

Not Available = Video is either unavailable or has not been recorded.

8 July 12, 2022City Council Meeting Agenda

THE HERCULES CITY COUNCIL ADHERES TO THE FOLLOWING POLICIES,

PROCEDURES AND REGULATIONS REGARDING CITY COUNCIL MEETINGS

1. SPECIAL ACCOMODATIONS: In compliance with the Americans with Disabilities Act, if you require special accommodations to participate at a City Council meeting, please contact the City Clerk at 510-799-8215 at least 48 hours prior to the meeting.

2. AGENDA ITEMS: Persons wishing to add an item to an agenda must submit the final written documentation 12 calendar days prior to the meeting. The City retains the discretion whether to add items to the agenda. Persons wishing to address the City Council otherwise may make comments during the Public Communication period of the meeting.

3. AGENDA POSTING: Agendas of regular City Council meetings are posted at least 72 hours prior to the meeting at City Hall, the Hercules Swim Center, Ohlone Child Care Center, Hercules Post Office, and on the City’s website (www.ci.hercules.ca.us),

4. PUBLIC COMMUNICATION: Persons who wish to address the City Council should complete the speaker form prior to the Council's consideration of the item on the agenda.

Anyone who wishes to address the Council on a topic that is not on the agenda and is relevant to the Council should complete the speaker form prior to the start of the meeting. Speakers will be called upon during the Public Communication portion of the meeting. In accordance with the Brown Act, the City Council may not take action on items not listed on the agenda. The Council may refer to staff any matters brought before them at this time and those matters may be placed on a future agenda.

In the interests of conducting an orderly and efficient meeting, speakers will be limited to three (3) minutes.

Anyone may also submit written comments at any time before or during the meeting.

5. CONSENT CALENDAR: All matters listed under Consent Calendar are considered to be routine and will be enacted by one motion. There will be no separate discussion of these items unless requested by a member of the Council or a member of the public prior to the time the City Council votes on the motion to adopt.

6. LEGAL CHALLENGES: If you challenge a decision of the City Council in court, you may be limited to raising only those issues you or someone else raised at the meeting or in written correspondence delivered at, or prior to, the meeting. Actions challenging City Council decisions shall be subject to the time limitations contained in Code of Civil Procedure Section 1094.6.

9 STAFF REPORT TO THE CITY COUNCIL

DATE: Regular Meeting of July 12, 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: Resolution Calling and Giving Notice of the Holding of an Election on November 8, 2022, for Voter Consideration of a Ballot Measure to Amend Title 8, Chapter 8 of the Hercules Municipal Code to Extend the Utility Users Tax at the Current Rate of 8% (that i s, with NO increase in the existing, voter -approved rate) Until Ended by the Voters or Repealed by the City Council; Ordering the Submittal of the Ordinance to the Voters at the Election; Requesting that the Contra Costa County Board of Supervisors Consent to the Consolidation of this Election with the Statewide General Election to be Held on the Same Date; Directing the Registrar of Voters to Conduct the Election; and Providing for Submittal of Ballot Arguments and Rebuttals and Authorizing the Filing of an Impartial Analysis.

RECOMMENDED ACTION(S)
Conduct a public hearing, consider adoption of a resolution calling and giving notice of the holding of an election on November 8, 2022 and ordering submittal of the ordinance to the voters at the election, of a Ballot Measure to amend Title 8, Chapter 8 of the Hercules Municipal Code to extend the Utility Users Tax at the current rate of 8% until ended by the Voters or repealed by the City Council; requesting that the Contra Costa County Board of Supervisors consent to the consolidation of this election with the statewide General Election to be held on the same date; directing the Registrar of Voters to conduct the election; and providing for submittal of ballot arguments and rebuttals and authorizing the filing of an impartial analysis.

COUNCIL OPTIONS:

1. Conduct a public hearing and adopt the Resolution placing the extension of the UUT on the November 8, 2022 election ballot; or

2. Conduct a public hearing, reject the Resolution, and provide Staff with direction.

10 BACKGROUND
The City Council has engaged in a series of discussions at regularly agendized council meetings regarding the potential for placing two tax measures on the November 8, 2022 ballot for voter approval. The first measure would be an extension of the existing Utility Users Tax (UUT), which if not extended by an affirmative vote of a majority of voters, will expire January 1, 2025. The second measure would be an increase in the Real Property Transfer Tax (RPTT) , which would necessitate becoming a charter city.

At the second public hearing for the Charter/RPTT measure held on June 14, 2022, t he Council directed that staff present for Council action the necessary documents required to place on the November 8, 2022 ballot both the UUT extension and Charter/RPTT tax measures. This Staff Report relates to the potential UUT measure; a separate report to Council has been agendized for tonight’s meeting regarding a potential Charter/RPTT ballot measure , to be presented following this item.

DISCUSSION
The City of Hercules enacted a Utility User s Tax (UUT) in 2004. The UUT was originally a 6% tax on utility services including but not limited to telephone, electricity, gas, water, cable and video. A UUT is a local funding measure commonly applied by California cities and counties on the consumption of utility services, as a local source of funding for services communities rely on.

The existing UUT is a general tax, meaning that it can be used for a variety of municipal services at the direction of the City Council. As a general tax, it requires simple majority approval by Hercules voters. A UUT is applied across a wide base of taxpayers, including property owners, renters, and businesses. It is a tax that is applied locally, and controlled at the local level, and cannot be taken by Sacramento. It is based on consumption; taxpayers pay based on their usage of the utility services covered under the UUT . The UUT is a stable revenue source that maintains a dependable local revenue stream. The tax is collected by the utility provider and remitted to the City. The UUT is set to expire January 1, 2025.

Pursuant to a June 4, 2013 special election, in order to assist the City in m aintaining long term fiscal stability with adequate reserves, Hercules voters approved a 2% increase to the original 6% UUT, for a total UUT of 8%. As with the original UUT, the 2% increase expires on January 1st of 2025.

According to Finance Director Gato, the City receives annually approximately $3. 6 million in revenue from the UUT. This comprises 20 percent of the City’s current budget. The UUT is vital to maintaining current levels of staffing and City services; if the UUT is not extended, significant and drastic cuts to the City’s budget would be required, which would impact staffing and the City’s ability to provide the level of services expected by residents.

The City has been advised by its longstanding revenue sustainability professional, The Lew Edwards Group (LEG) that a No Tax Increase UUT Renewal measure is viable, but only if it appears on the ballot itself, with NO other local revenue-related measure.

Through LEG subcontractor FM3 Research, the City’s longstanding public opinion research professional, two surveys were conducted this year to test the viability of th e UUT Renewal 11 Measure. The first survey was conducted on January 3-17 of this year. In that study, the viability of the measure was at 66% for a simple majority renewal on the third ballot test for the sole placement of this measure only, on the ballot.

The second survey was conducted May 28th – June 5th of this year. Viability of the UUT Renewal dropped a full 13 points, to 53% on the last ballot test, a 13 point erosion. LEG has advised the City of its professional judgment that the existence of a potential Charter/RP TT Measure clearly affected the viability of the UUT. Under those circumstances the UUT Renewal no longer meets LEG’s criteria as being viable, as it is within—not above—the margin of error. Therefore, LEG’s recommendation of proceeding with the UUT Renewal as a viable measure is wholly contingent on no other revenue measures sponsored by the City being on the ballot simultaneous to that one.

Below are two slides from each of the two public presentations to the City Council earlier in the year and on June 14, 2022, by Curtis Below of FM3 Research. These slides show the difference between a sole test of the UUT Renewal as a stand -alone measure, and as tested when appearing on the ballot as one of two measures.

UUT Renewal Viability As a Stand-Alone Measure: Vote Progression

12 UUT Renewal Viability As a Measure in Conjunction with Charter/RPTT: Within MOE

Following the June 14th presentation, the City Council directed Staff to prepare a ballot measure that would extend the existing UUT at the current rate (no tax increase), until ended by the voters (or repealed by Council pursuant to existing municipal code provisions). The City Council directed Staff to return with the necessary actions to place a UUT extension measure on the ballot for the November 8, 2022 General Election. This report and agenda item implement Council’s directive.

In order to place a proposed UUT No Tax Increase Extension Ordinance on the ballot for the November 8, 2022 election, Staff has prepared the attached Resolution that does the following:

 Calling and giving notice of the holding of an election on Tuesday, November 8, 2022, to consider the extension of the existing Utility Users Tax;  Ordering the submittal of a measure extending the Utility User s Tax to the Voters at the Election;
 Approving an Amended Ordinance extending the Utility User s Tax for submission to the Voters;
13  Requesting that the Contra Costa County Board of Supervisors Consent to the Consolidation of this Election with the Statewide General Election to be held on the same date; and
 Directing the Registrar of Voters to conduct the election.

BALLOT QUESTION
The State Elections Code requires the ballot measure to be printed in the ballot pamphlet in the form of a “yes or no” ballot question of no more than 75 words. The ballot question must include a true and impartial statement of the nature of the ballot measure. The ballot question for City Council consideration is as follows:

CITY OF HERCULES NO TAX INCREASE/ FINANCIAL STABILITY
MEASURE. Shall an ordinance to maintain Hercu les’ financial stability and essential services, such as neighborhood police patrols; meeting local water quality health standards; retaining/ attracting local businesses, and other general community services, by renewing a voter-approved 8% utility users’ tax, generating approximately $3,600,000 annually until ended by voters or repealed by the City Council , with no tax increase, low -income exemptions, independent citizens’ oversight, annual audits, and funding that cannot be taken by Sacramento, be adopted?

Additional election details addressed by the proposed Resolution direct the preparation of the ballot impartial analysis, arguments and rebuttals:

1) Impartial Analysis: The State Elections Code provides for the City Council to direct the City Attorney to prepare an impartial analysis of no more than 500 words, showing the effect of the measure on existing law. This analysis must be submitted to the City Clerk by August 19, 2022.

2) Ballot Arguments: The State Elections Code allows the City Council to determine its interest in authoring an argument in favor of the ballot measure. Arguments of no more than 300 words each for and against the ballot measure can then be included in the Voter Sample Ballot. The primary arguments for and against the measur e must be submitted by August 24, 2022. Further, the Resolution would enable the Mayor to submit the written argument in favor of the proposed measure, and the argument may also be signed by members of the City Council or bona fide associations or by indiv idual voters who are eligible to vote on the Measure.

3) Ballot Rebuttals: In the event that an argument against the Measure is filed, the Resolution would authorize the Mayor to submit a rebuttal argument on behalf of the City Council, which may be signed by members of the City Council or bona fide associations or by individual voters who are eligible to vote on the measure. The deadline for the submittal of rebuttal arguments is August 29, 2022.

14 Pursuant to Hercules Municipal Code Sec. 8 -8.408 and consistent with California Government Code Section 53724(b), the decision to place a measure on the November 8th ballot to continue the UUT beyond the sunset date of January 1, 2025 requires the affirmative vote of 2/3 of the Council.

Meeting the 2/3 vote requirement on a five -member council means that four of five council members would have to vote in the affirmative to place the UUT continuation measure on the ballot.

According to City Clerk Lauren Berges, Hercules Election costs have been estimated by the County to be between $33,950 and $55,169. This range covers the two seats for council and the potential for up to 3 measures.

CONCLUSION

The proposal to extend the UUT beyond the January 1, 2025 expiration date does not increase the current 8% rate as previously adopted by Hercules voters. Eliminating the sunset provision would mean the UUT would remain in place at the existing, voter-approved 8% rate until ended by voters in the future, or repealed by the City Council, and could not be increased by Council without voter approval. The draft ordinance that is Exhibit A to the attached draft resolution removes the sunset provision and also removes language regarding the Finance Commission’s role in recommending whether the temporary 2% increase continues; this particular task would not be required if the sunset provision is eliminated.

Attachments:

1. Draft Resolution calling an election on November 8, 2022, for a ballot measure to extend the UUT at the current 8% rate , and a draft Ordinance amending the Hercules Municipal Code Title 8, Chapter 8 to extend the 8% UUT rate until ended by voters.

15 DRAFT 220706
RESOLUTION NO. ___-2022

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERCULES CALLING AND GIVING NOTICE OF THE HOLDING OF AN ELECTION ON NOVEMBER 8, 2022, FOR VOTER CONSIDERATION OF A BALLOT MEASURE TO AMEND TITLE 8, CHAPTER 8

OF THE HERCULES MUNICIPAL CODE TO EXTEND THE UTILITY USERS TAX AT THE

CURRENT RATE UNTIL ENDED BY THE VOTERS OR REPEALED BY THE CITY COUNCIL; ORDERING THE SUBMITTAL OF THE ORDINANCE TO THE VOTERS AT THE ELECTION; REQUESTING THAT THE CONTRA COSTA COUNTY BO ARD OF

SUPERVISORS CONSENT TO THE CONSOLIDATION OF THIS ELECTION WITH THE STATEWIDE GENERAL ELECTION TO BE HELD ON THE SAME DATE; DIRECTING THE REGISTRAR OF VOTERS TO CONDUCT THE ELECTION; AND PROVIDING FOR

SUBMITTAL OF BALLOT ARGUMENTS AND REBUTTALS AND A UTHORIZING THE

FILING OF AN IMPARTIAL ANALYSIS

WHEREAS, in 2004, the City of Hercules established a Utility Users Tax (UUT); and WHEREAS, the UUT is paid by recipients of telecommunications, video, electric, and gas utility services, collected by the utilities as part of regular billing, and remitted to the City; and WHEREAS, the UUT will terminate on January 1, 2025, unless re-enacted by a majority vote of Hercules voters; and
WHEREAS, In 2013 and 2015, Hercules voters enacted Measure A (70.96% passage rate) and Measure C (72.52% passage rate) to update and extend the UUT, ensuring the City’s long -term fiscal sustainability and protecting core services residents rely on; and WHEREAS, Hercules is a place where people desire to live and raise famil ies and extending the existing, voter-approved UUT will maintain essential City services that make Hercules a safe, well-maintained place to live; and

WHEREAS, maintaining neighborhood police patrols and 9 -1-1 response times at a time when other parts of the Bay Area are struggling with rising crime has been consistently identified as a top priority for Hercules residents; and

WHEREAS, if the UUT is not renewed, the City will lose approximately $3.6 million annually, which is over 20% of the City's budget; and

16 WHEREAS, loss of the UUT would give the City no choice but to reduce basic city services just to balance its budget, jeopardizing police and neighborhood patrols, street maintenance, parks, senior services, youth programs, economic development, and other programs; and

WHEREAS, UUT funding has enabled the City of Hercules to maintain police services – otherwise, the City would be forced to seriously consider major cuts to the Hercules Police Department, impacting crime prevention and 911 response times; and

WHEREAS, the City wishes to prevent severe cuts to critical resident services in these challenging times; and
WHEREAS, extending voter -approved locally controlled funding at the current tax rate will maintain public safety, pothole repair and street maintenance, crime prevention, parks, and recreation programs and other city services with funding that cannot be taken by the State; and WHEREAS, voter -approved, locally controlled funding has helped maintain the City’s emergency reserves and fiscal stability; and
WHEREAS, by law, all funds from an extension of existing, voter -approved local funding must continue to stay in Hercules to maintain local services – no funds can be taken by Sacramento or the federal government; and
WHEREAS, all funds will continue to be subject to mandatory financial audits, and yearly reports to the community to ensure funds are spent as promised; and WHEREAS, the proposed UUT measure does not create a new tax or increase utility rates --it simply renews the existing UUT adopted twice by Hercules voters with NO increase in the current tax rate.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Hercules that:

1. The foregoing recitals are true and correct and hereby incorporated by reference.

2. Pursuant to California Constitution Article XIIIC, Section 2; Government Code section 53724; and Elections Code section 9222, the City Council of the City of Hercules hereby calls an election at which it shall submit to the qualified voters of the City of Hercules a measure that, if approved by a majority vote of the electorate , would extend the term of the UUT at the current rate, until ended by the voters or repealed by the City Council . The City Council hereby requests that the election be consolidated with the statewide election to be held on November 8, 2022. The City Council acknowledges that the consolidated election will be held and conducted in the manner prescribed in Election Code Section 10418.

3. The City Council does hereby submit for adoption by the qualified voters of the City of Hercules at the General Municipal Election of November 8, 2022, the following question:

CITY OF HERCULES NO TAX INCREASE/ FINANCIAL STABILITY
MEASURE. Shall an ordinance to maintain Hercules’ financial stability and essential services, such as neighborhood police patrols; meeting local water quality health standards; 17 retaining/ attracting local businesses, and other general community services, by renewing a voter-approved 8% utility users tax, generating approximately $3,600,000 annually until ended by voters, with no tax increase, low -income exemptions, independent citizens’ oversight, annual audits, and funding that cannot be taken by Sacramento, be adopted?

YES NO

4. The full text of the proposed measure to be submitted to the voters is attached as Exhibit A (the “Measure”) hereto. The Measure specifies that the existing voter -approved UUT at the current 8 percent (8%) shall be extended until ended by the voters or repealed by the Cit y Council. If a simple majority of the qualified voters voting on the Measure vote in favor therefore, the Measure shall be deemed adopted and shall be in full force and effect ten (10) days after the date the vote is declared by the City Council of the Ci ty of Hercules. The City Council hereby approves the Measure, attached as Exhibit A, the form thereof, and its submission to the voters of Hercules at the November 8, 2022 election. This measure shall be designated by letter by the Contra Costa County Registrar of Voters. The full text of the Measure proposed to be adopted by the voters shall be available upon request to the Office of the City Clerk and on the City’s website.

5. The City Clerk is authorized, instructed, and directed to work with the Office of the Registrar of Voters as needed in order to properly and lawfully conduct the election. The ballots to be used in the election shall be in form and content as required b y law. The Office of the Registrar of Voters is authorized to canvass the returns of the general municipal election. In all particulars not recited in this Resolution, the election shall be held and conducted as provided by law for holding municipal elections.

6. The Board of Supervisors of Contra Costa County is requested to instruct the Office of the Registrar of Voters to provide such services as may be necessary for the holding of the consolidated election. The election shall be held in all respects as if there were only one (1) election. The City recognizes that the County will incur additional costs because of this consolidation and agrees to reimburse the County for those costs. The City Manager is hereby authorized and directed to expend the necessary funds to pay for the City’s cost of placing the Measure on the election ballot.

This request is made pursuant to California Elections Code sections 10002 and 10403.

7. a) In accordance with Elections Code sections 9282 and 9283, arguments submitted for or against the Measure shall not exceed three hundred (300) words in length, and shall be printed upon the same sheet of paper and mailed to each voter with the sample ballot for the election and may be signed by not more than five (5) persons.
b) In accordance with Elections Code section 9282, the following headings, as appropriate, shall precede the arguments’ wording, but shall not be counted in the three hundred (300) word maximum: “Argument Against Measure “ or “Argument In Favor Of Measure “ (the blank spaces being filled only with the letter or number, if any, designating the Measure). c In accordance with Elections Code section 9283, printed arguments submitted to voters in accordance with Section 9282 of the Elections Code shall be filed with th e City Clerk, 18 accompanied by the printed name(s) and signature(s) of the author(s) submitting it or, if submitted on behalf of an organization, the name of the organization and the printed name and signature of at least one of its principal officers. Arguments are due in the office of the City Clerk prior to 5:00 p.m. on August 24, 2022.
d) The City Council hereby authorizes Mayor Dion Bailey to prepare and file a ballot argument in favor of the Ballot Measure set forth in this Resolution, which may be sig ned by members of the City Council, representatives of bona fide associations of citizens, and individual voters eligible to vote on the Measure. Members of the City Council who sign the ballot argument may use their titles. In accordance with Elections Co de section 9287, any council members authorized by the City Council to do so may sign the argument in favor of the Measure.

8. a) Pursuant to Elections Code section 9285, when the City Clerk has selected the arguments for and against the Measure, that will be printed and distributed to the voters, the City Clerk shall send copies of the argument in favor of the Measure to the authors of the argument against, and copies of the argument against to the authors of the argument in favor. Rebuttal arguments shall be printed in the same manner as the direct arguments. Each rebuttal argument shall immediately follow the direct argument that it seeks to rebut.
b) Rebuttal arguments shall not exceed two hundred fifty (250) words and may be signed by not more than five (5) persons. However, only the first five (5) persons to sign will be printed with the Ballot Measure. The persons that sign the rebuttal arguments may be different persons than the persons that signed the direct arguments.
c) The last day for submittal of rebuttal arguments for or against the Measure shall be by 5:00 p.m. on August 29, 2022.
d) The City Council hereby authorizes Mayor Bailey to prepare and file a rebuttal argument in favor of the Ballot Measure set forth in this Resolution, which may be signed by members of the City Council, representatives of bona fide associations of citizens, and individual voters eligible to vote on the Measure, who may be different from the people who signed the argument in favor of the measure. Members of the City Council who sign the rebuttal argument may use their titles.

In accordance with Elections Code section 9287, any council members authorized by the City Council to do so may sign the rebuttal argument for the Measure.

9. In accordance with Elections Code section 9280, the City Attorney is directed to file with the City Clerk, by 5:00 p.m. on August 19, 2022, an impartial analysis of the Measure, not to exceed five hundred (500) words, showing the effect of the Measure on the existing law and the operation of the Measure.

10. The City Clerk is directed to file certified copies of this Resolution with the Board of Supervisors and the Registrar of Voters of Contra Costa County , together with the attached Measure. The City Clerk is hereby authorized and directed to take all steps necessary to place the Measure on the ballot and to cause a synopsis of the Measure attached as Exhibit A to be published once in a newspaper of general circulation in accordance w ith California Elections Code section 12111 and California Government Code section 6061. A copy of the Measure shall be made 19 available to any voter upon request. The City Clerk is authorized and directed to give further additional notice of the Measure in the time, form, and manner required by law.

11. The jurisdictional boundaries of the City of Hercules have not changed since the last general municipal election.

12. The approval of this Resolution is exempt from the California Environmental Quality Act (Public Resources Code §§ 21000 et seq., “CEQA,” and 14 Cal. Code Reg. §§ 15000 et seq., “CEQA Guidelines”), based on the general rule set forth in CEQA Guidelines section 15061(b)(3) that CEQA applies only to projects which have the potential for causing a significant effect on the environment. This resolution places a measure on the ballot that, if approved, extends the term of the UUT at the current rate, until ended by the voters; thus, it can be said with certainty that there is no possibility that the Measure will have a significant effect on the environment.

13. This Resolution shall become effective immediately upon its passage and adoption. It is hereby certified that the foregoing Resolution No. _____, was duly introduced and duly adopted by the City Council of the City of Hercules at its regular meeting he ld on the ___ day of July 202 2, by the following roll call vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

APPROVED: _______________________
DION BAILEY, Mayor

ATTESTED: _______________________
LAUREN BERGES, City Clerk
20 ORDINANCE NO. ____

AN ORDINANCE OF THE CITY OF HERCULES AMENDING TITLE 8, CHAPTER 8 OF

THE HERCULES MUNICIPAL CODE TO EXTEND THE UTILITY USERS TAX AT THE CURRENT RATE OF 8% UNTIL ENDED BY THE VOTERS OR REPEALED BY THE

CITY COUNCIL

THE PEOPLE OF THE CITY OF HERCULES DO ORDAIN AS FOLLOWS:

SECTION 1. Amendments to Municipal Code (deletions in strikethrough; additions in italics).

Sections 8-8.318, 8-8.401, 8-8.406, 8-8.407, 8-8.408, and 8-8.409 of the Hercules Municipal Code are hereby amended to read as follows:

Sec. 8-8.318 Sunset Termination of Tax.

This Chapter shall automatically sunset, and its provisions shall become ineffective, on January 1, 2025. (Ord. 475 § 1 (part), 2013: Ord. 395 § 1 (part), 2004. Formerly 8-8.320) The levy of taxes as provided in this Chapter shall remain in full force and effect until ended by the voters or repealed by the City Council.

Sec. 8-8.401 Purpose.
(a) The purpose of this Article is to continue the increase of two percent (2%) to the existing six percent (6%) utility users tax rate approved by the voters at the June 4, 2013, special election, for a total utility users tax rate of eight percent (8%), which eight percent (8%) rate shall be applicable from the effective date of this Article to all categories of utility services identified in this Chapter, including but not limited to telephone, electricity, gas, water, cable and video, until ended by the voters or repealed by the City Council. such time as the Finance Commission determines that the City has met its goal of achieving long term fiscal stability with adequate reserves, and the City Council approves by a two-thirds (2/3) vote to terminate the two percent (2%) increase pursuant to Section 8-8.409, after which the rate shall revert to six percent (6%), with said six percent (6%) rate to sunset on the date indicated in Section 8-8.318. (b) The continuation of the 2013 voter approved tax increase is pursuant to voter approval at the November 3, 2015, special election. (Ord. 489 § 1 (part), 2015: Ord. 481 § 2 (part), 2014: Ord. 475 § 1 (part), 2013)
Sec. 8-8.406 Duties.
21 (a) The Commission is charged with the following responsibilities: (1) reviewing all appropriations of revenues received by the City from the sales and use taxes imposed pursuant to the provisions of this Chapter to determine whether such funds are to be used as provided for in this Chapter and the voter approved measure that adopted this Chapter; (2) reviewing the audit prepared by an independent auditor retained by the City to perform the City’s Comprehensive Annual Financial Report to determine whether such funds have been spent as provided for in this Chapter and the voter approved measure; and (3) prepare and issue the Commission’s own annual report setting forth their findings in regard to the foregoing; and (4) determining when the City has met its goal of achieving long term financial stability with adequate financial reserves, and issuing a report to Council detailing such findings, pursuant to Section 8-8.409. (b) In order to preserve the integrity and independence of the oversight process, Commission members will not play a formal role in contracting, project management, construction, or any other aspect of the funding. In addition, the Commission is not charged with decision-making on spending priorities, construction schedules, project details, funding source decisions (e.g., leveraged funds, developer fees, etc.), financing plans, tax rate assumptions, or selection of consultants, design, and construction firms. (Ord. 489 § 1 (part), 2015: Ord. 481 § 2 (part), 2014:

Ord. 475 § 1 (part), 2013)
Sec. 8-8.407 Effective Date.

This Article relates to the continuation of an temporary increase of two percent (2%) to the City’s existing utility users tax rate, and is a valid and binding City tax upon passage and approval by a majority of the electorate of the City of Hercules. This Article shall be considered adopted upon the date that the vote is declared by the legislative body and shall go into effect ten (10) days after that date. (Ord. 489 § 1 (part), 2015: Ord. 481 § 2 (part), 2014: Ord. 475 § 1 (part), 2013) Sec. 8-8.408 Amendments.

