Attach 1 - May 10 2022 Staff Report with Attachments — Hercules City Council, July 12, 2022

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
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 (“RPT T”) 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 inclu de 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
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 compete nt 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. 57 302. 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 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
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 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 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 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 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 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 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 Edwar ds 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
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 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

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 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:

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

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.

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.

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.

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.

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 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.

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 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
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
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 ch arter 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 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 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 am ounts 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 t he 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 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 regardi ng 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 engag ement options is non-exhaustive 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 p laced 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 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 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 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 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 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 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
101
102
.

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
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 cus tomers. 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. Revenu e 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
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 service s 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 grow th 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
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
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
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
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
109
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
Attachment 6 to
3/08/22 staff report
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
111
Attachment 7 to
3/08/22 staff report

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
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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
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
114
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

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

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

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

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

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

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

PROPOSED ORGANIZATIONAL

STRUCTURE
9 123

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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Attachment 10 to
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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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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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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 M ichael 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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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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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 ma intenance 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 admin isters 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 aspha lt 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:
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; In the last two years, all street name signs were replaced by staff; 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
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 wi ll 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 revie ws 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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By removing the inspection duties from the Superintendent, it f rees 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.
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.
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.
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.
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.
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:
An appropriately classified position to assist in the oversight and management of the City’s numerous outside contractors and vendors.
A clear line of authority in the absence of the Superintendent. A path of succession and promotion within the Division. 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 init ially 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 intervie w 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

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)
150

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

Hercules City CouncilJuly 12, 2022

Hercules City Council
July 12, 2022