The City Council of the City of Hercules may make amendments to this Chapter without approval of the voters of the City if the amendments do not affect the rate of tax imposed. The City Council may amend the rate of tax imposed herein (increase or decrease) or extend the term of the tax, only upon two-thirds (2/3) vote of the Council and with approval of the voters of the City under applicable codes. (Ord. 489 § 1 (part), 2015: Ord. 481 § 2 (part), 2014: Ord. 475 § 1 (part), 2013) Sec. 8-8.409 Procedure for Termination of Two Percent (2%) Increase.

This Article providing for an increase of two percent (2%) to the existing utility users tax rate shall remain in effect until ended by the voters or repealed by the City Council. January 1, 2025, pursuant to Section 8-8.318, or until such time as the Finance Commission, created pursuant to 22 Title 2, Chapter 2, Article 6, determines that the City has met its goal of achieving long term financial stability with adequate financial reserves. Upon finding by a two-thirds (2/3) vote of the City Council that the Finance Commission has adequately determined that the City has achieved long term financial stability with adequate financial reserves, the City Council shall enact legislation to reduce the UUT rate to six percent (6%), effective no later than one (1) year from date of passage. Notwithstanding this Section, the Council retains the independent authority to repeal the utility users tax pursuant to Section 8-8.317.

SECTION 2. Effective Date. This Ordinance, if approved by a majority of the voters of the City of Her cules at the General Municipal Election of November 8, 2022, shall become effective ten (10) days after the declaration of the results of that election by the City Council of the City of Hercules, pursuant to Elections Code section 9217.

SECTION 3. Publication. Within fifteen (15) days after the passage of this Ordinance, the City Clerk shall cause this Ordinance or a summary thereof to be published or to be posted in at least three (3) public places in the City of Hercules in accordance with the requirements of California Government Code section 36933.

SECTION 4. Codification. Upon adoption of this Ordinance pursuant to the voter approval referenced above, the City Clerk, in consultation with the City Attorney, is hereby authorized and directed to codify this Ordinance in the Hercules Municipal Code.

SECTION 5. City Council Amendments. The City Council of the City of Hercules may amend this Ordinance in any manner that does not increase the amount of tax any person would pay under this Chapter.

SECTION 6. Severability. If any section, subsection, sentence, clause, or phrase of this Chapter is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this Chapter. The City Council hereby declares that it would have passed the Ordinance codified in this Chapter, and each and every section, subsection, sentence, clause, or phrase not declared invalid or unconstitutional without regard to whether any portion of this Chapter would be subsequently declared invalid or unconstitutional.

SECTION 7. Execution. The Mayor is hereby authorized to attest to the adoption of the Ordinance by the voters of the City by signing where indicated below.

It is hereby certified that the foregoing Ordinance No. ___ was APPROVED by the following vote of the People of the City of Hercules on November 8, 2022:

YES:

NO:

It is hereby further certified that the foregoing Ordinance No. ___ was adopted by Declarat ion of the November 8, 2022 election results by the City Council of the City of Hercules on ___________, by the following vote:

AYES:

NOES:
23 ABSTAIN:

ABSENT:

APPROVED: ATTESTED:

__________________ __________________
Dion Bailey, Mayor Lauren Berges, City Clerk

24 STAFF REPORT TO THE CITY COUNCIL

DATE: Regular Meeting of July 12, 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: Provide d irection on November 8, 2022, City Charter Ballot Measure and associated Real Property Transfer Tax

ACTION REQUESTED:

Conduct a public hearing, and take action pursuant to either Option 1 or Option 2 below:

Option 1:

Direct staff to prepare documents for submitting to the City of Hercules electorate a measure to approve a City Charter (Exhibit A to the resolution) and the proposed Real Property Transfer Tax (RPTT), which would become effective only if adopted by 50 percent plus one vote of the Hercules electorate. If approved by the voters, the City would be converted from a general law city to a charter city, and the Real Property Transfer Tax increase would be approved.

Decide on a Real Property Transfer Tax amount a nd approve an ordinance (Exhibit B to the resolution) authorizing a Real Property Transfer Tax.

Decide on the scope of charter language; to grant local charter authority with respect to municipal revenues including taxation and assessment, or to limit local charter authority to a specified increase to the Real Property Transfer Tax.

Request that the Contra Costa County Board of Supervisors consent to the consolidation of this election with the statewide general election to be held on November 8, 2022 and direct the registrar of Voters to provide all services necessary to conduct the election and print a measure on the ballot as described in the resolution.

25 Option 2:

Decline to direct staff to prepare a measure to approve a City Charter and proposed RPTT for the November 8, 2022, General Election.

BACKGROUND
On June 14, 2022, the City Council held the second of two required public hearings to take public comment and discuss a proposal for Hercules to become a charter city for the purpose of gaining local control over taxing authority, and specifically to allow for a voter-approved increase to the Real Property Transfer Tax (RPTT). Council conducted the required public hearing and directed that the matter be brought back for further discus sion and possible action to place the matter on the ballot for the November 8, 2022 General Election. If the decision is made to place the Charter/RPTT measure on the ballot for November 8, the ballot materials must be submitted to the County by the first week in August 2022.

Currently in California, roughly one out of every four cities is a charter city. Local charter cities include Albany, Emeryville, Berkeley, El Cerrito, Richmond, Oakland, Alameda, Piedmont, San Francisco, San Leandro, and San Rafael.

A general law City such as Hercules has the authority to act locally but its acts must be consistent with the California Constitution, state statutes and state administrative regulations. A charter city has the additional authority to adopt laws regarding municipal affairs that differ from state statutes, but the charter must still be consistent with U.S. and California Constitutions.

Ultimately, the issue most frequently cited in discussions of whether to become a charter city is local control over municipal affairs pursuant to the concept of “home rule”:
• The home rule provision in the California Constitution allows cities to adopt a charter and ordinances that replace state laws in areas related to municipal affairs, subject only to the limitations within the charter, the U.S. Constitution, federal laws, the California Constitution, and state laws regarding matters of statewide concern. • The decision to become a charter city therefore turns on the question of which legislative body should make decisions regarding municipal affairs: The State Legislature or the City Council.

The Courts decide on a case -by-case basis what constitutes municipal affairs , which results in a concept that is fluid and changes over time. Areas that the courts have said constitute municipal affairs include:
• The form of city government.
• Procedural aspects of resolution and ordinance adoption. • Local elections, including qualifications for office and public funding of campaigns. • Some aspects of zoning and land use.
26 • The process of contracting for public works.
• Scope of authority related to taxes and assessments.

One of the more common reasons general law cities seek to become charter cities, and the reason the City of Hercules has been exploring becoming a charter c ity, is to provide local control over taxes and assessments, and in particular the ability to increase the Real Property Transfer Tax (RPTT). The RPTT cannot be increased by a general law city; only a charter city can have that authority. If the City became a charter c ity and enacted an RPTT higher than the current rate allowed for general law cities , the biggest impact for the City would be the revenu e associated with the implementation of a RPTT ; the RPTT would be a general tax that could be used for operations, capital, reserves, or debt service.

The decision to place a charter city measure on the ballot requires an affirmative vote of a simple majority of the Council but in this case, since the charter city proposal and the enhanced RPTT would be combined in a single measure, to be consistent with California Government Code Section 53724(b) requiring voter approval of a tax measure, placing the combined Charter/RPTT measure on the ballot would require the affirmative vote of 2/3 of the Council. Meeting the 2/3 affirmative vote requirement on a five-member council means that four of five council members would have to vote in the affirmative to place the proposed measure on the ballot.

MEASURE OVERVIEW
The ballot measure provided in the attachments to this report has the following key components:
 New City Charter, maintaining the current municipal code.  Inclusion of a RPTT at a rate of $ [to be determined by Council] per $1,000 of cost.  Provides greater local control in municipal affairs and to maintain and/or increase the current level of services and facilities provided by the City.  Independent audits of revenues generated would be required as part of the City’s annual outside audit.
 The Finance Commission would review the use of the funds as part of its annual budget review.
 All revenues would be kept local.

The ballot question describes both the Charter and the RPTT and potential uses of funds to avoid confusion and ensure voters understand that approval of the Charter is also an approval of the RPTT.

ANALYSIS
In November of 2021 , the City of Hercules commissioned the Lew Edwards Group (LEG) and FM3 Research (FM3) to conduct one or more surveys of local voters to determine support for two possible measures. The first would be an extension of the existing Utility Users Tax (UUT) beyond its current January 2025 expiration date (this is the topic of another public hearing scheduled for this evening).
27 The second would be to become a charter city for the limited purpose of enacting an increased Real Property Transfer Tax (RPTT).

LEG has advised the City that the Charter/RP TT Measure does not meet LEG’s criteria as being viable for placement on the November 2022 ballot, but that the City could certainly consider this measure for the November 2024 ballot. At the Council Meeting of June 14th, City Council received a presentation from Curtis Below of FM3 showing that the final ballot test of the .4% rate ($4 per $1,000 in value) and the 1.2% rate ($12 per $1,000 in value) garnered only 35% and 33% yes respectively—well below the simple maj ority threshold needed for passage, and concluding the Measure at either rate is not viable. On the following page is a slide graph showing the vote progression at both rates.

Charter/.4% and 1.2% rates only garner 35% and 33% yes, respectively and are not viable.

As described in the UUT Agenda Report, LEG has advised the City that the existence of the Charter/RPTT measure on the ballot simultaneously with the UUT affects the latter’s viability, such that the UUT would no longer meet LEG’s criteria for being viable.

28 NEXT STEPS
If the City were to decide to move forward with the Charter/RPTT proposal, the ordinance (Exhibit B to the resolution) would be subject to voter approval and contains the details of the RPTT collection. The proposed resolution would approve the ordinance as written and calls for the measure to be submitted to the voters of the Cit y at an election to be consolidated with the City Council and a statewide election to be held on November 8, 2022. The proposed resolution also directs the City Attorney to prepare an impartial analysis and authorizes the Mayor to prepare an argument in favor of the measure.

It should be noted that if the proposed measure were placed on the ballot and approved by the voters, the city attorney recommends additional cleanup of related code provisions within the Hercules Municipal Code for clarity; these additional edits would not require voter approval since they would not change the amount or structure of the proposed tax.

STRATEGIC PLAN CONSIDERATIONS
Implementing a City Charter and a Real Property Transfer Tax serves to fulfill the Strategic Plan Goal of achieving long-term financial sustainability, including the following strategies:
• Continue to pursue and support opportunities for new funding, including outside grants and ballot measures
• Develop a financial plan to address ongoing and deferred maintenance of facilities and infrastructure
• Develop a plan to ensure that Citywide revenue meets the cost of providing Citywide services, including adequate reserves for unanticipated revenue shortfalls.

ENVIRONMENTAL CONSIDERATIONS
This proposed action is exempt from the California Environmental Quality Act (Public Resources Code §§ 21000 et seq., (“CEQA”) and 14 Cal. Code Reg. §§ 15000 et seq., (“CEQA Guidelines”)).

The tax to be submitted to the voters is a general tax that can be use d for any legitimate governmental purpose; it is not a commitment to any particular action. As such, under CEQA Guidelines section 15378(b)(4), the tax is not a project within the meaning of CEQA because it creates a government funding mechanism that does not involve any commitment to any specific project that may result in a potentially significant physical impact on the environment. If revenue from the tax were used for a purpose that would have such effect, the City would undertake the required CEQA review for that particular project at the earliest feasible time prior to approval of the project, consistent with CEQA Guidelines Sections 15004 and 15352. Therefore, pursuant to CEQA Guidelines section 15060 CEQA analysis is not required.

FINANCIAL CONSIDERATIONS
29 If the measure as presented is placed on the November 8 , 2022, ballot and passed by the voters, General Fund revenues could increase considerably depending on the tax amount decided by the City Council . General Fund revenues are u sed to fund core City services such as Police, Recreation, increasing emergency reserves, capital projects, and maintenance of parks, playfields, open space, and facilities.

ELECTION COSTS
According to City Clerk Lauren Berges , Hercules Election costs have been estimated by the County to be between $33,950 and $55,169. This range covers the two seats for council and the potential for up to 3 measures.

LEGAL CONSIDERATIONS
The City Attorney has reviewed and approved all the documentation with respect to this measure, including all public information and outreach materials as well as the attached resolution and ordinance. Staff will continue to work with the City Attorney to ensure that all activities of the City and its employees are strictly limited to providing accurate, fair, and impartial information about the ballot measure and the election process.

Attachments:
1 . Resolution

2. Draft Charter (Exhibit A to Resolution)

3. RPTT Ordinance (Exhibit B to Resolution)

4. City Council Presentation from June 14 meeting

30 RESOLUTION 2022–XX

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF HERCULES CALLING

AND GIVING NOTICE OF THE HOLDING OF THE GENERAL MUNICIPAL ELECTION ON NOVEMBER 8, 2022; SUBMITTING TO THE VOTERS OF THE CITY A MEASURE

BOTH TO ADOPT A CITY CHARTER AND TO AUTHORIZE A REAL PROPERTY TRANSFER TAX; APPROVING AN ORDINANCE ENACTING A REAL PROPERTY TRANSFER TAX; ORDERING THE SUBMITTAL OF THE CHARTER AND ORDINANCE TO THE VOTERS AT THE ELECTION; AND REQUESTING THAT THE CONTRA

COSTA COUNTY BOARD OF SUPERVISORS CONSENT TO THE CONSOLIDATION

OF THIS ELECTION WITH THE STATEWIDE GENERAL ELECTION TO BE HELD ON

THE SAME DATE AND DIRECT THE REGISTRAR OF VOTERS TO CONDUCT THE

ELECTION

WHEREAS, the City of Hercules is incorporated as a general law city by residents seeking to manage local affairs; and

WHEREAS, in recent years, the authority of general law cities has been diminished through State mandates and State law regarding use of local resources; and

WHEREAS, the power of home rule granted by the California Constitution makes available to charter cities a variety of tools to construct local policy and address local concerns; and

WHEREAS, becoming a Charter City would allow Hercules to reclaim more local autonomy and expand the economic and fiscal independence of our City to promote the health, safety, and welfare of all residents; and

WHEREAS, establishing Hercules as a Charter City like Oakland, Alameda, Richmond, Emeryville, Albany, El Cerrito and Berkeley gives us more local control over City affairs and local fun ding needs, money that cannot be taken by the State; and

WHEREAS, the proposed Hercules Charter Measure is limited in scope and designed to give the City more local control over how it funds essential city services , by giving the City the ability to estab lish a Real Property Transfer Tax to better control local revenue sources; and

WHEREAS, a Real Property Transfer Tax is only paid by buyers and/or sellers when property is sold; and

WHEREAS, Hercules as a general law city does not have the authority to institute an enhanced Real Property Transfer Tax, so our residents lose out on millions of dollars 31 in funds that could be used for City services, and by becoming a Charter City, Hercules can collect its fair share; and

WHEREAS, the City Council held two noticed public hearings to receive comments from the public and to consider a proposed draft Hercules City Charter; and

WHEREAS, at the conclusion of the hearing process, after considering all testimony, evidence, and comments from the public, the City Council directed the preparation of a ballot measure to submit to the voters of Hercules the approval of the Hercules City Charter and an ordinance that would authorize a Real Property Transfer Tax; and

WHEREAS, the measure would require independent citizen oversight, annual independent financial audits, and yearly reports to the community to ensure that all funds are spent as directed; and

Option A: WHEREAS, the proposed Charter would authorize the City to levy a Real Property Transfer Tax and exercise th e other powers of a Charter City to raise revenue.

Option B: WHEREAS, the proposed Charter would be limited solely to granting the authorization to the City to levy a Real Property Transfer Tax.

It would authorize the City to exercise those powers of a Charter City but retains the existing form of government and the existing Municipal Code, and directs that the City will otherwise follow State law; and

WHEREAS, the tax to be submitted to the voters, if approved, would authorize a tax on the sale of property. Payment of the tax could be negotiated between buyer and seller. The tax would not be an annual tax on property, only a tax on the sale of property. The tax rate would be ____ percent of the consideration paid for real property ($____ per $1,000 of property value). The tax would be owed at the time of sale of real property. Both the Hercules City Charter and the tax would be approved if the measure receives at least a simple majority vote of affirmative votes; and

WHEREAS, the City Council has the authority to submit this measure to the voters of the City of Hercules pursuant to Article XI, Sections 3 and 5 of the California Constitution and Elections Code Section 9255.

NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Hercules as follows:

Section 1. Declaration of Findings. The foregoing recitals are true and correct and incorporated by reference.
32 Section 2. Election Called. Pursuant to the requirements of the laws of the State of California relating to general law cities, there is called and ordered to be held in the City of Hercules, California, on Tuesday, November 8, 2022, an election for submitting to the voters of Hercules a measure that would make Hercules a Charter City and approve a Real Property Transfer Tax.

Section 3. Measure To Be Submitted To Voters. The full text of the measure, attached to this Resolution as Exhibit A, including the proposed Charter of the City of Hercules and an ordinance authorizing a Real Property Transfer Tax, shall be printed in the voter pamphlet. The measure shall not take effect unless and until it is approved by a vote of at least a simple majority of affirmative votes of the voters voting on the question at the election. If the measure is approved, both the Charter and the Real Property Transfer Tax shall be approved. The City Council, pursuant to its right and authority, does order the following measure to be submitted to the voters which shall appear and be printed on the ballot as follows:

CITY OF HERCULES CITY CHARTER/LOCAL CONTROL MEASURE
To expand locally controlled funding for essential services, such as 911; keeping public areas safe/clean; and other general community services, shall a measure be adopted to: 1) establish Hercules as a Charter City and 2) enact adjustment of its Real Property Transfer Tax -- paid only by buyers/ seller s of property upon sale—to ._%, generating approximately $__________1 annually until ended by voters -- City powers shall otherwise remain unchanged?

YES
NO

Section 4. Approval of Ordinance. The City Council hereby approves the proposed ordinance to be submitted to the voters, attached hereto as Exhibit B. The proposed tax is a general tax and shall not take effect unless and until the proposed measure, including the Charter, is approved by a vote of at least a simple majority of affirmative votes of the voters voting on the question at the election. The ordinance specifies that the rate of the Real Property Transfer Tax shall be __% of the consideration paid for real property. The t ax is owed at the time of sale of real property.

Section 5. Ballot Format. The ballots to be used at the election shall be in the same form and content as required by law.

Section 6. Impartial Analysis. The City Attorney is hereby directed to prepare an impartial analysis of the measure pursuant to Elections Code Section 9280 which

1 By way of example, according to Finance Director Edwin Gato, an RPTT of .4% would generate revenues of approximately $840,000 a year.
33 shall be filed no later than August 19, 2022.

Section 7. Ballot Argument. The City Council hereby authorizes the Mayor to submit a ballot argument in favor of the measure, pu rsuant to Elections Code Section 9282.

The last day for filing of primary arg uments is 4:00 p.m. on August 24, 2022. At the Mayor’s discretion, the argument may also be signed by members of the City Council or representatives of bona fide associations or b y individual voters who are eligible to vote on the measure. In the event that an argument is filed against the measure, the Mayor is also authorized to submit a rebuttal argument on behalf of the City Council, which may also be signed by members of the Ci ty Council or representatives of bona fide associations or by individual voters who are eligible to vote on the measure, which may be different from those who signed the primary argument.

Section 8. Requesting the Consolidation of Elections. Pursuant to Elections Code Section 10400 et seq., the City Council of the City of Hercules hereby requests that the Contra Costa County Board of Supervisors consent and agree to the consolidation of the municipal election with the general electio n to be held on November 8, 2022 and provide all services necessary to conduct the election and print a measure on the ballot as described in Section 3 of this resolution. The county election department is authorized to canvass the returns of the special municipal election.

Within the City of Hercules, the election precincts, election officers, hours of voting, polling places and voting booths shall in every case be the same as those selected and designated by the Contra Costa County Registrar of Voters; provided that no person not a qualified elector of the City of Hercules shall be permitted to vote for the measure placed on the ballot by the City Council. The City Council recognizes that the County will incur additional costs in conducting the election called by this resolution, agrees to reimburse the County for those costs, and authorizes and directs the City Manager or his designee to expend the funds necessary to pay for the costs of conducting the election.

Section 9. Provisions For Rebuttal Arguments. The provisions of Elections Code Section 9285 shall apply to this election. The last day for filing of rebuttal arg uments is 4:00 p.m. on August 29, 2022.

Section 10. Hours of Polling. The polls for the election shall be open at 7:00 a.m. of the day of the election and shall remain open continuously from that time until 8:00 p.m. of the same day when the polls shall be closed except as provided in Elections Code Section 14401.

Section 11. Other Procedures. In all particulars not recited in this resolution, the election shall be held and conducted as provided by law for holding municipal elections. The City Council acknowledges that the consolidated election will be conducted in the manner prescribed in Elections Code section 10418.

34 Section 12. Notice. The City Clerk is authorized and directed to give notice of the election as required by law. The City Clerk shall file a copy of this resolution with the County Elections Official and the Clerk of the Board of Supervisors forthwith.

Section 13. Compliance with the California Environmental Quality Act.

Approval of this resolution is exempt from review under the California Environmental Quality Act (Public Resources Code §§ 21000 et seq. (“CEQA”) and 14 Cal. Code Reg. §§ 15000 et seq. (“CEQA Guidelines”)). The tax to be submi tted to the voters by this resolution is a general tax that can be used for any legitimate governmental purpose; it is not a commitment to any particular action. As such, under CEQA Guidelines section 15378(b)(4), the tax is not a project within the meanin g of CEQA because it creates a government funding mechanism that does not involve any commitment to any specific project that may result in a potentially significant physical impact on the environment. If revenue from the tax were used for a purpose that would have such effect, the City would undertake the required CEQA review for that particular project at the earliest feasible time prior to approval of the project, consistent with CEQA Guidelines Sections 15004 and 15352. Therefore, pursuant to CEQA Guidelines section 15060, CEQA analysis is not required.

BE IT FURTHER RESOLVED that this resolution shall become effective immediately upon passage and adoption.

I CERTIFY that at the regular meeting on July __, 2022 the Hercules City Council passed this resolution by the following vote:

AYES: COUNCILMEMBERS:

NOES: COUNCILMEMBERS:

ABSENT: COUNCILMEMBERS:

ABSTAIN: COUNCILMEMBERS:

IN WITNESS of this action, I sign this document and affix the corporate seal of the City of Hercules on July ___, 2022.

Lauren Berges, City Clerk

APPROVED:

Dion Bailey, Mayor
35 Attachment 1

CITY OF HERCULES CHARTER
[DRAFT]

ARTICLE I

NAME AND BOUNDARIES
100. Name and Boundaries
The municipal corporation now existing and known as the City of Hercules , hereafter referred to as “the City,” shall remain and continue to be a municipal body corporate and politic, as at present, in name, in fact, and in law.

ARTICLE II

POWERS OF CITY
Option A [Emeryville Charter Language, powers over taxation and assessment generally]:
200. Exercise of Constitutional Power of Taxation in relation to Municipal Revenues The City of Hercules adopts this Charter to exercise all constitutional powers conferred on cities under Article XI sections 7 and 5 of the California Constitution solely with respect to the powers over municipal affairs in relation to municipal revenues including taxation and assessment, and a system for the imposition, levy and collection of a tax on the conveyance of real property based on the value of the real property in addition to the amount authorized by California Revenue and Taxation Code section 11911.

Option B [Charter power to impose tax expressly limited to RPPT]:
200. Exercise of Constitutional Power of Taxation on the Conveyance of Real Property The City of Hercules adopts this Charter to exercise all constitutional powers conferred on cities under Article XI sections 7 and 5 of the California Constitution solely with respect to the powers over municipal affairs in relation to a system for the imposition, levy and collection of a tax on the conveyance of real property based on the value of the real property in addition to the amount authorized by California Revenue and Taxation Code section 11911.

201. Subject to General Laws
Except as provided in this Charter with respect to the power of the City over munic ipal affairs in relation to municipal revenues including taxation and assessment, the powers of the City shall otherwise be constrained by, subject to, and governed by the general laws of the State as now and hereafter existing relating to cities organized under said general laws. 202. Severability
If any provision of this Charter is found by a court of competent jurisdiction to be invalid, the remaining provisions of the Charter shall remain in full force and effect.

36 ARTICLE III

SUCCESSION
300. Rights and Liabilities
The City shall remain vested with and continue to have, hold, and enjoy all property, rights of property, and rights of action of every nature and description now pertaining to this municipality, and is hereby declared to be the successor of sa me. It shall be subject to all the obligations, contracts, liabilities, debts, and duties that now exist against or with the City. 301. Ordinances, Codes, and Other Regulations
All ordinances, codes, resolutions, regulations, rules, and portions thereof, i n force at the time this Charter takes effect, and not in conflict or inconsistent herewith, shall continue in force until repealed, amended, changed, or superseded in the manner provided by this Charter and any other applicable laws.
302. Pending Actions And Proceedings
No action or proceeding, civil or criminal, pending at the time this Charter takes effect, brought by or against the City or any officer, office, or department thereof, shall be affected or abated by the adoption of this Charter, or by anything herein contained.

ARTICLE IV

FORM OF GOVERNMENT
400. Form of Government
The form of government shall be that commonly known as the Council-Manager form of government.

The City Council, consisting of five councilmembers elected at large for four year staggered terms, in the manner in effect when this Charter was adopted, shall establish the policy of the City and the City Manager shall carry out that policy.

[]

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EXHIBIT B

ORDINANCE NO.

AN ORDINANCE OF THE CITY OF HERCULES AUTHORIZING A TAX ON THE TRANSFER OF REAL PROPERTY LOCATED IN HERCULES AND ADDING CHAPTER 11 – REAL PROPERTY TRANSFER TAX TO TITLE 8 OF THE HERCULES MUNICIPAL CODE

WHEREAS, the City of Hercules was incorporated as a general law city in 1900 by residents seeking to manage local affairs; and

WHEREAS, since then, the authority of general law cities has been diminished through State mandates and State law regarding use of local resources; and

WHEREAS, the power of home rule granted by the California Constitution makes available to charter cities a variety of tools to construct local policy and address local concerns; and

WHEREAS, becoming a Charter City would allow Hercules to reclaim more local autonomy and expand the economic and fiscal independence of our city to promote the health, safety, and welfare of all residents; and

WHEREAS, establishing Hercules as a Charter City like Oakland, Alameda, Richmond, Emeryville, El Cerrito, Albany, and Berkeley gives us more local control over City affairs and local funding needs, money that cannot be taken by the State; and

WHEREAS, the voters of each Charter City get to decide which tools to put in their tool box. Being a charter city allows for more options for funding important local services or capital projects. Potentially, the biggest impact for Hercules would be the ability to implement a real property transfer tax like several cities in the region; and

WHEREAS, Hercules does not have the authority to institute a local real property transfer tax on the sale of residential and commercial property, so our residents lose out on millions of dollars in funds that could be used for city services. By becoming a Charter City, Hercules can collect its fair share; and

WHEREAS, because Hercules only has the statutory real property transfer tax, Hercules has lost substantial revenue from commercial and residential property sales; and

WHEREAS, to address these issues, the City Council has engaged in a series of discussions to consider submitting to the voters of Hercules to change Hercules to a charter city, which would also empower the voters to approve a real property transfer tax; and

WHEREAS, the City Council held two noticed public hearings to receive comments from the public and to consider the proposed draft Hercules City Charter; and

WHEREAS, at the conclusion of the hearing process, after considering all testimony, evidence, and comments from the public, the City Council directed the preparation of a ballot measure to submit to the voters of Hercules the approval of the Hercules City Charter and an ordinance that would authorize a local real property transfer tax; and

WHEREAS, the measure provides a protected and reliable source of local revenue to maintain critical resident services; and

WHEREAS, revenue from the measure could be used to maintain police, emergency medical services, city parks, paths, playfields, and open space, rapid 9-1-1 emergency response times, programs for children, adults, and families, library programs, and create an emergency reserve for natural disasters and emergencies, and
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WHEREAS, the measure requires independent citizen oversight, annual independent financial audits, and yearly reports to the community to ensure that all funds are spent as directed; and

WHEREAS, the proposed Charter would authorize the City to levy a local real property transfer tax; and

WHEREAS, the tax to be submitted to the voters, if approved, would authorize a tax on the sale of property. Payment of the tax could be negotiated between buyer and seller. The tax would not be an annual tax on property, only a tax on the sale of property. The tax rate would be _______ dollars ($__.00) per each one thousand dollars ($1,000.00), or fraction thereof, of the consideration paid for real property. The tax would be owed at the time of sale of real property. Both the Hercules City Charter and the tax would be approved if the measure receives at least a simple majority vote of affirmative votes.

THE PEOPLE OF THE CITY OF HERCULES DO ORDAIN AS FOLLOWS:

SECTION 1. Recitals. The foregoing recitals are true and correct and made a par t of this Ordinance.

SECTION 2. Amendment of Municipal Code. Title 8, Chapter 11 is hereby added to the Hercules Municipal Code to read as follows:

Chapter 11 – REAL PROPERTY TRANSFER TAX

8-11.01 Title.

This chapter may be cited as the “Real Property Transfer Tax Ordinance of the City of Hercules.”

8-11.02 Purpose and Authority.

A. The tax imposed by this chapter is solely for the purpose of raising revenues for the general governmental purposes of the City. All of the proceeds from the tax imposed by this chapter shall be placed in the City’s general fund. This chapter is not enacted for regulatory purposes.

B. This ordinance is adopted pursuant to the City’s authority under Article XI, section 5 of the Constitution of the State of California and Section 200 of the Hercules City Charter.

8-11.03 Definitions.
"Changes in control and ownership of legal entities" means any direct or indirect acquisition or transfer of ownership interest or control in a legal entity that constitutes a change in ownership or transfer of the real property of the entity under California Revenue and Taxation Code section 64, as such statute reads and is interpreted by the California Department of Tax and Fee Administration.

“County Assessor” means the County Assessor of the County of Contra Costa.

“County Recorder” means the Office of the Clerk-Recorder of the County of Contra Costa.

"Person" and "persons" mean any natural person, receiver, administrator, executor, assignee, trustee in bankruptcy, trust, estate, firm, co-partnership, joint venture, club, company, joint stock company, business trust, limited liability company, municipal corporation, political subdivision of the State of California, domestic or foreign corporation, association, syndicate, society, or any group of individuals acting as a unit, whether mutual, cooperative, fraternal, nonprofit, or otherwise, and the United States or any instrumentality thereof. “Person” and “persons” also mean any natural person, who as an individual or with a spouse, owns 51 percent or more of the capital stock of a corporation obligated to file a declaration and pay tax pursuant to this chapter; and in addition, is a person with the power to control the fiscal decision-making process by which the corporation allocates funds to creditors in preference to its tax obligations under the pr ovisions of this chapter. A person who is also an officer or director of a corporation obligated to file declarations and pay tax pursuant to this chapter shall be presumed to be a person with the power 39 3

to control the fiscal decision-making process. Whenever the term "person" is used in any clause prescribing and imposing a penalty, the term as applied to association shall mean the owners or part owners thereof, and as applied to corporation, the officers thereof.

"Real property" and "realty" mean real property as defined by and under the laws of the state of California.

“Tax” means the tax authorized and imposed by this chapter.

“Tax administrator” means the Finance Director or other City official designated by the City Manager to administer the tax.

“Transfer of real property” means a sale, grant, assignment, transfer, or other conveyance of any lands, tenements, or other real property by deed, instrument, or other writing from a transferor to a transferee, or to a third person at or by the direction of transferee. “Transfer of real property” includes a change in control and ownership of a legal entity that results in a transfer of real property.

“Transferee” means a person to whom a transfer of real property is made.

“Transferor” means a person who makes a transfer of real property.

"Value of consideration" means the total consideration, valued in money of the United States, paid or delivered, or contracted to be paid or delivered in return for the transfer of real property, including the amount of any indebtedness existing immediately prior to the transfer which is secured by a lien, deed of trust or other encumbrance on the property conveyed and which continues to be secured by such lien, deed of trust or encumbrances after such transfer, and also including the amount of any indebtedness which is secured by a lien, deed of trust or encumbrance given or placed upon the property in connection with the transfer to secure the payment of the purchase price or any part thereof which remains unpaid at the time of transfer. "Value of the consideration" also includes the amount of any special assessment levied or imposed upon the property by a public body, district or agency, where such special assessment is a lien or encumbrance on the property and the purchaser or transferee agrees to pay such special assessment or takes the property subject to the lien of such special assessment. The value of any lien or encumbrance of a type other than those which are hereinabove specifically included, existing immediately prior to the transfer and remaining after such transfer, shall not be included in determining the value of the consideration. If the "value of the consideration" cannot be definitely determined, or is left open to be fixed by future contingencies, "value of the consideration" shall be deemed to mean the fair market value of the property at the time of transfer, after deducting the amount of any lien or encumbrance, if any, of a type which would be excluded in determining the "value of the consideration" pursuant to the above provisions of this section. In the event that the asserted “value of consideration” for a transfer of real property is less than the fair market value, the Tax Administrator may assume that the “value of consideration” is the fair market value of the property but shall consider evidence submitted by the persons responsible for the paying the tax that the lower amount represents the price agreed upon as part of a valid arms-length transaction.

By way of example only and without limiting the generality of the foregoing, a transfer of real property that is a gift, with the transferor transferring the real property to the transferee with no compensation and free and clear of liens and encumbrances, is a form of transfer of real property for which the value of consideration is less than the fair market value.

8-11.04 Tax Imposed.

A tax is hereby imposed on each transfer of real property located in the City of Hercules, when the value of the consideration exceeds one hundred dollars ($100.00).

8-11.05 Tax Rate.
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The rate of the tax imposed pursuant this chapter shall be ______dollars ($__.00) for each one thousand dollars ($1,000.00) of the value of consideration paid for a transfer of real property, or fractional part of each one thousand dollars ($1,000.00) of the value of consideration.

8-11.06 Persons Liable for Tax.

Any person who makes a transfer of real property subject to the tax imposed by this chapter and any person to whom such a transfer is made shall be jointly and severally liable for payment of the tax. The transferor and transferee may apportion the tax among themselves.

8-11.07 Exceptions and Exemptions.

A. Government Entities. A transfer of real property shall be exempt from any tax imposed pursuant to this chapter if the transferor or transferee is the United States or any political subdivision thereof, the State of California, any city, county, city and county, district or any other political subdivision of the State of California.

B. Writings That Secure a Debt. Any tax imposed pursuant to this chapter shall not apply to any instrument in writing given to secure a debt.

C. Transfers of Real Property to Effectuate a Plan of Reorganization. Any tax imposed pursuant to this chapter shall not apply to the making, delivery, or filing of conveyances to make effective any plan of reorganization or adjustment:

1. Confirmed under the Federal Bankruptcy Act, as amended;

2. Approved in an equity receivership proceeding in a court involving a railroad corporation, as defined in Section 101 of Title 11 of the United States Code, as amended;

3. Approved in an equity receivership proceeding in a court involving a corporation, as defined in Section 101 of Title 11 of the United States Code, as amended; or

4. Whereby a mere change in identity, form, or place of organization is effected.

Subsections (1) to (4), above, shall only apply if the making, delivery, or filing of instruments of transfer or conveyance occurs within five (5) years from the date of such confirmation, approval, or change.

D. Orders of the Securities and Exchange Commission. Any tax imposed purs uant to this article shall not apply to the making or delivery of conveyances to make effective any order of the Securities and Exchange Commission, as defined in subdivision (a) of Section 1083 of the Internal Revenue Code of 1954; but only if:

1. The order of the Securities and Exchange Commission in obedience to which such conveyance is made is necessary or appropriate to effectuate the provisions of Section 79k of Title 15 of the United States Code, relating to the Public Utility Holding Company Act of 1935;

2. Such order specifies the property which is ordered to be conveyed; and

3. Such conveyance is made in obedience to such order.

E. Transfer of Certain Partnership Property.

1. In the case of any realty held by a partnership or other entity treated as a partnership for federal income tax purposes, no tax shall be imposed pursuant to this chapter by reason of any transfer of an interest in the partnership or other entity or otherwise, if both of the following occur:

a. The partnership or other entity treated as a partnership is considered a continuing partnership within the meaning of Section 708 of the Internal Revenue Code of 1986.

b. The continuing partnership or other entity treated as a partnership continues to hold the realty concerned.
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2. If there is a termination of any partnership or other entity treated as a partnership for federal income tax purposes, within the meaning of Section 708 of the Internal Revenue Code of 1986, for purposes of this chapter, the partnership or other entity shall be treated as having executed an instrument whereby there was conveyed, for fair market value (including the value of any lien or encumbrance remaining thereon), all realty held by the partnership or other entity at the time of the termination.

3. Not more than one (1) tax shall be imposed pursuant to this chapter by reason of a termination described in subsection (2) of this subsection E, and any transfer pursuant thereto, with respect to the realty held by a partnership or other entity treated as a partnership at the time of the termination.

4. No tax shall be imposed pursuant to this chapter by reason of any transfer between an individual or individuals and a legal entity or between legal entities that results solely in a change in the method of holding title to the realty and in which proportional ownership interests in the realty, whether represented by stock, membership interest, partnership interest, cotenancy interest, or otherwise, directly or indirectly, remain the same immediately after the transfer.

F. Deed in Lieu of Foreclosure. Any tax imposed pursuant to this chapter shall not apply with respect to any deed, instrument, or writing to a beneficiary or mortgagee, which is taken from the mortgagor or trustor as a result of or in lieu of foreclosure; provided, that such tax shall apply to the extent that the consideration exceeds the unpaid debt, including accrued interest and cost of foreclosure. Consideration, unpaid debt amount, and identification of grantee as beneficiary or mortgagee shall be noted on said deed, instrument, or writing or stated in an affidavit or declaration under penalty of perjury for tax purposes.

G. Transfer of Restricted Affordable Units. The tax imposed pursuant to this chapter shall not apply to transfers of real property if the real property is encumbered by a recorded and enforceable covenant executed in favor of the City restricting the ownership and occupancy of the real property, for a period of no less than thirty (30) years following the date of transfer, to “persons and families of low or moderate income” as defined in California Health and Safety Code Section 50093.

H. Transfers between Spouses and Domestic Partners.

1. Any transfer made during the term of a marriage or domestic partnership between spouses or domestic partners shall be exempt from the tax imposed pursuant to this chapter.

2. Any transfer of property from one spouse or domestic partner to the other in accordance with the terms of a decree of dissolution or legal separation or in fulfillment of a property settlement incident thereto shall be exempt from the tax imposed pursuant to this chapter. This exemption shall apply only to property that was acquired by the spouses or domestic partners prior to the final decree of dissolution. This exemption shall not apply to a transfer of property to a third party, despite the existence of a valid court order or settlement agreement.

a. For domestic partners, the two parties to the transfer must have on file a valid domestic partnership registration (a) under existing law and procedures for the state of California domestic partnership registry, or (b) with a governmental agency of a jurisdiction that recognizes domestic partnership registration.

b. If domestic partners do not own, as joint tenants, the property that is the subject of their dissolution agreement, they must demonstrate that they were living together at the location of the real property in question either at least six months prior to the dissolution of the domestic partners relationship or the entire period of ownership of the transferring partner, whichever is more.

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c. To qualify for this exemption, domestic partners must provide that portion of their dissolution and property settlement agreement pertaining to the division or transfer of property, which shall be filed with the Office of the City Clerk. The copy of the settlement agreement shall be accompanied by an affidavit with verifiable signatures or proof of identity, that the copy is an accurate and authentic reproduction of the final settlement agreement between the parties.

I. Transfers That Confirm or Correct a Recorded Deed. A transfer of real property without consideration that confirms or corrects a deed shall be exempt from the tax imposed pursuant to this chapter. The correcting or confirming transfer must be recorded no later than ninety (90) days after the recordation of the transfer requiring correction or confirmation.

8-11.08 Administration of Tax.

The Tax Administrator shall collect the tax imposed pursuant to this chapter and shall otherwise administer this chapter. The Tax Administrator may make such rules and regulations, not inconsistent with this chapter, as they may deem reasonably necessary or desirable to administer this chapter, as well as necessary forms and receipts.

8-11.09 Due Dates, Delinquencies, Penalties, Interest, Administrative Charges, and Lien Release Recordation Fees.

The tax imposed pursuant to this chapter is due and payable at the time the deed, instrument, or writing effecting a transfer subject to the tax is delivered, and is delinquent if unpaid ninety (90) days later. If a transfer of real property is effected but not recorded with the County Recorder within ninety (90) days of the date on which the deed, instrument, or writing was delivered, all statutes of limitations regarding liability for the tax imposed pursuant to this chapter shall be tolled until the City has actual knowledge of the transfer, at which time the tax on the unrecorded transfer shall relate back to the date on which the deed, instrument, or writing was delivered. In these instances, penalties and interest shall be deemed to have begun accruing on the date the deed, instrument, or writing was delivered, and shall be the joint and several liability of the persons referred to in Section 8-11.06. In the event that the tax is not paid prior to becoming delinquent, a delinquency penalty of ten percent (10%) of the amount of the tax due shall accrue.

In the event only a portion of the tax is unpaid prior to becoming delinquent, the penalty shall only accrue as to the unpaid portion. An additional penalty of fifteen percent (15%) of the amount of tax due shall accrue if the tax remains unpaid on the ninetieth (90th) day following the date of the original delinquency. Interest shall accrue at the rate of one percent (1%) per month or fraction thereof, on the amount of the tax, inclusive of penalties, from the date the tax becomes delinquent to the date of payment. Interest and penalties shall become part of the tax. An administrative charge and a release of lien filing fee equal to the amount charged by the County Recorder shall be added to the amount owed for each property approved for a tax lien by the City Council.

8-11.10 Declaration May Be Required.

A. The tax imposed by this chapter shall be paid to the Tax Administrator by the persons referred to in Section 8-11.06. The Tax Administrator shall have the authority, pursuant to this chapter and any promulgated rules and regulations, to require that the payment shall be accompanied by a declaration of the amount of tax due signed by the person paying the tax or by their duly authorized agent. If a declaration is required, it shall include a statement that the value of the consideration on which the tax due was computed includes all indebtedness secured by liens, deeds of trust, or other encumbrances remaining or placed on the property transferred at the time of transfer, and also includes all special assessments on the property which a purchaser or transferee agrees to pay or which remains a lien on the property at the time of transfer. The declaration shall identify the deed, instrument, or writing effecting the transfer for which the tax is being paid. The Tax Administrator may require delivery of a copy of such deed, instrument, or writing whenever they deem such to be reasonably necessary to adequately identify such writing or to administer the provisions of this chapter. The Tax Administrator may but is not required to rely on the declaration as to the amount of the tax due.

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B. Whenever the Tax Administrator has reason to believe that the full amount of tax due is not shown on the declaration or has not been paid, they may, by notice served upon any person liable for the tax, require them to furnish a true copy of their records relevant to the value of the consideration or fair market value of the property transferred. Such notice may be served at any time within three (3) years after recordation of the deed, instrument, or writing which transfers such property.

8-11.11 Determination of Deficiency; Petition for Redetermination.

A. If on the basis of such information as the Tax Administrator receives pursuant to Section 8-

11.10, or on the basis of such other relevant information that comes into their po ssession, they determine that the amount of tax due as set forth in the declaration, or as paid, is insufficient, he or she may re-compute the tax due on the basis of such information.

B. If the declaration referenced in Section 8-11.10 is not submitted, the Tax Administrator may make an estimate of the value of the consideration for the property transferred and determine the amount of tax to be paid on the basis of any information in their possession or that may come into his or her possession.

C. More than one deficiency determinations may be made of the amount due with respect to any single transfer of real property.

D. The Tax Administrator shall give written notice to a person liable for payment of the tax imposed pursuant to this chapter of a deficiency determination made under this section. Such notice shall be given within three (3) years after the recordation of the deed, instrument, or writing effecting the transfer on which the tax deficiency determination was made.

E. Any notice required to be given by the Tax Administrator under this chapter may be served personally or by mail. If service is made by mail, it shall be made by depositing the notice in the United States mail, in a sealed envelope with postage paid, addressed to the person on whom it is to be served at the address as it appears in the records of the City or as ascertained by the Tax Administrator. The service is complete at the time of the deposit of the notice in the United States mail, without extension of time for any reason.

F. Any person against whom a deficiency determination is made under this chapter or any person directly interested may petition the Tax Administrator for a redetermination within sixty (60) days after service upon the person of notice thereof. If a petition for redetermination is not filed in writing with the Tax Administrator within the sixty (60) day period, the determination becomes final at the expiration of the period.

G. If a petition for redetermination is filed within the sixty (60) day period, th e Tax Administrator shall reconsider the determination and, if the person has so requested in his or her petition, shall grant the person an oral hearing, and shall give them ten (10) days’ notice of the time and place of the hearing. The Tax Administrator may designate a hearing officer for the purpose of conducting hearings. A hearing on a tax deficiency redetermination may be continued from time to time as may be necessary.

H. As part of a redetermination hearing, the Tax Administrator may decrease or increase the amount of the tax owed before a redetermination decision becomes final, but the amount may be increased only if the Tax Administrator asserts a claim for the increase at or before the hearing.

I. The order or decision of the Tax Administrator upon a petition for redetermination becomes final thirty (30) days after service of notice thereof upon the petitioner or at the time of hearing of redetermination. There is no administrative appeal to the City Council of the Tax Administrator’s decision on a petition for redetermination. Writs challenging the Tax Administrator’s decision 44 8

must be filed with the appropriate court within ninety (90) days of the final date of such redetermination. (California Code of Civil Procedure Section 1094.6.)

8-11.12 Tax a Debt.

The amount of any tax, penalty, and interest imposed under the provisions of this chapter shall be deemed a debt owed to the City. Any person owing money to the City under the provisions of this chapter shall be liable in an action brought in the name of the City for the recovery of such amount, plus the City’s costs of bringing the action, including attorneys’ fees and litigation costs.

The provisions of this section shall not be deemed a limitation upon the right of the City to bring any other action, whether criminal, legal, or equitable, based upon the failure to pay the tax, penalty, or interest imposed by this chapter or the failure to comply with any of the provisions hereof.

8-11.13 Refunds.

Whenever the amount of any tax, penalty, or interest has been overpaid, or paid more than once, or has been erroneously collected or received by the City under this chapter, it may be refunded as provided in this section. The person who paid the tax must file with the Tax Administrator a written claim stating under penalty of perjury the specific grounds on which the refund is claimed.

A refund claim must be filed within one (1) year of the date of payment. The claim shall be submitted on forms furnished by the Tax Administrator. The Tax Administrator may make such refund if they are satisfied that the claimant is entitled to the refund under the provisions of this chapter. No refund shall be paid under the provisions of this section unless the claimant establishes his or her right thereto.

8-11.14 Tax a Lien or Assessment against Transferred Real Property.

A. The amount of tax, penalty, and interest imposed under the provisions of this chapter is assessed against the real property upon the transfer of which the tax is imposed. If the tax, penalties, or interest are not paid when due, they may be recorded as a lien against or a special assessment on the real property transferred. Any lien against the transferred real property shall continue until the amount thereof including all penalties and interest are paid, or until it is discharged of record. Any person owing money to the City under the provisions of this chapter shall be liable to an action brought in the name of the City for the recovery of such amount.

B. The Tax Administrator shall file with the City Manager a written notice of liens and special assessments that the Tax Administrator believes should be recorded to collect the tax, penalties, or interest owned pursuant to this chapter. Upon the receipt of such notice, the City Manager sha ll present the same to the City Council, and the City Council shall forthwith, by resolution, fix a time and place for a public hearing on such notice.

C. The Tax Administrator shall cause a copy of such resolution and notice to be served upon the persons responsible for the tax, penalties, or interest owed. Notice shall be provided not less than ten (10) days prior to the time fixed for the hearing. Service shall be made by mailing a copy of the resolution and notice to the transferor and transferee of real property at their last known addresses. Service shall be deemed complete at the time of deposit in the United States mail.

D. Following the hearing, if the City Council determines that tax, penalties, or interest are owed pursuant to this chapter, it may authorize the imposition of a lien against the transferred real property and may order that any delinquent taxes, penalties, or interest that remain unpaid by the transferor or transferee shall constitute a special assessment against the transferred re al property. If the City Council orders the imposition of a special assessment against the transferred real property, the special assessment shall be collected at such time as is established by the County Assessor for inclusion in the next property tax assessment.

E. The Tax Administrator shall turn over to the County Assessor for inclusion in the next property tax assessment the total sum of unpaid delinquent charges consisting of the delinquent taxes, 45 9

penalties, and interest at the rate of twelve percent (12%) per annum from the date of recordation to the date of lien.

F. Thereafter, the authorized special assessment may be collected at the same time and in the same manner as ordinary property taxes are collected, and shall be subject to the same penalties and the same procedure of sale as provided for delinquent property taxes. The assessment lien previously imposed upon the property is paramount to all other liens except for those of State, county, and municipal taxes with which it shall be upon parity. The lien shall continue until the special assessment and all interest and charges due and payable thereon are paid. All taxes applicable to the levy, collection, and enforcement of municipal taxes shall be applicable to said special assessments.

8-11.15 Amendments. The following amendments to this ordinance must be approved by the voters of the City: increasing the tax rate or revising the methodology for calculating the tax such that a tax increase would result; imposing the tax on persons not previously subject to the tax; or extending the tax. The City Council may otherwise amend this Chapter without submitting the amendment to the voters for approval. The City Council may establish rules that are necessary and desirable for implementation of this ordinance.

8-11.16 Independent Audit of Tax Collection, Exemption, Remittance, and Expenditure.

The City shall annually verify that the taxes owed under this Article have been properly applied, exempted, collected, and remitted in accordance with this Article, and properly expended according to applicable municipal law. The annual verification shall be performed by a qualified independent third party and the review shall employ reasonable, cost-effective steps to assure compliance, including the use of sampling audits. The verification shall not be required of tax remitters where the cost of the verification may exceed the tax revenues to be reviewed. 8-11.17 Oversight by Finance Commission.

The Finance Commission, created pursuant to Title 2, Chapter 2, Article 6, or a subcommittee of the Commission established for this purpose, shall meet pursuant to Section 2-2.607 and review all revenues and expenditures under this Chapter in order to ensure that the funds are spent in accordance with the voter approved measure adopting this Chapter as well as any voter approved or Council approved priorities adopted to implement the provisions of this Chapter .

SECTION 3. Adjustment of Appropriations Limit. Pursuant to Article XIIIB of the Constitution of the State of California and applicable laws, the appropriations limit for the City is hereby increased by the aggregate sum authorized to be levied by this tax for fiscal year 2022-23 and each year thereafter.

SECTION 4. Compliance with the California Environmental Quality Act. Approval of this ordinance is exempt from review under the California Environmental Quality Act (Public Resources Code §§ 21000 et seq. (“CEQA”) and 14 Cal. Code Reg. §§ 15000 et seq. (“CEQA Guidelines”)). The tax authorized by this ordinance is a general tax that can be used for any legitimate governmental purpose; it is not a commitment to any particular action. As such, under CEQA Guidelines section 15378(b)(4), the tax is not a project within the meaning of CEQA because it creates a government funding mechanism that does not involve any commitment to any specific project that may result Agenda Item No. 7 Attachment 3 EXHIBIT B 16 in a potentially significant physical impact on the environment. If revenue from the tax were used for a purpose that would have such effect, the City would undertake the required CEQA review for that particular project at the earliest feasible time prior to approval of the project, consistent with CEQA Guidelines Sections 15004 and 15352. Therefore, pursuant to CEQA Guidelines section 15060, CEQA analysis is not required.

SECTION 5. Severability.
46 10

If any section, subsection, sentence, clause or phrase of this chapter is for any reason held to be invalid or unconstitutional by a decision of any court of competent jurisdiction, such decision shall not affect the validity of the remaining portions of this chapter. The city council hereby declares that it would have passed the ordinance codified in this chapter, and each and every section, subsection, sentence, clause or phrase not declared invalid or unconstitutional without regard to whether any portion of this chapter would be subsequently declared invalid or unconstitutional.

SECTION 6. Effective Date and Publication.

This Ordinance shall take effect and be enforced thirty days after the date of its adoption. Prior to the expiration of fifteen days from the passage thereof, the ordinance or a summary thereof shall be posted or published as may be required by law, and thereafter the same shall be in full force and effect.

The foregoing ordinance was approved by the following vote of the People of the City of Hercules at the General Municipal Election on November 8, 2022:

YESES:

NOES:

The foregoing ordinance was adopted by the Declaration of the vote at the November 8, 2022 General Municipal Election, which the City Council of the City of Hercules declared on December XX, 2022 by the following vote:

AYES:

NOES:

ABSENT:

ABSTAIN:

APPROVED:

________________________
Dion Bailey, Mayor

ATTEST: ________________________
Lauren Berges, City Clerk

47 1

STAFF REPORT TO THE CITY COUNCIL

DATE: Regular Meeting of June 14, 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: Second Public Hearing Regarding a Possible Charter City Measure

Recommended Action
Staff recommends that the City Council hold the second 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 placing two potential tax measures on the November 8, 2022 ballot for voter approval.

The first measure 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 measure would be an increase in the Real Property Transfer Tax (RPTT). The Council has directed that staff continue to explore both the UUT and Charter City/RPTT options for possible placement on the November 8, 2022 ballot.

The RPTT. Hercules is a general law city, and only charter cities c an impose RPTT, with voter approval, beyond the statutorily mandated amount for general law cities. In order for the City to seek voter approval for an adjustment to 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 process for placing the UUT continuation measu re on the ballot and the process for placing the Charter City/RPTT measure on the ballot are different; in order to place a charter city measure on the ballot, among other requirements two public hearings must be convened. This is the second of the required two public hearings for the Charter City/RPTT measure. 48 2

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 throu gh 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, state laws that apply to general law cities.

“Municipal affairs,” over which charter cities have independent authority and are not bound by 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 s tate 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 only 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 o f the property), Piedmont (1.3%), Richmond (0.7%), and San Leandro (1.1%). See prior staff reports containing additional information regarding which cities have opted to become charter cities, and the amount of RPTT these charter cities are collecting, attached to this report.

There have been several examples in recent years of general law cities seeking to become charter cities in order to increase the RPTT. For example, i n 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 has previously been presented to Council by staff as an example of a Bay Area city that has received voter approval to become a charter city, and can be found in the documents attached to this report . Emeryville’s charter is limited to municipal revenues, with a particular focus on increasing the City’s RPTT. If the decision is made to place a charter city matter on the ballot for November 8, 2022, a n ordinance 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 charter measure and the R PTT ordinance could be placed separately on the ballot, as Emeryville did, or they could be combined into one ballot measure, as El Cerrito did.

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 49 3

hearing, and the decision to put the charter on the ballot must be made at least 88 days before the election.

Next Steps:

After this second of two required public hearings is completed, the Charter City/RPTT proposal will come back to Council in July for a decision whether to proceed with placing the matter on the ballot, and if so, what the RPTT rate would be. A simple majority vote in the affirmative of the Council is required to place a Charter measure on the ballot. However, an increase to the RPTT would adjust the current R PTT tax rate, and p ursuant to California Government Code Section 53724(b), placing such a tax measure on the ballot requires 2/3 approval by Council. Meeting the statutory 2/3 vote requirement on a five-member council means that four of five council members would have to vote in the affirmative to place the RPTT tax measure on the ballot.

Conclusion
Should the Council direct that staff continue to explore the charter city option, it is recommended by staff that the decision and vote on whether to place the matter on the November 8th, 2022 ballot occurs at one of the regularly scheduled council meetings in July.

Attachment 1: Staff Report from the May 10, 2022 Council meeting, with attachments

50 1

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 regu larly agendized council meetings regarding two potential tax measur es. The first would be a rene wal 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 T ransfer 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 increas e 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 st aff continue to explore both th e 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 
51 2
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 pro perty), 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 or der 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 Counc il cannot vote on whether to submit the charter to the voters until at least 21 days after t he 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 
52 Attachment 1

CITY OF EMERYVILLE CHARTER

ARTICLE I

NAME AND BOUNDARIES
100. Name and Boundaries
The municipal corporation now existing and known as the City of Emeryville, hereafter referred to as “the City,” shall remain and continue to be a municipal body corporate and politic, as at present, in name, in fact, and in law.

ARTICLE II

POWERS OF CITY
200. Exercise of Constitutional Power of Taxation
The City of Emeryville adopts this Charter to exercise all cons titutional powers conferred on cities under Article XI sections 7 and 5 of the California Constitution sole ly with respect to the powers over municipal affairs in relation to municipal revenues including taxation and assessment, and a system for the imposition, levy and collection of a tax on the conveyance of real property based on the value of the real property in addition to the amount authorized by California Revenue and Taxation Code section 11911. 201. Subject to General Laws
Except as provided in this Charter with respect to the power of the City over municipal affairs in relation to municipal revenues including taxation and assessment, the powers of the City shall otherwise be constrained by, subject to, and governed by the general laws of the State as now and hereafter existing relating to cities organized
under said general laws.
202. Severability
If any provision of this Charter is found by a court of competent jurisdiction to be invalid, the remaining provisions of the Charter shall remain in full force and effect.

ARTICLE III

SUCCESSION
300. Rights and
Liabilities
The City shall remain vested with and continue to have, hold, and enjoy all property, rights of property, and rights of action of every nature and description now pertaining to this municipality, and is hereby declared to be the successor of same. It shall be subject to all the obl igations, contracts, liabilities, debts, and duties that now exist against or with the City.
301. Ordinances, Codes, and Other Regulations
All ordinances, codes, resolutions, regulations, rules, and por tions thereof, in force at the time this Charter takes effect, and not in conflict or inconsistent herewith, sha ll continue in force until repealed, amended, changed, or superseded in the manner provided by this Charter and any other applicable laws. 57 53

302. Pending Actions And Proceedings
No action or proceeding, civil or criminal, pending at the time this Charter takes effect, brought by or against the City or any officer, office, or department thereof, shall b e affected or abated by the adoption of this Charter, or by anything herein contained.

ARTICLE IV

FORM OF GOVERNMENT
400. Form of Government
The form of government shall be that commonly known as the Coun cil -Manager form of government. The
City Council, consisting of five councilmembers elected at large for four year staggered terms, in the manner in effect when this Charter was adopted, shall establish the po licy of the City and the City Manager shall carry out that policy.[]

58 54

REPORT TO THE CITY COUNCIL

DATE: Regular Meeting of March 8, 2022

TO: Mayor Bailey and Members of the City Council

SUBMITTED BY: J. Patrick Tang, City Attorney
Dante Hall, City Manager

SUBJECT: Follow up from February 22 Council meeting – Discussion of Potential Tax Measures: 1) Renewal of the City’s Existing Voter Approved Utility Users Tax (UUT), and 2) Process for Becoming a Charter City for the Limited Purpose of Increasing the Real Property Transfer Tax (RPTT), which is Only Paid by Buyers or Sellers of Real Property

RECOMMENDED ACTION:

Receive report, discuss, provide direction to staff regarding: 1) Extending the City’s existing, voter-approved Utility Users Tax (UUT) beyond January 1, 2025 and, 2) placing a potential charter city measure on the ballot, for the limited purpose of increasing the Real Property Transfer Tax (RPTT).

FISCAL IMPACT OF RECOMMENDATION:

If the Council moves forward with one or more of the proposed ballot measures, costs will be incurred for staff time, consulting, and ballot related expenses.

EXECUTIVE SUMMARY:

Two potential tax measures are discussed in this report. The first is 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 is 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 to increase the RPTT, the Council must place a ballot measure before the voters at a general election to become a 59 Attachment 2
to 5/10/22 report
55 charter city for that limited purpose. The Council has directed that both options be considered for placement on the November 8, 2022 ballot.

BACKGROUND:

At the February 8, 2022 Council meeting, the City’s consultants, the Lew Edwards Group and FM3 Research (“Consultants”), provided polling results related to extending the existing Utility Users Tax (UUT) currently set to expire in January 2025, and the viability of becoming a Charter City for the limited purpose of increasing the Real Property Transfer Tax (RPTT) (Attachments 1 and 2). After receiving the presentation and after a discussion of options, the Council declined to move forward with a ballot measure in June 2022 for renewing the UUT (this would have required the adoption of a fiscal emergency declaration by a unanimous vote of the Council), and instead directed that staff work with Consultants to determine the viability of placing on the November 2022 ballot:

1) A measure to renew the existing, voter-approved UUT, which if not continued would expire in January 2025; and

2) A measure to become a Charter City for the limited purpose of increasing the RPTT; and

3) In conjunction with 2 above, approval of an ordinance increasing the RPTT to an as yet unspecified amount above the current statutory amount of $0.55 per $1,000 of property value.

The direction from Council to explore the placement of all of the ab ove measures on the November ballot necessitates retention of one or more consultants for additional polling and survey work. At the February 22, 2022 Council meeting, staff presented Council with a contract extension for Lew Edwards and FM3 Research to undertake the work required to determine the viability of placing both the UUT and City Charter/RPTT measures on the November ballot. The Council had a number of questions regarding both of the proposed measures, and agreed to defer action on approval of additional funding for Consultants until the Council could first have additional discussion at tonight’s meeting regarding both the UUT and City Charter/RPTT matters.

DISCUSSION:

What is the UUT? The Utility Users Tax (UUT), pursuant to Title 8, Chapter 8 of the Hercules Municipal Code, is a tax approved in two different elections by Hercules voters and collected by the service provider on the use of various utilities by Hercules residents, covering telecommunications, electricity, natural gas, water, and video service usage. The 60 56
UUT is currently assessed at 8%, and the UUT will expire on January 1, 2025. The City receives approximately $3.5 million a year from the UUT.

The City is a lean organization and has not fully recovered from the staff and budgetary cuts necessitated by the Great Recession. With the dissolution of the redevelopment agency in 2012 by Sacramento, the City has lost a si gnificant funding source for funding capital improvements. In FY 2011, the City reduced its workforce by 30% and made significant service cuts to bring expenditures in line with its revenues. The attached chart identifies the changes in the number of full-time employees from FY 2011 through FY 2020 (Attachment 3). While these changes saved the City from near bankruptcy, it did not cure the long-term structural deficit, nor contemplate a plan for financial sustainability.

The City relies on UUT proceeds to fund a wide range of services including maintenance of public properties, staffing, and providing for public safety. If the UUT is allowed to expire in January 2025 without being continued, the loss of approximately $3.5 million a year in revenue would drastically impair the City’s ability to provide even a minimal level of service. If we are required to make budget cuts that may include police and neighborhood patrols, street maintenance, parks, senior services, youth programs, and economic development, we risk a decline in our quality of life.

What is the RPTT? The Real Property Transfer Tax (RPTT), pursuant to Title 8, Chapter 3 of the Hercules Municipal Code, is an existing tax collected by the County Clerk-Recorder which is only paid by buyers or sellers of real property. It is imposed on each deed, instrument or writing by which any land or other realty sold within the City of Hercules is granted, assigned, transferred or otherwise conveyed to any other person or persons, at the rate established by state law for general law cities of $1.10 for each $1,000 of property value.

The tax proceeds received are split, with $.055 per $1,000 going to the County, and the $.055 per $1,000 going to the City. The amount of RPTT the City received in 2021 for all properties sold during that year was a total of $120,000.00.

To increase the RPTT, a general law city must become a charter city. To become a charter city, a general law city must receive voter approval via a ballot measure. Becoming a charter city requires approval by a simple majority of voters at a general election. Other East Bay/Bay Area cities such as Alameda, Albany, Berkeley, El Cerrito, Emeryville, and Hayward have taken this step to expand their authority to collect a larger percentage of these transactions. If the City increases its share of RPTT in this manner, the County would continue to receive $0.55 per $1,000 of property value, but the City would retain the rest of the amount authorized by the tax measure.

At the February 22 meeting, the questions and comments by Council included:
61 57

x Can the UUT be renewed at a higher rate than the current 8%? How about 9% or 10%?

Answer: Yes. The UUT can be set higher than the current 8% rate; however, the polling to date by Consultants did not contemplate an increase to the current UUT rate of 8% and an increase might poll significantly differently from a renewal with no rate increase. Every increase of 1% of UUT would result in additional revenue of approximately $437,500 based on current UUT revenue of approximately $3.5 million a year.

x Should Consultants be provided a specific amount or a range of potential RPTT amounts prior to undertaking additional polling of voters?

Answer: Yes. To fully understand public sentiment of a potential RPTT increase, Council direction on a tax rate range (a low and high dollar amount) would be important to establish prior to polling, so consultants can test that range. Depending on feedback from the polling results, the Council would be able to select a viable RPTT tax me asure amount for placement on the November 2022 ballot.

x How have other cities determined the amount of RPTT increase to be sought?

Answer: Most of the cities surveyed have established an increased RPTT rate based in large part on a projection of future need. For example in the case of Emeryville in 2014, which is 95% inside a redevelopment area, the amount of RPTT to be collected, $12 per $1,000 of property value, was calculated based on h ow m u c h f u n d i n g f o r b u d ge t a n d c a p i ta l i m p ro vem en ts w a s l o s t a s a result of redevelopment dissolution, and how much funding would be needed for additional critical capital improvements.

As a point of reference, the chart below identifies the base RPTT rates applied in nearby charter cities. The median tax rate selected by these cities is $12 per $1,000 of property value. The RPTT rate for all charter cities in California has been previously reported and is included in the agenda materials from past Council reports, attached to this report (Attachment 4).

62 58

CITY CITY TAX (PER

THOUSAND DOLLARS)
Alameda $12.00
Albany $15.00
Berkeley $15.00
El Cerrito $12.00
Emeryville $12.00
Oakland $15.00
Piedmont $13.00
Richmond $7.00
San Leandro $11.00
Median $12.00

For Hercules, General Fund expenditures are projected to increase at the estimated rate of 3% a year. Expenditure projections for a 5-year forecast period through 2027 range from $16.8 to $18.6 million assuming the current service levels are preserved. A structural deficit of approximately $2 million will begin in FY 24-25 without additional revenue streams and if the UUT is not renewed beyond its January 2025 expiration date (Attachments 5 and 6).

This forecast does not include the fut ure expectations of the Council and citizens regarding the potential for expanded service levels and public infrastructure needs and improvements.

As mentioned above, in 2011 the City made significant service cuts in the attempt to bring expenditures in line with its revenues. Even if an extension of the UUT at its current rate of 8% were approved by the voters, an additional $3 million annually would still be need ed to restore City services to pre- recession levels (or FY 2011) (Attachment 7) .

Should Hercules become a charter city and increase its RPTT, the revenue comparison chart below shows the annual revenue that would be received using the average annual RPTT amounts received for Fiscal Years 2014-2019:

Tax Rate $0.55/1,000 $4/1,000 $8/1,000 $12/1,000 $16/1000 Estimated
Annual Revenue $115K $838K $1.6M $2.5M $3.3M

Therefore, curing the structural deficit projected to begin in FY 24-25 and restoring prior service levels to meet community demand would require a 63 59
renewal of the UUT at its current 8% rate, and an additional $3 million annually. Given the staff shortages in the Public Works Department (Attachments 8, 9 and 10), the current lack of a dedicated code enforcement unit, understaffing in the Planning Department, and the perceived need to increase public safety expenditures to meet future needs resulting from a projected increase in 1,509 resident ials units (Attachment 11), staff recommends that Consultants be directed to poll voters regarding the Charter City/RPTT proposal based on a range from $8 to $16 per $1,000 to achieve the revenue amounts illustrated in the above table.

x What is the timeline for each of the proposed measures?

UUT: A proposed measure to continue the UUT must be submitted at least eighty-eight (88) days before the November 8, 2022 election. The City Council would need to vote on submi ssion of the ballot measure no later than the August 9, 2022 council meeting.

Charter City/RPTT:

Prior to approving submission of the charter to the voters, the City Council must hold at least two public hearings on the proposal of the charter and the content of the charter, and notice of those hearings must be published at least twenty one (21) calendar days before the date of each hearing. The second public hearing must be held at least thirty (30) days after the first hearing, and at least one of the hearings must be held outside of normal business hours.

The City Council may not vote on submission of the charter to the voters until twenty one (21) days after the second public hearing. A charter proposal can only be voted on at a regular general election, absent a declaration of a fiscal emergency. In order for the City Council to place a charter measure on the ballot for November 2022, the City would need to adhere to the following timeline:

The City Council must vote to submit the proposed charter to the voters at least eighty-eight (88) days before the election, and hold at least two public hearings.

City Council holds first public hearing on proposed charter May 10, 2022
Notice of the hearing must be given 21 days in advance

City Council holds second public hearing on proposed charter 64 60
June 14, 2022
Must occur at least 30 days after first public hearing

City Council votes on submission of the proposed charter to the voters no later than August 9, 2022.

Election Date: November 8, 2022

CONCLUSION:

Staff seeks further direction from Council regarding the proposed tax measures discussed in this report.

Attachments:

1. February 8, 2022, Staff Report - Polling Results Related to Extending the Existing Utility Users Tax and the Viability of Becoming a Charter City

2. February 4, 2022, Summary Report of January 2022 Community Survey Results

3. Changes in Full-Time Equivalent City Government Employees by Function Last Ten Years

4. February 25, 2020, Staff Report - Process for Becoming a Charter City

5. January 25, 2022, Staff Report - Long-Term Financial Projection

6. FY 21-22 General Fund Five-Year Financial Forecast

7. Estimated Cost to Restore City Staffing Levels to Pre-recession Levels

8. March 23, 2021, Staff Report - Public Works Department Organizational Review and Analysis

9. March 23, 2021, City Council Presentation - Public Works Department Organizational Review and Analysis

10. March 23, 2021, Final Report - Public Works Department Organizational Review and Analysis

11. Summary of Built and Approved Residential Units as of February 28, 2022

65 61

REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of February 8, 2022
TO: Mayor Kelley and Members of the City Council
SUBMITTED BY: Dante Hall, City Manager
SUBJECT: Report on Polling Results Related to Extending the Existing Util ity Users Tax and the Viability of Becoming a Charter City for the Limited Purpose of Increasing the Real Estate Property Transfer Tax RECOMMENDATION ACTION:

Staff recommends that the City Council:

1. Receive the report from the Lew Edwards Group and direct staff to proceed with planning for the placement of the Utility Users Tax measure on the City’s regularly scheduled Municipal Election in November of 2022, or

2. Provide alternate direction
FISCAL IMPACT:

There is no fiscal impact to receiving this report. Based on th e Council’s direction, staff will return to the Council to request additional funds.

EXECUTIVE SUMMARY:

In October of 2021, the City awarded a contract to the Lew Edwards Group, and FM3 Research to determine the public opinion of registered voters regarding 1) the feasibility of going to the voters in November 2022 or November 2024 to extend the existing Utility Users Tax (UUT) prior to its expiration on January 1, 2025, and 2) the viability of becoming a charter city for the limited purpose of increasing the Real Property Transfer Tax (RPTT). 66 Attachment 1 to
3/08/22 staff report
62 Lew Edwards and FM3 Research have completed the public opinion survey and will be making a presentation about their findings and recommendations related to the UUT and RTTP initiatives (ATTACHMENT 1).

BACKGROUND AND ANALYSIS:

At its May 25 th, 2021 meeting, the Council engaged in a discussion regarding the feasibility of becoming a charter city for the limited purpose of increasing the real Property Transfer Tax, the Council requested that the Charter City/RPTT item come back for additional discussion and further directed that a companion report be prepared regarding the need to extend the UUT which will otherwise expire on January 1, 2025.

The City of Hercules relies on the UUT to provide sufficient ongoing revenues to sustain current levels of service. The UUT sunsets January 1, 2025 and is estimated to generate a projected $ 3.5 million in revenue in the fiscal year which ends June 30, 2022. Without these revenues, the city would not be in the position to continue to provide the services important to our community even at the current reduced level. While there has been some improvement in revenues overall, Hercules still receives a low share of the property taxes compared to other cities in Contra Costa County, and its retail tax base while largely weathering the effects of Covid-19 is not significant enough to support current service levels without the UUT.

Attachments:

1. Summary Report of January 2022 Community Survey Result

2. January 2022 Community Opinion Survey Questions

3. November 9, 2021 Staff Report – Lew Edwards Group award of contract

4. Resolution

5. Election Opinion Poll Services
67 63
To: Hercules City Manager Dante Hall

From: Lew Edwards Group and FM3 Research

Date: February 4, 2022

Re: Summary Report of January 2022 Community Survey Results

INTRODUCTION

Together with City Executive Staff, Lew Edwards Group (LEG) and FM3 Research (FM3) designed an updated 2022 City of Hercules Community Survey to evaluate customer satisfaction, resident priorities for services, and community interest in potential local funding measures.

Survey interviews were conducted by FM3 January 3-17 th. LEG/FM3 is pleased to report 324 completed interviews, which is more than the 245 respondents w illing to respond in the last survey conducted in the City in 2015. The Margin of Error on the full sample is +/- 5.4% at the 95% confidence level.

VIEWS OF THE CITY

Having served the City’s sustainability needs over the course of the past decade, LEG/FM3 have a unique view on how resident perspectives have evolved over time.

2022 survey respondents clearly view life in Hercules through a more positive lens. Today, those who say things are off on the wrong track are at a record low, and 56% of respondents feel the City is headed in the “right direction” -- a 25 point increase from when we started our collaboration with the City in 2012.

A majority of respondents feel the City is doing an “excellent” or “good” job providing services, and a plurality believe the City is doing a good job managing its budget and finances. At the same time, perceptions of city inefficiency and corruption have continued to steadily decline since 2012, with perceptions of corruption, cronyism, waste, or inefficiency dropping from a high of 63% in 2012 to 24% today.

While confidence has softened since our 2015 collaboration, it is st ill stronger than many other cities are currently experiencing and is likely due to the uncertain COVID times. This is a testament to City leadership’s hard work during these trying times.
68 Attachment 2
to 3/08/22 staff report
64 MEASURE VIABILITIES

There were three measures evaluated in the 2022 study.

Renewal of Existing Voter-Approved UUT, with No Increase in Tax Rate

The City is in a strong position to renew its existing, voter-approved utility users tax (UUT) measure in November 2022. The following ballot question (reviewed and approved by the City Attorney) was tested three times in the study:

CITY OF HERCULES NO TAX INCREASE/FINANCIAL STABILITY MEASURE: Shall an ordinance to maintain Hercules’ long-term financial stability and essential city services, such as neighborhood police patrols; crime prevention; street and pothole repair; and youth and senior programs, by renewing an existing, voter-approved 8% utility users’ tax, generating approximately $3, 600,000 annually until ended by voters, with no tax increase, low -income exemptions, independent citizens’ oversight, annual audits, and funding that cannot be taken by Sacramento, be adopted?

This simple majority requirement measure begins with a 67% viability threshold on the first ballot test, stays consistent at 69% on the second test, and remains at 66% on the final, third ballot test. As there is no statistical difference in these percentages, this measure is strongly supported by respondents and remains remarkably consistent through the entire progression of the survey.

Based on this evaluation, LEG/FM3 recommend the City proceed with planning for placement of this measure on the City’s regularly scheduled Municipal Election.

City Charter Measure

Each of the two following measures were tested once in the study:

CITY OF HERCULES CITY CHARTER/LOCAL CONTROL MEASURE. To enhance local control over funding essential city services, shall the City of Hercules Charter be adopted to establish Hercules as a Charter City with the ability to adopt a local real property transfer tax, subject to voter approval? The City Council’s powers otherwise remain unchanged and are limited by State general law, and any other powers as a charter city would have to be approved by voters. Do you think you would vote “yes” or “no” on this measure?

This simple majority-requirement Charter measure receives 39% support. While this percentage is not unusual for other LEG cities who have enacted similar measures, it bears noting that in Hercules's case, the percentage opposition to this measure is also 39%, which is far higher than in our other successful cities. The percentage of undecideds are therefore much lower in Hercules (around 20%) than in other successful jurisdictions.

69 65
Based on the community’s current reaction to this measure LEG/FM3 advise a longer runway of preparation for the 2024 election cycle to provide time for the City to educate the community about this measure concept if desired.

Real Property Transfer Tax (RPTT) Measure

The following companion revenue measure to the Charter Measure was also tested once in the survey:

CITY OF HERCULES ESSENTIAL SERVICES PROTECTION MEASURE. Shall an ordinance to expand locally controlled funding for essential city services such as improving 911 response times, disaster preparedness/ safe routes to school; retaining/ attracting businesses; keeping public areas/ parks safe/ clean; by enacting a real property transfer tax (paid only by buyers and sellers of property at the time of sale), until ended by voters and requiring annual audits, no funds for Sacramento, be adopted?

The test of this simple majority-requirement companion RPTT measure is at 53% which is within the MOE for the survey. As this type of funding mechanism is reliant on the companion Charter Measure being adopted, as noted above, deferring consideration of this measure package until 2024 is strongly advised due to the relatively low scoring reactions to both at this time.

TOP SCORING COMMUNITY PRIORITIES

An extensive battery of City services/objectives was evaluated in the study. The following seven services/objectives scored the most intensively and highly:

ƒ Maintaining long-term financial stability - 88%
ƒ Preventing funds being taken by Sacramento - 87%
ƒ Meeting water quality health standards - 86%
ƒ Maintaining fiscal accountability - 86%
ƒ Maintaining 911 response times - 85%
ƒ Keeping public areas and parks safe and clean - 84%
ƒ Keeping funds local - 81%

INFORMATIONAL STATEMENTS

The following paraphrased informational facts resonated most strongly and effectively with survey respondents.

Budget Implications: Without this funding, the City will lose $3.6 million every year, which is over 20% of the City's budget. The City may have no choice but to slash basic city services just to balance its budget, including police and neighborhood patrols, street maintenance, parks, senior services, youth programs, economic development, and others.

70 66
Maintaining Local Public Safety Services : Measure C has maintained police services. If it is not renewed, the City will be forced to seriously consider major cuts to our police department, which could impact crime prevention and 911 response times.

Quality of Life: Hercules is a place where people desire to live and raise families. If the City is forced to continue cutting basic city services, the character of our community and its quality of life will decline. Renewing local funding helps protect and maintain essential City services that make our community a safe, well-maintained place to live.

Finally, it bears noting that the study found that virtually half of Hercules respondents were concerned about the amount they were paying in utilities -- viewing it as an “extremely” or “very” serious problem. In these uncertain COVID times LEG/FM3 would caution the City about over- reaching to consider any increase or changes to the actual UUT rate. These results show your constituents clearly value maintaining existing voter-approved funding for the City’s long-term fiscal stability with no tax rate increase, but do not speak to the viability of a potential increase in the rate.

RECOMMENDATIONS/NEXT STEPS

Educating and engaging your residents around the City’s budget, service needs and local priorities is vital to maintaining measure viability. LEG/FM3 recommend the City educate and engage the community during the upcoming budget process to collect more input and keep the public updated on your challenges.

As in past collaborations with the City, LEG’s recommended Public Information toolkit will include the following:

ƒ Informational Speakers’ Bureau: City staff should visit those organizations in-person or through their scheduled online meetings to solicit feedback and provide information, which was highly effective and well-received by the community in past collaborations.

ƒ Opinion Leader Communications and Outreach: Communicating the results of this survey provides the City with an opportunity to engage opinion leaders and expand the conversation with high-level leaders.

ƒ Website/Newsletters/Social Media: Facts and information about the City’s financial condition should be placed on the City’s website, Facebook Page and Twitter feed. LEG will be recommending an E-Update & Social Media Plan to engage the public, get more feedback, and provide information.

ƒ Media Response & Earned Media: Any opportunity to respond to the media should be treated with high importance and an opportunity to share information with the community.

ƒ City Newsletter: Producing and mailing printed City Newsletters are recommended to engage and inform the Community about City service needs and priorities. While the Speakers’ 71 67
Bureau and Opinion Leader letters are extremely effective forms of communication, direct mail remains one essential component of a comprehensive, multi-disciplinary communications plan especially for seniors.

ƒ Citizens Advisory Committee engagement: In LEG/FM3’s past collaborations with the City, the Hercules Citizens Advisory Committee has always been involved as a highly credible community messenger, and we look forward to collaborating with the Committee again.

THUMBNAIL TIMELINE IF PREPARING FOR A NOVEMBER 2022 PLACEMENT

LEG/FM3 are looking forward to finalizing a graph presentation of Community Survey highlights for presentation to the City Council on February 8th. The following is a thumbnail outline of the timetable and key activities if planning for a November 2022 measure:

February – May: Update City Council, authorize continued project planning Engage Influentials and Community at Large
Solicit additional community feedback, report back to public Utilize budget consideration/adoption engagement and
messaging opportunities

June – July: Prepare ballot measure documents
Place measure on Municipal Election ballot

August – November: Submit ballot measure documents to County ROV Develop Municipal Election Communications Toolkit
Provide Municipal Election/Measure Information to public Thank the community for participating

November – December: Evaluate 2022 activities
If desired, commence assessment, planning and engagement for charter/RPTT activities

72 68
City of Hercules
Full-Time Equivalent City Government Employees by Function Last Ten Fiscal Years
For the Fiscal Year Ended June 30, Compared to
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 FY 2011 % Function
General Government 12.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 10.00 11.00 (1.00) -8% Public Safety 29.00 26.00 23.00 24.00 24.00 24.00 24.00 26.00 26.00 28.00 (1.00) -3% Public Works (a) 14.00 18.00 14.00 13.00 11.00 11.00 11.00 11.00 11.00 11.00 (3.00) -21% Community Development 5.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 2.00 (3.00) -60% Parks and Recreation 9.00 6.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 4.00 (5. 00) -56%

69.00 62.00 53.00 53.00 51.00 51.00 51.00 53.00 53.00 56.00 (13.00) -19% Housing Authority (b) 3.00 3.00
Total 72.00 65.00 53.00 53.00 51.00 51.00 51.00 53.00 53.00 56.00 (13.00) NOTE:
(a) Public Works includes Wastewater and Solid Waste
(b) The Housing Authority became a separate legal entity during Fiscal Year 2011-12 Source: City of Hercules Operating Budget
0 10
20 30
40 50
60 70
80 FTE's
General Government Public Safety Public Works (a)
Community Development Parks and Recreation Housing Authority (b) 73 Attachment 3 to
3/08/22 staff report
69 1

REPORT TO THE CITY COUNCIL

DATE: Regular Meeting of February 25, 2020
TO: Mayor Esquivias and Members of the City Council

SUBMITTED BY: J. Patrick Tang, City Attorney
David Biggs, City Manager

SUBJECT: Process for Becoming a Charter City for the Purpose of Increasing the Real Property Transfer Tax (RPTT)

RECOMMENDED ACTION:

Receive report, discuss, and provide direction, if any.

COMMISSION/SUBCOMMITTEE ACTION AND RECOMMENDATION:

There was no commission or subcommittee review of this item.

FISCAL IMPACT: There is no direct cost associated with the preparation of this report. Future steps of considering a ballot measure, including possible polling, prepa ring a proposed charter, undertaking the process to place the measure on the ballot, and conducting an e lection, would all incur costs. The exact amount of the impact would depend on what type of community eng agement the Council would want.

Any process would involve staff and city attorney time. If a ballot measure were approved by the voters, Hercules would see an increase in RPTT revenue. The amount of i ncrease would depend upon the RPTT rate set by the City; various estimates are provided in the Rev enue Rate Comparison Table, see page 4.

However, it is uncertain whether voters would approve an increased RPTT.

BACKGROUND: At its January 14, 2020 regular meeting, the City Council direc ted the city attorney and staff to prepare a report for Council information regarding the process for becoming a charter city, for the limited purpose of setting real property transfer tax (RPTT) ra tes beyond the rate set by state law for general law cities.

DISCUSSION: Cities in California are organized as either general law citi es 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 74 Attachment 4 to
3/08/22 staff report
70 2

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. This is why general law cities are “locked in” to receiving a real property transfer tax (RPTT) rate of $0.55 per $1,000 as set by the state. In contrast, a charter city may use its “home rule” authority to adopt local laws regarding “municipal affairs” that vary from state laws, so that a charter city has more control over local affairs than a general law city. A significant authority possessed by charter cities is the authority, with voter approval, to impose a higher RPTT rate. Charter law cities are not subject to state law regarding RPTT because the setting of RPTT rates is deemed a municipal affair. As a result, charter cities may impose RPTT at a rate higher than the maximum statutory rate otherwise received by general law ci ties. A list of all California general law and charter cities, along with their respective RPTT rates, is provided as Attachment 1.

There are other reasons why a general law city may seek to become a charter city other than to set RPTT rates, including but not limited to changing the number of elected officials, establishing district elections, and providing for a strong mayor form of government (see Attachment 2), but given Council’s direction to limit the discussion to becoming a charter city for the sole purpose of adjusting RPTT rates, other reasons for becoming a charter city are not discussed in this report. A n example of the type of limiting language that can be included in a charter to restrict the scope of local authority to setting the RPTT rate is provided below:

“The City may exercise the powers of a charter city to generate revenue by imposing a tax on the conveyance of real property, based upon the price paid for the real property ("real property transfer tax"). Any real property transfer tax imposed by the City shall be in addition to any similar tax authorized by the general laws of the State of California. Except as provided in this Charter, the powers of the City shall otherwise be constrained by, subject to, and governed by the general laws of the State as now and hereafter existing relating to cit ies organized under such general laws.“

It should be noted that, while other governance changes may not be in consideration as part of the approval of an initial charter, charter city status does expand the possible universe of both council and voter-initiated changes to governance and other matters via the electoral process that may otherwise not be possible as a General Law City. However, once a charter is adopted by the voters, it can only be changed by an affirmative vote of a majority of the electorate. And, on ce a RPTT rate has been approved by the voters, as a general tax it cannot be changed without receiving the affirmative vote of a majority of the electorate. In other words, the Council could not change the charter without voter approval, nor could the Council change the RPTT rate without voter approval.

What is RPTT? The real property transfer tax (RPTT) applies to transactions involving the sale and purchase of all improved property with homes or commercial structures, a nd all unimproved land with no structures. The tax is paid when ownership transfers from the s eller of the property to the purchaser of the property. Generally, the tax can be paid by either the seller or the purchaser, or the tax can be shared between the seller and the purchaser. It is a one-time expense related to the transfer of ownership, and is unrelated to the annual payment of property taxes. Currently under the California Revenue and Taxation Code, property in general law cities when it is sold is assesse d a county transfer tax of $1.10 for every $1,000 of the real estate’s sales price. Counties then split th at tax with the cities, so that the city where 75 71
3 the sale took place receives $0.55 for every $1,000 of sale price. Hercules thus currently receives an RPTT of the maximum allowed for general law cities of $0.55 per $1,000 of value.

Recently a number of general law cities have utilized the legal process to become charter cities for the limited purpose of setting RPTT rates beyond the baseline rate of $0.55 per $1,000 established for general law cities.1 Under State law and the California Constitution, cities cannot impose, increase or extend any tax unless the tax is approved by the voters. Accordingly, a me asure to become a charter city, and an increase to the RPTT, would require voter approval by a simple majority of the electorate.

How much does the property buyer pay? Property owners/sellers in general law cities in California p ay a RPTT of $1.10 per thousand dollars of sales price or $275 on a $250,000 property sale; by way of example, that means $550 on a $500,000 property sale; $825 on a $750,000 property sale, and; $1,100 on a $1,000,000 property sale. The RPTT amounts above are split between the county and the city, so that the city receives half. Should the City become a Charter City a nd enact a higher RPTT, the full $1.10 per thousand provided for under State law would go to the County, a nd the City rate authorized under the Charter would be in addition to the base $1.10 per thousand tha t the County would receive. The local increase to the RPTT is essentially a local tax measure; unlike the property tax where the City gets back less than 4 cents per dollar, all of the additional RPTT amount would flow to the City, with none of it going to the State and the County receiving only the statutory allocation of $1.10 per $1,000.

The table below shows the RPTT paid under the General Law city provisions now in effect, and four additional illustrations on what a possible Charter City rate w ould impose. As you can see, under the charter city examples, the amount that goes to the County remains the same, regardless of the RPTT rate set by the City:

TAX RATE COMPARISON TABLE

Gen. Law RPTT
$1.10/1,000

Charter RPTT
$4/1,000
Charter RPTT
$8/1,000
Charter RPTT
$12/1,000
Charter RPTT
$16/1,000
Property Sale
Price
City/County City/County City/County City/County City/County $250,000 137.50/137.50 1,000/275 2,000/275 3,000/275 4,000/275 $500,000 275/275 2,000/550 4,000/550 6,000/550 8,000/550 $750,000 412.50/412.50 3,000/825 6,000/825 9,000/825 12,000/825 $1,000,000 550/550 4,000/1,100 8,000/1,100 12,000/1,100 16,000/1,100

1 Six cities attempted to increase their RPTT rates at the 2018 general election. Voters in five of the six cities approved the RPTT increases. Two of the cities, El Cerrito and Union City, were general law cities that sought to become charter cities for that limited purpose; El Cerrito voters approved becoming a charter city and increasing their RPTT to $12.00 per thousand, while Union City voters did not approve a similar measure. Emeryville became a charter city to increase RPTT rates in 2014.
76 72
4 By way of comparison, a Hercules resident who buys a $25,000 au tomobile in Contra Costa County pays $2,187.50 in sales tax, based on the current 8.75% tax rate, of which the City receives $375.00. How much additional revenue would the city receive if the city adopted a n increase to the RPTT ? The amount of additional revenue would depend on what RPTT rate was selected. Below is a chart showing the annual revenue that would be received using the average annual RPTT amounts received by Hercules for Fiscal Years 2014-2019 ($115,248), and based on a range of RPTT rates:

REVENUE RATE COMPARISON TABLE

$0.55/1,000 $4/1,000 $8/1,000 $12/1,000 $16/1000
City County City County City County City County City County $115K $115K $838K $230K $1.6M $230K $2.5M $230K $3.3M $230K

What is the process for becoming a charter city?
Becoming a charter city requires approval by a simple majority of voters. Prior to approving submission of the charter to the voters, the City Council must hold at least two public hearings on the proposal of the charter and the content of the charter, and notice of those hea rings must be published at least twenty one (21) calendar days before the date of each hearing. The sec ond public hearing must be held at least thirty (30) days after the first hearing, and at least one of the hearings must be held outside of normal business hours. The City Council may not vote on submission of the charter to the voters until twenty one (21) days after the second public hearing. A charter proposal c an only be voted on at a regular general election, absent a declaration o f a fiscal emergency. In order for the City Council to place a charter measure on the ballot for November 3, 2020, the City would need to hold the first formal public hearing on a proposed charter at the first meeting in May 2020.

An increased RPTT is not itself established by the charter. Rat her, the RPTT would be established by a separate ordinance submitted simultaneously to the voters. The ordinance would include the RPTT rate along with other administrative rules. Since the draft charter would prohibit the City from exercising any of the powers of a charter city except for the enactment of an increased RPTT, becoming a charter city and the transfer tax are inextricably linked.

It is common for cities looking to adopt a charter to launch a community engagement process to inform the public about what becoming a charter city would entail and receive feedback prior to placing a charter measure on the ballot. Because becoming a charter city is a com plicated issue that can easily cause confusion, it is strongly recommended that if the Council decid ed to try and become a charter city that communications professionals be retained to help explain to the public what becoming a charter city entails.

If the Council wished to explore this further, it would want to make some preliminary decisions about the RPTT, such as the proposed rate, before beginning the community engagement process. In addition, the need to renew the expiring existing Utility Users base rate and override by no later than 2024 or 2025, should be considered. These and other factors could also be assessed by undertaking polling to determine 77 73
5 the voter’s reactions to a number of possible options. This would normally be one of the first steps before deciding to place a matter on the ballot. The City last undertook polling in 2015 prior to opting to place a measure on the ballot to renew the sales tax override, and the measure was crafted based on the information garnered from professional polling.

Ultimately, the Council would have the ability to make changes and adjustments prior to submitting the measure to the voters, based on feedback received during the en g a g e m e n t p r oc e s s a n d u p on f u r t h e r review.

Possible options for community engagement could include all or some of the following:

• Conduct polling to gauge community interest before placing th e measure on the ballot. This could include both scientific and unscientific polling; or • Appoint a community committee to make recommendations regarding the draft charter and RPTT;
• Conduct official town hall meetings to provide information ab out the charter and RPTT to the community, as well as allow an opportunity for the public to as k questions and the Council to receive feedback;
• Mail information including FAQs to residents about becoming a charter city.

The above list of community engagement options is non-exhaustiv e and is intended only as an example of possible types of outreach. The more extensive the outreach, the more community feedback can be expected, but there would be a greater increase in staff time and costs to implement.

SUMMARY CONCLUSION: Becoming a charter city is an option that a number of general law cities have pursued, for varying reasons. Most recently, cities that have placed charter city measures on the ballot have done so primarily to allow local control over the setting of RPTT rates, and have opted to expressly exclude additional powers that are otherwise available to charter cities.

ATTACHMENTS:

1. RPTT Rates Statewide

2. League of California Cities Summary

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94 90
General Law City v. Charter City
Characteristic General Law City Charter City
Ability to Govern
Municipal Affairs
Bound by the state’s general law, regardless
of whether the subject concerns a municipal
affair.

Has supreme authority over “municipal
affairs.” Cal. Const. art. XI, § 5(b).

Form of Government State law describes the city’s form of government For example, Government
Code section 36501 authorizes general law
cities be governed by a city council of five
members, a city clerk, a city treasurer, a
police chief, a fire chief and any subordinate
officers or employees as required by law.

City electors may adopt ordinance which
provides for a different number of council
members. Cal. Gov’t section 34871. The
Government Code also authorizes the “city
manager” form of government. Cal. Gov’t
Code § 34851.

Charter can provide for any form of
government including the “strong mayor,”
and “city manager” forms. See Cal. Const.
art. XI, § 5(b); Cal. Gov’t Code § 34450 et
seq.

Elections Generally Municipal elections conducted in accordance with the California Elections Code. Cal. Elec.

Code §§ 10101 et seq..

Not bound by the California Elections Code.

May establish own election dates, rules, and
procedures. See Cal. Const. art. XI, § 5(b);
Cal. Elec. Code §§ 10101 et seq..

Methods of Elections Generally holds at-large elections whereby voters vote for any candidate on the ballot.

Cities may also choose to elect the city
council “by” or “from” districts, so long as the
election system has been established by
ordinance and approved by the voters. Cal.

Gov’t Code § 34871. Mayor may be elected
by the city council or by vote of the people.

Cal. Gov’t Code §§ 34902.

May establish procedures for selecting
officers. May hold at-large or district
elections. See Cal. Const. art. XI, § 5(b).

City Council Member
Qualifications
Minimum qualifications are:

1. United States citizen

2. At least 18 years old

3. Registered voter

4. Resident of the city at least 15 days
prior to the election and throughout
his or her term

5. If elected by or from a district, be a
resident of the geographical area
comprising the district from which he
or she is elected.

Cal. Elec. Code § 321; Cal. Gov’t Code §§
34882, 36502; 87 Cal. Op. Att’y Gen. 30
(2004).

Can establish own criteria for city office
provided it does not violate the U.S.

Constitution. Cal. Const. art. XI, § 5(b), 82
Cal. Op. Att’y Gen. 6, 8 (1999).
95 91
Characteristic General Law City Charter City
Public Funds for Candidate
in Municipal Elections
No public officer shall expend and no
candidate shall accept public money for the
purpose of seeking elected office. Cal. Gov’t
Code § 85300.

Public financing of election campaigns is
lawful. Johnson v. Bradley, 4 Cal. 4th 389
(1992).

Term Limits May provide for term limits. Cal. Gov’t Code § 36502(b).

May provide for term limits. Cal. Const. art.

XI, § 5(b); Cal Gov’t Code Section 36502 (b).

Vacancies and Termination
of Office
An office becomes vacant in several
instances including death, resignation,
removal for failure to perform official duties,
electorate irregularities, absence from
meetings without permission, and upon non-
residency. Cal. Gov’t Code §§ 1770, 36502,
36513.

May establish criteria for vacating and
terminating city offices so long as it does not
violate the state and federal constitutions.

Cal. Const. art. XI, § 5(b).

Council Member
Compensation and
Expense Reimbursement
Salary-ceiling is set by city population and
salary increases set by state law except for
compensation established by city electors.

See Cal. Gov’t Code § 36516. If a city
provides any type of compensation or
payment of expenses to council members,
then all council members are required to
have two hours of ethics training. See Cal.

Gov’t Code §§ 53234 - 53235.

May establish council members’ salaries.

See Cal. Const. art. XI, § 5(b). If a city
provides any type of compensation or
payment of expenses to council members,
then all council members are required to
have two hours of ethics training. See Cal.

Gov’t Code §§ 53234 - 53235.

Legislative Authority Ordinances may not be passed within five days of introduction unless they are urgency
ordinances. Cal. Gov’t Code § 36934.

Ordinances may only be passed at a regular
meeting, and must be read in full at time of
introduction and passage except when, after
reading the title, further reading is waived.

Cal. Gov't Code § 36934.

May establish procedures for enacting local
ordinances. Brougher v. Bd. of Public Works,
205 Cal. 426 (1928).

Resolutions May establish rules regarding the
procedures for adopting, amending or
repealing resolutions.

May establish procedures for adopting,
amending or repealing resolutions. Brougher
v. Bd. of Public Works, 205 Cal. 426 (1928).

Quorum and Voting
Requirements
A majority of the city council constitutes a
quorum for transaction of business. Cal.

Gov’t Code § 36810.

All ordinances, resolutions, and orders for
the payment of money require a recorded
majority vote of the total membership of the
city council. Cal. Gov't Code § 36936.

Specific legislation requires supermajority
votes for certain actions.

May establish own procedures and quorum
requirements. However, certain legislation
requiring supermajority votes is applicable to
charter cities. For example, see California
Code of Civil Procedure section 1245.240
requiring a vote of two-thirds of all the
members of the governing body unless a
greater vote is required by charter.
96 92
Characteristic General Law City Charter City
Rules Governing
Procedure and Decorum
Ralph Brown Act is applicable. Cal. Gov’t
Code §§ 54951, 54953(a).

Conflict of interest laws are applicable. See
Cal. Gov’t Code § 87300 et seq..

Ralph Brown Act is applicable. Cal. Gov’t
Code §§ 54951, 54953(a).

Conflict of interest laws are applicable. See
Cal. Gov’t Code § 87300 et seq..

May provide provisions related to ethics,
conflicts, campaign financing and
incompatibility of office.

Personnel Matters May establish standards, requirements and procedures for hiring personnel consistent
with Government Code requirements.

May have “civil service” system, which
includes comprehensive procedures for
recruitment, hiring, testing and promotion.

See Cal. Gov't Code § 45000 et seq.

Meyers-Milias-Brown Act applies. Cal. Gov't
Code § 3500.

Cannot require employees be residents of
the city, but can require them to reside within
a reasonable and specific distance of their
place of employment. Cal. Const. art. XI, §
10(b).

May establish standards, requirements, and
procedures, including compensation, terms
and conditions of employment for personnel.

See Cal. Const. art. XI, § 5(b).

Procedures set forth in Meyers-Milias-Brown
Act (Cal. Gov't Code § 3500) apply, but note,
“[T]here is a clear distinction between the
substance of a public employee labor issue
and the procedure by which it is resolved.

Thus there is no question that 'salaries of
local employees of a charter city constitute
municipal affairs and are not subject to
general laws.'” Voters for Responsible
Retirement v. Board of Supervisors, 8
Cal.4th 765, 781 (1994).

Cannot require employees be residents of
the city, but can require them to reside within
a reasonable and specific distance of their
place of employment. Cal. Const. art. XI,
section 10(b).

Contracting Services Authority to enter into contracts to carry out necessary functions, including those
expressly granted and those implied by
necessity. See Cal. Gov't Code § 37103;
Carruth v. City of Madera, 233 Cal. App. 2d
688 (1965).

Full authority to contract consistent with
charter.

May transfer some of its functions to the
county including tax collection, assessment
collection and sale of property for non-
payment of taxes and assessments. Cal.

Gov't Code §§ 51330, 51334, 51335. 97
93 Characteristic General Law City Charter City
Public Contracts Competitive bidding required for public works contracts over $5,000. Cal. Pub. Cont. Code
§ 20162. Such contracts must be awarded to
the lowest responsible bidder. Pub. Cont.

Code § 20162. If city elects subject itself to
uniform construction accounting procedures,
less formal procedures may be available for
contracts less than $100,000. See Cal. Pub.

Cont. Code §§ 22000, 22032.

Contracts for professional services such as
private architectural, landscape architectural,
engineering, environmental, land surveying,
or construction management firms need not
be competitively bid, but must be awarded
on basis of demonstrated competence and
professional qualifications necessary for the
satisfactory performance of services. Cal.

Gov't Code § 4526.

Not required to comply with bidding statutes
provided the city charter or a city ordinance
exempts the city from such statutes, and the
subject matter of the bid constitutes a
municipal affair. Pub. Cont. Code § 1100.7;
see R & A Vending Services, Inc. v. City of
Los Angeles, 172 Cal. App. 3d 1188 (1985);
Howard Contracting, Inc. v. G.A. MacDonald
Constr. Co., 71 Cal. App. 4th 38 (1998).

Payment of Prevailing
Wages
In general, prevailing wages must be paid on
public works projects over $1,000. Cal. Lab.

Code § 1771. Higher thresholds apply
($15,000 or $25,000) if the public entity has
adopted a special labor compliance program.

See Cal. Labor Code § 1771.5(a)-(c).

Historically, charter cities have not been
bound by state law prevailing-wage
requirements so long as the project is a
municipal affair, and not one funded by state
or federal grants. Vial v. City of San Diego,
122 Cal. App. 3d 346, 348 (1981). However,
there is a growing trend on the part of the
courts and the Legislature to expand the
applicability of prevailing wages to charter
cities under an analysis that argues that the
payment of prevailing wages is a matter of
statewide concern. The California Supreme
Court currently has before them a case that
will provide the opportunity to decide
whether prevailing wage is a municipal affair
or whether it has become a matter of
statewide concern.
98 94
Characteristic General Law City Charter City
Finance and Taxing Power May impose the same kinds of taxes and assessment as charter cities. See Cal. Gov't
Code § 37100.5.

Imposition of taxes and assessments subject
to Proposition 218. Cal. Const. art.XIIIC.

Examples of common forms used in
assessment district financing include:
x Improvement Act of 1911. Cal. Sts.
& High. Code § 22500 et seq..
x Municipal Improvement Act of 1913.

See Cal. Sts. & High. Code §§
10000 et seq..
x Improvement Bond Act of 1915. Cal.

Sts. & High. Code §§ 8500 et seq..
x Landscaping and Lighting Act of
1972. Cal. Sts. & High. Code §§
22500 et seq..
x Benefit Assessment Act of 1982.

Cal. Gov't Code §§ 54703 et seq..

May impose business license taxes for
regulatory purposes, revenue purposes, or
both. See Cal. Gov't Code § 37101.

May not impose real property transfer tax.

See Cal. Const. art. XIIIA, § 4; Cal. Gov't
Code § 53725; but see authority to impose
documentary transfer taxes under certain
circumstances. Cal. Rev. & Tax. Code §
11911(a), (c).

Have the power to tax.

Have broader assessment powers than a
general law city, as well as taxation power as
determined on a case-by case basis.

Imposition of taxes and assessments subject
to Proposition 218, Cal. Const. art. XIIIC, §
2, and own charter limitations
May proceed under a general assessment
law, or enact local assessment laws and
then elect to proceed under the local law.

See J.W. Jones Companies v. City of San
Diego, 157 Cal. App. 3d 745 (1984).

May impose business license taxes for any
purpose unless limited by state or federal
constitutions, or city charter. See Cal. Const.
art. XI, § 5.

May impose real property transfer tax; does
not violate either Cal. Const art. XIIIA or
California Government Code section 53725.

See Cohn v. City of Oakland, 223 Cal. App.
3d 261 (1990); Fielder v. City of Los
Angeles, 14 Cal. App. 4th 137 (1993).

Streets & Sidewalks State has preempted entire field of traffic control. Cal. Veh. Code § 21.

State has preempted entire field of traffic
control. Cal. Veh. Code § 21.

Penalties & Cost Recovery May impose fines, penalties and forfeitures, with a fine not exceeding $1,000. Cal. Gov’t
Code § 36901.

May enact ordinances providing for various
penalties so long as such penalties do not
exceed any maximum limits set by the
charter. County of Los Angeles v. City of Los
Angeles, 219 Cal. App. 2d 838, 844 (1963).
99 95
Characteristic General Law City Charter City
Public Utilities/Franchises May establish, purchase, and operate public works to furnish its inhabitants with electric
power. See Cal. Const. art. XI, § 9(a); Cal.

Gov't Code § 39732; Cal. Pub. Util. Code §
10002.

May grant franchises to persons or
corporations seeking to furnish light, water,
power, heat, transportation or
communication services in the city to allow
use of city streets for such purposes. The
grant of franchises can be done through a
bidding process, under the Broughton Act,
Cal. Pub. Util. Code §§ 6001-6092, or
without a bidding process under the
Franchise Act of 1937, Cal. Pub. Util. Code
§§ 6201-6302.

May establish, purchase, and operate public
works to furnish its inhabitants with electric
power. See Cal. Const. art. XI, § 9(a); Cal.

Apartment Ass’n v. City of Stockton, 80 Cal.

App. 4th 699 (2000).

May establish conditions and regulations on
the granting of franchises to use city streets
to persons or corporations seeking to furnish
light, water, power, heat, transportation or
communication services in the city.

Franchise Act of 1937 is not applicable if
charter provides. Cal. Pub. Util. Code §
6205.

Zoning Zoning ordinances must be consistent with
general plan. Cal. Gov't Code § 65860.

Zoning ordinances are not required to be
consistent with general plan unless the city
has adopted a consistency requirement by
charter or ordinance. Cal. Gov’t. Code §
65803.
100
96 101
97 102
98 .

STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of January 25, 2022
TO: Members of the City Council
VIA: Dante Hall, City Manager
SUBMITTED BY: Edwin Gato, Finance Director
SUBJECT: Long-Term Financial Projection for the General Fund an d Approval of a Resolution to unanimously declare a fiscal emergency in the City of Hercules
RECOMMENDATION: R e v i e w a n d d i s c u s s t h e l o n g - t e r m financial projection for the G eneral Fund, and approval of a resolution to unanimously declare a fiscal emergency in the City of Hercules related to the expiration of the City’s Utility Users Tax on January 1, 2025.

FISCAL IMPACT OF RECOMMENDATION
There is no direct impact from the preparation and review of an updated long-term forecast. It is a planning tool that can be used to guide future fiscal decisions.

BACKGROUND AND DISCUSSION
The City’s finances are managed through four major efforts each year. The development and adoption of a budget for each fiscal year which starts July 1st is generally considered the first point in the annual cycle. This is generally followed by the completion and the acceptance of the audit for the prior fiscal year, with the goal of having that completed by December 31st or earlier.

The completion of the annual audit typically sets the stage for the mid-year budget review in February or March and can include some adjustments or additional appropriations or designations of reserves.

The preparation of an update to the long-term forecast would typically be received by the Council in March/April timeframe to set the stage for the development of the budget for the next fiscal year.

However, this year due to the Utility Users Tax, which will sunset in January 2025, staff prepared the long-term financial projections early to show the fiscal impact of the discontinuance of the UUT to the City’s bottom line and to start the voter approval process to continue its UUT.

With the audit being received by the City Council tonight, it is time to review an updated Long-Term Financial Projection. The forecast has been updated to reflect the FY 20-21 audit results with the FY 21-22 Adopted Budget and the preliminary look of the FY 22-23 projections. A long-term forecast was prepared for the General Fund for the time period from FY 23-24 through FY 27-28. 103
Attachment 5 to
3/08/22 staff report
99 The five-year forecast is an essential tool that reflects the City’s com mitment to fiscal health and sustainability. This model is used to evaluate the immediate impact of budgetary decisions and the costs of decisions over multiple years. The tool is updated based on current revenue and expenditure information. Though individual variables and assumptions may c hange over time, the five-year forecast provides a consistent model to realistically forecast the City’s fiscal performance. The five- year forecast includes all aspects of the General Fund. It mod els and forecasts all General Fund revenues (property tax, sales tax, utility users tax, etc.) and expenditures in detail. The City updates the five-year forecast as part of the regular budget update to the Council. These updates are part of developing the budget for the upcoming fiscal year, as explained above.

The five-year forecast (FY 22-23 through 26-27) marks the first look at the FY 22-23 annual budget.

It includes projected General Fund financials over the next five years based on current service levels and information on revenues.

SIGNIFICANT CHANGES FROM PRIOR YEAR
The COVID-19 Pandemic began to directly impact City operations in mid-March 2020 when the initial County Health Order resulted in a stay-home order for all but essential services workers.

Now, nearly two years later, we continue to operate under a County Health Order, which has been updated and revised. Over time, we have also had to comply with the Governor's Executive Orders as they have evolved. Also, the City Manager declared a local emergency in response to the COVID- 19 Pandemic initially on March 15, 2020. That local emergency declaration was ratified by the City Council and extended by the City Council's action every 60 days after that.

Also, we would like to acknowledge that the City of Hercules is the only City Hall in the county that did not close during the COVID event. As essential services workers, City employees continued to work unless they had COVID-related health or childcare issues. We were fortunate that our physical facilities and level of staffing lent themselves to operate on-site in a safe manner with all reasonable and required precautions taken to protect our employees and customers. Of course, we could not continue in-person City Council and other public meetings and transitioned to the Zoom platform.

We continue to utilize this platform in compliance with the Governor’s Executive Order.

REVENUE PROJECTION AND ASSUMPTIONS USED:The General Fund major revenue categories are summarized on Attachment 2. The City derives a significant portion of its General Fund revenues from economically sensitive sources such as property taxes, sales taxes (1% Bradley-Burns and Measure B), and utility users’ taxes. When one or more of these key revenue sources deviates from projections, funding for future programs and services may be affected.

As shown in the following graph, General Fund revenues are projected to increase at the rate of 2% a year and include estimated revenues from new development. Revenue projections for a 5-year forecast period through 2027 range from $17.5 to $16.7 million. The following explains the major revenue assumptions used to estimate General Fund revenues. 104
100
¾ Utility Users Tax (UUT) are revenues collected from the consumption of utility services, including (but not limited to) electric, gas, water, sewer, telephone (including cell phone and long-distance), sanitation, and cable television. The City determines the rate of the tax and the use of its revenues. Based on the trend and its consumption rate, the City continues to see erosion in Wireless Telecom’s UUT revenues due to the update in allocations of the bundled packages from the respective providers. These updated allocations shifted a more significant percentage towards data, which is not taxable.

On June 4, 2013, the voters approved Ordinance #475, increasing the tax rate from 6% to 8%. The Utility Users Tax will automatically sunset, and its provisions shall become ineffective on January 1, 2025. The five-year forecast assumes that the tax will sunset in mid FY 24-25. To avoid catastrophic impacts to City services due to a severe and sudden loss of revenue, Staff recommends going back to the voters to extend the tax imposed on utilities.
¾ Total Sales Tax revenue is highly concentrated with two producers generating over 50% of the City's sales tax. Based on the report received from MuniServices, Hercules’s sales tax revenue is substantially generated from business and industry sources. However, the City continues to benefit from the ongoing implementation of the Wayfair decision regarding online sales and the more significant amount of purchases being made online due to the Pandemic, with these trends being found as part of the City's share in the County pool. It should also be noted that the Wayfair decision's full effect is anticipated to have occurred by the end of the FY 20/21 fiscal year. After that, any increases from the County pool will be driven primarily by the underlying economic trends. ¾ The City is realizing a stable property tax-related revenue growth and assumed the following: The California Consumer Price Index (CCPI) for FY 2021-22 that has been approved by the State is 1.036%. In year two of the forecast, the CIP growth is estimated -
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
FY 22-23
Forecast
FY 23-24
Forecast
FY 24-25
Forecast
FY 25-26
Forecast
FY 26-27
Forecast
General Fund
5-Year Forecast - Operating Revenues
Taxes
Taxes on New Development
Intergovernmental
Program Revenues
Use of Money & Property/Other
Admin Cost Allocation
Transfers In
105
101
at 1.5% and in years 3-5 of the forecast, the CCPI has been for ecast at the maximum allowable rate of 2%.

This year the Assessors applied the CCPI factor of 1.036%. It is important to note that all properties that have been granted Proposition 8 reductions between 2008 and 2012, and in some counties in 2020 due to lower sale price trends in 2019 , are required to be reviewed each year outside of the CCPI adjustment and any positive adjustment to those properties will likely exceed the 1.036% if properties are granted value restorations. ¾ The new general tax revenues that will be generated from new developments, such as Muir Pointe, Bayfront, Sycamore Crossing, Willow Auto Site, and Hilltown are estimated based on residential unit impact, assuming an average of 2.5 people per unit using FY 19- 20 projected tax revenues as a base.
¾ The effect of COVID-19 mandatory closures to the Parks & Recreation program resulted in a reduction of $1.1 million of program revenues in FY 20-21 as adjusted at Midyear.

Childcare programs, contract classes, sports programs, and faci lity rentals were all suspended since March 2020, with very limited offerings underway now. The five-year projections assumed that all programs would be restored starting FY 21-22.

EXPENDITURE PROJECTION AND ASSUMPTIONS USED:As shown in the following graph, General Fund expenditures are projected to increase at the estimated rate of 3% a year.

Expenditure projections for a 5-year forecast period through 2027 range from $16.8 to $18.6 million assuming the same service level. The following chart shows the growth in General Fund expenditures.

1. The most significant cost in the General Fund is driven by its labor. Labor accounts for almost 60% of total expenditures. Below are significant assumptions used to estimate the cost of salaries and benefits:
-
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
14,000,000
16,000,000
18,000,000
20,000,000
FY 22-23
Forecast
FY 23-24
Forecast
FY 24-25
Forecast
FY 25-26
Forecast
FY 26-27
Forecast
General Fund
5-Year Forecast - Operating Expenditures
Non-Department/Transfers
Workers Comp/General Liability
Administration
Parks and Recreation
Community Development
Public Works
Police
106
102
a. Regular Salaries– Cost of living (COLA) increase by 3% per year. b. PERS Miscellaneous and Public Safety Normal Cost rate applied are projected as follows based on CalPERS actuarial assumptions:
c. PERS Unfunded Accrued Liability (UAL) contribution amounts are projected as follows based on CalPERS actuarial assumptions.

2. Parks & Recreation programs have been suspended since March 20 2 0. Th e five-y ear forecast assumed that programs would be restored starting FY 21-22.

3. The City of Hercules has been navigating a series of financial difficulties dating back to the Great Recession in FY 2007-08, the elimination of redevelopment in 2011, in addition to financial mismanagement which occurred under a former City Manager who resigned in 2011. While much progress has been made and the City has been able to build up its reserves by making financially prudent decisions and adopting balanced budgets which also use one-time monies for strategic purposes, ensuring the o ngoing financial sustainability of the City, and lingering issues associated with the State dissolution of redevelopment in 2011 have not been fully resolved.

On April 8, 2020, the City entered into a settlement agreement implementing an installment payment plan for the Other Funds Due Diligence Revi ew payment. The outstanding $3.6 million payment will be made by the City and Successor Agency to the Contra Costa County Auditor-Controller according to the following schedule, which the initial payment was made on May 1, 2020:

FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27
Police Classic 23.70% 23.70% 23.70% 23.70% 23.70%
Police 2nd-Tier 21.80% 21.80% 21.80% 21.80% 21.80%
Police PEPRA 13.10% 13.10% 13.10% 13.10% 13.10%
Miscellaneous Classic 10.30% 10.30% 10.30% 10.30% 10.30% Miscellaneous PEPRA 7.60% 7.60% 7.60% 7.60% 7.60%
FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27
Police Classic 747,000 $ 797,000 $ 847,000 $ 873,000 $ 896,000$ Police 2nd-Tier 2,000 2,100 2,200 400 400
Police PEPRA 6,200 4,900 5,800 6,000 6,200
Miscellaneous Classic 614,000 651,000 691,000 711,000 730,000 Miscellaneous PEPRA 3,400 4,200 4,800 5,000 5,100
1,372,600 $ 1,459,200$ 1,550,800$ 1,595,400 $ 1,637,700$ 107
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This $3.6 million are funds advanced by the City in 2011 to the Redevelopment Agency to make a bond payment in order to avoid a default on the Redevelopment Agency’s bonds due to the dramatic decline in property values as a result of the Great Recession. The City advanced these funds in April 2011, and the Redevelopment Dissolution Act approved by the State Legislature and signed by then Governor Brown, made t his type of transfer illegal after the fact later in 2011. The DDR completed in 2015 identified that this amount needed to be returned to the former Redevelopment Agency by the City.

The City is working with Senator Skinner regarding a bill which, if passed by the State Legislature and signed by the Governor, would make the City eligible for a Finding of Completion which would allow for the repayment of City loans ma de by the former Redeployment Agency. While more than $50 million in City loans are reflected as being outstanding, it is anticipated that the State Department of Fin ance will not find the supporting documentation acceptable for loans beyond an estimat ed $3 to $4 million.

Once that determination is made, any remaining accounts receivable related to loans from the City to the former Redevelopment Agency will have to be red uced by the loans disallowed, and that will be done once a final determination is made.

4. In August 2020, the City refinanced the proceeds of the Library Lease Revenue Bonds, Series 2003B. The City structured the refinancing to achieve all of the cash flow savings in the first three years which is reflected in the forecast.

5. On October 18, 2013, the City agreed with CalHFA to extend the term of the loan on Housing Enabled by Local Partnership (HELP) and Residential Dev elopment Loan Program (RDLP) through April 11, 2027, and August 15, 2026, res pectively. At that time, payments of the remaining loan balances are due in full. Prior to the end of the loan term, the City will work with CalHFA to negotiate a further extension to repay the remaining loan balance.

NET ANNUAL RESULTS
Based on the current information known, the General Fund will end the fiscal years with a positive net revenue until year three. On January 1, 2025, the Utility Users Tax (UUT) will sunset. Also, per our agreement with the California Housing Finance Agency (CalHFA), the remaining loan balances are due no later than April 11, 2027, and August 15, 2026, for HELP and RDLP loans, respectively.

Therefore, a structural deficit will start in FY 24-25 assuming the same service level, the UUT is not renewed, and the accelerated payments on CalHFA loans are not re negotiated. The FY 22-23 projections will be further updated and refined during the adoption of the budget in June 2022.

RECOMMENDATION
Staff recommends going back to the voters (a separate agenda item in the future) to extend the UUT, a tax imposed on utilities. In order to be submitted on the ballot for a state primary election, the City must first adopt a declaration of a fiscal emergency by unanimous vote of the Council. 108
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The California Constitution requires the election for a general tax measure such as this to be held on a regularly scheduled general municipal election, except in cases of emergency declared by a unanimous vote of the City Council. Declaring a fiscal emergenc y allows flexibility on when to place the renewal on the ballot. Placing the UUT tax renewal on an upcoming ballot before the tax expires will allow for an uninterrupted collection of the UUT and a seamless funding of critical city services.

ATTACHMENTS:

1. Resolution

2. General Fund Long-Term Financial Forecast
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General Fund
Five-Year Financial Forecast
Year 1 Year 2 Year 3 Year 4 Year 5
FY 19-20 FY 20-21 FY 21-22 FY 22-23 FY 23-24 FY 24-25 FY 25-26 FY 26-27 Audited
Actuals
Audited
Actuals Adopted Forecast Forecast Forecast Forecast Foreca st Beginning Available Balance $ 2,412,068 $ 1,847,112 2,138,983$ 1,071,458 1,317,948 2,636,463 2,698,978 $ - $ Revenues
Taxes
Utility User Tax 3,483,843 3,590,649 3,509,000 3,618,000 3,644,000 1,833,000 Sales Tax 4,212,285 4,775,496 4,654,675 4,962,649 5,059,649 5,158,649 5,258,649 5,360,649 Property Taxes 1,415,995 1,451,716 1,520,000 1,433,000 1,462,000 1,492,000 1,522,000 1,553,000 Franchise Fees 948,503 862,104 896,000 897,000 915,000 933,000 951,000 969,000 Business Licenses 251,418 268,697 198,000 279,000 284,000 290,000 296,000 302,000 Transfer Tax 142,850 126,488 132,000 130,000 133,000 136,000 139,000 142,000 Transient Occupancy Tax 6,179 7,635 5,000 8,000 8,000 8,000 8,000 8,000 Intergovernmental 2,151,433 2,285,392 2,418,000 2,394,866 2,471,866 2,555,866 2,642,866 2,695,000 Fines & Forefeitures 62,582 36,586 37,000 38,000 39,000 40,000 41,000 42,000 Revenues from New Developments 302,000 924,000 1,428,000 1,662,000 1,851,000 Program Revenues
Community Development 675,556 824,891 242,000 540,000 552,000 564,000 576,000 588,000 Parks and Recreation 1,020,758 396,290 1,753,000 1,789,000 1,826,000 1,863,000 1,900,000 1,938,000 Police 483,110 48,958 219,000 123,000 125,000 127,000 129,000 131,000 Public Works 28,588 46,908 68,000 48,000 49,000 50,000 51,000 52,000 Other 6,770 10,571 11,000 11,000 11,000 11,000 11,000 11,000 Use of Money & Property 600,707 511,191 244,000 249,000 254,000 260,000 266,000 272,000 Cost allocated to other funds 534,992 619,634 719,325 616,000 629,000 642,000 655,000 669,000 Transfers In 227,335 150,000 150,000 150,000 150,000 150,000 150,000 150,000 16,252,904 16,013,206 16,776,000 17,588,515 18,536,515 17,541,515 16,258,515 16,733,649 Expenditures
Police 7,564,927 7,549,028 7,545,685 8,019,000 8,284,000 8,558,000 8,810,000 9,068,000 Public Works 305,464 292,525 374,592 310,000 317,000 325,000 333,000 342,000 Community Development 611,297 792,456 725,810 820,000 845,000 870,000 895,000 922,000 Parks and Recreation 2,165,547 1,434,988 2,787,803 2,761,000 2,843,000 2,925,000 3,005,000 3,085,000 City Council 376,082 407,588 331,114 420,000 430,000 441,000 452,000 463,000 City Manager 385,675 360,115 409,908 368,000 378,000 389,000 400,000 411,000 Legal 284,709 154,562 265,000 164,000 169,000 174,000 179,000 184,000 Administrative Services 700,608 679,926 718,643 659,000 678,000 698,000 717,000 736,000 Finance 1,044,931 1,106,024 1,155,608 1,178,000 1,215,000 1,253,000 1,290,000 1,327,000 Workers Comp/General Liability 1,084,650 1,080,572 1,235,837 1,138,000 1,172,000 1,207,000 1,241,000 1,276,000 Non-Department 766,112 375,912 260,000 712,000 765,000 763,000 561,000 563,000 Transfers Out 205,099 214,819 423,000 330,000 236,000 236,000 245,000 256,000 15,495,101 14,448,515 16,233,000 16,879,000 17,332,000 17,839,000 18,128,000 18,633,000 Net Annual Activity
Baseline Operations 757,803$ 1,564,691$ 543,000 709,515 1,204,515 (297,485) (1,869,485) (1,899,351) One-Time Revenues 1,723,486 600,747 1,056,000 141,000 114,000 360,000 416,000 438,000 One-Time Expenditures (1,234,170) (2,062,500)
DOF Settlement (1,812,075) (604,025) (604,025) (604,025) CalHFA Loan Repayments (3,900,000) (1,300,000)
Draw/(Return) from Reserve (1,269,542) 2,654,507 1,380,010 Ending Available Balance 1,847,112$ 2,138,983 $ 1,071,458 $ 1,317,948 2,636,463 2,698,978 - (1,381,341)$ Operating Reserve:

Beginning Balance 3,797,650$ 2,764,975 $ 4,034,517 $ 4,034,517 4,034,517 4,034,517 4,034,517 $ 1,380,010 $ Current Year Contribution 236,867
Return/(Draw) - reserve (1,269,542) 1,269,542 (2,654,507) (1,380,010) Ending Balance 2,764,975$ 4,034,517 $ 4,034,517 $ 4,034,517 4,034,517 4,034,517 1,380,010 $ - $ % of Projected Operating
Expenditures 18% 28% 25% 24% 23% 23% 8% 0%
* Assumed discontinuation of Utility User Tax starting January 1, 2025 per ordinance. 110
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Position Title Function FTE Cut Revised
Accounting Technician General Government 3 (1) 2 Admin Srvc Director/City Clerk General Government 1 1
City Manager General Government 1 1
Finance Director General Government 1 1
Human Resources Administrator General Government 1 1
Information Systems Administrator General Government 1 1 Office Assistant General Government 1 (1) 0
Personnel Technician General Government 1 (1) 0 Senior Accountant General Government 1 1
Senior Clerk General Government 1 1
Information Systems Specialist General Government 1 1 Management Analyst General Government 1 1
Police Assistant Public Safety 1 1
Police Commander Public Safety 1 1
Police Officer Public Safety 19 (1) 18
Police Sergeant Public Safety 6 6
Administrative Specialist Public Safety 2 2
Assistant Engineer Public Works 1 1
Maintenance Aide Public Works 1 (1) 0
Maintenance Worker Public Works 8 1 9
Real Property Manager Public Works 1 (1) 0
Public Works Superintendent Public Works 1 1
Public Works Technician Public Works 1 (1) 0 Office Assistant Public Works 1 (1) 0
Assistant/Senior Planner Community Development 1 (1) 0 Chief Building Official Community Development 1 (1) 0 Development Services Technician Community Development 1 1 Permit Technician Community Development 1 (1) 0 Community Development Director Community Development 1 1 Parks and Recreation Director Parks and Recreation 1 1 Estimate Approx.

Recreation Coordinator Parks and Recreation 7 (4) 3 FY 21-22 in Restoring Cost Recreation Program Manager Parks and Recreation 1 (1) 0 Budget FY 2011 FTE Increase 69 -13 56 -19% $15,278,000 $18,333,600 $3,055,600
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STAFF REPORT TO THE CITY COUNCIL
DATE: Regular Meeting of March 23, 2021
TO: Members of the City Council
SUBMITTED BY: David Biggs, City Manager
Mike Roberts, Public Works Director/City Engineer
SUBJECT: Public Works Department Organizational Review and Analysis RECOMMENDED ACTION: Receive a presentation on the Public Works Department Organizational Review and Analysis, discuss, provide direction, if any.

FISCAL IMPACT OF RECOMMENDATION: There is no financial impact associated with receiving this report. Any cost associated with the recommendations will be evaluated in the future, at the time a specific recommendation is being considered for implementation.

At the last Council meeting of March 9, Decision Package #22-7 was introduced which would create a new Public Works Specialist/Inspector Classification utilizin g an existing vacant FTE.

Implementing this recommendation, which is the highest priority identified in the study, would be cost neutral to the General Fund. Additional information will be provided at the time the FY 21-22 budget is being considered for adoption.

DISCUSSION:The Public Works Department provides broad range of services including oversight of the City’s transportation network, sewer collection system, stormwater system, landscaping and lighting, facilities maintenance, capital improvements, and eng ineering review for private development projects. These services have been delivered with an organizational structure, staffing level, and staffing configuration that have remained constant since 2014, following staffing reductions that occurred due to the City’s financial hardship.

Given the time that has passed as well as the changes the City has undergone since 2014, MRG was retained to evaluate the Public Works Department and provide recommendations to ensure services are as efficient and effective as possible and the department remains responsive to the public.

In addition to drawing upon their in-house expertise, MRG’s org anizational assessment process included reviewing the City’s financial documents and interviewing staff and Council. They also completed a departmental comparison with four other similar cities in Contra Costa County. This included a comparison by related functions as summarized in the table below. 112
Attachment 8 to
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Table 1 – Comparative Municipalities Public Works Related Functions Agency Population1
Public
Roads
(maintained
miles)2
Collection
System
(miles)
Engineering
Staff
O&M
Staff
Total
Public
Works
Employees
Total PW
Employees/
10,000
Population
Pinole 19,500 53 49 3 10 13 6.7
El
Cerrito 25,000 72 NA 5 14 19 7.6
Orinda 19,000 92 NA 7 53 12 6.3
Moraga 16,900 63 NA 5 6 11 6.5
Comp
City
Avg
20,100 70 49 5 9 14 6.8
Hercules 25,500 55 63 2.54 8.54 11 4.3
1California Department of Finance Population Estimates - May 2020 2Caltrans California Public Road Data - December 2020
3O&M staffing reduced to 5 from 7 in FY 2020-2021 to address COVID financial impact 4The Public Works Superintendent position was estimated to split time equally between Engineering and Maintenance MRG’s recommendations cover three functional areas: staffing, organizational modifications, and technical & equipment enhancements. They are summarized below and covered in detail in the report.

I. Staffing
x Reclassify a vacant Maintenance Worker I/II position and create a n e w P u b l i c W o r k s Specialist (Inspector) classification.
x Consider creating a new Public Works Supervisor classification. x Consider shifting janitorial duties for all City buildings and potentially park restrooms from full-time staff to contract services.
x Consider creating a Maintenance Aide classification and shifting the weekend parks and facilities duties from two full-time Maintenance Workers to one full-time Maintenance Worker supported by part-time staff.
x Consider using the Maintenance Worker I/II as a flexibly staffed classification and/or better differentiate between the two levels.
x Consider creating a Senior Civil Engineer classification.

II. Organizational Modifications
x Ensure that Engineering staff c oordinates and reviews outside r eviewer comments for development projects prior to forwarding to developers/applicants. x Provide enhanced oversight of the City-wide landscape contract. x Relocate the Public Works Superintendent to the Maintenance Yard. x Establish performance or workload measures for the Department. x Establish clear timelines for response to the most common requests for service. x Clarify expectations, standards, and frequency of inspection fo r the Maintenance & Operations Division’s monthly public right-of-way inspection program. 113
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x Consider establishing a standby procedure and rotation that inc orporates all qualified maintenance staff.
x Ensure performance evaluations are completed consistently and in a timely manner. x Establish consistent and well-defined expectations and lines of authority in the Superintendent’s absence and clarify when “Additional Duties” pay will be applied. x Better define the “lead worker” language in the Local 315 MOU.

III. Technical and Equipment Enhancements
x Implement a basic work order and tracking system to begin track ing work output and scheduling recurring preventative maintenance activities. x Start mapping and inventorying maintained assets during the monthly inspection program. x Develop an agreement with Pinole or another neighboring agency to gain access to pavement patching equipment to improve road maintenance.

These recommendations cover a broad range of functional areas and could be phased in over time as resource levels allow. Staff looks forward to using the Organizational Review and Analysis as a guide to ensure the Public Works Department is optimally configured to best serve the public and the City’s needs into the foreseeable future.

MRG will be in attendance tonight to present their Public Works Organizational Review and Analysis as well as answer any questions.

ATTACHMENTS:

1. Presentation on Public Works Department Organizational Review and Analysis

2. Public Works Department Organizational Review and Analysis Financial Impact
Description:

Funding Source:

Budget Recap:

Total Estimated cost: $ New Revenue: $
Amount Budgeted: $ Lost Revenue: $
New funding required: $ New Personnel: $
Council Policy Change: Yes No
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City Council Meeting – March 23,2021
City of Hercules
Public Works Department
Organizational Review
and Analysis
1 115
Attachment 9 to
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PURPOSE OF THE PROJECT
The MRG project team conducted a high-level staffing,
service delivery and organizational structure analysis of the Public Works Department to achieve the following
objectives:
• Improve service delivery and outcomes
• Increase efficiencies and effectiveness
• Clarify employee roles and responsibilities
• Streamline management oversight
2 116
112

PROJECT METHODOLOGY
The project methodology included the following:
• Review of the City’s budget documents, staff cost
allocations, Comprehensive Annual Financial Reports,
Lighting and Landscape District Engineer Reports,
organizational chart, and job descriptions
• Interviews with City staff and each Council Member
• Desk review of the organizational structure of four
comparative municipalities in Contra Costa County:
• El Cerrito
• Pinole
• Moraga
• Orinda
3 117
113

KEY FINDINGS
• Extensive use of outside consultants and contractors
• Significant staff reductions between 2012 to 2014 from high of 18 to current 11
• Management staff spend virtually all their time performing staff level work or managing everyday work functions
• Insufficient capacity to perform strategic planning, implement work productivity systems and oversee staff
• No formal work order or work productivity systems in place • Limited inspection of encroachment permit work and
development projects
• Limited review and coordination of outside engineering firms • Desire for enhanced oversight of the landscape contractor 4 118
114

COMPARATIVE
AGENCY

ANALYSIS
5 Table 1 – Comparative Municipalities Public Works Related Functions

Agency Population 1
Public
Roads
(maintained
miles)2
Collection
System
(miles)
Engineering
Staff
O&M
Staff
Total
Public
Works
Employees
Total PW
Employees/
10,000
Population
Pinole 19,500 53 49 3 10 13 6.7
El Cerrito 25,000 72 NA 5 14 19 7.6
Orinda 19,000 92 NA 7 53 12 6.3
Moraga 16,900 63 NA 5 6 11 6.5
Comp
City Avg 20,100 70 49 5 9 14 6.8
Hercules 25,500 55 63 2.54 8.54 11 4.3
1California Department of Finance Population Estimates - May 2020 2Caltrans California Public Road Data - December 2020
3O&M staffing reduced to 5 from 7 in FY 2020-2021 to address COVID financial impact 4The Public Works Superintendent position was estimated to split time equally between Engineering and Maintenance 119
115

RECOMMENDATIONS
Create a new Public Works Specialist (Inspector) classification • Fund by reclassifying vacant Maintenance Worker I/II position • Addresses many of the Department’s most pressing issues:
• Frees the Superintendent to oversee maintenance staff and implement work order and other management tools
• Provides needed oversight of development projects and encroachment permit-related work in the City’s right-of-way
• Provides additional time for the Associate Engineer to review and coordinate the work of outside consultants by reassigning work to the new position
• Satisfies the City Council’s and other stakeholders’ goal for enhanced oversight of the landscape contractor by assigning oversight to this new position, trained and experienced in inspecting contract work and enforcing contract provisions
6 120
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RECOMMENDATIONS
• Create a new Public Works Supervisor classification
• Fill as funds become available or by upgrading a Maintenance Worker I/II position
• Assist in the oversight of outside contractors and vendors • Clear line of authority in the absence of the Superintendent • Path of succession and promotion within the Division
• Assist in the development and implementation of needed system improvements
• Consider shifting janitorial duties for all City buildings and potentially park restrooms to contract services
and/or part-time staff
• Implement a variety of work productivity and
performance measurement systems to improve
effectiveness
7 121
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PROPOSED ORGANIZATIONAL

STRUCTURE
• Reallocates Department staff to areas of greatest need – public works inspection, outside engineering consultant oversight, and landscape contract oversight through the creation of a Public Works Specialist position
• Creates a Public Works Supervisor classification that provides for both staff development opportunities and
succession planning
• Reallocates staff resources and responsibilities to provide adequate management and supervisory-level staff to
develop and implement necessary procedures and
systems for performance and workload management
8 122
118

PROPOSED ORGANIZATIONAL

STRUCTURE
9 123
119

Post Office Box 561 Wilton, California 95693 916-261-7547 [email protected]

CITY OF HERCULES

Public Works Department
Organizational Review and Analysis
Prepared by:

Mike Bakaldin
Charlene Harris
Mike Oliver

Municipal Resource Group, LLC
March 2021
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City of Hercules - Public Works Department Organizational Review and Analysis Page i Municipal Resource Group, LLC Report

TABLE OF CONTENTS
Page
EXECUTIVE SUMMARY .....................................................................................................1 BACKGROUND .................................................................................................................1 ORGANIZATIONAL ASSESSMENT PROCESS AND METHODOLOGY .....................................2 A. Document Review ................................................................................................2 B. Staff and Customer Interviews .............................................................................2 C. Comparative Municipality Review ............................... .........................................3 KEY OBSERVATIONS AND FINDINGS ................................. ................................................3 A. Public Works Department ....................................... .............................................3 B. Engineering Division .............................................................................................4 C. Maintenance & Operations Division .....................................................................5 COMPARATIVE AGENCIES .......................................... ......................................................9 RECOMMENDATIONS ............................................... .....................................................10 A. Staffing ..............................................................................................................10 B. Organizational Modifications .............................................................................13 C. Technical and Equipment Enhancements ......................... ..................................16 PROPOSED ORGANIZATIONAL STRUCTURE ............................. .......................................17 CONCLUSION .................................................................................................................17

ATTACHMENTS
Attachment A List of Interviewees
Attachment B List of Interview Questions
Attachment C-1 City of Pinole Organizational Chart
Attachment C-2 City of Orinda Organizational Chart
Attachment C-3 Town of Moraga Organizational Chart
Attachment C-4 City of El Cerrito Organizational Chart
Attachment D Hercules Public Works Department Proposed Organiza tional Structure

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City of Hercules - Public Works Department Organizational Review and Analysis Page 1 Municipal Resource Group, LLC Report

EXECUTIVE SUMMARY
The City of Hercules (“City”) engaged Municipal Resource Group, LLC (“MRG”) to assist the City’s Public Works Department (“Department”) in determining an organizational structure and staffing configuration that would improve service delivery and outcomes, increase efficiencies and effectiveness, clarify employee roles and responsibilities, and streamline management oversight.

The process included a review of provided documentation and dat a; individual interviews of identified Department staff, the City Manager, and each member of the City Council; and a review of data from comparative municipalities. The data and subseque nt analysis were incorporated into a series of findings and recommendations.

MRG’s most critical recommendation is to reclassify a currently vacant Maintenance Worker I/II position to a new Public Works Specialist (Inspector) classific ation. This one recommendation addresses many of the Department’s most pressing issues, in that it would:
x Free the Public Works Superintendent to provide the necessary o versight and direction to maintenance staff and the time to implement a work order sys tem, performance or workload measures and other management tools;
x Provide needed oversight of development projects and encroachme nt of permit-related work in the City’s right-of-way;
x Provide additional time for the Associate Engineer to review an d coordinate the work of outside consultants by reassigning work to the new position; and x Satisfy the City Council’s and other stakeholders’ goal for enh anced oversight of the landscape contractor by assigning oversight to this new positio n, who would be trained and experienced in inspecting contract work and enforcing contract provisions.

Other key recommendations include:
x Consider creating a new Public Works Supervisor classification; x Shifting janitorial duties for all City buildings and potentially park restrooms from full-time staff to contract services and/or part-time staff; and
x I m p l e m e n t i n g a v a r i e t y o f w o r k p r o d u c t i v i t y , p e r f o r m a n c e m e a s u rement and accountability systems to improve effectiveness.

BACKGROUND
The Department is tasked with overseeing the construction, reha bilitation, and maintenance of the City’s infrastructure. The Department operates with a limit ed number of staff supported by outside consultants and contractors for a wide variety of designated services. While the City has continued to develop and grow (9% population growth since 2011) , and infrastructure and infrastructure maintenance requirements have increased along wi th service delivery expectations, the number of Department staff has remained const ant since 2014, following staffing reductions to address fiscal impacts brought on by the Great Recession. The Department 126
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City of Hercules - Public Works Department Organizational Review and Analysis Page 2 Municipal Resource Group, LLC Report
operated with an average staffing of 14.75 FTEs between the years 2011 through 2014. Beginning in Fiscal Year 2015, the staffing level was reduced and has remained at 11.0 FTEs.

The MRG project team conducted a high-level staffing, service d elivery and organizational structure analysis of the Public Works Department to achieve the following objectives:
x Evaluate service delivery methods and outcomes, utilizing City Council, City Manager, and Public Works staff input, and provide recommendations to improv e service delivery and outcomes;
x Evaluate staffing levels, positions, and contracted services in relation to the workload to provide recommendations as to appropriate staffing levels; and x Evaluate the Public Works Department’s organizational structure a n d p r o v i d e recommendations for improved efficiency and service delivery.

The report that follows represents the results of that review a nd analysis, which included interviews with Department staff, the City Manager, and each me mber of the City Council. The results were based upon these interviews as well as a review of best practices and organizational design, other municipal models, and an assessment of the current departmental environment.

ORGANIZATIONAL ASSESSMENT PROCESS AND METHODOLOGY
The organizational assessment consisted of the following three steps:

A. Document Review
MRG reviewed the City’s budget documents, staff cost allocation s, Lighting and Landscape District Engineer Reports, and Department job descriptions to d evelop an understanding of the City’s and Department’s financial position and organizational structure.

B. Staff and Customer Interviews
On January 14, 2021, the project was officially kicked off with an online meeting that included City Manager David Biggs, Public Works Director/City Engineer Michael Roberts, and MRG Consultants Mike Oliver, Mike Bakaldin and Charlene Harris. Mr. Biggs and Mr. Roberts provided a background overview of the Department as well as critical input and perspective on the history, culture and effectiveness of the City and the Department. The team also discussed and finalized the project scope of services and timeline.

O n J a n u a r y 2 7 , 2 0 2 1 , M R G h e l d o n - s i t e i n t e r v i e w s w i t h t h e C i t y Manager, the Public Works Director, and selected Department staff. The interviews focuse d on the individuals’ roles and responsibilities, their Division’s performance, service deliver y, measurements of effectiveness, resource allocation and potential opportunities for improvement . MRG held follow-up phone interviews with the Public Works Director and Superintendent to clarify details and ensure the accuracy of the report findings.
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City of Hercules - Public Works Department Organizational Review and Analysis Page 3 Municipal Resource Group, LLC Report
In late January and early February of 2021, MRG interviewed eac h member of the City Council.

The interviews generally focused on service delivery and potent ial opportunities for improvement.

The complete list of interviewees is found in Attachment A. The interview questions are provided as Attachment B. These served as a guidepost for the interviews, and subseque nt questions were asked as issues were further identified or additional clarification was needed.

C. Comparative Municipality Review
The Consultants conducted a desk review of the organizational structures and assigned functions of four comparative municipalities in Contra Costa County. The se municipalities included El Cerrito, Pinole, Moraga, and Orinda.

KEY OBSERVATIONS AND FINDINGS
The review and analysis process led to the following key observations and findings. They identify opportunities for improvement in the Department’s organizationa l structure and serve as a roadmap to improve service delivery, operations, efficiencies, and management oversight. The recommendations in the next section are derived from the key observations and findings.

A. Public Works Department
The Public Works Department consists of two Divisions: Engineer ing and Maintenance & Operations.

The Public Works Director/City Engineer manages both Divisions, but is primarily focused on the Engineering Division in his capacity as the City Engineer. The Public Works Superintendent manages the Maintenance & Operations Division, while dedicating a significant portion of his time to support the Engineering Division. Key findings and obse rvations regarding the Department include:
x The Public Works Department utilizes outside consultants and co ntractors to provide a significant portion of the Department’s services. Department st aff is tasked with managing the contracts and overseeing the work product. The contract model appears to work well for the Department and allows for greater flexibility in managing the resources necessary to deliver services. However, there are challenges in managing the number of contracts and adequately overseeing the work product.
x The Department experienced significant personnel reductions bet ween 2011 and 2014, dropping from a high of 18 full-time positions to the current 11 full-time positions. x Due to the currently “lean” organizational structure, both the Department’s management personnel (Public Works Director/City Engineer and Public Works Superintendent) spend virtually all of their time performing staff-level work or mana ging everyday work functions. Currently, neither position has sufficient capacity to perform strategic planning 128
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City of Hercules - Public Works Department Organizational Review and Analysis Page 4 Municipal Resource Group, LLC Report
o r d e v e l o p a n d i m p l e m e n t n e w p r o c e d u r e s a n d s y s t e m s t o i m p r o v e infrastructure reliability and work productivity.
x The Department does not perform regular personnel performance evaluations, except for p r o b a t i o n a r y e m p l o y e e s a n d e m p l o y e e s e l i g i b l e f o r s t e p i n c r e a s es, and lacks performance standards and workload measures for most of the key functions.

Consequently, the Department is hindered by a lack of clear exp ectations within an agreed framework of planned goals, standards, and competence requirements. x The Department does not utilize a work order or computerized maintenance management system (CMMS). Work assignments are typically distri buted verbally and currently there is no formal or informal follow-up process. Cit y-wide, there has been a recent effort by the City Manager’s office to track citizen complaints and service requests via a spreadsheet with an expectation that each complaint/reque st will be tracked up to final resolution. The City is also exploring implementation of an off-the-shelf work order system that could potentially be used by all departments to iss ue and track complaints, service requests and internally generated work.
x The Department lacks a succession plan, and the organizational structure does not provide a clear line of succession for the two leadership posit ions, Public Works Director/City Engineer and Public Works Superintendent.

B. Engineering Division
The Engineering Division administers the City’s Capital Improve ment Program; reviews and i n s p e c t s g r a d i n g a n d p u b l i c i m p r o v e m e n t s o n p r i v a t e d e v e l o p m e n t projects; reviews traffic engineering; issues encroachment and grading permits; and administers the City’s clean water and sewer lateral certification programs. Engineering staff pri marily provides counter service, address public inquiries, and manage outside consultants and contractors who perform the bulk o f t h e d e v e l o p m e n t p l a n r e v i e w s , c a p i t a l p r o j e c t d e s i g n , a n d c apital project construction management.

The Division is staffed by a Public Works Director/City Engineer and an Associate Engineer, and is supported by the Public Works Superintendent, who performs publ ic works inspections on encroachment permits and private development projects and assis ts with capital projects. Key findings and observations for the Engineering Division include:
x Prior to his appointment in 2014 as the Public Works Superinten dent, the incumbent s e r v e d a s t h e C i t y ’ s P u b l i c W o r k s I n s p e c t o r f o r o v e r 2 0 y e a r s . Because the Inspector position has not been filled, the Superintendent continues to s erve as the primary inspector for development projects, encroachment permits and sewer lateral repairs and replacements. These dual roles result in the Superintendent spe nding less than the required time managing the maintenance activities. The Associate Engineer serves as his backup. The Superintendent estimates that, on average, inspecti on and Engineering Division-related responsibilities account for 30 to 40% of his time. x Engineering staff reports that they do not have the capacity to inspect a significant portion of the encroachment permit work, especially the work performed by public utilities. Staff 129
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also has limited capacity to actively inspect development projects and ensure compliance with conditions of approval.
x The Engineering Division relies heavily on outside consultants to review plans and specifications for new developments. Staff members report that they no longer have the capacity to review the outside consultant’s development plan re view comments. As a result, plan review comments are typically transmitted directly from the consultant to the developer without review by City staff. Further, City staff has limited time to coordinate and manage the outside staff. The lack of City staff review, an d coordination of development plan reviews can lead to uneven conformance with Ci ty specifications and conditions of approval.
x V i r t u a l l y , a l l c a p i t a l p r o j e c t d e s i g n , c o n s t r u c t i o n m a n a g e m e n t , a n d p r o j e c t i n s p e c t i o n activities are performed by outside consultants. On occasion, E ngineering staff will manage a small capital project and perform the construction inspection in-house.

C. Maintenance & Operations Division
The Maintenance & Operations Division is responsible for the following:
x Maintaining the City’s public parks, landscape medians, streets, sidewalks, and facilities; x Ensuring clean stormwater and compliant wastewater discharge in to San Pablo Bay through the City’s creek and storm drain maintenance, street sw eeping and sewer collection programs;
x Graffiti abatement;
x Addressing illegal dumping; and
x Oversight of the City-wide Lighting and Landscaping Assessment District contracts.

Maintenance & Operations staff’s primary duties include:
x Providing janitorial service to City facilities except for City Hall; x Performing light building maintenance;
x Cleaning and light maintenance of City parks;
x Replacing and repairing streetlights and street signs; x Inspecting sewer lift stations;
x Removing graffiti and illegally dumped materials;
x Temporarily patching potholes;
x Responding to sewer overflows; and
x Performing limited pavement and curb marking maintenance. 130
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The Division is also responsible for overseeing outside contractors who:
x M a i n t a i n t h e C i t y ’ s p a r k a n d m e d i a n l a n d s c a p i n g , t r a f f i c s i g n a ls, vehicles, sidewalks, roadways, and building and sewer system mechanical and electrical systems; x Provide street cleaning, weed abatement, and pest control services; and x Clean and repair the sewer collection system.

The Maintenance & Operations Division is staffed by a Public Wo rks Superintendent, four Maintenance Worker II positions and four Maintenance Worker I p ositions, with one of the Maintenance Worker I/II positions currently vacant. Key findings and observations include:
x The Public Works Superintendent has insufficient time to organi ze, direct, and supervise the work of the Maintenance & Operations Division. In addition to his inspection duties, the incumbent supports the Engineering Division as needed, whic h on average, takes up to 40% of his time. Over the past year, the Superintendent estimated that he spent up to 50% of his time overseeing the City’s energy efficiency and con servation project (Engie).

In effect, the Superintendent has had approximately 10% of available time in the last year to oversee the Maintenance & Operations Division. The Superinte ndent’s primary office is located at City Hall, with a secondary office at the maintenance yard. x As a result of the Superintendent’s multiple responsibilities, Maintenance & Operations Division staff is primarily self-directed. Each Maintenance Wor ker is assigned several parks and buildings to maintain during their workweek. The firs t half of the typical weekday is spent performing janitorial work in the City’s build ings and park restrooms, inspecting sewer lift stations, and opening and inspecting parks and buildings. The second half of the day is spent resolving issues discovered during the morning, responding to public complaints and service requests, working on minor projec ts assigned by the Superintendent, inspecting contract maintenance work, or inspec ting an assigned zone for issues.
x The Division does not have clearly established standards or exp ectations for the various routine daily tasks that the staff perform. For example, once a maintenance worker cleans and opens a building and restroom, there is no accepted or set standard as to the minimum number of times the maintenance worker should return to each facility during the day to ensure cleanliness and safety. Further, there is lit tle to no day-to-day supervision of maintenance staff by the Superintendent. Consequently, staff performance and facility conditions are inconsistent due to a lack of clear expectations, accountability, and oversight.
x The Division does not have clearly established response time ex pectations for the most common requests for service, including pothole repair, street l i g h t r e p a i r o r g r a f f i t i removal. Staff members stated that graffiti and illegal dumping requests for service are typically handled within 48 hours, and that street light outages can take up to a week. x The Division does not have the equipment or materials for asphalt work beyond the temporary repair of potholes with cold patch. More permanent as p h a l t r e p a i r s a r e prioritized and either performed under the annual asphalt maint enance contract or 131
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incorporated into the City’s asphalt management program and per formed in later years.

It is the City’s practice to defer permanent patching and repai r s t o e i t h e r t h e a n n u a l contracted repair project or the CIP program, which can take years to implement. x Maintenance is primarily conducted in a reactive mode, although there has been an effort to be more proactive. Recently, staff divided the City into eig h t z o n e s t o m a t c h t h e number of budgeted maintenance workers. Each worker is expected to drive through the assigned zone at least once during the calendar month to identi fy potholes, faded pavement markings and street signs, graffiti, and any other pot ential issues. The zones are rotated each month so that there is a fresh set of eyes loo king for items in need of repair or replacement.
x The Division does not formally track completed or outstanding work, resulting in the lack of a potential work backlog. However, Division staff members we re consistent in the belief that there were no outstanding items or projects in need of immediate attention.

That belief is partially supported by the following:
ƒ In the last two years, the Division had the entire sewer collection system cleaned and video inspected by contract. Per the Public Works Superintenden t, the City only experiences, on average, one sanitary sewer overflow per year; ƒ In the last two years, all street name signs were replaced by staff; ƒ T h e v a s t m a j o r i t y o f t h e C i t y ’ s s t r e e t l i g h t s a r e n e w e r L E D f i x tures, which have an anticipated service life of at least 15 years, thereby minimizi ng the number of bulb replacements needed as compared to the older high-pressure sodium streetlights that require replacement every three to five years; and
ƒ None of the interviewed staff or Council members highlighted serious issues with the City’s facilities or infrastructure, except for concerns with t he condition of the City’s roadways and a perceived long lag time to perform necessary repairs. x Maintenance staff’s perception that there is no work backlog su ggests that the Maintenance & Operations Division is adequately staffed for the amount of work that it performs in relation to the amount of work that is contracted o ut. A widely accepted standard is that properly functioning maintenance organizations should have a work order backlog of approximately four weeks.

The backlog allows for proper planning and procurement of neces sary contractors, equipment, or supplies prior to the start of work. Longer backlogs lead to poor employee morale due to overwork, loss of confidence that work will be do ne, and the slow degradation of infrastructure. Shorter backlogs lead to difficulty in keeping maintenance staff focused on priority work, increase unplanned work, and result in falling productivity.

However, the lack of a work order system and historic work and performance data does not allow for quantitative verification that the Division is properly resourced. x Under the City’s Memorandum of Understanding with Local 315, “t wo Public Works Maintenance Workers will be designated as "Lead Workers" and will receive 5% additional duties pay.” The MOU does not define the expected duties and responsibilities 132
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of the “Lead Worker.” The Department practice has been to give lead pay to one Maintenance Worker II to assist the Public Works Superintendent in overseeing the landscape contract and for another Maintenance Worker II to ass ist the Public Works Superintendent in overseeing the street lighting system and sewer lift stations. The actual authorities and expectations of the two maintenance workers des ignated as “Lead Workers,” both in terms of contract oversight and providing dir ection or technical and functional supervision to other maintenance workers, is not clearly defined or understood by staff. Typically, a Lead Worker, consistent with position c lassification standards, is d e f i n e d a s a n e m p l o y e e w h o h a s o n e o r m o r e e m p l o y e e s a s s i g n e d to their area of expertise and who directs, plans, schedules, assigns, and reviews the work of assigned employee(s). Lead Workers do not have supervisory authority. x In the absence of the Public Works Superintendent (vacations, e tc.), it has been the practice to assign one of the two “Lead Workers” to assume some of the duties of the Public Works Superintendent. The acting assignments do not typi cally come with additional pay unless the absence is for two weeks or more. Add itionally, there appears t o b e in c on sist e n t c o m m u n ic a t io n t o m a in t e n a n c e st a f f w h e n an acting assignment is made. This results in a lack of clarity about assigned duties and reporting expectations during the acting assignment.
x T h e D i v i s i o n h a s n o t i n s t i t u t e d a n e m p l o y e e s t a n d b y p r o c e d u r e for after-hours emergencies. The current practice is for Police Dispatch to fir s t c o n t a c t t h e Superintendent for after-hours emergencies. The Superintendent is expected to be available for requests for service or assistance. When the Superintendent is not available, Police Dispatch works down the list of maintenance workers, and if no staff are contacted, the issue goes unaddressed. One exception are sewer overflow calls, where Dispatch has the option to call the City of Pinole collection staff for assistance. x T h e D ivi sio n p r o vid e s w e e k e n d c o ve r a ge f or p a rk s a n d f a c il it ie s with full-time staff by assigning two Maintenance Workers a Wednesday through Saturday shift and two Maintenance Workers a Sunday through Wednesday shift. All othe r maintenance staff work Monday through Thursday, except for the Superintendent, wh o works Tuesday through Friday to ensure adequate staffing and oversight on Friday. x All maintenance staff have credit cards and procure necessary p arts by driving to hardware stores and other suppliers. The maintenance yard does not have a central storeroom, nor does there appear to be a system to minimize the number of visits to retail outlets or to procure and store commonly used parts and supplie s at the maintenance yard.
x T h e D i v i s i o n h a s n o t m a p p e d o r i n v e n t o r i e d m a n y o f t h e a s s e t s that it operates and maintains, such as pavement markings, street signs, and trees. The City, as a whole, does not have a Geographical Information System (GIS).
x There currently are staff that have been in the entry-level Mai ntenance Worker I classification for over 10 years, even though they may have the requisite experience and qualifications to function as a Maintenance Worker II. Operati onally, there is no clear distinction between the duties and responsibilities performed b y the Maintenance 133
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Worker I or II. While the Maintenance Worker I/II classification could function as a flexible staff classification, the Department is not managing the classification in that way.

COMPARATIVE MUNICIPALITIES
MRG conducted a desk review of the organizational structure and functions of public works- related functions in four selected comparable California munici palities. The four selected municipalities are all small cities or towns in Contra Costa Co unty that rely heavily on contract support to deliver services. All four deliver a range of services similar to the services provided by Hercules, with one exception. Pinole is the only other municipa lity that operates and maintains a sewer collection system. Pinole is additionally unique in that it is the only selected municipality that operates a wastewater treatment plant, which coincidentally also serves Hercules. Copies of the organizational charts for the four comparative municipalities are provided in Attachments C- 1 through C-4.

All the comparable municipalities are structured differently, w ith some assigning park maintenance, facility maintenance, janitorial, and median maint enance to their parks and recreation departments. MRG accounted for all positions performing services matching those of Hercules’ Public Works Department, regardless of department. Po sitions performing functions not found in Hercules, such as wastewater treatment plant staff in Pinole, or recycling center staff in El Cerrito, were excluded from employee counts. The key data are referenced in Table 1, below:

Table 1 – Comparative Municipalities Public Works-Related Functions Agency Population1
Public Roads
(maintained
miles)2
Collection
System
(miles)
Engineering
Staff
O&M
Staff
Total
Public
Works
Employees
Total PW
Employees
/10,000
Population
Pinole 19,500 53 49 3 10 13 6.7
El Cerrito 25,000 72 NA 5 14 19 7.6
Orinda 19,000 92 NA 7 53 12 6.3
Moraga 16,900 63 NA 5 6 11 6.5
Comp
City Avg 20,100 70 49 5 9 14 6.8
Hercules 25,500 55 63 2.54 8.54 11 4.3
1 California Department of Finance Population Estimates - May 2020. 2 Caltrans California Public Road Data - December 2020. 3 O&M staffing reduced to 5 from 7 in FY 2020-2021 to address COVID financial impact. 4 The Public Works Superintendent position was estimated to split time equally between Engineering and Maintenance & Operations.

A review of the organizational charts of the comparable municipalities indicates that each of the four organizations have more management and supervisory positions allocated to oversee public works-related functions relative to Hercules. The higher level of management and supervisory positions allow for increased levels of staff supervision and contract oversight, additional capacity for strategic planning and implementation of workload and performance measurement systems, and improved succession planning.
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As shown in Table 1, above, the data suggests that the Department, as a whole, is understaffed in comparison to the other municipalities, especially after normalizing the number of employees per 10,000 population. When combined with the key findings and observations, MRG believes that the Engineering Division, more specifically, requires additional resources. The primary areas of need are public works inspection and oversight and coordination of outside consultants.

The municipality comparison suggests that the Operations & Main tenance Division is also understaffed. However, the key findings and observations indica te that the Division could be a d e q u a t e l y s t a f f e d a n d t h a t t h e existing Maintenance Worker vac ancy could be partially reallocated to areas of greater need and priority. A more meaningful assessment of the resource needs of the Department would require at least a year’s worth o f workload and performance measurement data performed at the desired level of service. The Department could then more accurately ascertain the work that can and needs to be done as opposed to the work that is being done with existing staff and contract support levels.

RECOMMENDATIONS
While it is tempting to assume that increases in staff would so lve most operational issues, the reality is that there are limits on the City’s ability to fund increases in permanent staff. For that reason, it is incumbent upon management to implement operational best practices and systems that create efficiencies and enhance the utilization of current resources; adopt standardized expectations for quality service delivery; and establish proces ses that ensure current personnel are as knowledgeable and widely trained as is practicable. With these considerations in mind, the recommendations in this report are focused on enhancing the ope rations and effectiveness of the Public Works Department.

Our recommendations are organized into three categories to faci litate review and analysis. The recommendations are focused on developing practical and impleme ntable suggestions that will improve the Department’s organizational effectiveness and susta inability. These recommendations are not intended to be implemented all at the s ame time. Some of the personnel recommendations can be considered immediately due to the current vacancy in the Department, while others can be scheduled for implementation over a longer period of time.

A. Staffing
Staffing recommendations are designed to provide options for addressing the findings. They are not described in absolute terms, but may be modified and implem ented in combination with operational modifications. They include responses to address long-term organizational needs and seek to improve employee efficiency.
x Reclassify a vacant Maintenance Worker I/II position and create a new Public Works Specialist (Inspector) classification.

The creation of a dedicated Public Works Specialist (Inspector) position addresses several of the Department’s most pressing issues:
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ƒ By removing the inspection duties from the Superintendent, it frees the Superintendent to provide the necessary oversight and direction to maintenance staff and the time to implement a work order system, performance or workload measures and other management tools.
ƒ A common theme during the interviews was that there was inadequ ate oversight of development projects and encroachment permit-related work in th e City’s right-of- way. A full-time dedicated inspector would ensure a more regula r and consistent set of eyes in the field.
ƒ The new position could assume some of the duties currently perf ormed by the Associate Engineer, such as overseeing the sewer lateral inspec tion program and viewing the sewer lateral CCTV footage, freeing the Associate Engineer to review and coordinate the work of outside consultants.
ƒ The Specialist could be assigned oversight of the City-wide lan dscaping contract, which would partially offset the loss of the Maintenance Worker position by freeing up the Superintendent and Maintenance Worker II currently taske d with overseeing the contractor.
ƒ The City Council and other stakeholders have expressed a desire f o r e n h a n c e d oversight of the landscape contractor. Assigning the new position to an individual who i s t r a i n e d a n d e x p e r i e n c e d i n i n s p e c t i n g c o n t r a c t w o r k a n d e n f orcing contract provisions, would satisfy that goal.
ƒ By titling the new position as a “Specialist” rather than an “I nspector,” the City can add administrative and project management duties to the job spe cification to make the position more versatile and supportive of other Engineering Division functions.

The City of Pinole uses the Public Works Specialist title for its Inspector role. x Consider creating a new Public Works Supervisor classification.

The creation of a working supervisor position addresses several of the Maintenance & Operations Division’s most pressing issues:
ƒ An appropriately classified position to assist in the oversight and management of the City’s numerous outside contractors and vendors.
ƒ A clear line of authority in the absence of the Superintendent. ƒ A path of succession and promotion within the Division. ƒ A position to assist in the development and implementation of n eeded system improvements discussed in the recommendations below.

The City could consider filling this position as additional fun ding becomes available.

Alternatively, this position could be evaluated in anticipation o f a v a c a n c y i n t h e Maintenance & Operations Division.
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x Consider shifting janitorial duties for all City buildings and potentially park restrooms from full-time staff to contract services.

Currently, full-time maintenance workers provide janitorial ser vices to City facilities except for City Hall, which has a janitorial contract. Several maintenance workers spend the first hours of each daily shift cleaning all City facilitie s, including park restrooms.

Interviewed staff believed that janitorial service could be pro vided more efficiently and cost-effectively by a janitorial contractor, with building clea ning occurring after hours in the evenings. The City could consider this transition as additi onal funding becomes available. Alternatively, this transition could be evaluated in anticipation of a vacancy in the Maintenance & Operations Division. In the absence of a work o r d e r s y s t e m , t h e Department would first need to track staff hours spent on janitorial services to verify the staffing currently committed to janitorial services, obtain an estimate of the square footage of all City buildings, determine a potential range of c osts for contract janitorial services, and determine if there are cost savings and service b enefits to replacing staff with contract services.
x Consider creating a Maintenance Aide classification and shifting the weekend parks and facilities duties from two full-time Maintenance Workers to one full-time Maintenance Worker supported by part-time staff.

Two full-time maintenance workers provide janitorial and porter services during the w e e k e n d s t o C i t y p a r k s a n d o t h e r o p e n f a c i l i t i e s . T h e t w o f u l l -time employee configuration is not varied by season or usage, resulting in po tential overstaffing during bad weather or off-season and potential understaffing on holida y or peak usage weekends. Using part-time staff to perform the mostly menial weekend duties would be more cost-efficient and allow greater flexibility in staffing. Greater numbers of staff could be brought in for busy weekends and lower numbers for off-season, low-usage weekends.

The City could consider this transition as additional funding b ecomes available.

Alternatively, this recommendation could be evaluated as part of the recommendation to consider expanding the contract janitorial services in anticipa t i o n o f a v a c a n c y i n t h e Maintenance & Operations Division.
x Consider using the Maintenance Worker I/II as a flexibly staffe d classification and/or better differentiate between the two levels.

Using the Maintenance Worker I/II as a flexibly staffed classification allows qualified staff to progress from Maintenance Worker I to Maintenance Worker II once the employee’s performance, experience, skills, and knowledge clearly demonstr ate a promotion is warranted. Flexible staffing is a commonly used administrative tool that r ecognizes positions where the organizational need for assigning work span s more than one class level. In a flexibly staffed position, an employee may be initially appointed to one class level (e.g., the entry level), and then be promoted to the next level (e.g., the journey level) without a competitive process. The most common flexible staffin g involves entry- and journey-level classifications. Certain positions may be permanently allocated at the lower 137
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level because the duties do not warrant an upgrade to the highe r level no matter how well an incumbent performs the duties. However, this does not appear to be the situation in the Department, since no clear distinction is made between the work performed by the Maintenance Worker I and II classifications. A decision to use the Maintenance Worker I/II classification as a flexibly staffed classification would allow maintenance worker incumbents to promote from the entry-level to the journey-level classification once the employee’s performance clearly demonstrates a promotion is warranted. x Consider creating a Senior Civil Engineer classification.

Adding a Senior Civil Engineer classification gives the Departm ent the flexibility to promote qualified staff from Assistant to Associate to Senior o nce the employee’s performance, experience, skills, and licensing clearly demonstr ate a promotion is warranted. Adding the classification would potentially increase retention, which is critical for the Department, since there is only one Engineer position. Additionally, if the Department hires or promotes to the senior level classification , it provides a more likely potential candidate for Public Works Director/City Engineer for purposes of succession planning and organizational continuity.

B. Organizational Modifications
These recommendations focus on improving the Department’s effec tiveness. The recommendations also include enhancement of support services an d realignment of internal assignments.
x Ensure that Engineering staff coordinates and reviews outside r eviewer comments for development projects prior to forwarding to developers/applicants.

Currently, Engineering staff does not have the capacity to review and coordinate the work of its consultants tasked with reviewing development project plans. If the City creates and f i l l s t h e r e c o m m e n d e d P u b l i c W o r k s S p e c i a l i s t p o s i t i o n a n d r e a ssigns some of the Associate Engineer’s current duties to the Specialist, such as overseeing the sewer lateral inspection program and viewing the sewer lateral CCTV footage, the Associate Engineer will have additional capacity to review and coordinate the work of outside consultants. x Provide enhanced oversight of the City-wide landscape contract.

A s p r e v i o u s l y m e n t i o n e d , t h e p r o p o s e d P u b l i c W o r k s S p e c i a l i s t / Inspector would be a fitting position to oversee the City-wide landscape contractor. The new position would primarily be field oriented and expected to drive throughout th e City inspecting work in the City’s right-of-way. Monitoring the landscape work is a sen sible add-on to the position’s field duties, and provides the City with a higher le vel of oversight, since the Specialist will be trained and experienced in inspecting contra ct work and enforcing contract provisions.
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Alternatively, the proposed Public Works Supervisor position could oversee the City-wide landscape contractor, and the Public Works Specialist/Inspector could be assigned additional duties in the Engineering Division to allow the Associate Engineer to focus more time on outside consultant oversight.
x Relocate the Public Works Superintendent to the Maintenance Yard.

The Public Works Superintendent should be permanently housed at the Maintenance Yard to provide appropriate oversight, coordinate work, and generally be more visible to Maintenance & Operations staff.
x Establish performance or workload measures for the Department.

I t i s i m p o r t a n t t o e s t a b l i s h p e r f o r m a n c e m e a s u r e s a n d g o a l s t o ensure that staff is delivering projects and services within established standards a nd expectations.

Performance and workload measures also provide a meaningful way to justify additional resources, if necessary.

The best measures are derived from the perspective or expectations of the customer. For permits and approvals, that would include residents, contractors, or developers, while for capital projects and maintenance services, that would include e ither residents, other departments, or a combination of both. Performance measures sho uld cover timeliness, quality of services, customer satisfaction and/or cost. A typic a l outcome-based service objective may be to process an encroachment permit within a specified time period. The objective would be confirmed by the public as a desirable level o f se r vic e . T h e a c t u a l performance measure would be the percent of permits over a give n period of time processed within the desired timeline.

The absence of performance measurement does not necessarily mean that the staff does not focus on its customers or is not effective. However, a prop erly implemented performance measurement system ensures that staff understands i ts customers’ needs and can focus on meeting and/or exceeding those expectations. x Establish clear timelines for response to the most common requests for service.

Develop a response matrix for the most common service requests that includes a timeline for response. In setting the timelines, staff should be realist ic with its ability to consistently meet the timeline. Customers typically are understanding in non-emergency situations if they are informed of the expected response time and observe that the issue was addressed in the stated time. Both staff and customers will generally be more satisfied with a 99% response rate for a two workday graffiti a batement timeline rather than a 50% response rate with a one workday graffiti abatement timeline. As a possible enhancement to clearly communicating the response commitment to internal staff, citizens, and the City Council at the time of the request, the response matrix could be posted to the City’s website. If properly tracked and managed, the response matrix could be used as a performance measure.
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x Clarify expectations, standards, and frequency of inspection fo r the Maintenance & Operations Division’s monthly public right-of-way inspection program.

Develop a checklist that clarifies expectations for the Mainten ance Workers assigned to perform the monthly inspections of the City’s infrastructure. This would be a good task to track via the work order system.
x Consider establishing a standby procedure and rotation that inc orporates all qualified maintenance staff.

The current practice of solely relying on the Superintendent fo r after-hours emergency calls is not sustainable. The maintenance staff could be cross trained in the practices and procedures of the most common after hour emergency situations a nd be given the opportunity to be placed on a standby list. The City has an exi sting standby provision in the MOU with Local 315, which may need to be modified to ensure it meets the City’s needs and budget limitations. As it stands now, the City is obligated to pay a cash amount o n t o p o f a n h o u r l y r a t e f o r s t a n d b y , w h i c h i s a f a i r l y g e n e r o us provision. With the proliferation of cell phones, standby is no longer the burden i t was in the past, where a standby employee could not leave his/her house while on call or had to find a phone after being paged. Today, a standby employee is free to leave their h ome, with only the limitation of staying within one hour’s driving distance of the City. Another potential cost saving measure would be to assign weekend standby to employees normally assigned to w o r k w e e k e n d s . A f i n a l c o n s i d e r a t i o n i s t o i n c e n t i v i z e s t a f f t o resolve emergency situations by phone, where appropriate, without having to respo nd in person. A typical provision would be to pay a half-hour minimum for any call resolved by phone. x Ensure performance evaluations are completed consistently and in a timely manner.

The City does not have a formal performance management program. Rather, department heads are expected to complete annual employee performance eval uations for each respective performance evaluation period. While the Public Works Department has done a g o o d j o b o f c o m p l e t i n g p e r f o r m a n c e e v a l u a t i o n s f o r p r o b a t i o n ary staff on a timely basis, performance evaluations have not been completed in a con sistent or timely manner for Department staff who have successfully completed the ir probationary periods. Performance evaluations will be especially important o n c e t h e D e p a r t m e n t implements performance and workload measures. Late performance evaluations send a message that employees are not important enough to set aside sufficient time to conduct evaluations in a timely manner, which can negatively impact morale and productivity. The Public Works Director should ensure that evaluations for all De partment employees are conducted in a timely manner.
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x Establish consistent and well-defined expectations and lines of authority in the Superintendent’s absence and clarify when “Additional Duties” pay will be applied.

Currently, there is a lack of clarity regarding who is in charge when the Superintendent is absent. One of the issues appears to be inconsistent communicat ion about which “Lead Worker” is in charge, especially during absences of a week or less. Another issue appears to be that the “Lead Workers” don’t understand or accept the ex pected responsibilities during brief absences, since it appears they are not given “Add itional Duties” pay. These issues of “Additional Duties” pay and “Lead Worker” assignments would be resolved should the Department adopt the recommendation to establish a P ublic Works Supervisor classification. Typically, the assignment of duties to cover during an absence is assigned to a lower-level classification within the organizatio n’s classification hierarchy.

With the addition of the Public Works Supervisor, any work nece ssitated by the absence of the Public Works Superintendent would be assigned to the Pub lic Works Supervisor.

Nevertheless, the City should develop a policy or procedure that clarifies when either the “Additional Duties” or “work in a higher-class” MOU provisions apply when an employee is requested to assume some or all of the duties of his/her supervisor. x Better define the “lead worker” language in the Local 315 MOU.

The City should clarify the expectations and responsibilities o f those maintenance workers receiving the “Lead Worker” pay. Better definition will help clarify lines of authority, especially in the absence of the Superintendent.

C. Technical and Equipment Enhancements
These recommendations focus on enhancing operational effectiven ess, providing essential systems management and equipment to improve productivity, and providing data to avoid costly repairs or service interruptions.
x Implement a basic work order and tracking system to begin track ing work output and scheduling recurring preventative maintenance activities.

There are numerous off-the-shelf work order systems or computer ized maintenance management systems (CMMS) that the Department could implement f airly quickly and inexpensively. Such a system would allow the Department to start scheduling and tracking work to ensure items are not missed. The system, if properly installed and managed, will assist in establishing appropriate accountability measures, all ow performance measurement of responses to service requests, and reporting wor k output and performance measures to the City Manager, City Council and the public. A work order system will also allow the Maintenance & Operations Division to schedule recurring maintenance items, such as storm and roof drain and gutter clea ning, and ensure they are completed on schedule and documented. Implementation of the system will require a significant up-front effort on the part of the Superintendent or the proposed Public Works Supervisor position.
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x Start mapping and inventorying maintained assets during the mon thly inspection program.

As part of their monthly inspections, assign maintenance staff t o b e g i n m a p p i n g a n d inventorying the inspected assets within their inspection zones. The initial mapping and inventorying could be done on paper. Once mapped and inventoried, an employee should be designated as the keeper of the master inventory list and map to ensure all additions, deletions, or corrections are funneled through one person. Ultimately, the data could be added to a City-wide Geographic Information System.
x Develop an agreement with the City of Pinole or another neighbo ring agency to gain access to pavement patching equipment to improve road maintenance.

Gaining access to an asphalt patch truck on a scheduled basis will allow the Maintenance & Operations Division to make more permanent repairs in-house. This would resolve concerns about the length of time involved in making the repairs via the annual pavement contracts.

PROPOSED ORGANIZATIONAL STRUCTURE
A recommended Department organizational design model is provide d in Attachment D. T h e recommended model is based on an objective analysis of interview input, available data, MRG knowledge of organizational design practices, and where appropr iate, reference to the comparative municipal analysis. The rationale for the recommend ed structural changes is specified throughout the report. The recommended organizational structure provides the following benefits:
x Reallocates Department staff to areas of greatest need – public works inspection, outside engineering consultant oversight, and landscape contract oversight through the creation of a Public Works Specialist position.
x Creates a Public Works Supervisor classification that provides for both staff development opportunities and succession planning.
x Reallocates staff resources and responsibilities to provide ade quate management and supervisory-level staff to develop and implement necessary proc edures and systems for performance and workload management.

CONCLUSION
The Public Works Department provides important services to the community. Our proposed recommendations are intended to provide the Department an unbia sed and objective view of the organization’s current status and potential opportunities t o address the identified areas of improvement. The process to implement the proposed recommendati ons will take time and perseverance, considering current staffing and resource limitations. A measured and incremental approach, combined with strong leadership in the Department, an d a partnership with the City 142
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Council in making budget decisions and setting priorities, can be successful in implementing the proposed recommendations and in ensuring a more efficient and e ffective Public Works Department. The outcome will be enhanced quality services to th e community. We thank the City Councilmembers, City Manager, and participating Department staff for the opportunity to assist in this process.

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City of Hercules - Public Works Department Organizational Review and Analysis ATTACHMENT A Municipal Resource Group, LLC Report

ATTACHMENT A

LIST OF INTERVIEWEES

City Council Members

Chris Kelley, Mayor

Dion Bailey, Vice Mayor

Alexander Walker-Griffin, Councilmember

Dan Romero, Councilmember

Tiffany Grimsley, Councilmember

City Staff

David Biggs, City Manager

Michael Roberts, Public Works Director

Jeff Brown, Public Works Superintendent

Jose Pacheco, Associate Engineer

Eric Wright, Maintenance Worker II

Vergel Botin, Maintenance Worker I

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City of Hercules - Public Works Department Organizational Review and Analysis ATTACHMENT B Municipal Resource Group, LLC Report

ATTACHMENT B

LIST OF INTERVIEW QUESTIONS

City Council Interview Questions

1. Which Public Works Department services – development services, capital projects, and maintenance - are you most familiar with as a Council Member? as a customer?

2. For each of the three broad Public Works areas of responsibility - development services, capital projects, and maintenance – what is your overall experience or impression?

3. What do you believe is working well in the Public Works Department?

4. What do you believe needs improvement in the Public Works Department?

5. Given funding and staffing constraints, which services or responsibilities do you believe deserve the highest priority?

6. Do you have any specific recommendations for service enhancement, efficiency gains, or additional sources of revenue to fund improvements?

7. Is there anything you would like to add that we have not covered today?

City Staff Interview Questions

1. How long have you worked for the City in your current position? overall?

2. What are your key duties and what percentage of your time is spent on each key duty?

3. Are your duties, performance expectations, and work unit goals clearly defined and understood by you?

4. In your absence, who performs your duties?

5. Do you or anyone in your unit manage any outside staff or contracts? a. What is the annual value of each contract and how much time i s spent managing each contract?
b. Do you believe that contracting is the best way to service th ose functions? c. Are there any other functions that you believe could be bette r performed or supported by contract, another department or outside agency?

6. Do you have the appropriate resources and authority to achieve the objectives of your work unit? If not, what do you believe you need?

7. What are the most critical issues facing your work unit right now? Over the next 3 years?

8. What are your unit’s strengths? Its weaknesses?

9. What do you believe your work unit should be doing that it is not? Projects? Tasks?

10. Do you believe your work unit is staffed properly? What changes would you recommend?

11. Do you have any suggestions related to your unit’s or Department’s current organizational structure/assignment of tasks to make it more effective and efficient?

12. What do you feel is working well with the Public Works Department overall?

13. What needs to improve with the Public Works Department overall?

14. Is there anything you would like to add that we have not covered today? 145
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City of Hercules - Public Works Department Organizational Review and Analysis ATTACHMENT C-1 Municipal Resource Group, LLC Report
ATTACHMENT C-1

CITY OF PINOLE
Organizational Chart

Development Services
Director/City Engineer
Public Works Manager
Public Works
Supervisor
Maintenance Worker
(5)
Treatment Plant
Manager
(not counted)
Public Works
Supervisor
(Collections)
Maintenance Worker
(2)
Senior Project
Manager
Public Works Specialist
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City of Hercules - Public Works Department Organizational Review and Analysis ATTACHMENT C-2 Municipal Resource Group, LLC Report
ATTACHMENT C-2

CITY OF ORINDA
Organizational Chart

Assistant City
Manager/Public
Works Director
City Engineer
Senior Civil
Engineer (2)
Public Works
Inspector
Assistant
Engineer
Public Works
Maintenance
Supervisor
Maintenace
Worker III
Maintenance
Worker II
Sr. Admin
Assistant
Director of Parks
& Recreation
(not counted)
Facilities & Parks
Supervisor
Facility
Maintenance
Worker II
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City of Hercules - Public Works Department Organizational Review and Analysis ATTACHMENT C-3 Municipal Resource Group, LLC Report
ATTACHMENT C-3

TOWN OF MORAGA
Organizational Chart

Public Works
Director/Town
Engineer
Senior Civil
Engineer
Associate Civil
Engineer
Engineering
Technician
Manager Public
Works/Parks
Maintenance
Senior
Maitenance
Worker
Lead
Maintenance
Worker
Maintenance
Worker (3)
Administrative
Assistant
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City of Hercules - Public Works Department Organizational Review and Analysis ATTACHMENT C-4 Municipal Resource Group, LLC Report
ATTACHMENT C-4

CITY OF EL CERRITO
Organizational Chart

Public Works
Director/City Engineer
Senior Engineer
Associate Engineer
Engineering Technician
Operations &
Environmental
Services Manager (0.5)
Maintenance
Superintendent
Maintenance
Leadworker (2)
Maintenance Worker
(4)
Management Assistant
Management Assistant
Recreation Director
(not counted)
Aquatics & Facilities
Supervisor (0.5)
Custodial Maintenance
Lead Worker
Custodians (4)
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City of Hercules - Public Works Department Organizational Review and Analysis ATTACHMENT D Municipal Resource Group, LLC Report

ATTACHMENT D

HERCULES PUBLIC WORKS DEPARTMENT
Proposed Organizational Structure

Public Works
Director/City
Engineer
Public Works
Superintendent
Public Works
Supervisor
(New)
Maintenance
Worker I/II (6 or 7)
Associate Engineer
Public Works
Specialist/Inspector
(New)
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SUMMARY OF BUILT AND APPROVED RESIDENTIAL UNITS AS OF FEBRUARY 28, 2022

Since January 1, 2020, the following residential projects have been completed and received certificates of occupancy:

x Bayfront Block N (“The Exchange”): 172 multi-family units (162 apartments, plus 10 townhouses) x Bayfront Blocks Q & R (“The Grand”): 232 apartments

Other projects which have approved entitlements but which have not yet applied for building permits include:
x Bayfront Blocks M & P (“The Mint”): 267 apartments
x Bayfront Block O (“The Harbor House”): 120 apartments x Sycamore Crossing: 120 townhouses
x Hill Town: 598 multi-family units

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Attachment 11 to
3/08/22 staff report
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STAFF REPORT TO THE CITY COUNCIL

DATE: Regular Meeting of July 12, 2022

TO: Members of the City Council

VIA: Dante Hall, City Manager

SUBMITTED BY: Lauren Berges, City Clerk

SUBJECT: Mandatory Garbage/Solid Waste Disposal – Delinquent Accounts

RECOMMENDED ACTION:

Conduct a Public Hearing and upon conclusion, consider adopting a Resolution confirming the report of delinquent accounts and placing liens on said properties and special assessments upon property taxes pursuant to City of Hercules Municipal Code Section 5 -2.01 t o 5 -2.16, Mandatory Garbage/Solid Waste Disposal.

COMMISSION/SUBCOMMITTEE ACTION AND RECOMMENDATION:

There was no Commission or Subcommittee review of this item.

FISCAL IMPACT OF RECOMMENDATION:

In addition to the fees due Richmond Sanitary Service (the Collector), the City is authorized by the Code to establish reasonable administrative charges. In order to cover the costs incurred by the City through the lien process, a total administrative charge of $30 per delinquent account is assessed. This charge is comparable to that charged by the other cities in West County and notice of this charge has been provided to the affected property owners. This fee will be used to cover the cost of staff’s time and other costs associated with processing these delinquencies.

BACKGROUND:

Municipal Code Sections 5-2.01 to 5 -2.16, Mandatory Garbage/Solid Waste Disposal, require all property owners of occupied premises in the City to subscribe to, and pay for, garbage collection service through Richmond Sanitary Service, the City’s franchised refuse collector. Collection charges that are delinquent in a six-month period are subject to the notice and hearing process defined by the Code. This process ultimately results in an assessment lien against the property for which service was rendered to cover the delinquent garbage collection charges, penalties and City costs. The lien is placed on said property and the assessment is collected either through escrow when the property is sold or by the City with its regular property tax allocation from the County. The Collector, in turn, receives payment for the delinquent fees and charges from the City.

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The procedure specified by the Code for the collection of these fees and charges is as follows:

1. The Collector sends a notification to the affected property owners regarding the delinquency and the City lien process.

2. The Collector submits a delinquent accounts report to the City, Attachment 2.

3. Section 5-2.09 c of the Hercules Municipal Code requires the City to mail a notice of the public hearing date to the owners listed on the report not less than 10 days prior to the hearing.

This notice was mailed to delinquent property owners on June 22, 2022.

4. The City Council confirms the delinquent accounts report and orders placement of liens on said properties and special assessment upon property taxes by resolution.

5. By August 10th of each year, the City Council a pproves the final assessment levy and the confirmed report is submitted to the County Auditor for inclusion on the property tax rolls.

DISCUSSION:

At the July 23, 2019 City Council meeting Council gave direction to staff to meet with Republic Services to discuss reducing the amount of times per year to conduct these public hearings from 3 times per year to 2 times per year. City staff met with representatives of Republic Services on August 13, 2019 and determined that the months of February and July would best meet the needs of both parties to get liens placed for delinquent accounts on the tax roll.

Richmond Sanitary Service has submitted a report listing all of the delinquent accounts subject to lien proceedings and has provided the required notice to property owners.

For the period January 2022 through April 2022, Richmond Sanitary Services Preliminary Lien List Report lists 95 accounts totaling $41,851.89. The attached report show s the billing and service addresses of the subject property, the date that each account became at least six month delinquent, the amount due for the delinquent garbage collection service, the amount of administrative charges due to the City and the total amount due and to be liened against the property. Richmond Sanitary Service has confirmed that all required notices and billings have been mailed to this list of property owners.

The Finance Director may make revisions or corrections to the report as it deems just. Vacant premises or billing errors, which can be substantiated, are examples of circumstances which the Council might want to consider in the process of reviewing the report. The re port must then be confirmed by resolution of the City Council.

A certified copy of the report will be filed with the County Recorder’s Office for the placement of special liens against the respective parcels. Any payments made on these delinquencies after the date on the Preliminary Lien List and/or after the City Council public hearing, but prior to this filing date, will be deleted from the list and not filed with the County Recorder’s Office.

ATTACHMENTS:

1. Resolution

2. Lien List
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